<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement / / Confidential,
for Use of the Commission Only
/X/ Definitive Proxy Statement (as permitted by Rule 14a-6(e)(2))
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
BELL ATLANTIC CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
BELL ATLANTIC CORPORATION
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/ / $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transactions applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:(1)
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total Fee Paid:
- --------------------------------------------------------------------------------
/X/ Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
- --------------------------------------------------------------------------------
- ---------------
(1) Set forth the amount on which the filing fee is calculated and state
how it was determined.
<PAGE> 2
[BELL ATLANTIC LOGO]
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
Bell Atlantic Corporation ("Bell Atlantic") will hold a special meeting of
stockholders (the "Special Meeting") on November 8, 1996, at 10:30 a.m. at
Richmond's Landmark Theater, 6 N. Laurel Street, Richmond, Virginia, for the
following purposes:
1. To consider and vote on a proposal (the "Proposal") to approve an
Amended and Restated Agreement and Plan of Merger, dated as of April 21, 1996,
as amended and restated on July 2, 1996, between NYNEX Corporation and Bell
Atlantic, and related transactions, including the issuance of shares of Bell
Atlantic Common Stock and the amendment and restatement of Bell Atlantic's
certificate of incorporation.
2. To transact such other business as may properly come before the Special
Meeting.
Bell Atlantic has fixed the close of business on September 9, 1996 as the
record date for the determination of stockholders entitled to vote at the
Special Meeting or any adjournment thereof. A list of such stockholders will be
available for inspection by stockholders of record during business hours at Bell
Atlantic - Virginia, Inc., 600 E. Main Street, Richmond, Virginia, for ten days
prior to the date of the Special Meeting, and will also be available at the
Special Meeting.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE TO
APPROVE THE PROPOSAL, WHICH IS DESCRIBED IN DETAIL IN THE ACCOMPANYING JOINT
PROXY STATEMENT/PROSPECTUS. Approval of the Proposal requires the affirmative
vote of a majority of the outstanding shares of Bell Atlantic Common Stock
entitled to vote at the Special Meeting. Please sign and promptly return the
proxy card in the enclosed envelope, whether or not you expect to attend the
Special Meeting. Failure to return a properly executed proxy card or to vote at
the Special Meeting will have the same effect, in most cases, as a vote against
the merger.
P. Alan Bulliner
Vice President - Corporate Secretary and Counsel September 9, 1996
<PAGE> 3
[BELL ATLANTIC LOGO] [NYNEX LOGO]
MERGER PROPOSED -- YOUR VOTE IS VERY IMPORTANT
The Boards of Directors of Bell Atlantic Corporation and NYNEX Corporation
have agreed on a merger of equals designed to create one of the premier
communications companies in the world. The combined company will be named Bell
Atlantic Corporation, and will be headquartered in New York, New York.
If the merger is completed, NYNEX stockholders will receive 0.768 of a
share of Bell Atlantic common stock for each share of NYNEX common stock that
they own. Bell Atlantic stockholders will continue to own their existing shares
after the merger. We estimate that the shares of Bell Atlantic stock to be
issued to NYNEX stockholders will represent approximately 44% of the outstanding
stock of Bell Atlantic after the merger. Likewise, the shares of Bell Atlantic
stock held by Bell Atlantic stockholders prior to the merger will represent
approximately 56% of the outstanding stock of Bell Atlantic after the merger.
The merger cannot be completed unless the stockholders of both companies
approve it. We have scheduled special meetings for our stockholders to vote on
the merger. YOUR VOTE IS VERY IMPORTANT.
Whether or not you plan to attend a meeting, please take the time to vote
by completing and mailing the enclosed proxy card to us. If you sign, date and
mail your proxy card without indicating how you want to vote, your proxy will be
counted as a vote in favor of the merger. If you fail to return your card, the
effect in most cases will be a vote against the merger.
The dates, times and places of the meetings are as follows:
FOR NYNEX STOCKHOLDERS:
Wednesday, November 6, 1996
10:30 a.m.
Sheraton New York Hotel and Towers
811 Seventh Avenue
New York, New York
FOR BELL ATLANTIC STOCKHOLDERS:
Friday, November 8, 1996
10:30 a.m.
Richmond's Landmark Theater
6 N. Laurel Street
Richmond, Virginia
This Joint Proxy Statement/Prospectus provides you with detailed
information about the proposed merger. In addition, you may obtain information
about our companies from documents that we have filed with the Securities and
Exchange Commission ("SEC"). We encourage you to read this entire document
carefully.
/s/ Raymond W. Smith /s/ Ivan Seidenberg
- ------------------------------------ ------------------------------------
Raymond W. Smith Ivan Seidenberg
Chairman and Chief Executive Officer Chairman and Chief Executive Officer
Bell Atlantic Corporation NYNEX Corporation
NEITHER THE SEC NOR ANY STATE SECURITIES REGULATORS HAVE APPROVED THE BELL
ATLANTIC COMMON STOCK TO BE ISSUED UNDER THIS JOINT PROXY STATEMENT/PROSPECTUS
OR DETERMINED IF THIS JOINT PROXY STATEMENT/ PROSPECTUS IS ACCURATE OR ADEQUATE.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Joint Proxy Statement/Prospectus dated September 9, 1996, and first mailed to
stockholders on September 18, 1996.
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE BELL
ATLANTIC/NYNEX MERGER..................... 1
SUMMARY..................................... 2
THE MERGER.................................. 11
Background of the Merger.................. 11
Reasons for the Merger; Recommendations of
the Boards.............................. 16
Cautionary Statement Concerning Forward-
Looking Statements...................... 18
Accounting Treatment...................... 19
Material Federal Income Tax
Consequences............................ 19
Regulatory Approvals...................... 20
No Appraisal Rights....................... 21
Certain Litigation........................ 21
COMPARATIVE PER SHARE MARKET PRICE AND
DIVIDEND INFORMATION...................... 22
UNAUDITED PRO FORMA COMBINED
CONDENSED FINANCIAL STATEMENTS............ 23
OPINIONS OF FINANCIAL ADVISORS.............. 30
Opinions of NYNEX's Financial Advisors.... 30
Opinion of Bell Atlantic's Financial
Advisor................................. 43
INTERESTS OF CERTAIN PERSONS IN THE
MERGER.................................... 49
Employment Agreement of Raymond W.
Smith................................... 49
Employment Agreement of Ivan G.
Seidenberg.............................. 50
Employment Agreements of the Current Vice
Chairmen of Bell Atlantic............... 52
Agreements with Other Executive Officers
of Bell Atlantic........................ 52
Agreements with Executive Officers of
NYNEX................................... 53
Indemnification and Insurance............. 57
THE MERGER AGREEMENT........................ 57
General................................... 57
Consideration to be Received in the
Merger.................................. 57
Exchange of Shares........................ 58
New Bell Atlantic Following the Merger.... 58
Certain Conditions........................ 59
Certain Representations and Warranties.... 60
Transition Planning....................... 61
Certain Covenants......................... 61
No Solicitation of Transactions........... 61
Certain Benefits Matters.................. 62
Indemnification and Insurance............. 62
Termination............................... 62
Termination Fees.......................... 63
Expenses.................................. 64
THE SPECIAL MEETINGS........................ 64
Times and Places; Purposes................ 64
Voting Rights; Votes Required for
Approval................................ 65
Proxies................................... 65
DIRECTORS AND MANAGEMENT OF BELL ATLANTIC
FOLLOWING THE MERGER...................... 67
Directors................................. 67
Committees of the Board of Directors...... 67
Compensation of Directors................. 67
Executive Compensation.................... 67
Stock Ownership of Directors, Executive
Officers and Five Percent
Stockholders............................ 68
COMPARISON OF STOCKHOLDERS' RIGHTS.......... 68
Comparison of Current Bell Atlantic
Stockholder Rights and Bell Atlantic
Stockholder Rights Following the
Merger.................................. 68
Comparison of Current NYNEX Stockholder
Rights and Bell Atlantic Stockholder
Rights Following the Merger............. 69
DESCRIPTION OF BELL ATLANTIC CAPITAL STOCK
FOLLOWING THE MERGER...................... 71
Authorized Capital Stock.................. 71
Common Stock.............................. 71
Series Preferred Stock.................... 71
Preemptive Rights......................... 72
Transfer Agent and Registrar.............. 72
Stock Exchange Listing; Delisting and
Deregistration of NYNEX Common Stock.... 72
Federal Securities Laws Consequences;
Stock Transfer Restriction Agreements... 72
LEGAL MATTERS............................... 72
EXPERTS..................................... 73
FUTURE STOCKHOLDER PROPOSALS................ 73
WHERE YOU CAN FIND MORE INFORMATION......... 73
LIST OF DEFINED TERMS....................... 75
APPENDIX I: Amended and Restated Agreement and
Plan of Merger
APPENDIX II: Form of Restated Certificate of
Incorporation of Bell Atlantic
Corporation
APPENDIX III: Form of Bylaws of Bell Atlantic
Corporation
APPENDIX IV: Opinion of Bear, Stearns & Co. Inc.
APPENDIX V: Opinion of Morgan Stanley & Co.
Incorporated
APPENDIX VI: Opinion of Merrill Lynch, Pierce,
Fenner & Smith Incorporated
</TABLE>
<PAGE> 5
QUESTIONS AND ANSWERS
ABOUT THE BELL ATLANTIC/NYNEX MERGER
Q: WHY ARE THE TWO COMPANIES PROPOSING TO MERGE? HOW WILL I BENEFIT?
A: This merger means that you will have a stake in the nation's second largest
telecommunications company, which also will be one of the largest providers
of wireless communications in the world. The merged company will serve the
northeastern and Mid-Atlantic region of the United States, one of the world's
most attractive communications marketplaces. We also will have tremendous
opportunities in the new markets opened to us by legislation, including long
distance and video entertainment. We believe that this merger will allow us
to accelerate long-term growth, continue to provide competitive dividends,
and create stockholder value in years to come. To review the reasons for the
merger in greater detail, and related uncertainties, see pages 16 through 18.
Q: WHAT DO I NEED TO DO NOW?
A: Just mail your signed proxy card in the enclosed return envelope as soon as
possible, so that your shares may be represented at the special meetings. The
NYNEX meeting will take place November 6, 1996. The Bell Atlantic meeting
will take place November 8, 1996. The Boards of Directors of both Bell
Atlantic and NYNEX unanimously recommend voting in favor of the proposed
merger.
Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A: No. After the merger is completed, we will send NYNEX stockholders written
instructions for exchanging their share certificates. Bell Atlantic
stockholders will keep their certificates.
Q: PLEASE EXPLAIN THE EXCHANGE RATIO.
A: NYNEX stockholders will receive 0.768 of a share of Bell Atlantic common
stock in exchange for each share of NYNEX common stock. We will not issue
fractional shares, except for shares held in NYNEX Dividend Reinvestment
accounts. NYNEX stockholders who would otherwise be entitled to receive a
fractional share instead will receive cash based on the market value of the
fractional share of Bell Atlantic stock.
Example: If you currently own 100 shares of NYNEX stock, then after the
merger you will be entitled to receive 76 shares of Bell Atlantic stock and a
check for the market value of the .8 fractional share. If you currently own
100 shares of Bell Atlantic stock, then you will continue to hold those 100
shares after the merger.
Q: WHAT HAPPENS TO MY FUTURE DIVIDENDS?
A: We expect no changes in our dividend policies before the merger. After the
merger, we expect the initial annualized dividend rate to be $3.08 per share
of Bell Atlantic stock, reflecting our desire to provide you with competitive
dividends. The annualized rate of $3.08 per share is equivalent to the
historic dividend rate paid to NYNEX stockholders of $2.36 per share divided
by the exchange ratio of 0.768 (rounded up to the nearest cent) and is
intended to maintain the current annual dividend payment for NYNEX
stockholders. The expected dividend policy after the merger would result in a
7% dividend increase for current Bell Atlantic stockholders, from a current
annualized dividend rate of $2.88 per share to the $3.08 per share expected
to be paid after the merger.
Q: WHEN DO YOU EXPECT THE MERGER TO BE
COMPLETED?
A: We are working towards completing the merger as quickly as possible. In
addition to stockholder approvals, we must also obtain regulatory approvals.
We hope to complete the merger as early as January 1, 1997.
Q: WHAT ARE THE TAX CONSEQUENCES TO STOCKHOLDERS OF THE MERGER?
A: The exchange of shares by NYNEX stockholders will be tax-free to NYNEX
stockholders for federal income tax purposes, except for taxes on cash
received for a fractional share and on the payment by NYNEX of certain
transfer taxes on behalf of its stockholders. The merger will be tax-free to
Bell Atlantic stockholders for federal income tax purposes. To review the tax
consequences to stockholders in greater detail, see page 19.
Q: I AM A STOCKHOLDER IN BOTH COMPANIES; WHY DID I RECEIVE ONLY ONE PROXY
STATEMENT?
A: We have learned that more than 50% of our stockholders own stock in both
companies. To reduce expenses and to prevent our common stockholders from
receiving two virtually identical mailings, we decided to mail only one proxy
statement to stockholders we could identify as owning stock in both
companies. For those stockholders, we have enclosed a page with two
detachable proxy cards. Please sign and return both cards in the same return
envelope.
1
<PAGE> 6
SUMMARY
This summary highlights selected information from this document and
may not contain all of the information that is important to you. To
understand the merger fully and for a more complete description of the
legal terms of the merger, you should read carefully this entire document
and the documents we have referred you to. See "Where You Can Find More
Information." (Page 73)
THE COMPANIES
BELL ATLANTIC CORPORATION
1717 Arch Street
Philadelphia, Pennsylvania 19103
(215) 963-6333
Bell Atlantic is a diversified telecommunications company, providing voice,
data transport and calling card services, network access, directory publishing
and public telephone services to customers in the Mid-Atlantic region of the
United States, as well as systems integration and video services. Bell Atlantic
also invests in the high growth global wireless marketplace. After the merger,
Bell Atlantic's principal executive offices will be located at 1095 Avenue of
the Americas, New York, New York.
NYNEX CORPORATION
1095 Avenue of the Americas
New York, New York 10036
(212) 395-2121
NYNEX is a global communications and media corporation, providing a full
range of communications services in the northeastern United States and in high
growth markets around the world. NYNEX has expertise in telecommunications,
wireless communications, directory publishing, and video entertainment and
information services.
OUR REASONS FOR THE MERGER
This combined company will serve the northeastern and Mid-Atlantic region
of the United States, one of the world's most attractive communications
marketplaces. By combining, we believe that we will be able to increase our
revenues, reduce our costs, and improve our service. Under a single brand, we
will build on our common strengths and we expect to provide our stockholders and
customers with added value.
We also will have exciting opportunities in the new markets opened by
recent legislation, including long distance and video entertainment. For
example, together we will serve an expanded region that generates over $20
billion of long distance calls, offering opportunities for rapid growth and high
margins. Finally, our combined service territory is a major gateway for
international calls, representing nearly 35% of the United States' international
long distance traffic. We expect to begin taking advantage of the long distance
and video opportunities in our local service regions during 1997.
We are confident that our two companies will come together in a smooth and
expeditious manner. We already enjoy a successful track record in a significant
joint venture: our domestic cellular business, Bell Atlantic NYNEX Mobile, where
our combined team has realized immediate efficiencies by maximizing
complementary strengths and improving operating and financial results in a very
short time.
In reaching its recommendation in favor of the merger, each of our Boards
of Directors considered a number of uncertainties, including:
(a) the rapidly changing regulatory and competitive environment in the
domestic telecommunications industry;
(b) the challenges of combining the businesses of two large corporations
and the risk of diverting management resources from other strategic
opportunities and operational matters for an extended period of time;
(c) the impact on labor relations with our unions; and
(d) the likelihood of timely receipt of regulatory approvals for the merger
on terms that we find satisfactory.
To review the reasons for the merger in greater detail, as well as related
uncertainties, see pages 16 through 18.
2
<PAGE> 7
OUR RECOMMENDATIONS TO STOCKHOLDERS
TO BELL ATLANTIC STOCKHOLDERS:
The Bell Atlantic Board believes that the merger is in your best interest
and unanimously recommends that you vote FOR the proposal to:
(a) approve the merger agreement and the merger;
(b) approve the issuance of shares of Bell Atlantic common stock to NYNEX
stockholders in the merger; and
(c) amend and restate Bell Atlantic's certificate of incorporation as
required by the merger agreement (the amendments are summarized on page
6).
TO NYNEX STOCKHOLDERS:
The NYNEX Board believes that the merger is in your best interest and
unanimously recommends that you vote FOR the proposal to approve and adopt the
merger agreement and the merger.
THE MERGER
The merger agreement is attached as Appendix I to this Joint Proxy
Statement/Prospectus. We encourage you to read the merger agreement as it is the
legal document that governs the merger.
WHAT NYNEX STOCKHOLDERS WILL RECEIVE
(SEE PAGE 57)
As a result of the merger, NYNEX stockholders will receive 0.768 of a share
of Bell Atlantic common stock for each share of NYNEX common stock that they
own. No fractional shares will be issued except for shares held in NYNEX
dividend reinvestment accounts. Instead, NYNEX stockholders will receive a check
in payment for any fractional shares based on the market value of the Bell
Atlantic stock.
NYNEX Employee Stock Ownership Plans and some subsidiaries of NYNEX also
own shares of NYNEX common stock and will receive the same payment as other
NYNEX stockholders.
NYNEX stockholders should not send in their stock certificates until
instructed to do so after the merger is completed.
OWNERSHIP OF BELL ATLANTIC FOLLOWING THE MERGER
The shares of Bell Atlantic stock issued to NYNEX stockholders in the
merger will constitute approximately 44% of the outstanding stock of Bell
Atlantic after the merger. Based on that percentage, we anticipate that Bell
Atlantic will issue approximately 350 million shares of Bell Atlantic stock to
NYNEX stockholders in the merger.
BOARD OF DIRECTORS AND MANAGEMENT OF BELL ATLANTIC FOLLOWING THE MERGER (SEE
PAGES 58 AND 67)
If the merger is completed, we expect that Raymond W. Smith will continue
as Chief Executive Officer of Bell Atlantic until at least July 1, 1998 but no
later than December 31, 1998, and as Chairman until no later than December 31,
1998. We also expect that after the merger, Ivan G. Seidenberg, who is the
Chairman and Chief Executive Officer of NYNEX, will initially be Vice Chairman,
President and Chief Operating Officer of Bell Atlantic and will succeed Mr.
Smith in the offices of Chief Executive Officer and Chairman.
The Board of Directors of Bell Atlantic initially will consist of 22
members, half chosen by Bell Atlantic and half chosen by NYNEX. Bell Atlantic
and NYNEX will each appoint up to three directors who are its employees. The
rest of the directors will not be employees of either company.
OTHER INTERESTS OF OFFICERS AND DIRECTORS IN THE MERGER (SEE PAGE 49)
In considering the Boards' recommendations that you vote in favor of the
merger, you should be aware that a number of officers of Bell Atlantic and
NYNEX, including some officers who are also directors, have employment
agreements, retention incentives or benefit plans that provide them with
interests in the merger that are different from, or in addition to, yours.
3
<PAGE> 8
Each of the employee-directors of Bell Atlantic and NYNEX could receive
significant compensation if the merger is completed. Please refer to pages 49
through 57 for more information concerning employment arrangements, retention
incentives and benefit plans of our officers.
CONDITIONS TO THE MERGER (SEE PAGE 59)
The completion of the merger depends upon meeting a number of conditions,
including the following:
(a) the approval of the holders of a majority of the stock of each of Bell
Atlantic and NYNEX;
(b) there shall have been no law enacted or injunction entered which
effectively prohibits the merger or which causes a material adverse
effect on either of our companies;
(c) the approval of governmental authorities without burdensome demands;
and
(d) the receipt of letters from each of our independent accountants stating
that the merger will qualify for pooling of interests accounting
treatment.
Certain of the conditions to the merger may be waived by the company
entitled to assert the condition.
TERMINATION OF THE MERGER AGREEMENT
(SEE PAGE 62)
We can agree to terminate the merger agreement without completing the
merger, and either of us can terminate the merger agreement if any of the
following occurs:
(a) the merger is not completed by April 21, 1997, but this deadline will
be extended to September 30, 1997 if the completion of the merger is
delayed only because one or more governmental approvals have not been
received;
(b) the approvals of the holders of a majority of the stock of either Bell
Atlantic or NYNEX are not received;
(c) a court or other governmental authority permanently prohibits the
merger;
(d) the business of the other party, or the prospects for the combined
company, materially change for the worse;
(e) the other party breaches or materially fails to comply with any of its
representations or warranties or obligations under the merger
agreement;
(f) the Board of Directors of the other party: (A) withdraws or modifies in
any adverse manner its approval or recommendation in favor of the
merger, or (B) approves or recommends a significant transaction with a
third party; or
(g) the Board of Directors of either company determines, under certain
circumstances and before the approval of the merger agreement by its
stockholders, that the board's fiduciary obligations require acceptance
of an offer from a third party to enter into a significant transaction.
TERMINATION FEES (SEE PAGE 63)
The merger agreement generally requires Bell Atlantic or NYNEX to pay to
the other a termination fee of $200 million if the merger agreement terminates
under certain circumstances and it has received an offer to enter into a
significant transaction with a third party.
The merger agreement also requires Bell Atlantic or NYNEX to pay to the
other an additional $350 million if, within one and one-half years after the
termination described above, it agrees to enter into or completes a significant
transaction with certain third parties.
REGULATORY APPROVALS (SEE PAGE 20)
The Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended,
prohibits us from completing the merger until after we 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 ended. As of
July 19, 1996, we substantially complied with a request by the Department of
Justice for additional information and on August 8, 1996, the
4
<PAGE> 9
waiting period ended. The Department of Justice has the authority to challenge
the merger on antitrust grounds before or after the merger is completed and has
indicated that it will continue to review the information that we have
furnished.
Each state where we provide telephone service may also review the merger
under state antitrust law. Attorneys General in most of these states have
indicated that they intend to review the merger.
NYNEX has made regulatory filings with the public utilities commissions in
each of the seven states in which it provides local telephone service. As part
of that review, the commissions may look at the impact of the merger on
competition and on the customers and employees of the local telephone companies.
Bell Atlantic believes that it is not necessary to obtain the approval of
any state regulatory commission within its region to complete the merger. Bell
Atlantic has made informational filings with each of its seven regulatory
commissions to keep them fully informed about the merger.
In addition, both of us have filed applications with the Federal
Communications Commission seeking its approval of the transfer of control of
certain Federal Communications Commission licenses.
It is possible that some of these governmental authorities may impose
conditions for granting approval. We cannot predict whether we will obtain the
required regulatory approvals within the time frame contemplated by the merger
agreement or on conditions that would not be detrimental to either of us or the
combined company.
ACCOUNTING TREATMENT (SEE PAGE 19)
We expect the merger to qualify as a pooling of interests, which means that
we will treat our companies as if they had always been combined for accounting
and financial reporting purposes.
OPINIONS OF FINANCIAL ADVISORS (SEE PAGE 30)
In deciding to approve the merger, our Boards considered opinions from our
respective financial advisors as to the fairness of the exchange ratio from a
financial point of view. NYNEX received separate opinions from its two financial
advisors, Bear, Stearns & Co. Inc. and Morgan Stanley & Co. Incorporated, and
Bell Atlantic received an opinion from its financial advisor, Merrill Lynch,
Pierce, Fenner & Smith Incorporated. These opinions are attached as Appendices
IV, V and VI to this Joint Proxy Statement/Prospectus. We encourage you to read
these opinions.
In connection with delivering these opinions, our financial advisors
performed a variety of analyses. While not uniformly performed or presented, the
analyses included comparing Bell Atlantic and NYNEX historical stock prices and
financial multiples to each other and to those of other selected publicly-traded
companies, comparing the financial terms of the merger to those of other
publicly announced transactions and estimating the relative values and
contributions of Bell Atlantic and NYNEX based on past and estimated future
performances and anticipated benefits of the merger.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
(SEE PAGE 19)
We have structured the merger so that neither Bell Atlantic, NYNEX nor our
stockholders will recognize any gain or loss for federal income tax purposes in
the merger (except for tax payable because of cash received instead of
fractional shares by NYNEX stockholders and the payment of any New York State or
City real property transfer taxes by NYNEX on behalf of its stockholders). We
have conditioned the merger on our receipt of legal opinions that such is the
case.
NO APPRAISAL RIGHTS (SEE PAGE 21)
Under Delaware law, NYNEX stockholders have no right to an appraisal of the
value of their shares in connection with the merger.
5
<PAGE> 10
COMPARATIVE PER SHARE MARKET PRICE
INFORMATION (SEE PAGE 22)
Shares of Bell Atlantic and NYNEX common stock are listed on the New York
Stock Exchange and certain other stock exchanges. On April 19, 1996, the last
full trading day on the New York Stock Exchange prior to the public announcement
of the proposed merger, NYNEX stock closed at $53 per share and Bell Atlantic
stock closed at $65 per share. On September 5, 1996, NYNEX stock closed at
$42.625 per share and Bell Atlantic stock closed at $55.25 per share.
LISTING OF BELL ATLANTIC COMMON STOCK
(SEE PAGE 72)
Bell Atlantic will list the shares of Bell Atlantic common stock to be
issued in connection with the merger on the New York Stock Exchange and certain
other stock exchanges.
DIVIDENDS AFTER THE MERGER (SEE PAGE 59)
We expect that the initial annualized dividend rate paid to Bell Atlantic
stockholders after completion of the merger will be $3.08 per share, subject to
approval and declaration by the Bell Atlantic Board of Directors. The annualized
rate of $3.08 per share is equivalent to the historic dividend rate paid to
NYNEX stockholders of $2.36 per share divided by the exchange ratio of 0.768
(rounded up to the nearest cent) and is intended to maintain the current annual
dividend payment for NYNEX stockholders. The payment of dividends by Bell
Atlantic in the future, however, will depend on business conditions, its
financial position and earnings, and other factors.
AMENDMENTS TO BELL ATLANTIC CERTIFICATE OF INCORPORATION AND BYLAWS
(SEE PAGES 68 AND 71)
The merger agreement provides that, as part of the merger, Bell Atlantic
will amend and restate its certificate of incorporation and bylaws to, among
other things:
(a) increase its authorized capital stock;
(b) increase the number of its directors;
(c) implement certain governance arrangements consistent with a merger of
equals, such as Board composition and management succession;
(d) increase the number of shares necessary for a quorum at meetings of its
stockholders;
(e) change the par value of Bell Atlantic common stock; and
(f) acknowledge that the Board may consider a broad variety of factors in
evaluating a proposed acquisition of Bell Atlantic.
Bell Atlantic's proposed form of Restated Certificate of Incorporation is
attached as Appendix II and its proposed form of Bylaws is attached as Appendix
III.
A vote by Bell Atlantic stockholders in favor of the merger is a vote to
approve the proposed Restated Certificate of Incorporation. The Bell Atlantic
Board of Directors has the power to adopt the proposed Bylaws.
6
<PAGE> 11
SUMMARY SELECTED HISTORICAL AND UNAUDITED PRO FORMA
COMBINED CONDENSED FINANCIAL INFORMATION
We are providing the following financial information to aid you in your
analysis of the financial aspects of the merger. We derived this information
from audited financial statements for 1991 through 1995 and unaudited financial
statements for the six months ended June 30, 1996. The information is only a
summary and you should read it in conjunction with our historical financial
statements (and related notes) contained in the annual reports and other
information that we have filed with the SEC. See "Where You Can Find More
Information" on page 73.
BELL ATLANTIC -- HISTORICAL FINANCIAL INFORMATION
<TABLE>
<CAPTION>
AT OR FOR THE
SIX MONTHS
ENDED AT OR FOR THE YEAR ENDED DECEMBER 31,
JUNE 30, --------------------------------------------------------------
1996 1995 1994 1993 1992 1991
------------- ---------- ---------- ---------- ---------- ----------
(UNAUDITED) (DOLLARS IN MILLIONS, EXCEPT FOR PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
Operating revenues........ $ 6,467.1 $ 13,429.5 $ 13,791.4 $ 13,145.6 $ 12,836.0 $ 12,659.7
Income from continuing
operations.............. 964.8 1,861.8 1,401.9 1,481.6 1,382.2 1,229.9
Income from continuing
operations per common
share................... 2.19 4.25 3.21 3.39 3.23 2.91
Cash dividends declared
per common share........ 1.44 2.80 2.76 2.68 2.60 2.52
Book value per common
share................... 16.19 15.27 13.94 18.85 18.00 17.12
Total assets.............. 23,795.7 24,156.8 24,271.8 29,544.2 28,099.5 28,305.8
Long-term debt............ 6,130.6 6,407.2 6,805.7 7,206.2 7,348.2 7,984.0
</TABLE>
NYNEX -- HISTORICAL FINANCIAL INFORMATION
<TABLE>
<CAPTION>
AT OR FOR THE
SIX MONTHS
ENDED AT OR FOR THE YEAR ENDED DECEMBER 31,
JUNE 30, --------------------------------------------------------------
1996 1995 1994 1993 1992 1991
------------- ---------- ---------- ---------- ---------- ----------
(UNAUDITED) (DOLLARS IN MILLIONS, EXCEPT FOR PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
Operating revenues........ $ 6,699.8 $ 13,406.9 $ 13,306.6 $ 13,407.8 $ 13,182.5 $ 13,254.7
Income (loss) from
continuing operations... 571.8 1,069.5 792.6 (272.4) 1,311.2 600.8
Income (loss) from
continuing operations
per common share........ 1.31 2.50 1.89 (0.66) 3.20 1.49
Cash dividends declared
per common share........ 1.18 2.36 2.36 2.36 2.32 2.28
Book value per common
share................... 14.95 14.06 20.26 20.28 23.51 22.38
Total assets.............. 26,448.0 25,895.9 29,801.4 29,334.7 27,731.7 27,502.6
Long-term debt............ 9,367.1 9,336.9 7,784.5 6,937.8 7,018.2 6,833.1
</TABLE>
7
<PAGE> 12
SIGNIFICANT EVENTS AFFECTING HISTORICAL EARNINGS TRENDS
Our companies report quarterly and annual earnings results in their SEC
filings using methods required by Generally Accepted Accounting Principles
(GAAP). Sometimes the financial results reported in this way include unusual or
infrequent events and factors which are not expected to occur regularly in the
future. Examples of these events and factors include gains or losses on the sale
of businesses, the costs of completing major acquisitions and other business
development activities, and the costs of business restructurings.
Unusual or infrequent events and transactions which we believe would be
helpful to review in understanding our companies' past performance and future
prospects are briefly described below.
SIGNIFICANT EVENTS AFFECTING BELL ATLANTIC'S EARNINGS TRENDS
On July 1, 1995, Bell Atlantic and NYNEX formed a partnership to operate
our domestic cellular operations. Since that date, only Bell Atlantic's
proportionate share of partnership net income and related income taxes is
included in reported financial results.
Income from continuing operations per common share for 1995 includes (i) a
gain of $.46 per share as a result of the sale of certain cellular properties in
connection with the formation of the Bell Atlantic NYNEX Mobile partnership, and
(ii) nonrecurring charges of $.09 per share associated with certain business
development ventures and contracts.
Total assets at December 31, 1994 reflect a net decrease to telephone plant
and equipment and regulatory assets in the amount of $4,328.8 million in
connection with the discontinued use of regulatory accounting methods by Bell
Atlantic's telephone subsidiaries which were no longer appropriate due to
increased competition.
Income from continuing operations per common share for 1994 includes (i) a
charge of $.23 per share to recognize costs for the separation of employees, and
(ii) a charge of $.05 per share for the disposition of a liquefied petroleum gas
subsidiary and a foreign cellular operation.
Income from continuing operations per common share for 1992 includes (i)
gains aggregating $.09 per share on the sale of assets, (ii) $.04 per share of
interest income received for the settlement of prior period federal tax matters,
and (iii) $.09 per share of one-time costs related to the acquisition of a
cellular telephone company.
Income from continuing operations per common share for 1991 includes (i) a
net gain of $.15 per share as a result of the sale of a portion of Bell
Atlantic's investment in Telecom Corporation of New Zealand Limited, (ii) a
charge of $.10 per share for pension enhancements and restructuring costs, (iii)
a charge of $.04 per share for one-time costs related to the acquisition of a
cellular telephone company, and (iv) $.09 per share of one-time charges for
other corporate initiatives in support of long-term financial objectives.
SIGNIFICANT EVENTS AFFECTING NYNEX'S EARNINGS TRENDS
Income from continuing operations per common share for the six months ended
June 30, 1996 includes charges of $.52 per share for certain special charges and
for pension enhancements, and (ii) a gain of $.11 per share from the sale of
NYNEX's interest in Vanstar Corporation.
At June 30, 1996 and December 31, 1995, outstanding commercial paper
borrowings of $2.0 billion and $1.9 billion, respectively, were classified as
Long-term debt as a result of an unsecured revolving credit facility which may
be used to support outstanding commercial paper.
On July 1, 1995, Bell Atlantic and NYNEX formed a partnership to operate
our domestic cellular operations. Since that date, only NYNEX's proportionate
share of partnership net income and related income taxes is included in reported
financial results.
Total assets at December 31, 1995 reflect a net decrease to telephone plant
and equipment and regulatory assets in the amount of $5,177.3 million in
connection with the discontinued use of regulatory accounting methods by NYNEX's
telephone subsidiaries which were no longer appropriate due to increased
competition.
8
<PAGE> 13
Income from continuing operations per common share for 1995 includes (i)
charges of $1.29 per share for non-recurring items and for pension enhancements,
(ii) a gain of $.36 per share as a result of an initial public offering of
NYNEX's United Kingdom cable business, and (iii) a net gain of $.16 per share
from the sale of certain cellular properties in connection with the formation of
the Bell Atlantic NYNEX Mobile partnership.
Income from continuing operations per common share for 1994 includes a
charge of $1.08 per share for pension enhancements.
Income from continuing operations per common share for 1993 includes
charges of $3.66 per share for business restructuring and other charges.
Income from continuing operations per common share for 1991 includes
charges of $1.37 per share for business restructuring.
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
We expect that the merger will be accounted for as a "pooling of
interests," which means that for accounting and financial reporting purposes we
will treat our companies as if they had always been combined. For a more
detailed description of pooling of interests accounting see "The
Merger -- Accounting Treatment" on page 19.
We have presented below unaudited pro forma financial information that
reflects the pooling of interests method of accounting and is intended to give
you a better picture of what our businesses might have looked like had they
always been combined. We prepared the pro forma income statement and balance
sheet by adding or combining the historical amounts of each company. We then
adjusted the combined amounts for significant differences in accounting methods
used by the companies. The companies may have performed differently if they were
combined. You should not rely on the pro forma information as being indicative
of the historical results that we would have had or the future results that we
will experience after the merger. See "Unaudited Pro Forma Combined Condensed
Financial Statements" on page 23.
UNAUDITED PRO FORMA COMBINED
<TABLE>
<CAPTION>
AT OR FOR THE
SIX MONTHS
ENDED AT OR FOR THE YEAR ENDED DECEMBER 31,
JUNE 30, ---------------------------------------
1996 1995 1994 1993
------------- ----------- ----------- -----------
(DOLLARS IN MILLIONS, EXCEPT FOR PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Operating revenues........................... $ 14,347.9 $ 27,927.8 $ 27,098.0 $ 26,553.4
Income from continuing operations............ 1,544.7 3,007.2 2,232.9 1,337.5
Income from continuing operations per common
share...................................... 1.99 3.93 2.94 1.78
Cash dividends declared per common
share(1)................................... 1.48 2.92 2.89 2.85
Book value per common share.................. 15.79 14.73
Total assets................................. 50,966.1
Long-term debt............................... 15,497.7
</TABLE>
- ---------------
(1) We have announced that, upon consummation of the merger, the initial
annualized dividend rate will be equal to $3.08 per share of Bell Atlantic
Common Stock, subject to approval and declaration by the Board of Directors
of Bell Atlantic. The annualized rate of $3.08 per share of Bell Atlantic
Common Stock is equivalent to the historical dividend rate paid to NYNEX
shareholders of $2.36 per share divided by the exchange ratio of 0.768
rounded upwards to the nearest cent, and is intended to maintain the current
annualized dividend rate for the holders of NYNEX Common Stock. The Cash
dividends declared per common share in the Unaudited Pro Forma Combined
Condensed Financial Information reflect the sum of the dividends declared by
us divided by the number of shares that would have been outstanding for the
periods presented after adjusting the NYNEX shares by the exchange ratio of
0.768.
9
<PAGE> 14
COMPARATIVE PER SHARE INFORMATION
We have summarized below the per share information for our respective
companies on a historical, pro forma combined, and equivalent basis. The NYNEX
Per Share Equivalents are calculated by multiplying the Unaudited Pro Forma
Combined per share amounts by 0.768. NYNEX stockholders will receive 0.768
shares of Bell Atlantic Common Stock in exchange for each share of NYNEX Common
Stock.
COMPARATIVE PER SHARE INFORMATION
<TABLE>
<CAPTION>
AT OR FOR THE
SIX MONTHS AT OR FOR THE YEAR ENDED
ENDED DECEMBER 31,
JUNE 30, ----------------------------
1996 1995 1994 1993
------------- ------ ------ ------
<S> <C> <C> <C> <C>
UNAUDITED PRO FORMA COMBINED
Income from continuing operations per common
share............................................. $ 1.99 $ 3.93 $ 2.94 $ 1.78
Cash dividends declared per common share............ 1.48 2.92 2.89 2.85
Book value per common share......................... 15.79 14.73
NYNEX PER SHARE EQUIVALENTS
Income from continuing operations per common
share............................................. $ 1.53 $ 3.02 $ 2.26 $ 1.37
Cash dividends declared per common share............ 1.14 2.24 2.22 2.19
Book value per common share......................... 12.13 11.31
NYNEX -- HISTORICAL
Income (loss) from continuing operations per common
share............................................. $ 1.31 $ 2.50 $ 1.89 $(0.66)
Cash dividends declared per common share............ 1.18 2.36 2.36 2.36
Book value per common share......................... 14.95 14.06 20.26 20.28
BELL ATLANTIC -- HISTORICAL
Income from continuing operations per common
share............................................. $ 2.19 $ 4.25 $ 3.21 $ 3.39
Cash dividends declared per common share............ 1.44 2.80 2.76 2.68
Book value per common share......................... 16.19 15.27 13.94 18.85
</TABLE>
10
<PAGE> 15
THE MERGER
We are furnishing this Joint Proxy Statement/Prospectus to holders of
common stock, par value $1.00 per share ("Bell Atlantic Common Stock"), of Bell
Atlantic Corporation, a Delaware corporation ("Bell Atlantic"), and holders of
common stock, par value $1.00 per share ("NYNEX Common Stock"), of NYNEX
Corporation, a Delaware corporation ("NYNEX"), in connection with the
solicitation of proxies by the respective Boards of Directors of Bell Atlantic
and NYNEX for use at their respective special meetings of stockholders, and at
any adjournments or postponements thereof (the "Bell Atlantic Meeting" and the
"NYNEX Meeting," respectively, and together, the "Special Meetings"). At the
NYNEX Meeting, holders of NYNEX Common Stock will be asked to vote upon a
proposal (the "NYNEX Proposal") to approve and adopt an Amended and Restated
Agreement and Plan of Merger, dated as of April 21, 1996, as amended and
restated on July 2, 1996 (the "Merger Agreement"), between NYNEX and Bell
Atlantic and the transactions contemplated thereby. At the Bell Atlantic
Meeting, holders of Bell Atlantic Common Stock will be asked to vote upon a
proposal (the "Bell Atlantic Proposal") to approve the Merger Agreement and the
related transactions, including the issuance of shares of Bell Atlantic Common
Stock to NYNEX stockholders in the Merger and the amendment and restatement of
Bell Atlantic's certificate of incorporation (the "Certificate Amendment") at
the time of the Merger. Copies of the Merger Agreement and the form of Bell
Atlantic's Restated Certificate of Incorporation, which includes the proposed
amendments (the "Amended Bell Atlantic Charter"), are attached hereto as
Appendix I and Appendix II, respectively. The Merger Agreement also provides for
the Bell Atlantic bylaws to be amended and restated at the time of the Merger in
the form attached hereto as Appendix III (the "Amended Bell Atlantic Bylaws").
The Merger Agreement provides, among other things, for a merger of equals
transaction involving the merger of a wholly-owned subsidiary ("Merger
Subsidiary") of Bell Atlantic with and into NYNEX (the "Merger"), with NYNEX
surviving the Merger as a wholly-owned subsidiary of Bell Atlantic. In the
Merger, each share of NYNEX Common Stock issued and outstanding immediately
before the Effective Time (excluding those held in the treasury of NYNEX and
those owned by Bell Atlantic), without any action on the part of the holder
thereof, will be converted into the right to receive 0.768 of a share of Bell
Atlantic Common Stock (the "Exchange Ratio"). After giving effect to the
Certificate Amendment, the par value of Bell Atlantic Common Stock will become
$0.10 per share. The Merger will become effective upon the filing of a
Certificate of Merger with the Secretary of State of the State of Delaware (the
time of such filing being herein referred to as the "Effective Time"), which is
currently expected to occur after receipt of requisite regulatory approvals if
the NYNEX Proposal and the Bell Atlantic Proposal are approved by the requisite
votes of stockholders of NYNEX and Bell Atlantic, respectively. Bell Atlantic
following the Merger is sometimes referred to herein as "New Bell Atlantic."
Bell Atlantic Common Stock following the Merger is sometimes referred to herein
as "New Bell Atlantic Common Stock."
Under the terms of the Merger Agreement prior to its amendment on July 2,
1996 (the "Original Merger Agreement"), each share of Bell Atlantic Common Stock
was to have been exchanged for 1.302 shares (the "Original Bell Atlantic
Exchange Ratio") of the common stock ("Merger Company Common Stock") of a
newly-formed holding company (the "Merger Company") and each share of NYNEX
Common Stock was to have been exchanged for one share (the "Original NYNEX
Exchange Ratio") of Merger Company Common Stock (together with the other
transactions contemplated by the Original Merger Agreement, the "Original
Transaction"). The Exchange Ratio under the current transaction is equivalent to
the Original NYNEX Exchange Ratio divided by the Original Bell Atlantic Exchange
Ratio, and is intended to maintain the economic terms of the Original
Transaction. As used herein, references to events which occurred between April
21, 1996 and July 2, 1996 relate to the Original Transaction, the Original Bell
Atlantic Exchange Ratio and the Original NYNEX Exchange Ratio.
BACKGROUND OF THE MERGER
Effective January 1, 1984, American Telephone and Telegraph Company
("AT&T") divested itself of seven regional holding companies (the "Regional
Holding Companies"), including Bell Atlantic and NYNEX, pursuant to a consent
decree approved by the United States District Court for the District of Columbia
(the "Consent Decree"). The Consent Decree restricted the activities of the
Regional Holding
11
<PAGE> 16
Companies, prohibiting them, among other things, from providing interLATA (long
distance) telecommunications or engaging in the manufacture of
telecommunications equipment or customer premises equipment.
Since the divestiture, the United States telecommunications industry has
changed substantially due, in part, to continued growth in the volume of voice
and data traffic carried, the development of new communications technologies and
products which provide, or may in the future provide, competition for the
traditional copper wire local loop, and evolving legislative and regulatory
frameworks. These new technologies and products include various wireless
telephone systems such as cellular and personal communication services ("PCS"),
enhanced paging systems, wireline and wireless cable telephone systems,
satellite telephone and television systems and Internet access. The principal
long distance carriers have expanded their respective wireline and wireless
business and product offerings domestically and internationally. Also during
this period, many of the major U.S. telecommunications companies have expanded
their investments and operations internationally and have entered into
significant alliances with other international players in the worldwide
telecommunications industry. Conversely, major foreign companies have entered
U.S. markets. In the exchange access and local exchange markets, the regulatory
framework has gradually shifted focus over the last decade from the regulation
of profits to the regulation of rates, and is changing further to permit greater
competition at the local exchange level. More recently, judicial and legislative
developments suggested that the Regional Holding Companies soon would be
permitted to participate in the video and long distance markets.
By 1994, our companies had each independently recognized that a combination
with one or more similarly situated companies could be an effective means of
achieving the operating efficiency, scale, scope and financial resources
necessary to expand into new markets, such as long distance, video, Internet
access and international markets, and to compete with new market entrants.
In 1994, members of senior management of both of our companies including
Raymond W. Smith, Chief Executive Officer of Bell Atlantic, and William C.
Ferguson, then Chief Executive Officer of NYNEX, briefly considered the subject
of a possible combination of our companies driven principally by the similar
nature of our businesses and the overall compatibility of our long-term
strategic objectives. Several conversations took place relating to a potential
combination but we terminated these conversations after a short period of time
as we concluded that a combination would not be feasible for a number of
reasons, including the then existing federal and state legislative and
regulatory frameworks.
During 1995, Ivan G. Seidenberg, the newly-elected Chief Executive Officer
of NYNEX, and Mr. Smith, the Chief Executive Officer of Bell Atlantic, met from
time to time to discuss Congressional legislative initiatives which would allow
Regional Holding Companies to enter the long distance market, and the related
concerns and objectives of their respective companies. During these meetings,
the two Chief Executive Officers discussed various alternatives for a joint
entry into the long distance business. In September 1995, Mr. Seidenberg and Mr.
Smith met and decided that, in light of the favorable prospects for the
legislative initiatives, it would be advantageous to discuss the possibility of
merging their respective businesses, and to begin exchanging information to
better evaluate whether such an alternative would be in the best interests of
our two companies and our stockholders. We executed a confidentiality agreement
and, shortly thereafter, teams from each of our companies began a preliminary
evaluation of the potential benefits of a strategic combination of the two
companies and subsequently commenced their due diligence investigations.
At the September 1995 meeting of the NYNEX Board, Mr. Seidenberg and other
members of NYNEX senior management discussed an overall strategic vision to
enable NYNEX to grow and strengthen its position both domestically and
internationally. At that time, both the NYNEX Board and senior management
believed that, if the pending legislation relating to entry into the long
distance market were to be enacted into law, a combination of our companies
based upon the concept of a "merger of equals" (i.e., a strategic combination of
two similarly-sized companies in which each has an approximately equal voice in
the management of the combined entity) might represent a desirable approach for
NYNEX to achieve its strategic goals. They believed that a transaction with Bell
Atlantic could be highly advantageous to NYNEX
12
<PAGE> 17
stockholders because of the similar nature of the existing businesses and the
increased ability to take advantage of new business opportunities. Senior
management of NYNEX and the NYNEX Board felt that the combined resources of the
two companies would enable the companies to better capitalize on business
opportunities than either could on a stand-alone basis. The NYNEX Board
encouraged Mr. Seidenberg to continue to explore the possibility of a strategic
combination of NYNEX and Bell Atlantic. Similarly, Bell Atlantic management
informed the Bell Atlantic Board at its September 1995 meeting of its
discussions of the possible combination. Members of our respective senior
management continued discussions during the remainder of 1995 and early 1996,
and they continued to inform their respective Boards of the progress of these
discussions.
We continued our mutual due diligence process and members of our respective
senior managements continued to meet to discuss the ways in which a possible
combination could be structured, the benefits that could be derived from such a
combination and the issues that had to be resolved before any definitive
agreement could be reached. Mr. Smith and Mr. Seidenberg met in New York on
December 5, 1995 to review the progress of these discussions. Each stressed that
his company was not for sale. The structure discussed was based upon the concept
of a merger of equals.
On January 7, 1996 and January 8, 1996, Mr. Smith and Mr. Seidenberg met
again to discuss their interest in the structuring of such a transaction and the
major issues that would be integral to any such transaction. They discussed a
merger of equals with appropriate provisions concerning governance, the exchange
ratio, the dividend policy and other key concerns. They also discussed the fact
that the proposed combination depended in large part on the progress of pending
federal legislative initiatives permitting long distance entry.
At a meeting of the Bell Atlantic Board held on January 15, 1996, Mr. Smith
described in detail the strategic attractiveness of a possible combination as
well as the difficult issues presented by such a transaction. These issues
included, among others, the ultimate resolution of the legislative process
regarding telecommunications reform, pricing and valuation issues, branding
questions, headquarters location and dividend policy.
We continued discussions during the remainder of January and early February
and worked to complete our respective due diligence investigations. In early
February 1996, Frederic V. Salerno, Vice Chairman of NYNEX, and Jeffrey A.
Bowden, Vice President -- Strategy and Corporate Assurance of NYNEX, met with
William O. Albertini, Executive Vice President and Chief Financial Officer of
Bell Atlantic, and Thomas R. McKeough, Vice President -- Mergers and
Acquisitions and Associate General Counsel of Bell Atlantic, to discuss the key
terms that would form the basis of a merger agreement, including the exchange
ratio, dividend policy, board composition, management structure, name and
headquarters location of the combined company. They were unable to reach
agreement on certain of these terms and agreed to terminate negotiations.
On February 8, 1996, President Clinton signed into law the
Telecommunications Act of 1996. In general, the act opens the local exchange
service markets to competition and, upon the satisfaction of certain conditions
contained in the act and in regulations to be promulgated thereunder, will
permit the Regional Holding Companies to provide long distance services and
video programming and to engage in manufacturing. We expect to begin taking
advantage of the long distance and video opportunities in our local service
regions during 1997.
On February 9, 1996, members of the senior management of Bell Atlantic
reviewed with the Bell Atlantic Board the provisions of the Telecommunications
Act of 1996. Mr. Smith indicated that passage of the Telecommunications Act
created even more impetus for Bell Atlantic to seek strategic partners with whom
it could enter the long distance market. Meanwhile, Mr. Smith described the
reasons why the talks between our companies had cooled, noting that speculation
in the press regarding a possible combination and the resulting movement in the
respective prices of shares of Bell Atlantic Common Stock and NYNEX Common Stock
had complicated discussions of possible exchange ratios.
13
<PAGE> 18
At a February 15, 1996 meeting of the NYNEX Board of Directors, Mr. Salerno
reported on the status of the negotiations and the difficulty in reaching
agreement on an exchange ratio. Mr. Seidenberg recommended continuing to pursue
the discussions.
On February 23, 1996, Messrs. Smith and Seidenberg met and reached a
tentative agreement to proceed with discussions with respect to the proposed
combination. Following this meeting, we renewed our due diligence efforts in an
attempt to quantify the benefits that a combination of our two companies would
provide as well as to reassess the various issues that such a combination might
pose.
At a March 21, 1996 NYNEX Board meeting, Mr. Seidenberg indicated that due
diligence had continued and that discussions would be resuming. On March 25,
1996, members of our companies' respective senior management, including Messrs.
Seidenberg and Smith, met in Philadelphia. They discussed their due diligence
findings, valuation and other aspects of the proposed combination.
At a March 26, 1996 meeting of the Bell Atlantic Board, Mr. Smith described
the results of discussions with Mr. Seidenberg related to a possible exchange
ratio, the composition of the board of directors and senior management following
a proposed combination and the dividend policy, corporate name and headquarters
location of a combined entity. Mr. Smith also discussed the market rumors that
had made discussions related to the exchange ratio difficult and described the
requirements for the desired accounting treatment for the proposed transaction.
Thereafter, members of senior management of Bell Atlantic presented the results
of their due diligence efforts and compared the merits of a transaction with
NYNEX with those of possible alternative transactions and with a scenario that
included no significant transaction.
At a NYNEX Board meeting on March 29th, Mr. Seidenberg discussed each of
the major issues relating to the proposed combination, and the NYNEX Board
encouraged him to continue negotiating the remaining issues. Mr. Seidenberg also
discussed the overall vision and strategy of the proposed combination, including
its structure, the way in which the two Chief Executive Officers envisioned that
the combined businesses would be run, the management structure of the combined
organization and the proposed succession plan with respect to the office of
Chief Executive Officer.
In discussions led by Messrs. Seidenberg, Salerno, Smith, and Bell Atlantic
Vice Chairmen Lawrence T. Babbio and James G. Cullen during the remainder of
March and into April, representatives of our companies continued to negotiate
the terms of a proposed merger agreement. At the same time, Messrs. Seidenberg
and Smith continued informal discussions with members of their respective Boards
to keep them informed of the progress of the negotiations and the proposed
resolution of various open issues. During this period, the valuation discussions
resulted in a narrowing of the range of possible exchange ratios and we reached
tentative agreement on all other significant issues relating to the proposed
combination.
At a NYNEX Board meeting on April 18th, management reported that agreement
had been reached on all major elements of the proposed combination except the
exchange ratio and discussed the strategic aspects of the proposed combination,
the results of the due diligence investigations, the proposed resolution of
governance, management, dividend policy, employee benefit and organizational
issues, the proposed headquarters location and corporate name and communications
plans relating to the proposed combination. At the meeting, Bear, Stearns & Co.
Inc. ("Bear Stearns"), which had been acting as NYNEX's financial advisor in
connection with the proposed combination since November 1995, indicated that,
based on a narrow proposed range of exchange ratios, it would be prepared to
render a fairness opinion with respect to the proposed combination when an
exchange ratio within that range was agreed to, and described certain analyses
it had undertaken (and would finalize after determination of such exchange
ratio) in connection with delivering such an opinion. Morgan Stanley & Co.
Incorporated ("Morgan Stanley"), which NYNEX engaged on April 15, 1996 to render
a fairness opinion in connection with the proposed combination, separately
reported to the NYNEX Board on the status of its ongoing review. Coopers &
Lybrand L.L.P. ("Coopers & Lybrand") reported on the applicability of the
pooling of interests method of accounting for the proposed combination. NYNEX
counsel reviewed certain legal matters, including a detailed review of the terms
of the Original Merger Agreement, a draft and summary of which had been
distributed to the members of the NYNEX Board prior to the meeting. Outside
counsel discussed the business judgment rule, the fiduciary duties of the
directors and other relevant aspects of Delaware corporate law.
14
<PAGE> 19
During the evening of Friday, April 19th, management of our companies
reached an understanding concerning the exchange ratio for the proposed
combination which they agreed to submit to their respective Boards of Directors.
Our respective management reached agreement on the exchange ratio through arm's-
length negotiations. In reaching their understanding our management considered
the factors described below under "-- Information and Factors Considered by the
Boards of Directors of Bell Atlantic and NYNEX" and the financial analyses
performed by the respective financial advisors and summarized under "Opinions of
Financial Advisors." Our management did not assign relative or specific weights
to any of such factors or analyses.
The Bell Atlantic Board met on Saturday, April 20th. Mr. Smith and members
of senior management of Bell Atlantic presented the details of the Original
Transaction. As part of that presentation, Mr. Smith reviewed the strategic
rationale for the merger, stated that the resulting entity would be named "Bell
Atlantic" and would be headquartered in New York City, and reviewed other
background information concerning the Original Transaction, the parties and the
combined company. In addition, Mr. Smith discussed various issues related to
transition planning and the composition of the board of directors and senior
management of a combined company as well as the expected accounting treatment.
Representatives of Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill
Lynch") then reviewed with the Bell Atlantic Board certain financial analyses
relating to the proposed transaction and delivered an oral opinion that the Bell
Atlantic Exchange Ratio, taking into account the NYNEX Exchange Ratio, was fair
from a financial point of view to the holders of Bell Atlantic Common Stock.
Such oral opinion was confirmed in writing on April 21, 1996. See "Opinions of
Financial Advisors." Senior management reviewed the terms of the Original Merger
Agreement, a draft and summary of which had been distributed to the members of
the Bell Atlantic Board prior to the meeting along with a memorandum of outside
counsel discussing the business judgment rule, the fiduciary duties of the
directors and other relevant aspects of Delaware corporate law. The nonemployee
directors met in executive session to discuss the proposed transaction and
unanimously recommended to the Bell Atlantic Board that it approve the Original
Merger Agreement. The Bell Atlantic Board unanimously approved the Original
Merger Agreement and voted to recommend to Bell Atlantic stockholders that they
vote to approve the Merger Agreement.
The NYNEX Board met on Sunday, April 21st. After reports by senior
management concerning the agreement on the exchange ratio and the actions of the
Bell Atlantic Board on the previous day, and the delivery by each of Bear
Stearns and Morgan Stanley of their respective fairness opinions (see "Opinions
of Financial Advisors"), the NYNEX Board unanimously approved the Original
Merger Agreement and voted to recommend the approval and adoption of the
Original Merger Agreement to the NYNEX stockholders.
Our companies executed the Original Merger Agreement in New York City on
April 21st, and announced the Original Transaction on April 22, 1996.
During June 1996, we concluded that it would be advisable to restructure
the transaction to avoid a potential delay in consummating the transaction
because of a requirement under the structure contemplated by the Original Merger
Agreement that Bell Atlantic obtain approval of the transaction by Congress
pursuant to a 1913 statute covering Washington D.C. public utility corporations.
This statute will not apply to the Merger as restructured. As agreed, the Merger
as restructured does not change in any material respect any of the economic
terms of the transaction, such as the effect of the exchange ratio and dividend
policy of the combined entity, nor any of the governance or management
succession provisions of the Original Merger Agreement, and the combination
remains a merger of equals. The restructuring is expected to result in
approximately $10-15 million of savings in transactional costs, such as SEC
filing fees, transfer agent and exchange agent costs, stock certificate printing
costs and stock exchange listing fees.
The Boards of Bell Atlantic and NYNEX considered the Merger Agreement at
meetings on June 25, 1996 and July 2, 1996, respectively. At the NYNEX Board
meeting, NYNEX's financial advisors confirmed in writing that if, as of the date
of their prior fairness opinion, their analyses and review had been conducted in
connection with the Merger Agreement, they would have reached the same
conclusion as to fairness as in their respective April 1996 opinions. On July 2,
1996, Merrill Lynch delivered a letter to the Bell Atlantic Board confirming
that if, as of April 21, 1996, Merrill Lynch's analysis and review had been
conducted with
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<PAGE> 20
respect to the Merger Agreement as then proposed to be amended, Merrill Lynch
would have concluded, as of April 21, 1996 and subject to the assumptions and
qualifications set forth in the opinion delivered on that date, that the
Exchange Ratio was fair from a financial point of view to Bell Atlantic and,
accordingly, to the holders of Bell Atlantic Common Stock. Such letter confirmed
a letter delivered to the Bell Atlantic Board on June 25, 1996. See "Opinions of
Financial Advisors." At the respective meetings of the Bell Atlantic Board and
the NYNEX Board, the directors present unanimously approved the Merger Agreement
and voted to recommend the approval and adoption of the Merger Agreement to
their respective stockholders. On July 2, 1996, Bell Atlantic and NYNEX executed
the Merger Agreement.
REASONS FOR THE MERGER; RECOMMENDATIONS OF THE BOARDS
The Boards of NYNEX and Bell Atlantic believe that the Merger will create a
premier communications company that will be better positioned to compete
effectively in the rapidly changing communications industry. Each Board believes
that the Merger will provide opportunities to achieve substantial benefits for
their respective stockholders and customers that might not otherwise be
available. New Bell Atlantic, operating with the combined markets, networks,
financial resources, management, personnel and technical expertise of our
respective companies, will be better able to capitalize on growth opportunities
in the communications industry, both domestically and internationally. In
addition, the Merger will permit New Bell Atlantic to derive significant
advantages from the more efficient utilization of the combined assets,
management and personnel of NYNEX and Bell Atlantic.
Reasons for the Merger
We believe that the Merger will provide the following benefits:
- Competitive Size. The Merger will nearly double the size of each of our
companies in terms of access lines, revenues and cash flow, and will
create the largest local exchange customer base in the United States and
one of the largest providers of wireless communications services in the
world. New Bell Atlantic will be the second largest telecommunications
company in the United States and one of the premier telecommunications
companies in the world. New Bell Atlantic will have the scale, geographic
scope, product diversity and complementary competencies to serve its
customers better and to compete more effectively in the changing
telecommunications industry. In particular, the scale and scope of New
Bell Atlantic will facilitate its efforts to establish a national brand
identity in order to compete directly with national telecommunications
companies such as AT&T. Because of its greater size, New Bell Atlantic
will benefit over the long term from increased financial strength,
revenue diversification and financial flexibility as compared to either
company on a stand-alone basis.
New Bell Atlantic's size will make it an attractive partner for domestic
and international joint ventures with other partners including, for
example, Internet access providers and software companies seeking large
customer bases such as the approximately 38.8 million customer lines and
3.6 million wireless communications customers that will be served by New
Bell Atlantic. Both of our Boards believe that in the future the most
desirable and profitable partnering and investment opportunities in the
developing domestic and international telecommunications industry will be
available to companies possessing both significant scale and scope and
substantial financial resources and capacity.
In the rapidly changing telecommunications industry, other companies have
recognized the need for and the benefits of business combinations. Recent
examples of this include AT&T's acquisition of McCaw Cellular
Communications, Inc., U S WEST, Inc.'s ("U S WEST") proposed acquisition
of Continental Cablevision, Inc., British Telecommunications plc's
investment in MCI Communications Corp. ("MCI"), the joint venture between
Sprint Corporation ("Sprint") and three major cable companies, and the
proposed merger between SBC Communications, Inc. ("SBC") and Pacific
Telesis Group ("PacTel").
- Attractive Marketplace. The combined domestic region of New Bell
Atlantic -- thirteen northeastern and Mid-Atlantic States plus the
District of Columbia (collectively, the "Combined Region") --
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<PAGE> 21
is one of the most communications-intensive marketplaces in the world. As
a result of the Merger, New Bell Atlantic will enjoy greater geographic
diversification than either NYNEX or Bell Atlantic by combining domestic
local exchange operations in the Combined Region (reaching from Maine to
Virginia), as well as complementary international operations and
investments in Asia and the Pacific, the United Kingdom, Europe, Mexico
and South America. This increased geographic diversification will reduce
New Bell Atlantic's exposure to changes in economic, competitive,
political and climatic conditions in any given geographic area in which
New Bell Atlantic operates, as compared to the exposure of either company
in the absence of the Merger.
- Long Distance Opportunities. New Bell Atlantic will be positioned to
compete aggressively for more than $20 billion of long distance calls
that originate annually within the Combined Region. The combined market
potential is particularly significant with regard to long distance
traffic, and New Bell Atlantic will be able to carry, over its combined
network, a significantly higher volume of long distance traffic more
economically than the two companies could carry independently. Both of
our Boards view the potential in the international long distance
marketplace as particularly significant. Customers located in the
Combined Region of New Bell Atlantic account for approximately 35% of all
United States international calls, with a high concentration of traffic
moving to and from Canada, Europe and Japan.
- Potential for Long-Term Growth in Revenues, Earnings and Cash Flow
Margins. We expect that, excluding special transition and integration
charges, the Merger will be accretive to recurring earnings per share in
the first year after consummation of the Merger. With an expanded
presence in key communications and information markets, increased
opportunities are expected for long-term growth in both revenues and
earnings.
New Bell Atlantic is expected to recognize recurring expense savings of
approximately $600 million annually by the third year following the
consummation of the Merger as a result of consolidating operating systems
and other administrative functions and reducing management positions. We
expect to achieve $300 million of savings in the first year following the
consummation of the Merger, and this amount is expected to grow by an
additional $150 million in each of the two succeeding years. We expect
transition and integration charges of approximately $500 million in the
first year following the completion of the Merger and an additional $200
million to $400 million in aggregate charges over the two succeeding
years. Annual capital expenditures for New Bell Atlantic should reflect
approximately $250 million to $300 million of incremental savings,
including efficiencies relating to purchasing, market trials and
equipment testing.
We anticipate that New Bell Atlantic will realize stronger cash flow
margins (as compared to our stand-alone companies) through increased
potential for revenue growth and cost reduction. This should facilitate
New Bell Atlantic's ability to finance its operations, capital
expenditures, and dividends internally while maintaining a strong credit
rating, and provide the financial flexibility to be a major competitor in
the global communications market.
- Strong Management Team. A strong management team drawn from both
companies will manage New Bell Atlantic. These managers have worked
together successfully in other joint ventures and have complementary
strengths that will facilitate the accomplishment of the Merger in an
efficient and cooperative manner and will enhance the ability of New Bell
Atlantic to succeed in the new competitive environment. For example, our
companies have successfully worked together to combine our wireless
businesses. In June 1994, we agreed to form Bell Atlantic NYNEX Mobile
("BANM"), a partnership to which we each contributed our respective
domestic cellular businesses. In October 1994, we, together with AirTouch
Communications Inc. and U S WEST, formed various partnerships to provide
nationwide wireless communications services. One of these partnerships,
PrimeCo Personal Communications, L.P., acquired licenses in a Federal
Communications Commission auction to operate PCS systems in 11 markets.
The second partnership is developing a national brand and coordinating
and centralizing various functions for the cellular and PCS businesses.
During this period, we also entered into other joint ventures, such as
TeleTV, a series of partnerships among NYNEX, Bell
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<PAGE> 22
Atlantic and PacTel to deliver nationally branded home entertainment,
information and interactive services, and BANX Partnership, a partnership
through which Bell Atlantic and NYNEX invested in wireless cable
television systems.
Information and Factors Considered by the Boards of Directors of Bell
Atlantic and NYNEX
In reaching its conclusions, each of our Boards of Directors considered,
among other things, (i) information concerning the financial performance and
condition, business operations, capital levels, asset quality and prospects of
each company, and its projected future financial performance as a separate
entity and on a combined basis; (ii) current industry, economic and market
conditions and trends, including the likelihood of continuing consolidation and
increasing competition in the communications industry (and the corresponding
decrease in the number of suitable merger partners for each company); (iii) the
importance of market position, significant scale and scope and financial
resources to a company's ability to compete effectively in the changing
environment in the global communications market; (iv) the Merger's structure as
a merger of equals; (v) the possibility that achieving cost savings, operating
efficiencies and synergies as a result of consummating the Merger at this time
might not be available to either company on its own; (vi) the terms of the
Merger Agreement; (vii) the current and historical market prices of the Common
Stock of each company; (viii) the opinions of its financial advisors described
below as to the fairness, from a financial point of view, of the Exchange Ratio
(which was determined through arm's-length negotiations between our companies);
(ix) the likelihood of obtaining required regulatory approvals and the
possibility that regulatory authorities may impose burdensome conditions to the
grant of such approvals; (x) the changing regulatory environment in the domestic
telecommunications industry and the economic and regulatory environment in the
regions in which our companies now operate; (xi) the challenges of combining the
businesses of two major corporations of this size and the attendant risk of
diverting management resources from other strategic opportunities and from
operational matters for an extended period of time; (xii) labor relations with
the companies' respective unions; (xiii) alternative transactions; and (xiv) the
impact of the Merger on the customers and employees of each company. In reaching
their respective decisions to approve the Merger and to recommend the Merger to
stockholders, neither of our Boards of Directors assigned any relative or
specific weights to the various factors considered and individual directors may
have given differing weights to different factors.
Recommendations of the Boards
EACH OF OUR BOARDS OF DIRECTORS BELIEVES THAT THE TERMS OF THE MERGER ARE
FAIR TO, AND IN THE BEST INTERESTS OF, THEIR RESPECTIVE STOCKHOLDERS AND HAVE,
BY UNANIMOUS VOTE OF ALL DIRECTORS PRESENT, APPROVED THE MERGER AGREEMENT AND
THE TRANSACTIONS CONTEMPLATED THEREBY AND UNANIMOUSLY RECOMMEND THAT THEIR
RESPECTIVE STOCKHOLDERS VOTE "FOR" THE NYNEX PROPOSAL AND THE BELL ATLANTIC
PROPOSAL, RESPECTIVELY.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
We have made forward-looking statements in this document that are subject
to risks and uncertainties. Forward-looking statements include the information
concerning possible or assumed future results of operations of our companies and
New Bell Atlantic set forth under "-- Reasons for the Merger; Recommendations of
the Boards" and "Opinions of Financial Advisors" and those preceded by, followed
by or that include the words "believes," "expects," "anticipates" or similar
expressions. For those statements, we claim the protection of the safe harbor
for forward-looking statements contained in the Private Securities Litigation
Reform Act of 1995. You should understand that the following important factors,
in addition to those discussed elsewhere in this document and in the documents
which we incorporate by reference, could affect the future results of New Bell
Atlantic, Bell Atlantic and NYNEX, and could cause those results to differ
materially from those expressed in our forward-looking statements: materially
adverse changes in economic conditions in the markets served by our companies; a
significant delay in the expected closing of the Merger; future regulatory
actions and conditions in our companies' operating areas; competition from
others in the local exchange and toll service markets; and the timing of entry
and profitability of New Bell Atlantic in the long distance and video markets.
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<PAGE> 23
ACCOUNTING TREATMENT
It is a condition to the consummation of the Merger that we each receive
from Coopers & Lybrand a letter dated the Closing Date to the effect that they
concur with the conclusions of Bell Atlantic's and NYNEX's management that the
transactions contemplated by the Merger Agreement, if consummated, will qualify
as a transaction to be accounted for in accordance with the pooling of interests
method of accounting under Opinion No. 16, Business Combinations, of the
Accounting Principles Board of the American Institute of Certified Public
Accountants. Under this accounting method, the assets and liabilities of NYNEX
will be carried forward to New Bell Atlantic at their historical recorded bases.
Results of operations of New Bell Atlantic will include the results of both Bell
Atlantic and NYNEX for the entire fiscal year in which the Merger occurs. The
reported balance sheet amounts and results of operations of the separate
corporations for prior periods will be combined, reclassified and conformed, as
appropriate, to reflect the combined financial position and results of
operations for New Bell Atlantic. See "Unaudited Pro Forma Combined Condensed
Financial Statements."
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
The following general discussion summarizes the material federal income tax
consequences of the Merger and is based on the Internal Revenue Code of 1986, as
amended (the "Code"), the regulations promulgated thereunder, existing
administrative interpretations and court decisions. Future legislation,
regulations, administrative interpretations or court decisions could
significantly change such authorities either prospectively or retroactively. We
do not address all aspects of federal income taxation that may be important to a
stockholder in light of such stockholder's particular circumstances or to
stockholders subject to special rules, such as stockholders who are not citizens
or residents of the United States, financial institutions, tax-exempt
organizations, insurance companies, dealers in securities or stockholders who
acquired their NYNEX shares pursuant to the exercise of options or similar
derivative securities or otherwise as compensation. This discussion assumes that
NYNEX stockholders hold their respective shares of stock as capital assets
within the meaning of Section 1221 of the Code.
It is a condition to the obligations of our companies under the Merger
Agreement that Bell Atlantic receive an opinion from Morgan, Lewis & Bockius LLP
and NYNEX receive an opinion from Weil, Gotshal & Manges LLP regarding material
federal income tax consequences of the Merger. Neither Bell Atlantic nor NYNEX
intends to secure a ruling from the Internal Revenue Service (the "IRS") with
respect to the tax consequences of the Merger. We believe, based on the opinions
of Morgan, Lewis & Bockius LLP, and Weil, Gotshal and Manges LLP referred to
above, that the Merger will have the federal income tax consequences discussed
below. Bell Atlantic further believes, based on the opinion of Morgan, Lewis &
Bockius LLP, that the Certificate Amendment will not be a taxable transaction to
holders of Bell Atlantic Common Stock. The opinions of counsel referred to above
will assume the absence of changes in existing facts and may rely on
assumptions, representations and covenants including those contained in
certificates of officers of Bell Atlantic, NYNEX and others. The opinions
referred to above neither bind nor preclude the IRS from adopting a contrary
position. An opinion of counsel sets forth such counsel's legal judgment and has
no binding effect or official status of any kind, and no assurance can be given
that contrary positions will not be successfully asserted by the IRS or adopted
by a court if the issues are litigated.
Tax Implications to Bell Atlantic Stockholders. No gain or loss will be
recognized for federal income tax purposes by holders of Bell Atlantic Common
Stock as a result of the Merger or the Certificate Amendment.
Tax Implications to NYNEX Stockholders. Except as discussed below and in
the immediately following paragraph, (a) no gain or loss will be recognized for
federal income tax purposes by holders of NYNEX Common Stock who exchange their
NYNEX Common Stock for Bell Atlantic Common Stock pursuant to the Merger except
to the extent of cash received in lieu of fractional shares and (b) the
aggregate tax basis of Bell Atlantic Common Stock received as a result of the
Merger will be the same as the stockholder's aggregate tax basis in the NYNEX
Common Stock surrendered in the exchange (reduced by any such tax basis
allocable to fractional shares for which cash is received). The holding period
of the Bell Atlantic Common
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Stock held by former NYNEX stockholders as a result of the exchange will include
the period during which such stockholder held the NYNEX Common Stock exchanged.
Cash received by a holder of NYNEX Common Stock in lieu of a fractional share
interest in Bell Atlantic Common Stock will result in the recognition of gain or
loss for federal income tax purposes, measured by the difference between the
amount of cash received and the portion of the tax basis of the share of NYNEX
Common Stock allocable to such fractional share interest. Such gain or loss will
be capital gain or loss and will be long-term capital gain or loss if such share
of NYNEX Common Stock has been held for more than one year at the Effective
Time.
New York State and City impose certain taxes on the transfer of an interest
in real property (including leases) located in New York State or City ("Transfer
Taxes"). Transfer Taxes are also imposed in connection with certain changes of
ownership of an entity owning a real property interest in New York State or
City. The Merger is expected to result in the imposition of Transfer Taxes.
Pursuant to the Merger Agreement, NYNEX will pay any Transfer Taxes incurred as
a result of a change in ownership of NYNEX. For federal income tax purposes, the
payment of Transfer Taxes by NYNEX generally should be treated as a deemed
distribution by NYNEX to each NYNEX stockholder taxable to such stockholder as a
dividend. Any income taxes owing on account of such deemed distribution will be
the responsibility of the NYNEX stockholders. Although not free from doubt, a
NYNEX stockholder may be entitled to increase its tax basis in the Bell Atlantic
Common Stock received in the NYNEX Merger by an amount equal to its share of the
Transfer Taxes.
Tax Implications to Bell Atlantic, NYNEX and Merger Subsidiary. No gain or
loss will be recognized for federal income tax purposes by Bell Atlantic, NYNEX
or Merger Subsidiary as a result of the Certificate Amendment, the formation of
Merger Subsidiary or the Merger.
THE DISCUSSION SET FORTH ABOVE UNDER "MATERIAL FEDERAL INCOME TAX
CONSEQUENCES" IS INTENDED TO PROVIDE ONLY A GENERAL SUMMARY, AND DOES NOT
PURPORT TO BE A COMPLETE ANALYSIS OR DESCRIPTION OF ALL POTENTIAL FEDERAL INCOME
TAX CONSEQUENCES OF THE MERGER. IN ADDITION, THE FOREGOING DISCUSSION DOES NOT
ADDRESS TAX CONSEQUENCES WHICH MAY VARY WITH, OR ARE CONTINGENT ON, INDIVIDUAL
CIRCUMSTANCES. MOREOVER, EXCEPT FOR THE DISCUSSION OF TRANSFER TAXES ABOVE, THIS
DISCUSSION DOES NOT ADDRESS ANY NON-INCOME TAX OR ANY FOREIGN, STATE OR LOCAL
TAX CONSEQUENCES OF THE MERGER. THIS DISCUSSION DOES NOT ADDRESS THE TAX
CONSEQUENCES OF ANY TRANSACTION OTHER THAN THE MERGER AND THE CERTIFICATE
AMENDMENT. ACCORDINGLY, EACH STOCKHOLDER IS STRONGLY URGED TO CONSULT WITH SUCH
STOCKHOLDER'S TAX ADVISOR TO DETERMINE THE PARTICULAR UNITED STATES FEDERAL,
STATE, LOCAL OR FOREIGN INCOME OR OTHER TAX CONSEQUENCES TO SUCH STOCKHOLDER OF
THE MERGER AND THE CERTIFICATE AMENDMENT.
REGULATORY APPROVALS
Antitrust. Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended (the "HSR Act"), and the rules promulgated thereunder by the Federal
Trade Commission (the "FTC"), the Merger may not be consummated until
notifications have been given and certain information has been furnished to the
FTC and the Antitrust Division of the United States Department of Justice (the
"Antitrust Division") and specified waiting period requirements have been
satisfied. Bell Atlantic and NYNEX filed notification and report forms under the
HSR Act with the FTC and the Antitrust Division effective as of May 1, 1996. On
May 31, 1996, Bell Atlantic and NYNEX each received requests from the Antitrust
Division for additional information relating to the Merger. As of July 19, 1996,
NYNEX and Bell Atlantic certified substantial compliance with the Antitrust
Division's request for additional information and on August 8, 1996, the waiting
period ended. The Antitrust Division has the authority to challenge the Merger
on antitrust grounds before or after the Merger is completed and has indicated
that it will continue to review the information that Bell Atlantic and NYNEX
have furnished. The Merger is also subject to antitrust review under state law
in each of the states in which we provide telephone service. Attorneys General
in most of these states have indicated that they intend to review the Merger.
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State Regulatory Approvals
The Merger is also subject to certain other state regulatory approvals.
NYNEX has made regulatory filings with the public utilities commissions in each
of the seven states in which NYNEX provides local telephone service. The filings
seek the level of review appropriate under each state's law. The state
regulatory commissions in Connecticut, New York, Maine, Vermont, and New
Hampshire have indicated that they have the authority to approve the Merger and
have initiated proceedings. The state regulatory commission in Massachusetts is
reviewing the Merger within the context of its general supervisory authority
over telephone operations. The Rhode Island commission may also seek to review
the Merger. The governing legal standard varies from state to state, but
generally requires a showing that the Merger is consistent with the public
interest. As part of that standard, these state regulatory commissions may look
at the impact of the Merger on competition and on the customers and employees of
the local telephone company.
Bell Atlantic believes that it is not necessary to obtain the approval of
any state regulatory commission within its region in order to complete the
Merger. However, Bell Atlantic has made information filings with each of its
seven regulatory commissions in order to keep the commissions fully informed
regarding the Merger. There can be no assurance that none of the commissions in
the Bell Atlantic region will attempt to assert jurisdiction to approve or
disapprove of the Merger.
It is possible that the authorities in one or more of the foregoing
jurisdictions may seek, as conditions for granting approval, various regulatory
concessions. If any regulatory body conditions its approval upon concessions
that would be expected to have a Material Adverse Effect (as defined in the
Merger Agreement) on NYNEX or Bell Atlantic, either company can terminate the
Merger Agreement. There can be no assurance that the required regulatory
approvals will be obtained within the time frame contemplated by the Merger
Agreement or on terms that are satisfactory to NYNEX and Bell Atlantic. See "The
Merger Agreement -- Termination."
FCC Approvals
In addition, we are required to file notices with, and obtain approvals
from, the Federal Communications Commission (the "FCC") and have filed
applications with the FCC seeking such approvals. The transfer of control from
NYNEX to Bell Atlantic of NYNEX's subsidiaries holding certain FCC licenses and
authorizations must be approved by the FCC based on the FCC's evaluation as to
whether New Bell Atlantic is qualified to control such licenses and
authorizations and whether the public interest, convenience and necessity will
be served by such transfer of control. We believe that the transfer of control
applications that Bell Atlantic and NYNEX filed with the FCC demonstrate
compliance with these standards.
NO APPRAISAL RIGHTS
Holders of NYNEX Common Stock are not entitled to appraisal rights in
connection with the Merger because NYNEX Common Stock is listed on a national
securities exchange.
CERTAIN LITIGATION
On May 1, 1996, a purported class action complaint (Brazen v. Bell Atlantic
Corporation) was filed in the Delaware Court of Chancery against Bell Atlantic
and certain of its directors. The lawsuit alleges that the Bell Atlantic Board
breached its fiduciary duties to the Bell Atlantic stockholders by approving the
termination fees payable under the Merger Agreement if, under certain
circumstances, the Merger Agreement is terminated. See "The Merger
Agreement -- Termination Fees." The complaint requests preliminary and permanent
injunctive relief with respect to the implementation of the termination fee
provisions of the Merger Agreement, as well as costs and such other relief as
the court may deem just and proper. Bell Atlantic believes that the suit is
without merit, has answered the complaint and denied the pertinent allegations,
and intends to defend the suit vigorously.
On July 3, 1996, a purported class action (Salsitz v. NYNEX Corporation)
was filed with the Supreme Court of the State of New York, County of New York
against NYNEX, certain NYNEX directors and Bell
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Atlantic. The complaint alleges that the individual defendants breached their
fiduciary duties to NYNEX stockholders by failing to institute an auction or
other bidding mechanism in connection with an alleged "acquisition" of NYNEX by
Bell Atlantic. According to plaintiff, the restructuring of the Merger to
"accelerate its consummation" has diminished the ability of other suitors to bid
for NYNEX and has deprived NYNEX stockholders of the right to share in the "true
value of NYNEX's assets." Plaintiff seeks, among other things, (a) an order
requiring the individual defendants to create an active auction for NYNEX in
order to maximize stockholder value and to explore alternative means to maximize
stockholder value; (b) a declaration that the transaction is a nullity; (c) an
injunction prohibiting the consummation of the transaction; (d) in the event the
transaction is consummated, an order rescinding it and setting it aside; and (e)
an order creating a stockholder's committee of class members and their
representatives to insure fair procedures and independent input in connection
with any transaction for the shares of NYNEX. NYNEX and Bell Atlantic believe
that the suit is without merit and intend to defend the suit vigorously.
COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION
Bell Atlantic Common Stock and NYNEX Common Stock are listed on the NYSE,
the Philadelphia Stock Exchange, the Boston Stock Exchange, the Chicago Stock
Exchange, the Pacific Stock Exchange and various foreign exchanges. The Bell
Atlantic ticker symbol on the NYSE is BEL. The NYNEX ticker symbol on the NYSE
is NYN.
The tables below set forth, for the calendar quarters indicated, the
reported high and low sale prices of Bell Atlantic Common Stock and NYNEX Common
Stock as reported on the NYSE Composite Transaction Tape, in each case based on
published financial sources, and the dividends declared on such stock.
<TABLE>
<CAPTION>
BELL ATLANTIC COMMON STOCK NYNEX COMMON STOCK
-------------------------- ---------------------------
MARKET PRICE CASH MARKET PRICE CASH
------------- DIVIDENDS ------------- DIVIDENDS
HIGH LOW DECLARED HIGH LOW DECLARED
---- ---- -------- ---- ---- ---------
<S> <C> <C> <C> <C> <C> <C>
1994
First Quarter.................... $59 5/8 $51 $.69 $41 3/8 $34 1/4 $ .59
Second Quarter................... 56 3/4 49 .69 39 3/4 33 1/4 .59
Third Quarter.................... 58 3/8 52 1/4 .69 39 1/8 35 5/8 .59
Fourth Quarter................... 53 1/4 48 3/8 .69 39 3/4 36 1/4 .59
1995
First Quarter.................... $55 3/4 $48 3/8 $.70 $41 1/2 $35 7/8 $ .59
Second Quarter................... 58 7/8 52 .70 43 1/8 39 3/8 .59
Third Quarter.................... 61 7/8 54 7/8 .70 48 3/4 39 1/4 .59
Fourth Quarter................... 68 7/8 59 .70 54 46 .59
1996
First Quarter.................... $74 7/8 $61 1/8 $.72* $59 1/4 $47 1/2 $ .59
Second Quarter................... 67 3/4 59 .72 53 3/8 44 5/8 .59
</TABLE>
- ---------------
* Includes payment of $.005 per share for the redemption of rights under the
Bell Atlantic Shareholders Rights Plan.
On April 19, 1996, the last full trading day prior to the public
announcement of the proposed Merger, the closing price on the NYSE Composite
Transaction Tape was $65 per share of Bell Atlantic Common Stock and $53 per
share of NYNEX Common Stock. Certain of the prices set forth on the above table
may reflect the impact of several news articles that headlined the merger
discussions between NYNEX and Bell Atlantic. See "The Merger -- Background of
the Merger" and "Opinions of Financial Advisors -- Opinions of NYNEX's Financial
Advisors." On September 5, 1996, the most recent practicable date prior to the
printing of this Joint Proxy Statement/Prospectus, the closing price on the NYSE
Composite Transaction Tape was $55.25 per share of Bell Atlantic Common Stock
and $42.625 per share of NYNEX Common Stock. Stockholders are urged to obtain
current market quotations prior to making any decision with respect to the
Merger.
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UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
The following unaudited pro forma combined condensed financial statements
give effect to the Merger using the pooling of interests method of accounting,
after giving effect to the pro forma adjustments described in the accompanying
notes. These unaudited pro forma combined condensed financial statements have
been prepared from, and should be read in conjunction with, the historical
consolidated financial statements and notes thereto of Bell Atlantic and NYNEX,
which are incorporated by reference in this Joint Proxy Statement/Prospectus.
The unaudited pro forma information is presented for illustrative purposes
only and is not necessarily indicative of the operating results or financial
position that would have occurred had the Merger been consummated at the dates
indicated, nor is it necessarily indicative of future operating results or
financial position of the merged companies.
The unaudited Pro Forma Combined Condensed Balance Sheet gives effect to
the Merger as if it had occurred on June 30, 1996, combining the balance sheets
of Bell Atlantic and NYNEX at June 30, 1996. The unaudited Pro Forma Combined
Condensed Statements of Income give effect to the Merger as if it had occurred
at the beginning of the earliest period presented, combining the results of Bell
Atlantic and NYNEX for each year in the three-year period ended December 31,
1995 and for the six-month period ended June 30, 1996.
As a result of the Merger, the merged companies will incur certain
transition costs, currently estimated at $700 million to $900 million (pretax),
in connection with consummating the transaction and integrating the operations
of Bell Atlantic and NYNEX. The transition costs consist principally of
professional and registration fees, systems modification costs, costs associated
with the elimination and consolidation of duplicate facilities and employee
severance and relocation resulting from the Merger. While the exact timing,
nature and amount of these transition costs is subject to change, Bell Atlantic
anticipates that a one-time pretax charge of approximately $200 million for
direct incremental Merger-related costs will be recorded in the quarter in which
the Merger is consummated. The estimate is comprised of the following amounts:
<TABLE>
<CAPTION>
(DOLLARS IN MILLIONS)
---------------------
<S> <C>
Professional services...................... $ 75.6
Compensation arrangements.................. 52.1
Shareowner related costs................... 25.3
Registration and other regulatory costs.... 18.5
Taxes and other............................ 28.5
-------
$ 200.0
===============
</TABLE>
The direct incremental Merger-related costs have been reflected as an increase
to Other current liabilities in the unaudited Pro Forma Combined Condensed
Balance Sheet as of June 30, 1996. The after-tax cost of this anticipated charge
($180.4 million) has been reflected as a reduction in Retained earnings in the
unaudited Pro Forma Combined Condensed Balance Sheet as of June 30, 1996.
In addition to the one-time pretax charge of approximately $200 million for
direct incremental Merger-related costs, Bell Atlantic also expects to record a
one-time charge for severance costs in the quarter in which the merger is
consummated. Such pretax charge is currently estimated to be in the range of
$200 million to $300 million. The amount of the charge will vary depending on a
number of factors including: (i) the number of employees that will be terminated
under severance arrangements, (ii) the timing of employee terminations, and
(iii) changes, if any, to severance plan provisions.
The unaudited pro forma combined condensed financial statements do not
reflect the employee severance costs described above or the remaining $300
million to $400 million of transition costs to be incurred during the remainder
of 1997, 1998, and 1999 or any of the anticipated recurring expense savings.
23
<PAGE> 28
BELL ATLANTIC CORPORATION
PRO FORMA COMBINED CONDENSED BALANCE SHEET
JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL PRO FORMA PRO FORMA
NYNEX BELL ATLANTIC ADJUSTMENTS COMBINED
---------- ------------- ----------- ---------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and temporary cash investments..... $ 75.0 $ 161.2 $ 28.2 (3a) $ 264.4
Receivables, net........................ 2,960.7 2,352.7 378.4 (3e)
336.3 (3a) 6,028.1
Other current assets.................... 869.4 1,121.1 (207.6)(3e)
(83.1)(3g)
87.7 (3a) 1,787.5
--------- --------- --------- ---------
Total current assets............ 3,905.1 3,635.0 539.9 8,080.0
--------- --------- --------- ---------
Property, plant and equipment -- net...... 16,976.6 15,643.8 2,177.4 (3a) 34,797.8
Long-term investments..................... 3,522.9 3,201.9 (2,432.6)(3a) 4,292.2
Deferred charges and other assets......... 2,043.4 1,315.0 437.7 (3a) 3,796.1
--------- --------- --------- ---------
TOTAL ASSETS.................... $ 26,448.0 $23,795.7 $ 722.4 $50,966.1
========= ========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt......................... $ 432.5 $ 1,842.6 $ 185.0 (3a) $ 2,460.1
Other current liabilities............... 3,024.4 3,063.8 299.5 (3a)
200.0 (3d)
(99.5)(3e) 6,488.2
--------- --------- --------- ---------
Total current liabilities....... 3,456.9 4,906.4 585.0 8,948.3
--------- --------- --------- ---------
Long-term debt............................ 9,367.1 6,130.6 -- 15,497.7
Other long-term liabilities and deferred
credits................................. 5,501.9 5,650.6 2,262.4 (3b)
(859.6)(3g)
0.5 (3a) 12,555.8
Minority interest, including a portion
subject to redemption requirements...... 1,572.3 19.4 149.7 (3a) 1,741.4
Stockholders' Equity:
Common stock............................ 452.9 437.8 (812.2)(3c) 78.5
Additional paid-in capital.............. 6,825.2 5,510.7 795.3 (3c) 13,131.2
Retained earnings....................... 216.3 2,095.7 (1,402.8)(3b)
167.6 (3e)
(180.4)(3d) 896.4
Foreign currency translation
adjustment........................... (20.7) (479.2) -- (499.9)
Treasury stock.......................... (591.5) (2.8) 16.9 (3c) (577.4)
Deferred compensation -- LESOP Trust.... (332.4) (473.5) -- (805.9)
--------- --------- --------- ---------
Total Stockholders' Equity...... 6,549.8 7,088.7 (1,415.6) 12,222.9
--------- --------- --------- ---------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY.......... $ 26,448.0 $23,795.7 $ 722.4 $50,966.1
========= ========= ========= =========
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Statements.
24
<PAGE> 29
BELL ATLANTIC CORPORATION
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL PRO FORMA PRO FORMA
NYNEX BELL ATLANTIC ADJUSTMENTS COMBINED
---------- ------------- ----------- ---------
(DOLLARS IN MILLIONS, EXCEPT FOR PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
OPERATING REVENUES........................ $6,699.8 $ 6,467.1 $ (47.9)(3e)
1,228.9 (3a) $14,347.9
OPERATING EXPENSES........................ 5,557.6 4,857.7 (39.7)(3b)
16.9 (3f)
(21.3)(3e)
958.1 (3a) 11,329.3
---------- ------------- ----------- ---------
OPERATING INCOME.......................... 1,142.2 1,609.4 267.0 3,018.6
Other income (expense) -- net............. 78.7 161.5 (270.8)(3a) (30.6 )
Interest expense.......................... 321.5 240.6 (16.9)(3f) 545.2
Income taxes.............................. 327.6 565.5 5.0 (3g) 898.1
---------- ------------- ----------- ---------
INCOME FROM CONTINUING OPERATIONS......... 571.8 964.8 8.1 1,544.7
Cumulative effect of change in
accounting principle
Directory publishing income, net of
tax.................................. 131.0 -- 184.1 (3e) 315.1
---------- ------------- ----------- ---------
NET INCOME................................ $ 702.8 $ 964.8 $ 192.2 $1,859.8
========= ============ =========== =========
Income from continuing operations per
common share............................ $ 1.31 $ 2.19 $ 1.99
Net income per common share............... $ 1.61 $ 2.19 $ 2.40
Weighted average number of common
shares and equivalent shares outstanding
(in millions)........................... 435.5 439.9 (101.0)(2) 774.4
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Statements.
25
<PAGE> 30
BELL ATLANTIC CORPORATION
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL PRO FORMA PRO FORMA
NYNEX BELL ATLANTIC ADJUSTMENTS COMBINED
---------- ------------- ----------- ---------
(DOLLARS IN MILLIONS, EXCEPT FOR PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
OPERATING REVENUES....................... $ 13,406.9 $13,429.5 $ 1,091.4 (3a) $27,927.8
OPERATING EXPENSES....................... 11,314.7 10,343.3 (122.4)(3b)
30.3 (3f)
838.7 (3a) 22,404.6
--------- --------- -------- ---------
OPERATING INCOME......................... 2,092.2 3,086.2 344.8 5,523.2
Other income -- net...................... 352.1 484.2 (251.6)(3a) 584.7
Interest expense......................... 733.9 561.0 1.1 (3a)
(30.3)(3f) 1,265.7
Income taxes............................. 640.9 1,147.6 46.5 (3g) 1,835.0
--------- --------- -------- ---------
INCOME FROM CONTINUING OPERATIONS........ 1,069.5 1,861.8 75.9 3,007.2
Extraordinary items
Discontinuation of regulatory
accounting principles, net of tax... (2,919.4) -- -- (2,919.4)
Early extinguishment of debt, net of
tax................................. -- (3.5) -- (3.5)
--------- --------- -------- ---------
NET INCOME (LOSS)........................ $ (1,849.9) $ 1,858.3 $ 75.9 $ 84.3
========= ========= ======== =========
Income from continuing operations per
common share........................... $ 2.50 $ 4.25 $ 3.93
Net income (loss) per common share....... $ (4.34) $ 4.24 $ 0.11
Weighted average number of common shares
and equivalent shares outstanding
(in millions).......................... 426.5 438.3 (98.9)(2) 765.9
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Statements.
26
<PAGE> 31
BELL ATLANTIC CORPORATION
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1994
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL PRO FORMA PRO FORMA
NYNEX BELL ATLANTIC ADJUSTMENTS COMBINED
---------- ------------- ----------- ---------
(DOLLARS IN MILLIONS, EXCEPT FOR PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
OPERATING REVENUES.......................... $ 13,306.6 $13,791.4 $ -- $27,098.0
OPERATING EXPENSES.......................... 11,550.4 10,986.8 (62.0)(3b)
25.1 (3f) 22,500.3
--------- --------- --------- ---------
OPERATING INCOME............................ 1,756.2 2,804.6 36.9 4,597.7
Other income -- net......................... 13.9 64.3 -- 78.2
Interest expense............................ 673.8 582.1 (25.1)(3f) 1,230.8
Income taxes................................ 303.7 884.9 23.6 (3g) 1,212.2
--------- --------- --------- ---------
INCOME FROM CONTINUING OPERATIONS........... 792.6 1,401.9 38.4 2,232.9
Extraordinary items
Discontinuation of regulatory accounting
principles, net of tax................. -- (2,150.0) -- (2,150.0)
Early extinguishment of debt, net of
tax.................................... -- (6.7) -- (6.7)
--------- --------- --------- ---------
NET INCOME (LOSS)........................... $ 792.6 $ (754.8) $ 38.4 $ 76.2
========= ========= ========= =========
Income from continuing operations per
common share.............................. $ 1.89 $ 3.21 $ 2.94
Net income (loss) per common share.......... $ 1.89 $ (1.73) $ 0.10
Weighted average number of common
shares and equivalent shares outstanding
(in millions)............................. 418.8 437.2 (97.2)(2) 758.8
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Statements.
27
<PAGE> 32
BELL ATLANTIC CORPORATION
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1993
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL PRO FORMA PRO FORMA
NYNEX BELL ATLANTIC ADJUSTMENTS COMBINED
---------- ------------- ----------- ---------
(DOLLARS IN MILLIONS, EXCEPT FOR PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
OPERATING REVENUES........................ $ 13,407.8 $13,145.6 $ -- $26,553.4
OPERATING EXPENSES........................ 13,074.5 10,348.0 (207.0)(3b)
31.8 (3f) 23,247.3
--------- --------- --------- ---------
OPERATING INCOME.......................... 333.3 2,797.6 175.2 3,306.1
Other income (expense) -- net............. (118.9) 88.1 -- (30.8)
Interest expense.......................... 659.5 612.1 (31.8)(3f) 1,239.8
Income taxes.............................. (172.7) 792.0 78.7 (3g) 698.0
--------- --------- --------- ---------
INCOME (LOSS) FROM CONTINUING
OPERATIONS.............................. (272.4) 1,481.6 128.3 1,337.5
Extraordinary item
Early extinguishment of debt, net of
tax.................................. -- (58.4) -- (58.4)
Cumulative effect of changes in accounting
principles
Income taxes............................ -- 65.2 -- 65.2
Postemployment benefits, net of tax..... (121.7) (85.0) -- (206.7)
Postretirement benefits other than
pensions, net of tax................. -- -- (1,670.0)(3b) (1,670.0)
--------- --------- --------- ---------
NET INCOME (LOSS)......................... $ (394.1) $ 1,403.4 $(1,541.7) $ (532.4)
========= ========= ========= =========
Income (loss) from continuing operations
per common share........................ $ (0.66) $ 3.39 $ 1.78
Net income (loss) per common share........ $ (0.95) $ 3.22 $ (0.71)
Weighted average number of common shares
and equivalent shares outstanding
(in millions)........................... 412.7 436.3 (95.7)(2) 753.3
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Statements.
28
<PAGE> 33
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
NOTE 1 -- RECLASSIFICATIONS
Certain reclassifications have been made to the unaudited historical
financial statements to conform to the presentation expected to be used by the
merged companies.
NOTE 2 -- EXCHANGE RATIO
Under the Merger Agreement, each outstanding share of NYNEX Common Stock
will be converted into 0.768 shares of Bell Atlantic Common Stock. This exchange
ratio was used in computing share and per share amounts in the accompanying
unaudited pro forma combined condensed financial statements.
NOTE 3 -- PRO FORMA ADJUSTMENTS
(a) A pro forma adjustment has been made to consolidate the accounts of certain
cellular operations that are jointly controlled by NYNEX and Bell Atlantic
and which were accounted for by both companies using the equity method
beginning July 1, 1995.
(b) A pro forma adjustment has been made to reflect the adoption by NYNEX of
Statement of Financial Accounting Standards No. 106, "Employers' Accounting
for Postretirement Benefits Other Than Pensions," effective January 1,
1993, by electing the immediate recognition of the transition obligation,
to conform to the method used by Bell Atlantic. In its historical
consolidated financial statements, NYNEX has amortized the transition
obligation for retired employees and active employees over a 20-year
period.
(c) Pro forma adjustments have been made to reflect the issuance of shares in
the exchange ratio stated in Note 2 above, the cancellation of NYNEX
treasury stock (other than treasury shares held by consolidated
subsidiaries of NYNEX in connection with certain financing transactions),
and the change in the par value of shares of Bell Atlantic Common Stock, in
accordance with the Merger Agreement.
(d) See the fourth paragraph under "Unaudited Pro Forma Combined Condensed
Financial Statements" on page 23 for information related to Merger-related
transition costs and expenses.
(e) A pro forma adjustment has been made to conform the recognition of Bell
Atlantic's directory publishing revenue and production expense to the
"point of publication" method adopted by NYNEX effective January 1, 1996.
Under the point of publication method, revenues and expenses are recognized
when the directories are published rather than over the lives of the
directories (generally one year) as was the case under the amortized
method. Bell Atlantic recognizes directory publishing revenue and
production expense over the lives of the directories (generally one year).
NYNEX and Bell Atlantic management have determined that utilization of the
point of publication method is preferable for use by the merged companies
because it is the method that is generally followed by publishing companies
and reflects more precisely the operations of the business. The application
of the point of publication method is not expected to have a material
impact on annual results of operations. Future quarterly results are
expected to vary significantly from the amounts reflected in the unaudited
Pro Forma Combined Condensed Statement of Income for the six months ended
June 30, 1996 due principally to the timing of directory publications.
(f) A pro forma adjustment has been made to conform the presentation of
interest charges incurred by NYNEX's financial services business
(principally leasing operations) from Interest expense to Operating
expense.
(g) Pro forma adjustments have been made for the estimated tax effects of
adjustments discussed in (b), (d), and (e) above.
29
<PAGE> 34
OPINIONS OF FINANCIAL ADVISORS
Under the terms of the Original Merger Agreement, each share of Bell
Atlantic Common Stock was to have been exchanged for 1.302 shares of Merger
Company Common Stock pursuant to the Original Bell Atlantic Exchange Ratio, and
each share of NYNEX Common Stock was to have been exchanged for one share of
Merger Company Common Stock pursuant to the Original NYNEX Exchange Ratio. The
Exchange Ratio is equivalent to the Original NYNEX Exchange Ratio divided by the
Original Bell Atlantic Exchange Ratio, and is intended to maintain the economic
terms of the Original Transaction. The analyses and presentations to the
respective Boards of NYNEX and Bell Atlantic, which were prepared and delivered
in connection with the Original Merger Agreement, were based on the Original
Bell Atlantic Exchange Ratio and the Original NYNEX Exchange Ratio. The
following descriptions of the analyses performed by the financial advisors in
connection with the preparation of their fairness opinions have been restated to
reflect the Exchange Ratio (0.768), notwithstanding the fact that their analyses
actually were based on the Original Bell Atlantic Exchange Ratio (1.302) and the
Original NYNEX Exchange Ratio (1.000).
In connection with their various analyses, each of the financial advisors
were furnished with (i) summary financial projections, separately prepared by
NYNEX and Bell Atlantic, relating to the respective businesses, earnings, cash
flows, assets and prospects of each of NYNEX and Bell Atlantic for the years
ending December 31, 1996 and December 31, 1997 (the "Two-Year Projections") and
(ii) the following projected benefits expected to result from the Merger,
jointly prepared by Bell Atlantic and NYNEX (the "Projected Benefits"): (a)
recurring expense savings from consolidating operating systems and other
administrative functions and reducing the number of management positions of $300
million in the first year following completion of the Merger, $450 million in
the second year following completion of the Merger and $600 million in the third
year following completion of the Merger and in each year thereafter; and (b)
annual capital expenditure savings ultimately reaching approximately $250
million to $300 million resulting from (among other reasons) efficiencies
relating to purchasing, market trials and equipment testing. NYNEX and Bell
Atlantic agreed that the Two-Year Projections and the Projected Benefits would
be the only projections exchanged by the parties or provided by either party to
the other's advisors prior to consummation of the Merger.
Separately, Bell Atlantic furnished Merrill Lynch with certain other
estimates, prepared by Bell Atlantic in connection with Merrill Lynch's analysis
of the Merger, relating to the future performance of Bell Atlantic over the
ten-year period ending December 31, 2005. Bell Atlantic also prepared and
furnished Merrill Lynch with its estimates of NYNEX's future performance over
such ten-year period, but such estimates were not reviewed or discussed with
NYNEX or its advisors. NYNEX does not, as a matter of business practice, prepare
long-term consolidated financial forecasts, and, accordingly, did not furnish
its financial advisors with comparable estimates, either for itself or Bell
Atlantic.
OPINIONS OF NYNEX'S FINANCIAL ADVISORS
Opinion of Bear, Stearns & Co. Inc.
At the April 21, 1996 meeting of the NYNEX Board, Bear Stearns delivered
its written opinion (the "Original Bear Stearns Opinion") to the effect that, as
of the date thereof, and subject to the assumptions and qualifications set forth
therein, the Original NYNEX Exchange Ratio was fair, from a financial point of
view, to the holders of NYNEX Common Stock. At the July 2, 1996 meeting of the
NYNEX Board, Bear Stearns delivered a confirming letter to the effect that,
based solely on its review of a draft of the Merger Agreement (as proposed to be
amended and restated) and the reviews and analyses performed by Bear Stearns in
connection with the Original Bear Stearns Opinion (which were not updated), if,
as of the date of the Original Bear Stearns Opinion, Bear Stearns' reviews and
analyses had been conducted in connection with the Merger Agreement instead of
the Original Merger Agreement, Bear Stearns would have concluded that, as of the
date of the Original Bear Stearns Opinion and subject to the assumptions and
qualifications set forth in the Original Bear Stearns Opinion (conformed as
necessary to reflect the changes made in the Merger Agreement), the Exchange
Ratio was fair, from a financial point of view, to the holders of NYNEX Common
Stock.
30
<PAGE> 35
Bear Stearns has updated the Original Bear Stearns Opinion by delivery of a
written opinion, dated as of the date of this Joint Proxy Statement/Prospectus
(the "Updated Bear Stearns Opinion"), to the effect that, as of the date of this
Joint Proxy Statement/Prospectus, and subject to the assumptions and
qualifications set forth therein, the Exchange Ratio is fair, from a financial
point of view, to the holders of NYNEX Common Stock. The Original Bear Stearns
Opinion is substantially the same as the Updated Bear Stearns Opinion attached
hereto, except that the Original Bear Stearns Opinion does not reflect the
structural changes to the Original Transaction (e.g., a single Merger with a
single Exchange Ratio instead of two mergers (the "Original Mergers") with a
separate Original NYNEX Exchange Ratio and Original Bell Atlantic Exchange
Ratio) made by the Merger Agreement.
A COPY OF THE UPDATED BEAR STEARNS OPINION, WHICH SETS FORTH THE
ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITS ON THE REVIEW UNDERTAKEN, IS
ATTACHED AS APPENDIX IV TO THIS JOINT PROXY STATEMENT/ PROSPECTUS AND IS
INCORPORATED HEREIN BY REFERENCE. THE SUMMARY OF THE UPDATED BEAR STEARNS
OPINION SET FORTH IN THIS JOINT PROXY STATEMENT/PROSPECTUS IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THE FULL TEXT OF SUCH OPINION. STOCKHOLDERS OF NYNEX
ARE URGED TO READ SUCH OPINION IN ITS ENTIRETY.
The opinions of Bear Stearns are intended for the benefit and use of the
NYNEX Board, and do not constitute a recommendation to any holder of NYNEX
Common Stock as to how to vote shares in connection with the Merger. In
rendering its opinions, Bear Stearns analyzed the Merger (and, in the case of
the Original Bear Stearns Opinion, the Original Transaction) as a strategic
business combination not involving a sale of control of NYNEX, and Bear Stearns
did not solicit, and was not authorized to solicit, third party acquisition
interest in NYNEX. In addition, Bear Stearns is not expressing any opinion as to
the price or range of prices at which New Bell Atlantic Common Stock may trade
subsequent to the consummation of the Merger. Bear Stearns' opinions are
necessarily based upon economic, market and other conditions, and the
information made available to it, as of the respective dates of such opinions.
The Exchange Ratio (and, in the case of the Original Bear Stearns Opinion,
the Original Bell Atlantic Exchange Ratio and the Original NYNEX Exchange Ratio)
and the form of merger consideration were determined by arm's-length
negotiations between NYNEX and Bell Atlantic and were not based on any
recommendation by Bear Stearns, although Bear Stearns provided advice to NYNEX
from time to time with respect thereto. Except as noted above, no limitations
were imposed by NYNEX on Bear Stearns with respect to the investigations made or
the procedures followed by Bear Stearns in rendering its opinions.
In connection with rendering its opinions, Bear Stearns, among other
things: (i) reviewed the Original Merger Agreement and, for purposes of the
Updated Bear Stearns Opinion, the Merger Agreement; (ii) reviewed each of
NYNEX's and Bell Atlantic's Annual Reports to Shareholders and Annual Reports on
Form 10-K for the years ended December 31, 1993 through 1995, and their
respective Quarterly Reports on Form 10-Q for the periods ended March 31, 1995,
June 30, 1995, September 30, 1995 and, for purposes of the Updated Bear Stearns
Opinion, March 31, 1996 and June 30, 1996; (iii) reviewed certain operating and
financial information provided to Bear Stearns by the senior managements of
NYNEX and Bell Atlantic relating to NYNEX's and Bell Atlantic's respective
businesses and prospects, including the Two-Year Projections and certain other
forward-looking information; (iv) reviewed the Projected Benefits; (v) met
separately and/or jointly with certain members of the senior managements of
NYNEX and Bell Atlantic to discuss: (a) the current telecommunications landscape
and competitive dynamics related thereto, (b) each company's operations,
historical financial statements, future prospects and financial condition, (c)
their views of the strategic, business, operational and financial rationale for,
and expected strategic benefits and other implications of, the Merger, (d) the
Two-Year Projections and the Projected Benefits, and (e) certain assumptions and
judgments underlying the long-term estimates with respect to Bell Atlantic that
were prepared by Bell Atlantic in connection with Merrill Lynch's analysis of
the Merger; (vi) reviewed the historical stock prices, trading activity and
valuation parameters of NYNEX Common Stock and Bell Atlantic Common Stock; (vii)
reviewed and analyzed the pro forma financial impacts of the Merger on NYNEX and
Bell Atlantic, including the pro forma effects of the initial quarterly dividend
per share of New Bell Atlantic Common Stock that, pursuant to the Merger
Agreement, is intended to be declared and paid by New Bell Atlantic following
the Effective Time; (viii) reviewed the terms, to the extent publicly available,
of recent mergers and acquisitions which Bear Stearns deemed generally
comparable to the Merger or otherwise
31
<PAGE> 36
relevant to its inquiry; (ix) reviewed publicly available financial data, stock
market performance data and valuation parameters of companies which Bear Stearns
deemed generally comparable to NYNEX or Bell Atlantic or otherwise relevant to
its inquiry; and (x) conducted such other studies, analyses, inquiries and
investigations as Bear Stearns deemed appropriate.
In the course of its review, Bear Stearns relied upon and assumed, without
independent verification, the accuracy and completeness of the financial and
other information provided to it by NYNEX and Bell Atlantic. Bear Stearns did
not perform any independent appraisal of the assets or liabilities of NYNEX or
Bell Atlantic, nor was it furnished with any such appraisals. With respect to
the Two-Year Projections and the Projected Benefits, Bear Stearns assumed that
they were reasonably prepared on bases reflecting the best currently available
estimates and judgments of the respective senior managements of NYNEX and Bell
Atlantic as to the anticipated future performance of their respective companies
and as to the anticipated savings achievable within the time frames forecast
therein, and that regulatory authorities will not prevent New Bell Atlantic from
retaining the full benefit of the Projected Benefits. Bear Stearns did not
assume any responsibility for independent verification of any of such
information or of the Two-Year Projections or the Projected Benefits. Bear
Stearns also assumed with NYNEX's consent that the Merger (and, in the case of
the Original Bear Stearns Opinion, the Original Transaction) would (i) qualify
as a "reorganization" within the meaning of Section 368(a) of the Code, (ii) be
accounted for as a pooling of interests under generally accepted accounting
principles and (iii) otherwise be consummated in accordance with the terms
described in the Merger Agreement.
In connection with preparing and rendering its opinions, Bear Stearns
performed a variety of valuation, financial and comparative analyses. The
summary of such analyses, as set forth below, does not purport to be a complete
description of the analyses underlying Bear Stearns' opinions. The preparation
of a fairness opinion is a complex process and is not necessarily susceptible to
summary description. Bear Stearns believes that its analyses must be considered
as a whole, and that selecting portions of its analyses and the factors
considered by it, without considering all such factors and analyses, could
create an incomplete view of the processes underlying Bear Stearns' opinions.
Moreover, the estimates contained in such analyses are not necessarily
indicative of actual values or predictive of future results or values, which may
be significantly more or less favorable than those suggested by such analyses.
In addition, analyses relating to the value of businesses or securities do not
purport to be appraisals or necessarily reflect the prices at which businesses
or securities actually may be sold. Accordingly, such estimates are inherently
subject to substantial uncertainties.
The following is a summary of the material valuation, financial and
comparative analyses performed by Bear Stearns in arriving at the Original Bear
Stearns Opinion, dated April 21, 1996. For clarity of reading and understanding,
the summary of the analyses below has been conformed to take account of the
changes to the Original Transaction made by the Merger Agreement. Accordingly,
references therein to "market exchange ratios" and "hypothetical unaffected
exchange ratios" that were, for purposes of the Original Bear Stearns Opinion,
calculated by dividing Bell Atlantic Common Stock prices by NYNEX Common Stock
prices, have been inverted (thereby reflecting NYNEX Common Stock prices divided
by Bell Atlantic Common Stock prices). Consistent with the foregoing changes,
references in the summary below that, for purposes of the Original Bear Stearns
Opinion, otherwise would have been to the Merger Company and the Merger Company
Common Stock, the Original NYNEX Exchange Ratio and the Original Bell Atlantic
Exchange Ratio or the Original Mergers, have been changed respectively to New
Bell Atlantic and New Bell Atlantic Common Stock, the Exchange Ratio and the
Merger.
Historical Stock Price Performance and Implied Market Exchange Ratios.
Bear Stearns reviewed the historical stock prices of NYNEX Common Stock and Bell
Atlantic Common Stock and the implied market exchange ratios determined by
dividing the price per share of NYNEX Common Stock by the price per share of
Bell Atlantic Common Stock (the "Market Exchange Ratio") over various periods of
time including, among others, the three years ended April 16, 1996, the
approximately 8 1/2 months commencing on August 1, 1995 and ending on April 16,
1996 and the 20 trading days ended April 19, 1996. Bear Stearns also reviewed
the historical performance over the same August 1, 1995 through April 16, 1996
period of a stock price index comprised of the common shares of six other
publicly-traded local exchange carriers (Ameritech Corporation
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("Ameritech"), BellSouth Corporation ("BellSouth"), GTE Corporation ("GTE"), U S
WEST, SBC and PacTel) (collectively, the "LEC Peer Group"). The results of this
review indicated that the price per share of NYNEX Common Stock had moved up
significantly since August 1995 and had risen more on a relative basis than Bell
Atlantic Common Stock and the common shares of the LEC Peer Group during this
period. Bear Stearns calculated that the Market Exchange Ratio ranged (i) from a
low of 0.7879 to a high of 0.8626, with an average of 0.8237, during the 20
trading days ended April 19, 1996, (ii) from a low of 0.7004 to a high of
0.8485, with an average of 0.7619, for the year ended April 16, 1996, (iii) from
a low of 0.6560 to a high of 0.7731, with an average of 0.7199, for the year
ended April 13, 1995 and (iv) from a low of 0.6394 to a high of 0.8249, with an
average of 0.7302, for the year ended April 15, 1994. For the two and three-year
periods ended April 16, 1996, the Market Exchange Ratio averaged 0.7410 and
0.7374, respectively. Bear Stearns noted that for each of the full year
historical periods analyzed, the Exchange Ratio was within the range of the high
and low Market Exchange Ratios and above the average Market Exchange Ratios.
Accordingly, from NYNEX's perspective, the Exchange Ratio provided premiums of
0.8%, 6.7% and 5.2% to the average implied Market Exchange Ratios for the
respective years ended April 16, 1996, April 13, 1995 and April 15, 1994. Bear
Stearns further noted that the Market Exchange Ratio had demonstrated
significant volatility over the approximately 8 1/2 month period commencing on
August 1, 1995 and that, more recently, had narrowed to a trading range of
between about 0.74 and 0.83, as compared to the generally lower and slightly
wider trading range of between about 0.67 and 0.77 for the approximately two
years preceding August 1, 1995.
Bear Stearns reviewed a variety of significant news events which had
appeared to affect the respective stock prices for NYNEX Common Stock and Bell
Atlantic Common Stock, and hence the Market Exchange Ratio, during late 1995 and
early 1996, including, among other events: (i) approval of NYNEX's regulatory
plan by New York State regulators (August 1, 1995); (ii) Bell Atlantic's and
NYNEX's earnings announcements (October 19, 1995 and October 23, 1995,
respectively) for the third quarter of 1995; (iii) an article in The Wall Street
Journal (December 18, 1995) which headlined that NYNEX and Bell Atlantic were
engaged in discussions regarding a potential combination; (iv) NYNEX's and Bell
Atlantic's earnings announcements (January 23, 1996) for calendar year 1995; (v)
an article on the Reuters newswire (February 7, 1996) which indicated that NYNEX
and Bell Atlantic continued to engage in discussions regarding a potential
combination; (vi) an article in The Wall Street Journal (February 8, 1996) which
suggested that NYNEX's and Bell Atlantic's previously-rumored discussions
regarding a potential combination had cooled off; and (vii) the announcement
(April 1, 1996) of the proposed acquisition of PacTel by SBC.
Bear Stearns noted that the prices of NYNEX Common Stock and Bell Atlantic
Common Stock closed at $49 5/8 and $68 5/8, respectively, on December 15, 1995
(which was one trading day prior to the aforementioned article in The Wall
Street Journal (December 18, 1995) regarding a potential combination), and that
such closing stock prices resulted in a Market Exchange Ratio of 0.7231. As of
April 19, 1996 (the last trading day before approval and execution of the
Original Merger Agreement), Bear Stearns noted that the prices of NYNEX Common
Stock and Bell Atlantic Common Stock closed at $53 and $65, respectively, and
that such closing stock prices resulted in a Market Exchange Ratio of 0.8154.
Accordingly, from NYNEX's perspective, the Exchange Ratio of 0.768 provided for
under the Merger Agreement represented an approximate 6.2% premium to the Market
Exchange Ratio as of December 15, 1995, but an approximate (5.8%) discount to
the Market Exchange Ratio as of April 19, 1996.
Historical P/E Ratio Analysis and Implied Hypothetical Unaffected Stock
Price. For each of NYNEX Common Stock and Bell Atlantic Common Stock, Bear
Stearns analyzed historical price/earnings ratios ("P/E ratios") for each
quarter during the four years ended December 31, 1995. Bear Stearns calculated
the respective P/E ratios for NYNEX Common Stock and Bell Atlantic Common Stock
by dividing the average of their respective daily stock prices for the second
month following the close of each quarter by their respective latest twelve
months earnings per share as normalized by Bear Stearns for unusual and non-
recurring items. The results of this analysis indicated that during this
four-year period the P/E ratio for Bell Atlantic Common Stock (the "Bell
Atlantic P/E ratio") typically reflected a significant premium to the P/E ratio
for NYNEX Common Stock (the "NYNEX P/E ratio"). This premium ranged (i) for
1995, from a low of 9.3% to a high of 16.1%, (ii) for 1994, from a low of 4.2%
to a high of 20.6%, (iii) for 1993, from a low
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of 21.6% to a high of 31.7% and (iv) for 1992, from a low of 6.9% to a high of
17.0%. More recently, using closing stock prices as of April 16, 1996 and
normalized earnings per share for 1995, Bear Stearns noted that the NYNEX P/E
ratio and the Bell Atlantic P/E ratio had converged to the point where the NYNEX
P/E ratio and the Bell Atlantic P/E ratio were 15.6x and 15.5x, respectively. On
the presumption that public deal speculation had been the primary cause for such
convergence, Bear Stearns calculated a hypothetical unaffected market exchange
ratio (the "Hypothetical Unaffected Exchange Ratio") based on (i) closing prices
for NYNEX Common Stock and Bell Atlantic Common Stock of $51 1/8 and $60 1/4,
respectively, on April 16, 1996, (ii) an assumed historical Bell Atlantic P/E
ratio premium of 10% to 15% over the NYNEX P/E ratio and (iii) estimated
earnings per share for 1996 based on Wall Street consensus research analyst
estimates. As calculated by Bear Stearns, the Hypothetical Unaffected Exchange
Ratio ranged from 0.7681 (at a 10% premium) to 0.7347 (at a 15% premium), which
compared favorably to the Exchange Ratio of 0.768. Bear Stearns noted, however,
that factors other than public deal speculation, such as changes in the
historical valuation parameters ascribed by the stock market to NYNEX Common
Stock as compared to Bell Atlantic Common Stock, could account for some or much
of the recent convergence of the NYNEX P/E ratio and the Bell Atlantic P/E
ratio, in which case a higher Hypothetical Unaffected Exchange Ratio would
result (and thereby compare less favorably to the Exchange Ratio).
Precedent Merger of Equals Transactions. Bear Stearns analyzed the Merger
as a strategic business combination not involving a sale of control of NYNEX
and, accordingly, reviewed and analyzed the terms, to the extent publicly
available, of 13 major pending or completed merger of equals transactions (the
"Precedent MOE Transactions") in various consolidating sectors such as aerospace
and defense, utilities, commercial banking and pharmaceuticals. For each of the
Precedent MOE Transactions, Bear Stearns reviewed and analyzed the stock price
premium/(discount) from each combining company's perspective based on the deal
exchange ratio versus both (i) the market exchange ratio one day prior to the
announcement of the transaction and (ii) the market exchange ratio based on the
average stock prices for the 20 trading days prior to the announcement of the
transaction. Bear Stearns also reviewed and/or analyzed the pro forma ownership
of the combined company by each combining company's stockholders, each combining
company's representation on the board of directors of the combined company, the
senior management responsibilities in the combined company, the dividend policy
of the combined company and the pro forma effects of such dividend policy on
each combining company's stockholders, and the corporate headquarters location
of the combined company. Bear Stearns grouped the Precedent MOE Transactions
based on whether each combining company had even or uneven representation on the
board of directors of the combined company. Eight of the Precedent MOE
Transactions had even splits of the board of directors of the combined company:
(i) Kansas City Power & Light Company and UtiliCorp United Inc.; (ii) Pharmacia
Aktiebolag and The Upjohn Company; (iii) NBD Bancorp, Inc. and First Chicago
Corporation; (iv) Wisconsin Energy Corporation and Northern States Power
Company; (v) Martin Marietta Corporation and Lockheed Corporation; (vi) Southern
National Corporation and BB&T Financial Corporation; (vii) Wellfleet
Communications, Inc. and SynOptics Communications, Inc.; and (viii) Society
Corporation and KeyCorp. The remaining five of the Precedent MOE Transactions
had uneven splits of the board of directors of the combined company: (i)
Baltimore Gas and Electric Company and Potomac Electric Power Company; (ii)
Chemical Banking Corporation and The Chase Manhattan Corporation; (iii) Public
Service Company of Colorado and Southwestern Public Service Company; (iv) The
Cincinnati Gas & Electric Company and PSI Resources, Inc.; and (v) Chemical
Banking Corporation and Manufacturers Hanover Corporation.
Bear Stearns' analysis indicated that the exchange ratios for the Precedent
MOE Transactions were generally negotiated within a reasonably narrow band
around the market exchange ratio implied by recent pre-announcement stock market
prices (both using stock prices one day prior to announcement and over the 20
trading days prior to announcement), and that one party to a given transaction
typically received a modest premium to such recent pre-announcement stock market
prices whereas the other party to the transaction received a modest discount to
such recent pre-announcement stock market prices. For the eight Precedent MOE
Transactions where each of the combining companies had even representation on
the combined company's board of directors, the premiums ranged from 0.4% to
19.8% and the discounts ranged from (0.4%) to (16.5%), with the premiums and
discounts each being less than 9% in six of the eight transactions. For the five
Precedent MOE Transactions where each of the combining companies had uneven
representation on the
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combined company's board of directors, the premiums ranged from 1.5% to 34.2%
and the discounts ranged from (1.5%) to (25.5%), with the premiums and discounts
each being less than 9% in only two of the five transactions. Bear Stearns noted
that the Exchange Ratio in the Merger resulted in the following one-day and
average 20-day premiums/(discounts) compared to the Market Exchange Ratio as of
April 19, 1996: discounts of (5.8%) and (6.7%) from NYNEX's perspective and
premiums of 6.2% and 7.2% from Bell Atlantic's perspective. Bear Stearns viewed
these premiums/(discounts) as generally being consistent with the range of
premiums/(discounts) presented by the Precedent MOE Transactions.
Bear Stearns noted that none of the Precedent MOE Transactions was
identical to the Merger and that, accordingly, any analysis of the Precedent MOE
Transactions necessarily involved complex considerations and judgments
concerning differences in industry dynamics, stock market valuation parameters,
financial and operating characteristics and various other factors that would
necessarily affect the Exchange Ratio in the Merger as compared to the exchange
ratios for the Precedent MOE Transactions.
Relative Contribution Analysis. Bear Stearns calculated the relative
contribution by each of NYNEX and Bell Atlantic to New Bell Atlantic on a pro
forma combined basis with respect to, among other things, equity market
capitalization, enterprise value (i.e., equity market capitalization plus net
debt), operating cash flow, operating profit and net income. Bear Stearns'
relative contribution analysis did not take into account any Projected Benefits.
The results of this analysis indicated that NYNEX would contribute 46.2%, 45.3%
and 43.4% of New Bell Atlantic's equity market capitalization based on closing
prices for NYNEX Common Stock and Bell Atlantic Common Stock as of April 16,
1996, average prices for NYNEX Common Stock and Bell Atlantic Common Stock for
the 20 trading days ended April 16, 1996 and average prices for NYNEX Common
Stock and Bell Atlantic Common Stock for the year ended April 16, 1996,
respectively. In addition, this analysis indicated that NYNEX would contribute
36.1% and 36.5% of New Bell Atlantic's reported net income (before extraordinary
items and the cumulative effects of changes in accounting principles) for 1994
and 1995, respectively, and 45.5%, 45.6% and 45.1% of New Bell Atlantic's
normalized net income (adjusted to eliminate unusual and nonrecurring items) for
1993, 1994 and 1995, respectively. In addition, NYNEX would contribute 45.4% and
45.5% of New Bell Atlantic's projected net income, based on the Two-Year
Projections, for 1996 and 1997, respectively. Bear Stearns noted, however, that
the aforementioned relative net income contribution analysis did not reflect the
different P/E ratios that the stock market historically had ascribed to NYNEX
and Bell Atlantic. By way of comparison, Bear Stearns observed that the Exchange
Ratio would result in holders of NYNEX Common Stock receiving a 43.7% collective
ownership position in New Bell Atlantic (assuming for analytical purposes that
the proceeds from the hypothetical exercise of stock options are used to
repurchase shares).
Pro Forma Merger Analysis. Bear Stearns reviewed and analyzed certain pro
forma financial impacts of the Merger on the holders of NYNEX Common Stock and
Bell Atlantic Common Stock based on: (i) the Exchange Ratio; (ii) the Two-Year
Projections; (iii) the Projected Benefits; (iv) a change to conform NYNEX's and
Bell Atlantic's accounting for certain postretirement benefits other than
pensions (pursuant to Statement of Financial Accounting Standards No. 106),
resulting in a decrease in expenses of approximately $82 million per year on a
pre-tax basis; and (v) an assumption for analytical purposes that the Merger had
been effected as of January 1, 1996. Bear Stearns did not factor in any
potential revenue enhancements which might be realizable by New Bell Atlantic as
a result of the Merger and assumed that regulatory authorities would not prevent
New Bell Atlantic from retaining the full benefit of the Projected Benefits. In
addition, Bear Stearns did not take into account the income statement impact of
any one-time restructuring charges or other non-recurring charges associated
with the Merger.
The results of this analysis indicated that, after factoring in the
Projected Benefits and making the other adjustments as described above, the
Merger would result in accretion to the equivalent projected earnings per share
of NYNEX Common Stock of +2.0% and +3.3% for 1996 and 1997, respectively, as
compared to the projected earnings per share of NYNEX Common Stock on a
stand-alone basis. However, without the benefit of the Projected Benefits, the
Merger would result in dilution to the equivalent projected earnings per share
of NYNEX Common Stock of (3.2%) and (3.6%) for 1996 and 1997, respectively, as
compared to the projected earnings per share of NYNEX Common Stock on a
stand-alone basis.
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By way of comparison, the results of this analysis indicated that, after
factoring in the Projected Benefits and making the other adjustments as
described above, the Merger would result in accretion to the equivalent
projected earnings per share of Bell Atlantic Common Stock of +11.1% and +12.6%
for 1996 and 1997, respectively, as compared to the projected earnings per share
of Bell Atlantic Common Stock on a stand-alone basis, and, even without the
benefit of the Projected Benefits, would result in accretion to the equivalent
projected earnings per share of Bell Atlantic Common Stock of +5.4% and +5.1%,
respectively.
Bear Stearns noted that, based on the Exchange Ratio and the initial
quarterly dividend per share of New Bell Atlantic Common Stock which, pursuant
to the Merger Agreement, is intended to be declared and paid by New Bell
Atlantic following the Effective Time, each holder of a share of NYNEX Common
Stock would receive approximately $2.36 per share on an annual basis, which was
equal to the current indicated (and historical, since 1993) annual dividend per
share of NYNEX Common Stock. By way of comparison, Bear Stearns noted that the
same intended quarterly dividend per share of New Bell Atlantic Common Stock
would result in each holder of a share of Bell Atlantic Common Stock receiving
approximately $3.07 on an annual basis, which would reflect a 6.7% increase over
the current indicated annual dividend per share of Bell Atlantic Common Stock.
By way of background, Bear Stearns observed that Bell Atlantic's annual dividend
per share had increased at a compound annual growth rate of 2.7% over the past
five years.
Illustrative Valuation Analysis of Projected Benefits. Bear Stearns
performed an illustrative valuation of the Projected Benefits based on two
methodologies: (i) hypothetical capitalized value of estimated incremental net
income based on a range of P/E ratios and (ii) hypothetical net present value
based on estimated incremental free cash flow and a range of assumed discount
rates and terminal growth rates. Bear Stearns calculated that the hypothetical
capitalized value of the Projected Benefits ranged from approximately $2,500
million to approximately $8,500 million, assuming (i) a range of potential P/E
ratios for New Bell Atlantic Common Stock of 13.5x to 15.5x, (ii) pre-tax annual
expense savings (excluding one-time costs to achieve such expense savings)
ranging from $300 million to $900 million and (iii) an assumed tax rate of 38%.
The results of this analysis indicated that such hypothetical capitalized values
ranged from approximately 5.1% to 17.3% of the combined public market equity
value of NYNEX Common Stock and Bell Atlantic Common Stock as of April 16, 1996.
Bear Stearns calculated that the hypothetical net present value of the Projected
Benefits ranged from approximately $3,850 million to approximately $8,325
million, assuming (i) a range of discount rates from 9.0% to 11.0%, (ii) a range
of terminal growth rates from 0.0% to 4.0%, (iii) an assumed tax rate of 38% and
(iv) pre-tax cash outflows required to achieve such Projected Benefits of $500
million in the first year following the Merger and $200 million in each of the
second and third years following the Merger. The results of this analysis
indicated that such hypothetical net present values ranged from approximately
7.8% to 17.0% of the combined public market equity value of NYNEX Common Stock
and Bell Atlantic Common Stock as of April 16, 1996.
Illustrative Future Stockholder Value Analysis. Bear Stearns prepared
illustrative stockholder value matrices in order to demonstrate the hypothetical
pro forma impact of the Merger on the value of an equivalent share of NYNEX
Common Stock and Bell Atlantic Common Stock, using a range of potential P/E
ratios for New Bell Atlantic Common Stock of 13.5x to 16.0x and alternative
potential annual expense savings of $0, $300 million, $600 million and $900
million. Bear Stearns calculated that the hypothetical pro forma value of an
equivalent share of NYNEX Common Stock ranged from a low of approximately $47.09
(assuming a P/E ratio of 13.5x and no expense savings), to midpoints of
approximately $53.30 (assuming a P/E ratio of 14.5x and annual expense savings
of $300 million) and approximately $57.96 (assuming a P/E ratio of 15.0x and
annual expense savings of $600 million), to a high of approximately $64.83
(assuming a P/E ratio of 16.0x and annual expense savings of $900 million),
which imputed prices would respectively represent changes of (11.1%), 0.6%, 9.4%
and 22.3% from the closing price of $53.00 for NYNEX Common Stock on April 19,
1996.
By way of comparison, Bear Stearns calculated the hypothetical pro forma
value of an equivalent share of Bell Atlantic Common Stock, using the
aforementioned ranges of potential P/E ratios for New Bell Atlantic Common Stock
and alternative potential annual expense savings. This analysis yielded
hypothetical pro forma values that ranged from a low of approximately $61.32
(assuming a P/E ratio of 13.5x and no expense savings), to midpoints of
approximately $69.41 (assuming a P/E ratio of 14.5x and annual expense savings
of
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$300 million) and $75.47 (assuming a P/E ratio of 15.0x and annual expense
savings of $600 million), to a high of approximately $84.42 (assuming a P/E
ratio of 16.0x and annual expense savings of $900 million), which imputed prices
would respectively represent changes of (5.7%), 6.8%, 16.1% and 29.9% from the
closing price of $65.00 for Bell Atlantic Common Stock on April 19, 1996.
In performing its analyses, Bear Stearns was not expressing any opinion as
to the price or range of prices at which New Bell Atlantic Common Stock may
trade subsequent to the consummation of the Merger. The prices at which New Bell
Atlantic Common Stock ultimately trades in the stock market will be driven by a
variety of quantitative and qualitative factors (e.g., the P/E ratio at which
New Bell Atlantic Common Stock is valued by potential investors, which may be
significantly more or less favorable than the illustrative range of P/E ratios
used by Bear Stearns for its analytical purposes; the level of Projected
Benefits ultimately embraced by the stock market; etc.).
Other Analyses. Bear Stearns conducted such other analyses as it deemed
necessary, including reviewing historical and projected financial and operating
data for both NYNEX and Bell Atlantic and pro forma combined balance sheet data
for New Bell Atlantic, analyzing selected investment research reports on, and
earnings and other estimates for, each of NYNEX and Bell Atlantic and various of
their business segments, reviewing and comparing certain financial data and
valuation parameters for each of NYNEX and Bell Atlantic with the companies
comprising the LEC Peer Group and reviewing available information regarding the
institutional holdings of NYNEX Common Stock and Bell Atlantic Common Stock (and
the pro forma institutional holdings for New Bell Atlantic Common Stock).
In connection with the Updated Bear Stearns Opinion dated as of the date of
this Joint Proxy Statement/ Prospectus, Bear Stearns confirmed the
appropriateness of its reliance on the analyses used to render the Original Bear
Stearns Opinion, dated April 21, 1996, by performing procedures to update
certain of such analyses and by reviewing the assumptions on which such analyses
were based and the factors considered in connection therewith.
Pursuant to the terms of its engagement letter, dated November 27, 1995,
NYNEX has paid Bear Stearns an initial retainer fee of $2,000,000. NYNEX has
further agreed to pay Bear Stearns: (i) commencing on January 31, 1996 and on
the last day of each calendar month until the earlier of termination of the
engagement, December 31, 1997 or consummation of the Merger, monthly retainer
fees of $500,000 for services performed during the immediately preceding
calendar month or any portion thereof, (ii) a fee of $2,000,000 in connection
with the Original Bear Stearns Opinion, dated April 21, 1996, which fee became
payable upon the later of the issuance of the opinion and final approval by the
Board of Directors of NYNEX of the Merger and (iii) a transaction fee,
contingent upon and payable at closing of the Merger, of $25,000,000 (against
which all other fees, other than the initial $2,000,000 retainer, are to be
credited). Accordingly, if the Merger is consummated, Bear Stearns will receive
total financial advisory fees of $27,000,000. In addition, NYNEX has agreed
(subject to certain audit rights) to reimburse Bear Stearns for its
out-of-pocket expenses, including the fees and expenses of its counsel and other
outside advisers and consultants retained with NYNEX's approval, which
reimbursements are not to exceed $400,000 without NYNEX's prior consent (which
shall not be unreasonably withheld). NYNEX has also agreed to indemnify Bear
Stearns and certain related persons against certain liabilities in connection
with its engagement, including certain liabilities under the federal securities
laws.
Bear Stearns has been engaged previously by each of NYNEX and Bell
Atlantic, both separately and jointly, to provide certain investment banking and
financial advisory services in connection with the formation of the wireless
joint ventures of Bell Atlantic and NYNEX, by Bell Atlantic and NYNEX in
connection with the divestiture of certain cellular businesses related to the
formation of BANM, by Bell Atlantic in connection with an international cellular
investment and related equity financing and by NYNEX or Bell Atlantic in
connection with various other strategic initiatives. During the last two years,
Bear Stearns earned compensation with respect to all such services, other than
the fees described in the preceding paragraph, of approximately $12,000,000. In
addition, the Vice Chairman of NYNEX is a member of the Board of Directors of
The Bear Stearns Companies Inc., which is Bear Stearns' parent company. In the
ordinary course of its business, Bear Stearns may actively trade the equity
securities of NYNEX and/or Bell Atlantic for its
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own account and for the accounts of customers and, accordingly, may at any time
hold a long or short position in such securities.
Bear Stearns is an internationally recognized investment banking firm and
was selected as financial advisor to NYNEX in connection with the Merger because
of its substantial experience and expertise in transactions similar to the
Merger, its experience and expertise in the telecommunications and media sectors
and its specific familiarity with NYNEX and its business. As part of its
investment banking business, Bear Stearns regularly is 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 estate,
corporate and other purposes.
Opinion of Morgan Stanley & Co. Incorporated
Morgan Stanley has delivered its written opinion (the "Original Morgan
Stanley Opinion") to the NYNEX Board that, as of April 21, 1996, and based upon
and subject to the various considerations set forth in such opinion, the
Original NYNEX Exchange Ratio under the Original Merger Agreement was fair from
a financial point of view to the holders of NYNEX Common Stock (other than Bell
Atlantic and its affiliates). Morgan Stanley has also delivered a letter dated
July 2, 1996 to the NYNEX Board to the effect that, based solely upon its review
of a draft dated June 26, 1996 of the Merger Agreement as amended and restated
and on the investigations and analyses performed in connection with the delivery
of the Original Morgan Stanley Opinion (which investigations and analyses were
not updated), if, as of the date of the Original Morgan Stanley Opinion, Morgan
Stanley's review and analyses had been conducted in connection with the Merger
Agreement instead of the Original Merger Agreement, Morgan Stanley would have
concluded, as of the date of the Original Morgan Stanley Opinion and subject to
the assumptions and qualifications set forth in the Original Morgan Stanley
Opinion, that the Exchange Ratio was fair from a financial point of view to the
holders of NYNEX Common Stock (other than Bell Atlantic and its affiliates).
Morgan Stanley has also delivered its written opinion to the NYNEX Board
that, as of the date of this Joint Proxy Statement/Prospectus, and based upon
and subject to the various considerations set forth in such opinion, the
Exchange Ratio is fair from a financial point of view to the holders of NYNEX
Common Stock (other than Bell Atlantic and its affiliates) (the "Updated Morgan
Stanley Opinion").
THE FULL TEXT OF THE UPDATED MORGAN STANLEY OPINION, WHICH SETS FORTH THE
ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITS ON THE REVIEW UNDERTAKEN BY
MORGAN STANLEY, IS ATTACHED AS APPENDIX V TO THIS JOINT PROXY
STATEMENT/PROSPECTUS. STOCKHOLDERS OF NYNEX ARE URGED TO READ SUCH OPINION IN
ITS ENTIRETY. THE UPDATED MORGAN STANLEY OPINION IS DIRECTED ONLY TO THE
EXCHANGE RATIO AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY STOCKHOLDER OF
NYNEX AS TO HOW SUCH STOCKHOLDER SHOULD VOTE AT THE NYNEX MEETING. THE SUMMARY
OF THE UPDATED MORGAN STANLEY OPINION SET FORTH IN THIS JOINT PROXY STATEMENT/
PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF SUCH
OPINION.
In connection with rendering the Updated Morgan Stanley Opinion, Morgan
Stanley among other things: (i) analyzed certain publicly available financial
statements and other information of NYNEX and Bell Atlantic, respectively; (ii)
analyzed certain internal financial statements and other financial and operating
data concerning NYNEX prepared by the management of NYNEX; (iii) analyzed
certain summary near-term financial projections concerning NYNEX prepared by the
management of NYNEX; (iv) reviewed and discussed with senior executives of NYNEX
the past and current operations and financial condition of NYNEX and the
prospects of NYNEX in light of the current telecommunications environment, and
the long-term benefits expected to result from the Merger, including, without
limitation, certain estimates and timing of the potential cost savings for New
Bell Atlantic jointly prepared by NYNEX and Bell Atlantic; (v) analyzed certain
internal financial statements and other financial and operating data concerning
Bell Atlantic prepared by the management of Bell Atlantic; (vi) analyzed certain
summary near-term financial projections concerning Bell Atlantic prepared by the
management of Bell Atlantic; (vii) reviewed and discussed with senior executives
of Bell Atlantic the past and current operations and financial condition of Bell
Atlantic and the prospects of Bell Atlantic in light of the current
telecommunications environment, and the long-term benefits expected to result
from the Merger, including, without limitation, certain estimates and
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timing of potential cost savings for New Bell Atlantic jointly prepared by NYNEX
and Bell Atlantic; (viii) analyzed the estimated pro forma impact of the Merger,
including such impact on New Bell Atlantic's earnings per share, consolidated
capitalization, financial ratios and intended dividend policy; (ix) reviewed the
reported prices and trading activity for the NYNEX Common Stock and the Bell
Atlantic Common Stock; (x) compared the financial performance of NYNEX and Bell
Atlantic and the prices and trading activity of NYNEX Common Stock and Bell
Atlantic Common Stock with that of certain other comparable publicly traded
companies and their securities; (xi) discussed the strategic objectives of the
Merger and the plan for New Bell Atlantic with senior executives of NYNEX and
Bell Atlantic; (xii) reviewed the financial terms, to the extent publicly
available, of certain comparable transactions; (xiii) reviewed the Merger
Agreement and certain related documents; and (xiv) performed such other analyses
as it deemed appropriate.
Morgan Stanley assumed and relied upon without independent verification the
accuracy and completeness of the information reviewed by it for the purpose of
its opinion. With respect to the summary near-term financial projections and the
operating efficiencies and other potential synergies (including the timing
thereof) expected to result from the Merger supplied to Morgan Stanley by NYNEX
and Bell Atlantic, Morgan Stanley assumed that they were reasonably prepared on
bases reflecting the best currently available estimates and good faith judgments
of NYNEX's and Bell Atlantic's respective senior management of the future
competitive, operating and regulatory environments and related financial
performance of NYNEX and Bell Atlantic, as the case may be. Morgan Stanley did
not assume responsibility for conducting a physical inspection of the properties
or facilities of NYNEX or Bell Atlantic or for making or obtaining any
independent valuation or appraisal of the assets or liabilities of NYNEX or Bell
Atlantic nor was Morgan Stanley furnished with any such valuations or
appraisals. Morgan Stanley assumed with the consent of NYNEX that the Merger
will be free of federal tax to NYNEX, Bell Atlantic, and the holders of NYNEX
Common Stock and that the Merger will be accounted for as a pooling of interests
under generally accepted accounting principles. Morgan Stanley also assumed that
the transactions described in the Merger Agreement will be consummated on the
terms set forth therein. Morgan Stanley's opinion is necessarily based on
economic, market and other conditions and circumstances as they exist and can be
evaluated on, and the information made available to Morgan Stanley, as of the
date of its opinion.
Morgan Stanley was engaged by NYNEX as of April 15, 1996 for purposes of
delivering an opinion as to whether the Original NYNEX Exchange Ratio was fair
from a financial point of view to the holders of NYNEX Common Stock and, as a
result, Morgan Stanley did not participate in the structuring or the negotiation
of the terms of the Original Transaction. In addition, Morgan Stanley was not
authorized to solicit, and did not solicit, interest from any party with respect
to the acquisition of NYNEX or any of its assets. Morgan Stanley also expressed
no opinion as to the price or range of prices at which New Bell Atlantic Common
Stock may trade subsequent to consummation of the Merger.
In connection with its April 21, 1996 opinion rendered to the NYNEX Board
regarding the Original Transaction, Morgan Stanley performed a variety of
financial and comparative analyses. For the purposes of the Original Morgan
Stanley Opinion and Morgan Stanley's presentation on April 21, 1996 to the NYNEX
Board, references therein to "Historical Trading Ratios" and certain other
ratios were calculated by dividing the price per share of Bell Atlantic Common
Stock by the price per share of NYNEX Common Stock. For the purposes of this
summary of Morgan Stanley's analyses, such ratios have been inverted, thereby
reflecting the price per share of NYNEX Common Stock divided by the price per
share of Bell Atlantic Common Stock. Such inversion is intended to reflect the
structure of the current transaction without changing the relative relationships
or percentage relationships derived from analyses based on the original
structure. Consistent with the foregoing changes, references in the summary
below that, for purposes of the Original Morgan Stanley Opinion, otherwise would
have been to Merger Company and Merger Company Common Stock, the Original NYNEX
Exchange Ratio or the Mergers, have been changed respectively to Bell Atlantic
and Bell Atlantic Common Stock (in each case on a pro forma basis), the Exchange
Ratio and the Merger. The following summary of such analyses does not purport to
be a complete description of Morgan Stanley's presentation on April 21, 1996 to
the NYNEX Board in connection with the Original Transaction:
Trading Ratio Analysis. Morgan Stanley reviewed the historical ratios of
the daily closing prices per share of NYNEX Common Stock to those of Bell
Atlantic Common Stock (the "Historical Trading Ratios")
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for the period from January 1, 1993 through April 19, 1996, and the average of
such Historical Trading Ratios for the three-month, six-month and twelve-month
periods ending on December 15, 1995, which was the last trading date before it
was publicly reported in The Wall Street Journal on December 18, 1995 that NYNEX
and Bell Atlantic were engaged in merger discussions (the "Merger Discussions
Report"), and compared such implied trading ratios to the Exchange Ratio. This
analysis showed that on December 15, 1995, the Historical Trading Ratio was
approximately 0.723, and that the averages of the Historical Trading Ratios were
0.766 during the three-month period ending on December 15, 1995, 0.752 during
the six-month period ending on December 15, 1995 and 0.747 during the
twelve-month period ending on December 15, 1995. Morgan Stanley also reviewed
the Historical Trading Ratios for the five-year period prior to publication of
the Merger Discussions Report and the five-year period ending on April 19, 1996,
and compared such Historical Trading Ratios to the Exchange Ratio. This analysis
showed that the averages of the Historical Trading Ratios for the one-month,
three-month, six-month, one-year, two-year, three-year, four-year and five-year
periods prior to publication of the Merger Discussions Report were 0.760, 0.766,
0.752, 0.747, 0.725, 0.739, 0.766 and 0.766, respectively, and that the averages
of the Historical Trading Ratios for the corresponding periods ending on April
19, 1996, were 0.820, 0.790, 0.775, 0.762, 0.740, 0.736, 0.762 and 0.770,
respectively.
Morgan Stanley also reviewed the averages of the Historical Trading Ratios
during each of the periods set forth in the preceding paragraph, excluding the
per share closing prices for Bell Atlantic Common Stock and NYNEX Common Stock
during the period between October 6, 1993 (the date five trading days prior to
the first public announcement of the proposed merger between Bell Atlantic and
Tele-Communications, Inc.), and March 2, 1994 (the date five trading days after
the public announcement that such proposed merger had been abandoned), and
compared such averages to the Exchange Ratio. This analysis showed that such
averages of the Historical Trading Ratios for the one-month, three-month,
six-month, one-year, two-year, three-year, four-year and five-year periods prior
to publication of the Merger Discussions Report were 0.760, 0.766, 0.752, 0.747,
0.728, 0.746, 0.775 and 0.773, respectively, and that such averages of the
Historical Trading Ratios for the corresponding periods ending on April 19,
1996, were 0.820, 0.790, 0.775, 0.762, 0.740, 0.742, 0.770 and 0.778,
respectively.
Stock Price Study. Morgan Stanley reviewed the per share daily closing
market price movements of NYNEX Common Stock and Bell Atlantic Common Stock for
the period beginning one trading day prior to the publication of the Merger
Discussions Report and ending on April 19, 1996, and compared such movements to
the movements during the same period of (i) the per share market prices of the
common stock of certain other companies involved primarily in the provision of
domestic and international telephony services (including wireless services),
consisting of Ameritech, BellSouth, GTE, and SBC (collectively, the "Telephony
Services Group"), (ii) the Standard & Poor's Industrials Index (the "S&P 400"),
and (iii) the per share market prices of the common stock of two other entities
involved primarily in the provision of domestic wireline local telephony
services but not wireless telephony services, PacTel and U S WEST Communications
Group (collectively, the "Wireline Services Group"). This analysis showed that,
during such period beginning one trading day prior to the publication of the
Merger Discussions Report, the per share market price of NYNEX Common Stock
increased by 6.8%, the largest increase of any of the securities or indices
analyzed, while at the same time Bell Atlantic Common Stock decreased by 5.3%.
The stock prices of the companies in the Telephony Services Group had declined
from 0.2% to 13.1% over the same period. The S&P 400 increased by 5.6% over the
same time period. The change in the stock prices of the companies in the
Wireline Services Group ranged from an increase of 0.7% to a decrease of 4.8%.
Trading Ratio Sensitivity Analysis. Morgan Stanley reviewed the per share
daily closing market price movements and trading ratios implied by the per share
daily closing market price of NYNEX Common Stock relative to that of Bell
Atlantic Common Stock on the fifth trading day prior to and after each of the
following: (i) the publication of the Merger Discussions Report, (ii) February
8, 1996, the date it was reported in The Wall Street Journal that the merger
discussions between NYNEX and Bell Atlantic had "cooled" (the "Cooling Off
Report") and (iii) April 1, 1996, when PacTel and SBC publicly announced that
they had entered into a definitive merger agreement (the "PacTel/SBC Report").
This analysis showed that during the periods beginning five trading days prior
to and ending five trading days after each of the Merger
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Discussions Report, the Cooling Off Report and the PacTel/SBC Report, the per
share market price of NYNEX Common Stock increased by 5.5%, decreased by 1.6%
and increased by 2.2%, respectively, and the per share market price of Bell
Atlantic Common Stock decreased by 0.8%, increased by 1.8% and decreased by
3.7%, respectively. This analysis also showed that on the fifth trading day
prior to and after each of the Merger Discussions Report, the Cooling Off Report
and the PacTel/SBC Report, the ratios of the per share daily closing market
prices of NYNEX Common Stock to those of Bell Atlantic Common Stock changed from
0.718 to 0.764, 0.777 to 0.751 and 0.791 to 0.839, respectively.
Selected Equity Research Analysts' Price Targets. Morgan Stanley reviewed
selected equity research analysts' forecasted target per share market prices for
NYNEX Common Stock and Bell Atlantic Common Stock prepared and published by
analysts at Dean Witter Reynolds Inc., Merrill Lynch & Co., Morgan Stanley and
Smith Barney Inc. and the ratios implied thereby, and compared such implied
ratios to the Exchange Ratio. In each case, such estimates were published for
NYNEX Common Stock and Bell Atlantic Common Stock by the same analyst on the
same day. This analysis showed implied ratios ranging from 0.740 to 0.831, with
a median implied ratio of 0.755 and a mean implied trading ratio of 0.769.
Implied Public Trading Valuation Analysis. Morgan Stanley estimated ranges
of theoretical public trading values of NYNEX Common Stock and Bell Atlantic
Common Stock by aggregating estimated ranges of theoretical public trading
values of various businesses and investments of each company, including: (i)
domestic telephone services (including local exchange services) and directory
publishing, (ii) domestic wireless communications services (including cellular,
paging and PCS), and (iii) other material businesses and investments. For each
of Bell Atlantic and NYNEX, after aggregating the ranges of theoretical public
trading values, subtracting net debt and dividing by the fully-diluted number of
shares outstanding (based on the treasury method), Morgan Stanley arrived at
estimated ranges of value for a share of NYNEX Common Stock and Bell Atlantic
Common Stock, respectively. Utilizing this methodology, the ratios implied by
comparing (i) the low end of the range of theoretical public trading values of
NYNEX Common Stock to the low end of the range of theoretical public trading
values of Bell Atlantic Common Stock was 0.758 and (ii) the high end of the
range of theoretical public trading values of NYNEX Common Stock to the high end
of the range of theoretical public trading values of Bell Atlantic Common Stock
was 0.758.
Morgan Stanley arrived at estimated ranges of theoretical public trading
values for the businesses and investments of NYNEX and Bell Atlantic by
reviewing certain historical and projected financial and operating information
for such businesses furnished to Morgan Stanley by NYNEX and Bell Atlantic,
respectively, or publicly available through company reports, equity research
analysts' reports or other sources. Such information included in various
instances historical and projected revenues, operating income, net income and
earnings before interest, taxes, depreciation and amortization ("EBITDA"), the
book value of various investments made by each company, as well as selected
operating statistics such as the number of lines in service, subscribers or
potential customers. Morgan Stanley's determination of the implied value of such
businesses was based on, among other things, a review of public market valuation
multiples for various companies, the public trading values of the companies in
which NYNEX or Bell Atlantic has made investments (to the extent available),
discussions with the managements of NYNEX and Bell Atlantic regarding the
prospects of such businesses, and Morgan Stanley's expertise in securities
valuation generally.
Contribution Analysis. Morgan Stanley performed an analysis of the ratio
of the price per share of NYNEX Common Stock to the price per share of Bell
Atlantic Common Stock implied by the relative contributions of NYNEX and Bell
Atlantic to the pro forma combined company with respect to the market equity
capitalizations as of April 19, 1996 (based on the treasury method) of NYNEX and
Bell Atlantic, and the historical market capitalizations of NYNEX and Bell
Atlantic based on the average per share daily closing market prices for NYNEX
Common Stock and Bell Atlantic Common Stock for the six-month period prior to
the Merger Discussions Report. This analysis yielded implied exchange ratios for
a share of NYNEX Common Stock to a share of Bell Atlantic Common Stock of 0.81
and 0.75, respectively.
Morgan Stanley also performed an analysis of the relative implied equity
contributions of NYNEX and Bell Atlantic to the pro forma combined company with
respect to 1995 historical and 1996 and 1997 projected consolidated operating
results (adjusted to include proportionate cellular results) based upon
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individual projections for each company as provided by the respective
managements of NYNEX and Bell Atlantic of (i) revenues, (ii) operating cash
flow, (iii) operating income and (iv) net income. In the case of (i), (ii) and
(iii) above, the implied equity contribution analysis was calculated on the
basis of each company's implied proportion of the combined aggregate market
value (excluding unconsolidated assets), less each company's respective net
debt, plus the estimated value of such company's other unconsolidated assets.
This analysis yielded implied exchange ratios of a share of NYNEX Common Stock
to a share of Bell Atlantic Common Stock with respect to (i) revenues of 0.83 in
1995, 0.83 in 1996 and 0.82 in 1997, (ii) operating cash flow of 0.76 in 1995,
0.78 in 1996 and 0.78 in 1997, and (iii) operating income of 0.74 in 1995, 0.73
in 1996 and 0.76 in 1997. In the case of (iv) above, the implied equity
contribution analysis was calculated on the basis of each company's implied
proportion of the combined equity market value. This analysis yielded implied
exchange ratios of a share of NYNEX Common Stock to a share of Bell Atlantic
Common Stock of 0.83 in 1995, 0.83 in 1996 and 0.83 in 1997.
Comparable Company Trading Multiples Analysis. Using publicly available
information regarding selected publicly-traded companies (the "Comparable
Companies"), Morgan Stanley performed a regression analysis in order to analyze
the relationship between (i) the ratio of the per share market price of the
common stock of each Comparable Company to the projected 1996 earnings per share
of such Comparable Company, and (ii) the forecasted five-year earnings per share
growth rate for such Comparable Company. Earnings per share and growth rate
estimates were obtained from Institutional Brokers Estimate System ("IBES"). The
Comparable Companies included in this analysis were: U S WEST Communications
Group, SBC, BellSouth, GTE and Ameritech. Using the estimated 1996 earnings per
share and five-year earnings per share growth rates for NYNEX and Bell Atlantic
obtained from IBES and applying the results of the regression analysis for the
Comparable Companies, Morgan Stanley estimated the price to 1996 earnings
multiple for a share of each of NYNEX Common Stock and Bell Atlantic Common
Stock that would be consistent with each stock's respective forecasted five-year
earnings per share growth rate. Using such estimated price to earnings multiples
and such estimates of 1996 earnings per share for NYNEX and Bell Atlantic,
Morgan Stanley calculated the implied price per share of NYNEX and that of Bell
Atlantic, respectively, and calculated the implied exchange ratio per share of
NYNEX Common Stock to a share of Bell Atlantic Common Stock using such prices
per share. This analysis yielded an implied exchange ratio of NYNEX Common Stock
to Bell Atlantic Common Stock of 0.796.
Synergies Analysis. Morgan Stanley performed an analysis of the potential
synergies projected jointly by the managements of NYNEX and Bell Atlantic to be
achieved from the Merger and estimated the implied present value of such
synergies to New Bell Atlantic and the holders of NYNEX Common Stock. The
synergies analysis assumed that the Merger would be consummated within one year
from the date of such analysis, that projected synergies in the form of cost
reductions and reduced capital expenditures would accrue equally over a
three-year period thereafter, with costs incurred by New Bell Atlantic on a
dollar for dollar basis to achieve such synergies in the year in which such
benefits are initially realized and that the costs and benefits of such
synergies would accrue to the benefit of the holders of Common Stock of New Bell
Atlantic. The present value of the projected synergies was calculated assuming a
discount rate on after-tax cash flow of 12%, an effective tax rate for the
combined company of 40%, and a range of capitalization multiples for the
projected synergies at the end of the fourth year following consummation of the
Merger ranging from 10.0x to 15.1x (the latter of which reflects the blended
price to earnings per share trading multiple as of April 19, 1996 for NYNEX
Common Stock and Bell Atlantic Common Stock based upon estimated 1996 earnings
per share for NYNEX and Bell Atlantic, respectively, obtained from IBES).
Assuming New Bell Atlantic achieves ultimate annual synergies of $900 million,
this analysis yielded an estimated present value of the projected synergies to
New Bell Atlantic ranging from $4.3 billion to $6.1 billion, and to holders of
NYNEX Common Stock ranging from $4.28 per share to $6.00 per share.
As a sensitivity analysis, Morgan Stanley also estimated the implied
present value of the potential synergies to New Bell Atlantic and the holders of
NYNEX Common Stock assuming New Bell Atlantic achieves annual synergies of $300
million and $600 million. Assuming NYNEX achieves ultimate annual synergies of
$300 million, this analysis yielded an estimated present value of the projected
synergies to New Bell Atlantic ranging from $1.4 billion to $2.0 billion, and to
the holders of NYNEX Common Stock
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ranging from $1.43 per share to $2.00 per share. Assuming New Bell Atlantic
achieves ultimate annual synergies of $600 million, this analysis yielded an
estimated present value of the projected synergies to NYNEX ranging from $2.9
billion to $4.1 billion, and to holders of NYNEX Common Stock ranging from $2.85
per share to $4.00 per share.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to a partial analysis or summary description. Morgan
Stanley believes that its analyses must be considered as a whole and that
selecting portions of its analyses, without considering the analyses taken as a
whole, would create an incomplete view of the process underlying the analyses
set forth in its opinions. In addition, Morgan Stanley considered the results of
all such analyses and did not assign relative weights to any of the analyses, 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
NYNEX, Bell Atlantic or New Bell Atlantic.
In performing its analyses, Morgan Stanley made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of NYNEX or Bell Atlantic.
The analyses performed by Morgan Stanley are not necessarily indicative of
actual values, which may be significantly more or less favorable than suggested
by such analyses. Such analyses were prepared solely as a part of the Original
Morgan Stanley Opinion. The analyses do not purport to be appraisals or to
reflect the prices at which a company might actually be sold. In connection with
the Morgan Stanley Updated Opinion, Morgan Stanley confirmed the appropriateness
of its reliance on the analyses used to render its Original Opinion by
performing procedures to update certain of such analyses and by reviewing the
assumptions on which such analyses were based and the factors considered in
connection therewith.
The NYNEX Board of Directors retained Morgan Stanley based upon its
experience and expertise. 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, competitive biddings, secondary distributions of listed and
unlisted securities, private placements and valuations for corporate and other
purposes. In the course of its market making and other trading activities,
Morgan Stanley may, from time to time, have a long or short position in, and may
buy and sell, securities of NYNEX and Bell Atlantic. In the past, Morgan Stanley
and its affiliates have provided financial advisory and financing services to
NYNEX and to Bell Atlantic and have received customary fees for the rendering of
these services.
Pursuant to a letter agreement dated April 15, 1996, NYNEX agreed to pay
Morgan Stanley a fee of $3.25 million, which was payable upon delivery of the
Original Morgan Stanley Opinion. In addition, NYNEX has agreed to reimburse
Morgan Stanley for its reasonable out-of-pocket expenses, including the
reasonable fees of its attorneys, incurred in connection with the services
provided by Morgan Stanley and to indemnify and hold harmless Morgan Stanley and
certain related parties to the full extent lawful from and against certain
liabilities and expenses, including certain liabilities under the federal
securities laws, incurred in connection with its engagement.
OPINION OF BELL ATLANTIC'S FINANCIAL ADVISOR
On April 21, 1996, Merrill Lynch delivered its opinion (the "Original
Merrill Lynch Opinion") to the Bell Atlantic Board that, as of that date and on
the basis of and subject to the matters set forth therein, the Original Bell
Atlantic Exchange Ratio, taking into account the Original NYNEX Exchange Ratio,
was fair from a financial point of view to the holders of Bell Atlantic Common
Stock. Such written opinion confirmed an oral opinion delivered to the Bell
Atlantic Board at its meeting on April 20, 1996. On July 2, 1996, Merrill Lynch
delivered a letter to the Bell Atlantic Board confirming that if, as of April
21, 1996, Merrill Lynch's analysis and review had been conducted with respect to
the Merger Agreement as then proposed to be amended, Merrill Lynch would have
concluded, as of April 21, 1996 and subject to the assumptions and
qualifications set forth in the opinion delivered on that date, that the
Exchange Ratio was fair from a financial point of view to Bell Atlantic and,
accordingly, to the holders of Bell Atlantic Common Stock. Such letter confirmed
a letter delivered to the Bell Atlantic Board on June 25, 1996. Merrill Lynch
subsequently
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delivered its written opinion (the "Updated Merrill Lynch Opinion") to the Bell
Atlantic Board that, as of September 9, 1996 and on the basis of and subject to
the matters set forth therein, the Exchange Ratio was fair from a financial
point of view to Bell Atlantic and, accordingly, to the holders of Bell Atlantic
Common Stock.
A COPY OF THE UPDATED MERRILL LYNCH OPINION, WHICH SETS FORTH THE
ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITS ON THE REVIEW UNDERTAKEN, IS
ATTACHED AS APPENDIX VI TO THIS JOINT PROXY STATEMENT/ PROSPECTUS AND IS
INCORPORATED HEREIN BY REFERENCE. THE SUMMARY OF THE UPDATED MERRILL LYNCH
OPINION SET FORTH IN THIS JOINT PROXY STATEMENT/PROSPECTUS IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THE FULL TEXT OF SUCH OPINION. STOCKHOLDERS OF BELL
ATLANTIC ARE URGED TO READ SUCH OPINION IN ITS ENTIRETY.
The assumptions and qualifications contained in the Updated Merrill Lynch
Opinion are substantially identical to those contained in the Original Merrill
Lynch Opinion, except that the Updated Merrill Lynch Opinion addressed the
transaction structure contemplated by the Merger Agreement, as amended, and the
Original Merrill Lynch Opinion addressed the Original Transaction. References
herein to the opinion of Merrill Lynch are, unless otherwise noted, references
to the Updated Merrill Lynch Opinion. Merrill Lynch also provided a written
presentation to the Bell Atlantic Board regarding financial and comparative
analyses performed by Merrill Lynch in connection with preparation of the
Original Merrill Lynch Opinion and discussed such analyses with the Bell
Atlantic Board at its April 20, 1996 meeting. A description of such presentation
is contained in this section of the Joint Proxy Statement/Prospectus. For
purposes of such description, "Bell Atlantic" refers to Bell Atlantic without
giving effect to the Merger, "Bell Atlantic Common Stock" refers to Bell
Atlantic Common Stock without giving effect to the Merger and references in such
presentation to exchange ratios are expressed as NYNEX/Bell Atlantic exchange
ratios.
Merrill Lynch's opinion is directed only to the fairness, from a financial
point of view, of the Exchange Ratio to Bell Atlantic and, accordingly, to the
holders of Bell Atlantic Common Stock, and does not constitute a recommendation
to any holder of Bell Atlantic Common Stock as to how such stockholder should
vote at the Bell Atlantic Special Meeting. The Exchange Ratio was determined
through negotiations between Bell Atlantic and NYNEX and was approved by their
respective Boards of Directors. See "The Merger -- Background of the Merger."
Merrill Lynch provided advice to Bell Atlantic during the course of such
negotiations, including advice with respect to the Exchange Ratio. No
limitations were imposed by the Bell Atlantic Board on the investigations made
or procedures followed by Merrill Lynch in rendering its opinion. Merrill Lynch
expressed no opinion as to the prices at which shares of New Bell Atlantic
Common Stock will trade following the consummation of the Merger or the prices
at which Bell Atlantic Common Stock or NYNEX Common Stock will trade between the
date of its opinion and the consummation of the Merger. Merrill Lynch's opinion
is necessarily based upon financial, economic, market and other conditions as
they existed and could be evaluated on the date of such opinion.
In arriving at its opinion, Merrill Lynch, among other things: (1) reviewed
for the five fiscal years ended December 31, 1995, the Annual Reports of NYNEX,
NYNEX's Annual Report on Forms 10-K and related financial information; (2)
reviewed for the five fiscal years ended December 31, 1995, the Annual Reports
of Bell Atlantic, Bell Atlantic's Annual Report on Forms 10-K and related
financial information; (3) reviewed certain other filings with the SEC made by
NYNEX and Bell Atlantic, respectively, since December 31, 1992; (4) reviewed
certain information furnished to Merrill Lynch by NYNEX and Bell Atlantic,
including the Two-Year Projections and the Projected Benefits; (5) reviewed
certain other information furnished to Merrill Lynch by Bell Atlantic for
purposes of its analyses, including the financial estimates prepared by Bell
Atlantic relating to NYNEX and Bell Atlantic for the ten-year period ending
December 31, 2005, as well as the cost savings and related expenses and
synergies expected to result from the Merger; (6) conducted discussions with
members of senior management of NYNEX and Bell Atlantic concerning their
respective businesses, regulatory environments, strategic objectives and
prospects and the strategic implications of and operational and financial
benefits anticipated from the Merger; (7) reviewed the historical market prices
and trading activity for NYNEX Common Stock and Bell Atlantic Common Stock and
compared them with those of certain publicly traded companies that Merrill Lynch
deemed to be reasonably similar to NYNEX and Bell Atlantic, respectively; (8)
compared the results of operations of NYNEX and Bell Atlantic with those of
certain companies that Merrill Lynch deemed to be reasonably similar to NYNEX
and Bell
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Atlantic, respectively; (9) compared the proposed financial terms of the Merger
with the financial terms of certain other business combinations that Merrill
Lynch deemed to be relevant; (10) considered the pro forma effect of the Merger
on the earnings, cash flow, consolidated capitalization and certain financial
ratios of Bell Atlantic; (11) reviewed the Merger Agreement; (12) reviewed the
Joint Proxy Statement/Prospectus in substantially the final form to be sent to
the stockholders of Bell Atlantic; and (13) reviewed such other financial
studies and analyses and performed such other investigations and took into
account such other matters as Merrill Lynch deemed necessary or appropriate for
purposes of its opinion, including its assessment of general economic, market
and monetary conditions.
In preparing its opinion, Merrill Lynch assumed and relied on the accuracy
and completeness of all information supplied or otherwise made available to it
by NYNEX and Bell Atlantic or made publicly available by NYNEX or Bell Atlantic,
and Merrill Lynch did not independently verify such information or undertake an
independent evaluation or appraisal of any of the assets or liabilities of NYNEX
or Bell Atlantic and Merrill Lynch was not furnished with any such evaluation or
appraisal. With respect to the Two-Year Projections and Projected Benefits
furnished by NYNEX and Bell Atlantic, Merrill Lynch assumed that they had been
reasonably prepared in accordance with accepted industry practice and reflect
the best currently available estimates and judgment of NYNEX's or Bell
Atlantic's management as to the expected future financial performance of NYNEX
or Bell Atlantic, as the case may be, as well as the cost savings expected to
result from the Merger. With respect to the ten-year estimates provided by Bell
Atlantic, Merrill Lynch assumed that they had been reasonably prepared in
accordance with accepted industry practice and reflect the best currently
available estimates and judgment of Bell Atlantic's management as to the
expected future financial performance of Bell Atlantic and NYNEX over such
period as well as the cost savings and related expenses and synergies expected
to result from the Merger. In addition, in rendering its opinion, Merrill Lynch
assumed that in the course of obtaining the necessary regulatory approvals for
the Merger, no restrictions, including any divestiture requirements, will be
imposed that will have a material adverse effect on the contemplated benefits of
the Merger. Merrill Lynch further assumed that the Merger will be accounted for
as a pooling of interests under generally accepted accounting principles and
will constitute a tax-free transaction for U.S. federal income tax purposes.
The following paragraphs contain a summary of certain financial and
comparative analyses performed by Merrill Lynch in connection with the
preparation of the Original Merrill Lynch Opinion as presented to the Bell
Atlantic Board at its April 20, 1996 meeting. Merrill Lynch reviewed and updated
such analyses in connection with its preparation of the Updated Merrill Lynch
Opinion. The summary does not purport to be a complete description of the
analyses conducted by Merrill Lynch. In addition, Merrill Lynch believes that
its analyses must be considered as a whole and that selecting portions of its
analyses and the factors considered by it, without considering all such factors
and analyses, could create an incomplete view of the processes underlying its
opinion. Merrill Lynch did not assign relative weights to any of its analyses in
preparing its opinion. The preparation of a fairness opinion is a complex
process and is not necessarily susceptible to partial analysis or summary
description. In performing its analyses, Merrill Lynch made numerous assumptions
with respect to industry performance, general business and economic conditions
and other matters, many of which are beyond the control of NYNEX and Bell
Atlantic. In addition, in preparing its opinion, Merrill Lynch made judgments
and estimates that it considered reasonable and appropriate under the
circumstances. Any estimates incorporated in the analyses performed by Merrill
Lynch are not necessarily indicative of actual past or future values or results,
which may be significantly more or less favorable than suggested by such
estimates or analyses. Because such estimates are inherently subject to
uncertainty, neither Merrill Lynch nor any other person assumes responsibility
for their accuracy. In addition, analyses relating to the value of businesses do
not purport to be appraisals and do not necessarily reflect the prices at which
businesses may be sold in the future or at which their shares of capital stock
may trade in the future.
Comparative Stock Price Performance. As part of its analysis, Merrill
Lynch reviewed the ratios of the daily closing market prices of NYNEX Common
Stock to the daily closing market prices of Bell Atlantic Common Stock, in each
case from January 4, 1993 through April 18, 1996. Such ratios may be summarized
as follows: (a) during 1993, a range of 0.639 to 0.851, with a mean of 0.765;
(b) during 1994, a range of 0.652 to 0.773, with a mean of 0.708; (c) during
1995, a range of 0.700 to 0.807, with a mean of 0.749; and
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(d) during 1996 (through April 18), a range of 0.729 to 0.863, with a mean of
0.786. Merrill Lynch noted a variety of significant news events that appeared to
have affected the respective stock prices for NYNEX Common Stock and Bell
Atlantic Common Stock, and hence the market exchange ratio, during late 1995 and
early 1996. In addition, Merrill Lynch reviewed the recent stock market
performance of Bell Atlantic and NYNEX and compared such performance with that
of a group of other companies that Merrill Lynch deemed to be reasonably similar
to Bell Atlantic and NYNEX. Such group comprised Ameritech, BellSouth, PacTel,
SBC, U S WEST (adjusted for the Media Group target stock transaction) and GTE
(collectively, the "Comparable Public Companies").
Public Comparables Analyses. Merrill Lynch calculated ranges of implied
NYNEX/Bell Atlantic exchange ratios based on the implied per share values for
NYNEX and Bell Atlantic resulting from the Public Market Intrinsic Value
Analysis, the Multiples Analysis and the P/E-to-Growth Analysis described in
this paragraph. Merrill Lynch first calculated the implied values of each major
business of NYNEX and Bell Atlantic (the "Public Market Intrinsic Value
Analysis"), based on (a) in the case of certain of such NYNEX and Bell Atlantic
businesses, the comparative analyses described in the immediately succeeding
paragraph, (b) the market price of investments by NYNEX or Bell Atlantic,
respectively, in certain such businesses and (c) the amount paid by NYNEX or
Bell Atlantic, respectively, for investments in certain such businesses. The
implied NYNEX/Bell Atlantic exchange ratios resulting from such Public Market
Intrinsic Value Analysis ranged from 0.733 to 0.809. Next, Merrill Lynch
calculated, with respect to the Comparable Public Companies, market values or
market capitalizations (defined as market value plus debt, preferred stock and
minority interests less cash and cash equivalents) as multiples of net income or
EBITDA and earnings before interest and taxes ("EBIT") of the Comparable Public
Companies for the twelve-month periods ended December 31, 1995 and 1996 (the
"Multiples Analysis"). The implied NYNEX/Bell Atlantic exchange ratios resulting
from the Multiples Analysis ranged from 0.831 to 0.931. Finally, Merrill Lynch
calculated, with respect to the Comparable Public Companies, ratios of (x)
estimated 1996 P/E ratios (based on analysts' estimates, as compiled by IBES, of
1996 earnings per share ("EPS") of the respective companies and on the April 18,
1996 closing market prices of the common stock of the respective companies) to
(y) estimated 5-year compound annual growth rates ("CAGR") for EPS (based on
analysts' estimates, as compiled by IBES) (the "P/E-to-Growth Analysis"). The
implied NYNEX/Bell Atlantic exchange ratios resulting from the P/E-to-Growth
Analysis ranged from 0.735 to 0.896.
In connection with the analyses referred to in clause (a) of the second
sentence of the immediately preceding paragraph and in connection with the
analyses referred to in clause (a) of the second sentence of the immediately
succeeding paragraph, Merrill Lynch calculated, with respect to NYNEX, Bell
Atlantic and each of the Comparable Public Companies: (a) P/E ratios (based on
analysts' estimates, as compiled by IBES, of 1996 earnings of the respective
companies and on the April 18, 1996 closing market prices of the common stock of
the respective companies), which ranged from 12.6 to 15.6, with a median
(excluding Pacific Telesis and U S WEST) of 14.9, and with NYNEX's estimated
1996 P/E ratio being 14.9 and Bell Atlantic's estimated 1996 P/E ratio being
15.0; (b) the ratios of such estimated 1996 P/E ratios to estimated total
returns of such companies (calculated as the sum of (i) estimates, as compiled
by IBES, of 5-year CAGR for EPS of the respective companies and (ii) the then
current dividend yields of the respective companies), which ratios ranged from
1.00 to 1.34, with NYNEX's ratio being 1.34 and Bell Atlantic's ratio being
1.21; (c) implied values ("Telco Implied Values") of their respective network
and directories businesses (the "Telco Businesses"); (d) Telco Implied Values
per access line (which ranged from $1,193 to $1,968); and (e) multiples of Telco
Implied Values to estimated EBITDA of the respective Telco Businesses for the
twelve-month period ended December 31, 1995 (which ranged from 4.2x to 5.6x).
Intrinsic Value Analysis -- Private Market Value Basis. Merrill Lynch
calculated a range of implied NYNEX/Bell Atlantic exchange ratios based on
implied per share values for NYNEX and Bell Atlantic resulting from the private
market intrinsic value analysis described in this paragraph (the "Private Market
Intrinsic Value Analysis"). Such implied per share values were based on implied
values, including assumed control premium, of each major business of NYNEX and
Bell Atlantic based on (a) in the case of certain of such NYNEX and Bell
Atlantic businesses, the comparative analyses described in the immediately
preceding paragraph, (b) the market price of publicly traded investments by
NYNEX or Bell Atlantic, as the
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case may be, in certain such businesses and (c) the amount paid by NYNEX or Bell
Atlantic, as the case may be, for investments in certain such businesses. The
implied NYNEX/Bell Atlantic exchange ratios resulting from such Private Market
Intrinsic Value Analysis ranged from 0.748 to 0.816.
Contribution Analysis. Merrill Lynch calculated ranges of implied
NYNEX/Bell Atlantic exchange ratios, based on the ratios of the contributions of
NYNEX and Bell Atlantic, respectively, to the number of access lines and to the
pro forma revenues, EBITDA, EBIT and net income of New Bell Atlantic for 1995,
adjusted for leverage, where appropriate (based on actual amounts for NYNEX and
Bell Atlantic and adjusted for the respective proportional interests in
revenues, EBITDA and EBIT of BANM) and for 1996-2001 (based on Bell Atlantic
management's estimates for NYNEX and Bell Atlantic and adjusted for the
respective proportional interests in the revenues, EBITDA and EBIT of BANM).
Based on the ratios of such contributions, the following ranges of implied
NYNEX/Bell Atlantic exchange ratios were calculated (the high and low point of
each such range corresponding to the respective years having the highest and
lowest implied NYNEX/Bell Atlantic exchange ratios): (a) with respect to access
lines, from 0.746 to 0.782; (b) with respect to revenues, from 0.779 to 0.882;
(c) with respect to EBITDA, from 0.779 to 0.843; (d) with respect to EBIT, from
0.749 to 0.825; and (e) with respect to net income, from 0.767 to 0.838.
Analysts' Market Price Forecasts. Merrill Lynch also reviewed forecasts by
certain analysts of the target market prices for NYNEX Common Stock and Bell
Atlantic Common Stock ("Forecasted Market Prices") for 1996. The average of such
Forecasted Market Prices for NYNEX was $51.90 (compared with the April 18, 1996
closing market price of $52.75) and for Bell Atlantic was $67.43 (compared with
the April 18, 1996 closing market price of $62.50). Merrill Lynch noted that (a)
based on such Forecasted Market Prices, the implied NYNEX/Bell Atlantic exchange
ratio ranged from 0.697 to 0.824, (b) the implied NYNEX/ Bell Atlantic exchange
ratio based on the average of such Forecasted Market Prices was 0.770 and (c)
the implied NYNEX/Bell Atlantic exchange ratio based on the April 18, 1996
closing market prices was 0.844.
Discounted Cash Flow Analysis. Merrill Lynch calculated a range of implied
NYNEX/Bell Atlantic exchange ratios, based on the implied per share values for
NYNEX and Bell Atlantic resulting from the discounted cash flow analysis
described in this paragraph (the "Discounted Cash Flow Analysis"). Such implied
per share values were based on estimates, prepared by management of Bell
Atlantic in connection with the Merger and the Merrill Lynch analyses, of
after-tax, unlevered free cash flow for each major business segment of NYNEX and
Bell Atlantic for the years 1996 through 2005 and the following ranges of
discount rates and ranges of 2005 EBITDA exit multiples applied to such business
segments: (a) for the Telco Business, a range of exit multiples from 4x to 5x
and a range of discount rates from 8% to 10%; (b) for the long distance
telephone business, a range of exit multiples from 4x to 6x and a range of
discount rates from 10% to 12%; and (c) for the cellular telephone business, a
range of exit multiples from 9x to 11x and a range of discount rates from 10% to
14%. The implied values of other major businesses of NYNEX and Bell Atlantic
were based on (x) the market price of publicly traded investments by NYNEX or
Bell Atlantic, as the case may be, in certain such businesses and (y) the amount
paid by NYNEX or Bell Atlantic, as the case may be, for investments in certain
such businesses. The implied NYNEX/Bell Atlantic exchange ratios resulting from
the Discounted Cash Flow Analysis ranged from 0.778 to 0.822.
Pro Forma Analysis of the Merger. Merrill Lynch compared Bell Atlantic
management's EPS estimates for Bell Atlantic from 1996 through 2001 to Bell
Atlantic management's estimates of pro forma EPS of New Bell Atlantic from 1996
through 2001, including estimated net synergies, but excluding transition costs.
In addition, Merrill Lynch compared Bell Atlantic management's estimates of
dividends per share ("DPS") for Bell Atlantic from 1996 through 2001 to Bell
Atlantic management's estimates of pro forma DPS of New Bell Atlantic from 1996
through 2001. Based on the foregoing, Merrill Lynch calculated that the total
return of New Bell Atlantic for pre-Merger stockholders of Bell Atlantic would
be 17.2% compared with the 14.7% estimated total return for Bell Atlantic. In
connection with these analyses, Merrill Lynch also calculated the total return
of (a) NYNEX, Bell Atlantic, New Bell Atlantic, each of the Comparable Public
Companies and MCI Communications, Sprint and AT&T based on analysts' estimates,
as compiled by IBES, of 5-year EPS CAGR for the respective companies (and, in
the case of New Bell Atlantic, Bell Atlantic management's estimates of net
synergies) and the then current dividend yields of the respective companies
(which total returns ranged from 11.2% to 13.7%, with NYNEX's being 11.2%, Bell
Atlantic's
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being 12.3% and New Bell Atlantic's being 14.6%) and (b) New Bell Atlantic,
based on Bell Atlantic management's estimates, including estimated net synergies
(a total return of 16.2%).
Hypothetical Share Price Analysis. Merrill Lynch calculated, for the
period from April 18, 1996 to April 18, 2001, as described in this paragraph:
(a) the implied future per share prices of New Bell Atlantic Common Stock after
giving effect to the Merger ("Implied New Bell Atlantic Share Prices") and (b)
the implied future per share prices for Bell Atlantic Common Stock ("Implied
Bell Atlantic Share Prices"). Based on hypothetical P/E ratios for New Bell
Atlantic ranging from the weighted average multiple for NYNEX and Bell Atlantic
to an increase of 1.0 above such weighted average and based on Bell Atlantic
management's estimates of net income for New Bell Atlantic (including net
synergies), Merrill Lynch calculated the following ranges of Implied New Bell
Atlantic Share Prices: for April 18, 1996, from $66 to $70 and for April 18,
2001, from $115 to $123. Based on Bell Atlantic's share price of approximately
$63 and implied P/E ratio as of April 18, 1996 and Bell Atlantic management's
estimates of net income for Bell Atlantic, Merrill Lynch calculated an Implied
Bell Atlantic Share Price for April 18, 2001 of $101.
Analysis of Potential Incremental Share Price Impact of the Merger. In
order to analyze the potential incremental impact of the Merger (taking into
account the net synergies estimated by Bell Atlantic management) on the market
price of shares of Bell Atlantic Common Stock, Merrill Lynch calculated ranges
of Implied New Bell Atlantic Share Prices using the methodologies for the Public
Market Intrinsic Value Analysis, the Private Market Intrinsic Value Analysis and
the Discounted Cash Flow Analysis described above and compared such ranges to
ranges of Implied Bell Atlantic Share Prices calculated using the same
methodologies. Merrill Lynch then calculated the following ranges for the
potential impact: (a) an increase based on the Public Market Intrinsic Value
Analysis of $5.24 to $8.25 (with the midpoint of such range corresponding to a
9.8% increase); (b) an increase based on the Private Market Intrinsic Value
Analysis of $5.54 to $8.85 (with the midpoint of such range corresponding to a
8.9% increase); and (c) an increase based on the Discounted Cash Flow Analysis
of $6.82 to $9.39 (with the midpoint of such range corresponding to a 8.8%
increase). Merrill Lynch also calculated the Implied New Bell Atlantic Share
Price based on the combined market value of NYNEX and Bell Atlantic plus the net
synergies forecasted by Bell Atlantic management and noted that the results of
such analysis showed an increase of $0 to $9.08 over the closing market price of
Bell Atlantic Common Stock on April 18, 1996 (with the midpoint of such range
corresponding to a 7.3% increase).
Analysis of Selected Stock-for-Stock Transactions. Merrill Lynch reviewed
the financial terms of 22 stock-for-stock transactions in excess of US$1 billion
announced since January 1993 in which the smaller company's stockholders would
own between 40% and 50% of the combined entity. Of the 22 stock-for-stock
transactions, Merrill Lynch calculated percentage premiums of offer values over
market values, as described below, for seven transactions having similar
characteristics to the Merger, including parties with a similar business mix to
each other, shared management and board control after consummation of the
transaction, a unique strategic fit and a very limited number of other strategic
partners available to the smaller company in each such transaction (the
"Comparable Transactions"): Sandoz AG/Ciba-Geigy AG; Kansas City Power &
Light/UtiliCorp United Inc.; WPL Holdings Inc./IES Industries; Chemical Banking
Corp./Chase Manhattan; NBD Bancorp/First Chicago Corp.; Wisconsin Energy
Corp./Northern States Power Co.; Martin Marietta Corp./Lockheed Corp. Merrill
Lynch calculated the high, mean and low percentage premiums/(discounts) of offer
values over market values one day prior, one week prior and one month prior to
the announcement date of each Comparable Transaction, to be as follows: (a) one
day prior, 19.2%, 6.3% and (3.0)%, respectively; (b) one week prior, 24.3%, 7.6%
and (1.8)%, respectively; and (c) one month prior, 26.1%, 9.5% and (0.6)%,
respectively. Merrill Lynch noted that the smaller company incurred EPS dilution
in over half of the Comparable Transactions and dividend dilution in three of
the seven Comparable Transactions. Merrill Lynch also noted that six of the
seven Comparable Transactions were effected using an exchange ratio that was
lower than the highest exchange ratio implied by the closing market prices of
the common stocks of the respective parties on each trading day during the
twelve month period prior to the announcement date of the respective Comparable
Transactions. Based on the premiums of offer values over market values for the
Comparable Transactions as described above and the closing market prices of
NYNEX and Bell Atlantic on April 18, 1996, Merrill Lynch calculated low, mean
and high implied NYNEX/Bell
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Atlantic exchange ratios, as follows: (a) one day prior, 0.819, 0.894 and 1.006,
respectively; (b) one week prior, 0.829, 0.903 and 1.049, respectively; and (c)
one month prior, 0.839, 0.918 and 1.064, respectively. None of the transactions
reviewed by Merrill Lynch in connection with these analyses is identical to the
proposed Merger and none of the parties to such transactions is identical to
NYNEX or Bell Atlantic. Accordingly, an analysis of the results of the foregoing
is not mathematical; rather, it involves complex considerations and judgments
concerning differences in financial and operating characteristics of the
relevant companies and differences in the relevant transactions.
As part of its investment banking business, Merrill Lynch engages
continually in the valuation of businesses and securities in connection with
mergers and acquisitions and strategic transactions and for other purposes. Bell
Atlantic selected Merrill Lynch as financial advisor because of its reputation
as an internationally recognized investment banking firm with substantial
experience in complex business combination transactions. Pursuant to an
engagement letter dated as of May 1, 1995 (the "Engagement Letter"), Bell
Atlantic has agreed to pay Merrill Lynch an aggregate fee equal to $30 million,
of which $1.5 million has already been paid and the remainder of which is
contingent upon the consummation of the Merger. The Engagement Letter also
provides that Bell Atlantic will reimburse Merrill Lynch for its reasonable
out-of-pocket expenses (including certain fees and disbursements of its legal
counsel) and will indemnify Merrill Lynch and certain related persons against
certain liabilities arising out of its engagement.
Merrill Lynch has, in the past, provided financial advisory and financing
services to Bell Atlantic and has received customary fees for the rendering of
such services. Merrill Lynch has also, in the past, provided financial advisory
and financing services to NYNEX and has received customary fees for the
rendering of such services. In addition, in the ordinary course of its business,
Merrill Lynch may actively trade in Bell Atlantic Common Stock, NYNEX Common
Stock and other securities of Bell Atlantic and NYNEX and their respective
affiliates for its own account and for the accounts of its customers and,
accordingly, may at any time hold a long or short position in such securities.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the respective recommendations of the Bell Atlantic Board
and the NYNEX Board with respect to the Merger, stockholders of Bell Atlantic
and stockholders of NYNEX should be aware that certain officers of Bell Atlantic
and NYNEX, including some officers who are also directors, have certain
interests in the Merger that are different from, or in addition to, the
interests of stockholders of Bell Atlantic and stockholders of NYNEX generally.
Four executive officers of Bell Atlantic, William O. Albertini, Lawrence T.
Babbio, Jr., James G. Cullen and Raymond W. Smith, were also members of Bell
Atlantic's 17-person Board of Directors when the Board approved the Merger. Two
executive officers of NYNEX, Frederic V. Salerno and Ivan G. Seidenberg, were
also members of NYNEX's 13-person Board of Directors when the Board approved the
Merger.
EMPLOYMENT AGREEMENT OF RAYMOND W. SMITH
Raymond W. Smith will serve as Chairman and as Chief Executive Officer of
New Bell Atlantic after the Effective Time pursuant to an employment agreement
(the "Smith Employment Agreement") to be dated as of the Effective Time.
Pursuant to the Smith Employment Agreement, Mr. Smith's employment as Chairman
and Chief Executive Officer of New Bell Atlantic will begin at the Effective
Time. Mr. Smith's employment as Chief Executive Officer will end on the later of
(a) one year following the Effective Time, but no later than December 31, 1998
or (b) July 1, 1998, or, in any case, on such earlier date as Mr. Smith ceases
to be the Chief Executive Officer of New Bell Atlantic for any reason (the
"Initial Period"). The Smith Employment Agreement also provides that Mr. Smith's
employment as Chairman of New Bell Atlantic will continue from the end of the
Initial Period and end on December 31, 1998, or such earlier date as he ceases
to be the Chairman of New Bell Atlantic for any reason (such period, if any, and
the Initial Period, together, the "Smith Employment Period").
Mr. Smith's base salary during the Smith Employment Period will be
determined by the New Bell Atlantic Board, but will not be less than his annual
base salary from Bell Atlantic as in effect at the Effective
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Time. In addition, the Smith Employment Agreement provides for (a) Mr. Smith's
participation in both short and long-term incentive compensation plans providing
him with the opportunity to earn in the aggregate at least as much as he had the
opportunity to earn in his capacity as Chairman and Chief Executive Officer of
Bell Atlantic prior to the Effective Time, (b) Mr. Smith's participation in all
applicable incentive, savings and retirement plans, practices, policies and
programs and in all benefits and perquisites of New Bell Atlantic to the same
extent as other senior executives or, subsequent to his retirement, to the same
extent as other then-retiring senior executives, (c) Mr. Smith's or his eligible
dependents' participation in, and receipt of benefits under, all applicable
welfare benefit plans, practices and policies of New Bell Atlantic, (d) Mr.
Smith's participation in all supplemental executive retirement plans such that
the aggregate value of retirement benefits that he and his beneficiaries would
receive at the end of the Smith Employment Period are not less than those that
would have been received under similar plans provided to him by Bell Atlantic
prior to the Effective Time, (e) the New Bell Atlantic Board to give
consideration to any impairment of compensation or awards caused by Mr. Smith's
agreement to retire at the end of the Smith Employment Period and, to the extent
that the New Bell Atlantic Board reasonably determines that such an impairment
has occurred, to undertake to eliminate such impairment on or prior to Mr.
Smith's retirement in such manner as it deems appropriate, (f) life insurance
coverage to Mr. Smith providing a death benefit of not less than five times his
base salary or a benefit of comparable value, and (g) the receipt of fringe
benefits by Mr. Smith that are of comparable value to those received by him from
Bell Atlantic prior to the Effective Time.
The Smith Employment Agreement is terminable by either party to the
agreement in certain circumstances. Mr. Smith is entitled to termination
benefits in certain circumstances, including, but not limited to (a)
participation as a retiree in all retirement benefit plans applicable to
similarly situated executives, (b) special cashout or annuity conversion of his
benefits under any supplemental executive retirement plans, (c) continuation of
salary and participation in short and long-term incentive compensation plans
through the Smith Employment Period as if such period had not been earlier
terminated, with awards based on the maximum amount achievable under the
performance range of his awards, (d) in lieu of additional grants of stock-based
incentive compensation, a cash payment equal to the fair market value of any
stock option and other stock-based awards that would otherwise have been
granted, (e) a cash payment equal to the sum of (i) the maximum value of any and
all company matching contributions or other company contributions which Mr.
Smith could have received under any defined contribution retirement plan and
(ii) the maximum value of the premiums to purchase employee welfare benefits
which Mr. Smith would have received in the form of company-paid benefits, which
Mr. Smith could have received until the end of the Smith Employment Period, (f)
no change in the vesting terms or exercisability of any restricted stock or
options outstanding which Mr. Smith received from Bell Atlantic prior to the
Effective Time, (g) full vesting of all options and restricted stock awards
granted to Mr. Smith after the Effective Time, the exercisability of which will
be for the maximum period provided under the original terms of such options or
restricted stock awards, and (h) an additional payment to compensate Mr. Smith
for any excise tax imposed on him by the Code.
Until January 1, 1999, Mr. Smith may not be removed from the positions
specified in the Smith Employment Agreement, nor may another person be elected
to such positions, without a three-quarters vote of the entire New Bell Atlantic
Board. The Amended Bell Atlantic Bylaws provide that a three-quarters vote of
the entire New Bell Atlantic Board shall be required to amend the Smith
Employment Agreement. See "Comparison of Stockholders' Rights."
EMPLOYMENT AGREEMENT OF IVAN G. SEIDENBERG
Ivan G. Seidenberg will serve as the sole Vice Chairman and as President
and Chief Operating Officer of New Bell Atlantic after the Effective Time until
such time as he shall succeed Raymond W. Smith as Chief Executive Officer and,
ultimately, Chairman of New Bell Atlantic pursuant to an employment agreement
(the "Seidenberg Employment Agreement") to be dated as of the Effective Time.
Pursuant to the Seidenberg Employment Agreement, Mr. Seidenberg's employment
term is comprised of two periods: the Initial Period which begins at the
Effective Time and ends on the later of (i) the first anniversary of the
Effective Time, but no later than December 31, 1998, or (ii) July 1, 1998, or,
in any case, on such earlier date as Mr. Smith
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ceases to be Chief Executive Officer of New Bell Atlantic for any reason; and
the "Secondary Period" which begins at the end of the Initial Period and ends on
the fourth anniversary of the Effective Time (the Initial Period and Secondary
Period are referred to collectively as the "Seidenberg Employment Period").
During the Secondary Period, Mr. Seidenberg will serve as the sole Vice
Chairman, Chief Executive Officer and President of New Bell Atlantic. Beginning
on the date that Mr. Smith ceases to be Chairman of New Bell Atlantic, but in no
event later than December 31, 1998, Mr. Seidenberg will also serve as Chairman
of New Bell Atlantic.
Mr. Seidenberg's base salary during the Seidenberg Employment Period will
be determined by the New Bell Atlantic Board, but will be no less than his
annual base salary from NYNEX as in effect at the Effective Time. In addition,
the Seidenberg Employment Agreement provides that Mr. Seidenberg will (a)
participate in both short-term and long-term incentive compensation plans that
will provide him the opportunity to earn in the aggregate on a year-to-year
basis at least as much as he had the opportunity to earn under the ordinary
annual grants under comparable plans of NYNEX prior to the Effective Time; (b)
be entitled to participate in all applicable incentive, savings, retirement
plans, practices, policies, and employee plans or programs and receive all
benefits and perquisites to the same extent as other senior executives of New
Bell Atlantic (or, subsequent to his retirement, to the same extent as other
then-retiring senior executives); (c) participate in, and receive benefits
under, all applicable welfare benefit plans, practices and policies of New Bell
Atlantic; (d) participate in all supplemental executive retirement plans such
that the aggregate value of retirement benefits that he and his beneficiaries
will receive at the end of the Seidenberg Employment Period are not less than
those he would have received had he continued through the end of the Seidenberg
Employment Period under plans provided to him by NYNEX prior to the Effective
Time; (e) continue to receive life insurance coverage comparable to his current
NYNEX split-dollar coverage; and (f) receive fringe benefits that are of
comparable value to those received by him from NYNEX immediately prior to the
Effective Time.
The Seidenberg Employment Agreement is terminable by either party to the
Agreement in certain circumstances. Mr. Seidenberg is entitled to severance
payments and benefits in certain circumstances including, but not limited to (a)
participation as a retiree in all retirement benefit plans applicable to
similarly situated executives, (b) cashout or conversion of his benefits under
any supplemental executive retirement plans and qualified defined benefit plans,
(c) continuation of salary and participation in short and long-term incentive
compensation plans equal to the maximum he would have been eligible to receive
through the Seidenberg Employment Period, as if such period had not been earlier
terminated, (d) in lieu of additional grants of stock-based incentive
compensation, a cash payment equal to the fair market value of any restricted
stock and other stock-based awards that would otherwise have been granted with
awards based on the maximum amount Mr. Seidenberg would have been eligible to
receive thereunder, (e) a cash payment equal to the sum of (i) the maximum value
of New Bell Atlantic matching contributions or other New Bell Atlantic
contributions which Mr. Seidenberg could have received under any defined
contribution retirement plan and (ii) the maximum value of the premiums to
purchase employee welfare benefits which Mr. Seidenberg would have received in
the form of company-paid benefits which he could have received until the end of
the Seidenberg Employment Period, (f) full vesting of stock options and
restricted stock awards granted at any time, the exercisability of which will be
for the maximum period provided under the terms of the New Bell Atlantic stock
option plan applicable to a senior executive who is eligible to retire, and (g)
an additional payment to compensate Mr. Seidenberg for any excise tax imposed on
him by the Code. Furthermore, the Seidenberg Employment Agreement provides that
if Mr. Seidenberg resigns for good reason (as defined in the Seidenberg
Employment Agreement, which includes the failure to appoint him to the positions
and in the manner specified therein), he will receive an additional amount equal
to the excess of (i) the remuneration earned by the Chairman and Chief Executive
Officer of New Bell Atlantic from the second anniversary of the Effective Time
(or, if earlier, the date on which a person other than Mr. Seidenberg was
appointed as successor to Mr. Smith as Chairman or Chief Executive Officer), to
the fourth anniversary of the Effective Time, over (ii) the remuneration which
Mr. Seidenberg earned while actively employed by New Bell Atlantic, or had the
right to earn under the Seidenberg Employment Agreement subsequent to his
termination during such term.
At the Effective Time, pursuant to the Seidenberg Employment Agreement, New
Bell Atlantic will assume the Executive Retention Agreement for the benefit of
Mr. Seidenberg, as restated in April 1996, the
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terms of which are described in "-- Agreements with Executive Officers of
NYNEX -- Executive Retention Agreements of NYNEX," below.
Until January 1, 1999, Mr. Seidenberg may not be removed from the positions
specified in the Seidenberg Employment Agreement, nor may another person be
elected to such positions, without a three-quarters vote of the entire New Bell
Atlantic Board. The Amended Bell Atlantic Bylaws provide that a three-quarters
vote of the entire New Bell Atlantic Board shall be required to amend the
Seidenberg Employment Agreement. See "Comparison of Stockholders' Rights."
EMPLOYMENT AGREEMENTS OF THE CURRENT VICE CHAIRMEN OF BELL ATLANTIC
In May 1995, Bell Atlantic entered into employment agreements with each of
Mr. Babbio and Mr. Cullen in order to provide for an efficient transition upon
any change in the Chief Executive Officer of Bell Atlantic. As described in Bell
Atlantic's 1996 Proxy Statement, these agreements provided certain incentives
for the executive to remain employed by Bell Atlantic for a "committed
employment period" ending on the earlier of July 1, 1998, or the second
anniversary of the election of a new Chief Executive Officer.
In June 1996, Bell Atlantic executed amendments to the May 1995 employment
agreements of each of Messrs. Babbio and Cullen. Those amendments reaffirm the
terms of the May 1995 agreement through the Effective Time, and provide an
incentive in the form of a bonus which is payable at the Effective Time if the
executive then remains an employee in good standing. The amount of that
incentive is substantially equal to one times "Pay," where Pay means the sum of
the executive's annual salary, plus his most recent short-term bonus award (or,
if greater, a bonus with a performance modifier equal to 150% of the target
award). Based upon projections of salaries and short-term bonus awards
applicable for Messrs. Babbio and Cullen under the amendments, the bonuses
payable to each at the Effective Time if each then remains an employee in good
standing would be approximately $1.5 million. If the Merger Agreement is
terminated, the executives would each be entitled to a payment substantially
equal to 25% of Pay.
Furthermore, in June 1996, Bell Atlantic and each of Messrs. Babbio and
Cullen entered into a new employment agreement (the "1996 Agreements") which
will supersede the amended May 1995 agreements, if and when the closing of the
Merger occurs. The 1996 Agreements provide: (i) stated salary increments at the
Effective Time and on the first anniversary of the Effective Time; (ii)
continuation of the executive's salary grade; (iii) an opportunity to receive a
cash incentive equal to two times Pay for special efforts relating to
integrating the two businesses if the executive remains an employee in good
standing on the first anniversary of the Effective Time; (iv) an opportunity to
earn a cash incentive equal to one times Pay if the executive remains an
employee in good standing on the second anniversary of the Effective Time; and
(v) two years of additional service credit for purposes of the early retirement
discount under Bell Atlantic's nonqualified pension plan if the executive
remains in service through at least July 1, 1998. If the executive is terminated
without cause, or is constructively discharged, during the period ending two
years after the Effective Time, the Company will provide the pension service
credit which would otherwise have been earned, will afford the executive an
opportunity to exercise outstanding stock options as though the executive had
been retained in active employment through the second anniversary of the
Effective Time, and will pay the executive a series of cash payments
representing the value of compensation, incentives and benefits which the
executive would have received during the remaining term of the agreement. A
substantial portion of such payments are conditioned upon the executive
refraining from competition with Bell Atlantic for 24 months following
termination of employment.
AGREEMENTS WITH OTHER EXECUTIVE OFFICERS OF BELL ATLANTIC
In order to provide incentives related to the closing of the Merger and the
integration of the companies, Bell Atlantic also entered into employment
agreements in June 1996 with four executive officers (including Messrs.
Albertini and Johnson). Each agreement provides incentives for the executive to
remain employed through the Effective Time and obligates the executive to comply
with certain non-compete and non-disclosure agreements. Each executive will be
entitled to an incentive payment substantially equal to one times Pay if the
executive is an employee in good standing at the Effective Time. Based upon
projections of applicable salary and short-term bonus award, the bonus payable
to Mr. Albertini at the Effective Time if he
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then remains an employee in good standing would be approximately $650,000. If
the Merger Agreement is terminated, the executive will be entitled to an
incentive payment substantially equal to 25% of Pay.
If the executive is terminated without cause prior to the second
anniversary of the Effective Time, the executive would be entitled to receive
the applicable incentive payment (if not previously received by him) and would
be entitled to receive the compensation which he would have been entitled to
receive had he remained employed through the second anniversary of the Effective
Time. If the executive remains in compliance with the non-compete and
non-disclosure covenants for 24 months following termination of employment, the
executive would also be entitled to post-separation payments in an aggregate
amount substantially equal to two times Pay. In addition, under those
circumstances, the executive would be entitled to exercise outstanding stock
options as though the executive had remained in active employment through the
second anniversary of the Effective Time. One executive will also be entitled to
(a) stated salary increments at the Effective Time and the first anniversary of
the Effective Time; and (b) two years of additional service credit for purposes
of the early retirement discount under Bell Atlantic's nonqualified pension plan
if the executive remains in service through the second anniversary of the
Effective Time.
Bell Atlantic also entered into agreements in June 1996 with each of its
remaining executive officers. Each agreement provides incentives for the
executive to remain employed through the Effective Time and obligates the
executive to comply with certain non-compete and non-disclosure agreements. Each
such executive officer will be entitled to the following benefits: (i) an
incentive payment substantially equal to 50% to 175% of salary if the executive
is an employee in good standing at the Effective Time; or (ii) an incentive
payment substantially equal to 25% of salary if the Merger Agreement is
terminated. In the event that any member of this group of executive officers is
terminated without cause prior to the second anniversary of the Effective Time,
that executive officer would be entitled to a post-separation payment
substantially equal to two times Pay, provided that the executive remains in
compliance with applicable non-compete and non-disclosure covenants for 24
months following termination of employment.
Bell Atlantic entered into the amendments to the May 1995 employment
agreements and the 1996 Agreements with Messrs. Babbio and Cullen and the other
employment agreements with the other executive officers of Bell Atlantic in
order to provide incentives to these executive officers to remain with Bell
Atlantic during the period of uncertainty created by the Merger and to assist
Bell Atlantic in completing the Merger and integrating the operations of Bell
Atlantic and NYNEX after the Merger.
AGREEMENTS WITH EXECUTIVE OFFICERS OF NYNEX
NYNEX Executive Officer Short Term Incentive Plan and NYNEX Senior
Management Short Term Incentive Plan. The NYNEX Executive Officer Short Term
Incentive Plan and the NYNEX Senior Management Short Term Incentive Plan (the
"Short Term Plans") provide executive officers with the opportunity to earn
incentive compensation based on two factors: (i) achievement of annual
performance goals; and (ii) return on equity (calculated based on stock price
growth and dividends paid over the previous twelve-month performance period)
compared to the returns generated by certain companies comparable to NYNEX.
Payment of an award will go into an account, one-half of which is distributed
after the end of each year and the balance is mandatorily deferred and credited
with interest based on the three-year average return on NYNEX Common Stock. The
account balance is paid out in full only upon the executive officer's retirement
or other termination from service. The Short Term Plans were amended as of April
21, 1996 to provide that if, during the first three months of an Award Year (as
defined in the Short Term Plans) (x) the Effective Time occurs or (y) an
executive is involuntarily terminated without cause by NYNEX or one of its
Subsidiaries as a result of the Merger which, in either case, would result in a
forfeiture under the Short Term Plans, there will be no forfeiture of an Award
(as defined in the Short Term Plans) and the amount of any outstanding Award
will be prorated to the date of the Effective Time or the executive's
termination. The Short Term Plans already provide for such result if the
Effective Time or such a termination occurs other than during the first three
months of an Award Year.
NYNEX Senior Management Long Term Incentive Plan. Under the NYNEX Senior
Management Long Term Incentive Plan (the "Long Term Plan"), executive officers
who are plan participants have the opportunity to earn incentive compensation
over a four-year performance period based on two factors, each
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accorded equal weight: (i) return to stockholders (calculated based on stock
price growth and dividends paid over a four-year performance period), as
compared with the returns generated by certain companies comparable to NYNEX,
and (ii) corporate achievement of strategic objectives (based on the NYNEX
Board's Committee on Benefits' assessment of management's effectiveness during
the four-year period in positioning NYNEX for future success). Awards are paid
at the completion of each performance period in a combination of cash and shares
of NYNEX Common Stock; however, a minimum of one-half of the value of the award
must be paid in NYNEX Common Stock.
No grants were made under the Long Term Plan in 1995 and 1996, and no
future grants are planned; however, payouts are expected to occur with respect
to the 1993-1996 and the 1994-1997 performance periods. The Long Term Plan was
amended by the NYNEX Board as of April 21, 1996 to provide that if, during any
performance period not yet completed (x) the Effective Time occurs or (y) an
executive is involuntarily terminated without cause by NYNEX or one of its
subsidiaries as a result of the Merger which, in either case, would result in a
forfeiture under the Long Term Plan, there shall be no forfeiture of any awards
thereunder and the awards with respect to all outstanding performance periods
shall be prorated to the date of the Effective Time or the executive's
termination. The Long Term Plan already provides for such result if an executive
is eligible to retire with a full service pension at termination of employment.
Stock Options and Stock Appreciation Rights of NYNEX. The Merger Agreement
provides that, at the Effective Time, each option granted by NYNEX to purchase
shares of NYNEX Common Stock which is outstanding and unexercised shall be
assumed by New Bell Atlantic and converted into an option to purchase Bell
Atlantic Common Stock in such amount and at such exercise price as is provided
below and otherwise having the same terms and conditions as are in effect
immediately prior to the Effective Time (except to the extent such terms,
conditions and restrictions may be altered in accordance with their terms as a
result of the transactions contemplated by the Merger Agreement). The number of
shares of Bell Atlantic Common Stock to be subject to the new option will be
equal to the product of (x) the number of shares of NYNEX Common Stock subject
to the original option and (y) the Exchange Ratio. The exercise price per share
of Bell Atlantic Common Stock under the new option will be equal to (x) the
exercise price per share of the NYNEX Common Stock under the original option
divided by (y) the Exchange Ratio. In addition, at the Effective Time, each SAR
with respect to NYNEX Common Stock which is outstanding and unexercised will be
converted into a SAR with respect to shares of Bell Atlantic Common Stock on the
same terms and conditions as are in effect immediately prior to the Effective
Time, adjusted in the same manner as outstanding options to purchase shares of
NYNEX Common Stock.
Pursuant to the existing terms of substantially all of the NYNEX stock
option plans, the Merger will result in each option and related SAR, whether or
not fully vested, becoming fully exercisable. Any option not exercised will be
assumed and converted into an immediately exercisable option to purchase Bell
Atlantic Common Stock on the terms described above.
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The following table sets forth information with respect to the number of
vested options and the acceleration of exercisability of options for (i) each of
the Executive Officers named in NYNEX's 1996 proxy statement for the annual
meeting of its stockholders, and (ii) all Executive Officers as a group. None of
the non-employee Directors of NYNEX has been granted any options to buy NYNEX
Common Stock.
<TABLE>
<CAPTION>
VALUE AT
NUMBER OF UNVESTED WEIGHTED AVERAGE AUGUST 30,
NUMBER OF VESTED NYNEX OPTIONS AT EXERCISE PRICE PER 1996 OF ALL
NYNEX OPTIONS AUGUST 30, 1996 WHICH SHARE OF VESTED NYNEX OPTIONS
AT AUGUST 30, BECOME EXERCISABLE AND UNVESTED EXERCISABLE AT
1996 AT THE EFFECTIVE TIME NYNEX OPTIONS EFFECTIVE TIME(1)
---------------- --------------------- ------------------ -----------------
<S> <C> <C> <C> <C>
Richard A. Jalkut......... 146,661 155,000 $41.86 $ 381,601
Donald B. Reed............ 57,020 100,814 43.39 0
Frederic V. Salerno....... 177,789 159,286 41.36 594,937
Ivan G. Seidenberg........ 55,223 208,900 44.52 0
Alan Z. Senter(2)......... 38,858 137,715 41.88 219,833
All Executive Officers
as a group.............. 939,559 1,486,359 42.60 1,273,607
</TABLE>
- ---------------
(1) Value is based upon the closing sale price for NYNEX Common Stock on the
NYSE on August 30, 1996 less the weighted average exercise price per share
of vested and unvested NYNEX Options. For a more recent quote of the closing
sale price of NYNEX Common Stock, see "Comparative Per Share Market Price
and Dividend Information."
(2) Resigned as Executive Vice President and Chief Financial Officer as of May
31, 1996. As a result of such resignation, Richard W. Blackburn, President
and Group Executive of NYNEX Worldwide Communications and Media Group, is
now one of the five highest compensated executive officers of NYNEX. The
stock option information for Mr. Blackburn for purposes of the above table
is 70,378, 96,277, $42.44, and $114,159.
Executive Retention Agreements of NYNEX. A number of NYNEX executive
officers entered into retention agreements with NYNEX, effective January 3, 1994
(the "Executive Retention Agreements"). A retention award (the "Retention
Award"), consisting of a grant of restricted stock of NYNEX, was made to each
such executive officer at the time of entering into his respective Retention
Agreement.
The Executive Retention Agreements provide that in the event the executive
(i) voluntarily ends his employment with NYNEX with the consent of the Chairman
and Chief Executive Officer of NYNEX, (ii) is terminated by NYNEX without cause,
(iii) dies, or (iv) becomes totally disabled, the shares of restricted stock
granted to an executive in connection with a Retention Award will no longer be
restricted and, in addition, the executive (or his heirs) will receive a
severance payment pursuant to the NYNEX Executive Severance Pay Plan equal to
the monetary value of the Retention Award on the executive's last day of
employment.
On February 1, 1996, the Committee on Benefits of the NYNEX Board
authorized an additional severance payment to be paid to Executive Officers.
This additional severance payment will be equal to the balance on the
executive's last day of employment in an account which is credited with earnings
and losses based on the Global Balanced Fund investment option of the NYNEX
Savings Plan for Salaried Employees, but in no event will this severance payment
be less than three times annual base salary as of July 1, 1996 for Mr.
Seidenberg, and either two or one times annual base salary as of July 1, 1996
for other executives.
On April 21, 1996, the NYNEX Board authorized NYNEX to enter into new
retention agreements (the "Restated Agreements") with the parties to the
Executive Retention Agreements and certain other officers of NYNEX and its
subsidiaries. The Restated Agreements replace the Executive Retention Agreements
for those executives who execute the Restated Agreements. The Restated
Agreements provide the Retention Award and severance payments described above.
An executive is not eligible to receive benefits or payment under the Restated
Agreements if he has separated from active service for cause, has separated from
active service in connection with the sale or transfer of NYNEX or one of its
affiliates if within 60 days of such
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separation the transferee or purchaser hires or offers employment to such
executive, voluntarily terminates employment without the consent of the Chairman
and Chief Executive Officer of NYNEX, or has an employment agreement other than
the Restated Agreement with NYNEX or one of its subsidiaries. The Restated
Agreement also provides that in the event that any payment received or to be
received thereunder (including the Retention Award or the severance payments
described above) would be subject to any excise tax on an "excess parachute
payment" (in whole or in part) under Section 4999 of the Code, such payment
shall be reduced until no portion of such payment would be subject to the excise
tax, other than with respect to any such payment due to Mr. Seidenberg pursuant
to the Seidenberg Employment Agreement. If such individuals meet the
requirements for payment of the Retention Award and the additional severance as
described above, the number of shares and amount of severance (computed as of
August 30, 1996 and assuming no reduction due to the imposition of an excise tax
under section 4999 of the Code) which would be payable to each of Messrs.
Seidenberg, Salerno, Jalkut, Reed and Blackburn would be 10,921 and $2,762,818,
10,921 and $1,550,684, 10,318 and $1,463,564, 7,821 and $1,091,045, and 6,486
and $992,729, respectively.
NYNEX Discretionary Bonus. On April 21, 1996, the NYNEX Board approved a
discretionary bonus arrangement for officers who are actively employed by NYNEX
at the Effective Time. The NYNEX Board will determine the bonus, if any, to be
paid to Mr. Seidenberg, and delegated the authority to him to determine the
amount of the bonuses, if any, to be paid to each other officer. The actual
amount of each bonus will be based on achieving business objectives and the
extent to which the officer's efforts contribute to the completion of the
Merger. The bonus payable at the Effective Time to Mr. Seidenberg can range from
zero to 100% of annual base salary plus the maximum payout under the Short Term
Plans, to Messrs. Salerno and Jalkut and one other executive officer can range
from zero to 100% of annual base salary plus a portion of the maximum payout
under the Short Term Plans, to Messrs. Reed and Blackburn and certain other
executive officers can range from zero to 100% of annual base salary, and to all
other officers, including certain executive officers, can range from zero to 75%
of annual base salary. Based upon current salary and maximum payout under the
Short Term Plan, the bonus payable upon completion of the Merger to Mr.
Seidenberg could range from zero to $3.0 million and the bonus payable to Mr.
Salerno could range from zero to $1.06 million. The purpose of the bonus
arrangement is to retain key employees through the consummation of the Merger
and to help ensure the availability of their services to NYNEX and New Bell
Atlantic during the critical transition period and thereafter.
NYNEX Non-Employee Director Pension and Retainer Stock Plans. On December
21, 1995, the NYNEX Board amended the NYNEX Non-Employee Director Pension Plan
(the "Director Pension Plan") and adopted the NYNEX Corporation Non-Employee
Director Retainer Stock Plan (the "Director Retainer Plan") to increase the
portion of non-employee Director compensation that is paid in the form of NYNEX
Common Stock. These changes are designed to increase generally the portion of
non-employee Director compensation that is equity-based, thereby aligning the
Directors' interests more closely with those of the NYNEX Stockholders.
The Director Pension Plan was amended to terminate the accrual of future
benefits thereunder, effective August 1, 1996, based on a non-employee
Director's election made prior to February 1, 1996. Under the election, any
non-employee Director with at least five years' service was given the option to
convert the present value of his or her benefits under the Director Pension Plan
into NYNEX Common Stock. Directors making the conversion election are not
entitled to any other benefits under the Director Pension Plan. All non-employee
Directors who were eligible for the conversion in fact so elected. The present
value of the non-employee Directors' benefit was generally determined as of
August 1, 1996. Dr. Randolph W. Bromery retired from the Board prior to August
1, 1996 and the present value of his benefit under the Director Pension Plan was
determined as of his retirement date. With respect to each Director who made the
conversion election, the number of shares of NYNEX Common Stock determined upon
the conversion was deposited by NYNEX into a trust, which holds the Common
Stock, receives dividends thereon, reinvests such dividends in additional shares
of NYNEX Common Stock as soon as practicable after the receipt of such dividends
and, pending such reinvestment, invests the dividend proceeds in such manner as
the trustee deems appropriate. The Director shall have the authority to direct
the trustee's exercise of voting rights with respect to NYNEX Common Stock
credited to the Director's account, but shall have no other rights with respect
to such
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NYNEX Common Stock. The total number of shares of NYNEX Common Stock which may
be granted under the Director Pension Plan may not exceed 50,000, subject to
equitable adjustment by the Executive Committee of the NYNEX Board.
The Director Retainer Plan provides non-employee Directors with an
additional proprietary interest in NYNEX in a manner that is competitive with
compensation programs of other major corporations. Under the Retainer Plan, 250
shares of NYNEX Common Stock will be granted to each non-employee Director as
part of his or her annual retainer fee, provided that the initial grant for the
period July 1, 1996 through December 31, 1996 was 125 shares. In addition, (i)
50% of the balance of the non-employee Director annual retainer fee, as
determined from time to time by the NYNEX Board, will be paid automatically in
NYNEX Common Stock, and (ii) up to the remaining 50% of such annual retainer fee
and/or 100% of the Committee chairperson annual retainer fee may be paid in
NYNEX Common Stock at the non-employee Director's election. Each non-employee
Director may make a prospective election to defer the receipt of all or any
portion of the NYNEX Common Stock to be granted under the Director Retainer
Plan, which stock will be deposited by NYNEX into and held by a trust. The total
number of shares of NYNEX Common Stock that may be granted under the Director
Retainer Plan may not exceed 300,000, subject to equitable adjustment by the
Executive Committee of the NYNEX Board.
INDEMNIFICATION AND INSURANCE
New Bell Atlantic is required by the Merger Agreement to provide
indemnification and liability insurance arrangements for officers and directors
of NYNEX and Bell Atlantic. See "The Merger Agreement -- Indemnification and
Insurance."
THE MERGER AGREEMENT
GENERAL
The Merger Agreement contemplates the Merger of Merger Subsidiary with and
into NYNEX, with NYNEX surviving the Merger as a wholly-owned subsidiary of Bell
Atlantic. The Merger will become effective in accordance with the Certificate of
Merger to be filed with the Secretary of State of the State of Delaware. It is
anticipated that such filing will be made immediately after the Closing under
the Merger Agreement, which Closing, in turn, should occur as soon as
practicable after the last of the conditions precedent to the Merger set forth
in the Merger Agreement has been satisfied or waived. The Merger Agreement
obligates Bell Atlantic to have the shares of Bell Atlantic Common Stock to be
issued in connection with the Merger approved for listing on the NYSE, subject
to official notice of issuance, prior to the Effective Time. The following
description of the Merger Agreement is qualified by reference to the complete
text of the Merger Agreement, which is incorporated by reference herein and
attached hereto as Appendix I.
CONSIDERATION TO BE RECEIVED IN THE MERGER
At the Effective Time, (a) each issued and outstanding share of NYNEX
Common Stock (excluding shares held in the treasury of NYNEX or owned by Bell
Atlantic, but including shares held by employee stock ownership plans of NYNEX
or by certain consolidated subsidiaries of NYNEX in connection with financing
transactions) and all rights in respect thereof will be converted into the right
to receive 0.768 of a share of Bell Atlantic Common Stock, (b) each share of
NYNEX Common Stock owned by Bell Atlantic or held in the treasury of NYNEX will
be canceled and retired, and (c) each outstanding and unexercised option or
warrant to purchase shares of NYNEX Common Stock and each stock appreciation
right with respect to NYNEX Common Stock will be assumed by Bell Atlantic and
converted, as the case may be, into an option or warrant to purchase shares of
Bell Atlantic Common Stock or a stock appreciation right with respect to Bell
Atlantic Common Stock. The number of shares of Bell Atlantic Common Stock to be
subject to such new option, warrant or stock appreciation right will be
determined by multiplying the number of shares of NYNEX Common Stock subject to
the original option, warrant or stock appreciation right by the
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Exchange Ratio, and the exercise price with respect thereto will equal the
exercise price under the original option, warrant or stock appreciation right
divided by the Exchange Ratio. Such new option, warrant or stock appreciation
right will otherwise have the same terms and conditions in effect immediately
prior to the Effective Time except to the extent that such terms or conditions
change in accordance with their terms as a result of the transactions relating
to the Merger.
For a further discussion of the treatment of NYNEX stock options and other
employee benefit plans under the Merger Agreement, see "-- Certain Benefits
Matters" and "Interests of Certain Persons in the Merger."
EXCHANGE OF SHARES
Subject to the terms and conditions of the Merger Agreement, at or prior to
the Effective Time Bell Atlantic and NYNEX will jointly appoint an exchange
agent to effect the exchange of certificates representing shares of NYNEX Common
Stock for certificates representing shares of Bell Atlantic Common Stock (the
"Exchange Agent"). Bell Atlantic will from time to time deposit certificates
representing shares of Bell Atlantic Common Stock with the Exchange Agent for
conversion of shares as described above under "-- Consideration to be Received
in the Merger." Commencing immediately after the Effective Time, holders of
NYNEX Common Stock may surrender their certificates to the Exchange Agent (or,
if at the time of such surrender there is no Exchange Agent, to Bell Atlantic
directly). In exchange for such share certificates, holders will receive Bell
Atlantic Common Stock certificates representing such number of shares as
described under "-- Consideration to be Received in the Merger." Holders of
unexchanged shares of NYNEX Common Stock will not be entitled to receive any
dividends or other distributions payable by New Bell Atlantic until their
certificates are surrendered. Upon surrender, however, subject to applicable
laws, such holders will receive accumulated dividends and distributions, without
interest, together with cash in lieu of fractional shares.
No fractional shares of Bell Atlantic Common Stock will be issued to
holders of NYNEX Common Stock, except for shares held in the NYNEX Dividend
Reinvestment and Stock Purchase Plan. For each fractional share that would
otherwise be issued, the Exchange Agent will pay by check an amount equal to
either (a) a pro rata portion of the proceeds of the sale by the Exchange Agent
of shares of Bell Atlantic Common Stock representing the aggregate of all such
fractional shares, such sale to be executed by the Exchange Agent as promptly
after the Effective Time as, in the Exchange Agent's reasonable judgment, is
consistent with obtaining the best execution of such sales in light of
prevailing market conditions or, (b) if agreed to by Bell Atlantic and NYNEX at
their option prior to the Effective Time, the product obtained by multiplying
(i) the fractional share interest to which such holder would otherwise have been
entitled (after taking into account all shares of NYNEX Common Stock held at the
Effective Time by such holder) by (ii) the closing price for a share of Bell
Atlantic Common Stock on the NYSE Composite Transaction Tape on the first
business day immediately following the Effective Time.
NEW BELL ATLANTIC FOLLOWING THE MERGER
Headquarters. The Merger Agreement provides that the headquarters of New
Bell Atlantic will be located in New York, New York.
Board. The Merger Agreement provides that, at the Effective Time, the New
Bell Atlantic Board will consist of 22 members, eleven of whom initially will be
designated by the current Bell Atlantic Board from among the current members of
the Bell Atlantic Board and eleven of whom initially will be designated by the
NYNEX Board from among the current members of the NYNEX Board and the Boards of
NYNEX telephone companies. Up to six of the members of the New Bell Atlantic
Board may be employee directors, half employees of NYNEX and half employees of
Bell Atlantic. Membership on each of the committees of the Bell Atlantic Board
initially will consist of an equal number of designees of Bell Atlantic and
NYNEX. The Merger Agreement provides that Bell Atlantic's certificate of
incorporation and the Bell Atlantic bylaws will be amended and restated to
contain provisions governing the makeup of the New Bell Atlantic Board from and
after the Effective Time and until Raymond W. Smith ceases to be the Chairman of
New Bell
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Atlantic. During this period, the New Bell Atlantic Board and each Committee of
the New Bell Atlantic Board as constituted following each election of Directors
will consist of an equal number of persons who were directors of NYNEX or a
NYNEX telephone company on April 21, 1996 or persons designated by such persons
("NYNEX Directors") and persons who were directors of Bell Atlantic on April 21,
1996 or persons designated by such persons ("Bell Atlantic Directors"). If, at
any time during the period referred to in the immediately preceding sentence,
the number of NYNEX Directors and Bell Atlantic Directors serving, or that would
be serving following the next stockholders' meeting at which Directors are to be
elected as Directors of New Bell Atlantic or as members of any Committee of the
New Bell Atlantic Board, would not be equal, then, subject to the fiduciary
duties of the Board of Directors of New Bell Atlantic, the New Bell Atlantic
Board and the Nominating Committee thereof shall nominate for election at the
next stockholders' meeting at which Directors are to be elected such person or
persons as may be requested by the remaining NYNEX Directors (if the number of
NYNEX Directors is, or would otherwise become, less than the number of Bell
Atlantic Directors) or by the remaining New Bell Atlantic Directors (if the
number of Bell Atlantic Directors is, or would otherwise become, less than the
number of NYNEX Directors) to ensure that there shall be an equal number of
NYNEX Directors and Bell Atlantic Directors. See "Directors and Management of
Bell Atlantic Following the Merger -- Directors" and "-- Committees of the Board
of Directors."
Dividends. The Merger Agreement reflects the parties' intention that the
initial quarterly dividend per share of Bell Atlantic Common Stock following the
Merger will be at least equal to the dividend paid on each share of NYNEX Common
Stock for the last full fiscal quarter immediately preceding the date of the
Merger Agreement divided by the Exchange Ratio, which initial quarterly dividend
is expected to be $.77 per share, subject to approval and declaration by the New
Bell Atlantic Board.
CERTAIN CONDITIONS
Conditions of Each Party's Obligations to Effect the Merger. In addition
to stockholder approval, the obligation of each party to the Merger Agreement to
consummate the Merger is subject to the following: (a) no statute, rule,
regulation, executive order, decree or injunction shall have been enacted,
entered, promulgated or enforced by any court or governmental authority which
makes the Merger illegal or otherwise prohibits its consummation, or which
causes a Material Adverse Effect on NYNEX or Bell Atlantic (with or without
including its ownership of NYNEX), (b) any waiting period applicable to the
Merger under the HSR Act shall have expired or been terminated, (c) all material
authorizations, consents, orders or approvals of, or declarations or filings
with, and all expirations of waiting periods imposed by, any governmental body,
agency or official which are necessary for the consummation of the Merger shall
have been filed, have occurred or have been obtained, without imposition of any
condition, requirement, restriction or change of regulation or other action
which would reasonably be expected to either (i) have a Material Adverse Effect
on any of (A) NYNEX, (B) Bell Atlantic (either with or without including its
ownership of NYNEX after the Merger), (C) New York Telephone Company, (D) New
England Telephone and Telegraph Company, (E) Bell Atlantic's telephone company
subsidiaries operating in Pennsylvania, New Jersey and Delaware, taken as a
whole ("Bell Atlantic North"), or (F) Bell Atlantic's telephone company
subsidiaries operating in Maryland, Virginia, West Virginia and Washington,
D.C., taken as a whole ("Bell Atlantic South"), or (ii) prevent NYNEX and Bell
Atlantic from realizing in all material respects the economic benefits of the
transaction contemplated by the Merger Agreement, (d) the Registration Statement
of which this Joint Proxy Statement/Prospectus is a part shall have become
effective and no stop order suspending the effectiveness of the Registration
Statement or proceedings therefor shall be then threatened, initiated, or in
effect, (e) all required state securities or blue sky permits or approvals shall
have been received, (f) the Bell Atlantic Common Stock to be issued in the
Merger, as well as the Bell Atlantic Common Stock issuable upon exercise of
options for NYNEX Common Stock, shall have been duly approved for listing on the
NYSE subject to official notice of issuance, (g) each of NYNEX and Bell Atlantic
shall have received a letter from Coopers & Lybrand to the effect that the
transactions contemplated by the Merger Agreement qualify for pooling of
interests accounting treatment, (h) each of NYNEX and Bell Atlantic shall have
received all material third-party consents with respect to the transactions
contemplated by the Merger Agreement and (i) each of Bell Atlantic and NYNEX
shall have received opinions from their respective tax counsel as to certain tax
matters
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related to the contemplated transactions. The conditions to a party's
obligations to effect the Merger may be waived by the party entitled to assert
the condition.
Conditions to the Obligations of NYNEX. The obligation of NYNEX to effect
the Merger is further subject to all the following conditions: (a) the
representations and warranties of Bell Atlantic contained in the Merger
Agreement shall be true and correct as of the Effective Time with the same
effect as though made as of the Effective Time (except for changes contemplated
by the terms of the Merger Agreement) and except that, for purposes of
determining whether such condition is met, a representation and warranty shall
be deemed to be true and correct unless the failure of such representation and
warranty to be true would not result or reasonably be expected to result in a
Material Adverse Effect on NYNEX or Bell Atlantic (either with or without
including its ownership of NYNEX), (b) Bell Atlantic shall have performed or
complied in all material respects with all agreements, conditions and covenants
required by the Merger Agreement on or before the Effective Time, (c) NYNEX
shall have received an officers' certificate as to the matters set forth in the
immediately preceding subsections (a) and (b), (d) no shareholder rights plan
shall have been adopted by Bell Atlantic, (e) NYNEX shall have received Stock
Transfer Restriction Agreements from certain individuals affiliated with Bell
Atlantic, (f) Bell Atlantic shall have taken all actions necessary such that the
Certificate Amendment and the amendment and restatement of Bell Atlantic's
bylaws become effective not later than the Effective Time, and (g) at the
Effective Time, the composition of New Bell Atlantic's Board of Directors
complies with the requirements of the Merger Agreement.
Conditions to the Obligations of Bell Atlantic. The obligation of Bell
Atlantic to effect the Merger is further subject to all the following
conditions: (a) the representations and warranties of NYNEX contained in the
Merger Agreement shall be true and correct as of the Effective Time with the
same effect as though made as of the Effective Time (except for changes
contemplated by the terms of the Merger Agreement) and except that, for purposes
of determining whether such condition is met, a representation and warranty
shall be deemed to be true and correct unless the failure of such representation
and warranty to be true would result or reasonably be expected to result in a
Material Adverse Effect on NYNEX or Bell Atlantic (either with or without
including its ownership of NYNEX), (b) NYNEX shall have performed or complied in
all material respects with all agreements, conditions and covenants required by
the Merger Agreement on or before the Effective Time, (c) Bell Atlantic shall
have received an officers' certificate as to the matters set forth in the
immediately preceding subsections (a) and (b), (d) the rights issued pursuant to
the NYNEX rights agreement shall not have become non-redeemable, exercisable,
distributed or triggered pursuant to the terms of such agreement and would not
become so upon consummation of the transactions contemplated by the Merger
Agreement, and (e) Bell Atlantic shall have received Stock Transfer Restriction
Agreements from certain individuals affiliated with NYNEX.
"Material Adverse Effect" means any change in or effect on the business of
the referenced corporation or any of its subsidiaries that is or will be
materially adverse to the business, operations (including the income statement),
properties (including intangible properties), condition (financial or
otherwise), assets, liabilities or regulatory status of such referenced
corporation and its subsidiaries taken as a whole, but shall not include the
effects of changes that are generally applicable in (a) the telecommunications
industry, (b) the United States economy or (c) the United States securities
markets if, in any of (a), (b) or (c), the effect on NYNEX or Bell Atlantic,
determined without including its ownership of NYNEX after the Merger (as the
case may be), and its respective subsidiaries, taken as a whole, is not
disproportionate relative to the effect on the other and its subsidiaries, taken
as a whole. All references to Material Adverse Effect on Bell Atlantic or its
subsidiaries are deemed to refer only to Bell Atlantic and its subsidiaries
without including its ownership of NYNEX and its subsidiaries after the Merger
unless otherwise indicated.
CERTAIN REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains certain representations and warranties of
Bell Atlantic and NYNEX as to, among other things, due organization and good
standing, capitalization, ownership of subsidiaries and other investments,
corporate authority to enter into the contemplated transactions, recent reports
filed with the SEC, financial statements, tax matters, employee matters,
regulatory matters, information supplied for use in this Joint Proxy
Statement/Prospectus, contractual defaults, material changes or events,
litigation,
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violations of law, employee benefit plans, labor relations, environmental
matters, required Board and stockholder approvals, insurance, intellectual
property, material contracts, accounting matters, and conflicts with
organizational documents or certain material agreements.
TRANSITION PLANNING
Raymond W. Smith and Ivan G. Seidenberg, as Chief Executive Officers of
Bell Atlantic and NYNEX, respectively, jointly shall be responsible for
coordinating all aspects of transition planning and implementation relating to
the Merger and the other transactions contemplated by the Merger Agreement.
Until the Effective Time, Messrs. Smith and Seidenberg jointly shall (i) examine
various alternatives regarding the manner in which to best organize and manage
the businesses of Bell Atlantic and NYNEX after the Effective Time, and (ii)
coordinate policies and strategies with respect to regulatory authorities and
bodies, in all cases subject to applicable law.
CERTAIN COVENANTS
The Merger Agreement provides that, prior to the Effective Time, NYNEX,
Bell Atlantic, and their respective subsidiaries will each conduct its business
in the ordinary course consistent with past practices and will use commercially
reasonable efforts to preserve substantially intact its business organization,
to keep available the services of key officers, employees and consultants who
are integral to the operation of its business as presently conducted, and to
preserve its present relationships with significant customers and suppliers and
with other persons and entities with whom it has significant business
relationships. By way of amplification and without limiting the forgoing, the
Merger Agreement places restrictions on the ability of each of NYNEX and Bell
Atlantic to (a) issue or sell capital stock and related securities or grant
options therefor, (b) amend its charter or bylaws, (c) effect a stock split,
combination, or reclassification, (d) change its dividend, (e) repurchase or
redeem its stock, (f) make material acquisitions of, or investments in, other
entities, (g) make material dispositions of assets, (h) incur indebtedness, (i)
enter into derivative contracts, (j) increase employee compensation or severance
benefits, (k) make material changes in its accounting policies, (l) make
material capital expenditures, (m) adopt or amend employment or consulting
agreements or benefit plans, (n) enter into certain material contracts, and (o)
take any action which would affect or delay the receipt of required governmental
approvals or result in a material breach of contract or affect the accounting
treatment of the Merger.
The Merger Agreement contains certain other covenants including covenants
relating to the obtaining of pooling of interests accounting treatment for the
transactions contemplated by the Merger Agreement, preparation and distribution
of this Joint Proxy Statement/Prospectus, public announcements, mutual
notification of certain matters, access to information, and cooperation
regarding certain filings with governmental and other agencies and
organizations. In addition, the Merger Agreement contains a general covenant
requiring each of the parties thereto to use its commercially reasonable efforts
to effect the consummation of the Merger.
NO SOLICITATION OF TRANSACTIONS
The Merger Agreement provides that neither NYNEX, Bell Atlantic nor any of
their respective officers, directors, employees, financial advisors or agents
will, directly or indirectly, solicit, initiate, encourage (including by way of
furnishing information) or take any other action knowingly to facilitate any
inquiries or proposals which constitute or may reasonably be expected to lead to
an Acquisition Proposal (defined below), engage in any discussions or
negotiations relating thereto, or accept any Acquisition Proposal. This
prohibition does not apply, subject to the observance of certain notice,
confidentiality and other requirements, to certain discussions and negotiations
occurring prior to stockholder approval of the Merger Agreement relating to
Acquisition Proposals (i) that are financially superior to the transactions
contemplated by the Merger Agreement, (ii) in which the offeror has demonstrated
that the funds necessary for its Acquisition Proposal are reasonably likely to
be available and (iii) that the NYNEX Board or the Bell Atlantic Board, as the
case may be, concludes that it should consider in order to fulfill its fiduciary
duties to the stockholders of NYNEX or Bell Atlantic.
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"Acquisition Proposal" means a proposal or offer (other than by the other
party to the Merger Agreement) for a tender or exchange offer, merger,
consolidation or other business combination involving, NYNEX, Bell Atlantic, any
of their respective significant subsidiaries or telephone companies owned
respectively by them (collectively, the "Proposal Parties") or any proposal to
acquire in any manner a substantial equity interest in, or all or substantially
all the assets of, such Proposal Party; provided, however, that any proposal or
offer involving the acquisition by NYNEX or Bell Atlantic of an equity interest
in or assets of any person, whether by tender or exchange offer, merger,
consolidation or otherwise, which does not involve, directly or indirectly the
issuance of more than 15% of the then outstanding stock of NYNEX or Bell
Atlantic, as the case may be, shall not constitute an Acquisition Proposal.
CERTAIN BENEFITS MATTERS
Except as specifically set forth in the Merger Agreement (including
schedules thereto) or as mutually determined by NYNEX and Bell Atlantic, the
employee benefit plans covering present and former employees or directors of
each of NYNEX and Bell Atlantic and certain of their respective subsidiaries, or
their beneficiaries, or providing benefits to such persons in respect of
services provided to any such entity, including employee benefit plans within
the meaning of Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), deferred compensation bonuses, stock options,
restricted stock plans, incentive compensation, severance or change in control
agreements and any other material benefit arrangements or payroll practices
(collectively, "Benefit Plans") in effect as of April 21, 1996 will remain in
effect, subject to their terms, after the Effective Time with respect to the
classes of employees covered by such plans immediately prior to the Effective
Time. NYNEX Benefit Plans involving the issuance of options, stock appreciation
rights or restricted stock will be assumed by Bell Atlantic and converted into
options, stock appreciation rights or restricted stock of Bell Atlantic. See
"-- Consideration to be Received in the Merger" and "Interests of Certain
Persons in the Merger."
Except as specifically set forth in the Merger Agreement, with respect to
NYNEX Benefit Plans under which employees' interests are based upon the market
price of NYNEX Common Stock (but which interests do not constitute options),
such interests will, from and after the Effective Time, be based on Bell
Atlantic Common Stock in accordance with the Exchange Ratio. In addition, with
respect to NYNEX Benefit Plans which have entitlement or vesting terms based
upon the market price or value per share of NYNEX Common Stock, from and after
the Effective Time such market price or value per share entitlement or vesting
term will be adjusted by dividing it by the Exchange Ratio.
INDEMNIFICATION AND INSURANCE
For a period of six years following the Effective Time, (a) Bell Atlantic
will cause NYNEX to maintain in effect its current provisions regarding
indemnification of officers and directors contained in its charters and bylaws
(and in those of its subsidiaries) and any director, officer or employee
indemnification agreement with it or any of its subsidiaries, and (b) Bell
Atlantic will and will cause NYNEX to maintain in effect their respective
current policies (or policies of at least equal coverages and amounts) of
directors' and officers' liability insurance and fiduciary liability insurance
with respect to claims arising from facts or events which occurred on or before
the Effective Time, and (c) Bell Atlantic will and will cause NYNEX to indemnify
their respective directors and officers to the fullest extent permitted under
applicable law and its charters and bylaws. The indemnification obligations of
NYNEX will be guaranteed by Bell Atlantic from and after the Effective Time.
TERMINATION
Prior to the Effective Time, the Merger Agreement may be terminated by
NYNEX and Bell Atlantic by mutual consent, or by either of NYNEX or Bell
Atlantic if (a) the Merger has not been consummated on or before April 21, 1997
(the "Termination Date") (provided that the party wishing to terminate shall not
have prevented such consummation by failing to fulfill any of its obligations
under the Merger Agreement and provided further that if such consummation has
been prevented solely by the failure to receive certain regulatory approvals
then the Termination Date shall be extended to September 30, 1997), (b) a court
of
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competent jurisdiction or governmental, regulatory or administrative agency or
commission has issued an order, decree or ruling which has become final and
nonappealable, or taken any other action permanently to restrain, enjoin or
otherwise prohibit the transactions contemplated by the Merger Agreement, (c)
the other has breached or failed to comply in any material respect with any of
its obligations under the Merger Agreement or any representation or warranty
made by the other in the Merger Agreement is incorrect in any material respect,
and such breaches, failures, or misrepresentations are not cured within 30 days
of notice, and individually or in the aggregate would reasonably be expected to
result in a Material Adverse Effect on NYNEX or Bell Atlantic (with or without
including its ownership of NYNEX), (d) the parties are unable to realize, in all
material respects, the economic benefits that such parties contemplated
receiving from the Merger Agreement or a Material Adverse Effect occurs or an
event occurs which could reasonably be expected to result in a Material Adverse
Effect on NYNEX or Bell Atlantic (with or without its ownership of NYNEX), New
York Telephone Company, New England Telephone and Telegraph Company, Bell
Atlantic North or Bell Atlantic South, which relates to certain regulatory
matters set forth in the Merger Agreement and arises from an action by a state
or federal governmental body, agency or official which has become final and
nonappealable, (e) any other Material Adverse Effect occurs or an event occurs
which could reasonably be expected to result in a Material Adverse Effect on the
other or certain of the others' subsidiaries (which in the case of Bell Atlantic
will not include, after the Effective Time, its ownership of NYNEX), or, after
the Effective Time, New Bell Atlantic (including its ownership of NYNEX), (f)
the board of directors of the other resolves to or does withdraw or adversely
modify its approval or recommendation of the Merger Agreement or the Merger,
fails to reaffirm such approval or recommendation upon request, or approves or
recommends any acquisition of a material portion of its assets or any tender
offer for shares of its capital stock in each case by a third party (a
"Withdrawal"), (g) any of the required approvals of the stockholders of either
have not been obtained at a duly held meeting (including any adjournments
thereof), or (h) prior to the approval of the Merger Agreement by its
stockholders and upon five days' prior notice to the other if, as a result of an
Acquisition Proposal received by it from a third party, its board of directors
determines in good faith with the advice of counsel that its fiduciary
obligations require that it accept such Acquisition Proposal (provided that it
has and has caused its financial and legal advisers to negotiate with the other
to make such adjustments in the terms and conditions of the Merger Agreement as
would enable it to proceed with the transactions contemplated thereby).
TERMINATION FEES
Termination Fees Payable by NYNEX. The Merger Agreement obligates NYNEX to
pay to Bell Atlantic $200 million in cash (such amount, an "Initial Termination
Fee") if (a) (i) Bell Atlantic terminates the Merger Agreement because of either
a Withdrawal by NYNEX or NYNEX's failure to comply (and to cure such
non-compliance within 30 days' notice of the same) with certain Merger Agreement
covenants relating to the holding of a stockholders meeting, the solicitation of
proxies with respect to the NYNEX Proposal, and the filing of certain documents
with the Secretary of State of the State of Delaware, (ii) NYNEX terminates the
Merger Agreement prior to the approval of the NYNEX Proposal by the NYNEX
stockholders, upon NYNEX having received an Acquisition Proposal and the NYNEX
Board having concluded that its fiduciary obligations under applicable law
require that such Acquisition Proposal be accepted, or (iii) either party
terminates the Merger Agreement because of the failure of NYNEX to obtain
stockholder approval for the Merger Agreement and the transactions contemplated
thereby at a duly held stockholders' meeting, and (b) at the time of such
termination or prior to the meeting of the NYNEX stockholders there has been an
Acquisition Proposal involving NYNEX or certain of its significant subsidiaries
(whether or not such offer has been rejected or withdrawn prior to the time of
such termination or of the meeting). In addition, the Merger Agreement obligates
NYNEX to pay to Bell Atlantic an additional $350 million in cash if, within one
and one-half years following any such termination that required payment of an
Initial Termination Fee, NYNEX or one of its significant subsidiaries which was
the subject of such Acquisition Proposal (A) becomes a subsidiary (i.e.
ownership of more than 50% of its stock) of the person (or any of its
affiliates) that made the Acquisition Proposal occasioning the Initial
Termination Fee or another person which makes an Acquisition Proposal before or
within one hundred twenty days after a termination of the Merger Agreement
resulting in a Termination Fee (an "Offering Person"), or (B) accepts
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a written offer to consummate or consummates an Acquisition Proposal with such
person or any Offering Person.
Termination Fees Payable by Bell Atlantic. The Merger Agreement obligates
Bell Atlantic to pay to NYNEX an Initial Termination Fee if (a) (i) NYNEX
terminates the Merger Agreement because of either a Withdrawal by Bell Atlantic
or Bell Atlantic's failure to comply (and to cure such non-compliance within 30
days' notice of the same) with certain Merger Agreement covenants relating to
the holding of a stockholders meeting, the solicitation of proxies with respect
to the Bell Atlantic Proposal, and the filing of certain documents with the
Secretary of State of the State of Delaware, (ii) Bell Atlantic terminates the
Merger Agreement prior to the approval of the Bell Atlantic Proposal by the Bell
Atlantic stockholders, upon Bell Atlantic having received an Acquisition
Proposal and the Bell Atlantic Board having concluded that its fiduciary
obligations under applicable law require that such Acquisition Proposal be
accepted, or (iii) either party terminates the Merger Agreement because of the
failure of Bell Atlantic to obtain stockholder approval for the Merger Agreement
and the transactions contemplated thereby at a duly held stockholders' meeting,
and (b) at the time of such termination or prior to the meeting of the Bell
Atlantic stockholders there has been an Acquisition Proposal involving Bell
Atlantic or certain of its significant subsidiaries (whether or not such offer
has been rejected or withdrawn prior to the time of such termination or of the
meeting). In addition, the Merger Agreement obligates Bell Atlantic to pay to
NYNEX an additional $350 million in cash if, within one and one-half years
following any such termination that required payment of an Initial Termination
Fee, Bell Atlantic or one of its significant subsidiaries which was the subject
of such Acquisition Proposal (A) becomes a subsidiary (i.e. ownership of more
than 50% of its stock) of the person (or any of its affiliates) that made the
Acquisition Proposal occasioning the Initial Termination Fee or any Offering
Person, or (B) accepts a written offer to consummate or consummates an
Acquisition Proposal with such person or any Offering Person (or affiliate).
EXPENSES
Each of NYNEX and Bell Atlantic will bear its own costs and expenses
incurred in connection with the Merger Agreement and the transactions
contemplated thereby, except that the expenses incurred in connection with the
printing of this Joint Proxy Statement/Prospectus, as well as the filing fees
related thereto and any filing fee required in connection with the filing of
premerger notifications under the HSR Act, will be shared equally by NYNEX and
Bell Atlantic, and NYNEX will pay on behalf of NYNEX stockholders any Transfer
Taxes incurred as a result of a change of ownership of NYNEX.
THE SPECIAL MEETINGS
This Joint Proxy Statement/Prospectus is furnished in connection with the
solicitation of proxies (i) from the holders of Bell Atlantic Common Stock by
the Bell Atlantic Board for use at the Bell Atlantic Meeting and (ii) from the
holders of NYNEX Common Stock by the NYNEX Board for use at the NYNEX Meeting.
This Joint Proxy Statement/Prospectus and accompanying form of proxy are first
being mailed to the respective stockholders of Bell Atlantic and NYNEX on or
about September 18, 1996.
TIMES AND PLACES; PURPOSES
The Bell Atlantic Meeting will be held at Richmond's Landmark Theater, 6 N.
Laurel Street, Richmond, Virginia, on November 8, 1996, starting at 10:30 a.m.
local time. At the Bell Atlantic Special Meeting, the stockholders of Bell
Atlantic will be asked to consider and vote upon (i) the Bell Atlantic Proposal
and (ii) such other matters as may properly come before the Bell Atlantic
Meeting.
The NYNEX Meeting will be held at the Sheraton New York Hotel and Towers,
811 Seventh Avenue, New York, New York, on November 6, 1996, starting at 10:30
a.m., local time. At the NYNEX Meeting, the stockholders of NYNEX will be asked
to consider and vote upon (i) the NYNEX Proposal, and (ii) such other matters as
may properly come before the NYNEX Meeting.
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VOTING RIGHTS; VOTES REQUIRED FOR APPROVAL
Bell Atlantic. The Bell Atlantic Board has fixed the close of business on
September 9, 1996, as the Bell Atlantic Record Date. Only holders of record of
shares of Bell Atlantic Common Stock on the Bell Atlantic Record Date are
entitled to notice of and to vote at the Bell Atlantic Meeting. On the Bell
Atlantic Record Date, there were approximately 438 million shares of Bell
Atlantic Common Stock outstanding and entitled to vote at the Bell Atlantic
Meeting, held by approximately 887,000 stockholders of record.
Each holder of record, as of the Bell Atlantic Record Date, of Bell
Atlantic Common Stock is entitled to cast one vote per share. The presence, in
person or by proxy, of the holders of one-third of the outstanding shares of
Bell Atlantic Common Stock entitled to vote is necessary to constitute a quorum
at the Bell Atlantic Meeting. The affirmative vote, in person or by proxy, of
the holders of a majority of the shares of Bell Atlantic Common Stock
outstanding on the Bell Atlantic Record Date is required to approve and adopt
the Bell Atlantic Proposal.
NYNEX. The NYNEX Board has fixed the close of business on September 9,
1996, as the NYNEX Record Date. Only holders of record of shares of NYNEX Common
Stock on the NYNEX Record Date are entitled to notice of and to vote at the
NYNEX Meeting. On the NYNEX Record Date, there were approximately 454 million
shares of NYNEX Common Stock outstanding and entitled to vote at the NYNEX
Meeting, held by approximately 873,000 stockholders of record.
Each holder of record, as of the NYNEX Record Date, of NYNEX Common Stock
is entitled to cast one vote per share. The presence, in person or by proxy, of
the holders of a majority of the outstanding shares of NYNEX Common Stock
entitled to vote is necessary to constitute a quorum at the NYNEX Meeting. The
affirmative vote, in person or by proxy, of the holders of a majority of the
shares of NYNEX Common Stock outstanding on the NYNEX Record Date is required to
approve and adopt the NYNEX Proposal.
PROXIES
All shares of Bell Atlantic Common Stock and NYNEX Common Stock represented
by properly executed proxies received prior to or at the respective Bell
Atlantic Meeting or NYNEX Meeting, as the case may be, and not revoked, will be
voted in accordance with the instructions indicated in such proxies. If no
instructions are indicated on a properly executed returned proxy, such proxies
will be voted FOR the approval of the Bell Atlantic Proposal or the NYNEX
Proposal, as the case may be. A properly executed proxy marked "ABSTAIN,"
although counted for purposes of determining whether there is a quorum and for
purposes of determining the aggregate voting power and number of shares
represented and entitled to vote at the applicable Special Meeting, will not be
voted. Accordingly, since the affirmative vote of a majority of outstanding
shares is required for approval of each of the Bell Atlantic Proposal and the
NYNEX Proposal, a proxy marked "ABSTAIN" will have the effect of a vote against
such Proposals. Shares represented by "broker non-votes" (i.e., shares held by
brokers or nominees which are represented at a meeting but with respect to which
the broker or nominee is not empowered to vote on a particular proposal) will be
counted for purposes of determining whether there is a quorum at the applicable
Special Meeting. In accordance with NYSE rules, brokers and nominees are
precluded from exercising their voting discretion with respect to the approval
and adoption of either the Bell Atlantic Proposal or the NYNEX Proposal and
thus, absent specific instructions from the beneficial owner of such shares, are
not empowered to vote such shares with respect to the approval and adoption of
such proposals. Therefore, since the affirmative vote of a majority of the
aggregate voting power is required for approval of the Bell Atlantic Proposal
and the NYNEX Proposal, a "broker non-vote" with respect to either proposal will
have the effect of a vote against the Merger.
If a stockholder is a participant in Bell Atlantic's Dividend Reinvestment
and Stock Purchase Plan (the "Bell Atlantic DRSPP"), the proxy card represents
the number of full shares in such participant's plan account and will serve as
voting instructions for such shares. If a stockholder is a participant in Bell
Atlantic's 1976 Employee Stock Ownership Plan (the "Bell Atlantic ESOP"),
Savings Plan for Salaried Employees (the "Bell Atlantic SPSE"), or the Savings
and Security Plan (Non-Salaried Employees) (the "Bell Atlantic SSP"), the proxy
card will similarly serve as voting instructions for the trustees of those
plans, if accounts are registered in the same name. Shares in the Bell Atlantic
DRSPP and the Bell Atlantic ESOP cannot be
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voted unless the proxy card is signed and returned. If proxy cards representing
shares in the Bell Atlantic SPSE and the Bell Atlantic SSP are not executed and
returned, those shares will be voted by the trustee in the same proportion as
the shares for which executed proxy cards are returned by other participants in
those plans.
If a stockholder is a participant in NYNEX's Shareowner Dividend
Reinvestment and Stock Purchase Plan (the "NYNEX DRSPP"), the proxy card
represents the number of full shares in such participant's NYNEX DRSPP account
and will serve as voting instructions for such shares. For a stockholder who is
a participant in the NYNEX Corporation Savings Plan for Salaried Employees (the
"NYNEX SPSE") or the NYNEX Corporation Savings and Security Plan (Non-Salaried
Employees) (the "NYNEX SSP"), the proxy will similarly serve as voting
instructions for the trustee of those plans if accounts are registered in the
same name. If proxy cards representing shares in the NYNEX SPSE or the NYNEX SSP
are not executed and returned, those shares will be voted by the trustee in the
same proportion as the shares for which executed proxies are returned by other
participants in those plans.
The Bell Atlantic Board and the NYNEX Board are not currently aware of any
business to be acted upon at their respective Special Meetings other than as
described herein. If, however, other matters are properly brought before either
Special Meeting, or any adjournments or postponements thereof, the persons
appointed as proxies will have discretion to vote or act thereon according to
their best judgment. Such adjournments may be for the purpose of soliciting
additional proxies. Shares represented by proxies voting against the approval
and adoption of the Bell Atlantic Proposal or the NYNEX Proposal will be voted
against a proposal to adjourn the respective Special Meeting for the purpose of
soliciting additional proxies. Neither Bell Atlantic nor NYNEX currently intends
to seek an adjournment of its respective Special Meeting.
A stockholder may revoke his or her proxy at any time prior to its use by
delivering to the Secretary of Bell Atlantic or NYNEX, as the case may be, a
signed notice of revocation or a later-dated signed proxy or by attending the
applicable Special Meeting and voting in person. Attendance at the Bell Atlantic
Meeting or the NYNEX Meeting will not in itself constitute the revocation of a
proxy.
It is the policy of Bell Atlantic and NYNEX to keep confidential proxy
cards, ballots and voting tabulations that identify individual stockholders,
except where disclosure is mandated by law and in other limited circumstances.
The cost of solicitation of proxies will be paid by Bell Atlantic for Bell
Atlantic proxies and by NYNEX for NYNEX proxies. In addition to solicitation by
mail, arrangements will be made with brokerage houses and other custodians,
nominees and fiduciaries to send proxy material to beneficial owners; and Bell
Atlantic, or NYNEX, as the case may be, will, upon request, reimburse them for
their reasonable expenses in so doing. Bell Atlantic has retained Georgeson &
Company Inc. to aid in the solicitation of proxies and to verify certain records
related to the solicitation at a fee of $20,000 plus expenses. NYNEX has
retained Kissel-Blake Inc. to aid in the solicitation of proxies and to verify
certain records related to the solicitation at a fee of $21,000 plus expenses.
To the extent necessary in order to ensure sufficient representation at its
Special Meeting, Bell Atlantic or NYNEX may request by telephone or telegram the
return of proxy cards. The extent to which this will be necessary depends
entirely upon how promptly proxy cards are returned. Stockholders are urged to
send in their proxies without delay.
STOCKHOLDERS SHOULD NOT SEND IN ANY STOCK CERTIFICATES WITH THEIR PROXY
CARDS. A TRANSMITTAL FORM WITH INSTRUCTIONS FOR THE SURRENDER OF STOCK
CERTIFICATES FOR NYNEX COMMON STOCK WILL BE MAILED BY NEW BELL ATLANTIC TO
FORMER NYNEX STOCKHOLDERS AS SOON AS PRACTICABLE AFTER THE CONSUMMATION OF THE
MERGER.
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DIRECTORS AND MANAGEMENT OF BELL ATLANTIC FOLLOWING THE MERGER
DIRECTORS
The Merger Agreement provides that, immediately following the consummation
of the Merger, the New Bell Atlantic Board will have 22 members, 11 of whom will
be designated by Bell Atlantic and 11 of whom will be designated by NYNEX. It is
expected that, in addition to Raymond W. Smith and Ivan G. Seidenberg, the
Boards of each of Bell Atlantic and NYNEX will recommend two additional employee
Directors and eight non-employee Directors to serve as Directors of New Bell
Atlantic. The Amended Bell Atlantic Charter provides that the number of
Directors may be increased or reduced prior to the retirement of Raymond Smith
as Chairman of New Bell Atlantic only by the affirmative vote of three-quarters
of the entire New Bell Atlantic Board and thereafter by the majority of the Bell
Atlantic Board. See "The Merger Agreement -- New Bell Atlantic Following the
Merger -- Board."
COMMITTEES OF THE BOARD OF DIRECTORS
Pursuant to the Merger Agreement, membership on each of the committees of
the Bell Atlantic Board initially will consist of an equal number of designees
of NYNEX and Bell Atlantic. Committee structure and membership will be
determined by the New Bell Atlantic Board shortly after the completion of the
Merger. It is anticipated that the New Bell Atlantic Board will form an audit
committee, a compensation committee and a nominating committee, all of which
will be comprised entirely of non-employee directors.
COMPENSATION OF DIRECTORS
Directors who are employees of New Bell Atlantic will not receive any
compensation for service on the New Bell Atlantic Board. The specific terms of
the compensation to be paid to non-employee Directors of New Bell Atlantic have
not yet been determined. In order to more closely align the interests of
Directors and stockholders, it is expected that a significant portion of total
compensation to be paid to Directors of New Bell Atlantic will be based in
stock. The Director compensation for New Bell Atlantic is not expected to
include a pension plan.
The senior management team for New Bell Atlantic following the Merger is
expected to include the following individuals from Bell Atlantic and NYNEX:
<TABLE>
<S> <C>
Raymond W. Smith.................... Chairman and Chief Executive Officer
Ivan G. Seidenberg.................. Vice Chairman, President and Chief Operating
Officer
Lawrence T. Babbio, Jr.............. President and Chief Executive Officer,
Wireless and Global Enterprises
James G. Cullen..................... President and Chief Executive Officer, Telecom
Group
Richard A. Jalkut................... President and Chief Executive Officer, Network
Services
Frederic V. Salerno................. Executive Vice President -- Corporate Development
and Chief Financial Officer
</TABLE>
EXECUTIVE COMPENSATION
The New Bell Atlantic Board will rely on its compensation committee, which
will be composed of non-employee directors, to recommend the form and amount of
compensation to be paid to New Bell Atlantic's executive officers. For
information regarding employment agreements with certain of the above
individuals, see "Interests of Certain Persons in the Merger."
For information regarding compensation paid to executive officers of Bell
Atlantic and NYNEX, including the individuals named above, in 1995, see the 1996
Notice of Annual Meeting and Proxy Statement of Bell Atlantic and NYNEX,
respectively, the relevant portions of which are incorporated by reference into
the Bell Atlantic Form 10-K and the NYNEX Form 10-K for the year ended December
31, 1995.
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STOCK OWNERSHIP OF DIRECTORS, EXECUTIVE OFFICERS AND FIVE PERCENT STOCKHOLDERS
No director or executive officer is expected to own more than one percent
of the outstanding shares of Bell Atlantic Common Stock after giving effect to
the Merger. The directors and executive officers of New Bell Atlantic as a group
are expected to beneficially own less than 1.0% of the outstanding shares of
Bell Atlantic Common Stock after giving effect to the Merger. No person is
expected to beneficially own more than 5% of the outstanding shares of Bell
Atlantic Common Stock after giving effect to the Merger (based upon publicly
available information).
COMPARISON OF STOCKHOLDERS' RIGHTS
The rights of Bell Atlantic stockholders are currently governed by the
Delaware General Corporation Law (the "DGCL") and the certificate of
incorporation and bylaws of Bell Atlantic (the "Old Bell Atlantic Charter" and
the "Old Bell Atlantic Bylaws," respectively). The rights of NYNEX stockholders
are currently governed by the DGCL and the certificate of incorporation and
bylaws of NYNEX (the "NYNEX Charter" and the "NYNEX Bylaws," respectively). In
accordance with the Merger Agreement, at the Effective Time, Bell Atlantic will
amend and restate its certificate of incorporation and its bylaws. Accordingly,
upon consummation of the Merger, the rights of Bell Atlantic stockholders and
NYNEX stockholders who become stockholders of Bell Atlantic in the Merger will
be governed by the DGCL, the Amended Bell Atlantic Charter and the Amended Bell
Atlantic Bylaws. The following are summaries of certain differences between the
current rights of Bell Atlantic and NYNEX stockholders and those of Bell
Atlantic stockholders following the Merger.
The following discussions are not intended to be complete and are qualified
by reference to the DGCL, the Old Bell Atlantic Charter, the Old Bell Atlantic
Bylaws, the NYNEX Charter, the NYNEX Bylaws, the Amended Bell Atlantic Charter
and the Amended Bell Atlantic Bylaws. Copies of the Amended Bell Atlantic
Charter and the Amended Bell Atlantic Bylaws, in substantially the forms to be
adopted at the Effective Time, are attached to this Joint Proxy
Statement/Prospectus as Appendices II and III. Copies of the Old Bell Atlantic
Charter, the Old Bell Atlantic Bylaws, the NYNEX Charter, and the NYNEX Bylaws
are incorporated by reference herein and will be sent to holders of shares of
Bell Atlantic Common Stock and NYNEX Common Stock, respectively, upon request.
See "Where You Can Find More Information."
COMPARISON OF CURRENT BELL ATLANTIC STOCKHOLDER RIGHTS AND BELL ATLANTIC
STOCKHOLDER RIGHTS FOLLOWING THE MERGER
The rights of the holders of Bell Atlantic Common Stock will be
substantially the same under the DGCL and the Amended Bell Atlantic Charter and
Amended Bell Atlantic Bylaws as they were under the DGCL and the Old Bell
Atlantic Charter and Old Bell Atlantic Bylaws with the following exceptions.
Authorized Capital. The total number of authorized shares of capital stock
of Bell Atlantic is 1,525,000,000 shares, consisting of 12,500,000 shares of
Series Preferred Stock, par value $1.00 per share, 12,500,000 shares of Series
Preference Stock, par value $1.00 per share, and 1,500,000,000 shares of Bell
Atlantic Common Stock, par value $1.00 per share. The authorized capital of New
Bell Atlantic is as set forth under "Description of Bell Atlantic Capital Stock
Following the Merger -- Authorized Capital Stock." As a result of the
Certificate Amendment, the par value per share of the Bell Atlantic Common Stock
will be reduced from $1.00 to $.10.
Board of Directors. Bell Atlantic's Board currently consists of 15
directors, which number may be increased or decreased by resolution of the Board
pursuant to the Old Bell Atlantic Bylaws. The Amended Bell Atlantic Charter
provides for a Board of Directors consisting of 22 persons, which number may be
increased or decreased prior to the time that Mr. Smith has retired from his
position of Chairman of New Bell Atlantic (the "Retirement Date") only by the
vote of three-quarters of the entire New Bell Atlantic Board, and thereafter by
a majority of the entire New Bell Atlantic Board.
The Amended Bell Atlantic Bylaws provide that half of the total Board of
New Bell Atlantic shall be persons who were Bell Atlantic directors on April 21,
1996 or persons designated by such persons and half of
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<PAGE> 73
the total Board shall be persons who were directors of NYNEX or a NYNEX
telephone company on April 21, 1996 or persons designated by such persons. No
more than six members of the New Bell Atlantic Board may be employees of New
Bell Atlantic, and half of such employee directors shall be Bell Atlantic
Directors and half shall be NYNEX Directors. The New Bell Atlantic Board is
obligated by the Amended Bell Atlantic Bylaws to nominate at each stockholders'
meeting which occurs prior to the Retirement Date such designees, nominated by
the NYNEX Directors or the Bell Atlantic Directors, as may be necessary to
ensure that there shall be an equal number of Bell Atlantic Directors and NYNEX
Directors. Until the Retirement Date, vacancies in the Board may be filled only
by vote of the stockholders. The foregoing provisions of the Amended Bell
Atlantic Bylaws will be effective until further amended by three-quarters vote
of the entire Board of New Bell Atlantic.
Election of Officers. The Amended Bell Atlantic Bylaws provide that, until
January 1, 1999, the election of any person to the positions of Chairman, Vice
Chairman, President, Chief Executive Officer, or Chief Operating Officer other
than as contemplated by the Smith and Seidenberg Employment Agreements, or the
removal of Messrs. Smith or Seidenberg from any of such positions which they
then hold in accordance with such Employment Agreements, shall require the
affirmative vote of three-quarters of the entire Board of New Bell Atlantic.
Quorum for Stockholders' Meetings. To achieve a quorum at meetings of the
stockholders of New Bell Atlantic, the Amended Bell Atlantic Bylaws require the
presence of a majority of the outstanding shares of Bell Atlantic Common Stock.
The Old Bell Atlantic Bylaws only require the presence of one-third of the
outstanding shares of Bell Atlantic Common Stock to constitute a quorum at
meetings of the Bell Atlantic stockholders.
Consideration of Relevant Factors. The Amended Bell Atlantic Charter
contains a provision which expressly acknowledges that the Board of New Bell
Atlantic may give due consideration to all relevant factors when evaluating an
acquisition proposal with respect to New Bell Atlantic, which factors may
include the effects of such proposal on employees, customers, suppliers and
other affected persons, and the value of the consideration offered in the
acquisition proposal in relation to the Board's estimate of the then current
value of New Bell Atlantic in a freely negotiated transaction and the estimated
future value of New Bell Atlantic.
COMPARISON OF CURRENT NYNEX STOCKHOLDER RIGHTS AND BELL ATLANTIC STOCKHOLDER
RIGHTS FOLLOWING THE MERGER
Authorized Capital. The total number of authorized shares of capital stock
of NYNEX is 825,000,000 shares, par value $1.00 per share, consisting of
75,000,000 shares of series preferred stock, (the "NYNEX Preferred Stock"), and
750,000,000 shares of NYNEX Common Stock. The authorized capital of New Bell
Atlantic is as set forth under "Description of Bell Atlantic Capital Stock
Following the Merger -- Authorized Capital Stock."
Board of Directors. NYNEX's Board currently consists of 12 directors,
which number may be increased or decreased by the Board pursuant to NYNEX's
Bylaws. The Amended Bell Atlantic Charter provides for 22 directors, which
number may be increased or decreased by the vote of three-quarters of the entire
New Bell Atlantic Board (a majority of the entire New Bell Atlantic Board with
respect to any increase or decrease effective after the Retirement Date). The
NYNEX Charter provides that the number of directors shall be not less than nine
nor more than 19, the exact number of directors within such limits to be
determined by the NYNEX Board. The Amended Bell Atlantic Charter provides for
mandatory retirement of directors upon reaching 70 years of age; the NYNEX
Charter does not contain a comparable provision, although the NYNEX Board
currently has such a policy in effect. Under the Amended Bell Atlantic Bylaws,
the presence of one-third of the total number of directors is necessary to
constitute a quorum at any meeting. Under the NYNEX Bylaws, the presence of a
majority of the directors then in office is necessary to constitute a quorum at
any meeting.
The Amended Bell Atlantic Bylaws provide that half of the total Board of
New Bell Atlantic shall be Bell Atlantic Directors and half of the total Board
shall be NYNEX Directors. No more than six members of the New Bell Atlantic
Board may be employees of New Bell Atlantic, and half of such employee directors
shall
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<PAGE> 74
be Bell Atlantic Directors and half shall be NYNEX Directors. The New Bell
Atlantic Board is obligated by the Amended Bell Atlantic Bylaws to nominate at
each stockholders' meeting which occurs prior to the Retirement Date such
designees, nominated by the NYNEX Directors or the Bell Atlantic Directors, as
may be necessary to ensure that there shall be an equal number of Bell Atlantic
Directors and NYNEX Directors. Until the Retirement Date, vacancies in the board
may be filled only by vote of the stockholders. The foregoing provisions of the
Amended Bell Atlantic Bylaws will be effective until further amended by three-
quarters vote of the entire Board of New Bell Atlantic.
Election of Officers. The Amended Bell Atlantic Bylaws provide that, until
January 1, 1999, the election of any person to the positions of Chairman, Vice
Chairman, President, Chief Executive Officer, or Chief Operating Officer other
than as contemplated by the Smith and Seidenberg Employment Agreements, or the
removal of Messrs. Smith or Seidenberg from any of such positions which they
then hold in accordance with such Employment Agreements, shall require the
affirmative vote of three-quarters of the entire Board of New Bell Atlantic.
Removal of Directors. Under the NYNEX Charter, a director can only be
removed for cause and only by the affirmative vote of the holders of
three-quarters of the outstanding shares of NYNEX Common Stock. The Amended Bell
Atlantic Charter and Amended Bell Atlantic Bylaws do not contain any provisions
with respect to the removal of directors and, therefore, removal of New Bell
Atlantic directors will be governed by the DGCL. Pursuant to Section 141 of the
DGCL, directors may be removed, with or without cause, by the affirmative vote
of the holders of a majority of the outstanding shares entitled to vote in the
election of directors.
Classified Board. The NYNEX Charter establishes three classes of
directors, with each director elected for a term expiring at the third
succeeding annual meeting of stockholders after his or her election. The New
Bell Atlantic Board will not be divided into separate classes. Each director
will serve until the next annual meeting of stockholders after his or her
election.
Absence of Rights Plan. In 1989, NYNEX entered into the NYNEX Rights
Agreement, which has been amended to not apply to the Merger. New Bell Atlantic
will not have an effective rights plan following the Merger.
Supermajority Vote Requirement. The NYNEX Charter requires certain
transactions with a holder of ten percent or more of NYNEX's outstanding voting
securities (a "Ten Percent Holder") to be approved by the vote of three-quarters
of the outstanding voting securities of NYNEX. These transactions include any
merger or consolidation with a Ten Percent Holder, any sale, lease or other
transfer or disposition of assets with a value in excess of $50,000,000 to a Ten
Percent Holder, the issuance of equity securities to a Ten Percent Holder, the
adoption of any plan or proposal for the liquidation or dissolution of NYNEX or
any spin-off or split-up of any kind proposed by or on behalf of a Ten Percent
Holder, or any reclassification or recapitalization of NYNEX the effect of which
would increase the percentage of outstanding NYNEX equity securities owned by a
Ten Percent Holder. The Amended Bell Atlantic Charter and Amended Bell Atlantic
Bylaws do not contain any supermajority approval requirements.
Prohibition on Payment of Greenmail. The NYNEX Charter contains a
provision requiring that any purchase by NYNEX of shares of any class of equity
securities from any beneficial owner of 5% or more of NYNEX's outstanding
capital stock traded on a national securities exchange or on the NASDAQ National
Market must first be approved by the affirmative vote of holders of a majority
of outstanding shares of such stock not owned by such person. The Amended Bell
Atlantic Charter and Amended Bell Atlantic Bylaws do not contain any similar
provisions.
Special Meetings of Stockholders. Pursuant to Section 211 of the DGCL,
special meetings of stockholders may be called at the request of the
stockholders of a corporation provided such right is contained in the charter or
bylaws of the corporation. The NYNEX Bylaws permit special meetings of the
stockholders of NYNEX to be called by the holders of two-thirds of the
outstanding NYNEX Common Stock. The Amended Bell Atlantic Charter and Amended
Bell Atlantic Bylaws do not contain any provision granting stockholders the
right to call special meetings and, therefore, stockholders of New Bell Atlantic
will not have the right to call special meetings of the stockholders.
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<PAGE> 75
DESCRIPTION OF BELL ATLANTIC CAPITAL STOCK FOLLOWING THE MERGER
The summary of the terms of the capital stock of New Bell Atlantic set
forth below does not purport to be complete and is qualified by reference to the
Amended Bell Atlantic Charter and Amended Bell Atlantic Bylaws. Copies of the
Amended Bell Atlantic Charter and Amended Bell Atlantic Bylaws, in substantially
the forms to be adopted immediately prior to the Effective Time, are attached as
Appendices II and III.
AUTHORIZED CAPITAL STOCK
Under the Amended Bell Atlantic Charter, the total number of shares of all
classes of stock that New Bell Atlantic has authority to issue is 2,500,000,000
shares, par value $.10 per share, of which 2,250,000,000 are shares of Bell
Atlantic Common Stock and 250,000,000 are shares of Bell Atlantic Series
Preferred Stock ("Bell Atlantic Series Preferred Stock").
COMMON STOCK
Subject to any preferential rights of the Bell Atlantic Series Preferred
Stock, holders of shares of Bell Atlantic Common Stock will be entitled to
receive dividends on such stock out of assets legally available for distribution
when, as and if authorized and declared by the New Bell Atlantic Board and to
share ratably in the assets of Bell Atlantic legally available for distribution
to its stockholders in the event of its liquidation, dissolution or winding-up.
New Bell Atlantic will not be able to pay any dividend or make any distribution
of assets on shares of Bell Atlantic Common Stock until cumulative dividends on
shares of Bell Atlantic Series Preferred Stock then outstanding, if any, having
dividend or distribution rights senior to the Bell Atlantic Common Stock have
been paid. See "The Merger Agreement -- New Bell Atlantic Following the Merger"
with respect to the anticipated initial quarterly dividend on the Bell Atlantic
Common Stock.
Holders of Bell Atlantic Common Stock will be entitled to one vote per
share on all matters voted on generally by the stockholders, including the
election of directors, and, except as otherwise required by law or except as
provided with respect to any series of Bell Atlantic Series Preferred Stock, the
holders of such shares will possess all voting power. The Amended Bell Atlantic
Charter does not provide for cumulative voting for the election of directors.
The shares of Bell Atlantic Common Stock, when issued to holders of
outstanding shares of NYNEX Common Stock in connection with the Merger, will be
validly issued, fully paid and non-assessable.
Holders of Bell Atlantic Common Stock will have no preferences or
preemptive, conversion, or exchange rights.
SERIES PREFERRED STOCK
The Bell Atlantic Board is authorized at any time and from time to time to
provide for the issuance of all or any shares of the Bell Atlantic Series
Preferred Stock in one or more classes or series, and to fix for each such class
or series such voting powers, full or limited, or no voting powers, and such
distinctive designations, preferences and relative, participating, optional or
other special rights and such qualifications, limitations or restrictions
thereof as are permitted by the DGCL, including, but not limited to, the
authority to provide that any such class or series be (a) subject to redemption
at such time or times and at such price or prices; (b) entitled to receive
dividends (which may be cumulative or non-cumulative) at such rates, on such
conditions, and at such times, and payable in preference to, or in such relation
to, the dividends payable on any other class or classes or any other series; (c)
entitled to such rights upon the dissolution of, or upon any distribution of the
assets of, Bell Atlantic; or (d) convertible into, or exchangeable for, shares
of any class or classes of stock, or other securities or property, of Bell
Atlantic at such price or prices or at such rates of exchange and with such
adjustments; all as the Board determines by resolution. As of the date hereof,
no shares of Bell Atlantic Series Preferred Stock are outstanding.
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PREEMPTIVE RIGHTS
No holder of any shares of any class of stock of New Bell Atlantic will
have any preemptive or preferential right to acquire or subscribe for any
unissued shares of any class of stock or any authorized securities convertible
into or carrying any right, option or warrant to subscribe for or acquire shares
of any class of stock.
TRANSFER AGENT AND REGISTRAR
The principal transfer agent and registrar for Bell Atlantic Common Stock
after the Merger will be designated by Bell Atlantic and NYNEX prior to the
completion of the Merger.
STOCK EXCHANGE LISTING; DELISTING AND DEREGISTRATION OF NYNEX COMMON STOCK
It is a condition to the Merger that the shares of Bell Atlantic Common
Stock issuable in connection with the Merger be approved for listing on the NYSE
upon official notice of issuance. If the Merger is consummated, NYNEX Common
Stock will cease to be listed on the NYSE and the other exchanges on which such
securities are listed. NYNEX will continue to file periodic reports pursuant to
the Securities Exchange Act of 1934 after the Merger is consummated for so long
as it continues to have publicly-held debt securities outstanding.
FEDERAL SECURITIES LAWS CONSEQUENCES; STOCK TRANSFER RESTRICTION AGREEMENTS
This Joint Proxy Statement/Prospectus does not cover any resales of the
Bell Atlantic Common Stock to be received by the stockholders of NYNEX upon
consummation of the Merger, and no person is authorized to make any use of this
Joint Proxy Statement/Prospectus in connection with any such resale.
All shares of Bell Atlantic Common Stock received by NYNEX stockholders in
the Merger will be freely transferable, except that shares of Bell Atlantic
Common Stock received by persons who are deemed to be "affiliates" (as such term
is defined under the Securities Act of 1933) of NYNEX prior to the Merger may be
resold by them only in transactions permitted by the resale provisions of Rule
144 or 145 promulgated under the Securities Act of 1933 or as otherwise
permitted under the Securities Act of 1933. Persons who may be deemed to be
affiliates of NYNEX generally include individuals or entities that control, are
controlled by, or are under common control with, NYNEX and may include certain
officers, directors and principal stockholders of NYNEX. The Merger Agreement
requires NYNEX to use reasonable efforts to cause its affiliates to execute a
written agreement to the effect that such persons will not offer or sell or
otherwise dispose of any of the shares of Bell Atlantic Common Stock issued to
such persons in the Merger in violation of the Securities Act of 1933 or the
rules and regulations promulgated by the SEC thereunder.
In addition, pursuant to the Merger Agreement, Bell Atlantic and NYNEX each
have agreed to use reasonable efforts to cause its affiliates to execute written
agreements prohibiting such affiliates from transferring their Bell Atlantic
Common Stock or NYNEX Common Stock, respectively, during the period commencing
30 days prior to the Effective Time and ending at such time as financial results
covering at least 30 days of combined operations of NYNEX and Bell Atlantic have
been published within the meaning of Section 201.01 of the SEC's Codification of
Financial Reporting Policies, except to the extent permitted by, and in
accordance with, SEC Accounting Series Release 135 and SEC Staff Accounting
Bulletins 65 and 76 (the agreements described in this and the preceding
paragraph, collectively, the "Stock Transfer Restriction Agreements").
LEGAL MATTERS
The validity of the Bell Atlantic Common Stock to be issued in connection
with the Merger will be passed upon by James R. Young, Esq., Vice
President - General Counsel of Bell Atlantic.
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EXPERTS
The consolidated financial statements incorporated by reference in Bell
Atlantic's and NYNEX's Annual Reports on Form 10-K for the year ended December
31, 1995, have been audited by Coopers & Lybrand L.L.P., independent
accountants, as set forth in their reports thereon incorporated therein and
herein by reference (which reports include explanatory paragraphs concerning
Bell Atlantic's and NYNEX's discontinued accounting for the operations of their
respective telephone subsidiaries in accordance with Statement of Financial
Accounting Standards No. 71, "Accounting for the Effects of Certain Types of
Regulation," and changes in their methods of accounting for postemployment
benefits and income taxes). Such consolidated financial statements of Bell
Atlantic and NYNEX are incorporated herein by reference or included herein in
reliance upon such reports given upon the authority of such firm as experts in
accounting and auditing.
FUTURE STOCKHOLDER PROPOSALS
Any Bell Atlantic stockholder who intends to submit a proposal for
inclusion in the proxy materials for the 1997 annual meeting of Bell Atlantic
must submit such proposal to the Secretary of Bell Atlantic by November 8, 1996.
In addition, the current Bell Atlantic bylaws provide that any stockholder
wishing to make a nomination for director, or wishing to introduce a proposal or
other business, at the 1997 annual meeting of Bell Atlantic must give at least
60 days advance notice, subject to certain exceptions, and that notice must meet
certain other requirements set forth in the Bell Atlantic bylaws. A copy of the
applicable current Bell Atlantic bylaws may be obtained from the Secretary of
Bell Atlantic. The provisions in the Bell Atlantic bylaws relevant to the
foregoing will be continued unchanged in the Amended Bell Atlantic Bylaws.
NYNEX expects to hold an annual meeting of stockholders in the second
quarter of 1997 unless the Merger is completed prior thereto. SEC rules set
forth standards as to what stockholder proposals are required to be included in
a proxy statement. Any NYNEX stockholder who intends to submit a proposal for
inclusion in the proxy materials for the 1997 annual meeting of NYNEX must
submit such proposal to the Secretary of NYNEX by November 18, 1996. In
addition, the NYNEX Bylaws provide that any NYNEX stockholder wishing to make a
nomination for director, or wishing to introduce a proposal on other business,
at the 1997 annual meeting of NYNEX must notify the Secretary of NYNEX of the
stockholders' intentions and provide certain other information in advance of
such meeting, in accordance with the procedures detailed in the NYNEX Bylaws. A
copy of the NYNEX Bylaws may be obtained from the Secretary of NYNEX.
WHERE YOU CAN FIND MORE INFORMATION
Bell Atlantic and NYNEX file annual, quarterly and special reports, proxy
statements and other information with the SEC. You may read and copy any
reports, statements or other information we file at the SEC's public reference
rooms in Washington, D.C., New York, New York and Chicago, Illinois. Please call
the SEC at 1-800-SEC-0330 for further information on the public reference rooms.
Our SEC filings are also available to the public from commercial document
retrieval services and at the web site maintained by the SEC at
"http://www.sec.gov."
Bell Atlantic filed a Registration Statement on Form S-4 to register with
the SEC the Bell Atlantic Common Stock to be issued to NYNEX stockholders in the
Merger. This Joint Proxy Statement/Prospectus is a part of that Registration
Statement and constitutes a prospectus of Bell Atlantic in addition to being a
proxy statement of Bell Atlantic and NYNEX for the Special Meetings. As allowed
by SEC rules, this Joint Proxy Statement/Prospectus does not contain all the
information you can find in the Registration Statement or the exhibits to the
Registration Statement.
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The SEC allows us to "incorporate by reference" information into this Joint
Proxy Statement/Prospectus, which means that we can disclose important
information to you by referring you to another document filed separately with
the SEC. The information incorporated by reference is deemed to be part of this
Joint Proxy Statement/Prospectus, except for any information superseded by
information in this Joint Proxy Statement/Prospectus. This Joint Proxy
Statement/Prospectus incorporates by reference the documents set forth below
that we have previously filed with the SEC. These documents contain important
information about our companies and their finances.
<TABLE>
<CAPTION>
BELL ATLANTIC SEC FILINGS (FILE NO.
1-8606) PERIOD
------------------------------------------------------------------------------------
<S> <C>
Annual Report on Form 10-K Year ended December 31, 1995
Quarterly Reports on Form 10-Q Quarters ended March 31, 1996 and
June 30, 1996
Current Reports on Form 8-K Filed on January 23, 1996, January 24, 1996,
April 18, 1996, April 23, 1996,
July 3, 1996 and July 18, 1996
</TABLE>
<TABLE>
<CAPTION>
NYNEX SEC FILINGS (FILE NO. 1-8608) PERIOD
------------------------------------------------------------------------------------
<S> <C>
Annual Report on Form 10-K Year ended December 31, 1995
Quarterly Reports on Form 10-Q Quarters ended March 31, 1996 and
June 30, 1996
Current Reports on Form 8-K Filed on April 23, 1996 and July 3, 1996
</TABLE>
We are also incorporating by reference additional documents that we file
with the SEC between the date of this Joint Proxy Statement/Prospectus and the
dates of the Special Meetings of our stockholders.
Bell Atlantic has supplied all information contained or incorporated by
reference in this Joint Proxy Statement/Prospectus relating to Bell Atlantic and
NYNEX has supplied all such information relating to NYNEX.
If you are a stockholder, we may have sent you some of the documents
incorporated by reference, but you can obtain any of them through us or the SEC.
Documents incorporated by reference are available from us without charge,
excluding all exhibits unless we have specifically incorporated by reference an
exhibit in this Joint Proxy Statement/Prospectus. Stockholders may obtain
documents incorporated by reference in this Joint Proxy Statement/Prospectus by
requesting them in writing or by telephone from the appropriate party at the
following addresses:
<TABLE>
<S> <C>
Bell Atlantic Corporation NYNEX Corporation
Shareowner Services Share Owner Services
1717 Arch Street, 31st Floor 1095 Avenue of the Americas, 19th Floor
Philadelphia, PA 19103 New York, NY 10036
Tel: (215) 963-6333 Tel: (212) 395-2121
</TABLE>
If you would like to request documents from us, please do so by October 18,
1996 to receive them before the Special Meetings.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS JOINT PROXY STATEMENT/PROSPECTUS TO VOTE ON THE MERGER. WE
HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT
FROM WHAT IS CONTAINED IN THIS JOINT PROXY STATEMENT/PROSPECTUS. THIS JOINT
PROXY STATEMENT/PROSPECTUS IS DATED SEPTEMBER 9, 1996. YOU SHOULD NOT ASSUME
THAT THE INFORMATION CONTAINED IN THE JOINT PROXY STATEMENT/PROSPECTUS IS
ACCURATE AS OF ANY DATE OTHER THAN SUCH DATE, AND NEITHER THE MAILING OF THE
JOINT PROXY STATEMENT/PROSPECTUS TO STOCKHOLDERS NOR THE ISSUANCE OF BELL
ATLANTIC COMMON STOCK IN THE MERGER SHALL CREATE ANY IMPLICATION TO THE
CONTRARY.
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LIST OF DEFINED TERMS
<TABLE>
<CAPTION>
DEFINED TERM PAGE NO.
- ----------------------------------- --------
<S> <C>
1996 Agreements.................... 52
Acquisition Proposal............... 62
Amended Bell Atlantic Bylaws....... 11
Amended Bell Atlantic Charter...... 11
Ameritech.......................... 33
Antitrust Division................. 20
AT&T............................... 11
BANM............................... 17
Bear Stearns....................... 14
Bell Atlantic...................... 11
Bell Atlantic Common Stock......... 11
Bell Atlantic Directors............ 59
Bell Atlantic DRSPP................ 65
Bell Atlantic ESOP................. 65
Bell Atlantic Meeting.............. 11
Bell Atlantic North................ 59
Bell Atlantic P/E ratio............ 33
Bell Atlantic Proposal............. 11
Bell Atlantic Series Preferred
Stock............................ 71
Bell Atlantic South................ 59
Bell Atlantic SPSE................. 65
Bell Atlantic SSP.................. 65
BellSouth.......................... 33
Benefit Plans...................... 62
CAGR............................... 46
Certificate Amendment.............. 11
Code............................... 19
Combined Region.................... 16
Comparable Companies............... 42
Comparable Public Companies........ 46
Comparable Transactions............ 48
Consent Decree..................... 11
Cooling Off Report................. 40
Coopers & Lybrand.................. 14
DGCL............................... 68
Director Pension Plan.............. 56
Director Retainer Plan............. 56
Discounted Cash Flow Analysis...... 47
DPS................................ 47
EBIT............................... 46
EBITDA............................. 41
Effective Time..................... 11
Engagement Letter.................. 49
EPS................................ 46
ERISA.............................. 62
Exchange Agent..................... 58
<CAPTION>
DEFINED TERM PAGE NO.
- ----------------------------------- --------
<S> <C>
Exchange Ratio..................... 11
Executive Retention Agreements..... 55
FCC................................ 21
Forecasted Market Prices........... 47
FTC................................ 20
GTE................................ 33
Historical Trading Ratios.......... 39
HSR Act............................ 20
Hypothetical Unaffected Exchange
Ratio............................ 34
IBES............................... 42
Implied Bell Atlantic Share
Prices........................... 48
Implied New Bell Atlantic Share
Prices........................... 48
Initial Period..................... 49
Initial Termination Fee............ 63
IRS................................ 19
LEC Peer Group..................... 33
Long Term Plan..................... 53
Market Exchange Ratio.............. 32
Material Adverse Effect............ 60
MCI................................ 16
Merger............................. 11
Merger Agreement................... 11
Merger Company..................... 11
Merger Company Common Stock........ 11
Merger Discussions Report.......... 40
Merger Subsidiary.................. 11
Merrill Lynch...................... 15
Morgan Stanley..................... 14
Multiples Analysis................. 46
New Bell Atlantic.................. 11
New Bell Atlantic Common Stock..... 11
NYNEX.............................. 11
NYNEX Bylaws....................... 68
NYNEX Charter...................... 68
NYNEX Common Stock................. 11
NYNEX Directors.................... 59
NYNEX DRSPP........................ 66
NYNEX Meeting...................... 11
NYNEX P/E ratio.................... 33
NYNEX Preferred Stock.............. 69
NYNEX Proposal..................... 11
NYNEX SPSE......................... 66
NYNEX SSP.......................... 66
Offering Person.................... 63
Old Bell Atlantic Bylaws........... 68
Old Bell Atlantic Charter.......... 68
</TABLE>
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Original Bear Stearns Opinion...... 30
Original Bell Atlantic Exchange
Ratio............................ 11
Original Merger Agreement.......... 11
Original Mergers................... 31
Original Merrill Lynch Opinion..... 43
Original Morgan Stanley Opinion.... 38
Original NYNEX Exchange Ratio...... 11
Original Transaction............... 11
P/E ratios......................... 33
P/E-to-Growth Analysis............. 46
PacTel............................. 16
PacTel/SBC Report.................. 40
Pay................................ 52
PCS................................ 12
Precedent MOE Transactions......... 34
Private Market Intrinsic Value
Analysis......................... 46
Projected Benefits................. 30
Proposal Parties................... 62
Public Market Intrinsic Value
Analysis......................... 46
Regional Holding Companies......... 11
Restated Agreements................ 55
Retention Award.................... 55
Retirement Date.................... 68
DEFINED TERM PAGE NO.
- ----------------------------------- --------
S&P 400............................ 40
SBC................................ 16
Secondary Period................... 51
Seidenberg Employment Agreement.... 50
Seidenberg Employment Period....... 51
Short Term Plans................... 53
Smith Employment Agreement......... 49
Smith Employment Period............ 49
Special Meetings................... 11
Sprint............................. 16
Stock Transfer Restriction
Agreements....................... 72
Telco Businesses................... 46
Telco Implied Values............... 46
Telephony Services Group........... 40
Ten Percent Holder................. 70
Termination Date................... 62
Transfer Taxes..................... 20
Two-Year Projections............... 30
U S WEST........................... 16
Updated Bear Stearns Opinion....... 31
Updated Merrill Lynch Opinion...... 44
Updated Morgan Stanley Opinion..... 38
Wireline Services Group............ 40
Withdrawal......................... 63
</TABLE>
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APPENDIX I
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AMENDED AND RESTATED
AGREEMENT AND PLAN
OF MERGER
DATED AS OF
APRIL 21, 1996
BY AND BETWEEN
NYNEX CORPORATION
AND
BELL ATLANTIC CORPORATION
- --------------------------------------------------------------------------------
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TABLE OF CONTENTS
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ARTICLE I -- THE MERGER
SECTION 1.1 -- Formation of Merger Subsidiary................................. 1
SECTION 1.2 -- The Merger..................................................... 1
SECTION 1.3 -- Effective Time................................................. 1
SECTION 1.4 -- Effect of the Merger........................................... 2
SECTION 1.5 -- Subsequent Actions............................................. 2
SECTION 1.6 -- Certificate of Incorporation; Bylaws; Directors and Officers of
Surviving Corporation........................................ 2
ARTICLE II -- EFFECT ON STOCK OF THE SURVIVING CORPORATION
AND THE MERGED CORPORATION
SECTION 2.1 -- Conversion of Securities....................................... 2
SECTION 2.2 -- Conversion of Shares........................................... 2
SECTION 2.3 -- Cancellation of Treasury Shares................................ 3
SECTION 2.4 -- Conversion of Common Stock of the Merged Corporation into
Common Stock of the Surviving Corporation.................... 3
SECTION 2.5 -- Exchange of Shares Other Than Treasury Shares.................. 3
SECTION 2.6 -- Transfer Books................................................. 4
SECTION 2.7 -- No Fractional Share Certificates............................... 4
SECTION 2.8 -- Options to Purchase NYNEX Common Stock......................... 5
SECTION 2.9 -- Restricted Stock............................................... 6
SECTION 2.10 -- Certain Adjustments............................................ 6
ARTICLE III -- CERTAIN MATTERS RELATED TO BELL ATLANTIC
SECTION 3.1 -- Certificate of Incorporation and Bylaws of Bell Atlantic....... 6
SECTION 3.2 -- Dividends...................................................... 6
SECTION 3.3 -- Headquarters................................................... 6
SECTION 3.4 -- Corporate Identity............................................. 6
ARTICLE IV -- REPRESENTATIONS AND WARRANTIES OF NYNEX
SECTION 4.1 -- Organization and Qualification; Subsidiaries................... 6
SECTION 4.2 -- Certificate of Incorporation and Bylaws........................ 7
SECTION 4.3 -- Capitalization................................................. 7
SECTION 4.4 -- Authority Relative to this Agreement........................... 8
SECTION 4.5 -- No Conflict; Required Filings and Consents..................... 8
SECTION 4.6 -- SEC Filings; Financial Statements.............................. 9
SECTION 4.7 -- Absence of Certain Changes or Events........................... 9
SECTION 4.8 -- Litigation..................................................... 9
SECTION 4.9 -- No Violation of Law............................................ 9
SECTION 4.10 -- Joint Proxy Statement.......................................... 10
SECTION 4.11 -- Employee Matters; ERISA........................................ 10
SECTION 4.12 -- Labor Matters.................................................. 12
SECTION 4.13 -- Environmental Matters.......................................... 12
SECTION 4.14 -- Board Action; Vote Required; Amendment of Rights Agreement;
Applicability of Section 203................................. 14
SECTION 4.15 -- Opinion of Financial Advisor................................... 15
SECTION 4.16 -- Brokers........................................................ 15
SECTION 4.17 -- Tax Matters.................................................... 15
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SECTION 4.18 -- Intellectual Property.......................................... 16
SECTION 4.19 -- Insurance...................................................... 16
SECTION 4.20 -- Ownership of Securities........................................ 16
SECTION 4.21 -- Certain Contracts.............................................. 16
SECTION 4.22 -- Certain Regulatory Matters..................................... 17
SECTION 4.23 -- SFAS 106 Matters............................................... 17
ARTICLE V -- REPRESENTATIONS AND WARRANTIES OF BELL ATLANTIC
SECTION 5.1 -- Organization and Qualification; Subsidiaries................... 17
SECTION 5.2 -- Certificate of Incorporation and Bylaws........................ 17
SECTION 5.3 -- Capitalization................................................. 18
SECTION 5.4 -- Authority Relative to this Agreement........................... 18
SECTION 5.5 -- No Conflict; Required Filings and Consents..................... 19
SECTION 5.6 -- SEC Filings; Financial Statements.............................. 19
SECTION 5.7 -- Absence of Certain Changes or Events........................... 20
SECTION 5.8 -- Litigation..................................................... 20
SECTION 5.9 -- No Violation of Law............................................ 20
SECTION 5.10 -- Joint Proxy Statement.......................................... 21
SECTION 5.11 -- Employee Matters; ERISA........................................ 21
SECTION 5.12 -- Labor Matters.................................................. 22
SECTION 5.13 -- Environmental Matters.......................................... 23
SECTION 5.14 -- Board Action; Vote Required; Redemption of Rights;
Applicability of Section 203................................. 24
SECTION 5.15 -- Opinion of Financial Advisor................................... 24
SECTION 5.16 -- Brokers........................................................ 25
SECTION 5.17 -- Tax Matters.................................................... 25
SECTION 5.18 -- Intellectual Property.......................................... 25
SECTION 5.19 -- Insurance...................................................... 26
SECTION 5.20 -- Ownership of Securities........................................ 26
SECTION 5.21 -- Certain Contracts.............................................. 26
SECTION 5.22 -- Certain Regulatory Matters..................................... 26
ARTICLE VI -- CONDUCT OF INDEPENDENT BUSINESSES PENDING THE MERGER
SECTION 6.1 -- Transition Planning............................................ 27
SECTION 6.2 -- Conduct of Business in the Ordinary Course..................... 27
SECTION 6.3 -- No Solicitation................................................ 29
SECTION 6.4 -- Subsequent Financial Statements................................ 30
SECTION 6.5 -- Control of Operations.......................................... 31
ARTICLE VII -- ADDITIONAL AGREEMENTS
SECTION 7.1 -- Joint Proxy Statement and the Registration Statement........... 31
SECTION 7.2 -- NYNEX and Bell Atlantic Stockholders' Meetings and Consummation
of the Merger................................................ 31
SECTION 7.3 -- Additional Agreements.......................................... 32
SECTION 7.4 -- Notification of Certain Matters................................ 32
SECTION 7.5 -- Access to Information.......................................... 33
SECTION 7.6 -- Public Announcements........................................... 33
SECTION 7.7 -- Cooperation.................................................... 33
SECTION 7.8 -- Indemnification, Directors' and Officers' Insurance............ 33
SECTION 7.9 -- Employee Benefit Plans......................................... 34
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SECTION 7.10 -- Employment Arrangements........................................ 34
SECTION 7.11 -- Stock Exchange Listing......................................... 35
SECTION 7.12 -- Post-Merger Bell Atlantic Board of Directors................... 35
SECTION 7.13 -- No Shelf Registration.......................................... 35
SECTION 7.14 -- Affiliates..................................................... 36
SECTION 7.15 -- Blue Sky....................................................... 36
SECTION 7.16 -- Pooling of Interests........................................... 36
SECTION 7.17 -- Tax-Free Reorganization........................................ 36
ARTICLE VIII -- CONDITIONS TO MERGER
SECTION 8.1 -- Conditions to Obligations of Each Party to Effect the Merger... 36
SECTION 8.2 -- Additional Conditions to Obligations of NYNEX.................. 38
SECTION 8.3 -- Additional Conditions to Obligations of Bell Atlantic.......... 38
ARTICLE IX -- TERMINATION, AMENDMENT AND WAIVER
SECTION 9.1 -- Termination.................................................... 39
SECTION 9.2 -- Effect of Termination.......................................... 40
SECTION 9.3 -- Amendment...................................................... 42
SECTION 9.4 -- Waiver......................................................... 42
ARTICLE X -- GENERAL PROVISIONS
SECTION 10.1 -- Non-Survival of Representations, Warranties and Agreements..... 42
SECTION 10.2 -- Notices........................................................ 42
SECTION 10.3 -- Expenses....................................................... 43
SECTION 10.4 -- Certain Definitions............................................ 43
SECTION 10.5 -- Headings....................................................... 45
SECTION 10.6 -- Severability................................................... 45
SECTION 10.7 -- Entire Agreement; No Third-Party Beneficiaries................. 45
SECTION 10.8 -- Assignment..................................................... 45
SECTION 10.9 -- Governing Law.................................................. 45
SECTION 10.10 -- Counterparts................................................... 45
INDEX OF DEFINED TERMS............................................................. 46
APPENDIX I-A -- Form of Bell Atlantic Certificate of Incorporation
APPENDIX I-B -- Form of Bell Atlantic Bylaws
</TABLE>
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AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER, dated as of April 21,
1996, ("the date hereof"), as amended and restated by the parties as of July 2,
1996 (this "Agreement"), between NYNEX Corporation, a Delaware corporation
("NYNEX"), and Bell Atlantic Corporation, a Delaware corporation ("Bell
Atlantic").
WITNESSETH
WHEREAS, the Boards of Directors of NYNEX and Bell Atlantic have each
determined that it is in the best interests of their respective stockholders
that NYNEX and Bell Atlantic enter into a business combination under which a
subsidiary of Bell Atlantic will merge with and into NYNEX pursuant to the
Merger (as defined in Section 1.1 hereof) and Bell Atlantic and NYNEX desire to
enter into the "merger of equals" transaction contemplated hereby, and, in
connection therewith, to make certain representations, warranties and agreements
in connection with the Merger;
WHEREAS, the Boards of Directors of NYNEX and Bell Atlantic 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 and have each approved the Merger upon the terms and conditions set forth
herein;
WHEREAS, for federal income tax purposes, it is intended that the Merger
shall constitute a tax-free reorganization under Section 368 of the Internal
Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, for accounting purposes, it is intended that the Merger shall be
accounted for as a pooling of interests under United States generally accepted
accounting principles ("GAAP");
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby, the
parties hereto hereby agree as follows:
ARTICLE I -- THE MERGER
SECTION 1.1 -- Formation of Merger Subsidiary. Bell Atlantic will form
under the Delaware General Corporation Law ("Delaware Law") a wholly-owned
subsidiary (the "Merger Subsidiary") to be merged into NYNEX (the "Merger") as
set forth in Section 1.2 hereof. The Merger Subsidiary will be formed solely to
facilitate the Merger and will conduct no business or activity other than in
connection with the Merger. Bell Atlantic will (i) cause the Merger Subsidiary
to execute and deliver a joinder to this Agreement pursuant to Section 251 of
Delaware Law, and (ii) execute a formal written consent under Section 228 of
Delaware Law as the sole stockholder of the Merger Subsidiary, approving the
execution, delivery and performance of this Agreement by the Merger Subsidiary.
SECTION 1.2 -- The Merger. At the Effective Time (as defined in Section
1.3 hereof) and subject to and upon the terms and conditions of this Agreement
and Delaware Law, the Merger shall be consummated, whereby the Merger Subsidiary
shall be merged with and into NYNEX, the separate corporate existence of the
Merger Subsidiary shall cease, and NYNEX shall continue as the surviving
corporation which shall be a wholly owned subsidiary of Bell Atlantic. NYNEX as
the surviving corporation after the Merger is herein sometimes referred to as
the "Surviving Corporation" and the Merger Subsidiary as the non-surviving
corporation after the Merger is herein sometimes referred to as the "Merged
Corporation." NYNEX, Bell Atlantic, and, after entering into a joinder to this
Agreement, the Merger Subsidiary, are herein referred to collectively as the
"Parties" and each individually as a "Party."
SECTION 1.3 -- Effective Time. As promptly as practicable after the
satisfaction or waiver of the conditions set forth in Article VIII hereof and
the consummation of the Closing referred to in Section 7.2(b) hereof, the
Parties shall cause the Merger to be consummated by filing a Certificate of
Merger with the Secretary of State of the State of Delaware with respect to the
Merger, in such form as required by, and
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executed in accordance with, the relevant provisions of Delaware Law (the time
of such filing being the "Effective Time").
SECTION 1.4 -- Effect of the Merger. At the Effective Time, the effect of
the Merger shall be as provided in the applicable provisions of Delaware Law.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time all the property, rights, privileges, powers and franchises of
NYNEX and the Merger Subsidiary shall continue with, or vest in, as the case may
be, NYNEX as the Surviving Corporation, and all debts, liabilities and duties of
NYNEX and the Merger Subsidiary shall continue to be, or become, as the case may
be, the debts, liabilities and duties of NYNEX as the Surviving Corporation. As
of the Effective Time, the Surviving Corporation shall be a direct wholly owned
subsidiary of Bell Atlantic.
SECTION 1.5 -- Subsequent Actions. If, at any time after the Effective
Time, the Surviving Corporation shall consider or be advised that any deeds,
bills of sale, assignments, assurances or any other actions or things are
necessary or desirable to continue in, vest, perfect or confirm of record or
otherwise in the Surviving Corporation its right, title or interest in, to or
under any of the rights, properties, privileges, franchises or assets of either
of its constituent corporations acquired or to be acquired by the Surviving
Corporation as a result of, or in connection with, the Merger or otherwise to
carry out this Agreement, the officers and directors of the Surviving
Corporation shall be directed and authorized to execute and deliver, in the name
and on behalf of either of such constituent corporations, all such deeds, bills
of sale, assignments and assurances and to take and do, in the name and on
behalf of each of such corporations or otherwise, all such other actions and
things as may be necessary or desirable to vest, perfect or confirm any and all
right, title and interest in, to and under such rights, properties, privileges,
franchises or assets in the Surviving Corporation or otherwise to carry out this
Agreement.
SECTION 1.6 -- Certificate of Incorporation; Bylaws; Directors and Officers
of Surviving Corporation. Unless otherwise agreed by NYNEX and Bell Atlantic
before the Effective Time, at the Effective Time:
(a) the Certificate of Incorporation of NYNEX as the Surviving Corporation
shall be the Certificate of Incorporation of NYNEX as in effect immediately
prior to the Effective Time, until thereafter amended as provided by law and
such Certificate of Incorporation, except that Section 4.1 of the Certificate of
Incorporation of NYNEX shall be amended pursuant hereto, from and after the
Effective Time, to provide for a par value of $0.01 per share for each share of
Common Stock of NYNEX. The text of such section as the same shall be amended
hereby is set forth on Schedule 1.6(a) hereto;
(b) the Bylaws of NYNEX as the Surviving Corporation shall be the Bylaws of
NYNEX immediately prior to the Effective Time, until thereafter amended as
provided by law and the Certificate of Incorporation and the Bylaws of such
Surviving Corporation; and
(c) the directors and officers of NYNEX immediately prior to the Effective
Time shall continue to serve in their respective offices of the Surviving
Corporation from and after the Effective Time, in each case until their
successors are elected or appointed and qualified or until their resignation or
removal. If, at the Effective Time, a vacancy shall exist on the Board of
Directors or in any office of the Surviving Corporation, such vacancy may
thereafter be filled in the manner provided by law and the Bylaws of the
Surviving Corporation.
ARTICLE II -- EFFECT ON STOCK OF THE SURVIVING
CORPORATION AND THE MERGED CORPORATION
SECTION 2.1 -- Conversion of Securities. The manner and basis of
converting the shares of common stock of the Surviving Corporation and of the
Merged Corporation at the Effective Time, by virtue of the Merger and without
any action on the part of any of the Parties or the holder of any of such
securities, shall be as hereinafter set forth in this Article II.
SECTION 2.2 -- Conversion of Shares. (a) Each share of common stock, par
value $1.00 per share, of NYNEX ("NYNEX Common Stock") issued and outstanding
immediately before the Effective Time (excluding those held in the treasury of
NYNEX and those owned by Bell Atlantic) and all rights in respect
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thereof, shall at the Effective Time, without any action on the part of any
holder thereof, forthwith cease to exist and be converted into and become
exchangeable for 0.768 shares of common stock, par value $0.10 per share (after
giving effect to the Certificate Amendment described herein; "Bell Atlantic
Common Stock," as used herein, means the common stock, par value $1.00 per
share, of Bell Atlantic prior to the effectiveness of the Certificate Amendment,
and the common stock, par value $0.10 per share, of Bell Atlantic upon and after
such effectiveness). Such ratio of NYNEX Common Stock to Bell Atlantic Common
Stock is herein referred to as the "Exchange Ratio".
(b) Commencing immediately after the Effective Time, each certificate
which, immediately prior to the Effective Time, represented issued and
outstanding shares of NYNEX Common Stock ("NYNEX Shares"), shall evidence
ownership of Bell Atlantic Common Stock on the basis hereinbefore set forth, but
subject to the limitations set forth in Sections 2.3, 2.5, 2.7, 2.8, 2.9 and
2.10 hereof.
(c) For all purposes of this Agreement, unless otherwise specified, the
Mandalay Shares (as defined in Section 10.4 hereof) and all shares held by
employee stock ownership plans of NYNEX (i) shall be deemed to be issued and
outstanding, (ii) shall not be deemed to be held in the treasury of NYNEX and
(iii) shall be converted into shares of Bell Atlantic Common Stock in accordance
with the Exchange Ratio.
SECTION 2.3 -- Cancellation of Treasury Shares. At the Effective Time,
each share of NYNEX Common Stock held in the treasury of NYNEX or owned by Bell
Atlantic immediately prior to the Effective Time shall be canceled and retired
and no shares of stock or other securities of Bell Atlantic or the Surviving
Corporation shall be issuable, and no payment or other consideration shall be
made, with respect thereto.
SECTION 2.4 -- Conversion of Common Stock of the Merged Corporation into
Common Stock of the Surviving Corporation. At the Effective Time, each share of
common stock, par value $0.01 per share, of the Merger Subsidiary issued and
outstanding immediately prior to the Effective Time, and all rights in respect
thereof, shall, without any action on the part of Bell Atlantic, forthwith cease
to exist and be converted into 1,000 validly issued, fully paid and
nonassessable shares of common stock of NYNEX, par value $0.01 per share, as the
Surviving Corporation (the "New NYNEX Common Stock"). Immediately after the
Effective Time and upon surrender by Bell Atlantic of the certificate
representing the shares of the common stock of the Merger Subsidiary, NYNEX as
the Surviving Corporation shall deliver to Bell Atlantic an appropriate
certificate or certificates representing the New NYNEX Common Stock created by
conversion of the common stock of the Merger Subsidiary owned by Bell Atlantic.
SECTION 2.5 -- Exchange of Shares Other Than Treasury Shares. (a) Subject
to the terms and conditions hereof, at or prior to the Effective Time, Bell
Atlantic and NYNEX shall jointly appoint an exchange agent to effect the
exchange of NYNEX Shares for Bell Atlantic Common Stock in accordance with the
provisions of this Article II (the "Exchange Agent"). From time to time after
the Effective Time, Bell Atlantic shall deposit, or cause to be deposited, with
the Exchange Agent certificates representing Bell Atlantic Common Stock for
conversion of NYNEX Shares in accordance with the provisions of Section 2.2
hereof (such certificates, together with any dividends or distributions with
respect thereto, being herein referred to as the "Exchange Fund"). Commencing
immediately after the Effective Time and until the appointment of the Exchange
Agent shall be terminated, each holder of a certificate or certificates
theretofore representing NYNEX Shares may surrender the same to the Exchange
Agent, and, after the appointment of the Exchange Agent shall be terminated, any
such holder may surrender any such certificate to Bell Atlantic. Such holder
shall be entitled upon such surrender to receive in exchange therefor a
certificate or certificates representing the number of full shares of Bell
Atlantic Common Stock into which the NYNEX Shares theretofore represented by the
certificate or certificates so surrendered shall have been converted in
accordance with the provisions of Section 2.2 hereof, together with a cash
payment in lieu of fractional shares, if any, in accordance with Section 2.7
hereof, and all such shares of Bell Atlantic Common Stock shall be deemed to
have been issued at the Effective Time. Until so surrendered and exchanged, each
outstanding certificate which, prior to the Effective Time, represented issued
and outstanding NYNEX Shares shall be deemed for all corporate purposes of Bell
Atlantic, other than the payment of dividends and other distributions, if any,
to evidence ownership of the number of full shares of Bell Atlantic Common Stock
into which the NYNEX Shares theretofore represented thereby shall have been
converted at the Effective Time.
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Unless and until any such certificate theretofore representing NYNEX Shares is
so surrendered, no dividend or other distribution, if any, payable to the
holders of record of Bell Atlantic Common Stock as of any date subsequent to the
Effective Time shall be paid to the holder of such certificate in respect
thereof. Except as otherwise provided in Section 2.6 hereof, upon the surrender
of any such certificate theretofore representing NYNEX Shares, however, the
record holder of the certificate or certificates representing shares of Bell
Atlantic Common Stock issued in exchange therefor shall receive from the
Exchange Agent or from Bell Atlantic, as the case may be, payment of the amount
of dividends and other distributions, if any, which as of any date subsequent to
the Effective Time and until such surrender shall have become payable with
respect to such number of shares of Bell Atlantic Common Stock ("Pre-Surrender
Dividends"). No interest shall be payable with respect to the payment of
Pre-Surrender Dividends upon the surrender of certificates theretofore
representing NYNEX Shares. After the appointment of the Exchange Agent shall
have been terminated, any holders of certificates representing NYNEX Shares
which have not received payment of Pre-Surrender Dividends shall look only to
Bell Atlantic for payment thereof. Notwithstanding the foregoing provisions of
this Section 2.5(a), neither the Exchange Agent nor any Party shall be liable to
a holder of NYNEX Shares for any Bell Atlantic Common Stock, any dividends or
distributions thereon or any cash payment for fractional shares as contemplated
by Section 2.7, delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law or to a transferee pursuant to
Section 2.6 hereof.
(b) Notwithstanding anything herein to the contrary, certificates
surrendered for exchange by any "affiliate" of NYNEX shall not be exchanged
until Bell Atlantic shall have received a signed agreement from such "affiliate"
as provided in Section 7.14 hereof.
SECTION 2.6 -- Transfer Books. The stock transfer books of NYNEX shall be
closed at the Effective Time and no transfer of any NYNEX Shares will thereafter
be recorded on any of such stock transfer books. In the event of a transfer of
ownership of NYNEX Shares that is not registered in the stock transfer records
of NYNEX at the Effective Time, a certificate or certificates representing the
number of full shares of Bell Atlantic Common Stock into which such NYNEX Shares
shall have been converted shall be issued to the transferee together with a cash
payment in lieu of fractional shares, if any, in accordance with Section 2.7
hereof, and a cash payment in the amount of Pre-Surrender Dividends, if any, in
accordance with Section 2.5(a) hereof, if the certificate or certificates
representing such NYNEX Shares is or are surrendered as provided in Section 2.5
hereof, accompanied by all documents required to evidence and effect such
transfer and by evidence of payment of any applicable stock transfer tax.
SECTION 2.7 -- No Fractional Share Certificates. (a) No scrip or
fractional share certificate for Bell Atlantic Common Stock will be issued upon
the surrender for exchange of certificates evidencing NYNEX Shares, and an
outstanding fractional share interest will not entitle the owner thereof to
vote, to receive dividends or to any rights of a stockholder of Bell Atlantic or
of the Surviving Corporation with respect to such fractional share interest.
(b) As promptly as practicable following the Effective Time, the Exchange
Agent shall determine the excess of (i) the number of full shares of Bell
Atlantic Common Stock to be issued and delivered to the Exchange Agent pursuant
to Section 2.5 hereof over (ii) the aggregate number of full shares of Bell
Atlantic Common Stock to be distributed to holders of NYNEX Common Stock
pursuant to Section 2.5 hereof (such excess being herein called the "Excess
Shares"). Following the Effective Time, the Exchange Agent, as agent for the
holders of NYNEX Common Stock, shall sell the Excess Shares at then prevailing
prices on the New York Stock Exchange, Inc. (the "NYSE"), all in the manner
provided in subsection (c) of this Section 2.7.
(c) 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 all
reasonable efforts to complete the sale of the Excess Shares as promptly
following the Effective Time as, in the Exchange Agent's reasonable 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 NYNEX Common Stock, the Exchange Agent
will hold such proceeds in trust for the holders of NYNEX Common Stock (the
"Common Shares Trust"). Bell Atlantic
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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 holder of NYNEX
Common Stock shall be 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 fractional share interests to which such
holder of NYNEX Common Stock is entitled (after taking into account all shares
of NYNEX 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 holders of NYNEX Common Stock are entitled.
(d) Notwithstanding the provisions of subsections (b) and (c) of this
Section 2.7, NYNEX and Bell Atlantic may agree at their option, exercised prior
to the Effective Time, in lieu of the issuance and sale of Excess Shares and the
making of the payments contemplated in such subsections, that Bell Atlantic
shall pay to the Exchange Agent an amount sufficient for the Exchange Agent to
pay each holder of NYNEX Common Stock an amount in cash equal to the product
obtained by multiplying (i) the fractional share interest to which such holder
would otherwise be entitled (after taking into account all shares of NYNEX
Common Stock held at the Effective Time by such holder) by (ii) the closing
price for a share of Bell Atlantic Common Stock on the NYSE Composite
Transaction Tape on the first business day immediately following the Effective
Time, 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 subsection (d). In such event,
Excess Shares shall not be issued or otherwise transferred to the Exchange Agent
pursuant to Section 2.5(a) hereof.
(e) As soon as practicable after the determination of the amount of cash,
if any, to be paid to holders of NYNEX Common Stock with respect to any
fractional share interests, the Exchange Agent shall make available such
amounts, net of any required withholding, to such holders of NYNEX Common Stock,
subject to and in accordance with the terms of Section 2.5 hereof.
(f) Any portion of the Exchange Fund and the Common Shares Trust which
remains undistributed for six months after the Effective Time shall be delivered
to Bell Atlantic, upon demand, and any holders of NYNEX Common Stock who have
not theretofore complied with the provisions of this Article II shall thereafter
look only to Bell Atlantic for satisfaction of their claims for Bell Atlantic
Common Stock, any cash in lieu of fractional shares of Bell Atlantic Common
Stock and any Pre-Surrender Dividends.
SECTION 2.8 -- Options to Purchase NYNEX Common Stock. (a) At the
Effective Time, each option or warrant granted by NYNEX to purchase shares of
NYNEX Common Stock which is outstanding and unexercised immediately prior to the
Effective Time shall be assumed by Bell Atlantic and converted into an option or
warrant to purchase shares of Bell Atlantic Common Stock in such amount and at
such exercise price as provided below and otherwise having the same terms and
conditions as are in effect immediately prior to the Effective Time (except to
the extent that such terms, conditions and restrictions may be altered in
accordance with their terms as a result of the transactions contemplated
hereby):
(i) the number of shares of Bell Atlantic Common Stock to be subject to
the new option or warrant shall be equal to the product of (x) the number
of shares of NYNEX Common Stock subject to the original option or warrant
and (y) the Exchange Ratio;
(ii) the exercise price per share of Bell Atlantic Common Stock under
the new option or warrant shall be equal to (x) the exercise price per
share of the NYNEX Common Stock under the original option or warrant
divided by (y) the Exchange Ratio; and
(iii) upon each exercise of options or warrants by a holder thereof, the
aggregate number of shares of Bell Atlantic Common Stock deliverable upon
such exercise shall be rounded down, if necessary, to the nearest whole
share and the aggregate exercise price shall be rounded up, if necessary,
to the nearest cent.
The adjustments provided herein with respect to any options which are "incentive
stock options" (as defined in Section 422 of the Code) shall be effected in a
manner consistent with Section 424(a) of the Code.
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(b) At the Effective Time, each stock appreciation right ("SAR") with
respect to NYNEX Common Stock which is outstanding and unexercised immediately
before the Effective Time shall be converted into an SAR with respect to shares
of Bell Atlantic Common Stock on the same terms and conditions as are in effect
immediately prior to the Effective Time, with the adjustments set forth in
subsection (a) of this Section 2.8.
SECTION 2.9 -- Restricted Stock. At the Effective Time, any shares of
NYNEX Common Stock awarded pursuant to any plan, arrangement or transaction,
including, without limitation, the NYNEX 1987 Restricted Stock Award Plan, and
outstanding immediately prior to the Effective Time shall be converted into
shares of Bell Atlantic Common Stock in accordance with Section 2.2 hereof,
subject to the same terms, conditions and restrictions as in effect immediately
prior to the Effective Time, except to the extent that such terms, conditions
and restrictions may be altered in accordance with their terms as a result of
the transactions contemplated hereby.
SECTION 2.10 -- Certain Adjustments. If between the date hereof and the
Effective Time, the outstanding shares of NYNEX Common Stock or of Bell Atlantic
Common Stock shall be changed into a different number of shares by reason of any
reclassification, recapitalization, split-up, combination or exchange of shares,
or any dividend payable in stock or other securities shall be declared thereon
with a record date within such period, the Exchange Ratio shall be adjusted
accordingly to provide to the holders of NYNEX Common Stock and Bell Atlantic
Common Stock the same economic effect as contemplated by this Agreement prior to
such reclassification, recapitalization, split-up, combination, exchange or
dividend.
ARTICLE III -- CERTAIN MATTERS RELATED TO BELL ATLANTIC
SECTION 3.1 -- Certificate of Incorporation and Bylaws of Bell
Atlantic. At the Effective Time and subject to and upon the terms and
conditions of this Agreement and Delaware Law, Bell Atlantic shall cause the
Certificate of Incorporation of Bell Atlantic and the Bylaws of Bell Atlantic to
be amended and restated to read as set forth in Appendices I-A and I-B hereto,
respectively. Such amendment and restatement of the Bell Atlantic Certificate of
Incorporation and amendment and restatement of the Bell Atlantic Bylaws are
referred to herein as the "Certificate Amendment" and the "Bylaws Amendment",
respectively.
SECTION 3.2 -- Dividends. (a) Each of NYNEX and Bell Atlantic shall
coordinate with the other the declaration of, and the setting of record dates
and payment dates for, dividends on NYNEX Common Stock and Bell Atlantic Common
Stock so that holders of NYNEX Shares (i) do not receive dividends on both NYNEX
Shares and Bell Atlantic Common Stock received in connection with the Merger in
respect of any calendar quarter or (ii) fail to receive a dividend on either
NYNEX Shares or Bell Atlantic Common Stock received in connection with the
Merger in respect of any calendar quarter.
(b) It is the intention of the Parties that, after the Effective Time, the
initial quarterly dividend per share of Bell Atlantic Common Stock shall be at
least equal to $0.77, being the quotient of the dividend paid on each share of
NYNEX Common Stock for the last full fiscal quarter immediately preceding the
date hereof, divided by the Exchange Ratio, subject to approval and declaration
thereof by the Board of Directors of Bell Atlantic.
SECTION 3.3 -- Headquarters. NYNEX and Bell Atlantic agree that commencing
at the Effective Time the headquarters of Bell Atlantic shall be located in New
York, New York.
SECTION 3.4 -- Corporate Identity. NYNEX and Bell Atlantic agree that at
the Effective Time, the corporate name of Bell Atlantic shall remain "Bell
Atlantic Corporation".
ARTICLE IV -- REPRESENTATIONS AND WARRANTIES OF NYNEX
NYNEX hereby represents and warrants as of the date hereof to Bell Atlantic
as follows:
SECTION 4.1 -- Organization and Qualification; Subsidiaries. Each of NYNEX
and each of its Significant Subsidiaries is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation or organization. Each of the NYNEX Subsidiaries which is not a
Significant
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Subsidiary is duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation or organization, except for such
failure which, when taken together with all other such failures, would not
reasonably be expected to have a Material Adverse Effect on NYNEX. Each of NYNEX
and its Subsidiaries has the requisite corporate power and authority and any
necessary governmental authority, franchise, license or permit to own, operate
or lease the properties that it purports to own, operate or lease and to carry
on its business as it is now being conducted, and is duly qualified as a foreign
corporation to do business, and is in good standing, in each jurisdiction where
the character of its properties owned, operated or leased or the nature of its
activities makes such qualification necessary, except for such failure which,
when taken together with all other such failures, would not reasonably be
expected to have a Material Adverse Effect on NYNEX. The NYNEX Subsidiaries are
listed on Schedule 4.1 hereto.
SECTION 4.2 -- Certificate of Incorporation and Bylaws. NYNEX has
heretofore furnished, or otherwise made available, to Bell Atlantic a complete
and correct copy of the Certificate of Incorporation and the Bylaws, each as
amended to the date hereof, of NYNEX and each of its Significant Subsidiaries.
Such Certificates of Incorporation and Bylaws are in full force and effect.
Neither NYNEX nor any of its Significant Subsidiaries is in violation of any of
the provisions of its respective Certificate of Incorporation or, in any
material respect, its Bylaws.
SECTION 4.3 -- Capitalization. (a) The authorized capital stock of NYNEX
consists of (i) 70,000,000 shares of preferred stock, par value $1.00 per share,
none of which are outstanding and none of which are reserved for issuance, (ii)
5,000,000 shares of Series A Junior Participating Preferred Stock, par value
$1.00 per share, none of which are outstanding and 3,000,000 of which are
reserved for issuance, and (iii) 750,000,000 shares of NYNEX Common Stock, of
which, as of March 31, 1996, 449,831,510 shares were issued and outstanding,
695,305 shares were held in the treasury of NYNEX and 45,585,277 shares were
issuable upon the exercise of options outstanding under the NYNEX option plans
listed on Schedule 4.3 hereto. Except as set forth on Schedule 4.3 or, after the
date hereof, as permitted by Section 6.2 hereof, (i) since March 31, 1996, no
shares of NYNEX Common Stock have been issued, except upon the exercise of
options described in the immediately preceding sentence, and (ii) there are no
outstanding NYNEX Equity Rights. For purposes of this Agreement, NYNEX Equity
Rights shall mean subscriptions, options, warrants, calls, commitments,
agreements, conversion rights or other rights of any character (contingent or
otherwise) to purchase or otherwise acquire from NYNEX or any of NYNEX's
Subsidiaries at any time, or upon the happening of any stated event, any shares
of the capital stock of NYNEX ("NYNEX Equity Rights"), except for rights granted
under the Rights Agreement, dated as of October 19, 1989 (the "NYNEX Rights
Agreement"), between NYNEX and the Rights Agent (as defined therein). Schedule
4.3 hereto sets forth a complete and accurate list of certain information with
respect to all outstanding NYNEX Equity Rights as of March 31, 1996. Since March
31, 1996, no NYNEX Equity Rights have been issued except as set forth on
Schedule 4.3, or, after the date hereof, as permitted by Section 6.2 hereof.
(b) Except as set forth on Schedule 4.3, or, after the date hereof, as
permitted by Section 6.2 hereof, there are no outstanding obligations of NYNEX
or any of NYNEX's Subsidiaries to repurchase, redeem or otherwise acquire any
shares of capital stock of NYNEX.
(c) All of the issued and outstanding shares of NYNEX Common Stock are
validly issued, fully paid and nonassessable.
(d) Except as disclosed on Schedule 4.1 hereto, all the outstanding capital
stock of each of NYNEX's Subsidiaries is duly authorized, validly issued, fully
paid and nonassessable, and is owned by NYNEX free and clear of any liens,
security interests, pledges, agreements, claims, charges or encumbrances. Except
as set forth on Schedule 4.3 or hereafter issued or entered into in accordance
with Section 6.2 hereof, there are no existing subscriptions, options, warrants,
calls, commitments, agreements, conversion rights or other rights of any
character (contingent or otherwise) to purchase or otherwise acquire from NYNEX
or any of NYNEX's Subsidiaries at any time, or upon the happening of any stated
event, any shares of the capital stock of any NYNEX Subsidiary, whether or not
presently issued or outstanding (except for rights of first refusal to purchase
interests in Subsidiaries which are not wholly owned by NYNEX), and there are no
outstanding obligations of NYNEX or any of NYNEX's Subsidiaries to repurchase,
redeem or otherwise acquire any
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shares of capital stock of any of NYNEX's Subsidiaries. Except for (i) its
Subsidiaries and Material Investments, (ii) immaterial amounts of equity
securities acquired in the capacity of creditor in bankruptcy proceedings, (iii)
equity interests held by Material Investments and Jointly Held Persons, (iv)
investments of persons in which NYNEX has less than a 10% interest and (v)
equity interests disclosed on Schedule 4.3 hereto or hereafter acquired as
permitted under Section 6.2 hereof, NYNEX does not directly or indirectly own
any equity interest in any other person.
(e) As to each of the NYNEX Material Investments, Cellco Partnership and
Bell Atlantic NYNEX Mobile, Inc., NYNEX owns the equity interest set forth on
Schedule 4.3, free and clear of any liens, security interests, pledges, claims,
charges or encumbrances except as disclosed on Schedule 4.3. Except as disclosed
on Schedule 4.3, and excluding any rights of first refusal, there are no
existing subscriptions, options, warrants, calls, commitments, agreements,
conversion rights or other rights of any character (contingent or otherwise) to
purchase or otherwise acquire any of such equity interests, directly or
indirectly, by NYNEX.
SECTION 4.4 -- Authority Relative to this Agreement. NYNEX has the
necessary corporate power and authority to enter into this Agreement and,
subject to obtaining any necessary stockholder approval of the Merger Agreement,
to carry out its obligations hereunder. The execution and delivery of this
Agreement by NYNEX and the consummation by NYNEX of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of NYNEX, subject to the approval of this Agreement by NYNEX's
stockholders required by Delaware Law. This Agreement has been duly executed and
delivered by NYNEX and, assuming the due authorization, execution and delivery
thereof by the other Parties, constitutes a legal, valid and binding obligation
of NYNEX, enforceable against it in accordance with its terms.
SECTION 4.5 -- No Conflict; Required Filings and Consents. (a) Except as
listed on Schedule 4.5 hereto or as described in subsection (b) below, the
execution and delivery of this Agreement by NYNEX do not, and the performance of
this Agreement by NYNEX will not, (i) violate or conflict with the Certificate
of Incorporation or Bylaws of NYNEX, (ii) conflict with or violate any law,
regulation, court order, judgment or decree applicable to NYNEX or any of its
Subsidiaries or by which any of their respective property is bound or affected,
(iii) violate or conflict with the Certificate of Incorporation or Bylaws of any
of NYNEX's Subsidiaries, (iv) result in any breach of or constitute a default
(or an event which with notice or lapse of time or both would become a default)
under, or give to others any rights of termination or cancellation of, or result
in the creation of a lien or encumbrance on any of the properties or assets of
NYNEX or any of its Subsidiaries pursuant to, result in the loss of any material
benefit under, or require the consent of any other party to, any contract,
instrument, permit, license or franchise to which NYNEX or any of its
Subsidiaries is a party or by which NYNEX, any of such Subsidiaries or any of
their respective property is bound or affected, (v) to NYNEX's knowledge,
conflict with or violate any law, regulation, court order, judgment or decree
applicable to any of its Material Investments or by which such Material
Investments' property is bound or affected, (vi) to NYNEX's knowledge, violate
or conflict with the Certificate of Incorporation or Bylaws of any of its
Material Investments, or (vii) to NYNEX's knowledge, result in any breach of or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination or
cancellation of, or result in the creation of a lien or encumbrance on any of
the properties or assets of any of its Material Investments pursuant to, or
result in the loss of any material benefit under, or require the consent of any
other party to, any permit, license or franchise to which any of its Material
Investments is a party or by which any of such Material Investments or any of
their respective property is bound or affected, except, in the case of clauses
(ii), (iii), (iv), (v), (vi) or (vii) above, for conflicts, violations,
breaches, defaults, results or consents which, individually or in the aggregate,
would not have a Material Adverse Effect on NYNEX.
(b) Except as listed on Schedule 4.5 and except for applicable
requirements, if any, of state or foreign regulatory laws and commissions, the
Federal Communications Commission, the Exchange Act, the premerger notification
requirements of the HSR Act, filing and recordation of appropriate merger or
other documents as required by Delaware Law and any filings required pursuant to
any state securities or "blue sky" laws or the rules of any applicable stock
exchanges, neither NYNEX nor any of its Significant Subsidiaries is required to
submit any notice, report or other filing with any governmental authority,
domestic or foreign, in
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connection with the execution, delivery or performance of this Agreement. Except
as set forth in the immediately preceding sentence, no waiver, consent, approval
or authorization of any governmental or regulatory authority, domestic or
foreign, is required to be obtained by NYNEX or any of its Significant
Subsidiaries in connection with its execution, delivery or performance of this
Agreement.
SECTION 4.6 -- SEC Filings; Financial Statements. (a) NYNEX has filed all
forms, reports and documents required to be filed with the Securities and
Exchange Commission ("SEC") since January 1, 1993, and has heretofore delivered
or made available to Bell Atlantic, in the form filed with the SEC, together
with any amendments thereto, its (i) Annual Reports on Form 10-K for the fiscal
years ended December 31, 1993, 1994 and 1995, (ii) all proxy statements relating
to NYNEX's meetings of stockholders (whether annual or special) held since
January 1, 1993, (iii) Quarterly Reports on Form 10-Q for the fiscal quarters
ended March 31, June 30, and September 30, 1995, and (iv) all other reports or
registration statements filed by NYNEX with the SEC since January 1, 1993,
including without limitation all Annual Reports on Form 11-K filed with respect
to the NYNEX Benefit Plans (collectively, the "NYNEX SEC Reports"). The NYNEX
SEC Reports (i) were prepared substantially in accordance with the requirements
of the 1933 Act or the Exchange Act (as defined in Section 10.4 hereof), as the
case may be, and the rules and regulations promulgated under each of such
respective acts, and (ii) did not at the time they were filed contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
(b) The financial statements, including all related notes and schedules,
contained in the NYNEX SEC Reports (or incorporated by reference therein) fairly
present the consolidated financial position of NYNEX and its Subsidiaries as at
the respective dates thereof and the consolidated results of operations and cash
flows of NYNEX and its Subsidiaries for the periods indicated in accordance with
GAAP applied on a consistent basis throughout the periods involved (except for
changes in accounting principles disclosed in the notes thereto) and subject in
the case of interim financial statements to normal year-end adjustments.
SECTION 4.7 -- Absence of Certain Changes or Events. Except as disclosed
in the NYNEX SEC Reports filed prior to the date hereof and on Schedule 4.7,
since December 31, 1995, NYNEX and its Subsidiaries have not incurred any
material liability, except in the ordinary course of their businesses consistent
with their past practices, and there has not been any change, or any event
involving a prospective change, in the business, financial condition or results
of operations of NYNEX or any of its Subsidiaries which has had, or is
reasonably likely to have, a Material Adverse Effect on NYNEX, and NYNEX and its
Subsidiaries have conducted their respective businesses in the ordinary course
consistent with their past practices.
SECTION 4.8 -- Litigation. There are no claims, actions, suits,
proceedings or investigations pending or, to NYNEX's knowledge, threatened
against NYNEX or any of its Subsidiaries, or any properties or rights of NYNEX
or any of its Subsidiaries, before any court, administrative, governmental,
arbitral, mediation or regulatory authority or body, domestic or foreign, as to
which there is more than a remote possibility of an adverse judgment or
determination against NYNEX or any of its Subsidiaries or any properties or
rights of NYNEX or any of its Subsidiaries in excess of $2 million (net of
insurance and net of accruals reflected in the financial statements incorporated
by reference in NYNEX SEC Reports), except (a) as disclosed on Schedule 4.8
hereto, (b) as disclosed on Schedules 4.9, 4.12, 4.13 or 4.22 hereto, (c) such
claims, actions, suits, proceedings or investigations which are pending or
threatened against Jointly Held Persons (as defined in Section 10.4 hereof),
Bell Atlantic or any of its Subsidiaries, and (d) cases in which neither NYNEX
nor any of its Subsidiaries is a named defendant, but as to which NYNEX or any
of its Subsidiaries may be liable for an allocable share of any judgment
rendered pursuant to the POR (as defined in Section 10.4 hereof). With respect
to tax matters, litigation shall not be deemed threatened unless a tax authority
has delivered a written notice of deficiency to NYNEX or any of its
Subsidiaries.
SECTION 4.9 -- No Violation of Law. The business of NYNEX and its
Subsidiaries is not being conducted in violation of any statute, law, ordinance,
regulation, judgment, order or decree of any domestic or foreign governmental or
judicial entity (including any stock exchange or other self-regulatory body)
("Legal
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Requirements"), or in violation of any permits, franchises, licenses,
authorizations or consents that are granted by any domestic or foreign
government or judicial entity (including any stock exchange or other self-
regulatory body) ("Permits"), except for possible violations none of which,
individually or in the aggregate, may reasonably be expected to have a Material
Adverse Effect on NYNEX. Except as disclosed in NYNEX SEC Reports and as set
forth on Schedule 4.9 hereto, no investigation or review by any domestic or
foreign governmental or regulatory entity (including any stock exchange or other
self-regulatory body) with respect to NYNEX or its Subsidiaries in relation to
any alleged violation of law or regulation is pending or, to NYNEX's knowledge,
threatened, nor has any governmental or regulatory entity (including any stock
exchange or other self-regulatory body) indicated an intention to conduct the
same, except for such investigations which, if they resulted in adverse
findings, would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on NYNEX. Except as set forth on Schedule
4.9 hereto, neither NYNEX nor any of its Subsidiaries is subject to any cease
and desist or other order, judgment, injunction or decree issued by, or is a
party to any written agreement, consent agreement or memorandum of understanding
with, or is a party to any commitment letter or similar undertaking to, or is
subject to any order or directive by, or has adopted any board resolutions at
the request of, any court, governmental entity or regulatory agency that
materially restricts the conduct of its business or which may reasonably be
expected to have a Material Adverse Effect on NYNEX, nor has NYNEX or any of its
Subsidiaries been advised that any court, governmental entity or regulatory
agency is considering issuing or requesting any of the foregoing. None of the
representations and warranties made in this Section 4.9 are being made with
respect to Environmental Laws.
SECTION 4.10 -- Joint Proxy Statement. None of the information supplied or
to be supplied by or on behalf of NYNEX for inclusion or incorporation by
reference in the registration statement to be filed with the SEC by Bell
Atlantic in connection with the issuance of shares of Bell Atlantic Common Stock
in the Merger (the "Registration Statement") will, at the time the Registration
Statement becomes effective under the 1933 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, in light of the circumstances under
which they were made, not misleading. None of the information supplied or to be
supplied by or on behalf of NYNEX for inclusion or incorporation by reference in
the joint proxy statement, in definitive form, relating to the meetings of NYNEX
and Bell Atlantic stockholders to be held in connection with the Merger, or in
the related proxy and notice of meeting, or soliciting material used in
connection therewith (referred to herein collectively as the "Joint Proxy
Statement") will, at the dates mailed to stockholders and at the times of the
NYNEX stockholders' meeting and the Bell Atlantic 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 Registration Statement and the Joint Proxy Statement (except for
information relating solely to Bell Atlantic) will comply as to form in all
material respects with the provisions of the 1933 Act and the Exchange Act and
the rules and regulations promulgated thereunder.
SECTION 4.11 -- Employee Matters; ERISA. Except as previously disclosed in
writing by NYNEX's outside counsel to Bell Atlantic's outside counsel with
specific reference to this Section 4.11:
(a) Set forth on Schedule 4.11 hereto is a true and complete list of all
employee benefit plans covering present and former employees or directors of
NYNEX and of each of its Subsidiaries or their beneficiaries, or providing
benefits to such persons in respect of services provided to any such entity,
including, but not limited to, any employee benefit plans within the meaning of
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), any deferred compensation bonuses, stock options, restricted stock
plans, incentive compensation, severance or change in control agreements and any
other material benefit arrangements or payroll practices (collectively, the
"NYNEX Benefit Plans").
(b) All contributions and other payments required to be made by NYNEX or
any of its Subsidiaries to or under any NYNEX Benefit Plan (or to any person
pursuant to the terms thereof) have been made or the amount of such payment or
contribution obligation has been reflected in the NYNEX Financial Statements.
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(c) Each of the NYNEX Benefit Plans intended to be "qualified" within the
meaning of Section 401(a) of the Code has been determined by the Internal
Revenue Service (the "IRS") to be so qualified, and, to NYNEX's knowledge, no
circumstances exist that could reasonably be expected by NYNEX to result in the
revocation of any such determination. NYNEX is in compliance in all material
respects with, and each of the NYNEX Benefit Plans is and has been operated in
all material respects in compliance with, all applicable Legal Requirements
governing such plan, including, without limitation, ERISA and the Code. Each
NYNEX Benefit Plan intended to provide for the deferral of income or the
reduction of salary or other compensation, or to afford other income tax
benefits, complies in all material respects with the requirements of the
applicable provisions of the Code and other Legal Requirements to the extent
required to provide such income tax benefits.
(d) With respect to the NYNEX Benefit Plans, individually and in the
aggregate, no event has occurred and, to NYNEX's knowledge, there does not now
exist any condition or set of circumstances, that could subject NYNEX or any of
its Subsidiaries to any material liability arising under the Code, ERISA or any
other applicable Legal Requirements (including, without limitation, any
liability to any such plan or the Pension Benefit Guaranty Corporation (the
"PBGC")), or under any indemnity agreement to which NYNEX or any of its
Subsidiaries is a party, excluding liability for benefit claims and funding
obligations payable in the ordinary course.
(e) Except as set forth on Schedule 4.11 hereto, none of the NYNEX Benefit
Plans that are "welfare plans" within the meaning of Section 3(1) of ERISA
provides for any retiree benefits other than continuation coverage required to
be provided under Section 4980B of the Code or Part 6 of Title I of ERISA.
(f) NYNEX has made available to Bell Atlantic a true and correct copy of
each current or last, in the case where there is no current, expired collective
bargaining agreement to which NYNEX or any of its Subsidiaries is a party or
under which NYNEX or any of its Subsidiaries has obligations and, with respect
to each NYNEX Benefit Plan, where applicable, (i) such plan (but only to the
extent such plan is intended to be covered by Section 401 of the Code) and
summary plan description, (ii) the most recent annual report filed with the IRS,
(iii) each related trust agreement (including all material amendments to each
such trust agreement), (iv) the most recent determination of the IRS with
respect to the qualified status of such NYNEX Benefit Plan, and (v) the most
recent actuarial report or valuation.
(g) Except as set forth on Schedule 4.11 hereto, (i) the consummation or
announcement of any transaction contemplated by this Agreement will not (either
alone or upon the occurrence of any additional or further acts or events) result
in any (A) payment (whether of severance pay or otherwise) becoming due from
NYNEX or any of its Subsidiaries to any officer, employee, former employee or
director thereof or to the trustee under any "rabbi trust" or similar
arrangement, or (B) benefit under any NYNEX Benefit Plan being established or
becoming accelerated, vested or payable and (ii) neither NYNEX nor any of its
Subsidiaries is a party to (A) any management, employment, deferred
compensation, severance (including any payment, right or benefit resulting from
a change in control), bonus or other contract for personal services with any
current or former officer, director or employee (whether or not characterized as
a plan for purposes of ERISA), (B) any consulting contract with any person who
prior to entering into such contract was a director or officer of NYNEX or any
of its Subsidiaries, or (C) any plan, agreement, arrangement or understanding
similar to any of the items described in clause (ii)(A) or (B) of this sentence.
(h) The consummation or announcement of any transaction contemplated by
this Agreement will not (either alone or upon the occurrence of any additional
or further acts or events) result in the disqualification of any of the NYNEX
Benefit Plans intended to be qualified under, result in a prohibited transaction
or breach of fiduciary duty under, or otherwise violate, ERISA or the Code.
(i) Neither NYNEX nor any of its Subsidiaries nor any of their directors,
officers, employees or agents, nor any "party in interest" or "disqualified
person", as such terms are defined in Section 3 of ERISA and Section 4975 of the
Code has, with respect to any NYNEX Benefit Plan, engaged in or been a party to
any "prohibited transaction", as such term is defined in Section 4975 of the
Code or Section 406 of ERISA which is not otherwise exempt, which could result
in the imposition of either a penalty assessed pursuant to Section 502(i) of
ERISA or a tax imposed by Section 4975 of the Code or which could constitute a
breach of
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fiduciary duty, in each case applicable to NYNEX or any NYNEX Benefit Plan and
which would result in a Material Adverse Effect on NYNEX.
(j) No NYNEX Benefit Plan subject to Section 412 of the Code has incurred
any now existing "accumulated funding deficiency" (as defined in ERISA), whether
or not waived. Neither NYNEX nor any of its Subsidiaries has incurred, and none
of such entities reasonably expects to incur, any material liability to the PBGC
with respect to any NYNEX Benefit Plan. Neither NYNEX nor any of its
Subsidiaries is a party to, and neither has incurred or reasonably expects to
incur, any withdrawal liability with respect to any "multiemployer plan" (as
defined in Section 3(37) of ERISA) for which there is any outstanding liability.
SECTION 4.12 -- Labor Matters. Except as disclosed on Schedule 4.12
hereto, neither NYNEX nor any of its Subsidiaries is party to any collective
bargaining agreement or other labor agreement with any union or labor
organization and no union or labor organization has been recognized by NYNEX or
any of its Subsidiaries as an exclusive bargaining representative for employees
of NYNEX or any of its Subsidiaries. Except as disclosed on Schedule 4.12
hereto, to NYNEX's knowledge, there is no current union representation question
involving employees of NYNEX or any of its Subsidiaries, nor does NYNEX have
knowledge of any significant activity or proceeding of any labor organization
(or representative thereof) or employee group to organize any such employees.
Neither NYNEX nor any of its Subsidiaries has made any commitment not in
collective bargaining agreements listed on Schedule 4.12 hereto that would
require the application of the terms of any collective bargaining agreements
entered into by NYNEX or any of its Subsidiaries to Bell Atlantic, to any joint
venture of Bell Atlantic, or to any Subsidiary of Bell Atlantic (other than
NYNEX or its Subsidiaries). Except as disclosed on Schedule 4.12 hereto, (i)
there is no material active arbitration under any collective bargaining
agreement involving NYNEX or any of its Subsidiaries, (ii) there is no material
unfair labor practice, grievance, employment discrimination or other labor or
employment related charge, complaint or claim against NYNEX or any of its
Subsidiaries pending before any court, arbitrator, mediator or governmental
agency or tribunal, or, to NYNEX's knowledge, threatened, (iii) there is no
material strike, picketing or work stoppage by, or any lockout of, employees of
NYNEX or any of its Subsidiaries pending or, to NYNEX's knowledge, threatened,
against or involving NYNEX or any of its Subsidiaries, (iv) there is no
significant active arbitration under any collective bargaining agreement
involving NYNEX or any of its Subsidiaries regarding the employer's right to
move work from one location or entity to another, or to consolidate work
locations, or involving other similar restrictions on business operations, (v)
there is no arbitration, administrative agency proceeding, suit or claim
pending, or, to NYNEX's knowledge, threatened, involving the "New Businesses",
"Neutrality Letter", and "Old Business Letter" provisions contained in any
collective bargaining agreement to which NYNEX or any of its Subsidiaries is a
party, and (vi) there is no material proceeding, claim, suit, action or
governmental investigation pending or, to NYNEX's knowledge, threatened, in
respect of which any director, officer, employee or agent of NYNEX or any of its
Subsidiaries is or may be entitled to claim indemnification from NYNEX or such
NYNEX Subsidiary pursuant to their respective charters or bylaws or as provided
in the indemnification agreements, if any, listed on Schedule 4.12 hereto. For
purposes of this Section 4.12, "material" refers to any liability which could
reasonably be expected to exceed $1 million.
SECTION 4.13 -- Environmental Matters. Except as set forth on Schedule
4.13 hereto or in the NYNEX SEC Reports filed prior to the date hereof:
(a) To NYNEX's knowledge, NYNEX and each of its Subsidiaries is in
compliance with all applicable Environmental Laws (as defined below) and neither
NYNEX nor any of its Subsidiaries has received any written or oral communication
from any person or governmental authority that alleges that NYNEX or any of its
Subsidiaries is not in compliance with applicable Environmental Laws where such
non-compliance could reasonably be expected to result in a Material Adverse
Effect on NYNEX.
(b) To NYNEX's knowledge, NYNEX and each of its Subsidiaries has obtained
or has applied for all material environmental, health and safety permits,
licenses, variances, approvals and authorizations (collectively, the
"Environmental Permits") necessary for the construction of their facilities or
the conduct of their operations, and all such material Environmental Permits are
effective or, where applicable, a renewal application has been timely filed and
is pending agency approval, and NYNEX and its Subsidiaries are in
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material compliance with all terms and conditions of such Environmental Permits.
To NYNEX's knowledge, there are no past or present events, conditions,
circumstances, activities, practices, incidents, actions or plans that may
interfere with, or prevent, future continued material compliance on the part of
NYNEX or any of its Subsidiaries with such Environmental Permits. Neither NYNEX
nor any of its Subsidiaries has knowledge of matters or conditions that would
preclude reissuance or transfer of any such Environmental Permit, including
amendment of such instrument, to Bell Atlantic or one of its Subsidiaries, where
such action is necessary to maintain compliance with Environmental Laws in all
material respects.
(c) To NYNEX's knowledge, there is no currently existing requirement to be
imposed in the future by any Environmental Law or Environmental Permit which
could reasonably be expected to result in the incurrence of a material cost by
NYNEX or any of its Subsidiaries.
(d) To NYNEX's knowledge, there is no material Environmental Claim (as
defined below) pending or threatened (i) against NYNEX or any of its
Subsidiaries, (ii) against any person whose liability for any Environmental
Claim NYNEX or any of its Subsidiaries has or may have retained or assumed
either contractually or by operation of law, or (iii) against any real or
personal property or operations which NYNEX or any of its Subsidiaries owns,
leases or manages, in whole or in part.
(e) To NYNEX's knowledge, there have been no Releases (as defined below) of
any Hazardous Material (as defined below) that would be reasonably likely to
form the basis of any material Environmental Claim against NYNEX or any of its
Subsidiaries, or against any person whose liability for any material
Environmental Claim NYNEX or any of its Subsidiaries has or may have retained or
assumed either contractually or by operation of law.
(f) To NYNEX's knowledge, with respect to any predecessor of NYNEX or any
of its Subsidiaries, there is no material Environmental Claim pending or
threatened, or any Release of Hazardous Materials that would be reasonably
likely to form the basis of any material Environmental Claim against NYNEX or
any of its Subsidiaries.
(g) To NYNEX's knowledge, NYNEX has disclosed to Bell Atlantic all material
facts which NYNEX reasonably believes form the basis of a material current or
future cost relating to any environmental matter affecting NYNEX and its
Subsidiaries which NYNEX believes will or is reasonably likely to result in a
Material Adverse Effect on NYNEX.
(h) To NYNEX's knowledge, neither NYNEX nor any of its Subsidiaries, nor
any owner of premises leased or operated by NYNEX or any of its Subsidiaries,
has filed any notice with respect to such premises under federal, state, local
or foreign law indicating past or present treatment, storage or disposal of
Hazardous Materials, as regulated under 40 C.F.R. Parts 264-267 or any state,
local or foreign equivalent or is engaging or has engaged in business operations
involving the generation, transportation, treatment, recycle or disposal of any
waste (excluding low level radioactive tubes from central office equipment or
typical smoke and fire alarm components) regulated under Environmental Laws
pertaining to radioactive materials or the nuclear power industry, including,
without limitation, requirements of Volume 10 of the Code of Federal
Regulations.
(i) To NYNEX's knowledge, none of the properties owned, leased or operated
by NYNEX, its Subsidiaries or any predecessor thereof are now, or were in the
past, listed on the National Priorities List of Superfund Sites (the "NPL"), the
Comprehensive Environmental Response, Compensation and Liability Information
System ("CERCLIS"), or any other comparable state or local environmental
database (excluding easements that transgress such Superfund or CERCLIS sites).
(j) To NYNEX's knowledge, the Merger will not require any governmental
approvals under the Environmental Laws, including those that are triggered by
sales or transfers of businesses or real property.
For purposes of this Section 4.13 and Section 5.13 hereof:
(i) "Environmental Claim" means any and all administrative, regulatory
or judicial actions, suits, demands, demand letters, directives, claims,
liens, investigations, proceedings or notices of noncompliance or violation
(written or oral) by any person (including any federal, state, local or
foreign
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governmental authority) alleging potential liability (including, without
limitation, potential responsibility for or liability for enforcement,
investigatory costs, cleanup costs, governmental response costs, removal
costs, remedial costs, natural resources damages, property damages,
personal injuries or penalties) arising out of, based on or resulting from
(A) the presence, or Release or threatened Release into the environment, of
any Hazardous Materials at any location, whether or not owned, operated,
leased or managed by NYNEX or any of its Subsidiaries (for purposes of this
Section 4.13) or by Bell Atlantic or any of its Subsidiaries (for purposes
of Section 5.13 hereof) (including but not limited to obligations to clean
up contamination resulting from leaking underground storage tanks); or (B)
circumstances forming the basis of any violation or alleged violation of
any Environmental Law; or (C) any and all claims by any third party seeking
damages, contribution, indemnification, cost recovery, compensation or
injunctive relief resulting from the presence or Release of any Hazardous
Materials.
(ii) "Environmental Laws" means all applicable foreign, federal, state
and local laws (including the common law), rules, requirements and
regulations relating to pollution, the environment (including, without
limitation, ambient air, surface water, groundwater, land surface or
subsurface strata) or protection of human health as it relates to the
environment including, without limitation, laws and regulations relating to
Releases of Hazardous Materials, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Materials or relating to management of asbestos in
buildings.
(iii) "Hazardous Materials" means (A) any petroleum or any by-products
or fractions thereof, asbestos in any form that is or could become friable,
urea formaldehyde foam insulation, any form of natural gas, explosives, and
polychlorinated biphenyls ("PCBs"); (B) any chemicals, materials or
substances, whether waste materials, raw materials or finished products,
which are now defined as or included in the definition of "hazardous
substances," "hazardous wastes," "hazardous materials," "extremely
hazardous substances," "restricted hazardous wastes," "toxic substances,"
"toxic pollutants," "pollutants," "contaminants," or words of similar
import under any Environmental Law; and (C) any other chemical, material or
substance, whether waste materials, raw materials or finished products,
regulated or forming the basis of liability under any Environmental Law.
(iv) "Release" means any release, spill, emission, leaking, injection,
deposit, disposal, discharge, dispersal, leaching or migration into the
environment (including without limitation ambient air, atmosphere, soil,
surface water, groundwater or property).
(v) Any matter which NYNEX reasonably believes does not present a
significant likelihood of requiring expenditures by, or causing the
incurrence of liabilities by, NYNEX and its Subsidiaries of more than $2
million or, in the case of repetitive facility upgrades, will not in the
aggregate cause expenditures or liabilities of more than $12 million over a
six-year period, are excluded from the coverage of any representations made
hereunder.
(vi) No representation is made by NYNEX in this Section 4.13 as to
Environmental Claims for which neither NYNEX nor any of its Subsidiaries is
(or would be, if a claim were brought in a formal proceeding) a named
defendant, but as to which NYNEX or any of its Subsidiaries may be liable
for an allocable share of any judgment rendered pursuant to the POR. No
representation is made by NYNEX in subsection (i) of this Section 4.13 as
to properties owned, leased or operated by AT&T or any of its Subsidiaries
except for such properties which are, or at any time since November 1, 1983
were, owned, leased or operated by NYNEX or any of its Subsidiaries.
SECTION 4.14 -- Board Action; Vote Required; Amendment of Rights Agreement;
Applicability of Section 203. (a) The Board of Directors of NYNEX has
unanimously determined that the transactions contemplated by this Agreement are
in the best interests of NYNEX and its stockholders and has resolved to
recommend to such stockholders that they vote in favor thereof.
(b) The approval of the Merger Agreement by a majority of the votes
entitled to be cast by all holders of NYNEX Common Stock is the only vote of the
holders of any class or series of the capital stock of NYNEX required to approve
this Agreement, the Merger and the other transactions contemplated hereby. The
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provisions of Section 10.1 of the Certificate of Incorporation of NYNEX will not
apply to the transactions contemplated by this Agreement.
(c) The NYNEX Rights Agreement has been amended as of July 2, 1996 so as to
provide that (i) no "Distribution Date," "Stock Acquisition Date," or "Trigger
Event" thereunder shall be deemed to have occurred, (ii) none of Bell Atlantic
or any of its subsidiaries will be an "Acquiring Person" thereunder, and (iii)
no holder of rights issued thereunder shall be entitled to exercise such rights
under, or be entitled to any rights or benefits pursuant to, the NYNEX Rights
Agreement solely by reason of the approval, execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby.
(d) The provisions of Section 203 of the Delaware Law will not, assuming
the accuracy of the representations contained in Section 5.20 hereof (without
giving effect to the knowledge qualification therein), apply to this Agreement
or any of the transactions contemplated hereby.
SECTION 4.15 -- Opinion of Financial Advisor. NYNEX has received the
opinions of Bear, Stearns & Co. Inc. ("Bear Stearns") and Morgan Stanley & Co.
Incorporated ("Morgan Stanley"), each dated April 21, 1996, to the effect that,
as of such date, the NYNEX Exchange Ratio (as defined in the Agreement and Plan
of Merger dated as of April 21, 1996 among Seaboard Merger Company, NYNEX and
Bell Atlantic, referred to herein as the "Original Agreement") was fair from a
financial point of view to the holders of NYNEX Common Stock, and has received
the confirming letters of Bear Stearns and Morgan Stanley, each dated July 2,
1996, to the effect that if, as of April 21, 1996, their respective analyses and
review had been conducted in connection with this Agreement, instead of in
connection with the Original Agreement, such opining party would have concluded,
as of April 21, 1996, that the Exchange Ratio was fair from a financial point of
view to the holders of NYNEX Common Stock.
SECTION 4.16 -- Brokers. Except for Bear Stearns and Morgan Stanley, the
arrangements with which have been disclosed to Bell Atlantic prior to the date
hereof, who have been engaged by NYNEX, no broker, finder or investment banker
is entitled to any brokerage, finder's, investment banking or other fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of NYNEX or any of its
Subsidiaries.
SECTION 4.17 -- Tax Matters. Except as set forth on Schedule 4.17 hereto:
(a) All material federal and foreign tax returns and tax reports required
to be filed by NYNEX or its Subsidiaries on or prior to the Effective Time or
with respect to taxable periods ending on or prior to the Effective Time have
been or will be filed with the appropriate governmental authorities on or prior
to the Effective Time or by the due date thereof including extensions;
(b) All material state and local tax returns and tax reports required to be
filed by NYNEX or its Subsidiaries on or prior to the Effective Time or with
respect to taxable periods ending on or prior to the Effective Time which relate
to income, profits, franchise, property, sales, use or other taxes, have been or
will be filed with the appropriate governmental authorities on or prior to the
Effective Time or by the due date thereof including extensions;
(c) The tax returns and tax reports referred to in subparts (a) and (b) of
this Section 4.17 correctly reflect (and as to returns not filed as of the date
hereof, will correctly reflect) all material tax liabilities of NYNEX and its
Subsidiaries required to be shown thereon;
(d) All material federal, state, local and foreign income, profits,
franchise, property, sales, use and other taxes (including interest and
penalties) shown as due on those tax returns and tax reports referred to in
subparts (a) and (b) of this Section 4.17 which have been or will be filed by
the Effective Time, as well as any material foreign withholding taxes imposed on
or in respect of any amounts paid to or by NYNEX or any of its Subsidiaries,
whether or not such amounts or withholding taxes are referred to or shown on any
tax returns or tax reports referred to in Section 4.17(a) or (b) hereof, have
been or will be fully paid or adequately reflected as a liability on NYNEX's or
its Subsidiaries' books and records on or prior to the Closing Date;
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(e) With respect to any period for which tax returns and tax reports have
not yet been filed, or for which taxes are not yet due or owing, NYNEX and its
Subsidiaries have made due and sufficient accruals for such taxes in their
respective books and records and financial statements;
(f) The representations and warranties contained in the NYNEX Officer's
Certificate attached hereto as Schedule 4.17(f) are true and correct; and
(g) Neither NYNEX nor any of its affiliates has taken or agreed to take any
action that would (a) prevent or impede the Merger from qualifying as a tax-free
reorganization under Section 368 of the Code, or (b) make untrue any
representation or warranty contained in the Officer's Certificate referred to in
Section 4.17(f) hereof.
SECTION 4.18 -- Intellectual Property. To NYNEX's knowledge, neither NYNEX
nor any of its Subsidiaries utilizes or has utilized any patent, trademark,
tradename, service mark, copyright, software, trade secret or know-how, except
for those which are owned, possessed or lawfully used by NYNEX or its
Subsidiaries in their operations, and, to the knowledge of NYNEX, neither NYNEX
nor any of its Subsidiaries infringes upon or unlawfully or wrongfully uses any
patent, trademark, tradename, service mark, copyright or trade secret owned or
validly claimed by another.
SECTION 4.19 -- Insurance. Except as set forth on Schedule 4.19 hereto,
each of NYNEX and each of its Significant Subsidiaries is, and has been
continuously since January 1, 1985 (or such later date as such Significant
Subsidiary was organized or acquired by NYNEX), insured with financially
responsible insurers in such amounts and against such risks and losses as are
customary for companies conducting the business as conducted by NYNEX and its
Subsidiaries during such time period. Except as set forth on such Schedule 4.19,
since January 1, 1993, neither NYNEX nor any of its Subsidiaries has received
notice of cancellation or termination with respect to any material insurance
policy of NYNEX or its Subsidiaries. The insurance policies of NYNEX and its
Subsidiaries are valid and enforceable policies.
SECTION 4.20 -- Ownership of Securities. As of the date hereof, neither
NYNEX nor, to NYNEX's knowledge, any of its affiliates or associates (as such
terms are defined under the Exchange Act), (a)(i) beneficially owns, directly or
indirectly, or (ii) is party to any agreement, arrangement or understanding for
the purpose of acquiring, holding, voting or disposing of, in each case, shares
of capital stock of Bell Atlantic, which in the aggregate represent 10% or more
of the outstanding shares of Bell Atlantic Common Stock (other than shares held
by NYNEX Benefit Plans), nor (b) is an "interested stockholder" of Bell Atlantic
within the meaning of Section 203 of the Delaware Law. Except as set forth on
Schedule 4.20 hereto, NYNEX owns no shares of Bell Atlantic Common Stock
described in the parenthetical clause of Section 2.2(b) hereof which would be
canceled and retired without consideration pursuant to Section 2.3(a) hereof.
SECTION 4.21 -- Certain Contracts. (a) All contracts described in Item
601(b)(10) of Regulation S-K to which NYNEX or its Subsidiaries is a party or
may be bound ("NYNEX Contracts") have been filed as exhibits to, or incorporated
by reference in, NYNEX's Annual Report on Form 10-K for the year ended December
31, 1995. All NYNEX Contracts are valid and in full force and effect on the date
hereof except to the extent they have previously expired in accordance with
their terms, and neither NYNEX nor any of its Subsidiaries has violated any
provision of, or committed or failed to perform any act which with or without
notice, lapse of time or both would constitute a default under the provisions
of, any NYNEX Contract, except for defaults which, individually and in the
aggregate, would not reasonably be expected to result in a Material Adverse
Effect on NYNEX. True and complete copies of all NYNEX Contracts have been
delivered to Bell Atlantic or made available for inspection.
(b) Set forth on Schedule 4.21 hereto is a list of each contract, agreement
or arrangement to which NYNEX or any of its Subsidiaries is a party or may be
bound and (i) under the terms of which any of the rights or obligations of a
party thereto will be modified or altered as a result of the transactions
contemplated hereby in a manner which, individually or in the aggregate with all
such other contracts, agreements or arrangements would reasonably be expected to
result in a Material Adverse Effect on NYNEX; (ii) is an arrangement limiting or
restraining Bell Atlantic, NYNEX, any Bell Atlantic or NYNEX Subsidiary or any
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successor thereto from engaging or competing in any business which has, or could
reasonably be expected to have in the foreseeable future, a Material Adverse
Effect on NYNEX; or (iii) to NYNEX's knowledge, is an arrangement limiting or
restraining Bell Atlantic, NYNEX or any of their respective Subsidiaries or
their respective affiliates or any successor thereto from engaging or competing
in any business.
SECTION 4.22 -- Certain Regulatory Matters. (a) Except as disclosed on
Schedule 4.22 hereto and except for billing disputes with customers arising in
the ordinary course of business that in the aggregate involve immaterial
amounts, there are no proceedings or investigations pending or, to NYNEX's
knowledge, threatened, before any domestic or foreign court, administrative,
governmental or regulatory body in which any of the following matters are being
considered, nor has NYNEX or any of its Subsidiaries received written notice or
inquiry from any such body, government official, consumer advocacy or similar
organization or any private party, indicating that any of such matters should be
considered or may become the object of consideration or investigation: (i)
reduction of rates charged to customers; (ii) reduction of earnings; (iii)
refunds of amounts previously charged to customers; or (iv) failure to meet any
expense, infrastructure, service quality or other commitments previously made to
or imposed by any administrative, governmental or regulatory body.
(b) Except as disclosed on Schedule 4.22 hereto, neither NYNEX nor any of
its Subsidiaries has any outstanding commitments (and no such obligations have
been imposed upon NYNEX and remain outstanding) regarding (i) reduction of rates
charged to customers; (ii) reduction of earnings; (iii) refunds of amounts
previously charged to customers or (iv) expenses, infrastructure expenditures,
service quality or other regulatory requirements, to or by any domestic or
foreign court, administrative, governmental or regulatory body, government
official, consumer advocacy or similar organization.
SECTION 4.23 -- SFAS 106 Matters. To NYNEX's knowledge, the accrual by
NYNEX at the Effective Time of the portion of its remaining transition
obligation under Statement of Financial Accounting Standards No. 106 which it is
required to accrue at such time will not adversely affect the ability of NYNEX
to declare and pay annual dividends to Bell Atlantic after the Effective Time in
the same amounts as NYNEX paid to its stockholders on an annual basis prior to
the Effective Time.
ARTICLE V -- REPRESENTATIONS AND WARRANTIES OF BELL ATLANTIC
Bell Atlantic hereby represents and warrants as of the date hereof to NYNEX
as follows:
SECTION 5.1 -- Organization and Qualification; Subsidiaries. Each of Bell
Atlantic and each of its Significant Subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation or organization. Each of the Bell Atlantic
Subsidiaries which is not a Significant Subsidiary is duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation or organization, except for such failure which, when taken
together with all other such failures, would not reasonably be expected to have
a Material Adverse Effect on Bell Atlantic. Each of Bell Atlantic and its
Subsidiaries has the requisite corporate power and authority and any necessary
governmental authority, franchise, license or permit to own, operate or lease
the properties that it purports to own, operate or lease and to carry on its
business as it is now being conducted, and is duly qualified as a foreign
corporation to do business, and is in good standing, in each jurisdiction where
the character of its properties owned, operated or leased or the nature of its
activities makes such qualification necessary, except for such failure which,
when taken together with all other such failures, would not reasonably be
expected to have a Material Adverse Effect on Bell Atlantic. The Bell Atlantic
Subsidiaries are listed on Schedule 5.1 hereto.
SECTION 5.2 -- Certificate of Incorporation and Bylaws. Bell Atlantic has
heretofore furnished, or otherwise made available, to NYNEX a complete and
correct copy of the Certificate of Incorporation and the Bylaws, each as amended
to the date hereof, of Bell Atlantic and each of its Significant Subsidiaries.
Such Certificates of Incorporation and Bylaws are in full force and effect.
Neither Bell Atlantic nor any of its Significant Subsidiaries is in violation of
any of the provisions of its respective Certificate of Incorporation or, in any
material respect, its Bylaws.
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SECTION 5.3 -- Capitalization. (a) The authorized capital stock of Bell
Atlantic consists of (i) 12,500,000 shares of Series Preferred Stock, par value
$1.00 per share, none of which are outstanding and none of which are reserved
for issuance, (ii) 12,500,000 shares of Series Preference Stock, par value $1.00
per share, none of which are outstanding and 10,000,000 of which are reserved
for issuance, and (iii) 1,500,000,000 shares of Bell Atlantic Common Stock, of
which, as of March 31, 1996, 437,816,267 shares were issued and outstanding,
139,551 shares were held in the treasury of Bell Atlantic and 14,137,572 shares
were issuable upon the exercise of options outstanding under the Bell Atlantic
option plans listed on Schedule 5.3 hereto. Except as set forth on Schedule 5.3,
after the date hereof or, as permitted by Section 6.2 hereof, (i) since March
31, 1996, no shares of Bell Atlantic Common Stock have been issued, except upon
the exercise of options and rights described in the immediately preceding
sentence, and (ii) there are no outstanding Bell Atlantic Equity Rights. For
purposes of this Agreement, Bell Atlantic Equity Rights shall mean
subscriptions, options, warrants, calls, commitments, agreements, conversion
rights or other rights of any character (contingent or otherwise) to purchase or
otherwise acquire from Bell Atlantic or any of Bell Atlantic's Subsidiaries at
any time, or upon the happening of any stated event, any shares of the capital
stock of Bell Atlantic ("Bell Atlantic Equity Rights"). Schedule 5.3 hereto sets
forth a complete and accurate list of certain information with respect to all
outstanding Bell Atlantic Equity Rights as of March 31, 1996. Since March 31,
1996, no Bell Atlantic Equity Rights have been issued except as set forth on
Schedule 5.3, or, after the date hereof, as permitted by Section 6.2 hereof.
(b) Except as set forth on Schedule 5.3(b), or, after the date hereof, as
permitted by Section 6.2 hereof, there are no outstanding obligations of Bell
Atlantic or any of Bell Atlantic's Subsidiaries to repurchase, redeem or
otherwise acquire any shares of capital stock of Bell Atlantic.
(c) All of the issued and outstanding shares of Bell Atlantic Common Stock
are validly issued, fully paid and nonassessable.
(d) Except as disclosed on Schedule 5.1 hereto, all the outstanding capital
stock of each of Bell Atlantic's Subsidiaries is duly authorized, validly
issued, fully paid and nonassessable, and is owned by Bell Atlantic free and
clear of any liens, security interests, pledges, agreements, claims, charges or
encumbrances. Except as set forth on Schedule 5.3, or hereafter issued or
entered into in accordance with Section 6.2 hereof, there are no existing
subscriptions, options, warrants, calls, commitments, agreements, conversion
rights or other rights of any character (contingent or otherwise) to purchase or
otherwise acquire from Bell Atlantic or any of Bell Atlantic's Subsidiaries at
any time, or upon the happening of any stated event, any shares of the capital
stock of any Bell Atlantic Subsidiary, whether or not presently issued or
outstanding (except for rights of first refusal to purchase interests in
Subsidiaries which are not wholly owned by Bell Atlantic), and there are no
outstanding obligations of Bell Atlantic or any of Bell Atlantic's Subsidiaries
to repurchase, redeem or otherwise acquire any shares of capital stock of any of
Bell Atlantic's Subsidiaries. Except for (i) its Subsidiaries and Material
Investments, (ii) immaterial amounts of equity securities acquired, in the
capacity of creditor, in bankruptcy proceedings, (iii) equity interests held by
Material Investments and Jointly Held Persons, (iv) investments of persons in
which Bell Atlantic has less than a 10% interest and (v) equity interests
disclosed on Schedule 5.3 hereto or hereafter acquired as permitted under
Section 6.2 hereof, Bell Atlantic does not directly or indirectly own any equity
interest in any other person.
(e) As to each of the Bell Atlantic Material Investments, Cellco
Partnership and Bell Atlantic NYNEX Mobile, Inc., Bell Atlantic owns the equity
interests set forth on Schedule 5.3, free and clear of any liens, security
interests, pledges, claims, charges or encumbrances, except as disclosed on
Schedule 5.3. Except as disclosed on Schedule 5.3, and excluding any rights of
first refusal, there are no existing subscriptions, options, warrants, calls,
commitments, agreements, conversion rights or other rights of any character
(contingent or otherwise) to purchase or otherwise acquire any of such equity
interests, directly or indirectly, by Bell Atlantic.
SECTION 5.4 -- Authority Relative to this Agreement. Bell Atlantic has the
necessary corporate power and authority to enter into this Agreement and,
subject to obtaining any necessary stockholder approval of the Merger Agreement,
the issuance of Bell Atlantic Common Stock pursuant to the Merger Agreement and
the Certificate Amendment, to carry out its obligations hereunder. The execution
and delivery of this
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Agreement by Bell Atlantic and the consummation by Bell Atlantic of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Bell Atlantic, subject to the approval of this
Agreement and the issuance of Bell Atlantic Common Stock in accordance herewith
by Bell Atlantic's stockholders required by the rules of the NYSE and the
approval of the Certificate Amendment required by Delaware Law. This Agreement
has been duly executed and delivered by Bell Atlantic and, assuming the due
authorization, execution and delivery thereof by the other Parties, constitutes
a legal, valid and binding obligation of Bell Atlantic, enforceable against it
in accordance with its terms.
SECTION 5.5 -- No Conflict; Required Filings and Consents. (a) Except as
listed on Schedule 5.5 hereto or as described in subsection (b) below, the
execution and delivery of this Agreement by Bell Atlantic do not, and the
performance of this Agreement by Bell Atlantic will not, (i) violate or conflict
with the Certificate of Incorporation or Bylaws of Bell Atlantic, (ii) conflict
with or violate any law, regulation, court order, judgment or decree applicable
to Bell Atlantic or any of its Subsidiaries or by which any of their respective
property is bound or affected, (iii) violate or conflict with the Certificate of
Incorporation or Bylaws of any of Bell Atlantic's Subsidiaries, or (iv) result
in any breach of or constitute a default (or an event which with notice or lapse
of time or both would become a default) under, or give to others any rights of
termination or cancellation of, or result in the creation of a lien or
encumbrance on any of the properties or assets of Bell Atlantic or any of its
Subsidiaries pursuant to, result in the loss of any material benefit under, or
require the consent of any other party to, any contract, instrument, permit,
license or franchise to which Bell Atlantic or any of its Subsidiaries is a
party or by which Bell Atlantic, any of such Subsidiaries or any of their
respective property is bound or affected, (v) to Bell Atlantic's knowledge,
conflict with or violate any law, regulation, court order, judgment or decree
applicable to any of its Material Investments or by which such Material
Investments' property is bound or affected, (vi) to Bell Atlantic's knowledge,
violate or conflict with the Certificate of Incorporation or Bylaws of any of
its Material Investments, or (vii) to Bell Atlantic's knowledge, result in any
breach of or constitute a default (or an event which with notice or lapse of
time or both would become a default) under, or give to others any rights of
termination or cancellation of, or result in the creation of a lien or
encumbrance on any of the properties or assets of any of its Material
Investments pursuant to, or result in the loss of any material benefit under, or
require the consent of any other party to, any permit, license or franchise to
which any of its Material Investments is a party or by which any of such
Material Investments or any of their respective property is bound or affected,
except, in the case of clauses (ii), (iii), (iv), (v), (vi) or (vii) above, for
conflicts, violations, breaches, defaults, results or consents which,
individually or in the aggregate, would not have a Material Adverse Effect on
Bell Atlantic.
(b) Except as listed on Schedule 5.5 and except for applicable
requirements, if any, of state, District of Columbia or foreign regulatory laws
and commissions, the Federal Communications Commission, the Exchange Act, the
premerger notification requirements of the HSR Act, filing and recordation of
appropriate merger or other documents as required by Delaware Law and any
filings required pursuant to any state securities or "blue sky" laws or the
rules of any applicable stock exchanges, neither Bell Atlantic nor any of its
Significant Subsidiaries is required to submit any notice, report or other
filing with any governmental authority, domestic or foreign, in connection with
the execution, delivery or performance of this Agreement. Except as set forth in
the immediately preceding sentence, no waiver, consent, approval or
authorization of any governmental or regulatory authority, domestic or foreign,
is required to be obtained by Bell Atlantic or any of its Significant
Subsidiaries in connection with its execution, delivery or performance of this
Agreement.
SECTION 5.6 -- SEC Filings; Financial Statements. (a) Bell Atlantic has
filed all forms, reports and documents required to be filed with the SEC since
January 1, 1993, and has heretofore delivered or made available to NYNEX, in the
form filed with the SEC, together with any amendments thereto, its (i) Annual
Reports on Form 10-K for the fiscal years ended December 31, 1993, 1994 and
1995, (ii) all proxy statements relating to Bell Atlantic's meetings of
stockholders (whether annual or special) held since January 1, 1993, (iii)
Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31, June 30,
and September 30, 1995, and (iv) all other reports or registration statements
filed by Bell Atlantic with the SEC since January 1, 1993, including without
limitation all Annual Reports on Form 11-K filed with respect to the Bell
Atlantic Benefit Plans (collectively, the "Bell Atlantic SEC Reports"). The Bell
Atlantic SEC
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Reports (i) were prepared substantially in accordance with the requirements of
the 1933 Act or the Exchange Act, as the case may be, and the rules and
regulations promulgated under each of such respective acts, and (ii) did not at
the time they were filed contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.
(b) The financial statements, including all related notes and schedules,
contained in the Bell Atlantic SEC Reports (or incorporated by reference
therein) fairly present the consolidated financial position of Bell Atlantic and
its Subsidiaries as at the respective dates thereof and the consolidated results
of operations and cash flows of Bell Atlantic and its Subsidiaries for the
periods indicated in accordance with GAAP applied on a consistent basis
throughout the periods involved (except for changes in accounting principles
disclosed in the notes thereto) and subject in the case of interim financial
statements to normal year-end adjustments.
SECTION 5.7 -- Absence of Certain Changes or Events. Except as disclosed
in the Bell Atlantic SEC Reports filed prior to the date hereof and on Schedule
5.7, since December 31, 1995, Bell Atlantic and its Subsidiaries have not
incurred any material liability, except in the ordinary course of their
businesses consistent with their past practices, and there has not been any
change, or any event involving a prospective change, in the business, financial
condition or results of operations of Bell Atlantic or any of its Subsidiaries
which has had, or is reasonably likely to have, a Material Adverse Effect on
Bell Atlantic, and Bell Atlantic and its Subsidiaries have conducted their
respective businesses in the ordinary course consistent with their past
practices.
SECTION 5.8 -- Litigation. There are no claims, actions, suits,
proceedings or investigations pending or, to Bell Atlantic's knowledge,
threatened against Bell Atlantic or any of its Subsidiaries, or any properties
or rights of Bell Atlantic or any of its Subsidiaries, before any court,
administrative, governmental, arbitral, mediation or regulatory authority or
body, domestic or foreign, as to which there is more than a remote possibility
of an adverse judgment or determination against Bell Atlantic or any of its
Subsidiaries or any properties or rights of Bell Atlantic or any of its
Subsidiaries in excess of $2 million (net of insurance and net of accruals
reflected in the financial statements incorporated by reference in Bell Atlantic
SEC Reports), except (a) as disclosed on Schedule 5.8 hereto, (b) as disclosed
on Schedules 5.9, 5.12, 5.13 or 5.22 hereto, (c) such claims, actions, suits,
proceedings or investigations which are pending or threatened against Jointly
Held Persons, NYNEX or any of its Subsidiaries, and (d) cases in which neither
Bell Atlantic nor any of its Subsidiaries is a named defendant, but as to which
Bell Atlantic or any of its Subsidiaries may be liable for an allocable share of
any judgment rendered pursuant to the POR. With respect to tax matters,
litigation shall not be deemed threatened unless a tax authority has delivered a
written notice of deficiency to Bell Atlantic or any of its Subsidiaries.
SECTION 5.9 -- No Violation of Law. The business of Bell Atlantic and its
Subsidiaries is not being conducted in violation of any Legal Requirements or in
violation of any Permits, except for possible violations none of which,
individually or in the aggregate, may reasonably be expected to have a Material
Adverse Effect on Bell Atlantic. Except as disclosed in Bell Atlantic SEC
Reports and as set forth on Schedule 5.9 hereto, no investigation or review by
any domestic or foreign governmental or regulatory entity (including any stock
exchange or other self-regulatory body) with respect to Bell Atlantic or its
Subsidiaries in relation to any alleged violation of law or regulation is
pending or, to Bell Atlantic's knowledge, threatened, nor has any governmental
or regulatory entity (including any stock exchange or other self-regulatory
body) indicated an intention to conduct the same, except for such investigations
which, if they resulted in adverse findings, would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on Bell
Atlantic. Except as set forth on Schedule 5.9 hereto, neither Bell Atlantic nor
any of its Subsidiaries is subject to any cease and desist or other order,
judgment, injunction or decree issued by, or is a party to any written
agreement, consent agreement or memorandum of understanding with, or is a party
to any commitment letter or similar undertaking to, or is subject to any order
or directive by, or has adopted any board resolutions at the request of, any
court, governmental entity or regulatory agency that materially restricts the
conduct of its business or which may reasonably be expected to have a Material
Adverse Effect on Bell Atlantic, nor has Bell Atlantic or any of its
Subsidiaries been advised that any court, governmental entity or regulatory
agency is
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considering issuing or requesting any of the foregoing. None of the
representations and warranties made in this Section 5.9 are being made with
respect to Environmental Laws.
SECTION 5.10 -- Joint Proxy Statement. None of the information supplied or
to be supplied by or on behalf of Bell Atlantic for inclusion or incorporation
by reference in the Registration Statement will, at the time the Registration
Statement becomes effective under the 1933 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, in light of the circumstances under
which they were made, not misleading. None of the information supplied or to be
supplied by or on behalf of Bell Atlantic for inclusion or incorporation by
reference in the Joint Proxy Statement will, at the dates mailed to stockholders
and at the times of the NYNEX stockholders' meeting and the Bell Atlantic
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 Registration Statement and the Joint Proxy
Statement (except for information relating solely to NYNEX) will comply as to
form in all material respects with the provisions of the 1933 Act and the
Exchange Act and the rules and regulations promulgated thereunder.
SECTION 5.11 -- Employee Matters; ERISA. Except as previously disclosed in
writing by Bell Atlantic's outside counsel to NYNEX's outside counsel with
specific reference to this Section 5.11:
(a) Set forth on Schedule 5.11 hereto is a true and complete list of all
employee benefit plans covering present and former employees or directors of
Bell Atlantic and of each of its Subsidiaries or their beneficiaries, or
providing benefits to such persons in respect of services provided to any such
entity, including, but not limited to, any employee benefit plans within the
meaning of Section 3(3) of ERISA, any deferred compensation bonuses, stock
options, restricted stock plans, incentive compensation, severance or change in
control agreements and any other material benefit arrangements or payroll
practices (collectively, the "Bell Atlantic Benefit Plans").
(b) All contributions and other payments required to be made by Bell
Atlantic or any of its Subsidiaries to or under any Bell Atlantic Benefit Plan
(or to any person pursuant to the terms thereof) have been made or the amount of
such payment or contribution obligation has been reflected in the Bell Atlantic
Financial Statements.
(c) Each of the Bell Atlantic Benefit Plans intended to be "qualified"
within the meaning of Section 401(a) of the Code has been determined by the IRS
to be so qualified, and, to Bell Atlantic's knowledge, no circumstances exist
that could reasonably be expected by Bell Atlantic to result in the revocation
of any such determination. Bell Atlantic is in compliance in all material
respects with, and each of the Bell Atlantic Benefit Plans is and has been
operated in all material respects in compliance with, all applicable Legal
Requirements governing such plan, including, without limitation, ERISA and the
Code. Each Bell Atlantic Benefit Plan intended to provide for the deferral of
income or the reduction of salary or other compensation, or to afford other
income tax benefits, complies in all material respects with the requirements of
the applicable provisions of the Code and other Legal Requirements to the extent
required to provide such income tax benefits.
(d) With respect to the Bell Atlantic Benefit Plans, individually and in
the aggregate, no event has occurred and, to Bell Atlantic's knowledge, there
does not now exist any condition or set of circumstances, that could subject
Bell Atlantic or any of its Subsidiaries to any material liability arising under
the Code, ERISA or any other applicable Legal Requirements (including, without
limitation, any liability to any such plan or the PBGC), or under any indemnity
agreement to which Bell Atlantic or any of its Subsidiaries is a party,
excluding liability for benefit claims and funding obligations payable in the
ordinary course.
(e) Except as set forth on Schedule 5.11 hereto, none of the Bell Atlantic
Benefit Plans that are "welfare plans" within the meaning of Section 3(1) of
ERISA provides for any retiree benefits other than continuation coverage
required to be provided under Section 4980B of the Code or Part 6 of Title I of
ERISA.
(f) Bell Atlantic has made available to NYNEX a true and correct copy of
each current or last, in the case where there is no current, expired collective
bargaining agreement to which Bell Atlantic or any of its
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Subsidiaries is a party or under which Bell Atlantic or any of its Subsidiaries
has obligations and, with respect to each Bell Atlantic Benefit Plan, where
applicable, (i) such plan (but only to the extent such plan is intended to be
covered by Section 401 of the Code) and summary plan description, (ii) the most
recent annual report filed with the IRS, (iii) each related trust agreement
(including all material amendments to each such trust agreement), (iv) the most
recent determination of the IRS with respect to the qualified status of such
Bell Atlantic Benefit Plan, and (v) the most recent actuarial report or
valuation.
(g) Except as set forth on Schedule 5.11 hereto, (i) the consummation or
announcement of any transaction contemplated by this Agreement will not (either
alone or upon the occurrence of any additional or further acts or events) result
in any (A) payment (whether of severance pay or otherwise) becoming due from
Bell Atlantic or any of its Subsidiaries to any officer, employee, former
employee or director thereof or to the trustee under any "rabbi trust" or
similar arrangement, or (B) benefit under any Bell Atlantic Benefit Plan being
established or becoming accelerated, vested or payable and (ii) neither Bell
Atlantic nor any of its Subsidiaries is a party to (A) any management,
employment, deferred compensation, severance (including any payment, right or
benefit resulting from a change in control), bonus or other contract for
personal services with any current or former officer, director or employee
(whether or not characterized as a plan for purposes of ERISA), (B) any
consulting contract with any person who prior to entering into such contract was
a director or officer of Bell Atlantic or any of its Subsidiaries, or (C) any
plan, agreement, arrangement or understanding similar to any of the items
described in clause (ii)(A) or (B) of this sentence.
(h) The consummation or announcement of any transaction contemplated by
this Agreement will not (either alone or upon the occurrence of any additional
or further acts or events) result in the disqualification of any of the Bell
Atlantic Benefit Plans intended to be qualified under, result in a prohibited
transaction or breach of fiduciary duty under, or otherwise violate, ERISA or
the Code.
(i) Neither Bell Atlantic nor any of its Subsidiaries nor any of their
directors, officers, employees or agents, nor any "party in interest" or
"disqualified person", as such terms are defined in Section 3 of ERISA and
Section 4975 of the Code has, with respect to any Bell Atlantic Benefit Plan,
engaged in or been a party to any "prohibited transaction", as such term is
defined in Section 4975 of the Code or Section 406 of ERISA, which is not
otherwise exempt, which could result in the imposition of either a penalty
assessed pursuant to Section 502(i) of ERISA or a tax imposed by Section 4975 of
the Code or which could constitute a breach of fiduciary duty, in each case
applicable to Bell Atlantic or any Bell Atlantic Benefit Plan and which would
result in a Material Adverse Effect on Bell Atlantic.
(j) No Bell Atlantic Benefit Plan subject to Section 412 of the Code has
incurred any now existing "accumulated funding deficiency" (as defined in
ERISA), whether or not waived. Neither Bell Atlantic nor any of its Subsidiaries
has incurred, and none of such entities reasonably expects to incur, any
material liability to the PBGC with respect to any Bell Atlantic Benefit Plan.
Neither Bell Atlantic nor any of its Subsidiaries is a party to, and neither has
incurred or reasonably expects to incur, any withdrawal liability with respect
to, any "multiemployer plan" (as defined in Section 3(37) of ERISA) for which
there is any outstanding liability.
SECTION 5.12 -- Labor Matters. Except as disclosed on Schedule 5.12
hereto, neither Bell Atlantic nor any of its Subsidiaries is party to any
collective bargaining agreement or other labor agreement with any union or labor
organization and no union or labor organization has been recognized by Bell
Atlantic or any of its Subsidiaries as an exclusive bargaining representative
for employees of Bell Atlantic or any of its Subsidiaries. Except as disclosed
on Schedule 5.12 hereto, to Bell Atlantic's knowledge, there is no current union
representation question involving employees of Bell Atlantic or any of its
Subsidiaries, nor does Bell Atlantic have knowledge of any significant activity
or proceeding of any labor organization (or representative thereof) or employee
group to organize any such employees. Neither Bell Atlantic nor any of its
Subsidiaries has made any commitment not in collective bargaining agreements
listed on Schedule 5.12 hereto that would require the application of the terms
of any collective bargaining agreements entered into by Bell Atlantic or any of
its Subsidiaries to NYNEX, or to any joint venture of NYNEX or to any Subsidiary
of NYNEX. Except as disclosed on Schedule 5.12 hereto, (i) there is no material
active arbitration under any collective bargaining agreement involving Bell
Atlantic or any of its Subsidiaries, (ii) there is no material unfair labor
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practice, grievance, employment discrimination or other labor or employment
related charge, complaint or claim against Bell Atlantic or any of its
Subsidiaries pending before any court, arbitrator, mediator or governmental
agency or tribunal, or, to Bell Atlantic's knowledge, threatened, (iii) there is
no material strike, picketing or work stoppage by, or any lockout of, employees
of Bell Atlantic or any of its Subsidiaries pending or, to Bell Atlantic's
knowledge, threatened, against or involving Bell Atlantic or any of its
Subsidiaries, (iv) there is no significant active arbitration under any
collective bargaining agreement involving Bell Atlantic or any of its
Subsidiaries regarding the employer's right to move work from one location or
entity to another, or to consolidate work locations, or involving other similar
restrictions on business operations, and (v) there is no material proceeding,
claim, suit, action or governmental investigation pending or, to Bell Atlantic's
knowledge, threatened, in respect of which any director, officer, employee or
agent of Bell Atlantic or any of its Subsidiaries is or may be entitled to claim
indemnification from Bell Atlantic or such Bell Atlantic Subsidiary pursuant to
their respective charters or bylaws or as provided in the indemnification
agreements, if any, listed on Schedule 5.12 hereto. For purposes of this Section
5.12, "material" refers to any liability which could reasonably be expected to
exceed $1 million.
SECTION 5.13 -- Environmental Matters. Except as set forth on Schedule
5.13 hereto or in the Bell Atlantic SEC Reports filed prior to the date hereof:
(a) To Bell Atlantic's knowledge, Bell Atlantic and each of the Bell
Atlantic Subsidiaries is in compliance with all applicable Environmental Laws
and neither Bell Atlantic nor any of its Subsidiaries has received any written
or oral communication from any person or governmental authority that alleges
that Bell Atlantic or any of its Subsidiaries is not in compliance with
applicable Environmental Laws where such non-compliance could reasonably be
expected to result in a Material Adverse Effect on Bell Atlantic.
(b) To Bell Atlantic's knowledge, Bell Atlantic and each of its
Subsidiaries has obtained or has applied for all material Environmental Permits
necessary for the construction of their facilities or the conduct of their
operations, and all such material Environmental Permits are effective or, where
applicable, a renewal application has been timely filed and is pending agency
approval, and Bell Atlantic and its Subsidiaries are in material compliance with
all terms and conditions of such Environmental Permits. To Bell Atlantic's
knowledge, there are no past or present events, conditions, circumstances,
activities, practices, incidents, actions or plans that may interfere with, or
prevent, future continued material compliance on the part of Bell Atlantic or
any of its Subsidiaries with such Environmental Permits.
(c) To Bell Atlantic's knowledge, there is no currently existing
requirement to be imposed in the future by any Environmental Law or
Environmental Permit which could reasonably be expected to result in the
incurrence of a material cost by NYNEX or any of its Subsidiaries.
(d) To Bell Atlantic's knowledge, there is no material Environmental Claim
pending or threatened (i) against Bell Atlantic or any of its Subsidiaries, (ii)
against any person whose liability for any Environmental Claim Bell Atlantic or
any of its Subsidiaries has or may have retained or assumed either contractually
or by operation of law, or (iii) against any real or personal property or
operations which Bell Atlantic or any of its Subsidiaries owns, leases or
manages, in whole or in part.
(e) To Bell Atlantic's knowledge, there have been no Releases of any
Hazardous Material that would be reasonably likely to form the basis of any
material Environmental Claim against Bell Atlantic or any of its Subsidiaries,
or against any person whose liability for any material Environmental Claim Bell
Atlantic or any of its Subsidiaries has or may have retained or assumed either
contractually or by operation of law.
(f) To Bell Atlantic's knowledge, with respect to any predecessor of Bell
Atlantic or any of its Subsidiaries, there is no material Environmental Claim
pending or threatened, or any Release of Hazardous Materials that would be
reasonably likely to form the basis of any material Environmental Claim against
Bell Atlantic or any of its Subsidiaries.
(g) To Bell Atlantic's knowledge, Bell Atlantic has disclosed to NYNEX all
material facts which Bell Atlantic reasonably believes form the basis of a
material current or future cost relating to any environmental matter affecting
Bell Atlantic and its Subsidiaries which Bell Atlantic believes will or is
reasonably likely to result in a Material Adverse Effect on Bell Atlantic.
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(h) To Bell Atlantic's knowledge, neither Bell Atlantic nor any of its
Subsidiaries, nor any owner of premises leased or operated by Bell Atlantic or
any of its Subsidiaries has filed any notice with respect to such premises under
federal, state, local or foreign law indicating past or present treatment,
storage or disposal of Hazardous Materials, as regulated under 40 C.F.R. Parts
264-267 or any state, local or foreign equivalent or is engaging or has engaged
in business operations involving the generation, transportation, treatment,
recycle or disposal of any waste (excluding low level radioactive tubes from
central office equipment or typical smoke and fire alarm components) regulated
under Environmental Laws pertaining to radioactive materials or the nuclear
power industry, including, without limitation, requirements of Volume 10 of the
Code of Federal Regulations.
(i) To Bell Atlantic's knowledge, none of the properties owned, leased or
operated by Bell Atlantic, its Subsidiaries or any predecessor thereof are now,
or were in the past, listed on the NPL, CERCLIS or any other comparable state or
local environmental database (excluding easements that transgress such Superfund
Sites listed on the NPL or CERCLIS sites).
(j) To Bell Atlantic's knowledge, the Merger will not require any
governmental approvals under the Environmental Laws, including those that are
triggered by sales or transfers of businesses or real property.
(k) Any matter which Bell Atlantic reasonably believes does not present a
significant likelihood of requiring expenditures by, or causing the incurrence
of liabilities by, Bell Atlantic and its Subsidiaries of more than $2 million
or, in the case of repetitive facility upgrades, will not in the aggregate cause
expenditures or liabilities of more than $12 million over a six-year period, are
excluded from the coverage of any representations made hereunder.
(l) No representation is made by Bell Atlantic in this Section 5.13 as to
Environmental Claims for which neither Bell Atlantic nor any of its Subsidiaries
is (or would be, if a claim were brought in a formal proceeding) a named
defendant, but as to which Bell Atlantic or any of its Subsidiaries may be
liable for an allocable share of any judgment rendered pursuant to the POR. No
representation is made by Bell Atlantic in subsection (i) of this Section 5.13
as to properties owned, leased or operated by AT&T or any of its Subsidiaries
except for such properties which are, or at any time since November 1, 1983
were, owned, leased or operated by Bell Atlantic or any of its Subsidiaries.
SECTION 5.14 -- Board Action; Vote Required; Redemption of Rights;
Applicability of Section 203. (a) The Board of Directors of Bell Atlantic has
unanimously determined that the transactions contemplated by this Agreement are
in the best interests of Bell Atlantic and its stockholders and has resolved to
recommend to such stockholders that they vote in favor thereof.
(b) The approval of the Certificate Amendment by a majority of the votes
entitled to be cast by all holders of Bell Atlantic Common Stock and the
approval of the Merger Agreement and the issuance of Bell Atlantic Common Stock
pursuant thereto by a majority of the votes cast thereon, provided that the
total votes cast thereon represents over 50% in interest of all securities of
Bell Atlantic entitled to vote thereon, is the only vote of the holders of any
class or series of the capital stock of Bell Atlantic required to approve this
Agreement, the Merger, the Certificate Amendment and the other transactions
contemplated hereby.
(c) By resolution adopted January 23, 1996, the Board of Directors of Bell
Atlantic ordered the redemption of the rights issued pursuant to the Shareholder
Rights Plan adopted by the Board of Bell Atlantic on March 28, 1989 and the
related Rights Agreement, at a redemption price of $.01 per right. Bell Atlantic
has not adopted any other shareholder rights plan.
(d) The provisions of Section 203 of the Delaware Law will not, assuming
the accuracy of the representations contained in Section 4.20 hereof (without
giving effect to the knowledge qualification therein), apply to this Agreement
or any of the transactions contemplated hereby.
SECTION 5.15 -- Opinion of Financial Advisor. Bell Atlantic has received
the opinion of Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill
Lynch"), dated April 21, 1996, to the effect that, as of such date, the Bell
Atlantic Exchange Ratio (as defined in the Original Agreement), taking into
account the NYNEX Exchange Ratio (as defined in the Original Agreement), was
fair from a financial point of view to
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the holders of Bell Atlantic Common Stock, and has received the letter of
Merrill Lynch dated July 2, 1996, to the effect that if, as of April 21, 1996,
its analyses and review had been conducted in connection with this Agreement,
instead of in connection with the Original Agreement, Merrill Lynch would have
concluded, as of April 21, 1996, that the Exchange Ratio was fair from a
financial point of view to Bell Atlantic and, accordingly, to the holders of
Bell Atlantic Common Stock.
SECTION 5.16 -- Brokers. Except for Merrill Lynch, the arrangements with
which have been disclosed to NYNEX prior to the date hereof, who has been
engaged by Bell Atlantic, no broker, finder or investment banker is entitled to
any brokerage, finder's, investment banking or other fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Bell Atlantic or any of its Subsidiaries.
SECTION 5.17 -- Tax Matters. Except as set forth on Schedule 5.17 hereto:
(a) All material federal and foreign tax returns and tax reports required
to be filed by Bell Atlantic or its Subsidiaries on or prior to the Effective
Time or with respect to taxable periods ending on or prior to the Effective Time
have been or will be filed with the appropriate governmental authorities on or
prior to the Effective Time or by the due date thereof including extensions;
(b) All material state and local tax returns and tax reports required to be
filed by Bell Atlantic or its Subsidiaries on or prior to the Effective Time or
with respect to taxable periods ending on or prior to the Effective Time which
relate to income, profits, franchise, property, sales, use or other taxes, have
been or will be filed with the appropriate governmental authorities on or prior
to the Effective Time or by the due date thereof including extensions;
(c) The tax returns and tax reports referred to in subparts (a) and (b) of
this Section 5.17 correctly reflect (and as to returns not filed as of the date
hereof, will correctly reflect) all material tax liabilities of Bell Atlantic
and its Subsidiaries required to be shown thereon;
(d) All material federal, state, local and foreign income, profits,
franchise, property, sales, use and other taxes (including interest and
penalties) shown as due on those tax returns and tax reports referred to in
subparts (a) and (b) of this Section 5.17 which have been or will be filed by
the Effective Time, as well as any material foreign withholding taxes imposed on
or in respect of any amounts paid to or by Bell Atlantic or any of its
Subsidiaries, whether or not such amounts or withholding taxes are referred to
or shown on any tax returns or tax reports referred to in Section 5.17(a) or (b)
hereof, have been or will be fully paid or adequately reflected as a liability
on Bell Atlantic's or its Subsidiaries' books and records on or prior to the
Closing Date;
(e) With respect to any period for which tax returns and tax reports have
not yet been filed, or for which taxes are not yet due or owing, Bell Atlantic
and its Subsidiaries have made due and sufficient accruals for such taxes in
their respective books and records and financial statements;
(f) The representations and warranties contained in the Bell Atlantic
Officer's Certificate attached hereto as Schedule 5.17(f) are true and correct;
and
(g) Neither Bell Atlantic nor any of its affiliates has taken or agreed to
take any action that would (a) prevent or impede the Merger from qualifying as a
tax-free reorganization under Section 368 of the Code, or (b) make untrue any
representation or warranty contained in the Officer's Certificate referred to in
Section 5.17(f) hereof.
SECTION 5.18 -- Intellectual Property. To Bell Atlantic's knowledge,
neither Bell Atlantic nor any of its Subsidiaries utilizes or has utilized any
patent, trademark, tradename, service mark, copyright, software, trade secret or
know-how, except for those which are owned, possessed or lawfully used by Bell
Atlantic or its Subsidiaries in their operations, and, to the knowledge of Bell
Atlantic, neither Bell Atlantic nor any of its Subsidiaries infringes upon or
unlawfully or wrongfully uses any patent, trademark, tradename, service mark,
copyright or trade secret owned or validly claimed by another.
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SECTION 5.19 -- Insurance. Except as set forth on Schedule 5.19 hereto,
each of Bell Atlantic and each of its Significant Subsidiaries is, and has been
continuously since January 1, 1985 (or such later date as such Significant
Subsidiary was organized or acquired by Bell Atlantic), insured with financially
responsible insurers in such amounts and against such risks and losses as are
customary for companies conducting the business as conducted by Bell Atlantic
and its Subsidiaries during such time period. Except as set forth on such
Schedule 5.19, since January 1, 1993, neither Bell Atlantic nor any of its
Subsidiaries has received notice of cancellation or termination with respect to
any material insurance policy of Bell Atlantic or its Subsidiaries. The
insurance policies of Bell Atlantic and its Subsidiaries are valid and
enforceable policies.
SECTION 5.20 -- Ownership of Securities. As of the date hereof, neither
Bell Atlantic nor, to Bell Atlantic's knowledge, any of its affiliates or
associates (as such terms are defined under the Exchange Act), (a)(i)
beneficially owns, directly or indirectly, or (ii) is party to any agreement,
arrangement or understanding for the purpose of acquiring, holding, voting or
disposing of, in each case, shares of capital stock of NYNEX, which in the
aggregate represent 10% or more of the outstanding shares of NYNEX Common Stock
(other than shares held by Bell Atlantic Benefit Plans), nor (b) is an
"interested stockholder" of NYNEX within the meaning of Section 203 of the
Delaware Law. Except as set forth on Schedule 5.20 hereto, Bell Atlantic owns no
shares of NYNEX Common Stock described in the parenthetical clause of Section
2.2(a) hereof which would be canceled and retired without consideration pursuant
to Section 2.3(a) hereof.
SECTION 5.21 -- Certain Contracts. (a) All contracts described in Item
601(b)(10) of Regulation S-K to which Bell Atlantic or its Subsidiaries is a
party or may be bound ("Bell Atlantic Contracts") have been filed as exhibits
to, or incorporated by reference in, Bell Atlantic's Annual Report on Form 10-K
for the year ended December 31, 1995. All Bell Atlantic Contracts are valid and
in full force and effect on the date hereof except to the extent they have
previously expired in accordance with their terms, and neither Bell Atlantic nor
any of its Subsidiaries has violated any provision of, or committed or failed to
perform any act which with or without notice, lapse of time or both would
constitute a default under the provisions of, any Bell Atlantic Contract, except
for defaults which, individually and in the aggregate, would not reasonably be
expected to result in a Material Adverse Effect on Bell Atlantic. True and
complete copies of all Bell Atlantic Contracts have been delivered to NYNEX or
made available for inspection.
(b) Set forth on Schedule 5.21 hereto is a list of each contract, agreement
or arrangement to which Bell Atlantic or any of its Subsidiaries is a party or
may be bound and (i) under the terms of which any of the rights or obligations
of a party thereto will be modified or altered as a result of the transactions
contemplated hereby in a manner which, individually or in the aggregate with all
such other contracts, agreements or arrangements would reasonably be expected to
result in a Material Adverse Effect on Bell Atlantic; (ii) is an arrangement
limiting or restraining Bell Atlantic, NYNEX, any Bell Atlantic or NYNEX
Subsidiary or any successor thereto from engaging or competing in any business
which has, or could reasonably be expected to have in the foreseeable future, a
Material Adverse Effect on Bell Atlantic; or (iii) to Bell Atlantic's knowledge,
is an arrangement limiting or restraining Bell Atlantic, NYNEX or any of their
respective Subsidiaries or affiliates or any successor thereto from engaging or
competing in any business.
SECTION 5.22 -- Certain Regulatory Matters. (a) Except as disclosed on
Schedule 5.22 hereto and except for billing disputes with customers arising in
the ordinary course of business that in the aggregate involve immaterial
amounts, there are no proceedings or investigations pending or, to Bell
Atlantic's knowledge, threatened, before any domestic or foreign court,
administrative, governmental or regulatory body in which any of the following
matters are being considered, nor has Bell Atlantic or any of its Subsidiaries
received written notice or inquiry from any such body, government official,
consumer advocacy or similar organization or any private party, indicating that
any of such matters should be considered or may become the object of
consideration or investigation: (i) reduction of rates charged to customers;
(ii) reduction of earnings; (iii) refunds of amounts previously charged to
customers; or (iv) failure to meet any expense, infrastructure, service quality
or other commitments previously made to or imposed by any administrative,
governmental or regulatory body.
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(b) Except as disclosed on Schedule 5.22 hereto, neither Bell Atlantic nor
any of its Subsidiaries has any outstanding commitments (and no such obligations
have been imposed upon Bell Atlantic and remain outstanding) regarding (i)
reduction of rates charged to customers; (ii) reduction of earnings; (iii)
refunds of amounts previously charged to customers or (iv) expenses,
infrastructure expenditures, service quality or other regulatory requirements to
or by any domestic or foreign court, administrative, governmental or regulatory
body, government official, consumer advocacy or similar organization.
ARTICLE VI -- CONDUCT OF INDEPENDENT
BUSINESSES PENDING THE MERGER
SECTION 6.1 -- Transition Planning. Raymond W. Smith and Ivan G.
Seidenberg, as Chairmen of Bell Atlantic and NYNEX, respectively, jointly shall
be responsible for coordinating all aspects of transition planning and
implementation relating to the Merger and the other transactions contemplated
hereby. If either such person ceases to be Chairman of his respective company
for any reason, such person's successor as Chairman shall assume his
predecessor's responsibilities under this Section 6.1. During the period between
the date hereof and the Effective Time, Messrs. Smith and Seidenberg jointly
shall (i) examine various alternatives regarding the manner in which to best
organize and manage the businesses of Bell Atlantic and NYNEX after the
Effective Time, and (ii) coordinate policies and strategies with respect to
regulatory authorities and bodies, in all cases subject to applicable law.
SECTION 6.2 -- Conduct of Business in the Ordinary Course. Each of NYNEX
and Bell Atlantic covenants and agrees that, subject to the provisions of
Section 7.16 hereof, between the date hereof and the Effective Time, unless the
other shall otherwise consent in writing, and except as described on Schedule
6.2 hereto or as otherwise expressly contemplated hereby, the business of such
Party and its Subsidiaries shall be conducted only in, and such entities shall
not take any action except in, the ordinary course of business and in a manner
consistent with past practice; and each of NYNEX and Bell Atlantic and their
respective Subsidiaries will use their commercially reasonable efforts to
preserve substantially intact their business organizations, to keep available
the services of those of their present officers, employees and consultants who
are integral to the operation of their businesses as presently conducted and to
preserve their present relationships with significant customers and suppliers
and with other persons with whom they have significant business relations. By
way of amplification and not limitation, except as set forth on Schedule 6.2
hereto or as otherwise expressly contemplated by this Agreement, each of NYNEX
and Bell Atlantic agrees on behalf of itself and its Subsidiaries that they will
not, between the date hereof and the Effective Time, directly or indirectly, do
any of the following without the prior written consent of the other:
(a) (i) except for (A) the issuance of shares of NYNEX Common Stock and
Bell Atlantic Common Stock in amounts not exceeding the amounts set forth in
Schedule 6.2 in order to satisfy obligations under employee benefit plans
disclosed in Schedule 4.3 or 5.3 and Equity Rights issued thereunder and under
existing dividend reinvestment plans; (B) grants of stock options with respect
to NYNEX Common Stock or Bell Atlantic Common Stock to employees in the ordinary
course of business and in amounts and in a manner consistent with past practice,
which shall not exceed the respective amounts of options for NYNEX or Bell
Atlantic, as the case may be, set forth on Schedule 6.2 hereto; and (C) the
issuance of securities by a Subsidiary to any person which is directly or
indirectly wholly owned by NYNEX or Bell Atlantic (as the case may be): issue,
sell, pledge, dispose of, encumber, authorize, or propose the issuance, sale,
pledge, disposition, encumbrance or authorization of any shares of capital stock
of any class, or any options, warrants, convertible securities or other rights
of any kind to acquire any shares of capital stock of, or any other ownership
interest in, such Party or any of its Subsidiaries; (ii) amend or propose to
amend the Certificate of Incorporation or Bylaws of such Party or any of its
Subsidiaries or adopt, amend or propose to amend any shareholder rights plan or
related rights agreement; (iii) split, combine or reclassify any outstanding
shares of NYNEX Common Stock and Bell Atlantic Common Stock, or declare, set
aside or pay any dividend or distribution payable in cash, stock, property or
otherwise with respect to shares of NYNEX Common Stock and Bell Atlantic Common
Stock, except for cash dividends to stockholders of NYNEX and Bell Atlantic
declared in the ordinary course of business and consistent with past practice
payable to stockholders of record on the record dates consistently used in prior
periods, which dividends shall not exceed the per share
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amounts for NYNEX or Bell Atlantic, as the case may be, set forth on Schedule
6.2 hereto, and the redemption of rights contemplated by Section 5.14(c) hereof,
as long as such payments do not impair, and could not reasonably be expected to
impair, the ability to meet the condition set forth in Section 8.1(h) hereof;
(iv) redeem, purchase or otherwise acquire or offer to redeem, purchase or
otherwise acquire any shares of its capital stock, except that each of NYNEX and
Bell Atlantic shall be permitted to acquire shares of NYNEX Common Stock or Bell
Atlantic Common Stock, as the case may be, from time to time in open market
transactions, consistent with past practice and in compliance with applicable
law and the provisions of any applicable employee benefit plan, program or
arrangement, for issuance upon the exercise of options and other rights granted,
and the lapsing of restrictions, under such Party's respective employee benefit
plans, programs and arrangements and dividend reinvestment plans; or (v)
authorize or propose or enter into any contract, agreement, commitment or
arrangement with respect to any of the matters prohibited by this Section
6.2(a);
(b) (i) acquire (by merger, consolidation, or acquisition of stock or
assets) any corporation, partnership or other business organization or division
thereof or make any investment in another entity other than an entity which is a
wholly owned Subsidiary of such Party as of the date hereof, except for
investments which do not exceed $100,000,000 for any single investment or series
of related investments, or $300,000,000 in the aggregate for all such
investments in any 12-month period; (ii) except in the ordinary course of
business and in a manner consistent with past practice, sell, pledge, dispose
of, or encumber or authorize or propose the sale, pledge, disposition or
encumbrance of any assets of such Party or any of its Subsidiaries, except for
transactions which do not exceed $100,000,000 individually or $200,000,000 in
the aggregate in any 12-month period; (iii) authorize or make capital
expenditures which are in excess of the amounts shown in Schedule 6.2 hereto;
(iv) enter into any agreement, contract or commitment which involves an amount
in excess of $50,000,000 individually or as part of a series of related
transactions, except for (A) agreements, contracts and commitments of a type
referred to in another clause of this subsection (b) and not prohibited thereby
because of the amount of such contract and (B) agreements, contracts and
commitments entered into (I) in the ordinary course of business of operating the
wireline, directory publishing or cellular business of NYNEX or Bell Atlantic,
as the case may be, or (II) in accordance with the then current business plan
for any of the other existing businesses of NYNEX or Bell Atlantic, as the case
may be; or (v) authorize, enter into or amend any contract, agreement,
commitment or arrangement with respect to any of the matters prohibited by this
Section 6.2(b);
(c) incur indebtedness or increase minority interest (from that shown on
its balance sheet as at December 31, 1995) except as permitted by Schedule 6.2
hereto, and provided further that neither shall incur indebtedness, increase
minority interest, or take any other action if, following the taking of such
action, (i) it is reasonably anticipated that such Party's or any of its
Subsidiaries' outstanding senior indebtedness would be rated BBB or lower by
Standard & Poor's, or (ii) the amount of such Party's floating rate debt on a
consolidated basis would exceed 35% of total indebtedness for money borrowed on
the last day of the calendar quarter in which the action would be taken, or on
the Closing Date (where floating rate debt means indebtedness for money borrowed
as to which the interest rate is adjusted more often than annually);
(d) enter into (i) leveraged derivative contracts (defined as contracts
that use a factor to multiply the underlying index exposure), or (ii) other
derivative contracts except for the purpose of hedging known interest rate and
foreign exchange exposures or otherwise reducing such Party's cost of financing;
(e) take any action with respect to the grant of any severance or
termination pay, or stay, bonus, or other incentive arrangements (otherwise than
pursuant to Benefit Plans and policies of such Party in effect on the date
hereof) or with respect to any increase in benefits payable under its severance
or termination pay policies, or stay, bonus or other incentive arrangements in
effect on the date hereof.
(f) make any payments (except in the ordinary course of business and in
amounts and in a manner consistent with past practice or as otherwise required
by Legal Requirements or the provisions of any NYNEX Benefit Plan or Bell
Atlantic Benefit Plan, as the case may be) under any NYNEX Benefit Plan or any
Bell Atlantic Benefit Plan, as the case may be, to any director or employee of,
or independent contractor or consultant to, such Party or any of its
Subsidiaries, adopt or otherwise materially amend (except for
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amendments required or made advisable by Legal Requirements) any NYNEX Benefit
Plan or Bell Atlantic Benefit Plan, as the case may be, or enter into or amend
any employment or consulting agreement of the type which would be required to be
disclosed hereunder pursuant to Section 4.11 hereof with respect to NYNEX or
Section 5.11 hereof with respect to Bell Atlantic, or grant or establish any new
awards under any such existing NYNEX Benefit Plan or Bell Atlantic Benefit Plan
or agreement (except in the ordinary course of business and in amounts and in a
manner consistent with past practice);
(g) change in any material respect its accounting policies, methods or
procedures except as required by GAAP;
(h) do any act or omit to do any act which would cause a breach of any
contract, commitment or obligation if the result would, individually or in the
aggregate, have a Material Adverse Effect;
(i) take any action which could reasonably be expected to adversely affect
or delay the ability of any of the Parties to obtain any approval of any
governmental or regulatory body required to consummate the transactions
contemplated hereby;
(j) take any action that would (i) prevent or impede the Merger from
qualifying as a tax-free reorganization under Section 368 of the Code; (ii) make
untrue any representation or warranty contained, in the case of NYNEX and its
Subsidiaries, in the Officer's Certificate set forth on Schedule 4.17(f) and, in
the case of Bell Atlantic and its Subsidiaries, in the Officer's Certificate set
forth on Schedule 5.17(f); or (iii) prevent or impede the Merger from qualifying
as a pooling of interests for accounting purposes;
(k) take any action other than in the ordinary course of business and in a
manner consistent with past practice with respect to increases in employee
compensation;
(l) other than pursuant to this Agreement, take any action to cause the
shares of their respective Common Stock to cease to be quoted on any of the
stock exchanges on which such shares are now quoted;
(m) (i) issue SARs, new performance shares, restricted stock, or similar
equity based rights; (ii) materially modify (with materiality to be determined
with respect to the Benefit Plan in question) any actuarial cost method,
assumption or practice used in determining benefit obligations, annual expense
and funding for any Benefit Plan, except to the extent required by GAAP; (iii)
materially modify (with materiality to be determined with respect to the Benefit
Plan trust in question) the investment philosophy of the Benefit Plan trusts or
maintain an asset allocation which is not consistent with such philosophy,
subject to any ERISA fiduciary obligation; (iv) subject to any ERISA fiduciary
obligation, enter into any outsourcing agreement, or any other material contract
relating to the Benefit Plans or management of the Benefit Plan trusts, provided
that Bell Atlantic and NYNEX may enter into any such contracts that may be
terminated within two years; (v) offer any new or extend any existing retirement
incentive, "window" or similar benefit program; (vi) grant any ad hoc pension
increase; (vii) establish any new or fund any existing "rabbi" or similar trust
(except in accordance with the current terms of such trust), or enter into any
other arrangement for the purpose of securing non-qualified benefits or deferred
compensation; (viii) adopt or implement any corporate owned life insurance; or
(ix) adopt, implement or maintain any "split dollar" life insurance program; or
(n) take any action which would cause its representations and warranties
contained herein to become inaccurate in any material respect.
NYNEX and Bell Atlantic agree that any written approval obtained under this
Section 6.2 may be relied upon by the other Party if signed by the Chief
Executive Officer or any other executive officer of the Party providing such
written approval.
SECTION 6.3 -- No Solicitation. From and after the date hereof, NYNEX and
Bell Atlantic, without the prior written consent of the other, will not, and
will not authorize or permit any of their respective Party Representatives (as
defined in Section 7.5 hereof) to, directly or indirectly, solicit, initiate or
encourage (including by way of furnishing information) or take any other action
to facilitate knowingly any inquiries or the making of any proposal which
constitutes or may reasonably be expected to lead to an Acquisition Proposal (as
defined below) from any person, or engage in any discussion or negotiations
relating thereto or
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accept any Acquisition Proposal; provided, however, that notwithstanding any
other provision hereof, the respective Party may (i) at any time prior to the
time the respective Party's stockholders shall have voted to approve this
Agreement, engage in discussions or negotiations with a third party who (without
any solicitation, initiation, encouragement, discussion or negotiation, directly
or indirectly, by or with the Party or its Party Representatives after the date
hereof) seeks to initiate such discussions or negotiations and may furnish such
third party information concerning the Party and its business, properties and
assets if, and only to the extent that, (A)(x) the third party has first made an
Acquisition Proposal that is financially superior to the transactions
contemplated by this Agreement and has demonstrated that the funds necessary for
the Acquisition Proposal are reasonably likely to be available (as determined in
good faith in each case by the Party's Board of Directors after consultation
with its financial advisors) and (y) the Party's Board of Directors shall
conclude in good faith, after considering applicable provisions of state law, on
the basis of oral or written advice of outside counsel, that such action is
necessary for the Board of Directors to act in a manner consistent with its
fiduciary duties under applicable law and (B) prior to furnishing such
information to or entering into discussions or negotiations with such person,
such Party (x) provides prompt notice to the other Party to the effect that it
is furnishing information to or entering into discussions or negotiations with
such person or entity and (y) receives from such person or entity an executed
confidentiality agreement in reasonably customary form on terms not in the
aggregate materially more favorable to such person or entity than the terms
contained in the Confidentiality Agreement (as defined in Section 7.5 hereof),
(ii) comply with Rule 14e-2 promulgated under the Exchange Act with regard to a
tender or exchange offer, and/or (iii) provided such Party terminates this
Agreement pursuant to Section 9.1(h) hereof, accept an Acquisition Proposal from
a third party. Each Party shall immediately cease and terminate any existing
solicitation, initiation, encouragement, activity, discussion or negotiation
with any persons conducted heretofore by the Party or its Representatives with
respect to the foregoing. Each of NYNEX and Bell Atlantic agrees not to release
any third party from, or waive any provision of, any standstill agreement to
which it is a party or any confidentiality agreement between it and another
person who has made, or who may reasonably be considered likely to make, an
Acquisition Proposal, unless its Board of Directors shall conclude in good
faith, after considering applicable provisions of state law, on the basis of
oral or written advice of outside counsel, that such action is necessary for the
Board of Directors to act in a manner consistent with its fiduciary duties. Each
of NYNEX and Bell Atlantic shall notify the other Party orally and in writing of
any such inquiries, offers or proposals (including, without limitation, the
terms and conditions of any such proposal and the identity of the person making
it), within 24 hours of the receipt thereof, shall keep the other Party informed
of the status and details of any such inquiry, offer or proposal, and shall give
the other Party five days' advance notice of any agreement to be entered into
with, or any information to be supplied to, any person making such inquiry,
offer or proposal. As used herein, "Acquisition Proposal" shall mean a proposal
or offer (other than by another Party) for a tender or exchange offer, merger,
consolidation or other business combination involving NYNEX, Bell Atlantic or
any Significant Subsidiary of, or telephone company owned by, such Party or any
proposal to acquire in any manner a substantial equity interest in, or all or
substantially all of the assets of, such Party or any Significant Subsidiary of,
or telephone company owned by, such Party; provided, however, that any proposal
or offer involving the acquisition by NYNEX or Bell Atlantic of an equity
interest in or assets of any Person, whether by tender or exchange offer,
merger, consolidation or otherwise, which does not involve, directly or
indirectly the issuance of more than 15% of the outstanding common stock as of
the date hereof of NYNEX or Bell Atlantic, as the case may be, shall not
constitute an Acquisition Proposal, provided that any such transaction in any
event shall be subject to Section 6.2.
SECTION 6.4 -- Subsequent Financial Statements. Prior to the Effective
Time, each of NYNEX and Bell Atlantic (a) will consult with the other prior to
making publicly available its financial results for any period and (b) will
consult with the other prior to the filing of, and will timely file with the
SEC, each Annual Report on Form 10-K, Quarterly Report on Form 10-Q and Current
Report on Form 8-K required to be filed by such Party under the Exchange Act and
the rules and regulations promulgated thereunder and will promptly deliver to
the other copies of each such report filed with the SEC. As of their respective
dates, none of such reports shall contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading. The respective audited financial statements and
unaudited interim financial
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statements of each of NYNEX and Bell Atlantic, as the case may be, included in
such reports will fairly present the financial position of such Party and its
Subsidiaries as at the dates thereof and the results of their operations and
cash flows for the periods then ended in accordance with GAAP applied on a
consistent basis and, subject, in the case of unaudited interim financial
statements, to normal year-end adjustments and any other adjustments described
therein.
SECTION 6.5 -- Control of Operations. Nothing contained in this Agreement
shall give Bell Atlantic, directly or indirectly, the right to control or direct
NYNEX's operations prior to the Effective Time. Nothing contained in this
Agreement shall give NYNEX, directly or indirectly, the right to control or
direct Bell Atlantic's operations prior to the Effective Time. Prior to the
Effective Time, each of Bell Atlantic and NYNEX shall exercise, consistent with
the terms and conditions of this Agreement, complete control and supervision
over its respective operations.
ARTICLE VII -- ADDITIONAL AGREEMENTS
SECTION 7.1 -- Joint Proxy Statement and the Registration Statement. (a)
As promptly as practicable after the execution and delivery of this Agreement,
the Parties shall prepare and file with the SEC, and shall use all reasonable
efforts to have cleared by the SEC, and promptly thereafter shall mail to the
holders of record of shares of Bell Atlantic Common Stock and NYNEX Common
Stock, the Joint Proxy Statement, provided, however, that NYNEX and Bell
Atlantic shall not mail or otherwise furnish the Joint Proxy Statement to their
respective stockholders unless and until:
(i) they have received notice from the SEC that the Registration
Statement is effective under the 1933 Act;
(ii) NYNEX shall have received a letter from Coopers & Lybrand L.L.P.,
dated the effective date of the Registration Statement, to the effect set
forth in Section 8.1(h) hereof and a letter from each of Bear Stearns and
Morgan Stanley, dated within two business days of the date of the first
mailing of the Joint Proxy Statement, to the effect that, as of the date of
such opinion, the Exchange Ratio is fair from a financial point of view to
the holders of NYNEX Common Stock;
(iii) Bell Atlantic shall have received a letter from Coopers & Lybrand
L.L.P., dated the effective date of the Registration Statement, to the
effect set forth in Section 8.1(h) hereof and a letter from Merrill Lynch,
dated within two business days of the date of the first mailing of the
Joint Proxy Statement, to the effect that, as of the date of such opinion,
the Exchange Ratio is fair from a financial point of view to Bell Atlantic
and, accordingly, to the holders of Bell Atlantic Common Stock;
(iv) NYNEX shall have received a letter of Coopers & Lybrand L.L.P.,
dated a date within two business days prior to the date of the first
mailing of the Joint Proxy Statement, and addressed to NYNEX, in form and
substance reasonably satisfactory to NYNEX and customary in scope and
substance for "cold comfort" letters delivered by independent public
accountants in connection with registration statements on Form S-4 with
respect to the financial statements of Bell Atlantic included in the Joint
Proxy Statement and the Registration Statement; and
(v) Bell Atlantic shall have received a letter of Coopers & Lybrand
L.L.P., dated a date within two business days prior to the date of the
first mailing of the Joint Proxy Statement, and addressed to Bell Atlantic,
in form and substance reasonably satisfactory to Bell Atlantic and
customary in scope and substance for "cold comfort" letters delivered by
independent public accountants in connection with registration statements
on Form S-4 with respect to the financial statements of NYNEX included in
the Joint Proxy Statement and the Registration Statement.
(b) The Parties will cooperate in the preparation of the Joint Proxy
Statement and the Registration Statement and in having the Registration
Statement declared effective as soon as practicable.
SECTION 7.2 -- NYNEX and Bell Atlantic Stockholders' Meetings and
Consummation of the Merger. (a) At the earliest reasonably practicable time
following the execution and delivery of this Agreement, each of NYNEX and Bell
Atlantic shall promptly take all action necessary in accordance with Delaware
Law and
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its Certificate of Incorporation and Bylaws to convene a Stockholders' Meeting.
The stockholder vote or consent required for approval of the Merger Agreement,
and, in the case of Bell Atlantic, the issuance of Bell Atlantic Common Stock
pursuant to the Merger Agreement and the Certificate Amendment, will be no
greater than that contemplated by Sections 4.14(b) and 5.14(b) hereof; provided
however that Bell Atlantic may submit to its shareholders a single proposal
encompassing approval of the Merger Agreement, the issuance of Bell Atlantic
Common Stock pursuant to the Merger Agreement and the Certificate Amendment,
which proposal shall be approved if it receives the affirmative vote of a
majority of the votes entitled to be cast by all holders of Bell Atlantic Common
Stock. Each of NYNEX and Bell Atlantic shall use all commercially reasonable
efforts to solicit from its respective stockholders proxies to be voted at its
Stockholders Meeting in favor of this Agreement pursuant to the Joint Proxy
Statement and, subject to the fiduciary duties of its Board of Directors, each
of NYNEX and Bell Atlantic shall include in the Joint Proxy Statement the
recommendation of its Board of Directors in favor of this Agreement and the
Merger and, in the case of Bell Atlantic, the Certificate Amendment. Each of the
Parties shall take all other action necessary or, in the opinion of the other
Parties, advisable to promptly and expeditiously secure any vote or consent of
stockholders required by Delaware Law, the applicable requirements of any
securities exchange, and such Party's Certificate of Incorporation and Bylaws to
effect the Merger and, in the case of Bell Atlantic, the Certificate Amendment
and the Bylaws Amendment.
(b) Upon the terms and subject to the conditions hereof and as soon as
practicable after the conditions set forth in Article VIII hereof have been
fulfilled or waived, each of the Parties shall execute in the manner required by
Delaware Law and deliver to and file with the Secretary of State of the State of
Delaware such instruments and agreements as may be required by Delaware Law and
the Parties shall take all such other and further actions as may be required by
law to make the Merger effective, and Bell Atlantic shall take all such other
and further actions as may be required by law to make the Certificate Amendment
and the Bylaws Amendment effective. Prior to the filings referred to in this
Section 7.2(b), a closing (the "Closing") will be held at the offices of NYNEX
(or such other place as the Parties may agree) for the purpose of confirming all
the foregoing. The Closing will take place upon the fulfillment or waiver of all
of the conditions to closing set forth in Article VIII of this Agreement, or as
soon thereafter as practicable (the date of the Closing being herein referred to
as the "Closing Date").
SECTION 7.3 -- Additional Agreements. (a) Each of the Parties will comply
in all material respects with all applicable laws and with all applicable rules
and regulations of any governmental authority in connection with its execution,
delivery and performance of this Agreement and the transactions contemplated
hereby. Each of the Parties agrees to use all commercially reasonable efforts to
obtain in a timely manner all necessary waivers, consents and approvals and to
effect all necessary registrations and filings, and to use all commercially
reasonable efforts to take, or cause to be taken, all other actions and to do,
or cause to be done, all other things necessary, proper or advisable to
consummate and make effective as promptly as practicable the transactions
contemplated by this Agreement. Without limiting the generality of the
foregoing, each of NYNEX and Bell Atlantic shall promptly prepare and file a
Premerger Notification in accordance with the HSR Act, shall promptly comply
with any requests for additional information, and shall use its commercially
reasonable efforts to obtain termination of the waiting period thereunder as
promptly as practicable.
(b) The Parties agree that NYNEX shall pay on behalf of those persons who
are NYNEX stockholders immediately prior to the Effective Time any New York
State and New York City real estate transfer taxes and New York State real
property transfer gains tax payable in connection with the Merger.
SECTION 7.4 -- Notification of Certain Matters. Each of NYNEX and Bell
Atlantic shall give prompt notice to the other of the following:
(a) the occurrence or nonoccurrence of any event whose occurrence or
nonoccurrence would be likely to cause either (i) any representation or warranty
contained in this Agreement to be untrue or inaccurate in any material respect
at any time from the date hereof to the Effective Time, or (ii) directly or
indirectly, any Material Adverse Effect on such Party;
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(b) any material failure of such Party, or any officer, director, employee
or agent of any thereof, to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder; and
(c) any facts relating to such Party which would make it necessary or
advisable to amend the Joint Proxy Statement or the Registration Statement in
order to make the statements therein not misleading or to comply with applicable
law; provided, however, that the delivery of any notice pursuant to this Section
7.4 shall not limit or otherwise affect the remedies available hereunder to the
Party receiving such notice.
SECTION 7.5 -- Access to Information. (a) From the date hereof to the
Effective Time, each of NYNEX and Bell Atlantic shall, and shall cause its
respective Subsidiaries, and its and their officers, directors, employees,
auditors, counsel and agents to afford the officers, employees, auditors,
counsel and agents of the other Party complete access at all reasonable times to
such Party's and its Subsidiaries' officers, employees, auditors, counsel
agents, properties, offices and other facilities and to all of their respective
books and records, and shall furnish the other with all financial, operating and
other data and information as such other Party may reasonably request.
(b) Each of NYNEX and Bell Atlantic agrees that all information so received
from the other Party shall be deemed received pursuant to the confidentiality
agreement, dated as of June 14, 1996 between NYNEX and Bell Atlantic (the
"Confidentiality Agreement") and such Party shall, and shall cause its
Subsidiaries and each of its and their respective officers, directors,
employees, financial advisors and agents ("Party Representatives"), to comply
with the provisions of the Confidentiality Agreement with respect to such
information and the provisions of the Confidentiality Agreement are hereby
incorporated herein by reference with the same effect as if fully set forth
herein.
SECTION 7.6 -- Public Announcements. NYNEX and Bell Atlantic shall use all
reasonable efforts to develop a joint communications plan and each Party shall
use all reasonable efforts to ensure that all press releases and other public
statements with respect to the transactions contemplated hereby shall be
consistent with such joint communications plan or, to the extent inconsistent
therewith, shall have received the prior written approval of the other.
SECTION 7.7 -- Cooperation. (a) Upon the terms and subject to the
conditions hereof, each of the Parties agrees to use its commercially reasonable
efforts to take or cause to be taken all actions and to do or cause to be done
all things necessary, proper or advisable to consummate the transactions
contemplated by this Agreement and shall use its commercially reasonable efforts
to obtain all necessary waivers, consents and approvals, and to effect all
necessary filings under the 1933 Act, the Exchange Act and the HSR Act. The
Parties shall cooperate in responding to inquiries from, and making
presentations to, regulatory authorities.
(b) Each of NYNEX and Bell Atlantic agree to use its commercially
reasonable efforts to comply promptly with all requirements of the New Jersey
and Connecticut Property Transfer Statutes, to the extent applicable to the
transactions contemplated hereby, and to take all actions necessary to cause the
transactions contemplated hereby to be effected in compliance with the New
Jersey and Connecticut Property Transfer Statutes. NYNEX and Bell Atlantic agree
that they will consult with each other to determine what, if any, actions must
be taken prior to or after the Effective Time to ensure compliance with such
statutes. Each of NYNEX and Bell Atlantic agrees to provide the other with any
documents to be submitted to the relevant state agencies prior to submission and
agrees not to take any action to comply with the New Jersey and Connecticut
Property Transfer Statutes without the other's prior consent, which consent
shall not be unreasonably withheld. Each Party shall bear its respective costs
and expenses incurred in connection with compliance with the New Jersey and
Connecticut Property Transfer Statutes. For purposes of this section, the New
Jersey and Connecticut Property Transfer Statutes means the New Jersey
Industrial Site Recovery Act, 1993 N.J. Laws 139, and the Connecticut Transfer
Act, Conn. Gen. Stat. Ann. Section 22a-134(b).
SECTION 7.8 -- Indemnification, Directors' and Officers' Insurance. For a
period of six years after the Effective Time, (a) Bell Atlantic shall cause
NYNEX to maintain in effect the current provisions regarding indemnification of
officers and directors contained in the charter and bylaws of NYNEX and each of
its Subsidiaries and any directors, officers or employees indemnification
agreements of NYNEX and its
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respective Subsidiaries, (b) Bell Atlantic shall cause NYNEX to, and Bell
Atlantic shall, maintain in effect the current policies of directors' and
officers' liability insurance and fiduciary liability insurance maintained by
NYNEX and Bell Atlantic, respectively, (provided that Bell Atlantic may
substitute therefor policies of at least the same coverage and amounts
containing terms and conditions which are, in the aggregate, no less
advantageous to the insured in any material respect) with respect to claims
arising from facts or events which occurred on or before the Effective Time, and
(c) Bell Atlantic shall cause NYNEX to, and Bell Atlantic shall, indemnify the
directors and officers of NYNEX and Bell Atlantic, respectively, to the fullest
extent to which NYNEX and Bell Atlantic are permitted to indemnify such officers
and directors under their respective charters and bylaws and applicable law.
Bell Atlantic hereby unconditionally and irrevocably guarantees for the benefit
of such directors, officers and employees the obligations of NYNEX under the
foregoing indemnification arrangements.
SECTION 7.9 -- Employee Benefit Plans. (a) Except as otherwise provided
herein or set forth on Schedule 6.2, NYNEX and Bell Atlantic agree that, unless
otherwise mutually determined, the NYNEX Benefit Plans and the Bell Atlantic
Benefit Plans in effect at the date hereof shall remain in effect after the
Effective Time with respect to classes of employees covered by such plans
immediately prior to the Effective Time.
(b) Except as otherwise set forth on Schedule 6.2, in the case of the NYNEX
Benefit Plans under which the employees' interests are based upon NYNEX Common
Stock, or the respective market prices thereof (but which interests do not
constitute stock options), NYNEX and Bell Atlantic agree that such interests
shall, from and after the Effective Time, be based on Bell Atlantic Common Stock
in accordance with the Exchange Ratio.
(c) With respect to all NYNEX Benefit Plans which have entitlement or
vesting terms that are based upon the market price or value per share of NYNEX
Common Stock, NYNEX and Bell Atlantic agree that from and after the Effective
Time, such market price or value per share shall be adjusted by multiplying it
by the inverse of the Exchange Ratio.
(d) With respect to any NYNEX Benefit Plans maintained or contributed to
outside the United States for the benefit of non-United States citizens or
residents, the principles set forth in this Section 7.9 and on Schedule 6.2
shall apply to the extent the application of such principles does not violate
applicable foreign law.
(e) Without limiting the applicability of Sections 2.8 and 2.9 hereof, each
of the Parties shall take all actions as are necessary to ensure that NYNEX will
not at the Effective Time be bound by any options, SARs, warrants or other
rights or agreements which would entitle any person, other than Bell Atlantic,
to own any capital stock of the Surviving Corporation or to receive any payment
in respect thereof, and all NYNEX Benefit Plans conferring any rights with
respect to NYNEX Common Stock or other capital stock of NYNEX shall be deemed
hereby to be amended to be in conformity with this Section 7.9.
SECTION 7.10 -- Employment Arrangements. (a) At the Effective Time,
pursuant to the terms of the employment contracts referred to in Section 7.10(b)
hereof and subject to Section 5.11 of the Bylaws of Bell Atlantic reflecting the
Bylaws Amendment (the "Amended Bylaws") (i) Raymond W. Smith shall hold the
position of Chairman and Chief Executive Officer of Bell Atlantic, and (ii) Ivan
G. Seidenberg shall hold the position of Vice Chairman, President and Chief
Operating Officer of Bell Atlantic. Pursuant to the terms of the employment
contracts referred to in Section 7.10(b) hereof and subject to Section 5.11 of
the Amended Bylaws, Ivan G. Seidenberg shall succeed Raymond W. Smith in the
positions of Chief Executive Officer and Chairman. If either of such persons is
unable or unwilling to hold such offices as set forth above, his successor shall
be selected by the Board of Directors of Bell Atlantic in accordance with the
Amended Bylaws. The authority, duties and responsibilities of the Chairman, the
Vice Chairman, the Chief Executive Officer, the President and the Chief
Operating Officer shall be set forth in the employment contracts entered into
pursuant to Section 7.10(b) hereof, which employment contracts shall also set
forth in their entirety the rights and remedies of Raymond W. Smith and Ivan G.
Seidenberg with respect to employment by Bell Atlantic. Neither Raymond W. Smith
nor Ivan G. Seidenberg shall have any right, remedy or cause of action under
this Section 7.10, nor shall they be third party beneficiaries of this Section
7.10.
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(b) At the Closing, Bell Atlantic shall enter into employment agreements
with Messrs. Raymond W. Smith and Ivan G. Seidenberg in substantially the forms
previously agreed to by NYNEX and Bell Atlantic.
SECTION 7.11 -- Stock Exchange Listing. Each of the Parties shall use its
best efforts to obtain, prior to the Effective Time, the approval for listing on
the NYSE, effective upon official notice of issuance, of the shares of Bell
Atlantic Common Stock into which the NYNEX Shares will be converted pursuant to
Article II hereof and which will be issuable upon exercise of options pursuant
to Section 2.8 hereof.
SECTION 7.12 -- Post-Merger Bell Atlantic Board of Directors. At the
Effective Time, the total number of persons serving on the Board of Directors of
Bell Atlantic shall be twenty-two (unless otherwise agreed in writing by NYNEX
and Bell Atlantic prior to the Effective Time), half of whom shall be NYNEX
Directors and half of whom shall be Bell Atlantic Directors (as such terms are
defined below). No more than six of the twenty-two initial Directors of Bell
Atlantic shall be employees of NYNEX or Bell Atlantic; half of the employee
directors shall be NYNEX Directors and half shall be Bell Atlantic Directors (as
such terms are defined below). The persons to serve initially on the Board of
Directors of Bell Atlantic at the Effective Time who are NYNEX Directors shall
be selected solely by and at the absolute discretion of the Board of Directors
of NYNEX prior to the Effective Time; and the persons to serve on the Board of
Directors of Bell Atlantic at the Effective Time who are Bell Atlantic Directors
shall be selected solely by and at the absolute discretion of the Board of
Directors of Bell Atlantic prior to the Effective Time. In the event that, prior
to the Effective Time, any person so selected to serve on the Board of Directors
of Bell Atlantic after the Effective Time is unable or unwilling to serve in
such position, the Board of Directors which selected such person shall designate
another of its members to serve in such person's stead in accordance with the
provisions of the immediately preceding sentence. From and after the Effective
Time and until Raymond W. Smith ceases to be the Chairman of Bell Atlantic, the
Board of Directors of Bell Atlantic and each Committee of the Board of Directors
of Bell Atlantic as constituted following each election of Directors shall
consist of an equal number of NYNEX Directors and Bell Atlantic Directors. If,
at any time during the period referred to in the immediately preceding sentence,
the number of NYNEX Directors and Bell Atlantic Directors serving, or that would
be serving following the next stockholders' meeting at which Directors are to be
elected, as Directors of Bell Atlantic or as members of any Committee of the
Board of Directors of Bell Atlantic, would not be equal, then, subject to the
fiduciary duties of the Directors of Bell Atlantic, the Board of Directors and
the Nominating Committee thereof shall nominate for election at the next
stockholders' meeting at which Directors are to be elected, such person or
persons as may be requested by the remaining NYNEX Directors (if the number of
NYNEX Directors is, or would otherwise become, less than the number of Bell
Atlantic Directors) or by the remaining Bell Atlantic Directors (if the number
of Bell Atlantic Directors is, or would otherwise become, less than the number
of NYNEX Directors) to ensure that there shall be an equal number of NYNEX
Directors and Bell Atlantic Directors. The provisions of the preceding sentence
shall not apply in respect of any stockholders' meeting which takes place after
the date on which Raymond W. Smith ceases to be Chairman of Bell Atlantic, and
prior to such date, vacancies in the Board of Directors of Bell Atlantic shall
be filled only by vote of the stockholders. The term "NYNEX Director" means (i)
any person serving as a Director of NYNEX or of a NYNEX telephone company on the
date hereof who becomes a Director of Bell Atlantic at the Effective Time and
(ii) any person who becomes a Director of Bell Atlantic pursuant to the second
preceding sentence and who is designated by the NYNEX Directors; and the term
"Bell Atlantic Director" means (i) any person serving as a Director of Bell
Atlantic on the date hereof who continues as a Director of Bell Atlantic at the
Effective Time and (ii) any person who becomes a Director of Bell Atlantic
pursuant to the second preceding sentence and who is designated by the Bell
Atlantic Directors.
Each of NYNEX and Bell Atlantic shall take such action as shall reasonably
be deemed by either thereof to be advisable to give effect to the provisions set
forth in this section, including but not limited to incorporating such
provisions in the Bylaws of Bell Atlantic in effect at the Effective Time.
SECTION 7.13 -- No Shelf Registration. Bell Atlantic shall not be required
to amend or maintain the effectiveness of the Registration Statement for the
purpose of permitting resale of the shares of Bell Atlantic Common Stock
received pursuant hereto by the persons who may be deemed to be "affiliates" of
NYNEX or Bell Atlantic within the meaning of Rule 145 promulgated under the 1933
Act. The shares of Bell
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Atlantic Common Stock issuable upon exercise of options pursuant to Section 2.8
hereof shall be registered under the 1933 Act and such registration shall be
effective at the time of issuance.
SECTION 7.14 -- Affiliates. (a) Each of NYNEX and Bell Atlantic (i) has
disclosed to the other on Schedule 7.14 hereof all persons who are, or may be,
as of the date hereof its "affiliates" for purposes of Rule 145 under the
Securities Act or SEC Accounting Series Release 135, and (ii) shall use all
reasonable efforts to cause each person who is identified as an "affiliate" of
it on Schedule 7.14 to deliver to the other as promptly as practicable but in no
event later than the Closing Date, a signed agreement substantially in the form
previously agreed to by NYNEX and Bell Atlantic. NYNEX and Bell Atlantic shall
notify each other from time to time of any other persons who then are, or may
be, such an "affiliate" and use all reasonable efforts to cause each additional
person who is identified as an "affiliate" to execute a signed agreement as set
forth in this Section 7.14(a).
(b) If the transactions contemplated by this Agreement would otherwise
qualify for pooling of interests accounting treatment, shares of NYNEX Common
Stock and shares of Bell Atlantic Common Stock held by such "affiliates" of
NYNEX or Bell Atlantic, as the case may be, shall not be transferable during the
30 day period prior to the Effective Time, and shares of Bell Atlantic Common
Stock issued to, or as of the Effective Time held by, such "affiliates" of NYNEX
and Bell Atlantic shall not be transferable until such time as financial results
covering at least 30 days of combined operations of NYNEX and Bell Atlantic have
been published within the meaning of Section 201.01 of the SEC's Codification of
Financial Reporting Policies, regardless of whether each such "affiliate" has
provided the signed agreement referred to in Section 7.14(a), except to the
extent permitted by, and in accordance with, SEC Accounting Series Release 135
and SEC Staff Accounting Bulletins 65 and 76. Any Bell Atlantic Common Stock
held by any such "affiliate" shall not be transferable, regardless of whether
such "affiliate" has provided the applicable signed agreement referred to in
Section 7.14(a), if such transfer, either alone or in the aggregate with other
transfers by "affiliates", would preclude the ability of the Parties to account
for the transactions contemplated by this Agreement as a pooling of interests.
Bell Atlantic shall not register the transfer of any shares of Bell Atlantic
Common Stock unless such transfer is made in compliance with the foregoing.
SECTION 7.15 -- Blue Sky. NYNEX and Bell Atlantic will use their best
efforts to obtain prior to the Effective Time all necessary blue sky permits and
approvals required to permit the distribution of the shares of Bell Atlantic
Common Stock to be issued in accordance with the provisions of this Agreement.
SECTION 7.16 -- Pooling of Interests. Each of the Parties will use its
best efforts to cause the transactions contemplated by this Agreement to be
accounted for as a pooling of interests in accordance with GAAP, and such
accounting treatment to be accepted by Bell Atlantic's independent certified
public accountants, by the NYSE and by the SEC, respectively, and each of the
Parties agrees that it will take no action that would cause such accounting
treatment not to be obtained.
SECTION 7.17 -- Tax-Free Reorganization. Each of the Parties will use its
best efforts to cause the Merger to qualify as a tax-free reorganization under
Section 368 of the Code.
ARTICLE VIII -- CONDITIONS TO MERGER
SECTION 8.1 -- Conditions to Obligations of Each Party to Effect the
Merger. The respective obligations of each Party to effect the Merger shall be
subject to the following conditions:
(a) Stockholder Approval. The Merger and this Agreement shall have been
approved and adopted by the requisite vote of the stockholders of each of NYNEX
and Bell Atlantic and the Certificate Amendment and the issuance of Bell
Atlantic Common Stock pursuant to the Merger shall have been approved by the
requisite vote of the stockholders of Bell Atlantic, in each case in accordance
with Delaware Law and the rules of the NYSE, as applicable;
(b) Legality. No federal, state or foreign statute, rule, regulation,
executive order, decree or injunction shall have been enacted, entered,
promulgated or enforced by any court or governmental authority which is in
effect and has the effect of (i) making the Merger illegal or otherwise
prohibiting the consummation of the
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Merger or (ii) creating a Material Adverse Effect on NYNEX or Bell Atlantic,
with or without including its ownership of NYNEX and its Subsidiaries after the
Merger;
(c) HSR Act. Any waiting period applicable to the consummation of the
Merger under the HSR Act shall have expired or been terminated;
(d) Regulatory Matters. All authorizations, consents, orders or approvals
of, or declarations or filings with, and all expirations of waiting periods
imposed by, any governmental body, agency or official (all of the foregoing,
"Consents") which are necessary for the consummation of the transactions
contemplated hereby, other than immaterial Consents the failure to obtain which
would have no material adverse effect on the consummation of the transactions
contemplated hereby and no Material Adverse Effect on Bell Atlantic, with or
without including its ownership of NYNEX and its Subsidiaries after the Merger,
or NYNEX, shall have been filed, have occurred or have been obtained (all such
permits, approvals, filings and consents and the lapse of all such waiting
periods being referred to as the "Requisite Regulatory Approvals") and all such
Requisite Regulatory Approvals shall be in full force and effect, provided,
however, that a Requisite Regulatory Approval shall not be deemed to have been
obtained if in connection with the grant thereof there shall have been an
imposition by any state or federal governmental body, agency or official of any
condition, requirement, restriction or change of regulation, or any other action
directly or indirectly related to such grant taken by such governmental body,
which would reasonably be expected to either (i) have a Material Adverse Effect
on any of (A) NYNEX, (B) Bell Atlantic (either with or without including its
ownership of NYNEX and its Subsidiaries after the Merger), (C) New York
Telephone Company, (D) New England Telephone and Telegraph Company, (E) Bell
Atlantic -- Pennsylvania, Inc., Bell Atlantic -- Delaware, Inc. or Bell
Atlantic -- New Jersey, Inc., considered in the aggregate ("Bell Atlantic
North"), or (F) Bell Atlantic -- Maryland, Inc., Bell Atlantic -- Washington,
D.C., Inc., Bell Atlantic -- Virginia, Inc. or Bell Atlantic -- West Virginia,
Inc., considered in the aggregate ("Bell Atlantic South"), or (ii) prevent the
Parties from realizing in all material respects the economic benefits of the
transactions contemplated by this Agreement that such Parties currently
anticipate receiving therefrom;
(e) Registration Statement Effective. The Registration Statement shall
have become effective prior to the mailing by each of NYNEX and Bell Atlantic of
the Joint Proxy Statement to its respective stockholders, no stop order
suspending the effectiveness of the Registration Statement shall then be in
effect, and no proceedings for that purpose shall then be threatened by the SEC
or shall have been initiated by the SEC and not concluded or withdrawn;
(f) Blue Sky. All state securities or blue sky permits or approvals
required to carry out the transactions contemplated hereby shall have been
received;
(g) Stock Exchange Listing. The shares of Bell Atlantic Common Stock into
which the NYNEX Shares will be converted pursuant to Article II hereof and the
shares of Bell Atlantic Common Stock issuable upon the exercise of options
pursuant to Section 2.8 hereof shall have been duly approved for listing on the
NYSE, subject to official notice of issuance;
(h) Pooling. Each of NYNEX and Bell Atlantic shall have received a letter
from Coopers & Lybrand L.L.P., dated as of the Closing Date, to the effect that
the transactions contemplated hereby will qualify for pooling of interests
accounting treatment;
(i) Consents Under NYNEX Agreements. NYNEX shall have obtained the consent
or approval of any person whose consent or approval shall be required under any
agreement or instrument in order to permit the consummation of the transactions
contemplated hereby except those which the failure to obtain would not,
individually or in the aggregate, have a Material Adverse Effect on Bell
Atlantic, with or without including its ownership of NYNEX and its Subsidiaries
after the Merger, or NYNEX; and
(j) Consents Under Bell Atlantic Agreements. Bell Atlantic shall have
obtained the consent or approval of any person whose consent or approval shall
be required under any agreement or instrument in order to permit the
consummation of the transactions contemplated hereby except those which the
failure to obtain would not, individually or in the aggregate, have a Material
Adverse Effect on Bell Atlantic, with or without including its ownership of
NYNEX and its Subsidiaries after the Merger, or NYNEX.
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SECTION 8.2 -- Additional Conditions to Obligations of NYNEX. The
obligations of NYNEX to effect the Merger are also subject to the fulfillment of
the following conditions:
(a) Representations and Warranties. The representations and warranties of
Bell Atlantic contained in this Agreement shall be true and correct on the date
hereof and (except to the extent such representations and warranties speak as of
a date earlier than the date hereof) shall also be true and correct on and as of
the Closing Date, except for changes permitted under Section 6.2 hereof or
otherwise contemplated by this Agreement, with the same force and effect as if
made on and as of the Closing Date, provided, however, that for purposes of this
Section 8.2(a) only, such representations and warranties shall be deemed to be
true and correct unless the failure or failures of such representations and
warranties to be so true and correct (without regard to materiality qualifiers
contained therein), individually or in the aggregate, results or would
reasonably be expected to result in a Material Adverse Effect on Bell Atlantic,
either with or without including its ownership of NYNEX and its Subsidiaries
after the Merger;
(b) Agreements, Conditions and Covenants. Bell Atlantic shall have
performed or complied in all material respects with all agreements, conditions
and covenants required by this Agreement to be performed or complied with by
them on or before the Effective Time;
(c) Certificates. NYNEX shall have received a certificate of an executive
officer of Bell Atlantic to the effect set forth in paragraphs (a) and (b)
above;
(d) Bell Atlantic Rights Agreement. The rights issued pursuant to the Bell
Atlantic Rights Agreement shall have been redeemed and no new shareholder rights
plan shall have been adopted by Bell Atlantic;
(e) Tax Opinion. (i) NYNEX shall have received an opinion of Weil, Gotshal
& Manges LLP, special counsel to NYNEX, dated as of the Closing Date, in form
and substance reasonably satisfactory to NYNEX, substantially to the effect
that, on the basis of the facts, representations and assumptions set forth in
such opinion, the Merger, including the Certificate Amendment, constitutes a
tax-free reorganization under Section 368 of the Code and therefore: (A) no gain
or loss will be recognized for federal income tax purposes by Bell Atlantic,
NYNEX or the Merger Subsidiary as a result of the formation of the Merger
Subsidiary and the Merger, including the Certificate Amendment; and (B) no gain
or loss will be recognized for federal income tax purposes by the stockholders
of NYNEX upon their exchange of NYNEX Common Stock solely for Bell Atlantic
Common Stock pursuant to the Merger (except with respect to cash received in
lieu of a fractional share interest in Bell Atlantic Common Stock or the payment
of any real property transfer or gains taxes on behalf of the stockholders of
NYNEX). In rendering such opinion, Weil, Gotshal and Manges LLP may require and
rely upon representations and covenants including those contained in
certificates of officers of NYNEX and Bell Atlantic and others; and
(ii) Bell Atlantic shall have received the opinion described in Section
8.3(e)(i) hereof, in form and substance reasonably satisfactory to NYNEX.
(f) Affiliate Agreements. NYNEX shall have received the agreements
required by Section 7.14 hereof to be delivered by the Bell Atlantic
"affiliates," duly executed by each "affiliate" of Bell Atlantic.
(g) Certificate Amendment, Bylaws Amendment, Board of Directors. Bell
Atlantic shall have taken all such actions as shall be necessary so that (i) the
Certificate Amendment and the Bylaws Amendment shall become effective not later
than the Effective Time; and (ii) at the Effective Time, the composition of Bell
Atlantic's Board shall comply with Section 7.12 hereof (assuming NYNEX has
designated the NYNEX Directors as contemplated by Section 7.12 hereof).
SECTION 8.3 -- Additional Conditions to Obligations of Bell Atlantic. The
obligations of Bell Atlantic to effect the Merger are also subject to the
fulfillment of the following conditions:
(a) Representations and Warranties. The representations and warranties of
NYNEX contained in this Agreement shall be true and correct on the date hereof
and (except to the extent such representations and warranties speak as of a date
earlier than the date hereof) shall also be true and correct on and as of the
Closing Date, except for changes permitted under Section 6.2 hereof or otherwise
contemplated by this Agreement, with the same force and effect as if made on and
as of the Closing Date, provided, however, that
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for purposes of this Section 8.3(a) only, such representations and warranties
shall be deemed to be true and correct unless the failure or failures of such
representations and warranties to be so true and correct (without regard to
materiality qualifiers contained therein), individually or in the aggregate,
results or would reasonably be expected to result in a Material Adverse Effect
on NYNEX or Bell Atlantic (only after including its ownership of NYNEX and its
Subsidiaries after the Merger);
(b) Agreements, Conditions and Covenants. NYNEX shall have performed or
complied in all material respects with all agreements, conditions and covenants
required by this Agreement to be performed or complied with by them on or before
the Effective Time;
(c) Certificates. Bell Atlantic shall have received a certificate of an
executive officer of NYNEX to the effect set forth in paragraphs (a) and (b)
above;
(d) NYNEX Rights Agreement. The rights issued pursuant to the NYNEX Rights
Agreement shall not have become non-redeemable, exercisable, distributed or
triggered pursuant to the terms of such agreement and would not become so upon
consummation of the transactions contemplated hereby;
(e) Tax Opinion. (i) Bell Atlantic shall have received an opinion of
Morgan, Lewis & Bockius LLP, special counsel to Bell Atlantic, dated as of the
Effective Time, in form and substance reasonably satisfactory to Bell Atlantic,
substantially to the effect that, on the basis of the facts, representations and
assumptions set forth in such opinion, the Merger, including the Certificate
Amendment, constitutes a tax-free reorganization under Section 368 of the Code
and therefore: (A) no gain or loss will be recognized for federal income tax
purposes by Bell Atlantic, NYNEX or the Merger Subsidiary as a result of the
formation of the Merger Subsidiary and the Merger, including the Certificate
Amendment; and (B) no gain or loss will be recognized for federal income tax
purposes by the stockholders of Bell Atlantic as a result of the Merger,
including the Certificate Amendment. In rendering such opinion, Morgan, Lewis &
Bockius LLP may require and rely upon representations and covenants including
those contained in certificates of officers of Bell Atlantic and NYNEX and
others; and
(ii) NYNEX shall have received the opinion described in Section
8.2(e)(i) hereof, in form and substance reasonably satisfactory to Bell
Atlantic.
(f) Affiliate Agreements. Bell Atlantic shall have received the agreements
required by Section 7.14 hereof to be delivered by the NYNEX "affiliates," duly
executed by each "affiliate" of NYNEX.
ARTICLE IX -- TERMINATION, AMENDMENT AND WAIVER
SECTION 9.1 -- Termination. This Agreement may be terminated at any time
before the Effective Time, in each case as authorized by the respective Board of
Directors of NYNEX or Bell Atlantic:
(a) By mutual written consent of each of NYNEX and Bell Atlantic;
(b) By either NYNEX or Bell Atlantic if the Merger shall not have been
consummated on or before April 21, 1997 (the "Termination Date"); provided,
however, that the right to terminate this Agreement under this Section 9.1(b)
shall not be available to any Party whose failure to fulfill any obligation
under this Agreement has been the cause of, or resulted in, the failure of the
Effective Time to occur on or before the Termination Date; and provided,
further, that if on the Termination Date the conditions to the Closing set forth
in Sections 8.1(c) or (d) shall not have been fulfilled, but all other
conditions to the Closing shall be fulfilled or shall be capable of being
fulfilled, then the Termination Date shall be extended to September 30, 1997.
The Parties agree that any amendment of this Agreement to extend the Termination
Date beyond September 30, 1997 shall be made without any amendment to or
renegotiation of any other material provisions of this Agreement;
(c) By either NYNEX or Bell Atlantic if a court of competent jurisdiction
or governmental, regulatory or administrative agency or commission shall have
issued an order, decree or ruling or taken any other action (which order, decree
or ruling the Parties shall use their commercially reasonable efforts to lift),
in each case
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permanently restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement, and such order, decree, ruling or other action
shall have become final and nonappealable;
(d) By either NYNEX or Bell Atlantic if the other shall have breached, or
failed to comply with, in any material respect any of its obligations under this
Agreement or any representation or warranty made by such other Party shall have
been incorrect in any material respect when made or shall have since ceased to
be true and correct in any material respect, and such breach, failure or
misrepresentation is not cured within 30 days after notice thereof and such
breaches, failures or misrepresentations, individually or in the aggregate and
without regard to materiality qualifiers contained therein, results or would
reasonably be expected to result in a Material Adverse Effect on NYNEX or Bell
Atlantic, with or without including its ownership of NYNEX and its Subsidiaries
after the Merger;
(e) By either NYNEX or Bell Atlantic upon the occurrence of (i) a Material
Adverse Effect or an event which could reasonably be expected to result in a
Material Adverse Effect on Bell Atlantic (either with or without including its
ownership of NYNEX and its Subsidiaries after the Merger), Bell Atlantic North,
Bell Atlantic South, NYNEX, New England Telephone and Telegraph Company or New
York Telephone Company under Section 8.1(d) hereof arising from an action by a
state or federal governmental body, agency or official which has become final
and nonappealable, or (ii) any other Material Adverse Effect, or an event which
could reasonably be expected to result in a Material Adverse Effect on the other
(which in the case of Bell Atlantic shall not include its ownership of NYNEX and
its Subsidiaries after the Merger), or, after the Effective Time, Bell Atlantic,
including its ownership of NYNEX and its Subsidiaries;
(f) By either NYNEX or Bell Atlantic if the Board of Directors of the other
or any committee of the Board of Directors of the other (i) shall withdraw or
modify in any adverse manner its approval or recommendation of this Agreement or
the Merger or, in the case of the Board of Directors or any committee of the
Board of Directors of Bell Atlantic, the Certificate Amendment or the issuance
of Bell Atlantic Common Stock pursuant to the Merger Agreement, (ii) shall fail
to reaffirm such approval or recommendation upon such Party's request, (iii)
shall approve or recommend any acquisition of the other or a material portion of
its assets or any tender offer for shares of its capital stock, in each case,
other than by a Party or an affiliate thereof, or (iv) shall resolve to take any
of the actions specified in clause (i) above;
(g) By either NYNEX or Bell Atlantic if any of the required approvals of
the stockholders of NYNEX or of Bell Atlantic shall fail to have been obtained
at a duly held stockholders meeting of either of such companies, including any
adjournments thereof; or
(h) By either NYNEX or Bell Atlantic, prior to the approval of this
Agreement by the stockholders of such Party, upon five days' prior notice to the
other, if, as a result of an Acquisition Proposal (as defined in Section 6.3
hereof) received by such Party from a person other than a Party to this
Agreement or any of its affiliates, the Board of Directors of such Party
determines in good faith that their fiduciary obligations under applicable law
require that such Acquisition Proposal be accepted; provided, however, that (i)
the Board of Directors of such Party shall have concluded in good faith, after
considering applicable provisions of state law and after giving effect to all
concessions which may be offered by the other Party pursuant to clause (ii)
below, on the basis of oral or written advice of outside counsel, that such
action is necessary for the Board of Directors to act in a manner consistent
with its fiduciary duties under applicable law and (ii) prior to any such
termination, such Party shall, and shall cause its respective financial and
legal advisors to, negotiate with the other Party to this Agreement to make such
adjustments in the terms and conditions of this Agreement as would enable such
Party to proceed with the transactions contemplated hereby;
provided, however, that no termination shall be effective pursuant to Sections
9.1(f), (g) or (h) under circumstances in which an Initial NYNEX Termination Fee
or an Initial Bell Atlantic Termination Fee is payable by the terminating Party
under Section 9.2(b) or (c), as the case may be, unless concurrently with such
termination, such termination fee is paid in full by the terminating Party in
accordance with the provisions of Sections 9.2(b) or (c), as the case may be.
SECTION 9.2 -- Effect of Termination. (a) In the event of termination of
this Agreement as provided in Section 9.1 hereof, and subject to the provisions
of Section 10.1 hereof, this Agreement shall forthwith
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become void and there shall be no liability on the part of any of the Parties,
except (i) as set forth in this Section 9.2 and in Sections 4.10, 4.16, 5.10,
5.16 and 10.3 hereof, and (ii) nothing herein shall relieve any Party from
liability for any willful breach hereof.
(b) If (i) this Agreement (A) is terminated by Bell Atlantic pursuant to
Section 9.1(f) hereof or by NYNEX or Bell Atlantic pursuant to Section 9.1(g)
hereof because of the failure to obtain the required approval from the NYNEX
stockholders or by NYNEX pursuant to Section 9.1(h) hereof, or (B) is terminated
as a result of NYNEX's material breach of Section 7.2 hereof which is not cured
within 30 days after notice thereof to NYNEX, and (ii) at the time of such
termination or prior to the meeting of NYNEX's stockholders there shall have
been an Acquisition Proposal (as defined in Section 6.3 hereof) involving NYNEX
or any of its Significant Subsidiaries (whether or not such offer shall have
been rejected or shall have been withdrawn prior to the time of such termination
or of the meeting), NYNEX shall pay to Bell Atlantic a termination fee of $200
million (the "Initial NYNEX Termination Fee"). In addition, if, within one and
one-half years of any such termination described in clause (i) of the
immediately preceding sentence that gave rise to the obligation to pay the
Initial NYNEX Termination Fee, NYNEX, or the Significant Subsidiary of NYNEX
which was the subject of such Acquisition Proposal (the "NYNEX Target Party"),
becomes a subsidiary (as defined below) of the person which made (or the
affiliate of which made) an Acquisition Proposal described in clause (ii) of the
immediately preceding sentence or of any Offering Person (as defined below) or
accepts a written offer to consummate or consummates an Acquisition Proposal
with such person or any Offering Person, then, upon the signing of a definitive
agreement relating to any such Acquisition Proposal, or, if no such agreement is
signed then at the closing (and as a condition to the closing) of such NYNEX
Target Party becoming such a subsidiary or of any such Acquisition Proposal,
NYNEX shall pay to Bell Atlantic an additional termination fee equal to $350
million.
(c) If (i) this Agreement (A) is terminated by NYNEX pursuant to Sections
9.1(f) hereof or NYNEX or Bell Atlantic pursuant to Section 9.1(g) hereof
because of the failure to obtain the required approval from the Bell Atlantic
stockholders or by Bell Atlantic pursuant to Section 9.1(h) hereof, or (B) is
terminated as a result of Bell Atlantic's material breach of Section 7.2 hereof
which is not cured within 30 days after notice thereof to Bell Atlantic, and
(ii) at the time of such termination or prior to the meeting of Bell Atlantic's
stockholders there shall have been an Acquisition Proposal (as defined in
Section 6.3 hereof) involving Bell Atlantic or any of its Significant
Subsidiaries (whether or not such offer shall have been rejected or shall have
been withdrawn prior to the time of such termination or of the meeting), Bell
Atlantic shall pay to NYNEX a termination fee of $200 million (the "Initial Bell
Atlantic Termination Fee"). In addition, if, within one and one-half years of
any such termination described in clause (i) of the immediately preceding
sentence that gave rise to the obligation to pay the Initial Bell Atlantic
Termination Fee, Bell Atlantic, or the Significant Subsidiary of Bell Atlantic
which was the subject of such Acquisition Proposal (the "Bell Atlantic Target
Party"), becomes a subsidiary of the person which made (or the affiliate of
which made) an Acquisition Proposal described in clause (ii) of the immediately
preceding sentence or of any Offering Person or accepts a written offer to
consummate or consummates an Acquisition Proposal with such person or any
Offering Person, then, upon the signing of a definitive agreement relating to
any such Acquisition Proposal, or, if no such agreement is signed then at the
closing (and as a condition to the closing) of such Bell Atlantic Target Party
becoming such a subsidiary or of any such Acquisition Proposal, Bell Atlantic
shall pay to NYNEX an additional termination fee equal to $350 million.
(d) Each termination fee payable under Sections 9.2(b) and (c) above shall
be payable in cash. For purposes of this Section 9.2, an "Offering Person" shall
be any offeror who makes an Acquisition Proposal to NYNEX, the NYNEX Target
Party or their respective Representatives, or Bell Atlantic, the Bell Atlantic
Target Party or their respective Representatives, as the case may be, before or
within one hundred twenty days after any termination described in Section
9.2(b)(i) or 9.2(c)(i) and "subsidiary" shall mean with respect to any person,
any corporation or other legal entity of which such person owns, directly or
indirectly, more than 50% of the stock or other equity interests the holders of
which are generally entitled to vote for the election of the board of directors
or other governing body of such corporation or other legal entity.
(e) NYNEX and Bell Atlantic agree that the agreements contained in Sections
9.2(b) and (c) above are an integral part of the transactions contemplated by
this Agreement and constitute liquidated damages
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and not a penalty. If one Party fails to promptly pay to the other any fee due
under such Sections 9.2(b) and (c), the defaulting Party shall pay the costs and
expenses (including legal fees and expenses) in connection with any action,
including the filing of any lawsuit or other legal action, taken to collect
payment, together with interest on the amount of any unpaid fee at the publicly
announced prime rate of Citibank, N.A. from the date such fee was required to be
paid.
SECTION 9.3 -- Amendment. This Agreement may be amended by the Parties
pursuant to a writing adopted by action taken by all of the Parties at any time
before the Effective Time; provided, however, that, after approval of the Merger
Agreement by the stockholders of NYNEX or Bell Atlantic, whichever shall occur
first, no amendment may be made which would (a) alter or change the amount or
kinds of consideration to be received by the holders of NYNEX Shares upon
consummation of the Merger, (b) alter or change any term of the Certificate of
Incorporation of NYNEX or the Certificate of Incorporation of Bell Atlantic
(except for the implementation at the Effective Time of the Certificate
Amendment), or (c) alter or change any of the terms and conditions of this
Agreement if such alteration or change would adversely affect the holders of any
class or series of securities of NYNEX or Bell Atlantic. This Agreement may not
be amended except by an instrument in writing signed by the Parties.
SECTION 9.4 -- Waiver. At any time before the Effective Time, any 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 contained herein or in any document delivered pursuant hereto and (c)
waive compliance with any of the agreements or conditions contained herein. Any
agreement on the part of a Party to any such extension or waiver shall be valid
only as against such Party and only if set forth in an instrument in writing
signed by such Party.
ARTICLE X -- GENERAL PROVISIONS
SECTION 10.1 -- Non-Survival of Representations, Warranties and
Agreements. The representations, warranties and agreements in this Agreement
shall terminate at the Effective Time or upon the termination of this Agreement
pursuant to Section 9.1 hereof, as the case may be, except that (a) the
agreements set forth in Article I and Sections 2.4, 2.5, 2.6, 2.7, 7.8, 7.9 and
7.12 hereof shall survive the Effective Time indefinitely, (b) the agreements
and representations set forth in Sections 4.10, 4.16, 5.10, 5.16, 7.5(b), 9.2
and 10.3 hereof shall survive termination indefinitely and (c) nothing contained
herein shall limit any covenant or agreement of the Parties which by its terms
contemplates performance after the Effective Time.
SECTION 10.2 -- Notices. All notices and other communications given or
made pursuant hereto shall be in writing and shall be deemed to have been duly
given or made as of the date of receipt and shall be delivered personally or
mailed by registered or certified mail (postage prepaid, return receipt
requested), sent by overnight courier or sent by telecopy, to the Parties at the
following addresses or telecopy numbers (or at such other address or telecopy
number for a Party as shall be specified by like notice):
(a) if to NYNEX:
NYNEX Corporation
1095 Avenue of the Americas
New York, New York 10036
Attention: Executive Vice President and General Counsel
Telecopy No.: (212) 597-2560
with a copy to:
NYNEX Corporation
1095 Avenue of the Americas
New York, New York 10036
Attention: Vice President -- Law
Telecopy No.: (212) 597-2558
and
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Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attention: Stephen E. Jacobs, Esq.
Telecopy No.: (212) 310-8007
(b) if to Bell Atlantic:
Bell Atlantic Corporation
1310 North Court House Road, 11th floor
Arlington, Virginia 22201
Attention: Vice President - General Counsel
Telecopy No.: (703) 974-1951
with a copy to:
Bell Atlantic Corporation
1717 Arch Street, 48th floor
Philadelphia, Pennsylvania 19103
Attention: Vice President - Mergers and Acquisitions and Associate
General Counsel
Telecopy No.: (215) 963-9195
and
Morgan, Lewis & Bockius LLP
2000 One Logan Square
Philadelphia, Pennsylvania 19103
Attention: N. Jeffrey Klauder, Esq.
Telecopy No.: (215) 963-5299
SECTION 10.3 -- Expenses. Except as otherwise provided herein, all costs
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the Party incurring such costs and
expenses, except that those expenses incurred in connection with the printing of
the Joint Proxy Statement and the Registration Statement, as well as the filing
fees related thereto and any filing fee required in connection with the filing
of Premerger Notifications under the HSR Act, shall be shared equally by NYNEX
and Bell Atlantic.
SECTION 10.4 -- Certain Definitions. For purposes of this Agreement, the
following terms shall have the following meanings:
(a) "1933 Act" means the Securities Act of 1933, as the same may be amended
from time to time, and "Exchange Act" means the Securities Exchange Act of 1934,
as the same may be amended from time to time.
(b) "affiliate" of a person means a person that directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is under
common control with, the first mentioned person.
(c) "control" (including the terms "controlled by" and "under common
control with") means the possession, direct or indirect, of the power to direct
or cause the direction of the management and policies of a person, whether
through the ownership of stock, as trustee or executor, by contract or credit
arrangement or otherwise.
(d) "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as the same may be amended from time to time.
(e) "knowledge" of any Party shall mean the actual knowledge of the
executive officers of such Party.
(f) "Jointly Held Person" means each of Bell Communications Research, Inc.,
New York SMSA Limited Partnership, Cellco Partnership, Tomcom L.P., PCSCO
Partnership, Tele-TV, Tele-TV Media Partners, L.P., Tele-TV Systems Partners,
L.P., BANX Partnership, PCS Primeco, Bell Atlantic NYNEX
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Mobile, Inc., CAI Wireless Systems, Inc., and any other person in which each of
NYNEX and Bell Atlantic individually hold, directly or indirectly, 5% or more of
the stock of, or other equity interests in, such entity, and their respective
subsidiaries (which term shall have the same meaning as is ascribed thereto in
Section 9.2(d) hereof).
(g) "Mandalay Shares" means any shares of common stock of NYNEX sold or
hereafter issuable pursuant to (i) the Amended and Restated Stock Purchase and
Registration Agreement dated as of March 29, 1996 between NYNEX and Kipling
Associates L.L.C., a Delaware limited liability company ("KALLC") (or the
Original Agreement referred to therein), and (ii) the Amended and Restated Stock
Purchase and Registration Agreement dated as of March 29, 1996 between NYNEX and
Weatherly Holdings L.L.C., a Delaware limited liability company ("WHLLC") (or
the Original Agreement referred to therein), including (without limitation)
14,065,013 shares of common stock of NYNEX registered in the name of Cede & Co.
as nominee for Depository Trust Company on behalf of State Street Bank and Trust
Company, DTC Participant 987, Institution 93548, Agent 93547 for Account No.
HT2789 (WHLLC) and Account No. HT2791 (KALLC).
(h) "Material Adverse Effect" means any change in or effect on the business
of the referenced corporation or any of its Subsidiaries that is or will be
materially adverse to the business, operations (including the income statement),
properties (including intangible properties), condition (financial or
otherwise), assets, liabilities or regulatory status of such referenced
corporation and its Subsidiaries taken as a whole, but shall not include the
effects of changes that are generally applicable in (A) the telecommunications
industry, (B) the United States economy or (C) the United States securities
markets if, in any of (A), (B) or (C), the effect on NYNEX or Bell Atlantic,
determined without including its ownership of NYNEX after the Merger, (as the
case may be) and its respective Subsidiaries, taken as a whole, is not
disproportionate relative to the effect on the other and its Subsidiaries, taken
as a whole. All references to Material Adverse Effect on Bell Atlantic or its
Subsidiaries contained in Article IV, V or VI of this Agreement shall be deemed
to refer solely to Bell Atlantic and its Subsidiaries without including its
ownership of NYNEX and its Subsidiaries after the Merger.
(i) "Material Investment" means (a) as to NYNEX, each of FLAG Limited,
Orient Telecom and Technology Holdings Limited, PT Excelcomindo Pratama, Telecom
Asia Corporation Public Company Limited and any other person which NYNEX
directly or indirectly holds the stock of, or other equity interest in, provided
the lesser of the fair market value or book value of such interest exceeds $100
million, excluding, however, any person which is a Subsidiary of NYNEX or a
Jointly Held Person; and (b) as to Bell Atlantic, each of Grupo Iusacell, S.A.
de C.V., Telecom Corporation of New Zealand Limited, Omnitel, and any other
person which Bell Atlantic directly or indirectly holds the stock of, or other
equity interest in, provided the lesser of the fair market value or book value
of such interest exceeds $100 million, excluding, however, any Person which is a
Subsidiary of Bell Atlantic or a Jointly Held Person.
(j) "person" means an individual, corporation, partnership, association,
trust, unincorporated organization, entity or group (as defined in the Exchange
Act).
(k) "POR" means the Plan of Reorganization approved by the United States
Court for the District of Columbia on August 5, 1983 and the Agreement
Concerning Contingent Liabilities, Tax Matters and Termination of Certain
Agreements dated as of November 1, 1983, as amended and supplemented.
(l) "Significant Subsidiary" with respect to NYNEX means any Subsidiary
which on the date of determination is a "significant subsidiary" within the
meaning of Rule 1-02(w) of Regulation S-X promulgated under the Exchange Act
and, with respect to Bell Atlantic means any Subsidiary which on the date of
determination is a "significant subsidiary" within the meaning of Rule 1-02(w)
of Regulation S-X promulgated under the Exchange Act, excluding, however,
Jointly Held Persons.
(m) "Subsidiary", "NYNEX Subsidiary", or "Bell Atlantic Subsidiary" means
any corporation or other legal entity of which NYNEX or Bell Atlantic, as the
case may be (either alone or through or together with any other Subsidiary or
Subsidiaries), owns, directly or indirectly, more than 50% of the stock or other
equity
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interests the holders of which are generally entitled to vote for the election
wof the board of directors or other governing body of such corporation or other
legal entity, excluding, however, Jointly Held Persons.
SECTION 10.5 -- Headings. 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.
SECTION 10.6 -- 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 so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any Party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the Parties shall negotiate
in good faith to modify this Agreement so as to effect the original intent of
the Parties as closely as possible in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the maximum extent possible.
SECTION 10.7 -- Entire Agreement; No Third-Party Beneficiaries. This
Agreement constitutes the entire agreement and, except as expressly set forth
herein, supersedes any and all other prior agreements and undertakings, both
written and oral, among the Parties, or any of them, with respect to the subject
matter hereof and, except for Section 7.8 (Indemnification, Directors' and
Officers' Insurance) and Section 7.12 (Post-Merger Bell Atlantic Board of
Directors), is not intended to confer upon any person other than NYNEX, Bell
Atlantic, and the Merger Subsidiary and, after the Effective Time, their
respective stockholders, any rights or remedies hereunder.
SECTION 10.8 -- Assignment. This Agreement shall not be assigned by
operation of law or otherwise.
SECTION 10.9 -- Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware applicable to
contracts executed in and to be performed entirely within that State, without
regard to the conflicts of laws provisions thereof.
SECTION 10.10 -- Counterparts. This Agreement may be executed in one or
more counterparts, and by the different Parties in separate counterparts, each
of which when executed shall be deemed to be an original, but all of which shall
constitute one and the same agreement.
IN WITNESS WHEREOF, NYNEX and Bell Atlantic have caused this Agreement to
be executed as of the date first written above by their respective officers
thereunto duly authorized.
NYNEX CORPORATION
By: /s/ IVAN G. SEIDENBERG
------------------------------
Name: Ivan G. Seidenberg
Title: Chairman and Chief
Executive Officer
BELL ATLANTIC CORPORATION
By: /s/ RAYMOND W. SMITH
------------------------------
Name: Raymond W. Smith
Title: Chairman and Chief
Executive Officer
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<PAGE> 130
INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
DEFINED TERM PAGE NO. I-
- ---------------------------------------------------------------------------------- -----------
<S> <C>
1933 Act.......................................................................... 43
Acquisition Proposal.............................................................. 30
affiliate......................................................................... 43
Agreement......................................................................... 1
Amended Bylaws.................................................................... 34
Bear Stearns...................................................................... 15
Bell Atlantic..................................................................... 1
Bell Atlantic Equity Rights....................................................... 18
Bell Atlantic SEC Reports......................................................... 19
Bell Atlantic Benefit Plans....................................................... 21
Bell Atlantic Common Stock........................................................ 3
Bell Atlantic Contracts........................................................... 26
Bell Atlantic Director............................................................ 35
Bell Atlantic North............................................................... 37
Bell Atlantic South............................................................... 37
Bell Atlantic Target Party........................................................ 41
Bell Atlantic Subsidiary.......................................................... 44
Bylaws Amendment.................................................................. 6
CERCLIS........................................................................... 13
Certificate Amendment............................................................. 6
Closing........................................................................... 32
Closing Date...................................................................... 32
Code.............................................................................. 1
Common Shares Trust............................................................... 4
Confidentiality Agreement......................................................... 33
Consents.......................................................................... 37
control........................................................................... 43
Delaware Law...................................................................... 1
Effective Time.................................................................... 2
Environmental Permits............................................................. 12
Environmental Claim............................................................... 13
Environmental Laws................................................................ 14
ERISA............................................................................. 10
Excess Shares..................................................................... 4
Exchange Ratio.................................................................... 3
Exchange Fund..................................................................... 3
Exchange Agent.................................................................... 3
Exchange Act...................................................................... 43
GAAP.............................................................................. 1
Hazardous Materials............................................................... 14
HSR Act........................................................................... 43
Initial NYNEX Termination Fee..................................................... 41
Initial Bell Atlantic Termination Fee............................................. 41
IRS............................................................................... 11
Joint Proxy Statement............................................................. 10
Jointly Held Person............................................................... 43
</TABLE>
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<PAGE> 131
<TABLE>
<CAPTION>
DEFINED TERM PAGE NO. I-
- ---------------------------------------------------------------------------------- -----------
<S> <C>
KALLC............................................................................. 44
knowledge......................................................................... 43
Legal Requirements................................................................ 9
Mandalay Shares................................................................... 44
Material Investment............................................................... 44
Material Adverse Effect........................................................... 44
Merged Corporation................................................................ 1
Merger............................................................................ 1
Merger Subsidiary................................................................. 1
Merrill Lynch..................................................................... 24
Morgan Stanley.................................................................... 15
New NYNEX Common Stock............................................................ 3
NPL............................................................................... 13
NYNEX............................................................................. 1
NYNEX Benefit Plans............................................................... 10
NYNEX Contracts................................................................... 16
NYNEX Common Stock................................................................ 2
NYNEX Equity Rights............................................................... 7
NYNEX Rights Agreement............................................................ 7
NYNEX SEC Reports................................................................. 9
NYNEX Shares...................................................................... 3
NYNEX Director.................................................................... 35
NYNEX Target Party................................................................ 41
NYNEX Subsidiary.................................................................. 44
NYSE.............................................................................. 4
Offering Person................................................................... 41
Original Agreement................................................................ 15
Parties........................................................................... 1
Party............................................................................. 1
Party Representatives............................................................. 33
PBGC.............................................................................. 11
PCBs.............................................................................. 14
Permits........................................................................... 10
person............................................................................ 44
POR............................................................................... 44
Pre-Surrender Dividends........................................................... 4
Registration Statement............................................................ 10
Release........................................................................... 14
Requisite Regulatory Approvals.................................................... 37
SAR............................................................................... 6
SEC............................................................................... 9
Significant Subsidiary............................................................ 44
subsidiary........................................................................ 41
Subsidiary........................................................................ 44
Surviving Corporation............................................................. 1
Termination Date.................................................................. 39
the date hereof................................................................... 1
WHLLC............................................................................. 44
</TABLE>
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APPENDIX II
FORM OF
RESTATED
CERTIFICATE OF INCORPORATION
OF
BELL ATLANTIC CORPORATION
1. Corporate Name. The name of the corporation is Bell Atlantic
Corporation (the "Corporation").
2. Registered Office. The address of the registered office of the
Corporation is 1209 Orange Street, in the City of Wilmington, County of New
Castle. The name of the registered agent of the Corporation at such address is
The Corporation Trust Company.
3. Corporate Purpose. The nature of the business of the Corporation or the
purposes of the Corporation to be conducted or promoted is to engage in any
lawful act or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware, as amended from time to time (the
"GCL").
4. Capital Stock.
A. Authorized Shares. The total number of shares of all classes of stock
which the Corporation shall have the authority to issue is 2,500,000,000 shares,
of which 2,250,000,000 shares are Common Stock, $.10 par value per share, and
250,000,000 shares are Series Preferred Stock, $.10 par value.
B. Authority of Board to Fix Terms of Series Preferred Stock. The Board of
Directors of the Corporation is hereby expressly authorized at any time and from
time to time to provide for the issuance of all or any shares of the Series
Preferred Stock in one or more classes or series, and to fix for each such class
or series such voting powers, full or limited, or no voting powers, and such
distinctive designations, preferences and relative, participating, optional or
other special rights and such qualifications, limitations or restrictions
thereof, as shall be stated and expressed in the resolution or resolutions
adopted by the Board of Directors providing for the issuance of such class or
series and to the fullest extent as may now or hereafter be permitted by the
GCL, including, without limiting the generality of the foregoing, the authority
to provide that any such class or series may be (i) subject to redemption at
such time or times and at such price or prices; (ii) entitled to receive
dividends (which may be cumulative or non-cumulative) at such rates, on such
conditions, and at such times, and payable in preference to, or in such relation
to, the dividends payable on any other class or classes or any other series;
(iii) entitled to such rights upon the dissolution of, or upon any distribution
of the assets of, the Corporation; or (iv) convertible into, or exchangeable
for, shares of any other class or classes of stock, or of any other series of
the same or any other class or classes of stock, or other securities or
property, of the Corporation at such price or prices or at such rates of
exchange and with such adjustments; all as may be stated in such resolution or
resolutions. Unless otherwise provided in such resolution or resolutions, shares
of Series Preferred Stock of such class or series which shall be issued and
thereafter acquired by the Corporation through purchase, redemption, exchange,
conversion or otherwise shall return to the status of authorized but unissued
Series Preferred Stock.
5. Board of Directors of the Corporation.
A. Responsibilities. The business and affairs of the Corporation shall be
managed under the direction of the Board of Directors.
B. Number. Subject to the right of the Board of Directors to increase or
decrease the number of directors pursuant to this Article 5.B., the Board of
Directors shall consist of 22 directors. The Board of Directors may increase or
decrease the number of directors by the affirmative vote of (a) three-quarters
of the entire Board of Directors if the effective date of such increase or
decrease is prior to the date on which Raymond W. Smith ceases to be Chairman of
the Corporation (hereinafter referred to as the "Retirement Date"), and (b) a
majority of the entire Board of Directors if the effective date of the increase
or decrease is on or after the Retirement Date.
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C. Elections of Directors. Elections of directors need not be by written
ballot unless the Bylaws of the Corporation shall so provide.
D. Nominations for Directors. Except as otherwise permitted in Article
5.E., only persons who are nominated in accordance with the procedures
established in the Bylaws shall be eligible for election as directors.
E. Vacancies. Vacancies and newly created directorships may be filled by
the Board of Directors, provided that on or prior to the Retirement Date, such
action shall be in accordance with the method for the selection of directors set
forth in Section 4.16 of the Bylaws.
6. Bylaws. The Board of Directors is expressly authorized from time to
time to make, alter or repeal the Bylaws of the Corporation in the manner set
forth in the Bylaws from time to time.
7. Indemnification.
A. Indemnification of Authorized Representatives in Third Party
Proceedings. -- The Corporation shall indemnify any person who was or is an
authorized representative of the Corporation, and who was or is a party, or is
threatened to be made a party to any third party proceeding, by reason of the
fact that such person was or is an authorized representative of the Corporation,
against expenses, judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such third party
proceeding if such person acted in good faith and in a manner such person
reasonably believed to be in, or not opposed to, the best interests of the
Corporation and, with respect to any criminal third party proceeding, had no
reasonable cause to believe such conduct was unlawful. The termination of any
third party proceeding by judgment, order, settlement, conviction or upon a plea
of nolo contendere or its equivalent, shall not of itself create a presumption
that the authorized representative did not act in good faith and in a manner
which such person reasonably believed to be in or not opposed to, the best
interests of the Corporation, or, with respect to any criminal third party
proceeding, had reasonable cause to believe that such conduct was unlawful.
B. Indemnification of Authorized Representatives in Corporate
Proceedings. -- The Corporation shall indemnify any person who was or is an
authorized representative of the Corporation and who was or is a party or is
threatened to be made a party to any corporate proceeding, by reason of the fact
that such person was or is an authorized representative of the Corporation,
against expenses actually and reasonably incurred by such person in connection
with the defense or settlement of such corporate proceeding if such person acted
in good faith and in a manner reasonably believed to be in, or not opposed to,
the best interests of the Corporation; provided, however, that, except as
provided in this Article 7 with respect to proceedings to enforce rights to
indemnification, the Corporation shall indemnify any such person in connection
with an action, suit or proceeding (or part thereof) initiated by such person
only if the initiation of such action, suit or proceeding (or part thereof) was
authorized by the Board of Directors; provided further, however, that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Corporation
unless and only to the extent that the Court of Chancery or the court in which
such corporate proceeding was brought shall determine upon application that,
despite the adjudication of liability but in view of all the circumstances of
the case, such authorized representative is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
C. Mandatory Indemnification of Authorized Representatives. -- To the
extent that an authorized representative or other employee or agent of the
Corporation has been successful on the merits or otherwise in defense of any
third party or corporate proceeding or in defense of any claim, issue or matter
therein, such person shall be indemnified against expenses actually and
reasonably incurred by such person in connection therewith.
D. Determination of Entitlement to Indemnification. -- Any indemnification
under section 7(A), (B) or (C) of this Article (unless ordered by a court) shall
be made by the Corporation only as authorized in the specific case upon a
determination that indemnification of the authorized representative or other
employee or agent is proper in the circumstances because such person has either
met the applicable standard of conduct set forth in section 7(A) or (B) of this
Article or has been successful on the merits or otherwise as set forth in
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section 7(C) of this Article and that the amount requested has been actually and
reasonably incurred. Such determination shall be made:
(1) by the Board of Directors by a majority vote of a quorum consisting
of directors who were not parties to such third party or corporate
proceeding; or
(2) if such a quorum is not obtainable, or even if obtainable, a quorum
of disinterested directors so directs, by independent legal counsel in a
written opinion; or
(3) by the stockholders.
E. Advancing Expenses. -- Expenses actually and reasonably incurred in
defending a third party or corporate proceeding shall be paid on behalf of an
authorized representative by the Corporation in advance of the final disposition
of such third party or corporate proceeding and within 30 days of receipt by the
secretary of the Corporation of (i) an application from such authorized
representative setting forth the basis for such indemnification, and (ii) if
required by law at the time such application is made, an undertaking by or on
behalf of the authorized representative to repay such amount if it shall
ultimately be determined that the authorized representative is not entitled to
be indemnified by the Corporation as authorized in this Article. The financial
ability of any authorized representative to make a repayment contemplated by
this section shall not be a prerequisite to the making of an advance. Expenses
incurred by other employees and agents may be so paid upon such terms and
conditions, if any, as the Board of Directors deems appropriate.
F. Definitions. -- For purposes of this Article:
(1) "authorized representative" shall mean any and all directors and
officers of the Corporation and any person designated as an authorized
representative by the Board of Directors of the Corporation or any officer
of the Corporation to whom the Board has delegated the authority to make
such designations (which "authorized representative" may, but need not,
include any person serving at the request of the Corporation as a director,
officer, employee, trustee or agent of another corporation, partnership,
joint venture, trust or other enterprise);
(2) "Corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify
its directors, officers, employees or agents, so that any person who is or
was a director, officer, employee or agent of such constituent corporation,
or is or was serving at the request of such constituent corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, shall stand in the same position
under the provisions of this Article with respect to the resulting or
surviving corporation as such person would have with respect to such
constituent corporation if its separate existence had continued;
(3) "corporate proceeding" shall mean any threatened, pending or
completed action or suit by or in the right of the Corporation to procure a
judgment in its favor and any investigative proceeding by the Corporation;
(4) "criminal third party proceeding" shall include any action or
investigation which could or does lead to a criminal third party
proceeding;
(5) "expenses" shall include attorneys' fees and disbursements;
(6) "fines" shall include any excise taxes assessed on a person with
respect to an employee benefit plan;
(7) actions "not opposed to the best interests of the Corporation" shall
include without limitation actions taken in good faith and in a manner the
authorized representative reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit plan;
(8) "other enterprises" shall include employee benefit plans;
(9) "party" shall include the giving of testimony or similar
involvement;
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(10) "serving at the request of the Corporation" shall include without
limitation any service as a director, officer or employee of the
Corporation which imposes duties on, or involves services by, such
director, officer or employee with respect to an employee benefit plan, its
participants, or beneficiaries; and
(11) "third party proceeding" shall mean 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.
G. Insurance. -- The Corporation may purchase and maintain insurance on
behalf of any person who 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, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against the
person and incurred by the person in any such capacity, or arising out of his or
her status as such, whether or not the Corporation would have the power or the
obligation to indemnify such person against such liability under the provisions
of this Article.
H. Scope of Article. -- The indemnification of authorized representatives
and advancement of expenses, as authorized by the preceding provisions of this
Article, shall not be deemed exclusive of any other rights to which those
seeking indemnification or advancement of expenses may be entitled under any
agreement, vote of stockholders or disinterested directors or otherwise, both as
to action in an official capacity and as to action in another capacity while
holding such office. The indemnification and advancement of expenses provided by
or granted pursuant to this Article shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be an
authorized representative and shall inure to the benefit of the heirs, executors
and administrators of such a person.
I. Reliance on Provisions. -- Each person who shall act as an authorized
representative of the Corporation shall be deemed to be doing so in reliance
upon rights of indemnification provided by this Article. Any repeal or
modification of the provisions of this Article 7 by the stockholders of the
Corporation shall not adversely affect any right or benefit of a director
existing at the time of such repeal or modification.
J. Severability. -- If this Article 7 or any portion thereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify each authorized representative of the
Corporation as to expenses, judgments, fines and amounts paid in settlement with
respect to any action, suit or proceeding, whether civil, criminal,
administrative or investigative, including, without limitation, a grand jury
proceeding and an action, suit or proceeding by or in the right of the
Corporation, to the fullest extent permitted by any applicable portion of this
Article 7 that shall not have been invalidated, by the GCL or by any other
applicable law.
8. Duty of Care. A director of the Corporation shall not be liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of the law, (iii) under Section 174 of the GCL, or (iv) for any
transaction from which the director derived an improper personal benefit. If the
GCL is amended to authorize corporate action further eliminating or limiting the
personal liability of directors, then the liability of a director of the
Corporation shall be eliminated or limited to the fullest extent permitted by
the GCL, as so amended. Any repeal or modification of the provisions of this
Article 8 by the stockholders of the Corporation shall not adversely affect any
right or benefit of a director of the Corporation existing at the time of such
repeal or modification.
9. Board Consideration of All Relevant Factors. The Board of Directors of
the Corporation, when evaluating any offer of another party to (a) make a tender
or exchange offer for any equity security of the Corporation, (b) merge or
consolidate the Corporation with another corporation, or (c) purchase or
otherwise acquire all or substantially all of the properties and assets of the
Corporation, may, in connection with the exercise of its judgment in determining
what is in the best interests of the Corporation and its stockholders, give due
consideration to (i) all relevant factors, including without limitation the
social, legal, environmental and economic effects on employees, customers,
suppliers and other affected persons, firms and corporations
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and on the communities and geographical areas in which the Corporation and its
subsidiaries operate or are located and on any of the businesses and properties
of the Corporation or any of its subsidiaries, as well as such other factors as
the directors deem relevant, and (ii) the consideration being offered, not only
in relation to the then current market price for the Corporation's outstanding
shares of capital stock, but also in relation to the then current value of the
Corporation in a freely negotiated transaction and in relation to the Board of
Directors' estimate of the future value of the Corporation (including the
unrealized value of its properties and assets) as an independent going concern.
10. Unanimous Consent of Stockholders in Lieu of Meeting. Any action
required to be taken at any annual or special meeting of stockholders of the
Corporation, or any action which may be taken at any annual or special meeting
of such stockholders, may be taken without a meeting, without prior notice and
without a vote, if a consent or consents in writing, setting forth the action so
taken, shall be signed by the holders of all of the outstanding stock entitled
to vote to take such action at any annual or special meeting of stockholders of
the Corporation and shall be delivered to the Corporation by delivery to its
registered office in Delaware, its principal place of business, or an officer or
agent of the Corporation having custody of the books in which proceedings or
meetings of stockholders are recorded. Every written consent shall bear the date
of signature of each stockholder who signs the consent and no written consent
shall be effective to take the corporate action referred to unless, within 60
days of the earliest dated consent delivered in the manner required in this
section to the Corporation, written consents signed by the holders of all of the
outstanding stock entitled to vote to take such action are delivered to the
Corporation by delivery to its registered office in Delaware, its principal
place of business, or an officer or agent of the Corporation having custody of
the book in which proceedings of meetings of stockholders are recorded. Delivery
made to a Corporation's registered office shall be by hand or by certified or
registered mail, return receipt requested.
11. Amendments. The Corporation reserves the right to amend, alter, change
or repeal any provision contained in this certificate of incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
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APPENDIX III
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FORM
OF
BYLAWS
OF
BELL ATLANTIC CORPORATION
(A DELAWARE CORPORATION)
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<PAGE> 138
BYLAWS
OF
BELL ATLANTIC CORPORATION
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NO. III-
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<S> <C> <C>
ARTICLE I
OFFICES AND FISCAL YEAR
SECTION 1.01. Registered Office............................................... 1
SECTION 1.02. Fiscal Year..................................................... 1
ARTICLE II
NOTICE -- WAIVERS -- MEETINGS
SECTION 2.01. Notice, What Constitutes........................................ 1
SECTION 2.02. Notice of Meetings of Board of Directors........................ 1
SECTION 2.03. Notice of Meetings of Stockholders.............................. 1
SECTION 2.04. Waivers of Notice............................................... 1
SECTION 2.05. Exception to Requirements of Notice............................. 2
SECTION 2.06. Conference Telephone Meetings................................... 2
ARTICLE III
MEETINGS OF STOCKHOLDERS
SECTION 3.01. Place of Meeting................................................ 2
SECTION 3.02. Annual Meeting.................................................. 2
SECTION 3.03. Special Meetings................................................ 2
SECTION 3.04. Quorum, Manner of Acting and Adjournment........................ 2
SECTION 3.05. Organization.................................................... 3
SECTION 3.06. Voting.......................................................... 4
SECTION 3.07. Voting Lists.................................................... 4
SECTION 3.08. Inspectors of Election.......................................... 4
ARTICLE IV
BOARD OF DIRECTORS
SECTION 4.01. Powers.......................................................... 5
SECTION 4.02. Number.......................................................... 5
SECTION 4.03. Term of Office.................................................. 5
SECTION 4.04. Vacancies....................................................... 5
SECTION 4.05. Resignations.................................................... 5
SECTION 4.06. Organization.................................................... 6
SECTION 4.07. Place of Meeting................................................ 6
SECTION 4.08. Regular Meetings................................................ 6
SECTION 4.09. Special Meetings................................................ 6
SECTION 4.10. Quorum, Manner of Acting and Adjournment........................ 6
SECTION 4.11. Committees of the Board......................................... 6
SECTION 4.12. Compensation of Directors....................................... 7
SECTION 4.13. Qualifications and Election of Directors........................ 7
SECTION 4.14. Voting of Stock................................................. 8
</TABLE>
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<TABLE>
<CAPTION>
PAGE NO. III-
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<S> <C> <C>
SECTION 4.15. Endorsement of Securities for Transfer.......................... 8
SECTION 4.16. Representation on Board of Directors............................ 8
ARTICLE V
OFFICERS
SECTION 5.01. Number, Qualifications and Designation.......................... 9
SECTION 5.02. Election and Term of Office..................................... 9
SECTION 5.03. Subordinate Officers, Committees and Agents..................... 9
SECTION 5.04. The Chairman and Vice Chairman of the Board..................... 9
SECTION 5.05. The Chairman of the Board....................................... 9
SECTION 5.06. The President................................................... 9
SECTION 5.07. The Secretary................................................... 9
SECTION 5.08. The Treasurer................................................... 9
SECTION 5.09. Officers' Bonds................................................. 10
SECTION 5.10. Salaries........................................................ 10
SECTION 5.11. Employment Agreements........................................... 10
ARTICLE VI
CERTIFICATES OF STOCK, TRANSFER, ETC.
SECTION 6.01. Form and Issuance............................................... 10
SECTION 6.02. Transfer........................................................ 11
SECTION 6.03. Lost, Stolen, Destroyed or Mutilated Certificates............... 11
SECTION 6.04. Record Holder of Shares......................................... 11
SECTION 6.05. Determination of Stockholders of Record......................... 11
ARTICLE VII
GENERAL PROVISIONS
SECTION 7.01. Dividends....................................................... 12
SECTION 7.02. Contracts....................................................... 12
SECTION 7.03. Corporate Seal.................................................. 12
SECTION 7.04. Checks, Notes, Etc.............................................. 12
SECTION 7.05. Corporate Records............................................... 12
SECTION 7.06. Amendment of Bylaws............................................. 12
</TABLE>
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BYLAWS
OF
BELL ATLANTIC CORPORATION
(A DELAWARE CORPORATION)
ARTICLE I
OFFICES AND FISCAL YEAR
SECTION 1.01. Registered Office. -- The registered office of the
corporation shall be in the City of Wilmington, County of New Castle, State of
Delaware until otherwise established by resolution of the board of directors,
and a certificate certifying the change is filed in the manner provided by
statute.
SECTION 1.02. Fiscal Year. -- The fiscal year of the corporation shall end
on the 31st day of December in each year.
ARTICLE II
NOTICE -- WAIVERS -- MEETINGS
SECTION 2.01. Notice, What Constitutes. -- Whenever, under the provisions
of the Delaware General Corporation Law ("GCL") or the certificate of
incorporation or of these Bylaws, notice is required to be given to any director
or stockholder, it shall not be construed to require personal notice, but such
notice may be given in writing, by mail or by telegram (with messenger service
specified), telex or TWX (with answerback received) or courier service, charges
prepaid, or by telephone or facsimile transmission to the address (or to the
telex, TWX, facsimile or telephone number) of the person appearing on the books
of the corporation, or in the case of directors, supplied to the corporation for
the purpose of notice. If the notice is sent by mail, telegram or courier
service, it shall be deemed to be given when deposited in the United States mail
or with a telegraph office or courier service for delivery to that person or, in
the case of telex or TWX, when dispatched, or in the case of facsimile
transmission, when received.
SECTION 2.02. Notice of Meetings of Board of Directors. -- Notice of a
regular meeting of the board of directors need not be given. Notice of every
special meeting of the board of directors shall be given to each director in
person or by telephone or in writing at least 24 hours (in the case of notice in
person or by telephone, telex, TWX or facsimile transmission) or 48 hours (in
the case of notice by telegram, courier service or express mail) or five days
(in the case of notice by first class mail) before the time at which the meeting
is to be held. Every such notice shall state the time and place of the meeting.
Neither the business to be transacted at, nor the purpose of, any regular or
special meeting of the board need be specified in a notice of the meeting.
SECTION 2.03. Notice of Meetings of Stockholders. -- Written notice of the
place, date and hour of every meeting of the stockholders, whether annual or
special, shall be given to each stockholder of record entitled to vote at the
meeting not less than ten nor more than 60 days before the date of the meeting.
Every notice of a special meeting shall state the purpose or purposes thereof.
If the notice is sent by mail, it shall be deemed to have been given when
deposited in the United States mail, postage prepaid, directed to the
stockholder at the address of the stockholder as it appears on the records of
the corporation.
SECTION 2.04. Waivers of Notice.
(a) Written Waiver. -- Whenever notice is required to be given under any
provisions of the GCL or the certificate of incorporation or these Bylaws, a
written waiver, signed by the person or persons entitled to the notice, whether
before or after the time stated therein, shall be deemed equivalent to notice.
Neither the business to be transacted at, nor the purpose of, any regular or
special meeting of the stockholders, directors, or members of a committee of
directors need be specified in any written waiver of notice of such meeting.
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(b) Waiver by Attendance. -- Attendance of a person at a meeting, either in
person or by proxy, shall constitute a waiver of notice of such meeting, except
where a person attends a meeting for the express purpose of objecting at the
beginning of the meeting to the transaction of any business because the meeting
was not lawfully called or convened.
SECTION 2.05. Exception to Requirements of Notice.
(a) General Rule. -- Whenever notice is required to be given, under any
provision of the GCL or of the certificate of incorporation or these Bylaws, to
any person with whom communication is unlawful, the giving of such notice to
such person shall not be required and there shall be no duty to apply to any
governmental authority or agency for a license or permit to give such notice to
such person. Any action or meeting which shall be taken or held without notice
to any such person with whom communication is unlawful shall have the same force
and effect as if such notice had been duly given.
(b) Stockholders Without Forwarding Addresses. -- Whenever notice is
required to be given, under any provision of the GCL or the certificate of
incorporation or these Bylaws, to any stockholder to whom (i) notice of two
consecutive annual meetings, and all notices of meetings or of the taking of
action by written consent without a meeting to such person during the period
between such two consecutive annual meetings, or (ii) all, and at least two,
payments (if sent by first class mail) of dividends or interest on securities
during a 12 month period, have been mailed addressed to such person at his
address as shown on the records of the corporation and have been returned
undeliverable, the giving of such notice to such person shall not be required.
Any action or meeting which shall be taken or held without notice to such person
shall have the same force and effect as if such notice had been duly given. If
any such person shall deliver to the corporation a written notice setting forth
the person's then current address, the requirement that notice be given to such
person shall be reinstated.
SECTION 2.06. Conference Telephone Meetings. -- One or more directors may
participate in a meeting of the board, or of a committee of the board, by means
of conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other. Participation in a
meeting pursuant to this section shall constitute presence in person at such
meeting.
ARTICLE III
MEETINGS OF STOCKHOLDERS
SECTION 3.01. Place of Meeting. -- All meetings of the stockholders of the
corporation shall be held at such place within or without the State of Delaware
as shall be designated by the board of directors in the notice of such meeting
(or by an officer calling a meeting pursuant to Section 3.02) in accordance with
Section 3.02 or 3.03.
SECTION 3.02. Annual Meeting. -- The board of directors may fix and
designate the date and time of the annual meeting of the stockholders. At said
meeting the stockholders then entitled to vote shall elect directors and shall
transact such other business as may properly be brought before the meeting.
SECTION 3.03. Special Meetings. -- Special meetings of the stockholders of
the corporation may be called at any time by the chairman of the board or a
majority of the board of directors. At any time, upon the written request of any
person or persons who have duly called a special meeting, which written request
shall state the purpose or purposes of the meeting, it shall be the duty of the
secretary to fix the date of the meeting which shall be held at such date and
time as the secretary may fix, not less than ten nor more than 60 days after the
receipt of the request, and to give due notice thereof. If the secretary shall
neglect or refuse to fix the time and date of such meeting and give notice
thereof, the person or persons calling the meeting may do so.
SECTION 3.04. Quorum, Manner of Acting and Adjournment.
(a) Quorum. -- The holders of a majority of the shares entitled to vote,
present in person or represented by proxy, shall constitute a quorum at all
meetings of the stockholders except as otherwise provided by the GCL, by the
certificate of incorporation or by these Bylaws. If a quorum is not present or
represented at any
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meeting of the stockholders, the stockholders entitled to vote thereat, present
in person or represented by proxy, shall have power to adjourn the meeting from
time to time, without notice other than announcement at the meeting, until a
quorum is present or represented. At any such adjourned meeting at which a
quorum is present or represented, the corporation may transact any business
which might have been transacted at the original meeting. If the adjournment is
for more than 30 days, or if after the adjournment a new record date is fixed
for the adjourned meeting, a notice of the adjourned meeting shall be given to
each stockholder of record entitled to vote at the meeting.
(b) Manner of Acting. -- Directors shall be elected by a plurality of the
votes of the shares present in person or represented by proxy and entitled to
vote at the meeting on the election of directors. In all matters other than the
election of directors, the affirmative vote of the majority of shares present in
person or represented by proxy at the meeting and entitled to vote and voting
thereon shall be the act of the stockholders, unless the question is one upon
which, by express provision of the applicable statute, the certificate of
incorporation or these Bylaws, a different vote is required in which case such
express provision shall govern and control the decision of the question. The
stockholders present in person or by proxy at a duly organized meeting can
continue to do business until adjournment, notwithstanding withdrawal of enough
stockholders to leave less than a quorum.
(c) Stockholder Proposals. -- Nominations by stockholders of persons for
election to the board of directors of the corporation may be made at an annual
meeting in compliance with Section 4.13 hereof. The proposal of other business
to be considered by the stockholders at an annual meeting of stockholders may be
made (i) pursuant to the corporation's notice of meeting, (ii) by or at the
direction of the board of directors, or (iii) by any stockholder of the
corporation pursuant to timely notice in writing to the secretary of the
corporation. To be timely, a stockholder's notice shall be delivered to or
mailed and received at the principal executive offices of the corporation not
less than 60 days prior to the meeting; provided, however, that in the event
that less than 75 days' notice or prior public disclosure of the date of the
meeting is given or made to stockholders, notice by the stockholder to be timely
must be so received not later than the close of business on the 15th day
following the day on which such notice of the date of the meeting was mailed or
such public disclosure was made. Such stockholder's notice to the secretary
shall set forth (a) as to the stockholder giving notice and the beneficial
owner, if any on whose behalf the proposal is made, (i) their name and record
address, and (ii) the class and number of shares of capital stock of the
corporation which are beneficially owned by each of them, and (b) a brief
description of the business desired to be brought before the meeting, the
reasons for conducting such business at the meeting and any material interest in
such business of such stockholder giving notice and the beneficial owner, if
any, on whose behalf the proposal is made. Only such business shall be conducted
at a special meeting of stockholders as shall have been brought before the
meeting pursuant to the corporation's notice of meeting. Only such business
shall be conducted at a meeting of stockholders as shall have been brought
before the meeting in accordance with the procedures set forth in this section.
(d) The chairman of the meeting may, if the facts warrant, determine and
declare to the meeting that any nomination made at the meeting was not made in
accordance with the foregoing procedures and, in such event, the nomination
shall be disregarded. Any decision by the chairman of the meeting shall be
conclusive and binding upon all stockholders of the corporation for any purpose.
SECTION 3.05. Organization. -- At every meeting of the stockholders, the
chairman of the board, if there be one, or in the case of a vacancy in the
office or absence of the chairman of the board, one of the following persons
present in the order stated: the president, the vice chairman, if one has been
appointed, a chairman designated by the board of directors or a chairman chosen
by the stockholders entitled to cast a majority of the votes which all
stockholders present in person or by proxy are entitled to cast, shall act as
chairman, and the secretary, or, in the absence of the secretary, an assistant
secretary, or in the absence of the secretary and the assistant secretaries, a
person appointed by the chairman, shall act as secretary.
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SECTION 3.06. Voting.
(a) General Rule. -- Unless otherwise provided in the certificate of
incorporation, each stockholder shall be entitled to one vote, in person or by
proxy, for each share of capital stock having voting power held by such
stockholder.
(b) Voting and Other Action by Proxy. --
(1) A stockholder may execute a writing authorizing another person or
persons to act for the stockholder as proxy. Such execution may be
accomplished by the stockholder or the authorized officer, director,
employee or agent of the stockholder signing such writing or causing his or
her signature to be affixed to such writing by any reasonable means
including, but not limited to, by facsimile signature. A stockholder may
authorize another person or persons to act for the stockholder as proxy by
transmitting or authorizing the transmission of a telegram, cablegram, or
other means of electronic transmission to the person who will be the holder
of the proxy or to a proxy solicitation firm, proxy support service
organization or like agent duly authorized by the person who will be the
holder of the proxy to receive such transmission if such telegram,
cablegram or other means of electronic transmission sets forth or is
submitted with information from which it can be determined that the
telegram, cablegram or other electronic transmission was authorized by the
stockholder.
(2) No proxy shall be voted or acted upon after three years from its
date, unless the proxy provides for a longer period.
(3) A duly executed proxy shall be irrevocable if it states that it is
irrevocable and if, and only so long as, it is coupled with an interest
sufficient in law to support an irrevocable power. A proxy may be made
irrevocable regardless of whether the interest with which it is coupled is
an interest in the stock itself or an interest in the corporation
generally.
SECTION 3.07. Voting Lists. -- The officer who has charge of the stock
ledger of the corporation shall prepare and make, at least ten days before every
meeting of stockholders, a complete list of the stockholders entitled to vote at
the meeting. The list shall be arranged in alphabetical order, showing the
address of each stockholder and the number of shares registered in the name of
each stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business hours, for a
period of at least ten days prior to the meeting either at a place within the
city where the meeting is to be held, which place shall be specified in the
notice of the meeting, or, if not so specified, at the place where the meeting
is to be held. The list shall also be produced and kept at the time and place of
the meeting during the whole time thereof, and may be inspected by any
stockholder who is present.
SECTION 3.08. Inspectors of Election.
(a) Appointment. -- All elections of directors shall be by written ballot;
the vote upon any other matter need not be by ballot. In advance of any meeting
of stockholders the board of directors may appoint one or more inspectors, who
need not be stockholders, to act at the meeting and to make a written report
thereof. The board of directors may designate one or more persons as alternate
inspectors to replace any inspector who fails to act. If no inspector or
alternate is able to act at a meeting of stockholders, the person presiding at
the meeting shall appoint one or more inspectors to act at the meeting. Each
inspector, before entering upon the discharge of his or her duties, shall take
and sign an oath faithfully to execute the duties of inspector with strict
impartiality and according to the person's best ability.
(b) Duties. -- The inspectors shall ascertain the number of shares
outstanding and the voting power of each, shall determine the shares represented
at the meeting and the validity of proxies and ballots, shall count all votes
and ballots, shall determine and retain for a reasonable period a record of the
disposition of any challenges made to any determination by the inspectors, and
shall certify their determination of the number of shares represented at the
meeting and their count of all votes and ballots. The inspectors may appoint or
retain other persons or entities to assist the inspectors in the performance of
the duties of the inspectors.
(c) Polls. -- The date and time of the opening and the closing of the polls
for each matter upon which the stockholders will vote at a meeting shall be
announced at the meeting. No ballot, proxies or votes, nor any
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revocations thereof or changes thereto, shall be accepted by the inspectors
after the closing of the polls unless the Court of Chancery upon application by
a stockholder shall determine otherwise.
(d) Reconciliation of Proxies and Ballots. -- In determining the validity
and counting of proxies and ballots, the inspectors shall be limited to an
examination of the proxies, any envelopes submitted with those proxies, any
information transmitted in accordance with section 3.06, ballots and the regular
books and records of the corporation, except that the inspectors may consider
other reliable information for the limited purpose of reconciling proxies and
ballots submitted by or on behalf of banks, brokers, their nominees or similar
persons which represent more votes than the holder of a proxy is authorized by
the record owner to cast or more votes than the stockholder holds of record. If
the inspectors consider other reliable information for the limited purpose
permitted herein, the inspectors at the time they make their certification
pursuant to subsection (b) shall specify the precise information considered by
them including the person or persons from whom they obtained the information,
when the information was obtained, the means by which the information was
obtained and the basis for the inspectors' belief that such information is
accurate and reliable.
ARTICLE IV
BOARD OF DIRECTORS
SECTION 4.01. Powers. -- All powers vested by law in the corporation shall
be exercised by or under the authority of, and the business and affairs of the
corporation shall be managed under the direction of, the board of directors.
SECTION 4.02. Number. -- Subject to the provisions of the certificate of
incorporation, the board of directors shall consist of such number of directors
as may be determined from time to time by resolution adopted by a vote of a
majority of the entire board of directors.
SECTION 4.03. Term of Office. -- Directors of the corporation shall hold
office until the next annual meeting of stockholders and until their successors
shall have been elected and qualified, except in the event of death, resignation
or removal.
SECTION 4.04. Vacancies.
(a) Subject to the provisions of Section 4.16 hereof, vacancies and newly
created directorships resulting from any increase in the authorized number of
directors may be filled by a majority of the directors then in office, though
less than a quorum, or by a sole remaining director, and a director so chosen
shall hold office until the next annual election of the class for which such
director shall have been elected and until a successor is duly elected and
qualified. If there are no directors in office, then an election of directors
may be held in the manner provided by statute.
(b) Subject to the provisions of Section 4.16 hereof, whenever the holders
of any class or classes of stock or series thereof are entitled to elect one or
more directors by the provisions of the certificate of incorporation, vacancies
and newly created directorships of such class or classes or series may be filled
by a majority of the directors elected by such class or classes or series
thereof then in office, or by a sole remaining director so elected.
(c) If, at the time of filling any vacancy or any newly created
directorship, the directors then in office shall constitute less than a majority
of the entire board (as constituted immediately prior to any such increase), the
Court of Chancery may, upon application of any stockholder or stockholders
holding at least ten percent of the total number of the shares at the time
outstanding having the right to vote for such directors, summarily order an
election to be held to fill any such vacancies or newly created directorship, or
to replace the directors chosen by the directors then in office.
SECTION 4.05. Resignations. -- Any director may resign at any time upon
written notice to the chairman, president or secretary of the corporation. The
resignation shall be effective upon receipt thereof by the corporation or at
such subsequent time as shall be specified in the notice of resignation and,
unless otherwise specified in the notice, the acceptance of the resignation
shall not be necessary to make it effective.
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SECTION 4.06. Organization. -- At every meeting of the board of directors,
the chairman of the board, if there be one, or, in the case of a vacancy in the
office or absence of the chairman of the board, one of the following officers
present in the order stated: the president, the vice chairman, if one has been
appointed, the vice presidents in their order of rank and seniority, or a
chairman chosen by a majority of the directors present, shall preside, and the
secretary, or, in the absence of the secretary, an assistant secretary, or in
the absence of the secretary and the assistant secretaries, any person appointed
by the chairman of the meeting, shall act as secretary.
SECTION 4.07. Place of Meeting. -- Meetings of the board of directors, both
regular and special, shall be held at such place within or without the State of
Delaware as the board of directors may from time to time determine, or as may be
designated in the notice of the meeting.
SECTION 4.08. Regular Meetings. -- Regular meetings of the board of
directors shall be held without notice at such time and place as shall be
designated from time to time by resolution of the board of directors.
SECTION 4.09. Special Meetings. -- Special meetings of the board of
directors shall be held whenever called by the chairman or by three or more of
the directors.
SECTION 4.10. Quorum, Manner of Acting and Adjournment.
(a) General Rule. -- At all meetings of the board one-third of the total
number of directors shall constitute a quorum for the transaction of business.
The vote of a majority of the directors present at any meeting at which a quorum
is present shall be the act of the board of directors, except as may be
otherwise specifically provided by the GCL or by the certificate of
incorporation. If a quorum is not present at any meeting of the board of
directors, the directors present thereat may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum is
present.
(b) Unanimous Written Consent. -- Unless otherwise restricted by the
certificate of incorporation, any action required or permitted to be taken at
any meeting of the board of directors may be taken without a meeting, if all
members of the board consent thereto in writing, and the writing or writings are
filed with the minutes of proceedings of the board.
SECTION 4.11. Committees of the Board.
(a) Establishment. -- The board of directors may, by resolution adopted by
a majority of the entire board, establish one or more other committees, each
committee to consist of one or more directors. The membership of each such
committee shall be in compliance with Section 4.16 hereof. The board may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee. In
the absence or disqualification of a member of a committee and the alternate or
alternates, if any, designated for such member, the member or members of the
committee present at any meeting and not disqualified from voting, whether or
not they constitute a quorum, may unanimously appoint another director to act at
the meeting in the place of any such absent or disqualified member.
(b) Powers. -- Any such committee, to the extent provided in the resolution
establishing such committee, shall have and may exercise all the power and
authority of the board of directors in the management of the business and
affairs of the corporation and may authorize the seal of the corporation to be
affixed to all papers which may require it; but no such committee shall have
such power or authority in reference to amending the certificate of
incorporation (except that a committee may, to the extent authorized in the
resolution or resolutions providing for the issuance of shares of stock adopted
by the board of directors as provided in Section 151(a) of the GCL, fix the
designation and any of the preferences or rights of such shares relating to
dividends, redemption, dissolution, any distribution of assets of the
corporation or the conversion into, or the exchange of such shares for, shares
of any other class or classes or any other series of the same or any other class
or classes of stock of the corporation or fix the number of shares of any series
of stock or authorize the increase or decrease of shares of any series),
adopting an agreement of merger or consolidation under Section 251, 252, 254,
255, 256, 257, 258, 263, or 264 of the GCL, recommending to the stockholders the
sale, lease or exchange of all or substantially all of the corporation's
property and assets,
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recommending to the stockholders a dissolution of the corporation or a
revocation of a dissolution, or amending the Bylaws of the corporation. Such
committees shall have such name or names as may be determined from time to time
by resolution adopted by the board of directors. Each committee so formed shall
keep regular minutes of its meetings and report the same to the board of
directors when required.
(c) Committee Procedures. -- The term "board of directors" or "board," when
used in any provision of these Bylaws relating to the organization or procedures
of or the manner of taking action by the board of directors, shall be construed
to include and refer to any committee of the board.
SECTION 4.12. Compensation of Directors. -- Unless otherwise restricted by
the certificate of incorporation, the board of directors shall have the
authority to fix the compensation of directors. The directors may be paid their
expenses, if any, of attendance at each meeting of the board of directors and
may be paid a fixed sum for attendance at each meeting of the board of directors
or a stated salary as director. No such payment shall preclude any director from
serving the corporation in any other capacity and receiving compensation
therefor. Members of special or standing committees may be allowed like
compensation for attending committee meetings.
SECTION 4.13. Qualifications and Election of Directors.
(a) All directors of the corporation shall be natural persons of full age,
but need not be residents of Delaware or stockholders of the corporation. Except
in the case of vacancies, directors shall be elected by the stockholders. If
directors of more than one class are to be elected, each class of directors to
be elected at the meeting shall be nominated and elected separately. No person
who has reached 70 years of age may be elected or appointed to a term of office
as a director of the corporation. The term of office of any director elected or
appointed in conformity with the preceding sentence shall continue (to the
extent provided in the certificate of incorporation and these Bylaws) after such
director reaches 70 years of age.
(b) Nominations of persons for election to the board of directors of the
corporation may be made at a meeting of stockholders by or at the direction of
the board of directors, which shall, prior to the date of retirement of Raymond
W. Smith as Chairman of the Corporation (the "Retirement Date"), follow the
method for the selection of directors set forth in Section 4.16 of the Bylaws.
(c) Nominations of persons for election to the board of directors of the
corporation may also be made by any stockholder of the corporation entitled to
vote for the election of directors at the meeting who complies with the notice
procedures set forth in this Section 4.14 (c) and (d). Such nominations, other
than those made by or at the direction of the board, shall be made pursuant to
timely notice in writing to the secretary of the corporation. To be timely, a
stockholder's notice shall be delivered to or mailed and received at the
principal executive offices of the corporation not less than 60 days prior to
the meeting; provided, however, that in the event that less than 75 days' notice
or prior public disclosure of the date of the meeting is given or made to
stockholders, notice by the stockholder to be timely must be so received not
later than the close of business on the 15th day following the day on which such
notice of the date of the meeting was mailed or such public disclosure was made.
Such stockholder's notice to the secretary shall set forth (a) as to each person
whom the stockholder proposes to nominate for election or re-election as a
director, (i) the name, age, business address and residence address of the
person, (ii) the principal occupation or employment of the person, (iii) the
class and number of shares of capital stock of the corporation which are
beneficially owned by the person, and (iv) any other information relating to the
person that is required to be disclosed in solicitations for proxies for
election of directors pursuant to the rules and regulations promulgated under
the Securities Exchange Act of 1934 as amended; and (b) as to the stockholder
giving the notice (i) the name and record address of the stockholder and (ii)
the class and number of shares of capital stock of the corporation which are
beneficially owned by the stockholder. The corporation may require any proposed
nominee to furnish such other information as may reasonably be required by the
corporation to determine the eligibility of such proposed nominee to serve as a
director of the corporation. No person shall be eligible for election as a
director by the stockholders of the corporation unless nominated in accordance
with the procedures set forth herein.
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(d) The chairman of the meeting may, if the facts warrant, determine and
declare to the meeting that any nomination made at the meeting was not made in
accordance with the foregoing procedures and, in such event, the nomination
shall be disregarded. Any decision by the chairman of the meeting shall be
conclusive and binding upon all stockholders of the corporation for any purpose.
SECTION 4.14. Voting of Stock. Unless otherwise ordered by the board of
directors, each of the chairman of the board, the president, and the principal
accounting officer (as identified in the corporation's most recent report filed
with the United States Securities and Exchange Commission) shall have full power
and authority, on behalf of the corporation, to attend and to act and vote, in
person or by proxy, at any meeting of the stockholders of any company in which
the corporation may hold stock, and at any such meeting shall possess and may
exercise any and all of the rights and powers incident to the ownership of such
stock which, as the owner thereof, the corporation might have possessed and
exercised if present. The board of directors, by resolution adopted from time to
time, may confer like powers upon any other person or persons.
SECTION 4.15. Endorsement of Securities for Transfer. Each of the chairman
of the board, the president, and the principal accounting officer shall have the
power to endorse and deliver for sale, assignment or transfer certificates for
stock, bonds or other securities, registered in the name of or belonging to the
corporation, whether issued by the corporation or by any other corporation,
government, state or municipality or agency thereof; and the board of directors
from time to time may confer like power upon any other officer, agent or person
by resolution adopted from time to time. Every such endorsement shall be
countersigned by the treasurer or an assistant treasurer.
SECTION 4.16. Representation on Board of Directors. The total number of
persons serving on the board of directors shall be twenty-two, half of whom
shall be NYNEX Directors and half of whom shall be Old Bell Atlantic Directors
(as such terms are defined below). No more than six of the twenty-two directors
shall be employees of the corporation or NYNEX Corporation ("NYNEX"); half of
the employee directors shall be NYNEX Directors and half shall be Old Bell
Atlantic Directors. From the date hereof until Raymond W. Smith ceases to be the
Chairman of the corporation, the board of directors and each committee of the
board as constituted following each election of directors shall consist of an
equal number of NYNEX Directors and Old Bell Atlantic Directors. If, at any time
during the period referred to in the immediately preceding sentence, the number
of NYNEX Directors and Old Bell Atlantic Directors serving, or that would be
serving following the next stockholders' meeting at which directors are to be
elected, as directors or as members of any committee of the board, would not be
equal, then, subject to the fiduciary duties of the directors, the board of
directors and the nominating committee thereof shall nominate for election at
the next stockholders' meeting at which directors are to be elected, such person
or persons as may be requested by the remaining NYNEX Directors (if the number
of NYNEX Directors is, or would otherwise become, less than the number of Old
Bell Atlantic Directors) or by the remaining Old Bell Atlantic Directors (if the
number of Old Bell Atlantic Directors is, or would otherwise become, less than
the number of NYNEX Directors) to ensure that there shall be an equal number of
NYNEX Directors and Old Bell Atlantic Directors. The provisions of the preceding
sentence shall not apply in respect of any stockholders' meeting which takes
place after the date on which Raymond W. Smith ceases to be Chairman of the
corporation, and prior to such date, vacancies in the board of directors shall
be filled only by vote of the stockholders. The term "NYNEX Director" means (i)
any person serving as a director of NYNEX or of a NYNEX telephone company on
April 21, 1996 who becomes a director of the corporation and (ii) any person who
becomes a director pursuant to the second preceding sentence and who is
designated by the NYNEX directors; and the term "Old Bell Atlantic Director"
means (i) any person serving as a Director of the corporation on April 21, 1996
who continues as a director of the corporation after the effective time of the
merger of a wholly owned subsidiary of the corporation with and into NYNEX and
(ii) any person who becomes a director pursuant to the second preceding sentence
and who is designated by the Old Bell Atlantic Directors. Any amendment to or
modification of this Section 4.16 or of any provision of these Bylaws which
refers to this Section 4.16 shall require a three-quarters vote of the entire
board of directors.
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ARTICLE V
OFFICERS
SECTION 5.01. Number, Qualifications and Designation. -- The officers of
the corporation shall be chosen by the board of directors and shall be a
president, one or more vice presidents, a secretary, a treasurer, and such other
officers as may be elected in accordance with the provisions of section 5.03 of
this Article. Any number of offices may be held by the same person. Officers
may, but need not, be directors or stockholders of the corporation. The board of
directors may elect from among the members of the board a chairman of the board
and a vice chairman of the board.
SECTION 5.02. Election and Term of Office. -- The officers of the
corporation, except those elected by delegated authority pursuant to section
5.03 of this Article, shall be elected annually by the board of directors, and
each such officer shall hold office for a term of one year and until a successor
is elected and qualified, or until his or her earlier resignation or removal.
Any officer may resign at any time upon written notice to the corporation.
SECTION 5.03. Subordinate Officers, Committees and Agents. -- The board of
directors may from time to time elect such other officers and appoint such
committees, employees or other agents as it deems necessary, who shall hold
their offices for such terms and shall exercise such powers and perform such
duties as are provided in these Bylaws, or as the board of directors may from
time to time determine. The board of directors may delegate to any officer or
committee the power to elect subordinate officers and to retain or appoint
employees or other agents, or committees thereof, and to prescribe the authority
and duties of such subordinate officers, committees, employees or other agents.
SECTION 5.04. The Chairman and Vice Chairman of the Board. -- The chairman
of the board, or in the absence of the chairman, the vice chairman of the board,
if there be one, shall preside at all meetings of the stockholders and of the
board of directors, and shall perform such other duties as may from time to time
be assigned to them by the board of directors.
SECTION 5.05. The Chairman of the Board. -- The chairman of the board shall
have general supervision over the business and operations of the corporation,
subject, however, to the control of the board of directors, and shall perform
all duties incidental to his office which may be required by law and all such
other duties as are properly required of him by the board of directors. He shall
make reports to the board of directors and the stockholders, and shall see that
all orders and resolutions of the board of directors and of any committee
thereof are carried into effect.
SECTION 5.06. The President. -- The president shall, subject to the
Chairman, be the most senior executive of the corporation and shall assist the
Chairman of the board in the administration and operation of the corporation's
business and general supervision of its policies and affairs. The president
shall, in the absence of or because of the inability to act of the chairman of
the board, perform all duties of the chairman of the board and preside at all
meetings of stockholders and of the board of directors. The president shall
perform such other duties as may from time to time be assigned to him by the
board of directors or by the chairman of the board.
SECTION 5.07. The Secretary. -- The secretary, or an assistant secretary,
shall attend all meetings of the stockholders and of the board of directors and
shall record the proceedings of the stockholders and of the directors and of
committees of the board in a book or books to be kept for that purpose; shall
see that notices are given and records and reports properly kept and filed by
the corporation as required by law; shall be the custodian of the seal of the
corporation and see that it is affixed to all documents to be executed on behalf
of the corporation under its seal; and, in general, shall perform all duties
incident to the office of secretary, and such other duties as may from time to
time be assigned by the board of directors or the chairman of the board.
SECTION 5.08. The Treasurer. -- The treasurer, or an assistant treasurer,
shall have or provide for the custody of the funds or other property of the
corporation; shall collect and receive or provide for the collection and receipt
of moneys earned by or in any manner due to or received by the corporation;
shall deposit all funds in his or her custody as treasurer in such banks or
other places of deposit as the board of directors may
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from time to time designate; whenever so required by the board of directors,
shall render an account showing his or her transactions as treasurer and the
financial condition of the corporation; and, in general, shall discharge such
other duties as may from time to time be assigned by the board of directors or
the chairman of the board.
SECTION 5.09. Officers' Bonds. -- No officer of the corporation need
provide a bond to guarantee the faithful discharge of the officer's duties
unless the board of directors shall by resolution so require a bond in which
event such officer shall give the corporation a bond (which shall be renewed if
and as required) in such sum and with such surety or sureties as shall be
satisfactory to the board of directors for the faithful performance of the
duties of office.
SECTION 5.10. Salaries. -- The salaries of the officers and agents of the
corporation elected by the board of directors shall be fixed from time to time
by the board of directors.
SECTION 5.11. Employment Agreements. --
(a) Except as to the election to positions specifically provided for in the
employment agreements between the corporation and Raymond W. Smith and the
corporation and Ivan G. Seidenberg (each an "Employment Agreement," and
collectively, the "Employment Agreements"), which are expressly contemplated by
Section 7.10(b) of the Agreement and Plan of Merger dated as of April 21, 1996,
as amended and restated prior to the Effective Time under such Merger Agreement,
between the corporation and NYNEX Corporation, and until January 1, 1999, (i)
the election of any other person to such positions, or (ii) the removal or
replacement of Messrs. Smith or Seidenberg from one or more of those positions,
shall require a three-quarters vote of the entire board of directors.
Thereafter, such vote as is provided by Section 4.10 of these Bylaws shall be
required.
(b) Any amendment to or modification of either of the Employment Agreements
or of this Section 5.11 shall require a three-quarters vote of the entire board
of directors.
ARTICLE VI
CERTIFICATES OF STOCK, TRANSFER, ETC.
SECTION 6.01. Form and Issuance.
(a) Issuance. -- The shares of the corporation shall be represented by
certificates unless the board of directors shall by resolution provide that some
or all of any class or series of stock shall be uncertificated shares. Any such
resolution shall not apply to shares represented by a certificate until the
certificate is surrendered to the corporation. Notwithstanding the adoption of
any resolution providing for uncertificated shares, every holder of stock
represented by certificates and upon request every holder of uncertificated
shares shall be entitled to have a certificate signed by, or in the name of the
corporation by, the chairman or vice chairman of the board of directors, or the
president or vice president, and by the treasurer or an assistant treasurer, or
the secretary or an assistant secretary, representing the number of shares
registered in certificate form.
(b) Form and Records. -- Stock certificates of the corporation shall be in
such form as approved by the board of directors. The stock record books and the
blank stock certificate books shall be kept by the secretary or by any agency
designated by the board of directors for that purpose. The stock certificates of
the corporation shall be numbered and registered in the stock ledger and
transfer books of the corporation as they are issued.
(c) Signatures. -- Any of or all the signatures upon the stock certificates
of the corporation may be a facsimile. In case any officer, transfer agent or
registrar who has signed, or whose facsimile signature has been placed upon, any
share certificate shall have ceased to be such officer, transfer agent or
registrar, before the certificate is issued, it may be issued with the same
effect as if the signatory were such officer, transfer agent or registrar at the
date of its issue.
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SECTION 6.02. Transfer. -- Transfers of shares shall be made on the share
register or transfer books of the corporation upon surrender of the certificate
therefor, endorsed by the person named in the certificate or by an attorney
lawfully constituted in writing. No transfer shall be made which would be
inconsistent with the provisions of Article 8, Title 6 of the Delaware Uniform
Commercial Code-Investment Securities.
SECTION 6.03. Lost, Stolen, Destroyed or Mutilated Certificates. -- The
board of directors may direct a new certificate of stock or uncertificated
shares to be issued in place of any certificate theretofore issued by the
corporation alleged to have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen or destroyed. When authorizing such issue of a new certificate or
certificates, the board of directors may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed certificate or certificates, or the legal representative of the owner,
to give the corporation a bond sufficient to indemnify against any claim that
may be made against the corporation on account of the alleged loss, theft or
destruction of such certificate or the issuance of such new certificate or
uncertificated shares.
SECTION 6.04. Record Holder of Shares. -- The corporation shall be entitled
to recognize the exclusive right of a person registered on its books as the
owner of shares to receive dividends, and to vote as such owner, and to hold
liable for calls and assessments a person registered on its books as the owner
of shares, and shall not be bound to recognize any equitable or other claim to
or interest in such share or shares on the part of any other person, whether or
not it shall have express or other notice thereof, except as otherwise provided
by the laws of Delaware.
SECTION 6.05. Determination of Stockholders of Record.
(a) Meetings of Stockholders. -- In order that the corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, the board of directors may fix a record
date, which record date shall not precede the date upon which the resolution
fixing the record date is adopted by the board of directors, and which record
date shall not be more than 60 nor less than ten days before the date of such
meeting. If no record date is fixed by the board of directors, the record date
for determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next preceding the day
on which notice is given, or, if notice is waived, at the close of business on
the day next preceding the day on which the meeting is held. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting unless the board of
directors fixes a new record date for the adjourned meeting.
(b) Consent of Stockholders. -- In order that the corporation may determine
the stockholders entitled to consent to corporate action in writing without a
meeting, the board of directors may fix a record date, which record date shall
not precede the date upon which the resolution fixing the record date is adopted
by the board of directors, and which date shall not be more than ten days after
the date upon which the resolution fixing the record date is adopted by the
board of directors. If no record date has been fixed by the board of directors,
the record date for determining stockholders entitled to consent to corporate
action in writing without a meeting, when no prior action by the board of
directors is required by the GCL, shall be the first date on which a signed
written consent setting forth the action taken or proposed to be taken is
delivered to the corporation by delivery to its registered office in Delaware,
its principal place of business, or an officer or agent of the corporation
having custody of the book in which proceedings of meetings of stockholders are
recorded. Delivery made to a corporation's registered office shall be by hand or
by certified or registered mail, return receipt requested. If no record date has
been fixed by the board of directors and prior action by the board of directors
is required by the GCL, the record date for determining stockholders entitled to
consent to corporate action in writing without a meeting shall be at the close
of business on the day on which the board of directors adopts the resolution
taking such prior action.
(c) Dividends. -- In order that the corporation may determine the
stockholders entitled to receive payment of any dividend or other distribution
or allotment of any rights of the stockholders entitled to exercise any rights
in respect of any change, conversion or exchange of stock, or for the purpose of
any other lawful action, the board of directors may fix a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted, and which record date shall be not more than 60 days
prior to
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such action. If no record date is fixed, the record date for determining
stockholders for any such purpose shall be at the close of business on the day
on which the board of directors adopts the resolution relating thereto.
ARTICLE VII
GENERAL PROVISIONS
SECTION 7.01. Dividends. -- Subject to the restrictions contained in the
GCL and any restrictions contained in the certificate of incorporation, the
board of directors may declare and pay dividends upon the shares of capital
stock of the corporation.
SECTION 7.02. Contracts. -- Except as otherwise provided in these Bylaws,
the board of directors may authorize any officer or officers including the
chairman and vice chairman of the board of directors, or any agent or agents, to
enter into any contract or to execute or deliver any instrument on behalf of the
corporation and such authority may be general or confined to specific instances.
Any officer so authorized may, unless the authorizing resolution otherwise
provides, delegate such authority to one or more subordinate officers, employees
or agents, and such delegation may provide for further delegation.
SECTION 7.03. Corporate Seal. -- The corporation shall have a corporate
seal, which shall have inscribed thereon the name of the corporation, the year
of its organization and the words "Corporate Seal, Delaware". The seal may be
used by causing it or a facsimile thereof to be impressed or affixed or in any
other manner reproduced.
SECTION 7.04. Checks, Notes, Etc. -- All checks, notes and evidences of
indebtedness of the corporation shall be signed by such person or persons as the
board of directors may from time to time designate.
SECTION 7.05. Corporate Records.
(a) Examination by Stockholders. -- Every stockholder shall, upon written
demand under oath stating the purpose thereof, have a right to examine, in
person or by agent or attorney, during the usual hours for business, for any
proper purpose, the stock ledger, list of stockholders, books or records of
account, and records of the proceedings of the stockholders and directors of the
corporation, and to make copies or extracts therefrom. A proper purpose shall
mean a purpose reasonably related to such person's interest as a stockholder. In
every instance where an attorney or other agent shall be the person who seeks
the right to inspection, the demand under oath shall be accompanied by a power
of attorney or such other writing which authorizes the attorney or other agent
to so act on behalf of the stockholder. The demand under oath shall be directed
to the corporation at its registered office in Delaware or at its principal
place of business. Where the stockholder seeks to inspect the books and records
of the corporation, other than its stock ledger or list of stockholders, the
stockholder shall first establish (1) that the stockholder has complied with the
provisions of this section respecting the form and manner of making demand for
inspection of such documents; and (2) that the inspection sought is for a proper
purpose. Where the stockholder seeks to inspect the stock ledger or list of
stockholders of the corporation and has complied with the provisions of this
section respecting the form and manner of making demand for inspection of such
documents, the burden of proof shall be upon the corporation to establish that
the inspection sought is for an improper purpose.
(b) Examination by Directors. -- Any director shall have the right to
examine the corporation's stock ledger, a list of its stockholders and its other
books and records for a purpose reasonably related to the person's position as a
director.
SECTION 7.06. Amendment of Bylaws. -- Except as otherwise provided herein,
these Bylaws may be altered, amended or repealed or new Bylaws may be adopted
either (1) by vote of the stockholders at a duly organized annual or special
meeting of stockholders in accordance with the certificate of incorporation, or
(2) by vote of a majority of the entire board of directors at any regular or
special meeting of directors if such power is conferred upon the board of
directors by the certificate of incorporation.
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APPENDIX IV
[BEAR STEARNS LOGO] BEAR, STEARNS & CO. INC.
245 PARK AVENUE
NEW YORK, NEW YORK, 10167
(212)272-2000
September 9, 1996
Board of Directors
NYNEX Corporation
1095 Avenue of the Americas
New York, NY 10036
Ladies and Gentlemen:
We understand that NYNEX Corporation ("NYNEX") and Bell Atlantic
Corporation ("Bell Atlantic") have entered into a "merger of equals" transaction
by means of an Amended and Restated Agreement and Plan of Merger, dated as of
April 21, 1996, as amended and restated on July 2, 1996 (the "Merger
Agreement"), pursuant to which a newly-formed, wholly-owned subsidiary of Bell
Atlantic will be merged with and into NYNEX (the "Merger"), with NYNEX surviving
as a direct, wholly-owned subsidiary of Bell Atlantic (Bell Atlantic following
the Merger is sometimes referred to herein as "New Bell Atlantic"). We further
understand that in the Merger (i) each outstanding share of common stock, par
value $1.00 per share, of NYNEX ("NYNEX Common Stock"), other than treasury
shares and shares held by Bell Atlantic, and all rights in respect thereof, will
be converted into and exchanged for 0.768 of a share (the "Exchange Ratio") of
common stock, par value $0.10 per share (after giving effect to an amendment to
the Certificate of Incorporation of Bell Atlantic to become effective not later
than the effective time of the Merger), of Bell Atlantic (prior to the Merger,
"Bell Atlantic Common Stock" and, following the Merger, "New Bell Atlantic
Common Stock") and (ii) each outstanding NYNEX option or warrant to purchase
stock, stock appreciation right and restricted stock award will be converted
into a similar security or right of New Bell Atlantic, adjusted to reflect the
Exchange Ratio. Based on the Exchange Ratio, current holders of NYNEX Common
Stock would hold approximately 43.7%, and current holders of Bell Atlantic
Common Stock would hold approximately 56.3%, of the outstanding shares of New
Bell Atlantic Common Stock on a fully-diluted basis after consummation of the
Merger (assuming for analytical purposes that proceeds from the hypothetical
exercise of stock options or warrants are used to repurchase shares).
You have asked us to render our opinion as to whether the Exchange Ratio is
fair, from a financial point of view, to the holders of NYNEX Common Stock.
In the course of performing our review and analyses for rendering this
opinion, we have:
1. reviewed the Merger Agreement;
2. reviewed each of NYNEX's and Bell Atlantic's Annual Reports to
Shareholders and Annual Reports on Form 10-K for the years ended
December 31, 1993 through 1995, and their respective Quarterly Reports
on Form 10-Q for the periods ended March 31, 1996 and June 30, 1996;
3. reviewed certain operating and financial information provided to us by
the senior managements of NYNEX and Bell Atlantic relating to NYNEX's
and Bell Atlantic's respective businesses and prospects, including
projections of each company for the years ended December 31, 1996 and
1997 (collectively, the "Two-Year Projections") and certain other
forward-looking information;
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<PAGE> 153
4. reviewed certain estimates of cost savings and other combination
benefits (collectively, the "Projected Benefits") expected to result
from the Merger, jointly prepared and provided to us by the senior
managements of NYNEX and Bell Atlantic;
5. met separately and/or jointly with certain members of the senior
managements of NYNEX and Bell Atlantic to discuss (i) the current
telecommunications landscape and competitive dynamics related thereto,
(ii) each company's operations, historical financial statements, future
prospects and financial condition, (iii) their views of the strategic,
business, operational and financial rationale for, and expected
strategic benefits and other implications of, the Merger, (iv) the
Two-Year Projections and the Projected Benefits and (v) certain
assumptions and judgments underlying certain long-term estimates with
respect to Bell Atlantic that were prepared by Bell Atlantic in
connection with its financial advisor's analysis of the Merger;
6. reviewed the historical stock prices, trading activity and valuation
parameters of NYNEX Common Stock and Bell Atlantic Common Stock;
7. reviewed and analyzed the pro forma financial impacts of the Merger on
NYNEX and Bell Atlantic, including the pro forma effects of the initial
quarterly dividend per share of New Bell Atlantic Common Stock that,
pursuant to the Merger Agreement, is intended to be declared and paid by
New Bell Atlantic following the effective time of the Merger;
8. reviewed the terms, to the extent publicly available, of recent mergers
and acquisitions which we deemed generally comparable to the Merger or
otherwise relevant to our inquiry;
9. reviewed publicly available financial data, stock market performance
data and valuation parameters of companies which we deemed generally
comparable to NYNEX and Bell Atlantic or otherwise relevant to our
inquiry; and
10. conducted such other studies, analyses, inquiries and investigations as
we deemed appropriate.
In the course of our review, we have relied upon and assumed, without
independent verification, the accuracy and completeness of the financial and
other information provided to us by NYNEX and Bell Atlantic. With respect to the
Two-Year Projections and the Projected Benefits, we have assumed that they have
been reasonably prepared on bases reflecting the best currently available
estimates and judgments of the respective senior managements of NYNEX and Bell
Atlantic as to the anticipated future performance of their respective companies
and as to the anticipated savings achievable within the time frames forecast
therein, and that regulatory authorities will not prevent New Bell Atlantic from
retaining the full benefit of the Projected Benefits. We have not assumed any
responsibility for independent verification of any of such information or of the
Two-Year Projections or the Projected Benefits. We have also assumed with your
consent that the Merger will (i) qualify as a "reorganization" within the
meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended, (ii)
be accounted for as a pooling of interests under generally accepted accounting
principles and (iii) otherwise be consummated in accordance with the terms
described in the Merger Agreement.
In arriving at our opinion, we have not performed any independent appraisal
of the assets or liabilities of NYNEX or Bell Atlantic, nor have we been
furnished with any such appraisals. In rendering our opinion herein, we have
analyzed the Merger as a strategic business combination not involving a sale of
control of NYNEX, and we have not solicited, and have not been authorized to
solicit, third party acquisition interest in NYNEX. In addition, we are not
expressing any opinion as to the price or range of prices at which New Bell
Atlantic Common Stock may trade subsequent to the consummation of the Merger.
Our opinion is necessarily based on economic, market and other conditions, and
the information made available to us, as of the date hereof.
We have acted as financial advisor to NYNEX in connection with the Merger
and will receive a fee for such services, payment of a significant portion of
which is contingent upon the consummation of the Merger. We have previously
rendered certain investment banking and financial advisory services to both
NYNEX and Bell Atlantic for which we received customary compensation. In
addition, the Vice Chairman of NYNEX is a
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<PAGE> 154
member of the Board of Directors of The Bear Stearns Companies Inc., which is
our parent company. In the ordinary course of our business, we may actively
trade the securities of NYNEX and/or Bell Atlantic 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.
It is understood that this letter is intended for the benefit and use of
the Board of Directors of NYNEX, and does not constitute a recommendation to any
holder of NYNEX Common Stock as to how to vote shares in connection with the
Merger. This letter is not to be used for any other purpose, or reproduced,
disseminated, quoted or referred to at any time, in whole or in part, without
our prior written consent; provided, however, that this letter may be included
in its entirety in any joint proxy statement/prospectus to be distributed to the
holders of NYNEX Common Stock in connection with the Merger.
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 the
holders of NYNEX Common Stock.
Very truly yours,
BEAR, STEARNS & CO. INC.
By: /s/ ALAN D. SCHWARTZ
Senior Managing Director
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<PAGE> 155
APPENDIX V
[MORGAN STANLEY LOGO]
MORGAN STANLEY & CO.
INCORPORATED
1585 BROADWAY
NEW YORK, NEW YORK 10036
(212)761-4000
September 9, 1996
Board of Directors
NYNEX Corporation
1095 Avenue of the Americas
New York, NY 10036
Dear Sirs and Mesdames:
We understand that NYNEX Corporation (the "Company") and Bell Atlantic
Corporation ("Bell Atlantic") have entered into an Amended and Restated
Agreement and Plan of Merger, dated as of April 21, 1996, as amended and
restated as of July 2, 1996 (the "Merger Agreement"), pursuant to which a wholly
owned subsidiary of Bell Atlantic will merge with and into the Company (the
"Merger"). As a result of the Merger, the Company will become a wholly owned
subsidiary of Bell Atlantic.
The Merger Agreement provides, among other things, that at the effective time of
the Merger, each outstanding share of common stock, par value $1.00 per share,
of the Company, other than shares held in treasury or owned by Bell Atlantic
("Company Common Stock"), will be converted into the right to receive 0.768
shares of common stock, par value $1.00 per share (par value $0.10 per share
upon effectiveness of the Certificate Amendment (as defined in the Merger
Agreement)), of Bell Atlantic ("Bell Atlantic Common Stock") (the conversion
ratio of Company Common Stock into Bell Atlantic Common Stock is hereinafter
referred to as the "Exchange Ratio"). 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 the Exchange Ratio pursuant to the
Merger Agreement is fair from a financial point of view to holders of Company
Common Stock (other than Bell Atlantic and its affiliates).
For purposes of the opinion set forth herein, we have:
(i) analyzed certain publicly available financial statements and other
information of the Company and Bell Atlantic, respectively;
(ii) analyzed certain internal financial statements and other financial
and operating data concerning the Company prepared by the management
of the Company;
(iii) analyzed certain summary near-term financial projections concerning
the Company prepared by the management of the Company;
(iv) reviewed and discussed with senior executives of the Company the past
and current operations and financial condition of the Company and the
prospects of the Company in light of the current telecommunications
environment, and the long-term benefits expected to result from the
Merger, including without limitation certain estimates and timing of
the potential cost savings for the combined company jointly prepared
by the Company and Bell Atlantic;
(v) analyzed certain internal financial statements and other financial
and operating data concerning Bell Atlantic prepared by the
management of Bell Atlantic;
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<PAGE> 156
[MORGAN STANLEY LOGO]
September 9, 1996
Page 2
(vi) analyzed certain summary near-term financial projections concerning
Bell Atlantic prepared by the management of Bell Atlantic;
(vii) reviewed and discussed with senior executives of Bell Atlantic the
past and current operations and financial condition of Bell Atlantic
and the prospects of Bell Atlantic in light of the current
telecommunications environment, and the long-term benefits expected to
result from the Merger, including without limitation certain estimates
and timing of the potential cost savings for the combined company
jointly prepared by the Company and Bell Atlantic;
(viii) analyzed the estimated pro forma impact of the Merger, including such
impact on the combined company's earnings per share, consolidated
capitalization, financial ratios and intended dividend policy;
(ix) reviewed the reported prices and trading activity for Company Common
Stock and Bell Atlantic Common Stock;
(x) compared the financial performance of the Company and Bell Atlantic
and the prices and trading activity of Company Common Stock and Bell
Atlantic Common Stock with that of certain other comparable publicly
traded companies and their securities;
(xi) discussed the strategic objectives of the Merger and the plan for the
combined company with senior executives of the Company and Bell
Atlantic;
(xii) reviewed the financial terms, to the extent publicly available, of
certain comparable transactions;
(xiii) reviewed the Merger Agreement and certain related documents; and
(xiv) performed such other analyses 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 purpose of this
opinion. With respect to the summary near-term financial projections and the
operating efficiencies and other potential synergies (including the timing
thereof) expected to result from the Merger supplied to us by the Company and
Bell Atlantic, we have assumed that they have been reasonably prepared on bases
reflecting the best currently available estimates and good faith judgments of
the Company's and Bell Atlantic's respective senior management of the future
competitive, operating and regulatory environments and related financial
performance of the Company and Bell Atlantic, as the case may be. Furthermore,
we have not assumed responsibility for conducting a physical inspection of the
properties or facilities of the Company or Bell Atlantic or for making or
obtaining any independent valuation or appraisal of the assets or liabilities of
the Company or Bell Atlantic nor have we been furnished with any such valuations
or appraisals. We have assumed with your consent that the transaction will be
free of Federal tax to the Company, Bell Atlantic, and the holders of Company
Common Stock and that the Merger will be accounted for as a pooling of interests
under generally accepted accounting principles. We have also assumed that the
transactions described in the Merger Agreement will be consummated on the terms
set forth therein. Our opinion is necessarily based on economic, market and
other conditions and circumstances as they exist and can be evaluated on, and
the information made available to us as of the date hereof.
As you are aware, we were engaged by the Company as of April 15, 1996 for
purposes of delivering our April 21, 1996 opinion to the Board of Directors of
the Company, and, as a result, we did not participate in the structuring or the
negotiation of the terms of the Merger. In addition, 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. We also express no opinion as
to the price or range of prices at which Bell Atlantic Common Stock may trade
subsequent to consummation of the Merger.
We have acted as financial advisor to the Board of Directors of the Company in
connection with the transaction described in this letter and we will receive a
fee for our services. Morgan Stanley & Co.
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<PAGE> 157
[MORGAN STANLEY LOGO]
September 9, 1996
Page 3
Incorporated and its affiliates in the past have provided financial advisory and
financing services to the Company and Bell Atlantic and have received fees for
rendering these services.
It is understood that this letter is for the information of the Board of
Directors of the Company and, except for inclusion of this letter in its
entirety in a proxy statement-prospectus of the Company and Bell Atlantic
relating to the Merger, may not be used or quoted for any other purpose without
our prior written consent. In addition, we express no opinion or recommendation
as to how the holders of Company Common Stock should vote at the stockholders
meeting held in connection with the Merger.
Based upon 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 Company Common Stock (other than Bell Atlantic and its affiliates).
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
By: /s/ PAUL J. TAUBMAN
------------------------------------
Paul J. Taubman
Managing Director
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APPENDIX VI
INVESTMENT BANKING GROUP
WORLD FINANCIAL CENTER
NORTH TOWER
NEW YORK, NEW YORK 10281-1330
[MERRILL LYNCH LOGO]
September 9, 1996
Board of Directors
Bell Atlantic Corporation
1717 Arch Street
Philadelphia, PA 19103
Ladies and Gentlemen:
Bell Atlantic Corporation ("Bell Atlantic") and NYNEX Corporation ("NYNEX")
have entered into an agreement dated as of April 21, 1996, as amended and
restated as of July 2, 1996 (the "Agreement"), pursuant to which, among other
things, (i) a wholly-owned subsidiary of Bell Atlantic will be merged with and
into NYNEX (the "Merger") and (ii) each share of Common Stock, par value $1.00
per share, of NYNEX ("NYNEX Common Stock") (other than shares of NYNEX Common
Stock held in treasury or owned by Bell Atlantic) will be converted into 0.768
shares (the "Exchange Ratio") of Common Stock, par value $1.00 per share (or
$.10 per share after giving effect to an amendment to the Certificate of
Incorporation of Bell Atlantic to become effective at the effective time of the
Merger), of Bell Atlantic ("Bell Atlantic Common Stock"). Consummation of the
Merger is subject to the terms and conditions set forth in the Agreement.
You have asked us whether, in our opinion, the Exchange Ratio is fair from
a financial point of view to Bell Atlantic and, accordingly, to the holders of
Bell Atlantic Common Stock.
In arriving at the opinion set forth below, we have, among other things:
(1) Reviewed NYNEX's Annual Reports, Forms 10-K and related financial
information for the five fiscal years ended December 31, 1995 and NYNEX's
Forms 10-Q and related unaudited financial information for the quarterly
periods ended March 31, 1996 and June 30, 1996;
(2) Reviewed Bell Atlantic's Annual Reports, Forms 10-K and related
financial information for the five fiscal years ended December 31, 1995 and
Bell Atlantic's Forms 10-Q and related unaudited financial information for
the quarterly periods ended March 31, 1996 and June 30, 1996;
(3) Reviewed certain other filings with the Securities and Exchange
Commission made by NYNEX and Bell Atlantic, respectively, since December
31, 1992;
(4) Reviewed certain information furnished to us by NYNEX and Bell
Atlantic, including financial projections, relating to the business,
earnings, cash flow, assets and prospects of NYNEX and Bell Atlantic for
the years ended December 31, 1996 and 1997 (the "Two-Year Projections"), as
well as the cost savings expected to result from the Merger (the "Projected
Benefits");
(5) Reviewed certain other information furnished to us by Bell Atlantic
for purposes of our analyses, including financial estimates relating to
NYNEX and Bell Atlantic for the 10-year period ending December 31, 2005, as
well as the cost savings and related expenses and synergies expected to
result from the Merger;
(6) Conducted discussions with members of senior management of NYNEX and
Bell Atlantic concerning their respective businesses, regulatory
environments, strategic objectives and prospects and the strategic
implications of and operational and financial benefits anticipated from the
Merger;
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[MERRILL LYNCH LOGO]
(7) Reviewed the historical market prices and trading activity for NYNEX
Common Stock and Bell Atlantic Common Stock and compared them with those of
certain publicly traded companies that we deemed to be reasonably similar
to NYNEX and Bell Atlantic, respectively;
(8) Compared the results of operations of NYNEX and Bell Atlantic with
those of certain companies that we deemed to be reasonably similar to NYNEX
and Bell Atlantic, respectively;
(9) Compared the proposed financial terms of the Merger with the
financial terms of certain other business combinations that we deemed to be
relevant;
(10) Considered the pro forma effect of the Merger on the earnings, cash
flow, consolidated capitalization and certain financial ratios of Bell
Atlantic;
(11) Reviewed the Agreement;
(12) Reviewed the joint proxy statement of Bell Atlantic and NYNEX and
prospectus of Bell Atlantic in substantially the final form to be sent to
the stockholders of Bell Atlantic; and
(13) Reviewed such other financial studies and analyses and performed
such other investigations and took into account such other matters as we
deemed necessary or appropriate for purposes of this opinion, including our
assessment of general economic, market and 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 by
NYNEX and Bell Atlantic or made publicly available by NYNEX or Bell Atlantic,
and we have not independently verified such information or undertaken an
independent appraisal of any of the assets or liabilities of NYNEX or Bell
Atlantic or been furnished with any such evaluation or appraisal. With respect
to the Two-Year Projections and the Projected Benefits furnished by NYNEX and
Bell Atlantic, we have assumed that they have been reasonably prepared in
accordance with accepted industry practice and reflect the best currently
available estimates and judgment of NYNEX's or Bell Atlantic's management as to
the expected future financial performance of NYNEX or Bell Atlantic, as the case
may be, as well as the cost savings expected to result from the Merger. With
respect to the financial estimates for the 10-year period ending December 31,
2005 provided by Bell Atlantic, we have assumed that they have been reasonably
prepared in accordance with accepted industry practice and reflect the best
currently available estimates and judgment of Bell Atlantic's management as to
the expected future financial performance of Bell Atlantic and NYNEX over such
period as well as the cost savings and related expenses and synergies expected
to result from the Merger. In rendering our opinion, we have assumed that, in
the course of obtaining the necessary regulatory approvals for the Merger, no
restrictions, including any divestiture requirements, will be imposed that will
have a material adverse effect on the contemplated benefits of the Merger. We
have further assumed that the Merger will be accounted for as a pooling of
interests under generally accepted accounting principles and will constitute a
tax free transaction for U.S. federal income tax purposes. Our opinion is
necessarily based upon general economic, market, monetary and other conditions
as they exist and can be evaluated on the date hereof.
We have acted as financial advisor to Bell Atlantic in connection with the
Merger and will receive a fee from Bell Atlantic for our services, a significant
portion of which is contingent upon the consummation of the Merger. We have, in
the past, provided certain financial advisory and financing services to Bell
Atlantic and have received fees for the rendering of such services. We have
also, in the past, provided certain financing services to NYNEX and have
received fees for the rendering of such services. In addition, in the ordinary
course of our business, we may actively trade Bell Atlantic Common Stock, NYNEX
Common Stock and other securities of Bell Atlantic and NYNEX and their
respective affiliates for our own account and the accounts of our customers, and
we therefore may at any time hold a long or short position in such securities.
This opinion is addressed to the Board of Directors of Bell Atlantic and
does not constitute a recommendation to any shareholder as to how such
shareholder should vote on the Merger.
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<PAGE> 160
[MERRILL LYNCH LOGO]
We are not expressing any opinion herein as to the prices at which shares
of Bell Atlantic Common Stock will trade following the consummation of the
Merger or the prices at which shares of Bell Atlantic Common Stock or NYNEX
Common Stock will trade between the date hereof and the 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 Bell Atlantic and, accordingly, to the holders of Bell Atlantic Common Stock.
Very truly yours,
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
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[LOGO]
PRINTED ON RECYCLED PAPER.
This document is printed on recycled paper which contains at least 10%
post-consumer waste.
<PAGE> 162
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PROXY/VOTING INSTRUCTION CARD [BELL ATLANTIC LOGO]
----------------------------------------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE
SPECIAL MEETING OF STOCKHOLDERS, FRIDAY, NOVEMBER 8, 1996, 10:30 A.M.
LOCAL TIME, RICHMOND'S LANDMARK THEATER, 6 N. LAUREL STREET, RICHMOND,
VIRGINIA.
The undersigned hereby appoints W.O. Albertini, J.G. Cullen and R.W.
Smith, and each of them, proxies, with the powers the undersigned
would possess if personally present, and with full power of
substitution, to vote all common shares held of record by the
undersigned in Bell Atlantic Corporation, upon all subjects that may
properly come before the meeting, including the matters described in
the proxy statement furnished herewith, subject to any directions
indicated on the reverse side of this card. IF NO DIRECTIONS ARE
GIVEN, THE PROXIES WILL VOTE IN ACCORD WITH THE DIRECTORS'
RECOMMENDATION ON THE SUBJECT LISTED ON THE REVERSE SIDE OF THIS CARD
AND AT THEIR DISCRETION ON ANY OTHER MATTER THAT MAY PROPERLY COME
BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF.
This card also constitutes your voting instructions for shares held of
record by Bell Atlantic Corporation for your account in the Dividend
Reinvestment and Stock Purchase Plan (DRSPP) and, if shares are held
in the same name, shares held in the 1976 Bell Atlantic Employee Stock
Ownership Plan, Savings Plan for Salaried Employees, or Savings and
Security Plan (Non-Salaried Employees).
IF YOU DO NOT SIGN AND RETURN A PROXY, OR ATTEND THE MEETING AND VOTE
BY BALLOT, YOUR SHARES CANNOT BE VOTED, NOR YOUR INSTRUCTIONS
FOLLOWED, EXCEPT THAT SHARES IN THE SAVINGS PLANS WILL BE VOTED AS
DESCRIBED IN THE JOINT PROXY STATEMENT/PROSPECTUS.
<TABLE>
<S> <C>
BELL ATLANTIC CORPORATION
PLEASE SIGN ON THE REVERSE SIDE AND RETURN THIS P.O. BOX 1019
PROXY IN THE ENCLOSED ENVELOPE. NEWARK, NJ 07101-9757
</TABLE>
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<PAGE> 163
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DIRECTORS RECOMMEND A VOTE "FOR"
- --------------------------------------------------------------------------------
Approval of an Amended and Restated Agreement and Plan of Merger,
dated as of April 21, 1996, as amended and restated on July 2, 1996,
between NYNEX Corporation and Bell Atlantic Corporation, and related
transactions, including the issuance of shares of Bell Atlantic
Common Stock and the amendment and restatement of Bell Atlantic
Corporation's certificate of incorporation.
FOR AGAINST ABSTAIN
/ / / / / /
- --------------------------------------------------------------------------------
Please sign exactly as name or names
appear on this proxy. If stock is
held jointly, each holder should
sign. If signing as attorney,
trustee, executor, administrator,
custodian, guardian or corporate
officer, please give full title.
DATE____________________ , 1996_______
SIGNATURE______________________________
SIGNATURE______________________________
Votes must be indicated (X) in Black
or Blue Ink as in this example. /X/
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