<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 11, 2000
REGISTRATION NO. 333-
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- --------------------------------------------------------------------------------
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)
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NEW YORK 4811 13-4924710
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
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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 J. 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:
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DAVID M. SILK, ESQ. MARC A. LEAF, ESQ. JAMES P. BEAUBIEN, ESQ.
WACHTELL, LIPTON, ROSEN & KATZ BAKER BOTTS, L.L.P. LATHAM & WATKINS
51 WEST 52ND STREET 599 LEXINGTON AVENUE 633 WEST FIFTH STREET
NEW YORK, NEW YORK 10019 NEW YORK, NEW YORK 10022 LOS ANGELES, CALIFORNIA 90071
(212) 403-1000 (212) 705-5000 (213) 485-1234
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective time of this Registration Statement and the
effective time of the merger of a subsidiary of AT&T Corp. with and into Four
Media Company, as described in the Agreement and Plan of Merger, dated as of
December 6, 1999, attached as Annex A to the Proxy 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. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER SHARE OFFERING PRICE REGISTRATION FEE
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Class A Liberty Media Group Common
Stock, par value $1.00 per share... 5,459,508 Shares(1) (2) $272,147,397(3) $71,847(3)(4)
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(1) Based upon the maximum number of shares of Class A Liberty Media Group
Common Stock issuable, or to be reserved for issuance, in the merger.
(2) Not applicable.
(3) Estimated solely for the purpose of calculating the registration fee in
accordance with rules 457(f) and 457(c) under the Securities Act of 1933, as
amended (the "Securities Act"). The registration fee was calculated by
multiplying (i) $14.75, the average of the high and low sales prices of the
Four Media Company Common Stock on the Nasdaq National Market tier of The
Nasdaq Stock Market on February 9, 2000, as reported in published financial
sources by (ii) 26,789,654, the total number of outstanding shares of Four
Media Company Common Stock (assuming all of the outstanding options and
warrants to purchase shares of Four Media Company Common Stock are
exercised). Pursuant to rule 457(f)(3), such amount was then reduced by $123
million, the approximate total cash payment to be made by the Registrant in
connection with the transaction.
(4) The registration fee for the securities registered hereby was calculated by
multiplying the proposed maximum offering price by .000264 in accordance
with Section 6(b) of the Securities Act and the related rules. A
registration fee of $77,024 was previously paid by Four Media pursuant to
Rule 14a-6 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act") in connection with the filing of the preliminary proxy
materials of Four Media Company with the Securities and Exchange Commission
on January 21, 2000. Pursuant to Rule 457(b) under the Securities Act, such
fee is being credited against the registration fee due in connection with
this Registration Statement. Accordingly, no additional fee is being paid in
connection with this Registration Statement.
<PAGE> 2
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 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.
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<PAGE> 3
FOUR MEDIA COMPANY
To Our Stockholders:
You are cordially invited to attend a special meeting of stockholders of
Four Media Company to be held at the Waldorf-Astoria Hotel, 301 Park Avenue, New
York, New York 10022, on April 6, 2000 at 9:00 a.m. local time.
At the special meeting, you will be asked to vote on the approval of an
Agreement and Plan of Merger, dated as of December 6, 1999, among Liberty Media
Corporation, an indirect wholly owned subsidiary of AT&T Corp., AT&T, D-Group
Merger Corp., a wholly owned subsidiary of AT&T, and Four Media, under which
D-Group Merger Corp. will merge with Four Media, with Four Media continuing as
the surviving corporation and becoming a member of the Liberty Media Group. You
will also be asked to vote on the approval of the merger of D-Group Merger Corp.
with Four Media. The Liberty Media Group is a "tracking stock" group of AT&T
consisting principally of the assets and businesses of Liberty Media Corporation
and its subsidiaries, as well as other indirect subsidiaries of AT&T which have
businesses and assets related to those of Liberty Media Corporation.
As a result of the merger, you will be entitled to receive 0.16129 of a
share of Class A Liberty Media Group tracking stock and $6.25 in cash for each
share of Four Media common stock you own immediately prior to the merger.
Our board of directors has unanimously approved the merger agreement and
the merger and believes it is in the best interests of Four Media and its
stockholders to complete the transactions contemplated by the merger agreement.
The board of directors unanimously recommends that you vote FOR the proposal to
approve the merger agreement and the merger at the special meeting.
The attached notice of special meeting and proxy statement/prospectus
explain the proposed merger and provide specific information concerning the
special meeting. Please read these materials carefully. Do not send any
certificates representing Four Media common stock at this time.
Four Media is a Delaware corporation. Under Delaware law, the affirmative
vote of the holders of a majority of the outstanding shares of Four Media common
stock entitled to vote at the special meeting is required to approve the merger
agreement and the merger. Four Media stockholders owning approximately 70% of
its common stock have agreed to vote all of their shares of common stock in
favor of the proposal to approve the merger agreement and the merger.
Whether or not you plan to attend the special meeting, we urge you to
complete, sign and promptly return the enclosed proxy card to assure that your
shares will be voted at the special meeting. FAILURE TO RETURN A PROPERLY
EXECUTED PROXY CARD AND/OR TO VOTE AT THE SPECIAL MEETING WILL HAVE THE SAME
EFFECT AS A VOTE AGAINST APPROVAL OF THE MERGER AGREEMENT AND THE MERGER.
Sincerely,
/s/ Robert T. Walston
Robert T. Walston
Chief Executive Officer and
Chairman of the Board of Directors
WE URGE YOU TO CONSIDER THOSE MATTERS SET FORTH UNDER THE HEADING "RISK
FACTORS RELATING TO THE MERGER" BEGINNING ON PAGE 20 OF THE ACCOMPANYING PROXY
STATEMENT/PROSPECTUS.
NEITHER THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THE SHARES OF LIBERTY MEDIA
GROUP TRACKING STOCK TO BE ISSUED IN THE MERGER OR DETERMINED IF THIS PROXY
STATEMENT/PROSPECTUS IS ACCURATE OR ADEQUATE. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
This proxy statement/prospectus is dated February 11, 2000 and is first
expected to be mailed to Four Media stockholders on February 17, 2000.
<PAGE> 4
REFERENCE TO ADDITIONAL INFORMATION
This proxy statement/prospectus "incorporates by reference" important
business and financial information about Four Media, the Liberty Media Group and
AT&T from documents that are not included in or delivered with this proxy
statement/prospectus. You may obtain documents incorporated by reference in this
proxy statement/prospectus without charge by requesting them in writing or by
telephone from the appropriate company (documents relating to the Liberty Media
Group may be obtained from AT&T) at the following addresses:
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Four Media Company AT&T Corp.
2813 West Alameda Avenue 32 Avenue of the Americas
Burbank, California 91505 New York, New York 10013-2412
Tel: (818) 840-7000 Tel: (212) 387-5400
Attn: Corporate Secretary Attn: Corporate Secretary's Department
</TABLE>
IN ORDER TO OBTAIN THE DOCUMENTS IN TIME FOR THE SPECIAL MEETING, YOU MUST
REQUEST THE DOCUMENTS FROM US BY MARCH 30, 2000, WHICH IS FIVE BUSINESS DAYS
PRIOR TO THE DATE OF THE SPECIAL MEETING.
For a more detailed description of the information incorporated by
reference into this proxy statement/prospectus and how you may obtain it, see
"Summary -- Where You Can Find More Information" on page 17.
<PAGE> 5
FOUR MEDIA COMPANY
2813 WEST ALAMEDA AVENUE
BURBANK, CALIFORNIA 91505
-------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 6, 2000
To the Stockholders of Four Media Company:
A special meeting of stockholders of Four Media Company will be held on
April 6, 2000 at 9:00 a.m. local time at the Waldorf-Astoria Hotel, 301 Park
Avenue, New York, New York 10022, for the following purposes:
1. To consider and vote upon a proposal to approve and adopt:
(a) an Agreement and Plan of Merger, dated as of December 6, 1999,
among Liberty Media Corporation, an indirect wholly owned subsidiary of
AT&T Corp., AT&T, D-Group Merger Corp., a wholly owned subsidiary of
AT&T and Four Media, under which:
- D-Group Merger Corp. will be merged with Four Media, with Four
Media continuing as the surviving corporation and becoming a member
of the Liberty Media Group; and
- each issued and outstanding share of common stock of Four
Media will be canceled and converted into and represent the right to
receive 0.16129 of a share of Class A Liberty Media Group tracking
stock and $6.25 in cash; and
(b) the merger of D-Group Merger Corp. with Four Media as described
in clause (a) above; and
2. To transact any other business as may properly come before the
special meeting or any adjournment or postponement of the special meeting.
Our board of directors has unanimously approved the merger agreement and
the merger and unanimously recommends that you vote FOR approval of the merger
agreement and the merger. The proposal is described in more detail in the
accompanying proxy statement/prospectus, which you should read in its entirety
before voting. A copy of the merger agreement is attached as Annex A to the
accompanying proxy statement/ prospectus.
Only stockholders of record at the close of business on February 11, 2000
are entitled to notice of the special meeting, and to vote at the special
meeting and at any adjournments thereof. For ten days prior to the special
meeting, a complete list of stockholders entitled to vote at the special meeting
will be available for examination by any stockholder for any purpose germane to
the special meeting during ordinary business hours at the principal executive
offices of Four Media Company located in Burbank, California.
Holders of Four Media common stock are entitled to appraisal rights under
Section 262 of the Delaware General Corporation Law if the conditions set forth
in Section 262 are complied with. We have included a copy of Section 262 as
Annex C to the accompanying proxy statement/prospectus.
All Four Media stockholders are cordially invited to attend the special
meeting in person. However, to ensure your representation at the special
meeting, you are urged to complete, sign and return the enclosed proxy card as
promptly as possible in the enclosed postage-prepaid envelope. You may revoke
your proxy in the manner described in the accompanying proxy
statement/prospectus at any time before it is voted at the special meeting. If
you fail to return a properly executed proxy card or to vote in person at the
special meeting, the effect will be a vote against the proposal to approve the
merger agreement and the merger.
By Order of the Board of Directors,
/s/ Robert T. Walston
Robert T. Walston
Chief Executive Officer and
Chairman of the Board of Directors
Burbank, California
February 11, 2000
<PAGE> 6
TABLE OF CONTENTS
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PAGE
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QUESTIONS AND ANSWERS ABOUT THE
MERGER.............................. 1
SUMMARY............................... 3
The Companies....................... 3
The Proposed Merger................. 3
Recommendation of Four Media's Board
of Directors..................... 3
Four Media's Reasons for the
Merger........................... 4
Opinion of Four Media's Financial
Advisor.......................... 4
The Merger Agreement and Other
Transaction Agreements........... 4
Conditions to the Merger............ 4
Termination......................... 5
Termination Fees.................... 6
No Other Negotiations Involving Four
Media............................ 6
Regulatory Matters.................. 6
Accounting Treatment................ 7
New York Stock Exchange Listing..... 7
Interests of Four Media's Officers
and Directors in the Merger...... 7
Indemnification and Insurance....... 7
Vote Required....................... 8
Voting Agreements................... 8
Restructuring Transactions.......... 8
Dividends........................... 8
Restrictions on the Ability to Sell
Class A Liberty Media Group
Tracking Stock................... 8
Selected Historical Financial
Information...................... 9
Selected Pro Forma Condensed
Financial Information............ 12
Unaudited Comparative Per Share
Data............................. 13
Comparative Per Share Market Price
and Dividend Information......... 15
Where You Can Find More
Information...................... 17
RISK FACTORS RELATING TO THE MERGER... 20
The value of the Class A Liberty
Media Group tracking stock you
will receive in the merger may
fluctuate........................ 20
The price of Class A Liberty Media
Group tracking stock may be
affected by factors different
from those affecting the price of
Four Media common stock.......... 20
Regulatory agencies may impose
conditions on consents relating
to the merger.................... 20
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If we do not complete the merger,
it could negatively impact Four
Media and the price of its common
stock............................ 20
Holders of AT&T common stock and
Liberty Media Group tracking
stock may have competing
interests........................ 21
Liberty's board of directors has the
power to take actions that may
not be in the best interests of
AT&T or holders of Liberty Media
Group tracking stock............. 21
Liberty's board of directors may
have no fiduciary duties to
holders of Liberty Media Group
tracking stock................... 22
SPECIAL NOTE REGARDING FORWARD-LOOKING
STATEMENTS.......................... 23
THE COMPANIES......................... 25
Four Media Company............... 25
AT&T Corp........................ 25
D-Group Merger Corp. ............ 26
Liberty Media Corporation........ 26
THE PROPOSED MERGER................... 28
Special Meeting to Vote on the
Proposed Merger.................. 28
Structure of the Merger; Merger
Consideration.................... 28
Treatment of Four Media Stock
Options and Warrants............. 28
Background of the Merger............ 29
Four Media's Reasons for the
Merger........................... 31
The Liberty Media Group's Reasons
for the Merger................... 32
Recommendation of Four Media's Board
of Directors..................... 34
Opinion of Four Media's Financial
Advisor.......................... 34
Accounting Treatment................ 38
Interests of Four Media's Officers
and Directors in the Merger...... 38
Indemnification and Insurance....... 39
Material U.S. Federal Income Tax
Consequences..................... 39
Regulatory Matters.................. 41
Restrictions on Sales of Shares by
Affiliates of Four Media or
AT&T............................. 41
Listing on the New York Stock
Exchange of Class A Liberty Media
Group Tracking Stock to be Issued
in the Merger.................... 42
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Appraisal Rights.................... 42
Delisting and Deregistration of Four
Media Common Stock after the
Merger........................... 45
THE MERGER AGREEMENT.................. 46
Conditions to Completing the
Merger........................... 46
Termination......................... 51
Termination Fees.................... 53
No Solicitation..................... 53
Representations and Warranties...... 54
Conduct of Four Media's Business
Pending the Merger............... 55
Amendment, Extension and Waiver..... 57
Expenses............................ 57
OTHER TRANSACTION AGREEMENTS.......... 58
Voting Agreements................... 58
Waiver Agreement.................... 58
Amendment to Tax Sharing
Agreement........................ 58
Supplement to Inter-Group
Agreement........................ 59
DESCRIPTION OF AT&T CAPITAL STOCK..... 60
Authorized Capital Stock............ 60
AT&T Common Stock................... 60
AT&T Preferred Stock................ 63
AT&T Series D Preferred Stock....... 64
AT&T Series E Preferred Stock....... 66
COMPARISON OF RIGHTS OF STOCKHOLDERS
OF FOUR MEDIA AND AT&T.............. 68
Business Combinations............... 68
State Takeover Legislation.......... 69
Appraisal Rights.................... 70
Amendments to Charters.............. 71
Amendments to Bylaws................ 72
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No Preemptive Rights................ 72
Redemption of Capital Stock......... 72
Dividend Sources.................... 73
Duration of Proxies................. 73
Stockholder Action.................. 73
Nomination Procedures and
Stockholder Proposals............ 74
Special Stockholder Meetings........ 74
Cumulative Voting................... 74
Size of the Board of Directors;
Staggered Board.................. 75
Removal of Directors................ 75
Vacancies........................... 76
Indemnification of Directors and
Officers......................... 77
Limitation of Personal Liability of
Directors........................ 79
Case Law and Court Systems.......... 79
OWNERSHIP OF FOUR MEDIA COMMON
STOCK............................... 80
THE SPECIAL MEETING................... 82
Matters Relating to the Special
Meeting.......................... 82
Vote Necessary to Approve the Merger
Agreement and the Merger......... 83
Proxies............................. 83
Proxy Solicitation.................. 84
Other Business; Adjournments........ 84
SUBMISSION OF STOCKHOLDER PROPOSALS... 85
EXPERTS............................... 85
LEGAL MATTERS......................... 85
ANNEX A -- Agreement and Plan of
Merger.............................. A-1
ANNEX B -- Opinion of Houlihan Lokey
Howard & Zukin Financial Advisors... B-1
ANNEX C -- Section 262 of the Delaware
General Corporation Law............. C-1
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<PAGE> 8
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: WHAT WILL I RECEIVE IN THE MERGER?
A: If we complete the merger, you will receive, in exchange for each share of
Four Media common stock you hold on the date of the merger, 0.16129 of a
share of Class A Liberty Media Group tracking stock and $6.25 in cash. We
will not issue fractional shares in the merger. You will receive cash based
on the market price of Class A Liberty Media Group tracking stock instead of
any fractional share.
For a more complete description of what you will receive in the merger, see
the section entitled "The Proposed Merger -- Structure of the Merger; Merger
Consideration" on page 28.
Q: WHAT IS LIBERTY MEDIA GROUP TRACKING STOCK?
A: Liberty Media Group tracking stock is a class of common stock of AT&T that is
designed to reflect the economic performance of the businesses and assets of
the Liberty Media Group. All of the Liberty Media Group tracking stock to be
issued in the merger consists of Class A Liberty Media Group tracking stock.
Q: DOES FOUR MEDIA'S BOARD OF DIRECTORS RECOMMEND VOTING IN FAVOR OF THE MERGER
AGREEMENT AND THE MERGER?
A: Yes. After careful consideration, your board of directors unanimously
determined the merger to be fair to you and in your best interests as a
stockholder of Four Media and has declared the merger advisable. Four Media's
board of directors unanimously approved the merger agreement and the merger
and unanimously recommends that you vote in favor of the merger agreement and
the merger.
For a more complete description of the recommendation of and factors
considered by Four Media's board of directors, see the sections entitled "The
Proposed Merger -- Four Media's Reasons for the Merger" on page 31 and
"-- Recommendation of Four Media's Board of Directors" on page 34.
Q: WILL I RECOGNIZE A TAXABLE GAIN OR LOSS FOR U.S. FEDERAL INCOME TAX PURPOSES
IN THE MERGER?
A: We expect that, if the merger is completed, you will recognize gain or loss
equal to the difference between:
- the sum of:
(1) the value of the Class A Liberty Media Group tracking stock you receive
in the merger;
(2) the cash consideration you receive in the merger; and
(3) any cash you receive instead of fractional shares in the merger; and
- your tax basis in your Four Media common stock.
However, we strongly encourage you to consult your own tax advisor to
determine your particular tax consequences.
For a more complete description of the tax consequences of the merger and
some of the related risks, see the section entitled "The Proposed
Merger -- Material U.S. Federal Income Tax Consequences" on page 39.
Q: ARE THERE RISKS I SHOULD CONSIDER IN DECIDING WHETHER TO VOTE FOR THE MERGER
AGREEMENT AND THE MERGER?
A: Yes. For example, the number of shares of Class A Liberty Media Group
tracking stock that you will receive in the merger will not be adjusted based
on changes in the market prices of Class A Liberty Media Group tracking stock
before the completion of the merger. As a result you will not know the value
of the shares you will receive in the merger at the time you vote on the
merger. Four Media is not permitted to "walk away" from the merger or
resolicit the vote of its stockholders based on changes in the market value
of Class A Liberty Media Group tracking stock. WE URGE YOU TO OBTAIN CURRENT
MARKET QUOTATIONS OF CLASS A LIBERTY MEDIA GROUP TRACKING STOCK (NYSE: LMG.A)
AND FOUR MEDIA COMMON STOCK (NASDAQ: FOUR).
1
<PAGE> 9
In evaluating the merger, you should carefully consider these and other
factors discussed in the section entitled "Risk Factors Relating to the
Merger" on page 20.
Q: WHAT DO I NEED TO DO NOW?
A: We urge you to read this proxy statement/prospectus carefully, including its
annexes, and to consider how the merger affects you as a stockholder. You may
also want to review the documents referenced under "Summary -- Where You Can
Find More Information" on page 17.
Q: HOW DO I VOTE?
A: Simply indicate on your proxy card how you want to vote, and sign and mail
your proxy card in the enclosed return envelope as soon as possible so that
your shares may be represented at the special meeting. If you do not include
instructions on how to vote your proxy, we will vote your shares "FOR"
approval and adoption of the merger agreement and the merger unless your
shares are held in a brokerage account. If you fail to return your proxy card
or to vote in person, the effect will be a vote against the merger agreement
and the merger. For a more complete description of voting at the meeting, see
the section entitled "The Special Meeting -- Proxies" on page 83.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE MY
SHARES FOR ME?
A: Your broker will vote your shares only if you provide instructions on how to
vote in accordance with the information and procedures provided to you by
your broker. If you do not instruct your broker to vote your shares, it will
be equivalent to voting against the merger agreement and the merger.
For a more complete description of voting shares held in "street name," see
the section entitled "The Special Meeting -- Proxies" on page 83.
Q: WHAT DO I DO IF I WANT TO CHANGE MY VOTE?
A: If you want to change your vote, send the secretary of Four Media a
later-dated, signed proxy card before the special meeting or attend the
meeting and vote in person. You may also revoke your proxy by sending written
notice to the secretary of Four Media before the meeting.
For a more complete description of how to change your vote, see the section
entitled "The Special Meeting -- Proxies" on page 83.
Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A: No. After we complete the merger, we will send you written instructions for
exchanging your Four Media stock certificates for Class A Liberty Media Group
tracking stock certificates and the cash portion of the merger consideration,
which will be paid by check.
Q: WHEN DO YOU EXPECT TO COMPLETE THE MERGER?
A: We are working toward completing the merger as quickly as possible. We expect
to complete the merger during the second quarter of 2000.
For a description of the conditions to completion of the merger, see the
section entitled "The Merger Agreement -- Conditions to Completing the
Merger" on page 46.
Q: AM I ENTITLED TO APPRAISAL RIGHTS?
A: Under Delaware law, you have the right to an appraisal of the value of your
shares of Four Media common stock in connection with the merger. We have
included a discussion of these rights on page 42 and we encourage you to read
it.
Q: WHOM SHOULD I CALL WITH QUESTIONS?
A: You should call Four Media's Investor Relations department at (818) 840-7000
with any questions about the merger.
You may also obtain additional information about Four Media, Liberty Media
Group and AT&T from documents filed with the Securities and Exchange
Commission by following the instructions in the section entitled
"Summary -- Where You Can Find More Information" on page 17.
2
<PAGE> 10
SUMMARY
This summary highlights selected information from this proxy
statement/prospectus and may not contain all the information that is important
to you. To better understand the merger, you should read this entire document
carefully, including the Agreement and Plan of Merger attached as Annex A and
the other documents to which we refer you. In addition, we incorporate by
reference in this proxy statement/ prospectus important business and financial
information about Four Media, the Liberty Media Group and AT&T. You may obtain
the information incorporated by reference into this proxy statement/prospectus
without charge by following the instructions in the section entitled "-- Where
You Can Find More Information" on page 17.
THE COMPANIES
FOUR MEDIA COMPANY
2813 WEST ALAMEDA AVENUE
BURBANK, CALIFORNIA
TEL: (818) 840-7000
Four Media is a leading provider of technical and creative services to
producers and distributors of television programming, television commercials,
feature films and other entertainment content, as well as to owners of film and
television libraries. The name Four Media Company is derived from its core
competencies in film, video, sound and data. These services include the
processing, enhancement, storage and distribution of film and video from the
point it leaves the camera until it is shown, in various formats, to audiences
around the world.
LIBERTY MEDIA CORPORATION
9197 SOUTH PEORIA STREET
ENGLEWOOD, COLORADO 80112
TEL: (720) 875-5400
Liberty is a leading media, entertainment and communications company with
interests in a diverse group of public and private companies with
well-recognized brand names, such as Encore, STARZ!, Discovery, TV Guide, Fox,
USA Networks, QVC, CNN, TBS and Sprint PCS, which is held in trust. Liberty is
the primary operating company of the "Liberty Media Group," which is a "tracking
stock" group of AT&T.
AT&T CORP.
32 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10013
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 domestic long distance,
international long distance, regional, local and wireless telecommunications
services, and broadband and Internet communication transmission services. AT&T
also provides billing, directory, and calling card services to support these
communications services. Internet users can obtain information about AT&T and
its services at http://www.att.com.
On May 6, 1999 AT&T agreed to acquire MediaOne Group, Inc. The MediaOne
Group merger is described briefly on page 26 of this proxy statement/prospectus.
THE PROPOSED MERGER (SEE PAGE 28)
In the proposed merger, Four Media will be acquired by AT&T and will become
a member of the Liberty Media Group. Assuming all outstanding Four Media
warrants are rolled over into Class A Liberty Media tracking stock warrants, and
assuming all outstanding Four Media options are either cashed out or rolled over
into Class A Liberty Media tracking stock options, Four Media stockholders will
be entitled to receive a total of approximately 3.2 million shares of Class A
Liberty Media Group tracking stock and a total of approximately $123.0 million
in cash in the merger.
RECOMMENDATION OF FOUR MEDIA'S BOARD OF DIRECTORS (SEE PAGE 34)
After careful consideration, your board of directors unanimously determined
the merger to be fair to you and in your best interests as a stockholder of Four
Media and has declared the merger advisable. Four Media's board of directors
unanimously approved the merger agreement and the merger and unanimously
recommends you vote in favor of the merger agreement and the merger.
3
<PAGE> 11
FOUR MEDIA'S REASONS FOR THE MERGER
(SEE PAGE 31)
Four Media believes the merger affords its stockholders the opportunity to
realize a significant premium for their shares over the average trading price of
Four Media common stock at the time Four Media reached tentative agreement with
Liberty on the consideration to be received in the merger. In determining to
approve the merger, Four Media's board of directors also considered that Four
Media is permitted to accept alternative acquisition proposals under limited
circumstances.
OPINION OF FOUR MEDIA'S FINANCIAL ADVISOR
(SEE PAGE 34)
Four Media's financial advisor, Houlihan, Lokey, Howard & Zukin Financial
Advisors, has rendered a written opinion to Four Media's board of directors
that, as of December 6, 1999, the merger consideration was fair, from a
financial point of view, to the holders of Four Media common stock. The opinion
is subject to the considerations, qualifications and limitations set forth in
the opinion. The opinion is attached to this proxy statement/prospectus as Annex
B and we urge you to read it in its entirety.
THE MERGER AGREEMENT AND OTHER TRANSACTION AGREEMENTS (SEE PAGES 46 AND 58)
We have attached the merger agreement, which is the legal document that
governs the merger, to this proxy statement/prospectus as Annex A. We encourage
you to read the merger agreement carefully. As more fully described in this
proxy statement/prospectus, Four Media stockholders holding approximately 70% of
Four Media's outstanding common stock have entered into voting agreements with
Liberty under which these stockholders agreed to vote in favor of the merger
agreement and the merger. We have filed these voting agreements as exhibits to
AT&T's registration statement for the shares of Liberty Media Group tracking
stock to be issued in the merger. Please see the section titled "-- Where You
Can Find More Information," on page 17, for instructions on how to obtain copies
of these agreements.
CONDITIONS TO THE MERGER (SEE PAGE 46)
We will complete the merger only if a number of mutual conditions are
satisfied or waived, including the following:
- the merger agreement and the merger must be approved and adopted by Four
Media's stockholders at the special meeting;
- the applicable waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 must expire or be terminated; and
- the shares of Class A Liberty Media Group tracking stock that will be issued
in the merger must be authorized for listing on the New York Stock Exchange,
subject only to official notice of issuance.
AT&T's obligation to complete the merger is conditioned on the satisfaction
or waiver of a number of conditions that are for Liberty's benefit. These
conditions may only be waived by Liberty and include the following:
- Four Media must have performed and complied in all material respects with
all its obligations under the merger agreement;
- no law may be in effect that:
(1) prohibits us from completing the merger, or permits its completion only
subject to a condition or restriction that has had or would have a
material adverse effect on Liberty;
(2) imposes material damages or penalties in connection with the merger;
(3) as a result of completing the merger, requires Liberty to divest a
material portion of its business or assets, or prohibits Liberty or
Four Media from engaging in any material business; or
(4) imposes material limitations on Liberty's ability to own Four Media;
- we must have obtained all required consents and approvals from governmental
authorities, including approval from the Federal Communications Commission;
and
- Four Media stockholders that are parties to registration rights agreements
must acknowledge, in writing, to Four Media and Liberty
4
<PAGE> 12
that those agreements will terminate at the effective time of the merger.
AT&T's obligation to complete the merger is also conditioned on the
satisfaction or waiver of a number of conditions that are for AT&T's benefit.
These conditions may only be waived by AT&T and include the following:
- each of Four Media and Liberty must have performed and complied in all
material respects with its obligations under the merger agreement;
- no law may be in effect that:
(1) prohibits us from completing the merger, or permits its completion only
subject to a condition or restriction that has had or would have an
adverse effect on AT&T;
(2) imposes material damages or penalties in connection with the merger;
(3) as a result of completing the merger, requires AT&T to divest any
portion of its business or assets or imposes any restrictions or
conditions on AT&T's conduct of its business, in each case that would
have an adverse effect on AT&T;
(4) imposes material limitations on AT&T's or Liberty's ability to own Four
Media;
(5) as a result of completing the merger, prohibits AT&T or any of its
material subsidiaries from engaging in any material business; or
(6) materially increases AT&T's liabilities or obligations arising out of
the merger agreement or, in AT&T's reasonable judgment, would otherwise
have an adverse effect on AT&T as a result of completing the merger;
- Four Media must hold, and be in compliance with the terms of, all licenses,
permits and governmental authorizations necessary to the ownership of its
property or to the conduct of its business;
- we must have obtained all required consents and approvals from government
authorities, including approval from the Federal Communications Commission;
and
- Four Media stockholders that are parties to registration rights agreements
must acknowledge, in writing, to Four Media and AT&T that those agreements
will terminate at the effective time of the merger.
Four Media's obligation to complete the merger is conditioned on the
satisfaction or waiver of a number of conditions, including the following:
- each of Liberty, AT&T and D-Group Merger Corp. must have performed and
complied in all material respects with its obligations under the merger
agreement; and
- no law may be in effect which:
(1) prohibits us from completing the merger or permits its completion only
subject to a condition or restriction that has had or would have a
material adverse effect on Liberty; or
(2) has or is reasonably likely to have a material adverse effect on
Liberty.
TERMINATION (SEE PAGE 51)
Four Media, Liberty and AT&T can mutually agree to terminate the merger
agreement at any time before the merger is completed. In addition, any of Four
Media, Liberty or AT&T may terminate the merger agreement if any of the
following occurs:
- we do not complete the merger by July 31, 2000, except that this deadline
may be extended to September 30, 2000 by Four Media, Liberty or AT&T if the
merger is not completed by July 31, 2000 generally because we do not receive
required governmental approvals, or injunctions or legal proceedings are
pending;
- any other party materially breaches any representation, warranty, covenant
or agreement contained in the merger agreement that is not curable and would
prevent the satisfaction of the applicable conditions to completing the
merger;
- a court or other governmental body permanently prohibits the merger; or
- Four Media's stockholders do not approve and adopt the merger agreement and
the merger, except that AT&T may not terminate the merger agreement under
this circumstance without Liberty's consent.
5
<PAGE> 13
Liberty may terminate the merger agreement if Four Media's board of
directors:
- withdraws or modifies, in a manner adverse to Liberty or AT&T, its approval
or recommendation of the merger; or
- approves or recommends, or authorizes Four Media to enter into an agreement
relating to, an alternative transaction of the nature described in the
merger agreement, such as a merger, sale of assets or other business
combination.
Four Media may terminate the merger agreement if, at a time when its
obligation to refrain from engaging in discussions regarding alternative
acquisitions is not in effect, its board of directors determines in good faith,
after receiving advice from a nationally recognized financial advisor, that
another unsolicited, proposed transaction is superior to the merger.
TERMINATION FEES (SEE PAGE 53)
Four Media may be obligated to pay Liberty a termination fee of $6.5
million if the merger agreement is terminated in connection with a proposal for
an alternative transaction. The payment of the fee will depend upon the
particular circumstances of the termination.
NO OTHER NEGOTIATIONS INVOLVING FOUR MEDIA (SEE PAGE 53)
Until we complete the merger or terminate the merger agreement, Four Media
has agreed not to take any of the following actions:
- initiate, solicit, encourage or facilitate the making of any offer or
proposal which is or is reasonably likely to lead to an alternative
transaction;
- enter into any agreement regarding any alternative transaction; or
- in the event of an unsolicited proposal for an alternative transaction,
engage in negotiations or discussions with, or provide any non-public
information to anyone other than Liberty, AT&T, D-Group Merger Corp. or any
of their affiliates or representatives.
However, Four Media may take any of these actions, other than solicitation
or initiation, if, following the date of the merger agreement, it receives an
unsolicited proposal for an alternative transaction and both of the following
occur:
- Four Media's board of directors reasonably determines in good faith, after
consulting with a nationally recognized financial advisor, that the terms of
the proposed alternative transaction are more favorable to Four Media and
its stockholders than the merger, and financing for the transaction, to the
extent required, is either committed or, in the good faith judgment of Four
Media's board of directors, reasonably capable of being obtained; and
- Four Media's board of directors reasonably determines in good faith, after
consulting with legal counsel, that the board is, or is reasonably likely to
be, required to take the action in order to properly discharge its fiduciary
duties under applicable law.
Four Media's board of directors has also agreed to include in this proxy
statement/ prospectus its recommendation in favor of approving the merger
agreement and the merger. However, Four Media's board may withdraw or modify its
recommendation if:
- Four Media receives a proposal for an alternative transaction that was not
solicited or initiated by Four Media;
- Four Media's board of directors makes the determination described above that
the proposal is more favorable than the merger; and
- Four Media's board of directors reasonably determines in good faith, after
consulting with legal counsel, that the withdrawal or modification is, or is
reasonably likely to be, required in order for it to properly discharge its
fiduciary duties under applicable law.
REGULATORY MATTERS (SEE PAGE 41)
We have made or will make filings, and have taken or will take other
actions necessary to obtain required approvals from governmental authorities in
connection with the proposed merger, including U.S. antitrust authorities and
the Federal Communications Commission, with a view to completing the merger as
soon as possible.
On December 20, 1999, we filed the requisite Pre-Merger Notification and
Report Forms under the Hart-Scott-Rodino Antitrust Improvements
6
<PAGE> 14
Act of 1976, as amended, with the Department of Justice and the Federal Trade
Commission. The waiting period initiated by these filings expired at 11:59 p.m.
on January 19, 2000. The Department of Justice or the Federal Trade Commission,
as well as a foreign regulatory agency or government, state or private person,
may challenge the merger at any time before its completion.
We expect to obtain all material required governmental approvals and
complete the merger in the second quarter of 2000. We cannot be sure, however,
that we will obtain these approvals, or that we will obtain them without
conditions that would be detrimental to AT&T or Four Media. AT&T is not required
to close the merger if any governmental approval for the merger contains
conditions that, in its reasonable judgment, would be adverse to or burdensome
on AT&T or its subsidiaries or their relationships with federal or state
governmental authorities.
ACCOUNTING TREATMENT (SEE PAGE 38)
The merger will be accounted for as a purchase in accordance with generally
accepted accounting principles.
NEW YORK STOCK EXCHANGE LISTING
We will use reasonable efforts to cause the shares of Class A Liberty Media
Group tracking stock that will be issued in the merger to be authorized for
listing on the New York Stock Exchange, subject to official notice of issuance,
before we complete the merger. It is a condition to the closing of the merger
that this listing authorization be obtained.
INTERESTS OF FOUR MEDIA'S OFFICERS AND DIRECTORS IN THE MERGER (SEE PAGE 38)
When considering the recommendation of Four Media's board of directors, you
should be aware that members of Four Media's management and board of directors
may be deemed to have interests in the merger that are different from, or in
addition to, yours as a stockholder of Four Media. All of Four Media's directors
and executive officers hold options under Four Media's 1997 Stock Plan or its
1997 Director Option Plan and several officers have been granted options outside
of these plans.
In connection with the merger, all outstanding Four Media options and
warrants, other than options that are cashed out, will be rolled over into
options and warrants to purchase shares of Class A Liberty Media Group tracking
stock. Holders of options that are vested and exercisable on the closing date of
the merger may elect to receive a cash payment for their options instead of
having their options rolled over.
As of February 9, 2000, Four Media's directors and executive officers held
options to purchase a total of 3,676,422 shares of Four Media common stock. Of
those options, 823,088 were vested. If all Four Media options held by Four
Media's directors and executive officers were rolled over into Class A Liberty
Media Group options, those directors and executive officers would receive
options to purchase a total of 1,185,940 shares of Class A Liberty Media Group
tracking stock at a weighted average exercise price of $24.81 per share. If all
vested Four Media options held by Four Media's directors and executive officers
were cashed out in connection with the merger, those directors and executive
officers would receive payments totaling approximately $3.9 million.
Two of Four Media's directors are affiliated with Warburg, Pincus Equity
Partners, L.P., one of Four Media's principal stockholders. Warburg, Pincus
holds a presently exercisable warrant to purchase 1.1 million shares of Four
Media common stock. At the effective time of the merger, this warrant will be
rolled over into a warrant to purchase shares of Class A Liberty Media Group
tracking stock. Warburg, Pincus Equity Partners, L.P. and a number of its
affiliated entities have entered into a voting agreement with Liberty in
connection with the merger.
For a more complete description of how Four Media stock options and
warrants will be treated in the merger, see the section entitled "The Proposed
Merger -- Treatment of Four Media Stock Options and Warrants" on page 28.
INDEMNIFICATION AND INSURANCE (SEE PAGE 39)
The merger agreement provides for the indemnification of Four Media's
officers, directors and employees and for the continuation of directors and
officers liability insurance.
7
<PAGE> 15
VOTE REQUIRED (SEE PAGE 83)
Approval and adoption of the merger agreement and the merger requires the
favorable vote of a majority of the voting power of the Four Media common stock.
Four Media's directors and executive officers currently intend to vote in favor
of the merger agreement and the merger. As described below, Robert T. Walston,
Four Media's Chief Executive Officer and Chairman of the Board, has entered into
a voting agreement in connection with the merger. As of the record date for the
special meeting, Four Media's directors and executive officers beneficially
owned and were entitled to vote approximately 70% of the shares of Four Media
common stock entitled to vote at the special meeting.
VOTING AGREEMENTS (SEE PAGE 58)
A number of Four Media's principal stockholders, including Robert T.
Walston, through an entity in which he is a limited partner, have entered into
voting agreements with Liberty. Under the voting agreements, these stockholders
have agreed to vote their shares of Four Media common stock in favor of the
merger agreement and the merger. As of the record date for the special meeting,
the shares of Four Media common stock subject to these voting agreements
represented approximately 70% of the total voting power of the Four Media common
stock entitled to vote at the special meeting. As a result of these voting
agreements, the votes represented by these shares will be sufficient to
constitute a quorum and to approve the merger agreement and the merger at the
special meeting.
For a description of these voting agreements, see "Other Transaction
Agreements -- Voting Agreements" on page 58.
RESTRUCTURING TRANSACTIONS
The merger agreement provides that Liberty and AT&T will complete various
restructuring transactions following the merger. As a result of these
transactions, Four Media, as the surviving entity in the merger, will be a
wholly owned subsidiary of Liberty and a member of the Liberty Media Group.
DIVIDENDS
AT&T does not expect to pay any dividends on the Class A Liberty Media
Group tracking stock for the foreseeable future.
RESTRICTIONS ON THE ABILITY TO SELL CLASS A LIBERTY MEDIA GROUP TRACKING STOCK
All shares of Class A Liberty Media Group tracking stock received by you in
connection with the merger will be freely transferable unless you are considered
an "affiliate" of Four Media or AT&T under the Securities Act of 1933. In that
case, prior to the first anniversary of the merger, sales may be made only under
a registration statement or an exemption under the Securities Act.
8
<PAGE> 16
SELECTED HISTORICAL FINANCIAL INFORMATION
AT&T
In the table below, we provide you with selected historical consolidated
financial data of AT&T. AT&T prepared this information using its consolidated
financial statements as of the dates indicated and for each of the fiscal years
in the five-year period ended December 31, 1998 and for the nine-month periods
ended September 30, 1999 and 1998. AT&T derived the consolidated income
statement data below for each of the three years ended December 31, 1998, and
the consolidated balance sheet data at December 31, 1998 and 1997 from financial
statements audited by PricewaterhouseCoopers LLP, independent accountants. AT&T
derived the remaining data from unaudited consolidated financial statements.
This information is only a summary and you should read it together with the
financial information we incorporate by reference in this proxy
statement/prospectus. For copies of the information we incorporate by reference,
see "-- Where You Can Find More Information" on page 17.
Income from continuing operations for the nine months ended September 30,
1999 includes $0.8 billion of net nonoperational charges, primarily including an
in-process research and development charge associated with AT&T's merger with
Tele-Communications, Inc. (TCI), equity losses associated with investments in At
Home Corporation and Cablevision Systems Corporation, and gains on the sale of
businesses. Income from continuing operations for the nine months ended
September 30, 1998 and for the year ended December 31, 1998 includes net
nonoperational charges of $1.3 billion and $1.1 billion, respectively, including
restructuring and other charges as well as benefits from gains on the sales of
businesses. Income from continuing operations for 1995 includes $2.0 billion of
restructuring and other charges. The number of shares of AT&T common stock
outstanding and per share data have been adjusted to reflect the AT&T
three-for-two stock split paid on April 15, 1999. The number of shares of
Liberty Media Group tracking stock outstanding and per share data reflect a
two-for-one stock split paid on June 11, 1999.
AT&T -- SELECTED HISTORICAL FINANCIAL INFORMATION
(UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
AT OR FOR THE NINE
MONTHS ENDED
SEPTEMBER 30, AT OR FOR THE YEAR ENDED DECEMBER 31,
------------------ -----------------------------------------------
1999(1) 1998 1998 1997 1996 1995 1994
-------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues.............................................. $ 46,057 $39,695 $53,223 $51,577 $50,688 $48,449 $46,063
Operating income...................................... 8,418 4,301 7,487 6,836 8,709 5,169 7,393
Income from continuing operations..................... 3,479 3,247 5,235 4,249 5,458 2,981 4,230
Income from continuing operations -- available to AT&T
common shareowners.................................. 4,297 3,247 5,235 4,249 5,458 2,981 4,230
Weighted average AT&T common shares and potential
common shares....................................... 3,140 2,715 2,700 2,683 2,651 2,612 2,571
Per AT&T common share -- basic:
Income from continuing operations(2)................ 1.41 1.21 $ 1.96 $ 1.59 $ 2.07 $ 1.15 $ 1.65
Per AT&T common share -- diluted:
Income from continuing operations(3)................ 1.39 1.20 1.94 1.59 2.07 1.14 1.64
Cash dividends declared per AT&T common share......... 0.66 0.66 0.88 0.88 0.88 0.88 0.88
Loss from continuing operations available to Liberty
Media Group shareowners............................. 818 -- -- -- -- -- --
Weighted average Liberty Media Group shares........... 1,257 -- -- -- -- -- --
Liberty Media Group loss per share -- basic......... 0.65 -- -- -- -- -- --
Liberty Media Group loss per share -- diluted....... 0.65 -- -- -- -- -- --
Cash dividends declared per Liberty Media Group
share............................................... -- -- -- -- -- -- --
-------- ------- ------- ------- ------- ------- -------
BALANCE SHEET DATA:
Total assets.......................................... $161,806 $58,318 $59,550 $61,095 $57,348 $62,864 $57,817
Long-term debt........................................ 22,073 6,079 5,556 7,857 8,878 8,913 9,138
Shareowners' equity................................... 74,763 24,164 25,522 23,678 21,092 17,400 18,100
</TABLE>
- -------------------------
(1) On March 9, 1999, the TCI merger closed. The TCI merger was recorded as a
purchase. Accordingly, the results of operations of TCI and Liberty Media
Group have been included in AT&T's consolidated results since the date the
merger closed. In conjunction with the TCI merger, AT&T issued Liberty Media
Group
9
<PAGE> 17
tracking stock to reflect the separate economic performance of the Liberty
Media Group. AT&T does not have a "controlling financial interest" for
financial accounting purposes in the Liberty Media Group, therefore AT&T
accounts for the Liberty Media Group as an equity investment. Because the
Liberty Media Group is reflected by a separate tracking stock, AT&T excludes
all of the earnings or losses related to the Liberty Media Group from the
earnings available to the holders of AT&T common stock. Certain 1999 amounts
for AT&T have been reclassified to conform with the current presentation.
(2) Basic earnings per share from continuing operations of AT&T common stock
prior to the three-for-two stock split, for the five years ended December
31, 1998 through December 31, 1994, respectively, were $2.93, $2.39, $3.10,
$1.72 and $2.48, respectively.
(3) Diluted earnings per share from continuing operations of AT&T common stock
prior to the three-for-two stock split, for the five years ended December
31, 1998 through December 31, 1994, respectively, were $2.91, $2.38, $3.09,
$1.71 and $2.47, respectively.
10
<PAGE> 18
Four Media
In the table below, we provide you with selected historical financial data
of Four Media. The data presented below is derived from Four Media's audited
consolidated financial statements for each of the fiscal years in the five year
period ended August 1, 1999 and Four Media's unaudited consolidated financial
statements for three months ended October 31, 1999 and November 1, 1998. Fiscal
years ended July 30, 1995, August 4, 1996, August 3, 1997 and August 2, 1998
were audited by PricewaterhouseCoopers LLP, independent accountants, and the
fiscal year ended August 1, 1999 was audited by Ernst & Young LLP, independent
auditors. This information is only a summary and you should read it together
with the financial information incorporated by reference in this proxy
statement/prospectus. See "-- Where You Can Find More Information" on page 17.
<TABLE>
<CAPTION>
AT OR FOR THE THREE
MONTHS ENDED AT OR FOR THE FISCAL YEARS ENDED(1)
------------------------- --------------------------------------------------------
OCTOBER 31, NOVEMBER 1, AUGUST 1, AUGUST 2, AUGUST 3, AUGUST 4, JULY 30,
1999 1998 1999 1998 1997 1996 1995
----------- ----------- --------- --------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Television............................ $ 37,480 $ 33,077 $125,491 $ 60,405 $ 30,768 $23,343 $22,712
Mastering and distribution............ 16,074 9,829 41,571 $ 35,633 $ 26,658 23,468 20,677
Broadcast and syndication............. 5,649 5,331 22,609 22,701 23,694 20,901 16,163
Film and animation.................... 2,217 1,312 7,313 10,429 3,407 2,316 1,452
-------- -------- -------- -------- -------- ------- -------
Total revenues.................. 61,420 49,549 196,984 129,168 84,527 70,028 61,004
-------- -------- -------- -------- -------- ------- -------
Operating costs:
Direct operating costs................ 32,526 29,272 115,983 81,144 53,184 43,411 38,696
Depreciation and amortization......... 8,001 6,356 27,476 18,191 13,175 10,165 6,241
Sales, general and administrative..... 11,241 8,417 34,901 18,504 12,899 11,116 10,918
-------- -------- -------- -------- -------- ------- -------
Total operating costs........... 51,768 44,045 178,360 117,839 79,258 64,692 55,855
-------- -------- -------- -------- -------- ------- -------
Income from operations................ 9,652 5,504 18,624 11,329 5,269 5,336 5,149
Other income (expense):
Interest income....................... 129 -- 1,425 12 -- -- --
Interest expense...................... (3,407) (3,521) (14,178) (8,151) (3,887) (3,906) (2,917)
Other income (expense)(2)............. 87 1 (933) -- -- -- --
-------- -------- -------- -------- -------- ------- -------
Total other income (expense).... (3,191) (3,520) (13,686) (8,139) (3,887) (3,906) (2,917)
-------- -------- -------- -------- -------- ------- -------
Income before income tax benefits and
extraordinary item.................. 6,461 1,984 4,938 3,190 1,382 1,430 2,232
Income tax benefits (provision)......... (2,797) -- -- -- -- 994 988
-------- -------- -------- -------- -------- ------- -------
Income before extraordinary item...... 3,664 1,984 4,938 3,190 1,382 2,424 3,220
Extraordinary loss on early
extinguishment of debt................ -- -- -- (2,449) -- -- --
-------- -------- -------- -------- -------- ------- -------
Net income...................... 3,664 1,984 4,938 741 1,382 2,424 3,220
======== ======== ======== ======== ======== ======= =======
Earnings per common share -- Basic:
Income before extraordinary item...... $ 0.19 $ 0.19 $ 0.37 $ 0.33 $ 0.17 $ 0.37 $ 0.50
Extraordinary item.................... -- -- -- (0.25) -- -- --
-------- -------- -------- -------- -------- ------- -------
Net income...................... $ 0.19 $ 0.19 $ 0.37 $ 0.08 $ 0.17 $ 0.37 $ 0.50
======== ======== ======== ======== ======== ======= =======
Earnings per common share -- Diluted:
Income before extraordinary item...... $ 0.19 $ 0.16 $ 0.34 $ 0.29 $ 0.16 $ 0.37 $ 0.50
Extraordinary item.................... -- -- -- (0.22) -- -- --
-------- -------- -------- -------- -------- ------- -------
Net income...................... $ 0.19 $ 0.16 $ 0.34 $ 0.07 $ 0.16 $ 0.37 $ 0.50
======== ======== ======== ======== ======== ======= =======
Weighted average number of common shares
outstanding:
Basic................................. 19,693 10,203 13,271 9,634 7,971 6,475 6,475
Diluted............................... 19,803 12,275 14,729 10,898 8,563 6,475 6,475
BALANCE SHEET DATA:
Total assets.......................... 350,966 302,036 343,543 217,298 132,237 81,827 71,780
Long-term debt........................ 176,031 198,109 171,321 124,671 54,633 42,978 38,472
Total debt............................ 188,960 205,487 184,296 130,855 65,192 49,131 41,942
Total stockholders' equity............ 128,577 71,734 124,971 67,113 49,738 22,143 19,617
</TABLE>
- -------------------------
(1) Four Media has made a number of significant acquisitions in each of the
years presented.
(2) Other expense is comprised primarily of costs incurred related to Four
Media's uncompleted bond offering during fiscal 1999.
11
<PAGE> 19
SELECTED PRO FORMA CONDENSED FINANCIAL INFORMATION
In the table below, we provide you with unaudited selected pro forma
condensed financial information for AT&T as if its merger with MediaOne Group
had been completed on January 1, 1998 for income statement purposes and on
September 30, 1999 for balance sheet purposes. In addition, this information
reflects the TCI merger as if it had been completed on January 1, 1998 for
income statement purposes. TCI is reflected in AT&T's balance sheet as of
September 30, 1999, therefore there is no TCI pro forma impact on the balance
sheet.
This unaudited selected pro forma condensed financial information should be
read together with the separate historical financial statements and accompanying
notes of AT&T and of MediaOne Group, which we incorporate by reference in this
proxy statement/prospectus. AT&T filed detailed unaudited pro forma financial
statements with the SEC on January 6, 2000, which we incorporate by reference in
this proxy statement/prospectus. For copies of the information we incorporate by
reference, see "-- Where You Can Find More Information" on page 17. You should
not rely on the unaudited selected pro forma financial information as an
indication of the results of operations or financial position that AT&T would
have achieved if the TCI and MediaOne Group mergers had taken place earlier or
of the results of operations or financial position of AT&T after the completion
of the MediaOne Group and TCI mergers.
Income from continuing operations attributable to holders of AT&T common
stock excludes the results of the Liberty Media Group and dividend requirements
on AT&T preferred stock. The MediaOne Group and TCI mergers will have no effect
on Liberty Media Group tracking stock.
The selected pro forma condensed financial information of AT&T in the table
below, and the pro forma financial statements of AT&T we incorporate by
reference in this proxy statement/prospectus, do not show any adjustments to
reflect the merger of Four Media with a subsidiary of AT&T, as the merger would
not have a material effect on the results of operations or financial position of
AT&T, whether or not the pending AT&T/MediaOne Group merger is completed.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
1999 1998
-------------- -------------
(IN MILLIONS, EXCEPT PER SHARE
DATA)
<S> <C> <C>
UNAUDITED PRO FORMA CONDENSED INCOME STATEMENT DATA:
Revenues.................................................. $49,000 $62,308
Operating income.......................................... $ 7,389 $ 6,225
Income from continuing operations attributable to AT&T
common shareowners...................................... $ 4,358 $ 4,169
Weighted average shares and potential shares of AT&T
common stock............................................ 3,911 3,874
Basic earnings per AT&T common share--Income from
continuing operations................................... $ 1.15 $ 1.11
Diluted earnings per AT&T common share--Income from
continuing operations................................... $ 1.13 $ 1.08
Basic and diluted loss per Liberty Media Group share
(Class A and Class B)................................... $ 0.82 $ 0.25
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30,
1999
-------------
<S> <C>
UNAUDITED PRO FORMA CONDENSED BALANCE SHEET DATA:
Total assets.............................................. $251,495
Long-term debt............................................ 29,518
Shareowners' equity -- AT&T common stock.................. 75,251
Shareowners' equity -- Liberty Media Group tracking
stock................................................... 35,519
</TABLE>
12
<PAGE> 20
UNAUDITED COMPARATIVE PER SHARE DATA
In the first table below, we provide you with AT&T's historical per share
information as of and for the nine months ended September 30, 1999 and as of and
for the year ended December 31, 1998. In addition, we provide AT&T pro forma
information as of and for the nine months ended September 30, 1999 and for the
year ended December 31, 1998. In the column labeled "AT&T Pro Forma Including
MediaOne Group," we have assumed that AT&T had completed the pending
AT&T/MediaOne Group merger and its merger with TCI on January 1, 1998 for income
statement purposes, and had completed the pending AT&T/MediaOne Group merger on
September 30, 1999 for balance sheet purposes. In the column labeled "AT&T Pro
Forma Excluding MediaOne Group," we have assumed that AT&T had completed the TCI
merger on January 1, 1998 for income statement purposes, and has not completed
the pending AT&T/MediaOne Group merger. AT&T's historical balance sheet as of
September 30, 1999 gives effect to the TCI merger. Following the merger
described in this proxy statement/prospectus, Four Media will be a member of the
Liberty Media Group. Therefore, the merger will have no impact on earnings or
dividends per share of AT&T common stock.
In the second table below, we provide you with historical per share
information for the Liberty Media Group as of and for the seven months ended
September 30, 1999 and we provide pro forma per share information for the
Liberty Media Group as of and for the nine months ended September 30, 1999 and
for the year ended December 31, 1998. In addition, we provide historical per
share information for Four Media as of and for the three months ended October
31, 1999 and as of and for the fiscal year ended August 1, 1999 as well as
conformed historical per share and equivalent per share information for the nine
months ended September 30, 1999 and the year ended December 31, 1998. In the
column labeled "Liberty Media Group Pro Forma" we have assumed that AT&T had
completed its merger with TCI and the merger of Four Media on January 1, 1998
for income statement purposes, and that the merger of Four Media was completed
on September 30, 1999 for balance sheet purposes. Upon completion of the Four
Media merger, the total consideration will be allocated to the specific
identifiable tangible and intangible assets and liabilities of Four Media based
on final determination of their fair values. For purposes of this presentation,
the preliminary excess of the consideration over the net assets acquired is
amortized over 20 years. The Liberty Media Group's historical balance sheet as
of September 30, 1999 gives effect to the TCI merger. The column labeled "Four
Media Pro Forma Equivalent" presents the per share data set forth in the column
labeled "Liberty Media Group Pro Forma" multiplied by 0.16129.
It is important that when you read this information, you read along with it
the selected pro forma condensed financial information of AT&T, as well as the
consolidated financial statements and accompanying notes of AT&T (including the
Liberty Media Group), MediaOne Group and Four Media included in the documents
that are described under "-- Where You Can Find More Information" and are
incorporated in this proxy statement/prospectus by reference. You should not
rely on the unaudited comparative per share data as an indication of the results
of operations or the financial position that would have been achieved if the
pending AT&T/MediaOne Group merger and the TCI merger had taken place earlier or
the results of operations or financial position of AT&T after completion of
those transactions.
13
<PAGE> 21
The per share data presented below for AT&T historical and pro forma
amounts have been adjusted to reflect the three-for-two split of AT&T common
stock paid on April 15, 1999.
AT&T
<TABLE>
<CAPTION>
AT&T AT&T
PRO FORMA PRO FORMA
INCLUDING EXCLUDING
AT&T MEDIAONE MEDIAONE
HISTORICAL GROUP GROUP
---------- --------- ---------
<S> <C> <C> <C>
Book value per common share:
September 30, 1999........................................ $12.28 $19.75 $12.28
December 31, 1998(1)...................................... 9.70 N/A N/A
Income from continuing operations...........................
Earnings (loss) per common share -- basic:
For the nine months ended September 30, 1999............ 1.41 1.15 1.24
For the year ended December 31, 1998.................... 1.96 1.11 1.30
Earnings (loss) per common share -- diluted:
For the nine months ended September 30, 1999............ 1.39 1.13 1.22
For the year ended December 31, 1998.................... 1.94 1.08 1.25
Cash dividends per common share:
For the nine months ended September 30, 1999............ 0.66 N/A N/A
For the year ended December 31, 1998.................... 0.88 N/A N/A
</TABLE>
- -------------------------
(1) AT&T historical book value per common share as of December 31, 1998 prior to
adjustment for the three-for-two stock split AT&T paid on April 15, 1999 was
$14.55.
Liberty Media Group
<TABLE>
<CAPTION>
LIBERTY MEDIA LIBERTY MEDIA FOUR MEDIA
GROUP GROUP FOUR MEDIA PRO FORMA
HISTORICAL PRO FORMA HISTORICAL EQUIVALENT
------------- ------------- ----------- ----------
<S> <C> <C> <C> <C>
Book value per common share:
September 30, 1999(1)..................................... $28.08 $28.21 $ 6.50 $ 4.55
October 31, 1999.......................................... -- -- 6.53 --
August 1, 1999............................................ -- -- 6.50 --
Income from continuing operations
Earnings (loss) per common share -- basic:
For the seven months ended September 30, 1999........... (.65) -- -- --
For the nine months ended September 30, 1999(1)......... -- (.83) 0.33 (.13)
For the year ended December 31, 1998(1)................. -- (.25) 0.25 (.04)
For the three months ended October 31, 1999............. -- -- 0.19 --
For the year ended August 1, 1999....................... -- -- 0.37 --
Earnings (loss) per common share -- diluted:
For the seven months ended September 30, 1999........... (.65) -- -- --
For the nine months ended September 30, 1999(1)......... -- (.83) 0.31 (.13)
For the year ended December 31, 1998(1)................. -- (.25) 0.21 (.04)
For the three months ended October 31, 1999............. -- -- 0.19 --
For the year ended August 1, 1999....................... -- -- 0.34 --
</TABLE>
- -------------------------
(1) Since Four Media's fiscal year end differs from Liberty Media's fiscal year
end, Four Media's results have been conformed to reflect results as of and
for the periods ended September 30, 1999 and December 31, 1998.
14
<PAGE> 22
COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION
Shares of Four Media's common stock are listed on the Nasdaq National
Market. Shares of Class A and Class B Liberty Media Group tracking stock and
AT&T common stock are listed on the New York Stock Exchange. Public trading of
Class A and Class B Liberty Media Group tracking stock commenced on March 9,
1999, the date of the closing of AT&T's acquisition of TCI. Public trading of
Four Media's common stock commenced on February 7, 1997.
The following table sets forth, for the fiscal quarters indicated, the high
and low sales prices for a share of:
- Four Media's common stock as reported on Nasdaq;
- Class A and Class B Liberty Media Group tracking stock as reported on the
New York Stock Exchange Composite Transaction Tape; and
- AT&T common stock, as reported on the New York Stock Exchange Composite
Transaction Tape, as well as dividends declared on AT&T common stock.
AT&T's fiscal year ends on December 31 of each year and Four Media's fiscal
year end fluctuates, ending on the Sunday closest to August 1 of each year.
Prices for Class A and Class B Liberty Media Group tracking stock have been
adjusted to reflect the two-for-one split of Class A and Class B Liberty Media
Group tracking stock on June 11, 1999. Prices and cash dividends per share for
AT&T common stock have been adjusted to reflect the three-for-two split of AT&T
common stock on April 15, 1999. Cash dividends have never been paid with respect
to Four Media's common stock or either class of Liberty Media Group tracking
stock.
<TABLE>
<CAPTION>
CLASS A CLASS B
LIBERTY LIBERTY
FOUR MEDIA GROUP MEDIA GROUP
MEDIA COMMON TRACKING TRACKING
STOCK STOCK STOCK
----------------------- ----------------------- -----------------------
HIGH LOW HIGH LOW HIGH LOW
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
1997
First Quarter............. 10$1/2 7 $ -- -- -- --
Second Quarter............ 8 5/8 5 -- -- -- --
Third Quarter............. 8 3/8 6 1/4 -- -- -- --
Fourth Quarter............ 10 3/16 7 -- -- -- --
1998
First Quarter............. 9 3/4 7 1/8 -- -- -- --
Second Quarter............ 11 1/2 6 1/4 -- -- -- --
Third Quarter............. 9 1/8 3 3/4 -- -- -- --
Fourth Quarter............ 9 7/16 2 15/16 -- -- -- --
1999
First Quarter............. 8 9/16 5 1/4 29$1/16 $25 7/8 $29 1/8 $26 1/8
Second Quarter............ 7 21/32 5 3/8 37 1/16 26 1/4 37 1/4 27 3/8
Third Quarter............. 6 11/16 4 3/8 39 11/16 30 7/8 39 3/4 32
Fourth Quarter............ 13 4 7/16 56 13/16 35 7/8 68 3/4 38 5/8
2000
First Quarter (through
February 9, 2000)....... 15 3/8 13 1/4 58 15/16 48 7/8 73 1/8 57 7/8
<CAPTION>
AT&T COMMON STOCK
------------------------------------
CASH
DIVIDENDS
PER
HIGH LOW SHARE
---------- ---------- ----------
<S> <C> <C> <C>
1997
First Quarter............. $28 7/16 $22 3/4 $0.22
Second Quarter............ 25 11/16 20 1/2 0.22
Third Quarter............. 30 3/4 22 11/16 0.22
Fourth Quarter............ 42 11/16 28 11/16 0.22
1998
First Quarter............. 45 11/16 38 1/4 0.22
Second Quarter............ 44 15/16 37 7/16 0.22
Third Quarter............. 40 15/16 32 1/4 0.22
Fourth Quarter............ 52 11/16 37 1/2 0.22
1999
First Quarter............. 64 1/8 50 5/8 0.22
Second Quarter............ 63 50 1/16 0.22
Third Quarter............. 59 41 13/16 0.22
Fourth Quarter............ 61 41 1/2 0.22
2000
First Quarter (through
February 9, 2000)....... 55 47 13/16 --
</TABLE>
The following table sets forth the closing prices per share of Four Media's
common stock as reported on Nasdaq, and the closing prices per share of Class A
Liberty Media Group tracking stock as reported on the New York Stock Exchange,
on:
- October 29, 1999, the last full trading day prior to the public
announcement of the proposed merger; and
- February 10, 2000, the last full trading day for which closing prices
were available prior to the printing of this proxy statement/prospectus.
15
<PAGE> 23
The following table also sets forth the equivalent prices per share of
Class A Liberty Media Group tracking stock of shares of Four Media's common
stock on those dates. The equivalent price per share of Class A Liberty Media
Group tracking stock of Four Media common stock is equal to the closing price of
a share of Class A Liberty Media Group tracking stock on the applicable date
multiplied by 0.16129, the number of shares of Class A Liberty Media Group
tracking stock to be issued in the merger in exchange for each share of Four
Media common stock. These equivalent per share prices reflect the market value
of the Class A Liberty Media Group tracking stock you would receive for each of
your shares of Four Media common stock if the merger were completed on the
specified dates. Because the market price of Class A Liberty Media Group
tracking stock may increase or decrease before the merger is completed, you are
urged to obtain current market quotations. The equivalent price per share does
not include the cash portion of the merger consideration, which is $6.25 per
share of Four Media common stock.
<TABLE>
<CAPTION>
CLASS A EQUIVALENT PRICE PER SHARE
FOUR MEDIA LIBERTY MEDIA OF CLASS A LIBERTY MEDIA
COMMON STOCK STOCK GROUP TRACKING STOCK
------------ ------------- --------------------------
<S> <C> <C> <C>
DATES
October 29, 1999................... $ 6.06 $39.69 $6.40
February 10, 2000.................. $15.00 $53.00 $8.55
</TABLE>
16
<PAGE> 24
WHERE YOU CAN FIND MORE INFORMATION
Four Media and AT&T file annual, quarterly and special reports, proxy
statements and other information with the SEC, and information relating to the
Liberty Media Group is included in reports and information filed by AT&T. You
may read and copy any reports, statements or other information we file at the
SEC's public reference rooms at the following locations:
<TABLE>
<S> <C> <C>
Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W. 7 World Trade Center Citicorp Center
Room 1024 Suite 1300 500 West Madison Street
Washington, D.C. 20549 New York, NY 10048 Suite 1400
Chicago, IL 60661-2511
</TABLE>
Please call the SEC at 1-800-SEC-0330 for further information on the public
reference rooms. Four Media's SEC filings are also available to the public from
commercial document retrieval services and at the Internet world wide web site
maintained by the SEC at www.sec.gov.
AT&T filed a registration statement on Form S-4 to register with the SEC
the Class A Liberty Media Group tracking stock to be issued to Four Media
stockholders in the merger. This proxy statement/ prospectus is a part of that
registration statement and constitutes a prospectus of AT&T, as well as a proxy
statement of Four Media for the special meeting. As allowed by SEC rules, this
proxy statement/ prospectus does not contain all the information you can find in
the registration statement or the exhibits to the registration statement.
17
<PAGE> 25
The SEC allows us to "incorporate by reference" information into this proxy
statement/prospectus, which means that we can disclose important information to
you by referring you to another document filed separately with the SEC. The
information incorporated by reference is deemed to be a part of this proxy
statement/prospectus, except for any information superseded by information
contained directly in this proxy statement/prospectus. This proxy
statement/prospectus incorporates by reference the documents set forth below
that we have previously filed with the SEC. These documents contain important
information about our companies and their financial condition.
<TABLE>
<CAPTION>
FOUR MEDIA SEC FILINGS
(FILE NO. 0-21943) PERIOD
---------------------- ------
<S> <C>
Annual Report on Form 10-K............. Year ended August 1, 1999 (as amended
on November 29, 1999)
Quarterly Report on Form 10-Q.......... Quarter ended October 31, 1999
Current Reports on Form 8-K............ Filed on November 1, 1999 and December
7, 1999
Registration Statement on Form S-1/A... Filed on December 27, 1996 (description
of Four Media's common stock)
</TABLE>
<TABLE>
<CAPTION>
AT&T SEC FILINGS
(FILE NO. 1-1105) PERIOD
----------------- ------
<S> <C>
Annual Report on Form 10-K............. Year ended December 31, 1998 (as
amended on March 23, 1999 and July 12,
1999)
Quarterly Reports on Form 10-Q......... Quarters ended March 31, June 30, 1999
and September 30, 1999
Current Reports on Form 8-K............ Filed on January 8, 1999, January 27,
1999, March 9, 1999, March 10, 1999,
March 22, 1999, May 3, 1999, May 7,
1999, September 2, 1999 (including the
historical financial statements of
MediaOne Group contained therein),
October 29, 1999 (including the
unaudited pro forma financial
information contained therein),
November 22, 1999, December 6, 1999,
January 6, 2000 and January 14, 2000
Proxy Statements....................... Filed on January 8, 1999 (proxy
statement/ prospectus, including the
description of AT&T's capital stock),
March 19, 1999 and January 26, 2000
</TABLE>
Four Media and AT&T also incorporate by reference into this proxy
statement/prospectus additional documents that may be filed with the SEC from
the date of this proxy statement/prospectus to the date of the special meeting.
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.
Four Media has supplied all information contained or incorporated by
reference in this proxy statement/prospectus relating to Four Media, AT&T has
supplied all information contained or incorporated by reference in this proxy
statement/prospectus relating to AT&T, and Liberty has supplied all information
contained or incorporated by reference in this proxy statement/prospectus
relating to the Liberty Media Group.
You may have previously received some of the documents incorporated by
reference in this proxy statement/prospectus, but you can obtain any of them
through us, the SEC or the SEC's Internet world
18
<PAGE> 26
wide web site as described above. Documents incorporated by reference are
available from us without charge, excluding all exhibits unless we have
specifically incorporated by reference an exhibit in this proxy
statement/prospectus. You may obtain documents incorporated by reference in this
proxy statement/ prospectus by requesting them in writing or by telephone from
the appropriate company at the following addresses:
<TABLE>
<S> <C>
Four Media Company AT&T Corp.
2813 West Alameda Avenue 32 Avenue of the Americas
Burbank, California 91505 New York, New York 10013-2412
Tel: (818) 840-7000 Tel: (212) 387-5400
Attn: Corporate Secretary Attn: Corporate Secretary's Department
</TABLE>
If you would like to request documents from us, please do so by March 30,
2000 to receive them before the special meeting.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROXY STATEMENT/PROSPECTUS TO VOTE ON THE MERGER AGREEMENT AND
THE MERGER. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT
IS DIFFERENT FROM WHAT IS CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS. THIS
PROXY STATEMENT/PROSPECTUS IS DATED FEBRUARY 11, 2000. YOU SHOULD NOT ASSUME
THAT THE INFORMATION CONTAINED IN THE PROXY STATEMENT/PROSPECTUS IS ACCURATE AS
OF ANY DATE OTHER THAN THAT DATE, AND NEITHER THE MAILING OF THIS PROXY
STATEMENT/PROSPECTUS TO STOCKHOLDERS NOR THE ISSUANCE OF CLASS A LIBERTY MEDIA
GROUP TRACKING STOCK IN THE MERGER SHALL CREATE ANY IMPLICATION TO THE CONTRARY.
19
<PAGE> 27
RISK FACTORS RELATING TO THE MERGER
The merger, and an investment in Class A Liberty Media Group tracking
stock, involves numerous risks. In addition to the other information we include
in or incorporate by reference into this proxy statement/prospectus, you should
consider the following risk factors in deciding whether to vote for the merger.
THE VALUE OF THE CLASS A LIBERTY MEDIA GROUP TRACKING STOCK YOU WILL RECEIVE IN
THE MERGER MAY FLUCTUATE.
The number of shares of Class A Liberty Media Group tracking stock you will
receive in the merger will not be adjusted based on changes in the market prices
of Class A Liberty Media Group tracking stock. Accordingly, because the market
price of Class A Liberty Media Group tracking stock may fluctuate, the value of
the consideration you receive when we complete the merger will depend on the
market price of Class A Liberty Media Group tracking stock at that time. We
cannot assure you as to the market value of the stock consideration you will
receive when the merger is completed. Four Media is not permitted to "walk away"
from the merger or resolicit the vote of its stockholders based solely on
changes in the market value of Class A Liberty Media Group tracking stock before
completion of the merger. For historical and current market prices of Class A
Liberty Media Group tracking stock, see "Summary -- Comparative Per Share Market
Price and Dividend Information."
THE PRICE OF CLASS A LIBERTY MEDIA GROUP TRACKING STOCK MAY BE AFFECTED BY
FACTORS DIFFERENT FROM THOSE AFFECTING THE PRICE OF FOUR MEDIA COMMON STOCK.
When we complete the merger, you will become a holder of Class A Liberty
Media Group tracking stock. The businesses of the Liberty Media Group differ
from the businesses of Four Media, and the results of operations of the Liberty
Media Group, as well as the market price of Class A Liberty Media Group tracking
stock, may be affected by factors different from those affecting Four Media's
results of operations and the market price of Four Media common stock. As a
result, factors that had little or no effect on the price of Four Media common
stock may adversely affect the price of Class A Liberty Media Group tracking
stock.
REGULATORY AGENCIES MAY IMPOSE CONDITIONS ON CONSENTS RELATING TO THE MERGER.
A condition to completing the merger is that all material required
governmental consents and approvals relating to the merger must be received
without material restrictions or conditions. We cannot assure you that
governmental authorities will not impose material restrictions or conditions as
a condition of their approval of the merger or at some later date. Depending on
the nature of any restrictions or conditions, these restrictions or conditions
may jeopardize or delay completion of the merger, or lessen the anticipated
benefits of the merger.
IF WE DO NOT COMPLETE THE MERGER, IT COULD NEGATIVELY IMPACT FOUR MEDIA AND THE
PRICE OF ITS COMMON STOCK.
If the merger is not completed, Four Media may be subject to a number of
material risks, including the following:
- Four Media may be required to pay Liberty a termination fee of up to $6.5
million;
- the market price of Four Media common stock may decline to the extent
that the current market price of Four Media common stock reflects a
market assumption that the merger will be completed; and
- costs related to the merger, such as legal and accounting fees and
expenses and financial advisor expenses, must be paid even if the merger
is not completed.
20
<PAGE> 28
Further, if the merger agreement is terminated and Four Media's board of
directors seeks another merger or business combination, we cannot assure you
that it will be able to find a party willing to pay an equivalent or more
attractive price than that which will be paid in the merger. In addition, while
the merger agreement is in effect, subject to limited exceptions, Four Media is
prohibited from soliciting, cooperating with, or furnishing non-public
information regarding Four Media to, or negotiating or entering into an
agreement with, any party other than Liberty or AT&T regarding any proposal for
an alternative transaction. For additional information regarding Four Media's
ability to enter into an alternative transaction, see "The Merger
Agreement -- No Solicitation."
HOLDERS OF AT&T COMMON STOCK AND LIBERTY MEDIA GROUP TRACKING STOCK MAY HAVE
COMPETING INTERESTS.
After the merger is completed, you will hold shares of Class A Liberty
Media Group tracking stock, which is a separate class of common stock of AT&T.
The existence of separate classes of common stock of AT&T could result in
occasions when the interests of holders of AT&T common stock and Liberty Media
Group tracking stock diverge or appear to diverge. For example, AT&T's board of
directors may determine to:
- pay or omit the payment of dividends on Liberty Media Group tracking
stock or AT&T common stock;
- approve dispositions of assets attributed to AT&T and its subsidiaries
(excluding Liberty and its subsidiaries); and
- make operational and financial decisions with respect to AT&T and its
subsidiaries (excluding Liberty and its subsidiaries) that could be
considered detrimental to Liberty and its subsidiaries.
LIBERTY'S BOARD OF DIRECTORS HAS THE POWER TO TAKE ACTIONS THAT MAY NOT BE IN
THE BEST INTERESTS OF AT&T OR HOLDERS OF LIBERTY MEDIA GROUP TRACKING STOCK.
A majority of Liberty's board of directors are individuals that were
designated by Tele-Communications, Inc. (TCI) before its merger with AT&T. If
these individuals or their designated successors cease to constitute a majority
of Liberty's board of directors, a new entity controlled by officers of Liberty
has the power to require Liberty to transfer all of Liberty's assets to that new
entity.
Subject to its fiduciary duties to AT&T and to the obligations under an
inter-group agreement between Liberty and AT&T, Liberty's board of directors has
the power under Delaware law to manage the business and affairs of Liberty. This
includes, among other things, the power to:
- set management compensation;
- issue shares of stock of Liberty, including preferred shares;
- repurchase securities, including securities owned by officers or
directors of Liberty;
- cause Liberty to engage in businesses and activities that compete
directly with AT&T; or
- cause Liberty to pursue business opportunities that may also be of
interest to AT&T.
This creates the risk that Liberty's board of directors could take actions
that AT&T's board of directors does not believe are in the best interests of
AT&T or holders of Liberty Media Group tracking stock. If Liberty's board were
to take any of these actions, AT&T's recourse would be limited to making a claim
for breach of the fiduciary duties owed by Liberty's board of directors to AT&T
in its capacity as a stockholder of Liberty, or a claim under the inter-group
agreement, if it applies. We cannot assure you, however, that AT&T would be able
to obtain effective relief by making a breach of fiduciary duty claim.
21
<PAGE> 29
LIBERTY'S BOARD OF DIRECTORS MAY HAVE NO FIDUCIARY DUTIES TO HOLDERS OF LIBERTY
MEDIA GROUP TRACKING STOCK.
We are not aware of any legal precedent under Delaware law that would
impose on Liberty's board of directors any fiduciary duties directly to holders
of Liberty Media Group tracking stock. For this reason, we cannot assure you
that holders of Liberty Media Group tracking stock would be able to pursue a
claim for breach of fiduciary duty against Liberty's board of directors for
actions taken by that board, even if those actions were not in the best
interests of the holders of Liberty Media Group tracking stock. If AT&T is
unwilling to pursue its own claim regarding these actions, the only recourse
available to a holder of Liberty Media Group tracking stock may be to claim a
breach of fiduciary duty against AT&T's board of directors for failing to make a
claim on behalf of AT&T against Liberty's board of directors. We cannot assure
you that any holder of Liberty Media Group tracking stock would be able to
obtain effective relief by making a breach of fiduciary duty claim against
AT&T's board.
22
<PAGE> 30
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This proxy statement/prospectus contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995. These
forward-looking statements relate to the financial condition, results of
operations, cash flows, dividends, financing plans, business strategies,
operating efficiencies or synergies, budgets, capital and other expenditures,
competitive positions, growth opportunities for existing products, benefits from
new technology, plans and objectives of management, markets for Four Media's and
AT&T's stock, including the Liberty Media Group tracking stock, and other
matters. Statements in this document that are not historical facts are
identified as "forward-looking statements" for the purpose of the safe harbor
provided by Section 21E of the Securities Exchange Act of 1934 and Section 27A
of the Securities Act of 1933.
These forward-looking statements, including statements relating to future
business prospects, revenues, working capital, liquidity, capital needs,
interest costs and income wherever they occur in this proxy
statement/prospectus, are estimates reflecting the best judgment of the senior
management of Liberty, AT&T and Four Media, respectively. These forward-looking
statements involve a number of risks and uncertainties that could cause actual
results to differ materially from those suggested by the forward-looking
statements. Forward-looking statements should, therefore, be considered in light
of various important factors, including those set forth in this proxy
statement/prospectus. Important factors that could cause actual results to
differ materially from estimates or projections contained in the forward-
looking statements include, without limitation:
- the effects of vigorous competition in the markets in which the Liberty
Media Group and Four Media operate, including the potential for
additional competition from major motion picture studios and the content
producers that are currently customers of Four Media;
- the ability to enter into agreements, and the cost of entering new
territories necessary, to provide nationwide services;
- requirements imposed on these entities or latitude allowed to their
competitors by the FCC or state regulatory commissions under the
Telecommunications Act of 1996 or other applicable laws and regulations;
- changes in technology that may increase the number of competitors the
Liberty Media Group or Four Media faces or require significant capital
expenditures to provide competitive services;
- general economic or business conditions that may be less favorable than
expected, resulting in, among other things, lower than expected revenues;
- costs or difficulties related to the integration of the businesses of the
Liberty Media Group and Four Media may be greater than expected;
- legislative or regulatory changes may adversely affect the businesses in
which the Liberty Media Group and Four Media are engaged;
- the rate of customer bankruptcies and other defaults may increase;
- necessary technological changes, including changes to address "Year 2000"
data systems issues, may be more difficult or expensive to make than
anticipated;
- adverse changes may occur in the securities markets; and
- other factors, including, but not limited to, economic, key employee,
competitive, regulatory, governmental and technological factors, which
may affect the Liberty Media Group or Four Media.
23
<PAGE> 31
When we use the words "estimate," "project," "intend," "expect," "believe"
and similar expressions, we are making forward-looking statements. These
forward-looking statements are found at various places throughout this proxy
statement/prospectus and the other documents we incorporate by reference in this
proxy statement/prospectus. We caution you not to place undue reliance on these
forward-looking statements, which speak only as of the date they were made. We
do not undertake any obligation to publicly release any revisions to these
forward-looking statements to reflect events or circumstances after the date of
this proxy statement/prospectus or to reflect the occurrence of unanticipated
events.
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THE COMPANIES
FOUR MEDIA COMPANY
Four Media is a leading provider of technical and creative services to
producers and distributors of television programming, television commercials,
feature films and other entertainment content, as well as to owners of film and
television libraries. The name Four Media Company is derived from its core
competencies in film, video, sound and data. These services include the
processing, enhancement, storage and distribution of film and video from the
point it leaves the camera until it is shown, in various formats, to audiences
around the world. Four Media seeks to capitalize on growth in domestic and
international demand for original entertainment content and for existing
television and film libraries without taking production or ownership risk with
respect to any specific television program, feature film or other content.
Since its formation in 1993, Four Media has invested extensively in new
digital systems and equipment. In addition, Four Media has successfully
identified and either acquired or started and then integrated fourteen
complementary businesses. The latest of these acquisitions occurred in June 1999
when Four Media acquired the operations of Ross Digital Sound and Picture. As a
result of its investments and acquisitions, Four Media is one of the largest and
most diversified independent providers of technical and creative services to the
entertainment industry and therefore is able to offer its customers a single
source for these services.
AT&T CORP.
AT&T is among the world's communications leaders, providing voice, data and
video communications services to large and small businesses, consumers and
government entities. AT&T and its subsidiaries furnish domestic long distance,
international long distance, regional, local and wireless telecommunications
services and broadband and Internet communications services. AT&T also provides
billing, directory and calling card services to support these communications
services.
AT&T common stock is currently divided into two classes, with each class
intended to reflect the separate performance of a specified group of AT&T's
assets and businesses:
- AT&T common stock is intended to reflect the economic performance of the
"AT&T Common Stock Group." The AT&T Common Stock Group has attributed to
it all of the assets of AT&T, excluding the assets of the Liberty Media
Group.
- Liberty Media Group tracking stock is intended to reflect the economic
performance of the "Liberty Media Group." The Liberty Media Group has
attributed to it the programming assets, principal international assets
and businesses and substantially all of the non-cable and non-
programming assets of TCI, as well as additional assets and businesses
acquired by the Liberty Media Group since the merger of TCI and AT&T.
On January 26, 2000, AT&T filed with the Securities and Exchange Commission
a proxy statement requesting approval of its stockholders to create a new class
of common stock designed to reflect the economic performance of its wireless
services businesses. AT&T refers to this new class of common stock as AT&T
Wireless Group tracking stock. Following shareholder approval of an amendment to
AT&T's charter to create AT&T Wireless Group tracking stock, AT&T currently
expects to issue, in an underwritten public offering, shares of AT&T Wireless
Group tracking stock representing a portion of the economic performance of the
AT&T Wireless Group followed by a distribution to the holders of AT&T common
stock of shares of AT&T Wireless Group tracking stock representing the remaining
economic performance of the AT&T Wireless Group. Following this distribution,
AT&T's common shares would be divided into three classes:
- AT&T common stock would be intended to reflect the economic performance
of the AT&T Common Stock Group. The AT&T Common Stock Group would have
attributed to it all of the
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assets of AT&T, excluding the assets attributed to the AT&T Wireless
Group and the Liberty Media Group.
- AT&T Wireless Group tracking stock would be intended to reflect the
economic performance of the AT&T Wireless Group. The AT&T Wireless Group
would have attributed to it substantially all of AT&T's current wireless
operations.
- Liberty Media Group tracking stock would continue to be intended to
reflect the economic performance of the Liberty Media Group.
AT&T's board of directors reserves the right not to create AT&T Wireless
Group tracking stock or not to issue the tracking stock once it is created. In
addition, even if AT&T completes the initial public offering, there is no
guarantee that the distribution will follow. The proposed terms of the AT&T
Wireless Group tracking stock are described under "The Charter Amendment
Proposal -- Tracking Stock Amendment" in AT&T's proxy statement, which we
incorporate by reference into this proxy statement/prospectus. To obtain a copy
of AT&T's proxy statement, see "Summary -- Where You Can Find More Information."
On May 6, 1999, AT&T agreed to acquire MediaOne Group through a merger of a
wholly owned subsidiary of AT&T with MediaOne Group. In the MediaOne Group
merger, holders of MediaOne Group common stock will receive, at their election
and subject to proration, for each share of MediaOne Group common stock, 1.4912
shares of AT&T common stock, $85.00 in cash, or a combination of $30.85 in cash
and 0.95 of a share of AT&T common stock. In addition, to the extent the price
of AT&T's common stock is less than $57.00 per share during a prescribed closing
period shortly prior to the closing, stockholders of MediaOne Group receiving
AT&T common stock in the merger will also receive an additional cash payment to
account for the difference between the actual price of AT&T common stock
(subject to a floor of $51.30) and $57.00.
In addition, at the effective time of the MediaOne Group merger, holders of
MediaOne Group Series D preferred stock and Series E preferred stock will
receive shares of newly issued classes of, respectively, Series D preferred
stock and Series E preferred stock of AT&T, each of which will be designed to
have substantially the same rights as the respective series of MediaOne Group
preferred stock. AT&T expects that MediaOne will redeem the outstanding Series D
preferred stock prior to the closing of the MediaOne Group merger. As a result,
AT&T does not expect that any shares of AT&T Series D preferred stock will be
outstanding at the time of the Four Media merger.
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.
D-GROUP MERGER CORP.
D-Group Merger Corp. is a Delaware corporation formed by AT&T in October
1999 solely for the purpose of being merged with and into Four Media and is
wholly owned by AT&T. The mailing address of D-Group Merger Corp.'s principal
executive offices is c/o AT&T Corp., 32 Avenue of the Americas, New York, New
York 10013-2412 and its telephone number is (212) 387-5400.
LIBERTY MEDIA CORPORATION
Liberty has been an indirect wholly owned subsidiary of AT&T since March 9,
1999. On that date, AT&T acquired by merger Liberty's former parent, TCI.
Liberty is included in the Liberty Media Group, and the businesses and assets of
Liberty and its subsidiaries constitute substantially all of the businesses and
assets of the Liberty Media Group. Liberty is a leading media, entertainment and
communications company with interests in a diverse group of public and private
companies that are market leaders in their respective industries. Liberty's
subsidiaries and business affiliates are engaged in a broad range of
programming, communications, technology and Internet businesses and have some of
the most recognized
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and respected brands. These brands include Encore, STARZ!, Discovery, TV Guide,
Fox, USA Networks, QVC, CNN, TBS and Sprint PCS.
The following table lists Liberty's principal subsidiaries and business
affiliates and Liberty's direct equity interests or indirect attributed equity
interests based on ownership of capital stock. Liberty's direct or attributed
equity interest in a particular company does not necessarily represent a voting
interest in that company. Liberty's indirect attributed interest is determined
by multiplying Liberty's ownership interest in the holder of an equity interest
by that equity holder's ownership interest in the listed subsidiary or business
affiliate. The ownership percentages are approximate, calculated as of September
30, 1999 and, in the case of convertible securities Liberty holds, assume
conversion to common stock by Liberty and, to the extent known by us, other
holders. In some cases Liberty's interest is subject to buy/sell procedures,
rights of first refusal or other obligations. All of Liberty's direct and
indirect interests in the following companies are attributed to the Liberty
Media Group.
<TABLE>
<CAPTION>
ATTRIBUTED
SUBSIDIARY/BUSINESS AFFILIATE OWNERSHIP PERCENTAGE
----------------------------- --------------------
<S> <C>
Encore Media Group LLC...................................... 100%
Liberty Digital, Inc........................................ 95%
Discovery Communications, Inc............................... 49%
TV Guide, Inc............................................... 44%
QVC Inc..................................................... 43%
Flextech, plc............................................... 37%
Sprint PCS Group............................................ 23%*
Telewest Communications plc................................. 22%
USA Networks, Inc........................................... 21%
General Instrument Corporation.............................. 21%
Time Warner, Inc............................................ 9%
The News Corporation Limited................................ 8.5%
</TABLE>
- -------------------------
* Equity interest held in trust.
Although Liberty is an indirect subsidiary of AT&T, it enjoys a substantial
degree of managerial autonomy from AT&T as a result of the corporate governance
provisions of its charter and bylaws and contractual arrangements with AT&T.
Liberty's board of directors is controlled by persons designated by TCI prior to
its acquisition by AT&T, and that board will continue to be controlled by those
persons, or others chosen by them, for at least the next six years. Liberty's
management consists of individuals who managed Liberty's businesses while it was
a subsidiary of TCI prior to its acquisition by AT&T. Liberty has entered into
agreements with AT&T which provide it with a level of financial and operational
separation from AT&T, define its tax sharing rights and obligations as a member
of AT&T's consolidated tax group, enable Liberty to finance its operations
separately from those of AT&T and provide Liberty with programming rights
relating to AT&T's cable systems. The other members of the Liberty Media Group
have similar arrangements in place that govern their relationship with AT&T.
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THE PROPOSED MERGER
SPECIAL MEETING TO VOTE ON THE PROPOSED MERGER
We are furnishing this proxy statement/prospectus to you in connection with
the solicitation of proxies by Four Media for use at the special meeting.
The special meeting will be held at the Waldorf-Astoria Hotel, 301 Park
Avenue, New York, New York 10022, on April 6, 2000, at 9:00 a.m. local time. At
the special meeting, you will be asked to vote on a proposal to approve the
merger agreement, a copy of which is attached to this proxy statement/
prospectus as Annex A, and the merger.
STRUCTURE OF THE MERGER; MERGER CONSIDERATION
- The Merger. In accordance with the merger agreement and Delaware law,
D-Group Merger Corp. will be merged with and into Four Media. As a result
of the merger, the separate corporate existence of D-Group Merger Corp.
will cease and Four Media will survive the merger as a wholly owned
subsidiary of AT&T and a member of the Liberty Media Group. Unless the
context otherwise requires, references in this proxy statement/prospectus
to "Liberty Media Group tracking stock" refer to the Class A Liberty
Media Group tracking stock only and not to Class B Liberty Media Group
tracking stock.
- Merger Consideration. In the merger, Four Media stockholders will
receive, for each share of Four Media common stock held, 0.16129 of a
share of Class A Liberty Media Group tracking stock and $6.25 in cash.
The number of shares of Class A Liberty Media Group tracking stock
stockholders will receive in the merger will be appropriately adjusted
for any stock splits, combinations and other similar events that occur
between the date of the merger agreement and the completion of the
merger. We will not issue fractional shares of Class A Liberty Media
Group tracking stock in the merger. Instead, each Four Media stockholder
otherwise entitled to a fractional share will receive cash, without
interest, in lieu of a fraction of a share of Class A Liberty Media Group
tracking stock. Specifically, the exchange agent in the merger will sell
in the open market a number of shares of Class A Liberty Media Group
tracking stock equal to the aggregate number of fractional shares that
would otherwise be issuable in the merger and will remit to the Four
Media stockholders otherwise entitled to a fractional share an amount
equal to that stockholder's pro rata portion of the net proceeds of those
sales.
- Effective Time of the Merger. The merger will become effective when a
certificate of merger is filed with the Delaware Secretary of State or at
a later time as may be specified in the certificate of merger. The
effective time of the merger will occur as soon as practicable after the
last of the conditions in the merger agreement has been satisfied or
waived. We expect the merger to occur in the second quarter of 2000.
However, because the merger is subject to governmental approvals and
other customary conditions, we cannot predict the exact timing.
TREATMENT OF FOUR MEDIA STOCK OPTIONS AND WARRANTS
At the effective time of the merger, each outstanding Four Media stock
option, other than stock options that are cashed out as described below, and
each outstanding Four Media warrant, whether or not immediately exercisable or
"in the money," will be assumed by AT&T and converted into a rollover option or
rollover warrant, as the case may be, to purchase shares of Liberty Media Group
tracking stock. Each rollover option or rollover warrant will, upon completion
of the merger, become an option or warrant, as applicable, to purchase a number
of shares of Liberty Media Group tracking stock determined by multiplying the
number of shares of Four Media common stock subject to the Four Media option or
warrant immediately prior to the merger by 0.32258. The resulting number of
shares will be rounded up to the nearest whole share. The per share exercise
price of each rollover option and rollover warrant will be equal to the per
share exercise price of the corresponding Four Media option or warrant divided
by
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0.32258. The resulting exercise price will be rounded down to the nearest whole
cent and will be subject to adjustment under the circumstances described in the
merger agreement.
Holders of Four Media stock options that are vested and exercisable on the
closing date of the merger may elect to have their options canceled and cashed
out rather than having their options rolled over. If a holder of a vested Four
Media option elects to be cashed out, that holders' option will be canceled at
the time of the merger in exchange for a cash payment from Four Media. The cash
payment, if any, will be equal to the number of shares of Four Media common
stock subject to each option multiplied by the difference, if positive, between
$12.50 and the exercise price per share of the option. Four Media will be
required to provide Liberty a report five days prior to the closing date of the
merger listing each option holder that elected to receive a cash payment. There
are presently 1,789,957 shares of Four Media common stock subject to options
that are exercisable. Assuming all of the holders of vested and exercisable
options elect to have their options cashed out, Four Media will be required to
make cash payments totaling approximately $8.8 million.
BACKGROUND OF THE MERGER
In late July 1999, Four Media approached Liberty to discuss a possible
business combination transaction. On July 30, 1999, senior executives of Four
Media and Liberty met telephonically to discuss each company's strategic
objectives and a possible acquisition of Four Media. On August 4, 1999, Robert
T. Walston, Chairman of the Board and Chief Executive Officer of Four Media, and
Jeffrey J. Marcketta, President and Chief Operating Officer of Four Media, held
an initial meeting with David Beddow, Vice President/Technology of Liberty
Media, in Denver, Colorado to discuss the primary benefits and parameters of a
possible transaction. Following this meeting, on August 13, 1999, Four Media and
Liberty executed a non-disclosure agreement.
The parties continued to meet in person to discuss a possible acquisition
transaction through late September 1999. During this time, Four Media and
Liberty exchanged financial and other information. On September 27, 1999, Four
Media made a preliminary proposal to Liberty regarding the key terms of a
possible acquisition of Four Media in a tax-free merger, whereby Four Media
stockholders would receive shares of Class A Liberty Media Group tracking stock.
On October 1, 1999, Four Media and its legal advisors and Liberty and its legal
advisors held a conference call to discuss the specific deal parameters and tax
structures.
On October 8, 1999, Four Media's board of directors met to consider the
terms of the potential transaction and generally discussed the terms of the
proposed merger agreement and the related agreements. In early October,
Liberty's legal advisors delivered a preliminary draft of a merger agreement to
Four Media and its legal advisors. Between October 8, 1999 and October 25, 1999
Liberty and its legal advisors and Four Media and its legal advisors negotiated
the terms of the merger agreement and the related agreements.
On October 25, 1999, Four Media's board of directors met and Four Media's
senior management and legal and financial advisors reviewed the following:
- the status of the negotiations of the proposed transaction;
- the benefits and potential risks of the proposed transaction;
- the principal terms of the merger agreement and related documents; and
- the board's fiduciary duties in considering the merger.
Houlihan Lokey presented financial analyses relating to the proposed merger
and to its evaluation as to the fairness from a financial point of view, to Four
Media's stockholders, of the merger consideration. At the conclusion of the
meeting, Four Media's board of directors authorized management to enter into a
letter of intent regarding the principal terms of the merger and directed Four
Media's legal advisors to continue the negotiations with Liberty with a view to
finalizing a merger agreement that could be presented for board approval.
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Between October 25, 1999 and October 29, 1999, Four Media's management and
legal advisors and Liberty's management and legal advisors continued to
negotiate by telephone the final terms of a letter of intent, which provided for
Liberty's acquisition of Four Media in a tax-free transaction. The parties also
continued to negotiate the terms of a merger agreement and related transaction
documents. In late October 1999, Liberty approached AT&T regarding a possible
acquisition of Four Media. On October 29, 1999, Four Media and Liberty entered
into a letter of intent regarding the principal terms of the merger and on
November 1, 1999, Four Media issued a press release announcing the letter of
intent.
In early November, Liberty's legal advisors delivered a copy of the draft
merger agreement and related documents to AT&T's legal advisors. Subsequently,
Four Media's management and legal advisors, Liberty's management and legal
advisors and AT&T's legal advisors continued to negotiate the draft merger
agreement and the related transaction documents. These negotiations were
conducted principally by telephone. The discussions and negotiations between
Four Media, Liberty and AT&T concerning the terms of the merger agreement and
related documents included discussions and negotiations regarding the following:
- termination rights under the merger agreement;
- Four Media's ability to solicit and accept alternative acquisition
proposals;
- the conditions upon which any breakup fee would be payable;
- Liberty's and AT&T's conditions to completing the merger; and
- the representations, warranties and covenants to be made by each party.
During several discussions in mid-November 1999 between Four Media's and
Liberty's senior executives, Four Media and Liberty tentatively agreed, subject
to negotiation of definitive documents and AT&T's approval, to a change in the
merger consideration. Specifically, Four Media and Liberty agreed that Four
Media stockholders would receive, in a taxable transaction, a portion of the
consideration in shares of Class A Liberty Media Group tracking stock and a
portion of the consideration in cash.
On November 16, 1999, the Capital Stock Committee of AT&T's board of
directors approved the issuance of shares of Class A Liberty Media Group
tracking stock under the revised terms. On November 17, 1999, at a meeting of
AT&T's board of directors, AT&T's board of directors approved the merger
agreement and authorized the issuance of shares of Class A Liberty Media Group
tracking stock in connection with the merger.
On November 18, 1999, Four Media's board of directors met again by a
telephone. At the meeting, Four Media's management and legal advisors reviewed
for the board the revised terms of the merger agreement and related documents.
The Four Media board further discussed the revised terms of the proposed
transaction and determined that the merger was advisable. The board of directors
then approved the merger agreement by unanimous written consent and resolved to
recommend that Four Media stockholders approve and adopt the merger agreement
and the merger. In addition, at this meeting, Houlihan Lokey rendered its oral
opinion that, as of that date, based upon and subject to the considerations set
forth in the opinion, the merger consideration was fair, from a financial point
of view, to Four Media's stockholders.
On December 3, 1999, Four Media's board of directors executed a unanimous
written consent approving the final transaction documents.
On December 6, 1999, Four Media, Liberty, AT&T and D-Group Merger Corp.
executed the merger agreement, and Four Media's principal stockholders entered
into voting agreements with Liberty. In addition, Houlihan Lokey rendered its
written opinion (which opinion is attached to this proxy statement/ prospectus
as Annex B) that, based upon and subject to the considerations set forth in the
opinion, as of the date of the opinion, the merger consideration was fair, from
a financial point of view, to Four Media's stockholders.
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Four Media and Liberty issued a joint press release on December 6, 1999
announcing the merger agreement.
FOUR MEDIA'S REASONS FOR THE MERGER
In arriving at its decision to approve, and to recommend that Four Media
stockholders approve, the merger agreement and the merger, Four Media's board of
directors considered several affirmative and negative factors. Four Media's
board of directors considered, among others, the following affirmative factors:
- the merger consideration represented:
(1) as of November 18, 1999 (the date on which Four Media's board approved
and resolved to recommend approval of the merger agreement and the
merger), an approximate 116% premium over the closing price per share
of Four Media's common stock on October 29, 1999 (the last trading day
prior to the announcement of the letter of intent)
(2) as of December 3, 1999 (the date on which Four Media's board executed
the unanimous written consent approving the final transaction
documents), an approximate 120% premium over the closing price per
share of Four Media's common stock on October 29, 1999.
- the merger would provide Four Media stockholders with increased liquidity
generally, given the higher trading volumes and greater number of holders
of Class A Liberty Media Group tracking stock as compared to Four Media
common stock;
- Four Media's stockholders would have the opportunity to continue to
participate in any increase in value of the Liberty Media Group,
including any increase in value that may be attributable to the
acquisition of Four Media. Four Media believes that Liberty's
technological expertise, investments, business reputation, and its
financial resources and access to capital markets, provide it with the
ability to grow and position, and thereby enhance the value of, Four
Media's assets; and
- Four Media's management has from time to time solicited, and engaged in
discussions with, a number of significant participants in the
communications industry regarding a possible business combination
involving Four Media.
In the course of its deliberations, the Four Media board of directors
reviewed with Four Media's management and outside advisors a number of
additional factors relevant to the merger, including:
- historical information concerning Liberty's and Four Media's respective
businesses, financial performance and condition, operations and
competitive position, including public reports concerning results of
operations during the most recent fiscal year filed with the SEC (see
"Summary -- Where You Can Find More Information" on page 17 for
information on how you can obtain copies of these reports);
- current market conditions and historical market prices, volatility,
liquidity and trading information with respect to Liberty Media Group
tracking stock and Four Media common stock;
- detailed financial analyses and other information with respect to the
Liberty Media Group and Four Media presented by Houlihan Lokey in a
presentation to the Four Media board of directors, including Houlihan
Lokey's oral opinion, subsequently confirmed in writing as of December 6,
1999, that, based upon and subject to the considerations, qualifications
and limitations set forth in the opinion, as of the date of the opinion,
the merger consideration was fair, from a financial point of view, to
Four Media stockholders;
- the communications and other regulatory approvals required for the merger
and the process and timing associated with these approvals; and
- the belief that the terms of the merger agreement, including the parties'
representations, warranties and covenants, and the conditions to the
parties' respective obligations, are reasonable.
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Four Media's board of directors also considered, in particular, the terms
of the merger agreement restricting Four Media's rights to solicit, consider,
negotiate and accept other acquisition proposals, and to terminate the merger
agreement, as well as the possible effects of the provisions regarding
termination fees and the effect of the voting agreements. Four Media's board of
directors also reviewed with its management and outside advisors various
alternatives to the merger, including remaining as an independent company.
Four Media's board of directors believes that these factors, including the
board of directors' review of the terms of the merger agreement, support the
board's recommendation of the merger agreement and the merger when viewed
together with the risks and potential benefits of the merger. Four Media's board
of directors also identified and considered some potentially negative factors in
its deliberations concerning the merger, including, but not limited to:
- the potentially lengthy period of time that may be required to complete
the merger, particularly in light of the fact that the merger agreement
does not prohibit Liberty and AT&T from engaging in transactions that
could impede or prevent completion of the merger;
- the risk of a decline in the market value of Class A Liberty Media Group
tracking stock during the period between signing the merger agreement and
completing the merger;
- the restrictions on Four Media imposed by the merger agreement and the
potential business opportunities that might be foregone due to these
restrictions or the pendency of the merger generally;
- the possibility that the merger might not be completed and the impact
that might have on Four Media's businesses and assets and its ability to
complete an alternative transaction on similar or equally advantageous
terms; and
- the other risks described under "Risk Factors Relating to the Merger."
Four Media's board of directors believed that these risks were outweighed
by the potential benefits of the merger.
The foregoing discussion is not exhaustive of all factors considered by
Four Media's board of directors. Each member of Four Media's board of directors
may have considered different factors, and Four Media's board of directors
evaluated these factors as a whole and did not quantify or otherwise assign
relative weights to the factors considered.
THE LIBERTY MEDIA GROUP'S REASONS FOR THE MERGER
At the Liberty Media Group's request, AT&T entered into the merger
agreement on behalf of the Liberty Media Group to acquire 100% of the business
and assets of Four Media. The Liberty Media Group considered the following
factors in connection with its decision to acquire Four Media.
Strategic Business Opportunity. The acquisition of Four Media is part of
the Liberty Media Group's strategy to consolidate a group of companies,
including Four Media, The Todd-AO Corporation and SounDelux Entertainment Group,
Inc., that provide a wide range of post-production and distribution services to
television producers, motion picture studios, cable and broadcast networks and
advertising agencies. The Liberty Media Group hopes to capitalize on the
potential operating synergies within that group of companies, as well as the
financial strength of such companies' core businesses, and to grow such
companies' combined client base. The Liberty Media Group also hopes to position
the acquired companies to become major providers of new digital production,
post-production, distribution and archiving services, including interactive
enablement, to the creative community and diverse retail media outlets
throughout the world. The Liberty Media Group believes that its capital,
expertise and reputation in the media industry will strengthen such companies'
consolidated product offerings and marketing efforts and assist the Liberty
Media Group and the acquired companies in implementing their global strategy.
Proposed Transactions with Todd-AO and SounDelux. On December 10, 1999,
Liberty, AT&T (at the request of the Liberty Media Group), B-Group Merger Corp.,
a wholly-owned subsidiary of AT&T, and Todd-AO entered into an Agreement and
Plan of Merger. The Todd-AO merger agreement provides
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for the merger of B-Group Merger Corp. with and into Todd-AO, with Todd-AO
surviving. As a result of the Todd-AO merger and other transactions contemplated
by the Todd-AO merger agreement, the Liberty Media Group will acquire 60% of the
outstanding equity and approximately 94% of the voting power of Todd-AO.
On December 30, 1999, Liberty, AT&T (at the request of the Liberty Media
Group), C-Group Merger Corp., a wholly owned subsidiary of AT&T, and SounDelux
entered into an Agreement and Plan of Merger. The SounDelux merger agreement
provides for the merger of C-Group Merger Corp. with and into SounDelux, with
SounDelux surviving. As a result of the SounDelux merger and other transactions
contemplated by the SounDelux merger agreement, the Liberty Media Group will
acquire more than 55% of the outstanding equity and 92% of the voting power of
SounDelux. Following the Todd-AO and SounDelux transactions, the stockholders of
SounDelux, other than Liberty, will have the opportunity, on terms and
conditions provided for in connection with the SounDelux merger, to exchange
their SounDelux shares (which are not publicly traded) for shares of Todd-AO
(which are publicly traded).
Following acquisition of controlling interests in Todd-AO and SounDelux and
of 100% of the voting securities of Four Media, and subject to certain
conditions, the Liberty Media Group will cause the following additional
transactions to occur:
- contribution of the Liberty Media Group's controlling interest in Todd-AO
to SounDelux, in exchange for additional shares of voting stock of
SounDelux;
- contribution by SounDelux to Todd-AO of 100% of the business and
operations of SounDelux, in exchange for additional shares of voting
stock of Todd-AO and the assumption by Todd-AO of 100% of the liabilities
of SounDelux; and
- contribution by the Liberty Media Group to SounDelux, and by SounDelux to
Todd-AO, of 100% of the stock of Four Media to be acquired by the Liberty
Media Group as a result of the transactions described in this proxy
statement/prospectus.
As a result of these transactions, the assets and operations now owned and
operated by Four Media, SounDelux and Todd-AO will be consolidated within
Todd-AO, which will change its name to Liberty Livewire, Inc. The term
"Livewire" used in this proxy statement/prospectus generally refers to Todd-AO
following its acquisition by the Liberty Media Group, whether or not the
proposed acquisitions of SounDelux and Four Media are completed as described in
this section. Liberty's ownership in Livewire will be a component of the Liberty
Media Group.
THE TODD-AO AND SOUNDELUX TRANSACTIONS DESCRIBED HEREIN ARE NOT
PREREQUISITES TO THE LIBERTY MEDIA GROUP'S PROPOSED ACQUISITION OF FOUR MEDIA,
AND THE CLOSING OF THE FOUR MEDIA MERGER IS NOT CONDITIONED ON THE CLOSING OF
ANY OTHER TRANSACTION. THE PENDING TRANSACTIONS WITH TODD-AO AND SOUNDELUX ARE
SUBJECT TO CUSTOMARY CLOSING CONDITIONS, AND NO ASSURANCE CAN BE GIVEN THAT SUCH
TRANSACTIONS WILL BE COMPLETED.
Competitive Advantage. The principal service offerings of Four Media are
complementary to those of Todd-AO and SounDelux. Todd-AO provides
post-production sound services (including music recording, sound editing and
mixing) for theatrical feature films, television shows and commercials, as well
as a wide variety of video and other services, such as film-to-video transfer
(also known as "telecine"), mastering, duplication and transmission for
satellite broadcast. SounDelux provides sound creation, design and supervision
services for major motion picture studios and other clients and operates two
sound studios for recording, editing and mixing work. SounDelux also offers
creative content production, technical design and installation for theme parks,
restaurants and other "location-based" entertainment venues, as well as other
sound and entertainment related products and services. The Liberty Media Group
believes that Livewire's ability to offer a broad and comprehensive array of
services to the entertainment and media industries, on both a bundled and "a la
carte" basis, will enable Livewire to distinguish its services from those of its
competitors, creating customer loyalty and increasing the value of the Livewire
brand.
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Expanded Service Offerings. Building on the foundation provided by the
acquisition of Four Media and the proposed consolidation of Four Media's
business with those of Todd-AO and SounDelux, the Liberty Media Group hopes that
Livewire will develop and offer a wide selection of new or enhanced products and
services to content producers, programmers, networks and advertising agencies.
These products and services may include:
- interactive enablement of video programming and advertisements;
- a high-capacity server network for caching of multimedia programming and
elements;
- connections to caching servers for broadcast, cable and DSL access to
interactive elements and streaming video;
- electronic cinema distribution to theaters, and related products and
services;
- interactive delivery to point-of-sale, public spaces and other
non-traditional venues; and
- various services to facilitate the simultaneous or coordinated use of
television and PCs/internet appliances;
It should be emphasized that these products and services are not currently
offered by Four Media, Todd-AO or SounDelux, and that Livewire's ability to
develop and offer such products and services is subject to the risks and
uncertainties inherent in any new business venture, and other significant risks
and uncertainties including the following:
- the high cost of creating an infrastructure to provide these products and
services, and the financial risks resulting from such an investment;
- the likelihood of vigorous competition from other existing or new
industry players, some of which may be better capitalized, some of which
may have better access to proprietary technologies, and some of which may
be affiliated with major potential customers of these products and
services; and
- the risk of technological obsolescence.
RECOMMENDATION OF FOUR MEDIA'S BOARD OF DIRECTORS
AFTER CAREFUL CONSIDERATION, YOUR BOARD OF DIRECTORS UNANIMOUSLY DETERMINED
THE MERGER TO BE FAIR TO YOU AND IN YOUR BEST INTEREST AND HAS DECLARED THE
MERGER ADVISABLE. THE BOARD OF DIRECTORS UNANIMOUSLY APPROVED THE MERGER
AGREEMENT AND THE MERGER AND UNANIMOUSLY RECOMMENDS THAT YOU VOTE IN FAVOR OF
THE MERGER AGREEMENT AND THE MERGER AT THE SPECIAL MEETING.
In considering the recommendation of Four Media's board of directors
relating to the merger agreement and the merger, you should be aware that some
of its directors and officers have interests in the merger that are different
from, or are in addition to, the interests of Four Media stockholders generally.
Please see the section entitled "-- Interests of Four Media's Officers and
Directors in the Merger" below for additional information regarding these
interests.
OPINION OF FOUR MEDIA'S FINANCIAL ADVISOR
Four Media retained Houlihan Lokey Howard & Zukin Financial Advisors to act
as its financial advisor for a possible strategic combination with Liberty and
AT&T. Pursuant to Houlihan Lokey's engagement letter, Houlihan Lokey rendered an
oral opinion on November 18, 1999 and a written opinion on December 6, 1999 to
Four Media's board of directors to the effect that, based upon and subject to
the considerations, qualifications and limitations set forth in the opinion, as
of December 6, 1999, the merger consideration was fair, from a financial point
of view, to Four Media's stockholders.
Annex B contains the full text of Houlihan Lokey's opinion, which sets
forth the assumptions made, general procedures followed, matters considered and
limits on the review undertaken. This summary of Houlihan Lokey's opinion is
qualified in its entirety by the full text of the opinion. YOU ARE URGED TO READ
THE HOULIHAN LOKEY OPINION CAREFULLY AND COMPLETELY.
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As compensation for services rendered in connection with the fairness
opinion, Four Media agreed to pay Houlihan Lokey a fee of $130,000. No portion
of Houlihan Lokey's fees is contingent upon the successful completion of the
merger. Four Media has also agreed to indemnify Houlihan Lokey and related
persons against certain liabilities, including liabilities under federal
securities laws, arising out of Houlihan Lokey's engagement, and to reimburse
Houlihan Lokey for some of its expenses.
Houlihan Lokey, as part of its investment banking business, is continually
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, leveraged buyouts, business valuation for a variety of
regulatory and planning purposes, recapitalizations, financial restructurings,
and private placements of debt and equity securities. Houlihan Lokey is familiar
with Four Media, having acted as financial advisor to its board of directors in
connection with Warburg Pincus' investment in Four Media in January 1999.
The opinion does not address Four Media's underlying business decision to
effect the merger. Houlihan Lokey did not, and was not requested by Four Media
to, make any recommendations as to the form or amount of consideration to be
paid to its shareholders in connection with the merger. In addition, Houlihan
Lokey was not requested to, and did not, solicit third party indications of
interest in acquiring all or part of Four Media. Furthermore, Houlihan Lokey was
not requested to, and did not, negotiate or advise Four Media with respect to
alternatives to the merger.
In connection with its opinion, Houlihan Lokey conducted reviews, analyses
and inquiries as it deemed necessary and appropriate under the circumstances.
Among other things, Houlihan Lokey:
- reviewed Four Media's historical financial statements for the three
fiscal years ending August 1, 1999, and the unaudited pro forma financial
statements for the fiscal year ending August 1, 1999, as well as the
financial information for the months ending August 29, 1997, 1998 and
1999;
- reviewed publicly available business and financial information relating
to Liberty, the Liberty Media Group and AT&T that it deemed relevant;
- reviewed a copy of the draft merger agreement dated November 18, 1999;
- met with members of Four Media's senior management to discuss Four
Media's operations, financial condition, future prospects and projected
operations and performance;
- visited Four Media's facilities and business offices;
- reviewed forecasts and projections prepared by Four Media's management
with respect to Four Media for the years ended July 31, 2000 through
2005;
- reviewed the historical market prices and trading volume for Four Media's
publicly traded securities;
- reviewed the historical market prices and trading volume for Class A
Liberty Media Group tracking stock;
- reviewed other publicly available financial data for companies that were
deemed comparable to Liberty and Four Media, and publicly available
prices and premiums paid in other mergers that are considered similar to
the merger;
- reviewed drafts of several documents to be delivered at the closing of
the merger; and
- conducted other studies, analyses and inquiries as it deemed appropriate.
In connection with its review, Houlihan Lokey did not assume any
responsibility for independent verification of any of the foregoing information
and relied on this information as being complete and accurate in all material
respects. In addition, Houlihan Lokey did not make any independent evaluation or
appraisal of any of Four Media's assets or liabilities, contingent or otherwise,
nor was Houlihan Lokey furnished with any evaluation or appraisal. With respect
to the financial projections referred to above, Houlihan Lokey assumed that they
were reasonably prepared on bases reflecting the best currently available
estimates and judgment of Four Media's management as to Four Media's future
financial performance.
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The summary of Houlihan Lokey's analysis set forth below does not purport
to be a complete description of the analyses underlying its opinion. The
preparation of a financial opinion is a complex analytical process involving
various determinations as to the most appropriate and relevant methods of
financial analyses and the application of those methods to the particular
circumstances and, therefore, is not readily susceptible to summary description.
In arriving at its opinion, Houlihan Lokey did not assign any particular weight
to any analysis or factor considered by it, but rather made qualitative
judgments based on its experience in rendering these opinions. Accordingly,
Houlihan Lokey believes that its analyses must be considered as a whole and that
selecting portions of its analysis and the factors considered, without
considering all analyses and factors in totality, could create a misleading or
incomplete view of the processes underlying these analyses and the opinion.
In assessing the financial fairness of the merger consideration to Four
Media's shareholders, Houlihan Lokey:
- analyzed the reasonableness of the trading value of Four Media's publicly
traded equity securities;
- valued Four Media's common equity using widely accepted valuation
methodologies; and
- analyzed the reasonableness of the trading value of the Liberty tracking
stock.
The following paragraphs summarize the primary and material analyses
performed by Houlihan Lokey in arriving at its opinion.
Historical Stock Trading Analysis
As part of its analysis, Houlihan Lokey analyzed the trading values of Four
Media common stock and Liberty Media Group tracking stock. Houlihan Lokey
calculated the implied price/earnings multiples and enterprise value/earnings
before interest, taxes, depreciation and amortization, or "EBITDA," multiples
for Four Media and the Liberty Media Group based on each company's latest twelve
months earnings per share and EBITDA and compared those ratios to comparable
publicly traded companies. Houlihan Lokey also analyzed daily closing stock
prices and volumes from October 8, 1998 to October 6, 1999. As part of this
analysis, Houlihan Lokey calculated the ratios of the stock's average daily
volume (over the most recent 365 days) to the float and total shares
outstanding. Houlihan Lokey also analyzed the amount and nature of equity
analyst coverage of Four Media and the Liberty Media Group.
Independent Valuation Analysis of Four Media
In addition to analyzing recent trading activity, Houlihan Lokey applied
three valuation approaches to arrive at an independent valuation of Four Media.
Analysis of Recent Acquisition Mergers. Using publicly available
information, Houlihan Lokey reviewed selected multiples paid in mergers and
acquisitions involving post-production companies, which Houlihan Lokey deemed
relevant. In particular, Houlihan Lokey focused on multiples of enterprise
value, defined as the purchase price paid for the common and preferred equity of
the target company, plus all interest-bearing liabilities at book value, less
cash, to trailing twelve months revenues; earnings before interest, and taxes,
or "EBIT"; and EBITDA. Additionally, Houlihan Lokey compared the pre-deal per
share price to the merger prices of the companies involved in the selected
mergers to determined the premium or amount over the market price that was paid
to obtain control of the target company. We refer to this premium as the
"control premium."
Houlihan Lokey reviewed the following acquisitions of post-production
companies for which adequate public information was available: Liberty's pending
acquisition of Todd-AO Corporation and the acquisition of Vaughn Communication,
Inc. by Allied Digital Technologies Corp.
For the mergers examined, the multiple of enterprise value to revenues for
the acquired companies for the latest twelve month period prior to closing was
1.3x and 0.5x for an average of 0.9x. The multiples of enterprise value to EBIT
for the latest twelve month period prior to closing were 21.2x and 8.0x
averaging 14.6x. The multiples of enterprise value to EBITDA for the latest
twelve-month period prior to closing
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averaged 6.1x, and ranged from 8.0x to 4.2x. Furthermore, based on Houlihan
Lokey's analysis, a control premium of 147% and 28% were associated with the
Todd-AO and the Vaughn mergers, respectively.
Based on the merger consideration Four Media's shareholders will receive in
the merger, the merger carries the following implied multiples for Four Media:
- enterprise value to revenue of 1.9x;
- enterprise value to EBIT of 19.2x; and
- enterprise value to EBITDA of 8.2x.
Furthermore, based on this analysis, the theoretical value per common share for
a controlling interest in Four Media ranged from $5.88 and $7.33 per share of
Four Media's common stock.
Analysis of Selected Publicly Traded Comparable Companies in the
Post-Production Industry. Using publicly available information, Houlihan Lokey
reviewed the stock prices and market multiples of the common stock of the
following companies:
- Laser Pacific Media Corp;
- Northwest Teleproductions;
- Seattle Filmworks, Inc.;
- VDI Multimedia; and
- Video Services Corp.
Houlihan Lokey believes these companies are engaged in lines of business
that are generally similar to those of Four Media. Houlihan Lokey determined the
equity value (defined as the shares outstanding times the market share price at
the date of valuation) and derived the enterprise value for each of the
comparable companies for which there was sufficient public information.
Houlihan Lokey calculated a range of these enterprise values as a multiple
of EBIT and EBITDA. Enterprise value as a multiple of the latest twelve months
EBIT averaged 15.3x and ranged from 5.8x to 23.0x, and enterprise value as a
multiple of the latest twelve months EBITDA averaged 6.1x and ranged from 1.5x
to 12.4x. Enterprise value as a multiple of the projected next twelve months
EBIT based on forecasts provided by Four Media's management averaged 8.3x and
ranged from 7.9x to 8.7x, and enterprise value as a multiple of the next twelve
months EBITDA averaged 5.2x and ranged from 3.1x to 6.6x.
Lastly, market multiples for publicly traded companies represent the value
of a transferable minority ownership position and, therefore, do not incorporate
the premium that acquirors are generally willing to pay to garner a controlling
majority ownership position. In order to compare market multiples for
transferring a minority interest with a transfer of a control position, Houlihan
Lokey applied a 40% control premium to the valuation of a transferable minority
equity interest in Four Media suggested by this market multiple analysis. Based
on this analysis, the theoretical value per common share for a controlling
interest in Four Media ranged from $7.99 to $10.12.
Discounted Cash Flow Analysis. Houlihan Lokey performed a discounted cash
flow analysis of Four Media on a stand-alone basis utilizing a set of underlying
operating projections that were developed and provided by Four Media. Utilizing
such projections, Houlihan Lokey calculated the theoretical unlevered discounted
present value for Four Media by adding together the present value of:
- the projected stream of unlevered free cash flow through the year 2005
for Four Media; and
- the projected value of Four Media at the end of year 2005, or the
"terminal value."
The terminal value was determined using a range of multiples of EBITDA from
5.0x to 7.0x. The unlevered after-tax discount rates utilized in the discounted
cash flow analysis ranged from 14% to 17%.
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The theoretical value of Four Media based on these projections produced a value
per share of Four Media common stock ranging from $7.73 and $8.74.
Control Premium Study
Houlihan Lokey examined 223 mergers under $500 million from March 10, 1994
to September 20, 1999 to compare the pre-deal per share price to the merger
prices of the companies involved in the selected transactions to determine the
control premium that was paid to obtain control of the target company. Based on
this analysis, the median indicated control premium ranged from 29.8% to 44.9%.
Based upon the foregoing, and in reliance thereon, it is the opinion of
Houlihan Lokey that the merger consideration is fair, from a financial point of
view, to Four Media's public stockholders.
ACCOUNTING TREATMENT
The merger will be accounted for under the purchase method of accounting,
with AT&T treated as the acquiror. As a result, AT&T will record the assets and
liabilities of Four Media at their estimated fair values and will record as
goodwill the excess of the purchase price over the estimated fair values. From
the date of the merger, the operating results of Four Media will be combined
with the results of AT&T as part of the Liberty Media Group, which is accounted
for as an equity investment by AT&T since AT&T does not possess a "controlling
financial interest" in the Liberty Media Group for financial accounting
purposes. See "Summary -- Selected Pro Forma Condensed Financial Information."
INTERESTS OF FOUR MEDIA'S OFFICERS AND DIRECTORS IN THE MERGER
In considering the recommendation of Four Media's board regarding the
merger, you should be aware that several members of Four Media's management and
board of directors and some of its principal stockholders may be deemed to have
interests in the merger that are different from, or in addition to, the
interests of Four Media stockholders generally. Four Media's board of directors
was aware of these interests and considered them, among other matters, in
approving the merger agreement and the merger.
Stock Options
Four Media's directors and executive officers hold options to purchase Four
Media common stock. As described above under "The Proposed Merger -- Treatment
of Four Media Stock Options and Warrants," at the effective time of the merger,
each outstanding unvested Four Media option will be assumed by AT&T and
converted into a rollover option to purchase shares of Class A Liberty Media
Group tracking stock. In addition, each outstanding vested Four Media option
will, at the holder's option, either be assumed by AT&T and converted into a
rollover option or cancelled in exchange for a cash payment. Each rollover
option will continue to be exercisable for shares of Class A Liberty Media Group
tracking stock on the same terms and conditions as were applicable to the option
prior to the merger.
As a result of completing the merger, unvested outstanding options to
purchase shares of Four Media common stock held by the following officers and
directors of Four Media will vest and become fully exercisable:
- Robert T. Walston, Chairman of the Board and Chief Executive Officer;
- Jeffrey J. Marcketta, President and Chief Operating Officer;
- Christopher M.R. Phillips, Executive Vice President and Chief Financial
Officer; and
- William E. Niles, Executive Vice President of Business Affairs, General
Counsel and Secretary.
These officers and directors collectively hold unvested options to purchase
an aggregate of 2,616,667 shares of Four Media common stock. Mr. Walston,
however, has agreed to waive the acceleration of his options in connection with
the merger. See "Other Transaction Agreements -- Waiver Agreement" for
additional information regarding Mr. Walston's waiver.
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Warburg, Pincus Warrant
Warburg, Pincus Equity Partners, L.P. and a number of its affiliated
entities hold a presently exercisable warrant to purchase 1.1 million shares of
Four Media common stock. At the effective time of the merger, this warrant will
be assumed by AT&T and converted into a rollover warrant to purchase shares of
Class A Liberty Media Group tracking stock. The rollover warrant will be
exercisable for shares of Class A Liberty Media Group tracking stock on the same
terms and conditions as were applicable to the warrant prior to the merger.
Two of Four Media's directors, Messrs. Lapidus and Libowitz, are affiliated
with the Warburg, Pincus entities. As described below under "-- Voting
Agreements" below and under the section "Other Transaction Agreements -- Voting
Agreements," the Warburg, Pincus entities have entered into a voting agreement
with Liberty whereby they have agreed to vote their shares of Four Media common
stock in favor of the merger.
Voting Agreements
As of the record date for the special meeting, the Warburg, Pincus
entities, Fleming Asset Management USA and Robert T. Walston, through an entity
in which he is a limited partner, collectively owned approximately 70% of Four
Media's outstanding shares of common stock. Under the voting agreements, which
are described in the section entitled "Other Transaction Agreements -- Voting
Agreements" below, these stockholders have agreed to vote their shares of Four
Media common stock in favor of the merger and against any alternative
acquisition of Four Media. As a result of the voting agreements, the votes
represented by these shares will be sufficient to constitute a quorum and to
approve the merger agreement and the merger at the special meeting, irrespective
of the votes cast by any other stockholder.
INDEMNIFICATION AND INSURANCE
The merger agreement provides that, following the merger:
- Liberty and the surviving entity in the merger will, jointly and
severally, indemnify, and advance expenses, including fees of counsel to
Four Media's present and former officers, directors and employees and any
person who is or was serving at Four Media's request as an officer or
director of another entity, against all liabilities for acts or omissions
in those capacities occurring prior to the completion of the merger or
pertaining to the merger agreement or the merger, to the fullest extent
permitted under the Delaware General Corporation Law. This indemnity will
be provided to the extent insurance of the type mentioned below does not
provide coverage and actual payment.
- For at least six years after the merger is completed, Liberty is required
to cause the surviving entity in the merger to maintain in effect Four
Media's existing officers' and directors' liability insurance, or to
provide equivalent insurance covering acts or omissions occurring prior
to completion of the merger. However, the surviving entity in the merger
is not required to pay an annual premium for this insurance in excess of
250% of the last annual premium paid by Four Media prior to the date of
the merger agreement.
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES
General
The following discussion summarizes the material United States federal
income tax consequences of the merger. It is based on and subject to the
Internal Revenue Code of 1986, as amended, the regulations promulgated under the
Internal Revenue Code, existing administrative interpretations and court
decisions as in effect on the date hereof, all of which are subject to change,
possibly with retroactive effect. This discussion does not address all aspects
of United States federal income taxation that may be important to
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you either in light of your particular circumstances or because you are subject
to special rules, such as rules relating to:
- individual stockholders who are not citizens or residents of the United
States;
- financial institutions;
- tax-exempt organizations;
- insurance companies;
- dealers in securities;
- stockholders who acquired their shares of Four Media common stock
pursuant to the exercise of options or similar derivative securities or
otherwise as compensation; and
- stockholders who hold their shares of Four Media common stock as part of
a hedge, constructive sale, straddle or conversion transaction.
This discussion assumes you hold your shares of Four Media common stock as
capital assets within the meaning of Section 1221 of the Internal Revenue Code.
Tax Consequences to Four Media Stockholders
The receipt of Class A Liberty Media Group tracking stock and cash in the
merger, including any cash received instead of fractional shares of Class A
Liberty Media Group tracking stock, will be a taxable transaction for federal
income tax purposes under the Internal Revenue Code. In general, you will
recognize capital gain or loss equal to the difference between:
- the sum of:
(1) the value of the Class A Liberty Media Group tracking stock you
receive in the merger;
(2) the cash consideration you receive in the merger; and
(3) any cash you receive instead of fractional shares of Class A Liberty
Media Group tracking stock in the merger; and
- your tax basis in your Four Media common stock.
Your tax basis in the Class A Liberty Media Group tracking stock will be
equal to the fair market value of your stock on the date of the merger. Your
holding period for the Class A Liberty Media Group tracking stock will begin on
the day after the merger is completed.
If you exercise appraisal rights and receive cash consideration in exchange
for your shares of Four Media common stock, you will generally recognize capital
gain or loss equal to the difference between the cash you receive and your tax
basis in the Four Media common stock as to which you exercised your appraisal
rights.
Capital gains of non-corporate stockholders are generally taxable at a
maximum United States federal income tax rate of 20% if the stockholder's
holding period in its shares is more than one year at the time the merger is
completed. Capital gains of corporate stockholders are generally taxable at the
regular tax rates applicable to corporations.
Backup withholding at a rate of 31% may apply to payments made in
connection with the merger. Backup withholding will not apply, however, to a
stockholder who:
- furnishes a correct taxpayer identification number and certifies that it
is not subject to backup withholding on the substitute Form W-9 or
successor form included in the letter of transmittal to be delivered to
Four Media stockholders following completion of the merger;
- provides a certification of foreign status on Form W-8 or successor form;
or
- is otherwise exempt from backup withholding.
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THE FOREGOING IS A GENERAL DISCUSSION OF THE MATERIAL UNITED STATES FEDERAL
INCOME TAX CONSEQUENCES OF THE MERGER AND IS INCLUDED FOR GENERAL INFORMATION
ONLY. THE FOREGOING DISCUSSION DOES NOT TAKE INTO ACCOUNT THE PARTICULAR FACTS
AND CIRCUMSTANCES OF YOUR STATUS AND ATTRIBUTES. AS A RESULT, THE UNITED STATES
FEDERAL INCOME TAX CONSEQUENCES ADDRESSED IN THE FOREGOING DISCUSSION MAY NOT
APPLY TO YOU. IN VIEW OF THE INDIVIDUAL NATURE OF INCOME TAX CONSEQUENCES, YOU
ARE URGED TO CONSULT YOUR TAX ADVISOR TO DETERMINE THE SPECIFIC TAX CONSEQUENCES
OF THE MERGER TO YOU, INCLUDING THE APPLICATION AND EFFECT OF UNITED STATES
FEDERAL, STATE, LOCAL AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN
UNITED STATES FEDERAL AND OTHER TAX LAWS.
REGULATORY MATTERS
HSR Act and Antitrust
The merger is subject to the requirements of the Hart-Scott Rodino
Antitrust Improvements Act of 1976, as amended, and the rules promulgated under
that Act by the Federal Trade Commission, which prevent some transactions from
being completed until required information and materials are furnished to the
Antitrust Division of the U.S. Department of Justice and the U.S. Federal Trade
Commission and the waiting periods end or expire. On December 20, 1999, we filed
the requisite Pre-Merger Notification and Report Forms under that Act with the
U.S. Federal Trade Commission and the U.S. Department of Justice. The waiting
period initiated by these filings expired at 11:59 p.m. on January 19, 2000. The
Antitrust Division of the Department of Justice, the Federal Trade Commission
and others may challenge the merger on antitrust grounds either before or after
expiration of the applicable waiting periods. Accordingly, at any time before or
after the completion of the merger, the Antitrust Division of the Department of
Justice, the Federal Trade Commission or others could take action under the
antitrust laws as it deems necessary or desirable in the public interest,
including without limitation seeking to enjoin the completion of the merger or
permitting completion subject to regulatory concessions or conditions. We cannot
assure you that a challenge to the merger will not be made or that, if a
challenge is made, it will not prevail.
Federal Communications Commission
Under the Communications Act of 1934, as amended, transmissions from Four
Media's domestic broadcast division's earth station to satellites must be made
pursuant to a license granted by the Federal Communications Commission. Catalina
Transmission Corp., Four Media's indirect wholly-owned subsidiary, holds three
satellite earth station licenses. The proposed transactions will result in a
transfer of control of Four Media's licenses to Liberty and will require prior
FCC consent. Accordingly, Four Media and Liberty must file applications and
notices with the FCC seeking its approval of the changes in control of the
various FCC-issued licenses resulting from the merger and the contemplated
post-merger restructuring transactions. On December 23, 1999, Four Media filed
the requisite applications with the FCC. In evaluating these filings, the FCC
will consider whether Liberty is qualified to hold the interests in the licenses
and whether the public interest, convenience and necessity will be served by the
merger and related transactions.
The FCC is required to issue a public notice of the applications and
notices regarding the proposed transactions. In most cases, interested parties
will have thirty days in which to file comments, after which the applicants may
file responses to any oppositions.
We cannot assure you that the FCC will approve the changes in control of
the various FCC-issued licenses or that the FCC will not impose conditions on
its approval which could jeopardize or delay completion of the merger and
related transactions.
RESTRICTIONS ON SALES OF SHARES BY AFFILIATES OF FOUR MEDIA OR AT&T
The shares of Class A Liberty Media Group tracking stock that will be
issued in the merger will be registered under the Securities Act and will be
freely transferable under the Securities Act, except for shares of Class A
Liberty Media Group tracking stock issued to any person who is deemed to be an
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"affiliate" of either Four Media or AT&T at the time of the special meeting.
Persons who may be deemed to be affiliates include individuals or entities that
control, are controlled by or are under common control with, Four Media or AT&T
and may include some of their officers and directors, as well as their principal
stockholders. Any person deemed to be an affiliate of Four Media or AT&T at the
time of the special meeting may not sell their shares of Class A Liberty Media
Group tracking stock acquired in the merger except pursuant to:
- an effective registration statement under the Securities Act covering the
resale of those shares;
- an exemption under paragraph (d) of Rule 145 under the Securities Act; or
- any other applicable exemption under the Securities Act.
AT&T's registration statement, of which this proxy statement/prospectus forms a
part, does not cover the resale of shares of Class A Liberty Media Group
tracking stock to be received by affiliates of Four Media in the merger.
LISTING ON THE NEW YORK STOCK EXCHANGE OF CLASS A LIBERTY MEDIA GROUP TRACKING
STOCK TO BE ISSUED IN THE MERGER
We will use reasonable efforts to cause the shares of Class A Liberty Media
Group tracking stock that will be issued in the merger to be authorized for
listing on the New York Stock Exchange, subject to official notice of issuance,
before completing the merger. It is a condition to the closing of the merger
that this listing authorization be obtained.
APPRAISAL RIGHTS
Under Section 262 of the Delaware General Corporation law, any record
holder of Four Media common stock who does not wish to accept the merger
consideration for his, her or its shares of Four Media common stock as provided
in the merger agreement, has the right to seek an appraisal of, and to be paid
the fair value for, his, her or its shares of Four Media common stock if the
stockholder complies with Section 262.
Record holders of shares of Four Media common stock who do not vote in
favor of the merger agreement and the merger at the special meeting and who
otherwise comply with the applicable statutory procedures of Section 262
summarized in this proxy statement/prospectus, will be entitled to appraisal
rights under Section 262. If you are the record holder of shares of Four Media
common stock, you must follow the steps summarized below properly and in a
timely manner in order to exercise and perfect your appraisal rights. If you
have a beneficial interest in shares of Four Media common stock held of record
in the name of another person, such as a broker or nominee, you must act
promptly to cause the record holder to follow the steps summarized below
properly and in a timely manner to perfect appraisal rights.
THE FOLLOWING DISCUSSION IS NOT A COMPLETE STATEMENT OF THE LAW OF
APPRAISAL RIGHTS AND IS QUALIFIED IN ITS ENTIRETY BY THE FULL TEXT OF SECTION
262, WHICH IS REPRINTED IN ITS ENTIRETY AS ANNEX C. ALL REFERENCES IN SECTION
262 AND IN THIS SUMMARY TO A "STOCKHOLDER" OR "HOLDER" ARE TO THE RECORD HOLDER
OF SHARES OF FOUR MEDIA COMMON STOCK.
Under Section 262, holders of Four Media common stock who follow the
procedures set forth in Section 262 will be entitled to have their shares
appraised by the Delaware Court of Chancery and to receive payment in cash of
the "fair value" of their shares, exclusive of any element of value arising from
the accomplishment or expectation of the merger, together with a fair rate of
interest, if any, as determined by the court.
Under Section 262, where a proposed merger is to be submitted for approval
at a meeting of stockholders, as in the case of the special meeting to which
this proxy statement/prospectus relates, the corporation, not less than 20 days
prior to the meeting, must notify each of its stockholders who held stock on the
record date for the special meeting that appraisal rights are available and must
include a copy of Section 262 in the notice. We have scheduled a special meeting
of stockholders to consider and vote upon
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approval of the merger agreement and the merger for 9:00 a.m. local time in New
York, New York on April 6, 2000. Please see the section entitled "The Special
Meeting" for additional information regarding the special meeting. This proxy
statement/prospectus constitutes the requisite notice to holders of Four Media
common stock and the text of Section 262 is attached to this proxy
statement/prospectus as Annex C. If you wish to exercise your appraisal rights
or wish to preserve your right to do so, you should review the following
discussion and Annex C carefully. If you fail to comply with the procedures
specified in a timely and proper manner, it will result in the loss of your
appraisal rights.
If you wish to exercise appraisal rights you must:
- not vote in favor of the merger agreement and the merger; and
- deliver to Four Media, before the vote at the special meeting, a written
demand for appraisal of your shares of Four Media common stock.
If you sign and return a proxy card without expressly directing that your
shares of Four Media common stock be voted against the merger agreement and the
merger, you will effectively waive your appraisal rights because your shares
represented by the proxy card will be voted in favor of the merger agreement and
the merger. Accordingly, if you desire to exercise and perfect appraisal rights
with respect to any of your shares of Four Media common stock, you must either:
- refrain from executing and returning the enclosed proxy card and from
voting in person in favor of approval and adoption of the merger
agreement and the merger; or
- check either the box entitled "Against" or "Abstain" next to the proposal
to approve and adopt the merger agreement and the merger on your proxy
card or affirmatively vote in person against the proposal or register in
person your abstention with respect to the proposal.
A vote or proxy against the merger agreement and the merger will not, in and of
itself, constitute a demand for appraisal.
A demand for appraisal will be sufficient if it reasonably informs us of
the stockholders' identity and that the stockholder intends to demand appraisal
of its shares of Four Media common stock. This written demand for appraisal must
be separate from any proxy or vote abstaining from or voting against the
approval and adoption of the merger agreement and the merger. If you wish to
exercise appraisal rights, you must be the record holder of the shares of Four
Media common stock on the date the written demand for appraisal is made and must
continue to hold your shares through the effective time of the merger.
Accordingly, if you are the record holder of shares of Four Media common stock
on the date the written demand for appraisal is made, but thereafter transfer
shares prior to the effective time of the merger, you will lose any right to
appraisal with respect to those shares. Beneficial holders of shares of Four
Media common stock are not entitled to directly assert appraisal rights.
A demand for appraisal should be executed by or on behalf of the holder of
record, fully and correctly, as the holder's name appears on the stock
certificates and must state that the holder intends to demand appraisal of his,
her or its shares. If the shares are owned in a fiduciary capacity, such as by a
trustee, guardian or custodian, execution of the demand for appraisal should be
made in that capacity, and if the shares are owned of record by more than one
person, as in a joint tenancy or a tenancy in common, the demand should be
executed by or on behalf of all joint owners. An authorized agent, including one
for two or more joint owners, may execute the demand for appraisal on behalf of
a holder of record; however, the agent must identify the record owner or owners
and expressly disclose the fact that, in executing the demand, he or she is
acting as agent for the owner or owners.
A record holder, such as a broker who holds shares as nominee for several
beneficial owners, may exercise appraisal rights for the shares of Four Media
common stock held on behalf of one or more beneficial owners while not
exercising such rights for the shares held on behalf of other beneficial owners.
Under these circumstances, the written demand should set forth the number of
shares as to which appraisal is sought. Where the number of shares of Four Media
common stock is not expressly stated, the demand will be presumed to cover all
shares held in the name of the record owner. If you hold your shares
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<PAGE> 51
in brokerage accounts or other nominee form and wish to exercise appraisal
rights, you are urged to consult with your broker to determine the appropriate
procedures for making a demand for appraisal by your nominee.
ALL WRITTEN DEMANDS FOR APPRAISAL SHOULD BE DELIVERED TO FOUR MEDIA
COMPANY, 2813 WEST ALAMEDA AVENUE, BURBANK, CALIFORNIA 91505, OR SHOULD BE
DELIVERED TO FOUR MEDIA'S SECRETARY AT THE SPECIAL MEETING PRIOR TO THE VOTE.
Within 10 days after the completion of the merger, we will notify each
holder of Four Media common stock who properly asserted appraisal rights under
Section 262 and did not vote in favor of the merger agreement and the merger
that the merger has been completed.
Within 120 days after the effective time of the merger, but not thereafter,
Four Media, or any holder of Four Media common stock who complied with the
statutory requirements summarized above, may file a petition with the Delaware
Court of Chancery demanding a determination of the fair value of the shares held
by all such holders of Four Media common stock. If a petition is not filed, all
holders of Four Media common stock who had previously demanded appraisal of
their shares will lose their appraisal rights. Four Media is not under any
obligation, and has no present intention, to file a petition for appraisal of
the value of the shares. Accordingly, if you wish to exercise your appraisal
rights, you should regard it as your obligation to take all steps necessary to
perfect your appraisal rights in the manner prescribed in Section 262.
Within 120 days after the effective time of the merger, any holder of Four
Media common stock who has complied with the provisions of Section 262 will be
entitled, upon written request, to receive from Four Media a statement setting
forth the aggregate number of shares of Four Media common stock not voted in
favor of the merger agreement and the merger and for which demands for appraisal
were received, and the number of persons holding those shares. Four Media must
mail this statement within 10 days after it receives any written request of this
type.
If a petition for appraisal is timely filed and we are served a copy
thereof, we will then be obligated within 20 days to file with the Delaware
Register in Chancery a duly verified list containing the names and addresses of
the holders of Four Media common stock who have demanded appraisal of their
shares and with whom agreements as to the value of their shares have not been
reached. Thereafter, the Delaware court is empowered to conduct a hearing on the
petition to determine those holders of Four Media common stock who have complied
with Section 262 and who have become entitled to appraisal rights thereunder.
The Delaware court may require the holders who demanded appraisal rights to
submit their stock certificates to the Register in Chancery for notation thereon
of the pendency of the appraisal proceeding. If any holder of Four Media common
stock fails to comply with this direction, the Delaware court may dismiss the
proceedings as to that holder.
After determining which holders of Four Media common stock are entitled to
appraisal, the Delaware court will appraise the "fair value" of their shares,
exclusive of any element of value arising from the accomplishment or expectation
of the merger, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. If you are considering seeking
appraisal, you should be aware that the fair value of your shares as determined
under Section 262 could be more than, the same as or less than the consideration
you are entitled to receive pursuant to the merger agreement if you did not seek
appraisal of your shares and that investment banking opinions as to the fairness
from a financial point of view are not necessarily opinions as to fair value
under Section 262.
The costs of the action may be determined by the Delaware court and taxed
upon the parties as the Delaware court deems equitable. The Delaware court may
also order that all or a portion of the expenses incurred by any holder of Four
Media common stock in connection with an appraisal, including, without
limitation, reasonable attorneys' fees and the fees and expenses of experts
utilized in the appraisal proceeding, be charged pro rata against the value of
all of the shares entitled to appraisal. If a determination or assessment is not
made, each party bears its own expenses.
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At any time within 60 days after the effective time of the merger, any
holder of Four Media common stock will have the right to withdraw his or her
demand for appraisal and to accept the merger consideration. After this period,
a holder may withdraw a demand only with Four Media's written consent. If a
petition for appraisal is not filed with the Delaware court within 120 days
after the effective time of the merger, a holder's right to appraisal will cease
and the holder will be entitled to receive the merger consideration, without
interest, as if the holder had not demanded appraisal of his or her shares. A
petition demanding appraisal that is timely filed in the Delaware court, may not
be dismissed as to any holder of Four Media common stock without the approval of
the Delaware court, and the court may condition the approval on any terms as it
deems just.
If any holder of Four Media common stock who properly demands appraisal of
his or her shares under Section 262 fails to perfect, or effectively withdraws
or loses, his or her right to appraisal as provided in the Delaware General
Corporation Law, the holder's shares of Four Media common stock will be
converted into the right to receive the merger consideration in accordance with
the terms of the merger agreement.
IF YOU WISH TO EXERCISE YOUR APPRAISAL RIGHTS, YOU MUST NOT VOTE IN FAVOR
OF THE MERGER AGREEMENT AND THE MERGER AND MUST STRICTLY COMPLY WITH THE
PROCEDURES SET FORTH IN SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW.
IF YOU FAIL TO TAKE ANY REQUIRED STEP IN CONNECTION WITH THE EXERCISE OF
APPRAISAL RIGHTS, IT WILL RESULT IN THE TERMINATION OR WAIVER OF THESE RIGHTS.
DELISTING AND DEREGISTRATION OF FOUR MEDIA COMMON STOCK AFTER THE MERGER
If the merger is completed, Four Media common stock will be delisted from
the Nasdaq National Market and will be deregistered under the Exchange Act.
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THE MERGER AGREEMENT
The following description summarizes the material provisions of the merger
agreement a copy of which is attached as Annex A to this proxy
statement/prospectus. We urge you to read the merger agreement carefully.
Please note that the terms Material Adverse Effect, Liberty Material
Adverse Effect and Parent Adverse Effect used in this section are defined on
pages 50 and 51.
CONDITIONS TO COMPLETING THE MERGER
Conditions to the obligations of each party. Our respective obligations to
complete the merger are subject to the satisfaction or waiver, at or prior to
the closing date of the merger, of each of the following conditions:
- the merger agreement and the merger must be approved and adopted by the
holders of a majority of the shares of Four Media common stock entitled
to vote at the special meeting;
- AT&T's registration statement relating to the merger must be effective
and must not be the subject of any stop order or proceedings seeking a
stop order;
- AT&T must receive all state securities law or blue sky permits and
authorizations necessary to issue the merger consideration;
- any waiting period applicable to the merger under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 must expire or be terminated; and
- the shares of Class A Liberty Media Group tracking stock that will be
issued in the merger must be approved for listing on the New York Stock
Exchange, subject only to official notice of issuance.
Conditions to the obligations of AT&T for the benefit of Liberty. AT&T's
obligation to complete the merger is subject to the satisfaction of each of the
following additional conditions, which are for the benefit of Liberty and may be
asserted or waived solely by Liberty acting alone:
- Four Media's representations and warranties must, if specifically
qualified by materiality, be true and correct and, if not so qualified,
be true and correct in all material respects, as of December 6, 1999 and,
except to the extent the representations and warranties relate to an
earlier date, on the date the merger is completed, except for changes
permitted or contemplated by the merger agreement;
- Four Media must have performed or complied in all material respects with
all of its obligations, agreements and covenants contained in the merger
agreement;
- Four Media must have delivered to AT&T and Liberty a compliance
certificate signed by an appropriate officer certifying that Four Media
has fulfilled several specified conditions;
- there must not be any permanent or preliminary injunction, restraining
order or other order in effect or pending that, if determined in a manner
adverse to Four Media, Liberty or AT&T, would have the effect of:
(1) preventing us from completing the merger and the other transactions
contemplated by the merger agreement, or permitting completion only
subject to a condition or restriction that has had or would have a
Liberty Material Adverse Effect;
(2) requiring Liberty to divest, as a result of completing the merger, a
material portion of its business or assets or a material portion of
the business and assets of its subsidiaries and affiliates taken as a
whole;
(3) imposing material limitations on Liberty's ability to effectively
exercise full rights of ownership of shares of capital stock or other
equity interests in the surviving entity in the merger, or
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<PAGE> 54
making that ownership illegal or subject to any materially burdensome
requirement or condition; or
(4) requiring Liberty, its subsidiaries, or Four Media or any of its
subsidiaries, to cease or refrain from engaging in any of their lines
of business as a result of completing the merger.
- there must not be in effect any applicable law, regulation, order or
judgment of any foreign or United States federal, state or local
governmental entity of competent jurisdiction that:
(1) makes the merger agreement, the merger or any transaction contemplated
in the merger agreement illegal or imposes or is reasonably likely to
impose material damages or penalties in connection with the merger
agreement or the merger;
(2) requires or is reasonably likely to require, as a result of completing
the merger, the divestiture of, or any restrictions or conditions on
the conduct of:
- a portion of the business or assets of Four Media and its
subsidiaries, taken as a whole, which would have a Material Adverse
Effect; or
- a material portion of the business or assets of Liberty and its
subsidiaries and affiliates taken as a whole;
(3) imposes or is reasonably likely to impose material limitations on
Liberty's ability to effectively exercise full rights of ownership of
shares of capital stock or other equity interests in the surviving
entity in the merger or makes that ownership illegal or subject to any
materially burdensome requirement or condition; or
(4) requires or is reasonably likely to require Liberty, its subsidiaries
or affiliates, or Four Media or any of its material subsidiaries, to
cease or refrain from engaging in any material business, including, in
the case of Liberty, any material business conducted by Four Media or
any of its subsidiaries prior to the merger, as a result of the
completing of the merger;
- other than filing the certificate of merger and filings due after the
merger is completed:
(1) all approvals and governmental consents that are required in
connection with completing the merger must have been obtained and must
be in full force and effect without any condition, limitation or
restriction;
(2) all governmental filings required in connection with completing the
merger must have been made; and
(3) all waiting periods, if any, applicable to completing the merger
imposed by any governmental entity must have expired,
- other than any of the foregoing which, if not obtained, in force or
effect, made or expired would not, either individually or in the
aggregate, have a Material Adverse Effect; except that any governmental
consent by the FCC relating to Four Media's FCC licenses will not be
deemed ineffective solely because it is subject to appeal or
reconsideration by the FCC on its own motion;
- Four Media and Liberty must have received written acknowledgements from
the Fleming Funds and the Warburg Entities, each as defined below, that
the registration rights agreements to which they are party, and their
rights under those agreements will terminate as of the effective time of
the merger.
As used in this proxy statement/prospectus, the term "Fleming Funds" means,
collectively, Fleming US Discovery Fund III, L.P. and Fleming US Discovery
Offshore Fund III, L.P. The term "Warburg Entities" means, collectively,
Warburg, Pincus Equity Partners, L.P., Warburg, Pincus Netherlands Equity
Partners I, C.V., Warburg, Pincus Netherlands Equity Partners II, C.V. and
Warburg, Pincus Netherlands Equity Partners III, C.V.
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Conditions to the obligations of AT&T for the benefit of AT&T. AT&T's
obligation to complete the merger is subject to the satisfaction of each of the
following additional conditions, which are for AT&T's benefit and may be waived
by AT&T acting alone:
- all of Four Media's representations and warranties in the merger
agreement must, if specifically qualified by materiality, be true and
correct, and if not so qualified, be true and correct in all material
respects, in each case as of December 6, 1999 and, except to the extent
the representations and warranties speak as of a specified earlier date,
on the date the merger is completed, except for changes permitted or
contemplated by the merger agreement;
- Four Media must have performed or complied in all material respects with
all of its obligations, agreements and covenants contained in the merger
agreement;
- Four Media must have delivered to AT&T a compliance certificate signed by
an appropriate officer of Four Media certifying that Four Media has
complied with several specified conditions and identifying the following:
(1) all pending actions or proceedings by any governmental entity seeking
a permanent or preliminary injunction or restraining order or any
other legal restraint or prohibition which, if determined in a manner
adverse to Four Media, Liberty or AT&T, could have the effect of
preventing completion of the transactions contemplated in the merger
agreement or permitting completion subject to any condition or
restriction;
(2) any injunction or other order, restraint or prohibition that is in
effect preventing completion of the transactions contemplated in the
merger agreement or permitting completion subject to any condition or
restriction;
(3) any contract, agreement or understanding to which Four Media or any of
its subsidiaries is a party that would, at the effective time of the
merger, be legally enforceable against AT&T or any of its subsidiaries
(other than Liberty, some of its affiliates, Four Media and their
respective subsidiaries); and
(4) any license that Four Media and its subsidiaries need for the
ownership and operation of their respective businesses which, as of
the merger completion date, they no longer hold, or the terms of which
they are not in compliance, or in connection with which they have not
currently filed all reports and other information required to be filed
by them.
- there must not be any permanent or preliminary injunction, restraining
order or other order in effect, or pending, that, if determined in a
manner adverse to Four Media, Liberty or AT&T, could prevent us from
completing the merger and the other transactions contemplated by the
merger agreement, or permitting completion only subject to any condition
or restriction that:
(1) has had or would have a Parent Material Adverse Effect or a Material
Adverse Effect;
(2) would require AT&T or any of its subsidiaries to take or refrain from,
or would prohibit AT&T or any of its subsidiaries from taking or
refraining from, any action (other than actions required to be taken
by AT&T or its subsidiaries under the merger agreement or otherwise
specifically agreed to by AT&T or one of its subsidiaries in the
merger agreement);
- there must not be in effect any applicable statute, rule, law,
regulation, order, decree or judgment of any foreign or United States
federal, state, local or governmental entity of competent jurisdiction
that:
(1) makes the merger agreement, the merger, the post-merger restructuring
transactions or any other transaction contemplated by the merger
agreement illegal or imposes material damages or penalties in
connection with these transactions or otherwise prohibits or
unreasonably delays any of these transactions;
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(2) requires AT&T or any of its subsidiaries to divest or hold separate
any portion of their respective businesses or assets, in any case as a
result of completing the merger, or would require AT&T or any of its
subsidiaries to take or refrain from, or would prohibit AT&T or any of
its subsidiaries from taking or refraining from, any action, other
than as specifically agreed to by AT&T or one of its subsidiaries in
the merger agreement;
(3) imposes any material limitations on Liberty's or AT&T's ability to
effectively exercise full rights of ownership of shares of capital
stock or other equity interests in the surviving entity or makes that
ownership illegal or subject to any materially burdensome requirement
or condition;
(4) requires AT&T or any of its subsidiaries, excluding Liberty and its
subsidiaries, to cease or refrain from engaging in any material
business, whether or not the business is conducted by Four Media or
any of its subsidiaries, as a result of completing the merger; or
(5) materially increases AT&T's liabilities or obligations arising out of
the merger agreement or, in AT&T's reasonable judgment, would
otherwise have a Parent Adverse Effect as a result of completing the
merger;
- other than filing the certificate of merger and filings due after the
merger is completed:
(1) all approvals and governmental consents required in connection with
completing the merger must have been obtained and must be in full
force and effect without any condition, limitation or restriction;
(2) all governmental filings required in connection with completing the
merger must have been made; and
(3) all waiting periods, if any, applicable to completing the merger
imposed by any governmental entity shall have expired,
- other than any of the foregoing which, if not so obtained, in force or
effect, made or expired would not, in AT&T's reasonable judgment, either
individually or in the aggregate, have a Parent Adverse Effect; except
that any governmental consent by the FCC relating to Four Media's FCC
licenses will not be deemed ineffective solely because it is subject to
appeal or reconsideration by the FCC on its own motion.
- neither Four Media or any of its subsidiaries may be a party to any
contract, agreement or understanding that, at the time the merger is
completed, would be legally enforceable against AT&T or any of its
subsidiaries (other than Liberty, some of Liberty's affiliates, Four
Media and any of their subsidiaries), except those which would not have a
Parent Adverse Effect;
- Four Media and its subsidiaries must hold and be in compliance with the
terms of, and have filed all reports and information in connection with,
all licenses, franchises, orders and similar approvals of governmental
entities required for the ownership of their respective properties or to
the conduct of their respective businesses, except for any failure to so
hold, be in compliance with the terms of, or have duly and currently
filed, that in AT&T's reasonable judgment, would not have a Parent
Adverse Effect;
- AT&T must not have been notified by Liberty that any of the conditions,
except for those conditions to Four Media's obligations listed below, to
complete the merger remain unsatisfied;
- Liberty must have performed or complied in all material respects with all
of its obligations, agreements and covenants contained in the merger
agreement, and Liberty must have delivered to AT&T a certificate signed
by an appropriate officer to that effect;
- any applicable waiting period applicable to the merger under the
Hart-Scott-Rodino Act must have expired or been terminated without
receipt of any objections or commencement of litigation or threat by the
appropriate governmental entity to restrain the transactions contemplated
in the merger agreement; and
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- Four Media and AT&T must have received written acknowledgements from each
of the Fleming Funds and the Warburg Entities that the registration
rights agreements to which they are party, and their rights under those
agreements, will terminate as of the effective time of the merger.
Conditions to the obligations of Four Media. Four Media's obligation to
complete the merger is subject to the satisfaction or waiver of each of the
following conditions:
- AT&T's and Liberty's representations and warranties contained in the
merger agreement must, if specifically qualified by materiality, be true
and correct and, if not so qualified, be true and correct in all material
respects, in each case as of December 6, 1999 and, except to the extent
the representations and warranties relate to a specified earlier date, on
the merger completion date, except for changes permitted or contemplated
by the merger agreement;
- each of Liberty, AT&T and D-Group Merger Corp. must have performed or
complied in all material respects with all of their obligations,
agreements and covenants contained in the merger agreement;
- each of Liberty and AT&T must have delivered to Four Media a compliance
certificate signed by an appropriate officer certifying that its
conditions have been satisfied;
- there must not be in effect any permanent or preliminary injunction,
restraining order or other order by any court or other governmental
entity of competent jurisdiction preventing the completion of the merger
and the other transactions contemplated by the merger agreement, or
permitting completion only subject to any condition or restriction that
would have a Liberty Material Adverse Effect;
- no statute, rule or regulation may be in effect that was enacted,
promulgated, entered, issued, enforced or deemed applicable by any
foreign or United States federal, state or local governmental entity of
competent jurisdiction, and no action brought by any governmental entity
may be pending, that:
(1) makes or may make the merger agreement or the merger illegal; or
(2) has or is reasonably likely to have a Liberty Material Adverse Effect;
- other than filing the certificate of merger and filings due after the
merger is completed:
(1) all approvals and governmental consents required in connection with
completing the merger must have been obtained and must be in full
force and effect without any condition, limitation or restriction; and
(2) all waiting periods, if any, applicable to completing the merger
imposed by any governmental entity must have expired,
- other than any of the foregoing which, if not so obtained, in force or
effect, made or expired would not, either individually or in the
aggregate, be reasonably likely to have a Liberty Material Adverse
Effect; except that, any governmental consent by the FCC relating to Four
Media's FCC licenses will not be deemed ineffective solely because it is
subject to appeal or reconsideration by the FCC on its own motion.
Defined terms. As used in the discussion of the conditions to completing
the merger and the discussion under "-- Termination" below, the following terms
have the indicated meanings:
- a "Material Adverse Effect" means:
(1) a material adverse effect on the transactions contemplated by the
merger agreement, including a material adverse effect on the ability
of any party to the agreement to complete the transactions or perform
its material obligations under the merger agreement; or
(2) a material adverse effect on the business, assets or financial
condition of Four Media and its subsidiaries, taken as a whole.
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- a "Liberty Material Adverse Effect" means:
(1) a material adverse effect on the transactions contemplated by the
merger agreement, including a material adverse effect on the ability
of Liberty to perform its obligations under the merger agreement; or
(2) a material adverse effect on the business, assets or financial
condition of Liberty and its subsidiaries, taken as a whole.
- a "Parent Adverse Effect" means:
(1) an effect which is adverse to, or burdensome on the business, assets,
liabilities, condition, financial or otherwise, results of operations,
operations or prospects of any business of AT&T or its subsidiaries,
excluding Liberty and its subsidiaries, being conducted on December 6,
1999 other than, in each case, any effect which is insignificant in
nature or consequence; or
(2) an adverse effect on the relationship between AT&T or any of its
subsidiaries, excluding Liberty and its subsidiaries and any federal
or state governmental entity having jurisdiction over any business of
AT&T or its subsidiaries, excluding Liberty and its subsidiaries, or
either of their respective operations or assets other than an effect
which is insignificant in nature or consequence.
TERMINATION
The merger agreement and the transactions contemplated in the merger
agreement, may be terminated at any time prior to completing the merger, whether
before or after approval and adoption of the merger agreement and the merger by
Four Media's stockholders, in the following situations:
- by mutual consent of Liberty, AT&T and Four Media;
- by any of Liberty, AT&T or Four Media:
(1) if the merger has not been completed on or before July 31, 2000;
however:
- if the failure to complete the merger is due to any party's failure
to perform any of its obligations under the merger agreement, this
termination right will not be available to the nonperforming party;
or
- if the failure to complete the merger is solely due to the fact that
the conditions in the merger agreement regarding AT&T's registration
statement relating to the merger, required governmental consents and
approvals, any Hart-Scott-Rodino waiting period and the absence of
any enactments or injunctions preventing the merger have not been
satisfied, any party by written notice to each other party may extend
the termination date up to September 30, 2000;
(2) if there has been a material breach of any representation, warranty,
covenant or agreement on the part of any other party contained in the
merger agreement, in each case that is not curable, which would
prevent the satisfaction of the applicable conditions to closing
requiring that the party's representations and warranties be accurate
and its covenants and agreements be performed;
(3) if any court of competent jurisdiction or other competent governmental
entity has issued an order, decree or ruling or taken any other action
permanently restraining, enjoining or otherwise prohibiting the merger
and the order, decree, ruling or other action has become final and
nonappealable; or
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(4) Four Media's stockholders fail to approve and adopt the merger
agreement and the merger by the requisite vote:
- at the special meeting called for that purpose; or
- by the date one day prior to the termination date or the extended
termination date as described above,
but only if AT&T's registration statement relating to the merger became and
remained effective (unless the failure of the registration statement to become
effective is the result of Four Media's material breach of its agreement to
cooperate with the filing of the registration statement) so that this proxy
statement could be mailed to Four Media stockholders and the special meeting
could be held prior to that date. AT&T may not terminate the merger agreement
under the circumstance described in clause (4) above without Liberty's
agreement;
- by Liberty, if Four Media's board of directors:
(1) withdraws or modifies, in a manner adverse to Liberty or AT&T, its
approval or recommendation of the merger; or
(2) approves or recommends, or authorizes Four Media to enter into an
agreement regarding, an Extraordinary Transaction (as defined below),
as described under "-- No Solicitation" below; or
- by Four Media, if Four Media's board determines in good faith, after
receiving written advice from a nationally recognized financial advisor
and after consulting with legal counsel, that an Extraordinary
Transaction is a Superior Proposal (as defined below) to the merger,
provided that AT&T and Liberty have had a reasonable opportunity to make
adjustments in the terms and conditions of the merger.
As used in this section and below under "-- No Solicitation" the following
terms have the indicated meanings:
- an "Extraordinary Transaction" means:
(1) any tender or exchange offer involving Four Media;
(2) any proposal for a merger, consolidation or other business combination
involving Four Media;
(3) any proposal or offer to acquire in any manner more than a 15% equity
interest in, or a significant portion of the business or assets of,
Four Media;
(4) any proposal or offer with respect to any recapitalization or
restructuring of Four Media; or
(5) any other proposal or offer substantially similar to any of the
foregoing provisions.
- a "Superior Proposal" means any unsolicited proposal made by a third
party relating to an Extraordinary Transaction that Four Media's board of
directors:
(1) determines in good faith, after receiving written advice from a
nationally recognized financial advisor, that the terms of the
Extraordinary Transaction are more favorable to Four Media's
stockholders than the merger, and financing for the Extraordinary
Transaction, to the extent required, is either committed or, in the
good faith judgment of Four Media's board of directors, is reasonably
capable of being obtained; and
(2) reasonably determines in good faith, after consultation with legal
counsel, that requires or is reasonably likely to require the board,
to take the action in order to satisfy its fiduciary obligation to
Four Media stockholders.
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TERMINATION FEES
Four Media will pay Liberty a termination fee of $6.5 million if, during
the term of the merger agreement:
- Four Media's board of directors:
(1) withdraws or modifies, in a manner adverse to Liberty or AT&T, its
approval or recommendation of the merger; or
(2) approves, recommends or authorizes Four Media to enter into an
agreement with respect to an Extraordinary Transaction; and
- the merger agreement is terminated by any non-breaching party under the
provision described in the second "bullet point" under "-- Termination,"
by Liberty under the provision described in the third "bullet point"
under "-- Termination," or by Four Media under the provision described in
the fourth "bullet point" under "-- Termination;" and
- if the merger agreement is terminated by any non-breaching party under to
the provisions described in the second "bullet point" under
"-- Termination," Four Media thereafter executes any definitive agreement
involving or completes an Extraordinary Transaction with any person other
than Liberty, AT&T or an affiliate of either of them within six months
after the date the merger agreement is terminated.
NO SOLICITATION
Four Media has agreed that, except as described below, it will not, and
will use its best efforts to ensure that its officers, directors, employees and
other agents or affiliates do not, directly or indirectly, take any of the
following actions:
- initiate, solicit, encourage, or take any action to facilitate the making
of, any offer or proposal which constitutes or is reasonably likely to
lead to any Extraordinary Transaction;
- enter into any agreement with respect to any Extraordinary Transaction;
or
- in the event of an unsolicited Extraordinary Transaction for Four Media,
engage in negotiations or discussions with, or provide any information or
data to, any person (other than Liberty, AT&T, D-Group Merger Corp. or
any of their affiliates or representatives, and except for information
that Four Media previously disseminated publicly) relating to any
Extraordinary Transaction.
Four Media will immediately notify Liberty and AT&T if a third party:
- submits any proposals, inquires or expresses interest in acquiring Four
Media;
- requests information from Four Media; or
- seeks to initiate or continue negotiations with Four Media or its
representatives,
in each case in connection with any Extraordinary Transaction or the possibility
or consideration by the third party of making a Extraordinary Transaction. Four
Media will include the third party's name and the terms and conditions of any
proposals or offers in its notice to Liberty and AT&T.
However, Four Media may furnish information concerning its business,
properties or assets to any person if appropriate confidentiality agreements
have been executed, and may negotiate and participate in discussions and
negotiations with that person concerning an Extraordinary Transaction if,
following December 6, 1999, the person has, without Four Media or any of its
officers, directors, employees or agents taking any of the prohibited actions
set forth above, submitted a bona fide written proposal to Four Media relating
to an Extraordinary Transaction and each of the following occurs:
- Four Media's board of directors determines in good faith, after receiving
written advice from a nationally recognized financial advisor, that the
terms of the Extraordinary Transaction are more
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favorable to Four Media's stockholders than the merger, and financing for
the transaction, to the extent required, is either committed or, in the
good faith judgment of Four Media's board of directors, is reasonably
capable of being obtained by the entity or group proposing the
transaction; and
- in the opinion of Four Media's board of directors, after consultation
with legal counsel, the failure to provide this information or access or
to engage in discussions or negotiations would cause the board of
directors to breach its fiduciary duties to Four Media's stockholders
under applicable law.
REPRESENTATIONS AND WARRANTIES
Four Media, Liberty and AT&T each made a number of representations and
warranties in the merger agreement, including representations and warranties
relating to, among other things:
- corporate organization, qualification to do business and similar
corporate matters of AT&T, Four Media and Liberty;
- Four Media's subsidiaries and their corporate organization, qualification
to do business and similar corporate matters;
- authorization, execution, delivery, performance and enforceability of the
merger agreement and related matters of AT&T, Four Media and Liberty;
- AT&T's and Four Media's capital structure;
- AT&T's formation and ownership of D-Group Merger Corp.;
- ownership of capital stock of Four Media by Liberty and AT&T;
- Four Media's SEC filings, the accuracy of the information contained in
those filings and the absence of undisclosed liabilities in those
filings;
- required consents, approvals, orders and authorizations of governmental
authorities relating to execution and delivery of the merger agreement
and related matters;
- absence of defaults, violations or breaches under Four Media's material
contracts and absence of undisclosed liabilities of Four Media and its
subsidiaries;
- absence of material adverse changes or events concerning Four Media's and
Liberty's respective businesses since August 1, 1999 and December 31,
1998, respectively;
- the accuracy of the information supplied by Four Media, Liberty and AT&T
in connection with this proxy statement/prospectus and the related
registration statement;
- material litigation involving Four Media;
- possession of and compliance with all licenses required to conduct Four
Media's business and compliance with applicable regulatory requirements
by Four Media;
- engagement and payment of fees of brokers, investment bankers and
financial advisors by Four Media;
- filing of tax returns and payment of taxes by Four Media;
- Four Media's labor matters and employee benefits;
- receipt by Four Media of a fairness opinion of Houlihan Lokey regarding
the merger consideration;
- approval and recommendation of the merger agreement and the merger by
Four Media's board of directors;
- Four Media's real property and the condition of its personal and real
property;
- required vote of Four Media stockholders;
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- Four Media's FCC licenses and authorizations and intellectual property;
- environmental and insurance matters with respect to Four Media and its
subsidiaries;
- transactions and contracts with affiliates of Four Media;
- Four Media not being subject to regulation as an investment company or a
real property holding corporation;
- exemption of Liberty and AT&T from Section 203 of the Delaware General
Corporation Law as applied to Four Media;
- Four Media's "Pioneer" status in Singapore; and
- Four Media's interest in competitors and British Telecommunications.
The representations and warranties in the merger agreement are complicated
and not easily summarized. You are urged to read carefully the articles of the
merger agreement entitled "Representations and Warranties of the Company,"
"Representations and Warranties of Parent" and "Representations and Warranties
of Liberty Media."
CONDUCT OF FOUR MEDIA'S BUSINESS PENDING THE MERGER
Four Media agreed in the merger agreement that, except as specifically
contemplated by the merger agreement and the other transaction documents, until
the merger is completed or unless Liberty or AT&T consent in writing, Four Media
and its subsidiaries will operate their businesses in the ordinary and usual
course of business consistent with past practices and use their reasonable best
efforts to:
- preserve intact their present business organizations;
- preserve their respective licenses;
- keep available the services of their present officers and employees; and
- preserve their relationships with customers, suppliers and others having
business dealings with them to the end that their goodwill and on-going
businesses shall be unimpaired.
Four Media also agreed that until the merger is completed or unless Liberty
and AT&T consent in writing Four Media will not propose to or take any of the
following actions:
- pledge or transfer or agree to pledge or transfer any of its
subsidiaries' capital stock or other equity interests;
- amend any of its organizational documents;
- split, combine or reclassify its outstanding capital stock or issue or
authorize or propose the issuance of any other securities in respect of,
in lieu of or in substitution for shares of the capital stock, or
declare, set aside or pay any dividend or other distribution payable in
cash, stock or property;
- directly or indirectly redeem or otherwise acquire or agree to redeem or
otherwise acquire any shares of its capital stock or that of its
subsidiaries subject to several specified exceptions;
Four Media also agreed that until the merger is completed or unless Liberty
and AT&T consent in writing, and in some instances consent telephonically,
neither Four Media, nor any of its subsidiaries will:
- issue, deliver, sell or encumber any additional shares of, or stock or
appreciation rights or rights of any kind to acquire any shares of, its
capital stock or other equity interest;
- amend or modify any outstanding options or convertible securities, or any
other equity interests or equity appreciation rights, or adopt or
authorize any other equity incentive plan or agreement;
- make any changes in its capital structure;
- acquire, lease or agree to acquire any capital assets or any other
assets;
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- dispose or agree to dispose of any capital assets or other assets except
in the ordinary course of business consistent with past practice;
- incur additional debt, guarantee any debt, issue or sell any debt
securities or warrants or rights to acquire any debt securities of Four
Media or any of its subsidiaries, or guarantee any debt security of any
other person, other than in the ordinary course of business consistent
with past practice;
- secure any of its outstanding unsecured debt, provide additional security
for any of its outstanding secured debt or create or suffer to exist any
lien on or with respect to any of its property, assets or rights;
- sell, lease, encumber, grant a security interest in, or otherwise dispose
of any assets material, individually or in the aggregate, to Four Media
or any of its subsidiaries, other than in the ordinary course of business
consistent with past practice;
- incur any liability or obligation, or contribute any asset, to a
subsidiary of Four Media that is material to Four Media and its
subsidiaries other than in the ordinary course of business consistent
with past practice;
- acquire or agree to acquire, in any manner, any business or any
corporation or other business organization, which is material,
individually or in the aggregate, to Four Media or any of its
subsidiaries;
- adopt, enter into, terminate or amend any bonus, profit sharing,
compensation, severance, termination, stock option, pension, retirement,
deferred compensation, employment or other plan, agreement or other
arrangement for the benefit or welfare of any Four Media director,
officer or current or former employee;
- increase in any manner the compensation or fringe benefits of any
director, officer or employee, except in the ordinary course of business
consistent with past practice and that does not, in the aggregate, result
in a material increase of benefits or compensation expense;
- pay any benefit not provided under any existing plan or arrangement;
- except for benefits that have already been earned or vested without
acceleration, grant any awards or make any payments under any bonus,
incentive, performance or other compensation plan or arrangement or other
Four Media plan;
- take any action to fund or in any other way secure the payment of
compensation or benefits under any employee plan, agreement, contract or
arrangement or Four Media plan, other than in the ordinary course of
business consistent with past practice;
- make any investments in non-investment grade securities;
- make any change in their accounting policies or procedures except as
required by generally accepted accounting principles;
- make any material tax election, change any material tax election already
made, adopt any material tax accounting method, change any material tax
accounting method unless required by generally accepted accounting
principles, enter into any closing agreement, settle any tax claim or
assessment or consent to any tax claim or assessment or any waiver of the
statute of limitations for any claim or assessment;
- pay, discharge, or satisfy claims, liabilities or obligations, other than
in the ordinary course of business consistent with past practice;
- cancel any debt or waive any claims or rights, except in the ordinary
course of business consistent with past practice;
- accelerate the payment of, or otherwise prepay, any existing outstanding
debt, except in the ordinary course of business consistent with past
practice;
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- other than as contemplated or otherwise permitted by the merger agreement
and other than their normal cash management practices conducted in the
ordinary course of their businesses, make any advance or loan to or
engage in any material transaction with any director, officer, partner or
affiliate not required by the terms of an existing contract;
- guarantee or otherwise become responsible for any debt of any other
person;
- take any actions that would cause Four Media's representations and
warranties in the merger agreement to be untrue or the conditions
applicable to Four Media to be unsatisfied, in any respect; or
- enter into or assume any contract, agreement, obligation, commitment or
arrangement with respect to any of the foregoing.
Four Media's agreement regarding the conduct of its and its subsidiaries'
businesses until the merger is completed is complicated and not easily
summarized. You are urged to read carefully the section of the merger agreement
entitled "Additional Covenants and Agreements."
AMENDMENT, EXTENSION AND WAIVER
We may amend the merger agreement, if authorized by our respective boards
of directors, in writing at any time before or after the merger agreement and
the merger are approved by Four Media's stockholders. We may not amend the
merger agreement if the amendment would require further approval by Four Media
stockholders, unless that further approval has been obtained. Several provisions
of the merger agreement may be amended by written consent of Four Media and
Liberty only, without any action on the part of AT&T or D-Group Merger Corp.
At any time before the merger is completed, we may, by written instrument
signed by the waiving party, extend the time for performance of the obligations
of any other party to the merger agreement, waive inaccuracies in
representations and warranties of any other party contained in the merger
agreement, waive compliance by any other party with any agreements or conditions
in the merger agreement, or waive any condition to the waiving party's
obligation to complete the transactions contemplated in the merger agreement or
to any of the waiving party's other obligations under the merger agreement.
EXPENSES
Whether or not the merger is completed, all costs and expenses incurred in
connection with the merger agreement and the transactions contemplated by the
merger agreement will be paid by the party incurring the cost or expense, except
as otherwise provided in the merger agreement and except that Four Media and
Liberty will share equally the costs and expenses incurred in connection with
printing and mailing this proxy statement/prospectus, AT&T's registration
statement of which this proxy statement/prospectus forms a part (and any
amendment or supplement to the registration statement) and any prospectus
included in the registration statement and the costs of filings under the
Hart-Scott-Rodino Act.
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OTHER TRANSACTION AGREEMENTS
VOTING AGREEMENTS
As inducement for it to enter into the merger agreement, Liberty required
Four Media's principal stockholders to enter into voting agreements. These
stockholders include Robert T. Walston, Four Media's Chief Executive Officer and
Chairman of the Board, the Warburg Entities and the Fleming Funds. Mr. Walston
is party to the voting agreement through an entity in which he is a limited
partner. In the voting agreements, these stockholders agreed with Liberty to
vote their shares of Four Media common stock in favor of the merger agreement
and the merger and against any alternative acquisition of Four Media.
As of the record date for the special meeting, these stockholders
collectively held 13,882,875 shares of Four Media common stock, representing in
the aggregate approximately 70% of the total number of votes entitled to be cast
at the special meeting by holders of shares of Four Media common stock. As a
result of the voting agreements, the votes represented by these shares will be
sufficient to constitute a quorum and to approve the merger agreement and the
merger at the special meeting irrespective of the votes cast by any other
stockholder. These stockholders were not paid additional consideration in
connection with the voting agreements.
Each of these stockholders agreed not to sell or otherwise transfer the
shares of Four Media common stock directly or indirectly controlled or owned by
the stockholder that are covered by the voting agreement, except for any
transfer in which the stockholder retains full voting rights with respect to the
shares or a transfer to any person who has agreed in writing to be bound by the
voting agreement. The voting agreements will terminate upon the earlier of the
date we complete the merger or terminate the merger agreement in accordance with
its terms. The voting agreements are filed as exhibits to AT&T's registration
statement of which this proxy statement/prospectus is a part.
WAIVER AGREEMENT
On November 19, 1999, in connection with the merger, Robert T. Walston
executed a waiver agreement pursuant to which he agreed to:
- waive any rights to acceleration he has under any outstanding options to
purchase Four Media common stock:
(1) to the extent the right to acceleration arises as a result of the
merger; and
(2) only to the extent that the value of the acceleration would constitute
a "parachute payment" within the meaning of Section 280G of the
Internal Revenue Code such that the acceleration of the stock options,
together with any other payments which might result in parachute
payments, would subject Mr. Walston to any excise tax under Section
4999 of the Internal Revenue Code; and
- waive his right to have his $2,000,000 loan from Four Media forgiven to
the extent the right arises as a result of the merger.
AMENDMENT TO TAX SHARING AGREEMENT
AT&T, Liberty and other direct and indirect subsidiaries of AT&T have
entered into an amendment to the existing tax sharing agreement governing the
sharing, allocation and reimbursement of taxes by the members of the AT&T Common
Stock Group and the Liberty Media Group. Under this amendment, all tax items of
Four Media and all tax items arising out of the merger and the contemplated
restructuring transactions are generally allocated to the Liberty Media Group.
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SUPPLEMENT TO INTER-GROUP AGREEMENT
AT&T, Liberty and other members of the Liberty Media Group have entered
into a supplement to the existing inter-group agreement, which governs matters
between the AT&T Common Stock Group and the Liberty Media Group. This supplement
provides for, among other things, the completion of various restructuring
transactions by the AT&T Common Stock Group and the Liberty Media Group and the
allocation of potential liabilities arising out of the merger.
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DESCRIPTION OF AT&T CAPITAL STOCK
The following description of the terms of AT&T's capital stock does not
purport to be complete and is qualified in its entirety by reference to AT&T's
charter, which we incorporate by reference in this proxy statement/prospectus.
For more information as to how you can obtain this document, see "Summary --
Where You Can Find More Information" on page 17.
AUTHORIZED CAPITAL STOCK
AT&T's charter provides that AT&T is authorized to issue 8.85 billion
shares of capital stock, consisting of:
- 100 million shares of preferred stock, par value $1.00 per share; and
- 8.75 billion shares of common stock.
Of the 8.75 billion shares of authorized common stock:
(1) 6 billion shares are shares of AT&T common stock, par value $1.00 per
share;
(2) 2.5 billion shares are shares of Class A Liberty Media Group common
stock, par value $1.00 per share; and
(3) 250 million shares are shares of Class B Liberty Media Group common
stock, par value $1.00 per share.
The Class A Liberty Media Group common stock and the Class B Liberty Media
Group common stock are referred to in this description of AT&T capital stock as
"Class A Liberty Media Group tracking stock" and "Class B Liberty Media Group
tracking stock," respectively, and, collectively, as "Liberty Media Group
tracking stock." As of September 30, 1999, 3,195,633,438 shares of AT&T common
stock, 1,156,751,950 shares of Class A Liberty Media Group tracking stock,
108,421,708 shares of Class B Liberty Media Group tracking stock and no shares
of AT&T preferred stock were issued and outstanding.
AT&T COMMON STOCK
Voting Rights
After adjustments for recent stock splits:
- holders of AT&T common stock are entitled to one vote for each share of
stock held;
- holders of Class B Liberty Media Group tracking stock are entitled to
3/4 of a vote for each share of stock held; and
- holders of Class A Liberty Media Group tracking stock are entitled to
3/40 of a vote for each share of stock held,
in each case on all matters voted on by shareholders, including elections of
directors. Except as otherwise required by law or provided in any resolution
adopted by AT&T's board of directors with respect to any series of AT&T
preferred stock, holders of AT&T stock possess all voting power. AT&T's charter
does not provide for cumulative voting in the election of directors.
AT&T's charter provides that, except as otherwise required by New York law,
any special voting rights of AT&T preferred stock or as set forth below, the
holders of AT&T common stock, Liberty Media Group tracking stock and AT&T
preferred stock, if any, entitled to vote with the common shareholders will vote
together as one class. The following circumstances require the separate class
approval of the Liberty Media Group tracking stock:
- any amendment to AT&T's charter that would change the total number of
authorized shares or the par value of Liberty Media Group tracking stock
or that would adversely change the rights of Liberty Media Group tracking
stock;
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- a Covered Disposition, as that term is defined in AT&T's charter, which
generally includes a sale or transfer by AT&T of its equity interest in
Liberty or Liberty Media Group LLC or a grant of a pledge or other
security interest in the equity interest of AT&T in Liberty or Liberty
Media Group LLC; and
- any merger or similar transaction in which Liberty Media Group tracking
stock is converted, reclassified or changed into or otherwise exchanged
for any consideration, unless specified requirements are met that are
generally intended to ensure that the rights of the holders are not
materially altered and the composition of the holders is not changed.
Notwithstanding the foregoing, the separate approval of the holders of Liberty
Media Group tracking stock is not required in the case of a redemption of
Liberty Media Group tracking stock under certain circumstances.
AT&T's charter also includes an anti-dilution adjustment provision so that
the aggregate voting rights of AT&T common stock, on the one hand, and Liberty
Media Group tracking stock, on the other hand, will not change as a result of
stock splits, reverse stock splits, stock dividends or distributions.
Dividends
General. Provided that there are sufficient assets to pay a dividend on a
class of stock, AT&T's board of directors has the sole authority and discretion
to declare and pay dividends on Liberty Media Group tracking stock or AT&T
common stock. AT&T's charter provides that dividends on Liberty Media Group
tracking stock are limited to an "available dividend amount" that is designed to
be equivalent to the amount that would legally be available for dividends on
that stock if the Liberty Media Group were a stand-alone corporation. Dividends
on AT&T common stock are limited to the amount of legally available funds less
the "available dividend amount" for the Liberty Media Group tracking stock.
AT&T's charter also provides that holders of Class A Liberty Media Group
tracking stock and Class B Liberty Media Group tracking stock receive equal
dividends per share. The exceptions to this are described under "--Share
Distributions -- Distributions on Liberty Media Group Tracking Stock" below.
Discrimination between Classes of Common Stock. AT&T's charter does not
provide for mandatory dividends. Provided that there are sufficient assets to
pay a dividend on a class of stock as described in the preceding paragraph,
AT&T's board of directors has the sole authority and discretion to declare and
pay dividends, in equal or unequal amounts, on Liberty Media Group tracking
stock or AT&T common stock, regardless of the respective available dividend
amounts, prior dividend amounts declared, liquidation rights or any other
factor. As a result, AT&T's board of directors could declare dividends on AT&T
common stock while not declaring dividends on Liberty Media Group tracking stock
or vice versa.
Dividend Policy as to Liberty Media Group Tracking Stock. The dividend
policy of AT&T's board of directors as it relates to Liberty Media Group
tracking stock generally provides that AT&T will distribute, subject to
limitations in AT&T's charter, any dividends AT&T receives from an entity
included in the Liberty Media Group to the holders of Liberty Media Group
tracking stock. This dividend policy may be amended, modified or rescinded only
by the unanimous consent of AT&T's board of directors.
Share Distributions
AT&T may declare and pay a distribution consisting of shares of AT&T common
stock, Liberty Media Group tracking stock or any other securities of AT&T or any
other person (sometimes referred to in this section as a "share distribution")
only as set forth below.
Distributions on AT&T Common Stock. AT&T may declare and pay share
distributions to holders of AT&T common stock that consist of any securities of
AT&T, any subsidiary of AT&T or any other person, except for shares of Liberty
Media Group tracking stock, securities attributed to the Liberty Media Group,
securities of any person included in the Liberty Media Group or securities
convertible, exercisable or exchangeable for any of the Liberty Media Group
securities described in this paragraph.
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Distributions on Liberty Media Group Tracking Stock. AT&T may declare and
pay share distributions to holders of Liberty Media Group tracking stock that
consist of shares of:
- Class A Liberty Media Group tracking stock on an equal per-share basis to
all holders;
- AT&T common stock on an equal per-share basis to all holders;
- Class A Liberty Media Group tracking stock to Class A holders and Class B
Liberty Media Group tracking stock to Class B holders; or
- other AT&T securities or stock of any other person on an equal per-share
basis or, to the extent practicable, on a basis that gives shares having
greater relative voting rights and related differences to holders of
Class B Liberty Media Group tracking stock.
Liquidation Rights
In the event of a voluntary or involuntary liquidation, dissolution or
winding up of AT&T (collectively, "liquidation"), AT&T's board of directors will
first pay or make provisions for the payment of AT&T's debts and other
liabilities, including the liquidation preferences of any outstanding AT&T
preferred stock. Thereafter, holders of AT&T common stock and holders of Liberty
Media Group tracking stock will share in the funds remaining for distribution to
AT&T's common shareholders in proportion to the aggregate market capitalization
of AT&T common stock, or the aggregate market capitalization of Liberty Media
Group tracking stock, as applicable, to the aggregate market capitalization of
the AT&T common stock and the Liberty Media Group tracking stock. The market
capitalizations will be calculated based on the 20-trading day period ending on
the trading day prior to the public announcement of the liquidation. Holders of
Class A Liberty Media Group tracking stock and Class B Liberty Media Group
tracking stock will share equally, on a share-for-share basis.
Neither the consolidation or merger of AT&T with another corporation nor
the sale, transfer or lease of all or substantially all of the assets of AT&T
will itself constitute a liquidation. In addition, any transaction or series of
related transactions that results in all of the assets and liabilities included
in the Liberty Media Group being held by one or more "qualifying subsidiaries"
(as defined in AT&T's charter) included in the Liberty Media Group, and the
distribution of the "qualifying subsidiary" (and no other material assets or
liabilities) to the holders of Liberty Media Group tracking stock, will not
constitute a liquidation, but will be subject to the provisions in AT&T's
charter regarding the redemption of Liberty Media Group tracking stock.
Other Classes of Common Shares
There currently are no other classes of common stock of AT&T outstanding.
On January 26, 2000, AT&T filed with the SEC a proxy statement relating to the
creation of a new class of common stock, called AT&T Wireless Group tracking
stock, designed to reflect the economic performance of the AT&T Wireless Group.
The proposed terms of the AT&T Wireless Group tracking stock are described under
"The Charter Amendment Proposal -- Tracking Stock Amendment" in AT&T's proxy
statement, which we incorporate by reference into this proxy
statement/prospectus. To obtain a copy of AT&T's proxy statement, see
"Summary -- Where You Can Find More Information."
Determinations by AT&T's Board of Directors
Any determinations made by AT&T's board of directors under any provision
described under this section, "Description of AT&T Capital Stock," will be final
and binding on all of AT&T's stockholders, except as may otherwise be required
by law. AT&T will prepare and file with its Secretary a statement of any
determination by AT&T's board of directors relating to the fair market value of
any properties, assets or securities.
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Relationship between the Groups
Neither the Liberty Media Group, on the one hand, nor the AT&T Common Stock
Group, on the other hand, has any duty, responsibility or obligation to refrain
from:
- engaging in the same or similar activities or lines of business as any
member of the other group;
- doing business with any potential or actual supplier or customer of any
member of the other group; or
- engaging in, or refraining from, any other activities whatsoever relating
to any of the potential or actual suppliers or customers of any member of
the other group.
None of the directors or officers of the AT&T Common Stock Group or the Liberty
Media Group will have any duty, responsibility or obligation to cause the
respective groups to refrain from doing any of the foregoing.
Neither the Liberty Media Group, on the one hand, nor the AT&T Common Stock
Group, on the other hand, has any duty, responsibility or obligation:
- to communicate or offer any business or other corporate opportunity to
any other person, including any business or other corporate opportunity
that may arise that either group may be financially able to undertake,
and that is, from its nature, in the line of more than one group's
business and is of practical advantage to more than one group;
- to provide financial support to the other group or any member of the
group; or
- otherwise to assist the other group.
None of the directors or officers of the AT&T Common Stock Group or the Liberty
Media Group has any duty, responsibility or obligation to cause the respective
groups to do any of the foregoing. In addition, none of AT&T's directors or
officers will be liable to AT&T or any holder of any of its securities for any
failure or alleged failure of the officer or director to offer, or to cause the
Liberty Media Group or the AT&T Common Stock Group to offer, either group any
corporate opportunity of any kind or nature that is pursued by the other group.
Nothing set forth in the immediately preceding paragraphs will prevent any
member of the Liberty Media Group from entering into written agreements with the
AT&T Common Stock Group to define or restrict any aspect of the relationship
between the groups.
No Preemptive Rights
Holders of Liberty Media Group tracking stock do not have any preemptive
rights to subscribe for any additional shares of capital stock or other
obligations convertible into or exercisable for shares of capital stock that may
hereafter be issued by AT&T.
Transfer Agent and Registrar
Boston Equiserve Trust Company, N.A. is the transfer agent and registrar
for the Class A Liberty Media Group common stock.
AT&T PREFERRED STOCK
AT&T preferred stock may be issued from time to time in one or more series.
AT&T's board of directors is authorized to fix the number of shares of each
series, the designation of each series, and, subject to the other provisions of
AT&T's charter, the relative rights, preferences and limitations of each series
and the variations in the rights, preferences and limitations as between series.
There are currently no shares of AT&T preferred stock outstanding, and AT&T's
board of directors has not fixed the designations of any series of shares of
AT&T preferred stock.
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The merger agreement for the MediaOne Group merger provides that AT&T will
file certificates of designation with the Secretary of State of the State of New
York prior to the effective time of the MediaOne Group merger to create three
new series of AT&T preferred stock: the "AT&T Series C Preferred Stock," the
"AT&T Series D Preferred Stock" and the "AT&T Series E Preferred Stock."
However, if no shares of Series C or Series D MediaOne Group preferred stock
remain outstanding immediately prior to the effective time of the MediaOne Group
merger, AT&T will not file a certificate of designation for the corresponding
series of AT&T preferred stock. MediaOne redeemed the outstanding Series C
MediaOne Group preferred stock at the end of the third quarter of 1999. AT&T
expects that MediaOne will redeem the outstanding Series D MediaOne Group
preferred stock prior to the effective time of the MediaOne Group merger. The
AT&T Series D preferred stock and AT&T Series E preferred stock are each
described below.
AT&T SERIES D PREFERRED STOCK
Voting Rights
Holders of AT&T Series D preferred stock will not be entitled to voting
rights, except as provided by the certificate of designation, AT&T's charter or
applicable law.
The certificate of designation will provide that, without the written
consent or affirmative vote of holders of at least 66 2/3% of the outstanding
shares of AT&T Series D preferred stock, AT&T may not:
- authorize any senior stock or reclassify any junior stock or parity stock
as senior stock; or
- amend the certificate of designation or AT&T's charter so as to adversely
affect the preferences, rights or powers of the AT&T Series D preferred
stock.
In addition, holders of AT&T Series D preferred stock will be entitled to
elect two additional directors under the circumstances described below under
"-- Dividend Rights; Rights Upon Liquidation."
Dividend Rights; Rights upon Liquidation
Holders of AT&T Series D preferred stock will be entitled to receive, from
legally available funds, quarterly cash dividends at the annual rate of 4.50% of
the liquidation preference of $50 per share. In the event of the liquidation,
dissolution or winding up of AT&T, holders of AT&T Series D preferred stock will
be entitled to receive the liquidation preference in cash, together with accrued
and unpaid dividends.
If at any time dividends have not been paid in an aggregate amount equal to
or greater than six quarters of dividends, the number of authorized directors on
the AT&T board of directors will be increased by two. Holders of shares of AT&T
Series D preferred stock, voting as a single class with any other shares of AT&T
preferred stock entitled to this right, will be entitled to elect the two
additional directors. Holders of shares of AT&T Series D preferred stock will
have this right until all dividends in arrears have been paid in full and
dividends for the four subsequent quarters have been paid or declared and set
aside for payment. At that time, the terms of office of the two additional
directors will terminate and the number of directors on the AT&T board of
directors will be reduced accordingly.
Redemption Rights
AT&T Series D preferred stock will not be redeemable or exchangeable prior
to November 15, 1999. On and after November 15, 1999 and before November 15,
2001, each share of AT&T Series D preferred stock will be exchangeable, at the
option of AT&T, into a number of shares of AT&T common stock equal to $50, plus
any accrued and unpaid dividends, divided by 95% of the market price of AT&T
common stock on the date of exchange, if the last reported sales price of AT&T
common stock is greater than the conversion price multiplied by 1.35 on 20 of
the 30 trading days immediately prior to the date AT&T provides notice of
redemption and/or exchange of the AT&T Series D preferred stock.
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On and after November 15, 2001, each share of AT&T Series D preferred stock
will be redeemable at AT&T's option and, on November 15, 2016, will be
mandatorily redeemable, in each case at AT&T's election, for:
- an amount in cash equal to $50, together with any accrued and unpaid
dividends;
- a number of shares of AT&T common stock equal to $50, together with any
accrued and unpaid dividends, divided by 95% of the current market price
of AT&T common stock; or
- a combination of the consideration described in the two bullet points
above.
Conversion Rights
At any time until the date AT&T effects a redemption or exchange of all or
any part of the outstanding AT&T Series D preferred stock, each share of AT&T
Series D preferred stock will be convertible, at the option of the holder, into
the consideration the holder would have received in the MediaOne Group merger if
that holder had converted its MediaOne Group Series D preferred stock into
MediaOne Group common stock immediately prior to the MediaOne Group merger.
The conversion rate will be adjusted if, among other things, the following
events occur:
- AT&T issues shares of AT&T common stock as a dividend or distribution;
- AT&T subdivides, reclassifies or combines the AT&T common stock;
- AT&T issues all holders of AT&T common stock rights, options or warrants
to subscribe for or purchase shares of AT&T common stock at a price below
its then current market value; or
- AT&T pays or distributes to all holders of AT&T common stock, capital
stock, cash, evidences of AT&T's indebtedness or other assets, excluding
regular cash dividends and dividends or distributions referred to in the
first bullet point above.
In addition, the conversion rate may be increased:
- if necessary to ensure that any dividend or distribution payable in any
reclassification or combination of, or any issuance of rights or warrants
to purchase, shares of AT&T common stock is not taxable to holders of
AT&T common stock; or
- from time to time for a period of at least 20 trading days if determined
by AT&T's board of directors to be in AT&T's best interest.
If there is a merger, a consolidation or a sale of all or substantially all
of AT&T's assets, each share of AT&T Series D preferred stock that is not
converted in the transaction will be convertible after the transaction, during
the period the share is convertible, into the kind and amount of consideration
that its holder would have received had that holder converted his, her or its
share into AT&T common stock immediately prior to the transaction. If holders of
AT&T common stock are entitled to elect the consideration to be received, the
kind and amount of consideration into which shares of AT&T Series D preferred
stock will be convertible after the transaction will be based on the election of
the record holder of the largest number of shares of AT&T Series D preferred
stock. If an election is not timely made, each holder of AT&T Series D preferred
stock will be deemed to have failed to make an election. This provision is not
applicable if AT&T is the surviving corporation in the transaction, and, with
several exceptions, if the transaction does not result in a reclassification of,
or other changes in, the outstanding shares of AT&T common stock.
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AT&T SERIES E PREFERRED STOCK
Voting Rights
Holders of AT&T Series E preferred stock will not be entitled to voting
rights, except as provided by the certificate of designation, AT&T's charter or
applicable law.
The certificate of designation will provide that, without the approval of
holders of at least 66 2/3% of the outstanding shares of AT&T Series E preferred
stock, AT&T may not:
- authorize any senior stock or reclassify any junior stock or parity stock
as senior stock; or
- amend the certificate of designation or AT&T's charter so as to adversely
affect the preferences, rights or powers of the AT&T Series E preferred
stock.
Dividend Rights; Rights Upon Liquidation
Holders of AT&T Series E preferred stock will be entitled to receive, from
legally available funds, quarterly cash dividends at the annual rate of 6.342%
of the liquidation preference of $50 per share. If AT&T liquidates, dissolves or
winds up, holders of AT&T Series E preferred stock will be entitled to receive
the liquidation preference in cash, together with any accrued and unpaid
dividends.
Redemption Rights
AT&T may, at its option, redeem shares of AT&T Series E preferred stock as
follows:
- beginning on June 30, 2002, AT&T may redeem all or part of these shares
at a redemption price of $50 per share, payable in cash, together with
any accrued and unpaid dividends; and
- beginning on August 1, 2007 and continuing through August 1, 2016, AT&T
may redeem 49,704 shares annually at a redemption price of $50 per share,
payable in cash, together with any accrued and unpaid dividends, or any
lesser number of shares that are then outstanding.
AT&T must redeem shares of AT&T Series E preferred stock as follows:
- beginning on August 1, 2007 and continuing through August 1, 2016, AT&T
must redeem 49,704 shares annually at a redemption price of $50 per
share, payable in cash, together with any accrued and unpaid dividends,
or any lesser number of shares that are then outstanding; and
- on June 30, 2017, AT&T must redeem all outstanding shares at a redemption
price of $50 per share, payable in cash, together with any accrued and
unpaid dividends.
Conversion Rights
After receipt from AT&T of a notice of redemption under the circumstances
described above under "-- Redemption Rights" and until the date of redemption,
each share of AT&T Series E preferred stock will be convertible, at the option
of the holder, into the consideration the holder would have received in the
MediaOne Group merger if that holder had converted its MediaOne Group Series E
preferred stock into MediaOne Group common stock immediately prior to the
MediaOne Group merger.
The conversion rate may be increased:
- if necessary to ensure that any dividend or distribution payable in, any
reclassification or combination of, or any issuance of rights or warrants
to purchase, shares of AT&T common stock is not taxable to holders of
AT&T common stock; or
- from time to time for a period of at least 20 trading days if determined
by AT&T's board of directors to be in AT&T's best interest.
In the event of a merger, a consolidation or a sale of all or substantially
all of AT&T's assets, each share of AT&T Series E preferred stock that is not
converted in the transaction will be convertible,
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assuming shares of AT&T Series E preferred stock are then by their terms
convertible into AT&T common stock, after the transaction, during the period
such share is convertible, into the kind and amount of consideration to which
its holder would have received had that holder converted such share into AT&T
common stock immediately prior to the transaction. If holders of AT&T common
stock are entitled to elect the consideration to be received, the kind and
amount of consideration into which shares of AT&T Series E preferred stock will
be convertible after the transaction will be based on the election of the record
holder of the largest number of shares of AT&T Series E preferred stock. If no
such election is timely made, each holder of AT&T Series E preferred stock will
be deemed to have failed to make such an election. This provision is not
applicable if AT&T is the surviving corporation in the transaction, and, with
several exceptions, if the transaction does not result in a reclassification of,
or other changes in, the outstanding shares of AT&T common stock.
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COMPARISON OF RIGHTS OF STOCKHOLDERS
OF FOUR MEDIA AND AT&T
If the merger is completed, stockholders of Four Media will hold shares of
Class A Liberty Media Group tracking stock and their rights will be governed by
AT&T's charter and AT&T's bylaws, which differ in several material respects from
Four Media's charter and Four Media's bylaws. As holders of Class A Liberty
Media Group tracking stock, the rights of former Four Media stockholders will
also be governed by the New York Business Corporation Law instead of the
Delaware General Corporation Law. New York is AT&T's jurisdiction of
incorporation and Delaware is Four Media's jurisdiction of incorporation.
The following comparison summarizes the material differences between the
New York Business Corporation Law, AT&T's charter and AT&T's bylaws, on the one
hand, and the Delaware General Corporation Law, Four Media's charter and Four
Media's bylaws, on the other hand, but is not intended to list all differences.
BUSINESS COMBINATIONS
Generally, under the Delaware General Corporation Law, 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 to complete a merger or consolidation
or sale, lease or exchange of all or substantially all the corporation's assets.
Under the New York Business Corporation Law, a plan of merger or
consolidation, a plan of share exchange or the sale, lease, exchange or other
disposition of all or substantially all of the assets of a corporation must be
approved:
- in the case of corporations like AT&T that were in existence on February
22, 1998 and that do not expressly provide in their certificates of
incorporation for majority approval of these transactions, by two-thirds
of the votes of all outstanding shares entitled to vote on the
transaction; and
- in the case of all other corporations, by a majority of the votes of all
outstanding shares entitled to vote on the transaction.
AT&T's charter does not contain a provision expressly providing for majority
approval of these types of transactions.
The New York Business Corporation Law also provides that the holders of
shares of a class, or series of a class, of capital stock of a corporation will
be entitled to vote together and to vote as a separate class on any merger or
consolidation in which:
- the holder's shares will remain outstanding after the merger or
consolidation or will be converted into the right to receive shares of
stock of the surviving or consolidated corporation or another
corporation; and
- the charter of the surviving or consolidated corporation or other
corporation immediately after the merger or consolidation is effective:
(1) will contain any provision that is not contained in the charter of the
pre-merger corporation; and
(2) if the provision was contained in an amendment to the pre-merger
charter, the shareholders would be entitled to vote as a separate
class under the procedures of the New York Business Corporation Law
for class voting on charter amendments discussed under "-- Amendments
to Charters" below.
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STATE TAKEOVER LEGISLATION
Delaware Business Combination Law
Delaware General Corporation Law Section 203, in general, prohibits a
business combination between a corporation and an interested stockholder within
three years of the time the stockholder became an interested stockholder,
unless:
- prior to the time the board of directors of the corporation approved
either the business combination or the transaction that resulted in the
stockholder becoming an interested stockholder;
- upon completion of the transaction that resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned at
least 85% of the voting stock of the corporation outstanding at the time
the transaction began, exclusive of shares owned by directors who are
also officers and by employee stock plans; or
- at or after the time the stockholder became an interested stockholder,
the business combination is approved by the board of directors and
authorized at an annual or special stockholders' meeting by the
affirmative vote of at least 66 2/3% of the outstanding voting stock
which is not owned by the interested stockholder.
The term "business combination" is defined to include, among other
transactions between an interested stockholder and the corporation or any direct
or indirect majority owned subsidiary of the corporation:
- a merger or consolidation;
- a sale, pledge, transfer or other disposition (including as part of a
dissolution, but other than to the interested stockholder proportionately
as a stockholder) of assets having an aggregate market value equal to 10%
or more of either the aggregate market value of all assets of the
corporation on a consolidated basis or the aggregate market value of all
the outstanding stock of the corporation;
- transactions that would increase the interested stockholder's
proportionate share ownership of the stock of any class or series of the
corporation or majority owned subsidiary; and
- any receipt by the interested stockholder (other than proportionately as
a stockholder) of the benefit of any loans, advances, guarantees, pledges
or other financial benefits provided by or through the corporation or any
majority owned subsidiary.
In general, and subject to several exceptions, an "interested stockholder"
is any person who is the owner of 15% or more of the outstanding voting stock
(or, in the case of a corporation with classes of voting stock with disparate
voting power, 15% or more of the voting power of the outstanding voting stock)
of the corporation, and the affiliates and associates of that person.
The term "owner" is broadly defined to include any person that,
individually or with or through that person's affiliates or associates, among
other things, beneficially owns the stock, or has the right to acquire the
stock, whether or not the right is immediately exercisable, under any agreement
or understanding or upon the exercise of warrants or options or otherwise or has
the right to vote the stock under any agreement or understanding, or has an
agreement or understanding with the beneficial owner of the stock for the
purpose of acquiring, holding, voting or disposing of the stock.
The restrictions in Section 203 do not apply to corporations that have
elected, in the manner provided in Section 203, not to be subject to the
Delaware Business Combination Law or, with certain exceptions, which do not have
a class of voting stock that is listed on a national securities exchange or
authorized for quotation on the Nasdaq National Market or held of record by more
than 2,000 stockholders. Because Four Media's charter and Four Media's bylaws do
not opt out of Section 203, Section 203 is applicable to the merger. Four
Media's board of directors unanimously approved the merger and the transactions
contemplated by the merger agreement prior to the time that either AT&T or
D-Group Merger Corp.
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became an interested stockholder for purposes of Section 203. See "The Merger
Agreement -- Representations and Warranties."
New York Business Combination Law
Section 912 of the New York Business Corporation 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 shareholder" for a
period of five years after the date on which the interested shareholder became
an interested shareholder. "Interested shareholder" is defined generally as any
person who, directly or indirectly, beneficially owns 20% or more of the
outstanding voting stock of a New York corporation. These restrictions do not
apply, however, to any business combination with an interested shareholder if
the business combination, or the purchase of stock by the interested shareholder
that caused the shareholder to become an interested shareholder was approved by
the board of directors of the New York corporation prior to the date on which
the interested shareholder became an interested shareholder. After the five-year
period, a business combination between a New York corporation and the interested
shareholder is prohibited unless either the "fair price" provisions set forth in
Section 912 are complied with or the business combination is approved by a
majority of the outstanding voting stock not beneficially owned by the
interested shareholder or its affiliates and associates.
A New York corporation may adopt an amendment to its bylaws, approved by
the affirmative vote of a majority of votes of the outstanding voting stock,
excluding the voting stock of interested shareholders and their affiliates and
associates, expressly electing not to be governed by Section 912. The amendment
will not, however, be effective until 18 months after the stockholder vote and
will not apply to any business combination with a shareholder who was an
interested shareholder on or prior to the effective date of the amendment.
AT&T's bylaws do not contain a provision electing not to be governed by Section
912.
APPRAISAL RIGHTS
Under the Delaware General Corporation Law, except as otherwise provided by
the Delaware General Corporation Law, stockholders of a constituent corporation
in a merger or consolidation have the right to demand and receive payment of the
fair value of their stock in a merger or consolidation. However, except as
otherwise provided by the Delaware General Corporation Law, stockholders do not
have appraisal rights in a merger or consolidation if, among other things, their
shares are:
- listed on a national securities exchange or designated as a national
market system security on an inter-dealer quotation system by the
National Association of Securities Dealers, Inc.; or
- held of record by more than 2,000 stockholders; and,
in each case, the consideration the stockholders receive for their shares in a
merger or consolidation consists solely of:
- shares of stock of the corporation surviving or resulting from the merger
or consolidation;
- shares of stock of any other corporation that at the effective date of
the merger or consolidation will be either listed on a national
securities exchange, or designated as a national market system security
on an inter-dealer quotation system by the NASD or held of record by more
than 2,000 stockholders;
- cash in lieu of fractional shares of the corporations described in the
two immediately preceding bullet points; or
- any combination of shares of stock and cash in lieu of fractional shares
described in the three immediately preceding bullet points.
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In the merger, Four Media's stockholders who comply with certain conditions
will be entitled to appraisal rights. See "The Proposed Merger -- Appraisal
Rights" for a more detailed description of these rights.
Except as otherwise provided by the New York Business Corporation Law,
shareholders of a New York corporation whose shares are not listed on a national
securities exchange or designated as a national market system security on an
inter-dealer quotation system by the NASD generally have the right to dissent
and receive payment of the fair value of their shares, if the corporation:
- is involved in a merger or consolidation of a specified type; or
- sells, leases, exchanges or otherwise disposes of all or substantially
all of its assets or effects an exchange of its shares.
AMENDMENTS TO CHARTERS
Under the Delaware General Corporation Law, unless a corporation's
certificate of incorporation requires a greater vote, a proposed amendment to a
corporation's certificate of incorporation requires an affirmative vote of a
majority of the voting power of the outstanding stock entitled to vote on the
amendment and a majority of the voting power of the outstanding stock of any
class entitled to vote on the amendment separately as a class.
Except as described below, if a proposed amendment to the certificate of
incorporation would change the aggregate number of authorized shares of any
class of capital stock, the par value of the shares of any class of capital
stock, or alter or change the powers, preferences or special rights of the
shares of any class of capital stock so as to affect them adversely, the
Delaware General Corporation Law requires that the amendment be approved by the
holders of a majority of the outstanding shares of the affected class, voting
separately as a class, whether or not the class is entitled to vote on the
amendment by the certificate of incorporation. If a proposed amendment would
alter or change the powers, preferences or special rights of one or more series
of any class so as to affect them adversely, but would not affect the remainder
of the class, then only the shares of the series so affected would be entitled
to vote as a separate class on the proposed amendment. The authorized number of
shares of any class of stock may be increased or decreased (but may not be
decreased below the number of outstanding shares in the class) without a
separate vote of stockholders of the class if so provided in the original
certificate of incorporation or in any amendment thereto that created the class
of stock or that was adopted prior to the issuance of any shares of the class,
or in an amendment authorized by a majority vote of the holders of shares of the
class.
Four Media's charter requires the affirmative vote of 66 2/3% of the total
number of votes entitled to be cast by stockholders to approve any amendment of
any charter provision relating to the board of directors, actions by
stockholders, special meetings of stockholders and amendments to the charter.
Under the New York Business Corporation Law, proposed amendments to a
certificate of incorporation must be authorized by a New York corporation's
board of directors and generally must be approved by vote of a majority of all
outstanding shares entitled to vote on the proposed amendment at a stockholder's
meeting. The approval of a majority of the votes of all outstanding shares of
any class of capital stock of a corporation, voting separately as a class, is
required to approve a proposed amendment to a corporation's certificate of
incorporation, whether or not the holders are otherwise entitled to vote on the
amendment by the certificate of incorporation, that:
- would decrease the par value of the shares of the class, change any
shares of the class into a different number of shares of the same class
or into the same or a different number of shares of a different class,
alter or change the designation, relative rights, preferences or
limitations of the shares of the class or provide new conversion rights
or the alteration of any existing conversion rights, so as to affect them
adversely;
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- would exclude or limit the voting rights of the shares of the class,
except as such rights may be limited by voting rights given to new shares
then being authorized of any existing or new class or series of shares;
or
- would subordinate the rights of the shares of the class by authorizing
shares having preferences superior to the rights of the existing shares.
If a proposed amendment would have any of the effects discussed in the last
sentence of the previous paragraph only on one or more series of any class so as
to affect them adversely, but would not affect the remainder of the class, then
only the shares of the series affected by the proposed amendment would be
entitled to vote as a separate class on the proposed amendment. The holders of
Liberty Media Group tracking stock also have a class vote under other
circumstances.
AMENDMENTS TO BYLAWS
Under the Delaware General Corporation Law, the power to adopt, alter and
repeal a corporation's bylaws is vested in the stockholders, except to the
extent that a corporation's certificate of incorporation vests concurrent power
in the board of directors.
Four Media's charter provides that the board of directors is authorized and
empowered to adopt, amend or repeal any provision of Four Media's bylaws.
Provisions of Four Media's bylaws may also be adopted, amended or repealed by
the affirmative vote of at least 66 2/3% of the voting power of the stockholders
entitled to cast a vote.
Under the New York Business Corporation Law, except as otherwise provided
in a corporation's certificate of incorporation, a corporation's bylaws may be
amended, repealed or adopted by a majority of the votes cast by the shares
entitled to vote in the election of any directors. When provided in the
certificate of incorporation or a bylaw adopted by the shareholders, bylaws also
may be amended, repealed or adopted by the board of directors by the vote
specified, which vote may be greater than the vote otherwise prescribed by the
New York Business Corporation Law, but any bylaw adopted by the board of
directors may be amended or repealed by the stockholders as provided by the New
York Business Corporation Law. AT&T's bylaws may be amended by AT&T's
shareholders at any meeting, or by AT&T's board of directors at any meeting by a
majority vote of the full AT&T board or at two successive meetings by a majority
vote of the board of directors present, provided that a quorum is present.
NO PREEMPTIVE RIGHTS
Under the Delaware General Corporation Law, a stockholder does not possess
preemptive rights unless preemptive rights are specifically granted in a
corporation's certificate of incorporation. Four Media's charter does not
provide for preemptive rights to stockholders.
Under the New York Business Corporation Law, except as otherwise provided
in the New York Business Corporation Law or in a corporation's certificate of
incorporation, holders of equity shares of any corporation incorporated prior to
February 22, 1998, like AT&T, are granted preemptive rights. AT&T's charter
provides that no holder of AT&T common stock has any preemptive rights.
REDEMPTION OF CAPITAL STOCK
Under the Delaware General Corporation Law, subject to several limitations,
a corporation's capital stock may be made subject to redemption by the
corporation at its option, at the option of its stockholders or otherwise. Under
the New York Business Corporation Law, subject to several 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, the
holders of the class or series, other persons or upon the happening of specified
events for cash, other property, debt or other securities of the same or another
corporation, at the time or times, price or prices, or rate or rates, and with
any adjustments, that are stated in the certificate of incorporation. AT&T's
charter does not contain this type of provision. However, the certificate of
designation relating to each of the AT&T Series D preferred stock and AT&T
Series E
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preferred stock to be issued in the MediaOne Group merger will contain
provisions relating to the redemption of each of these series of AT&T preferred
stock. See "Description of AT&T Capital Stock -- AT&T Preferred Stock" on page
63.
DIVIDEND SOURCES
Under the Delaware General Corporation Law, a board of directors may
authorize a corporation to declare and pay dividends and other distributions to
its stockholders, subject to any restrictions contained in the corporation's
certificate of incorporation, either out of surplus, or, if there is no surplus,
out of net profits for the current or preceding fiscal year in which the
dividend is declared. However, a distribution out of net profits is not
permitted if a 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 the deficiency has been
repaired.
Under the New York Business Corporation Law, a corporation may declare and
pay dividends or make other distributions, except when it is insolvent or would
thereby be made insolvent, or when the declaration, payment or distribution
would be contrary to any restrictions contained in its certificate of
incorporation. Except as otherwise provided in the New York Business Corporation
Law, dividends may be declared and paid and other distributions may only be made
out of surplus, so that the net assets of the corporation remaining after the
declaration, payment or distribution must at least equal the amount of its
stated capital.
Following the merger, AT&T expects to continue to pay its regular quarterly
dividend on AT&T common stock at its current rate, subject to any change that
AT&T's board of directors may determine. No cash dividends have ever been paid
on Class A Liberty Media Group tracking stock and it is not expected that any
cash dividends will be paid on Class A Liberty Media Group tracking stock in the
foreseeable future.
DURATION OF PROXIES
Under the Delaware General Corporation Law, a proxy is only valid for three
years after its date unless otherwise provided in the proxy. A proxy is
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 New York Business Corporation Law, no proxy is valid more than 11
months after its date unless otherwise provided in the proxy. Irrevocable
proxies may be created for a:
- pledgee;
- person who has purchased or agreed to purchase the shares;
- creditor of the corporation who extends credit in consideration of the
proxy;
- person who has contracted to perform services as an officer of the
corporation if a proxy is required by the employment contract; and
- person designated under a voting agreement.
STOCKHOLDER ACTION
Under the Delaware General Corporation Law, unless otherwise provided in a
corporation's certificate of incorporation, any action required or permitted to
be taken at a stockholders' meeting may be taken without a meeting, without
prior notice and without a vote, if a written consent setting forth the action
taken is signed by the holders of outstanding stock having at least the minimum
number of votes that would be necessary to authorize or take the action at a
meeting at which all shares entitled to vote upon
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the action were present and voted. Four Media's charter provides that
stockholder action may be taken only at a stockholders' meeting and stockholders
may not act by written consent.
The New York Business Corporation Law provides that shareholder action may
be taken without a meeting upon the written consent of the holders of all
outstanding shares entitled to vote, and also allows, if a corporation's
certificate of incorporation provides, shareholder action without a meeting upon
the written consent of holders of outstanding shares having at least the minimum
number of votes that would be necessary to authorize the action at a meeting at
which all shares entitled to vote upon the action were present and voted. AT&T's
charter does not contain this type of a provision.
NOMINATION PROCEDURES AND STOCKHOLDER PROPOSALS
Four Media's bylaws require that written notice of a nomination for the
election of directors at a stockholders' meeting must be received by Four
Media's Secretary not less than 60 and no more than 90 days prior to the
anniversary date of the immediately preceding annual stockholders' meeting.
However, if Four Media's stockholders are given less than 70 days' notice of the
annual meeting, a stockholder's notice of nomination must be received not later
than the close of business on the tenth day following the day on which notice of
the date of the annual meeting was mailed or that public disclosure of the date
of the annual meeting was made, whichever first occurs. This requirement is in
addition to the requirements that a shareholder must meet to have a shareholder
proposal included in Four Media's proxy statement under SEC Rule 14a-8.
AT&T's bylaws require that, for a shareholder to properly bring business
before an annual meeting, the shareholder must have delivered written notice to
AT&T containing the information specified in AT&T's bylaws not less than 90 and
no more than 120 days prior to the first anniversary of the preceding year's
annual meeting. This requirement is in addition to the requirements that a
shareholder must meet to have a shareholder proposal included in AT&T's proxy
statement under SEC Rule 14a-8.
SPECIAL STOCKHOLDER MEETINGS
The Delaware General Corporation Law provides that a special meeting of
stockholders may be called by the board of directors or by any person or persons
as may be authorized by a corporation's certificate of incorporation or by the
bylaws.
Under Four Media's bylaws, only the chairman of the board of directors and
the chief executive officer, or a majority of the directors in office, whether
or not a quorum, may call a special stockholders' meeting.
The New York Business Corporation Law provides that, if, for a period of
one month after the date fixed by or under the bylaws for the annual
shareholders' meeting 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 corporation's business, the board of
directors must call a special meeting for the election of directors. If the
board of directors does not call a special meeting within two weeks after the
expiration of the 13 month period or if it is called but directors are not
elected for a period of two months after the expiration of the 13 month period,
holders of 10% of the votes 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 New York Business Corporation Law provides that a
corporation's board of directors or any person authorized by a corporation's
certificate of incorporation or bylaws may call a special shareholders' meeting.
AT&T's bylaws provide that the Chairman of AT&T's board of directors, AT&T's
board of directors or shareholders, upon AT&T's receipt of a written request
signed by shareholders representing one-third of AT&T's common stock, may call a
special shareholders' meeting.
CUMULATIVE VOTING
Under the Delaware General Corporation Law, a corporation's certificate of
incorporation may provide that at all elections of directors, or at elections
held under specified circumstances, each stockholder is
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entitled to cumulative voting. Four Media's charter does not provide for
cumulative voting for the election of directors.
Under the New York Business Corporation Law, the certificate of
incorporation may provide that in all elections of directors each shareholder is
entitled to cumulative voting. AT&T's charter does not provide for cumulative
voting in the election of directors.
SIZE OF THE BOARD OF DIRECTORS; STAGGERED BOARD
The Delaware General Corporation Law permits a corporation's certificate of
incorporation or bylaws to contain provisions governing the number and terms of
directors. However, if the certificate of incorporation contains provisions
fixing the number of directors, the number may not be changed without amending
the certificate of incorporation. The Delaware General Corporation Law also
permits a corporation's certificate of incorporation or a bylaw adopted by the
stockholders to provide that directors be divided into one, two or three
classes, with the term of office of one class of directors to expire each year.
The Delaware General Corporation Law further permits the certificate of
incorporation to confer upon holders of any class or series of stock the right
to elect one or more directors to serve for the terms and have the voting powers
contained in the certificate of incorporation. The terms of office and voting
powers of directors so elected may be greater or less than those of any other
director or class of directors. Four Media's bylaws provide for a board of
directors of not less than three and no more than 11 members, divided into three
classes of approximately equal size, with each class to be elected for a
three-year term. The exact number of directors is fixed by Four Media's board of
directors by resolution.
The New York Business Corporation Law permits the number of directors of a
corporation to be fixed by its bylaws, by action of the shareholders or by
action of the board of directors under the specific provision of a bylaw adopted
by the shareholders. The number of directors may be increased or decreased,
subject to several limitations set forth in the New York Business Corporation
Law. At each annual stockholders' meeting, directors are to be elected to hold
office until the next annual meeting, except as described below for corporations
with classified boards. The New York Business Corporation Law also permits a
corporation's certificate of incorporation, or the specific provisions of a
bylaw adopted by the shareholders, to provide that directors be divided into
either two, three or four classes. All classes must be as nearly equal in number
as possible. 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. Recent
amendments to the New York Business Corporation Law delete the requirement of at
least three directors in any class. AT&T's charter provides that the number of
directors shall be as provided for in AT&T's bylaws. AT&T's bylaws provide that
the number of directors shall be not less than 10 and no more than 25, the exact
number of directors to be fixed and determined by the vote of a majority of
AT&T's entire board of directors. AT&T does not have a classified board of
directors.
REMOVAL OF DIRECTORS
The Delaware General Corporation Law provides that a corporation's
directors may be removed with or without cause by the holders of a majority in
voting power of the shares then entitled to vote at an election of directors,
except that:
- members of a classified board of directors may be removed only for cause,
unless the certificate of incorporation provides otherwise; and
- in the case of a corporation having cumulative voting, if less than the
entire board of directors is to be removed, no director may be removed
without cause if the votes cast against the director's removal would be
sufficient to elect the director if then cumulatively voted at an
election of the entire board of directors or of the class of directors of
which the director is a part.
Four Media's directors may be removed only for cause upon the affirmative
vote of a majority of the total number of votes entitled to be cast by the
stockholders.
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The New York Business Corporation Law provides that any or all of a
corporation's directors may be removed for cause by a vote of its shareholders,
and, if the certificate of incorporation or the specific provisions of a bylaw
adopted by its shareholders provides, a director may be removed for cause by
action of the board of directors. An action to procure a judgment removing a
director for cause may be brought by the Attorney General of the State of New
York or by the holders of 10% of the outstanding shares, whether or not entitled
to vote. If the certificate of incorporation or bylaws provide, any or all of
the directors may be removed without cause by vote of the corporation's
shareholders.
The removal of directors, with or without cause, is subject to the
following:
- in the case of a corporation having cumulative voting, no director may be
removed when the votes cast against the director's removal would be
sufficient to elect the director if voted cumulatively; and
- if a director is elected by the holders of shares of any class or series,
that director may be removed only by the applicable vote of the holders
of the shares of that class or series voting as a class.
Neither AT&T's charter nor AT&T's bylaws provide that its directors may be
removed without cause by AT&T's common stockholders or by AT&T's board of
directors.
VACANCIES
Under the Delaware General Corporation Law, unless otherwise provided in a
corporation's certificate of incorporation or bylaws, vacancies on a
corporation's 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. However, in the case of a classified board of directors,
vacancies and newly created directorships may be filled by a majority of the
directors elected by the class or by the sole remaining director so elected.
Directors elected to fill vacancies or newly created directorships on a
classified board of directors hold office until the next election of the class
for which the directors have been chosen, and until their successors have been
duly elected and qualified. In addition, if, at the time any vacancy or newly
created directorship is filled, the directors in office constitute less than a
majority of the whole board of directors (as constituted immediately prior to
any 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 for the 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.
Four Media's charter and bylaws provide that, subject to the rights of the
holders of any class or series of Four Media preferred stock, any vacancies on
Four Media's board of directors caused by death, resignation, retirement,
disqualification or removal from office or any newly created directorships
resulting from an increase in the number of directors, will be filled by the
affirmative vote of a majority of the remaining directors then in office, even
though less than a quorum, or the sole remaining director. Four Media's charter
also provides that any directors chosen to fill a vacancy on Four Media's board
of directors or newly created directorship will serve a term that will coincide
with the remaining term of that class of directors.
Under the New York Business Corporation Law, newly created directorships
resulting from an increase in the number of directors and vacancies occurring on
the board of directors for any reason, except the removal of directors without
cause, may be filled by vote of the board of directors. Unless a corporation's
certificate of incorporation or bylaws provide otherwise, a vacancy in a
directorship elected by holders of a particular class of shares shall be filled
by the vote of the other directors elected by holders of the same class of
shares. However, the certificate of incorporation or bylaws may provide that
such newly created directorships or vacancies are to be filled by vote of the
shareholders. Unless the certificate of incorporation or the specific provisions
of a bylaw adopted by the shareholders provide that the board of directors may
fill vacancies occurring on the board of directors by reason of the removal of
directors without cause, such vacancies may be filled only by vote of the
shareholders. A director elected to fill a
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vacancy, unless elected by the shareholders, will hold office until the next
shareholders' meeting at which the election of directors is in the regular order
of business and until his or her successor has been elected and qualified.
Notwithstanding the foregoing, unless otherwise provided in a corporation's
certificate of incorporation or bylaws, whenever the holders of one or more
classes or series of shares are entitled to elect one or more directors by the
certificate of incorporation, any vacancy that may be filled by the board or a
majority of the directors then in office shall be filled by a majority of the
directors then in office that were elected by such class or series. AT&T's
bylaws provide that any vacancy on AT&T's board of directors may be filled by a
majority vote of the remaining directors, though less than a quorum.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Delaware law generally permits a corporation to indemnify its directors and
officers against expenses, judgments, fines and amounts paid in settlement
actually and reasonably incurred in connection with a third-party action, other
than a derivative action, and against expenses actually and reasonably incurred
in the defense or settlement of a derivative action, provided that there is a
determination that the individual acted in good faith and in a manner reasonably
believed to be in or not opposed to the best interests of the corporation. The
determination must be made, in the case of an individual who is a director or
officer at the time of determination, by:
- a majority of the directors who are not parties to the action, suit or
proceeding, even though less than a quorum;
- a committee of these directors designated by a majority vote of these
directors, even though less than a quorum;
- independent legal counsel, regardless of whether a quorum of these
directors exists; or
- a majority vote of the stockholders, at a meeting at which a quorum is
present.
Without court approval, however, an individual may not be indemnified in
any claim, issue or matter in a derivative action as to which the individual is
adjudged liable to the corporation. Delaware law requires indemnification of
directors and officers for expenses relating to a successful defense on the
merits or otherwise of a derivative or third-party action. Delaware law permits
a corporation to advance expenses incurred in the defense of any proceeding to
directors and officers contingent upon an undertaking by or on behalf of the
individuals' to repay any advances if it is determined ultimately that the
individuals are not entitled to be indemnified. Under Delaware law, the rights
to indemnification and advancement of expenses provided in the law are
non-exclusive, in that, subject to public policy issues, indemnification and
advancement of expenses beyond that provided by statute may be provided by
bylaw, agreement, vote of stockholders, disinterested directors or otherwise.
Four Media's charter and bylaws provide that Four Media officers and directors
will be indemnified to the fullest extent permitted by applicable law, and that
Four Media shall pay the expenses incurred in defending any proceeding in
advance of its final disposition. However, the payment of expenses incurred by a
director or officer in advance of the final disposition of the proceeding will
be made only upon the receipt of an undertaking by the director or officer to
repay all amounts advanced if it should be ultimately determined that the
director or officer is not entitled to be indemnified.
Under the New York Business Corporation Law, a corporation may indemnify
its directors and officers that are made, or are threatened to be made, a party
to any action or proceeding, except for shareholder derivative suits, against
judgments, fines, amounts paid in settlement and reasonable expenses incurred as
a result of the action or proceeding if the director or officer acted in good
faith, for a purpose that he or she reasonably believed to be in the best
interests of the corporation or, in the case of service to another corporation
or enterprise, not opposed to the best interests of the corporation. In criminal
proceedings, in addition to the preceding conditions, the director or officer
must not have had reasonable cause to believe that his or her conduct was
unlawful. In the case of shareholder derivative suits, the corporation may
indemnify a director or officer if he or she acted in good faith for a purpose
that he or she reasonably believed to be in or, in the case of service to
another corporation or enterprise, not opposed to
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the best interests of the corporation, except that, in either case, no
indemnification may be made in respect of:
- a threatened action, or a pending action that is settled or otherwise
disposed of; or
- any claim, issue or matter as to which such individual 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 individual is fairly and
reasonably entitled to indemnity for such portion of the settlement
amount and expenses as the court deems proper.
Any individual 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 New York Business Corporation Law, any indemnification
under the New York Business Corporation Law 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 applicable standard of conduct by the disinterested
directors if a quorum is available, or if the quorum so directs or is
unavailable, by the board of directors upon the written opinion of independent
legal counsel, or the stockholders.
A corporation may advance expenses incurred by a director or officer in
defending any action or proceeding prior to its final disposition upon receipt
of an undertaking by or on behalf of the officer or director to repay the
advance to the extent the advance exceeds the indemnification to which the
officer or director is entitled.
The indemnification described above under the New York Business Corporation
Law is not exclusive of other indemnification rights to which a director or
officer may be entitled, whether contained in the certificate of incorporation
or bylaws, or, when authorized by the certificate of incorporation or bylaws
contained in:
- a resolution of shareholders;
- a resolution of directors; or
- an agreement providing for indemnification,
provided that indemnification may not 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.
AT&T's bylaws provide that AT&T is authorized, to the fullest extent
permitted by applicable law, to provide indemnification and to advance expenses
to its directors and officers by resolution of shareholders or directors or by
an agreement providing for indemnification, in each case for claims, actions,
suits or proceedings based upon, arising from, relating to or by reason of the
fact that any director or officer serves or served in such capacity with AT&T,
or at AT&T's request, in any capacity with any other enterprise.
AT&T has entered into indemnification agreements with some of its officers
and directors in accordance with AT&T's bylaws.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling AT&T or Four
Media under the foregoing provisions, AT&T and Four Media have been informed
that, in the opinion of the SEC, such indemnification is against public policy
as expressed in the Securities Act and is, therefore, unenforceable.
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LIMITATION OF PERSONAL LIABILITY OF DIRECTORS
The Delaware General Corporation Law provides that a corporation's
certificate of incorporation may include a provision limiting a director's
personal liability to the corporation or its stockholders for monetary damages
for breach of his or her fiduciary duty as a director. However, the certificate
of incorporation may not contain a provision that eliminates or limits a
director's liability for:
- any breach of the director's duty of loyalty to the corporation or its
stockholders;
- acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of the law;
- violation of certain provisions of the Delaware General Corporation Law;
- any transaction from which the director derived an improper personal
benefit; or
- any act or omission that occurred before the provision limiting director
liability was adopted.
The New York Business Corporation Law provides that a corporation's
certificate of incorporation may contain a provision eliminating or limiting a
director's personal liability to the corporation or its shareholders for damages
for any breach of duty in his or her capacity as a director. However, the
certificate of incorporation may not contain a provision that eliminates or
limits a director's liability:
- if a judgment or other final adjudication adverse to the director
establishes that the director's acts or omissions were in bad faith or
involved intentional misconduct or a knowing violation of law, that the
director personally gained in fact a financial profit or other advantage
to which the director was not legally entitled, or that the director's
acts violated certain provisions of the New York Business Corporation
Law; or
- for any act or omission that occurred before the provision limiting
director liability was adopted.
AT&T's charter provides that directors will not be personally liable to
AT&T or any of its shareholders for damages for any breach of duty as a
director. However, a director's liability will not be eliminated or limited:
- 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, 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 New York Business Corporation Law (which
includes declaration of dividends, purchase of capital stock,
distribution of assets to shareholders after dissolution of the
corporation and loans to directors to the extent contrary to New York
law); or
- for any act or omission that occurred before the provision limiting
director liability was adopted by AT&T's shareholders.
CASE LAW AND COURT SYSTEMS
There is a substantial body of case law in Delaware interpreting the
corporation laws of that state. The body of case law interpreting the
corporation laws of New York is not as developed as that of Delaware. Delaware's
court system includes a Chancery Court to adjudicate matters arising under
Delaware corporate law. New York does not have an equivalent court system. As a
result of these factors, there may be less certainty as to the outcome of some
matters governed by New York corporate law, and, therefore, it may be more
difficult to obtain legal guidance as to those matters than would be the case
under Delaware corporate law.
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OWNERSHIP OF FOUR MEDIA COMMON STOCK
The following table sets forth information concerning the beneficial
ownership of Four Media's common stock as of February 9, 2000, for each of the
following:
- each person or entity who is known by Four Media to own beneficially more
than 5% of the outstanding shares of Four Media common stock;
- each of Four Media's current directors;
- some of Four Media's executive officers; and
- all of Four Media's directors and officers as a group.
The number and percentage of shares beneficially owned is based on
19,730,295 shares of Four Media common stock outstanding as of February 9, 2000
and is determined in accordance with Rule 13d-3 of the Exchange Act. This
information is not necessarily indicative of beneficial ownership for any other
purpose. Under Rule 13d-3, beneficial ownership includes any shares as to which
the individual or entity has voting power or investment power and any shares
that the individual has the right to acquire within 60 days of February 9, 2000
through the exercise of any stock option or other right.
As indicated below, Four Media's principal stockholders have entered into
voting agreements with Liberty, whereby they have agreed with Liberty to vote
their shares of Four Media common stock in favor of the merger agreement and the
merger and against any alternative acquisition of Four Media.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF
BENEFICIAL OWNER BENEFICIALLY OWNED OUTSTANDING SHARES
---------------- ------------------ ------------------
<S> <C> <C>
Liberty Media Corporation(1).................... 13,882,875 70.4%
Warburg, Pincus Equity Partners, L.P.(2)(3)..... 11,300,000 54.2
Fleming US Discovery Fund III, L.P. and Fleming
US Discovery Offshore Fund III, L.P.(4)....... 2,250,000 11.4
Robert T. Walston(5)............................ 1,932,875 9.6
Jeffrey J. Marcketta(6)......................... 100,000 *
Christopher M.R. Phillips(7).................... 30,000 *
William E. Niles(8)............................. 66,667 *
John H. Donlon(9)............................... 84,515 *
Gavin W. Schutz(10)............................. 66,422 *
Robert Bailey(10)............................... 66,422 *
James Conlon(11)................................ 100,000 *
William Amon(12)................................ 50,000 *
Sidney Lapidus(3)(13)........................... 11,310,000 54.2
David E. Libowitz(3)(13)........................ 11,310,000 54.2
William C. Scott(14)............................ 10,000 *
Eytan Shapiro(14)............................... 10,000 *
All directors and officers as a group
(14 persons)(15).............................. 13,870,235 63.3
</TABLE>
- -------------------------
* Less than 1%.
(1) Information is based upon the Schedule 13D dated January 20, 2000 filed by
Liberty with the Securities and Exchange Commission. The shares indicated
are subject to voting agreements, dated as of December 6, 1999, among
Liberty and Four Media's principal stockholders, including Technical
Services Partners, L.P. ("TSP"), Warburg, Pincus Equity Partners, L.P. (and
certain affiliates) and Fleming Asset Management USA, under which the
stockholders party to the voting agreements have agreed with Liberty to
vote their shares of Four Media common stock in favor of the merger
agreement and the merger and against any alternative acquisition of Four
Media. For a more complete description of the voting agreements, see the
section entitled "Other Transaction Agreements -- Voting Agreements." The
address of Liberty Media Corporation is 9197 South Peoria Street Englewood,
CO 80112.
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(2) The stockholder is Warburg, Pincus Equity Partners, L.P., which includes
three affiliated limited partnerships ("WPEP"). Warburg, Pincus & Co.
("WP") is the sole general partner of WPEP. WPEP is managed by E.M.
Warburg, Pincus & Co., LLC ("EMW LLC"). Lionel I. Pincus is the managing
partner of WP and the managing member of EMW LLC and may be deemed to
control both entities.
Messrs. Lapidus and Libowitz, two of Four Media's directors, are managing
directors and members of EMW LLC and general partners of WP. Messrs.
Lapidus and Libowitz may be deemed to have an indirect pecuniary interest
(within the meaning of Rule 16a-1 under the Exchange Act) in an
indeterminate portion of the shares beneficially owned by WPEP.
The address of the Warburg, Pincus entities is 466 Lexington Avenue, New
York, New York 10017.
(3) Includes a presently exercisable warrant to purchase 1,100,000 shares of
Four Media common stock beneficially held by WPEP.
(4) In connection with Warburg, Pincus' investment in Four Media, Fleming US
Discovery Fund III, L.P. and Fleming US Discovery Offshore Fund III, L.P.
converted 150,000 shares of Series A Convertible Preferred Stock into
2,250,000 shares of Four Media common stock.
(5) Includes options to purchase 500,000 shares of Four Media common stock that
will become exercisable within 60 days. In connection with a 1993
acquisition of shares of common stock by TSP, Mr. Walston was granted a
profit interest in TSP equal to 10% of the excess, if any, by which the
distributions, in cash or in kind, from TSP exceed the partners' total
investment in TSP plus a return of 9% per annum. As a result of his profit
interest in TSP, Mr. Walston is deemed to beneficially own 1,432,875 shares
of Four Media common stock.
(6) Represents options to purchase 100,000 shares of Four Media common stock
that will become exercisable within 60 days.
(7) Represents options to purchase 30,000 shares of Four Media common stock
that will become exercisable within 60 days.
(8) Represents options to purchase 66,667 shares of Four Media common stock
that are presently exercisable or will become exercisable within 60 days.
(9) Represents options to purchase 84,515 shares of Four Media common stock
that are presently exercisable or will become exercisable within 60 days.
(10) Represents options to purchase 66,422 shares of Four Media common stock
that are presently exercisable or will become exercisable within 60 days.
(11) Represents presently exercisable options to purchase 100,000 shares of Four
Media common stock.
(12) Represents options to purchase 50,000 shares of Four Media common stock
that are presently exercisable or will become exercisable within 60 days.
(13) Includes presently exercisable options to purchase 10,000 shares of Four
Media common stock. Messrs. Lapidus and Libowitz are deemed to have an
indirect pecuniary interest (within the meaning of Rule 16a-1 under the
Exchange Act) in 11,300,000 of the shares as a result of their affiliation
with the Warburg, Pincus entities (see Note 2 above). Messrs. Lapidus and
Libowitz disclaim beneficial ownership of all such shares. The address of
Messrs. Lapidus and Libowitz is c/o E.M. Warburg, Pincus & Co. LLC, 466
Lexington Avenue, New York, New York 10017.
(14) Represents presently exercisable options to purchase 10,000 shares of Four
Media common stock.
(15) Includes options to purchase 1,137,360 shares of Four Media common stock
that are presently exercisable or will become exercisable within 60 days.
Also includes 11,300,000 shares held by WPEP (see Note 12 above),
beneficial ownership of which is disclaimed by Messrs. Lapidus and
Libowitz.
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THE SPECIAL MEETING
We are furnishing this proxy statement/prospectus to stockholders of Four
Media as part of the solicitation of proxies by Four Media's board of directors
for use at the special meeting. We are first mailing this proxy
statement/prospectus and the accompanying form of proxy to Four Media
stockholders on or about February 17, 2000.
MATTERS RELATING TO THE SPECIAL MEETING
Date, Time and Place
We will hold the special meeting at the Waldorf-Astoria Hotel, 301 Park
Avenue, New York, New York 10022, at 9:00 a.m., local time, on April 6, 2000.
Purpose of the Special Meeting
At the special meeting, we are asking holders of Four Media common stock to
approve and adopt the merger agreement and the merger. Four Media's board of
directors has determined that the merger is fair to, and in the best interests
of, Four Media stockholders, has unanimously approved the merger agreement and
the merger and declared the advisability of the merger, and unanimously
recommends that Four Media stockholders vote FOR approval and adoption of the
merger agreement and the merger.
Record Date
The record date for shares entitled to vote at the special meeting is
February 11, 2000. On the record date, 19,730,295 shares of Four Media common
stock were outstanding, held by approximately 30 stockholders of record, not
including stockholders who beneficially own shares held in street name by
brokers.
List of Stockholders
A list of Four Media stockholders entitled to vote at the meeting will be
available for inspection by any stockholder for purposes germane to the special
meeting during normal business hours at Four Media's executive offices. The list
will also be available for inspection by stockholders present at the special
meeting.
Shares Entitled to Vote
Only shares of Four Media common stock held at the close of business on the
record date are entitled to vote at the special meeting. Each Four Media
stockholder is entitled to one vote for each share of Four Media common stock
held by the stockholder on the record date.
Quorum Requirement
A quorum of stockholders is necessary to hold a valid meeting. A quorum
will be present at the special meeting if a majority of the total number of
votes entitled to be cast by holders of Four Media's common stock on the record
date are represented in person or by proxy. If a quorum is not present at the
special meeting, it is expected that the meeting will be adjourned or postponed
to solicit additional proxies. The shares of Four Media common stock which are
subject to voting agreements entered into by a number of Four Media's principal
stockholders will be sufficient to constitute a quorum. Abstentions and broker
"non-votes" count as present for establishing a quorum. A broker "non-vote"
occurs on an item when a broker is not permitted to vote on that item without
instruction from the beneficial owner of the shares and no instruction is given.
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Shares beneficially owned by Directors and Executive Officers on the Record
Date
On the record date, directors and executive officers of Four Media
beneficially owned and were entitled to vote approximately 11,632,875 shares of
Four Media common stock, representing approximately 59% of the total number of
votes entitled to be cast at the special meeting by all holders of shares of
Four Media common stock. These directors and officers, including Robert T.
Walston who, through an entity in which he is a limited partner is party to the
voting agreement described in the section "Other Transaction
Agreements -- Voting Agreements," have indicated a present intention to vote in
favor of the merger agreement and the merger.
VOTE NECESSARY TO APPROVE THE MERGER AGREEMENT AND THE MERGER
Approval and adoption of the merger agreement and the merger requires the
affirmative vote of a majority of the total number of votes entitled to be cast
by holders of shares of Four Media common stock outstanding on the record date.
IF A FOUR MEDIA STOCKHOLDER ABSTAINS FROM VOTING OR DOES NOT VOTE, EITHER IN
PERSON OR BY PROXY, IT WILL HAVE THE EFFECT OF A VOTE AGAINST APPROVAL AND
ADOPTION OF THE MERGER AGREEMENT AND THE MERGER. THE SHARES OF FOUR MEDIA COMMON
STOCK WHICH ARE SUBJECT TO VOTING AGREEMENTS ENTERED INTO BY FOUR MEDIA'S
PRINCIPAL STOCKHOLDERS WILL BE SUFFICIENT TO APPROVE THE MERGER AGREEMENT AND
THE MERGER AT THE SPECIAL MEETING.
Under the rules of the National Association of Securities Dealers, Inc., if
your broker holds your shares in its name, your broker may not vote your shares
on the merger proposal absent instructions from you. Without your voting
instructions, a broker non-vote will occur on the merger proposal and will have
the effect of a vote against approval and adoption of the merger agreement.
PROXIES
Voting Your Proxy
You may vote in person at the meeting or by proxy. We recommend you vote by
proxy even if you plan to attend the special meeting. You can always change your
vote at the meeting.
Voting instructions are included on your proxy card. If you properly give
your proxy and submit it to us in time to vote, one of the individuals named as
your proxy will vote your shares as you have directed.
If you sign and timely return your proxy card but do not indicate how your
shares are to be voted, your shares will be voted in favor of the merger
agreement and the merger, and the individuals named in the proxy card will have
discretionary authority to vote upon any adjournment or postponement of the
meeting, including for the purpose of soliciting additional proxies.
How to Vote by Proxy
You may vote by proxy by completing, signing, dating and returning your
proxy card in the enclosed envelope. If you hold your shares through a broker or
other custodian, you should check the voting form used by that firm to see if it
offers telephone or Internet voting.
Revoking Your Proxy
You may revoke your proxy before it is voted by:
- sending in a new proxy with a later date;
- notifying the Secretary of Four Media in writing before the meeting that
you have revoked your proxy; or
- voting in person at the meeting.
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Voting in Person
If you plan to attend the meeting and wish to vote in person, we will give
you a ballot at the meeting. However, if your shares are held in the name of
your broker, bank or other nominee, you must bring a proxy from your nominee
authorizing you to vote your "street name" shares on February 2, 2000, the
record date for voting.
PROXY SOLICITATION
Four Media and Liberty will share equally the costs and expenses incurred
in connection with printing and mailing this proxy statement/prospectus. Four
Media will pay the cost of the solicitation of proxies from its stockholders.
In addition to solicitation by mail, the directors and employees of Four
Media and its subsidiaries may solicit proxies from stockholders by telephone or
other electronic means or in person. Any director or employee of Four Media or
its subsidiaries used to solicit proxies will not receive additional
compensation for these services. Four Media has also retained D.F. King & Co.,
Inc. at an estimated cost of $4,000, plus reimbursement of expenses, to assist
in the solicitation of proxies. Four Media and D.F. King will request brokerage
houses and other custodians, nominees and fiduciaries to forward solicitation
materials to the beneficial owners of stock held of record by such persons. Four
Media will reimburse custodians, nominees and fiduciaries for their reasonable
out-of-pocket expenses in doing so.
A transmittal form with instructions for the surrender of Four Media common
stock certificates will be mailed to Four Media stockholders as soon as
practicable after completion of the merger.
STOCKHOLDERS SHOULD NOT SEND STOCK CERTIFICATES WITH THEIR PROXIES.
OTHER BUSINESS; ADJOURNMENTS
Under Four Media's bylaws, no business may be conducted at the special
meeting other than voting on the proposal to approve and adopt the merger
agreement and the merger or on adjourning or postponing the meeting.
Adjournments may be made for the purpose of, among other things, soliciting
additional proxies. An adjournment may be made from time to time by the chairman
of the meeting or by approval of the holders of shares representing a majority
of the votes present in person or by proxy at the meeting, whether or not a
quorum exists. In their discretion, the proxies named in the proxy card are
authorized to vote upon any adjournment or postponement of the meeting,
including for the purpose of soliciting additional proxies. However, no proxies
voted against adoption of the merger will be voted in favor of adjournment of
the meeting for the purpose of soliciting additional proxies.
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SUBMISSION OF STOCKHOLDER PROPOSALS
Due to the contemplated completion of the merger, Four Media does not
currently expect to hold a 2000 annual meeting of stockholders, as Four Media's
common stock will not be publicly held after the merger. If the merger is not
completed and an annual meeting is held, stockholder proposals for inclusion in
proxy materials for the meeting must have been submitted to the Secretary of
Four Media in writing and received at the executive offices of Four Media by
August 2, 1999. Any proposal must also meet the other requirements of the rules
of the Securities and Exchange Commission relating to stockholder proposals.
EXPERTS
The consolidated financial statements of AT&T Corp. incorporated in this
proxy statement/prospectus by reference to the Annual Report on Form 10-K/A,
filed on July 12, 1999, for the year ended December 31, 1998, have been so
incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
The consolidated financial statements and financial statement schedule of
Four Media at August 1, 1999 and for the year then ended included in its 1999
Annual Report on Form 10-K, as amended, have been audited by Ernst & Young LLP,
independent auditors, as indicated in their report thereon included therein, and
are incorporated by reference in this proxy statement/prospectus in reliance
upon such report given on the authority of such firm as experts in accounting
and auditing.
The consolidated financial statements incorporated by reference in this
proxy statement/prospectus from the Annual Report on Form 10-K of Four Media at
August 2, 1998 and for the two years then ended have been so incorporated in
reliance on the reports of PricewaterhouseCoopers LLP, independent accountants,
given on the authority of said firm as experts in auditing and accounting.
The consolidated balance sheets of TCI and its subsidiaries as of December
31, 1998 and 1997, and the related consolidated statements of operations and
comprehensive earnings, stockholders' equity, and cash flows for each of the
years in the three-year period ended December 31, 1998, which appear in the
Current Report on Form 8-K, dated March 22, 1999, of AT&T, have been
incorporated by reference herein in reliance upon the report, dated March 9,
1999, of KPMG LLP, independent certified public accountants, incorporated by
reference herein, and upon the authority of said firm as experts in accounting
and auditing.
The combined balance sheets of Liberty/Ventures Group as of December 31,
1998 and 1997, and the related combined statements of operations and
comprehensive earnings, equity, and cash flows for each of the years in the
three-year period ended December 31, 1998, which appear in the Current Report on
Form 8-K, dated March 22, 1999, of AT&T, have been incorporated by reference
herein in reliance upon the report, dated March 9, 1999, of KPMG LLP,
independent certified public accountants, incorporated by reference herein, and
upon the authority of said firm as experts in accounting and auditing.
The consolidated balance sheets of MediaOne Group, Inc. as of December 31,
1998 and 1997, and the consolidated statements of operations, shareowners'
equity and cash flows for each of the three years in the period ended December
31, 1998, included in AT&T Corp.'s Current Report on Form 8-K, dated September
2, 1999, have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report with respect thereto, and are
incorporated by reference herein in reliance upon the authority of said firm as
experts in accounting and auditing in giving said reports.
LEGAL MATTERS
The legality of Class A Liberty Media Group tracking stock to be issued in
the merger is being passed upon for AT&T by Robert S. Feit, Esq., General
Attorney and Assistant Secretary of AT&T.
As of February 9, 2000, Mr. Feit owned 5,035 shares of AT&T common stock
and holds options to purchase an additional 33,750 shares of AT&T common stock.
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ANNEX A
AGREEMENT AND PLAN OF MERGER
AMONG
AT&T CORP.,
D-GROUP MERGER CORP.,
LIBERTY MEDIA CORPORATION
AND
FOUR MEDIA COMPANY
DATED AS OF DECEMBER 6, 1999
A-1
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TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C> <C>
ARTICLE I. DEFINITIONS AND CONSTRUCTION.............................. A-5
1.1 Certain Definitions......................................... A-5
1.2 Additional Definitions...................................... A-9
1.3 Terms Generally............................................. A-11
ARTICLE II. THE MERGER AND RELATED MATTERS........................... A-11
2.1 The Merger.................................................. A-11
2.2 Closing..................................................... A-12
2.3 Conversion of Securities.................................... A-13
2.4 Exchange of Shares.......................................... A-14
2.5 Changes in Class A Liberty Media Group Stock................ A-17
2.6 Capital Contribution to Liberty Media....................... A-17
ARTICLE III. CERTAIN ACTIONS......................................... A-17
3.1 Stockholder Meeting......................................... A-17
3.2 Registration Statement and Other Commission Filings......... A-18
3.3 Identification of Rule 145 Affiliates....................... A-18
3.4 Reasonable Efforts.......................................... A-19
3.5 Company Stock Option and Other Plans........................ A-20
3.6 Parent Ownership of Company Common Stock.................... A-20
3.7 Expenses.................................................... A-20
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF THE COMPANY............ A-21
4.1 Corporate Organization...................................... A-21
4.2 Subsidiaries................................................ A-21
4.3 Capitalization.............................................. A-22
4.4 Corporate Proceedings, etc.................................. A-22
4.5 Consents and Approvals...................................... A-23
4.6 Absence of Defaults, Conflicts, etc......................... A-23
4.7 Reports..................................................... A-24
4.8 Absence of Certain Developments............................. A-25
4.9 Compliance with Law......................................... A-25
4.10 Litigation.................................................. A-26
4.11 Material Contracts.......................................... A-26
4.12 Absence of Undisclosed Liabilities.......................... A-26
4.13 Labor Relations and Employment.............................. A-27
4.14 Employee Benefit Plans...................................... A-27
4.15 FCC Matters................................................. A-30
4.16 Real Property............................................... A-30
4.17 Condition of Properties..................................... A-31
4.18 Environmental Matters....................................... A-31
4.19 Intellectual Property....................................... A-32
</TABLE>
<TABLE>
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4.20 Year 2000................................................... A-33
4.21 Tax Matters................................................. A-34
4.22 Insurance................................................... A-35
4.23 Transactions with Related Parties........................... A-35
4.24 Interest in Competitors..................................... A-35
4.25 Brokerage................................................... A-35
4.26 Disclosure.................................................. A-36
</TABLE>
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<TABLE>
<CAPTION>
<S> <C> <C>
4.27 DGCL Section 203............................................ A-36
4.28 Company Action.............................................. A-36
4.29 Fairness Opinion............................................ A-36
4.30 FIRPTA...................................................... A-36
4.31 No Investment Company....................................... A-36
4.32 Employment Agreements....................................... A-36
4.33 Negative Assurances......................................... A-37
4.34 Vote Required............................................... A-37
4.35 No Excise Tax Obligations................................... A-37
4.36 Pioneer Status.............................................. A-37
4.37 British Telecommunications.................................. A-37
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF PARENT.................. A-37
5.1 Organization and Qualification.............................. A-37
5.2 Authorization and Validity of Agreement..................... A-37
5.3 Capitalization of Parent.................................... A-38
5.4 Ownership of Merger Sub; No Prior Activities; Assets of
Merger Sub.................................................. A-38
5.5 Information Supplied........................................ A-38
ARTICLE VI. REPRESENTATIONS AND WARRANTIES OF LIBERTY MEDIA.......... A-39
6.1 Organization and Qualification.............................. A-39
6.2 Authorization and Validity of Agreement..................... A-39
6.3 Ownership of Company Common Stock........................... A-39
6.4 Information Supplied........................................ A-39
6.5 Liberty Media Group Information............................. A-40
6.6 No Approvals or Notices Required; No Conflict with
Instruments................................................. A-40
6.7 Absence of Certain Changes or Events........................ A-41
6.8 Brokers or Finders.......................................... A-41
ARTICLE VII. ADDITIONAL COVENANTS AND AGREEMENTS..................... A-41
7.1 Access to Information Concerning Properties and Records..... A-41
7.2 Confidentiality............................................. A-42
7.3 Public Announcements........................................ A-43
7.4 Conduct of the Company's Business Pending the Effective
Time........................................................ A-43
7.5 No Solicitation............................................. A-45
7.6 Maintenance of Pioneer Status............................... A-47
7.7 Actions by Merger Sub....................................... A-47
7.8 Listing..................................................... A-47
7.9 Convertible Securities...................................... A-47
7.10 Voting Agreement............................................ A-47
7.11 Indemnification of Directors and Officers; Insurance........ A-47
7.12 [Intentionally Omitted.].................................... A-49
7.13 Certificates as to Indebtedness............................. A-49
7.14 Notification of Certain Matters............................. A-49
7.15 Defense of Litigation....................................... A-49
7.16 Additional Financial Statements............................. A-49
7.17 Agreement with Robert T. Walston............................ A-50
</TABLE>
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<TABLE>
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ARTICLE VIII. CONDITIONS PRECEDENT................................... A-50
8.1 Conditions Precedent to the Obligations of Parent, Liberty
Media, Merger Sub and the Company........................... A-50
8.2 Conditions Precedent to the Obligations of Parent and Merger
Sub for the Benefit of Liberty Media........................ A-50
8.3 Conditions Precedent to the Obligations of Parent and Merger
Sub for the Benefit of Parent............................... A-52
8.4 Conditions Precedent to the Obligations of the Company...... A-54
ARTICLE IX. TERMINATION.............................................. A-55
9.1 Termination and Abandonment................................. A-55
9.2 Termination Fee; Effects of Termination..................... A-56
ARTICLE X. MISCELLANEOUS............................................. A-57
10.1 No Waiver or Survival of Representations and Warranties..... A-57
10.2 Notices..................................................... A-57
10.3 Entire Agreement............................................ A-58
10.4 Assignment; Binding Effect; Benefit......................... A-58
10.5 Amendment................................................... A-58
10.6 Extension; Waiver........................................... A-58
10.7 Parent Transactions......................................... A-59
10.8 Headings.................................................... A-59
10.9 Counterparts................................................ A-59
10.10 Applicable Law.............................................. A-59
10.11 Enforcement................................................. A-59
10.12 Company Disclosure Schedule................................. A-59
</TABLE>
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made as of this 6th
day of December, 1999, by and among AT&T Corp., a New York corporation
("Parent"), D-Group Merger Corp., a Delaware corporation ("Merger Sub"), Liberty
Media Corporation, a Delaware corporation ("Liberty Media"), and Four Media
Company, a Delaware corporation (the "Company").
WHEREAS, the parties are entering into this Agreement to provide for the
terms and conditions upon which the Company will be acquired by Parent by means
of a merger of Merger Sub, a direct wholly owned Subsidiary of Parent, with and
into the Company (the "Merger").
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants, representations, warranties and agreements contained herein, the
parties hereby agree as follows:
ARTICLE I.
DEFINITIONS AND CONSTRUCTION
1.1 Certain Definitions. As used in this Agreement, the following terms
shall have the following meanings unless the context otherwise requires:
An "Affiliate" of any Person shall mean any other Person which, directly or
indirectly, controls or is controlled by or is under common control with such
Person. A Person shall be deemed to "control," be "controlled by" or be "under
common control with" any other Person if such other Person possesses, directly
or indirectly, power to direct or cause the direction of the management or
policies of such Person whether through the ownership of voting securities or
partnership interests, by contract or otherwise. For purposes of this Agreement,
the Company's "Affiliates" shall include the Warburg Entities, but shall not
include any Affiliates of the Warburg Entities. Notwithstanding the foregoing,
for purposes of this Agreement, neither Parent nor any of its Affiliates shall
be deemed to be an Affiliate of Liberty Media or any of its Affiliates, and
neither Liberty Media nor any entity that is a member of the Liberty Media Group
nor any of the Affiliates of any of the foregoing shall be deemed to be an
Affiliate of Parent or any of its Affiliates.
"Agreement" shall mean this Agreement and Plan of Merger, including all
Exhibits and Schedules hereto.
"Catalina" shall mean Catalina Transmission Corp., an indirect wholly owned
Subsidiary of the Company.
"Class A Liberty Media Group Stock" shall mean the Class A Liberty Media
Group Common Stock, par value $1.00 per share, of Parent.
"Class B Liberty Media Group Stock" shall mean the Class B Liberty Media
Group Common Stock, par value $1.00 per share, of Parent.
"Closing" shall mean the consummation of the transactions contemplated by
this Agreement.
"Closing Date" shall mean the date on which the Closing occurs pursuant to
Section 2.2.
"Commission" shall mean the Securities and Exchange Commission.
"Common Stock Group" shall have the meaning given to such term in the
Parent Charter.
"Company Common Stock" shall mean the common stock, par value $.01 per
share, of the Company.
"Company Disclosure Schedule" shall mean the disclosure schedule, dated as
of the date of this Agreement, delivered by the Company to each of Parent and
Liberty Media on or prior to the date hereof.
"Company Stock Plans" shall mean (i) the Company's 1997 Stock Option Plan
and (ii) the Company's Amended and Restated 1997 Directors Option Plan, as
listed in Section 4.3(a) of the Company Disclosure Schedule.
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"Company Transaction Documents" shall mean this Agreement and all other
agreements contemplated by this Agreement to which the Company is a party.
"Contribution Agreement" shall mean the Contribution Agreement dated March
9, 1999, by and among Liberty Media, Liberty Media Management LLC, Liberty Media
Group LLC and Liberty Ventures Group LLC.
"Covered Entity" shall have the meaning ascribed thereto in the Parent
Charter.
"DGCL" shall mean the General Corporation Law of the State of Delaware.
"Effective Time" shall mean the time when the Merger of Merger Sub with and
into the Company becomes effective under the DGCL as provided in Section 2.1(a).
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
and the rules and regulations thereunder.
"Fleming Funds" shall mean Fleming US Discovery Fund III, L.P., a Delaware
limited partnership, and Fleming US Discovery Offshore Fund III, L.P., a Bermuda
limited partnership, collectively.
"Fifth Tax Sharing Amendment" shall mean the Fifth Amendment to Tax Sharing
Agreement, by and among Parent, Liberty Media, for itself and each member of the
Liberty Media Group, Tele-Communications, Inc., Liberty Ventures Group LLC,
Liberty Media Group LLC, TCI Starz, Inc., TCI CT Holdings, Inc. and each Covered
Entity (as defined therein), dated as of the date hereof.
"GAAP" shall mean generally accepted accounting principles in the United
States as in effect from time to time.
"Governmental Consent" shall mean any consent, approval, order or
authorization of or other action by any Governmental Entity.
"Governmental Entity" shall mean and include any court, arbitrators,
administrative or other governmental department, agency, commission, authority
or instrumentality, domestic or foreign.
"Governmental Filing" shall mean any registration, qualification,
declaration or filing with or any notice to any Governmental Entity.
"Hart-Scott Act" shall mean the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, and the rules and regulations thereunder.
"Indebtedness" shall mean, with respect to any Person, without duplication
(whether or not the recourse of the lender is to the whole of the assets of such
Person or only to a portion thereof), (i) every liability of such Person
(excluding intercompany accounts between the Company and any wholly owned
Subsidiary of the Company or between wholly owned Subsidiaries of the Company)
(A) for borrowed money, (B) evidenced by notes, bonds, debentures or other
similar instruments (whether or not negotiable), (C) for reimbursement of
amounts drawn under letters of credit, bankers' acceptances or similar
facilities issued for the account of such Person, (D) issued or assumed as the
deferred purchase price of property or services (excluding contingent payment
obligations and accounts payable) or (E) relating to a capitalized lease
obligation and all debt attributable to sale/leaseback transactions of such
Person; (ii) every liability of others of the kind described in the preceding
clause (i) which such Person has guaranteed or which is otherwise its legal
liability, in either case to the extent required pursuant to GAAP to be set
forth as a liability on a balance sheet of such Person.
"Inter-Group Agreement" shall mean the Inter-Group Agreement, dated as of
March 9, 1999, as amended, among Parent, on the one hand, and Liberty Media,
Liberty Media Group LLC and each Covered Entity (as defined therein), on the
other hand.
"Inter-Group Supplement" shall mean the Fourth Supplement to the
Inter-Group Agreement between and among Parent, on the one hand, and Liberty
Media, Liberty Media Group LLC and each Covered Entity (as defined therein), on
the other hand, dated as of the date hereof.
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"Law" shall mean any foreign or domestic law, statute, code, ordinance,
rule, regulation promulgated, or order, judgment, writ, stipulation, award,
injunction or decree promulgated or entered by a Governmental Entity.
"Liberty Media Affiliate," "Affiliate of Liberty Media" and similar phrases
shall mean Liberty Media, each member of the Liberty Media Group, each Covered
Entity and each Subsidiary of Liberty Media, any member of the Liberty Media
Group or a Covered Entity and, from and after the Effective Time, the Surviving
Entity.
"Liberty Media Group" shall mean the Liberty Media Group, as defined in the
Parent Charter and shall include Ranger Acquisition Corp., A-Group Merger Corp.,
B-Group Merger Corp., C-Group Merger Corp., and each of their respective
Subsidiaries and successors.
"Liberty Media Group Information" means the information regarding the
Liberty Media Group described in Section 6.5.
"Liberty Media Material Adverse Effect" shall mean (i) a material adverse
effect on the transactions contemplated hereby (including a material adverse
effect on the ability of Liberty Media to perform its obligations hereunder) or
(ii) a material adverse effect on the business, assets or financial condition of
Liberty Media and its Subsidiaries, taken as a whole.
"Lien" shall mean any security interest, mortgage, pledge, hypothecation,
charge, claim, option, right to acquire, adverse interest, assignment, deposit
arrangement, encumbrance, restriction, lien (statutory or other), or preference,
priority or other security agreement or preferential arrangement of any kind or
nature whatsoever (including any conditional sale or other title retention
agreement, any financing lease involving substantially the same economic effect
as any of the foregoing, and the filing of any financing statement under the
Uniform Commercial Code or comparable law of any jurisdiction).
"Material Adverse Effect" shall mean (i) a material adverse effect on the
transactions contemplated hereby (including a material adverse effect on the
ability of any party hereto to consummate such transactions or perform its
material obligations hereunder) or (ii) a material adverse effect on the
business, assets or financial condition of the Company and its Subsidiaries,
taken as a whole.
"Merger" shall have the meaning specified in the preamble hereto.
"Merger Consideration" shall mean the Stock Consideration and the Cash
Consideration to which holders of shares of Company Common Stock are entitled
pursuant to Section 2.3(a)(i).
"NYSE" shall mean The New York Stock Exchange.
"Parent Adverse Effect" shall mean any of (i) an effect which is adverse
to, or burdensome on the business, assets, liabilities, condition (financial or
otherwise), results of operations, operations or prospects of any business of
Parent or its Subsidiaries being conducted on the date hereof (other than, in
each case, any such effect which is insignificant in nature or consequence) or
(ii) an adverse effect on the relationship between Parent or any of its
Subsidiaries and any federal or state Governmental Entity having jurisdiction
over any business of Parent or its Subsidiaries or the operations or assets
thereof (other than such an effect which is insignificant in nature or
consequence).
"Parent Charter" shall mean the Amended Certificate of Incorporation of
Parent.
"Parent Common Stock" shall mean the common stock, par value $1.00 per
share, of Parent.
"Parent/Liberty Media Commission Filings" means and includes all reports,
registration statements, definitive proxy statements and other documents (in
each case together with all amendments thereto) filed or to be filed by Parent
or Liberty Media with the Commission during the period from the effectiveness of
the acquisition by Parent of Tele-Communications, Inc., on March 9, 1999,
through the Closing Date, to the extent (and only to the extent) that such
documents include any financial statements of, or narrative description
(including management's discussion and analysis) specifically regarding, the
Liberty Media Group.
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"Parent Material Adverse Effect" shall mean (i) a material adverse effect
on the transactions contemplated hereby (including a material adverse effect on
the ability of Parent and Merger Sub to perform their respective obligations
hereunder) or (ii) an adverse effect on the business, assets, liabilities,
operations, results of operations, or financial condition of Parent or any of
its Subsidiaries that is material to the Parent and all of its Subsidiaries
taken as a whole.
"Parent Transaction" shall mean any merger, acquisition, business
combination, stock repurchase, stock issuance or other transaction or business
opportunity, even if such Parent Transaction would materially interfere with the
transactions contemplated by this Agreement.
"Permitted Encumbrances" shall mean the following Liens with respect to the
properties and assets of the Company: (a) Liens for taxes, assessments or other
governmental charges or levies not at the time delinquent or thereafter payable
without penalty or being contested in good faith by appropriate proceedings and
for which adequate reserves in accordance with GAAP shall have been set aside on
the Company's books (to the extent required thereby); (b) Liens of carriers,
warehousemen, mechanics, materialmen and landlords incurred in the ordinary
course of business for sums not overdue or being contested in good faith by
appropriate proceedings and for which adequate reserves in accordance with GAAP
shall have been set aside on the Company's books (to the extent required
thereby); (c) Liens incurred in the ordinary course of business in connection
with workmen's compensation, unemployment insurance or other forms of
governmental insurance or benefits, or to secure performance of tenders,
statutory obligations, leases and contracts (other than for borrowed money)
entered into in the ordinary course of business or to secure obligations on
surety or appeal bonds; (d) purchase money security interests or Liens on
property acquired or held by the Company in the ordinary course of business to
secure the purchase price of such property or to secure Indebtedness incurred
solely for the purpose of financing the acquisition of such property, and (e)
easements, restrictions and other defects of title which are not, in the
aggregate, material and which do not, individually or in the aggregate,
materially and adversely affect the Company's use or occupancy of the property
affected thereby.
"Person" shall mean an individual, partnership, corporation, limited
liability company, trust, unincorporated organization, association, or joint
venture or a government, agency, political subdivision, or instrumentality
thereof.
"Post-Merger Restructuring Transactions" shall mean each of the
transactions described in Exhibit 2.6 hereto.
"Restriction", with respect to any capital stock or other security, shall
mean any voting or other trust or agreement, option, warrant, escrow
arrangement, proxy, buy-sell agreement, power of attorney or other Contract, any
Law, rule, regulation, order, judgment or decree which, conditionally or
unconditionally, (i) grants to any Person the right to purchase or otherwise
acquire, or obligates any Person to purchase or sell or otherwise acquire,
dispose of or issue, or otherwise results or, whether upon the occurrence of any
event or with notice or lapse of time or both or otherwise, may result in any
person acquiring, (A) any of such capital stock or other security; (B) any of
the proceeds of, or any distributions paid or which are or may become payable
with respect to, any of such capital stock or other security; or (C) any
interest in such capital stock or other security or any such proceeds or
distributions; (ii) restricts or, whether upon the occurrence of any event or
with notice or lapse of time or both or otherwise, may restrict the transfer or
voting of, or the exercise of any rights or the enjoyment of any benefits
arising by reason of ownership of, any such capital stock or other security or
any such proceeds or distributions; or (iii) creates or, whether upon the
occurrence of any event or with notice or lapse of time or both or otherwise,
may create a Lien or purported Lien affecting such capital stock or other
security, proceeds or distributions.
"Securities Act" shall mean the Securities Act of 1933, as amended, and the
rules and regulations thereunder.
"Subsidiary" when used with respect to any Person, means any corporation or
other organization, whether incorporated or unincorporated, of which such Person
or any other Subsidiary of such Person is a general partner or at least 50% of
the securities or other interests having by their terms ordinary voting
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power to elect at least 50% of the Board of Directors or others performing
similar functions with respect to such corporation or other organization is
directly or indirectly owned or controlled by such Person, by any one or more of
its Subsidiaries, or by such Person and one or more of its Subsidiaries.
Notwithstanding the foregoing, for purposes of this Agreement, Parent's
Subsidiaries shall be deemed not to include Liberty Media, any Liberty Media
Affiliate or any entity that is a member of the Liberty Media Group or any of
the Affiliates of any of the foregoing, whether or not they otherwise would be
Subsidiaries of Parent under the foregoing definition. Notwithstanding the
foregoing, for purposes of this Agreement, the Company's Subsidiaries shall
include all entities listed in Section 4.2 of the Company Disclosure Schedule.
"Surviving Entity" shall mean the Company as the surviving entity in the
Merger as provided in Section 2.1(a).
"Voting Agreements" shall mean the Agreements, dated as of the date hereof,
among Liberty Media and certain stockholders of the Company, substantially in
the forms of Exhibits 7.10(a) and 7.10(b) attached hereto.
"Warburg Entities" shall mean Warburg, Pincus & Co., Warburg, Pincus Equity
Partners, L.P., Warburg, Pincus Netherlands Equity Partners I, C.V., Warburg,
Pincus Netherlands Equity Partners II, C.V. and Warburg, Pincus Netherlands
Equity Partners III, C.V.
1.2 Additional Definitions. The following additional terms have the
meaning ascribed thereto in the Section indicated below next to such term:
<TABLE>
<CAPTION>
DEFINED TERM SECTION
------------ -------
<S> <C>
breaching party............................................. 3.7
BT.......................................................... 4.37
Cash Consideration.......................................... 2.3(a)(i)
Cashed Out Options.......................................... 2.3(b)(ii)
Certificates................................................ 2.4(b)
Certificate of Merger....................................... 2.1(a)
Claim....................................................... 7.11(a)
Class A Liberty Media Group Stock Exchange Ratio............ 2.3(a)(i)
Code........................................................ 4.14(a)
Company..................................................... Preamble
Company Board............................................... 3.1
Company Charter............................................. 3.1
Company Plans............................................... 4.14(a)
Company Preferred Stock..................................... 4.3(a)
Company SEC Reports......................................... 4.7(a)
Company Stock Option........................................ 2.3(b)(i)
Computer Software........................................... 4.20
Confidential Information.................................... 7.2
Consolidated Returns........................................ 4.21
Contract Consent............................................ 4.6(a)
Contract Notice............................................. 4.6(a)
Contract.................................................... 4.6(a)(1)
Convertible Securities...................................... 4.3(c)
disclosing party............................................ 7.2
Employment Agreements....................................... 4.32
Environmental and Health Laws............................... 4.18
Environmental Permits....................................... 4.18
ERISA....................................................... 4.14(a)
ERISA Affiliate............................................. 4.14(a)
</TABLE>
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<TABLE>
<CAPTION>
DEFINED TERM SECTION
------------ -------
<S> <C>
Excess Shares............................................... 2.4(f)
Exchange Agent.............................................. 2.4(a)
Exchange Agent Agreement.................................... 2.4(a)
Exchange Pool............................................... 2.4(a)
Extraordinary Transaction................................... 7.5(a)
Extraordinary Transaction Interest.......................... 7.5(a)
Fairness Opinion............................................ 4.29
FCC......................................................... 4.5
FCC Licenses................................................ 4.15
Fractional Fund............................................. 2.4(f)
Hazardous Material.......................................... 4.18
Houlihan Lokey.............................................. 4.25
Indemnified Liabilities..................................... 7.11(a)
Indemnified Party........................................... 7.11(a)
Injunction.................................................. 3.4(a)
Intellectual Property....................................... 4.19
Interim SEC Reports......................................... 4.7(a)
IRS......................................................... 4.21(a)
Leased Real Property........................................ 4.16(b)
Licenses.................................................... 4.9(c)
Local Approvals............................................. 4.5(ii)
Liberty Media............................................... Preamble
Liberty Media Disclosure Schedule........................... Article VI
Material Contracts.......................................... 4.11
Merger...................................................... Preamble
Merger Proposal............................................. 3.1
Merger Sub.................................................. Preamble
Multiemployer Plan.......................................... 4.14(b)
non-breaching party......................................... 3.7
Option Holders.............................................. 2.3(b)(ii)
Option/Warrant Rollover Ratio............................... 2.3(b)(i)
Organizational Documents.................................... 4.1(a)
Owned Real Property......................................... 4.16(a)
Parent...................................................... Preamble
Parent Preferred Stock...................................... 5.3
PBGC........................................................ 4.14(e)
PCB......................................................... 4.18(a)(iv)
Pension Plans............................................... 4.14(a)
Proxy Statement............................................. 3.2(a)
receiving party............................................. 7.2
Registration Statement...................................... 3.2(a)
Remedial Action............................................. 4.18
Representatives............................................. 7.2
Rollover Option............................................. 2.3(b)(i)
Rollover Warrants........................................... 2.3(b)(i)
Rule 145 Agreement.......................................... 3.3
Special Meeting............................................. 3.1
Stock Consideration......................................... 2.3(a)(i)
</TABLE>
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<TABLE>
<CAPTION>
DEFINED TERM SECTION
------------ -------
<S> <C>
Subsequent Determination.................................... 7.5(c)
Superior Proposal........................................... 7.5(c)
tax......................................................... 4.21(a)
Termination Fee............................................. 9.2
Violation................................................... 4.6(a)
Voting Debt................................................. 4.3(a)
Warrants.................................................... 2.3(b)(i)
</TABLE>
1.3 Terms Generally. The definitions in Sections 1.1 and 1.2 shall apply
equally to both the singular and plural forms of the terms defined. Whenever the
context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include", "includes" and "including" shall
be deemed to be followed by the phrase "without limitation." The words "herein,"
"hereof" and "hereunder" and words of similar import refer to this Agreement
(including the Exhibits and Schedules) in its entirety and not to any part
hereof unless the context shall otherwise require. As used herein, the term "to
the Company's knowledge" or any similar term relating to the knowledge of the
Company means the actual knowledge of any of the following officers and
employees of the Company: Robert T. Walston, Jeffrey J. Marcketta, Christopher
M. R. Phillips and William E. Niles, in each case without investigation or
inquiry by such officers and employees (other than any such investigation or
inquiry in the ordinary course of their duties to the Company), unless the
context otherwise requires. All references herein to Articles, Sections,
Exhibits and Schedules shall be deemed references to Articles and Sections of,
and Exhibits and Schedules to, this Agreement unless the context shall otherwise
require. Unless the context shall otherwise require, any references to any
agreement or other instrument or statute or regulation are to it as amended and
supplemented from time to time (and, in the case of a statute or regulation, to
any successor provisions). Any reference in this Agreement to a "day" or number
of "days" (without the explicit qualification of "business") shall be
interpreted as a reference to a calendar day or number of calendar days. If any
action or notice is to be taken or given on or by a particular calendar day, and
such calendar day is not a business day, then such action or notice shall be
deferred until, or may be taken or given on, the next business day. As applied
to Parent and its Subsidiaries, the phrases "as soon as reasonably practicable,"
"as promptly as practicable" and similar phrases shall mean "reasonably promptly
under the circumstances, in light of the other burdens on the time and attention
of the directors, officers, employees and agents of Parent and the relative
benefits to Parent of this Agreement and such other burdens."
ARTICLE II.
THE MERGER AND RELATED MATTERS
2.1 The Merger.
(a) Merger; Effective Time. At the Effective Time and subject to and upon
the terms and conditions of this Agreement, Merger Sub shall, and Parent shall
cause Merger Sub to, merge with and into the Company in accordance with the
provisions of the DGCL, the separate corporate existence of Merger Sub shall
cease and the Company shall continue as the Surviving Entity. The Effective Time
shall occur upon the filing with the Secretary of State of the State of Delaware
of a Certificate of Merger (the "Certificate of Merger") substantially in the
form of Exhibit 2.1(a) and executed in accordance with the applicable provisions
of the DGCL, or at such later time as may be agreed to by Parent, Liberty Media
and the Company and specified in the Certificate of Merger. Provided that this
Agreement has not been terminated pursuant to Article IX, the parties will cause
the Certificate of Merger to be filed concurrently with or as soon as
practicable after the Closing.
(b) Effects of the Merger. The Merger shall have the effect set forth in
Section 259 of the DGCL. Without limiting the generality of the foregoing, and
subject thereto, at the Effective Time, all the properties, rights, privileges,
powers and franchises of the Company, and Merger Sub shall vest in the
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Surviving Entity, and all debts, liabilities and duties of the Company and
Merger Sub shall become the debts, liabilities and duties of the Surviving
Entity. If, at any time after the Effective Time, the Surviving Entity considers
or is advised that any deeds, bills of sale, assignments, assurances or any
other actions or things are necessary or desirable to vest, perfect or confirm
of record or otherwise in the Surviving Entity its right, title or interest in,
to or under any of the rights, properties, or assets of either the Company or
Merger Sub, or otherwise to carry out the intent and purposes of this Agreement,
the officers and directors of the Surviving Entity will be authorized to execute
and deliver, in the name and on behalf of each of the Company and Merger Sub,
all such deeds, bills of sale, assignments and assurances and to take and do, in
the name and on behalf of each of the Company and Merger Sub, all such other
actions and things as the Board of Directors of the Surviving Entity may
determine to be necessary or desirable to vest, perfect or confirm any and all
right, title and interest in, to and under such rights, properties or assets in
the Surviving Entity or otherwise to carry out the intent and purposes of this
Agreement.
(c) Certificate of Incorporation and Bylaws of Surviving Entity. At the
Effective Time, the certificate of incorporation of the Company, as theretofore
amended, supplemented, and/or restated, shall be amended and restated to read in
its entirety as set forth in Exhibit 2.1(c)(i) attached hereto and incorporated
herein by this reference, and as so amended and restated shall be the
certificate of incorporation of the Surviving Entity until thereafter amended,
supplemented, and/or restated in accordance with the DGCL. At the Effective
Time, the bylaws of the Company, as theretofore amended, supplemented, and/or
restated, shall be amended and restated to read in their entirety as set forth
in Exhibit 2.1(c)(ii) attached hereto and incorporated herein by this reference,
and as so amended and restated shall be the bylaws of the Surviving Entity until
thereafter amended, supplemented, and/or restated in accordance with the DGCL.
(d) Directors and Officers of Surviving Entity. The persons serving
immediately prior to the Effective Time as directors of the Company shall
resign, effective immediately prior to the Effective Time, and at the Effective
Time any such person who shall not have so resigned shall be, and hereby is,
removed, and at the Effective Time the following persons shall constitute the
board of directors of the Surviving Entity: Charles Tanabe and Robert R.
Bennett. At the Effective Time, each person serving as an officer of the Company
immediately prior to the Effective Time shall be and continue as an officer of
the Surviving Entity, holding the same office of, and having the same powers,
authority, and authorization as to, the Surviving Entity, as such person held
and had in respect of the Company immediately prior to the Effective Time.
2.2 Closing.
(a) Closing. The Closing shall take place (i) at 10:00 a.m. (New York time)
at the offices of Baker & Botts, L.L.P., 599 Lexington Avenue, New York, New
York 10022, on the first business day following the date on which the last of
the conditions set forth in Article VIII (other than the filing of the
Certificate of Merger and other than any such conditions which by their terms
are not capable of being satisfied until the Closing Date) is satisfied or, to
the extent permissible, waived, or (ii) on such other date and at such other
time or place as is mutually agreed by the parties hereto.
(b) Obligations of the Company. In addition to the documents required by
Article VIII, the Company shall deliver the following documents at the Closing:
(i) a long form certificate of good standing from the State of
Delaware dated as of a date not more than two business days prior to the
Closing Date and certifying that the Company is duly qualified and in good
standing as of the date of such certificate;
(ii) written resignations from the directors of the Company, effective
immediately prior to the Effective Time; and
(iii) the executed Certificate of Merger substantially in the form of
Exhibit 2.1(a).
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2.3 Conversion of Securities.
(a) Conversion of Company Securities. At the Effective Time, by virtue of
the Merger and without any action on the part of Parent, Merger Sub, Liberty
Media, the Company or the holders of any of their securities:
(i) Each share of Company Common Stock outstanding immediately prior
to the Effective Time (other than such shares to be canceled in accordance
with Section 2.3(a)(iii) and subject to Sections 2.4(f) and 2.4(j)) shall
be converted into and represent the right to receive, and shall be
exchangeable for (i) 0.16129 of a share (the "Class A Liberty Media Group
Stock Exchange Ratio") of Class A Liberty Media Group Stock (the "Stock
Consideration") and (ii) $6.25 in cash (the "Cash Consideration").
(ii) All shares of Class A Liberty Media Group Stock issued pursuant
to this Section 2.3(a) will be validly issued, fully paid and
non-assessable. All shares of Company Common Stock outstanding immediately
prior to the Effective Time shall no longer be outstanding and shall
automatically be canceled and retired, and, subject to Section 2.4(j), each
holder of a certificate representing any such shares shall cease to have
any rights with respect thereto, except the right to receive the Merger
Consideration pursuant to this Section 2.3(a), including any cash in lieu
of a fractional share payable pursuant to Section 2.4(f) (and any dividends
or other distributions payable pursuant to Section 2.4(g)), with respect
thereto upon the surrender of such certificate in accordance with Section
2.4, without interest.
(iii) Each share of Company Common Stock that immediately prior to the
Effective Time is held by the Company as a treasury share shall be canceled
and retired without payment of any consideration thereof and without any
conversion thereof into the Merger Consideration.
(b) Treatment of Company Stock Options and Warrants.
(i) The Company shall take any action necessary (including those actions
contemplated by Section 3.5 hereof) under the Company Stock Plans, any other
agreements pursuant to which Company Stock Options were issued and the Warrants
to effect the transactions contemplated by this Section 2.3(b). Subject to
Section 2.3(b)(ii) below, at the Effective Time, (A) subject, to the extent
necessary under the Company's 1997 Amended and Restated 1997 Director Option
Plan, to each optionee's consent to the actions contemplated by this Section
2.3(b)(i), all outstanding options to purchase shares of Company Common Stock
under a Company Stock Plan, which are listed in Section 2.3(b)(i)(A) of the
Company Disclosure Schedule ("Company Stock Options") other than Cashed Out
Options (as defined below), and (B) all outstanding warrants issued by the
Company to purchase shares of Company Common Stock listed in Section
2.3(b)(i)(B) of the Company Disclosure Schedule ("Warrants"), whether or not
then immediately exercisable or "in the money," shall, without any further
action on the part of any holder thereof, be assumed by Parent in accordance
with the following sentence. Thereafter, each Company Stock Option so assumed (a
"Rollover Option") and each Warrant so assumed (a "Rollover Warrant") shall
(subject, to the extent necessary under the Company's 1997 Amended and Restated
1997 Director Option Plan, to each optionee's consent to the actions
contemplated by this Section 2.3(b)(i)) be deemed to constitute an option or
warrant, as applicable, to purchase, on the same terms and conditions as were
applicable under such Company Stock Option or Warrant, that number of shares of
Class A Liberty Media Group Stock which is equal to the number of shares of
Company Common Stock that were subject to such Company Stock Option or Warrant
immediately prior to the Effective Time multiplied by 0.32258 (the
"Option/Warrant Rollover Ratio"), rounded up to the nearest whole number, at an
exercise price per share of Class A Liberty Media Group Stock equal to the
amount determined by dividing the exercise price per share of Company Common
Stock subject to such Company Stock Option or Warrant immediately prior to the
Effective Time by the Option/Warrant Rollover Ratio, and rounding the resulting
number down to the nearest whole cent; provided, however, that (a) the
Option/Warrant Rollover Ratio shall be adjusted in a manner consistent with all
adjustments, if any, to the Class A Liberty Media Group Stock Exchange Ratio
pursuant to Section 2.5, and (b) after the Effective Time, holders of Rollover
Options to the extent vested and
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exercisable, shall be entitled, upon surrender and termination of such Rollover
Option, to receive a cash payment from Liberty in an amount (if any) equal to
the number of shares of Class A Liberty Media Group Stock subject to such
Rollover Option multiplied by the difference (if positive) between (i) the
average of the closing prices of Class A Liberty Media Group Stock on the NYSE
Composite Transaction Tape for the ten previous consecutive trading days and
(ii) the exercise price of such Rollover Option. All shares of Class A Liberty
Media Group Stock issued upon the exercise of any Rollover Option or Rollover
Warrant will be validly issued, fully paid and non-assessable. Parent shall use
commercially reasonable efforts to cause the issuance of shares of Class A
Liberty Media Group Stock issuable upon exercise of any Rollover Options to have
been registered, at or as promptly as reasonably practicable following the
Effective Time, pursuant to an effective registration statement on Form S-8 (or
other comparable form) under the Securities Act, and Parent shall use its
commercially reasonable efforts to maintain the effectiveness of such
registration statement thereafter for so long as any Rollover Options remain
exercisable. Liberty shall use commercially reasonable efforts to cause the
option agreements or other appropriate documentation representing Rollover
Options to be delivered to Persons entitled to Rollover Options (against
surrender of the option agreements or other appropriate documentation
representing the Company Stock Options to which such Rollover Options relate)
within five days after the Closing Date, subject to the terms of such Rollover
Options.
(ii) Concurrent with the Effective Time, Company Stock Options that are
vested and exercisable on the Closing Date and for which the holders thereof
("Option Holders") have, on or prior to the Effective Time, executed and
delivered the requisite form of consent (reasonably acceptable to Liberty Media
and Parent), shall, at the Effective Time and upon their surrender to the
Company by such Option Holders, be canceled by the Company and such Option
Holders shall receive in full satisfaction thereof a cash payment from the
Company in an amount (if any) equal to the number of shares of Company Common
Stock subject to each such surrendered Company Stock Option multiplied by the
difference (if positive) between $12.50 and the exercise price per share of such
Company Stock Option. The Company Stock Options so surrendered are referred to
herein as "Cashed Out Options." The Company shall use its reasonable best
efforts to obtain each Option Holders' consent to such cash payment and shall
provide a report to Liberty Media five days prior to the Closing Date listing
the Option Holders that elected to obtain Cashed Out Options; the Company shall
also confirm such report on the Closing Date.
(c) Conversion of Merger Sub Stock. At the Effective Time, by virtue of the
Merger and without any action on the part of Parent, Merger Sub, Liberty Media,
the Company or the holders of any of their securities, each share of capital
stock of Merger Sub outstanding immediately prior to the Effective Time shall be
converted into one share of the common stock, par value $.01 per share, of the
Surviving Entity.
2.4 Exchange of Shares.
(a) Appointment of Exchange Agent; Exchange Pool. On or before the Closing
Date, Parent and the Company shall enter into an agreement (the "Exchange Agent
Agreement") with Boston Equiserve Trust Company, N.A. or, at Parent's option,
another exchange agent selected by Parent and reasonably acceptable to the
Company (the "Exchange Agent"), authorizing such exchange agent to act as
exchange agent hereunder. At the Effective Time, Liberty Media shall deposit
with the Exchange Agent, for the benefit of those Persons who immediately prior
to the Effective Time were the holders of Company Common Stock, cash in amounts
necessary to pay the Cash Consideration pursuant to Section 2.3(a). Promptly
following the Effective Time, Parent shall make available to the Exchange Agent,
for the benefit of those Persons who immediately prior to the Effective Time
were the holders of Company Common Stock, certificates representing a sufficient
number of shares of Class A Liberty Media Group Common Stock required to effect
the delivery of the Stock Consideration pursuant to Section 2.3(a) (the cash and
the certificates representing Class A Liberty Media Group Common Stock delivered
to the Exchange Agent pursuant to this Section 2.4(a) and comprising the Merger
Consideration being hereinafter referred to as the "Exchange Pool"). The
Exchange Agent shall invest any cash included in the Exchange Pool in one or
more bank accounts or in high-quality, short-term investments, as directed by
Liberty Media, on a daily basis. Any interest and other income resulting from
such investments will be paid to Liberty Media.
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(b) Letter of Transmittal. As soon as reasonably practicable after the
Effective Time, the Exchange Agent shall mail to each holder of record of a
certificate or certificates which immediately prior to the Effective Time
represented issued and outstanding shares of Company Common Stock (the
"Certificates") whose shares were converted into the right to receive the Merger
Consideration: (i) a notice of the effectiveness of the Merger and (ii) a letter
of transmittal (which shall state that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent) with instructions for use in effecting the
surrender and exchange of the Certificates. Such notice, letter of transmittal
and instructions shall contain such provisions and be in such form as Parent,
Liberty Media and the Company reasonably specify.
(c) Exchange Procedure. Promptly following the surrender, in accordance
with such instructions, of a Certificate to the Exchange Agent (or such other
agent or agents as may be appointed by the Exchange Agent or Parent pursuant to
the Exchange Agent Agreement), together with such letter of transmittal (duly
executed) and any other documents required by such instructions or letter of
transmittal, the Exchange Agent shall, subject to Section 2.4(d), cause to be
distributed to the Person in whose name such Certificate shall have been issued
(i) a certificate registered in the name of such Person representing the number
of whole shares of Class A Liberty Media Group Stock constituting the Stock
Consideration issuable with respect to the shares of Company Common Stock
previously represented by the surrendered Certificate, (ii) payment by check of
the Cash Consideration payable with respect to the shares of Company Common
Stock previously represented by the surrendered Certificate, and (iii) and
payment made by check of any cash payable in lieu of fractional shares of Class
A Liberty Media Group Stock pursuant to Section 2.4(f). Each Certificate so
surrendered shall be canceled. No interest will be paid or will accrue on any
cash payable to holders of Certificates pursuant to the provisions of this
Article II.
(d) Unregistered Transfers of Company Common Stock. In the event of a
transfer of ownership of Company Common Stock which is not registered in the
transfer records of the Company, certificates representing the Stock
Consideration may be issued to, and the Cash Consideration and any cash in lieu
of fractional shares of Class A Liberty Media Group Stock may be delivered to,
the transferee if the Certificate representing such Company Common Stock
surrendered to the Exchange Agent in accordance with Section 2.4(c) is properly
endorsed for transfer or is accompanied by appropriate and properly endorsed
stock powers and is otherwise in proper form to effect such transfer, if the
Person requesting such transfer pays to the Exchange Agent any transfer or other
taxes payable by reason of such transfer or establishes to the satisfaction of
the Exchange Agent that such taxes have been paid or are not required to be paid
and if such Person establishes to the satisfaction of Parent that such transfer
would not violate applicable Federal or state securities laws.
(e) Lost, Stolen or Destroyed Certificates. Subject to the DGCL, if any
Certificate shall have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the Person claiming such Certificate to be lost,
stolen or destroyed satisfactory to Parent and complying with any other
reasonable requirements imposed by Parent, the Exchange Agent will cause to be
delivered to such Person in respect of such lost, stolen or destroyed
Certificate the Merger Consideration (including any cash in lieu of fractional
shares of Class A Liberty Media Group Common Stock to which such Person is
entitled pursuant to Section 2.4(f)) in respect thereof as determined in
accordance with this Article II. Parent may, in its discretion, require the
owner of such lost, stolen or destroyed Certificate to give Parent a bond in
such reasonable sum as it may direct as indemnity against any claim that may be
made against Parent or the Surviving Entity with respect to the Certificate
alleged to have been lost, stolen or destroyed.
(f) No Fractional Shares. No fractional shares of Class A Liberty Media
Group Stock shall be issued in the Merger. In lieu of any such fractional
shares, each holder of shares of Company Common Stock who would otherwise have
been entitled to a fraction of a share of Class A Liberty Media Group Stock upon
surrender of Certificates for exchange pursuant to this Section 2.4 will be paid
an amount in cash (without interest) equal to such holder's proportionate
interest in the proceeds from the sale or sales in the open market by the
Exchange Agent, on behalf of all such holders, of the aggregate fractional
shares of Class A Liberty Media Group Stock which, but for this Section 2.4(f),
would be issuable in the Merger. As soon as practicable following the Effective
Time, the Exchange Agent shall determine the
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excess of (i) the number of full shares of Class A Liberty Media Group Stock
delivered to the Exchange Agent by Parent over (ii) the aggregate number of full
shares of Class A Liberty Media Group Stock to be distributed to former holders
of Company Common Stock (such excess being herein called the "Excess Shares").
The Exchange Agent, as agent for the former holders of Company Common Stock,
shall sell the Excess Shares at the prevailing prices on the NYSE as soon as
practicable after the Closing. The sales 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. All commissions,
transfer taxes and other out-of-pocket transaction costs, if any, including the
expenses and compensation, if any, of the Exchange Agent, incurred in connection
with such sale of Excess Shares, shall be deducted from the proceeds otherwise
distributable to the holders of Company Common Stock. Until the proceeds of such
sale have been distributed to the former holders of Company Common Stock, the
Exchange Agent will hold such proceeds in trust for such former holders (the
"Fractional Fund"). As soon as practicable after the determination of the amount
of cash to be paid to former holders of Company Common Stock in lieu of any
fractional interests, the Exchange Agent shall make available in accordance with
this Agreement such amounts to such former holders.
(g) No Dividends Before Surrender of Certificates. No dividends or other
distributions declared or made after the Effective Time with respect to Class A
Liberty Media Group Stock with a record date after the Effective Time shall be
paid to the holder of any unsurrendered Certificate with respect to the shares
of Class A Liberty Media Group Stock represented thereby, until the holder of
record of such Certificate shall surrender such Certificate as provided herein.
Following surrender of any such Certificate, there shall be paid to the record
holder of the certificates representing whole shares of Class A Liberty Media
Group Stock issued in exchange therefor, without interest, (i) at the time of
such surrender, the amount of dividends or other distributions, if any, with a
record date after the Effective Time and payable with respect to such whole
shares of Class A Liberty Media Group Stock between the Effective Time and the
time of such surrender, and (ii) at the appropriate payment date, the amount of
dividends or other distributions, if any, with a record date after the Effective
Time but prior to surrender and with a payment date subsequent to surrender
payable with respect to such whole shares of Class A Liberty Media Group Stock.
(h) No Further Ownership Rights in Company Common Stock. The Merger
Consideration (together with cash paid in lieu of fractional shares) delivered
upon the surrender for exchange of shares of Company Common Stock in accordance
with the terms hereof shall be deemed to have been issued and paid in full
satisfaction of all rights pertaining to such shares of Company Common Stock,
and there shall be no further registration of transfers on the stock transfer
books of the Surviving Entity of the shares of Company Common Stock which were
outstanding immediately prior to the Effective Time. Subject to Section 2.4(i),
if, after the Effective Time, Certificates are presented to the Surviving Entity
for any reason, they shall be canceled and exchanged as provided in this Article
II.
(i) Termination of Exchange Pool and Fractional Fund; Abandoned Property
Laws. Any portion of the Exchange Pool and the Fractional Fund (and any
dividends or other distributions with respect to such portion of the Exchange
Pool) 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, after such delivery,
look only to Parent for payment of their claim for the applicable Merger
Consideration including any cash in lieu of fractional shares of Class A Liberty
Media Group Stock (and any such dividends or other distributions). Neither
Parent nor the Surviving Entity shall be liable to any holder of shares of
Company Common Stock or Class A Liberty Media Group Stock for any Merger
Consideration, for any dividends or distributions with respect thereto or for
any cash in lieu of fractional shares, which may be delivered to any public
official pursuant to any abandoned property, escheat or similar law.
(j) Appraisal Shares. Notwithstanding Sections 2.3(a)(i) and 2.4(f), each
share of Company Common Stock held of record immediately prior to the Effective
Time by a stockholder of the Company that has not failed to perfect and has not
effectively withdrawn, surrendered, or lost appraisal rights under Section 262
of the DGCL as to such share (to the extent, if any, that such appraisal rights
are available
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under Section 262 of the DGCL) shall not be converted into and represent the
right to receive and shall not be exchangeable for the Merger Consideration
(including any payments of cash in lieu of fractional shares) as provided in
this Article II, and such stockholder shall not be entitled to receive the
Merger Consideration as provided in this Article II (including any payment of
cash in lieu of fractional shares), and such stockholder shall be entitled only
to such appraisal rights as to such share, provided, however, that if and when
any such stockholder shall have failed to perfect such appraisal rights or shall
have effectively withdrawn, surrendered, or lost such appraisal rights as to
such share in accordance with the DGCL, then such share of Company Common Stock
shall be converted into and represent the right to receive and shall be
exchangeable for (to the fullest extent permitted under the DGCL, as of the
Effective Time) the Merger Consideration as provided in this Article II
(including any payment of cash in lieu of fractional shares), and such
stockholder shall be entitled to receive the Merger Consideration as provided in
this Article II (including any payment of cash in lieu of fractional shares and
any dividends or other distributions pursuant to Section 2.4(g)) in exchange for
and upon the surrender of the Certificate evidencing such share in accordance
with this Agreement.
2.5 Changes in Class A Liberty Media Group Stock. If, prior to the
Effective Time, the Class A Liberty Media Group Stock shall be recapitalized,
redeemed or reclassified or Parent shall effect any stock dividend, stock split,
or reverse stock split of Class A Liberty Media Group Stock or shall otherwise
effect any transaction that changes the shares of Class A Liberty Media Group
Stock into any other securities (including securities of another corporation),
or shall make any other dividend or distribution on the shares of Class A
Liberty Media Group Stock (other than normal quarterly cash dividends as the
same may be adjusted from time to time), then the Class A Liberty Media Group
Stock Exchange Ratio, the terms of the foregoing exchanges, and the
Option/Warrant Rollover Ratio and the other terms of the conversion of any
Rollover Options and Rollover Warrants as provided in Section 2.3(b) will, as
appropriate, be adjusted to reflect such split, combination, transaction,
dividend or other distribution or change.
2.6 Capital Contribution to Liberty Media. As soon as practicable
following the Effective Time, to the extent permitted by applicable law, Parent
and Liberty Media shall cause the Post-Merger Restructuring Transactions
described in Exhibit 2.6, as the same may be modified or amended by mutual
agreement of the parties, to be consummated.
ARTICLE III.
CERTAIN ACTIONS
3.1 Stockholder Meeting. The Company and its Board of Directors (the
"Company Board") shall take all action necessary in accordance with applicable
law, the requirements of the Nasdaq National Market and the Company's Restated
Certificate of Incorporation (the "Company Charter") and Bylaws to duly call and
hold, as soon as reasonably practicable after the date hereof, a meeting of the
Company's stockholders (the "Special Meeting") for the purpose of considering
and voting upon the approval and adoption of this Agreement and the Merger
contemplated hereby (the "Merger Proposal"). The only matters the Company shall
propose to be acted on by the Company's stockholders at the Special Meeting
shall be the Merger Proposal and related matters incidental to the consummation
of the Merger and, if so determined by the Company and with the consent of
Liberty Media (which shall not be unreasonably withheld), such other matters as
are customarily presented to stockholders at an annual meeting. Subject to
Section 7.5(c), the Company Board will recommend that the Company's stockholders
vote in favor of approval of the Merger Proposal and include such recommendation
in the Proxy Statement, and the Company will use its commercially reasonable
efforts to solicit from its stockholders proxies in favor of such approval and
to secure the vote of stockholders of the Company required by the DGCL and the
Company Charter to effect the Merger. The Company shall not require any vote
greater than a majority of the votes entitled to be cast by the holders of the
issued and outstanding shares of Company Common Stock for approval of the Merger
Proposal.
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3.2 Registration Statement and Other Commission Filings.
(a) Registration Statement and Proxy Statement. As soon as reasonably
practicable after the execution of this Agreement, Parent, Liberty Media and the
Company shall cooperate in the preparation of, and the Company shall file
confidentially with the Commission, a preliminary proxy statement in form and
substance reasonably satisfactory to each of Parent, Liberty Media and the
Company, and, following resolution of comments, if any, of the Commission on the
preliminary proxy statement, Liberty Media and Parent shall prepare and Parent
shall file with the Commission a registration statement on Form S-4 (the
"Registration Statement"), containing a form of prospectus that includes such
proxy statement (as amended or supplemented, if applicable) registering under
the Securities Act the issuance of the shares of Class A Liberty Media Group
Stock issuable upon conversion of Company Common Stock pursuant to the Merger.
Each of Parent, Liberty Media and the Company shall use its commercially
reasonable efforts to respond to any comments of the Commission and to have the
Registration Statement declared effective as promptly as practicable after such
filing and the Company shall use its commercially reasonable efforts to cause
the proxy statement as filed with the Commission and as thereafter amended or
supplemented to be cleared by the Commission and mailed to the Company's
stockholders as promptly as practicable after the Registration Statement becomes
effective (such proxy statement in the definitive form mailed to the Company's
stockholders, as thereafter amended or supplemented, being referred to as the
"Proxy Statement"). The Company, Liberty Media and Parent will notify each other
party promptly of the receipt of any comments from the Commission or its staff
or any other government officials and of any request by the Commission or its
staff for amendments or supplements to the Registration Statement, the Proxy
Statement or any other filing or for additional information, and will supply the
other parties with copies of all correspondence between it and any of its
representatives, on the one hand, and the Commission or its staff or any other
government officials on the other hand, with respect to the Registration
Statement, the Proxy Statement, the Merger or any filing with the Commission
relating thereto. Whenever any party hereto becomes aware of any event that is
required to be set forth in an amendment or supplement to the Proxy Statement,
the Registration Statement or any other filing with the Commission in connection
with this Agreement or the transactions contemplated hereby, such party shall
promptly inform the other parties of such occurrence and cooperate in the prompt
filing with the Commission or its staff or any other governmental officials,
and/or mailing to stockholders of the Company, of such amendment or supplement,
which shall comply in all material respects with the provisions of the
Securities Act and the Exchange Act. The Company, and Parent and Liberty Media,
each shall promptly provide the other (or its counsel) copies of all filings
made by such party with any Governmental Entity in connection with this
Agreement or the transactions contemplated hereby.
(b) Comfort Letters. The Company will use its commercially reasonable best
efforts to cause to be delivered to Parent and Liberty Media letters of
PricewaterhouseCoopers LLP and Ernst & Young LLP, the Company's former and
current independent auditors, respectively, dated a date within two business
days before the date on which the Registration Statement becomes effective and
addressed to Parent and Liberty Media, each in form reasonably satisfactory to
Parent and Liberty Media and customary in scope and substance for letters
delivered by nationally recognized independent auditors in connection with
registration statements similar to the Registration Statement.
3.3 Identification of Rule 145 Affiliates. Within 30 days after the
execution of this Agreement, the Company shall deliver to Parent and Liberty
Media a letter identifying all Persons who the Company knows are or who the
Company has reason to believe may be, as of the date of the Special Meeting,
"affiliates" of the Company for purposes of Rule 145 under the Securities Act.
The Company will supplement such letter, if applicable, with the name and
address of any other Person subsequently identified by either Parent or the
Company, as the case may be, as a Person who may be deemed to be such an
affiliate; provided, however, that no such Person identified by the Company
shall remain on such list of affiliates if the Company shall receive from
Parent, on or before the date of the Special Meeting, an opinion of outside
counsel reasonably satisfactory the Company to the effect that such Person is
not such an affiliate. The Company shall use its reasonable best efforts to
cause each Person who is identified as an "affiliate" in the letter referred to
above (as so supplemented) to deliver to Parent, on or prior to the
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Closing Date, a written agreement, in substantially the form annexed hereto as
Exhibit 3.3 (each a "Rule 145 Agreement"). Parent shall not be required to
maintain the effectiveness of the Registration Statement or any other
registration statement under the Securities Act for the purposes of resale of
Class A Liberty Media Group Stock received by such affiliates in the Merger.
3.4 Reasonable Efforts.
(a) Subject to the terms and conditions of this Agreement (including
Section 7.4 hereof) and applicable law, and (with respect to Parent) subject to
the last proviso of the following sentence, each of the parties hereto shall use
its reasonable efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things reasonably necessary, proper or advisable to
consummate and make effective the transactions contemplated by this Agreement as
soon as reasonably practicable, including such actions or things as any other
party hereto may reasonably request in order to cause any of the conditions to
such party's obligation to consummate such transactions specified in Article
VIII to be fully satisfied. Without limiting the generality of the foregoing,
each of the parties hereto shall (and each shall cause its directors, officers
and Subsidiaries, and use its reasonable efforts to cause its Affiliates,
employees, agents, attorneys, accountants and representatives, to) consult and
fully cooperate with and provide reasonable assistance to each other in (A) the
preparation and filing with the Commission of the Registration Statement, the
preliminary proxy statement referred to in Section 3.2, the Proxy Statement and
any necessary amendments or supplements to any of the foregoing; (B) seeking to
have such Registration Statement declared effective by the Commission as soon as
reasonably practicable after filing; (C) taking such actions as may reasonably
be required under applicable state securities or blue sky laws in connection
with the issuance of the Stock Consideration; (D) using commercially reasonable
efforts to obtain all required consents, approvals, waivers, licenses, permits,
authorizations, registrations, qualifications, or other permission or action by,
and to give all required notices to and to make all required filings with and
applications and submissions to, any Governmental Entity or other Person, in
each case required in order to cause any of the conditions to each other party's
obligation to consummate the Merger and the transactions contemplated hereby to
be fully satisfied; (E) filing all pre-merger notification and report forms
required under the Hart-Scott Act and responding to any requests for additional
information made by any Governmental Entity pursuant to the Hart-Scott Act; (F)
using commercially reasonable efforts (which in the case of Parent do not
require the commencement of litigation) to cause the lifting of any permanent or
preliminary injunction or restraining order or other similar order issued or
entered by any court or other Governmental Entity (an "Injunction") of any type
referred to in Section 8.2(d), 8.3(d) or 8.4(d); (G) providing all such
information about such party, its Subsidiaries and its officers, directors,
partners and Affiliates, and making all applications and filings, as may be
necessary or reasonably requested in connection with any of the foregoing; and
(H) in general, using commercially reasonable efforts to consummate and make
effective the transactions contemplated hereby; provided, however, that in
making any such filing and in order to obtain any consent, approval, waiver,
license, permit, authorization, registration, qualification, or other permission
or action or the lifting of any Injunction referred to in this sentence, (x)
neither the Company, nor Liberty Media, nor Parent, nor any of their respective
Affiliates shall be required to (and without the prior written consent of
Liberty Media and Parent, the Company and its Affiliates shall not): (i) pay any
consideration; (ii) surrender, modify or amend in any substantive respect any
License or Contract (including this Agreement), (iii) hold separately (in trust
or otherwise), divest itself of, or otherwise rearrange the composition of, any
of its assets, (iv) agree to any limitations on any such Person's freedom of
action with respect to future acquisitions of assets or with respect to any
existing or future business or activities or on the enjoyment of the full rights
of ownership, possession and use of any asset now owned or hereafter acquired by
any such Person, or (v) agree to any of the foregoing or any other conditions or
requirements of any Governmental Entity or other Person that are materially
adverse or burdensome; (y) Parent shall not be required to take any action
pursuant to the foregoing if the taking of such action is reasonably likely to
result in the imposition of a condition or restriction of the type referred to
in Section 8.3(e); and (z) Liberty Media and the Company recognize that Parent
may allocate resources in whatever manner it reasonably deems appropriate; and
provided, further, that Parent and its Subsidiaries shall not be required to
take any such action, or any other action pursuant to this Section 3.4, except
to the extent that such action is required by statute, rule or regulation to be
taken by or in the
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name of Parent or such Subsidiary (as opposed to by or in the name of Liberty
Media or the Company or a Subsidiary thereof) in connection with the
transactions contemplated by this Agreement and, in such event, Parent (or such
Subsidiary of Parent) shall be required only to make filings and statements of
fact and shall not under any circumstances be required to commit or be committed
to take or refrain from taking any action or be subject to any restriction that
relates to any business, asset, liability, operation or employee of Parent or
any of its Subsidiaries. Prior to making any application to or filing with any
Governmental Entity or other Person in connection with this Agreement, each
party shall provide the other party with drafts thereof and afford the other
party a reasonable opportunity to comment on such drafts.
(b) The Company will take all reasonable steps to (i) exempt the Merger
from the requirements of any applicable state takeover law and (ii) assist in
any challenge by Parent or Liberty Media to the validity or applicability to the
Merger of any state takeover law.
3.5 Company Stock Option and Other Plans. Promptly following the mailing
of the Proxy Statement, the Company shall cause a notice (which shall include,
without limitation, the information contained in Section 2.3(b)(i) hereof) to be
sent to each holder of Company Stock Options and Warrants, whether vested or
unvested, in such form as is reasonably agreed upon by the Company, Parent and
Liberty Media.
3.6 Parent Ownership of Company Common Stock. As of the date hereof,
Parent and its Subsidiaries that are members of the Common Stock Group do not
"own" or have any rights to acquire "ownership" of (which rights are not subject
to any significant condition other than payment of consideration, it being
agreed that Parent's acquisition of MediaOne Group, Inc. is subject to
significant conditions other than the payment of consideration) more than 5% of
the shares of Company Common Stock (other than pursuant to this Agreement,
including Exhibit 2.6 hereto, the Inter-Group Agreement, the Fifth Tax Sharing
Amendment or any document referred to herein or therein or executed in
connection herewith or therewith to which the Company, Liberty or any of their
respective Subsidiaries or Affiliates is a party) outstanding on the date
hereof, excluding (from the shares that may be deemed to be owned by Parent or
its Subsidiaries) any shares of or interests in stock of the Company that may be
owned by or for the benefit of any (i) employee benefit plan of Parent, Liberty
or any of their respective Subsidiaries or (ii) the Liberty Media Group;
provided, however, that (subject to the preceding clauses (i) and (ii)) the term
"own" as used in this Section 3.6 shall have the meaning given to such term in
Section 203 of the DGCL and the term "ownership" as used herein shall have a
correlative meaning.
3.7 Expenses. Except as otherwise may be provided in this Agreement, the
Inter-Group Supplement, the Fifth Tax Sharing Amendment, the Parent Charter or
any document referred to herein or therein or executed in connection herewith or
therewith to which the Company, Liberty Media or any of their respective
Subsidiaries or Affiliates is a party, whether or not the Merger is consummated,
all costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such cost
or expense, except that the costs and expenses incurred in connection with
printing and mailing the Proxy Statement, the Registration Statement (and any
amendment or supplement thereto) and any prospectus included in the Registration
Statement (and any amendment or supplement thereto) and the costs of filing
under the Hart-Scott Act shall be borne one-half by Liberty Media and one-half
by the Company. The filing fee payable to the Commission in connection with the
filing of the Registration Statement shall be paid by Liberty Media.
Notwithstanding the foregoing, if this Agreement is terminated by a party (the
"non-breaching party") as a result of a material willful breach by the other
party (the "breaching party") of its covenants or agreements contained herein or
the representations and warranties made by it herein, the breaching party shall
reimburse the non-breaching party for all reasonably documented out-of-pocket
costs and expenses incurred in connection with the transactions contemplated by
this Agreement.
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ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby makes the following representations and warranties to
Parent and Liberty Media, in each case except as otherwise set forth in the
appropriate section of the Company Disclosure Schedule dated as of the date of
this Agreement and delivered to each of Parent and Liberty Media:
4.1 Corporate Organization.
(a) The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. Attached hereto as
Exhibit 4.1(a)(i) and Exhibit 4.1(a)(ii), respectively, are true and complete
copies of the Certificate of Incorporation and Bylaws of the Company, as amended
through the date hereof (together, the "Organizational Documents").
(b) The Company has all requisite power and authority and has all necessary
approvals, licenses, permits and authorization to own, operate or lease its
properties and to carry on its business as now conducted. The Company has all
requisite power and authority to execute and deliver the Company Transaction
Documents and to perform its obligations thereunder.
(c) The Company has filed all necessary documents to qualify to do business
as a foreign corporation in, and the Company is in good standing under the laws
of, each jurisdiction in which the conduct of the Company's business or the
nature of the properties owned or leased by the Company requires such
qualification, except where the failure to so qualify or be in good standing
would not reasonably be expected to have a Material Adverse Effect.
4.2 Subsidiaries.
(a) Section 4.2 of the Company Disclosure Schedule sets forth (i) the name
of each Subsidiary of the Company; (ii) the name of each corporation,
partnership, joint venture or other entity (other than such Subsidiaries) in
which the Company or any of its Subsidiaries has, or pursuant to any agreement
has the right or obligation to acquire at any time by any means, directly or
indirectly, an equity interest or investment; (iii) in the case of each of such
corporations described in clauses (i) and (ii) above, (A) the jurisdiction of
incorporation, (B) the percentage of each class of voting capital stock owned by
the Company or any of its Subsidiaries, (C) a description of any contractual
limitations on the holder's ability to vote or alienate such securities, (D) a
description of any outstanding options or other rights to acquire securities of
such corporation, and (E) a description of any other contractual charge or
impediment which would limit or impair the Company's or any of its Subsidiaries'
ownership of such entity or interest or its ability effectively to exercise the
full rights of ownership of such entity or interest; and (iv) in the case of
each of such unincorporated entities, information substantially equivalent to
that provided pursuant to clause (iii) above with regard to corporate entities.
(b) Each Subsidiary of the Company listed in Section 4.2 of the Company
Disclosure Schedule has been duly organized, is validly existing and in good
standing under the laws of the jurisdiction of its organization, has the
corporate power and authority to own and lease its properties and to conduct its
business and is duly registered, qualified and authorized to transact business
and is in good standing in each jurisdiction in which the conduct of its
business or the nature of its properties requires such registration,
qualification or authorization, except where the failure to be so registered,
qualified, authorized or in good standing would not reasonably be expected to
have a Material Adverse Effect. All of the issued and outstanding equity or
other participating interests of each Subsidiary have been duly authorized and
validly issued, are fully paid and non-assessable, and, to the extent owned by
the Company as indicated on Section 4.2 of the Company Disclosure Schedule, are
owned free and clear of any Lien, Restriction or equity, except as set forth in
Section 4.2 of the Company Disclosure Schedule. Except as set forth on Section
4.2 of the Company Disclosure Schedule, there are no outstanding options,
warrants, agreements, conversion rights, preemptive rights or other rights to
subscribe for, purchase or otherwise acquire any issued or unissued shares of
capital stock of any Subsidiary.
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4.3 Capitalization.
(a) The authorized capital stock of the Company consists of 50,000,000
shares of Company Common Stock and 5,000,000 shares of preferred stock, par
value $.01 per share ("Company Preferred Stock"), of which 150,000 shares of
Company Preferred Stock have been designated as Series A Preferred Stock. As of
the close of business on the date one business day prior to the date hereof, (i)
19,693,629 shares of Company Common Stock were issued and outstanding, (ii) no
shares of Company Common Stock were held in the treasury of the Company, (iii)
no shares of Series A Preferred Stock were issued and outstanding, (iv) no other
shares of Company Preferred Stock were issued or outstanding, (v) 7,088,823
shares of Company Common Stock were reserved for issuance under the Company's
employee stock option plans and the option agreements listed in Section 4.3(a)
of the Company Disclosure Schedule in the amounts stated in such section and
(vi) there were no bonds, debentures, notes or other evidences of indebtedness
issued or outstanding having the right to vote on any matters on which the
Company's stockholders may vote ("Voting Debt").
(b) All the outstanding shares of capital stock of the Company have been
duly authorized and validly issued and are fully paid and non-assessable free of
all preemptive or similar rights and were issued in accordance with the
registration or qualification requirements of the Securities Act and any
relevant state securities laws or pursuant to valid exemptions therefrom.
(c) Except for the Warrants and the Company Stock Options, which are listed
on Sections 2.3(b)(i)(A) and 2.3(b)(i)(B) of the Company Disclosure Schedule,
there are no warrants, options, subscriptions, calls, rights, commitments,
convertible securities or any other agreements of any character to or by which
the Company or any of its Subsidiaries is a party or is bound which, directly or
indirectly, obligate the Company or any of its Subsidiaries to issue, deliver or
sell or cause to be issued, delivered or sold any additional shares of Company
Common Stock, Company Preferred Stock or any other capital stock, equity
interest or Voting Debt of the Company or any Subsidiary of the Company, any
securities convertible into, or exercisable or exchangeable for, or evidencing
the right to subscribe for any such shares, interests or Voting Debt, or any
phantom shares, phantom equity interests or stock or equity appreciation rights,
or obligating the Company or any of its Subsidiaries to grant, extend or enter
into any such subscription, option, warrant, call or right (collectively,
"Convertible Securities"). Neither the Company nor any Subsidiary thereof is
subject to any obligation (contingent or otherwise) to repurchase or otherwise
acquire or retire any shares of its capital stock.
(d) Except as disclosed in Section 4.3(d) of the Company Disclosure
Schedule, there are not, and immediately after the Effective Time, there will
not be, any outstanding or authorized subscriptions, options, warrants, calls,
rights, commitments or other agreements of any character to or by which the
Company or any of its Subsidiaries is a party or is bound that, directly or
indirectly, (i) call for or relate to the sale, pledge, transfer or other
disposition by the Company or any Subsidiary of the Company of any shares of
capital stock, any partnership or other equity interests or any Voting Debt of
any Subsidiary of the Company, or (ii) relate to the voting or control of such
capital stock, partnership or other equity interests or Voting Debt.
(e)(i) no stockholder of the Company is entitled to any preemptive or
similar rights to subscribe for shares of capital stock of the Company, (ii) the
Company has not agreed to register any of its securities under the Securities
Act (other than pursuant to the registration rights agreement listed in Section
4.3(e) of the Company Disclosure Schedule) and (iii) there are no existing
voting trusts or similar agreements to which the Company or any of its
Subsidiaries is a party with respect to the voting of the capital stock of the
Company or any of its Subsidiaries.
(f) No party (except the Company) to the registration rights agreements
listed in Section 4.3(e) of the Company Disclosure Schedule (excluding those
registration rights agreements that are mentioned in Section 8.2(g) hereof) is
an "affiliate" of the Company for purposes of Rule 145 under the Securities Act.
4.4 Corporate Proceedings, etc. The Company has full corporate power to
execute and deliver the Company Transaction Documents to which it is a party, to
perform its obligations hereunder and, subject
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to obtaining the approval of its stockholders specified in Section 3.1, to
consummate the transactions contemplated hereby. The execution, delivery and
performance by the Company of this Agreement and the consummation by the Company
of the transactions contemplated hereby (including, without limitation, the
Merger) have been duly and validly authorized by all necessary corporate action
on the part of the Company, subject, in the case of the consummation by it of
the Merger, to the approval of the Company's stockholders specified in the
previous sentence. This Agreement has been duly executed and delivered by the
Company and is a legal, valid and binding obligation of the Company enforceable
in accordance with its terms (except that insofar as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting creditors' rights generally, or by principles
governing the availability of equitable remedies).
4.5 Consents and Approvals. The execution and delivery by the Company of
this Agreement do not, and the performance by the Company of its obligations
hereunder and the consummation by the Company of the Merger and the transactions
contemplated hereby will not, require any Governmental Consent or any
Governmental Filing, in each case on the part of or with respect to the Company
or any Subsidiary of the Company, except for (i) the approval of the Company's
stockholders specified in Section 3.1, (ii) the filing of the Certificate of
Merger with the Delaware Secretary of State and appropriate documents with the
relevant authorities of other states in which the Company is qualified to do
business, (iii) the Governmental Consents and Governmental Filings with foreign,
state and local governmental authorities set forth in Section 4.5 of the Company
Disclosure Schedule (the "Local Approvals"), (iv) such Governmental Consents and
Governmental Filings as may be required in connection with the issuance of the
Merger Consideration as contemplated hereby pursuant to state securities and
blue sky laws, (v) the Governmental Filings required to be made pursuant to the
pre-merger notification requirements of the Hart-Scott Act, (vi) the filing with
the Commission of (A) the preliminary proxy statement and the definitive Proxy
Statement as contemplated by Section 3.2(a) and (B) such reports under Section
13(a), 13(d), 15(d) or 1(a) of the Exchange Act as may be required in connection
with this Agreement, the Voting Agreements or the transactions contemplated
hereby or thereby, (vii) such other Governmental Consents and Governmental
Filings the absence or omission of which will not, either individually or in the
aggregate, have a Material Adverse Effect and (viii) the Governmental Consent of
the Federal Communications Commission (the "FCC"), as specified in Section 4.15.
4.6 Absence of Defaults, Conflicts, etc.
(a) Except as set forth in Section 4.6 of the Company Disclosure Schedule,
and assuming the consents and approvals referred to in Section 4.5 above and
Section 4.5 of the Company Disclosure Schedule are obtained, the execution and
delivery by the Company of this Agreement do not, and the consummation of the
Merger and the fulfillment of the terms hereof, will not, (i) result in a breach
of any of the terms, conditions or provisions of, or constitute a default under,
or permit the acceleration of rights under or termination, cancellation,
suspension or modification of or result in any increase in any payment required
by, or cause the impairment, loss or forfeiture of any material benefit, right
or privilege under, or create a Lien or other encumbrance on any assets pursuant
to (any such conflict, violation, breach, default, right of termination,
cancellation or acceleration, loss or creation, a "Violation") or (ii) require,
on the part of the Company or any Subsidiary of the Company, to obtain any
consent by or approval or authorization of (a "Contract Consent") or notice to
(a "Contract Notice") any other Person (other than a Governmental Entity),
under:
(1) any indenture, mortgage, deed of trust, credit agreement, note,
bond or other evidence of indebtedness, lease, franchise, permit,
authorization, license, contract, instrument, employee benefit plan or
practice, or other agreement, obligation, commitment or concession of any
nature to which the Company or any Subsidiary is a party, by which the
Company, any Subsidiary of the Company or any of their respective assets or
properties is bound or affected or pursuant to which the Company or any
Subsidiary of the Company is entitled to any rights or benefits (including
the Licenses) (collectively, "Contracts"), except for such Violations that
would not, individually or in the aggregate, be reasonably likely to have a
Material Adverse Effect;
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(2) assuming the approval of the Merger Proposal by the Company's
stockholders as contemplated by Section 3.1, the Organizational Documents,
or
(3) any order, judgment, law, rule or regulation of any Governmental
Entity having jurisdiction over the Company or any of its Subsidiaries or
over their respective properties or businesses, other than, in the case of
clause (A) above, any such breaches, defaults, accelerations or
terminations that would not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect.
(b) No event has occurred and no condition exists that, upon notice or the
passage of time (or both), would constitute a Violation under any of the items
listed in clauses (1), (2) or (3) of Section 4.6(a) above, other than any such
Violations that would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
4.7 Reports.
(a) The Company has made available to Parent and Liberty Media true and
complete copies (including all amendments thereof) of its (i) Annual Reports on
Form 10-K for all fiscal years since January 1, 1994 as filed with the
Commission, (ii) Quarterly Reports on Form 10-Q for all quarters since January
1, 1994, as filed with the Commission, (iii) proxy statements related to all
meetings of its stockholders (whether annual or special) held since January 1,
1994 and (iv) all other reports filed with, or registration statements declared
effective by, the Commission since January 1, 1994, which are all the documents
(other than preliminary material) that the Company filed or was required to file
with the Commission from that date through the date hereof (clauses (i) through
(iv) being referred to herein collectively as the "Company SEC Reports").
From the date hereof through the Closing Date, the Company will furnish to
Parent and Liberty Media copies of any reports and registration statements to be
filed with the Commission (the "Interim SEC Reports") within a reasonable amount
of time prior to filing thereof. As of their respective dates, the Company SEC
Reports (or the Interim SEC Reports, as the case may be) complied or will
comply, as the case may be, in all material respects with the requirements of
the Securities Act or the Exchange Act, as the case may be, and the rules and
regulations of the Commission thereunder applicable to such reports and
registration statements. As of their respective dates, the Company SEC Reports
(or the Interim SEC Reports, as the case may be) did not and will not, as the
case may be, contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were, or will be, made,
not misleading.
(b) The audited consolidated financial statements and unaudited interim
financial statements of the Company included in the Company SEC Reports (or to
be included in the Interim SEC Reports, as the case may be) comply as to form in
all material respects with applicable accounting requirements of the Securities
Act or the Exchange Act, as applicable, and with the published rules and
regulations of the Commission with respect thereto. The financial statements and
the condensed financial statements, as applicable, included in the Company SEC
Reports (or to be included in the Interim SEC Reports, as the case may be) (i)
have been prepared in accordance with GAAP applied on a consistent basis (except
as may be indicated therein or in the notes thereto), (ii) present fairly, in
all material respects, the financial position of the Company and its
Subsidiaries as of the dates thereof and the results of their operations and
cash flows for the periods then ended subject, in the case of the unaudited
interim financial statements, to normal year-end audit adjustments and any other
adjustments described therein and the fact that certain information and notes
have been condensed or omitted in accordance with the Exchange Act and the rules
and regulations promulgated thereunder, and (iii) are in all material respects
in agreement with the books and records of the Company and its Subsidiaries.
(c) The Company and its Subsidiaries keep proper accounting records in
which all material assets and liabilities, and all material transactions, of the
Company and its Subsidiaries are recorded in conformity with applicable
accounting principles. No part of the Company's or any of its Subsidiaries'
accounting system or records, or access thereto, is under the control of a
Person who is not an employee of
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the Company or such Subsidiary (other than the Company's independent auditors
and outside legal counsel).
4.8 Absence of Certain Developments. Except as disclosed in the Company
SEC Reports filed with the Commission prior to the date hereof or in Section 4.8
of the Company Disclosure Schedule, and except for the transactions contemplated
by this Agreement, since August 1, 1999 the Company and its Subsidiaries have
conducted their business only in the ordinary and usual course in accordance
with past practice, and:
(a) there have not occurred any events, changes or conditions
(including the incurrence of any liabilities of any nature, whether or not
accrued, contingent or otherwise) that have had, or are reasonably likely
in the future to have, individually or in the aggregate, a Material Adverse
Effect; and
(b) neither the Company nor any Subsidiary of the Company has taken
any action which would have been prohibited under Section 7.4 hereof.
4.9 Compliance with Law.
(a) Except as set forth in Section 4.9 of the Company Disclosure Schedule,
neither the Company nor any of its Subsidiaries is in violation of any laws,
ordinances, governmental rules or regulations to which it is subject, including,
without limitation, laws or regulations relating to the environment or to
occupational health and safety. No expenditures material to the Company and its
Subsidiaries taken as a whole are or will be required in order to cause the
current operations or properties of such entities to comply with any such laws,
ordinances, governmental rules or regulations and except as set forth in Section
4.9 of the Company Disclosure Schedule, neither the Company nor any of its
Subsidiaries has received notice of violation of any law, ordinance,
governmental rule or regulation and except as set forth in Section 4.9 of the
Company Disclosure Schedule, no investigation or review by any Governmental
Entity with respect to the Company or any of its Subsidiaries is pending or, to
the best of the Company's knowledge, threatened, nor has any Governmental Entity
indicated an intention to conduct the same.
(b) Neither the Company or any of its Subsidiaries nor, to the Company's
knowledge, any of the officers, directors, employees, agents or other
representatives of the Company or any of its Subsidiaries or any other business
entity or enterprise with which the Company or any Subsidiary is or has been
affiliated or associated, has, directly or indirectly, made or authorized any
payment, contribution or gift of money, property, or services, whether or not in
contravention of applicable law, (i) as a kickback or bribe to any Person or
(ii) to any political organization, or the holder of or any aspirant to any
elective or appointive public office except for personal political contributions
not involving the direct or indirect use of funds of the Company or any of its
Subsidiaries.
(c) The Company and its Subsidiaries have, and Section 4.9 of the Company
Disclosure Schedule lists, all licenses, permits, rights of way, easements,
franchises, ordinances, certificates, variances, exemptions, concessions,
leases, instruments, orders and approvals, governmental authorizations, domestic
or foreign, necessary to the ownership of their property or to the conduct of
their respective businesses, which if violated or not obtained might have a
Material Adverse Effect (collectively, the "Licenses"). Neither the Company nor
any Subsidiary has finally been denied any application for any such Licenses.
Without limiting the generality of the foregoing, the Company and its
Subsidiaries, (i) have all Licenses from Governmental Entities required for the
operation of the facilities being operated on the date hereof by the Company or
any of its Subsidiaries, (ii) have duly and currently filed all reports and
other information required to be filed by any other Governmental Entity in
connection with such Licenses and (iii) are not in violation of any of such
Licenses, other than the lack of Licenses, delays in filing reports or possible
violations which have not had and, insofar as can reasonably be foreseen by the
Company, in the future are not reasonably likely to have, a Material Adverse
Effect.
(d) The Company and its Subsidiaries have not made any misstatements of
fact, or omitted to disclose any fact, to any Governmental Entity, 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 Licenses
held by the Company to revocation or failure to renew, except where such
revocation or failure to
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renew, individually or in the aggregate, does not and would not be reasonably
likely to have a Material Adverse Effect.
4.10 Litigation. Except as disclosed in the Company SEC Reports or in
Section 4.10 of the Company Disclosure Schedule, there is no legal action, suit,
arbitration or other legal, administrative or other governmental investigation,
inquiry or proceeding (whether federal, state, local or foreign) pending or, to
the best of the Company's knowledge, threatened against or affecting the Company
or any Subsidiary or any of their respective properties, assets or businesses
which, either alone or in the aggregate, would reasonably be expected to have a
Material Adverse Effect or prevent or delay the consummation of the transactions
contemplated by this Agreement. To the best of the Company's knowledge, there
are no facts which might result in or form the basis for any such action, suit,
arbitration, investigation, inquiry or other proceeding. Except as set forth on
Section 4.10 of the Company Disclosure Schedule, neither the Company nor any
Subsidiary is subject to any order, writ, judgment, Injunction, decree,
determination or award of any Governmental Entity.
4.11 Material Contracts. Neither the Company nor any of its Subsidiaries
is in default (or would be in default with notice or lapse of time, or both)
under, is in violation (or would be in violation with notice or lapse of time,
or both) of, or has otherwise breached, any indenture, note, credit agreement,
loan document, lease, license or other agreement, including, without limitation,
any Material Contract (as defined below), whether or not such default has been
waived, which default, alone or in the aggregate with all other such defaults,
would reasonably be expected to have a Material Adverse Effect. Section 4.11 of
the Company Disclosure Schedule contains a complete and correct list as of the
date hereof of each agreement, contract and commitment of the following types,
written or oral, to which the Company or any of its Subsidiaries is a party or
by which they or any of their assets are bound, including: (a) mortgages,
indentures, security agreements, guarantees, pledges and other agreements and
instruments relating to the borrowing of money or extension of credit; (b)
employment, severance and consulting agreements (other than any such agreements
that are terminable without liability or penalty on 30 days' or less notice);
(c) licenses of patent, trademark and other rights relating to any Intellectual
Property (as defined below) (other than licenses relating to commercially
available software) and any other licenses, permits and authorizations relating
to the businesses of the Company and its Subsidiaries (whether as licensor or
licensee) that involve by their terms a per annum payment in excess of $100,000
or resulted in a payment obligation in excess of $100,000 in the fiscal year
ended August 1, 1999; and (d) joint venture or partnership contracts or
agreements ((a) through (d) collectively, "Material Contracts"). Prior to the
date hereof, the Company has delivered to Parent and Liberty Media or their
representatives complete and correct copies of all written Material Contracts
together will all amendments thereto, and accurate descriptions of all
non-written Material Contracts. Each Material Contract is in full force and
effect and is binding upon the Company or one of its Subsidiaries, as the case
may be, and, to the best of the Company's knowledge, is binding upon such other
parties, in each case in accordance with its terms. Except as disclosed in
Section 4.11 of the Company Disclosure Schedule, there are no material
unresolved disputes involving the Company or any of its Subsidiaries under any
Material Contract.
4.12 Absence of Undisclosed Liabilities.
(a) Except as disclosed in Section 4.12 of the Company Disclosure Schedule
and except for Indebtedness, obligations or liabilities that are reflected or
reserved against as set forth in the Company SEC Reports (including the notes to
the financial statements included therein), neither the Company nor any of its
Subsidiaries has any debt, obligation or liability (whether accrued, absolute,
contingent, liquidated or otherwise, whether due or to become due and whether or
not known to the Company) arising out of any transaction entered into at or
prior to the Effective Time, or any act or omission at or prior to the Effective
Time, or any state of facts existing at or prior to the Effective Time, except
(a) for debts, obligations or liabilities incurred in the ordinary course of
business since August 1, 1999, none of which (individually or in the aggregate)
would reasonably be expected to have a Material Adverse Effect and (b) for
liabilities and obligations arising under this Agreement.
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(b) Except as disclosed in Section 4.12 of the Company Disclosure Schedule
and except for liabilities that are reflected or reserved against in the most
recent financial statements included in the Company SEC Reports, neither the
Company nor any of its Subsidiaries has any tax liability with respect to or
based upon any transactions or events occurring at or prior to the Effective
Time, including, without limitation, unfunded past service liabilities under any
pension, profit sharing or similar plan.
4.13 Labor Relations and Employment.
(a) Except as set forth in Section 4.13(a) of the Company Disclosure
Schedule, (i) there is no labor strike, dispute, slowdown, stoppage or lockout
actually pending, or, to the best of the Company's knowledge, threatened against
the Company or any of its Subsidiaries, and during the past three years there
has not been any such action; (ii) to the best of the Company's knowledge, there
are no union claims to represent the employees of the Company or any of its
Subsidiaries; (iii) neither the Company nor any of its Subsidiaries is a party
to or bound by any collective bargaining or similar agreement with any labor
organization, or work rules or practices agreed to with any labor organization
or employee association applicable to employees of the Company or any of its
Subsidiaries; (iv) none of the employees of the Company or any of its
Subsidiaries is represented by any labor organization and the Company does not
have any knowledge of any current union organizing activities among the
employees of the Company or any of its Subsidiaries, nor does any question
concerning representation exist concerning such employees; (v) the Company and
its Subsidiaries are, and have at all times been, in compliance with all
applicable laws respecting employment and employment practices, terms and
conditions of employment, wages, hours of work, occupational safety and health,
equal opportunity, collective bargaining and payment of social security and
other taxes, and are not engaged in any discriminatory employment practices or
unfair labor practices as defined in the National Labor Relations Act or other
applicable law, ordinance or regulation; (vi) there is no unfair labor practice
charge or complaint against the Company or any of its Subsidiaries pending or,
to the best of the Company's knowledge, threatened before the National Labor
Relations Board or any similar state or foreign agency; (vii) there is no
grievance filed, or to the best of the Company's knowledge, threatened to be
filed, against the Company or any of its Subsidiaries arising out of any
collective bargaining agreement or employment agreement or other grievance
procedure; (viii) no charges with respect to or relating to the Company or any
of its Subsidiaries are pending before the Equal Employment Opportunity
Commission or any other agency responsible for the prevention of unlawful
employment practices; (ix) neither the Company nor any of its Subsidiaries has
received notice of the intent of any federal, state, local or foreign agency
responsible for the enforcement of labor or employment laws to conduct an
investigation with respect to or relating to the Company or any of its
Subsidiaries and no such investigation is in progress; (x) there are no
complaints, lawsuits or other proceedings pending or, to the best of the
Company's knowledge, threatened in any forum by or on behalf of any present or
former employee of the Company or any of its Subsidiaries alleging breach of any
express or implied contract of employment, any law or regulation governing
employment or the termination thereof or other discriminatory, wrongful or
tortious conduct in connection with the employment relationship; and (xi) there
has been no "mass layoff" or "plant closing" as defined by the Worker Adjustment
and Retraining Notification Act or any similar state or local "plant closing"
law with respect to the current or former employees of the Company and its
Subsidiaries.
(b) The Company is not aware that any officer or key employee, or that any
group of key employees, intends to terminate their employment with the Company
or any of its Subsidiaries, nor does the Company have a present intention to
terminate the employment of any of the foregoing.
4.14 Employee Benefit Plans.
(a) Section 4.14(a) of the Company Disclosure Schedule sets forth: (i) all
"employee benefit plans", as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), and all other material
employee benefit arrangements (including any trusts maintained for such
arrangements), including, without limitation, any such arrangements providing
severance pay, sick leave, vacation pay, salary continuation for disability,
retirement benefits, deferred compensation, bonus pay, incentive pay, stock
options, hospitalization insurance, medical insurance, life insurance,
scholarships
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or tuition reimbursements, maintained by the Company or any of its Subsidiaries
or to which the Company or any of its Subsidiaries is obligated to contribute
thereunder for current or former employees of the Company and its Subsidiaries
(the "Company Plans"), and (ii) all "employee pension benefit plans", as defined
in Section 3(2) of ERISA, maintained by the Company or any trade or business
(whether or not incorporated) which is or has ever been under control or treated
as a single employer ("ERISA Affiliate") with the Company under Section 414(b)
or (c), of the Internal Revenue Code of 1986, as amended (the "Code") or to
which the Company or any ERISA Affiliate has contributed or been obligated to
contribute thereunder during the last six years (the "Pension Plans").
(b) Except as set forth in Section 4.14(a) of the Company Disclosure
Schedule, none of the Company Plans or Pension Plans is a multiemployer plan, as
defined in Section 3(37) of ERISA ("Multiemployer Plan"), and neither the
Company nor any ERISA Affiliate has completely or partially withdrawn from any
Multiemployer Plan with respect to which the Company or any ERISA Affiliate has
any unsatisfied withdrawal liability, nor has any of them incurred any
unsatisfied liability due to the termination or reorganization of a
Multiemployer Plan; and with respect to each Pension Plan that is a
Multiemployer Plan: (i) none of the Company, any of its Subsidiaries nor any
ERISA Affiliate would be subject to any withdrawal liability under Part I of
Subtitle E of Title IV of ERISA if, as of the close of the most recent fiscal
year of any such plan, the Company or any of its subsidiaries or any of their
respective ERISA Affiliates were to experience a complete withdrawal from such
plan; (ii) to the Company's knowledge, none of the Company, any of its
Subsidiaries, nor any of their respective ERISA Affiliates has received any
notification, nor has any reason to believe, that such Multiemployer Plan is in
reorganization, has been terminated, is insolvent, or may reasonably be expected
to be in reorganization, to be insolvent, or to be terminated; and (iii) the
Company and its ERISA Affiliates have made all contributions to such
Multiemployer Plan that they are required to make under the terms of such plan
or under any applicable law or contract, except in the case of clauses (i), (ii)
and (iii), which would not reasonably be expected to have a Material Adverse
Effect.
(c) Each Pension Plan (other than a Multiemployer Plan) that is intended to
qualify under Section 401 of the Code and is the subject of a favorable
determination letter from the Internal Revenue Service to the effect that such
Pension Plan is qualified and exempt from Federal income taxes under Sections
401(a) and 501(a) of the Code, and nothing has occurred with respect to the
operation of any such Pension Plan that could cause the loss of such
qualification or exemption or the imposition of any liability, penalty or tax
under ERISA or the Code.
(d) All contributions (including all employer contributions and employee
salary reduction contributions) required to have been made under any of the
Company Plans or Pension Plans (other than any Multiemployer Plan) or by law
(without regard to any waivers granted under Section 412 of the Code) to any
funds or trusts established thereunder or in connection therewith have been made
by the due date thereof (including any valid extension), and all contributions
for any period ending on or before the Effective Time which are not yet due will
have been paid or accrued on or prior to the Effective Time. No accumulated
funding deficiencies exist in any of the Pension Plans (other than any
Multiemployer Plan) subject to Section 412 of the Code.
(e) There is no "amount of unfunded benefit liabilities" within the meaning
of Section 4001(a)(18) of ERISA in any of the Pension Plans (other than any
Multiemployer Plan) which are subject to Title IV of ERISA. Each of the Pension
Plans (other than any Multiemployer Plan) are fully funded in accordance with
the actuarial assumptions used by the Pension Benefit Guaranty Corporation
("PBGC") to determine the level of funding required in the event of the
termination of the Pension Plans.
(f) Neither the Company nor any ERISA Affiliate has terminated any Pension
Plan (other than a Multiemployer Plan) subject to Title IV of ERISA with respect
to which it has incurred any material outstanding liability, or incurred any
material outstanding liability under Section 4062 of ERISA to the PBGC or to a
trustee appointed under Section 4042 of ERISA. All premiums due the PBGC with
respect to the Pension Plans (other than any Multiemployer Plan) have been paid.
Neither the Company nor any ERISA Affiliate has engaged in any transaction
described in Section 4069 of ERISA.
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(g) There has been no "reportable event" within the meaning of Section 4043
of ERISA with respect to any Pension Plans (other than any Multiemployer Plan)
subject to Title IV of ERISA which would require the giving of notice or any
other event requiring disclosure under Section 4041(c)(3)(C) or 4063(a) of
ERISA.
(h) There has been no violation of ERISA or the Code with respect to the
filing of applicable reports, documents and notices regarding the Company Plans
(other than any Multiemployer Plan) with the Secretary of Labor or the Secretary
of the Treasury or the furnishing of required reports, documents or notices to
the participants or beneficiaries of such Company Plans which could result in a
material liability to the Company.
(i) True, correct and complete copies of the following documents, with
respect to each of the Company Plans and Pension Plans (other than any
Multiemployer Plan), have been delivered to Parent and Liberty Media by the
Company or are publicly available: (i) all plans and related trust documents,
and amendments thereto; (ii) the most recent Forms 5500; (iii) the last IRS
determination letter; (iv) summary plan descriptions; (v) the most recent
actuarial report relating to such Company Plans and Pension Plans; and (vi)
written descriptions of all non-written agreements relating to such Company
Plans.
(j) There are no pending actions, claims or lawsuits which have been
asserted or instituted against the Company Plans (other than any Multiemployer
Plan), the assets of any of the trusts under such plans or the plan sponsor or
the plan administrator, or against any fiduciary of such Company Plans with
respect to the operation of such plans (other than routine benefit claims), nor
does the Company have knowledge of facts which could form the basis for any such
claim or lawsuit.
(k) All amendments and actions required to bring the Company Plans and
Pension Plans (other than any Multiemployer Plan) into conformity in all
material respects with all of the applicable provisions of ERISA, the Code and
other applicable laws have been made or taken except to the extent that such
amendments or actions are not required by law to be made or taken until a date
after the Effective Time.
(l) The Company Plans (other than any Multiemployer Plan) have been
maintained, in all material respects, in accordance with their terms and with
all provisions of ERISA and the Code (including rules and regulations
thereunder) and other applicable federal and state laws and regulations, and
neither the Company, any of its Subsidiaries, nor, to the best of the Company's
knowledge, any "party in interest" or "disqualified person" with respect to such
Company Plans has engaged in a "prohibited transaction" within the meaning of
Section 406 of ERISA or 4975 of the Code. No fiduciary has any liability for
breach of fiduciary duty or any other failure to act or comply in connection
with the administration or investment of the assets of any such Company Plan.
(m) None of the Company Plans (other than any Multiemployer Plan) provides
retiree life or retiree health benefits except as may be required under Section
4980B of the Code or Section 601 of ERISA or applicable state law and at the
expense of the participant or the participant's beneficiary. The Company and the
ERISA Affiliates have at all times complied with the notice and health care
continuation requirements of Section 4980B of the Code and Sections 601 through
608 of ERISA.
(n) Except as set forth in Section 4.14(n) of the Company Disclosure
Schedule, none of the execution and delivery of this Agreement, the consummation
of the transactions contemplated hereby or any other transactions involving the
Company, Parent, Merger Sub, Liberty Media and/or any of the Company's
stockholders will (i) result in any payment becoming due to any employee
(current, former or retired) of the Company or any of its Subsidiaries, (ii)
increase any benefits otherwise payable under any Company Plan (other than any
Multiemployer Plan), (iii) result in the acceleration of the time of payment or
vesting of any benefits under any such Company Plan, (iv) qualify as a "change
of control" or similar event under any such Company Plan or (v) result in any
payment becoming due to any employee that may be nondeductible under Section
162(m) or Section 280G of the Code.
(o) Except as set forth in Section 4.14(o) of the Company Disclosure
Schedule, no stock or other security issued by the Company or any Affiliate
forms or has formed a material part of the assets of any Company Plan or Pension
Plan (other than any Multiemployer Plan).
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4.15 FCC Matters.
(a) A complete and accurate list of the licenses and authorizations issued
by the FCC and held by the Company, Catalina or any Subsidiary of the Company
(the "FCC Licenses") is set forth in Section 4.15 of the Company Disclosure
Schedule. The FCC Licenses are in full force and effect and unimpaired by any
condition that could have a Material Adverse Effect. No application, complaint,
action or proceeding is pending or, to the best of the Company's knowledge,
threatened, that may result in the revocation, modification, non-renewal or
suspension of any FCC License or the imposition of any administrative or
judicial sanction with respect to any FCC License. Neither the Company nor any
other Subsidiary of the Company has knowledge of any failure by the Company or
any of its Subsidiaries to comply in all material respects with the terms and
conditions of the FCC Licenses, and all applicable rules, regulations and
policies of the FCC and requirements of the Communications Act of 1934, as
amended.
(b) The equipment which is operated pursuant to the FCC Licenses is
operated in all material respects in compliance with the rules, regulations and
policies of the FCC and requirements of the Communications Act of 1934, as
amended.
(c) Neither the Company nor any other Subsidiary of the Company is aware of
any facts or circumstances that are likely to prevent or delay prompt approval
by the FCC of the transactions contemplated by this Agreement.
4.16 Real Property.
(a) Section 4.16(a) of the Company Disclosure Schedule contains a complete
and accurate list of all real property owned in whole or in part, directly or
indirectly, by the Company or its Subsidiaries (the "Owned Real Property"). The
Company has good and marketable title in fee simple to all of the Owned Real
Property, free and clear of all liens, encumbrances, charges, mortgages,
judgments and hypothecations, whether recorded or unrecorded. None of the Owned
Real Property is subject to any right or option of any other Person to purchase
or lease or otherwise obtain title to or an interest in such real property. No
Person other than the Company or any of its Subsidiaries has any right to use,
occupy or lease any of the Owned Real Property or Leased Real Property (as
defined in subsection (b) of this Section 4.16). Section 4.16(a) of the Company
Disclosure Schedule contains an accurate and complete list of all Owned Real
Property leased in whole or in part by the Company as landlord. True and
complete copies of all leases including all modification and amendments thereto
listed in Section 4.16(a) of the Company Disclosure Schedule have been delivered
to Parent and Liberty Media. All of the buildings, improvements, structures and
appurtenances situated on the Owned Real Property are owned by the Company or
one if its Subsidiaries and are in all material respects in good operating
condition, normal wear and tear excepted. Except as set forth in Section 4.16(a)
of the Company Disclosure Schedule, no condemnation proceeding or similar
proceeding is pending or, to the best of the Company's knowledge, threatened
that would preclude or impair the use of any such property or any improvement
thereon by the Company or any of its Subsidiaries for the purpose for which it
is currently used. There is no material latent or patent structural, mechanical
or other significant defect, soil condition or deficiency in any of the
improvements located on any of the Owned Real Property or, to the best of the
Company's knowledge, the Leased Real Property.
(b) Section 4.16(b) of the Company Disclosure Schedule lists all real
property leased by the Company or its Subsidiaries as well as the commencement
and expiration dates of all leases relating thereto (the "Leased Real
Property"). True and complete copies of all leases listed in Section 4.16(b) of
the Company Disclosure Schedule have been delivered to Parent and Liberty Media.
The Company or one of its Subsidiaries has a valid and existing lease or
sublease for each property subsumed within the Leased Real Property. All leases
covering any of the Leased Real Property are valid and enforceable by the
Company or one of its Subsidiaries, as the case may be, in accordance with their
respective terms, are in full force and effect, and have not been modified,
supplemented or terminated except as set forth in Section 4.16(b) of the Company
Disclosure Schedule, and there is not under any such lease any default by the
Company or one of its Subsidiaries or, to the best of the Company's knowledge,
by any landlord or
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lessor under any such lease. All third party consents required in respect of the
Owned Real Property or Leased Real Property in order to consummate the
transactions contemplated by this Agreement each of which are set forth in
Section 4.16(b) of the Company Disclosure Schedule, have been or will be
obtained by the Closing Date. The facilities and real properties covered by the
Leased Real Property and included in the Owned Real Property constitute all of
the facilities and real properties presently used by the Company or its
Subsidiaries.
(c) Except as set forth in Section 4.16(c) of the Company Disclosure
Schedule, any increase in real property taxes due to the acquisition of Owned
Real Property by the Company is reflected in the most recent financial
statements included in the Company SEC Reports. Section 4.16(c) of the Company
Disclosure Schedule accurately states the assessed values for purposes of
California property taxes of the Owned Real Property.
4.17 Condition of Properties. Except as would not reasonably be expected
to have a Material Adverse Effect, all facilities, machinery, equipment,
fixtures, vehicles and other properties owned, leased or used by the Company and
its Subsidiaries are in good operating condition and repair, are reasonably fit
and usable for the purposes for which they are being used, are adequate and
sufficient for the Company's or such Subsidiary's business and conform in all
material respects with all applicable ordinances, regulations and laws.
4.18 Environmental Matters.
(a) Except as set forth in Section 4.18 of the Company Disclosure
Schedule and except as would not reasonably be expected to have a Material
Adverse Effect:
(i) The Company and its Subsidiaries (i) are in substantial compliance
with all Environmental and Health Laws; (ii) have obtained all necessary
Environmental Permits, all of which are in full force and effect; and (iii)
are in substantial compliance with all terms and conditions of such
Environmental Permits.
(ii) Neither the Company nor any of its Subsidiaries has violated or
done any act which could give rise to liability under, or have otherwise
failed to act in a manner which would expose any of them to liability
under, any Environmental and Health Law.
(iii) No Hazardous Material has been released, spilled, discharged,
dumped, disposed of, or otherwise come to be located in, at, beneath or
near any of the Owned Real Property or Leased Real Property including
properties formerly owned, operated or otherwise controlled by the Company
or any of its Subsidiaries (during the period of the Company's or such
Subsidiaries' ownership, operation or control thereof) in such manner as
would reasonably be expected to result in environmental liability to the
Company or any of its Subsidiaries.
(iv) There have been and are no: (i) aboveground or underground
storage tanks; (ii) surface impoundments for Hazardous Materials; or (iii)
friable asbestos or asbestos-containing materials or polychlorinated
biphenyl ("PCB") or PCB-containing equipment, located within any portion of
the Owned Real Property or Leased Real Property.
(v) No Liens have been placed upon any Owned Real Property or Leased
Real Property in connection with any actual or alleged liability under any
Environmental and Health Law.
(vi) Neither the Company nor any of its Subsidiaries has received any
written notice, claim, demand, suit or request for information from any
Governmental Entity or private entity with respect to any liability or
alleged liability under any Environmental Law, nor has any entity
previously owned, operated, or otherwise controlled by the Company or its
Subsidiaries whose liability, in whole or in part, may be attributed to the
Company or any of its Subsidiaries, received any such notice, claim,
demand, suit or request for information; neither the Company nor any of its
Subsidiaries has ongoing negotiations with or agreements with any
Governmental Entity or other Person or entity relating to any Remedial
Action or other claim arising under or related to any Environmental and
Health Law.
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(vii) Neither the Company nor any of its Subsidiaries has disposed, or
arranged for the disposal, of any Hazardous Materials at any facility that
is or has ever been the subject of investigation or response action under
the Comprehensive Environmental Response, Compensation and Liability Act,
42 U.S.C. (S) 9601 et seq., Resource Conservation and Recovery Act, 42
U.S.C. (S) 6901 et seq., or any state law of similar effect.
(viii) The Company has provided to Parent and Liberty Media all
environmental studies and reports pertaining to the Owned Real Property or
Leased Real Property including properties formerly owned, operated or
otherwise controlled by the Company or any of its Subsidiaries and the
improvements thereon that they are aware of, have commissioned or have in
their possession. To the best of the Company's knowledge, such studies and
reports do not contain any inaccuracies resulting from, in whole or in
part, any material misrepresentation of the Company.
For purposes of this Agreement, the following terms shall have the
following meanings:
"Environmental and Health Laws" shall mean all applicable federal, state
and local environmental, health and safety laws, statutes, ordinances, rules and
regulations of any governmental or a quasi governmental authority of the United
States or Singapore (for the Singapore Leased Real Property only) relating to
(i) errors or omissions, (ii) discharges to surface water or ground water, (iii)
solid or liquid waste disposal, (iv) the use, storage, generation, handling,
transport, discharge, release or disposal of toxic or Hazardous Materials or
waste, (v) the emission of non-ionizing electromagnetic radiation or (vi) other
environmental, health or safety matters, including without limitation, all
matters set forth in the Comprehensive Environmental Response Compensation and
Liability Act of 1980 as amended by the Superfund Amendments and Authorization
Act of 1986; the Occupational Safety and Health Act; the Resource Conservation
Recovery Act of 1976; the Federal Water Pollution Control Act of 1970; the Safe
Drinking Water Act of 1974; the Toxic Substances Control Act of 1976; the
Emergency Planning Community Right to Know Act of 1986, as amended; and the
Clean Air Act, as amended.
"Environmental Permits" shall mean all permits, licenses, approvals,
authorizations, consents or registrations required under any applicable
Environmental and Health Law.
"Hazardous Materials" shall mean any chemicals, pollutants, contaminants,
wastes, toxic substances, hazardous substances, hazardous materials, hazardous
wastes, radioactive materials, petroleum or petroleum products.
"Remedial Action" shall mean any action required to: (i) clean up, remove
or treat Hazardous Materials; (ii) prevent a release or threat of release of any
Hazardous Material; (iii) perform pre-remedial studies, investigations or
post-remedial monitoring and care; or (iv) cure a violation of Environmental and
Health Law.
4.19 Intellectual Property.
(a) Section 4.19(a) of the Company Disclosure Schedule sets forth a
complete list of registrations/patents or applications therefor pertaining to
the Intellectual Property, the dates of application/issuance and the relevant
jurisdictions. Except as described on Sections 4.19(a), (b) or (c) of the
Company Disclosure Schedule, the Company or one of its Subsidiaries owns or, to
the best of the Company's knowledge, has the valid right to use, free and clear
of all liens and other encumbrances or claims of any nature, all of the
Intellectual Property necessary for the conduct of the business of the Company
or any of its Subsidiaries. Except as described on Schedule 4.19(a), (b) or (c),
all Intellectual Property listed on Section 4.19(a) of the Company Disclosure
Schedule is valid, subsisting, unexpired, and enforceable and all renewal fees
and other maintenance fees that have fallen due on or prior to the effective
date of this Agreement have been paid.
(b) Except as set forth in Section 4.19(b) of the Company Disclosure
Schedule, there is no claim, suit, action or proceeding pending or, to the best
of the Company's knowledge, threatened against the Company or one of its
Subsidiaries (and, to the best of the Company's knowledge, no grounds therefor):
(i) alleging that the Company's or any of the Company's Subsidiaries' respective
business or operations, as
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currently conducted, including, without limitation, the marketing, sale and
provision by the Company or any of its Subsidiaries of all products and services
marketed, sold or made conflict or infringe with any third party's proprietary
rights; or (ii) challenging the Company or one of its Subsidiaries' ownership or
use, or the validity or enforceability of any Intellectual Property that is
necessary for the conduct of the business of the Company or any of its
Subsidiaries. Except as set forth in Schedule 4.19(b) of the Company Disclosure
Schedule there is no claim, suit, action or proceeding pending or, to best of
the Company's knowledge, threatened by the Company or one of its Subsidiaries,
alleging any third party's intellectual property rights conflict or infringe the
Intellectual Property of the Company or one of its Subsidiaries.
(c) Section 4.19(c) of the Company Disclosure Schedule sets forth a
complete and accurate list of all:
(i) licenses, sublicenses and other agreements in which the Company or
one of its Subsidiaries grants rights to any Person to use the Intellectual
Property; and (ii) consents, indemnifications, forbearances to sue,
settlement agreements or cross-licensing arrangements relating to the
Intellectual Property or the intellectual property of any third party to
which the Company or one of its Subsidiaries is a party. Except as set
forth in Section 4.19(c) of the Company Disclosure Schedule, neither the
Company nor any of its Subsidiaries is under any obligation to pay
royalties or similar payments in connection with any license, nor will the
Company or any of its Subsidiaries be, as a result of the execution and
delivery of this Agreement or the performance of its obligations hereunder
in breach of any license, sublicense or other agreement relating to the
Intellectual Property.
(d) Except as set forth in Section 4.19(d) of the Company Disclosure
Schedule, no former or present employee, officer or director of the Company or
any of its Subsidiaries holds any right or title, directly or indirectly, in
whole or in part, in or to any Intellectual Property.
(e) The Company or one of its Subsidiaries owns or has the right to use all
computer software, software systems and databases and all other information
systems currently used in the business of the Company or any of its Subsidiaries
and necessary for the conduct of the business of the Company or any of its
Subsidiaries, including, without limitation, all such computer software used in
the business of the Company on personal computers by employees of the Company or
any of its Subsidiaries.
For purposes of this Agreement, "Intellectual Property" shall mean all of
the following, owned or used in the business of the Company or any of its
Subsidiaries: (i) trademarks and service marks (registered or unregistered),
trade dress, trade names and other names and slogans embodying business or
product goodwill or indications of origin, all applications or registrations in
any jurisdiction pertaining to the foregoing and all goodwill associated
therewith; (ii) patents, patentable inventions, discoveries, improvements,
ideas, know-how, formula methodology, processes, technology and computer
programs, software and databases (including source code, object code,
development documentation, programming tools, drawings, specifications and data)
and all applications or registrations in any jurisdiction pertaining to the
foregoing, including all reissues, continuations, divisions,
continuations-in-part, renewals or extensions thereof; (iii) trade secrets,
including confidential and other non-public information, and the right in any
jurisdiction to limit the use or disclosure thereof; (iv) copyrights in
writings, designs, mask works or other works, and applications or registrations
in any jurisdiction for the foregoing; (v) database rights; (vi) Internet Web
sites, domain names and registrations or applications for registration thereof;
(vii) licenses, immunities, covenants not to sue and the like relating to any of
the foregoing; (viii) books and records described or used in connection with any
of the foregoing; and (ix) claims or causes of action arising out of or related
to infringement or misappropriation of any of the foregoing.
4.20 Year 2000.
Except as set forth in Section 4.20 of the Company Disclosure Schedule or
in the Company SEC Reports, or as would not have, individually or in the
aggregate, a Material Adverse Effect:
(a) To the best of the Company's knowledge after the investigation or
inquiry described in the Company SEC Reports, none of the Computer
Software, computer firmware, computer hardware
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(whether general or special purpose) and other similar or related items of
automated, computerized and/or software system(s) that are used or relied
on by the Company or any of its Subsidiaries in the conduct of their
respective businesses will malfunction, cease to function, generate
incorrect data, or provide incorrect results when processing, providing,
and/or receiving (i) date-related data into and between the twentieth and
twenty-first centuries and (ii) date-related data in connection with any
valid date in the twentieth and twenty-first centuries.
(b) To the best of the Company's knowledge, none of the products and
services sold, licensed, rendered or otherwise provided by the Company or
any of its Subsidiaries in the conduct of their respective businesses will
malfunction, cease to function, generate incorrect data or produce
incorrect results when processing, providing and/or receiving (i)
date-related data in and between the twentieth and twenty-first centuries
and (ii) date-related data in connection with any valid date in the
twentieth and twenty-first centuries; and the Company and its Subsidiaries
are not and shall not be subject to liabilities arising from their failure
to do so.
For purposes of this Agreement, "Computer Software" shall mean any and all
items, products and systems used in the operation of the business of the Company
or its Subsidiaries, which incorporate the processing of dates or date-related
data (including, but not limited to, representing, calculating, comparing and
sequencing) and are operationally material to the business of the Company or its
Subsidiaries, including, but not limited to, computer systems, infrastructure
items, software applications, hardware, and related equipment and utilities
including, but not limited to (i) any and all computer programs and applications
consisting of sets of statements and instructions to be used directly or
indirectly in computer software or firmware whether in source code or object
code form, (ii) databases and compilations, including without limitation any and
all data and collections of data, whether machine readable or otherwise, (iii)
all versions of the foregoing including, without limitation, all screen displays
and designs thereof, and all component modules of source code or object code or
natural language code therefor, and whether recorded on paper, magnetic media or
other electronic or non-electronic device, (iv) all descriptions, flowcharts and
other work product used to design, plan, organize and develop any of the
foregoing, (v) all documentation including, without limitation, all technical
and user manuals and training materials relating to the foregoing, and (vi)
Internet domain names and content contained on all World Wide Web sites of the
Company or any of its Subsidiaries.
4.21 Tax Matters.
(a)(i) There has been duly filed by or on behalf of the Company and each of
its Subsidiaries (and each of their respective predecessors, if any), or filing
extensions from the appropriate federal, state, foreign and local Governmental
Entities have been obtained with respect to, all federal, state, foreign and
local tax returns and reports required to be filed on or prior to the date
hereof; (ii) payment in full or adequate provision for the payment of all taxes
required to be paid in respect of the periods covered by such tax returns and
reports has been made, except where the failure to so pay or make such adequate
provision has not had, and would not be reasonably likely to have, a Material
Adverse Effect; (iii) a reserve which the Company reasonably believes to be
adequate has been set up for the payment of all such taxes anticipated to be
payable in respect of periods through the most recent fiscal quarter end, except
where the failure to establish adequate reserves has not had and would not be
reasonably likely to have a Material Adverse Effect; (iv) none of the income tax
returns required to be filed by or on behalf of the Company and each of its
Subsidiaries consolidated in such returns (and their respective predecessors, if
any) (the "Consolidated Returns") have been examined by or settled with the
Internal Revenue Service ("IRS") or other Governmental Entity; (v) there are no
material "deferred intercompany transactions" or "intercompany transactions,"
the gain or loss in which has not yet been taken into account under the
Consolidated Returns; (vi) there are no liens for taxes on the assets of the
Company and each 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); and (vii) there have been no claims or assessments against the Company
or any of its Subsidiaries asserted in writing by any Governmental Entity with
respect to any alleged deficiency in any tax. For the purpose of this Agreement,
the term "tax" (including, with correlative meaning, the terms
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"taxes" and "taxable") shall include all federal, state, local and foreign
income, profits, franchise, gross receipts, payroll, sales, employment, use,
property, withholding, excise and other taxes, duties or assessments of any
nature whatsoever, together with all interest, penalties and additions imposed
with respect to such amounts. The term "tax return" means a report, return or
other information required to be supplied to or filed with a Governmental Entity
with respect to any tax including an information return, claim for refund,
amended tax return or declaration of estimated tax.
(b) Neither the Company nor any of its Subsidiaries (i) is a party to any
tax allocation or tax sharing agreement, (ii) has been a member of an affiliated
group filing a consolidated federal income tax return other than a group the
common parent of which was the Company, or (iii) has any liability for taxes of
any Person (other than the Company and its Subsidiaries) under Reg. sec.1.1502-6
(or any similar provision of state, local or foreign law), as transferee or
successor, by contract or otherwise.
4.22 Insurance. The Company and its Subsidiaries and their respective
properties are insured in such amounts, against such losses and with such
insurers as are prudent when considered in light of the nature of the properties
and businesses of the Company and its Subsidiaries. Section 4.22 of the Company
Disclosure Schedule sets forth a complete and accurate list of the insurance
policies of the Company and its Subsidiaries as in effect on the date hereof,
including in each case the applicable coverage limits, deductibles and the
policy expiration dates. No notice of any termination or threatened termination
of any of such policies has been received by the Company or any of its
Subsidiaries and such policies are in full force and effect.
4.23 Transactions with Related Parties. Except as set forth in Section
4.23 of the Company Disclosure Schedule or in the Company SEC Reports, neither
the Company nor any Subsidiary is a party to any agreement with any of the
Company's directors, officers or, to the best of the Company's knowledge,
shareholders or, to the best of the Company's knowledge, any Affiliate or family
member of any of the foregoing under which it: (i) leases any real or personal
property (either to or from such Person), (ii) licenses real or personal
property or Intellectual Property (either to or from such Person), (iii) is
obligated to purchase any tangible or intangible asset from or sell such asset
to such Person, (iv) purchases products or services from such Person, (v) has
borrowed money from or loaned money to such Person or (vi) permits such Person
to use any personal property of the Company or any of its Subsidiaries for
personal purposes. Except as set forth in Section 4.23 of the Company Disclosure
Schedule or in the Company SEC Reports, neither the Company nor any Subsidiary
employs as an employee or engages as a consultant any family member of any of
the Company's directors, officers or, to the best of the Company's knowledge,
shareholders. To the best of the Company's knowledge and except as set forth in
Section 4.23 of the Company Disclosure Schedule, there exist no agreements among
shareholders of the Company, except as contemplated by the Voting Agreements, to
act in concert with respect to their voting or holding of Company securities.
4.24 Interest in Competitors. Neither the Company, nor any or its
Subsidiaries, nor, to the best of the Company's knowledge, any of their
respective officers or directors, has any interest, either by way of contract or
by way of investment (other than as holder of not more than 2% of the
outstanding capital stock of a publicly traded Person) or otherwise, directly or
indirectly, in any Person other than the Company and its Subsidiaries that (i)
provides any services or designs, produces or sells any product or product lines
or engages in any activity similar to or competitive with any activity currently
proposed to be conducted by the Company or any of its Subsidiaries or (ii) has
any direct or indirect interest in any asset or property, real or personal,
tangible or intangible, of the Company.
4.25 Brokerage. Other than with respect to fees payable to Houlihan,
Lokey, Howard & Zukin Capital ("Houlihan Lokey"), there are no claims for
brokerage commissions or finder's fees or similar compensation in connection
with the transactions contemplated by this Agreement based on any arrangement
made by or on behalf of the Company and the Company agrees to indemnify and hold
Parent, Liberty Media, Merger Sub and their respective Affiliates harmless from
and against any and all claims, liabilities or obligations with respect to any
other such fees, commissions, expenses or claims for indemnification or
contribution asserted by any Person on the basis of any act or statement made or
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alleged to have been made by the Company or any of its Subsidiaries, directors,
officers, employees or Affiliates in connection with this Agreement or any
transaction provided for or described herein.
4.26 Disclosure. None of the information with respect to the Company or
its Subsidiaries to be included or incorporated by reference in the Proxy
Statement or the Registration Statement will, at the time of the mailing of the
Proxy Statement, and at the time of the Special Meeting, 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; provided, that the
foregoing representation shall not be applicable with respect to untrue
statements or omissions based upon information furnished to the Company by
Parent, Liberty Media or Merger Sub for use therein. The Proxy Statement will
comply as to form in all material respects with the provisions of the Exchange
Act and the rules and regulations thereunder. Prior to the date hereof, the
Company has provided or made available to Parent and Liberty Media or their
respective representatives complete and accurate copies of (i) all unredacted
minutes of meetings and written consents of the Board and committees thereof for
the period from September 25, 1996 through July 29, 1999 and (ii) all documents
and agreements, including any amendments, renewals or modifications thereof,
referenced in the schedules to this Agreement.
4.27 DGCL Section 203. As of the date hereof and at all times on or prior
to the Effective Time, the Company Board shall have approved the Merger, this
Agreement, the Voting Agreements and the transactions contemplated by this
Agreement, so as to render inapplicable hereto and thereto the limitations on
business combinations contained in Section 203 of the DGCL.
4.28 Company Action. The Company Board (at a meeting duly called and held)
has by unanimous vote of the directors (i) determined and declared that this
Agreement and the transactions that are the subject of this Agreement are
advisable and in the best interests of the Company and its stockholders, (ii)
recommended the approval of the transactions that are the subject of this
Agreement (including, without limitation, the Merger and the Voting Agreements)
and directed that the transactions that are the subject of this Agreement be
submitted for consideration by the Company's stockholders at the Special Meeting
(subject to its right to withdraw, modify or amend such recommendation and
direction solely as provided in Section 7.5 of this Agreement), and (iii)
adopted resolutions approving this Agreement and recommending approval and
adoption of this Agreement and the Merger by the stockholders of the Company.
4.29 Fairness Opinion. The Company Board has received the written opinion
of Houlihan Lokey to the effect that, as of the date hereof, the Merger
Consideration is fair, from a financial point of view, to the holders of the
Company Common Stock (the "Fairness Opinion"). The Company has provided, or
prior to the filing of the preliminary proxy statement will provide, Liberty
Media and Parent with a true and complete copy of the Fairness Opinion and will
include an executed copy of the Fairness Opinion in the Proxy Statement, and
will provide to Liberty and Parent prior to the mailing of the Proxy Statement a
letter from Houlihan Lokey, dated as of a recent date, reaffirming the Fairness
Opinion.
4.30 FIRPTA. The Company is not, and has not been at any time during the
five year period ending on the date of this Agreement, a United States real
property holding corporation within the meaning of Section 897(c)(2) of the
Code.
4.31 No Investment Company. The Company is not an "investment company"
subject to the registration requirements of, or regulation as an investment
company under, the Investment Company Act of 1940, as amended.
4.32 Employment Agreements. Section 4.32 of the Company Disclosure
Schedule contains a list of each of the executives that have employment
agreements with the Company (collectively, the "Employment Agreements"). Each of
the Employment Agreements is in full force and effect and none of the parties
thereto are in breach thereof.
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4.33 Negative Assurances. To the Company's knowledge, the representations
and warranties of the Warburg Entities, the Fleming Funds and Technical Service
Partners L.P. in the Voting Agreements, are, in each such case, true and correct
in all material respects.
4.34 Vote Required. The only vote of stockholders (or holders of Voting
Debt) of the Company required under the DGCL, Nasdaq Stock Market requirements
and the Organization Documents in order to approve and adopt the Merger Proposal
is the affirmative vote of a majority of the total number of votes entitled to
be cast by the holders of the issued and outstanding shares of Company Common
Stock voting as a single class, and no other vote or approval of or other action
by the holders of any capital stock (or Voting Debt, options or warrants) of the
Company is required for such approval and adoption, or for the consummation of
any of the transactions contemplated hereby, except, to the extent necessary
under the Company's 1997 Amended and Restated 1997 Director Option Plan, for the
consent of each holder of options thereunder to the actions contemplated by
Section 2.3(b)(i).
4.35 No Excise Tax Obligations. The Company does not have, and following
the consummation of the Merger the Surviving Entity will not have, any
obligation to make payments to any past or present employees of the Company or
its Subsidiaries or Affiliates as a result of the imposition of any excise taxes
pursuant to Section 4999 of the Code or the imposition of any excise or similar
taxes pursuant to any similar provision of state or local law.
4.36 Pioneer Status. The Company has "Pioneer" status in Singapore,
pursuant to which the Company and its Subsidiaries receive certain tax
abatements and other benefits under Singapore law. None of the transactions
contemplated by this Agreement shall have any effect on the Company's "Pioneer"
status in Singapore.
4.37 British Telecommunications. As of the date hereof, the Company and
its Subsidiaries do not, directly or indirectly, beneficially own (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) any shares of any
class of capital stock of British Telecommunications plc, a company organized
under the laws of England and Wales ("BT"), or any of its Subsidiaries, or any
direct or indirect rights or options to acquire (through purchase, exchange,
conversion or otherwise) any shares of any class of capital stock of BT or any
of its Subsidiaries. Between the date of this Agreement and the Effective Time,
neither the Company nor its Subsidiaries will voluntarily acquire or agree to
acquire (through purchase, exchange, conversion or otherwise) beneficial
ownership of any shares of any class of capital stock of BT or its Subsidiaries
or any direct or indirect rights or options to so acquire any shares of any
class of capital stock of BT or any of its Subsidiaries.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent hereby makes the following representations and warranties to the
Company and, solely with respect to Sections 5.1 and 5.2, to Liberty Media:
5.1 Organization and Qualification. Each of Parent and Merger Sub (i) is a
corporation duly incorporated, validly existing and in good standing under the
laws of the jurisdiction of its incorporation, (ii) has all requisite corporate
power and authority to own, lease and operate its properties and to carry on its
business as now being conducted and (iii) is duly qualified or licensed and is
in good standing to do business in each jurisdiction in which the properties
owned, leased or operated by it or the nature of its activities makes such
qualification necessary, except where the failure to be so duly qualified or
licensed and in good standing has not had and is not reasonably likely to have,
individually or in the aggregate, a Parent Material Adverse Effect.
5.2 Authorization and Validity of Agreement. This Agreement has been duly
executed and delivered by Parent and Merger Sub. Each of Parent and Merger Sub
has all requisite corporate power and authority to enter into this Agreement and
each of Parent and Merger Sub has all requisite corporate power and authority to
perform its obligations hereunder and to consummate the transactions
contemplated
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hereby. The execution, delivery and performance by Parent and Merger Sub of this
Agreement and the consummation by each of Parent and Merger Sub of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action on the part of Parent and Merger Sub (including in
the case of Merger Sub, approval and adoption of this Agreement and the Merger
by Parent, as the sole stockholder of Merger Sub). This Agreement is a legal,
valid and binding obligation of Parent and Merger Sub, enforceable in accordance
with its terms (except insofar as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally, or by principles governing the availability of
equitable remedies). The shares of Class A Liberty Media Group Stock to be
issued and delivered by Parent pursuant to Sections 2.3 and 2.4 will be, when
the Merger has become effective and such shares are issued and delivered as
provided in Sections 2.3 and 2.4 duly authorized, validly issued, fully paid and
non-assessable and no stockholder of Parent will have any preemptive right of
subscription or purchase in respect thereof.
5.3 Capitalization of Parent. As of the date hereof, Parent's authorized
capital stock consists of 8,850,000,000 shares, consisting of (a) 100,000,000
preferred shares, par value $1.00 per share ("Parent Preferred Stock"), and (b)
8,750,000,000 common shares, par value $1.00 per share, of which (i)
6,000,000,000 shares are Parent Common Stock, (ii) 2,500,000,000 shares are
Class A Liberty Media Group Stock and (iii) 250,000,000 shares are Class B
Liberty Media Group Stock.
5.4 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, except as
contemplated by this Agreement and the Inter-Group Supplement, the Post-Merger
Restructuring Transactions and the Contribution Agreement, 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 agreements, obligations or liabilities entered into or incurred in
connection with its incorporation or organization and the transactions
contemplated hereby and by the Inter-Group Supplement, the Fifth Tax Sharing
Amendment or any other documents referred to herein or executed in connection
herewith to which any of the Company or its Subsidiaries or Affiliates is a
party, Merger Sub has not and will not have incurred, 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 commercially reasonable actions 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. If, notwithstanding the foregoing sentence, any assets are
contributed to Merger Sub, Parent will take all commercially reasonable actions
necessary to ensure that no assets will be withdrawn from Merger Sub at any time
prior to the Effective Time.
5.5 Information Supplied. None of the information concerning Parent or any
of its Subsidiaries supplied or to be supplied by Parent or Merger Sub for
inclusion or incorporation by reference in, and which is included or
incorporated by reference in, (i) the Registration Statement or any amendment or
supplement thereto filed or to be filed by Parent with the Commission under the
Securities Act in connection with the issuance of the Merger Consideration, or
(ii) any documents filed or to be filed with the Commission or any other
Governmental Entity in connection with the transactions contemplated hereby
(including, without limitation, the Proxy Statement) will, at the respective
times such documents are filed, and, in the case of the Registration Statement
or any amendment or supplement thereto, when
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the same becomes effective and at the Effective Time, be false or misleading
with respect to any 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 were made, not misleading or
necessary to correct any statement in any earlier communication.
ARTICLE VI.
REPRESENTATIONS AND WARRANTIES OF LIBERTY MEDIA
Liberty Media hereby makes the following representations and warranties to
Parent and the Company, in each case except as otherwise set forth in the
appropriate section of the disclosure schedule (the "Liberty Media Disclosure
Schedule"), dated as of the date of this Agreement and delivered by Liberty
Media to each of Parent and the Company:
6.1 Organization and Qualification. Liberty Media (i) is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, (ii) has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
as now being conducted and (iii) is duly qualified or licensed and in good
standing to do business in each jurisdiction in which the properties owned,
leased or operated by it or the nature of its activities makes such
qualification necessary, except in such jurisdictions where the failure to be so
duly qualified or licensed and in good standing has not had and is not
reasonably likely to have, individually or in the aggregate, a Liberty Media
Material Adverse Effect. As of September 30, 1999, (a) 1,156,751,950 shares of
Class A Liberty Media Group Stock were issued and outstanding, (b) 49,265,043
shares of Class A Liberty Media Group Stock were reserved for issuance upon
exercise of outstanding options to purchase shares of Class A Liberty Media
Group Stock, (c) 108,421,708 shares of Class B Liberty Media Group Stock were
issued and outstanding and (d) 2,912,000 shares of Class B Liberty Media Group
Stock were reserved for issuance upon exercise of outstanding options to
purchase shares of Class B Liberty Media Group Stock.
6.2 Authorization and Validity of Agreement. This Agreement has been duly
executed and delivered by Liberty Media. Liberty Media has all requisite
corporate power and authority to enter into this Agreement and Liberty Media has
all requisite corporate power and authority to perform its obligations hereunder
and to consummate the transactions contemplated hereby. The execution, delivery
and performance by Liberty Media of this Agreement and the consummation by
Liberty Media of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action on its part. This Agreement is a
legal, valid and binding obligation of Liberty Media, enforceable in accordance
with its terms (except insofar as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally, or by principles governing the availability of
equitable remedies).
6.3 Ownership of Company Common Stock. As of the date hereof, neither
Liberty Media nor any Subsidiary or Affiliate of Liberty Media "owns", and has
not since such date "owned" (as such terms are defined in Section 203 of the
DGCL), any shares of Company Common Stock; provided that the foregoing
representation is to the best knowledge of Liberty Media with respect to shares
of Company Common Stock so "owned" by Liberty Media by virtue of the ownership
of shares of Company Common Stock by Liberty Media's "affiliates" or
"associates" (as such terms are defined in the DGCL). Between the date of this
Agreement and the Effective Time, neither Liberty Media nor any Subsidiary or
Affiliate of Liberty Media will acquire any additional shares of Company Common
Stock, except in accordance with Section 3.6.
6.4 Information Supplied. None of the information supplied or to be
supplied by Liberty Media relating to Liberty Media or any of its Subsidiaries
or the Liberty Media Group for inclusion or incorporation by reference in, and
which is included or incorporated by reference in, (i) the Registration
Statement, or any amendment or supplement thereto, filed or to be filed by
Parent with the Commission under the Securities Act in connection with the
issuance of the Merger Consideration (ii) any documents
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filed or to be filed with the Commission or any other Governmental Entity in
connection with the transactions contemplated hereby (including, without
limitation, the Proxy Statement) will, at the respective times such documents
are filed, and, in the case of the Registration Statement or any amendment or
supplement thereto, when the same becomes effective and at the Effective Time,
be false or misleading with respect to any 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 were made,
not misleading or necessary to correct any statement in any earlier
communication. The Registration Statement, including any amendments or
supplements thereto, will comply as to form in all material respects with the
provisions of the Securities Act.
6.5 Liberty Media Group Information.
(a) The narrative information contained in the proxy statement of
Tele-Communications, Inc., dated January 8, 1999, with respect to the Liberty
Media Group (referred to in such proxy statement as the "New Liberty Media
Group"), giving effect to the transactions described in such proxy statement,
did not as of such date contain any untrue statement of a material fact, or omit
to state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The items of selected pro forma financial information with
respect to such "New Liberty Media Group" in such proxy statement, giving effect
to the transactions described in such proxy statement and on the basis described
therein, were accurate in all material respects as of the dates and for the
periods for which such information is presented.
(b) The narrative information contained in the Parent's Annual Report on
Form 10-K for the fiscal year ended December 31, 1998 with respect to the
Liberty Media Group (referred to therein as the "Liberty/Ventures Group"),
giving effect to the acquisition of Tele-Communications, Inc. by Parent
described therein, the combination of the TCI Ventures Group referred to therein
with the predecessor of the Liberty Media Group, and the related transfers of
assets by the TCI Ventures Group in exchange for approximately $5.5 billion in
cash, did not as of the date such report was filed with the Commission contain
an untrue statement of a material fact, or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(c) Liberty Media has made available to the Company true and complete
copies of all Parent/ Liberty Media Commission Filings filed prior to the date
hereof and agrees to provide the Company, upon request, with true and complete
copies of all Parent/Liberty Media Commission Filings filed after the date
hereof. As of their respective dates, each of the Parent/Liberty Media
Commission Filings complied and, in the case of filings after the date hereof,
will comply in all material respects with the applicable requirements of the
Securities Act, the Exchange Act and the rules and regulations under each such
Act, and none of the Parent/Liberty Media Commission Filings contained as of
such date any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading. When
filed with the Commission, the financial statements included in the
Parent/Liberty Media Commission Filings complied as to form in all material
respects with the applicable rules and regulations of the Commission and were
prepared in accordance with GAAP applied on a consistent basis (except as may be
indicated therein or in the notes or schedules thereto), and such financial
statements fairly present the consolidated financial position of the Liberty
Media Group as at the dates thereof and the consolidated results of their
operations and their consolidated cash flows for the periods then ended,
subject, in the case of the unaudited interim financial statements, to normal,
recurring year-end audit adjustments.
6.6 No Approvals or Notices Required; No Conflict with Instruments. Except
as set forth in Section 6.6 of the Liberty Media Disclosure Schedule, and
assuming in each case the accuracy, at all relevant times, of each of the
representations and warranties of the Company contained herein, the
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execution and delivery by Liberty Media of this Agreement do not, and the
performance by Liberty Media of its obligations hereunder will not:
(i) conflict with or violate the charter or bylaws, as currently in
effect, of Liberty Media or of any material corporate Subsidiary of Liberty
Media or the partnership agreement or other governing instrument of any
material Subsidiary of Liberty Media that is not a corporation;
(ii) require any Governmental Consent or any Governmental Filing by or
on behalf of Liberty Media or any Subsidiary of Liberty Media prior to the
Effective Time, except for (A) any such Governmental Consents and
Governmental Filings that have been or at or prior to the Effective Time
shall be obtained or made and (B) such other Governmental Consents and
Government Filings the absence or omission of which would not reasonably be
expected, either individually or in the aggregate, to have a Liberty Media
Material Adverse Effect;
(iii) conflict with or result in any Violation of any material
Contract to which Liberty Media or any Subsidiary of Liberty Media is a
party, or by which the Liberty Media, any Subsidiary of Liberty Media or
any of their respective material assets or properties is bound or affected,
except for any such Violations as would not reasonably expected, either
individually or in the aggregate, to have a Liberty Media Material Adverse
Effect; or
(iv) assuming that all Governmental Consents and Governmental Filings
contemplated by Section 6.6(ii) are obtained or made, conflict with or
result in a Violation of, under or pursuant to any law, rule, regulation,
order, judgment or decree applicable to Liberty Media or any Subsidiary of
Liberty Media or by which any of their respective material properties or
assets are bound, except for any such Violations as would not reasonably be
expected, either individually or in the aggregate, to have a Liberty Media
Material Adverse Effect.
6.7 Absence of Certain Changes or Events. Except as set forth in Section
6.7 of the Liberty Media Disclosure Schedule or otherwise disclosed in the
Liberty Media Group Information, since December 31, 1998, there has not been any
adverse change in, and no event has occurred and no condition exists, that,
individually or together with all such changes, events and conditions has had
or, insofar as Liberty Media can reasonably foresee, is reasonably likely to
have a Liberty Media Material Adverse Effect.
6.8 Brokers or Finders. Except as set forth in Section 6.8 of the Liberty
Media Disclosure Schedule, no agent, broker, investment banker, financial
advisor or other Person is or will be entitled, by reason of any agreement, act
or statement by Liberty Media or any of its Subsidiaries, directors, officers,
employees or Affiliates, to any financial advisory, broker's, finder's or
similar fee or commission, to reimbursement of expenses or to indemnification or
contribution in connection with any of the transactions contemplated by this
Agreement, and, if this Agreement is terminated prior to the Effective Time,
Liberty Media agrees to indemnify and hold the Company and its Affiliates
harmless from and against any and all claims, liabilities or obligations with
respect to any fees, commissions, expenses or claims for indemnification or
contribution asserted by any Person on the basis of any act or statement made or
alleged to have been made by Liberty Media or any of its Subsidiaries,
directors, officers, employees or Affiliates in connection with this Agreement
or any transaction provided for or described herein.
ARTICLE VII.
ADDITIONAL COVENANTS AND AGREEMENTS
7.1 Access to Information Concerning Properties and Records. Upon
reasonable notice, the Company shall (and shall cause each of its Subsidiaries
to) afford to the officers, employees, counsel, accountants and other authorized
representatives of Parent and Liberty Media reasonable access during normal
business hours to all its properties, personnel, books and records and furnish
promptly to such Persons such financial and operating data and other information
concerning its business, properties, personnel and affairs as such Persons shall
from time to time reasonably request and instruct the officers, directors,
employees, counsel and financial advisors of the Company to discuss the business
operations,
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affairs and assets of the Company and otherwise fully cooperate with the other
party in its investigation of the business of the Company. Parent and Liberty
Media agree that they will not, and will cause their respective officers,
employees, counsel, accountants and other authorized representatives not to, use
any information obtained pursuant to this Section 7.1 for any purpose unrelated
to the transactions contemplated by this Agreement. No investigation pursuant to
this Section 7.1 will affect any representation or warranty given by the Company
to Parent or Liberty Media hereunder.
7.2 Confidentiality. Unless otherwise agreed to in writing by the party
disclosing (or whose Representatives disclosed) the same (a "disclosing party"),
each party (a "receiving party") shall, and shall cause its Affiliates,
directors, officers, employees, agents, counsel, financial advisors and
controlling Persons (such Affiliates and other Persons with respect to any party
being collectively referred to as such party's "Representatives") to, (i) keep
all Confidential Information of the disclosing party confidential and not
disclose or reveal any such Confidential Information to any Person other than
those Representatives of the receiving party who are participating in effecting
the transactions contemplated hereby or who otherwise need to know such
Confidential Information, (ii) use such Confidential Information only in
connection with consummating the transactions contemplated hereby and enforcing
the receiving party's rights hereunder, and (iii) not use Confidential
Information in any manner detrimental to the disclosing party. In the event that
a receiving party is requested pursuant to, or required by, applicable law or
regulation or by legal process to disclose any Confidential Information of the
disclosing party, the receiving party shall provide the disclosing party with
prompt notice of such request(s) to enable the disclosing party to seek an
appropriate protective order. A party's obligations hereunder with respect to
Confidential Information that (i) is disclosed to a third party with the
disclosing party's written approval, (ii) is required to be produced under order
of a court of competent jurisdiction or other similar requirements of a
governmental agency, or (iii) is required to be disclosed by applicable law or
regulation, will, subject in the case of clauses (ii) and (iii) above to the
receiving party's compliance with the preceding sentence, cease to the extent of
the disclosure so consented to or required, except to the extent otherwise
provided by the terms of such consent or covered by a protective order. If a
receiving party uses a degree of care to prevent disclosure of the Confidential
Information that is at least as great as the care it normally takes to preserve
its own information of a similar nature, it shall not be liable for any
disclosure that occurs despite the exercise of that degree of care, and in no
event shall a receiving party be liable for any indirect, punitive, special or
consequential damages unless such disclosure resulted from its willful
misconduct or gross negligence in which event it shall be liable in damages for
the disclosing party's lost profits resulting directly and solely from such
disclosure; provided, however, that notwithstanding the foregoing, Parent will
not be liable under any circumstances for damages other than direct damages (and
not lost profits or indirect, special, punitive or consequential damages)
resulting directly and solely from such wrongful disclosure by Parent. In the
event this Agreement is terminated, each party shall, if so requested by any
other party, promptly return or destroy all of the Confidential Information of
such other party, including all copies, reproductions, summaries, analyses or
extracts thereof or based thereon in the possession of the receiving party or
its Representatives; provided, however, that the receiving party shall not be
required to return or cause to be returned summaries, analyses or extracts
prepared by it or its Representatives, but shall destroy (or cause to be
destroyed) the same upon request of the disclosing party.
For purposes of this Section 7.2, "Confidential Information" of a party
means all confidential or proprietary information about such party that is
furnished by it or its Representatives to the other party or the other party's
Representatives, regardless of the manner in which it is furnished.
"Confidential Information" does not include, however, information which (a) has
been or in the future is published or is now or in the future is otherwise in
the public domain through no fault of the receiving party or its
Representatives, (b) was available to the receiving party or its Representatives
on a non-confidential basis prior to its disclosure by the disclosing party, (c)
becomes available to the receiving party or its Representatives on a
non-confidential basis from a Person other than the disclosing party or its
Representatives who is not otherwise bound by a confidentiality agreement with
the disclosing party or its Representatives, or is not otherwise prohibited from
transmitting the information to the receiving party or its Representatives, or
(d) is independently developed by the receiving party or its Representatives
through Persons who have not had, either directly or indirectly, access to or
knowledge of such information.
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7.3 Public Announcements. The Company, Liberty Media and Parent shall use
commercially reasonable efforts to develop a joint communications plan and each
party hereto shall use reasonable efforts to ensure that all press releases and
other public statements with respect to the transactions contemplated hereby
shall be consistent with such joint communications plan. Unless otherwise
required by applicable law or by obligations pursuant to any listing agreement
with or rules of any securities exchange, the National Association of Securities
Dealers, Inc. or the Nasdaq Stock Market, each party shall use commercially
reasonable efforts to consult with, and use commercially reasonable efforts to
accommodate the comments of the other parties before issuing any press release
or otherwise making any public statement with respect to this Agreement or the
transactions contemplated hereby.
7.4 Conduct of the Company's Business Pending the Effective Time. Except
as contemplated by the Company Transaction Documents (copies of which have been
provided to Parent prior to the date hereof), from the date hereof through the
Effective Time, unless Parent and Liberty Media shall otherwise agree in writing
or, in the case of Section 7.4(c)(i), telephonically, followed by an agreement
in writing:
(a) the Company shall and shall cause its Subsidiaries to carry on
their respective businesses in the usual, regular and ordinary course in
substantially the same manner as heretofore conducted, and shall, and shall
cause its Subsidiaries to, use their reasonable best efforts to preserve
intact their present business organizations, preserve their respective
Licenses, keep available the services of their present officers and
employees and preserve their relationships with customers, suppliers and
others having business dealings with them to the end that their goodwill
and on-going businesses shall be unimpaired at the Effective Time. Without
limiting the generality of the foregoing, the Company shall, and shall
cause its Subsidiaries to, (i) maintain insurance coverages and its books
and records in a manner consistent with prior practices, (ii) comply with
all laws, ordinances and regulations of Governmental Entities applicable to
the Company and its Subsidiaries, (iii) maintain and keep its properties
and equipment in good repair, working order and condition, ordinary wear
and tear excepted, and (iv) perform its obligations under all contracts and
commitments to which it is a party or by which it is bound, except in each
case where the failure to so maintain, comply or perform, either
individually or in the aggregate, would not reasonably be expected to
result in a Material Adverse Effect;
(b) the Company shall not, nor shall it propose to, (i) sell, grant,
pledge or transfer or agree to sell, grant, pledge or transfer any of its
or its Subsidiaries' capital stock or other equity interests, (ii) amend
any of its Organizational Documents, (iii) split, combine or reclassify its
outstanding capital stock or issue or authorize or propose the issuance of
any other securities in respect of, in lieu of or in substitution for
shares of the capital stock, or declare, set aside or pay any dividend or
other distribution payable in cash, stock or property, or (iv) directly or
indirectly redeem, purchase or otherwise acquire or agree to redeem,
purchase or otherwise acquire any shares of its capital stock or that of
its Subsidiaries, except pursuant to (A) the exercise of rights granted to
such party to repurchase shares of its capital stock from employees upon
termination of employment or (B) contractual obligations arising under
agreements existing on the date hereof and disclosed in Section 4.3(e) of
the Company Disclosure Schedule;
(c) the Company shall not, nor shall it permit any of its Subsidiaries
to, (i) issue, deliver, sell or encumber or agree to issue, deliver, sell
or encumber any additional shares of, or stock or appreciation rights or
rights of any kind to acquire any shares of, its capital stock of any
class, or any options, rights or warrants to acquire shares of capital
stock, or Convertible Securities or any phantom shares or phantom equity
interests other than issuances of Company Common Stock pursuant to the
exercise of warrants or stock options outstanding on the date hereof and
disclosed in Section 2.3(b)(i)(A) of the Company Disclosure Schedule, (ii)
amend or modify any outstanding options, warrants, or rights to acquire, or
Convertible Securities, or any phantom shares, phantom equity interests or
stock or equity appreciation rights, or adopt or authorize any other stock
or equity appreciation rights, restricted stock or equity, stock or equity
purchase, stock or equity bonus or similar plan, arrangement or agreement;
(iii) make any changes in its equity capital structure, (iv) acquire, lease
or agree to acquire or lease any capital assets or any other assets except
capital assets or other assets the value of
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which, in the aggregate, does not exceed the total capital budget set forth
in Section 7.4(c)(iv) of the Company Disclosure Schedule (without regard to
the budgeted sub-categories within the capital budget), (v) dispose or
agree to dispose of any capital assets or other assets except in the
ordinary course of business consistent with past practices, (vi) incur
additional indebtedness for borrowed money or guarantee any such
indebtedness or issue or sell any debt securities or warrants or rights to
acquire any debt securities of the Company or any of its Subsidiaries or
guarantee any debt security of any other Person, other than in the ordinary
course of business consistent with past practice, (vii) secure any of its
outstanding unsecured Indebtedness, provide additional security for any of
its outstanding secured Indebtedness or grant, create or suffer to exist
any Lien on or with respect to any property, assets or rights of the
Company or any Subsidiary of the Company, except in any such case for
Permitted Encumbrances, (viii) sell, lease, encumber, grant a security
interest in, or otherwise dispose of any assets which are material,
individually or in the aggregate, to the Company and its Subsidiaries, as a
whole, other than in the ordinary course of business, (ix) incur any
liability or obligation, or contribute any asset, to a Subsidiary of the
Company that is material to the Company and its Subsidiaries other than in
the ordinary course of business, (x) acquire or agree to acquire by merging
or consolidating with, or by purchasing a substantial equity interest in,
or by any other manner, any business or any corporation, partnership,
association or other business organization or division thereof, in each
case in this clause (x) which are material, individually or in the
aggregate, to the Company and its Subsidiaries taken as a whole, except as
set forth in Section 7.4(c)(x) of the Company Disclosure Schedule, or (xi)
adopt, enter into, amend or terminate any contract, agreement, commitment
or arrangement with respect to any of the foregoing that is not otherwise
permitted by the exceptions applicable to the foregoing;
(d) the Company shall not, nor shall it permit any of its Subsidiaries
to, other than to comply with applicable law, (i) adopt, enter into,
terminate or amend any bonus, profit sharing, compensation, severance,
termination, stock option, pension, retirement, deferred compensation,
employment or other Company Plan agreement, trust, fund or other
arrangement for the benefit or welfare of any director, officer or current
or former employee, except with respect to the agreements described in
Section 7.4(d) of the Company Disclosure Schedule, (ii) increase in any
manner the compensation or fringe benefits of any director, officer or
employee (except for normal increases in the ordinary course of business
that are consistent with past practice and that, in the aggregate, do not
result in a material increase in benefits or compensation expense to the
Company and its Subsidiaries relative to the level in effect prior to such
increase), (iii) pay any benefit not provided under any existing plan or
arrangement, (iv) except for benefits that have already been earned or
vested without acceleration, grant any awards or make any payments under
any bonus, incentive, performance or other compensation plan or arrangement
or Company Plan (including, without limitation, the grant of stock options,
stock or equity appreciation rights, stock-based or stock-related awards,
performance units or restricted stock, or the removal of existing
restrictions in any benefit plans or agreements or awards made thereunder),
except for (A) making of matching and annual contributions to 401(k) plans
and (B) the grant of employee stock options and the issuance of Company
Common Stock upon exercise thereof pursuant to subsection (c) of this
Section 7.4, (v) take any action to fund or in any other way secure the
payment of compensation or benefits under any employee plan, agreement,
contract or arrangement or Company Plan, other than in the ordinary course
of business consistent with past practice, or (vi) adopt, enter into, amend
or terminate any contract, agreement, commitment or arrangement to do any
of the foregoing that is not otherwise permitted by the exceptions
applicable to the foregoing;
(e) the Company shall not, nor shall it permit any of its Subsidiaries
to, make any investments in non-investment grade securities;
(f) the Company shall not, nor shall it permit its Subsidiaries to,
(i) make any change in its accounting policies or procedures except as
required by GAAP or (ii) make any material Tax election, change any
material Tax election already made, adopt any material Tax accounting
method, change any material Tax accounting method unless required by GAAP,
enter into any closing
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agreement, settle any Tax claim or assessment or consent to any Tax claim
or assessment or any waiver of the statute of limitations for any such
claim or assessment;
(g) (i) the Company shall not pay, discharge or satisfy claims,
liabilities or obligations (absolute, accrued, contingent or otherwise),
other than the payment, discharge or satisfaction in the ordinary course of
business consistent with past practice; (ii) cancel any Indebtedness or
waive any claims or rights, except in the ordinary course of business and
consistent with past practice or as described in Section 7.4(g)(ii) of the
Company Disclosure Schedule; (iii) accelerate the payment of, or otherwise
prepay, any existing outstanding Indebtedness except in the ordinary course
of business consistent with past practice; (iv) other than as contemplated
or otherwise permitted by this Agreement and other than the normal cash
management practices of the Company and its Subsidiaries conducted in the
ordinary and usual course of their business and consistent with past
practice, make any advance or loan to or engage in any material transaction
with any director, officer, partner or Affiliate not required by the terms
of an existing Contract described in Section 4.23 of the Company Disclosure
Schedule; (v) guarantee or otherwise become responsible for any
Indebtedness of any other Person; or (vi) enter into or assume any
contract, agreement, obligation, commitment or arrangement with respect to
any of the foregoing;
(h) the Company shall not take any action that would or is reasonably
likely to result in (i) any of the representations or warranties made in
Article IV hereof being untrue on and as of the Closing Date as though made
on and as of the Closing Date (except for any changes expressly permitted
or contemplated by this Agreement) or (ii) any of the conditions set forth
in Section 8.1, 8.2 or 8.3 not being satisfied; or
(i) the Company shall not enter into any agreement to perform any of
the actions prohibited under this Section 7.4 and not otherwise permitted
by the exceptions contained therein.
Notwithstanding the foregoing, but subject to the provisions of Section 7.5
(to the extent applicable), the foregoing provisions of this Section 7.4 shall
not prohibit or restrict in any way the Company from soliciting or taking other
actions to pursue, or entering an agreement with respect to, an Extraordinary
Transaction.
7.5 No Solicitation.
(a) The Company will notify Parent and Liberty Media immediately, but in
any event within 24 hours, if any proposals, inquiries or expressions of
interest are received by, any information is requested from, or any negotiations
or discussions are sought to be initiated or continued with the Company or its
representatives, in each case in connection with any Extraordinary Transaction
(as defined below) or the possibility or consideration by a third party of
making a Extraordinary Transaction ("Extraordinary Transaction Interest")
indicating, in connection with such notice, the name of the Person indicating
such Extraordinary Transaction Interest and the terms and conditions of any
proposals or offers. The Company agrees that it will immediately cease and cause
to be terminated any existing activities, discussions or negotiations with any
parties conducted heretofore with respect to any Extraordinary Transaction
Interest. The Company agrees that it will take the necessary steps promptly to
inform the Persons referred to in the first sentence hereof of the obligations
undertaken in this Section 7.5. The Company agrees that it shall keep Parent and
Liberty Media informed, on a current basis, of the status and terms of any
Extraordinary Transaction Interest. As used in this Agreement, "Extraordinary
Transaction" shall mean any tender or exchange offer involving the Company, any
proposal for a merger, consolidation or other business combination involving the
Company, any proposal or offer to acquire in any manner a greater than 15%
equity interest in, or a significant portion of the business or assets of, the
Company (other than immaterial or insubstantial assets or inventory in the
ordinary course of business or assets held for sale), any proposal or offer with
respect to any recapitalization or restructuring with respect to the Company or
any proposal or offer with respect to any other transaction similar to any of
the foregoing with respect to the Company other than pursuant to the
transactions to be effected pursuant to this Agreement.
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(b) The Company will not, and will use its best efforts to ensure that its
officers, directors, employees, investment bankers, attorneys, accountants and
other agents do not, directly or indirectly: (i) initiate, solicit or encourage,
or take any action to facilitate (including by the furnishing of information)
the making of, any offer or proposal which constitutes or is reasonably likely
to lead to any Extraordinary Transaction, (ii) enter into any agreement with
respect to any Extraordinary Transaction, or (iii) in the event of an
unsolicited Extraordinary Transaction for the Company, engage in negotiations or
discussions with, or provide any information or data to, any Person (other than
Parent, Liberty Media, Merger Sub, any of their Affiliates or Representatives
and except for information which has been previously publicly disseminated by
the Company) relating to any Extraordinary Transaction.
(c) Notwithstanding the foregoing, prior to the Effective Time, the Company
may furnish information concerning its business, properties or assets to any
Person pursuant to appropriate confidentiality agreements, and may negotiate and
participate in discussions and negotiations with such Person concerning a
Extraordinary Transaction (provided that the Company shall not agree to any
exclusive right to negotiate with the Company) if (x) such entity or group has,
without the Company or any of its officers, directors, employees, investment
bankers, attorneys, accountants or other agents having taken any action
prohibited by Section 7.5(b) of this Agreement following the date of this
Agreement, submitted a bona fide written proposal to the Company relating to any
such transaction that the Company Board determines, in good faith, after
receiving written advice from a financial advisor of nationally recognized
reputation (which shall include Houlihan Lokey) is more favorable to the Company
and its stockholders than the transactions contemplated hereby (taking into
account all relevant factors), and for which financing, to the extent required,
is then committed or which, in the good faith judgment of the Company Board, is
reasonably capable of being obtained by such entity or group and (y) in the
opinion of the Company Board, after consultation with legal counsel, the failure
to provide such information or access or to engage in such discussions or
negotiations would cause the Company Board to breach its fiduciary duties to the
Company's stockholders under applicable law (an Extraordinary Transaction which
satisfies clauses (x) and (y) being referred to herein as a "Superior
Proposal"). The Company shall within one business day following a determination
that such Extraordinary Transaction is a Superior Proposal notify Parent and
Liberty Media of the receipt of the same. The Company shall promptly provide to
Parent and Liberty Media any nonpublic information regarding the Company
provided to any other party which was not previously provided to Parent and
Liberty Media. If, after consultation with legal counsel, the Company Board
determines that the fiduciary duties of the Company Board so require, the
Company Board may (subject to this and the following sentences) inform the
Company's stockholders that it no longer believes that the transactions
contemplated hereby are advisable, and that it no longer recommends approval of
the Merger (a "Subsequent Determination"), but only at a time that is after the
fifth business day following Parent's and Liberty Media's receipt of written
notice advising Parent and Liberty Media that the Company Board has received a
Superior Proposal specifying the material terms and conditions of such Superior
Proposal (and including a copy thereof with all accompanying documentation),
identifying the Person making such Superior Proposal and stating that it intends
to make a Subsequent Determination. After providing such notice, the Company
shall provide a reasonable opportunity to Parent and Liberty Media to make such
adjustments in the terms and conditions of this Agreement and/or any of the
Company Transaction Documents as would enable the Company Board to proceed with
its recommendation to its stockholders without a Subsequent Determination. At
any time after five business days following notification to Parent and Liberty
Media of the Company's intent to do so and if the Company has otherwise complied
with the terms of this Section 7.5(c), the Company Board may terminate this
Agreement pursuant to clause (iv) of Section 9.1 and enter into an agreement
with respect to a Superior Proposal, provided that the Company shall,
concurrently with terminating this Agreement pursuant to such clause, pay or
cause to be paid to Liberty Media the Termination Fee (as defined in Section 9.2
hereof). Notwithstanding any other provision of this Agreement, provided that
this Agreement has not previously been terminated in accordance with its terms,
the Company shall submit the Merger Proposal to its stockholders pursuant to
Section 3.1 hereof, whether or not the Company Board makes a Subsequent
Determination.
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(d) Except as set forth in Section 7.5(c), neither the Company Board nor
any committee thereof shall (i) withdraw or modify, or propose to withdraw or
modify, in a manner adverse to Parent and Liberty Media, the approval or
recommendation by the Company Board or any such committee of this Agreement, the
other Company Transaction Documents, and the transactions contemplated hereby
and (ii) approve or recommend, or propose to approve or recommend, any
Extraordinary Transaction or (iii) enter into any agreement with respect to any
Extraordinary Transaction.
(e) Nothing contained in this Agreement shall prohibit the Company or the
Company Board from (i) taking, and disclosing to the Company's stockholders, a
position with respect to a Extraordinary Transaction pursuant to Rules 14d-9 and
14e-2 under the Exchange Act or (ii) making any disclosure to the Company's
stockholders that the Company Board determines, in good faith and upon exercise
of its reasonable judgment after consultation with its financial advisors and
outside legal counsel, that the failure to so disclose would be reasonably
likely to result in a breach of the fiduciary duties of the Company Board under
applicable law.
7.6 Maintenance of Pioneer Status. The Company shall take all steps
necessary in order to maintain its "Pioneer" status in Singapore through the
Effective Time, including the filing of any applications and/or notices, and the
taking of any other actions, required under Singapore law or regulations in
connection with the transactions contemplated hereby.
7.7 Actions by Merger Sub. In its capacity as the sole stockholder of
Merger Sub and subject to the terms and conditions of this Agreement, Parent
shall cause Merger Sub to approve and adopt the Merger Proposal and to take all
corporate action necessary on its part to consummate the Merger and the
transactions contemplated hereby.
7.8 Listing. Each party hereto agrees to use its reasonable efforts to
cause the shares of Class A Liberty Media Group Stock to be issued in the Merger
to be authorized for listing on the NYSE, subject to official notice of
issuance, and to cause the shares of Class A Liberty Media Group Stock issuable
upon the exercise of Rollover Options and the Rollover Warrants to be listed on
the NYSE.
7.9 Convertible Securities. The Company agrees to take such actions as are
necessary to ensure that, immediately prior to the Effective Time, all rights to
exercise, convert or exchange any Convertible Securities, whether or not issued
under any stock option or similar plans of the Company or any Subsidiary, will
have been exercised by the applicable holders of such Convertible Securities or
the rights of the applicable holders thereof to so exercise, convert or exchange
such Convertible Securities following the Effective Time shall have been
canceled, terminated or otherwise rendered null, void and of no further effect,
except in any such case as otherwise provided for herein with respect to any
Rollover Options and Rollover Warrants.
7.10 Voting Agreement. Concurrently with the execution and delivery of
this Agreement, the Voting Agreements, copies of the forms of which are attached
hereto as Exhibit 7.10(a) and Exhibit 7.10(b), are being executed by the parties
identified on the signature pages thereto.
7.11 Indemnification of Directors and Officers; Insurance.
(a) From and after the Effective Time, Liberty Media and the Surviving
Entity 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 or director of another Person (each, an "Indemnified
Party" and together, the "Indemnified Parties") (and shall also, subject to
Section 7.11(b), advance expenses as incurred to the fullest extent permitted
under the DGCL, 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), against (i) all losses, costs,
expenses, claims, damages, judgments or liabilities arising out of, or in
connection with, any claim, action, suit, proceeding or investigation based in
whole or in part on the fact that the Indemnified Party is or was an officer,
director or employee of the Company or any of its Subsidiaries, or is or was
serving at the request of the Company as an officer or director of another
Person, pertaining to any matter existing or occurring before or at the
Effective Time and whether
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asserted or claimed before, at or after, the Effective Time (the "Indemnified
Liabilities") and (ii) all Indemnified Liabilities based in whole or in part on,
or arising in whole or in part out of, or pertaining to this Agreement, the
Merger or any other transactions contemplated hereby or thereby, in each case to
the fullest extent permitted under the DGCL (notwithstanding the Charter, Bylaws
or similar organizational documents of the Company, the Surviving Entity, Parent
or Liberty Media); 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 Liberty Media or the
Surviving Entity shall, subject to Section 7.11(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 Liberty Media or the Surviving Entity, as the case may be, shall be
entitled to repayment of such advances from the proceeds of such insurance
coverage). Liberty Media 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
Indemnified Parties as provided in the Company's Charter or Bylaws or pursuant
to other agreements, or certificates of incorporation or bylaws 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 Entity shall, and Liberty Media shall cause the Surviving Entity to,
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 or at the Effective Time; provided, however, that (i) the Surviving
Entity 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 currently such insurance coverage for directors and
officers of the Company, and (ii) the Surviving Entity shall not be required to
pay an annual premium for such insurance in excess of two and one-half 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) If any Claim relating hereto or to the transactions contemplated by
this Agreement is commenced before the Effective Time, the Company, Liberty
Media and the Surviving Entity 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
this Section 7.11, upon learning of any such claim, action, suit, proceeding or
investigation (whether arising before, at or after the Effective Time), shall
promptly notify Liberty Media thereof (but the failure so to notify shall not
relieve the Company, Liberty Media or the Surviving Entity from any liability
which it may have under this Section 7.11 except to the extent such failure
materially prejudices such party), whereupon Liberty Media or the Surviving
Entity shall have the right, from and after the Effective Time, to assume from
such Indemnified Party and control the defense thereof on behalf of such
Indemnified Party, and upon such assumption, the Surviving Entity 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. Notwithstanding the foregoing, if counsel
for the Indemnified Parties advises that there are issues which raise conflicts
of interest between Liberty Media or the Surviving Entity and the Indemnified
Parties, the Indemnified Parties may retain separate counsel and Liberty Media
shall pay or cause to be paid all reasonable fees and expenses of such counsel;
provided that Liberty Media shall not be obligated pursuant to this Section
7.11(b) to pay or cause to be paid for more than one firm or counsel to
represent all Indemnified Parties in any jurisdiction unless there is, under
applicable standards of professional conduct, a conflict on any significant
issue between the positions of any two or more Indemnified Parties. Neither
Liberty Media nor the Surviving Entity shall be liable for any settlement
effected without its prior written consent, which consent, however, shall not be
unreasonably withheld.
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(c) This Section 7.11 is intended to benefit the Indemnified Parties and
shall be enforceable by each Indemnified Party, his or her heirs and
representatives and shall be binding on all successors and assigns of Liberty
Media, Merger Sub and the Surviving Entity. Anything contained herein to the
contrary notwithstanding (but without limiting the obligations of Liberty Media
and the Surviving Entity to indemnify, defend and hold harmless the Indemnified
Parties as set forth in this Section 7.11), as between Liberty Media and the
Surviving Entity, the Indemnified Liabilities and all costs and expenses
incurred by Liberty Media or the Surviving Entity in connection with or arising
from the Indemnified Liabilities, or in connection with or arising from any
obligation to indemnify, defend and hold harmless any Indemnified Party, or to
advance expenses or maintain insurance in connection therewith, shall be borne
by the Surviving Entity, and if any liability, loss, cost, damage, claim or
expense (including any attorneys' fees and expenses) is paid or incurred by
Liberty Media as a result of any Indemnified Liability or any obligation to
indemnify, defend, hold harmless, advance expenses to or maintain insurance for
any Indemnified Party, Liberty Media shall be entitled to reimbursement in full
therefor by the Surviving Entity and shall be subrogated to all rights of the
Indemnified Parties vis-a-vis the Surviving Entity with respect to such
Indemnified Liabilities and obligations.
7.12 [Intentionally Omitted.]
7.13 Certificates as to Indebtedness. The Company shall cause each
applicable lender with respect to any outstanding Indebtedness of the Company as
of the Effective Time to deliver a certificate to Parent and Liberty Media at
the Closing certifying the amount of outstanding Indebtedness of the Company to
such lender as of such time.
7.14 Notification of Certain Matters. Between the date hereof and the
Effective Time, each of Liberty and the Company will give prompt notice in
writing to the other of: (i) any information that indicates that any of its
representations or warranties contained herein was not true and correct as of
the date hereof or will not be true and correct at and as of the Effective Time
with the same force and effect as if made at and as of the Effective Time
(except for changes permitted or contemplated by this Agreement), (ii) the
occurrence of any event that will result, or has a reasonable prospect of
resulting, in the failure of any condition specified in Article VIII hereof to
be satisfied, (iii) any notice or other communication from any third party
alleging that the consent of such third party is or may be required in
connection with the transactions contemplated by this Agreement or that such
transactions otherwise may violate the rights of or confer remedies upon such
third party and (iv) any notice of, or other communication relating to, any
litigation referred to in Section 7.15 or any order or judgment entered or
rendered therein.
7.15 Defense of Litigation. Each of Liberty and the Company agrees to
vigorously defend against any and all actions, suits or proceedings in which
such party is named as a defendant that seek to enjoin, restrain or prohibit the
transactions contemplated hereby or seek damages with respect to such
transactions. The Company shall not settle any such action, suit or proceeding
or fail to perfect on a timely basis any right to appeal any judgment rendered
or order entered against the Company therein without the consent of Parent and
Liberty Media (which consent shall not unreasonably be withheld or delayed).
Liberty Media and Merger Sub shall not settle any such action, suit or
proceeding, if such settlement would have, or could reasonably be expected to
have, a Material Adverse Effect, without the consent of the Company (which
consent shall not unreasonably be withheld or delayed). Each of Liberty and the
Company further agrees to use its reasonable efforts to cause each of its
Affiliates, directors and officers to vigorously defend any action, suit or
proceeding in which such Affiliate, director or officer is named as a defendant
and which seeks any such relief to comply with this Section to the same extent
as if such person were a party hereto.
7.16 Additional Financial Statements. Promptly after the same become
available, the Company shall furnish to Parent and Liberty Media such additional
financial data concerning the Company and its Subsidiaries as Parent or Liberty
Media may reasonably request, including any audited consolidated financial
statements of the furnishing party for any year ending on or after the date
hereof, prepared in conformity with the requirements of the Commission
applicable to annual financial statements to be
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included in Form 10-K under the Exchange Act, and all interim quarterly
consolidated financial statements of the furnishing party prepared on or after
the date of this Agreement, accompanied by a statement of the principal
financial officer of the Company that, in the opinion of such officer, such
quarterly financial statements were prepared in conformity with the requirements
of the Commission applicable to financial statements to be included in Form 10-Q
under the Exchange Act, applied (in each such case) on a consistent basis
(except as otherwise stated in the quarterly financial statements) and present
fairly the consolidated financial position, results of operations and cash flows
of the Company and its consolidated Subsidiaries as of the date and for the
period indicated (subject in the case of quarterly financial statements to
normal, recurring year-end audit adjustments).
7.17 Agreement with Robert T. Walston. Concurrently with the execution of
this Agreement, an agreement with Robert T. Walston, Chief Executive Officer of
the Company, a copy of the form of which is attached hereto as Exhibit 7.17, is
being executed by Mr. Walston, pursuant to which Mr. Walston agrees to waive any
rights to acceleration he has pursuant to any Company Stock Options listed in
Section 2.3(b)(i)(A) of the Company Disclosure Schedule (i) to the extent that
such right to acceleration arises out of the Merger and (ii) only to the extent
that the value of such acceleration would constitute a "parachute payment"
within the meaning of Section 280G of the Code such that the acceleration of the
Company Stock Options together with any other payments which might result in
parachute payments would subject Mr. Walston to any excise tax under Section
4999 of the Code.
ARTICLE VIII.
CONDITIONS PRECEDENT
8.1 Conditions Precedent to the Obligations of Parent, Liberty Media,
Merger Sub and the Company. The respective obligations of Parent, Liberty Media,
Merger Sub and the Company to consummate the Merger are subject to the
satisfaction at or prior to the Closing Date of each of the following
conditions, any of which, to the extent permitted by applicable law, may be
waived by Parent (only with the concurrence of Liberty Media), for itself and
Merger Sub (but not, in either case, for the Company), or by the Company for
itself (but not for Parent, Merger Sub or Liberty Media):
(a) Approval of Stockholders. This Agreement and the Merger Proposal
shall have been approved and adopted by such vote of the stockholders of
the Company as set forth in Sections 3.1 and 4.34.
(b) Registration. The Registration Statement (as amended or
supplemented) shall have become effective under the Securities Act and
shall not be subject to any stop order, and no action, suit, proceeding or
investigation by the Commission seeking a stop order or to suspend the
effectiveness of the Registration Statement shall have been initiated and
be continuing. Parent shall have received all state securities law or blue
sky permits and authorizations necessary to issue the Merger Consideration
as contemplated hereby and such permits and authorizations shall be in full
force and effect.
(c) Hart-Scott Act. Any applicable waiting period (and any extension
thereof) under the Hart-Scott Act shall have expired or been terminated.
(d) NYSE Listing. The shares of Class A Liberty Media Group Stock to
be issued in the Merger shall have been authorized for listing on the NYSE,
subject only to official notice of issuance.
8.2 Conditions Precedent to the Obligations of Parent and Merger Sub for
the Benefit of Liberty Media. The obligations of Parent and Merger Sub to
consummate the Merger are also subject to the satisfaction at or prior to the
Closing Date of each of the following conditions, which conditions are solely
for the benefit of Liberty Media, and any or all of which may be asserted or
waived solely by Liberty Media acting alone:
(a) Accuracy of Representations and Warranties. All representations
and warranties of the Company contained in this Agreement shall, if
specifically qualified by materiality, be true and correct and, if not so
qualified, be true and correct in all material respects, in each case as of
the date of this
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Agreement and, except to the extent such representations and warranties
speak as of a specified earlier date, on and as of the Closing Date as
though made on and as of the Closing Date, except for any changes permitted
or contemplated by this Agreement.
(b) Performance of Agreements. The Company shall have performed in all
material respects all obligations and agreements, and complied in all
material respects with all covenants and conditions, contained in this
Agreement to be performed or complied with by it prior to or on the Closing
Date.
(c) Compliance Certificate. The Company shall have delivered to Parent
and Liberty Media a certificate, dated the Closing Date, 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 8.1(a), 8.2(a), 8.2(b) and 8.2(f) (to the extent such
Local Approvals or Governmental Consents must be obtained by the Company).
(d) Absence of Injunctions and Proceedings. No permanent or
preliminary Injunction or restraining order or other order by any court or
other Governmental Entity of competent jurisdiction or other legal
restraint or prohibition shall be in effect, (i) preventing consummation of
the transactions contemplated hereby as provided herein, or permitting such
consummation only subject to any condition or restriction that has had or
would have a Liberty Media Material Adverse Effect, (ii) requiring the
divestiture, as a result of consummation of the Merger, of a material
portion of the business or assets of Liberty Media and its Subsidiaries and
Affiliates taken as a whole, (iii) imposing material limitations on the
ability of Liberty Media effectively to exercise full rights of ownership
of shares of capital stock or other ownership interests of the Surviving
Entity (including the right to vote such shares or other ownership
interests on all matters properly presented to the stockholders or other
equity holders of the Surviving Entity) or making the holding by Liberty
Media of any such shares or other ownership interests illegal or subject to
any materially burdensome requirement or condition, or (iv) requiring
Liberty Media, its Subsidiaries or the Company or any of its Subsidiaries
to cease or refrain from engaging in any line of business, including any
line of business conducted by the Company or any of its Subsidiaries, as a
result of the consummation of the Merger.
(e) No Adverse Enactments. No statute, rule, regulation, law, order,
judgment or decree enacted, promulgated, entered, issued, enforced or
deemed applicable by any foreign or United States federal, state or local
Governmental Entity of competent jurisdiction shall be in effect which (i)
makes this Agreement, the Merger or any other transaction contemplated
hereby illegal or imposes or is reasonably likely to impose material
damages or penalties in connection therewith, (ii) requires or is
reasonably likely to require, as a result of the consummation of the
Merger, the divestiture of or any restrictions or conditions on the conduct
of (A) a portion of the business or assets of the Company and its
Subsidiaries, taken as a whole, which would have a Material Adverse Effect,
or (B) a material portion of the business or assets of Liberty Media and
its Subsidiaries and Affiliates taken as a whole, (iii) imposes or is
reasonably likely to result in imposition of material limitations on the
ability of Liberty Media effectively to exercise full rights of ownership
of shares of capital stock or other ownership interests of the Surviving
Entity (including the right to vote such shares or other ownership
interests on all matters properly presented to the stockholders or other
equity holders of the Surviving Entity) or makes the holding by Liberty
Media of any such shares or other ownership interests illegal or subject to
any materially burdensome requirement or condition, or (iv) requires or is
reasonably likely to require Liberty Media or its Subsidiaries or
Affiliates or the Company or any of its material Subsidiaries to cease or
refrain from engaging in any material business, including in the case of
Liberty Media any material business conducted by the Company or any of its
Subsidiaries prior to the Merger, as a result of the consummation of the
Merger.
(f) Governmental Consents, Etc. Other than the filing of the
Certificate of Merger with the Delaware Secretary of State and filings due
after the Effective Time, all Local Approvals, and all other Governmental
Consents (other than those specified in Section 8.1(c)) as are required in
connection with the consummation of the Merger shall have been obtained and
shall be in full force and effect without any condition, limitation or
restriction, all Governmental Filings as are required in
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connection with the consummation of the Merger shall have been made, and
all waiting periods, if any, applicable to the consummation of the Merger
imposed by any Governmental Entity (other than those specified in Section
8.1(c)) shall have expired, other than any of the foregoing which, if not
so obtained, in force or effect, made or expired (as the case may be) would
not, either individually or in the aggregate, have a Material Adverse
Effect (or an effect on Liberty Media and its Subsidiaries and Affiliates
that, were the Company and its Subsidiaries subjected to the same (or a
materially similar) effect, would constitute a Material Adverse Effect);
provided, however, that any Governmental Consent by the FCC relating to the
Company's FCC Licenses described in Section 4.15 of the Company Disclosure
Schedule shall not be deemed ineffective for purposes of this subsection
8.2(f) solely because such Governmental Consent is subject to appeal
(provided that no notice of appeal shall have been filed) or to
reconsideration by the FCC on its own motion.
(g) Termination of Registration Rights. The Company shall have
received (and the Company shall have provided to Liberty Media a copy of)
(i) a written acknowledgment from each of Fleming US Discovery Fund III,
L.P. and Fleming US Discovery Offshore Fund III, L.P. that the registration
rights agreement referred to in Item 3 of Schedule 4.3(e), and the rights
of each such party thereunder, shall be terminated as of the Effective
Time, and (ii) a written acknowledgment from each of Warburg, Pincus Equity
Partners, L.P., Warburg, Pincus Netherlands Equity Partners I, C.V.,
Warburg, Pincus Netherlands Equity Partners II, C.V., and Warburg, Pincus
Netherlands Equity Partners III, C.V. that the registration rights
agreement referred to in Item 4 of Schedule 4.3(e), and the rights of each
such party thereunder, shall be terminated as of the Effective Time.
8.3 Conditions Precedent to the Obligations of Parent and Merger Sub for
the Benefit of Parent. The obligations of Parent and Merger Sub to consummate
the Merger are also subject to the satisfaction at or prior to the Closing Date
of each of the following conditions, which conditions are solely for the benefit
of Parent, and any or all of which may be waived solely by Parent acting alone:
(a) Accuracy of Representations and Warranties. All representations
and warranties of the Company contained in this Agreement shall, if
specifically qualified by materiality, be true and correct and, if not so
qualified, be true and correct in all material respects in each case as of
the date of this Agreement and (except to the extent such representations
and warranties speak as of a specified earlier date) on and as of the
Closing Date as though made on and as of the Closing Date, except for
changes permitted or contemplated by this Agreement.
(b) Performance of Agreements. The Company shall have performed in all
material respects all obligations and agreements, and complied in all
material respects with all covenants and conditions, contained in this
Agreement to be performed or complied with by it prior to or on the Closing
Date.
(c) Compliance Certificate. The Company shall have delivered to Parent
a certificate, dated the Closing Date, 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
8.1(a), 8.3(a), 8.3(b) and 8.3(f) (to the extent such Local Approvals or
Governmental Consents must be obtained by the Company), and identifying (to
the extent not set forth on the Company Disclosure Schedule) the following:
(i) any pending action or preceding by any Governmental Entity
seeking a permanent or preliminary Injunction or restraining order or
other order by any court or other Governmental Entity of competent
jurisdiction or other legal restraint or prohibition which, if
determined in a manner adverse to the Company, Liberty Media or Parent,
could have the effect of, and any such Injunction or other order,
restraint or prohibition in an action or proceeding (whether by a
Governmental Entity or otherwise) that is in effect, preventing
consummation of the transactions contemplated hereby as provided herein
or permitting such consummation subject to any condition or restriction;
(ii) any contract, agreement or understanding to which the Company
or any of its Subsidiaries is a party that would, at the Effective Time,
be legally enforceable against Parent or
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any of its Subsidiaries (other than Liberty Media, the Liberty Media
Affiliates, the Company, and their respective Subsidiaries); and
(iii) any License that is required for the ownership and operation
of the assets and facilities of the respective businesses of Company and
its Subsidiaries which, as of the Closing Date, the Company and its
Subsidiaries no longer hold, or are not in compliance with the terms of,
or have not duly and currently filed all reports and other information
required to be filed by them in connection therewith.
(d) Absence of Injunctions and Proceedings. No action or proceeding by
any Governmental Entity seeking a permanent or preliminary Injunction or
restraining order or other order by any court or other Governmental Entity
of competent jurisdiction or other legal restraint or prohibition shall be
pending which, if determined in a manner adverse to the Company, Liberty
Media or Parent, could have the effect of, and no such Injunction or other
order, restraint or prohibition in an action or proceeding (whether by a
Governmental Entity or otherwise) shall be in effect, preventing
consummation of the transactions contemplated hereby as provided herein, or
permitting such consummation only subject to any condition or restriction
that (x) has had or would have a Parent Material Adverse Effect or a
Material Adverse Effect or (y) would require Parent or any of its
Subsidiaries to take or refrain from, or would prohibit Parent or any of
its Subsidiaries from taking or refraining from, any action (other than
actions required to be taken by Parent or its Subsidiaries pursuant to the
final proviso of the penultimate sentence of Section 3.4 hereof, or
otherwise specifically agreed to by Parent or one of its Subsidiaries in
this Agreement).
(e) No Adverse Enactments. No statute, rule, regulation, law, order,
judgment or decree enacted, promulgated, entered, issued, enforced or
deemed applicable by any foreign or United States federal, state or local
Governmental Entity of competent jurisdiction shall be in effect which (i)
makes this Agreement, the Merger, the Post-Merger Restructuring
Transactions or any other transaction contemplated hereby illegal or
imposes material damages or penalties in connection therewith or otherwise
prohibits or unreasonably delays any of such transactions, (ii) requires
the divestiture or holding separate of any portion of the business or any
assets of Parent or any of its Subsidiaries (or any reorganization or
restructuring thereof) in any such case as a result of the consummation of
the Merger, or would require Parent or any of its Subsidiaries to take or
refrain from, or would prohibit Parent or any of its Subsidiaries from
taking or refraining from, any action (other than actions required to be
taken or refrained from (or prohibited to be taken or refrained from, as
the case may be) by Parent or any of its Subsidiaries pursuant to the final
proviso of the penultimate sentence of Section 3.4 hereof, or otherwise
specifically agreed to by Parent or one of its Subsidiaries in this
Agreement), (iii) imposes any material limitations on the ability of Parent
or Liberty Media effectively to exercise full rights of ownership of shares
of capital stock or other ownership interests of the Surviving Entity
(including the right to vote such shares or other ownership interests on
all matters properly presented to the stockholders or other equity holders
of the Surviving Entity), or makes the holding by Parent or Liberty Media
of any such shares or other ownership interests illegal or subject to any
materially burdensome requirement or condition, (iv) requires Parent or any
of its Subsidiaries to cease or refrain from engaging in any material
business, whether or not such business is conducted by the Company or any
of its Subsidiaries, as a result of the consummation of the Merger, or (v)
increases in any material respect the liabilities or obligations of Parent
arising out of this Agreement or, in Parent's reasonable judgment,
otherwise would have a Parent Adverse Effect, as a result of the
consummation of the Merger.
(f) Governmental Consents, Etc. Other than the filing of the
Certificate of Merger with the Delaware Secretary of State and filings due
after the Effective Time, all Local Approvals, and all other Governmental
Consents as are required in connection with the consummation of the
transactions contemplated hereby shall have been obtained and shall be in
full force and effect without any condition, limitation or restriction, all
Governmental Filings as are required in connection with the consummation of
the transactions contemplated hereby shall have been made, and all waiting
periods, if any, applicable to the consummation of such transactions
imposed by any Governmental
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Entity shall have expired, other than the foregoing which, if not so
obtained, in force or effect, made or expired (as the case may be) would
not, in Parent's reasonable judgement, either individually or in the
aggregate, have a Parent Adverse Effect; provided, however, that any
Governmental Consent by the FCC relating to the Company's FCC Licenses
described in Section 4.15 of the Company Disclosure Schedule shall not be
deemed ineffective for purposes of this subsection 8.3(f) solely because
such Governmental Consent is subject to appeal (provided that no notice of
appeal shall have been filed) or to reconsideration by the FCC on its own
motion.
(g) Certain Agreements. Neither the Company nor any of its
Subsidiaries shall be a party to any contract, agreement or understanding
that would at the Effective Time be legally enforceable against Parent or
any of its Subsidiaries (other than Liberty Media, the Liberty Media
Affiliates, the Company, and their respective Subsidiaries), except as
would not have a Parent Adverse Effect.
(h) Certain Licenses. The Company and its Subsidiaries shall hold, and
be in compliance with the terms of, and shall have duly and currently filed
all reports and other information required to be filed by them in
connection with, all licenses, permits, rights of way, easements,
franchises, ordinances, certificates, variances, exemptions, concessions,
leases, instruments, orders and approvals, governmental authorizations,
domestic and foreign, necessary to the ownership of the Company's and its
Subsidiaries' property or to the conduct of their respective businesses,
including without limitation, all FCC Licenses required for the ownership
and operation of the assets and facilities of their respective businesses,
except for any failure to so hold, be in compliance with the terms of, or
have duly and currently filed, that in the reasonable judgment of Parent
would not have a Parent Adverse Effect.
(i) No Liberty Media Notice. Parent shall not have been notified by
Liberty Media that any of the Conditions set forth in this Article VIII
(other than Section 8.4) shall remain unsatisfied.
(j) Performance of Agreements. Liberty Media shall have performed in
all material respects all obligations and agreements, and complied in all
material respects with all covenants and conditions, to be performed or
complied with by it hereunder, prior to or on the Closing Date and Liberty
Media shall have delivered to Parent a certificate dated as of the Closing
Date, signed by the President or any Vice President of Liberty Media (but
without personal liability thereto) certifying as to the matters described
in this Section 8.3(j).
(k) Hart-Scott. Any applicable waiting period under the Hart-Scott Act
shall have expired or been terminated without receipt of any objections or
commencement of litigation or threat thereof by the appropriate
Governmental Entity to restrain the transactions contemplated hereby.
(l) Termination of Registration Rights. The Company shall have
received (and the Company shall have provided to Parent a copy of) (i) a
written acknowledgment from each of Fleming US Discovery Fund III, L.P. and
Fleming US Discovery Offshore Fund III, L.P. that the registration rights
agreement referred to in Item 3 of Schedule 4.3(e), and the rights of each
such party thereunder, shall be terminated as of the Effective Time, and
(ii) a written acknowledgment from each of Warburg, Pincus Equity Partners,
L.P., Warburg, Pincus Netherlands Equity Partners I, C.V., Warburg, Pincus
Netherlands Equity Partners II, C.V., and Warburg, Pincus Netherlands
Equity Partners III, C.V. that the registration rights agreement referred
to in Item 4 of Schedule 4.3(e), and the rights of each such party
thereunder, shall be terminated as of the Effective Time.
8.4 Conditions Precedent to the Obligations of the Company. The obligation
of the Company to consummate the Merger is also subject to the satisfaction at
or prior to the Closing Date of each of the following conditions, unless waived
by the Company:
(a) Accuracy of Representations and Warranties. All representations
and warranties of Parent and Liberty Media contained in this Agreement
shall, if specifically qualified by materiality, be true and correct and,
if not so qualified, be true and correct in all material respects in each
case as of the date of this Agreement and (except to the extent such
representations and warranties speak as of a
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specified earlier date) on and as of the Closing Date as though made on and
as of the Closing Date, except for changes permitted or contemplated by
this Agreement.
(b) Performance of Agreements. Each of Merger Sub, Liberty Media and
Parent shall have performed in all material respects all obligations and
agreements, and complied in all material respects with all covenants and
conditions, contained in this Agreement to be performed or complied with by
it prior to or on the Closing Date.
(c) Officers' Certificates. (i) Liberty Media shall have delivered to
the Company a certificate dated the Closing Date, signed by the President
or any Vice President of Liberty Media (but without personal liability
thereto) certifying as to the fulfillment of the conditions specified in
Sections 8.4(a) and 8.4(b) (insofar as each relates to Liberty Media) and
(ii) Parent shall have delivered to the Company a certificate, dated the
Closing Date, 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 Section 8.4(a) and 8.4(b) (insofar as each
relates to Parent and Merger Sub).
(d) Absence of Injunctions. No permanent or preliminary Injunction or
restraining order or other order by any court or other Government Entity of
competent jurisdiction, or other legal restraint or prohibition, shall be
in effect preventing consummation of the transactions contemplated hereby
as provided herein, or permitting such consummation only subject to any
condition or restriction that has had or would have a Liberty Media
Material Adverse Effect.
(e) No Adverse Enactments. No statute, rule or regulation enacted,
promulgated, entered, issued, enforced or deemed applicable by any foreign
or United States federal, state or local Governmental Entity of competent
jurisdiction shall be in effect, and there shall be no action, suit or
proceeding brought by any such Governmental Entity and pending which (i)
makes this Agreement or the Merger illegal or (ii) has or is reasonably
likely to have a Liberty Media Material Adverse Effect.
(f) Governmental Consents, Etc. Other than the filing of the
Certificate of Merger with the Delaware Secretary of State and filings due
after the Effective Time, all Local Approvals, and all other Governmental
Consents (other than those specified in Section 8.1(c)) as are required in
connection with the consummation of the Merger shall have been obtained and
shall be in full force and effect, and all waiting periods, if any,
applicable to the consummation of the Merger imposed by any Governmental
Entity shall have expired, other than any of the foregoing which, if not
obtained, in force or effect, made or expired (as the case may be), would
not, either individually or in the aggregate, be reasonably likely to have
a Liberty Media Material Adverse Effect; provided, however, that any
Governmental Consent by the FCC relating to the Company's FCC Licenses
described in Section 4.15 of the Company Disclosure Schedule shall not be
deemed ineffective for purposes of this subsection 8.4(f) solely because
such Governmental Consent is subject to appeal (provided that no notice of
appeal shall have been filed) or to reconsideration by the FCC on its own
motion.
ARTICLE IX.
TERMINATION
9.1 Termination and Abandonment. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned at any time prior to the
Effective Time, whether before or after approval and adoption of this Agreement
by the stockholders of the Company:
(i) by mutual consent of Parent, Liberty Media and the Company;
(ii) by any of the Company, Parent or Liberty Media: (A) if the Merger
shall not have been consummated on or before July 31, 2000, provided that
the right to terminate this Agreement pursuant to this clause (ii)(A) shall
not be available to any party whose failure to perform any of its
obligations under this Agreement has been the cause of or resulted in the
failure of the Merger to be consummated on or before such date, and
provided further that if the Merger has not been
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consummated on or before July 31, 2000 solely as a result of the failure of
the conditions set forth in Sections 8.1(b) (if the failure to satisfy such
condition is the result of any material acquisition or other transaction,
or agreement with respect thereto, engaged in, or entered into, by Parent
or Liberty Media or any of their respective Affiliates whether prior to or
after the date hereof), 8.1(c), 8.2(d), 8.2(f), 8.3(d), 8.3(f), 8.4(d), or
8.4(f) to be satisfied or waived, any party, by written notice to the other
parties, may extend such date up to September 30, 2000, (B) if there has
been a material breach of any representation, warranty, covenant or
agreement on the part of any other party contained in this Agreement, in
each case that is not curable, such that the conditions set forth in
Sections 8.2(a) or (b) or Sections 8.3(a) or (b), in the case of such a
breach by the Company, or Sections 8.4(a) or (b), in the case of such a
breach by Parent, Merger Sub or Liberty Media, cannot be satisfied, (C) if
any court of competent jurisdiction or other competent Governmental Entity
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, or (D) the stockholders of the Company fail to approve and
adopt the Merger Proposal by the requisite vote (I) at the Special Meeting,
or (II) by the date one day prior to the applicable date referred to in (A)
above, provided the Registration Statement became effective (unless the
failure of the Registration Statement to become effective is the result of
the Company's material breach of Section 3.2(a)) and remained effective
such that the Proxy Statement could be mailed to the Company stockholders
and the Special Meeting held prior to such applicable date (provided that
Parent shall not terminate this Agreement pursuant to this clause (D)
without the concurrence of Liberty Media); or
(iii) by Liberty Media if (x) the Company Board withdraws or modifies,
in a manner adverse to Parent or Liberty Media, its approval or
recommendation of the Merger or (y) the Company Board approves or
recommends, or authorizes the Company to enter into an agreement with
respect to, an Extraordinary Transaction.
(iv) by the Company, pursuant to Section 7.5(c).
9.2 Termination Fee; Effects of Termination.
(a) If (i) during the term of this Agreement, the Company Board withdraws
or modifies, in a manner adverse to Parent or Liberty Media, its approval or
recommendation of the Merger, or the Company Board approves, or recommends, or
authorizes the Company to enter into an agreement with respect to, an
Extraordinary Transaction, and (ii) this Agreement is thereafter terminated
pursuant to Section 9.1(ii), Section 9.1(iii) or Section 9.1(iv), and (iii) in
the case of any termination pursuant to Section 9.1(ii) only, the Company
thereafter enters into any definitive agreement with respect to or consummates
an Extraordinary Transaction with any Person other than Liberty Media, Parent or
an Affiliate of either of them, within six months after the date of such
termination, then, in any such case, the Company shall immediately pay Liberty
Media a fee of $6,500,000 (the "Termination Fee"), payable by wire transfer of
same day funds.
(b) If this Agreement is terminated by the Company, Parent or Liberty Media
pursuant to Section 9.1, this Agreement forthwith shall become void and there
shall be no liability or obligation on the part of Parent, Liberty Media, Merger
Sub, the Company or any of their respective Affiliates, stockholders, directors,
officers, agents employees or Representatives except (i) as provided in Sections
4.25, 6.8, 7.2 and 7.5, which shall survive such termination and (ii) subject to
Section 10.10, to the extent such termination results from the willful breach by
Parent, Liberty Media, Merger Sub or the Company of any of its representations,
warranties, covenants or agreements contained in this Agreement.
(c) Notwithstanding anything to the contrary contained herein, any election
by the Company to pay, or by Liberty Media or Parent to receive, the Termination
Fee pursuant to Section 9.2(a) shall constitute full settlement of any and all
liabilities of the Company for damages under this Agreement in respect of a
termination of this Agreement pursuant to Sections 9.1(i), 9.1(ii) and 9.1(iii)
and shall be the sole measure of damages with respect to such termination.
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(d) In the event of any termination of this Agreement pursuant to Section
9.1, Parent shall have no further obligation or liability hereunder, except for
its confidentiality obligations pursuant to Section 7.2.
ARTICLE X.
MISCELLANEOUS
10.1 No Waiver or Survival of Representations and Warranties. The
respective representations and warranties of Parent, Merger Sub, Liberty Media
and the Company contained herein or in any certificate or other instrument
delivered pursuant hereto prior to or at the Closing shall not be deemed waived
or otherwise affected by any investigation made by any party hereto. All
representations and warranties made by each of the parties herein shall expire
at the Effective Time and shall thereafter be of no further force or effect.
10.2 Notices. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given if delivered personally
or mailed, certified or registered mail with postage prepaid, or sent by
telegram or confirmed telex or telecopier, as follows:
(a) If to Parent or Merger Sub:
AT&T Corp.
295 North Maple Avenue
Basking Ridge, NJ 07920
Attention: Vice President -- Law and Corporate Secretary
Facsimile: (908) 221-6618
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 W. 52nd Street
New York, NY 10019
Attention: David M. Silk, Esq.
Facsimile: (212) 403-2000
(b) If to Liberty Media:
Liberty Media Corporation
9197 South Peoria Street
Englewood, CO 80112
Attention: Charles Y. Tanabe, Esq.
Facsimile: (720) 875-5382
with copies to:
Baker & Botts, L.L.P.
599 Lexington Ave.
New York, NY 10022
Attention: Marc A. Leaf, Esq.
Facsimile: (212) 705-5125
and
Liberty Media Corporation
9197 South Peoria Street
Englewood, CO 80112
Attention: David P. Beddow
Facsimile: (720) 875-5415
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(c) If to the Company:
Four Media Company
625 Arizona Avenue
Santa Monica, California 90401
Attention: William E. Niles, Esq.
Facsimile: (310) 587-1277
with a copy to:
Latham & Watkins
633 West Fifth Street
Suite 4000
Los Angeles, CA 90071
Attention: James P. Beaubien, Esq.
Facsimile: (213) 891-8763
or to such other Person or address as any party shall specify by notice in
writing to the other party. All such notices, requests, demands, waivers and
communications shall be deemed to have been received on the date of delivery or
on the third business day after the mailing thereof, except that any notice of a
change of address shall be effective only upon actual receipt thereof.
10.3 Entire Agreement. This Agreement (including the Schedules, Exhibits
and other documents referred to herein), together with (in the case of the
Company and Liberty Media) the Mutual Nondisclosure Agreement, dated as of
August 13, 1999, between the Company and Liberty Media, constitutes the entire
agreement between the parties and supersedes all prior agreements and
understandings, oral and written, between the parties with respect to the
subject matter hereof.
10.4 Assignment; Binding Effect; Benefit. Neither this Agreement nor any
of the rights, benefits or obligations hereunder may be assigned by any party
(whether by operation of law or otherwise) without the prior written consent of
the other party. Subject to the preceding sentence, this Agreement will be
binding upon, inure to the benefit of and be enforceable by, the parties and
their respective successors and permitted assigns. Except for Section 7.11,
nothing in this Agreement, expressed or implied, is intended to confer on any
person other than the parties or their respective successors and permitted
assigns, any rights, remedies, obligations or liabilities under or by reason of
this Agreement.
10.5 Amendment. This Agreement may be amended by action of all the
parties, by action taken or authorized by their respective Boards of Directors,
at any time before or after approval and adoption of this Agreement and the
Merger by the stockholders of the Company, but, after any such approval by the
stockholders of the Company, no amendment shall be made which by law requires
further approval by such stockholders of the Company without such further
approval. This Agreement may not be amended except by an instrument in writing
signed on behalf of each of the parties. Notwithstanding the foregoing, (a) the
provisions of Sections 7.4 (other than to the extent related to Sections
7.4(c)(i) and 7.4(h)) and 7.5 may be amended by an instrument signed in writing
by the Company and Liberty Media, without any action on the part of Parent or
Merger Sub and (b) following the Effective Time, this sentence of Section 10.5
may only be amended by an instrument signed in writing by Parent, Liberty Media
and, on behalf of the Company, by at least one individual who was serving on the
board of directors of the Company immediately prior to the Effective Time.
10.6 Extension; Waiver. At any time prior to the Effective Time, the
parties, by action taken or authorized by each such party's Board of Directors,
may, to the extent legally allowed, (i) extend the time specified herein for the
performance of any of the obligations of the other parties, (ii) waive any
inaccuracies in the representations and warranties of the other parties
contained herein or in any document delivered pursuant hereto, (iii) waive
compliance by the other parties with any of the agreements or covenants of such
other parties contained herein or (iv) waive any condition to such waiving
party's obligation to consummate the transactions contemplated hereby or to any
of such waiving party's other obligations hereunder. Any agreement on the part
of a party hereto to any such extension or waiver shall
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be valid only if set forth in a written instrument signed on behalf of such
party. Any such extension or waiver by any party shall be binding on such party
but not on any other party entitled to the benefits of the provision of this
Agreement affected unless such other party also has agreed to such extension or
waiver. No such waiver shall constitute a waiver of, or estoppel with respect
to, any subsequent or other breach or failure to strictly comply with the
provisions of this Agreement. The failure of any party to insist on strict
compliance with this Agreement or to assert any of its rights or remedies
hereunder or with respect hereto shall not constitute a waiver of such rights or
remedies. Whenever this Agreement requires or permits consent or approval by any
party, such consent or approval shall be effective if given in writing in a
manner consistent with the requirements for a waiver of compliance as set forth
in this Section 10.6. Any waiver by either Parent or Liberty Media shall require
the consent of both Parent and Liberty Media. Notwithstanding the foregoing, the
provisions of Sections 7.4 (other than to the extent related to Sections
7.4(c)(i) and 7.4(h)) and 7.5 may be waived by an instrument signed in writing
by the Company and Liberty Media without any action on the part of Parent or
Merger Sub.
10.7 Parent Transactions. Notwithstanding anything to the contrary in this
Agreement, the pursuit and/or consummation by Parent or any of its Subsidiaries
or Affiliates of any Parent Transaction shall be deemed not to be a breach of
any provision of this Agreement.
10.8 Headings. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. The phrase "made available" in this
Agreement shall mean that the information referred to has been made available if
requested by the party to whom such information is to be made available.
10.9 Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed to be an original, and all of which together shall be
deemed to be one and the same instrument.
10.10 Applicable Law. This Agreement and the legal relations between the
parties hereunder shall be governed by and construed in accordance with the laws
of the State of Delaware, without regard to the conflict of laws thereof.
10.11 Enforcement. The parties agree that irreparable damage would occur
in the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to seek an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States or
in Delaware state court, this being in addition to any other remedy to which
they are entitled at law or in equity. In addition, each of the parties hereto
(a) consents to submit itself to the non-exclusive jurisdiction of any Federal
court located in the State of Delaware or any Delaware state court in the event
any dispute arises out of this Agreement or any of the transactions contemplated
by this Agreement, and (b) agrees that it will not attempt to deny or defeat
such personal jurisdiction by motion or other request for leave from any such
court.
10.12 Company Disclosure Schedule. The parties acknowledge that the
Company Disclosure Schedule (i) relates to certain matters concerning the
disclosures required and transactions contemplated by this Agreement, (ii) is
qualified in its entirety by reference to specific provisions of this Agreement
and (iii) is 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 any of its Subsidiaries or will have or is likely to have a Material
Adverse Effect, Liberty Media Material Adverse Effect, Parent Material Adverse
Effect or Parent Adverse Effect. Disclosure of the information contained in one
section or part of the Company Disclosure Schedule shall be deemed as proper
disclosure for other sections or parts of the Company Disclosure Schedule only
if appropriately cross-referenced or if the relevance thereof is reasonably
apparent from the context in which it appears and provided, further that
information set forth in the Company Disclosure Schedule shall be deemed to
qualify the representations in Section 4.1, 4.2 and 4.3 of this Agreement only
if such information is set forth in Section 4.1, 4.2 or 4.3, as applicable, of
the Company Disclosure Schedule.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement and
Plan of Merger as of the date first above written.
AT&T CORP.
By: /s/ MARILYN J. WASSER
------------------------------------
Name: Marilyn J. Wasser
Title: Vice President -- Law and
Secretary
FOUR MEDIA COMPANY
By: /s/ ROBERT T. WALSTON
------------------------------------
Name: Robert T. Walston
Title: Chairman and Chief
Executive Officer
LIBERTY MEDIA CORPORATION
By: /s/ CHARLES Y. TANABE
------------------------------------
Name: Charles Y. Tanabe
Title: Senior Vice President
D-GROUP MERGER CORP.
By: /s/ MARILYN J. WASSER
------------------------------------
Name: Marilyn J. Wasser
Title: Treasurer
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<PAGE> 153
EXHIBITS
<TABLE>
<S> <C>
Exhibit 2.1(a) Form of Certificate of Merger
Exhibit 2.1(c)(i) Certificate of Incorporation of Surviving Entity
Exhibit 2.1(c)(ii) Bylaws of Surviving Entity
Exhibit 2.6 Post-Merger Restructuring Transactions
Exhibit 3.3 Form of Affiliate Agreement
Exhibit 4.1(a)(i) Certificate of Incorporation of the Company
Exhibit 4.1(a)(ii) Bylaws of the Company
Exhibit 7.10(a) Form of TSP Voting Agreement
Exhibit 7.10(b) Form of Warburg, Pincus/Fleming Funds Voting Agreement
Exhibit 7.17 Form of Waiver Agreement
</TABLE>
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SCHEDULES
Company Disclosure Schedule
Liberty Media Disclosure Schedule
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<PAGE> 155
ANNEX B
[COMPANY LOGO]
December 6, 1999
To The Board of Directors of
Four Media Company
Dear Gentlemen:
We understand that the Company is considering entering into an agreement
and plan of merger whereby the Company's issued and outstanding common stock
will, in a taxable transaction, be exchanged for Class A Liberty Media Group
tracking stock (NYSE:LMGA) of AT&T Corp. and cash consideration. Upon
consummation of the merger, each share of the Company's common stock will be
exchanged for .16129 of a share of Class A Liberty Media Group tracking stock
plus $6.25 in cash (collectively the "Merger Consideration"). As of November 16,
1999 the closing price of LMGA stock was $42.50 per share, indicating a value of
$13.10 for each of the Company's shares. All of the Company's obligations to
holders of Company options and warrants will be assumed by Liberty Media Group,
subject to the right of holders of vested options to elect to receive a cash
payment. Such transaction and other related transactions disclosed to Houlihan
Lokey are referred to collectively herein as the "Transaction."
You have requested our opinion (the "Opinion") as to the matters set forth
below. The Opinion does not address the Company's underlying business decision
to effect the Transaction. We have not been requested to, and did not, solicit
third party indications of interest in acquiring all or any part of the Company.
Furthermore, at your request, we have not negotiated the Transaction or advised
you with respect to alternatives to it.
In connection with this Opinion, we have made such reviews, analyses and
inquiries as we have deemed necessary and appropriate under the circumstances.
Among other things, we have:
1. reviewed the Company's historic financial statements (10-K's) for the
three fiscal years ending August 1, 1999, and the unaudited pro-forma
financial statements for the fiscal year ending August 1, 1999 as well
as the financial information for the months ending August 29, 1997, 1998
and 1999;
2. reviewed certain publicly available business and financial information
relating to AT&T/Liberty that we deemed to be relevant;
3. reviewed a copy of the draft Agreement and Plan of Merger dated November
18, 1999;
4. met with certain members of the senior management of the Company to
discuss the operations, financial condition, future prospects and
projected operations and performance of the Company;
5. visited certain facilities and business offices of the Company;
6. reviewed forecasts and projections prepared by the Company's management
with respect to the Company for the years ended July 31, 2000 through
2005;
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<PAGE> 156
7. reviewed the historical market prices and trading volume for the
Company's publicly traded securities;
8. reviewed the historical market prices and trading volume for Class A
Liberty Media Group tracking stock;
9. reviewed certain other publicly available financial data for certain
companies that we deem comparable to the Company, and publicly available
prices and premiums paid in other transactions that we considered
similar to the Transaction;
10. reviewed drafts of certain documents to be delivered at the closing of
the Transaction; and
11. conducted such other studies, analyses and inquiries as we have deemed
appropriate.
We have relied upon and assumed, without independent verification, that the
financial forecasts and projections provided to us have been reasonably prepared
and reflect the best currently available estimates of the future financial
results and condition of the Company, and that there has been no material change
in the assets, financial condition, business or prospects of the Company since
the date of the most recent financial statements made available to us.
We have not independently verified the accuracy and completeness of the
information supplied to us with respect to the Company and do not assume any
responsibility with respect to it. We have not made any physical inspection or
independent appraisal of any of the properties or assets of the Company. Our
opinion is necessarily based on business, economic, market and other conditions
as they exist and can be evaluated by us at the date of this letter.
Based upon the foregoing, and in reliance thereon, it is our opinion that
the Merger Consideration is fair, from a financial point of view, to the public
stockholders of the Company.
HOULIHAN LOKEY HOWARD & ZUKIN FINANCIAL
ADVISORS, INC.
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<PAGE> 157
ANNEX C
DELAWARE GENERAL CORPORATION LAW
SECTION 262 Appraisal Rights -- (a) Any stockholder of a corporation of
this State who holds shares of stock on the date of the making of a demand
pursuant to subsection (d) of this section with respect to such shares, who
continuously holds such shares through the effective date of the merger or
consolidation, who has otherwise complied with subsection (d) of this section
and who has neither voted in favor of the merger or consolidation nor consented
thereto in writing pursuant to sec.228 of this title shall be entitled to an
appraisal by the Court of Chancery of the fair value of the stockholder's shares
of stock under the circumstances described in subsections (b) and (c) of this
section. As used in this section, the word "stockholder" means a holder of
record of stock in a stock corporation and also a member of record of a nonstock
corporation; the words "stock" and "share" mean and include what is ordinarily
meant by those words and also membership or membership interest of a member of a
nonstock corporation; and the words "depository receipt" mean a receipt or other
instrument issued by a depository representing an interest in one or more
shares, or fractions thereof, solely of stock of a corporation, which stock is
deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to sec.251 (other than a merger effected pursuant to
sec.251(g) of this title), sec.252, sec.254, sec.257, sec.258, sec.263 or
sec.264 of this title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock, which
stock, or depository receipts in respect thereof, at the record date fixed
to determine the stockholders entitled to receive notice of and to vote at
the meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the stockholders of the surviving corporation
as provided in subsection (f) of sec.251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to
sec.sec.251, 252, 254, 257, 258, 263 and 264 of this title to accept for
such stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock (or depository receipts in
respect thereof) or depository receipts at the effective date of the
merger or consolidation will be either listed on a national securities
exchange or designated as a national market system security or an
interdealer quotation system by the National Association of Securities
Dealers, Inc. or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under sec.253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall
be available for the shares of the subsidiary Delaware corporation.
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<PAGE> 158
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to
the meeting, shall notify each of its stockholders who was such on the
record date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsections (b) or (c) hereof that
appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of this
section. Each stockholder electing to demand the appraisal of such
stockholder's shares shall deliver to the corporation, before the taking of
the vote on the merger or consolidation, a written demand for appraisal of
such stockholder's shares. Such demand will be sufficient if it reasonably
informs the corporation of the identity of the stockholder and that the
stockholder intends thereby to demand the appraisal of such stockholder's
shares. A proxy or vote against the merger or consolidation shall not
constitute such a demand. A stockholder electing to take such action must
do so by a separate written demand as herein provided. Within 10 days after
the effective date of such merger or consolidation, the surviving or
resulting corporation shall notify each stockholder of each constituent
corporation who has complied with this subsection and has not voted in
favor of or consented to the merger or consolidation of the date that the
merger or consolidation has become effective; or
(2) If the merger or consolidation was approved pursuant to sec.228 or
sec.253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of
stock of such constituent corporation who are entitled to appraisal rights
of the approval of the merger or consolidation and that appraisal rights
are available for any or all shares of such class or series of stock of
such constituent corporation, and shall include in such notice a copy of
this section; provided that, if the notice is given on or after the
effective date of the merger or consolidation, such notice shall be given
by the surviving or resulting corporation to all such holders of any class
or series of stock of a constituent corporation that are entitled to
appraisal rights. Such notice may, and, if given on or after the effective
date of the merger or consolidation, shall, also notify such stockholders
of the effective date of the merger or consolidation. Any stockholder
entitled to appraisal rights may, within 20 days after the date of mailing
of such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the
appraisal of such holder's shares. If such notice did not notify
stockholders of the effective date of the merger or consolidation, either
(i) each such constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of the holders
of any class or series of stock of such constituent corporation that are
entitled to appraisal rights of the effective date of the merger or
consolidation or (ii) the surviving or resulting corporation shall send
such a second notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is sent more
than 20 days following the sending of the first notice, such second notice
need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with
this subsection. An affidavit of the secretary or assistant secretary or of
the transfer agent of the corporation that is required to give either
notice that such notice has been given shall, in the absence of fraud, be
prima facie evidence of the facts stated therein. For purposes of
determining the stockholders entitled to receiver either notice, each
constituent corporation may fix, in advance, a record date that shall be
not more than 10 days prior to the date the notice is given, provided, that
if the notice is given on or after the effective date of the
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<PAGE> 159
merger or consolidation, the record date shall be such effective date. If
no record date is fixed and the notice is given prior to the effective
date, the record date shall be the close of business on the day next
preceding the day on which the notice is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw such stockholder's demand for appraisal and to accept the terms offered
upon the merger or consolidation. Within 120 days after the effective date of
the merger or consolidation, any stockholder who has complied with the
requirements of subsections (a) and (d) hereof, upon written request, shall be
entitled to receive from the corporation surviving the merger or resulting from
the consolidation a statement setting forth the aggregate number of shares not
voted in favor of the merger or consolidation and with respect to which demands
for appraisal have been received and the aggregate number of holders of such
shares. Such written statement shall be mailed to the stockholder within 10 days
after his written request for such a statement is received by the surviving or
resulting corporation or within 10 days after expiration of the period for
delivery of demands for appraisal under subsection (d) hereof, whichever is
later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted
such stockholder's certificates of stock to the Register in Chancery, if such is
required, may participate fully in all proceedings until it is finally
determined that such stockholder's is not entitled to appraisal rights under
this section.
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<PAGE> 160
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded such stockholder's appraisal rights as provided in
subsection (d) of this section shall be entitled to vote such stock for any
purpose or to receive payment of dividends or other distributions on the stock
(except dividends or other distributions payable to stockholders of record at a
date which is prior to the effective date of the merger or consolidation);
provided, however, that if no petition for an appraisal shall be filed within
the time provided in subsection (e) of this section, or if such stockholder
shall deliver to the surviving or resulting corporation a written withdrawal of
such stockholder's demand for an appraisal and an acceptance of the merger or
consolidation, either within 60 days after the effective date of the merger or
consolidation as provided in subsection (e) of this section or thereafter with
the written approval of the corporation, then the right of such stockholder to
an appraisal shall cease. Notwithstanding the foregoing, no appraisal proceeding
in the Court of Chancery shall be dismissed as to any stockholder without the
approval of the Court, and such approval may be conditioned upon such terms as
the Court deems just.
(1) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
C-4
<PAGE> 161
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 a 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 December 6, 1999,
by and among the Registrant, D-Group Merger Corp., Liberty
Media Corporation ("Liberty") and Four Media Company ("Four
Media") (included as Annex A to the Proxy
Statement/Prospectus). The Registrant agrees to furnish
supplementally a copy of any omitted schedule or exhibit to
the Commission upon request.
2.02 Voting Agreement, dated as of December 6, 1999, among
Liberty, Four Media and Warburg, Pincus Equity Partners,
L.P., Warburg, Pincus Netherlands Equity Partners I, C.V.
Warburg, Pincus Netherlands Equity Partners II, C.V.,
Warburg, Pincus Netherlands Equity Partners III, C.V.,
Fleming US Discovery Fund III, L.P. and Fleming US Discovery
Offshore Fund III, L.P. (incorporated by reference to
Exhibit 99.2 to the Current Report on Form 8-K filed by Four
Media on December 7, 1999).
</TABLE>
II-1
<PAGE> 162
<TABLE>
<CAPTION>
EXHIBIT
NO.
- -------
<C> <S>
2.03 Voting Agreement, dated as of December 6, 1999, among
Liberty, Four Media and Technical Services Partners, L.P.
(incorporated by reference to Exhibit 99.3 to the Current
Report on Form 8-K filed by Four Media on December 7, 1999).
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 Robert S. Feit, General Attorney and Assistant
Secretary of the Registrant, as to the legality of the
securities being registered.*
23.01 Consent of Robert S. Feit (included in Exhibit 5.01).*
23.02 Consent of Houlihan Lokey Howard & Zukin.*
23.03 Consent of PricewaterhouseCoopers LLP.*
23.04 Consent of Ernst & Young LLP.*
23.05 Consent of PricewaterhouseCoopers LLP.*
23.06 Consent of KPMG LLP.*
23.07 Consent of KPMG LLP.*
23.08 Consent of Arthur Andersen LLP.*
24.01 Powers of attorney.*
99.01 Form of Proxy Card to be used in connection with the Special
Meeting of Stockholders of Four Media.*
</TABLE>
- -------------------------
* Filed herewith
(b) No financial statement schedules are required to be filed herewith.
(c) The Opinion of Houlihan Lokey Howard & Zukin is included as Annex B to
the Proxy Statement/Prospectus included in this Registration Statement.
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.
II-2
<PAGE> 163
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, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the 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> 164
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 February 11, 2000.
AT&T CORP.
By: /s/ MARILYN J. WASSER
------------------------------------
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.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY
--------- --------
<S> <C>
PRINCIPAL EXECUTIVE OFFICER:
C. Michael Armstrong* Chairman and Chief Executive Officer
PRINCIPAL FINANCIAL OFFICER:
Charles Noski* Senior Executive Vice President and Chief
Financial Officer
PRINCIPAL ACCOUNTING OFFICER:
Nicholas S. Cyprus* Vice President, Controller and Chief
Financial Officer
DIRECTORS:
C. Michael Armstrong*
Kenneth T. Derr*
M. Kathryn Eickhoff*
Walter Y. Elisha*
George M.C. Fisher*
Donald V. Fites*
Amos B. Hostetter, Jr.*
Ralph S. Larsen*
John C. Malone*
Donald F. McHenry*
</TABLE>
II-4
<PAGE> 165
<TABLE>
<CAPTION>
SIGNATURE CAPACITY
--------- --------
<S> <C>
Michael I. Sovern*
Sanford I. Weill*
Thomas H. Wyman*
John D. Zeglis*
</TABLE>
*By: /s/ MARILYN J. WASSER
-------------------------------
Marilyn J. Wasser
(Attorney-in-Fact)
February 11, 2000
II-5
<PAGE> 166
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DOCUMENT DESCRIPTION PAGE NO.
------- -------------------- --------
<C> <S> <C>
2.01 Agreement and Plan of Merger, dated as of December 6, 1999,
by and among the Registrant, D-Group Merger Corp., Liberty
Media Corporation ("Liberty") and Four Media Company ("Four
Media") (included as Annex A to the Proxy
Statement/Prospectus). The Registrant agrees to furnish
supplementally a copy of any omitted schedule or exhibit to
the Commission upon request.
2.02 Voting Agreement, dated as of December 6, 1999, among
Liberty, Four Media and Warburg, Pincus Equity Partners,
L.P., Warburg, Pincus Netherlands Equity Partners I, C.V.
Warburg, Pincus Netherlands Equity Partners II, C.V.,
Warburg, Pincus Netherlands Equity Partners III, C.V.,
Fleming US Discovery Fund III, L.P. and Fleming US Discovery
Offshore Fund III, L.P. (incorporated by reference to
Exhibit 99.2 to the Current Report on Form 8-K filed by Four
Media on December 7, 1999).
2.03 Voting Agreement, dated as of December 6, 1999, among
Liberty, Four Media and Technical Services Partners, L.P.
(incorporated by reference to Exhibit 99.3 to the Current
Report on Form 8-K filed by Four Media on December 7, 1999).
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 Robert S. Feit, General Attorney and Assistant
Secretary of the Registrant, as to the legality of the
securities being registered.*
23.01 Consent of Robert S. Feit (included in Exhibit 5.01).*
23.02 Consent of Houlihan Lokey Howard & Zukin.*
23.03 Consent of PricewaterhouseCoopers LLP.*
23.04 Consent of Ernst & Young LLP.*
23.05 Consent of PricewaterhouseCoopers LLP.*
23.06 Consent of KPMG LLP.*
23.07 Consent of KPMG LLP.*
23.08 Consent of Arthur Andersen LLP.*
24.01 Powers of attorney.*
99.01 Form of Proxy Card to be used in connection with the Special
Meeting of Stockholders of Four Media.*
</TABLE>
- -------------------------
* Filed herewith.
<PAGE> 1
EXHIBIT 5.01
[Letterhead of AT&T Corp.]
February 11, 2000
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 5,459,508 shares of the Company's Class A Liberty Media Group common
stock, par value $1.00 per share (the "Liberty Media Group Common Stock"), to be
issued pursuant to the Agreement and Plan of Merger, dated as of December 6,
1999, among the Company, D-Group Merger Corp., Liberty Media Corporation and
Four Media Company, 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 Liberty Media Group Common Stock has been duly
authorized by appropriate corporate action of the Company; and
3. when the Liberty Media Group Common Stock has been issued and delivered
pursuant to a sale in the manner described in the Registration
Statement, such Liberty Media Group Common Stock will be validly issued,
fully paid and non-assessable.
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
Proxy Statement/Prospectus under the heading "Legal Matters."
Very truly yours,
/s/ ROBERT S. FEIT
------------------------------------
Robert S. Feit
General Attorney and Assistant Secretary
<PAGE> 1
EXHIBIT 23.02
CONSENT OF FINANCIAL ADVISOR
We hereby consent to the inclusion in this Registration Statement on Form
S-4 of AT&T Corp. (the "Registration Statement") of our opinion dated December
6, 1999 to the Board of Directors of Four Media Company attached as Annex B to
the Proxy Statement/Prospectus which is a part of the Registration Statement,
and to the description of and reference to such opinion and our firm therein. 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 (the "Securities Act"), or the rules and regulations of the Securities
and Exchange Commission (the "Commission") issued thereunder, nor do we admit
that we are experts with respect to any part of the Registration Statement
within the meaning of the term "experts" as used in the Securities Act, or the
rules and regulations of the Commission thereunder.
Houlihan Lokey Howard & Zukin Financial Advisors, Inc.
By: /s/ Darleen Armour
--------------------------------------------------
Name: Darleen Armour
Title: Senior Vice President
Dated: February 8, 2000
<PAGE> 1
EXHIBIT 23.03
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-4 of AT&T Corp. of our report dated January 25, 1999
relating to the consolidated financial statements, which appears in the AT&T
Corp. 1998 Annual Report to Shareholders, which is incorporated by reference in
its Annual Report on Form 10-K/A filed on July 12, 1999, for the year ended
December 31, 1998. We also consent to the incorporation by reference of our
report dated January 25, 1999 relating to the financial statement schedule,
which appears in such Annual Report on Form 10-K/A. We also consent to the
reference to us under the heading "Experts" and "Selected Historical Financial
Data" in such Registration Statement.
/s/ PricewaterhouseCoopers LLP
- ------------------------------
PricewaterhouseCoopers LLP
New York, New York
February 9, 2000
<PAGE> 1
EXHIBIT 23.04
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in AT&T
Corp.'s Registration Statement on Form S-4 and to the incorporation by
reference therein of our report dated October 25, 1999, with respect to the
consolidated financial statements and schedule of Four Media Company included
in Four Media Company's Annual Report (Form 10-K) for the year ended August 1,
1999, filed with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
Los Angeles, California
February 9, 2000
<PAGE> 1
Exhibit 23.05
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-4 of AT&T Corp. of our report dated October 21, 1998,
relating to the financial statements and financial statement schedule of Four
Media Company, which appears in Four Media Company's Annual Report on Form 10-K
for the year ended August 1, 1999. We also consent to the reference to us under
the heading "Experts" in such Registration Statement.
PricewaterhouseCoopers LLP
Los Angeles, California
February 9, 2000
<PAGE> 1
EXHIBIT 23.06
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the registration statement on
Form S-4 of AT&T Corp. of our report, dated March 9, 1999, relating to the
consolidated balance sheets of Tele-Communications, Inc. and subsidiaries as of
December 31, 1998 and 1997, and the related consolidated statements of
operations and comprehensive earnings, stockholders' equity, and cash flows for
each of the years in the three-year period ended December 31, 1998, which report
appears in the Current Report on Form 8-K of AT&T Corp., dated March 22, 1999,
and to the reference to our firm under the heading "Experts" in the registration
statement.
/s/ KPMG LLP
------------------------------------
KPMG LLP
Denver, Colorado
February 9, 2000
<PAGE> 1
EXHIBIT 23.07
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the registration statement on
Form S-4 of AT&T Corp. of our report, dated March 9, 1999, relating to the
combined balance sheets of Liberty/Ventures Group as of December 31, 1998 and
1997, and the related combined statements of operations and comprehensive
earnings, equity, and cash flows for each of the years in the three-year period
ended December 31, 1998, which report appears in the Current Report on Form 8-K
of AT&T Corp., dated March 22, 1999, and to the reference to our firm under the
heading "Experts" in the registration statement.
/s/ KPMG LLP
------------------------------------
KPMG LLP
Denver, Colorado
February 9, 2000
<PAGE> 1
EXHIBIT 23.08
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement on Form S-4 of our report dated
February 18, 1999 (except with respect to the matters discussed in Note 22, as
to which the date is March 22, 1999) included in MediaOne Group, Inc.'s
consolidated financial statements for the year ended December 31, 1998, included
in AT&T Corp.'s Form 8-K dated September 2, 1999.
/s/ ARTHUR ANDERSEN LLP
Denver, Colorado
February 11, 2000
<PAGE> 1
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 shares of Class A Liberty Media Group
common stock to be issued in connection with the merger of a wholly owned
subsidiary of the Company with and into Four Media Company; and
WHEREAS, the undersigned is both a director and an officer of the Company,
as indicated below his signature; and
WHEREAS, the undersigned hereby constitutes and appoints Charles Noski
and Marilyn 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 such registration statement with respect to the
above-described common shares, and thereafter to execute and file any amended
registration statement or statements with respect 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 3rd day of February, 2000.
/s/ C. MICHAEL ARMSTRONG
------------------------------------
C. Michael Armstrong
Chairman and Chief Executive Officer
<PAGE> 2
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 shares of Class A Liberty Media Group
common stock to be issued in connection with the merger of a wholly owned
subsidiary of the Company with and into Four Media Company; and
WHEREAS, the undersigned is an officer of the Company, as indicated below
his signature; and
WHEREAS, the undersigned hereby constitutes and appoints Marilyn J. Wasser
as attorney for him and in his name, place and stead, and in his capacity as an
officer of the Company, to execute and file such registration statement with
respect to the above-described common shares, and thereafter to execute and file
any amended registration statement or statements with respect thereto, hereby
giving and granting to said attorney 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 attorney 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 2nd day of February, 2000.
/s/ CHARLES NOSKI
------------------------------------
Charles Noski
Senior Executive Vice President
and Chief Financial Officer
<PAGE> 3
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 shares of Class A Liberty Media Group
common stock to be issued in connection with the merger of a wholly owned
subsidiary of the Company with and into Four Media Company; and
WHEREAS, the undersigned is an officer of the Company, as indicated below
his signature; and
WHEREAS, the undersigned hereby constitutes and appoints Charles Noski and
Marilyn 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
such registration statement with respect to the above-described common shares,
and thereafter to execute and file any amended registration statement or
statements with respect 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 2nd day of February, 2000.
/s/ NICHOLAS S. CYPRUS
---------------------------------------
Nicholas S. Cyprus
Controller and Chief Accounting Officer
<PAGE> 4
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 shares of Class A Liberty Media Group
common stock to be issued in connection with the merger of a wholly owned
subsidiary of the Company with and into Four Media Company; and
WHEREAS, the undersigned is a director of the Company, as indicated below
his signature; and
WHEREAS, the undersigned hereby constitutes and appoints Charles Noski and
Marilyn 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
such registration statement with respect to the above-described common shares,
and thereafter to execute and file any amended registration statement or
statements with respect 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 8th day of February, 2000.
/s/ KENNETH T. DERR
------------------------------------
Kenneth T. Derr
Director
<PAGE> 5
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 shares of Class A Liberty Media Group
common stock to be issued in connection with the merger of a wholly owned
subsidiary of the Company with and into Four Media Company; and
WHEREAS, the undersigned is a director of the Company, as indicated below
her signature; and
WHEREAS, the undersigned hereby constitutes and appoints Charles Noski and
Marilyn 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
such registration statement with respect to the above-described common shares,
and thereafter to execute and file any amended registration statement or
statements with respect 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 3rd day of February, 2000.
/s/ M. KATHRYN EICKHOFF
------------------------------------
M. Kathryn Eickhoff
Director
<PAGE> 6
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 shares of Class A Liberty Media Group
common stock to be issued in connection with the merger of a wholly owned
subsidiary of the Company with and into Four Media Company; and
WHEREAS, the undersigned is a director of the Company, as indicated below
his signature; and
WHEREAS, the undersigned hereby constitutes and appoints Charles Noski and
Marilyn 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
such registration statement with respect to the above-described common shares,
and thereafter to execute and file any amended registration statement or
statements with respect 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 2nd day of February, 2000.
/s/ WALTER Y. ELISHA
------------------------------------
Walter Y. Elisha
Director
<PAGE> 7
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 shares of Class A Liberty Media Group
common stock to be issued in connection with the merger of a wholly owned
subsidiary of the Company with and into Four Media Company; and
WHEREAS, the undersigned is a director of the Company, as indicated below
his signature; and
WHEREAS, the undersigned hereby constitutes and appoints Charles Noski and
Marilyn 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
such registration statement with respect to the above-described common shares,
and thereafter to execute and file any amended registration statement or
statements with respect 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 7th day of February, 2000.
/s/ GEORGE M.C. FISHER
------------------------------------
George M.C. Fisher
Director
<PAGE> 8
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 shares of Class A Liberty Media Group
common stock to be issued in connection with the merger of a wholly owned
subsidiary of the Company with and into Four Media Company; and
WHEREAS, the undersigned is a director of the Company, as indicated below
his signature; and
WHEREAS, the undersigned hereby constitutes and appoints Charles Noski and
Marilyn 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
such registration statement with respect to the above-described common shares,
and thereafter to execute and file any amended registration statement or
statements with respect 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 8th day of February, 2000.
/s/ DONALD V. FITES
------------------------------------
Donald V. Fites
Director
<PAGE> 9
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 shares of Class A Liberty Media Group
common stock to be issued in connection with the merger of a wholly owned
subsidiary of the Company with and into Four Media Company; and
WHEREAS, the undersigned is a director of the Company, as indicated below
his signature; and
WHEREAS, the undersigned hereby constitutes and appoints Charles Noski
and Marilyn 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 such registration statement with respect to the above-described common
shares, and thereafter to execute and file any amended registration statement or
statements with respect 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 3rd day of February, 2000.
/s/ AMOS B. HOSTETTER, JR.
------------------------------------
Amos B. Hostetter, Jr.
Director
<PAGE> 10
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 shares of Class A Liberty Media Group
common stock to be issued in connection with the merger of a wholly owned
subsidiary of the Company with and into Four Media Company; and
WHEREAS, the undersigned is a director of the Company, as indicated below
his signature; and
WHEREAS, the undersigned hereby constitutes and appoints Charles Noski
and Marilyn 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 such registration statement with respect to the above-described common
shares, and thereafter to execute and file any amended registration statement or
statements with respect 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 3rd day of February, 2000.
/s/ RALPH S. LARSEN
------------------------------------
Ralph S. Larsen
Director
<PAGE> 11
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 shares of Class A Liberty Media Group
common stock to be issued in connection with the merger of a wholly owned
subsidiary of the Company with and into Four Media Company; and
WHEREAS, the undersigned is a director of the Company, as indicated below
his signature; and
WHEREAS, the undersigned hereby constitutes and appoints Charles Noski
and Marilyn 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 such registration statement with respect to the above-described common
shares, and thereafter to execute and file any amended registration statement or
statements with respect 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 4th day of February, 2000.
/s/ JOHN C. MALONE
------------------------------------
John C. Malone
Director
<PAGE> 12
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 shares of Class A Liberty Media Group
common stock to be issued in connection with the merger of a wholly owned
subsidiary of the Company with and into Four Media Company; and
WHEREAS, the undersigned is a director of the Company, as indicated below
his signature; and
WHEREAS, the undersigned hereby constitutes and appoints Charles Noski
and Marilyn 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 such registration statement with respect to the above-described common
shares, and thereafter to execute and file any amended registration statement or
statements with respect 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 3rd day of February, 2000.
/s/ DONALD F. McHENRY
------------------------------------
Donald F. McHenry
Director
<PAGE> 13
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 shares of Class A Liberty Media Group
common stock to be issued in connection with the merger of a wholly owned
subsidiary of the Company with and into Four Media Company; and
WHEREAS, the undersigned is a director of the Company, as indicated below
his signature; and
WHEREAS, the undersigned hereby constitutes and appoints Charles Noski
and Marilyn 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 such registration statement with respect to the above-described common
shares, and thereafter to execute and file any amended registration statement or
statements with respect 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 2nd day of February, 2000.
/s/ MICHAEL I. SOVERN
------------------------------------
Michael I. Sovern
Director
<PAGE> 14
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 shares of Class A Liberty Media Group
common stock to be issued in connection with the merger of a wholly owned
subsidiary of the Company with and into Four Media Company; and
WHEREAS, the undersigned is a director of the Company, as indicated below
his signature; and
WHEREAS, the undersigned hereby constitutes and appoints Charles Noski
and Marilyn 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 such registration statement with respect to the above-described common
shares, and thereafter to execute and file any amended registration statement or
statements with respect 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 2nd day of February, 2000.
/s/ SANFORD I. WEILL
------------------------------------
Sanford I. Weill
Director
<PAGE> 15
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 shares of Class A Liberty Media Group
common stock to be issued in connection with the merger of a wholly owned
subsidiary of the Company with and into Four Media Company; and
WHEREAS, the undersigned is a director of the Company, as indicated below
his signature; and
WHEREAS, the undersigned hereby constitutes and appoints Charles Noski
and Marilyn 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 such registration statement with respect to the above-described common
shares, and thereafter to execute and file any amended registration statement or
statements with respect 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 3rd day of February, 2000.
/s/ THOMAS H. WYMAN
------------------------------------
Thomas H. Wyman
Director
<PAGE> 16
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 shares of Class A Liberty Media Group
common stock to be issued in connection with the merger of a wholly owned
subsidiary of the Company with and into Four Media Company; and
WHEREAS, the undersigned is both a director and an officer of the Company,
as indicated below his signature; and
WHEREAS, the undersigned hereby constitutes and appoints Charles Noski
and Marilyn 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 such registration statement with respect to the
above-described common shares, and thereafter to execute and file any amended
registration statement or statements with respect 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 6th day of February, 2000.
/s/ JOHN D. ZEGLIS
------------------------------------
John D. Zeglis
Director
<PAGE> 1
EXHIBIT 99.1
FORM OF PROXY
FOUR MEDIA COMPANY
SPECIAL MEETING OF STOCKHOLDERS -- APRIL 6, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
AND MAY BE REVOKED PRIOR TO ITS EXERCISE
The undersigned hereby appoints Robert T. Walston, Jeffrey J. Marcketta and
William E. Niles lawful attorneys and proxies with power to act without the
other and with full power of substitution, and hereby authorizes them to
represent and vote all the shares of common stock of Four Media Company standing
in the name of the undersigned on the books of Four Media Company at the close
of business on February 11, 2000, with all powers which the undersigned would
possess if present at the Special Meeting of Four Media Stockholders to be held
on April 6, 2000, or any adjournment or postponement thereof.
THE POWERS HEREBY GRANTED MAY BE EXERCISED BY EACH OF SAID ATTORNEYS OR PROXIES
OR THEIR SUBSTITUTES PRESENT AND ACTING AT THE SPECIAL MEETING OF STOCKHOLDERS
OR ANY ADJOURNMENTS THEREOF OR IF ONLY ONE BE PRESENT AND ACTING, THEN BY THAT
ONE. THE UNDERSIGNED HEREBY REVOKES ANY AND ALL PROXIES HERETOFORE GIVEN BY THE
UNDERSIGNED TO VOTE AT THE SPECIAL MEETING.
<PAGE> 2
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE PROPOSAL SET
FORTH BELOW.
Unless contrary instructions are given below, this proxy will be voted
according to the recommendation of the Board of Directors.
1. Proposal 1: To approve and adopt the Agreement and Plan of Merger and
approve the Merger.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the special meeting or any adjournments
thereof.
Signature(s)
Dated:
--------------------------------------------------------------- ,
2000
Signature if held jointly
Dated:
--------------------------------------------------------------- ,
2000
Note: Please sign as your
name appears on this proxy.
Joint owners must each sign
personally. Trustees and others
signing in a representative
capacity should indicate the
capacity in which they sign.
[ ] I plan to attend the meeting
