As filed with the Securities and Exchange Commission on June 5, 1998
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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SBC COMMUNICATIONS INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<CAPTION>
<S> <C> <C>
DELAWARE 6719 43-1301883
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
175 EAST HOUSTON
SAN ANTONIO, TEXAS 78205-2233
(210) 821-4105
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------------------
JUDITH M. SAHM
SBC COMMUNICATIONS INC.
175 EAST HOUSTON
SAN ANTONIO, TEXAS 78205-2233
(210) 821-4105
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
Copies to:
------------------------------------
<TABLE>
<S> <C> <C> <C>
BENJAMIN F. STAPLETON WAYNE A. WIRTZ THADDEUS J. MALIK CHARLES W. MULANEY, JR.
SULLIVAN & CROMWELL SBC COMMUNICATIONS INC. AMERITECH CORPORATION SKADDEN, ARPS, SLATE,
125 BROAD STREET 175 EAST HOUSTON 30 SOUTH WACKER DRIVE MEAGHER & FLOM (ILLINOIS)
NEW YORK, NEW YORK 10004 SAN ANTONIO, TEXAS 78205-2233 CHICAGO, ILLINOIS 60606 333 WEST WACKER DRIVE
CHICAGO, ILLINOIS 60606
</TABLE>
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS SOON AS
PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
------------------------------------
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. |_|
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_| _________________
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_| _______________________
------------------------------------
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
====================================================================================================================================
PROPOSED MAXIMUM
OFFERING PRICE ROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE PER SHARE OF AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED COMMON STOCK OFFERING PRICE FEE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $1.00 per 1,449,647,026(2) N/A 47,091,497,240(3) 13,891,991.69
share, together with Preferred Stock
Purchase Rights, if any (1)
====================================================================================================================================
<FN>
(1) As of the date hereof, preferred stock purchase rights are attached to and trade with the common stock, par value $1.00 per
share ("SBC Common Stock"), of SBC Communications Inc., a Delaware corporation ("SBC"). The value attributable to such rights,
if any, is reflected in the market price of SBC Common Stock.
(2) Represents the maximum amount of SBC Common Stock estimated to be issuable upon the consummation of the merger (the "Merger")
of SBC Delaware, Inc., a Delaware corporation and a wholly-owned subsidiary of SBC, with and into Ameritech Corporation, a
Delaware corporation ("Ameritech").
(3) Pursuant to Rules 457(f)(1) and 457(c) under the Securities Act and solely for the purpose of calculating the registration fee,
the proposed maximum aggregate offering price is equal to the market value of the common stock, $1.00 par value per share, of
Ameritech ("Ameritech Common Stock") to be canceled in the Merger and is based upon $42.75, the average of the high and low
sale prices per share of Ameritech Common Stock on the New York Stock Exchange Composite Tape on June 1, 1998.
------------------------------------
</FN>
</TABLE>
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT FILES
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
WILL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT BECOMES EFFECTIVE ON
SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY
DETERMINE.
================================================================================
<PAGE>
AMERITECH CORPORATION
30 South Wacker Drive
Chicago, Illinois 60606
[o], 1998
Dear Shareowner:
We cordially invite you to attend a special meeting of shareowners (the
"Special Meeting") of Ameritech Corporation, a Delaware corporation
("Ameritech"), which will be held on [o], 1998, at [o], local time, at [o].
At the Special Meeting, you will be asked to consider and vote upon a
proposal to adopt the Agreement and Plan of Merger, dated as of May 10, 1998,
among Ameritech, SBC Communications Inc., a Delaware corporation ("SBC") and SBC
Delaware, Inc., a Delaware corporation and a wholly-owned subsidiary of SBC
("Merger Sub") (as such agreement may be amended, supplemented or otherwise
modified from time to time, the "Merger Agreement"), pursuant to which Merger
Sub will be merged with and into Ameritech (the "Merger") and Ameritech will
become a wholly-owned subsidiary of SBC. Upon consummation of the Merger, each
share of common stock, $1.00 par value per share, of Ameritech ("Ameritech
Common Stock") will be converted into 1.316 (the "Exchange Ratio") shares of
common stock, par value $1.00 per share, of SBC ("SBC Common Stock"), together
with the appropriate number of preferred stock purchase rights attached thereto,
if any.
The Board of Directors of Ameritech has carefully reviewed and considered
the terms and conditions of the Merger. In addition, the Board of Directors of
Ameritech has received a written opinion from its financial advisor, Goldman,
Sachs & Co., to the effect that, as of May 10, 1998, the Exchange Ratio is fair
from a financial point of view to the holders of Ameritech Common Stock.
AMERITECH'S BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER AGREEMENT AND
THE TRANSACTIONS CONTEMPLATED THEREBY ARE FAIR TO, AND IN THE BEST INTERESTS OF,
AMERITECH AND ITS SHAREOWNERS. ACCORDINGLY, THE BOARD HAS UNANIMOUSLY APPROVED
THE MERGER AGREEMENT AND THE MERGER AND UNANIMOUSLY RECOMMENDS THAT ALL
SHAREOWNERS VOTE FOR ADOPTION OF THE MERGER AGREEMENT.
I urge you to review and consider carefully the accompanying Notice of
Special Meeting of Shareowners and Joint Proxy Statement/Prospectus, which
contain information about Ameritech and SBC and describe the Merger and certain
other matters relating to the Merger.
The affirmative vote of the holders of at least a majority of the
outstanding shares of Ameritech Common Stock is necessary for adoption of the
Merger Agreement. If the Merger Agreement is adopted and the Merger is
consummated, you will be sent a letter of transmittal with instructions for
obtaining your shares of SBC Common Stock and cash in lieu of fractional shares
of SBC Common Stock. If you hold share certificates, please do not send your
certificates representing Ameritech Common Stock until you receive these
materials.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE SPECIAL MEETING,
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING IN PERSON AND REGARDLESS
OF THE NUMBER OF SHARES YOU OWN. TO MAKE SURE YOUR SHARES ARE REPRESENTED, WE
URGE YOU TO SUBMIT YOUR VOTING INSTRUCTIONS AS SOON AS POSSIBLE BY TELEPHONE,
THROUGH THE INTERNET OR BY SIGNING, DATING AND MAILING YOUR PROXY CARD. Failure
to submit your proxy through any such method or to vote at the Special Meeting
or any abstention will have the same effect as a vote against the proposal to
adopt the Merger Agreement. Your prompt cooperation will be appreciated.
Sincerely,
Richard C. Notebaert
Chairman of the Board, President
and Chief Executive Officer
<PAGE>
SBC COMMUNICATIONS INC.
175 East Houston
San Antonio, Texas 78205-2233
[o], 1998
To Our Shareowners:
You are cordially invited to attend a special meeting of shareowners (the
"Special Meeting") of SBC Communications Inc., a Delaware corporation ("SBC"),
to be held on [o], 1998, at [o], local time, at [o].
At the Special Meeting, you will be asked to consider and vote upon a
proposal to issue shares of common stock, par value $1.00 per share, of SBC
("SBC Common Stock") pursuant to the Agreement and Plan of Merger, dated as of
May 10, 1998, among Ameritech Corporation, a Delaware corporation ("Ameritech"),
SBC and SBC Delaware, Inc., a Delaware corporation and a wholly owned subsidiary
of SBC ("Merger Sub") (as such agreement may be amended, supplemented or
otherwise modified from time to time, the "Merger Agreement"), pursuant to which
Merger Sub will be merged with and into Ameritech (the "Merger"), and Ameritech
will become a wholly-owned subsidiary of SBC. Upon the Merger becoming
effective, each share of common stock, $1.00 par value per share, of Ameritech
("Ameritech Common Stock") will be converted into 1.316 (the "Exchange Ratio")
shares of SBC Common Stock, together with the appropriate number of preferred
stock purchase rights attached thereto, if any. In addition, at the Special
Meeting, you will be asked to consider proposals to amend the Bylaws of SBC to
provide that the maximum number of persons that may serve as directors on the
Board of Directors of SBC be increased to 25 from 21 (the "Bylaw Amendment") and
to amend the Restated Certificate of Incorporation of SBC to increase the number
of shares of authorized SBC Common Stock to 10.0 billion from 7.0 billion (the
"Share Increase Proposal").
The Board of Directors of SBC has carefully reviewed and considered the
terms and conditions of the Merger. In addition, the Board of Directors of SBC
has received a written opinion from its financial advisor, Salomon Brothers Inc
and Smith Barney Inc., to the effect that, as of May 10, 1998, the Exchange
Ratio is fair from a financial point of view to SBC.
SBC'S BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY ARE FAIR TO, AND IN THE BEST INTERESTS OF, SBC
AND ITS SHAREOWNERS. ACCORDINGLY, THE SBC BOARD OF DIRECTORS HAS AUTHORIZED AND
APPROVED THE MERGER AGREEMENT AND THE MERGER AND UNANIMOUSLY RECOMMENDS THAT
SHAREOWNERS VOTE FOR APPROVAL OF THE ISSUANCE OF SHARES OF SBC COMMON STOCK
PURSUANT TO THE MERGER AGREEMENT. IN ADDITION, SBC'S BOARD OF DIRECTORS HAS
UNANIMOUSLY APPROVED BOTH THE BYLAW AMENDMENT AND THE SHARE INCREASE PROPOSAL
AND HAS DETERMINED THAT EACH OF THE BYLAW AMENDMENT AND THE SHARE INCREASE
PROPOSAL IS ADVISABLE AND RECOMMENDS THAT SHAREOWNERS VOTE FOR ADOPTION OF THE
BYLAW AMENDMENT AND THE SHARE INCREASE PROPOSAL.
I urge you to review and consider carefully the accompanying Notice of
Special Meeting of Shareowners and Joint Proxy Statement/Prospectus, which
contain information about Ameritech and SBC and describe the Merger and certain
other matters relating to the Merger.
The affirmative vote of the holders of at least a majority of the shares of
SBC Common Stock voting on the proposal to issue shares of SBC Common Stock
pursuant to the Merger Agreement, assuming at least a majority of the
outstanding shares of SBC Common Stock are present at the Special Meeting, is
necessary for approval of the issuance of shares of SBC Common Stock pursuant to
the Merger Agreement. The affirmative vote of the holders of at least two-thirds
of the shares of SBC Common Stock issued and outstanding on the record date for
determining shareowners entitled to vote is necessary to adopt the Bylaw
Amendment, and the affirmative vote of the holders of at least a majority of the
shares of SBC Common Stock issued and outstanding on the record date for
determining shareowners entitled to vote is necessary to adopt the Share
Increase Proposal.
IN ORDER THAT YOUR SHARES MAY BE REPRESENTED AT THE SPECIAL MEETING, YOU ARE
URGED TO PROMPTLY COMPLETE, SIGN, DATE AND RETURN THE ACCOMPANYING PROXY IN THE
ENCLOSED ENVELOPE, WHETHER OR NOT YOU PLAN TO ATTEND THE
<PAGE>
SPECIAL MEETING. FAILURE TO VOTE ON THE BYLAW AMENDMENT AND THE SHARE INCREASE
PROPOSAL OR ABSTENTIONS WITH RESPECT TO SUCH PROPOSALS WILL HAVE THE SAME EFFECT
AS A VOTE AGAINST THE BYLAW AMENDMENT AND THE SHARE INCREASE PROPOSAL. Your
prompt cooperation will be appreciated.
Sincerely,
Edward E. Whitacre, Jr.
Chairman of the Board
and Chief Executive Officer
<PAGE>
AMERITECH CORPORATION
30 SOUTH WACKER DRIVE
CHICAGO, ILLINOIS 60606
----------------------------------------------
NOTICE OF SPECIAL MEETING OF SHAREOWNERS
TO BE HELD ON [O], 1998
----------------------------------------------
To the Shareowners of Ameritech Corporation:
NOTICE IS HEREBY GIVEN that a special meeting of shareowners (including any
adjournments or postponements thereof, the "Special Meeting") of Ameritech
Corporation, a Delaware corporation ("Ameritech"), will be held on [o], 1998, at
[o], local time, at [o]. The purpose of the Special Meeting is to consider and
vote upon the following matters:
1. A proposal to adopt the Agreement and Plan of Merger, dated as of
May 10, 1998 (as such agreement may be amended, supplemented or otherwise
modified from time to time, the "Merger Agreement"), among Ameritech, SBC
Communications Inc., a Delaware corporation ("SBC"), and SBC Delaware, Inc.
a Delaware corporation and a wholly-owned subsidiary of SBC ("Merger Sub"),
pursuant to which Merger Sub will be merged (the "Merger") with and into
Ameritech and Ameritech will become a wholly-owned subsidiary of SBC. Upon
the Merger becoming effective, each share of common stock, $1.00 par value
per share, of Ameritech ("Ameritech Common Stock"), will be converted into
1.316 shares of common stock, par value $1.00 per share, of SBC, together
with the appropriate number of preferred stock purchase rights attached
thereto, if any.
2. Such other business related to the proposal to adopt the Merger
Agreement as may properly come before the Special Meeting or any
adjournments or postponements thereof.
Adoption of the Merger Agreement requires the affirmative vote of the
holders of at least a majority of the shares of Ameritech Common Stock
outstanding on the record date. Notwithstanding shareowner adoption of the
Merger Agreement, Ameritech reserves the right to abandon the Merger at any time
prior to the consummation thereof, subject to the terms and conditions of the
Merger Agreement.
The Board of Directors of Ameritech has fixed the close of business on [o],
1998, as the record date for the determination of shareowners entitled to notice
of, and to vote at, the Special Meeting. Only shareowners of record as of such
time will be entitled to notice of, and to vote at, the Special Meeting.
A form of proxy and a Joint Proxy Statement/Prospectus containing more
detailed information with respect to the matters to be considered at the Special
Meeting (including a copy of the Merger Agreement attached as Annex A thereto)
accompany and form a part of this notice.
If you are a shareowner of record as of the record date and you plan to
attend the Special Meeting, please keep the admission ticket and map that are
attached to the form of proxy sent to you with this notice and the Joint Proxy
Statement/Prospectus. Please also check the box on the form of proxy that
indicates that you plan to attend the meeting. If your shares are held by a
broker or a bank and you do not receive an admission ticket, please bring proof
of your ownership in order to be admitted to the Special Meeting.
Whether or not you plan to attend the Special Meeting , it is important that
you read the accompanying materials carefully and vote your shares as soon as
possible. Record holders of Ameritech Common Stock may submit their voting
instructions by dialing toll free 1-800-_______ or through the Internet.
Instructions for using these services are set forth on the enclosed proxy card.
Of course, you also may submit your voting instructions by completing, signing,
dating and returning the accompanying proxy in the enclosed self-addressed,
postage-paid envelope. If you attend the Special Meeting and desire to revoke
your proxy in writing and vote in person, you may do so. In any event, a proxy
may be revoked in writing at any time before it is exercised.
------------------
<PAGE>
THE BOARD OF DIRECTORS OF AMERITECH HAS UNANIMOUSLY APPROVED THE MERGER
AGREEMENT AND UNANIMOUSLY RECOMMENDS THAT SHAREOWNERS VOTE FOR ADOPTION OF THE
MERGER AGREEMENT.
By Order of the Board of Directors,
Deidra D. Gold
Secretary
Chicago, Illinois
[o], 1998
THE INFORMATION AGENT FOR THE MERGER IS:
SHAREHOLDER COMMUNICATIONS CORPORATION
17 STATE STREET, 27TH FLOOR
NEW YORK, NEW YORK 10004
CALL TOLL FREE 1-800-________
----------------------------------------
- --------------------------------------------------------------------------------
: YOUR VOTE IS IMPORTANT :
: PLEASE SUBMIT YOUR VOTE BY TELEPHONE, :
: THROUGH THE INTERNET OR BY RETURNING YOUR PROXY BY MAIL :
- --------------------------------------------------------------------------------
<PAGE>
SBC COMMUNICATIONS INC.
175 EAST HOUSTON
SAN ANTONIO, TEXAS 78205
----------------------------------------------
NOTICE OF SPECIAL MEETING OF SHAREOWNERS
TO BE HELD ON [O], 1998
----------------------------------------------
To the Shareowners of SBC:
NOTICE IS HEREBY GIVEN that a special meeting of shareowners (including any
adjournments or postponements thereof, the "Special Meeting") of SBC
Communications Inc., a Delaware corporation ("SBC"), will be held on [o], 1998,
at [o], local time, at [o]. The purpose of the Special Meeting is to consider
and vote upon the following matters:
1. A proposal to approve the issuance of shares of common stock, par
value $1.00 per share, of SBC ("SBC Common Stock") pursuant to the Agreement
and Plan of Merger, dated as of May 10, 1998, among Ameritech Corporation, a
Delaware corporation, SBC and SBC Delaware, Inc., a Delaware corporation and
a wholly-owned subsidiary of SBC ("Merger Sub") (as such agreement may be
amended, supplemented or otherwise modified from time to time, the "Merger
Agreement"), pursuant to which Merger Sub will be merged (the "Merger") with
and into Ameritech and Ameritech will become a wholly-owned subsidiary of
SBC. Upon the Merger becoming effective, each share of common stock, $1.00
par value per share, of Ameritech, will be converted into 1.316 shares of
common stock, par value $1.00 per share, of SBC ("SBC Common Stock"),
together with the appropriate number of preferred stock purchase rights
attached thereto, if any.
2. A proposal to adopt an amendment to Article II, Section 1, of the
Bylaws of SBC to provide that the maximum number of persons that may serve
as directors on the Board of Directors of SBC be increased to twenty-five
(25) from twenty-one (21) (the "Bylaw Amendment").
3. A proposal to adopt an amendment to the Restated Certificate of
Incorporation of SBC to increase the number of shares of authorized SBC
Common Stock to 10.0 billion from 7.0 billion (the "Share Increase
Proposal").
4. Such other business related to the foregoing proposals as may
properly come before the Special Meeting or any adjournments or
postponements thereof.
Approval of the proposal to issue shares of SBC Common Stock pursuant to the
Merger Agreement requires the affirmative vote of the holders of at least a
majority of the shares of SBC Common Stock voting on such proposal at the
Special Meeting, assuming at least a majority of outstanding shares are present
at the Special Meeting. The affirmative vote of the holders of at least
two-thirds of the shares of SBC Common Stock issued and outstanding on the
record date for determining shareowners entitled to vote is necessary to adopt
the Bylaw Amendment. The affirmative vote of the holders of at least a majority
of the shares of SBC Common Stock issued and outstanding for determining
shareowners entitled to vote is necessary to adopt the Share Increase Proposal.
Notwithstanding shareowner approval of the issuance of shares of SBC Common
Stock pursuant to the Merger Agreement, SBC reserves the right to abandon the
Merger at any time prior to the consummation thereof, subject to the terms and
conditions of the Merger Agreement.
The Board of Directors of SBC has fixed the close of business on [o], 1998,
as the record date for the determination of shareowners entitled to notice of,
and to vote at, the Special Meeting, and only shareowners of record at such time
will be entitled to notice of, and to vote at, the Special Meeting.
<PAGE>
A form of proxy and a Joint Proxy Statement/Prospectus containing more
detailed information with respect to the matters to be considered at the Special
Meeting (including a copy of the Merger Agreement attached as Annex A thereto)
accompany and form a part of this notice.
Whether or not you plan to attend the Special Meeting, please promptly
complete, sign, date and return the accompanying proxy in the enclosed
self-addressed, stamped envelope. If you attend the Special Meeting and desire
to revoke your proxy in writing and vote in person, you may do so. In any event,
a proxy may be revoked in writing at any time before it is exercised.
------------------
THE BOARD OF DIRECTORS OF SBC HAS AUTHORIZED AND APPROVED THE MERGER
AGREEMENT AND THE MERGER AND UNANIMOUSLY RECOMMENDS THAT SHAREOWNERS VOTE FOR
APPROVAL OF THE ISSUANCE OF SHARES OF SBC COMMON STOCK PURSUANT TO THE MERGER
AGREEMENT. IN ADDITION, SBC'S BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED BOTH
THE BYLAW AMENDMENT AND THE SHARE INCREASE PROPOSAL AND HAS DETERMINED THAT EACH
OF THE BYLAW AMENDMENT AND THE SHARE INCREASE PROPOSAL IS ADVISABLE AND
RECOMMENDS THAT SHAREOWNERS VOTE FOR ADOPTION OF THE BYLAW AMENDMENT AND THE
SHARE INCREASE PROPOSAL.
By Order of the Board of Directors,
Judith M. Sahm
Vice President and Secretary
San Antonio, Texas
[o], 1998
THE INFORMATION AGENT FOR THE MERGER IS:
SHAREHOLDER COMMUNICATIONS CORPORATION
17 STATE STREET, 27TH FLOOR
NEW YORK, NEW YORK 10004
CALL TOLL FREE 1-800 _______
- --------------------------------------------------------------------------------
: YOUR VOTE IS IMPORTANT :
: PLEASE SIGN, DATE AND RETURN YOUR PROXY :
- --------------------------------------------------------------------------------
<PAGE>
RED HERRING TEXT
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
[SBC LOGO] [AMERITECH LOGO]
JOINT PROXY STATEMENT
----------------------
SBC COMMUNICATIONS INC.
PROSPECTUS
----------------------
This Joint Proxy Statement/Prospectus is being furnished to the
shareowners of SBC Communications Inc., a Delaware corporation ("SBC"), in
connection with the solicitation of proxies by the Board of Directors of SBC
(the "SBC Board") from holders of outstanding shares of common stock, par value
$1.00 per share, of SBC ("SBC Common Stock"), for use at a special meeting of
shareowners of SBC to be held on [o], 1998, at [o], local time, at [o]
(including any adjournments or postponements thereof, the "SBC Special
Meeting"). This Joint Proxy Statement/Prospectus is also being furnished to the
shareowners of Ameritech Corporation, a Delaware corporation ("Ameritech"), in
connection with the solicitation of proxies by the Board of Directors of
Ameritech (the "Ameritech Board") from holders of outstanding shares of common
stock, $1.00 par value per share, of Ameritech ("Ameritech Common Stock"), for
use at a special meeting of shareowners of Ameritech to be held on [o], 1998, at
[o], local time, at [o] (including any adjournments or postponements thereof,
the "Ameritech Special Meeting" and, together with the SBC Special Meeting, the
"Special Meetings").
At the Ameritech Special Meeting, shareowners of Ameritech will be
asked to consider and vote upon a proposal (the "Merger Proposal") to adopt the
Agreement and Plan of Merger, dated as of May 10, 1998, among Ameritech, SBC and
SBC Delaware, Inc., a Delaware corporation and a wholly owned subsidiary of SBC
("Merger Sub") (as such agreement may be amended, supplemented or otherwise
modified from time to time, the "Merger Agreement"). At the SBC Special Meeting,
shareowners of SBC will be asked to approve the issuance of shares of SBC Common
Stock pursuant to the Merger Agreement. The Merger Agreement is attached as
Annex A to this Joint Proxy Statement/Prospectus and is incorporated herein by
reference. In addition, at the SBC Special Meeting, shareowners of SBC will also
be asked to consider proposals to amend the Bylaws of SBC (the "SBC Bylaws") to
provide that the maximum number of persons that may serve as directors on the
SBC Board be increased to 25 from 21 (the "Bylaw Amendment") and to amend the
Restated Certificate of Incorporation of SBC (the "SBC Restated Certificate") to
increase the number of shares of authorized SBC Common Stock to 10.0 billion
from 7.0 billion (the "Share Increase Proposal"). See "The Bylaw Amendment" and
"The Share Increase Proposal."
The Merger Agreement provides for the merger (the "Merger") of Merger
Sub with and into Ameritech, with Ameritech being the surviving corporation in
the Merger (sometimes referred to in this Joint Proxy Statement/Prospectus as
the "Surviving Corporation") and becoming a wholly owned subsidiary of SBC. Upon
the Merger becoming effective, each share of Ameritech Common Stock issued and
outstanding immediately prior to such time (other than (i) shares of Ameritech
Common Stock that are owned by SBC, Merger Sub or any other direct or indirect
subsidiary of SBC or (ii) shares of Ameritech Common Stock that are owned by
Ameritech or any direct or indirect subsidiary of Ameritech, in the case of each
of (i) and (ii) not held on behalf of third parties (collectively, "Excluded
Ameritech Common Stock")) will be converted into 1.316 (the "Exchange Ratio")
shares of SBC Common Stock. See "The Merger -- Terms of the Merger." Each share
of SBC Common Stock issued in the Merger will have attached thereto the
appropriate number of preferred stock purchase rights of SBC in the event that
at the time shares of SBC Common Stock are distributed pursuant to the Merger
Agreement preferred stock purchase rights are attached to the outstanding shares
of SBC Common Stock. See "Description of SBC Capital Stock -- Description of SBC
Rights."
On January 4, 1998, SBC announced that it had entered into an agreement
to acquire Southern New England Telecommunications Corporation, a Connecticut
corporation ("SNET"), which is expected to close prior to the end of 1998. In
addition to the Merger, SBC's pending acquisition of SNET is reflected in
certain of the pro forma financial information presented herein. See "Unaudited
Pro Forma Combined Condensed Financial Statements."
SBC has filed a Registration Statement on Form S-4 (including exhibits
and amendments thereto, the "Registration Statement") pursuant to the Securities
Act of 1933, as amended (the "Securities Act"), covering the approximately ___
shares of SBC Common Stock (and any accompanying participating preferred stock
purchase rights of SBC) issuable upon consummation of the Merger. This Joint
Proxy Statement/Prospectus constitutes the Proxy Statement of both SBC and
Ameritech relating to the solicitation of proxies for use at their respective
Special Meetings and the Prospectus of SBC in connection with the issuance of
SBC Common Stock pursuant to the Merger Agreement. This Joint Proxy
Statement/Prospectus and the accompanying proxy cards are first being provided
to shareowners of Ameritech and SBC on or about [o], 1998.
The Rights Agreement, dated as of January 27, 1989 and amended on
August 5, 1992 and June 15, 1994 (the "SBC Rights Agreement"), between SBC and
The Bank of New York, as Rights Agent, and the SBC Rights (as defined below) are
scheduled to expire by their terms on January 27, 1999 (the "SBC Rights
Expiration Date"). As of the date of this Joint Proxy Statement/Prospectus, SBC
has not determined whether it will enter into an amendment of the SBC Rights
Agreement or a new rights agreement which would have the effect that the rights
to purchase Series A Junior Participating Preferred Stock, par value $1.00 per
share, of SBC (the "SBC Rights") currently outstanding under the SBC Rights
Agreement would continue to be outstanding after the SBC Rights Expiration Date.
If the SBC Rights or
<PAGE>
similar rights ("SBC Substitute Rights") are outstanding at the time shares of
SBC Common Stock are issued pursuant to the Merger Agreement, such shares of SBC
Common Stock will have attached the appropriate number of SBC Rights or SBC
Substitute Rights. If no such rights are outstanding at the time shares of SBC
Common Stock are issued pursuant to the Merger Agreement, no rights will be
attached to such shares of SBC Common Stock.
THE SECURITIES TO BE ISSUED PURSUANT TO THIS JOINT PROXY STATEMENT/PROSPECTUS
HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS JOINT PROXY STATEMENT/
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
The date of this Joint Proxy Statement/Prospectus is [o], 1998
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AVAILABLE INFORMATION
Each of SBC and Ameritech is subject to the informational requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports, proxy statements and other information with
the Securities and Exchange Commission (the "SEC"). The reports, proxy
statements and other information filed by SBC and Ameritech with the SEC can be
inspected and copied at the SEC's public reference room located at Judiciary
Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at the
public reference facilities in the SEC's regional offices located at: 7 World
Trade Center, 13th Floor, New York, New York 10048, and Suite 1400, Northwestern
Atrium Center, 500 West Madison Street, Chicago, Illinois 60661. Copies of such
material can be obtained at prescribed rates by writing to the Securities and
Exchange Commission, Public Reference Section, 450 Fifth Street, N.W.,
Washington, D.C. 20549. The SEC maintains a Website that contains reports, proxy
and information statements and other information regarding registrants that file
electronically with the SEC, which registrants include SBC and Ameritech. The
address of such site is http://www.sec.gov. The shares of SBC Common Stock and
Ameritech Common Stock are listed on the New York Stock Exchange (the "NYSE"),
the Pacific Exchange (the "PSE"), and the Chicago Stock Exchange ("CSE") and the
shares of Ameritech Common Stock are also listed on the Boston Stock Exchange
(the "BSE") and the Philadelphia Stock Exchange ("PHLX"). As such, the periodic
reports, proxy statements and other information filed with the SEC by SBC and
Ameritech may be inspected at the offices of the NYSE, 20 Broad Street, New
York, New York 10005, the offices of the PSE, 301 Pine Street, San Francisco,
California 94104, and the offices of the CSE, 440 South LaSalle Street, Chicago,
Illinois 60605 and, in addition, in the case of Ameritech, the offices of the
PHLX, 1900 Market Street, Philadelphia, Pennsylvania 19103 and the BSE, 38th
Floor, One Boston Place, Boston, Massachusetts 02108.
This Joint Proxy Statement/Prospectus does not contain all of the
information set forth in the Registration Statement covering the securities
offered hereby which SBC has filed with the SEC, certain portions of which have
been omitted pursuant to the rules and regulations of the SEC, and to which
portions reference is hereby made for further information with respect to SBC,
Ameritech and the securities offered hereby. Statements contained herein
concerning any documents are not necessarily complete and, in each instance,
reference is made to the copies of such documents filed as exhibits to the
Registration Statement. Each such statement is qualified in its entirety by such
reference.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
THIS JOINT PROXY STATEMENT/PROSPECTUS INCORPORATES BY REFERENCE DOCUMENTS
WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. DOCUMENTS RELATING TO SBC,
EXCLUDING EXHIBITS TO SUCH DOCUMENTS UNLESS SUCH EXHIBITS ARE SPECIFICALLY
INCORPORATED HEREIN BY REFERENCE, ARE AVAILABLE WITHOUT CHARGE UPON REQUEST TO
MANAGER-EXTERNAL REPORTING, SBC COMMUNICATIONS INC., 175 EAST HOUSTON, SAN
ANTONIO, TEXAS 78205-2233. TELEPHONE REQUESTS MAY BE DIRECTED TO
MANAGER-EXTERNAL REPORTING AT (210) 351-3049. DOCUMENTS RELATING TO AMERITECH,
EXCLUDING EXHIBITS TO SUCH DOCUMENTS UNLESS SUCH EXHIBITS ARE SPECIFICALLY
INCORPORATED HEREIN BY REFERENCE, ARE AVAILABLE WITHOUT CHARGE UPON REQUEST TO
MANAGER-SHAREHOLDER RELATIONS, AMERITECH CORPORATION, 30 SOUTH WACKER DRIVE,
35TH FLOOR, CHICAGO, ILLINOIS 60606. TELEPHONE REQUESTS MAY BE DIRECTED TO
AMERITECH INVESTOR RELATIONS AT (312) 750-5353. IN ORDER TO ENSURE TIMELY
DELIVERY OF ANY OF SUCH DOCUMENTS IN ADVANCE OF THE SPECIAL MEETINGS TO WHICH
THIS JOINT PROXY STATEMENT/PROSPECTUS RELATES, ANY REQUEST SHOULD BE MADE BY
[O], 1998.
The following documents filed with the SEC by SBC (File No. 1-8610) are
incorporated herein by reference: (a) SBC's Annual Report on Form 10-K for the
year ended December 31, 1997 (the "1997 SBC 10-K"); (b) SBC's Quarterly Report
on Form 10-Q for the quarterly period ended March 31, 1998; (c) SBC's Current
Reports on Form 8-K, filed on January 5, 1998, February 5, 1998 and May 11,
1998; (d) SBC's proxy statement for its 1998 annual meeting of shareowners; (e)
the description of SBC Common Stock contained in SBC's Registration Statement on
Form 10, dated November 15, 1983; and (f) SBC's Registration Statement on Form
8-A, dated February 9, 1989, together with amendments thereto.
The following documents filed with the SEC by Ameritech (File No. 1-8612)
are incorporated herein by reference: (a) Ameritech's Annual Report on Form 10-K
for the fiscal year ended December 31, 1997 (the "1997 Ameritech 10-K"); (b)
Ameritech's Quarterly Report on Form 10-Q for the quarterly period ended March
31, 1998; (c) Ameritech's Current Reports on Form 8-K, filed January 13, 1998,
April 14, 1998 and May 11, 1998; (d) Ameritech's proxy statement for its 1998
annual meeting of shareowners; (e) the description of Ameritech Common Stock
contained
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in Ameritech's Registration Statement on Form 10, dated November 16, 1983; and
(f) Ameritech's Registration Statement on Form 8-A, dated December 21, 1988,
together with amendments thereto.
The following documents filed with the SEC by SNET (File No. 1-9157) are
incorporated herein by reference: (a) SNET's Annual Report on Form 10-K for the
fiscal year ended December 31, 1997; (b) SNET's Quarterly Report on Form 10-Q
for the quarterly period ended March 31, 1998; (c) SNET's Current Reports on
Form 8-K, filed January 5, 1998, January 27, 1998, March 31, 1998 and April 27,
1998; and (d) SNET's proxy statement for its 1998 annual meeting of
shareholders.
All documents filed by either SBC, Ameritech or SNET pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
Joint Proxy Statement/Prospectus and prior to the date of the Special Meetings
will be deemed to be incorporated herein by reference and to be a part hereof
from the date of filing of such document. Any statement contained herein or in a
document incorporated or deemed to be incorporated herein by reference will be
deemed to be modified or superseded for purposes hereof to the extent that a
statement contained herein or in any other subsequently filed document which is,
or is deemed to be, incorporated herein by reference modifies or supersedes such
statement. Any such statement so modified or superseded will not be deemed to
constitute a part hereof, except as so modified or superseded.
No person is authorized to give any information or to make any
representations not contained in this Joint Proxy Statement/Prospectus or in the
documents incorporated herein by reference in connection with the solicitation
and the offering made hereby and, if given or made, such information or
representation should not be relied upon as having been authorized by SBC or
Ameritech. This Joint Proxy Statement/Prospectus does not constitute an offer to
sell, or a solicitation of an offer to purchase, the securities offered by this
Joint Proxy Statement/Prospectus, or the solicitation of a proxy from any
person, in any jurisdiction in which it is unlawful to make such offer,
solicitation of an offer or proxy solicitation. Neither the delivery of this
Joint Proxy Statement/Prospectus nor any distribution of the securities made
under this Joint Proxy Statement/Prospectus hereunder will, under any
circumstances, create an implication that there has been no change in the
affairs of SBC or Ameritech since the date of this Joint Proxy
Statement/Prospectus other than as set forth in the documents incorporated
herein by reference.
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<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
AVAILABLE INFORMATION....................................................................iii
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE........................................iii
SUMMARY....................................................................................1
The Companies...........................................................................1
Recent Developments.....................................................................2
The Special Meetings....................................................................2
The Merger..............................................................................2
Interests of Certain Persons in the Merger.............................................10
Dissenters' Rights of Appraisal........................................................10
Accounting Treatment...................................................................11
Certain Federal Income Tax Consequences of the Merger..................................11
The Bylaw Amendment....................................................................11
The Share Increase Proposal............................................................11
Certain Effects of the Merger on the Rights of Holders of Ameritech Common Stock.......11
COMPARATIVE STOCK PRICES..................................................................12
SELECTED HISTORICAL AND UNAUDITED PRO FORMA COMBINED FINANCIAL DATA.......................13
THE SPECIAL MEETINGS......................................................................16
General................................................................................16
SBC.................................................................................16
Ameritech...........................................................................16
Date, Place and Time...................................................................16
Record Dates...........................................................................16
SBC.................................................................................16
Ameritech...........................................................................16
Vote Required..........................................................................17
SBC.................................................................................17
Ameritech...........................................................................17
Voting and Revocation of Proxies.......................................................18
Solicitation of Proxies................................................................19
THE COMPANIES.............................................................................19
SBC....................................................................................19
Ameritech..............................................................................19
Merger Sub.............................................................................20
RECENT DEVELOPMENTS.......................................................................20
Ameritech..............................................................................20
THE MERGER................................................................................20
General................................................................................20
Background of the Merger...............................................................21
Reasons for the Merger; Recommendations of the Boards of Directors.....................22
SBC.................................................................................22
Ameritech...........................................................................24
Opinions of Financial Advisors.........................................................26
SBC.................................................................................26
Ameritech...........................................................................32
Cautionary Statement Concerning Forward-Looking Statements.............................36
Terms of the Merger....................................................................36
Closing; Effective Time................................................................37
Exchange of Ameritech Common Stock for Shares of SBC Common Stock......................37
Procedures..........................................................................37
Lost, Stolen or Destroyed Certificates..............................................38
Distributions with Respect to Unexchanged Shares; Voting............................38
Representations and Warranties.........................................................39
Certain Covenants......................................................................39
Interim Operations..................................................................39
Acquisition Proposals...............................................................41
The Special Meetings................................................................42
Pooling of Interests................................................................43
Certain Regulatory Filings and Approvals...............................................43
HSR.................................................................................44
FCC.................................................................................44
State PUCs..........................................................................44
Illinois Commerce Commission........................................................44
Public Utility Commission of Ohio...................................................45
PUC Approvals Regarding Intrastate Interexchange Service............................45
Municipal Cable Franchises..........................................................45
<PAGE>
European Regulatory Approvals.......................................................45
Stock Exchange Listing and De-listing..................................................46
Employee Benefits......................................................................46
Stock Options.......................................................................46
Benefit Plans.......................................................................46
Expenses...............................................................................47
Indemnification; Directors' and Officers' Insurance....................................47
Dividends..............................................................................47
SBC Board Following the Merger.........................................................47
Conditions.............................................................................47
Termination............................................................................49
Certain Termination Fees ............................................................50
Resale of SBC Common Stock.............................................................51
Dissenters' Rights of Appraisal........................................................52
Interests of Certain Persons in the Merger.............................................52
ACCOUNTING TREATMENT......................................................................55
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER.....................................55
General................................................................................55
Fractional Shares......................................................................56
THE BYLAW AMENDMENT.......................................................................56
THE SHARE INCREASE PROPOSAL...............................................................57
UNAUDITED PRO FORMA COMBINED
CONDENSED FINANCIAL STATEMENTS............................................................59
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS......................66
DESCRIPTION OF SBC CAPITAL STOCK..........................................................68
SBC Common Stock.......................................................................68
SBC Preferred Stock....................................................................68
Description of SBC Rights..............................................................69
COMPARISON OF CERTAIN RIGHTS OF SHAREOWNERS
OF SBC AND AMERITECH......................................................................70
General................................................................................70
Size and Classification of the Board of Directors......................................71
Removal of Directors...................................................................71
Action by Written Consent..............................................................71
Meetings of Shareowners; Quorum and Voting.............................................72
Shareowner Proposals and Shareowner Nominations of Directors...........................72
Amendment of Corporate Charter and Bylaws..............................................73
Fair Price Provisions..................................................................73
Rights Plans...........................................................................74
Indemnification of Officers and Directors..............................................75
EXPERTS...................................................................................75
VALIDITY OF SHARES........................................................................76
INDEX OF DEFINED TERMS....................................................................77
ANNEX A Agreement and Plan of Merger...................................................A-1
ANNEX B Opinion of Salomon Smith Barney................................................B-1
ANNEX C Opinion of Goldman, Sachs & Co.................................................C-1
</TABLE>
<PAGE>
SUMMARY
The following is a summary of certain information contained elsewhere in
this Joint Proxy Statement/Prospectus, does not purport to be complete and is
qualified in its entirety by reference to the full text of this Joint Proxy
Statement/Prospectus, including the Annexes attached hereto and the documents
incorporated herein by reference. The information contained in this Joint Proxy
Statement/Prospectus with respect to SBC and Merger Sub has been supplied by
SBC, and the information with respect to Ameritech has been supplied by
Ameritech.
THE COMPANIES
SBC
SBC is a holding company whose subsidiaries and affiliates operate
predominantly in the communications services industry. SBC's subsidiaries and
affiliates provide landline and wireless telecommunications services and
equipment, directory advertising, publishing services and Internet access
services. SBC's subsidiaries and affiliates provide landline telecommunications
and related services in California, Texas, Missouri, Oklahoma, Kansas, Arkansas
and Nevada and wireless telecommunications and related services in those states
as well as in Illinois, Maryland, Indiana, Massachusetts, New York, Virginia,
Washington, D.C. and West Virginia. SBC will also provide landline and wireless
telecommunications and related services in Connecticut and wireless services in
Rhode Island following the completion of the acquisition of SNET, if completed.
SBC was incorporated under the laws of the State of Delaware in 1983.
On January 4, 1998, SBC entered into an agreement to acquire SNET, which, as
of and for the year ended December 31, 1997, had assets of $2.8 billion,
shareholders' equity of $597 million and net income of $194 million. The
acquisition of SNET is intended to qualify for "pooling of interests" accounting
treatment, and is expected to close prior to the end of 1998. The Merger and the
SNET acquisition are both reflected in certain of the pro forma combined
financial information presented herein.
The mailing address of SBC's principal executive offices is 175 East
Houston, San Antonio, Texas 78205-2233, and its telephone number is (210)
821-4105.
Ameritech
Ameritech is a holding company whose subsidiaries and affiliates operate
predominantly in the communications services industry. Ameritech's subsidiaries
and affiliates provide a wide range of communications services, including local
and long distance, cellular, paging, security, cable TV, Internet access and
directory publishing services. Ameritech's subsidiaries and affiliates provide
landline and wireless telecommunications and related services in Illinois,
Indiana, Michigan, Ohio and Wisconsin, wireless telecommunications and related
services in Missouri, Minnesota and Hawaii and security monitoring services in
most of the United States' largest metropolitan areas. Ameritech also has
significant investments in the European telecommunications industry with
financial interests in 15 European countries.
The mailing address of Ameritech's principal executive offices is 30 South
Wacker Drive, Chicago, Illinois 60606, and its telephone number is (800)
257-0902.
Merger Sub
Merger Sub, a wholly-owned subsidiary of SBC, was formed by SBC solely for
the purpose of effecting the Merger. The mailing address of Merger Sub's
principal executive offices is 175 East Houston, San Antonio, Texas 78205-2233,
and its telephone number is (210) 821-4105.
<PAGE>
RECENT DEVELOPMENTS
Ameritech
Telecom Corporation of New Zealand ("TCNZ"). Pursuant to a plan publicly
announced in December 1997, Ameritech completed the sale of substantially all of
its stake in TCNZ in a global stock offering in April 1998. Subject to
applicable exchange rates, Ameritech expects to receive total net proceeds of
approximately $2.1 billion (before deducting transaction costs). Approximately
$1.1 billion of such proceeds has been received, and the remainder is due by
March 31, 1999. Ameritech accounted for this transaction as a sale and recorded
an after-tax gain of approximately $1.0 billion, which will be reflected in the
second quarter of 1998.
THE SPECIAL MEETINGS
SBC
The SBC Special Meeting to consider and vote on the proposal to issue shares
of SBC Common Stock pursuant to the Merger Agreement, the Bylaw Amendment and
the Share Increase Proposal will be held on [o], 1998, at [o], local time, at
[o]. Only holders of record of SBC Common Stock at the close of business on [o]
(the "SBC Record Date") will be entitled to vote at the SBC Special Meeting. On
the SBC Record Date, there were [o] shares of SBC Common Stock outstanding and
entitled to vote. Each share of SBC Common Stock is entitled to one vote at the
SBC Special Meeting.
The affirmative vote of at least a majority of the shares of SBC Common
Stock voting on the proposal to issue shares of SBC Common Stock pursuant to the
Merger Agreement, assuming at least a majority of the outstanding shares of SBC
Common Stock are present at the SBC Special Meeting, is necessary for approval
of such share issuance. The affirmative vote of the holders of at least
two-thirds of the shares of SBC Common Stock issued and outstanding on the SBC
Record Date is necessary to adopt the Bylaw Amendment. The affirmative vote of
the holders of at least a majority of the shares of SBC Common Stock issued and
outstanding on the SBC Record Date is necessary to adopt the Share Increase
Proposal.
Ameritech
The Ameritech Special Meeting to consider and vote on the Merger Proposal
will be held on [o], 1998, at [o], local time, at [o]. Only holders of record of
Ameritech Common Stock at the close of business on [o], 1998 (the "Ameritech
Record Date") will be entitled to vote at the Ameritech Special Meeting. On the
Ameritech Record Date, there were [o] shares of Ameritech Common Stock
outstanding and entitled to vote. Each share of Ameritech Common Stock is
entitled to one vote at the Ameritech Special Meeting.
The affirmative vote of at least a majority of the shares of Ameritech
Common Stock issued and outstanding on the Ameritech Record Date is necessary
for approval of the Merger Proposal.
For additional information relating to the Special Meetings, see "The
Special Meetings."
THE MERGER
The Merger Agreement provides for a business combination of SBC and
Ameritech pursuant to which, subject to the satisfaction or waiver of the
conditions therein, at the effective time of the Merger (the "Effective Time"),
Merger Sub will be merged with and into Ameritech and Ameritech will thereby
become a wholly-owned subsidiary of SBC in a transaction intended to qualify for
"pooling of interests" accounting treatment and as a tax-free "reorganization"
under the Internal Revenue Code of 1986, as amended (the "Code"), for federal
income tax purposes. As a consequence of the Merger, each share of Ameritech
Common Stock issued and outstanding immediately prior to the Effective Time
(other than Excluded Ameritech Common Stock) will be converted into and become
exchangeable for a number of shares of SBC Common Stock equal to the Exchange
Ratio (the "Merger Consideration"). Each share of SBC Common Stock issued in the
Merger will have attached thereto the
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appropriate number of SBC Rights or SBC Substitute Rights in the event that SBC
Rights or SBC Substitute Rights are attached to the outstanding shares of SBC
Common Stock when shares of SBC Common Stock are issued pursuant to the Merger
Agreement. Each outstanding share of SBC Common Stock will remain outstanding
and unaffected by the Merger. As a result of the Merger, holders of Ameritech
Common Stock immediately prior to the Effective Time will own approximately [o]%
of SBC Common Stock (based on the number of shares of SBC Common Stock and
Ameritech Common Stock issued and outstanding as of [o], 1998 and on the
Exchange Ratio, but not including any shares of SBC Common Stock to be issued in
the SNET acquisition).
No fractional shares of SBC Common Stock will be issued in the Merger.
Instead, the Merger Agreement provides that each holder of Ameritech Common
Stock who would otherwise have been entitled to receive a fractional share of
SBC Common Stock in the Merger will be entitled to receive, in lieu thereof, an
amount in cash (without interest) determined by multiplying such fraction
(rounded to the nearest one-hundredth of a share) by 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.
Reasons for the Merger; Recommendations of the Boards of Directors
SBC
The SBC Board has determined that the terms of the Merger Agreement and the
transactions contemplated thereby are fair to, and in the best interests of, SBC
and its shareowners. ACCORDINGLY, THE SBC BOARD HAS AUTHORIZED AND APPROVED THE
MERGER AGREEMENT AND THE MERGER AND UNANIMOUSLY RECOMMENDS THAT THE SHAREOWNERS
OF SBC VOTE FOR APPROVAL OF THE ISSUANCE OF SHARES OF SBC COMMON STOCK PURSUANT
TO THE MERGER AGREEMENT. The recommendation of the SBC Board is based on a
number of strategic, operating and financial factors as described in "The Merger
- -- Reasons for the Merger; Recommendations of the Boards of Directors -- SBC."
Ameritech
The Ameritech Board has unanimously determined that the terms of the Merger
Agreement and the transactions contemplated thereby are fair to, and in the
best interests of, Ameritech and its shareowners. ACCORDINGLY, THE AMERITECH
BOARD HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND UNANIMOUSLY RECOMMENDS
THAT THE SHAREOWNERS OF AMERITECH VOTE FOR ADOPTION OF THE MERGER PROPOSAL. The
recommendation of the Ameritech Board is based on a number of strategic,
operating and financial factors as described in "The Merger -- Reasons for the
Merger; Recommendations of the Boards of Directors -- Ameritech."
Opinions of Financial Advisors
SBC
On May 10, 1998, Salomon Brothers Inc and Smith Barney Inc., collectively
doing business as Salomon Smith Barney ("Salomon Smith Barney"), delivered to
the SBC Board their opinion to the effect that, as of such date, the Exchange
Ratio was fair from a financial point of view to SBC.
The full text of the written opinion of Salomon Smith Barney, dated May 10,
1998, which sets forth assumptions made, matters considered and limitations on
the review undertaken in connection with the opinion, is attached hereto as
Annex B and is incorporated herein by reference. Holders of SBC Common Stock are
urged to, and should, read such opinion in its entirety. See "The Merger --
Opinions of Financial Advisors -- SBC."
Ameritech
On May 10, 1998, Goldman, Sachs & Co. ("Goldman Sachs") delivered to the
Ameritech Board its opinion to the effect that, as of such date, the Exchange
Ratio pursuant to the Merger Agreement is fair from a financial point of view to
the holders of Ameritech Common Stock.
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The full text of the written opinion of Goldman Sachs, dated May 10, 1998,
which sets forth assumptions made, matters considered and limitations on the
review undertaken in connection with the opinion, is attached hereto as Annex C
and is incorporated herein by reference. Holders of Ameritech Common Stock are
urged to, and should, read such opinion in its entirety. See "The Merger --
Opinions of Financial Advisors -- Ameritech."
Effective Time
The Effective Time will occur when a certificate of merger (the "Certificate
of Merger") has been duly filed with the Secretary of State of the State of
Delaware or such other time as agreed upon by the parties and set forth in the
Certificate of Merger in accordance with the Delaware General Corporation Law
(the "DGCL").
See "The Merger -- Closing; Effective Time."
Covenants
Interim Operations
Pursuant to the Merger Agreement, each of SBC and Ameritech has agreed as to
itself and its respective Subsidiaries (as defined herein) that, after the date
of the Merger Agreement and prior to the Effective Time, it will, among other
things and subject to certain specified exceptions, (i) conduct its business in
the ordinary and usual course; (ii) not declare, set aside or pay any dividend
payable in cash, stock or property (other than, in the case of SBC, SBC Common
Stock) in respect of any capital stock, other than regular quarterly cash
dividends in amounts consistent with its past practice; (iii) not 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; (iv) not issue any preferred stock or incur any
indebtedness for borrowed money or guarantee any such indebtedness if it should
reasonably anticipate that, after any such issuance or incurrence, any of its or
any of its Subsidiaries' outstanding senior indebtedness would be rated A or
lower by Standard & Poor's; (v) not, and not permit its Subsidiaries to, make
any capital expenditures in any period of twelve consecutive months in an
aggregate amount in excess of 150% of the aggregate amount reflected in its
capital expenditure budget for such year; (vi) not spend in excess of $4.8
billion, in the case of SBC, and $3.6 billion, in the case of Ameritech, in the
aggregate in any period of twelve consecutive months to acquire any business;
and (vii) not enter into any business other than the telecommunications business
and those businesses traditionally associated with the telecommunications
business. See "The Merger -- Certain Covenants -- Interim Operations."
Acquisition Proposals
Pursuant to the Merger Agreement, each of SBC and Ameritech has agreed that
neither they nor any of their respective Subsidiaries will, and that each will
direct and use its best efforts to cause its and its Subsidiaries employees,
agents and representatives not to, directly or indirectly, initiate, solicit,
encourage or otherwise facilitate any inquiries or the making of any proposal or
offer with respect to a merger, reorganization, share exchange, consolidation or
similar transaction involving, or any purchase of, or tender offer for, any of
the assets of it or any of its Subsidiaries or its voting securities if, as a
result of such transaction, (i) the shareowners of SBC or Ameritech, as the case
may be, do not hold more than 50% of the voting securities of the surviving
corporation or its ultimate parent, (ii) the directors of SBC or Ameritech, as
the case may be, do not constitute a majority of the board of directors of the
surviving corporation or its ultimate parent, or (iii) another person would
acquire more than 50% of the assets of SBC or Ameritech, as the case may be, and
their respective Subsidiaries (any such proposal or offer made to SBC being an
"SBC Acquisition Proposal" and any such proposal or offer made to Ameritech
being an "Ameritech Acquisition Proposal," and together referred to as an
"Acquisition Proposal").
SBC and Ameritech have further agreed in the Merger Agreement that neither
they nor any of their Subsidiaries will, and that they will direct and use their
best efforts to cause their respective representatives not to, directly or
indirectly, have any discussion with or provide any confidential information or
data to any person relating to an SBC Acquisition Proposal or an Ameritech
Acquisition Proposal, as the case may be, or engage in any negotiations
concerning an SBC Acquisition Proposal or an Ameritech Acquisition Proposal, as
the case may be, or otherwise facilitate any effort or attempt to make or
implement an SBC Acquisition Proposal or an Ameritech Acquisition Proposal.
Notwithstanding the foregoing, the Merger Agreement does not prevent either
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SBC or Ameritech or their respective representatives 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
Acquisition Proposal to the shareowners of SBC or Ameritech, as the case may be,
if and only to the extent that, in such cases referred to in (B) or (C), (i) the
SBC Board or the Ameritech Board, as the case may be, concludes in good faith
(after consultation with its financial advisor) that such SBC Acquisition
Proposal or Ameritech Acquisition Proposal, as the case may be, 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 its shareowners from a
financial point of view than the transaction contemplated by the Merger
Agreement (any such more favorable SBC Acquisition Proposal being referred to as
a "Superior SBC Proposal," and any such more favorable Ameritech Acquisition
Proposal being referred to as a "Superior Ameritech Proposal," and together as a
"Superior Proposal"), (ii) the SBC Board or the Ameritech Board, as the case may
be, determines in good faith after consultation with outside legal counsel that
such action is necessary to comply with its fiduciary duty under applicable law
and (iii) prior to providing any information or data to any person in connection
with an SBC Acquisition Proposal or Ameritech Acquisition Proposal, as the case
may be, by any such person, the SBC Board or the Ameritech Board, as the case
may be, receives from such person a confidentiality agreement in customary form,
subject to exceptions provided for in the Merger Agreement.
"Pooling of Interests" Accounting Treatment
Pursuant to the Merger Agreement, Ameritech and SBC have agreed to use all
of their respective reasonable best efforts to cause the Merger to qualify for
"pooling of interests" accounting treatment.
Certain Regulatory Filings and Approvals
Pursuant to the Merger Agreement, Ameritech and SBC have agreed to cooperate
with each other and use (and cause their respective Subsidiaries to use) all of
their respective reasonable best efforts to take or cause to be taken all
actions, and do or cause to be done all things, necessary, proper or advisable
on its part under the Merger Agreement and applicable laws to consummate and
make effective the Merger and the other transactions contemplated by the Merger
Agreement as soon as practicable; provided, however, that nothing set forth in
the provisions of the Merger Agreement relating to regulatory filings or
approvals will require, or be construed to require, SBC or Ameritech to agree
to, or comply with, any conditions to the granting of any consent, registration,
approval, permit or authorization by any Governmental Entity (as defined herein)
if compliance with such conditions, individually or in the aggregate, would be
reasonably likely to have a Regulatory Material Adverse Effect (as defined
herein) on the Surviving Corporation or SBC following the Effective Time. See
"The Merger -- Certain Regulatory Approvals."
General
There can be no assurance as to when or if any of the regulatory approvals
described below will be obtained. In addition, there can be no assurance that
certain of such approvals will not include conditions that could result in the
abandonment of the Merger by SBC and Ameritech.
HSR
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended
(the "HSR Act"), and the rules promulgated thereunder, certain transactions,
including the Merger, may not be consummated unless certain waiting period
requirements have been satisfied. SBC and Ameritech will each file a Premerger
Notification and Report Form (a "Notification and Report Form") pursuant to the
HSR Act with the Antitrust Division of the Department of Justice ("Department of
Justice") and the Federal Trade Commission ("FTC"). The HSR Act waiting period
will expire thirty days after the Notification and Report Forms are filed,
unless the waiting period is extended by action of the Department of Justice or
the FTC requesting additional information. At any time before or after the
Effective Time, the FTC, the Department of Justice or others could take action
under the antitrust laws with respect to the Merger, including seeking to enjoin
the consummation of the Merger, to rescind the Merger or to require divestiture
of substantial assets of SBC or Ameritech. There can be no assurance that a
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<PAGE>
challenge to the Merger on antitrust grounds will not be made or, if such a
challenge is made, that it would not be successful.
FCC
Before the Merger can be consummated, SBC and Ameritech must obtain the
approval of the Federal Communications Commission (the "FCC") pursuant to the
Communications Act of 1934, as amended (the "Communications Act") for transfer
of control from Ameritech to SBC of certain FCC licenses and authorizations held
by certain of Ameritech's Subsidiaries. SBC and Ameritech intend to file
transfer of control applications with the FCC which will seek the FCC's approval
to transfer such licenses and authorizations. SBC and Ameritech expect that
these applications will demonstrate compliance with the FCC's standards. See
"The Merger -- Certain Regulatory Filings and Approvals -- FCC."
The FCC has established certain rules and regulations, including in
particular 47 C.F.R. Section 22.942, that limit the ability of any single person
to have an interest in more than one cellular license in the same market. In an
effort to comply with the FCC's rules and regulations, SBC and Ameritech are
investigating various alternatives regarding their overlapping cellular
licenses. See "The Merger -- Certain Regulatory Filings and Approvals -- FCC."
State PUC Approvals
Ameritech has subsidiaries that operate as public utility or public service
companies in the states of Illinois, Michigan, Ohio, Wisconsin, and Indiana and
such subsidiaries accordingly are regulated by the public utility commissions
(including any analogous foreign or local bodies, each a "PUC") in such states.
Express statutory provisions in Illinois and Ohio require SBC and Ameritech to
obtain the approval of such states' PUCs prior to the consummation of the
Merger. Approval of the PUCs is not expressly required in the states of Indiana,
Michigan and Wisconsin. See "The Merger -- Certain Regulatory Filings and
Approvals -- State PUCs." In addition, in connection with the Merger, Ameritech
may be required to modify or withdraw certain of its authorizations to provide
long distance service in states where it or SBC operates local exchange service.
See "The Merger -- Certain Regulatory Filings and Approvals -- PUC Approvals
Regarding Intrastate, Interexchange Service."
Municipal Cable Franchises
Under the Cable Franchise Agreements (as defined herein), the consummation
of the Merger may require the approval of the relevant municipalities. See "The
Merger -- Certain Regulatory Filings and Approvals -- Municipal Cable
Franchises."
European Regulatory Approvals
SBC and Ameritech may be required to make certain notifications to or
filings with regulatory authorities in one or more European countries in which
SBC or Ameritech has direct or indirect investments in telecommunications
companies. See "The Merger -- Regulatory Approvals -- European Regulatory
Approvals."
Stock Exchange Listing
SBC has agreed to 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 NYSE, subject
to official notice of issuance, prior to the date of the closing of the Merger
(the "Closing Date").
Employee Benefits
Stock Options
The Merger Agreement provides that at the Effective Time each outstanding
option to purchase shares of Ameritech Common Stock (each an "Ameritech Option")
under the Ameritech Stock Plans (as defined herein),
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<PAGE>
whether vested or unvested, will be deemed to constitute an option to acquire,
on the same terms and conditions as were applicable under such Ameritech Option,
the same number of shares of SBC Common Stock as the holder of such Ameritech
Option would have been entitled to receive pursuant to the Merger had such
holder exercised such Ameritech 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)
(a "Substitute Option Price") equal to (y) the aggregate exercise price for the
shares of Ameritech Common Stock otherwise purchasable pursuant to such
Ameritech Option divided by (z) the number of full shares of SBC Common Stock
deemed purchasable pursuant to such Ameritech Option in accordance with the
terms of the Merger Agreement. See "The Merger--Employee Benefits--Stock
Options."
Benefit Plans
The Merger Agreement provides that, subject to certain exceptions, for at
least two years after the Effective Time, SBC will cause the Surviving
Corporation to provide or cause to be provided to employees of Ameritech and its
Subsidiaries compensation and benefit plans that are no less favorable, in the
aggregate, than certain Ameritech Compensation and Benefit Plans (as defined
herein) specifically disclosed to SBC. See "The Merger -- Employee Benefits --
Benefit Plans".
Expenses
The Merger Agreement provides that whether or not the Merger is consummated,
all costs and expenses incurred in connection with the Merger Agreement and the
Merger and the other transactions contemplated by the Merger Agreement will be
paid by the party incurring such expense, except that expenses incurred in
connection with the filing fee for the Registration Statement and printing and
mailing this Joint Proxy Statement/Prospectus and the Registration Statement and
the filing fee under the HSR Act will be shared equally by SBC and Ameritech.
Indemnification; Directors' and Officers' Insurance
The Merger Agreement provides that, from and after the Effective Time, SBC
will, and will cause the Surviving Corporation to, indemnify and hold harmless
each present and former director and officer of Ameritech (when acting in such
capacity) determined as of the Effective Time (each, an "Indemnified Party")
against any costs or expenses (including reasonable attorneys' fees), judgments,
fines, losses, claims, damages or liabilities (collectively, "Costs") incurred
in connection with any claim, action, suit, proceeding or investigation, whether
civil, criminal, administrative or investigative, arising out of or pertaining
to matters existing or occurring at or prior to the Effective Time, whether
asserted or claimed prior to, at or after the Effective Time, to the fullest
extent permitted under Delaware law.
The Merger Agreement also provides that the Surviving Corporation will
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 Ameritech's existing directors' and
officers' liability insurance coverage, for a period of six years after the
Effective Time. However, if the existing D&O Insurance expires, is terminated or
canceled, or if the annual premium therefor is increased to an amount in excess
of 175% of the last annual premium paid prior to the date of the Merger
Agreement (the "Current Premium"), in each case during such six year period, the
Surviving Corporation will use its best efforts to obtain D&O Insurance in an
amount and scope as great as can be obtained for the remainder of such period
for a premium not in excess (on an annualized basis) of 175% of the Current
Premium.
SBC Board Following the Merger
SBC has agreed pursuant to the Merger Agreement that at the Effective Time
SBC will enable up to five members of the Ameritech Board to be members of the
SBC Board. The SBC Board, in consultation with the Chief Executive officer of
Ameritech and the Ameritech Board, will select the director designees and
appoint each such director designee to the SBC Board as of the Effective Time,
with such director designees divided as nearly evenly as is possible among the
classes of directors on the SBC Board. SBC and Ameritech expect that Richard C.
Notebaert, Chairman of the Board, President and Chief Executive Officer of
Ameritech, will be one of the members of the Ameritech Board who will become a
member of the SBC Board as of the Effective Time.
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<PAGE>
Conditions
The respective obligations of Ameritech, SBC and Merger Sub to effect the
Merger are subject to the satisfaction or waiver at or prior to the Effective
Time of a number of conditions including the following: (a) the Merger Agreement
having been duly adopted by the requisite vote of holders of Ameritech Common
Stock and duly adopted by the sole stockholder of Merger Sub, and the issuance
of shares of SBC Common Stock pursuant to the Merger Agreement having been duly
approved by the holders of shares of SBC Common Stock; (b) the shares of SBC
Common Stock issuable to the shareowners of Ameritech pursuant to the Merger
Agreement having been authorized for listing on the NYSE, upon official notice
of issuance; (c) the waiting period applicable to the consummation of the Merger
under the HSR Act having expired or been terminated and all material Ameritech
Required Consents (as defined herein) and material SBC Required Consents (as
defined herein) from or with any Governmental Entity having been made or
obtained pursuant to a Final Order (as defined herein), free of any conditions
(other than conditions that are not reasonably likely, either individually or in
the aggregate to have a Regulatory Material Adverse Effect (as defined herein));
(d) no Governmental Entity of competent jurisdiction having enacted, issued,
promulgated, enforced or entered any law or injunction (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
the Merger Agreement or that is, individually or in the aggregate, with all
other such laws or injunctions, reasonably likely to have a Material Adverse
Effect (as defined herein) on SBC or Ameritech (collectively, an "Order"), and
no Governmental Entity having instituted any proceeding or, in the case of a
federal Governmental Entity, threatened in writing to institute any proceeding
seeking any such Order; (e) the Registration Statement having become effective
under the Securities Act; (f) SBC and Ameritech having received customary
"comfort" letters from each other's independent auditors with respect to the
Registration Statement, and letters from their respective independent public
accounting firms to the effect that the Merger will qualify for "pooling of
interests" accounting treatment; and (g) SBC having received all state
securities and "blue sky" permits and approvals necessary to consummate the
transactions contemplated by the Merger Agreement. See "The Merger --
Conditions."
The Merger Agreement also provides that the obligations of SBC and Merger
Sub to effect the Merger are subject to the satisfaction or waiver by SBC at or
prior to the Effective Time of a number of conditions including the following,
subject to certain exceptions: (a) the representations and warranties of
Ameritech set forth in the Merger Agreement being true and correct in all
material respects; (b) Ameritech having performed in all material respects all
obligations required to be performed by it under the Merger Agreement at or
prior to the Closing Date; (c) Ameritech having obtained the consent or approval
of each person whose consent or approval is required in order to consummate the
transactions contemplated by the Merger Agreement under any Contract (as defined
in the Merger Agreement) to which Ameritech or any of its Subsidiaries is a
party, except those for which the failure to obtain such consent or appraisal,
individually or in the aggregate, is not reasonably likely to have a Material
Adverse Effect on Ameritech; and (d) SBC having received the opinion of Sullivan
& Cromwell, 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 Ameritech
will be a party to that "reorganization" within the meaning of Section 368(b) of
the Code. See "The Merger -- Conditions."
The Merger Agreement further provides that the obligation of Ameritech to
effect the Merger is subject to the satisfaction or waiver by Ameritech at or
prior to the Effective Time of a number of conditions including the following:
(a) the representations and warranties of SBC and Merger Sub set forth in the
Merger Agreement being true and correct in all material respects; (b) each of
SBC and Merger Sub having performed in all material respects all obligations
required to be performed by it under the Merger Agreement at or prior to the
Closing Date; and (c) Ameritech having received the opinion of Skadden, Arps,
Slate, Meagher & Flom (Illinois) 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 Ameritech will be a party to that "reorganization" within the meaning of
Section 368(b) of the Code. See "The Merger -- Conditions."
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<PAGE>
Termination
The Merger Agreement provides that it may be terminated and the Merger may
be abandoned at any time prior to the Effective Time, whether before or after
the required approval or adoption, as applicable, by the shareowners of
Ameritech and SBC, by mutual written consent of Ameritech and SBC authorized by
action of their respective Boards of Directors. The Merger Agreement further
provides that it may be terminated and the Merger may be abandoned at any time
prior to the Effective Time by action of either the SBC Board or the Ameritech
Board if (i) the Merger has not been consummated by July 31, 1999 (the
"Termination Date") (provided, however, that if SBC or Ameritech determines that
additional time is necessary in connection with obtaining an SBC Required
Consent or an Ameritech Required Consent from or with any Governmental Entity,
the Termination Date may be extended to a date no later than March 31, 2000
(which date will be deemed the Termination Date)), (ii) the adoption of the
Merger Agreement by Ameritech's shareowners has not occurred at the Ameritech
Special Meeting, (iii) the approval of the issuance of shares of SBC Common
Stock pursuant to the Merger Agreement by SBC's shareowners has not been
obtained at the SBC Special Meeting, or (iv) any Order permanently restraining,
enjoining or otherwise prohibiting consummation of the Merger has become final
and non-appealable.
In addition, the Merger Agreement provides that it may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, by action of
the Ameritech Board: (a) if (i) the Ameritech Board approves entering into a
binding written agreement concerning a transaction that constitutes a Superior
Ameritech Proposal and Ameritech notifies SBC in writing that Ameritech desires
to enter into such agreement, (ii) SBC does not make, within ten calendar days
after receipt of Ameritech's written notification of its desire to enter into a
binding agreement for a Superior Ameritech Proposal, the terms of which are
specified in such notice, an offer that the Ameritech Board believes, in good
faith after consultation with its financial advisors, is at least as favorable,
from a financial point of view, to the shareowners of Ameritech as the Superior
Ameritech Proposal, and (iii) prior to such termination Ameritech pays to SBC in
immediately available funds any termination fees required to be paid pursuant to
the Merger Agreement, or (b) if (i) the SBC Board has withdrawn or adversely
modified its approval of the Merger Agreement or its recommendation to the
shareowners of SBC that such shareowners approve the issuance of shares of SBC
Common Stock pursuant to the Merger Agreement or failed to reconfirm such
recommendation in certain specific circumstances, (ii) there has been a material
breach by SBC or Merger Sub of any representation, warranty, covenant or
agreement contained in the Merger Agreement which (x) would result in a failure
of the condition relating to either the representations and warranties of SBC or
Merger Sub or the performance of the obligations of SBC or Merger Sub under the
Merger Agreement and (y) cannot be or is not cured prior to the Termination Date
or (iii) SBC or any of its representatives takes any of the actions that would
be proscribed by the non-solicitation provisions of the Merger Agreement
described under "The Merger -- Certain Covenants -- Acquisition Proposals" but
for the exception described therein allowing certain actions to be taken with
respect to engaging in discussions or negotiating in response to a bona fide
written unsolicited Superior SBC Proposal.
The Merger Agreement may also be terminated and the Merger may be abandoned
at any time prior to the Effective Time, by action of the SBC Board: (a) if (i)
the SBC Board approves entering into a binding written agreement concerning a
transaction that constitutes a Superior SBC Proposal and SBC notifies Ameritech
in writing that SBC desires to enter into such agreement, (ii) Ameritech does
not make, within ten days after receipt of SBC's written notification of its
desire to enter into a binding agreement for a Superior SBC Proposal, the terms
of which are specified in such notice, an offer that the SBC Board believes, in
good faith after consultation with its financial advisors, is at least as
favorable, from a financial point of view, to the shareowners of SBC as the
Superior SBC Proposal, and (iii) SBC prior to such termination pays to Ameritech
in immediately available funds any termination fees required to be paid pursuant
to the Merger Agreement or (b) if (i) the Ameritech Board has withdrawn or
adversely modified its approval or recommendation to Ameritech's shareowners of
the Merger Agreement, or failed to reconfirm such recommendation in certain
specified circumstances, (ii) there has been a material breach by Ameritech of
any representation, warranty, covenant or agreement contained in the Merger
Agreement at the Ameritech Special Meeting which (x) would result in a failure
of a condition relating to either the representations and warranties of
Ameritech or the performance of its obligations under the Merger Agreement and
(y) cannot be or is not cured prior to the Termination Date or (iii) Ameritech
or any of its representatives takes any of the actions that would be proscribed
by the non-solicitation provisions of the Merger Agreement described
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under "The Merger -- Certain Covenants -- Acquisition Proposals" but for the
exception described therein allowing certain actions to be taken with respect to
engaging in discussions or negotiating in response to a bona fide written
unsolicited Superior Ameritech Proposal.
Certain Termination Fees
The Merger Agreement provides that (i) in the event that a bona fide
Ameritech Acquisition Proposal has been made to Ameritech and such Ameritech
Acquisition Proposal has not been withdrawn prior to the Ameritech Special
Meeting and thereafter the Merger Agreement is terminated by either SBC or
Ameritech pursuant to the provisions of the Merger Agreement permitting
termination if Ameritech's shareowners fail to adopt the Merger Agreement at the
Ameritech Special Meeting and within nine months after such termination
Ameritech enters into an agreement to consummate a transaction that would
constitute an Ameritech Acquisition Proposal if it were the subject of a
proposal, or (ii) the Merger Agreement is terminated (x) by Ameritech pursuant
to the provisions of the Merger Agreement permitting it to terminate in order to
enter into an agreement concerning a transaction that constitutes a Superior
Ameritech Proposal or (y) by SBC pursuant to the provisions of the Merger
Agreement permitting it to terminate (A) because the Ameritech Board has
withdrawn or adversely modified its approval or recommendation to Ameritech's
shareowners of the Merger Agreement, (B) because of a wilful or intentional
breach of the representations, warranties or covenants of Ameritech or (C)
because Ameritech or any of its representatives has taken any actions that would
be proscribed by the non-solicitation provisions of the Merger Agreement, but
for the exception therein allowing certain actions to be taken in response to a
bona fide unsolicited Superior Ameritech Proposal, then Ameritech will be
required to pay SBC a fee equal to $1.2 billion (the "Termination Fee"). See
"The Merger -- Termination" and "-- Certain Termination Fees."
The Merger Agreement further provides that (i) in the event that a bona fide
SBC Acquisition Proposal has been made to SBC and such SBC Acquisition Proposal
has not been withdrawn prior to the SBC Special Meeting and thereafter the
Merger Agreement is terminated by either SBC or Ameritech pursuant to the
provision of the Merger Agreement permitting termination if SBC's shareowners
fail to approve the issuance of shares of SBC Common Stock at the SBC Special
Meeting pursuant to the Merger Agreement and within nine months after such
termination SBC enters into an agreement to consummate a transaction that would
constitute an SBC Acquisition Proposal if it were the subject of a proposal, or
(ii) if the Merger Agreement is terminated (x) by SBC pursuant to the provisions
of the Merger Agreement permitting it to terminate in order to enter into an
agreement concerning a transaction that constitutes a Superior SBC Proposal or
(y) by Ameritech pursuant to the provisions of the Merger Agreement permitting
it to terminate (A) because the SBC Board has withdrawn or adversely modified
its approval or recommendation to SBC's shareowners of the issuance of shares of
SBC Common Stock pursuant to the Merger Agreement, (B) because of a wilful or
intentional breach of the representations, warranties or covenants of SBC or (C)
because SBC or any of its representatives has taken any actions that would be
proscribed by the non-solicitation provisions of the Merger Agreement, but for
the exception therein allowing certain actions to be taken in response to a bona
fide unsolicited Superior SBC Proposal, then SBC will be required to pay
Ameritech the Termination Fee. See "The Merger -- Termination" and "-- Certain
Termination Fees."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of Ameritech's Board, shareowners should
be aware that certain members of management of Ameritech and of the Ameritech
Board have certain interests in the Merger that are in addition to the interests
of shareowners generally. See "The Merger -- Interests of Certain Persons in the
Merger."
DISSENTERS' RIGHTS OF APPRAISAL
In accordance with Section 262 of the DGCL, no appraisal rights will be
available to either holders of Ameritech Common Stock or SBC Common Stock in
connection with the Merger. No appraisal rights will be available to holders of
SBC Common Stock in connection with the Bylaw Amendment or the Share Increase
Proposal.
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ACCOUNTING TREATMENT
Based on the advice of their respective independent public accountants, SBC
and Ameritech believe that the Merger will qualify for "pooling of interests"
accounting treatment. Under this method of accounting, SBC will retroactively
restate its consolidated financial statements at the Effective Time to include
the assets, liabilities, shareowners' equity and results of operations of
Ameritech. Consummation of the Merger is conditioned upon the receipt by SBC and
Ameritech of letters from their respective independent public accounting firms
stating that the Merger will qualify for "pooling of interests" accounting
treatment. See "The Merger -- Conditions" and "Accounting Treatment."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The Merger is intended to qualify for federal income tax purposes as a
"reorganization" within the meaning of Section 368(a) of the Code. In general,
assuming the Merger so qualifies as a reorganization within the meaning of
Section 368(a) of the Code, no gain or loss will be recognized for federal
income tax purposes by holders of Ameritech Common Stock with respect thereto on
the surrender of their Ameritech Common Stock in exchange for SBC Common Stock,
except with respect to cash received in lieu of fractional shares, and no gain
or loss will be recognized for federal income tax purposes by SBC, Merger Sub or
Ameritech. See "Certain Federal Income Tax Consequences of the Merger."
THE BYLAW AMENDMENT
The SBC Board has unanimously approved the Bylaw Amendment and recommends
that the shareowners of SBC vote FOR the Bylaw Amendment. The Bylaw Amendment
would amend the second paragraph of Article II, Section 1, of the SBC Bylaws to
provide that the maximum number of persons who may serve as directors on the SBC
Board be increased to 25 from 21. See "The Bylaw Amendment."
THE SHARE INCREASE PROPOSAL
The SBC Board has unanimously approved the Share Increase Proposal,
determined that it is advisable and recommends that shareowners of SBC vote FOR
the Share Increase Proposal. The Share Increase Proposal would increase the
number of authorized shares of SBC Common Stock to 10.0 billion from 7.0
billion. See "The Share Increase Proposal."
CERTAIN EFFECTS OF THE MERGER ON THE RIGHTS OF HOLDERS OF AMERITECH COMMON STOCK
Upon consummation of the Merger, holders of shares of Ameritech Common Stock
will become shareowners of SBC. The internal affairs of SBC are governed by the
DGCL, the SBC Restated Certificate of Incorporation and the SBC Bylaws. The
internal affairs of Ameritech are governed by the DGCL, the Certificate of
Incorporation of Ameritech, as amended (the "Ameritech Charter") and the By-Laws
of Ameritech (the "Ameritech Bylaws"). For a description of certain differences
between the rights holders of Ameritech Common Stock currently have and those
they would have as holders of SBC Common Stock, see "Description of SBC Capital
Stock," and "Comparison of Certain Rights of Shareowners of SBC and Ameritech."
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COMPARATIVE STOCK PRICES
The shares of SBC Common Stock and Ameritech Common Stock are each listed on
the NYSE as well as on certain other exchanges. SBC is listed on the NYSE under
the symbol "SBC" and Ameritech is listed on the NYSE under the symbol "AIT." The
following table sets forth, for the periods indicated, the high and low sale
prices per share of SBC Common Stock and Ameritech Common Stock as reported on
the NYSE Composite Transactions Tape.
<TABLE>
<CAPTION>
SBC AMERITECH
COMMON STOCK (1) COMMON STOCK (2)
---------------- ----------------
CALENDAR QUARTER HIGH LOW HIGH LOW
- ---------------- ---- --- ---- ---
<S> <C> <C> <C> <C>
1996
First Quarter.............................. $30 1/8 $24 7/8 $33 7/16 $26 1/8
Second Quarter............................. 25 3/8 23 1/8 30 26 5/16
Third Quarter.............................. 25 1/2 23 29 13/16 24 13/16
Fourth Quarter............................. 27 5/8 23 1/2 31 11/16 26
1997
First Quarter.............................. 29 1/8 24 13/16 32 1/2 28 5/16
Second Quarter............................. 30 15/16 24 5/8 35 7/8 27 5/8
Third Quarter.............................. 31 1/8 26 25/32 35 5/16 30 21/32
Fourth Quarter............................. 38 1/16 30 43 1/8 30 1/8
1998
First Quarter.............................. 46 9/16 35 3/8 49 7/8 38 27/32
Second Quarter (through June 4, 1998)...... 44 15/16 37 1/8 50 1/4 41 7/8
<FN>
(1) Prices for SBC Common Stock reflect the effect of the two-for-one split of
SBC Common Stock effective March 19, 1998 (the "SBC Stock Split").
(2)Prices for Ameritech Common Stock reflect the effect of the two-for-one split
of Ameritech Common Stock effective December 31, 1997 (the "Ameritech Stock
Split").
</FN>
</TABLE>
On May 8, 1998, the last trading day before the public announcement of the
Merger Agreement, the closing prices of SBC Common Stock and Ameritech Common
Stock as reported on the NYSE Composite Transactions Tape were $42 3/8 per share
and $43 7/8 per share, respectively. Based on the Exchange Ratio, the pro forma
equivalent per share value of Ameritech Common Stock on May 8, 1998 was equal to
approximately $55.77 per share. The pro forma equivalent per share value of
Ameritech Common Stock on any date equals the closing sale price of SBC Common
52Stock on such date multiplied by the Exchange Ratio.
On [o] 1998, the closing sale prices of the shares of SBC Common Stock and
Ameritech Common Stock as reported on the NYSE Composite Transactions Tape were
$[o] per share and $[o] per share ($[o] on a pro forma equivalent per share
basis), respectively.
Shareowners are urged to obtain current quotations for the market prices of
SBC Common Stock and Ameritech Common Stock.
No assurance can be given as to the market price of the SBC Common Stock at
the Effective Time. Because the Exchange Ratio is fixed in the Merger Agreement,
the market value of the shares of SBC Common Stock that holders of Ameritech
Common Stock will receive following the Closing may vary significantly from the
market value of the shares of SBC Common Stock that holders of Ameritech Common
Stock would receive if the Merger were consummated on the date of this Joint
Proxy Statement/Prospectus.
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SELECTED HISTORICAL AND UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
The following table presents selected historical financial data of SBC,
Ameritech and SNET and selected unaudited pro forma combined financial data
after giving effect to the Merger and the pending SNET acquisition, each
accounted for as a "pooling of interests." SBC, Ameritech and SNET selected
historical data for each of the five years in the period ended December 31, 1997
have been derived from audited financial statements filed with the SEC and the
selected historical data for the three-month period ended March 31, 1998 have
been derived from unaudited financial statements filed with the SEC. All per
share amounts give effect to the SBC Stock Split and the Ameritech Stock Split,
as appropriate. The pro forma combined financial data are presented for
illustrative purposes only and are not necessarily indicative of the financial
position or operating results that would have occurred or that will occur upon
consummation of the Merger and the SNET acquisition. The pro forma combined
financial data do not give effect to any cost savings which may result from the
integration of the operations of SBC, Ameritech and SNET. These potential
savings, as well as any potential revenue synergies, reflect future
opportunities, including the reduction of expected cost increases, and do not
necessarily involve reductions from historical cost levels. The unaudited pro
forma combined financial data do not include any transaction costs relating to
the Merger (which are estimated to be approximately $150 million) or the SNET
acquisition. In addition, the unaudited pro forma combined financial data do not
include any reorganization costs or costs associated with the actions that may
be required to be taken regarding certain overlapping wireless properties as a
result of the Merger. As the nature of any actions to be taken regarding
overlapping wireless properties is unknown, the accompanying selected unaudited
pro forma combined financial data do not reflect any disposition which may be
made or consideration which may be received. Differences in accounting policies
do not have a material effect on either the pro forma combined financial
position or pro forma combined results of operations and have not been reflected
in any unaudited pro forma combined financial data. The following selected
financial data should be read in conjunction with the related historical and pro
forma combined financial statements and notes thereto incorporated by reference
or included herein. See "Available Information," "Incorporation of Certain
Information by Reference" and "Unaudited Pro Forma Combined Condensed Financial
Statements."
<TABLE>
<CAPTION>
As of or for the As of or for the years ended December 31,
three months --------------------------------------------------------------
ended
March 31, 1998 1997 1996 1995 1994 1993
-------------- ---- ---- ---- ---- ----
(in millions, except per share amounts)
<S> <C> <C> <C> <C> <C> <C>
SBC - HISTORICAL
Operating revenues $6,424 $24,856 $23,445 $21,712 $21,006 $20,084
Income from continuing operations 912 1,474 3,189 2,958 2,777 1,589
Income from continuing operations
per common share-basic 0.50 0.81 1.73 1.61 1.52 0.88
Income from continuing operations
per common share-assuming
dilution 0.49 0.80 1.72 1.60 1.52 0.88
Total assets 42,114 42,132 39,485 37,112 46,113 47,695
Long-term debt 11,758 12,019 10,930 10,409 10,746 10,588
Dividends per common share 0.23375 0.895 0.86 0.825 0.79 0.755
Book value per common share 5.67 5.38 5.28 4.57 7.29 8.34
Network access lines 33.93 33.44 31.84 30.32 29.15 28.23
AMERITECH - HISTORICAL
Operating revenues $4,133 $15,998 $14,917 $13,428 $12,569 $11,865
Income from continuing operations 492 2,296 2,134 2,008 1,170 1,513
Income from continuing operations
per common share-basic 0.45 2.09 1.93 1.81 1.06 1.39
Income from continuing operations
per common share-assuming
dilution 0.44 2.08 1.92 1.81 1.06 1.39
Total assets 27,953 25,339 23,707 21,942 19,947 23.428
Long-term debt 7,019 4,610 4,437 4,513 4,448 4,090
Dividends per common share 0.30 1.148 1.078 1.015 0.97 0.93
Book value per common share 7.75 7.57 6.99 6.33 5.49 7.18
13
<PAGE>
As of or for the As of or for the years ended December 31,
three months --------------------------------------------------------------
ended
March 31, 1998 1997 1996 1995 1994 1993
-------------- ---- ---- ---- ---- ----
(in millions, except per share amounts)
Network access lines 20.75 20.54 19.70 19.06 18.24 17.56
PRO FORMA SBC AND
AMERITECH COMBINED
Operating revenues $10,557 $40,854 $38,362 $35,140 $33,575 $31,949
Income from continuing operations 1,404 3,770 5,323 4,966 3,947 3,102
Income from continuing operations
per common share-basic 0.43 1.15 1.62 1.51 1.21 0.96
Income from continuing operations
per common share-assuming
dilution 0.42 1.14 1.61 1.50 1.21 0.96
Total assets 70,067 67,471 63,192 59,054 66,060 71,123
Long-term debt 18,777 16,629 15,367 14,922 15,194 14,678
Dividends per common share(1) 0.23375 0.895 0.86 0.825 0.79 0.755
Book value per common share 5.77 5.54 5.29 4.68 5.92 7.07
Network access lines 54.69 53.98 51.55 49.37 47.39 45.79
SNET-HISTORICAL
Operating revenues $527 $2,022 $1,942 $1,816 $1,718 $1,655
Income (loss) from continuing
operations 56 198 193 169 178 (44)
Income (loss) from continuing
operations per common share
basic 0.84 2.99 2.95 2.60 2.77 (0.68)
Income (loss) from continuing
operations per common share
assuming dilution 0.83 2.98 2.94 2.60 2.77 (0.68)
Total assets 2,815 2,771 2,671 2,724 3,505 3,762
Long-term debt 1,146 1,157 1,170 1,182 952 984
Dividends per common share 0.44 1.76 1.76 1.76 1.76 1.76
Book value per common share 10.23 8.96 7.05 5.42 14.77 13.38
Network access lines 2.32 2.29 2.16 2.07 2.01 1.96
PRO FORMA SBC,
AMERITECH AND
SNET COMBINED
Operating revenues $11,084 $42,876 $40,304 $36,956 $35,293 $33,604
Income from continuing operations 1,460 3,964 5,516 5,135 4,125 3,058
Income from continuing operations
per common share-basic 0.43 1.17 1.62 1.50 1.22 0.91
Income from continuing operations
per common share-assuming
dilution 0.42 1.16 1.61 1.50 1.22 0.91
Total assets 72,882 70,242 65,863 61,778 69,565 74,885
Long-term debt 19,923 17,786 16,537 16,104 16,146 15,662
Dividends per common share (1) 0.23375 0.895 0.86 0.825 0.79 0.755
14
<PAGE>
As of or for the As of or for the years ended December 31,
three months --------------------------------------------------------------
ended
March 31, 1998 1997 1996 1995 1994 1993
-------------- ---- ---- ---- ---- ----
(in millions, except per share amounts)
Book value per common share 5.77 5.53 5.25 4.63 6.00 7.09
Network access lines 57.00 56.27 53.71 51.45 49.40 47.76
AMERITECH EQUIVALENTS -
SBC AND AMERITECH
COMBINED
Income from continuing operations
per common share-basic(2) 0.57 1.51 2.13 1.99 1.59 1.26
Income from continuing operations
per common share-assuming
dilution(2) 0.55 1.50 2.12 1.97 1.59 1.26
Dividends per common share(2) 0.31 1.18 1.13 1.09 1.04 0.99
Book value per common share(2) 7.59 7.29 6.96 6.16 7.79 9.30
AMERITECH EQUIVALENTS -
SBC, AMERITECH AND
SNET COMBINED
Income from continuing operations
per common share-basic(2) 0.57 1.54 2.13 1.97 1.61 1.20
Income from continuing operations
per common share-assuming
dilution(2) 0.55 1.53 2.12 1.97 1.61 1.20
Dividends per common share(2) 0.31 1.18 1.13 1.09 1.04 0.99
Book value per common share(2) 7.59 7.28 6.91 6.09 7.90 9.33
-----------------
<FN>
(1) The unaudited pro forma combined cash dividends declared per share of
SBC Common Stock are assumed to be the same as cash dividends declared by SBC on
an historical basis.
(2) The Ameritech Equivalents per share amounts are calculated by
multiplying the pro forma combined per share amounts by the Exchange Ratio.
</FN>
</TABLE>
15
<PAGE>
THE SPECIAL MEETINGS
GENERAL
SBC
This Joint Proxy Statement/Prospectus is being furnished to holders of SBC
Common Stock in connection with the solicitation of proxies by the SBC Board for
use at the SBC Special Meeting, to be held on [o], 1998, to consider and vote
upon the approval of the issuance of shares of SBC Common Stock pursuant to the
Merger Agreement, adoption of the Bylaw Amendment and adoption of the Share
Increase Proposal, and to transact such other business related to such proposals
as may properly come before the SBC Special Meeting.
THE SBC BOARD HAS AUTHORIZED AND APPROVED THE MERGER AGREEMENT AND
UNANIMOUSLY RECOMMENDS THAT THE SBC SHAREOWNERS VOTE FOR THE APPROVAL OF THE
ISSUANCE OF SHARES OF SBC COMMON STOCK PURSUANT TO THE MERGER AGREEMENT. IN
ADDITION, THE SBC BOARD HAS UNANIMOUSLY APPROVED BOTH THE BYLAW AMENDMENT AND
THE SHARE INCREASE PROPOSAL AND DETERMINED THAT EACH IS ADVISABLE AND RECOMMENDS
THAT SBC SHAREOWNERS VOTE FOR ADOPTION OF THE BYLAW AMENDMENT AND THE SHARE
INCREASE PROPOSAL.
Ameritech
This Joint Proxy Statement/Prospectus is being furnished to holders of
Ameritech Common Stock in connection with the solicitation of proxies by the
Ameritech Board for use at the Ameritech Special Meeting, to be held on [o],
1998, and any adjournments or postponements thereof, to consider and vote upon
the adoption of the Merger Agreement and to transact such other business related
to the proposal to consider and vote upon adoption of the Merger Agreement as
may properly come before the Ameritech Special Meeting.
THE AMERITECH BOARD HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND
UNANIMOUSLY RECOMMENDS THAT THE AMERITECH SHAREOWNERS VOTE FOR THE ADOPTION OF
THE MERGER AGREEMENT.
This Joint Proxy Statement/Prospectus is also furnished to Ameritech
shareowners as a prospectus in connection with the issuance by SBC of shares of
SBC Common Stock pursuant to the Merger Agreement.
Each copy of this Joint Proxy Statement/Prospectus mailed to holders of
Ameritech Common Stock is accompanied by a form of proxy for use at the
Ameritech Special Meeting, and each copy of this Joint Proxy
Statement/Prospectus mailed to holders of SBC Common Stock is accompanied by a
form of proxy for use at the SBC Special Meeting. In addition, record owners of
Ameritech Common Stock as of the Ameritech Record Date may provide proxies by
calling toll-free at 1-800-___-____, or through the Internet, in accordance with
the instructions set forth on the accompanying proxy card.
DATE, PLACE AND TIME
The SBC Special Meeting will be held on [o], 1998, at [o], local time at
[o].
The Ameritech Special Meeting will be held on [o], 1998, at [o], local time
at [o].
RECORD DATES
SBC
The SBC Board has fixed the close of business on [o], 1998 as the SBC Record
Date for the determination of the holders of SBC Common Stock entitled to
receive notice of and to vote at the SBC Special Meeting.
Ameritech
The Ameritech Board has fixed the close of business on [o], 1998 as the
Ameritech Record Date for the determination of the holders of Ameritech Common
Stock entitled to receive notice of and to vote at the Ameritech Special
Meeting.
16
<PAGE>
VOTE REQUIRED
SBC
As of the SBC Record Date, there were [o] shares of SBC Common Stock issued
and outstanding. Each share of SBC Common Stock outstanding on the SBC Record
Date is entitled to one vote upon each matter properly submitted at the SBC
Special Meeting.
The affirmative vote of at least a majority of the shares of SBC Common
Stock voting on the proposal to issue shares of SBC Common Stock pursuant to the
Merger Agreement is necessary for approval of such share issuance. Under the
rules of the NYSE, in order to approve the issuance of shares of SBC Common
Stock pursuant to the Merger Agreement, the total number of votes cast with
respect to such matter must be in excess of 50% of the issued and outstanding
shares of SBC Common Stock. The affirmative vote of the holders of at least
two-thirds of the shares of SBC Common Stock issued and outstanding on the SBC
Record Date is necessary to adopt the Bylaw Amendment. The affirmative vote of
the holders of at least a majority of the shares of SBC Common Stock issued and
outstanding on the SBC Record Date is necessary to adopt the Share Increase
Proposal.
With respect to the proposal to issue shares of SBC Common Stock pursuant to
the Merger Agreement, any abstention or broker non-vote will have the effect of
reducing the aggregate number of shares of SBC Common Stock voting and the
number of shares of SBC Common Stock required to approve such proposal. With
respect to each of the Bylaw Amendment and the Share Increase Proposal, any
abstention by a record holder or beneficial owner of SBC Common Stock or failure
to vote by a record holder of SBC Common Stock will have the effect of a vote
against such proposal. Under the rules of the NYSE, brokers who hold shares in
street name for customers will not have authority to vote on the issuance of
shares of SBC Common Stock pursuant to the Merger Agreement, unless they receive
specific instructions from beneficial owners. However, under the rules of the
NYSE, brokers who hold shares in street name for customers will have authority
to vote on the Bylaw Amendment and the Share Increase Proposal, each of which is
considered a "routine" matter. Shares that are not voted because brokers did not
receive any such instructions are referred to as "broker non-votes."
As of [o], 1998, directors and executive officers of SBC and their
affiliates owned beneficially an aggregate of [o] shares of SBC Common Stock
(including shares which may be acquired within 60 days upon exercise of employee
stock options) or approximately [o]% of the shares of SBC Common Stock
outstanding on such date. The directors and executive officers of SBC have
indicated their intention to vote in favor of the proposal to issue shares of
SBC Common Stock pursuant to the Merger Agreement.
As of [o], 1998, the directors and executive officers of SBC owned [o]
shares of Ameritech Common Stock.
Ameritech
As of the Ameritech Record Date, there were [o] shares of Ameritech Common
Stock issued and outstanding. Each share of Ameritech Common Stock outstanding
on the Ameritech Record Date is entitled to one vote on the proposal to adopt
the Merger Agreement at the Ameritech Special Meeting. The affirmative vote of
the holders of a majority of the shares of Ameritech Common Stock outstanding on
the Ameritech Record Date is required to adopt the Merger Agreement. Any failure
to be present at the Ameritech Special Meeting, in person or by proxy, any
abstention and any broker non-vote will have the same effect as a vote against
adoption of the Merger Agreement. Under the rules of the NYSE, brokers who hold
shares in street name for customers will not have authority to vote on the
Merger Proposal unless they receive specific instructions from the beneficial
owners of such shares.
The presence, in person or by proxy, of a majority of the votes entitled to
be cast at the Ameritech Special Meeting will constitute a quorum for the
transaction of business.
As of [o], 1998, directors and executive officers of Ameritech and their
affiliates owned beneficially an aggregate of [o] shares of Ameritech Common
Stock (including shares which may be acquired within 60 days upon exercise of
employee stock options) or approximately [o]% of the shares of Ameritech Common
Stock outstanding on such date. The directors and executive officers of
Ameritech have indicated their intention to vote in favor of the proposal to
adopt the Merger Agreement.
As of [o], 1998, the directors and executive officers of Ameritech owned [o]
shares of SBC Common Stock.
17
<PAGE>
See "The Merger -- Interests of Certain Persons in the Merger."
VOTING AND REVOCATION OF PROXIES
Voting and Revocation of Proxies
Shares of SBC Common Stock and Ameritech Common Stock represented by a proxy
properly signed and received at or prior to the appropriate Special Meeting,
unless subsequently revoked, will be voted in accordance with the instructions
thereon. If a proxy is signed and returned without indicating any voting
instructions, shares of SBC Common Stock represented by the proxy will be voted
FOR the proposal to approve the issuance of shares of SBC Common Stock pursuant
to the Merger Agreement, FOR the Bylaw Amendment and FOR the Share Increase
Proposal, and shares of Ameritech Common Stock represented by the proxy will be
voted FOR the proposal to adopt the Merger Agreement. Any proxy given pursuant
to this solicitation may be revoked by the person giving it at any time before
the proxy is voted by filing a duly executed revocation or a duly executed proxy
bearing a later date with the Secretary of SBC, for SBC shareowners, or with the
Secretary of Ameritech or communicating the same by telephone or through the
Internet in the manner described on Ameritech's proxy card, for Ameritech
shareowners, prior to or at the appropriate Special Meeting, or, in either case,
by voting in person at the appropriate Special Meeting, although attendance at
the appropriate Special Meeting will not in and of itself constitute revocation
of a proxy. All written notices of revocation and other communications with
respect to revocation by SBC shareowners should be addressed as follows: SBC
Communications Inc., 175 East Houston, San Antonio, Texas 78205, Attention:
Secretary. All written notices of revocation and other communications with
respect to revocation by Ameritech shareowners should be addressed as follows:
Ameritech Corporation, 30 South Wacker Drive, Chicago, Illinois 60606,
Attention: Corporate Secretary.
If an SBC shareowner is a participant in SBC's Direct Stock Purchase and
Reinvestment Plan, the SBC proxy card will serve as voting instructions with
respect to the number of shares of SBC Common Stock held in the plan on behalf
of the particular shareowner. If an SBC shareowner is a participant in any of
the following compensation and benefit plans of SBC: the SBC PAYSOP, the SBC
Savings Plan, the SBC Savings and Security Plan, the Pacific Telesis Group
Supplemental Retirement and Savings Plan for Non-Salaried Employees, or the
Pacific Telesis Group PAYSOP, then the SBC proxy card will, similarly, serve as
a voting instruction for the trustees of those plans where all accounts are
registered in the same name. If proxy cards representing shares of SBC Common
Stock in the foregoing compensation and benefit plans are not received, those
shares of SBC Common Stock will be voted in the same proportion as the shares of
SBC Common Stock for which signed cards are returned by other participants in
such compensation and benefit plans of SBC. If an SBC shareowner participates in
any of these plans or maintains other accounts under a different name (e.g.,
with and without a middle initial), the SBC shareowner may receive more than one
set of Joint Proxy Statement/Prospectus materials. To ensure that all shares of
SBC Common Stock are voted, the shareowner must sign and return every proxy card
received.
If an Ameritech shareowner is a participant in the Ameritech Direct Services
Investment Plan, the Ameritech proxy card will serve as voting instructions with
respect to the number of full shares of Ameritech Common Stock held in the plan
on behalf of the particular shareowner. If an Ameritech shareowner is a
participant in the Ameritech Savings Plan for Salaried Employees or the
Ameritech Savings and Security Plan for Non-Salaried Employees, then the
Ameritech proxy card similarly will serve as voting instructions for the
trustees of those plans if all accounts are registered in the same name. Shares
of Ameritech Common Stock in the Ameritech Savings Plan for Salaried Employees
or the Ameritech Savings and Security Plan for Non-Salaried Employees as to
which voting instructions are not received, as well as shares of Ameritech
Common Stock which have not yet been allocated to participants' accounts in the
savings plans, will be voted in the same proportion as the shares of Ameritech
Common Stock for which voting instructions are given by other participants in
the same plan. If an Ameritech shareowner participates in any of these plans or
maintains other accounts under a different name (e.g., with and without a middle
initial), the Ameritech shareowner may receive more than one copy of this Joint
Proxy Statement/Prospectus. To ensure that all shares of Ameritech Common Stock
are voted, the shareowner must vote shares covered by every proxy card received.
The SBC Board and the Ameritech Board are not currently aware of any
business to be acted upon at their respective Special Meetings, other than as
described herein. If, however, other matters related to the proposals at the
respective Special Meetings are properly brought before either Special Meeting,
the persons appointed as proxies will have discretion to vote or act thereon
according to their best judgment. The persons appointed as proxies will have
discretion to vote on adjournment of the Special Meetings. Such adjournment may
be for the purpose of soliciting additional proxies. Shares represented by
proxies voting against, in the case of SBC, approval of the issuance of shares
of SBC Common Stock pursuant to the Merger Agreement and, in the case of
Ameritech, adoption of the Merger
18
<PAGE>
Agreement will be voted against a proposal to adjourn the respective Special
Meeting for the purpose of soliciting additional proxies.
Shareowners of SBC and Ameritech will not be entitled to present any matter
for consideration at their respective Special Meetings.
SOLICITATION OF PROXIES
In addition to solicitation by mail, directors, officers and employees of
SBC or Ameritech, none of whom will be specifically compensated for such
services but may be reimbursed for reasonable out-of-pocket expenses in
connection therewith, may solicit proxies from the shareowners of SBC or
Ameritech personally or by telephone, telecopy or telegram or other forms of
communication. Brokerage houses, nominees, fiduciaries and other custodians will
be requested to forward soliciting materials to beneficial owners and will be
reimbursed for their reasonable expenses incurred in sending such materials to
beneficial owners.
In addition, SBC has retained [o] and Ameritech has retained [o] to assist
in the solicitation of proxies from their respective shareowners. The fees to be
paid by SBC to [o] for such services will be equal to approximately $[o], and
the fees to be paid by Ameritech to [o] for such services will be equal to
approximately $[o] plus in each case reasonable out-of-pocket costs and
expenses. SBC and Ameritech will each bear its own expenses in connection with
the solicitation of proxies for the Special Meetings, except that SBC and
Ameritech will share equally all expenses incurred in connection with the filing
fee for the Registration Statement and printing and mailing this Joint Proxy
Statement/Prospectus and the Registration Statement.
AMERITECH SHAREOWNERS SHOULD NOT SEND AMERITECH COMMON STOCK CERTIFICATES
WITH THEIR PROXY CARDS.
THE COMPANIES
SBC
SBC is a holding company whose subsidiaries and affiliates operate
predominantly in the communications services industry. SBC's subsidiaries and
affiliates provide landline and wireless telecommunications services and
equipment, directory advertising, publishing services and Internet access
services. SBC's subsidiaries and affiliates provide landline telecommunications
and related services in California, Texas, Missouri, Oklahoma, Kansas, Arkansas
and Nevada and wireless telecommunications and related services principally in
those states as well as in Illinois, Indiana, Maryland, Massachusetts, New York,
Virginia, Washington, D.C. and West Virginia. SBC will also provide landline and
wireless telecommunications and related services in Connecticut and wireless
services in Rhode Island following the completion of the acquisition of SNET, if
completed. SBC was incorporated under the laws of the State of Delaware in 1983.
On January 4, 1998, SBC entered into an agreement to acquire SNET, which, as
of and for the year ended December 31, 1997, had assets of $2.8 billion,
shareholders' equity of $597 million and net income of $194 million. The
acquisition of SNET is intended to qualify for "pooling of interests" accounting
treatment, and is expected to close prior to the end of 1998. The Merger and the
SNET acquisition are reflected in certain of the pro forma combined financial
information presented herein.
The mailing address of SBC's principal executive offices is 175 East
Houston, San Antonio, Texas 78205-2233, and its telephone number is (210)
821-4105.
AMERITECH
Ameritech is a holding company whose subsidiaries and affiliates operate
predominantly in the communications services industry. Ameritech's subsidiaries
and affiliates provide a wide range of communications services, including local
and long distance, cellular, paging, security, cable TV, Internet access and
directory publishing services. Ameritech's subsidiaries and affiliates provide
landline and wireless telecommunications and related services in Illinois,
Indiana, Michigan, Ohio and Wisconsin, wireless telecommunications and related
services in Missouri, Minnesota and
19
<PAGE>
Hawaii and security monitoring services in most of the United States' largest
metropolitan areas. Ameritech also has significant investments in the European
telecommunications industry with financial interests in 15 European countries.
The mailing address of Ameritech's principal executive offices is 30 South
Wacker Drive, Chicago, Illinois 60606, and its telephone number is
1-800-257-0902.
MERGER SUB
Merger Sub, a wholly-owned subsidiary of SBC, was formed by SBC solely for
the purpose of effecting the Merger. The mailing address of Merger Sub's
principal executive offices is 175 East Houston, San Antonio, Texas 78205-2233
and its telephone number is (210) 821-4105.
RECENT DEVELOPMENTS
AMERITECH
Telecom Corporation of New Zealand. Pursuant to a plan publicly announced in
December 1997, Ameritech completed the sale of substantially all of its stake in
TCNZ in a global stock offering in April 1998. Subject to applicable exchange
rates, Ameritech expects to receive total net proceeds of approximately $2.1
billion (before deducting transaction costs). Approximately $1.1 billion of such
proceeds has been received, and the remainder is due by March 31, 1999.
Ameritech accounted for this transaction as a sale and recorded an after-tax
gain of approximately $1.0 billion, which will be reflected in the second
quarter of 1998.
THE MERGER
This section of this Joint Proxy Statement/Prospectus describes certain
aspects of the Merger. To the extent that it relates to the Merger Agreement,
the following description does not purport to be complete and is qualified in
its entirety by reference to the Merger Agreement, which is attached as Annex A
to this Joint Proxy Statement/Prospectus and is incorporated herein by
reference. All shareowners of SBC and Ameritech are urged to read the Merger
Agreement in its entirety.
GENERAL
The Merger Agreement provides for a business combination between SBC and
Ameritech pursuant to which, subject to the satisfaction or waiver of the
conditions therein, at the Effective Time, Merger Sub will be merged with and
into Ameritech, and Ameritech will thereby become a wholly-owned subsidiary of
SBC in a transaction intended to qualify as a "pooling of interests" for
accounting and financial reporting purposes and as a tax free "reorganization"
within the meaning of Section 368(a) of the Code for federal income tax
purposes. As a consequence of the Merger, each share of Ameritech Common Stock
issued and outstanding immediately prior to the Effective Time (other than
Excluded Ameritech Common Stock) will be converted into and exchangeable for the
Merger Consideration. Each share of SBC Common Stock issued in the Merger will
have attached thereto the appropriate number of SBC Rights or SBC Substitute
Rights in the event that SBC Rights or SBC Substitute Rights are attached to the
outstanding shares of SBC Common Stock when such shares are issued pursuant to
the Merger Agreement. Each outstanding share of SBC Common Stock will remain
outstanding and unaffected by the Merger. As a result of the Merger, holders of
Ameritech Common Stock immediately prior to the Effective Time will own
approximately [o]% of the SBC Common Stock (issued on the number of shares of
SBC Common Stock and Ameritech Common Stock outstanding as of [o], 1998 and
based on the Exchange Ratio, but not including any shares of SBC Common Stock to
be issued in the SNET acquisition).
The SBC Rights Agreement and the SBC Rights are scheduled to expire by their
terms on the SBC Rights Expiration Date. As of the date of this Joint Proxy
Statement/Prospectus, SBC has not determined whether it will enter into an
amendment of the SBC Rights Agreement or a new rights agreement which would have
the effect that the SBC Rights currently outstanding under the SBC Rights
Agreement would continue to be outstanding after the SBC Rights Expiration Date.
If the SBC Rights or SBC Substitute Rights are outstanding at the time shares of
SBC Common Stock are issued pursuant to the Merger Agreement, the appropriate
number of SBC Rights or SBC Substitute Rights will be
20
<PAGE>
attached to such shares of SBC Common Stock. If no such rights are outstanding
at the time shares of SBC Common Stock are issued pursuant to the Merger
Agreement, no rights will be attached to such shares of SBC Common Stock.
No fractional shares of SBC Common Stock will be issued in the Merger.
Instead, the Merger Agreement provides that each holder of Ameritech Common
Stock who would otherwise have been entitled to receive a fractional share of
SBC Common Stock in the Merger will be entitled to receive, in lieu thereof, an
amount in cash (without interest) determined by multiplying such fraction
(rounded to the nearest one-hundredth of a share) by 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.
BACKGROUND OF THE MERGER
Prior to the passage of the Telecommunications Act, Mr. Notebaert and the
Ameritech Board began considering strategic alternatives to better position
Ameritech in the changing telecommunications industry, including possible
combinations with other large telecommunications carriers. During the two years
leading up to the execution of the Merger Agreement, Mr. Notebaert and other
members of Ameritech's senior management together with, among others, Goldman
Sachs, identified and reviewed various strategic alternatives. Although
Ameritech considered certain of these strategic alternatives, none were pursued
beyond exploratory discussions.
During a meeting on February 24, 1998, Edward E. Whitacre, Jr., Chairman of
the Board and Chief Executive Officer of SBC and Mr. Notebaert discussed the
possibility of a combination of the respective businesses of SBC and Ameritech,
including possible structures for such a combination. On March 24, 1998, Mr.
Whitacre and Mr. Notebaert met for further discussions. By the conclusion of
this meeting, their discussions had focused on the possibility of a combination
that would yield a premium for Ameritech shareowners. During the course of that
meeting, Mr. Whitacre and Mr. Notebaert decided that each of them would form a
management team to further explore the feasibility of a potential business
combination.
Thereafter, Mr. Whitacre asked James S. Kahan, Senior Vice President -
Corporate Development of SBC, to assemble a small team of SBC representatives to
work with a small group of Ameritech representatives in evaluating a potential
combination. Mr. Notebaert requested that Oren G. Shaffer, Executive Vice
President and Chief Financial Officer of Ameritech , Kelly R. Welsh, Executive
Vice President and General Counsel of Ameritech, and Ali Shadman, Vice President
of Corporate Strategy and Development of Ameritech, represent Ameritech in
evaluating the feasibility of a possible business combination with SBC.
On April 8, 1998, SBC and Ameritech entered into a confidentiality and
non-disclosure agreement governing their exchange of confidential information.
Beginning in early April, representatives of SBC met with representatives
of Ameritech to discuss various aspects of a potential combination. During the
week of April 13, 1998, SBC began to involve its outside financial and legal
advisors. At a meeting of the Ameritech Board on April 15, 1998, Ameritech
management presented information and its views regarding the possibility of a
transaction with SBC. Thereafter, on April 21, 1998 Mr. Notebaert and Mr.
Whitacre met and determined, based on the information that had been exchanged
and reviewed, that there appeared to be sufficient mutual interest in a
potential combination to continue discussions.
The Ameritech Board met again on April 22, 1998 to consider additional
information with respect to a possible combination with SBC. At the conclusion
of such meeting, the Ameritech Board authorized further exploration of such a
transaction, with the assistance of outside financial and legal advisors.
Beginning on April 28, 1998, representatives of SBC and Ameritech began
conducting mutual due diligence reviews in Chicago and in San Antonio. These
reviews continued throughout the first ten days of May. On April 29, 1998,
representatives of SBC and Ameritech met in San Antonio to discuss the terms of
a draft Merger Agreement. Negotiations regarding the Merger and the terms of the
draft Merger Agreement continued on a daily basis between April 29th and the
early morning hours of May 10th.
On May 6, 1998 the Ameritech Board met to discuss various aspects of the
proposed merger. Members of Ameritech's senior management, representatives of
Goldman Sachs and Ameritech's legal advisors made presentations to the Ameritech
Board and discussed their views and analyses of various aspects of the proposed
transaction. The Ameritech Board reviewed and considered, among other things,
the matters described under
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"-- Reasons for the Merger; Recommendations of the Boards of Directors --
Ameritech" and "-- Opinions of Financial Advisors -- Ameritech." The Ameritech
Board also discussed various issues still being negotiated. The Ameritech Board
authorized representatives of Ameritech to continue negotiating with SBC and
determined that it would convene again on May 10, 1998 to further consider the
potential transaction with SBC.
On May 7, 1998, the SBC Board met to discuss various aspects of the
proposed merger. Members of SBC's senior management and representatives of SBC,
as well as Salomon Smith Barney, made presentations to the SBC Board and
discussed with the SBC Board their views and analyses of various aspects of the
proposed transaction. The SBC Board reviewed and considered, among other things,
the matters described under "-- Reasons for the Merger; Recommendations of
Boards of Directors -- SBC" and "-- Opinions of Financial Advisors -- SBC." The
SBC Board also discussed various issues that were still being negotiated. At the
conclusion of this meeting, a meeting of the SBC Board was scheduled for May 10,
1998 to consider approving a merger with Ameritech.
The parties continued to negotiate following the mid-week Board meetings and
in the early morning hours of May 10, 1998 the negotiators for each company
reached an agreement which they were prepared to recommend to their respective
Boards of Directors. Later that morning, the Ameritech Board met with
representatives of Ameritech and its outside advisors to further discuss the
terms of the Merger Agreement, including, among other things, the Exchange
Ratio. At this meeting, Goldman Sachs delivered its opinion to the Ameritech
Board to the effect that, as of the date of such meeting, the Exchange Ratio was
fair from a financial point of view to holders of Ameritech Common Stock. After
deliberation, the Ameritech Board unanimously approved the Merger Agreement.
The SBC Board met in the afternoon on May 10, 1998 with representatives of
SBC and its outside advisors to further discuss the terms of the Merger
Agreement, including the issuance of shares of SBC Common Stock pursuant to the
Merger Agreement. At this meeting, Salomon Smith Barney delivered its opinion to
the SBC Board to the effect that, as of the date of such meeting, the Exchange
Ratio was fair from a financial point of view to SBC. After deliberation, the
SBC Board unanimously (with one director absent) authorized and approved the
Merger Agreement, including the issuance of shares of SBC Common Stock pursuant
to the Merger Agreement.
Thereafter, the Merger Agreement was executed on May 10, 1998.
REASONS FOR THE MERGER; RECOMMENDATIONS OF THE BOARDS OF DIRECTORS
SBC
In reaching its conclusion to approve the Merger Agreement and the Merger
and recommend that shareowners of SBC vote FOR approval of the issuance of
shares of SBC Common Stock pursuant to the Merger Agreement, the SBC Board
concluded that over time the Merger was likely to increase the value of shares
of SBC Common Stock over what that value would have been had SBC not agreed to
the Merger and that the opportunities created by the Merger to increase such
value more than offset the risks inherent in the Merger. In reaching this
conclusion, the SBC Board considered the following benefits that it believes
will be derived from the Merger:
o Creation of a Global Telecommunications Company. The Merger will create a
global telecommunications company that will be better positioned to compete
in local, national and international markets. The SBC Board and SBC's
management believe that over the course of the next several years as a result
of the rapid changes taking place in the telecommunications industry, the
telecommunications industry will be comprised of a limited number of
integrated global operators and a large number of regional, niche and local
competitors. The Merger is intended to position the combined entity to be a
successful global operator in this environment.
o The "National-Local" Strategy. The SBC Board and SBC's management believe
that the Merger will provide the resulting entity with the scope, scale,
management and "critical mass" of resources to permit it to pursue and
implement successfully a strategy that focuses on the local exchange market
on a national basis. In furtherance of this national-local strategy, the
combined company would be positioned to enter, following the receipt of
applicable regulatory approvals which are expected to be obtained within
three years, 30 U.S. markets outside its traditional local telephone region,
including New York, Baltimore/Washington, Boston, Atlanta, Denver, Miami,
Phoenix and Seattle, offering an integrated bundle of local exchange, long
distance, cellular, Internet and high-speed data services to large, medium
and small businesses and residential consumers, thereby providing customers
with a competitive alternative to existing service providers to implement
this strategy. SBC will be required to obtain certificates to act as a
competitive local exchange carrier in all states in which it intends
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to function in such capacity. Capital expenditures associated with this
expansion are anticipated to be up to approximately $2.5 billion in the ten
years following consummation of the Merger. It is expected that the
resulting entity would serve customers in the top 50 U.S. markets (i.e., 30
markets outside of the traditional service territories of SBC, Ameritech and
SNET and 20 markets inside those territories) and that the resulting entity
would use those 50 markets as a platform to develop a truly national,
state-of-the-art voice and data network and ultimately to interconnect that
national network with its international operations to create an
international network permitting it to "follow" communications traffic and
serve its customers globally. SBC estimates that this national-local
strategy has the potential of making a positive contribution to SBC's
financial results in the fourth year after consummation of the Merger, with
the potential of adding $2.0 billion in revenue in the fifth year after
consummation of the Merger and $7.0 billion in revenue and $900 million in
net income in the tenth year after consummation of the Merger.
o Synergistic Benefits Resulting from the Merger. The SBC Board and SBC's
management believe that the Merger will result in significant opportunities
for cost savings, revenue growth, technological development and other
synergistic benefits. Economies of scope and scale, the elimination of
duplicative expenditures and the consistent use of the best practices of SBC,
Ameritech and SNET in cost control and product offerings are expected to
enable the combined company to realize significant cost savings and revenue
enhancements. SBC estimates that these potential synergies could increase
estimated net income by $1.4 billion annually and that 90% of such synergies
could be achieved by the third full year following consummation of the
Merger. The estimated annual pre-tax synergies are expected to be derived
from $1.2 billion in potential expense savings, $750 million in potential
additional revenue synergies and $300 million in potential combined future
long distance synergies. Additionally, the Merger also provides the
opportunity to reduce annual capital expenditures by $250 million annually in
three years. It is anticipated that the expense savings will primarily come
from SBC's operations in Texas, Missouri, Oklahoma, Kansas, Arkansas and
areas outside its traditional local telephone region while the revenue
synergies will primarily come from Ameritech's operations. All of the
preceding estimates of synergistic benefits are exclusive of the
national-local strategy effects described above.
o Geographic Diversification. As a result of the Merger, SBC will be more
geographically diverse. Its geographic region would include the combined
traditional 13 state region of SBC, Ameritech and SNET, as well as
complementary international operations and investments in, among other
locations, Mexico, South Africa, France, Belgium, Denmark, Norway,
Switzerland and Hungary. This increased geographic diversification will
reduce the resulting entity's exposure to changes in economic, competitive
and political conditions in any given geographic area in which it operates,
as compared to the exposure that either SBC or Ameritech would have in the
absence of the Merger.
o International Investment and Expansion. The Merger would expand SBC's
international investments, especially in Europe. This increased investment
will facilitate continuation of SBC's strategy of deploying key
telecommunications infrastructures in high-traffic areas around the world.
o Employees. A strong management team, drawn from the experienced management of
both companies, should permit the new entity to become a global
communications company, to achieve synergistic benefits and to successfully
implement its strategies, including the national-local strategy.
The SBC Board weighed these advantages and opportunities against the following
risks associated with the Merger:
o the challenges inherent in the combination of two business enterprises of the
size and scope of SBC and Ameritech and the possible resulting diversion of
management attention for an extended period of time;
o the likelihood that the competitiveness of the local exchange business will
increase due to the entrance of additional competitors or to strategic or
product initiatives by existing competitors which could occur in the absence
of a Merger, but the effect of which could be exacerbated by the Merger;
o the additional complexity of satisfying the FCC standards for permission to
provide long distance service as a result of being a larger company; and
o the fact that, excluding special transition and integration charges and
assuming that the Merger is consummated in the second half of 1999, the
Merger (including anticipated synergies) is expected to be dilutive to SBC's
otherwise anticipated earnings per share in 2000 and 2001 by approximately 7%
and 3%, respectively.
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In reaching the determination that the terms of the Merger were fair to and
in the best interests of SBC and its shareowners, the SBC Board also considered
a number of additional factors, including its management's knowledge of
Ameritech's business and its management's reports concerning the results of its
due diligence investigation of Ameritech, the terms of the Merger Agreement, the
historical and current market prices of Ameritech Common Stock, the presentation
of SBC's financial advisor, Salomon Smith Barney, and the written opinion of
Salomon Smith Barney to the effect that the Exchange Ratio is fair from a
financial point of view to SBC.
The foregoing discussion of the information and material factors which were
given weight by the SBC Board is not intended to be exhaustive. The SBC Board
did not assign specific weights to the foregoing factors and individual
Directors may have given different weights to different factors. The SBC Board,
however, unanimously (with one director absent) authorized and approved the
Merger Agreement, including the issuance of shares of SBC Common Stock pursuant
to the Merger Agreement.
THE SBC BOARD UNANIMOUSLY RECOMMENDS THAT SBC SHAREOWNERS VOTE FOR APPROVAL
OF THE ISSUANCE OF SHARES OF SBC COMMON STOCK PURSUANT TO THE MERGER AGREEMENT.
Ameritech
The Ameritech Board has unanimously determined that the terms of the Merger
Agreement and the transactions contemplated thereby are fair to, and in the best
interests of, Ameritech and its shareowners.
In reaching its decision to approve the Merger Agreement and recommend that
Ameritech shareowners vote for adoption of the Merger Proposal, the Ameritech
Board concluded that the Merger would afford the opportunity to accelerate the
delivery of shareowner value and create a combined enterprise which would be
better positioned to accomplish Ameritech's growth strategies and participate in
the rapidly evolving and expanding global communications marketplace. The
Ameritech Board considered a number of factors in reaching this conclusion,
including the following:
Exchange Ratio and Transaction Structure. The Ameritech Board considered the
relationship of the Exchange Ratio to the historical market prices for Ameritech
Common Stock, including the fact that the Exchange Ratio would provide a premium
of approximately 27% to Ameritech shareowners based on the closing per share
sale prices on the NYSE of Ameritech Common Stock and SBC Common Stock on May 8,
1998, the last trading day prior to the announcement of the Merger. The
Ameritech Board also viewed favorably the form of the Merger Consideration and
the structure of the Merger, which permit Ameritech shareowners to exchange, on
a tax-free basis, outstanding shares of Ameritech Common Stock for registered
shares of SBC Common Stock representing approximately 44% of the total
outstanding equity of SBC (based on the number of outstanding shares of SBC
Common Stock outstanding as of May 8, 1998, without giving effect to the SNET
acquisition). Ameritech shareowners can thereby retain a significant aggregate
equity interest in the combined enterprise and the related opportunity to share
in its future growth. In reaching its conclusions, the Ameritech Board
considered, among other things, the various analyses and reports of its
financial advisors and the opinion of its financial advisor described below as
to the fairness, from a financial point of view, of the Exchange Ratio to
Ameritech's shareowners. See "--Opinions of Financial Advisors--Ameritech."
Combined Best Practices and Other Synergistic Benefits. The Ameritech Board
considered the opportunity presented by the Merger for two well-regarded,
profitable companies to integrate and apply as best practices across the
combined enterprise their complementary business strengths, including those
relating to revenue enhancement, asset management, capital allocation, cost
control, operational and engineering practices, marketing programs and product
offerings. The Ameritech Board also considered management's view that the Merger
would create opportunities for revenue growth, economies of scope and scale
(including the greater purchasing scale of the combined enterprise), elimination
of duplicative expenditures, joint technological development and other
synergistic benefits in which Ameritech shareowners would be able to participate
as shareowners of SBC following the Merger. The Ameritech Board concluded that
the cost and operating synergies expected to be achievable as a result of the
Merger would not be available to Ameritech on its own. In addition, the
Ameritech Board considered the demonstrated ability of SBC's management to
successfully integrate and obtain synergistic benefits from previous SBC
acquisitions, most notably SBC's acquisition of Pacific Telesis Group.
Competitive Scope and Scale. The Ameritech Board considered the opportunity
afforded by the merger of two companies with a shared strategic vision to create
a combined enterprise with the scale, scope and financial, technological,
management and operational resources to take greater advantage of rapid growth
and change in the global
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communications marketplace than would have been achievable by Ameritech alone.
The Ameritech Board considered the importance of scale, scope, market position
and financial and other resources in accelerating and achieving the execution of
Ameritech's growth strategies and in better serving customers through offering a
broad, integrated package of products and services on a cost-effective basis.
The Ameritech Board also considered that recent consolidation in the
telecommunications industry may continue or accelerate, leading to the formation
of a limited number of global industry leaders.
Expanded Geographic Coverage; Complementary International Presence. As a
result of the Merger, the combined enterprise would be more geographically
diversified, both domestically and internationally, through the complementary
investments and operations of Ameritech and SBC in Belgium, Denmark, Hungary,
Mexico, South Africa and fourteen other countries on five continents. The
Ameritech Board considered management's view that this extended reach would
provide opportunities for the resulting entity to meet the needs of national and
international customers for integrated communications services across a broader
geographic base. The Ameritech Board also considered the opportunity for the
combined company's expanded platform in key communications and information
markets to position it to maximize future growth opportunities, both
domestically and internationally.
Potential Risks. The Ameritech Board considered a number of potential risks,
as well as related mitigating factors, in connection with its evaluation of the
Merger. Such risks included the potential diversion of management resources from
operational matters and the opportunity costs associated with the proposed
Merger during an extended regulatory review process. In weighing this factor,
however, the Ameritech Board considered the flexibility afforded by the interim
operating covenants in the Merger Agreement, relating, for example, to
acquisitions, divestitures, capital expenditures, indebtedness and continued
regular dividend payments. See "--Certain Covenants." Other risks considered by
the Ameritech Board included the possibility that: (i) despite the historical
performance of SBC Common Stock and the historical relationship of its market
price to that of Ameritech Common Stock, the value of the Merger Consideration
received by Ameritech shareowners in the Merger (which is determined by a fixed
exchange ratio) may diminish prior to the Effective Time if the market value of
SBC Common Stock declines during the period prior to the Effective Time; (ii)
the synergistic benefits expected from the Merger may be more difficult to
achieve than anticipated; and (iii) the Merger ultimately may not be consummated
as a result of material adverse conditions imposed by regulatory authorities or
otherwise. In the judgment of the Ameritech Board, however, these potential
risks were more than offset by the potential benefits of the Merger discussed
above.
Additional Considerations. In the course of its deliberations on the Merger,
the Ameritech Board received and evaluated reports, analyses and presentations
from members of Ameritech's senior management and from Ameritech's financial,
legal, accounting and tax advisors on various business and financial matters,
including comparative information on peer companies and combinations of
telecommunications companies and information on the results of the due diligence
investigations of SBC. Additional factors considered by the Ameritech Board in
determining whether to approve the Merger Agreement included: (i) information
concerning the financial performance and condition, operations, cash flows and
business plans and prospects of each company, and the projected future
performance of Ameritech as a separate entity and of Ameritech and SBC on a
combined basis; (ii) the current and historical market prices of Ameritech
Common Stock and SBC Common Stock; (iii) the opinion of Ameritech's financial
advisor, described below, as to the fairness, from a financial point of view, of
the Exchange Ratio to Ameritech's shareowners; (iv) the improbability of an
alternative transaction that would yield a superior value to Ameritech
shareowners; (v) the terms and conditions of the Merger Agreement; (vi) the
current industry, economic and marketplace conditions and trends; (vii) the
likelihood and anticipated timing of receipt of required regulatory approvals,
the possible divestiture of certain overlapping wireless properties and the
potential effect of the pendency of the Merger on existing regulatory
proceedings involving Ameritech and its subsidiaries; (viii) labor relations at
each of the companies; (ix) SBC's expressed commitments to continue following
the consummation of the Merger Ameritech's historic levels of charitable
contributions and community activities and support economic development and
education in Ameritech's region consistent with Ameritech's established
commitments in these areas; and (x) the expressed intention of SBC to provide
job opportunities through business growth and to avoid net reductions in
employment levels within Ameritech's traditional local exchange regions as a
result of the Merger, as well as various SBC commitments in the Merger Agreement
with respect to contractual benefit obligations and compensation and benefit
plans of the Surviving Corporation. See "--Opinions of Financial Advisors--
Ameritech" and "--Employee Benefits."
The foregoing discussion of the information and factors considered by the
Ameritech Board is not intended to be exhaustive, but is believed to include all
material factors considered by the Ameritech Board. In view of the variety of
factors considered in connection with its evaluation of the Merger Agreement,
the Ameritech Board did not consider
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it practical to, and did not, quantify or otherwise assign relative weights to
the factors it considered in reaching its determination, and individual
Directors may have given different weights to different factors.
THE AMERITECH BOARD HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND
UNANIMOUSLY RECOMMENDS THAT AMERITECH SHAREOWNERS VOTE FOR ADOPTION OF THE
MERGER PROPOSAL.
OPINIONS OF FINANCIAL ADVISORS
SBC
At the meeting of the SBC Board held on May 10, 1998, Salomon Smith Barney
delivered its oral opinion, subsequently confirmed in writing, that, as of such
date, the Exchange Ratio was fair to SBC from a financial point of view. No
limitations were imposed by the SBC Board upon Salomon Smith Barney with respect
to the investigation made or the procedures followed by Salomon Smith Barney in
rendering its opinion.
The full text of the written opinion of Salomon Smith Barney, dated May 10,
1998, which sets forth assumptions made, matters considered and limitations on
the review undertaken in connection with the opinion, is attached hereto as
Annex B and is incorporated by reference herein. Holders of SBC Common Stock are
urged to, and should, read such opinion in its entirety. The summary of the
opinion as set forth in this Joint Proxy Statement/Prospectus is qualified in
its entirety by reference to the full text of such opinion.
In connection with rendering its opinion, Salomon Smith Barney reviewed
certain publicly available information concerning SBC and Ameritech and certain
other financial information concerning SBC and Ameritech, including financial
forecasts, that were provided to Salomon Smith Barney by SBC and Ameritech,
respectively. Salomon Smith Barney discussed the past and current business
operations and financial conditions of SBC and Ameritech as well as other
matters it believed relevant to its inquiry, including matters relating to the
regulatory approvals required to consummate the Merger, with certain officers
and employees of SBC and Ameritech, respectively. Salomon Smith Barney also
considered such other information, financial studies, analyses, investigations
and financial, economic and market criteria that it deemed relevant.
In its review and analysis and in arriving at its opinion, Salomon Smith
Barney assumed and relied upon the accuracy and completeness of the financial
and other information (including information relating to the regulatory
approvals required to consummate the Merger) reviewed by Salomon Smith Barney,
and it did not assume any responsibility for independent verification of such
information. With respect to the financial forecasts of SBC and Ameritech,
Salomon Smith Barney assumed that such forecasts had been reasonably prepared on
bases reflecting the best currently available estimates and judgments of the
respective managements of SBC and Ameritech as to the future financial
performance of SBC or Ameritech, respectively, and Salomon Smith Barney
expressed no opinion with respect to such forecasts or the assumptions on which
such forecasts were based. Salomon Smith Barney also assumed that the Merger
will be consummated in accordance with the terms of the Merger Agreement.
Salomon Smith Barney did not make or obtain or assume any responsibility for
making or obtaining any independent evaluations or appraisals of any of the
assets (including properties and facilities) or liabilities of SBC or Ameritech.
Salomon Smith Barney's opinion is necessarily based upon conditions as they
existed and could be evaluated on the date thereof. Salomon Smith Barney's
opinion does not imply any conclusion as to the trading range for SBC Common
Stock following the consummation of the Merger, which may vary depending upon,
among other factors, changes in interest rates, dividend rates, market
conditions, general economic conditions and other factors that generally
influence the price of securities. Salomon Smith Barney's opinion does not
address SBC's underlying business decision to effect the Merger. Salomon Smith
Barney's opinion is directed only to the fairness, from a financial point of
view, of the Exchange Ratio to SBC and does not constitute a recommendation
concerning how holders of SBC Common Stock should vote with respect to the
transactions contemplated by the Merger Agreement.
The material portions of the analyses which were performed by Salomon Smith
Barney in connection with its opinion dated May 10, 1998 are summarized below.
(i) Historical Stock Price Performance. Salomon Smith Barney reviewed
the relationship between movements in the closing prices of Ameritech Common
Stock and SBC Common Stock with the Salomon Smith Barney RHBC (as defined
below) Index (excluding Ameritech and SBC, as appropriate) and the Standard
& Poor's
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Composite Average for the period from January 2, 1997 through May 4, 1998,
the trading volume and price history of Ameritech Common Stock for the
period from January 2, 1997 through May 1, 1998 and the trading volume and
price history of SBC Common Stock for the period from January 2, 1997
through May 1, 1998.
(ii) Historical Exchange Ratio Analysis. Salomon Smith Barney also
reviewed the relationship between the daily closing prices of SBC Common
Stock and Ameritech Common Stock during the period from January 1, 1997
through May 4, 1998 and the implied historical exchange ratios determined by
dividing the price per share of Ameritech Common Stock by the price per
share of SBC Common Stock (the "Historical Exchange Ratio") over such
period. Salomon Smith Barney calculated that during this period the
Historical Exchange Ratio ranged from a high of 1.191 to a low of 1.004 with
an average of 1.112. The Exchange Ratio is 1.316.
(iii) Comparative Premium Analysis. Salomon Smith Barney noted that if
the Merger had closed on May 4, 1998, SBC would have paid a 28.2% premium to
the Ameritech Common Stock May 1, 1998 closing price, a 30.0% premium to the
one-week closing historical average price per share of Ameritech Common
Stock and a 24.0% premium to the three-month historical average closing
price per share of Ameritech Common Stock, in the latter two cases with
respect to the period ended May 1, 1998. Salomon Smith Barney compared these
implied premiums to the implied premiums for similar periods prior to public
announcement in the following comparable transactions: Qwest Communications
International Inc.'s pending acquisition of LCI International, Inc., SBC's
pending acquisition of SNET, WorldCom Inc.'s pending acquisition of MCI,
WorldCom, Inc.'s acquisition of Brooks Fiber Properties, Inc., WorldCom
Inc.'s acquisition of MFS Communications Co. and SBC's acquisition of
Pacific Telesis Group. The median premiums in such transactions were 35.5%
to the previous trading day closing price, 39.1% to the prior one-week
historical average price and 47.0% to the prior three-month historical
average closing price per share. Salomon Smith Barney noted that the
premiums paid, assuming the Merger had closed on May 4, 1998, would be
consistent with those paid in the comparable transactions discussed above.
(iv) Ameritech Segmented Public Market Analysis. Salomon Smith Barney
arrived at a range of values for Ameritech by separately valuing its
telecommunications business segment ("Ameritech Telco"), domestic cellular
segment ("Ameritech Cellular"), domestic PCS business segment ("Ameritech
PCS"), directory/publishing business segment ("Ameritech Publishing") its
other business segments, including paging, security monitoring, video,
leasing segments and international investments (collectively, "Ameritech
Other Assets") and aggregating the values determined for the various
business segments. Salomon Smith Barney utilized a public market analysis in
valuing these business segments. Public market analysis assesses a segment's
operating performance and outlook relative to a group of publicly traded
peer companies to determine an implied unaffected market trading value. No
company used in the public market analyses described below is identical to
the comparable business segment of Ameritech. Accordingly, an examination of
the results of analyses described below necessarily involves complex
considerations and judgments concerning differences in financial and
operating characteristics of the business segments and other facts that
could affect the public trading value of the companies to which they are
being compared.
Ameritech Telco
Salomon Smith Barney compared certain financial information of
Ameritech Telco with two groups of companies that Salomon Smith Barney
believed to be appropriate for comparison. The first group, which
Salomon Smith Barney believed was more closely comparable to Ameritech
Telco, included Bell Atlantic Corp., BellSouth Telecommunications, Inc.,
SBC, USWest, Inc. and GTE Corporation (the "RBHCs"). The second group,
which Salomon Smith Barney believed was somewhat less comparable to
Ameritech Telco, included Aliant Communications Inc., ALLTEL Corp.,
Century Telephone Enterprises, Inc., Cincinnati Bell Inc. and SNET (the
"Independent Telcos"). The financial and valuation data for the
comparable companies were adjusted by Salomon Smith Barney to estimate
the financial and valuation characteristics of pure "stripped wireline"
telecommunications companies. Salomon Smith Barney reviewed the
multiples of firm value to 1997 earnings before interest, taxes,
depreciation and amortization ("EBITDA") represented by the trading
prices of the RBHCs as of May 1, 1998, which ranged from 6.2x to 8.2x,
with a mean of 7.0x and a median of 6.7x, and the comparable multiples
for the Independent Telcos, which ranged from 6.5x to 8.2x, with a mean
of 7.4x and a median of 7.3x. Using this information and other factors
relevant in the valuation of Ameritech Telco, Salomon Smith Barney
determined a valuation range for Ameritech Telco of approximately $33.6
billion to $38.7 billion.
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Ameritech Cellular
Salomon Smith Barney compared certain financial information of
Ameritech Cellular with the following group of companies that Salomon
Smith Barney believed to be appropriate for comparison: AirTouch
Communications Inc., Centennial Cellular Corp., PriCellular Corporation,
United States Cellular Corp., Vanguard Cellular Systems Inc. and 360
degrees Communications Company (the "Cellular Comparable Companies").
Salomon Smith Barney reviewed the multiples of firm value to the latest
twelve months ("LTM") EBITDA represented by the trading prices of the
Cellular Comparable Companies, which ranged from 11.3x to 19.0x, with a
mean of 14.4x and a median of 13.9x . Using this information and other
factors relevant in the valuation of Ameritech Cellular, Salomon Smith
Barney determined a valuation range for Ameritech Cellular of
approximately $4.0 billion to $4.5 billion.
Ameritech PCS
Salomon Smith Barney compared certain financial information of
Ameritech PCS with the following group of companies that Salomon Smith
Barney believed to be appropriate for comparison: Aerial Communications
Inc., Omnipoint Corp., Powertel Inc., Western Wireless Corp. and Nextel
Communications Inc. (the "PCS Comparable Companies"). Salomon Smith
Barney reviewed the multiples of firm value to the number of adjusted
"population equivalents" ("POPs") represented by the trading prices of
the PCS Comparable Companies, which resulted in a range of $42 to $60
per POP. Using this information and other factors relevant in the
valuation of Ameritech PCS, Salomon Smith Barney determined a valuation
range of Ameritech PCS of approximately $288 million to $370 million.
Ameritech Publishing
Salomon Smith Barney compared certain financial information of
Ameritech Publishing with the following group of companies that Salomon
Smith Barney believed to be appropriate for comparison: Central
Newspapers Inc., Dow Jones & Company, Inc., Gannett Co., Knight-Ridder,
Inc., McClatchy Newspapers Inc., The New York Times Company, Tribune
Company, The Times Mirror Company, The Washington Post Company,
Hollinger International Inc. and Lee Enterprises, Incorporated (the
"Publishing Comparable Companies"). Salomon Smith Barney reviewed the
multiples of firm value to LTM EBITDA represented by the trading prices
of the Publishing Comparable Companies, which ranged from 7.2x to 13.9x,
with a mean of 10.5x and a median of 10.3x. Using this information and
other factors relevant in the valuation of Ameritech Publishing, Salomon
Smith Barney determined a valuation range for Ameritech Publishing of
approximately $5.5 billion to $6.8 billion.
Ameritech Other Assets
Salomon Smith Barney compared certain financial information of certain
of the businesses comprising Ameritech Other Assets with groups of
companies that Salomon Smith Barney believed were appropriate for
comparison. In addition, Salomon Smith Barney valued certain domestic
and international minority investments, including, without limitation,
investments in Belgacom SA, MATAV Rt., Tele Danmark A/S, and NetCom,
based on the trading prices of such entities. These analyses resulted in
a valuation range for Ameritech Other Assets of approximately $10.0
billion to $10.9 billion.
Total Ameritech Public Market Valuation
By combining the stand-alone valuations for Ameritech Telco, Ameritech
Cellular, Ameritech PCS, Ameritech Publishing and Ameritech Other Assets
described above and making certain adjustments for debt, preferred
securities, cash and cash equivalents, investments and option proceeds,
this analysis resulted in a valuation range for Ameritech's aggregate
equity of approximately $44.1 billion to $52.2 billion, or $39.70 to
$46.91 per share based on the number of fully diluted shares of
Ameritech Common Stock as of May 1, 1998.
(v) Ameritech Segmented Discounted Cash Flow Analysis. Salomon Smith
Barney performed a discounted cash flow analysis based on projected earnings
and capital requirements and the subsequent cash flows generated by the
business segments of Ameritech. Salomon Smith Barney derived ranges of firm
values for Ameritech's business segments based upon the aggregate present
value of each segment's eleven-year stream (to 2008) of
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projected cash flows (without giving effect to the Merger). In general, the
growth rates for each segment's projected cash flow for the years from 2009
to 2017 were reduced or increased to reach the assumed 2017 perpetuity
growth rate. For Ameritech Telco (which excludes long distance), Salomon
Smith Barney applied discount rates reflecting a weighted average cost of
capital ("WACC") ranging from 8.75% to 9.75% and perpetuity growth rates
ranging from 2.00% to 3.00%, which resulted in a valuation range for
Ameritech Telco of $42.5 billion to $46.2 billion. For the Ameritech long
distance business segment, Salomon Smith Barney applied discount rates
reflecting a WACC ranging from 10.50% to 11.50% and perpetuity growth rates
ranging from 2.50% to 3.50%, which resulted in a valuation range for
Ameritech long distance of $3.2 billion to $3.6 billion. For the segment
consisting of Ameritech Cellular along with Ameritech's paging business,
Salomon Smith Barney applied discount rates reflecting a WACC ranging from
10.00% to 11.00% and perpetuity growth rates ranging from 2.50% to 3.50%,
which resulted in a valuation range for such segment and Ameritech's paging
business of $6.4 billion to $6.9 billion. For Ameritech PCS, Salomon Smith
Barney applied discount rates reflecting a WACC ranging from 12.50% to
13.50% and perpetuity growth rates ranging from 2.50% to 3.50%, which
resulted in a valuation range for Ameritech PCS of $366 million to $434
million. For Ameritech Publishing, Salomon Smith Barney applied discount
rates reflecting a WACC ranging from 9.00% to 10.00% and perpetuity growth
rates ranging from 1.00% to 2.00%, which resulted in a valuation range for
Ameritech Publishing of $6.1 billion to $6.6 billion. For the Ameritech
security monitoring segment, Salomon Smith Barney applied discount rates
reflecting a WACC ranging from 10.50% to 11.50% and perpetuity growth rates
ranging from 3.00% to 4.00%, which resulted in a valuation range for the
Ameritech security monitoring segment of $1.9 billion to $2.1 security
monitoring segment of $1.9 billion to $2.1 billion. For the other business
segments and assets of Ameritech, including, without limitation, the leasing
business segment, the international investments and corporate overhead,
Salomon Smith Barney derived a range of net values based on other valuation
methodologies discussed above under "Ameritech Segmented Public Market
Analysis" of $5.1 billion to $5.5 billion. By combining the stand-alone
discounted cash flow valuations for the business segments described above
and making certain adjustments for debt, preferred securities of
subsidiaries, cash and cash equivalents, investments, option proceeds and
minority investments in Ameritech Cellular, this analysis resulted in a
valuation range for Ameritech's equity value of $55.4 billion to $60.9
billion, or $49.80 to $54.79 per share based on the number of fully-diluted
shares of Ameritech Common Stock as of May 1, 1998.
(vi) Consolidated Public Market Comparison. Salomon Smith Barney
compared the price to earnings per share ("EPS") multiples ("P/E Multiples")
of SBC and Ameritech with the P/E Multiples of the RBHCs. The P/E Multiples
of the RHBCs ranged from 19.9x to 22.8x based on 1997 EPS, with a median of
20.7x, from 17.9x to 20.4x based on 1998 analysts' estimated EPS, with a
median of 19.0x, and from 16.3x to 18.4x based on 1999 analysts' estimated
EPS, with a median of 17.1x. The P/E Multiples for Ameritech were 20.3x,
18.1x and 16.8x based on 1997 EPS, 1998 estimated EPS and 1999 estimated EPS
(based on First Call estimates), respectively, representing a discount to
the RBHCs median of 1.8%, 4.6% and 1.7% for such periods, respectively. The
P/E Multiples for SBC were 23.9x, 20.4x and 18.1x based on 1997 EPS, 1998
estimated EPS and 1999 estimated EPS (based on First Call estimates),
respectively, representing a premium to the RHBCs median of 15.2%, 7.3% and
6.1% for such periods, respectively.
(vii) SBC Segmented Public Market Analysis. Salomon Smith Barney arrived
at a range of values for SBC by separately valuing its telecommunications
business segment ("SBC Telco"), domestic cellular segment ("SBC Cellular"),
domestic PCS business segment ("SBC PCS"), directory/publishing business
segment ("SBC Publishing") and its other business segments, including
domestic video businesses, Nevada Bell, SNET and international investments
(collectively, "SBC Other Assets") and aggregating the values determined for
the various business segments. Salomon Smith Barney utilized a public market
analysis in valuing these business segments. Public market analysis assesses
a segment's operating performance and outlook relative to a group of
publicly traded peer companies to determine an implied unaffected market
trading value. No company used in the public market analyses described below
is identical to the comparable business segment of SBC. Accordingly, an
examination of the results of analyses described below necessarily involves
complex considerations and judgments concerning differences in financial and
operating characteristics of the business segments and other facts that
could affect the public trading value of the companies to which they are
being compared.
SBC Telco
Salomon Smith Barney compared certain financial information of SBC
Telco with two groups of companies that Salomon Smith Barney believed to
be appropriate for comparison. The first group, which Salomon Smith
Barney believed was more closely comparable to SBC Telco, was the RBHCs
(excluding SBC and including Ameritech) and the second group, which
Salomon Smith Barney believed was somewhat less comparable to
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SBC Telco, was the Independent Telcos. The financial and valuation data
of the comparable companies were adjusted by Salomon Smith Barney to
estimate the financial and valuation characteristics of pure "stripped
wireline" telecommunications companies. Salomon Smith Barney reviewed
the multiples of firm value to 1997 EBITDA represented by the trading
prices of the RHBCs, which ranged from 6.2x to 8.2x, with a mean of 6.9x
and a median of 6.7x, and the comparable multiples for the Independent
Telcos, which ranged from 6.5x to 8.2x, with a mean of 7.4x and a median
of 7.3x. Using this information and other factors relevant in the
valuation of SBC Telco, Salomon Smith Barney determined a valuation
range for SBC Telco of $52.1 billion to $60.1 billion.
SBC Cellular
Salomon Smith Barney compared certain financial information of SBC
Cellular with the Cellular Comparable Companies. Salomon Smith Barney
reviewed the multiples of firm value to LTM EBITDA represented by the
trading prices of the Cellular Comparable Companies, which ranged from
11.3x to 19.0x, with a mean of 14.4x and a median of 13.9x. Using this
information and other factors relevant in the valuation of SBC Cellular,
Salomon Smith Barney determined a valuation range for SBC Cellular of
$10.4 billion to $11.5 billion.
SBC PCS
Salomon Smith Barney compared certain financial information of SBC PCS
with the PCS Comparable Companies. Salomon Smith Barney reviewed the
multiples of firm value to the number of adjusted POPs represented by
the trading prices of the PCS Comparable Companies, which resulted in a
range of $42 to $60 per POP. Using this information and other factors
relevant in the valuation of SBC PCS, Salomon Smith Barney determined a
valuation range for SBC PCS of $1.6 billion to $2.3 billion.
SBC Publishing
Salomon Smith Barney compared certain financial information of SBC
Publishing with the Publishing Comparable Companies. Salomon Smith
Barney reviewed the multiples of firm value to LTM EBITDA represented by
the trading prices of the Publishing Comparable Companies, which ranged
from 7.2x to 13.9x, with a mean of 10.5x and a median of 10.3x. Using
this information and other factors relevant in the valuation of SBC
Publishing, Salomon Smith Barney determined a valuation range for SBC
Publishing of $8.4 billion to $10.6 billion.
SBC Other Assets
Salomon Smith Barney compared certain financial information of certain
SBC business segments in North America, including, without limitation,
wireless cable, Media Ventures Hauser and Nevada Bell with groups of
companies that Salomon Smith Barney believed were appropriate for
comparison. In addition, Salomon Smith Barney valued certain domestic
and international investments, including, without limitation,
investments in Cegetel, Shinsegi, MTN, Telmex, Aurec, VTR, diAx and
Telkom SA, based on other valuation methodologies appropriate for SBC's
percentage ownership. Salomon Smith Barney also valued SNET based on the
exchange ratio for the pending acquisition of SNET by SBC. These
analyses resulted in a valuation of SBC Other Assets ranging from
approximately $14.2 billion to $15.5 billion.
Total SBC Public Market Valuation
By combining the stand-alone valuations for SBC Telco, SBC Cellular,
SBC PCS, SBC Publishing and SBC Other Assets described above and making
certain adjustments for debt, preferred securities of subsidiaries, cash
and cash equivalents, investments and option proceeds, this analysis
resulted in a valuation range for SBC's aggregate equity of $71.1
billion to $84.4 billion, or $35.86 to $42.57 per share based on the
number of fully-diluted shares of SBC Common Stock as of May 1, 1998
(including the issuance of shares of SBC Common Stock expected to be
issued in the SNET acquisition).
(viii) SBC Segmented Discounted Cash Flow Analysis. Salomon Smith Barney
performed a discounted cash flow analysis based on projected earnings and
capital requirements and the subsequent cash flows generated by the business
segments of SBC. Salomon Smith Barney derived ranges of firm values for
SBC's business
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segments based upon the aggregate present value of each segment's
eleven-year stream (to 2008) of projected cash flows (without giving effect
to the Merger). In general, the growth rates for each segment's projected
cash flow for the years from 2009 to 2017 were reduced or increased to reach
the assumed 2017 perpetuity growth rate. For SBC Telco (which excludes long
distance), Salomon Smith Barney applied discount rates reflecting a WACC
ranging from 8.75% to 9.75% and perpetuity growth rates ranging from 2.00%
to 3.00%, which resulted in a valuation range for SBC Telco of $67.2 billion
to $72.9 billion. For the SBC long distance segment, Salomon Smith Barney
applied discount rates reflecting a WACC ranging from 10.50% to 11.50% and
perpetuity growth rates ranging from 2.50% to 3.50%, which resulted in a
valuation range for SBC long distance of $5.9 billion to $6.6 billion. For
the segment consisting of SBC Cellular, Salomon Smith Barney applied
discount rates reflecting a WACC ranging from 10.00% to 11.00% and
perpetuity growth rates ranging from 2.50% to 3.50%, which resulted in a
valuation range for such segment of $11.9 billion to $13.2 billion. For SBC
PCS, Salomon Smith Barney applied discount rates reflecting a WACC ranging
from 12.50% to 13.50% and perpetuity growth rates ranging from 2.50% to
3.50%, which resulted in a valuation range for SBC PCS of $2.4 billion to
$2.6 billion. For SBC Publishing, Salomon Smith Barney applied discount
rates reflecting a WACC ranging from 9.00% to 10.00% and perpetuity growth
rates ranging from 1.00% to 2.00%, which resulted in a valuation range for
SBC Publishing of $9.3 billion to $10.2 billion. For the other business
segments and assets of SBC, including, without limitation, the domestic
video business segment, the international investments, SNET and corporate
overhead, Salomon Smith Barney derived a range of net values based on
various valuation methodologies of $4.6 billion to $5.4 billion. By
combining the stand-alone discounted cash flow valuations for the business
segments described above and making certain adjustments for debt, preferred
securities of subsidiaries, cash and cash equivalents, investments and
option proceeds, this analysis resulted in a valuation range for SBC's
aggregate equity of $92.7 billion to $103.5 billion, or $46.77 to $52.22 per
share based on the number of fully-diluted shares of SBC Common Stock as of
May 1, 1998 (including the issuance of shares of SBC Common Stock expected
to be issued in the SNET acquisition).
(ix) Synergies. Salomon Smith Barney reviewed the synergy estimates
provided by the management of SBC (the "SBC Synergy Estimates") prepared
after the management of SBC held discussions and exchanged information with
the management of Ameritech. The SBC Synergy Estimates reflect only the
incremental benefits expected by the management of SBC to result from the
Merger compared to SBC on a stand-alone basis (but adjusted on a pro forma
basis as if SBC had completed its pending acquisition of SNET), and include
revenue, expense and capital expenditure synergies. The SBC Synergy
Estimates assumed full potential synergies would not be achieved until 2003.
Salomon Smith Barney then estimated the present value of the future streams
of after-tax cash flows generated by those synergies, net of implementation
costs, by applying discount rates reflecting a WACC ranging from 9.0% to
10.0% to such cash flows through 2008 and by adding a terminal value
determined by projecting a range of nominal perpetual synergy growth rates
ranging from 1.5% to 2.5%. This analysis resulted in a net present value for
the synergies of $16.0 billion to $19.0 billion or $4.64 per share of SBC
Common Stock to $5.51 per share of SBC Common Stock outstanding following
the consummation of the Merger on a fully diluted basis (including the
issuance of shares of SBC Common Stock expected to be issued in the SNET
acquisition). For a more detailed discussion of SBC management's projected
synergies resulting from the Merger, see "Reasons for the Merger;
Recommendation of the Boards of Directors -- SBC -- Synergistic Benefits
Resulting from the Merger."
(x) Pro Forma EPS Impact to SBC. Salomon Smith Barney reviewed certain
pro forma financial effects of the Merger on the estimated EPS of SBC.Using
SBC management projections, Salomon Smith Barney compared the EPS of SBC, on
a stand-alone basis assuming the Merger was not consummated (but adjusted on
a pro forma basis as if SBC had completed its pending acquisition of SNET),
to the estimated EPS of SBC following consummation of the Merger on a pro
forma basis. Salomon Smith Barney's analysis assumed that each share of
Ameritech Common Stock would be exchanged for a number of shares of SBC
Common Stock equal to the Exchange Ratio and gave effect to revenue, expense
and capital expenditure synergies along with certain costs necessary to
achieve those synergies referred to above. Based on such analysis, Salomon
Smith Barney determined that the proposed Merger would be dilutive to the
EPS of SBC on a pro forma basis by approximately 7.3% in 2000, would be
slightly dilutive in 2001 and would be accretive thereafter.
The preparation of a fairness opinion is a complex process not susceptible
to partial analysis or summary descriptions. The summary set forth above does
not purport to be a complete description of the analyses underlying Salomon
Smith Barney's opinion or its presentation to the Board of Directors of SBC.
Salomon Smith Barney believes that its analysis and the summary set forth above
must be considered as a whole and that selecting portions of its analyses and
the factors considered by it, without considering all analyses and factors,
could create an incomplete view of the processes underlying its opinion.
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In performing its analyses, Salomon Smith Barney made numerous assumptions
with respect to industry performance, general business, financial, market and
economic conditions and other matters, many of which are beyond the control of
SBC or Ameritech. The analyses which Salomon Smith Barney performed are not
necessarily indicative of actual values or actual future results, which may be
significantly more or less favorable than suggested by such analyses. Such
analyses were prepared solely as part of Salomon Smith Barney's analysis of the
fairness, from a financial point of view, of the Exchange Ratio to SBC. The
analyses do not purport to be appraisals or to reflect the prices at which a
company might actually be sold or the prices at which any securities may trade
at the present time or at any time in the future.
Pursuant to an engagement letter (the "Engagement Letter") dated April 20,
1998, SBC agreed to pay Salomon Smith Barney a fee of: (a) $1 million, which was
paid promptly after execution of the Engagement Letter; plus (b) an additional
fee of $4 million which was paid promptly following execution of the Merger
Agreement; plus (c) an additional fee of $28 million contingent upon the
consummation of the Merger and payable promptly at the closing thereof (or, if
following or in connection with the termination or abandonment of the Merger
prior to its consummation SBC receives any "break-up", "termination" or similar
fee or payment from Ameritech, an additional cash fee equal to the lesser of $20
million and 2.5% of the excess of the aggregate amount of all such termination
fees and expense reimbursements over SBC's direct out-of-pocket expenses). SBC
also agreed, under certain circumstances, to reimburse Salomon Smith Barney for
certain out-of-pocket expenses incurred by Salomon Smith Barney in connection
with the Merger, and agreed to indemnify Salomon Smith Barney and certain
related persons against certain liabilities, including liabilities under the
Federal securities laws, relating to or arising out of its engagement.
Salomon Smith Barney is an internationally recognized investment banking
firm that provides financial services in connection with a wide range of
business transactions. As part of its business, Salomon Smith Barney regularly
engages in the valuation of companies and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and for other purposes. In the past, Salomon Smith Barney has rendered certain
investment banking and financial advisory services to SBC for which Salomon
Smith Barney received customary compensation. In addition, in the ordinary
course of its business, Salomon Smith Barney and its current and future
affiliates (including Travelers Group Inc.) may actively trade the securities of
SBC and Ameritech for its own account and the accounts of its customers and,
accordingly, may at any time hold a long or short position in such securities.
Salomon Smith Barney and its current and future affiliates (including Travelers
Group Inc.) may have other business relationships with SBC, Ameritech and their
respective affiliates. The SBC Board retained Salomon Smith Barney based on its
expertise in the valuation of companies as well as its substantial experience in
transactions such as the Merger.
Ameritech
Goldman Sachs delivered its written opinion, dated May 10, 1998, to the
Ameritech Board that as of such date, the Exchange Ratio pursuant to the Merger
Agreement is fair from a financial point of view to the holders of Ameritech
Common Stock.
The full text of the written opinion of Goldman Sachs, dated May 10, 1998,
which sets forth assumptions made, matters considered and limitations on the
review undertaken in connection with the opinion, is attached as Annex C to this
Joint Proxy Statement/Prospectus and is incorporated herein by reference. The
summary of the Opinion in this Joint Proxy Statement/Prospectus is qualified in
its entirety by reference to the full text of the opinion. Shareowners of
Ameritech are urged to, and should, read such opinion in its entirety.
In connection with its opinion, Goldman Sachs reviewed, among other things,
the Merger Agreement; Annual Reports to shareowners and Annual Reports on Form
10-K of Ameritech and SBC for the five years ended December 31, 1997; certain
interim reports to shareowners and Quarterly Reports on Form 10-Q of Ameritech
and SBC; certain other communications from Ameritech and SBC to their respective
shareowners; and certain internal financial analyses and forecasts for Ameritech
and SBC prepared by their respective managements. Goldman Sachs held discussions
with members of the senior management of Ameritech and SBC regarding the past
and current business operations, financial condition, and future prospects of
their respective companies. Goldman Sachs also held discussions with members of
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the senior management of Ameritech and SBC regarding the strategic rationale
for, and potential benefits of, the transactions contemplated by the Merger
Agreement, including a discussion of potential synergies expected to be derived
as a result of the transactions contemplated by the Merger Agreement. In
addition, Goldman Sachs reviewed the reported price and trading activity for
Ameritech Common Stock and SBC Common Stock, compared certain financial and
stock market information for Ameritech and SBC with similar information for
certain other companies the securities of which are publicly traded, reviewed
the financial terms of certain recent business combinations in the
telecommunications industry specifically and in other industries generally and
performed such other studies and analyses as it considered appropriate.
Goldman Sachs relied upon the accuracy and completeness of all of the
financial and other information reviewed by it and assumed such accuracy and
completeness for purposes of rendering its opinion. In addition, Goldman Sachs
did not make an independent evaluation or appraisal of the assets and
liabilities of Ameritech or SBC or any of their subsidiaries and Goldman Sachs
has not been furnished with any such evaluation or appraisal. Goldman Sachs also
assumed that the Merger will be accounted for as a pooling of interests under
generally accepted accounting principles. Goldman Sachs' advisory services and
the opinion of Goldman Sachs referred to herein were provided for the
information and assistance of the Ameritech Board in connection with its
consideration of the transactions contemplated by the Merger Agreement. The
opinion of Goldman Sachs referred to herein does not constitute a recommendation
as to how any Ameritech shareowner should vote with respect to the Merger
Agreement.
The following is a summary of certain of the financial analyses used by
Goldman Sachs in connection with providing its written opinion to the Ameritech
Board:
1. Historical Stock Price Analysis. Goldman Sachs reviewed market valuation
information for Ameritech, SBC, Bell Atlantic Corp., BellSouth Corporation,
GTE Corporation and US West Communications, Inc. (the "Selected Companies").
This analysis indicated P/E Multiples for the Selected Companies based on
estimated 1998 and 1999 EPS ranging from 18.2x to 21.2x with a median of
19.5x 1998 EPS, and ranging from 16.7x to 19.2x with a median of 17.3x 1999
EPS, compared with P/E Multiples for Ameritech of 18.9x and 17.1x,
respectively in 1998 and 1999, based on the latest estimates provided by the
Institutional Brokers Estimate Service ("IBES"). IBES is a data service
which monitors and publishes a compilation of earnings estimates produced by
selected research analysts on companies of interest to investors. Goldman
Sachs performed a shareowner return on common stock analysis as of May 4,
1998 for the Selected Companies (excluding US West Communications, Inc., but
including AT&T Corp.), assuming the re-investment of dividends and excluding
spin-offs. This analysis indicated a total return ranging from 79.3% to
214.0% over the five years preceding May 4, 1998, compared with a return of
183.8% for Ameritech, a total return ranging from 90.0% to 140.8% over the
three years preceding May 4, 1998, compared with a return of 115.1% for
Ameritech, and a return ranging from 33.8% to 89.5% over the preceding year,
compared with a return of 48.8% for Ameritech. Goldman Sachs reviewed
historical closing prices for Ameritech Common Stock from May 5, 1995 to May
1, 1998. This analysis showed that the Ameritech Common Stock price had
increased over this period from $22.75 per share to $43.125 per share, as
adjusted to give effect to stock splits. Goldman Sachs also reviewed
historical implied exchange ratios based on market prices for Ameritech
Common Stock and SBC Common Stock, weekly from May 5, 1995 to May 1, 1998.
This analysis showed implied exchange ratios ranging from approximately
0.925 to approximately 1.200 and an implied exchange ratio of approximately
1.025 at May 1,1998.
2. Comparable Transactions Analysis. Goldman Sachs reviewed and compared
certain P/E Multiples relative to the merger of NYNEX Corporation and
Atlantic Corp. on April 22, 1996 (the "NYNEX Merger") and the acquisition of
Pacific Telesis Group by SBC on April 1, 1996 (the "Pactel Acquisition"),
and P/E Multiples relative to the Merger, using for both the NYNEX Merger
and the Pactel Acquisition P/E Multiples based on pre-announcement and
post-announcement stock prices, and for the Merger, P/E Multiples based on
stock prices as of May 4, 1998, of $44.125 per share of Ameritech Common
Stock and $43.125 per share of SBC Common Stock, and, in each case, based on
the latest IBES estimates of EPS. This comparison demonstrated for the NYNEX
Merger, the Pactel Acquisition and the Merger, respectively, based upon
exchange ratios of 0.768x, 0.733x and 1.316x, respectively: (i)
pre-announcement P/E Multiples for the acquired company of 14.9x, 11.1x and
18.9x based on calendar year-end earnings estimates; (ii) transaction P/E
Multiples for the acquired company of 14.0x, 15.4x and 24.3x based on
calendar year-end earnings estimates (using
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announcement stock prices for the NYNEX Merger and Pactel Acquisition and
stock prices as of May 4, 1998 for the Merger); (iii) acquiror P/E Multiples
based on stock prices at announcement for the NYNEX Merger and the Pactel
Acquisition and as of May 4, 1998 for the Merger of 15.5x, 15.3x and 20.9x
based on calendar year-end earnings estimates; and (iv) premiums to acquiror
P/E Multiples of (9.4)%, 0.5% and 15.9% based on calendar year- end earnings
estimates. In each of (i) through (iv) above, year-end earnings estimates
were based on latest IBES estimates for the then current fiscal year of each
company. Goldman Sachs also performed a contribution analysis exchange ratio
comparison for the NYNEX Merger, the Pactel Acquisition and the Merger,
based on (i) IBES estimates for the then current fiscal year of each company
as of April 1996 for the NYNEX Merger and the Pactel Acquisition and as of
April 1998 for the Merger, (ii) closing prices of $44.125 per share of
Ameritech Common Stock and $43.125 per share of SBC Common Stock, and (iii)
exchange ratios of 0.768, 0.733 and 1.316, respectively, for the NYNEX
Merger, the Pactel Acquisition and the Merger. Such analysis indicated a
premium (discount) to net income contribution analysis of (9.1)%, 0.3% and
15.8%, respectively, for the NYNEX Merger, the Pactel Acquisition and the
Merger.
3. Synergy Analysis. Goldman Sachs performed an analysis of the synergies
estimated by the management of Ameritech to be achievable following the
Merger, assuming that 40% of the projected synergies would be generated in
1999, 70% in 2000, 90% in 2001 and 100% in 2002. The analysis showed (i) a
range of incremental annual pre-tax earnings of $1,827 million to $2,722
million, (ii) annual capital expenditure synergies ranging from $640 million
to $1,030 million and (iii) total annual cash flow improvement ranging from
$2,467 million to $3,752 million. For purposes of the analysis set forth
below, Goldman Sachs used anticipated synergies of $2,275 million, which
constitutes the mid-point of the range of incremental pre-tax earnings set
forth in (i) above.
4. Contribution Analysis. Goldman Sachs reviewed certain historical and
estimated future operating and financial information (including revenue,
EBIT and net income) for Ameritech and SBC and the relative contribution of
Ameritech and SBC to the combined company, based on an average of estimates
provided by research analysts' reports that were used by Goldman Sachs and
on estimates provided by management of Ameritech and SBC. This analysis
indicated, among other things, that Ameritech would contribute for each of
1997, 1998 and 1999, (i) 39%, 39% and 39% of revenue, respectively,
according to research analysts' estimates and management estimates, (ii)
38%, 38% and 37% of EBIT, respectively, according to research analysts'
estimates (or 38%, 37% and 36%, respectively, according to management
estimates), and (iii) 41%, 40% and 40% of net income, respectively,
according to research analysts' estimates (or 41%, 40% and 38%,
respectively, according to management estimates), as compared with an
implied ownership by Ameritech shareowners of 44.1% of the equity value of
the combined company based on the Exchange Ratio. Goldman Sachs also
performed an analysis of the relative estimated contribution of Ameritech
and SBC to the combined company on a pro forma basis in 1998 before and
after taking into account any of the possible benefits that management of
Ameritech estimates may be realized following the Merger, based on an
average of estimates provided by research analysts. This analysis indicated,
among other things, that Ameritech would contribute (i) 37.4% of EBITDA
(33.3% after taking into account the benefits that management of Ameritech
estimates may be realized following the Merger) as compared with an implied
ownership of 42.9% of the combined levered company based on the Exchange
Ratio, (ii) 38% of EBIT (31.5% after taking into account the benefits that
management of Ameritech estimates may be realized from the Merger) as
compared with an implied ownership of 42.9% of the combined levered company
based on the Exchange Ratio and (iii) 40.5% of net income (33.1% after
taking into account the benefits that management of Ameritech estimates may
be realized from the Merger) as compared with an implied ownership by
Ameritech shareowners of 44.1% of the equity value of the combined company
based on the Exchange Ratio.
5. Pro Forma Merger Analysis. Goldman Sachs performed an analysis of the pro
forma EPS impact of the Merger on the Ameritech shareowners, based on IBES
estimates and on estimates provided by management of Ameritech and SBC. For
purposes of this analysis, Goldman Sachs used estimates provided by
management of Ameritech that the Merger would generate pre-tax synergies of
$910 million in 1999 and $2,275 million in 2000. This analysis showed pro
forma EPS for Ameritech shareowners, as adjusted by the Exchange Ratio,
before giving effect to the synergies that management of Ameritech estimates
will be realized from the Merger, of $2.85 and $3.08 in 1999 and 2000,
respectively, based on IBES estimates ($3.00 and $3.63, respectively, based
on management estimates) and based on a pro forma ownership of 44.1% of the
combined entity at the Exchange Ratio. Such pro forma EPS represent an
accretion of 10.5% and 10.6%, respectively, over estimated EPS of Ameritech
Common Stock on a stand alone basis, based on IBES estimates (15.7% and
21.9%, respectively, based on management estimates). After giving effect to
such synergies, this analysis showed pro
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forma EPS for Ameritech Common Stock, as adjusted by the Exchange Ratio, of
$3.07 and $3.63 in 1999 and 2000, respectively, based on IBES estimates
($3.21 and $4.18, respectively, based on management estimates). Such pro
forma EPS represent an accretion of 19.0% and 30.1%, respectively, over EPS
of Ameritech Common Stock on a stand alone basis, based on IBES estimates
(24.1% and 40.2%, respectively, based on management estimates).
Comparatively, an analysis of the pro forma EPS impact of the NYNEX Merger
and the Pactel Acquisition, assuming that these acquisitions were
consummated using the pooling of interests method of accounting and
generated no synergies, indicated (i) an EPS accretion for Bell Atlantic
shareowners of 3.8% in 1997 and 4.5% in 1998 and dilution for NYNEX
shareowners of (4.6)% in 1997 and (5.4)% in 1998 and (ii) EPS dilution for
SBC shareowners of (3.8)% in 1997 and (7.3)% in 1998 and an accretion for
Pacific Telesis Group shareowners of 8.4% in 1997 and 18.1% in 1998.
6. Present Values of Future Performance Analysis. Goldman Sachs performed an
analysis of the present value at May 1, 1998 of the potential future price
per share of Ameritech Common Stock in 2000 (plus the present value of
quarterly dividends to be received by Ameritech shareowners from May 1, 1998
through December 31, 2000) using IBES EPS estimates and EPS estimates
provided by management of Ameritech and SBC, (i) on a stand alone basis and
on a combined basis with SBC, both before and after giving effect to the
synergies that management of Ameritech estimates may be realized following
the Merger, (ii) assuming that until the end of 1999 the holders of
Ameritech Common Stock will receive dividends at a rate based on a dividend
growth rate of 5.5% according to the five year historical average dividend
growth rate of the Ameritech Common Stock and after such date will receive
dividends as projected for the year 2000 by SBC management, (iii) assuming
synergies of $2,275 million in 2000 and (iv) assuming an ownership by
Ameritech shareowners of 44.1% of the equity value of the combined company
(based on the Exchange Ratio). Goldman Sachs calculated the present value
per share of Ameritech Common Stock based on year 2000 estimated EPS by
applying discount rates of 9.0%, 10.0% and 11.0% and P/E Multiples to
estimated EPS in the year 2000 of 16.0x, 18.0x and 20.0x. This analysis
indicated present values per share of Ameritech Common Stock (i) ranging
from $36.61 to $47.23, based on IBES estimates ($38.91 to $50.25, based on
estimates provided by management of Ameritech) if Ameritech is considered on
a stand alone basis, (ii) ranging from $40.14 to $51.87, based on IBES
estimates ($46.77 to $60.57, based on estimates provided by management of
Ameritech and SBC) if Ameritech is considered on a combined basis with SBC,
but before giving effect to the synergies that management of Ameritech
estimates will be realized following the Merger, and (iii) ranging from
$46.73 to 60.52, based on IBES estimates ($53.36 to $69.22, based on
estimates provided by management of Ameritech and SBC) if Ameritech is
considered on a combined basis with SBC and after giving effect to the
synergies that management of Ameritech estimates will be realized following
the Merger.
7. Discounted Cash Flow Analysis. Goldman Sachs performed a discounted cash
flow analysis after giving effect to the Merger, both before and after
giving effect to the synergies that management of Ameritech estimates will
be realized following the Merger. Assuming a 7.5% revenue growth rate and an
exit multiple of 6.0x EBITDA, and using discount rates ranging from 8.5% to
11.5% and an EBITDA margin ranging from 40.0% to 44.0%, this analysis showed
a value per share of Ameritech Common Stock, adjusted for the Exchange
Ratio, ranging from $45.78 to $66.22 per share before giving effect to the
synergies that management of Ameritech estimates will be realized following
the Merger, and a value per share ranging from $50.34 to $71.77 after giving
effect to such synergies. Assuming a revenue growth rate ranging from 5.5%
to 9.5%, an exit multiple of 6.0x EBITDA, and using a discount rate of 10.5%
and an EBITDA margin ranging from 40.0% to 44.0%, this analysis showed a
value per share of Ameritech Common Stock, adjusted for the Exchange Ratio
ranging from $41.66 to $67.08 per share before giving effect to the
synergies that management of Ameritech estimates will be realized following
the Merger, and a value per share ranging from $46.52 to $71.94 per share
after giving effect to such synergies.
The analyses referred to above do not take into account the acquisition of
SNET by SBC, which has not yet been consummated.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. Selecting
portions of the analyses or of the summary set forth above, without considering
the analyses as a whole, could create an incomplete view of the processes
underlying Goldman Sachs' opinion. In arriving at its fairness determination,
Goldman Sachs considered the results of all such analyses. No company or
transaction (other than the Merger) used in the above analyses as a comparison
is directly comparable to Ameritech or SBC or the contemplated transaction. The
analyses were prepared solely for purposes of Goldman Sachs providing its
opinion to the Ameritech Board as to the fairness from a financial point of view
to the holders of Ameritech Common Stock of the Exchange Ratio pursuant to the
Merger Agreement and do not purport to be appraisals or necessarily reflect the
prices at which businesses or securities actually may be sold. Analyses based
upon forecasts of future results are not necessarily indicative of actual future
results, which may be significantly more or less favorable than suggested by
such analyses. Because such analyses are inherently subject to uncertainty,
being based upon numerous factors or events beyond the control of the parties or
their respective advisors, none of Ameritech, SBC, Goldman Sachs or any other
person assumes responsibility if future results are materially different from
those forecast.
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As described above, Goldman Sachs' opinion to the Ameritech Board was one of
many factors taken into consideration by the Ameritech Board in making its
determination to approve the Merger Agreement. The foregoing summary does not
purport to be a complete description of the analysis performed by Goldman Sachs
and is qualified by reference to the written opinion of Goldman Sachs set forth
in Annex C hereto.
Goldman Sachs, as part of its investment banking business, is continually
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for estate, corporate and other purposes. Goldman Sachs is
familiar with Ameritech, having provided certain investment banking services to
Ameritech from time to time, including: (i) having acted as financial advisor to
Ameritech with respect to Ameritech's purchase of 4.5 million Class A ordinary
shares of TeleDanmark in 1997, (ii) having acted as managing underwriter of a
public offering of stated rate auction preferred securities issued by Ameritech
Denmark Capital Funding Corporation, an affiliate of Ameritech, on April 20,
1998, (iii) having acted as managing underwriter of a public offering of $1.75
billion of notes and debentures issued by Ameritech on January 15, 1998, and
(iv) having acted as financial advisor to Ameritech in connection with, and
participated in certain of the negotiations leading to, the Merger Agreement.
Goldman Sachs has also provided certain investment banking services to SBC from
time to time, including having acted as co-manager of a public offering of $200
million of notes for a subsidiary of SBC on February 10, 1998, and may provide
investment banking services to SBC in the future. Goldman Sachs provides a full
range of financial advisory and securities services and, in the course of its
normal trading activities, may from time to time effect transactions and hold
securities, including derivative securities, of Ameritech or SBC for its own
account and for the accounts of customers. As of May 6, 1998, Goldman Sachs had
accumulated (i) a long position of 287,383 shares of Ameritech Common Stock
against which Goldman Sachs is short 191,694 shares of Ameritech Common Stock,
(ii) a short position of 1,431,742 shares of SBC Common Stock against which
Goldman Sachs is long 446,807 shares of SBC Common Stock, options to purchase
40,000 shares of SBC Common Stock, and 10,100 convertible bonds of SBC, and
(iii) a long position of 666,000 shares of common stock of SNET.
Pursuant to a letter agreement dated May 7, 1998 (the "Goldman Sachs
Engagement Letter"), Ameritech engaged Goldman Sachs to act as its financial
advisor to assist Ameritech in connection with the possible sale of all or a
portion of Ameritech. Pursuant to the terms of the Goldman Sachs Engagement
Letter, Ameritech has agreed to pay Goldman Sachs (i) a fee equal to $10 million
payable upon execution of the Merger Agreement, (ii) an additional transaction
fee of $15 million payable upon consummation of the Merger or another
transaction involving the sale of 50% or more of the outstanding common stock or
assets of Ameritech, (iii) an additional fee of $5 million, payable at
Ameritech's discretion, based on Goldman Sachs' availability and contribution
through the closing of any such transactions, and (iv) an additional fee of $10
million, payable at Ameritech's discretion, based on Goldman Sachs' reasonable
support, upon request, in the pursuit by Ameritech of regulatory approvals
necessary to consummate any such transactions. Ameritech has also agreed to
indemnify Goldman Sachs and certain related persons against various liabilities
in connection with its engagement and to reimburse Goldman Sachs for its
out-of-pocket expenses, including reasonable attorney's fees.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
Certain matters discussed herein are forward-looking statements that involve
risks and uncertainties. Forward-looking statements include the information
concerning possible or assumed future results of operations of SBC and Ameritech
and synergistic benefits of the Merger set forth under "--Reasons for the
Merger; Recommendations of the Board of Directors" and "-- Opinions of Financial
Advisors." To that extent, SBC and Ameritech claim the protection of the
disclosure liability safe harbor for forward-looking statements contained in the
Private Securities Litigation Reform Act of 1995. Readers are cautioned that the
following important factors, in addition to those discussed elsewhere herein,
and in the documents incorporated by reference herein, could affect the future
results of SBC and Ameritech and cause those results to differ materially from
those expressed in such forward-looking statements: future regulatory conditions
in both companies' operating areas, including conditions which may be attached
to regulatory approvals required for consummation of the Merger, greater than
anticipated competition in the local service market or other markets in which
either company operates, integration of the businesses, rate of growth of SBC's
and Ameritech's cellular businesses, the timing, extent, and profitability of
SBC's national-local strategy and its entry into the long-distance market,
growth in local access lines, risks inherent in international operations,
including exposure to fluctuations in foreign currency exchange rates and
political risk, the impact of new technologies and changes in general economic
and market conditions.
TERMS OF THE MERGER
At the Effective Time, Merger Sub will be merged with and into Ameritech and
the separate corporate existence of Merger Sub will thereupon cease. Ameritech
will be the Surviving Corporation, will continue to be governed by the laws of
the State of Delaware and will become a wholly owned subsidiary of SBC. The
Merger Agreement provides that the Ameritech Charter as in effect immediately
prior to the Effective Time will be amended as contemplated by the Merger
Agreement and, as so amended, will be the certificate of incorporation of the
Surviving Corporation and that the by-laws of Merger Sub in effect at the
Effective Time will be the by-laws of the Surviving Corporation.
Pursuant to the Merger Agreement, at the Effective Time, each share of
Ameritech Common Stock issued and outstanding immediately prior to the Effective
Time (other than Excluded Ameritech Common Stock) will be converted into a
number of shares of SBC Common Stock equal to the Exchange Ratio (subject to
appropriate adjustment to prevent dilution), together with an appropriate number
of corresponding SBC Rights or SBC Substitute Rights, if any. See "- General."
The Merger Agreement further provides that at the Effective Time, all shares of
Ameritech Common Stock will no longer be outstanding, will be canceled and
retired and will cease to exist, and (A) each certificate (an
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"Ameritech Certificate") formerly representing any shares of Ameritech Common
Stock (other than Excluded Ameritech Shares) and (B) each uncertificated share
of Ameritech Common Stock (a "Registered Ameritech Share") registered to a
holder on the stock transaction books of Ameritech (other than Excluded
Ameritech Common Stock) will thereafter represent only the right to receive the
Merger Consideration and the right, if any, to receive cash in lieu of
fractional shares and any distribution or dividend on SBC Common Stock with a
record date at or after the Effective Time. In addition, each share of Excluded
Ameritech Common Stock issued and outstanding immediately prior to the Effective
Time will be canceled and retired without payment of any consideration therefor
and will cease to exist.
The Merger Agreement provides that in the event that prior to the Effective
Time there is a change in the number of shares of Ameritech Common Stock or
shares of SBC Common Stock or securities convertible or exchangeable into or
exercisable for shares of Ameritech Common Stock 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 will be equitably adjusted to eliminate
the effects of such event.
No fractional shares of SBC Common Stock will be issued in the Merger.
Instead, the Merger Agreement provides that each holder of Ameritech Common
Stock who would otherwise have been entitled to receive a fractional share of
SBC Common Stock in the Merger will be entitled to receive, in lieu thereof, an
amount in cash (without interest) determined by multiplying such fraction
(rounded to the nearest one-hundredth of a share) by the average 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.
CLOSING; EFFECTIVE TIME
The Merger Agreement provides that the Closing will take place on the second
business day after the date on which the last to be fulfilled or waived of the
conditions set forth in the Merger Agreement are satisfied or waived in
accordance with the Merger Agreement, or on such other date as SBC and Ameritech
may agree in writing. Immediately following the Closing, Ameritech and SBC will
cause the Certificate of Merger to be executed, acknowledged and filed with the
Secretary of State of the State of Delaware as provided in Section 251 of the
DGCL. The Merger will become effective at the time when the Certificate of
Merger has been duly filed with the Secretary of State of the State of Delaware
or such other time as agreed upon by the parties and set forth in the
Certificate of Merger in accordance with the DGCL.
EXCHANGE OF AMERITECH COMMON STOCK FOR SHARES OF SBC COMMON STOCK
Procedures. The Merger Agreement provides that promptly after the Effective
Time, the Surviving Corporation will cause an exchange agent (the "Exchange
Agent") to mail to each holder of record as of the Effective Time of an
Ameritech Certificate or a Registered Ameritech Share, as the case may be (other
than holders of Ameritech Certificates or Registered Ameritech Shares in respect
of Excluded Ameritech Common Stock), (i) (x) in the case of holders of Ameritech
Certificates, a letter of transmittal specifying that delivery will be effected,
and that risk of loss and title to the Ameritech Certificates will pass, only
upon delivery of Ameritech Certificates (or affidavits of loss in lieu thereof)
to the Exchange Agent (the "Certificate Letter of Transmittal") or (y) in the
case of holders of Registered Ameritech Shares, a letter of transmittal
specifying that the exchange for SBC Common Stock will occur only upon delivery
of a letter of transmittal to the Exchange Agent (the "Registered Letter of
Transmittal"), each such letter of transmittal to be in such form and have such
other provisions as SBC and Ameritech may reasonably agree, and (ii)
instructions for exchanging Ameritech Certificates or Registered Ameritech
Shares for (A) uncertificated shares of SBC Common Stock registered on the stock
transfer books of SBC in the name of such holder ("Registered SBC Shares") or,
at the election of such holder, certificates representing shares of SBC Common
Stock and (B) any unpaid dividends and other distributions and cash in lieu of
fractional shares. Except as otherwise provided in the Merger Agreement, upon
(I) surrender of an Ameritech Certificate for cancellation to the Exchange Agent
together with a Certificate Letter of Transmittal, duly executed, the holder of
such Ameritech Certificate or (II) delivery of a Registered Letter of
Transmittal, duly executed, the holder of such Registered Ameritech Shares, as
the case may be, will be entitled to receive in exchange therefor (x) Registered
SBC Shares or, at the election of such holder, a certificate representing that
number of whole shares of SBC Common Stock that such holder is entitled to
receive pursuant to the Merger Agreement, (y) a check in the amount (after
giving effect to any required tax withholdings) of (A) any cash in lieu of
fractional shares determined in accordance with the terms of the Merger
Agreement plus (B) any cash dividends and any other dividends or other
distributions that such holder has the right to receive pursuant to the Merger
Agreement, and any Ameritech Certificate so surrendered and any Registered
Ameritech Share in respect of which a Registered Letter of Transmittal is so
delivered will be canceled. No interest will be paid or accrued on any amount
payable upon
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due surrender of any Ameritech Certificate or delivery of a duly executed
Registered Letter of Transmittal, as the case may be.
The Merger Agreement also provides that in the event of a transfer of
ownership of Ameritech Common Stock that is not registered in the transfer
records of Ameritech, Registered SBC Shares or a certificate representing the
proper number of shares of SBC Common Stock, as the case may be, together with a
check for any cash to be paid upon due surrender of the Ameritech Certificate or
upon the delivery to the Exchange Agent of the duly executed Registered Letter
of Transmittal and any other dividends or distributions in respect thereof, may
be issued and/or paid to such a transferee if, in the case of holders of
Ameritech Certificates, the Ameritech Certificate formerly representing such
Ameritech Common Stock is presented to the Exchange Agent, and, in the case of
holders of Registered Ameritech Shares, if the Registered Letter of Transmittal
is delivered to the Exchange Agent, in either case accompanied by all documents
required to evidence and effect such transfer and to evidence that any
applicable stock transfer taxes have been paid. If any Registered SBC Shares or
any certificate for shares of SBC Common Stock is to be issued in a name other
than that in which the Ameritech Certificate surrendered in exchange therefor or
the Registered Ameritech Shares exchanged therefor, as the case may be, is
registered, it will be a condition of such exchange that the Person (as defined
in the Merger Agreement) requesting such exchange will pay any transfer or other
taxes required by reason of the issuance of Registered SBC Shares or a
certificate for shares of SBC Common Stock in a name other than that of the
registered holder of the Ameritech Certificate surrendered or the Registered
Ameritech Shares exchanged, as the case may be, or will establish to the
satisfaction of SBC or the Exchange Agent that such tax has been paid or is not
applicable.
Lost, Stolen or Destroyed Certificates
In the event any Ameritech Certificate is lost, stolen or destroyed, upon
the making of an affidavit of that fact by the Person claiming such Ameritech
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 Ameritech Certificate, SBC will
issue the shares of SBC Common Stock and the Exchange Agent will issue the
shares of SBC Common Stock and the Exchange Agent will issue any cash, dividends
and other distributions in respect thereof issuable and/or payable in exchange
for such lost, stolen or destroyed Certificate pursuant to the terms of the
Merger Agreement upon due surrender of and delivery in respect of the Ameritech
Common Stock represented by such Ameritech Certificate pursuant to the Merger
Agreement, in each case, without interest.
Distributions with Respect to Unexchanged Shares; Voting
The Merger Agreement provides that 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 will include dividends or other
distributions in respect of all shares of SBC Common Stock issuable pursuant to
the Merger Agreement. The Merger Agreement also provides that no dividends or
other distributions in respect of such SBC Common Stock will be paid to any
holder of any unsurrendered Ameritech Certificate or Registered Ameritech Shares
for which a Registered Letter of Transmittal has not been delivered, until such
Ameritech Certificate is surrendered for exchange or such Registered Letter of
Transmittal is delivered, as the case may be, in accordance with the provisions
of the Merger Agreement. Subject to the effect of applicable laws, following
surrender of any such Ameritech Certificate or delivery of any such Registered
Letter of Transmittal, as the case may be, there will be issued and/or paid to
the holder of the Registered SBC Shares or the certificates representing whole
shares of SBC Common Stock, as the case may be, issued in exchange therefor,
without interest, (A) at the time of such surrender or delivery, as the case may
be, the dividends or other distributions with a record date after the Effective
Time and a payment date on or prior to the date of issuance of such whole shares
of SBC Common Stock and not previously paid and (B) at the appropriate payment
date, the dividends or other distributions payable with respect to such whole
shares of SBC Common Stock with a record date after the Effective Time but with
a payment date subsequent to surrender or delivery, as the case may be. For
purposes of dividends or other distributions in respect of shares of SBC Common
Stock, all shares of SBC Common Stock to be issued pursuant to the Merger will
be deemed issued and outstanding as of the Effective Time.
The Merger Agreement further provides that registered holders of
unsurrendered Ameritech Certificates or Registered Ameritech Shares for which a
duly executed Registered Letter of Transmittal has not been delivered will be
entitled to vote after the Effective Time at any meeting of SBC shareowners with
a record date at or after the Effective Time the number of whole shares of SBC
Common Stock represented by such Ameritech Certificates or Registered Ameritech
Shares, as the case may be, regardless of whether such holders have surrendered
their Ameritech Certificates or delivered duly executed Registered Letters of
Transmittal, as the case may be.
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REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various representations and warranties of
Ameritech, SBC and Merger Sub, certain of which are qualified as to materiality.
Ameritech represents and warrants to SBC and Merger Sub, and SBC (on behalf of
itself and Merger Sub) represents and warrants to Ameritech regarding the
following matters, among others: (i) corporate existence and capitalization of
it and its respective Significant Subsidiaries (as defined in Rule 1.02(w) of
Regulation S-X promulgated pursuant to the Exchange Act); (ii) corporate power
and authority to execute, deliver and perform its obligations under the Merger
Agreement and to consummate the Merger; (iii) that the Merger Agreement and the
consummation of the Merger will not result in a violation of any Contract to
which it is a party, or violate any law, rule, regulation, any governmental or
non-governmental permit or license or the organizational documents of it or its
Significant Subsidiaries; (iv) consents, registrations, approvals, permits or
authorizations required by any governmental or regulatory authority, court,
agency, commission, body or other governmental entity ("Governmental Entity")
required in connection with the execution and delivery of the Merger Agreement
and the consummation of the Merger and the other transactions contemplated by
the Merger Agreement, including filings with applicable PUCs and the FCC; (v)
its financial statements; (vi) the conduct of its and its Subsidiaries'
businesses since December 31, 1997; (vii) pending or threatened civil, criminal
or administrative suits, actions or proceedings and undisclosed liabilities;
(viii) employee benefits; (ix) compliance with laws; (x) in the case of
Ameritech, inapplicability of state takeover statutes; (xi) environmental
matters; (xii) accounting and tax matters, including the absence of any action
that would prevent SBC from accounting for the Merger as a "pooling of
interests" or prevent the Merger from qualifying as a "reorganization" within
the meaning of Section 368(a) of the Code; (xiii) labor matters; (xiv) in the
case of Ameritech, Ameritech having adopted an amendment to the Rights Agreement
between Ameritech and American Transtech Inc., as Rights Agent dated as of
December 21, 1988 (the "Ameritech Rights Agreement") to provide, among other
things, that neither SBC nor Ameritech will have any obligations relating to the
Rights Agreement as a result of the Merger; and (xv) the absence of any
liability to any undisclosed person for any brokerage fees, commissions or
finders' fees.
As used in the Merger Agreement, the term "Subsidiary" means, with respect
to Ameritech, SBC or Merger Sub, as the case may be, any entity, whether
incorporated or unincorporated, of which at least fifty percent of the
securities or ownership interests having by their terms ordinary voting power to
elect at least fifty percent of the board of directors or other persons
performing similar functions is directly or indirectly owned by such party or by
one or more of its respective Subsidiaries or by such party and any one or more
of its respective Subsidiaries.
CERTAIN COVENANTS
Interim Operations
Pursuant to the Merger Agreement, Ameritech has covenanted and agreed as to
itself and its Subsidiaries that, after the date of the Merger Agreement and
prior to the Effective Time (unless SBC otherwise approves in writing, and
except as otherwise expressly contemplated by the Merger Agreement, disclosed to
SBC or required by applicable Law): (i) the business of it and its Subsidiaries
will be conducted in the ordinary and usual course and, to the extent consistent
therewith, it and its Subsidiaries will use all reasonable best efforts to
preserve its business organization intact and maintain its existing relations
and goodwill with customers, suppliers, regulators, distributors, creditors,
lessors, employees and business associates; (ii) it will not (A) amend the
Ameritech Charter or the Ameritech Bylaws or amend, modify or terminate the
Ameritech Rights Agreement; provided, however, that nothing in the Merger
Agreement will prevent Ameritech from reducing below 20% the beneficial
ownership threshold in the definition of an Acquiring Person (as defined in the
Ameritech Rights Agreement) or extending the Final Expiration Date (as defined
in the Ameritech Rights Agreement) or adopting a new rights agreement having
substantially similar terms as the Rights Agreement and not inconsistent with
the terms of the Merger Agreement relating to the Ameritech Rights Agreement or
the transactions contemplated by the Merger Agreement; (B) split, combine,
subdivide or reclassify its outstanding shares of capital stock; (C) declare,
set aside or pay any dividend or distribution payable in cash, stock or property
in respect of any capital stock, other than regular quarterly cash dividends in
amounts consistent with its past practice or rights to purchase Ameritech Common
Stock or Ameritech Preference Stock pursuant to any successor agreement to the
Ameritech Rights Agreement, adopted in accordance with the terms of the Merger
Agreement; or (D) repurchase, redeem or otherwise acquire or permit any of its
Subsidiaries to purchase or otherwise acquire, except in open market
transactions in connection with the Ameritech Stock Plans, any shares of its
capital stock or any securities convertible into or exchangeable or exercisable
for any shares of its capital stock, but subject to Ameritech's obligations
under the following item (iii); (iii) neither it nor any of its Subsidiaries
will 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
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Section 368(a) of the Code or that would cause any of its representations and
warranties contained in the Merger Agreement to become untrue in any material
respect; (iv) neither it nor any of its Subsidiaries will terminate, establish,
adopt, enter into, make any new grants or awards of stock-based compensation or
other benefits under, amend or otherwise modify, any Ameritech Compensation and
Benefit Plans or increase the salary, wage, bonus or other compensation of any
directors, officers or key employees except (A) for grants or awards to
directors, officers and employees of it or its Subsidiaries under existing
Ameritech 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 will include normal periodic performance reviews and related
Ameritech Compensation and Benefit Plan increases and the provision of
individual Ameritech Compensation and Benefit Plans consistent with past
practice for promoted or newly hired officers and employees and the adoption of
Ameritech Compensation and Benefit Plans for employees of new Subsidiaries in
amounts and on terms consistent with past practice); provided, that in no event
will it institute a broad based change in compensation, unless it has used its
reasonable best efforts to provide SBC with prior notice of any such change or,
if Ameritech was unable to provide such prior notice, Ameritech will provide SBC
with notice as soon as practicable following any such change, or (C) for actions
necessary to satisfy existing contractual obligations under Ameritech
Compensation and Benefit Plans existing as of the date of the Merger Agreement;
(v) neither it nor any of its Subsidiaries will issue any Ameritech Preferred
Stock or Ameritech Preference Stock or incur any indebtedness for borrowed money
or guarantee any such indebtedness if it reasonably anticipates that after such
incurrence any of its or any of its Subsidiaries' outstanding senior
indebtedness would be rated A or lower by Standard & Poor's; (vi) neither it nor
any of its Subsidiaries will make any capital expenditures in any period of
twelve consecutive months following the date of the Merger Agreement in an
aggregate amount in excess of 150% of the aggregate amount reflected in
Ameritech's capital expenditure budget for such year; (vii) neither it nor any
of its Subsidiaries will transfer, lease, license, sell, mortgage, pledge,
encumber or otherwise dispose of any of its or its Subsidiaries property or
assets (including capital stock of any of its Subsidiaries) with a fair market
value in excess of $1 billion in the aggregate in any period of twelve
consecutive months following the date of the Merger Agreement except for
transfers, leases, licenses, sales, mortgages, pledges, encumbrances, or other
dispositions in the ordinary course of business consistent with past practice;
(viii) neither it nor any of its Subsidiaries will issue, deliver, sell, or
encumber shares of any class of its common stock or any securities convertible
into, or any rights, warrants or options to acquire, any such shares except (A)
any such shares issued pursuant to options and other awards outstanding on the
date of the Merger Agreement under the Ameritech Stock Plans, awards of options
and other awards granted after the execution of the Merger Agreement under
Ameritech Stock Plans in accordance with the Merger Agreement and shares
issuable pursuant to such awards and (B) up to an aggregate amount of $3.6
billion of such shares, securities, rights, warrants or options (valued at their
fair market value as of the date of the agreement to make such acquisition) in
any period of twelve consecutive months following the date of the Merger
Agreement to fund, in whole or in part, the cost of any acquisition or
acquisitions permitted under the following item (ix) following reasonable notice
to SBC of its intention to take such action; (ix) neither it nor any of its
Subsidiaries will spend in excess of $3.6 billion in the aggregate in any period
of twelve consecutive months following the date of the Merger Agreement to
acquire any business, whether by merger, consolidation, purchase of property or
assets or otherwise, provided, that no such acquisition will prevent, materially
delay or materially impair its ability to consummate the transactions
contemplated by the Merger Agreement, and provided further, that neither it nor
any of its Subsidiaries will acquire any business the acquisition of which would
subject SBC and its Subsidiaries following the consummation of the Merger to any
Commercial Mobile Radio Service spectrum aggregation limit restriction pursuant
to the provisions of 47 C.F.R. Section 20.6 or place SBC and its Subsidiaries
following the consummation of the Merger in violation of the Cellular Cross
Ownership limits contained in 47 C.F.R. Section 22.942; (x) neither it nor its
Subsidiaries will enter into any business other than the telecommunications
business and those businesses traditionally associated with the
telecommunications business; and (xi) neither it nor any of its Subsidiaries
will authorize or enter into any agreement to do any of the foregoing.
Pursuant to the Merger Agreement, SBC has covenanted and agreed as to itself
and its Subsidiaries that after the date of the Merger Agreement and prior to
the Effective Time (unless Ameritech otherwise approves in writing, which
approval will not be unreasonably withheld or delayed, and except as otherwise
expressly contemplated by the Merger Agreement, disclosed to Ameritech or
required by applicable Law): (i) the business of it and its Subsidiaries will be
conducted in the ordinary and usual course and, to the extent consistent
therewith, it and its Subsidiaries will use all reasonable best efforts to
preserve its business organization intact and maintain its existing relations
and goodwill with customers, suppliers, regulators, distributors, creditors,
lessors, employees and business associates; (ii) it will not (A) amend the SBC
Charter or SBC Bylaws in any manner that would prohibit or hinder, impede or
delay in any material respect the Merger or the consummation of the transactions
contemplated thereby, provided, that any amendment to the SBC Charter to
increase the authorized number of shares of any class or series of the capital
stock of SBC will in no way be restricted by the foregoing; (B) declare, set
aside or pay any dividend or other distribution payable in cash or property
(other than SBC Common Stock or rights to purchase SBC Common Stock or SBC
Preferred
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Stock pursuant to any successor agreement to the SBC Rights Agreement) in
respect of any capital stock, other than per share regular quarterly cash
dividends in amounts consistent with its past practice; or (C) repurchase,
redeem or otherwise acquire, or permit any of its Subsidiaries to purchase or
otherwise acquire, except in open market transactions in connection with the SBC
Stock Plans, any shares of its capital stock or any securities convertible into
or exchangeable for any shares of its capital stock, but subject to SBC's
obligations under the following item (iii); (iii) neither it nor any of its
Subsidiaries will knowingly take any action that would prevent the Merger from
qualifying for "pooling-of-interests" accounting treatment or as a tax-free
"reorganization" within the meaning of Section 368(a) of the Code or that will
cause any of its representations and warranties therein to become untrue in any
material respect; (iv) neither it nor any of its Subsidiaries will issue any SBC
Preferred Stock or incur any indebtedness for borrowed money or guarantee any
such indebtedness if it reasonably anticipates that after such incurrence any of
its or any of its Subsidiaries' outstanding senior indebtedness would be rated A
or lower by Standard & Poor's; (v) neither it nor any of its Subsidiaries will
make any capital expenditures in any period of twelve consecutive months
following the date of the Merger Agreement in an aggregate amount in excess of
150% of the aggregate amount of capital expenditures reflected in its capital
expenditure budget for such year; (vi) neither it nor any of its Subsidiaries
will transfer, lease, license, sell, mortgage, pledge, encumber or otherwise
dispose of any of its or its Subsidiaries property or assets (including capital
stock of any of its Subsidiaries) with a fair market value in excess of $1.5
billion in the aggregate in any period of twelve consecutive months following
the date of the Merger Agreement except for transfers, leases, licenses, sales,
mortgages, pledges, encumbrances, or other dispositions in the ordinary course
of business consistent with past practice; (vii) neither it nor any of its
Subsidiaries will issue, deliver, sell or encumber shares of any class of its
common stock or any securities convertible into, or any rights, warrants or
options to acquire, any such shares, except (A) any such shares issued pursuant
to options and other awards outstanding on the date of the Merger Agreement
under the SBC Stock Plans, awards of options and other awards granted hereafter
under the SBC Stock Plans and shares issuable pursuant to such awards, (B) up to
an aggregate amount of $4.8 billion of such shares, securities, rights, warrants
or options in any period of twelve consecutive months following the date of the
Merger Agreement to fund, in whole or in part, the cost of any acquisition or
acquisitions permitted under the following item (viii), following reasonable
notice to Ameritech of its intention to take such action, and (C) pursuant to
the terms of the Agreement and Plan of Merger dated as of January 4, 1998, by
and among SNET and SBC(CT) Sub, Inc. a Connecticut corporation and a
wholly-owned subsidiary of SBC (the "SNET Agreement"), which issuances of SBC
capital stock will not be included in calculating the $4.8 billion of
permissible issuances, deliveries, sales or encumbrances, or require notice to
Ameritech, pursuant to clause (B) above; (viii) neither it nor any of its
Subsidiaries will spend in excess of $4.8 billion in the aggregate in any period
of twelve consecutive months following the date of the Merger Agreement to
acquire any business, whether by merger, consolidation, purchase of property or
assets or otherwise (valuing any non-cash consideration at its fair market value
as of the date of the agreement for such acquisition), provided, however, that
no such acquisition would prevent, materially delay or materially impair its
ability to consummate the transactions contemplated by the Merger Agreement; and
provided, further, that the SNET Agreement and the transactions contemplated
thereby will not be subject to the terms of the foregoing restriction and,
provided, further, that neither it nor any of its Subsidiaries will acquire any
business the acquisition of which would subject SBC and its Subsidiaries
following the consummation of the Merger to any Commercial Mobile Radio Service
spectrum aggregation limit restriction pursuant to the provisions of 47 C.F.R.
Section 20.6 or place SBC and its Subsidiaries following the consummation of the
Merger in violation of the Cellular Cross Ownership limits contained in 47
C.F.R. Section 22.942, except that the SNET Agreement and the transactions
contemplated thereby will not be subject to the terms of the foregoing
restriction; (ix) neither it nor any of its Subsidiaries will enter any business
other than the telecommunications business and those businesses traditionally
associated with the telecommunications business; and (x) neither it nor any of
its Subsidiaries will authorize or enter into an agreement to do any of the
foregoing.
Acquisition Proposals
In accordance with the terms of the Merger Agreement, Ameritech has agreed
that neither it nor any of its Subsidiaries will, and that it will 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) (Ameritech, its Subsidiaries and
their officers, directors, employees, agents and representatives being the
"Ameritech Representatives") not to, directly or indirectly, initiate, solicit,
encourage or otherwise facilitate any inquiries or the making of any Ameritech
Acquisition Proposal. Ameritech has further agreed that neither it nor any of
its Subsidiaries will, and that it will direct and use its best efforts to cause
Ameritech Representatives not to, directly or indirectly, have any discussion
with or provide any confidential information or data to any Person relating to
an Ameritech Acquisition Proposal or engage in any negotiations concerning an
Ameritech Acquisition Proposal, or otherwise facilitate any effort or attempt to
make or implement an Ameritech Acquisition Proposal; provided, however, that
nothing contained in the Merger Agreement will prevent either Ameritech or
Ameritech Representatives from (A) complying with Rule 14e-2
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promulgated under the Exchange Act with regard to an Ameritech 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
Ameritech Acquisition Proposal by any such Person; or (C) recommending such an
unsolicited bona fide written Ameritech Acquisition Proposal to the shareowners
of Ameritech if, and only to the extent that, in such case referred to in clause
(B) or (C), (i) the Ameritech Board concludes in good faith (after consultation
with its financial advisor) that such Ameritech 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 Superior Ameritech Proposal, (ii) the
Ameritech Board determines in good faith after consultation with outside legal
counsel that such action is necessary for the Ameritech Board to comply with its
fiduciary duty under applicable law and (iii) prior to providing any information
or data to any Person in connection with an Ameritech Acquisition Proposal by
any such Person, the Ameritech Board receives from such Person a confidentiality
agreement in customary form, provided, that such confidentiality agreement will
not contain terms that prevent Ameritech from complying with its obligations
under the foregoing provisions of the Merger Agreement.
In accordance with the terms of the Merger Agreement, SBC has agreed that
neither it nor any of its Subsidiaries will, and that it will direct and use its
best efforts to cause its and its Subsidiaries' employees, agents and
representatives (including any investment banker, attorney or accountant
retained by it or any of its Subsidiaries) (SBC, its Subsidiaries and their
officers, directors, employees, agents and representatives being the "SBC
Representatives") not to, directly or indirectly, initiate, solicit, encourage
or otherwise facilitate any inquiries or the making of any SBC Acquisition
Proposal. SBC has further agreed that neither it nor any of its Subsidiaries nor
any of the officers and directors of it or its Subsidiaries will, and that it
will direct and use its best efforts to cause the SBC Representatives not to,
directly or indirectly, have any discussion with or provide any confidential
information or data to any Person relating to a SBC Acquisition Proposal or
engage in any negotiations concerning a SBC Acquisition Proposal, or otherwise
facilitate any effort or attempt to make or implement a SBC Acquisition
Proposal; provided, however, that nothing contained in the Merger Agreement will
prevent either SBC or the SBC Representatives from (A) complying with Rule 14e-2
promulgated under the Exchange Act with regard to a SBC Acquisition Proposal;
(B) engaging in any discussions or negotiations with or providing any
information to, any Person in response to an unsolicited bona fide written SBC
Acquisition Proposal by any such Person; or (C) recommending such an unsolicited
bona fide written SBC Acquisition Proposal to the shareowners of SBC if and only
to the extent that, in such cases referred to in clause (B) or (C), (i) the SBC
Board concludes in good faith (after consultation with its financial advisor)
that such SBC Acquisition Proposal is reasonably capable of being completed,
taking into account all legal, financial, regulatory and other aspects of the
proposal and the Person making the proposal, and would, if consummated, result
in a Superior SBC Proposal, (ii) the SBC Board determines in good faith after
consultation with outside legal counsel that such action is necessary for the
Board of Directors to comply with its fiduciary duty under applicable law and
(iii) prior to providing any information or data to any Person in connection
with a SBC Acquisition Proposal by any such Person, the SBC Board will receive
from such Person a confidentiality agreement in customary form, provided, that,
such confidentiality agreement will not contain terms that prevent SBC from
complying with its obligations under the foregoing provisions of the Merger
Agreement.
Ameritech and SBC have each agreed in the Merger Agreement to cease and
cause to be terminated any existing activities, discussions or negotiations with
any parties conducted theretofore with respect to any Ameritech Acquisition
Proposal or SBC Acquisition Proposal, as the case may be. The Merger Agreement
further requires Ameritech and SBC to 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 to inform the other of any
material modification of the terms of any such proposal or offer or the
withdrawal thereof. The Merger Agreement requires Ameritech and SBC to promptly
request each Person that has theretofore executed a confidentiality agreement in
connection with its consideration of any Ameritech Acquisition Proposal or any
SBC Acquisition Proposal, as the case may be, to return all confidential
information heretofore furnished to such Person by or on behalf of it or any of
its Subsidiaries.
The Special Meetings
Ameritech has agreed in the Merger Agreement to take all action necessary to
convene the Ameritech Special Meeting as promptly as practicable after the
Registration Statement is declared effective. Similarly, SBC has agreed in the
Merger Agreement to take all action necessary to convene the SBC Special Meeting
as promptly as practicable after the Registration Statement is declared
effective.
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Subject to their respective fiduciary obligations under applicable law and
the terms of the Merger Agreement, Ameritech has agreed in the Merger Agreement
that the Ameritech Board will recommend that the shareowners of Ameritech adopt
the Merger Agreement and thereby approve the transactions contemplated thereby
and to take all lawful action to solicit such adoption, and SBC has agreed in
the Merger Agreement that the SBC Board will recommend that the shareowners of
SBC approve the issuance of shares of SBC Common Stock pursuant to the Merger
Agreement and will take all lawful action to solicit such approval.
Pooling of Interests
Pursuant to the Merger Agreement, Ameritech and SBC have each agreed to use
all respective reasonable best efforts to cause the Merger to qualify for
"pooling of interests" accounting treatment. See "Accounting Treatment."
CERTAIN REGULATORY FILINGS AND APPROVALS
Pursuant to the Merger Agreement, each of Ameritech and SBC has agreed to
cooperate with the other and use (and cause their respective Subsidiaries to
use) all their respective reasonable best efforts to take or cause to be taken
all actions, and do or cause to be done all things, necessary, proper or
advisable on its part under the Merger Agreement and applicable laws to
consummate and make effective the Merger and the other transactions contemplated
by the Merger Agreement as soon as practicable after the execution of the Merger
Agreement, including preparing and filing as promptly as practicable after the
date of the Merger Agreement all documentation to effect all necessary
applications, notices, petitions, filings and other documents and to obtain as
promptly as practicable all consents, registrations, approvals, permits and
authorizations required to be obtained from any third party and/or any
Governmental Entity in connection with the execution and delivery of the Merger
Agreement and the consummation of the Merger and the other transactions
contemplated thereby; provided, however, that nothing in the foregoing will
require, or be construed to require, SBC or Ameritech to agree to, or comply
with, any conditions to the granting of any such consent, registration,
approval, permit or authorization by any Governmental Entity if compliance with
such conditions, individually or in the aggregate, would be reasonably likely to
have a Material Adverse Effect on the Surviving Corporation or SBC following the
Effective Time (it being understood for purposes of the Merger Agreement that,
for this purpose only, materiality shall be determined by reference to the
trading market equity value of SBC prior to the consummation of the Merger and
after taking into account (i) any adverse effects reasonably likely to arise
from any restrictions on the ability of the Surviving Corporation or SBC or any
of their respective Subsidiaries to conduct its operations as currently
conducted or as proposed as of the date of the Merger Agreement to be conducted
resulting from complying with the conditions to or from the grant of any such
consent, registration, approval, permit or authorization, (ii) any benefits
reasonably likely to be realized by SBC on a consolidated basis (other than
those operational benefits reasonably likely to be realized directly from the
consummation of the Merger) resulting from complying with the conditions to or
from the grant of any such consent, registration, approval, permit or
authorization, and (iii) any proceeds resulting from any divestiture required by
a Governmental Entity as a condition to its granting any such consent,
registration, approval, permit or authorization) (a "Regulatory Material Adverse
Effect"). The Merger Agreement further provides that any divestiture by either
SBC or Ameritech or any of their respective Subsidiaries reasonably required to
cause the Surviving Corporation to be in compliance with the commercial mobile
radio service spectrum aggregation limits established by the FCC in 47 C.F.R.
Section 20.6 and the cellular cross ownership limits contained in 47 C.F.R.
Section 22.942 will be deemed not to have any adverse effect on either the
Surviving Corporation or SBC following the Effective Time.
There can be no assurance that the approvals described below will be
obtained or, if obtained, will not include conditions that could result in the
abandonment of the Merger by SBC and Ameritech.
As used in the Merger Agreement, "Material Adverse Effect" means, with
respect to either SBC or Ameritech, as the case may be, a material adverse
effect determined by reference to its trading market equity value prior to the
consummation of the Merger, other than effects or changes resulting from the
execution of the Merger Agreement or the announcement thereof or changes in (I)
the telecommunications industry generally, (II) the national economy generally
or (A) with respect to SBC only, the economy of Texas, Oklahoma, Missouri,
Kansas, Arkansas, Nevada and California, taken together, generally or of France,
Mexico and/or the Republic of South Africa or (B) with respect to Ameritech
only, the economies of Illinois, Indiana, Michigan, Ohio and Wisconsin, taken
together, generally, or of Belgium, Denmark and/or Hungary or (III) the
securities markets generally.
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HSR
Under the HSR Act and the rules promulgated thereunder, certain
transactions, including the Merger, may not be consummated unless certain
waiting period requirements have been satisfied. SBC and Ameritech will each
file a Notification and Report Form pursuant to the HSR Act with the Department
of Justice and the FTC. The HSR Act waiting period will expire thirty days after
the filing of the Notification and Report Forms, unless the waiting period is
extended by action of the Department of Justice or the FTC requesting additional
information. At any time before or after the Effective Time, the FTC, the
Department of Justice or others could take action under the antitrust laws with
respect to the Merger, including seeking to enjoin the consummation of the
Merger, to rescind the Merger or to require divestiture of substantial assets of
SBC or Ameritech. One or more state attorneys general may seek to review the
Merger under various antitrust or anticompetitive laws. There can be no
assurance that a challenge to the Merger on antitrust or anticompetitive grounds
will not be made or, if such a challenge is made, that it would not be
successful.
FCC
Before the Merger can be consummated, SBC and Ameritech must obtain the
approval of the FCC pursuant to the Communications Act for the deemed transfer
of control from Ameritech to SBC of certain FCC licenses and authorizations held
by certain of Ameritech's subsidiaries. These licenses and authorizations
include various microwave authorizations currently held by Ameritech's local
exchange and cellular operations, numerous cellular authorizations,
authorizations to provide long distance service and other authorizations used in
connection with the businesses of such subsidiaries. The FCC is expected to
evaluate whether SBC is qualified to control Ameritech and whether the public
interest, convenience, and necessity will be served by the transfer of control
that will be effected upon consummation of the Merger. SBC and Ameritech intend
to file transfer of control applications with the FCC which will seek the FCC's
approval to transfer the above-described FCC licenses and authorizations. SBC
and Ameritech expect that these applications will demonstrate compliance with
the FCC's standards. There can be no assurance as to when and if the requisite
FCC approvals will be obtained. In addition, there can be no assurance that such
approvals will not include conditions that could result in the abandonment of
the Merger.
The FCC has established certain rules and regulations, including in
particular the cellular cross-ownership limits contained in 47 C.F.R. Section
22.942, that limit the ability of any single person to have an interest in more
than one cellular license in the same market. SBC and Ameritech own competing
cellular licenses in several markets, including, but not limited to, Chicago,
Illinois and St. Louis, Missouri (the "Overlapping Cellular Licenses"). SBC and
Ameritech expect that the FCC, pursuant to its rules and regulations, will
require either SBC or Ameritech to divest one of the Overlapping Cellular
Licenses in each market. In an effort to comply with the FCC's rules and
regulations and certain provisions of the Merger Agreement, SBC and Ameritech
are investigating various alternatives regarding their Overlapping Cellular
Licenses.
State PUCs
Ameritech has subsidiaries that operate as public utility or public service
companies in the states of Illinois, Michigan, Ohio, Wisconsin, and Indiana. The
PUCs in Illinois and Ohio have express statutory requirements that require SBC
and Ameritech to obtain their approval prior to the consummation of the Merger.
There can be no assurance as to when and if the requisite PUC approvals will be
obtained. In addition, there can be no assurance that such approvals will not
include conditions that could result in the abandonment of the Merger. The
states of Michigan and Wisconsin do not have express statutory requirements for
prior approval of the Merger by their respective state PUCs, although such
states may attempt to assert jurisdiction. In addition, SBC must file a notice
with the California Public Utility Commission explaining how the Merger affects
the analysis used and conditions imposed by the California Public Utility
Commission in its order granting approval of the merger of SBC and Pacific
Telesis Group.
Illinois Commerce Commission. Ameritech has two operating company
subsidiaries in Illinois: Illinois Bell Telephone Company, d/b/a Ameritech
Illinois, and Ameritech Illinois Metro, Inc. (collectively, the "Illinois
Telecommunications Carriers"). Because the Merger is a "reorganization" for
purposes of the Illinois Public Utilities Act ("IPUA"), it is subject to the
jurisdiction of the Illinois Commerce Commission ("ICC"), and may not be
consummated without approval of the ICC. Similarly, the Merger will be deemed to
be a change in control of the Illinois Telecommunications Carriers, subject to
the jurisdiction of the ICC. SBC and the Illinois Telecommunications Carriers
and, if required, Ameritech (collectively, the "Applicants"), intend to file a
joint application with the ICC (the "ICC Application") requesting the necessary
approvals to consummate the Merger and for SBC to indirectly control the
Illinois Telecommunications Carriers. The IPUA provides that the ICC will not
approve any "reorganization" if the ICC
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finds, after notice and hearing, that the reorganization will adversely affect
the public utility's ability to perform its duties under the IPUA. In order to
find that there will be no such adverse effect, the ICC must find that the
reorganization meets the requirements specified in chapter 220 Section 5/7-204
of the Illinois Compiled Statutes. In approving the Merger, the ICC may impose
such terms, conditions or requirements as, in its judgment, are necessary to
protect the interests of the public utility and its customers. The ICC has 11
months to make its decision on the ICC Application, unless the ICC finds that it
has been delayed by the Applicants' failure to provide data or information
requested by the ICC or to provide information that the ICC has ordered the
Applicants to turn over to other parties. The ICC may extend the review period
for up to three months if the ICC Application is amended or if necessary to
consider changes in circumstances after the filing of the ICC Application that
were not reasonably foreseeable.
Public Utility Commission of Ohio. Ohio Bell Telephone Company, d/b/a
Ameritech Ohio ("Ohio Bell"), a subsidiary of Ameritech, is a domestic telephone
company (as defined by the Ohio Public Utility Act (the "Ohio Act")). Section
4905.402 of the Ohio Act provides that no person can acquire control, directly
or indirectly, of a domestic telephone company or a holding company controlling
a domestic telephone company until that person obtains the prior approval of the
Public Utilities Commission of Ohio (the "PUCO"). SBC and Ameritech must file an
application (the "Ohio Application") with the PUCO seeking authority for the
deemed transfer of control of Ohio Bell to SBC. Under the provisions of the Ohio
Act, the Ohio Application must demonstrate that the transfer of control will
promote the public convenience and result in the provision of adequate service
for a reasonable rate, rental, toll or charge. A hearing on the Ohio Application
may be held by the PUCO, but is not required. If no hearing is held, the PUCO is
required to issue an order within 30 days of the filing of the Ohio Application.
If a hearing is held, then the PUCO must issue an order within 20 days of the
conclusion of the hearing. Section 4905.402 indicates that if, after the review
of the Ohio Application, and after any necessary hearing, the PUCO is satisfied
that approval of the Ohio Application will promote the public convenience and
result in the provision of adequate service for a reasonable rate, rental, toll
or charge, the PUCO shall approve the application and make such orders as it
considers proper. If the PUCO does not issue an order within the 30 or 20 day
time periods, the Ohio Application will be deemed approved by operation of law.
PUC Approvals Regarding Intrastate Interexchange Service
Ameritech is authorized to provide interexchange services (the "LD
Certificates") in 45 states and the District of Columbia. Ameritech is also
authorized to provide local exchange services (the "LE Certificates", and
together with the LD Certificates, the "State Certificates") in eight states
outside of its five state region. The State Certificates include authorizations
for Ameritech, or its subsidiaries, to provide local exchange services in the
states of California, Texas and Missouri, which are each states in which SBC has
a subsidiary which is an incumbent local exchange carrier, as defined by the
Telecommunications Act. Ameritech may be required to modify or withdraw LD
Certificates in the states of California, Nevada, Texas, Missouri, Kansas,
Arkansas and Oklahoma depending upon the status of SBC's applications to obtain
authority to provide long distance service in these states. Furthermore,
authorization may be required from certain other states to permit Ameritech to
effect the deemed transfer of its existing long distance authorizations to SBC
or one of its subsidiaries. In addition, Ameritech may be required to modify or
withdraw its LE Certificates in the states of California, Nevada, Texas,
Missouri, Kansas, Arkansas and Oklahoma as a result of this transaction. SBC may
be required to modify or amend any LD Certificates or LE Certificates it may
have in the states of Illinois, Indiana, Michigan, Ohio and Wisconsin.
Municipal Cable Franchises
Ameritech has been granted cable franchises pursuant to agreements with
various municipalities ("Cable Franchise Agreements") located in the states of
Illinois, Michigan and Ohio. Under the Cable Franchise Agreements, consummation
of the Merger may require the approval of the appropriate municipality prior to
the Effective Time. Ameritech and SBC intend to seek any required approvals.
European Regulatory Approvals
SBC and Ameritech may be required to make certain notifications to or
filings with regulatory authorities in one or more European countries in which
SBC or Ameritech has direct or indirect investments in telecommunications
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companies. SBC has investments in the United Kingdom, France and Switzerland.
Ameritech has equity investments in telecommunications companies in Belgium,
Germany, Denmark, Norway, and Hungary.
STOCK EXCHANGE LISTING AND DE-LISTING
SBC has agreed to 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 NYSE, subject
to official notice of issuance, prior to the Closing Date. The Merger Agreement
provides that the Surviving Corporation will use its best efforts to cause the
shares of Ameritech Common Stock to be de-listed from the NYSE, CSE, BSE, PSE
and PHLX and de-registered under the Exchange Act as soon as practicable
following the Effective Time.
EMPLOYEE BENEFITS
Stock Options
The Merger Agreement provides that at the Effective Time each outstanding
Ameritech Option under the Ameritech Stock Plans, whether vested or unvested,
will be deemed to constitute a Substitute Option at an exercise price equal to
the Substitute Option Price. For each Substitute Option substituted for an
Ameritech Option that included a right under certain circumstances to receive
dividend equivalents in the form of stock units ("Ameritech Stock Units"), all
Ameritech Stock Units credited to the account of the holder of such Substitute
Option at the Effective Time will, as of the Effective Time, be deemed to
constitute a number of stock units, each of which will represent one share of
SBC Common Stock ("SBC Stock Units"), equal to the number of shares of SBC
Common Stock the holder of such Substitute Option would have been entitled to
receive pursuant to the Merger Agreement had such Ameritech Stock Units been
distributed to such holder in full immediately prior to the Effective Time.
Thereafter SBC Stock Units will continue to be credited to the account of the
holder of such Substitute Option to the same extent and on the same terms and
conditions as they would have under the Ameritech Option for which the
Substitute Option was substituted (except that the record dates and dividend
amounts will be the record dates and dividend amounts for SBC Common Stock), and
all such SBC Stock Units will be distributed at the same times and in the same
manner as the Ameritech Stock Units would have been distributed had the
Substitute Option not been substituted for the Ameritech Option (except that the
option price used to determine if the SBC Stock Units can be distributed will be
the Substitute Option Price).
The Merger Agreement further provides that at or prior to the Effective
Time, Ameritech will make all necessary arrangements with respect to the
Ameritech Stock Plans to permit the assumption of the unexercised Ameritech
Options by SBC and as soon as practicable after the Effective Time SBC will use
its best efforts to register under the Securities Act on Form S-8 or other
appropriate form (and use its best efforts to maintain the effectiveness
thereof) shares of SBC Common Stock issuable pursuant to all Substitute Options.
The Merger Agreement further provides that, effective at the Effective Time, SBC
will assume each Ameritech Option in accordance with the terms of the Ameritech
Stock Plan under which it was issued and the stock option agreement by which it
is evidenced and that as promptly as practicable after the Effective Time,
Ameritech will deliver to the participants in the Ameritech Stock Plans
appropriate notices setting forth such participants' rights pursuant to such
assumed Ameritech Options.
Benefit Plans
Pursuant to the Merger Agreement, SBC agrees that it will cause the
Surviving Corporation for at least two years after the Effective Time to provide
or cause to be provided to employees of Ameritech and its Subsidiaries
compensation and benefit plans that are no less favorable, in the aggregate,
than the Ameritech Compensation and Benefit Plans specifically disclosed to SBC.
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 will proportionately adjust the
benefits under Ameritech's compensation and benefit plans or the cost thereof to
participants. Notwithstanding the foregoing, the Merger Agreement provides that
with respect to employees who are subject to collective bargaining, all benefits
will be provided only in accordance with the applicable collective bargaining
agreement. Pursuant to the Merger Agreement, at or prior to the Effective Time,
Ameritech will make all necessary arrangements to cause any Ameritech Common
Stock units under the Ameritech Compensation and Benefit Plans to be converted
into share units with respect to SBC Common Stock by multiplying the shares of
Ameritech Common Stock subject to such Ameritech Common Stock units by the
Exchange Ratio. In addition, the Merger Agreement provides that SBC will, and
will cause the Surviving Corporation to, honor, pursuant to their terms,
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all employee benefit obligations existing at the Closing Date to current and
former employees under the Ameritech Compensation and Benefit Plans.
EXPENSES
Whether or not the Merger is consummated, all costs and expenses incurred in
connection with the Merger Agreement and the Merger and the other transactions
contemplated by the Merger Agreement will be paid by the party incurring such
expense, except that expenses incurred in connection with the filing fee for the
Registration Statement and printing and mailing this Joint Prospectus/Proxy
Statement and the Registration Statement and the filing fee under the HSR Act
will be shared equally by SBC and Ameritech.
INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE
The Merger Agreement provides that, from and after the Effective Time, SBC
will, and will cause the Surviving Corporation to, indemnify and hold harmless
each Indemnified Party against any Costs incurred in connection with any claim,
action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, arising out of or pertaining to matters
existing or occurring at or prior to the Effective Time, whether asserted or
claimed prior to, at or after the Effective Time, to the fullest extent
permitted under Delaware law (and the Surviving Corporation will 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).
The Merger Agreement also provides that the Surviving Corporation will
maintain D&O Insurance with coverage in amount and scope at least as favorable
as Ameritech's existing directors' and officers' liability insurance coverage
for a period of six years after the Effective Time. However, if the existing D&O
Insurance expires, is terminated or cancelled, or if the annual premium therefor
is increased to an amount in excess of 175% the Current Premium, in each case
during such six year period, the Surviving Corporation will use its best efforts
to obtain D&O Insurance in an amount and scope as great as can be obtained for
the remainder of such period for a premium not in excess (on an annualized
basis) of 175% of the Current Premium.
DIVIDENDS
The Merger Agreement provides that Ameritech will coordinate with SBC the
declaration, setting of record dates and payment dates of dividends on shares of
Ameritech Common Stock so that holders of Ameritech Common Stock do not receive
dividends on both Ameritech Common Stock and SBC Common Stock received in the
Merger in respect of any calendar quarter or fail to receive a dividend on
either Ameritech Common Stock or SBC Common Stock received in the Merger in
respect of any calendar quarter.
SBC BOARD FOLLOWING THE MERGER
SBC has agreed pursuant to the Merger Agreement that at the Effective Time
SBC will enable up to five members of the Ameritech Board to be members of the
SBC Board. The SBC Board will, in consultation with the Chief Executive Officer
of Ameritech and the Ameritech Board, select the director designees and appoint
each such director designee to the SBC Board as of the Effective Time, with such
director designees divided as nearly evenly as is possible among the classes of
directors on the SBC Board. SBC and Ameritech expect that Mr. Notebaert will be
one of the members of the Ameritech Board who will become a member of the SBC
Board as of the Effective Time.
CONDITIONS
The respective obligations of Ameritech, SBC and Merger Sub to effect the
Merger are subject to the satisfaction or waiver at or prior to the Effective
Time of each of the following conditions: (a) the Merger Agreement having been
duly adopted by holders of Ameritech Common Stock and having been duly adopted
by the sole stockholder of Merger Sub, and the issuance of shares of SBC Common
Stock pursuant to the Merger Agreement having been duly approved by the holders
of shares of SBC Common Stock; (b) the shares of SBC Common Stock issuable to
Ameritech shareowners pursuant to the Merger Agreement having been authorized
for listing on the NYSE upon official notice of issuance; (c) the waiting period
applicable to the consummation of the Merger under the HSR Act having expired or
been terminated and all material Ameritech Required Consents and material SBC
Required Consents from or with any Governmental Entity having been made or
obtained pursuant to a Final Order (as defined below), free of any
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conditions (other than conditions that are not reasonably likely, either
individually or in the aggregate, to have a Regulatory Material Adverse Effect);
(d) no Governmental Entity of competent jurisdiction having enacted, issued,
promulgated, enforced or entered any Order, and no Governmental Entity having
instituted any proceeding, or, in the case of a federal Governmental Entity,
threatened in writing to institute any proceeding, seeking any such Order; (e)
the Registration Statement having become effective under the Securities Act and
no stop order suspending the effectiveness of the Registration Statement having
been issued, and no proceedings for that purpose having been initiated or be
threatened by the SEC; (f) SBC and Ameritech having received "comfort" letters
in customary form and substance and letters from their respective independent
public accounting firms to the effect that the Merger will qualify for "pooling
of interests" accounting treatment; and (g) SBC having received all state
securities and "blue sky" permits and approvals necessary to consummate the
transactions contemplated by the Merger Agreement.
For purposes of the Merger Agreement, the term "Final Order" means an action
or decision that has been granted as to which (a) no request for a stay or any
similar request is pending, no stay is in effect, the action or decision has not
been vacated, reversed, set aside, annulled or suspended and any deadline for
filing such a request that may be designated by statute or regulation has
passed, (b) no petition for rehearing or reconsideration or application for
review is pending and the time for the filing of any such petition or
application has passed, (c) no Governmental Entity has undertaken to reconsider
the action on its own motion and the time within which it may effect such
reconsideration has passed and (d) no appeal is pending (including other
administrative or judicial review) or in effect and any deadline for filing any
such appeal that may be specified by statute or rule has passed, which in any
such case (a), (b), (c) or (d) is reasonably likely to result in vacating,
reversing, setting aside, annulling, suspending or modifying such action or
decision (in any such case in a manner which would have a Regulatory Material
Adverse Effect following the Effective Time).
For purposes of the Merger Agreement, the necessary filings, notices and/or
approvals (i) under the HSR Act, the Exchange Act and the Securities Act, (ii)
to comply with state securities or "blue-sky" laws, (iii) if any, of the FCC
pursuant to the Telecommunications Act, (iv) if any, of the PUC and the local,
state and foreign Governmental Entities identified by SBC or Ameritech to one
another pursuant to Utilities Laws and (v) if any, of the foreign regulatory
bodies identified by SBC or Ameritech to one another pursuant to applicable
foreign laws regulating actions having the purpose or effect of monopolization
or restraint of trade with respect to SBC are referred to as the "SBC Required
Consents" and with respect to Ameritech are referred to as the "Ameritech
Required Consents."
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) the representations and warranties of Ameritech set
forth in the Merger Agreement (i) to the extent qualified by Material Adverse
Effect being true and correct and (ii) to the extent not qualified by Material
Adverse Effect being true and correct, except that such representations and
warranties will be deemed satisfied so long as any failures of such
representations and warranties to be true and correct, taken together, do not
have a Material Adverse Effect on Ameritech, in each case (i) and (ii), as of
the Closing Date as though made on and as of the Closing Date (except to the
extent such representations and warranties speak as of an earlier date); (b)
Ameritech's having performed in all material respects all obligations required
to be performed by it under the Merger Agreement at or prior to the Closing
Date; (c) Ameritech's having obtained the consent or approval of each Person
whose consent or approval is required in order to consummate the transactions
contemplated by the Merger Agreement under any Contract to which Ameritech 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 Ameritech; and (d) SBC's having
received the opinion of Sullivan & Cromwell, counsel to SBC, dated the Closing
Date, to the effect that the Merger will be treated for federal income tax
purposes as a reorganization within the meaning of Section 368(a) of the Code,
and that each of SBC, Merger Sub and Ameritech will be a party to that
reorganization within the meaning of Section 368(b) of the Code.
The obligation of Ameritech to effect the Merger is also subject to the
satisfaction or waiver by Ameritech at or prior to the Effective Time of the
following conditions: (a) the representations and warranties of SBC and Merger
Sub set forth in the Merger Agreement (i) to the extent qualified by Material
Adverse Effect being true and correct, and (ii) to the extent not qualified by
Material Adverse Effect being true and correct, except that such representations
and warranties will be deemed satisfied so long as any failures of such
representations and warranties to be true and correct, taken together, do not
have a Material Adverse Effect on SBC, in each case (i) and (ii), as of the
Closing Date as though made on and as of the Closing Date (except to the extent
such representations and warranties speak as of an earlier date); (b) each of
SBC and Merger Sub having performed in all material respects all obligations
required to be performed by it under the Merger Agreement at or prior to the
Closing Date; and (c) Ameritech having received the opinion of Skadden, Arps,
Slate, Meagher & Flom (Illinois), counsel to Ameritech, dated the Closing Date,
to the effect that the
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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 Ameritech will be a party to that reorganization within the meaning of
Section 368(b) of the Code.
TERMINATION
The Merger Agreement provides that it may be terminated and the Merger may
be abandoned at any time prior to the Effective Time, whether before or after
the approval by shareowners of Ameritech and SBC by mutual written consent of
Ameritech and SBC authorized by action of their respective Boards of Directors.
The Merger Agreement further provides that it may be terminated and the Merger
may be abandoned at any time prior to the Effective Time by action of either the
SBC Board or the Ameritech Board if (a) the Merger has not been consummated by
the Termination Date, whether such date is before or after the date of approval
by the shareowners of Ameritech or SBC (provided, however, that if SBC or
Ameritech determines that additional time is necessary in connection with
obtaining a SBC Required Consent or an Ameritech Required Consent from or with
any Governmental Entity, the Termination Date may be extended for up to 60
calendar days at any one time by SBC or Ameritech from time to time by written
notice to the other party up to a date not beyond March 31, 2000, which date
will be deemed to be the Termination Date), (b) the adoption of the Merger
Agreement by Ameritech's shareowners has not occurred at the Ameritech Special
Meeting, (c) the approval of SBC's shareowners necessary to approve the issuance
of shares of SBC Common Stock pursuant to the Merger Agreement has not been
obtained at the SBC Special Meeting, or (d) any Order permanently restraining,
enjoining or otherwise prohibiting consummation of the Merger becomes final and
non-appealable (whether before or after the adoption or approval by the
shareowners of Ameritech or SBC, as the case may be). The Merger Agreement
provides that the right to terminate the Merger Agreement pursuant to clause (a)
above will not be available to any party that has breached in any material
respect its obligations under the Merger Agreement in any manner that
proximately contributes to the failure of the Merger to be consummated.
The Merger Agreement also provides that it may be terminated and the Merger
may be abandoned at any time prior to the Effective Time, whether before or
after the adoption of the Merger Agreement by the shareowners of Ameritech, by
action of the Ameritech Board: (a) if (i) the Ameritech Board approves entering
into a binding written agreement concerning a transaction that constitutes a
Superior Ameritech Proposal and Ameritech notifies SBC in writing that Ameritech
desires to enter into such agreement, (ii) SBC does not make, within ten
calendar days after receipt of Ameritech's written notification of its desire to
enter into a binding agreement for a Superior Ameritech Proposal, the terms of
which are specified in such notice, an offer that the Ameritech Board believes,
in good faith after consultation with its financial advisors, is at least as
favorable, from a financial point of view, to the shareowners of Ameritech as
the Superior Ameritech Proposal, and (iii) Ameritech prior to such termination
pays to SBC in immediately available funds any fees required to be paid pursuant
to the Merger Agreement; or (b) if (i) the SBC Board has withdrawn or adversely
modified its approval of the Merger Agreement or its recommendation to the
shareowners of SBC that such shareowners approve the issuance of shares of SBC
Common Stock pursuant to the Merger Agreement or failed to reconfirm such
recommendation within fifteen business days after a written request by Ameritech
to do so (provided that such a request is made after the SBC Board or any SBC
Representative has taken any of the actions that would be proscribed by the
provisions of the Merger Agreement relating to SBC Acquisition Proposals, but
for the exception in such provisions allowing certain actions to be taken with
respect to any bona fide written SBC Acquisition Proposal that has not been
withdrawn or rejected by the SBC Board), (ii) there has been a material breach
by SBC or Merger Sub of any representation, warranty, covenant or agreement
contained in the Merger Agreement which (x) would result in a failure of the
condition relating to SBC and Merger Sub's representations and warranties or the
condition relating to performance in all material respects of all obligations
required to be performed by SBC or Merger Sub pursuant to the Merger Agreement
and (y) cannot be or is not cured prior to the Termination Date, or (iii) SBC or
any SBC Representative takes any of the actions that would be proscribed by the
terms of the Merger Agreement relating to SBC Acquisition Proposals.
The Merger 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
shareowners of SBC, by action of the SBC Board: (a) if (i) the SBC Board
approves entering into a binding written agreement concerning a transaction that
constitutes a Superior SBC Proposal
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and SBC notifies Ameritech in writing that SBC desires to enter into such
agreement, (ii) Ameritech does not make, within ten days after receipt of SBC's
written notification of its desire to enter into a binding agreement for a
Superior SBC Proposal, the terms of which are specified in such notice, an offer
that the SBC Board believes, in good faith after consultation with its financial
advisors, is at least as favorable, from a financial point of view, to the
shareowners of SBC as the Superior SBC Proposal, and (iii) SBC prior to such
termination pays to Ameritech in immediately available funds any fees required
to be paid pursuant to the Merger Agreement, or (b) if (i) the Ameritech Board
has withdrawn or adversely modified its approval or recommendation to
Ameritech's shareowners of the Merger Agreement, or failed to reconfirm such
recommendation within fifteen business days after a written request by SBC to do
so (provided that such a request is made after the Ameritech Board or any
Ameritech Representative has taken any of the actions that would be proscribed
by the provisions of the Merger Agreement relating to Ameritech Acquisition
Proposals but for the exception in such provisions allowing certain actions to
be taken with respect to any bona fide written Ameritech Acquisition Proposal
that has not been withdrawn or rejected by the Ameritech Board, (ii) there has
been a material breach by Ameritech of any representation, warranty, covenant or
agreement contained in the Merger Agreement which (x) would result in a failure
of a condition relating to Ameritech's representations and warranties or the
condition relating to performance in all material respects of all obligations
required to be performed by Ameritech pursuant to the Merger Agreement and (y)
cannot be or is not cured prior to the Termination Date, or (iii) if Ameritech
or any Ameritech Representative takes any of the actions that would be
proscribed by provisions of the Merger Agreement relating to Ameritech
Acquisition Proposals but for the exception therein allowing certain actions to
be taken.
In the event of termination of the Merger Agreement and the abandonment of
the Merger pursuant to the termination provisions enumerated above, the Merger
Agreement (other than those provisions which will specifically survive) will
become void and of no effect with no liability on the part of any party thereto
(or of any of its directors, officers, employees, agents, legal or financial
advisors or other representatives); provided, however, no such termination will
relieve any party thereto from any liability for damages resulting from any
willful and intentional breach of the Merger Agreement (to the extent such
damages exceed any Termination Fee as described below under "-- Certain
Termination Fees") or from any obligation to pay, if applicable, the Termination
Fee.
CERTAIN TERMINATION FEES
The Merger Agreement provides that (a) in the event that (i) a bona fide
Ameritech Acquisition Proposal has been made to Ameritech and made known to
shareowners generally or has been made directly to shareowners generally or any
Person has publicly announced an intention (whether or not conditional) to make
a bona fide Ameritech Acquisition Proposal and such Ameritech Acquisition
Proposal or announced intention has not been withdrawn prior to the Ameritech
Special Meeting and thereafter the Merger Agreement is terminated by either SBC
or Ameritech because adoption of the Merger Agreement by Ameritech's shareowners
at the Ameritech Special Meeting has not occurred and within nine months after
such termination Ameritech enters into an agreement to consummate a transaction
that would constitute an Ameritech Acquisition Proposal if it were the subject
of a proposal, or (ii) the Merger Agreement is terminated (x) by Ameritech
pursuant to the provisions of the Merger Agreement permitting Ameritech to
terminate if the Ameritech Board has approved entering into a binding written
agreement concerning a transaction that constitutes a Superior Ameritech
Proposal and SBC has not made, within ten calendar days after receipt of
Ameritech's written notification of its desire to enter into a binding agreement
for a Superior Ameritech Proposal an offer that the Ameritech Board believes, in
good faith after consultation with its financial advisors, is at least as
favorable, from a financial point of view, to the shareowners of Ameritech as
the Superior Ameritech Proposal or (y) by SBC pursuant to the provisions of the
Merger Agreement permitting termination (A) if the Ameritech Board withdraws or
adversely modifies its approval or recommendation to Ameritech's shareowners of
the Merger Agreement or fails to reconfirm such recommendation within fifteen
business days after a written request by SBC to do, (B) if Ameritech materially
breaches any representation, warranty, covenant or agreement contained in the
Merger Agreement which would result in a failure of the condition relating to
Ameritech's representations and warranties or the condition relating to
performance by Ameritech in all material respects of all obligations of
Ameritech under the Merger Agreement (solely with respect to a willful and
intentional breach) or (C) if Ameritech or any Ameritech Representative takes
any of the actions that would be proscribed by provisions of the Merger
Agreement relating to Ameritech Acquisition Proposals but for the exception
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therein allowing certain actions to be taken, then Ameritech will promptly, but
in no event later than two days after the date of such termination (except as
otherwise provided in the Merger Agreement), or, in the case of termination
because of Ameritech's shareowners' failure to adopt the agreement, two days
after the relevant agreement is entered into, pay SBC the Termination Fee, which
amount will be exclusive of any amounts to be paid pursuant to the provision of
the Merger Agreement relating to the sharing of expenses. See "--Expenses."
The Merger Agreement further provides that in the event that (i) a bona fide
SBC Acquisition Proposal has been made to SBC and made known to shareowners
generally or has been made directly to shareowners generally or any Person has
publicly announced an intention (whether or not conditional) to make a bona fide
SBC Acquisition Proposal and such SBC Acquisition Proposal or announced
intention has not been withdrawn prior to the SBC Special Meeting and thereafter
the Merger Agreement is terminated by Ameritech or SBC because the approval of
SBC's shareowners necessary for the issuance of shares of SBC Common Stock
pursuant to the Merger Agreement has not been obtained and within nine months
after such termination SBC enters into an agreement to consummate a transaction
that would constitute a SBC Acquisition Proposal if it were the subject of a
proposal, or (ii) the Merger Agreement is terminated (x) by SBC pursuant to the
provisions of the Merger Agreement permitting SBC to terminate the Merger
Agreement if the SBC Board has approved entering into a binding written
agreement concerning a transaction that constitutes a Superior SBC Proposal and
Ameritech does not make, within ten calendar days after receipt of SBC's written
notification of its desire to enter into a binding agreement for a Superior SBC
Proposal an offer that the SBC Board believes, in good faith after consultation
with its financial advisors, is at least as favorable, from a financial point of
view, to the shareowners of SBC as the Superior SBC Proposal or (y) by Ameritech
pursuant to the provisions of the Merger Agreement permitting termination (A) if
the SBC Board withdraws or adversely modifies its approval or recommendation to
SBC's shareowners of the issuance of shares of SBC Common Stock or fails to
reconfirm such recommendation within fifteen business days after a written
request by Ameritech to do so or (B) if SBC or Merger Sub materially breaches
any representation, warranty, covenant or agreement contained in the Merger
Agreement which would result in a failure of the condition relating to SBC's
representations and warranties or the condition relating to performance by SBC
or Merger Sub in all material respects of all obligations of SBC and Merger Sub
under the Merger Agreement (solely with respect to a willful and intentional
breach) or (C) if SBC or any SBC Representative takes any of the actions that
would be proscribed by provisions of the Merger Agreement relating to SBC
Acquisition Proposals but for the exception therein allowing certain actions to
be taken, then SBC will promptly, but in no event later than two days after the
date of such termination (except as otherwise provided in the Merger Agreement)
or, in the case of a termination because of the failure to obtain SBC shareowner
approval of the issuance of shares of SBC Common Stock pursuant to the Merger
Agreement, two (2) days after the relevant agreement is entered into, pay
Ameritech a fee equal to the Termination Fee, which amount will be exclusive of
any amounts to be paid pursuant to provision relating to sharing of expenses.
See "--Expenses."
RESALE OF SBC COMMON STOCK
The shares of SBC Common Stock issuable to shareowners of Ameritech in
connection with the Merger have been registered under the Securities Act. Such
shares may be traded freely and without restriction by those shareowners not
deemed to be "affiliates" of Ameritech prior to the date of the Ameritech
Special Meeting, or of SBC following the Effective Time, as that term is defined
in the rules under the Securities Act. "Affiliates" are generally defined as
persons who control, are controlled by or are under common control with
Ameritech at the time of the Ameritech Special Meeting or SBC following the
Effective Time. Shares of SBC Common Stock received by those shareowners of
Ameritech who are deemed to be "affiliates" of Ameritech may be resold without
registration as provided for by Rules 144 or 145, or as otherwise permitted,
under the Securities Act, subject to the provisions of the Ameritech Affiliates
Letter referred to below. This Joint Proxy Statement/Prospectus does not cover
any resales of SBC Common Stock received by affiliates of Ameritech in the
Merger or by certain of their family members or related interests.
Pursuant to the Merger Agreement, each of Ameritech and SBC has agreed to
deliver to the other a letter identifying all persons whom such company believes
to be, as of the date of the Ameritech Special Meeting, "affiliates" of such
company for purposes of applicable interpretations regarding use of the
"pooling-of-interests" accounting method and, in the case of "affiliates" of
Ameritech, for purposes of Rule 145 under the Securities Act. Each of Ameritech
and SBC has agreed to use all reasonable best efforts to cause each person who
is identified as an "affiliate" in the letter referred to above to deliver to
SBC prior to the date of the Ameritech Special Meeting a written agreement in
the appropriate form attached to the Merger Agreement (in the case of affiliates
of Ameritech, an "Ameritech Affiliates Letter" and, in the case of affiliates of
SBC, an "SBC Affiliates Letter"). The provisions of the Ameritech Affiliates
Letter restrict certain sales of securities of SBC by such affiliates of
Ameritech prior to and following the Effective Time and sales of securities of
Ameritech at certain times prior to the Effective Time. The provisions of the
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SBC Affiliates Letter restrict sales of securities of SBC by affiliates of SBC
at certain times prior to and following the Effective Time.
DISSENTERS' RIGHTS OF APPRAISAL
In accordance with Section 262 of the DGCL, no appraisal rights will be
available to either holders of Ameritech Common Stock or SBC Common Stock in
connection with the Merger. No appraisal rights will be available to holders of
SBC Common Stock in connection with the Bylaw Amendment or the Share Increase
Proposal.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the Ameritech Board, Ameritech
shareowners should be aware that certain members of Ameritech's management and
of the Ameritech Board have certain interests in the Merger that are in addition
to the interests of shareowners generally.
Board of Directors following the Merger
SBC has agreed pursuant to the Merger Agreement that at the Effective Time
SBC will enable up to five members of the Ameritech Board to become members of
the SBC Board. The SBC Board, in consultation with the Chairman of the Board,
President and Chief Executive Officer of Ameritech and the Ameritech Board, will
select the director designees and appoint each such director designee to the SBC
Board as of the Effective Time, with such director designees divided as nearly
evenly as is possible among the classes of directors on the SBC Board. SBC and
Ameritech expect that Mr. Notebaert will be one of the members of the Ameritech
Board who will become a member of the SBC Board as of the Effective Time.
Directors' Plan
Under Ameritech's Deferred Compensation Plan for Non-Employee Directors,
directors who are not employees of Ameritech may elect to defer receipt of their
retainers for service on the Ameritech Board in the form of cash units or stock
units. The Ameritech Board has determined that under the terms of such plan, as
a result of the Merger, deferred amounts will be paid out in a lump sum as soon
as practicable after the Effective Time. Stock units will be valued for this
purpose at the highest sales price of Ameritech Common Stock as reported on the
NYSE Composite Transactions Tape during the thirty days prior to the Effective
Time. The Ameritech directors who have deferred accounts under the plan, and the
current value thereof, based on a price per share of Ameritech Common Stock of
$43.9375, the closing price on June 2, 1998, are Donald C. Clark, $985,035;
James A. Henderson, $908,535; Sheldon B. Lubar, $402,643; Arthur C. Martinez,
$170,434; John B. McCoy, $323,775; and James A. Unruh, $156,187.
Stock Options
Substantially all Ameritech Options granted prior to May 11, 1998 pursuant
to Ameritech Compensation and Benefit Plans become fully vested upon a change in
control and certain associated agreements not to compete with Ameritech
terminate upon a change in control under the terms of such associated
agreements. The Ameritech Board has concluded that the consummation of the
Merger will constitute a change in control under the Ameritech Compensation and
Benefit Plans. The following table sets forth, with respect to Mr. Notebaert,
Mr. Shaffer, Barry K. Allen, Executive Vice President Regulatory and Wholesale
Operations, W. Patrick Campbell, Executive Vice President - Corporate Strategy
and Business Development and Thomas E. Richards, Executive Vice President -
Communications and Information Products, the named executive officers set forth
in Ameritech's proxy statement for the 1998 annual meeting of its shareowners
(the "Named Executive Officers"), and all other executive officers of Ameritech
as a group, based on the closing price per share of Ameritech Common Stock of
$43.9375 on June 2, 1998, and an assumed Effective Time of May 1, 1999: (i) the
number of shares of Ameritech
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Common Stock subject to Ameritech Options held by such persons that will become
exercisable at the Effective Time, (ii) the weighted average exercise price for
such Ameritech Options held by such persons and (iii) the aggregate value of
such Ameritech Options held by such persons, in each case based upon the number
of outstanding Ameritech Options held by such persons as of the date of this
Joint Proxy Statement/Prospectus:
<TABLE>
<CAPTION>
Options Which Become
Exercisable At Weighted Average Aggregate Value of
The Effective Time Exercise Price Per Share Options
---------------------- ------------------------ ------------------
<S> <C> <C> <C>
Mr. Notebaert................ 749,624 $31.4459 $9,539,829
Mr. Shaffer.................. 344,136 36.0197 2,781,415
Mr. Campbell................. 188,198 35.9129 1,545,033
Mr. Allen.................... 265,900 36.1507 2,117,290
Mr. Richards................. 291,498 34.7636 2,707,770
All executive officers
as a group (15 persons
in total).................... 2,479,578 34.5471 23,770,883
</TABLE>
Under the terms of certain of the foregoing options, dividend equivalent
shares are credited quarterly for up to five years on the shares subject to the
options (and on previously credited dividend equivalent shares) by dividing the
aggregate cash dividend that would have been paid on such shares had they been
outstanding by the then current market price of the Ameritech Common Stock. The
dividend equivalents will be distributed in the form of shares of stock after
the earlier of the exercise of the option or the first set distribution date
which is at least five years from the date of grant on which the then current
market price exceeds the exercise price. The number of dividend equivalent
shares credited to date on options that will become exercisable at the Effective
Time and the value of such dividend equivalent shares based on the closing price
per share of Ameritech Common Stock of $43.9375 on June 2, 1998 were 16,332
($717,587) for all executive officers as a group, including 4,282 shares
($188,140) for Mr. Notebaert; 1,537 shares ($67,532) for Mr. Shaffer; 1,215
shares ($53,384) for Mr. Campbell; 1,118 shares ($49,122) for Mr. Allen; and
3,858 shares ($169,511) for Mr. Richards.
Change in Control Agreements and Severance Plan
In connection with their respective appointments to the Management Committee
of Ameritech, Ameritech entered into agreements regarding changes in control
with Messrs. Notebaert, Campbell, Shaffer, Allen and Richards and the three
other members of the Management Committee of Ameritech. The agreements provide
that each executive officer's compensation and employee benefits will not be
reduced following a change in control. The agreements also provide that, if the
executive officer's employment with Ameritech is terminated under specified
circumstances, the executive officer will continue to receive certain medical,
insurance and other employee benefit coverage and perquisites for a period of 24
months following such termination and will receive a lump sum payment up to the
sum of (i) 2.99 times the executive officer's annual base salary and the
executive officer's short term incentive award for the preceding year, plus (ii)
the actuarial equivalent of the additional pension benefits the executive
officer would have accrued under Ameritech's qualified and non-qualified pension
arrangements, if, on the date of termination, the executive had been credited
with two additional years of age, service and compensation (base salary and
target short term incentive award). Under such plans, these benefits will be
provided to the executive officers other than Mr. Notebaert if the executive
officer's employment is terminated involuntarily for any reason other than
death, disability or just cause during the 24 month period following the change
in control or voluntarily by the executive during the thirty-day period
beginning on the first anniversary of the change in control, and to Mr.
Notebaert if his employment is voluntarily or involuntarily terminated (other
than for death, disability or just cause) during the 24 month period following
the change in control. The Ameritech Board has concluded that the consummation
of the Merger will constitute a change in control under the Change in Control
Agreements.
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Approximately 220 members of the management of Ameritech participate in the
Corporate Resource Severance Pay Plan (the "Severance Plan") which provides for
severance payments upon termination of employment after a change in control. The
Ameritech Board has concluded that the consummation of the Merger will
constitute a change in control under the Severance Plan. The Severance Plan
provides that base salaries for such employees and certain incentive plans and
benefit plans will not be materially reduced during the 24 month period
following the Merger and provides for a severance benefit to such employees, in
an amount up to two times the sum of their base annual salary and their target
short-term incentive award and other bonuses for the year preceding the change
in control, and the actuarial equivalent of the additional pension benefits the
employee would have accrued under the qualified and non-qualified pension
arrangements of Ameritech if, on the date of termination, he or she had been
credited with two additional years of age, service and compensation (base salary
and target short term incentive award). Under the Severance Plan, the
aforementioned benefits become payable if the employee's employment is
terminated by Ameritech other than for cause or disability or by the employee
for good reason during the 24 months following a change in control or at the
employee's discretion during the 30-day period following the first anniversary
of the change in control. In addition, if at the time of the employee's
termination of employment, such employee is a participant in the Ameritech Key
Management Life Insurance Plan and/or the Ameritech Estate Preservation Plan and
is not then Retirement Eligible (as defined in these plans), Ameritech will
contribute on the employee's behalf, for a period of not less than 24
consecutive months immediately following the date of termination, such amount as
Ameritech in its sole discretion determines to be needed to maintain the
employee's death benefits under such plans. The employee also shall be entitled
to receive certain medical insurance and other benefits and perquisites for a
period of 24 months.
The aggregate amount of payments to be made by Ameritech pursuant to the
Change in Control Agreements and the Severance Plan cannot be determined
definitively at this time; however, the maximum aggregate amount of such
payments, if all covered employees were terminated under circumstances entitling
them to severance benefits, is estimated to be approximately $38,900,000 for all
executive officers as a group, including up to $13,900,000 for Mr. Notebaert, up
to $3,700,000 for Mr. Shaffer, up to $3,300,000 for Mr. Allen, up to $3,400,000
for Mr. Campbell and up to $2,700,000 for Mr. Richards, and approximately
$135,500,000 for the other covered employees under the Severance Plan. All
payments under such plans and agreements may be reduced to the extent they,
together with certain other payments, may result in the loss of a tax deduction
to Ameritech under certain provisions of the Code.
Other Compensation and Benefit Plans
The Ameritech Management Committee Short-Term Incentive Plan and the
Ameritech Senior Management Short-Term Incentive Plan (the "Short-Term Incentive
Plans") provide that upon a change in control, each participant will receive as
soon as practicable following the earlier of such employee's termination or at
the end of the calendar year in which the change in control occurs, a payment
equal to not less than 100% of the target award for such participant for that
year established by the Compensation Committee of the Ameritech Board. In
addition, upon a change in control benefits of all participants under certain
nonqualified pension plans will become fully vested and compensation previously
deferred at the election of the employee will be paid in a lump sum unless
otherwise elected by the employee. The Ameritech Board has concluded that the
consummation of Merger will constitute a change in control under the Short-Term
Incentive Plans and the nonqualified pension plans. The Short-Term Incentive
Plans cover approximately 35 employees, including all executive officers.
Performance and Retention Bonus
On May 10, 1998, the Ameritech Board approved the grant to Mr. Notebaert of
a retention and performance bonus of $2.5 million, as recommended by the
Compensation Committee, payable on the earlier of the Effective Time or
September 1, 1999.
Agreements for Services
On May 10, 1998, SBC entered into an agreement for services (the "Agreements
for Services") with each of Messrs. Notebaert, Shaffer, Allen, Campbell and
Richards, and the three other members of the Management Committee of Ameritech.
The Agreements for Services provide that each such officer of Ameritech will be
employed by SBC or a subsidiary of SBC for a period of up to 30 months
commencing at the Effective Time. The Agreements for Services also provide that
the executive officer may cease to be a full-time employee of Ameritech and
become a consultant to SBC any time after six months from the Effective Time at
the officer's or SBC's election. The Agreements for Services acknowledge that
termina tion of the executive officer's status as a full-time employee under the
Agreements for Services would constitute an involuntary termination for purposes
of the Change in Control Agreements. The annual compensation as an employee or a
consultant of the Named Executive Officers pursuant to the Agreements for
Services is as follows: Mr. Notebaert $7,000,000, Mr. Shaffer $2,300,000, Mr.
Allen $2,000,000, Mr. Campbell $1,800,000 and Mr. Richards $1,600,000, and
$3,400,000 for the other three members of the Management Committee of Ameritech
54
<PAGE>
as a group. The Agreements for Services also provide that, in addition to this
compensation, Mr. Notebaert will receive a bonus for the year in which the
Merger is consummated in an amount equal to $1,331,000 multiplied by the
percentage by which the bonus paid to the Chief Executive Officer of SBC for
such year exceeds his base salary, and Mr. Shaffer will be treated as having
fully earned his pension supplements pursuant to his supplemental pension
arrangement entered into with Ameritech in 1995, and will qualify for certain
post-retirement benefits. All payments under the Agreements for Services cease
if SBC terminates the employment or consulting relationship of the executive
officer in the event the executive officer becomes an employee or director of,
or performs services for, a substantial competitor of SBC during the term. In
addition, each Agreement for Services prohibits the executive officer for 36
months after the Effective Time from soliciting customers of SBC or attempting
to induce any employee or agent to cease his relationship with SBC. Upon
termination of employment, unless the non-competition clause is violated, the
Agreements for Services provide that each executive officer shall receive
financial consulting assistance for a period of five years under SBC's standard
policies for retiring executives, and, in addition, Mr. Notebaert will receive
office space and secretarial support.
ACCOUNTING TREATMENT
Based on the advice of their respective independent public accountants, SBC
and Ameritech believe that the Merger will qualify as a pooling-of-interests for
accounting and financial reporting purposes. Under this method of accounting,
SBC will retroactively restate its consolidated financial statements at the
Effective Time to include the assets, liabilities, shareowners' equity and
results of operations of Ameritech. Consummation of the Merger is conditioned on
receipt by SBC and Ameritech of letters from their respective independent public
accounting firms to the effect that the Merger will qualify as a "pooling of
interests" for accounting purposes. See "The Merger -- Conditions" and "The
Merger -- Pooling of Interests."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following summary discusses the material federal income tax consequences
of the Merger. The summary is based upon the Code, applicable Treasury
Regulations thereunder and administrative rulings and judicial authority as of
the date hereof (collectively, "Currently Applicable Law"), and certain
representations as to factual matters made or to be made by Ameritech and SBC
(such representations, the "Factual Representations"). Any change in Currently
Applicable Law, which may or may not have retroactive effect, or failure of the
Factual Representations to be true, correct and complete in all material
respects, could affect the continuing validity of this discussion. This
discussion assumes that holders of shares of Ameritech Common Stock hold such
shares as a capital asset within the meaning of Section 1221 of the Code.
Further, the discussion does not address the federal income tax consequences
that may be relevant to a particular shareowner subject to special treatment
under certain federal income tax laws, such as dealers in securities or foreign
currencies, banks, trusts, insurance companies, tax-exempt organizations,
persons that hold Ameritech Common Stock as part of a straddle, a hedge against
currency risk or a constructive sale or conversion transaction, persons that
have a functional currency other than the U.S. dollar, investors in pass-through
entities, non-United States persons, shareowners who acquired shares of
Ameritech Common Stock through the exercise of options or otherwise as
compensation or through a tax-qualified retirement plan, and holders of options
and performance share units granted under Ameritech's benefit plans. This
discussion does not address any consequences arising under the laws of any
state, locality or foreign jurisdiction.
Neither Ameritech nor SBC has requested a ruling from the Internal Revenue
Service ("IRS") with regard to any of the federal income tax consequences of the
Merger and the discussion below as to such federal income tax consequences will
not be binding on the IRS. As a result, there can be no assurance that the IRS
will not disagree with or challenge any of the conclusions set forth in the
discussion.
GENERAL
As of the date hereof, it is intended that the Merger will constitute a
reorganization pursuant to Section 368(a) of the Code and that for federal
income tax purposes no gain or loss will be recognized by SBC, Ameritech or
Merger Sub. The obligations of SBC and Merger Sub, on the one hand, and
Ameritech, on the other hand, to consummate the Merger are respectively
conditioned on (i) the receipt by SBC of an opinion of Sullivan & Cromwell,
dated as of 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, Ameritech and Merger Sub will be a
party to the reorganization within the meaning of Section 368(b) of the Code,
and (ii) the receipt by Ameritech of an opinion of Skadden, Arps, Slate, Meagher
& Flom (Illinois), dated as of 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, Ameritech and
Merger Sub will be a party to the reorganization within the meaning of Section
368(b) of the Code. Such opinions will be based upon, among other things, (i)
factual representations reasonably satisfactory in form and substance to each
counsel dated as of the Closing Date and (ii) certain assumptions, including the
assumption that the Merger will be consummated in accordance with the terms of
the Merger Agreement.
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<PAGE>
Assuming the Merger is consummated in accordance with the terms of the
Merger Agreement and as described in this Joint Proxy Statement/Prospectus, and
based upon Currently Applicable Law and the Factual Representations, the Merger
will be treated as a "reorganization" within the meaning of Section 368(a) of
the Code, and Ameritech, SBC and Merger Sub will each be parties to that
"reorganization" within the meaning of Section 368(b) of the Code. As a result,
(i) no gain or loss will be recognized by holders of Ameritech Common Stock with
respect thereto as a result of the surrender of all of their shares of Ameritech
Common Stock in exchange for shares of SBC Common Stock (including the receipt
of SBC Rights) pursuant to the Merger (except as discussed below with respect to
cash received in lieu of fractional shares), (ii) the aggregate adjusted tax
basis of the shares of SBC Common Stock received by holders of Ameritech Common
Stock who exchange all of their Ameritech Common Stock solely for SBC Common
Stock pursuant to the Merger Agreement will be the same as the aggregate
adjusted tax basis of the shares of Ameritech Common Stock surrendered in
exchange therefor in the Merger Agreement (reduced by any amount of tax basis
allocable to a fractional share interest in SBC Common Stock for which cash is
received), (iii) the holding period in the Merger will include the holding
period of shares of Ameritech Common Stock surrendered in exchange therefor,
(iv) no gain or loss will be recognized by holders of SBC Common Stock as a
result of the Merger, and (v) in general, no gain or loss will be recognized by
Ameritech, SBC or Merger Sub as a result of the Merger.
FRACTIONAL SHARES
If a holder of shares of Ameritech Common Stock receives cash in lieu of a
fractional share interest in SBC Common Stock in the Merger, such fractional
share interest will be treated as having been distributed to the holder, and
such cash amount will be treated as received in redemption of the fractional
share interest. Under Section 302 of the Code, if such redemption is "not
essentially equivalent to a dividend" after giving effect to the constructive
ownership rules of the Code, the holder of Ameritech Common Stock will generally
recognize capital gain or loss equal to the cash amount received for the
fractional share of SBC Common Stock reduced by the portion of the holder's
adjusted tax basis in shares of Ameritech Common Stock surrendered that is
allocable to the fractional share interest in SBC Common Stock. Under these
rules, a minority shareowner of Ameritech should generally recognize capital
gain or loss on the receipt of cash in lieu of a fractional share interest in
SBC Common Stock. The capital gain or loss will be long term capital gain or
loss if the holder's holding period in the fractional share interest is more
than one year. Under recently enacted legislation, long-term gain of an
individual holder is subject to a maximum tax rate of 28% in respect of capital
assets held for more than one year. The maximum rate for an individual is
reduced to 20% in respect of capital assets held for more than 18 months.
THE PRECEDING DISCUSSION DOES NOT PURPORT TO BE A COMPLETE ANALYSIS OR
DISCUSSION OF ALL POTENTIAL TAX EFFECTS RELEVANT TO THE MERGER. THUS, AMERITECH
SHAREOWNERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC TAX
CONSEQUENCES TO THEM OF THE MERGER, INCLUDING TAX RETURN REPORTING REQUIREMENTS,
THE APPLICABILITY AND EFFECT OF FEDERAL, STATE, LOCAL, AND OTHER APPLICABLE TAX
LAWS AND THE EFFECT OF ANY PROPOSED CHANGES IN THE TAX LAWS.
THE BYLAW AMENDMENT
The SBC Board has unanimously approved the Bylaw Amendment and recommends
that the shareowners of SBC vote for the Bylaw Amendment. The Bylaw Amendment
would amend the second paragraph of Article II, Section 1, of the SBC Bylaws to
provide that the maximum number of persons that may serve as directors on the
SBC Board be increased to 25 from 21.
The SBC Board desires to cause the adoption of the Bylaw Amendment to
facilitate the transactions contemplated by the Merger Agreement. SBC has
agreed, pursuant to the Merger Agreement, that as of the Effective Time up to
five members of the Ameritech Board will become members of the SBC Board. The
SBC Board is currently composed of 19 members. If the SNET acquisition is
completed, pursuant to the SNET Merger Agreement (as defined herein), SBC will
be obligated to cause a person designated by SNET to become a member of the SBC
Board. Therefore, following the SNET acquisition, the SBC Board may be composed
of up to 20 members. The SBC Bylaws currently provide that the maximum number of
persons who may be members of the SBC Board is 21. Therefore, at the Effective
Time, it may be necessary for the maximum number of persons who may serve on the
SBC Board to be increased to permit the election of members of the Ameritech
Board to the SBC Board. The SBC Board is therefore proposing the Bylaw Amendment
to serve to ensure that up to five members of the Ameritech Board may be
appointed to the SBC Board as of the Effective Time. There can, however, be no
assurance that the Bylaw Amendment will be
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<PAGE>
necessary at the Effective Time as certain directors of SBC may cease to serve
as members of the SBC Board prior to the Effective Time, in which case there may
be sufficient vacancies to permit the election of the Ameritech designees.
The approval of the Bylaw Amendment requires the affirmative vote of at
least two-thirds of the shares of SBC Common Stock issued and outstanding as of
the SBC Record Date. Abstentions and failures to vote shares of SBC Common Stock
will have the effect of a vote against the approval of the Bylaw Amendment.
THE SBC BOARD HAS UNANIMOUSLY APPROVED THE BYLAW AMENDMENT AND DETERMINED
THAT IT IS ADVISABLE AND RECOMMENDS THAT SBC SHAREOWNERS VOTE FOR APPROVAL OF
THE BYLAW AMENDMENT.
THE SHARE INCREASE PROPOSAL
The SBC Board has unanimously approved the Share Increase Proposal and
determined that it is advisable. The Share Increase Proposal would amend the SBC
Restated Certificate to increase the number of authorized shares of SBC Common
Stock from 7.0 billion shares to 10.0 billion shares.
The first paragraph of Article Five of the SBC Restated Certificate would be
amended to read as follows:
ARTICLE FIVE
The aggregate number of shares which the corporation is
authorized to issue is 10,010,000,000 shares, consisting of
10,000,000,000 common shares having a par value of $1 per
share and 10,000,000 preferred shares having a par value of
$1 per share.
The Share Increase Proposal is not required for SBC to have a sufficient
number of shares of SBC Common Stock authorized to issue shares pursuant to the
Merger Agreement. The SBC Board believes, however, that the Share Increase
Proposal is necessary to maintain the same type of flexibility SBC sought when
it increased the number of authorized shares of SBC Common Stock at the annual
meeting of shareowners of SBC in 1998.
At the time of SBC's divestiture from AT&T Corp. in 1984, SBC had
approximately 97 million shares of common stock outstanding, out of an
authorized 350 million shares. In 1987 and 1993, respectively, SBC declared
3-for-1 and 2-for-1 stock splits (each effected in the form of a stock
dividend). In 1988 and 1996, respectively, the shareowners of SBC approved
increases in the authorized shares of SBC Common Stock, first to 1.1 billion,
then to 2.2 billion. Following these increases, SBC issued 300 million shares of
SBC Common Stock in connection with the acquisition of Pacific Telesis Group in
1997, raising the number of outstanding shares of SBC Common Stock to
approximately 919 million.
Earlier this year, SBC effected the SBC Stock Split. As a result there are
approximately 1.84 billion shares of SBC Common Stock outstanding. At the annual
meeting of shareowners of SBC in 1998 the authorized number of shares of SBC
Common Stock was increased to 7.0 billion. SBC expects that it will be required
to issue approximately 1.45 billion shares of SBC Common Stock pursuant to the
Merger Agreement and approximately 120 million shares of SBC Common Stock
pursuant to the SNET Merger Agreement. These issuances would bring the total
number of shares of SBC Common Stock outstanding up to approximately 3.4 billion
out of an authorized 7.0 billion. Although a further two-for-one stock split
would not be impossible, doing so would leave SBC with little flexibility to
issue additional shares of SBC Common Stock.
Therefore, in order to have sufficient number of shares of SBC Common Stock
available for issuance in connection with subsequent stock splits, acquisitions,
financings, compensation and benefit plans and other proper corporate purposes,
the SBC Board recommends increasing the number of authorized shares of SBC
Common Stock. SBC has no specific plans at this time for the use of the
additional SBC Common Stock, other than in the Merger and the SNET acquisition.
Having such additional authorized shares available for issuance in the future
would give SBC greater flexibility and would allow such shares to be issued
without the expense and delay of a special shareowners' meeting. The additional
shares of SBC Common Stock would be identical to the shares of SBC Common Stock
now authorized. Holders of shares of SBC Common Stock do not have preemptive
rights to subscribe to additional securities which may be issued by SBC.
Although the SBC Board has no present intention of doing so, the additional
shares of SBC Common Stock could be used to make it more difficult to effect a
change in control of SBC. SBC has other
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defenses available against coercive or unfair acts of third parties that are
designed to effect a change in control of SBC. Presently, the SBC Board knows of
no such attempt to obtain control of SBC.
The approval of the Share Increase Proposal requires the affirmative vote of
at least a majority of the shares of SBC Common Stock issued and outstanding as
of the SBC Record Date. Abstentions and failures to vote shares of SBC Common
Stock will have the effect of a vote against the approval of the Share Increase
Proposal.
THE SBC BOARD HAS UNANIMOUSLY APPROVED THE SHARE INCREASE PROPOSAL AND
DETERMINED THAT IT IS ADVISABLE AND RECOMMENDS THAT SBC SHAREOWNERS VOTE FOR
ADOPTION OF THE SHARE INCREASE PROPOSAL.
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UNAUDITED PRO FORMA COMBINED
CONDENSED FINANCIAL STATEMENTS
The following unaudited pro forma combined condensed financial statements
and notes thereto are presented assuming the Merger and the pending SNET
acquisition will each be accounted for as a "pooling of interests." For a
description of pooling of interests accounting with respect to the Merger, see
"The Merger--Accounting Treatment."
The following unaudited pro forma combined condensed financial statements
have been prepared using the Exchange Ratio. See "The Merger--Terms of the
Merger."
The unaudited pro forma combined condensed income statements reflect the
combination of the historical operating results of SBC and Ameritech, and SBC,
Ameritech and SNET for the years ended December 31, 1997, 1996 and 1995 and for
the three months ended March 31, 1998. The unaudited pro forma combined
condensed balance sheets reflect the combination of the historical balance
sheets of SBC and Ameritech and SBC, Ameritech and SNET at December 31, 1997 and
at March 31, 1998.
The unaudited pro forma combined condensed financial statements are not
necessarily indicative of the results of operations or financial position that
actually would have occurred had the Merger and the SNET acquisition been
consummated on the dates indicated or that may be obtained in the future. These
unaudited pro forma combined condensed financial statements should be read in
conjunction with the related historical financial statements and notes thereto
of SBC, Ameritech and SNET incorporated by reference in this Joint Proxy
Statement/Prospectus.
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<TABLE>
<CAPTION>
SBC COMMUNICATIONS INC. AND AMERITECH CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
AS OF MARCH 31, 1998
SBC/
SBC/ AMERITECH/
HISTORICAL AMERITECH HISTORICAL SNET
---------- PRO FORMA PRO FORMA ---------- PRO FORMA PRO FORMA
SBC AMERITECH ADJUSTMENTS COMBINED SNET ADJUSTMENTS COMBINED
---------- ----------- ----------- --------- ---------- ----------- ----------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 674 $ 148 $ 822 $ 14 $ 836
Accounts receivable-net 4,730 2,962 7,692 364 8,056
Other current assets 1,565 856 2,421 108 2,529
- ------------------------------------------------------------------------------------------------------------------------------------
Total current assets 6,969 3,966 10,935 486 11,421
- ------------------------------------------------------------------------------------------------------------------------------------
PROPERTY, PLANT AND EQUIPMENT-NET 27,380 13,900 41,280 1,741 43,021
- ------------------------------------------------------------------------------------------------------------------------------------
INTANGIBLE ASSETS-NET 3,238 1,867 5,105 389 5,494
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTMENTS IN EQUITY AFFILIATES 2,581 4,685 7,266 -- 7,266
- ------------------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS 1,946 3,535 5,481 199 5,680
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $42,114 $27,953 $70,067 $2,815 $72,882
- ------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREOWNERS' EQUITY
CURRENT LIABILITIES
Debt maturing within one year $ 2,661 $ 2,893 $ 5,554 $ 164 $ 5,718
Other current liabilities 7,171 4,393 11,564 457 12,021
- ------------------------------------------------------------------------------------------------------------------------------------
Total current liabilities 9,832 7,286 17,118 621 17,739
- ------------------------------------------------------------------------------------------------------------------------------------
LONG-TERM DEBT 11,758 7,019 18,777 1,146 19,923
- ------------------------------------------------------------------------------------------------------------------------------------
POSTEMPLOYMENT BENEFIT OBLIGATION 4,820 3,126 7,946 260 8,206
- ------------------------------------------------------------------------------------------------------------------------------------
OTHER NONCURRENT LIABILITIES 4,275 1,995 6,270 95 6,365
- ------------------------------------------------------------------------------------------------------------------------------------
CORPORATION-OBLIGATED MANDATORILY
REDEEMABLE PREFERRED SECURITIES
OF SUBSIDIARY TRUSTS* 1,000 -- 1,000 -- 1,000
- ------------------------------------------------------------------------------------------------------------------------------------
SHAREOWNERS' EQUITY
Common shares 1,867 1,177 $ 270 2a 3,314 70 $ 49 2b 3,433
Capital in excess of par value 8,489 5,411 (1,919) 2a 11,981 672 (134) 2b 12,519
Retained earnings 1,629 4,352 5,981 69 6,050
Guaranteed obligations of ESOPs (147) (113) (260) (33) (293)
Deferred compensation - LESOP (119) -- (119) -- (119)
Foreign currency translation
adjustment (582) (651) (1,233) -- (1,233)
Treasury shares (at cost) (708) (1,649) 1,649 2a (708) (85) 85 2b (708)
- ------------------------------------------------------------------------------------------------------------------------------------
Total shareowners' equity 10,429 8,527 -- 18,956 693 -- 19,649
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREOWNERS'
EQUITY $42,114 $27,953 $ -- $70,067 $2,815 $ -- $72,882
<FN>
* The trusts contain assets of $1,030 in principal amount of the Subordinated Debentures of Pacific Telesis Group.
The accompanying notes are an integral part of these unaudited pro forma combined condensed financial statements.
</FN>
</TABLE>
60
<PAGE>
<TABLE>
<CAPTION>
SBC COMMUNICATIONS INC. AND AMERITECH CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
AS OF DECEMBER 31, 1997
SBC/
SBC/ AMERITECH/
HISTORICAL AMERITECH HISTORICAL SNET
---------- PRO FORMA PRO FORMA ---------- PRO FORMA PRO FORMA
SBC AMERITECH ADJUSTMENTS COMBINED SNET ADJUSTMENTS COMBINED
---------- ----------- ----------- --------- ---------- ----------- ----------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 398 $ 239 $ 637 $ 12 $ 649
Accounts receivable - net 5,015 3,078 8,093 328 8,421
Other current assets 1,649 1,232 2,881 115 2,996
- ------------------------------------------------------------------------------------------------------------------------------------
Total current assets 7,062 4,549 11,611 455 12,066
- ------------------------------------------------------------------------------------------------------------------------------------
PROPERTY, PLANT AND EQUIPMENT - NET 27,339 13,873 41,212 1,717 42,929
- ------------------------------------------------------------------------------------------------------------------------------------
INTANGIBLE ASSETS - NET 3,269 1,882 5,151 395 5,546
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTMENTS IN EQUITY AFFILIATES 2,740 1,685 4,425 -- 4,425
- ------------------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS 1,722 3,350 5,072 204 5,276
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 42,132 $ 25,339 $ 67,471 $ 2,771 $ 70,242
- ------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREOWNERS' EQUITY
CURRENT LIABILITIES
Debt maturing within one year $ 1,953 $ 3,036 $ 4,989 $ 186 $ 5,175
Other current liabilities 8,299 4,205 12,504 472 12,976
- ------------------------------------------------------------------------------------------------------------------------------------
Total current liabilities 10,252 7,241 17,493 658 18,151
- ------------------------------------------------------------------------------------------------------------------------------------
LONG-TERM DEBT 12,019 4,610 16,629 1,157 17,786
- ------------------------------------------------------------------------------------------------------------------------------------
POSTEMPLOYMENT BENEFIT OBLIGATION 4,929 3,127 8,056 267 8,323
- ------------------------------------------------------------------------------------------------------------------------------------
OTHER NONCURRENT LIABILITIES 4,040 2,053 6,093 92 6,185
- ------------------------------------------------------------------------------------------------------------------------------------
CORPORATION-OBLIGATED MANDATORILY
REDEEMABLE PREFERRED SECURITIES OF
SUBSIDIARY TRUSTS* 1,000 -- 1,000 -- 1,000
- ------------------------------------------------------------------------------------------------------------------------------------
SHAREOWNERS' EQUITY
Common shares 934 1,177 $ (455) 2a 1,656 69 $ (10) 2b 1,715
Capital in excess of par value 9,418 5,313 (1,190) 2a 13,541 622 (75) 2b 14,088
Retained earnings 1,146 4,190 5,336 27 5,363
Guaranteed obligations of ESOPs (183) (190) (373) (36) (409)
Deferred compensation - LESOP (119) -- (119) -- (119)
Foreign currency translation adjustment (574) (537) (1,111) -- (1,111)
Treasury shares (at cost) (730) (1,645) 1,645 2a (730) (85) 85 2b (730)
- ------------------------------------------------------------------------------------------------------------------------------------
Total shareowners' equity 9,892 8,308 -- 18,200 597 -- 18,797
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND
SHAREOWNERS' EQUITY $ 42,132 $ 25,339 $ -- $ 67,471 $ 2,771 $ -- $70,242
====================================================================================================================================
<FN>
* The trusts contain assets of $1,030 in principal amount of the Subordinated Debentures of Pacific Telesis Group.
The accompanying notes are an integral part of these unaudited pro forma combined condensed financial statements.
</FN>
</TABLE>
61
<PAGE>
<TABLE>
<CAPTION>
SBC COMMUNICATIONS INC. AND AMERITECH CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1998
SBC/
SBC/ AMERITECH/
HISTORICAL AMERITECH HISTORICAL SNET
---------- PRO FORMA PRO FORMA ---------- PRO FORMA PRO FORMA
SBC AMERITECH ADJUSTMENTS COMBINED SNET ADJUSTMENTS COMBINED
---------- ----------- ----------- --------- ---------- ----------- ----------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Total operating revenues $ 6,424 $ 4,133 $ 10,557 $ 527 $ 11,084
Total operating expenses 4,765 3,228 7,993 413 8,406
- ------------------------------------------------------------------------------------------------------------------------------------
OPERATING INCOME 1,659 905 2,564 114 2,678
Interest expense (233) (175) (408) (23) (431)
Equity in net income of affiliates 53 99 152 -- 152
Other income (expense) - net (38) (48) (86) (1) (87)
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAX AND
CUMULATIVE EFFECT OF
ACCOUNTING CHANGE 1,441 781 2,222 90 2,312
Income taxes 529 289 818 34 852
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE CUMULATIVE EFFECT OF
ACCOUNTING CHANGE 912 492 1,404 56 1,460
Cumulative Effect of Accounting
Change, net of tax -- -- -- 16 16
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCOME $ 912 $ 492 $ 1,404 $ 72 $ 1,476
- ------------------------------------------------------------------------------------------------------------------------------------
EARNINGS PER COMMON SHARE-
BASIC:(2C)
INCOME BEFORE CUMULATIVE EFFECT OF
ACCOUNTING CHANGE $ 0.50 $ 0.45 0.43 0.84 0.43
NET INCOME $ 0.50 $ 0.45 $ 0.43 $ 1.07 $ 0.43
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 1,839 1,100 348 3,287 67 51 3,405
- ------------------------------------------------------------------------------------------------------------------------------------
EARNINGS PER COMMON
SHARE-ASSUMING DILUTION:(2C)
INCOME BEFORE CUMULATIVE EFFECT OF
ACCOUNTING CHANGE $ 0.49 $ 0.44 $ 0.42 $ 0.83 $ 0.42
NET INCOME $ 0.49 $ 0.44 $ 0.42 $ 1.06 $ 0.43
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 1,864 1,109 350 3,323 68 51 3,442
<FN>
The accompanying notes are an integral part of these unaudited pro forma combined condensed financial statements.
</FN>
</TABLE>
62
<PAGE>
<TABLE>
<CAPTION>
SBC COMMUNICATIONS INC. AND AMERITECH CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1997
SBC/
SBC/ AMERITECH/
HISTORICAL AMERITECH HISTORICAL SNET
---------- PRO FORMA PRO FORMA ---------- PRO FORMA PRO FORMA
SBC AMERITECH ADJUSTMENTS COMBINED SNET ADJUSTMENTS COMBINED
---------- ----------- ----------- --------- ---------- ----------- ----------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Total operating revenues $ 24,856 $ 15,998 $ 40,854 $ 2,022 $ 42,876
Total operating expenses 21,686 12,199 33,885 1,624 35,509
- ------------------------------------------------------------------------------------------------------------------------------------
OPERATING INCOME 3,170 3,799 6,969 398 7,367
Interest expense (947) (505) (1,452) (90) $ (6) 2d (1,548)
Equity in net income of affiliates 201 206 407 -- 407
Other income (expense) - net (87) 184 97 8 105
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAX AND
EXTRAORDINARY LOSS 2,337 3,684 6,021 316 (6) 2d 6,331
Income taxes 863 1,388 2,251 118 (2) 2d 2,367
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE EXTRAORDINARY LOSS 1,474 2,296 3,770 198 (4) 2d 3,964
Extraordinary Loss, net of tax -- -- -- (4) 4 2d --
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCOME $ 1,474 $ 2,296 $ 3,770 $ 194 $ -- $ 3,964
- ------------------------------------------------------------------------------------------------------------------------------------
EARNINGS PER COMMON SHARE-
BASIC:(2C)
INCOME BEFORE EXTRAORDINARY LOSS $ 0.81 $ 2.09 $ 1.15 $ 2.99 $ 1.17
NET INCOME $ 0.81 $ 2.09 $ 1.15 $ 2.93 $ 1.17
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 1,828 1,099 347 3,274 66 50 3,390
- ------------------------------------------------------------------------------------------------------------------------------------
EARNINGS PER COMMON
SHARE-ASSUMING DILUTION:(2c)
INCOME BEFORE EXTRAORDINARY LOSS $ 0.80 $ 2.08 $ 1.14 $ 2.98 $ 1.16
NET INCOME $ 0.80 $ 2.08 $ 1.14 $ 2.92 $ 1.16
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 1,845 1,104 349 3,298 66 50 3,414
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
The accompanying notes are an integral part of these unaudited pro forma combined condensed financial statements.
</FN>
</TABLE>
63
<PAGE>
<TABLE>
<CAPTION>
SBC COMMUNICATIONS INC. AND AMERITECH CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996
SBC/
SBC/ AMERITECH/
HISTORICAL AMERITECH HISTORICAL SNET
---------- PRO FORMA PRO FORMA ---------- PRO FORMA PRO FORMA
SBC AMERITECH ADJUSTMENTS COMBINED SNET ADJUSTMENTS COMBINED
---------- ----------- ----------- --------- ---------- ----------- ----------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Total operating revenues $ 23,445 $ 14,917 $ 38,362 $ 1,942 $40,304
Total operating expenses 17,609 11,412 29,021 1,560 30,581
- ------------------------------------------------------------------------------------------------------------------------------------
OPERATING INCOME 5,836 3,505 9,341 382 9,723
Interest expense (812) (514) (1,326) (89) (1,415)
Equity in net income of affiliates 207 236 443 -- 443
Other income (expense) - net (82) 90 8 7 15
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES AND
CUMULATIVE EFFECT OF ACCOUNTING
CHANGE 5,149 3,317 8,466 300 8,766
Income taxes 1,960 1,183 3,143 107 3,250
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE CUMULATIVE EFFECT OF
ACCOUNTING CHANGE 3,189 2,134 5,323 193 5,516
Cumulative Effect of Accounting Change
net of tax 90 -- 90 -- 90
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCOME $ 3,279 $ 2,134 $ 5,413 $ 193 $5,606
- ------------------------------------------------------------------------------------------------------------------------------------
EARNINGS PER COMMON SHARE-BASIC:(2c)
INCOME BEFORE CUMULATIVE EFFECT
OF ACCOUNTING CHANGE $ 1.73 $ 1.93 $ 1.62 $ 2.95 $ 1.62
NET INCOME $ 1.78 $ 1.93 $ 1.64 $ 2.95 $ 1.64
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 1,841 1,104 349 3,294 65 49 3,408
- ------------------------------------------------------------------------------------------------------------------------------------
EARNINGS PER COMMON SHARE-
ASSUMING DILUTION:(2c)
INCOME BEFORE CUMULATIVE EFFECT
OF ACCOUNTING CHANGE $ 1.72 $ 1.92 $ 1.61 $ 2.94 $ 1.61
NET INCOME $ 1.77 $ 1.92 $ 1.64 $ 2.94 $ 1.64
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 1,851 1,108 350 3,309 66 50 3,425
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
The accompanying notes are an integral part of these unaudited pro forma combined condensed financial statements.
</FN>
</TABLE>
64
<PAGE>
<TABLE>
<CAPTION>
SBC COMMUNICATIONS INC. AND AMERITECH CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1995
SBC/
SBC/ AMERITECH/
HISTORICAL AMERITECH HISTORICAL SNET
---------- PRO FORMA PRO FORMA ---------- PRO FORMA PRO FORMA
SBC AMERITECH ADJUSTMENTS COMBINED SNET ADJUSTMENTS COMBINED
---------- ----------- ----------- --------- ---------- ----------- ----------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Total operating revenues $21,712 $13,428 $ 35,140 $ 1,816 $ 36,956
Total operating expenses 16,592 10,125 26,717 1,467 28,184
- ------------------------------------------------------------------------------------------------------------------------------------
OPERATING INCOME 5,120 3,303 8,423 349 8,772
Interest expense (957) (469) (1,426) (86) (1,512)
Equity in net income of affiliates 120 94 214 -- 214
Other income (expense) - net 194 166 360 15 375
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAX AND
EXTRAORDINARY LOSS 4,477 3,094 7,571 278 7,849
Income taxes 1,519 1,086 2,605 109 2,714
INCOME BEFORE EXTRAORDINARY LOSS 2,958 2,008 4,966 169 5,135
Extraordinary Loss, net of tax (6,022) -- (6,022) (687) (6,709)
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) $(3,064) $2,008 $ (1,056) $ (518) $ (1,574)
- ------------------------------------------------------------------------------------------------------------------------------------
EARNINGS PER COMMON SHARE-BASIC:(2c)
INCOME BEFORE EXTRAORDINARY LOSS $ 1.61 $ 1.81 $1.51 $ 2.60 $1.50
NET INCOME (LOSS) $(1.66) $ 1.81 $ (0.32) $ (7.99) $(0.46)
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 1,841 1,107 350 3,298 65 49 3,412
- ------------------------------------------------------------------------------------------------------------------------------------
EARNINGS PER COMMON SHARE-ASSUMING
DILUTION:(2c)
INCOME BEFORE EXTRAORDINARY LOSS $ 1.60 $ 1.81 $ 1.50 $ 2.60 $1.50
NET INCOME (LOSS) $(1.66) $ 1.81 $ (0.32) $ (7.99) $(0.46)
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 1,849 1,111 351 3,311 65 49 3,425
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
The accompanying notes are an integral part of these unaudited pro forma combined condensed financial statements.
</FN>
</TABLE>
65
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited pro forma combined condensed financial statements
include the historical financial statements of SBC, Ameritech and SNET and are
intended to reflect the impact of the Merger and the pending SNET acquisition on
SBC. On January 5, 1998, SBC and SNET jointly announced the execution of the
SNET Merger Agreement, pursuant to which SBC would acquire SNET in a transaction
in which each share of common stock, par value $1.00 per share, of SNET ("SNET
Common Stock") would be converted into and exchanged for 1.7568 shares of SBC
Common Stock (equivalent to approximately 120 million shares, or 6% of the
outstanding shares of SBC Common Stock at December 31, 1997). After the SNET
acquisition, SNET will be a wholly-owned subsidiary of SBC. The transaction is
intended to be accounted for as a "pooling of interests" and to be a tax-free
reorganization. The shareholders of SNET approved the merger on March 27, 1998;
however, the SNET acquisition is also subject to certain regulatory approvals.
If such approvals are granted, the transaction is expected to close by the end
of 1998.
The accompanying unaudited pro forma combined condensed financial statements are
presented for illustrative purposes only and do not give effect to any cost
savings which may result from the integration of SBC's, Ameritech's and SNET's
operations. These potential savings, as well as any potential revenue synergies,
reflect future opportunities, including the reduction of expected cost
increases, and do not necessarily involve reductions from historical cost
levels. Additionally, the unaudited pro forma combined condensed financial
statements do not include any transaction costs relating to the Merger (which
are estimated to be approximately $150 million), nor do they consider any
reorganization costs or costs associated with the disposition of certain
overlapping wireless properties that may be required as a result of the Merger.
As the nature of any dispositions of overlapping wireless properties is unknown,
the accompanying unaudited pro forma combined condensed financial statements do
not reflect any disposition which may be made or consideration which may be
received. Differences in accounting policies do not have a material effect on
either the pro forma combined financial position or pro forma combined results
of operations and have not been reflected in the unaudited pro forma combined
condensed financial statements. The unaudited pro forma combined condensed
statements of income reflect the Merger and the SNET acquisition as if each had
been in effect on January 1, 1998, 1997, 1996 and 1995, respectively.
The unaudited pro forma combined condensed financial statements are not
necessarily indicative of the results of operations or financial position that
actually would have occurred had the Merger and the SNET acquisition been
consummated on the dates indicated or that may be obtained in the future. These
unaudited pro forma combined condensed financial statements should be read in
conjunction with the related historical financial statements and notes thereto
of SBC, Ameritech and SNET incorporated by reference in this Joint Proxy
Statement/Prospectus.
SBC issued shares in connection with the SBC Stock Split, effected in the form
of a stock dividend, in the first quarter of 1998. Shareowners' equity accounts
were adjusted at the time of such issuance.
Ameritech issued shares in connection with the Ameritech Stock Split, effected
in the form of a stock dividend, on December 31, 1997. Shareowners' equity
accounts were retroactively restated as of December 31, 1997 to reflect the
effects of the Ameritech Stock Split.
NOTE 2 - PRO FORMA ADJUSTMENTS
a. Shareowners' Equity - The shareowners' equity accounts of Ameritech have
been adjusted to reflect the assumed issuance of approximately 1,450 million
shares of SBC Common Stock in exchange for all of the issued and outstanding
Ameritech Common Stock (based on the Exchange Ratio of 1.316). The actual
number of shares of SBC Common Stock to be issued in connection with the
Merger will be based upon the number of shares of Ameritech Common Stock
issued and outstanding at the Effective Time.
b. Shareowners' Equity - The shareowners' equity accounts of SNET have been
adjusted to reflect the assumed issuance of approximately 120 million shares
of SBC Common Stock in exchange for all of the issued and outstanding SNET
Common Stock (based on the exchange ratio in the SNET acquisition of 1.7568
shares of SBC Common Stock for each share of SNET Common Stock). The actual
number of shares of SBC Common Stock to be issued in connection with the
SNET acquisition will be based upon the number of shares of SNET Common
Stock issued and outstanding at the time the SNET acquisition becomes
effective.
66
<PAGE>
c. Earnings per Common Share - Pro forma combined basic earnings per common
share and earnings per common share assuming dilution for each period
presented are based on the combined weighted average shares outstanding in
each period after conversion of shares of Ameritech Common Stock and SNET
Common Stock into shares of SBC Common Stock, as appropriate.
d. Extraordinary Loss - The extraordinary loss on early extinguishment of debt
is reclassified as the amount is not material to SBC and, therefore, is not
reported as an extraordinary item.
e. Intercompany Transactions - There are no significant intercompany
transactions between or among SBC, Ameritech and SNET.
NOTE 3 - FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The unaudited pro forma combined condensed financial statements assume that the
Merger qualifies as a tax-free reorganization for federal income tax purposes.
NOTE 4 - RECENT DEVELOPMENTS - SALE OF TELECOM CORPORATION OF
NEW ZEALAND LIMITED
Pursuant to a plan publicly announced in December 1997, Ameritech completed the
sale of substantially all of its stake in Telecom Corporation of New Zealand
Limited (New Zealand Telecom) in a global stock offering in April 1998.
Ameritech sold a total of 436,970,670 ordinary shares in the form of either
ordinary shares or American Depository Shares ("ADSs"), with each ADS
representing eight ordinary shares. Ameritech will receive payment for the sale
in two installments; the first was received in April 1998 and the second is due
by March 31, 1999. Payment for ordinary shares will be made in New Zealand
dollars (or in Australian dollars for those sold in the Australian tranche of
the offering), while payment for ADSs will be made in U.S. dollars.
At the time of the first installment payment, Ameritech irrevocably transferred
the relevant New Zealand Telecom shares to a trustee, which is holding the
shares in trust for the purchasers until the final installment is paid.
Ameritech has retained a security interest in the shares and each purchaser
remains personally liable until the final installment payment is received.
However, the purchasers or their transferees will receive all ordinary dividends
on the underlying shares in the interim period. The trustee will have one vote
for each share, and will vote the shares based on instructions from the
purchasers or their transferees.
In accordance with FAS 125 "Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities," Ameritech accounted for this
transaction as a sale and recorded an after-tax gain of approximately $1.0
billion, which will be reflected in the second quarter of 1998.
Because the receivable from the second installment payment does not have a
stated interest rate, Ameritech is imputing interest at 9%. Subject to
applicable exchange rates, Ameritech expects to receive total net proceeds of
approximately $2.1 billion (before deducting transaction costs). Net proceeds
from the initial installment of the purchase price were approximately $1.1
billion after application of applicable exchange rates, which were used to pay
down short-term debt balances and for general corporate purposes. Ameritech has
hedged substantially all foreign exchange risk associated with the final
installment of the purchase price.
67
<PAGE>
DESCRIPTION OF SBC CAPITAL STOCK
The following description of certain terms of the capital stock of SBC does
not purport to be complete and is qualified in its entirety by reference to the
SBC Restated Certificate incorporated herein by reference and to the relative
rights, preferences and limitations of the Series A Junior Participating
Preferred Stock (the "SBC Participating Preferred Stock"), which documents are
filed or incorporated by reference as exhibits to the Registration Statement of
which this Joint Proxy Statement/Prospectus is a part.
The authorized capital stock of SBC currently consists of 7,000,000,000
shares of SBC Common Stock and will consist of 10,000,000,000 if the Share
Increase Proposal is adopted, and 10,000,000 shares of preferred stock, par
value $1.00 per share issuable in series (the "SBC Preferred Stock"). Each share
of SBC Common Stock trades with one fourth of a SBC Right. See "-- Description
of SBC Rights." As of [o], 1998, there were outstanding [o] shares of SBC Common
Stock, with an additional [o] shares issued and held in treasury. There are no
shares of SBC Preferred Stock outstanding, but SBC has designated all 10,000,000
shares as SBC Participating Preferred Stock.
SBC COMMON STOCK
The holders of SBC Common Stock are entitled to one vote per share for each
share held of record on all matters voted on by shareowners, including the
election of directors, and are entitled to participate equally in dividends when
and as such dividends may be declared by the SBC Board out of funds legally
available therefor. As a Delaware corporation, SBC is subject to statutory
limitations on the declaration and payment of dividends. In the event of a
liquidation, dissolution or winding up of SBC, holders of SBC Common Stock have
the right to a ratable portion of assets remaining after satisfaction in full of
the prior rights of creditors, including holders of SBC's indebtedness, all
liabilities and the aggregate liquidation preferences of any outstanding shares
of SBC Preferred Stock. The holders of SBC Common Stock have no conversion,
redemption, preemptive or cumulative voting rights. All outstanding shares of
SBC Common Stock are, and the shares of SBC Common Stock to be issued in the
Merger will be, validly issued, fully paid and non-assessable.
The transfer agent and registrar for SBC Common Stock is The Bank of New
York, 48 Wall Street, New York, New York 10286.
SBC PREFERRED STOCK
The SBC Restated Certificate provides that the SBC Preferred Stock may be
issued from time to time in one or more series. The SBC Board is specifically
authorized to establish the number of shares in any series and to set the
designation of any series and the powers, preferences, and rights and the
qualifications, limitations or restrictions on each series of SBC Preferred
Stock. The holders of SBC Preferred Stock will have no preemptive rights.
In connection with the SBC Rights Agreement, the SBC Board has authorized
the issuance of up to 10,000,000 shares of SBC Participating Preferred Stock.
Upon issuance, each share of SBC Participating Preferred Stock is entitled to
quarterly cash dividends equal to the greater of $5 or 200 times (subject to
antidilution adjustments for stock dividends and stock splits) the aggregate
value of all dividends or other distributions declared on a share of SBC Common
Stock (other than distributions of SBC Common Stock) since the last quarterly
dividend payment date. The SBC Participating Preferred Stock is not redeemable
by SBC.
Each share of SBC Participating Preferred Stock is entitled to 400 votes
(subject to antidilution adjustments) on all matters submitted to a vote of the
shareowners of SBC, voting together as one class with SBC Common Stock. In
addition, if at any time dividends in an amount equal to six quarterly dividend
payments will have accrued and be unpaid, the SBC Board will be increased by two
directors and holders of the SBC Participating Preferred Stock will have the
right to elect two members to the SBC Board until dividends on the SBC
Participating Preferred Stock have been declared and paid or set apart for
payment. Except as required by applicable law, holders of SBC Participating
Preferred Stock have no other special voting rights. Whenever dividends or
distributions on the SBC Participating Preferred Stock are in arrears, SBC is
prohibited from declaring or paying dividends or distributions on, and SBC and
any subsidiary are prohibited from redeeming or acquiring for value, any stock
ranking junior as to dividends or upon liquidation. During any such arrearage,
SBC may declare or pay dividends on stock ranking on a parity with the SBC
Participating Preferred Stock as to dividends or upon liquidation only if
declared or paid ratably with the SBC Participating Preferred Stock. During any
such arrearage, SBC and any subsidiary are prohibited from redeeming or
acquiring for value any such parity stock or any SBC Participating Preferred
Stock, except pursuant to an exchange of
68
<PAGE>
parity stock for stock ranking junior to the SBC Participating Preferred Stock
or pursuant to a purchase offer to the SBC Participating Preferred Stock and
holders of parity stock on terms the SBC Board determines to be fair and
equitable.
The SBC Participating Preferred Stock ranks junior to all other series of
SBC's preferred stock as to the payment of dividends and the distribution of
assets, unless the terms of any such series provides otherwise.
Upon any liquidation, dissolution or winding up of SBC, the SBC
Participating Preferred Stock is entitled to a liquidation preference of $100
per share plus any accrued but unpaid dividends, subject to the prior rights of
any series of preferred stock ranking in liquidation senior to the SBC
Participating Preferred Stock. In the event of any shortfall in the assets
available for distribution, any such liquidating distribution will be made
ratably to the SBC Participating Preferred Stock and any other series of
preferred stock ranking on a parity in proportion to their relative liquidation
preferences. Following such payment, no additional liquidating distributions may
be made on the SBC Participating Preferred Stock until each share of SBC Common
Stock has received $0.50 (subject to antidilution adjustments). Thereafter, any
remaining assets will be distributed to each share of SBC Participating
Preferred Stock and each share of SBC Common Stock in the ratio of 400 to 1
(subject to antidilution adjustments).
DESCRIPTION OF SBC RIGHTS
The SBC Rights Agreement is intended to protect shareowners in the event of
unsolicited offers or attempts to acquire SBC, including offers that do not
treat all shareowners equally, acquisitions in the open market of shares
constituting control without offering fair value to all shareowners and other
coercive or unfair takeover tactics that could impair the SBC Board's ability to
represent shareowners' interests fully. Pursuant to the SBC Rights Agreement,
the SBC Board declared a dividend distribution of one SBC Right for each
outstanding share of SBC Common Stock to shareowners of record at the close of
business on February 16, 1989 (the "SBC Rights Record Date"), and authorized the
issuance of one SBC Right (as adjusted pursuant to the SBC Rights Agreement, as
described below) for each share of SBC Common Stock issued between the SBC
Rights Record Date and the SBC Distribution Date (as defined below). After
giving effect to a stock split in May 1993 and the SBC Stock Split, each
effected in the form of a stock dividend, each share of SBC Common Stock
outstanding or to be issued prior to the SBC Distribution Date has or will have
attached one-quarter of an SBC Right. Each SBC Right entitles the registered
holder to purchase from SBC one one-hundredth of a share (an "SBC Unit") of
SBC's Participating Preferred Stock at a price of $160 per SBC Unit, subject to
adjustment, which is not exercisable until after an SBC Distribution Date. The
description and terms of the SBC Rights are set forth in the SBC Rights
Agreement dated as of January 27, 1989 and amended on August 5, 1992 and June
15, 1994 between SBC and The Bank of New York, as Rights Agent. One-quarter of
an SBC Right will be attached to each share of SBC Common Stock issued by SBC
(including shares of SBC Common Stock issued to holders of Ameritech Common
Stock in the Merger).
The SBC Rights have certain anti-takeover effects. The SBC Rights may cause
substantial dilution to a person that attempts to acquire SBC without the
approval of the SBC Board. The SBC Rights, however, should not affect offers for
all outstanding shares of SBC Common Stock at a fair price and otherwise in the
best interests of SBC and its shareowners as determined by the SBC Board and
should not interfere with any merger or other business combination approved by
the SBC Board since the SBC Board may, at its option, at any time until 10 days
following the SBC Stock Acquisition Date (as defined below), redeem all but not
less than all of the then outstanding SBC Rights at a redemption price of $.05
per share, except that in certain circumstances a majority of directors not
affiliated with an SBC Acquiring Person (as defined below) or an SBC Adverse
Person (as defined below) who were elected by a majority of unaffiliated
directors may need to approve the redemption.
Initially, the SBC Rights are and will be attached to all certificates
representing SBC Common Stock (including shares issued in the Merger) at the
time outstanding. The SBC Rights will separate from the SBC Common Stock on the
SBC Distribution Date, which is defined as (i) 10 business days after the public
announcement by SBC or the SBC Acquiring Person (the date of such public
announcement, the "SBC Stock Acquisition Date") that a person (an "SBC Acquiring
Person") has acquired 20% or more of the then outstanding SBC Common Stock, (ii)
10 business days following commencement of a tender offer or exchange offer for
20% or more of the then outstanding SBC Common Stock or (iii) 10 business days
after an owner of 10% or more of the then outstanding SBC Common Stock is
determined to be an "SBC Adverse Person" by the SBC Board of Directors and a
majority of SBC's independent directors that are not officers of SBC. An SBC
Adverse Person is one who intends to have SBC repurchase such person's ownership
interest, who intends to pressure SBC into action for the short-term financial
gain of such person and such action is not in the best long-term interests of
SBC or its shareowners or whose ownership is likely to cause a material adverse
effect
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on the business or prospects of SBC (including, but not limited to, impairment
of SBC's (i) relationships with customers, (ii) relationships with regulators or
(iii) ability to maintain its competitive position).
If an "SBC Flip-in Event" occurs, the holder of an SBC Right is entitled to
receive SBC Common Stock or other property of SBC valued at two times the
exercise price of the SBC Right. An SBC Flip-in Event occurs if a person
acquires 20% or more of the SBC Common Stock (except offers to acquire all of
the SBC Common Stock deemed by a majority of the SBC Board that are not officers
of SBC and who are not representatives, nominees or associates of an SBC
Acquiring Person to be fair and in the best interests of SBC) or if a person is
determined to be an SBC Adverse Person. Following the occurrence of a Flip-in
Event, SBC may exchange at its option, without requiring payment therefrom, SBC
Common Stock and cash or other assets for an SBC Right.
To avoid the consequences of an SBC Flip-in Event, SBC may redeem the SBC
Rights in whole, but not in part, at a redemption price of $0.05 per SBC Right
at any time prior to an SBC Stock Acquisition Date, except that in certain
circumstances a majority of directors not affiliated with an SBC Acquiring
Person or an SBC Adverse Person who were elected by a majority of unaffiliated
directors may need to approve the redemption.
If an "SBC Flip-over Event" occurs, the holder of a SBC Right is entitled to
receive common stock of a company that has acquired SBC valued at two times the
exercise price of the SBC Right. An SBC Flip-over Event occurs if SBC is
acquired in a merger or other business combination in which SBC is not the
survivor or if 50% or more of SBC's assets, cash flow or earning power is sold
or transferred.
Following the occurrence of an SBC Flip-in Event or SBC Flip-over Event, all
SBC Rights that are beneficially owned by an SBC Acquiring Person or an SBC
Adverse Person or any transferee thereof will be null and void.
The SBC Rights Agreement may be amended at any time prior to an SBC
Distribution Date, without the approval of holders of SBC Rights in any manner,
except to amend the Redemption Price (as defined in the SBC Rights Agreement),
the SBC Rights Expiration Date, the SBC Purchase Price and the number of SBC
Units for which an SBC Right is exercisable.
The SBC Rights Agreement expires on the SBC Rights Expiration Date. As of
the date of this Joint Proxy Statement/Prospectus, SBC has not determined
whether it will enter into an amendment of the SBC Rights Agreement or a new
rights agreement which would have the effect that the SBC Rights currently
outstanding under the SBC Rights Agreement would continue to be outstanding
after the SBC Rights Expiration Date. If the SBC Rights or SBC Substitute Rights
are outstanding at the time shares of SBC Common Stock are issued pursuant to
the Merger Agreement, such shares of SBC Common Stock will have attached the
appropriate number of SBC Rights or SBC Substitute Rights. If no such rights are
outstanding at the time shares of SBC Common Stock are issued pursuant to the
Merger Agreement, no rights will be attached to such shares of SBC Common Stock.
The foregoing description of the SBC Rights is qualified in its entirety by
reference to the SBC Rights Agreement, which is filed or incorporated by
reference as an exhibit to the Registration Statement of which this Joint Proxy
Statement/Prospectus is a part.
COMPARISON OF CERTAIN RIGHTS OF SHAREOWNERS
OF SBC AND AMERITECH
GENERAL
As a result of the Merger, holders of Ameritech Common Stock will become
holders of SBC Common Stock and the rights of all such former holders of
Ameritech Common Stock will thereafter be governed by the SBC Restated
Certificate, the SBC Bylaws and the DGCL (which is the law governing their
rights as shareowners of Ameritech). The rights of the holders of Ameritech
Common Stock are presently governed by the Ameritech Charter, the Ameritech
Bylaws and the DGCL. The following summary, which does not purport to be a
complete statement of the differences among the rights of the shareowners of SBC
and Ameritech, sets forth certain differences between the SBC Restated
Certificate and the SBC Bylaws, on the one hand, and the Ameritech Charter and
the Ameritech Bylaws, on the other hand. This summary is qualified in its
entirety by reference to the full text of each of such documents.
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SIZE AND CLASSIFICATION OF THE BOARD OF DIRECTORS
SBC
The SBC Bylaws provide that the number of directors of SBC will be
determined from time to time by a majority of the SBC Board, but in no event
will the SBC Board be comprised of more than 21 members. The current number of
directors is 19. The SBC Bylaws also provide that the SBC Board will be divided
into three classes with the number of directors divided as evenly as possible
among the three classes. Each class is elected to serve for a term of three
years. Each year the term of one class of directors expires and approximately
one-third of the directors are elected. The SBC Restated Certificate provides
that the classified board provision and the limitation on the maximum number of
directors that may serve on the SBC Board may only be amended or repealed by a
two-thirds majority vote of the total number of shares of stock of SBC then
outstanding and entitled to vote.
Ameritech
The Ameritech Charter provides that the number of directors of Ameritech
will be determined from time to time by a majority vote of the Ameritech Board,
but may not be less than three or more than 18. Until 1995, the Ameritech Board
was divided into three classes of directors with one class of directors elected
each year for a three-year term, but an amendment to the Ameritech Charter filed
on April 30, 1996 eliminated the classification of the Ameritech Board as
directors' terms expire. Pursuant to that amendment, all directors will be
elected annually beginning in 1999 and hold office until the next annual meeting
of shareowners and until their successors are elected or qualified, or until the
directors' earlier resignation or removal.
REMOVAL OF DIRECTORS
SBC
Pursuant to the DGCL, unless a corporation's certificate of incorporation
provides otherwise, in the case of a corporation whose board of directors is
classified (as the SBC Board is), any director or the entire SBC Board may be
removed only for cause and only by the affirmative vote of a majority of the
outstanding shares of SBC capital stock entitled to vote in the election of
directors.
Ameritech
The Ameritech Charter provides that no director will be removed from the
Ameritech Board by action of the shareowners of Ameritech other than for cause
(which means that the conduct of such director has been determined by a court of
competent jurisdiction to constitute a breach of such director's fiduciary
duty). To remove a director for cause, the holders of a majority of the shares
then entitled to vote in an election of directors must vote in favor of removal.
ACTION BY WRITTEN CONSENT
SBC
Under the DGCL, unless otherwise provided in a corporation's certificate of
incorporation, shareowners may take action without a meeting, without prior
notice and without a vote, upon the written consent of shareowners having not
less than the minimum number of votes that would be necessary to authorize the
proposed action at a meeting at which all shares entitled to vote were present
and voted. The SBC Restated Certificate provides that action can be taken by
shareowners without a meeting if a consent in writing, setting forth the actions
so taken, is signed by the holders of at least two-thirds of all the issued and
outstanding shares of stock of SBC entitled to vote thereon at any such meeting.
Ameritech
The Ameritech Charter requires that all actions by shareowners be taken at a
duly called annual or special meeting and may not be taken by written consent of
such shareowners.
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MEETINGS OF SHAREOWNERS; QUORUM AND VOTING
SBC
Pursuant to the SBC Bylaws, a special meeting of shareowners may be called
at any time by either the SBC Board or the Chairman of the SBC Board. The
Chairman of the SBC Board is required to call a special meeting whenever
requested to do so by shareowners representing two-thirds of the shares of SBC
then outstanding and entitled to vote at the meeting.
The SBC Bylaws provide that the presence in person or by proxy of forty
percent of the issued and outstanding shares of SBC stock entitled to vote will
constitute a quorum. When a quorum is present or represented at a meeting of the
shareowners of SBC, the vote of a majority of the votes cast will decide any
question brought before the meeting, unless the question is one upon which by
express provision of the DGCL, the SBC Restated Certificate or the SBC Bylaws a
different vote is required, in which case such express provision will govern and
control the decision of such question brought before the meeting. See "-- Size
and Classification of Directors."
Ameritech
The Ameritech Bylaws provide that a special meeting of shareowners may be
called at any time by either the Ameritech Board or the Chairman of the
Ameritech Board. The Ameritech Bylaws also state that the presence, in person or
by proxy, of a majority of the outstanding stock entitled to vote constitutes a
quorum at all shareowners' meetings, except as provided by law. When a quorum is
present, a majority vote will decide any question brought before the meeting,
unless a different vote is required by law or by the Ameritech Charter.
SHAREOWNER PROPOSALS AND SHAREOWNER NOMINATIONS OF DIRECTORS
SBC
The SBC Bylaws establish procedures that must be followed for a shareowner
to submit a proposal to be voted on by the shareowners of SBC at its annual
meeting of shareowners and a substantially similar procedure to be followed for
the nomination and election of directors. No business may be proposed by a
shareowner at the annual meeting of shareowners without giving written notice to
the Secretary of SBC not less than 60 days or more than 90 days prior to the
scheduled date of the meeting. In the event, however, that less than 70 days'
notice or prior public disclosure of the date of the meeting is given to
shareowners, notice by the shareowner to be timely must be received not later
than the close of business on the tenth day following the earlier of (i) the day
on which such notice of the date of the meeting was mailed or (ii) the day on
which such public disclosure was made. The shareowner's notice must set forth
(i) the name and record address of such shareowner and (ii) the class or series
and number of shares of capital stock of SBC which are owned beneficially or of
record by such shareowner. In addition, with respect to business to be brought
before an annual meeting, the shareowner's notice must set forth (i) a brief
description of the business desired to be brought before the annual meeting and
the reasons for conducting the business at the annual meeting and (ii) any
material interest the shareowner has in the proposal. Shareowners' notices
relating to director nominations must include (i) the name, age, business
address and residence address of the nominee, (ii) the principal occupation or
employment of the nominee, (iii) the class or series and number of shares of
capital stock of SBC which are owned beneficially or of record by the nominee
and (iv) any other information relating to the nominee and the shareowner making
the nomination that is required to be disclosed in a proxy statement or other
filings required to be made in connection with the solicitation of proxies for
the election of directors under the Exchange Act. If the Chairman of the SBC
Board determines that any such proposal (including a director nomination) was
not made in accordance with these procedures or is otherwise not in accordance
with law, the Chairman of the SBC Board may so declare at the meeting, and such
defective proposal (or nomination) will be disregarded.
Ameritech
The Ameritech Charter and the Ameritech Bylaws do not set forth procedures
for shareowner proposals or for the nomination and election of directors.
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AMENDMENT OF CORPORATE CHARTER AND BYLAWS
SBC
Under the DGCL, an amendment to a corporation's certificate of incorporation
generally requires the recommendation of the board of directors, the approval of
a majority of all shares entitled to vote thereon, voting together as a single
class, and the majority of the outstanding stock of each class entitled to vote
thereon.
Under the DGCL, a corporation's board of directors may amend its bylaws if
its certificate of incorporation contains a provision entitling the directors to
amend the bylaws. Even if the certificate of incorporation contains such a
provision, the shareowners also have the power to amend the bylaws. The SBC
Restated Certificate provides that the SBC Board is expressly authorized to
adopt, amend or repeal the SBC Bylaws without the consent or vote of its
shareowners, except for certain SBC Bylaws described under "-- Size and
Classification of the Board of Directors" and "-- Fair Price Provisions."
Ameritech
The Ameritech Charter provides that Ameritech may amend, alter or repeal any
provision contained in the Ameritech Charter; however, an affirmative vote of
80% of all voting stock of Ameritech is required to change, repeal or render
inoperative any of the provisions set forth in the Ameritech Charter concerning
the Ameritech Board, super-majority voting requirements for certain business
combinations or such super-majority voting requirements for amendments to the
Ameritech Charter. Notwithstanding this requirement, the 80% vote is not
required for any amendments concerning these provisions that are unanimously
recommended to the shareowners by the Ameritech Board when no other entity owns
or proposes to acquire more than 5% of Ameritech's voting stock, or if all
directors then serving on the Ameritech Board were members of the Ameritech
Board prior to the acquisition of 5% of Ameritech's voting stock by another
entity. See "Fair Price Provisions."
The Ameritech Bylaws may be amended by the Ameritech Board. In addition, the
Ameritech Bylaws may be amended by the shareowners of Ameritech.
FAIR PRICE PROVISIONS
SBC
The SBC Bylaws provide that certain "business combinations" involving
"interested shareowners" (defined generally to be beneficial owners of 10% or
more of the voting stock of SBC or any person acquiring any voting stock, in the
two year period prior to the business combination, from such a person in a
non-public offering) require approval by a vote of the holders of at least
two-thirds of the then-outstanding shares of capital stock of SBC entitled to
vote generally for the election of directors, voting as a single class, if not
previously approved by a majority of the members of the SBC Board who are not
affiliated with the interested shareowner (and those who became directors after
the time at which the interested shareowner acquired its shares, if they are
approved by a majority of the unaffiliated directors) or unless certain minimum
price and procedural criteria are satisfied. The minimum price criteria require
that the consideration paid to SBC's shareowners must be either cash or the same
type of consideration paid by the interested shareowner in acquiring the largest
portion of its SBC shares prior to the proposed business combination and would
generally have to be at least equal in value to the greater of (i) the highest
per share price paid by the interested shareowner in acquiring any share of SBC
Common Stock during the two years prior to the announcement date of the proposed
business combination or in the transaction in which it became an interested
shareowner (whichever is higher), (ii) the fair market value per share of SBC
Common Stock on the day after such announcement date or on the date on which the
interested shareowner became an interested shareowner (whichever is higher), or
(iii) the price per share determined pursuant to (ii) multiplied by the ratio of
(a) the highest per share price paid by the interested shareowner in acquiring
any share of SBC Common Stock during the two years prior to such announcement to
(b) the fair market value per share of SBC Common Stock on the first day in such
two-year period upon which the interested shareowner acquired any shares of SBC
Common Stock. This provision may only be amended or repealed by a vote of the
holders of at least two-thirds of the then-outstanding shares of capital stock
of SBC entitled to vote generally for the election of directors, voting as a
single class.
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Ameritech
The Ameritech Charter provides that the affirmative vote of 80% of all
outstanding voting stock is required to approve an "extraordinary business
transaction" with another entity if, as of the record date for such vote, the
other entity is the beneficial owner of 5% or more of Ameritech's voting stock.
For the purposes of this provision, an extraordinary business transaction
includes the merger or consolidation of Ameritech with or into another
corporation, the sale, lease, exchange or disposition of assets representing 10%
or more of Ameritech's total assets or going concern value (as determined by the
Ameritech Board), or the sale or lease to Ameritech or its subsidiaries, in
exchange for securities of Ameritech or its subsidiaries, of any assets having
an aggregate fair market value in excess of $5 million. This 80% voting
requirement does not apply, however, if (a) the value of the consideration to be
received by Ameritech common shareowners in the extraordinary business
transaction is equal to or greater than (i) the highest share price paid by the
acquiring entity for any of its Ameritech holdings, and (ii) Ameritech's book
value per share in its most recently published financial statements, and (b) a
proxy statement soliciting approval of the transaction is mailed to all
Ameritech common shareowners and contains any recommendation that the continuing
directors (as defined in the Ameritech Charter) or the Ameritech Board may have
concerning the advisability of undertaking the transaction as well as any
opinions from experts that the Ameritech Board has received concerning the
fairness of the transaction to Ameritech common shareowners. In addition, the
80% voting requirement will not be applicable if the extraordinary business
transaction is approved by at least 80% of the continuing directors (as defined
in the Ameritech Charter) at a time when the continuing directors constitute a
majority of the Ameritech Board.
RIGHTS PLANS
SBC
Pursuant to the SBC Rights Agreement each share of SBC Common Stock has
attached to it after giving effect to the May 1993 stock split and the SBC Stock
Split one-quarter of an SBC Right. Each SBC Right entitles the holder thereof to
purchase one one-hundredth of a share of SBC Participating Preferred Stock for
$160. Until the SBC Distribution Date the SBC Rights remain attached to the SBC
Common Stock. Following the SBC Distribution Date, the SBC Rights will separate.
After the occurrence of an SBC Flip-in Event or an SBC Flip-over Event the
holders of the SBC Rights will have the right to purchase shares of SBC Common
Stock or shares of common stock of an SBC Acquiring Person or SBC Adverse
Person, as the case may be, having a market value of twice the purchase price
(i.e., $320 worth of SBC Common Stock or common stock of an SBC Acquiring Person
or SBC Adverse Person, as the case may be, for $160). See "Description of SBC
Common Stock -- Description of Rights."
The SBC Board may, at its option, redeem the SBC Rights at a redemption
price of $0.05 per SBC Right, generally at any time prior to an SBC Stock
Acquisition Date. The SBC Rights will terminate on January 27, 1999. See
"Description of SBC Capital Stock -- Description of SBC Rights."
Ameritech
Pursuant to the Ameritech Rights Agreement, each share of Ameritech Common
Stock has attached to it one quarter of a right, and each such right, when
exercisable, permits the holder thereof to purchase from Ameritech one
one-hundredth of a share of Series A Junior Participating Preference Stock, par
value $1.00 per share, for $125, subject to adjustment (each, an "Ameritech
Right"). Until the Ameritech Distribution Date (as defined in the Ameritech
Rights Agreement), the Ameritech Rights remain attached to the Ameritech Common
Stock, but following the Ameritech Distribution Date, the Ameritech Rights will
separate. In the event that any person becomes the beneficial owner of 20% or
more of the then-outstanding shares of Ameritech Common Stock, except pursuant
to a tender or exchange offer for all outstanding shares that a majority of the
Ameritech Board determines to be fair and in the best interests of Ameritech and
its shareowners, each owner of an Ameritech Right will have the right to receive
upon exercise Ameritech Common Stock or other consideration with a value equal
to twice the exercise price of the Ameritech Right. The Ameritech Rights are not
exercisable until the Ameritech Distribution Date and will expire upon the
earliest of (i) December 30, 1998, (ii) consummation of certain approved merger
transactions, or (iii) redemption by Ameritech at a price of $.01 per Ameritech
Right. The Ameritech Rights Agreement was amended on May 10, 1998 to provide
that the Merger Agreement and the consummation of the transactions contemplated
by the Merger Agreement will not cause any of the provisions of the Rights
Agreement to be triggered.
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The description of the Ameritech Rights Agreement specifying the terms of
the Ameritech Rights is incorporated herein by reference. See "Incorporation of
Certain Documents by Reference." The foregoing description of the Ameritech
Rights is qualified in its entirety by reference to the Ameritech Rights
Agreement.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
SBC
Section 145 of the DGCL provides that a corporation may indemnify its
officers and directors who were or are a party to any action, suit or proceeding
by reason of the fact that he or she was a director, officer, or employee of the
corporation by, among other things, a majority vote of a quorum consisting of
directors who were not parties to such action, suit, or proceeding, provided
that such officers and directors acted in good faith and in a manner they
reasonably believed to be in or not opposed to the best interests of the
corporation. The SBC Restated Certificate provides for indemnification of
officers and directors as permitted by the DGCL. The SBC Restated Certificate
also provides for the payment of expenses incurred by directors and officers in
defending a proceeding in advance of the final disposition of such proceeding as
authorized by the SBC Board upon receipt of an undertaking by or on behalf of
that person to repay such amounts unless it is ultimately determined that person
is entitled to be indemnified under Delaware law.
Ameritech
The Ameritech Bylaws provide for indemnification of directors and officers
of Ameritech to the full extent permitted by law. The Ameritech Bylaws also
contain indemnification provisions similar to those provisions contained in the
SBC Restated Certificate. However, in the case of criminal actions or
proceedings, the Ameritech Bylaws contain the additional requirement that the
person being indemnified must have had no reasonable cause to believe that his
conduct was unlawful. The Ameritech Bylaws also provide for payment of expenses
actually and reasonably incurred by a director, officer, employee or agent in
connection with such an action, suit or proceeding if he or she has been
successful on the merits or otherwise in defense thereof. The Ameritech Bylaws
also provide for advancement of expenses upon receipt of an undertaking similar
to that provided for in the SBC Restated Certificate. With respect to
threatened, pending or completed legal action by or on behalf of Ameritech
against such person, Ameritech will indemnify such person against expenses
actually and reasonably incurred in connection with the defense or settlement of
such an action or suit, provided that such person acted in good faith and in a
manner such person believed to be in or not opposed to Ameritech's best
interests. No indemnification will be made, however, with respect to any claim,
issue or matter as to which such person has been found liable for negligence or
misconduct in the performance of such person's duty to Ameritech, unless the
applicable court determines that such person is fairly or reasonably entitled to
indemnification.
The Ameritech Charter further provides that Ameritech directors have no
personal liability to Ameritech or Ameritech shareowners for monetary damages
for breach of his or her fiduciary duty as a director, except (i) for any breach
of the director's duty of loyalty to Ameritech or Ameritech shareowners; (ii)
for acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law; (iii) under Section 174 of the DGCL providing for
liability of directors for unlawful payment of dividends or unlawful stock
purchases or redemptions, or (iv) for any transaction from which the director
derived an improper personal benefit.
EXPERTS
The consolidated financial statements and schedules of SBC at December 31,
1997 and 1996, and for each of the three years in the period ended December 31,
1997, incorporated by reference in this Joint Proxy Statement/Prospectus have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
reports thereon incorporated herein by reference which, as to the years 1996 and
1995, are based in part on the reports of Coopers & Lybrand L.L.P, independent
accountants. Such consolidated financial statements and schedules are
incorporated herein by reference in reliance upon such reports given upon the
authority of such firms as experts in accounting and auditing.
The consolidated financial statements and schedules of Ameritech as of
December 31, 1997 and 1996 and for the three years in the period ended December
31, 1997, included and incorporated by reference in the Ameritech 10-K,
incorporated by reference in this Joint Proxy Statement/Prospectus and
Registration Statement have been audited by Arthur Andersen LLP, independent
public accountants, as set forth in their reports thereon, which are
incorporated herein by reference. Such consolidated financial statements are
incorporated herein by reference in reliance upon authority of such firm as
experts in accounting and auditing.
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The consolidated financial statements and schedule of SNET as of December
31, 1997 and 1996, and for the three years in the period ended December 31,
1997, incorporated by reference in this Joint Proxy Statement/Prospectus and
Registration Statement, have been audited by Coopers & Lybrand L.L.P.,
independent accountants, as set forth in their reports thereon, which are
incorporated herein by reference. Such consolidated financial statements are
incorporated herein by reference in reliance upon authority of such firm as
experts in accounting and auditing.
VALIDITY OF SHARES
The validity of the SBC Common Stock to be issued pursuant to the Merger
will be passed upon for SBC by James D. Ellis, Senior Executive Vice President
and General Counsel of SBC. As of the date of this Joint Proxy
Statement/Prospectus, Mr. Ellis owned less than ___% of the shares (including
options representing certain rights to purchase shares) of SBC Common Stock.
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INDEX OF DEFINED TERMS
Term Page
- ---- ----
1997 Ameritech 10-K.........................................................iii
1997 SBC 10-K...............................................................iii
Acquiring Person.............................................................34
Acquisition Proposal..........................................................4
ADSs.........................................................................64
Affiliates...................................................................46
Agreement for Services.......................................................49
Ameritech.....................................................................i
Ameritech Acquisition Proposal................................................4
Ameritech Affiliates Letter..................................................46
Ameritech Board...............................................................i
Ameritech Bylaws.............................................................11
Ameritech Cellular...........................................................25
Ameritech Certificate........................................................31
Ameritech Charter............................................................11
Ameritech Common Stock........................................................i
Ameritech Distribution Date..................................................68
Ameritech Option..............................................................6
Ameritech Other Assets.......................................................25
Ameritech PCS................................................................25
Ameritech Publishing.........................................................25
Ameritech Record Date.........................................................2
Ameritech Representatives....................................................36
Ameritech Required Consents..................................................42
Ameritech Right..............................................................68
Ameritech Rights Agreement...................................................33
Ameritech Special Meeting.....................................................i
Ameritech Stock Split........................................................12
Ameritech Stock Units........................................................40
Ameritech Telco..............................................................25
Applicants...................................................................39
BSE.........................................................................iii
Bylaw Amendment...............................................................i
Cable Franchise Agreements...................................................40
Cause........................................................................47
Cellular Comparable Companies................................................26
Certificate Letter of Transmittal............................................32
Certificate of Merger.........................................................4
Change in Control............................................................47
Change in Control Agreements.................................................47
Change in Control of Ameritech...............................................47
Closing Date..................................................................6
Code..........................................................................2
Communications Act............................................................6
Continuing Directors.........................................................68
Contract......................................................................8
Costs.........................................................................7
CSE.........................................................................iii
Current Premium...............................................................7
Currently Applicable Law.....................................................49
D&O Insurance.................................................................7
Department of Justice.........................................................5
DGCL..........................................................................4
EBIT.........................................................................34
EBITDA.......................................................................26
77
<PAGE>
Effective Time................................................................2
Engagement Letter............................................................30
EPS..........................................................................28
Exchange Act................................................................iii
Exchange Agent...............................................................31
Exchange Procedures..........................................................31
Exchange Ratio................................................................i
Excluded Ameritech Common Stock...............................................i
Factual Representations......................................................49
FCC...........................................................................6
Final Expiration Date........................................................34
Final Order..................................................................42
FTC...........................................................................5
Goldman Sachs.................................................................3
Goldman Sachs Engagement Letter..............................................36
Good Reason..................................................................47
Governmental Entity..........................................................33
Historical Exchange Ratio....................................................25
HSR Act.......................................................................5
IBES....................................................................... 33
ICC..........................................................................39
ICC Application..............................................................39
Illinois Telecommunications Carriers.........................................39
Indemnified Party.............................................................7
Independent Telcos...........................................................26
Initial 50 Day Period.........................................................9
IPUA.........................................................................39
IRS..........................................................................50
LD Certificates..............................................................40
LE Certificates..............................................................40
LTM..........................................................................26
Material Adverse Effect......................................................38
Merger........................................................................i
Merger Agreement..............................................................i
Merger Consideration..........................................................2
Merger Proposal...............................................................i
Merger Sub....................................................................i
Named Executive Officers................................................... 52
Notification and Report Form..................................................5
NYNEX Merger............................................................... 33
NYSE........................................................................iii
Ohio Act.....................................................................39
Ohio Application.............................................................39
Ohio Bell....................................................................39
Order.........................................................................8
Overlapping Cellular Licenses................................................39
Pactel Acquisition......................................................... 33
PCS Comparable Companies.....................................................26
P/E Multiples................................................................28
Person.......................................................................32
PHLX........................................................................iii
POPs.........................................................................26
PSE.........................................................................iii
Publishing Comparable Companies..............................................26
PUC...........................................................................6
PUCO.........................................................................40
RBHCs........................................................................26
Redemption Price.............................................................64
78
<PAGE>
Registered Ameritech Share...................................................31
Registered Letter of Transmittal.............................................32
Registered SBC Shares........................................................32
Registration Statement........................................................i
Regulatory Material Adverse Effect...........................................38
Salomon Smith Barney..........................................................3
SBC...........................................................................i
SBC Acquiring Person.........................................................63
SBC Acquisition Proposal......................................................4
SBC Adverse Person...........................................................63
SBC Affiliates Letter........................................................46
SBC Board.....................................................................i
SBC Cellular.................................................................28
SBC Common Stock..............................................................i
SBC Flip-over Event..........................................................64
SBC Flip-in Event............................................................64
SBC Other Assets.............................................................28
SBC Participating Preferred..................................................62
SBC PCS......................................................................28
SBC Preferred Stock..........................................................62
SBC Publishing...............................................................28
SBC Record Date...............................................................2
SBC Representatives..........................................................36
SBC Required Consents........................................................42
SBC Rights....................................................................i
SBC Rights Agreement.........................................................63
SBC Rights Expiration Date....................................................i
SBC Rights Record Date.......................................................63
SBC Special Meeting...........................................................i
SBC Stock Acquisition Date...................................................63
SBC Stock Split..............................................................12
SBC Stock Units..............................................................40
SBC Substitute Rights........................................................ii
SBC Unit.....................................................................63
SEC.........................................................................iii
Securities Act................................................................i
Selected Companies......................................................... 33
Severance Plan...............................................................47
Share Increase Proposal.......................................................i
Short-Term Incentive Plans...................................................48
Significant Subsidiaries.....................................................33
SNET..........................................................................i
SNET Agreement...............................................................35
SNET Common Stock............................................................63
State Certificates...........................................................40
Special Meetings..............................................................i
Subsidiary...................................................................33
Substitute Option.............................................................7
Substitute Option Price.......................................................7
Superior Ameritech Proposal...................................................5
Superior Proposal.............................................................5
Superior SBC Proposal.........................................................5
Surviving Corporation.........................................................i
TCNZ..........................................................................1
Termination Date..............................................................9
Termination Fee..............................................................10
79
<PAGE>
WACC.........................................................................27
80
<PAGE>
ANNEX A
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
Among
AMERITECH CORPORATION
SBC COMMUNICATIONS INC.
and
SBC DELAWARE, INC.
Dated as of May 10, 1998
<PAGE>
TABLE OF CONTENTS
PAGE
----
RECITALS
ARTICLE I
The Merger; Closing; Effective Time
1.1. The Merger..............................................................1
1.2. Closing.................................................................2
1.3. Effective Time..........................................................2
ARTICLE II
Certificate of Incorporation and By-Laws
of the Surviving Corporation
2.1. The Certificate of Incorporation........................................2
2.2. The By-Laws.............................................................3
ARTICLE III
Officers and Directors
3.1. Directors of Surviving Corporation......................................3
3.2. Officers of Surviving Corporation.......................................3
3.3. Election to SBC's Board of Directors....................................3
ARTICLE IV
Effect of the Merger on Capital Stock;
Exchange of Certificates
4.1. Effect on Capital Stock.................................................4
(a) Merger Consideration.............................................4
(b) Cancellation of Shares...........................................5
(c) Merger Sub.......................................................5
4.2. Exchange of Certificates for Shares.....................................5
(a) Exchange Procedures..............................................5
(b) Distributions with Respect to Unexchanged Shares; Voting.........7
(c) Transfers........................................................8
(d) Fractional Shares................................................8
A-i
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Page
----
(e) Termination of Exchange Period; Unclaimed Stock..................8
(f) Lost, Stolen or Destroyed Certificates...........................9
(g) Affiliates.......................................................9
4.3. Dissenters' Rights......................................................9
4.4. Adjustments to Prevent Dilution........................................10
ARTICLE V
Representations and Warranties
5.1. Representations and Warranties of the Company, SBC and Merger Sub......10
(a) Organization, Good Standing and Qualification...................10
(b) Capital Structure...............................................11
(c) Corporate Authority; Approval and Fairness......................14
(d) Governmental Filings; No Violations.............................15
(e) Reports; Financial Statements...................................17
(f) Absence of Certain Changes......................................18
(g) Litigation and Liabilities......................................19
(h) Employee Benefits...............................................19
(i) Compliance with Laws............................................22
(j) Takeover Statutes...............................................23
(k) Environmental Matters...........................................23
(l) Accounting and Tax Matters......................................24
(m) Taxes...........................................................25
(n) Labor Matters...................................................26
(o) Rights Agreement................................................26
(p) Brokers and Finders.............................................26
ARTICLE VI
Covenants
6.1. Interim Operations.....................................................27
6.2. Acquisition Proposals..................................................33
6.3. Information Supplied...................................................37
6.4. Stockholders Meetings..................................................38
6.5. Filings; Other Actions; Notification...................................38
6.6. Access; Consultation...................................................41
6.7. Affiliates.............................................................42
6.8. Stock Exchange Listing and De-listing..................................43
6.9. Publicity..............................................................43
A-ii
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Page
----
6.10. Benefits...............................................................43
(a) Stock Options...................................................43
(b) Employee Benefits...............................................45
6.11. Expenses...............................................................45
6.12. Indemnification; Directors' and Officers' Insurance....................45
6.13. Takeover Statute.......................................................47
6.14. Dividends..............................................................48
6.15. Confidentiality........................................................48
6.16. Control of the Company's Operations....................................48
ARTICLE VII
Conditions
7.1. Conditions to Each Party's Obligation to Effect the Merger.............48
(a) Stockholder Approval............................................49
(b) NYSE Listing....................................................49
(c) Governmental Consents...........................................49
(d) Laws and Order..................................................50
(e) S-4.............................................................50
(f) Accountants' Letters............................................50
(g) Blue Sky Approvals..............................................50
7.2. Conditions to Obligations of SBC and Merger Sub........................50
(a) Representations and Warranties..................................50
(b) Performance of Obligations of the Company.......................51
(c) Consents Under Agreements.......................................51
(d) Tax Opinion.....................................................51
7.3. Conditions to Obligation of the Company................................51
(a) Representations and Warranties..................................51
(b) Performance of Obligations of SBC and Merger Sub................52
(c) Tax Opinion.....................................................52
ARTICLE VIII
Termination
8.1. Termination by Mutual Consent..........................................52
8.2. Termination by Either SBC or the Company...............................52
8.3. Termination by the Company.............................................53
8.4. Termination by SBC.....................................................55
8.5. Effect of Termination and Abandonment..................................56
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<PAGE>
Page
----
ARTICLE IX
Miscellaneous and General
9.1. Survival...............................................................58
9.2. Modification or Amendment..............................................58
9.3. Waiver of Conditions...................................................59
9.4. Counterparts...........................................................59
9.5. GOVERNING LAW AND VENUE; WAIVER OF JURY TRIAL..........................59
9.6. Notices................................................................60
9.7. Entire Agreement.......................................................62
9.8. No Third Party Beneficiaries...........................................62
9.9. Obligations of SBC and of the Company..................................62
9.10. Severability...........................................................62
9.11. Interpretation.........................................................63
9.12. Captions...............................................................63
9.13. Assignment.............................................................63
EXHIBITS
A Form of Company Affiliate's Letter . . . . . . . . . . . . . . . . . .A-1
B Form of SBC Affiliate's Letter . . . . . . . . . . . . . . . . . . . .B-1
A-iv
<PAGE>
Term Section
- ---- -------
INDEX OF DEFINED TERMS
Affiliate................................................................6.7(a)
Agreement............................................................. preamble
Audit Date.............................................................. 5.1(e)
Bankruptcy and Equity Exception.......................................5.1(c)(i)
By-Laws................................................................. 2.2
Certificate............................................................. 4.1(a)
Certificate Letter of Transmittal........................................4.2(a)
Certificate of Merger................................................... 1.3
Charter................................................................. 2.1
Closing................................................................. 1.2
Closing Date............................................................ 1.2
Code.................................................................. recitals
Company............................................................... preamble
Company Acquisition Proposal.............................................6.2(a)
Company Affiliate's Letter.............................................. 6.7(a)
Company Compensation and Benefit Plans................................5.1(h)(i)
Company Disclosure Letter............................................... 5.1
Company Option.......................................................6.10(a)(i)
Company Preference Shares.............................................5.1(b)(i)
A-v
<PAGE>
Term Section
- ---- -------
Company Preferred Shares..............................................5.1(b)(i)
Company Representatives..................................................6.2(a)
Company Required Consents.............................................5.1(d)(i)
Company Requisite Vote.............................................. 5.1(c)(i)
Company Share............................................................4.1(a)
Company Shares.......................................................... 4.1(a)
Company Stock Plans................................................. 5.1(b)(i)
Company Stock Units..................................................6.10(a)(i)
Company Stockholders Meeting........................................... 6.4
Compensation and Benefit Plans.......................................5.1(h)(ii)
Confidentiality Agreement............................................... 6.15
Constituent Corporations...............................................preamble
Contracts............................................................5.1(d)(ii)
Costs...................................................................6.12(a)
Current Premium.........................................................6.12(c)
D&O Insurance...........................................................6.12(c)
DGCL..................................................................... 1.1
Director Designees...................................................... 3.3
Disclosure Letter....................................................... 5.1
Effective Time.......................................................... 1.3
A-vi
<PAGE>
Term Section
- ---- -------
Environmental Law....................................................... 5.1(k)
ERISA................................................................5.1(h)(ii)
ERISA Affiliate.....................................................5.1(h)(iii)
ERISA Affiliate Plan................................................5.1(h)(iii)
Exchange Act..........................................................5.1(b)(i)
Exchange Agent.......................................................... 4.2(a)
Exchange Ratio.......................................................... 4.1(a)
Excluded Company Shares................................................. 4.1(a)
FCC...................................................................5.1(d)(i)
Final Order............................................................. 7.1(c)
GAAP.................................................................... 5.1(e)
Governmental Entity...................................................5.1(d)(i)
Hazardous Substance..................................................... 5.1(k)
HSR Act.............................................................. 5.1(d)(i)
Indemnified Parties.....................................................6.12(a)
Initial 50 Day Period................................................... 8.3(b)
IRS..................................................................5.1(h)(ii)
Laws.................................................................... 5.1(i)
Material Adverse Effect................................................. 5.1(a)
Merger................................................................ recitals
A-vii
<PAGE>
Term Section
- ---- -------
Merger Consideration.................................................... 4.1(a)
Merger Sub.............................................................preamble
NYSE..................................................................... 6.8
Order................................................................... 7.1(d)
Pension Plan.........................................................5.1(h)(ii)
Permits..................................................................5.1(i)
Person...................................................................4.2(a)
Prospectus/Proxy Statement................................................. 6.3
PUC.................................................................. 5.1(d)(i)
Registered Company Shares................................................4.1(a)
Registered Letter of Transmittal.........................................4.2(a)
Registered SBC Shares................................................... 4.2(a)
Regulatory Material Adverse Effect.......................................6.5(c)
Reports................................................................. 5.1(e)
Rights Agreement..................................................... 5.1(b)(i)
Rights Amendment...................................................... 5.1(o)
S-4 Registration Statement................................................ 6.3
SBC....................................................................preamble
SBC Acquisition Proposal................................................ 6.2(b)
SBC Affiliate's Letter.................................................. 6.7(a)
A-viii
<PAGE>
Term Section
- ---- -------
SBC Common Stock........................................................ 4.1(a)
SBC Companies........................................................... 4.1(a)
SBC Disclosure Letter.................................................... 5.1
SBC Preferred Shares.................................................5.1(b)(ii)
SBC Representatives..................................................... 6.2(b)
SBC Required Consents.................................................5.1(d)(i)
SBC Requisite Vote...................................................5.1(c)(ii)
SBC Rights.............................................................. 4.1(a)
SBC Rights Agreement.................................................5.1(b)(ii)
SBC Stock Plans......................................................5.1(b)(ii)
SBC Stock Units......................................................6.10(a)(i)
SBC Stockholders Meeting................................................ 6.4
SEC.................................................................... 5.1(e)
Securities Act........................................................5.1(d)(i)
Significant Subsidiary................................................5.1(b)(i)
SNET................................................................6.1(b)(vii)
SNET Agreement......................................................6.1(b)(vii)
Stockholders Meeting........................................................6.4
Subsidiary............................................................ 5.1(a)
Substitute Option....................................................6.10(a)(i)
A-ix
<PAGE>
Term Section
- ---- -------
Substitute Option Price..............................................6.10(a)(i)
Superior Company Proposal.............................................. 6.2(a)
Superior SBC Proposal................................................... 6.2(b)
Surviving Corporation.................................................. 1.1
Takeover Statute....................................................... 5.1(j)
Tax.................................................................... 5.1(m)
Tax Return............................................................. 5.1(m)
Taxable................................................................ 5.1(m)
Taxes.................................................................. 5.1(m)
Termination Date...................................................... 8.2(i)
Termination Fee........................................................ 8.5(b)
Utilities Laws........................................................5.1(d)(i)
A-x
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (hereinafter called this "Agreement"),
dated as of May 10, 1998, among Ameritech Corporation, a Delaware corporation
(the "Company"), SBC Communications Inc., a Delaware corporation ("SBC"), and
SBC Delaware, Inc., a Delaware corporation and a wholly-owned subsidiary of SBC
("Merger Sub," the Company and Merger Sub sometimes being hereinafter together
referred to as the "Constituent Corporations").
RECITALS
WHEREAS, the respective Boards of Directors of each of SBC, Merger Sub
and the Company have approved this Agreement and the merger of Merger Sub with
and into the Company (the "Merger") upon the terms and subject to the conditions
set forth in this Agreement;
WHEREAS, it is intended that, for federal income tax purposes, the
Merger shall qualify as a reorganization under the provisions of Section 368(a)
of the Internal Revenue Code of 1986, as amended, and the rules and regulations
promulgated thereunder (the "Code");
WHEREAS, for financial accounting purposes, it is intended that the
Merger shall be accounted for as a "pooling-of-interests;" and
WHEREAS, the Company, SBC and Merger Sub desire to make certain
representations, warranties, covenants and agreements in connection with this
Agreement.
NOW, THEREFORE, in consideration of the premises, and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto agree as follows:
<PAGE>
ARTICLE I
The Merger; Closing; Effective Time
1.1. The Merger. Upon the terms and subject to the conditions set forth
in this Agreement, at the Effective Time (as defined in Section 1.3) Merger Sub
shall be merged with and into the Company and the separate corporate existence
of Merger Sub shall thereupon cease. The Company shall be the surviving
corporation in the Merger (sometimes hereinafter referred to as the "Surviving
Corporation") and shall continue to be governed by the laws of the State of
Delaware, and the separate corporate existence of the Company with all its
rights, privileges, immunities, powers and franchises shall continue unaffected
by the Merger except as set forth in Article III hereof. The Merger shall have
the effects specified in the Delaware General Corporation Law, as amended (the
"DGCL").
1.2. Closing. The closing of the Merger (the "Closing") shall take
place (i) at the offices of Sullivan & Cromwell, 125 Broad Street, New York, New
York 10004 at 9:00 A.M., local time, on the second business day after the date
on which the last to be fulfilled or waived of the conditions set forth in
Article VII (other than those conditions that by their nature are to be
satisfied at the Closing, but subject to the fulfillment or waiver of those
conditions) shall be satisfied or waived in accordance with this Agreement or
(ii) at such other place and time and/or on such other date as the Company and
SBC may agree in writing (the "Closing Date").
1.3. Effective Time. Immediately following the Closing, the Company and
SBC will cause a Certificate of Merger (the "Certificate of Merger") to be
executed, acknowledged and filed with the Secretary of State of Delaware as
provided in Section 251 of the DGCL. The Merger shall become effective at the
time when the Certificate of Merger has been duly filed with the Secretary of
State of Delaware or such other time as shall be agreed upon by the parties and
set forth in the Certificate of Merger in accordance with the DGCL (the
"Effective Time").
A-2
<PAGE>
ARTICLE II
Certificate of Incorporation and By-Laws
of the Surviving Corporation
2.1. The Certificate of Incorporation. The certificate of incorporation
of the Company as in effect immediately prior to the Effective Time shall be the
certificate of incorporation of the Surviving Corporation (the "Charter"), until
duly amended as provided therein or by applicable law, except that (i) Article
Fourth of the Charter shall be amended to read in its entirety as follows:
"FOURTH. The aggregate number of shares that the Corporation shall have the
authority to issue is 1,000 shares of Common Stock, par value $1.00 per share.";
(ii) Article Fifth of the Charter shall be deleted in its entirety and shall
read as follows: "FIFTH. Reserved."; (iii) Article Eighth, Section B of the
Charter shall be amended to read in its entirety as follows: "B. Number. The
number of directors, their terms and their manner of election shall be fixed by
or pursuant to the By-Laws of the Corporation."; (iv) Article Ninth of the
Charter shall be deleted in its entirety and shall read as follows: "NINTH.
Reserved." and (v) Article Tenth of the Charter shall be amended to read in its
entirety as follows: "TENTH. The Corporation reserves the right to amend, alter,
change or repeal any provision contained in this Certificate of Incorporation,
in any manner now or hereafter permitted or prescribed by statute."
2.2. The By-Laws. The by-laws of Merger Sub in effect at the Effective
Time shall be the by-laws of the Surviving Corporation (the "By-Laws"), until
thereafter amended as provided therein or by applicable law.
ARTICLE III
Officers and Directors
3.1. Directors of Surviving Corporation. The directors of Merger Sub at
the Effective Time shall, from
A-3
<PAGE>
and after the Effective Time, be the directors of the Surviving Corporation
until their successors have been duly elected or appointed and qualified or
until their earlier death, resignation or removal in accordance with the Charter
and the By-Laws.
3.2. Officers of Surviving Corporation. The officers of the Company at
the Effective Time shall, from and after the Effective Time, be the officers of
the Surviving Corporation until their successors have been duly elected or
appointed and qualified or until their earlier death, resignation or removal in
accordance with the Charter and the By-Laws.
3.3. Election to SBC's Board of Directors. At the Effective Time of the
Merger, SBC shall increase the size of its Board of Directors in order to enable
up to five members of the Board of Directors of the Company to be members of the
SBC Board of Directors, which persons shall be selected by the SBC Board of
Directors in consultation with the Chief Executive Officer of the Company and
the Board of Directors of the Company (the "Director Designees"), and the SBC
Board of Directors shall appoint each of the Director Designees to the SBC Board
of Directors as of the Effective Time, with such Director Designees to be
divided as nearly evenly as is possible among the classes of directors of SBC.
ARTICLE IV
Effect of the Merger on Capital Stock;
Exchange of Certificates
4.1. Effect on Capital Stock. At the Effective Time, as a result of the
Merger and without any action on the part of the holder of any capital stock of
the Company:
(a) Merger Consideration. Each share of Common Stock, $1.00 par
value per share, of the Company (each a "Company Share" and together the
"Company Shares") issued and outstanding immediately prior to the Effective
A-4
<PAGE>
Time (other than Company Shares that are owned by SBC, Merger Sub or any other
direct or indirect subsidiary of SBC (collectively, the "SBC Companies") or
Company Shares that are owned by the Company or any direct or indirect
subsidiary of the Company and in each case not held on behalf of third parties
(collectively, "Excluded Company Shares")) shall be converted into and become
exchangeable for 1.316 (the "Exchange Ratio") shares of Common Stock, par value
$1.00 per share, of SBC ("SBC Common Stock"), subject to adjustment as provided
in Section 4.4 (the "Merger Consideration"). All references in this Agreement to
SBC Common Stock to be issued pursuant to the Merger shall be deemed to include
the corresponding rights ("SBC Rights") to purchase shares of SBC Participating
Preferred Stock pursuant to the SBC Rights Agreement (as defined in Section
5.1(b)(ii)), except where the context otherwise requires. At the Effective Time,
all Company Shares shall no longer be outstanding, shall be cancelled and
retired and shall cease to exist, and (A) each certificate(a "Certificate")
formerly representing any of such Company Shares (other than Excluded Company
Shares) and (B) each uncertificated Company Share (a "Registered Company Share")
registered to a holder on the stock transaction books of the Company (other than
Excluded Company Shares), shall thereafter represent only the right to the
Merger Consideration and the right, if any, to receive pursuant to Section
4.2(d) cash in lieu of fractional shares into which such Company Shares have
been converted pursuant to this Section 4.1(a) and any distribution or dividend
pursuant to Section 4.2(b), in each case without interest.
(b) Cancellation of Shares. Each Excluded Company Share issued
and outstanding immediately prior to the Effective Time shall, by virtue of the
Merger and without any action on the part of the holder thereof, no longer be
outstanding, shall be cancelled and retired without payment of any consideration
therefor and shall cease to exist.
(c) Merger Sub. At the Effective Time, each share of Common
Stock, par value $1.00 per share, of Merger Sub issued and outstanding
immediately prior to the
A-5
<PAGE>
Effective Time shall be converted into one share of common stock of the
Surviving Corporation, and the Surviving Corporation shall be a wholly-owned
subsidiary of SBC.
4.2. Exchange of Certificates for Shares.
(a) Exchange Procedures. Promptly after the Effective Time, the
Surviving Corporation shall cause an exchange agent selected by SBC with the
Company's prior approval, which shall not be unreasonably withheld (the
"Exchange Agent") to mail to each holder of record as of the Effective Time of a
Certificate or Registered Company Shares, as the case may be, (other than
holders of a Certificate or Registered Company Shares in respect of Excluded
Company Shares) (i) (x) in the case of holders of Certificates, a letter of
transmittal specifying that delivery shall be effected, and that risk of loss
and title to the Certificates shall pass, only upon delivery of the Certificates
(or affidavits of loss in lieu thereof) to the Exchange Agent (the "Certificate
Letter of Transmittal") or (y) in the case of holders of Registered Company
Shares, a letter of transmittal specifying that the exchange for SBC Shares
shall occur only upon delivery of such letter of transmittal to the Exchange
Agent (the "Registered Letter of Transmittal"), each such letter of transmittal
to be in such form and have such other provisions as SBC and the Company may
reasonably agree, and (ii) instructions for exchanging Certificates or
Registered Company Shares for (A) uncertificated shares of SBC Common Stock
registered on the stock transfer books of SBC in the name of such holder
("Registered SBC Shares") or, at the election of such holder, certificates
representing shares of SBC Common Stock and (B) any unpaid dividends and other
distributions and cash in lieu of fractional shares. Subject to Section 4.2(g),
upon (I) surrender of a Certificate for cancellation to the Exchange Agent
together with a Certificate Letter of Transmittal, duly executed, the holder of
such Certificate or (II) upon delivery of a Registered Letter of Transmittal,
duly executed, the holder of such Registered Company Shares, as the case may be,
shall be entitled to receive in exchange therefor (x) Registered SBC Shares or,
at the election of such holder, a certificate representing that number of whole
A-6
<PAGE>
shares of SBC Common Stock that such holder is entitled to receive pursuant to
this Article IV, (y) a check in the amount (after giving effect to any required
tax withholdings) of (A) any cash in lieu of fractional shares determined in
accordance with Section 4.2(d) hereof plus (B) any cash dividends and any other
dividends or other distributions that such holder has the right to receive
pursuant to the provisions of this Article IV, and any Certificate so
surrendered and any Registered Company Share in respect of which a Registered
Letter of Transmittal is so delivered shall forthwith be cancelled. No interest
will be paid or accrued on any amount payable upon due surrender of any
Certificate or delivery of a duly executed Registered Letter of Transmittal, as
the case may be. In the event of a transfer of ownership of Company Shares that
is not registered in the transfer records of the Company, Registered SBC Shares
or a certificate representing the proper number of shares of SBC Common Stock,
as the case may be, together with a check for any cash to be paid upon due
surrender of the Certificate or upon the delivery to the Exchange Agent of the
duly executed Registered Letter of Transmittal and any other dividends or
distributions in respect thereof, may be issued and/or paid to such a transferee
if, in the case of holders of Certificates, the Certificate formerly
representing such Company Shares is presented to the Exchange Agent, and, in the
case of holders of Registered Company Shares, if the Registered Letter of
Transmittal is delivered to the Exchange Agent in either case accompanied by all
documents required to evidence and effect such transfer and to evidence that any
applicable stock transfer taxes have been paid. If any Registered SBC Shares or
any certificate for shares of SBC Common Stock is to be issued in a name other
than that in which the Certificate surrendered in exchange therefor or the
Registered Company Shares exchanged therefor, as the case may be, is
registered, it shall be a condition of such exchange that the Person (as defined
below) requesting such exchange shall pay any transfer or other taxes required
by reason of the issuance of Registered SBC Shares or a certificate for shares
of SBC Common Stock in a name other than that of the registered holder of the
Certificate surrendered or the Registered Company Shares exchanged, as
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the case may be, or shall establish to the satisfaction of SBC or the Exchange
Agent that such tax has been paid or is not applicable.
For the purposes of this Agreement, the term "Person" shall mean any
individual, corporation (including not-for-profit), general or limited
partnership, limited liability company, joint venture, estate, trust,
association, organization, Governmental Entity (as defined in Section 5.1(d)(i))
or other entity of any kind or nature.
(b) Distributions with Respect to Unexchanged Shares; Voting.
(i) Whenever a dividend or other distribution is declared by
SBC in respect of SBC Common Stock, the record date for which is at or after the
Effective Time, that declaration shall include dividends or other distributions
in respect of all shares of SBC Common Stock issuable pursuant to this
Agreement. No dividends or other distributions in respect of such SBC Common
Stock shall be paid to any holder of any unsurrendered Certificate or Registered
Company Shares for which a Registered Letter of Transmittal shall not have been
delivered, until such Certificate is surrendered for exchange or such Registered
Letter of Transmittal is delivered, as the case may be, in accordance with this
Article IV. Subject to the effect of applicable laws, following surrender of any
such Certificate or delivery of any such Registered Letter of Transmittal, as
the case may be, there shall be issued and/or paid to the holder of the
Registered SBC Shares or the certificates representing whole shares of SBC
Common Stock, as the case may be, issued in exchange therefor, without interest,
(A) at the time of such surrender or delivery, as the case may be, the dividends
or other distributions with a record date after the Effective Time and a payment
date on or prior to the date of issuance of such whole shares of SBC Common
Stock and not previously paid and (B) at the appropriate payment date, the
dividends or other distributions payable with respect to such whole shares of
SBC Common Stock with a record date after the Effective Time but with a payment
date subsequent to surrender or delivery, as the case may be.
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For purposes of dividends or other distributions in respect of shares of SBC
Common Stock, all shares of SBC Common Stock to be issued pursuant to the Merger
shall be deemed issued and outstanding as of the Effective Time.
(ii) Registered holders of unsurrendered Certificates or
Registered Company Shares for which a duly executed Registered Letter of
Transmittal shall not have been delivered shall be entitled to vote after the
Effective Time at any meeting of SBC stockholders with a record date at or after
the Effective Time the number of whole shares of SBC Common Stock represented by
such Certificates or Registered Company Shares, as the case may be, regardless
of whether such holders have surrendered their Certificates or delivered duly
executed Registered Letters of Transmittal, as the case may be.
(c) Transfers. After the Effective Time, there shall be no
transfers on the stock transfer books of the Company of the Company Shares that
were outstanding immediately prior to the Effective Time.
(d) Fractional Shares. Notwithstanding any other provision of
this Agreement, no fractional shares of SBC Common Stock will be issued and any
holder of Company Shares entitled to receive a fractional share of SBC Common
Stock but for this Section 4.2(d) shall be entitled to receive an amount in cash
(without interest) determined by multiplying such fraction (rounded to the
nearest one-hundredth of a share) by the average of the closing price of a share
of SBC Common Stock, as reported in The Wall Street Journal, New York City
edition, on the trading day immediately prior to the Effective Time.
(e) Termination of Exchange Period; Unclaimed Stock. Any shares
of SBC Common Stock and any portion of the cash, dividends or other
distributions with respect to the SBC Common Stock deposited by SBC with the
Exchange Agent (including the proceeds of any investments thereof) that remain
unclaimed by the stockholders of the Company 180 days after the Effective Time
shall be paid to SBC. Any stockholders of the Company who have not
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theretofore complied with this Article IV shall thereafter look only to SBC for
payment of their shares of SBC Common Stock and any cash, dividends and other
distributions in respect thereof issuable and/or payable pursuant to Section
4.1, Section 4.2(b) and Section 4.2(d) upon due (i) surrender of (i) their
Certificates (or affidavits of loss in lieu thereof) or (ii) delivery of duly
executed Registered Letters of Transmittal, as the case may be, in each case
with respect to both clause (i) and (ii), without any interest thereon.
Notwithstanding the foregoing, none of SBC, the Surviving Corporation, the
Exchange Agent or any other Person shall be liable to any former holder of
Company Shares for any amount properly delivered to a public official pursuant
to applicable abandoned property, escheat or similar laws.
(f) Lost, Stolen or Destroyed Certificates. In the event any
Certificate shall have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the Person claiming such Certificate to be lost,
stolen or destroyed and the posting by such Person of a bond in the form
customarily required by SBC as indemnity against any claim that may be made
against it with respect to such Certificate, SBC will issue the shares of SBC
Common Stock and the Exchange Agent will issue any cash, dividends and other
distributions in respect thereof issuable and/or payable in exchange for such
lost, stolen or destroyed Certificate pursuant to Section 4.1, Section 4.2(b)
and Section 4.2(d) upon due surrender of and deliverable in respect of the
Company Shares represented by such Certificate pursuant to this Agreement, in
each case, without interest.
(g) Affiliates. Notwithstanding anything herein to the contrary,
Certificates surrendered for exchange, or Registered Company Shares to be
exchanged pursuant to a Registered Letter of Transmittal delivered, by any
"affiliate" (as determined pursuant to Section 6.7) of the Company shall not be
exchanged until SBC has received a written agreement from such Person as
provided in Section 6.7 hereof.
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4.3. Dissenters' Rights. In accordance with Section 262 of the DGCL, no
appraisal rights shall be available to holders of Company Shares in connection
with the Merger.
4.4. Adjustments to Prevent Dilution. In the event that prior to the
Effective Time there is a change in the number of Company Shares or shares of
SBC Common Stock or securities convertible or exchangeable into or exercisable
for Company Shares or shares of SBC Common Stock issued and outstanding as a
result of a distribution, reclassification, stock split (including a reverse
split), stock dividend or distribution, or other similar transaction, the
Exchange Ratio shall be equitably adjusted to eliminate the effects of such
event.
ARTICLE V
Representations and Warranties
5.1. Representations and Warranties of the Company, SBC and Merger Sub.
Except as set forth in the corresponding sections or subsections of the
disclosure letter, dated the date hereof, delivered by the Company to SBC or by
SBC to the Company (each a "Disclosure Letter", and the "Company Disclosure
Letter" and the "SBC Disclosure Letter", respectively), as the case may be, the
Company (except for subparagraphs (b)(ii), (b)(iii), (c)(ii) and (p)(ii) below
and references in subparagraphs (a) and (e) below to documents made available by
SBC to the Company) hereby represents and warrants to SBC and Merger Sub, and
SBC (except for subparagraphs (b)(i), (c)(i), (d)(iii), the last sentence of
(f), (j), (o) and (p)(i) below and references in subparagraphs (a), (e) and
(h)(i) below to documents made available by the Company to SBC), on behalf of
itself and Merger Sub, hereby represents and warrants to the Company, that:
(a) Organization, Good Standing and Qualification. Each of it and
its Subsidiaries is a corporation duly organized, validly existing and in good
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standing under the laws of its respective jurisdiction of organization and has
all requisite corporate or similar power and authority to own and operate its
properties and assets and to carry on its business as presently conducted and is
qualified to do business and is in good standing as a foreign corporation in
each jurisdiction where the ownership or operation of its properties or conduct
of its business requires such qualification, except where the failure to be so
qualified or in good standing is not, when taken together with all other such
failures, reasonably likely to have a Material Adverse Effect (as defined below)
on it. It has made available to SBC, in the case of the Company, and to the
Company, in the case of SBC, a complete and correct copy of its certificate of
incorporation and by-laws, each as amended to date. Such certificates of
incorporation and by-laws as so made available are in full force and effect.
As used in this Agreement, (i) the term "Subsidiary" means, with respect to the
Company, SBC or Merger Sub, as the case may be, any entity, whether incorporated
or unincorporated, of which at least fifty percent of the securities or
ownership interests having by their terms ordinary voting power to elect at
least fifty percent of the Board of Directors or other persons performing
similar functions is directly or indirectly owned by such party or by one or
more of its respective Subsidiaries or by such party and any one or more of its
respective Subsidiaries, (ii) the term "Material Adverse Effect" means, with
respect to either SBC or the Company, as the case may be, a material adverse
effect, it being understood that materiality shall be determined by reference to
the trading market equity value of such Person prior to the consummation of the
Merger, other than effects resulting from the execution of this Agreement or the
announcement thereof or changes in (I) the telecommunications industry
generally, (II) the national economy generally or (A) with respect to SBC only,
the economy of Texas, Oklahoma, Missouri, Kansas, Arkansas, Nevada and
California, taken together, generally, or of France, Mexico and/or the Republic
of South Africa or (B) with respect to the Company only, the economies of
Illinois, Indiana, Michigan, Ohio and Wisconsin, taken together, generally, or
of Belgium, Denmark
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and/or Hungary or (III) the securities markets generally, and (iii) reference to
"the other party" means, with respect to the Company, SBC and means, with
respect to SBC, the Company.
(b) Capital Structure. (i) The authorized capital stock of the
Company consists of 2,400,000,000 Company Shares, of which 1,100,161,364 Company
Shares were issued and outstanding and 76,993,242 Company Shares were held in
treasury as of the close of business on April 30, 1998, 30,000,000 shares of
Preferred Stock, $1.00 par value per share (the "Company Preferred Shares"),
none of which were outstanding as of the close of business on May 8, 1998 and
30,000,000 shares of Preference Stock, $1.00 par value per share, (the "Company
Preference Shares"), none of which were outstanding as of the close of business
on May 8, 1998. All of the outstanding Company Shares have been duly authorized
and are validly issued, fully paid and nonassessable. Other than 12,000,000
Company Preference Shares, designated "Series A Junior Participating Preference
Stock", reserved for issuance pursuant to the Rights Agreement, dated as of
December 21, 1988, between the Company and American Transtech Inc., as Rights
Agent (the "Rights Agreement"), and Company Shares subject to issuance as set
forth below, the Company has no Company Shares, Company Preferred Shares or
Company Preference Shares reserved for or otherwise subject to issuance. As of
May 10, 1998, there were not more than 47,000,000 Company Shares that the
Company was obligated to issue pursuant to the Company Compensation and Benefit
Plans identified in Section 5.1(h) of the Company Disclosure Letter as being the
only Company Compensation and Benefit Plans pursuant to which Company Shares may
be issued (collectively the "Company Stock Plans"). Each of the outstanding
shares of capital stock or other securities of each of the Company's
Subsidiaries that constitute a "Significant Subsidiary" (as defined in Rule
1.02(w) of Regulation S-X promulgated pursuant to the Securities Exchange Act of
1934, as amended (the "Exchange Act"), is duly authorized, validly issued, fully
paid and nonassessable and owned by the Company or a direct or indirect
wholly-owned Subsidiary of the Company, free and clear of any lien, pledge,
security interest, claim
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or other encumbrance. Except as set forth above and for Company Shares and
options to purchase Company Shares which may be issued in accordance with
Section 6.1(a), there are no preemptive or other outstanding rights, options,
warrants, conversion rights, stock appreciation rights, redemption rights,
repurchase rights, agreements, arrangements or commitments to issue or sell any
shares of capital stock or other securities of the Company or any of its
Significant Subsidiaries or any securities or obligations convertible or
exchangeable into or exercisable for, or giving any Person a right to subscribe
for or acquire, any securities of the Company or any of its Significant
Subsidiaries, and no securities or obligations evidencing such rights are
authorized, issued or outstanding. The Company does not have outstanding any
bonds, debentures, notes or other obligations the holders of which have the
right to vote (or convertible into or exercisable for securities having the
right to vote) with the stockholders of the Company on any matter.
(ii) The authorized capital stock of SBC consists of
7,000,000,000 shares of SBC Common Stock, of which 1,838,844,294 shares were
issued and outstanding and 26,060,210 shares were held in treasury as of the
close of business on April 30, 1998, and 10,000,000 shares of Preferred Stock,
par value $1.00 per share (the "SBC Preferred Shares"), none of which shares
were outstanding as of the close of business on May 8, 1998. All of the
outstanding shares of SBC Common Stock have been duly authorized and are validly
issued, fully paid and nonassessable. SBC has no shares of SBC Common Stock or
SBC Preferred Shares reserved for or subject to issuance except that SBC has
reserved no more than 10,000,000 SBC Preferred Shares for or subject to issuance
pursuant to the Rights Agreement, dated as of January 27, 1989, between SBC and
American Transtech, Inc., as Rights Agent, as amended by the Amendment of Rights
Agreement, dated as of August 5, 1992, between SBC and The Bank of New York, as
successor Rights Agent, and the Second Amendment of Rights Agreement, dated as
of June 15, 1994, between SBC and The Bank of New York, as successor Rights
Agent (as amended, the "SBC Rights Agreement"). As of May 10, 1998, there were
not more than
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92,000,000 shares of SBC Common Stock that SBC was obligated to issue pursuant
to (x) SBC's Senior Management Long Term Incentive Plan, Senior Management
Incentive Award Deferral Plan, Non-Employee Directors Stock and Deferral Plan,
Stock Savings Plan, 1994 Stock Option Plan, 1996 Stock and Incentive Plan, 1995
Management Stock Option Plan, Savings Plan and the Savings and Security Plan and
(y) Pacific Telesis Group's Supplemental Retirement and Savings Plan for
Salaried Employees, Supplemental Retirement and Savings Plan for Non-Salaried
Employees, Supplemental Retirement and Savings Plan for Salaried and
Non-Salaried Employees, Employee Stock Ownership Plan, Stock Option and Stock
Appreciation Rights Plan, Outside Directors Deferred Stock Unit Plan and
Restricted Stock Plan (collectively, the "SBC Stock Plans"). Each of the
outstanding shares of capital stock of each of SBC's Significant Subsidiaries is
duly authorized, validly issued, fully paid and nonassessable and owned by SBC
or a direct or indirect wholly-owned subsidiary of SBC, free and clear of any
lien, pledge, security interest, claim or other encumbrance. Except as set forth
above, there are no preemptive or other outstanding rights, options, warrants,
conversion rights, stock appreciation rights, redemption rights, repurchase
rights, agreements, arrangements or commitments to issue or to sell any shares
of capital stock or other securities of SBC or any of its Significant
Subsidiaries or any securities or obligations convertible or exchangeable into
or exercisable for, or giving any Person a right to subscribe for or acquire,
any securities of SBC or any of its Significant Subsidiaries, and no securities
or obligation evidencing such rights are authorized, issued or outstanding. SBC
does not have outstanding any bonds, debentures, notes or other obligations the
holders of which have the right to vote (or convertible into or exercisable for
securities having the right to vote) with the stockholders of SBC on any matter.
(iii) The authorized capital stock of Merger Sub consists of
1,000 shares of Common Stock, par value $1.00 per share, all of which are
validly issued and outstanding. All of the issued and outstanding capital stock
of Merger Sub is, and at the Effective Time will be, owned by SBC, and there are
(i) no other shares of capital
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stock or other voting securities of Merger Sub, (ii) no securities of Merger Sub
convertible into or exchangeable for shares of capital stock or other voting
securities of Merger Sub and (iii) no options or other rights to acquire from
Merger Sub, and no obligations of Merger Sub to issue, any capital stock, other
voting securities or securities convertible into or exchangeable for capital
stock or other voting securities of Merger Sub. Merger Sub has not conducted any
business prior to the date hereof and has no, and prior to the Effective Time
will have no, assets, liabilities or obligations of any nature other than those
incident to its formation and pursuant to this Agreement and the Merger and the
other transactions contemplated by this Agreement.
(c) Corporate Authority; Approval and Fairness. (i) The Company
has all requisite corporate power and authority and has taken all corporate
action necessary in order to execute, deliver and perform its obligations under
this Agreement and to consummate, subject only to adoption of this Agreement by
the holders of a majority of the outstanding Company Shares (the "Company
Requisite Vote") and the Company Required Consents (as defined in Section
5.1(d)), the Merger. This Agreement has been duly executed and delivered by the
Company and is a valid and binding agreement of the Company enforceable against
the Company in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general equity
principles (the "Bankruptcy and Equity Exception"). The Board of Directors of
the Company (A) has unanimously approved this Agreement and the Merger and the
other transactions contemplated hereby and (B) has received the opinion of its
financial advisors, Goldman, Sachs & Co., in a customary form and to the effect
that the Merger Consideration to be received by the holders of the Company
Shares in the Merger is fair to such holders from a financial point of view.
(ii) SBC and Merger Sub each has all requisite corporate
power and authority and each has taken all corporate action necessary in order
to execute,
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deliver and perform its obligations under this Agreement and to consummate,
subject only to the approval by the stockholders of SBC by a majority of votes
cast on the proposal to issue the shares of SBC Common Stock required to be
issued pursuant to Article IV; provided, that the total vote cast represents
over 50% of all of the outstanding shares of SBC Common Stock (the "SBC
Requisite Vote") and the SBC Required Consents (as defined in Section 5.1(d)),
the Merger. This Agreement has been duly executed and delivered by SBC and
Merger Sub and is a valid and binding agreement of SBC and Merger Sub,
enforceable against each of SBC and Merger Sub in accordance with its terms,
subject to the Bankruptcy and Equity Exception. SBC has received the opinion of
its financial advisors, Salomon Brothers Inc and Smith Barney Inc., in a
customary form and to the effect that the Exchange Ratio is fair to SBC from a
financial point of view. The shares of SBC Common Stock, when issued pursuant to
this Agreement, will be validly issued, fully paid and nonassessable, and no
stockholder of SBC will have any preemptive right of subscription or purchase in
respect thereof.
(d) Governmental Filings; No Violations. (i) Other than the
necessary filings, notices and/or approvals (A) pursuant to Section 1.3, (B)
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), the Exchange Act and the Securities Act of 1933, as amended (the
"Securities Act"), (C) to comply with state securities or "blue-sky" laws, (D)
if any, of the Federal Communications Commission ("FCC") pursuant to the
Communications Act of 1934, as amended, (E) if any, of the local, state and
foreign public utility commissions or similar local, state or foreign regulatory
bodies (each a "PUC") and the local, state and foreign Governmental Entities (as
defined below) identified in its respective Disclosure Letter pursuant to
applicable local, state or foreign laws regulating the telephone, mobile
cellular, paging, cable television or other telecommunications business
("Utilities Laws") and (F) if any, of the foreign regulatory bodies identified
in its Disclosure Letter pursuant to applicable foreign laws regulating actions
having the purpose or effect of
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monopolization or restraint of trade (such filings, notices and/or approvals of
SBC being the "SBC Required Consents" and of the Company being the "Company
Required Consents"), no filings, notices and/or reports are required to be made
by it with, nor are any consents, registrations, approvals, permits or
authorizations required to be obtained by it from, any governmental or
regulatory authority, court, agency, commission, body or other governmental
entity ("Governmental Entity"), in connection with the execution and delivery of
this Agreement by it and the consummation by it of the Merger and the other
transactions contemplated hereby, except those that the failure to make or
obtain are not, individually or in the aggregate, reasonably likely to have a
Material Adverse Effect on it or prevent, materially delay or materially impair
its ability to consummate the transactions contemplated by this Agreement.
(ii) The execution, delivery and performance of this
Agreement by it do not, and the consummation by it of the Merger and the other
transactions contemplated hereby will not, constitute or result in (A) a breach
or violation of, or a default under, its certificate of incorporation or by-laws
or the comparable governing instruments of any of its Significant Subsidiaries,
(B) a breach or violation of, or a default under, the acceleration of any
obligations or the creation of a lien, pledge, security interest or other
encumbrance on its assets or the assets of any of its Subsidiaries (with or
without notice, lapse of time or both) pursuant to, any agreement, lease,
contract, note, mortgage, indenture, arrangement or other obligation
("Contracts") binding upon it or any of its Subsidiaries or, assuming the
filings, notices and/or approvals referred to in Section 5.1(d)(i) are made or
obtained, any Law (as defined in Section 5.1(i)) or governmental or
non-governmental permit or license to which it or any of its Subsidiaries is
subject or (C) any change in the rights or obligations of any party under any of
its Contracts, except, in the case of clause (B) or (C) above, for any breach,
violation, default, acceleration, creation or change that, individually or in
the aggregate, is not reasonably likely to have a Material Adverse Effect on it
or prevent, materially delay or materially impair its ability
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to consummate the transactions contemplated by this Agreement. The Company
Disclosure Letter, with respect to the Company, and the SBC Disclosure Letter,
with respect to SBC, sets forth a correct and complete list of Contracts of it
and its Subsidiaries pursuant to which consents or waivers are or may be
required prior to consummation of the transactions contemplated by this
Agreement other than those where the failure to obtain such consents or waivers
is not, individually or in the aggregate, reasonably likely to have a Material
Adverse Effect on it or prevent or materially impair its ability to consummate
the transactions contemplated by this Agreement.
(e) Reports; Financial Statements. It has made available to the
other party, each registration statement, report, proxy statement or information
statement prepared by it since December 31, 1997 (the "Audit Date"), including
its Annual Report on Form 10-K for the year ended December 31, 1997 in the form
(including exhibits, annexes and any amendments thereto) filed with the
Securities and Exchange Commission (the "SEC") (collectively, including any such
reports filed subsequent to the date hereof, its "Reports"). As of their
respective dates, its Reports did not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements made therein, in light of the circumstances in which they
were made, not misleading. Each of the consolidated balance sheets included in
or incorporated by reference into its Reports (including the related notes and
schedules) fairly presents the consolidated financial position of it and its
Subsidiaries as of its date and each of the consolidated statements of income
and of cash flows included in or incorporated by reference into its Reports
(including any related notes and schedules) fairly presents the consolidated
results of operations, retained earnings and cash flows, as the case may be, of
it and its Subsidiaries for the periods set forth therein (subject, in the case
of unaudited statements, to notes and normal year-end audit adjustments that
will not be material in amount or effect), in each case in accordance with
United States generally accepted accounting principles ("GAAP") consistently
applied during the periods involved,
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except as may be noted therein. Since the Audit Date, it and each Subsidiary
required to make filings under Utilities Laws has filed with the applicable PUCs
or the FCC, as the case may be, all material forms, statements, reports and
documents (including exhibits, annexes and any amendments thereto) required to
be filed by them, and each such filing complied in all material respects with
all applicable laws, rules and regulations, other than such failures to file and
non-compliance that are, individually or in the aggregate, not reasonably likely
to have a Material Adverse Effect on it or prevent or materially impair its
ability to consummate the transactions contemplated by this Agreement. To its
knowledge, as of the date hereof, no Person or "group" "beneficially owns" 5% or
more of its outstanding voting securities, with the terms "beneficially owns"
and "group" having the meanings ascribed to them under Rule 13d-3 and Rule 13d-5
under the Exchange Act.
(f) Absence of Certain Changes. Except as disclosed in its Reports
filed prior to the date hereof or as expressly contemplated or permitted by this
Agreement, since the Audit Date it and its Subsidiaries have conducted their
respective businesses only in, and have not engaged in any material transaction
other than according to, the ordinary and usual course of such businesses and
there has not been (i)any change in the financial condition, properties,
prospects, business or results of operations of it and its Subsidiaries, except
those changes that are not, individually or in the aggregate, reasonably likely
to have a Material Adverse Effect on it; (ii) any damage, destruction or other
casualty loss with respect to any asset or property owned, leased or otherwise
used by it or any of its Subsidiaries, whether or not covered by insurance,
which damage, destruction or loss is reasonably likely, individually or in the
aggregate, to have a Material Adverse Effect on it; (iii) any declaration,
setting aside or payment of any dividend or other distribution in respect of its
capital stock, except publicly announced regular quarterly cash dividends on its
common stock and, in the case of SBC, any dividends in capital stock of SBC
which are simultaneously taken into account in an adjustment to the Exchange
Ratio pursuant to Section 4.4; or (iv) any change
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by it in accounting principles, practices or methods, except as required by
GAAP. Since the Audit Date, except as provided for herein, in the Company
Disclosure Letter, as disclosed in the Reports filed by the Company prior to the
date hereof or permitted hereby, there has not been any increase in the salary,
wage, bonus or other compensation payable or that could become payable by the
Company or any of its Subsidiaries to directors, officers or key employees or
any amendment of any of the Company Compensation and Benefit Plans (as defined
in Section 5.1(h)(i)) other than increases or amendments in the ordinary course.
(g) Litigation and Liabilities. Except as disclosed in its
Reports filed prior to the date hereof, there are no (i) civil, criminal or
administrative actions, suits, claims, hearings, investigations or proceedings
pending or, to the actual knowledge of its executive officers, threatened in
writing against it or any of its Affiliates (as defined in Rule 12b-2 under the
Exchange Act) or (ii) obligations or liabilities, whether or not accrued,
contingent or otherwise and whether or not required to be disclosed, including
those relating to matters involving any Environmental Law (as defined in Section
5.1(k)), or any other facts or circumstances, in either such case, of which its
executive officers have actual knowledge that are reasonably likely to result in
any claims against or obligations or liabilities of it or any of its Affiliates,
except for those that are not, individually or in the aggregate, reasonably
likely to have a Material Adverse Effect on it or prevent, materially delay or
materially impair its ability to consummate the transactions contemplated by
this Agreement; provided, however, that for purposes of this subsection (g) no
action, suit, claim, hearing, investigation or proceeding arising after the date
hereof shall be deemed to have any adverse effect if and to the extent such
actions, suits, claims, hearings, investigations or proceedings are based on
this Agreement or the transactions contemplated hereby.
(h) Employee Benefits.
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(i) A copy of each bonus, deferred compensation, pension,
retirement, profit-sharing, thrift, savings, employee stock ownership, stock
bonus, stock purchase, restricted stock, stock option, employment, termination,
severance, compensation, medical, health or other plan, agreement, policy or
arrangement that covers employees, directors, former employees or former
directors of the Company and its Subsidiaries (the "Company Compensation and
Benefit Plans") and any trust agreements or insurance contracts forming a part
of such Company Compensation and Benefit Plans has been made available by the
Company to SBC prior to the date hereof and each such Company Compensation and
Benefit Plan is listed in Section 5.1(h) of the Company Disclosure Letter.
(ii) In the case of the Company, each of the Company
Compensation and Benefit Plans or, in the case of SBC, each bonus, deferred
compensation, pension, retirement, profit-sharing, thrift, savings, employee
stock ownership, stock bonus, stock purchase, restricted stock, stock option,
employment, termination, severance, compensation, medical, health or other plan,
agreement, policy or arrangement that covers employees, directors, former
employees or former directors of SBC and SBC's Subsidiaries (together with the
Company Compensation and Benefit Plans, its "Compensation and Benefit Plans") is
in substantial compliance with all applicable law, including the Code and the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"). Each of
its Compensation and Benefit Plans that is an "employee pension benefit plan"
within the meaning of Section 3(2) of ERISA (a "Pension Plan") and that is
intended to be qualified under Section 401(a) of the Code has received a
favorable determination letter from the Internal Revenue Service (the "IRS")
with respect to "TRA" (as such term is defined in Section 1 of Rev. Proc 93-39),
and it is not aware of any circumstances likely to result in revocation of any
such favorable determination letter. There is no pending or, to the actual
knowledge of its executive officers, threatened in writing material litigation
relating to its Compensation and Benefit Plans. Neither it nor any Subsidiary
has engaged in a transaction with respect to any of its Compensation and
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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
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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) None of the consummation of the Merger and the other
transactions contemplated by this Agreement, in the case of SBC and the Company,
the adoption of this Agreement by the stockholders of the Company, in the case
of the Company, the approval by the stockholders of SBC of the issuance of the
shares of SBC Common Stock required to be issued pursuant to Article IV, in the
case of SBC, shall (x) entitle any of their respective employees or directors or
any employees of their respective Subsidiaries to severance pay, directly or
indirectly, upon termination of employment, (y) accelerate the time of funding
(whether through a grantor trust or otherwise), payment or vesting or trigger
any payment of compensation or benefits under, increase the amount payable or
trigger any other material obligation pursuant to, any of their respective
Compensation and Benefit Plans or (z) result in any breach or violation of, or a
default under, any of their respective Compensation and Benefit Plans.
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(i) Compliance with Laws. Except as set forth in its Reports
filed prior to the date hereof, the businesses of each of it and its
Subsidiaries have not been, and are not being, conducted in violation of any
law, statute, ordinance, regulation, judgment, order, decree, injunction,
arbitration award, license, authorization, opinion, agency requirement or permit
of any Governmental Entity or common law (collectively, "Laws"), except for
violations or possible violations that are not, individually or in the
aggregate, reasonably likely to have a Material Adverse Effect on it or prevent,
materially delay or materially impair its ability to consummate the transactions
contemplated by this Agreement. Except as set forth in its Reports filed prior
to the date hereof, no investigation or review by any Governmental Entity with
respect to it or any of its Subsidiaries is pending or, to the actual knowledge
of its executive officers, threatened, nor has any Governmental Entity indicated
an intention to conduct the same, except for those the outcome of which are not,
individually or in the aggregate, reasonably likely to have a Material Adverse
Effect on it or prevent, materially delay or materially impair its ability to
consummate the transactions contemplated by this Agreement. To the actual
knowledge of its executive officers, no material change is required in its or
any of its Subsidiaries' processes, properties or procedures in connection with
any such Laws, and it has not received any notice or communication of any
material noncompliance with any such Laws that has not been cured as of the date
hereof, except for such changes and noncompliance that are not, individually or
in the aggregate, reasonably likely to have a Material Adverse Effect on it or
prevent, materially delay or materially impair its ability to consummate the
transactions contemplated by this Agreement. Each of it and its Subsidiaries has
all permits, licenses, franchises, variances, exemptions, orders and other
governmental authorizations, consents and approvals (collectively, "Permits"),
necessary to conduct their business as presently conducted, except for those the
absence of which are not, individually or in the aggregate, reasonably likely to
have a Material Adverse Effect on it or prevent, materially delay
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or materially impair its ability to consummate the transactions contemplated by
this Agreement.
(j) Takeover Statutes. The Board of Directors of the Company has
taken all appropriate and necessary actions such that SBC will not be prohibited
from entering into a "business combination" with the Company as an "interested
stockholder" (in each case as such term is used in Section 203 of the DGCL) as a
result of the execution and delivery of this Agreement or the consummation of
the transactions contemplated hereby. To the best knowledge of the Company, no
other "fair price," "moratorium," "control share acquisition" or other similar
anti-takeover statute or regulation (each a "Takeover Statute") as in effect on
the date hereof is applicable to the Company, the Company Shares, the Merger or
the other transactions contemplated by this Agreement. No anti-takeover
provision contained in the Company's certificate of incorporation, including
Article Ninth thereof, or its by-laws is, or at the Effective Time will be,
applicable to the Company, the Company Shares, the Merger or the other
transactions contemplated by this Agreement.
(k) Environmental Matters. Except as disclosed in its Reports
filed prior to the date hereof and except for such matters that, alone or in the
aggregate, are not reasonably likely to have a Material Adverse Effect on it:
(i) each of it and its Subsidiaries has complied with all applicable
Environmental Laws (as defined below); (ii) the properties currently owned or
operated by it or any of its Subsidiaries (including soils, groundwater, surface
water, buildings or other structures) are not contaminated with any Hazardous
Substances (as defined below); (iii) the properties formerly owned or operated
by it or any of its Subsidiaries were not contaminated with Hazardous Substances
during the period of ownership or operation by it or any of its Subsidiaries;
(iv) neither it nor any of its Subsidiaries is subject to liability for any
Hazardous Substance disposal or contamination on any third party property; (v)
neither it nor any Subsidiary has been associated with any release or threat of
release of any Hazardous Substance; (vi) neither it nor any Subsidiary has
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received any notice, demand, letter, claim or request for information alleging
that it or any of its Subsidiaries may be in violation of or liable under any
Environmental Law (including any claims relating to electromagnetic fields or
microwave transmissions); (vii) neither it nor any of its Subsidiaries is
subject to any orders, decrees, injunctions or other arrangements with any
Governmental Entity or is subject to any indemnity or other agreement with any
third party relating to liability under any Environmental Law or relating to
Hazardous Substances; and (viii) there are no circumstances or conditions
involving it or any of its Subsidiaries that could reasonably be expected to
result in any claims, liability, investigations, costs or restrictions on the
ownership, use, or transfer of any of its properties pursuant to any
Environmental Law.
As used herein, the term "Environmental Law" means any Law relating to:
(A) the protection, investigation or restoration of the environment, health,
safety, or natural resources, (B) the handling, use, presence, disposal, release
or threatened release of any Hazardous Substance or (C) noise, odor, wetlands,
pollution, contamination or any injury or threat of injury to persons or
property in connection with any Hazardous Substance.
As used herein, the term "Hazardous Substance" means any substance that
is: listed, classified or regulated pursuant to any Environmental Law, including
any petroleum product or by-product, asbestos-containing material,
lead-containing paint or plumbing, polychlorinated biphenyls, radioactive
materials or radon.
(l) Accounting and Tax Matters. As of the date hereof, neither it
nor any of its affiliates (as determined in accordance with Section 6.7) has
taken or agreed to take any action, nor do its executive officers have any
actual knowledge of any fact or circumstance, that, to their actual knowledge,
would prevent SBC from accounting for the business combination to be effected by
the Merger as a "pooling-of-interests" or prevent the Merger and the other
transactions contemplated by this Agreement from qualifying
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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,
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withholding, excise, production, value added, occupancy and other taxes, duties
or assessments of any nature whatsoever, together with all interest, penalties
and additions imposed with respect to such amounts and any interest in respect
of such penalties and additions, and (ii) the term "Tax Return" includes all
returns and reports (including elections, declarations, disclosures, schedules,
estimates and information returns) required to be supplied to a Tax authority
relating to Taxes.
(n) Labor Matters. Neither it nor any of its Subsidiaries is the
subject of any material proceeding asserting that it or any of its Subsidiaries
has committed an unfair labor practice or is seeking to compel it to bargain
with any labor union or labor organization nor is there pending or, to the
actual knowledge of its executive officers, threatened in writing, nor has there
been for the past five years, any labor strike, dispute, walkout, work stoppage,
slow-down or lockout involving it or any of its Subsidiaries, except in each
case as is not, individually or in the aggregate, reasonably likely to have a
Material Adverse Effect on it.
(o) Rights Agreement. (i) The Company has adopted an amendment to
the Rights Agreement (the "Rights Amendment") with the effect that neither SBC
nor Merger Sub shall be deemed to be an Acquiring Person (as such term is
defined in the Rights Agreement) and the Distribution Date (as defined in the
Rights Agreement) shall not be deemed to occur and that the Rights will not
separate from the Company Shares, as a result of entering into this Agreement or
consummating the Merger and/or the other transactions contemplated hereby.
(ii) The Company has taken all necessary action with respect
to all of the outstanding Rights (as defined in the Rights Agreement) so that,
as of immediately prior to the Effective Time, as a result of entering into this
Agreement or consummating the Merger and/or the other transactions contemplated
by this Agreement, (A) neither the Company nor SBC will have any obligations
under the Rights or the Rights Agreement and
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(B) the holders of the Rights will have no rights under the Rights or the Rights
Agreement.
(p) Brokers and Finders. Neither it nor any of its officers,
directors or employees has employed any broker or finder or incurred any
liability for any brokerage fees, commissions or finders, fees in connection
with the Merger or the other transactions contemplated in this Agreement except
that (i) the Company has employed Goldman, Sachs & Co. as its financial advisor,
the arrangements with which have been disclosed to SBC prior to the date hereof,
and (ii) SBC and Merger Sub have employed Salomon Brothers Inc and Smith Barney
Inc. as their financial advisor, the arrangements with which have been disclosed
to the Company prior to the date hereof.
ARTICLE VI
Covenants
6.1. Interim Operations. (a) The Company covenants and agrees as to
itself and its Subsidiaries that, after the date hereof and prior to the
Effective Time (unless SBC shall otherwise approve in writing, which approval
shall not be unreasonably withheld or delayed, and except as otherwise expressly
contemplated by this Agreement, disclosed in the Company Disclosure Letter or
required by applicable Law):
(i) the business of it and its Subsidiaries shall be
conducted in the ordinary and usual course and, to the extent consistent
therewith, it and its Subsidiaries shall use all reasonable best efforts to
preserve its business organization intact and maintain its existing relations
and goodwill with customers, suppliers, regulators, distributors, creditors,
lessors, employees and business associates;
(ii) it shall not (A) amend its certificate of incorporation
or by-laws or amend, modify or terminate the Rights Agreement; provided,
however, that
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nothing in this Agreement shall prevent the Company from reducing below 20% the
beneficial ownership threshold in the definition of an Acquiring Person (as
defined in the Rights Agreement) or extending the Final Expiration Date of the
Rights Agreement (as defined therein) or adopting a new rights agreement having
substantially similar terms as the Rights Agreement and not inconsistent with
(x) this proviso, (y)Section 5.1(o) (assuming references therein are to such a
new rights agreement) or (z) the transactions contemplated by this Agreement;
(B) split, combine, subdivide or reclassify its outstanding shares of capital
stock; (C) declare, set aside or pay any dividend or distribution payable in
cash, stock or property in respect of any capital stock, other than regular
quarterly cash dividends in amounts consistent with its past practice or rights
to purchase Company Shares or Company Preference Shares pursuant to any
successor agreement to the Rights Agreement, adopted in accordance with the
terms of this Agreement; or (D) repurchase, redeem or otherwise acquire or
permit any of its Subsidiaries to purchase or otherwise acquire, except in open
market transactions in connection with the Company Stock Plans, any shares of
its capital stock or any securities convertible into or exchangeable or
exercisable for any shares of its capital stock, but subject to the Company's
obligations under subparagraph (iii) below.
(iii) neither it nor any of its Subsidiaries shall knowingly
take any action that would prevent the Merger from qualifying for "pooling of
interests" accounting treatment or as a "reorganization" within the meaning of
Section 368(a) of the Code or that would cause any of its representations and
warranties herein to become untrue in any material respect;
(iv) neither it nor any of its Subsidiaries shall terminate,
establish, adopt, enter into, make any new grants or awards of stock-based
compensation or other benefits under, amend or otherwise modify, any Company
Compensation and Benefit Plans or increase the salary, wage, bonus or other
compensation of any directors, officers or key employees except (A) for grants
or awards to directors, officers and employees of it or its Subsidiaries under
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existing Company Compensation and Benefit Plans in such amounts and on such
terms as are consistent with past practice, (B) in the normal and usual course
of business (which shall include normal periodic performance reviews and related
Company Compensation and Benefit Plan increases and the provision of individual
Company Compensation and Benefit Plans consistent with past practice for
promoted or newly hired officers and employees and the adoption of Company
Compensation and Benefit Plans for employees of new Subsidiaries in amounts and
on terms consistent with past practice); provided, that in no event shall it
institute a broad based change in compensation, unless it shall have used its
reasonable best efforts to provide SBC with prior notice of any such change or,
if the Company was unable to provide such prior notice, the Company shall
provide SBC with notice as soon as practicable following any such change, or (C)
for actions necessary to satisfy existing contractual obligations under Company
Compensation and Benefit Plans existing as of the date hereof;
(v) neither it nor any of its Subsidiaries shall issue any
Company Preferred Shares or Company Preference Shares or incur any indebtedness
for borrowed money or guarantee any such indebtedness if it should reasonably
anticipate that after such incurrence any of its or any of its Subsidiaries'
outstanding senior indebtedness would be rated A or lower by Standard & Poor's;
(vi) neither it nor any of its Subsidiaries shall make any
capital expenditures in any period of twelve consecutive months following the
date hereof in an aggregate amount in excess of 150% of the aggregate amount
reflected in the Company's capital expenditure budget for such year, a copy of
which has been provided to SBC;
(vii) neither it nor any of its Subsidiaries shall transfer,
lease, license, sell, mortgage, pledge, encumber or otherwise dispose of any of
its or its Subsidiaries property or assets (including capital stock of any of
its Subsidiaries) with a fair market value in excess of $1 billion in the
aggregate in any period of twelve
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consecutive months following the date hereof except for transfers, leases,
licenses, sales, mortgages, pledges, encumbrances, or other dispositions in the
ordinary course of business consistent with past practice;
(viii) neither it nor any of its Subsidiaries shall issue,
deliver, sell, or encumber shares of any class of its common stock or any
securities convertible into, or any rights, warrants or options to acquire, any
such shares except, (A) any such shares issued pursuant to options and other
awards outstanding on the date hereof under the Company Stock Plans, awards of
options and other awards granted hereafter under the Company Stock Plans in
accordance with this Agreement and shares issuable pursuant to such awards, and
(B) up to an aggregate amount of $3.6 billion of such shares, securities,
rights, warrants or options (valued at their fair market value as of the date of
the agreement to make such acquisition) in any period of twelve consecutive
months following the date hereof to fund, in whole or in part, the cost of any
acquisition or acquisitions permitted under clause (ix) below following
reasonable notice to SBC of its intention to take such action;
(ix) neither it nor any of its Subsidiaries shall spend in
excess of $3.6 billion in the aggregate in any period of twelve consecutive
months following the date hereof to acquire any business, whether by merger,
consolidation, purchase of property or assets or otherwise (valuing any non-cash
consideration at its fair market value as of the date of the agreement for such
acquisition); provided, that no such acquisition would prevent, materially delay
or materially impair its ability to consummate the transactions contemplated by
this Agreement. Notwithstanding the foregoing, neither it nor any of its
Subsidiaries shall acquire any business the acquisition of which would subject
SBC and its Subsidiaries following the consummation of the Merger to any
Commercial Mobile Radio Service spectrum aggregation limit restriction pursuant
to the provisions of 47 C.F.R. Section 20.6 or place SBC and its Subsidiaries
following the consummation of the Merger in violation of the Cellular Cross
Ownership
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limits contained in 47 C.F.R. Section 22.942. For purposes of this
clause (ix), the amount spent with respect to any acquisition shall be deemed to
include the aggregate amount of capital expenditures that the Company is
obligated to make at any time or plans to make as a result of such acquisition
within two years after the date of acquisition;
(x) neither it nor its Subsidiaries shall enter into any
business other than the telecommunications business and those businesses
traditionally associated with the telecommunications business; and
(xi) neither it nor any of its Subsidiaries shall authorize
or enter into any agreement to do any of the foregoing.
(b) SBC covenants and agrees as to itself and its Subsidiaries
that after the date hereof and prior to the Effective Time (unless the Company
shall otherwise approve in writing, which approval shall not be unreasonably
withheld or delayed, and except as otherwise expressly contemplated by this
Agreement, disclosed in the SBC Disclosure Letter or required by applicable
Law):
(i) the business of it and its Subsidiaries shall be
conducted in the ordinary and usual course and, to the extent consistent
therewith, it and its Subsidiaries shall use all reasonable best efforts to
preserve its business organization intact and maintain its existing relations
and goodwill with customers, suppliers, regulators, distributors, creditors,
lessors, employees and business associates;
(ii) it shall not (A) amend its certificate of incorporation
or by-laws in any manner that would prohibit or hinder, impede or delay in any
material respect the Merger or the consummation of the transactions contemplated
hereby, provided that any amendment to its certificate of incorporation to
increase the authorized number of shares of any class or series of the capital
stock of SBC shall in no way be restricted by the foregoing; (B)
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declare, set aside or pay any dividend or other distribution payable in cash or
property (other than SBC Common Stock or rights to purchase SBC Common Stock or
SBC Preferred Stock pursuant to any successor agreement to the SBC Rights
Agreement) in respect of any capital stock, other than per share regular
quarterly cash dividends in amounts consistent with its past practice; or (C)
repurchase, redeem or otherwise acquire, or permit any of its Subsidiaries to
purchase or otherwise acquire, except in open market transactions in connection
with the SBC Stock Plans, any shares of its capital stock or any securities
convertible into or exchangeable for any shares of its capital stock, but
subject to SBC's obligations under subparagraph (iii) below;
(iii) neither it nor any of its Subsidiaries shall knowingly
take any action that would prevent the Merger from qualifying for
"pooling-of-interests" accounting treatment or as a tax-free "reorganization"
within the meaning of Section 368(a) of the Code or that would cause any of its
representations and warranties herein to become untrue in any material respect;
(iv) neither it nor any of its Subsidiaries shall issue any
SBC Preferred Shares or incur any indebtedness for borrowed money or guarantee
any such indebtedness if it should reasonably anticipate that after such
incurrence any of its or any of its Subsidiaries' outstanding senior
indebtedness would be rated A or lower by Standard & Poor's;
(v) neither it nor any of its Subsidiaries shall make any
capital expenditures in any period of twelve consecutive months following the
date hereof in an aggregate amount in excess of 150% of the aggregate amount of
capital expenditures reflected in its capital expenditure budget for such year,
a copy of which has been provided to the Company;
(vi) neither it nor any of its Subsidiaries shall transfer,
lease, license, sell, mortgage, pledge, encumber or otherwise dispose of any of
its or its
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Subsidiaries' property or assets (including capital stock of any of its
Subsidiaries) with a fair market value in excess of $1.5 billion in the
aggregate in any period of twelve consecutive months following the date hereof
except for transfers, leases, licenses, sales, mortgages, pledges, encumbrances,
or other dispositions in the ordinary course of business consistent with past
practice;
(vii) neither it nor any of its Subsidiaries shall issue,
deliver, sell or encumber shares of any class of its common stock or any
securities convertible into, or any rights, warrants or options to acquire, any
such shares, except (A) any such shares issued pursuant to options and other
awards outstanding on the date hereof under the SBC Stock Plans, awards of
options and other awards granted hereafter under the SBC Stock Plans and shares
issuable pursuant to such awards, (B) up to an aggregate amount of $4.8 billion
of such shares, securities, rights, warrants or options (valued at their fair
market value as of the date of the agreement to make such acquisition) in any
period of twelve consecutive months following the date hereof to fund, in whole
or in part, the cost of any acquisition or acquisitions permitted under clause
(viii) below, following reasonable notice to the Company of its intention to
take such action, and (C) pursuant to the terms of the Agreement and Plan of
Merger dated as of January 4, 1998, by and among Southern New England
Telecommunications Corporation ("SNET"), SBC and SBC(CT) Sub, Inc. a Connecticut
corporation and a wholly-owned subsidiary of SBC (the "SNET Agreement"), which
issuances of SBC capital stock shall not be included in calculating the $4.8
billion of permissible issuances, deliveries, sales or encumbrances, or require
notice to the Company, pursuant to clause (B) above;
(viii) neither it nor any of its Subsidiaries shall spend in
excess of $4.8 billion in the aggregate in any period of twelve consecutive
months following the date hereof to acquire any business, whether by merger,
consolidation, purchase of property or assets or otherwise (valuing any non-cash
consideration at its fair market value as of the date of the agreement for such
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acquisition); provided, however, that no such acquisition would prevent,
materially delay or materially impair its ability to consummate the transactions
contemplated by this Agreement; provided, further, that the SNET Agreement and
the transactions contemplated thereby shall not be subject to the terms of the
foregoing restriction. Notwithstanding the foregoing, neither it nor any of its
Subsidiaries shall acquire any business the acquisition of which would subject
SBC and its Subsidiaries following the consummation of the Merger to any
Commercial Mobile Radio Service spectrum aggregation limit restriction pursuant
to the provisions of 47 C.F.R. Section 20.6 or place SBC and its Subsidiaries
following the consummation of the Merger in violation of the Cellular Cross
Ownership limits contained in 47 C.F.R. Section 22.942; provided, that, the SNET
Agreement and the transactions contemplated thereby shall not be subject to the
terms of the foregoing restriction. For purposes of this clause (viii), the
amount spent with respect to any acquisition shall be deemed to include the
aggregate amount of capital expenditures that the Company is obligated to make
at any time or plans to make as a result of such acquisition within two years
after the date of acquisition;
(ix) neither it nor any of its Subsidiaries shall enter any
business other than the telecommunications business and those businesses
traditionally associated with the telecommunications business; and
(x) neither it nor any of its Subsidiaries shall authorize
or enter into an agreement to do any of the foregoing.
(c) SBC and the Company agree that any written approval obtained
under this Section 6.1 may be relied upon by the other party if signed by the
Chief Executive Officer or another executive officer of the other party.
6.2. Acquisition Proposals. (a) The Company agrees that neither it nor
any of its Subsidiaries shall, and that it shall direct and use its best efforts
to cause
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its and its Subsidiaries' employees, agents and representatives (including any
investment banker, attorney or accountant retained by it or any of its
Subsidiaries) (the Company, its Subsidiaries and their officers, directors,
employees, agents and representatives being the "Company Representatives") not
to, directly or indirectly, initiate, solicit, encourage or otherwise facilitate
any inquiries or the making of any proposal or offer with respect to a merger,
reorganization, share exchange, consolidation or similar transaction involving,
or any purchase of, or tender offer for, any of the assets of it or any of its
Subsidiaries or its voting securities if, as a result of such transaction, (i)
the stockholders of the Company would not hold more than 50% of the voting
securities of the surviving corporation or its ultimate parent, (ii) the
directors of the Company would not constitute a majority of the board of
directors of the surviving corporation or its ultimate parent, or (iii) another
Person would acquire more than 50% of the assets of the Company and its
Subsidiaries (any such proposal or offer being hereinafter referred to as a
"Company Acquisition Proposal"). The Company further agrees that neither it nor
any of its Subsidiaries shall, and that it shall direct and use its best efforts
to cause the Company Representatives not to, directly or indirectly, have any
discussion with or provide any confidential information or data to any Person
relating to a Company Acquisition Proposal or engage in any negotiations
concerning a Company Acquisition Proposal, or otherwise facilitate any effort or
attempt to make or implement a Company Acquisition Proposal; provided, however,
that nothing contained in this Agreement shall prevent either the Company or the
Company Representatives from (A) complying with Rule 14e-2 promulgated under the
Exchange Act with regard to a Company Acquisition Proposal; (B) engaging in any
discussions or negotiations with or providing any information to, any Person in
response to an unsolicited bona fide written Company Acquisition Proposal by any
such Person; or (C) recommending such an unsolicited bona fide written Company
Acquisition Proposal to the stockholders of the Company if and only to the
extent that, in such case referred to in clause (B) or (C), (i) the Board of
Directors of the Company concludes in good faith (after consultation
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with its financial advisor) that such Company Acquisition Proposal is reasonably
capable of being completed, taking into account all legal, financial, regulatory
and other aspects of the proposal and the Person making the proposal, and would,
if consummated, result in a transaction more favorable to the Company's
stockholders from a financial point of view than the transaction contemplated by
this Agreement (any such more favorable Company Acquisition Proposal being
referred to in this Agreement as a "Superior Company Proposal"), (ii) the Board
of Directors of the Company determines in good faith after consultation with
outside legal counsel that such action is necessary for the Board of Directors
to comply with its fiduciary duty under applicable law and (iii) prior to
providing any information or data to any Person in connection with a Company
Acquisition Proposal by any such Person, the Board of Directors of the Company
shall receive from such Person a confidentiality agreement in customary form;
provided, that such confidentiality agreement shall not contain terms that
prevent the Company from complying with its obligations under this Section 6.2.
(b) SBC agrees that neither it nor any of its Subsidiaries shall,
and that it shall direct and use its best efforts to cause its and its
Subsidiaries' employees, agents and representatives (including any investment
banker, attorney or accountant retained by it or any of its Subsidiaries) (SBC,
its Subsidiaries and their officers, directors, employees, agents and
representatives being the "SBC Representatives") not to, directly or indirectly,
initiate, solicit, encourage or otherwise facilitate any inquiries or the making
of any proposal or offer with respect to a merger, reorganization, share
exchange, consolidation or similar transaction involving, or any purchase of, or
tender offer for, all or any assets of it or any of its Subsidiaries or its
voting securities if, as a result of such transaction, (i) the stockholders of
SBC would not hold more than 50% of the voting securities of the surviving
corporation or its ultimate parent, (ii) the directors of SBC would not
constitute a majority of the board of directors of the surviving corporation or
its ultimate parent, or (iii) another Person would acquire more
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than 50% of the assets of SBC and its Subsidiaries (any such proposal or offer
being hereinafter referred to as a "SBC Acquisition Proposal"). SBC further
agrees that neither it nor any of its Subsidiaries nor any of the officers and
directors of it or its Subsidiaries shall, and that it shall direct and use its
best efforts to cause the SBC Representatives not to, directly or indirectly,
have any discussion with or provide any confidential information or data to any
Person relating to a SBC Acquisition Proposal or engage in any negotiations
concerning a SBC Acquisition Proposal, or otherwise facilitate any effort or
attempt to make or implement a SBC Acquisition Proposal; provided, however, that
nothing contained in this Agreement shall prevent either SBC or the SBC
Representatives from (A) complying with Rule 14e-2 promulgated under the
Exchange Act with regard to a SBC Acquisition Proposal; (B) engaging in any
discussions or negotiations with or providing any information to, any Person in
response to an unsolicited bona fide written SBC Acquisition Proposal by any
such Person; or (C) recommending such an unsolicited bona fide written SBC
Acquisition Proposal to the stockholders of SBC if and only to the extent that,
in such cases referred to in clause (B) or (C), (i) the Board of Directors of
SBC concludes in good faith (after consultation with its financial advisor) that
such SBC Acquisition Proposal is reasonably capable of being completed, taking
into account all legal, financial, regulatory and other aspects of the proposal
and the Person making the proposal, and would, if consummated, result in a
transaction more favorable to SBC or SBC's stockholders from a financial point
of view than the transaction contemplated by this Agreement (any such more
favorable SBC Acquisition Proposal being referred to herein as a "Superior SBC
Proposal"), (ii) the Board of Directors of SBC determines in good faith after
consultation with outside legal counsel that such action is necessary for the
Board of Directors to comply with its fiduciary duty under applicable law and
(iii) prior to providing any information or data to any Person in connection
with a SBC Acquisition Proposal by any such Person, the Board of Directors of
SBC shall receive from such Person a confidentiality agreement in customary
form; provided, that, such confidentiality agreement shall not contain terms
that
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prevent SBC from complying with its obligations under this Section 6.2.
(c) The Company and SBC each agrees that it will immediately
cease and cause to be terminated any existing activities, discussions or
negotiations with any parties conducted heretofore with respect to any Company
Acquisition Proposal or SBC Acquisition Proposal, as the case may be. The
Company and SBC each agrees that it will take the necessary steps to promptly
inform the individuals or entities referred to in the first sentence of
paragraphs (a) and (b), respectively, of the obligations undertaken in Section
6.2(a) or (b), as the case may be. The Company and SBC each agrees that it will
notify the other immediately if any such inquiries, proposals or offers are
received by, any such information is requested from, or any such discussions or
negotiations are sought to be initiated or continued with, any of its
representatives indicating, in connection with such notice, the name of such
Person and the terms and conditions of any proposals or offers, and thereafter
shall inform the other of any material modification of the terms of any such
proposal or offer or the withdrawal thereof. The Company and SBC each also
agrees that it will promptly request each Person that has heretofore executed a
confidentiality agreement in connection with its consideration of any Company
Acquisition Proposal or any SBC Acquisition Proposal, as the case may be, to
return all confidential information heretofore furnished to such Person by or on
behalf of it or any of its Subsidiaries.
6.3. Information Supplied. The Company and SBC each agrees, as to
itself and its Subsidiaries, that none of the information supplied or to be
supplied by it or its Subsidiaries for inclusion or incorporation by reference
in (i) the Registration Statement on Form S-4 to be filed with the SEC by SBC in
connection with the issuance of shares of SBC Common Stock in the Merger
(including the joint proxy statement and prospectus (the "Prospectus/Proxy
Statement") constituting a part thereof) (the "S-4 Registration Statement")
will, at the time the S-4 Registration Statement becomes effective under the
Securities Act, and (ii) the Prospectus/Proxy Statement and any amendment or
supplement
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thereto will, at the date of mailing to stockholders and at the times of the
meetings of stockholders of the Company and SBC to be held in connection with
the Merger, in any such case, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. If at any time prior to the Effective Time any
information relating to SBC or the Company, or any of their respective
affiliates, officers or directors, should be discovered by SBC or the Company
which should be set forth in an amendment or supplement to either the S-4
Registration Statement or the Prospectus/Proxy Statement, so that any of such
documents would not include any misstatement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, the party which discovers such information shall promptly
notify the other parties hereto and an appropriate amendment or supplement
describing such information shall be promptly filed with the SEC and, to the
extent required by law, disseminated to the stockholders of the Company and SBC.
6.4. Stockholders Meetings. The Company will take, in accordance with
applicable law and its certificate of incorporation and by-laws, all action
necessary to convene a meeting of holders of Company Shares (the "Company
Stockholders Meeting") as promptly as practicable after the S-4 Registration
Statement is declared effective to consider and vote upon the adoption of this
Agreement. SBC will take, in accordance with applicable law and its certificate
of incorporation and by-laws, all action necessary to convene a meeting of
holders of the SBC Common Stock (the "SBC Stockholders Meeting", and either the
SBC Stockholders Meeting or the Company Stockholders Meeting, a "Stockholders
Meeting") as promptly as practicable after the S-4 Registration Statement is
declared effective to consider and vote upon the approval of the issuance of SBC
Common Stock required to be issued pursuant to Article IV. Subject to fiduciary
obligations under applicable law and the terms of this Agreement, the Company's
Board of Directors shall recommend that the stockholders of the Company adopt
this Agreement and thereby approve the transactions contemplated hereby and
shall take all lawful action to solicit such adoption, and SBC's Board of
Directors shall
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recommend that the stockholders of SBC approve the issuance of SBC Common Stock
required to be issued pursuant to Article IV and shall take all lawful action to
solicit such approval.
6.5. Filings; Other Actions; Notification. (a) SBC and the Company
shall promptly prepare and file with the SEC the Prospectus/Proxy Statement, and
SBC shall prepare and file with the SEC the S-4 Registration Statement as
promptly as practicable. SBC and the Company each shall use all reasonable best
efforts to have the S-4 Registration Statement declared effective under the
Securities Act as promptly as practicable after such filing, and promptly
thereafter mail the Prospectus/Proxy Statement to the respective stockholders of
each of the Company and SBC. SBC shall also use all reasonable best efforts to
obtain prior to the effective date of the S-4 Registration Statement all
necessary state securities law or "blue sky" permits and approvals required in
connection with the Merger and to consummate the other transactions contemplated
by this Agreement and will pay all expenses incident thereto.
(b) The Company and SBC each shall use all reasonable best
efforts to cause (x) the Merger to qualify for "pooling of interests" accounting
treatment and (y) to be delivered to the other party and its directors a letter
of its independent auditors, dated (i) the date on which the S-4 Registration
Statement shall become effective and (ii) the Closing Date, and addressed to the
other party and its directors, in form and substance customary for "comfort"
letters delivered by independent public accountants in connection with
registration statements similar to the S-4 Registration Statement.
(c) The Company and SBC shall cooperate with each other and use
(and shall cause their respective Subsidiaries to use) all their respective
reasonable best efforts to take or cause to be taken all actions, and do or
cause to be done all things, necessary, proper or advisable
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on its part under this Agreement and applicable Laws to consummate and make
effective the Merger and the other transactions contemplated by this Agreement
as soon as practicable, including preparing and filing as promptly as
practicable all documentation to effect all necessary applications, notices,
petitions, filings and other documents and to obtain as promptly as practicable
all consents, registrations, approvals, permits and authorizations required to
be obtained from any third party and/or any Governmental Entity in connection
with the execution and delivery of this Agreement and the consummation of the
Merger and the other transactions contemplated hereby; provided, however, that
nothing in this Section 6.5 shall require, or be construed to require, SBC or
the Company to agree to, or comply with, any conditions to the granting of any
such consent, registration, approval, permit or authorization by any
Governmental Entity if compliance with such conditions, individually or in the
aggregate, would be reasonably likely to have a Material Adverse Effect on the
Surviving Corporation or SBC following the Effective Time (it being understood
that, for this purpose only, materiality shall be determined by reference to the
trading market equity value of SBC prior to the consummation of the Merger and
after taking into account (i) any adverse effects reasonably likely to arise
from any restrictions on the ability of the Surviving Corporation or SBC or any
of their respective Subsidiaries to conduct its operations as currently
conducted or as proposed as of the date of this Agreement to be conducted
resulting from complying with the conditions to or from the grant of any such
consent, registration, approval, permit or authorization, (ii) any benefits
reasonably likely to be realized by SBC on a consolidated basis (other than
those operational benefits reasonably likely to be realized directly from the
consummation of the Merger) resulting from complying with the conditions to or
from the grant of any such consent, registration, approval, permit or
authorization, and (iii) any proceeds resulting from any divestiture required by
a Governmental Entity as a condition to its granting any such consent,
registration, approval, permit or authorization); provided, further, that any
divestiture by either SBC or the Company or any of their
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respective Subsidiaries reasonably required to cause the Surviving Corporation
to be in compliance with the Commercial Mobile Radio Service spectrum
aggregation limits established by the FCC in 47 C.F.R. Section 20.6 and the
Cellular Cross Ownership limits contained in 47 C.F.R. Section 22.942 shall be
deemed not to have any adverse effect on either the Surviving Corporation or SBC
following the Effective Time (a "Regulatory Material Adverse Effect"). Subject
to applicable laws relating to the exchange of information, SBC and the Company
shall have the right to review in advance, and to the extent practicable each
will consult the other on, all the information relating to SBC or the Company,
as the case may be, and any of their respective Subsidiaries, that appear in any
filing made with, or written materials submitted to, any third party and/or any
Governmental Entity in connection with the Merger and the other transactions
contemplated by this Agreement. In exercising the foregoing right, each of the
Company and SBC shall act reasonably and as promptly as practicable.
(d) The Company and SBC each shall, upon request by the other,
furnish the other with all information concerning itself, its Subsidiaries,
directors, officers and stockholders and such other matters as may be reasonably
necessary or advisable in connection with the Prospectus/Proxy Statement, the
S-4 Registration Statement or any other statement, filing, notice or application
made by or on behalf of SBC, the Company or any of their respective Subsidiaries
to any third party and/or any Governmental Entity in connection with the Merger
and the transactions contemplated by this Agreement.
(e) The Company and SBC each shall keep the other apprised of the
status of matters relating to completion of the transactions contemplated
hereby, including promptly furnishing the other with copies of notice or other
communications received by SBC or the Company, as the case may be, or any of its
Subsidiaries, from any third party and/or any Governmental Entity with respect
to the Merger and the other transactions contemplated by this Agreement. Each of
the Company and SBC shall give prompt notice to the other of any change that is
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reasonably likely to result in a Material Adverse Effect on it or of any failure
of any condition to the other party's obligations to effect the Merger set forth
in Article VII.
6.6. Access; Consultation. (a) Upon reasonable notice, and except as
may otherwise be required by applicable law, the Company and SBC each shall (and
shall cause its Subsidiaries to) afford the SBC Representatives or the Company
Representatives, as the case may be, reasonable access, during normal business
hours throughout the period prior to the Effective Time, to its properties,
books, contracts and records and, during such period, each shall (and shall
cause its Subsidiaries to) furnish promptly to the other all information
concerning its business, properties and personnel as may reasonably be
requested, provided that no investigation pursuant to this Section shall affect
or be deemed to modify any representation or warranty made by the Company, SBC
or Merger Sub hereunder, and provided, further, that the foregoing shall not
require the Company or SBC to permit any inspection, or to disclose any
information, that in the reasonable judgment of the Company or SBC, as the case
may be, would result in the disclosure of any trade secrets of third parties or
violate any of its obligations with respect to confidentiality if the Company or
SBC, as the case may be, shall have used all reasonable best efforts to obtain
the consent of such third party to such inspection or disclosure. All requests
for information made pursuant to this Section shall be directed to an executive
officer of the Company or SBC, as the case may be, or such Person as may be
designated by any such executive officer, as the case may be.
(b) From the date hereof to the Effective Time, SBC and the
Company agree to consult with each other on a regular basis on a schedule to be
agreed with regard to their respective operations.
(c) From the date hereof to the Effective Time, the Company
agrees to notify SBC in advance of any issuance by the Company or any of its
Subsidiaries of any long-term debt in excess of $50 million, Company Preferred
Shares or Company Preference Shares.
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6.7. Affiliates. (a) Each of the Company and SBC shall deliver to the
other a letter identifying all Persons whom such party believes to be, at the
date of the Stockholders Meeting of such party, "affiliates" of such party for
purposes of applicable interpretations regarding use of the pooling-of-interests
accounting method and, in the case of "affiliates" of the Company, for purposes
of Rule 145 under the Securities Act. Each of the Company and SBC shall use all
reasonable best efforts to cause each Person who is identified as an "affiliate"
in the letter referred to above to deliver to SBC on or prior to the date of the
Stockholders Meeting of such party a written agreement, in the form attached
hereto as Exhibit A, in the case of affiliates of the Company (the "Company
Affiliate's Letter"), and Exhibit B, in the case of affiliates of SBC (the "SBC
Affiliate's Letter"). Prior to the Effective Time, each of the Company and SBC
shall use all reasonable best efforts to cause each additional Person who is
identified as an "affiliate" after the date of the relevant Stockholders Meeting
to execute the applicable written agreement as set forth in this Section 6.7, as
soon as practicable after such Person is identified.
(b) If the Merger would otherwise qualify for 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 shall have been published within the
meaning of Section 201.01 of the SEC's Codification of Financial Reporting
Policies, regardless of whether each such affiliate has provided the written
agreement referred to in this Section, except to the extent permitted by, and in
accordance with, SEC Accounting Series Release 135 and SEC Staff Accounting
Bulletins 65 and 76. Any Company Shares held by any such affiliate shall not be
transferable, regardless of whether such affiliate has provided the applicable
written agreement referred to in this Section, if such transfer, either alone or
in the aggregate with other transfers by affiliates, would preclude SBC's
ability to account for the business combination to be effected by the
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Merger as a pooling of interests. The Company shall not register the transfer of
any Certificate, unless such transfer is made in compliance with the foregoing.
6.8. Stock Exchange Listing and De-listing. SBC shall use its best
efforts to cause the shares of SBC Common Stock to be issued in the Merger to be
approved for listing on the New York Stock Exchange ("NYSE"), subject to
official notice of issuance, prior to the Closing Date. The Surviving
Corporation shall use its best efforts to cause the Company Shares to be
de-listed from the NYSE and the Chicago, Boston, Pacific and Philadelphia stock
exchanges and de-registered under the Exchange Act as soon as practicable
following the Effective Time.
6.9. Publicity. The initial press release with respect to the Merger
shall be a joint press release and thereafter the Company and SBC shall consult
with each other prior to issuing any press releases or otherwise making public
announcements with respect to the Merger and the other transactions contemplated
by this Agreement and prior to making any filings with any third party and/or
any Governmental Entity (including any national securities exchange) with
respect thereto, except as may be required by law or by obligations pursuant to
any listing agreement with or rules of any national securities exchange.
6.10. Benefits.
(a) Stock Options.
(i) At the Effective Time, each outstanding option to
purchase Company Shares (a "Company Option") under the Company Stock Plans,
whether vested or unvested, shall be deemed to constitute an option to acquire,
on the same terms and conditions as were applicable under such Company Option
(except to the extent such terms and conditions are altered in accordance with
their terms as a result of the consummation of the transactions contemplated by
this Agreement), the same number of shares of SBC Common Stock as the holder of
such Company Option would have been entitled to receive pursuant to the Merger
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had such holder exercised such Company Option in full immediately prior to the
Effective Time (rounded down to the nearest whole number) (a "Substitute
Option"), at an exercise price per share (rounded up to the nearest whole
cent)(the "Substitute Option Price") equal to (y) the aggregate exercise price
for the Company Shares otherwise purchasable pursuant to such Company Option
divided by (z) the number of full shares of SBC Common Stock deemed purchasable
pursuant to such Company Option in accordance with the foregoing. For each
Substitute Option substituted for a Company Option that included a right under
certain circumstances to receive dividend equivalents in the form of stock units
("Company Stock Units"), all Company Stock Units credited to the account of the
holder of such Substitute Option at the Effective Time shall, as of the
Effective Time, be deemed to constitute a number of stock units, each of which
shall represent one share of SBC Common Stock ("SBC Stock Units"), equal to the
number of shares of SBC Common Stock the holder of such Substitute Option would
have been entitled to receive pursuant to this Agreement had such Company Stock
Units been distributed to such holder in full immediately prior to the Effective
Time and thereafter SBC Stock Units shall continue to be credited to the account
of the holder of such Substitute Option to the same extent and on the same terms
and conditions as they would have under the Company Option for which the
Substitute Option was substituted (except that the record dates and dividend
amounts shall be the record dates and dividend amounts for SBC Common Stock),
and all such SBC Stock Units shall be distributed at the same times and in the
same manner as the Company Stock Units would have been distributed had the
Substitute Option not been substituted for the Company Option (except that the
option price used to determine if the SBC Stock Units can be distributed shall
be the Substitute Option Price). At or prior to the Effective Time, the Company
shall make all necessary arrangements with respect to the Company Stock Plans to
permit the assumption of the unexercised Company Options by SBC pursuant to this
Section and as soon as practicable after the Effective Time SBC shall use its
best efforts to register under the Securities Act on Form S-8 or other
appropriate form (and use its best efforts to maintain the effectiveness
thereof)
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shares of SBC Common Stock issuable pursuant to all Substitute Options.
(ii) Effective at the Effective Time, SBC shall assume each
Company Option in accordance with the terms of the Company Stock Plan under
which it was issued and the stock option agreement by which it is evidenced. As
promptly as practicable after the Effective Time, the Company shall deliver to
the participants in the Stock Plans appropriate notices setting forth such
participants' rights pursuant to such assumed Company Options.
(b) Employee Benefits. SBC agrees that it shall cause the
Surviving Corporation for at least two years after the Effective Time to provide
or cause to be provided to employees of the Company and its Subsidiaries
compensation and benefit plans that are no less favorable, in the aggregate,
than the Company Compensation and Benefit Plans disclosed in Section 6.10(b) of
the Company Disclosure Letter; provided, however, if during this period SBC
implements any widespread increase or decrease in benefits under compensation
and benefit plans or in the cost thereof to participants under compensation and
benefit plans applicable to employees of SBC and its Subsidiaries (other than
the Surviving Corporation and its Subsidiaries), the Surviving Corporation shall
proportionately adjust the benefits under the Company's compensation and benefit
plans or the cost thereof to participants, and provided, further with respect to
employees who are subject to collective bargaining, all benefits shall be
provided only in accordance with the applicable collective bargaining agreement.
At or prior to the Effective Time, the Company shall make all necessary
arrangements to cause any Company Share units under the Company's Compensation
and Benefit Plans to be converted into share units with respect to SBC Common
Stock by multiplying the Company Shares subject to such Company Share units by
the Exchange Ratio. SBC shall, and shall cause the Surviving Corporation to,
honor, pursuant to their terms, all employee benefit obligations existing at the
Closing Date to current and former employees under the Company Compensation and
Benefit Plans.
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6.11. Expenses. Whether or not the Merger is consummated, all costs and
expenses incurred in connection with this Agreement and the Merger and the other
transactions contemplated by this Agreement shall be paid by the party incurring
such expense, except that expenses incurred in connection with the filing fee
for the S-4 Registration Statement and printing and mailing the Prospectus/Proxy
Statement and the S-4 Registration Statement and the filing fee under the HSR
Act shall be shared equally by SBC and the Company.
6.12. Indemnification; Directors' and Officers' Insurance. (a) From and
after the Effective Time, SBC shall, and shall cause the Surviving Corporation
to, indemnify and hold harmless each present and former director and officer of
the Company (when acting in such capacity) determined as of the Effective Time
(the "Indemnified Parties"), against any costs or expenses (including reasonable
attorneys' fees), judgments, fines, losses, claims, damages or liabilities
(collectively, "Costs") incurred in connection with any claim, action, suit,
proceeding or investigation, whether civil, criminal, administrative or
investigative, arising out of or pertaining to matters existing or occurring at
or prior to the Effective Time, whether asserted or claimed prior to, at or
after the Effective Time, to the fullest extent permitted under Delaware law
(and the Surviving Corporation shall also advance expenses as incurred to the
fullest extent permitted under applicable law, provided the Person to whom
expenses are advanced provides an undertaking to repay such advances if it is
ultimately determined that such Person is not entitled to indemnification).
(b) Any Indemnified Party wishing to claim indemnification under
paragraph (a) of this Section 6.12, upon learning of any such claim, action,
suit, proceeding or investigation, shall promptly notify the Surviving
Corporation thereof, but the failure to so notify shall not relieve the
Surviving Corporation of any liability it may have to such Indemnified Party if
such failure does not materially prejudice the Surviving Corporation. In the
event of any such claim, action, suit, proceeding or
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investigation (whether arising before or after the Effective Time), (i) the
Surviving Corporation shall have the right to assume the defense thereof and the
Surviving Corporation shall not be liable to such Indemnified Parties for any
legal expenses of other counsel or any other expenses subsequently incurred by
such Indemnified Parties in connection with the defense thereof, except that if
the Surviving Corporation elects not to assume such defense or counsel for the
Indemnified Parties advises that there are issues which raise conflicts of
interest between the Surviving Corporation and the Indemnified Parties, the
Indemnified Parties may retain counsel satisfactory to them, and the Surviving
Corporation shall pay all reasonable fees and expenses of such counsel for the
Indemnified Parties promptly as statements therefor are received; provided,
however, that the Surviving Corporation shall be obligated pursuant to this
paragraph (b) to pay for only one firm of counsel for all Indemnified Parties in
any jurisdiction (unless there is a conflict of interest as provided above) (ii)
the Indemnified Parties will cooperate in the defense of any such matter and
(iii) the Surviving Corporation shall not be liable for any settlement effected
without its prior written consent.
(c) The Surviving Corporation shall maintain a policy of
officers' and directors' liability insurance for acts and omissions occurring
prior to the Effective Time ("D&O Insurance") with coverage in amount and scope
at least as favorable as the Company's existing directors' and officers'
liability insurance coverage for a period of six years after the Effective Time;
provided, however, if the existing D&O Insurance expires, is terminated or
cancelled, or if the annual premium therefor is increased to an amount in excess
of 175% of the last annual premium paid prior to the date hereof (the "Current
Premium"), in each case during such six year period, the Surviving Corporation
will use its best efforts to obtain D&O Insurance in an amount and scope as
great as can be obtained for the remainder of such period for a premium not in
excess (on an annualized basis) of 175% of the Current Premium.
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(d) If SBC or any of its successors or assigns (i) shall
consolidate with or merge into any other corporation or entity and shall not be
the continuing or surviving corporation or entity of such consolidation or
merger or (ii) shall transfer all or substantially all of its properties and
assets to any individual, corporation or other entity, then and in each such
case, proper provisions shall be made so that the successors and assigns of SBC
shall assume all of the obligations set forth in this Section.
(e) The provisions of this Section are intended to be for the
benefit of, and shall be enforceable by, each of the Indemnified Parties, their
heirs and their representatives.
6.13. Takeover Statute. If any Takeover Statute is or may become
applicable to the Merger or the other transactions contemplated by this
Agreement, each of SBC and the Company and its Board of Directors shall grant
such approvals and take such actions as are necessary so that such transactions
may be consummated as promptly as practicable on the terms contemplated by this
Agreement or by the Merger and otherwise act to eliminate or minimize the
effects of such statute or regulation on such transactions. The Company will
cause the Rights Agent to promptly execute the Rights Amendment.
6.14. Dividends. The Company shall coordinate with SBC the declaration,
setting of record dates and payment dates of dividends on Company Shares so that
holders of Company Shares do not receive dividends on both Company Shares and
SBC Common Stock received in the Merger in respect of any calendar quarter or
fail to receive a dividend on either Company Shares or SBC Common Stock received
in the Merger in respect of any calendar quarter.
6.15. Confidentiality. The Company and SBC each acknowledges and
confirms that it has entered into a Confidentiality and Non-Disclosure
Agreement, dated April 8, 1997 (the "Confidentiality Agreement"), that
information provided by each party hereto to the other party hereto
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pursuant to this Agreement is subject to the terms of the Confidentiality
Agreement and that the Confidentiality Agreement shall remain in full force and
effect in accordance with its terms, except that notwithstanding any provision
to the contrary contained in the Confidentiality Agreement, the Confidentiality
Agreement shall not terminate until the earlier to occur of the following: (i)
the Effective Time and (ii) the expiration of two years following the date of
any termination of this Agreement pursuant to Article VIII.
6.16. Control of the Company's Operations. Nothing contained in this
Agreement shall give SBC or the Company, directly or indirectly, rights to
control or direct the operations of the other prior to the Effective Time. Prior
to the Effective Time, each of SBC and the Company shall exercise, consistent
with the terms and conditions of this Agreement, complete control and
supervision of its operations.
ARTICLE VII
Conditions
7.1. Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each party to effect the Merger is subject to the
satisfaction or waiver at or prior to the Effective Time of each of the
following conditions:
(a) Stockholder Approval. This Agreement shall have been duly
adopted by holders of Company Shares constituting the Company Requisite Vote and
have been duly adopted by the sole stockholder of Merger Sub, and the issuance
of SBC Common Stock required to be issued pursuant to Article IV shall have been
duly approved by the holders of shares of SBC Common Stock constituting the SBC
Requisite Vote;
(b) NYSE Listing. The shares of SBC Common Stock issuable to the
Company stockholders pursuant
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to this Agreement shall have been authorized for listing on the NYSE upon
official notice of issuance.
(c) Governmental Consents. The waiting period applicable to the
consummation of the Merger under the HSR Act shall have expired or been
terminated and all material Company Required Consents and material SBC Required
Consents from or with any Governmental Entity shall have been made or obtained
pursuant to a Final Order, free of any conditions (other than conditions that
are not reasonably likely, either individually or in the aggregate, to have a
Regulatory Material Adverse Effect). For the purposes of this Agreement, "Final
Order" means an action or decision that has been granted as to which (a) no
request for a stay or any similar request is pending, no stay is in effect, the
action or decision has not been vacated, reversed, set aside, annulled or
suspended and any deadline for filing such a request that may be designated by
statute or regulation has passed, (b) no petition for rehearing or
reconsideration or application for review is pending and the time for the filing
of any such petition or application has passed, (c) no Governmental Entity has
undertaken to reconsider the action on its own motion and the time within which
it may effect such reconsideration has passed and (d) no appeal is pending
(including other administrative or judicial review) or in effect and any
deadline for filing any such appeal that may be specified by statute or rule has
passed, which in any such case (a), (b), (c) or (d) is reasonably likely to
result in vacating, reversing, setting aside, annulling, suspending or modifying
such action or decision (in any such case in a manner which would have a
Regulatory Material Adverse Effect following the Effective Time).
(d) Laws and Order. No Governmental Entity of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
Law (whether temporary, preliminary or permanent) that is in effect and
restrains, enjoins or otherwise prohibits consummation of the Merger or the
other transactions contemplated by this Agreement or that is, individually or in
the aggregate with all other such Laws, reasonably likely to have a Material
Adverse
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Effect on SBC or the Company (collectively, an "Order"), and no Governmental
Entity shall have instituted any proceeding, or, in the case of a federal
Governmental Entity, threatened in writing to institute any proceeding, seeking
any such Order.
(e) S-4. The S-4 Registration Statement shall have become
effective under the Securities Act. No stop order suspending the effectiveness
of the S-4 Registration Statement shall have been issued, and no proceedings for
that purpose shall have been initiated or be threatened by the SEC.
(f) Accountants' Letters. SBC and the Company shall have received
the "comfort" letters described in Section 6.5(b). SBC and the Company shall
have received letters from their respective independent public accounting firms
to the effect that the Merger will qualify for "pooling of interests" accounting
treatment.
(g) Blue Sky Approvals. SBC shall have received all state
securities and "blue sky" permits and approvals necessary to consummate the
transactions contemplated hereby.
7.2. Conditions to Obligations of SBC and Merger Sub. The obligations
of SBC and Merger Sub to effect the Merger are also subject to the satisfaction
or waiver by SBC at or prior to the Effective Time of the following conditions:
(a) Representations and Warranties. The representations and
warranties of the Company set forth in this Agreement (i) to the extent
qualified by Material Adverse Effect shall be true and correct and (ii) to the
extent not qualified by Material Adverse Effect shall be true and correct,
except that this clause (ii) shall be deemed satisfied so long as any failures
of such representations and warranties to be true and correct, taken together,
do not have a Material Adverse Effect on the Company, in each case (i) and
(ii), as of the Closing Date as though made on and as of the Closing Date
(except to the
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extent such representations and warranties speak as of an earlier date), and SBC
shall have received a certificate signed on behalf of the Company by an
executive officer of the Company to such effect.
(b) Performance of Obligations of the Company. The Company shall
have performed in all material respects all obligations required to be performed
by it under this Agreement at or prior to the Closing Date, and SBC shall have
received a certificate signed on behalf of the Company by an executive officer
of the Company to such effect.
(c) Consents Under Agreements. The Company shall have obtained the
consent or approval of each Person whose consent or approval shall be required
in order to consummate the transactions contemplated by this Agreement under any
Contract to which the Company or any of its Subsidiaries is a party, except
those for which the failure to obtain such consent or approval, individually or
in the aggregate, is not reasonably likely to have, a Material Adverse Effect on
the Company.
(d) Tax Opinion. SBC shall have received the opinion of Sullivan
& Cromwell, counsel to SBC, dated the Closing Date, to the effect that the
Merger will be treated for Federal income tax purposes as a reorganization
within the meaning of Section 368(a) of the Code, and that each of SBC, Merger
Sub and the Company will be a party to that reorganization within the meaning of
Section 368(b) of the Code; it being understood that in rendering such opinion,
such counsel shall be entitled to rely on certain customary representations and
assumptions.
7.3. Conditions to Obligation of the Company. The obligation of the
Company to effect the Merger is also subject to the satisfaction or waiver by
the Company at or prior to the Effective Time of the following conditions:
(a) Representations and Warranties. The representations and
warranties of SBC and Merger Sub set forth in this Agreement (i) to the extent
qualified by
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Material Adverse Effect shall be true and correct, and (ii) to the extent not
qualified by Material Adverse Effect shall be true and correct, except that this
clause (ii) shall be deemed satisfied so long as any failures of such
representations and warranties to be true and correct, taken together, do not
have a Material Adverse Effect on SBC, in each case (i) and (ii), as of the
Closing Date as though made on and as of the Closing Date (except to the extent
such representations and warranties speak as of an earlier date), and the
Company shall have received a certificate signed on behalf of SBC by an
executive officer of SBC to such effect.
(b) Performance of Obligations of SBC and Merger Sub. Each of SBC
and Merger Sub shall have performed in all material respects all obligations
required to be performed by it under this Agreement at or prior to the Closing
Date, and the Company shall have received a certificate signed on behalf of SBC
and Merger Sub by an executive officer of SBC to such effect.
(c) Tax Opinion. The Company shall have received the opinion of
Skadden, Arps, Slate, Meagher & Flom (Illinois), counsel to the Company, dated
the Closing Date, to the effect that the Merger will be treated for Federal
income tax purposes as a reorganization within the meaning of Section 368(a) of
the Code, and that each of SBC, Merger Sub and the Company will be a party to
that reorganization within the meaning of Section 368(b) of the Code; it being
understood that in rendering such opinion, such counsel shall be entitled to
rely on certain customary representations and assumptions.
ARTICLE VIII
Termination
8.1. Termination by Mutual Consent. This Agreement may be terminated
and the Merger may be abandoned at any time prior to the Effective Time, whether
before or after the approval by stockholders of the Company and SBC
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referred to in Section 7.1(a), by mutual written consent of the Company and SBC,
by action of their respective Boards of Directors.
8.2. Termination by Either SBC or the Company. This Agreement may be
terminated and the Merger may be abandoned at any time prior to the Effective
Time by action of the Board of Directors of either SBC or the Company if (i) the
Merger shall not have been consummated by July 31, 1999 (the "Termination
Date"), whether such date is before or after the date of approval by the
stockholders of the Company or SBC; provided, however, that if SBC or the
Company determines that additional time is necessary in connection with
obtaining a SBC Required Consent or a Company Required Consent from or with any
Governmental Entity, the Termination Date may be extended for up to 60 calendar
days at any one time by SBC or the Company from time to time by written notice
to the other party up to a date not beyond March 31, 2000, which date shall be
deemed to be the Termination Date, (ii) the adoption of this Agreement by the
Company's stockholders required by Section 7.1(a) shall not have occurred at a
meeting duly convened therefor or at any adjournment or postponement thereof,
(iii) the approval of SBC's stockholders necessary for the issuance of SBC
Common Stock required to be issued pursuant to Article IV as required by Section
7.1(a) shall not have been obtained at a meeting duly convened therefor or at
any adjournment or postponement thereof, or (iv) any Order permanently
restraining, enjoining or otherwise prohibiting consummation of the Merger shall
become final and non-appealable (whether before or after the adoption or
approval by the stockholders of the Company or SBC, as the case may be);
provided, that the right to terminate this Agreement pursuant to clause (i)
above shall not be available to any party that has breached in any material
respect its obligations under this Agreement in any manner that shall have
proximately contributed to the failure of the Merger to be consummated.
8.3. Termination by the Company. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time, whether
before or after
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the adoption of this Agreement by the stockholders of the Company referred to in
Section 7.1(a), by action of the Board of Directors of the Company:
(a) if (i) the Board of Directors of the Company approves
entering into a binding written agreement concerning a transaction that
constitutes a Superior Company Proposal and the Company notifies SBC in writing
that the Company desires to enter into such agreement, (ii) SBC does not make,
within ten calendar days after receipt of the Company's written notification of
its desire to enter into a binding agreement for a Superior Company Proposal,
the terms of which are specified in such notice, an offer that the Board of
Directors of the Company believes, in good faith after consultation with its
financial advisors, is at least as favorable, from a financial point of view, to
the stockholders of the Company as the Superior Company Proposal, and (iii) the
Company prior to such termination pays to SBC in immediately available funds any
fees required to be paid pursuant to Section 8.5(b). The Company agrees to
notify SBC promptly if its desire to enter into a written agreement referred to
in its notification shall change at any time after giving such notification; or
(b) if (i) the Board of Directors of SBC shall have withdrawn or
adversely modified its approval of this Agreement or its recommendation to the
stockholders of SBC that such stockholders approve the issuance of SBC Common
Stock required to be issued pursuant to Article IV or failed to reconfirm such
recommendation within fifteen business days after a written request by the
Company to do so; provided that such a request is made after the Board of
Directors of SBC or any SBC Representative shall have taken any of the actions
that would be proscribed by Section 6.2(b) but for the exception therein
allowing certain actions to be taken pursuant to clause (B) or (C) of the
proviso thereof with respect to any bona fide written SBC Acquisition Proposal
that has not been withdrawn or rejected by the Board of Directors of SBC, (ii)
there has been a material breach by SBC or Merger Sub of any representation,
warranty, covenant or agreement contained in this Agreement
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which (x) would result in a failure of a condition set forth in Section 7.3(a)
or 7.3(b) and (y) cannot be or is not cured prior to the Termination Date, or
(iii) SBC or any SBC Representative shall take any of the actions that would be
proscribed by Section 6.2(b) but for the exception therein allowing certain
actions to be taken pursuant to clause (B) or (C) of the proviso thereof (other
than any such actions taken pursuant to such clause (B) with respect to any bona
fide written SBC Acquisition Proposal (received after the date hereof that was
not solicited by SBC after the date hereof) during the Initial 50 Day Period, if
such SBC Acquisition Proposal is received during the first through the 30th days
of the Initial 50 Day Period or during the 20 calendar day period following
receipt of such SBC Acquisition Proposal by SBC if such SBC Acquisition Proposal
is received during the 31st through 50th days of the Initial 50 Day Period, in
each case if, and only if, SBC receives such SBC Acquisition Proposal during the
Initial 50 Day Period). For purposes of this Agreement, the "Initial 50 Day
Period" shall mean the 50 calendar day period commencing with the first calendar
day after the day on which this Agreement shall have been filed by SBC or the
Company with the SEC as an exhibit to a Current Report on Form 8-K under the
Exchange Act.
8.4. Termination by SBC. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, before or after
the approval by the stockholders of SBC referred to in Section 7.1(a), by action
of the Board of Directors of SBC:
(a) If (i) the Board of Directors of SBC approves entering into a
binding written agreement concerning a transaction that constitutes a Superior
SBC Proposal and SBC notifies the Company in writing that SBC desires to enter
into such agreement, (ii) the Company does not make, within ten days after
receipt of SBC's written notification of its desire to enter into a binding
agreement for a Superior SBC Proposal, the terms of which are specified in such
notice, an offer that the Board of Directors of SBC believes, in good faith
after consultation with its financial advisors, is at least as favorable, from
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a financial point of view, to the stockholders of SBC as the Superior SBC
Proposal, and (iii) SBC prior to such termination pays to the Company in
immediately available funds any fees required to be paid pursuant to Section
8.5(c). SBC agrees to notify the Company promptly if its desire to enter into a
written agreement referred to in its notification shall change at any time after
giving such notification.
(b) If (i) the Board of Directors of the Company shall have
withdrawn or adversely modified its approval or recommendation to the Company's
stockholders of this Agreement, or failed to reconfirm such recommendation
within fifteen business days after a written request by SBC to do so; provided
that such a request is made after the Board of Directors of the Company or any
Company Representative shall have taken any of the actions that would be
proscribed by Section 6.2(a) but for the exception therein allowing certain
actions to be taken pursuant to clause (B) or (C) of the proviso thereof with
respect to any bona fide written Company Acquisition Proposal that has not been
withdrawn or rejected by the Board of Directors of the Company, or (ii) there
has been a material breach by the Company of any representation, warranty,
covenant or agreement contained in this Agreement which (x) would result in a
failure of a condition set forth in Section 7.2(a) or 7.2(b) and (y) cannot be
or is not cured prior to the Termination Date, or (iii) if the Company or any
Company Representative shall take any of the actions that would be proscribed by
Section 6.2(a) but for the exception therein allowing certain actions to be
taken pursuant to clause (B) or (C) of the proviso thereof (other than any such
actions taken pursuant to such clause (B) with respect to any bona fide written
Company Acquisition Proposal (received after the date hereof that was not
solicited by the Company after the date hereof) during the Initial 50 Day
Period, if such Company Acquisition Proposal is received during the first
through the 30th days of the Initial 50 Day Period or during the 20 calendar day
period following receipt of such Company Acquisition Proposal by the Company if
such Company Acquisition Proposal is received during the 31st through 50th days
of the Initial 50 Day Period, in each case if, and
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only if, the Company receives such Company Acquisition Proposal during the
Initial 50 Day Period).
8.5. Effect of Termination and Abandonment. (a) In the event of
termination of this Agreement and the abandonment of the Merger pursuant to this
Article VIII, this Agreement (other than as set forth in Section 9.1) shall
become void and of no effect with no liability on the part of any party hereto
(or of any of its directors, officers, employees, agents, legal or financial
advisors or other representatives); provided, however, no such termination shall
relieve any party hereto from any liability for damages resulting from any
willful and intentional breach of this Agreement (to the extent any such damages
exceed any Termination Fee that may have been paid pursuant to Section 8.5(b) or
8.5(c)) or from any obligation to pay, if applicable, the Termination Fee
pursuant to Section 8.5(b) or 8.5(c).
(b) In the event that (i) a bona fide Company Acquisition
Proposal shall have been made to the Company and made known to stockholders
generally or have been made directly to stockholders generally or any Person
shall have publicly announced an intention (whether or not conditional) to make
a bona fide Company Acquisition Proposal and such Company Acquisition Proposal
or announced intention shall not have been withdrawn prior to the Company's
Stockholders Meeting and thereafter this Agreement is terminated by either SBC
or the Company pursuant to Section 8.2(ii) and within nine months after such
termination the Company shall have entered into an agreement to consummate a
transaction that would constitute a Company Acquisition Proposal if it were the
subject of a proposal, or (ii) this Agreement is terminated (x) by the Company
pursuant to Section 8.3(a) or (y) by SBC pursuant to Section 8.4(b)(i), (b)(ii)
(solely with respect to a willful and intentional breach) or (b)(iii), then the
Company shall promptly, but in no event later than two days after the date of
such termination (except as otherwise provided in Section 8.3(a)), or, in the
case of termination pursuant to Section 8.2(ii), two days after the relevant
agreement is entered into, pay SBC a fee equal to $1.2 billion (the "Termination
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Fee"), which amount shall be exclusive of any expenses to be paid pursuant to
Section 6.11, payable by wire transfer of same day funds. The Company
acknowledges that the agreements contained in this Section 8.5(b) are an
integral part of the transactions contemplated by this Agreement, and that,
without these agreements, SBC and Merger Sub would not enter into this
Agreement; accordingly, if the Company fails to pay promptly the amount due
pursuant to this Section 8.5(b), and, in order to obtain such payment, SBC or
Merger Sub commences a suit which results in a judgment against the Company for
the fee set forth in this paragraph (b), the Company shall pay to SBC or Merger
Sub its costs and expenses (including attorneys' fees) in connection with such
suit, together with interest on the amount of the fee at the prime rate of
Citibank N.A. in effect on the date such payment was required to be made.
(c) In the event that (i) a bona fide SBC Acquisition Proposal
shall have been made to SBC and made known to stockholders generally or shall
have been made directly to stockholders generally or any Person shall have
publicly announced an intention (whether or not conditional) to make a bona fide
SBC Acquisition Proposal and such SBC Acquisition Proposal or announced
intention shall not have been withdrawn prior to the SBC Stockholder Meeting and
thereafter this Agreement is terminated by the Company or SBC pursuant to
Section 8.2(iii) and within nine months after such termination SBC shall have
entered into an agreement to consummate a transaction that would constitute a
SBC Acquisition Proposal if it were the subject of a proposal, or (ii) this
Agreement is terminated (x) by SBC pursuant to Section 8.4(a) or (y) by the
Company pursuant to Section 8.3(b)(i), (b)(ii) (solely with respect to a willful
and intentional breach) or (b)(iii), then SBC shall promptly, but in no event
later than two days after the date of such termination (except as otherwise
provided in Section 8.4(a)), or, in the case of a termination pursuant to
Section 8.2(iii), two (2) days after the relevant agreement is entered into, pay
the Company a fee equal to the Termination Fee, which amount shall be exclusive
of any expenses to be paid pursuant to Section 6.11, payable by wire transfer of
same day funds. SBC acknowledges that the
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agreements contained in this Section 8.5(c) are an integral part of the
transactions contemplated by this Agreement, and that, without these agreements,
the Company would not enter into this Agreement; accordingly, if SBC fails to
pay promptly the amount due pursuant to this Section 8.5(c), and, in order to
obtain such payment, the Company commences a suit which results in a judgment
against SBC for the fee set forth in this paragraph (c), SBC shall pay to the
Company its costs and expenses (including attorneys' fees) in connection with
such suit, together with interest on the amount of the fee at the prime rate of
Citibank N.A. in effect on the date such payment was required to be made.
ARTICLE IX
Miscellaneous and General
9.1. Survival. This Article IX and the agreements of the Company, SBC
and Merger Sub contained in Sections 6.10 (Benefits), 6.11 (Expenses) and 6.12
(Indemnification; Directors' and Officers' Insurance) shall survive the
consummation of the Merger. This Article IX (other than Section 9.2
(Modification or Amendment), Section 9.3 (Waiver of Conditions) and Section 9.13
(Assignment)) and the agreements of the Company, SBC and Merger Sub contained in
Section 6.11 (Expenses), Section 6.15 (Confidentiality) and Section 8.5 (Effect
of Termination and Abandonment) shall survive the termination of this Agreement.
All other representations, warranties, covenants and agreements in this
Agreement shall not survive the consummation of the Merger or the termination of
this Agreement.
9.2. Modification or Amendment. Subject to the provisions of
applicable law, at any time prior to the Effective Time, the parties hereto may
modify or amend this Agreement, by written agreement executed and delivered by
duly authorized officers of the respective parties.
9.3. Waiver of Conditions. (a) Any provision of this Agreement may be
waived prior to the Effective Time if,
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and only if, such waiver is in writing and signed by the party against whom the
waiver is to be effective.
(b) No failure or delay by any party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. Except as
otherwise herein provided, the rights and remedies herein provided shall be
cumulative and not exclusive of any rights or remedies provided by law.
9.4. Counterparts. This Agreement may be executed in any number of
counterparts, each such counter part being deemed to be an original instrument,
and all such counterparts shall together constitute the same agreement.
9.5. GOVERNING LAW AND VENUE; WAIVER OF JURY TRIAL.
(a) THIS AGREEMENT SHALL BE DEEMED TO BE MADE IN AND IN ALL
RESPECTS SHALL BE INTERPRETED, CONSTRUED AND GOVERNED BY AND IN ACCORDANCE WITH
THE LAW OF THE STATE OF DELAWARE WITHOUT REGARD TO THE CONFLICT OF LAW
PRINCIPLES THEREOF. The parties hereby irrevocably submit to the jurisdiction of
the Federal courts of the United States of America and the state courts located
in the State of Delaware solely in respect of the interpretation and enforcement
of the provisions of this Agreement and of the documents referred to in this
Agreement, and in respect of the transactions contemplated hereby, and hereby
waive, and agree not to assert, as a defense in any action, suit or proceeding
for the interpretation or enforcement hereof or of any such document, that it is
not subject thereto or that such action, suit or proceeding may not be brought
or is not maintainable in said courts or that the venue thereof may not be
appropriate or that this Agreement or any such document may not be enforced in
or by such courts, and the parties hereto irrevocably agree that all claims with
respect to such action or proceeding shall be heard and determined in such a
Federal or state court. The parties hereby consent to and grant any such court
jurisdiction over
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the Person of such parties and over the subject matter of such dispute and agree
that mailing of process or other papers in connection with any such action or
proceeding in the manner provided in Section 9.6 or in such other manner as may
be permitted by law, shall be valid and sufficient service thereof.
(b) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH
MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT
ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY
WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT,
OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND
ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH SUCH PARTY
UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH SUCH
PARTY MAKES THIS WAIVER VOLUNTARILY, AND (iv) EACH SUCH PARTY HAS BEEN INDUCED
TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION 9.5.
9.6. Notices. Notices, requests, instructions or other documents to be
given under this Agreement shall be in writing and shall be deemed given, (i)
when sent if sent by facsimile, provided that the fax is promptly confirmed by
telephone confirmation thereof, (ii) when delivered, if delivered personally to
the intended recipient, and (iii) one business day later, if sent by overnight
delivery via a national courier service, and in each case, addressed to a party
at the following address for such party:
if to SBC or Merger Sub
SBC Communications Inc.
175 E. Houston
San Antonio, Texas 78205
Attention: James D. Ellis, Esq.
Fax: (210) 351-2298
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with a copy to:
Benjamin F. Stapleton, Esq.
Sullivan & Cromwell
125 Broad Street
New York, NY 10004
Fax: (212) 558-3588
if to the Company
Ameritech Corporation
30 S. Wacker Drive
Chicago, Illinois 60606
Attention: Chairman of the Board, President and Chief
Executive Officer
Fax: (312) 207-0892
with copies to:
Ameritech Corporation
30 S. Wacker Drive
Chicago, Illinois 60606
Attention: Executive Vice President and General Counsel
Fax: (312) 207-1540
and
Ameritech Corporation
30 S. Wacker Drive
Chicago, Illinois 60606
Attention: Assistant General Counsel - Transactions
Fax: (312) 207-0086
and
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Charles W. Mulaney, Jr., Esq.
Skadden, Arps, Slate, Meagher & Flom (Illinois)
333 W. Wacker Dr.
Chicago, Illinois 60606
Fax: (312) 407-0411
or to such other persons or addresses as may be designated in writing by the
party to receive such notice as provided above.
9.7. Entire Agreement. This Agreement (including any exhibits hereto),
the Confidentiality Agreement, the Company Disclosure Letter and the SBC
Disclosure Letter constitute the entire agreement, and supersede all other prior
agreements, understandings, representations and warranties both written and
oral, among the parties, with respect to the subject matter hereof. EACH PARTY
HERETO AGREES THAT, EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES CONTAINED IN
THIS AGREEMENT, NEITHER SBC AND MERGER SUB NOR THE COMPANY MAKES ANY OTHER
REPRESENTATIONS OR WARRANTIES, AND EACH HEREBY DISCLAIMS ANY OTHER
REPRESENTATIONS OR WARRANTIES MADE BY ITSELF OR ANY OF ITS OFFICERS, DIRECTORS,
EMPLOYEES, AGENTS, FINANCIAL AND LEGAL ADVISORS OR OTHER REPRESENTATIVES, WITH
RESPECT TO THE EXECUTION AND DELIVERY OF THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY, NOTWITHSTANDING THE DELIVERY OR DISCLOSURE TO THE OTHER OR
THE OTHER'S REPRESENTATIVES OF ANY DOCUMENTATION OR OTHER INFORMATION WITH
RESPECT TO ANY ONE OR MORE OF THE FOREGOING.
9.8. No Third Party Beneficiaries. Except as provided in Section 6.12
(Indemnification; Directors' and Officers' Insurance), this Agreement is not
intended to confer upon any Person other than the parties hereto any rights or
remedies hereunder.
9.9. Obligations of SBC and of the Company. Whenever this Agreement
requires a Subsidiary of SBC to take any action, such requirement shall be
deemed to include an undertaking on the part of SBC to cause such Subsidiary to
take such action. Whenever this Agreement requires a Subsidiary of the Company
to take any action, such
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requirement shall be deemed to include an undertaking on the part of the Company
to cause such Subsidiary to take such action and, after the Effective Time, on
the part of the Surviving Corporation to cause such Subsidiary to take such
action.
9.10. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability or the other provisions hereof. If any
provision of this Agreement, or the application thereof to any Person or any
circumstance, is invalid or unenforceable, (a) a suitable and equitable
provision shall be substituted therefor in order to carry out, so far as may be
valid and enforceable, the intent and purpose of such invalid or unenforceable
provision and (b) the remainder of this Agreement and the application of such
provision to other Persons or circumstances shall not be affected by such
invalidity or unenforceability, nor shall such invalidity or unenforceability
affect the validity or enforceability of such provision, or the application
thereof, in any other jurisdiction.
9.11. Interpretation. The table of contents and headings herein are
for convenience of reference only, do not constitute part of this Agreement and
shall not be deemed to limit or otherwise affect any of the provisions hereof.
Where a reference in this Agreement is made to a Section or Exhibit, such
reference shall be to a Section of or Exhibit to this Agreement unless otherwise
indicated. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation."
9.12. Captions. The Article, Section and paragraph captions herein are
for convenience of reference only, do not constitute part of this Agreement and
shall not be deemed to limit or otherwise affect any of the provisions hereof.
9.13. Assignment. This Agreement shall not be assignable by operation
of law or otherwise; provided,
A-70
<PAGE>
however, that SBC may designate prior to the Effective Time, by written notice
to the Company, another wholly-owned direct or indirect Subsidiary to be a party
to the Merger in lieu of Merger Sub, in which event all references herein to
Merger Sub shall be deemed references to such other Subsidiary (except with
respect to representations and warranties made herein with respect to Merger Sub
as of the date hereof) and all representations and warranties made herein with
respect to Merger Sub as of the date hereof shall also be made with respect to
such other subsidiary as of the date of such designation. Any assignment in
contravention of the preceding sentence shall be null and void.
A-71
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by the duly authorized officers of the parties hereto as of the date first
written above.
AMERITECH CORPORATION
By: /s/ Richard C. Notebaert
--------------------------------
Name: Richard C. Notebaert
Title: Chairman, President and
Chief Executive Officer
SBC COMMUNICATIONS INC.
By: /s/ Edward E. Whitacre, Jr.
--------------------------------
Name: Edward E. Whitacre, Jr.
Title: Chairman and
Chief Executive Officer
SBC DELAWARE, INC.
By: /s/ Edward E. Whitacre, Jr.
--------------------------------
Name: Edward E. Whitacre, Jr.
Title: President
A-72
<PAGE>
EXHIBIT A
FORM OF COMPANY AFFILIATE'S LETTER
_______, 1998
SBC Communications Inc.
175 E. Houston
San Antonio, TX 78205
Ladies and Gentlemen:
The undersigned is a holder of shares of Common Stock, $1.00 par value per share
("Company Common Stock"), of Ameritech Corporation, a Delaware corporation (the
"Company"). Pursuant to the terms of that certain Agreement and Plan of Merger,
dated as of May 10, 1998, among the Company, SBC Communications Inc., a Delaware
corporation ("SBC"), and SBC (Delaware), Inc., a Delaware corporation and a
wholly-owned subsidiary of SBC ("Merger Sub"), Merger Sub will be merged with
and into the Company and the Company will become a wholly owned subsidiary of
SBC (the "Merger"). In connection with the Merger, the undersigned, as a holder
of Company Common Stock, will be entitled to receive Common Stock, par value
$1.00 per share, of SBC (the "Securities") in exchange for the shares of Company
Common Stock held by the undersigned at the effective time of the Merger.
The undersigned acknowledges that the undersigned may be deemed an "affiliate"
of the Company within the meaning of Rule 145 ("Rule 145") promulgated under the
Securities Act of 1933, as amended (the "Act"), and/or as such term is used in
and for purposes of Accounting Series Release Nos. 130 and 135, as amended, of
the Securities and Exchange Commission (the "Commission"), although nothing
contained herein shall be construed as an admission of such status.
If in fact the undersigned were an affiliate of the Company under the Act, the
undersigned's ability to sell, assign or transfer any Securities received by the
undersigned in exchange for any shares of Company Common Stock pursuant to the
Merger may be restricted unless such sale, assignment or transfer is registered
under the Act or an exemption from such registration is available. The
undersigned understands that such exemptions are limited and the undersigned has
obtained advice of counsel as to the nature and conditions of such exemptions,
including information with respect to the
A-A-1
<PAGE>
SBC Communications Inc.
_______, 1998
Page 2
applicability to the sale of such Securities of Rules 144 and 145(d) promulgated
under the Act.
The undersigned hereby represents to and covenants with SBC that it will not
sell, assign or transfer any Securities received by the undersigned in exchange
for shares of Company Common Stock pursuant to the Merger except (i) pursuant to
an effective registration statement under the Act, (ii) by a sale made in
conformity with the volume and other limitations of Rule 145 (and otherwise in
accordance with Rule 144 under the Act, if the undersigned is an affiliate of
SBC and if so required at the time) or (iii) in a transaction which, in the
opinion of independent counsel reasonably satisfactory to the Company or as
described in a "no-action" or interpretive letter from the Staff of the
Commission reasonably satisfactory to SBC, is not required to be registered
under the Act.
The undersigned understands that SBC is under no obligation to register the
sale, assignment, transfer or other disposition of the Securities by the
undersigned or on behalf of the undersigned under the Act or to take any other
action necessary in order to make compliance with an exemption from such
registration available solely as a result of the Merger.
In the event of a sale of Securities pursuant to Rule 145, the undersigned will
supply SBC with evidence of compliance with such Rule, in the form of customary
seller's and broker's Rule 145 representation letters or as SBC may otherwise
reasonably request. The undersigned understands that SBC may instruct its
transfer agent to withhold the transfer of any Securities disposed of by the
undersigned in a manner inconsistent with this letter.
The undersigned acknowledges and agrees that appropriate legends will be placed
on certificates representing Securities received by the undersigned in the
Merger or held by a transferee thereof, which legends will be removed (i) by
delivery of substitute certificates upon receipt of a letter from the staff of
the Commission, or an opinion of counsel in form and substance reasonably
satisfactory to SBC, to the effect that such legends are no longer required for
the purposes of the Act and the rules and regulations of the Commission
promulgated thereunder, (ii) in the event of a sale of the Securities which has
been registered under the Act or made in conformity with the provisions of Rule
145.
The undersigned further represents to and covenants with SBC that (i) the
undersigned will not, during the 30 days prior to the effective time of the
Merger sell, transfer or otherwise dispose of, or reduce any risk relative to,
any securities of the Company or
A-A-2
<PAGE>
SBC Communications Inc.
_______, 1998
Page 3
SBC, and (ii) the undersigned will not, after the effective time of the Merger,
sell, transfer or otherwise dispose of, or reduce any risk relative to, the
Securities, whether received by the undersigned in the Merger or otherwise,
until after such time as financial results covering at least 30 days of
post-Merger operations of SBC (including the combined operations of the Company
and SBC) have been published by SBC in the form of a quarterly earnings report,
an effective registration statement filed with the Commission, a report to the
Commission on Form 10-K, 10-Q or 8-K, or any other public filing or announcement
which includes such results of operations, except in the cases of clauses (i)
and (ii) of this paragraph to the extent permitted by, and in accordance with,
SEC Accounting Series Release 135 and SEC Staff Accounting Bulletins 65 and 76
if and to the extent that such release and bulletins remain in full force and
effect at the relevant time.
I further understand and agree that this letter agreement shall apply to all
shares of Company Common Stock and Securities that I am deemed to beneficially
own pursuant to applicable federal securities law.
The undersigned acknowledges that it has carefully reviewed this letter and
understands the requirements hereof and the limitations imposed upon the
distribution, sale, transfer or other disposition of Securities.
Sincerely,
[NAME OF COMPANY AFFILIATE]
A-A-3
<PAGE>
EXHIBIT B
FORM OF SBC AFFILIATE'S LETTER
_______, 1998
SBC Communications Inc.
175 E. Houston
San Antonio, TX 78205
Ladies and Gentlemen:
The undersigned is a holder of shares of Common Stock, par value $1.00 per share
(the "Securities"), of SBC Communications Inc., a Delaware corporation ("SBC").
Pursuant to the terms of that certain Agreement and Plan of Merger, dated as of
May 10, 1998, among Ameritech Corporation, a Delaware corporation (the
"Company"), SBC and SBC Delaware, Inc., a Delaware corporation and a
wholly-owned subsidiary of SBC ("Merger Sub"), Merger Sub will be merged with
and into the Company and the Company will become a wholly owned subsidiary of
SBC (the "Merger").
The undersigned acknowledges that the undersigned may be deemed an "affiliate"
of SBC as such term is used in and for purposes of Accounting Series Release
Nos. 130 and 135, as amended, of the Securities and Exchange Commission (the
"Commission"), although nothing contained herein shall be construed as an
admission of such status.
The undersigned hereby represents to and covenants with SBC that the undersigned
will not, during the 30 days prior to the effective time of the Merger sell,
transfer or otherwise dispose of, or reduce any risk relative to, the Securities
or any other shares of the capital stock of SBC until after such time as
financial results covering at least 30 days of post-Merger operations of SBC
(including the combined operations of the Company and SBC) have been published
by SBC in the form of a quarterly earnings report, an effective registration
statement filed with the Commission, a report to the Commission on Form 10-K,
10-Q or 8-K, or any other public filing or announcement which includes such
results of operations, except to the extent permitted by, and in accordance
with, SEC Accounting Series Release 135 and SEC Staff Accounting Bulletins 65
and 76 if and to the extent that such release and bulletins remain in full force
and effect at the relevant time.
A-B-1
<PAGE>
SBC Communications Inc.
_______, 1998
Page 2
I further understand and agree that this letter agreement shall apply to all
Securities that I am deemed to beneficially own pursuant to applicable federal
securities law.
The undersigned acknowledges that the undersigned has carefully reviewed this
letter and understands the requirements hereof and the limitations imposed upon
the sale, transfer or other disposition of Securities.
Sincerely,
[NAME OF SBC AFFILIATE]
A-B-2
<PAGE>
ANNEX B
Opinion of Salomon Smith Barney
[To Come]
B-1
<PAGE>
ANNEX C
Opinion of Goldman, Sachs & Co.
[To Come]
C-1
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The SBC Bylaws provide that SBC will indemnify any person who was or is
a party or is threatened to be made a party to any action, suit or proceeding,
whether civil, criminal, administrative or investigative (including any action
or suit by or in the right of SBC) by reason of the fact that such person is or
was a director, officer, employee or agent of SBC or is or was serving at the
request of SBC as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with such action,
suit or proceeding, but in each case only if and to the extent permitted under
applicable state or federal law.
The SBC Bylaws further state that the indemnification provided therein
will not be deemed exclusive of any other rights to which those indemnified may
be entitled, and will continue as to a person who has ceased to be a director,
officer, employee or agent and will inure to the benefit of the heirs, and
personal representatives of such a person.
Section 145 of the DGCL permits a corporation to indemnify its
directors and officers against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlements actually and reasonably incurred by them
in connection with any action, suit or proceeding brought by third parties, if
such directors or officers acted in good faith and in a manner they reasonably
believed to be in or not opposed to the best interests of the corporation and,
with respect to any criminal action or proceeding, had no reason to believe
their conduct was unlawful. In a derivative action, i.e., one by or in the right
of the corporation, indemnification may be made only for expenses actually and
reasonably incurred by directors and officers in connection with the defense or
settlement of an action or suit, and only with respect to a matter as to which
they will have acted in good faith and in a manner they reasonably believed to
be in or not opposed to the best interests of the corporation, except that no
indemnification will be made if such person will have been adjudged liable to
the corporation, unless and only to the extent that the court in which the
action or suit was brought will determine upon application that the defendant
officers or directors are fairly and reasonably entitled to indemnity for such
expenses despite such adjudication of liability.
The SBC Restated Certificate provides that no director of SBC will be
liable to SBC or its shareowners for monetary damages for breach of fiduciary
duty as a director, except for liability (1) for any breach of the director's
duty of loyalty to SBC or its shareowners; (2) for acts or omissions not in good
faith or which involve intentional misconduct or knowing violation of the law;
(3) under Section 174 of the DGCL; or (4) for any transaction from which a
director derived an improper benefit.
<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
Exhibit
Number
- -----------
2 Agreement and Plan of Merger, among Ameritech, SBC and Merger
Sub, dated as of May 10, 1998 (included as Annex A to the Joint
Proxy Statement/Prospectus contained in this Registration
Statement).
3-a Restated Certificate of Incorporation of SBC, filed with the
Secretary of State of the State of Delaware on April 29, 1996
(incorporated herein by reference to Exhibit 3 to Form 10-Q (File
No. 1-8610), dated March 31, 1996).
3-b Certificate of Incorporation of Ameritech, filed with the
Secretary of State of the State of Delaware on October 18, 1983,
as amended on April 30, 1996 (incorporated herein by reference to
Exhibit 3a to Form 10-Q for the quarter ended March 31, 1996
(file No. 1-8612)).
3-c By-Laws of SBC, dated January 30, 1998 (incorporated herein by
reference to Exhibit 3a to Form 8-K dated March 5, 1998 (file No.
1-8610)).
3-d By-Laws of Ameritech, as amended on March 19, 1997 (incorporated
herein by reference to Exhibit 3b to Form 10-Q for the quarter
ended March 31, 1997 (file No. 1-8612)).
4 See Exhibits 3-a and 3-c for provisions of SBC Restated
Certificate and SBC By-laws defining rights of holders of SBC
Common Stock.
5 Opinion of James D. Ellis, Senior Executive Vice President and
General Counsel of SBC, regarding validity of securities being
registered.*
8-a Opinion of Sullivan & Cromwell regarding certain federal income
tax consequences.*
8-b Opinion of Skadden, Arps, Slate, Meagher & Flom (Illinois)
regarding certain federal income tax matters.*
23-a Consent of Ernst & Young LLP.**
23-b Consent of Arthur Andersen LLP.**
23-c Consent of Coopers & Lybrand L.L.P. (Hartford, CT).**
23-d Consent of Coopers & Lybrand L.L.P. (San Francisco, CA).**
23-e Consent of James D. Ellis, Senior Executive Vice President and
General Counsel of SBC. (Included in the opinion filed as Exhibit
5 to this Registration Statement and incorporated herein by
reference).*
23-f Consent of Sullivan & Cromwell (Included in the opinion filed as
Exhibit 8-a to this Registration Statement and incorporated
herein by reference).*
23-g Consent of Skadden, Arps, Slate, Meagher & Flom (Illinois).
(Included in the opinion filed as Exhibit 8-b to this
Registration Statement and incorporated herein by reference).*
____________
* To be filed by Amendment
** Filed herewith
<PAGE>
23-h Consent of Salomon Brothers Inc and Smith Barney Inc.*
23-i Consent of Goldman, Sachs & Co.*
24 Powers of Attorney.**
99-a Form of Proxy Card of Ameritech.**
99-b Form of Proxy Card of SBC.**
99-c Opinion of Salomon Smith Barney (included as Annex B to the Joint
Proxy Statement/Prospectus contained in this Registration
Statement).*
99-d Opinion of Goldman, Sachs & Co. (included as Annex C to the Joint
Proxy Statement/Prospectus contained in this Registration
Statement).*
ITEM 22. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933,
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Securities and
Exchange Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment will be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time will be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities which remain unsold at the termination of the offering;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
Registration Statement is on Form S-3, Form S-8 or Form F-3, and the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed with or furnished to the Securities and
Exchange Commission by the registrant pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
Registration Statement.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 that is incorporated by reference in the Registration
Statement will be deemed to be a new
____________
* To be filed by AMendment
** Filed herewith
<PAGE>
registration statement relating to the securities offered therein, and the
offering of such securities at that time will be deemed to be the initial bona
fide offering thereof.
(c) (1) The undersigned registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this Registration Statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(2) The undersigned registrant hereby undertakes that every prospectus
(i) that is filed pursuant to paragraph (1) immediately preceding, or (ii) that
purports to meet the requirements of Section 10(a)(3) of the Act and is used in
connection with an offering of securities subject to Rule 415, will be filed as
a part of an amendment to the Registration Statement and will not be used until
such amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment will be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time will be deemed to be
the initial bona fide offering thereof.
(d) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(e) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11 or 13 of this form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through the date
of responding to the request.
(f) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and Ameritech
being acquired involved therein, that was not the subject of and included in the
registration statement when it became effective.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that is has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-4 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of San Antonio, State of Texas, on the 4th day of June,
1998.
SBC Communications Inc.
(Registrant)
By:/s/Donald E. Kiernan
---------------------------------
Donald E. Kiernan
Senior Vice President, Treasurer
and Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
Principal Executive Officer: Edward E. Whitacre, Jr.,*
Chairman and Chief Executive
Officer
Principal Financial and Accounting Officer: Donald E. Kiernan,
Senior Vice President, Treasurer
and Chief Financial Officer
By:/s/Donald E. Kiernan
--------------------------------
Donald E. Kiernan, as attorney-
in-fact for Mr. Whitacre, the
Directors, and on his own behalf
as Principal Financial Officer
and Principal Accounting Officer
DIRECTORS: June 4, 1998
Edward E. Whitacre, Jr.*
Clarence C. Barksdale*
August A. Busch III*
Royce S. Caldwell*
Ruben R. Cardenas*
William P. Clark*
Martin K. Eby, Jr.*
Herman E. Gallegos*
Jess T. Hay*
Bobby R. Inman*
Charles F. Knight*
Mary S. Metz*
Haskell M. Monroe, Jr.*
Toni Rembe*
S. Donley Ritchey*
Richard M. Rosenberg*
Carlos Slim Helu*
Patricia P. Upton*
- --------
* By power of attorney
EXHIBIT 23-a
Consent of Independent Auditors
We consent to the reference to our firm under the captions "Experts" and
"Selected Historical and Unaudited Pro Forma Combined Financial Data" in the
Registration Statement (Form S-4) and related Joint Proxy Statement/Prospectus
of Ameritech Corporation and SBC Communications Inc. (SBC) for the registration
of shares of Common Stock of SBC and to the incorporation by reference therein
of our reports dated February 20, 1998, with respect to the consolidated
financial statements and schedules of SBC included in or incorporated by
reference in its Annual Report (Form 10-K) for the year ended December 31, 1997,
filed with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
San Antonio, Texas
June 2, 1998
EXHIBIT 23-b
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to the incorporation by
reference in this Registration Statement on Form S-4 and the related Joint Proxy
Statement/Prospectus of Ameritech Corporation (Ameritech) and SBC Communications
Inc. of our reports dated January 13, 1998 included and incorporated by
reference in Ameritech's Annual Report on Form 10-K for the year ended December
31, 1997 and to all references to our Firm included in this Registration
Statement and the related Joint Proxy Statement/Prospectus.
/s/ Arthur Andersen LLP
Chicago, Illinois
June 4, 1998
EXHIBIT 23-c
Consent of Independent Accountants
We consent to the incorporation by reference in this registration statement of
SBC Communications Inc. on Form S-4 and the related Joint Proxy
Statement/Prospectus of Ameritech Corporation and SBC Communications Inc. of our
reports dated January 27, 1998, which includes an explanatory paragraph related
to the discontinuance of SFAS No. 71, "Accounting for Certain Types of
Regulation", effective January 1, 1996, on our audits of the consolidated
financial statements and the financial statement schedule of Southern New
England Telecommunications Corporation ("SNET") as of December 31, 1997 and 1996
and for the three years in the period ended December 31, 1997, which reports are
included or incorporated by reference in SNET's 1997 Annual Report on Form 10-K.
We also consent to the reference to our Firm under the caption "Experts".
/s/ Coopers & Lybrand L.L.P.
Hartford, Connecticut
June 4, 1998
EXHIBIT 23-d
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the reference to our firm under the caption "experts" in this
Registration Statement on Form S-4 and related Joint Proxy Statement/Prospectus
of Ameritech Corporation and SBC Communications Inc. ("SBC") for the
registration of shares of SBC Common Stock and to the incorporation by reference
therein of our report dated February 27, 1997 on our audits of the consolidated
financial statements and financial statement schedule of Pacific Telesis Group
and Subsidiaries as of December 31, 1996, and for each of the two years in the
period then ended, which is included in SBC's Annual Report on Form 10-K for the
year ended December 31, 1997.
/s/ Coopers & Lybrand L.L.P.
San Francisco, California
June 3, 1998
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
THAT, WHEREAS, SBC COMMUNICATIONS INC., a Delaware corporation, hereinafter
referred to as the "Corporation," proposes to file with the Securities and
Exchange Commission at Washington, D.C., under the provisions of the Securities
Act of 1933, as amended, a Registration Statement on Form S-4 for the issuance
of shares of the Corporation's Common Stock pursuant to the merger agreement
among Ameritech Corporation, the Corporation, and SBC Delaware, Inc., dated May
10, 1998; and
WHEREAS, the undersigned is an officer and a director of the Corporation;
NOW, THEREFORE, the undersigned hereby constitutes and appoints James D.
Ellis, Donald E. Kiernan, Alfred G. Richter, Jr., Roger W. Wohlert, or any one
of them, all of the City of San Antonio and State of Texas, his attorneys for
him and in his name, place and stead, and in each of his offices and capacities
in the Corporation, to execute and file such Registration Statement, and
thereafter to execute and file any and all amended registration statements and
amended prospectuses or amendments or supplements to any of the foregoing,
hereby giving and granting to said attorneys full power and authority to do and
perform each and every act and thing whatsoever requisite and necessary to be
done in and concerning the premises, as fully to all intents and purposes as the
undersigned might or could do if personally present at the doing thereof, hereby
ratifying and confirming all that said attorneys may or will lawfully do, or
cause to be done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand the date set
forth below.
/s/Edward E. Whitacre, Jr. May 27, 1998
- --------------------------------------- ------------------------------
Edward E. Whitacre, Jr. Date
Chairman of the Board and
Chief Executive Officer
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
THAT, WHEREAS, SBC COMMUNICATIONS INC., a Delaware corporation, hereinafter
referred to as the "Corporation," proposes to file with the Securities and
Exchange Commission at Washington, D.C., under the provisions of the Securities
Act of 1933, as amended, a Registration Statement on Form S-4 for the issuance
of shares of the Corporation's Common Stock pursuant to the merger agreement
among Ameritech Corporation, the Corporation, and SBC Delaware, Inc., dated May
10, 1998; and
WHEREAS, the undersigned is an officer and a director of the Corporation;
NOW, THEREFORE, the undersigned hereby constitutes and appoints James D.
Ellis, Donald E. Kiernan, Alfred G. Richter, Jr., Roger W. Wohlert, or any one
of them, all of the City of San Antonio and State of Texas, his attorneys for
him and in his name, place and stead, and in each of his offices and capacities
in the Corporation, to execute and file such Registration Statement, and
thereafter to execute and file any and all amended registration statements and
amended prospectuses or amendments or supplements to any of the foregoing,
hereby giving and granting to said attorneys full power and authority to do and
perform each and every act and thing whatsoever requisite and necessary to be
done in and concerning the premises, as fully to all intents and purposes as the
undersigned might or could do if personally present at the doing thereof, hereby
ratifying and confirming all that said attorneys may or will lawfully do, or
cause to be done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand the date set
forth below.
/s/Royce S. Caldwell May 27, 1998
- ------------------------------------------------ ------------------------------
Royce S. Caldwell Date
President -- SBC Operations and Director
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
THAT, WHEREAS, SBC COMMUNICATIONS INC., a Delaware corporation, hereinafter
referred to as the "Corporation," proposes to file with the Securities and
Exchange Commission at Washington, D.C., under the provisions of the Securities
Act of 1933, as amended, a Registration Statement on Form S-4 for the issuance
of shares of the Corporation's Common Stock pursuant to the merger agreement
among Ameritech Corporation, the Corporation, and SBC Delaware, Inc., dated May
10, 1998; and
WHEREAS, each of the undersigned is a director of the Corporation;
NOW, THEREFORE, each of the undersigned hereby constitutes and appoints
Edward E. Whitacre, Jr., James D. Ellis, Donald E. Kiernan, Alfred G. Richter,
Jr., Roger W. Wohlert, or any one of them, all of the City of San Antonio and
State of Texas, the undersigned's attorneys for the undersigned and in the
undersigned's name, place and stead, and in the undersigned's offices and
capacities in the Corporation, to execute and file such Registration Statement,
and thereafter to execute and file any and all amended registration statements
and amended prospectuses or amendments or supplements to any of the foregoing,
hereby giving and granting to said attorneys full power and authority to do and
perform each and every act and thing whatsoever requisite and necessary to be
done in and concerning the premises, as fully to all intents and purposes as the
undersigned might or could do if personally present at the doing thereof, hereby
ratifying and confirming all that said attorneys may or will lawfully do, or
cause to be done, by virtue hereof.
IN WITNESS WHEREOF, each of the undersigned has hereunto set his or her hand
the date set forth below.
/s/Clarence C. Barksdale May 29, 1998
- ------------------------------------- -----------------------------------
Clarence C. Barksdale Date
Director
/s/August A. Busch III May 27, 1998
- ------------------------------------- -----------------------------------
August A. Busch III Date
Director
/s/Ruben R. Cardenas May 27, 1998
- ------------------------------------- -----------------------------------
Ruben R. Cardenas Date
Director
/s/William P. Clark May 27, 1998
- ------------------------------------- -----------------------------------
William P. Clark Date
Director
/s/Martin K. Eby, Jr. May 28, 1998
- ------------------------------------- -----------------------------------
Martin K. Eby, Jr. Date
Director
/s/Herman E. Gallegos May 28, 1998
- ------------------------------------- -----------------------------------
Herman E. Gallegos Date
Director
<PAGE>
/s/Jess T. Hay May 28, 1998
- ------------------------------------- -----------------------------------
Jess T. Hay Date
Director
/s/Bobby R. Inman May 30, 1998
- ------------------------------------- -----------------------------------
Bobby R. Inman Date
Director
/s/Charles F. Knight May 26, 1998
- ------------------------------------- -----------------------------------
Charles F. Knight Date
Director
/s/Mary S. Metz May 28, 1998
- ------------------------------------- -----------------------------------
Mary S. Metz Date
Director
/s/Haskell M. Monroe, Jr. May 27, 1998
- ------------------------------------- -----------------------------------
Haskell M. Monroe, Jr. Date
Director
/s/Toni Rembe June 3, 1998
- ------------------------------------- -----------------------------------
Toni Rembe Date
Director
/s/S. Donley Ritchey May 29, 1998
- ------------------------------------- -----------------------------------
S. Donley Ritchey Date
Director
/s/Richard M. Rosenberg May 27, 1998
- ------------------------------------- -----------------------------------
Richard M. Rosenberg Date
Director
/s/Carlos Slim Helu June 2, 1998
- ------------------------------------- -----------------------------------
Carlos Slim Helu Date
Director
/s/Patricia P. Upton May 27, 1998
- ------------------------------------- -----------------------------------
Patricia P. Upton Date
Director
EXHIBIT 99-a
AMERITECH CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
AMERITECH CORPORATION
30 S. WACKER DRIVE
CHICAGO, ILLINOIS 60606
For the Special Meeting of Shareowners on __________________, 1998
The undersigned hereby (1) acknowledges receipt of the Notice of Special
Meeting of Shareowners (the "Ameritech Special Meeting") of Ameritech
Corporation, a Delaware corporation ("Ameritech"), to be held on [O ], 1998, at
[o ], local time, at [o ] and the Joint Proxy Statement/Prospectus in connection
therewith, and (2) appoints [_________________ and _________________,] and each
of them, his or her proxies with full power of substitution for and in the name,
place, and stead of the undersigned, to vote upon and act with respect to all of
the shares of common stock, $1.00 par value per share, of Ameritech ("Ameritech
Common Stock") standing in the name of the undersigned, or with respect to which
the undersigned is entitled to vote and act, at the Ameritech Special Meeting
and at any adjournments or postponements thereof.
The undersigned directs that this proxy be voted as follows:
(1) To adopt a proposal to adopt the Agreement and Plan of Merger, dated as of
May 10, 1998, among Ameritech, SBC Communications Inc. ("SBC"), a Delaware
corporation, and SBC Delaware, Inc. ("Merger Sub"), a Delaware corporation
and a wholly owned subsidiary of SBC (as such agreement may be amended,
supplemented or otherwise modified from time to time, the "Merger
Agreement"). Pursuant to the Merger Agreement, Merger Sub will be merged
(the "Merger") with and into Ameritech and Ameritech will become a wholly
owned subsidiary of SBC.
|_| FOR |_| AGAINST |_| ABSTAIN
(2) In the discretion of the proxies, on such other business related to proposal
(1) as may properly come before the Ameritech Special Meeting or any
adjournments or postponements thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS SPECIFIED ABOVE. IF NO
SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR THE PROPOSAL TO ADOPT THE
MERGER AGREEMENT. THE PROXIES CANNOT VOTE YOUR SHARES UNLESS YOU SIGN AND RETURN
THIS CARD.
This card also serves as voting instructions for shares held in the
Ameritech Direct Services Investment Plan and, if registrations are identical,
shares held in the Ameritech Savings Plan for Salaried Employees and the
Ameritech Savings Plan for Non-Salaried Employees as described in the proxy
statement.
Notwithstanding shareholder adoption of the Merger Agreement, Ameritech
reserves the right to abandon the Merger at any time prior to its consummation,
subject to the terms and conditions of the Merger Agreement.
Holders of Ameritech Common Stock will not be entitled to appraisal or
dissenters' rights in connection with the proposal.
The undersigned hereby revokes any proxy heretofore given to vote or act
with respect to the Ameritech Common Stock and hereby ratifies and confirms all
that the proxies, their substitutes, or any of them may lawfully do by virtue
hereof.
To vote by telephone or Internet, please see the reverse side of this card.
To vote by mail, please mark, sign, date and return this proxy in the enclosed
envelope. No postage is required.
<PAGE>
Please mark, sign, date and return this proxy in the enclosed envelope. No
postage is required.
Date: ______________, 1998
-----------------------------------
Signature of Stockholder
-----------------------------------
Signature of Stockholder (if jointly held)
Please date this proxy and sign your name exactly
as it appears hereon. Where there is more than
one owner, each should sign. When signing as an
attorney, administrator, executor, guardian, or
trustee, please add your title as such. If
executed by a corporation, the proxy should be
signed by a duly authorized officer and state the
full name of the corporate officer and the
corporation.
AMERITECH OFFERS PHONE OR INTERNET VOTING
24 hours a day, 7 days a week
- --------------------------------------------------------------------------------
On a touch-tone phone call toll-free 1-800-652-8683 (outside the U.S. and Canada
call 201-324-0377) and you will hear these instructions:
- --------------------------------------------------------------------------------
- -> Enter the last four digits of your social security number; and
- -> Enter the control number from the box just below the perforation on the proxy
card.
- -> You will then be asked to vote on the proposal to adopt the Merger Agreement.
- -> Your vote will be repeated to you and you will be asked to confirm it.
- --------------------------------------------------------------------------------
Log onto the Internet and type: http://www.vote-by-net.com
- --------------------------------------------------------------------------------
- -> Have your proxy card ready and follow the simple instructions.
Your electronic proxy authorizes the named proxies to vote your shares to the
same extent as if you marked, signed, dated and returned the proxy card.
IF YOU HAVE VOTED BY PHONE OR INTERNET, DO NOT RETURN YOUR PROXY CARD.
THANK YOU FOR VOTING!
EXHIBIT 99-b
SBC COMMUNICATIONS INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
SBC COMMUNICATIONS INC.
175 EAST HOUSTON
SAN ANTONIO, TEXAS 78205
The undersigned hereby (1) acknowledges receipt of the Notice of Special
Meeting of Shareowners (the "SBC Special Meeting") of SBC Communications Inc., a
Delaware corporation ("SBC"), to be held on [o ], 1998, at [o ], local time, at
[o ] and the Joint Proxy Statement/Prospectus in connection therewith, and (2)
appoints [________________ and _________________,] and each of them, his or her
proxies with full power of substitution for and in the name, place, and stead of
the undersigned, to vote upon and act with respect to all of the shares of
common stock, $1.00 par value per share, of SBC ("SBC Common Stock") standing in
the name of the undersigned, or with respect to which the undersigned is
entitled to vote and act, at the SBC Special Meeting and at any adjournments or
postponements thereof.
The undersigned directs that this proxy be voted as follows:
(1) To approve a proposal to issue shares of SBC Common Stock pursuant to the
Agreement and Plan of Merger dated as of May 10, 1998, among Ameritech
Corporation ("Ameritech"), a Delaware corporation, SBC and SBC Delaware,
Inc. ("Merger Sub"), a Delaware corporation and a wholly owned subsidiary of
SBC (as such agreement may be amended, supplemented or otherwise modified
from time to time, the "Merger Agreement"). Pursuant to the Merger
Agreement, Merger Sub will be merged (the "Merger") with and into Ameritech
and Ameritech will become a wholly owned subsidiary of SBC.
|_| FOR |_| AGAINST |_| ABSTAIN
(2) A proposal to adopt an amendment to Article II Section 1 of the Bylaws of
SBC to increase the maximum number of persons that may serve on the Board of
Directors of SBC from twenty-one (21) to twenty-five (25) (the "Bylaw
Amendment").
(3) A proposal to adopt an amendment to the Restated Certificate of
Incorporation of SBC to increase the number of shares of authorized SBC
Common Stock from 7.0 billion to 10.0 billion (the "Share Increase
Proposal").
(4) In the discretion of the proxies, on such other business related to
proposals (1), (2) or (3) as may properly come before the meeting or any
adjournments or postponements thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS SPECIFIED ABOVE. IF NO
SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR THE PROPOSAL TO ISSUE SHARES
OF SBC COMMON STOCK PURSUANT TO THE MERGER AGREEMENT, FOR THE BYLAW AMENDMENT
AND FOR THE SHARE INCREASE PROPOSAL. THE PROXIES CANNOT VOTE YOUR SHARES, WITH
RESPECT TO THE PROPOSAL TO ISSUE SHARES OF SBC COMMON STOCK PURSUANT TO THE
MERGER AGREEMENT, UNLESS YOU SIGN AND RETURN THIS CARD.
Notwithstanding shareowner approval of the foregoing proposal, SBC reserves
the right to abandon the Merger at any time prior to its consummation, subject
to the terms and conditions of the Merger Agreement.
<PAGE>
Holders of SBC Common Stock will not be entitled to appraisal or dissenters'
rights in connection with the proposals.
The undersigned hereby revokes any proxy heretofore given to vote or act
with respect to the SBC Common Stock and hereby ratifies and confirms all that
the proxies, their substitutes, or any of them may lawfully do by virtue hereof.
<PAGE>
Please mark, sign, date, and return this proxy in the enclosed envelope. No
postage is required.
Date: ______________, 1998
-------------------------------------------------
Signature of Stockholder
-------------------------------------------------
Signature of Stockholder (if jointly held)
Please date this proxy and sign your name exactly
as it appears hereon. Where there is more than
one owner, each should sign. When signing as an
attorney, administrator, executor, guardian, or
trustee, please add your title as such. If
executed by a corporation, the proxy should be
signed by a duly authorized officer and state the
full name of the corporation.
