SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported):
April 1, 1996
Pacific Telesis Group
(Exact name of registrant as specified in its charter)
NEVADA 1-8609 94-2919931
(State or other (Commission (IRS Employer
jurisdiction File Number) Identification No.)
of incorporation)
130 Kearny Street
San Francisco, CA 94108
(Address of principal executive offices)
Registrant's telephone number, including area code:
415-394-3000
Item 5. Other Events.
The following information was included in a press
release issued by Pacific Telesis Group, a Nevada corporation
("Telesis"), on April 1, 1996:
SBC Communications Inc., a Delaware corporation ("SBC"),
and Telesis, today jointly announced that they have entered into
a definitive merger agreement (the "Merger Agreement") pursuant
to which SBC Communications (NV) Inc., a Nevada corporation and a
wholly-owned subsidiary of SBC, would be merged with and into
Telesis.
Under terms of the Merger Agreement, each share of
common stock, par value $.10 per share, of Telesis will be
converted into 0.733 shares of common stock, par value $1.00 per
share, of SBC (the "Common Stock"), subject to adjustment, as
described in the Merger Agreement. Under the Merger Agreement,
except for the dividend payable May 1, 1996, Telesis may not
pay a dividend in excess of 73.3% of SBC's dividend.
The transaction, which has been approved by the board
of directors of each company, will be accounted for as a pooling
of interests and be a tax-free reorganization. The Merger
Agreement is subject to certain regulatory approvals as well as
approval by the stockholders of each company at special meetings
expected to be held within the next four months.
The preceding is qualified in its entirety by reference
to the Merger Agreement which is attached hereto as an exhibit.
Item 7. Financial Statements and Exhibits.
(c) Exhibits
(2) Agreement and Plan of Merger among Pacific Telesis Group,
SBC Communications Inc. and SBC Communications (NV) Inc.,
dated as of April 1, 1996.
(99) Press Release, dated April 1, 1996, issued by SBC
Communications Inc. and Pacific Telesis Group.
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 hereunto duly authorized.
Pacific Telesis Group
Date: April 2, 1996 By: /s/ J. R. Moberg
J. R. Moberg
Executive Vice President
EXHIBIT INDEX
Exhibit
Number Description
(2) Agreement and Plan of Merger among Pacific Telesis Group,
SBC Communications Inc. and SBC Communications (NV) Inc.,
dated as of April 1, 1996.
(99) Press Release, dated April 1, 1996, issued by SBC
Communications Inc. and Pacific Telesis Group.
Exhibit 2
AGREEMENT AND PLAN OF MERGER
Among
PACIFIC TELESIS GROUP
SBC COMMUNICATIONS INC.
and
SBC COMMUNICATIONS (NV) INC.
Dated as of April 1, 1996
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (hereinafter called
this "Agreement"), dated as of April 1, 1996, among Pacific
Telesis Group, a Nevada corporation (the "Company"), SBC
Communications Inc., a Delaware corporation ("SBC"), and SBC
Communications (NV) Inc., a Nevada corporation and a wholly-
owned subsidiary of SBC ("Merger Sub," the Company and
Merger Sub sometimes being hereinafter collectively referred
to as the "Constituent Corporations.")
RECITALS
WHEREAS, the respective boards of directors of
each of SBC, Merger Sub and the Company have approved the
merger of Merger Sub with and into the Company (the
"Merger") and approved and adopted 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 regula
tions 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
Nevada, and the separate corporate existence of the Company
with all its rights, privileges, immunities, powers and
franchises shall continue unaffected by the Merger. The
Merger shall have the effects specified in the Nevada
Private Corporations Law (the "NPCL").
1.2. Closing. The closing of the Merger (the
"Closing") shall take place (i) at the offices of Pillsbury
Madison & Sutro LLP, San Francisco, California at 9:00 A.M.
on the third business day 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 satis
fied 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. As soon as practicable
following the Closing, the Company and SBC will cause
Articles of Merger (the "Articles of Merger") to be signed,
acknowledged and delivered for filing with the Secretary of
State of Nevada as provided in Section 92A.200 of the NPCL.
The Merger shall become effective at the time when the
Articles of Merger have been duly filed with the Secretary
of State of Nevada or such other time as shall be agreed
upon by the parties and set forth in the Articles of Merger
and in accordance with the NPCL (the "Effective Time").
ARTICLE II
Articles of Incorporation and By-Laws
of the Surviving Corporation
2.1. The Articles of Incorporation. The
articles of incorporation of the Company as in effect
immediately prior to the Effective Time shall be the
articles 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:
"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." and (ii) Article Fifth of the
Charter shall be amended to read in its entirety as follows:
"The governing board of this corporation shall be known as
the board of directors and its members shall be known as
directors, and the number of directors may from time to time
be increased or decreased by resolution of the board of
directors." The Articles of Merger shall set forth the
amendments to the articles of incorporation of the Surviving
Corporation described in this Section 2.1.
2.2. The By-Laws. The by-laws of the Company 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, Directors and Management
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 approxi
mately one-third of the SBC Board of Directors to be com
prised of directors selected by the SBC Board of Directors
in consultation with the Chief Executive Officer and Board
of Directors of the Company from among the members of the
Company's Board of Directors (the "Director Designees"), to
be appointed to the SBC Board of Directors, 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
as evenly as is possible among the classes of directors of
SBC.
3.4 Management. At the Effective Time of the
Merger, SBC shall cause Mr. Philip J. Quigley to be
appointed President and Chief Executive Officer of the
Surviving Corporation and Vice Chairman of the Board 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. Subject to Section 4.1(c)
and Section 4.2(d), each share of the Common Stock, par
value $0.10 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 the right to receive, and become exchangeable
for, the Exchange Ratio (as defined in Section 9.13) of a
share (the "Merger Consideration") of Common Stock, par
value $1 per share, of SBC ("SBC Common Stock"). 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 Common Stock pursuant to the SBC Rights Agreement (as
defined in Section 5.1(b)(i)), 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 each certificate
(a "Certificate") formerly representing any of such Company
Shares (other than Excluded Company Shares) shall thereafter
represent only the right to receive 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 Company Share issued
and outstanding immediately prior to the Effective Time and
owned by any of the SBC Companies or owned by the Company or
any direct or indirect subsidiary of the Company (other than
Company Shares that are in each case owned on behalf of
third parties), 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) Restricted Stock. Each Company Share issued and
outstanding immediately prior to the Effective Time that is
restricted under the Company's 1994 Stock Incentive Plan or
Restricted Stock Plan shall be converted into the right to
receive, and become exchangeable for a fraction of a share
of SBC Common Stock equal to the Exchange Ratio, having the
same restrictions, terms and conditions as were applicable
to such Company Share of restricted stock.
(d) Outside Directors Deferred Stock Unit Plan. Each
stock unit outstanding immediately prior to the Effective
Time under the Outside Directors' Deferred Stock Unit Plan
and representing one Company Share shall be converted into
the right to receive a stock unit representing a fraction of
a share of SBC Common Stock equal to the Exchange Ratio and
having the same terms and conditions as were applicable to
such stock unit before the Effective Time.
(e) 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 of a Certificate in
respect of Company Shares (other than holders of a
Certificate in respect of Excluded Company Shares) (i) 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, 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
the Certificates for (A) 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 surrender of a Certificate
for cancellation to the Exchange Agent together with such
letter of transmittal, duly executed, the holder of such
Certificate shall be entitled to receive in exchange
therefor (x) 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
plus (B) any unpaid non-stock 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 the Certificate so surrendered shall forthwith be
cancelled. No interest will be paid or accrued on any
amount payable upon due surrender of the Certificates. In
the event of a transfer of ownership of Company Shares that
is not registered in the transfer records of the Company, a
certificate representing the proper number of shares of SBC
Common Stock, together with a check for any cash to be paid
upon due surrender of the Certificate and any other divi
dends or distributions in respect thereof, may be issued
and/or paid to such a transferee if the Certificate formerly
representing such Company Shares is presented to the
Exchange Agent, 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
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 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
certificates for shares of SBC Common Stock in a name other
than that of the registered holder of the Certificate
surrendered, 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)) 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 issuable pursuant to this
Agreement. No dividends or other distributions in respect
of the SBC Common Stock shall be paid to any holder of any
unsurrendered Certificate until such Certificate is
surrendered for exchange in accordance with this Article IV
herein. Subject to the effect of applicable laws, following
surrender of any such Certificate, there shall be issued
and/or paid to the holder of the certificates representing
whole shares of SBC Common Stock issued in exchange
therefor, without interest, (A) at the time of such sur
render, 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. 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) Holders of unsurrendered Certificates 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, regardless of
whether such holders have exchanged their Certificates.
(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 a
cash payment in lieu thereof, which payment shall represent
such holder's proportionate interest in a share of SBC
Common Stock based on 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 the SBC with the Exchange Agent
(including the proceeds of any investments thereof) that
remains 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 com
plied 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 surrender of
their Certificates (or affidavits of loss in lieu thereof),
in each case, 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, the Exchange Agent will issue in exchange for
such lost, stolen or destroyed Certificate the shares of SBC
Common Stock, any unpaid dividends or other distributions
and any cash payment in lieu of a fractional share in
respect thereof issuable and/or payable pursuant to this
Article IV 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 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 92A.390 of the NPCL, 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), (e) and
(h)(i) 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), (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 qualifi
cation, 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 perform
ing 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 any Person, a material adverse effect on the
total enterprise value of such Person and its Subsidiaries,
taken as a whole, other than general changes in (A) the
telecommunications industry, (B) economic conditions or
(C) the securities markets that, in any of (A), (B) or (C),
affect the total enterprise value of such Person and its
Subsidiaries, taken as a whole, on the one hand, and the
other party and its Subsidiaries, on the other hand, substan
tially proportionately relative to the other party, 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 1,100,000,000 Company Shares, of
which 428,434,672 Company Shares were issued and outstanding
and 4,392,923 Company Shares were held in treasury as of the
close of business on March 29, 1996, and 50,000,000 shares
of Preferred Stock, par value $0.10 per share (the
"Preferred Shares"), of which no shares were outstanding as
of the close of business on March 29, 1996. All of the
outstanding Company Shares have been duly authorized and are
validly issued, fully paid and nonassessable. Other than
6,000,000 Preferred Shares, designated "Series A
Participating Preferred Stock", reserved for issuance
pursuant to the Rights Agreement, dated as of September 22,
1989, 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 or Preferred Shares reserved for issuance.
As of March 29, 1996, there were not more than 16,500,000
Company Shares that the Company was obligated to issue
pursuant to the Company's Supplemental Retirement and
Savings Plan for Salaried Employees, Supplemental Retirement
and Savings Plan for Nonsalaried Employees, 1994 Stock
Incentive Plan, Restricted Stock Plan, Shareholder Dividend
Reinvestment and Stock Purchase Plan, Nonemployee Director
Stock Option Plan, Non-employee Directors Stock Grant Plan,
Senior Management Long Term Incentive Plan and Stock Option
and Stock Appreciation Rights Plan (collectively the "Stock
Plans"). Each of the outstanding shares of capital stock or
other securities of each of the Company's "Significant
Subsidiaries" (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, 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 obliga
tions 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 ("Voting Debt").
(ii) The authorized capital stock of SBC consists of
1,100,000,000 shares of SBC Common Stock, of which
609,069,574 shares were issued and outstanding and
11,413,727 shares were held in treasury as of the close of
business on March 28, 1996, and 10,000,000 shares of
Preferred Stock, par value $1.00 per share (the "SBC
Preferred Shares"), of which no shares were outstanding as
of the close of business on March 28, 1996. All of the
outstanding shares of SBC Common Stock have been duly
authorized and are validly issued, fully paid and nonassess
able. SBC has no shares of SBC Common Stock or SBC
Preferred Shares reserved for issuance except that SBC has
reserved 8,000,000 SBC Preferred Shares for 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 March 28, 1996, there
were not more than 24,000,000 shares of SBC Common Stock
that SBC was obligated to issue pursuant to SBC's Senior
Management Long Term Incentive Plan, Senior Management
Incentive Award Deferral Plan, Restricted Stock Plan for Non-
Employee Directors, Stock Savings Program, 1994 Stock Option
Plan, 1996 Stock and Incentive Plan, 1995 Management Stock
Option Plan, Savings Plan and the Savings and Security 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 pre
emptive 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 the Com
pany or any of its Significant Subsidiaries, and no securi
ties 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 exer
cisable for securities having the right to vote) with the
stockholders of SBC on any matter ("SBC Voting Debt").
(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 approval 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 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 contem
plated hereby and (B) has received the opinion of its
financial advisors, Salomon Brothers Inc, 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 stockholder approval
necessary to permit the issuance of SBC Common Stock
required to be issued pursuant to Article IV (the "SBC
Requisite Vote") and the SBC Required Consents (as defined
in Section 5.1(d)), the Merger. This Agreement 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, Lazard
Freres & Co. LLC, in a customary form and to the effect that
the Merger Consideration to be paid by SBC in the Merger 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 filings and/or notices (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)
the necessary notices and, if any, approvals of the Federal
Communications Commission ("FCC") pursuant to the
Communications Act of 1934, as amended and (E) the necessary
notices and necessary approvals, if any, of the state and
foreign public utility commissions or similar state or
foreign regulatory bodies (each a "PUC") identified in its
respective Disclosure Letter pursuant to applicable state or
foreign laws regulating the telephone, mobile cellular,
paging, cable television or other telecommunications
business ("Utilities Laws") (such filings and/or notices of
SBC being the "SBC Required Consents" and of the Company
being the "Company Required Consents"), no notices, reports
or other filings 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 trans
actions 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 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, material
ly 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 its Contracts and Contracts of 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 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 delivered
to the other party, each registration statement, report,
proxy statement or information statement prepared by it
since December 31, 1995 (the "Audit Date"), including its
Annual Report on Form 10-K for the year ended December 31,
1995 in the form (including exhibits, annexes and any amend
ments 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 circum
stances 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 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 generally accepted accounting principles
("GAAP") consistently applied during the periods involved,
except as may be noted therein. Since December 31, 1992, 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 Securities Exchange Act of 1934.
(f) Absence of Certain Changes. Except as disclosed
in its Reports filed prior to the date hereof or as
expressly contemplated 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 Subsidi
aries, 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; or (iv) any change by it in accounting
principles, practices or methods. Since the Audit Date,
except as provided for herein, in the Company Disclosure
Letter or as disclosed in its Reports filed prior to the
date hereof, there has not been any increase in the
compensation payable or that could become payable by it or
any of its Subsidiaries to officers or key employees or any
amendment of any of its 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 knowledge of its executive officers, threatened
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 or mater
ially impair its ability to consummate the transactions
contemplated by this Agreement.
(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 it and
its Subsidiaries (its "Compensation and Benefit Plans") and
any trust agreements or insurance contracts forming a part
of such Compensation and Benefit Plans has been made
available by it to the other party prior to the date hereof
and each such Compensation and Benefit Plan is listed in
Section 5.1(h) of its respective Disclosure Letter.
(ii) All of its Compensation and Benefit Plans are 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 deter
mination letter from the Internal Revenue Service (the
"IRS"), 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 knowledge of its
executive officers, threatened 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 Compensation and Benefit Plans, except as set forth
in its Reports filed prior to the date hereof or as required
by applicable law.
(vii) The consummation of the Merger (or its
approval by its stockholders) and the other transactions
contemplated by this Agreement will not (x) entitle any of
its employees or directors or any employees of its
Subsidiaries to severance pay, directly or indirectly, upon
termination of employment, (y) accelerate the time of
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 its
Compensation and Benefit Plans or (z) result in any breach
or violation of, or a default under, any of its 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 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 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 Subsid
iaries' 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, individ
ually 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 contem
plated by this Agreement. Each of it and its Subsidiaries
has all permits, licenses, franchises, variances, exemp
tions, orders and other governmental authorizations, con
sents 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 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 or will take all appropriate and necessary
actions such that Sections 78.378 et seq. and 78.411 et seq.
of the NPCL will not have any effect on the Merger or the
other transactions contemplated by this Agreement. No other
"fair price," "moratorium," "control share acquisition" or
other similar anti-takeover statute or regulation (each a
"Takeover Statute") is, as of the date hereof, is applicable
to 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; (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 would prevent
SBC from accounting for the business combination to be
effected by the Merger as a "pooling-of-interests" 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 informa
tion 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 knowledge of its executive
officers, threatened, 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 with the effect that
neither SBC nor Merger Sub shall be deemed to be either an
(i) Acquiring Person or (ii) Adverse Person (as each 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 Salomon Brothers
Inc 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 Lazard Freres & Co.
LLC 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 and SBC
each covenants and agrees as to itself and its Subsidiaries
that, after the date hereof and prior to the Effective Time
(unless SBC or the Company, as the case may be, shall
otherwise approve in writing, which approval shall not be
unreasonably withheld or delayed, and except as otherwise
expressly contemplated by this Agreement or in its
respective Disclosure Letter or as 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 efforts to preserve its business
organization intact and maintain its existing relations and
goodwill with customers, suppliers, regulators, distribu
tors, 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
SBC Rights Agreement or the Rights Agreement, as the case
may be, other than, in the case of SBC, an amendment to the
certificate of incorporation of SBC for the purpose of
increasing the authorized number of shares of SBC Common
Stock as contemplated by SBC's March 12, 1996 Proxy
Statement; (B) split, combine, subdivide or reclassify its
outstanding shares of capital stock; (C) declare, set aside
or pay any dividend payable in cash, stock or property in
respect of any capital stock, other than (I) in the case of
the Company, the quarterly dividend declared on March 22,
1996, payable on May 1, 1996 to stockholders of record on
April 9, 1996 and per share regular quarterly cash dividends
thereafter not in excess of the Exchange Ratio multiplied by
the dividend per share of SBC Common Stock in such quarter,
and (II) in the case of SBC, regular quarterly cash and
dividends not in excess of $0.43 per share of SBC Common
Stock; or (D) repurchase, redeem or otherwise acquire,
except (I) in the case of the Company, in connection with
the Stock Plans and (II) in the case of SBC, in connection
with the SBC Stock Plans, or permit any of its Subsidiaries
to purchase or otherwise acquire, any shares of its capital
stock or any securities convertible into or exchangeable or
exercisable for any shares of its capital stock;
(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 Compensation and
Benefit Plans or increase the salary, wage, bonus or other
compensation of any directors, officers or employees except
(A) for grants or awards to directors, officers and
employees of it or its Subsidiaries under existing
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 compensation
and benefit increases and the provision of individual
Compensation of Benefit Plans consistent with past practice
for newly hired officers and employees and the adoption of
Compensation and Benefit Plans for employees of new
Subsidiaries in amounts and on terms consistent with past
practice) or (C) for actions necessary to satisfy existing
contractual obligations under Compensation and Benefit Plans
existing as of the date hereof; and
(v) neither it nor any of its Subsidiaries will
authorize, or enter into an agreement to do any of the fore
going.
(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 or the SBC Disclosure Letter
or as required by applicable Law):
(i) Neither SBC nor any of its Subsidiaries shall
issue any preferred stock or incur any indebtedness for
borrowed money or guarantee any such indebtedness if SBC
should reasonably anticipate that after such incurrence any
of SBC's or any of its Subsidiaries' outstanding senior
indebtedness would be rated BBB or lower by Standard &
Poor's;
(ii) Neither SBC nor any of its Subsidiaries shall make
any capital expenditures in any calendar year in an
aggregate amount in excess of 150% of the aggregate amount
of capital expenditures reflected in SBC's capital
expenditure budget for such year, a copy of which has been
provided to the Company;
(iii) Neither SBC 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) in public offerings for cash where the aggregate
proceeds to SBC are less than $1 billion in any calendar
year, (B) shares issuable pursuant to stock 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 in accordance with this
Agreement and shares issuable pursuant to such awards, and
(C) to fund the cost of any acquisition of a
telecommunications business, whether by merger,
consolidation, purchase of assets or otherwise;
(iv) Neither SBC nor any of its subsidiaries, other
than in transactions between themselves, shall sell or
otherwise transfer, directly or indirectly, any of its
indirect investment in AA shares of Telefonos de Mexico S.A.
de C.V.;
(v) Neither SBC nor any of its Subsidiaries shall
enter any business other than the telecommunications
business and those businesses traditionally associated with
the telecommunications business; and
(vi) Neither SBC nor any of its Subsidiaries shall
agree prior to the Effective Time to do any of the foregoing
after the Effective Time.
(c) 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 or the Company Disclosure Letter or as
required by applicable Law):
(i) Neither the Company nor any of its Subsidiaries
shall issue any preferred stock or incur any indebtedness
for borrowed money or guarantee any such indebtedness if the
Company should reasonably anticipate that after such
incurrence any of the Company's or any of its Subsidiaries'
outstanding senior indebtedness would be rated BBB or lower
by Standard & Poor's;
(ii) Neither the Company nor any of its Subsidiaries
shall make any capital expenditures in any calendar year in
an aggregate amount in excess of the aggregate amount
reflected in the Company's capital expenditure budget for
such year, a copy of which has been provided to SBC, plus
$250 million; provided, however, that the foregoing shall
not limit in any respect the ability of Pacific Bell or
Nevada Bell to make or commit to capital expenditures with
respect to any aspect of their respective existing
businesses;
(iii) Neither the Company 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) shares issued pursuant
to options and other awards outstanding on the date hereof
under the Stock Plans, awards of options and other awards
granted hereafter under the Stock Plans in accordance with
this Agreement and shares issuable pursuant to such awards,
and (B) up to an aggregate amount of $300 million of such
stock (valued at its fair market value as of the date of the
agreement to make such acquisition) in any calendar year to
fund, in whole or in part, the cost of any acquisition or
acquisitions permitted under clause (iv) below;
(iv) Neither the Company nor any of its Subsidiaries
shall spend in excess of $600 million in any calendar year
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), unless such business
is acquired directly by the Company and is within the
Company's existing lines of business. Notwithstanding the
foregoing, neither the Company nor any of its Subsidiaries
shall acquire (A) any cellular, personal communications
services or wireless cable business servicing any territory
outside of the states of California and Nevada, or (B) any
business servicing any territory outside the United States
unless such business primarily consists of the long distance
telephone business, the internet services business, or the
internet hubbing business. None of the foregoing shall
limit in any respect the ability of Pacific Bell and Nevada
Bell to acquire businesses which would be subject to
regulation within California and Nevada, respectively. For
purposes of this clause (iv), 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;
(v) Neither the Company nor its Subsidiaries shall
enter any business other than the telecommunications
business and those businesses traditionally associated with
the telecommunications business; and
(vi) Neither the Company nor any of its Subsidiaries
shall agree prior to the Effective Time to do any of the
foregoing after the Effective Time.
(d) 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. The Company and SBC
each 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 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 and directors,
employees, agents and representatives being the "SBC
Representatives" and 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 all or any significant portion of the assets
or any equity securities of, it or any of its Subsidiaries
that, in any such case, could reasonably be expected to lead
to a breach of this Agreement or otherwise interfere with
the completion of the Merger contemplated by this Agreement
(any such proposal or offer being hereinafter referred to as
an "Acquisition Proposal"). The Company and SBC each
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 its and its Subsidiaries' employees,
agents and representatives (including any investment banker,
attorney or accountant retained by it or any of its Subsidi
aries) not to, directly or indirectly, have any discussion
with or provide any confidential information or data to any
Person relating to an Acquisition Proposal or engage in any
negotiations concerning an Acquisition Proposal, or
otherwise facilitate any effort or attempt to make or
implement an Acquisition Proposal; provided, however, that
nothing contained in this Agreement shall prevent either the
Company or SBC or its board of directors from (A) complying
with Rule 14e-2 promulgated under the Exchange Act with
regard to an 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 Acquisition Proposal by any such Person;
or (C) recommending such an unsolicited bona fide written
Acquisition Proposal to the stockholders of the Company or
SBC, as the case may be, 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 or SBC, as the case may be,
concludes in good faith (after consultation with its
financial advisor) that such 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 or SBC's stockholders from a financial point of
view than the transaction contemplated by this Agreement
(any such more favorable Acquisition Proposal being referred
to in this Agreement as a "Superior Proposal"), (ii) the
board of directors of the Company or SBC, as the case may
be, determines in good faith after consultation with outside
legal counsel that such action is necessary for its board of
directors to comply with their respective fiduciary duties
under applicable law and (iii) prior to providing any
information or data to any Person in connection with an
Acquisition Proposal by any such Person, such board of
directors receives from such Person an executed confidenti
ality agreement on terms substantially similar to those
contained in the confidentiality agreement previously
entered into between SBC and the Company in connection with
their consideration of the Merger. 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 Acquisition Proposal. 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 hereof of the obligations undertaken in
this Section 6.2. 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 keep SBC or the
Company, as the case may be, informed, on a current basis,
of the status and terms of any such proposals or offers and
the status of any such discussions or negotiations. The Com
pany also agrees that it will promptly request each Person
that has heretofore executed a confidentiality agreement in
connection with its consideration of any Acquisition
Proposal 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.
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
"Stockholders Meeting") as promptly as practicable after the
S-4 Registration Statement is declared effective to consider
and vote upon the approval of this Agreement and the Merger.
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 SBC Common
Stock 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 in the
Merger. In the event that, after adjustment pursuant to
Section 6.16, the Exchange Ratio shall be less than 0.667 of
a share of SBC Common Stock (other than as a result of any
adjustment pursuant to Section 4.4), then the Company shall,
as promptly as practicable after the determination of the
Exchange Ratio convene another Stockholders Meeting in
accordance with this Section at which the holders of Company
Shares shall be requested again to consider and vote upon
the transactions contemplated hereby taking into account the
Exchange Ratio, as adjusted. SBC and the Company shall
cooperate in all reasonable respects to effectuate promptly
the holding of such additional Stockholders Meeting.
Subject to fiduciary obligations under applicable law, each
of the Company's and SBC's board of directors shall
recommend approval of the transactions contemplated hereby
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 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 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
efforts to cause 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 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 necessary or advisable
to be obtained from any third party and/or any Governmental
Entity in order to consummate the Merger or any of the other
transactions contemplated by this Agreement; provided,
however, that, except as contemplated by Section 6.16,
nothing in this Section 6.5 shall require, or be construed
to require, SBC or the Company to proffer to, or agree to,
any concession to any Governmental Entity that SBC concludes
is reasonably likely to materially reduce the economic or
business benefits SBC expects, as of the date hereof, to
realize from the Merger. Subject to applicable laws relat
ing 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 informa
tion 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.
6.6. Access; Consultation. (a) Upon reasonable
notice, and except as may otherwise be required by appli
cable law, the Company and SBC each shall (and shall cause
its Subsidiaries to) afford the other's officers, employees,
counsel, accountants and other authorized representatives
("Representatives") 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 infor
mation 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 fore
going 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 efforts to obtain the
consent of such third party to such inspection or disclo
sure. 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.
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, "affiliates" of such party for
purposes of Rule 145 under the 1933 Act. Each of the
Company and SBC shall use all reasonable efforts to cause
each Person who is identified as an "affiliate" in the
letter referred to above to deliver to SBC prior to the date
of the Stockholders Meeting a written agreement providing
that each such Person will agree not to sell, pledge,
transfer or otherwise dispose of the shares of SBC Common
Stock to be received by such Person in the Merger except in
compliance with the applicable provisions of the 1933 Act
and, if the Merger qualifies for pooling of interests
accounting treatment, until such time as financial results
covering at least 30 days of combined operations of SBC and
the Company shall have been published. Prior to the
Effective Time, each of the Company and SBC shall amend and
supplement such letter and use all reasonable efforts to
cause each additional Person who is identified as an
"affiliate" to execute a written agreement as set forth in
this Section 6.7.
(b) If the Merger would otherwise qualify for
pooling-of-interests 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 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
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 each 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 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, 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) 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. At or prior to the Effective Time, the
Company shall make all necessary arrangements with respect
to the Stock Plans to permit the assumption of the unexer
cised 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 of
1933 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
Stock Plan under which it was issued and the stock option
agreement by which it is evidenced.
(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 on 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 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 fraction of a share of SBC Common Stock
equal to the Exchange Ratio. SBC shall, and shall cause the
Surviving Corporation to, honor, pursuant to their terms,
all employee benefit obligations to current and former
employees under the Compensation and Benefit Plans to the
extent such Compensation and Benefit Plans are disclosed on
Section 6.10(b) of the Company Disclosure Letter.
6.11. Expenses. Except as otherwise
provided in Section 8.5(b) and 8.5(c), 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 for expenses to be
borne by SBC or the Company pursuant to Section 6.16 and
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 agrees that it will 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 pertain
ing 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 that the
Company would have been permitted under Nevada law and its
articles of incorporation or by-laws in effect on the date
hereof to indemnify such Person (and SBC 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 indemni
fication under paragraph (a) of this Section 6.12, upon
learning of any such claim, action, suit, proceeding or
investigation, shall promptly notify SBC thereof, but the
failure to so notify shall not relieve SBC of any liability
it may have to such Indemnified Party if such failure does
not materially prejudice the indemnifying party. In the
event of any such claim, action, suit, proceeding or
investigation (whether arising before or after the Effective
Time), (i) SBC or the Surviving Corporation shall have the
right to assume the defense thereof and SBC 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 SBC or 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 SBC or the Surviving
Corporation and the Indemnified Parties, the Indemnified
Parties may retain counsel satisfactory to them, and SBC or
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 SBC 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) SBC 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 so long as the annual premium therefor is
not in excess of the last annual premium paid prior to the
date hereof (the "Current Premium"); provided, however, if
the existing D&O Insurance expires, is terminated or
cancelled during such six year period, the Surviving Corpora
tion 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 the Surviving Corporation 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 the Surviving Corporation 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, SBC
and Merger Sub each agrees not to disclose or permit the
disclosure for any purpose other than the transactions
contemplated hereby of any non-public, confidential or
proprietary information furnished to such party by another
party hereto in connection with the transactions
contemplated by this Agreement, provided that such
disclosure may be made (a) to any Person who is an officer,
director or employee of such party, or to counsel,
accountants and financial advisors to such party solely for
their use in evaluating the transactions contemplated by
this Agreement, (b) with the prior written consent of all
parties to this Agreement or (c) pursuant to a subpoena or
order issued by a court, arbitrator or governmental body,
agency or official.
6.16. Determination of SBC and Company
Costs. (a) Within five (5) days after the Determination
Date (as defined in Section 9.12) each of SBC and the
Company shall simultaneously exchange with the other written
notice of the dollar amount of the Regulatory Approval Costs
which it believes, in good faith, to be the appropriate
amount of the Regulatory Approval Costs for it to bear,
which amount shall not exceed fifty percent (50%) of the
Regulatory Approval Costs (a "Tentative Share").
(b) In the event that SBC's Tentative Share and
the Company's Tentative Share both equal fifty percent (50%)
of the Regulatory Approval Costs, then the SBC Costs shall
equal fifty percent (50%) of the Regulatory Approval Costs
and the Company Costs shall equal fifty percent (50%) of the
Regulatory Approval Costs, and the Exchange Ratio shall be
adjusted to the Revised Exchange Ratio.
(c) In the event the Tentative Share of one party
(the "Higher Party") exceeds the Tentative Share of the
other party (the "Lower Party") and neither paragraph (b)
nor (d) of this Section 6.16 would otherwise apply, then the
Higher Party shall elect, by providing written notice of
such decision to the Lower Party, to either: (i) accept as
its share of the Regulatory Approval Costs an amount equal
to the difference between the Regulatory Approval Costs and
the greater of (A) the Tentative Share of the Lower Party
and (B) the lesser of (X) 50% of the Regulatory Approval
Costs and (Y) the Termination Fee (the greater of (A) and
(B) being the Lower Party's Share), and such amount shall
constitute the SBC Costs (if the Higher Party is SBC) or the
Company Costs (if the Higher Party is the Company), and the
Tentative Share of the Lower Party shall constitute the SBC
Costs (if the Lower Party is SBC) or the Company Costs (if
the Lower Party is the Company); or (ii) subject to any
Lower Party Election (as defined below) terminate this
Agreement pursuant to the applicable provisions of Section
8.3(b)(vii) or 8.4(v) hereof after providing the Lower Party
with ten (10) days prior written notice of its intent to so
terminate the Agreement (the "Notice of Proposed
Termination") provided, however, that in the event the
Higher Party elects to terminate this Agreement as provided
for in clause (ii), above, then the Lower Party may, within
five (5) days of receipt of notice of the Notice of Proposed
Termination, provide written notice to the Higher Party of
the election of the Lower Party (the "Lower Party Election")
to bear as its share of the Regulatory Approval Costs an
amount equal to the difference between the Regulatory
Approval Costs and the Tentative Share of the Lower Party,
and such amount shall constitute the SBC Costs (if the Lower
Party is SBC) or the Company Costs (if the Lower Party is
the Company), and the Tentative Share of the Lower Party
shall constitute the SBC Costs (if the Higher Party is SBC)
or the Company Costs (if the Higher Party is the Company);
provided further, however, that the Lower Party Election
shall only be available if the Lower Party's Tentative Share
is at least 80% of Higher Party's Tentative Share. At the
Effective Time, the Exchange Ratio shall be adjusted to the
Revised Exchange Ratio.
(d) In the event the Tentative Share of each of
SBC and Company is smaller than fifty percent (50%) of the
Regulatory Approval Costs (a "Failure to Agree Event"), then
this Agreement shall terminate pursuant to Section 8.1(b).
6.17. Control of the Company's
Operations. Nothing contained in this Agreement shall give
SBC, directly or indirectly, rights to control or direct the
Company's operations prior to the Effective Time. Prior to
the Effective Time, 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 (including
the Exchange Ratio if required to be approved at an
additional Stockholders Meeting by Section 6.4 hereof) shall
have been duly approved by holders of Company Shares
constituting the Company Requisite Vote and have been duly
approved by the sole stockholder of Merger Sub, and the
issuance of SBC Common Stock pursuant to the Merger 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, the decision and
order of the California Public Utilities Commission ("CPUC")
authorizing the Merger and making any required determ
inations under Section 854(a)-(c) of the California Public
Utilities Code, including its determination as to any
required allocation of economic benefits, if any, of the
Merger, between shareholders and ratepayers, shall have
become final, and other than the filing provided for in
Section 1.3, all notices, reports and other filings required
to be made prior to the Effective Time by the Company or SBC
or any of their respective Subsidiaries with, and all
consents, registrations, approvals, permits and
authorizations required to be obtained prior to the
Effective Time by, the Company or SBC or any of their
respective Subsidiaries from, any Governmental Entity
(collectively, "Governmental Consents") in connection with
the execution and delivery of this Agreement and the
consummation of the Merger and the other transactions
contemplated hereby shall have been made or obtained (as the
case may be) upon terms and conditions that are not
reasonably likely to have a Material Adverse Effect on SBC
or the Company, it being understood that in the event the
CPUC were to require by final decision and order that an
allocation of economic benefit to ratepayers is required
under Section 854(b) of the California Public Utilities
Code, the effect of any such final decision and order shall
not be considered to have a Material Adverse Effect on SBC
or the Company.
(d) Litigation. No court or 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 threatened 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.
(h) Allocation of Certain Costs. The determination of
SBC and Company Costs as provided in Section 6.16 shall have
been completed.
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 shall be true and correct as of the date of
this Agreement and (except to the extent such representa
tions and warranties speak as of an earlier date) as of the
Closing Date as though made on and as of 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.
(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 or is not reasonably likely to materially
adversely affect the ability of the Company to consummate
the transactions contemplated by this Agreement.
(d) Tax Opinion. SBC shall have received the opinion
of Sullivan & Cromwell, special 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.
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 shall be true and correct as of the
date of this Agreement and (except to the extent such
representations and warranties speak as of an earlier date)
as of the Closing Date as though made on and as of the
Closing 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) Consents Under Agreements. SBC 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 SBC or any of its Subsidiaries is a party,
except those for which failure to obtain such consents and
approvals, individually or in the aggregate, is not
reasonably likely to have a Material Adverse Effect on SBC
or is not reasonably likely to materially adversely affect
the ability of SBC to consummate the transactions
contemplated by this Agreement.
(d) Tax Opinion. The Company shall have received the
opinion of Pillsbury Madison & Sutro LLP, 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.
ARTICLE VIII
Termination
8.1. Termination by Mutual Consent; Automatic
Termination. (a) 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.
(b) This Agreement shall be terminated and the Merger
shall be abandoned upon the occurrence of a Failure to Agree
Event as provided in Section 6.16(d).
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 March 31,
1997, 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 required approval of the CPUC, the Termination
Date may be extended by SBC or the Company from time to time
by written notice to the other party to a date not beyond
December 31, 1997 (the "Termination Date"), (ii) the
approval of the Company's stockholders required by Sec
tion 7.1(a) shall not have been obtained at a meeting duly
convened therefor or at any adjournment or postponement
thereof, (iii) the approval of SBC's stockholders as
required by Section 7.1(a) shall not have been obtained at a
meeting duly convened therefor, or (iv) any Order
permanently restraining, enjoining or otherwise prohibiting
consummation of the Merger shall become final and non-appeal
able (whether before or after the approval by the
stockholders of the Company or SBC); 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 approval by 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 Company is not in material breach of
any of the terms of this Agreement, (ii) the board of
directors of the Company approves entering into a binding
written agreement concerning a transaction that constitutes
a Superior Proposal and the Company notifies SBC in writing
that the Company wishes to enter into such agreement,
(iii) SBC does not make, within ten business days of receipt
of the Company's written notification of its desire to enter
into a binding agreement for a Superior Proposal, 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 Proposal and
(iv) the Company prior to such termination pays to SBC in
immediately available funds any fees required to be paid
pursuant to Section 8.5. The Company agrees to notify SBC
promptly if its wish 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 SBC shall have
withdrawn or adversely modified its approval or
recommendation of this Agreement or failed to reconfirm its
recommendation of this Agreement within fifteen business
days after a written request by the Company to do so,
(ii) Section 6.2 shall be breached by SBC in any material
respect and SBC shall have failed to promptly terminate the
activity giving rise to such breach and use best efforts to
cure such breach upon notice thereof from the Company or SBC
shall breach Section 6.2 by failing to promptly notify the
Company as required thereunder, (iii) there has been a
material breach by SBC or Merger Sub of any representation,
warranty, covenant or agreement (other than Section 6.2)
contained in this Agreement that is not curable or, if
curable, is not cured within 30 days after written notice of
such breach is given by the Company to the party committing
such breach, (iv) if SBC or any SBC Representatives shall
take any of the actions that would be proscribed by
Section 6.2 but for the exception therein allowing certain
actions to be taken pursuant to clause (B) or (C) of the
proviso thereof; provided, that, the Company shall not have
any right to terminate this Agreement pursuant to this
Section 8.3(b)(iv) as a result of the taking of any such
action during the first 45 days after the date hereof (the
"45 Day Period") unless the Company exercises its right of
termination prior to the later of (x) the end of the 45 Day
Period and (y) 15 business days after the date the Company
receives written notice from SBC of the action giving rise
to a right of termination, (v) the persons comprising the
members of the SBC Board of Directors as of the date hereof
(the "Incumbent Directors") and any additional members of
SBC Board of Directors whose election or nomination for
election as a director is supported by a majority of the
Incumbent Directors (such additional member of SBC Board of
Directors thereafter being an Incumbent Director) shall
cease to constitute a majority of the members of the Board
of Directors of SBC or any Person or "group" (as defined in
Rule 13d-5 under the Securities Exchange Act of 1934) shall
own capital stock of SBC with voting power sufficient to
cast a majority of the votes entitled to be cast for the
election of directors of SBC, (vi) SBC, directly or through
any of its Subsidiaries, shall, in any calendar year, enter
into an agreement or agreements to spend in excess of $5
billion (valuing any non-cash consideration at its fair
market value as of the date of the agreement to make such
acquisition) to acquire one or more businesses, whether by
merger, consolidation, purchase of property or assets or
otherwise, or (vii) pursuant to Section 6.16(c), the Company
is the Higher Party and neither paragraph (b) or (d) of
Section 6.16 would otherwise apply and SBC does not make a
timely Lower Party Election.
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 if (i) the board of
directors of the Company shall have withdrawn or adversely
modified its approval or recommendation of this Agreement or
failed to reconfirm its recommendation of this Agreement
within fifteen business days after a written request by SBC
to do so, (ii) Section 6.2 shall be breached by the Company
in any material respect and the Company shall have failed to
promptly terminate the activity giving rise to such breach
and use best efforts to cure such breach upon notice thereof
from SBC or the Company shall breach Section 6.2 by failing
to promptly notify SBC as required thereunder, (iii) there
has been a material breach by the Company of any
representation, warranty, covenant or agreement (other than
Section 6.2) contained in this Agreement that is not curable
or, if curable, is not cured within 30 days after written
notice of such breach is given by SBC to the party
committing such breach, (iv) if the Company or any Company
Representative shall take any of the actions that would be
proscribed by Section 6.2 but for the exception therein
allowing certain actions to be taken pursuant to clause (B)
or (C) of the proviso thereof; provided, that, SBC shall not
have any right to terminate this Agreement pursuant to this
Section 8.4(iv) as a result of the taking of any such action
during the 45 Day Period unless SBC exercises its right of
termination prior to the later of (x) the end of the 45 Day
Period and (y) 15 business days after the date SBC receives
written notice from the Company of the action giving rise to
a right of termination or (v) pursuant to Section 6.16(c)
SBC is the Higher Party and neither paragraph (b) or (d) of
Section 6.16 would otherwise apply and the Company does not
make a timely Lower Party Election.
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 any breach of this Agreement.
(b) In the event that (i) a bona fide Acquisition
Proposal with respect to the Company or any Subsidiary of
the Company shall have been made to the Company or any of
its Subsidiaries and made known to stockholders generally or
has been made directly to stockholders generally or any
Person shall have publicly announced an intention (whether
or not conditional) to make a bona fide Acquisition Proposal
with respect to the Company or any Subsidiary of the Company
and such Acquisition Proposal or announced intention shall
not have been withdrawn prior to the Stockholders Meeting
and thereafter this Agreement is terminated by either SBC or
the Company pursuant to Section 8.2(ii), 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(i),
(ii), (iv) or (v), 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),
pay SBC a fee equal to $300 million (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; provided, however, that no Termination Fee shall
be payable to SBC pursuant to clause (i) of this paragraph
(b) or pursuant to a termination by SBC pursuant to
Section 8.4(iv) as a result of the taking of any action
during the 45 Day Period unless and until within 9 months of
such termination, the Company or any Subsidiary of the
Company enters into any agreement (I) pursuant to which any
Person (other than SBC) (an "Acquiring Party") proposes to
acquire, by purchase, merger, consolidation, sale, assign
ment, lease, transfer or otherwise, thirty percent or more
of the voting power of the outstanding securities of the
Company or any Significant Subsidiary of the Company or a
majority of the assets of the Company or any Significant
Subsidiary of the Company, (II) pursuant to which there is
proposed to be consummated a merger, consolidation or
similar transaction between the Company or any of its
Subsidiaries and an Acquiring Party in which shareholders of
the Company immediately prior to such merger, consolidation
or similar transaction would not (if such transaction were
consummated on the date of such agreement) own securities
representing at least seventy percent of the outstanding
voting power of the surviving entity (or, if applicable, any
entity in control of such Acquiring Party) of such merger,
consolidation or similar transaction immediately following
the consummation thereof or (III) pursuant to which any of
the transactions described in (I) or (II) is proposed,
assuming that the references to thirty percent and seventy
percent were both to fifty percent; provided, further,
however, that, no fee shall be payable in the case of (I)
and (II) above where the persons comprising the Board of
Directors of the Company prior to entering into such
agreement are intended to constitute after consummation a
majority of the members of the Board of Directors of the
Company, in the case of (I) or the surviving entity (or, if
applicable, any entity in control of such Acquiring Party)
in the case of (II). 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 promptly pay the amount due pursuant to this Sec
tion 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 para
graph (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. In the event of a
termination by SBC pursuant to Section 8.4(iv) as a result
of the taking of any action during the 45 Day Period, the
Company shall promptly pay upon SBC's request all charges
and expenses incurred by SBC and Merger Sub in connection
with this Agreement and the transactions contemplated
hereby, which payments shall be credited against any
Termination Fee that may subsequently become payable.
(c) In the event that (i) a bona fide Acquisition
Proposal with respect to SBC or any Subsidiary of SBC shall
have been made to SBC or any of its Subsidiaries and made
known to stockholders generally or has been made directly to
stockholders generally or any Person shall have publicly
announced an intention (whether or not conditional) to make
a bona fide Acquisition Proposal with respect to SBC or any
Subsidiary of SBC and thereafter this Agreement is term
inated by either the Company or SBC pursuant to Sec
tion 8.2(iii), or (ii) this Agreement is terminated by the
Company pursuant to Section 8.3(b)(i), (ii), (iv), (v), (vi)
or (vii), then SBC shall promptly, but in no event later
than two days after the date of such termination, 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;
provided, however, that no Termination Fee shall be payable
to the Company pursuant to clause (i) of this paragraph (c)
or pursuant to a termination by the Company pursuant to
Section 8.3(iv) as a result of the taking of any action
during the 45 Day Period unless and until, within 9 months
of such termination, SBC or any Subsidiary of SBC enters
into any agreement (I) pursuant to which any Person (other
than the Company) (a "SBC Acquiring Party") proposes to
acquire, by purchase, merger, consolidation, sale,
assignment, lease, transfer or otherwise, thirty percent or
more of the voting power of the outstanding securities of
SBC or any Significant Subsidiary of SBC or a majority of
the assets of SBC or any Significant Subsidiary of SBC, (II)
pursuant to which there is proposed to be consummated a
merger, consolidation or similar transaction between SBC or
any of its Subsidiaries and a SBC Acquiring Party in which
shareholders of SBC immediately prior to such merger,
consolidation or similar transaction would not (if such
transaction were consummated on the date of such agreement)
own securities representing at least seventy percent of the
outstanding voting power of the surviving entity (or, if
applicable, any entity in control of such SBC Acquiring
Party) of such consolidation, merger or similar transaction
immediately following the consummation thereof or (III)
pursuant to which any of the transactions described in (I)
or (II) is proposed, assuming that the references to thirty
percent and seventy percent were both to fifty percent;
provided, further, however, that except that, no fee shall
be payable in the case of (I) and (II) above where the
persons comprising the Board of Directors of SBC prior to
entering into such agreement are intended to constitute
after consummation a majority of the members of the Board of
Directors of SBC, in the case of (I) or the surviving entity
(or, if applicable, any entity in control of such Acquiring
Party) in the case of (II). 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 promptly
pay 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. In
the event of a termination by the Company pursuant to
Section 8.3(b)(iv) as a result of the taking of any action
during the 45 Day Period SBC shall promptly pay upon the
Company's request all charges and expenses incurred by the
Company in connection with this Agreement and the trans
actions contemplated hereby, which payments shall be
credited against any Termination Fee that may subsequently
become payable.
ARTICLE IX
Miscellaneous and General
9.1. Survival. This Article IX and the agree
ments 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 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 the 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. The conditions to
each of the parties' obligations to consummate the Merger
are for the sole benefit of such party and may be waived by
such party in whole or in part to the extent permitted by
applicable 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 CALIFORNIA
WITHOUT REGARD TO THE CONFLICT OF LAW PRINCIPLES THEREOF,
EXCEPT THAT NEVADA LAW SHALL APPLY TO THE EXTENT REQUIRED IN
CONNECTION WITH THE EFFECTUATION OF THE MERGER. The parties
hereby irrevocably submit to the jurisdiction of the Federal
courts of the United States of America located in the States
of California and Texas solely in respect of the interpreta
tion 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 thereby,
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 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. Any notice, request, instruction
or other document to be given hereunder by any party to the
others shall be in writing and delivered personally or sent
by registered or certified mail, postage prepaid, or by
facsimile:
if to SBC or Merger Sub
SBC Communications Inc.
175 E. Houston
San Antonio, Texas 78205-2233
Attention: Chairman and
Chief Executive Officer
Fax: (210) 351-2298
with copies to:
SBC Communications Inc.
175 E. Houston
San Antonio, Texas 78205-2233
Attention: Senior Executive Vice President
and General Counsel
Fax: (210) 351-2298
Benjamin F. Stapleton, Esq.
Sullivan & Cromwell
125 Broad Street
New York, NY 10004
Fax: (212) 558-3588
if to the Company
Pacific Telesis Group
130 Kearny Street
San Francisco, California 94108
Attention: President and
Chief Executive Officer
Fax: (415) 362-2913
with copies to:
Pacific Telesis Group
130 Kearny Street
San Francisco, California 94108
Attention: Executive Vice President,
General Counsel, External Affairs
and Secretary
Fax: (415)362-2913
James M. Canty, Esq.
Pillsbury Madison & Sutro LLP
235 Montgomery Street
San Francisco, California 94104
Fax: (415) 983-1200
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 (includ
ing any exhibits hereto), 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 require
ment 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 Agree
ment 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. Certain Costs. Within five (5) days after
the date upon which the conditions set forth in Section
7.1(c) have been satisfied or waived (or such earlier date
as the parties may otherwise agree) (the "Estimate Date"),
SBC and Company shall determine the present value as of the
Estimate Date in the manner hereinafter set forth of the
net costs, fees and expenses and other financial effects
which have been or are to be incurred or sustained by the
Company, the Surviving Corporation or any Subsidiary thereof
in connection with or as a result of state Governmental
Consents (the "Regulatory Approval Costs"). Such present
value shall be calculated on an after-tax basis using an
assumed combined tax rate of forty-one percent (41%), a
discount rate of ten percent (10%) and a term equal to the
period over which such amounts are likely to be incurred or
sustained (but in all events the parties hereto agree that
the term, for purposes of such calculation, shall not exceed
5.6 years after the Estimate Date unless the use of such
term would materially distort the economic impact to the
parties). If SBC and the Company do not for any reason
agree on the present value of the Regulatory Approval Costs
within ten (10) days of the Estimate Date, then each of SBC
and Company shall select a nationally recognized public
accounting firm, other than a firm then employed as an
auditor of either SBC or Company (each, an "Independent
Accounting Firm") within ten (10) days after the Estimate
Date and such accounting firms shall jointly select within
five (5) additional days a third similarly qualified public
accounting firm (the "Third Firm"), and each such accounting
firm shall be instructed to provide, within ten (10) days
after the selection of the Third Firm (or such later date as
the parties may mutually agree) (the "Determination Date"),
written notice of each such accounting firm's estimate of
the present value of the Regulatory Approval Costs (each of
the amounts so determined by the Independent Accounting
Firms, an "Estimated Cost Amount," and the amount so
determined by the Third Firm, the "Third Firm Estimate")
simultaneously to each of SBC and Company. If the Third
Firm Estimate is less than the amount of the smaller
Estimated Cost Amount, or larger than the amount of the
higher Estimated Cost Amount, then the Regulatory Approval
Costs shall be the Estimated Cost Amount closest to the
Third Firm Estimate. If the Third Firm Estimate is less
than the amount of the higher Estimated Cost Amount and
larger than the amount of the smaller Estimated Cost Amount,
then the Regulatory Approval Costs shall equal the average
of the Third Party Estimate and the Estimated Cost Amount
closest to the Third Party Estimate. Each party will bear
the fees, costs and expenses of the Independent Accounting
Firm selected by such party and shall jointly bear the fees,
costs and expenses of the Third Firm.
9.13. Certain Defined Terms. For purposes of
this Agreement, the following capitalized terms shall have
the following meanings:
"Company Costs" means the Company's share of the
Regulatory Approval Costs, as determined pursuant to Section
6.16 hereof.
"Company Value" means $53.875 multiplied by 0.733
(equitably adjusted for any event effecting SBC Common Stock
or Company Shares of the type referred to in Section 4.4
hereof, occurring after the date hereof and up to and
including the Estimate Date) multiplied by the number of
outstanding Company Shares as of the Estimate Date (the
"Company Share Number").
"Exchange Ratio" means 0.733 of a share of SBC
Common Stock (or, in the event of an adjustment pursuant to
Section 6.16 hereof, the Revised Exchange Ratio).
"Revised Company Value" means Company Value less
Company Costs.
"Revised Exchange Ratio" means (i)(A) the Revised
Ratio divided by (B) 1.000 minus the Revised Ratio,
multiplied by (ii) the SBC Share Number divided by the
Company Share Number.
"Revised Ratio" means (i) the Revised Company
Value divided by (ii) the sum of the Revised SBC Value and
the Revised Company Value.
"Revised SBC Value" means SBC Value less SBC
Costs.
"SBC Costs" means SBC's share of the Regulatory
Approval Costs, as determined pursuant to Section 6.16
hereof.
"SBC Value" means $53.875 (equitably adjusted for
any event affecting SBC Common Stock of the type referred to
in Section 4.4 hereof, occurring after the date hereof and
up to and including the Estimate Date) multiplied by the
number of outstanding shares of SBC Common Stock as of the
Estimate Date (the "SBC Share Number").
9.14. Assignment. This Agreement shall not be
assignable by operation of law or otherwise; provided,
however, that SBC may designate, by written notice to the
Company, another wholly-owned direct or indirect Subsidiary
to be a Constituent Corporation in lieu of Merger Sub, in
which event all references herein to Merger Sub shall be
deemed references to such other Subsidiary except that all
representations and warranties made herein with respect to
Merger Sub as of the date of this Agreement shall be deemed
representations and warranties made with respect to such
other subsidiary as of the date of such designation.
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.
PACIFIC TELESIS GROUP
By: /s/ P. J. Quigley
Name: P. J. Quigley
Title:
SBC COMMUNICATIONS INC.
By: /s/ Edward E. Whitacre, Jr.
Name:Edward E. Whitacre, Jr.
Title:
SBC COMMUNICATIONS (NV) INC.
By: /s/ Edward E. Whitacre, Jr.
Name: Edward E. Whitacre, Jr.
Title:
Exhibit 99
SBC COMMUNICATIONS INC., PACIFIC TELESIS GROUP
ANNOUNCE MERGER AGREEMENT
Creates Nation's Second Largest Telecommunications Company
SAN FRANCISCO, April 1, 1996 -- SBC Communications Inc.
and Pacific Telesis Group today announced a definitive
agreement to merge into a single company uniquely positioned
to thrive in the new, dynamic telecommunications industry.
The merger, the first of its kind between two former
Bell System companies, combines two outstanding
telecommunications companies into a single corporation
serving the nation's two most populous states -- California
and Texas, seven of the country's 10 largest metropolitan
areas and sixteen of the top fifty markets. The companies
serve over 30 million access lines in high growth areas and
have access to over 80 million potential wireless customers
across the country.
The company will be known as SBC Communications Inc.
with Edward E. Whitacre Jr. serving as chairman of the board and
chief executive officer. Phil Quigley will be vice-chairman of the
board and second in command; he will continue to operate the successful
exchange operations in California and Nevada. After the
merger, members of the Pacific Telesis board will be asked
to join the SBC board so that they will constitute one-third
of the expanded board.
The combined company will offer products and services
under some of the strongest brands in the industry --
Southwestern Bell, Pacific Bell, Cellular One and Nevada
Bell.
Locations served span the nation and include
attractive and growing markets such as Boston, Chicago,
Dallas, Houston, Los Angeles, St. Louis, San Diego, San
Francisco, and Washington, D.C.
Upon completion of the transaction, SBC will have more
than 100,000 employees, revenues of over $21 billion,
operating cash flow of $9 billion, and income of almost
$3 billion. The merger creates the nation's second largest
telecommunications company in terms of market value.
"This merger will combine two of the best
telecommunications companies in the world into a strong
company truly prepared to meet the challenges of the 21st
century," said Whitacre, chairman and chief executive
officer, SBC Communications Inc. "It is a dynamic combination
that will benefit our customers, shareholders and employees."
The merger is partially a product of the changes
occurring in the telecommunications industry. The recent
landmark federal legislation opens up tremendous new
business opportunities for the combined companies and
changes the core telephone industry into a much more
competitive business.
"In this new competitive environment, customer
satisfaction, a strong market presence, efficient and lower-
cost operations, a substantial financial base quality and
new, innovative services will be crucial to success in the
marketplace," said Quigley, chairman, president and chief
executive officer, Pacific Telesis Group. "We believe this
merger will enhance our ability to deliver what customers
want."
The merger involves an exchange of stock with current
Pacific Telesis stockholders receiving SBC stock. Based on
the average of SBC's closing stock prices last week, this
implies a value of approximately $39 for each Pacific
Telesis' share. The exchange ratio has Pacific Telesis
shareowners receiving 0.733 shares of SBC common stock for
each of their shares subject to certain adjustments. For
example, a Pacific Telesis shareowner holding 1,000 shares
of stock will receive 733 shares of SBC stock. After the
tax-free exchange, 66 percent of the combined company's
stock will be retained by SBC shareholders and 34 percent
held by Pacific Telesis investors.
Pacific Telesis will initially maintain its first
quarter dividend of 54.5 cents per share, payable May 1 to
shareowners of record on April 9. As part of the terms of
the agreement, Pacific Telesis will reduce its second
quarter dividend to 31.5 cents per share, which is expected
to be paid August 1.
Strategically, the merger is expected to create a
telecommunications company with an unparalleled focus on the
growing Latin American and Asian markets and enhance the
combined company's ability to successfully compete in the
$75 billion U.S. long-distance market. In addition to
sharing strong inter-region traffic, both companies are
connected to Mexico. More than 50 percent of all
international traffic to Mexico, where SBC has a
strategic business presence and partnership with Telmex, and
20 percent of all international traffic to Asia originates
in locations where the companies have network facilities.
SBC's relationship with Mexico and Latin America, and
Pacific Telesis' Pacific Rim focus will allow strong
marketing to diverse populations in the merged company's
markets.
The company plans to take advantage of SBC's proven
strength in product development, marketing and sales and
Pacific Telesis' network engineering skills, efficiency in
process management and cost containment. Consumers will
benefit from the merger through the integration of the two
companies' resources and skills which will promote
competition and enhance the development of new,
competitively-priced telecommunications, entertainment,
information and interactive products and services.
While the corporate headquarters will be in San
Antonio, Texas, the company will maintain headquarters of
Pacific Bell and Nevada Bell in California and Nevada. In
addition, a new company will be headquartered in California
to provide integrated administrative and support services
for the combined companies. California will be the
headquarters' location for the company's long distance
company, internet company and international operations. The
combined company is committed to creating at least 1,000
jobs in California over what would otherwise have been the
case if the merger had not occurred.
The combined companies' wireless headquarters will be
located in Dallas.
"This historic merger is about growth -- growth in
jobs, markets and services to our customers," Whitacre said.
"It is not about downsizings or reduced employment
opportunities. We see the future of this industry offering
tremendous opportunities and this merger positions the
company to realize these opportunities for our
stakeholders."
The parties hope to complete the transaction by the end
of the year. It must be approved by the California Public
Utilities Commission, the United States Department of
Justice and the Federal Communications Commission. Given
the pro-competition effects of the merger and the fact that
the two companies are not competitors in the local exchange,
long distance or wireless markets, this merger is not
expected to raise any antitrust or competitive issues.
Pacific Telesis (NYSE:PAC) is a diversified
telecommunications corporation based in San Francisco.
Through its Pacific Bell and Nevada Bell subsidiaries, the
corporation offers a wide array of telecommunications
services throughout California and in Nevada, including
directory advertising and publishing. The corporation
serves nearly 15.8 million access lines, including 53,000
that deliver ISDN service. It currently offers Internet
access service to business customers and will expand that to
residential customers in the very near future. Another
subsidiary, Pacific Bell Mobile Services, will offer
personal communications services at the Republican National
Convention in San Diego this year and will initiate
commercial service by year end.
SBC Communications Inc. is one of the world's leading
diversified telecommunications companies and the second
largest wireless communications company based in the United
States. SBC provides innovative telecommunications products
and services under the Southwestern Bell and Cellular One
brands. Its businesses include wireless services and
equipment in the United States and interests in wireless
businesses in Europe, Latin America, South Africa and Asia;
cable television in both domestic and international markets;
and directory advertising and publishing. SBC (NYSE:SBC)
reported 1995 revenues of $12.7 billion.
