<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 13, 1999
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
------------------------
CINCINNATI BELL INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
OHIO 4813 31-1056105
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
------------------------
201 EAST FOURTH STREET, 102-760
P.O. BOX 2301
CINCINNATI, OHIO 45201-2301
TELEPHONE: (513) 397-9900
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
------------------------------
THOMAS E. TAYLOR, ESQ.
CINCINNATI BELL INC.
201 EAST FOURTH STREET, 102-760
P.O. BOX 2301
CINCINNATI, OHIO 45201-2301
TELEPHONE: (513) 397-9900
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------
COPIES TO:
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<S> <C>
ROBERT A. KINDLER, ESQ. MICHAEL P. WHALEN, ESQ.
ROBERT I. TOWNSEND, III, ESQ. RIORDAN & MCKINZIE
CRAVATH, SWAINE & MOORE 695 TOWN CENTER DRIVE
WORLDWIDE PLAZA, 825 EIGHTH AVENUE SUITE 1500
NEW YORK, NEW YORK 10019 COSTA MESA, CALIFORNIA 92626
(212) 474-1000 (714) 433-2618
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: Upon consummation of the merger referred to herein.
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. / /
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE>
CALCULATION OF REGISTRATION FEE
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<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED UNIT PRICE REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, par value $0.01 per share(1)...... 103,152,121(2) N/A $1,604,375,450(3) $446,016.38(4)
7 1/4% Junior Convertible Preferred Stock Due
2007, without par value....................... 1,400,000 N/A $162,786,144(5) $45,254.55(4)
Depositary Shares, each representing a
one-twentieth interest in a share of 6 3/4%
Cumulative Convertible Preferred Stock,
without par value............................. 3,105,000 N/A $117,601,875(6) $32,693.33(4)
6 3/4% Cumulative Convertible Preferred Stock,
without par value............................. 155,250 N/A N/A N/A(7)
</TABLE>
(1) This Registration Statement also covers the associated preferred stock
purchase rights (the "Rights") issued pursuant to a Rights Agreement dated
as of April 29, 1997, as amended, between Cincinnati Bell and The Fifth
Third Bank, as rights agent. Until the occurrence of certain events, the
Rights will not be exercisable for or evidenced separately from shares of
common stock, par value $0.01 per share ("Cincinnati Bell Common Stock"), of
Cincinnati Bell Inc. ("Cincinnati Bell").
(2) Based on (a) the maximum number of shares of Cincinnati Bell Common Stock
estimated to be issuable upon the completion of the merger (the "Merger") of
Ivory Merger Inc., a Delaware corporation and wholly owned subsidiary of
Cincinnati Bell, with and into IXC Communications, Inc., a Delaware
corporation, ("IXC"), calculated as the sum of (i) 41,077,720, the aggregate
number of shares of common stock, par value $0.01 per share ("IXC Common
Stock"), of IXC outstanding on September 7, 1999 (other than shares owned by
IXC, Cincinnati Bell or Ivory Merger Inc.) to be exchanged for Cincinnati
Bell Common Stock in the Merger or issuable pursuant to outstanding options
prior to the date the Merger is expected to be completed, (ii) 5,964,000,
the aggregate number of shares of IXC Common Stock issuable upon conversion
of the IXC 7 1/4% Junior Convertible Preferred Stock Due 2007 and (iii)
2,134,539, the aggregate number of shares of IXC Common Stock issuable upon
conversion of the IXC 6 3/4% Cumulative Convertible Preferred Stock, or, if
applicable, the number of depositary shares which represents such series of
preferred stock presently outstanding multiplied by (b) the exchange ratio
of 2.0976 shares of Cincinnati Bell Common Stock to be exchanged for each
share of IXC Common Stock.
(3) Estimated solely for the purpose of calculating the registration fee
required by Section 6(b) of the Securities Act, and calculated pursuant to
Rule 457(f) under the Securities Act. Pursuant to Rule 457(f)(1) under the
Securities Act, the proposed maximum aggregate offering price of Cincinnati
Bell Common Stock was calculated in accordance with Rule 457(c) under the
Securities Act as: (a) $32.625, the average of the high and low prices per
share of IXC Common Stock on September 7, 1999, as reported on The Nasdaq
National Market, multiplied by (b) 49,176,259, the aggregate number of
shares of IXC Common Stock (i) to be exchanged for Cincinnati Bell Common
Stock in the Merger or issuable pursuant to outstanding options prior to the
date the Merger is expected to be completed, (ii) issuable upon conversion
of the IXC 7 1/4% Junior Convertible Preferred Stock Due 2007 and (iii)
issuable upon conversion of the IXC 6 3/4% Cumulative Convertible Preferred
Stock, or, if applicable, the number of depositary shares which represents
such series of preferred stock presently outstanding.
(4) Calculated by multiplying the proposed maximum aggregate offering price for
all securities to be registered by .000278. $268,665.72 of the registration
fee was previously paid in connection with Cincinnati Bell's and IXC's
Preliminary Proxy Statement on Schedule 14A filed with the Commission on
August 18, 1999. Pursuant to Rule 457(b), this amount is not remitted
herewith, and only the balance of $255,298.54 is required to be paid in
connection with the filing of this Registration Statement.
(5) Estimated solely for the purpose of calculating the registration fee in
accordance with Rules 457(f)(1) and (c) under the Securities Act based on
(a) the average of the bid and asked prices, $151.00 and $152.00,
respectively, on September 7, 1999, of the IXC 7 1/4% Junior Convertible
Preferred Stock Due 2007 multiplied by (b) the estimated maximum number of
shares of the IXC 7 1/4% Junior Convertible Preferred Stock Due 2007 to be
acquired in the Merger (1,074,496).
(6) Estimated solely for the purpose of calculating the registration fee in
accordance with Rules 457(f)(1) and (c) under the Securities Act based on
(a) the average of the bid and asked prices, $37.25 and $38.50,
respectively, on September 7, 1999, of the Depositary Shares of the IXC
6 3/4% Cumulative Convertible Preferred Stock multiplied by (b) the
estimated maximum number of Depositary Shares of IXC 6 3/4% Cumulative
Convertible Preferred Stock to be acquired in the Merger (3,105,000).
(7) Included in the fee payable with respect to the related Depositary Shares
pursuant to Rule 457(i) of the Securities Act. No additional filing fee is
payable.
<PAGE>
[LOGO]
IXC COMMUNICATIONS, INC.
1122 CAPITAL OF TEXAS HIGHWAY SOUTH
AUSTIN, TEXAS 78746-6426
September 13, 1999
Dear Stockholder:
You are cordially invited to attend a special meeting of the stockholders of
IXC Communications, Inc., which we will hold on Friday, October 29, 1999, at
9:00 a.m., local time, at Barton Creek Country Club, 8212 Barton Club Drive,
Austin, Texas 78735.
At the special meeting, we will ask you to vote on the merger of IXC and a
subsidiary of Cincinnati Bell Inc. As a result of the merger, IXC will become a
subsidiary of Cincinnati Bell. In the merger, you will receive 2.0976 shares of
Cincinnati Bell common stock for each outstanding share of IXC common stock that
you own. At the special meeting, we will also ask you to vote on an internal
reorganization of IXC involving a merger between IXC and one of its wholly owned
subsidiaries which will take place immediately before the merger of IXC and the
Cincinnati Bell subsidiary.
Holders of IXC 7 1/4% preferred stock will receive one share of Cincinnati
Bell 7 1/4% preferred stock in the merger for each share of IXC 7 1/4% preferred
stock they own. Holders of IXC 6 3/4% preferred stock will receive one
depositary share of Cincinnati Bell 6 3/4% preferred stock in the merger for
each depositary share of IXC 6 3/4% preferred stock they own. Each share of IXC
12 1/2% preferred stock will remain outstanding as 12 1/2% preferred stock of
the surviving corporation in the merger. After the merger, holders of Cincinnati
Bell 7 1/4% preferred stock and Cincinnati Bell 6 3/4% preferred stock will each
be entitled to one vote for each whole share of Cincinnati Bell preferred stock
they own and these shares of Cincinnati Bell preferred stock will be convertible
into Cincinnati Bell common stock on a basis that gives effect to the exchange
ratio in the merger.
Cincinnati Bell common stock is listed on the New York Stock Exchange under
the trading symbol "CSN" and on September 9, 1999, Cincinnati Bell common stock
closed at $18 per share. You will not incur federal income tax as a result of
the merger, except on any cash received for fractional shares.
We cannot complete the merger or the IXC internal reorganization unless the
holders of a majority of the outstanding shares of IXC common stock vote to
adopt the merger agreement and the agreement governing the IXC internal
reorganization. Only stockholders who hold shares of IXC common stock at the
close of business on September 22, 1999 will be entitled to vote at the special
meeting.
YOU SHOULD CONSIDER THE MATTERS DISCUSSED UNDER "RISK FACTORS RELATING TO
THE MERGER" BEGINNING ON PAGE 16 OF THE ENCLOSED PROXY STATEMENT/PROSPECTUS
BEFORE VOTING. PLEASE REVIEW CAREFULLY THE ENTIRE PROXY STATEMENT/PROSPECTUS.
AFTER CAREFUL CONSIDERATION, THE IXC BOARD OF DIRECTORS HAS APPROVED THE
MERGER AGREEMENT AND THE AGREEMENT GOVERNING THE IXC INTERNAL REORGANIZATION,
AND HAS DETERMINED THAT THE MERGER, THE IXC INTERNAL REORGANIZATION, THE MERGER
AGREEMENT AND THE AGREEMENT GOVERNING THE IXC REORGANIZATION ARE ADVISABLE, FAIR
TO AND IN THE BEST INTERESTS OF IXC AND ITS STOCKHOLDERS. THE IXC BOARD OF
DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE ADOPTION OF THE MERGER AGREEMENT AND
THE AGREEMENT GOVERNING THE IXC INTERNAL REORGANIZATION.
You can find additional information regarding Cincinnati Bell and IXC in the
section entitled "Where You Can Find More Information" on page 94 of the
enclosed proxy statement/prospectus.
Thank you for your cooperation.
Sincerely,
/s/ John M. Zrno
John M. Zrno
President and Chief Executive Officer
YOUR VOTE IS IMPORTANT.
PLEASE COMPLETE, SIGN, DATE AND RETURN YOUR PROXY.
Neither the Securities and Exchange Commission nor any state securities
regulator has approved or disapproved the merger or the IXC internal
reorganization described in the proxy statement/prospectus or the Cincinnati
Bell common stock to be issued in connection with the merger, or determined if
the proxy statement/prospectus is accurate or adequate. Any representation to
the contrary is a criminal offense.
THE PROXY STATEMENT/PROSPECTUS IS DATED SEPTEMBER 13, 1999, AND IS FIRST BEING
MAILED TO STOCKHOLDERS ON OR ABOUT SEPTEMBER 14, 1999.
<PAGE>
REFERENCES TO ADDITIONAL INFORMATION
This proxy statement/prospectus incorporates important business and
financial information about IXC and Cincinnati Bell from other documents that
are not included in or delivered with this proxy statement/prospectus. This
information is available to you without charge upon your written or oral
request. You can obtain those 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:
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<S> <C>
IXC Communications, Inc. Cincinnati Bell Inc.
1122 Capital of Texas Highway South 201 East Fourth Street, 102-760
Austin, Texas 78746-6426 P.O. Box 2301
Telephone: (512) 328-1112 Cincinnati, Ohio 45201-2301
Attention: Investor Relations Telephone: (800) 345-6301
Coordinator Attention: Director of Investor
Relations
</TABLE>
IF YOU WOULD LIKE TO REQUEST DOCUMENTS, PLEASE DO SO BY OCTOBER 22, 1999 IN
ORDER TO RECEIVE THEM BEFORE YOUR SPECIAL MEETING.
See "Where You Can Find More Information" on page 94.
<PAGE>
[LOGO]
IXC COMMUNICATIONS, INC.
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON OCTOBER 29, 1999
To the Stockholders of IXC Communications, Inc.:
We will hold a special meeting of the stockholders of IXC Communications,
Inc. on Friday, October 29, 1999, at 9:00 a.m., local time, at Barton Creek
Country Club, 8212 Barton Club Drive, Austin, Texas 78735, for the following
purposes:
1. To consider and vote upon a proposal to adopt the merger agreement among
Cincinnati Bell Inc., a subsidiary of Cincinnati Bell and IXC. In the
merger, IXC will become a subsidiary of Cincinnati Bell, and each
outstanding share of IXC common stock, excluding any shares held by parties
to the merger agreement, will be converted into the right to receive 2.0976
shares of Cincinnati Bell common stock.
2. To consider and vote upon a proposal to adopt the agreement governing the
IXC internal reorganization between IXC and a wholly owned subsidiary of
IXC, involving a merger of IXC and a wholly owned subsidiary of IXC, which
will take place immediately before the merger of IXC and Cincinnati Bell.
We will transact no other business at the special meeting, except for
business properly brought before the special meeting or any adjournment or
postponement of it by the IXC board of directors.
Only holders of record of shares of IXC common stock at the close of
business on September 22, 1999, the record date for the special meeting, are
entitled to notice of, and to vote at, the special meeting and any adjournments
or postponements of it. Only holders of record of shares of IXC preferred stock
at the close of business on the record date for the special meeting are entitled
to notice of the meeting and any adjournments or postponements of it.
We cannot complete the merger and the IXC internal reorganization described
above unless the holders of a majority of the outstanding shares of IXC common
stock vote to adopt the merger agreement and the agreement governing the IXC
internal reorganization. We will not complete the IXC internal reorganization
unless we are going to complete the merger immediately thereafter.
FOR MORE INFORMATION ABOUT THE MERGER AND THE IXC INTERNAL REORGANIZATION,
PLEASE REVIEW THE ACCOMPANYING PROXY STATEMENT/PROSPECTUS AND THE MERGER
AGREEMENT AND THE AGREEMENT GOVERNING THE IXC INTERNAL REORGANIZATION ATTACHED
AS ANNEXES 1 AND 2.
Whether or not you plan to attend the special meeting, please complete, sign
and date the enclosed proxy and return it promptly in the enclosed postage-paid
envelope. If you do not vote by proxy or in person at the special meeting, it
will count as a vote against the merger agreement and the agreement governing
the IXC internal reorganization.
Please do not send any stock certificates at this time.
By Order of the Board of Directors,
/s/ Jeffrey C. Smith
Jeffrey C. Smith
Secretary
Austin, Texas
September 13, 1999
<PAGE>
[LOGO]
CINCINNATI BELL INC.
201 EAST FOURTH STREET, 102-1900
P.O. BOX 2301
CINCINNATI, OHIO 45201-2301
September 13, 1999
Dear Shareholder:
You are cordially invited to attend a special meeting of the shareholders of
Cincinnati Bell Inc., which we will hold on Friday, October 29, 1999, at 9:00
a.m., local time, at Reakirt Auditorium, Cincinnati Museum Center at Union
Terminal, 1301 Western Avenue, Cincinnati, Ohio 45203.
At the special meeting, we will ask you to vote on the issuance of
Cincinnati Bell common stock to stockholders of IXC Communications, Inc. in the
merger of IXC and a subsidiary of Cincinnati Bell. As a result of the merger,
IXC will become a subsidiary of Cincinnati Bell. In the merger, holders of IXC
common stock will receive 2.0976 shares of Cincinnati Bell common stock for each
share of IXC common stock they own. In the merger, holders of IXC 7 1/4%
preferred stock will receive one share of Cincinnati Bell 7 1/4% preferred stock
for each share of IXC 7 1/4% preferred stock that they own, and holders of IXC
6 3/4% preferred stock will receive one depositary share of Cincinnati Bell
6 3/4% preferred stock for each depositary share of IXC 6 3/4% preferred stock
that they own. In the merger, each share of IXC 12 1/2% preferred stock will
remain outstanding as 12 1/2% preferred stock of the surviving corporation in
the merger.
We cannot issue the Cincinnati Bell common stock to IXC stockholders, which
is necessary for the merger of IXC and a subsidiary of Cincinnati Bell, unless
the holders of a majority of all shares of Cincinnati Bell common stock casting
votes at the special meeting approve the issuance of shares of Cincinnati Bell
common stock in the merger. Only shareholders who hold shares of Cincinnati Bell
common stock at the close of business on September 22, 1999 will be entitled to
vote at the special meeting.
YOU SHOULD CONSIDER THE MATTERS DISCUSSED UNDER "RISK FACTORS RELATING TO
THE MERGER" BEGINNING ON PAGE 16 OF THE ENCLOSED PROXY STATEMENT/PROSPECTUS
BEFORE VOTING. PLEASE REVIEW CAREFULLY THE ENTIRE PROXY STATEMENT/PROSPECTUS.
AFTER CAREFUL CONSIDERATION, THE CINCINNATI BELL BOARD OF DIRECTORS HAS
UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND DETERMINED THAT THE MERGER AND THE
MERGER AGREEMENT ARE ADVISABLE, FAIR TO AND IN THE BEST INTERESTS OF CINCINNATI
BELL AND ITS SHAREHOLDERS. THE CINCINNATI BELL BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS THAT YOU VOTE FOR THE ISSUANCE OF SHARES OF CINCINNATI BELL COMMON
STOCK IN THE MERGER.
You can find additional information regarding Cincinnati Bell and IXC in the
section entitled "Where You Can Find More Information" on page 94 of the
enclosed proxy statement/prospectus.
Thank you for your cooperation.
Sincerely,
/s/ Richard G. Ellenberger
Richard G. Ellenberger
President and Chief Executive Officer
YOUR VOTE IS IMPORTANT.
PLEASE COMPLETE, SIGN, DATE AND RETURN YOUR PROXY.
Neither the Securities and Exchange Commission nor any state securities
regulator has approved or disapproved the merger described in the proxy
statement/prospectus or the Cincinnati Bell common stock to be issued in
connection with the merger, or determined if the proxy statement/prospectus is
accurate or adequate. Any representation to the contrary is a criminal offense.
THE PROXY STATEMENT/PROSPECTUS IS DATED SEPTEMBER 13, 1999,
AND IS FIRST BEING MAILED TO SHAREHOLDERS ON OR ABOUT SEPTEMBER 14, 1999.
<PAGE>
[LOGO]
CINCINNATI BELL INC.
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON OCTOBER 29, 1999
To the Shareholders of Cincinnati Bell Inc.:
We will hold a special meeting of the shareholders of Cincinnati Bell Inc.
on Friday, October 29, 1999, at 9:00 a.m., local time, at Reakirt Auditorium,
Cincinnati Museum Center at Union Terminal, 1301 Western Avenue, Cincinnati,
Ohio 45203, for the following purpose:
To consider and vote upon a proposal to approve the issuance of shares
of Cincinnati Bell common stock in the merger of IXC Communications, Inc.
and a subsidiary of Cincinnati Bell. In the merger, IXC will become a
subsidiary of Cincinnati Bell, and all outstanding shares of IXC common
stock, excluding any shares held by parties to the merger agreement, will be
converted into the right to receive 2.0976 shares of Cincinnati Bell common
stock.
We will transact no other business at the special meeting, except for
business properly brought before the special meeting or any adjournment or
postponement of it by the Cincinnati Bell board of directors.
Only holders of record of shares of Cincinnati Bell common stock at the
close of business on September 22, 1999, the record date for the special
meeting, are entitled to notice of, and to vote at, the special meeting and any
adjournments or postponements of it.
We cannot issue the Cincinnati Bell common stock to IXC stockholders, which
is necessary for the merger of IXC and a subsidiary of Cincinnati Bell, unless
the holders of a majority of all shares of Cincinnati Bell common stock casting
votes at the Cincinnati Bell special meeting approve the issuance of shares of
Cincinnati Bell common stock in the merger, assuming that the total votes cast
represent more than 50% of all Cincinnati Bell capital stock entitled to vote.
FOR MORE INFORMATION ABOUT THE MERGER, PLEASE REVIEW THE ACCOMPANYING PROXY
STATEMENT/ PROSPECTUS AND THE MERGER AGREEMENT ATTACHED AS ANNEX 1.
Whether or not you plan to attend the special meeting, please complete, sign
and date the enclosed proxy and return it promptly in the enclosed postage-paid
envelope. If you do not vote by proxy or in person at the special meeting, it
will have no effect in determining whether the issuance of shares of Cincinnati
Bell common stock in the merger will be approved.
By Order of the Board of Directors,
/s/ Thomas E. Taylor
Thomas E. Taylor
Secretary
Cincinnati, Ohio
September 13, 1999
<PAGE>
TABLE OF CONTENTS
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QUESTIONS AND ANSWERS ABOUT THE MERGER..................................................................... 1
SUMMARY.................................................................................................... 3
General.................................................................................................. 3
The Special Meetings..................................................................................... 4
The Merger............................................................................................... 5
The Companies............................................................................................ 8
Comparative Per Share Information........................................................................ 10
Selected Historical and Unaudited Pro Forma Combined Condensed Financial Data............................ 11
Cincinnati Bell........................................................................................ 11
IXC.................................................................................................... 13
Cincinnati Bell and IXC Pro Forma Combined............................................................. 15
RISK FACTORS RELATING TO THE MERGER........................................................................ 16
The exchange ratio for shares of Cincinnati Bell common stock to be received in the merger is fixed and
will not be adjusted in the event of any change in stock price......................................... 16
The integration of Cincinnati Bell and IXC following the merger will present significant challenges...... 16
The merger may cause customers to delay purchasing decisions............................................. 16
The price of Cincinnati Bell common stock may be affected by factors different from those affecting the
price of IXC common stock.............................................................................. 16
The merger is subject to the receipt of consents and approvals from government entities that may impose
conditions that could have a material adverse effect on Cincinnati Bell or IXC or cause abandonment of
the merger............................................................................................. 17
THE CINCINNATI BELL SPECIAL MEETING........................................................................ 17
Date, Time and Place..................................................................................... 17
Purpose of Cincinnati Bell Special Meeting............................................................... 17
Cincinnati Bell Record Date; Stock Entitled to Vote; Quorum.............................................. 17
Votes Required........................................................................................... 18
Voting by Cincinnati Bell Directors and Executive Officers............................................... 18
Voting of Proxies........................................................................................ 18
Revocability of Proxies.................................................................................. 19
Solicitation of Proxies.................................................................................. 19
THE IXC SPECIAL MEETING.................................................................................... 19
Date, Time and Place..................................................................................... 19
Purpose of IXC Special Meeting........................................................................... 19
IXC Record Date; Stock Entitled to Vote; Quorum.......................................................... 20
Votes Required........................................................................................... 20
Voting by IXC Directors and Executive Officers........................................................... 20
Voting of Proxies........................................................................................ 20
Revocability of Proxies.................................................................................. 21
Solicitation of Proxies.................................................................................. 21
THE COMPANIES.............................................................................................. 22
IXC...................................................................................................... 22
Cincinnati Bell.......................................................................................... 22
THE MERGER................................................................................................. 23
Background to the Merger................................................................................. 23
Reasons for the Merger and the IXC Board of Directors Recommendation..................................... 27
Opinions of IXC's Financial Advisors..................................................................... 30
Reasons for the Merger and the Cincinnati Bell Board of Directors Recommendation......................... 43
</TABLE>
i
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<TABLE>
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PAGE
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Opinion of Cincinnati Bell's Financial Advisor........................................................... 45
Interests of IXC's Directors and Management in the Merger................................................ 51
Form of the Merger....................................................................................... 52
Merger Consideration..................................................................................... 52
Conversion of Shares; Procedures for Exchange of Certificates; Fractional Shares......................... 52
Effective Time of the Merger............................................................................. 54
Listing of Cincinnati Bell Capital Stock................................................................. 54
Listing of IXC Capital Stock............................................................................. 54
Delisting and Deregistration of IXC Capital Stock........................................................ 54
Material United States Federal Income Tax Consequences of the Merger..................................... 54
Regulatory Matters....................................................................................... 56
Litigation............................................................................................... 57
Accounting Treatment..................................................................................... 57
Appraisal Rights......................................................................................... 58
Continuation of IXC Employee Benefits.................................................................... 58
Effect on Awards Outstanding Under IXC Stock Plans; Warrants............................................. 59
Resale of Cincinnati Bell Stock.......................................................................... 59
New IXC Bank Financing................................................................................... 59
The IXC Internal Reorganization.......................................................................... 60
THE MERGER AGREEMENT AND RELATED DOCUMENTS................................................................. 62
The Merger Agreement..................................................................................... 62
The Stock Option Agreements.............................................................................. 69
The Stockholders Agreements.............................................................................. 71
COMPARATIVE STOCK PRICES AND DIVIDENDS..................................................................... 72
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS................................................ 73
DESCRIPTION OF CINCINNATI BELL CAPITAL STOCK............................................................... 80
General.................................................................................................. 80
Common Stock............................................................................................. 80
Preferred Stock.......................................................................................... 80
Cincinnati Bell 7 1/4% Preferred Stock................................................................... 81
Cincinnati Bell 6 3/4% Preferred Stock................................................................... 82
Cincinnati Bell Series A Preferred Stock................................................................. 83
COMPARISON OF RIGHTS OF CINCINNATI BELL SHAREHOLDERS AND IXC STOCKHOLDERS.................................. 83
Capitalization........................................................................................... 83
Voting Rights............................................................................................ 84
Number, Election, Vacancy and Removal of Directors....................................................... 84
Amendments to the Amended Articles of Incorporation and Restated Certificate of Incorporation............ 84
Amendments to the Amended Regulations and By-laws........................................................ 85
Shareholder/Stockholder Action........................................................................... 85
Notice of Certain Shareholder/Stockholder Action......................................................... 85
Special Shareholder/Stockholder Meetings................................................................. 85
Director and Officer Liability and Indemnification....................................................... 86
Dividends................................................................................................ 88
Conversion............................................................................................... 88
Rights Plans............................................................................................. 89
Antitakeover Provisions.................................................................................. 91
LEGAL MATTERS.............................................................................................. 93
EXPERTS.................................................................................................... 93
STOCKHOLDER PROPOSALS...................................................................................... 94
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
PAGE
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<S> <C>
OTHER MATTERS.............................................................................................. 94
WHERE YOU CAN FIND MORE INFORMATION........................................................................ 94
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS.......................................................... 96
</TABLE>
Annexes
<TABLE>
<S> <C>
Annex 1 Agreement and Plan of Merger
Annex 2 Agreement Governing the IXC Internal Reorganization
Annex 3 Cincinnati Bell Stock Option Agreement
Annex 4 IXC Stock Option Agreement
Annex 5 General Electric Stockholder Agreement
Annex 6 Stockholders Agreement
Annex 7 Opinion of Salomon Smith Barney Inc.
Annex 8 Opinion of Morgan Stanley & Co. Incorporated
Annex 9 Opinion of Merrill Lynch, Pierce, Fenner & Smith Incorporated
Annex 10 Delaware General Corporation Law--Appraisal Rights
</TABLE>
iii
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: WHY ARE CINCINNATI BELL AND IXC PROPOSING TO MERGE?
A: Cincinnati Bell and IXC believe that the merger will create an innovative,
highly competitive company with an integrated high capacity communications
network. Cincinnati Bell and IXC believe that the combined company will be
well-positioned to capitalize on future growth opportunities and provide more
comprehensive and integrated products, services and support to customers.
To review the reasons for the merger in greater detail, see pages 27 through
29 and 43 through 45.
Q: WHAT DO I NEED TO DO NOW?
A: After carefully reading and considering the information contained in this
proxy statement/ prospectus, please complete and sign your proxy and return
it in the enclosed return envelope as soon as possible, so that your shares
may be represented at your special meeting.
If you sign and send in your proxy and do not indicate how you want to vote,
we will count your proxy as a vote in favor of adoption of the merger
agreement and the agreement governing the IXC internal reorganization if you
are an IXC stockholder, or in favor of the issuance of shares of Cincinnati
Bell common stock in the merger if you are a Cincinnati Bell shareholder.
If you are an IXC stockholder and you abstain from voting or do not vote, it
will be equivalent to a vote against adoption of the merger agreement and the
agreement governing the IXC internal reorganization. If you are a Cincinnati
Bell shareholder and you abstain from voting or do not vote, it will have no
effect in determining whether the issuance of shares of Cincinnati Bell
common stock in the merger will be approved.
The IXC special meeting will take place on Friday, October 29, 1999. The
Cincinnati Bell special meeting will take place on Friday, October 29, 1999.
You may attend your special meeting and vote your shares in person rather
than signing and mailing your proxy.
Q: CAN I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY?
A: Yes. You can change your vote at any time before your proxy is voted at your
special meeting. You can do this in one of three ways. First, you can send a
written notice stating that you would like to revoke your proxy. Second, you
can complete and submit a new proxy. If you choose either of these two
methods, you must submit your notice of revocation or your new proxy to IXC
at the address on page 96 or to Cincinnati Bell at the address on page 96.
Third, you can attend your special meeting and vote in person.
Q: IF MY BROKER HOLDS MY SHARES IN "STREET NAME", WILL MY BROKER VOTE MY SHARES?
A: Your broker will vote your shares only if you provide instructions on how to
vote. You should follow the directions provided by your broker regarding how
to instruct your broker to vote your shares. If you are an IXC stockholder
and you do not provide your broker with instructions on how to vote your
shares, it will be equivalent to a vote against adoption of the merger
agreement and the agreement governing the IXC internal reorganization. If you
are a Cincinnati Bell shareholder and you do not provide your broker with
instructions on how to vote your shares, it will have no effect in
determining whether the issuance of shares of Cincinnati Bell common stock in
the merger will be approved.
Q: SHOULD I SEND IN MY IXC STOCK CERTIFICATES NOW?
A: No. After the merger is completed, we will send IXC stockholders written
instructions for exchanging their IXC stock certificates. IXC stockholders
should not send in their stock certificates now. Cincinnati Bell shareholders
will keep their existing share certificates.
Q: WHEN DO YOU EXPECT TO COMPLETE THE MERGER?
A: We expect to complete the merger in the fourth calendar quarter of 1999 or
early in 2000. We are working to complete the merger as quickly as possible
and intend to do so
1
<PAGE>
shortly after the special meetings, provided that we have obtained the
regulatory approvals necessary for the merger.
Q: WHO CAN HELP ANSWER MY QUESTIONS?
A: If you have any questions about the merger or
if you need additional copies of this proxy
statement/prospectus or the enclosed proxy,
you should contact:
IXC STOCKHOLDERS:
Georgeson Shareholders Communications Inc.
17 State Street
New York, New York 10004
Telephone: (800) 223-2064
(212) 440-9800
Investor Relations Coordinator
IXC Communications, Inc.
1122 Capital of Texas Highway South
Austin, Texas 78746-6426
Telephone: (512) 328-1112
CINCINNATI BELL SHAREHOLDERS:
Georgeson Shareholders Communications Inc.
17 State Street
New York, New York 10004
Telephone: (800) 223-2064
(212) 440-9800
Director of Investor Relations
Cincinnati Bell Inc.
201 East Fourth Street, 102-760
P.O. Box 2301
Cincinnati, Ohio 45201-2301
Telephone: (800) 345-6301
2
<PAGE>
SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS PROXY
STATEMENT/PROSPECTUS AND MAY NOT CONTAIN ALL OF THE INFORMATION THAT IS
IMPORTANT TO YOU. TO UNDERSTAND THE MERGER FULLY AND FOR A MORE COMPLETE
DESCRIPTION OF THE LEGAL TERMS OF THE MERGER, YOU SHOULD READ CAREFULLY THIS
ENTIRE PROXY STATEMENT/PROSPECTUS AND THE OTHER DOCUMENTS TO WHICH WE HAVE
REFERRED YOU. SEE "WHERE YOU CAN FIND MORE INFORMATION" ON PAGE 94. WE HAVE
INCLUDED PAGE REFERENCES PARENTHETICALLY TO DIRECT YOU TO A MORE COMPLETE
DESCRIPTION OF THE TOPICS PRESENTED IN THIS SUMMARY.
GENERAL
WHAT YOU WILL RECEIVE IN THE MERGER
CINCINNATI BELL SHAREHOLDERS
After the merger, each share of Cincinnati Bell common stock will remain
outstanding.
IXC STOCKHOLDERS
In the merger, holders of IXC common stock will receive 2.0976 shares of
Cincinnati Bell common stock for each share of IXC common stock that they own.
Stockholders will receive cash for any fractional shares which they would
otherwise receive in the merger. This amount will be calculated by multiplying
the fractional share interest of Cincinnati Bell common stock to which each IXC
stockholder would be entitled by the closing price of Cincinnati Bell common
stock on the closing date.
In the merger, holders of IXC 7 1/4% preferred stock will receive one share
of Cincinnati Bell 7 1/4% preferred stock for each share of IXC 7 1/4% preferred
stock that they own, and holders of IXC 6 3/4% preferred stock will receive one
depositary share of Cincinnati Bell 6 3/4% preferred stock for each depositary
share of IXC 6 3/4% preferred stock that they own. In the merger, each share of
IXC 12 1/2% preferred stock will remain outstanding as 12 1/2% preferred stock
of the surviving corporation in the merger.
IXC STOCKHOLDERS SHOULD NOT SEND IN THEIR IXC STOCK CERTIFICATES UNTIL
INSTRUCTED TO DO SO AFTER THE MERGER IS COMPLETED.
OWNERSHIP OF CINCINNATI BELL AFTER THE MERGER
Based on the number of outstanding shares of IXC common stock on September
9, 1999, the most recent practicable date prior to the date of this proxy
statement/prospectus, IXC stockholders will receive a total of approximately
86,164,625 shares of Cincinnati Bell common stock in the merger. Based on that
number and on the number of outstanding shares of Cincinnati Bell common stock
on September 9, 1999, after the merger former IXC stockholders will own
approximately 39%, and existing Cincinnati Bell shareholders will own
approximately 61%, of the outstanding shares of Cincinnati Bell common stock.
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER (page 54)
The merger will be tax-free to holders of IXC common stock for United States
federal income tax purposes, except with respect to cash received for fractional
shares of Cincinnati Bell common stock.
TAX MATTERS ARE VERY COMPLICATED AND THE TAX CONSEQUENCES OF THE MERGER TO
YOU WILL DEPEND ON THE FACTS OF YOUR OWN SITUATION. YOU SHOULD CONSULT YOUR OWN
TAX ADVISOR FOR A FULL UNDERSTANDING OF THE TAX CONSEQUENCES OF THE MERGER TO
YOU.
BOARD OF DIRECTORS RECOMMENDATIONS (pages 29 and 45)
The Cincinnati Bell board of directors has determined that the merger and
the merger agreement are advisable, fair to and in the best interests of
Cincinnati Bell and its shareholders and unanimously recommends that Cincinnati
Bell shareholders vote FOR the issuance of shares of Cincinnati Bell common
stock in the merger.
The IXC board of directors has determined that the merger, the IXC internal
reorganization, the merger agreement and the agreement governing the IXC
internal reorganization are advisable, fair to and in the best interests of IXC
and its stockholders and recommends that IXC stockholders vote FOR the adoption
of the merger agreement and the agreement governing the IXC internal
reorganization.
3
<PAGE>
To review the background and reasons for the merger and the IXC internal
reorganization in greater detail, as well as certain risks related to the
merger, see pages 16 through 17, 23 through 29, 43 through 45 and 61.
FAIRNESS OPINIONS OF FINANCIAL ADVISORS
CINCINNATI BELL (page 45)
In deciding to approve the merger and the issuance of shares of Cincinnati
Bell common stock in the merger, the Cincinnati Bell board of directors
considered the opinion, dated July 20, 1999, of its financial advisor, Salomon
Smith Barney Inc., as to the fairness, from a financial point of view, as of
that date, of the 2.0976 exchange ratio to Cincinnati Bell. This opinion is
attached as Annex 7 to this proxy statement/ prospectus. WE ENCOURAGE CINCINNATI
BELL SHAREHOLDERS TO READ THIS OPINION CAREFULLY.
IXC (page 30)
In deciding to approve the merger, the IXC board of directors considered the
opinions, each dated July 20, 1999, of its financial advisors, Morgan Stanley &
Co. Incorporated and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as to
the fairness, from a financial point of view, as of that date, of the 2.0976
exchange ratio to its stockholders. These opinions are attached as Annexes 8 and
9 to this proxy statement/ prospectus. WE ENCOURAGE IXC STOCKHOLDERS TO READ
THESE OPINIONS CAREFULLY.
INTERESTS OF IXC'S DIRECTORS AND MANAGEMENT IN THE MERGER (page 51)
IXC stockholders should note that some IXC directors and officers have
interests in the merger as directors or officers that are different from, or in
addition to, the interests of other IXC stockholders. You should be aware of
these interests because they may conflict with yours. If we complete the merger,
two IXC directors will become members of the board of directors of Cincinnati
Bell and several current IXC executive officers will continue to be employees of
IXC. The indemnification arrangements for current IXC directors and officers
will also be continued. In addition, options to acquire IXC common stock held by
IXC executives and key employees will automatically vest unless the executive or
key employee elects to vest his or her options in accordance with the original
vesting schedule. Under the IXC Outside Directors' Phantom Stock Plan, to the
extent not already vested, the accounts of non-employee directors of IXC will
automatically vest at the effective time of the merger and will be paid within
10 days after the effective time.
THE SPECIAL MEETINGS
CINCINNATI BELL (page 17)
The special meeting of Cincinnati Bell shareholders will be held at Reakirt
Auditorium, Cincinnati Museum Center at Union Terminal, 1301 Western Avenue,
Cincinnati, Ohio 45203, at 9:00 a.m., local time, on Friday, October 29, 1999.
At the Cincinnati Bell special meeting, shareholders will be asked to approve
the issuance of shares of Cincinnati Bell common stock in the merger.
IXC (page 19)
The special meeting of IXC stockholders will be held at Barton Creek Country
Club, 8212 Barton Club Drive, Austin, Texas 78735, at 9:00 a.m., local time, on
Friday, October 29, 1999. At the IXC special meeting, stockholders will be asked
to adopt the merger agreement and the agreement governing the IXC internal
reorganization.
RECORD DATES; VOTING POWER
CINCINNATI BELL (page 17)
Cincinnati Bell shareholders are entitled to vote at the Cincinnati Bell
special meeting if they owned shares of Cincinnati Bell common stock as of the
close of business on September 22, 1999, the Cincinnati Bell record date.
On September 9, 1999, there were approximately 132,041,901 shares of
Cincinnati Bell common stock entitled to vote at the Cincinnati Bell special
meeting. Cincinnati Bell shareholders will have one vote at the Cincinnati Bell
special meeting for each share of Cincinnati Bell common stock that they owned
on the Cincinnati Bell record date.
4
<PAGE>
IXC (page 20)
IXC stockholders are entitled to vote at the IXC special meeting if they
owned shares of IXC common stock as of the close of business on September 22,
1999, the IXC record date.
On September 9, 1999, there were 37,412,215 shares of IXC common stock
entitled to vote at the IXC special meeting. IXC stockholders will have one vote
at the IXC special meeting for each share of IXC common stock that they owned on
the IXC record date.
VOTES REQUIRED
CINCINNATI BELL (page 18)
The affirmative vote of the holders of a majority of all shares of
Cincinnati Bell common stock casting votes at the Cincinnati Bell special
meeting is required to approve the issuance of shares of Cincinnati Bell common
stock in the merger, assuming that the total votes cast represent more than 50%
of all Cincinnati Bell capital stock entitled to vote.
IXC (page 20)
The affirmative vote of a majority of the shares of IXC common stock
outstanding on the IXC record date is required to adopt the merger agreement and
the agreement governing the IXC internal reorganization.
VOTING BY DIRECTORS AND EXECUTIVE OFFICERS
CINCINNATI BELL (page 18)
On September 9, 1999, directors and executive officers of Cincinnati Bell
and their affiliates owned and were entitled to vote approximately 2,340,220
shares of Cincinnati Bell common stock, or approximately 1.8% of the shares of
Cincinnati Bell common stock outstanding on that date.
The directors and executive officers of Cincinnati Bell have indicated that
they intend to vote the Cincinnati Bell common stock which they own for the
issuance of shares of Cincinnati Bell common stock in the merger.
IXC (page 20)
On September 9, 1999, directors and executive officers of IXC and their
affiliates owned and were entitled to vote 7,547,203 shares of IXC common stock,
or approximately 20% of the shares of IXC common stock outstanding on that date.
The directors and executive officers of IXC have indicated that they intend
to vote the IXC common stock which they own for adoption of the merger agreement
and the agreement governing the IXC internal reorganization. Under the terms of
a stockholders agreement with Cincinnati Bell, Richard D. Irwin, Chairman of the
Board of IXC, and Ralph J. Swett, a director of IXC, have agreed to vote their
IXC common stock for adoption of the merger agreement and the agreement
governing the IXC internal reorganization. On September 9, 1999, Messrs. Irwin
and Swett together owned and were entitled to vote 6,011,737 shares of IXC
common stock, or approximately 16% of the shares of IXC common stock outstanding
on that date.
THE MERGER (page 23)
THE MERGER AGREEMENT IS ATTACHED AS ANNEX 1 TO THIS PROXY
STATEMENT/PROSPECTUS. WE ENCOURAGE YOU TO READ THE MERGER AGREEMENT. IT IS THE
PRINCIPAL DOCUMENT GOVERNING THE MERGER.
CONDITIONS TO THE COMPLETION OF THE MERGER (page 62)
Cincinnati Bell and IXC will complete the merger only if they satisfy or, in
some cases, waive, several conditions, including the following:
- holders of a majority of the outstanding shares of IXC common stock must
have adopted the merger agreement and the agreement governing the IXC
internal reorganization
- holders of a majority of all shares of Cincinnati Bell common stock
casting votes must have approved the issuance of shares of Cincinnati Bell
common stock in the merger
- the waiting period required under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 must have expired or been terminated
5
<PAGE>
- all consents, approvals or orders of, authorizations of, or actions by,
the Federal Communications Commission and all necessary state public
utility commission approvals must have been obtained
- no legal restraints or prohibitions may exist which prevent the completion
of the merger or are reasonably likely to have a material adverse effect
on Cincinnati Bell or IXC
- Cincinnati Bell common stock issuable to IXC stockholders in the merger
must have been approved for listing on the New York Stock Exchange
- Riordan & McKinzie, counsel to IXC, must have delivered an opinion to IXC
stating that the merger will qualify for United States federal income tax
purposes as a reorganization within the meaning of the Internal Revenue
Code
- Cincinnati Bell must have received $400 million under the terms of an
investment agreement among Cincinnati Bell, Oak Hill Capital Partners L.P.
and certain related parties of Oak Hill (which are together referred to as
Oak Hill), which occurred on July 21, 1999
- Cincinnati Bell and IXC must have satisfied the representations,
warranties and obligations contained in the merger agreement in all
material respects.
TERMINATION OF THE MERGER AGREEMENT (page 64)
1. Cincinnati Bell and IXC can jointly agree to terminate the merger
agreement at any time without completing the merger.
2. Cincinnati Bell or IXC can terminate the merger agreement if:
- the merger is not completed by April 30, 2000, provided that either
Cincinnati Bell or IXC may extend this date until July 31, 2000 if the
fourth condition described above under "--Conditions to the Completion of
the Merger" has not been satisfied
- the holders of a majority of the outstanding shares of IXC common stock do
not adopt the merger agreement and the agreement governing the IXC
internal reorganization
- the holders of a majority of all shares of Cincinnati Bell casting votes
do not approve the issuance of shares of Cincinnati Bell common stock in
the merger
- a governmental authority or other legal action permanently prohibits the
completion of the merger or is reasonably likely to have a material
adverse effect on Cincinnati Bell or IXC
- a condition to the completion of the merger cannot be satisfied because
the other party breached or failed to comply in any material respect with
any of the representations or warranties it made or any of its obligations
under the merger agreement and has not cured the breach or failure within
30 days.
3. Cincinnati Bell can also terminate the merger agreement if IXC or any of
its directors or officers participates in discussions or negotiations with third
parties regarding certain takeover proposals or other business transactions in
breach of the merger agreement.
4. IXC can also terminate the merger agreement if Cincinnati Bell or any of
its directors or officers participates in discussions or negotiations with third
parties regarding certain takeover proposals or other business transactions in
breach of the merger agreement.
TERMINATION FEES
CINCINNATI BELL (page 65)
Cincinnati Bell must pay IXC a termination fee of $105 million if:
- Cincinnati Bell or its shareholders receive a takeover proposal or a
takeover proposal otherwise becomes publicly known and Cincinnati Bell or
IXC then terminates the merger agreement for the first or third reason
described in paragraph 2 above under "--Termination of the Merger
Agreement"
- IXC terminates the merger agreement for the reason described in paragraph
4 above
6
<PAGE>
under "--Termination of the Merger Agreement".
Cincinnati Bell is not required to pay IXC the termination fee unless
Cincinnati Bell or any of its subsidiaries enters into an agreement for or
completes any takeover proposal within 12 months of the termination of the
merger agreement.
IXC (page 64)
IXC must pay Cincinnati Bell a termination fee of $105 million if:
- IXC or its stockholders receive a takeover proposal or a takeover proposal
otherwise becomes publicly known and Cincinnati Bell or IXC then
terminates the merger agreement for the first or second reason described
in paragraph 2 above under "--Termination of the Merger Agreement"
- Cincinnati Bell terminates the merger agreement for the reason described
in paragraph 3 above under "--Termination of the Merger Agreement".
IXC is not required to pay Cincinnati Bell the termination fee unless IXC or
any of its subsidiaries enters into an agreement for or completes any takeover
proposal within 12 months of the termination of the merger agreement.
THE STOCK OPTION AGREEMENTS (page 69)
Cincinnati Bell and IXC have granted to each other options to purchase
shares of the other party's common stock equal to approximately 19.9% of the
number of outstanding shares of their common stock if any of the events occur
that entitle that party to receive the termination fee under the merger
agreement. Each option agreement imposes a limit of $26.25 million on the total
amount the other party may receive from the stock option.
THE STOCKHOLDERS AGREEMENTS (page 71)
General Electric Pension Trust and Messrs. Irwin and Swett, who on September
9, 1999 collectively held approximately 26% of IXC common stock then
outstanding, have agreed with Cincinnati Bell to vote the shares of IXC common
stock over which they have voting power or control in favor of the adoption of
the merger agreement and the agreement governing the IXC internal
reorganization.
REGULATORY APPROVALS (page 56)
United States antitrust laws prohibit Cincinnati Bell and IXC from
completing the merger until after they have furnished certain information and
materials to the Antitrust Division of the Department of Justice and the Federal
Trade Commission and a required waiting period has expired or been terminated.
Cincinnati Bell and IXC filed the required notification and report forms with
the Antitrust Division and the Federal Trade Commission on July 27, 1999, and
August 3, 1999, respectively. The waiting period with respect to each of
Cincinnati Bell and IXC was terminated on August 27, 1999.
The Federal Communications Commission must approve the transfer of control
of IXC's FCC licenses and authorizations to Cincinnati Bell. As of August 4,
1999, Cincinnati Bell and IXC filed initial applications for approval with the
Federal Communications Commission, and on August 20, 1999, Cincinnati Bell and
IXC filed amended applications. As part of its approval process, on September 3,
1999, the Federal Communications Commission requested public comment on this
transfer of control. IXC and Cincinnati Bell expect the Federal Communications
Commission approval to be obtained by November 30, 1999, unless this approval is
delayed.
Cincinnati Bell and IXC must also provide certain information to and, in
some cases, receive clearance for the merger from certain state public utility
commissions. As of August 16, 1999, Cincinnati Bell and IXC had furnished
information to these public utility commissions and expect all necessary
clearances to be obtained by November 30, 1999, unless the applicable public
utility commissions extend the waiting period for these clearances or request
additional information.
ACCOUNTING TREATMENT (page 57)
The merger will be accounted for using the purchase method of accounting
with Cincinnati Bell having acquired IXC.
7
<PAGE>
APPRAISAL RIGHTS (page 58)
Under the Delaware General Corporation Law, IXC common stockholders are not
entitled to appraisal rights in connection with the merger. IXC is in the
process of applying to list its shares of preferred stock on a national
securities exchange or The Nasdaq National Market. Holders of IXC preferred
stock will only be entitled to appraisal rights if the shares of IXC preferred
stock are not listed on a national securities exchange or The Nasdaq National
Market prior to the IXC record date. Under the Ohio General Corporation Law,
Cincinnati Bell shareholders are not entitled to dissenters rights in connection
with the merger.
EXPENSES (page 67)
Each of Cincinnati Bell and IXC will bear all expenses it incurs in
connection with the merger, except that Cincinnati Bell and IXC will share
equally the costs of filing the registration statement, of which this proxy
statement/ prospectus is a part, with the Securities and Exchange Commission,
printing and mailing this proxy statement/prospectus and the filing fees
incurred in connection with obtaining regulatory approval under the
Hart-Scott-Rodino Act.
THE COMPANIES (page 22)
IXC COMMUNICATIONS, INC.
1122 Capital of Texas Highway South
Austin, Texas 78746-6426
(512) 328-1112
IXC is a leading provider of data and voice telecommunications transmission
services. IXC owns and operates an advanced coast-to-coast digital
communications network that includes 13,000 route miles of fiber optic
transmission facilities. IXC's network-based delivery solutions are designed to
address the speed and capacity requirements of the global telecommunications
market. IXC offerings include private line, fast packet (ATM and frame relay),
Internet and long distance switched and dedicated services. IXC is at the
forefront of the industry's new class of emerging domestic and international
carriers.
CINCINNATI BELL INC.
201 East Fourth Street, 102-760
P.O. Box 2301
Cincinnati, Ohio 45201-2301
(800) 345-6301
Cincinnati Bell is a full service, integrated communications company that
provides competitive local communications as well as data, Internet, wireless,
directory, long distance and data networking services to customers in the
Cincinnati, Ohio metropolitan area and in many other Midwestern cities.
The local communications services division provides local, long distance,
data networking and transport, Internet access and pay phone services, as well
as sales of communications equipment, in southwestern Ohio, northern Kentucky
and southeastern Indiana, to both residential and business customers. The
directory services division sells directory advertising and information services
primarily to customers in the geographic areas described above. Cincinnati Bell
also resells long distance and Internet access services and provides data
services and products to small- and medium-sized business customers mainly in a
five-state Midwestern area, and telecommunications and computer equipment in the
secondary market. The wireless services division provides advanced digital
personal communications and sales of related communications equipment to both
businesses and residential customers in its Greater Cincinnati and Dayton, Ohio
operating areas.
MARKET PRICE AND DIVIDEND INFORMATION (page 72)
Shares of Cincinnati Bell common stock are listed on the New York Stock
Exchange. Shares of IXC common stock are listed on The Nasdaq National Market.
The following table presents:
- the last reported sale price of one share of Cincinnati Bell common stock,
as reported on the New York Stock Exchange Composite Transaction Tape
- the last reported sale price of one share of IXC common stock, as reported
on The Nasdaq National Market and
- the market value of one share of IXC common stock on an equivalent per
share basis determined as if the merger had been completed,
8
<PAGE>
in each case as if the merger had been completed on July 20, 1999, the last full
trading day prior to the public announcement of the proposed merger, and on
September 9, 1999, the last day for which such information could be calculated
prior to the date of this proxy statement/prospectus. The equivalent price per
share data for IXC common stock has been determined by multiplying the last
reported sale price of one share of Cincinnati Bell common stock on each of
these dates by the exchange ratio of 2.0976.
<TABLE>
<CAPTION>
EQUIVALENT
PRICE PER
SHARE OF
CINCINNATI BELL IXC IXC
COMMON COMMON COMMON
DATE STOCK STOCK STOCK
- --------------------- --------------- ----------- -----------
<S> <C> <C> <C>
July 20, 1999........ $ 23.56 $ 36.25 $ 49.42
September 9, 1999.... 18.00 33.56 37.76
</TABLE>
Cincinnati Bell has historically paid a regular quarterly dividend to its
shareholders. In connection with the merger, Cincinnati Bell discontinued its
quarterly dividend starting after the August 3, 1999 payment date. IXC has never
paid dividends to its stockholders.
9
<PAGE>
COMPARATIVE PER SHARE INFORMATION
We have summarized below the income (loss) from continuing operations before
extraordinary items, cash dividends per common share and the book value per
common share data for Cincinnati Bell and IXC on a historical, pro forma
combined and pro forma equivalent basis. We combined historical consolidated
financial information of Cincinnati Bell and IXC using the purchase method of
accounting for business combinations. Each of Cincinnati Bell's and IXC's fiscal
year ends on December 31.
The unaudited "pro forma combined" and the unaudited "pro forma
equivalent--IXC" information assumes that the merger occurred on January 1,
1998. The unaudited "pro forma combined" information combines the financial
information of Cincinnati Bell for the fiscal year ended December 31, 1998, and
the six-month period ended June 30, 1999, with the financial information of IXC
for the fiscal year ended December 31, 1998, and the six-month period ended June
30, 1999.
The unaudited "pro forma equivalent--IXC" information was calculated by
multiplying the corresponding pro forma combined data by the exchange ratio of
2.0976. This information shows how each share of IXC common stock would have
participated in net earnings, cash dividends and book value of Cincinnati Bell
if the merger had been completed at the beginning of the earliest period
presented. However, these amounts do not necessarily reflect future per share
levels of net earnings, cash dividends or book value of Cincinnati Bell. The
following information which is unaudited comparative and unaudited pro forma per
share data is derived from the historical and unaudited pro forma combined
condensed financial statements of Cincinnati Bell and IXC.
YOU SHOULD READ THE INFORMATION IN THIS SECTION ALONG WITH CINCINNATI BELL'S
AND IXC'S HISTORICAL CONSOLIDATED FINANCIAL STATEMENTS AND ACCOMPANYING NOTES
INCLUDED IN THE DOCUMENTS DESCRIBED UNDER "WHERE YOU CAN FIND MORE INFORMATION"
ON PAGE 94. YOU SHOULD ALSO READ THE UNAUDITED PRO FORMA COMBINED CONDENSED
FINANCIAL STATEMENTS AND ACCOMPANYING DISCUSSION AND NOTES INCLUDED IN THIS
PROXY STATEMENT/PROSPECTUS STARTING ON PAGE 73.
<TABLE>
<CAPTION>
AT OR FOR THE SIX
AT OR FOR MONTHS ENDED
THE YEAR ENDED JUNE 30,
DECEMBER 31, (UNAUDITED)
-------------------- ----------------------
1998 1997 1999 1998
--------- --------- ----------- ---------
<S> <C> <C> <C> <C>
CINCINNATI BELL--HISTORICAL
Basic earnings per common share from continuing operations............... $0.60 $0.76 $0.39 $0.29
Diluted earnings per common share from continuing operations............. 0.59 0.74 0.38 0.28
Cash dividends declared per common share................................. 0.40 0.40 0.20 0.20
Book value per outstanding common share.................................. 1.04 4.26 1.28 4.56
IXC--HISTORICAL
Basic and diluted loss per common share from continuing operations....... $ (4.28) $ (3.47) $ (5.14 ) $ (2.18)
Cash dividends declared per common share................................. N/A N/A N/A N/A
Book value (deficit) per outstanding common share........................ (1.99) (0.52) (2.35 ) (0.11)
</TABLE>
<TABLE>
<CAPTION>
AT OR FOR AT OR FOR THE SIX
THE YEAR ENDED MONTHS ENDED
DECEMBER 31, 1998 JUNE 30, 1999
(UNAUDITED) (UNAUDITED)
------------------- -----------------
<S> <C> <C>
PRO FORMA COMBINED
Basic and diluted loss per common share from continuing operations....... $ (0.65) $ (0.77)
Cash dividends declared per common share................................. N/A N/A
Book value per outstanding common share.................................. N/A 9.72
PRO FORMA EQUIVALENT--IXC
Basic and diluted loss per common share from continuing operations....... $ (1.36) $ (1.62)
Cash dividends declared per common share................................. N/A N/A
Book value per outstanding common share.................................. N/A 20.38
</TABLE>
- ------------------------
N/A--Not Applicable
10
<PAGE>
SELECTED HISTORICAL AND UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL DATA
CINCINNATI BELL
The following selected financial data of Cincinnati Bell at December 31,
1998, 1997, 1996, 1995 and 1994, and for each of the five years in the period
ended December 31, 1998, are derived from audited consolidated financial
statements incorporated by reference in this proxy statement/prospectus. The
following selected financial data of Cincinnati Bell at June 30, 1999 and 1998,
and for the six-month periods ended June 30, 1999 and 1998, are derived from
unaudited consolidated financial statements incorporated by reference in this
proxy statement/prospectus.
You should note the following in reading the Cincinnati Bell selected
historical financial information:
- on December 31, 1998, Cincinnati Bell completed a tax-free spin-off of its
wholly owned subsidiary, Convergys Corporation, by distributing one share
of Convergys common stock for each share of Cincinnati Bell common stock
owned by Cincinnati Bell shareholders of record on December 1, 1998. As a
result, the consolidated financial results for all periods have been
restated to reflect the disposition of Convergys as discontinued
operations
- in February 1998, Cincinnati Bell announced its intention to acquire from
AT&T PCS an 80% interest in a PCS wireless business in the Greater
Cincinnati and Dayton, Ohio markets. The agreement specified that before
the completion of the transaction, Cincinnati Bell and AT&T PCS would
operate under an interim agreement where losses would be funded in the
same percentages as the proposed transaction. Cincinnati Bell's required
funding of the losses was $27.3 million in 1998 through the completion of
the acquisition at December 31, 1998. This loss has been included in
Cincinnati Bell's financial results as a wireless venture loss line item
below operating income. Beginning in 1999 the results of this business are
included in Cincinnati Bell's operating results.
The following extraordinary, unusual or infrequently occurring item has
impacted operating income for the periods presented:
- in 1995, Cincinnati Bell initiated a restructuring plan to reduce the
number of its employees. A restructuring liability was established to
provide for the voluntary and involuntary separation of employees.
Cincinnati Bell recorded charges of $131.6 million, net of pension
settlement gains, to reflect the cost of this plan. Since the
establishment of the reserve, certain gains have been realized that have
been reflected as income. The amounts include $21.0 million and $27.4
million in 1997 and 1996, respectively, for pension settlement gains, and
$1.1 million and $2.3 million in 1998 and 1996, respectively, for
reversals of unneeded reserves.
For purposes of Cincinnati Bell and IXC selected historical financial data
and for Cincinnati Bell and IXC pro forma combined condensed financial data,
EBITDA represents operating income before interest expense, interest income,
income taxes, depreciation, amortization and special charges (such as
restructuring or merger-related charges). EBITDA should not be considered as an
alternative to, or more meaningful than, (1) operating income, as determined in
accordance with generally accepted accounting principles, as an indicator of
operating performance or (2) cash flows from operating activities, as determined
in accordance with generally accepted accounting principles, as a measure of
liquidity. EBITDA is presented as additional information because certain
investors consider it to be a useful indicator of a company's ability to meet
its debt service requirements. Because EBITDA is not calculated identically by
all companies, the presentation in this proxy statement/prospectus may not be
comparable to similarly titled measures of other companies.
11
<PAGE>
For purposes of computing the ratio of earnings to combined fixed charges
and preferred dividends for Cincinnati Bell historical financial data and
Cincinnati Bell and IXC pro forma combined condensed financial data, (1)
earnings consist of pretax income (loss) from continuing operations, excluding
minority interest in losses of consolidated subsidiaries and equity investees
income (losses), and (2) fixed charges consist of pretax interest (including
capitalized interest) on all indebtedness, amortization of debt discount and
expense, that portion of rental expense which Cincinnati Bell believes to be
representative of interest, and dividend requirements on mandatorily redeemable
preferred securities and preferred dividends.
YOU SHOULD READ THE INFORMATION IN THIS SECTION ALONG WITH CINCINNATI BELL'S
FINANCIAL STATEMENTS AND ACCOMPANYING NOTES INCORPORATED BY REFERENCE IN THIS
PROXY STATEMENT/PROSPECTUS. SEE "WHERE YOU CAN FIND MORE INFORMATION" ON PAGE
94.
<TABLE>
<CAPTION>
HISTORICAL
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
AT OR FOR THE SIX
MONTHS ENDED JUNE
30,
AT OR FOR THE YEAR ENDED DECEMBER 31, (UNAUDITED)
----------------------------------------------------- --------------------
1998 1997 1996 1995 1994 1999 1998
--------- --------- --------- --------- --------- --------- ---------
<CAPTION>
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues................................. $885.1 $834.5 $779.8 $736.0 $704.3 $495.8 $436.0
Operating income......................... 180.0 191.4 180.6 9.4 108.8 97.1 80.7
Income (loss) from
continuing operations.................. 81.8 102.3 99.5 (29.1) 43.0 53.0 38.6
Income (loss) from continuing operations
per common share-- basic............... 0.60 0.76 0.74 (0.22) 0.33 0.39 0.29
Income (loss) from continuing operations
per common share-- diluted............. 0.59 0.74 0.73 (0.22) 0.33 0.38 0.28
Dividends declared per
common share........................... 0.40 0.40 0.40 0.40 0.40 0.20 0.20
BALANCE SHEET DATA:
Total assets............................. $ 1,041.0 $ 1,275.1 $ 1,415.9 $ 1,363.8 $ 1,474.8 $ 1,135.1 $ 1,336.9
Total debt (including capital lease
obligations)........................... 553.0 399.5 409.0 423.7 514.9 616.6 418.8
Shareowners' equity...................... 142.1 579.7 634.4 478.1 552.4 176.5 622.3
<CAPTION>
OTHER DATA:
<S> <C> <C> <C> <C> <C> <C> <C>
EBITDA................................... $290.0 $294.7 $271.9 $257.3 $230.6 $162.0 $134.7
Cash provided by
operating activities................... 212.3 197.4 132.0 151.5 207.8 60.5 85.0
Ratio of earnings to combined fixed
charges and preferred dividends........ 5.5 5.7 6.0 -- 2.5 3.6
Deficiency of earnings to combined fixed
charges and preferred dividends........ -- -- -- $45.1 -- --
</TABLE>
12
<PAGE>
IXC
The following selected financial data of IXC at December 31, 1998 and 1997
and for the three years ended December 31, 1998 are derived from the audited
consolidated financial statements incorporated by reference in this proxy
statement/prospectus. The following selected financial data of IXC at June 30,
1999 and 1998, and for the six-month periods ended June 30, 1999 and 1998, are
derived from unaudited condensed consolidated financial statements incorporated
by reference in this proxy statement/prospectus. The selected financial data for
all other periods and as of all other dates is derived from audited consolidated
financial statements not incorporated by reference herein. The financial
information for all periods presented prior to June 30, 1998 has been restated
to include the results of operations of Eclipse Telecommunications, Inc., which
was acquired by IXC in June 1998 in a transaction accounted for as a pooling of
interests.
You should note the following in reading the IXC selected historical
financial information:
- in April 1998, IXC completed a tender offer to repurchase $284.2 million
of its 12 1/2% senior notes prior to their scheduled maturity. With the
early redemption of the 12 1/2% senior notes, IXC recognized a charge of
approximately $67.0 million, net of taxes, as an extraordinary item in
1998
- during the six-month period ended June 30, 1999, IXC announced plans to
exit certain operations in its switched wholesale business. As a result,
IXC recorded a $25.8 million charge, consisting of severance costs,
charges for asset write-downs, estimated costs to decommission certain
assets that will no longer be necessary, and lease termination costs on
assets and office space that will not be needed after the restructuring.
13
<PAGE>
YOU SHOULD READ THE INFORMATION IN THIS SECTION ALONG WITH IXC'S FINANCIAL
STATEMENTS AND ACCOMPANYING NOTES INCORPORATED BY REFERENCE IN THIS PROXY
STATEMENT/PROSPECTUS. SEE "WHERE YOU CAN FIND MORE INFORMATION" ON PAGE 94.
<TABLE>
<CAPTION>
HISTORICAL
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
AT OR FOR THE SIX
MONTHS ENDED JUNE
30,
AT OR FOR THE YEAR ENDED DECEMBER 31, (UNAUDITED)
----------------------------------------------------- --------------------
1998 1997 1996 1995 1994 1999 1998
--------- --------- --------- --------- --------- --------- ---------
<CAPTION>
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues.............................. $668.6 $ 521.6 $ 282.0 $ 154.7 $ 129.0 $319.3 $313.5
Operating income (loss)............... (30.8) (49.5) (19.9) 3.4 16.7 (108.4) (11.8)
Income (loss) from
continuing operations............... (95.5) (99.2) (44.2) (2.4) 6.7 (156.4) (50.6)
Income (loss) from continuing
operations per common
share--basic and diluted............ (4.28) (3.47) (1.52) (0.15) 0.25 (5.14) (2.18)
Dividends declared per
common share........................ N/A N/A N/A N/A N/A N/A N/A
BALANCE SHEET DATA:
Total assets.......................... $ 1,748.2 $ 968.9 $ 485.3 $ 365.7 $ 122.7 $ 2,101.5 $ 1,437.3
Total debt (including capital lease
obligations)........................ 693.0 320.7 305.6 302.8 70.6 773.0 500.7
Redeemable preferred stock............ 447.9 403.4 -- -- -- 471.1 425.9
Stockholders' equity (deficit)........ (72.5) (18.7) 75.3 23.5 23.6 (87.9) (3.9)
OTHER DATA:
EBITDA................................ $90.7 $23.2 $16.0 $22.5 $29.7 $(6.6) $38.6
Cash provided (used) by
operating activities................ 202.3 21.8 (22.9) 13.7 14.2 105.5 41.3
</TABLE>
- ------------------------
N/A--Not Applicable
14
<PAGE>
CINCINNATI BELL AND IXC PRO FORMA COMBINED
The following selected unaudited pro forma combined condensed financial data
of Cincinnati Bell and IXC combine the consolidated financial information of
Cincinnati Bell at or for the year ended December 31, 1998 and the six-month
period ended June 30, 1999, with the consolidated financial information of IXC
at or for the period ended December 31, 1998, and the six-month period ended
June 30, 1999. The selected unaudited pro forma combined condensed financial
data is derived from the unaudited pro forma combined condensed financial
statements contained elsewhere in this proxy statement/prospectus. We have
prepared the unaudited pro forma combined condensed financial information using
the purchase method of accounting. This pro forma information does not give
effect to any restructuring costs or to any potential cost savings or other
synergies that could result from the merger.
The unaudited pro forma combined condensed financial information does not
purport to represent what the combined company's financial position or results
of operations would have been had the merger occurred at the beginning of the
earliest period presented or to project the combined financial position or
results of operations for any future date or period.
YOU SHOULD READ THE FINANCIAL INFORMATION IN THIS SECTION ALONG WITH
HISTORICAL AND UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS AND
ACCOMPANYING NOTES, EITHER INCORPORATED BY REFERENCE OR INCLUDED IN THIS PROXY
STATEMENT/PROSPECTUS. SEE "UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL
STATEMENTS" ON PAGE 73 AND "WHERE YOU CAN FIND MORE INFORMATION" ON PAGE 94.
<TABLE>
<CAPTION>
PRO FORMA
------------------------------------
<S> <C> <C>
AT OR FOR AT OR FOR THE SIX
THE YEAR ENDED MONTHS ENDED
DECEMBER 31, 1998 JUNE 30, 1999
----------------- -----------------
<CAPTION>
(DOLLARS IN MILLIONS, EXCEPT PER
SHARE AMOUNTS)
<S> <C> <C>
INCOME STATEMENT DATA:
Revenues................................................................. $ 1,553.7 $815.1
Operating income (loss).................................................. 109.5 (29.9 )
Loss from continuing operations.......................................... (116.7 ) (149.9 )
Loss from continuing operations
per common share--basic and diluted.................................... (0.65 ) (0.77 )
Dividends declared per common share...................................... N/A N/A
BALANCE SHEET DATA:
Total assets............................................................. N/A $ 5,701.0
Total debt (including capital lease obligations)......................... N/A 1,787.6
Redeemable preferred stock............................................... N/A 187.3
Minority interest........................................................ N/A 364.9
Shareowners' equity...................................................... N/A 1,997.6
OTHER DATA:
EBITDA................................................................... $383.0 $155.4
Ratio of earnings to combined fixed charges and preferred dividends...... -- --
Deficiency of earnings to combined fixed charges and preferred
dividends.............................................................. $73.4 $134.5
</TABLE>
- ------------------------
N/A--Not Applicable
15
<PAGE>
RISK FACTORS RELATING TO THE MERGER
IN ADDITION TO THE OTHER INFORMATION INCLUDED AND INCORPORATED BY REFERENCE
IN THIS PROXY STATEMENT/ PROSPECTUS, CINCINNATI BELL SHAREHOLDERS SHOULD
CONSIDER CAREFULLY THE MATTERS DESCRIBED BELOW IN DETERMINING WHETHER TO APPROVE
THE ISSUANCE OF SHARES OF CINCINNATI BELL COMMON STOCK IN THE MERGER AND IXC
STOCKHOLDERS SHOULD CONSIDER CAREFULLY THE MATTERS DESCRIBED BELOW IN
DETERMINING WHETHER TO ADOPT THE MERGER AGREEMENT AND THE AGREEMENT GOVERNING
THE IXC INTERNAL REORGANIZATION.
- THE EXCHANGE RATIO FOR SHARES OF CINCINNATI BELL COMMON STOCK TO BE
RECEIVED IN THE MERGER IS FIXED AND WILL NOT BE ADJUSTED IN THE EVENT OF
ANY CHANGE IN STOCK PRICE. Under the merger agreement, each share of IXC
common stock will be converted into the right to receive 2.0976 shares of
Cincinnati Bell common stock. This exchange ratio is a fixed number and
will not be adjusted in the event of any increase or decrease in the price
of Cincinnati Bell common stock or IXC common stock. The prices of
Cincinnati Bell common stock and IXC common stock at the closing of the
merger may vary from their respective prices on the date of this proxy
statement/ prospectus and on the dates of the special meetings. These
prices may vary as a result of changes in the business, operations or
prospects of Cincinnati Bell or IXC, market assessments of the likelihood
that the merger will be completed, the timing of the completion of the
merger, the prospects of post-merger operations, regulatory
considerations, general market and economic conditions and other factors.
Because the date that the merger is completed may be later than the dates
of the special meetings, the prices of Cincinnati Bell common stock and
IXC common stock on the dates of the special meetings may not be
indicative of their respective prices on the date the merger is completed.
We urge Cincinnati Bell shareholders and IXC stockholders to obtain
current market quotations for Cincinnati Bell common stock and IXC common
stock.
- THE INTEGRATION OF CINCINNATI BELL AND IXC FOLLOWING THE MERGER WILL
PRESENT SIGNIFICANT CHALLENGES. Cincinnati Bell and IXC will face
significant challenges in consolidating functions, integrating their
organizations, procedures, operations and product lines in a timely and
efficient manner, and retaining key Cincinnati Bell and IXC personnel. The
integration of Cincinnati Bell and IXC will be complex and time-consuming.
The failure to successfully integrate Cincinnati Bell and IXC and to
successfully manage the challenges presented by the integration process
may result in Cincinnati Bell and IXC not achieving the anticipated
potential benefits of the merger.
- THE MERGER MAY CAUSE CUSTOMERS TO DELAY PURCHASING DECISIONS. There can be
no assurance that the customers of each of Cincinnati Bell and IXC will
continue to use and purchase Cincinnati Bell's or IXC's products or
services as they have in the past without regard to the proposed merger.
Uncertainties regarding new product development by the combined company,
for example, may cause customers to delay purchasing decisions.
- THE PRICE OF CINCINNATI BELL COMMON STOCK MAY BE AFFECTED BY FACTORS
DIFFERENT FROM THOSE AFFECTING THE PRICE OF IXC COMMON STOCK. Upon
completion of the merger, holders of IXC common stock will become holders
of Cincinnati Bell common stock. Cincinnati Bell's business is different
from that of IXC, and Cincinnati Bell's results of operations, as well as
the price of Cincinnati Bell common stock, may be affected by factors
different than those affecting IXC's results of operations and the price
of IXC common stock. For a discussion of Cincinnati Bell's and IXC's
businesses and certain factors to consider in connection with such
businesses, see Cincinnati Bell's Annual Report on Form 10-K for the
fiscal year ended December 31, 1998 and IXC's Annual Report on Form 10-K
for the fiscal year ended December 31, 1998, as amended, which are
incorporated by reference in this proxy statement/prospectus.
16
<PAGE>
- THE MERGER IS SUBJECT TO THE RECEIPT OF CONSENTS AND APPROVALS FROM
GOVERNMENT ENTITIES THAT MAY IMPOSE CONDITIONS THAT COULD HAVE A MATERIAL
ADVERSE EFFECT ON CINCINNATI BELL OR IXC OR CAUSE ABANDONMENT OF THE
MERGER. Completion of the merger is conditioned upon the expiration or
termination of the applicable waiting period under the Hart-Scott-Rodino
Act and the receipt of potential consents, orders, approvals or
clearances, as required, from the Federal Communications Commission and
state public utility commissions. The terms and conditions of these
consents, orders, approvals and clearances may require the divestiture of
divisions, operations or assets of Cincinnati Bell or IXC or may affect
the FCC licenses or authorizations of Cincinnati Bell or IXC. These
required divestitures or other conditions, if any, may have a material
adverse effect on the business, financial condition or results of
operations of Cincinnati Bell or IXC or may cause the abandonment of the
merger by Cincinnati Bell or IXC. Cincinnati Bell and IXC have not
determined how they will respond to any of these potential conditions,
limitations or divestitures which may be required.
THE CINCINNATI BELL SPECIAL MEETING
WE ARE FURNISHING THIS PROXY STATEMENT/PROSPECTUS TO SHAREHOLDERS OF
CINCINNATI BELL AS PART OF THE SOLICITATION OF PROXIES BY THE CINCINNATI BELL
BOARD OF DIRECTORS FOR USE AT THE CINCINNATI BELL SPECIAL MEETING.
DATE, TIME AND PLACE
We will hold the Cincinnati Bell special meeting on Friday, October 29,
1999, at 9:00 a.m., local time, at Reakirt Auditorium, Cincinnati Museum Center
at Union Terminal, 1301 Western Avenue, Cincinnati, Ohio 45203.
PURPOSE OF CINCINNATI BELL SPECIAL MEETING
At the Cincinnati Bell special meeting, we are asking holders of Cincinnati
Bell common stock to approve the issuance of shares of Cincinnati Bell common
stock in order for each IXC stockholder to receive in the merger 2.0976 shares
of Cincinnati Bell common stock for each share of IXC common stock that they
own. See "The Merger" and "The Merger Agreement and Related Documents". The
Cincinnati Bell board of directors has unanimously approved the merger agreement
and the merger, and has determined that the merger and the merger agreement are
advisable, fair to and in the best interests of Cincinnati Bell and its
shareholders. The Cincinnati Bell board of directors unanimously recommends that
Cincinnati Bell shareholders vote FOR the issuance of shares of Cincinnati Bell
common stock in the merger.
CINCINNATI BELL RECORD DATE; STOCK ENTITLED TO VOTE; QUORUM
Only holders of record of Cincinnati Bell common stock at the close of
business on September 22, 1999, the Cincinnati Bell record date, are entitled to
notice of and to vote at the Cincinnati Bell special meeting. On September 9,
1999, the most recent practicable date prior to the date of this proxy
statement/prospectus, approximately 132,041,901 shares of Cincinnati Bell common
stock were issued and outstanding and held by approximately 23,307 holders of
record. A quorum will be present at the Cincinnati Bell special meeting if a
majority of the shares of Cincinnati Bell common stock issued and outstanding
and entitled to vote on the Cincinnati Bell record date are represented in
person or by proxy. If a quorum is not present at the Cincinnati Bell special
meeting, we expect that the meeting will be adjourned or postponed to solicit
additional proxies. Holders of record of Cincinnati Bell common stock on the
Cincinnati Bell record date are entitled to one vote per share at the Cincinnati
Bell
17
<PAGE>
special meeting on the proposal to approve the issuance of shares of Cincinnati
Bell common stock in the merger.
VOTES REQUIRED
The issuance of shares of Cincinnati Bell common stock in the merger
requires the affirmative vote of the holders of a majority of all shares of
Cincinnati Bell common stock casting votes in person or by proxy at the
Cincinnati Bell special meeting, assuming that the total votes cast, including
votes cast against the proposal, represent more than 50% of all Cincinnati Bell
capital stock entitled to vote. If a Cincinnati Bell shareholder abstains from
voting or does not vote, it will have no effect in determining whether the
issuance of shares of Cincinnati Bell common stock in the merger will be
approved.
VOTING BY CINCINNATI BELL DIRECTORS AND EXECUTIVE OFFICERS
At the close of business on September 9, 1999, directors and executive
officers of Cincinnati Bell and their affiliates owned and were entitled to vote
approximately 2,340,220 shares of Cincinnati Bell common stock, which
represented approximately 1.8% of the shares of Cincinnati Bell common stock
outstanding on that date. Each Cincinnati Bell director and executive officer
has indicated his or her present intention to vote, or cause to be voted, the
shares of Cincinnati Bell common stock owned by him or her for the issuance of
shares of Cincinnati Bell in the merger.
VOTING OF PROXIES
All shares represented by properly executed proxies received in time for the
Cincinnati Bell special meeting will be voted at the Cincinnati Bell special
meeting in the manner specified by the holders of those proxies. Properly
executed proxies that do not contain voting instructions will be voted for the
issuance of shares of Cincinnati Bell common stock in the merger.
Shares of Cincinnati Bell common stock represented at the Cincinnati Bell
special meeting but not voting, including shares of Cincinnati Bell common stock
for which proxies have been received but for which holders of shares have
abstained, will be treated as present at the Cincinnati Bell special meeting for
purposes of determining the presence or absence of a quorum for the transaction
of all business.
Only shares affirmatively voted for the issuance of shares of Cincinnati
Bell common stock in the merger, including properly executed proxies that do not
contain voting instructions, will be counted as favorable votes for that
proposal. Brokers who hold shares of Cincinnati Bell common stock in street name
for customers who are the beneficial owners of those shares may not give a proxy
to vote those shares without specific instructions from those customers. These
non-voted shares are referred to as broker non-votes and will have no effect in
determining whether the issuance of shares of Cincinnati Bell common stock in
the merger will be approved.
The persons named as proxies by a Cincinnati Bell shareholder may propose
and vote for one or more adjournments of the Cincinnati Bell special meeting,
including adjournments to permit further solicitations of proxies. No proxy
voted against the proposal to issue shares of Cincinnati Bell common stock in
the merger will be voted in favor of any such adjournment or postponement.
Cincinnati Bell does not expect that any matter other than the proposal to
issue shares of Cincinnati Bell common stock in the merger will be brought
before the Cincinnati Bell special meeting. If, however, the Cincinnati Bell
board of directors properly presents other matters, the persons named as proxies
will vote in accordance with their judgment.
18
<PAGE>
REVOCABILITY OF PROXIES
The grant of a proxy on the enclosed form of proxy does not preclude a
Cincinnati Bell shareholder from voting in person at the Cincinnati Bell special
meeting. A Cincinnati Bell shareholder may revoke a proxy at any time prior to
its exercise by filing with Cincinnati Bell a duly executed revocation of proxy,
by submitting a duly executed proxy to Cincinnati Bell bearing a later date or
by appearing at the Cincinnati Bell special meeting and voting in person.
Attendance at the Cincinnati Bell special meeting will not itself revoke a
proxy.
SOLICITATION OF PROXIES
Cincinnati Bell will bear the cost of the solicitation of proxies from its
shareholders. In addition to solicitation by mail, the directors, officers and
employees of Cincinnati Bell and its subsidiaries may solicit proxies from
Cincinnati Bell shareholders by telephone or other electronic means or in
person. Arrangements will also be made with brokerage houses and other
custodians, nominees and fiduciaries for the forwarding of solicitation
materials to the beneficial owners of stock held of record by these persons, and
Cincinnati Bell will reimburse them for their reasonable out-of-pocket expenses.
Cincinnati Bell will mail a copy of this proxy statement/prospectus to each
holder of record of Cincinnati Bell common stock on the Cincinnati Bell record
date.
Georgeson & Company Inc. will assist in the solicitation of proxies by
Cincinnati Bell. Cincinnati Bell will pay Georgeson & Company a fee of $12,500,
plus reimbursement of certain out-of-pocket expenses, and will indemnify
Georgeson & Company against any losses arising out of Georgeson & Company's
proxy soliciting services on behalf of Cincinnati Bell.
THE IXC SPECIAL MEETING
WE ARE FURNISHING THIS PROXY STATEMENT/PROSPECTUS TO STOCKHOLDERS OF IXC AS
PART OF THE SOLICITATION OF PROXIES BY THE IXC BOARD OF DIRECTORS FOR USE AT THE
IXC SPECIAL MEETING.
DATE, TIME AND PLACE
We will hold the IXC special meeting on Friday, October 29, 1999, at 9:00
a.m., local time, at Barton Creek Country Club, 8212 Barton Club Drive, Austin,
Texas 78735.
PURPOSE OF IXC SPECIAL MEETING
At the IXC special meeting, we are asking holders of record of IXC common
stock to:
- consider and vote on a proposal to adopt the merger agreement among
Cincinnati Bell, Ivory Merger Inc., a Delaware corporation and a wholly
owned subsidiary of Cincinnati Bell, and IXC, providing for the merger of
Ivory Merger Inc. with and into IXC. After the merger, IXC will be a
subsidiary of Cincinnati Bell
- consider and vote on a proposal to adopt the agreement governing the IXC
internal reorganization between IXC and IXC Merger Sub, Inc., a wholly
owned subsidiary of IXC, providing for an internal reorganization
involving the merger of IXC Merger Sub, Inc. with and into IXC prior to
the merger with the Cincinnati Bell subsidiary.
The IXC board of directors has approved the merger agreement and the agreement
governing the IXC internal reorganization, and has determined that the merger,
the IXC internal reorganization, the
19
<PAGE>
merger agreement and the agreement governing the IXC reorganization are
advisable, fair to and in the best interests of IXC and its stockholders. The
IXC board of directors recommends that IXC stockholders vote FOR the adoption of
the merger agreement and the agreement governing the IXC internal
reorganization.
IXC RECORD DATE; STOCK ENTITLED TO VOTE; QUORUM
Only holders of record of IXC common stock at the close of business on
September 22, 1999, the IXC record date, are entitled to notice of and to vote
at the IXC special meeting and any adjournments or postponements of it. Only
holders of record of shares of IXC preferred stock at the close of business on
the IXC record date are entitled to notice of the IXC special meeting and any
adjournments or postponements of it.
On September 9, 1999, the most recent practicable date prior to the date of
this proxy statement/ prospectus, 37,412,215 shares of IXC common stock were
outstanding and held by approximately 307 holders of record. A quorum will be
present at the IXC special meeting if a majority of the shares of IXC common
stock issued and outstanding and entitled to vote on the IXC record date are
represented in person or by proxy. If a quorum is not present at the IXC special
meeting, we expect that the IXC special meeting will be adjourned or postponed
to solicit additional proxies. Holders of record of IXC common stock on the IXC
record date are entitled to one vote per share at the IXC special meeting on the
proposals to adopt the merger agreement and the agreement governing the IXC
internal reorganization.
VOTES REQUIRED
The adoption of the merger agreement and the agreement governing the IXC
internal reorganization requires the affirmative vote of a majority of the
shares of IXC common stock outstanding on the IXC record date. IF AN IXC
STOCKHOLDER ABSTAINS FROM VOTING OR DOES NOT VOTE (EITHER IN PERSON OR BY
PROXY), IT WILL HAVE THE SAME EFFECT AS IF THAT IXC STOCKHOLDER HAD VOTED
AGAINST ADOPTION OF THE MERGER AGREEMENT AND THE AGREEMENT GOVERNING THE IXC
INTERNAL REORGANIZATION.
VOTING BY IXC DIRECTORS AND EXECUTIVE OFFICERS
At the close of business on September 9, 1999, Messrs. Irwin and Swett and
their respective affiliates owned and were entitled to vote 6,011,737 shares of
IXC common stock outstanding on that date. At the close of business on September
9, 1999, directors and executive officers of IXC and their affiliates owned and
were entitled to vote 7,547,203 shares of IXC common stock, which represented
approximately 20% of the shares of IXC common stock outstanding on that date.
Each IXC director and executive officer has indicated his or her present
intention to vote, or cause to be voted, the IXC common stock owned by him or
her for the adoption of the merger agreement and the agreement governing the IXC
internal reorganization. General Electric and Messrs. Irwin and Swett have
agreed to vote the shares of IXC common stock over which they have voting power
or control in favor of the adoption of the merger agreement and the agreement
governing the IXC internal reorganization. See "The Merger Agreement and Related
Documents--Stockholders Agreements".
VOTING OF PROXIES
All shares represented by properly executed proxies received in time for the
IXC special meeting will be voted at the IXC special meeting in the manner
specified by the holders of those proxies. Properly executed proxies that do not
contain voting instructions will be voted for adoption of the merger agreement
and the agreement governing the IXC internal reorganization.
20
<PAGE>
Shares of IXC common stock represented at the IXC special meeting but not
voting, including shares of IXC common stock for which proxies have been
received but for which holders of shares have abstained, will be treated as
present at the IXC special meeting for purposes of determining the presence or
absence of a quorum for the transaction of all business.
Only shares affirmatively voted for adoption of the merger agreement and the
agreement governing the IXC internal reorganization, including properly executed
proxies that do not contain voting instructions, will be counted as favorable
votes for these proposals. Brokers who hold shares of IXC common stock in street
name for customers who are the beneficial owners of those shares may not give a
proxy to vote those shares without specific instructions from those customers.
These non-voted shares are referred to as broker non-votes and have the same
effect as votes against adoption of the merger agreement and the agreement
governing the IXC internal reorganization.
The persons named as proxies by an IXC stockholder may propose and vote for
one or more adjournments of the IXC special meeting, including adjournments to
permit further solicitations of proxies. No proxy voted against the proposals to
adopt the merger agreement and the agreement governing the IXC internal
reorganization will be voted in favor of any such adjournment or postponement.
IXC does not expect that any matter other than the proposals to adopt the
merger agreement and the agreement governing the IXC internal reorganization
will be brought before the IXC special meeting. If, however, the IXC board of
directors properly presents other matters, the persons named as proxies will
vote in accordance with their judgment.
REVOCABILITY OF PROXIES
The grant of a proxy on the enclosed form of proxy does not preclude an IXC
stockholder from voting in person at the IXC special meeting. An IXC stockholder
may revoke a proxy at any time prior to its exercise by filing with IXC a duly
executed revocation of proxy, by submitting a duly executed proxy to IXC bearing
a later date or by appearing at the IXC special meeting and voting in person.
Attendance at the IXC special meeting will not itself revoke a proxy.
SOLICITATION OF PROXIES
IXC will bear the cost of the solicitation of proxies from its stockholders.
In addition to solicitation by mail, the directors, officers and employees of
IXC and its subsidiaries may solicit proxies from IXC stockholders by telephone
or other electronic means or in person. Arrangements will also be made with
brokerage houses and other custodians, nominees and fiduciaries for the
forwarding of solicitation materials to the beneficial owners of stock held of
record by these persons, and IXC will reimburse them for their reasonable
out-of-pocket expenses.
IXC will mail a copy of this proxy statement/prospectus to each holder of
record of IXC common stock on the IXC record date.
Georgeson & Company will assist in the solicitation of proxies by IXC. IXC
will pay Georgeson & Company a fee of $10,000, plus reimbursement of certain
out-of-pocket expenses, and will indemnify Georgeson & Company against any
losses arising out of Georgeson & Company's proxy soliciting services on behalf
of IXC.
IXC STOCKHOLDERS SHOULD NOT SEND STOCK CERTIFICATES WITH THEIR PROXIES. A
transmittal form with instructions for the surrender of IXC common stock
certificates will be mailed to IXC stockholders as soon as practicable after
completion of the merger and the IXC internal reorganization.
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THE COMPANIES
IXC
IXC is a leading provider of data and voice telecommunications transmission
services. IXC owns and operates an advanced coast-to-coast digital
communications network that includes 13,000 route miles of fiber optic
transmission facilities. IXC's network-based delivery solutions are designed to
address the speed and capacity requirements of the global telecommunications
market. IXC offerings include private line, fast packet (ATM and frame relay),
Internet and long distance switched and dedicated services. IXC is at the
forefront of the industry's new class of emerging domestic and international
carriers.
CINCINNATI BELL
Cincinnati Bell is a full service, integrated communications company that
provides competitive local communications as well as data, Internet, wireless,
directory, long distance and data networking services to customers in the
Cincinnati, Ohio metropolitan area and in many other Midwestern cities.
The local communications services division provides local, long distance,
data networking and transport, Internet access and pay phone services, as well
as sales of communications equipment, in southwestern Ohio, northern Kentucky
and southeastern Indiana, to both residential and business customers. The
directory services division sells directory advertising and information services
primarily to customers in the geographic areas described above. Cincinnati Bell
also resells long distance and Internet access services and provides data
services and products to small- and medium-sized business customers mainly in a
five-state Midwestern area, and telecommunications and computer equipment in the
secondary market. The wireless services division provides advanced digital
personal communications and sales of related communications equipment to both
businesses and residential customers in its Greater Cincinnati and Dayton, Ohio
operating areas.
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THE MERGER
THE DISCUSSION IN THIS PROXY STATEMENT/PROSPECTUS OF THE MERGER AND THE
PRINCIPAL TERMS OF EACH OF:
- THE MERGER AGREEMENT DATED AS OF JULY 20, 1999, AMONG CINCINNATI BELL,
IVORY MERGER INC. AND IXC
- THE AGREEMENT GOVERNING THE IXC INTERNAL REORGANIZATION DATED AS OF AUGUST
16, 1999, BETWEEN IXC AND IXC MERGER SUB, INC.
- THE CINCINNATI BELL STOCK OPTION AGREEMENT DATED AS OF JULY 20, 1999,
BETWEEN CINCINNATI BELL AND IXC
- THE IXC STOCK OPTION AGREEMENT DATED AS OF JULY 20, 1999, BETWEEN
CINCINNATI BELL AND IXC
- THE STOCKHOLDER AGREEMENT DATED AS OF JULY 20, 1999, BETWEEN CINCINNATI
BELL AND GENERAL ELECTRIC PENSION TRUST
- THE STOCKHOLDERS AGREEMENT DATED AS OF JULY 20, 1999, AMONG CINCINNATI
BELL, RICHARD D. IRWIN AND RALPH J. SWETT,
IS NOT COMPLETE AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MERGER
AGREEMENT, THE AGREEMENT GOVERNING IXC INTERNAL REORGANIZATION, THE CINCINNATI
BELL STOCK OPTION AGREEMENT, THE IXC STOCK OPTION AGREEMENT, THE STOCKHOLDER
AGREEMENT AND THE STOCKHOLDERS AGREEMENT, COPIES OF WHICH ARE ATTACHED TO THIS
PROXY STATEMENT/PROSPECTUS AS ANNEXES 1, 2, 3, 4, 5 AND 6 AND ARE INCORPORATED
HEREIN BY REFERENCE.
BACKGROUND TO THE MERGER
On February 4, 1999, IXC announced that it was considering various strategic
alternatives to create advanced, diversified products and services and to
achieve the scale necessary to provide complete voice, data and Internet
solutions to a broad customer base. It stated that alternatives under
consideration included, among others, the sale or swap of fiber assets, joint
ventures or a combination of IXC with another company. IXC also announced that
it had retained Morgan Stanley for assistance in reviewing strategic
alternatives. In the following months, IXC was contacted by companies interested
in discussing a transaction with IXC. After discussions with Morgan Stanley,
some of these companies and IXC entered into mutual nondisclosure agreements.
IXC explored potential transactions with these companies, including, in certain
cases, performing due diligence reviews of their businesses, engaging in
negotiations, and allowing these companies to review IXC's business and to make
presentations to the IXC board of directors. During the course of these
activities, some of these companies made proposals for a possible transaction.
The proposals were all subject to various conditions such as satisfactory due
diligence, approval of the board of directors of the potential strategic
partner, the negotiation of a definitive agreement and other conditions. None of
these proposals resulted in a definitive agreement to be presented to the IXC
board of directors.
On April 21, 1999, Richard G. Ellenberger, President and Chief Executive
Officer of Cincinnati Bell, Kevin W. Mooney, Chief Financial Officer of
Cincinnati Bell, and Michael Callaghan, Vice President of Corporate Development
of Cincinnati Bell, met with J. Taylor Crandall, Managing Director of Oak Hill,
Benjamin Diesbach, Consultant to Oak Hill, David Russekoff, Principal of Oak
Hill, and Jonathan Friesel, an Associate at Oak Hill, during which meeting they
discussed the possibility of Cincinnati Bell and Oak Hill together acquiring an
equity interest in IXC and participating in the management of IXC.
On April 23, 1999, Messrs. Crandall, Diesbach, Russekoff and Friesel met
with Messrs. Irwin and Swett, each a co-founder and director of IXC, to discuss
the possibility of Oak Hill making an investment in IXC.
On April 28, 1999, Cincinnati Bell informed Oak Hill that it would be
interested in investigating the possibility of developing a relationship with
IXC and Oak Hill.
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On May 6, 1999, Messrs. Ellenberger, Mooney, Crandall, Russekoff, Diesbach
and Friesel met with Messrs. Irwin and Swett to discuss the background of
Cincinnati Bell and what contribution it could make in a possible relationship
with IXC. Mr. Crandall also reviewed Oak Hill's background and discussed a
possible relationship with Cincinnati Bell and IXC.
On May 14, 1999, Cincinnati Bell formally engaged Salomon Smith Barney as
its financial advisor in connection with a possible transaction involving
Cincinnati Bell and IXC. Salomon Smith Barney had provided from time to time
financial advisory and other banking services to Cincinnati Bell.
On May 18, 1999, Cincinnati Bell formally engaged Cravath, Swaine & Moore as
its legal advisor in connection with a possible transaction involving Cincinnati
Bell, IXC and Oak Hill.
On May 19, 1999, Messrs. Ellenberger, Mooney, Callaghan, Crandall, Diesbach,
Russekoff and Friesel met with representatives of Salomon Smith Barney to
discuss the views of Salomon Smith Barney regarding a possible transaction
involving Cincinnati Bell, IXC and Oak Hill.
On May 20, 1999, Messrs. Ellenberger, Crandall and Russekoff met with Donald
W. Torey, Executive Vice President of General Electric Investment Corporation,
which serves as an advisor to the Trustees of General Electric Pension Trust,
and Wolf Bragin, a director of IXC and Vice President of General Electric
Investment Corporation, to discuss a possible relationship among Cincinnati
Bell, IXC and Oak Hill. At the meeting, Oak Hill indicated that, in connection
with any relationship among Cincinnati Bell, IXC and Oak Hill, it was interested
in making a significant investment in Cincinnati Bell and in purchasing 50% of
General Electric's shares of IXC common stock for cash. In addition, on May 20,
1999, Messrs. Ellenberger and Crandall met with James D. Kiggen, Chairman of the
Board of Cincinnati Bell, to discuss a possible relationship among Cincinnati
Bell, IXC and Oak Hill.
On May 21, 1999, at a regularly scheduled meeting of the Cincinnati Bell
board of directors, Cincinnati Bell management and representatives of Salomon
Smith Barney reviewed with the Cincinnati Bell board of directors the strategic
fit and background of IXC as well as a matching of IXC's perceived needs to
Cincinnati Bell's strengths. A possible relationship with Oak Hill was discussed
and Mr. Crandall addressed the Cincinnati Bell board of directors briefly on
these matters. These discussions included, among other things, a possible
business combination with IXC. As a result of this review, the Cincinnati Bell
board of directors authorized Cincinnati Bell management to proceed with its due
diligence investigation of IXC.
On May 25, 1999, Mr. Crandall met with Mr. Irwin to discuss a possible
business combination involving Cincinnati Bell and IXC and the possibility of an
investment by Oak Hill in Cincinnati Bell.
On May 28, 1999, at a regularly scheduled meeting of the IXC board of
directors, Mr. Irwin briefed the IXC board of directors on the discussions held
with Cincinnati Bell. At the meeting, the IXC board of directors approved a
confidentiality agreement with Cincinnati Bell and Oak Hill.
On May 28, 1999, Cincinnati Bell, IXC and Oak Hill entered into a
confidentiality agreement, containing customary terms and conditions.
From June 1 through June 17, 1999, representatives of Cincinnati Bell and
Oak Hill, including their respective financial and legal advisors, met with
representatives of IXC and conducted due diligence concerning the business and
operations of IXC.
From June 1 through July 14, 1999, Mr. Irwin and John M. Zrno, President and
Chief Executive Officer of IXC, informed the IXC board of directors periodically
as to the status of the due diligence investigations conducted by IXC with
respect to Cincinnati Bell and the ongoing discussions with Cincinnati Bell.
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From June 14 through July 7, 1999, representatives of Oak Hill, including
its legal advisors, met with representatives of Cincinnati Bell and conducted
due diligence concerning the business and operations of Cincinnati Bell.
On June 21, 1999, the Cincinnati Bell board of directors held a regularly
scheduled meeting attended by members of Cincinnati Bell's senior management and
representatives of Salomon Smith Barney and Cravath, Swaine & Moore. Mr.
Ellenberger discussed with the Cincinnati Bell board of directors the status of
discussions with IXC and representatives of Cincinnati Bell management discussed
the current status and results of their due diligence investigations. Based on
the presentations made, the Cincinnati Bell board of directors authorized and
instructed Cincinnati Bell management to conduct additional due diligence on the
business and operations of IXC.
From June 18 through July 7, 1999, representatives of Cincinnati Bell and
Oak Hill, including their respective financial and legal advisors, continued
their due diligence investigations concerning the business and operations of
IXC.
On July 8 and July 9, 1999, representatives of IXC, including their
financial and legal advisors, met with representatives of Cincinnati Bell and
conducted due diligence concerning the business and operations of Cincinnati
Bell.
On July 9, 1999, at a meeting of the Cincinnati Bell board of directors,
Cincinnati Bell management and representatives of Salomon Smith Barney reviewed
with the Cincinnati Bell board of directors the results of the additional due
diligence investigations conducted by representatives of Cincinnati Bell and its
advisors. The Cincinnati Bell board of directors authorized Cincinnati Bell
management to commence discussions with IXC regarding the terms of a possible
business combination and to commence discussions with Oak Hill regarding the
terms of a possible investment by Oak Hill in Cincinnati Bell.
From July 9 through July 14, 1999, representatives of Cincinnati Bell and
Oak Hill, together with their respective financial and legal advisors, held
numerous meetings to discuss and negotiate the terms and conditions of the
investment to be made by Oak Hill in Cincinnati Bell.
On July 14, 1999, Messrs. Ellenberger and Callaghan, Richard Pontin,
President and Chief Operating Officer of Cincinnati Bell Telephone Company, a
wholly owned subsidiary of Cincinnati Bell, and Mr. Crandall met with Messrs.
Irwin and Zrno to discuss the principal economic terms of the proposed business
combination involving Cincinnati Bell and the proposed investment to be made by
Oak Hill in Cincinnati Bell. On July 14, 1999, drafts of the merger agreement
and related documents (including a proposal by Cincinnati Bell to acquire 50% of
General Electric's shares of IXC common stock for cash) were distributed by
counsel to Cincinnati Bell, IXC, Oak Hill, General Electric and their respective
advisors. On July 15, 1999, drafts of the merger agreement and related documents
were distributed to the IXC board of directors. From July 15 through July 17,
1999, the respective counsels for Cincinnati Bell and IXC negotiated various
terms of the merger agreement and related documents.
On July 18, 1999, the IXC board of directors held a meeting attended by
representatives of Cincinnati Bell and Oak Hill, including their respective
financial and legal advisors. Members of Cincinnati Bell's senior management and
representatives of Salomon Smith Barney, Morgan Stanley and Merrill Lynch made
presentations to the IXC board of directors regarding a possible business
combination between IXC and Cincinnati Bell and a possible investment by Oak
Hill in Cincinnati Bell.
From July 18 through July 20, 1999, representatives of Cincinnati Bell, IXC,
Oak Hill and General Electric, together with their financial and legal advisors,
held numerous meetings to discuss and negotiate the terms and conditions of the
merger agreement, the stockholders agreements, the stock option agreements, the
stock purchase agreement, the investment agreement and related documents and
various other legal, financial and regulatory issues relating to the proposed
business combination and related transactions.
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On July 19, 1999, the IXC board of directors, members of IXC's senior
management and representatives of Riordan & McKinzie met to discuss the proposed
merger.
On July 20, 1999, the Cincinnati Bell board of directors held a meeting
attended by members of Cincinnati Bell's senior management, Mr. Crandall, and
representatives of Salomon Smith Barney and Cravath, Swaine & Moore. Prior to
the meeting, Cravath, Swaine & Moore provided each member of the Cincinnati Bell
board of directors with summaries and copies of each of the merger agreement,
the stockholders agreements, the stock option agreements, the stock purchase
agreement, the investment agreement and related documents and with summaries of
the other transactions contemplated by the merger agreement. Mr. Ellenberger
summarized the status of the negotiations between Cincinnati Bell and IXC, and
between Cincinnati Bell and Oak Hill. Representatives of Salomon Smith Barney
described its financial analysis with respect to the possible combination of
Cincinnati Bell and IXC, and then delivered the oral opinion of Salomon Smith
Barney, later confirmed in writing, to the effect that, as of July 20, 1999, the
exchange ratio was fair, from a financial point of view, to Cincinnati Bell.
Following discussions, the Cincinnati Bell board of directors considered the
terms of the merger and the definitive agreements, and, after deliberation,
approved the merger agreement, the stockholders agreements, the stock option
agreements, the stock purchase agreement, the investment agreement and other
related documents.
On the morning of July 20, 1999, the IXC board of directors held a
telephonic meeting attended by members of IXC's senior management and
representatives of Riordan & McKinzie and IXC's Delaware counsel to discuss the
proposed merger.
In the evening of July 20, 1999, the IXC board of directors held a
telephonic meeting attended by members of IXC senior management and
representatives of Morgan Stanley, Merrill Lynch and Riordan & McKinzie. Prior
to the meeting, Riordan & McKinzie provided each member of the IXC board of
directors with copies of each of the merger agreement, the stockholders
agreements, the stock option agreements, the stock purchase agreement, the
investment agreement and related documents. The IXC board of directors
considered the proposed merger agreement, stockholders agreements, stock option
agreements, stock purchase agreement, investment agreement, certain related
documents and the transactions contemplated by the merger agreement.
Representatives of each of Morgan Stanley and Merrill Lynch described its
financial analysis with respect to the possible combination between IXC and
Cincinnati Bell, and then delivered the oral opinion of each of Morgan Stanley
and Merrill Lynch, each of which was later confirmed in writing, to the effect
that, as of July 20, 1999, the exchange ratio was fair, from a financial point
of view, to IXC stockholders, other than Cincinnati Bell and its affiliates.
Following discussions, the IXC board of directors concluded that the merger was
advisable, fair to and in the best interests of IXC and its stockholders and
approved the merger agreement and related documents and recommended that IXC
stockholders vote to adopt the merger agreement and related documents.
The merger agreement, the stockholders agreements, the stock option
agreements, the stock purchase agreement, the investment agreement and related
documents were signed by the parties on the night of July 20, 1999. On the
morning of July 21, 1999, prior to the commencement of trading, Cincinnati Bell,
IXC and Oak Hill issued a joint press release announcing the execution of the
merger agreement and related documents.
Under the investment agreement between Cincinnati Bell and Oak Hill, on July
21, 1999, Oak Hill purchased convertible subordinated debentures of Cincinnati
Bell for an aggregate purchase price of $400 million, which debentures bear
interest at a rate of 6.75% per annum. These debentures are convertible at the
option of Oak Hill at any time after the completion of the merger into shares of
Cincinnati Bell common stock at a price of $29.89 per share. Based on the number
of shares of Cincinnati Bell common stock outstanding on September 9, 1999 and
assuming that the debentures were converted into Cincinnati Bell common stock at
a conversion price of $29.89 per share, on a pro
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forma basis after giving effect to the merger Oak Hill will own approximately 6%
of the outstanding shares of Cincinnati Bell common stock immediately after the
merger.
Under the stock purchase agreement between Cincinnati Bell and General
Electric, on July 27, 1999, Cincinnati Bell purchased 300,000 shares of IXC
common stock, and on August 16, 1999, Cincinnati Bell purchased 4,699,345 shares
of IXC common stock for an aggregate purchase price of approximately $250
million. Based on the number of shares of IXC common stock outstanding on
September 9, 1999, Cincinnati Bell owned approximately 13% of the outstanding
shares of IXC common stock on that date.
REASONS FOR THE MERGER AND THE IXC BOARD OF DIRECTORS RECOMMENDATION
At its meeting on July 20, 1999, the IXC board of directors determined that
the merger and the merger agreement were advisable, fair to and in the best
interests of IXC and its stockholders, approved and declared advisable the
merger and the merger agreement and recommended that the IXC stockholders adopt
the merger agreement.
In reaching its decision to approve the merger and the merger agreement and
to recommend that IXC stockholders vote to adopt the merger agreement, the IXC
board of directors consulted with IXC management and its financial and legal
advisors and considered a number of factors, including the following:
PREMIUM AND FAIRNESS
- the fact that at the time it was approved by the IXC board of directors
the consideration to be received in the merger represented a significant
premium to IXC stockholders as compared to IXC's stock price before the
February 1999 announcement that IXC had engaged Morgan Stanley to pursue
strategic alternatives, and the price at which the IXC directors expected
that the stock might trade if second quarter results were announced
without the concurrent announcement of the merger transaction
- the written opinions of Morgan Stanley and Merrill Lynch each dated July
20, 1999, copies of which are attached as Annexes 8 and 9, respectively,
to this proxy statement/prospectus, that, subject to the assumptions and
limitations contained in their opinions, the exchange ratio was fair, from
a financial point of view, as of that date to IXC stockholders, other than
Cincinnati Bell and its affiliates, and the financial presentations made
by Morgan Stanley and Merrill Lynch to the IXC board of directors in
connection with delivering their opinions.
CINCINNATI BELL'S BUSINESS AND STOCK
- the views of the IXC board of directors that Cincinnati Bell had a good
reputation on Wall Street, Cincinnati Bell's stock had a good performance
record and Cincinnati Bell had a strong cash flow, the ability to raise
capital and a large, established and stable business base
- the quality and depth of Cincinnati Bell's management team
- Cincinnati Bell's experience in the development and marketing of bundled
services, reputation for operational, back-office and provisioning
excellence and leadership in the deployment of DSL technology
- IXC's due diligence regarding Cincinnati Bell's business, operations,
assets, financial condition, operating results and prospects.
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FIT BETWEEN THE TWO COMPANIES
- the high degree of compatibility in the businesses of IXC and Cincinnati
Bell
- the potential for operational and financial efficiencies as a result of
the integration of the resources of IXC and Cincinnati Bell
- the combined company's potential for pursuing the retail market and more
fully realizing the potential of IXC's extensive, state-of-the-art fiber
network and advanced Internet Protocol (IP) data services
- the greater financial resources that would be available to the combined
company to exploit IXC's strategic assets.
INCREASED VALUE IN THE COMBINED COMPANY
- the proposed strategy for the combined company and the potential creation
of significant increased value through the merger
- the presentations and discussions by representatives of Cincinnati Bell
and Oak Hill regarding Cincinnati Bell and its plans indicating a
significantly enhanced value for the combined company over the stand-alone
values of IXC and Cincinnati Bell
- the fact that IXC directors, Messrs. Swett and Irwin, who, together with
their affiliates, would hold approximately 12 million shares of the
combined company, would take all stock in the merger, believing the
potential upside in the stock price of the combined company outweighed the
benefits of taking half the value of their shares of IXC common stock in
cash
- the fact that General Electric, considered by the IXC board of directors
to be one of the most respected institutional investors in the world, was
in favor of the merger and would remain a stockholder of the combined
company with approximately 10 million shares of stock on a fully diluted
basis in the combined company
- the willingness of Oak Hill, a well-respected investment fund, to invest
$400 million in the combined company in exchange for a debt instrument
with a conversion price substantially higher than the price at which the
Cincinnati Bell common stock would be valued in the merger
- the opportunity for IXC stockholders to participate, as holders of
Cincinnati Bell common stock, in a combined enterprise that has greater
financial, technical and marketing resources and would be expected to be a
much stronger and more successful competitor in the telecommunications
industry than IXC.
GENERAL INDUSTRY AND MARKET CONDITIONS
- market prices, recent trading patterns and financial data relating to
other telecommunications companies
- consolidation trends in the domestic telecommunications industry
- current industry, economic and market conditions.
IXC'S DIFFICULTIES
- IXC's financing needs and IXC's difficulties in obtaining additional
financing
- the lack of alternatives to the merger available to IXC and its
stockholders and the lack of other possible acquirors
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- the comparatively poor performance of IXC's stock.
OTHER FACTORS
- the terms and conditions of the merger agreement, the stockholders
agreements and the stock option agreements, including the material adverse
change provision and the non-solicitation, termination and termination fee
provisions in the merger agreement, and the ability of the directors to
fulfill their legal duties in the event of an unsolicited offer
- Cincinnati Bell's refusal to enter into the merger agreement without the
stockholders agreements and the stock option agreements
- the opportunity for IXC stockholders to receive Cincinnati Bell common
stock in a tax-free exchange
- the opportunity for IXC stockholders to vote to approve or disapprove the
merger
- the likelihood that no alternative transaction would become available in
light of the stockholders agreements
- the amount of the termination fee
- the intention of Cincinnati Bell to provide most of IXC's employees with
continuing career opportunities.
RISKS
- the possible negative effect of the deal announcement on the market prices
of Cincinnati Bell common stock and IXC common stock
- the challenges in combining the two companies
- the ability of IXC's management to continue to focus on strategic goals
while working to implement the merger
- the challenges in obtaining regulatory approval in a reasonable time frame
and upon terms and conditions that would not unduly burden the combined
company
- the risk that the proposed merger would not be completed
- the ability of IXC to obtain sufficient financing prior to closing the
merger.
The IXC board of directors believed that IXC could avoid or mitigate certain
of these risks, and that the potential benefits of the merger to IXC and its
stockholders outweighed the risks.
This is not an exhaustive list of the information and factors considered and
given weight by the IXC board of directors. In view of the wide variety of
factors considered in connection with its evaluation of the merger and the
complexity of these matters, the IXC board of directors did not find it
practicable, and did not attempt, to quantify, rank or otherwise assign relative
weights to the specific factors considered in reaching its determination. The
IXC board of directors discussed the factors above, including asking questions
of IXC's management and IXC's legal and financial advisors, and determined that
the merger was in the best interests of IXC and its stockholders. In considering
the factors described above, individual members of the IXC board of directors
may have given different weight to different factors.
RECOMMENDATION OF THE IXC BOARD OF DIRECTORS. After careful consideration,
the IXC board of directors has approved the merger agreement and the agreement
governing the IXC internal reorganization, and has determined that the merger
and the IXC internal reorganization and the terms
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of the merger agreement and the agreement governing the IXC internal
reorganization are advisable, fair to and in the best interests of IXC and its
stockholders. The IXC board of directors recommends that IXC stockholders vote
FOR the adoption of the merger agreement and the agreement governing the IXC
internal reorganization. One member of the IXC board of directors, Mr. Bragin,
abstained from voting on the foregoing determination and recommendation.
OPINIONS OF IXC'S FINANCIAL ADVISORS
IXC engaged Morgan Stanley and Merrill Lynch as its financial advisors in
connection with the merger based on their experience and expertise. Morgan
Stanley and Merrill Lynch are internationally recognized investment banking
firms that have substantial experience in transactions similar to the merger.
The IXC financial advisors, as part of their investment banking businesses, are
continuously engaged in the valuation of businesses and securities in connection
with mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for corporate and other purposes.
At the July 20, 1999 meeting of the IXC board of directors, Morgan Stanley
and Merrill Lynch both delivered their oral opinions (subsequently confirmed
separately by each in writing) to the effect that, as of the date thereof, and
subject to the assumptions, qualifications and limitations set forth therein,
the exchange ratio pursuant to the merger agreement was fair, from a financial
point of view, to the holders of IXC common stock, other than Cincinnati Bell
and its affiliates.
THE FULL TEXT OF THESE OPINIONS, WHICH SET FORTH THE ASSUMPTIONS MADE,
MATTERS CONSIDERED AND QUALIFICATIONS AND LIMITATIONS ON THE REVIEW UNDERTAKEN
BY THE IXC FINANCIAL ADVISORS, IS SET FORTH AS ANNEXES 8 AND 9 AND IS
INCORPORATED HEREIN BY REFERENCE. IXC STOCKHOLDERS ARE URGED TO READ CAREFULLY
EACH OF THE MORGAN STANLEY AND MERRILL LYNCH OPINIONS IN ITS ENTIRETY.
In reading the following discussion of these fairness opinions, IXC
stockholders should be aware that the opinions:
- were provided to the IXC board of directors for its information and are
directed only to the fairness, from a financial point of view, of the
exchange ratio to the holders of IXC common stock (other than Cincinnati
Bell and its affiliates)
- did not constitute a recommendation to the IXC board of directors in
connection with its consideration of the merger agreement and the merger
- do not address the merits of the underlying decision by IXC to engage in
the merger or the price or range of prices at which shares of IXC common
stock or Cincinnati Bell common stock may trade subsequent to the
announcement or consummation of the merger
- do not constitute a recommendation to any holder of IXC common stock as to
how such stockholder should vote on the merger or any matter related
thereto.
Although the IXC financial advisors each evaluated the fairness, from a
financial point of view, of the exchange ratio to the holders of IXC common
stock, the exchange ratio itself was determined by Cincinnati Bell and IXC
through arm's-length negotiations. The IXC financial advisors provided advice to
IXC during the course of such negotiations. IXC did not provide specific
instructions to, or place any limitations on, the IXC financial advisors with
respect to the procedures to be followed or factors to be considered by them in
performing their analyses or providing their opinions.
MORGAN STANLEY OPINION
In arriving at the Morgan Stanley opinion, Morgan Stanley, among other
things:
- reviewed certain publicly available financial statements and other
information of IXC and Cincinnati Bell
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- reviewed certain internal financial statements and other financial and
operating data concerning IXC and Cincinnati Bell prepared by the
respective managements of such companies
- analyzed financial projections for IXC and Cincinnati Bell contained in
certain securities analysts' research reports that were recommended for
review by the respective managements of such companies
- discussed the past and current operations and financial conditions and the
prospects of IXC and Cincinnati Bell, including information relating to
certain strategic, financial and operational benefits anticipated from the
merger, with the respective managements of such companies
- analyzed the estimated pro forma impact of the merger on Cincinnati Bell's
cash flow, consolidated capitalization and financial ratios
- reviewed the reported prices and trading activity for the IXC common stock
and the Cincinnati Bell common stock
- discussed with senior executives of each of IXC and Cincinnati Bell the
strategic rationale for, and certain regulatory issues associated with,
the merger
- compared the financial performance of IXC and Cincinnati Bell and the
prices and trading activity of the IXC common stock and the Cincinnati
Bell common stock with those of certain other comparable publicly traded
companies and their securities
- reviewed the financial terms, to the extent publicly available, of certain
comparable transactions
- participated in discussions and negotiations among representatives of IXC
and Cincinnati Bell and their respective financial, accounting and legal
advisors
- reviewed drafts of the merger agreement, the investment agreement and
certain related documents and
- performed such other analyses and considered such other factors as Morgan
Stanley deemed appropriate.
Morgan Stanley assumed and relied upon without independent verification the
accuracy and completeness of the information reviewed by it for the purposes of
its opinion. With respect to the internal financial statements and other
financial and operating data and discussions relating to the strategic,
financial and operational benefits anticipated from the merger, Morgan Stanley
assumed that such financial statements and other financial and operating data
had been reasonably prepared on bases reflecting the best currently available
estimates and good faith judgments of the future competitive, operating and
regulatory environments and financial performance of IXC and Cincinnati Bell.
Morgan Stanley did not make any independent valuation or appraisal of the assets
or liabilities of IXC or Cincinnati Bell, nor was it furnished with any such
appraisals. The Morgan Stanley opinion was necessarily based on economic, market
and other conditions as in effect on, and the information made available to it
as of, the date thereof.
Morgan Stanley further assumed, with IXC's consent, that the merger will be
consummated in accordance with the terms set forth in the draft merger agreement
(without waiver of any condition contained therein) and will be treated as a
tax-free reorganization and/or exchange, for purposes of the Internal Revenue
Code. In addition, Morgan Stanley assumed that obtaining all necessary
regulatory approvals for the merger will not have an adverse effect on
Cincinnati Bell or the contemplated benefits expected to be derived in the
proposed merger.
31
<PAGE>
FINANCIAL ANALYSES BY MORGAN STANLEY
Morgan Stanley was not authorized to solicit, and did not solicit, interest
from any party with respect to the acquisition of IXC or any of its assets, or
any other strategic alternative, other than the merger.
The following is a summary of the material financial analyses performed by
Morgan Stanley in preparing its opinion to the IXC board of directors on July
20, 1999. Certain of these summaries of financial analyses include information
presented in tabular format. In order to fully understand the financial analyses
used by Morgan Stanley, the tables must be read together with the text of each
summary. The tables alone do not represent a complete description of the
financial analyses.
Morgan Stanley noted that IXC management did not have an up-to-date forecast
that IXC believed would accurately represent the future prospects of IXC's
business. Therefore, for purposes of certain of the analyses described below,
Morgan Stanley used a forecast for IXC that was comprised of estimates for
fiscal year 1999 developed by Cincinnati Bell (and confirmed by IXC management
as being reasonable) and estimates for fiscal years 2000 through 2003 based on a
forecast by a securities research analyst. The estimates for fiscal years 2000
through 2003 were arrived at by applying a one-year delay to the securities
research analyst's forecast. In other words, the estimates for fiscal years 2000
through 2003 were comprised of the securities research analyst's estimates for
fiscal years 1999 through 2002.
(1) HISTORICAL PUBLIC MARKET TRADING VALUE. Morgan Stanley reviewed the
recent stock price performance of IXC based on an analysis of historical closing
prices and trading volumes during the period from the IXC initial public
offering on July 3, 1996 through July 19, 1999. The following table summarizes
the price performance of IXC's common stock over that period:
<TABLE>
<CAPTION>
HISTORICAL IXC
COMMON STOCK PRICES
---------------------
<S> <C>
July 19, 1999 $ 37.50
High Price (March 27, 1998) $ 60.38
Low Price (July 25, 1996) $ 11.50
</TABLE>
Morgan Stanley also reviewed the recent stock price performance of
Cincinnati Bell based on an analysis of historical closing prices and trading
volumes during the period from December 31, 1997 through July 19, 1999. Due to
the initial public offering of Cincinnati Bell's subsidiary Convergys
Corporation on August 12, 1998 and the subsequent spin-off of Cincinnati Bell's
remaining interest in Convergys Corporation to Cincinnati Bell shareholders on
December 31, 1998, Morgan Stanley's review of Cincinnati Bell's stock price
performance was focused on the period after August 12, 1998. Furthermore, Morgan
Stanley adjusted Cincinnati Bell's stock price from the period between August
12, 1998 and December 31, 1998 in order to approximate the "standalone" value of
Cincinnati Bell common stock during this period. The following table summarizes
the price performance of Cincinnati Bell common stock over the period from
August 12, 1998 through July 19, 1999 (the Low Price in the table has been
adjusted as described above):
<TABLE>
<CAPTION>
HISTORICAL CINCINNATI
BELL
COMMON STOCK PRICES
-----------------------
<S> <C>
July 19, 1999 $ 25.00
High Price (July 14, 1999) $ 26.13
Low Price (October 13, 1998) $ 9.44
</TABLE>
(2) COMPARATIVE STOCK PRICE PERFORMANCE. As part of its analysis, Morgan
Stanley reviewed the recent stock price performance of IXC and compared this
performance with that of the S&P 500 Index
32
<PAGE>
and the following companies: COLT Telecom Group plc, Equant NV, Global Crossing
Ltd., Global TeleSystems Group, Inc., Level 3 Communications, Inc., Qwest
Communications International Inc. and Viatel, Inc. Morgan Stanley observed that
over the period from August 14, 1998 (the date of the Global Crossing initial
public offering) to July 19, 1999, the closing market prices appreciated as set
forth below:
<TABLE>
<CAPTION>
COMPANY % APPRECIATION
- ---------------------------------------------------------- --------------
<S> <C>
IXC (6.5%)
COLT 97.6%
Equant 101.5%
Global Crossing 246.6%
Global TeleSystems 60.1%
Level 3 58.8%
Qwest 78.3%
Viatel 223.4%
S&P 500 32.5%
</TABLE>
Morgan Stanley also reviewed the recent stock price performance of
Cincinnati Bell and compared this performance with that of a group of comparable
companies and the S&P 500 Index. As noted above, Morgan Stanley adjusted
Cincinnati Bell's stock price from the period between August 12, 1998 and
December 31, 1998 in order to approximate the "standalone" value of Cincinnati
Bell common stock during this period. Morgan Stanley observed that over the
period from the Convergys Corporation initial public offering on August 12, 1998
to July 19, 1999, the closing market prices appreciated as set forth below:
<TABLE>
<CAPTION>
COMPANY % APPRECIATION
- ---------------------------------------------------------- -----------------
<S> <C>
Cincinnati Bell 99.0%
Aliant Communications 65.0%
ALLTEL 74.3%
CenturyTel 29.3%
Commonwealth Telephone 83.8%
Regional Bell Operating Company Index 46.3%
S&P 500 Index 31.0%
</TABLE>
(3) SECURITIES RESEARCH ANALYSTS' FUTURE PRICE TARGETS. Morgan Stanley
reviewed and analyzed the future private market value targets for IXC common
stock prepared and published by certain securities research analysts in the
period from February 4, 1999 to July 19, 1999, reflecting such analysts'
estimates of the future private market value of IXC common stock at the end of
the time period considered in such estimate. Morgan Stanley noted that such
estimates had been developed and published when securities analysts'
expectations for IXC's profitability were considerably higher than results later
achieved by IXC. Morgan Stanley also reviewed and analyzed future public market
trading price targets for Cincinnati Bell common stock during the period from
April 15, 1999 to July 19, 1999. These targets reflected each analyst's estimate
of the future public market trading price of Cincinnati
33
<PAGE>
Bell common stock at the end of the particular time period considered for each
time estimate (typically 12 months).
<TABLE>
<CAPTION>
VALUE PER SHARE RANGE
----------------------
<S> <C> <C>
LOW HIGH
--- -----
IXC Private Market Value Target $ 40 $ 65
Cincinnati Bell Public Market Price Target $ 25 $ 28
</TABLE>
Morgan Stanley noted that the private market value and public market trading
price targets published by the securities research analysts do not reflect
current private market value targets and market trading prices for IXC or
Cincinnati Bell common stock and that these estimates are subject to
uncertainties, including the availability of information, the future financial
performance of IXC and Cincinnati Bell and future financial market conditions.
(4) PEER GROUP COMPARISON. Morgan Stanley reviewed and analyzed the
financial information of seven emerging telecommunications carriers (COLT
Telecom Group plc, Equant NV, Global Crossing Ltd., Global TeleSystems Group,
Inc., Level 3 Communications, Inc., Qwest Communications International Inc. and
Viatel, Inc.) and compared the results to financial information relating to IXC.
Morgan Stanley analyzed, among other things, the current aggregate value of each
company expressed as a multiple of forecast revenues and forecast earnings
before interest, taxes, depreciation and amortization, or EBITDA, for 1999 and
2000. As of July 19, 1999 and based on estimates of revenues and EBITDA taken
from selected securities research analysts, the statistics derived from this
analysis were as set forth below.
<TABLE>
<CAPTION>
AGGREGATE VALUE AS A AGGREGATE VALUE AS A
MULTIPLE OF EBITDA MULTIPLE OF REVENUES
-------------------- --------------------
<S> <C> <C> <C> <C>
1999E 2000E 1999E 2000E
--------- --------- --------- ---------
IXC 21.5x 15.0x 3.5x 2.5x
COLT NM NM 35.7x 22.6x
Equant 113.6x 53.8x 19.3x 14.0x
Global Crossing 30.3x 37.9x 27.2x 27.4x
Global TeleSystems NM 74.6x 8.8x 5.4x
Level 3 NM NM 43.6x 25.2x
Qwest 11.1x 10.0x 6.6x 5.8x
Viatel NM 36.0x 7.5x 4.2x
</TABLE>
Morgan Stanley also reviewed and analyzed the financial information of four
independent local exchange carriers (Aliant Communications, ALLTEL Corporation,
Inc., CenturyTel, Inc. and Commonwealth Telephone Enterprises, Inc.) and six
regional Bell operating companies (Ameritech Corporation, Bell Atlantic
Corporation, BellSouth Corporation, GTE Corporation, SBC Communications Inc.,
and U S WEST Communications, Inc.) and compared the results to financial
information relating to Cincinnati Bell. Morgan Stanley analyzed, among other
things, the current aggregate value of each company expressed as a multiple of
forecast EBITDA for 1999 and 2000 and the current price of the common stock of
each company expressed as a multiple of forecast earnings per share for 1999 and
2000.
34
<PAGE>
As of July 19, 1999 and based on estimates of EBITDA and earnings per share
taken from selected securities research analysts, the statistics derived from
this analysis were as set forth below.
<TABLE>
<CAPTION>
AGGREGATE VALUE AS A
AGGREGATE VALUE AS A
MULTIPLE OF EARNINGS
MULTIPLE OF EBITDA
PER SHARE
-------------------- --------------------
<S> <C> <C> <C> <C>
1999E 2000E 1999E 2000E
--------- --------- --------- ---------
Cincinnati Bell 12.4x 10.8x 31.3x 26.6x
ALLTEL 10.6x 9.6x 27.7x 23.4x
Aliant 10.1x 9.3x 27.9x 27.1x
CenturyTel 10.0x 9.5x 25.0x 21.7x
Commonwealth 15.2x 12.1x NM 53.4x
Regional Bell Operating Company Average 9.0x 8.4x 22.8x 20.5x
</TABLE>
No company used in the peer group comparisons is identical to IXC or
Cincinnati Bell. In evaluating the peer group companies, Morgan Stanley made
judgments and assumptions with regard to industry performance, general business,
economic, market and financial conditions and other matters, many of which are
beyond the control of IXC and Cincinnati Bell, such as the impact of competition
on IXC or Cincinnati Bell and the industry generally, industry growth and the
absence of any material adverse change in the financial condition and prospects
of IXC or Cincinnati Bell or the industry or in the financial markets in
general.
(5) SUM-OF-THE-PARTS VALUATION ANALYSIS. Morgan Stanley performed a
sum-of-the-parts valuation analysis of IXC. Morgan Stanley performed this
analysis to arrive at both a theoretical public market trading value and a
theoretical private market, or acquisition, value for IXC. As part of this
analysis, Morgan Stanley divided IXC's business into four parts: revenues
generated through the provision of long distance telecommunications services,
physical network assets and IXC's equity interests in PSINet Inc. and
AppliedTheory Corporation. Morgan Stanley estimated the value of revenues
generated through the provision of long distance telecommunications services by
applying a range of revenue multiples based on the revenue multiples of publicly
traded companies that provide similar services (for the public market trading
analysis) and multiples of revenue paid in acquisitions of companies that
provide similar services (for the private market analysis). Morgan Stanley
estimated the value of IXC's physical network assets by estimating the cost to
replace such assets (for the public market trading analysis) and estimating the
cost to acquire such assets (for the private market analysis). Morgan Stanley
arrived at the estimated value of IXC's equity interest in both PSINet and
Applied Theory by multiplying the number of shares owned by IXC in each of the
companies by their respective closing common stock share prices on July 19,
1999. The sum-of-the-parts valuation analysis implied a range of values for IXC
common stock of $23 to $35 per share on a public market trading basis and $35 to
$52 per share on a private market basis.
(6) DISCOUNTED CASH FLOW ANALYSIS. Morgan Stanley performed discounted cash
flow analysis, which is an analysis of the present value of projected cash flows
using discount rates and terminal year EBITDA multiples (as indicated below), of
IXC. Morgan Stanley analyzed IXC's business using a forecast (described above)
for the period beginning January 1, 1999 and ending December 31, 2003. Morgan
Stanley estimated IXC's discounted cash flow value using discount rates ranging
from 11% to 13% and terminal multiples of estimated 2003 EBITDA ranging from 11x
to 13x. The discounted cash flow analysis implied a range of values for IXC
common stock of $20 to $32 per share.
Morgan Stanley also performed discounted cash flow analysis of Cincinnati
Bell. Morgan Stanley analyzed Cincinnati Bell's business using both Cincinnati
Bell's management forecast for the period
35
<PAGE>
beginning January 1, 1999 and ending December 31, 2003 and securities research
analyst estimates for the same period. Morgan Stanley estimated Cincinnati
Bell's discounted cash flow value using discount rates ranging from 10% to 11%
and terminal multiples of estimated 2003 EBITDA ranging from 8x to 10x. The
discounted cash flow analysis using Cincinnati Bell's management forecast
implied a range of values for Cincinnati Bell common stock of $24.58 to $31.57
per share. The discounted cash flow analysis using Cincinnati Bell's securities
research analyst estimates implied a range of values for Cincinnati Bell common
stock of $18.23 to $23.57 per share.
(7) EXCHANGE RATIO ANALYSIS. Morgan Stanley compared the exchange ratio of
2.0976 Cincinnati Bell shares to each IXC share provided in the merger agreement
to the ratio of the closing market prices of IXC and Cincinnati Bell common
stock on July 19, 1999. Morgan Stanley also compared this ratio to selected
average historical ratios of the closing market prices of IXC to Cincinnati Bell
common stock over various periods ending July 19, 1999. The results of this
analysis are set forth below:
<TABLE>
<CAPTION>
MARKET PRICE RATIO
------------------
<S> <C>
July 19, 1999 1.5000x
30-Day Average 1.5583x
90-Day Average 1.5905x
6-Month Average 1.8922x
Since Convergys IPO (August 12, 1998) 2.1733x
</TABLE>
(8) RELATIVE CONTRIBUTION ANALYSIS. Morgan Stanley compared the pro forma
contribution of each of IXC (using historical information and the forecast
described above) and Cincinnati Bell (using historical information and both
Cincinnati Bell's management forecast and securities research analyst estimates)
to the resultant combined company assuming completion of the merger in
accordance with the terms of the agreement provided to us and calculated the
implied theoretical exchange ratio. The results of this analysis using
Cincinnati Bell's management forecast are set forth below:
<TABLE>
<CAPTION>
FORECAST
-------------------------------------------
<S> <C> <C> <C> <C> <C>
HISTORICAL
STATISTIC 1998 1999E 2000E 2001E 2002E
- -------------------------------------- ----------- --------- --------- --------- ----------
Revenues 2.2558x 1.6707x 2.1251x 2.1972x 2.26323x
EBITDA 1.0259x NM 1.0859x 1.3368x 1.4576x
Gross Invested Capital 6.0488x
Net Invested Capital 5.6978x
Gross PP&E 2.3613x
</TABLE>
36
<PAGE>
The results of this analysis using Cincinnati Bell's securities research
analyst estimates are set forth below:
<TABLE>
<CAPTION>
FORECAST
------------------------------------------
<S> <C> <C> <C> <C> <C>
HISTORICAL
STATISTIC 1998 1999E 2000E 2001E 2002E
- ----------------------------- ----------- --------- --------- --------- ---------
Revenues 2.2558x 1.9915x 2.6167x 2.7883x 2.9817x
EBITDA 1.0259x NM 1.2918x 1.6064x 1.8282x
Gross Invested Capital 6.0488x
Net Invested Capital 5.6978x
Gross PP&E 2.3613x
</TABLE>
Morgan Stanley performed a variety of financial and comparative analyses
solely for purposes of providing its opinion to the IXC board of directors as to
the fairness from a financial point of view to the holders of IXC common stock
(other than Cincinnati Bell and its affiliates) of the exchange ratio pursuant
to the merger agreement. The preparation of a fairness opinion is a complex
process and is not necessarily susceptible to partial analysis or summary
description. In arriving at its opinion, Morgan Stanley considered the results
of all of its analyses as a whole and did not attribute any particular weight to
any analysis or factor considered by it. Furthermore, selecting any portion of
its analyses, without considering all analyses, would create an incomplete view
of the process underlying its opinion. In addition, Morgan Stanley may have
given various analyses and factors more or less weight than other analyses and
factors, and may have deemed various assumptions more or less probable than
other assumptions, so that the ranges of valuations resulting from any
particular analysis described above should not be taken to be Morgan Stanley's
view of the actual value of IXC or Cincinnati Bell. In performing its analyses,
Morgan Stanley made a number of assumptions with respect to industry
performance, general business and economic conditions and other matters, many of
which are beyond the control of IXC or Cincinnati Bell. Any estimates used by
Morgan Stanley in rendering its opinion or reflected herein are not necessarily
indicative of future results or actual values, which may be significantly more
or less favorable than those suggested by such estimates. The analyses performed
were prepared solely as part of Morgan Stanley's analysis of the fairness of the
exchange ratio pursuant to the merger agreement from a financial point of view
to the holders of IXC Common Stock and were conducted in connection with the
delivery of its opinion. The analyses are not intended to be appraisals or to
reflect the prices at which IXC or Cincinnati Bell might actually be sold or the
price at which their securities may trade.
The merger consideration was determined through arm's-length negotiations
between IXC and Cincinnati Bell and was approved by the IXC board of directors.
Morgan Stanley did not recommend any specific merger consideration to IXC or
that any specific merger consideration constituted the only appropriate merger
consideration for the merger. Morgan Stanley's opinion to the IXC board of
directors was one of many factors taken into consideration by the IXC board of
directors in making its determination to approve the merger. Consequently, the
Morgan Stanley analyses described above should not be viewed as determinative of
the opinion of the IXC board of directors with respect to the value of IXC or
whether the IXC board of directors would have been willing to agree to different
merger consideration. Morgan Stanley was not authorized to solicit, and did not
solicit, interest from any party with respect to the acquisition of IXC or any
of its assets, or any other strategic alternative, other than the merger.
Morgan Stanley is an internationally recognized investment banking and
advisory firm. Morgan Stanley, as part of its investment banking business, is
continuously engaged in the valuation of businesses and securities in connection
with mergers and acquisitions, negotiated underwritings,
37
<PAGE>
competitive biddings, secondary distributions of listed and unlisted securities,
private placements and valuations for corporate and other purposes. In the
ordinary course of Morgan Stanley's trading, brokerage and financing activities,
Morgan Stanley or its affiliates may at any time hold long or short positions,
may trade, make a market or otherwise effect transactions, for its own account
or for the accounts of customers, in the securities of IXC or Cincinnati Bell.
In the past, Morgan Stanley and its affiliates have provided financial advisory
and/or financing services for IXC, Cincinnati Bell and one or more other parties
to the transaction, and certain of their affiliates, and have received fees for
the rendering of those services.
Under a letter agreement dated as of February 3, 1999, Morgan Stanley
provided advisory services and a financial opinion in connection with the merger
and IXC agreed to pay a customary fee to Morgan Stanley. In addition, IXC agreed
to indemnify Morgan Stanley and its affiliates, their respective directors,
officers, agents and employees and each person, if any, controlling Morgan
Stanley or any of its affiliates against certain liabilities, including
liabilities under the federal securities laws, and expenses, including the fees
of its legal counsel, arising out of Morgan Stanley's engagement and the
transactions in connection therewith.
MERRILL LYNCH OPINION
In arriving at its opinion, Merrill Lynch, among other things:
- reviewed certain publicly available business and financial information
relating to IXC and Cincinnati Bell that Merrill Lynch deemed to be
relevant
- reviewed certain information, including financial forecasts, relating to
the business, earnings, cash flow, assets, liabilities and prospects of
IXC and Cincinnati Bell, as well as the amount and timing of the cost
savings and related expenses and synergies expected to result from the
merger furnished to Merrill Lynch by IXC and Cincinnati Bell, respectively
- conducted discussions with members of senior management and
representatives of IXC and Cincinnati Bell concerning the matters
described in the above two bullet points, as well as their respective
businesses and prospects before and after giving effect to the merger and
the expected synergies
- reviewed the market prices and valuation multiples for shares of IXC
common stock and Cincinnati Bell common stock and compared them with those
of certain publicly traded companies that Merrill Lynch deemed to be
relevant
- reviewed the results of operations of IXC and Cincinnati Bell and compared
them with those of certain publicly traded companies that Merrill Lynch
deemed to be relevant
- compared the proposed financial terms of the merger with the financial
terms of certain other transactions that Merrill Lynch deemed to be
relevant
- participated in certain discussions and negotiations among representatives
of IXC and Cincinnati Bell and their financial and legal advisors
- reviewed the potential pro forma impact of the merger
- reviewed drafts of the merger agreement, the stock option agreements and
the investment agreement
- reviewed such other financial studies and analyses and took into account
such other matters as Merrill Lynch deemed necessary, including its
assessment of general economic, market and monetary conditions.
38
<PAGE>
In preparing its opinion, Merrill Lynch assumed and relied on the accuracy
and completeness of all information supplied or otherwise made available to
Merrill Lynch, discussed with or reviewed by or for Merrill Lynch, or publicly
available, and Merrill Lynch did not assume any responsibility for independently
verifying such information or undertake an independent evaluation or appraisal
of any of the assets or liabilities of IXC or Cincinnati Bell nor was Merrill
Lynch furnished with any such evaluation or appraisal. In addition, Merrill
Lynch did not assume any obligation to conduct any physical inspection of the
properties or facilities of IXC or Cincinnati Bell. With respect to the
financial forecast information and the expected synergies furnished to or
discussed with Merrill Lynch by IXC or Cincinnati Bell, Merrill Lynch assumed
that they had been reasonably prepared and reflected the best currently
available estimates and judgment of IXC's or Cincinnati Bell's management as to
the expected future financial performance of IXC or Cincinnati Bell, as the case
may be, and the expected synergies. Merrill Lynch further assumed that the
merger will be accounted for as a purchase by Cincinnati Bell of IXC under
generally accepted accounting principles and that it will qualify as a tax-free
reorganization for U.S. federal income tax purposes. Merrill Lynch also assumed
that the final form of the merger agreement would be substantially similar to
the last draft reviewed by Merrill Lynch.
Merrill Lynch's opinion was necessarily based upon market, economic and
other conditions as they existed and could be evaluated as of, and on the
information made available to Merrill Lynch as of, the date of its opinion.
Merrill Lynch assumed that in the course of obtaining the necessary regulatory
or other consents or approvals (contractual or otherwise) for the merger, no
restrictions, including any divestiture requirements or amendments or
modifications to the merger agreement, will be imposed that will have a material
adverse effect on the contemplated benefits of the merger.
Merrill Lynch's opinion did not address the relative merits, financial or
otherwise, of the merger as compared to any alternative transaction or business
strategy that may be available to IXC.
FINANCIAL ANALYSES BY MERRILL LYNCH
The following is a brief summary of the material valuation, financial and
comparative analyses presented by Merrill Lynch to the IXC board of directors in
connection with the rendering of the Merrill Lynch opinion. This summary does
not purport to be a complete description of the analyses underlying Merrill
Lynch's opinion and is qualified in its entirety by reference to the full text
of the opinion which is incorporated herein by reference.
In performing its analyses, Merrill Lynch made numerous assumptions with
respect to industry performance, general business, economic, market and
financial conditions and other matters, many of which are beyond the control of
Merrill Lynch, IXC and Cincinnati Bell. Any estimates contained in the analyses
performed by Merrill Lynch are not necessarily indicative of actual values or
future results, which may be significantly more or less favorable than suggested
by such analyses. In addition, estimates of the value of businesses or
securities do not purport to be appraisals or to reflect the prices at which
such businesses or securities might actually be sold. Accordingly, such analyses
and estimates are inherently subject to substantial uncertainty. In addition, as
described above, Merrill Lynch's opinion is among several factors taken into
consideration by the IXC board of directors in making its determination to
approve the merger agreement and the merger.
CINCINNATI BELL VALUATION
(1) COMPARABLE PUBLICLY TRADED COMPANIES ANALYSIS. In order to assess how
the public market values shares of similar publicly traded companies, Merrill
Lynch reviewed and compared specific financial information relating to
Cincinnati Bell to corresponding financial information, ratios and
39
<PAGE>
public market multiples for the following publicly traded companies in two
sectors, Regional Bell Operating Companies (referred to as RBOCs) and incumbent
local exchange carriers (referred to as ILECs):
RBOCs
- BellSouth Corporation
- SBC Communications Inc.
- Ameritech Corporation
- Bell Atlantic Corporation
- GTE Corporation.
ILECs
- ALLTEL Corporation (pro forma for its acquisition of Aliant Communications
Inc.)
- CenturyTel, Inc.
- Commonwealth Telephone Enterprises, Inc.
The comparable companies were chosen because they are publicly traded
companies with operations that, for purposes of analysis, may be considered
similar to Cincinnati Bell.
Merrill Lynch calculated the multiple of each company's current market price
to its projected 1999 (calendar year) and 2000 (calendar year) earnings per
share (which is commonly referred to as EPS and the ratio is commonly referred
to as a price to earnings ratio, or P/E). Merrill Lynch further calculated each
company's projected total return by adding its projected 5-year annual EPS
growth rate and its dividend yield and then calculated the multiple of each
company's 2000 P/E to projected total return. An appropriate range of 2000 P/E
to projected total return multiples derived from this analysis was applied to
the projected total return of Cincinnati Bell based upon Cincinnati Bell's
projected 5-year annual EPS growth rate and its current dividend yield to
determine an appropriate P/E range for Cincinnati Bell. This P/E range was then
applied to Cincinnati Bell's projected 2000 EPS to arrive at a range of values
per share of Cincinnati Bell common stock of $22.88 to $26.97, as compared to a
market price per share of $25.00 on July 19, 1999.
However, because of the inherent differences in the businesses, operations,
financial conditions and prospects of Cincinnati Bell and the comparable
companies, Merrill Lynch believed that it was inappropriate to, and therefore
did not, rely solely on the quantitative results of the comparable companies
analysis, and, accordingly, also made quantitative judgments based upon
perceived qualitative differences between the characteristics of the comparable
companies and Cincinnati Bell and IXC that would affect the trading values of
Cincinnati Bell, IXC and such companies.
(2) DISCOUNTED CASH FLOW ANALYSIS. Merrill Lynch performed a discounted
cash flow analysis of the projected after-tax unlevered free cash flows of
Cincinnati Bell (defined as unlevered after-tax earnings plus amortization and
depreciation less capital expenditures and net changes in working capital, or
EBITDA). Merrill Lynch calculated a range of present values for Cincinnati Bell
based upon the discounted present value of the sum of the projected stream of
after-tax unlevered free cash flows of Cincinnati Bell and the projected
terminal value of Cincinnati Bell based upon a range of multiples of Cincinnati
Bell's projected EBITDA. Applying discount rates ranging from 9.0% to 11.0% and
terminal value multiples of 8.0x to 10.0x, Merrill Lynch calculated implied
equity values per share of Cincinnati Bell common stock ranging from $26.45 to
$35.59, as compared to a market price per share of $25.00 on July 19, 1999.
(3) SUM OF THE PARTS ANALYSIS. Merrill Lynch performed a "sum of the parts"
analysis of Cincinnati Bell by valuing each individual business segment
individually and deriving therefrom a range of values for Cincinnati Bell as a
whole. The Cincinnati Bell business segments considered were the local
40
<PAGE>
wireline business, the wireless business, the DSL business, the directory
business, the network solutions business and the equipment supply business.
Using various methodologies that Merrill Lynch deemed appropriate for each
business segment analyzed, the analysis indicated a range of equity values per
share of Cincinnati Bell common stock ranging from $23.10 to $27.69 per share,
as compared to a market price per share of $25.00 on July 19, 1999.
IXC VALUATION
(1) COMPARABLE PUBLICLY TRADED COMPANIES ANALYSIS. Merrill Lynch reviewed
and compared specific financial information relating to IXC to corresponding
financial information, ratios and public market multiples for the following
publicly traded companies in two sectors, Long Distance Providers and
Fiber-Based Network Providers:
Long Distance Providers
- AT&T Corp.
- MCI WorldCom, Inc.
- Sprint Corporation (Wireline only).
Fiber-Based Network Providers
- Global Crossing Ltd./Frontier Corporation (on a pro forma basis)
- Level 3 Communications, Inc.
- Qwest Communications International Inc.
The comparable companies were chosen because they are publicly traded
companies with operations that, for purposes of analysis, may be considered
similar to IXC.
Merrill Lynch calculated the multiple of each company's current enterprise
value (total equity value plus the value of net debt, preferred stock and
minority interests) to its projected 2000 (calendar year) EBITDA. Each EBITDA
multiple was further compared to each company's projected EBITDA growth rate to
calculate an EBITDA multiple to projected EBITDA growth rate ratio. An
appropriate range of 2000 EBITDA multiple to EBITDA growth rate ratios derived
from this analysis was then applied to IXC's projected EBITDA growth rate to
determine an appropriate range of 2000 EBITDA multiples for IXC, and this range
was then applied to IXC's projected 2000 EBITDA to imply a range of values per
share of IXC common stock of $44.13 to $54.78 (after subtracting net debt), as
compared to a market price per share of $37.50 on July 19, 1999.
However, because of the inherent differences in the businesses, operations,
financial conditions and prospects of IXC and the comparable companies, Merrill
Lynch believed that it was inappropriate to, and therefore did not, rely solely
on the quantitative results of the comparable companies analysis, and,
accordingly, also made quantitative judgments based upon perceived qualitative
differences between the characteristics of the comparable companies and IXC that
would affect the trading values of IXC and such companies.
(2) DISCOUNTED CASH FLOW ANALYSIS. Merrill Lynch performed a discounted
cash flow analysis of the projected after-tax unlevered free cash flows of IXC.
Merrill Lynch calculated a range of present values for IXC based upon the
discounted present value of the sum of the projected stream of after-tax
unlevered free cash flows of IXC and the projected terminal value of IXC based
upon a range of multiples of IXC's projected EBITDA. Applying discount rates
ranging from 12.0% to 14.5% and terminal value multiples of 11.0x to 13.0x,
Merrill Lynch calculated implied equity values per share of IXC common stock
ranging from $21.53 to $40.76, as compared to a market price per share of $37.50
on July 19, 1999.
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<PAGE>
(3) SUM OF THE PARTS ANALYSIS. Merrill Lynch performed a "sum of the parts"
analysis of IXC by valuing each individual business segment individually and
deriving therefrom a range of values for IXC as a whole. The business segments
considered were the switched long distance business, the private line and data
business, IXC's excess fiber capacity and its stakes in certain joint ventures
and publicly traded companies. Using various methodologies that Merrill Lynch
deemed appropriate for each business segment, the analysis indicated a range of
equity values per share of IXC common stock ranging from $30.75 to $57.80 per
share, as compared to a market price per share of $37.50 on July 19, 1999.
(4) SELECTED TRANSACTIONS ANALYSIS. Merrill Lynch reviewed publicly
available information relating to comparable merger and acquisition transactions
involving telecommunications companies, in order to determine an appropriate
range of values per share of IXC common stock based on the prices paid in such
transactions as a multiple of the target companies' revenues. In particular,
Merrill Lynch examined multiples of the consideration paid for the common equity
and value of the indebtedness less cash and cash equivalents assumed in each of
the transactions to, among other measures, the acquired companies' forward year
revenues.
The selected comparable telecommunications acquisitions that Merrill Lynch
reviewed were the following:
- the acquisition of Excel Communications, Inc. by Teleglobe Inc.
- the acquisition of LCI International, Inc. by Qwest Communications
International Inc.
- the acquisition of ACC Corp. by Teleport Communications Group Inc.
- the acquisition of MCI Communications Corporation by WorldCom, Inc.
- the acquisition of Telco Communications Group, Inc. by Excel
Communications, Inc.
Because of the inherent differences in the businesses, operations, financial
conditions and prospects of IXC and the above companies, Merrill Lynch believed
that it was appropriate to make certain quantitative judgments based upon those
differences. As a result, Merrill Lynch applied an adjusted range of multiples
to the corresponding financial data of IXC, which indicated a range of values
per share of IXC common stock of $35.74 to $52.27, as compared to a market price
per share of $37.50 on July 19, 1999.
(5) PREMIUMS PAID ANALYSIS. Merrill Lynch also examined the premiums paid
in a larger group of comparable telecommunications transactions for the targets'
equity over pre-announcement stock prices one day prior to announcement, one
week prior to announcement and four weeks prior to announcement. This analysis
indicated that for the comparable transactions the premiums paid as compared to:
- the target's price one day prior to the announcement of the transaction
ranged from a low of (17.0%) to a high of 65.0%, with a mean of 29.4%, as
compared to 39.3% for the proposed transaction
- the target's price one week prior to the announcement of the transaction
ranged from a low of (6.0%) to a high of 70.7%, with a mean of 32.9%, as
compared to 40.0% for the proposed transaction
- the target's price one month prior to the announcement of the transaction
ranged from a low of 2.0% to a high of 87.0%, with a mean of 38.2%, as
compared to 30.6% for the proposed transaction.
42
<PAGE>
(6) EXCHANGE RATIO ANALYSIS. Merrill Lynch performed an analysis of the
historical daily exchange ratios of Cincinnati Bell common stock to IXC common
stock based on the daily closing prices of Cincinnati Bell common stock and IXC
common stock between January 4, 1999 and July 19, 1999. The analysis indicated
that the exchange ratio ranged from a low of 1.3861x to a high of 2.6332x during
the period, with a mean of 1.8771x and a median of 1.7722x, compared to the
exchange ratio of 2.0976x pursuant to the merger agreement.
RELEVANCE OF VARIOUS ANALYSES
The preparation of a fairness opinion is a complex process and involves
various judgments and determinations as to the most appropriate and relevant
assumptions and financial analyses and the application of these methods to the
particular circumstances involved. Such an opinion is therefore not readily
susceptible to partial analysis or summary description, and taking portions of
the analyses set out above, without considering the analysis as a whole, would,
in the view of Merrill Lynch, create an incomplete and misleading picture of the
processes underlying the analyses considered in rendering its opinion. Merrill
Lynch did not form an opinion as to whether any individual analysis or factor
(positive or negative), considered in isolation, supported or failed to support
its opinion. In arriving at its opinion, Merrill Lynch considered the results of
its separate analyses and did not attribute particular weight to any one
analysis or factor considered by it. The analyses performed by Merrill Lynch,
particularly those based on estimates and projections, are not necessarily
indicative of actual values or actual future results, which may be significantly
more or less favorable than suggested by such analyses. Such analyses were
prepared solely as part of Merrill Lynch's analyses of the fairness, from a
financial point of view, of the exchange ratio to the holders of IXC common
stock (other than Cincinnati Bell and its affiliates).
FEE ARRANGEMENTS
Pursuant to the terms of its engagement letter with Merrill Lynch, IXC has
agreed to pay customary fees to Merrill Lynch in connection with the delivery of
Merrill Lynch's opinion. In addition, IXC has agreed to reimburse Merrill Lynch
for all reasonable out-of-pocket expenses incurred by it in connection with the
merger, including reasonable fees and disbursements of its legal counsel. IXC
has also agreed to indemnify Merrill Lynch against certain liabilities in
connection with its engagement, including certain liabilities under the federal
securities laws.
Merrill Lynch has previously rendered certain investment banking and
financial advisory services to IXC. In addition, Merrill Lynch has previously
rendered certain investment banking services to Cincinnati Bell. Merrill Lynch
may hereafter provide financial advisory and financing services to the combined
company resulting from the merger and/or its affiliates and may receive fees for
the rendering of such services. In addition, in the ordinary course of business,
Merrill Lynch and its affiliates may actively trade in securities of IXC and
Cincinnati Bell for its own accounts and for the accounts of its customers and,
accordingly, may at any time hold a long or short position in such securities.
REASONS FOR THE MERGER AND THE CINCINNATI BELL BOARD OF DIRECTORS RECOMMENDATION
REASONS FOR THE MERGER. At its meeting on July 20, 1999, the Cincinnati
Bell board of directors determined that the merger and the merger agreement were
advisable, fair to and in the best interests of Cincinnati Bell and its
shareholders, approved and declared advisable the merger and the merger
agreement and recommended that Cincinnati Bell shareholders approve the issuance
of shares of Cincinnati Bell common stock in the merger.
In reaching its decision to approve the merger and the merger agreement and
to recommend that Cincinnati Bell shareholders vote to approve the issuance of
shares of Cincinnati Bell common stock in
43
<PAGE>
the merger, the Cincinnati Bell board of directors consulted with senior
management and its financial and legal advisors and considered a number of
factors, including the following potentially positive factors:
- the opportunity to market fully integrated communications solutions for
business customers nationwide, using IXC's nationwide next-generation,
high-bandwidth network as a platform
- the opportunity to access more customers than Cincinnati Bell currently
serves in its existing markets, and to become a nationally integrated
communications provider offering local, long distance, data, Internet,
xDSL, video and other value-added, high-bandwidth services
- the opportunity to (1) combine Cincinnati Bell's knowledge and experience
in marketing bundled local communications services, in services
provisioning and back-office support, in customer service and its
experienced management team with IXC's nationwide, next-generation,
high-bandwidth data network, nationwide market presence, and rapidly
growing base of communications-intensive business customers and (2)
leverage Cincinnati Bell's currently existing bandwidth enhanced services
with IXC's network presence in the national market
- the fact that the merger significantly advances the strategic goals of
Cincinnati Bell to expand geographically, to focus on serving the rapidly
growing bandwidth and data management needs of its customers and to
leverage its strong position with customers
- the strategic and financial alternatives available to Cincinnati Bell,
including remaining a smaller independent regional communications company
- the written opinion of Salomon Smith Barney, dated July 20, 1999, a copy
of which is attached as Annex 7 to this proxy statement/prospectus, that,
subject to the assumptions and limitations contained in that opinion, as
of that date, the exchange ratio was fair, from a financial point of view,
to Cincinnati Bell, and the financial presentation made by Salomon Smith
Barney to the Cincinnati Bell board of directors in connection with
delivering that opinion
- the terms and conditions of the merger agreement, including termination
fees and closing conditions.
The Cincinnati Bell board of directors also considered other factors
relating to the merger, and their impact on Cincinnati Bell shareholders,
including:
- the financial condition, cash flows and results of operations of
Cincinnati Bell and IXC, on both a historical and prospective basis
- the historical market prices and trading information with respect to
Cincinnati Bell common stock and IXC common stock
- the impact of the merger on Cincinnati Bell's and IXC's customers,
suppliers and employees
- the impact of the merger on Cincinnati Bell's existing shareholder base
- current industry, economic and market conditions.
The Cincinnati Bell board of directors also identified and considered a
number of potentially negative factors in its deliberations concerning the
merger, including:
- the risk that the operations of Cincinnati Bell and IXC might not be
successfully integrated
- the risk that, despite the efforts of Cincinnati Bell and IXC, key
personnel might leave IXC after the merger
44
<PAGE>
- the difficulty of managing operations in the different geographic
locations in which Cincinnati Bell and IXC operate
- the risk that potential benefits of the merger might not be fully
realized.
The Cincinnati Bell board of directors believed that certain of these risks
were unlikely to occur, while others could be avoided or mitigated by Cincinnati
Bell, and that, overall, these risks were outweighed by the potential benefits
of the merger.
This discussion of the information and factors considered by the Cincinnati
Bell board of directors in making its decision is not intended to be exhaustive
but is believed to include all material factors considered by the Cincinnati
Bell board of directors. In view of the variety of material factors considered
in connection with its evaluation of the merger, the Cincinnati Bell board of
directors did not find it practicable to, and did not, quantify or otherwise
assign relative weights to, the specific factors considered in reaching its
determination. In addition, individual members of the Cincinnati Bell board of
directors may have given different weight to different factors.
RECOMMENDATION OF THE CINCINNATI BELL BOARD OF DIRECTORS. After careful
consideration, the Cincinnati Bell board of directors has unanimously determined
that the merger and the terms of the merger agreement are advisable, fair to,
and in the best interests of Cincinnati Bell and its shareholders and
unanimously recommends that Cincinnati Bell shareholders vote FOR the issuance
of shares of Cincinnati Bell common stock in the merger.
OPINION OF CINCINNATI BELL'S FINANCIAL ADVISOR
At the meeting of the Cincinnati Bell board of directors held on July 20,
1999, Salomon Smith Barney delivered its oral opinion, subsequently confirmed in
writing, that, as of that date, the exchange ratio was fair, from a financial
point of view, to Cincinnati Bell. The Cincinnati Bell board of directors did
not impose any limitations on the investigation made or the procedures followed
by Salomon Smith Barney in rendering its opinion.
THE FULL TEXT OF THE WRITTEN OPINION OF SALOMON SMITH BARNEY IS SET FORTH AS
ANNEX 7 TO THIS PROXY STATEMENT/PROSPECTUS AND SETS FORTH THE ASSUMPTIONS MADE,
PROCEDURES FOLLOWED AND MATTERS CONSIDERED BY SALOMON SMITH BARNEY. CINCINNATI
BELL SHAREHOLDERS ARE URGED TO READ CAREFULLY SALOMON SMITH BARNEY'S OPINION IN
ITS ENTIRETY.
In connection with rendering its opinion, Salomon Smith Barney reviewed
certain publicly available information concerning Cincinnati Bell and IXC and
certain other financial information concerning Cincinnati Bell and IXC,
including financial forecasts, that Cincinnati Bell and IXC provided to Salomon
Smith Barney. Salomon Smith Barney discussed the past and current business
operations, financial condition and prospects of Cincinnati Bell and IXC with
certain officers and employees of Cincinnati Bell and IXC. Salomon Smith Barney
also considered other information, financial studies, analyses, investigations
and financial, economic and market criteria that it deemed relevant.
In its review and analysis and in arriving at its opinion, Salomon Smith
Barney assumed and relied upon the accuracy and completeness of the information
it reviewed, and Salomon Smith Barney did not assume any responsibility for
independent verification of the information. Salomon Smith Barney assumed the
financial forecasts of Cincinnati Bell and IXC were reasonably prepared on bases
reflecting the best currently available estimates and judgments of the
management of Cincinnati Bell and IXC who provided the financial forecasts.
Salomon Smith Barney expressed no opinion with respect to these forecasts or the
assumptions on which they were based. Salomon Smith Barney also assumed that the
merger will be completed according to the terms of the merger agreement. Salomon
Smith Barney did not make or obtain, or assume any responsibility for making or
obtaining, any independent evaluation or appraisal of any of the assets or
liabilities of Cincinnati Bell or IXC.
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<PAGE>
Salomon Smith Barney's opinion is necessarily based upon conditions as they
existed and could be evaluated on the date of the opinion. Salomon Smith
Barney's opinion does not imply any conclusion as to the likely trading range
for Cincinnati Bell common stock following the completion of the merger, which
may vary depending upon, among other factors, changes in interest rates,
dividend rates, market conditions, general economic conditions and other factors
that generally influence the price of securities. Salomon Smith Barney's opinion
does not address Cincinnati Bell's underlying business decision to effect the
merger. Salomon Smith Barney expressed no view on the effect on Cincinnati Bell
of the merger and related transactions. Further, Salomon Smith Barney's opinion
is directed only to the fairness, from a financial point of view, of the
exchange ratio to Cincinnati Bell and is not a recommendation concerning how the
holders of Cincinnati Bell common stock should vote on the proposal to issue
Cincinnati Bell common stock in the merger.
In connection with its opinion, Salomon Smith Barney performed certain
financial analyses, which it discussed with the Cincinnati Bell board of
directors on July 20, 1999. The material portions of the analyses performed by
Salomon Smith Barney in connection with the rendering of its opinion dated July
20, 1999, are summarized below. The summary of certain of the financial analyses
includes information presented in tabular format. In order to understand fully
the financial analyses used by Salomon Smith Barney, these tables must be read
together with the text of each summary. The tables alone do not constitute a
complete description of the financial analyses.
(1) HISTORICAL STOCK PRICE PERFORMANCE
IXC. Salomon Smith Barney reviewed the relationship between movements of
the following during the period from January 2, 1997 through July 16, 1999:
- IXC common stock
- an index composed of long distance company common stocks
- an index composed of fiber provider common stocks (for June 26, 1997 to
July 16, 1999)
- the Standard & Poor's 400 Composite Index.
Salomon Smith Barney noted that over this period IXC common stock
performed comparably to the long distance and S&P 400 Composite indices
until August 1998 and underperformed those indices for the period between
August 1998 to July 1999. Salomon Smith Barney also noted that IXC common
stock dramatically underperformed the fiber provider index between June 1997
and July 1999.
CINCINNATI BELL. Salomon Smith Barney reviewed the relationship between
movements of the following during the period from January 4, 1999, through
July 16, 1999:
- Cincinnati Bell common stock
- IXC common stock
- an index composed of independent telephone company common stocks
- an index composed of regional Bell holding company common stocks
- the Standard & Poor's 400 Composite Index.
Salomon Smith Barney noted that, although IXC common stock initially
outperformed Cincinnati Bell common stock during this period, Cincinnati
Bell common stock outperformed IXC common stock after May 1999 until the end
of the period, and outperformed all of the indices for the entire period.
(2) HISTORICAL EXCHANGE RATIO ANALYSIS. Salomon Smith Barney reviewed the
daily closing prices of IXC common stock and Cincinnati Bell common stock during
the period from January 4, 1999 through July 16, 1999, and the implied
historical exchange ratios determined by dividing the daily closing price per
share of IXC common stock by the daily closing price per share of Cincinnati
Bell common stock over that period. Salomon Smith Barney calculated that during
the last six months of
46
<PAGE>
this period, the historical daily exchange ratio ranged from a high of 2.63x to
a low of 1.39x with an average of 1.89x and an exchange ratio based on closing
prices as of July 16, 1999 of 1.48x.
(3) VALUATION ANALYSIS. Salomon Smith Barney arrived at a range of values
for IXC and Cincinnati Bell by utilizing the following four principal valuation
methodologies:
- PUBLIC MARKET ANALYSIS. A public market analysis reviews a business'
operating performance and outlook relative to a group of publicly traded
peer companies to determine an implied unaffected market trading valuation
range.
- PRIVATE MARKET ANALYSIS. A private market analysis provides a valuation
range based upon financial information of companies which have been
acquired in selected recent transactions or which are to be acquired in
transactions that have been publicly announced and which are in the same
or similar industries as the business being valued.
- DISCOUNTED CASH FLOW ANALYSIS. A discounted cash flow analysis provides
insight into the intrinsic value of a business based on the projected
financial results, including capital requirements, and the net present
value of the free cash flow anticipated to be generated by the assets of
the business.
- SEGMENT VALUATION ANALYSIS. A segment valuation analysis separately values
distinct segments of a company using a public or private market analysis
with publicly traded companies or acquisition transactions comparable to
each segment, or by using a discounted cash flow analysis of each segment,
and uses those valuations to arrive at a range of values for the
consolidated entity.
No company used in the public market analyses or the public market segment
valuation analyses described below is identical to IXC or Cincinnati Bell. No
transaction used in the private market valuation analysis described below is
identical to the merger. Accordingly, an examination of the results of the
analyses described below necessarily involves complex considerations and
judgments concerning differences in financial and operating characteristics of
the businesses and other facts that could affect the public trading value or the
acquisition value of the companies to which they are being compared.
(a) IXC PUBLIC MARKET ANALYSIS. Salomon Smith Barney compared the
multiples of firm value to revenue, to fiber miles and to net property, plant
and equipment of IXC with companies that Salomon Smith Barney believed to be
appropriate for comparison. These companies are comparable because they also own
nationwide fiber optic networks, currently under construction, able to carry
long haul voice and data traffic. Using this information and other factors
considered relevant by Salomon Smith Barney, Salomon Smith Barney determined
ranges of multiples of firm value to last 12 months revenue and to net property,
plant and equipment of 4.0x to 5.5x, and a range of values per fiber mile of
$20,000 to $25,000. The following table presents the companies considered:
<TABLE>
<S> <C>
- - Frontier Corporation - Level 3 Communications, Inc.
- - Qwest Communications - Williams (forecasted values after
International, Inc. initial public offering)
</TABLE>
These multiples and values per fiber mile resulted in implied equity values
per share of IXC common stock ranging from $80 to $100.
(b) IXC PRIVATE MARKET VALUATION ANALYSIS. Salomon Smith Barney reviewed
and analyzed certain financial, operating and stock market information relating
to a selected pending merger transaction involving Qwest Communications and
Frontier. Frontier is also a provider of telecom services, including long
distance and data/internet services, and also owns a nationwide fiber optic
network, currently under construction, able to carry long haul voice and data
traffic. Salomon Smith Barney reviewed, among other things, the long distance
business segment valuation of this transaction as a multiple of actual 1998 and
expected 1999 and 2000 Frontier long distance revenue and earnings before
interest,
47
<PAGE>
taxes, depreciation and amortization. Using this information and other factors
deemed relevant by Salomon Smith Barney, Salomon Smith Barney determined a range
of multiples of the long distance business segment value of the transaction to
actual 1998 revenues and estimated 1999 and 2000 revenues of 3.8x to 5.6x, and
to earnings before interest, taxes, depreciation and amortization for these
years of 22.4x to 47.9x.
These multiples resulted in implied equity values per share of IXC common
stock ranging from $51 to $71.
(c) IXC DISCOUNTED CASH FLOW ANALYSIS. Salomon Smith Barney performed a
discounted cash flow analysis to provide insight into the intrinsic value of IXC
based on projected financial results, including capital requirements, and the
subsequent free cash flows generated by the assets of IXC. Salomon Smith Barney
calculated ranges of per share equity values of IXC based upon the following:
- the present value as of December 31, 1999, of a nine-year stream of
projected free cash flows, based on estimates developed by management of
Cincinnati Bell
- the projected 2008 terminal values based upon a range of multiples of
projected 2008 earnings before interest, taxes, depreciation and
amortization, based on estimates developed by management of Cincinnati
Bell.
Salomon Smith Barney applied discount rates to these results which reflected
a weighted average cost of capital ranging from 12.0% to 13.0% and terminal
multiples of earnings before interest, taxes, depreciation and amortization
ranging from 6.5x to 8.5x. Based on these discount rates, terminal multiples and
certain adjustments, this analysis resulted in implied equity values per share
of IXC common stock ranging from $66 to $91.
(d) IXC PUBLIC MARKET SEGMENT ANALYSIS. Salomon Smith Barney arrived at a
range of values for IXC by separately valuing various of its business segments
and assets. Salomon Smith Barney analyzed the various business segment portions
of IXC's operating performance and outlook relative to groups of publicly traded
peer companies to determine an implied unaffected market trading value. The
following table presents the various business segments of IXC considered and the
range of multiples of firm value to last quarter annualized revenue for the
group of publicly traded peer companies for those segments:
<TABLE>
<CAPTION>
MULTIPLE RANGE OF FIRM VALUE/LAST QUARTER
BUSINESS SEGMENT ANNUALIZED REVENUE
- ---------------------------------------------- ----------------------------------------------
<S> <C>
Private line & data/Internet 9.0x to 13.0x
Retail & wholesale switched long distance 1.0x to 2.5x
</TABLE>
Salomon Smith Barney also separately analyzed the value of various assets of
IXC, including certain minority interests in private entities, to determine an
implied unaffected market trading value. The following table presents the
various assets of IXC considered:
<TABLE>
<S> <C>
- - PSINet Inc. shares - AppliedTheory Corporation
- - Grupo Marca-Tel S.A. de C.V. shares and options
- - Unidial Communications Services, LLC - Storm Communications, Ltd.
</TABLE>
When the value of these assets was combined with the values produced by the
business segment analysis described above, this segment valuation analysis
resulted in implied equity values per share of IXC common stock ranging from $66
to $82.
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<PAGE>
(e) CINCINNATI BELL PUBLIC MARKET ANALYSIS. Salomon Smith Barney compared
the multiple of share price to earnings per share of Cincinnati Bell with
companies that Salomon Smith Barney believed to be appropriate for comparison.
For these companies, Salomon Smith Barney reviewed the multiples of share price
to 1999 and 2000 estimated earnings per share, as adjusted to reflect the
projected five-year earnings per share growth rate, calculated both with and
without the projected five-year dividend yield as of July 16, 1999. Using this
information and other factors considered relevant by Salomon Smith Barney,
Salomon Smith Barney determined ranges of multiples of share price to 1999 and
2000 estimated earnings per share, as adjusted for the projected five-year
earnings per share growth rate with and without the dividend yield as of July
16, 1999, of 1.8x to 2.6x. The following table presents the companies
considered:
<TABLE>
<S> <C>
- - ALLTEL Corporation - CenturyTel, Inc.
- - Ameritech Corporation - Bell Atlantic Corporation
- - BellSouth Corporation - GTE Corporation
- - SBC Communications Inc. - U S WEST Communications, Inc.
</TABLE>
These multiples resulted in implied equity values per share of Cincinnati
Bell common stock ranging from $24 to $27.
(f) CINCINNATI BELL DISCOUNTED CASH FLOW ANALYSIS. Salomon Smith Barney
performed a discounted cash flow analysis to provide insight into the intrinsic
value of Cincinnati Bell based on projected financial results, including capital
requirements, and the free cash flows generated by the assets of Cincinnati
Bell. Salomon Smith Barney calculated ranges of per share equity values of
Cincinnati Bell based upon the following:
- the present value as of December 31, 1999, of a five-year stream of
projected cash flows, based on estimates provided by management of
Cincinnati Bell
- the projected 2004 terminal values based upon a range of multiples of
projected 2004 earnings before interest, taxes, depreciation and
amortization, based on estimates provided by management of Cincinnati
Bell.
Salomon Smith Barney applied discount rates reflecting a weighted average
cost of capital ranging from 10.0% to 11.0% and terminal multiples of earnings
before interest, taxes, depreciation and amortization ranging from 8.0x to
10.0x. Based on these discount rates, terminal multiples and certain
adjustments, this analysis resulted in implied equity values per share of
Cincinnati Bell common stock ranging from $26 to $33.
(g) CINCINNATI BELL PUBLIC MARKET SEGMENT ANALYSIS. Salomon Smith Barney
arrived at a range of values for Cincinnati Bell by separately valuing various
of its business segments. Salomon Smith Barney analyzed the various business
segment portions of Cincinnati Bell's operating performance and outlook relative
to groups of publicly traded peer companies to determine an implied unaffected
market trading value. The following table presents the various business segments
of Cincinnati Bell considered and the range of values for those business
segments based on a group of publicly traded peer companies:
<TABLE>
<CAPTION>
VALUE (IN
BUSINESS SEGMENT MILLIONS)
- --------------------------------------------- ------------------
<S> <C>
Local services $2,355 to $2,617
ADSL/Zoomtown $459 to $510
Wireless services $145 to $198
Directory services $206 to $257
Long distance/supply services $118 to $158
</TABLE>
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<PAGE>
When these values were combined, after making certain adjustments, this
segment valuation analysis resulted in implied equity values per share of
Cincinnati Bell common stock ranging from $19 to $22.
(h) CINCINNATI BELL DISCOUNTED CASH FLOW SEGMENT ANALYSIS. Salomon Smith
Barney performed a discounted cash flow analysis of various of Cincinnati Bell's
business segments to provide insight into the intrinsic value of Cincinnati Bell
based on projected financial results, including capital requirements, and the
free cash flows generated by those business segments. Salomon Smith Barney
calculated value ranges for the business segments of Cincinnati Bell based upon
the following:
- the present value as of December 31, 1999, of a five-year stream of
projected cash flows, based on estimates provided by management of
Cincinnati Bell
- the projected 2004 terminal values based upon a range of multiples of
projected 2004 earnings before interest, taxes, depreciation and
amortization, based on estimates provided by management of Cincinnati
Bell.
Salomon Smith Barney applied discount rate ranges reflecting weighted
average costs of capital of 9.0% to 13.5%, and ranges of terminal multiples of
earnings before interest, taxes, depreciation and amortization, as appropriate
for each business segment, of 6.0x to 11.0x. The following table presents the
various business segments of Cincinnati Bell considered:
- Telco services, including Zoomtown
- Wireless services
- Directory services
- Long distance/supply services
- Corporate/other.
Based on these discount rates, terminal multiples and certain adjustments, and
after combining the individual values to calculate a combined value, this
analysis resulted in implied equity values per share of Cincinnati Bell common
stock ranging from $26 to $31.
The preparation of a fairness opinion is a complex process not susceptible
to partial analysis or summary descriptions. The summary set forth above is not
a complete description of the analyses underlying Salomon Smith Barney's opinion
or its presentation to the Cincinnati Bell board. Salomon Smith Barney believes
that its analyses and the summary set forth above must be considered as a whole
and that selecting portions of its analyses and the factors considered by it,
without considering all such analyses and factors, could create an incomplete
view of the processes underlying the analyses set forth in its opinion.
In performing its analyses, Salomon Smith Barney made numerous assumptions
with respect to industry performance, general business, financial, market and
economic conditions and other matters, many of which are beyond the control of
Cincinnati Bell or IXC. The analyses which Salomon Smith Barney performed are
not necessarily indicative of actual values or actual future results, which may
be significantly more or less favorable than suggested by the analyses. The
analyses were prepared solely as part of Salomon Smith Barney's analysis of the
fairness, from a financial point of view, of the exchange ratio to Cincinnati
Bell. The analyses do not purport to be appraisals or to reflect the prices at
which a company might actually be sold or the prices at which any securities may
trade at the present time or at any time in the future.
Pursuant to the terms of its engagement letter with Salomon Smith Barney,
Cincinnati Bell has agreed to pay customary fees to Salomon Smith Barney in
connection with the delivery of Salomon Smith Barney's opinion. Cincinnati Bell
has also agreed to reimburse Salomon Smith Barney for all
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reasonable fees and disbursements of Salomon Smith Barney's counsel and all of
Salomon Smith Barney's reasonable travel and other expenses incurred in
connection with the merger, or otherwise from Salomon Smith Barney's engagement.
Cincinnati Bell further agreed to indemnify Salomon Smith Barney and certain
related persons against various liabilities, including liabilities under the
federal securities laws, relating to or arising out of its engagement.
Salomon Smith Barney is an internationally recognized investment banking
firm that provides financial services in connection with a wide range of
business transactions. As part of its business, Salomon Smith Barney regularly
engages in the valuation of companies and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and other purposes. In the past, Salomon Smith Barney has rendered investment
banking and financial advisory services to Cincinnati Bell and certain of its
affiliates for which Salomon Smith Barney received customary compensation. In
addition, in the ordinary course of its business, Salomon Smith Barney and its
affiliates may actively trade the securities of Cincinnati Bell and IXC for its
own accounts and the accounts of its customers and, accordingly, may at any time
hold a long or short position in their securities. Salomon Smith Barney and its
affiliates may have other business relationships with Cincinnati Bell, IXC and
their affiliates. The Cincinnati Bell board retained Salomon Smith Barney based
on Salomon Smith Barney's expertise in the valuation of companies as well as its
substantial experience in transactions similar to the merger.
INTERESTS OF IXC'S DIRECTORS AND MANAGEMENT IN THE MERGER
In considering the recommendation of the IXC board of directors in favor of
the merger and the IXC internal reorganization, IXC stockholders should be aware
that certain directors and executive officers of IXC have interests in the
merger that are different from, or in addition to, the interests of IXC
stockholders, as described below. The IXC board of directors was aware of, and
considered the interests of, its directors and executive officers when it
considered and approved the merger agreement, the agreement governing the IXC
internal reorganization, the merger and the IXC internal reorganization.
BOARD OF DIRECTORS. In the merger, the Cincinnati Bell board will be
increased to add Messrs. Irwin and Zrno, both existing IXC directors, as Class I
and Class II directors, respectively.
TERMINATION BENEFITS. At the time of the execution of the merger agreement,
IXC was in the process of structuring termination payments to (1) Benjamin L.
Scott, former Chairman of the Board, President and Chief Executive Officer of
IXC, and James F. Guthrie, former Executive Vice President and Chief Financial
Officer of IXC, and (2) other executives and key employees who had not been
identified to Cincinnati Bell. In the merger agreement, IXC has agreed that the
aggregate payments to Messrs. Scott and Guthrie and the other executives and key
employees, when aggregated with the investment banking and legal fees incurred
by IXC in the negotiation and structuring of the transactions contemplated by
the merger agreement, will not exceed $25,000,000.
Subject to the consent of the transition committee established by Cincinnati
Bell and IXC, several executives and key employees who hold options to acquire
IXC common stock which would otherwise become vested at the effective time of
the merger may elect instead to have the exercisability of all or a portion of
their options continue to vest in accordance with the original schedule set
forth in their respective option agreements. In such event, the optionholder's
options will become vested if the optionholder is involuntarily or
constructively terminated from employment without cause following the effective
time of the merger and the optionholder will be eligible to receive a gross-up
payment to offset any golden parachute excise taxes which may then be owed by
the optionholder.
OPTIONS AND OTHER EQUITY-BASED COMPENSATION. For a description of the
treatment in the merger of options to acquire shares of IXC common stock held by
directors and executive officers of IXC, see "--Effect on Awards Outstanding
Under IXC Stock Plans; Warrants".
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INDEMNIFICATION AND INSURANCE. Under the merger agreement and subject to
certain limitations, Cincinnati Bell has agreed that the surviving corporation
in the merger will assume the same obligations with respect to indemnification
of directors or officers of IXC or its subsidiaries as were contained in the
restated certificate of incorporation or by-laws of IXC or its subsidiaries and
any indemnification or other agreements at the date of signing the merger
agreement. In addition, the surviving corporation will maintain, with certain
limitations, the directors' and officers' liability insurance policies currently
maintained by IXC, or policies no less favorable than such policies for a period
of at least six years following the merger except that the surviving corporation
is not required to spend an amount more than 200% of the annual premiums paid in
1998 by IXC in any one year.
FORM OF THE MERGER
Subject to the terms and conditions of the merger agreement and in
accordance with Delaware law, at the effective time of the merger, Ivory Merger
Inc., a wholly owned subsidiary of Cincinnati Bell formed for purposes of the
merger and a party to the merger agreement, will be merged with and into IXC,
which will survive the merger as a subsidiary of Cincinnati Bell, and will
continue its corporate existence under Delaware law.
MERGER CONSIDERATION
At the effective time of the merger, each share of IXC common stock, except
for stock held by IXC, Cincinnati Bell or Ivory Merger Inc., will be converted
into the right to receive 2.0976 shares of Cincinnati Bell common stock. Cash
will be paid instead of fractional shares. As of the effective time of the
merger, all shares of IXC common stock to be exchanged for the merger
consideration will no longer be outstanding, will automatically be canceled and
will cease to exist, and each holder of a certificate representing any of these
shares will cease to have any rights in respect of those shares except the right
to receive the merger consideration. See "--Conversion of Shares; Procedures for
Exchange of Certificates; Fractional Shares". The merger consideration was
determined through arms'-length negotiations between Cincinnati Bell and IXC.
Any shares of IXC common stock owned immediately before the merger by
Cincinnati Bell, IXC or Ivory Merger Inc. will be canceled and no consideration
will be delivered in exchange for these shares.
Also at the effective time of the merger, each share of IXC 7 1/4% Junior
Convertible Preferred Stock Due 2007 and IXC 6 3/4% Cumulative Convertible
Preferred Stock will be converted into the right to receive preferred stock
issued by Cincinnati Bell with terms substantially identical to the terms of the
IXC 7 1/4% preferred stock and the IXC 6 3/4% preferred stock as in effect
immediately before the merger, respectively, except that each new whole share of
preferred stock will be entitled to one vote on all matters with the Cincinnati
Bell common stock and with the other shares of Cincinnati Bell voting preferred
stock. After the merger, the new Cincinnati Bell 7 1/4% Junior Convertible
Preferred Stock Due 2007 and the new Cincinnati Bell 6 3/4% Cumulative
Convertible Preferred Stock will only be convertible into Cincinnati Bell common
stock. See "--The IXC Internal Reorganization" and "Description of Cincinnati
Bell Capital Stock--Preferred Stock".
The IXC 12 1/2% Junior Exchangeable Preferred Stock Due 2009 will remain
issued and outstanding after the merger as 12 1/2% preferred stock of the
surviving corporation in the merger without any change to the terms of such
preferred stock as in effect immediately before the merger.
CONVERSION OF SHARES; PROCEDURES FOR EXCHANGE OF CERTIFICATES; FRACTIONAL SHARES
The conversion of each share of IXC common stock into the right to receive
2.0976 shares of Cincinnati Bell common stock and the conversion of each share
of IXC 7 1/4% preferred stock and IXC 6 3/4% preferred stock into the right to
receive one share of Cincinnati Bell 7 1/4% preferred stock and one share of
Cincinnati Bell 6 3/4% preferred stock, respectively, will occur automatically
at the effective
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time of the merger. As soon as practicable after the merger, The Fifth Third
Bank, the exchange agent, will send a transmittal letter to each former IXC
stockholder. The transmittal letter will contain instructions with respect to
obtaining the merger consideration in exchange for shares of IXC stock. IXC
STOCKHOLDERS SHOULD NOT RETURN STOCK CERTIFICATES WITH THE ENCLOSED PROXY.
After the merger, each certificate that previously represented shares of IXC
common stock will represent only the right to receive the merger consideration,
including cash for any fractional shares of Cincinnati Bell common stock. After
the merger, each certificate that previously represented shares of IXC 7 1/4%
preferred stock and IXC 6 3/4% preferred stock will represent only the right to
receive Cincinnati Bell 7 1/4% preferred stock and Cincinnati Bell 6 3/4%
preferred stock, respectively, into which such shares were converted in the
merger.
Holders of certificates previously representing IXC stock will not be paid
dividends or distributions on the Cincinnati Bell stock into which their IXC
stock has been converted with a record date after the merger, and will not be
paid cash for any fractional shares of Cincinnati Bell common stock, until their
certificates are surrendered to the exchange agent for exchange. When their
certificates are surrendered, any unpaid dividends and any cash instead of
fractional shares will be paid without interest.
In the event of a transfer of ownership of IXC stock which is not registered
in the records of IXC's transfer agent, a certificate representing the proper
number of shares of Cincinnati Bell stock may be issued, to a person other than
the person in whose name the surrendered certificate is registered if:
- the certificate is properly endorsed or otherwise is in proper form for
transfer and
- the person requesting such payment and issuance will:
(1) pay any transfer or other taxes resulting from the issuance of
shares of Cincinnati Bell stock to a person other than the registered holder
of the certificate or
(2) establish to the satisfaction of Cincinnati Bell that any taxes
have been paid or are not applicable.
All shares of Cincinnati Bell common stock issued upon surrender of
certificates representing shares of IXC common stock and all shares of
Cincinnati Bell 7 1/4% preferred stock and Cincinnati Bell 6 3/4% preferred
stock issued upon surrender of certificates representing shares of IXC 7 1/4%
preferred stock and IXC 6 3/4% preferred stock, respectively, including any cash
paid instead of any fractional shares of Cincinnati Bell common stock, will be
deemed to have been issued and paid in full satisfaction of all rights relating
to those shares of IXC common stock, IXC 7 1/4% preferred stock and IXC 6 3/4%
preferred stock. Cincinnati Bell will remain obligated, however, to pay any
dividends or make any other distributions declared or made by IXC in accordance
with the merger agreement on shares of IXC common or preferred stock with a
record date before the effective time of the merger and which remain unpaid at
the effective time of the merger. If certificates are presented to Cincinnati
Bell or the exchange agent after the effective time of the merger, they will be
canceled and exchanged as described above.
No fractional shares of Cincinnati Bell common stock will be issued to any
IXC stockholder upon surrender of certificates previously representing IXC
common stock. Promptly after the merger, the exchange agent will pay to each
stockholder who would otherwise have been entitled to receive a fraction of a
share of Cincinnati Bell common stock an amount in cash without interest equal
to (1) the fractional share interest to which the holder would otherwise be
entitled multiplied by (2) the closing price for a share of Cincinnati Bell
common stock on the New York Stock Exchange on the closing date of the merger.
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EFFECTIVE TIME OF THE MERGER
The effective time of the merger will be the time of the filing of the
certificate of merger with the Delaware Secretary of State or a later time if
agreed upon by Cincinnati Bell and IXC and specified in the certificate of
merger. The filing of the certificate of merger will occur as soon as
practicable following the closing.
LISTING OF CINCINNATI BELL CAPITAL STOCK
Prior to the completion of the merger, Cincinnati Bell has agreed to use its
reasonable efforts to have its common stock issuable to IXC stockholders in the
merger and issuable pursuant to the Cincinnati Bell stock option agreement
approved for listing on the New York Stock Exchange, subject to official notice
of issuance. Prior to the completion of the merger, Cincinnati Bell will have
the Cincinnati Bell 7 1/4% preferred stock and the Cincinnati Bell 6 3/4%
preferred stock approved for listing on a national securities exchange or The
Nasdaq National Market, subject to official notice of issuance.
LISTING OF IXC CAPITAL STOCK
Prior to the completion of the merger, IXC has agreed to use its reasonable
efforts to have its common stock issuable pursuant to the IXC stock option
agreement approved for quotation on The Nasdaq National Market, subject to
official notice of issuance. In addition, prior to the IXC record date, IXC has
agreed to use its reasonable best efforts to have the IXC 7 1/4% preferred
stock, IXC 12 1/2% preferred stock and IXC 6 3/4% preferred stock approved for
listing on a national securities exchange or The Nasdaq National Market, subject
to official notice of issuance.
DELISTING AND DEREGISTRATION OF IXC CAPITAL STOCK
If the merger is completed, IXC common stock will be delisted from The
Nasdaq National Market and the IXC 7 1/4% preferred stock and IXC 6 3/4%
preferred stock will be delisted from their respective national securities
exchanges or The Nasdaq National Market, as applicable, and will be deregistered
under the Securities Exchange Act of 1934. If the IXC 12 1/2% preferred stock is
approved for listing on a national securities exchange or The Nasdaq National
Market, as applicable, after the merger the IXC 12 1/2% preferred stock will
continue to be listed on that national securities exchange or The Nasdaq
National Market, as applicable, and will remain registered under the Exchange
Act.
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following summary discusses the material United States federal income
tax consequences to IXC stockholders of the merger. This discussion is based
upon the United States Internal Revenue Code, Treasury regulations,
administrative rulings and judicial decisions currently in effect. The
discussion assumes that IXC stockholders hold their IXC stock and will hold
their Cincinnati Bell stock as a capital asset within the meaning of Section
1221 of the Internal Revenue Code. Further, the discussion does not address all
aspects of United States federal income taxation that may be relevant to a
particular stockholder in light of his, her or its personal investment
circumstances or to stockholders subject to special treatment under the U.S.
federal income tax laws such as:
- insurance companies
- tax-exempt organizations
- dealers in securities or foreign currency
- banks or trusts
- persons that hold their IXC stock as part of a straddle, a hedge against
currency risk, a constructive sale or conversion transaction
- persons that have a functional currency other than the U.S. dollar
- investors in pass-through entities
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- stockholders who acquired their IXC stock through the exercise of options
or otherwise as compensation or through a tax-qualified retirement plan or
- holders of options granted under any IXC benefit plan.
Furthermore, this discussion does not consider the potential effects of any
state, local or foreign tax laws.
Neither Cincinnati Bell nor IXC has requested a ruling from the United
States Internal Revenue Service with respect to any of the United States federal
income tax consequences of the merger and, as a result, there can be no
assurance that the Internal Revenue Service will not disagree with or challenge
any of the conclusions described below.
HOLDERS OF IXC STOCK ARE URGED TO CONSULT THEIR OWN TAX ADVISORS REGARDING
THE SPECIFIC TAX CONSEQUENCES TO THEM OF THE MERGER, INCLUDING THE APPLICABILITY
AND EFFECT OF FEDERAL, STATE, LOCAL AND FOREIGN INCOME AND OTHER TAX LAWS IN
THEIR PARTICULAR CIRCUMSTANCES.
For purposes of this discussion, "U.S. Holder" means:
(1) a citizen or resident of the United States
(2) a corporation or other entity taxable as a corporation created or
organized under the laws of the United States or any of its political
subdivisions
(3) a trust if a U.S. court is able to exercise primary supervision over the
administration of the trust and one or more U.S. fiduciaries have the
authority to control all substantial decisions of the trust or
(4) an estate that is subject to United States federal income tax on its
income regardless of its source.
Riordan & McKinzie has delivered its opinion to IXC as to the United States
federal income tax consequences to IXC stockholders of the merger. The Riordan
tax opinion is subject to qualifications and is based on currently applicable
law, certain factual representations made by Cincinnati Bell and IXC and certain
assumptions. Any change in currently applicable law, which may or may not be
retroactive, or failure of any of such factual representations or assumptions to
be true, correct and complete in all material respects, could affect the
continuing validity of the Riordan tax opinion. The Riordan tax opinion is
attached as Exhibit 8.1 to the registration statement on Form S-4 filed with the
Securities and Exchange Commission, which includes this proxy
statement/prospectus. IXC stockholders should read the Riordan tax opinion in
its entirety. The conclusions reached in the Riordan tax opinion are:
- the merger will be treated as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code
- IXC, Cincinnati Bell and Ivory Merger Inc. will each be a party to that
reorganization within the meaning of Section 368(b) of the Internal
Revenue Code
- except as discussed below with respect to cash received instead of
fractional shares of Cincinnati Bell common stock, no gain or loss will be
recognized by U.S. Holders of IXC stock on the exchange of their IXC stock
for Cincinnati Bell stock
- the aggregate adjusted tax basis of the Cincinnati Bell stock received in
the merger, including any fractional interest, by a U.S. Holder will be
the same as the aggregate adjusted tax basis of such U.S. Holder's IXC
stock exchanged for such Cincinnati Bell stock
- the holding period of Cincinnati Bell stock received in the merger by a
U.S. Holder will include the holding period of such U.S. Holder's IXC
stock exchanged for such Cincinnati Bell stock.
The receipt of cash instead of a fractional share of Cincinnati Bell common
stock by a U.S. Holder of IXC common stock will result in taxable gain or loss
to such U.S. Holder for United States federal income tax purposes based upon the
difference between the amount of cash received by such U.S.
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Holder and such U.S. Holder's adjusted tax basis in such fractional share as set
forth above. Such gain or loss will constitute capital gain or loss and will
constitute long-term capital gain or loss if the U.S. Holder's holding period is
greater than 12 months as of the date of the merger. For non-corporate U.S.
Holders, any such long-term capital gain generally will be taxed at a maximum
United States federal income tax rate of 20%. The deductibility of capital
losses is subject to limitations.
Certain non-corporate IXC stockholders may be subject to backup withholding
at a 31% rate on cash payments received instead of fractional shares of
Cincinnati Bell common stock. Backup withholding will not apply, however, to an
IXC stockholder who or that (1) furnishes a correct taxpayer identification
number and certifies that he, she or 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 IXC stockholders following the date of the merger, (2)
provides a certification of foreign status on Form W-8 or successor form or (3)
is otherwise exempt from backup withholding.
REGULATORY MATTERS
UNITED STATES ANTITRUST. Under the Hart-Scott-Rodino Act and its rules,
certain transactions, including the merger, may not be completed unless certain
waiting period requirements have been satisfied. On July 27, 1999, and August 3,
1999, Cincinnati Bell and IXC, respectively, filed a Notification and Report
Form under the Hart-Scott-Rodino Act with the Antitrust Division and the Federal
Trade Commission. The waiting period with respect to each of Cincinnati Bell and
IXC was terminated on August 27, 1999. At any time before or after the effective
time of the merger, the Antitrust Division, the Federal Trade Commission or
others could take action under the antitrust laws with respect to the merger,
including seeking to enjoin the completion of the merger, to rescind the merger
or to conditionally approve the merger upon the divestiture of substantial
assets of Cincinnati Bell or IXC. A challenge to the merger on antitrust grounds
could be made and, if such a challenge is made, it could be successful.
FEDERAL COMMUNICATIONS COMMISSION APPROVALS. The Federal Communications
Commission must approve the transfer of control to Cincinnati Bell of IXC and
those subsidiaries of IXC that hold Federal Communications Commission licenses
and authorizations. The Federal Communications Commission must decide whether
Cincinnati Bell is qualified to control such licenses and authorizations, and
whether the transfer is consistent with public interest, convenience and
necessity. In particular, the Federal Communications Commission will examine,
among other things, the competitive impact of the merger and other benefits and
alleged harms to the public.
Although the Federal Communications Commission retains broad discretion with
regard to the proposed merger, there are relatively few well-established bases
upon which an interested party can successfully challenge a transfer of control
application. Generally, the Federal Communications Commission reviews a merger
for compliance with statutory requirements, such as any limitations placed on
foreign ownership of Federal Communications Commission licenses, and to ensure
that the markets in which the two entities participate will remain competitive
after the merger. In the absence of a filed objection, the Federal
Communications Commission has generally approved transfers of control within 90
days from the date petitions to deny were due. However, a challenge might have
the effect of extending the Federal Communications Commission's review for an
additional six months or more. We cannot predict with accuracy when the Federal
Communications Commission might approve the merger.
As of August 4, 1999, Cincinnati Bell and IXC filed initial applications for
approval with the Federal Communications Commission, and on August 20, 1999,
Cincinatti Bell and IXC filed amended applications. As required, on September 3,
1999, the Federal Communications Commission requested public comments on the
applications. No comments by interested parties have been filed as of the date
of this document.
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Cincinnati Bell and IXC believe that Cincinnati Bell's general
qualifications to be a licensee have already been established and there is very
little overlap in the services being offered. They also believe that the Federal
Communications Commission applications demonstrate that the proposed merger
satisfies the Federal Communications Commission's standards for approval.
Although we are seeking Federal Communications Commission approval, we cannot
assure you that such approvals will be obtained with respect to all licenses and
authorizations on terms satisfactory to either party.
STATE PUBLIC UTILITY COMMISSIONS APPROVALS. Various subsidiaries of IXC
hold licenses and authorizations that have been issued by state public utility
commissions. The transfer of control over those licenses and authorizations from
IXC to Cincinnati Bell must be approved by approximately 18 state public utility
commissions. The process of filing the necessary state public utility commission
applications was completed on August 16, 1999. Notification to the public
utility commissions in the remaining states is also required. The notification
process was completed on August 6, 1999. The state public utility commissions
will review the applications to assess compliance with state requirements. In
the absence of objection, the requisite state approvals may be obtained within
120 days of submission. However, processing delays or challenges to the
applications could extend the state review process. We cannot predict with
accuracy, therefore, when the relevant state public utility commissions might
approve the merger.
GENERAL. It is possible that filings may be made with other governmental
entities which may seek various regulatory concessions. There can be no
assurance that:
- Cincinnati Bell or IXC will be able to satisfy or comply with such
conditions
- compliance or non-compliance will not have adverse consequences for
Cincinnati Bell after completion of the merger
- the required regulatory approvals will be obtained within the time frame
contemplated by Cincinnati Bell and IXC and referred to in this proxy
statement/prospectus or on terms that will be satisfactory to Cincinnati
Bell and IXC.
See "The Merger Agreement and Related Documents".
LITIGATION
On July 21, 1999, July 23, 1999 and July 27, 1999, five purported
stockholder class action suits were filed in the Delaware Court of Chancery
against IXC, certain present and former members of the IXC board of directors,
Cincinnati Bell and Ivory Merger Inc. These complaints allege, among other
things, that the IXC director defendants, aided and abetted by Cincinnati Bell
and Ivory Merger Inc., have breached their fiduciary duties to IXC's
stockholders by failing to maximize stockholder value in connection with
entering into the merger agreement. Specifically, the complaints allege that
IXC's approval of the merger of IXC and Cincinnati Bell provided stockholders
with inferior value to other available offers and to the $50 cash price paid for
certain shares of IXC held by the General Electric Pension Trust. The complaints
also allege that the no solicitation and termination provisions in the merger
agreement with Cincinnati Bell improperly discourage other potential bidders and
prevent IXC from entertaining higher offers. The complaints seek damages and a
court order enjoining completion of the merger. On August 12, 1999, plaintiffs
in the various actions moved for a preliminary injunction to prevent the
completion of the merger pending a full hearing on the merits. Discovery is
commencing in connection with that preliminary injunction motion, and a hearing
date of October 20, 1999, has been set by the court for the motion. IXC and
Cincinnati Bell believe that the complaints are without merit and intend to
defend these actions vigorously.
ACCOUNTING TREATMENT
The merger is expected to be accounted for using purchase accounting with
Cincinnati Bell being deemed to have acquired IXC.
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APPRAISAL RIGHTS
Under Delaware law, IXC common stockholders are not entitled to appraisal
rights in connection with the merger because on the IXC record date IXC common
stock will be designated and quoted for trading on The Nasdaq National Market
and will be converted into the right to receive shares of Cincinnati Bell common
stock, which at the effective time of the merger will be listed on the New York
Stock Exchange.
Under Delaware law, holders of IXC 7 1/4% preferred stock and holders of IXC
6 3/4% preferred stock will not be entitled to appraisal rights in connection
with the merger if IXC 7 1/4% preferred stock and IXC 6 3/4% preferred stock are
(1) listed on a national securities exchange or The Nasdaq National Market prior
to the IXC record date and (2) converted into the right to receive shares of
Cincinnati Bell 7 1/4% preferred stock and Cincinnati Bell 6 3/4% preferred
stock, respectively, which at the effective time will be listed on a national
securities exchange or The Nasdaq National Market.
Under Delaware law, holders of IXC 12 1/2% preferred stock will not be
entitled to appraisal rights in connection with the merger if IXC 12 1/2%
preferred stock is listed on a national securities exchange or The Nasdaq
National Market prior to the IXC record date and remains outstanding as 12 1/2%
preferred stock of the surviving corporation.
IXC is in the process of applying to list its shares of preferred stock on a
national securities exchange or The Nasdaq National Market. Holders of IXC
preferred stock will only be entitled to appraisal rights if the shares of IXC
preferred stock are not listed on a national securities exchange or The Nasdaq
National Market prior to the IXC record date. In that case, under Section 262 of
the Delaware General Corporation Law, holders of IXC 7 1/4% preferred stock, IXC
12 1/2% preferred stock and IXC 6 3/4% preferred stock on the IXC record date
will be entitled to demand judicial appraisal of, and obtain a cash payment for,
the "fair value" of their shares of IXC 7 1/4% preferred stock, IXC 12 1/2%
preferred stock and IXC 6 3/4% preferred stock, respectively, exclusive of any
element of value arising from the accomplishment or expectation of the merger.
In order to exercise their appraisal rights, holders of the IXC preferred stock
must not vote in favor of adoption of the merger agreement, must deliver to IXC
a written demand for appraisal prior to the taking of the vote on the merger
agreement and must otherwise comply with the procedural requirements of Section
262. The full text of Section 262 is attached as Annex 10 to this proxy
statement/prospectus, and any stockholder desiring to exercise appraisal rights
in connection with the merger is urged to consult with legal counsel prior to
taking any action in order to ensure that he or she complies with Section 262.
Failure to take any of the steps required under Section 262 on a timely basis
may result in the loss of appraisal rights.
Under Ohio law, Cincinnati Bell shareholders are not entitled to dissenters
rights in connection with the merger.
CONTINUATION OF IXC EMPLOYEE BENEFITS
Cincinnati Bell has agreed that, from the effective time of the merger until
at least six months after the effective time of the merger, it will either (1)
maintain the IXC employee benefit plans (other than equity-based plans) provided
by IXC before the effective time of the merger or (2) replace all or any such
plans with plans for similarly situated employees of Cincinnati Bell, provided
that the aggregate level of benefits during that six-month period (other than
equity-based arrangements) will be substantially similar to the aggregate level
of benefits (other than equity-based arrangements) provided by IXC prior to the
effective time of the merger.
Cincinnati Bell has agreed to waive any waiting period or pre-existing
limitation under any Cincinnati Bell employee benefit plan made available to IXC
employees after the effective time of the merger to the extent waived under the
corresponding IXC plan prior to the effective time of the merger. Cincinnati
Bell has also agreed to recognize, or cause to be recognized, the dollar amount
of all expenses incurred by each IXC employee (and his or her eligible
dependents) for purposes of satisfying any deductible, co-insurance and maximum
out-of-pocket provisions for the year in which the
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effective time of the merger occurs under the relevant welfare benefit plans in
which they will be eligible to participate from and after the effective time of
the merger.
EFFECT ON AWARDS OUTSTANDING UNDER IXC STOCK PLANS; WARRANTS
Under the merger agreement, at the effective time of the merger, Cincinnati
Bell will assume each stock option plan of IXC. Under the merger agreement,
immediately prior to the merger, each outstanding and unexercised option to
acquire shares of IXC common stock under such plans will be converted into an
option to acquire shares of Cincinnati Bell common stock on the same terms and
conditions as under the IXC stock option plan. The number of shares of
Cincinnati Bell common stock to be subject to any such option will be equal to
the number of shares of IXC common stock originally subject to such IXC option
multiplied by the 2.0976 exchange ratio and rounded down to the nearest whole
share. The amount of the exercise price per share of Cincinnati Bell common
stock under any such option will be equal to the aggregate amount of the
exercise price for the shares of IXC common stock subject to such IXC option
divided by the total number of shares of Cincinnati Bell common stock to be
subject to such option (rounded up to the nearest whole cent). As of September
9, 1999, the number of shares of IXC common stock reserved for issuance under
such plans was approximately 8.7 million.
Subject to the consent of the transition committee established by Cincinnati
Bell and IXC, several executives and key employees who hold options to acquire
IXC common stock which would otherwise become vested at the effective time of
the merger may elect instead to have the exercisability of all or a portion of
their options continue to vest in accordance with the original schedule set
forth in their respective option agreements. In such event, the optionholder's
options will become vested if the optionholder is involuntarily or
constructively terminated from employment without cause following the effective
time of the merger and the optionholder will be eligible to receive a gross-up
payment to offset any golden parachute excise taxes which may then be owed by
the optionholder. Under the IXC Outside Directors' Phantom Stock Plan, to the
extent not already vested, the accounts of non-employee directors of IXC will
automatically vest at the effective time of the merger and will be paid within
10 days after the effective time.
RESALE OF CINCINNATI BELL STOCK
Cincinnati Bell stock issued in the merger will not be subject to any
restrictions on transfer arising under the Securities Act of 1933, except for
shares issued to any IXC stockholder who may be deemed to be an "affiliate" of
Cincinnati Bell or IXC for purposes of Rule 145 under the Securities Act. It is
expected that each such affiliate will agree not to transfer any Cincinnati Bell
stock received in the merger except in compliance with the resale provisions of
Rule 144 or 145 under the Securities Act or as otherwise permitted under the
Securities Act. The merger agreement requires IXC to use reasonable efforts to
cause its affiliates to enter into these agreements. This proxy
statement/prospectus does not cover resales of IXC stock received by any person
upon completion of the merger, and no person is authorized to make any use of
this proxy statement/prospectus in connection with any resale.
NEW IXC BANK FINANCING
IXC Internet Services, Inc., a wholly owned subsidiary of IXC, and Bank of
America, N.A. entered into a credit agreement dated as of September 7, 1999,
pursuant to which Bank of America agreed to make available to IXC Internet
Services revolving loans in an aggregate principal amount of up to $210 million.
The obligations of IXC Internet Services under the credit agreement are secured
by substantially all the assets of IXC Internet Services and its subsidiaries,
and are guaranteed by certain subsidiaries of IXC.
IXC Communications Services, Inc., a wholly owned subsidiary of IXC, and
Bank of America entered into a credit agreement dated as of September 10, 1999,
pursuant to which Bank of America agreed to make available to IXC Communications
Services revolving loans in an aggregate principal
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amount of up to $100 million. The obligations of IXC Communications Services
under the credit agreement are secured by certain assets of IXC Communications
Services and IXC Internet Services and their respective subsidiaries, and are
guaranteed by certain of their subsidiaries.
The proceeds of the revolving loans made under these new credit agreements
will be used to repay certain intercompany indebtedness among IXC's subsidiaries
and to finance capital expenditures and working capital requirements of IXC's
subsidiaries. As of September 10, 1999, approximately $50 million was
outstanding under the new credit agreements.
Loans outstanding under each new credit agreement will mature on the first
to occur of:
- February 28, 2000, in the case of loans outstanding under the IXC Internet
Services credit agreement, and October 24, 2003, in the case of loans
outstanding under the IXC Communications Services credit agreement
- the completion of the merger
- any termination of the merger agreement by Cincinnati Bell or IXC in
accordance with its terms
- any public announcement made or press release issued by Cincinnati Bell or
IXC stating its intention not to pursue the completion of the merger or
not to seek Cincinnati Bell shareholder approval or IXC stockholder
approval for the merger
- any date on which the total amount outstanding under the new credit
agreements becomes due and payable.
The other provisions of each credit agreement are substantially similar to
the provisions of the existing first amended and restated credit agreement among
IXC Communications Services, Bank of America and the other lenders and
co-syndication agents named therein.
IXC Communications Services entered into an amendment dated as of September
7, 1999, to its existing credit agreement to provide, among other things, for
the execution of the new credit agreements and the reduction of the revolving
loan commitment under such agreement to zero.
Pursuant to the terms of a note purchase agreement dated as of September 7,
1999, between Cincinnati Bell and Bank of America, Bank of America may elect to
sell and assign to Cincinnati Bell, and upon such election Cincinnati Bell will
be required to purchase and assume from Bank of America, all its rights and
obligations under the new credit agreements at any time after the first to occur
of:
- the date on which the loans under the new credit agreements mature
- a payment default on the loans under either credit agreement or the other
related agreements
- a payment default on the loans under the existing credit agreement
- any exercise by the lenders under the existing credit agreement of any
foreclosure, offset or other collection right against any of the
collateral securing the obligations under such credit agreement
- the date on which the ratio of Cincinnati Bell's total debt to EBITDA for
the immediately preceding four consecutive fiscal quarters exceeds 4:1
- certain bankruptcy events relating to IXC or certain of its subsidiaries.
THE IXC INTERNAL REORGANIZATION
The purpose of the internal reorganization is to amend the IXC restated
certificate of incorporation to satisfy requirements to permit the Cincinnati
Bell/IXC merger to be tax-free to holders of IXC common stock, except with
respect to cash received for fractional shares in the merger. If IXC
stockholders adopt the agreement governing the IXC internal reorganization and
the agreement is not otherwise terminated, IXC will cause IXC Merger Sub, Inc.,
a newly formed, wholly owned subsidiary of IXC, to merge with and into IXC, with
IXC being the surviving corporation in the merger. IXC
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Merger Sub, Inc., will not have conducted any material business prior to the
time of the IXC internal reorganization.
Subject to the adoption of the agreement governing the IXC internal
reorganization by the affirmative vote of a majority of the shares of IXC common
stock outstanding on the IXC record date and the satisfaction or waiver of the
conditions to the completion of the merger, the completion of the internal
reorganization will occur immediately before the Cincinnati Bell/IXC merger. See
"The IXC Special Meeting".
Under the internal reorganization, the IXC restated certificate of
incorporation will be amended to provide that, after the internal
reorganization:
- the holders of IXC 12 1/2% preferred stock will be entitled to vote
together with the holders of IXC common stock on all matters to be voted
upon by holders of IXC common stock, and each share of IXC 12 1/2%
preferred stock will be entitled to one-tenth of one vote per share of IXC
12 1/2% preferred stock
- the definition of "successor" in the certificate of designation for the
IXC 7 1/4% preferred stock will include a corporation that is the direct
or indirect owner of all the equity interests of the surviving corporation
in a merger
- IXC will not be entitled to amend the certificate of designation for each
of the IXC 12 1/2% preferred stock and the IXC 6 3/4% preferred stock so
as to affect adversely the specified rights, preferences, privileges or
voting rights of holders of shares of IXC 12 1/2% preferred stock and IXC
6 3/4% preferred stock, respectively, without the affirmative vote or
consent of holders of at least two-thirds of the issued and outstanding
shares of IXC 12 1/2% preferred stock and IXC 6 3/4% preferred stock,
respectively, voting or consenting, as the case may be, as one class.
At a meeting on July 20, 1999, the IXC board of directors approved the
agreement governing the IXC internal reorganization, determined that the IXC
internal reorganization and the agreement governing the IXC internal
reorganization were advisable, fair to and in the best interests of IXC and its
stockholders and recommended that IXC stockholders vote at the IXC special
meeting to adopt the agreement governing the IXC internal reorganization.
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THE MERGER AGREEMENT AND RELATED DOCUMENTS
THE FOLLOWING DESCRIPTION SUMMARIZES THE MATERIAL PROVISIONS OF THE MERGER
AGREEMENT, THE STOCK OPTION AGREEMENTS AND THE STOCKHOLDERS AGREEMENTS. YOU ARE
URGED TO READ CAREFULLY THE MERGER AGREEMENT, THE STOCK OPTION AGREEMENTS AND
THE STOCKHOLDERS AGREEMENTS, WHICH ARE ATTACHED AS ANNEXES 1, 3, 4, 5 AND 6 TO
THIS PROXY STATEMENT/PROSPECTUS.
THE MERGER AGREEMENT
CONDITIONS TO THE COMPLETION OF THE MERGER. Each party's obligation to
effect the merger is subject to the satisfaction or waiver of various conditions
which include, in addition to other customary closing conditions, the following:
- holders of a majority of the outstanding shares of IXC common stock having
adopted the merger agreement and the agreement governing the IXC internal
reorganization
- holders of a majority of all shares of Cincinnati Bell casting votes
having approved the issuance of shares of Cincinnati Bell common stock in
the merger, assuming that the total vote cast, including votes cast
against the proposal, represents more than 50% in interest of all
Cincinnati Bell capital stock entitled to vote
- the waiting period applicable to the merger under the Hart-Scott-Rodino
Act having expired or been terminated
- no judgment, order, decree, statute, law, ordinance, rule or regulation,
being entered, enacted, promulgated, enforced or issued by any court or
other governmental entity of competent jurisdiction or other legal
restraint or prohibition being in effect, and no suit, action or
proceeding by any governmental entity being pending or threatened that (1)
would prevent the completion of the merger or (2) otherwise would be
reasonably likely to have a material adverse effect, as described below,
on Cincinnati Bell or IXC; PROVIDED, HOWEVER, that each of the parties
shall have used its reasonable efforts to prevent the entry of any such
legal restraint or prohibition that may be entered
- all consents, approvals or orders of authorization of, or actions by the
Federal Communications Commission and all necessary state public utility
commission approvals having been obtained
- the registration statement on Form S-4, of which this proxy
statement/prospectus forms a part, having become effective under the
Securities Act and not being the subject of any stop order or proceedings
seeking a stop order
- the shares of Cincinnati Bell common stock issuable to IXC stockholders in
the merger having been approved for listing on the New York Stock
Exchange, subject to official notice of issuance
- Cincinnati Bell having received $400 million under an investment agreement
between Cincinnati Bell and Oak Hill, which occurred on July 21, 1999.
In addition, each party's obligation to effect the merger is further subject
to the satisfaction or waiver of the following additional conditions:
- the representations and warranties of each other party set forth in the
merger agreement that are qualified as to materiality being true and
correct, and those that are not so qualified being true and correct in all
material respects, in each case as of the date of the merger agreement and
as of the date on which the merger is to be completed as though made on
and as of such time, or, if such representations and warranties expressly
relate to an earlier date, then as of such date
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- each other party to the merger agreement having performed in all material
respects all obligations required to be performed by it under the merger
agreement on or prior to the date on which the merger is to be completed
- with respect only to IXC's obligation to effect the merger, IXC having
received from Riordan & McKinzie on the date on which the registration
statement is filed with the Securities and Exchange Commission and on the
date on which the merger is to be completed, an opinion, in each case
dated as of such respective date, to the effect that: (1) the merger will
qualify for United States federal income tax purposes as a reorganization
within the meaning of Section 368(a) of the Internal Revenue Code and (2)
IXC, Cincinnati Bell and Ivory Merger Inc. will each be a "party to a
reorganization" within the meaning of Section 368(b) of the Internal
Revenue Code. The issuance of such opinions will be conditioned upon the
receipt by Riordan & McKinzie of customary representation letters from
each of IXC and Cincinnati Bell.
The merger agreement provides that a "material adverse change" or "material
adverse effect" means, when used in connection with IXC or Cincinnati Bell, any
change, effect, event, occurrence, condition, development or state of facts that
is materially adverse to the business, assets, results of operations, conditions
(financial or otherwise) or prospects of such party (or the surviving
corporation in the merger, when used in connection with IXC) and its
subsidiaries, taken as a whole, other than any change, effect, event,
occurrence, condition, development or state of facts:
- relating to the economy or securities markets in general
- relating to the industries in which such party operates in general and not
specifically relating to such party
- resulting from the announcement or anticipated completion of the
transactions contemplated by the merger agreement, the stockholders
agreements, the stock option agreements and the transactions contemplated
by the merger agreement
- arising from a change in generally accepted accounting principles.
NO SOLICITATION. In the merger agreement, each of Cincinnati Bell and IXC
has agreed that it will not, nor will it permit any of its subsidiaries to, nor
will it authorize or permit any of its directors, officers or employees or any
investment banker, financial advisor, attorney, accountant or other
representative retained by it or any of its subsidiaries to, directly or
indirectly through another person:
- solicit, initiate or encourage (including by way of furnishing
information), or take any other action designed to facilitate, any
inquiries or the making of any takeover proposal, as described below
- participate in any discussions or negotiations regarding any takeover
proposal.
The merger agreement provides that the term "takeover proposal" means any
bona fide inquiry, proposal or offer from any person relating to any direct or
indirect acquisition or purchase of a business that constitutes 35% or more of
the net revenues, net income or assets of a party and its subsidiaries, taken as
a whole, or 35% or more of any class of equity securities of a party or any of
its subsidiaries, any tender offer or exchange offer that if completed would
result in any person beneficially owning 35% or more of any class of equity
securities of a party or any of its subsidiaries or any merger, consolidation,
business combination, recapitalization, liquidation, dissolution or similar
transaction involving a party or any of its subsidiaries, other than the
transactions contemplated by the merger agreement.
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None of the board of directors of Cincinnati Bell or IXC or any committee
thereof will:
- except as required by law as advised by counsel, withdraw or modify, or
propose publicly to withdraw or modify, in a manner adverse to the other
party, the approval or recommendation by such board of directors or such
committee of the merger or the merger agreement
- approve or recommend, or propose publicly to approve or recommend, any
takeover proposal
- cause a party to enter into any letter of intent, agreement in principle,
acquisition agreement or other similar agreement related to any takeover
proposal.
The merger agreement also provides that each party will immediately advise
the other of any request for information or of any takeover proposal, the
material terms and conditions of such request or takeover proposal and the
identity of the person making such request or takeover proposal.
TERMINATION. The merger agreement may be terminated at any time prior to
the effective time of the merger:
1. by mutual written consent of Cincinnati Bell and IXC
2. by Cincinnati Bell or IXC, if the merger has not been completed by April
30, 2000, or, at the option of either party, July 31, 2000, if the
consents or approvals of the Federal Communications Commission or the
state public utility commissions have not been obtained by April 30,
2000; PROVIDED, HOWEVER, that such right to terminate the merger
agreement will not be available to a party whose failure to perform any
of its obligations under the merger agreement has resulted in the failure
of the merger to be completed by that date
3. by Cincinnati Bell or IXC, if the IXC stockholders have not adopted the
merger agreement at an IXC stockholders meeting
4. by Cincinnati Bell or IXC, if the Cincinnati Bell shareholders have not
approved the issuance of shares of Cincinnati Bell common stock in the
merger at a Cincinnati Bell shareholders meeting
5. by Cincinnati Bell or IXC, if any legal restraint or prohibition is in
effect and has become final and nonappealable (1) preventing the
completion of the merger or (2) which otherwise is reasonably likely to
have a material adverse effect on Cincinnati Bell or IXC, PROVIDED that
the party seeking to exercise this right to terminate the merger
agreement has used reasonable efforts to prevent the entry of and to
remove such legal restraint or prohibition
6. by Cincinnati Bell or IXC, if the other party has breached or failed to
perform in any material respect any of its representations, warranties,
covenants or other agreements contained in the merger agreement, which
breach or failure to perform would give rise to the failure of a
condition to the merger and has not been or cannot be cured within 30
calendar days of receiving notice from the other party of the event of
default
7. by Cincinnati Bell or IXC, if any of the other party's directors or
officers has participated in discussions or negotiations prohibited by
the covenant described in "--No Solicitation" above.
TERMINATION FEES.
IXC. If the merger agreement is terminated:
1. by Cincinnati Bell or IXC as described above in the second or third
paragraph under "--Termination" at a time when a takeover proposal
has been made directly to IXC or any of its subsidiaries or directly
to IXC stockholders generally or has otherwise become
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publicly known or any person has publicly announced an intention to
make a takeover proposal or
2. by Cincinnati Bell as described above in the seventh paragraph under
"--Termination",
then IXC must pay Cincinnati Bell a $105 million termination fee; PROVIDED,
HOWEVER, that no termination fee will be payable unless IXC enters into a
definitive agreement concerning, or completes, a takeover proposal involving
at least 35% of the stock of IXC or at least 50% of the net revenues, net
income or assets of IXC within 12 months of termination of the merger
agreement.
CINCINNATI BELL. If the merger agreement is terminated:
1. by Cincinnati Bell or IXC as described above in the second or fourth
paragraph under "--Termination" at a time when a takeover proposal
has been made directly to Cincinnati Bell or any of its subsidiaries
or directly to Cincinnati Bell shareholders generally or has
otherwise become publicly known or any person has publicly announced
an intention to make a takeover proposal or
2. by IXC as described above in the seventh paragraph under
"--Termination",
then Cincinnati Bell must pay IXC a $105 million termination fee; PROVIDED,
HOWEVER, that no termination fee will be payable unless Cincinnati Bell
enters into a definitive agreement concerning, or completes, a takeover
proposal involving at least 35% of the stock of Cincinnati Bell or at least
50% of the net revenues, net income or assets of Cincinnati Bell within 12
months of termination of the merger agreement.
The merger agreement further provides that if Cincinnati Bell or IXC fails
to pay any termination fee due, it must pay the costs and expenses in connection
with any action taken to collect payment, together with interest on the amount
of the termination fee.
CONDUCT OF BUSINESS PENDING THE MERGER--IXC. Under the merger agreement, IXC
has agreed that, prior to the effective time of the merger, it will carry on its
business in the ordinary course consistent with past practice and in compliance
in all material respects with applicable laws and regulations. In addition, IXC
has agreed that, among other things and subject to certain exceptions, prior to
the effective time of the merger neither it nor any of its subsidiaries may:
- declare, set aside or pay any dividends on, or make any other
distributions in respect of, any of its capital stock, other than certain
dividends and distributions by a wholly owned subsidiary, or split,
combine or reclassify any of its capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock or purchase, redeem or
otherwise acquire any shares of capital stock of IXC or its subsidiaries
or any other of their securities or any rights, warrants or options to
acquire any such securities
- issue, deliver, sell, grant, pledge or otherwise encumber or subject to
any lien any shares of its capital stock, any other voting securities or
any securities convertible into, or any rights, warrants or options to
acquire, any such securities, other than in accordance with IXC's rights
agreement, under existing options and warrants, or options issued after
the date of the merger agreement without the approval of Cincinnati Bell
in its sole discretion, the issuance of shares of IXC common stock upon
conversion of the IXC 7 1/4% Preferred Stock and the IXC 6 3/4% Preferred
Stock or issuance of shares of IXC common stock under the IXC stock option
agreement
- amend the restated certificate of incorporation of IXC, the by-laws of IXC
or other comparable organizational documents
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- acquire or agree to acquire by merging or consolidating with, or by
purchasing assets of, any business or any person other than purchases of
raw materials or supplies in the ordinary course of business consistent
with past practice
- sell, lease, license, sell and leaseback, mortgage or otherwise encumber
or subject to any lien or otherwise dispose of any of its properties or
assets, other than sales or licenses of finished goods and services in the
ordinary course of business consistent with past practice
- incur any indebtedness for borrowed money or guarantee any such
indebtedness of another person, issue or sell any debt securities or
warrants or other rights to acquire any debt securities of IXC or any of
its subsidiaries, guarantee any debt securities of another person, enter
into any "keep well" or other agreement to maintain any financial
statement condition of another person or enter into any arrangement having
the economic effect of any of the foregoing, except for short-term
borrowings incurred in the ordinary course of business consistent with
past practice or intercompany indebtedness between IXC and any of its
wholly owned subsidiaries or between such wholly owned subsidiaries
- make any loans, advances or capital contributions to, or investments in,
any other person
- make or agree to make any new capital expenditures
- pay, discharge, settle or satisfy any claims, liabilities, obligations or
litigation, other than the payment, discharge, settlement or satisfaction,
in the ordinary course of business consistent with past practice or in
accordance with its terms, of any liability recognized or disclosed in the
most recent consolidated financial statements (or the notes to such) of
IXC included in the documents filed by IXC with the Securities and
Exchange Commission before the date of the merger agreement or incurred
since the date of such financial statements, or waive the benefits of, or
agree to modify in any manner, terminate, release any person from or fail
to enforce any confidentiality, any standstill or similar agreement to
which IXC or any of its subsidiaries is a party to or of which IXC or any
of its subsidiaries is a beneficiary
- except as required by law or contemplated in the merger agreement, enter
into, adopt or amend in any material respect or terminate any benefit
plan, collective bargaining agreement, employment agreement or any other
agreement, plan or policy involving IXC or its subsidiaries, and one or
more of its current or former directors, officers or employees, or change
any actuarial or other assumption used to calculate funding obligations
with respect to any pension plan, or change the manner in which
contributions to any pension plan are made or the basis on which such
contributions are determined
- except for normal increases in the ordinary course of business consistent
with past practice that, in the aggregate, do not materially increase
benefits or compensation expenses of IXC or its subsidiaries, or as
contemplated in the merger agreement or by the terms of any contract the
existence of which does not violate the merger agreement, increase the
compensation, bonus or other benefits of any director, executive officer
or other employee or pay any benefit or amount not required by a plan or
arrangement as in effect on the date of the merger agreement to any such
person
- transfer or license to any person or entity or otherwise extend, amend or
modify any rights to the intellectual property rights of IXC and its
subsidiaries other than in the ordinary course of business consistent with
past practices or on a non-exclusive basis not materially different from
past practices
- take any action that would cause certain representations and warranties in
the merger agreement to no longer be true
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- call or hold any meeting of IXC stockholders other than in connection with
the election of the members of the IXC board of directors or other routine
matters in the ordinary course of business consistent with past practice
- enter into any contract, agreement, obligation, commitment, arrangement or
understanding with any affiliate of IXC that would have been required to
be filed as an exhibit to the IXC 1998 Report on Form 10-K had IXC been a
party to such as of December 31, 1998
- make any material tax election or settle or compromise any material tax
liability other than in the ordinary course of business
- make any offering of IXC stock options under any employee stock option or
stock purchase plan after the date of the merger agreement
- authorize, commit, resolve or agree to take any of the foregoing actions.
CONDUCT OF BUSINESS PENDING THE MERGER--CINCINNATI BELL. Under the merger
agreement, Cincinnati Bell has agreed that, prior to the effective time of the
merger, without prior consultation with IXC, Cincinnati Bell will not, nor will
it permit its subsidiaries to:
- make any material acquisition of assets or businesses
- sell or otherwise dispose of any material part of its properties or assets
other than sales or licenses of services in the ordinary course of
business consistent with past practice
- issue or sell a material amount of its shares of capital stock, any other
voting securities or any securities convertible into any such shares,
voting securities or convertible securities, other than in accordance with
Cincinnati Bell's Rights Agreement or issuance of shares of Cincinnati
Bell common stock upon the exercise of stock options or pursuant to the
Cincinnati Bell stock option agreement with IXC.
AMENDMENT; EXTENSION AND WAIVER. Subject to applicable law:
- the merger agreement may be amended by the parties in writing at any time,
except that after the merger agreement has been adopted by IXC
stockholders or the issuance of shares of Cincinnati Bell common stock in
the merger has been approved by Cincinnati Bell shareholders, no amendment
shall be made that by law requires further approval by IXC stockholders or
Cincinnati Bell shareholders without further approval of such stockholders
or shareholders
- at any time prior to the effective time of the merger, a party may, by
written instrument signed on behalf of such 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 or in any related document and except as
provided in the merger agreement, waive compliance by any other party with
any agreements or conditions in the merger agreement.
Under Section 251(d) of the Delaware General Corporation Law, no amendment
to the merger agreement made after the adoption of the merger agreement by IXC
stockholders may, without further stockholder approval, alter or change the
amount or kind of shares, securities, cash, property and/or rights to be
received by IXC stockholders in the merger, alter or change any terms of the IXC
restated certificate of incorporation to be effected by the merger, or alter or
change any terms and conditions of the merger agreement if such alteration or
change would adversely affect the holders of any class or series of stock of
IXC.
EXPENSES. Whether or not the merger is completed, all fees and expenses
incurred in connection with the merger, the merger agreement, the stock option
agreements, the stockholders agreements and the transactions contemplated
thereby will be paid by the party incurring such fees or expenses, except
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as otherwise provided in the merger agreement and except that Cincinnati Bell
and IXC will share equally the expenses incurred in connection with filing,
printing and mailing of this proxy statement/ prospectus and the registration
statement of which it is a part and the filing fees for the pre-merger
notification and report forms under the Hart-Scott-Rodino Act.
REPRESENTATIONS AND WARRANTIES. The merger agreement contains customary
representations and warranties relating to, among other things:
- corporate organization and similar corporate matters of each of Cincinnati
Bell and IXC
- subsidiaries of each of Cincinnati Bell and IXC
- the capital structure of each of Cincinnati Bell and IXC
- authorization, execution, delivery, performance and enforceability of, and
required consents, approvals, orders and authorizations of governmental
authorities relating to, the merger agreement and related matters of
Cincinnati Bell and IXC
- documents filed by each of Cincinnati Bell and IXC with the Securities and
Exchange Commission, the accuracy of information contained therein and the
absence of undisclosed liabilities of each of Cincinnati Bell and IXC
- the accuracy of information supplied by each of Cincinnati Bell and IXC in
connection with this proxy statement/prospectus and the registration
statement of which it is a part
- absence of material changes or events with respect to each of Cincinnati
Bell and IXC
- compliance with applicable laws by each of Cincinnati Bell and IXC
- absence of changes in benefit plans of each Cincinnati Bell and IXC
- matters relating to the Employee Retirement Income Security Act of 1974
for each of Cincinnati Bell and IXC
- filing of tax returns and payment of taxes by each of Cincinnati Bell and
IXC
- required stockholder vote of each of Cincinnati Bell and IXC
- satisfaction of certain state takeover statutes' requirements for IXC
- engagement and payment of fees of brokers, investment bankers, finders and
financial advisors by each of Cincinnati Bell and IXC
- receipt of fairness opinions by each of Cincinnati Bell and IXC from their
respective financial advisors
- intellectual property and year 2000 matters of each of Cincinnati Bell and
IXC
- outstanding and pending material litigation of each of Cincinnati Bell and
IXC
- title to properties of each of Cincinnati Bell and IXC
- certain contracts of each of IXC and Cincinnati Bell
- ownership of IXC stock by Cincinnati Bell
- amendments of the rights agreements of each of Cincinnati Bell and IXC
- interim operations of Ivory Merger Inc.
AMENDMENTS TO THE IXC RESTATED CERTIFICATE OF INCORPORATION. After the
effective time of the merger, the certificate of incorporation of the surviving
corporation will be substantially identical to the IXC restated certificate of
incorporation, except that such restated certificate of incorporation will be
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amended in the merger to provide that the total shares of authorized capital
stock of IXC will consist of (1) 3,000,000 shares of common stock, par value
$.01 per share, and (2) 3,000,000 shares of preferred stock, par value $.01 per
share. For a summary of certain provisions of the IXC restated certificate of
incorporation and the associated rights of IXC stockholders, see "Comparison of
Rights of Cincinnati Bell Shareholders and IXC Stockholders".
AMENDMENTS TO IXC BY-LAWS. The merger agreement provides that the by-laws
of Ivory Merger Inc., as in effect immediately prior to the effective time of
the merger, will be the by-laws of the surviving corporation following the
merger until changed or amended. For a summary of certain provisions of the IXC
by-laws and the associated rights of IXC stockholders, see "Comparison of Rights
of Cincinnati Bell Shareholders and IXC Stockholders".
THE STOCK OPTION AGREEMENTS
GENERAL. Concurrently with the execution and delivery of the merger
agreement, Cincinnati Bell and IXC entered into (1) the IXC stock option
agreement under which IXC granted Cincinnati Bell an option to purchase up to
7,427,192 shares of IXC common stock, at a price per share of $52.25, and (2)
the Cincinnati Bell stock option agreement under which Cincinnati Bell granted
IXC an option to purchase up to 27,420,757 shares of Cincinnati Bell common
stock, at a price per share of $34.83.
EXERCISE OF THE OPTION. Except as described below, each option is
exercisable by the optionholder at any time after the occurrence of any event
unconditionally entitling it to receive the termination fee under the merger
agreement. The right to purchase shares under the IXC stock option agreement or
the Cincinnati Bell stock option agreement will expire upon the first to occur
of:
- the effective time of the merger
- 12 months after the first occurrence of any event unconditionally
entitling the optionholder to receive the termination fee under the merger
agreement
- termination of the merger agreement prior to the occurrence of any event
unconditionally entitling the optionholder to receive the termination fee,
unless the optionholder has the right to receive such termination fee upon
the occurrence of certain events, in which case the option will not
terminate until the later of (1) six months following the time such
termination fee becomes unconditionally payable and (2) the expiration of
the period during which the optionholder has the right to receive a
termination fee.
Any purchase of shares upon the exercise of the option is subject to
compliance with the Hart-Scott-Rodino Act and the obtaining or making of any
governmental or regulatory consents, approvals, orders, notifications, filings
or authorizations, the failure of which to have obtained or made would make the
issuance of shares subject to the option illegal. If any such governmental or
regulatory action has not yet been obtained or made before the termination of
the option, such term will be extended to the fifth business day after receipt
of such regulatory approval. If the option has been exercised before its
termination, the optionholder will be entitled to purchase the option shares and
the termination of the option will not affect any rights under the stock option
agreement. If the optionholder receives notice that a regulatory approval
required for the purchase of any option shares under the option will not be
issued or granted or such regulatory approval has not been issued or granted
within six months of the date of the exercise notice, the optionholder will have
the right to exercise its cash-out right with respect to the option shares for
which such regulatory approval will not be issued or granted or has not been
issued or granted.
ADJUSTMENTS TO NUMBER AND TYPE OF SHARES. The number and type of securities
subject to the option and the purchase price will be adjusted for any change in
the common stock subject to the option by reason of a stock dividend, split-up,
merger, recapitalization, combination, exchange of shares
69
<PAGE>
or similar transaction, such that the optionholder will receive, upon exercise
of the option, the number and type of securities that it would have received if
the option had been exercised immediately before the occurrence of such event,
or the record date of such event.
If the issuer of the option agrees to (1) consolidate with or merge into any
person other than the optionholder or one of its subsidiaries, (2) permit any
person other than the optionholder or one of its subsidiaries to merge into the
issuer or (3) sell or otherwise transfer all or substantially all of its assets
to any person other than the optionholder or one of its subsidiaries, then such
agreement will provide that the option will, upon the completion of such
transaction, be converted into or exchanged for an option to acquire the number
and class of shares or other securities or property the optionholder would have
received for the issuer's common stock if the option had been exercised
immediately prior to such consolidation, merger, sale or transfer, or the record
date of such event.
CASH PAYMENT FOR THE OPTION. Instead of purchasing shares of common stock
under the option, the optionholder may exercise its right to have the issuer of
the option pay to the optionholder an amount per share of the issuer's common
stock equal to the number of shares of the issuer's common stock subject to the
option multiplied by the difference between:
- the average closing price on the New York Stock Exchange or The Nasdaq
National Market, as the case may be, of shares of the issuer's common
stock for the 10 trading days commencing on the 12th trading day
immediately preceding the option closing date and
- the exercise price of the option.
In addition, each stock option agreement provides that in no event will the
optionholder's total profit from the option exceed $26.25 million in the
aggregate and, if the optionholder's total profit from the option would
otherwise exceed such amount, the optionholder is required to:
- reduce the number of shares of common stock subject to the option
- deliver to the issuer of the option for cancelation shares of the issuer's
common stock previously purchased by the optionholder
- pay cash to the issuer of the option
- do any combination of the foregoing, so that the optionholder's total
profit from the option does not exceed $26.25 million after taking into
account the foregoing actions.
REGISTRATION RIGHTS AND LISTING. Each optionholder has certain rights to
require registration by the issuer of the option of any shares purchased under
the option under the securities laws if necessary for the optionholder to be
able to sell such shares and to require the listing of such shares on the New
York Stock Exchange, The Nasdaq National Market or other national securities
exchange.
ASSIGNABILITY. The stock option agreements may not be assigned or delegated
by Cincinnati Bell or IXC without the prior written consent of the other. The
shares subject to the option may not be sold, assigned, transferred or otherwise
disposed of except in an underwritten public offering or to a purchaser or
transferee who would not, immediately after such sale, assignment, transfer or
disposal, beneficially own more than 5.0% of the outstanding voting power of the
issuer of the option; PROVIDED, HOWEVER, that the optionholder shall be
permitted to sell any such shares if the sale is made in connection with a
tender or exchange offer that has been approved or recommended by a majority of
the issuer's board of directors.
EFFECT OF STOCK OPTION AGREEMENTS. The stock option agreements are intended
to increase the likelihood that the merger will be completed on the terms set
forth in the merger agreement. Consequently, certain aspects of the stock option
agreements may discourage persons who might now or prior to the effective time
of the merger be interested in acquiring all or a significant interest in
70
<PAGE>
Cincinnati Bell or IXC from considering or proposing such an acquisition, even
if such persons were prepared to offer higher consideration per share for IXC
common stock than that implicit in the 2.0976 exchange ratio or a higher price
per share for IXC common stock or Cincinnati Bell common stock than the market
price.
THE STOCKHOLDERS AGREEMENTS
GENERAL. Concurrently with the execution of the merger agreement,
Cincinnati Bell entered into:
- a stockholders agreement with Messrs. Irwin and Swett who, together with
their respective affiliates, on September 9, 1999, together held
approximately 16% of IXC's common stock then outstanding
- a stockholder agreement with General Electric, which on September 9, 1999,
held approximately 10% of the IXC common stock then outstanding.
AGREEMENTS. Each of the stockholders signing the stockholders agreements
has agreed:
- at every meeting of IXC stockholders called to vote upon the merger or the
merger agreement, to vote those shares of IXC common stock for which it
has voting power or control in favor of the adoption of the merger
agreement and approval of the transactions contemplated by the merger
agreement, including the IXC internal reorganization
- not to take any action by written consent in any circumstance other than
in accordance with the paragraph above
- not to sell, transfer, tender, pledge, encumber, assign or otherwise
dispose of its shares of IXC common stock unless the person who receives
those shares agrees to be bound by the applicable stockholders agreement
- not to enter into any voting arrangement, whether by proxy, voting
agreement or otherwise, in connection with its shares of IXC common stock
- not to, and not to permit any of its affiliates or representatives to,
directly or indirectly, (1) solicit, initiate, encourage (including by way
of furnishing information), or take any other action designed to
facilitate, any inquiries or the making of any takeover proposal for IXC,
as described under "--The Merger Agreement--No Solicitation", (2) enter
into any agreement with respect to any such takeover proposal or (3)
participate in discussions or negotiations regarding any such takeover
proposal.
TERMINATION. Each of the stockholders agreements provides that it will
terminate upon the first to occur of:
- the effective time of the merger
- 10 business days after the merger agreement is terminated.
71
<PAGE>
COMPARATIVE STOCK PRICES AND DIVIDENDS
Cincinnati Bell common stock is listed for trading on the New York Stock
Exchange under the symbol "CSN" and IXC common stock is listed for trading on
The Nasdaq National Market under the symbol "IIXC". The following table sets
forth, for the periods indicated, dividends and the high and low sales prices
per share of Cincinnati Bell common stock and IXC common stock on the New York
Stock Exchange Composite Transaction Tape and The Nasdaq National Market,
respectively. Cincinnati Bell's per share data has been restated to account for
Cincinnati Bell's two-for-one stock split effective May 2, 1997, and reflects
the spin-off of Convergys Corporation on December 31, 1998. For current price
information, you are urged to consult publicly available sources.
<TABLE>
<CAPTION>
CINCINNATI BELL IXC
COMMON STOCK COMMON STOCK
--------------------------------- -----------------------------------
DIVIDENDS DIVIDENDS
CALENDAR PERIOD HIGH LOW DECLARED HIGH LOW DECLARED
- ---------------------------------------------------- --------- --------- ----------- --------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
1997
First Quarter..................................... $ 33.75 $ 28.25 $ 0.10 $ 36.25 $ 18.75 N/A
Second Quarter.................................... 33.25 26.06 0.10 27.88 17.00 N/A
Third Quarter..................................... 32.25 23.06 0.10 33.00 19.50 N/A
Fourth Quarter.................................... 31.13 25.38 0.10 40.13 29.38 N/A
1998
First Quarter..................................... 36.31 30.13 0.10 62.00 30.25 N/A
Second Quarter.................................... 38.63 28.50 0.10 58.25 36.88 N/A
Third Quarter..................................... 33.19 22.50 0.10 55.13 22.75 N/A
Fourth Quarter.................................... 38.13 20.88 0.10 41.94 16.50 N/A
1999
First Quarter..................................... 23.44 16.06 0.10 54.75 29.75 N/A
Second Quarter.................................... 26.50 19.63 0.10 52.38 30.63 N/A
Third Quarter (through September 9, 1999)......... 26.50 17.56 N/A 43.66 31.25 N/A
</TABLE>
- ------------------------
N/A--Not Applicable
The following table sets forth the high and low sales prices per share of
Cincinnati Bell common stock on the New York Stock Exchange Composite
Transactions Tape and IXC common stock on The Nasdaq National Market on July 20,
1999, the last full trading day before the public announcement of the merger
agreement, and on September 9, 1999, the latest trading day before the date of
this proxy statement/prospectus:
<TABLE>
<CAPTION>
CINCINNATI BELL IXC
COMMON STOCK COMMON STOCK
-------------------- --------------------
HIGH LOW HIGH LOW
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
July 20, 1999.............................................................. $ 24.88 $ 23.31 $ 38.00 $ 36.13
September 9, 1999.......................................................... 18.00 17.75 34.00 33.31
</TABLE>
72
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
The following unaudited pro forma combined condensed financial statements
give effect to the merger of Cincinnati Bell and IXC under the purchase method
of accounting. These pro forma statements are presented for illustrative
purposes only. The pro forma adjustments are based upon available information
and certain assumptions that management believes are reasonable. The pro forma
combined condensed financial statements do not purport to represent what the
results of operations or financial position of Cincinnati Bell would actually
have been if the merger and related transactions had in fact occurred on such
dates, nor do they purport to project the results of operations or financial
position of Cincinnati Bell for any future period or as of any date,
respectively.
Under the purchase method of accounting, tangible and identifiable
intangible assets acquired and liabilities assumed are recorded at their
estimated fair values. The excess of the purchase price, including estimated
fees and expenses related to the merger, over the net assets acquired is
classified as goodwill on the accompanying unaudited pro forma combined
condensed balance sheet. The estimated fair values and useful lives of assets
acquired and liabilities assumed are based on a preliminary valuation and are
subject to final valuation adjustments which may cause certain of the
intangibles to be amortized over a shorter life than the goodwill amortization
period of 40 years.
The unaudited pro forma combined condensed balance sheet as of June 30, 1999
was prepared by combining the balance sheet at June 30, 1999 for Cincinnati Bell
with the balance sheet at June 30, 1999 for IXC, giving effect to the merger as
though it had been completed on June 30, 1999.
The unaudited pro forma combined condensed statements of income for the
periods presented was prepared by combining Cincinnati Bell's statements of
income for the year ended December 31, 1998, and the six months ended June 30,
1999, with IXC's statements of income for the year ended December 31, 1998, and
the six-month period ended June 30, 1999, respectively, giving effect to the
merger as though it had occurred on January 1, 1998. This unaudited pro forma
combined condensed financial data does not give effect to any restructuring
costs or to any potential cost savings or other synergies that could result from
the merger.
The consolidated historical financial statements of Cincinnati Bell and IXC
for the year ended December 31, 1998, are derived from audited consolidated
financial statements incorporated by reference in this proxy
statement/prospectus. The condensed consolidated historical financial statements
of Cincinnati Bell and IXC for the six months ended June 30, 1999, are derived
from unaudited condensed consolidated financial statements incorporated by
reference in this proxy statement/ prospectus.
YOU SHOULD READ THE FINANCIAL INFORMATION IN THIS SECTION ALONG WITH
CINCINNATI BELL'S AND IXC'S HISTORICAL CONSOLIDATED FINANCIAL STATEMENTS AND
ACCOMPANYING NOTES INCORPORATED BY REFERENCE IN THIS PROXY STATEMENT/PROSPECTUS.
SEE "WHERE YOU CAN FIND MORE INFORMATION" ON PAGE 94.
73
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
AS OF JUNE 30, 1999
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
CINCINNATI BELL IXC ADJUSTMENTS COMBINED
--------------- -------- ----------- ---------
<S> <C> <C> <C> <C>
(c) (c)
ASSETS
Current Assets:
Cash and cash equivalents..................................... $ 4.1 $ 98.6 $ 400.0(e) $ 252.7
(250.0)(i)
Receivables, net.............................................. 149.0 95.7 244.7
Other current assets.......................................... 63.7 22.7 86.4
--------------- -------- ----------- ---------
Total current assets...................................... 216.8 217.0 150.0 583.8
Property, plant and equipment, net.............................. 727.4 1,251.3 1,978.7
Noncurrent marketable securities................................ -- 452.5 452.5
Goodwill and other noncurrent assets............................ 190.9 180.7 2,421.6(d) 2,686.0
47.8(d)
(155.0)(j)
--------------- -------- ----------- ---------
Total assets.............................................. $1,135.1 $2,101.5 $2,464.4 $5,701.0
--------------- -------- ----------- ---------
--------------- -------- ----------- ---------
LIABILITIES AND SHAREOWNERS' EQUITY
Current Liabilities:
Debt maturing in one year..................................... $ 250.3 $ 12.8 $ 263.1
Current portion of unearned revenue........................... -- 53.4 53.4
Payables and other current liabilities........................ 195.0 273.5 $ 58.0(o) 526.5
--------------- -------- ----------- ---------
Total current liabilities................................. 445.3 339.7 58.0 843.0
Long-term debt.................................................. 366.3 760.2 400.0(e) 1,524.5
(2.0)(d)
Noncurrent unearned revenue..................................... -- 533.0 533.0
Deferred credits and other liabilities.......................... 147.0 85.3 18.4(l) 250.7
--------------- -------- ----------- ---------
Total liabilities......................................... 958.6 1,718.2 474.4 3,151.2
7 1/4% preferred stock.......................................... -- 103.8 83.5(d) 187.3
12 1/2% preferred stock......................................... -- 367.3 (367.3)(k)
Minority interest............................................... 364.9(d)(k) 364.9
Shareowners' equity:
6 3/4% preferred stock.......................................... -- 0.0 129.4(d) 129.4
Common shares................................................... 1.4 0.4 0.7(g) 2.1
(0.4)(f)
Additional paid-in capital...................................... 156.0 253.4 (253.4)(f) 1,847.0
1,549.5(g)
140.9(h)
0.6(h)
Retained earnings............................................... 25.8 (482.7) 482.7(f) 25.8
Other comprehensive income...................................... (6.7) 141.1 (141.1)(f) (6.7)
--------------- -------- ----------- ---------
Total shareowners' equity................................. 176.5 (87.8) 1,908.9 1,997.6
--------------- -------- ----------- ---------
Total liabilities
and shareowners' equity................................. $1,135.1 $2,101.5 $2,464.4 $5,701.0
--------------- -------- ----------- ---------
--------------- -------- ----------- ---------
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Statements.
74
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED INCOME STATEMENT
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
CINCINNATI BELL IXC ADJUSTMENTS COMBINED
--------------- ------- ----------- ---------
<S> <C> <C> <C> <C>
(c) (c)
REVENUES......................................................... $495.8 $ 319.3 $ 815.1
COSTS AND EXPENSES:
Costs of providing services and products sold.................. 216.9 213.1 430.0
Selling, general and administrative............................ 113.2 112.8 226.0
Depreciation and amortization.................................. 64.9 75.8 $(11.7)(j) 159.3
30.3(j)
Restructuring charge........................................... -- 25.8 25.8
Other infrequent costs......................................... 3.7 0.2 3.9
------ ------- ----------- ---------
Total costs and expenses..................................... 398.7 427.7 18.6 845.0
------ ------- ----------- ---------
OPERATING (LOSS) INCOME.......................................... 97.1 (108.4) (18.6) (29.9)
Loss from unconsolidated subsidiaries............................ -- 16.0 16.0
Interest expense................................................. 18.0 20.1 17.6(e) 55.7
Minority interest................................................ (4.1) 0.6 26.7(k) 23.2
Other (income) expense, net...................................... -- 5.0 5.0
------ ------- ----------- ---------
Income (loss) from continuing operations before
income taxes................................................... 83.2 (150.1) (62.9) (129.8)
Income taxes..................................................... 30.2 6.3 (16.4)(l) 20.1
------ ------- ----------- ---------
INCOME (LOSS) FROM CONTINUING OPERATIONS......................... 53.0 (156.4) (46.5) (149.9)
Dividend requirements on preferred stock......................... -- 32.4 (24.8)(m) 7.6
------ ------- ----------- ---------
INCOME (LOSS) FROM CONTINUING OPERATIONS
ATTRIBUTABLE TO COMMON SHAREOWNERS............................. $ 53.0 $(188.8) $(21.7) $(157.5)
------ ------- ----------- ---------
------ ------- ----------- ---------
Income (loss) per common share:
Income (loss) from continuing operations attributable to common
shareowners:
Basic........................................................ $0.39 $(5.14) $(0.77)
Diluted...................................................... 0.38 (5.14) (0.77)
Shares used in computing information attributable to common
shareowners (n):
Basic........................................................ 136.7 36.7 204.5
Diluted...................................................... 140.7 36.7 204.5
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Statements.
75
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED INCOME STATEMENT
YEAR ENDED DECEMBER 31, 1998
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
CINCINNATI BELL IXC ADJUSTMENTS COMBINED
--------------- ------- ----------- ---------
<S> <C> <C> <C> <C>
(c) (c)
REVENUES......................................................... $885.1 $668.6 $1,553.7
COSTS AND EXPENSES:
Costs of providing services and products sold.................. 369.6 433.3 802.9
Selling, general and administrative............................ 204.0 144.5 348.5
Depreciation and amortization.................................. 111.1 113.6 $60.5(j) 264.4
(20.8)(j)
Other infrequent costs......................................... 20.4 8.0 28.4
------ ------- ----------- ---------
Total costs and expenses..................................... 705.1 699.4 39.7 1,444.2
------ ------- ----------- ---------
OPERATING (LOSS) INCOME.......................................... 180.0 (30.8) (39.7) 109.5
Loss from unconsolidated subsidiaries............................ 27.3 33.0 60.3
Interest expense................................................. 24.2 31.7 35.3(e) 91.2
Minority interest................................................ -- 0.7 48.8(k) 49.5
Other (income) expense, net...................................... 2.4 (14.5) (12.1)
------ ------- ----------- ---------
Income (loss) from continuing operations before
income taxes................................................... 126.1 (81.7) (123.8) (79.4)
Income taxes..................................................... 44.3 13.9 (20.9)(l) 37.3
------ ------- ----------- ---------
INCOME (LOSS) FROM CONTINUING OPERATIONS......................... 81.8 (95.6) (102.9) (116.7)
Dividend requirements on preferred stock......................... -- 58.2 (43.1)(m) 15.1
------ ------- ----------- ---------
INCOME (LOSS) FROM CONTINUING OPERATIONS ATTRIBUTABLE TO COMMON
SHAREOWNERS.................................................... $ 81.8 $(153.8) $(59.8) $(131.8)
------ ------- ----------- ---------
------ ------- ----------- ---------
Income (loss) per common share:
Income (loss) from continuing operations attributable to common
shareowners:
Basic........................................................ $ 0.60 $(4.28) $(0.65)
Diluted...................................................... 0.59 (4.28) (0.65)
Shares used in computing information attributable to common
shareowners (n):
Basic........................................................ 136.0 35.9 203.8
Diluted...................................................... 138.2 35.9 203.8
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Statements.
76
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
(a) The unaudited pro forma combined condensed balance sheet assumes that
the merger took place on June 30, 1999, and the unaudited pro forma combined
condensed statements of income assume that the merger took place as of January
1, 1998.
On a combined basis, there were no material transactions between Cincinnati
Bell and IXC during the periods presented. There are no material differences
between the accounting policies of Cincinnati Bell and IXC.
(b) The unaudited pro forma combined condensed financial data do not give
effect to any restructuring costs or to any potential cost savings or other
synergies that could result from the merger. Cincinnati Bell is in the process
of developing a plan to integrate the operations of IXC with the operations of
Cincinnati Bell, which may involve certain restructuring activities. As a result
of this plan, a liability, which may be material but which cannot be quantified
as of the date of this proxy statement/ prospectus, is expected to be recognized
in the period in which Cincinnati Bell's plan is completed. Separately, in
connection with the hiring of IXC's new chief executive officer and new chief
financial officer, IXC is reviewing plans to streamline its operations and is
expecting to record a restructuring charge in the third fiscal quarter of 1999.
Although the plans are still being formulated, initial projections indicate that
the amount of the charge will be at least $10 million. This nonrecurring charge
is not reflected in the unaudited pro forma combined condensed financial
statements.
In addition, Cincinnati Bell is developing a plan to provide the combined
entity with access to credit facilities that will be sufficient to fund its
working capital requirements and for its other general corporate purposes. To
the extent that establishing such credit facilities results in refinancing
existing indebtedness of Cincinnati Bell or IXC, an extraordinary loss of
approximately $20 million may be incurred to write off certain debt issuance
costs.
This unaudited pro forma combined condensed financial data is based on a
preliminary allocation of the total merger consideration. Cincinnati Bell has
not yet completed a formal valuation of IXC's individual assets and liabilities.
When Cincinnati Bell completes a formal valuation of IXC's individual assets and
liabilities, which will be based on third-party appraisals, Cincinnati Bell will
make a final allocation of the total merger consideration to the IXC assets
acquired and liabilities assumed, tangible and intangible, with any change in
the fair value of the net assets acquired increasing or decreasing goodwill. The
effect of these changes cannot be assessed at this time and any such changes
could materially affect the amount of goodwill and related amortization.
(c) These columns represent historical results of operations and financial
position.
77
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(d) This adjustment reflects the initial estimate made by Cincinnati Bell's
management of the excess of the total merger consideration over the net assets
of IXC to be acquired, and the liabilities to be assumed, in the merger. The
following is a calculation (for purposes of this note only, in thousands except
per share data):
Consideration:
<TABLE>
<S> <C>
Shares of IXC common stock outstanding at July 20, 1999............................................. 32,323
----------
Shares of IXC common stock to be exchanged in the merger............................................ 32,323
Cincinnati Bell exchange ratio per share............................................................ 2.0976
----------
Shares of Cincinnati Bell common stock to be issued in the merger................................... 67,801
Cincinnati Bell price per share based on the average closing price 3 days before and after July 21,
1999, the date of the announcement of the merger.................................................. $ 22.8646
----------
Value of Cincinnati Bell common stock to be issued in the merger.................................... 1,550,243
Acceleration of stock options vesting as a result of the merger--4,588 shares....................... 140,990
Exchange of stock warrants as a result of the merger--75 shares..................................... 575
Estimated Cincinnati Bell transaction costs......................................................... 47,000
IXC common stock acquired by Cincinnati Bell from General Electric--4,999 shares at $50 per share... 250,000
Issuance of Cincinnati Bell 6 3/4% preferred stock.................................................. 129,437
----------
Total merger consideration ......................................................................... $2,118,245
----------
Historical IXC net deficit exchanged in the merger at July 20, 1999 adjusted for the elimination of
existing goodwill of $155,000..................................................................... 242,820
Estimated IXC expenses.............................................................................. 11,000
Fair value adjustments relating to:
Cincinnati Bell 7 1/4% preferred stock............................................................ 83,472
Surviving corporation 12 1/2% preferred stock..................................................... (2,425)
Investments in minority-owned investments......................................................... (47,813)
Subordinated debt adjustment...................................................................... (2,025)
Deferred tax impact............................................................................... 18,400
----------
Preliminary goodwill............................................................................ $2,421,674
----------
----------
</TABLE>
The total merger consideration will be allocated to the assets and
liabilities of IXC based on their estimated fair value. The impact of this fair
value adjustment has been reflected in pro forma deferred tax balances. The
excess of the total merger consideration over the historical book value of IXC's
net assets has been allocated to goodwill and other intangible assets. The final
allocation of the merger consideration to the IXC assets acquired and
liabilities assumed depends upon certain valuations and studies that have not
progressed to a stage where there is sufficient information to make a final
allocation in the accompanying pro forma combined condensed financial
information. We anticipate that a portion of the purchase price up to $300
million will be allocated to intangible assets including customer contracts. The
amortization period for these assets could range between 10 and 20 years.
(e) Reflects the recognition of debt and related interest and financing
expense incurred or assumed in connection with the merger. Interest expense
associated with the additional $400 million of indebtedness incurred in
connection with the merger relating to the issuance of subordinated convertible
debentures by Cincinnati Bell pursuant to an investment agreement between
Cincinnati Bell and Oak Hill on July 21, 1999, was calculated based on an
assumed average interest rate of 7.43% per
78
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
year. The Cincinnati Bell board of directors has also authorized the use of $200
million of the proceeds of such indebtedness to repurchase Cincinnati Bell
common stock in connection with an open market share repurchase program. Since
June 30, 1999, Cincinnati Bell has repurchased 2.98 million shares of its common
stock in the open market. The repurchase of these shares of Cincinnati Bell
common stock has not been reflected in the unaudited pro forma combined
condensed financial statements.
(f) Reflects the elimination of IXC's stockholders' equity accounts
including the elimination of IXC's existing unrealized gain on investments.
(g) Reflects the issuance of approximately 67.8 million shares of Cincinnati
Bell common stock in connection with the merger pursuant to which each issued
and outstanding share of IXC common stock will be converted into the right to
receive 2.0976 shares of Cincinnati Bell common stock. As of July 20, 1999, 32.3
million shares of IXC common stock were outstanding.
(h) Represents the excess fair value of vested stock options granted and
warrants issued by Cincinnati Bell in exchange for outstanding vested stock
options originally granted and warrants originally issued, as applicable, by
IXC.
(i) Reflects cash to be used to purchase approximately 5 million shares of
IXC common stock from General Electric Pension Trust for a cash price of $50 per
share pursuant to the terms of a stock purchase agreement between Cincinnati
Bell and General Electric Pension Trust.
(j) Reflects the adjustment to amortization for the effect of goodwill. For
purposes of the unaudited pro forma condensed combined financial statements,
goodwill has been amortized over an estimated life of 40 years. While amounts
allocated to goodwill are expected to be amortized over 40 years, other
intangible assets may be amortized over shorter periods which will have the
effect of reducing the amount of net income presented in these financial
statements. We have not made a final determination of the amounts or lives
attributable to the intangible assets other than goodwill. See Notes (a) and
(c). This entry also reflects the elimination of net goodwill of IXC of $155
million and the related goodwill amortization of IXC recorded historically for
the periods presented.
(k) Reflects the reclassification of the IXC 12 1/2% preferred stock, which
will remain outstanding after the merger as 12 1/2% preferred stock of the
surviving corporation in the merger, and which will be treated as a minority
interest of the combined company. Accordingly, the dividends payable on the
12 1/2% preferred stock have also been reclassified as a minority interest, net
in the pro forma combined condensed income statement.
(l) Represents the tax effect of the pro forma adjustments. The acquisition
adjustments include nondeductible goodwill amortization. See Note (j). Pro forma
net deferred tax assets are reduced by a valuation allowance of $123.9 million
at June 30, 1999.
(m) Under the terms of the merger agreement, each issued and outstanding
share of IXC 7 1/4% preferred stock and IXC 6 3/4% preferred stock will be
converted into the right to receive one share of Cincinnati Bell 7 1/4%
preferred stock and one share of Cincinnati Bell 6 3/4% preferred stock,
respectively, on substantially identical terms. This adjustment reflects the
accretion and dividend adjustment for the 7 1/4% preferred stock and the 6 3/4%
preferred stock.
(n) Pro forma per share data is based on the number of shares of Cincinnati
Bell common stock and common equivalent shares that would have been outstanding
had the merger occurred on the earliest date presented.
(o) Reflects estimated merger-related fees and expenses of Cincinnati Bell
and IXC. The impact of these fees and expenses have been reflected in the
unaudited pro forma combined condensed unaudited balance sheet and statement of
income as an increase in the merger consideration and has been allocated to the
assets acquired and liabilities assumed, based upon their estimated fair values.
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DESCRIPTION OF CINCINNATI BELL CAPITAL STOCK
The following summary of the capital stock of Cincinnati Bell is subject in
all respects to applicable provisions of the Ohio General Corporation Law, the
Cincinnati Bell amended articles of incorporation and amended regulations and
the Cincinnati Bell rights agreement. See "Comparison of Rights of Cincinnati
Bell Shareholders and IXC Stockholders" on page 83 and "Where You Can Find More
Information" on page 94.
GENERAL
The total authorized shares of capital stock of Cincinnati Bell consist of
(1) 480,000,000 shares of common stock, par value $.01 per share, (2) 4,000,000
shares of voting preferred stock without par value and (3) 1,000,000 shares of
non-voting preferred stock without par value (together with the voting preferred
stock, preferred stock). The Cincinnati Bell board of directors has designated
2,000,000 shares of its voting preferred stock as series A preferred stock.
Before completion of the merger, the Cincinnati Bell board of directors will
designate (1) 1,400,000 shares of voting preferred stock as Cincinnati Bell
7 1/4% preferred stock and (2) 155,250 shares of voting preferred stock as
Cincinnati Bell 6 3/4% preferred stock. At the close of business on September 9,
1999, approximately 132,041,901 shares of Cincinnati Bell common stock were
issued and outstanding, and no shares of Cincinnati Bell preferred stock were
issued and outstanding.
COMMON STOCK
Each holder of common stock is entitled to cast one vote for each share held
of record on all matters submitted to a vote of shareholders, including the
election of directors. Holders of common stock are entitled to receive dividends
or other distributions declared by the board of directors. The right of the
board of directors to declare dividends, however, is subject to the rights of
any holders of preferred stock of Cincinnati Bell and certain requirements of
Ohio law.
PREFERRED STOCK
The Cincinnati Bell board of directors is authorized to provide for the
issuance from time to time of Cincinnati Bell preferred stock in series and, as
to each series, to fix the designation, the dividend rate and the date or dates
from which such dividends will be cumulative, the times when and the prices at
which shares will be redeemable, the voluntary and involuntary liquidation
prices, the sinking fund provisions, if any, applicable to such series, the
conversion or exchange privileges, if any, of such series, the restrictions, if
any, upon the payment of dividends or other distributions and upon the creation
of indebtedness, if any, and any other rights, preferences and limitations.
Cumulative dividends, dividend preferences and conversion, exchange and
redemption provisions, to the extent that some or all of these features may be
present when shares of Cincinnati Bell preferred stock are issued, could have an
adverse effect on the availability of earnings for distribution to the holders
of Cincinnati Bell common stock or for other corporate purposes.
In the merger, shares of IXC 7 1/4% preferred stock and IXC 6 3/4% preferred
stock will be converted into the right to receive shares of Cincinnati Bell
7 1/4% preferred stock and Cincinnati Bell 6 3/4% preferred stock, respectively.
The terms of the Cincinnati Bell 7 1/4% preferred stock and Cincinnati Bell
6 3/4% preferred stock will be substantially identical to the terms of the IXC
7 1/4% preferred stock and IXC 6 3/4% preferred stock, respectively, except
that:
- the issuer will be an Ohio corporation, Cincinnati Bell, instead of a
Delaware corporation, IXC
- Cincinnati Bell preferred stock will be convertible into Cincinnati Bell
common stock instead of IXC common stock
- Cincinnati Bell preferred stock will be convertible into Cincinnati Bell
common stock on a basis that gives effect to the exchange ratio in the
merger
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- each holder of a share of Cincinnati Bell 7 1/4% preferred stock and each
holder of a whole share of Cincinnati Bell 6 3/4% preferred stock will be
entitled to one vote per share on all matters submitted to the vote of
holders of Cincinnati Bell common stock.
In the merger, shares of IXC 12 1/2% preferred stock will remain outstanding
as 12 1/2% preferred stock of the surviving corporation in the merger.
The terms of the Cincinnati Bell 7 1/4% preferred stock and the Cincinnati
Bell 6 3/4% preferred stock are summarized below under "Description of
Cincinnati Bell Capital Stock--Cincinnati Bell 7 1/4% Preferred Stock" and
"--Cincinnati Bell 6 3/4% Preferred Stock". For a comparison of the relevant
provisions of Ohio law and Delaware law, see "Comparison of Rights of Cincinnati
Bell Shareholders and IXC Stockholders" on page 83. For a complete description
of the terms of the IXC 7 1/4% preferred stock, IXC 6 3/4% preferred stock and
IXC 12 1/2% preferred stock, see "Where You Can Find More Information" on page
94.
CINCINNATI BELL 7 1/4% PREFERRED STOCK
VOTING RIGHTS. Holders of Cincinnati Bell 7 1/4% preferred stock are
entitled to cast one vote per share on all matters submitted to a vote of the
shareholders, including the election of directors. Holders of Cincinnati Bell
7 1/4% preferred stock, holders of Cincinnati Bell 6 3/4% preferred stock and
holders of Cincinnati Bell common stock will vote together as a single class,
unless otherwise provided by law or the Cincinnati Bell amended articles of
incorporation. The approval of at least two-thirds of the votes entitled to be
cast by holders of Cincinnati Bell 7 1/4% preferred stock is required to amend
the Cincinnati Bell amended articles of incorporation to affect adversely the
specified rights, preferences, privileges or voting rights of holders of
Cincinnati Bell 7 1/4% preferred stock.
DIVIDENDS. Dividends on the Cincinnati Bell 7 1/4% preferred stock accrue
at a rate of 7 1/4% per annum per share on a liquidation preference of $100 per
share, $7.25 per annum per share. If Cincinnati Bell is not permitted to pay
cash dividends on Cincinnati Bell 7 1/4% preferred stock by the terms of any
outstanding indebtedness or any other agreement or instrument to which
Cincinnati Bell is subject, if permitted by Ohio law, Cincinnati Bell will be
required to pay dividends, which shall accrue at the rate of 8 3/4% per annum,
through the issuance of additional shares of Cincinnati Bell 7 1/4% preferred
stock.
CONVERSION RIGHTS. Unless previously redeemed, Cincinnati Bell 7 1/4%
preferred stock is convertible at the option of the holders at any time into
shares of Cincinnati Bell common stock at a rate, subject to adjustment in
certain events, of 8.94 shares of Cincinnati Bell common stock for each share of
Cincinnati Bell 7 1/4% preferred stock.
REDEMPTION PROVISIONS. Cincinnati Bell is required to redeem all the
remaining shares of Cincinnati Bell 7 1/4% preferred stock on March 31, 2007.
Cincinnati Bell 7 1/4% preferred stock is not redeemable prior to April 3, 2000.
On or after such date, Cincinnati Bell 7 1/4% preferred stock will be redeemable
at the option of Cincinnati Bell, in whole or in part, at the redemption prices
set forth in the Cincinnati Bell amended articles of incorporation plus accrued
and unpaid dividends through the redemption date. However, prior to April 1,
2002, Cincinnati Bell 7 1/4% preferred stock will not be subject to redemption
unless for any 20 trading days within the period of 30 consecutive trading days
ending on the trading day immediately before the notice of redemption, the
closing bid price for Cincinnati Bell common stock on the New York Stock
Exchange equals or exceeds 150% of the then effective conversion price.
ADJUSTMENT FOR CONSOLIDATION, MERGER OR CHANGE IN CONTROL. In order to
protect the interests of holders of Cincinnati Bell 7 1/4% preferred stock, the
Cincinnati Bell amended articles of incorporation provide for adjustment of the
conversion price and related terms in the case of certain consolidations,
mergers or changes in control.
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LIQUIDATION RIGHTS. In the event of the liquidation, dissolution or winding
up of the business of Cincinnati Bell, holders of Cincinnati Bell 7 1/4%
preferred stock are entitled to receive the liquidation preference of $100 per
share plus all accrued and unpaid dividends.
CINCINNATI BELL 6 3/4% PREFERRED STOCK
VOTING RIGHTS. Holders of Cincinnati Bell 6 3/4% preferred stock are
entitled to cast one vote per whole share that they own on all matters submitted
to a vote of the shareholders, including the election of directors. Holders of
Cincinnati Bell 7 1/4% preferred stock, holders of Cincinnati Bell 6 3/4%
preferred stock and holders of Cincinnati Bell common stock will vote together
as a single class, unless otherwise provided by law or the Cincinnati Bell
amended articles of incorporation. The approval of each holder of Cincinnati
Bell 6 3/4% preferred stock is necessary to:
- alter the voting rights
- reduce the liquidation preference
- reduce the rate of or change the time for payment of dividends
- adversely alter certain redemption provisions.
In addition, the approval of at least two-thirds of the votes entitled to be
cast by holders of Cincinnati Bell 6 3/4% preferred stock is required to amend
the Cincinnati Bell amended articles of incorporation to affect adversely the
specified rights, preferences, privileges or voting rights of holder of
Cincinnati Bell 6 3/4% preferred stock.
DIVIDENDS. Dividends on Cincinnati Bell 6 3/4% preferred stock are payable
quarterly and accrue at a rate of 6 3/4% per annum per share on a liquidation
preference of $1,000 per share, $67.50 per annum per share. Dividends may, at
the option of Cincinnati Bell, be paid in shares of Cincinnati Bell common stock
if, and only if, the documents governing Cincinnati Bell's indebtedness that
existed as of March 30, 1998, prohibit the payment of such dividends in cash.
Cincinnati Bell is allowed to pay dividends only if permitted by Ohio law.
CONVERSION RIGHTS. Unless previously redeemed or repurchased, Cincinnati
Bell 6 3/4% preferred stock is convertible at the option of the holders at any
time into shares of Cincinnati Bell common stock at a rate, subject to
adjustment in certain events, of 28.84 shares of Cincinnati Bell common stock
for each share of Cincinnati Bell 6 3/4% preferred stock.
REDEMPTION PROVISIONS. Cincinnati Bell 6 3/4% preferred stock is redeemable
after April 5, 2000, subject to certain conditions with respect to the closing
price of Cincinnati Bell common stock in the case of redemptions prior to April
1, 2002.
ADJUSTMENT FOR CONSOLIDATION, MERGER OR CHANGE IN CONTROL. In order to
protect the interests of holders of Cincinnati Bell 6 3/4% preferred stock, the
Cincinnati Bell amended articles of incorporation provide for adjustment of the
conversion rate and related terms in the case of certain consolidations, mergers
or changes in control.
LIQUIDATION RIGHTS. In the event of the liquidation, dissolution or winding
up of the business of Cincinnati Bell, holders of Cincinnati Bell 6 3/4%
preferred stock are entitled to receive the liquidation preference of $1,000 per
share plus all accrued and unpaid dividends.
DEPOSITARY SHARES. Cincinnati Bell 6 3/4% preferred stock is issued as and
represented by depositary shares. These depositary shares represent a
one-twentieth of a share of Cincinnati Bell 6 3/4% preferred stock. A holder of
depositary shares of Cincinnati Bell 6 3/4% preferred stock only has voting
rights equal to the number of whole shares of Cincinnati Bell 6 3/4% preferred
stock represented by such depositary shares of Cincinnati Bell 6 3/4% preferred
stock.
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CINCINNATI BELL SERIES A PREFERRED STOCK
Cincinnati Bell series A preferred stock is designated in connection with
the Cincinnati Bell rights agreement. No shares of Cincinnati Bell series A
preferred stock are outstanding. For a description of the rights to acquire
Cincinnati Bell series A preferred stock that are attached to shares of
Cincinnati Bell common stock, see "Comparison of Rights of Cincinnati Bell
Shareholders and IXC Stockholders--Rights Plans--Cincinnati Bell".
COMPARISON OF RIGHTS OF CINCINNATI BELL
SHAREHOLDERS AND IXC STOCKHOLDERS
The rights of Cincinnati Bell shareholders are currently governed by Ohio
law and the Cincinnati Bell amended articles of incorporation and amended
regulations. The rights of IXC stockholders are currently governed by the
Delaware General Corporation Law and the IXC restated certificate of
incorporation and by-laws. Upon completion of the merger, the rights of IXC
stockholders who become shareholders of Cincinnati Bell in the merger will be
governed by Ohio law and the Cincinnati Bell amended articles of incorporation
and amended regulations.
The following description summarizes the material differences which may
affect the rights of Cincinnati Bell shareholders and IXC stockholders but does
not purport to be a complete statement of all such differences, or a complete
description of the specific provisions referred to in this summary. The
identification of specific differences is not intended to indicate that other
equally or more significant differences do not exist. Cincinnati Bell
shareholders and IXC stockholders should read carefully the relevant provisions
of Ohio law and Delaware law, the Cincinnati Bell amended articles of
incorporation and amended regulations, and the IXC restated certificate of
incorporation and by-laws.
CAPITALIZATION
CINCINNATI BELL. Cincinnati Bell's authorized capital stock is described
above under "Description of Cincinnati Bell Capital Stock".
IXC. The total authorized shares of capital stock of IXC consist of (1)
300,000,000 shares of common stock, par value $.01 per share, (2) 3,000,000
shares of preferred stock, par value $.01 per share, and (3) 17,000,000 shares
of class B preferred stock, par value $.01 per share. Of the 3,000,000 shares of
preferred stock, (1) 1,400,000 shares have been designated as IXC 7 1/4%
preferred stock, (2) 450,000 shares have been designated as IXC 12 1/2%
preferred stock, (3) 55,000 shares have been designated as IXC series A junior
participating preferred stock and (4) 155,250 shares have been designated as IXC
6 3/4% preferred stock.
At the close of business on September 9, 1999, (1) 37,412,215 shares of IXC
common stock, (2) 1,074,496 shares of IXC 7 1/4% preferred stock, (3) 383,232
shares of IXC 12 1/2% preferred stock and (4) 155,250 shares of IXC 6 3/4%
preferred stock were issued and outstanding. No other shares of preferred stock
or class B preferred stock were issued and outstanding.
The IXC board of directors is authorized to issue preferred stock from time
to time in series, to set forth the voting powers of each series, and to fix the
designations, preferences and relative, participating, optional or other special
rights and qualifications, limitations or restrictions of each series of
preferred stock. The IXC board of directors is authorized to issue class B
preferred stock from time to time in series, to set forth the voting powers of
each series, and to fix the number of shares constituting each series and the
designations, preferences and relative, participating, optional or other special
rights and qualifications, limitations or restrictions of each series of class B
preferred stock. The IXC board of directors, without stockholder approval, can
issue IXC preferred stock and IXC class B preferred stock with voting,
conversion or other rights that could dilute the voting power and other rights
of the holders of IXC common stock. IXC preferred stock and IXC class B
preferred stock could also be issued quickly with terms that could delay or
prevent a change in control of IXC or make
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removal of management more difficult. Additionally, issuing IXC preferred stock
may cause the market price of IXC common stock to decrease.
VOTING RIGHTS
CINCINNATI BELL. Each holder of Cincinnati Bell common stock is entitled to
one vote for each share held of record and may not cumulate votes for the
election of directors.
IXC. Each holder of IXC common stock is entitled to one vote for each share
held of record and may not cumulate votes for the election of directors.
NUMBER, ELECTION, VACANCY AND REMOVAL OF DIRECTORS
CINCINNATI BELL. The Cincinnati Bell board of directors has ten members.
The Cincinnati Bell amended articles of incorporation provide that the
Cincinnati Bell board of directors will consist of a number of directors to be
fixed from time to time by the board of directors, but will in any event not be
less than nine. The Cincinnati Bell amended regulations also state that the
number of directors of Cincinnati Bell shall not be less than nine nor greater
than seventeen. The Cincinnati Bell amended articles of incorporation provide
that the Cincinnati Bell board of directors consists of three classes of
directors with staggered terms. The term of each class of directors is
approximately three years each.
Under the Cincinnati Bell amended regulations, if there is a vacancy on the
Cincinnati Bell board of directors or if the number of directors is increased,
these vacancies or newly created directorships will be filled by the affirmative
vote of a majority of the remaining directors then in office, or by the
affirmative vote of two-thirds of the outstanding voting power of Cincinnati
Bell. No decrease in the number of directors will shorten the term of any
incumbent director.
Under the Cincinnati Bell amended regulations, any director may be removed
from office without assigning cause by the affirmative vote of the holders of at
least two-thirds of the outstanding voting power of Cincinnati Bell, voting
together as a single class.
IXC. The IXC board of directors has seven members. The IXC by-laws provide
that the IXC board of directors will consist of a number of directors to be
fixed from time to time pursuant to a resolution adopted by the board of
directors but will, in any event, not be less than seven or greater than nine.
Neither the IXC restated certificate of incorporation nor the IXC by-laws
provide for a staggered board of directors.
Vacancies on the IXC board of directors and newly created directorships
resulting from any increase in the authorized number of directors may be filled
by the majority of the remaining directors in office, though less than a quorum.
If, at the time of filling of any vacancy or newly created directorship, the
directors then in office constitute less than a majority of the authorized
number of directors, the Chancery Court for the State of Delaware may, upon
application of any stockholder or stockholders holding at least 10% of the total
voting power of IXC, order an election to be held to fill such vacancy or
replace the directors selected by the directors then in office.
Under Delaware law and the IXC by-laws, any director or the entire IXC board
of directors may be removed at any time, with or without cause, by the
affirmative vote of the holders of at least a majority of the outstanding voting
power of IXC.
AMENDMENTS TO THE AMENDED ARTICLES OF INCORPORATION AND RESTATED CERTIFICATE OF
INCORPORATION
CINCINNATI BELL. Ohio law provides that the affirmative vote of two-thirds
of the voting power of the corporation is necessary to adopt an amendment to the
articles of incorporation. The board of directors of a corporation may only
adopt amendments without shareholder approval in limited circumstances which
include, among others, the following:
- to specify the terms and conditions of any series of preferred stock
- to reduce or increase the number of authorized shares under certain
conditions
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- to eliminate language from the articles following a merger or
consolidation.
The Cincinnati Bell amended articles of incorporation do not contain any
provisions regarding the amendment of the articles of incorporation and
therefore may be amended as described above under Ohio law.
IXC. Under Delaware law, an amendment to the certificate of incorporation
of a corporation requires the approval of the board of directors and the
approval of holders of a majority of the outstanding stock entitled to vote upon
the proposed amendment. Holders of the outstanding shares of a class are
entitled to vote as a separate class on a proposed amendment that would:
- increase or decrease the aggregate number of authorized shares of such
class (unless this class voting right has been eliminated in the
certificate of incorporation in certain circumstances)
- increase or decrease the par value of the shares of such class or
- alter or change the powers, preferences or special rights of the shares of
such class, so as to affect them adversely.
The IXC restated certificate of incorporation provides that the certificate
of incorporation may be amended as prescribed by Delaware law.
AMENDMENTS TO THE AMENDED REGULATIONS AND BY-LAWS
CINCINNATI BELL. The Cincinnati Bell amended regulations may be altered,
amended or repealed by the affirmative vote of the holders of two-thirds of the
outstanding voting power of Cincinnati Bell. However, if the change is
recommended by the affirmative vote of two-thirds of the board of directors,
then the amended regulations can be altered, amended or repealed by the
affirmative vote of a majority of the outstanding voting power of Cincinnati
Bell.
IXC. Under Delaware law, the stockholders have the power to adopt, amend or
repeal the by-laws and the directors may also have such power if it is conferred
upon them by the certificate of incorporation. The IXC restated certificate of
incorporation and by-laws allow the directors and stockholders to amend or
repeal the by-laws.
SHAREHOLDER/STOCKHOLDER ACTION
CINCINNATI BELL. Ohio law provides that any action which may be authorized
or taken at a meeting of shareholders may be authorized or taken without a
meeting with the affirmative vote in writing of all the shareholders who would
be entitled to notice of such a meeting.
IXC. Delaware law and the IXC restated certificate of incorporation provide
that any action which may be taken at an annual meeting or special meeting of
stockholders may be taken without a meeting, if a consent in writing is signed
by the holders of outstanding stock having the minimum number of votes necessary
to authorize such action at a meeting of stockholders.
NOTICE OF CERTAIN SHAREHOLDER/STOCKHOLDER ACTION
CINCINNATI BELL. The Cincinnati Bell amended articles of incorporation and
amended regulations do not place any limits on the submission of a shareholder
proposal.
IXC. The IXC restated certificate of incorporation and by-laws do not place
any limits on the submission of a stockholder proposal. The IXC by-laws do
provide, however, that the only business that may be conducted at special
meetings is the business stated in the notice of that special meeting. See
"--Special Shareholder/Stockholder Meetings".
SPECIAL SHAREHOLDER/STOCKHOLDER MEETINGS
CINCINNATI BELL. The Cincinnati Bell amended regulations provide that a
special meeting of the shareholders may be called by the chairman of the board,
by the president, by resolution of the board
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of directors or by resolution of the holders of not less than one-half of the
outstanding voting power of Cincinnati Bell.
IXC. The IXC by-laws provide that a special meeting of the stockholders may
be called by the president, or at the request of a majority of the board of
directors or at the written request of the holders of a majority of the
outstanding capital stock of IXC.
DIRECTOR AND OFFICER LIABILITY AND INDEMNIFICATION
CINCINNATI BELL. With certain exceptions to the following limitation, Ohio
law provides that a director is liable in damages for any action he or she takes
or fails to take only if it is proved by clear and convincing evidence in a
court of competent jurisdiction that such action or failure to act was taken
with deliberate intent to cause injury to the corporation or undertaken with
reckless disregard for the best interests of the corporation.
Under Ohio law, a corporation may indemnify any person who was or is a party
or is threatened to be made a party to any proceeding, other than an action by
or in the right of the corporation, because the person is or was a director or
officer, against liability reasonably incurred by the director or officer in
connection with the proceeding if either:
- the director or officer acted in good faith and in a manner the director
or officer reasonably believed to be in or not opposed to the best
interests of the corporation or
- with respect to any criminal action or proceeding, the director or officer
had no reasonable cause to believe the director's or officer's conduct was
unlawful.
Under Ohio law, a corporation may indemnify any person who was or is a party
or is threatened to be made a party to any proceeding, by or in the right of the
corporation to procure a judgment in its favor, because the person is or was a
director or officer against liability reasonably incurred by the director or
officer in connection with the proceeding if the director or officer acted in
good faith and in a manner the director or officer reasonably believed to be in
or not opposed to the best interests of the corporation, except that a
corporation may not indemnify a director or officer if either:
- the director or officer has been adjudged to be liable for negligence or
misconduct in the performance of the director's or officer's duty to the
corporation unless and only to the extent that the court in which the
proceeding was brought determines that, in view of all the circumstances
of the case, the director or officer is fairly and reasonably entitled to
indemnity for such expenses as the court deems proper or
- the only liability asserted against a director in a proceeding is for the
director voting for or assenting to the following:
- the payment of a dividend or distribution, the making of a distribution
of assets to shareholders, or the purchase or redemption of the
corporation's own shares in violation of Ohio law or the corporation's
articles of incorporation
- a distribution of assets to shareholders during the winding up of the
affairs of the corporation, or dissolution or otherwise, without the
payment of all known obligations of the corporation or without making
adequate provision for their payment or
- the making of a loan, other than in the usual course of business, to an
officer, director or shareholder of the corporation other than in the
case of at the time of the making of the loan, a majority of the
disinterested directors of the corporation voted for the loan and,
taking into account the terms and provisions of the loan and other
relevant factors, determined that the making of the loan could
reasonably be expected to benefit the corporation.
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Under Ohio law, to the extent that a director or officer has been successful
on the merits or otherwise in defense of the proceeding, the director or officer
must be indemnified against expenses actually and reasonably incurred by him or
her in connection with that proceeding.
Ohio law provides that any indemnification for a director or officer, unless
ordered by a court, is subject to a determination that the director or officer
has met the applicable standard of conduct. The determination will be made by
either:
- a majority vote of a quorum of the directors who are not parties to such
proceeding
- if there is not a quorum of such directors, or if a majority vote of such
directors so directs, independent legal counsel in a written opinion
- by the shareholders or
- by the court of common pleas or by the court in which the proceeding was
brought.
Ohio law provides that the corporation must pay expenses as they are
incurred by the director or officer in defending the proceeding if the director
or officer undertakes to:
- repay the amount if it is determined that the director's or officer's
action or failure to act involved an act or omission undertaken with
deliberate intent to cause injury to the corporation or undertaken with
reckless disregard for the best interests of the corporation and
- reasonably cooperate with the corporation concerning the proceeding.
Under Ohio law, a corporation may advance expenses before the final
disposition of a proceeding if the director or officer undertakes to repay the
amount if it is ultimately determined that the director or officer is not
entitled to indemnification.
Ohio law gives a corporation the power to purchase and maintain insurance on
behalf of any director or officer against any liability asserted against, and
incurred in his or her capacity as a director or officer, whether or not the
corporation would have the power to indemnify the director or officer against
this liability under Ohio law.
The Cincinnati Bell amended regulations provide that Cincinnati Bell will
indemnify directors and officers to the fullest extent permitted by law.
IXC. The IXC restated certificate of incorporation provides that no
director will be personally liable to IXC or its stockholders for monetary
damages for breach of fiduciary duty as a director, except, if required by law,
for liability:
- for any breach of a director's duty of loyalty to the corporation or its
stockholders
- for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law
- for violation of Section 174 of the Delaware General Corporation Law
regarding unlawful payment of dividends or unlawful stock purchases or
redemptions or
- for any transaction from which the director derived an improper personal
benefit.
Under Delaware law, a corporation may indemnify any person who was or is a
party or is threatened to be made a party to any proceeding, other than an
action by or on behalf of the corporation, because the person is or was a
director or officer against liability incurred in connection with the proceeding
if either:
- the director or officer acted in good faith and in a manner the director
or officer reasonably believed to be in or not opposed to the best
interests of the corporation or
- with respect to any criminal action or proceeding, the director or officer
had no reasonable cause to believe the director's or officer's conduct was
unlawful.
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Under Delaware law, a corporation may not indemnify a director or officer in
connection with any proceeding brought by or on behalf of the corporation in
which the director or officer has been adjudged to be liable to the corporation
unless and only to the extent that the director or officer satisfies the conduct
standard set forth above and the court in which the proceeding was brought
determines that, in view of all the circumstances of the case, the director or
officer is fairly and reasonably entitled to indemnity for such expenses which
the court deems proper.
Delaware law provides that any indemnification for a director or officer,
unless ordered by a court, is subject to a determination that the director or
officer has met the applicable standard of conduct. The determination will be
made by either:
- a majority vote of the directors who are not parties to such action, suit
or proceeding, even though less than a quorum, or by a committee of such
directors designated by majority vote of such directors, even though less
than a quorum
- if there are no such directors, or if such directors so direct,
independent legal counsel in a written opinion or
- the stockholders.
Under Delaware law, a corporation may advance expenses before the final
disposition of a proceeding if the director or officer undertakes to repay the
amount if it is ultimately determined that the director or officer is not
entitled to indemnification. Expenses incurred by former directors or officers
may be paid upon such terms and conditions, if any, as the corporation deems
appropriate.
Under Delaware law, to the extent that a present or former director or
officer of a corporation has been successful on the merits or otherwise in
defense of the proceeding, that person must be indemnified against expenses
actually and reasonably incurred in connection with any claim.
Delaware law gives a corporation the power to purchase and maintain
insurance on behalf of any director or officer against any liability asserted
against, and incurred in his or her capacity as a director or officer whether or
not the corporation would have the power to indemnify the director or officer
against this liability under Delaware law.
The IXC by-laws provide that IXC will indemnify every director or officer of
IXC to the fullest extent allowed by law.
DIVIDENDS
CINCINNATI BELL. Ohio law provides that a corporation may pay cash
dividends only out of surplus and must notify its shareholders if a dividend is
paid out of capital surplus. The right of the Cincinnati Bell board of directors
to declare dividends is also subject to the rights of holders of Cincinnati Bell
preferred stock.
IXC. Delaware law provides that a corporation may pay dividends out of its
surplus or if there is no surplus out of its net profits for the fiscal year in
which the dividend is declared and/or for the preceding fiscal year. Delaware
law also provides that dividends may not be paid out of the net profits if,
after the payment of the dividend, the corporation's capital would be less than
the capital represented by the issued and outstanding stock of all classes
having a preference upon the distribution of assets.
CONVERSION
CINCINNATI BELL. Holders of Cincinnati Bell common stock do not have the
right to convert their shares into any other securities.
IXC. Holders of IXC common stock do not have the right to convert their
shares into any other securities.
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RIGHTS PLANS
The following descriptions of the rights agreements of Cincinnati Bell and
IXC do not purport to be complete and are qualified in their entirety by
reference to the terms and conditions of the rights agreements. See "Where You
Can Find More Information" on page 94.
CINCINNATI BELL. Under the Cincinnati Bell rights agreement, rights attach
to each share of Cincinnati Bell common stock outstanding and, when exercisable,
entitle the registered holder to purchase from Cincinnati Bell one one-hundredth
of a share of Cincinnati Bell series A preferred stock without par value at a
purchase price of $125 per one one-hundredth of a share, subject to adjustment.
The rights will not be exercisable until the earlier to occur of:
- 10 business days following a public announcement that a person or group
has acquired beneficial ownership of 15% or more of the outstanding shares
of Cincinnati Bell common stock
- 10 business days following the commencement of, or announcement of an
intention to make, a tender offer or exchange offer the consummation of
which would result in a person or group acquiring beneficial ownership of
15% or more of the outstanding shares of Cincinnati Bell common stock.
The rights will expire on May 2, 2007, unless such date is extended or unless
the rights are earlier redeemed or exchanged by Cincinnati Bell, in each case as
summarized below.
In the event that a person or group acquires beneficial ownership of 15% or
more of the outstanding shares of Cincinnati Bell common stock, each holder of a
right, other than rights beneficially owned by such person or group, which
become void, will have the right to receive upon exercise that number of shares
of Cincinnati Bell common stock having a market value of two times the purchase
price provided for in the right. In the event that Cincinnati Bell is acquired
in a merger or other business combination transaction or 50% or more of its
consolidated assets or earning power is sold after a person or group acquires
beneficial ownership of 15% or more of the outstanding shares of Cincinnati Bell
common stock, each holder of a right will thereafter have the right to receive
upon exercise that number of shares of common stock of the acquiring company
which at the time of such transaction will have a market value of two times the
purchase price provided for in the right.
At any time after a person or group acquires beneficial ownership of 15% or
more of the outstanding shares of Cincinnati Bell common stock and prior to the
acquisition by such person or group of 50% or more of the then outstanding
shares of Cincinnati Bell common stock, the Cincinnati Bell board of directors
may exchange the rights (other than rights owned by such person or group which
have become void), in whole or in part, for Cincinnati Bell common stock or
Cincinnati Bell series A preferred stock.
At any time prior to a person or group acquiring beneficial ownership of 15%
or more of the outstanding shares of Cincinnati Bell common stock, the
Cincinnati Bell board of directors may redeem the rights in whole, but not in
part, at a redemption price of $.01 per right, subject to adjustment, or amend
the terms of the rights, in each case without the consent of the holders of the
rights, at such time, on such basis and with such conditions as the Cincinnati
Bell board of directors may establish. However, no amendment may decrease the
redemption price of the rights.
Cincinnati Bell series A preferred stock purchasable upon exercise of the
rights is not redeemable. Cincinnati Bell series A preferred stock has dividend,
voting and liquidation rights that are intended to result in the value of a one
one-hundredth interest in a share of Cincinnati Bell series A preferred stock
purchasable upon exercise of each right approximating the value of one share of
Cincinnati Bell common stock.
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The rights may have antitakeover effects. The rights will cause substantial
dilution to a person or group of persons that attempts to acquire Cincinnati
Bell by a share acquisition on terms not approved by the Cincinnati Bell board
of directors. The rights should not interfere with any merger or other business
combination approved by the Cincinnati Bell board of directors prior to the time
that a person or group has acquired 15% or more of the outstanding shares of
Cincinnati Bell common stock since the rights may be redeemed or amended by
Cincinnati Bell until such time.
IXC. Under the IXC rights agreement, rights attach to each share of IXC
common stock outstanding and, when exercisable, entitle the registered holder to
purchase from IXC one one-thousandth of a share of IXC series A junior
participating preferred stock, par value $.01 per share, at a purchase price of
$210 per one one-thousandth of a share, subject to adjustment.
The rights will not be exercisable until the earlier to occur of:
- 10 days following a public announcement that a person or group has
acquired beneficial ownership of 20% or more of the outstanding shares of
IXC common stock or
- 10 business days, or such later date as may be determined by the IXC board
of directors, following the commencement of, or announcement of an
intention to make, a tender offer or exchange offer the consummation of
which would result in a person or group acquiring beneficial ownership of
20% or more of the outstanding shares of IXC common stock.
The rights will expire on September 20, 2008, unless such date is extended or
unless the rights are earlier redeemed or exchanged by IXC, in each case as
summarized below.
In the event that a person or group acquires beneficial ownership of 20% or
more of the outstanding shares of IXC common stock, each holder of a right,
other than rights beneficially owned by such person or group, which become void,
will have the right to receive upon exercise that number of shares of IXC common
stock having a market value of two times the purchase price provided for in the
right. In the event that IXC is acquired in a merger or other business
combination transaction or 50% or more of its consolidated assets or earning
power is sold after a person or group acquires beneficial ownership of 20% or
more of the outstanding shares of IXC common stock, each holder of a right will
thereafter have the right to receive upon exercise that number of shares of
common stock of the acquiring company which at the time of such transaction will
have a market value of two times the purchase price provided for in the right.
At any time after a person or group acquires beneficial ownership of 20% or
more of the outstanding shares of IXC common stock and prior to the acquisition
by such person or group of 50% or more of the then outstanding shares of IXC
common stock, the IXC board of directors may exchange the rights (other than
rights owned by such person or group which have become void), in whole or in
part, for IXC common stock or IXC series A junior participating preferred stock.
At any time prior to a person or group acquiring beneficial ownership of 20%
or more of the outstanding shares of IXC common stock, the IXC board of
directors may redeem the rights in whole, but not in part, at a redemption price
of $.01 per right, subject to adjustment, or amend the terms of the rights, in
each case without the consent of the holders of the rights, at such time, on
such basis and with such conditions as the IXC board of directors may establish.
However, no amendment may change the redemption price of the rights.
IXC series A junior participating preferred stock purchasable upon exercise
of the rights is not redeemable. IXC series A junior participating preferred
stock has dividend, voting and liquidation rights that are intended to result in
the value of a one one-thousandth interest in a share of IXC series A junior
participating preferred stock purchasable upon exercise of each right
approximating the value of one share of IXC common stock.
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The rights may have antitakeover effects. The rights will cause substantial
dilution to a person or group of persons that attempts to acquire IXC by a stock
acquisition on terms not approved by the IXC board of directors. The rights
should not interfere with any merger or other business combination approved by
the IXC board of directors prior to the time that a person or group has acquired
20% or more of the outstanding shares of IXC common stock since the rights may
be redeemed or amended by IXC until such time.
ANTITAKEOVER PROVISIONS
CINCINNATI BELL. The Cincinnati Bell amended articles of incorporation
regulate transactions between Cincinnati Bell and an interested shareholder.
Under the Cincinnati Bell amended articles of incorporation, an "interested
shareholder" is defined as a shareholder who is the beneficial owner of 10% or
more of the voting power of Cincinnati Bell. If any person is an interested
shareholder under the Cincinnati Bell amended articles of incorporation, the
affirmative vote of 80% of the outstanding voting power of Cincinnati Bell is
required for any of the following:
- any merger or consolidation of Cincinnati Bell or any of its subsidiaries
with an interested shareholder
- any sale, lease, exchange, mortgage, pledge, transfer or disposition to or
with an interested shareholder of any assets of Cincinnati Bell or any of
its subsidiaries having an aggregate fair market value of $5,000,000 or
more
- any sale or other transfer by Cincinnati Bell or any of its subsidiaries
of any securities of Cincinnati Bell or any of its subsidiaries to an
interested shareholder for consideration of $5,000,000 or more in fair
market value
- the adoption of any plan or proposal for the liquidation or dissolution of
Cincinnati Bell proposed by or on behalf of an interested shareholder
- any reclassification of securities or recapitalization of Cincinnati Bell,
or merger or consolidation or other transaction which has the effect,
directly or indirectly, of increasing the proportionate share of
outstanding shares of any class of equity or convertible securities of a
corporation owned by an interested shareholder.
The supermajority voting requirement does not apply if a majority of the
directors not associated with such an interested shareholder approves the
transaction or certain other requirements regarding consideration paid are met.
Ohio law contains several anti-takeover provisions which apply to
corporations like Cincinnati Bell. Cincinnati Bell is subject to these
provisions because there are no opt-out provisions in the Cincinnati Bell
amended articles of incorporation or amended regulations with respect to these
provisions.
TRANSACTIONS WITH INTERESTED SHAREHOLDERS. Chapter 1704 of the Ohio General
Corporation Law applies to a broad range of business combinations between an
Ohio corporation and an interested shareholder. The Ohio law definition of
"business combination" includes mergers, consolidations, combinations or
majority share acquisitions. An "interested shareholder" is defined as a
shareholder who, directly or indirectly, exercises or directs the exercise of
10% or more of the voting power of the corporation. Chapter 1704 of the Ohio
General Corporation Law restricts corporations from engaging in business
combinations with interested shareholders, unless the articles of incorporation
provide otherwise, for a period of three years following the date on which the
shareholder became an interested shareholder, unless the directors of the
corporation have approved the business combination or the interested
shareholder's acquisition of shares of the corporation prior to the date the
shareholder became an interested shareholder. After the initial three-year
moratorium, Chapter 1704 prohibits such transactions absent approval by the
directors of the interested shareholder's acquisition
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of shares of the corporation prior to the date that the shareholder becomes an
interested shareholder, approval by disinterested shareholders of the
corporation or the transaction meeting certain statutorily defined fair price
provisions.
CONTROL SHARE ACQUISITIONS. Under Section 1701.831 of the Ohio General
Corporation Law, unless the articles of incorporation provide otherwise, any
control share acquisition of a corporation can only be made with the prior
approval of the corporation's shareholders. A "control share acquisition" is
defined as any acquisition of shares of a corporation that, when added to all
other shares of that corporation owned by the acquiring person, would enable
that person to exercise levels of voting power in any of the following ranges:
at least 20% but less than 33 1/3%; at least 33 1/3% but less than 50%; or 50%
or more.
IXC. IXC is subject to the provisions of Delaware law described below
regarding business combinations with interested stockholders because there is no
opt-out provision in its restated certificate of incorporation with respect to
these provisions.
Section 203 of the Delaware General Corporation Law applies to a broad range
of business combinations between a Delaware corporation and an interested
stockholder. The Delaware law definition of "business combination" includes
mergers, consolidations, sales of assets, issuance of voting stock and certain
other transactions. An "interested stockholder" is defined as any person who
directly or indirectly beneficially owns or has certain rights, agreements,
arrangements or understandings with respect to 15% or more of the outstanding
voting stock of a corporation and the affiliates or associates of such person.
Section 203 prohibits a corporation from engaging in a business combination
with an interested stockholder for a period of three years following the date on
which the stockholder became an interested stockholder, unless:
- before the stockholder became an interested stockholder, the board of
directors approved the business combination or the board of directors
approved the transaction that resulted in the stockholder becoming an
interested stockholder
- upon completion of the transaction which resulted in the stockholder
becoming an interested stockholder, such stockholder owned at least 85% of
the voting stock outstanding when the transaction began other than shares
held by directors who are also officers and by certain employee stock
plans
- prior to a stockholder becoming an interested stockholder, a corporation
opted out of Section 203 in its certificate of incorporation
- the board of directors approved the business combination after the
stockholder became an interested stockholder and the business combination
was approved at a meeting by at least two-thirds of the outstanding voting
stock not owned by such stockholder.
These limitations on business combinations with interested stockholders do not
apply to a corporation that does not have a class of voting stock listed on a
national securities exchange or held by at least 2,000 holders of record.
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LEGAL MATTERS
The legality of Cincinnati Bell common stock offered by this proxy
statement/prospectus will be passed upon for Cincinnati Bell by Thomas E.
Taylor, Esq., General Counsel and Secretary of Cincinnati Bell. As of September
9, 1999, Mr. Taylor owned approximately 62,000 shares of Cincinnati Bell common
stock (a substantial majority of which are subject to vesting restrictions) and
options to purchase 108,750 shares of Cincinnati Bell common stock.
Certain United States federal income tax consequences of the merger will be
passed upon for IXC by Riordan & McKinzie, Costa Mesa, California. Riordan &
McKinzie acts as counsel for IXC and its subsidiaries. Carl W. McKinzie, Esq.
and other attorneys of Riordan & McKinzie beneficially own shares of IXC common
stock. Another attorney of Riordan & McKinzie holds an option to acquire shares
of IXC common stock.
EXPERTS
The consolidated balance sheets of Cincinnati Bell as of December 31, 1998,
and December 31, 1997, and the consolidated statements of income and
comprehensive income (loss), common shareowners' equity and cash flows for each
of the three fiscal years in the period ended December 31, 1998, incorporated in
this proxy statement/prospectus by reference to Cincinnati Bell's Annual Report
on Form 10-K for the fiscal 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
accounting and auditing.
Ernst & Young LLP, independent auditors, have audited the IXC consolidated
balance sheets as of December 31, 1998 and 1997, and the consolidated statements
of operations, stockholders' equity (deficit) and cash flows for each of the
three years in the period ended December 31, 1998, as set forth in their report,
which is incorporated in this proxy statement/prospectus by reference to IXC's
Annual Report on Form 10-K for the fiscal year ended December 31, 1998, and, to
the extent set forth below, is based on the reports of other independent
auditors. The IXC financial statements are incorporated by reference in reliance
on Ernst & Young's report, given on their authority as experts in accounting and
auditing.
The consolidated financial statements of Network Long Distance, Inc. as of
March 31, 1998, and for each of the two fiscal years in the period ended March
31, 1998 and 1997, have been audited by Arthur Andersen LLP, independent public
accountants. In their report, such firm states that with respect to certain
acquired entities, its opinion is based on the reports of other independent
accountants. The report has been incorporated by reference herein in reliance
upon the authority of such firm as experts in accounting and auditing.
The consolidated financial statements of Grupo Marca Tel S.A. de C.V., as of
December 31, 1998 and 1997, and for each of the two fiscal years in the period
ended December 31, 1998 and 1997, have been audited by Arthur Andersen LLP,
independent public accountants. Their report has been incorporated by reference
in this registration statement in reliance upon the authority of such firm as
experts in accounting and auditing. Reference is made to their report, which
includes an explanatory paragraph with respect to the uncertainty regarding
Marca Tel's ability to continue as a going concern.
The consolidated financial statements of National Teleservices, Inc., as of
and for the year ended March 31, 1997 incorporated in this joint proxy
statement/prospectus by reference to IXC's Annual Report on Form 10-K for the
fiscal year ended December 31, 1998, have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report, which is incorporated herein by
reference, and have been so incorporated in reliance upon the report of such
firm given upon their authority as experts in accounting and auditing.
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STOCKHOLDER PROPOSALS
CINCINNATI BELL
Shareholder proposals intended to be presented at the 2000 annual meeting of
Cincinnati Bell shareholders pursuant to Rule 14a-8 under the Exchange Act must
be received by the Secretary of Cincinnati Bell no later than November 25, 1999,
in order to be included in the proxy materials sent by Cincinnati Bell
management for the annual meeting. Shareholder proposals intended to be
presented at the 2000 annual meeting of Cincinnati Bell shareholders that are
not intended to be included in management's proxy materials under rule 14a-8
must be received by the Secretary of Cincinnati Bell no later than November 25,
1999, in order to be considered at the 2000 annual meeting.
IXC
If the merger is completed, IXC will not hold an annual meeting of its
stockholders in 2000. If the merger is not completed, IXC will hold the 2000
annual meeting of its stockholders. If such a meeting is held, stockholder
proposals submitted for inclusion in the proxy statement for the 2000 annual
meeting must comply with the requirements of the Securities and Exchange
Commission. A stockholder proposal generally will be voted on only if the
stockholder or the stockholder's representative attends the 2000 annual meeting
and presents the proposal. Any IXC stockholder who intends to submit a proposal
for inclusion in the proxy materials for the 2000 annual meeting is required to
have submitted his or her proposal to IXC's executive offices no later than
December 10, 1999.
OTHER MATTERS
As of the date of this proxy statement/prospectus, neither the Cincinnati
Bell board of directors nor the IXC board of directors knows of any matter that
will be presented for consideration at the Cincinnati Bell special meeting or
the IXC special meeting other than as described in this proxy
statement/prospectus.
WHERE YOU CAN FIND MORE INFORMATION
Cincinnati Bell and IXC file annual, quarterly and special reports, proxy
statements and other information with the Securities and Exchange Commission.
You may read and copy any reports, statements or other information that
Cincinnati Bell and IXC file with the Securities and Exchange Commission at the
Securities and Exchange Commission's public reference rooms at the following
locations:
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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 Securities and Exchange Commission at 1-800-SEC-0330 for
further information on the public reference rooms. These Securities and Exchange
Commission filings are also available to the public from commercial document
retrieval services and at the Internet worldwide web site maintained by the
Securities and Exchange Commission at "http://www.sec.gov". Reports, proxy
statements and other information concerning Cincinnati Bell may also be
inspected at the offices of the New York Stock Exchange, which is located at 20
Broad Street, New York, New York 10005. Reports, proxy statements and other
information pertaining to IXC may also be inspected at the offices of The Nasdaq
Stock Market, which is located at 1735 K. Street, N.W., Washington, D.C. 20006.
Cincinnati Bell filed a registration statement on Form S-4 on September 13,
1999, to register with the Securities and Exchange Commission the Cincinnati
Bell common stock to be issued to IXC
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stockholders in the merger. This proxy statement/prospectus is a part of that
registration statement and constitutes a prospectus of Cincinnati Bell in
addition to being a proxy statement of Cincinnati Bell and IXC. As allowed by
Securities and Exchange Commission rules, this proxy statement/prospectus does
not contain all the information you can find in Cincinnati Bell's registration
statement or the exhibits to the registration statement.
The Securities and Exchange Commission allows Cincinnati Bell and IXC to
"incorporate by reference" information into this proxy statement/prospectus,
which means that the companies can disclose important information to you by
referring you to other documents filed separately with the Securities and
Exchange Commission. The information incorporated by reference is considered
part of this proxy statement/prospectus, except for any information superseded
by information contained directly in this proxy statement/prospectus or in later
filed documents incorporated by reference in this proxy statement/prospectus.
This proxy statement/prospectus incorporates by reference the documents set
forth below that Cincinnati Bell and IXC have previously filed with the
Securities and Exchange Commission. These documents contain important business
and financial information about Cincinnati Bell and IXC that is not included in
or delivered with this proxy statement/prospectus.
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CINCINNATI BELL FILINGS (FILE NO. 1-8519) PERIOD
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
Annual Report on Form 10-K Fiscal Year ended December 31, 1998
Quarterly Reports on Form 10-Q Quarters ended March 31, 1999 and June 30, 1999
Current Reports on Form 8-K Filed January 15, 1999, February 8, 1999, April 20,
1999, July 21, 1999 and July 23, 1999
Proxy Statement Filed March 24, 1999
The description of Cincinnati Bell common stock set Filed under the Securities Act on October 8, 1996
forth in the Cincinnati Bell Registration Statement on
Form S-3
The description of the Cincinnati Bell rights to acquire Filed under Section 12 of the Exchange Act on May 1,
preferred stock set forth in the Cincinnati Bell 1997
Registration Statement on Form 8-A
<CAPTION>
IXC FILINGS (FILE NO. 0-20803) PERIOD
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
Annual Report on Form 10-K Fiscal Year ended December 31, 1998, as amended by
Amendment No. 1 thereto filed on Form 10-K/A on August
24, 1999
Quarterly Reports on Form 10-Q Quarters ended March 31, 1999 and June 30, 1999
Current Reports on Form 8-K Filed January 20, 1999, February 4, 1999, April 14,
1999, May 17, 1999, June 2, 1999, June 29, 1999, July
21, 1999, July 27, 1999, August 4, 1999 and August 9,
1999
Proxy Statement Filed April 30, 1999
The description of IXC common stock set forth in the IXC Filed under Section 12 of the Exchange Act on June 4,
Registration Statement on Forms 8-A and 8-A/A 1996 and June 26, 1996 and June 28, 1996, respectively
</TABLE>
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<S> <C>
The description of the IXC rights to acquire junior Filed under Section 12 of the Exchange Act on September
preferred stock set forth in the IXC Registration 11, 1998
Statement on Form 8-A
</TABLE>
Cincinnati Bell and IXC also incorporate by reference additional documents
that may be filed with the Securities and Exchange Commission under Section
13(a), 13(c), 14 or 15(d) of the Exchange Act between the date of this proxy
statement/prospectus and the date of the Cincinnati Bell special meeting and the
date of the IXC special meeting, as applicable. 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.
Cincinnati Bell has supplied all information contained or incorporated by
reference in this proxy statement/prospectus relating to Cincinnati Bell, and
IXC has supplied all such information relating to IXC.
IXC stockholders should not send in their IXC stock certificates until they
receive the transmittal materials from the exchange agent. IXC stockholders of
record who have further questions about their stock certificates or the exchange
of their IXC common stock for Cincinnati Bell common stock should call the
exchange agent.
If you are a Cincinnati Bell shareholder or an IXC stockholder, we may have
sent you some of the documents incorporated by reference, but you can also
obtain any of them through the companies, the Securities and Exchange Commission
or the Securities and Exchange Commission's Internet web site as described
above. Documents incorporated by reference are available from the companies
without charge, excluding all exhibits, except that if the companies have
specifically incorporated by reference an exhibit in this proxy
statement/prospectus, the exhibit will also be provided without charge. 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:
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<S> <C>
IXC Communications, Inc. Cincinnati Bell Inc.
1122 Capital of Texas Highway South 201 East Fourth Street, 102-760
Austin, Texas 78746-6426 P.O. Box 2301
Telephone: (512) 328-1112 Cincinnati, Ohio 45201-2301
Attention: Investor Relations Coordinator Telephone: (800) 345-6301
Attention: Director of Investor Relations
</TABLE>
You should rely only on the information contained or incorporated by
reference in this proxy statement/prospectus. 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 September
13, 1999. You should not assume that the information contained in this proxy
statement/ prospectus is accurate as of any date other than that date. Neither
the mailing of this proxy statement/ prospectus to Cincinnati Bell and IXC
stockholders nor the issuance of Cincinnati Bell common stock in the merger
creates any implication to the contrary.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This proxy statement/prospectus contains certain forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995 with
respect to the financial condition, results of operations, business strategies,
operating efficiencies or synergies, competitive positions, growth opportunities
for existing products, plans and objectives of management, markets for stock of
Cincinnati Bell and IXC and other matters. Statements in this proxy
statement/prospectus that are not historical facts are hereby identified as
"forward-looking statements" for the purpose of the safe harbor provided by
Section 21E of the Exchange Act and Section 27A of the Securities Act. Such
forward-
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looking statements, including, without limitation, those relating to the future
business prospects, revenues and income, in each case relating to Cincinnati
Bell and IXC, wherever they occur in this proxy statement/prospectus, are
necessarily estimates reflecting the best judgment of the senior management of
Cincinnati Bell and IXC and involve a number of risks and uncertainties that
could cause actual results to differ materially from those suggested by the
forward-looking statements. Such 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 ability to integrate the operations of Cincinnati Bell and IXC,
including their respective products and services
- the effects of vigorous competition in the markets in which Cincinnati
Bell and IXC operate.
Words such as "estimate," "project," "plan," "intend," "expect," "believe"
and similar expressions are intended to identify forward-looking statements.
These forward-looking statements are found at various places throughout this
proxy statement/prospectus and the other documents incorporated herein by
reference, including, but not limited to, the Annual Report on Form 10-K for the
year ended December 31, 1998 of each of Cincinnati Bell and IXC, including any
amendments. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date of this proxy
statement/prospectus. Neither Cincinnati Bell nor IXC undertakes any obligation
to publicly update or 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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ANNEX 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
DATED AS OF JULY 20, 1999
BY AND AMONG
CINCINNATI BELL INC.,
IVORY MERGER INC.
AND
IXC COMMUNICATIONS, INC.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
ARTICLE I
THE MERGER
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PAGE
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SECTION 1.01. The Merger............................................................................. 1-2
SECTION 1.02. Closing................................................................................ 1-2
SECTION 1.03. Effective Time......................................................................... 1-3
SECTION 1.04. Effects of the Merger.................................................................. 1-2
SECTION 1.05. Certificate of Incorporation and By-laws............................................... 1-2
SECTION 1.06. Board of Directors of the Surviving Corporation........................................ 1-2
SECTION 1.07. Board of Directors of CBI.............................................................. 1-2
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
SECTION 2.01. Effect on Capital Stock................................................................ 1-3
(a) Capital Stock of Sub............................................................... 1-3
(b) Cancelation of Treasury Stock and CBI-Owned Stock.................................. 1-3
(c) Conversion of IXC Common Stock..................................................... 1-3
(d) Conversion of IXC 7 1/4% Preferred Stock and IXC 6 3/4% Preferred Stock............ 1-3
(e) Effect on IXC 12 1/2% Preferred Stock.............................................. 1-4
(f) Anti-Dilution Provisions........................................................... 1-4
SECTION 2.02. Exchange of Certificates............................................................... 1-4
(a) Exchange Agent..................................................................... 1-4
(b) Exchange Procedures................................................................ 1-4
(c) Distributions with Respect to Unsurrendered Certificates........................... 1-5
(d) No Further Ownership Rights in IXC Common Stock, IXC 7 1/4% Preferred Stock or IXC
6 3/4% Preferred Stock................................................................. 1-5
(e) No Fractional Shares............................................................... 1-6
(f) Termination of Exchange Fund....................................................... 1-7
(g) No Liability....................................................................... 1-7
(h) Investment of Exchange Fund........................................................ 1-7
(i) Lost Certificates.................................................................. 1-7
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.01. Representations and Warranties of IXC.................................................. 1-7
(a) Organization, Standing and Corporate Power......................................... 1-7
(b) Subsidiaries....................................................................... 1-8
(c) Capital Structure.................................................................. 1-8
(d) Authority; Noncontravention........................................................ 1-9
(e) SEC Documents; Undisclosed Liabilities............................................. 1-10
(f) Information Supplied............................................................... 1-11
(g) Absence of Certain Changes or Events............................................... 1-11
(h) Litigation......................................................................... 1-12
(i) Compliance with Applicable Laws.................................................... 1-12
(j) Contracts.......................................................................... 1-12
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(k) Absence of Changes in Benefit Plans................................................ 1-12
(l) ERISA Compliance................................................................... 1-13
(m) Taxes.............................................................................. 1-13
(n) Voting Requirements................................................................ 1-15
(o) State Takeover Statutes............................................................ 1-15
(p) Brokers............................................................................ 1-15
(q) Opinions of Financial Advisors..................................................... 1-15
(r) Intellectual Property; Year 2000................................................... 1-15
(s) IXC Rights Agreement............................................................... 1-16
(t) Title to Properties................................................................ 1-16
SECTION 3.02. Representations and Warranties of CBI and Sub.......................................... 1-16
(a) Organization, Standing and Corporate Power......................................... 1-17
(b) Capital Structure.................................................................. 1-17
(c) Authority; Noncontravention........................................................ 1-18
(d) SEC Documents; Undisclosed Liabilities............................................. 1-19
(e) Information Supplied............................................................... 1-20
(f) Absence of Certain Changes or Events............................................... 1-20
(g) Litigation......................................................................... 1-20
(h) Compliance with Applicable Laws.................................................... 1-21
(i) Contracts.......................................................................... 1-21
(j) Absence of Changes in Benefit Plans................................................ 1-21
(k) ERISA Compliance................................................................... 1-21
(l) Taxes.............................................................................. 1-22
(m) Voting Requirements................................................................ 1-23
(n) Brokers............................................................................ 1-23
(o) Opinion of Financial Advisor....................................................... 1-23
(p) Interim Operations of Sub.......................................................... 1-23
(q) Intellectual Property; Year 2000................................................... 1-23
(r) Ownership of IXC Stock............................................................. 1-24
(s) CBI Rights Agreement............................................................... 1-24
(t) Title to Properties................................................................ 1-24
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 4.01. Conduct of Business.................................................................... 1-25
(a) Conduct of Business by IXC......................................................... 1-25
(b) Conduct of Business by CBI......................................................... 1-27
(c) Other Actions...................................................................... 1-27
(d) Advice of Changes.................................................................. 1-27
SECTION 4.02. Transition Team........................................................................ 1-27
SECTION 4.03. No Solicitation by IXC................................................................. 1-27
SECTION 4.04. No Solicitation by CBI................................................................. 1-28
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01. Preparation of the Form S-4 and Joint Proxy Statement; Stockholder Meetings............ 1-29
SECTION 5.02. Letters of IXC's Accountants........................................................... 1-30
SECTION 5.03. Letters of CBI's Accountants........................................................... 1-30
SECTION 5.04. Access to Information; Confidentiality................................................. 1-30
</TABLE>
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SECTION 5.05. Reasonable Efforts..................................................................... 1-31
SECTION 5.06. IXC Stock Options and IXC Warrants..................................................... 1-32
SECTION 5.07. Employee Benefit Plans; Existing Agreements............................................ 1-33
SECTION 5.08. Indemnification, Exculpation and Insurance............................................. 1-33
SECTION 5.09. Fees and Expenses...................................................................... 1-34
SECTION 5.10. Public Announcements................................................................... 1-35
SECTION 5.11. Affiliates............................................................................. 1-35
SECTION 5.12. Stock Exchange Listings................................................................ 1-35
SECTION 5.13. Tax Treatment.......................................................................... 1-36
SECTION 5.14. Further Assurances..................................................................... 1-36
SECTION 5.15. IXC Rights Agreement................................................................... 1-36
SECTION 5.16. CBI Rights Agreement................................................................... 1-36
SECTION 5.17. Transfer Taxes......................................................................... 1-36
SECTION 5.18. Stockholders Agreements Legend......................................................... 1-36
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.01. Conditions to Each Party's Obligation to Effect the Merger............................. 1-37
(a) Stockholder Approvals.............................................................. 1-37
(b) HSR Act............................................................................ 1-37
(c) FCC and PUC Approvals.............................................................. 1-37
(d) No Litigation...................................................................... 1-37
(e) Form S-4........................................................................... 1-37
(f) Stock Exchange Listings............................................................ 1-37
(g) Equity Investment.................................................................. 1-37
SECTION 6.02. Conditions to Obligations of CBI and Sub............................................... 1-37
(a) Representations and Warranties..................................................... 1-37
(b) Performance of Obligations of IXC.................................................. 1-38
SECTION 6.03. Conditions to Obligations of IXC....................................................... 1-38
(a) Representations and Warranties..................................................... 1-38
(b) Performance of Obligations of CBI and Sub.......................................... 1-38
(c) Tax Opinion........................................................................ 1-38
SECTION 6.04. Frustration of Closing Conditions...................................................... 1-38
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.01. Termination............................................................................ 1-38
SECTION 7.02. Effect of Termination.................................................................. 1-39
SECTION 7.03. Amendment.............................................................................. 1-39
SECTION 7.04. Extension; Waiver...................................................................... 1-39
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.01. Nonsurvival of Representations and Warranties.......................................... 1-40
SECTION 8.02. Notices................................................................................ 1-40
SECTION 8.03. Definitions............................................................................ 1-41
SECTION 8.04. Interpretation......................................................................... 1-41
SECTION 8.05. Counterparts........................................................................... 1-42
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SECTION 8.06. Entire Agreement; No Third-Party Beneficiaries......................................... 1-42
SECTION 8.07. Governing Law.......................................................................... 1-42
SECTION 8.08. Assignment............................................................................. 1-42
SECTION 8.09. Enforcement............................................................................ 1-42
SECTION 8.10. Severability........................................................................... 1-42
SECTION 8.11. Additional Agreement of IXC............................................................ 1-42
Annex I Index of Defined Terms
Exhibit A Form of Affiliate Letter
Exhibit B Corporate Governance of CBI following the Effective Time
Exhibit C Form of IXC Representation Letter
Exhibit D Form of CBI Representation Letter
Exhibit E Form of Riordan & McKinzie Opinion
Exhibit F Form of Amendment to IXC Rights Agreement
</TABLE>
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AGREEMENT AND PLAN OF MERGER (this "Agreement") dated as of July 20,
1999, among CINCINNATI BELL INC., an Ohio corporation ("CBI"), IVORY
MERGER INC., a Delaware corporation and a wholly owned subsidiary of CBI
("Sub"), and IXC COMMUNICATIONS, INC., a Delaware corporation ("IXC").
WHEREAS the respective Boards of Directors of CBI, Sub and IXC have approved
and declared advisable this Agreement and the merger of Sub with and into IXC
(the "Merger"), upon the terms and subject to the conditions set forth in this
Agreement, whereby (a) each issued and outstanding share of common stock, par
value $.01 per share, of IXC (the "IXC Common Stock"), other than any such
shares directly owned by CBI, Sub or IXC, will be converted into the right to
receive the Common Stock Merger Consideration; (b) each issued and outstanding
share of 7 1/4% Junior Convertible Preferred Stock Due 2007, par value $.01 per
share, of IXC (the "IXC 7 1/4% Preferred Stock"), other than any such shares
directly owned by CBI, Sub or IXC, will be converted into the right to receive
the 7 1/4% Preferred Stock Merger Consideration; and (c) each issued and
outstanding share of 6 3/4% Cumulative Convertible Preferred Stock, par value
$.01 per share, of IXC (the "IXC 6 3/4% Preferred Stock"), other than any such
shares directly owned by CBI, Sub or IXC, will be converted into the right to
receive the 6 3/4% Preferred Stock Merger Consideration;
WHEREAS the respective Boards of Directors of CBI, Sub and IXC have each
determined that the Merger and the other transactions contemplated hereby are
consistent with, and in furtherance of, their respective business strategies and
goals;
WHEREAS simultaneously with the execution and delivery of this Agreement and
as a condition and inducement to the willingness of CBI and Sub to enter into
this Agreement, CBI and certain principal stockholders of IXC (the "Principal
Stockholders") are entering into certain stockholder and stock purchase
agreements (collectively, the "Stockholders Agreements") pursuant to which the
Principal Stockholders will agree to vote to adopt the Merger Agreement and to
take certain other actions in furtherance of the Merger upon the terms and
subject to the conditions set forth in the Stockholders Agreements;
WHEREAS immediately following the execution and delivery of this Agreement,
CBI and IXC will enter into (a) a stock option agreement (the "IXC Stock Option
Agreement") pursuant to which IXC will grant CBI an option to purchase shares of
IXC Common Stock, upon the terms and subject to the conditions set forth therein
and (b) a stock option agreement (the "CBI Stock Option Agreement" and, together
with the IXC Stock Option Agreement, the "Option Agreements") pursuant to which
CBI will grant IXC an option to purchase shares of CBI Common Stock, upon the
terms and subject to the conditions set forth therein;
WHEREAS concurrently with the execution and delivery of this Agreement, CBI,
Oakhill Capital Partners, L.P. ("Oakhill") and OHCP Ocean I, LLC (together with
Oakhill, the "Investors") will enter into an agreement (the "Investment
Agreement") relating to the Investors' investment in CBI;
WHEREAS for U.S. Federal income tax purposes, it is intended that (a) the
Merger will qualify as a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended (the "Code"), and the rules and
regulations promulgated thereunder, (b) this Agreement constitutes a plan of
reorganization and (c) CBI, Sub and IXC will each be a party to such
reorganization within the meaning of Section 368(b) of the Code; and
WHEREAS CBI, Sub and IXC desire to make certain representations, warranties,
covenants and agreements in connection with the Merger and also to prescribe
various conditions to the Merger.
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NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, the parties hereto agree
as follows:
ARTICLE I
THE MERGER
SECTION 1.01. THE MERGER. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the Delaware General Corporation
Law (the "DGCL"), Sub shall be merged with and into IXC at the Effective Time.
Following the Effective Time, IXC shall be the surviving corporation (the
"Surviving Corporation") and shall succeed to and assume all the rights and
obligations of Sub in accordance with the DGCL.
SECTION 1.02. CLOSING. The closing of the Merger (the "Closing") will take
place at 10:00 a.m. on a date to be specified by the parties (the "Closing
Date"), which shall be no later than the second Business Day after satisfaction
or waiver of the conditions set forth in Article VI (other than those conditions
that by their nature are to be satisfied at the Closing, but subject to the
satisfaction or waiver of those conditions), at the offices of Cravath, Swaine &
Moore, Worldwide Plaza, 825 Eighth Avenue, New York, New York 10019, unless
another time, date or place is agreed to by the parties hereto.
SECTION 1.03. EFFECTIVE TIME. Subject to the provisions of this Agreement,
as soon as practicable on or after the Closing Date, the parties shall file a
certificate of merger or other appropriate documents (in any such case, the
"Certificate of Merger") executed in accordance with the relevant provisions of
the DGCL and shall make all other filings or recordings required under the DGCL.
The Merger shall become effective at such time as the Certificate of Merger is
duly filed with the Delaware Secretary of State, or at such other time as CBI
and IXC shall agree and specify in the Certificate of Merger (the time the
Merger becomes effective being hereinafter referred to as the "Effective Time").
SECTION 1.04. EFFECTS OF THE MERGER. The Merger shall have the effects set
forth in Section 259 of the DGCL.
SECTION 1.05. CERTIFICATE OF INCORPORATION AND BY-LAWS. (a) The Restated
Certificate of Incorporation of IXC, as in effect immediately prior to the
Effective Time, shall be amended as of the Effective Time so that the first
sentence of Article IV of such Restated Certificate of Incorporation reads in
its entirety as follows: "The total number of shares of stock which the
Corporation shall have authority to issue is 6,000,000 consisting of (i) three
million (3,000,000) shares of common stock, par value $.01 per share and (ii)
three million (3,000,000) shares of preferred stock, par value $.01 per share."
and, as so amended, such Restated Certificate of Incorporation shall be the
Certificate of Incorporation of the Surviving Corporation until thereafter
changed or amended as provided therein or by applicable law.
(b) The By-laws of Sub, as in effect immediately prior to the Effective
Time, shall be the By-laws of the Surviving Corporation until thereafter changed
or amended as provided therein or by applicable law.
SECTION 1.06. BOARD OF DIRECTORS OF THE SURVIVING CORPORATION. The
directors of Sub immediately prior to the Effective Time shall be the directors
of the Surviving Corporation, until the earlier of their resignation or removal
or until their respective successors are duly elected and qualified, as the case
may be.
SECTION 1.07. BOARD OF DIRECTORS OF CBI. The Board of Directors of CBI
shall be as set forth on or designated in accordance with Exhibit B hereto until
the earlier of the resignation or removal of
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any individual set forth on or designated in accordance with Exhibit B hereto or
until their respective successors are duly elected and qualified, as the case
may be, it being agreed that if any director shall be unable or unwilling to
serve as a director at the Effective Time the party which designated such
individual as indicated in Exhibit B shall designate another individual to serve
in such individual's place.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
SECTION 2.01. EFFECT ON CAPITAL STOCK. As of the Effective Time, by virtue
of the Merger and without any action on the part of the holder of any shares of
capital stock of IXC or any shares of capital stock of Sub:
(a) CAPITAL STOCK OF SUB. Each issued and outstanding share of capital
stock of Sub shall be converted into and become one fully paid and nonassessable
share of common stock, par value $.01 per share, of the Surviving Corporation.
(b) CANCELATION OF TREASURY STOCK AND CBI-OWNED STOCK. Each share of IXC
Common Stock, IXC 7 1/4% Preferred Stock and IXC 6 3/4% Preferred Stock that is
directly owned by IXC, Sub or CBI shall automatically be canceled and shall
cease to be outstanding, and no consideration shall be delivered in exchange
therefor.
(c) CONVERSION OF IXC COMMON STOCK. Subject to Section 2.02(e), each
issued and outstanding share (other than shares to be canceled in accordance
with Section 2.01(b)) of IXC Common Stock shall be converted into the right to
receive 2.0976 (the "Exchange Ratio") fully paid and nonassessable shares of
common stock, par value $.01 per share, of CBI ("CBI Common Stock") (the "Common
Stock Merger Consideration"). As of the Effective Time, all such shares of IXC
Common Stock shall no longer be outstanding and shall automatically be canceled
and shall cease to be outstanding, and each holder of a certificate that
immediately prior to the Effective Time represented any such shares of IXC
Common Stock shall cease to have any rights with respect thereto, except the
right to receive the Common Stock Merger Consideration and any cash in lieu of
fractional shares of CBI Common Stock to be issued or paid in consideration
therefor upon surrender of such certificate in accordance with Section 2.02,
without interest.
(d) CONVERSION OF IXC 7 1/4% PREFERRED STOCK AND IXC 6 3/4% PREFERRED
STOCK. (i) Each issued and outstanding share of IXC 7 1/4% Preferred Stock
shall be converted into the right to receive one fully paid and nonassessable
share of 7 1/4% Junior Convertible Preferred Stock Due 2007, par value $.01 per
share, of CBI (the "CBI 7 1/4% Preferred Stock") (the "7 1/4% Preferred Stock
Merger Consideration"), which CBI 7 1/4% Preferred Stock shall have terms that
are identical to the IXC 7 1/4% Preferred Stock except that (x) the issuer
thereof shall be CBI rather than IXC, (y) the CBI 7 1/4% Preferred Stock shall
become convertible into CBI Common Stock as required by Paragraph (g) of the
Certificate of Designation for the IXC 7 1/4% Preferred Stock and (z) each share
of CBI 7 1/4% Preferred Stock shall be entitled to one vote per share on all
matters voting together with the CBI Common Stock as a single class; PROVIDED
that the number of authorized shares of CBI 7 1/4% Preferred Stock may be
increased or decreased without any additional vote of the holders of CBI 7 1/4%
Preferred Stock voting as a separate class. As of the Effective Time, all such
shares of IXC 7 1/4% Preferred Stock shall no longer be outstanding and shall
automatically be canceled and shall cease to exist, and each holder of a
certificate that immediately prior to the Effective Time represented any such
shares shall cease to have any rights with respect thereto, except the right to
receive the 7 1/4% Preferred Stock Merger Consideration.
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(ii) Each issued and outstanding share of IXC 6 3/4% Preferred Stock shall
be converted into the right to receive one fully paid and nonassessable share of
6 3/4% Cumulative Convertible Preferred Stock, par value $.01 per share, of CBI
(the "CBI 6 3/4% Preferred Stock") (the "6 3/4% Preferred Stock Merger
Consideration"), which CBI 6 3/4% Preferred Stock shall have terms that are
identical to the IXC 6 3/4% Preferred Stock except that (x) the issuer thereof
shall be CBI rather than IXC, (y) the CBI 6 3/4% Preferred Stock shall become
convertible into CBI Common Stock as required by Paragraph 7 of the Certificate
of Designations for the IXC 6 3/4% Preferred Stock and (z) each share of CBI
6 3/4% Preferred Stock shall be entitled to one vote per share on all matters
voting together with the CBI Common Stock as a single class; PROVIDED that the
number of authorized shares of CBI 6 3/4% Preferred Stock may be increased or
decreased without any additional vote of the holders of CBI 6 3/4% Preferred
Stock voting as a separate class. As of the Effective Time, all such shares of
IXC 6 3/4% Preferred Stock shall no longer be outstanding and shall
automatically be canceled and shall cease to exist, and each holder of a
certificate that immediately prior to the Effective Time represented any such
shares shall cease to have any rights with respect thereto, except the right to
receive the 6 3/4% Preferred Stock Merger Consideration. The Common Stock Merger
Consideration, the 7 1/4% Preferred Stock Merger Consideration and the 6 3/4%
Preferred Stock Merger Consideration shall be referred to collectively in this
Agreement as the "Merger Consideration".
(e) EFFECT ON IXC 12 1/2% PREFERRED STOCK. Each share of 12 1/2% Junior
Exchangeable Preferred Stock Due 2009, par value $.01 per share, of IXC (the
"IXC 12 1/2% Preferred Stock") outstanding immediately prior to the Effective
Time shall remain outstanding as 12 1/2% Preferred Stock of the Surviving
Corporation, without any change to the powers, preferences or special rights of
such IXC 12 1/2% Preferred Stock provided for in the Certificate of Designation
for the 12 1/2% Junior Exchangeable Preferred Stock Due 2009 of IXC (the "IXC
12 1/2% Certificate of Designation").
(f) ANTI-DILUTION PROVISIONS. In the event CBI changes (or establishes a
record date for changing) the number of shares of CBI Common Stock issued and
outstanding prior to the Effective Time as a result of a stock split, stock
dividend, recapitalization, subdivision, reclassification, combination, exchange
of shares or similar transaction with respect to the outstanding CBI Common
Stock and the record date therefor shall be prior to the Effective Time, the
Exchange Ratio shall be proportionately adjusted to reflect such stock split,
stock dividend, recapitalization, subdivision, reclassification, combination,
exchange of shares or similar transaction.
SECTION 2.02. EXCHANGE OF CERTIFICATES. (a) EXCHANGE AGENT. Prior to the
Effective Time, CBI shall enter into an agreement with The Fifth Third Bank or
such other bank or trust company as may be designated by CBI and reasonably
acceptable to IXC (the "Exchange Agent"), which shall provide that CBI shall
deposit with the Exchange Agent as of the Effective Time, for the benefit of the
holders of shares of IXC Common Stock, IXC 7 1/4% Preferred Stock and IXC 6 3/4%
Preferred Stock, for exchange in accordance with this Article II, through the
Exchange Agent, certificates representing the Merger Consideration issuable
pursuant to Section 2.01 in exchange for outstanding shares of IXC Common Stock,
IXC 7 1/4% Preferred Stock and IXC 6 3/4% Preferred Stock, respectively. CBI
shall make available to the Exchange Agent from time to time as required after
the Effective Time cash necessary to pay dividends and other distributions in
accordance with Section 2.02(c) and to make payments in lieu of any fractional
shares of CBI Common Stock in accordance with Section 2.02(e).
(b) EXCHANGE PROCEDURES. As soon as reasonably practicable after the
Effective Time, the Exchange Agent shall mail to each holder of record of a
certificate or certificates (the "Certificates") which immediately prior to the
Effective Time represented outstanding shares of IXC Common Stock, IXC 7 1/4%
Preferred Stock or IXC 6 3/4% Preferred Stock whose shares were converted into
the right to receive the Merger Consideration pursuant to Section 2.01, (i) a
letter of transmittal (which shall specify 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 and shall be in such form and have such other
provisions as CBI may reasonably specify) and (ii) instructions for use in
surrendering the Certificates
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in exchange for certificates representing the Merger Consideration. Upon
surrender of a Certificate for cancelation to the Exchange Agent, together with
such letter of transmittal, duly executed, and such other documents as may
reasonably be required by the Exchange Agent, the holder of such Certificate
shall be entitled to receive in exchange therefor a certificate representing
that number of whole shares of CBI Common Stock, CBI 7 1/4% Preferred Stock or
CBI 6 3/4% Preferred Stock that such holder has the right to receive pursuant to
the provisions of this Article II, certain dividends or other distributions in
accordance with Section 2.02(c) and cash in lieu of any fractional share of CBI
Common Stock in accordance with Section 2.02(e), and the Certificate so
surrendered shall forthwith be canceled. In the event of a transfer of ownership
of IXC Common Stock, IXC 7 1/4% Preferred Stock or IXC 6 3/4% Preferred Stock
that is not registered in the transfer records of IXC, a certificate
representing the proper number of shares of CBI Common Stock, CBI 7 1/4%
Preferred Stock or CBI 6 3/4% Preferred Stock, as applicable, may be issued to a
person other than the person in whose name the Certificate so surrendered is
registered if such Certificate shall be properly endorsed or otherwise be in
proper form for transfer and the person requesting such issuance shall pay any
transfer or other taxes required by reason of the issuance of shares of CBI
Common Stock, CBI 7 1/4% Preferred Stock or CBI 6 3/4% Preferred Stock to a
person other than the registered holder of such Certificate or establish to the
satisfaction of CBI that such tax has been paid or is not applicable. Until
surrendered as contemplated by this Section 2.02(b), each Certificate shall be
deemed at any time after the Effective Time to represent only the right to
receive upon such surrender the Merger Consideration that the holder thereof has
the right to receive pursuant to the provisions of this Article II, certain
dividends or other distributions in accordance with Section 2.02(c) and cash in
lieu of any fractional share of CBI Common Stock in accordance with Section
2.02(e). No interest shall be paid or will accrue on any cash payable to holders
of Certificates pursuant to the provisions of this Article II.
(c) DISTRIBUTIONS WITH RESPECT TO UNSURRENDERED CERTIFICATES. Any
dividends or other distributions with respect to CBI Common Stock, CBI 7 1/4%
Preferred Stock or CBI 6 3/4% Preferred 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 CBI Common Stock, CBI 7 1/4% Preferred Stock or CBI
6 3/4% Preferred Stock represented thereby, and any cash payment in lieu of
fractional shares of CBI Common Stock shall be paid to any such holder pursuant
to Section 2.02(e) only upon the surrender of such Certificate by the holder of
record of such Certificate in accordance with this Article II. Subject to the
effect of applicable escheat or similar laws, following surrender of any such
Certificate there shall be paid to the holder of the certificate representing
whole shares of CBI Common Stock, CBI 7 1/4% Preferred Stock or CBI 6 3/4%
Preferred Stock issued in exchange therefor, without interest, (i) at the time
of such surrender, the amount of dividends or other distributions with a record
date after the Effective Time theretofore paid with respect to such whole shares
of CBI Common Stock, CBI 7 1/4% Preferred Stock or CBI 6 3/4% Preferred Stock,
and the amount of any cash payable in lieu of a fractional share of CBI Common
Stock to which such holder is entitled pursuant to Section 2.02(e) and (ii) at
the appropriate payment date, the amount of dividends or other distributions
with a record date after the Effective Time but prior to such surrender and with
a payment date subsequent to such surrender payable with respect to such whole
shares of CBI Common Stock, CBI 7 1/4% Preferred Stock or CBI 6 3/4% Preferred
Stock.
(d) NO FURTHER OWNERSHIP RIGHTS IN IXC COMMON STOCK, IXC 7 1/4% PREFERRED
STOCK OR IXC 6 3/4% PREFERRED STOCK. All shares of CBI Common Stock, CBI 7 1/4%
Preferred Stock or CBI 6 3/4% Preferred Stock issued upon the surrender for
exchange of Certificates in accordance with the terms of this Article II
(including any cash paid pursuant to this Article II) shall be deemed to have
been issued (and paid) in full satisfaction of all rights pertaining to the
shares of IXC Common Stock, IXC 7 1/4% Preferred Stock or IXC 6 3/4% Preferred
Stock previously represented by such Certificates, SUBJECT, HOWEVER, to the
Surviving Corporation's obligation to pay any dividends or make any other
distributions with a record date prior to the Effective Time which may have been
declared or made by IXC on such shares of IXC Common Stock, IXC 7 1/4% Preferred
Stock or IXC 6 3/4% Preferred Stock which remain
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unpaid at the Effective Time, and there shall be no further registration of
transfers on the stock transfer books of the Surviving Corporation of the shares
of IXC Common Stock, IXC 7 1/4% Preferred Stock or IXC 6 3/4% Preferred Stock
which were outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates are presented to the Surviving Corporation or the
Exchange Agent for any reason, they shall be canceled and exchanged as provided
in this Article II.
(e) NO FRACTIONAL SHARES. (i) No certificates or scrip representing
fractional shares of CBI Common Stock shall be issued upon the surrender for
exchange of Certificates formerly representing IXC Common Stock, no dividend or
distribution of CBI shall relate to such fractional share interests and such
fractional share interests will not entitle the owner thereof to vote or to
exercise any rights of a shareholder of CBI.
(ii) As promptly as practicable following the Effective Time, the Exchange
Agent shall determine the excess of (A) the number of whole shares of CBI Common
Stock delivered to the Exchange Agent by CBI pursuant to Section 2.02(a) over
(B) the aggregate number of whole shares of CBI Common Stock to be distributed
to former holders of IXC Common Stock pursuant to Section 2.02(b) (such excess
being herein called the "Excess Shares"). Following the Effective Time, the
Exchange Agent shall, on behalf of former stockholders of IXC, sell the Excess
Shares at then-prevailing prices on the New York Stock Exchange, Inc. (the
"NYSE"), all in the manner provided in Section 2.02(e)(iii).
(iii) The sale of the Excess Shares by the Exchange Agent shall be executed
on the NYSE through one or more member firms of the NYSE and shall be executed
in round lots to the extent practicable. The Exchange Agent shall use reasonable
efforts to complete the sale of the Excess Shares as promptly following the
Effective Time as, in the Exchange Agent's sole judgment, is practicable
consistent with obtaining the best execution of such sales in light of
prevailing market conditions. Until the net proceeds of such sale or sales have
been distributed to the holders of Certificates formerly representing IXC Common
Stock, the Exchange Agent shall hold such proceeds in trust for such holders
(the "Common Shares Trust"). IXC shall pay all commissions, transfer taxes and
other out-of-pocket transaction costs, including the expenses and compensation
of the Exchange Agent, incurred in connection with such sale of the Excess
Shares. The Exchange Agent shall determine the portion of the Common Shares
Trust to which each former holder of IXC Common Stock is entitled, if any, by
multiplying the amount of the aggregate net proceeds comprising the Common
Shares Trust by a fraction, the numerator of which is the amount of the
fractional share interest to which such former holder of IXC Common Stock is
entitled (after taking into account all shares of IXC Common Stock held at the
Effective Time by such holder) and the denominator of which is the aggregate
amount of fractional share interests to which all former holders of IXC Common
Stock are entitled.
(iv) Notwithstanding the provisions of Sections 2.02(e)(ii) and (iii), CBI
may elect at its option, exercised prior to the Effective Time, in lieu of the
issuance and sale of Excess Shares and the making of the payments hereinabove
contemplated, to pay each former holder of IXC Common Stock an amount in cash
equal to the product obtained by multiplying (A) the fractional share interest
to which such former holder (after taking into account all shares of IXC Common
Stock held at the Effective Time by such holder) would otherwise be entitled by
(B) the closing price for a share of CBI Common Stock as reported on the NYSE
(as reported in THE WALL STREET JOURNAL or, if not reported thereby, any other
authoritative source) on the Closing Date, and, in such case, all references
herein to the cash proceeds of the sale of the Excess Shares and similar
references shall be deemed to mean and refer to the payments calculated as set
forth in this Section 2.02(e)(iv).
(v) As soon as practicable after the determination of the amount of cash, if
any, to be paid to holders of Certificates formerly representing IXC Common
Stock with respect to any fractional share interests, the Exchange Agent shall
make available such amounts to such holders of Certificates formerly
representing IXC Common Stock subject to and in accordance with the terms of
Section 2.02(c).
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(f) TERMINATION OF EXCHANGE FUND. Any portion of the Exchange Fund that
remains undistributed to the holders of the Certificates for six months after
the Effective Time shall be delivered to CBI, upon demand, and any holders of
the Certificates who have not theretofore complied with this Article II shall
thereafter look only to CBI for payment of their claim for the Merger
Consideration, any dividends or distributions with respect to CBI Common Stock
and any cash in lieu of fractional shares of CBI Common Stock.
(g) NO LIABILITY. None of CBI, Sub, IXC or the Exchange Agent shall be
liable to any person in respect of any Merger Consideration, any dividends or
distributions with respect thereto, or any cash in lieu of fractional shares of
CBI Common Stock, in each case delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law. If any Certificate shall
not have been surrendered prior to three years after the Effective Time (or
immediately prior to such earlier date on which any Merger Consideration, any
dividends or distributions payable to the holder of such Certificate or any cash
payable in lieu of fractional shares of CBI Common Stock pursuant to this
Article II, would otherwise escheat to or become the property of any
Governmental Entity), any such Merger Consideration, dividends or distributions
in respect thereof or such cash shall, to the extent permitted by applicable
law, become the property of the Surviving Corporation, free and clear of all
claims or interest of any person previously entitled thereto.
(h) INVESTMENT OF EXCHANGE FUND. The Exchange Agent shall invest any cash
included in the Exchange Fund in investment-grade securities, as directed by
CBI, on a daily basis. Any interest and other income resulting from such
investments shall be paid to CBI.
(i) LOST CERTIFICATES. 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 and, if required by CBI, the
posting by such person of a bond in such reasonable amount as CBI may direct as
indemnity against any claim that may be made against it with respect to such
Certificate, the Exchange Agent shall issue in exchange for such lost, stolen or
destroyed Certificate the Merger Consideration and any unpaid dividends and
distributions in respect thereof and any cash in lieu of fractional shares of
CBI Common Stock, in each case pursuant to this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.01. REPRESENTATIONS AND WARRANTIES OF IXC. Except (i) with
respect to matters expressly permitted by Section 4.01(a), (ii) as expressly
disclosed in IXC SEC Documents filed and publicly available prior to the date of
this Agreement (the "IXC Filed SEC Documents") or (iii) as expressly set forth
on the disclosure schedule delivered by IXC to CBI prior to the execution of
this Agreement (the "IXC Disclosure Schedule"), IXC represents and warrants to
CBI and Sub as follows:
(a) ORGANIZATION, STANDING AND CORPORATE POWER. Each of IXC and its
Subsidiaries is a corporation or other legal entity duly organized, validly
existing and in good standing under the laws of the jurisdiction in which it is
organized and has the requisite corporate or other power and authority, as the
case may be, to carry on its business as now being conducted. Each of IXC and
its Subsidiaries is duly qualified or licensed to do business and is in good
standing in each jurisdiction in which the nature of its business or the
ownership, leasing or operation of its properties makes such qualification or
licensing necessary, except for those jurisdictions in which the failure to be
so qualified or licensed or to be in good standing individually or in the
aggregate is not reasonably likely to have a Material Adverse Effect on IXC. IXC
has made available to CBI prior to the execution of this Agreement complete and
correct copies of its Restated Certificate of Incorporation and By-laws, as
amended to the date of this Agreement, and the comparable charter and
organizational documents of each Subsidiary of IXC, in each case as amended to
the date of this Agreement.
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(b) SUBSIDIARIES. Section 3.01(b) of the IXC Disclosure Schedule sets
forth a true and complete list of each of IXC's Subsidiaries as of the date
hereof. All the outstanding shares of capital stock of, or other equity
interests in, each Subsidiary of IXC have been validly issued and are fully paid
and nonassessable and are owned directly or indirectly by IXC, free and clear of
all pledges, claims, liens, charges, encumbrances and security interests of any
kind or nature whatsoever (collectively, "Liens") and free of any restriction on
the right to vote, sell or otherwise dispose of such capital stock or other
ownership interests. Except for the capital stock or other ownership interests
of its Subsidiaries, as of the date hereof, IXC does not beneficially own
directly or indirectly any material capital stock, membership interest,
partnership interest, joint venture interest or other material equity interest
in any person.
(c) CAPITAL STRUCTURE. The authorized capital stock of IXC consists of
320,000,000 shares of capital stock consisting of: (1) 300,000,000 shares of IXC
Common Stock, (2) 3,000,000 shares of preferred stock, par value $.01 per share
(the "IXC Ordinary Preferred Stock"), and (3) 17,000,000 shares of Class B
preferred stock, par value $.01 per share (the "IXC Class B Preferred Stock"
and, together with the IXC Ordinary Preferred Stock, the "IXC Preferred Stock"),
of which (A) 1,400,000 shares have been designated as the IXC 7 1/4% Preferred
Stock, (B) 450,000 shares have been designated as the IXC 12 1/2% Preferred
Stock, (C) 450,000 shares have been designated as 12 1/2% Series B Junior
Exchangeable Preferred Stock Due 2009 (the "IXC 12 1/2% Series B Preferred
Stock"), (D) 55,000 shares have been designated as Series A Junior Participating
Preferred Stock (the "IXC Series A Preferred Stock") and (E) 155,250 shares have
been designated as the IXC 6 3/4% Preferred Stock. At the close of business on
July 20, 1999, (i) 37,322,576 shares of IXC Common Stock were issued and
outstanding; (ii) 71,363 shares of IXC Common Stock were held by IXC in its
treasury; (iii) 1,074,496 shares of IXC 7 1/4% Preferred Stock were issued and
outstanding; (iv) 371,618 shares of IXC 12 1/2% Preferred Stock were issued and
outstanding; (v) no shares of IXC 12 1/2% Series B Preferred Stock were issued
and outstanding; (vi) 55,000 shares of IXC Series A Preferred Stock were
reserved for issuance in connection with the rights (the "IXC Rights") to
purchase shares of IXC Series A Preferred Stock issued pursuant to the Rights
Agreement dated as of September 9, 1998 (the "IXC Rights Agreement"), between
IXC and U.S. Stock Transfer Corporation, as rights agent; (vii) 155,250 shares
of IXC 6 3/4% Preferred Stock were issued and outstanding; (viii) no other
shares of IXC Preferred Stock were issued and outstanding; (ix) 75,000 shares of
IXC Common Stock were reserved for issuance pursuant to 75,000 warrants issued
and outstanding to purchase IXC Common Stock (the "IXC Warrants"); (x) 8,664,850
shares of IXC Common Stock were reserved for issuance pursuant to the Amended
and Restated 1994 Stock Plan of IXC, as amended, the Special Stock Plan of IXC,
the IXC 1998 Stock Plan, as amended, the IXC 1997 Special Executive Stock Plan
and grants of options made to individual employees (such plans and arrangements,
collectively, the "IXC Stock Plans") (of which 8,066,527 shares of IXC Common
Stock are subject to outstanding IXC Stock Options); and (xi) 8,602,577 shares
of IXC Common Stock were reserved for issuance upon conversion of (A) the IXC
7 1/4% Preferred Stock and (B) the IXC 6 3/4% Preferred Stock. There are no
outstanding stock appreciation rights or other rights (other than the IXC Stock
Options and IXC Warrants) to receive shares of IXC Common Stock on a deferred
basis granted under the IXC Stock Plans or otherwise. Section 3.01(c)(i) of the
IXC Disclosure Schedule sets forth a complete and correct list, as of July 20,
1999, of (i) the name of each holder of outstanding stock options or other
rights to purchase or to receive IXC Common Stock granted under the IXC Stock
Plans (collectively, "IXC Stock Options"), (ii) the number of shares of IXC
Common Stock subject to each such IXC Stock Option, (iii) the exercise prices
thereof and (iv) the name of the IXC Stock Plan pursuant to which such IXC Stock
Options were granted. Section 3.01(c)(ii) of the IXC Disclosure Schedule sets
forth a complete and correct list, as of July 20, 1999, of (i) the name of each
holder of outstanding IXC Warrants, (ii) the number of shares of IXC Common
Stock subject to each such IXC Warrant and (iii) the exercise prices thereof. No
bonds, debentures, notes or other indebtedness of IXC having the right to vote
(or convertible into or exchangeable or exercisable for securities having the
right to vote)
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on any matters on which stockholders of IXC or any of its Subsidiaries may vote
are issued or outstanding or subject to issuance. All outstanding shares of
capital stock of IXC are, and all shares which may be issued will be, when
issued, duly authorized, validly issued, fully paid and nonassessable and will
be delivered free and clear of all Liens (other than Liens created by or imposed
upon the holders thereof) and not subject to preemptive rights. Except as set
forth in this Section 3.01(c) (including pursuant to the conversion or exercise
of the securities referred to above), (x) there are not issued, reserved for
issuance or outstanding (A) any shares of capital stock or other voting
securities of IXC or any of its Subsidiaries (other than shares of capital stock
or other voting securities of such Subsidiaries that are directly or indirectly
owned by IXC), (B) any securities of IXC or any of its Subsidiaries convertible
into or exchangeable or exercisable for shares of capital stock or other voting
securities of, or other ownership interests in, IXC or any of its Subsidiaries
or (C) any warrants, calls, options or other rights to acquire from IXC or any
of its Subsidiaries, and no obligation of IXC or any of its Subsidiaries to
issue, any capital stock or other voting securities of, or other ownership
interests in, or any securities convertible into or exchangeable or exercisable
for any capital stock or other voting securities of, or other ownership
interests in, IXC or any of its Subsidiaries, (y) there are not any outstanding
obligations of IXC or any of its Subsidiaries to repurchase, redeem or otherwise
acquire any such securities or to issue, deliver or sell, or cause to be issued,
delivered or sold, any such securities and (z) IXC is not a party to any voting
agreement with respect to the voting of any such securities.
(d) AUTHORITY; NONCONTRAVENTION. IXC has the requisite corporate power and
corporate authority to enter into this Agreement and, subject to receipt of IXC
Stockholder Approval, to consummate the transactions contemplated by this
Agreement. IXC has the requisite corporate power and corporate authority to
enter into the Option Agreements and to consummate the transactions contemplated
thereby. The execution and delivery of this Agreement and the Option Agreements
by IXC and the consummation by IXC of the transactions contemplated by this
Agreement and the Option Agreements have been duly authorized by all necessary
corporate action on the part of IXC, subject, in the case of the Merger, to
receipt of IXC Stockholder Approval. This Agreement and the Option Agreements
have been duly executed and delivered by IXC and, assuming the due
authorization, execution and delivery by each of the other parties hereto and
thereto, constitute the legal, valid and binding obligations of IXC, enforceable
against IXC in accordance with their terms. The execution and delivery of this
Agreement and the Option Agreements do not, and the consummation of the
transactions contemplated by this Agreement and the Option Agreements and
compliance with the provisions hereof and thereof will not, conflict with, or
result in any violation of, or default (with or without notice or lapse of time,
or both) under, or give rise to a right of termination, cancelation or
acceleration of any obligation or loss of a benefit under, or result in the
creation of any Lien upon any of the properties or assets of IXC or any of its
Subsidiaries under, (i) the Restated Certificate of Incorporation or By-laws of
IXC or the comparable organizational documents of any of its Subsidiaries, (ii)
any loan or credit agreement, note, bond, mortgage, indenture, lease or other
agreement, instrument, permit, concession, franchise, license or similar
authorization applicable to IXC or any of its Subsidiaries or their respective
properties or assets or (iii) subject to the governmental filings and other
matters referred to in the following sentence, any judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to IXC or any of its
Subsidiaries or their respective properties or assets, other than, in the case
of clauses (ii) and (iii), any such conflicts, violations, defaults, rights,
losses or Liens that individually or in the aggregate are not reasonably likely
to (x) have a Material Adverse Effect on IXC, (y) impair the ability of IXC to
perform its obligations under this Agreement or any of the Option Agreements or
(z) prevent or materially delay the consummation of the transactions
contemplated by this Agreement or any of the Option Agreements. No consent,
approval, order or authorization of, action by or in respect of, or
registration, declaration or filing with, any Federal, state, local or foreign
government, any court, administrative, regulatory or other governmental agency,
commission or authority or any nongovernmental self-regulatory agency,
commission or
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authority (each a "Governmental Entity") is required by or with respect to IXC
or any of its Subsidiaries in connection with the execution and delivery of this
Agreement or any of the Option Agreements by IXC or the consummation by IXC of
the Merger or the other transactions contemplated by this Agreement or any of
the Option Agreements, except for (1) the filing of a premerger notification and
report form by IXC under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act"), and any applicable filings and approvals under
similar foreign antitrust or competition laws and regulations; (2) the filing
with the Securities and Exchange Commission (the "SEC") of (A) a joint proxy
statement relating to the IXC Stockholders Meeting and the CBI Shareholders
Meeting (such proxy statement, as amended or supplemented from time to time, the
"Joint Proxy Statement"), and (B) such reports under Section 13(a), 13(d), 15(d)
or 16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), as may be required in connection with this Agreement, the Stockholders
Agreements, the Option Agreements and the transactions contemplated by this
Agreement, the Stockholders Agreements or any of the Option Agreements; (3) 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 IXC
is qualified to do business and such filings with Governmental Entities to
satisfy the applicable requirements of state securities or "blue sky" laws; (4)
filings with and approvals of the Federal Communications Commission (the "FCC")
as required under the Communications Act of 1934, as amended (the
"Communications Act"), and the rules and regulations promulgated thereunder; (5)
such filings with and approvals of The Nasdaq National Market ("Nasdaq") to
permit the shares of IXC Common Stock that are to be issued pursuant to the IXC
Stock Option Agreement to be quoted on Nasdaq; (6) filings with and approvals of
any state public utility commissions ("PUCs"), foreign telecommunications
regulatory agencies or similar regulatory bodies as required by applicable
statutes, laws, rules, ordinances and regulations; and (7) such other consents,
approvals, orders or authorizations the failure of which to be made or obtained
individually or in the aggregate is not reasonably likely to (x) have a Material
Adverse Effect on IXC, (y) impair the ability of IXC to perform its obligations
under this Agreement or any of the Option Agreements or (z) prevent or
materially delay the consummation of the transactions contemplated by this
Agreement or any of the Option Agreements.
(e) SEC DOCUMENTS; UNDISCLOSED LIABILITIES. IXC has filed all required
reports, schedules, forms, statements and other documents (including exhibits
and all other information incorporated therein) with the SEC since January 1,
1998 (collectively, the "IXC SEC Documents"). As of their respective dates, the
IXC SEC Documents complied in all material respects with the requirements of the
Securities Act of 1933, as amended (the "Securities Act"), or the Exchange Act,
as the case may be, and the rules and regulations of the SEC promulgated
thereunder applicable to such IXC SEC Documents, and none of the IXC SEC
Documents when filed contained any untrue statement of a material fact or
omitted 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. Except to the extent that information contained
in any IXC SEC Document has been revised or superseded by a later filed IXC SEC
Document, none of the IXC SEC Documents contains any untrue statement of a
material fact or omits 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. The financial
statements of IXC included in the IXC SEC Documents comply as to form, as of
their respective dates of filing with the SEC, in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto (the "Accounting Rules"), have been prepared in
accordance with generally accepted accounting principles ("GAAP") (except, in
the case of unaudited statements, as permitted by Form 10-Q of the SEC) applied
on a consistent basis during the periods involved (except as may be indicated in
the notes thereto) and fairly present in all material respects the consolidated
financial position of IXC and its consolidated Subsidiaries as of the dates
thereof and the consolidated results of their operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to normal
recurring
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year-end audit adjustments and the absence of footnotes, if applicable). Except
(i) as reflected in the IXC Filed SEC Documents, (ii) for liabilities incurred
in connection with this Agreement or any of the Option Agreements or the
transactions contemplated by this Agreement or any of the Option Agreements or
(iii) incurred since March 31, 1999, in the ordinary course of business
consistent with past practice, neither IXC nor any of its Subsidiaries has any
liabilities or obligations of any nature (whether accrued, absolute, contingent
or otherwise) which individually or in the aggregate are reasonably likely to
have a Material Adverse Effect on IXC.
(f) INFORMATION SUPPLIED. None of the information supplied or to be
supplied by IXC specifically for inclusion or incorporation by reference in (i)
the registration statement on Form S-4 to be filed with the SEC by CBI in
connection with the issuance of CBI Common Stock in the Merger (the "Form S-4")
will, at the time the Form S-4 becomes effective under the Securities Act,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading or (ii) the Joint Proxy Statement will, at the date it is first
mailed to IXC's stockholders and CBI's shareholders or at the time of the IXC
Stockholders Meeting or the CBI Shareholders 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. The Joint Proxy
Statement will comply as to form in all material respects with the requirements
of the Exchange Act and the rules and regulations promulgated thereunder. No
representation or warranty is made by IXC with respect to statements made or
incorporated by reference in the Joint Proxy Statement based on information
supplied by CBI or Sub specifically for inclusion or incorporation by reference
in the Joint Proxy Statement.
(g) ABSENCE OF CERTAIN CHANGES OR EVENTS. Except for liabilities incurred
in connection with or expressly permitted by this Agreement and the Option
Agreements and except as disclosed in the IXC Filed SEC Documents, since March
31, 1999, IXC and its Subsidiaries have conducted their business only in the
ordinary course consistent with past practice, and since such date there has not
been (1) any Material Adverse Change in IXC, (2) any declaration, setting aside
or payment of any dividend or other distribution (whether in cash, stock or
property) with respect to any of IXC's capital stock, except for dividends or
other distributions declared, set aside or paid by IXC as required by and in
accordance with the respective terms of such capital stock as of the date
hereof, (3) any split, combination or reclassification of any of IXC's capital
stock or any issuance or the authorization of any issuance of any other
securities in respect of, in lieu of or in substitution for shares of IXC's
capital stock, (4) (A) any granting by IXC or any of its Subsidiaries to any
current or former director, executive officer or other employee of IXC or its
Subsidiaries of any increase in compensation, bonus or other benefits, except
for normal increases in cash compensation in the ordinary course of business
consistent with past practice or as was required under any employment agreements
in effect as of the date of the most recent audited financial statements
included in the IXC Filed SEC Documents, (B) any granting by IXC or any of its
Subsidiaries to any such current or former director, executive officer or
employee of any increase in severance or termination pay, (C) any entry by IXC
or any of its Subsidiaries into, or any amendments of, any employment, deferred
compensation, consulting, severance, termination or indemnification agreement
with any such current or former director, executive officer or employee or (D)
any amendment to, or modification of, any IXC Stock Option or IXC Warrant, (5)
any damage, destruction or loss, whether or not covered by insurance, that
individually or in the aggregate is reasonably likely to have a Material Adverse
Effect on IXC, (6) except insofar as may have been required by a change in GAAP,
any change in accounting methods, principles or practices by IXC or any of its
Subsidiaries materially affecting the consolidated financial position or results
of operations of IXC or (7) any tax election or any settlement or compromise of
any income tax liability that individually or in the aggregate is reasonably
likely to adversely affect the tax liability or tax attributes of IXC or any of
its Subsidiaries in any material respect or any settlement or compromise of any
material income tax liability.
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(h) LITIGATION. There is no suit, action, proceeding, claim, grievance or
investigation pending or, to the Knowledge of IXC or any of its Subsidiaries,
threatened against or affecting IXC or any of its Subsidiaries that individually
or in the aggregate is reasonably likely to have a Material Adverse Effect on
IXC nor is there any judgment, decree, injunction, rule or order of any
Governmental Entity or arbitrator outstanding against IXC or any of its
Subsidiaries having, or that individually or in the aggregate is reasonably
likely to have a Material Adverse Effect on IXC. There are no facts,
circumstances or conditions that are reasonably likely to give rise to any
liability of, or form the basis of a claim against, IXC or any of its
Subsidiaries under any applicable statutes, laws, ordinances, rules or
regulations, which liability or claim is reasonably likely to have, individually
or in the aggregate, a Material Adverse Effect on IXC.
(i) COMPLIANCE WITH APPLICABLE LAWS. IXC and its Subsidiaries hold all
material permits, licenses, variances, exemptions, orders, registrations and
approvals of all Governmental Entities (the "IXC Permits") which are required
for them to own, lease or operate their assets and to carry on their businesses.
IXC and its Subsidiaries are in compliance in all material respects with the
terms of the IXC Permits and all applicable statutes, laws, ordinances, rules
and regulations. No action, demand, requirement or investigation by any
Governmental Entity and no suit, action or proceeding by any person, in each
case with respect to IXC or any of its Subsidiaries or any of their respective
properties, which is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on IXC, is pending or, to the Knowledge of
IXC, threatened. As of the date hereof, Section 3.01(i) of the IXC Disclosure
Schedule sets forth a true and complete list of all IXC Permits obtained from
the FCC and any state PUC.
(j) CONTRACTS. Neither IXC nor any of its Subsidiaries is in violation of
or in default under (nor does there exist any condition which upon the passage
of time or the giving of notice or both would cause such a violation of or
default under) any loan or credit agreement, bond, note, mortgage, indenture,
lease or other contract, agreement, obligation, commitment, arrangement,
understanding, instrument, permit or license to which it is a party or by which
it or any of its properties or assets is bound, except for violations or
defaults that individually or in the aggregate are not reasonably likely to have
a Material Adverse Effect on IXC. Since December 31, 1998, through the date
hereof, neither IXC nor any of its Subsidiaries has entered into any contract,
agreement, obligation, commitment, arrangement or understanding with any
Affiliate of IXC that would have been required to be filed as an exhibit to
IXC's Annual Report on Form 10-K for the fiscal year ended December 31, 1998
(the "IXC 1998 10-K") had IXC been a party thereto as of December 31, 1998.
Neither IXC nor any of its Subsidiaries is a party to or bound by any
noncompetition agreement or any other similar agreement or obligation which
purports to limit in any material respect the manner in which, or the localities
in which, all or any material portion of the business of IXC and its
Subsidiaries, taken as a whole, is conducted.
(k) ABSENCE OF CHANGES IN BENEFIT PLANS. Since the date of the most recent
audited financial statements included in the IXC Filed SEC Documents, there has
not been (i) any adoption or amendment by IXC or any of its Subsidiaries of any
employment agreement with any director, officer or employee of IXC or any of its
Subsidiaries or of any collective bargaining agreement or (ii) any adoption or
amendment of any bonus, pension, profit sharing, deferred compensation,
incentive compensation, stock ownership, stock purchase, stock option, phantom
stock, retirement, vacation, severance, disability, death benefit,
hospitalization, medical, welfare benefit or other plan, arrangement or
understanding providing compensation or benefits to any current or former
director, officer or employee of IXC or any of its Subsidiaries (collectively,
the "IXC Benefit Plans"), or any change in any actuarial or other assumption
used to calculate funding obligations with respect to any IXC pension plans, or
any change in the manner in which contributions to any IXC pension plans are
made or the basis on which such contributions are determined which are
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on IXC.
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(l) ERISA COMPLIANCE. (i) With respect to IXC Benefit Plans, no liability
has been incurred and, to the Knowledge of IXC, there exists no condition or
circumstances in connection with which IXC or any of its Subsidiaries could be
subject to any liability that individually or in the aggregate is reasonably
likely to have a Material Adverse Effect on IXC under the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), the Code or any other
applicable law.
(ii) Each IXC Benefit Plan has been administered in accordance with its
terms, except for any failures so to administer any IXC Benefit Plan that
individually or in the aggregate are not reasonably likely to have a Material
Adverse Effect on IXC. IXC, its Subsidiaries and all IXC Benefit Plans are in
compliance with the applicable provisions of ERISA, the Code and all other
applicable laws and the terms of all applicable collective bargaining
agreements, except for any failures to be in such compliance that individually
or in the aggregate are not reasonably likely to have a Material Adverse Effect
on IXC.
(iii) None of IXC or any of its Subsidiaries sponsors or contributes to any
IXC Benefit Plan that is subject to Title IV of ERISA.
(iv) IXC and its Subsidiaries are in compliance with all Federal, state,
local and foreign requirements regarding employment, except for any failures to
comply that individually or in the aggregate are not reasonably likely to have a
Material Adverse Effect on IXC. Neither IXC nor any of its Subsidiaries is a
party to any collective bargaining or other labor union contract applicable to
persons employed by IXC or any of its Subsidiaries in the United States and as
of the date of this Agreement no such collective bargaining agreement is being
negotiated by IXC or any of its Subsidiaries. As of the date of this Agreement,
there is no labor dispute, strike or work stoppage against IXC or any of its
Subsidiaries pending or, to the Knowledge of IXC, threatened which may interfere
with the respective business activities of IXC or any of its Subsidiaries,
except where such dispute, strike or work stoppage individually or in the
aggregate is not reasonably likely to have a Material Adverse Effect on IXC. As
of the date of this Agreement, to the Knowledge of IXC, none of IXC, any of its
Subsidiaries or any of their respective representatives or employees has
committed any unfair labor practice in connection with the operation of the
respective businesses of IXC or any of its Subsidiaries, and there is no action,
charge or complaint against IXC or any of its Subsidiaries by the National Labor
Relations Board or any comparable governmental agency pending or threatened in
writing, in each case except where such practices, actions, charges or
complaints, individually or in the aggregate, are not reasonably likely to have
a Material Adverse Effect on IXC.
(v) (A) No employee of IXC or its Subsidiaries will be entitled to any
additional benefits or any acceleration of the time of payment or vesting of any
benefits under any IXC Benefit Plan (other than acceleration of vesting of
options in accordance with their terms) as a result of the transactions
contemplated by this Agreement or any of the Option Agreements, (B) no amount
payable, or economic benefit provided, by IXC or its Subsidiaries (including any
acceleration of the time of payment or vesting of any benefit (other than
acceleration of vesting of options in accordance with their terms)) could be
considered an "excess parachute payment" under Section 280G of the Code and (C)
no person is entitled to receive any additional payment from IXC or its
Subsidiaries or any other person in the event that the excise tax of Section
4999 of the Code is imposed on such person, in each case except where such
additional benefits or payments or acceleration (other than acceleration of
vesting of options in accordance with their terms), individually or in the
aggregate, are not reasonably likely to have a Material Adverse Effect on IXC.
(m) TAXES. (i) Each of IXC and its Subsidiaries and each IXC Consolidated
Group has filed or has caused to be filed all material tax returns and reports
required to be filed by it and all such returns and reports are complete and
correct in all material respects, or requests for extensions to file such
returns or reports have been timely filed, granted and have not expired, except
to the extent that such failures to file, to be complete or correct or to have
extensions granted that remain in effect
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individually or in the aggregate are not reasonably likely to have a Material
Adverse Effect on IXC. IXC, each of its Subsidiaries and each IXC Consolidated
Group has paid or caused to be paid (or IXC has paid on its behalf) all material
taxes due and owing, and the most recent financial statements contained in the
IXC Filed SEC Documents reflect an adequate reserve for all material taxes
payable by IXC and its Subsidiaries for all taxable periods and portions thereof
accrued through the date of such financial statements.
(ii) No deficiencies, audit examinations, refund litigation, proposed
adjustments or matters in controversy for any taxes have been proposed, asserted
or assessed in writing against IXC or any of its Subsidiaries or any IXC
Consolidated Group that are not adequately reserved for, except for
deficiencies, audit examinations, refund litigation, proposed adjustments or
matters in controversy that individually or in the aggregate are not reasonably
likely to have a Material Adverse Effect on IXC. The Federal income tax returns
prior to the date set forth in Section 3.01(m)(ii) of the IXC Disclosure
Schedule of IXC and its Subsidiaries consolidated in such returns have closed by
virtue of the applicable statute of limitations. All assessments for taxes due
and owing by IXC, any of its Subsidiaries or any IXC Consolidated Group with
respect to completed and settled examinations or concluded litigation have been
paid.
(iii) Neither IXC nor any of its Subsidiaries has taken or agreed to take
any action or knows of any fact, agreement, plan or other circumstance that is
reasonably likely to prevent the Merger from qualifying as a reorganization
within the meaning of Section 368(a) of the Code.
(iv) No deduction of any amount that would otherwise be deductible with
respect to tax periods ending on or before the Effective Time could be
disallowed under Section 162(m) of the Code, except any disallowances under
Section 162(m) of the Code that alone or with other such disallowances are not
reasonably likely to have a Material Adverse Effect on IXC.
(v) Neither IXC nor any of its Subsidiaries has constituted either a
"distributing corporation" or a "controlled corporation" in a distribution of
stock qualifying for tax-free treatment under Section 355 of the Code (x) in the
two years prior to the date of this Agreement or (y) in a distribution which
could otherwise constitute part of a "plan" or "series of related transactions"
(within the meaning of Section 355(e) of the Code) in conjunction with the
Merger.
(vi) To the Knowledge of IXC, no shareholder of IXC is a foreign person who
held more than 5% of the IXC stock at some time during the shorter of the
periods described in Section 897(c)(1)(A)(ii) of the Code.
(vii) Neither IXC nor any of its Subsidiaries has any material "deferred
intercompany gains" (as defined in Treas. Reg. Section 1.1502-13).
(viii) Section 3.01(m)(1) of the IXC Disclosure Schedule sets forth a
complete schedule of each IXC Consolidated Group of which IXC is or has been a
member during the last six years. Such schedule sets forth the names of all
members of each such IXC Consolidated Group and the periods during which IXC or
any of its Subsidiaries is or has been a member.
(ix) As used in this Agreement (1) "taxes" shall include all (x) Federal,
state, local or foreign income, property, sales, excise and other taxes or
similar governmental charges, including any interest, penalties or additions
with respect thereto, (y) liability for the payment of any amounts of the type
described in clause (x) as a result of being a member of an affiliated,
consolidated, combined or unitary group, and (z) liability for the payment of
any amounts as a result of being party to any tax sharing agreement or as a
result of any express or implied obligation to indemnify any other person with
respect to the payment of any amounts of the type described in clause (x) or (y)
and (2) "IXC Consolidated Group" means any affiliated group within the meaning
of Section 1504(a) of the Code, in which IXC (or any Subsidiary of IXC) is or
has ever been a member or any group of corporations with which IXC files, has
filed or is or was required to file an affiliated, consolidated, combined,
unitary or aggregate tax return.
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(n) VOTING REQUIREMENTS. The affirmative vote of the holders of a majority
of the outstanding shares of IXC Common Stock entitled to vote at the IXC
Stockholders Meeting to (i) adopt this Agreement and (ii) adopt the agreement
referred to in Section 8.11 (collectively, the "IXC Stockholder Approval") are
the only votes or approvals of the holders of any class or series of IXC's
capital stock necessary to adopt this Agreement and the Option Agreements and to
approve the Merger and the other transactions contemplated hereby or thereby.
(o) STATE TAKEOVER STATUTES. The Board of Directors of IXC (including the
disinterested directors thereof) has approved the terms of this Agreement, the
Stockholders Agreements and the Option Agreements and the consummation of the
Merger and the other transactions contemplated by this Agreement, the
Stockholders Agreements and the Option Agreements and such approval constitutes
approval of the Merger and the other transactions contemplated by this
Agreement, the Stockholders Agreements and the Option Agreements by the Board of
Directors of IXC under the provisions of Section 203 of the DGCL and represents
all the action necessary to ensure that the restrictions on "business
combinations" (as defined in such Section 203) contained in Section 203 do not
apply to CBI in connection with the Merger and the other transactions
contemplated by this Agreement, the Stockholders Agreements and the Option
Agreements. No other state takeover statute or similar statute or regulation is
applicable to this Agreement, the Stockholders Agreements, the Option
Agreements, the Merger or the other transactions contemplated by this Agreement,
the Stockholders Agreements and the Option Agreements.
(p) BROKERS. No broker, investment banker, financial advisor or other
person, other than Merrill Lynch & Co. and Morgan Stanley & Co. Incorporated,
the fees, commissions and expenses of which will be paid by IXC, is entitled to
any broker's, finder's, financial advisor's or other similar fee or commission,
or the reimbursement of expenses, in connection with the transactions
contemplated by this Agreement and the Option Agreements based upon arrangements
made by or on behalf of IXC. IXC has furnished to CBI true and complete copies
of all agreements under which any such fees, commissions or expenses are payable
and all indemnification and other agreements related to the engagement of the
persons to whom such fees, commissions or expenses are payable.
(q) OPINIONS OF FINANCIAL ADVISORS. IXC has received the opinions of its
financial advisors, dated the date of this Agreement, to the effect that, as of
such date, the Exchange Ratio is fair from a financial point of view to the
stockholders of IXC (other than CBI and its Affiliates), a signed copy of which
has been or promptly will be delivered to CBI.
(r) INTELLECTUAL PROPERTY; YEAR 2000. (i) IXC and its Subsidiaries own, or
are validly licensed or otherwise have the right to use, all patents, patent
rights, trademarks, trade secrets, trade names, service marks, copyrights and
other proprietary intellectual property rights and computer programs (the
"Intellectual Property Rights") which are material to the conduct of the
business of IXC and its Subsidiaries, except where the failure to own or license
such Intellectual Property Rights is not reasonably likely to have a Material
Adverse Effect on IXC.
(ii) To the Knowledge of IXC, neither IXC nor any of its Subsidiaries has
materially interfered with, infringed upon, misappropriated or otherwise come
into conflict with any Intellectual Property Rights of any other person. Neither
IXC nor any of its Subsidiaries has received any written charge, complaint,
claim, demand or notice alleging any such interference, infringement,
misappropriation or other conflict (including any claim that IXC or any such
Subsidiary must license or refrain from using any Intellectual Property Rights
or other proprietary information of any other person) which has not been settled
or otherwise fully resolved. To IXC's Knowledge, no other person has materially
interfered with, infringed upon, misappropriated or otherwise come into conflict
with any Intellectual Property Rights of IXC or any of its Subsidiaries.
(iii) As the business of IXC and its Subsidiaries is presently conducted and
proposed to be conducted without giving effect to any change with respect
thereto that may be made by CBI, to IXC's
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Knowledge, CBI's use after the Closing of the Intellectual Property Rights which
are material to the conduct of the business of IXC and its Subsidiaries taken as
a whole will not interfere with, infringe upon, misappropriate or otherwise come
into conflict with the Intellectual Property Rights of any other person.
(iv) The disclosure set forth in the IXC 1998 10-K under the heading "Year
2000 Readiness" was true and correct in all material respects on the date
thereof and is true and correct in all material respects as if made as of the
date hereof.
(v) As of the Closing Date, IXC and its Subsidiaries have no Knowledge that
they are not Year 2000 Compliant and, as of the date hereof, IXC and its
Subsidiaries have no Knowledge that their respective suppliers will not be Year
2000 Compliant at January 1, 2000, except, in each case, for such failures to be
Year 2000 Compliant that individually or in the aggregate are not reasonably
likely to have a Material Adverse Effect on IXC. The term "Year 2000 Compliant",
with respect to a computer system or software program, means that such computer
system or program: (A) is capable of recognizing, processing, managing,
representing, interpreting and manipulating correctly date-related data for
dates earlier and later than January 1, 2000; (B) has the ability to provide
date recognition for any data element without limitation; (C) has the ability to
function automatically into and beyond the Year 2000 without human intervention
and without any change in operations associated with the advent of the Year
2000; (D) has the ability to interpret data, dates and time correctly into and
beyond the Year 2000; (E) has the ability not to produce noncompliance in
existing data, nor otherwise corrupt such data, into and beyond the Year 2000;
(F) has the ability to process correctly after January 1, 2000, data containing
dates and times before that date; and (G) has the ability to recognize all "leap
year" dates, including February 29, 2000.
(s) IXC RIGHTS AGREEMENT. IXC has amended the IXC Rights Agreement
substantially in the form of Exhibit F hereto.
(t) TITLE TO PROPERTIES. (i) Section 3.01(t) of the IXC Disclosure
Schedule sets forth a true and complete list of all material real property and
the 20 most significant leasehold properties owned or leased by IXC or any of
its Subsidiaries. Each of IXC and its Subsidiaries has good and valid title to,
or valid leasehold interests in or valid rights to, all its material properties
and assets except for such as are no longer used or useful in the conduct of its
businesses or as have been disposed of in the ordinary course of business and
except for defects in title, easements, restrictive covenants and similar
encumbrances that individually or in the aggregate do not materially interfere
with its ability to conduct its business as currently conducted. All such
material assets and properties, other than assets and properties in which IXC or
any of its Subsidiaries has a leasehold interest, are free and clear of all
Liens except for Liens that individually or in the aggregate do not materially
interfere with the ability of IXC and its Subsidiaries to conduct their
respective businesses as currently conducted.
(ii) Each of IXC and its Subsidiaries has complied in all material respects
with the terms of all material leases to which it is a party and under which it
is in occupancy, and all such leases are in full force and effect. Each of IXC
and its Subsidiaries enjoys peaceful and undisturbed possession under all such
leases, except where a failure to do so individually or in the aggregate are not
reasonably likely to have a Material Adverse Effect on IXC.
SECTION 3.02. REPRESENTATIONS AND WARRANTIES OF CBI AND SUB. Except (i)
with respect to matters expressly permitted by Section 4.01(b), (ii) as
expressly disclosed in the CBI SEC Documents filed and publicly available prior
to the date of this Agreement (the "CBI Filed SEC Documents") or (iii) as
expressly set forth on the disclosure schedule delivered by CBI and Sub to IXC
prior to the
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execution of this Agreement (the "CBI Disclosure Schedule"), CBI and Sub
represent and warrant to IXC as follows:
(a) ORGANIZATION, STANDING AND CORPORATE POWER. Each of CBI, Sub and its
Subsidiaries is a corporation or other legal entity duly organized, validly
existing and in good standing under the laws of the jurisdiction in which it is
organized and has the requisite corporate or other power and authority, as the
case may be, to carry on its business as now being conducted. Each of CBI and
its Subsidiaries is duly qualified or licensed to do business and is in good
standing in each jurisdiction in which the nature of its business or the
ownership, leasing or operation of its properties makes such qualification or
licensing necessary, except for those jurisdictions in which the failure to be
so qualified or licensed or to be in good standing individually or in the
aggregate is not reasonably likely to have a Material Adverse Effect on CBI. CBI
has made available to IXC prior to the execution of this Agreement complete and
correct copies of its Amended Articles of Incorporation and Amended Regulations,
as amended to the date of this Agreement.
(b) CAPITAL STRUCTURE. (i) The authorized capital stock of CBI consists of
485,000,000 shares of capital stock consisting of: (1) 480,000,000 shares of CBI
Common Stock, (2) 1,000,000 shares of non-voting preferred stock without par
value (the "Non-Voting Preferred Stock") and (3) 4,000,000 shares of voting
preferred stock without par value (the "Voting Preferred Stock" and, together
with the Non-Voting Preferred Stock, the "CBI Preferred Stock") of which
2,000,000 shares have been designated as Series A Preferred Stock (the "CBI
Series A Preferred Stock"). At the close of business on July 15, 1999, (i)
137,792,751 shares of CBI Common Stock were issued and outstanding; (ii) no
shares of CBI Common Stock were held by CBI in its treasury; (iii) no shares of
CBI Preferred Stock were issued and outstanding; (iv) 2,000,000 shares of CBI
Series A Preferred Stock were reserved for issuance in connection with the
rights to purchase shares of CBI Common Stock issued pursuant to the Rights
Agreement dated as of April 29, 1997 (the "CBI Rights Agreement"), between CBI
and The Fifth Third Bank, as rights agent; and (v) no shares of CBI Common Stock
were reserved for issuance pursuant to the CBI 1989 Stock Option Plan, the CBI
1997 Stock Option Plan for Non-Employee Directors, the CBI 1997 Long Term
Incentive Plan, the CBI Executive Deferred Compensation Plan and grants of
options made to individual employees (such plans and arrangements, collectively,
the "CBI Stock Plans") (of which 10,629,687 shares of CBI Common Stock are
subject to outstanding CBI Stock Options). There are no outstanding stock
appreciation rights or rights (other than the CBI Stock Options) to receive
shares of CBI Common Stock on a deferred basis granted under the CBI Stock Plans
or otherwise. Section 3.02(b) of the CBI Disclosure Schedule sets forth a
complete and correct list, as of July 15, 1999, of all outstanding stock options
or other rights to purchase or receive CBI Common Stock granted under the CBI
Stock Plans (collectively, "CBI Stock Options"). No bonds, debentures, notes or
other indebtedness of CBI having the right to vote (or convertible into or
exchangeable or exercisable for securities having the right to vote) on any
matters on which stockholders of CBI or any of its Subsidiaries may vote are
issued or outstanding or subject to issuance. All outstanding shares of capital
stock of CBI are, and all shares which may be issued will be, when issued, duly
authorized, validly issued, fully paid and nonassessable and will be delivered
free and clear of all Liens (other than Liens created by or imposed upon the
holders thereof) and not subject to preemptive rights. Except as set forth in
this Section 3.02(b) (including pursuant to the conversion or exercise of the
securities referred to above), (x) there are not issued, reserved for issuance
or outstanding (A) any shares of capital stock or other voting securities of CBI
or any of its Subsidiaries (other than shares of capital stock or other voting
securities of such Subsidiaries that are directly or indirectly owned by CBI),
(B) any securities of CBI or any of its Subsidiaries convertible into or
exchangeable or exercisable for shares of capital stock or other voting
securities of, or other ownership interests in, CBI or any of its Subsidiaries
or (C) any warrants, calls, options or other rights to acquire from CBI or any
of its Subsidiaries, and no obligation of CBI or any of its Subsidiaries to
issue, any capital stock or other voting securities of, or other ownership
interests in, or any securities convertible into or exchangeable or exercisable
for any capital stock or other voting securities of, or other
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ownership interests in, CBI or any of its Subsidiaries, (y) there are not any
outstanding obligations of CBI or any of its Subsidiaries to repurchase, redeem
or otherwise acquire any such securities or to issue, deliver or sell, or cause
to be issued, delivered or sold, any such securities and (z) CBI is not a party
to any voting agreement with respect to the voting of any such securities. Other
than the capital stock of, or other equity interests in, its Subsidiaries, CBI
does not directly or indirectly beneficially own any securities or other
beneficial ownership interests in any other entity.
(ii) The authorized capital stock of Sub consists of 1,000 shares of common
stock, par value $.01 per share ("Sub Common Stock"). There are issued and
outstanding 1,000 shares of Sub Common Stock. All such shares are owned by CBI.
Sub does not have issued or outstanding any options, warrants, subscriptions,
calls, rights, convertible securities or other agreements or commitments
obligating Sub to issue, transfer or sell any shares of Sub Common Stock. Sub
does not have bonds, debentures, notes or other indebtedness outstanding.
(iii) Section 3.02(b)(iii) of the CBI Disclosure Schedule sets forth a true
and complete list of each of CBI's Subsidiaries as of the date hereof. All the
outstanding shares of capital stock of, or other equity interests in, each
Subsidiary of CBI have been validly issued and are fully paid and nonassessable
and are owned directly or indirectly by CBI, free and clear of any Liens and
free of any restriction on the right to vote, sell or otherwise dispose of such
capital stock or other ownership interests. Except for the capital stock or
other ownership interests of its Subsidiaries, as of the date hereof, CBI does
not beneficially own directly or indirectly any material capital stock,
membership interest, partnership interest, joint venture interest or other
material equity interest in any person.
(c) AUTHORITY; NONCONTRAVENTION. Each of CBI and Sub has the requisite
corporate power and corporate authority to enter into this Agreement and,
subject to receipt of CBI Shareholder Approval, to consummate the transactions
contemplated by this Agreement. CBI has the requisite corporate power and
corporate authority to enter into the Stockholders Agreements and the Option
Agreements and to consummate the transactions contemplated thereby. The
execution and delivery of this Agreement, the Stockholders Agreements and the
Option Agreements by CBI and the consummation by CBI of the transactions
contemplated by this Agreement, the Stockholders Agreements and the Option
Agreements have been duly authorized by all necessary corporate action on the
part of CBI, subject, in connection with, among other things, the issuance of
shares of CBI Common Stock in the Merger, to receipt of CBI Shareholder
Approval. This Agreement, the Stockholders Agreements and the Option Agreements
have been duly executed and delivered by CBI and, assuming the due
authorization, execution and delivery by each of the other parties hereto and
thereto, constitute the legal, valid and binding obligations of CBI, enforceable
against CBI in accordance with their terms. The execution and delivery of this
Agreement, the Stockholders Agreements and the Option Agreements do not, and the
consummation of the transactions contemplated by this Agreement, the
Stockholders Agreements and the Option Agreements and compliance with the
provisions hereof and thereof will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancelation or acceleration of
any obligation or loss of a benefit under, or result in the creation of any Lien
upon any of the properties or assets of CBI or any of its Subsidiaries under,
(i) the Amended Articles of Incorporation or Amended Regulations of CBI or the
comparable organizational documents of any of its Subsidiaries, (ii) any loan or
credit agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise, license or similar authorization
applicable to CBI or any of its Subsidiaries or their respective properties or
assets or (iii) subject to the governmental filings and other matters referred
to in the following sentence, any judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to IXC or any of its Subsidiaries or
their respective properties or assets, other than, in the case of clauses (ii)
and (iii), any such conflicts, violations, defaults, rights, losses or Liens
that individually or in the aggregate are not reasonably likely to (x) have a
Material Adverse Effect on CBI, (y) impair the ability of CBI to perform its
obligations under this Agreement or any of the Option Agreements or
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(z) prevent or materially delay the consummation of the transactions
contemplated by this Agreement or any of the Option Agreements. No consent,
approval, order or authorization of, action by or in respect of, or
registration, declaration or filing with, any Governmental Entity is required by
or with respect to CBI or any of its Subsidiaries in connection with the
execution and delivery of this Agreement, the Stockholders Agreements or any of
the Option Agreements by CBI or the consummation by CBI of the Merger or the
other transactions contemplated by this Agreement, the Stockholders Agreements
or any of the Option Agreements, except for (1) the filing of a premerger
notification and report form by CBI under the HSR Act and any applicable filings
and approvals under similar foreign antitrust or competition laws and
regulations; (2) the filing with the SEC of (A) the Joint Proxy Statement and
(B) such reports under Section 13(a), 13(d), 15(d) or 16(a) of the Exchange Act
as may be required in connection with this Agreement, the Stockholders
Agreements and the Option Agreements and the transactions contemplated by this
Agreement, the Stockholders Agreements or any of the Option Agreements; (3) 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 CBI
is qualified to do business and such filings with Governmental Entities to
satisfy the applicable requirements of state securities or "blue sky" laws; (4)
filings with and approvals of the FCC as required under the Communications Act
and the rules and regulations promulgated thereunder; (5) such filings with and
approvals of the NYSE and The Cincinnati Stock Exchange (the "CSE") to permit
the shares of CBI Common Stock that are to be issued in the Merger and pursuant
to the CBI Stock Option Agreement to be listed on the NYSE and the CSE; (6)
filings with and approvals of any state PUCs, foreign telecommunications
regulatory agencies or similar regulatory bodies as required by applicable
statutes, laws, rules, ordinances and regulations; and (7) such other consents,
approvals, orders or authorizations the failure of which to be made or obtained
individually or in the aggregate is not reasonably likely to (x) have a Material
Adverse Effect on CBI, (y) impair the ability of CBI to perform its obligations
under this Agreement or any of the Option Agreements or (z) prevent or
materially delay the consummation of the transactions contemplated by this
Agreement or any of the Option Agreements.
(d) SEC DOCUMENTS; UNDISCLOSED LIABILITIES. CBI has filed all required
reports, schedules, forms, statements and other documents (including exhibits
and all other information incorporated therein) with the SEC since January 1,
1998 (collectively, the "CBI SEC Documents"). As of their respective dates, the
CBI SEC Documents complied 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 SEC promulgated thereunder applicable to such CBI SEC
Documents, and none of the CBI SEC Documents when filed contained any untrue
statement of a material fact or omitted 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. Except to the
extent that information contained in any CBI SEC Document has been revised or
superseded by a later filed CBI SEC Document, none of the CBI SEC Documents
contains any untrue statement of a material fact or omits 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. The financial statements of CBI included in the CBI SEC Documents
comply as to form, as of their respective dates of filing with the SEC, in all
material respects with the Accounting Rules, have been prepared in accordance
with GAAP (except, in the case of unaudited statements, as permitted by Form
10-Q of the SEC) applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto) and fairly present in all
material respects the consolidated financial position of CBI and its
consolidated Subsidiaries as of the dates thereof and the consolidated results
of their operations and cash flows for the periods then ended (subject, in the
case of unaudited statements, to normal recurring year-end audit adjustments and
the absence of footnotes if applicable). Except (i) as reflected in the CBI
Filed SEC Documents, (ii) for liabilities incurred in connection with this
Agreement, the Stockholders Agreements or any of the Option Agreements or the
transactions contemplated by this
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Agreement, the Stockholders Agreements or any of the Option Agreements or (iii)
incurred since March 31, 1999, in the ordinary course of business consistent
with past practice, neither CBI nor any of its Subsidiaries has any liabilities
or obligations of any nature (whether accrued, absolute, contingent or
otherwise) which individually or in the aggregate are reasonably likely to have
a Material Adverse Effect on CBI.
(e) INFORMATION SUPPLIED. None of the information supplied or to be
supplied by CBI specifically for inclusion or incorporation by reference in (i)
the Form S-4 will, at the time the Form S-4 becomes effective under the
Securities Act, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading or (ii) the Joint Proxy Statement will, at the
date it is first mailed to CBI's shareholders and IXC's stockholders or at the
time of the CBI Shareholders Meeting or the IXC Stockholders 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. The Form S-4 and the Joint Proxy Statement will comply as to form in
all material respects with the requirements of the Securities Act and the
Exchange Act, as applicable, and the respective rules and regulations
promulgated thereunder. No representation or warranty is made by CBI with
respect to statements made or incorporated by reference in the Form S-4 and the
Joint Proxy Statement based on information supplied by IXC specifically for
inclusion or incorporation by reference in the Form S-4 or the Joint Proxy
Statement, as the case may be.
(f) ABSENCE OF CERTAIN CHANGES OR EVENTS. Except for liabilities incurred
in connection with or expressly permitted by this Agreement, the Stockholders
Agreements and the Option Agreements and except as disclosed in the CBI Filed
SEC Documents, since March 31, 1999, CBI and its Subsidiaries have conducted
their business only in the ordinary course consistent with past practice, and
since such date there has not been (1) any Material Adverse Change in CBI, (2)
any declaration, setting aside or payment of any dividend or other distribution
(whether in cash, stock or property) with respect to any of CBI's capital stock,
except for regular quarterly cash dividends declared, set aside or paid by CBI
with respect to CBI Common Stock, (3) any split, combination or reclassification
of any of CBI's capital stock or any issuance or the authorization of any
issuance of any other securities in respect of, in lieu of or in substitution
for shares of CBI's capital stock, (4) (A) any granting by CBI or any of its
Subsidiaries to any current or former director, executive officer or other
employee of CBI or its Subsidiaries of any increase in compensation, bonus or
other benefits, except for normal increases in cash compensation in the ordinary
course of business consistent with past practice or as was required under any
employment agreements in effect as of the date of the most recent audited
financial statements included in the CBI Filed SEC Documents, (B) any granting
by CBI or any of its Subsidiaries to any such current or former director,
executive officer or employee of any increase in severance or termination pay,
(C) any entry by CBI or any of its Subsidiaries into, or any amendments of, any
employment, deferred compensation, consulting, severance, termination or
indemnification agreement with any such current or former director, executive
officer or employee or (D) any amendment to, or modification of, any CBI Stock
Option, (5) any damage, destruction or loss, whether or not covered by
insurance, that individually or in the aggregate is reasonably likely to have a
Material Adverse Effect on CBI, (6) except insofar as may have been required by
a change in GAAP, any change in accounting methods, principles or practices by
CBI or any of its Subsidiaries materially affecting the consolidated financial
position or results of operations of CBI or (7) any tax election or any
settlement or compromise of any income tax liability that individually or in the
aggregate is reasonably likely to adversely affect the tax liability or tax
attributes of CBI or any of its Subsidiaries in any material respect or any
settlement or compromise of any material income tax liability.
(g) LITIGATION. There is no suit, action, proceeding, claim, grievance or
investigation pending or, to the Knowledge of CBI or any of its Subsidiaries,
threatened against or affecting CBI or any of its Subsidiaries that individually
or in the aggregate is reasonably likely to have a Material Adverse Effect
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on CBI nor is there any judgment, decree, injunction, rule or order of any
Governmental Entity or arbitrator outstanding against IXC or any of its
Subsidiaries having, or that is individually or in the aggregate reasonably
likely to have, a Material Adverse Effect on CBI. There are no facts,
circumstances or conditions that are reasonably likely to give rise to any
liability of, or form the basis of a claim against, CBI or any of its
Subsidiaries under any applicable statutes, laws, ordinances, rules or
regulations, which liability or claim is reasonably likely to have individually
or in the aggregate a Material Adverse Effect on CBI.
(h) COMPLIANCE WITH APPLICABLE LAWS. CBI and its Subsidiaries hold all
material permits, licenses, variances, exemptions, orders, registrations and
approvals of all Governmental Entities (the "CBI Permits") which are required
for them to own, lease or operate their assets and to carry on their businesses.
CBI and its Subsidiaries are in compliance in all material respects with the
terms of the CBI Permits and all applicable statutes, laws, ordinances, rules
and regulations. No action, demand, requirement or investigation by any
Governmental Entity and no suit, action or proceeding by any person, in each
case with respect to CBI or any of its Subsidiaries or any of their respective
properties, that is reasonably likely to have, individually or in the aggregate,
a Material Adverse Effect on CBI, is pending or, to the Knowledge of CBI,
threatened. As of the date hereof, Section 3.02(h) of the CBI Disclosure
Schedule sets forth a true and complete list of all CBI Permits obtained from
the FCC and any state PUC.
(i) CONTRACTS. Neither CBI nor any of its Subsidiaries is in violation of
or in default under (nor does there exist any condition which upon the passage
of time or the giving of notice or both would cause such a violation of or
default under) any loan or credit agreement, bond, note, mortgage, indenture,
lease or other contract, agreement, obligation, commitment, arrangement,
understanding, instrument, permit or license to which it is a party or by which
it or any of its properties or assets is bound, except for violations or
defaults that individually or in the aggregate are not reasonably likely to have
a Material Adverse Effect on CBI. Since December 31, 1998, through the date
hereof, neither of CBI nor any of its Subsidiaries has entered into any
contract, agreement, obligation, commitment, arrangement or understanding with
any Affiliate of CBI that would have been required to be filed as an exhibit to
CBI's Annual Report on Form 10-K for the fiscal year ended December 31, 1998
(the "CBI 1998 10-K") had CBI been a party thereto as of December 31, 1998.
Neither CBI nor any of its Subsidiaries is a party to or bound by any
non-competition agreement or any other similar agreement or obligation which
purports to limit in any material respect the manner in which, or the localities
in which, all or any material portion of the business of CBI and its
Subsidiaries, taken as a whole, is conducted.
(j) ABSENCE OF CHANGES IN BENEFIT PLANS. Since the date of the most recent
audited financial statements included in the CBI Filed SEC Documents, there has
not been (i) any adoption or amendment by CBI or any of its Subsidiaries of any
employment agreement with any director, officer or employee of CBI or any of its
Subsidiaries or of any collective bargaining agreement or (ii) any adoption or
amendment of any bonus, pension, profit sharing, deferred compensation,
incentive compensation, stock ownership, stock purchase, stock option, phantom
stock, retirement, vacation, severance, disability, death benefit,
hospitalization, medical, welfare benefit or other plan, arrangement or
understanding providing compensation or benefits to any current or former
director, officer or employee of CBI or any of its Subsidiaries (collectively,
the "CBI Benefit Plans"), or any change in any actuarial or other assumption
used to calculate funding obligations with respect to any CBI pension plans, or
any change in the manner in which contributions to any CBI pension plans are
made or the basis on which such contributions are determined which are
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on CBI.
(k) ERISA COMPLIANCE. (i) With respect to CBI Benefit Plans, no liability
has been incurred and, to the Knowledge of CBI, there exists no condition or
circumstances in connection with which CBI or any of its Subsidiaries could be
subject to any liability that individually or in the aggregate is reasonably
likely to have a Material Adverse Effect on CBI under ERISA, the Code or any
other applicable law.
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(ii) Each CBI Benefit Plan has been administered in accordance with its
terms, except for any failures so to administer any CBI Benefit Plan that
individually or in the aggregate are not reasonably likely to have a Material
Adverse Effect on CBI. CBI, its Subsidiaries and all CBI Benefit Plans are in
compliance with the applicable provisions of ERISA, the Code and all other
applicable laws and the terms of all applicable collective bargaining
agreements, except for any failures to be in such compliance that individually
or in the aggregate are not reasonably likely to have a Material Adverse Effect
on CBI.
(iii) None of CBI or any of its Subsidiaries sponsors or contributes to any
CBI Benefit Plan that is subject to Title IV of ERISA.
(iv) CBI and its Subsidiaries are in compliance with all Federal, state,
local and foreign requirements regarding employment, except for any failures to
comply that individually or in the aggregate are not reasonably likely to have a
Material Adverse Effect on CBI. Neither CBI nor any of its Subsidiaries is a
party to any collective bargaining or other labor union contract applicable to
persons employed by CBI or any of its Subsidiaries in the United States and as
of the date of this Agreement no such collective bargaining agreement is being
negotiated by CBI or any of its Subsidiaries. As of the date of this Agreement,
there is no labor dispute, strike or work stoppage against CBI or any of its
Subsidiaries pending or, to the Knowledge of CBI, threatened which may interfere
with the respective business activities of CBI or any of its Subsidiaries,
except where such dispute, strike or work stoppage individually or in the
aggregate is not reasonably likely to have a Material Adverse Effect on CBI. As
of the date of this Agreement, to the Knowledge of CBI, none of CBI, any of its
Subsidiaries or any of their respective representatives or employees has
committed any unfair labor practice in connection with the operation of the
respective businesses of CBI or any of its Subsidiaries, and there is no action,
charge or complaint against CBI or any of its Subsidiaries by the National Labor
Relations Board or any comparable governmental agency pending or threatened in
writing, in each case except where such practices, actions, charges or
complaints, individually or in the aggregate, are not reasonably likely to have
a Material Adverse Effect on CBI.
(l) TAXES. (i) Each of CBI and its Subsidiaries and each CBI Consolidated
Group has filed or has caused to be filed all material tax returns and reports
required to be filed by it and all such returns and reports are complete and
correct in all material respects, or requests for extensions to file such
returns or reports have been timely filed, granted and have not expired, except
to the extent that such failures to file, to be complete or correct or to have
extensions granted that remain in effect individually or in the aggregate are
not reasonably likely to have a Material Adverse Effect on CBI. CBI, each of its
Subsidiaries and each CBI Consolidated Group has paid or caused to be paid (or
CBI has paid on its behalf) all material taxes due and owing, and the most
recent financial statements contained in the CBI Filed SEC Documents reflect an
adequate reserve for all material taxes payable by CBI and its Subsidiaries for
all taxable periods and portions thereof accrued through the date of such
financial statements.
(ii) No deficiencies, audit examinations, refund litigation, proposed
adjustments or matters in controversy, for any taxes have been proposed,
asserted or assessed in writing against CBI or any of its Subsidiaries or any
CBI Consolidated Group that are not adequately reserved for, except for
deficiencies, audit examinations, refund litigation, proposed adjustments or
matters in controversy that individually or in the aggregate are not reasonably
likely to have a Material Adverse Effect on CBI. The Federal income tax returns
of CBI and its Subsidiaries consolidated in such returns prior to 1993 have
closed by virtue of the applicable statute of limitations. All assessments for
taxes due and owing by CBI, any of its Subsidiaries or any CBI Consolidated
Group with respect to completed and settled examinations or concluded litigation
have been paid.
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(iii) Neither CBI nor any of its Subsidiaries has taken or agreed to take
any action or knows of any fact, agreement, plan or other circumstance that is
reasonably likely to prevent the Merger from qualifying as a reorganization
within the meaning of Section 368(a) of the Code.
(iv) No deduction of any amount that would otherwise be deductible with
respect to tax periods ending on or before the Effective Time could be
disallowed under Section 162(m) of the Code, except any disallowances under
Section 162(m) of the Code that alone or with other such disallowances are not
reasonably likely to have a Material Adverse Effect on CBI.
(v) Section 3.02(l)(1) of the CBI Disclosure Schedule sets forth a complete
schedule of each CBI Consolidated Group of which CBI is or has been a member
during the last six years. Such schedule sets forth the names of all members of
each such CBI Consolidated Group and the periods during which CBI or any of its
Subsidiaries is or has been a member.
(vi) As used in this Agreement (1) "taxes" shall include all (x) Federal,
state, local or foreign income, property, sales, excise and other taxes or
similar governmental charges, including any interest, penalties or additions
with respect thereto, (y) liability for the payment of any amounts of the type
described in clause (x) as a result of being a member of an affiliated,
consolidated, combined or unitary group, and (z) liability for the payment of
any amounts as a result of being party to any tax sharing agreement or as a
result of any express or implied obligation to indemnify any other person with
respect to the payment of any amounts of the type described in clause (x) or (y)
and (2) "CBI Consolidated Group" means any affiliated group within the meaning
of Section 1504(a) of the Code, in which CBI (or any Subsidiary of CBI) is or
has ever been a member or any group of corporations with which CBI files, has
filed or is or was required to file an affiliated, consolidated, combined,
unitary or aggregate tax return.
(m) VOTING REQUIREMENTS. The affirmative vote at the CBI Shareholders
Meeting (the "CBI Shareholder Approval") of the holders of a majority of all
shares of CBI Common Stock casting votes (PROVIDED that the total vote cast
represents more than fifty percent in interest of all capital stock of CBI
entitled to vote) is the only vote of the holders of any class or series of
CBI's capital stock necessary to approve, in accordance with the applicable
rules of the NYSE, the issuance of CBI Common Stock in connection with the
Merger and the other transactions contemplated by this Agreement.
(n) BROKERS. No broker, investment banker, financial advisor or other
person, other than Salomon Smith Barney Inc., the fees, commissions and expenses
of which will be paid by CBI, is entitled to any broker's, finder's, financial
advisor's or other similar fee or commission, or the reimbursement of expenses,
in connection with the transactions contemplated by this Agreement, the
Stockholders Agreements and the Option Agreements based upon arrangements made
by or on behalf of CBI. CBI has furnished to IXC true and complete copies of all
agreements under which any such fees, commissions or expenses are payable and
all indemnification and other agreements related to the engagement of the
persons to whom such fees, commissions or expenses are payable.
(o) OPINION OF FINANCIAL ADVISOR. CBI has received the opinion of Salomon
Smith Barney Inc., dated the date of this Agreement, to the effect that, as of
such date, the Exchange Ratio is fair to CBI from a financial point of view, a
signed copy of which has been or promptly will be delivered to CBI.
(p) INTERIM OPERATIONS OF SUB. Sub was formed solely for the purpose of
engaging in the transactions contemplated hereby, has engaged in no other
business activities and has conducted its operations only as contemplated
hereby.
(q) INTELLECTUAL PROPERTY; YEAR 2000. (i) CBI and its Subsidiaries own, or
are validly licensed or otherwise have the right to use, all Intellectual
Property Rights which are material to the conduct of the business of CBI and its
Subsidiaries, except where the failure to own or license such Intellectual
Property Rights is not reasonably likely to have a Material Adverse Effect on
CBI.
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(ii) To the Knowledge of CBI, neither CBI nor any of its Subsidiaries has
materially interfered with, infringed upon, misappropriated or otherwise come
into conflict with any Intellectual Property Rights of any other person. Neither
CBI nor any of its Subsidiaries has received any written charge, complaint,
claim, demand or notice alleging any such interference, infringement,
misappropriation or other conflict (including any claim that CBI or any such
Subsidiary must license or refrain from using any Intellectual Property Rights
or other proprietary information of any other person) which has not been settled
or otherwise fully resolved. To CBI's Knowledge, no other person has materially
interfered with, infringed upon, misappropriated or otherwise come into conflict
with any Intellectual Property Rights of CBI or any of its Subsidiaries.
(iii) The disclosure set forth in the CBI 1998 10-K under the heading "Year
2000 Readiness" was true and correct in all material respects on the date
thereof and is true and correct in all material respects as if made as of the
date hereof.
(iv) As of the Closing Date, CBI and its Subsidiaries have no Knowledge that
they are not Year 2000 Compliant and, as of the date hereof, CBI and its
Subsidiaries have no Knowledge that their respective suppliers will not be Year
2000 Compliant at January 1, 2000, except, in each case, for such failures to be
Year 2000 Compliant that individually or in the aggregate are not reasonably
likely to have a Material Adverse Effect on CBI.
(r) OWNERSHIP OF IXC STOCK. Neither CBI nor Sub (nor any other Subsidiary
of CBI) has acquired or, except as the result of the Merger, will acquire, or
has owned in the past three years, any stock of IXC.
(s) CBI RIGHTS AGREEMENT. CBI has amended the CBI Rights Agreement to
provide that IXC shall not be deemed to be an Acquiring Person (as defined in
the CBI Rights Agreement) and the Distribution Date or Share Acquisition Date
(each as defined in the CBI Rights Agreement) shall not be deemed to occur and
that the CBI Rights will not become separable, distributable, unredeemable or
exercisable as a result of the approval, execution and delivery of this
Agreement, the CBI Stock Option Agreement or the consummation of the Merger
and/or the other transactions contemplated hereby or thereby.
(t) TITLE TO PROPERTIES. (i) Section 3.02(t) of the CBI Disclosure
Schedule sets forth a true and complete list of all material real property and
leasehold property owned or leased by CBI or any of its Subsidiaries. Each of
CBI and its Subsidiaries has good and valid title to, or valid leasehold
interests in or valid rights to, all its material properties and assets except
for such as are no longer used or useful in the conduct of its businesses or as
have been disposed of in the ordinary course of business and except for defects
in title, easements, restrictive covenants and similar encumbrances that
individually or in the aggregate do not materially interfere with its ability to
conduct its business as currently conducted. All such material assets and
properties, other than assets and properties in which CBI or any of its
Subsidiaries has a leasehold interest, are free and clear of all Liens except
for Liens that individually or in the aggregate do not materially interfere with
the ability of CBI and its Subsidiaries to conduct their respective businesses
as currently conducted.
(ii) Each of CBI and its Subsidiaries has complied in all material respects
with the terms of all material leases to which it is a party and under which it
is in occupancy, and all such leases are in full force and effect. Each of CBI
and its Subsidiaries enjoys peaceful and undisturbed possession under all such
leases, except where a failure to do so individually or in the aggregate are not
reasonably likely to have a Material Adverse Effect on CBI.
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ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 4.01. CONDUCT OF BUSINESS. (a) CONDUCT OF BUSINESS BY IXC. Except
as set forth in Section 4.01(a) of the IXC Disclosure Schedule, as otherwise
expressly permitted by this Agreement or any of the Option Agreements or as
consented to in writing by CBI, during the period from the date of this
Agreement to the Effective Time, IXC shall, and shall cause its Subsidiaries to,
carry on their respective businesses in the ordinary course consistent with past
practice and in compliance in all material respects with all applicable laws and
regulations. Without limiting the generality of the foregoing, during the period
from the date of this Agreement to the Effective Time, except as set forth in
Section 4.01(a) of the IXC Disclosure Schedule, as otherwise expressly permitted
by this Agreement or any of the Option Agreements or as consented to in writing
by CBI, IXC shall not, and shall not permit any of its Subsidiaries to:
(i) other than dividends and distributions (including liquidating
distributions) by a direct or indirect wholly owned Subsidiary of IXC to its
parent and dividends and distributions declared, set aside or paid by IXC as
required by and in accordance with the respective terms of its capital stock
as of the date hereof, (x) declare, set aside or pay any dividends on, or
make any other distributions (whether in cash, stock, property or otherwise)
in respect of, any of its capital stock, (y) split, combine or reclassify
any of its capital stock or issue or authorize the issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
capital stock, or (z) purchase, redeem or otherwise acquire, directly or
indirectly, any shares of capital stock of IXC or any of its Subsidiaries or
any other securities thereof or any rights, warrants or options to acquire
any such shares or other securities;
(ii) issue, deliver, sell, grant, pledge or otherwise encumber or
subject to any Lien any shares of its capital stock, any other voting
securities or any securities convertible into, or any rights, warrants or
options to acquire, any such shares, voting securities or convertible
securities (other than (w) in accordance with the IXC Rights Agreement, (x)
the issuance of shares of IXC Common Stock upon the exercise of IXC Stock
Options as of the date hereof in accordance with their terms on the date
hereof or options issued after the date hereof with the approval of CBI in
its sole discretion, (y) the issuance of shares of IXC Common Stock upon the
conversion of the IXC 7 1/4% Preferred Stock and the IXC 6 3/4% Preferred
Stock outstanding as of the date hereof in accordance with their terms on
the date hereof or (z) the issuance of shares of IXC Common Stock pursuant
to the IXC Stock Option Agreement);
(iii) amend IXC's Restated Certificate of Incorporation, By-laws or other
comparable organizational documents;
(iv) acquire or agree to acquire by merging or consolidating with, or by
purchasing assets of, or by any other manner, any business or any person,
other than purchases of raw materials or supplies in the ordinary course of
business consistent with past practice;
(v) sell, lease, license, sell and leaseback, mortgage or otherwise
encumber or subject to any Lien or otherwise dispose of any of its
properties or assets (including securitizations), other than sales or
licenses of finished goods and services in the ordinary course of business
consistent with past practice;
(vi) (A) incur any indebtedness for borrowed money or guarantee any such
indebtedness of another person, issue or sell any debt securities or
warrants or other rights to acquire any debt securities of IXC or any of its
Subsidiaries, guarantee any debt securities of another person, enter into
any "keep well" or other agreement to maintain any financial statement
condition of another person or enter into any arrangement having the
economic effect of any of the foregoing, except
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for (x) short-term borrowings incurred in the ordinary course of business
(or to refund existing or maturing indebtedness) consistent with past
practice and (y) intercompany indebtedness between IXC and any of its wholly
owned Subsidiaries or between such wholly owned Subsidiaries, or (B) make
any loans, advances or capital contributions to, or investments in, any
other person;
(vii) make or agree to make any new capital expenditure or expenditures;
(viii) (A) pay, discharge, settle or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise) or litigation (whether or not commenced prior to the date of this
Agreement), other than the payment, discharge, settlement or satisfaction,
in the ordinary course of business consistent with past practice or in
accordance with its terms, of any liability recognized or disclosed in the
most recent consolidated financial statements (or the notes thereto) of IXC
included in the IXC Filed SEC Documents or incurred since the date of such
financial statements, or (B) waive the benefits of, or agree to modify in
any manner, terminate, release any person from or fail to enforce any
confidentiality, standstill or similar agreement to which IXC or any of its
Subsidiaries is a party or of which IXC or any of its Subsidiaries is a
beneficiary;
(ix) except as required by law or contemplated hereby, enter into, adopt
or amend in any material respect or terminate any IXC Benefit Plan,
collective bargaining agreement, employment agreement, deferred compensation
agreement, consulting agreement, severance agreement, termination agreement,
indemnification agreement or any other agreement, plan or policy involving
IXC or any of its Subsidiaries, and one or more of its current or former
directors, officers or employees, or change any actuarial or other
assumption used to calculate funding obligations with respect to any pension
plan, or change the manner in which contributions to any pension plan are
made or the basis on which such contributions are determined;
(x) except for normal increases in the ordinary course of business
consistent with past practice that, in the aggregate, do not materially
increase benefits or compensation expenses of IXC or its Subsidiaries, or as
contemplated hereby or by the terms of any contract the existence of which
does not constitute a violation of this Agreement, increase the
compensation, bonus or other benefits of any director, officer or other
employee or pay any benefit or amount not required by a plan or arrangement
as in effect on the date of this Agreement to any such person;
(xi) transfer or license to any person or entity or otherwise extend,
amend or modify any rights to the Intellectual Property Rights of IXC and
its Subsidiaries other than in the ordinary course of business consistent
with past practices or on a non-exclusive basis not materially different
from past practices;
(xii) take any action that would cause the representations and warranties
set forth in paragraph (4)(B), (4)(D), (6) or (7) of Section 3.01(g) to no
longer be true and correct on the Closing Date;
(xiii) call or hold any meeting of stockholders of IXC other than in
connection with the election of members of the Board of Directors of IXC or
other routine matters in the ordinary course of business consistent with
past practice;
(xiv) enter into any contract, agreement, obligation, commitment,
arrangement or understanding with any Affiliate of IXC that would have been
required to be filed as an exhibit to the IXC 1998 10-K had IXC been a party
thereto as of December 31, 1998;
(xv) make any material tax election or settle or compromise any material
tax liability other than in the ordinary course of business;
(xvi) make any offering of IXC Stock Options under any employee stock
option or stock purchase plan after the date hereof; or
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(xvii) authorize, commit, resolve or agree to take any of the foregoing
actions.
(b) CONDUCT OF BUSINESS BY CBI. During the period from the date of this
Agreement to the Effective Time, without prior consultation with IXC, CBI shall
not, nor shall it permit any of its Subsidiaries to:
(i) make any material acquisition of assets or businesses;
(ii) sell or otherwise dispose of any material part of its properties or
assets other than sales or licenses of services in the ordinary course of
business consistent with past practice; or
(iii) issue or sell a material amount of its shares of capital stock, any
other voting securities or any securities convertible into any such shares,
voting securities or convertible securities (other than (x) in accordance
with the CBI Rights Agreement, (y) the issuance of shares of CBI Common
Stock upon the exercise of CBI Stock Options in accordance with their terms
or (z) the issuance of shares of CBI Common Stock pursuant to the CBI Stock
Option Agreement).
(c) OTHER ACTIONS. Except as required by applicable law or as expressly
permitted by this Agreement, IXC and CBI shall not, and shall not permit any of
their respective Subsidiaries to, voluntarily take any action that would, or
that is reasonably likely to, result in (i) any of the representations and
warranties of such party set forth in this Agreement or any of the Option
Agreements that are qualified as to materiality becoming untrue at the Effective
Time, (ii) any of such representations and warranties that are not so qualified
becoming untrue in any material respect at the Effective Time or (iii) any of
the conditions to the Merger set forth in Article VI not being satisfied.
(d) ADVICE OF CHANGES. IXC and CBI shall promptly advise the other party
orally and in writing to the extent it has Knowledge of (i) any representation
or warranty made by it (and, in the case of CBI, made by Sub) contained in this
Agreement or any of the Option Agreements that is qualified as to materiality
becoming untrue or inaccurate in any respect or any such representation or
warranty that is not so qualified becoming untrue or inaccurate in any material
respect or (ii) the failure of it (and, in the case of CBI, by Sub) to comply
with or satisfy in any material respect any covenant, condition or agreement to
be complied with or satisfied by it under this Agreement or any of the Option
Agreements and (iii) any change or event having, or which is reasonably likely
to have, a Material Adverse Effect on such party or on the truth of their
respective representations and warranties or the ability of the conditions set
forth in Article VI to be satisfied; PROVIDED, HOWEVER, that no such
notification shall affect the representations, warranties, covenants or
agreements of the parties (or remedies with respect thereto) or the conditions
to the obligations of the parties under this Agreement or any of the Option
Agreements.
SECTION 4.02. TRANSITION TEAM. Immediately following the execution of this
Agreement, the parties will create a special transition team (the "Transition
Team") comprised of the individuals from CBI and IXC set forth in Section 4.02
of the CBI Disclosure Schedule and IXC will make available to the Transition
Team sufficient office space, facilities and support within its corporate
headquarters. To the extent permitted under applicable law, CBI and IXC will
consult with each other regarding the business and operations of IXC and its
Subsidiaries. In addition, the Transition Team will develop recommendations
concerning the future structure and operations of the Surviving Corporation and
its Subsidiaries following the Effective Time.
SECTION 4.03. NO SOLICITATION BY IXC. (a) From and after the date of this
Agreement, IXC shall not, nor shall it permit any of its Subsidiaries to, nor
shall it authorize or permit any of its directors, officers or employees or any
investment banker, financial advisor, attorney, accountant or other
representative retained by it or any of its Subsidiaries to, directly or
indirectly through another person, (i) solicit, initiate or encourage (including
by way of furnishing information), or take any other action designed to
facilitate, any inquiries or the making of any proposal that constitutes, an IXC
Takeover Proposal or (ii) participate in any discussions or negotiations
regarding any IXC Takeover
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Proposal. For purposes of this Agreement, "IXC Takeover Proposal" means any bona
fide inquiry, proposal or offer from any person relating to any direct or
indirect acquisition or purchase of a business that constitutes 35% or more of
the net revenues, net income or the assets of IXC and its Subsidiaries, taken as
a whole, or 35% or more of any class of equity securities of IXC or any of its
Subsidiaries, any tender offer or exchange offer that if consummated would
result in any person beneficially owning 35% or more of any class of equity
securities of IXC or any of its Subsidiaries, or any merger, consolidation,
business combination, recapitalization, liquidation, dissolution or similar
transaction involving IXC or any of its Subsidiaries, other than the
transactions contemplated by this Agreement.
(b) Neither the Board of Directors of IXC nor any committee thereof shall
(i) except as required by law as advised by counsel, withdraw or modify, or
propose publicly to withdraw or modify, in a manner adverse to CBI, the approval
or recommendation by such Board of Directors or such committee of the Merger or
this Agreement, (ii) approve or recommend, or propose publicly to approve or
recommend, any IXC Takeover Proposal or (iii) cause IXC to enter into any letter
of intent, agreement in principle, acquisition agreement or other similar
agreement (each, an "IXC Acquisition Agreement") related to any IXC Takeover
Proposal.
(c) In addition to the obligations of IXC set forth in paragraphs (a) and
(b) of this Section 4.03, IXC shall immediately advise CBI orally and in writing
of any request for information or of any IXC Takeover Proposal, the material
terms and conditions of such request or IXC Takeover Proposal and the identity
of the person making such request or IXC Takeover Proposal. IXC will keep CBI
informed of the status and details (including amendments or proposed amendments)
of any such request or IXC Takeover Proposal.
(d) Nothing contained in this Section 4.03 shall prohibit IXC from taking
and disclosing to its stockholders a position contemplated by Rule 14d-9 or
14e-2 promulgated under the Exchange Act or from making any disclosure to IXC's
stockholders if, in the good faith judgment of the Board of Directors of IXC,
after consultation with outside counsel, failure so to disclose would be
inconsistent with its obligations under applicable law; provided, however, that,
subject to Section 4.03(b)(i), neither IXC nor its Board of Directors nor any
committee thereof shall withdraw or modify, or propose publicly to withdraw or
modify, its position with respect to this Agreement or the Merger or approve or
recommend, or propose publicly to approve or recommend, an IXC Takeover
Proposal.
SECTION 4.04. NO SOLICITATION BY CBI. (a) From and after the date of this
Agreement, CBI shall not, nor shall it permit any of its Subsidiaries to, nor
shall it authorize or permit any of its directors, officers or employees or any
investment banker, financial advisor, attorney, accountant or other
representative retained by it or any of its Subsidiaries to, directly or
indirectly through another person, (i) solicit, initiate or encourage (including
by way of furnishing information), or take any other action designed to
facilitate, any inquiries or the making of any proposal that constitutes, a CBI
Takeover Proposal or (ii) participate in any discussions or negotiations
regarding any CBI Takeover Proposal. For purposes of this Agreement, "CBI
Takeover Proposal" means any bona fide inquiry, proposal or offer from any
person relating to any direct or indirect acquisition or purchase of a business
that constitutes 35% or more of the net revenues, net income or the assets of
CBI and its Subsidiaries, taken as a whole, or 35% or more of any class of
equity securities of CBI or any of its Subsidiaries, any tender offer or
exchange offer that if consummated would result in any person beneficially
owning 35% or more of any class of equity securities of CBI or any of its
Subsidiaries, or any merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction involving CBI
or any of its Subsidiaries, other than the transactions contemplated by this
Agreement.
(b) Neither the Board of Directors of CBI nor any committee thereof shall
(i) except as required by law as advised by counsel, withdraw or modify, or
propose publicly to withdraw or modify, in a
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manner adverse to IXC, the approval or recommendation by such Board of Directors
or such committee of the Merger or this Agreement, (ii) approve or recommend, or
propose publicly to approve or recommend, any CBI Takeover Proposal or (iii)
cause CBI to enter into any letter of intent, agreement in principle,
acquisition agreement or other similar agreement (each, a "CBI Acquisition
Agreement") related to any CBI Takeover Proposal.
(c) In addition to the obligations of CBI set forth in paragraphs (a) and
(b) of this Section 4.04, CBI shall immediately advise IXC orally and in writing
of any request for information or of any CBI Takeover Proposal, the material
terms and conditions of such request or CBI Takeover Proposal and the identity
of the person making such request or CBI Takeover Proposal. CBI will keep IXC
informed of the status and details (including amendments or proposed amendments)
of any such request or CBI Takeover Proposal.
(d) Nothing contained in this Section 4.04 shall prohibit CBI from taking
and disclosing to its shareholders a position contemplated by Rule 14d-9 or
14e-2 promulgated under the Exchange Act or from making any disclosure to CBI's
shareholders if, in the good faith judgment of the Board of Directors of CBI,
after consultation with outside counsel, failure so to disclose would be
inconsistent with its obligations under applicable law; PROVIDED, HOWEVER, that,
subject to Section 4.03(b)(i), neither CBI nor its Board of Directors nor any
committee thereof shall withdraw or modify, or propose publicly to withdraw or
modify, its position with respect to this Agreement or the Merger or approve or
recommend, or propose publicly to approve or recommend, a CBI Takeover Proposal.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01. PREPARATION OF THE FORM S-4 AND JOINT PROXY STATEMENT;
STOCKHOLDER MEETINGS. (a) As soon as practicable following the date of this
Agreement, IXC and CBI shall prepare and file with the SEC the Joint Proxy
Statement and IXC and CBI shall prepare and CBI shall file with the SEC the Form
S-4, in which the Joint Proxy Statement will be included as a prospectus. Each
of IXC and CBI shall use reasonable efforts to have the Form S-4 declared
effective under the Securities Act as promptly as practicable after such filing
and keep the Form S-4 effective for so long as necessary to complete the Merger.
IXC will use all reasonable efforts to cause the Joint Proxy Statement to be
mailed to IXC's stockholders, and CBI will use all reasonable efforts to cause
the Joint Proxy Statement to be mailed to CBI's shareholders, in each case as
promptly as practicable after the Form S-4 is declared effective under the
Securities Act. CBI shall also take any action (other than qualifying to do
business in any jurisdiction in which it is not now so qualified or to file a
general consent to service of process) required to be taken under any applicable
state securities laws in connection with the issuance of CBI Common Stock in the
Merger and IXC shall furnish all information concerning IXC and the holders of
capital stock of IXC as may be reasonably requested in connection with any such
action. No filing of, or amendment or supplement to, or correspondence to the
SEC or its staff with respect to, the Form S-4 will be made by CBI, or the Joint
Proxy Statement will be made by CBI or IXC, without providing the other party a
reasonable opportunity to review and comment thereon. CBI will advise IXC,
promptly after it receives notice thereof, of the time when the Form S-4 has
become effective or any supplement or amendment thereto has been filed, the
issuance of any stop order, the suspension of the qualification of the CBI
Common Stock issuable in connection with the Merger for offering or sale in any
jurisdiction, or any request by the SEC for amendment of the Form S-4 or the
Joint Proxy Statement or comments thereon and responses thereto or requests by
the SEC for additional information and will, as promptly as practicable, provide
to IXC copies of all correspondence and filings with the SEC with respect to the
Form S-4. IXC will inform CBI, promptly after it receives notice thereof, of any
request by the SEC for the amendment of the Joint Proxy Statement or comments
thereon and responses thereto or requests by the SEC for additional
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information and will, as promptly as practicable, provide to CBI copies of all
correspondence and filings with the SEC with respect to the Joint Proxy
Statement. If at any time prior to the Effective Time any information relating
to IXC or CBI, or any of their respective Affiliates, directors or officers,
should be discovered by IXC or CBI which should be set forth in an amendment or
supplement to any of the Form S-4 or the Joint Proxy Statement, so that any of
such documents would not include any misstatement of a material fact or omit to
state any material fact necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, the party which
discovers such information shall promptly notify the other parties hereto and an
appropriate amendment or supplement describing such information shall be
promptly filed with the SEC and, to the extent required by law, disseminated to
the shareholders of CBI and the stockholders of IXC. For purposes of Sections
3.01(f), 3.02(e) and 5.01, information concerning or related to CBI, its
Subsidiaries or the CBI Shareholders Meeting will be deemed to have been
provided by CBI, and information concerning or related to IXC, its Subsidiaries
or the IXC Stockholders Meeting will be deemed to have been provided by IXC.
(b) IXC (i) shall, as soon as practicable following the date of this
Agreement, establish a record date (which shall be as soon as practicable
following the date of this Agreement) for, duly call, give notice of, convene
and hold a meeting of its stockholders (the "IXC Stockholders Meeting") for the
purpose of obtaining IXC Stockholder Approval and (ii) shall, through its Board
of Directors, recommend to its stockholders the approval and adoption of this
Agreement, the Merger and the other transactions contemplated hereby. Without
limiting the generality of the foregoing but subject to its rights to terminate
this Agreement pursuant to Section 7.01, IXC agrees that its obligations
pursuant to the first sentence of this Section 5.01(b) shall not be affected by
the commencement, public proposal, public disclosure or communication to IXC of
any IXC Takeover Proposal.
(c) CBI (i) shall, as soon as practicable following the date of this
Agreement, establish a record date (which shall be as soon as practicable
following the date of this Agreement) for, duly call, give notice of, convene
and hold a meeting of its shareholders (the "CBI Shareholders Meeting") for the
purpose of obtaining CBI Shareholder Approval and (ii) shall, through its Board
of Directors, recommend to its shareholders the approval of the matters referred
to in Section 3.02(m). Without limiting the generality of the foregoing but
subject to its rights to terminate this Agreement pursuant to Section 7.01, CBI
agrees that its obligations pursuant to the first sentence of this Section
5.01(c) shall not be affected by the commencement, public proposal, public
disclosure or communication to CBI of any CBI Takeover Proposal.
(d) IXC and CBI will use all reasonable efforts to hold the IXC Stockholders
Meeting and the CBI Shareholders Meeting on the same date and as soon as
practicable after the date hereof.
SECTION 5.02. LETTERS OF IXC'S ACCOUNTANTS. IXC shall use reasonable
efforts to cause to be delivered to CBI two letters from IXC's independent
accountants, one dated a date within two Business Days before the date on which
the Form S-4 shall become effective and one dated a date within two Business
Days before the Closing Date, each addressed to CBI, in form and substance
reasonably satisfactory to CBI and customary in scope and substance for comfort
letters delivered by independent public accountants in connection with
registration statements similar to the Form S-4.
SECTION 5.03. LETTERS OF CBI'S ACCOUNTANTS. CBI shall use reasonable
efforts to cause to be delivered to IXC two letters from CBI's independent
accountants, one dated a date within two Business Days before the date on which
the Form S-4 shall become effective and one dated a date within two Business
Days before the Closing Date, each addressed to IXC, in form and substance
reasonably satisfactory to IXC and customary in scope and substance for comfort
letters delivered by independent public accountants in connection with
registration statements similar to the Form S-4.
SECTION 5.04. ACCESS TO INFORMATION; CONFIDENTIALITY. Subject to the
existing confidentiality agreement dated as of May 28, 1999 (the
"Confidentiality Agreement"), between CBI and IXC, upon
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reasonable notice, each of CBI and IXC shall, and shall cause each of its
respective Subsidiaries to, afford to the other party and to the officers,
employees, accountants, counsel, financial advisors and other representatives of
such other party, reasonable access during normal business hours during the
period prior to the Effective Time to all their respective properties, books,
contracts, commitments, personnel and records and, during such period, each of
CBI and IXC shall, and shall cause each of its respective Subsidiaries to,
furnish promptly to the other party (a) a copy of each report, schedule,
registration statement and other document filed or received by it during such
period pursuant to the requirements of Federal or state securities laws and (b)
all other information concerning its business, properties and personnel as such
other party may reasonably request. Neither CBI nor IXC shall be required to
provide access to or disclose information where such access or disclosure would
contravene any applicable law, rule, regulation, order or decree or would, with
respect to any pending matter, result in a waiver of the attorney-client
privilege or the protection afforded attorney work-product. CBI and IXC shall
use reasonable efforts to obtain from third parties any consents or waivers of
confidentiality restrictions with respect to any such information being provided
by it. No review pursuant to this Section 5.04 shall have an effect for the
purpose of determining the accuracy of any representation or warranty given by
either party hereto to the other party hereto. Each of CBI and IXC will hold,
and will cause its respective officers, employees, accountants, counsel,
financial advisors and other representatives and Affiliates to hold, any
nonpublic information in accordance with the terms of the Confidentiality
Agreement.
SECTION 5.05. REASONABLE EFFORTS. (a) Upon the terms and subject to the
conditions set forth in this Agreement, each of the parties agrees to use its
reasonable efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, and to assist and cooperate with the other parties in doing,
all things necessary, proper or advisable to consummate and make effective, in
the most expeditious manner practicable, the Merger and the other transactions
contemplated by this Agreement, the Stockholders Agreements and the Option
Agreements, including using reasonable efforts to accomplish the following: (i)
the taking of all reasonable acts necessary to cause the conditions to Closing
to be satisfied as promptly as practicable, (ii) the obtaining of all necessary
actions or nonactions, waivers, consents and approvals from Governmental
Entities and the making of all necessary registrations and filings (including
filings with Governmental Entities, if any) and the taking of all reasonable
steps as may be necessary to obtain an approval or waiver from, or to avoid an
action or proceeding by any Governmental Entity, (iii) the obtaining of all
necessary consents, approvals or waivers from third parties, (iv) the defending
of any lawsuits or other legal proceedings, whether judicial or administrative,
challenging this Agreement, the Stockholders Agreements or any of the Option
Agreements or the consummation of the Merger or the other transactions
contemplated by, and to fully carry out the purposes of, this Agreement, the
Stockholders Agreements and the Option Agreements, including seeking to have any
stay or temporary restraining order entered by any court or other Governmental
Entity vacated or reversed and (v) the execution and delivery of any additional
instruments necessary to consummate the Merger and the other transactions
contemplated by, and to fully carry out the purposes of, this Agreement, the
Stockholders Agreements and the Option Agreements.
(b) In connection with and without limiting the foregoing, IXC and its Board
of Directors and CBI and its Board of Directors shall make reasonable efforts
to: (1) take all action necessary to ensure that no state takeover statute or
similar statute or regulation is or becomes applicable to this Agreement, the
Stockholders Agreements or any of the Option Agreements or the Merger or any of
the other transactions contemplated by this Agreement, the Stockholders
Agreements or any of the Option Agreements and (2) if any state takeover statute
or similar statute becomes applicable to this Agreement, the Stockholders
Agreements, any of the Option Agreements, the Merger or any other transactions
contemplated by this Agreement, the Stockholders Agreements or any of the Option
Agreements, take all action necessary to ensure that the Merger and the other
transactions contemplated by this Agreement, the Stockholders Agreements and the
Option Agreements may be consummated as promptly as practicable on the terms
contemplated by this Agreement, the
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Stockholders Agreements and the Option Agreements and otherwise to minimize the
effect of such statute or regulation on this Agreement, the Stockholders
Agreements, the Option Agreements, the Merger and the other transactions
contemplated by this Agreement, the Stockholders Agreements and the Option
Agreements. Nothing in this Agreement shall be deemed to require CBI to agree
to, or proffer to, divest or hold separate any assets or any portion of any
business of CBI, IXC or any of their respective Subsidiaries if the Board of
Directors of CBI determines that so doing would materially impair the benefit
intended to be obtained by CBI in the Merger. Without limiting the generality of
the foregoing, IXC shall give CBI the opportunity to participate in the defense
of any litigation against IXC and/or its directors relating to the transactions
contemplated by this Agreement, the Stockholders Agreements and the Option
Agreements.
SECTION 5.06. IXC STOCK OPTIONS AND IXC WARRANTS. (a) As soon as
practicable following the date of this Agreement, the Board of Directors of IXC
(or, if appropriate, any committee administering IXC Stock Plans) shall adopt
such resolutions or take such other actions as may be required to effect the
following:
(i) adjust the terms of all outstanding IXC Stock Options, whether
vested or unvested, as necessary to provide that, at the Effective Time,
each IXC Stock Option outstanding immediately prior to the Effective Time
shall be amended and converted into an option to acquire, on the same terms
and conditions as were applicable under IXC Stock Option, the number of
shares of CBI Common Stock (rounded down to the nearest whole share)
determined by multiplying the number of shares of IXC Common Stock subject
to such IXC Stock Option by the Exchange Ratio, at a price per share of CBI
Common Stock equal to (A) the aggregate exercise price for the shares of IXC
Common Stock otherwise purchasable pursuant to such IXC Stock Option divided
by (B) the aggregate number of shares of CBI Common Stock deemed purchasable
pursuant to such IXC Stock Option (each, as so adjusted, an "Adjusted
Option"); provided that such exercise price shall be rounded up to the
nearest whole cent; and
(ii) make such other changes to IXC Stock Plans as CBI and IXC may agree
are appropriate to give effect to the Merger.
(b) The adjustments provided herein with respect to any IXC Stock Options to
which Section 421(a) of the Code applies shall be and are intended to be
effected in a manner which is consistent with Section 424(a) of the Code.
(c) At the Effective Time, by virtue of the Merger and without the need of
any further corporate action, each IXC Stock Option outstanding at the Effective
Time shall be converted into an option relating to CBI Common Stock following
the Effective Time so as to substitute CBI Common Stock for IXC Common Stock
purchasable thereunder (subject to the adjustments required by this Section 5.06
after giving effect to the Merger). Prior to the Effective Time, CBI shall take
all necessary actions (including, if required to comply with Section 162(m) of
the Code (and the regulations thereunder) or applicable law or rule of Nasdaq,
obtaining the approval of its shareholders at the next regularly scheduled
annual meeting of CBI following the Effective Time) for the conversion of IXC
Stock Options, including the reservation, issuance and listing of CBI Common
Stock in a number at least equal to the number of shares of CBI Common Stock
that will be subject to the Adjusted Options.
(d) As soon as practicable following the Effective Time, CBI shall prepare
and file with the SEC a registration statement on Form S-8 (or another
appropriate form) registering a number of shares of CBI Common Stock equal to
the number of shares subject to the Adjusted Options. Such registration
statement shall be kept effective (and the current status of the prospectus or
prospectuses required thereby shall be maintained) at least for so long as any
Adjusted Options or any unsettled awards granted under IXC Stock Plans after the
Effective Time may remain outstanding.
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(e) As soon as practicable after the Effective Time, CBI shall deliver to
the holders of IXC Stock Options appropriate notices setting forth such holders'
rights pursuant to the respective IXC Stock Plans and the agreements evidencing
the grants of such IXC Stock Options and that such IXC Stock Options and
agreements shall be assumed by CBI and shall continue in effect on the same
terms and conditions (subject to the adjustments required by this Section 5.06
after giving effect to the Merger and to vesting, if any, caused by the Merger).
(f) Except as otherwise expressly provided in this Section 5.06 and except
to the extent required under the respective terms of IXC Stock Options, all
restrictions or limitations on transfer and vesting with respect to IXC Stock
Options awarded under IXC Stock Plans or any other plan, program or arrangement
of IXC or any of its Subsidiaries, to the extent that such restrictions or
limitations shall not have already lapsed, and all other terms thereof, shall
remain in full force and effect with respect to such options after giving effect
to the Merger and the assumption by CBI as set forth above.
(g) At the Effective Time, by virtue of the Merger and without the need for
any further corporate action, each Warrant outstanding immediately prior to the
Effective Time shall be automatically converted into an option or warrant to
acquire, on the same terms and conditions as were applicable under such Warrant,
the number of shares of CBI Common Stock (rounded down to the nearest whole
share) determined by multiplying the number of shares of IXC Common Stock
subject to such Warrant by the Exchange Ratio, at a price per share of CBI
Common Stock equal to (A) the aggregate exercise price for shares of IXC Common
Stock otherwise purchasable pursuant to such Warrant divided by (B) the
aggregate number of shares of CBI Common Stock deemed purchasable pursuant to
such Warrant; PROVIDED, HOWEVER, that such exercise price shall be rounded up to
the nearest whole cent.
SECTION 5.07. EMPLOYEE BENEFIT PLANS; EXISTING AGREEMENTS. (a) During the
six-month period following the Effective Time (the "Transition Period"), CBI
shall cause the Surviving Corporation to either maintain the benefit programs
(other than equity-based arrangements) provided by IXC and its Subsidiaries
before the Effective Time or replace all or any such programs with programs
maintained for similarly situated employees of CBI; PROVIDED that the aggregate
level of benefits (other than equity-based arrangements) provided during the
Transition Period shall be substantially similar to the aggregate level of
benefits (other than equity-based arrangements) provided by IXC and its
Subsidiaries before the Effective Time. To the extent that any plan of CBI or
any of its Affiliates (a "CBI Plan") becomes applicable to any employee or
former employee of IXC or its Subsidiaries, CBI shall grant, or cause to be
granted, to such employees or former employees credit for their service with IXC
and its Subsidiaries (and any of their predecessors) for the purpose of
determining eligibility to participate and nonforfeitability of benefits under
such CBI Plan and for purposes of benefit accrual under vacation and severance
pay plans (but only to the extent such service was credited under similar plans
of IXC and its Subsidiaries).
(b) With respect to any welfare benefit plan of CBI or its Affiliates made
available to individuals who immediately prior to the Closing Date were
employees of IXC or any of its Subsidiaries, CBI shall, or shall cause the
Surviving Corporation to, waive any waiting periods, pre-existing condition
exclusions and actively-at-work requirements to the extent such provisions were
inapplicable immediately before such plan was made available and provide that
any expenses incurred on or before the date such plan was made available by any
such individual or such individual's covered dependents shall be taken into
account for purposes of satisfying applicable deductible, coinsurance and
maximum out-of-pocket provisions.
SECTION 5.08. INDEMNIFICATION, EXCULPATION AND INSURANCE. (a) CBI and Sub
agree that all rights to indemnification and exculpation from liabilities for
acts or omissions occurring at or prior to the Effective Time (and rights for
advancement of expenses) now existing in favor of the current or former
directors or officers of IXC or its Subsidiaries as provided in their respective
certificates of incorporation or by-laws (or comparable organizational
documents) and any indemnification or other
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agreements of IXC as in effect on the date hereof shall be assumed by the
Surviving Corporation in the Merger, without further action, as of the Effective
Time and shall survive the Merger and shall continue in full force and effect in
accordance with their terms.
(b) In the event that the Surviving Corporation or any of its successors or
assigns (i) consolidates with or merges into any other person and is not the
continuing or surviving corporation or entity of such consolidation or merger or
(ii) transfers or conveys all or substantially all its properties and assets to
any person, then, and in each such case, CBI shall cause proper provision to be
made so that the successors and assigns of the Surviving Corporation assume the
obligations set forth in this Section 5.08.
(c) For six years from and after the Effective Time, CBI shall maintain in
effect IXC's current directors' and officers' liability insurance covering acts
or omissions occurring prior to the Effective Time covering each person
currently covered by IXC's directors' and officers' liability insurance policy
on terms with respect to such coverage and amounts no less favorable than those
of such policy in effect on the date hereof; PROVIDED that CBI may substitute
therefor policies of CBI or its subsidiaries containing terms with respect to
coverage and amount no less favorable to such directors or officers; PROVIDED,
HOWEVER, that in no event shall CBI be required to pay aggregate premiums for
insurance under this Section 5.08(c) in excess of 200% of the amount of the
aggregate premiums paid by IXC in 1998 on an annualized basis for such purpose;
PROVIDED that CBI shall nevertheless be obligated to provide such coverage as
may be obtained for such 200% amount.
(d) The provisions of this Section 5.08 (i) are intended to be for the
benefit of, and will be enforceable by, each indemnified party, his or her heirs
and his or her representatives and (ii) are in addition to, and not in
substitution for, any other rights to indemnification or contribution that any
such person may have by contract or otherwise.
SECTION 5.09. FEES AND EXPENSES. (a) Except as provided in this Section
5.09, all fees and expenses incurred in connection with the Merger, this
Agreement, the Stockholders Agreements, the Option Agreements and the
transactions contemplated hereby and thereby shall be paid by the party
incurring such fees or expenses, whether or not the Merger is consummated,
except that each of CBI and IXC shall bear and pay one-half of (1) the costs and
expenses incurred in connection with the filing, printing and mailing of the
Form S-4 and the Joint Proxy Statement (including SEC filing fees) and (2) the
filing fees for the premerger notification and report forms under the HSR Act.
(b) In the event that (1) an IXC Takeover Proposal shall have been made to
IXC or any of its Subsidiaries or shall have been made directly to the
stockholders of IXC generally or shall have otherwise become publicly known or
any person shall have publicly announced an intention (whether or not
conditional) to make an IXC Takeover Proposal and thereafter this Agreement is
terminated by either CBI or IXC pursuant to Section 7.01(b)(i) or (iii) or (2)
this Agreement is terminated by CBI pursuant to Section 7.01(e), then IXC shall
promptly, but in no event later than the date of such termination, pay CBI a fee
equal to $105 million (the "Termination Fee"), payable by wire transfer of same
day funds; PROVIDED, HOWEVER, that no Termination Fee shall be payable to CBI
pursuant to clause (1) of this paragraph (b) or pursuant to a termination by CBI
pursuant to Section 7.01(e) unless and until within 12 months of such
termination IXC or any of its Subsidiaries enters into any IXC Acquisition
Agreement with respect to, or consummates, any IXC Takeover Proposal (for the
purposes of the foregoing proviso the term "IXC Takeover Proposal" shall have
the meaning assigned to such term in Section 4.03 except that references to
"35%" in the definition of "IXC Takeover Proposal" in Section 4.03 as they
relate to net revenues, net income or assets of IXC and its Subsidiaries, taken
as a whole, shall be deemed to be references to "50%"), in which event the
Termination Fee shall be payable upon the first to occur of such events. IXC
acknowledges that the agreements contained in this Section 5.09(b) are an
integral part of the transactions contemplated by this Agreement, and that,
without these agreements, CBI would not enter into this Agreement; accordingly,
if IXC fails promptly
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to pay the amount due pursuant to this Section 5.09(b), and, in order to obtain
such payment, CBI commences a suit which results in a judgment against IXC for
the fee set forth in this Section 5.09(b), IXC shall pay to CBI its costs and
expenses (including attorneys' fees and expenses) in connection with such suit,
together with interest on the amount of the fee at the prime rate of Citibank,
N.A. in effect on the date such payment was required to be made.
(c) In the event that (1) a CBI Takeover Proposal shall have been made to
CBI or any of its Subsidiaries or shall have been made directly to the
shareholders of CBI generally or shall have otherwise become publicly known or
any person shall have publicly announced an intention (whether or not
conditional) to make a CBI Takeover Proposal and thereafter this Agreement is
terminated by either CBI or IXC pursuant to Section 7.01(b)(i) or (ii) or (2)
this Agreement is terminated by IXC pursuant to Section 7.01(f), then CBI shall
promptly, but in no event later than the date of such termination, pay IXC the
Termination Fee, payable by wire transfer of same day funds; PROVIDED, HOWEVER,
that no Termination Fee shall be payable to IXC pursuant to clause (1) of this
paragraph (c) or pursuant to a termination by IXC pursuant to Section 7.01(f)
unless and until within 12 months of such termination CBI or any of its
Subsidiaries enters into any CBI Acquisition Agreement with respect to, or
consummates, any CBI Takeover Proposal (for the purposes of the foregoing
proviso the term "CBI Takeover Proposal" shall have the meaning assigned to such
term in Section 4.04 except that references to "35%" in the definition of "CBI
Takeover Proposal" in Section 4.04 as they relate to net revenues, net income or
assets of CBI and its Subsidiaries, taken as a whole, shall be deemed to be
references to "50%"), in which event the Termination Fee shall be payable upon
the first to occur of such events. CBI acknowledges that the agreements
contained in this Section 5.09(c) are an integral part of the transactions
contemplated by this Agreement, and that, without these agreements, IXC would
not enter into this Agreement; accordingly, if CBI fails promptly to pay the
amount due pursuant to this Section 5.09(c), and, in order to obtain such
payment, IXC commences a suit which results in a judgment against CBI for the
fee set forth in this Section 5.09(c), CBI shall pay to IXC its costs and
expenses (including attorneys' fees and expenses) in connection with such suit,
together with interest on the amount of the fee at the prime rate of Citibank,
N.A. in effect on the date such payment was required to be made.
SECTION 5.10. PUBLIC ANNOUNCEMENTS. Promptly after the date hereof, CBI
and IXC will develop a joint communications plan and each party hereto shall use
all reasonable best efforts to ensure that all press releases and other public
statements with respect to the transactions contemplated by this Agreement,
including the Merger, the Stockholders Agreements and the Option Agreements
shall be consistent with such joint communications plan. CBI and IXC will
consult with each other before issuing any press release or otherwise making any
written public statement with respect to the transactions contemplated by this
Agreement, including the Merger, the Stockholders Agreements and the Option
Agreements, and shall not issue any such press release or make any such written
public statement prior to such consultation, except as either party may
determine is required by applicable law or by obligations pursuant to any
listing agreement with any national securities exchange or national trading
system. The parties agree that the initial press release to be issued with
respect to the transactions contemplated by this Agreement, the Stockholders
Agreements and the Option Agreements shall be in the form heretofore agreed to
by the parties.
SECTION 5.11. AFFILIATES. IXC shall deliver to CBI at least 30 days prior
to the Closing Date a letter identifying all persons who are, at the time this
Agreement is submitted for adoption by the stockholders of IXC, "affiliates" of
IXC for purposes of Rule 145 under the Securities Act and applicable SEC rules
and regulations. IXC shall use reasonable efforts to cause each such person to
deliver to CBI at least 30 days prior to the Closing Date a written agreement
substantially in the form attached as Exhibit A hereto.
SECTION 5.12. STOCK EXCHANGE LISTINGS. (a) CBI shall use reasonable
efforts to cause the CBI Common Stock issuable in the Merger and pursuant to the
CBI Stock Option Agreement to be
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<PAGE>
approved for listing on the NYSE and the CSE, subject to official notice of
issuance, as promptly as practicable after the date hereof, and in any event
prior to the Closing Date.
(b) IXC shall use reasonable efforts to cause the IXC Common Stock issuable
pursuant to the IXC Stock Option Agreement to be approved for quotation on
Nasdaq, subject to official notice of issuance, as promptly as practicable after
the date hereof, and in any event prior to the Closing Date.
(c) IXC shall use reasonable best efforts to cause the IXC 7 1/4% Preferred
Stock, the IXC 6 3/4% Preferred Stock and the IXC 12 1/2% Preferred Stock to be
approved for quotation on Nasdaq, subject to official notice of issuance, as
promptly as practicable after the date hereof, and in any event prior to the
record date for the IXC Stockholders Meeting.
SECTION 5.13. TAX TREATMENT. Each of CBI and IXC shall use reasonable
efforts to cause the Merger to qualify as a reorganization under the provisions
of Section 368 of the Code and to obtain the opinions of counsel referred to in
Section 6.03(c), including the execution of the letters of representation
referred to therein.
SECTION 5.14. FURTHER ASSURANCES. IXC shall deliver, or shall cause to be
delivered, if required by the terms of any note, indenture, credit agreement,
warrant or other financing instrument or preferred stock, as promptly as
possible after the date hereof but in no event less than 15 days prior to the
Effective Time, any notice of the Merger or the transactions contemplated by
this Agreement.
SECTION 5.15. IXC RIGHTS AGREEMENT. The Board of Directors of IXC shall
take all further action (in addition to that referred to in Section 3.01(s))
necessary or desirable (including redeeming IXC Rights immediately prior to the
Effective Time or amending the IXC Rights Agreement if reasonably requested by
CBI) in order to render the IXC Rights inapplicable to the Merger and to the
other transactions contemplated by this Agreement, the Stockholders Agreements
and the Option Agreements to the extent provided herein. Except as provided
above with respect to the Merger and the other transactions contemplated by this
Agreement, the Stockholders Agreements and the Option Agreements, until the date
following the IXC Stockholders Meeting, the Board of Directors of IXC shall not,
without the prior written consent of CBI, (a) amend the IXC Rights Agreement or
(b) take any action with respect to, or make any determination under, the IXC
Rights Agreement, including a redemption of the IXC Rights or any action to
facilitate an IXC Takeover Proposal.
SECTION 5.16. CBI RIGHTS AGREEMENT. The Board of Directors of CBI shall
take all further action (in addition to that referred to in Section 3.02(s))
necessary or desirable (including redeeming CBI Rights immediately prior to the
Effective Time or amending the CBI Rights Agreement if reasonably requested by
IXC) in order to render the CBI Rights inapplicable to the Merger and the other
transactions contemplated by this Agreement, the Stockholders Agreements and the
Option Agreements to the extent provided herein. Except as provided above with
respect to the Merger and the other transactions contemplated by this Agreement,
the Stockholders Agreements and the Option Agreements, until the date following
the CBI Shareholders Meeting, the Board of Directors of CBI shall not, without
the prior written consent of IXC, (a) amend the CBI Rights Agreement (other than
any amendment made in connection with an acquisition by CBI of any assets or
voting securities of another person) or (b) take any action with respect to, or
make any determination under, the CBI Rights Agreement, including a redemption
of the CBI Rights or any action to facilitate a CBI Takeover Proposal.
SECTION 5.17. TRANSFER TAXES. All stock transfer, real estate transfer,
documentary, stamp, recording and other similar taxes (including interest,
penalties and additions to any such taxes) incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by IXC.
SECTION 5.18. STOCKHOLDERS AGREEMENTS LEGEND. IXC will inscribe upon any
certificate representing Subject Shares (as defined in the Stockholders
Agreements) tendered by a Stockholder (as defined in the Stockholders
Agreements) in connection with any proposed transfer of any Subject
1-36
<PAGE>
Shares by such Stockholder in accordance with the terms of the Stockholders
Agreements the following legend: "THE SHARES OF COMMON STOCK, PAR VALUE $.01,
PER SHARE, OF IXC COMMUNICATIONS, INC., REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO A STOCKHOLDERS AGREEMENT DATED AS OF JULY 20, 1999, AND ARE SUBJECT
TO THE TERMS THEREOF. COPIES OF SUCH AGREEMENT MAY BE OBTAINED AT THE PRINCIPAL
EXECUTIVE OFFICES OF IXC COMMUNICATIONS, INC."; and IXC will return such
certificate containing such inscription to such Stockholder within three
business days following IXC's receipt thereof.
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.01. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
MERGER. The respective obligation of each party to effect the Merger is subject
to the satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) STOCKHOLDER APPROVALS. Each of the IXC Stockholder Approval and the
CBI Shareholder Approval shall have been obtained.
(b) HSR ACT. The waiting period (and any extension thereof) applicable to
the Merger under the HSR Act shall have been terminated or shall have expired.
(c) FCC AND PUC APPROVALS. All consents, approvals or orders of
authorization of, or actions by the FCC and all necessary state PUC approvals
shall have been obtained.
(d) NO LITIGATION. No judgment, order, decree, statute, law, ordinance,
rule or regulation, entered, enacted, promulgated, enforced or issued by any
court or other Governmental Entity of competent jurisdiction or other legal
restraint or prohibition (collectively, "Restraints") shall be in effect, and
there shall not be pending or threatened any suit, action or proceeding by any
Governmental Entity (i) preventing the consummation of the Merger or (ii) which
otherwise is reasonably likely to have a Material Adverse Effect on IXC or CBI,
as applicable; PROVIDED, HOWEVER, that each of the parties shall have used its
reasonable efforts to prevent the entry of any such Restraints and to appeal as
promptly as possible any such Restraints that may be entered.
(e) FORM S-4. The Form S-4 shall have become effective under the
Securities Act and shall not be the subject of any stop order or proceedings
seeking a stop order.
(f) STOCK EXCHANGE LISTINGS. The shares of CBI Common Stock issuable to
IXC's stockholders as contemplated by this Agreement shall have been approved
for listing on the NYSE, subject to official notice of issuance.
(g) EQUITY INVESTMENT. CBI shall have received $400 million pursuant to
the terms of the Investment Agreement.
SECTION 6.02. CONDITIONS TO OBLIGATIONS OF CBI AND SUB. The obligation of
CBI and Sub to effect the Merger is further subject to satisfaction or waiver of
the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties of
IXC set forth herein that are qualified as to materiality shall be true and
correct, and those that are not so qualified shall be true and correct in all
material respects, in each case as of the date hereof and as of the Closing
Date, with the same effect as if made at and as of such time (except to the
extent expressly made as of an earlier date, in which case as of such date). CBI
shall have received a certificate signed on behalf of IXC by the chief executive
officer of IXC to such effect.
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<PAGE>
(b) PERFORMANCE OF OBLIGATIONS OF IXC. IXC shall have performed in all
material respects all obligations required to be performed by it under this
Agreement at or prior to the Closing Date. CBI shall have received a certificate
signed on behalf of IXC by the chief executive officer of IXC to such effect.
SECTION 6.03. CONDITIONS TO OBLIGATIONS OF IXC. The obligation of IXC to
effect the Merger is further subject to satisfaction or waiver of the following
conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties of
CBI and Sub set forth herein that are qualified as to materiality shall be true
and correct, and those that are not so qualified shall be true and correct in
all material respects, in each case as of the date hereof and as of the Closing
Date, with the same effect as if made at and as of such time (except to the
extent expressly made as of an earlier date, in which case as of such date). IXC
shall have received a certificate signed on behalf of CBI by the chief executive
officer of CBI to such effect.
(b) PERFORMANCE OF OBLIGATIONS OF CBI AND SUB. CBI and Sub shall have
performed in all material respects all obligations required to be performed by
them under this Agreement at or prior to the Closing Date. IXC shall have
received a certificate signed on behalf of CBI by the chief executive officer of
CBI to such effect.
(c) TAX OPINION. IXC shall have received from Riordan & McKinzie, counsel
to IXC, on the date on which the Form S-4 is filed with the SEC and on the
Closing Date, an opinion, in each case dated as of such respective date and to
the effect that: (i) the Merger will qualify for U.S. Federal income tax
purposes as a "reorganization" within the meaning of Section 368(a) of the Code
and (ii) IXC, CBI and Sub will each be a "party to a reorganization" within the
meaning of Section 368(b) of the Code. The issuance of such opinion shall be
conditioned upon the receipt by such tax counsel of representation letters from
each of IXC and CBI in substantially the same form as Exhibits C and D,
respectively. The opinion shall be in substantially the same form as Exhibit E.
SECTION 6.04. FRUSTRATION OF CLOSING CONDITIONS. None of CBI, Sub or IXC
may rely on the failure of any condition set forth in Section 6.01, 6.02 or
6.03, as the case may be, to be satisfied if such failure was caused by such
party's failure to use its reasonable efforts to consummate the Merger and the
other transactions contemplated by this Agreement, the Stockholders Agreements
and the Option Agreements, as required by and subject to Section 5.05.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.01. TERMINATION. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after the CBI Shareholder
Approval or the IXC Stockholder Approval:
(a) by mutual written consent of CBI and IXC;
(b) by either CBI or IXC:
(i) if the Merger shall not have been consummated by April 30, 2000;
PROVIDED, HOWEVER, that if on such date the condition to the Closing set
forth in Section 6.01(c) shall not have been satisfied, then either CBI or
IXC may cause such date to be extended to July 31, 2000, upon delivery of
written notice to the other party; PROVIDED FURTHER, HOWEVER, that the right
to terminate this Agreement pursuant to this Section 7.01(b)(i) shall not be
available to any party whose failure to perform any of its obligations under
this Agreement results in the failure of the Merger to be consummated by
such time;
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<PAGE>
(ii) if the CBI Shareholder Approval shall not have been obtained at a
CBI Shareholders Meeting duly convened therefor or at any adjournment or
postponement thereof;
(iii) if the IXC Stockholder Approval shall not have been obtained at an
IXC Stockholders Meeting duly convened therefor or at any adjournment or
postponement thereof; or
(iv) if any Restraint having any of the effects set forth in Section
6.01(d) shall be in effect and shall have become final and nonappealable;
PROVIDED that the party seeking to terminate this Agreement pursuant to this
Section 7.01(b)(iv) shall have used reasonable efforts to prevent the entry
of and to remove such Restraint;
(c) by CBI, if IXC shall have breached or failed to perform in any material
respect any of its representations, warranties, covenants or other agreements
contained in this Agreement, which breach or failure to perform (A) would give
rise to the failure of a condition set forth in Section 6.02(a) or (b) and (B)
has not been or is incapable of being cured by IXC within 30 calendar days after
its receipt of written notice from CBI;
(d) by IXC, if CBI shall have breached or failed to perform in any material
respect any of its representations, warranties, covenants or other agreements
contained in this Agreement, which breach or failure to perform (A) would give
rise to the failure of a condition set forth in Section 6.03(a) or (b) and (B)
has not been or is incapable of being cured by CBI within 30 calendar days after
its receipt of written notice from IXC;
(e) by CBI, if IXC or any of its directors or officers shall participate in
discussions or negotiations in breach of Section 4.03; or
(f) by IXC, if CBI or any of its directors or officers shall participate in
discussions or negotiations in breach of Section 4.04.
SECTION 7.02. EFFECT OF TERMINATION. In the event of termination of this
Agreement by either IXC or CBI as provided in Section 7.01, this Agreement shall
forthwith become void and have no effect, without any liability or obligation on
the part of CBI or IXC, other than the provisions of Section 3.01(p), Section
3.02(n), the last sentence of Section 5.04, Section 5.09, this Section 7.02 and
Article VIII, which provisions survive such termination, and except to the
extent that such termination results from the wilful and material breach by a
party of any of its representations, warranties, covenants or agreements set
forth in this Agreement. If this Agreement is terminated under circumstances in
which a party is entitled to receive the Termination Fee, the payment of such
Termination Fee shall be the sole and exclusive remedy available to such party,
except if there shall have been a wilful breach by the other party of Section
4.03 or Section 4.04, as the case may be.
SECTION 7.03. AMENDMENT. This Agreement may be amended by the parties at
any time before or after the IXC Stockholder Approval or the CBI Shareholder
Approval; PROVIDED, HOWEVER, that after any such approval, there shall not be
made any amendment that by law requires further approval by the stockholders of
IXC or further approval of the shareholders of CBI without the further approval
of such stockholders or shareholders. This Agreement may not be amended except
by an instrument in writing signed on behalf of each of the parties.
SECTION 7.04. EXTENSION; WAIVER. At any time prior to the Effective Time,
a party may (a) extend the time for the performance of any of the obligations or
other acts of the other parties, (b) waive any inaccuracies in the
representations and warranties of the other parties contained in this Agreement
or in any document delivered pursuant to this Agreement or (c) subject to the
proviso of Section 7.03, waive compliance by the other party with any of the
agreements or conditions contained in this Agreement. Any agreement on the part
of a party to any such extension or waiver shall be valid only if set forth in
an instrument in writing signed on behalf of such party. The failure of any
party to
1-39
<PAGE>
this Agreement to assert any of its rights under this Agreement or otherwise
shall not constitute a waiver of such rights.
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.01. NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. None of the
representations, warranties, covenants or agreements in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive the Effective
Time. This Section 8.01 shall not limit any covenant or agreement of the parties
which by its terms contemplates performance after the Effective Time.
SECTION 8.02. NOTICES. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally, telecopied (which is confirmed) or sent by
overnight courier (providing proof of delivery) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(a) if to CBI or Sub, to
Cincinnati Bell Inc.
201 E. Fourth Street, 102-1900
P.O. Box 2301
Cincinnati, Ohio 45201-2301
Telecopy No.: (513) 397-9557
Attention: General Counsel
with a copy to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019
Telecopy No.: (212) 474-3700
Attention: Robert A. Kindler, Esq.
Robert I. Townsend, III, Esq.;
and
(b) if to IXC, to
IXC Communications, Inc.
1122 Capital of Texas Highway South
Austin, Texas 78746-6426
Telecopy No.: (512) 328-7902
Attention: General Counsel
with a copy to:
Riordan & McKinzie
695 Town Center Drive
Suite 1500
Costa Mesa, CA 92626
Telecopy No.: (714) 549-3244
Attention: Michael P. Whalen, Esq.
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<PAGE>
SECTION 8.03. DEFINITIONS. For purposes of this Agreement:
(a) an "Affiliate" of any person means another person that directly or
indirectly, through one or more intermediaries, controls, is controlled by,
or is under common control with, such first person, where "control" means
the possession, directly or indirectly, of the power to direct or cause the
direction of the management policies of a person, whether through the
ownership of voting securities, by contract, as trustee or executor, or
otherwise;
(b) "Business Day" means any day other than Saturday, Sunday or any
other day on which banks are legally permitted to be closed in New York;
(c) "Knowledge" of any person that is not an individual means, with
respect to any specific matter, the knowledge of such person's executive
officers and other officers having primary responsibility for such matter;
(d) "Material Adverse Change" or "Material Adverse Effect" means, when
used in connection with IXC or CBI, any change, effect, event, occurrence,
condition, development or state of facts that is materially adverse to the
business, assets, results of operations, condition (financial or otherwise)
or prospects of such party (or the Surviving Corporation when used with
respect to IXC) and its Subsidiaries, taken as a whole, other than any
change, effect, event, occurrence, condition, development or state of facts
(i) relating to the economy or securities markets in general, (ii) relating
to the industries in which such party operates in general and not
specifically relating to such party, (iii) resulting from the announcement
or anticipated consummation of the transactions contemplated by this
Agreement, the Stockholders Agreements, the Option Agreements, and the
transactions contemplated by this Agreement, or (iv) arising from a change
in generally accepted accounting principles.
(e) "person" means an individual, corporation, partnership, limited
liability company, joint venture, association, trust, unincorporated
organization or other entity; and
(f) a "Subsidiary" of any person means another person, an amount of the
voting securities, other voting ownership or voting partnership interests of
which is sufficient to elect at least a majority of its Board of Directors
or other governing body (or, if there are no such voting interests, 50% or
more of the equity interests of which) is owned directly or indirectly by
such first person.
SECTION 8.04. INTERPRETATION. When a reference is made in this Agreement
to an Article, Section or Exhibit, such reference shall be to an Article or
Section of, or an Exhibit to, this Agreement unless otherwise indicated. 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. Whenever the words "include", "includes" or "including" are used
in this Agreement, they shall be deemed to be followed by the words "without
limitation". The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement. All terms defined in this
Agreement shall have the defined meanings when used in any certificate or other
document made or delivered pursuant hereto unless otherwise defined therein. The
definitions contained in this Agreement are applicable to the singular as well
as the plural forms of such terms and to the masculine as well as to the
feminine and neuter genders of such term. Any agreement, instrument or statute
defined or referred to herein or in any agreement or instrument that is referred
to herein means such agreement, instrument or statute as from time to time
amended, modified or supplemented, including (in the case of agreements or
instruments) by waiver or consent and (in the case of statutes) by succession of
comparable successor statutes and references to all attachments thereto and
instruments incorporated therein. References to a person are also to its
permitted successors and assigns. Terms used herein that are defined under GAAP
are used herein as so defined.
1-41
<PAGE>
SECTION 8.05. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
SECTION 8.06. ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES. This
Agreement (including the documents and instruments referred to herein), the
Option Agreements, the Stockholders Agreements and the Confidentiality Agreement
(a) constitute the entire agreement, and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter of this Agreement and (b) except for the provisions of Article
II, Section 5.06 and Section 5.08, are not intended to confer upon any person
other than the parties any rights or remedies.
SECTION 8.07. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflict of
laws thereof, except to the extent the laws of the State of Ohio are mandatorily
applicable for the rights of CBI shareholders and directors and corporate
governance matters.
SECTION 8.08. ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned, in whole or in
part, by operation of law or otherwise by either of the parties hereto without
the prior written consent of the other party. Any assignment in violation of the
preceding sentence shall be void. Subject to the preceding two sentences, this
Agreement will be binding upon, inure to the benefit of, and be enforceable by,
the parties and their respective successors and assigns.
SECTION 8.09. ENFORCEMENT. The parties agree that irreparable damage would
occur and that the parties would not have any adequate remedy at law 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 an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any Federal court located in the
State of Delaware 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 personal 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, (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, and (c) agrees that it will not bring any action
relating to this Agreement or any of the transactions contemplated by this
Agreement in any court other than a Federal court sitting in the State of
Delaware or a Delaware state court.
SECTION 8.10. SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect. Upon such determination that any
term or other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible to the fullest
extent permitted by applicable law in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
SECTION 8.11. ADDITIONAL AGREEMENT OF IXC. IXC agrees that (a) promptly
after the date hereof, it will form a wholly owned subsidiary and enter into a
merger agreement with such subsidiary in a form satisfactory to CBI, including
the terms set forth in Section 8.11 to the IXC Disclosure Schedule and (b) it
will submit such merger agreement for approval of stockholders of IXC at the IXC
Stockholders Meeting.
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<PAGE>
IN WITNESS WHEREOF, CBI, Sub and IXC have caused this Agreement to be signed
by their respective officers thereunto duly authorized, all as of the date first
written above.
<TABLE>
<S> <C> <C>
CINCINNATI BELL INC.,
By: /s/ RICHARD G. ELLENBERGER
-----------------------------------------
Name: Richard G. Ellenberger
Title: President and Chief
Executive Officer
IVORY MERGER INC.,
By: /s/ THOMAS E. TAYLOR
-----------------------------------------
Name: Thomas E. Taylor
Title: Vice President and Secretary
IXC COMMUNICATIONS, INC.,
By: /s/ JOHN M. ZRNO
-----------------------------------------
Name: John M. Zrno
Title: President and Chief
Executive Officer
</TABLE>
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<PAGE>
ANNEX I
TO THE MERGER AGREEMENT
INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
TERM PAGE
- ----------------------------------------------- ---------
<S> <C>
Accounting Rules............................... 1-10
Adjusted Option................................ 1-32
Affiliate...................................... 1-41
Agreement...................................... 1-1
Business Day................................... 1-41
CBI............................................ 1-1
CBI Acquisition Agreement...................... 1-29
CBI Benefit Plans.............................. 1-21
CBI Common Stock............................... 1-3
CBI Consolidated Group......................... 1-23
CBI Disclosure Schedule........................ 1-17
CBI Filed SEC Documents........................ 1-16
CBI 1998 10-K.................................. 1-21
CBI Permits.................................... 1-21
CBI Plan....................................... 1-38
CBI Preferred Stock............................ 1-17
CBI Rights Agreement........................... 1-17
CBI SEC Documents.............................. 1-19
CBI Series A Preferred Stock................... 1-17
CBI 7 1/4 Preferred Stock...................... 1-3
CBI Shareholder Approval....................... 1-23
CBI Shareholders Meeting....................... 1-30
CBI 6 3/4 Preferred Stock...................... 1-4
CBI Stock Option Agreement..................... 1-2
CBI Stock Options.............................. 1-17
CBI Stock Plans................................ 1-17
CBI Takeover Proposal.......................... 1-28
Certificate of Merger.......................... 1-2
Certificates................................... 1-4
Closing........................................ 1-2
Closing Date................................... 1-2
Code........................................... 1-1
Common Shares Trust............................ 1-6
Common Stock Merger Consideration.............. 1-3
Communications Act............................. 1-10
Confidentiality Agreement...................... 1-30
control........................................ 1-41
CSE............................................ 1-19
DGCL........................................... 1-2
Effective Time................................. 1-2
ERISA.......................................... 1-13
Excess Shares.................................. 1-6
Exchange Act................................... 1-10
Exchange Agent................................. 1-4
Exchange Ratio................................. 1-3
FCC............................................ 1-10
Form S-4....................................... 1-11
<CAPTION>
TERM PAGE
- ----------------------------------------------- ---------
<S> <C>
GAAP........................................... 1-10
Governmental Entity............................ 1-10
HSR Act........................................ 1-10
Intellectual Property Rights................... 1-15
Investment Agreement........................... 1-1
Investors...................................... 1-1
IXC............................................ 1-1
IXC Acquisition Agreement...................... 1-28
IXC Benefit Plans.............................. 1-12
IXC Class B Preferred Stock.................... 1-8
IXC Common Stock............................... 1-1
IXC Consolidated Group......................... 1-14
IXC Disclosure Schedule........................ 1-7
IXC Filed SEC Documents........................ 1-7
IXC 1998 10-K.................................. 1-12
IXC Ordinary Preferred Stock................... 1-8
IXC Permits.................................... 1-12
IXC Preferred Stock............................ 1-8
IXC Rights..................................... 1-8
IXC Rights Agreement........................... 1-8
IXC SEC Documents.............................. 1-10
IXC Series A Preferred Stock................... 1-8
IXC 7 1/4 Preferred Stock...................... 1-1
IXC 6 3/4 Preferred Stock...................... 1-1
IXC Stock Option Agreement..................... 1-1
IXC Stock Options.............................. 1-8
IXC Stock Plans................................ 1-8
IXC Stockholder Approval....................... 1-15
IXC Stockholders Meeting....................... 1-30
IXC Takeover Proposal.......................... 1-28
IXC 12 1/2 Certificate of Designation.......... 1-4
IXC 12 1/2 Preferred Stock..................... 1-4
IXC 12 1/2 Series B Preferred Stock............ 1-8
IXC Warrants................................... 1-8
Joint Proxy Statement.......................... 1-10
Knowledge...................................... 1-41
Liens.......................................... 1-8
Material Adverse Change........................ 1-41
Material Adverse Effect........................ 1-41
Merger......................................... 1-1
Merger Consideration........................... 1-4
Nasdaq......................................... 1-10
Non-Voting Preferred Stock..................... 1-17
NYSE........................................... 1-6
Oakhill........................................ 1-1
Option Agreements.............................. 1-1
person......................................... 1-41
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TERM PAGE
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<S> <C>
Principal Stockholders......................... 1-1
PUCs........................................... 1-10
Restraints..................................... 1-37
SEC............................................ 1-10
Securities Act................................. 1-10
7 1/4% Preferred Stock Merger Consideration.... 1-3
6 3/4% Preferred Stock Merger Consideration.... 1-4
Stockholders Agreements........................ 1-1
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<S> <C>
Sub............................................ 1-1
Sub Common Stock............................... 1-18
Subsidiary..................................... 1-41
Surviving Corporation.......................... 1-2
taxes.......................................... 1-15
Termination Fee................................ 1-34
Transition Period.............................. 1-33
Transition Team................................ 1-27
Voting Preferred Stock......................... 1-17
Year 2000 Compliant............................ 1-16
</TABLE>
<PAGE>
ANNEX 2
AGREEMENT GOVERNING THE IXC INTERNAL REORGANIZATION dated as of August 16,
1999 (this "Agreement"), between IXC COMMUNICATIONS, INC., a Delaware
corporation ("IXC"), and IXC MERGER SUB, INC., a Delaware corporation and a
wholly owned subsidiary of IXC ("Merger Sub").
WHEREAS the respective Boards of Directors of IXC and Merger Sub have each
approved and declared advisable this Agreement and the merger of Merger Sub with
and into IXC (the "Initial Merger"), upon the terms and subject to the
conditions set forth in this Agreement, whereby each issued and outstanding
share of common stock, par value $.01 per share, of Merger Sub ("Merger Sub
Common Stock") shall be canceled and retired in accordance with the terms of
this Agreement and all rights in respect thereof shall cease to exist;
WHEREAS the respective Boards of Directors of IXC and Merger Sub have each
determined that the Initial Merger is consistent with, and in furtherance of,
their respective business strategies and goals;
WHEREAS the respective Boards of Directors of Cincinnati Bell Inc., an Ohio
corporation ("Cincinnati Bell"), Ivory Merger Inc., a Delaware corporation and a
wholly owned subsidiary of Cincinnati Bell ("Ivory"), and IXC have approved and
declared advisable an Agreement and Plan of Merger dated as of July 20, 1999 (as
the same may be amended or supplemented, the "Merger Agreement"; terms used but
not defined herein shall have the meanings set forth in the Merger Agreement),
and the merger of Ivory with and into IXC (the "Principal Merger"); and
WHEREAS for U.S. federal income tax purposes, it is intended that the
Initial Merger shall qualify as (i) a tax-free liquidation under Sections 332
and 337 of the Internal Revenue Code of 1986, as amended (the "Code"), and/or
(ii) a tax-free reorganization under the provisions of Section 368(a) of the
Code and that this Agreement constitutes a plan of reorganization.
NOW, THEREFORE, the parties agree as follows:
ARTICLE I
THE INITIAL MERGER
SECTION 1.01. THE INITIAL MERGER. Upon the terms and subject to the
conditions set forth in this Agreement, and in accordance with the Delaware
General Corporation Law (the "DGCL"), Merger Sub shall be merged with and into
IXC at the Initial Effective Time (as defined in Section 1.03). Following the
Initial Merger, the separate corporate existence of Merger Sub shall cease and
IXC shall continue as the surviving corporation (the "Surviving Corporation")
and shall succeed to and assume all the rights and obligations of Merger Sub in
accordance with the DGCL.
SECTION 1.02. CLOSING. The closing of the Initial Merger (the "Closing")
will take place at 9:00 a.m. on a date to be specified by the parties (the
"Closing Date"), at the offices of Cravath, Swaine & Moore, Worldwide Plaza, 825
Eighth Avenue, New York, New York 10019, unless another time, date or place is
agreed to by the parties hereto.
SECTION 1.03. INITIAL EFFECTIVE TIME. Subject to the provisions of this
Agreement, a certificate of merger and all other appropriate documents (the
"Certificate of Merger") shall be duly prepared, executed, acknowledged and
filed with the Secretary of State of the State of Delaware by the parties hereto
in accordance with the relevant provisions of the DGCL. The Initial Merger shall
become effective at such time as the Certificate of Merger is duly filed with
the Secretary of State of the State of Delaware, or at such subsequent time as
Merger Sub and IXC shall agree should be specified in the Certificate of Merger
(the time the Initial Merger becomes effective being herein referred to as the
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<PAGE>
"Initial Effective Time"); PROVIDED, HOWEVER, that the Initial Effective Time of
the Initial Merger shall be prior to the Effective Time of the Principal Merger.
SECTION 1.04. EFFECTS OF THE INITIAL MERGER. The Initial Merger shall have
the effects set forth in Section 259 of the DGCL.
SECTION 1.05. CERTIFICATE OF INCORPORATION AND BYLAWS. (a) At the Initial
Effective Time, the Restated Certificate of Incorporation of IXC, as amended
through the Initial Effective Time, shall be the Certificate of Incorporation of
the Surviving Corporation with such amendments as are set forth in Exhibit A
hereto and incorporated herein by reference, until thereafter changed or amended
as provided therein or by applicable law.
(b) The bylaws of IXC as in effect immediately prior to the Initial
Effective Time shall be the bylaws of the Surviving Corporation, until
thereafter changed or amended as provided therein or by applicable law.
SECTION 1.06. BOARD OF DIRECTORS. The directors of IXC immediately prior to
the Initial Effective Time shall be the directors of the Surviving Corporation
until the earlier of their resignation or removal or until their respective
successors are duly elected and qualified, as the case may be.
SECTION 1.07. OFFICERS. The officers of IXC immediately prior to the Initial
Effective Time shall be the officers of the Surviving Corporation until the
earlier of their resignation or removal or until their respective successors are
duly elected and qualified, as the case may be.
ARTICLE II
EFFECT OF THE INITIAL MERGER ON THE CAPITAL STOCK OF IXC AND MERGER SUB COMMON
STOCK
SECTION 2.01. EFFECT ON THE CAPITAL STOCK OF IXC. As of the Initial
Effective Time, by virtue of the Initial Merger and without any action on the
part of IXC, Merger Sub or the holder of any shares of capital stock of IXC or
Merger Sub Common Stock, each issued and outstanding share of capital stock of
IXC shall continue to remain issued and outstanding.
SECTION 2.02. EFFECT ON MERGER SUB COMMON STOCK. As of the Initial Effective
Time, by virtue of the Initial Merger and without any action on the part of IXC,
Merger Sub or the holder of any shares of capital stock of IXC or any shares of
Merger Sub Common Stock, each issued and outstanding share of Merger Sub Common
Stock shall be canceled and retired and all rights in respect thereof shall
cease to exist without any conversion thereof or any payment with respect
thereto or in exchange therefor.
ARTICLE III
CONDITION PRECEDENT
SECTION 3.01. CONDITION TO EACH PARTY'S OBLIGATION TO EFFECT THE INITIAL
MERGER. The respective obligation of each party hereto to effect the Initial
Merger is subject to the satisfaction or waiver by the parties thereto of the
conditions precedent to the consummation of the Principal Merger set forth in
Article VI of the Merger Agreement.
ARTICLE IV
TERMINATION, AMENDMENT AND WAIVER
SECTION 4.01. TERMINATION. This Agreement may only be terminated by IXC
prior to the Initial Effective Time if the Merger Agreement has been terminated
in accordance with its terms.
SECTION 4.02. EFFECT OF TERMINATION. In the event of termination of this
Agreement as provided in Section 4.01, this Agreement shall forthwith become
void and have no effect, without any liability or obligation on the part of IXC
or Merger Sub other than the provisions of this Section 4.02 and Article V.
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<PAGE>
SECTION 4.03. AMENDMENT. This Agreement may be amended by the parties hereto
at any time by an instrument in writing signed on behalf of each of the parties
hereto.
SECTION 4.04. WAIVER. At any time prior to the Initial Effective Time, a
party may waive compliance by the other party with any of the agreements or
conditions contained in this Agreement. Any agreement on the part of a party to
any such waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party. The failure of any party to this Agreement to
assert any of its rights under this Agreement or otherwise shall not constitute
a waiver of such rights.
SECTION 4.05. PROCEDURE FOR TERMINATION, AMENDMENT, EXTENSION OR WAIVER. A
termination of this Agreement pursuant to Section 4.01, an amendment of this
Agreement pursuant to Section 4.03 or a waiver pursuant to Section 4.04 shall,
in order to be effective, require in the case of IXC or Merger Sub, action by
its Board of Directors or the duly authorized designee of its Board of Directors
to the extent permitted by law.
ARTICLE V
GENERAL PROVISIONS
SECTION 5.01. NOTICES. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally, telecopied (which is confirmed) or sent by
overnight courier (providing proof of delivery) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(a) if to IXC, to:
IXC Communications, Inc.
1122 Capital of Texas Highway South
Austin, TX 78746-6426
Telecopy: (512) 328-7902
Attention: General Counsel
(b) if to Merger Sub, to:
IXC Merger Sub Inc.
1122 Capital of Texas Highway South
Austin, TX 78746-6426
Telecopy: (512) 328-7902
Attention: President
SECTION 5.02. ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES. This Agreement
(including the documents and instruments referred to herein) (a) constitutes the
entire agreement, and supersedes all prior agreements and understandings, both
written and oral, between the parties with respect to the subject matter of this
Agreement and (b) is not intended to confer any rights or remedies upon any
person other than the parties.
SECTION 5.03. TRANSFER TAXES. All transfer, documentary and other similar
taxes (including any interest, penalties or additions with respect thereto) and
all filing, recording and other similar fees, in each case, attributable to the
transactions contemplated by this Agreement shall be paid by IXC.
SECTION 5.04. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
2-3
<PAGE>
IN WITNESS WHEREOF, IXC and Merger Sub have caused this Agreement to be
signed by their respective officers thereunto duly authorized, all as of the
date first written above.
<TABLE>
<S> <C> <C>
IXC COMMUNICATIONS, INC.,
by /s/ JEFFREY C. SMITH
---------------------------------------
Name: Jeffrey C. Smith
Title:Senior Vice President,
General Counsel and
Secretary
IXC MERGER SUB, INC.,
by /s/ JEFFREY C. SMITH
---------------------------------------
Name: Jeffrey C. Smith
Title:Senior Vice President,
General Counsel and
Secretary
</TABLE>
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<PAGE>
EXHIBIT A
The Restated Certificate of Incorporation of IXC shall be amended in the
Initial Merger as follows:
1. Section (g)(ix)(3) of the Certificate of Designation for the 7 1/4%
Junior Convertible Preferred Stock Due 2007 shall be amended by inserting
after the words "business of the Company" in the definition of "Common Stock
Change in Control" the following: "(which shall include a corporation that
is the direct or indirect owner of all the equity interests of the surviving
corporation in the merger) (hereinafter, a "successor")".
2. Section (f)(i) of the Certificate of Designation for the 12 1/2%
Junior Exchangeable Preferred Stock Due 2009 shall be amended to read as
follows: "The holders of Exchangeable Preferred Stock, in addition to the
voting rights required under Delaware law and as set forth in paragraphs
(ii) and (iii) below, shall be entitled to cast one-tenth of one vote per
share on all matters, voting together with the common stock of the Company
as a single class."
3. Section (f)(iii)(B) of the Certificate of Designation for the 12 1/2%
Junior Exchangeable Preferred Stock Due 2009 shall be amended by deleting
the words "a majority" and by substituting the words "two-thirds" therefor.
4. Section (6) of the Certificate of Designation for the 6 3/4%
Cumulative Convertible Preferred Stock shall be amended by inserting the
following paragraph after paragraph 5 of such section:
"So long as any shares of the Cumulative Convertible Preferred Stock are
outstanding, the Company will not amend this Certificate of Designation so
as to affect adversely the specified rights, preferences, privileges or
voting rights of Holders of shares of Cumulative Convertible Preferred Stock
or to authorize the issuance of any additional shares of Cumulative
Convertible Preferred Stock without the affirmative vote or consent of
Holders of at least two-thirds of the issued and outstanding shares of
Cumulative Convertible Preferred Stock, voting or consenting, as the case
may be, as one class, given in person or by proxy, either in writing or by
resolution adopted at an annual or special meeting."
2-5
<PAGE>
ANNEX 3
STOCK OPTION AGREEMENT dated as of July 20, 1999 (the "Agreement"),
by and between IXC COMMUNICATIONS, INC., a Delaware corporation
("Issuer"), and CINCINNATI BELL INC., an Ohio corporation ("Grantee").
RECITALS
A. Grantee, Ivory Merger Inc., a wholly owned subsidiary of Grantee ("Sub"),
and Issuer have entered into an Agreement and Plan of Merger dated as of the
date hereof (the "Merger Agreement"; defined terms used but not defined herein
have the meanings set forth in the Merger Agreement), providing for, among other
things, the merger of Sub with and into Issuer, with Issuer as the surviving
corporation in the Merger;
B. As a condition and inducement to Grantee's willingness to enter into the
Merger Agreement, the Stockholders Agreements and the CBI Stock Option
Agreement, Grantee has requested that Issuer agree, and Issuer has agreed, to
grant Grantee the Option (as defined below); and
C. As a condition and inducement to Issuer's willingness to enter into the
Merger Agreement and this Agreement, Issuer has requested that Grantee agree,
and Grantee has agreed, to grant Issuer an option to purchase shares of
Grantee's common stock on substantially the same terms as the Option.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, Issuer
and Grantee agree as follows:
1. GRANT OF OPTION. Subject to the terms and conditions set forth herein,
Issuer hereby grants to Grantee an irrevocable option (the "Option") to purchase
up to 7,427,192 (as adjusted as set forth herein) shares (the "Option Shares")
of Common Stock, par value $.01 per share ("Issuer Common Stock"), of Issuer at
a purchase price of $52.25 (as adjusted as set forth herein) per Option Share
(the "Purchase Price").
2. EXERCISE OF OPTION. (a) Grantee may, at any time or times, exercise the
Option with respect to at least 33 1/3% of the Option Shares, subject to the
provisions of Section 2(c), after the occurrence of any event as a result of
which the Grantee is unconditionally entitled to receive the Termination Fee
pursuant to Section 5.09 of the Merger Agreement (a "Purchase Event"); PROVIDED,
HOWEVER, that (i) except as provided in the last sentence of this Section 2(a),
the Option will terminate and be of no further force and effect upon the
earliest to occur of (A) the Effective Time, (B) 12 months after the first
occurrence of a Purchase Event, and (C) termination of the Merger Agreement in
accordance with its terms prior to the occurrence of a Purchase Event, unless,
in the case of clause (C), Grantee has the right to receive a Termination Fee
following such termination upon the occurrence of certain events, in which case
the Option will not terminate until the later of (x) six months following the
time such Termination Fee becomes unconditionally payable and (y) the expiration
of the period in which the Grantee has such right to receive a Termination Fee,
and (ii) any purchase of Option Shares upon exercise of the Option will be
subject to compliance with the HSR Act and the obtaining or making of any
consents, approvals, orders, notifications, filings or authorizations, the
failure of which to have obtained or made would violate any law, regulation or
agreement to which Issuer is subject (the "Regulatory Approvals").
Notwithstanding the foregoing, (A) if all necessary Regulatory Approvals have
not been obtained prior to the termination of the Option, such termination shall
be extended to the date that is the fifth Business Day after receipt of such
Regulatory Approvals, and (B) notwithstanding the termination of the Option, if
Grantee has exercised the Option in accordance with the terms hereof prior to
the termination of the Option, Grantee will be entitled to purchase the Option
Shares and the termination of the Option will not affect any rights hereunder.
(b) In the event that Grantee is entitled to and wishes to exercise the
Option, it will send to Issuer a written notice (an "Exercise Notice"; the date
of which being herein referred to as the "Notice
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<PAGE>
Date") to that effect which Exercise Notice also specifies the number of Option
Shares, if any, Grantee wishes to purchase pursuant to this Section 2(b), the
number of Option Shares, if any, with respect to which Grantee wishes to
exercise its Cash-Out Right (as defined herein) pursuant to Section 6(c), the
denominations of the certificate or certificates evidencing the Option Shares
which Grantee wishes to purchase pursuant to this Section 2(b) and a date (an
"Option Closing Date"), subject to the following sentence, not earlier than
three business days nor later than 20 business days from the Notice Date for the
closing of such purchase (an "Option Closing"). Any Option Closing will be at an
agreed location and time in New York, New York on the applicable Option Closing
Date or at such later date as may be necessary so as to comply with the first
sentence of Section 2(a).
(c) Notwithstanding anything to the contrary contained herein, any exercise
of the Option and purchase of Option Shares shall be subject to compliance with
applicable laws and regulations, which may prohibit the purchase of all the
Option Shares specified in the Exercise Notice without first obtaining or making
certain Regulatory Approvals. In such event, if the Option is otherwise
exercisable and Grantee wishes to exercise the Option, the Option may be
exercised in accordance with Section 2(b) and Grantee shall acquire the maximum
number of Option Shares specified in the Exercise Notice that Grantee is then
permitted to acquire under the applicable laws and regulations, and if Grantee
thereafter obtains the Regulatory Approvals to acquire the remaining balance of
the Option Shares specified in the Exercise Notice, then Grantee shall be
entitled to acquire such remaining balance. Issuer agrees to use its reasonable
efforts to assist Grantee in seeking the Regulatory Approvals.
In the event (i) Grantee receives notice that a Regulatory Approval required
for the purchase of any Option Shares will not be issued or granted or (ii) such
Regulatory Approval has not been issued or granted within six months of the date
of the Exercise Notice, Grantee shall have the right to exercise its Cash-Out
Right pursuant to Section 6(c) with respect to the Option Shares for which such
Regulatory Approval will not be issued or granted or has not been issued or
granted.
3. PAYMENT AND DELIVERY OF CERTIFICATES. (a) At any Option Closing,
Grantee will pay to Issuer in immediately available funds by wire transfer to a
bank account designated in writing by Issuer an amount equal to the Purchase
Price multiplied by the number of Option Shares to be purchased at such Option
Closing plus the amount of any transfer, stamp or other similar taxes or charges
imposed in connection therewith.
(b) At any Option Closing, simultaneously with the delivery of immediately
available funds as provided in Section 3(a), Issuer will deliver to Grantee a
certificate or certificates representing the Option Shares to be purchased at
such Option Closing, which Option Shares will be free and clear of all liens,
claims, charges and encumbrances of any kind whatsoever, except pursuant to
applicable federal and state securities laws. If at the time of issuance of
Option Shares pursuant to an exercise of the Option hereunder, Issuer shall have
issued any securities similar to rights under a stockholder rights plan, then
each Option Share issued pursuant to such exercise will also represent such a
corresponding right with terms substantially the same as and at least as
favorable to Grantee as are provided under any such stockholder rights plan then
in effect.
(c) Certificates for the Option Shares delivered at an Option Closing will
have typed or printed thereon a restrictive legend which will read substantially
as follows:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE REOFFERED OR SOLD
ONLY IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE. SUCH SECURITIES ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON
TRANSFER AS SET FORTH IN THE STOCK OPTION AGREEMENT DATED AS OF JULY 20,
1999, A COPY OF WHICH MAY BE OBTAINED
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<PAGE>
FROM THE SECRETARY OF IXC COMMUNICATIONS, INC. AT ITS PRINCIPAL EXECUTIVE
OFFICES."
It is understood and agreed that (i) the reference to restrictions arising under
the Securities Act in the above legend will be removed by delivery of substitute
certificate(s) without such reference if such Option Shares have been registered
pursuant to the Securities Act, such Option Shares have been sold in reliance on
and in accordance with Rule 144 under the Securities Act or Grantee has
delivered to Issuer a copy of a letter from the staff of the SEC, or an opinion
of counsel in form and substance reasonably satisfactory to Issuer and its
counsel, to the effect that such legend is not required for purposes of the
Securities Act and (ii) the reference to restrictions pursuant to this Agreement
in the above legend will be removed by delivery of substitute certificate(s)
without such reference if the Option Shares evidenced by certificate(s)
containing such reference have been sold or transferred in compliance with the
provisions of this Agreement under circumstances that do not require the
retention of such reference.
4. REPRESENTATIONS AND WARRANTIES OF ISSUER. Issuer hereby represents and
warrants to Grantee as follows:
AUTHORIZED STOCK. Issuer has taken all necessary corporate and other
action to authorize and reserve and, subject to the expiration or
termination of any required waiting period under the HSR Act and other
Regulatory Approvals that are required, to permit it to issue, and, at all
times from the date hereof until the obligation to deliver Option Shares
upon the exercise of the Option terminates, shall have reserved for
issuance, upon exercise of the Option, shares of Issuer Common Stock
necessary for Grantee to exercise the Option, and Issuer will take all
necessary corporate action to authorize and reserve for issuance all
additional shares of Issuer Common Stock or other securities which may be
issued pursuant to Section 6 upon exercise of the Option. The shares of
Issuer Common Stock to be issued upon due exercise of the Option, including
all additional shares of Issuer Common Stock or other securities which may
be issuable upon exercise of the Option or any other securities which may be
issued pursuant to Section 6, upon issuance pursuant hereto, will be duly
and validly issued, fully paid and nonassessable, and will be delivered free
and clear of all liens, claims, charges and encumbrances of any kind or
nature whatsoever, including without limitation any preemptive rights of any
stockholder of Issuer, but will be subject to applicable securities laws.
5. REPRESENTATIONS AND WARRANTIES OF GRANTEE. Grantee hereby represents
and warrants to Issuer that:
PURCHASE NOT FOR DISTRIBUTION. Any Option Shares or other securities
acquired by Grantee upon exercise of the Option will not be transferred or
otherwise disposed of except in a transaction registered, or exempt from
registration, under the Securities Act.
6. ADJUSTMENT UPON CHANGES IN CAPITALIZATION, ETC. (a) In the event of any
change in Issuer Common Stock by reason of a stock dividend, split-up, merger,
recapitalization, combination, exchange of shares, or similar transaction, the
type and number of shares or securities subject to the Option, and the Purchase
Price thereof, will be adjusted appropriately, and proper provision will be made
in the agreements governing such transaction, so that Grantee will receive upon
exercise of the Option the number and class of shares or other securities or
property that Grantee would have received in respect of Issuer Common Stock if
the Option had been exercised immediately prior to such event or the record date
therefor, as applicable, PROVIDED THAT no such adjustment shall be required in
connection with the exercise of options or similar rights under any stock option
plan or benefit arrangement in effect on the date hereof or in connection with
the conversion of any convertible or exchangeable securities outstanding on the
date hereof.
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<PAGE>
(b) Without limiting the parties' relative rights and obligations under the
Merger Agreement, in the event that Issuer enters into an agreement (i) to
consolidate with or merge into any person, other than Grantee or one of its
subsidiaries, and Issuer will not be the continuing or surviving corporation in
such consolidation or merger, (ii) to permit any person, other than Grantee or
one of its subsidiaries, to merge into Issuer and Issuer will be the continuing
or surviving corporation, but in connection with such merger, the shares of
Issuer Common Stock outstanding immediately prior to the consummation of such
merger will be changed into or exchanged for stock or other securities of Issuer
or any other person or cash or any other property, or the shares of Issuer
Common Stock outstanding immediately prior to the consummation of such merger
will, after such merger, represent less than 50% of the outstanding voting
securities of the merged company, or (iii) to sell or otherwise transfer all or
substantially all of its assets to any person, other than Grantee or one of its
subsidiaries, then, and in each such case, the agreement governing such
transaction will make proper provision so that the Option will, upon the
consummation of any such transaction and upon the terms and conditions set forth
herein, be converted into, or exchanged for, an option with identical terms
appropriately adjusted to acquire the number and class of shares or other
securities or property that Grantee would have received in respect of Issuer
Common Stock if the Option had been exercised immediately prior to such
consolidation, merger, sale, or transfer, or the record date therefor, as
applicable and make any other necessary adjustments.
(c) If, at any time during the period commencing on a Purchase Event and
ending on the termination of the Option in accordance with Section 2, Grantee
sends to Issuer an Exercise Notice indicating Grantee's election to exercise its
right (the "Cash-Out Right") pursuant to this Section 6(c), then Issuer shall
pay to Grantee, on the Option Closing Date, in exchange for the cancelation of
the Option with respect to such number of Option Shares as Grantee specifies in
the Exercise Notice, an amount in cash equal to such number of Option Shares
multiplied by the difference between (i) the average closing price, for the 10
trading days commencing on the 12th trading day immediately preceding the Option
Closing Date, per share of Issuer Common Stock as reported on The Nasdaq
National Market (or, if not listed on The Nasdaq National Market, as reported on
any other national securities exchange or national securities quotation system
on which the Issuer Common Stock is listed or quoted, as reported in THE WALL
STREET JOURNAL (Northeast edition), or, if not reported thereby, any other
authoritative source) (the "Closing Price") and (ii) the Purchase Price.
Notwithstanding the termination of the Option, Grantee will be entitled to
exercise its rights under this Section 6(c) if it has exercised such rights in
accordance with the terms hereof prior to the termination of the Option.
7. PROFIT LIMITATIONS. (a) Notwithstanding any other provision of this
Agreement, in no event shall the Total Option Profit (as defined herein) exceed
in the aggregate $26.25 million (such amount, the "Profit Limit") and, if any
payment to be made to Grantee otherwise would cause such aggregate amount to be
exceeded, the Grantee, at its sole election, shall either (i) reduce the number
of shares of Issuer Common Stock subject to this Option, (ii) deliver to Issuer
for cancelation Option Shares previously purchased by Grantee, (iii) pay cash to
Issuer or (iv) any combination thereof, so that the Total Option Profit shall
not exceed the Profit Limit after taking into account the foregoing actions.
(b) Notwithstanding any other provision of this Agreement, the Option may
not be exercised for a number of shares of Issuer Common Stock as would, as of
the date of exercise, result in a Notional Total Option Profit (as hereinafter
defined) which would exceed in the aggregate the Profit Limit and, if it
otherwise would exceed such amount, the Grantee, at its sole election, shall on
or prior to the date of exercise either (i) reduce the number of shares of
Issuer Common Stock subject to such exercise, (ii) deliver to Issuer for
cancelation Option Shares previously purchased by Grantee, (iii) pay cash to
Issuer or (iv) any combination thereof, so that the Notional Total Option Profit
shall not exceed the Profit Limit after taking into account the foregoing
actions, provided that this paragraph (b) shall not be construed as to restrict
any exercise of the Option that is not prohibited hereby on any subsequent date.
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<PAGE>
(c) As used herein, the term "Total Option Profit" shall mean the aggregate
amount (before taxes) of the following: (i) any amount received by Grantee
pursuant to the Cash-Out Right, (ii)(x) the net consideration, if any, received
by Grantee pursuant to the sale of Option Shares (or any other securities into
which such Option Shares are converted or exchanged) to any unaffiliated party,
valuing any non-cash consideration at its fair market value (as defined below),
less (y) the Exercise Price and any cash paid by Grantee to Issuer pursuant to
Section 7(a)(iii) or Section 7(b)(iii) and (iii) the net cash amounts received
by Grantee on the transfer (in accordance with Section 12(g)) of the Option (or
any portion thereof) to any unaffiliated party.
(d) As used herein, the term "Notional Total Option Profit" with respect to
any number of shares of Option Shares as to which Grantee may propose to
exercise the Option shall be the aggregate of (i) the Total Option Profit
determined under paragraph (c) above with respect to prior exercises and (ii)
Total Option Profit with respect to such number of shares of Issuer Common Stock
as to which Grantee proposes to exercise and all other Option Shares held by
Grantee and its affiliates as of such date, assuming that all such shares were
sold for cash at the closing market price for Issuer Common Stock as of the
close of business on the preceding trading day (less customary brokerage
commissions or underwriting discounts).
(e) As used herein, the "fair market value" of any non-cash consideration
consisting of:
(i) securities listed on a national securities exchange or traded on The
Nasdaq National Market shall be equal to the average closing price per share
of such security as reported on such exchange or The Nasdaq National Market
for the five trading days after the date of determination; and
(ii) consideration which is other than cash or securities of the form
specified in clause (i) above shall be determined by a nationally recognized
independent investment banking firm mutually agreed upon by the parties
within five business days of the event requiring selection of such banking
firm, PROVIDED that if the parties are unable to agree within two business
days after the date of such event as to the investment banking firm, then
the parties shall each select one firm, and those firms shall select a third
nationally recognized independent investment banking firm, which third firm
shall make such determination.
8. REGISTRATION RIGHTS. Issuer will, if requested by Grantee at any time
and from time to time within three years of the exercise of the Option, as
expeditiously as possible prepare and file up to three registration statements
under the Securities Act if such registration is necessary in order to permit
the sale or other disposition of any or all shares of securities that have been
acquired by or are issuable to Grantee upon exercise of the Option in accordance
with the intended method of sale or other disposition stated by Grantee,
including a "shelf" registration statement under Rule 415 under the Securities
Act or any successor provision, and Issuer will use its reasonable efforts to
qualify such shares or other securities under any applicable state securities
laws, PROVIDED that Issuer shall not be required to effect such registration if
less than 10% of the Option Shares subject to the Option will be offered for
sale pursuant thereto. Grantee agrees to cause, and to cause any underwriters of
any sale or other disposition to cause, any sale or other disposition pursuant
to such registration statement to be effected on a widely distributed basis so
that upon consummation thereof no purchaser or transferee will own beneficially
more than 5% of the then-outstanding voting power of Issuer. Issuer will use
reasonable efforts to cause each such registration statement to become
effective, to obtain all consents or waivers of other parties which are required
therefor, and to keep such registration statement effective for such period not
in excess of 120 calendar days from the day such registration statement first
becomes effective as may be reasonably necessary to effect such sale or other
disposition. The obligations of Issuer hereunder to file a registration
statement and to maintain its effectiveness may be suspended for up to 120
calendar days in the aggregate if the Board of Directors of Issuer shall have
determined that the filing of such registration statement or the maintenance of
its effectiveness would
3-5
<PAGE>
require premature disclosure of material nonpublic information that would
materially and adversely affect Issuer or otherwise interfere with or adversely
affect any pending or proposed offering of securities of Issuer or any other
material transaction involving Issuer. Any registration statement prepared and
filed under this Section 8, and any sale covered thereby, will be at Issuer's
expense except for underwriting discounts or commissions, brokers' fees and the
fees and disbursements of Grantee's counsel related thereto. Grantee will
provide all information reasonably requested by Issuer for inclusion in any
registration statement to be filed hereunder. If, during the time periods
referred to in the first sentence of this Section 8, Issuer effects a
registration under the Securities Act of Issuer Common Stock for its own account
or for any other stockholders of Issuer (other than on Form S-4 or Form S-8, or
any successor form), it will allow Grantee the right to participate in such
registration, and such participation will not affect the obligation of Issuer to
effect demand registration statements for Grantee under this Section 8; PROVIDED
that, if the managing underwriters of such offering advise Issuer in writing
that in their opinion the number of shares of Issuer Common Stock requested to
be included in such registration exceeds the number which can be sold in such
offering, Issuer will include the shares requested to be included therein by
Grantee pro rata with the shares intended to be included therein by Issuer. In
connection with any registration pursuant to this Section 8, Issuer and Grantee
will provide each other and any underwriter of the offering with customary
representations, warranties, covenants, indemnification, and contribution in
connection with such registration.
9. TRANSFERS. The Option Shares may not be sold, assigned, transferred, or
otherwise disposed of except (i) in an underwritten public offering as provided
in Section 8 or (ii) to any purchaser or transferee who would not, to the
knowledge of Grantee after reasonable inquiry (which shall include obtaining a
representation from the purchaser or transferee), immediately following such
sale, assignment, transfer or disposal, beneficially own more than 5% of the
then-outstanding voting power of the Issuer and who is not a competitor in any
material line of business of Issuer; PROVIDED, HOWEVER, that Grantee shall be
permitted to sell any Option Shares if such sale is made pursuant to a tender or
exchange offer that has been approved or recommended by a majority of the
members of the Board of Directors of Issuer (which majority shall include a
majority of directors who were directors as of the date hereof).
10. QUOTATION. If Issuer Common Stock or any other securities to be
acquired upon exercise of the Option are then approved for quotation on The
Nasdaq National Market (or any other national securities exchange or national
securities quotation system), Issuer, upon the request of Grantee, will promptly
file an application to have approved for quotation the shares of Issuer Common
Stock or other securities to be acquired upon exercise of the Option on The
Nasdaq National Market (and any such other national securities exchange or
national securities quotation system) and will use reasonable efforts to obtain
approval of such quotation as promptly as practicable.
11. LOSS OR MUTILATION. Upon receipt by Issuer of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this
Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancelation of this
Agreement, if mutilated, Issuer will execute and deliver a new Agreement of like
tenor and date. Any such new Agreement executed and delivered will constitute an
additional contractual obligation on the part of Issuer, whether or not the
Agreement so lost, stolen, destroyed, or mutilated shall at any time be
enforceable by anyone.
12. MISCELLANEOUS. (a) EXPENSES. Each of the parties hereto will bear and
pay all costs and expenses incurred by it or on its behalf in connection with
the transactions contemplated hereunder, including fees and expenses of its own
financial consultants, investment bankers, accountants, and counsel.
(b) AMENDMENT. This Agreement may not be amended, except by an instrument
in writing signed on behalf of each of the parties.
3-6
<PAGE>
(c) EXTENSION; WAIVER. Any agreement on the part of a party to waive any
provision of this Agreement, or to extend the time for performance, will be
valid only if set forth in an instrument in writing signed on behalf of such
party. The failure of any party to this Agreement to assert any of its rights
under this Agreement or otherwise will not constitute a waiver of such rights.
(d) ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES. This Agreement, the
Merger Agreement (including the documents and instruments attached thereto as
exhibits or schedules or delivered in connection therewith), the Stockholders
Agreement, the CBI Stock Option Agreement and the Confidentiality Agreement (i)
constitute the entire agreement, and supersede all prior agreements and
understandings, both written and oral, between the parties with respect to the
subject matter of this Agreement, and (ii) except as provided in Section 8.06 of
the Merger Agreement, are not intended to confer upon any person other than the
parties any rights or remedies.
(e) GOVERNING LAW. This Agreement will be governed by, and construed in
accordance with, the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflict of laws thereof.
(f) NOTICES. All notices, requests, claims, demands, and other
communications under this Agreement shall be sent in the manner and to the
addresses set forth in the Merger Agreement.
(g) ASSIGNMENT. Neither this Agreement, the Option nor any of the rights,
interests, or obligations under this Agreement may be assigned or delegated, in
whole or in part, by operation of law or otherwise, by Issuer or Grantee without
the prior written consent of the other. Any assignment or delegation in
violation of the preceding sentence will be void. Subject to the first and
second sentences of this Section 12(g), this Agreement will be binding upon,
inure to the benefit of, and be enforceable by, the parties and their respective
successors and assigns.
(h) FURTHER ASSURANCES. In the event of any exercise of the Option by
Grantee, Issuer and Grantee will execute and deliver all other documents and
instruments and take all other actions that may be reasonably necessary in order
to consummate the transactions provided for by such exercise.
(i) ENFORCEMENT. The parties agree that irreparable damage would occur and
that the parties would not have any adequate remedy at law 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 will be entitled to an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and provisions of this
Agreement in any Federal court located in the State of Delaware or in Delaware
state court, the foregoing being in addition to any other remedy to which they
are entitled at law or in equity. In addition, each of the parties hereto (i)
consents to submit itself to the personal 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, (ii) agrees that it will not attempt to deny or defeat such
personal jurisdiction by motion or other request for leave from any such court,
and (iii) agrees that it will not bring any action relating to this Agreement or
any of the transactions contemplated by this Agreement in any court other than a
Federal court sitting in the State of Delaware or a Delaware state court.
(j) SEVERABILITY. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible to the fullest extent
permitted by applicable law in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
3-7
<PAGE>
IN WITNESS WHEREOF, Issuer and Grantee have caused this Agreement to be
signed by their respective officers thereunto duly authorized as of the day and
year first written above.
<TABLE>
<S> <C> <C>
IXC COMMUNICATIONS, INC.,
By: /s/ JOHN M. ZRNO
-----------------------------------------
Name: John M. Zrno
Title: President and
Chief Executive Officer
CINCINNATI BELL INC.,
By: /s/ RICHARD G. ELLENBERGER
-----------------------------------------
Name: Richard G. Ellenberger
Title: President and Chief
Executive Officer
</TABLE>
3-8
<PAGE>
ANNEX 4
STOCK OPTION AGREEMENT dated as of July 20, 1999 (the "Agreement"),
by and between CINCINNATI BELL INC., an Ohio corporation ("Issuer"), and
IXC COMMUNICATIONS, INC., a Delaware corporation ("Grantee").
RECITALS
A. Issuer, Ivory Merger Inc., a wholly owned subsidiary of Issuer ("Sub"),
and Grantee have entered into an Agreement and Plan of Merger dated as of the
date hereof (the "Merger Agreement"; defined terms used but not defined herein
have the meanings set forth in the Merger Agreement), providing for, among other
things, the merger of Sub with and into Grantee, with Grantee as the surviving
corporation in the Merger;
B. As a condition and inducement to Grantee's willingness to enter into the
Merger Agreement and the IXC Stock Option Agreement, Grantee has requested that
Issuer agree, and Issuer has agreed, to grant Grantee the Option (as defined
below); and
C. As a condition and inducement to Issuer's willingness to enter into the
Merger Agreement, the Stockholder Agreements and this Agreement, Issuer has
requested that Grantee agree, and Grantee has agreed, to grant Issuer an option
to purchase shares of Grantee's common stock on substantially the same terms as
the Option.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, Issuer
and Grantee agree as follows:
1. GRANT OF OPTION. Subject to the terms and conditions set forth herein,
Issuer hereby grants to Grantee an irrevocable option (the "Option") to purchase
up to 27,420,757 (as adjusted as set forth herein) shares (the "Option Shares")
of Common Stock, par value $.01 per share ("Issuer Common Stock"), of Issuer at
a purchase price of $34.83 (as adjusted as set forth herein) per Option Share
(the "Purchase Price").
2. EXERCISE OF OPTION. (a) Grantee may, at any time or times, exercise the
Option with respect to at least 33 1/3% of the Option Shares, subject to the
provisions of Section 2(c), after the occurrence of any event as a result of
which the Grantee is unconditionally entitled to receive the Termination Fee
pursuant to Section 5.09 of the Merger Agreement (a "Purchase Event"); PROVIDED,
HOWEVER, that (i) except as provided in the last sentence of this Section 2(a),
the Option will terminate and be of no further force and effect upon the
earliest to occur of (A) the Effective Time, (B) 12 months after the first
occurrence of a Purchase Event, and (C) termination of the Merger Agreement in
accordance with its terms prior to the occurrence of a Purchase Event, unless,
in the case of clause (C), Grantee has the right to receive a Termination Fee
following such termination upon the occurrence of certain events, in which case
the Option will not terminate until the later of (x) six months following the
time such Termination Fee becomes unconditionally payable and (y) the expiration
of the period in which the Grantee has such right to receive a Termination Fee,
and (ii) any purchase of Option Shares upon exercise of the Option will be
subject to compliance with the HSR Act and the obtaining or making of any
consents, approvals, orders, notifications, filings or authorizations, the
failure of which to have obtained or made would violate any law, regulation or
agreement to which Issuer is subject (the "Regulatory Approvals").
Notwithstanding the foregoing, (A) if all necessary Regulatory Approvals have
not been obtained prior to the termination of the Option, such termination shall
be extended to the date that is the fifth Business Day after receipt of such
Regulatory Approvals, and (B) notwithstanding the termination of the Option, if
Grantee has exercised the Option in accordance with the terms hereof prior to
the termination of the Option, Grantee will be entitled to purchase the Option
Shares and the termination of the Option will not affect any rights hereunder.
4-1
<PAGE>
(b) In the event that Grantee is entitled to and wishes to exercise the
Option, it will send to Issuer a written notice (an "Exercise Notice"; the date
of which being herein referred to as the "Notice Date") to that effect which
Exercise Notice also specifies the number of Option Shares, if any, Grantee
wishes to purchase pursuant to this Section 2(b), the number of Option Shares,
if any, with respect to which Grantee wishes to exercise its Cash-Out Right (as
defined herein) pursuant to Section 6(c), the denominations of the certificate
or certificates evidencing the Option Shares which Grantee wishes to purchase
pursuant to this Section 2(b) and a date (an "Option Closing Date"), subject to
the following sentence, not earlier than three business days nor later than 20
business days from the Notice Date for the closing of such purchase (an "Option
Closing"). Any Option Closing will be at an agreed location and time in New
York, New York on the applicable Option Closing Date or at such later date as
may be necessary so as to comply with the first sentence of Section 2(a).
(c) Notwithstanding anything to the contrary contained herein, any exercise
of the Option and purchase of Option Shares shall be subject to compliance with
applicable laws and regulations, which may prohibit the purchase of all the
Option Shares specified in the Exercise Notice without first obtaining or making
certain Regulatory Approvals. In such event, if the Option is otherwise
exercisable and Grantee wishes to exercise the Option, the Option may be
exercised in accordance with Section 2(b) and Grantee shall acquire the maximum
number of Option Shares specified in the Exercise Notice that Grantee is then
permitted to acquire under the applicable laws and regulations, and if Grantee
thereafter obtains the Regulatory Approvals to acquire the remaining balance of
the Option Shares specified in the Exercise Notice, then Grantee shall be
entitled to acquire such remaining balance. Issuer agrees to use its reasonable
efforts to assist Grantee in seeking the Regulatory Approvals.
In the event (i) Grantee receives notice that a Regulatory Approval required
for the purchase of any Option Shares will not be issued or granted or (ii) such
Regulatory Approval has not been issued or granted within six months of the date
of the Exercise Notice, Grantee shall have the right to exercise its Cash-Out
Right pursuant to Section 6(c) with respect to the Option Shares for which such
Regulatory Approval will not be issued or granted or has not been issued or
granted.
3. PAYMENT AND DELIVERY OF CERTIFICATES. (a) At any Option Closing,
Grantee will pay to Issuer in immediately available funds by wire transfer to a
bank account designated in writing by Issuer an amount equal to the Purchase
Price multiplied by the number of Option Shares to be purchased at such Option
Closing plus the amount of any transfer, stamp or other similar taxes or charges
imposed in connection therewith.
(b) At any Option Closing, simultaneously with the delivery of immediately
available funds as provided in Section 3(a), Issuer will deliver to Grantee a
certificate or certificates representing the Option Shares to be purchased at
such Option Closing, which Option Shares will be free and clear of all liens,
claims, charges and encumbrances of any kind whatsoever, except pursuant to
applicable federal and state securities laws. If at the time of issuance of
Option Shares pursuant to an exercise of the Option hereunder, Issuer shall have
issued any securities similar to rights under a stockholder rights plan, then
each Option Share issued pursuant to such exercise will also represent such a
corresponding right with terms substantially the same as and at least as
favorable to Grantee as are provided under any such stockholder rights plan then
in effect.
(c) Certificates for the Option Shares delivered at an Option Closing will
have typed or printed thereon a restrictive legend which will read substantially
as follows:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE REOFFERED OR SOLD
ONLY IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE. SUCH SECURITIES ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON
TRANSFER AS SET FORTH IN THE STOCK OPTION
4-2
<PAGE>
AGREEMENT DATED AS OF JULY 20, 1999, A COPY OF WHICH MAY BE OBTAINED FROM
THE SECRETARY OF CINCINNATI BELL INC. AT ITS PRINCIPAL EXECUTIVE OFFICES."
It is understood and agreed that (i) the reference to restrictions arising under
the Securities Act in the above legend will be removed by delivery of substitute
certificate(s) without such reference if such Option Shares have been registered
pursuant to the Securities Act, such Option Shares have been sold in reliance on
and in accordance with Rule 144 under the Securities Act or Grantee has
delivered to Issuer a copy of a letter from the staff of the SEC, or an opinion
of counsel in form and substance reasonably satisfactory to Issuer and its
counsel, to the effect that such legend is not required for purposes of the
Securities Act and (ii) the reference to restrictions pursuant to this Agreement
in the above legend will be removed by delivery of substitute certificate(s)
without such reference if the Option Shares evidenced by certificate(s)
containing such reference have been sold or transferred in compliance with the
provisions of this Agreement under circumstances that do not require the
retention of such reference.
4. REPRESENTATIONS AND WARRANTIES OF ISSUER. Issuer hereby represents and
warrants to Grantee as follows:
AUTHORIZED STOCK. Issuer has taken all necessary corporate and other action
to authorize and reserve and, subject to the expiration or termination of any
required waiting period under the HSR Act and other Regulatory Approvals that
are required, to permit it to issue, and, at all times from the date hereof
until the obligation to deliver Option Shares upon the exercise of the Option
terminates, shall have reserved for issuance, upon exercise of the Option,
shares of Issuer Common Stock necessary for Grantee to exercise the Option, and
Issuer will take all necessary corporate action to authorize and reserve for
issuance all additional shares of Issuer Common Stock or other securities which
may be issued pursuant to Section 6 upon exercise of the Option. The shares of
Issuer Common Stock to be issued upon due exercise of the Option, including all
additional shares of Issuer Common Stock or other securities which may be
issuable upon exercise of the Option or any other securities which may be issued
pursuant to Section 6, upon issuance pursuant hereto, will be duly and validly
issued, fully paid and nonassessable, and will be delivered free and clear of
all liens, claims, charges and encumbrances of any kind or nature whatsoever,
including without limitation any preemptive rights of any stockholder of Issuer,
but will be subject to applicable securities laws.
5. REPRESENTATIONS AND WARRANTIES OF GRANTEE. Grantee hereby represents
and warrants to Issuer that:
PURCHASE NOT FOR DISTRIBUTION. Any Option Shares or other securities
acquired by Grantee upon exercise of the Option will not be transferred or
otherwise disposed of except in a transaction registered, or exempt from
registration, under the Securities Act.
6. ADJUSTMENT UPON CHANGES IN CAPITALIZATION, ETC. (a) In the event of any
change in Issuer Common Stock by reason of a stock dividend, split-up, merger,
recapitalization, combination, exchange of shares, or similar transaction, the
type and number of shares or securities subject to the Option, and the Purchase
Price thereof, will be adjusted appropriately, and proper provision will be made
in the agreements governing such transaction, so that Grantee will receive upon
exercise of the Option the number and class of shares or other securities or
property that Grantee would have received in respect of Issuer Common Stock if
the Option had been exercised immediately prior to such event or the record date
therefor, as applicable, PROVIDED THAT no such adjustment shall be required in
connection with the exercise of options or similar rights under any stock option
plan or benefit arrangement in effect on the date hereof or in connection with
the conversion of any convertible or exchangeable securities outstanding on the
date hereof.
4-3
<PAGE>
(b) Without limiting the parties' relative rights and obligations under the
Merger Agreement, in the event that Issuer enters into an agreement (i) to
consolidate with or merge into any person, other than Grantee or one of its
subsidiaries, and Issuer will not be the continuing or surviving corporation in
such consolidation or merger, (ii) to permit any person, other than Grantee or
one of its subsidiaries, to merge into Issuer and Issuer will be the continuing
or surviving corporation, but in connection with such merger, the shares of
Issuer Common Stock outstanding immediately prior to the consummation of such
merger will be changed into or exchanged for stock or other securities of Issuer
or any other person or cash or any other property, or the shares of Issuer
Common Stock outstanding immediately prior to the consummation of such merger
will, after such merger, represent less than 50% of the outstanding voting
securities of the merged company, or (iii) to sell or otherwise transfer all or
substantially all of its assets to any person, other than Grantee or one of its
subsidiaries, then, and in each such case, the agreement governing such
transaction will make proper provision so that the Option will, upon the
consummation of any such transaction and upon the terms and conditions set forth
herein, be converted into, or exchanged for, an option with identical terms
appropriately adjusted to acquire the number and class of shares or other
securities or property that Grantee would have received in respect of Issuer
Common Stock if the Option had been exercised immediately prior to such
consolidation, merger, sale, or transfer, or the record date therefor, as
applicable and make any other necessary adjustments.
(c) If, at any time during the period commencing on a Purchase Event and
ending on the termination of the Option in accordance with Section 2, Grantee
sends to Issuer an Exercise Notice indicating Grantee's election to exercise its
right (the "Cash-Out Right") pursuant to this Section 6(c), then Issuer shall
pay to Grantee, on the Option Closing Date, in exchange for the cancelation of
the Option with respect to such number of Option Shares as Grantee specifies in
the Exercise Notice, an amount in cash equal to such number of Option Shares
multiplied by the difference between (i) the average closing price, for the 10
trading days commencing on the 12th trading day immediately preceding the Option
Closing Date, per share of Issuer Common Stock as reported on the New York Stock
Exchange, Inc. (the "NYSE") (or, if not listed on the NYSE, as reported on any
other national securities exchange or national securities quotation system on
which the Issuer Common Stock is listed or quoted, as reported in THE WALL
STREET JOURNAL (Northeast edition), or, if not reported thereby, any other
authoritative source) (the "Closing Price") and (ii) the Purchase Price.
Notwithstanding the termination of the Option, Grantee will be entitled to
exercise its rights under this Section 6(c) if it has exercised such rights in
accordance with the terms hereof prior to the termination of the Option.
7. PROFIT LIMITATIONS. (a) Notwithstanding any other provision of this
Agreement, in no event shall the Total Option Profit (as defined herein) exceed
in the aggregate $26.25 million (such amount, the "Profit Limit") and, if any
payment to be made to Grantee otherwise would cause such aggregate amount to be
exceeded, the Grantee, at its sole election, shall either (i) reduce the number
of shares of Issuer Common Stock subject to this Option, (ii) deliver to Issuer
for cancelation Option Shares previously purchased by Grantee, (iii) pay cash to
Issuer or (iv) any combination thereof, so that the Total Option Profit shall
not exceed the Profit Limit after taking into account the foregoing actions.
(b) Notwithstanding any other provision of this Agreement, the Option may
not be exercised for a number of shares of Issuer Common Stock as would, as of
the date of exercise, result in a Notional Total Option Profit (as hereinafter
defined) which would exceed in the aggregate the Profit Limit and, if it
otherwise would exceed such amount, the Grantee, at its sole election, shall on
or prior to the date of exercise either (i) reduce the number of shares of
Issuer Common Stock subject to such exercise, (ii) deliver to Issuer for
cancellation Option Shares previously purchased by Grantee, (iii) pay cash to
Issuer or (iv) any combination thereof, so that the Notional Total Option Profit
shall not exceed the Profit Limit after taking into account the foregoing
actions, provided that this paragraph (b) shall not be construed as to restrict
any exercise of the Option that is not prohibited hereby on any subsequent date.
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<PAGE>
(c) As used herein, the term "Total Option Profit" shall mean the aggregate
amount (before taxes) of the following: (i) any amount received by Grantee
pursuant to the Cash-Out Right, (ii)(x) the net consideration, if any, received
by Grantee pursuant to the sale of Option Shares (or any other securities into
which such Option Shares are converted or exchanged) to any unaffiliated party,
valuing any non-cash consideration at its fair market value (as defined below),
less (y) the Exercise Price and any cash paid by Grantee to Issuer pursuant to
Section 7(a)(iii) or Section 7(b)(iii) and (iii) the net cash amounts received
by Grantee on the transfer (in accordance with Section 12(g)) of the Option (or
any portion thereof) to any unaffiliated party.
(d) As used herein, the term "Notional Total Option Profit" with respect to
any number of shares of Option Shares as to which Grantee may propose to
exercise the Option shall be the aggregate of (i) the Total Option Profit
determined under paragraph (c) above with respect to prior exercises and (ii)
Total Option Profit with respect to such number of shares of Issuer Common Stock
as to which Grantee proposes to exercise and all other Option Shares held by
Grantee and its affiliates as of such date, assuming that all such shares were
sold for cash at the closing market price for Issuer Common Stock as of the
close of business on the preceding trading day (less customary brokerage
commissions or underwriting discounts).
(e) As used herein, the "fair market value" of any non-cash consideration
consisting of:
(i) securities listed on a national securities exchange or traded on The
Nasdaq National Market shall be equal to the average closing price per share
of such security as reported on such exchange or The Nasdaq National Market
for the five trading days after the date of determination; and
(ii) consideration which is other than cash or securities of the form
specified in clause (i) above shall be determined by a nationally recognized
independent investment banking firm mutually agreed upon by the parties
within five business days of the event requiring selection of such banking
firm, PROVIDED that if the parties are unable to agree within two business
days after the date of such event as to the investment banking firm, then
the parties shall each select one firm, and those firms shall select a third
nationally recognized independent investment banking firm, which third firm
shall make such determination.
8. REGISTRATION RIGHTS. Issuer will, if requested by Grantee at any time
and from time to time within three years of the exercise of the Option, as
expeditiously as possible prepare and file up to three registration statements
under the Securities Act if such registration is necessary in order to permit
the sale or other disposition of any or all shares of securities that have been
acquired by or are issuable to Grantee upon exercise of the Option in accordance
with the intended method of sale or other disposition stated by Grantee,
including a "shelf" registration statement under Rule 415 under the Securities
Act or any successor provision, and Issuer will use its reasonable efforts to
qualify such shares or other securities under any applicable state securities
laws, PROVIDED that Issuer shall not be required to effect such registration if
less than 10% of the Option Shares subject to the Option will be offered for
sale pursuant thereto. Grantee agrees to cause, and to cause any underwriters of
any sale or other disposition to cause, any sale or other disposition pursuant
to such registration statement to be effected on a widely distributed basis so
that upon consummation thereof no purchaser or transferee will own beneficially
more than 5% of the then-outstanding voting power of Issuer. Issuer will use
reasonable efforts to cause each such registration statement to become
effective, to obtain all consents or waivers of other parties which are required
therefor, and to keep such registration statement effective for such period not
in excess of 120 calendar days from the day such registration statement first
becomes effective as may be reasonably necessary to effect such sale or other
disposition. The obligations of Issuer hereunder to file a registration
statement and to maintain its effectiveness may be suspended for up to 120
calendar days in the aggregate if the Board of Directors of Issuer shall have
determined that the filing of such registration statement or the maintenance of
its effectiveness would
4-5
<PAGE>
require premature disclosure of material nonpublic information that would
materially and adversely affect Issuer or otherwise interfere with or adversely
affect any pending or proposed offering of securities of Issuer or any other
material transaction involving Issuer. Any registration statement prepared and
filed under this Section 8, and any sale covered thereby, will be at Issuer's
expense except for underwriting discounts or commissions, brokers' fees and the
fees and disbursements of Grantee's counsel related thereto. Grantee will
provide all information reasonably requested by Issuer for inclusion in any
registration statement to be filed hereunder. If, during the time periods
referred to in the first sentence of this Section 8, Issuer effects a
registration under the Securities Act of Issuer Common Stock for its own account
or for any other stockholders of Issuer (other than on Form S-4 or Form S-8, or
any successor form), it will allow Grantee the right to participate in such
registration, and such participation will not affect the obligation of Issuer to
effect demand registration statements for Grantee under this Section 8; PROVIDED
that, if the managing underwriters of such offering advise Issuer in writing
that in their opinion the number of shares of Issuer Common Stock requested to
be included in such registration exceeds the number which can be sold in such
offering, Issuer will include the shares requested to be included therein by
Grantee pro rata with the shares intended to be included therein by Issuer. In
connection with any registration pursuant to this Section 8, Issuer and Grantee
will provide each other and any underwriter of the offering with customary
representations, warranties, covenants, indemnification, and contribution in
connection with such registration.
9. TRANSFERS. The Option Shares may not be sold, assigned, transferred, or
otherwise disposed of except (i) in an underwritten public offering as provided
in Section 8 or (ii) to any purchaser or transferee who would not, to the
knowledge of Grantee after reasonable inquiry (which shall include obtaining a
representation from the purchaser or transferee), immediately following such
sale, assignment, transfer or disposal, beneficially own more than 5% of the
then-outstanding voting power of the Issuer and who is not a competitor in any
material line of business of Issuer; PROVIDED, HOWEVER, that Grantee shall be
permitted to sell any Option Shares if such sale is made pursuant to a tender or
exchange offer that has been approved or recommended by a majority of the
members of the Board of Directors of Issuer (which majority shall include a
majority of directors who were directors as of the date hereof).
10. LISTING. If Issuer Common Stock or any other securities to be acquired
upon exercise of the Option are then listed on the NYSE (or any other national
securities exchange or national securities quotation system), Issuer, upon the
request of Grantee, will promptly file an application to list the shares of
Issuer Common Stock or other securities to be acquired upon exercise of the
Option on the NYSE (and any such other national securities exchange or national
securities quotation system) and will use reasonable efforts to obtain approval
of such listing as promptly as practicable.
11. LOSS OR MUTILATION. Upon receipt by Issuer of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this
Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancelation of this
Agreement, if mutilated, Issuer will execute and deliver a new Agreement of like
tenor and date. Any such new Agreement executed and delivered will constitute an
additional contractual obligation on the part of Issuer, whether or not the
Agreement so lost, stolen, destroyed, or mutilated shall at any time be
enforceable by anyone.
12. MISCELLANEOUS. (a) EXPENSES. Each of the parties hereto will bear and
pay all costs and expenses incurred by it or on its behalf in connection with
the transactions contemplated hereunder, including fees and expenses of its own
financial consultants, investment bankers, accountants, and counsel.
(b) AMENDMENT. This Agreement may not be amended, except by an instrument
in writing signed on behalf of each of the parties.
4-6
<PAGE>
(c) EXTENSION; WAIVER. Any agreement on the part of a party to waive any
provision of this Agreement, or to extend the time for performance, will be
valid only if set forth in an instrument in writing signed on behalf of such
party. The failure of any party to this Agreement to assert any of its rights
under this Agreement or otherwise will not constitute a waiver of such rights.
(d) ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES. This Agreement, the
Merger Agreement (including the documents and instruments attached thereto as
exhibits or schedules or delivered in connection therewith), the Stockholders
Agreement, the IXC Stock Option Agreement and the Confidentiality Agreement (i)
constitute the entire agreement, and supersede all prior agreements and
understandings, both written and oral, between the parties with respect to the
subject matter of this Agreement, and (ii) except as provided in Section 8.06 of
the Merger Agreement, are not intended to confer upon any person other than the
parties any rights or remedies.
(e) GOVERNING LAW. This Agreement will be governed by, and construed in
accordance with, the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflict of laws thereof,
except to the extent the laws of the State of Ohio are mandatorily applicable
for the rights of CBI shareholders and directors and corporate governance
matters.
(f) NOTICES. All notices, requests, claims, demands, and other
communications under this Agreement shall be sent in the manner and to the
addresses set forth in the Merger Agreement.
(g) ASSIGNMENT. Neither this Agreement, the Option nor any of the rights,
interests, or obligations under this Agreement may be assigned or delegated, in
whole or in part, by operation of law or otherwise, by Issuer or Grantee without
the prior written consent of the other. Any assignment or delegation in
violation of the preceding sentence will be void. Subject to the first and
second sentences of this Section 12(g), this Agreement will be binding upon,
inure to the benefit of, and be enforceable by, the parties and their respective
successors and assigns.
(h) FURTHER ASSURANCES. In the event of any exercise of the Option by
Grantee, Issuer and Grantee will execute and deliver all other documents and
instruments and take all other actions that may be reasonably necessary in order
to consummate the transactions provided for by such exercise.
(i) ENFORCEMENT. The parties agree that irreparable damage would occur and
that the parties would not have any adequate remedy at law 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 will be entitled to an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and provisions of this
Agreement in any Federal court located in the State of Delaware or in Delaware
state court, the foregoing being in addition to any other remedy to which they
are entitled at law or in equity. In addition, each of the parties hereto (i)
consents to submit itself to the personal 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, (ii) agrees that it will not attempt to deny or defeat such
personal jurisdiction by motion or other request for leave from any such court,
and (iii) agrees that it will not bring any action relating to this Agreement or
any of the transactions contemplated by this Agreement in any court other than a
Federal court sitting in the State of Delaware or a Delaware state court.
(j) SEVERABILITY. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible to the fullest extent
permitted by applicable law in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
4-7
<PAGE>
IN WITNESS WHEREOF, Issuer and Grantee have caused this Agreement to be
signed by their respective officers thereunto duly authorized as of the day and
year first written above.
<TABLE>
<S> <C> <C>
IXC COMMUNICATIONS, INC.,
By: /s/ JOHN M. ZRNO
-----------------------------------------
Name: John M. Zrno
Title: President and Chief
Executive Officer
CINCINNATI BELL INC.,
By: /s/ RICHARD G. ELLENBERGER
-----------------------------------------
Name: Richard G. Ellenberger
Title: President and Chief
Executive Officer
</TABLE>
4-8
<PAGE>
ANNEX 5
STOCKHOLDER AGREEMENT dated as of July 20, 1999 (this "Agreement"),
between CINCINNATI BELL INC., an Ohio corporation ("CBI"), and GENERAL
ELECTRIC PENSION TRUST, a New York common law trust ("GE").
WHEREAS CBI, Ivory Merger Inc., a Delaware corporation and a wholly owned
subsidiary of CBI ("Sub"), and IXC COMMUNICATIONS, INC., a Delaware corporation
("IXC"), propose to enter into an Agreement and Plan of Merger dated as of the
date hereof (as the same may be amended or supplemented, the "Merger Agreement";
terms used but not defined herein shall have the meanings set forth in the
Merger Agreement) providing for the merger of Sub with and into IXC (the
"Merger") upon the terms and subject to the conditions set forth in the Merger
Agreement;
WHEREAS GE owns the number of shares of common stock of IXC set forth on
Schedule A hereto (such shares of common stock of IXC, together with any other
shares of common stock of IXC acquired by GE after the date hereof and during
the term of this Agreement (including through the exercise of any stock options,
warrants or similar instruments), being collectively referred to herein as the
"Subject Shares");
WHEREAS as a condition to its willingness to enter into the Merger
Agreement, CBI has requested that GE enter into this Agreement; and
WHEREAS as a condition to its willingness to enter into this Agreement, GE
has requested that CBI agree to purchase from GE, and GE agrees to sell to CBI,
a portion of the Subject Shares pursuant to a stock purchase agreement dated as
of the date hereof (the "Stock Purchase Agreement").
NOW, THEREFORE, to induce CBI to enter into, and in consideration of its
entering into, the Merger Agreement, and in consideration of the premises and
the representations, warranties and agreements contained herein, the parties
hereto agree as follows:
SECTION 1. REPRESENTATIONS AND WARRANTIES OF GE. GE hereby represents and
warrants to CBI as follows:
(a) ORGANIZATION; AUTHORITY; EXECUTION AND DELIVERY; ENFORCEABILITY. GE
has all requisite power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby. GE is duly organized, validly
existing and in good standing under the laws of its jurisdiction of
organization. The execution and delivery of this Agreement by GE and the
consummation by GE of the transactions contemplated hereby have been duly
authorized by all necessary action on the part of GE. This Agreement has been
duly executed and delivered by GE and, assuming due authorization, execution and
delivery by CBI, constitutes a legal, valid and binding obligation of GE,
enforceable against GE in accordance with its terms. The execution and delivery
by GE of this Agreement do not, and the consummation of the transactions
contemplated hereby and compliance with the provisions hereof, will not,
conflict with, or result in any violation of, or default (with or without notice
or lapse of time or both) under, or give rise to a right of termination,
cancelation or acceleration of any obligation or loss of a benefit under, or
result in the creation of any Lien on any properties or assets of GE under, (i)
any provision of the certificate of incorporation or by-laws or partnership
agreement or the comparable organizational documents applicable to GE, (ii) any
loan or credit agreement, note, bond, mortgage, indenture, lease or other
agreement, instrument, permit, concession, franchise, license or similar
authorization (a "Contract") to which GE is a party or by which any of the
properties or assets of GE are bound or (iii) subject to the filings and other
matters referred to in the following sentence of this Section 1(a), any
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to GE or its properties or assets, except in the case of each of clauses (ii)
and (iii), as is not materially likely to (x) impair the ability of GE to
perform its obligations under this Agreement or (y) prevent or
5-1
<PAGE>
materially delay the consummation of the transactions contemplated by this
Agreement. No consent, approval, order or authorization of, action by or in
respect of, or registration, declaration or filing with, any Governmental Entity
is required by or with respect to GE in connection with the execution and
delivery of this Agreement by GE or the consummation by GE of the transactions
contemplated hereby, except for (1) such filings under the Exchange Act as may
be required in connection with this Agreement and the transactions contemplated
hereby, (2) such filings under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended (the "HSR Act") as may be required in connection with this
Agreement and the transactions contemplated hereby and (3) those which are not
materially likely to (x) impair the ability of GE to perform its obligations
under this Agreement or (y) prevent or materially delay the consummation of the
transactions contemplated by this Agreement. No trust of which GE is a trustee
requires the consent of any beneficiary to the execution and delivery of this
Agreement or to the consummation of the transactions contemplated hereby.
(b) THE SUBJECT SHARES. GE is the record and beneficial owner of (or is
the trustee of a trust that is the record holder of, and whose beneficiaries are
the beneficial owners of), and has good and marketable title to, the Subject
Shares set forth on Schedule A hereto, free and clear of any Liens. GE does not
own of record any shares of common stock of IXC other than the Subject Shares
set forth on Schedule A hereto, and does not beneficially own any shares of
common stock of IXC other than Subject Shares and any shares of common stock of
IXC into which its shares of IXC 7 1/4% convertible preferred stock are
convertible. GE has the sole right to vote and Transfer (as defined below) the
Subject Shares set forth opposite its name on Schedule A hereto, and none of
such Subject Shares is subject to any voting trust or other agreement,
arrangement or restriction with respect to the voting or the Transfer of such
Subject Shares, except as set forth in Section 3 of this Agreement.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF CBI. CBI hereby represents
and warrants to GE as follows: CBI has all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by CBI and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of CBI. This Agreement has been
duly executed and delivered by CBI and, assuming due authorization, execution
and delivery by GE, constitutes a legal, valid and binding obligation of CBI,
enforceable against CBI in accordance with its terms. The execution and delivery
by CBI of this Agreement do not, and the consummation of the transactions
contemplated hereby and compliance with the provisions hereof, will not,
conflict with, or result in any violation of, or default (with or without notice
or lapse of time or both) under, or give rise to a right of termination,
cancelation or acceleration of any obligation or loss of a benefit under, or
result in the creation of any Lien on any properties or assets of CBI under, (i)
any provision of the Amended Articles of Incorporation or Amended Regulations of
CBI, (ii) any Contract to which CBI is a party or by which any of its properties
or assets are bound or (iii) subject to the filings and other matters referred
to in the last sentence of this Section 2, any judgment, order, decree, statute,
law, ordinance, rule or regulation applicable to CBI or any of its properties or
assets, except in the case of each of clauses (ii) and (iii), as is not
materially likely to (x) have a Material Adverse Effect on CBI, (y) impair the
ability of CBI to perform its obligations under this Agreement or (z) prevent or
materially delay the consummation of the transactions contemplated by this
Agreement. No consent, approval, order or authorization of, action by or in
respect of, or registration, declaration or filing with, any Governmental Entity
is required by or with respect to CBI in connection with the execution and
delivery of this Agreement by CBI or the consummation by CBI of the transactions
contemplated hereby except for (1) such filings under the Exchange Act as may be
required in connection with this Agreement and the transactions contemplated
hereby, (2) such filings under the HSR Act as may be required in connection with
this Agreement and the transactions contemplated hereby and (3) those which are
not materially likely to (x) have a Material Adverse Effect on CBI, (y) impair
the ability of CBI to perform its obligations under this Agreement or (z)
prevent or materially delay the consummation of the transactions contemplated by
this Agreement.
5-2
<PAGE>
SECTION 3. COVENANTS OF GE. GE covenants and agrees during the term of
this Agreement as follows:
(a) At any meeting of the stockholders of IXC called to vote upon the Merger
or the Merger Agreement or at any adjournment thereof or in any other
circumstances upon which a vote, consent or other approval (including by written
consent) with respect to the Merger or the Merger Agreement is sought, GE shall,
including by executing a written consent solicitation if requested by CBI, vote
(or cause to be voted) the Subject Shares (other than the Subject Shares which
shall have been purchased by CBI) in favor of the adoption by IXC of the Merger
Agreement and the approval of the terms thereof and of the Merger and each of
the other transactions contemplated by the Merger Agreement. GE hereby agrees
not to take any action by written consent in any circumstance other than in
accordance with this paragraph.
(b) Other than in accordance with the terms of this Agreement and the Stock
Purchase Agreement, GE shall not (i) sell, transfer, pledge, assign or otherwise
dispose of (including by gift) (collectively, "Transfer"), or consent to any
Transfer of, any Subject Shares or any interest therein or enter into any
Contract, option or other arrangement (including any profit sharing or other
derivative arrangement) with respect to the Transfer of, any Subject Shares or
any interest therein to any person other than pursuant to the Merger Agreement
or (ii) enter into any voting arrangement, whether by proxy, voting agreement or
otherwise, in connection with, directly or indirectly, any IXC Takeover Proposal
or otherwise with respect to the Subject Shares. GE shall not commit or agree to
take any action inconsistent with the foregoing. Notwithstanding the foregoing,
GE may Transfer all or a portion of the Subject Shares to any other person if
such person expressly agrees in writing to be bound by all of the provisions of
this Agreement.
(c) From and after the date of this Agreement, GE shall not, and shall not
authorize or permit any of its Subsidiaries or affiliates (other than IXC) or
any of its or their directors, officers, employees, investment bankers,
financial advisors, attorneys, accountants or other representatives to, directly
or indirectly, (i) solicit, initiate, encourage (including by way of furnishing
information), or take any other action designed to facilitate, any inquiries or
the making of any proposal that constitutes, an IXC Takeover Proposal, (ii)
enter into any agreement with respect to any IXC Takeover Proposal or (iii)
participate in any discussions or negotiations regarding an IXC Takeover
Proposal.
(d) GE shall not issue any press release or make any other public statement,
and shall not authorize or permit any of its Subsidiaries or affiliates (other
than IXC) or any of its or their directors, officers, employees, partners,
investment bankers, attorneys or other advisors or representatives to issue any
press release or make any other public statement, with respect to the Merger
Agreement, this Agreement, the Merger or any of the other transactions
contemplated by the Merger Agreement or this Agreement without the prior written
consent of CBI, except as may be required by applicable law, including any
filings required under the Exchange Act.
SECTION 4. FURTHER ASSURANCES. GE will, from time to time, execute and
deliver, or cause to be executed and delivered, such additional or further
consents, documents and other instruments as CBI may reasonably request for the
purpose of effectuating the matters covered by this Agreement.
SECTION 5. CERTAIN EVENTS. GE agrees that this Agreement and the
obligations hereunder shall attach to GE's Subject Shares and shall be binding
upon any person or entity to which legal or beneficial ownership of such Subject
Shares shall pass, whether by operation of law or otherwise, including GE's
administrators or successors. In the event of any stock split, stock dividend,
merger, reorganization, recapitalization or other change in the capital
structure of IXC affecting the IXC Common Stock, or the acquisition of
additional shares of IXC Common Stock or other voting securities of IXC by any
Stockholder, the number of Subject Shares listed on Schedule A hereto shall be
adjusted appropriately and this Agreement and the obligations hereunder shall
attach to any additional shares of IXC Common Stock or other voting securities
of IXC issued to or acquired by GE.
5-3
<PAGE>
SECTION 6. ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned, in whole or in
part, by operation of law or otherwise, by any of the parties hereto without the
prior written consent of the other parties hereto, except that CBI may assign,
in its sole discretion, any of or all its rights, interests and obligations
under this Agreement to any direct or indirect wholly owned subsidiary of CBI,
but no such assignment shall relieve CBI of its obligations under this
Agreement. Any purported assignment in violation of this Section 6 shall be
void. Subject to the preceding sentences of this Section 6, this Agreement will
be binding upon, inure to the benefit of, and be enforceable by, the parties
hereto and their respective successors and assigns.
SECTION 7. TERMINATION. This Agreement shall terminate upon the earlier of
(a) the Effective Time and (b) 10 Business Days after the termination of the
Merger Agreement in accordance with its terms. No such termination of this
Agreement shall relieve any party hereto from any liability for any breach of
this Agreement prior to termination.
SECTION 8. GENERAL PROVISIONS. (a) AMENDMENTS. This Agreement may not be
amended except by an instrument in writing signed by each of the parties hereto.
(b) NOTICES. All notices, requests, clauses, demands and other
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally, telecopied (with confirmation) or sent by
overnight or same-day courier (providing proof of delivery) to CBI in accordance
with Section 8.02 of the Merger Agreement and to the Stockholders at their
respective addresses set forth on Schedule A hereto (or at such other address
for a party as shall be specified by like notice).
(c) INTERPRETATION. When a reference is made in this Agreement to Sections
or Schedules, such reference shall be to a Section or Schedule to this Agreement
unless otherwise indicated. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Wherever the words "include", "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation". The words "hereof", "herein" and "hereunder" and
words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement. The
term "or" is not exclusive. The definitions contained in this Agreement are
applicable to the singular as well as the plural forms of such terms. Any
agreement or instrument defined or referred to herein or in any agreement or
instrument that is referred to herein means such agreement or instrument as from
time to time amended, modified or supplemented. References to a person are also
to its permitted successors and assigns.
(d) COUNTERPARTS; EFFECTIVENESS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original, but all of
which, taken together, shall be considered one and the same agreement and shall
become effective when one or more counterparts have been signed by each of the
parties hereto and delivered to the other party. The effectiveness of this
Agreement shall be conditioned upon the execution and delivery of the Merger
Agreement by each of the parties thereto.
(e) ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES. This Agreement
(including the documents and instruments referred to herein) (i) constitutes the
entire agreement and supersedes all prior agreements and understandings, both
written and oral, among the parties hereto with respect to the subject matter of
this Agreement and (ii) is not intended to confer upon any person other than the
parties hereto any rights or remedies hereunder.
(f) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD TO ANY
PRINCIPLES OF CONFLICTS OF LAWS OF SUCH STATE.
5-4
<PAGE>
SECTION 9. ENFORCEMENT. Each of the parties hereto agrees 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 hereto shall be entitled to
an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions of this Agreement in any Delaware
state court or any Federal court located in the State of Delaware, 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
personal jurisdiction of any Delaware state court or any Federal court located
in the State of Delaware in the event any dispute arises out of or under or
relates to this Agreement or any of the transactions contemplated hereby, (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, (c) agrees that it will
not bring any action, suit or proceeding arising out of or under or relating to
this Agreement or any of the transactions contemplated hereby in any court other
than any Delaware state court or any Federal court located in the State of
Delaware and (iv) waives any right to trial by jury with respect to any action,
suit or proceeding arising out of or under or relating to this Agreement or any
of the transactions contemplated hereby in any Delaware state court or any
Federal court located in the State of Delaware, and hereby further and
unconditionally waives and agrees not to plead or claim in any such court that
any such action, suit or proceeding brought in any such court has been brought
in an inconvenient forum.
IN WITNESS WHEREOF, CBI has caused this Agreement to be signed by its
officer thereunto duly authorized and GE has signed this Agreement, all as of
the date first written above.
<TABLE>
<S> <C> <C>
CINCINNATI BELL INC.,
By: /s/ RICHARD G. ELLENBERGER
-----------------------------------------
Name: Richard G. Ellenberger
Title: President and Chief
Executive Officer
GENERAL ELECTRIC PENSION TRUST,
by GENERAL ELECTRIC INVESTMENT
CORPORATION, its investment manager,
By: /s/ DONALD W. TOREY
-----------------------------------------
Name: Donald W. Torey
Title: Executive Vice President
</TABLE>
5-5
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
NUMBER OF
OUTSTANDING
SHARES OF
STOCKHOLDER IXC COMMON STOCK
- -------------------------------------------------------------------------- ------------------
<S> <C>
GE........................................................................ 8,624,517
</TABLE>
5-6
<PAGE>
ANNEX 6
STOCKHOLDERS AGREEMENT dated as of July 20, 1999 (this "Agreement"),
among CINCINNATI BELL INC., an Ohio corporation ("CBI"), and the
individuals and other parties listed on Schedule A attached hereto (each,
a "Stockholder" and, collectively, the "Stockholders").
WHEREAS CBI, Ivory Merger Inc., a Delaware corporation and a wholly owned
subsidiary of CBI ("Sub"), and IXC Communications, Inc., a Delaware corporation
("IXC"), propose to enter into an Agreement and Plan of Merger dated as of the
date hereof (as the same may be amended or supplemented, the "Merger Agreement";
terms used but not defined herein shall have the meanings set forth in the
Merger Agreement) providing for the merger of Sub with and into IXC (the
"Merger") upon the terms and subject to the conditions set forth in the Merger
Agreement;
WHEREAS each Stockholder owns the number of shares of common stock of IXC
set forth opposite such Stockholder's name on Schedule A hereto (such shares of
common stock of IXC, together with any other shares of common stock of IXC
acquired by such Stockholder after the date hereof and during the term of this
Agreement (including through the exercise of any stock options, warrants or
similar instruments), being collectively referred to herein as the "Subject
Shares"); and
WHEREAS as a condition to its willingness to enter into the Merger
Agreement, CBI has requested that each Stockholder enter into this Agreement.
NOW, THEREFORE, to induce CBI to enter into, and in consideration of its
entering into, the Merger Agreement, and in consideration of the premises and
the representations, warranties and agreements contained herein, the parties
hereto agree as follows:
SECTION 1. REPRESENTATIONS AND WARRANTIES OF EACH STOCKHOLDER. Except as
specifically set forth in the disclosure schedule delivered to CBI by such
Stockholder on the date hereof, each Stockholder hereby, severally and not
jointly, represents and warrants to CBI as follows:
(a) ORGANIZATION; AUTHORITY; EXECUTION AND DELIVERY; ENFORCEABILITY. Such
Stockholder has all requisite power and authority to enter into this Agreement
and to consummate the transactions contemplated hereby. To the extent that such
Stockholder is an entity other than an individual, such Stockholder is duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization. The execution and delivery of this Agreement by
such Stockholder and the consummation by such Stockholder of the transactions
contemplated hereby have been duly authorized by all necessary action on the
part of such Stockholder. This Agreement has been duly executed and delivered by
such Stockholder and, assuming due authorization, execution and delivery by CBI,
constitutes a legal, valid and binding obligation of such Stockholder,
enforceable against such Stockholder in accordance with its terms. The execution
and delivery by such Stockholder of this Agreement do not, and the consummation
of the transactions contemplated hereby and compliance with the provisions
hereof, will not, conflict with, or result in any violation of, or default (with
or without notice or lapse of time or both) under, or give rise to a right of
termination, cancelation or acceleration of any obligation or loss of a benefit
under, or result in the creation of any Lien on any properties or assets of such
Stockholder under, (i) any provision of any certificate of incorporation or
by-laws or partnership agreement or the comparable organizational documents
applicable to such Stockholder, (ii) any loan or credit agreement, note, bond,
mortgage, indenture, lease or other agreement, instrument, permit, concession,
franchise, license or similar authorization (a "Contract") to which such
Stockholder is a party or by which any of the properties or assets of such
Stockholder are bound or (iii) subject to the filings and other matters referred
to in the following sentence of this Section 1(a), any judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to such Stockholder or
its properties or assets, except in the case of each of clauses (ii) and (iii),
as is not materially likely to (x) impair the ability of such Stockholder to
perform its obligations under this
6-1
<PAGE>
Agreement or (y) prevent or materially delay the consummation of the
transactions contemplated by this Agreement. No consent, approval, order or
authorization of, action by or in respect of, or registration, declaration or
filing with, any Governmental Entity is required by or with respect to such
Stockholder in connection with the execution and delivery of this Agreement by
such Stockholder or the consummation by such Stockholder of the transactions
contemplated hereby, except for such filings under the Exchange Act as may be
required in connection with this Agreement and the transactions contemplated
hereby and except those which are not materially likely to (x) impair the
ability of such Stockholder to perform its obligations under this Agreement or
(y) prevent or materially delay the consummation of the transactions
contemplated by this Agreement. No trust of which such Stockholder is a trustee
requires the consent of any beneficiary to the execution and delivery of this
Agreement or to the consummation of the transactions contemplated hereby, except
for such consents which have been obtained prior to the date hereof.
(b) THE SUBJECT SHARES. Such Stockholder is the record and beneficial
owner of (or is the trustee of a trust that is the record holder of, and whose
beneficiaries are the beneficial owners of), and has good and marketable title
to, the Subject Shares set forth opposite its name on Schedule A hereto, free
and clear of any Liens. Such Stockholder does not own of record any shares of
common stock of IXC other than the Subject Shares set forth opposite its name on
Schedule A hereto, and does not beneficially own any shares of common stock of
IXC other than Subject Shares. Such Stockholder has the sole right to vote and
Transfer (as defined below) the Subject Shares set forth opposite its name on
Schedule A hereto, and none of such Subject Shares is subject to any voting
trust or other agreement, arrangement or restriction with respect to the voting
or the Transfer of such Subject Shares, except as set forth in Section 3 of this
Agreement.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF CBI. CBI hereby represents
and warrants to each Stockholder as follows: CBI has all requisite corporate
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by CBI and the consummation of the transactions contemplated hereby have been
duly authorized by all necessary corporate action on the part of CBI. This
Agreement has been duly executed and delivered by CBI and, assuming due
authorization, execution and delivery by each Stockholder, constitutes a legal,
valid and binding obligation of CBI, enforceable against CBI in accordance with
its terms. The execution and delivery by CBI of this Agreement do not, and the
consummation of the transactions contemplated hereby and compliance with the
provisions hereof, will not, conflict with, or result in any violation of, or
default (with or without notice or lapse of time or both) under, or give rise to
a right of termination, cancelation or acceleration of any obligation or loss of
a benefit under, or result in the creation of any Lien on any properties or
assets of CBI under, (i) any provision of the Amended Articles of Incorporation
or Amended Regulations of CBI, (ii) any Contract to which CBI is a party or by
which any of its properties or assets are bound or (iii) subject to the filings
and other matters referred to in the last sentence of this Section 2, any
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to CBI or any of its properties or assets, except in the case of each of clauses
(ii) and (iii), as is not materially likely to (x) have a Material Adverse
Effect on CBI, (y) impair the ability of CBI to perform its obligations under
this Agreement or (z) prevent or materially delay the consummation of the
transactions contemplated by this Agreement. No consent, approval, order or
authorization of, action by or in respect of, or registration, declaration or
filing with, any Governmental Entity is required by or with respect to CBI in
connection with the execution and delivery of this Agreement by CBI or the
consummation by CBI of the transactions contemplated hereby except for such
filings under the Exchange Act as may be required in connection with this
Agreement and the transactions contemplated hereby and except those which are
not materially likely to (x) have a Material Adverse Effect on CBI, (y) impair
the ability of CBI to perform its obligations under this Agreement or (z)
prevent or materially delay the consummation of the transactions contemplated by
this Agreement.
6-2
<PAGE>
SECTION 3. COVENANTS OF EACH STOCKHOLDER. Each Stockholder, severally and
not jointly, covenants and agrees during the term of this Agreement as follows:
(a) At any meeting of the stockholders of IXC called to vote upon the Merger
or the Merger Agreement or at any adjournment thereof or in any other
circumstances upon which a vote, consent or other approval (including by written
consent) with respect to the Merger or the Merger Agreement is sought, such
Stockholder shall, including by executing a written consent solicitation if
requested by CBI, vote (or cause to be voted) the Subject Shares in favor of the
adoption by IXC of the Merger Agreement and the approval of the terms thereof
and of the Merger and each of the other transactions contemplated by the Merger
Agreement. Such Stockholder hereby agrees not to take any action by written
consent in any circumstance other than in accordance with this paragraph.
(b) Other than in accordance with the terms of this Agreement, such
Stockholder shall not (i) sell, transfer, pledge, assign or otherwise dispose of
(including by gift) (collectively, "Transfer"), or consent to any Transfer of,
any Subject Shares or any interest therein or enter into any Contract, option or
other arrangement (including any profit sharing or other derivative arrangement)
with respect to the Transfer of, any Subject Shares or any interest therein to
any person other than pursuant to the Merger Agreement or (ii) enter into any
voting arrangement, whether by proxy, voting agreement or otherwise, in
connection with, directly or indirectly, any IXC Takeover Proposal or otherwise
with respect to the Subject Shares. Such Stockholder shall not commit or agree
to take any action inconsistent with the foregoing. Notwithstanding any other
provision of this Agreement, (i) each Stockholder may, in the aggregate,
Transfer up to 200,000 of such Stockholder's Subject Shares and (ii) each
Stockholder may Transfer all or a portion of such Stockholder's Subject Shares
to any other person if such person expressly agrees in writing to be bound by
all of the provisions of this Agreement.
(c) From and after the date of this Agreement, such Stockholder shall not,
and shall not authorize or permit any of its Subsidiaries or affiliates (other
than IXC) or any of its or their directors, officers, employees, investment
bankers, financial advisors, attorneys, accountants or other representatives to,
directly or indirectly, (i) solicit, initiate, encourage (including by way of
furnishing information), or take any other action designed to facilitate, any
inquiries or the making of any proposal that constitutes, an IXC Takeover
Proposal, (ii) enter into any agreement with respect to any IXC Takeover
Proposal or (iii) participate in any discussions or negotiations regarding an
IXC Takeover Proposal.
(d) Such Stockholder shall not issue any press release or make any other
public statement, and shall not authorize or permit any of its Subsidiaries or
affiliates (other than IXC) or any of its or their directors, officers,
employees, partners, investment bankers, attorneys or other advisors or
representatives to issue any press release or make any other public statement,
with respect to the Merger Agreement, this Agreement, the Merger or any of the
other transactions contemplated by the Merger Agreement or this Agreement
without the prior written consent of CBI, except as may be required by
applicable law, including any filings required under the Exchange Act.
SECTION 4. FURTHER ASSURANCES. Each Stockholder will, from time to time,
execute and deliver, or cause to be executed and delivered, such additional or
further consents, documents and other instruments as CBI may reasonably request
for the purpose of effectuating the matters covered by this Agreement.
SECTION 5. CERTAIN EVENTS. Each Stockholder agrees that this Agreement and
the obligations hereunder shall attach to such Stockholder's Subject Shares and
shall be binding upon any person or entity to which legal or beneficial
ownership of such Subject Shares shall pass, whether by operation of law or
otherwise, including such Stockholder's heirs, guardians, administrators or
successors. In the event of any stock split, stock dividend, merger,
reorganization, recapitalization or other change in the capital structure of IXC
affecting the IXC Common Stock, or the acquisition of additional shares of IXC
Common Stock or other voting securities of IXC by any Stockholder, the number of
Subject Shares listed on Schedule A hereto beside the name of such Stockholder
shall be adjusted
6-3
<PAGE>
appropriately and this Agreement and the obligations hereunder shall attach to
any additional shares of IXC Common Stock or other voting securities of IXC
issued to or acquired by such Stockholder.
SECTION 6. ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned, in whole or in
part, by operation of law or otherwise, by any of the parties hereto without the
prior written consent of the other parties hereto, except that CBI may assign,
in its sole discretion, any of or all its rights, interests and obligations
under this Agreement to any direct or indirect wholly owned subsidiary of CBI,
but no such assignment shall relieve CBI of its obligations under this
Agreement. Any purported assignment in violation of this Section 6 shall be
void. Subject to the preceding sentences of this Section 6, this Agreement will
be binding upon, inure to the benefit of, and be enforceable by, the parties
hereto and their respective successors and assigns.
SECTION 7. TERMINATION. This Agreement shall terminate upon the earlier of
(a) the Effective Time and (b) 10 Business Days after the termination of the
Merger Agreement in accordance with its terms. No such termination of this
Agreement shall relieve any party hereto from any liability for any breach of
this Agreement prior to termination.
SECTION 8. GENERAL PROVISIONS. (a) AMENDMENTS. This Agreement may not be
amended except by an instrument in writing signed by each of the parties hereto.
(b) NOTICES. All notices, requests, clauses, demands and other
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally, telecopied (with confirmation) or sent by
overnight or same-day courier (providing proof of delivery) to CBI in accordance
with Section 8.02 of the Merger Agreement and to the Stockholders at their
respective addresses set forth on Schedule A hereto (or at such other address
for a party as shall be specified by like notice).
(c) INTERPRETATION. When a reference is made in this Agreement to Sections
or Schedules, such reference shall be to a Section or Schedule to this Agreement
unless otherwise indicated. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Wherever the words "include", "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation". The words "hereof", "herein" and "hereunder" and
words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement. The
term "or" is not exclusive. The definitions contained in this Agreement are
applicable to the singular as well as the plural forms of such terms. Any
agreement or instrument defined or referred to herein or in any agreement or
instrument that is referred to herein means such agreement or instrument as from
time to time amended, modified or supplemented. References to a person are also
to its permitted successors and assigns.
(d) COUNTERPARTS; EFFECTIVENESS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original, but all of
which, taken together, shall be considered one and the same agreement and shall
become effective when one or more counterparts have been signed by each of the
parties hereto and delivered to the other party. The effectiveness of this
Agreement shall be conditioned upon the execution and delivery of the Merger
Agreement by each of the parties thereto.
(e) ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES. This Agreement
(including the documents and instruments referred to herein) (i) constitutes the
entire agreement and supersedes all prior agreements and understandings, both
written and oral, among the parties hereto with respect to the subject matter of
this Agreement and (ii) is not intended to confer upon any person other than the
parties hereto any rights or remedies hereunder.
6-4
<PAGE>
(f) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD TO ANY
PRINCIPLES OF CONFLICTS OF LAWS OF SUCH STATE.
SECTION 9. STOCKHOLDER CAPACITY. No person executing this Agreement who is
or becomes during the term hereof a director or officer of IXC makes any
agreement or understanding herein in his or her capacity as such director or
officer. Each Stockholder signs solely in his or her capacity as the record
holder and beneficial owner of, or the trustee of a trust whose beneficiaries
are the beneficial owners of, such Stockholder's Subject Shares and nothing
herein shall limit or affect any actions taken by a Stockholder in its capacity
as an officer or director of IXC.
SECTION 10. ENFORCEMENT. Each of the parties hereto agrees 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 hereto shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions of this Agreement in any
Delaware state court or any Federal court located in the State of Delaware, 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 personal jurisdiction of any Delaware state court or any Federal court
located in the State of Delaware in the event any dispute arises out of or under
or relates to this Agreement or any of the transactions contemplated hereby, (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, (c) agrees that it will
not bring any action, suit or proceeding arising out of or under or relating to
this Agreement or any of the transactions contemplated hereby in any court other
than any Delaware state court or any Federal court located in the State of
Delaware and (iv) waives any right to trial by jury with respect to any action,
suit or proceeding arising out of or under or relating to this Agreement or any
of the transactions contemplated hereby in any Delaware state court or any
Federal court located in the State of Delaware, and hereby further and
unconditionally waives and agrees not to plead or claim in any such court that
any such action, suit or proceeding brought in any such court has been brought
in an inconvenient forum.
IN WITNESS WHEREOF, CBI has caused this Agreement to be signed by its
officer thereunto duly authorized and each Stockholder has signed this
Agreement, all as of the date first written above.
<TABLE>
<S> <C> <C>
CINCINNATI BELL INC.,
By: /s/ RICHARD G. ELLENBERGER
-----------------------------------------
Name: Richard G. Ellenberger
Title: President and Chief Executive
Officer
STOCKHOLDERS:
/s/ RICHARD D. IRWIN
-----------------------------------------
Richard D. Irwin
/s/ RALPH J. SWETT
-----------------------------------------
Ralph J. Swett
</TABLE>
6-5
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
NUMBER OF
OUTSTANDING SHARES
OF PERCENTAGE OF VOTING
STOCKHOLDER IXC COMMON STOCK POWER OF IXC
- ----------------------------------------------------------------------- -------------------- -----------------------
<S> <C> <C>
Ralph J. Swett......................................................... 1,760,105
Ralph J. Swett......................................................... 409*
Ralph J. Swett, Trustee of the RJS 1994 Trust.......................... 472,480
Ralph J. Swett, Trustee of the MBS 1994 Trust.......................... 472,480
Ralph and Eileen Swett................................................. 35,242
----------
Total............................................................ 2,740,716 7.3%
----------
----------
</TABLE>
Mr. Swett's address is 2305 Barton Creek Boulevard, #23, The Fairways,
Austin, Texas 78735.
- ------------------------
* To be issued as of the date hereof.
6-6
<PAGE>
SCHEDULE B
<TABLE>
<CAPTION>
NUMBER OF
OUTSTANDING SHARES
OF PERCENTAGE OF VOTING
STOCKHOLDER IXC COMMON STOCK POWER OF IXC
- ----------------------------------------------------------------------- -------------------- -----------------------
<S> <C> <C>
Richard D. Irwin (individually or in the Richard Irwin Revocable Living
Trust)............................................................... 190,905+
Grumman Hill Investments, L.P., a Delaware limited partnership......... 636,990
The Irwin Family Limited Partnership, dated January 4, 1995............ 1,628,216
The Irwin Family Limited Partnership #2................................ 341,341
The Irwin Family Limited Partnership #3................................ 350,444
Grumman Hill Associates, Inc........................................... 107,094
----------
Total............................................................ 3,254,990 8.7%
----------
----------
</TABLE>
Mr. Irwin's address is 23 Wild Duck Road, Wilton, Connecticut 06897.
- ------------------------
+ Subject to a reduction of 35,512 shares which have not been located in Mr.
Irwin's Merrill Lynch account.
6-7
<PAGE>
ANNEX 7
[LOGO]
July 20, 1999
Board of Directors
Cincinnati Bell Inc.
201 E. Fourth Street
Cincinnati, OH 45202
Members of the Board:
You have requested our opinion as to the fairness, from a financial point of
view, to Cincinnati Bell Inc. ("Cincinnati Bell"), of the consideration to be
provided by Cincinnati Bell in connection with the proposed merger (the
"Merger") of Ivory Merger Inc. ("Sub"), a wholly owned subsidiary of Cincinnati
Bell, with and into IXC Communications, Inc. ("IXC Communications"), pursuant to
an Agreement and Plan of Merger, dated as of July 20, 1999 (the "Merger
Agreement"), among Cincinnati Bell, IXC Communications and Sub. Upon the
effectiveness of the Merger, each issued and outstanding share of common stock,
par value $.01 per share, of IXC Communications ("IXC Communications Common
Stock") (other than shares owned or held directly by Cincinnati Bell, IXC
Communications or Sub) will be converted into the right to receive 2.0976 (the
"Exchange Ratio") shares of common stock, par value $.01 per share, of
Cincinnati Bell ("Cincinnati Bell Common Stock"). We understand that the Merger
is expected to qualify, for U.S. Federal income tax purposes, as a
reorganization under the provisions of Section 368(a) of the Internal Revenue
Code of 1986, as amended.
In connection with rendering our opinion, we have reviewed certain publicly
available information concerning Cincinnati Bell and IXC Communications and
certain other financial information concerning Cincinnati Bell and IXC
Communications, including financial forecasts provided to us by Cincinnati Bell
and IXC Communications. We have discussed the past and current business
operations, financial condition and prospects of Cincinnati Bell and IXC
Communications with certain officers and employees of Cincinnati Bell and IXC
Communications, respectively. We have also considered such other information,
financial studies, analyses, investigations and financial, economic and market
criteria that we deemed relevant.
In our review and analysis and in arriving at our opinion, we have assumed
and relied upon the accuracy and completeness of the information reviewed by us
for the purpose of this opinion and we have not assumed any responsibility for
independent verification of such information. With respect to the financial
forecasts of Cincinnati Bell and IXC Communications, we have assumed that they
have been reasonably prepared on bases reflecting the best currently available
estimates and judgments of the managements of Cincinnati Bell and IXC
Communications, respectively. We express no opinion with respect to such
forecasts or the assumptions on which they are based. We also have assumed that
the Merger will be consummated in accordance with the terms of the Merger
Agreement. We have not made or obtained or assumed any responsibility for making
or obtaining any independent evaluation or appraisal of any of the assets
(including properties and facilities) or liabilities of Cincinnati Bell or IXC
Communications.
7-1
<PAGE>
Our opinion is necessarily based upon conditions as they exist and can be
evaluated on the date hereof. Our opinion as expressed below does not imply any
conclusion as to the likely trading range for Cincinnati Bell Common Stock
following the consummation of the Merger, which may vary depending upon, among
other factors, changes in interest rates, dividend rates, market conditions,
general economic conditions and other factors that generally influence the price
of securities. Our opinion does not address Cincinnati Bell's underlying
business decision to effect the Merger, and we express no view on the effect on
Cincinnati Bell of the Merger and related transactions. Our opinion is directed
only to the fairness, from a financial point of view, of the Exchange Ratio to
Cincinnati Bell and does not constitute a recommendation concerning how holders
of Cincinnati Bell Common Stock should vote regarding the proposed issuance of
Cincinnati Bell Common Stock pursuant to the Merger or any related matter.
We have acted as financial advisor to the Board of Directors of Cincinnati
Bell in connection with the Merger and will receive a fee for our services, a
significant portion of which is contingent upon consummation of the Merger. In
the ordinary course of business, we and our affiliates may actively trade the
securities of Cincinnati Bell and IXC Communications and their affiliates for
our own account and for the accounts of customers and, accordingly, may at any
time hold a long or short position in such securities. Also, we and our
affiliates have previously rendered investment banking and financial advisory
services to Cincinnati Bell and certain of its affiliates for which we have
received customary compensation. We and our affiliates may have other business
relationships with Cincinnati Bell, IXC Communications and their respective
affiliates.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the Exchange Ratio is fair, from a financial point of view, to
Cincinnati Bell.
Very truly yours,
/s/ Salomon Smith Barney Inc.
SALOMON SMITH BARNEY INC.
7-2
<PAGE>
ANNEX 8
[MORGANSTANLEYDEANWITTER LETTERHEAD]
1585
BROADWAY
NEW
YORK, NEW YORK 10036
(212)
761-4000
July 20, 1999
Board of Directors
IXC Communications, Inc.
1122 Capital of Texas Hwy. South
Austin, TX 78746-6426
Members of the Board:
IXC Communications, Inc. (the "Company"), Cincinnati Bell Inc. (the "Acquiror")
and Ivory Merger Inc., a wholly owned subsidiary of the Acquiror (the
"Acquisition Sub"), propose to enter into an Agreement and Plan of Merger
substantially in the form of the draft dated July 19, 1999 (the "Merger
Agreement") pursuant to which Acquisition Sub will be merged (the "Merger") with
and into the Company in a transaction in which each outstanding share of the
common stock, par value $0.01 per share (the "Company Shares"), of the Company
is to be converted into the right to receive 2.0976 shares (the "Exchange
Ratio") of the common stock, par value $0.01 per share, of the Acquiror (the
"Acquiror Shares"). It is also proposed that, concurrently with entry into the
Merger Agreement, the Acquiror will enter into an Investment Agreement providing
for the Investment of $400 million in cash in the Acquiror, to be represented as
convertible subordinated notes of the Acquiror. The terms and conditions of the
Merger are more fully set forth in the Merger Agreement.
You have asked for our opinion as to whether, as of the date hereof, the
Exchange Ratio is fair from a financial point of view to holders of Company
Shares (other than the Acquiror and its affiliates).
For purposes of the opinion set forth herein, we have:
(i) reviewed certain publicly available financial statements and other
information of the Company and the Acquiror;
(ii) reviewed certain internal financial statements and other financial
and operating data concerning the Company and the Acquiror prepared by
the respective managements of such companies;
(iii) analyzed financial projections for the Company and the Acquiror
contained in certain securities analysts' research reports that were
recommended for review by the respective managements of such companies;
(iv) discussed the past and current operations and financial conditions
and the prospects of the Company and the Acquiror, including information
relating to certain strategic, financial and operational benefits
anticipated from the Merger, with the respective managements of such
companies;
(v) analyzed the estimated pro forma impact of the Merger on the
Acquiror's cash flow, consolidated capitalization and financial ratios;
(vi) reviewed the reported prices and trading activity for the Company
Shares and the Acquiror Shares;
8-1
<PAGE>
(vii) discussed with senior executives of each of the Company and the
Acquiror the strategic rationale for, and certain regulatory issues
associated with, the Merger;
(viii) compared the financial performance of the Company and the Acquiror
and the prices and trading activity of the Company Shares and the
Acquiror Shares with those of certain other comparable publicly traded
companies and their securities;
(ix) reviewed the financial terms, to the extent publicly available, of
certain comparable transactions;
(x) participated in discussions and negotiations among representatives of
the Company and the Acquiror and their respective financial, accounting
and legal advisors;
(xi) reviewed drafts of the Merger Agreement, the Investment Agreement and
certain related documents; and
(xii) performed such other analyses and considered such other factors as we
have deemed appropriate.
We have assumed and relied upon without independent verification the accuracy
and completeness of the information reviewed by us for the purposes of this
opinion. With respect to the internal financial statements and other financial
and operating data and discussions relating to the strategic, financial and
operational benefits anticipated from the Merger, we have assumed that such
financial statements and other financial and operating data have been reasonably
prepared on bases reflecting the best currently available estimates and good
faith judgments of the future competitive, operating and regulatory environments
and financial performance of the Company and the Acquiror. We have not made any
independent valuation or appraisal of the assets or liabilities of the Company
or the Acquiror, nor have we been furnished with any such appraisals. Our
opinion is necessarily based on economic, market and other conditions as in
effect on, and the information made available to us as of, the date hereof.
We have further assumed, with your consent, that the Merger will be consummated
in accordance with the terms set forth in the Merger Agreement (without waiver
of any condition contained therein) and will be treated as a tax-free
reorganization and/or exchange, for purposes of the Internal Revenue Code of
1986. In addition, we have assumed that obtaining all necessary regulatory
approvals for the Merger will not have an adverse effect on the Acquiror or the
contemplated benefits expected to be derived in the Merger.
We were not authorized to solicit, and did not solicit, interest from any party
with respect to the acquisition of the Company or any of its assets, or any
other strategic alternative, other than the Merger.
We have acted as financial advisor to the Board of Directors of the Company in
connection with this transaction and will receive a fee for our services. In the
past, Morgan Stanley & Co. Incorporated and its affiliates have provided
financial advisory and/or financing services for the Company, the Acquiror and
one or more other parties to the Transaction, and certain of their affiliates,
and have received fees for the rendering of those services.
It is understood that this letter is for the information of the Board of
Directors of the Company and may not be used for any other purpose without our
prior written consent, except that this opinion may be included in its entirety
in any filing made by the Company in respect of the Merger with the Securities
and Exchange Commission. In addition, this opinion does not in any manner
address the prices at which the Acquiror Shares will trade following
announcement or consummation of the Merger, and we express no opinion or
recommendation as to how the holders of Company Shares should vote at the
stockholders' meeting held in connection with the Merger.
8-2
<PAGE>
Based on and subject to the foregoing, we are of the opinion on the date hereof
that the Exchange Ratio is fair from a financial point of view to the holders of
Company Shares (other than the Acquiror and its affiliates).
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
<TABLE>
<S> <C>
By: /s/ Scott W. Matlock
- ---------------------------------------------
Scott W. Matlock
Principal
</TABLE>
8-3
<PAGE>
ANNEX 9
[LOGO] Investment Banking
Corporate and Institutional
Client Group
World Financial Center
North Tower
New York, New York 10281-1320
212 449 1000
July 20, 1999
Board of Directors
IXC Communications, Inc.
1122 Capital of Texas Highway South
Austin, Texas 78746
Members of the Board of Directors:
IXC Communications, Inc. (the "Company"), Cincinnati Bell Inc. (the
"Acquiror") and a wholly owned subsidiary of the Acquiror (the "Acquisition
Sub"), propose to enter into an Agreement and Plan of Merger (the "Merger
Agreement") pursuant to which Acquisition Sub will be merged with the Company in
a transaction (the "Merger") in which each outstanding share of the Company's
common stock (the "Company Shares") will be converted into the right to receive
2.0976 shares (the "Exchange Ratio") of the common stock of the Acquiror (the
"Acquiror Shares"). It is also proposed that, concurrently with execution of the
Merger Agreement, (i) the Company and the Acquiror will enter into Stock Option
Agreements providing for reciprocal options on Company Shares and Acquiror
Shares that are exercisable in certain circumstances, (ii) the Acquiror will
enter into Stockholders Agreements with certain stockholders of the Company
providing for their voting of Company Shares in favor of the Merger and for
certain other matters, (iii) the Acquiror will enter into an Investment
Agreement with certain purchasers providing for the sale by the Acquiror of
convertible subordinated notes to such purchasers and (vi) the Company will
enter into an agreement amending the Rights Agreement relating to the rights
associated with the Company Shares. The Merger Agreement and the other foregoing
agreements are collectively referred to as the "Agreements".
You have asked us whether, in our opinion, the Exchange Ratio is fair from a
financial point of view to the holders of the Company Shares, other than the
Acquiror and its affiliates.
In arriving at the opinion set forth below, we have, among other things:
(1) Reviewed certain publicly available business and financial information
relating to the Company and the Acquiror that we deemed to be relevant;
(2) Reviewed certain information, including financial forecasts, relating to
the business, earnings, cash flow, assets, liabilities and prospects of
the Company and the Acquiror, as well as the amount and timing of the
cost savings and related expenses and synergies expected to result from
the Merger (the "Expected Synergies") furnished to us by the Company and
the Acquiror, respectively;
(3) Conducted discussions with members of senior management and
representatives of the Company and the Acquiror concerning the matters
described in clauses 1 and 2 above, as well as their respective
businesses and prospects before and after giving effect to the Merger and
the Expected Synergies;
9-1
<PAGE>
(4) Reviewed the market prices and valuation multiples for the Company
Shares and the Acquiror Shares and compared them with those of certain
publicly traded companies that we deemed to be relevant;
(5) Reviewed the results of operations of the Company and the Acquiror and
compared them with those of certain publicly traded companies that we
deemed to be relevant;
(6) Compared the proposed financial terms of the Merger with the financial
terms of certain other transactions that we deemed to be relevant;
(7) Participated in certain discussions and negotiations among
representatives of the Company and the Acquiror and their financial and
legal advisors;
(8) Reviewed the potential pro forma impact of the Merger;
(9) Reviewed a draft dated July 19, 1999 of the Agreements; and
(10)Reviewed such other financial studies and analyses and took monetary
conditions.
In preparing our opinion, we have assumed and relied on the accuracy and
completeness of all information supplied or otherwise made available to us,
discussed with or reviewed by or for us, or publicly available, and we have not
assumed any responsibility for independently verifying such information or
undertaken an independent evaluation or appraisal of any of the assets or
liabilities of the Company or the Acquiror or been furnished with any such
evaluation or appraisal. In addition, we have not assumed any obligation to
conduct any physical inspection of the properties or facilities of the Company
or the Acquiror. With respect to the financial forecast information and the
Expected Synergies furnished to or discussed with us by the Company or the
Acquiror, we have assumed that they have been reasonably prepared and reflect
the best currently available estimates and judgment of the Company's or the
Acquiror's management as to the expected future financial performance of the
Company or the Acquiror, as the case may be, and the Expected Synergies. We have
also assumed that the final form of the Agreements will be similar in all
material respects to the last drafts reviewed by us.
Our opinion is necessarily based upon market, economic and other conditions
as they exist and can be evaluated on, and on the information made available to
us as of, the date hereof. We have assumed that in the course of obtaining the
necessary regulatory or other consents or approvals (contractual or otherwise)
for the Merger, no restrictions, including any divestiture requirements or
amendments or modifications, will be imposed that will have a material adverse
effect on the Company, the Acquiror, either of their operations or the
contemplated benefits of the Merger. We have also assumed that the Merger will
be treated as a tax free reorganization under the U.S. Internal Revenue Code.
In connection with the preparation of this opinion, we have not been
authorized by the Company or the Board of Directors to solicit, nor have we
solicited, third-party indications of interest for the acquisition of all or any
part of the Company and we have not evaluated or pursued on behalf of the
Company any other strategic alternatives to the Merger.
We are acting as financial advisor to the Company in connection with the
Merger and will receive a fee from the Company for our services. We have, in the
past, provided financial advisory and/or financing services to the Company and
the Acquiror (including certain of their affiliates) and may continue to do so
and have received, and may receive, fees for the rendering of such services. In
addition, in the ordinary course of our business, we may actively trade the
Company Shares and other securities of the Company, as well as the Acquiror
Shares and other securities of the Acquiror, for our own account and for the
accounts of customers and, accordingly, may at any time hold a long or short
position in such securities.
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This opinion is for the use and benefit of the Board of Directors of the
Company. Our opinion does not address the merits of the underlying decision by
the Company to engage in the Merger and does not constitute a recommendation to
any shareholder as to how such shareholder should vote on the proposed Merger or
any matter related thereto.
We are not expressing any opinion herein as to the prices at which the
Company Shares or the Acquiror Shares will trade following the announcement or
consummation of the Merger.
On the basis of and subject to the foregoing, we are of the opinion that, as
of the date hereof, the Exchange Ratio is fair from a financial point of view to
the holders of the Company Shares, other than the Acquiror and its affiliates.
Very truly yours,
/s/ Merrill Lynch, Pierce, Fenner &
Smith Incorporated
MERRILL LYNCH, PIERCE, FENNER &
SMITH INCORPORATED
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ANNEX 10
DELAWARE CODE
TITLE 8. CORPORATIONS
CHAPTER 1. GENERAL CORPORATION LAW
SUBCHAPTER IX. MERGER OR CONSOLIDATION
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 Section 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 Section 251 (other than a merger effected pursuant to
Section 251(g) of this title), 252, 254, 257, 258, 263 or 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 Section 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 Sections
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 on an interdealer quotation system by the National
Association of Securities Dealers, Inc. or held of record by more
than 2,000 holders;
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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 Section 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.
(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 subsection (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 Section 228 or
Section 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
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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 receive
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 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 such stockholder's 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.
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(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 is not entitled to appraisal rights under this section.
(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 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.
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PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 1701.59(D) of the Ohio Revised Code provides that a director shall
be liable in damages for any action he takes or fails to take as a director only
if it is proved by clear and convincing evidence in a court of competent
jurisdiction that his action or failure to act involved an act or omission
undertaken with deliberate intent to cause injury to the corporation or
undertaken with reckless disregard for the best interests of the corporation.
This limitation on the liability of directors does not apply to liability
asserted against a director pursuant to Section 1701.95 of the Ohio Revised Code
concerning unlawful loans, dividends and distributions of assets.
The Ohio Revised Code provides that the Cincinnati Bell amended articles of
incorporation and amended regulations may provide that the limitation on the
liability of directors provided in Section 1701.59(D) described above are not
applicable to Cincinnati Bell, however, the Cincinnati Bell amended articles of
incorporation and amended regulations do not exempt Cincinnati Bell from this
provision.
Section 1701.13(E) of the Ohio Revised Code provides that a corporation may
indemnify or agree to indemnify any person who was or is a party, or is
threatened to be made a party, to any threatened, pending, or completed action,
suit, or proceeding, whether civil, criminal, administrative, or investigative,
other than an action by or in the right of the corporation, by reason of the
fact that he is or was a director, officer, employee, or agent of the
corporation, or is or was serving at the request of the corporation as a
director, trustee, officer, employee, member, manager, or agent of another
corporation, domestic or foreign, nonprofit or for profit, a limited liability
company, or a partnership, joint venture, trust, or other enterprise, against
expenses, including attorney's fees, judgments, fines, and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit, or proceeding, if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, if he had
no reasonable cause to believe his conduct was unlawful. The termination of any
action, suit, or proceeding by judgment, order, settlement, or conviction, or
upon a plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, that he had
reasonable cause to believe that his conduct was unlawful.
Section 1701.13(E)(2) further specifies that a corporation may indemnify or
agree to indemnify any person who was or is a party, or is threatened to be made
a party, to any threatened, pending, or completed action or suit by or in the
right of the corporation to procure a judgment in its favor, by reason of the
fact that he is or was a director, officer, employee, or agent of the
corporation, or is or was serving at the request of the corporation as a
director, trustee, officer, employee, member, manager, or agent of another
corporation, domestic or foreign, nonprofit or for profit, a limited liability
company, or a partnership, joint venture, trust, or other enterprise, against
expenses, including attorney's fees, actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit, if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation, except that no indemnification shall be made
in respect of (a) any claim, issue, or matter as to which such person shall have
been adjudged to be liable for negligence or misconduct in the performance of
his duty to the corporation unless, and only to the extent that, the court of
common pleas or the court in which such action or suit was brought determines,
upon application, that, despite the adjudication of liability, but in view of
all the circumstances of the case, such person is fairly and reasonably entitled
to indemnity for such expenses as the court of common pleas or such other court
shall deem proper, and (b) any action or suit in
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which the only liability asserted against a director is pursuant to Section
1701.95 of the Ohio Revised Code concerning unlawful loans, dividends and
distributions of assets.
In addition, Section 1701.13(E) requires a corporation to pay any expenses,
including attorney's fees, of a director in defending an action, suit, or
proceeding referred to above as they are incurred, in advance of the final
disposition of the action, suit, or proceeding, upon receipt of an undertaking
by or on behalf of the director in which he agrees to both (i) repay such amount
if it is proved by clear and convincing evidence in a court of competent
jurisdiction that his action or failure to act involved an act or omission
undertaken with deliberate intent to cause injury to the corporation or
undertaken with reckless disregard for the best interests of the corporation and
(ii) reasonably cooperate with the corporation concerning the action, suit, or
proceeding. The indemnification provided by Section 1701.13(E) shall not be
deemed exclusive of any other rights to which those seeking indemnification may
be entitled under the Cincinnati Bell articles of incorporation or amended
regulations.
The Cincinnati Bell amended regulations provide that Cincinnati Bell will
indemnify directors to the fullest extent permitted by law.
Cincinnati Bell has in effect insurance policies in the amount of (i) $50
million for general officers' and directors' liability insurance for liability
incurred on actions occurring on or after January 1, 1999, (ii) $100 million for
general officers' and directors' liability insurance for liability incurred on
actions that have occurred prior to January 1, 1999 and (iii) $25 million for
fiduciary liability insurance covering all of Cincinnati Bell's directors and
officers in certain instances where by law they may not be indemnified by
Cincinnati Bell.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) See Exhibit Index.
(b) Not Applicable.
(c) Opinion of Salomon Smith Barney Inc. (included as Annex 7 to the proxy
statement/ prospectus which is a part of this registration statement).
Opinion of Morgan Stanley & Co. Incorporated (included as Annex 8 to the
proxy statement/ prospectus which is a part of this registration
statement).
Opinion of Merrill Lynch, Pierce, Fenner & Smith Incorporated (included
as Annex 9 to the proxy statement/prospectus which is a part of this
registration statement).
ITEM 22. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933.
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the registration statement. Notwithstanding the foregoing, any increase
or decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price
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represent no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, 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 that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
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.
(c)(1) The undersigned registrant hereby undertakes as follows: 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.
(2) The registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (c)(1) immediately preceding, or (ii) that purports to
meet the requirements of Section 10(a)(3) of the Securities Act of 1933 and is
used in connection with an offering of securities subject to Rule 415, will be
filed as a part of an amendment to the registration statement and will not be
used until such amendment is effective, and that, for purposes of determining
any liability under the Securities Act of 1933, 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 that time
shall be deemed to be the initial bona fide offering thereof.
(d) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 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 of
1933 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 of 1933 and will be governed by the final adjudication of such issue.
(e) The undersigned registrant hereby undertakes 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
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or other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(f) The undersigned registrant hereby undertakes 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 the registration statement when it became effective.
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SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, CINCINNATI BELL HAS DULY
CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF CINCINNATI, STATE OF
OHIO, ON SEPTEMBER 13, 1999.
<TABLE>
<S> <C> <C>
CINCINNATI BELL INC.
By: /s/ KEVIN W. MOONEY
-----------------------------------------
Name: Kevin W. Mooney
Title: Chief Financial Officer
</TABLE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Richard G. Ellenberger, Kevin W. Mooney and
Thomas E. Taylor, Esq. and each of them, his true and lawful attorney-in-fact
and agent with full power of substitution for him and in his name, place and
stead, in any and all capacities to sign any and all amendments (including
pre-effective and post-effective amendments) to this Registration Statement, and
to file the same with all exhibits thereto and other documents in connection
therewith, including any Registration Statement filed pursuant to Rule 462(b)
under the Securities Act of 1933, with the Securities and Exchange Commission,
grants unto said attorneys-in-fact and agents full power and authority to do and
perform each and every act and thing requisite and necessary to be done in and
about the premises, as fully to all intents and purposes as he might or could do
in person, and hereby ratifies and confirms all that said attorneys-in-fact and
agents or their substitute or substitutes may lawfully do or cause to be done by
virtue hereof.
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 DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
<C> <S> <C>
/s/ RICHARD G. ELLENBERGER President, Chief Executive
- ------------------------------ Officer and Director September 13, 1999
Richard G. Ellenberger (Chief Executive Officer)
/s/ KEVIN W. MOONEY Chief Financial Officer
- ------------------------------ (Principal Accounting and September 13, 1999
Kevin W. Mooney Financial Officer)
/s/ PHILLIP R. COX Director
- ------------------------------ September 13, 1999
Phillip R. Cox
/s/ J. TAYLOR CRANDALL Director
- ------------------------------ September 13, 1999
J. Taylor Crandall
/s/ WILLIAM A. FRIEDLANDER Director
- ------------------------------ September 13, 1999
William A. Friedlander
/s/ KAREN M. HOGUET Director
- ------------------------------ September 13, 1999
Karen M. Hoguet
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
<C> <S> <C>
/s/ DANIEL J. MEYER Director
- ------------------------------ September 13, 1999
Daniel J. Meyer
/s/ JAMES D. KIGGEN Director
- ------------------------------ September 13, 1999
James D. Kiggen
/s/ JOHN T. LAMACCHIA Director
- ------------------------------ September 13, 1999
John T. LaMacchia
/s/ MARY D. NELSON Director
- ------------------------------ September 13, 1999
Mary D. Nelson
/s/ DAVID B. SHARROCK Director
- ------------------------------ September 13, 1999
David B. Sharrock
</TABLE>
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
2.1 Agreement and Plan of Merger dated as of July 20, 1999, among Cincinnati Bell, Ivory Merger Inc. and IXC
(included as Annex 1 to the proxy statement/prospectus which is a part of this Registration Statement).
2.2 Agreement Governing the IXC Internal Reorganization dated as of August 16, 1999, between IXC and IXC
Merger Sub, Inc. (included as Annex 2 to the proxy statement/prospectus which is a part of this
Registration Statement).
4.1 Provisions of the Amended Articles of Incorporation of Cincinnati Bell effective November 9, 1989, which
define the rights of security holders of Cincinnati Bell (incorporated by reference to Exhibit (3)(a) to
Cincinnati Bell's Annual Report on Form 10-K filed March 31, 1999, SEC File #1-8519).
4.2 Form of Certificate of Amendment by the Board of Directors to the Amended Articles of Incorporation of
Cincinnati Bell including the description of each of the Cincinnati Bell 7 1/4% Junior Convertible
Preferred Stock Due 2007 and the Cincinnati Bell 6 3/4% Cumulative Convertible Preferred Stock to be in
effect as of the effective time of the merger.
4.3 Provisions of the Amended Regulations of Cincinnati Bell which define the rights of security holders of
Cincinnati Bell (incorporated by reference to Exhibit 3.2 to Cincinnati Bell's Registration Statement on
Form S-3 filed February 26, 1985, SEC File #2-96054).
4.4 Specimen certificate of Cincinnati Bell common stock, par value $0.01.
4.5 Rights Agreement dated as of April 29, 1997, as amended, between Cincinnati Bell and The Fifth Third
Bank, as Rights Agent, including the form of rights certificate attached as Exhibit B thereto
(incorporated by reference to Exhibit 4.1 to Cincinnati Bell's Registration Statement on Form 8-A filed
May 1, 1997, SEC File #1-8519, Exhibit 1 to Amendment No. 1 to the Registration Statement on Form 8-A/A
filed August 6, 1999, SEC File #1-8519).
4.7 Indenture dated as of April 21, 1998, between IXC and IBJ Schroder Bank & Trust Company, as Trustee, in
respect of the IXC 9% Senior Subordinated Notes due 2008 (incorporated by reference to Exhibit 4.3 to
IXC's Current Report on Form 8-K filed April 22, 1998, SEC File #0-20803).
4.8 Indenture dated as of November 30, 1998, among Cincinnati Bell Telephone Company, as Issuer, Cincinnati
Bell, as Guarantor, and The Bank of New York, as Trustee (incorporated by reference to Exhibit 4-A to
Cincinnati Bell's Current Report on Form 8-K filed November 30, 1998, SEC File #1-8519).
4.9 Investment Agreement dated as of July 21, 1999, among Cincinnati Bell, Oak Hill Capital Partners L.P.
and certain related parties of Oak Hill.
5.1 Opinion of Thomas E. Taylor, Esq., General Counsel of Cincinnati Bell, regarding the legality of the
securities being registered.
8.1 Opinion of Riordan & McKinzie as to tax matters.
10.1 Stock Option Agreement between Cincinnati Bell, as Issuer, and IXC, as Grantee, dated as of July 20,
1999 (included as Annex 3 to the proxy statement/prospectus which is a part of this Registration
Statement).
10.2 Stock Option Agreement between IXC, as Issuer, and Cincinnati Bell, as Grantee, dated as of July 20,
1999 (included as Annex 4 to the proxy statement/prospectus which is a part of this Registration
Statement).
10.3 Stockholder Agreement between Cincinnati Bell and General Electric Pension Trust (included as Annex 5 to
the proxy statement/prospectus which is a part of this Registration Statement).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
10.4 Stockholders Agreement among Cincinnati Bell, Richard D. Irwin and Ralph J. Swett (included as Annex 6
to the proxy statement/prospectus which is a part of this Registration Statement).
12.1 Computation of Ratio of Earnings to Fixed Charges and Preferred Dividends.
23.1 Consent of PricewaterhouseCoopers LLP.
23.2 Consent of Ernst & Young LLP.
23.3 Consent of Deloitte & Touche LLP.
23.4 Consents of Arthur Andersen LLP.
23.5 Consent of Thomas E. Taylor, Esq., General Counsel of Cincinnati Bell (included in
Exhibit 5.1).
23.6 Consent of Riordan & McKinzie (included in Exhibit 8.1).
23.7 Consent of Salomon Smith Barney Inc.
23.8 Consent of Morgan Stanley & Co. Incorporated.
23.9 Consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated.
24.1 Power of Attorney (included on the signature page of this Registration Statement).
99.1 Form of Proxy Card of Cincinnati Bell.
99.2 Form of Proxy Card of IXC.
99.3 Opinion of Salomon Smith Barney Inc. (included as Annex 7 to the proxy statement/ prospectus which is a
part of this registration statement).
99.4 Opinion of Morgan Stanley & Co. Incorporated (included as Annex 8 to the proxy statement/ prospectus
which is a part of this registration statement).
99.5 Opinion of Merrill Lynch, Pierce, Fenner & Smith Incorporated (included as Annex 9 to the proxy
statement/prospectus which is a part of this registration statement).
</TABLE>
<PAGE>
FORM OF CERTIFICATE OF AMENDMENT
BY THE BOARD OF DIRECTORS
TO THE
AMENDED ARTICLES OF INCORPORATION OF
CINCINNATI BELL INC.
______________________, who is the [officer] of Cincinnati Bell Inc., an Ohio
corporation, hereby certifies that at a meeting of the board of directors of
Cincinnati Bell Inc., duly called and held on _________________, the following
resolution was unanimously adopted pursuant to Section 1701.70(B) of the
Ohio Revised Code:
RESOLVED, that, pursuant to the authority vested in the Board
of Directors of the corporation in accordance with the provisions of the Ohio
General Corporation Law, as amended, and by Article Fourth of the corporation's
Amended Articles of Incorporation, such Article Fourth is amended to add a new
Paragraph 11 and a new Paragraph 12 providing for a series of 7 1/4% Junior
Convertible Preferred Shares Due 2007 and a series of 6 3/4% Cumulative
Convertible Preferred Shares, respectively, and that the designations and the
authorized number of shares of, and the relative rights, preferences and
limitations of, each such series are as set forth on Annexes 1 and 2,
respectively, hereto.
IN WITNESS WHEREOF, the above named officer, acting for and on
behalf of the corporation, has hereunto subscribed his name on ________________.
By:______________________________
Title:___________________________
<PAGE>
ANNEX 1
11. Of the 4,000,000 Voting Preferred Shares of the corporation, 1,400,000
shall constitute a series of Voting Preferred Shares designated as 7 1/4%
Junior Convertible Preferred Shares Due 2007 (the "7 1/4% Preferred
Shares") with a Liquidation Preference of $100 per share (the "Liquidation
Preference"), and have, subject and in addition to the other provisions of
this Article Fourth, the following relative rights, preferences and
limitations:
(1) RANK. The 7 1/4% Preferred Shares will, with respect to dividend
rights and rights on liquidation, winding-up and dissolution, rank (i) senior to
all classes of Common Shares and to each other class or series of Preferred
Shares established hereafter by the Board of Directors, the terms of which do
not expressly provide that it ranks senior to, or on a parity with, the 7 1/4%
Preferred Shares as to dividend rights and rights on liquidation, winding-up and
dissolution of the corporation (collectively referred to, together with all
classes of Common Shares of the corporation, as "Junior Shares"); (ii) on a
parity with each other class or series of Preferred Shares established hereafter
by the Board of Directors, the terms of which expressly provide that such class
or series will rank on a parity with the 7 1/4% Preferred Shares as to dividend
rights and rights on liquidation, winding-up and dissolution (collectively
referred to as "Parity Shares"); and (iii) junior to each class or series of
Preferred Shares established hereafter by the Board of Directors, the terms of
which hereafter established classes or series expressly provide that such class
or series will rank senior to the 7 1/4% Preferred Shares as to dividend rights
or rights on liquidation, winding-up and dissolution of the corporation
(collectively referred to as "Senior Shares"). The corporation may not
authorize, create or increase the authorized amount of any class or series of
Senior Shares without the approval of the holders of at least two-thirds of the
shares of 7 1/4% Preferred Shares then outstanding, voting or consenting, as the
case may be, as one class. All claims of the holders of the 7 1/4% Preferred
Shares, including claims with respect to dividend payments, redemption payments,
mandatory repurchase payments or rights upon liquidation, winding-up or
dissolution, shall rank junior to the claims of the holders of any debt of the
corporation and all other creditors of the corporation.
(2) DIVIDENDS. (i) Holders of the outstanding shares of 7 1/4%
Preferred Shares will be entitled to receive, when, as and if declared by the
Board of Directors, out of funds legally available therefor, dividends on each
share of the 7 1/4% Preferred Shares at a rate per annum equal to 7 1/4% of the
Liquidation Preference of such share payable quarterly (each such quarterly
period being herein called a "Dividend Period").
2
<PAGE>
All dividends on the 7 1/4% Preferred Shares, to the extent accrued,
shall be cumulative, whether or not earned or declared, on a daily basis from
the Issue Date or, in the case of additional shares of 7 1/4% Preferred
Shares issued in payment of a dividend, from the date of issuance of such
additional shares of 7 1/4% Preferred Shares, and shall be payable quarterly
in arrears on March 31, June 30, September 30 and December 31 of each year
(each a "Dividend Payment Date"), to holders of record on the March 15, June
15, September 15 and December 15 immediately preceding the relevant Dividend
Payment Date. All dividends shall be payable in cash; PROVIDED, HOWEVER, that
to the extent and for so long as the corporation is prohibited by the terms
of any of its indebtedness then outstanding of the corporation or any
agreement or instrument to which the corporation is then subject, from paying
cash dividends on the 7 1/4% Preferred Shares, such dividends will accrue on
each share at the rate per annum equal to 8 3/4% of the Liquidation
Preference per share (instead of the 7 1/4% rate set forth in the first
paragraph of this paragraph (2)(i)) payable through the issuance of a number
of additional shares (rounded to the nearest whole share) of 7 1/4% Preferred
Shares (the "Additional Shares") equal to the dividend amount on such share
divided by the Liquidation Preference of such Additional Shares on the
relevant Dividend Payment Date. Except as provided herein, accrued and unpaid
dividends, if any, will not bear interest or bear dividends thereon.
(ii) All dividends paid with respect to shares of the 7 1/4% Preferred
Shares pursuant to paragraph (2)(i) shall be paid pro rata to the holders
entitled thereto.
(iii) No full dividends may be declared or paid or set apart for the
payment of dividends by the corporation on any Parity Shares for any period
unless full cumulative dividends in respect of each Dividend Period ending on or
before such period shall have been or contemporaneously are declared and paid
(or are deemed declared and paid) in full or declared and, if payable in cash, a
sum in cash sufficient for such payment set apart for such payment on the 7 1/4%
Preferred Shares. If full dividends are not so paid, the 7 1/4% Preferred Shares
will share dividends pro rata with the Parity Shares.
(iv) The corporation will not (A) declare, pay or set apart funds for
the payment of any dividend or other distribution with respect to any Junior
Shares or (B) redeem, purchase or otherwise acquire for consideration any Junior
Shares through a sinking fund or otherwise, unless (1) all accrued and unpaid
dividends with respect to the 7 1/4% Preferred Shares and any Parity Shares at
the time such dividends are payable have been paid or funds have been set apart
for payment of such dividends and (2) sufficient funds have been paid or set
apart for the payment of the dividend for the current dividend period with
respect to the 7 1/4% Preferred Shares and any Parity Shares. As used herein,
the term "dividend" does not include dividends payable solely in shares of
Junior Shares
3
<PAGE>
on Junior Shares or in options, warrants or rights to holders of Junior
Shares to subscribe or purchase any Junior Shares.
(v) Dividends on account of arrears for any past Dividend Period and
dividends in connection with any optional redemption may be declared and paid at
any time, without reference to any regular Dividend Payment Date, to holders of
record on such date, not more than 45 days prior to the payment thereof, as may
be fixed by the Board of Directors of the corporation.
(vi) Dividends payable on the 7 1/4% Preferred Shares for any period
other than a Dividend Period shall be computed on the basis of a 360-day
consisting year of twelve 30-day months and the actual number of days elapsed in
the period for which payable. Dividends payable on the 7 1/4% Preferred Shares
for a full Dividend Period will be computed by dividing the per annum dividend
rate by four.
(vii) Certificates of Common Shares relating to 7 1/4% Preferred
Shares surrendered for conversion by a registered Holder during the period from
the close of business on any regular record date next preceding any Dividend
Payment Date to the opening of business on such Dividend Payment Date (except
7 1/4% Preferred Shares called for redemption on a Redemption Date within such
period) must be accompanied by payment in cash of an amount equal to the accrued
but unpaid dividends thereon which such registered Holder is to receive on such
Dividend Payment Date with respect to the 7 1/4% Preferred Shares so
surrendered.
(3) LIQUIDATION PREFERENCE. (i) Upon any voluntary or involuntary
liquidation, dissolution or winding-up of the corporation, holders of 7 1/4%
Preferred Shares will be entitled to be paid, out of the assets of the
corporation available for distribution to its shareholders, the Liquidation
Preference of the outstanding shares of 7 1/4% Preferred Shares, plus, without
duplication, an amount in cash equal to all accumulated and unpaid dividends
thereon to the date fixed for liquidation, dissolution or winding-up (including
an amount equal to a prorated dividend for the period from the last Dividend
Payment Date to the date fixed for liquidation, dissolution or winding-up that
would have been payable had the 7 1/4% Preferred Shares been the subject of an
Optional Redemption on such date) before any distribution is made on any Junior
Shares. If, upon any voluntary or involuntary liquidation, dissolution or
winding up of the corporation, the amounts payable with respect to the 7 1/4%
Preferred Shares and all Parity Shares are not paid in full, the 7 1/4%
Preferred Shares and the Parity Shares will share equally and ratably (in
proportion to the respective amounts that would be payable on such shares of
7 1/4% Preferred Shares and the Parity Shares, respectively, if all amounts
payable thereon had been paid in full) in any distribution of assets of the
corporation to which each is entitled. After payment of the full amount of the
Liquidation Preference of the outstanding shares of 7 1/4% Preferred Shares
(and, if applicable, an amount equal to a prorated dividend), the holders of
shares of 7 1/4% Preferred Shares will not be entitled to any further
participation in any distribution of assets of the corporation.
4
<PAGE>
(ii) For the purposes of this paragraph (3), neither the sale,
conveyance, exchange or transfer (for cash, shares of stock, securities or other
consideration) of all or substantially all of the property or assets of the
corporation nor the consolidation or merger of the corporation with or into one
or more other entities shall be deemed to be a liquidation, dissolution or
winding-up of the corporation.
(4) REDEMPTION. (i) OPTIONAL REDEMPTION. (A) The 7 1/4% Preferred
Shares shall not be redeemable prior to April 3, 2000. On or after April 3,
2000, each share of the 7 1/4% Preferred Shares may be redeemed (subject to
the legal availability of funds therefor) at any time, in whole or in part,
at the option of the corporation, at the redemption prices (expressed as a
percentage of the Liquidation Preference of such share) set forth below,
plus, without duplication, an amount in cash equal to all accrued and unpaid
dividends to the date fixed for redemption (the "Optional Redemption Date")
(including an amount in cash equal to a prorated dividend for the period from
the Dividend Payment Date immediately prior to the Optional Redemption Date)
(the "Optional Redemption Price"). Notwithstanding the foregoing, prior to
April 1, 2002, the corporation shall only have the option to redeem shares of
7 1/4% Preferred Shares if, during the period of 30 consecutive Trading Days
ending on the Trading Day immediately preceding the date that the Redemption
Notice is mailed to holders, the Closing Bid Price for the Common Shares
exceeded 150% of the Conversion Price effective on the date of such
Redemption Notice for at least 20 of such Trading Days. If redeemed during
the 12-month period beginning April 1 of each of the years set forth below
(or in the case of the year 2000, April 3), the Optional Redemption Price per
share shall be the applicable percentage of the Liquidation Preference of
such share set forth below plus, without duplication, in each case, an amount
in cash equal to all accrued and unpaid dividends (including an amount equal
to a prorated dividend from the immediately preceding Dividend Payment Date
to the Optional Redemption Date), if any, to the Optional Redemption Date:
<TABLE>
<CAPTION>
YEAR IN WHICH REDEMPTION OCCURS PERCENTAGE
<S> <C>
2000 .................................... 104.83%
2001 .................................... 104.03%
2002 .................................... 103.22%
2003 .................................... 102.42%
2004 .................................... 101.61%
2005 .................................... 100.81%
2006 .................................... 100.00%
</TABLE>
(B) In the event of a redemption of only a portion of the then
outstanding shares of 7 1/4% Preferred Shares, the corporation shall effect such
redemption on a pro rata basis, except that the corporation may redeem all of
the shares held by holders of fewer than 100 shares (or all of the shares held
by holders who would hold less than 100 shares as a result of such redemption),
as may be determined by the corporation.
5
<PAGE>
(ii) MANDATORY REDEMPTION. Each share of the 7 1/4% Preferred
Shares (if not earlier redeemed or converted) shall be subject to mandatory
redemption in whole (to the extent of lawfully available funds therefor) on
March 31, 2007 (the "Mandatory Redemption Date") at a price equal to 100% of
the Liquidation Preference of such share, plus, without duplication, all
accrued and unpaid dividends thereon (including an amount equal to a prorated
dividend thereon from the immediately preceding Dividend Payment Date to the
Mandatory Redemption Date), if any, to the Mandatory Redemption Date (the
"Mandatory Redemption Price").
(iii) PROCEDURE FOR REDEMPTION. (A) On and after the Optional
Redemption Date or the Mandatory Redemption Date, as the case may be (the
"Redemption Date"), unless the corporation defaults in the payment of the
applicable redemption price, dividends will cease to accumulate on shares of 7
1/4% Preferred Shares called for redemption and all rights of holders of such
shares will terminate except for the right to receive the Optional Redemption
Price or the Mandatory Redemption Price, as the case may be, without interest;
PROVIDED, HOWEVER, that if a notice of redemption shall have been given as
provided in paragraph (iii)(B) and the funds necessary for redemption (including
an amount in respect of all dividends that will accrue to the Redemption Date)
shall have been segregated and irrevocably set apart by the corporation, in
trust for the benefit of the holders of the shares called for redemption, then
dividends shall cease to accumulate on the Redemption Date on the shares to be
redeemed and, at the close of business on the day on which such funds are
segregated and set apart, the holders of the shares to be redeemed shall, with
respect to the shares to be redeemed, cease to be stockholders of the
corporation and shall be entitled only to receive the Optional Redemption Price
or the Mandatory Redemption Price, as the case may be, for such shares without
interest from the Redemption Date.
(B) With respect to a redemption pursuant to paragraph (4)(i) or
(4)(ii), the corporation will send a written notice of redemption by first class
mail to each holder of record of shares of 7 1/4% Preferred Shares, not fewer
than 15 days nor more than 60 days prior to the Redemption Date at its
registered address (the "Redemption Notice"); PROVIDED, HOWEVER, that no failure
to give such notice nor any deficiency therein shall affect the validity of the
procedure for the redemption of any shares of 7 1/4% Preferred Shares to be
redeemed except as to the holder or holders to whom the corporation has failed
to give said notice or except as to the holder or holders whose notice was
defective. The Redemption Notice shall state:
(1) whether the redemption is pursuant to paragraph (4)(i) or (4)(ii)
hereof;
(2) the Optional Redemption Price or the Mandatory Redemption Price,
as the case may be;
(3) whether all or less than all the outstanding shares of the 7 1/4%
Preferred Shares are to be redeemed and the total number of shares of the 7
1/4% Preferred Shares being redeemed;
(4) the Redemption Date;
6
<PAGE>
(5) that the holder is to surrender to the corporation, in the manner,
at the place or places and at the price designated, his certificate or
certificates representing the shares of 7 1/4% Preferred Shares to be
redeemed; and
(6) that dividends on the shares of the 7 1/4% Preferred Shares to be
redeemed shall cease to accumulate on such Redemption Date unless the
corporation defaults in the payment of the Optional Redemption Price or the
Mandatory Redemption Price, as the case may be.
(C) Each holder of 7 1/4% Preferred Shares shall surrender the
certificate or certificates representing such shares of 7 1/4% Preferred Shares
to the corporation, duly endorsed (or otherwise in proper form for transfer, as
determined by the corporation), in the manner and at the place designated in the
Redemption Notice, and on the Redemption Date the full Optional Redemption Price
or Mandatory Redemption Price, as the case may be, for such shares shall be
payable in cash to the person whose name appears on such certificate or
certificates as the owner thereof, and each surrendered certificate shall be
canceled and retired. In the event that less than all of the shares represented
by any such certificate are redeemed, a new certificate shall be issued
representing the unredeemed shares.
(5) VOTING RIGHTS. (i) Each holder of 7 1/4% Preferred Shares,
except as required under Ohio law or as set forth in paragraphs (ii) and
(iii) below, shall be entitled to one vote for each share of 7 1/4% Preferred
Shares held by such holder on any matter required or permitted to be voted
upon by the shareholders of the corporation.
(ii) (A) If (1) dividends on the 7 1/4% Preferred Shares are in
arrears and unpaid for six or more Dividend Periods (whether or not consecutive)
(a "Dividend Default"); or (2) the corporation fails to redeem the 7 1/4%
Preferred Shares on March 31, 2007, or fails to otherwise discharge any
redemption obligation with respect to the 7 1/4% Preferred Shares, then the
number of directors constituting the Board of Directors will be increased by two
and the Holders of the then outstanding shares of 7 1/4% Preferred Shares
(together with the holders of Parity Shares upon which like rights have been
conferred and are exercisable), voting separately and as a class, shall have the
right and power to elect such two additional directors. Each such event
described in clause (1) or (2) above is a "Voting Rights Triggering Event". A
Voting Rights Triggering Event shall not be deemed to have occurred if at the
time of such event there are less than 200,000 shares of 7 1/4% Preferred Shares
then outstanding.
(B) The voting rights set forth in subparagraph (4)(ii)(A) above will
continue until such time as (x) in the case of a Dividend Default, all dividends
in arrears on the 7 1/4% Preferred Shares are paid in full in cash, (y) in all
other cases, any failure, breach or default giving rise to such Voting Rights
Triggering Event is remedied or waived by the Holders of at least two-thirds of
the shares of 7 1/4% Preferred Shares then outstanding or (z) at any time there
are less than 200,000 shares of 7 1/4% Preferred Shares outstanding, at which
time the term of any directors elected pursuant to the provisions of
subparagraph (5)(ii)(A) above shall terminate and the number of directors
constituting the
7
<PAGE>
Board of Directors shall be decreased by two (until the occurrence of any
subsequent Voting Rights Triggering Event). At any time after voting power to
elect directors shall have become vested and be continuing in the holders of
7 1/4% Preferred Shares (together with the holders of Parity Shares upon which
like rights have been conferred and are exercisable) pursuant to subparagraph
(5)(ii)(A) hereof, or if vacancies shall exist in the offices of directors
elected by such holders, a proper officer of the corporation may, and upon the
written request of the holders of record of at least 25% of the shares of 7 1/4%
Preferred Shares then outstanding or the holders of 25% of the shares of Parity
Shares then outstanding upon which like rights have been confirmed and are
exercisable addressed to the secretary of the corporation shall, call a special
meeting of the Holders of 7 1/4% Preferred Shares and the holders of such Parity
Shares for the purpose of electing the directors which such holders are entitled
to elect pursuant to the terms hereof; PROVIDED, HOWEVER, that no such special
meeting shall be called if the next annual meeting of shareholders of the
corporation is to be held within 60 days after the voting power to elect
directors shall have become vested, in which case such meeting shall be deemed
to have been called for such next annual meeting. If such meeting shall not be
called by a proper officer of the corporation within 20 days after personal
service to the secretary of the corporation at its principal executive offices,
then the Holders of record of at least 25% of the outstanding shares of 7 1/4%
Preferred Shares or the holders of 25% of the shares of Parity Shares upon which
like rights have been confirmed and are exercisable may designate in writing one
of their members to call such meeting at the expense of the corporation, and
such meeting may be called by the person so designated upon the notice required
for the annual meetings of shareholders of the corporation and shall be held at
the place for holding the annual meetings of shareholders. Any holder of 7 1/4%
Preferred Shares or such Parity Shares so designated shall have, and the
corporation shall provide, access to the lists of holders of 7 1/4% Preferred
Shares and the holders of such Parity Shares to be called pursuant to the
provisions hereof. If no special meeting of the Holders of 7 1/4% Preferred
Shares and the holders of such Parity Shares is called as provided in this
paragraph (5)(ii), then such meeting shall be deemed to have been called for the
next annual meeting of shareholders of the corporation or special meeting of the
holders of any other capital shares of the corporation.
(C) At any meeting held for the purposes of electing directors at
which the Holders of 7 1/4% Preferred Shares (together with the holders of
Parity Shares upon which like rights have been conferred and are exercisable)
shall have the right, voting together as a separate class, to elect directors as
aforesaid, the presence in person or by proxy of the holders of at least a
majority in voting power of the outstanding shares of 7 1/4% Preferred Shares
(and such Parity Shares) shall be required to constitute a quorum thereof.
(D) Any vacancy occurring in the office of a director elected by the
Holders of 7 1/4% Preferred Shares (and such Parity Shares) may be filled by the
remaining director elected by the Holders of 7 1/4% Preferred Shares (and such
Parity Shares) unless and until such vacancy shall be filled by the Holders of 7
1/4% Preferred Shares (and such Parity Shares).
(iii) (A) So long as any shares of the 7 1/4% Preferred Shares are
outstanding, the corporation will not authorize, create or increase the
authorized amount of any class
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or series of Senior Shares without the affirmative vote or consent of holders of
at least two-thirds of the shares of 7 1/4% Preferred Shares then outstanding,
voting or consenting, as the case may be, as one class, given in person or by
proxy, either in writing or by resolution adopted at an annual or special
meeting.
(B) So long as any shares of the 7 1/4% Preferred Shares are
outstanding, the corporation will not amend this Article Fourth so as to affect
adversely the specified rights, preferences, privileges or voting rights of
Holders of shares of 7 1/4% Preferred Shares or to authorize the issuance of any
additional shares of 7 1/4% Preferred Shares (except to authorize the issuance
of additional shares of 7 1/4% Preferred Shares to be paid as dividends on the
7 1/4% Preferred Shares, for which no consent shall be necessary) without the
affirmative vote or consent of Holders of at least two-thirds of the issued and
outstanding shares of 7 1/4% Preferred Shares, voting or consenting, as the case
may be, as one class, given in person or by proxy, either in writing or by
resolution adopted at an annual or special meeting.
(C) Except as set forth in paragraph (5)(iii)(A) or (B) above, (x) the
creation, authorization or issuance of any shares of any Junior Shares, Parity
Shares or Senior Shares, including the designation of a series of 7 1/4%
Preferred Shares, or (y) the increase or decrease in the amount of authorized
capital shares of any class, including Preferred Shares, shall not require the
consent of Holders of 7 1/4% Preferred Shares and shall not be deemed to affect
adversely the rights, preferences, privileges or voting rights of shares of
7 1/4% Preferred Shares.
(iv) In any case in which the Holders of 7 1/4% Preferred Shares shall
be entitled to vote pursuant to this paragraph (5) or pursuant to Ohio law, each
Holder of 7 1/4% Preferred Shares entitled to vote with respect to such matters
shall be entitled to one vote for each share of 7 1/4% Preferred Shares held.
(6) CONVERSION. (i) At any time after 60 days from the Issue Date, at
the option of the Holder thereof, any share of 7 1/4% Preferred Shares may be
converted at the Liquidation Preference thereof into fully paid and
nonassessable Common Shares (calculated as to each conversion to the nearest
1/100 of a share), at the Conversion Price, determined as hereinafter provided,
in effect at the time of conversion. Such conversion right shall expire at the
close of business on the Mandatory Redemption Date. In case a share of 7 1/4%
Preferred Shares is called for optional redemption, such conversion right in
respect of the share of 7 1/4% Preferred Shares so called shall expire at the
close of business on the applicable Optional Redemption Date, unless the
corporation defaults in making the payment due upon redemption.
The price at which Common Shares shall be delivered upon conversion
(herein called the "Conversion Price") shall be initially $11.18 per share of
Common Shares. The Conversion Price shall be adjusted in certain instances as
provided in paragraph (6)(iv) and paragraph (6)(v).
(ii) In order to exercise the conversion privilege, the Holder of any
share of
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7 1/4% Preferred Shares to be converted shall surrender the certificate for such
share of 7 1/4% Preferred Shares, duly endorsed or assigned to the corporation
or in blank, at the office of the Transfer Agent or at any office or agency of
the corporation maintained for that purpose, accompanied by written notice to
the corporation in the form of Exhibit B that the Holder elects to convert such
share of 7 1/4% Preferred Shares or, if fewer than all of the shares of 7 1/4%
Preferred Shares represented by a single share certificate are to be converted,
the number of shares represented thereby to be converted. Except as provided in
paragraph (2)(viii), no payment or adjustment shall be made upon any conversion
on account of any dividends accrued on the shares of 7 1/4% Preferred Shares
surrendered for conversion or on account of any dividends on the Common Shares
issued upon conversion. Such notice shall also contain the office or the address
to which the corporation should deliver shares of Common Shares issuable upon
conversion (and any other payments or certificates related thereto). Except as
provided in paragraph (2)(viii), in no event shall the corporation be obligated
to pay any converting Holder any unpaid dividend, whether or not in arrears, on
converted shares or any dividends on the shares of Common Shares issued upon
such conversion.
Shares of 7 1/4% Preferred Shares shall be deemed to have been
converted immediately prior to the close of business on the day of surrender of
such shares of 7 1/4% Preferred Shares for conversion in accordance with the
foregoing provisions, and at such time the rights of the Holders of such shares
of 7 1/4% Preferred Shares as Holders shall cease, and the person or persons
entitled to receive the Common Shares issuable upon conversion shall be treated
for all purposes as the record holder or holders of such Common Shares at such
time. As promptly as practicable on or after the conversion date, the
corporation shall issue and shall deliver to such office or agency as the
converting Holder shall have designated in its written notice to the corporation
a certificate or certificates for the number of full Common Shares issuable upon
conversion, together with payment in lieu of any fraction of a share, as
provided in paragraph (6)(iii) hereof.
In the case of any conversion of fewer than all the shares of 7 1/4%
Preferred Shares evidenced by a certificate, upon such conversion the
corporation shall execute and the Transfer Agent shall authenticate and deliver
to the Holder thereof (at the address designated by such Holder), at the expense
of the corporation, a new certificate or certificates representing the number of
unconverted shares of 7 1/4% Preferred Shares.
(iii) No fractional Common Shares shall be issued upon the conversion
of a share of 7 1/4% Preferred Shares. If more than one share of 7 1/4%
Preferred Shares shall be surrendered for conversion at one time by the same
holder, the number of full shares of Common Shares which shall be issuable upon
conversion thereof shall be computed on the basis of the aggregate shares of
7 1/4% Preferred Shares so surrendered. Instead of any fractional share of
Common Shares which would otherwise be issuable upon conversion of any share of
7 1/4% Preferred Shares, the corporation shall pay a cash adjustment in respect
of such fraction in an amount equal to the same fraction of the closing price
(as defined in paragraph (6)(iv)(7)) per share of Common Shares at the close of
business on the Business Day prior to the day of conversion.
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(iv) The Conversion Price shall be adjusted from time to time by the
corporation as follows:
(1) If the corporation shall hereafter pay a dividend or make a
distribution in Common Shares to all holders of any outstanding class or
series of Common Shares of the corporation, the Conversion Price in effect
at the opening of business on the date following the date fixed for the
determination of shareholders entitled to receive such dividend or other
distribution shall be reduced by multiplying such Conversion Price by a
fraction of which the numerator shall be the number of shares of Common
Shares outstanding at the close of business on the Record Date (as defined
in paragraph (6)(iv)(7)) fixed for such determination and the denominator
shall be the sum of such number of outstanding shares and the total number
of shares constituting such dividend or other distribution, such reduction
to become effective immediately after the opening of business on the day
following the Record Date. If any dividend or distribution of the type
described in this paragraph (6)(iv)(i) is declared but not so paid or made,
the Conversion Price shall again be adjusted to the Conversion Price which
would then be in effect if such dividend or distribution had not been
declared.
(2) If the corporation shall offer or issue rights or warrants to all
holders of its outstanding Common Shares entitling them to subscribe for or
purchase Common Shares at a price per share less than the Current Market
Price (as defined in paragraph (6)(iv)(7)) on the Record Date fixed for the
determination of shareholders entitled to receive such rights or warrants,
the Conversion Price shall be adjusted so that the same shall equal the
price determined by multiplying the Conversion Price in effect at the
opening of business on the date after such Record Date by a fraction of
which the numerator shall be the number of shares of Common Shares
outstanding at the close of business on the Record Date plus the number of
shares of Common Shares which the aggregate offering price of the total
number of shares of Common Shares subject to such rights or warrants would
purchase at such Current Market Price and of which the denominator shall be
the number of shares of Common Shares outstanding at the close of business
on the Record Date plus the total number of additional shares of Common
Shares subject to such rights or warrants for subscription or purchase.
Such adjustment shall become effective immediately after the opening of
business on the day following the Record Date fixed for determination of
shareholders entitled to purchase or receive such rights or warrants. To
the extent that shares of Common Shares are not delivered pursuant to such
rights or warrants, upon the expiration or termination of such rights or
warrants the Conversion Price shall again be adjusted to be the Conversion
Price which would then be in effect had the adjustments made upon the
issuance of such rights or warrants been made on the basis of delivery of
only the number of shares of Common Shares actually delivered. If such
rights or warrants are not so issued, the Conversion Price shall again be
adjusted to be the Conversion Price which would then be in effect if such
date fixed for the determination of shareholders entitled to receive such
rights or warrants had not been fixed. In determining whether any rights or
warrants entitle the holders to subscribe for or purchase Common Shares at
less than such Current
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Market Price, and in determining the aggregate offering price of such
shares of Common Shares, there shall be taken into account any
consideration received for such rights or warrants, with the value of such
consideration, if other than cash, to be determined by the Board of
Directors.
(3) If the outstanding shares of Common Shares shall be subdivided
into a greater number of shares of Common Shares, the Conversion Price in
effect at the opening of business on the day following the day upon which
such subdivision becomes effective shall be proportionately reduced, and,
conversely, if the outstanding shares of Common Shares shall be combined
into a smaller number of shares of Common Shares, the Conversion Price in
effect at the opening of business on the day following the day upon which
such combination becomes effective shall be proportionately increased, such
reduction or increase, as the case may be, to become effective immediately
after the opening of business on the day following the day upon which such
subdivision or combination becomes effective.
(4) If the corporation shall, by dividend or otherwise, distribute to
all holders of its shares of Common Shares shares of any class of capital
stock of the corporation (other than any dividends or distributions to
which paragraph (6)(iv)(1) applies) or evidences of its indebtedness, cash
or other assets (including securities, but excluding any rights or warrants
of a type referred to in paragraph (6)(iv)(2) and excluding dividends and
distributions paid exclusively in cash and excluding any capital stock,
evidences of indebtedness, cash or assets distributed upon a merger or
consolidation to which paragraph (6)(v) applies) (the foregoing hereinafter
in this paragraph (6)(iv)(4) called the "Distributed Securities"), then, in
each such case, the Conversion Price shall be reduced so that the same
shall be equal to the price determined by multiplying the Conversion Price
in effect immediately prior to the close of business on the Record Date (as
defined in paragraph (6)(iv)(7)) with respect to such distribution by a
fraction of which the numerator shall be the Current Market Price
(determined as provided in paragraph (6)(iv)(7)) of the Common Shares on
such date less the fair market value (as determined by the Board of
Directors, whose determination shall be conclusive and described in a
resolution of the Board of Directors) on such date of the portion of the
Distributed Securities so distributed applicable to one share of Common
Shares and the denominator shall be such Current Market Price, such
reduction to become effective immediately prior to the opening of business
on the day following the Record Date; PROVIDED, HOWEVER, that, in the event
the then fair market value (as so determined) of the portion of the
Distributed Securities so distributed applicable to one share of Common
Shares is equal to or greater than the Current Market Price on the Record
Date, in lieu of the foregoing adjustment, adequate provision shall be made
so that each holder of 7 1/4% Preferred Shares shall have the right to
receive upon conversion of a share of 7 1/4% Preferred Shares (or any
portion thereof) the amount of Distributed Securities such holder would
have received had such holder converted such share of 7 1/4% Preferred
Shares (or portion thereof) immediately prior to such Record Date. If such
dividend or distribution is not so paid or made, the Conversion Price shall
again be adjusted to be the Conversion Price which would then be in effect
if such
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dividend or distribution had not been declared. If the Board of Directors
determines the fair market value of any distribution for purposes of this
paragraph (6)(iv)(4) by reference to the actual or when issued trading
market for any securities comprising all or part of such distribution, it
must in doing so consider the prices in such market over the same period
used in computing the Current Market Price pursuant to paragraph (6)(iv)(7)
to the extent possible.
Rights or warrants distributed by the corporation to all holders of Common
Shares entitling the holders thereof to subscribe for or purchase shares of
the corporation's capital shares (either initially or under certain
circumstances), which rights or warrants, until the occurrence of a
specified event or events ("Dilution Trigger Event"): (i) are deemed to be
transferred with such Common Shares; (ii) are not exercisable; and (iii)
are also issued in respect of future issuances of Common Shares, shall be
deemed not to have been distributed for purposes of this paragraph
(6)(iv)(4) (and no adjustment to the Conversion Price under this paragraph
(6)(iv)(4) shall be required) until the occurrence of the earliest Dilution
Trigger Event, whereupon such rights and warrants shall be deemed to have
been distributed and an appropriate adjustment to the Conversion Price
under this paragraph (6)(iv)(4) shall be made. If any such rights or
warrants, including any such existing rights or warrants distributed prior
to the date hereof, are subject to subsequent events, upon the occurrence
of each of which such rights or warrants shall become exercisable to
purchase different securities, evidences of indebtedness or other assets,
then the occurrence of each such event shall be deemed to be such date of
issuance and record date with respect to new rights or warrants (and a
termination or expiration of the existing rights or warrants without
exercise by the holder thereof). In addition, in the event of any
distribution (or deemed distribution) of rights or warrants, or any
Dilution Trigger Event with respect thereto, that was counted for purposes
of calculating a distribution amount for which an adjustment to the
Conversion Price under this paragraph (6)(iv)(4) was made, (1) in the case
of any such rights or warrants which shall all have been redeemed or
repurchased without exercise by any holders thereof, the Conversion Price
shall be readjusted upon such final redemption or repurchase to give effect
to such distribution or Dilution Trigger Event, as the case may be, as
though it were a cash distribution, equal to the per share redemption or
repurchase price received by a holder or holders of Common Shares with
respect to such rights or warrants (assuming such holder had retained such
rights or warrants), made to all holders of Common Shares as of the date of
such redemption or repurchase, and (2) in the case of such rights or
warrants which shall have expired or been terminated without exercise by
any holders thereof, the Conversion Price shall be readjusted as if such
rights and warrants had not been issued.
Notwithstanding any other provision of this paragraph (6)(iv)(4) to the
contrary, capital stock, rights, warrants, evidences of indebtedness, other
securities, cash or other assets (including, without limitation, any rights
distributed pursuant to any shareholder rights plan) shall be deemed not to
have been distributed for purposes of this paragraph (6)(iv)(4) if the
corporation makes proper provision so that each holder of shares of 7 1/4%
Preferred Shares who converts a share of 7 1/4% Preferred
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Shares (or any portion thereof) after the date fixed for determination of
shareholders entitled to receive such distribution shall be entitled to
receive upon such conversion, in addition to the Common Shares issuable
upon such conversion, the amount and kind of such distributions that such
holder would have been entitled to receive if such holder had, immediately
prior to such determination date, converted such share of 7 1/4% Preferred
Shares into Common Shares.
For purposes of this paragraph (6)(iv)(4) and paragraphs (6)(iv)(1) and
(2), any dividend or distribution to which this paragraph (6)(iv)(4) is
applicable that also includes Common Shares, or rights or warrants to
subscribe for or purchase Common Shares to which paragraph (6)(iv)(2)
applies (or both), shall be deemed instead to be (1) a dividend or
distribution of the evidences of indebtedness, cash, assets, shares of
capital stock, rights or warrants other than (A) such shares of Common
Shares or (B) rights or warrants to which paragraph (6)(iv)(2) applies (and
any Conversion Price reduction required by this paragraph (6)(iv)(4) with
respect to such dividend or distribution shall then be made) immediately
followed by (2) a dividend or distribution of such Common Shares or such
rights or warrants (and any further Conversion Price reduction required by
paragraph (6)(iv)(1) and (2) with respect to such dividend or distribution
shall then be made), except that (1) the Record Date of such dividend or
distribution shall be substituted as "the Record Date fixed for the
determination of stockholders entitled to receive such dividend or other
distribution", "Record Date fixed for such determination" and "Record Date"
within the meaning of paragraph (6)(iv)(1) and as "the Record Date fixed
for the determination of shareholders entitled to receive such rights or
warrants", "the date fixed for the determination of the shareholders
entitled to receive such rights or warrants" and "such Record Date" within
the meaning of paragraph (6)(iv)(2), and (2) any share of Common Shares
included in such dividend or distribution shall not be deemed "outstanding
at the close of business on the date fixed for such determination" within
the meaning of paragraph (6)(iv)(1).
(5) If the corporation shall, by dividend or otherwise, distribute to
all holders of its Common Shares cash (excluding any cash that is
distributed upon a merger or consolidation to which paragraph (6)(v)
applies or as part of a distribution referred to in paragraph (6)(iv)) in
an aggregate amount that, combined together with (1) the aggregate amount
of any other such distributions to all holders of its Common Shares made
exclusively in cash within the 12 months preceding the date of payment of
such distribution, and in respect of which no adjustment pursuant to this
paragraph (6)(iv)(5) has been made, and (2) the aggregate of any cash plus
the fair market value (as determined by the Board of Directors, whose
determination shall be conclusive and described in a resolution of the
Board of Directors) of consideration payable in respect of any tender offer
by the corporation or a Subsidiary of the corporation for all or any
portion of the Common Shares concluded within the 12 months preceding the
date of payment of such distribution, and in respect of which no adjustment
pursuant to paragraph (6)(iv)(4) has been made, exceeds 12.5% of the
product of the Current
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Market Price (determined as provided in paragraph (6)(iv)(7)) on the Record
Date with respect to such distribution times the number of shares of Common
Shares outstanding on such date, then, and in each such case, immediately
after the close of business on such date, the Conversion Price shall be
reduced so that the same shall equal the price determined by multiplying
the Conversion Price in effect immediately prior to the close of business
on such Record Date by a fraction (i) the numerator of which shall be equal
to the Current Market Price on the Record Date less an amount equal to the
quotient of (x) the excess of such combined amount over such 12.5% amount
divided by (y) the number of shares of Common Shares outstanding on the
Record Date and (ii) the denominator of which shall be equal to the Current
Market Price on such Record Date; PROVIDED, HOWEVER, that, if the portion
of the cash so distributed applicable to one share of Common Shares is
equal to or greater than the Current Market Price of the Common Shares on
the Record Date, in lieu of the foregoing adjustment, adequate provision
shall be made so that each holder of 7 1/4% Preferred Shares shall have the
right to receive upon conversion of a share of 7 1/4% Preferred Shares (or
any portion thereof) the amount of cash such holder would have received had
such holder converted such share of 7 1/4% Preferred Shares (or portion
thereof) immediately prior to such Record Date. If such dividend or
distribution is not so paid or made, the Conversion Price shall again be
adjusted to be the Conversion Price which would then be in effect if such
dividend or distribution had not been declared.
(6) If a tender or exchange offer made by the corporation or any of
its Subsidiaries for all or any portion of the Common Shares expires and
such tender or exchange offer (as amended upon the expiration thereof)
requires the payment to shareholders (based on the acceptance (up to any
maximum specified in the terms of the tender offer) of Purchased Shares (as
defined below)) of an aggregate consideration having a fair market value
(as determined by the Board of Directors, whose determination shall be
conclusive and described in a resolution of the Board of Directors) that,
combined together with (1) the aggregate of the cash plus the fair market
value (as determined by the Board of Directors, whose determination shall
be conclusive and described in a resolution of the Board of Directors), as
of the expiration of such tender offer, of consideration payable in respect
of any other tender offers, by the corporation or any of its Subsidiaries
for all or any portion of the Common Shares expiring within the 12 months
preceding the expiration of such tender offer and in respect of which no
adjustment pursuant to this paragraph (6)(iv)(6) has been made and (2) the
aggregate amount of any distributions to all holders of the Common Shares
made exclusively in cash within 12 months preceding the expiration of such
tender offer and in respect of which no adjustment pursuant to paragraph
(6)(iv)(5) has been made, exceeds 12.5% of the product of the Current
Market Price (determined as provided in paragraph (6)(iv)(7)) as of the
last time (the "Expiration Time") tenders could have been made pursuant to
such tender offer (as it may be amended) times the number of shares of
Common Shares outstanding (including any tendered shares) at the Expiration
Time, then, and in each such case, immediately prior to the opening of
business on the day after the date of the Expiration Time, the
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Conversion Price shall be adjusted so that the same shall equal the price
determined by multiplying the Conversion Price in effect immediately prior
to the close of business on the date of the Expiration Time by a fraction
of which the numerator shall be the number of shares of Common Shares
outstanding (including any tendered shares) at the Expiration Time
multiplied by the Current Market Price of the Common Shares on the Trading
Day next succeeding the Expiration Time and the denominator shall be the
sum of (x) the fair market value (determined as aforesaid) of the aggregate
consideration payable to shareholders based on the acceptance (up to any
maximum specified in the terms of the tender offer) of all shares validly
tendered and not withdrawn as of the Expiration Time (the shares deemed so
accepted, up to any such maximum, being referred to as the "Purchased
Shares") and (y) the product of the number of shares of Common Shares
outstanding (less any Purchased Shares) at the Expiration Time and the
Current Market Price of the Common Shares on the Trading Day next
succeeding the Expiration Time, such reduction (if any) to become effective
immediately prior to the opening of business on the day following the
Expiration Time. If the corporation is obligated to purchase shares
pursuant to any such tender offer, but the corporation is permanently
prevented by applicable law from effecting any such purchases or all such
purchases are rescinded, the Conversion Price shall again be adjusted to be
the Conversion Price which would then be in effect if such tender offer had
not been made. If the application of this paragraph (6)(iv)(6) to any
tender offer would result in an increase in the Conversion Price, no
adjustment shall be made for such tender offer under this paragraph
(6)(iv)(6).
(7) For purposes of this paragraph (6)(iv), the following terms shall
have the meaning indicated:
"closing price" with respect to any securities on any day means the closing
price on such day or, if no such sale takes place on such day, the average
of the reported high and low prices on such day, in each case on The Nasdaq
National Market or the New York Stock Exchange, as applicable, or, if such
security is not listed or admitted to trading on such national market or
exchange, on the principal national securities exchange or quotation system
on which such security is quoted or listed or admitted to trading, or, if
not quoted or listed or admitted to trading on any national securities
exchange or quotation system, the average of the high and low prices of
such security on the over-the-counter market on the day in question as
reported by the National Quotation Bureau Incorporated or a similar
generally accepted reporting service, or, if not so available, in such
manner as furnished by any New York Stock Exchange member firm selected
from time to time by the Board of Directors for that purpose, or a price
determined in good faith by the Board of Directors, whose determination
shall be conclusive and described in a resolution of the Board of
Directors.
"Current Market Price" means the average of the daily closing prices per
share of Common Shares for the 10 consecutive trading days immediately
prior to the date in question; PROVIDED, HOWEVER, that (A) if the "ex" date
(as hereinafter defined) for any event (other than the issuance or
distribution requiring such computation)
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that requires an adjustment to the Conversion Price pursuant to paragraphs
(6)(iv)(1), (2), (3), (4), (5) or (6) occurs during such 10 consecutive
trading days, the closing price for each trading day prior to the "ex" date
for such other event shall be adjusted by multiplying such closing price by
the same fraction by which the Conversion Price is so required to be
adjusted as a result of such other event, (B) if the "ex" date for any
event (other than the issuance or distribution requiring such computation)
that requires an adjustment to the Conversion Price pursuant to paragraphs
(6)(iv)(1), (2), (3), (4), (5) or (6) occurs on or after the "ex" date for
the issuance or distribution requiring such computation and prior to the
day in question, the closing price for each trading day on and after the
"ex" date for such other event shall be adjusted by multiplying such
closing price by the reciprocal of the fraction by which the Conversion
Price is so required to be adjusted as a result of such other event and (C)
if the "ex" date for the issuance or distribution requiring such
computation is prior to the day in question, after taking into account any
adjustment required pursuant to clause (A) or (B) of this proviso, the
closing price for each trading day on or after such "ex" date shall be
adjusted by adding thereto the amount of any cash and the fair market value
(as determined by the Board of Directors in a manner consistent with any
determination of such value for purposes of paragraphs (6)(iv)(4) or (5),
whose determination shall be conclusive and described in a resolution of
the Board of Directors) of the evidence of indebtedness, shares of capital
stock or assets being distributed applicable to one Common Share as of the
close of business on the day before such "ex" date. For purposes of any
computation under paragraph (6)(vi), the Current Market Price on any date
shall be deemed to be the average of the daily closing prices per share of
Common Shares for such day and the next two succeeding trading days;
PROVIDED, HOWEVER, that, if the "ex" date for any event (other than the
tender offer requiring such computation) that requires an adjustment to the
Conversion Price pursuant to paragraph (6)(iv)(1), (2), (3), (4), (5) or
(6) occurs on or after the Expiration Time for the tender or exchange offer
requiring such computation and prior to the day in question, the closing
price for each trading day on and after the "ex" date for such other event
shall be adjusted by multiplying such closing price by the reciprocal of
the fraction by which the Conversion Price is so required to be adjusted as
a result of such other event. For purposes of this paragraph, the term "ex"
date (I) when used with respect to any issuance or distribution, means the
first date on which the Common Shares trade regular way on the relevant
exchange or in the relevant market from which the closing price was
obtained without the right to receive such issuance or distribution, (II)
when used with respect to any subdivision or combination of Common Shares,
means the first date on which the Common Shares trade regular way on such
exchange or in such market after the time at which such subdivision or
combination becomes effective and (III) when used with respect to any
tender or exchange offer means the first date on which the Common Shares
trade regular way on such exchange or in such market after the Expiration
Time of such offer. Notwithstanding the foregoing, whenever successive
adjustments to the Conversion Price are called for pursuant to this
paragraph (6)(iv), such adjustments shall be made to the Current Market
Price as may be necessary or appropriate to effectuate the intent of this
paragraph (6)(iv)
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and to avoid unjust or inequitable results, as determined in good faith by
the Board of Directors.
"fair market value" shall mean the amount which a willing buyer would pay a
willing seller in an arm's-length transaction.
"Record Date" shall mean, with respect to any dividend, distribution or
other transaction or event in which the holders of Common Shares have the
right to receive any cash, securities or other property or in which the
Common Shares (or other applicable security) are exchanged for or converted
into any combination of cash, securities or other property, the date fixed
for determination of shareholders entitled to receive such cash, securities
or other property (whether such date is fixed by the Board of Directors or
by statute, contract or otherwise).
(8) No adjustment in the Conversion Price shall be required unless
such adjustment would require an increase or decrease of at least 1% in
such price; PROVIDED, HOWEVER, that any adjustments which by reason of this
paragraph (6)(iv)(8) are not required to be made shall be carried forward
and taken into account in any subsequent adjustment. All calculations under
this paragraph (6)(iv)(8) shall be made by the corporation and shall be
made to the nearest cent or to the nearest one-hundredth of a share, as the
case may be. No adjustment need be made for a change in the par value or no
par value of the Common Shares.
(9) Whenever the Conversion Price is adjusted as herein provided, the
corporation shall promptly file with the Transfer Agent an Officers'
Certificate setting forth the Conversion Price after such adjustment and
setting forth a brief statement of the facts requiring such adjustment.
Promptly after delivery of such certificate, the corporation shall prepare
a notice of such adjustment of the Conversion Price setting forth the
adjusted Conversion Price and the date on which each adjustment becomes
effective and shall mail such notice of such adjustment of the Conversion
Price to each holder of 7 1/4% Preferred Shares at such holder's last
address appearing on the register of holders maintained for that purpose
within 20 days of the effective date of such adjustment. Failure to deliver
such notice shall not affect the legality or validity of any such
adjustment.
(10) In any case in which this paragraph (6)(iv) provides that an
adjustment shall become effective immediately after a Record Date for an
event, the corporation may defer until the occurrence of such event issuing
to the holder of any share of 7 1/4% Preferred Shares converted after such
Record Date and before the occurrence of such event the additional Common
Shares issuable upon such conversion by reason of the adjustment required
by such event over and above the Common Shares issuable upon such
conversion before giving effect to such adjustment.
(11) For purposes of this paragraph (6)(iv), the number of shares of
Common Shares at any time outstanding shall not include shares held in the
treasury of the corporation but shall include shares issuable in respect of
scrip
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certificates issued in lieu of fractions of Common Shares. The corporation
shall not pay any dividend or make any distribution on Common Shares held
in the treasury of the corporation.
(v) In case of any consolidation of the corporation with, or merger of
the corporation into, any other corporation, or in case of any merger of
another corporation into the corporation (other than a merger which does
not result in any reclassification, conversion, exchange or cancelation of
outstanding shares of Common Shares of the corporation), or in case of any
conveyance or transfer of the properties and assets of the corporation
substantially as an entirety, the holder of each share of 7 1/4% Preferred
Shares then outstanding shall have the right thereafter, during the period
such 7 1/4% Preferred Shares shall be convertible as specified in paragraph
(6)(i), to convert such share of 7 1/4% Preferred Shares only into the kind
and amount of securities, cash and other property receivable upon such
consolidation, merger, conveyance or transfer by a holder of the number of
shares of Common Shares of the corporation into which such share of 7 1/4%
Preferred Shares might have been converted immediately prior to such
consolidation, merger, conveyance or transfer, assuming such holder of
Common Shares of the corporation failed to exercise his rights of election,
if any, as to the kind or amount of securities, cash and other property
receivable upon such consolidation, merger, conveyance or transfer
(provided that, if the kind or amount of securities, cash and other
property receivable upon such consolidation, merger, conveyance or transfer
is not the same for each share of Common Shares of the corporation in
respect of which such rights of election shall not have been exercised
("nonelecting share"), then for the purpose of this paragraph (6)(v) the
kind and amount of securities, cash and other property receivable upon such
consolidation, merger, conveyance or transfer by each nonelecting share
shall be deemed to be the kind and amount so receivable per share by a
plurality of the nonelecting shares). Such securities shall provide for
adjustments which, for events subsequent to the effective date of the
triggering event, shall be as nearly equivalent as may be practicable to
the adjustments provided for in this paragraph (6)(v). The above provisions
of this Section shall similarly apply to successive consolidations,
mergers, conveyances or transfers.
(vi) In case:
(1) the corporation shall declare a dividend (or any other
distribution) on its Common Shares payable otherwise than in cash out of its
earned surplus; or
(2) the corporation shall authorize the granting to all holders of its
Common Shares of rights or warrants to subscribe for or purchase any shares of
capital stock of any class or of any other rights; or
(3) of any reclassification of the Common Shares of the corporation
(other than a subdivision or combination of its outstanding Common Shares), or
of any consolidation or merger to which the corporation is a party and for which
approval of any
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shareholders of the corporation is required, or the sale or transfer of all or
substantially all the assets of the corporation; or
(4) of the voluntary or involuntary dissolution, liquidation or
winding up of the corporation;
then the corporation shall cause to be filed with the Transfer Agent and at each
office or agency maintained for the purpose of conversion of the 7 1/4%
Preferred Shares, and shall cause to be mailed to all holders at their last
addresses as they shall appear in the 7 1/4% Preferred Shares Register, at least
20 days (or 10 days in any case specified in clause (1) or (2) above) prior to
the applicable date hereinafter specified, a notice stating (x) the date on
which a record is to be taken for the purpose of such dividend, distribution,
rights or warrants, or, if a record is not to be taken, the date as of which the
holders of Common Shares of record to be entitled to such dividend,
distribution, rights or warrants are to be determined or (y) the date on which
such reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding up is expected to become effective, and the date as of
which it is expected that holders of Common Shares of record shall be entitled
to exchange their Common Shares for securities, cash or other property
deliverable upon such reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding up. Failure to give the notice requested by
this Section or any defect therein shall not affect the legality or validity of
any dividend, distribution, right, warrant, reclassification, consolidation,
merger, sale, transfer, dissolution, liquidation or winding up, or the vote upon
any such action.
(vii) The corporation shall at all times reserve and keep available,
free from preemptive rights, out of its authorized but unissued shares of Common
Shares (or out of its authorized shares of Common Shares held in the treasury of
the corporation), for the purpose of effecting the conversion of the 7 1/4%
Preferred Shares, the full number of Common Shares then issuable upon the
conversion of all outstanding shares of 7 1/4% Preferred Shares.
(viii) The corporation will pay any and all document, stamp or similar
issue or transfer taxes that may be payable in respect of the issue or delivery
of Common Shares on conversion of the 7 1/4% Preferred Shares pursuant hereto.
The corporation shall not, however, be required to pay any tax which may be
payable in respect of any transfer involved in the issue and delivery of shares
of Common Shares in a name other than that of the holder of the share of 7 1/4%
Preferred Shares or the shares of 7 1/4% Preferred Shares to be converted, and
no such issue or delivery shall be made unless and until the Person requesting
such issue has paid to the corporation the amount of any such tax, or has
established to the satisfaction of the corporation that such tax has been paid.
(ix) (1) Notwithstanding any other provision in the preceding
paragraphs to the contrary, if any Change in Control occurs then, if the
corporation does not elect to make a Change in Control Offer, the Conversion
Price in effect shall be adjusted immediately after such Change in Control as
described below. In addition, in the event of a Common Shares Change in Control
(as defined in this paragraph (6)(ix)), each share of the 7 1/4% Preferred
Shares shall be convertible solely into common stock of the kind
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received by holders of Common Shares as the result of such Common Shares Change
in Control. For purposes of calculating any adjustment to be made pursuant to
this paragraph in the event of a Change in Control, immediately after such
Change in Control:
(A) in the case of a Non-Stock Change in Control (as defined in this
paragraph (6)(ix)), the Conversion Price shall thereupon become the lower
of (x) the Conversion Price in effect immediately prior to such Non-Stock
Change in Control, but after giving effect to any other prior adjustments,
and (y) the result obtained by multiplying the greater of the Applicable
Price (as defined in this paragraph (6)(ix)) or the then applicable
Reference Market Price (as defined in this paragraph (6)(ix)) by a fraction
of which the numerator shall be $100.00 and the denominator shall be the
then current Optional Redemption Price per share; and
(B) in the case of a Common Shares Change in Control, the Conversion
Price in effect immediately prior to such Common Shares Change in Control,
but after giving effect to any prior adjustments, shall thereupon be
adjusted by multiplying such Conversion Price by a fraction, of which the
numerator shall be the Purchaser Shares Price (as defined in this paragraph
(6)(ix)) and the denominator shall be the Applicable Price; PROVIDED,
HOWEVER, that in the event of a Common Shares Change in Control in which
(x) 100% of the value of the consideration received by a holder of Common
Shares is common stock of the successor, acquiror, or other third party
(and cash, if any, is paid with respect to any fractional interests in such
common stock resulting from such Common Shares Change in Control) and (y)
all of the Common Shares will have been exchanged for, converted into, or
acquired for, common stock (and cash with respect to fractional interests)
of the successor, acquiror or other third party, the Conversion Price in
effect immediately prior to such Common Shares Change in Control shall
thereupon be adjusted by multiplying such Conversion Price by a fraction,
of which the numerator shall be one (1) and the denominator shall be the
number of shares of common stock of the successor, acquiror, or other third
party received by a holder of one share of Common Shares as a result of
such Common Shares Change in Control.
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(2) For purposes of this paragraph (ix), the following terms shall
have the meanings indicated:
"Applicable Price" means (i) in the event of a Non-Stock Change in
Control in which the holders of the Common Shares receive only cash, the
amount of cash received by the holder of one share of Common Shares and
(ii) in the event of any other Non-Stock Change in Control or any Common
Shares Change in Control, the average of the Closing Bid Prices for the
Common Shares during the ten Trading Days prior to and including the record
date for the determination of the holders of Common Shares entitled to
receive cash, securities, property or other assets in connection with such
Non-Stock Change in Control or Common Shares Change in Control or, if
there is no such record date, the date upon which the holders of the Common
Shares shall have the right to receive such cash, securities, property or
other assets, in each case, as adjusted in good faith by the Board of
Directors to appropriately reflect any of the events referred to in
paragraph (6)(iv)(1) through (6).
"Common Shares Change in Control" means any Change in Control in which
more than 50% of the value (as determined in good faith by the Board of
Directors of the corporation) of the consideration received by holders of
Common Shares consists of common stock that for each of the ten consecutive
Trading Days referred to in the preceding paragraph has been admitted for
listing or admitted for listing subject to notice of issuance on a national
securities exchange or quoted on The Nasdaq National Market; PROVIDED,
HOWEVER, that a Change in Control shall not be a Common Shares Change in
Control unless either (i) the corporation continues to exist after the
occurrence of such Change in Control and the outstanding shares of 7 1/4%
Preferred Shares continue to exist as outstanding shares of 7 1/4%
Preferred Shares, or (ii) not later than the occurrence of such Change in
Control, the outstanding shares of 7 1/4% Preferred Shares are converted
into or exchanged for shares of convertible preferred stock of a
corporation succeeding to the business of the corporation (which shall
include a corporation that is the direct or indirect owner of all the
equity interests of the surviving corporation in the merger) (hereinafter,
a "successor"), which convertible preferred stock has powers, preferences
and relative, participating, optional or other rights, and qualifications,
limitations and restrictions, substantially similar to those of the 7 1/4%
Preferred Shares.
"Non-Stock Change in Control" means any Change in Control other than a
Common Shares Change in Control.
"Purchaser Shares Price" means, with respect to any Common Shares
Change in Control, the product of (i) the number of shares of common stock
received in such Common Shares Change of Control for each share of Common
Shares, and (ii) the average of the per share Closing Prices for the common
stock received in such Common Shares Change in Control for the ten
consecutive Trading Days prior to and including the record date for the
determination of the holders of Common Shares entitled to receive such
common stock, or if there is no such record date, the date upon which the
holders of the Common Shares shall have the right to receive such common
stock, in each case, as adjusted in good
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faith by the Board of Directors to appropriately reflect any of the events
referred to in paragraph (6)(iv)(1) through (6); PROVIDED, HOWEVER, that if
no such Closing Prices exist, then the Purchaser Shares Price shall be set
at a price determined in good faith by the Board of Directors of the
corporation.
"Reference Market Price" shall initially mean $______ (which is an
amount equal to 66 2/3% of the reported last sale price for the Common
Shares on the New York Stock Exchange on ________, 1999), and in the
event of any adjustment to the conversion prices other than as a result
of a Change in Control, the Reference Market Price shall also be
adjusted so that the ratio of the Reference Market Price to the
Conversion Price after giving effect to any such adjustment shall always
be the same as the ratio of $_____ to the initial Conversion Price set
forth in paragraph (6)(i).
(7) CHANGE IN CONTROL. (i) Upon the occurrence of a Change of
Control (the date of such occurrence being the "Change in Control Date"), the
corporation shall be obligated to (1) purchase all or a portion of each
holder's 7 1/4% Preferred Shares in cash pursuant to the offer described in
paragraph (7)(iii) (the "Change of Control Offer") at a purchase price equal
to 100% of the Liquidation Preference, plus, without duplication, all accrued
and unpaid dividends, if any, to the Change of Control Payment Date,
including an amount in cash equal to a prorated dividend for the period from
the Dividend Payment Date immediately prior to the Change of Control Payment
Date to the Change of Control Payment Date or (2) adjust the conversion price
as provided under paragraph (6)(ix).
(ii) Prior to the mailing of the notice referred to in paragraph
(7)(iii), but in any event within 15 days following the date on which the
corporation knows or reasonably should have known that a Change in Control has
occurred, the corporation covenants that it shall promptly determine if the
purchase of the 7 1/4% Preferred Shares would violate or constitute a default
under any indebtedness of the corporation.
(iii) Within 15 days following the date on which the corporation knows
or reasonably should have known that a Change in Control has occurred, the
corporation must send, by first-class mail, postage prepaid, a notice to each
holder of 7 1/4% Preferred Shares. Such notice shall state whether the Change of
Control Offer would be permitted under the Indenture or other indebtedness of
the corporation, and if permitted, such notice shall contain all instructions
and materials necessary to enable such holders to tender 7 1/4% Preferred Shares
pursuant to the Change of Control Offer. If the Change of Control Offer would be
permitted under any indebtedness of the corporation, such notice shall state:
(A) that a Change of Control has occurred, that the Change of Control
Offer is being made pursuant to this paragraph (7) and that all 7 1/4%
Preferred Shares validly tendered and not withdrawn will be accepted for
payment;
(B) the purchase price (including the amount of accrued dividends, if
any) and the purchase date (which must be no earlier than 30 days nor later
than
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75 days from the date such notice is mailed, other than as may be required
by law) (the "Change of Control Payment Date");
(C) that any shares of 7 1/4% Preferred Shares not tendered will
continue to accrue dividends;
(D) that, unless the corporation defaults in making payment therefor,
any share of 7 1/4% Preferred Shares accepted for payment pursuant to the
Change of Control Offer shall cease to accrue dividends after the Change of
Control Payment Date;
(E) that holders electing to have any shares of 7 1/4% Preferred
Shares purchased pursuant to a Change of Control Offer will be required to
surrender such shares of 7 1/4% Preferred Shares, properly endorsed for
transfer, together with such other customary documents as the corporation
and the Transfer Agent may reasonably request to the Transfer Agent and
registrar for the 7 1/4% Preferred Shares at the address specified in the
notice prior to the close of business on the Business Day prior to the
Change of Control Payment Date;
(F) that holders will be entitled to withdraw their election if the
corporation receives, not later than five Business Days prior to the Change
of Control Payment Date, a telegram, telex, facsimile transmission or
letter setting forth the name of the holder, the number of shares of 7 1/4%
Preferred Shares the holder delivered for purchase and a statement that
such holder is withdrawing his election to have such shares of 7 1/4%
Preferred Shares purchased;
(G) that holders whose shares of 7 1/4% Preferred Shares are purchased
only in part will be issued a new certificate representing the unpurchased
shares of 7 1/4% Preferred Shares; and
(H) the circumstances and relevant facts regarding such Change of
Control.
If the Change of Control Offer would not be permitted under any
indebtedness of the corporation, such notice shall state the Conversion Price
as adjusted pursuant to paragraph (6)(ix).
(iv) The corporation will comply with any tender offer rules under the
Exchange Act which then may be applicable, including Rules 13e-4 and 14e-1, in
connection with any offer required to be made by the corporation to repurchase
the shares of 7 1/4% Preferred Shares as a result of a Change of Control. To the
extent that the provisions of any securities laws or regulations conflict with
provisions of this Article Fourth, the corporation shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations under this Article Fourth by virtue thereof.
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(v) On the Change of Control Payment Date the corporation shall (A)
accept for payment the shares of 7 1/4% Preferred Shares validly tendered
pursuant to the Change of Control Offer, (B) pay to the holders of shares so
accepted the purchase price therefor in cash and (C) cancel and retire each
surrendered certificate. Unless the corporation defaults in the payment for the
shares of 7 1/4% Preferred Shares tendered pursuant to the Change of Control
Offer, dividends will cease to accrue with respect to the shares of 7 1/4%
Preferred Shares tendered and all rights of holders of such tendered shares will
terminate, except for the right to receive payment therefor, on the Change of
Control Payment Date.
(vi) To accept the Change of Control Offer, the holder of a share of
7 1/4% Preferred Shares shall deliver, on or before the 10th day prior to the
Change of Control Payment Date, written notice to the corporation (or an agent
designated by the corporation for such purpose) of such holder's acceptance,
together with certificates evidencing the shares of 7 1/4% Preferred Shares with
respect to which the Change of Control Offer is being accepted, duly endorsed
for transfer.
(8) REISSUANCE OF 7 1/4% PREFERRED SHARES. Shares of 7 1/4% Preferred
Shares that have been issued and reacquired in any manner, including shares
purchased or redeemed or exchanged, shall not be reissued as shares of 7 1/4%
Preferred Shares and shall (upon compliance with any applicable provisions of
the laws of Ohio) have the status of authorized and unissued shares of Preferred
Shares undesignated as to series and may be redesignated and reissued as part of
any series of Preferred Shares; PROVIDED, HOWEVER, that so long as any shares of
7 1/4% Preferred Shares are outstanding, any issuance of such shares must be in
compliance with the terms hereof.
(9) BUSINESS DAY. If any payment, redemption or exchange shall be
required by the terms hereof to be made on a day that is not a Business Day,
such payment, redemption or exchange shall be made on the immediately succeeding
Business Day.
(10) LIMITATION ON MERGERS AND ASSET SALES. The corporation may not
consolidate with or merge with or into, or convey, transfer or lease all or
substantially all its assets to, any person unless: (1) the successor,
transferee or lessee (if not the corporation) is organized and existing under
the laws of the United States of America or any State thereof or the District of
Columbia and the 7 1/4% Preferred Shares shall be converted into or exchanged
for and shall become shares of such successor, transferee or lessee, having in
respect of such successor, transferee or lessee substantially the same powers,
preference and relative participating, optional or other special rights and the
qualifications, limitations or restrictions thereon, that the 7 1/4% Preferred
Shares had immediately prior to such transaction; and (2) the corporation
delivers to the Transfer Agent an Officers' Certificate and an Opinion of
Counsel stating that such consolidation, merger or transfer complies with this
Article Fourth. The successor, transferee or lessee will be the successor
company.
(11) CERTIFICATES. (i) FORM AND DATING. The 7 1/4% Preferred Shares
and the Transfer Agent's certificate of authentication shall be substantially in
the form of
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Exhibit A, which is hereby incorporated in and expressly made a part of this
Article Fourth. The 7 1/4% Preferred Shares certificate may have notations,
legends or endorsements required by law, stock exchange rule, agreements to
which the corporation is subject, if any, or usage (provided that any such
notation, legend or endorsement is in a form acceptable to the corporation).
Each 7 1/4% Preferred Shares certificate shall be dated the date of its
authentication. The terms of the 7 1/4% Preferred Shares certificate set forth
in Exhibit A are part of the terms of this Article Fourth.
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(ii) EXECUTION AND AUTHENTICATION. Two Officers shall sign the 7 1/4%
Preferred Shares for the corporation by manual or facsimile signature. The
corporation's seal shall be impressed, affixed, imprinted or reproduced on the
7 1/4% Preferred Shares and may be in facsimile form.
If an Officer whose signature is on 7 1/4% Preferred Shares no longer
holds that office at the time the Transfer Agent authenticates the 7 1/4%
Preferred Shares, the 7 1/4% Preferred Shares shall be valid nevertheless.
A 7 1/4% Preferred Share shall not be valid until an authorized
signatory of the Transfer Agent manually signs the certificate of authentication
on the 7 1/4% Preferred Shares. The signature shall be conclusive evidence that
the 7 1/4% Preferred Shares have been authenticated under this Article Fourth.
The Transfer Agent shall authenticate and deliver _________ shares of
7 1/4% Preferred Shares for original issue upon a written order of the
corporation signed by two Officers or by an Officer and either an Assistant
Treasurer or an Assistant Secretary of the corporation. In addition, the
Transfer Agent shall authenticate and deliver, from time to time, Additional
Shares for original issue upon order of the corporation signed by two Officers
or by an Officer or either an Assistant Treasurer or Assistant Secretary of the
corporation. Such orders shall specify the number of shares of 7 1/4% Preferred
Shares to be authenticated and the date on which the original issue of 7 1/4%
Preferred Shares is to be authenticated.
The Transfer Agent may appoint an authenticating agent reasonably
acceptable to the corporation to authenticate the 7 1/4% Preferred Shares.
Unless limited by the terms of such appointment, an authenticating agent may
authenticate 7 1/4% Preferred Shares whenever the Transfer Agent may do so. Each
reference in this Article Fourth to authentication by the Transfer Agent
includes authentication by such agent. An authenticating agent has the same
rights as the Transfer Agent or agent for service of notices and demands.
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(iii) TRANSFER AND EXCHANGE. (A) TRANSFER AND EXCHANGE OF 7 1/4%
PREFERRED SHARES. When 7 1/4% Preferred Shares certificates are presented to
the Transfer Agent with a request to register the transfer of such 7 1/4%
Preferred Shares certificates or to exchange such 7 1/4% Preferred Shares
certificates for an equal number of shares of 7 1/4% Preferred Shares
certificates of other authorized denominations, the Transfer Agent shall
register the transfer or make the exchange as requested if its reasonable
requirements for such transaction are met; PROVIDED, HOWEVER, that the 7 1/4%
Preferred Shares certificates surrendered for transfer or exchange shall be
duly endorsed or accompanied by a written instrument of transfer in form
reasonably satisfactory to the corporation and the Transfer Agent, duly
executed by the Holder thereof or its attorney duly authorized in writing.
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(B) OBLIGATIONS WITH RESPECT TO TRANSFERS AND EXCHANGES OF 7 1/4%
PREFERRED SHARES. (1) To permit registrations of transfers and exchanges, the
corporation shall execute and the Transfer Agent shall authenticate 7 1/4%
Preferred Shares certificates as required pursuant to the provisions of this
paragraph (iii).
(2) All 7 1/4% Preferred Shares certificates issued upon any
registration of transfer or exchange of 7 1/4% Preferred Shares
certificates shall be the valid obligations of the corporation, entitled
to the same benefits under this Article Fourth as the 7 1/4% Preferred
Shares certificates surrendered upon such registration of transfer or
exchange.
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(3) Prior to due presentment for registration of transfer of any
shares of 7 1/4% Preferred Shares, the Transfer Agent and the corporation
may deem and treat the person in whose name such shares of 7 1/4% Preferred
Shares are registered as the absolute owner of such 7 1/4% Preferred Shares
and neither the Transfer Agent nor the corporation shall be affected by
notice to the contrary.
(4) No service charge shall be made to a Holder for any registration
of transfer or exchange upon surrender of any 7 1/4% Preferred Shares
certificate at the office of the Transfer Agent maintained for that
purpose. However, the corporation may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in
connection with any registration of transfer or exchange of 7 1/4%
Preferred Shares certificates.
(iv) REPLACEMENT CERTIFICATES. If a mutilated 7 1/4% Preferred Shares
certificate is surrendered to the Transfer Agent or if the Holder of a 7 1/4%
Preferred Shares certificate claims that the 7 1/4% Preferred Shares certificate
has been lost, destroyed or wrongfully taken, the corporation shall issue and
the Transfer Agent shall countersign a replacement 7 1/4% Preferred Shares
certificate if the reasonable requirements of the Transfer Agent and of Section
8-405 of the Uniform Commercial
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Code as in effect in the State of New York are met. If required by the Transfer
Agent or the corporation, such Holder shall furnish an indemnity bond sufficient
in the judgment of the corporation and the Transfer Agent to protect the
corporation and the Transfer Agent from any loss which either of them may suffer
if a 7 1/4% Preferred Shares certificate is replaced. The corporation and the
Transfer Agent may charge the Holder for their expenses in replacing a 7 1/4%
Preferred Shares certificate.
(v) CANCELATION. (A) In the event the corporation shall purchase or
otherwise acquire 7 1/4% Preferred Shares certificates, the same shall thereupon
be delivered to the Transfer Agent for cancelation.
(B) The Transfer Agent and no one else shall cancel and destroy all 7
1/4% Preferred Shares certificates surrendered for transfer, exchange,
replacement or cancelation and deliver a certificate of such destruction to the
corporation unless the corporation directs the Transfer Agent to deliver
canceled 7 1/4% Preferred Shares certificates to the corporation. The
corporation may not issue new 7 1/4% Preferred Shares certificates to replace 7
1/4% Preferred Shares certificates to the extent they evidence 7 1/4% Preferred
Shares which the corporation has purchased or otherwise acquired.
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(12) CERTAIN DEFINITIONS. As used in this Article Fourth, the
following terms shall have the following meanings (and (1) terms defined in the
singular have comparable meanings when used in the plural and vice versa, (2)
"including" means including without limitation, (3) "or" is not exclusive and
(4) an accounting term not otherwise defined has the meaning assigned to it in
accordance with United States generally accepted accounting principles as in
effect on the Issue Date and all accounting calculations will be determined in
accordance with such principles), unless the content otherwise requires:
"BUSINESS DAY" means each day which is not a Legal Holiday.
"CAPITAL SHARE" of any person means any and all shares, interests,
rights to purchase, warrants, options, participation or other equivalents of or
interests in (however designated) equity of such person, including any Preferred
Shares, but excluding any debt securities convertible into or exchangeable for
such equity.
"CHANGE IN CONTROL" or "CHANGE OF CONTROL" means: (i) the sale,
lease, transfer, conveyance or other disposition (other than by way of merger
or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the corporation and its Subsidiaries taken
as a whole to any "person" (as such term is used in Section 13(d)(3) of the
Exchange Act), (ii) the adoption of a plan relating to the liquidation or
dissolution of the corporation, (iii) the consummation of any transaction
(including, without limitation, any merger or consolidation) the result of
which is that any "person" (as defined above), (other than officers,
directors and stockholders of the corporation and their affiliates on the
date of this Certificate of Amendment by the Board of Directors), becomes the
beneficial owner (as determined in accordance with Rules 13d-3 and 13d-5
under the Exchange Act), directly or indirectly, of more than 50% of the
voting stock of the corporation or (iv) the first day on which a majority of
the members of the board of directors (excluding the directors elected
pursuant to paragraph (f) are not Continuing Directors.
"CLOSING BID PRICE" means on any day the last reported bid price on
such day, or in case no bid takes place on such day, the average of the
reported closing bid and asked prices, in each case on the New York Stock
Exchange or, if the Common Shares are not quoted on such exchange, on The
Nasdaq National Market or the principal national securities exchange on which
such stock is listed or admitted to trading, or if not listed or admitted to
trading on The Nasdaq National Market or any national securities exchange,
the average of the closing bid and asked prices as furnished by any
independent registered broker-dealer firm, selected by the corporation for
that purpose.
"CONTINUING DIRECTORS" means, as of any date of determination, any
member of the Board of Directors who (i) was a member of such Board of
Directors on the date of this Certificate of Amendment by the Board of
Directors or (ii) was nominated for election or elected to such Board of
Directors with the approval of a majority of the Continuing Directors who
were members of such Board of Directors at the time of such nomination or
election.
"DEFAULT" means any event which is, or after notice or passage of time
or both would be, a Voting Rights Triggering Event.
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"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"HOLDERS" means the registered holders from time to time of the 7 1/4%
Preferred Shares.
"ISSUE DATE" means the date on which the 7 1/4% Preferred Shares are
initially issued.
"LEGAL HOLIDAY" means a Saturday, a Sunday or a day on which banking
institutions are not required to be open in the State of New York.
"OFFICER" means the Chairman of the Board of Directors, the President,
any Vice President, the Treasurer, the Secretary or any Assistant Secretary of
the corporation.
"OFFICERS' CERTIFICATE" means a certificate signed by two Officers.
"OPINION OF COUNSEL" means a written opinion from legal counsel who is
acceptable to the Transfer Agent. The counsel may be an employee of or counsel
to the corporation or the Transfer Agent.
"PERSON" means any individual, corporation, partnership, joint
venture, limited liability company, association, joint-stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
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"SUBSIDIARY" means any corporation, association, partnership, limited
liability company or other business entity of which more than 50% of the total
voting power of shares of capital stock or other interests entitled (without
regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by the corporation, the corporation and one or more
Subsidiaries or one or more Subsidiaries and any partnership the sole general
partner or the managing partner of which the corporation or any Subsidiary or
the only general partners of which are the corporation and one or more
Subsidiaries or one or more Subsidiaries.
"TRADING DAY" means, in respect of any securities exchange or
securities market, each Monday, Tuesday, Wednesday, Thursday and Friday, other
than any day on which securities are not traded on the applicable securities
exchange or in the applicable securities market.
"TRANSFER AGENT" means the transfer agent for the 7 1/4% Preferred
Shares appointed by the corporation.
"VOTING SHARES" of a corporation means all classes of Capital Shares
of such corporation then outstanding and normally entitled to vote in the
election of directors.
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<PAGE>
are transferable on the books and records of the Registrar, in person or by a
duly authorized attorney, upon surrender of this certificate duly endorsed and
in proper form for transfer. The designation, rights, privileges, restrictions,
preferences and other terms and provisions of the 7 1/4% Preferred Shares
represented hereby are issued and shall in all respects be subject to the
provisions of the Cincinnati Bell Amended Articles of Incorporation dated [ ],
as the same may be amended from time to time (the "Articles"). Capitalized terms
used herein but not defined shall have the meaning given them in the Articles.
The corporation will provide a copy of the Articles to a Holder without charge
upon written request to the corporation at its principal place of business.
Reference is hereby made to select provisions of the 7 1/4% Preferred
Shares set forth on the reverse hereof, and to the Articles, which select
provisions and the Articles shall for all purposes have the same effect as if
set forth at this place.
Upon receipt of this certificate, the Holder is bound by the Articles
and is entitled to the benefits thereunder.
Unless the Transfer Agent's Certificate of Authentication hereon has
been properly executed, these shares of 7 1/4% Preferred Shares shall not be
entitled to any benefit under the Articles or be valid or obligatory for any
purpose.
IN WITNESS WHEREOF, the corporation has executed this certificate this
[ ] day of [ ], [ ].
CINCINNATI BELL INC.,
By:________________________
Name:
Title:
[Seal]
By:________________________
Name:
Title:
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<PAGE>
ANNEX 2
12. Of the 4,000,000 Voting Preferred Shares of the corporation, 155,250 shall
constitute a series of Voting Preferred Shares designated as 6 3/4%
Cumulative Convertible Preferred Shares (the "6 3/4% Preferred Shares")
with a Liquidation Preference of $1,000 per share (the "Liquidation
Preference"), and have, subject and in addition to the other provisions of
this Article Fourth, the following relative rights, preferences and
limitations:
(1) ISSUE DATE. The date the 6 3/4% Preferred Shares is first issued
is referred to as the "Issue Date".
(2) RANK. The 6 3/4% Preferred Shares will, rank (i) PARI PASSU in
right of payment with the corporation's 7 1/4% Junior Convertible Preferred
Shares Due 2007 (the "7 1/4% Preferred Shares") and each other class of
Capital Shares or series of Preferred Shares established hereafter by the
Board of Directors, the terms of which expressly provide that such class or
series ranks on a parity with the 6 3/4% Preferred Shares as to dividend
rights and rights on liquidation, dissolution and winding up of the
corporation (collectively referred to, as "Parity Securities"); (ii) junior
in right of payment to any Senior Securities (as defined) as to dividends and
upon liquidation, dissolution or winding up of the corporation and (iii)
senior in right of payment as to dividend rights and upon liquidation,
dissolution or winding up of the corporation to the Common Shares or any
Capital Shares of the corporation that expressly provide that they will rank
junior to the 6 3/4% Preferred Shares as to dividend rights or rights on
liquidation, winding up and dissolution of the corporation (collectively
referred to as "Junior Securities"). The corporation may not authorize,
create (by way of reclassification or otherwise) or issue any class or series
of Capital Shares of the corporation ranking senior in right of payment as to
dividend rights or upon liquidation, dissolution or winding up of the
corporation to the 6 3/4% Preferred Shares ("Senior Securities") or any
obligation or security convertible or exchangeable into, or evidencing a
right to purchase, shares of any class or series of Senior Securities without
the affirmative vote or consent of the Holders of at least 66 2/3% of the
outstanding shares of the 6 3/4% Preferred Shares.
(3) DIVIDENDS. The Holders of shares of the 6 3/4% Preferred Shares
will be entitled to receive, when, as and if dividends are declared by the Board
of Directors out of funds of the corporation legally available therefor,
cumulative preferential dividends from the Issue Date of the 6 3/4% Preferred
Shares accruing at the rate of $67.50 per share of the 6 3/4% Preferred Shares
per annum, or $16.875 per share of the 6 3/4% Preferred Shares per quarter,
payable quarterly in arrears on January 1, April 1, July 1, and October 1 of
each year or, if any such date is not a Business Day, on the next succeeding
business day (each, a "Dividend Payment Date"), to the Holders of record as of
the next preceding December 15, March 15, June 15, and September 15 (each, a
"Record Date"). Accrued but unpaid dividends, if any, may be paid on such dates
as
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<PAGE>
determined by the Board of Directors. Dividends will be payable in cash
except as set forth below. Dividends payable on the 6 3/4% Preferred Shares will
be computed on the basis of a 360-day year of twelve 30-day months and will be
deemed to accrue on a daily basis. Dividends may, at the option of the
corporation, be paid in Common Shares if, and only if, the documents governing
the corporation's indebtedness that exist on the Issue Date then prohibit the
payment of such dividends in cash. If the corporation elects to pay dividends in
shares of Common Shares, the number of shares of Common Shares to be distributed
will be calculated by dividing the amount of such dividend otherwise payable in
cash by 95% of the arithmetic average of the Closing Price (as defined) for the
five Trading Days (as defined) preceding the Dividend Payment Date. The 6 3/4%
Preferred Shares will not be redeemable unless all dividends accrued through
such redemption date shall have been paid in full. Notwithstanding anything to
the contrary herein contained, the corporation shall not be required to declare
or pay a dividend if another person (including, without limitation, any of its
subsidiaries) pays an amount to the Holders equal to the amount of such dividend
on behalf of the corporation and, in such event, the dividend will be deemed
paid for all purposes.
Dividends on the 6 3/4% Preferred Shares will accrue whether or not
the corporation has earnings or profits, whether or not there are funds legally
available for the payment of such dividends and whether or not dividends are
declared. Dividends will accumulate to the extent they are not paid on the
Dividend Payment Date for the quarter to which they relate. Accumulated unpaid
dividends will accrue and cumulate at a rate of 6.75% per annum. The corporation
will take all reasonable actions required or permitted under Ohio law to permit
the payment of dividends on the 6 3/4% Preferred Shares.
No dividend whatsoever shall be declared or paid upon, or any sum
set apart for the payment of dividends upon, any outstanding share of the
6 3/4% Preferred Shares with respect to any dividend period unless all
dividends for all preceding dividend periods have been declared and paid
upon, or declared and a sufficient sum set apart for the payment of such
dividend upon, all outstanding shares of the 6 3/4% Preferred Shares. Unless
full cumulative dividends on all outstanding shares of the 6 3/4% Preferred
Shares due for all past dividend periods shall have been declared and paid,
or declared and a sufficient sum for the payment thereof set apart, then: (i)
no dividend (other than a dividend payable solely in shares of Junior
Securities or options, warrants or rights to purchase Junior Securities)
shall be declared or paid upon, or any sum set apart for the payment of
dividends upon, any shares of Junior Securities; (ii) no other distribution
shall be declared or made upon, or any sum set apart for the payment of any
distribution upon, any shares of Junior Securities; (iii) no shares of Junior
Securities shall be purchased, redeemed or otherwise acquired or retired for
value (excluding an exchange for shares of other Junior Securities or a
purchase, redemption or other acquisition from the proceeds of a
substantially concurrent sale of Junior Securities) by the corporation or any
of its subsidiaries; and (iv) no monies shall be paid into or set apart or
made available for a
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<PAGE>
sinking or other like fund for the purchase, redemption
or other acquisition or retirement for value of any shares of Junior
Securities by the corporation or any of its subsidiaries. Holders of the
6 3/4% Preferred Shares will not be entitled to any dividends, whether payable
in cash, property or stock, in excess of the full cumulative dividends as
herein described.
(4) LIQUIDATION PREFERENCE. Upon any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the corporation
after payment in full of the liquidation preference (and any accrued and
unpaid dividends) on any Senior Securities, each Holder of shares of the 6
3/4% Preferred Shares shall be entitled, on an equal basis with the holders
of the 7 1/4% Preferred Shares and any other outstanding Parity Securities,
to payment out of the assets of the corporation available for distribution of
the Liquidation Preference per share of the 6 3/4% Preferred Shares held by
such Holder, plus an amount equal to the accrued and unpaid dividends (if
any) on the 6 3/4% Preferred Shares to the date fixed for liquidation,
dissolution, or winding up before any distribution is made on any Junior
Securities, including, without limitation, Common Shares of the corporation.
After payment in full of the Liquidation Preference and an amount equal to
the accrued and unpaid dividends (if any), to which Holders of the 6 3/4%
Preferred Shares are entitled, such Holders will not be entitled to any
further participation in any distribution of assets of the corporation.
However, neither the voluntary sale, conveyance, exchange or transfer (for
cash, shares of stock, securities or other consideration) of all or
substantially all of the property or assets of the corporation nor the
consolidation or merger of the corporation with or into one or more
corporations will be deemed to be a voluntary or involuntary liquidation,
dissolution or winding up of the corporation, unless such sale, conveyance,
exchange, transfer, consolidation or merger shall be in connection with a
liquidation, dissolution or winding up of the affairs of the corporation or
reduction or decrease in capital stock.
(5) REDEMPTION. The 6 3/4% Preferred Shares may not be redeemed at the
option of the corporation on or prior to April 5, 2000. After April 5, 2000 the
corporation may redeem the 6 3/4% Preferred Shares. Notwithstanding the
foregoing, prior to April 1, 2002, the corporation shall only have the option to
redeem shares of the 6 3/4% Preferred Shares if, during the period of 30
consecutive Trading Days ending on the Trading Day immediately preceding the
date that the notice of redemption is mailed to Holders, the Closing Price for
the Common Shares exceeded $75 divided by the Conversion Rate effective on the
date of such notice for at least 20 of such Trading Days. Subject to the
immediately preceding sentence, the 6 3/4% Preferred Shares may be redeemed, in
whole or in part, at the option of the corporation after April 5, 2000, at the
redemption prices specified below (expressed as percentages of the Liquidation
Preference thereof), in each case, together with an amount equal to accrued and
unpaid dividends on the 6 3/4% Preferred Shares (excluding any declared
dividends for which the
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Record Date has passed), to the date of redemption, upon not less than 15 nor
more than 60 days' prior written notice, if redeemed during the period
commencing on April 5, 2000 to March 31, 2001 at 105.40%, and thereafter
during the 12-month period commencing on April 1 of each of the years set
forth below:
<TABLE>
<CAPTION>
YEAR REDEMPTION RATE
<S> <C>
20001......................................................... 104.73%
20002......................................................... 104.05%
20003......................................................... 103.38%
20004......................................................... 102.70%
20005......................................................... 102.03%
20006......................................................... 101.35%
20007......................................................... 100.68%
2008 and thereafter........................................... 100.00%
</TABLE>
Except as provided in the preceding sentence, no payment or allowance
will be made for accrued dividends on any shares of the 6 3/4% Preferred Shares
called for redemption.
On and after any date fixed for redemption (the "Redemption Date"),
provided that the corporation has made available at the office of the Transfer
Agent a sufficient amount of cash to effect the redemption, dividends will cease
to accrue on the 6 3/4% Preferred Shares called for redemption (except that, in
the case of a Redemption Date after a dividend payment Record Date and prior to
the related Dividend Payment Date, Holders of the 6 3/4% Preferred Shares on the
dividend payment Record Date will be entitled on such Dividend Payment Date to
receive the dividend payable on such shares), such shares shall no longer be
deemed to be outstanding and all rights of the holders of such shares as Holders
of the 6 3/4% Preferred Shares shall cease except the right to receive the cash
deliverable upon such redemption, without interest from the Redemption Date.
In the event of a redemption of only a portion of the then outstanding
shares of the 6 3/4% Preferred Shares, the corporation shall effect such
redemption on a pro rata basis, except that the corporation may redeem all of
the shares held by Holders of fewer than 100 shares (or all of the shares held
by Holders who would hold less than 100 shares as a result of such redemption),
as may be determined by the corporation.
With respect to a redemption pursuant hereto, the corporation will
send a written notice of redemption by first class mail to each holder of record
of shares of the
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6 3/4% Preferred Shares, not fewer than 15 days nor more than 60 days prior to
the Redemption Date at its registered address (the "Redemption Notice");
PROVIDED, HOWEVER, that no failure to give such notice nor any deficiency
therein shall affect the validity of the procedure for the redemption of any
shares of the 6 3/4% Preferred Shares to be redeemed except as to the holder or
holders to whom the corporation has failed to give said notice or except as to
the holder or holders whose notice was defective. The Redemption Notice shall
state:
a. the redemption price;
b. whether all or less than all the outstanding shares of the 6 3/4%
Preferred Shares are to be redeemed and the total number of shares of the 6 3/4%
Preferred Shares being redeemed;
c. the Redemption Date;
d. that the Holder is to surrender to the corporation, in the manner,
at the place or places and at the price designated, his certificate or
certificates representing shares of the 6 3/4% Preferred Shares to be redeemed;
and
e. that dividends on shares of the 6 3/4% Preferred Shares to be
redeemed shall cease to accumulate on such Redemption Date unless the
corporation defaults in the payment of the redemption price.
Each Holder of the 6 3/4% Preferred Shares shall surrender the
certificate or certificates representing such shares of the 6 3/4% Preferred
Shares to the corporation, duly endorsed (or otherwise in proper form for
transfer, as determined by the corporation), in the manner and at the place
designated in the Redemption Notice, and on the Redemption Date the full
redemption price for such shares shall be payable in cash to the person whose
name appears on such certificate or certificates as the owner thereof, and each
surrendered certificate shall be canceled and retired. In the event that less
than all of the shares represented by any such certificate are redeemed, a new
certificate shall be issued representing the unredeemed shares.
(6) VOTING RIGHTS. Each Holder of record of shares of the 6 3/4%
Preferred Shares, except as required under Ohio law or as provided in
paragraph (6) and in paragraphs (2), (8) and (13) hereof, will be entitled to
one vote for each share of the 6 3/4% Preferred Shares held by such Holder on
any matter required or permitted to be voted upon by the shareholders of the
corporation.
Upon the accumulation of accrued and unpaid dividends on the
outstanding 6 3/4% Preferred Shares in an amount equal to six full quarterly
dividends
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(whether or not consecutive) (together with any event with a similar effect
pursuant to the terms of any other series of Preferred Shares upon which like
rights have been conferred, a "Voting Rights Triggering Event"), the number of
members of the corporation's Board of Directors will be immediately and
automatically increased by two (unless previously increased pursuant to the
terms of any other series of Preferred Shares upon which like rights have been
conferred), and the Holders of a majority of the outstanding shares of the
6 3/4% Preferred Shares, voting together as a class (pro rata, based on
liquidation preference) with the holders of any other series of Preferred Shares
upon which like rights have been conferred and are exercisable, will be entitled
to elect two members to the Board of Directors of the corporation. Voting rights
arising as a result of a Voting Rights Triggering Event will continue until such
time as all dividends in arrears on the 6 3/4% Preferred Shares are paid in
full. Notwithstanding the foregoing, however, such voting rights to elect
directors will expire when the number of shares of the 6 3/4% Preferred Shares
outstanding is reduced to 13,500 or less.
In the event such voting rights expire or are no longer exercisable
because dividends in arrears have been paid in full, the term of any
directors elected pursuant to the provisions of this paragraph 6 above shall
terminate forthwith and the number of directors constituting the Board of
Directors shall be immediately and automatically decreased by two (until the
occurrence of any subsequent Voting Rights Triggering Event). At any time
after voting power to elect directors shall have become vested and be
continuing in Holders of the 6 3/4% Preferred Shares (together with the
holders of anY other series of Preferred Shares upon which like rights have
been conferred and are exercisable) pursuant to this paragraph 6, or if
vacancies shall exist in the offices of directors elected by such Holders, a
proper officer of the corporation may, and upon the written request of
Holders of record of at least 25% of shares of the 6 3/4% Preferred Shares
then outstanding or Holders of 25% of shares of any other series of Preferred
Shares then outstanding upon which like rights have been conferred and are
exercisable addressed to the Secretary of the corporation shall, call a
special meeting of Holders of the 6 3/4% Preferred Shares and the holders of
such other series of Preferred Shares for the purpose of electing the
directors which such holders are entitled to elect pursuant to the terms
hereof; PROVIDED, HOWEVER, that no such special meeting shall be called if
the next annual meeting of shareholders of the corporation is to be held
within 60 days after the voting power to elect directors shall have become
vested (or such vacancies arise, as the case may be), in which case such
meeting shall be deemed to have been called for such next annual meeting. If
such meeting shall not be called, pursuant to the provision of the
immediately preceding sentence, by a proper officer of the corporation within
20 days after personal service to the secretary of the corporation at its
principal executive offices, then Holders of record of at least 25% of the
outstanding shares of the 6 3/4% Preferred Shares or holders of 25% of shares
of any other series of Preferred Shares upon which like rights have been
conferred and are exercisable may designate in writing one of their members to
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<PAGE>
call such meeting at the expense of the corporation, and such meeting may be
called by the person so designated upon the notice required for the annual
meetings of shareholders of the corporation and shall be held at the place for
holding the annual meetings of shareholders. Any Holder of the 6 3/4% Preferred
Shares or such other series of Preferred Shares so designated shall have, and
the corporation shall provide, access to the lists of Holders of the 6 3/4%
Preferred Shares and the holders of such other series of Preferred Shares for
any such meeting of the holders thereof to be called pursuant to the provisions
hereof. If no special meeting of Holders of the 6 3/4% Preferred Shares and the
holders of such other series of Preferred Shares is called as provided in this
paragraph 6, then such meeting shall be deemed to have been called for the next
meeting of shareholders of the corporation.
At any meeting held for the purposes of electing directors at which
Holders of the 6 3/4% Preferred Shares (together with the holders of any other
series of Preferred Shares upon which like rights have been conferred and are
exercisable) shall have the right, voting together as a separate class, to elect
directors as aforesaid, the presence in person or by proxy of Holders of at
least a majority in voting power of the outstanding shares of the 6 3/4%
Preferred Shares (and such other series of Preferred Shares) shall be required
to constitute a quorum thereof.
Any vacancy occurring in the office of a director elected by Holders
of the 6 3/4% Preferred Shares (and such other series of Preferred Shares) may
be filled by the remaining director elected by Holders of the 6 3/4% Preferred
Shares (and such other series of Preferred Shares) unless and until such vacancy
shall be filled by Holders of the 6 3/4% Preferred Shares (and such other series
of Preferred Shares).
So long as any shares of the 6 3/4% Preferred Shares are
outstanding, the corporation will not amend this Article Fourth so as to
affect adversely the specified rights, preferences, privileges or voting
rights of Holders of shares of the 6 3/4% Preferred Shares or to authorize
the issuance of any additional shares of the 6 3/4% Preferred Shares without
the affirmative vote or consent of Holders of at least two-thirds of the
issued and outstanding shares of the 6 3/4% Preferred Shares, voting or
consenting, as the case may be, as one class, given in person or by proxy,
either in writing or by resolution approved at an annual or special meeting.
Except as set forth above and otherwise required by applicable law,
the creation, authorization or issuance of any shares of any Junior Securities,
Parity Securities or Senior Securities, or the increase or decrease in the
amount of authorized Capital Shares of any class, including Preferred Shares,
shall not require the affirmative vote or consent of Holders of the 6 3/4%
Preferred Shares and shall not be deemed to affect adversely the rights,
preferences, privileges or voting rights of shares of the 6 3/4% Preferred
Shares.
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<PAGE>
In any case in which the Holders of the 6 3/4% Preferred Shares shall
be entitled to vote pursuant hereto or pursuant to Ohio law, each Holder of the
6 3/4% Preferred Shares entitled to vote with respect to such matters shall be
entitled to one vote for each share of the 6 3/4% Preferred Shares held by such
Holder.
(7) CONVERSION RIGHTS. The 6 3/4% Preferred Shares will be
convertible at the option of the Holder, into shares of Common Shares at any
time, unless previously redeemed or repurchased, at a conversion rate of
28.838 shares of Common Shares per share of the 6 3/4% Preferred Shares) (as
adjusted pursuant to the provisions hereof, the "Conversion Rate") (subject
to the adjustments described below). The right to convert a share of the 6
3/4% Preferred Shares called for redemption or delivered for repurchase will
terminate at the close of business on the Redemption Date for such 6 3/4%
Preferred Shares or at the time of the repurchase, as the case may be.
The right of conversion attaching to any share of the 6 3/4% Preferred
Shares may be exercised by the Holder thereof by delivering the share to be
converted to the office of the Transfer Agent, or any agency or office of the
corporation maintained for that purpose, accompanied by a duly signed and
completed notice of conversion in form reasonably satisfactory to the Transfer
Agent of the corporation, such as that which is set forth in Exhibit B hereto.
The conversion date will be the date on which the share and the duly signed and
completed notice of conversion are so delivered. As promptly as practicable on
or after the conversion date, the corporation will issue and deliver to the
Transfer Agent a certificate or certificates for the number of full shares of
Common Shares issuable upon conversion, with any fractional shares rounded up to
full shares or, at the corporation's option, payment in cash in lieu of any
fraction of a share, based on the Closing Price of the Common Shares on the
Trading Day preceding the conversion date. Such certificate or certificates will
be delivered by the Transfer Agent to the appropriate Holder on a book-entry
basis or by mailing certificates evidencing the additional shares to the Holders
at their respective addresses set forth in the register of Holders maintained by
the Transfer Agent. All shares of Common Shares issuable upon conversion of the
6 3/4% Preferred Shares will be fully paid and nonassessable and will rank PARI
PASSU with the other shares of Common Shares outstanding from time to time. Any
shares of the 6 3/4% Preferred Shares surrendered for conversion during the
period from the close of business on any Record Date to the opening of business
on the next succeeding Dividend Payment Date must be accompanied by payment of
an amount equal to the dividends payable on such Dividend Payment Date on shares
of the 6 3/4% Preferred Shares being surrendered for conversion. No other
payment or adjustment for dividends, or for any dividends in respect of shares
of Common Shares, will be made upon conversion. Holders of Common Shares issued
upon conversion will not be entitled to receive any dividends payable to holders
of Common Shares as of any record time before the close of business on the
conversion date.
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<PAGE>
The Conversion Rate shall be adjusted from time to time by the
corporation as follows:
a. If the corporation shall hereafter pay a dividend or make a
distribution in Common Shares to all holders of any outstanding class or series
of Common Shares of the corporation, the Conversion Rate in effect at the
opening of business on the date following the date fixed for the determination
of shareholders entitled to receive such dividend or other distribution shall be
increased by multiplying such Conversion Rate by a fraction of which the
denominator shall be the number of shares of Common Shares outstanding at the
close of business on the Record Date (as defined below) fixed for such
determination and the numerator shall be the sum of such number of outstanding
shares and the total number of shares constituting such dividend or other
distribution, such increase to become effective immediately after the opening of
business on the day following the Record Date. If any dividend or distribution
of the type described in this provision (a) is declared but not so paid or made,
the Conversion Rate shall again be adjusted to the Conversion Rate which would
then be in effect if such dividend or distribution had not been declared.
b. If the outstanding shares of Common Shares shall be subdivided
into a greater number of shares of Common Shares, the Conversion Rate in effect
at the opening of business on the day following the day upon which such
subdivision becomes effective shall be proportionately increased and,
conversely, if the outstanding shares of Common Shares shall be combined into a
smaller number of shares of Common Shares, the Conversion Rate in effect at the
opening of business on the day following the day upon which such combination
becomes effective shall be proportionately reduced, such increase or reduction,
as the case may be, to become effective immediately after the opening of
business on the day following the day upon which such subdivision or combination
becomes effective.
c. If the corporation shall offer or issue rights, options or
warrants to all holders of its outstanding Common Shares entitling them to
subscribe for or purchase Common Shares at a price per share less than the
Current Market Price (as defined below) on the Record Date fixed for the
determination of shareholders entitled to receive such rights or warrants,
the Conversion Rate shall be adjusted so that the same shall equal the rate
determined by multiplying the Conversion Rate in effect at the opening of
business on the date after such Record Date by a fraction of which the
denominator shall be the number of shares of Common Shares outstanding at the
close of business on the Record Date plus the number of shares of Common
Shares which the aggregate offering price of the total number of shares of
Common Shares subject to such rights, options or warrants would purchase at
such Current Market Price and of which the numerator shall be the number of
shares of Common Shares outstanding at the close of
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business on the Record Date plus the total number of additional shares of
Common Shares subject to such rights, options or warrants for subscription or
purchase. Such adjustment shall become effective immediately after the
opening of business on the day following the Record Date fixed for
determination of shareholders entitled to purchase or receive such rights or
warrants. To the extent that shares of Common Shares are not delivered
pursuant to such rights, options or warrants, upon the expiration or
termination of such rights or warrants the Conversion Rate shall again be
adjusted to be the Conversion Rate which would then be in effect had the
adjustments made upon the issuance of such rights or warrants been made on
the basis of delivery of only the number of shares of Common Shares actually
delivered. If such rights or warrants are not so issued, the Conversion Rate
shall again be adjusted to be the Conversion Rate which would then be in
effect if such date fixed for the determination of shareholders entitled to
receive such rights or warrants had not been fixed. In determining whether
any rights or warrants entitle the holders to subscribe for or purchase
Common Shares at less than such Current Market Price, and in determining the
aggregate offering price of such shares of Common Shares, there shall be
taken into account any consideration received for such rights or warrants,
with the value of such consideration, if other than cash, to be determined by
the Board of Directors.
d. If the corporation shall, by dividend or otherwise, distribute
to all holders of its shares of Common Shares of any class of capital stock of
the corporation (other than any dividends or distributions to which provision
(a) of this paragraph applies) or evidences of its indebtedness, cash or other
assets (including securities, but excluding any rights or warrants of a type
referred to in paragraph (c) of this paragraph) (the foregoing hereinafter
called the "Distributed Securities"), then, in each such case, the Conversion
Rate shall be increased so that the same shall be equal to the rate determined
by multiplying the Conversion Rate in effect immediately prior to the close of
business on the Record Date (as defined below) with respect to such distribution
by a fraction of which the denominator shall be the Current Market Price
(determined as provided in provision g(ii) of this paragraph) of the Common
Shares on such date less the Fair Market Value (as defined below) on such date
of the portion of the Distributed Securities so distributed applicable to one
share of Common Shares and the numerator shall be such Current Market Price,
such increase to become effective immediately prior to the opening of business
on the day following the Record Date; PROVIDED, HOWEVER, that, in the event the
then Fair Market Value (as so determined) of the portion of the Distributed
Securities so distributed applicable to one share of Common Shares is equal to
or greater than the Current Market Price on the Record Date, in lieu of the
foregoing adjustment, adequate provision shall be made so that each Holder of
the 6 3/4% Preferred Shares shall have the right to receive upon conversion of a
share of the 6 3/4% Preferred Shares (or any portion thereof) the amount of
Distributed Securities such holder would have received had such holder converted
such share of the 6 3/4% Preferred Shares (or portion thereof) immediately prior
to such Record Date. If such dividend or distribution is
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not so paid or made, the Conversion Rate shall again be adjusted to be the
Conversion Rate which would then be in effect if such dividend or distribution
had not been declared. If the Board of Directors determines the Fair Market
Value of any distribution for purposes hereof by reference to the actual or when
issued trading market for any securities comprising all or part of such
distribution, it must in doing so consider the prices in such market over the
same period used in computing the Current Market Price pursuant to provision
g(ii) of this paragraph to the extent possible.
Rights or warrants distributed by the corporation to all holders of
Common Shares entitling the holders thereof to subscribe for or purchase shares
of the corporation's Capital Shares (either initially or under certain
circumstances), which rights or warrants, until the occurrence of a specified
event or events ("Dilution Trigger Event"): (i) are deemed to be transferred
with such Common Shares; (ii) are not exercisable; and (iii) are also issued in
respect of future issuances of Common Shares, shall be deemed not to have been
distributed for purposes of this provision (d) (and no adjustment to the
Conversion Rate under this provision (d) shall be required) until the occurrence
of the earliest Dilution Trigger Event, whereupon such rights and warrants shall
be deemed to have been distributed and an appropriate adjustment to the
Conversion Rate under this provision (d) shall be made. If any such rights or
warrants, including any such existing rights or warrants distributed prior to
the date hereof, are subject to subsequent events, upon the occurrence of each
of which such rights or warrants shall become exercisable to purchase different
securities, evidences of indebtedness or other assets, then the occurrence of
each such event shall be deemed to be such date of issuance and record date with
respect to new rights or warrants (and a termination or expiration of the
existing rights or warrants without exercise by the holder thereof). In
addition, in the event of any distribution (or deemed distribution) of rights or
warrants, or any Dilution Trigger Event with respect thereto, that was counted
for purposes of calculating a distribution amount for which an adjustment to the
Conversion Rate under this provision (d) was made, (1) in the case of any such
rights or warrants which shall all have been redeemed or repurchased without
exercise by any holders thereof, the Conversion Rate shall be readjusted upon
such final redemption or repurchase to give effect to such distribution or
Dilution Trigger Event, as the case may be, as though it were a cash
distribution, equal to the per share redemption or repurchase price received by
a holder or holders of Common Shares with respect to such rights or warrants
(assuming such holder had retained such rights or warrants), made to all holders
of Common Shares as of the date of such redemption or repurchase, and (2) in the
case of such rights or warrants which shall have expired or been terminated
without exercise by any holders thereof, the Conversion Rate shall be readjusted
as if such rights and warrants had not been issued.
Notwithstanding any other provision of this provision (d) to the
contrary, Capital Shares, rights, warrants, evidences of indebtedness, other
securities, cash or other assets (including, without limitation, any rights
distributed pursuant to any shareholder rights plan) shall be deemed not to have
been distributed for purposes of this provision
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(d) if the corporation makes proper provision so that each Holder of shares of
the 6 3/4% Preferred Shares who converts a share of the 6 3/4% Preferred Shares
(or any portion thereof) after the date fixed for determination of shareholders
entitled to receive such distribution shall be entitled to receive upon such
conversion, in addition to the Common Shares issuable upon such conversion, the
amount and kind of such distributions that such holder would have been entitled
to receive if such holder had, immediately prior to such determination date,
converted such share of the 6 3/4% Preferred Shares into Common Shares.
For purposes of this provision (d), provision (a) and provision (b),
any dividend or distribution to which this provision (d) is applicable that also
includes Common Shares, or rights or warrants to subscribe for or purchase
Common Shares to which provision (b) applies (or both), shall be deemed instead
to be (1) a dividend or distribution of the evidences of indebtedness, cash,
assets, shares of capital stock, rights or warrants other than (A) such shares
of Common Shares or (B) rights or warrants to which provision (b) applies (and
any Conversion Rate increase required by this provision (d) with respect to such
dividend or distribution shall then be made) immediately followed by (2) a
dividend or distribution of such Common Shares or such rights or warrants (and
any further Conversion Rate increase required by provisions (a) and (b) with
respect to such dividend or distribution shall then be made), except that (1)
the Record Date of such dividend or distribution shall be substituted as "the
Record Date fixed for the determination of shareholders entitled to receive such
dividend or other distribution", "Record Date fixed for such determination" and
"Record Date" within the meaning of provision (a) and as "the Record Date fixed
for the determination of shareholders entitled to receive such rights or
warrants", "the date fixed for the determination of the shareholders entitled to
receive such rights or warrants" and "such Record Date" within the meaning of
provision (b), and (2) any share of Common Shares included in such dividend or
distribution shall not be deemed "outstanding at the close of business on the
date fixed for such determination" within the meaning of provision (a).
e. If the corporation shall, by dividend or otherwise, distribute
to all holders of its Common Shares cash (excluding any cash that is part of a
distribution referred to in provision (d)) in an aggregate amount that, combined
together with (1) the aggregate amount of any other such distributions to all
holders of its Common Shares made exclusively in cash within the 12 months
preceding the date of payment of such distribution, and in respect of which no
adjustment pursuant to this provision (e) has been made, and (2) the aggregate
of any cash plus the Fair Market Value (as determined by the Board of Directors,
whose determination shall be conclusive and described in a resolution of the
Board of Directors) of consideration payable in respect of any tender offer by
the corporation or a Subsidiary of the corporation for all or any portion of the
Common Shares concluded within the 12 months preceding the date of payment of
such distribution, and in respect of which no adjustment pursuant to provision
(d) has been
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made, exceeds 10% of the product of the Current Market Price (determined as
provided below) on the Record Date with respect to such distribution times the
number of shares of Common Shares outstanding on such date, then, and in each
such case, immediately after the close of business on such date, the Conversion
Rate shall be increased so that the same shall equal the price determined by
multiplying the Conversion Rate in effect immediately prior to the close of
business on such Record Date by a fraction (i) the denominator of which shall be
equal to the Current Market Price on the Record Date less an amount equal to the
quotient of (x) the excess of such combined amount over such 10% amount divided
by (y) the number of shares of Common Shares outstanding on the Record Date and
(ii) the numerator of which shall be equal to the Current Market Price on such
Record Date; PROVIDED, HOWEVER, that, if the portion of the cash so distributed
applicable to one share of Common Shares is equal to or greater than the Current
Market Price of the Common Shares on the Record Date, in lieu of the foregoing
adjustment, adequate provision shall be made so that each Holder of the 6 3/4%
Preferred Shares shall have the right to receive upon conversion of a share of
the 6 3/4% Preferred Shares (or any portion thereof) the amount of cash such
holder would have received had such Holder converted such share of the 6 3/4%
Preferred Shares (or portion thereof) immediately prior to such Record Date. If
such dividend or distribution is not so paid or made, the Conversion Rate shall
again be adjusted to be the Conversion Rate which would then be in effect if
such dividend or distribution had not been declared.
f. If a tender or-exchange offer made by the corporation or any
of its subsidiaries for all or any portion of Common Shares expires and such
tender or exchange offer (as amended upon the expiration thereof) requires the
payment to shareholders (based on the acceptance (up to any maximum specified in
the terms of the tender offer) of Purchased Shares (as defined below)) of an
aggregate consideration having a Fair Market Value that, combined together with
(1) the aggregate of the cash plus the Fair Market Value, as of the expiration
of such tender offer, of consideration payable in respect of any other tender
offers, by the corporation or any of its subsidiaries for all or any portion of
the Common Shares expiring within the 12 months preceding the expiration of such
tender offer and in respect of which no adjustment pursuant to this provision
(f) has been made and (2) the aggregate amount of any distributions to all
holders of the Common Shares made exclusively in cash within 12 months preceding
the expiration of such tender offer and in respect of which no adjustment
pursuant to provision (e) has been made, exceeds 10% of the product of the
Current Market Price as of the last time (the "Expiration Time") tenders could
have been made pursuant to such tender offer (as it may be amended) times the
number of shares of Common Shares outstanding (including any tendered shares) at
the Expiration Time, then, and in each such case, immediately prior to the
opening of business on the day after the date of the Expiration Time, the
Conversion Rate shall be adjusted so that the same shall equal the price
determined by multiplying the Conversion Rate in effect immediately prior to the
close of business on the date of the Expiration Time by a fraction of which the
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denominator shall be the number of shares of Common Shares outstanding
(including any tendered shares) at the Expiration Time multiplied by the Current
Market Price of the Common Shares on the Trading Day next succeeding the
Expiration Time and the numerator shall be the sum of (x) the Fair Market Value
of the aggregate consideration payable to shareholders based on the acceptance
(up to any maximum specified in the terms of the tender offer) of all shares
validly tendered and not withdrawn as of the Expiration Time (the shares deemed
so accepted, up to any such maximum, being referred to as the "Purchased
Shares") and (y) the product of the number of shares of Common Shares
outstanding (less any Purchased Shares) at the Expiration Time and the Current
Market Price of the Common Shares on the Trading Day next succeeding the
Expiration Time, such reduction (if any) to become effective immediately prior
to the opening of business on the day following the Expiration Time. If the
corporation is obligated to purchase shares pursuant to any such tender offer,
but the corporation is permanently prevented by applicable law from effecting
any such purchases or all such purchases are rescinded, the Conversion Rate
shall again be adjusted to be the Conversion Rate which would then be in effect
if such tender offer had not been made. If the application of this provision (f)
to any tender offer would result in a decrease in the Conversion Rate, no
adjustment shall be made for such tender offer under this provision (f).
The corporation may make voluntary increases in the Conversion Rate in
addition to those required in the foregoing provisions, provided that each such
increase is in effect for at least 20 calendar days.
In addition, in the event that any other transaction or event occurs
as to which the foregoing Conversion Rate adjustment provisions are not strictly
applicable but the failure to make any adjustment would adversely affect the
conversion rights represented by the 6 3/4% Preferred Shares in accordance with
the essential intent and principles of such provisions, then, in each such case,
either (i) the corporation will appoint an investment banking firm of recognized
national standing, or any other financial expert that does not (or whose
directors, officers, employees, affiliates or shareholders do not) have a direct
or material indirect financial interest in the corporation or any of its
subsidiaries, who has not been, and, at the time it is called upon to give
independent financial advice to the corporation, is not (and none of its
directors, officers, employees, affiliates or shareholders are) a promoter,
director or officer of the corporation or any of its subsidiaries, which will
give their opinion upon or (ii) the Board of Directors shall, in its sole
discretion, determine consistent with the Board of Directors' fiduciary duties
to the holders of the corporation's Common Shares, the adjustment, if any, on a
basis consistent with the essential intent and principles established in the
foregoing Conversion Rate adjustment provisions, necessary to preserve, without
dilution, the conversion rights represented by the 6 3/4% Preferred Shares. Upon
receipt of such opinion or determination, the corporation will promptly mail a
copy thereof to the Holders of the
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6 3/4% Preferred Shares and will, subject to the fiduciary duties of the Board
of Directors, make the adjustments described therein.
The corporation will provide to Holders of the 6 3/4% Preferred Shares
reasonable notice of any event that would result in an adjustment to the
Conversion Rate pursuant to this section so as to permit the Holders to effect a
conversion of the 6 3/4% Preferred Shares into shares of Common Shares prior to
the occurrence of such event.
g. For purposes of this paragraph, the following terms shall have
the meaning indicated:
i. "Current Market Price" means the average of the daily
closing prices per share of Common Shares for the 10 consecutive trading days
immediately prior to the date in question.
ii. "Fair Market Value" shall mean the amount which a
willing buyer would pay a willing seller in an arm's-length transaction, under
usual and ordinary circumstances and after consideration of all available uses
and purposes without any compulsion upon the seller to sell or the buyer to buy,
as determined by the Board of Directors, whose determination shall be made in
good faith and shall be conclusive and described in a resolution of the Board of
Directors.
iii. "Record Date" shall mean, with respect to any dividend,
distribution or other transaction or event in which the holders of Common Shares
have the right to receive any cash, securities or other property or in which the
Common Shares (or other applicable security) is exchanged for or converted into
any combination of cash, securities or other property, the date fixed for
determination of shareholders entitled to receive such cash, securities or other
property (whether such date is fixed by the Board of Directors or by statute,
contract or otherwise).
h. No adjustment in the Conversion Rate shall be required unless
such adjustment would require an increase or decrease of at least 1% in such
rate; PROVIDED, HOWEVER, that any adjustments which by reason of this paragraph
are not required to be made shall be carried forward and taken into account in
any subsequent adjustment. All calculations under this paragraph shall be made
by the corporation and shall be made to the nearest cent or to the nearest one
hundredth of a share, as the case may be. No adjustment need be made for a
change in the par value or no par value of the Common Shares.
i. Whenever the Conversion Rate is adjusted as herein provided,
the corporation shall promptly file with the Transfer Agent an Officers'
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Certificate setting forth the Conversion Rate after such adjustment and setting
forth a brief statement of the facts requiring such adjustment. Promptly after
delivery of such certificate, the corporation shall prepare a notice of such
adjustment of the Conversion Rate setting forth the adjusted Conversion Rate and
the date on which each adjustment becomes effective and shall mail such notice
of such adjustment of the Conversion Rate to each Holder of the 6 3/4% Preferred
Shares at such holder's last address appearing on the register of holders
maintained for that purpose within 20 days of the effective date of such
adjustment. Failure to deliver such notice shall not affect the legality or
validity of any such adjustment.
j. In any case in which this paragraph provides that an
adjustment shall become effective immediately after a Record Date for an event,
the corporation may defer until the occurrence of such event issuing to the
Holder of any share of the 6 3/4% Preferred Shares converted after such Record
Date and before the occurrence of such event the additional Common Shares
issuable upon such conversion by reason of the adjustment required by such event
over and above the Common Shares issuable upon such conversion before giving
effect to such adjustment.
k. For purposes of this paragraph, the number of shares of Common
Shares at any time outstanding shall not include shares held in the treasury of
the corporation but shall include shares issuable in respect of scrip
certificates issued in lieu of fractions of Common Shares. The corporation shall
not pay any dividend or make any distribution on Common Shares held in the
treasury of the corporation.
(8) CERTAIN COVENANTS.
a. TRANSACTIONS WITH AFFILIATES
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Without the affirmative vote or consent of the holders of a
majority of the outstanding shares of the 6 3/4% Preferred Shares, the
corporation will not, and will not permit any of its subsidiaries to, make any
payment to, or sell, lease, transfer or otherwise dispose of any of its
properties or assets to, or purchase any property or assets from, or enter into
or make or amend any contract, agreement, understanding, loan, advance or
guarantee with, or for the benefit of, any Affiliate (each of the foregoing, an
"Affiliate Transaction"), unless (i) such Affiliate Transaction is on terms that
are no less favorable to the corporation or the relevant subsidiary than those
that would have been obtained in a comparable transaction by the corporation or
such subsidiary with an unrelated Person and (ii) the corporation files in its
minute books with respect to any Affiliate Transaction or series of related
Affiliate Transaction involving aggregate consideration in excess of $1.0
million, a resolution of the Board of Directors set forth in an Officers'
Certificate certifying that such Affiliate Transaction complies with clause (i)
above and that such Affiliate Transaction has been approved by a majority of the
members of the Board of Directors that are disinterested as to such Affiliate
Transaction.
As used herein, "Affiliate" of any specified Person means any
other Person directly or indirectly controlling or controlled by or under direct
or indirect common control with such specified Person. For purposes of this
definition, "control" (including, with correlative meanings, the terms
"controlling," "controlled by" and "under common control with"), as used with
respect to any Person, shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of such
Person, whether through the ownership of voting securities, by agreement or
otherwise; provided that beneficial ownership of 10% or more of the voting
securities of a Person shall be deemed to be control.
The provisions of the foregoing paragraph shall not prohibit (i)
any issuance of securities, or other payments, awards or grants in cash,
securities or otherwise pursuant to, or the funding of, employment arrangements,
stock options and stock ownership plans approved by the Board of Directors, (ii)
the grant of stock options or similar rights to employees and directors of the
corporation pursuant to plans approved by the Board of Directors, (iii) any
employment or consulting arrangement or agreement entered into by the
corporation or any of its subsidiaries in the ordinary course of business and
consistent with the past practice of the corporation or such subsidiary, (iv)
the payment of reasonable fees to directors of the corporation and its
subsidiaries who are not employees of the corporation or its subsidiaries, (v)
any Affiliate Transaction between the corporation and a subsidiary thereof or
between such subsidiaries (for purposes of this paragraph, "subsidiary" includes
any entity deemed to be an Affiliate because the corporation or any of its
subsidiaries own securities in such entity or controls such entity), or (vi)
transactions between the corporation or any subsidiary thereof specifically
contemplated by the PSINet Agreement dated as of July 22, 1997 between a
subsidiary of the corporation and PSINet, as amended as of the date hereof.
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b. PAYMENTS FOR CONSENT
The corporation nor any of its subsidiaries will, directly or
indirectly, pay or cause to be paid any consideration, whether by way of
dividend or other distribution, fee or otherwise, to any Holder of shares of the
6 3/4% Preferred Shares for or as an inducement to any consent, waiver or
amendment of any of the terms or provisions of this Article Fourth or the 6 3/4%
Preferred ShareS unless such consideration is offered to be paid and is paid to
all Holders of the 6 3/4% Preferred Shares that consent, waive or agree to amend
in the time frame set forth in the solicitation documents relating to such
consent, waiver or agreement.
c. REPORTS
Whether or not required by the rules and regulations of the
Commission, so long as any shares of the 6 3/4% Preferred Shares are
outstanding, the corporation will furnish to the Holders of the 6 3/4% Preferred
Shares (i) all quarterly and annual financial information that would be required
to be contained in a filing with the Commission on Forms 10-Q and 10-K if the
corporation were required to file such Forms, including "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and, with respect
to the annual information only, a report thereon by the corporation's certified
independent accountants and (ii) all information that would be required to be
contained in a current report on Form 8-K if the corporation were required to
file such reports. In the event the corporation has filed any such report with
the Commission, it will not be obligated to separately finish the report to any
Holder unless and until such Holder requests a copy of the report. In addition,
whether or not required by the rules and regulations of the Commission, the
corporation will file a copy of all such information and reports with the
Commission for public availability (unless the Commission will not accept such a
filing) and make such information available to securities analysts and
prospective investors upon request.
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(9) MERGER, CONSOLIDATION OR SALE OF ASSETS OF THE CORPORATION
In the event that the corporation is party to any Fundamental Change
or transaction (including, without limitation, a merger other than a merger that
does not result in a reclassification, conversion, exchange or cancellation of
Common Shares), consolidation, sale of all or substantially all of the assets of
the corporation, recapitalization or reclassification of Common Shares (other
than a change in par value, or from par value to no par value, or from no par
value to par value or as a result of a subdivision or combination of Common
Shares) or any compulsory share exchange (each of the foregoing, including any
Fundamental Change, being referred to as a "Transaction"), the corporation will
be obligated, subject to applicable provisions of state law and the restrictions
of the Indenture, either to offer (a "Repurchase Offer") to purchase all of the
shares of the 6 3/4% Preferred Shares on the date (the "Repurchase Date") that
is 75 days after the date the corporation gives notice of the Transaction, at a
price (the "Repurchase Price") equal to $1,000.00 per share of the 6 3/4%
Preferred Shares, together with an amount equal to accrued and unpaid dividends
on the 6 3/4% Preferred Shares through the Repurchase Date or to adjust the
Conversion Rate as described below. If a Repurchase Offer is made, the
corporation shall deposit, on or prior to the Repurchase Date, with a paying
agent an amount of money sufficient to pay the aggregate Repurchase Price of the
6 3/4% Preferred Shares which is tO be paid on the Repurchase Date.
On or before the 15th day after the corporation knows or reasonably
should know that a Transaction has occurred, the corporation will be required to
mail to all Holders a notice of the occurrence of such Transaction and whether
or not the documents governing the corporation's indebtedness permit at such
time a Repurchase Offer, and, as applicable, either the new Conversion Rate (as
adjusted at the option of the corporation) or the date by which the Repurchase
Offer must be accepted, the Repurchase Price for the 6 3/4% Preferred Shares and
the procedures which the holder must follow to accept the Repurchase Offer. To
accept the Repurchase Offer, the Holder of a share of the 6 3/4% Preferred
Shares will be required to deliver, on or before the 10th day prior to the
Repurchase Date, written notice to the corporation (or an agent designated by
the corporation for such purpose) of the holder's acceptance, together with the
certificates evidencing the 6 3/4% Preferred Shares with respect to which the
offer is being accepted, duly endorsed for transfer.
In the event the corporation does not make a Repurchase Offer with
respect to a Transaction and such Transaction results in shares of Common Shares
being converted into the right to receive, or being exchanged for, (i) in the
case of any Transaction other than a Transaction involving a Common Shares
Fundamental Change (as defined below) (and subject to funds being legally
available for such purpose under applicable law at the time of such conversion),
securities, cash or other property, each share of the 6 3/4% Preferred Shares
shall thereafter be convertible into the kind and, in the
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case of a Transaction which does not involve a Fundamental Change (as defined
below), amount of securities, cash and other property receivable upon the
consummation of such Transaction by a holder of that number of shares of
Common Shares into which a share of the 6 3/4% Preferred Shares was
convertible immediately prior to such Transaction, or (ii) in the case of a
Transaction involving a Common Shares Fundamental Change, common stock, each
share of the 6 3/4% Preferred Shares shall thereafter be convertible (in the
manner described therein) into common stock of the kind received by holders
of Common Shares (but in each case after giving effect to any adjustment
discussed below relating to a Fundamental Change if such Transaction
constitutes a Fundamental Change), other than as required by Ohio law.
If any Fundamental Change occurs, then the Conversion Rate in effect
will be adjusted immediately after such Fundamental Change as described below.
In addition, in the event of a Common Shares Fundamental Change, each share of
the 6 3/4% Preferred Shares shall be convertible solely into common stock of the
kind received by holders of Common Shares as a result of such Common Shares
Fundamental Change.
The Conversion Rate in the case of any Transaction involving a
Fundamental Change will be adjusted immediately after such Fundamental Change:
(i) in the case of a Non-Stock Fundamental Change (as defined
below), the Conversion Rate will thereupon become the higher of (A) the
Conversion Rate in effect immediately prior to such Non-Stock Fundamental
Change, but after giving effect to any other prior adjustments effected, and
(B) a fraction, the numerator of which is (x) the redemption rate for one
share of the 6 3/4% Preferred Shares if the redemption date were the date of
such Non-Stock Fundamental Change (or, for the twelve-month period commencing
April 1, 1999, the product of 106.75% and 106.075%, respectively), multiplied
by $1,000 plus (y) the amount of any then-accrued and unpaid dividends on one
share of the 6 3/4% Preferred Shares, and the denominator of which is the
greater of the Applicable Price or the then applicable Reference Market
Price; and
(ii) in the case of a Common Shares Fundamental Change, the
Conversion Rate in effect immediately prior to such Common Shares Fundamental
Change, but after giving effect to any other prior adjustments effected, will
thereupon be adjusted by multiplying such Conversion Rate by a fraction of which
the denominator will be the Purchaser Stock Price (as defined below) and the
numerator will be the Applicable Price; provided, however, that in the event of
a Common Shares Fundamental Change in which (A) 100% of the value of the
consideration received by a holder of Common Shares is common stock of the
successor, acquiror, or other third party (and cash, if any, is paid only with
respect to any fractional interests in such common stock
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resulting from such Common Shares Fundamental Change) and (B) all Common Shares
will have been exchanged for, converted into, or acquired for common stock (and
cash with respect to fractional interests) of the successor, acquiror, or other
third party, the Conversion Rate in effect immediately prior to such Common
Shares Fundamental Change will thereupon be adjusted by multiplying such
Conversion Rate by the number of shares of common stock of the successor,
acquirer, or other third party received by a holder of one share of Common
Shares as a result of such Common Shares Fundamental Change.
The term "Applicable Price" means (i) in the case of a Non-Stock
Fundamental Change in which the holders of Common Shares receive only cash, the
amount of cash received by the holder of one share of Common Shares and (ii) in
the event of any other Non-Stock Fundamental Change or any Common Shares
Fundamental Change, the average of the Closing Price (as defined below) for
Common Shares during the ten Trading Days prior to the record date for the
determination of the holders of Common Shares entitled to receive such
securities, cash, or other property in connection with such Non-Stock
Fundamental Change or Common Shares Fundamental Change or, if there is no such
record date, the date upon which the holders of Common Shares shall have the
right to receive such securities, cash, or other property (such record date or
distribution date being hereinafter referred to as the "Entitlement Date") in
each case as adjusted in good faith by the corporation to appropriately reflect
any of the events referred to above.
The term "Common Shares Fundamental Change" means any Fundamental
Change in which more than 50% of the value (as determined in good faith by
the Board of Directors of the corporation) of the consideration received by
holders of Common Shares consists of common stock that for each of the ten
consecutive Trading Days prior to the Entitlement Date has been admitted for
listing or admitted for listing subject to notice of issuance on a national
securities exchange or quoted on the Nasdaq National Market; provided,
however, that a Fundamental Change shall not be a Common Shares Fundamental
Change unless either (i) the corporation continues to exist after the
occurrence of such Fundamental Change and the outstanding shares of the
6 3/4% Preferred Shares continue to exist as outstanding shares of the 6 3/4%
Preferred Shares or (ii) not later than the occurrence of such Fundamental
Change, the outstanding shares of the 6 3/4% Preferred Shares is converted
into or exchanged for shares of convertible Preferred Shares of an entity
succeeding to the business of the corporation or a subsidiary thereof, which
convertible Preferred Shares has powers, preferences, and relative,
participating, optional, or other rights and qualifications, limitations, and
restrictions, substantially similar to those of the 6 3/4% Preferred Shares.
The term "Fundamental Change" means the occurrence of any Transaction
or event in connection with a plan pursuant to which all or substantially all
Common
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Shares shall be exchanged for, converted into, acquired for, or constitute
solely the right to receive securities, cash, or other property (whether by
means of an exchange offer, liquidation, tender offer, consolidation, merger,
combination, reclassification, recapitalization, or otherwise), provided, that,
in the case of a plan involving more than one such Transaction or event, for
purposes of adjustment of the Conversion Rate, such Fundamental Change shall be
deemed to have occurred when substantially all Common Shares shall be exchanged
for, converted into, or acquired for or constitute solely the right to receive
securities, cash, or other property, but the adjustment shall be based upon the
consideration that a holder of Common Shares received in such Transaction or
event as a result of which more than 50% of Common Shares shall have been
exchanged for, converted into, or acquired or constitute solely the right to
receive securities, cash, or other property. The term "Non-Stock Fundamental
Change" means any Fundamental Change other than a Common Shares Fundamental
Change.
The term "Purchaser Stock Price" means, with respect to any Common
Shares Fundamental Change, the average of the Closing Prices for the common
stock received in such Common Shares Fundamental Change for the ten consecutive
Trading Days prior to and including the Entitlement Date, as adjusted in good
faith by the corporation to appropriately reflect any of the events referred to
above.
The term "Reference Market Price" shall initially mean $_____
(which is an amount equal to 66 2/3% of the reported last sales price for
Common Shares on the New York Stock Exchange on ____________, 1999) and in the
event of any adjustment of the Conversion Rate other than as a result of a
Non-Stock Fundamental Change, the Reference Market Price shall also be
adjusted so that the ratio of the Reference Market Price to the Conversion
Rate after giving effect to any such adjustment shall always be the same as
the ratio of the initial Reference Market Price to the initial Conversion
Rate.
In case (1) the corporation shall declare a dividend (or any other
distribution) on its Common Shares payable otherwise than in cash out of its
earned surplus; (2) the corporation shall authorize the granting to all holders
of its Common Shares of rights or warrants to subscribe for or purchase any
shares of capital stock of any class or of any other rights; (3) of any
reclassification of the Common Shares of the corporation (other than a
subdivision or combination of its outstanding Common Shares); (4) of any
consolidation or merger to which the corporation is a party and for which
approval of any shareholders of the corporation is required; (5) the sale or
transfer of all or substantially all the assets of the corporation; or (6) of
the voluntary or involuntary dissolution, liquidation or winding up of the
corporation; then the corporation shall cause to be filed with the Transfer
Agent and at each office or agency maintained for the purpose of conversion of
the 6 3/4% Preferred Shares, and shalL cause to be mailed to all holders at
their last addresses as they shall appear in the 6 3/4% Preferred Shares
Register, at least 20 days (or 10 days in any case specified in clause (1) or
(2) above) prior to the
59
<PAGE>
applicable date hereinafter specified, a notice stating (x) the date on which a
record is to be taken for the purpose of such dividend, distribution, rights or
warrants, or, if a record is not to be taken, the date as of which the holders
of Common Shares of record to be entitled to such dividend, distribution, rights
or warrants are to be determined or (y) the date on which such reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation or winding up is
expected to become effective, and the date as of which it is expected that
holders of Common Shares of record shall be entitled to exchange their Common
Shares for securities, cash or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding up. Failure to give the notice requested by this
paragraph or any defect therein shall not affect the legality or validity of any
dividend, distribution, right, warrant, reclassification, consolidation, merger,
sale, transfer, dissolution, liquidation or winding up, or the vote upon any
such action.
The corporation shall at all times reserve and keep available, free
from preemptive rights, out of its authorized but unissued shares of Common
Shares (or out of its authorized shares of Common Shares held in the treasury of
the corporation), for the purpose of effecting the conversion of the 6 3/4%
Preferred Shares, the full number of shares of Common Shares then issuable upon
the conversion of all outstanding shares of the 6 3/4% Preferred Shares.
The corporation will pay any and all document, stamp or similar issue
or transfer taxes that may be payable in respect of the issue or delivery of
Common Shares on conversion of the 6 3/4% Preferred Shares pursuant hereto. The
corporation shall not, however, be required to pay any tax which may be payable
in respect of any transfer involved in the issue and delivery of shares of
Common Shares in a name other than that of the Holder of the share of the 6 3/4%
Preferred Shares or shares of the 6 3/4% Preferred Shares to be converted, and
no such issue or delivery shall be made unless and until the Person requesting
such issue has paid to the corporation the amount of any such tax, or has
established to the satisfaction of the corporation that such tax has been paid.
(10) Reissuance of the 6 3/4% Preferred Shares. Shares of the 6 3/4%
Preferred Shares redeemed for or converted into Common Shares or that have been
reacquired in any manner shall not be reissued as shares of the 6 3/4% Preferred
Shares and shall (upon compliance with any applicable provisions of Ohio law)
have the status of authorized and unissued shares of Preferred Shares
undesignated as to series and may be redesignated and reissued as part of any
series of Preferred Shares; PROVIDED, however, that so long as any shares of the
6 3/4% Preferred Shares are outstanding, any issuance of such shares must be in
compliance with the terms hereof.
(11) BUSINESS DAY. If any payment, redemption or exchange shall be
required by the terms hereof to be made on a day that is not a Business Day,
such
60
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payment, redemption or exchange shall be made on the immediately succeeding
Business Day.
(12) AMENDMENT, SUPPLEMENT AND WAIVER. Except as set forth in
paragraph (6), the corporation may amend this Article Fourth with the
affirmative vote or consent of the holders of a majority of the shares of the
6 3/4% Preferred Shares then outstanding (including votes or consents
obtained in connection with a tender offer or exchange offer for the 6 3/4%
Preferred Shares) and, except as otherwise provided by applicable law, any
past default or failure to comply with any provision of this Article Fourth
may also be waived with the consent of such holders. Notwithstanding the
foregoing and except as set forth in paragraph (6), however, without the
consent of each Holder affected, an amendment or waiver may not (with respect
to any shares of the 6 3/4% Preferred Shares held by a non-consenting
Holder): (i) alter the voting rights with respect to the 6 3/4% Preferred
Shares or reduce the number of shares of the 6 3/4% Preferred Shares whose
Holders must consent to an amendment, supplement or waiver, (ii) reduce the
Liquidation Preference of any share of the 6 3/4% Preferred Shares or
adversely alter the provisions with respect to the redemption of the 6 3/4%
Preferred Shares, (iii) reduce the rate of or change the time for payment of
dividends on any share of the 6 3/4% Preferred Shares, (iv) waive a default
in the payment of dividends on the 6 3/4% Preferred Shares, (v) make any
share of the 6 3/4% Preferred Shares payable in money other than United
States dollars, (vi) make any change in the provisions of the Article Fourth
relating to waivers of the rights of Holders of the 6 3/4% Preferred Shares
to receive the Liquidation Preference, dividends on the 6 3/4% Preferred
Shares, or (vii) make any change in the foregoing amendment and waiver
provisions.
Notwithstanding the foregoing, without the consent of any Holder of
the 6 3/4% Preferred Shares, the corporation may (to the extent permitted by,
and subject to the requirements of, Ohio law) amend or supplement this
Article Fourth to cure any ambiguity, defect or inconsistency, to provide for
uncertificated shares of the 6 3/4% Preferred Shares in addition to or in place
of certificated shares of the 6 3/4% Preferred Shares, to make any change that
would provide any additional rights or benefits to the Holders of the 6 3/4%
Preferred Shares or to make any change that the Board of Directors determines,
in good faith, is not materially adverse to Holders of the 6 3/4% Preferred
Shares.
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(13) TRANSFER AND EXCHANGE. When a share of the 6 3/4% Preferred
Shares is presented to the Transfer Agent with a request to register the
transfer of such share of the 6 3/4% Preferred Shares or to exchange such share
of the 6 3/4% Preferred Shares for an equal number of shares of the 6 3/4%
Preferred Shares of other authorized denominations, the Transfer Agent shall
register the transfer or make the exchange as requested if its reasonable
requirements for such transaction are met and such transfer or exchange is in
compliance with applicable laws or regulations.
(14) CERTAIN DEFINITIONS. As used in this paragraph 12 of Article
Fourth, the following terms shall have the following meanings (and (1) terms
defined in the singular have comparable meanings when used in the plural and
vice versa, (2) "including" means including without limitation, (3) "or" is not
exclusive and (4) an accounting term not otherwise defined has the meaning
assigned to it in accordance with United States generally accepted accounting
principles as in effect on the Issue Date and all accounting calculations will
be determined in accordance with such principles), unless the content otherwise
requires:
"BOARD OF DIRECTORS" mean the Board of Directors of the corporation or
any committee thereof duly authorized to act on behalf of the Board.
62
<PAGE>
"BUSINESS DAY" means each day which is not a legal holiday.
"CAPITAL SHARES" of any person means any and all shares, interests,
rights to purchase, warrants, options, participation or other equivalents of or
interests in (however designated) equity of such person, including any Preferred
Shares, but excluding any debt securities convertible into or exchangeable for
such equity.
"CLOSING PRICE" means on any day the reported last bid price on such
day, or in case no sale takes place on such day, the average of the reported
closing bid and asked prices on the principal national securities exchange on
which such stock is listed or admitted to trading, or if not listed or admitted
to trading on any national securities exchange, the average of the closing bid
and asked prices as furnished by any independent registered broker-dealer firm,
selected by the corporation for that purpose, in each case adjusted for any
stock split during the relevant period.
"COMMISSION" means the Securities and Exchange Commission.
"DEFAULT" means any event which is, or after notice or passage of time
or both would be, a Voting Rights Triggering Event.
"HOLDERS" means the registered holders from time to time of the 6 3/4%
Preferred Shares.
"OFFICERS' CERTIFICATE" means a certificate signed by two officers of
the corporation.
"PERSON" means any individual, corporation, partnership, joint
venture, limited liability company, association, joint-stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
63
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involuntary liquidation or dissolution of such corporation, over shares of
Capital Shares of any other class of such corporation.
"SUBSIDIARY" means any corporation, association, partnership, limited
liability company or other business entity of which more than 50% of the total
voting power of shares of capital stock or other interests entitled (without
regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by the corporation, the corporation and one or more
Subsidiaries or one or more Subsidiaries and any partnership the sole general
partner or the managing partner of which the corporation or any Subsidiary or
the only general partners of which are the corporation and one or more
Subsidiaries or one or more Subsidiaries.
"TRADING DAY" means, in respect of any securities exchange or
securities market, each Monday, Tuesday, Wednesday, Thursday and Friday, other
than any day on which securities are not traded on the applicable securities
exchange or in the applicable securities market.
"TRANSFER AGENT" means the transfer agent for the 6 3/4% Preferred
Shares appointed by the corporation.
64
<PAGE>
<TABLE>
<S> <C>
NUMBER SHARES
FTB 207000
COMMON COMMON
INCORPORATED UNDER THE LAWS OF THE STATE OF OHIO
CINCINNATI BELL INC. CUSIP 171870 10 8
THIS CERTIFICATE IS TRANSFERABLE IN THE CITY OF NEW YORK OR IN THE CITY OF CINCINNATI
This Certifies that:
SEE REVERSE AS TO
ABBREVIATIONS
is the owner of
FULLY PAID AND NONASSESSABLE COMMON SHARES OF CINCINNATI BELL INC.,
transferable on the books of the Company in person or by duly authorized attorney upon surrender of this certificate properly
endorsed. This certificate is not valid unless countersigned [SEAL] by a Transfer Agent and registered by a Registrar.
Witness the seal of the Company and the signatures of its duly authorized officers.
DATED /s/ Thomas E. Taylor /s/ Richard G. Ellenberger
----------------------------- -------------------------------------
GENERAL COUNSEL AND SECRETARY PRESIDENT AND CHIEF EXECUTIVE OFFICER
</TABLE>
COUNTERSIGNED AND REGISTERED.
FIFTH THIRD BANK
(CINCINNATI, OHIO)
TRANSFER AGENT AND REGISTRAR
AUTHORIZED SIGNATURE.
<PAGE>
CINCINNATI BELL INC.
WILL MAIL TO THE SHAREHOLDER, WITHOUT CHARGE, WITHIN FIVE DAYS AFTER RECEIPT
OF WRITTEN REQUEST THEREFOR, ADDRESSED TO THE SECRETARY OF THE CORPORATION,
201 EAST FOURTH STREET, P.O. BOX 2301, CINCINNATI, OHIO 45201. A STATEMENT OF
THE EXPRESS TERMS OF THE COMMON SHARES REPRESENTED BY THIS CERTIFICATE AND OF
ANY OTHER CLASS OR CLASSES AND SERIES OF SHARES WHICH THE CORPORATION IS
AUTHORIZED TO ISSUE.
The following abbreviations shall be construed as though the words set
forth below opposite each abbreviation were written out in full where such
abbreviation appears:
<TABLE>
<S> <C> <C> <C>
TEN COM --as tenants in common (Name) CUST (Name) UNIF --(Name) as Custodian for (Name)
TEN ENT --as tenants by the entireties GIFT MIN ACT (State) under the (State) Uniform
JT TEN --as joint tenants with right of Gifts to Minors Act
survivorship and not as tenants in common
</TABLE>
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, _______ HEREBY SELL, ASSIGN AND TRANSFER UNTO
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING POSTAL ZIP CODE OF
ASSIGNEE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SHARES
- ----------------------------------------------------------------------
REPRESENTED BY THE WITHIN CERTIFICATE, AND DO HEREBY IRREVOCABLY CONSTITUTE
AND APPOINT
--------------------------------------------------------------------
- -------------------------------------------------------------------------------
ATTORNEY TO TRANSFER THE SAID SHARES ON THE BOOKS OF THE WITHIN-NAMED COMPANY
WITH FULL POWER OF SUBSTITUTION IN THE PREMISES.
DATED,
------------------------
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT, OR ANY CHANGE WHATEVER.
This certificate also evidences and entitles the holder hereof to certain
Rights as set forth in a Rights Agreement between Cincinnati Bell Inc. and
Fifth Third Bank, as Rights Agent, dated as of April 29, 1997 as the same may
be amended from time to time (the "Rights Agreement"), the terms of which are
hereby incorporated herein by reference and a copy of which is on file at the
principal executive offices of Cincinnati Bell Inc. Under certain
circumstances set forth in the Rights Agreement, such Rights will be
evidenced by separate certificates and will no longer be evidenced by this
certificate. Cincinnati Bell Inc. will mail to the holder of this certificate
a copy of the Rights Agreement without charge within five days after receipt
of a written request therefor. Under certain circumstances set forth in the
Rights Agreement, Rights issued to, or held by any Person who is, was or
becomes an Acquiring Person or any Affiliate or Associate thereof (as such
terms are defined in the Rights Agreement) and any subsequent holder of such
Rights may become null and void. In no event may the Rights be exercised
after May 2, 2007.
<PAGE>
Exhibit 4.9
- ------------------------------------------------------------------------------
INVESTMENT AGREEMENT
By and Among
OAK HILL CAPITAL PARTNERS, L.P.
OHCP OCEAN I, LLC,
OHCP OCEAN III, LLC,
OHCP OCEAN IV, LLC,
OHCP OCEAN V, LLC,
OAK HILL SECURITIES FUND, L.P.,
OAK HILL SECURITIES FUND II, L.P.
and
CINCINNATI BELL INC.
------------------------------------
Dated as of July 21, 1999
------------------------------------
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
----
<S> <C> <C>
Article 1 DEFINITIONS............................................................................2
1.1 Definitions.....................................................................................2
1.2 Accounting Terms...............................................................................13
Article 2 PURCHASE AND SALE OF NOTES............................................................13
2.1 Purchase and Sale of Notes.....................................................................13
2.2 Notes..........................................................................................14
2.3 Closing........................................................................................14
Article 3 CONDITIONS TO THE OBLIGATION OF THE PURCHASERS
TO CLOSE..............................................................................14
3.1 Representations and Warranties True............................................................14
3.2 Compliance with this Agreement.................................................................14
3.3 Officer's Certificate..........................................................................15
3.4 Secretary's Certificate........................................................................15
3.5 Opinion of Counsel.............................................................................15
3.6 No Material Adverse Change.....................................................................15
3.7 Registration Rights Agreement..................................................................15
3.8 IXC Transaction................................................................................15
3.9 Company Board of Directors. ..................................................................15
Article 4 CONDITIONS TO THE OBLIGATION OF THE COMPANY
TO CLOSE AT THE CLOSING...............................................................16
4.1 Representations and Warranties True............................................................16
4.2 Compliance with this Agreement.................................................................16
4.3 Consents and Approvals.........................................................................16
4.4 IXC Transaction................................................................................16
Article 5 REPRESENTATIONS AND WARRANTIES
OF THE COMPANY........................................................................17
5.1 Organization, Standing and Corporate Power.....................................................17
5.2 Capital Structure..............................................................................17
5.3 Authority; Noncontravention....................................................................18
5.4 SEC Documents..................................................................................20
5.5 Litigation.....................................................................................20
5.6 Compliance with Applicable Laws................................................................21
5.7 Taxes..........................................................................................21
5.8 Change of Control..............................................................................22
5.9 State Takeover Statutes........................................................................22
5.10 Brokers.......................................................................................22
5.11 Senior Debt Documents.........................................................................22
5.12 Margin Stock..................................................................................22
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Article 6 REPRESENTATIONS AND WARRANTIES
OF THE PURCHASERS.....................................................................23
6.1 Organization, Standing and Corporate Power.....................................................23
6.2 Authority; Noncontravention....................................................................23
6.3 Brokers........................................................................................24
6.4 Securities Act Representation..................................................................24
6.5 Present Ownership..............................................................................24
Article 7 INDEMNIFICATION.......................................................................24
7.1 Indemnification by the Company.................................................................24
7.2 Notification...................................................................................25
7.3 Registration Rights Agreement..................................................................26
Article 8 AFFIRMATIVE COVENANTS.................................................................26
8.1 Financial Statements...........................................................................26
8.2 Certificates; Other Information................................................................27
8.3 Preservation of Corporate Existence............................................................27
8.4 Payment of Taxes...............................................................................27
8.5 Compliance with Laws...........................................................................27
8.6 Inspection.....................................................................................28
8.7 Notices........................................................................................28
8.8 Issue Taxes....................................................................................28
8.9 Reservation of Shares..........................................................................28
8.10 Company Board of Directors Representation.....................................................28
8.11 Standstill....................................................................................31
8.12 Voting........................................................................................32
8.13 Transfer......................................................................................33
8.14 Investment Proposal/Competing Proposal........................................................34
8.15 Rating........................................................................................35
8.16 Indenture.....................................................................................35
8.17 Issuance of Tranche B Notes...................................................................36
8.18 Change of Control.............................................................................36
8.19 Registration of Notes.........................................................................39
8.20 Dividends or Distributions Paid into Escrow...................................................39
8.21 [Intentionally Omitted].......................................................................40
8.22 Maintenance of Properties.....................................................................40
8.23 HSR Act; Stock Exchange Listings..............................................................40
Article 9 NEGATIVE COVENANTS....................................................................41
9.1 Mergers........................................................................................41
9.2 Forbearance From Restrictions on Rights of Holders of Notes....................................41
9.3 Senior Debt Documents..........................................................................41
Article 10 DEFAULTS AND REMEDIES.................................................................41
10.1 Events of Default.............................................................................41
10.2 Acceleration..................................................................................43
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Article 11 SUBORDINATION.........................................................................43
11.1 Notes Subordinate to Senior Debt..............................................................43
11.2 Payment Over of Proceeds Upon Dissolution, Etc................................................43
11.3 Prior Payment to Senior Debt Upon Acceleration of Securities..................................45
11.4 Payment To Holders............................................................................45
11.5 Payment Permitted If No Default...............................................................46
11.6 Subrogation to Rights of Holders of Senior Debt...............................................46
11.7 Provisions Solely to Define Relative Rights...................................................47
11.8 No Waiver of Subordination Provisions.........................................................47
11.9 Reliance on Judicial Order or Certificate of Liquidating Agent................................48
11.10 Certain Conversions Not Deemed Payment.......................................................48
11.11 Distribution To Be Paid Over.................................................................48
Article 12 MANDATORY PREPAYMENT..................................................................49
12.1 Mandatory Redemption..........................................................................49
Article 13 OPTIONAL PREPAYMENT...................................................................51
13.1 Optional Redemption...........................................................................51
Article 14 VOLUNTARY CONVERSION..................................................................52
14.1 Conversion....................................................................................52
14.2 Procedure.....................................................................................53
14.3 Antidilution..................................................................................53
14.4 No Adjustment.................................................................................57
14.5 Officer's Certificate.........................................................................57
14.6 Fractional Shares.............................................................................57
14.7 Reorganization, Etc...........................................................................57
14.8 Notice of Certain Events......................................................................58
14.9 Taxes.........................................................................................59
Article 15 MISCELLANEOUS.........................................................................59
15.1 Survival of Provisions........................................................................59
15.2 Notices.......................................................................................59
15.3 Successors....................................................................................60
15.4 Assignments...................................................................................61
15.5 Amendment and Waiver..........................................................................61
15.6 Counterparts..................................................................................62
15.7 Interpretation................................................................................62
15.8 Determinations................................................................................63
15.9 Governing Law.................................................................................63
15.10 Jurisdiction.................................................................................63
15.11 Severability.................................................................................63
15.12 Remedies.....................................................................................63
15.13 Entire Agreement.............................................................................64
15.14 Publicity....................................................................................64
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C> <C>
15.15 Legend.......................................................................................64
</TABLE>
SCHEDULES
Schedule 1 -- Notes to be Purchased at the Closing
EXHIBITS
Exhibit A -- Form of Note
Exhibit B -- Registration Rights Agreement
Exhibit C -- Form of Opinion of Thomas Taylor
Exhibit D -- Form of Opinion of Cravath, Swaine & Moore
iv
<PAGE>
INVESTMENT AGREEMENT, dated as of July 21, 1999, by and among
Cincinnati Bell Inc., an Ohio corporation (the "COMPANY"), and Oak Hill Capital
Partners, L.P., a Delaware limited partnership ("OAK HILL CAPITAL"), OHCP Ocean
I, LLC, a Delaware limited liability company ("OCEAN I"), OHCP Ocean III, LLC, a
Delaware limited liability company ("OCEAN III"), OHCP Ocean IV, LLC, a Delaware
limited liability company ("OCEAN IV"), OHCP Ocean V, LLC, a Delaware limited
liability company ("OCEAN V"), Oak Hill Securities Fund, L.P., a Delaware
limited partnership, and Oak Hill Securities Fund II, L.P., a Delaware limited
partnership (collectively, the "PURCHASERS," and each a "PURCHASER"). OHCP AIV
I, L.P., a Delaware limited partnership ("OHCP AIV"), joins this Agreement for
purposes of Sections 8.10 and 8.11 hereof.
WHEREAS, the Purchasers desire to become long-term investors
in the Company and wish to purchase from the Company, and the Company desires
the Purchasers to become long-term investors in the Company and wishes to issue
and sell to the Purchasers, Convertible Subordinated Notes with a final maturity
of July 21, 2009 with an aggregate original issuance price of $400 million
(together with all notes issued in connection with the substitution, replacement
or transfer thereof, the "NOTES"), upon the terms and subject to the conditions
set forth in this Agreement and in the Notes;
WHEREAS, concurrently with the execution of this Agreement,
the Company and IXC Communications, Inc., a Delaware corporation ("IXC"), are
entering into an Agreement and Plan of Merger (the "MERGER AGREEMENT") pursuant
to which a wholly-owned subsidiary of the Company will merge with and into IXC
(the "MERGER");
WHEREAS, the Board of Directors of the Company (the "COMPANY
BOARD OF DIRECTORS") and the Board of Directors of IXC have approved the Merger
Agreement and each of the Company Board of Directors and each Purchaser has
approved this Agreement and the transactions contemplated hereby, upon the terms
and subject to the conditions set forth herein; and
WHEREAS, in connection with the Purchasers becoming long-term
investors in the Company, the Company and the Purchasers desire to regulate
certain aspects of their relationship.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein and for good and valuable consideration, the receipt
and adequacy of which is hereby acknowledged, the parties hereto agree as
follows:
<PAGE>
Article 1
DEFINITIONS
1.1 DEFINITIONS. As used in this Agreement, and unless the
context requires a different meaning, the following terms have the meanings
indicated:
"ACCELERATED AMOUNT" has the meaning assigned to that
term in Section 8.18.
"ACCOUNTING RULES" means the applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto.
"ACCRETED VALUE" shall have the meaning specified in the
Notes.
"AFFILIATE" has the meaning ascribed to such term in
Rule 12b-2 of the General Rules and Regulations under the Exchange Act;
PROVIDED that none of the Purchasers shall be deemed to be an "Affiliate" of
the Company.
"AGREEMENT" means this Agreement as the same may be
amended, supplemented or modified in accordance with the terms hereof.
"ANTITRUST DIVISION" has the meaning assigned to that
term in Section 8.23.
"BUSINESS DAY" means any day other than a Saturday,
Sunday or other day on which commercial banks in the City of New York, New
York or Cincinnati, Ohio are authorized or required by law or executive order
to close.
"CASH PERCENTAGE" has the meaning assigned to that term
in Section 8.18.
"CHANGE OF CONTROL" is deemed to occur if:
(i) a tender offer shall be made and
consumma ted for the ownership of 30% or more of the outstanding voting
securities of the Company;
(ii) the Company shall be merged or
consolidated with another corporation and as a result of such merger or
consolidation less than 75% of the outstanding voting securities of the
surviving or resulting corporation shall be owned in the aggregate by the former
shareholders of the Company, other than Affiliates (within the meaning of the
Exchange Act) of any party to such merger or
2
<PAGE>
consolidation as the same shall have existing immediately prior to such merger
or consolidation;
(iii) the Company shall sell substantially all
of its assets to another corporation which is not a wholly owned subsidiary;
(iv) a person within the meaning of
Section 3(a)(9) or of Section 13(d)(3) (as in effect on December 5, 1988) of
the Exchange Act shall acquire 20% or more of the outstanding voting
securities of the Company (whether directly, indirectly, beneficially or of
record), or a person within the meaning of Section 3(a)(9) or Section
13(d)(3) (as in effect on December 5, 1988) of the Exchange Act controls in
any manner the election of a majority of the directors of the Company;
(v) within any period of two consecutive
years commencing on or after December 5, 1988, individuals who at the beginning
of such period constitute the Company Board of Directors cease for any reason to
constitute a majority thereof, unless the election of each director who was not
a director at the beginning of such period has been approved in advance by
directors representing at least two-thirds of the directors then in office who
were directors at the beginning of the period (for purposes hereof, ownership of
voting securities shall take into account and shall include ownership as
determined by applying the provisions of Rule 13(d)-3(d)(1)(i) pursuant to the
Exchange Act); or
(vi) a merger, consolidation or similar
transaction (regardless of whether the Company is a constituent corporation in
such transaction and other than those transactions of the type referred to in
clause (ii) above) with respect to which persons who were beneficial owners of
Voting Securities immediately prior to such transaction own less than 50% of the
Voting Securities (including securities of any successor corporation of the
Company having the ordinary power to vote in the election of directors of such
successor corporation) upon the consummation of such transaction.
For the avoidance of doubt, (x) the terms being used in clauses (i), (ii),
(iii), (iv) and (v) of this definition of "Change of Control" shall have the
respective meanings for such terms as used in the Company's 1989 Stock Option
Plan as of the date hereof and (y) the IXC Transaction shall not be deemed to be
a Change of Control.
"CHANGE OF CONTROL OFFER" has the meaning assigned to
that term in Section 8.18.
"CHANGE OF CONTROL PAYMENT" has the meaning assigned
to that term in Section 8.18.
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"CHANGE OF CONTROL PAYMENT DATE" has the meaning
assigned to that term in Section 8.18.
"CITIBANK" has the meaning assigned to that term in
Section 2.1.
"CITIBANK TRANSACTION" has the meaning assigned to
that term in Section 2.1.
"CLOSING" has the meaning assigned to that term in
Section 2.3.
"CLOSING DATE" means the date specified in Section
2.3.
"CODE" means the Internal Revenue Code of 1986, as
amended.
"COMMON STOCK" means the common stock, par value $.01
per share, of the Company and any other class of capital stock of the Company
into which such stock is reclassified or reconstituted.
"COMPANY" has the meaning set forth in the recitals
to this Agreement.
"COMPANY BENEFIT PLANS" means and includes any bonus,
pension, profit sharing, deferred compensation, incentive compensation, stock
ownership, stock purchase, stock option, phantom stock, retirement, vacation,
severance, disability, death benefit, hospitalization, medical, welfare benefit
or other plan, arrangement or understanding providing compensation or benefits
to any current or former director, officer or employee of Company or any of its
Subsidiaries.
"COMPANY BOARD OF DIRECTORS" has the meaning set
forth in the recitals to this Agreement.
"COMPANY CONSOLIDATED GROUP" has the meaning assigned
to that term in Section 5.7.
"COMPANY FILED SEC DOCUMENTS" has the meaning
assigned to that term in the introduction to Article 5.
"COMPANY OPTION PERIOD" has the meaning assigned to
that term in Section 8.13.
"COMPANY PERMITS" has the meaning assigned to that
term in Section 5.6.
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"COMPANY PREFERRED STOCK" has the meaning assigned to
that term in Section 5.2.
"COMPANY RIGHTS AGREEMENT" means the Rights
Agreement, dated as of April 29, 1997, between the Company and The Fifth Third
Bank, as rights agent, as amended.
"COMPANY SEC DOCUMENTS" has the meaning assigned to
that term in Section 5.4.
"COMPANY SERIES A PREFERRED STOCK" has the meaning
assigned to that term in Section 5.2.
"COMPANY STOCK OPTIONS" means all outstanding stock
options or other rights to purchase or receive the Common Stock granted under
the Company Stock Plans.
"COMPANY STOCK PLANS" has the meaning assigned to
that term in Section 5.2.
"COMPETING PROPOSAL" has the meaning assigned to that
term in Section 8.14.
"CONSULTATION PERIOD" has the meaning assigned to
that term in Section 8.10.
"CONVERSION PRICE" has the meaning assigned to that
term in Section 14.1.
"CONVERSION RATIO" has the meaning assigned to that
term in Section 14.1.
"CONVERSION SHARES" means the shares of Common Stock
issued or issuable upon conversion of the Notes.
"CREDIT AGREEMENT" means the Credit Agreement, dated
as of March 13, 1998, between the Company and Chase Manhattan Bank as
Administrative Agent.
"CURRENT MARKET PRICE" per share shall mean, on any
date specified herein for the determination thereof, (a) the average daily
Market Price of the Common Stock for those days during the period of 10 Trading
Days ending on such date, and (b) if the Common Stock is not then listed or
admitted to trading on any
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national securities exchange or quoted in the over-the-counter market, the
Market Price on such date, adjusted as the parties may mutually agree to take
into account the "ex" date dividend.
"DATE" has the meaning assigned to that term in
Section 14.3.
"DESIGNATED SENIOR DEBT" shall mean any Senior Debt
in which the instrument creating or evidencing the same or the assumption or
guarantee thereof (or related agreements or documents to which the Company is a
party) expressly provides that such Senior Debt shall be "Designated Senior
Debt" for purposes of this Agreement (provided that such instrument, agreement
or other document may place limitations and conditions on the right of such
Senior Debt to exercise the rights of Designated Senior Debt). If any payment
made to any holder of any Designated Senior Debt or its representative with
respect to such Designated Senior Debt is rescinded or must otherwise be
returned by such holder or representative upon the insolvency, bankruptcy or
reorganization of the Company or otherwise, the reinstated Senior Debt of the
Company arising as a result of such rescission or return shall constitute
Designated Senior Debt effective as of the date of such rescission or return.
"DESIGNATED VALUE" shall mean, for any Note to be
converted (or assumed to be converted) into Common Stock, (i) if the conversion
(or assumed conversion) occurs prior to the Full Accretion Date, (w) for
purposes of Sections 8.20, 14.3(a) and 14.7, (x) under the circumstances
described in the second sentence of Section 12.1, (y) in connection with a
Change of Control or (z) on or after a record date and prior to an Interest
Payment Date, in each case, the Accreted Value for $1,000 of original issue
price of such Note as of the date of determination, (ii) for all other
conversions prior to the Full Accretion Date, the Accreted Value for $1,000 of
original issue price of such Note as of the immediately preceding SemiAnnual
Accrual Date, and (iii) at or after the Full Accretion Date, the Full Accreted
Value for $1,000 of original issue price of such Note.
"ERISA" means the Employment Retirement Income
Security Act of 1974.
"EVENT OF DEFAULT" shall have the meaning specified
in Section 10.1.
"EXCHANGE ACT" means the Securities Exchange Act of
1934, as amended, and the rules and regulations of the SEC thereunder.
"EXPIRATION TIME" has the meaning assigned to that
term in Section 14.3.
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"FAIR MARKET VALUE" shall mean, with respect to any
property, the amount which an informed and willing buyer under no compulsion to
buy would pay an informed and willing seller, under no compulsion to sell in an
arm's-length transaction.
"FCC" means the Federal Communications Commission.
"FEE LETTER" means the letter of even date herewith
by and between the Company and Oak Hill Capital.
"FTC" has the meaning assigned to that term in
Section 8.23.
"FULL ACCRETED VALUE" with respect to a Note shall
have the meaning specified in such Note.
"FULL ACCRETION DATE" shall have the meaning
specified in the Note.
"GAAP" means generally accepted accounting principles
in the United States in effect from time to time.
"GOVERNMENTAL ENTITY" means any Federal, state, local
or foreign government, any court, administrative, regulatory or other
governmental agency, commission or authority or any non-governmental
self-regulatory agency, commission or authority.
"HOLDER" means, with respect to the Notes, any holder
of the Notes and, with respect to the Conversion Shares, any holder of
Conversion Shares and any subsequent direct or indirect transferee of such
security permitted hereunder.
"HSR ACT" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules and regulations of the
Federal Trade Commission thereunder.
"INDEMNIFIED PARTY" has the meaning assigned to that
term in Section 7.1.
"INDENTURE" has the meaning assigned to that term in
Section 8.16.
"INDENTURE NOTES" has the meaning assigned to that
term in Section 8.16.
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"INVESTMENT PROPOSAL" has the meaning assigned to
that term in Section 8.14.
"ISSUANCE DATE" has the meaning assigned to that term
in Section 14.3.
"IXC" has the meaning set forth in the recitals to
this Agreement.
"IXC TRANSACTION" means any merger, consolidation,
business combination or any similar transaction (by asset sale or otherwise)
involving the Company and IXC or any of their respective Subsidiaries,
including, without limitation, the Merger.
"KNOWLEDGE" of any person that is not an individual
means, with respect to any specific matter, the knowledge of such person's
executive officers and other officers having primary responsibility for such
matter.
"LIABILITIES" has the meaning assigned to that term
in Section 7.1.
"LIENS" mean all pledges, claims, liens, charges,
encumbrances and security interests of any kind or nature whatsoever.
"MANDATORY REDEMPTION" has the meaning assigned to
that term in Section 12.1.
"MANDATORY REDEMPTION DATE" has the meaning assigned
to that term in Section 12.1.
"MANDATORY REDEMPTION NOTICE" has the meaning
assigned to that term in Section 12.1.
"MANDATORY REDEMPTION PERIOD" has the meaning
assigned to that term in Section 12.1.
"MANDATORY REDEMPTION PRICE" has the meaning assigned
to that term in Section 12.1.
"MARKET PRICE" shall mean, per share of common stock
or any other security on any date specified herein: (a) if the common stock or
such other security is listed or admitted to trading on any national securities
exchange, the closing price of the common stock or such other security on such
date, or if the common stock or such other security is not then listed or
admitted to trading on any national securities exchange but is designated as a
national market system security, the last trading price
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of the common stock or such other security on such date; or (b) if there shall
have been no trading on such date or if the common stock or such other security
is not so designated, the average of the reported closing bid and asked prices
of the common stock or such other security on such date as shown by NASDAQ and
reported by any member firm of the NYSE, selected by the Company. If neither (a)
nor (b) above is applicable, Market Price shall mean the Fair Market Value per
share determined in a manner consistent with the last sentence of Section
8.18(c).
"MATERIAL ADVERSE CHANGE" OR "MATERIAL ADVERSE
EFFECT" means, when used in connection with the Company or any Purchaser, any
change, effect, event, occurrence, condition, development or state of facts that
is materially adverse to the business, assets, results of operations, condition
(financial or otherwise) or prospects of such party and its subsidiaries, taken
as a whole, other than any change, effect, event, occurrence, condition,
development or state of facts (i) relating to the economy or securities markets
in general or (ii) relating to the industries in which such party operates in
general and not specifically relating to such party.
"MERGER" has the meaning set forth in the recitals to
this Agreement.
"MERGER AGREEMENT" has the meaning set forth in the
recitals to this Agreement.
"MINIMUM AMOUNT" has the meaning set forth in Section
8.10.
"NASDAQ" shall mean the National Market System of the
NASDAQ Stock Market.
"NON-VOTING PREFERRED STOCK" has the meaning assigned
to that term in Section 5.2.
"NOTE REGISTER" has the meaning assigned to that term
in Section 8.19.
"NOTICE OF DEFAULT" has the meaning assigned to that
term in Section 10.1.
"NYSE" means the New York Stock Exchange, Inc.
"OAK HILL AFFILIATED ENTITY" has the meaning assigned
to that term in Section 8.10.
"OAK HILL CAPITAL" has the meaning set forth in the
recitals.
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<PAGE>
"OAK HILL DESIGNEE" means (i) the person designated
by the Oak Hill Affiliated Entity to be a member of the Company Board of
Directors under Section 8.10(a) and (ii) the person appointed by Oak Hill
Capital to attend meetings of the Company Board of Directors as the Visitor
referred to in Section 8.10(c).
"OCEAN PURCHASERS" means, collectively, Ocean I,
Ocean III, Ocean IV and Ocean V.
"OFFER PRICE" has the meaning assigned to that term
in Section 8.13.
"OFFERED SECURITIES" has the meaning assigned to that
term in Section 8.13.
"OFFERING NOTICE" has the meaning assigned to that
term in Section 8.13.
"OHCP AIV" has the meaning set forth in the recitals
to this Agreement.
"OPTIONAL REDEMPTION" has the meaning assigned to
that term in Section 13.1.
"OPTIONAL REDEMPTION DATE" has the meaning assigned
to that term in Section 13.1.
"OPTIONAL REDEMPTION NOTICE" has the meaning assigned
to that term in Section 13.1.
"OPTIONAL REDEMPTION PRICE" has the meaning assigned
to that term in Section 13.1.
"PAYMENT BLOCKAGE NOTICE" has the meaning assigned to
that term in Section 11.4.
"PERCENTAGE LIMITATION" has the meaning set forth in
Section 8.11.
"PERSON" means any individual, firm, corporation,
partnership, limited liability company, trust, incorporated or unincorporated
association, joint venture, joint stock company, Governmental Entity or other
entity of any kind, and shall include any successor (by merger or otherwise) of
such entity.
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<PAGE>
"PRE-OFFERING NOTICE" has the meaning assigned to
that term in Section 8.13.
"PREPAYMENT EVENT" has the meaning assigned to that
term in Section 12.1.
"PREPAYMENT EVENT NOTICE" has the meaning assigned to
that term in Section 12.1.
"PURCHASERS" has the meaning set forth in the
recitals to this Agreement and does not include any assignees of any Purchaser
other than any Affiliate of the Purchasers.
"REGISTRATION RIGHTS AGREEMENT" means the
Registration Rights Agreement between the Company and the Purchasers
substantially in the form attached as EXHIBIT B hereto.
"REGULAR DIVIDEND" shall mean any nominal regular
quarterly dividend declared by the Company Board of Directors on the shares of
the Common Stock.
"RESPONSIBLE OFFICER" shall mean, when used with
respect to any trustee, any officer within the Corporate Trust Office, including
any Vice President, Managing Director, Assistant Vice President, Secretary,
Assistant Secretary, Treasurer or Assistant Treasurer or any other officer of
such trustee customarily performing functions similar to those performed by any
of the above designated officers, and when used with respect to any Holder, an
executive officer of such Holder or persons performing functions similar to
those performed by an executive officer.
"SEC" means the Securities and Exchange Commission or
any similar agency then having jurisdiction to enforce the Securities Act.
"SECURITIES ACT" means the Securities Act of 1933, as
amended, and the rules and regulations of the SEC thereunder.
"SEMI-ANNUAL ACCRUAL DATE" with respect to a Note
shall have the meaning specified in such Note.
"SELLING PURCHASER" has the meaning assigned to that
term in Section 8.13.
"SENIOR DEBT" means the principal of (and premium, if
any) and interest (including all interest accruing subsequent to the
commencement of any
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bankruptcy or similar proceeding, whether or not a claim for post-petition
interest is allowable as a claim in any such proceeding) on, and
all fees and other amounts (including collection expenses, attorney's fees and
late charges) owing with respect to, the following, whether direct or indirect,
absolute or contingent, secured or unsecured, due or to become due, outstanding
at the date of execution of this Agreement or thereafter incurred, created or
assumed: (a) indebtedness of the Company for money borrowed or evidenced by
bonds, debentures, notes, guarantees or similar instruments, (b) reimbursement,
prepayment and other obligations of the Company with respect to letters of
credit, bankers' acceptances and similar facilities issued for the account of
the Company, (c) every obligation of the Company issued or assumed as the
deferred purchase price of property or services purchased by the Company, (d)
obligations of the Company as lessee under leases required to be capitalized on
the balance sheet of the lessee under United States generally accepted
accounting principles or which can be capitalized under the Code, (e)
obligations of the Company under interest rate and currency swaps, caps, floors,
collars or similar arrangements intended to protect the Company against
fluctuations in interest or currency exchange rates, (f) all indebtedness for
borrowed money of the Company secured by any Lien on any property or asset owned
or held by the Company regardless of whether the indebtedness secured thereby
shall have been assumed by the Company or shall be non-recourse to the credit of
the Company, (g) all indebtedness created or arising under any conditional sale
or other title retention agreement with respect to property acquired by the
Company (even though the rights and remedies of the seller or lender under such
agreement in the event of default are limited to repossession or sale of such
property), (h) indebtedness of others of the kinds described in the preceding
clauses (a) through (g) and all dividends and distributions of others in each
case that the Company has assumed, guaranteed or otherwise assured the payment
thereof, directly or indirectly (including guarantees of indebtedness for
borrowed money of any of its Subsidiaries), and/or (i) deferrals, renewals,
extensions and refundings of, or amendments, modifications or supplements to,
any indebtedness or obligation described in the preceding clauses (a) through
(h) whether or not there is any notice to or consent of the Holders; PROVIDED,
HOWEVER, that the following shall not constitute Senior Debt: (i) any particular
indebtedness or obligation that is owed by the Company to any of its direct and
indirect Subsidiaries, (ii) any particular indebtedness, deferral, renewal,
extension or refunding if it is expressly stated in the governing terms or in
the assumption thereof that the indebtedness involved is pari passu in right of
payment with or junior in right of payment to the Notes and (iii) any trade
payables and other accrued current liabilities incurred in the ordinary course
of business.
"SENIOR DEBT DOCUMENTS" means, collectively, any and
all agreements relating to any Senior Debt, including, without limitation, the
Credit Agreement.
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"SIGNIFICANT SUBSIDIARIES" has the meaning ascribed
to such term in Rule 1-02(w) of Regulation S-X under the Securities Act and the
Exchange Act.
"SPECIFIED DATE" means the later of (i) the
consummation of the IXC Transaction and (ii) the expiration or earlier
termination of any applicable waiting period under the HSR Act with respect to
the acquisition of the shares of Common Stock upon any conversion of the Notes.
"STATED MATURITY" when used with respect to the Notes
or any installment of principal or Full Accreted Value thereof or interest
thereon, means the date specified in the Note or this Agreement as the fixed
date on which the principal or Full Accreted Value of such Note or such
installment of interest is due and payable.
"SUBSIDIARY" of any Person means another Person, an
amount of the voting stock, other voting ownership or voting partnership
interests of which is sufficient to elect at least a majority of its board of
directors or other governing body (or, if there are no voting interests, 50% or
more of the equity interests of which) is owned directly or indirectly by such
first Person.
"THIRD PARTY OFFER" has the meaning assigned to that
term in Section 8.13.
"THIRD PARTY OFFEROR" has the meaning assigned to
that term in Section 8.13.
"TRADING DAYS" means, with respect to a security
traded on a securities exchange, automated quotation system or market, a day on
which such exchange, system or market is open for a full day of trading.
"TRANCHE A NOTES" has the meaning assigned to that
term in Section 2.1.
"TRANCHE B NOTES" has the meaning assigned to that
term in Section 8.17.
"TRANSACTION" has the meaning assigned to that term
in Section 14.7.
"VISITOR" has the meaning assigned to that term in
Section 8.10(c).
"VOTING PREFERRED STOCK" has the meaning assigned to
that term in Section 5.2.
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"VOTING SECURITIES" has the meaning set forth in
Section 8.11.
1.2 ACCOUNTING TERMS. All accounting terms used herein not
expressly defined in this Agreement shall have the respective meanings given to
them in accordance with GAAP.
Article 2
PURCHASE AND SALE OF NOTES
2.1 PURCHASE AND SALE OF NOTES.
Subject to the terms and conditions herein set forth,
each of the Purchasers, severally and not jointly, agrees that it, or its
permitted assignee, will purchase from the Company, at the Closing, Notes with
an aggregate initial principal amount set forth opposite such Purchaser's name
on SCHEDULE 1 attached hereto under the heading "Notes to be Purchased at the
Closing" (the "TRANCHE A NOTES") for the purchase price set forth opposite such
Purchaser's name on SCHEDULE 1 attached hereto under "Purchase Price," in cash,
by wire transfer of immediately available funds to an account designated by the
Company in a notice delivered to each Purchaser at least one day prior to the
Closing Date. Each Ocean Purchaser has assigned its rights to purchase the Notes
to be purchased by it to Citibank N.A. ("CITIBANK") who upon consummation of the
Closing will be a Holder of such Notes (the "CITIBANK TRANSACTION").
2.2 NOTES. The Notes will be substantially in the form of
the Note attached as EXHIBIT A hereto.
2.3 CLOSING.
(a) The purchase and issuance of the Tranche A
Notes shall take place immediately upon execution of this Agreement at the
closing (the "CLOSING") to be held at a location agreed to by the parties, on
July 21, 1999, or on such other later date as the parties may agree in writing
(the "CLOSING DATE"), at 10:00 a.m., New York City time. At the Closing, subject
to the terms and conditions set forth herein, the Company shall sell the Tranche
A Notes to the Purchasers (or their assignee) by delivering to each Purchaser
(or its assignee) its respective Tranche A Notes registered in its name, free
and clear of any Liens, and each Purchaser (or its assignee) shall purchase the
Tranche A Notes to be purchased by it.
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<PAGE>
Article 3
CONDITIONS TO THE OBLIGATION OF THE
PURCHASERS TO CLOSE AT THE CLOSING
The obligation of each Purchaser to purchase the Tranche A
Notes to be purchased by it, to pay the Purchase Price to be paid by it at the
Closing and to perform any obligations hereunder shall be subject to the
satisfaction or waiver of the following conditions on or as of the Closing Date:
3.1 REPRESENTATIONS AND WARRANTIES TRUE. The
representations and warranties of the Company set forth herein that are
qualified as to materiality shall be true and correct, and those that are not so
qualified shall be true and correct in all material respects, in each case as of
the Closing Date, with the same effect as if made at and as of such time (except
to the extent expressly made as of an earlier date, in which case as of such
date).
3.2 COMPLIANCE WITH THIS AGREEMENT. The Company shall
have performed and complied with all of its agreements and conditions set forth
herein that are required to be performed or complied with by the Company on or
before the Closing Date.
3.3 OFFICER'S CERTIFICATE. The Purchasers shall have
received a certificate, dated the Closing Date and signed by the President or a
Vice-President of the Company, certifying that the conditions set forth in
Sections 3.1 and 3.2 hereof have been satisfied.
3.4 SECRETARY'S CERTIFICATE. The Purchasers shall have
received a certificate, dated the Closing Date and signed by the Secretary or an
Assistant Secretary of the Company, certifying the truth and correctness of
attached copies of the Amended Articles of Incorporation and Amended Regulations
of the Company and resolutions of the Company Board of Directors approving the
Merger, this Agreement and the transactions contemplated hereby and thereby.
3.5 OPINION OF COUNSEL. The Purchasers shall have
received the opinion of each of Thomas Taylor, general counsel of the Company,
and of Cravath, Swaine & Moore, counsel to the Company, dated the Closing Date,
substantially in the form attached hereto as EXHIBIT C and EXHIBIT D,
respectively.
3.6 NO MATERIAL ADVERSE CHANGE. Since December 31, 1998,
there shall have been no Material Adverse Change with respect to the Company.
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<PAGE>
3.7 REGISTRATION RIGHTS AGREEMENT. The Company shall
have duly executed and delivered to the Purchasers the Registration Rights
Agreement.
3.8 IXC TRANSACTION. The Merger Agreement shall have been
executed by the parties thereto simultaneously with the Closing. The Purchasers
shall have received a fully executed copy of the Merger Agreement.
3.9 COMPANY BOARD OF DIRECTORS. J. Taylor Crandall shall
have been elected to the Company Board of Directors on the terms provided for in
Section 8.10.
EACH PURCHASER ACKNOWLEDGES AND AGREES THAT BY EXECUTING AND
DELIVERING THIS AGREEMENT ALL OF THE CONDITIONS SET FORTH IN THIS ARTICLE 3 HAVE
BEEN SATISFIED OR WAIVED.
Article 4
CONDITIONS TO THE OBLIGATION OF
THE COMPANY TO CLOSE AT THE CLOSING
The obligations of the Company to issue and sell the Notes to
a Purchaser, to consummate the transactions contemplated herein on the Closing
Date with respect to such Purchaser and to perform any obligations hereunder
shall be subject to the satisfaction or waiver of the following conditions on or
as of the Closing Date:
4.1 REPRESENTATIONS AND WARRANTIES TRUE. The
representations and warranties of such Purchaser set forth herein that are
qualified as to materiality shall be true and correct, and those that are not so
qualified shall be true and correct in all material respects, in each case as of
the Closing Date, with the same effect as if made at and as of such time (except
to the extent expressly made as of an earlier date, in which case as of such
date).
4.2 COMPLIANCE WITH THIS AGREEMENT. Such Purchaser shall
have performed and complied with all of its agreements and conditions set forth
or contemplated herein that are required to be performed or complied with by
such Purchaser on or before the Closing Date.
4.3 CONSENTS AND APPROVALS. All consents, exemptions,
authorizations, or other actions by, or notices to, or filings with,
Governmental Entities and other Persons necessary or required in connection with
the execution, delivery or performance by such Purchaser or enforcement against
such Purchaser of this
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Agreement shall have been obtained and be in full force and effect, and the
Company shall have been furnished with appropriate evidence thereof.
4.4 IXC TRANSACTION. The Merger Agreement shall have been
executed by the parties thereto simultaneously with the Closing.
THE COMPANY ACKNOWLEDGES AND AGREES THAT BY EXECUTING AND
DELIVERING THIS AGREEMENT ALL OF THE CONDITIONS SET FORTH IN THIS ARTICLE 4 HAVE
BEEN SATISFIED OR WAIVED.
Article 5
REPRESENTATIONS AND
WARRANTIES OF THE COMPANY
Except as expressly disclosed in the Company SEC Documents
filed and publicly available prior to the date of this Agreement (the "COMPANY
FILED SEC DOCUMENTS"), the Company represents and warrants to each Purchaser as
follows:
5.1 ORGANIZATION, STANDING AND CORPORATE POWER. Each of
the Company and its Subsidiaries is a corporation or other legal entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is organized and has the requisite corporate or other
power, as the case may be, and authority to carry on its business as now being
conducted. Each of the Company and its Subsidiaries is duly qualified or
licensed to do business and is in good standing in each jurisdiction in which
the nature of its business or the ownership, leasing or operation of its
properties makes such qualification or licensing necessary, except for those
jurisdictions in which the failure to be so qualified or licensed or to be in
good standing individually or in the aggregate is not reasonably likely to have
a Material Adverse Effect on the Company. The Company has made available to the
Purchasers prior to the execution of this Agreement complete and correct copies
of its Amended Articles of Incorporation and Amended Regulations, as amended to
the date of this Agreement.
5.2 CAPITAL STRUCTURE. The authorized capital stock of
the Company consists of 485,000,000 shares of capital stock consisting of: (1)
480,000,000 shares of the Common Stock, (2) 1,000,000 shares of non-voting
preferred stock without par value (the "NON-VOTING PREFERRED STOCK") and (3)
4,000,000 shares of voting preferred stock without par value (the "VOTING
PREFERRED STOCK" and, together with the Non-Voting Preferred Stock, the "COMPANY
PREFERRED STOCK") of which 2,000,000 shares have been designated as Series A
Preferred Stock (the "COMPANY SERIES A PREFERRED STOCK"). At the close of
business on July 15, 1999, (i) 137,792,751 shares of the
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Common Stock were issued and outstanding; (ii) no shares of the Common Stock
were held by the Company in its treasury; (iii) no shares of the Company
Preferred Stock were issued and outstanding; (iv) 2,000,000 shares of the
Company Series A Preferred Stock were reserved for issuance in connection with
the rights to purchase shares of the Common Stock issued pursuant to the Company
Rights Agreement; and (v) no shares of the Common Stock were reserved for
issuance pursuant to the Company's 1989 Stock Option Plan, the Company's 1997
Stock Option Plan for Non-Employee Directors, the Company's 1997 Long Term
Incentive Plan, the Company's Executive Deferred Compensation Plan and grants of
options made to individual employees (such plans and arrangements, collectively,
the "COMPANY STOCK PLANS") (of which 7,284,000 shares of the Common Stock are
subject to outstanding Company Stock Options). There are no outstanding stock
appreciation rights or rights (other than the Company Stock Options) to receive
shares of the Common Stock on a deferred basis granted under the Company Stock
Plans or otherwise. No bonds, debentures, notes or other indebtedness of the
Company having the right to vote (or convertible into or exchangeable or
exercisable for securities having the right to vote) on any matters on which
shareholders of the Company or any of its Subsidiaries may vote are issued or
outstanding or subject to issuance. All outstanding shares of capital stock of
the Company are, and all shares which may be issued will be, when issued, duly
authorized, validly issued, fully paid and nonassessable and will be delivered
free and clear of all Liens (other than Liens created by or imposed upon the
holders thereof) and not subject to preemptive rights. The Conversion Shares
when issued upon conversion of the Notes will be duly authorized, validly
issued, fully paid and nonassessable. The Company has reserved and has available
out of its authorized Common Stock, solely for the purpose of issuing Conversion
Shares, such number of shares of Common Stock as shall be issuable upon
conversion of the Notes. Except as set forth in this Section 5.2 (including
pursuant to the conversion or exercise of the securities referred to above), (x)
there are not issued, reserved for issuance or outstanding (A) any shares of
capital stock or other voting securities of the Company or any of its
Subsidiaries (other than shares of capital stock or other voting securities of
such Subsidiaries that are directly or indirectly owned by the Company), (B) any
securities of the Company or any of its Subsidiaries convertible into or
exchangeable or exercisable for shares of capital stock or other voting
securities of, or other ownership interests in, the Company or any of its
Subsidiaries or (C) any warrants, calls, options or other rights to acquire from
the Company or any of its Subsidiaries, and no obligation of the Company or any
of its Subsidiaries to issue any capital stock or other voting securities of, or
other ownership interests in, or any securities convertible into or exchangeable
or exercisable for any capital stock or other voting securities of, or other
ownership interests in, the Company or any of its Subsidiaries and (y) there are
not any outstanding obligations of the Company or any of its Subsidiaries to
repurchase, redeem or otherwise acquire any such securities or to issue, deliver
or sell, or cause to be issued, delivered or sold, any such securities. The
Company is not a party to any voting agreement with respect to the voting of any
such securities. Other than the capital stock of, or other equity
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interests in, its Subsidiaries, the Company does not directly or indirectly
beneficially own any securities or other beneficial ownership interests in any
other entity.
5.3 AUTHORITY; NONCONTRAVENTION. The Company has the
requisite corporate power and authority to enter into this Agreement, the Notes,
the Registration Rights Agreement, the Fee Letter and the Merger Agreement, and
to consummate the transactions contemplated by this Agreement and thereby. The
execution and delivery of this Agreement, the Notes, the Registration Rights
Agreement, the Fee Letter and the Merger Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby and thereby
have been duly authorized by all necessary corporate action on the part of the
Company. This Agreement, the Notes, the Registration Rights Agreement, the Fee
Letter and the Merger Agreement have been duly executed and delivered by the
Company and, assuming the due authorization, execution and delivery by each of
the other parties hereto and thereto, constitute the legal, valid and binding
obligations of the Company, enforceable against the Company in accordance with
their terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability relating to
or affecting creditors' rights and to general equity principles. The execution
and delivery of this Agreement, the Notes, the Registration Rights Agreement,
the Fee Letter and the Merger Agreement do not, and the consummation of the
transactions contemplated by this Agreement, the Notes, the Registration Rights
Agreement, the Fee Letter and the Merger Agreement and compliance with the
provisions hereof and thereof shall not, assuming the receipt of the approval of
the shareholders of the Company contemplated by the Merger Agreement, violate
any rules prescribed by the NYSE and will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of
any obligation or loss of a benefit under, or result in the creation of any Lien
upon any of the properties or assets of the Company or any of its Subsidiaries
under, (i) the Amended Articles of Incorporation or Amended Regulations of the
Company or the comparable organizational documents of any of its Subsidiaries,
(ii) any loan or credit agreement, note, bond, mortgage, indenture, lease or
other agreement, instrument, permit, concession, franchise, license or similar
authorization applicable to the Company or any of its Subsidiaries or their
respective properties or assets or (iii) subject to the governmental filings and
other matters referred to in the following sentence, any judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to the Company or
any of its Subsidiaries or their respective properties or assets, other than, in
the case of clauses (ii) and (iii), any such conflicts, violations, defaults,
rights, losses or Liens that individually or in the aggregate are not reasonably
likely to (x) have a Material Adverse Effect on the Company, (y) impair the
ability of the Company to perform its obligations under this Agreement, the
Notes, the Registration Rights Agreement, the Fee Letter or the Merger
Agreement, or (z) prevent or materially delay the consummation of the
transactions contemplated by this Agreement, the Notes, the Registration Rights
Agreement, the Fee Letter or the
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Merger Agreement. No consent, approval, order or authorization of, action by or
in respect of, or registration, declaration or filing with, any Governmental
Entity is required by or with respect to the Company or any of its Subsidiaries
in connection with the execution and delivery of this Agreement, the Notes, the
Registration Rights Agreement, the Fee Letter or Merger Agreement by the Company
or the consummation by the Company of the transactions contemplated hereby or
thereby, except for (1) such filings under the Securities Act as may be required
pursuant to the Registration Rights Agreement, (2) filings described in Section
8.23 hereof and (3) such filings under the Exchange Act as may be required in
connection with this Agreement and the transactions contemplated hereby and
except for such consents, approvals, orders or authorizations the failure of
which to be made or obtained individually or in the aggregate is not reasonably
likely to (x) have a Material Adverse Effect on the Company, (y) impair the
ability of the Company to perform its obligations under this Agreement, the
Notes, the Registration Rights Agreement, the Fee Letter or the Merger Agreement
or (z) prevent or materially delay the consummation of the transactions
contemplated hereby or thereby.
5.4 SEC DOCUMENTS. The Company has filed all required
reports, schedules, forms, statements and other documents (including exhibits
and all other information incorporated therein) with the SEC since January 1,
1998 (collectively, the "COMPANY SEC DOCUMENTS"). As of their respective dates,
the Company SEC Documents complied 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 SEC promulgated thereunder applicable to such
Company SEC Documents, and none of the Company SEC Documents when filed
contained any untrue statement of a material fact or omitted 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. Except to the extent that information contained in any Company SEC
Document has been revised or superseded by a later filed Company SEC Document,
none of the Company SEC Documents contains any untrue statement of a material
fact or omits 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. The financial statements of the
Company included in the Company SEC Documents complied as to form, as of their
respective dates of filing with the SEC, in all material respects with the
Accounting Rules, have been prepared in accordance with GAAP (except, in the
case of unaudited statements, as permitted by Form 10-Q of the SEC) applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto) and fairly presented in all material respects the consolidated
financial position of the Company and its consolidated Subsidiaries as of the
dates thereof and the consolidated results of their operations and cash flows
for the periods then ended (subject, in the case of unaudited statements, to
normal recurring year-end audit adjustments and the absence of footnotes if
applicable).
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5.5 LITIGATION. There is no suit, action, proceeding,
claim, grievance or investigation pending or, to the Knowledge of the Company or
any of its Subsidiaries, threatened against or affecting the Company or any of
its Subsidiaries that individually or in the aggregate is reasonably likely to
have a Material Adverse Effect on the Company nor is there any judgment, decree,
injunction, rule or order of any Governmental Entity or arbitrator outstanding
against the Company or any of its Subsidiaries having, or that is individually
or in the aggregate reasonably likely to have a Material Adverse Effect on the
Company. There are no facts, circumstances or conditions that are reasonably
likely to give rise to any liability of, or form the basis of a claim against,
the Company or any of its Subsidiaries under any applicable statutes, laws,
ordinances, rules or regulations, which liability or claim is reasonably likely
to have individually or in the aggregate a Material Adverse Effect on the
Company.
5.6 COMPLIANCE WITH APPLICABLE LAWS. The Company and its
Subsidiaries hold all material permits, licenses, variances, exemptions, orders,
registrations and approvals of all Governmental Entities (the "COMPANY PERMITS")
which are required for them to own, lease or operate their assets and to carry
on their businesses. The Company and its Subsidiaries are in compliance in all
material respects with the terms of the Company Permits and all applicable
statutes, laws, ordinances, rules and regulations. No action, demand,
requirement or investigation by any Governmental Entities and no suit, action or
proceeding by any person, in each case with respect to the Company or any of its
Subsidiaries or any of their respective properties, is pending or, to the
Knowledge of the Company, threatened.
5.7 TAXES. (i) Each of the Company and its Subsidiaries
and each Company Consolidated Group has filed or has caused to be filed all
material tax returns and reports required to be filed by it and all such
returns and reports are complete and correct in all material respects, or
requests for extensions to file such returns or reports have been timely
filed, granted and have not expired, except to the extent that such failures
to file, to be complete or correct or to have extensions granted that remain
in effect individually or in the aggregate are not reasonably likely to have
a Material Adverse Effect on the Company. The Company, each of its
Subsidiaries and each Company Consolidated Group has paid or caused to be
paid (or the Company has paid on its behalf) all material taxes due and
owing, and the most recent financial statements contained in the Company
Filed SEC Documents reflect an adequate reserve for all material taxes
payable by the Company and its Subsidiaries for all taxable periods and
portions thereof accrued through the date of such financial statements.
(ii) No deficiencies, audit examinations,
refund litigation, proposed adjustments or matters in controversy, for
any taxes have been proposed, asserted or assessed in writing against
the Company or any of its Subsidiaries or any Company Consolidated
Group that are not adequately reserved for, except for deficiencies,
audit examinations, refund litigation,
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proposed adjustments or matters in controversy that individually or in
the aggregate are not reasonably likely to have a Material Adverse
Effect on the Company.
(iii) As used in this Agreement (1) "taxes"
shall include all (x) Federal, state, local or foreign income,
property, sales, excise and other taxes or similar governmental
charges, including any interest, penalties or additions with respect
thereto, (y) liability for the payment of any amounts of the type
described in clause (x) as a result of being a member of an
affiliated, consolidated, combined or unitary group, and (z) liability
for the payment of any amounts as a result of being party to any tax
sharing agreement or as a result of any express or implied obligation
to indemnify any other person with respect to the payment of any
amounts of the type described in clause (x) or (y) and (2) "COMPANY
CONSOLIDATED GROUP" means any affiliated group within the meaning of
Section 1504(a) of the Code, in which the Company (or any Subsidiary
of the Company) is or has ever been a member or any group of
corporations with which the Company files, has filed or is or was
required to file an affiliated, consolidated, combined, unitary or
aggregate tax return.
5.8 CHANGE OF CONTROL. No employee of the Company or its
Subsidiaries will be entitled to any additional benefits or any acceleration of
the time of payment or vesting of any benefits under any Company Benefit Plan as
a result of the transactions contemplated by this Agreement, the Notes, the
Registration Rights Agreement, the Fee Letter or the Merger Agreement.
5.9 STATE TAKEOVER STATUTES. The Company Board of
Directors has unanimously approved the terms of this Agreement, the Notes, the
Registration Rights Agreement, the Fee Letter and the Merger Agreement and the
consummation of the Merger and the other transactions contemplated hereby and
thereby and such approval represents all the actions of the Company necessary to
ensure that Sections 1704.01-1704.07 of the Ohio Revised Code do not apply to
the Company in connection with the Merger, this Agreement and the other
transactions contemplated hereby and thereby.
5.10 BROKERS. No broker, investment banker, financial
advisor or other person, other than Salomon Smith Barney Inc., the fees,
commissions and expenses of which will be paid by the Company, is entitled to
any broker's, finder's, financial advisor's or other similar fee or commission,
or the reimbursement of expenses, in connection with the transactions
contemplated by this Agreement and the Registration Rights Agreement, based upon
arrangements made by or on behalf of the Company.
5.11 SENIOR DEBT DOCUMENTS. The Senior Debt Documents do
not prohibit any payment to the Purchasers pursuant to Section 12.1 hereof.
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5.12 MARGIN STOCK. The Company represents and warrants
that not more than 25 percent of the value of the consolidated assets of the
Company is represented by margin stock (as such term is defined in Regulation U
of the Board of Governors of the Federal Reserve System as in effect on the date
hereof).
Article 6
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each of the Purchasers, severally but not jointly, represents
and warrants to the Company as follows.
6.1 ORGANIZATION, STANDING AND CORPORATE POWER. Each such
Purchaser is a corporation or other legal entity duly organized, validly
existing and in good standing under the laws of the jurisdiction in which it is
organized and has the requisite corporate or other power, as the case may be,
and authority to carry on its business as now being conducted. Each such
Purchaser is duly qualified or licensed to do business and is in good standing
in each jurisdiction in which the nature of its business or the ownership,
leasing or operation of its properties makes such qualification or licensing
necessary, except for those jurisdictions in which the failure to be so
qualified or licensed or to be in good standing individually or in the aggregate
is not reasonably likely to have a Material Adverse Effect on such Purchaser.
6.2 AUTHORITY; NONCONTRAVENTION. Each such Purchaser has
the requisite corporate power and authority to enter into this Agreement and the
Registration Rights Agreement and to consummate the transactions contemplated
hereby and thereby (including the purchase by such Purchaser of the Notes). The
execution and delivery of this Agreement and the Registration Rights Agreement
by the Company and the consummation by such Purchaser of the transactions contem
plated by this Agreement (including the purchase by such Purchaser of the Notes)
and the Registration Rights Agreement have been duly authorized by all necessary
corporate action on the part of such Purchaser. This Agreement and the
Registration Rights Agreement have been duly executed and delivered by such
Purchaser and, assuming the due authorization, execution and delivery by each of
the other parties hereto and thereto, constitute the legal, valid and binding
obligations of such Purchaser, enforceable against such Purchaser in accordance
with their terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability relating to
or affecting creditors' rights and to general equity principles. No consent,
approval, order or authorization of, action by or in respect of, or
registration, declaration or filing with, any Governmental Entity is required by
or with respect to such Purchaser in connection with the execution and delivery
of this Agreement or the Registration Rights Agreement by the Purchaser or
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the consummation by the Purchaser of the transactions contemplated by this
Agreement (including the purchase by such Purchaser of the Notes) or the
Registration Rights Agreement, except for (i) filings under the HSR Act required
in connection with the conversion of the Notes (ii) filings under the Exchange
Act and (iii) such consents, approvals, orders or authorizations the failure of
which to be made or obtained individually or in the aggregate is not reasonably
likely to (x) have a Material Adverse Effect on the Purchaser, (y) impair the
ability of the Purchaser to perform its obligations under this Agreement
(including the purchase by such Purchaser of the Notes) or the Registration
Rights Agreement or (z) prevent or materially delay the consummation of the
transactions contemplated by this Agreement (including the purchase by such
Purchaser of the Notes) or the Registration Rights Agreement.
6.3 BROKERS. No broker, investment banker, financial
advisor or other person, the fees, commissions and expenses of which will be
paid by such Purchaser, is entitled to any broker's, finder's, financial
advisor's or other similar fee or commission, or the reimbursement of expenses,
in connection with the transactions contemplated by this Agreement and the
Registration Rights Agreement, based upon arrangements made by or on behalf of
the Purchaser.
6.4 SECURITIES ACT REPRESENTATION. Such Purchaser is an
"accredited investor" as defined in Rule 501 promulgated under Regulation D
under the Securities Act. Such Purchaser will acquire the Notes to be issued
hereunder and all the Conversion Shares that may be issued upon conversion
thereof for its own account for the purpose of investment and not with a view to
a distribution or resale of any such securities in violation of any applicable
Federal or state securities laws. Such Purchaser will not offer to sell, sell or
otherwise dispose of any Notes or Conversion Shares in violation of applicable
Federal or state securities laws.
6.5 PRESENT OWNERSHIP. Other than the Notes to be issued
hereunder and the Conversion Shares issuable upon the conversion thereof, such
Purchaser does not beneficially own (within the meaning of Rule 13d-3 under the
Exchange Act, such term to have such meaning throughout this Agreement) any
Voting Securities.
Article 7
INDEMNIFICATION
7.1 INDEMNIFICATION BY THE COMPANY. In addition to all
other sums due hereunder or provided for in this Agreement, the Notes, the
Registration Rights Agreement or the Fee Letter, the Company agrees to indemnify
and hold harmless each Purchaser and its Affiliates and their respective
officers, directors, members, agents, employees, subsidiaries, partners and
controlling persons (each, an "INDEMNIFIED
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PARTY") to the fullest extent permitted by law from and against any and all
losses, claims, damages, expenses (including reasonable fees, disbursements and
other charges of counsel) or other liabilities ("LIABILITIES") resulting from
any breach of any covenant, agreement, representation or warranty of the Company
in this Agreement or any legal, administrative or other actions (including
actions brought by the Company or any equity holders of the Company or
derivative actions brought by any Person claiming through the Company or in the
Company's name), proceedings or investigations (whether formal or informal), or
written threats thereof, arising out of any Indemnified Party's role in the
transactions contemplated hereby or in the IXC Transaction; PROVIDED, HOWEVER,
that the Company shall not be liable under this Section 7.1 (a) for any amount
paid in settlement of claims without the Company's prior written consent (which
consent shall not be unreasonably withheld) or (b) to the extent that it is
finally judicially determined that such Liabilities resulted from the willful
misconduct, bad faith or gross negligence of such Indemnified Party or any
Affiliate thereof; PROVIDED, FURTHER, that if and to the extent that the
Indemnified Party is entitled to such indemnification under this Section 7.1 but
such indemnification is unenforceable for any reason, the Company shall make the
maximum contribution to the payment and satisfaction of such indemnified
Liability which shall be permissible under applicable laws. In connection with
the obligation of the Company to indemnify for expenses as set forth above, the
Company further agrees to reimburse each Indemnified Party for all such expenses
(including reasonable fees, disbursements and other charges of counsel) as they
are incurred by such Indemnified Party; PROVIDED, HOWEVER, that if an
Indemnified Party is reimbursed hereunder for any expenses, such reimbursement
of expenses shall be refunded immediately to the extent it is finally judicially
determined that the Liabilities in question (x) resulted from the willful
misconduct, bad faith or gross negligence of such Indemnified Party or (y) was
not properly the subject of indemnification under this Section 7.1.
7.2 NOTIFICATION. Each Indemnified Party under this
Article 7 will, promptly after the receipt of notice of the commencement of any
action or other proceeding against such Indemnified Party in respect of which
indemnity may be sought from the Company under this Article 7, notify the
Company in writing of the commencement thereof. The omission of any Indemnified
Party so to notify the Company of any such action shall not relieve the Company
from any liability which it may have to such Indemnified Party (i) other than
pursuant to this Article 7 or (ii) under this Article 7 unless, and only to the
extent that the Company is prejudiced thereby. In case any such action or other
proceeding shall be brought against any Indemnified Party and it shall notify
the Company of the commencement thereof, the Company shall be entitled to
participate therein and, to the extent that it may wish, to assume the defense
thereof, with counsel reasonably satisfactory to such Indemnified Party;
PROVIDED, HOWEVER, that any Indemnified Party may, at its own expense, retain
separate counsel to participate in such defense. Notwithstanding the foregoing,
in any action or proceeding in which both the Company and an Indemnified Party
is, or is
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reasonably likely to become, a party, such Indemnified Party shall have the
right to employ separate counsel at the Company's expense and to control its own
defense of such action or proceeding if, in the reasonable written opinion of
outside counsel to such Indemnified Party delivered to the Company, (a) there
are or may be legal defenses available to such Indemnified Party or to other
Indemnified Parties that are different from or additional to those available to
the Company or (b) any conflict or potential conflict exists between the Company
and such Indemnified Party that would make such separate representation
advisable; PROVIDED, HOWEVER, that in no event shall the Company be required to
pay fees and expenses under this Article 7 for more than one firm of attorneys
in any jurisdiction in any one legal action or group of related legal actions.
The Company agrees that the Company will not, without the prior written consent
(such consent not to be unreasonably withheld) of the Indemnified Party, settle,
compromise or consent to the entry of any judgment in any pending or threatened
claim, action or proceeding relating to the matters contemplated hereby (if any
Indemnified Party is a party thereto or has been actually threatened to be made
a party thereto) unless such settlement, compromise or consent includes an
unconditional release of such Indemnified Party and each other Indemnified Party
from all liability arising or that may arise out of such claim, action or
proceeding. The rights accorded to Indemnified Parties hereunder shall be in
addition to any rights that any Indemnified Party may have at common law, by
separate agreement or otherwise.
7.3 REGISTRATION RIGHTS AGREEMENT. Notwithstanding
anything to the contrary in this Article 7, the indemnification and contribution
provisions of the Registration Rights Agreement shall govern any claim made with
respect to any registration statement filed pursuant thereto or sales made
thereunder.
Article 8
AFFIRMATIVE COVENANTS
8.1 FINANCIAL STATEMENTS. For so long as the Notes are
outstanding, the Company shall deliver to each Holder:
(a) as soon as available, but not later than one
hundred twenty (120) days after the end of each fiscal year of the Company, a
copy of the audited consolidated balance sheet of the Company and its
Subsidiaries as of the end of such year and the related consolidated statements
of income and cash flows for such fiscal year, setting forth in each case in
comparative form the figures for the previous year, all in reasonable detail and
accompanied by a management summary and analysis of the operations of the
Company and its Subsidiaries for such fiscal year and by the opinion of
PricewaterhouseCoopers LLP (or any successor thereto) or a nationally recognized
independent public accounting firm which report shall state that such
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consolidated financial statements present fairly the financial position for the
periods indicated in conformity with GAAP applied on a basis consistent with
prior years; PROVIDED that the delivery of a copy of the Company's Annual Report
on Form 10-K shall satisfy the requirements of this Section 8.1(a);
(b) as soon as available and, in any event,
within 45 days after the end of each of the first three fiscal quarters of each
year commencing with the fiscal quarter ended September 30, 1999, the unaudited
consolidated balance sheet of the Company and its Subsidiaries, and the related
consolidated statements of income and cash flow for such quarter and for the
period commencing on the first day of the fiscal year and ending on the last day
of such quarter, all certified by an appropriate officer of the Company;
PROVIDED that the delivery of a copy of the Company's Quarterly Report on Form
10-Q shall satisfy the requirements of this Section 8.1(b); and
(c) except as otherwise provided pursuant to
Section 8.1(a) and (b), as long as the Company is subject to the Securities Act
or the Exchange Act, as promptly as practicable after the same are filed, copies
of all reports, statements and other documents filed with the SEC.
8.2 CERTIFICATES; OTHER INFORMATION. The Company shall
furnish to each Holder of the Notes concurrently with the delivery of the
financial statements referred to in Section 8.1(a) above, a certificate of the
Company's Chief Financial Officer stating that, to the best of such officer's
knowledge, there exists no Event of Default.
8.3 PRESERVATION OF CORPORATE EXISTENCE. Except in the
events of a transaction permitted under Section 9.1 or a Change of Control, the
Company shall do or cause to be done all things necessary to: (a) preserve and
maintain in full force and effect its corporate existence and good standing
under the laws of its jurisdiction of incorporation or organization; and (b)
preserve and maintain in full force and effect all material rights, privileges,
qualifications, licenses and franchises necessary in the normal conduct of its
business, PROVIDED, HOWEVER, that the Company shall not be required to preserve
any such right, privilege, qualification, license, or franchise if the Company
Board of Directors shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Company and that the loss
thereof is not disadvantageous in any material respect to the Holders.
8.4 PAYMENT OF TAXES. The Company shall, or shall cause
its Subsidiaries to, pay or discharge before the same shall become delinquent,
all taxes assessments and governmental charges or levies upon it or its
properties or assets, unless the same are being contested in good faith by
appropriate proceedings.
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8.5 COMPLIANCE WITH LAWS. The Company shall comply, and
shall cause each Subsidiary to comply, in all material respects with (i) its
articles or certificate of incorporation and by-laws or other organizational or
governing documents, (ii) any law, treaty, rule or regulation or determination
of an arbitrator or a court or other Governmental Entity, in each case
applicable to or binding upon the Company or any of its property or to which the
Company or any of its property is subject and (iii) the directions of any
Governmental Entity having jurisdiction over it or its business, except any such
failure to comply which would not have a Material Adverse Effect on the Company.
8.6 INSPECTION. The Company will permit, and will cause
each of its Subsidiaries to permit, representatives of the Purchasers to examine
its corporate, financial and operating records at such reasonable times during
normal business hours as may be reasonably requested, upon reasonable advance
notice to the Company.
8.7 NOTICES. Upon knowledge of the Chief Executive
Officer, the President, any Executive Vice-President or the Chief Financial
Officer of the Company of the events described below, the Company shall give
prompt written notice (but in any event within 20 days) to each Holder of Notes:
(a) of the occurrence of any default under, or
breach of, any of the provisions of the Notes;
(b) of any acceleration prior to stated maturity
under the Senior Debt; and
(c) of any amendment (or proposed amendment) to
the Merger Agreement of the type set forth in clause (y) of the first sentence
of Section 12.1(a).
Each notice pursuant to this Section 8.7 shall be accompanied by a certificate
of the Company setting forth details of the occurrence referred to therein and
stating what action the Company proposes to take with respect thereto.
8.8 ISSUE TAXES. The Company shall pay, or cause to be
paid, all documentary and similar taxes levied under the laws of the State of
Ohio or the State of New York in connection with the issuance of the Notes and
the execution and delivery of the other agreements and documents contemplated
hereby.
8.9 RESERVATION OF SHARES. The Company shall at all times
reserve and keep available out of its authorized Common Stock, solely for the
purpose of issue upon conversion of outstanding Notes as provided herein and
therein, such number of shares of Common Stock as shall then be issuable upon
the conversion of outstanding
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Notes. The Company shall issue the Common Stock into which the Notes are
convertible upon the proper surrender of the Notes in accordance with the
provisions herein and shall otherwise comply with the terms thereof.
8.10 COMPANY BOARD OF DIRECTORS REPRESENTATION.
(a) The Company shall, at or prior to the
Closing Date, cause J. Taylor Crandall (who shall agree at such time to resign
as a member of the Company Board of Directors if requested in accordance with
the terms of this Agreement), the designee of OHCP AIV, an Affiliate of Oak Hill
Capital (the "OAK HILL AFFILIATED ENTITY"), to be elected to the Company Board
of Directors as a Class III director. So long as the Purchasers hold in the
aggregate at least 662/3% of the Conversion Shares issued or issuable to the
Purchasers (determined as though all of the Notes originally issued or issuable
to the Purchasers (including for purposes of this calculation, the Notes
originally issued to Citibank, as assignee of the Ocean Purchasers, but
excluding any Notes previously redeemed by the Company pursuant to Section 13.1)
were converted into Common Stock) (the "MINIMUM AMOUNT"), the Oak Hill
Affiliated Entity shall be entitled to designate one director to the Company
Board of Directors. At such time as the Purchasers hold in the aggregate less
than the Minimum Amount, the Oak Hill Affiliated Entity's right of designation
will immediately terminate and, at the Company's request, the Oak Hill
Affiliated Entity will cause to resign, and take all other actions necessary to
cause the prompt removal of J. Taylor Crandall (or the then serving designee of
the Oak Hill Affiliated Entity) from the Company Board of Directors. The Company
shall cause such designee of the Oak Hill Affiliated Entity to be included in
the slate of nominees recommended by the Board of Directors to the Company's
shareholders for election as directors, and the Company shall use its reasonable
best efforts to cause the election of such designee, including voting all shares
for which the Company holds proxies (unless otherwise directed by the
shareholder submitting such proxy) or is otherwise entitled to vote, in favor of
the election of such person. In addition, if such designee of the Oak Hill
Affiliated Entity is not elected to the Company Board of Directors by the
Company's shareholders and the Oak Hill Affiliated Entity's right of designation
has not terminated as provided in the third sentence of this Section 8.10(a),
the Company, at the first meeting of the Company Board of Directors after the
Company's shareholder meeting (which will be held as promptly as practicable),
shall as promptly as practicable cause such designee of the Oak Hill Affiliated
Entity to be elected to the Company Board of Directors on the terms set forth
herein. Notwithstanding the foregoing, if the Oak Hill Affiliated Entity has not
designated a person pursuant to this Section 8.10(a) and is then entitled to do
so, the Oak Hill Affiliated Entity shall be entitled to receive all notices and
materials distributed to the members of the Company Board of Directors, and to
receive minutes of all such meetings upon preparation thereof. The designee of
the Oak Hill Affiliated Entity to the Board of Directors pursuant to this
Section 8.10(a) shall also serve on the compensation committee of the Company
Board of Directors.
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(b) In the event such designee of the Oak Hill
Affiliated Entity shall cease to serve as a director for any reason, other than
by reason of the Oak Hill Affiliated Entity not being entitled to designate a
designee as provided in Section 8.10(a), the Company shall as promptly as
practicable cause the vacancy resulting thereby to be filled by a designee of
the Oak Hill Affiliated Entity (who shall agree at such time to resign as a
member of the Company Board of Directors if requested in accordance with the
terms of this Agreement) to serve on the terms set forth herein.
(c) So long as the Purchasers hold in the
aggregate at least the Minimum Amount (the "CONSULTATION PERIOD"), Oak Hill
Capital shall be entitled to appoint a representative (who shall agree to resign
as such representative if requested in accordance with the terms of this
Agreement) (the "VISITOR") to attend meetings of the Company Board of Directors
(but shall not have any right to vote on matters), to change the Visitor so
appointed at any time and, upon the resignation of the Visitor for any reason,
to reappoint a replacement Visitor. In addition, the Company shall provide the
Visitor with a copy of any materials to be distributed or discussed at such
meetings at the same time as provided to members of the Company Board of
Directors; PROVIDED, HOWEVER, that at such time as the Purchasers hold in the
aggregate less than the Minimum Amount, Oak Hill Capital's right to appoint a
Visitor will immediately terminate and, at the Company's request, Oak Hill
Capital will cause to resign, and take all other action necessary to cause the
prompt removal of, the Visitor. The Visitor will, if requested by the Company,
at the time of appointment execute a customary confidentiality agreement with
the Company which will not be more restrictive than the Company's
confidentiality policy applicable to directors of the Company.
(d) Each Oak Hill Designee shall be reasonably
acceptable to the Company; PROVIDED, that at least one of the managing directors
of Oak Hill Capital selected by Oak Hill Capital and one of the managing
directors of Oak Hill Capital selected by the Oak Hill Affiliated Entity, as the
case may be, shall be acceptable to the Company.
(e) During the Consultation Period, each Oak
Hill Designee shall be entitled, from time to time, to make proposals,
recommendations and suggestions to the Company relating to the business and
affairs of the Company, not in violation of Section 8.11.
(f) During the Consultation Period, the Company
shall permit each Oak Hill Designee at reasonable times and at the expense of
Oak Hill Capital and the Oak Hill Affiliated Entity, to discuss the Company's
business and affairs with its officers, directors and independent accountants.
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(g) During the Consultation Period, the Company
shall permit each Oak Hill Designee, at reasonable times and at the expense of
Oak Hill Capital and the Oak Hill Affiliated Entity, to examine such books,
records, documents and other written information in the possession of the
Company relating to its affairs as they may reasonably request.
(h) During the Consultation Period, the Company
shall permit each Oak Hill Designee, at reasonable times and at the expense of
Oak Hill Capital and the Oak Hill Affiliated Entity, to visit and inspect the
Company's properties.
(i) The special rights of access to information
and to consultation set forth in subsections (e) - (h) hereof have been provided
for the purpose of allowing the direct or indirect investments in the Company
contemplated by this Agreement by the Oak Hill Affiliated Entity and by Oak Hill
Capital to qualify as "venture capital investments" under the Department of
Labor's ERISA plan asset regulation and shall continue during the Consultation
Period until such time as the Company Board of Directors asks each of the Oak
Hill Affiliated Entity and Oak Hill Capital, as the case may be, to determine,
and each of them, as applicable, does determine, each in its sole discretion,
based on advice of counsel, that such special rights are no longer necessary or
desirable to accomplish such purpose.
(j) In the event of a material breach of
Section 8.11 of this Agreement by any Purchaser, at the request of the Company,
Oak Hill Capital and the Oak Hill Affiliated Entity will cause to resign, and
take all other action necessary to cause the prompt removal of, each Oak Hill
Designee.
8.11 STANDSTILL. Until the later to occur of the close of
business on (x) the fifth anniversary of the Closing and (y) the date that is
one year after the date on which the Purchasers (including their Affiliates) no
longer own any Notes or Conversion Shares (including the Notes originally issued
to Citibank, as assignee of the Ocean Purchasers), each Purchaser and its
Affiliates will not, alone or in concert with others (and each Purchaser and its
Affiliates will not advise, assist or encourage others to), directly or
indirectly, unless specifically permitted in writing in advance by the Company:
(i) by purchase or otherwise, acquire, or agree to acquire, beneficial ownership
of any securities of the Company having the ordinary power to vote in the
election of directors of the Company ("VOTING SECURITIES") or direct or indirect
rights or options to acquire such beneficial ownership if, as a result of such
acquisition, the Purchasers and their respective Affiliates would beneficially
own Voting Securities representing in excess of 1.0% of the total voting power
of all then outstanding Voting Securities (such percentage limitation being the
"PERCENTAGE LIMITATION"); PROVIDED that the foregoing shall not prohibit (and
such percentage shall not include) beneficial ownership of Voting Securities (w)
issued in connection with the IXC Transaction with respect to the 50,000 shares
of common stock of IXC owned by the Purchasers on the
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date hereof, (x) issued upon conversion of the Notes, (y) received or receivable
under the terms of the Notes or (z) issued as dividends or distributions on the
Conversion Shares; PROVIDED, FURTHER, that in the event any Purchaser transfers
(in accordance with Section 8.13) any Notes or any Conversion Shares or any
Notes are redeemed by the Company, the foregoing shall not prohibit any
Purchaser or an Affiliate of such Purchaser from acquiring Voting Securities so
long as the aggregate number of Voting Securities acquired does not exceed the
aggregate number of Voting Securities transferred by any such Purchaser or
Affiliate of such Purchaser or redeemed by the Company, as the case may be; (ii)
make, or in any way participate in, any "solicitation" of "proxies" (as defined
in Regulation 14A under the Exchange Act) relating to any shares of Voting
Securities; (iii) call, or in any way consent to or participate in a call for,
any special meeting of shareholders of the Company; (iv) request, or take any
action to obtain or retain, any list of holders of Voting Securities; (v)
initiate, propose or participate in the making of any shareholder proposal
relating to the Company; (vi) deposit any shares of Voting Securities in a
voting trust or subject any shares of Voting Securities to any voting agreement
or arrangement (including any grant of an irrevocable proxy); (vii) form, join
or in any way participate in a partnership, limited partnership, limited
liability company, syndicate or other group (including a "group" as defined in
Section 13(d) under the Exchange Act) with respect to, or for the purpose of
acquiring, holding or disposing of, any shares of Voting Securities, or any
securities the ownership of which would make the owner thereof a beneficial
owner of shares of Voting Securities; (viii) make any offer or proposal with
respect to the acquisition, directly or indirectly, of the Company or any of its
securities or assets or with respect to any business combination or similar
transaction with, change in control of, or restructuring, recapitalization or
other extraordinary transaction involving the Company or any of its assets,
PROVIDED, that this clause (viii) shall not limit the right of the Purchasers to
acquire shares of Voting Securities in a manner that does not violate the
Percentage Limitation; (ix) except as otherwise provided in Section 8.10 hereof,
seek representation on, the removal of any members of, or a change in the
composition or size of, the Company Board of Directors; (x) disclose any intent,
purpose, plan or proposal with respect to the Company, the Company Board of
Directors, management, policies or affairs or any of its securities or assets or
these provisions that is inconsistent with these provisions, including any
intent, purpose, plan or proposal that is conditioned on, or would require
waiver, amendment, nullification or invalidation of, any of these provisions;
(xi) take any action that could require the Company to make any public
disclosure relating to any such intent, purpose, plan, proposal or condition;
(xii) request the Company Board of Directors to waive, amend or consent to any
action prohibited by these provisions; (xiii) assist, advise or encourage any
person with respect to, or seeking to do, any of the foregoing. Notwithstanding
anything to the contrary contained herein, nothing contained in this Section
8.11 shall affect or impair the right of any director of the Company to (x) act
as a member of the Company Board of Directors or any committee
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thereof or (y) take any action necessary or advisable to carry out his
obligations and duties as a director of the Company.
8.12 VOTING. The Purchasers will take all such action as
may be required such that (i) all Voting Securities beneficially owned by the
Purchasers and any person controlled by any of the Purchasers will be present
for quorum purposes, in person or represented by proxy, at every meeting of the
Company's shareholders and (ii) so long as the Company has made the nomination,
if any, required under Section 8.10(a) hereof, all Voting Securities
beneficially owned by the Purchasers and any person controlled by any of the
Purchasers is voted at every meeting of the Company's shareholders (or, if
applicable, written consent is given) in favor of the nominees to the Company
Board of Directors presented by the Company Board of Directors.
8.13 TRANSFER.
(a) The Purchasers shall not transfer the Notes
until the consummation of the IXC Transaction, except for transfers (i) from one
Purchaser to another Purchaser or to an Affiliate of a Purchaser, (ii) transfer
of $325 million of original issue price in connection with the Citibank
Transaction, (iii) in connection with a Change of Control or (iv) to the Company
pursuant to Section 12.1.
(b) Until the earlier to occur of the close of
business on (x) the fifth anniversary of the Closing and (y) the date on which
the Purchasers (including their respective Affiliates) beneficially own less
than 50% of the Conversion Shares issued or issuable to the Purchasers
(determined as though all of the Notes originally issued to the Purchasers
(including for purposes of this calculation, the Notes originally issued to
Citibank, as assignee of the Ocean Purchasers, but excluding any Notes
previously redeemed by the Company pursuant to Section 13.1) were converted into
Common Stock), the Purchasers will not, at any time, directly or indirectly,
sell or transfer, any Notes or Voting Securities beneficially owned by them
without the prior written consent of the Company; PROVIDED that the Purchasers
may without the consent of the Company sell or transfer Notes or Voting
Securities (i) to any person who would beneficially own immediately after any
such sale or transfer less than 5% of the outstanding Voting Securities on a
fully diluted basis (after giving effect to the conversion of the Notes), (ii)
to any person who would beneficially own immediately after any such sale or
transfer 5% or more of the outstanding Voting Securities on a fully diluted
basis (after giving effect to the conversion of the Notes); PROVIDED that prior
to any such sale or transfer the Purchaser follows the procedure set forth in
Section 8.13(c), (iii) in a registered broad distribution public offering
(including pursuant to the Registration Rights Agreement), (iv) to the Company,
(v) to another Purchaser or to an Affiliate of a Purchaser or (vi) in a tender
offer for Voting Securities pursuant to a Schedule 14D-1 (under the Exchange
Act) on file with the SEC and not in violation of Section 8.11. Any pledgee of
Notes or Conversion Shares
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issued to the Purchasers foreclosing on a pledge in connection with a bona fide
financing transaction by the Purchasers may transfer such Notes and Conversion
Shares without restrictions, except those set forth in Section 8.13(a). Any
party to, or holder of any Note subject to, a forward sale agreement with Oak
Hill Capital or its Affiliates in connection with the Citibank Transaction may
transfer, without restrictions, any Notes owned by such party or interests
therein and, following consummation of the IXC Transaction, any Conversion
Shares owned by such party.
(c) If any Purchaser (a "SELLING PURCHASER")
intends to transfer all or any portion of its Notes or Voting Securities to any
Person pursuant to clause (ii) of the first proviso in Section 8.13(b), such
Selling Purchaser shall send a written notice (the "PRE-OFFERING NOTICE") to the
Company stating such intent. For a period not less than 30 days and not more
than 90 days after the delivery of the Pre-Offering Notice, such Selling
Purchaser may send written notice (the "OFFERING NOTICE") to the Company, which
shall state (a) the number of Notes or Voting Securities to be transferred (the
"OFFERED SECURITIES"), (b) the identity of and proposed purchase price per share
or Note (the "OFFER PRICE") to be paid by a Person (a "THIRD PARTY OFFEROR"),
and (c) all other material terms of the proposed offer (a "THIRD PARTY OFFER").
Following receipt of the Offering Notice, the Company shall have three days (the
"COMPANY OPTION PERIOD") within which to elect to purchase all but not less than
all the Offered Securities specified therein, at the price and on the same terms
specified therein. If the Company chooses not to purchase all of the Offered
Securities, or fails to respond within such Company Option Period, the Selling
Purchaser may sell the Offered Securities to the Third Party Offeror at the
Offer Price and on the terms set forth in the Offering Notice. If the Company
elects within such Company Option Period to purchase all the Offered Shares,
then the closing of the purchase of Offered Securities subscribed to by the
Company shall be held at the principal office of the Company within 30 days
after the Company elects in writing to purchase the Offered Shares or at such
other time and place as the parties to the transaction may agree. At such
closing, the Selling Purchaser shall deliver certificates representing the
Offered Securities, and the Company shall pay the Offer Price specified in the
Offering Notice. At such closing, the parties to the transaction shall execute
such additional documents as are otherwise necessary or appropriate.
(d) Any transfer of the Notes or Voting
Securities of the Company in violation of this Section 8.13 shall be null and
void and will be suspended on the books of the Company.
8.14 INVESTMENT PROPOSAL/COMPETING PROPOSAL.
(a) The Company shall not, nor shall the
Company permit any of its Subsidiaries or Affiliates, or any of its or their
officers, directors, employees, advisors, representatives or agents to, directly
or indirectly, solicit, initiate
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or encourage the submission of an Investment Proposal, enter into any agreement
with respect to any Investment Proposal, or initiate or participate in any
discussions or negotiations regarding, or furnish to any person any information
or assistance with respect to, or take any other action to facilitate any
inquiries or the making of any proposal that constitutes, or can reasonably be
expected to lead to, an Investment Proposal. For purposes of this Agreement,
"INVESTMENT PROPOSAL" means any proposal or offer (other than a proposal or
offer by the Purchasers or Oak Hill Capital) to provide financing to the Company
through the subscription or purchase of common stock, preferred stock or debt
(other than pursuant to a new senior credit facility and other Senior Debt) if
such financing is in connection with or in any way related to the IXC
Transaction. If the Company receives any Investment Proposal, the Company will
advise Oak Hill Capital immediately of the terms of the Investment Proposal and,
if the Investment Proposal is in writing, the Company will furnish Oak Hill
Capital a true and complete copy thereof.
(b) Oak Hill Capital shall not, nor shall Oak
Hill Capital permit any of its Subsidiaries or Affiliates, or any of its or
their officers, directors, employees, advisors, representatives or agents to,
directly or indirectly, solicit, initiate or encourage the submission of a
Competing Proposal, enter into any agreement with respect to any Competing
Proposal or initiate or participate in any discussions or negotiations
regarding, or furnish to any person any information or assistance with respect
to, or take any other action to facilitate any inquiries or the making of any
proposal that constitutes, or can reasonably be expected to lead to, a Competing
Proposal. For purposes of this Agreement, a "COMPETING PROPOSAL" means any
proposal, offer or transaction involving IXC, its capital stock, assets or that
of its Subsidiaries other than (x) the IXC Transaction and (y) any such
proposal, offer or transaction solely between IXC and Oak Hill Capital or any of
its Affiliates and not involving any other party.
8.15 RATING. At the request of the Purchasers, as soon as
reasonably practicable following the Closing and in any event prior to the
consummation of the IXC Transaction, the Company shall make presentations as
necessary to Standard and Poor's Rating Group and Moody's Investor Service, Inc.
in connection with a request for the Notes to be rated; PROVIDED, that the
Company shall not request that such ratings be published except at the request
of the Purchasers.
8.16 INDENTURE.
(a) EXECUTION AND DELIVERY OF INDENTURE. Prior
to the consummation of the IXC Transaction, the Company, at its expense, will,
execute and deliver to a bank or trust company having a combined capital and
surplus in excess of $500,000,000 that shall be designated by the Company as
trustee and shall be reasonably acceptable to the Holders of the Notes, an
indenture (the "INDENTURE"),
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providing for the issuance thereunder of notes ("INDENTURE NOTES") in an
aggregate principal amount at maturity equal to the aggregate Full Accreted
Value of the Notes (plus, if appropriate, the aggregate full accreted value of
the Tranche B Notes) and having substantially all the rights, benefits and
privileges carried by the Notes. The Company and the Holders of at least 51% of
the aggregate Accreted Value of the Notes outstanding shall cooperate to have
the Indenture and the Indenture Notes to be issued thereunder embody the
substance of all covenants, provisions and terms, including subordination
provisions, contained in this Agreement and in the Notes, and the Indenture and
the Indenture Notes shall, so far as appropriate, contain such other terms as
are reasonable and customary in corporate indentures and notes for securities
similar to the Notes, or required by the Trust Indenture Act of 1939, as
amended, as the case may be, and shall otherwise, subject to the foregoing, be
reasonably satisfactory in substance and form to the Holders of at least 51% of
the aggregate Accreted Value of the Notes outstanding. The Indenture and all
Indenture Notes delivered thereunder shall, in the opinion of counsel to the
Company reasonably satisfactory to such Holders, be duly authorized, executed
and delivered by or on behalf of the Company and be valid and binding
obligations of the Company enforceable in accordance with their terms.
(b) EXCHANGE OF NOTES FOR INDENTURE NOTES.
Upon the execution and delivery of the Indenture, each Note shall be deemed to
be amended to contain the terms of the Indenture Notes. Within five days of such
execution and delivery the Company, at its expense, will give written notice
thereof to each Holder of the Notes at the time outstanding and, at any time or
from time to time thereafter, upon surrender of any Notes to the Company in
exchange therefor, the Company will issue and deliver Indenture Notes in not
less than the same aggregate Accreted Value (and having an aggregate principal
amount at maturity equal to the Full Accreted Value) as the Notes surrendered,
in fully registered form and in such denominations (not less than $1,000 in
original issue price) as any Holder may request and bearing interest from the
date to which interest shall have been paid on the Note or Notes so surrendered.
The Company will pay all expenses in connection with the indenturization and
issuance of the Indenture Notes.
8.17 ISSUANCE OF TRANCHE B NOTES. In the Company's sole
discretion, it may issue up to $200 million original principal amount of a
second tranche of subordinated convertible notes (the "TRANCHE B NOTES"). The
Tranche B Notes, if issued, will be issued under the Indenture and will be
identical to the Notes in all respects except for (i) the issuance date (and
related differences arising from the change of original issue date) and (ii)
those provisions of the Notes which are no longer relevant after the
consummation of the Merger. The Tranche B Notes, if issued, will be issued
simultaneously with the consummation of the Merger.
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8.18 CHANGE OF CONTROL.
(a) CASH TRANSACTION. If, on or prior to
July 21, 2004, a Change of Control occurs in which all or a portion of the
consideration received by the Company's shareholders is in cash then,
notwithstanding any other provision of this Agreement or the Notes, a Holder of
a Note may elect to receive in connection with the Change of Control Payment
pursuant to Section 8.18(b) an amount equal to the product of (x) the Cash
Percentage and (y) the difference between the Full Accreted Value of such Note
and the Accreted Value of such Note on the date such Change of Control occurs
(the "Full Cash Payment"); PROVIDED, HOWEVER, that if the Holder of a Note
elects not to have the Company purchase all or any portion of its Note pursuant
to Section 8.18(b), such Holder shall not be entitled to the Full Cash Payment.
The "CASH PERCENTAGE" means the ratio (expressed as a percentage) of cash
received by the Company's shareholders in a Change of Control described in the
first sentence of this Section 8.18(a) to the Fair Market Value of all
consideration (including, without limitation, such cash portion) received by the
Company's shareholders in such Change of Control. The Fair Market Value shall be
determined in accordance with Section 8.18(c).
(b) CHANGE OF CONTROL PUT. Upon the occurrence
of a Change of Control (whether the consideration is cash, securities or other
property, or a combination thereof), the Company shall offer, and each Holder of
the Notes shall have the right to require the Company, to repurchase all, or a
portion (equal to the Cash Percentage multiplied by the Accreted Value) of such
Holder's Notes at a cash price (the "CHANGE OF CONTROL PAYMENT") equal to the
greater of (i) the sum of 101% of the Accreted Value of the Notes to be
repurchased and the Full Cash Payment (the "ACCELERATED AMOUNT"), and (ii) the
Fair Market Value (as determined in Section 8.18(c)) of the consideration
(whether such consideration is cash, securities or other property, or a
combination thereof) that such Holder would have received had it converted its
Notes to be repurchased at the Accelerated Amount into shares of Common Stock
immediately prior to such Change of Control, in each case plus any accrued and
unpaid cash interest thereon to the date of repurchase.
(i) Within 30 days following any
Change of Control, the Company shall mail a notice to the Holders of the Notes,
at the Holders' addresses as they appear on the transfer books of the Company,
stating:
(A) that an offer is being made
pursuant to this Section 8.18(b) and that all Notes tendered and not withdrawn
will be accepted for payment;
(B) the circumstances and
relevant facts regarding such Change of Control (including information with
respect to
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PRO FORMA historical income, cash flow and capitalization, each after
giving effect to such Change of Control);
(C) the purchase price and the purchase date
(which shall be a Business Day), which shall be not later than 60 days
from the date such notice is mailed (the "CHANGE OF CONTROL PAYMENT DATE");
(D) that any Notes not tendered will continue to accrue
Accreted Value and interest pursuant to their terms; PROVIDED, that the
Full Cash Payment provided in Section 8.18(a) shall not be made;
(E) that, unless the Company defaults in the payment of the
Change of Control Payment, all Notes accepted for payment pursuant to the
repurchase offer made pursuant to this Section 8.18(b) (the "CHANGE OF
CONTROL OFFER") shall cease to accrue Accreted Value and interest on and
after the Change of Control Payment Date; and
(F) the procedures that Holders must follow to accept the
Change of Control Offer.
(ii) The Company shall have the Change of Control Offer remain
open for at least 20 Business Days or for such longer period as is required by
law.
(iii) On the Change of Control Payment Date, the Company shall:
(A) accept for payment all Notes or portions thereof
validly tendered and not withdrawn pursuant to the Change of Control Offer;
(B) pay to each Holder of Notes so accepted the Change
of Control Payment in accordance with the terms of this Section in cash in
immediately available funds.
(iv) If any of the Notes are partially tendered to the extent
permitted under Section 8.18(b), the Company shall execute, issue and mail to
such Holder, a new Note with a full Accreted Value equal to that of any
unpurchased portion of the Notes surrendered.
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(c) FAIR MARKET VALUE. The Fair Market Value of
the cash, securities and other property received in a Change of Control by the
Company's shareholders shall be determined in good faith by the Company Board of
Directors and the value of any securities shall be determined by reference to
the Market Price of such Securities. The Fair Market Value determined by the
Company Board of Directors shall be conclusive and binding unless the Holders of
at least 51% of the aggregate Accreted Value of the Notes outstanding request
that the Company obtain an opinion of an independent nationally recognized
investment banking firm mutually acceptable to the Company and such Holders (the
expense of which is to be borne equally by the Company on the one hand and such
Holders on the other), in which event the Fair Market Value of such cash,
securities and other property shall be determined by such investment banking
firm.
(d) CONVERSION ON CHANGE OF CONTROL. Any Notes
not tendered pursuant to Section 8.18(b) will (i) continue to accrue Accreted
Value and interest pursuant to their terms; PROVIDED that the Full Cash Payment
for such Notes shall not be made and (ii) thereafter be convertible in the
manner provided in Section 14.7.
(e) CHANGE OF CONTROL PAYMENT ASSURANCE.
Immediately prior to the occurrence of any Change of Control, the Company shall
at its option either (i) deposit with the trustee for the benefit of the Holders
of the Notes or, if there is no trustee, the Company shall segregate and hold in
trust for the benefit of the Holders of the Notes, an amount in cash sufficient
to fully satisfy the Company's payment obligations under Section 8.18(b) with
respect to such Change of Control or (ii) cause the payment obligations of the
Company under Section 8.18(b) with respect to such Change of Control to be
assumed by the entity or entities issuing or paying, as the case may be, the
stock, other securities or other property or assets (including cash) issued or
paid with respect to or in exchange for the Common Stock in connection with such
Change of Control.
8.19 REGISTRATION OF NOTES. The Company shall keep at its
principal executive office a register for the registration and registration of
transfers of Notes (the "NOTE REGISTER"). The name and address of each Holder of
one or more Notes, each transfer thereof and the name and address of each
transferee of one or more Notes shall be registered in such register. Prior to
due presentment for registration of transfer, the Person in whose name any Note
shall be registered shall be deemed and treated as the owner and Holder thereof
for all purposes hereof, and the Company shall not be affected by any notice or
knowledge to the contrary. The Company shall give to any Holder of at least 5%
of the aggregate original issue price of Notes promptly upon request therefor, a
complete and correct copy of the names and addresses of all registered Holders
of Notes.
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8.20 DIVIDENDS OR DISTRIBUTIONS PAID INTO ESCROW. In
addition to the interest on the Notes described in Section 2 of the Note, in
the event that the Company shall declare a dividend or make any other
distribution (including, without limitation, in cash, in capital stock (which
shall include, without limitation, any options, warrants or other rights to
acquire capital stock) of the Company, a redemption pursuant to, or a
triggering event under, a shareholder rights plan, "poison pill" or similar
arrangement, or in other property or assets and including a Regular Dividend)
to holders of Common Stock, then, at the option of Holders of the Notes
(which shall be dictated by at least 51% of the aggregate Accreted Value of
the Notes outstanding), (i) the Company Board of Directors shall declare, and
the Holder of each Note shall be entitled to have paid into an escrow
account, as set forth below, a distribution in an amount equal to the amount
of such dividend or distribution received by a holder of the number of shares
of Common Stock for which such Note is convertible on the record date for
such dividend or distribution at the Designated Value as of such date or
(ii) except in the case of Regular Dividends, the Conversion Price of the Notes
shall be adjusted pursuant to Section 14.3 hereof. Promptly after the
Company's declaration of a dividend or making of any other distribution (but
not later than 10 Business Days thereafter), the Company shall deliver a
notice to the Holders of the Notes of such dividend or distribution. Within
10 Business Days of such notice, the Holders of Notes shall notify the
Company of its election under this Section 8.20 which shall be evidenced by a
written resolution by at least 51% of the aggregate Accreted Value of the
Notes outstanding. If the Holders of the Notes elect to receive such
dividends or distributions in the manner set forth in clause (i) above, the
Company shall pay all such distributions to a mutually agreeable third party
escrow agent to be held in an escrow account pursuant to mutually agreed
escrow arrangements (which will provide, among other things, that the
distributees of the escrowed amounts will be entitled to the interest earned
thereon) for the benefit of the Holders of the Notes until the earlier of
(i) such time as such Notes are converted into Common Stock and (ii) the
redemption of Notes under Section 8.18. In the event of a repurchase of Notes
under Section 8.18(b), the portion of the escrow relating to the Notes
repurchased shall be distributed to the Holders of such Notes at the time of
such repurchase. In the event of any such Change of Control, the Cash
Percentage of each such distribution held in such escrow account shall be
distributed to the Holders of the Notes upon such Change of Control. The fees
of the escrow agreement will be borne equally by the Company, on the one
hand, and the Holders, on the other.
8.21 [INTENTIONALLY OMITTED.]
8.22 MAINTENANCE OF PROPERTIES. The Company shall maintain
and preserve, and cause each of its Subsidiaries to maintain and preserve, all
of its properties that are used or useful in the conduct of its business in good
working order and condition, ordinary wear and tear excepted, except for such
failures to maintain and preserve which would not have a Material Adverse Effect
on the Company.
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8.23 HSR ACT; STOCK EXCHANGE LISTINGS. Following a filing
by the Purchasers, the Company will as promptly as practicable file with the
Federal Trade Commission (the "FTC") and the Antitrust Division of the United
States Department of Justice (the "ANTITRUST DIVISION") a premerger notification
and report form in accordance with the HSR Act, with respect to the conversion
of the Notes into shares of Common Stock, and the Company and the Purchasers
will use their respective reasonable best efforts to obtain, as promptly as
practicable, any clearance required under the HSR Act with respect thereto, it
being understood that neither the Company nor the Purchasers shall be required
to divest, alter the conduct of, limit or restrict its ownership of or to hold
separate, any shares of Common Stock or any other businesses or assets or to
amend the terms of this Agreement or any other agreement between the Company and
the Purchasers. Each of the Company and the Purchasers agrees to promptly
furnish the FTC and the Antitrust Division with any additional information
requested by either of them in connection with this Agreement and the
transactions contemplated hereby. The Company will use its reasonable best
efforts to obtain, as promptly as practicable, the approval for listing of the
shares of Common Stock into which the Notes are convertible on the NYSE and the
Cincinnati Stock Exchange.
Article 9
NEGATIVE COVENANTS
9.1 MERGERS. (a) Upon the consummation of any
consolidation or merger in which the Company is not the surviving party, the
Person formed by such consolidation or into which the Company is merged or which
acquires by conveyance, lease or transfer the properties and assets of the
Company substantially as an entirety, or to which obligations of, and position
as, the Company hereunder are transferred and assigned shall expressly assume,
by a supplement hereto, executed and delivered to the Holders of the Notes, due
and punctual payment of the principal amount, Accreted Value of, premium, if
any, and interest on all of the Notes and the performance of every covenant of
this Agreement and in the Notes on the part of the Company to be performed or
observed.
(b) The Company will not merge or consolidate with
any other Person if at the time of such merger or consolidation such other
Person has received a notice of payment default under a material indenture or
any other material indebtedness of such entity that has not been cured within
the period specified therein.
9.2 FORBEARANCE FROM RESTRICTIONS ON RIGHTS OF HOLDERS OF
NOTES. The Company will not enter into any agreement or instrument or otherwise
agree to any covenant that would in any way limit the right of the Holders of
the Notes to convert the Notes into Common Stock.
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<PAGE>
9.3 SENIOR DEBT DOCUMENTS. Until such time as no amount could
be due or payable pursuant to Section 12.1 hereof, the Company will not enter
into any Senior Debt Document that would, or amend the terms of any existing
Senior Debt Document in a manner that would, prohibit any payment pursuant to
Section 12.1.
Article 10
DEFAULTS AND REMEDIES
10.1 EVENTS OF DEFAULT. An "EVENT OF DEFAULT" shall occur
(whatever the reason for such Event of Default and whether it shall be voluntary
or involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body) if:
(a) default in the payment of the principal or
Full Accreted Value of and premium, if any, on any Notes, when and as the same
shall become due and payable, whether at maturity or at a date fixed for
prepayment or by acceleration or otherwise, whether or not such payment is
prohibited by the provisions of Article 11; or
(b) default in the payment of any installment of
cash interest on any Note according to the terms thereof, when and as the same
shall become due and payable and such default shall continue for a period of 20
days, whether or not such payment is prohibited by the provisions of Article 11;
or
(c) the Company or any of its Subsidiaries, as
the case may be, shall default in the due observance or performance of any other
covenant, condition or agreement on the part of the Company or any of its
Subsidiaries to be observed or performed pursuant to the terms of this
Agreement, and such default shall continue for 50 days after written notice
thereof, by registered or certified mail, which shall have been given to the
Company by the Holders of at least 25% of the aggregate Accreted Value of the
Notes outstanding specifying such default and requiring it to be remedied and
stating that such notice is a "NOTICE OF DEFAULT" hereunder; or
(d) [Intentionally Omitted]
(e) any default in the observance or performance
of any agreement or condition relating to Senior Debt in an amount in excess of
$250,000,000 or contained in any instrument or agreement evidencing, securing or
relating thereto, or any other event shall occur or condition exist, the effect
of which default or other event or condition has resulted in the acceleration of
such Senior Debt prior to its stated maturity; or
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<PAGE>
(f) an involuntary proceeding shall be commenced
or an involuntary petition shall be filed in a court of competent jurisdiction
seeking (a) relief in respect of the Company or any of its Significant
Subsidiaries, or of a substantial part of their property or assets, under Title
11 of the United States Code, as now constituted or hereafter amended, or any
other Federal or state bankruptcy, insolvency, receivership or similar law, (b)
the appointment of a receiver, trustee, custodian, sequestrator, conservator or
similar official for the Company or any of its Significant Subsidiaries, or for
a substantial part of their property or assets, or (c) the winding up or
liquidation of the Company or any of its Significant Subsidiaries; and such
proceeding or petition shall continue undismissed for 60 days, or an order or
decree approving or ordering any of the foregoing shall be entered; or
(g) the Company or any Significant Subsidiary
thereof shall (i) voluntarily commence any proceeding or file any petition
seeking relief under Title 11 of the United States Code, as now constituted or
hereafter amended, or any other Federal or state bankruptcy, insolvency,
receivership or similar law, (ii) consent to the institution of or the entry of
an order for relief against it, or fail to contest in a timely and appropriate
manner, any proceeding or the filing of any petition described in paragraph (f)
of this Section 10.1, (iii) apply for or consent to the appointment of a
receiver, trustee, custodian, sequestrator, conservator or similar official for
the Company or any of its Significant Subsidiaries, or for a substantial part of
their property or assets, (iv) file an answer admitting the material allegations
of a petition filed against it in any such proceeding, (v) make a general
assignment for the benefit of creditors, (vi) become unable, admit in writing
its inability or fail generally to pay its debts as they become due or (vii)
take any corporate action for the purpose of effecting any of the foregoing.
10.2 ACCELERATION. If an Event of Default occurs under
clauses (f) or (g) of Section 10.1, then the Accreted Value of, premium, if any,
on and all accrued interest on the Notes and all other amounts owing under this
Agreement and the Notes shall automatically become immediately due and payable,
without presentment, demand, protest or notice of any kind, all of which are
expressly waived. If any other Event of Default (other than an Event of Default
specified under clauses (f) or (g) of Section 10.1) occurs and is continuing,
the Holders of 25% of the aggregate Accreted Value of the Notes outstanding, by
written notice to the Company, may declare the Accreted Value of, premium, if
any, on and accrued interest on the Notes and all other amounts owing under this
Agreement to be due and payable immediately. Upon such declaration, such
Accreted Value, premium and interest and other amounts shall become immediately
due and payable. The Holders of a majority of the aggregate Accreted Value of
the Notes outstanding may rescind and annul an acceleration and its consequences
if all existing Events of Default have been cured or waived, except nonpayment
of Accreted Value, premium or interest or other amounts that have become due
solely because of the acceleration, and if the rescission would not conflict
with any
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<PAGE>
judgment or decree. Any notice or rescission shall be given in the
manner specified in Section 15.2 hereof.
Article 11
SUBORDINATION
11.1 NOTES SUBORDINATE TO SENIOR DEBT. The Company
covenants and agrees, and each Holder of a Note, by its acceptance thereof,
likewise covenants and agrees, that, to the extent and in the manner hereinafter
set forth in this Article, the indebtedness represented by the Notes and the
payment of the principal, Accreted Value of (and premium, if any) and interest
on each and all of the Notes and any payment of the Mandatory Redemption Price
or Change of Control Payment are hereby expressly made subordinate and subject
in right of payment to the prior payment in full of all Senior Debt.
11.2 PAYMENT OVER OF PROCEEDS UPON DISSOLUTION, ETC. In
the event of (a) any insolvency or bankruptcy case or proceeding, or any
receivership, liquidation, reorganization or other similar case or proceeding in
connection therewith, relating to the Company or to its assets, or (b) any
payment or distribution of the assets of the Company to creditors upon a total
or partial liquidation, dissolution or other winding up of the Company, whether
voluntary or involuntary and whether or not involving insolvency or bankruptcy,
or (c) any assignment for the benefit of creditors or any other marshalling of
assets and liabilities of the Company, then and in any such event the holders of
Senior Debt shall be entitled to receive payment in full in cash or other
payment satisfactory to the holders of Senior Debt (in their sole discretion) of
all amounts due or to become due on or in respect of all Senior Debt before the
Holders of the Notes are entitled to receive any payment on account of principal
or Accreted Value of (or premium, if any) or interest on the Notes or on account
of the purchase, redemption or other retirement of Notes (including any payment
of the Mandatory Redemption Price or Change of Control Payment), and to that end
the holders of Senior Debt shall be entitled to receive, for application to the
payment thereof, any payment or distribution of any kind or character, whether
in cash, property or securities, which may be payable or deliverable in respect
of the Notes in any such case, proceeding, receivership, dissolution,
liquidation, reorganization or other winding up or event.
In the event that, notwithstanding the foregoing provisions of
this Section 11.2, the Holder of any Note shall have received any payment or
distribution of assets of the Company of any kind or character, whether in cash,
securities or other property, before all Senior Debt is paid in full, then such
payment or distribution shall be paid over or delivered forthwith to the trustee
in bankruptcy, receiver, liquidating
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<PAGE>
trustee, custodian, assignee, agent or other Person making payment or
distribution of assets of the Company for application to the payment of all
Senior Debt remaining unpaid, to the extent necessary to pay all Senior Debt in
full, after giving effect to any concurrent payment or distribution to or for
the holders of Senior Debt.
For purposes of this Article only, the words "cash, securities
or other property" shall not be deemed to include shares of stock of the Company
as reorganized or readjusted, or securities of the Company or any other
corporation provided for by a plan of reorganization or readjustment which
shares of stock are subordinated in right of payment to all then outstanding
Senior Debt at least to the same extent as the Notes are so subordinated as
provided in this Article. The consolidation of the Company with, or the merger
of the Company into, another Person or the liquidation or dissolution of the
Company following the conveyance or transfer of its properties and assets
substantially as an entirety to another Person upon the terms and conditions set
forth in Section 9.1 shall not be deemed a dissolution, winding up, liquidation,
reorganization, assignment for the benefit of creditors or marshalling of assets
and liabilities of the Company for the purposes of this Section if the Person
formed by such consolidation or into which the Company is merged or which
acquires by conveyance or transfer such properties and assets substantially as
an entirety, as the case may be, shall, as a part of such consolidation, merger,
conveyance or transfer, comply with the conditions set forth in Section 9.1.
11.3 PRIOR PAYMENT TO SENIOR DEBT UPON ACCELERATION OF
SECURITIES. In the event that any Notes are declared due and payable before
their Stated Maturity pursuant to Section 10.1, then and in such event the
holders of the Senior Debt outstanding at the time such Notes so become due and
payable shall be entitled to receive payment in full of all amounts due or to
become due as a result of such acceleration of the Notes on or in respect of all
Senior Debt before the Holders of the Notes are entitled to receive any payment
by the Company on account of the principal or Accreted Value of (or premium, if
any) or interest on the securities or on account of the purchase, redemption or
other retirement of Notes (including any payment of the Mandatory Redemption
Price or Change of Control Payment).
The provisions of this Section shall not apply to any payment
with respect to which Section 11.2 would be applicable.
11.4 PAYMENT TO HOLDERS
No payments shall be made with respect to the principal or
Accreted Value of, or premium, if any, or interest on the Notes by the Company
(including, but not limited to, the Mandatory Redemption Price and the Change of
Control Payment), except payments and distributions made as permitted by Section
11.5, if:
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<PAGE>
(i) a default in the payment of principal,
premium, interest, or rent or other obligations due on any Senior Debt
of the Company has occurred and is continuing Senior Debt (including
upon acceleration of such Senior Debt) or a default in payment of any
other obligation with respect to the Senior Debt continues beyond the
period of grace, if any, specified in the instrument or lease
evidencing such Senior Debt, unless and until such default shall have
been cured or waived or shall have ceased to exist; or
(ii) a default (other than a default
described in clause (i) of this Section 11.4) on Designated Senior
Debt occurs and is continuing that permits holders of such Designated
Senior Debt to accelerate its maturity and the Holders (or their
trustee, if any) receives a notice of the default (a "PAYMENT
BLOCKAGE NOTICE") from a representative of Designated Senior Debt
or the Company.
If the Holders (or their trustee, if any) receives any Payment
Blockage Notice pursuant to clause (ii) above, no subsequent Payment Blockage
Notice shall be effective for purposes of this Section 11.4 unless and until at
least 360 days shall have elapsed since the initial effectiveness of the
immediately prior Payment Blockage Notice. No default that existed or was
continuing on the date of delivery of any Payment Blockage Notice to the Holders
(or their trustee, if any) (unless such default was waived, cured or otherwise
ceased to exist and thereafter subsequently reoccurred) shall be, or be made,
the basis for a subsequent Payment Blockage Notice.
The Company may and shall resume payments on and distributions
in respect of the Notes upon the earlier of:
(1) in the case of a default described in clause
(i) of this Section 11.4, the date upon which the default is cured or waived or
ceased to exist, or
(2) in the case of a default referred to in
clause (ii) of this Section 11.4 above, the earlier of the date on which such
default is cured or waived or ceases to exist or 179 days after the date on
which the applicable Payment Blockage Notice is received if the maturity of such
Senior Debt has not been accelerated, unless this Article 11 otherwise prohibits
the payment or distribution at the time of such payment or distribution.
11.5 PAYMENT PERMITTED IF NO DEFAULT. Nothing contained in
this Article or elsewhere in this Agreement or in any of the Notes shall prevent
(a) the Company, at any time except during the pendency of any case, proceeding,
dissolution, liquidation or other winding up, assignment for the benefit of
creditors or other marshalling of assets and liabilities of the Company referred
to in Section 11.2 or
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<PAGE>
under the conditions described in Section 11.3 or 11.4, from making payments at
any time of principal or Accreted Value of (and premium, if any) or interest on
the Notes, the Change of Control Payment or the Mandatory Redemption Price, or
(b) the application by a trustee for the Holders (if any) of any money deposited
with it hereunder to the payment of or on account of the principal or Accreted
Value of (and premium, if any) or interest on the Notes, Change of Control
Payment or Mandatory Redemption Price or the retention of such payment by the
Holders if, at the time of such application by the trustee or retention, as
applicable, a Responsible Officer of the trustee did not have actual knowledge
that such payment would have been prohibited by the provisions of this Article.
11.6 SUBROGATION TO RIGHTS OF HOLDERS OF SENIOR DEBT.
After the payment in full of all Senior Debt, the Holders of the Notes shall be
subrogated to the extent of the payments or distributions made to the holders of
such Senior Debt pursuant to the provisions of this Article to the rights of the
holders of such Senior Debt to receive payments and distributions of cash,
property and securities applicable to the Senior Debt until the principal or
Accreted Value of (and premium, if any) and interest on the Notes, Change of
Control Payment or Mandatory Redemption Price shall be paid in full. For
purposes of such subrogation, no payments or distributions to the holders of the
Senior Debt of any cash, property or securities to which the Holders of the
Notes would be entitled except for the provisions of this Article, and no
payments over pursuant to the provisions of this Article to the holders of
Senior Debt by Holders of the Notes, shall, as among the Company, its creditors
other than holders of Senior Debt and the Holders of the Notes, be deemed to be
a payment or distribution by the Company to or on account of the Senior Debt.
11.7 PROVISIONS SOLELY TO DEFINE RELATIVE RIGHTS. The
provisions of this Article are intended solely for the purpose of defining the
relative rights of the Holders of the Notes on the one hand and the holders of
Senior Debt on the other hand. Nothing contained in this Article or elsewhere in
this Agreement or in the Notes is intended to or shall (a) impair, as among the
Company, its creditors other than holders of Senior Debt and the Holders of the
Notes, the obligation of the Company, which is absolute and unconditional, to
pay to the Holders of the Notes the principal or Accreted Value of (and premium,
if any) and interest on the Notes, Change of Control Payment or Mandatory
Redemption Price, as and when the same shall become due and payable in
accordance with their terms; or (b) affect the relative rights against the
Company of the Holders of the Notes and creditors of the Company other than the
holders of Senior Debt; or (c) prevent the Holder of any Notes from exercising
all remedies otherwise permitted by applicable law upon default under this
Agreement, subject to the rights, if any, under this Article of the holders of
Senior Debt to receive cash, property and securities otherwise payable or
deliverable to such Holder.
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<PAGE>
11.8 NO WAIVER OF SUBORDINATION PROVISIONS. No right of
any present or future holder of any Senior Debt to enforce subordination as
herein provided shall at any time in any way be prejudiced or impaired by any
act or failure to act on the part of the Company or by any act or failure to
act, in good faith, by any such holder of any Senior Debt, or by any
non-compliance by the Company with the terms, provisions and covenants of this
Agreement, regardless of any knowledge thereof any such holder may have or be
otherwise charged with.
Without in any way limiting the generality of the foregoing
paragraph, the holders of Senior Debt may, at any time and from time to time,
without the consent of or written notice to the Holders of the Notes, without
incurring responsibility to the Holders of the Notes and without impairing or
releasing the subordination provided in this Article or the obligations
hereunder of the Holders of the Notes to the holders of Senior Debt, do any one
or more of the following: (i) change the manner, place or terms of payment or
reduce or extend the time of payment of, or renew or alter, Senior Debt, or
otherwise amend or supplement in any manner (including the interest rate
thereof) Senior Debt or any instrument evidencing the same or any agreement
under which Senior Debt is outstanding; (ii) sell, exchange, release or
otherwise deal with any property pledged, mortgaged or otherwise securing Senior
Debt; (iii) release any Person liable in any manner for the collection of Senior
Debt; and (iv) exercise or refrain from exercising any rights against the
Company and any other Person.
11.9 RELIANCE ON JUDICIAL ORDER OR CERTIFICATE OF
LIQUIDATING AGENT. Upon any payment or distribution of assets of the Company
referred to in this Article, the Holders of the Notes shall be entitled to
conclusively rely upon any order or decree entered by any court of competent
jurisdiction in which such insolvency, bankruptcy, receivership, liquidation,
reorganization, dissolution, winding up or similar case or proceeding is
pending, or a certificate of the trustee in bankruptcy, receiver, liquidating
trustee, custodian, assignee for the benefit of creditors, agent or other Person
making such payment or distribution, delivered to the Holders of Notes, for the
purpose of ascertaining the Persons entitled to participate in such payment or
distribution, the holders of the Senior Debt and other indebtedness of the
Company, the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this Article.
11.10 CERTAIN CONVERSIONS NOT DEEMED PAYMENT. For the
purposes of this Article only, (1) the issuance and delivery of junior
securities upon conversion of Notes in accordance with Article 14 shall not be
deemed to constitute a payment or distribution on account of the principal or
Accreted Value of or premium or interest on Notes or on account of the purchase
or other acquisition of Notes, and (2) the payment, issuance or delivery of
cash, property or securities upon conversion of a Note or pursuant to Section
8.20 shall not be deemed to constitute payment on account of the principal or
Accreted Value of such Security. For the purposes of this Section, the
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<PAGE>
term "junior securities" means (a) shares of any stock of any class of the
Company into which the Securities are convertible pursuant to Article 14 and (b)
securities of the Company which are subordinated in right of payment to all
Senior Debt which may be outstanding at the time of issuance or delivery of such
securities to at least the same extent as the Notes are so subordinated as
provided in this Article. Nothing contained in this Article or elsewhere in this
Agreement or in the Notes is intended to or shall impair, as among the Company,
its creditors other than holders of Senior Debt and the Holders of the Notes,
the right, which is absolute and unconditional, of the Holder of any Notes to
convert such Notes in accordance with Article 14.
11.11 DISTRIBUTION TO BE PAID OVER. Subject to Section 11.5,
in the event that a distribution is made to the Holder of any Note that is
prohibited by this Article 11 then each such Holder shall hold such distribution
in trust for the holders of Senior Debt and shall promptly pay it over to the
Company.
Article 12
MANDATORY PREPAYMENT
12.1 MANDATORY REDEMPTION.
(a) MANDATORY REDEMPTION. If the Company and IXC
(i) fail to consummate the IXC Transaction and the Merger Agreement is
terminated and not renewed during the 45 day period following such termination
or (ii) amend the terms of such agreement so as to (x) materially increase the
merger price above that set forth in the Merger Agreement or (y) amend any other
material financial terms of the IXC Transaction without the prior consent of Oak
Hill Capital, which consent shall be given at the sole discretion of Oak Hill
Capital (in the case of either clause (i) or (ii), a "PREPAYMENT EVENT"), then
during the period beginning on the 46th day and ending on the 90th day following
the occurrence of a Prepayment Event (the "MANDATORY REDEMPTION PERIOD"), the
Company shall be obligated to purchase, and the Holders of the Notes shall be
obligated to sell (a "MANDATORY REDEMPTION"), all of the outstanding Notes at a
redemption price (the "MANDATORY REDEMPTION PRICE") equal to 101% of the
Accreted Value of the Notes as of the Mandatory Redemption Date. Notwithstanding
the previous sentence, in case a Prepayment Event described in clause (i) of the
previous sentence shall have occurred and at the time of such Prepayment Event
or within the 45 day period beginning on the date of the Prepayment Event (i) a
public proposal has been made and not withdrawn, (ii) a definitive agreement has
been entered into, or (iii) the Company Board of Directors or members thereof
are involved in discussions, in each case, relating to a transaction which, if
consummated, would result in a Change of Control, then, at the election of each
Holder of a Note evidenced by written notice to the Company delivered to the
Company within 45 days following the
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<PAGE>
Prepayment Event, such Note shall not be subject to the Mandatory Redemption
provisions of the first sentence of this Section 12.1(a) (and such Holder shall
have the right to first convert its Note into Conversion Shares in accordance
with Article 14) until the first to occur of such time as (v) such Holder
subsequently requests the Company to redeem its Note, (w) in the case of clause
(i) of this sentence, the proposal has expired or has been withdrawn or
terminated, (x) in the case of clause (ii) of this sentence, the definitive
agreement has been terminated or (y) in the case of clause (iii) of this
sentence, the Board level discussions have ceased, in which case all Notes
outstanding immediately following such event shall be repurchased by the Company
as provided in the first sentence of this Section 12.1(a). If a Change of
Control occurs before the Notes are redeemed pursuant to this Section 12.1, then
this Section 12.1 shall not apply to the Notes and the Holders of the Notes
shall be entitled to the rights under Section 8.18.
(b) NOTICE OF PREPAYMENT EVENT. The Company
shall deliver promptly (but in any event within 72 hours after the occurrence of
a Prepayment Event) a notice of the occurrence of a Prepayment Event (the
"PREPAYMENT EVENT NOTICE"), which shall be delivered by courier, facsimile or
express mail to the Holders of the Notes, at the Holders' addresses as they
appear on the transfer books of the Company.
(c) NOTICE OF MANDATORY REDEMPTION . During the
Mandatory Redemption Period, the Company shall deliver a notice (the "MANDATORY
REDEMPTION NOTICE"), which Notice shall contain all instruments and materials
necessary to enable any Holder of the Notes to tender their Notes pursuant to
this Article 12. The Mandatory Redemption Notice, which shall govern the terms
of the Mandatory Redemption, shall state:
(1) that a Prepayment Event has
occurred, that the Company is obligated to effect a Mandatory Redemption
pursuant to this Article 12 and that Notes validly tendered and not
withdrawn will be redeemed;
(2) the Mandatory Redemption Price and
the date fixed for the Mandatory Redemption (the "MANDATORY REDEMPTION
DATE"), which shall be no earlier than the 46th day and no later than the
90th day after the Prepayment Event and shall be not less than five days
after the date of the Mandatory Redemption Notice;
(3) that the Notes, if redeemed pursuant
to the Mandatory Redemption, shall cease to accrue interest after the
Mandatory Redemption Date (unless the Company shall default in the payment
of the Mandatory Redemption Price, in which case the Notes shall not cease
to accrue interest after such date); and
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(4) such other information respecting
the procedures for effecting the Mandatory Redemption as the Company shall
include and such other information as may be required by law.
(d) REDEMPTION PROCEDURE. On the Mandatory
Redemption Date, the Holders of the Notes shall surrender the Notes to the
Company at the place designated in the Mandatory Redemption Notice, and the
Company shall pay to each Holder of the Notes the Mandatory Redemption Price in
accordance with the terms of the Notes. From and after the Mandatory Redemption
Date (i) the Notes shall no longer be deemed outstanding, (ii) the right to
receive interest thereon shall cease to accrue and (iii) all rights of the
Holders of the Notes shall cease and terminate, excepting only the right to
receive the Mandatory Redemption Price therefor; PROVIDED, HOWEVER, that if the
Company shall default in the payment of the Mandatory Redemption Price, the
Notes shall thereafter be deemed to be outstanding and the Holder thereof shall
have all of the rights of a Holder of the Notes until such time as such default
shall no longer be continuing or shall have been waived by the Holders of the
Notes.
Article 13
OPTIONAL PREPAYMENT
13.1 OPTIONAL REDEMPTION.
(a) REDEMPTION BY COMPANY. The Company may
redeem (the "OPTIONAL REDEMPTION") all of the Notes, or any portion of the Notes
in minimum multiples of $100,000,000 of original issue price, at any time after
the fifth anniversary of the Closing, at the following redemption prices (each,
an "OPTIONAL REDEMPTION PRICE") expressed in percentages of the Full Accreted
Value of the Note on the redemption date, plus accrued and unpaid interest to
the date of redemption, subject to the right of the Holder of the Note of record
on the relevant record date to receive interest on the relevant Interest Payment
Date:
<TABLE>
<CAPTION>
PERIOD REDEMPTION PRICE
<S> <C>
From July 21, 2004 through
July 20, 2005.............................................................. 103.375%
From July 21, 2005 through
July 20, 2006.............................................................. 102.250%
From July 21, 2006 through
July 20, 2007.............................................................. 101.125%
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
PERIOD REDEMPTION PRICE
<S> <C>
July 21, 2007 and thereafter............................................... 100.000%
</TABLE>
(b) NOTICE. Notice (the "OPTIONAL REDEMPTION
NOTICE") of an Optional Redemption pursuant to this Section 13.1 shall be mailed
at least 30, but not more than 60, days prior to the redemption date fixed in
the Optional Redemption Notice, which must be a Business Day (any such date an
"OPTIONAL REDEMPTION DATE"), to the Holders of the Notes, at such Holders'
address as they appear on the transfer books of the Company. In order to
facilitate the Optional Redemption of the Note, the Company Board of Directors
may fix a record date for the determination of the Notes to be redeemed, or may
cause the transfer books of the Company for the Notes to be closed, not more
than 60 days or less than 30 days prior to the Optional Redemption Date.
(c) REDEMPTION PROCEDURE. On the Optional
Redemption Date, the Holders of the Notes shall surrender the Notes subject to
the Optional Redemption to the Company at the place designated in the Optional
Redemption Notice, and the Company shall pay to each Holder of the Notes subject
to the Optional Redemption the Optional Redemption Price in accordance with the
terms of the Notes. From and after the Optional Redemption Date (i) the Notes
subject to the Optional Redemption shall no longer be deemed outstanding, (ii)
the right to receive interest thereon shall cease to accrue and (iii) all rights
of the Holders of the Notes subject to the Optional Redemption shall cease and
terminate, excepting only the right to receive the Optional Redemption Price
therefor and the right to convert such Notes into shares of Common Stock until
the close of business on one Business Day immediately preceding the date of
redemption, in accordance with Article 14; PROVIDED, HOWEVER, that if the
Company shall default in the payment of the Optional Redemption Price, the Notes
shall thereafter be deemed to be outstanding and the Holder thereof shall have
all of the rights of a Holder of the Notes until such time as such default shall
no longer be continuing or shall have been waived by the Holders of the Notes.
Article 14
VOLUNTARY CONVERSION
14.1 CONVERSION. Each Holder shall have the right, at its
option, at any time (i) after the Specified Date, (ii) in connection with a
Change of Control or (iii) as contemplated by the second sentence of Section
12.1(a) to convert, subject to the terms and provisions of this Article 14, such
Note (or any portion thereof of the original issue price that is an integral
multiple of $1,000) into such number of fully paid and non-assessable shares of
Common Stock at the Conversion Ratio (as defined
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below) then in effect, except that if such Notes have been called for redemption
pursuant to Article 13, such right shall terminate at the close of business on
the Business Day immediately preceding the date of redemption for such Notes,
unless in any such case, the Company shall default in performance or payment due
upon redemption thereof. The "CONVERSION RATIO" shall mean, as of the close of
business on any date, the ratio obtained by dividing the Designated Value by the
Conversion Price. The "CONVERSION PRICE" shall initially be $29.89 and shall be
subject to adjustment as set forth in Section 14.3. Such conversion right shall
be exercised by the surrender of a Note (or a portion thereof) to be converted
to the Company at any time during usual business hours at its principal place of
business to be maintained by it, accompanied by written notice that the Holder
elects to convert such Note (or any portion thereof) and specifying the Accreted
Value of such Note to be converted, the name or names (with address) in which a
certificate or certificates for shares of Common Stock are to be issued and (if
so required by the Company) by a written instrument or instruments of transfer
in form reasonably satisfactory to the Company duly executed by the Holder or
its duly authorized legal representative and transfer tax stamps or funds
therefor, if required pursuant to Section 14.9. Any Note (or portion thereof)
surrendered for conversion shall be delivered to the Company for cancellation
and canceled by it. Except to the extent expressly provided for in Section 2 in
the Notes, no interest shall be payable upon conversion of any Note (or portion
thereof).
14.2 PROCEDURE. As promptly as practicable after the
surrender of any Note (or portion thereof) for conversion pursuant to Section
14.1, the Company shall deliver to or upon the written order of the Holder of
such Note so surrendered a certificate or certificates representing the number
of fully paid and non-assessable shares of Common Stock into which such Note (or
portion thereof) may be or have been converted in accordance with the provisions
of this Article 14. Subject to the following provisions of this paragraph and of
Section 14.3, such conversion shall be deemed to have been made immediately
prior to the close of business on the date that such Note (or portion thereof)
shall have been surrendered in satisfactory form for conversion, and the Person
or Persons entitled to receive the Common Stock deliverable upon conversion of
such Note (or portion thereof) shall be treated for all purposes as having
become the record holder or holders of such Common Stock at such time, and such
conversion shall be at the Conversion Ratio in effect at such time; PROVIDED,
HOWEVER, that any such surrender on any date when the share transfer books of
the Company shall be closed (but not for any period in excess of five days),
shall be effective on the day of such surrender to constitute the Person or
Persons entitled to receive such Common Stock as the record holder or holders
thereof for all purposes immediately prior to the close of business on the next
succeeding day on which such share transfer books are open, and such conversion
shall be deemed to have been made at, and shall be made at the Conversion Price
in effect on the day such Note was surrendered. If a Note is converted in part
only, upon such conversion, the Company shall execute and deliver to the Holder,
at the expense of the Company, a new Note
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with an aggregate original purchase price equal to that of the unconverted
portion of the principal amount at maturity of such Note. The Company's
delivery upon conversion of the shares of Common Stock into which the Notes
are convertible shall be deemed to satisfy the Company's obligation to pay
the principal amount at maturity of the portion of Notes so converted and any
unpaid interest accrued on such Notes at the time of such conversion.
14.3 ANTIDILUTION. The Conversion Price shall be subject
to adjustment as follows:
(a) In case the Company shall at any time or
from time to time (A) pay or make a dividend or make a distribution (other than
a dividend or distribution paid to the escrow account in the manner provided in
Section 8.20 of this Agreement) on the outstanding shares of Common Stock in
capital stock (which, for purposes of this Section 14.3(a) shall include,
without limitation, any options, warrants or other rights to acquire capital
stock) of the Company, (B) subdivide the outstanding shares of Common Stock into
a larger number of shares, (C) combine the outstanding shares of Common Stock
into a smaller number of shares, (D) issue any shares of its capital stock in a
reclassification of the Common Stock or (E) pay a dividend or make a
distribution (other than a dividend or distribution paid or made to the escrow
account in the manner provided in Section 8.20 of this Agreement) on the
outstanding shares of Common Stock in securities of the Company as a redemption
pursuant to or trigger of a shareholder rights plan, "poison pill" or similar
arrangement, then, and in each such case, the Conversion Price in effect
immediately prior to such event shall be adjusted (and any other appropriate
actions shall be taken by the Company) so that the Holder of Notes thereafter
surrendered for conversion shall be entitled to receive the number of shares of
Common Stock or other securities of the Company that such Holder would have
owned or would have been entitled to receive upon or by reason of any of the
events described above, had such Note been converted immediately prior to the
occurrence of such event at the Designated Value as of such date. An adjustment
made pursuant to this Section 14.3(a) shall become effective retroactively (A)
in the case of any such dividend or distribution, to a date immediately
following the close of business on the record date for the determination of
Holders of Common Stock entitled to receive such dividend or distribution or (B)
in the case of any such subdivision, combination or reclassification, to the
close of business on the day upon which such corporate action becomes effective.
(b) In case the Company shall at any time or
from time to time issue shares of Common Stock (or securities convertible into
or exchangeable for Common Stock, or any options, warrants or other rights to
acquire shares of Common Stock other than rights issued in connection with a
shareholders' rights plan, "poison pill" or similar arrangement) for a
consideration per share less than the Current Market Price per share of Common
Stock then in effect at issuance date (the "DATE"), referred
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to in the following sentence (treating the price per share of any security
convertible or exchangeable or exercisable into Common Stock as equal to (A) the
sum of the price for such security convertible, exchangeable or exercisable into
Common Stock plus any additional consideration payable (without regard to any
anti-dilution adjustments) upon the conversion, exchange or exercise of such
security into Common Stock divided by (B) the number of shares of Common Stock
initially under lying such convertible, exchangeable or exercisable security),
then, and in each such case, the Conversion Price then in effect shall be
adjusted by dividing the Conversion Price in effect on the day immediately prior
to the Date by a fraction (x) the numerator of which shall be the sum of the
number of shares of Common Stock outstanding on the Date plus the number of
additional shares of Common Stock issued or to be issued (or the maximum number
into which such convertible or exchangeable securities initially may convert or
exchange or for which such options, warrants or other rights initially may be
exercised) and (y) the denominator of which shall be the sum of the number of
shares of Common Stock outstanding on the Date plus the number of shares of
Common Stock which the aggregate consideration for the total number of such
additional shares of Common Stock so issued or be issued upon the conversion,
exchange or exercise of such convertible or exchangeable securities or options,
warrants or other rights (plus the aggregate amount of any additional
consideration initially payable upon such conversion, exchange or exercise of
such security) would purchase at the Current Market Price per share of Common
Stock on the Date. Such adjustment shall be made whenever such shares,
securities, options, warrants or other rights are issued other than rights
issued in connection with a shareholders' rights plan, "poison pill" or similar
arrangement, and shall become effective retroactively to a date immediately
following the close of business (1) in the case of issuance to shareholders of
the Company, as such, on the record date for the determination of shareholders
entitled to receive such shares, securities, options, warrants or other rights
and (2) in all other cases, on the date ("ISSUANCE DATE") of such issuance;
PROVIDED that:
(i) the determination as to whether an
adjustment is required to be made pursuant to this Section 14.3(b) shall be made
upon the issuance of such shares or such convertible or exchangeable securities,
options, warrants or other rights;
(ii) no adjustment in the Conversion
Price shall be made pursuant to this Section 14.3(b) as a result of any issuance
of securities by the Company in respect of which an adjustment to the Conversion
Price is made pursuant to Section 14.3(a).
(c) In case the Company shall at any time or
from time to time distribute to all holders of shares of its Common Stock
(including any such distribution made in connection with a consolidation or
merger in which the Company is the resulting or surviving corporation and the
Common Stock is not changed or
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exchanged), cash, evidences of indebtedness of the Company or another issuer,
securities of the Company or another issuer or other assets (excluding (A)
dividends or distributions paid or made to the escrow account in the manner
provided in Section 8.21 hereof, (B) Regular Dividends, and (C) dividends
payable in shares of Common Stock for which adjustment is made under Section
14.3(a)) or rights or warrants to subscribe for or purchase securities of the
Company (excluding those referred to in Section 14.3(b) or those in respect of
which an adjustment in the Conversion Price is made pursuant to Section 14.3(a)
and (b) and excluding any rights issued in connection with a shareholders'
rights plan, "poison pill" or similar arrangement), then, and in each such case,
the Conversion Price then in effect shall be adjusted by dividing the Conversion
Price in effect immediately prior to the date of such distribution by a fraction
(x) the numerator of which shall be the Current Market Price of the Common Stock
on the record date referred to below and (y) the denominator of which shall be
such Current Market Price of the Common Stock less the then Fair Market Value
(as determined by the Company Board of Directors unless Holders of at least 51%
of the aggregate Accreted Value of the Notes outstanding request that the
Company obtain an opinion of an independent nationally recognized investment
banking firm mutually agreed by the Company and such Holders (the expense of
which shall be borne equally by the Company on the one hand and such Holders on
the other), in which event Fair Market Value shall be as determined by such
investment banking firm) of the portion of the cash, evidences of indebtedness,
securities or other assets so distributed or of such subscription rights or
warrants applicable to one share of Common Stock (but such denominator not to be
less than one). Such adjustment shall be made whenever any such distribution is
made and shall become effective retroactively to a date immediately following
the close of business on the record date for the determination of shareholders
entitled to receive such distribution.
(d) In case a tender or exchange offer made by
the Company or any Subsidiary for all or any portion of the Common Stock shall
expire and such tender or exchange offer (as amended upon the expiration
thereof) shall require the payment to stockholders of consideration per share of
Common Stock having a Fair Market Value (as determined in a manner consistent
with Section 8.18(c)) that as of the last time (the "EXPIRATION TIME") tenders
or exchanges may be made pursuant to such tender or exchange offer (as it may be
amended) exceeds the Current Market Price of the Common Stock on the Trading Day
next succeeding the Expiration Time, the Conversion Price shall be reduced so
that the same shall equal the price determined by multiplying the Conversion
Price in effect immediately prior to the Expiration Time by a fraction the
numerator of which shall be the number of shares of Common Stock outstanding
(including any tendered or exchanged shares) on the Expiration Time multiplied
by the Current Market Price of the Common Stock on the Trading Day next
succeeding the Expiration Time and the denominator of which shall be the sum of
(x) the Fair Market Value (determined in a manner consistent with Section
8.18(c)) of the
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aggregate consideration payable to stockholders based on the acceptance (up to
any maximum specified in the terms of the tender or exchange offer) of all
shares validly tendered or exchanged and not withdrawn as of the Expiration Time
(the shares so accepted, up to any such maximum, being referred to as the
"PURCHASED SHARES") and (y) the product of the number of shares of Common Stock
outstanding (less any Purchased Shares) on the Expiration Time and the Current
Market Price of the Common Stock on the Trading Day next succeeding the
Expiration Time, such reduction to become effective immediately prior to the
opening of business on the day following the Expiration Time. In the event that
the Company is obligated to purchase shares pursuant to any such tender or
exchange offer, but the Company is permanently prevented by applicable law from
effecting any such purchases or all such purchases are rescinded, the Conversion
Price shall again be adjusted to be the Conversion Price that would then be in
effect if such tender or exchange offer had not been made.
(e) In the case the Company, at any time or from
time to time, shall take any action affecting its Common Stock similar to or
having an effect similar to any of the actions described in any of Section
14.3(a) through Section 14.3(c), inclusive, or Section 14.7 (but not including
any action described in any such Section) and the Company Board of Directors in
good faith determines that it would be equitable in the circumstances to adjust
the Conversion Price as a result of such action, then, and in each such case,
the Conversion Price shall be adjusted in such manner and at such time as the
Company Board of Directors in good faith determines would be equitable in the
circumstances (such determination to be evidenced in a resolution, a certified
copy of which shall be mailed to the Holders of the Notes).
(f) Notwithstanding anything herein to the
contrary, no adjustment under this Section 14.3 need be made to the Conversion
Price unless such adjustment would require an increase or decrease of at least
1% of the Conversion Price then in effect. Any lesser adjustment shall be
carried forward and shall be made at the time of and together with the next
subsequent adjustment, which, together with any adjustment or adjustments so
carried forward, shall amount to an increase or decrease of at least 1% of such
Conversion Price.
14.4 NO ADJUSTMENT. If the Company shall take a record of
the holders of its Common Stock for the purpose of entitling them to receive a
dividend or other distribution, and shall thereafter and before the distribution
to shareholders thereof legally abandon its plan to pay or deliver such dividend
or distribution, then thereafter no adjustment in the Conversion Price then in
effect shall be required by reason of the taking of such record.
14.5 OFFICER'S CERTIFICATE. Upon any increase or decrease
in the Conversion Price, then, and in each such case, the Company promptly shall
deliver to each registered Holder at least 10 Business Days after effecting any
of the foregoing
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transactions a certificate, signed by the President or a Vice-President and by
the Treasurer or an Assistant Treasurer or the Secretary or an Assistant
Secretary of the Company, setting forth in reasonable detail the event requiring
the adjustment and the method by which such adjustment was calculated and
specifying the increased or decreased Conversion Price then in effect following
such adjustment.
14.6 FRACTIONAL SHARES. No fractional shares or scrip
representing fractional shares shall be issued upon the conversion of a Note or
any portion thereof. If more than one Note shall be surrendered for conversion
at one time by the same Holder, the number of full shares of Common Stock
issuable upon conversion thereof shall be computed on the basis of the Accreted
Value of the Note so surrendered. If the conversion of any Note (or any portion
thereof) results in a fraction, an amount equal to such fraction multiplied by
the Market Price of the Common Stock on the Business Day preceding the day of
conversion shall be paid to such Holder in cash by the Company.
14.7 REORGANIZATION, ETC. In case of any capital
reorganization or reclassification or other change of outstanding shares of
Common Stock (other than a change in par value, or from par value to no par
value, or from no par value to par value), or in case of any consolidation or
merger of the Company with or into another Person (other than a consolidation or
merger in which the Company is the resulting or surviving Person and which does
not result in any reclassification or cancellation or conversion of shares of
Capital Stock) or any sale or conveyance of the properties and assets of the
Company as, or substantially as, an entirety to any other corporation, as a
result of which holders of Common Stock shall be entitled to receive stock,
other securities or other property or assets (including cash) with respect to or
in exchange for such Common Stock, (any of the foregoing, a "TRANSACTION"), the
Company, or such successor or purchasing Person, as the case may be, shall
execute and deliver to each Holder of a Note at least 10 Business Days prior to
effecting a Transaction, a certificate that the Holder of each Note then
outstanding shall have the right thereafter to convert such Note into the kind
and amount of shares of stock or other securities (of the Company or another
issuer) or property or cash receivable upon such Transaction by a holder of the
number of shares of Common Stock into which such Note could have been converted
immediately prior to such Transaction. Such certificate shall provide for
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Article 14. If, in the case of any such
Transaction, the stock, other securities, cash or property receivable thereupon
by a holder of Common Stock includes shares of stock or other securities of a
Person other than the successor or purchasing Person and other than the Company,
which controls or is controlled by the successor or purchasing Person or which,
in connection with such Transaction, issues stock, securities, other property or
cash to holders of Common Stock, then such certificate also shall be executed by
such Person, and such Person shall, in such certificate, specifically
acknowledge the obligations of such successor or purchasing
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Person and acknowledge its obligations to issue such stock, securities, other
property or cash to the Holders of Notes upon conversion of the Notes as
provided above. The provisions of this Section 14.7 and any equivalent thereof
in any such certificate similarly shall apply to successive Transactions.
14.8 NOTICE OF CERTAIN EVENTS. In case at any time or
from time to time:
(a) the Company shall declare a dividend (or any
other distribution) on its Common Stock;
(b) the Company shall authorize the granting to
the holders of its Common Stock of rights or warrants to subscribe for or
purchase any shares of stock of any class or of any other rights or warrants;
(c) there shall be any reclassification of the
Common Stock, or any consolidation or merger to which the Company is a party and
for which approval of any shareholders of the Company is required, or any sale
or other disposition of all or substantially all of the assets of the Company;
or
(d) of the voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then the Company shall mail to each Holder of the Notes at such Holder's address
as it appears on the transfer books of the Company, as promptly as possible but
in any event at least 10 days prior to the applicable date hereinafter
specified, a notice stating (x) the date on which a record is to be taken for
the purpose of such dividend, distribution or rights or warrants or, if a record
is not to be taken, the date as of which the holders of Common Stock of record
to be entitled to such dividend, distribution or rights are to be determined, or
(y) the date on which such reclassification, consolidation, merger, sale,
conveyance, dissolution, liquidation or winding up is expected to become
effective. Such notice also shall specify the date as of which it is expected
that holders of Common Stock of record shall be entitled to exchange their
Common Stock for shares of stock or other securities or property or cash
deliverable upon such reclassification, consolidation, merger, sale, conveyance,
dissolution, liquidation or winding up.
14.9 TAXES. The issuance or delivery of certificates for
Common Stock upon the conversion of Notes pursuant to Section 14.1, shall be
made without charge to the converting Holder of Notes for such certificates or
for any tax (except for any tax levied under foreign laws) in respect of the
issuance or delivery of such certificates or the securities represented thereby,
and such certificates shall be issued or delivered in the respective names of,
or (subject to compliance with the applicable provisions of federal and state
securities laws) in such names as may be directed by,
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the Holders of the Note so converted; PROVIDED, HOWEVER, that the Company shall
not be required to pay any tax which may be payable in respect of any transfer
involved in the issuance and delivery of any such certificate in a name other
than that of the Holder of the Notes so converted, and the Company shall not be
required to issue or deliver such certificate unless or until the Person or
Persons requesting the issuance or delivery thereof shall have paid to the
Company the amount of such tax or shall have established to the reasonable
satisfaction of the Company that such tax has been paid.
Article 15
MISCELLANEOUS
15.1 SURVIVAL OF PROVISIONS. All warranties,
representations and covenants made by the Company in or under this Agreement
shall be considered to have been relied upon by each Purchaser and shall survive
the execution and delivery of this Agreement and the issuance to such Purchaser
of the Notes, regardless of any investigation made by or on behalf of such
Purchaser. All of the representations and warranties made herein and each of the
provisions hereof shall survive the execution and delivery of this Agreement,
any investigation by or on behalf of a Purchaser or any Affiliate, acceptance of
the Notes and payment therefor, payment of the Notes or on redemption or
otherwise or termination of this Agreement.
15.2 NOTICES. All notices, demands and other
communications provided for or permitted hereunder shall be made in writing and
shall be by registered or certified first-class mail, return receipt requested,
telecopier (which is confirmed), courier service (providing proof of delivery)
or personal delivery to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
(a) if to Purchasers
c/o OHCP Ocean III, L.L.C.
65 E. 55th Street
New York, New York 10022
Telecopier No.: (212) 593-3596
Attention: Manager
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with a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Telecopier No.: (212) 757-3990
Attention: Marilyn Sobel, Esq.
(b) if to the Company at the following address:
Cincinnati Bell Inc.
201 East Fourth Street
Cincinnati, Ohio 45202
(513) 721-7358
Attention: General Counsel and Secretary
with a copy to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, New York 10019
Telecopier No: (212) 474-3700
Attention: Robert Kindler
Robert Townsend, III
All such notices and communications shall be deemed to have
been duly given: when delivered by hand, if personally delivered; when delivered
by courier, if delivered by commercial overnight courier service; five Business
Days after being deposited in the mail, postage prepaid, if mailed; and when
receipt is acknowledged, if telecopied.
15.3 SUCCESSORS. This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns and
permitted transferees of the parties hereto. Except as provided in Article 11,
no Person other than the parties hereto and their successors and permitted
assigns is intended to be a beneficiary of this Agreement and the Notes.
15.4 ASSIGNMENTS.
(a) The Company may not assign any of its rights
or obligations under this Agreement without the written consent of Holders of at
least 51% of the aggregate Accreted Value of the Notes outstanding.
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(b) Unless otherwise prohibited by Section 8.13,
the Purchasers and any subsequent Holder of Notes or Conversion Shares may, at
any time or from time to time sell, agree to sell or assign such Notes or
Conversion Shares to one or more other Persons who shall thereupon become a
Holder of such Note or Conversion Shares and shall be entitled to all the
benefits and rights of a Holder hereunder. In the event of any such sale or
assignment of a Note, upon surrender for exchange of any Note at the Note
Register, the Company shall execute and deliver in exchange therefor, without
expense to the Holder, one or more new Notes (in denominations reasonably
requested by such Holder) in the same Accreted Value as the then unpaid Note so
surrendered as such Holder shall specify, dated as of the date to which interest
has been paid on the Note so surrendered (or, if no interest has been paid, the
date of such surrendered Note), in the name of such Person or Persons as may be
designated by such Holder in writing, and otherwise of the same form and tenor
as the Note so surrendered for exchange. Every Note surrendered for transfer
shall be duly endorsed, or accompanied by a written instrument of transfer duly
executed by the Holder of such Note or its attorney duly authorized in writing.
15.5 AMENDMENT AND WAIVER.
(a) No failure or delay on the part of any
Holder, in exercising any right, power or remedy hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right,
power or remedy preclude any other or further exercise thereof or the exercise
of any other right, power or remedy. The remedies provided for herein are
cumulative and are not exclusive of any remedies that may be available to any
Holder of a Note at law, in equity or otherwise.
(b) Any amendment, supplement or modification of
or to any provision of this Agreement, any waiver of any provision of this
Agreement and any consent to any departure by the Company from the terms of any
provision of this Agreement, shall be effective (i) only if it is made or given
in writing and signed by the Company and Holders of at least 51% of the
aggregate Accreted Value of the Notes outstanding and (ii) only in the specific
instance and for the specific purpose for which made or given.
(c) Any amendment, supplement or modification of
or to any provision of the Notes, any waiver of any provision of the Notes, and
any consent to any departure by the Company from the terms of any provision of
the Notes, shall be effective only if it is made or given in writing and signed
by the Company and the Holders of at least 51% of the aggregate Accreted Value
of the Notes outstanding, and only in the specific instance and for the specific
purpose for which made or given. However, without the consent of each Holder of
a Note affected, an amendment may not: (i) reduce the rate of or extend the time
for payment of interest on any Note; (ii) reduce the principal amount or
Accreted Value of or extend the maturity of any
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Note; (iii) change the time at which any Note shall or may be prepaid in
accordance with the terms of the Notes; (iv) make any Note payable in money
other than that stated in the Notes; (v) make any change in Article 11 that
adversely affects the rights of any Holder of a Note under Article 11; or (vi)
make any change in the first or second sentence of this Section 15.5(c).
Except where notice is specifically required by this
Agreement, no notice to or demand on the Company in any case shall entitle the
Company to any other or further notice or demand in similar or other
circumstances.
15.6 COUNTERPARTS. This Agreement may be executed in any
number of counterparts and by each of the parties hereto in separate
counterparts, each of which when so executed by each of the parties hereto shall
be deemed to be an original and all of which taken together and delivered to the
other parties shall constitute one and the same agreement.
15.7 INTERPRETATION. When a reference is made in this
Agreement to an Article, Section or Exhibit, such reference shall be to an
Article or Section of, or an Exhibit to, this Agreement unless otherwise
indicated. 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. Whenever the words "include", "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation". The words "hereof", "herein" and "hereunder" and
words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement. All
terms defined in this Agreement shall have such defined meanings when used in
any certificate or other document made or delivered pursuant hereto unless
otherwise defined therein. The definitions contained in this Agreement are
applicable to the singular as well as the plural forms of such terms and to the
masculine as well as to the feminine and neuter genders of such term. Except as
otherwise set forth herein, any agreement, instrument or statute defined or
referred to herein or in any agreement or instrument that is referred to herein
means such agreement, instrument or statute as from time to time amended,
modified or supplemented, including (in the case of agreements or instruments)
by waiver or consent and (in the case of statutes) by succession of comparable
successor statutes and references to all attachments thereto and instruments
incorporated therein. Except as otherwise set forth herein, references to a
person are also to its permitted successors and assigns.
15.8 DETERMINATIONS. Except where any provision expressly
requires that a determination be reasonable or a consent not be unreasonably
withheld, or be subject to qualifications to similar effect, all determinations
to be made by the Company, any Purchaser or any Holder hereunder in its opinion
or judgment or with its approval or otherwise shall be made by it in its sole
discretion.
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15.9 GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York, without
regard to principles of conflicts of law.
15.10 JURISDICTION. Each party to this Agreement hereby
irrevocably agrees that any legal action or proceeding arising out of or
relating to this Agreement or any agreements or transactions contemplated hereby
may be brought in the courts of the State of New York located in New York City
or of the United States of America for the Southern District of New York and
hereby expressly submits irrevocably to the personal jurisdiction and venue of
such courts for the purposes thereof and expressly waives any claim of improper
venue and any claim that such courts are an inconvenient forum. Each party
hereby irrevocably consents to the service of process of any of the
aforementioned courts in any such suit, action or proceeding by the mailing of
copies thereof by registered or certified mail, postage prepaid, to the address
set forth in Section 15.2, such service to become effective 10 days after such
mailing.
15.11 SEVERABILITY. In the event that any one or more of
the provisions contained herein, or the application thereof in any circumstance,
is held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions hereof shall not be in any way impaired,
unless the provisions held invalid, illegal or unenforceable shall substantially
impair the benefits of the remaining provisions hereof. Upon such determination
that any term or other provision is invalid, illegal or incapable of being
enforced, the parties hereto shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible to the fullest extent permitted by applicable law in an acceptable
manner to the end that the transactions contemplated hereby are fulfilled to the
extent possible.
15.12 REMEDIES. The Purchasers and the Company agree that
the parties would not have an adequate remedy at law for money damages and
that money damages would be incalculable, if a breach of this Agreement or
the Notes by the Company or any of the Purchasers occurs and is continuing,
the Company or any Holder, as the case may be, may pursue any available
remedy by proceeding at law or in equity to enforce the performance
(including, without limitation, the specific performance) of any provision of
this Agreement or the Notes. A Holder may maintain a proceeding even if it
does not possess any of the Notes or does not produce any of them in the
proceeding. Except as otherwise provided by law, a delay or omission by the
Company or any Holder, as the case may be, in exercising any right or remedy
accruing upon any such breach shall not impair the right or remedy or
constitute a waiver of or acquiescence in any such breach. No remedy is
exclusive of any other remedy. All available remedies are cumulative.
64
<PAGE>
15.13 ENTIRE AGREEMENT. This Agreement, together with the
Exhibits and Schedules hereto, the Notes, the Registration Rights Agreement and
the Fee Letter, is intended by the parties as a final expression of their
agreement and intended to be a complete and exclusive statement of the agreement
and understanding of the parties hereto in respect of the subject matter
contained herein and therein. There are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein or therein. This
Agreement, together with the Exhibits and Schedules hereto, the Notes, the
Registration Rights Agreement and the Fee Letter supersede all prior agreements
and understandings between the parties with respect to such subject matter.
15.14 PUBLICITY. Except as may be required by applicable
law or regulation, no party hereto shall issue a publicity release or
announcement or otherwise make any public disclosure concerning this Agreement
or the transactions contemplated hereby, without prior approval by the other
parties hereto. If any announcement is required by law to be made by any party
hereto, prior to making such announcement such party will deliver a draft of
such announcement to the other parties and shall give the other parties an
opportunity to comment thereon.
15.15 LEGEND. All notes evidencing the Notes and all
certificates evidencing shares of Common Stock into which the Notes convert, in
each case, beneficially owned by a Purchaser, shall have the following legend,
which legend will remain on such notes and certificates until such time as the
securities represented by such notes and certificates are no longer subject to
the restrictions of this Agreement and there is delivered to the Company an
opinion of counsel reasonably acceptable to the Company to the effect that such
legend is no longer required:
THIS SECURITY IS SUBJECT TO THE PROVISIONS OF THE INVESTMENT
AGREEMENT DATED AS OF JULY 21, 1999 BETWEEN THE ISSUER AND THE
PURCHASERS NAMED THEREIN AND MAY NOT BE SOLD OR TRANSFERRED EXCEPT IN
ACCORDANCE THEREWITH. A COPY OF SUCH AGREEMENT IS ON FILE AT THE OFFICE
OF THE CORPORATE SECRETARY OF THE ISSUER. THIS SECURITY WAS SOLD IN A
PRIVATE PLACEMENT, WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF
1933, AND MAY BE OFFERED OR SOLD ONLY IF REGISTERED UNDER THE
SECURITIES ACT OF 1933 OR IF AN EXEMPTION FROM
REGISTRATION IS AVAILABLE.
65
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed and delivered by their respective representatives
hereunto duly authorized as of the date first above written.
CINCINNATI BELL INC.
By: /s/ Richard G. Ellenberger
----------------------------
Name: Richard G. Ellenberger
Title: President and Chief
Executive Officer
OAK HILL CAPITAL PARTNERS, L.P.
By: OHCP GenPar, L.P.,
its general partner
By: OHCP MGP, LLC,
its general partner
By: /s/ J. Taylor Crandall
-------------------------
Name: J. Taylor Crandall
Title: Vice President
OHCP OCEAN I, LLC
By: OHCP AIV I (Cayman), Ltd.,
its member
By: /s/ John R. Monsky
-------------------------
Name: John R. Monsky
Title: Vice President
66
<PAGE>
[Investment Agreement]
OHCP OCEAN III, LLC
By: Oak Hill Capital Partners, L.P.,
its member
By: OHCP GenPar, L.P.,
its general partner
By: OHCP MGP, LLC,
its general partner
By: /s/ J. Taylor Crandall
-------------------------
Name: J. Taylor Crandall
Title: Vice President
OHCP OCEAN IV, LLC
By: Oak Hill Capital Management Partners, L.P.,
its member
By: OHCP GenPar, L.P.,
its general partner
By: OHCP MGP, LLC,
its general partner
By: /s/ J. Taylor Crandall
-------------------------
Name: J. Taylor Crandall
Title: Vice President
67
<PAGE>
[Investment Agreement]
OHCP OCEAN V, LLC
By: OHCP Ocean II, LLC,
its member
By: OHCP GenPar, L.P.,
its managing member
By: OHCP MGP, LLC,
its general partner
By: /s/ J. Taylor Crandall
-------------------------
Name: J. Taylor Crandall
Title: Vice President
OAK HILL SECURITIES FUND, L.P.
By: Oak Hill Securities GenPar, L.P.,
its general partner
By: Oak Hill Securities MGP, Inc.,
its general partner
By: /s/ Scott Krase
-------------------------
Name: Scott Krase
Title: Vice President
OAK HILL SECURITIES FUND II, L.P.
By: Oak Hill Securities GenPar II, L.P.,
its general partner
By: Oak Hill Securities MGP II, Inc.,
its general partner
By: /s/ Scott Krase
-------------------------
Name: Scott Krase
Title: Vice President
68
<PAGE>
[Investment Agreement]
Agreed to as to Sections 8.10 and 8.11 only:
OHCP AIV I, LP.
By: OHCP GenPar, L.P.,
its general partner
By: OHCP MGP, LLC,
its general partner
By: /s/ Kevin G. Levy
-------------------------
Name: Kevin G. Levy
Title: Vice President
69
<PAGE>
[Investment Agreement]
70
<PAGE>
SCHEDULE 1
NOTES TO BE PURCHASED AT THE CLOSING
<TABLE>
<CAPTION>
PURCHASER (or assignee) PURCHASE PRICE
- --------- --------------
<S> <C>
Ocean I $42,455,156
Ocean III 231,107,007
Ocean IV 8,125,000
Ocean V 43,312,837
Oak Hill Securities Fund 75,000,000
Oak Hill Securities Fund II --
------------
Total $400,000,000
</TABLE>
71
<PAGE>
EXHIBIT 5.1
September 13, 1999
Board of Directors of
Cincinnati Bell Inc.
201 East Fourth Street
Cincinnati, Ohio 45201-2301
Ladies and Gentlemen:
I have acted as counsel for Cincinnati Bell Inc., an Ohio
corporation ("Cincinnati Bell"), in connection with the preparation of a
Registration Statement on Form S-4 (the "Registration Statement") which is
being filed on the date hereof by Cincinnati Bell with the Securities and
Exchange Commission under the Securities Act of 1933 (the "Act"). The
Registration Statement relates to the proposed issuance by Cincinnati Bell of
up to (i) 103,152,121 shares of its common stock, par value $0.01 per share
("Cincinnati Bell Common Stock"), (ii) 1,400,000 shares of its 7 1/4% Junior
Convertible Preferred Stock Due 2007, without par value ("Cincinnati Bell
7 1/4% Preferred Stock"), (iii) 3,105,000 shares of its Depositary Shares, each
representing a one-twentieth interest in a share of 6 3/4% Cumulative
Convertible Preferred Stock, without par value (the "Depositary Shares"), and
(iv) 155,250 shares of its 6 3/4% Cumulative Convertible Preferred Stock,
without par value ("Cincinnati Bell 6 3/4% Preferred Stock"), pursuant to the
Agreement and Plan of Merger dated as of July 20, 1999 (the "Merger
Agreement"), among Cincinnati Bell, Ivory Merger Inc., a Delaware corporation
and a wholly owned subsidiary of Cincinnati Bell ("Merger Sub"), and IXC
Communications, Inc., a Delaware corporation ("IXC"). The Merger Agreement
provides for the merger of Merger Sub with and into IXC (the "Merger"), with
IXC surviving the Merger as a subsidiary of Cincinnati Bell.
In that connection, I have examined originals, or copies
certified or otherwise identified to my satisfaction, of such documents,
corporate records and other instruments as I have deemed necessary or
appropriate for the purposes of this opinion, including: (a) the Registration
Statement and (b) the proxy statement/prospectus that forms a part of the
Registration Statement. In such examination, I have assumed the genuineness of
all signatures and the authenticity of all documents submitted to me as copies.
In examining agreements executed by parties other than Cincinnati Bell and
Merger Sub, I have assumed that such parties had the power, corporate or other,
to enter into and
<PAGE>
Cincinnati Bell Inc.
September 13, 1999
Page 2
perform all obligations thereunder and also have assumed the due authorization
by all requisite action, corporate or other, and execution and delivery by such
parties of such documents, and the validity and binding effect thereof. As to
any facts material to the opinion expressed herein which I have not
independently verified or established, I have relied upon statements and
representations of officers and representatives of Cincinnati Bell and others.
Based on such examination, I am of the opinion that (i) the
shares of Cincinnati Bell Common Stock, (ii) the shares of Cincinnati Bell
7 1/4% Preferred Stock, (iii) the Depositary Shares and (iv) the shares of
Cincinnati Bell 6 3/4% Preferred Stock have been duly authorized for issuance
and, when issued in accordance with the terms and conditions of the Merger
Agreement, will be validly issued, fully paid and non-assessable.
I am admitted to practice in the State of Ohio, and I express
no opinion as to any matters governed by any law other than the law of the State
of Ohio and the Federal law of the United States of America.
I hereby consent to the inclusion of this opinion as an
exhibit to the Registration Statement and to the reference to me under the
heading "Legal Matters" in the proxy statement/prospectus that forms a part of
the Registration Statement. In giving such consent, I do not hereby admit that I
am in the category of persons whose consent is required under Section 7 of the
Act.
Very truly yours,
/s/ Thomas E. Taylor
-----------------------------
Thomas E. Taylor
General Counsel and Secretary
Cincinnati Bell Inc.
<PAGE>
Exhibit 8.1
September 13, 1999
IXC Communications, Inc
1122 Capitol of Texas Highway South
Austin, Texas 78746
Re: Agreement and Plan of Merger Dated as of July 20, 1999 By and
Among CINCINNATI BELL, INC., IVORY MERGER INC. AND IXC
COMMUNICATIONS, INC.
Dear Sirs:
We have acted as counsel for IXC Communications, Inc., a Delaware
corporation ("IXC"), in connection with the merger (the "Merger") of Ivory
Merger, Inc., a Delaware corporation ("Sub") and wholly-owned subsidiary of
Cincinnati Bell, Inc., an Ohio corporation ("CBI"), with and into IXC
Communications, Inc., a Delaware corporation ("IXC") pursuant to an Agreement
and Plan of Merger, dated as of July 20, 1999, by and among IXC, Sub and CBI
(the "Merger Agreement").
In that connection, you have requested our opinion regarding certain
U.S. Federal income tax consequences of the Merger. In providing our opinion, we
have examined the Merger Agreement, the registration statement on Form S-4 (the
"Registration Statement"), which includes the Joint Proxy Statement and
Prospectus of IXC and CBI (the "Proxy Statement/Prospectus"), filed with the
Securities and Exchange Commission (the "SEC") on September 13, 1999, and such
other documents and corporate records as we have deemed necessary or appropriate
for purposes of our opinion. In our examination, we have assumed the genuineness
of all signatures, the legal capacity of all natural persons, the authority of
all persons signing documents, the authenticity of all documents submitted to us
as originals, the conformity to original documents of all documents submitted to
us as certified, conformed or photostatic copies and the authenticity of the
originals of such copies. In addition, we have assumed that (i) the Merger will
be consummated in accordance with the provisions of the Merger Agreement and the
Registration Statement, (ii) the statements concerning the Merger set forth in
the Merger Agreement and the Registration Statement are true, complete and
correct, (iii) the
<PAGE>
IXC Communications, Inc.
September 13, 1999
Page 2
representations made by IXC and CBI, in their respective letters delivered to
us for purposes of this opinion (the "Representation Letters") are true,
complete and correct and will remain true, complete and correct at all times
up to and including the Effective Time (as defined in the Merger Agreement),
(iv) any representations made in the Representation Letters "to the best
knowledge of" or similarly qualified are correct without such qualification
and (v) payment to holders of any preferred stock of IXC pursuant to the
exercise of such holders' appraisal rights under Delaware law with respect to
their preferred stock will not exceed in the aggregate 9% of the value of the
assets of IXC as of the Effective Time. We have made no independent
investigation with regard to such statements or representations. We assume
that no actions will be taken that are inconsistent with such statements and
representations. If any of the above described assumptions are untrue for any
reason or if the Merger is consummated in a manner that is different from the
manner in which it is described in the Merger Agreement or the Proxy
Statement/Prospectus, our opinions as expressed below may be adversely
affected and may not be relied upon.
Based upon the foregoing, for U.S. Federal income tax purposes, we are
of opinion that (i) the Merger will constitute a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the
"Code"), (ii) IXC, Sub and CBI will each be a party to such reorganization
within the meaning of Section 368(b) of the Code; (iii) except as provided
below, holders of IXC stock (a) will not recognize gain or loss for federal
income tax purposes as a result of the exchange of their shares of IXC stock for
CBI common stock in the Merger, except with respect to cash received instead of
a fractional share of CBI common stock, as discussed below, and (b) will have a
tax basis in the CBI stock received in the Merger equal to the tax basis of the
IXC stock surrendered in the Merger less any tax basis of the IXC stock
surrendered that is allocable to a fractional share of CBI common stock for
which cash is received; (iv) an IXC stockholder's holding period with respect to
the CBI common stock received in the Merger will include the holding period of
the IXC stock surrendered in the Merger therefor, assuming the stockholder holds
the shares of IXC stock as a capital asset on the date of the exchange; and (v)
to the extent that a holder of shares of IXC stock receives cash instead of a
fractional share of CBI common stock, the holder will recognize gain or loss for
federal income tax purposes, measured by the difference between the amount of
cash received and the portion of the tax basis of the holder's shares of IXC
stock allocable to such fractional share of CBI common stock. Assuming the
stockholder holds the shares of IXC stock as a capital asset on the date of the
exchange, the gain or loss will be a capital gain or loss and will be a
long-term capital gain or loss if the share of IXC stock exchanged for the
fractional share of CBI common stock was held for more than one year at the
Effective Time.
Our opinion does not address all aspects of United States federal
income taxation that may be relevant to a IXC stockholder in light of the
stockholder's particular circumstances or to those IXC stockholders subject to
special rules, such as stockholders who are not citizens or residents of the
United States or organized under the laws of the United States, financial
institutions, tax-exempt organizations, insurance companies, brokers or dealers
in securities, traders in securities electing mark to market, stockholders who
acquired their IXC stock pursuant to the
<PAGE>
IXC Communications, Inc.
September 13, 1999
Page 3
exercise of options or similar derivative securities or otherwise as
compensation or stockholders who hold their IXC stock pursuant to a
tax-qualified retirement plan or as part of a straddle, hedge or conversion
transaction. Our opinion does not apply to holders who transfer their IXC stock
pursuant to the Stock Purchase Agreement (as defined in the Merger Agreement).
Our opinion is limited to the federal income tax matters addressed, and
no opinion is rendered with respect to any other issue, including any other tax
aspects of the Merger. In particular, we express no opinion with respect to the
tax consequences of any CBI common stock received other than in exchange for IXC
stock or with respect to any state, local or foreign tax consequences of the
Merger. In addition, our conclusions are based on federal income tax law
currently in effect, which is subject to change on a prospective or retroactive
basis. If any assumption or representation described above or contained in the
Merger Agreement or the Representations Letters is not true, correct and
complete, or in the event of a change in law adversely affecting the conclusions
reached in this letter, our opinion will be void and of no force or effect. You
should be aware that although this letter represents our opinion concerning the
matter specifically discussed, it is not binding on the courts or on any
administrative agency, including the Internal Revenue Service, and a court or
agency may hold or act to the contrary. We undertake no obligation to update
this letter or our opinion at any time. Our opinion is provided to you as a
legal opinion only, and not as a guaranty or warranty, and is limited to the
specific transactions, documents and matter described above. No opinion may be
implied or inferred beyond that which is expressly stated in this letter.
This opinion is furnished solely for the benefit of IXC in connection
with the Merger Agreement and may not be filed with or furnished to any
individual, entity, association, agency or other person and may not be quoted or
referred to, orally or in writing, in whole or in part, without our prior
written consent.
We hereby consent to the use of our name in the Registration Statement
and in the Joint Proxy Statement/Prospectus filed as a part thereof and to the
filing of this opinion as an exhibit to the Registration Statement.
Very truly yours,
/s/ Riordan & McKinzie
<PAGE>
EXHIBIT 12.1
CINCINNATI BELL INC.
COMPUTATION OF RATIO OF EARNINGS TO COMBINED
FIXED CHARGES AND PREFERRED DIVIDENDS
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
PRO FORMA
-------------
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED YEAR ENDED
----------------------------------------------------- JUNE 30, DECEMBER 31,
1998 1997 1996 1995 1994 1999 1998
--------- --------- --------- --------- --------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Pre-tax income (loss) from continuing
operations before minority interests in
consolidated subsidiaries and income or
loss from equity investees................ $ 126.1 $ 158.6 $ 153.2 $ (45.1) $ 67.4 $ 53.0 $ 3.1
Fixed charges:
Interest expense, including amortization.. 24.2 30.1 27.9 45.4 40.1 18.0 95.0
Interest portion of rental expense........ 3.9 3.9 3.0 4.0 4.2 2.7 48.0
--------- --------- --------- --------- --------- ----- ------
28.1 34.0 30.9 49.4 44.3 20.7 143.0
Pre-tax income (loss) from continuing
operations before minority interests in
consolidated subsidiaries and income or
loss from equity investees plus fixed
charges................................... $ 154.2 $ 192.6 $ 184.1 $ 4.3 $ 111.7 $ 73.7 $ 146.1
--------- --------- --------- --------- --------- ----- ------
--------- --------- --------- --------- --------- ----- ------
Fixed Charges
Interest expensed and capitalized......... 24.2 30.1 27.9 45.4 40.1 18.0 107.5
Interest portion of rental expense........ 3.9 3.9 3.0 4.0 4.2 2.7 48.0
Preferred stock dividend requirements of
majority owned subsidiaries............. -- -- -- -- -- -- 48.8
--------- --------- --------- --------- --------- ----- ------
Total fixed charges..................... $ 28.1 $ 34.0 $ 30.9 $ 49.4 $ 44.3 $ 20.7 $ 204.3
Preferred stock dividend requirements....... -- -- -- -- -- -- 15.2
Total fixed charges and preferred
dividends................................. 28.1 34.0 30.9 49.4 44.3 20.7 219.5
--------- --------- --------- --------- --------- ----- ------
--------- --------- --------- --------- --------- ----- ------
Ratio of earnings to combined fixed charges
and preferred dividends................... 5.5 5.7 6.0 -- 2.5 3.6 --
Deficiency of earnings to combined fixed
charges and preferred dividends........... $ 45.1 $ 73.4
<CAPTION>
SIX MONTHS
ENDED
JUNE 30,
1999
-----------
<S> <C>
Pre-tax income (loss) from continuing
operations before minority interests in
consolidated subsidiaries and income or
loss from equity investees................ $ (90.6)
Fixed charges:
Interest expense, including amortization.. 58.5
Interest portion of rental expense........ 27.1
-----------
85.6
Pre-tax income (loss) from continuing
operations before minority interests in
consolidated subsidiaries and income or
loss from equity investees plus fixed
charges................................... $ (5.0)
-----------
-----------
Fixed Charges
Interest expensed and capitalized......... 68.1
Interest portion of rental expense........ 27.1
Preferred stock dividend requirements of
majority owned subsidiaries............. 26.7
-----------
Total fixed charges..................... $ 121.9
Preferred stock dividend requirements....... 7.6
Total fixed charges and preferred
dividends................................. 129.5
-----------
-----------
Ratio of earnings to combined fixed charges
and preferred dividends................... --
Deficiency of earnings to combined fixed
charges and preferred dividends........... $ 134.5
</TABLE>
<PAGE>
EXHIBIT 23.1
CONSENT OF PRICEWATERHOUSECOOPERS LLP
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-4 of Cincinnati Bell Inc. of our report dated March 12, 1999
relating to the financial statements, which appears in Cincinnati Bell Inc.'s
1998 Annual Report to Shareholders, which is incorporated by reference in its
Annual Report on Form 10-K for the year ended December 31, 1998. We also consent
to the incorporation by reference of our report dated March 29, 1999 relating to
the financial statement schedules, which appears in such Annual Report on Form
10-K. We also consent to the references to us under the headings "Experts" and
"Selected Financial Data" in such Registration Statement.
/s/ PricewaterhouseCoopers LLP
Cincinnati, Ohio
September 13, 1999
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated February 28, 1999, incorporated by reference in the
Joint Proxy Statement of Cincinnati Bell Inc. and IXC Communications, Inc. that
is made part of the Registration Statement (Form S-4) and related Prospectus of
Cincinnati Bell Inc. and IXC Communications, Inc. for the registration of shares
of its common stock in connection with the merger of Cincinnati Bell Inc. and
IXC Communications, Inc.
/s/ Ernst & Young LLP
Austin, Texas
September 8, 1999
<PAGE>
EXHIBIT 23.3
CONSENT OF DELOITTE & TOUCHE LLP
We consent to the incorporation by reference in this Registration Statement
on Form S-4 of Cincinnati Bell Inc. and IXC Communications, Inc. of our report
on National Teleservice, Inc. dated July 28, 1997, appearing in the Annual
Report on Form 10-K/A of IXC Communications, Inc. for the year ended December
31, 1998. We also consent to the reference to us under the heading "Experts" in
this Registration Statement.
/s/ Deloitte & Touche LLP
Minneapolis, Minnesota
September 9, 1999
<PAGE>
EXHIBIT 23.4
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 May 18,
1998 included in IXC Communications, Inc.'s Form 10-K for the year ended
December 31, 1998 and to all references to our Firm included in the Registration
Statement.
/s/ Arthur Andersen LLP
Jackson, Mississippi
September 8, 1999.
<PAGE>
EXHIBIT 23.4
[LETTERHEAD OF ARTHUR ANDERSEN]
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The consolidated financial statements of Grupo Marcatel, S.A. de C.V. and
subsidiaries as of December 31, 1998 and for the year then ended, have been
audited by Arthur Andersen, independent public accountants. Their reports have
been incorporated by reference in this registration statement in reliance upon
the authority of such firm as experts in accounting and auditing. Reference is
made to their report, which includes an explanatory paragraph with respect to
the uncertainty to continue as a going concern.
/s/ Arthur Andersen
Monterrey, Nuevo Leon
September 8, 1999
<PAGE>
EXHIBIT 23.7
CONSENT OF SALOMON SMITH BARNEY INC.
We hereby consent to the use of our name in, to the description of our
opinion letter under the caption "Opinion of Cincinnati Bell's Financial
Advisor" in, and to the inclusion of our opinion letter as Annex 7 to, the Proxy
Statement-Prospectus of Cincinnati Bell Inc. and IXC Communications, Inc. that
is made a part of the Registration Statement on Form S-4 (File No. 333- )
of Cincinnati Bell Inc. By giving such consent we do not thereby admit that we
are experts with respect to any part of such Registration Statement within the
meaning of the term "expert" as used in, or that we come within the category of
persons whose consent is required under, the Securities Act of 1933, as amended,
or the rules and regulations of the Securities and Exchange Commission
promulgated thereunder.
<TABLE>
<S> <C> <C>
By: /s/ SALOMON SMITH BARNEY INC.
-----------------------------------------
SALOMON SMITH BARNEY INC.
</TABLE>
New York, NY
September 10, 1999
<PAGE>
EXHIBIT 23.8
[Letterhead of Morgan Stanley & Co. Incorporated]
We hereby consent to the use of our opinion letter dated July 20, 1999 to
the Board of Directors of IXC Communications, Inc., included as Annex 8 to the
Proxy Statement/Prospectus which
forms part of the Registration Statement on Form S-4 relating to the proposed
merger of IXC Communications, Inc. with a subsidiary of Cincinnati Bell Inc.,
and to the references to such opinion in such Proxy Statement/Prospectus under
the headings "Summary--Fairness Opinions of Financial Advisors," "The
Merger--Background to The Merger," "The Merger--Reasons for the Merger and the
IXC Board of Directors Recommendation" and "Opinions of IXC's Financial
Advisors." In giving such consent, we do not admit and we hereby disclaim that
we come within the category of persons whose consent is required under Section 7
of the Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission thereunder, nor do we thereby admit that we
are experts with respect to any part of the Registration Statement within the
meaning of the terms "experts" as used in the Securities Act, as amended, or the
rules and regulations of the Securities and Exchange Commission thereunder.
<TABLE>
<S> <C> <C>
MORGAN STANLEY & CO. INCORPORATED
By: /s/ SCOTT W. MATLOCK
-----------------------------------------
Name: Scott W. Matlock
Title: Principal
</TABLE>
September 10, 1999
<PAGE>
EXHIBIT 23.9
[Letterhead of Merrill Lynch, Pierce, Fenner & Smith]
We hereby consent to the use of our opinion letter dated July 20, 1999 to
the Board of Directors of IXC Communications, Inc. included as Annex 9 to the
Proxy Statement/Prospectus which forms part of the Registration Statement on
Form S-4 relating to the proposed merger of IXC Communications, Inc. with a
subsidiary of Cincinnati Bell Inc., and to the references to such opinion in
such Proxy Statement/Prospectus under the headings "Summary--Fairness Opinions
of Financial Advisors," "The Merger--Background to The Merger," "The
Merger--Reasons for the Merger and the IXC Board of Directors Recommendation,"
and "Opinions of IXC's Financial Advisors." In giving such consent, we do not
admit and we hereby disclaim that we come within the category of persons whose
consent is required under Section 7 of the Securities Act of 1933, as amended,
or the rules and regulations of the Securities and Exchange Commission
thereunder, nor do we thereby admit that we are experts with respect to any part
of the Registration Statement within the meaning of the terms "experts" as used
in the Securities Act, as amended, or the rules and regulations of the
Securities and Exchange Commission thereunder.
<TABLE>
<S> <C> <C>
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By: /s/ ANDREW K. WOEBER
------------------------------------------
Name: Andrew K. Woeber
Title: Vice President
</TABLE>
September 10, 1999
<PAGE>
EXHIBIT 99.1
CINCINNATI BELL INC.
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON OCTOBER 29, 1999
The undersigned shareholder of Cincinnati Bell Inc. ("Cincinnati Bell"),
revoking all prior proxies, hereby appoints James D. Kiggen and Karen M. Hoguet,
or either of them acting singly, proxies, with full power of substitution, to
vote all shares of capital stock of Cincinnati Bell which the undersigned is
entitled to vote at the special meeting of shareholders to be held at Reakirt
Auditorium, Cincinnati Museum Center at Union Terminal, 1301 Western Avenue,
Cincinnati, Ohio 45203, on Friday, October 29, 1999, beginning at 9:00 a.m.,
local time, and at any adjournments or postponements thereof, upon the matter
set forth in the Notice of Special Meeting dated September 13, 1999, and the
related proxy statement/prospectus, copies of which have been received by the
undersigned, and in their discretion upon any adjournment or postponement of the
meeting.
THIS PROXY IS SOLICITED ON BEHALF OF THE CINCINNATI BELL BOARD OF DIRECTORS.
A SHAREHOLDER WISHING TO VOTE IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE
CINCINNATI BELL BOARD OF DIRECTORS NEED ONLY SIGN AND DATE THIS PROXY AND RETURN
IT IN THE ENCLOSED ENVELOPE.
(Continued on reverse side)
(Please fill in the appropriate boxes on the other side)
<PAGE>
CINCINNATI BELL INC.
/X/ PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE.
1. To approve the issuance of shares of Cincinnati Bell common stock in the
merger of IXC Communications, Inc. and a wholly owned subsidiary of Cincinnati
Bell Inc. pursuant to the Agreement and Plan of Merger dated July 20, 1999,
among Cincinnati Bell Inc., Ivory Merger Inc., a wholly owned subsidiary of
Cincinnati Bell Inc., and IXC Communications, Inc.
/ / FOR / / AGAINST / / ABSTAIN
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO
DIRECTION IS GIVEN WITH RESPECT TO THE PROPOSAL SET FORTH ABOVE, WILL BE VOTED
FOR SUCH PROPOSAL.
DATED , 1999
Signature of Shareholder(s)
- ------------------------------------------------------------
- ------------------------------------------------------------
Please promptly complete, date and sign this proxy and mail it in the
enclosed envelope to assure representation of your shares. No postage is needed
if mailed in the United States. PLEASE SIGN EXACTLY AS NAME(S) APPEAR ON THE
SHARE CERTIFICATE.
If the shareholder is a corporation, please sign full corporate name by
president or other authorized officer and, if a partnership, please sign full
partnership name by an authorized partner or other persons.
Mark here if you plan to attend the meeting / /.
PLEASE MARK, DATE, SIGN AND RETURN THIS PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
<PAGE>
EXHIBIT 99.2
IXC COMMUNICATIONS, INC.
PROXY FOR SPECIAL MEETING STOCKHOLDERS
TO BE HELD ON OCTOBER 29, 1999
The undersigned stockholder of IXC Communications, Inc. ("IXC"), revoking
all prior proxies, hereby appoints John M. Zrno, Stanley W. Katz and Jeffrey C.
Smith, or either of them acting singly, proxies, with full power of
substitution, to vote all shares of capital stock of IXC which the undersigned
its entitled to vote at the special meeting of stockholders to be held at Barton
Creek Country Club, 8212 Barton Club Drive, Austin, Texas 78735, on Friday,
October 29, 1999, beginning at 9:00 a.m., local time, and at any adjournments or
postponements thereof, upon the matter set forth in the Notice of Special
Meeting dated September 13, 1999, and the related proxy statement/prospectus,
copies of which have been received by the undersigned, and in their discretion
upon any adjournment or postponement of the meeting.
THIS PROXY IS SOLICITED ON BEHALF OF THE IXC BOARD OF DIRECTORS. A
STOCKHOLDER WISHING TO VOTE IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE IXC
BOARD OF DIRECTORS NEED ONLY SIGN AND DATE THIS PROXY AND RETURN IT IN THE
ENCLOSED ENVELOPE.
(Continued on reverse side)
(Please fill in the appropriate boxes on the other side)
<PAGE>
IXC COMMUNICATIONS, INC.
/X/ PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE.
1. To adopt the Agreement and Plan of Merger dated as of July 20, 1999,
among Cincinnati Bell Inc., Ivory Merger Inc, a wholly owned subsidiary of
Cincinnati Bell Inc., and IXC Communications, Inc. as the same may be amended
from time to time.
/ / FOR / / AGAINST / / ABSTAIN
2. To adopt the Agreement Governing the IXC Internal Reorganization dated as
of August 16, 1999, between IXC Communications, Inc. and IXC Merger Sub, Inc., a
wholly owned subsidiary of IXC Communications, Inc., as the same may be amended
from time to time.
/ / FOR / / AGAINST / / ABSTAIN
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO
DIRECTION IS GIVEN WITH RESPECT TO THE PROPOSALS SET FORTH ABOVE, WILL BE VOTED
FOR SUCH PROPOSALS.
DATED , 1999
Signature of Stockholder(s)
- --------------------------------------------------------------------
- --------------------------------------------------------------------
Please promptly complete, date and sign this proxy and mail it in the
enclosed envelope to assure representation of your shares. No postage is needed
if mailed in the United States. PLEASE SIGN EXACTLY AS NAME(S) APPEAR ON THE
STOCK CERTIFICATE.
If the stockholder is a corporation, please sign full corporate name by
president or other authorized officer and, if a partnership, please sign full
partnership name by an authorized partner or other persons.
Mark here if you plan to attend the meeting / /.
PLEASE MARK, DATE, SIGN AND RETURN THIS PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
