SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20579
--------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
May 11, 1998
Date of Report (Date of earliest event reported)
--------------------
AMERITECH CORPORATION
(Exact name of Registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation)
1-8612 36-3251481
(Commission File Number) (IRS Employer
Identification No.)
30 SOUTH WACKER DRIVE, CHICAGO, ILLINOIS 60606
(Address of principal executive offices)(Zip Code)
(800) 257-0902
(Registrant's telephone number, including area code)
Item 5. Other events.
On May 11, 1998, Ameritech Corporation ("Ameritech") and SBC
Communications Inc. ("SBC"), a Delaware corporation, jointly announced
that Ameritech, SBC and SBC Delaware, Inc. ("Merger Sub"), a Delaware
corporation and a wholly-owned subsidiary of SBC, had entered into an
Agreement and Plan of Merger, dated as of May 10, 1998 (the "Merger
Agreement"), pursuant to which Merger Sub would be merged with and into
Ameritech (the "Merger").
Under the terms of the Merger Agreement, at the effective time of the
Merger, each outstanding share of common stock, par value $1.00 per share,
of Ameritech would be converted into 1.316 shares of common stock, par
value $1.00 per share, of SBC.
The transaction, which has been approved by the board of directors of
each company, is intended to be accounted for as a pooling of interests and
be a tax-free reorganization. Consummation of the transactions
contemplated in the Merger Agreement is subject to the expiration or
earlier termination of the applicable Hart-Scott-Rodino waiting period and
the receipt of other regulatory approvals, approval of the merger by the
shareholders of Ameritech, approval of the issuance of common stock of SBC
pursuant to the Merger Agreement by the shareholders of SBC and other
closing conditions.
The foregoing is qualified in its entirety by reference to the Merger
Agreement, a copy of which is filed herewith as an exhibit and incorporated
herein by reference.
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits.
No financial statements or pro forma financial information are
required to be filed as a part of this report. The exhibits filed as part
of this report are listed in the Exhibit Index hereto.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
AMERITECH CORPORATION
By: /s/ Barbara A. Klein
____________________________
Barbara A. Klein
Dated: May 11, 1998
AMERITECH CORPORATION
EXHIBIT INDEX
Number and Description of Exhibit*
1. None
2. Agreement and Plan of Merger among Ameritech Corporation, SBC
Communications Inc. and SBC Delaware, Inc., dated as of May 10, 1998.
4. None
16. None
17. None
20. None
23. None
24. None
27. None
99. Press Release dated May 11, 1998 issued jointly by Ameritech
Corporation and SBC Communications Inc.
* Exhibits not listed are inapplicable.
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
Among
AMERITECH CORPORATION
SBC COMMUNICATIONS INC.
and
SBC DELAWARE, INC.
Dated as of May 10, 1998
TABLE OF CONTENTS
PAGE
RECITALS
ARTICLE I
The Merger; Closing; Effective Time
1.1. The Merger.....................................................1
1.2. Closing........................................................2
1.3. Effective Time.................................................2
ARTICLE II
Certificate of Incorporation and ByLaws
of the Surviving Corporation
2.1. The Certificate of Incorporation...............................2
2.2. The ByLaws.....................................................3
ARTICLE III
Officers and Directors
3.1. Directors of Surviving Corporation.............................3
3.2. Officers of Surviving Corporation..............................3
3.3. Election to SBC's Board of Directors...........................3
ARTICLE IV
Effect of the Merger on Capital Stock;
Exchange of Certificates
4.1. Effect on Capital Stock........................................4
(a) Merger Consideration.......................................4
(b) Cancellation of Shares.....................................5
(c) Merger Sub.................................................5
4.2. Exchange of Certificates for Shares............................5
(a) Exchange Procedures........................................5
(b) Distributions with Respect to Unexchanged
Shares; Voting.................................................7
(c) Transfers..................................................8
(d) Fractional Shares..........................................8
(e) Termination of Exchange Period; Unclaimed
Stock..........................................................8
(f) Lost, Stolen or Destroyed Certificates.....................9
(g) Affiliates.................................................9
4.3. Dissenters' Rights.............................................9
4.4. Adjustments to Prevent Dilution...............................10
ARTICLE V
Representations and Warranties
5.1. Representations and Warranties of the Company, SBC
and Merger Sub................................................10
(a) Organization, Good Standing and
Qualification.................................................10
(b) Capital Structure.........................................11
(c) Corporate Authority; Approval and
Fairness......................................................14
(d) Governmental Filings; No Violations.......................15
(e) Reports; Financial Statements.............................17
(f) Absence of Certain Changes................................18
(g) Litigation and Liabilities................................19
(h) Employee Benefits.........................................19
(i) Compliance with Laws......................................22
(j) Takeover Statutes.........................................23
(k) Environmental Matters.....................................23
(l) Accounting and Tax Matters................................24
(m) Taxes.....................................................25
(n) Labor Matters.............................................26
(o) Rights Agreement..........................................26
(p) Brokers and Finders.......................................26
ARTICLE VI
Covenants
6.1. Interim Operations............................................27
6.2. Acquisition Proposals.........................................33
6.3. Information Supplied..........................................37
6.4. Stockholders Meetings.........................................38
6.5. Filings; Other Actions; Notification..........................38
6.6. Access; Consultation..........................................41
6.7. Affiliates....................................................42
6.8. Stock Exchange Listing and Delisting..........................43
6.9. Publicity.....................................................43
6.10. Benefits......................................................43
(a) Stock Options.............................................43
(b) Employee Benefits.........................................45
6.11. Expenses......................................................45
6.12. Indemnification; Directors' and Officers'
Insurance.....................................................45
6.13. Takeover Statute..............................................47
6.14. Dividends.....................................................48
6.15. Confidentiality...............................................48
6.16. Control of the Company's Operations...........................48
ARTICLE VII
Conditions
7.1. Conditions to Each Party's Obligation to Effect the
Merger........................................................48
(a) Stockholder Approval......................................49
(b) NYSE Listing..............................................49
(c) Governmental Consents.....................................49
(d) Laws and Order............................................50
(e) S4........................................................50
(f) Accountants' Letters......................................50
(g) Blue Sky Approvals........................................50
7.2. Conditions to Obligations of SBC and Merger Sub...............50
(a) Representations and Warranties............................50
(b) Performance of Obligations of the Company.................51
(c) Consents Under Agreements.................................51
(d) Tax Opinion...............................................51
7.3. Conditions to Obligation of the Company.......................51
(a) Representations and Warranties............................51
(b) Performance of Obligations of SBC and
Merger Sub....................................................52
(c) Tax Opinion...............................................52
ARTICLE VIII
Termination
8.1. Termination by Mutual Consent.................................52
8.2. Termination by Either SBC or the Company......................52
8.3. Termination by the Company....................................53
8.4. Termination by SBC............................................55
8.5. Effect of Termination and Abandonment.........................56
ARTICLE IX
Miscellaneous and General
9.1. Survival......................................................58
9.2. Modification or Amendment.....................................58
9.3. Waiver of Conditions..........................................59
9.4. Counterparts..................................................59
9.5. GOVERNING LAW AND VENUE; WAIVER OF JURY TRIAL.................59
9.6. Notices.......................................................60
9.7. Entire Agreement..............................................62
9.8. No Third Party Beneficiaries..................................62
9.9. Obligations of SBC and of the Company.........................62
9.10. Severability..................................................62
9.11. Interpretation................................................63
9.12. Captions......................................................63
9.13. Assignment....................................................63
EXHIBITS
A Form of Company Affiliate's Letter . . . . . . . A1
B Form of SBC Affiliate's Letter . . . . . . . . . B1
INDEX OF DEFINED TERMS
Term Section
Affiliate.........................................................6.7(a)
Agreement...................................................... preamble
Audit Date....................................................... 5.1(e)
Bankruptcy and Equity Exception................................5.1(c)(i)
ByLaws........................................................... 2.2
Certificate...................................................... 4.1(a)
Certificate Letter of Transmittal.................................4.2(a)
Certificate of Merger............................................ 1.3
Charter.......................................................... 2.1
Closing.......................................................... 1.2
Closing Date..................................................... 1.2
Code........................................................... recitals
Company........................................................ preamble
Company Acquisition Proposal......................................6.2(a)
Company Affiliate's Letter....................................... 6.7(a)
Company Compensation and Benefit Plans.........................5.1(h)(i)
Company Disclosure Letter........................................ 5.1
Company Option................................................6.10(a)(i)
Company Preference Shares......................................5.1(b)(i)
Company Preferred Shares.......................................5.1(b)(i)
Company Representatives...........................................6.2(a)
Company Required Consents......................................5.1(d)(i)
Company Requisite Vote....................................... 5.1(c)(i)
Company Share.....................................................4.1(a)
Company Shares................................................... 4.1(a)
Company Stock Plans.......................................... 5.1(b)(i)
Company Stock Units...........................................6.10(a)(i)
Company Stockholders Meeting.................................... 6.4
Compensation and Benefit Plans................................5.1(h)(ii)
Confidentiality Agreement........................................ 6.15
Constituent Corporations........................................preamble
Contracts.....................................................5.1(d)(ii)
Costs............................................................6.12(a)
Current Premium..................................................6.12(c)
D&O Insurance....................................................6.12(c)
DGCL.............................................................. 1.1
Director Designees............................................... 3.3
Disclosure Letter................................................ 5.1
Effective Time................................................... 1.3
Environmental Law................................................ 5.1(k)
ERISA.........................................................5.1(h)(ii)
ERISA Affiliate..............................................5.1(h)(iii)
ERISA Affiliate Plan.........................................5.1(h)(iii)
Exchange Act...................................................5.1(b)(i)
Exchange Agent................................................... 4.2(a)
Exchange Ratio................................................... 4.1(a)
Excluded Company Shares.......................................... 4.1(a)
FCC............................................................5.1(d)(i)
Final Order...................................................... 7.1(c)
GAAP............................................................. 5.1(e)
Governmental Entity............................................5.1(d)(i)
Hazardous Substance.............................................. 5.1(k)
HSR Act...................................................... 5.1(d)(i)
Indemnified Parties..............................................6.12(a)
Initial 50 Day Period............................................ 8.3(b)
IRS...........................................................5.1(h)(ii)
Laws............................................................. 5.1(i)
Material Adverse Effect.......................................... 5.1(a)
Merger......................................................... recitals
Merger Consideration............................................. 4.1(a)
Merger Sub......................................................preamble
NYSE.............................................................. 6.8
Order............................................................ 7.1(d)
Pension Plan..................................................5.1(h)(ii)
Permits...........................................................5.1(i)
Person............................................................4.2(a)
Prospectus/Proxy Statement.......................................... 6.3
PUC.......................................................... 5.1(d)(i)
Registered Company Shares.........................................4.1(a)
Registered Letter of Transmittal..................................4.2(a)
Registered SBC Shares............................................ 4.2(a)
Regulatory Material Adverse Effect................................6.5(c)
Reports.......................................................... 5.1(e)
Rights Agreement............................................. 5.1(b)(i)
Rights Amendment............................................... 5.1(o)
S4 Registration Statement.......................................... 6.3
SBC.............................................................preamble
SBC Acquisition Proposal......................................... 6.2(b)
SBC Affiliate's Letter........................................... 6.7(a)
SBC Common Stock................................................. 4.1(a)
SBC Companies.................................................... 4.1(a)
SBC Disclosure Letter............................................. 5.1
SBC Preferred Shares..........................................5.1(b)(ii)
SBC Representatives.............................................. 6.2(b)
SBC Required Consents..........................................5.1(d)(i)
SBC Requisite Vote............................................5.1(c)(ii)
SBC Rights....................................................... 4.1(a)
SBC Rights Agreement..........................................5.1(b)(ii)
SBC Stock Plans...............................................5.1(b)(ii)
SBC Stock Units...............................................6.10(a)(i)
SBC Stockholders Meeting......................................... 6.4
SEC............................................................. 5.1(e)
Securities Act.................................................5.1(d)(i)
Significant Subsidiary.........................................5.1(b)(i)
SNET ....................................................... 6.1(b)(vii)
SNET Agreement ............................................. 6.1(b)(vii)
Stockholders Meeting.................................................6.4
Subsidiary..................................................... 5.1(a)
Substitute Option.............................................6.10(a)(i)
Substitute Option Price.......................................6.10(a)(i)
Superior Company Proposal....................................... 6.2(a)
Superior SBC Proposal............................................ 6.2(b)
Surviving Corporation........................................... 1.1
Takeover Statute................................................ 5.1(j)
Tax............................................................. 5.1(m)
Tax Return...................................................... 5.1(m)
Taxable......................................................... 5.1(m)
Taxes........................................................... 5.1(m)
Termination Date............................................... 8.2(i)
Termination Fee................................................. 8.5(b)
Utilities Laws.................................................5.1(d)(i)
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (hereinafter called this
"Agreement"), dated as of May 10, 1998, among Ameritech Corporation, a
Delaware corporation (the "Company"), SBC Communications Inc., a Delaware
corporation ("SBC"), and SBC Delaware, Inc., a Delaware corporation and a
wholly-owned subsidiary of SBC ("Merger Sub," the Company and Merger Sub
sometimes being hereinafter together referred to as the "Constituent
Corporations").
RECITALS
WHEREAS, the respective Boards of Directors of each of SBC,
Merger Sub and the Company have approved this Agreement and the merger of
Merger Sub with and into the Company (the "Merger") upon the terms and
subject to the conditions set forth in this Agreement;
WHEREAS, it is intended that, for federal income tax purposes,
the Merger shall qualify as a reorganization under the provisions of
Section 368(a) of the Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder (the "Code");
WHEREAS, for financial accounting purposes, it is intended that
the Merger shall be accounted for as a "pooling-of-interests;" and
WHEREAS, the Company, SBC and Merger Sub desire to make certain
representations, warranties, covenants and agreements in connection with
this Agreement.
NOW, THEREFORE, in consideration of the premises, and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto agree as follows:
ARTICLE I
The Merger; Closing; Effective Time
1.1. The Merger. Upon the terms and subject to the conditions
set forth in this Agreement, at the Effective Time (as defined in Section
1.3) Merger Sub shall be merged with and into the Company and the separate
corporate existence of Merger Sub shall thereupon cease. The Company shall
be the surviving corporation in the Merger (sometimes hereinafter referred
to as the "Surviving Corporation") and shall continue to be governed by the
laws of the State of Delaware, and the separate corporate existence of the
Company with all its rights, privileges, immunities, powers and franchises
shall continue unaffected by the Merger except as set forth in Article III
hereof. The Merger shall have the effects specified in the Delaware General
Corporation Law, as amended (the "DGCL").
1.2. Closing. The closing of the Merger (the "Closing") shall
take place (i) at the offices of Sullivan & Cromwell, 125 Broad Street, New
York, New York 10004 at 9:00 A.M., local time, on the second business day
after the date on which the last to be fulfilled or waived of the
conditions set forth in Article VII (other than those conditions that by
their nature are to be satisfied at the Closing, but subject to the
fulfillment or waiver of those conditions) shall be satisfied or waived in
accordance with this Agreement or (ii) at such other place and time and/or
on such other date as the Company and SBC may agree in writing (the
"Closing Date").
1.3. Effective Time. Immediately following the Closing, the
Company and SBC will cause a Certificate of Merger (the "Certificate of
Merger") to be executed, acknowledged and filed with the Secretary of State
of Delaware as provided in Section 251 of the DGCL. The Merger shall become
effective at the time when the Certificate of Merger has been duly filed
with the Secretary of State of Delaware or such other time as shall be
agreed upon by the parties and set forth in the Certificate of Merger in
accordance with the DGCL (the "Effective Time").
ARTICLE II
Certificate of Incorporation and By-Laws
of the Surviving Corporation
2.1. The Certificate of Incorporation. The certificate of
incorporation of the Company as in effect immediately prior to the
Effective Time shall be the certificate of incorporation of the Surviving
Corporation (the "Charter"), until duly amended as provided therein or by
applicable law, except that (i) Article Fourth of the Charter shall be
amended to read in its entirety as follows: "FOURTH. The aggregate number
of shares that the Corporation shall have the authority to issue is 1,000
shares of Common Stock, par value $1.00 per share."; (ii) Article Fifth of
the Charter shall be deleted in its entirety and shall read as follows:
"FIFTH. Reserved."; (iii) Article Eighth, Section B of the Charter shall be
amended to read in its entirety as follows: "B. Number. The number of
directors, their terms and their manner of election shall be fixed by or
pursuant to the ByLaws of the Corporation."; (iv) Article Ninth of the
Charter shall be deleted in its entirety and shall read as follows: "NINTH.
Reserved." and (v) Article Tenth of the Charter shall be amended to read in
its entirety as follows: "TENTH. The Corporation reserves the right to
amend, alter, change or repeal any provision contained in this Certificate
of Incorporation, in any manner now or hereafter permitted or prescribed by
statute."
2.2. The By-Laws. The by-laws of Merger Sub in effect at the
Effective Time shall be the by-laws of the Surviving Corporation (the
"By-Laws"), until thereafter amended as provided therein or by applicable
law.
ARTICLE III
Officers and Directors
3.1. Directors of Surviving Corporation. The directors of
Merger Sub at the Effective Time shall, from and after the Effective Time,
be the directors of the Surviving Corporation until their successors have
been duly elected or appointed and qualified or until their earlier death,
resignation or removal in accordance with the Charter and the By-Laws.
3.2. Officers of Surviving Corporation. The officers of the
Company at the Effective Time shall, from and after the Effective Time, be
the officers of the Surviving Corporation until their successors have been
duly elected or appointed and qualified or until their earlier death,
resignation or removal in accordance with the Charter and the By-Laws.
3.3. Election to SBC's Board of Directors. At the Effective
Time of the Merger, SBC shall increase the size of its Board of Directors
in order to enable up to five members of the Board of Directors of the
Company to be members of the SBC Board of Directors, which persons shall be
selected by the SBC Board of Directors in consultation with the Chief
Executive Officer of the Company and the Board of Directors of the Company
(the "Director Designees"), and the SBC Board of Directors shall appoint
each of the Director Designees to the SBC Board of Directors as of the
Effective Time, with such Director Designees to be divided as nearly evenly
as is possible among the classes of directors of SBC.
ARTICLE IV
Effect of the Merger on Capital Stock;
Exchange of Certificates
4.1. Effect on Capital Stock. At the Effective Time, as a
result of the Merger and without any action on the part of the holder of
any capital stock of the Company:
(a) Merger Consideration. Each share of Common Stock,
$1.00 par value per share, of the Company (each a "Company Share" and
together the "Company Shares") issued and outstanding immediately prior to
the Effective Time (other than Company Shares that are owned by SBC, Merger
Sub or any other direct or indirect subsidiary of SBC (collectively, the
"SBC Companies") or Company Shares that are owned by the Company or any
direct or indirect subsidiary of the Company and in each case not held on
behalf of third parties (collectively, "Excluded Company Shares")) shall be
converted into and become exchangeable for 1.316 (the "Exchange Ratio")
shares of Common Stock, par value $1.00 per share, of SBC ("SBC Common
Stock"), subject to adjustment as provided in Section 4.4 (the "Merger
Consideration"). All references in this Agreement to SBC Common Stock to be
issued pursuant to the Merger shall be deemed to include the corresponding
rights ("SBC Rights") to purchase shares of SBC Participating Preferred
Stock pursuant to the SBC Rights Agreement (as defined in Section
5.1(b)(ii)), except where the context otherwise requires. At the Effective
Time, all Company Shares shall no longer be outstanding, shall be cancelled
and retired and shall cease to exist, and (A) each certificate(a
"Certificate") formerly representing any of such Company Shares (other than
Excluded Company Shares) and (B) each uncertificated Company Share a
"Registered Company Share") registered to a holder on the stock transaction
books of the Company (other than Excluded Company Shares), shall thereafter
represent only the right to the Merger Consideration and the right, if any,
to receive pursuant to Section 4.2(d) cash in lieu of fractional shares
into which such Company Shares have been converted pursuant to this Section
4.1(a) and any distribution or dividend pursuant to Section 4.2(b), in each
case without interest.
(b) Cancellation of Shares. Each Excluded Company Share
issued and outstanding immediately prior to the Effective Time shall, by
virtue of the Merger and without any action on the part of the holder
thereof, no longer be outstanding, shall be cancelled and retired without
payment of any consideration therefor and shall cease to exist.
(c) Merger Sub. At the Effective Time, each share of
Common Stock, par value $1.00 per share, of Merger Sub issued and
outstanding immediately prior to the Effective Time shall be converted into
one share of common stock of the Surviving Corporation, and the Surviving
Corporation shall be a wholly-owned subsidiary of SBC.
4.2. Exchange of Certificates for Shares.
(a) Exchange Procedures. Promptly after the Effective
Time, the Surviving Corporation shall cause an exchange agent selected by
SBC with the Company's prior approval, which shall not be unreasonably
withheld (the "Exchange Agent") to mail to each holder of record as of the
Effective Time of a Certificate or Registered Company Shares, as the case
may be, (other than holders of a Certificate or Registered Company Shares
in respect of Excluded Company Shares) (i) (x) in the case of holders of
Certificates, a letter of transmittal specifying that delivery shall be
effected, and that risk of loss and title to the Certificates shall pass,
only upon delivery of the Certificates (or affidavits of loss in lieu
thereof) to the Exchange Agent (the "Certificate Letter of Transmittal") or
(y) in the case of holders of Registered Company Shares, a letter of
transmittal specifying that the exchange for SBC Shares shall occur only
upon delivery of such letter of transmittal to the Exchange Agent (the
"Registered Letter of Transmittal"), each such letter of transmittal to be
in such form and have such other provisions as SBC and the Company
may reasonably agree, and (ii) instructions for exchanging Certificates or
Registered Company Shares for (A) uncertificated shares of SBC Common Stock
registered on the stock transfer books of SBC in the name of such holder
("Registered SBC Shares") or, at the election of such holder, certificates
representing shares of SBC Common Stock and (B) any unpaid dividends and
other distributions and cash in lieu of fractional shares. Subject to
Section 4.2(g), upon (I) surrender of a Certificate for cancellation to the
Exchange Agent together with a Certificate Letter of Transmittal, duly
executed, the holder of such Certificate or (II) upon delivery of a
Registered Letter of Transmittal, duly executed, the holder of such
Registered Company Shares, as the case may be, shall be entitled to receive
in exchange therefor (x) Registered SBC Shares or, at the election of such
holder, a certificate representing that number of whole shares of SBC
Common Stock that such holder is entitled to receive pursuant to this
Article IV, (y) a check in the amount (after giving effect to any required
tax withholdings) of (A) any cash in lieu of fractional shares determined
in accordance with Section 4.2(d) hereof plus (B) any cash dividends and
any other dividends or other distributions that such holder has the right
to receive pursuant to the provisions of this Article IV, and any
Certificate so surrendered and any Registered Company Share in respect of
which a Registered Letter of Transmittal is so delivered shall forthwith be
cancelled. No interest will be paid or accrued on any amount payable upon
due surrender of any Certificate or delivery of a duly executed Registered
Letter of Transmittal, as the case may be. In the event of a transfer of
ownership of Company Shares that is not registered in the transfer records
of the Company, Registered SBC Shares or a certificate representing the
proper number of shares of SBC Common Stock, as the case may be, together
with a check for any cash to be paid upon due surrender of the Certificate
or upon the delivery to the Exchange Agent of the duly executed Registered
Letter of Transmittal and any other dividends or distributions in respect
thereof, may be issued and/or paid to such a transferee if, in the case of
holders of Certificates, the Certificate formerly representing such Company
Shares is presented to the Exchange Agent, and, in the case of holders of
Registered Company Shares, if the Registered Letter of Transmittal is
delivered to the Exchange Agent in either case accompanied by all documents
required to evidence and effect such transfer and to evidence that any
applicable stock transfer taxes have been paid. If any Registered SBC
Shares or any certificate for shares of SBC Common Stock is to be issued in
a name other than that in which the Certificate surrendered in exchange
therefor or the Registered Company Shares exchanged therefor, as the case
may be, is registered, it shall be a condition of such exchange that the
Person (as defined below) requesting such exchange shall pay any transfer
or other taxes required by reason of the issuance of Registered SBC Shares
or a certificate for shares of SBC Common Stock in a name other than that
of the registered holder of the Certificate surrendered or the Registered
Company Shares exchanged, as the case may be, or shall establish to the
satisfaction of SBC or the Exchange Agent that such tax has been paid or is
not applicable.
For the purposes of this Agreement, the term "Person" shall
mean any individual, corporation (including not-for-profit), general or
limited partnership, limited liability company, joint venture, estate,
trust, association, organization, Governmental Entity (as defined in
Section 5.1(d)(i)) or other entity of any kind or nature.
(b) Distributions with Respect to
Unexchanged Shares; Voting.
(i) Whenever a dividend or other distribution is
declared by SBC in respect of SBC Common Stock, the record date for which
is at or after the Effective Time, that declaration shall include dividends
or other distributions in respect of all shares of SBC Common Stock
issuable pursuant to this Agreement. No dividends or other distributions in
respect of such SBC Common Stock shall be paid to any holder of any
unsurrendered Certificate or Registered Company Shares for which a
Registered Letter of Transmittal shall not have been delivered, until such
Certificate is surrendered for exchange or such Registered Letter of
Transmittal is delivered, as the case may be, in accordance with this
Article IV. Subject to the effect of applicable laws, following surrender
of any such Certificate or delivery of any such Registered Letter of
Transmittal, as the case may be, there shall be issued and/or paid to the
holder of the Registered SBC Shares or the certificates representing whole
shares of SBC Common Stock, as the case may be, issued in exchange
therefor, without interest, (A) at the time of such surrender or delivery,
as the case my be, the dividends or other distributions with a record date
after the Effective Time and a payment date on or prior to the date of
issuance of such whole shares of SBC Common Stock and not previously paid
and (B) at the appropriate payment date, the dividends or other
distributions payable with respect to such whole shares of SBC Common Stock
with a record date after the Effective Time but with a payment date
subsequent to surrender or delivery, as the case may be. For purposes of
dividends or other distributions in respect of shares of SBC Common Stock,
all shares of SBC Common Stock to be issued pursuant to the Merger shall be
deemed issued and outstanding as of the Effective Time.
(ii) Registered holders of unsurrendered Certificates
or Registered Company Shares for which a duly executed Registered Letter of
Transmittal shall not have been delivered shall be entitled to vote after
the Effective Time at any meeting of SBC stockholders with a record date at
or after the Effective Time the number of whole shares of SBC Common Stock
represented by such Certificates or Registered Company Shares, as the case
may be, regardless of whether such holders have surrendered their
Certificates or delivered duly executed Registered Letters of Transmittal,
as the case may be.
(c) Transfers. After the Effective Time, there shall be
no transfers on the stock transfer books of the Company of the Company
Shares that were outstanding immediately prior to the Effective Time.
(d) Fractional Shares. Notwithstanding any other
provision of this Agreement, no fractional shares of SBC Common Stock will
be issued and any holder of Company Shares entitled to receive a fractional
share of SBC Common Stock but for this Section 4.2(d) shall be entitled to
receive an amount in cash (without interest) determined by multiplying such
fraction (rounded to the nearest onehundredth of a share) by the average of
the closing price of a share of SBC Common Stock, as reported in The Wall
Street Journal, New York City edition, on the trading day immediately prior
to the Effective Time.
(e) Termination of Exchange Period; Unclaimed Stock.
Any shares of SBC Common Stock and any portion of the cash, dividends or
other distributions with respect to the SBC Common Stock deposited by SBC
with the Exchange Agent (including the proceeds of any investments thereof)
that remain unclaimed by the stockholders of the Company 180 days after the
Effective Time shall be paid to SBC. Any stockholders of the Company who
have not theretofore complied with this Article IV shall thereafter look
only to SBC for payment of their shares of SBC Common Stock and any cash,
dividends and other distributions in respect thereof issuable and/or
payable pursuant to Section 4.1, Section 4.2(b) and Section 4.2(d) upon due
(i) surrender of (i) their Certificates (or affidavits of loss in lieu
thereof) or (ii) delivery of duly executed Registered Letters of
Transmittal, as the case may be, in each case with respect to both clause
(i) and (ii), without any interest thereon. Notwithstanding the foregoing,
none of SBC, the Surviving Corporation, the Exchange Agent or any other
Person shall be liable to any former holder of Company Shares for any
amount properly delivered to a public official pursuant to applicable
abandoned property, escheat or similar laws.
(f) Lost, Stolen or Destroyed Certificates. In the
event any Certificate shall have been lost, stolen or destroyed, upon the
making of an affidavit of that fact by the Person claiming such Certificate
to be lost, stolen or destroyed and the posting by such Person of a bond in
the form customarily required by SBC as indemnity against any claim that
may be made against it with respect to such Certificate, SBC will issue the
shares of SBC Common Stock and the Exchange Agent will issue any cash,
dividends and other distributions in respect thereof issuable and/or
payable in exchange for such lost, stolen or destroyed Certificate pursuant
to Section 4.1, Section 4.2(b) and Section 4.2(d) upon due surrender of and
deliverable in respect of the Company Shares represented by such
Certificate pursuant to this Agreement, in each case, without interest.
(g) Affiliates. Notwithstanding anything herein to the
contrary, Certificates surrendered for exchange, or Registered Company
Shares to be exchanged pursuant to a Registered Letter of Transmittal
delivered, by any "affiliate" (as determined pursuant to Section 6.7) of
the Company shall not be exchanged until SBC has received a written
agreement from such Person as provided in Section 6.7 hereof.
4.3. Dissenters' Rights. In accordance with Section 262 of the
DGCL, no appraisal rights shall be available to holders of Company Shares
in connection with the Merger.
4.4. Adjustments to Prevent Dilution. In the event that prior
to the Effective Time there is a change in the number of Company Shares or
shares of SBC Common Stock or securities convertible or exchangeable into
or exercisable for Company Shares or shares of SBC Common Stock issued and
outstanding as a result of a distribution, reclassification, stock split
(including a reverse split), stock dividend or distribution, or other
similar transaction, the Exchange Ratio shall be equitably adjusted to
eliminate the effects of such event.
ARTICLE V
Representations and Warranties
5.1. Representations and Warranties of the Company, SBC and
Merger Sub. Except as set forth in the corresponding sections or
subsections of the disclosure letter, dated the date hereof, delivered by
the Company to SBC or by SBC to the Company (each a "Disclosure Letter",
and the "Company Disclosure Letter" and the "SBC Disclosure Letter",
respectively), as the case may be, the Company (except for subparagraphs
(b)(ii), (b)(iii), (c)(ii) and (p)(ii) below and references in
subparagraphs (a) and (e) below to documents made available by SBC to the
Company) hereby represents and warrants to SBC and Merger Sub, and SBC
(except for subparagraphs (b)(i), (c)(i), (d)(iii), the last sentence of
(f), (j), (o) and (p)(i) below and references in subparagraphs (a), (e) and
(h)(i) below to documents made available by the Company to SBC), on behalf
of itself and Merger Sub, hereby represents and warrants to the Company,
that:
(a) Organization, Good Standing and Qualification. Each of it
and its Subsidiaries is a corporation duly organized, validly existing and
in good standing under the laws of its respective jurisdiction of
organization and has all requisite corporate or similar power and authority
to own and operate its properties and assets and to carry on its business
as presently conducted and is qualified to do business and is in good
standing as a foreign corporation in each jurisdiction where the ownership
or operation of its properties or conduct of its business requires such
qualification, except where the failure to be so qualified or in good
standing is not, when taken together with all other such failures,
reasonably likely to have a Material Adverse Effect (as defined below) on
it. It has made available to SBC, in the case of the Company, and to the
Company, in the case of SBC, a complete and correct copy of its certificate
of incorporation and by-laws, each as amended to date. Such certificates of
incorporation and by-laws as so made available are in full force and
effect.
As used in this Agreement, (i) the term "Subsidiary" means,
with respect to the Company, SBC or Merger Sub, as the case may be, any
entity, whether incorporated or unincorporated, of which at least fifty
percent of the securities or ownership interests having by their terms
ordinary voting power to elect at least fifty percent of the Board of
Directors or other persons performing similar functions is directly or
indirectly owned by such party or by one or more of its respective
Subsidiaries or by such party and any one or more of its respective
Subsidiaries, (ii) the term "Material Adverse Effect" means, with respect
to either SBC or the Company, as the case may be, a material adverse
effect, it being understood that materiality shall be determined by
reference to the trading market equity value of such Person prior to the
consummation of the Merger, other than effects resulting from the execution
of this Agreement or the announcement thereof or changes in (I) the
telecommunications industry generally, (II) the national economy generally
or (A) with respect to SBC only, the economy of Texas, Oklahoma, Missouri,
Kansas, Arkansas, Nevada and California, taken together, generally, or of
France, Mexico and/or the Republic of South Africa or (B) with respect to
the Company only, the economies of Illinois, Indiana, Michigan, Ohio and
Wisconsin, taken together, generally, or of Belgium, Denmark and/or Hungary
or (III) the securities markets generally, and (iii) reference to "the
other party" means, with respect to the Company, SBC and means, with
respect to SBC, the Company.
(b) Capital Structure. (i) The authorized capital stock of the
Company consists of 2,400,000,000 Company Shares, of which 1,100,161,364
Company Shares were issued and outstanding and 76,993,242 Company Shares
were held in treasury as of the close of business on April 30, 1998,
30,000,000 shares of Preferred Stock, $1.00 par value per share (the
"Company Preferred Shares"), none of which were outstanding as of the close
of business on May 8, 1998 and 30,000,000 shares of Preference Stock, $1.00
par value per share, (the "Company Preference Shares"), none of which were
outstanding as of the close of business on May 8, 1998. All of the
outstanding Company Shares have been duly authorized and are validly
issued, fully paid and nonassessable. Other than 12,000,000 Company
Preference Shares, designated "Series A Junior Participating Preference
Stock", reserved for issuance pursuant to the Rights Agreement, dated as of
December 21, 1988, between the Company and American Transtech Inc., as
Rights Agent (the "Rights Agreement"), and Company Shares subject to
issuance as set forth below, the Company has no Company Shares, Company
Preferred Shares or Company Preference Shares reserved for or otherwise
subject to issuance. As of May 10, 1998, there were not more than
47,000,000 Company Shares that the Company was obligated to issue pursuant
to the Company Compensation and Benefit Plans identified in Section 5.1(h)
of the Company Disclosure Letter as being the only Company Compensation and
Benefit Plans pursuant to which Company Shares may be issued (collectively
the "Company Stock Plans"). Each of the outstanding shares of capital stock
or other securities of each of the Company's Subsidiaries that constitute a
"Significant Subsidiary" (as defined in Rule 1.02(w) of Regulation S-X
promulgated pursuant to the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), is duly authorized, validly issued, fully paid and
nonassessable and owned by the Company or a direct or indirect wholly-owned
Subsidiary of the Company, free and clear of any lien, pledge, security
interest, claim or other encumbrance. Except as set forth above and for
Company Shares and options to purchase Company Shares which may be issued
in accordance with Section 6.1(a), there are no preemptive or other
outstanding rights, options, warrants, conversion rights, stock
appreciation rights, redemption rights, repurchase rights, agreements,
arrangements or commitments to issue or sell any shares of capital stock or
other securities of the Company or any of its Significant Subsidiaries or
any securities or obligations convertible or exchangeable into or
exercisable for, or giving any Person a right to subscribe for or acquire,
any securities of the Company or any of its Significant Subsidiaries, and
no securities or obligations evidencing such rights are authorized, issued
or outstanding. The Company does not have outstanding any bonds,
debentures, notes or other obligations the holders of which have the right
to vote (or convertible into or exercisable for securities having the right
to vote) with the stockholders of the Company on any matter.
(ii) The authorized capital stock
of SBC consists of 7,000,000,000 shares of SBC Common Stock, of which
1,838,844,294 shares were issued and outstanding and 26,060,210 shares were
held in treasury as of the close of business on April 30, 1998, and
10,000,000 shares of Preferred Stock, par value $1.00 per share (the "SBC
Preferred Shares"), none of which shares were outstanding as of the close
of business on May 8, 1998. All of the outstanding shares of SBC Common
Stock have been duly authorized and are validly issued, fully paid and
nonassessable. SBC has no shares of SBC Common Stock or SBC Preferred
Shares reserved for or subject to issuance except that SBC has reserved no
more than 10,000,000 SBC Preferred Shares for or subject to issuance
pursuant to the Rights Agreement, dated as of January 27, 1989, between SBC
and American Transtech, Inc., as Rights Agent, as amended by the Amendment
of Rights Agreement, dated as of August 5, 1992, between SBC and The Bank
of New York, as successor Rights Agent, and the Second Amendment of Rights
Agreement, dated as of June 15, 1994, between SBC and The Bank of New York,
as successor Rights Agent (as amended, the "SBC Rights Agreement"). As of
May 10, 1998, there were not more than 92,000,000 shares of SBC Common
Stock that SBC was obligated to issue pursuant to (x) SBC's Senior
Management Long Term Incentive Plan, Senior Management Incentive Award
Deferral Plan, Non-Employee Directors Stock and Deferral Plan, Stock
Savings Plan, 1994 Stock Option Plan, 1996 Stock and Incentive Plan, 1995
Management Stock Option Plan, Savings Plan and the Savings and Security
Plan and (y) Pacific Telesis Group's Supplemental Retirement and Savings
Plan for Salaried Employees, Supplemental Retirement and Savings Plan for
NonSalaried Employees, Supplemental Retirement and Savings Plan for
Salaried and NonSalaried Employees, Employee Stock Ownership Plan, Stock
Option and Stock Appreciation Rights Plan, Outside Directors Deferred Stock
Unit Plan and Restricted Stock Plan (collectively, the "SBC Stock Plans").
Each of the outstanding shares of capital stock of each of SBC's
Significant Subsidiaries is duly authorized, validly issued, fully paid and
nonassessable and owned by SBC or a direct or indirect wholly-owned
subsidiary of SBC, free and clear of any lien, pledge, security interest,
claim or other encumbrance. Except as set forth above, there are no
preemptive or other outstanding rights, options, warrants, conversion
rights, stock appreciation rights, redemption rights, repurchase rights,
agreements, arrangements or commitments to issue or to sell any shares of
capital stock or other securities of SBC or any of its Significant
Subsidiaries or any securities or obligations convertible or
exchangeable into or exercisable for, or giving any Person a right to
subscribe for or acquire, any securities of SBC or any of its Significant
Subsidiaries, and no securities or obligation evidencing such rights are
authorized, issued or outstanding. SBC does not have outstanding any bonds,
debentures, notes or other obligations the holders of which have the right
to vote (or convertible into or exercisable for securities having the right
to vote) with the stockholders of SBC on any matter.
(iii) The authorized capital stock
of Merger Sub consists of 1,000 shares of Common Stock, par value $1.00 per
share, all of which are validly issued and outstanding. All of the issued
and outstanding capital stock of Merger Sub is, and at the Effective Time
will be, owned by SBC, and there are (i) no other shares of capital stock
or other voting securities of Merger Sub, (ii) no securities of Merger Sub
convertible into or exchangeable for shares of capital stock or other
voting securities of Merger Sub and (iii) no options or other rights to
acquire from Merger Sub, and no obligations of Merger Sub to issue, any
capital stock, other voting securities or securities convertible into or
exchangeable for capital stock or other voting securities of Merger Sub.
Merger Sub has not conducted any business prior to the date hereof and has
no, and prior to the Effective Time will have no, assets, liabilities or
obligations of any nature other than those incident to its formation and
pursuant to this Agreement and the Merger and the other transactions
contemplated by this Agreement.
(c) Corporate Authority; Approval and Fairness. (i) The
Company has all requisite corporate power and authority and has taken all
corporate action necessary in order to execute, deliver and perform its
obligations under this Agreement and to consummate, subject only to
adoption of this Agreement by the holders of a majority of the outstanding
Company Shares (the "Company Requisite Vote") and the Company Required
Consents (as defined in Section 5.1(d)), the Merger. This Agreement has
been duly executed and delivered by the Company and is a valid and binding
agreement of the Company enforceable against the Company in accordance with
its terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity principles
(the "Bankruptcy and Equity Exception"). The Board of Directors of the
Company (A) has unanimously approved this Agreement and the Merger and the
other transactions contemplated hereby and (B) has received the opinion of
its financial advisors, Goldman, Sachs & Co., in a customary form and to
the effect that the Merger Consideration to be received by the holders of
the Company Shares in the Merger is fair to such holders from a financial
point of view.
(ii) SBC and Merger Sub each has
all requisite corporate power and authority and each has taken all
corporate action necessary in order to execute, deliver and perform its
obligations under this Agreement and to consummate, subject only to the
approval by the stockholders of SBC by a majority of votes cast on the
proposal to issue the shares of SBC Common Stock required to be issued
pursuant to Article IV; provided, that the total vote cast represents over
50% of all of the outstanding shares of SBC Common Stock (the "SBC
Requisite Vote") and the SBC Required Consents (as defined in Section
5.1(d)), the Merger. This Agreement has been duly executed and delivered by
SBC and Merger Sub and is a valid and binding agreement of SBC and Merger
Sub, enforceable against each of SBC and Merger Sub in accordance with its
terms, subject to the Bankruptcy and Equity Exception. SBC has received the
opinion of its financial advisors, Salomon Brothers Inc and Smith Barney
Inc., in a customary form and to the effect that the Exchange Ratio is fair
to SBC from a financial point of view. The shares of SBC Common Stock, when
issued pursuant to this Agreement, will be validly issued, fully paid and
nonassessable, and no stockholder of SBC will have any preemptive right of
subscription or purchase in respect thereof.
(d) Governmental Filings; No Violations. (i) Other than
the necessary filings, notices and/or approvals (A) pursuant to Section
1.3, (B) under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), the Exchange Act and the Securities Act of 1933,
as amended (the "Securities Act"), (C) to comply with state securities or
"blue-sky" laws, (D) if any, of the Federal Communications Commission
("FCC") pursuant to the Communications Act of 1934, as amended, (E) if any,
of the local, state and foreign public utility commissions or similar
local, state or foreign regulatory bodies (each a "PUC") and the local,
state and foreign Governmental Entities (as defined below) identified in it
respective Disclosure Letter pursuant to applicable local, state or foreign
laws regulating the telephone, mobile cellular, paging, cable television or
other telecommunications business ("Utilities Laws") and (F) if any, of the
foreign regulatory bodies identified in its Disclosure Letter pursuant to
applicable foreign laws regulating actions having the purpose or effect of
monopolization or restraint of trade (such filings, notices and/or
approvals of SBC being the "SBC Required Consents" and of the Company being
the "Company Required Consents"), no filings, notices and/or reports are
required to be made by it with, nor are any consents, registrations,
approvals, permits or authorizations required to be obtained by it from,
any governmental or regulatory authority, court, agency, commission, body
or other governmental entity ("Governmental Entity"), in connection with
the execution and delivery of this Agreement by it and the consummation by
it of the Merger and the other transactions contemplated hereby, except
those that the failure to make or obtain are not, individually or in the
aggregate, reasonably likely to have a Material Adverse Effect on it or
prevent, materially delay or materially impair its ability to consummate
the transactions contemplated by this Agreement.
(ii) The execution, delivery and performance of
this Agreement by it do not, and the consummation by it of the Merger and
the other transactions contemplated hereby will not, constitute or result
in (A) a breach or violation of, or a default under, its certificate of
incorporation or by-laws or the comparable governing instruments of any of
its Significant Subsidiaries, (B) a breach or violation of, or a default
under, the acceleration of any obligations or the creation of a lien,
pledge, security interest or other encumbrance on its assets or the assets
of any of its Subsidiaries (with or without notice, lapse of time or both)
pursuant to, any agreement, lease, contract, note, mortgage, indenture,
arrangement or other obligation ("Contracts") binding upon it or any of its
Subsidiaries or, assuming the filings, notices and/or approvals referred to
in Section 5.1(d)(i) are made or obtained, any Law (as defined in Section
5.1(i)) or governmental or non-governmental permit or license to which it
or any of its Subsidiaries is subject or (C) any change in the rights or
obligations of any party under any of its Contracts, except, in the case of
clause (B) or (C) above, for any breach, violation, default, acceleration,
creation or change that, individually or in the aggregate, is not
reasonably likely to have a Material Adverse Effect on it or prevent,
materially delay or materially impair its ability to consummate the
transactions contemplated by this Agreement. The Company Disclosure Letter,
with respect to the Company, and the SBC Disclosure Letter, with respect to
SBC, sets forth a correct and complete list of Contracts of it and its
Subsidiaries pursuant to which consents or waivers are or may be required
prior to consummation of the transactions contemplated by this Agreement
other than those where the failure to obtain such consents or waivers is
not, individually or in the aggregate, reasonably likely to have a Material
Adverse Effect on it or prevent or materially impair its ability to
consummate the transactions contemplated by this Agreement.
(e) Reports; Financial Statements. It has made
available to the other party, each registration statement, report, proxy
statement or information statement prepared by it since December 31, 1997
(the "Audit Date"), including its Annual Report on Form 10-K for the year
ended December 31, 1997 in the form (including exhibits, annexes and any
amendments thereto) filed with the Securities and Exchange Commission (the
"SEC") (collectively, including any such reports filed subsequent to the
date hereof, its "Reports"). As of their respective dates, its Reports did
not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances in which they were
made, not misleading. Each of the consolidated balance sheets included in
or incorporated by reference into its Reports (including the related notes
and schedules) fairly presents the consolidated financial position of it
and its Subsidiaries as of its date and each of the consolidated statements
of income and of cash flows included in or incorporated by reference into
its Reports (including any related notes and schedules) fairly presents the
consolidated results of operations, retained earnings and cash flows, as
the case may be, of it and its Subsidiaries for the periods set forth
therein (subject, in the case of unaudited statements, to notes and normal
year-end audit adjustments that will not be material in amount or effect),
in each case in accordance with United States generally accepted accounting
principles ("GAAP") consistently applied during the periods involved,
except as may be noted therein. Since the Audit Date, it and each
Subsidiary required to make filings under Utilities Laws has filed with the
applicable PUCs or the FCC, as the case may be, all material forms,
statements, reports and documents (including exhibits, annexes and any
amendments thereto) required to be filed by them, and each such filing
complied in all material respects with all applicable laws, rules and
regulations, other than such failures to file and non-compliance that are,
individually or in the aggregate, not reasonably likely to have a Material
Adverse Effect on it or prevent or materially impair its ability to
consummate the transactions contemplated by this Agreement. To its
knowledge, as of the date hereof, no Person or "group" "beneficially owns"
5% or more of its outstanding voting securities, with the terms
"beneficially owns" and "group" having the meanings ascribed to them under
Rule 13d-3 and Rule 13d-5 under the Exchange Act.
(f) Absence of Certain Changes. Except as disclosed in
its Reports filed prior to the date hereof or as expressly contemplated or
permitted by this Agreement, since the Audit Date it and its Subsidiaries
have conducted their respective businesses only in, and have not engaged in
any material transaction other than according to, the ordinary and usual
course of such businesses and there has not been (i)any change in the
financial condition, properties, prospects, business or results of
operations of it and its Subsidiaries, except those changes that are not,
individually or in the aggregate, reasonably likely to have a Material
Adverse Effect on it; (ii) any damage, destruction or other casualty loss
with respect to any asset or property owned, leased or otherwise used by it
or any of its Subsidiaries, whether or not covered by insurance, which
damage, destruction or loss is reasonably likely, individually or in the
aggregate, to have a Material Adverse Effect on it; (iii) any declaration,
setting aside or payment of any dividend or other distribution in respect
of its capital stock, except publicly announced regular quarterly cash
dividends on its common stock and, in the case of SBC, any dividends in
capital stock of SBC which are simultaneously taken into account in an
adjustment to the Exchange Ratio pursuant to Section 4.4; or (iv) any
change by it in accounting principles, practices or methods, except as
required by GAAP. Since the Audit Date, except as provided for herein, in
the Company Disclosure Letter, as disclosed in the Reports filed by the
Company prior to the date hereof or permitted hereby, there has not been
any increase in the salary, wage, bonus or other compensation payable or
that could become payable by the Company or any of its Subsidiaries to
directors, officers or key employees or any amendment of any of the Company
Compensation and Benefit Plans (as defined in Section 5.1(h)(i)) other than
increases or amendments in the ordinary course.
(g) Litigation and Liabilities. Except as disclosed in
its Reports filed prior to the date hereof, there are no (i) civil,
criminal or administrative actions, suits, claims, hearings, investigations
or proceedings pending or, to the actual knowledge of its executive
officers, threatened in writing against it or any of its Affiliates (as
defined in Rule 12b-2 under the Exchange Act) or (ii) obligations or
liabilities, whether or not accrued, contingent or otherwise and whether or
not required to be disclosed, including those relating to matters involving
any Environmental Law (as defined in Section 5.1(k)), or any other facts or
circum stances, in either such case, of which its executive officers have
actual knowledge that are reasonably likely to result in any claims against
or obligations or liabilities of it or any of its Affiliates, except for
those that are not, individually or in the aggregate, reasonably likely to
have a Material Adverse Effect on it or prevent, materially delay or
materially impair its ability to consummate the transactions contemplated
by this Agreement; provided, however, that for purposes of this subsection
(g) no action, suit, claim, hearing, investigation or proceeding arising
after the date hereof shall be deemed to have any adverse effect if and to
the extent such actions, suits, claims, hearings, investigations or
proceedings are based on this Agreement or the transactions contemplated
hereby.
(h) Employee Benefits.
(i) A copy of each bonus, deferred
compensation, pension, retirement, profit-sharing, thrift, savings,
employee stock ownership, stock bonus, stock purchase, restricted stock,
stock option, employment, termination, severance, compensation, medical,
health or other plan, agreement, policy or arrangement that covers
employees, directors, former employees or former directors of the Company
and its Subsidiaries (the "Company Compensation and Benefit Plans") and any
trust agreements or insurance contracts forming a part of such Company
Compensation and Benefit Plans has been made available by the Company to
SBC prior to the date hereof and each such Company Compensation and Benefit
Plan is listed in Section 5.1(h) of the Company Disclosure Letter.
(ii) In the case of the Company,
each of the Company Compensation and Benefit Plans or, in the case of SBC,
each bonus, deferred compensation, pension, retirement, profit-sharing,
thrift, savings, employee stock ownership, stock bonus, stock purchase,
restricted stock, stock option, employment, termination, severance,
compensation, medical, health or other plan, agreement, policy or
arrangement that covers employees, directors, former employees or former
directors of SBC and SBC's Subsidiaries (together with the Company
Compensation and Benefit Plans, its "Compensation and Benefit Plans") is in
substantial compliance with all applicable law, including the Code and the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"). Each
of its Compensation and Benefit Plans that is an "employee pension benefit
plan" within the meaning of Section 3(2) of ERISA (a "Pension Plan") and
that is intended to be qualified under Section 401(a) of the Code has
received a favorable determination letter from the Internal Revenue Service
(the "IRS") with respect to "TRA" (as such term is defined in Section 1 of
Rev. Proc 9339), and it is not aware of any circumstances likely to result
in revocation of any such favorable determination letter. There is no
pending or, to the actual knowledge of its executive officers, threatened
in writing material litigation relating to its Compensation and Benefit
Plans. Neither it nor any Subsidiary has engaged in a transaction with
respect to any of its Compensation and Benefit Plans that, assuming the
taxable period of such transaction expired as of the date hereof, would
subject it or any of its Subsidiaries to a material tax or penalty imposed
by either Section 4975 of the Code or Section 502 of ERISA.
(iii) As of the date hereof, no
liability under Subtitle C or D of Title IV of ERISA (other than the
payment of prospective premium amounts to the Pension Benefit Guaranty
Corporation in the normal course) has been or is expected to be incurred by
it or any Subsidiary with respect to any ongoing, frozen or terminated
"single-employer plan", within the meaning of Section 4001(a)(15) of ERISA,
currently or formerly maintained by any of them, or the single-employer
plan of any entity which is considered one employer with it under Section
4001 of ERISA or Section 414 of the Code (its "ERISA Affiliate") (each such
single-employer plan, its "ERISA Affiliate Plan"). It and its Subsidiaries
and ERISA Affiliates have not contributed, or been obligated to contribute,
to a multiemployer plan under Subtitle E of Title IV of ERISA at any time
since September 26, 1980. No notice of a "reportable event", within the
meaning of Section 4043 of ERISA for which the 30-day reporting requirement
has not been waived, has been required to be filed for any of its Pension
Plans or any of its ERISA Affiliate Plans within the 12-month period ending
on the date hereof or will be required to be filed in connection with the
transactions contemplated by this Agreement.
(iv) All contributions required to
be made under the terms of any of its Compensation and Benefit Plans as of
the date hereof have been timely made or have been reflected on the most
recent consolidated balance sheet filed or incorporated by reference in its
Reports prior to the date hereof. Neither any of its Pension Plans nor any
of any of its ERISA Affiliate Plans has an "accumulated funding deficiency"
(whether or not waived) within the meaning of Section 412 of the Code or
Section 302 of ERISA. Neither it nor its Subsidiaries has provided, or is
required to provide, security to any of its Pension Plans or to any of its
ERISA Affiliate Plans pursuant to Section 401(a)(29) of the Code.
(v) Under each of its Pension
Plans which is a single-employer plan and each of its ERISA Affiliate
Plans, as of the last day of the most recent plan year ended prior to the
date hereof, the actuarially determined present value of all "benefit
liabilities", within the meaning of Section 4001(a)(16) of ERISA (as
determined on the basis of the actuarial assumptions contained in such
Pension Plan's or ERISA Affiliate Plan's most recent actuarial valuation),
did not exceed the then current value of the assets of such Pension Plan or
ERISA Affiliate Plan, and there has been no material change in the
financial condition of such Pension Plan or ERISA Affiliate Plan since the
last day of the most recent plan year.
(vi) Neither it nor its Subsidiaries have any
obligations for retiree health and life benefits under any of its Compensatio
and Benefit Plans, except as set forth in its Reports filed prior to the
date hereof or as required by applicable law.
(vii) None of the consummation of the Merger and
the other transactions contemplated by this Agreement, in the case of SBC
and the Company, the adoption of this Agreement by the stockholders of the
Company, in the case of the Company, the approval by the stockholders of
SBC of the issuance of the shares of SBC Common Stock required to be issued
pursuant to Article IV, in the case of SBC, shall (x) entitle any of their
respective employees or directors or any employees of their respective
Subsidiaries to severance pay, directly or indirectly, upon termination of
employment, (y) accelerate the time of funding (whether through a grantor
trust or otherwise), payment or vesting or trigger any payment of
compensation or benefits under, increase the amount payable or trigger any
other material obligation pursuant to, any of their respective Compensation
and Benefit Plans or (z) result in any breach or violation of, or a default
under, any of their respective Compensation and Benefit Plans.
(i) Compliance with Laws. Except as set forth in its
Reports filed prior to the date hereof, the businesses of each of it and
its Subsidiaries have not been, and are not being, conducted in violation
of any law, statute, ordinance, regulation, judgment, order, decree,
injunction, arbitration award, license, authorization, opinion, agency
requirement or permit of any Governmental Entity or common law
(collectively, "Laws"), except for violations or possible violations that
are not, individually or in the aggregate, reasonably likely to have a
Material Adverse Effect on it or prevent, materially delay or materially
impair its ability to consummate the transactions contemplated by this
Agreement. Except as set forth in its Reports filed prior to the date
hereof, no investigation or review by any Governmental Entity with respect
to it or any of its Subsidiaries is pending or, to the actual knowledge of
its executive officers, threatened, nor has any Governmental Entity
indicated an intention to conduct the same, except for those the outcome of
which are not, individually or in the aggregate, reasonably likely to have
a Material Adverse Effect on it or prevent, materially delay or materially
impair its ability to consummate the transactions contemplated by this
Agreement. To the actual knowledge of its executive officers, no material
change is required in its or any of its Subsidiaries' processes, properties
or procedures in connection with any such Laws, and it has not received any
notice or communication of any material noncompliance with any such Laws
that has not been cured as of the date hereof, except for such changes and
noncompliance that are not, individually or in the aggregate, reasonably
likely to have a Material Adverse Effect on it or prevent, materially delay
or materially impair its ability to consummate the transactions
contemplated by this Agreement. Each of it and its Subsidiaries has all
permits, licenses, franchises, variances, exemptions, orders and other
governmental authorizations, consents and approvals (collectively,
"Permits"), necessary to conduct their business as presently conducted,
except for those the absence of which are not, individually or in the
aggregate, reasonably likely to have a Material Adverse Effect on it or
prevent, materially delay or materially impair its ability to consummate
the transactions contemplated by this Agreement.
(j) Takeover Statutes. The Board of Directors of the
Company has taken all appropriate and necessary actions such that SBC will
not be prohibited from entering into a "business combination" with the
Company as an "interested stockholder" (in each case as such term is used
in Section 203 of the DGCL) as a result of the execution and delivery of
this Agreement or the consummation of the transactions contemplated hereby.
To the best knowledge of the Company, no other "fair price," "moratorium,"
"control share acquisition" or other similar anti-takeover statute or
regulation (each a "Takeover Statute") as in effect on the date hereof is
applicable to the Company, the Company Shares, the Merger or the other
transactions contemplated by this Agreement. No antitakeover provision
contained in the Company's certifi cate of incorporation, including Article
Ninth thereof, or its by-laws is, or at the Effective Time will be,
applicable to the Company, the Company Shares, the Merger or the other
transactions contemplated by this Agreement.
(k) Environmental Matters. Except as disclosed in its
Reports filed prior to the date hereof and except for such matters that,
alone or in the aggregate, are not reasonably likely to have a Material
Adverse Effect on it: (i) each of it and its Subsidiaries has complied with
all applicable Environmental Laws (as defined below); (ii) the properties
currently owned or operated by it or any of its Subsidiaries (including
soils, groundwater, surface water, buildings or other structures) are not
contaminated with any Hazardous Substances (as defined below); (iii) the
properties formerly owned or operated by it or any of its Subsidiaries were
not contaminated with Hazardous Substances during the period of ownership
or operation by it or any of its Subsidiaries; (iv) neither it nor any of
its Subsidiaries is subject to liability for any Hazardous Substance
disposal or contamination on any third party property; (v) neither it nor
any Subsidiary has been associated with any release or threat of release of
any Hazardous Substance; (vi) neither it nor any Subsidiary has received
any notice, demand, letter, claim or request for information alleging that
it or any of its Subsidiaries may be in violation of or liable under any
Environmental Law (including any claims relating to electromagnetic fields
or microwave transmissions); (vii) neither it nor any of its Subsidiaries
is subject to any orders, decrees, injunctions or other arrangements with
any Governmental Entity or is subject to any indemnity or other agreement
with any third party relating to liability under any Environmental Law or
relating to Hazardous Substances; and (viii) there are no circumstances or
conditions involving it or any of its Subsidiaries that could reasonably be
expected to result in any claims, liability, investigations, costs or
restrictions on the ownership, use, or transfer of any of its properties
pursuant to any Environmental Law.
As used herein, the term "Environmental Law" means any Law
relating to: (A) the protection, investigation or restoration of the
environment, health, safety, or natural resources, (B) the handling, use,
presence, disposal, release or threatened release of any Hazardous
Substance or (C) noise, odor, wetlands, pollution, contamination or any
injury or threat of injury to persons or property in connection with any
Hazardous Substance.
As used herein, the term "Hazardous Substance" means any
substance that is: listed, classified or regulated pursuant to any
Environmental Law, including any petroleum product or by-product,
asbestos-containing material, lead-containing paint or plumbing,
polychlorinated biphenyls, radioactive materials or radon.
(l) Accounting and Tax Matters. As of the date hereof,
neither it nor any of its affiliates (as determined in accordance with
Section 6.7) has taken or agreed to take any action, nor do its executive
officers have any actual knowledge of any fact or circumstance, that, to
their actual knowledge, would prevent SBC from accounting for the business
combination to be effected by the Merger as a "pooling-ofinterests" or
prevent the Merger and the other transactions contemplated by this
Agreement from qualifying as a "reorganization" within the meaning of
Section 368(a) of the Code.
(m) Taxes. It and each of its Subsidiaries have
prepared in good faith and duly and timely filed (taking into account any
extension of time within which to file) all material Tax Returns (as
defined below) required to be filed by any of them and all such filed tax
returns are complete and accurate in all material respects and: (i) it and
each of its Subsidiaries have paid all Taxes (as defined below) that are
shown as due on such filed Tax Returns or that it or any of its
Subsidiaries is obligated to withhold from amounts owing to any employee,
creditor or third party, except with respect to matters contested in good
faith or for such amounts that, alone or in the aggregate, are not
reasonably likely to have a Material Adverse Effect on it; (ii) as of the
date hereof, there are not pending or, to the actual knowledge of its
executive officers threatened in writing, any audits, examinations,
investigations or other proceedings in respect of Taxes or Tax matters; and
(iii) there are not, to the actual knowledge of its executive officers, any
unresolved questions or claims concerning its or any of its Subsidiaries'
Tax liability that are reasonably likely to have a Material Adverse Effect
on it. Neither it nor any of its Subsidiaries has any liability with
respect to income, franchise or similar Taxes in excess of the amounts
accrued in respect thereof that are reflected in the financial statements
included in its Reports, except such excess liabilities as are not,
individually or in the aggregate, reasonably likely to have a Material
Adverse Effect on it. No payments to be made to any of the officers and
employees of it or its Subsidiaries will as a result of consummation of the
Merger be subject to the deduction limitations under Section 280G of the
Code.
As used in this Agreement, (i) the term "Tax"
(including, with correlative meaning, the terms "Taxes", and "Taxable")
includes all federal, state, local and foreign income, profits, franchise,
gross receipts, environmental, customs duty, capital stock, severance,
stamp, payroll, sales, employment, unemployment, disability, use, property,
withholding, excise, production, value added, occupancy and other taxes,
duties or assessments of any nature whatsoever, together with all interest,
penalties and additions imposed with respect to such amounts and any
interest in respect of such penalties and additions, and (ii) the term "Tax
Return" includes all returns and reports (including elections,
declarations, disclosures, schedules, estimates and information returns)
required to be supplied to a Tax authority relating to Taxes.
(n) Labor Matters. Neither it nor any of its
Subsidiaries is the subject of any material proceeding asserting that it or
any of its Subsidiaries has committed an unfair labor practice or is
seeking to compel it to bargain with any labor union or labor organization
nor is there pending or, to the actual knowledge of its executive officers,
threatened in writing, nor has there been for the past five years, any
labor strike, dispute, walkout, work stoppage, slow-down or lockout
involving it or any of its Subsidiaries, except in each case as is not,
individually or in the aggregate, reasonably likely to have a Material
Adverse Effect on it.
(o) Rights Agreement. (i) The Company has adopted an
amendment to the Rights Agreement (the "Rights Amendment") with the effect
that neither SBC nor Merger Sub shall be deemed to be an Acquiring Person
(as such term is defined in the Rights Agreement) and the Distribution Date
(as defined in the Rights Agreement) shall not be deemed to occur and that
the Rights will not separate from the Company Shares, as a result of
entering into this Agreement or consummating the Merger and/or the other
transactions contemplated hereby.
(ii) The Company has taken all
necessary action with respect to all of the outstanding Rights (as defined
in the Rights Agreement) so that, as of immediately prior to the Effective
Time, as a result of entering into this Agreement or consummating the
Merger and/or the other transactions contemplated by this Agreement, (A)
neither the Company nor SBC will have any obligations under the Rights or
the Rights Agreement and (B) the holders of the Rights will have no rights
under the Rights or the Rights Agreement.
(p) Brokers and Finders. Neither it nor any of its
officers, directors or employees has employed any broker or finder or
incurred any liability for any brokerage fees, commissions or finders, fees
in connection with the Merger or the other transactions contemplated in
this Agreement except that (i) the Company has employed Goldman, Sachs &
Co. as its financial advisor, the arrangements with which have been
disclosed to SBC prior to the date hereof, and (ii) SBC and Merger Sub have
employed Salomon Brothers Inc and Smith Barney Inc. as their financial
advisor, the arrangements with which have been disclosed to the Company
prior to the date hereof.
ARTICLE VI
Covenants
6.1. Interim Operations. (a) The Company covenants and agrees
as to itself and its Subsidiaries that, after the date hereof and prior to
the Effective Time (unless SBC shall otherwise approve in writing, which
approval shall not be unreasonably withheld or delayed, and except as
otherwise expressly contemplated by this Agreement, disclosed in the
Company Disclosure Letter or required by applicable Law):
(i) the business of it and its
Subsidiaries shall be conducted in the ordinary and usual course and, to
the extent consistent therewith, it and its Subsidiaries shall use all
reasonable best efforts to preserve its business organization intact and
maintain its existing relations and goodwill with customers, suppliers,
regulators, distributors, creditors, lessors, employees and business
associates;
(ii) it shall not (A) amend its certificate of
incorporation or by-laws or amend, modify or terminate the Rights
Agreement; provided, however, that nothing in this Agreement shall prevent
the Company from reducing below 20% the beneficial ownership threshold in
the definition of an Acquiring Person (as defined in the Rights Agreement)
or extending the Final Expiration Date of the Rights Agreement (as defined
therein) or adopting a new rights agreement having substantially similar
terms as the Rights Agreement and not inconsistent with (x) this proviso,
(y)Section 5.1(o) (assuming references therein are to such a new rights
agreement) or (z) the transactions contemplated by this Agreement; (B)
split, combine, subdivide or reclassify its outstanding shares of capital
stock; (C) declare, set aside or pay any dividend or distribution payable
in cash, stock or property in respect of any capital stock, other than
regular quarterly cash dividends in amounts consistent with its past
practice or rights to purchase Company Shares or Company Preference Shares
pursuant to any successor agreement to the Rights Agreement, adopted in
accordance with the terms of this Agreement; or (D) repurchase, redeem or
otherwise acquire or permit any of its Subsidiaries to purchase or
otherwise acquire, except in open market transactions in connection with
the Company Stock Plans, any shares of its capital stock or any securities
convertible into or exchangeable or exercisable for any shares of its
capital stock, but subject to the Company's obligations under subparagraph
(iii) below.
(iii) neither it nor any of its
Subsidiaries shall knowingly take any action that would prevent the Merger
from qualifying for "pooling of interests" accounting treatment or as a
"reorganization" within the meaning of Section 368(a) of the Code or that
would cause any of its representations and warranties herein to become
untrue in any material respect;
(iv) neither it nor any of its
Subsidiaries shall terminate, establish, adopt, enter into, make any new
grants or awards of stock-based compensation or other benefits under, amend
or otherwise modify, any Company Compensation and Benefit Plans or increase
the salary, wage, bonus or other compensation of any directors, officers or
key employees except (A) for grants or awards to directors, officers and
employees of it or its Subsidiaries under existing Company Compensation and
Benefit Plans in such amounts and on such terms as are consistent with past
practice, (B) in the normal and usual course of business (which shall
include normal periodic performance reviews and related Company
Compensation and Benefit Plan increases and the provision of individual
Company Compensation and Benefit Plans consistent with past practice for
promoted or newly hired officers and employees and the adoption of Company
Compensation and Benefit Plans for employees of new Subsidiaries in amounts
and on terms consistent with past practice); provided, that in no event
shall it institute a broad based change in compensation, unless it shall
have used its reasonable best efforts to provide SBC with prior notice of
any such change or, if the Company was unable to provide such prior notice,
the Company shall provide SBC with notice as soon as practicable following
any such change, or (C) for actions necessary to satisfy existing
contractual obligations under Company Compensation and Benefit Plans
existing as of the date hereof;
(v) neither it nor any of its
Subsidiaries shall issue any Company Preferred Shares or Company Preference
Shares or incur any indebtedness for borrowed money or guarantee any such
indebtedness if it should reasonably anticipate that after such incurrence
any of its or any of its Subsidiaries' outstanding senior indebtedness
would be rated A or lower by Standard & Poor's;
(vi) neither it nor any of its
Subsidiaries shall make any capital expenditures in any period of twelve
consecutive months following the date hereof in an aggregate amount in
excess of 150% of the aggregate amount reflected in the Company's capital
expenditure budget for such year, a copy of which has been provided to SBC;
(vii) neither it nor any of its
Subsidiaries shall transfer, lease, license, sell, mortgage, pledge,
encumber or otherwise dispose of any of its or its Subsidiaries property or
assets (including capital stock of any of its Subsidiaries) with a fair
market value in excess of $1 billion in the aggregate in any period of
twelve consecutive months following the date hereof except for transfers,
leases, licenses, sales, mortgages, pledges, encumbrances, or other
dispositions in the ordinary course of business consistent with past
practice;
(viii) neither it nor any of its
Subsidiaries shall issue, deliver, sell, or encumber shares of any class of
its common stock or any securities convertible into, or any rights,
warrants or options to acquire, any such shares except, (A) any such shares
issued pursuant to options and other awards outstanding on the date hereof
under the Company Stock Plans, awards of options and other awards granted
hereafter under the Company Stock Plans in accordance with this Agreement
and shares issuable pursuant to such awards, and (B) up to an aggregate
amount of $3.6 billion of such shares, securities, rights, warrants or
options (valued at their fair market value as of the date of the agreement
to make such acquisition) in any period of twelve consecutive months
following the date hereof to fund, in whole or in part, the cost of any
acquisition or acquisitions permitted under clause (ix) below following
reasonable notice to SBC of its intention to take such action;
(ix) neither it nor any of its
Subsidiaries shall spend in excess of $3.6 billion in the aggregate in any
period of twelve consecutive months following the date hereof to acquire
any business, whether by merger, consolidation, purchase of property or
assets or otherwise (valuing any non-cash consideration at its fair market
value as of the date of the agreement for such acquisition); provided, that
no such acquisition would prevent, materially delay or materially impair
its ability to consummate the transactions contemplated by this Agreement.
Notwithstanding the foregoing, neither it nor any of its Subsidiaries shall
acquire any business the acquisition of which would subject SBC and its
Subsidiaries following the consummation of the Merger to any Commercial
Mobile Radio Service spectrum aggregation limit restriction pursuant to the
provisions of 47 C.F.R. Section 20.6 or place SBC and its Subsidiaries
following the consummation of the Merger in violation of the Cellular Cross
Ownership limits contained in 47 C.F.R. Section 22.942. For purposes of
this clause (ix), the amount spent with respect to any acquisition shall be
deemed to include the aggregate amount of capital expenditures that the
Company is obligated to make at any time or plans to make as a result of
such acquisition within two years after the date of acquisition;
(x) neither it nor its Subsidiaries shall enter
into any business other than the telecommunications business and those
businesses traditionally associated with the telecommunications business;
and
(xi) neither it nor any of its Subsidiaries
shall authorize or enter into any agreement to do any of the foregoing.
(b) SBC covenants and agrees as to itself and its
Subsidiaries that after the date hereof and prior to the Effective Time
(unless the Company shall otherwise approve in writing, which approval
shall not be unreasonably withheld or delayed, and except as otherwise
expressly contemplated by this Agreement, disclosed in the SBC Disclosure
Letter or required by applicable Law):
(i) the business of it and its Subsidiaries shall
be conducted in the ordinary and usual course and, to the extent consistent
therewith, it and its Subsidiaries shall use all reasonable best efforts to
preserve its business organization intact and maintain its existing
relations and goodwill with customers, suppliers, regulators, distributors,
creditors, lessors, employees and business associates;
(ii) it shall not (A) amend its
certificate of incorporation or bylaws in any manner that would prohibit or
hinder, impede or delay in any material respect the Merger or the
consummation of the transactions contemplated hereby, provided that any
amendment to its certificate of incorporation to increase the authorized
number of shares of any class or series of the capital stock of SBC shall
in no way be restricted by the foregoing; (B) declare, set aside or pay any
dividend or other distribution payable in cash or property (other than SBC
Common Stock or rights to purchase SBC Common Stock or SBC Preferred Stock
pursuant to any successor agreement to the SBC Rights Agreement) in respect
of any capital stock, other than per share regular quarterly cash dividends
in amounts consistent with its past practice; or (C) repurchase, redeem or
otherwise acquire, or permit any of its Subsidiaries to purchase or
otherwise acquire, except in open market transactions in connection with
the SBC Stock Plans, any shares of its capital stock or any securities
convertible into or exchangeable for any shares of its capital stock, but
subject to SBC's obligations under subparagraph (iii) below;
(iii) neither it nor any of its
Subsidiaries shall knowingly take any action that would prevent the Merger
from qualifying for "poolingof interests" accounting treatment or as a
taxfree "reorganization" within the meaning of Section 368(a) of the Code
or that would cause any of its representations and warranties herein to
become untrue in any material respect;
(iv) neither it nor any of its
Subsidiaries shall issue any SBC Preferred Shares or incur any indebtedness
for borrowed money or guarantee any such indebtedness if it should
reasonably anticipate that after such incurrence any of its or any of its
Subsidiaries' outstanding senior indebtedness would be rated A or lower by
Standard & Poor's;
(v) neither it nor any of its Subsidiaries shall
make any capital expenditures in any period of twelve consecutive months
following the date hereof in an aggregate amount in excess of 150% of the
aggregate amount of capital expenditures reflected in its capital
expenditure budget for such year, a copy of which has been provided to the
Company;
(vi) neither it nor any of its
Subsidiaries shall transfer, lease, license, sell, mortgage, pledge,
encumber or otherwise dispose of any of its or its Subsidiaries property or
assets (including capital stock of any of its Subsidiaries) with a fair
market value in excess of $1.5 billion in the aggregate in any period of
twelve consecutive months following the date hereof except for transfers,
leases, licenses, sales, mortgages, pledges, encumbrances, or other
dispositions in the ordinary course of business consistent with past
practice;
(vii) neither it nor any of its
Subsidiaries shall issue, deliver, sell or encumber shares of any class of
its common stock or any securities convertible into, or any rights,
warrants or options to acquire, any such shares, except (A) any such shares
issued pursuant to options and other awards outstanding on the date hereof
under the SBC Stock Plans, awards of options and other awards granted
hereafter under the SBC Stock Plans and shares issuable pursuant to such
awards, (B) up to an aggregate amount of $4.8 billion of such shares,
securities, rights, warrants or options (valued at their fair market value
as of the date of the agreement to make such acquisition) in any period of
twelve consecutive months following the date hereof to fund, in whole or in
part, the cost of any acquisition or acquisitions permitted under clause
(viii) below, following reasonable notice to the Company of its intention
to take such action, and (C) pursuant to the terms of the Agreement and
Plan of Merger dated as of January 4, 1998, by and among Southern New
England Telecommunications Corporation ("SNET"), SBC and SBC(CT) Sub, Inc.
a Connecticut corporation and a whollyowned subsidiary of SBC (the "SNET
Agreement"), which issuances of SBC capital stock shall not be included in
calculating the $4.8 billion of permissible issuances, deliveries, sales or
encumbrances, or require notice to the Company, pursuant to clause (B)
above;
(viii) neither it nor any of its Subsidiaries
shall spend in excess of $4.8 billion in the aggregate in any period of
twelve consecutive months following the date hereof to acquire any
business, whether by merger, consolidation, purchase of property or assets
or otherwise (valuing any noncash consideration at its fair market value as
of the date of the agreement for such acquisition); provided, however, that
no such acquisition would prevent, materially delay or materially impair
its ability to consummate the transactions contemplated by this Agreement;
provided, further, that the SNET Agreement and the transactions
contemplated thereby shall not be subject to the terms of the foregoing
restriction. Notwithstanding the foregoing, neither it nor any of its
Subsidiaries shall acquire any business the acquisition of which would
subject SBC and its Subsidiaries following the consummation of the Merger
to any Commercial Mobile Radio Service spectrum aggregation limit
restriction pursuant to the provisions of 47 C.F.R. Section 20.6 or place
SBC and its Subsidiaries following the consummation of the Merger in
violation of the Cellular Cross Ownership limits contained in 47 C.F.R.
Section 22.942; provided, that, the SNET Agreement and the transactions
contemplated thereby shall not be subject to the terms of the foregoing
restriction. For purposes of this clause (viii), the amount spent with
respect to any acquisition shall be deemed to include the aggregate amount
of capital expenditures that the Company is obligated to make at any time
or plans to make as a result of such acquisition within two years after the
date of acquisition;
(ix) neither it nor any of its Subsidiaries
shall enter any business other than the telecommunications business and
those businesses traditionally associated with the telecommunications
business; and
(x) neither it nor any of its Subsidiaries shall
authorize or enter into an agreement to do any of the foregoing.
(c) SBC and the Company agree that any written approval
obtained under this Section 6.1 may be relied upon by the other party if
signed by the Chief Executive Officer or another executive officer of the
other party.
6.2. Acquisition Proposals. (a) The Company agrees that neither
it nor any of its Subsidiaries shall, and that it shall direct and use its
best efforts to cause its and its Subsidiaries' employees, agents and
representatives (including any investment banker, attorney or accountant
retained by it or any of its Subsidiaries) (the Company, its Subsidiaries
and their officers, directors, employees, agents and representatives being
the "Company Representatives") not to, directly or indirectly, initiate,
solicit, encourage or otherwise facilitate any inquiries or the making of
any proposal or offer with respect to a merger, reorganization, share
exchange, consolidation or similar transaction involving, or any purchase
of, or tender offer for, any of the assets of it or any of its Subsidiaries
or its voting securities if, as a result of such transaction, (i) the
stockholders of the Company would not hold more than 50% of the voting
securities of the surviving corporation or its ultimate parent, (ii) the
directors of the Company would not constitute a majority of the board of
directors of the surviving corporation or its ultimate parent, or (iii)
another Person would acquire more than 50% of the assets of the Company and
its Subsidiaries (any such proposal or offer being hereinafter referred to
as a "Company Acquisition Proposal"). The Company further agrees that
neither it nor any of its Subsidiaries shall, and that it shall direct and
use its best efforts to cause the Company Representatives not to, directly
or indirectly, have any discussion with or provide any confidential
information or data to any Person relating to a Company Acquisition
Proposal or engage in any negotiations concerning a Company Acquisition
Proposal, or otherwise facilitate any effort or attempt to make or
implement a Company Acquisition Proposal; provided, however, that nothing
contained in this Agreement shall prevent either the Company or the Company
Representatives from (A) complying with Rule 14e-2 promulgated under the
Exchange Act with regard to a Company Acquisition Proposal; (B) engaging in
any discussions or negotiations with or providing any information to, any
Person in response to an unsolicited bona fide written Company Acquisition
Proposal by any such Person; or (C) recommending such an unsolicited bona
fide written Company Acquisition Proposal to the stockholders of the
Company if and only to the extent that, in such case referred to in clause
(B) or (C), (i) the Board of Directors of the Company concludes in good
faith (after consultation with its financial advisor) that such Company
Acquisition Proposal is reasonably capable of being completed, taking into
account all legal, financial, regulatory and other aspects of the proposal
and the Person making the proposal, and would, if consummated, result in a
transaction more favorable to the Company's stockholders from a financial
point of view than the transaction contemplated by this Agreement (any such
more favorable Company Acquisition Proposal being referred to in this
Agreement as a "Superior Company Proposal"), (ii) the Board of Directors of
the Company determines in good faith after consultation with outside legal
counsel that such action is necessary for the Board of Directors to comply
with its fiduciary duty under applicable law and (iii) prior to providing
any information or data to any Person in connection with a Company
Acquisition Proposal by any such Person, the Board of Directors of the
Company shall receive from such Person a confidentiality agreement in
customary form; provided, that such confidentiality agreement shall not
contain terms that prevent the Company from complying with its obligations
under this Section 6.2.
(b) SBC agrees that neither it nor any of its
Subsidiaries shall, and that it shall direct and use its best efforts to
cause its and its Subsidiaries' employees, agents and representatives
(including any investment banker, attorney or accountant retained by it or
any of its Subsidiaries) (SBC, its Subsidiaries and their officers,
directors, employees, agents and representatives being the "SBC
Representatives") not to, directly or indirectly, initiate, solicit,
encourage or otherwise facilitate any inquiries or the making of any
proposal or offer with respect to a merger, reorganization, share exchange,
consolidation or similar transaction involving, or any purchase of, or
tender offer for, all or any assets of it or any of its Subsidiaries or its
voting securities if, as a result of such transaction, (i) the stockholders
of SBC would not hold more than 50% of the voting securities of the
surviving corporation or its ultimate parent, (ii) the directors of SBC
would not constitute a majority of the board of directors of the surviving
corporation or its ultimate parent, or (iii) another Person would acquire
more than 50% of the assets of SBC and its Subsidiaries (any such proposal
or offer being hereinafter referred to as a "SBC Acquisition Proposal").
SBC further agrees that neither it nor any of its Subsidiaries nor any of
the officers and directors of it or its Subsidiaries shall, and that it
shall direct and use its best efforts to cause the SBC Representatives not
to, directly or indirectly, have any discussion with or provide any
confidential information or data to any Person relating to a SBC
Acquisition Proposal or engage in any negotiations concerning a SBC
Acquisition Proposal, or otherwise facilitate any effort or attempt to make
or implement a SBC Acquisition Proposal; provided, however, that nothing
contained in this Agreement shall prevent either SBC or the SBC
Representatives from (A) complying with Rule 14e-2 promulgated under the
Exchange Act with regard to a SBC Acquisition Proposal; (B) engaging in any
discussions or negotiations with or providing any information to, any
Person in response to an unsolicited bona fide written SBC Acquisition
Proposal by any such Person; or (C) recommending such an unsolicited bona
fide written SBC Acquisition Proposal to the stockholders of SBC if and
only to the extent that, in such cases referred to in clause (B) or (C),
(i) the Board of Directors of SBC concludes in good faith (after
consultation with its financial advisor) that such SBC Acquisition Proposal
is reasonably capable of being completed, taking into account all legal,
financial, regulatory and other aspects of the proposal and the Person
making the proposal, and would, if consummated, result in a transaction
more favorable to SBC or SBC's stockholders from a financial point of view
than the transaction contemplated by this Agreement (any such more
favorable SBC Acquisition Proposal being referred to herein as a "Superior
SBC Proposal"), (ii) the Board of Directors of SBC determines in good faith
after consultation with outside legal counsel that such action is necessary
for the Board of Directors to comply with its fiduciary duty under
applicable law and (iii) prior to providing any information or data to any
Person in connection with a SBC Acquisition Proposal by any such Person,
the Board of Directors of SBC shall receive from such Person a
confidentiality agreement in customary form; provided, that, such
confidentiality agreement shall not contain terms that prevent SBC from
complying with its obligations under this Section 6.2.
(c) The Company and SBC each agrees that it will
immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any parties conducted heretofore with
respect to any Company Acquisition Proposal or SBC Acquisition Proposal, as
the case may be. The Company and SBC each agrees that it will take the
necessary steps to promptly inform the individuals or entities referred to
in the first sentence of paragraphs (a) and (b), respectively, of the
obligations undertaken in Section 6.2(a) or (b), as the case may be. The
Company and SBC each agrees that it will notify the other immediately if
any such inquiries, proposals or offers are received by, any such
information is requested from, or any such discussions or negotiations are
sought to be initiated or continued with, any of its representatives
indicating, in connection with such notice, the name of such Person and the
terms and conditions of any proposals or offers, and thereafter shall
inform the other of any material modification of the terms of any such
proposal or offer or the withdrawal thereof. The Company and SBC each also
agrees that it will promptly request each Person that has heretofore
executed a confidentiality agreement in connection with its consideration
of any Company Acquisition Proposal or any SBC Acquisition Proposal, as the
case may be, to return all confidential information heretofore furnished to
such Person by or on behalf of it or any of its Subsidiaries.
6.3. Information Supplied. The Company and SBC each agrees, as
to itself and its Subsidiaries, that none of the information supplied or to
be supplied by it or its Subsidiaries for inclusion or incorporation by
reference in (i) the Registration Statement on Form S-4 to be filed with
the SEC by SBC in connection with the issuance of shares of SBC Common
Stock in the Merger (including the joint proxy statement and prospectus
(the "Prospectus/Proxy Statement") constituting a part thereof) (the "S-4
Registration Statement") will, at the time the S-4 Registration Statement
becomes effective under the Securities Act, and (ii) the Prospectus/Proxy
Statement and any amendment or supplement thereto will, at the date of
mailing to stockholders and at the times of the meetings of stockholders of
the Company and SBC to be held in connection with the Merger, in any such
case, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading. If at any time prior to the Effective Time any
information relating to SBC or the Company, or any of their respective
affiliates, officers or directors, should be discovered by SBC or the
Company which should be set forth in an amendment or supplement to either
the S4 Registration Statement or the Prospectus/Proxy Statement, so that
any of such documents would not include any misstatement of a material fact
or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, the party which discovers such
information shall promptly notify the other parties hereto and an
appropriate amendment or supplement describing such information shall be
promptly filed with the SEC and, to the extent required by law,
disseminated to the stockholders of the Company and SBC.
6.4. Stockholders Meetings. The Company will take, in
accordance with applicable law and its certificate of incorporation and
by-laws, all action necessary to convene a meeting of holders of Company
Shares (the "Company Stockholders Meeting") as promptly as practicable
after the S-4 Registration Statement is declared effective to consider and
vote upon the adoption of this Agreement. SBC will take, in accordance with
applicable law and its certificate of incorporation and by-laws, all action
necessary to convene a meeting of holders of the SBC Common Stock (the "SBC
Stockholders Meeting", and either the SBC Stockholders Meeting or the
Company Stockholders Meeting, a "Stockholders Meeting") as promptly as
practicable after the S-4 Registration Statement is declared effective to
consider and vote upon the approval of the issuance of SBC Common Stock
required to be issued pursuant to Article IV. Subject to fiduciary
obligations under applicable law and the terms of this Agreement, the
Company's Board of Directors shall recommend that the stockholders of the
Company adopt this Agreement and thereby approve the transactions
contemplated hereby and shall take all lawful action to solicit such
adoption, and SBC's Board of Directors shall recommend that the
stockholders of SBC approve the issuance of SBC Common Stock required to be
issued pursuant to Article IV and shall take all lawful action to solicit
such approval.
6.5. Filings; Other Actions; Notification. (a) SBC and the
Company shall promptly prepare and file with the SEC the Prospectus/Proxy
Statement, and SBC shall prepare and file with the SEC the S-4 Registration
Statement as promptly as practicable. SBC and the Company each shall use
all reasonable best efforts to have the S-4 Registration Statement declared
effective under the Securities Act as promptly as practicable after such
filing, and promptly thereafter mail the Prospectus/Proxy Statement to the
respective stockholders of each of the Company and SBC. SBC shall also use
all reasonable best efforts to obtain prior to the effective date of the
S-4 Registration Statement all necessary state securities law or "blue sky"
permits and approvals required in connection with the Merger and to
consummate the other transactions contemplated by this Agreement and will
pay all expenses incident thereto.
(b) The Company and SBC each shall use all reasonable
best efforts to cause (x) the Merger to qualify for "pooling of interests"
accounting treatment and (y) to be delivered to the other party and its
directors a letter of its independent auditors, dated (i) the date on which
the S-4 Registration Statement shall become effective and (ii) the Closing
Date, and addressed to the other party and its directors, in form and
substance customary for "comfort" letters delivered by independent public
accountants in connection with registration statements similar to the S-4
Registration Statement.
(c) The Company and SBC shall cooperate with each other
and use (and shall cause their respective Subsidiaries to use) all their
respective reasonable best efforts to take or cause to be taken all
actions, and do or cause to be done all things, necessary, proper or
advisable on its part under this Agreement and applicable Laws to
consummate and make effective the Merger and the other transactions
contemplated by this Agreement as soon as practicable, including preparing
and filing as promptly as practicable all documentation to effect all
necessary applications, notices, petitions, filings and other documents and
to obtain as promptly as practicable all consents, registrations,
approvals, permits and authorizations required to be obtained from any
third party and/or any Governmental Entity in connection with the execution
and delivery of this Agreement and the consummation of the Merger and the
other transactions contemplated hereby; provided, however, that nothing in
this Section 6.5 shall require, or be construed to require, SBC or the
Company to agree to, or comply with, any conditions to the granting of any
such consent, registration, approval, permit or authorization by any
Governmental Entity if compliance with such conditions, individually or in
the aggregate, would be reasonably likely to have a Material Adverse Effect
on the Surviving Corporation or SBC following the Effective Time (it being
understood that, for this purpose only, materiality shall be determined by
reference to the trading market equity value of SBC prior to the
consummation of the Merger and after taking into account (i) any adverse
effects reasonably likely to arise from any restrictions on the ability of
the Surviving Corporation or SBC or any of their respective Subsidiaries to
conduct its operations as currently conducted or as proposed as of the date
of this Agreement to be conducted resulting from complying with the
conditions to or from the grant of any such consent, registration,
approval, permit or authorization, (ii) any benefits reasonably likely to
be realized by SBC on a consolidated basis (other than those operational
benefits reasonably likely to be realized directly from the consummation of
the Merger) resulting from complying with the conditions to or from the
grant of any such consent, registration, approval, permit or authorization,
and (iii) any proceeds resulting from any divestiture required by a
Governmental Entity as a condition to its granting any such consent,
registration, approval, permit or authorization); provided, further, that
any divestiture by either SBC or the Company or any of their respective
Subsidiaries reasonably required to cause the Surviving Corporation to be
in compliance with the Commercial Mobile Radio Service spectrum aggregation
limits established by the FCC in 47 C.F.R. Section 20.6 and the Cellular
Cross Ownership limits contained in 47 C.F.R. Section 22.942 shall be
deemed not to have any adverse effect on either the Surviving Corporation
or SBC following the Effective Time (a "Regulatory Material Adverse
Effect"). Subject to applicable laws relating to the exchange of
information, SBC and the Company shall have the right to review in advance,
and to the extent practicable each will consult the other on, all the
information relating to SBC or the Company, as the case may be, and any of
their respective Subsidiaries, that appear in any filing made with, or
written materials submitted to, any third party and/or any Governmental
Entity in connection with the Merger and the other transactions
contemplated by this Agreement. In exercising the foregoing right, each of
the Company and SBC shall act reasonably and as promptly as practicable.
(d) The Company and SBC each shall, upon request by the
other, furnish the other with all information concerning itself, its
Subsidiaries, directors, officers and stockholders and such other matters
as may be reasonably necessary or advisable in connection with the
Prospectus/Proxy Statement, the S-4 Registration Statement or any other
statement, filing, notice or application made by or on behalf of SBC, the
Company or any of their respective Subsidiaries to any third party and/or
any Governmental Entity in connection with the Merger and the transactions
contemplated by this Agreement.
(e) The Company and SBC each shall keep the other
apprised of the status of matters relating to completion of the
transactions contemplated hereby, including promptly furnishing the other
with copies of notice or other communications received by SBC or the
Company, as the case may be, or any of its Subsidiaries, from any third
party and/or any Governmental Entity with respect to the Merger and the
other transactions contemplated by this Agreement. Each of the Company and
SBC shall give prompt notice to the other of any change that is reasonably
likely to result in a Material Adverse Effect on it or of any failure of
any condition to the other party's obligations to effect the Merger set
forth in Article VII.
6.6. Access; Consultation. (a) Upon reasonable notice, and
except as may otherwise be required by applicable law, the Company and SBC
each shall (and shall cause its Subsidiaries to) afford the SBC
Representatives or the Company Representatives, as the case may be,
reasonable access, during normal business hours throughout the period prior
to the Effective Time, to its properties, books, contracts and records and,
during such period, each shall (and shall cause its Subsidiaries to)
furnish promptly to the other all information concerning its business,
properties and personnel as may reasonably be requested, provided that no
investigation pursuant to this Section shall affect or be deemed to modify
any representation or warranty made by the Company, SBC or Merger Sub
hereunder, and provided, further, that the foregoing shall not require the
Company or SBC to permit any inspection, or to disclose any information,
that in the reasonable judgment of the Company or SBC, as the case may be,
would result in the disclosure of any trade secrets of third parties or
violate any of its obligations with respect to confidentiality if the
Company or SBC, as the case may be, shall have used all reasonable best
efforts to obtain the consent of such third party to such inspection or
disclosure. All requests for information made pursuant to this Section
shall be directed to an executive officer of the Company or SBC, as the
case may be, or such Person as may be designated by any such executive
officer, as the case may be.
(b) From the date hereof to the Effective Time, SBC and
the Company agree to consult with each other on a regular basis on a
schedule to be agreed with regard to their respective operations.
(c) From the date hereof to the Effective Time, the
Company agrees to notify SBC in advance of any issuance by the Company or
any of its Subsidiaries of any longterm debt in excess of $50 million,
Company Preferred Shares or Company Preference Shares.
6.7. Affiliates. (a) Each of the Company and SBC shall deliver
to the other a letter identifying all Persons whom such party believes to
be, at the date of the Stockholders Meeting of such party, "affiliates" of
such party for purposes of applicable interpretations regarding use of the
poolingofinterests accounting method and, in the case of "affiliates" of
the Company, for purposes of Rule 145 under the Securities Act. Each of the
Company and SBC shall use all reasonable best efforts to cause each Person
who is identified as an "affiliate" in the letter referred to above to
deliver to SBC on or prior to the date of the Stockholders Meeting of such
party a written agreement, in the form attached hereto as Exhibit A, in the
case of affiliates of the Company (the "Company Affiliate's Letter"), and
Exhibit B, in the case of affiliates of SBC (the "SBC Affiliate's Letter").
Prior to the Effective Time, each of the Company and SBC shall use all
reasonable best efforts to cause each additional Person who is identified
as an "affiliate" after the date of the relevant Stockholders Meeting to
execute the applicable written agreement as set forth in this Section 6.7,
as soon as practicable after such Person is identified.
(b) If the Merger would otherwise qualify for
poolingofinterests accounting treatment, shares of SBC Common Stock issued
to such affiliates of the Company in exchange for Company Shares shall not
be transferable until such time as financial results covering at least 30
days of combined operations of SBC and the Company shall have been
published within the meaning of Section 201.01 of the SEC's Codification of
Financial Reporting Policies, regardless of whether each such affiliate has
provided the written agreement referred to in this Section, except to the
extent permitted by, and in accordance with, SEC Accounting Series Release
135 and SEC Staff Accounting Bulletins 65 and 76. Any Company Shares held
by any such affiliate shall not be transferable, regardless of whether such
affiliate has provided the applicable written agreement referred to in this
Section, if such transfer, either alone or in the aggregate with other
transfers by affiliates, would preclude SBC's ability to account for the
business combination to be effected by the Merger as a pooling of
interests. The Company shall not register the transfer of any Certificate,
unless such transfer is made in compliance with the foregoing.
6.8. Stock Exchange Listing and De-listing. SBC shall use its
best efforts to cause the shares of SBC Common Stock to be issued in the
Merger to be approved for listing on the New York Stock Exchange ("NYSE"),
subject to official notice of issuance, prior to the Closing Date. The
Surviving Corporation shall use its best efforts to cause the Company
Shares to be de-listed from the NYSE and the Chicago, Boston, Pacific and
Philadelphia stock exchanges and de-registered under the Exchange Act as
soon as practicable following the Effective Time.
6.9. Publicity. The initial press release with respect to the
Merger shall be a joint press release and thereafter the Company and SBC
shall consult with each other prior to issuing any press releases or
otherwise making public announcements with respect to the Merger and the
other transactions contemplated by this Agreement and prior to making any
filings with any third party and/or any Governmental Entity (including any
national securities exchange) with respect thereto, except as may be
required by law or by obligations pursuant to any listing agreement with or
rules of any national securities exchange.
6.10. Benefits.
(a) Stock Options.
(i) At the Effective Time, each outstanding option to
purchase Company Shares (a "Company Option") under the Company Stock Plans,
whether vested or unvested, shall be deemed to constitute an option to
acquire, on the same terms and conditions as were applicable under such
Company Option (except to the extent such terms and conditions are altered
in accordance with their terms as a result of the consummation of the
transactions contemplated by this Agreement), the same number of shares of
SBC Common Stock as the holder of such Company Option would have been
entitled to receive pursuant to the Merger had such holder exercised such
Company Option in full immediately prior to the Effective Time (rounded
down to the nearest whole number) (a "Substitute Option"), at an exercise
price per share (rounded up to the nearest whole cent)(the "Substitute
Option Price") equal to (y) the aggregate exercise price for the Company
Shares otherwise purchasable pursuant to such Company Option divided by (z)
the number of full shares of SBC Common Stock deemed purchasable pursuant
to such Company Option in accordance with the foregoing. For each
Substitute Option substituted for a Company Option that included a right
under certain circumstances to receive dividend equivalents in the form of
stock units ("Company Stock Units"), all Company Stock Units credited to
the account of the holder of such Substitute Option at the Effective Time
shall, as of the Effective Time, be deemed to constitute a number of stock
units, each of which shall represent one share of SBC Common Stock ("SBC
Stock Units"), equal to the number of shares of SBC Common Stock the holder
of such Substitute Option would have been entitled to receive pursuant to
this Agreement had such Company Stock Units been distributed to such holder
in full immediately prior to the Effective Time and thereafter SBC Stock
Units shall continue to be credited to the account of the holder of such
Substitute Option to the same extent and on the same terms and conditions
as they would have under the Company Option for which the Substitute Option
was substituted (except that the record dates and dividend amounts shall be
the record dates and dividend amounts for SBC Common Stock), and all such
SBC Stock Units shall be distributed at the same times and in the same
manner as the Company Stock Units would have been distributed had the
Substitute Option not been substituted for the Company Option (except that
the option price used to determine if the SBC Stock Units can be
distributed shall be the Substitute Option Price). At or prior to the
Effective Time, the Company shall make all necessary arrangements with
respect to the Company Stock Plans to permit the assumption of the
unexercised Company Options by SBC pursuant to this Section and as soon as
practicable after the Effective Time SBC shall use its best efforts to
register under the Securities Act on Form S-8 or other appropriate form
(and use its best efforts to maintain the effectiveness thereof) shares of
SBC Common Stock issuable pursuant to all Substitute Options.
(ii) Effective at the Effective Time, SBC shall assume
each Company Option in accordance with the terms of the Company Stock Plan
under which it was issued and the stock option agreement by which it is
evidenced. As promptly as practicable after the Effective Time, the Company
shall deliver to the participants in the Stock Plans appropriate notices
setting forth such participants' rights pursuant to such assumed Company
Options.
(b) Employee Benefits. SBC agrees that it shall cause
the Surviving Corporation for at least two years after the Effective Time
to provide or cause to be provided to employees of the Company and its
Subsidiaries compensation and benefit plans that are no less favorable, in
the aggregate, than the Company Compensation and Benefit Plans disclosed in
Section 6.10(b) of the Company Disclosure Letter; provided, however, if
during this period SBC implements any widespread increase or decrease in
benefits under compensation and benefit plans or in the cost thereof to
participants under compensation and benefit plans applicable to employees
of SBC and its Subsidiaries (other than the Surviving Corporation and its
Subsidiaries), the Surviving Corporation shall proportionately adjust the
benefits under the Company's compensation and benefit plans or the cost
thereof to participants, and provided, further with respect to employees
who are subject to collective bargaining, all benefits shall be provided
only in accordance with the applicable collective bargaining agreement. At
or prior to the Effective Time, the Company shall make all necessary
arrangements to cause any Company Share units under the Company's
Compensation and Benefit Plans to be converted into share units with
respect to SBC Common Stock by multiplying the Company Shares subject to
such Company Share units by the Exchange Ratio. SBC shall, and shall cause
the Surviving Corporation to, honor, pursuant to their terms, all employee
benefit obligations existing at the Closing Date to current and former
employees under the Company Compensation and Benefit Plans.
6.11. Expenses. Whether or not the Merger is consummated, all
costs and expenses incurred in connection with this Agreement and the
Merger and the other transactions contemplated by this Agreement shall be
paid by the party incurring such expense, except that expenses incurred in
connection with the filing fee for the S-4 Registration Statement and
printing and mailing the Prospectus/Proxy Statement and the S-4
Registration Statement and the filing fee under the HSR Act shall be shared
equally by SBC and the Company.
6.12. Indemnification; Directors' and Officers' Insurance. (a)
From and after the Effective Time, SBC shall, and shall cause the Surviving
Corporation to, indemnify and hold harmless each present and former
director and officer of the Company (when acting in such capacity)
determined as of the Effective Time (the "Indemnified Parties"), against
any costs or expenses (including reasonable attorneys' fees), judgments,
fines, losses, claims, damages or liabilities (collectively, "Costs")
incurred in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative,
arising out of or pertaining to matters existing or occurring at or prior
to the Effective Time, whether asserted or claimed prior to, at or after
the Effective Time, to the fullest extent permitted under Delaware law (and
the Surviving Corporation shall also advance expenses as incurred to the
fullest extent permitted under applicable law, provided the Person to whom
expenses are advanced provides an undertaking to repay such advances if it
is ultimately determined that such Person is not entitled to
indemnification).
(b) Any Indemnified Party wishing to claim indemnification
under paragraph (a) of this Section 6.12, upon learning of any such claim,
action, suit, proceeding or investigation, shall promptly notify the
Surviving Corporation thereof, but the failure to so notify shall not
relieve the Surviving Corporation of any liability it may have to such
Indemnified Party if such failure does not materially prejudice the
Surviving Corporation. In the event of any such claim, action, suit,
proceeding or investigation (whether arising before or after the Effective
Time), (i) the Surviving Corporation shall have the right to assume the
defense thereof and the Surviving Corporation shall not be liable to such
Indemnified Parties for any legal expenses of other counsel or any other
expenses subsequently incurred by such Indemnified Parties in connection
with the defense thereof, except that if the Surviving Corporation elects
not to assume such defense or counsel for the Indemnified Parties advises
that there are issues which raise conflicts of interest between the
Surviving Corporation and the Indemnified Parties, the Indemnified Parties
may retain counsel satisfactory to them, and the Surviving Corporation
shall pay all reasonable fees and expenses of such counsel for the
Indemnified Parties promptly as statements therefor are received; provided,
however, that the Surviving Corporation shall be obligated pursuant to this
paragraph (b) to pay for only one firm of counsel for all Indemnified
Parties in any jurisdiction (unless there is a conflict of interest as
provided above) (ii) the Indemnified Parties will cooperate in the defense
of any such matter and (iii) the Surviving Corporation shall not be liable
for any settlement effected without its prior written consent.
(c) The Surviving Corporation shall maintain a policy
of officers' and directors' liability insurance for acts and omissions
occurring prior to the Effective Time ("D&O Insurance") with coverage in
amount and scope at least as favorable as the Company's existing directors'
and officers' liability insurance coverage for a period of six years after
the Effective Time; provided, however, if the existing D&O Insurance
expires, is terminated or cancelled, or if the annual premium therefor is
increased to an amount in excess of 175% of the last annual premium paid
prior to the date hereof (the "Current Premium"), in each case during such
six year period, the Surviving Corporation will use its best efforts to
obtain D&O Insurance in an amount and scope as great as can be obtained for
the remainder of such period for a premium not in excess (on an annualized
basis) of 175% of the Current Premium.
(d) If SBC or any of its successors or assigns (i)
shall consolidate with or merge into any other corporation or entity and
shall not be the continuing or surviving corporation or entity of such
consolidation or merger or (ii) shall transfer all or substantially all of
its properties and assets to any individual, corporation or other entity,
then and in each such case, proper provisions shall be made so that the
successors and assigns of SBC shall assume all of the obligations set forth
in this Section.
(e) The provisions of this Section are intended to be
for the benefit of, and shall be enforceable by, each of the Indemnified
Parties, their heirs and their representatives.
6.13. Takeover Statute. If any Takeover Statute is or may
become applicable to the Merger or the other transactions contemplated by
this Agreement, each of SBC and the Company and its Board of Directors
shall grant such approvals and take such actions as are necessary so that
such transactions may be consummated as promptly as practicable on the
terms contemplated by this Agreement or by the Merger and otherwise act to
eliminate or minimize the effects of such statute or regulation on such
transactions. The Company will cause the Rights Agent to promptly execute
the Rights Amendment.
6.14. Dividends. The Company shall coordinate with SBC the
declaration, setting of record dates and payment dates of dividends on
Company Shares so that holders of Company Shares do not receive dividends
on both Company Shares and SBC Common Stock received in the Merger in
respect of any calendar quarter or fail to receive a dividend on either
Company Shares or SBC Common Stock received in the Merger in respect of any
calendar quarter.
6.15. Confidentiality. The Company and SBC each acknowledges
and confirms that it has entered into a Confidentiality and NonDisclosure
Agreement, dated April 8, 1997 (the "Confidentiality Agreement"), that
information provided by each party hereto to the other party hereto
pursuant to this Agreement is subject to the terms of the Confidentiality
Agreement and that the Confidentiality Agreement shall remain in full force
and effect in accordance with its terms, except that notwithstanding any
provision to the contrary contained in the Confidentiality Agreement, the
Confidentiality Agreement shall not terminate until the earlier to occur of
the following: (i) the Effective Time and (ii) the expiration of two years
following the date of any termination of this Agreement pursuant to Article
VIII.
6.16. Control of the Company's Operations. Nothing contained in
this Agreement shall give SBC or the Company, directly or indirectly,
rights to control or direct the operations of the other prior to the
Effective Time. Prior to the Effective Time, each of SBC and the Company
shall exercise, consistent with the terms and conditions of this Agreement,
complete control and supervision of its operations.
ARTICLE VII
Conditions
7.1. Conditions to Each Party's Obligation to Effect the
Merger. The respective obligation of each party to effect the Merger is
subject to the satisfaction or waiver at or prior to the Effective Time of
each of the following conditions:
(a) Stockholder Approval. This Agreement shall have
been duly adopted by holders of Company Shares constituting the Company
Requisite Vote and have been duly adopted by the sole stockholder of Merger
Sub, and the issuance of SBC Common Stock required to be issued pursuant to
Article IV shall have been duly approved by the holders of shares of SBC
Common Stock constituting the SBC Requisite Vote;
(b) NYSE Listing. The shares of SBC Common Stock
issuable to the Company stockholders pursuant to this Agreement shall have
been authorized for listing on the NYSE upon official notice of issuance.
(c) Governmental Consents. The waiting period
applicable to the consummation of the Merger under the HSR Act shall have
expired or been terminated and all material Company Required Consents and
material SBC Required Consents from or with any Governmental Entity shall
have been made or obtained pursuant to a Final Order, free of any
conditions (other than conditions that are not reasonably likely, either
individually or in the aggregate, to have a Regulatory Material Adverse
Effect). For the purposes of this Agreement, "Final Order" means an action
or decision that has been granted as to which (a) no request for a stay or
any similar request is pending, no stay is in effect, the action or
decision has not been vacated, reversed, set aside, annulled or suspended
and any deadline for filing such a request that may be designated by
statute or regulation has passed, (b) no petition for rehearing or
reconsideration or application for review is pending and the time for the
filing of any such petition or application has passed, (c) no Governmental
Entity has undertaken to reconsider the action on its own motion and the
time within which it may effect such reconsideration has passed and (d) no
appeal is pending (including other administrative or judicial review) or in
effect and any deadline for filing any such appeal that may be specified by
statute or rule has passed, which in any such case (a), (b), (c) or (d) is
reasonably likely to result in vacating, reversing, setting aside,
annulling, suspending or modifying such action or decision (in any such
case in a manner which would have a Regulatory Material Adverse Effect
following the Effective Time).
(d) Laws and Order. No Governmental Entity of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered
any Law (whether temporary, preliminary or permanent) that is in effect and
restrains, enjoins or otherwise prohibits consummation of the Merger or the
other transactions contemplated by this Agreement or that is, individually
or in the aggregate with all other such Laws, reasonably likely to have a
Material Adverse Effect on SBC or the Company (collectively, an "Order"),
and no Governmental Entity shall have instituted any proceeding, or, in the
case of a federal Governmental Entity, threatened in writing to institute
any proceeding, seeking any such Order.
(e) S-4. The S-4 Registration Statement shall have
become effective under the Securities Act. No stop order suspending the
effectiveness of the S-4 Registration Statement shall have been issued, and
no proceedings for that purpose shall have been initiated or be threatened
by the SEC.
(f) Accountants' Letters. SBC and the Company shall
have received the "comfort" letters described in Section 6.5(b). SBC and
the Company shall have received letters from their respective independent
public accounting firms to the effect that the Merger will qualify for
"pooling of interests" accounting treatment.
(g) Blue Sky Approvals. SBC shall have received all
state securities and "blue sky" permits and approvals necessary to
consummate the transactions contemplated hereby.
7.2. Conditions to Obligations of SBC and Merger Sub. The
obligations of SBC and Merger Sub to effect the Merger are also subject to
the satisfaction or waiver by SBC at or prior to the Effective Time of the
following conditions:
(a) Representations and Warranties. The representations
and warranties of the Company set forth in this Agreement (i) to the extent
qualified by Material Adverse Effect shall be true and correct and (ii) to
the extent not qualified by Material Adverse Effect shall be true and
correct, except that this clause (ii) shall be deemed satisfied so long as
any failures of such representations and warranties to be true and correct,
taken together, do not have a Material Adverse Effect on the Company, in
each case (i) and (ii), as of the Closing Date as though made on and as of
the Closing Date (except to the extent such representations and warranties
speak as of an earlier date), and SBC shall have received a certificate
signed on behalf of the Company by an executive officer of the Company to
such effect.
(b) Performance of Obligations of the Company. The
Company shall have performed in all material respects all obligations
required to be performed by it under this Agreement at or prior to the
Closing Date, and SBC shall have received a certificate signed on behalf of
the Company by an executive officer of the Company to such effect.
(c) Consents Under Agreements. The Company shall have
obtained the consent or approval of each Person whose consent or approval
shall be required in order to consummate the transactions contemplated by
this Agreement under any Contract to which the Company or any of its
Subsidiaries is a party, except those for which the failure to obtain such
consent or approval, individually or in the aggregate, is not reasonably
likely to have, a Material Adverse Effect on the Company.
(d) Tax Opinion. SBC shall have received the opinion of
Sullivan & Cromwell, counsel to SBC, dated the Closing Date, to the effect
that the Merger will be treated for Federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code, and that
each of SBC, Merger Sub and the Company will be a party to that
reorganization within the meaning of Section 368(b) of the Code; it being
understood that in rendering such opinion, such counsel shall be entitled
to rely on certain customary representations and assumptions.
7.3. Conditions to Obligation of the Company. The obligation of
the Company to effect the Merger is also subject to the satisfaction or
waiver by the Company at or prior to the Effective Time of the following
conditions:
(a) Representations and Warranties. The representations
and warranties of SBC and Merger Sub set forth in this Agreement (i) to the
extent qualified by Material Adverse Effect shall be true and correct, and
(ii) to the extent not qualified by Material Adverse Effect shall be true
and correct, except that this clause (ii) shall be deemed satisfied so long
as any failures of such representations and warranties to be true and
correct, taken together, do not have a Material Adverse Effect on SBC, in
each case (i) and (ii), as of the Closing Date as though made on and as of
the Closing Date (except to the extent such representations and warranties
speak as of an earlier date), and the Company shall have received a
certificate signed on behalf of SBC by an executive officer of SBC to such
effect.
(b) Performance of Obligations of SBC and Merger Sub.
Each of SBC and Merger Sub shall have performed in all material respects
all obligations required to be performed by it under this Agreement at or
prior to the Closing Date, and the Company shall have received a
certificate signed on behalf of SBC and Merger Sub by an executive officer
of SBC to such effect.
(c) Tax Opinion. The Company shall have received the
opinion of Skadden, Arps, Slate, Meagher & Flom (Illinois), counsel to the
Company, dated the Closing Date, to the effect that the Merger will be
treated for Federal income tax purposes as a reorganization within the
meaning of Section 368(a) of the Code, and that each of SBC, Merger Sub and
the Company will be a party to that reorganization within the meaning of
Section 368(b) of the Code; it being understood that in rendering such
opinion, such counsel shall be entitled to rely on certain customary
representations and assumptions.
ARTICLE VIII
Termination
8.1. Termination by Mutual Consent. This Agreement may be
terminated and the Merger may be abandoned at any time prior to the
Effective Time, whether before or after the approval by stockholders of the
Company and SBC referred to in Section 7.1(a), by mutual written consent of
the Company and SBC, by action of their respective Boards of Directors.
8.2. Termination by Either SBC or the Company. This Agreement
may be terminated and the Merger may be abandoned at any time prior to the
Effective Time by action of the Board of Directors of either SBC or the
Company if (i) the Merger shall not have been consummated by July 31, 1999
(the "Termination Date"), whether such date is before or after the date of
approval by the stockholders of the Company or SBC; provided, however, that
if SBC or the Company determines that additional time is necessary in
connection with obtaining a SBC Required Consent or a Company Required
Consent from or with any Governmental Entity, the Termination Date may be
extended for up to 60 calendar days at any one time by SBC or the Company
from time to time by written notice to the other party up to a date not
beyond March 31, 2000, which date shall be deemed to be the Termination
Date, (ii) the adoption of this Agreement by the Company's stockholders
required by Section 7.1(a) shall not have occurred at a meeting duly
convened therefor or at any adjournment or postponement thereof, (iii) the
approval of SBC's stockholders necessary for the issuance of SBC Common
Stock required to be issued pursuant to Article IV as required by Section
7.1(a) shall not have been obtained at a meeting duly convened therefor or
at any adjournment or postponement thereof, or (iv) any Order permanently
restraining, enjoining or otherwise prohibiting consummation of the Merger
shall become final and non-appealable (whether before or after the adoption
or approval by the stockholders of the Company or SBC, as the case may be);
provided, that the right to terminate this Agreement pursuant to clause (i)
above shall not be available to any party that has breached in any material
respect its obligations under this Agreement in any manner that shall have
proximately contributed to the failure of the Merger to be consummated.
8.3. Termination by the Company. This Agreement may be
terminated and the Merger may be abandoned at any time prior to the
Effective Time, whether before or after the adoption of this Agreement by
the stockholders of the Company referred to in Section 7.1(a), by action of
the Board of Directors of the Company:
(a) if (i) the Board of Directors of the Company approves
entering into a binding written agreement concerning a transaction that
constitutes a Superior Company Proposal and the Company notifies SBC in
writing that the Company desires to enter into such agreement, (ii) SBC
does not make, within ten calendar days after receipt of the Company's
written notification of its desire to enter into a binding agreement for a
Superior Company Proposal, the terms of which are specified in such notice,
an offer that the Board of Directors of the Company believes, in good faith
after consultation with its financial advisors, is at least as favorable,
from a financial point of view, to the stockholders of the Company as the
Superior Company Proposal, and (iii) the Company prior to such termination
pays to SBC in immediately available funds any fees required to be paid
pursuant to Section 8.5(b). The Company agrees to notify SBC promptly if
its desire to enter into a written agreement referred to in its
notification shall change at any time after giving such notification; or
(b) if (i) the Board of Directors of SBC shall have
withdrawn or adversely modified its approval of this Agreement or its
recommendation to the stockholders of SBC that such stockholders approve the
issuance of SBC Common Stock required to be issued pursuant to Article IV or
failed to reconfirm such recommendation within fifteen business days after a
written request by the Company to do so; provided that such a request is made
after the Board of Directors of SBC or any SBC Representative shall have taken
any of the actions that would be proscribed by Section 6.2(b) but for the
exception therein allowing certain actions to be taken pursuant to clause
(B) or (C) of the proviso thereof with respect to any bona fide written SBC
Acquisition Proposal that has not been withdrawn or rejected by the Board
of Directors of SBC, (ii) there has been a material breach by SBC or Merger
Sub of any representation, warranty, covenant or agreement contained in
this Agreement which (x) would result in a failure of a condition set forth
in Section 7.3(a) or 7.3(b) and (y) cannot be or is not cured prior to the
Termination Date, or (iii) SBC or any SBC Representative shall take any of
the actions that would be proscribed by Section 6.2(b) but for the
exception therein allowing certain actions to be taken pursuant to clause
(B) or (C) of the proviso thereof (other than any such actions taken
pursuant to such clause (B) with respect to any bona fide written SBC
Acquisition Proposal (received after the date hereof that was not solicited
by SBC after the date hereof) during the Initial 50 Day Period, if such SBC
Acquisition Proposal is received during the first through the 30th days of
the Initial 50 Day Period or during the 20 calendar day period following
receipt of such SBC Acquisition Proposal by SBC if such SBC Acquisition
Proposal is received during the 31st through 50th days of the Initial 50
Day Period, in each case if, and only if, SBC receives such SBC Acquisition
Proposal during the Initial 50 Day Period). For purposes of this Agreement,
the "Initial 50 Day Period" shall mean the 50 calendar day period
commencing with the first calendar day after the day on which this
Agreement shall have been filed by SBC or the Company with the SEC as an
exhibit to a Current Report on Form 8K under the Exchange Act.
8.4. Termination by SBC. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time, before
or after the approval by the stockholders of SBC referred to in Section
7.1(a), by action of the Board of Directors of SBC:
(a) If (i) the Board of Directors of
SBC approves entering into a binding written agreement concerning a
transaction that constitutes a Superior SBC Proposal and SBC notifies the
Company in writing that SBC desires to enter into such agreement, (ii) the
Company does not make, within ten days after receipt of SBC's written
notification of its desire to enter into a binding agreement for a Superior
SBC Proposal, the terms of which are specified in such notice, an offer
that the Board of Directors of SBC believes, in good faith after
consultation with its financial advisors, is at least as favorable, from a
financial point of view, to the stockholders of SBC as the Superior SBC
Proposal, and (iii) SBC prior to such termination pays to the Company in
immediately available funds any fees required to be paid pursuant to
Section 8.5(c). SBC agrees to notify the Company promptly if its desire to
enter into a written agreement referred to in its notification shall change
at any time after giving such notification.
(b) If (i) the Board of Directors of the Company shall
have withdrawn or adversely modified its approval or recommendation to the
Company's stockholders of this Agreement, or failed to reconfirm such
recommendation within fifteen business days after a written request by SBC
to do so; provided that such a request is made after the Board of Directors
of the Company or any Company Representative shall have taken any of the
actions that would be proscribed by Section 6.2(a) but for the exception
therein allowing certain actions to be taken pursuant to clause (B) or (C)
of the proviso thereof with respect to any bona fide written Company
Acquisition Proposal that has not been withdrawn or rejected by the Board
of Directors of the Company, or (ii) there has been a material breach by
the Company of any representation, warranty, covenant or agreement
contained in this Agreement which (x) would result in a failure of a
condition set forth in Section 7.2(a) or 7.2(b) and (y) cannot be or is not
cured prior to the Termination Date, or (iii) if the Company or any Company
Representative shall take any of the actions that would be proscribed by
Section 6.2(a) but for the exception therein allowing certain actions to be
taken pursuant to clause (B) or (C) of the proviso thereof (other than any
such actions taken pursuant to such clause (B) with respect to any bona
fide written Company Acquisition Proposal (received after the date hereof
that was not solicited by the Company after the date hereof) during the
Initial 50 Day Period, if such Company Acquisition Proposal is received
during the first through the 30th days of the Initial 50 Day Period or
during the 20 calendar day period following receipt of such Company
Acquisition Proposal by the Company if such Company Acquisition Proposal is
received during the 31st through 50th days of the Initial 50 Day Period, in
each case if, and only if, the Company receives such Company Acquisition
Proposal during the Initial 50 Day Period).
8.5. Effect of Termination and Abandonment. (a) In the event of
termination of this Agreement and the abandonment of the Merger pursuant to
this Article VIII, this Agreement (other than as set forth in Section 9.1)
shall become void and of no effect with no liability on the part of any
party hereto (or of any of its directors, officers, employees, agents,
legal or financial advisors or other representatives); provided, however,
no such termination shall relieve any party hereto from any liability for
damages resulting from any willful and intentional breach of this Agreement
(to the extent any such damages exceed any Termination Fee that may have
been paid pursuant to Section 8.5(b) or 8.5(c)) or from any obligation to
pay, if applicable, the Termination Fee pursuant to Section 8.5(b) or
8.5(c).
(b) In the event that (i) a bona fide Company Acquisition
Proposal shall have been made to the Company and made known to stockholders
generally or have been made directly to stockholders generally or any
Person shall have publicly announced an intention (whether or not
conditional) to make a bona fide Company Acquisition Proposal and such
Company Acquisition Proposal or announced intention shall not have been
withdrawn prior to the Company's Stockholders Meeting and thereafter this
Agreement is terminated by either SBC or the Company pursuant to Section
8.2(ii) and within nine months after such termination the Company shall
have entered into an agreement to consummate a transaction that would
constitute a Company Acquisition Proposal if it were the subject of a
proposal, or (ii) this Agreement is terminated (x) by the Company pursuant
to Section 8.3(a) or (y) by SBC pursuant to Section 8.4(b)(i), (b)(ii)
(solely with respect to a willful and intentional breach) or (b)(iii), then
the Company shall promptly, but in no event later than two days after the
date of such termination (except as otherwise provided in Section 8.3(a)),
or, in the case of termination pursuant to Section 8.2(ii), two days after
the relevant agreement is entered into, pay SBC a fee equal to $1.2 billion
(the "Termination Fee"), which amount shall be exclusive of any expenses to
be paid pursuant to Section 6.11, payable by wire transfer of same day
funds. The Company acknowledges that the agreements contained in this
Section 8.5(b) are an integral part of the transactions contemplated by
this Agreement, and that, without these agreements, SBC and Merger Sub
would not enter into this Agreement; accordingly, if the Company fails to
pay promptly the amount due pursuant to this Section 8.5(b), and, in order
to obtain such payment, SBC or Merger Sub commences a suit which results in
a judgment against the Company for the fee set forth in this paragraph (b),
the Company shall pay to SBC or Merger Sub its costs and expenses
(including attorneys' fees) in connection with such suit, together with
interest on the amount of the fee at the prime rate of Citibank N.A. in
effect on the date such payment was required to be made.
(c) In the event that (i) a bona fide SBC Acquisition
Proposal shall have been made to SBC and made known to stockholders generally
or shall have been made directly to stockholders generally or any Person shall
have publicly announced an intention (whether or not conditional) to make a
bona fide SBC Acquisition Proposal and such SBC Acquisition Proposal or
announced intention shall not have been withdrawn prior to the SBC
Stockholder Meeting and thereafter this Agreement is terminated by the
Company or SBC pursuant to Section 8.2(iii) and within nine months after
such termination SBC shall have entered into an agreement to consummate a
transaction that would constitute a SBC Acquisition Proposal if it were the
subject of a proposal, or (ii) this Agreement is terminated (x) by SBC
pursuant to Section 8.4(a) or (y) by the Company pursuant to Section
8.3(b)(i), (b)(ii) (solely with respect to a willful and intentional
breach) or (b)(iii), then SBC shall promptly, but in no event later than
two days after the date of such termination (except as otherwise provided
in Section 8.4(a)), or, in the case of a termination pursuant to Section
8.2(iii), two (2) days after the relevant agreement is entered into, pay
the Company a fee equal to the Termination Fee, which amount shall be
exclusive of any expenses to be paid pursuant to Section 6.11, payable by
wire transfer of same day funds. SBC acknowledges that the agreements
contained in this Section 8.5(c) are an integral part of the transactions
contemplated by this Agreement, and that, without these agreements, the
Company would not enter into this Agreement; accordingly, if SBC fails to
pay promptly the amount due pursuant to this Section 8.5(c), and, in order
to obtain such payment, the Company commences a suit which results in a
judgment against SBC for the fee set forth in this paragraph (c), SBC shall
pay to the Company its costs and expenses (including attorneys' fees) in
connection with such suit, together with interest on the amount of the fee
at the prime rate of Citibank N.A. in effect on the date such payment was
required to be made.
ARTICLE IX
Miscellaneous and General
9.1. Survival. This Article IX and the agreements of the
Company, SBC and Merger Sub contained in Sections 6.10 (Benefits), 6.11
(Expenses) and 6.12 (Indemnification; Directors' and Officers' Insurance)
shall survive the consummation of the Merger. This Article IX (other than
Section 9.2 (Modification or Amendment), Section 9.3 (Waiver of Conditions)
and Section 9.13 (Assignment)) and the agreements of the Company, SBC and
Merger Sub contained in Section 6.11 (Expenses), Section 6.15
(Confidentiality) and Section 8.5 (Effect of Termination and Abandonment)
shall survive the termination of this Agreement. All other representations,
warranties, covenants and agreements in this Agreement shall not survive
the consummation of the Merger or the termination of this Agreement.
9.2. Modification or Amendment. Subject to the provisions of
applicable law, at any time prior to the Effective Time, the parties hereto
may modify or amend this Agreement, by written agreement executed and
delivered by duly authorized officers of the respective parties.
9.3. Waiver of Conditions. (a) Any provision of this Agreement
may be waived prior to the Effective Time if, and only if, such waiver is
in writing and signed by the party against whom the waiver is to be
effective.
(b) No failure or delay by any party in exercising any
right, power or privilege hereunder shall operate as a waiver thereof nor
shall any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power or privilege.
Except as otherwise herein provided, the rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
9.4. Counterparts. This Agreement may be executed in any number
of counterparts, each such counter part being deemed to be an original
instrument, and all such counterparts shall together constitute the same
agreement.
9.5. GOVERNING LAW AND VENUE; WAIVER OF JURY
TRIAL.
(a) THIS AGREEMENT SHALL BE DEEMED TO BE MADE IN AND IN ALL
RESPECTS SHALL BE INTERPRETED, CONSTRUED AND GOVERNED BY AND IN ACCORDANCE
WITH THE LAW OF THE STATE OF DELAWARE WITHOUT REGARD TO THE CONFLICT OF LAW
PRINCIPLES THEREOF. The parties hereby irrevocably submit to the
jurisdiction of the Federal courts of the United States of America and the
state courts located in the State of Delaware solely in respect of the
interpretation and enforcement of the provisions of this Agreement and of
the documents referred to in this Agreement, and in respect of the
transactions contemplated hereby, and hereby waive, and agree not to
assert, as a defense in any action, suit or proceeding for the
interpretation or enforcement hereof or of any such document, that it is
not subject thereto or that such action, suit or proceeding may not be
brought or is not maintainable in said courts or that the venue thereof may
not be appropriate or that this Agreement or any such document may not be
enforced in or by such courts, and the parties hereto irrevocably agree
that all claims with respect to such action or proceeding shall be heard
and determined in such a Federal or state court. The parties hereby consent
to and grant any such court jurisdiction over the Person of such parties
and over the subject matter of such dispute and agree that mailing of
process or other papers in connection with any such action or proceeding in
the manner provided in Section 9.6 or in such other manner as may be
permitted by law, shall be valid and sufficient service thereof.
(b) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY
WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND
DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING
TO THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH
PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT
SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER, (ii) EACH SUCH PARTY UNDERSTANDS AND HAS CONSIDERED THE
IMPLICATIONS OF THIS WAIVER, (iii) EACH SUCH PARTY MAKES THIS WAIVER
VOLUNTARILY, AND (iv) EACH SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS
AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN
THIS SECTION 9.5.
9.6. Notices. Notices, requests, instructions or other
documents to be given under this Agreement shall be in writing and shall be
deemed given, (i) when sent if sent by facsimile, provided that the fax is
promptly confirmed by telephone confirmation thereof, (ii) when delivered,
if delivered personally to the intended recipient, and (iii) one business
day later, if sent by overnight delivery via a national courier service,
and in each case, addressed to a party at the following address for such
party:
if to SBC or Merger Sub
SBC Communications Inc.
175 E. Houston
San Antonio, Texas 78205
Attention: James D. Ellis, Esq.
Fax: (210) 3512298
with a copy to:
Benjamin F. Stapleton, Esq.
Sullivan & Cromwell
125 Broad Street
New York, NY 10004
Fax: (212) 558-3588
if to the Company
Ameritech Corporation
30 S. Wacker Drive
Chicago, Illinois 60606
Attention: Chairman of the Board, President and
Chief Executive Officer
Fax: (312) 2070892
with copies to:
Ameritech Corporation
30 S. Wacker Drive
Chicago, Illinois 60606
Attention: Executive Vice President and
General Counsel
Fax: (312) 2071540
and
Ameritech Corporation
30 S. Wacker Drive
Chicago, Illinois 60606
Attention: Assistant General Counsel
Transactions
Fax: (312) 2070086
and
Charles W. Mulaney, Jr., Esq.
Skadden, Arps, Slate, Meagher & Flom (Illinois)
333 W. Wacker Dr.
Chicago, Illinois 60606
Fax: (312) 4070411
or to such other persons or addresses as may be designated in writing by
the party to receive such notice as provided above.
9.7. Entire Agreement. This Agreement (including any exhibits
hereto), the Confidentiality Agreement, the Company Disclosure Letter and
the SBC Disclosure Letter constitute the entire agreement, and supersede
all other prior agreements, understandings, representations and warranties
both written and oral, among the parties, with respect to the subject
matter hereof. EACH PARTY HERETO AGREES THAT, EXCEPT FOR THE
REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS AGREEMENT, NEITHER SBC AND
MERGER SUB NOR THE COMPANY MAKES ANY OTHER REPRESENTATIONS OR WARRANTIES,
AND EACH HEREBY DISCLAIMS ANY OTHER REPRESENTATIONS OR WARRANTIES MADE BY
ITSELF OR ANY OF ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, FINANCIAL AND
LEGAL ADVISORS OR OTHER REPRESENTATIVES, WITH RESPECT TO THE EXECUTION AND
DELIVERY OF THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY,
NOTWITHSTANDING THE DELIVERY OR DISCLOSURE TO THE OTHER OR THE OTHER'S
REPRESENTATIVES OF ANY DOCUMENTATION OR OTHER INFORMATION WITH RESPECT TO
ANY ONE OR MORE OF THE FOREGOING.
9.8. No Third Party Beneficiaries. Except as provided in
Section 6.12 (Indemnification; Directors' and Officers' Insurance), this
Agreement is not intended to confer upon any Person other than the parties
hereto any rights or remedies hereunder.
9.9. Obligations of SBC and of the Company. Whenever this
Agreement requires a Subsidiary of SBC to take any action, such requirement
shall be deemed to include an undertaking on the part of SBC to cause such
Subsidiary to take such action. Whenever this Agreement requires a
Subsidiary of the Company to take any action, such requirement shall be
deemed to include an undertaking on the part of the Company to cause such
Subsidiary to take such action and, after the Effective Time, on the part
of the Surviving Corporation to cause such Subsidiary to take such action.
9.10. Severability. The provisions of this Agreement shall be
deemed severable and the invalidity or unenforceability of any provision
shall not affect the validity or enforceability or the other provisions
hereof. If any provision of this Agreement, or the application thereof to
any Person or any circumstance, is invalid or unenforceable, (a) a suitable
and equitable provision shall be substituted therefor in order to carry
out, so far as may be valid and enforceable, the intent and purpose of such
invalid or unenforceable provision and (b) the remainder of this Agreement
and the application of such provision to other Persons or circumstances
shall not be affected by such invalidity or unenforceability, nor shall
such invalidity or unenforceability affect the validity or enforceability
of such provision, or the application thereof, in any other jurisdiction.
9.11. Interpretation. The table of contents and headings herein
are for convenience of reference only, do not constitute part of this
Agreement and shall not be deemed to limit or otherwise affect any of the
provisions hereof. Where a reference in this Agreement is made to a Section
or Exhibit, such reference shall be to a Section of or Exhibit to this
Agreement unless otherwise indicated. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed
to be followed by the words "without limitation."
9.12. Captions. The Article, Section and paragraph captions
herein are for convenience of reference only, do not constitute part of
this Agreement and shall not be deemed to limit or otherwise affect any of
the provisions hereof.
9.13. Assignment. This Agreement shall not be assignable by
operation of law or otherwise; provided, however, that SBC may designate
prior to the Effective Time, by written notice to the Company, another
wholly-owned direct or indirect Subsidiary to be a party to the Merger in
lieu of Merger Sub, in which event all references herein to Merger Sub
shall be deemed references to such other Subsidiary (except with respect to
representations and warranties made herein with respect to Merger Sub as of
the date hereof) and all representations and warranties made herein with
respect to Merger Sub as of the date hereof shall also be made with respect
to such other subsidiary as of the date of such designation. Any assignment
in contravention of the preceding sentence shall be null and void.
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officers of the parties hereto as of the
date first written above.
AMERITECH CORPORATION
By: /s/ Richard C. Notebaert
_______________________________
Name: Richard C. Notebaert
Title: Chairman of the the Board
and Chief Executive Officer
SBC COMMUNICATIONS INC.
By: /s/ Edward E. Whitacre, Jr.
______________________________
Name: Edward E. Whitacre, Jr.
Title: Chairman of the Board
and Chief Executive Officer
SBC DELAWARE, INC.
By: /s/ Edward E. Whitacre, Jr.
_______________________________
Name: Edward E. Whitacre, Jr.
Title: President
EXHIBIT A
FORM OF COMPANY AFFILIATE'S LETTER
_______, 1998
SBC Communications Inc.
175 E. Houston
San Antonio, TX 78205
Ladies and Gentlemen:
The undersigned is a holder of shares of Common Stock, $1.00 par value per
share ("Company Common Stock"), of Ameritech Corporation, a Delaware
corporation (the "Company"). Pursuant to the terms of that certain
Agreement and Plan of Merger, dated as of May 10, 1998, among the Company,
SBC Communications Inc., a Delaware corporation ("SBC"), and SBC
(Delaware), Inc., a Delaware corporation and a whollyowned subsidiary of
SBC ("Merger Sub"), Merger Sub will be merged with and into the Company and
the Company will become a wholly owned subsidiary of SBC (the "Merger"). In
connection with the Merger, the undersigned, as a holder of Company Common
Stock, will be entitled to receive Common Stock, par value $1.00 per share,
of SBC (the "Securities") in exchange for the shares of Company Common
Stock held by the undersigned at the effective time of the Merger.
The undersigned acknowledges that the undersigned may be deemed an
"affiliate" of the Company within the meaning of Rule 145 ("Rule 145")
promulgated under the Securities Act of 1933, as amended (the "Act"),
and/or as such term is used in and for purposes of Accounting Series
Release Nos. 130 and 135, as amended, of the Securities and Exchange
Commission (the "Commission"), although nothing contained herein shall be
construed as an admission of such status.
If in fact the undersigned were an affiliate of the Company under the Act,
the undersigned's ability to sell, assign or transfer any Securities
received by the undersigned in exchange for any shares of Company Common
Stock pursuant to the Merger may be restricted unless such sale, assignment
or transfer is registered under the Act or an exemption from such
registration is available. The undersigned understands that such exemptions
are limited and the undersigned has obtained advice of counsel as to the
nature and conditions of such exemptions, including information with
respect to the applicability to the sale of such Securities of Rules 144
and 145(d) promulgated under the Act.
The undersigned hereby represents to and covenants with SBC that it will
not sell, assign or transfer any Securities received by the undersigned in
exchange for shares of Company Common Stock pursuant to the Merger except
(i) pursuant to an effective registration statement under the Act, (ii) by
a sale made in conformity with the volume and other limitations of Rule 145
(and otherwise in accordance with Rule 144 under the Act, if the
undersigned is an affiliate of SBC and if so required at the time) or (iii)
in a transaction which, in the opinion of independent counsel reasonably
satisfactory to the Company or as described in a "noaction" or interpretive
letter from the Staff of the Commission reasonably satisfactory to SBC, is
not required to be registered under the Act.
The undersigned understands that SBC is under no obligation to register the
sale, assignment, transfer or other disposition of the Securities by the
undersigned or on behalf of the undersigned under the Act or to take any
other action necessary in order to make compliance with an exemption from
such registration available solely as a result of the Merger.
In the event of a sale of Securities pursuant to Rule 145, the undersigned
will supply SBC with evidence of compliance with such Rule, in the form of
customary seller's and broker's Rule 145 representation letters or as SBC
may otherwise reasonably request. The undersigned understands that SBC may
instruct its transfer agent to withhold the transfer of any Securities
disposed of by the undersigned in a manner inconsistent with this letter.
The undersigned acknowledges and agrees that appropriate legends will be
placed on certificates representing Securities received by the undersigned
in the Merger or held by a transferee thereof, which legends will be
removed (i) by delivery of substitute certificates upon receipt of a letter
from the staff of the Commission, or an opinion of counsel in form and
substance reasonably satisfactory to SBC, to the effect that such legends
are no longer required for the purposes of the Act and the rules and
regulations of the Commission promulgated thereunder, (ii) in the event of
a sale of the Securities which has been registered under the Act or made in
conformity with the provisions of Rule 145.
The undersigned further represents to and covenants with SBC that (i) the
undersigned will not, during the 30 days prior to the effective time of the
Merger sell, transfer or otherwise dispose of, or reduce any risk relative
to, any securities of the Company or SBC, and (ii) the undersigned will
not, after the effective time of the Merger, sell, transfer or otherwise
dispose of, or reduce any risk relative to, the Securities, whether
received by the undersigned in the Merger or otherwise, until after such
time as financial results covering at least 30 days of postMerger
operations of SBC (including the combined operations of the Company and
SBC) have been published by SBC in the form of a quarterly earnings report,
an effective registration statement filed with the Commission, a report to
the Commission on Form 10K, 10Q or 8K, or any other public filing or
announcement which includes such results of operations, except in the cases
of clauses (i) and (ii) of this paragraph to the extent permitted by, and
in accordance with, SEC Accounting Series Release 135 and SEC Staff
Accounting Bulletins 65 and 76 if and to the extent that such release and
bulletins remain in full force and effect at the relevant time.
I further understand and agree that this letter agreement shall apply to
all shares of Company Common Stock and Securities that I am deemed to
beneficially own pursuant to applicable federal securities law.
The undersigned acknowledges that it has carefully reviewed this letter and
understands the requirements hereof and the limitations imposed upon the
distribution, sale, transfer or other disposition of Securities.
Sincerely,
[NAME OF COMPANY AFFILIATE]
EXHIBIT B
FORM OF SBC AFFILIATE'S LETTER
_______, 1998
SBC Communications Inc.
175 E. Houston
San Antonio, TX 78205
Ladies and Gentlemen:
The undersigned is a holder of shares of Common Stock, par value $1.00 per
share (the "Securities"), of SBC Communications Inc., a Delaware
corporation ("SBC"). Pursuant to the terms of that certain Agreement and
Plan of Merger, dated as of May 10, 1998, among Ameritech Corporation, a
Delaware corporation (the "Company"), SBC and SBC Delaware, Inc., a
Delaware corporation and a whollyowned subsidiary of SBC ("Merger Sub"),
Merger Sub will be merged with and into the Company and the Company will
become a wholly owned subsidiary of SBC (the "Merger").
The undersigned acknowledges that the undersigned may be deemed an
"affiliate" of SBC as such term is used in and for purposes of Accounting
Series Release Nos. 130 and 135, as amended, of the Securities and Exchange
Commission (the "Commission"), although nothing contained herein shall be
construed as an admission of such status.
The undersigned hereby represents to and covenants with SBC that the
undersigned will not, during the 30 days prior to the effective time of the
Merger sell, transfer or otherwise dispose of, or reduce any risk relative
to, the Securities or any other shares of the capital stock of SBC until
after such time as financial results covering at least 30 days of
postMerger operations of SBC (including the combined operations of the
Company and SBC) have been published by SBC in the form of a quarterly
earnings report, an effective registration statement filed with the
Commission, a report to the Commission on Form 10K, 10Q or 8K, or any other
public filing or announcement which includes such results of operations,
except to the extent permitted by, and in accordance with, SEC Accounting
Series Release 135 and SEC Staff Accounting Bulletins 65 and 76 if and to
the extent that such release and bulletins remain in full force and effect
at the relevant time.
I further understand and agree that this letter agreement shall apply to
all Securities that I am deemed to beneficially own pursuant to applicable
federal securities law.
The undersigned acknowledges that the undersigned has carefully reviewed
this letter and understands the requirements hereof and the limitations
imposed upon the sale, transfer or other disposition of Securities.
Sincerely,
[NAME OF SBC AFFILIATE]
NEWS RELEASE
SBC COMMUNICATIONS AND AMERITECH TO MERGE
CREATES NATIONAL AND GLOBAL COMPETITOR:
A NEW KIND OF TELECOMMUNICATIONS COMPANY
SAN ANTONIO, TEXAS (May 11, 1998)--SBC Communications Inc.
(NYSE: SBC) and Ameritech Corporation (NYSE: AIT) have agreed to a $62
billion, industry-transforming merger that will create a new type of
telecommunications company with a "national-local" focus combined with
national and international service capabilities. The company will have the
assets, scope and strategies to compete against incumbent local
telecommunications companies, competitive local exchange carriers, long
distance companies and global competitors.
"The merger will enable the new SBC to accelerate and expand
telecommunications competition by entering 30 U.S. markets outside its
traditional 13-state local region (see attached list) so that the combined
company will serve customers in all the top 50 markets in the nation. In
addition, the new company will build on its growing international presence
to serve a worldwide market. We will provide a competitive, integrated mix
of local, long distance, Internet and high-speed data services providing
more choices, new and improved services, more competitive prices and more
convenience for millions of consumers, giving us the opportunity to create
significant value for our shareowners," said Edward E. Whitacre Jr.,
chairman and chief executive officer of SBC.
"This transaction will allow us to implement a 'national-local'
strategy in which we will offer local services across the country in
combination with major national and international operations," Whitacre
added. "It will transform us from a regional company to a new kind of
company that uses its premiere networks to focus on 'national-local' and
global markets. We will then be positioned to compete head-to-head with
incumbent local telephone companies, competitive local exchange carriers
(CLECs), data networks, long distance carriers and global competitors."
"We know we have the people, resources and the ability to make
our new company an unqualified success for our customers, our employees,
and our shareholders. We leap forward in terms of our ability to invest in
new technology and become a leading player in the global marketplace," said
Richard C. Notebaert, chairman and chief executive officer of Ameritech.
Ameritech shareholders will receive a fixed exchange ratio of
1.316 SBC shares for each share of Ameritech. Based upon closing prices as
of May 8, after adjusting for the exchange ratio, the combined companies'
value is $146 billion. The transaction will be a tax free, stock-for-stock
exchange and will be accounted for as a pooling of interests. The combined
company will be called SBC and will be approximately 56% owned by SBC's
existing shareowners and 44% by Ameritech's existing shareowners (ownership
percentages are prior to SBC completing its merger with SNET).
"The Telecommunications Act of 1996 helped open the door to a
period of rapid change in the telecommunications industry. But so far, it
has not created the level of competition that many expected," said
Notebaert.
"This merger is critical because it transforms us into a
company that has the size, scope and incentive to make the promise of the
Act a reality. This new company will be in the best position to serve our
customers in the evolving marketplace. We expect to see, in the next few
years, the emergence of integrated national and international operators.
Successful carriers will either be part of this group or more narrowly
focused niche players. Our combined company intends to be one of the
successful global operators," said Notebaert.
"This merger should be viewed as a welcomed development by
regulators," said Whitacre. "If they are looking for a truly potent way to
jump start competition, then approving this merger should be a clear
decision."
"We are going to take advantage of the best employee team, the
best customer service, and the best technology around," said Whitacre.
The executives noted several benefits of the merger at the
announcement:
o Consumers and businesses, large and small, in markets such as
New York, Baltimore/Washington, Boston, Atlanta, Denver,
Philadelphia, Miami, Phoenix and Seattle will benefit from a
new major alternative for all their telecommunications needs,
one brought to them by a company with local exchange
experience, marketing experience and advanced technology
products. The new company will pursue multiple market entry
strategies that include building, acquiring and partnering.
o Customers in the 13-state region already served by SBC and
Ameritech-which include half of the Fortune 500 companies-will
enjoy the best and most competitively priced product offerings
and services of each company.
o The new company will be able to serve customers in all the top
50 U.S. markets, increasing the potential customer base to 180
million people.
o Local competition in the 13-state region will be advanced as
SBC and Ameritech, the recognized leaders in interconnection
technology, create a uniform standard of technical excellence
for operational support systems available to competitors. The
new company will deliver products and services more efficiently
to retail and wholesale customers, enhancing competition in the
13-state region.
o The merged company's combined international assets, which include
operations in 19 countries in Europe, Asia, Africa, North
America and South America, coupled with its integrated
services, will allow it to follow customers wherever they go.
The combination will also result in significant opportunities
for revenue growth, technology development, cost synergies and other
benefits. "We expect to optimize costs through increased economies of scale
and scope, the elimination of duplicated expenditures and the adoption of
best practices in cost control," said Whitacre. "We expect to grow revenues
more rapidly than would have been possible independently both in our
existing service areas and in new markets. These synergies can be used to
integrate our two companies, improve our operations, benefit our customers
and fund expansion.
"The experience and knowledge we have gained from the very
successful integration of Pacific Telesis makes us very confident about our
ability to realize the potential financial and strategic benefits of the
combination with Ameritech. Going forward the transaction and strategy
announced today will diversify our sources of earnings and establish a
platform for sustainable future growth," Whitacre continued.
The anticipated cost synergies resulting from the merger will
not result in any net job reductions in the combined company. As a result
of growth in existing lines of business, out-of-region expansion and new
opportunities in data, long distance and other new services, the total
number of employees is expected to rise over the next few years.
In fact, SBC made a commitment to Ameritech that employment
levels in the five-state region will not be reduced due to the transaction,
as well as to:
o maintain Ameritech's headquarters in Chicago and its state
headquarters in its traditional states of Illinois, Indiana,
Michigan, Ohio and Wisconsin;
o continue to use the Ameritech name in each of its operating
states;
o continue to support economic development and education in
Ameritech's region consistent with its well-established
commitment; and
o continue Ameritech's historic levels of charitable
contributions and community activities.
After the transaction is completed, Whitacre will remain as
chairman and chief executive officer of SBC. Notebaert will remain as
chairman and chief executive officer of Ameritech. Upon closing of the
merger, SBC's board of directors will be expanded to include Notebaert and
four other current Ameritech directors.
The merger is subject to shareholder and regulatory approvals.
Since federal law prohibits ownership of overlapping wireless licenses, the
companies will divest certain cellular properties. "Given the size and
significance of the transaction we expect close scrutiny but ultimate
approval from regulatory authorities," said Whitacre. "Obviously, given the
paradigm shifting potential of this merger and the rapid changes in our
business, the sooner we can deliver the benefits of this merger to
consumers, the better. We recognize that we need the support of regulators
for this transaction to be approved. We are committed to listening to any
concerns they might raise, and to working with them to promptly resolve any
issues. We anticipate the transaction closing within a year," he continued.
Salomon Smith Barney acted as the financial advisor to SBC
Communications on the transaction. Goldman Sachs & Co. advised Ameritech.
# # # #
SBC Communications Inc. is a global leader in the telecommunications
industry, with nearly 34 million access lines and over 5.6 million wireless
customers across the United States, as well as investments in
telecommunications businesses in 10 countries. Under the Southwestern Bell,
Pacific Bell, Nevada Bell and Cellular One brands, SBC, through its
subsidiaries, offers a wide range of innovative services, including local
and long-distance telephone service, wireless communications, paging,
Internet access, and messaging, as well as telecommunications equipment,
and directory advertising and publishing. SBC (www.sbc.com) has more than
118,000 employees and reported 1997 revenues of $25 billion. SBC's equity
market value of $80 billion as of March 31, 1998, ranks it as one of the
largest telecommunications companies in the world.
Ameritech serves millions of customers in 50 states and 40 countries.
Ameritech provides a full range of communications services, including local
and long distance telephone, cellular, paging, security services, cable TV,
Internet service and more. One of the world's 100 largest companies,
Ameritech (www.ameritech.com) has 73,000 employees, 1 million shareowners
and nearly $28 billion in assets.
NEW MARKETS FOR THE NEW SBC
Below are the markets where the Below are the markets in which
new SBC plans to compete under SBC and Ameritech currently
the "National-Local" strategy, offer services, ranked by size:
ranked by size:
1. New York 1. Los Angeles (SBC)
2. Philadelphia 2. Chicago (AIT)
3. Boston 3. Detroit (AIT)
4. Washington 4. Dallas-Ft. Worth (SBC)
5. Miami-Ft. Lauderdale 5. Houston (SBC)
6. Atlanta 6. San Francisco/Oakland (SBC)
7. Minneapolis - St. Paul 7. San Diego (SBC)
8. Phoenix 8. St. Louis (SBC)
9. Baltimore 9. Cleveland (AIT)
10. Seattle - Everett 10. San Jose (SBC)
11. Denver - Boulder 11. Kansas City (SBC)
12. Pittsburgh 12. Sacramento (SBC)
13. Tampa - St. Petersburg 13. Milwaukee (AIT)
14. Portland 14. San Antonio (SBC)
15. Cincinnati 15. Indianapolis (AIT)
16. Salt Lake City - Ogden 16. Columbus, OH (AIT)
17. Orlando 17. Hartford/New Britain (SBC)
18. Buffalo 18. Oklahoma City (SBC)
19. New Orleans 19. Austin (SBC)
20. Nashville - Davidson 20. Dayton (AIT)
21. Memphis
22. Las Vegas
23. Norfolk - Virginia Beach
24. Rochester
25. Greensboro - Winston - Salem
26. Louisville
27. Birmingham
28. Honolulu
29. Providence - Warwick
30. Albany - Schenectady - Troy
