<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 9, 1998
REGISTRATION NO. 333-62945
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- --------------------------------------------------------------------------------
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 1
TO
FORM F-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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TELEGLOBE INC.
(Exact name of registrant as specified in its charter)
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CANADA 4813 98-0115049
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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1000, RUE DE LA GAUCHETIERE OUEST
MONTREAL, QUEBEC, CANADA H3B 4X5
(514) 868-8124
(Address, including ZIP code, and telephone number, including area code, of
registrant's principal executive offices)
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CT CORPORATION SYSTEM
1633 BROADWAY
NEW YORK, NEW YORK 10019
(212) 664-1666
(Name, address, including ZIP code, and telephone number, including area code,
of agent for service in the United States)
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Copies Of All Communications To:
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PHILIP T. RUEGGER III, ESQ. FREDERICK S. GREEN, ESQ.
SIMPSON THACHER & BARTLETT WEIL, GOTSHAL & MANGES LLP
425 LEXINGTON AVENUE 767 FIFTH AVENUE
NEW YORK, NEW YORK 10017 NEW YORK, NEW YORK 10153
(212) 455-2000 (212) 310-8000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after the effectiveness of the Registration Statement and the
effective time of the merger of a subsidiary of Teleglobe Inc. with and into
EXCEL Communications, Inc., as described in the Agreement and Plan of Merger,
dated as of June 14, 1998, attached as Appendix A to the Information
Statement/Prospectus forming a part of this Registration Statement.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
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[EXCEL COMMUNICATIONS, INC. LOGO] [TELEGLOBE INC. LOGO]
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October 9, 1998
Dear EXCEL Stockholder:
The attached Information Statement/Prospectus provides you with detailed
information concerning the proposed merger of equals involving EXCEL
Communications, Inc. and Teleglobe Inc., which was announced on June 14, 1998.
We encourage you to read the attached Information Statement/Prospectus
carefully.
Your Board of Directors has carefully reviewed and considered the terms and
conditions of the proposed business combination and believes it will create
additional opportunities for EXCEL stockholders by providing a platform for the
acceleration of EXCEL's business plan. The combination of EXCEL's strong
channels of distribution with TELEGLOBE's extensive intercontinental network and
broad product offering better positions EXCEL to introduce new products to
existing customers, to expand into new geographic markets and to realize
international network cost savings. The Boards of Directors of EXCEL and
TELEGLOBE have agreed (each by unanimous approval) to the terms and conditions
of the merger.
This merger of equals will create the fourth largest long-distance
telecommunications carrier in North America, with a global network reaching
approximately 240 countries and territories and with 4,800 employees worldwide
serving approximately 380 carriers.
On June 14, 1998, holders of a majority of the outstanding shares of EXCEL
common stock approved the merger by executing written consents approving a
Merger Agreement dated the same date. THEREFORE, NO FURTHER VOTE OF THE EXCEL
STOCKHOLDERS IS REQUIRED TO APPROVE THE MERGER OR THE MERGER AGREEMENT. Under
the Merger Agreement, EXCEL will merge with a subsidiary of TELEGLOBE, with
EXCEL surviving as a wholly owned subsidiary of TELEGLOBE, and each outstanding
share of EXCEL common stock will be converted into the right to receive .885 of
a common share of TELEGLOBE. Upon completion of the merger, which is expected to
occur before the end of November 1998, each EXCEL stockholder will receive
additional information about the transaction, including instructions on how to
exchange shares of EXCEL common stock into TELEGLOBE common shares. Following
the merger, EXCEL stockholders will hold approximately 48.6% of the
fully-diluted TELEGLOBE common shares.
Stockholders may obtain additional information about both companies from
documents on file with the Securities and Exchange Commission and about
TELEGLOBE from documents on file with the Canadian securities authorities.
We are excited about the opportunities that lie ahead for the combined
company.
Very truly yours,
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/s/ KENNY A. TROUT /s/ CHARLES SIROIS
Kenny A. Troutt Charles Sirois
Chairman and Chief Executive Officer Chairman and Chief Executive Officer
EXCEL Communications, Inc. Teleglobe Inc.
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[EXCEL COMMUNICATIONS, INC. LOGO] [TELEGLOBE INC. LOGO]
INFORMATION STATEMENT PROSPECTUS
</TABLE>
We are sending you this Information Statement/Prospectus to describe the
proposed merger of equals involving EXCEL Communications, Inc. ("EXCEL") and
Teleglobe Inc. ("TELEGLOBE"). When we complete this merger, EXCEL will become a
wholly owned subsidiary of TELEGLOBE and each of your shares of EXCEL common
stock will be converted into .885 of a TELEGLOBE common share. We will round the
total number of TELEGLOBE common shares you receive down to the nearest whole
number, however, and you will receive a cash payment for any remaining fraction
of a share.
We expect the merger to be a reorganization in which no gain or loss will
be recognized for federal income tax purposes by EXCEL or TELEGLOBE. In that
case, no gain or loss will be recognized for federal income tax purposes by you
except with respect to any cash you receive in place of a fractional TELEGLOBE
common share.
Certain of EXCEL's stockholders, Troutt Partners, Ltd., The Troutt Family
Trust and Austex Enterprises, Ltd., have already approved the merger by signing
a written stockholders' consent. Because these stockholders own a majority of
EXCEL's outstanding shares, no further vote of EXCEL stockholders is necessary
to approve the merger. WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED
NOT TO SEND US A PROXY. As we explain in this Information Statement/Prospectus,
however, completion of the merger is still subject to certain conditions. We
cannot predict with certainty when we will complete the merger, but we hope to
complete it before the end of November 1998. SEE "RISK FACTORS" BEGINNING ON
PAGE 16 OF THIS INFORMATION STATEMENT/PROSPECTUS FOR A DISCUSSION OF CERTAIN
MATTERS WHICH SHOULD BE CAREFULLY CONSIDERED BY HOLDERS OF EXCEL COMMON STOCK IN
EVALUATING THE EFFECTS OF THE MERGER ON THEIR SECURITIES.
This Information Statement/Prospectus is also TELEGLOBE's prospectus for
the TELEGLOBE common shares it will issue to EXCEL stockholders in the merger.
TELEGLOBE will list its common shares to be issued in the merger on the New York
Stock Exchange, the Montreal Exchange and The Toronto Stock Exchange.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE OR CANADIAN PROVINCIAL SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY OTHER SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS INFORMATION
STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This Information Statement/Prospectus is dated October 9, 1998, and was
first mailed to stockholders of EXCEL on or about October 9, 1998.
<PAGE> 4
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q. WHAT IS THE PROPOSED TRANSACTION?
A. EXCEL and TELEGLOBE will combine their businesses in a merger of equals in
which EXCEL will merge with a subsidiary of TELEGLOBE (the "Merger"). As a
result, EXCEL will become a wholly owned subsidiary of TELEGLOBE, and EXCEL
stockholders will exchange their shares of EXCEL common stock for TELEGLOBE
common shares as described below.
Q. WHAT EFFECT WILL THE MERGER HAVE ON MY EXCEL SHARES?
A. Each share of EXCEL common stock that you own will be exchanged for .885 of
a TELEGLOBE common share (the "Exchange Ratio"). You will receive a cash
payment in place of any fractional TELEGLOBE common share you would
otherwise have received.
For example, if you own 100 shares of EXCEL common stock, you will receive
88 TELEGLOBE common shares plus cash equal to the market value of one-half
of a TELEGLOBE common share at the time of the Merger. If you own 1,000
shares of EXCEL common stock, you will receive 885 TELEGLOBE common shares
and no cash payment.
Q. WHAT IS THE TOTAL VALUE OF THE TRANSACTION AND WILL IT CHANGE BETWEEN
NOW AND THE TIME THE MERGER IS COMPLETED?
A. Based on the closing price of the TELEGLOBE common shares on the New York
Stock Exchange and the number of shares of EXCEL common stock outstanding on
October 5, 1998, the total value of the common shares that TELEGLOBE will
issue in the Merger will be about $2.6 billion. The Exchange Ratio is a
fixed exchange ratio, which means that it will not change even if the
trading price of the TELEGLOBE common shares changes. Therefore, the market
value of the TELEGLOBE common shares you will receive in the Merger will
increase or decrease as the price of the TELEGLOBE common shares increases
or decreases.
Q. HOW DOES THE MARKET VALUE OF THE TELEGLOBE COMMON SHARES I WILL
RECEIVE COMPARE WITH EXCEL'S TRADING PRICES?
A. The decision of EXCEL's Board of Directors to approve the Merger was a
strategic decision with long-term implications for EXCEL and its
stockholders. The decision was based on a number of important factors, one
of which was the market value of the TELEGLOBE common shares to be received
in the Merger. For a detailed discussion of these important factors, see
"The Merger -- Factors Considered by the EXCEL Board" on pages 25-29.
EXCEL's per share closing price on the New York Stock Exchange was $19 11/16
on October 5, 1998 (the most recent practicable date prior to the date of
this Information Statement/Prospectus) and $27 9/16 on June 12, 1998 (the
last full trading day prior to the announcement of the Merger). EXCEL's
average per share closing price on the New York Stock Exchange for the
twenty consecutive trading days prior to and including June 12, 1998 was
$23.74. Using the TELEGLOBE per share closing price (split-adjusted) on the
New York Stock Exchange of $22 9/16 on October 5, 1998 and of $25 13/16 on
June 12, 1998, each share of EXCEL common stock, if exchanged based on such
prices, would be exchanged for TELEGLOBE common shares having a market value
of $19.97 and $22.84, respectively. Using TELEGLOBE's average per share
closing price (split-adjusted) on the New York Stock Exchange for the twenty
consecutive trading days prior to and including June 12, 1998 of $25.64,
each share of EXCEL common stock, if exchanged based on such price, would be
exchanged for TELEGLOBE common shares having a market value of $22.69.
As the Exchange Ratio is fixed, the actual market value of the TELEGLOBE
common shares received in the Merger will be based on the market price of
the TELEGLOBE common shares at the time of the Merger.
ii
<PAGE> 5
Q. WHERE WILL MY NEW TELEGLOBE COMMON SHARES TRADE AFTER THE MERGER?
A. The TELEGLOBE common shares you will receive will be listed on the New York
Stock Exchange, the Montreal Exchange and The Toronto Stock Exchange.
Q. WHY IS THERE NO STOCKHOLDER VOTE?
A. Troutt Partners Ltd., The Troutt Family Trust and Austex Enterprises, Ltd.
together own about 54% of all of the shares of EXCEL common stock and
control about 54% of the voting power of EXCEL. On the day that TELEGLOBE
and EXCEL signed the merger agreement for the Merger, these three entities
gave their written consent to the Merger. Their consents satisfied the
stockholder approval requirements for the Merger under Delaware law, so no
separate stockholder vote is necessary. Even though these three entities
hold controlling voting rights, they will exchange their shares of EXCEL
common stock for TELEGLOBE common shares at the same Exchange Ratio as other
EXCEL stockholders.
Q. WHAT IS THE TAX IMPACT OF THE MERGER ON EXCEL STOCKHOLDERS?
A. The Merger has been structured to qualify as a nontaxable transaction under
the U.S. Internal Revenue Code. As a result, it is expected that EXCEL
stockholders will not recognize any taxable gain or loss for U.S. federal
income tax purposes on the exchange of their shares of EXCEL common stock
for TELEGLOBE common shares in the Merger, except with respect to any cash
payments they receive in place of fractional TELEGLOBE common shares.
Q. WHAT HAS BEEN THE DIVIDEND POLICY OF EXCEL AND TELEGLOBE?
A. EXCEL does not pay regular cash dividends and does not expect to do so in
the future. TELEGLOBE has paid regular quarterly cash dividends and has
recently increased the quarterly dividend rate to CDN$0.085 per common share
(approximately U.S.$0.055 per common share based on the CDN$/US$ exchange
rate as of October 5, 1998). TELEGLOBE presently intends to continue this
policy after the Merger. The payment of dividends in the future will depend
on TELEGLOBE's financial condition and earnings, business conditions and
other factors.
Q. HOW WILL THE MERGER BE TREATED FOR ACCOUNTING PURPOSES?
A. The Merger will be accounted for as a "pooling of interests" under U.S.
generally accepted accounting principles. Pooling of interests accounting
means that the book value of EXCEL will be carried over to TELEGLOBE's
balance sheet and the new combined company will be treated as if the two
companies had always been combined. The Merger will be accounted for as a
"purchase" under Canadian generally accepted accounting principles. See
"Notes to Unaudited Pro Forma Condensed Combined Financial Statements" on
page 67, "Financial Statement Presentation and Exchange Rate Information" on
page 13 and "The Merger -- Accounting Treatment" on page 50 for further
information regarding accounting and financial reporting and the differences
between U.S. and Canadian generally accepted accounting principles.
Q. AM I ENTITLED TO APPRAISAL RIGHTS?
A. No. Under Delaware law, which governs EXCEL and the Merger, you are not
entitled to appraisal rights.
Q. WHAT DO I NEED TO DO NOW?
A. Nothing. After the Merger is completed, you will receive written
instructions and a letter of transmittal for exchanging your shares of EXCEL
common stock for TELEGLOBE common shares and receiving your cash payment in
place of any fraction of a TELEGLOBE common share. Please do not send your
EXCEL share certificates until you receive the instructions and letter of
transmittal.
iii
<PAGE> 6
Q. WHEN DO YOU EXPECT TO COMPLETE THE MERGER?
A. We must still satisfy a number of conditions before we can complete the
Merger, but we hope to complete the Merger before the end of November 1998.
However, delays in satisfying these conditions could delay the Merger.
Q. WHAT PERIODIC REPORTS CAN I EXPECT TO RECEIVE AS A TELEGLOBE
SHAREHOLDER?
A. After the Merger, you will receive the same periodic reports that TELEGLOBE
currently provides to its shareholders under Canadian law. These reports
include Annual Reports (which include audited annual consolidated financial
statements), unaudited quarterly consolidated financial statements (unless
you notify TELEGLOBE of your desire not to receive these reports) and proxy
statements and related materials for annual and special meetings of
shareholders. In addition, you will be able to request TELEGLOBE's Annual
Information Form.
Q. WHERE CAN I FIND MORE INFORMATION ABOUT TELEGLOBE AND EXCEL?
A. From various sources described under "Where You Can Find More Information"
on page 95 of this Information Statement/Prospectus.
iv
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CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
This Information Statement/Prospectus contains forward-looking statements,
including (without limitation) statements concerning possible or assumed future
results of operations of EXCEL and TELEGLOBE set forth under "The
Merger -- EXCEL's and TELEGLOBE's Reasons for the Merger," "-- Factors
Considered by the EXCEL Board" and "-- Opinion of the Financial Advisor to the
EXCEL Board" and those preceded by, followed by or that include the words
"believes," "expects," "anticipates" or similar expressions. For those
statements, EXCEL, TELEGLOBE and North Merger Sub Corporation (the wholly owned
subsidiary of TELEGLOBE which will merge into EXCEL) claim the protection of the
safe harbor for forward-looking statements contained in the Private Securities
Litigation Reform Act of 1995. You should understand that the following
important factors, in addition to those discussed under "Risk Factors" and
elsewhere in this document and in the documents which are incorporated herein by
reference, could affect the future results of EXCEL and TELEGLOBE, and could
cause those results to differ materially from those expressed in such
forward-looking statements: materially adverse changes in economic conditions in
the markets served by the companies; a significant delay in the expected closing
of the Merger ; future regulatory actions and conditions in the companies'
operating areas; competition from others in the telecommunications market and
other industry segments; failure to realize fully expected cost savings from the
Merger ; the ability to enter, the timing of entry and the profitability of
entering new markets; greater than expected costs or difficulties related to the
integration of the businesses of EXCEL and TELEGLOBE; and other risks and
uncertainties as may be detailed from time to time in EXCEL's and/or TELEGLOBE's
public announcements and filings or as may be set forth under "Risk Factors" on
page 16.
ENFORCEMENT OF CERTAIN CIVIL LIABILITIES
TELEGLOBE is organized under the laws of Canada pursuant to the Canada
Business Corporations Act. Some or all of TELEGLOBE's current directors and
officers and certain experts named herein may be residents of Canada, and all or
a substantial portion of the assets of such persons and a substantial part of
the assets of TELEGLOBE may be located outside the United States. Consequently,
it may be difficult for United States investors to effect service of process on
such persons, or to enforce, in United States courts, judgments (in original
actions or in actions for enforcement) against TELEGLOBE or such persons which
are obtained in the courts of the United States and which are predicated upon
the civil liability provisions of the federal securities laws of the United
States.
v
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TABLE OF CONTENTS
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PAGE
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QUESTIONS AND ANSWERS ABOUT THE MERGER...................... ii
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING
STATEMENTS................................................ v
ENFORCEMENT OF CERTAIN CIVIL LIABILITIES.................... v
SUMMARY..................................................... 1
FINANCIAL STATEMENT PRESENTATION AND EXCHANGE RATE
INFORMATION............................................... 13
THE COMPANIES............................................... 14
EXCEL..................................................... 14
TELEGLOBE................................................. 14
North Merger Sub Corporation.............................. 15
RISK FACTORS................................................ 16
Fixed Exchange Ratio...................................... 16
Risk of Nonrealization of Synergies and Other Benefits.... 16
End of Canadian Exclusive Mandate......................... 16
International Licensing and Regulatory Risks.............. 17
U.S. Regulatory Change.................................... 17
Competition............................................... 18
Dependence on Third-Party Carriers........................ 18
Tax Risks Associated with Foreign Operations.............. 18
Rapid Expansion and Growth................................ 19
Dependence on Key Personnel............................... 19
Shares Eligible for Future Sale........................... 19
Influence by Certain Shareholders......................... 19
Enforceability of Civil Liabilities....................... 20
Certain Stockholder Litigation............................ 20
Regulation and Management of EXCEL's Independent
Representatives........................................ 21
Interests of Management................................... 21
THE MERGER.................................................. 21
Background................................................ 22
EXCEL's and TELEGLOBE's Reasons for the Merger............ 25
Factors Considered by the EXCEL Board..................... 25
Opinion of the Financial Advisor to the EXCEL Board....... 29
Terms of the Merger....................................... 36
Exchange of Certificates in the Merger.................... 37
Listing of the TELEGLOBE Common Shares.................... 37
Representations and Warranties............................ 37
Businesses of EXCEL and TELEGLOBE Pending the Merger...... 38
Transition Arrangements................................... 39
Other Covenants........................................... 39
No Solicitation........................................... 39
Conditions; Waivers....................................... 40
Amendment; Termination.................................... 42
Termination Fees; Expenses................................ 43
United States Federal Income Tax Consequences............. 43
Canadian Federal Income Tax Consequences.................. 46
Regulatory Approvals...................................... 47
Canadian Foreign Ownership Considerations................. 49
Resale of TELEGLOBE Common Shares Issued in the Merger;
Affiliates............................................. 49
Stock Exchanges........................................... 50
Delisting and Deregistration of EXCEL Common Stock;
Cessation of EXCEL Periodic Reporting.................. 50
Accounting Treatment...................................... 50
Interests of Certain Persons in the Merger................ 51
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vi
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EXCEL Directors Who Will Become TELEGLOBE Directors After
the Merger............................................. 54
EXCEL Directors After the Merger.......................... 54
Certain Stockholder Litigation............................ 54
No Appraisal Rights....................................... 55
OTHER AGREEMENTS............................................ 55
Voting Agreements......................................... 55
Stock Option Agreements................................... 57
Registration Rights Agreement............................. 58
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
STATEMENTS................................................ 60
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
STATEMENTS................................................ 67
DIVIDENDS AND MARKET PRICES................................. 77
EXCEL..................................................... 77
TELEGLOBE................................................. 78
SECURITY OWNERSHIP.......................................... 79
DIRECTORS AND MANAGEMENT OF TELEGLOBE FOLLOWING THE
MERGER.................................................... 80
Statement of TELEGLOBE Corporate Governance Practices..... 80
TELEGLOBE Board After the Merger.......................... 80
Officers of TELEGLOBE After the Merger.................... 81
COMPARISON OF STOCKHOLDERS' RIGHTS AND DESCRIPTION OF
TELEGLOBE COMMON SHARES FOLLOWING THE MERGER.............. 82
Classes and Series of Capital Stock....................... 82
TELEGLOBE Common Shares and Non-Voting Shares............. 82
TELEGLOBE Preferred Shares................................ 82
Annual Meeting of Stockholders............................ 84
Special Meetings of Stockholders.......................... 84
Quorum of Stockholders.................................... 85
Stockholder Action Without a Meeting...................... 85
Notice of Stockholder Proposals........................... 85
Access to Corporate Records and Financial Statements...... 85
Charter Amendments........................................ 86
By-law Amendments......................................... 86
Sale or Lease of Assets................................... 86
Preemptive Rights......................................... 87
Dividends and Distributions............................... 87
Appraisal and Dissent Rights.............................. 87
Stock Repurchases......................................... 88
Number and Qualification of Directors..................... 88
Filling Vacancies on the Board of Directors............... 89
Removal of Directors...................................... 90
Transactions with Directors............................... 90
Director and Officer Liability and Indemnification........ 91
Oppression Remedy......................................... 92
Derivative Action......................................... 92
Anti-Takeover Laws........................................ 93
Voluntary Dissolution..................................... 94
Vote on Extraordinary Corporate Transactions.............. 94
LEGAL OPINIONS.............................................. 94
EXPERTS..................................................... 95
WHERE YOU CAN FIND MORE INFORMATION......................... 95
INDEX OF DEFINED TERMS...................................... 98
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APPENDICES
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APPENDIX A Agreement and Plan of Merger, dated as of June 14, 1998,
among Teleglobe Inc., North Merger Sub Corporation and EXCEL
Communications, Inc.
APPENDIX B Opinion of Lehman Brothers
APPENDIX C Form of Teleglobe Articles Amendment
APPENDIX D EXCEL Consent and Voting Agreement, dated as of June 14,
1998, by and among Teleglobe Inc., Troutt Partners, Ltd.,
The Troutt Family Trust and Austex Enterprises Ltd.
APPENDIX E TELEGLOBE Consent and Voting Agreement, dated as of June 14,
1998, by and among EXCEL Communications, Inc. and Funds Nos.
650 and 724, by its manager, MacKenzie Financial Corporation
APPENDIX F TELEGLOBE Consent and Voting Agreement, dated as of June 14,
1998, by and between EXCEL Communications, Inc. and Capital
Communications CDPQ Inc. (English translation)
APPENDIX G TELEGLOBE Consent and Voting Agreement, dated as of June 14,
1998, by and between EXCEL Communications, Inc. and BCE Inc.
APPENDIX H TELEGLOBE Consent and Voting Agreement, dated as of June 14,
1998, by and between EXCEL Communications, Inc. and
Telesystem Telecom Ltd.
APPENDIX I EXCEL Stock Option Agreement, dated as of June 14, 1998, by
and between Teleglobe Inc. and EXCEL Communications, Inc.
APPENDIX J TELEGLOBE Stock Option Agreement, dated as of June 14, 1998,
by and between EXCEL Communications, Inc. and Teleglobe Inc.
APPENDIX K Form of Registration Rights Agreement, by and among
Teleglobe Inc. and the signatories thereto
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viii
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SUMMARY
This summary highlights selected information from this Information
Statement/Prospectus and may not contain all of the information that is
important to you. To understand the Merger fully and for a more complete
description of the legal terms of the Merger, you should read carefully this
entire document and the documents to which we have referred you. Except as
otherwise noted, all references to EXCEL include all subsidiaries and affiliates
of EXCEL, and all references to TELEGLOBE include all subsidiaries and
affiliates of TELEGLOBE. See "Where You Can Find More Information" and
"Cautionary Statement Concerning Forward-Looking Statements." On page 98 you
will find an index of defined terms which are used in this document. Unless
otherwise indicated, all dollar amounts herein are in U.S. dollars. Unless
otherwise indicated, all translations of Canadian dollar amounts to U.S. dollars
use the noon buying rate in New York City for cable transfers in Canadian
dollars as certified for customs purposes by the Federal Reserve Bank (the "Noon
Buying Rate"). The Noon Buying Rate on October 5, 1998 (the most recent
practicable date) was CDN $1.00 = $0.6423. See "Financial Statement Presentation
and Exchange Rate Information."
THE COMPANIES
EXCEL Communications, Inc.
8750 North Central Expressway
Suite 2000
Dallas, Texas 75231
(214) 863-8000
EXCEL provides long distance telecommunications and paging services to both
residential and commercial customers in the United States. EXCEL has developed
several marketing channels for its services, including direct sales to
residential, commercial and wholesale customers through independent
representatives, dealers and internal sales personnel, as well as direct mail
marketing of several dial-around products. EXCEL is currently the fifth largest
long distance company in the United States based on the number of presubscribed
lines.
Teleglobe Inc.
1000, rue de La Gauchetiere ouest
Montreal, Quebec, Canada H3B 4X5
(514) 868-8124
TELEGLOBE is an established and expanding global facilities-based provider
of international telecommunications services. TELEGLOBE has an international
network linking approximately 240 countries and territories. TELEGLOBE believes
that this network is one of the most extensive intercontinental facilities-
based networks among North American carriers. The services TELEGLOBE provides
include voice, data, Internet and value-added services, primarily on a wholesale
basis, to approximately 380 carriers and over 100 Internet service providers in
more than 140 countries.
EXCEL'S REASONS FOR THE MERGER (see page 25)
EXCEL's Board of Directors (the "EXCEL Board") believes that the Merger
provides EXCEL with a strategic opportunity to expand its business in a number
of important ways and that EXCEL's competitive position and overall performance
will benefit from TELEGLOBE's business, technological and financial resources.
The EXCEL Board also believes that the Exchange Ratio provides fair value to you
for your shares of EXCEL common stock, par value $0.001 per share ("EXCEL Common
Stock"), and that the TELEGLOBE common shares, without par value ("TELEGLOBE
Common Shares"), that you will receive in the Merger will allow you to continue
your investment in a combined enterprise that the EXCEL Board believes will be
well positioned to take advantage of new opportunities and to meet competitive
challenges in the communications industry. Please note that achieving these
benefits is subject to important factors that could affect the future results of
EXCEL and TELEGLOBE. See "Cautionary Statement Concerning Forward-Looking
Statements" on page v.
1
<PAGE> 12
NO FURTHER STOCKHOLDER APPROVAL REQUIRED; EXCEL BOARD APPROVAL (see page 21)
WE ARE NOT ASKING YOU TO VOTE ON THE MERGER. On June 14, 1998, Troutt
Partners, Ltd., The Troutt Family Trust and Austex Enterprises, Ltd., which
together hold about 54% of EXCEL's voting power, gave their written consents to
the Merger. Their consents were sufficient for stockholder approval of the
Merger and no other vote is required.
The EXCEL Board believes that the Merger is in your best interest and in
EXCEL's best interest. The EXCEL Board has unanimously approved the Merger.
FAIRNESS OPINION (see page 29)
Lehman Brothers, EXCEL's financial advisor, has provided a fairness opinion
to the EXCEL Board as to the fairness of the Exchange Ratio to EXCEL
stockholders from a financial point of view. We have attached a copy of Lehman
Brothers' fairness opinion as Appendix B to this Information
Statement/Prospectus. We encourage you to read this opinion.
RISK FACTORS (see page 16)
We refer you to "Risk Factors" on page 16 for a discussion of certain
matters which should be carefully considered by holders of EXCEL Common Stock in
evaluating the effects of the Merger on their securities, including:
- the potential effect of market fluctuations on the value of the TELEGLOBE
Common Shares to be received in the Merger;
- costs incurred in connection with the Merger and potential difficulties
in realizing the benefits expected from the Merger in the amounts and in
the time frames expected;
- the termination on October 1, 1998 of TELEGLOBE's exclusive mandate to
provide Canadian-overseas facilities-based services;
- international licensing and regulatory risks; and
- (i) competition, (ii) EXCEL's dependence on third party carriers to carry
telephone traffic through leased transmission lines, (iii) the dependence
of the combined company's business on certain key personnel, (iv) the
potential for influence by certain significant shareholders over the
policies of the combined company, (v) the regulation and management of
EXCEL's independent representatives (who may be responsible for a
significant portion of the combined company's new customers) and (vi)
certain other matters.
THE MERGER
THE MERGER AGREEMENT (see page 36)
The Agreement and Plan of Merger, dated as of June 14, 1998 (the "Merger
Agreement"), is the legal document that governs the Merger. It is attached as
Appendix A to this Information Statement/Prospectus, and we encourage you to
read it carefully.
CONDITIONS TO THE MERGER (see page 40)
The completion of the Merger depends upon meeting a number of conditions,
including, among others, the following:
- receipt of regulatory approvals and consents under applicable U.S. and
Canadian law (which approvals and consents have been received);
- receipt of legal opinions about certain tax consequences of the Merger;
2
<PAGE> 13
- receipt of a ruling from the Internal Revenue Service (the "IRS")
concerning certain tax consequences of the Merger;
- the listing of the TELEGLOBE Common Shares to be issued in the Merger on
The New York Stock Exchange, Inc. (the "NYSE"), the Montreal Exchange
(the "ME") and The Toronto Stock Exchange (the "TSE") (which listings
have been approved, subject to official notice of issuance or customary
requirements, as applicable); and
- the absence of certain material adverse changes in EXCEL or TELEGLOBE.
It is a non-waivable condition to the obligations of EXCEL and TELEGLOBE to
consummate the Merger that each of EXCEL and TELEGLOBE receive legal opinions
about certain tax consequences of the Merger. See "United States Federal Income
Tax Consequences." All of the other conditions to the completion of the Merger
are waivable by the party entitled to the benefits thereof. The Merger Agreement
will terminate on June 14, 1999, if the conditions to the Merger are not
satisfied by such time. However, EXCEL and TELEGLOBE presently anticipate that
the conditions to the Merger set forth in the Merger Agreement will be satisfied
in time to permit the completion of the Merger before the end of November 1998.
REGULATORY APPROVALS (see page 47)
In order to complete the Merger, EXCEL and TELEGLOBE must receive
authorizations from various U.S. and Canadian federal and state or provincial
governmental agencies (which authorizations have been obtained as of the date of
this Information Statement/Prospectus). These authorizations relate primarily
to:
- competition and securities law issues; and
- the approval of transfer of control with respect to licenses granted by
the Federal Communications Commission (the "FCC") and state public
utility commissions.
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES (see page 43)
The Merger has been structured to qualify as a nontaxable transaction under
the United States Internal Revenue Code of 1986, as amended (the "Code"). It is
a non-waivable condition to the obligations of EXCEL and TELEGLOBE to consummate
the Merger that EXCEL and TELEGLOBE shall have received opinions (i) from Weil,
Gotshal & Manges LLP and Goodman, Phillips & Vineberg, respectively, to the
effect that the Merger will be treated for U.S. federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code and that
TELEGLOBE, North Merger Sub Corporation and EXCEL will each be a party to the
reorganization within the meaning of Section 368(b) of the Code, (ii) as to
EXCEL, from Weil, Gotshal & Manges LLP, that no gain or loss will be recognized
for U.S. federal income tax purposes by the holders of shares of EXCEL Common
Stock as a result of the Merger (except with respect to any cash received in
lieu of fractional shares) and (iii) as to TELEGLOBE, from Goodman, Phillips &
Vineberg, that no gain or loss will be recognized by TELEGLOBE, North Merger Sub
Corporation or EXCEL as a result of the Merger. See "The Merger -- United States
Federal Income Tax Consequences."
ACCOUNTING TREATMENT (see page 50)
The Merger will be accounted for as a "pooling of interests" under U.S.
generally accepted accounting principles ("U.S. GAAP"), which means that the
book value of the assets, liabilities and stockholders' equity of EXCEL will be
carried over to the consolidated balance sheet of TELEGLOBE, and no goodwill
will be created for TELEGLOBE. The Merger will be accounted for as a "purchase"
under Canadian generally accepted accounting principles ("Canadian GAAP"). The
rules for accounting for business combinations under Canadian GAAP differ in
many significant respects from the rules for accounting for business
combinations under U.S. GAAP. These rules require the Merger to be treated as a
purchase under Canadian GAAP. Under Canadian GAAP, when an "acquiror" is
identified in connection with a business combination, that combination must be
accounted for using the principles of purchase accounting. It has been
interpreted by Canadian regulators that, under Canadian GAAP, an acquiror will
be identified in connection with a
3
<PAGE> 14
business combination if 55% or more of the voting shares of the combined entity
are held by the previous shareholders of one of the combining entities. Because
it is anticipated that the current TELEGLOBE shareholders will own in excess of
55% of the total number of outstanding shares of the combined company, under
Canadian GAAP, TELEGLOBE will be identified as the acquiror, requiring the
Merger to be accounted for as a purchase under Canadian GAAP. The principles of
pooling of interests accounting under U.S. GAAP do not include provisions
comparable to those discussed above. Accordingly, the Merger will be accounted
for as a pooling of interests under U.S. GAAP and TELEGLOBE cannot alternatively
use purchase accounting under U.S. GAAP.
The availability of pooling accounting treatment under either U.S. GAAP or
Canadian GAAP is not a condition to the closing of the Merger. See "Notes to
Unaudited Pro Forma Condensed Combined Financial Statements" for certain effects
of and differences between pooling of interests and purchase accounting with
respect to the combined company after the Merger.
TERMINATION (see page 42)
The Merger Agreement may be terminated, and the Merger abandoned, only in a
very limited number of circumstances, including, among others, the following:
(i) the parties' agreement to terminate the Merger Agreement;
(ii) by TELEGLOBE or EXCEL if the Merger is not completed by June 14,
1999;
(iii) by TELEGLOBE or EXCEL if any law or court order permanently
prohibits the Merger or if any required regulatory approvals are not
obtained (which approvals have been obtained as of the date of this
Information Statement/Prospectus);
(iv) by TELEGLOBE or EXCEL if the other party materially breaches its
obligations or representations or warranties under the Merger Agreement; or
(v) by TELEGLOBE or EXCEL if any third person becomes the owner of
more than 25% of the voting stock of the other.
TERMINATION FEES AND EXPENSES (see page 43)
The Merger Agreement requires EXCEL to pay TELEGLOBE a termination fee of
$120 million in cash, plus out-of-pocket expenses relating to the Merger, if
TELEGLOBE terminates the Merger Agreement under the circumstances set forth in
clause (v) under "Termination" above.
The Merger Agreement requires TELEGLOBE to pay EXCEL a termination fee of
$120 million in cash, plus out-of-pocket expenses relating to the Merger, if
EXCEL terminates the Merger Agreement under the circumstances set forth in
clause (v) under "Termination" above.
STOCK OPTION AGREEMENTS (see page 57)
EXCEL and TELEGLOBE each have entered into stock option agreements giving
the other the right to acquire up to 19.9% of the other's common shares
outstanding as of the date of the Merger Agreement upon a termination of the
Merger Agreement by the other under the circumstances set forth in clause (iv)
under "Termination" above (if at the time of termination an Acquisition Proposal
is pending) or clause (v) under "Termination" above.
EFFECTS OF THE MERGER ON THE RIGHTS OF EXCEL STOCKHOLDERS (see page 82)
As a result of the Merger, you will become a shareholder of TELEGLOBE.
TELEGLOBE is governed by Canadian law and by its articles of incorporation and
by-laws. Your rights under these provisions differ from your rights as a
stockholder of EXCEL. See "Comparison of Stockholders' Rights and Description of
TELEGLOBE Common Shares Following the Merger" on page 82.
4
<PAGE> 15
INTERESTS OF CERTAIN OFFICERS, DIRECTORS AND STOCKHOLDERS IN THE MERGER (see
page 51)
You should be aware that certain officers, directors and stockholders of
EXCEL have certain interests in the Merger that are different from, or in
addition to, the interests of stockholders of EXCEL generally. These persons
include (i) the directors and officers of EXCEL, who may benefit from certain
indemnification and directors' and officers' insurance provisions in the Merger
Agreement, (ii) Nicholas A. Merrick, Stephen G. Canton, J. Christopher Dance,
Kenneth Hilton, Lester M. Lichter, Craig E. Holmes and Paul D. Fletcher,
officers or directors of EXCEL whose existing stock options will, by their
terms, become fully exercisable upon completion of the Merger, (iii) certain
persons who could be deemed to be affiliates of TELEGLOBE after the Merger, who
will receive registration rights for their TELEGLOBE Common Shares received in
the Merger, and (iv) BCE Inc. ("BCE"), a significant shareholder of TELEGLOBE
and EXCEL which has certain contract rights that will be amended upon completion
of the Merger. Please see "The Merger -- Interests of Certain Persons in the
Merger" on page 51 for more information concerning these persons and these
interests.
5
<PAGE> 16
SUMMARY SELECTED HISTORICAL FINANCIAL DATA
EXCEL
The following tables set forth selected consolidated financial data for
EXCEL as of the dates and for the periods indicated, and have been prepared in
accordance with U.S. GAAP. The financial data for each of the years ended
December 31, 1993, 1994, 1995, 1996 and 1997 are derived from audited financial
statements of EXCEL. The financial data for the six months ended June 30, 1997
and 1998 are derived from unaudited consolidated financial statements of EXCEL,
which, in the opinion of EXCEL management, contain all adjustments (consisting
only of normal recurring adjustments) necessary for a fair presentation thereof.
The results of operations for the six months ended June 30, 1998 are not
necessarily indicative of the results to be expected for the full year. The data
set forth below in this table are qualified in their entirety by, and should be
read in conjunction with, the Consolidated Financial Statements of EXCEL and the
related notes thereto and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" of EXCEL incorporated herein by reference.
See "Where You Can Find More Information."
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------------------------------- -------------------
1993 1994 1995 1996 1997(1) 1997 1998
------- -------- -------- ---------- ---------- -------- --------
(IN THOUSANDS OF US DOLLARS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Communications services............... $24,198 $108,819 $363,301 $1,090,649 $1,333,101 $596,599 $950,292
Marketing services(2)................. 6,650 43,339 143,397 260,653 121,251 65,342 33,935
------- -------- -------- ---------- ---------- -------- --------
Total revenues.......................... 30,848 152,158 506,698 1,351,302 1,454,352 661,941 984,227
Operating expenses:
Communication......................... 13,761 58,925 209,995 596,598 716,781 322,485 525,020
Selling, general and administrative... 13,351 66,157 217,751 530,295 504,421 220,502 312,903
Depreciation and amortization......... 190 346 1,239 6,880 23,676 7,930 25,769
Non-recurring charges(3).............. -- -- -- -- 64,637 -- --
------- -------- -------- ---------- ---------- -------- --------
Total operating expenses................ 27,302 125,428 428,985 1,133,773 1,309,515 550,917 863,692
------- -------- -------- ---------- ---------- -------- --------
Operating income........................ 3,546 26,730 77,713 217,529 144,837 111,024 120,535
------- -------- -------- ---------- ---------- -------- --------
Interest (expense)...................... (75) (295) (593) (261) (8,551) (32) (18,879)
Other income (expense).................. 24 83 (5,781) 12,647 7,301 4,186 962
------- -------- -------- ---------- ---------- -------- --------
Income before income taxes.............. 3,495 26,518 71,339 229,915 143,587 115,178 102,618
Provision for income taxes.............. 1,126 10,648 26,893 85,488 55,661 43,083 42,846
------- -------- -------- ---------- ---------- -------- --------
Income before cumulative effect of
change in accounting principle........ 2,369 15,870 44,446 144,427 87,926 72,095 59,772
Cumulative effect of change in
accounting principle, net of income
taxes(4).............................. -- -- -- -- (65,214) (65,214) --
------- -------- -------- ---------- ---------- -------- --------
Net income.............................. $ 2,369 $ 15,870 $ 44,446 $ 144,427 $ 22,712 $ 6,881 $ 59,772
======= ======== ======== ========== ========== ======== ========
Basic net income per share(4)(5)........ $ 0.03 $ 0.18 $ 0.46 $ 1.38 $ 0.20 $ 0.06 $ 0.44
======= ======== ======== ========== ========== ======== ========
Diluted net income per common and
equivalent share:(4)(5)
Income before cumulative effect of
change in accounting principle, net
of income taxes..................... $ 0.03 $ 0.18 $ 0.46 $ 1.35 $ 0.76 $ 0.65 $ 0.44
Cumulative effect of change in
accounting principle, net of income
taxes............................... -- -- -- -- (0.56) (0.59) --
------- -------- -------- ---------- ---------- -------- --------
Diluted net income per share.......... $ 0.03 $ 0.18 $ 0.46 $ 1.35 $ 0.20 $ 0.06 $ 0.44
======= ======== ======== ========== ========== ======== ========
Cash dividends declared per share....... $ -- $ 0.05 $ 0.20 $ -- $ -- $ -- $ --
======= ======== ======== ========== ========== ======== ========
</TABLE>
6
<PAGE> 17
(continued)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
--------------------------------------------------- ---------------------
1993 1994 1995 1996 1997(1) 1997 1998
------ ------- -------- -------- ---------- -------- ----------
(IN THOUSANDS OF US DOLLARS, EXCEPT MINUTE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
SUPPLEMENTAL OPERATING DATA:
Long distance minutes of usage (in
millions of minutes)(6)................. 118.4 544.6 2,101.2 6,271.2 7,902.2 3,303.3 6,178.8
BALANCE SHEET DATA (AT PERIOD END):
Working capital........................... $ (186) $ 7,134 $ 1,071 $209,227 $ 31,599 $213,199 $ 77,757
Property and equipment, net............... 662 2,476 8,560 76,912 281,847 99,532 324,714
Total assets.............................. 9,058 59,412 203,581 579,164 1,637,016 475,707 1,716,165
Long-term obligations, net of current
maturities.............................. 313 3,369 345 100 477,292 70 541,874
Stockholders' equity...................... 1,995 13,635 37,708 322,281 752,707 302,170 795,515
</TABLE>
- ---------------
(1) On October 14, 1997, EXCEL completed its merger with Telco Communications
Group, Inc. ("Telco"). The merger with Telco was accounted for as a
purchase; accordingly, the operating results for Telco are included in
EXCEL's operating results from October 14, 1997, the effective date of such
merger. See Note 3 to the Consolidated Financial Statements incorporated
herein by reference.
(2) Revenues from marketing services include the effect of deferring a portion
of the cash received during each period and amortizing the deferred revenues
over 12 months. See Note 1 to the Consolidated Financial Statements
incorporated herein by reference.
(3) Results for 1997 include $64.6 million in non-recurring charges primarily
related to the consolidation and integration of Telco. See Note 4 to the
Consolidated Financial Statements incorporated herein by reference.
(4) Effective January 1, 1997, EXCEL changed its method of accounting for
subscriber acquisition costs. See Note 1 to the Consolidated Financial
Statements incorporated herein by reference.
(5) See Note 8 to the Consolidated Financial Statements incorporated herein by
reference for an explanation of the number of shares used in computing net
income per share.
(6) Long distance minutes of usage represent minutes billable to subscribers
during the period.
7
<PAGE> 18
TELEGLOBE
The following tables set forth selected consolidated financial data for
TELEGLOBE as of the dates and for the periods indicated, and have been prepared
in accordance with Canadian GAAP and U.S. GAAP. Dollar amounts are expressed in
Canadian dollars, except for convenience translations to U.S. dollars where
indicated. See "Financial Statement Presentation and Exchange Rate Information."
The financial data for each of the years ended December 31, 1993, 1994, 1995,
1996 and 1997 are derived from audited financial statements of TELEGLOBE. The
financial data for the six months ended June 30, 1997 and 1998 are derived from
unaudited consolidated financial statements of TELEGLOBE, which, in the opinion
of TELEGLOBE management, contain all adjustments (consisting only of normal
recurring adjustments) necessary for a fair presentation thereof. The results of
operations for the six months ended June 30, 1998 are not necessarily indicative
of the results to be expected for the full year. The data set forth below are
qualified in their entirety by, and should be read in conjunction with, the
Consolidated Financial Statements of TELEGLOBE and the related notes thereto and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" of TELEGLOBE, incorporated herein by reference. See "Where You Can
Find More Information" and "Financial Statement Presentation and Exchange Rate
Information."
Canadian GAAP:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------------
1993 1994 1995 1996 1997 1997(1)
----------- ----------- ----------- ----------- ----------- --------
(IN MILLIONS OF CDN$, EXCEPT PER SHARE AND CONVENIENCE TRANSLATION DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues......................... CDN$1,320.0 CDN$1,364.8 CDN$1,398.3 CDN$1,562.7 CDN$1,987.9 $1,350.8
Costs of revenues................ 888.3 863.0 831.4 956.7 1,269.7 862.8
----------- ----------- ----------- ----------- ----------- --------
Gross margin..................... 431.7 501.8 566.9 606.0 718.2 488.0
Expenses:
Operating expenses.............. 208.9 238.1 245.4 228.6 306.8 208.5
Depreciation and amortization... 103.9 129.3 164.3 163.4 129.6 88.1
Non-recurring items............. -- 8.5 (3.6) -- 17.7 12.0
----------- ----------- ----------- ----------- ----------- --------
Total expenses................... 312.8 375.9 406.1 392.0 454.1 308.6
----------- ----------- ----------- ----------- ----------- --------
Income from operations........... 118.9 125.9 160.8 214.0 264.1 179.4
Financial charges................ (18.0) (14.3) (38.2) (34.4) (35.4) (24.1)
----------- ----------- ----------- ----------- ----------- --------
Income from continuing operations
before income taxes............. 100.9 111.6 122.6 179.6 228.7 155.3
Provision for income taxes....... 42.8 42.8 56.5 72.0 110.3 74.9
----------- ----------- ----------- ----------- ----------- --------
Income from continuing
operations...................... 58.1 68.8 66.1 107.6 118.4 80.4
Income from discontinued
operations...................... 11.0 15.8 23.3 4.9 22.1 15.0
----------- ----------- ----------- ----------- ----------- --------
Net income....................... 69.1 84.6 89.4 112.5 140.5 95.4
Preferred dividends.............. -- 5.4 6.8 6.8 6.8 4.6
----------- ----------- ----------- ----------- ----------- --------
Net income to common
shareholders.................... CDN$ 69.1 CDN$ 79.2 CDN$ 82.6 CDN$ 105.7 CDN$ 133.7 $ 90.8
=========== =========== =========== =========== =========== ========
Basic net income per share(2).... CDN$ 0.62 CDN$ 0.68 CDN$ 0.71 CDN$ 0.90 CDN$ 1.06 $ 0.72
Diluted net income per common and
equivalent shares:(2)
Income from continuing
operations before
non-recurring items net of
related taxes................. CDN$ 0.51 CDN$ 0.55 CDN$ 0.47 CDN$ 0.80 CDN$ 0.99 $ 0.67
Income from continuing
operations.................... 0.51 0.52 0.50 0.80 0.85 0.58
Net income...................... 0.60 0.62 0.65 0.84 1.02 0.69
Cash dividends declared per
share:
Common and first series
preferred(2).................. CDN$ 0.16 CDN$ 0.18 CDN$ 0.20 CDN$ 0.23 CDN$ 0.29 $ 0.20
Second series preferred......... 2.00 2.00 2.00 2.00 0.67 0.46
Third series preferred.......... -- 1.08 1.35 1.35 1.35 0.92
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-----------------------------------
1997 1998 1998(1)
----------- ----------- -------
(IN MILLIONS OF CDN$, EXCEPT PER SHARE AND CONVENIENCE TRANSLATION DATA)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues......................... CDN$ 897.3 CDN$1,108.3 $753.1
Costs of revenues................ 571.0 697.8 474.2
----------- ----------- ------
Gross margin..................... 326.3 410.5 278.9
Expenses:
Operating expenses.............. 125.6 180.5 122.6
Depreciation and amortization... 80.2 72.1 49.0
Non-recurring items............. -- -- --
----------- ----------- ------
Total expenses................... 205.8 252.6 171.6
----------- ----------- ------
Income from operations........... 120.5 157.9 107.3
Financial charges................ (20.4) (13.5) (9.2)
----------- ----------- ------
Income from continuing operations
before income taxes............. 100.1 144.4 98.1
Provision for income taxes....... 43.6 60.0 40.8
----------- ----------- ------
Income from continuing
operations...................... 56.5 84.4 57.3
Income from discontinued
operations...................... 3.7 -- --
----------- ----------- ------
Net income....................... 60.2 84.4 57.3
Preferred dividends.............. 3.4 3.4 2.3
----------- ----------- ------
Net income to common
shareholders.................... CDN$ 56.8 CDN$ 81.0 $ 55.0
=========== =========== ======
Basic net income per share(2).... CDN$ 0.47 CDN$ 0.62 $ 0.42
Diluted net income per common and
equivalent shares:(2)
Income from continuing
operations before
non-recurring items net of
related taxes................. CDN$ 0.42 CDN$ 0.61 $ 0.41
Income from continuing
operations.................... 0.42 0.61 0.41
Net income...................... 0.44 0.61 0.41
Cash dividends declared per
share:
Common and first series
preferred(2).................. CDN$ 0.14 CDN$ 0.16 $ 0.11
Second series preferred......... 0.67 -- --
Third series preferred.......... 0.675 0.675 0.459
</TABLE>
8
<PAGE> 19
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------
1993 1994 1995 1996 1997
----------- ----------- ----------- ----------- -----------
(IN MILLIONS OF CDN$, EXCEPT MINUTE AND CONVENIENCE TRANSLATION DATA)
<S> <C> <C> <C> <C> <C>
SUPPLEMENTAL OPERATING
DATA:
TELEPHONE TRAFFIC (IN
MILLIONS OF MINUTES):(3)
Outbound Canada........... 761.5 861.2 897.9 914.6 1,112.4
International
Inbound................. 503.4 543.8 603.4 671.3 736.5
Global.................. 39.0 63.7 112.5 446.9 951.5
----------- ----------- ----------- ----------- -----------
Total international....... 542.4 607.5 715.9 1,118.2 1,688.0
----------- ----------- ----------- ----------- -----------
Total telephone traffic... 1,303.9 1,468.7 1,613.8 2,032.8 2,800.4
=========== =========== =========== =========== ===========
BALANCE SHEET DATA (AT
PERIOD END):
Working capital........... CDN$ (103.1) CDN$ (57.5) CDN$ 255.7 CDN$ 322.0 CDN$ 325.0
Property and equipment,
net..................... 1,240.3 1,330.7 1,146.4 1,107.6 1,267.0
Total assets.............. 1,768.2 1,934.4 2,080.3 2,310.4 2,584.0
Long-term obligations, net
of current portion...... 669.6 631.9 675.4 717.3 605.5
Stockholders' equity...... 630.9 811.7 873.5 939.2 1,114.5
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
------------------------------------
1997 1998 1998(1)
----------- ----------- --------
(IN MILLIONS OF CDN$, EXCEPT MINUTE AND CONVENIENCE TRANSLATION DATA)
<S> <C> <C> <C>
SUPPLEMENTAL OPERATING
DATA:
TELEPHONE TRAFFIC (IN
MILLIONS OF MINUTES):(3)
Outbound Canada........... 527.7 568.0
International
Inbound................. 350.4 366.8
Global.................. 393.8 735.7
----------- -----------
Total international....... 744.2 1,102.5
----------- -----------
Total telephone traffic... 1,271.9 1,670.5
=========== ===========
BALANCE SHEET DATA (AT
PERIOD END):
Working capital........... CDN$ 459.2 CDN$ 228.3 $ 155.1
Property and equipment,
net..................... 1,093.1 1,393.7 947.0
Total assets.............. 2,455.6 2,672.6 1,816.0
Long-term obligations, net
of current portion...... 708.0 613.6 416.9
Stockholders' equity...... 1,052.0 1,163.6 790.7
</TABLE>
U.S. GAAP
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
-------------------------------------------------- ----------------------
1995 1996 1997 1997(4) 1998 1998(4)
----------- ----------- ----------- -------- ----------- --------
(IN MILLIONS OF CDN$ OR US$, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues............................................ CDN$1,359.0 CDN$1,525.4 CDN$2,022.0 $1,459.9 CDN$1,090.9 $ 758.1
Income from continuing operations................... 29.4 116.1 39.8 28.8 105.7 73.4
Net income.......................................... 52.7 90.8 122.7 88.6 105.7 73.4
Basic earnings per share(2):
Income from continuing operations................. 0.14 0.88 0.25 0.18 0.79 0.55
Discontinued operations........................... 0.20 0.04 0.66 0.48 -- --
Extraordinary item................................ -- (0.26) -- -- -- --
Basic net income per share........................ 0.34 0.66 0.91 0.66 0.79 0.55
Diluted earnings per common and equivalent share(2):
Income from continuing operations................. 0.14 0.83 0.25 0.18 0.78 0.54
Discontinued operations........................... 0.20 0.04 0.63 0.45 -- --
Extraordinary item................................ -- (0.23) -- -- -- --
Diluted net income per share...................... 0.34 0.64 0.88 0.63 0.78 0.54
BALANCE SHEET DATA
(AT PERIOD END):
Total assets........................................ CDN$1,888.0 CDN$2,063.8 CDN$2,289.4 $1,602.6 CDN$2,386.9 $1,621.9
Long-term obligations, net of current portion....... 572.5 567.5 452.5 316.7 451.0 306.5
</TABLE>
- ---------------
(1) With the exception of U.S. GAAP data, Canadian dollar amounts have been
translated into U.S. dollars solely for the convenience of the reader at the
rate of CDN$1.00 = $0.6795 as of and for the year ended December 31, 1997
and as of and for the six months ended June 30, 1998 (in each case, at the
Noon Buying Rate as of June 30, 1998). The translated amounts should not be
construed as representations that the Canadian dollar has been, could have
been, or could in the future be, converted into U.S. dollars at these or any
other rate of exchange.
(2) Reflects the effect of a two-for-one stock split by way of a stock dividend,
effective June 15, 1998.
(3) Telephone traffic represents billable minutes as measured at TELEGLOBE's
switch sites.
(4) For purposes of U.S. GAAP, Canadian dollar amounts have been translated into
U.S. dollars using the average exchange rate for the period for the
statement of operations data and the period end exchange rate for the
balance sheet data (all rates being based on the Noon Buying Rate). This
presentation is not materially different from that which would be presented
had the most recent balance sheet date exchange rate been used.
9
<PAGE> 20
SUMMARY UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL DATA
The following unaudited income statement and pro forma balance sheet data
of the combined company have been prepared in accordance with U.S. GAAP and
illustrate the effect of the Merger, as accounted for under the pooling of
interests method, as if the Merger had occurred at the beginning of the earliest
period presented, for purposes of the pro forma income statement data, and on
June 30, 1998, for purposes of the pro forma balance sheet data. The pro forma
data is provided for information purposes only and is not necessarily indicative
of the results of operations or the financial condition that would have been
reported by the combined company had the Merger been in effect during those
periods or that may be reported in the future. Pro forma combined per share data
of EXCEL and TELEGLOBE give effect to the exchange of each share of EXCEL Common
Stock for .885 of a TELEGLOBE Common Share.
The following data should be read in conjunction with, and are qualified in
their entirety by, the Consolidated Financial Statements of EXCEL and TELEGLOBE
and the related notes thereto incorporated herein by reference and the Unaudited
Pro Forma Condensed Combined Financial Statements and the related notes thereto.
See "Where You Can Find More Information," "Financial Statement Presentation and
Exchange Rate Information" and "Unaudited Pro Forma Condensed Combined Financial
Statements."
<TABLE>
<CAPTION>
AS OF AND FOR
THE SIX
MONTHS ENDED
FOR THE YEAR ENDED DECEMBER 31, JUNE 30,
--------------------------------------------- ----------------
1995 1996 1997 1998
------------- ------------- ------------- ----------------
(IN THOUSANDS OF US DOLLARS, EXCEPT PER SHARE AND MINUTE DATA)
<S> <C> <C> <C> <C>
Income Statement Data:
Total revenues........................... $1,496,435 $2,469,565 $3,357,410 $1,742,290
Operating income......................... 161,500 338,069 231,577 248,310
Income from continuing operations........ 65,851 229,505 74,844 133,203
Income from continuing operations per
share................................. 0.28 0.99 0.28 0.52
Cash dividends declared per common
share................................. 0.18 0.08 0.10 0.06
Balance Sheet Data:
Working capital.......................... $ 235,009
Property and equipment, net.............. 914,272
Total assets............................. 3,338,033
Long-term debt and capital lease
obligations, net of current portion... 848,362
Stockholders' equity..................... 1,545,068
Supplemental Operating Data:
Total telephone traffic (in millions of
minutes).............................. 3,715.0 8,304.0 10,702.6 7,849.3
</TABLE>
10
<PAGE> 21
COMPARATIVE PER SHARE DATA
The following table sets forth, for the periods indicated, selected pro
forma per share amounts for the TELEGLOBE Common Shares after the Merger, pro
forma per share equivalent amounts for shares of the EXCEL Common Stock and the
corresponding historical per share data for shares of the EXCEL Common Stock and
the TELEGLOBE Common Shares, in accordance with U.S. GAAP, after giving effect
to the Merger and accounted for under the pooling of interests method. The
information presented is based upon, and is qualified in its entirety by, the
Consolidated Financial Statements and the related notes thereto of each of EXCEL
and TELEGLOBE incorporated herein by reference. See "Where You Can Find More
Information" and "Financial Statement Presentation and Exchange Rate
Information." You should not rely on the pro forma per share data as being
indicative of the results of operations or the financial condition that would
have been reported by the combined company had the Merger been in effect during
those periods or that may be reported in the future. See "Unaudited Pro Forma
Condensed Combined Financial Statements."
<TABLE>
<CAPTION>
AS OF OR FOR
THE SIX
AS OF OR FOR THE YEAR ENDED MONTHS ENDED
DECEMBER 31, JUNE 30,
--------------------------- ------------
1995 1996 1997 1998
------- ------- ------- ------------
(US DOLLARS)
<S> <C> <C> <C> <C>
Unaudited Pro Forma Combined(1)
Income from continuing operations per share(2)(3)...... $0.28 $0.99 $0.28 $0.52
Cash dividends declared per share(3)................... 0.18 0.08 0.10 0.06
Book value per share................................... 6.16
EXCEL Per Share Equivalents(4)
Income from continuing operations per share(2)(3)...... $0.25 $0.88 $0.25 $0.46
Cash dividends declared per share(3)................... 0.16 0.07 0.09 0.05
Book value per share................................... 5.45
EXCEL Historical
Income from continuing operations per share............ $0.46 $1.35 $0.76 $0.44
Cash dividends declared per share...................... 0.20 -- -- --
Book value per share................................... 6.51 5.88
TELEGLOBE Historical
Income from continuing operations per share(3)......... $0.10 $0.61 $0.18 $0.54
Cash dividends declared per share(3)................... 0.14 0.17 0.21 0.11
Book value per share................................... 5.53 5.71
</TABLE>
- ---------------
(1) The pro forma TELEGLOBE per share equivalents are equal to the Unaudited Pro
Forma Combined per share amounts, as the TELEGLOBE Common Shares will remain
unchanged after the Merger.
(2) On October 14, 1997, EXCEL acquired Telco in a business combination
accounted for as a purchase transaction. The pro forma effects of the
transaction with Telco have been included for the year ended December 31,
1997, as if the transaction was consummated as of January 1, 1997. See
"Where You Can Find More Information" for the respective purchase accounting
adjustments made.
(3) Reflects the effects of a two-for-one stock split by way of a stock
dividend, effective June 15, 1998.
(4) The EXCEL Per Share Equivalents were calculated by multiplying the Unaudited
Pro Forma Combined per share amounts by the Exchange Ratio.
11
<PAGE> 22
COMPARATIVE PER SHARE MARKET INFORMATION
The EXCEL Common Stock has been listed for trading on the NYSE since May
1996 under the symbol "ECI." The TELEGLOBE Common Shares have been listed for
trading on the NYSE since June 1997 and on the ME and the TSE since December
1985, in each case under the symbol "TGO."
The table below sets forth, for the calendar quarters indicated, the
reported high and low sale prices of the EXCEL Common Stock and the TELEGLOBE
Common Shares as reported on the NYSE Composite Tape (converted to decimals for
comparative purposes) and, for TELEGLOBE only, as reported on the ME and the
TSE, converted to U.S. dollars using a convenience translation rate based on the
Noon Buying Rate as of October 5, 1998, which was CDN$1.00 = US$0.6423.
<TABLE>
<CAPTION>
MARKET PRICE PER SHARE
---------------------------------------------------------------------
EXCEL TELEGLOBE(1)
--------------- ---------------------------------------------------
NYSE NYSE ME TSE
--------------- --------------- --------------- ---------------
HIGH LOW HIGH LOW HIGH LOW HIGH LOW
------ ------ ------ ------ ------ ------ ------ ------
(US DOLLARS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1996
First Quarter.......... N/A N/A N/A N/A $ 6.70 $ 5.58 $ 6.71 $ 5.58
Second Quarter(2)...... $47.00 $25.50 N/A N/A 6.97 6.13 6.99 6.13
Third Quarter.......... 31.88 19.50 N/A N/A 8.29 6.95 8.27 6.92
Fourth Quarter......... 35.50 20.00 N/A N/A 13.17 7.71 13.17 7.71
1997
First Quarter.......... $21.63 $13.00 N/A N/A $13.65 $12.04 $13.70 $11.97
Second Quarter(3)...... 29.38 12.38 $19.88 $16.25 17.66 12.40 17.66 12.40
Third Quarter.......... 28.88 20.69 20.31 15.88 17.98 13.98 17.98 14.05
Fourth Quarter......... 28.94 14.13 19.06 15.00 16.86 13.17 16.86 13.17
1998
First Quarter.......... $25.31 $13.00 $23.75 $14.25 $21.34 $13.04 $20.87 $13.04
Second Quarter......... 27.81 20.25 30.88 21.63 29.16 19.83 29.22 19.86
Third Quarter.......... 24.88 19.34 29.63 23.31 28.90 23.12 28.93 23.12
Fourth Quarter (through
October 5).......... 22.38 19.19 25.75 22.25 25.11 22.16 25.11 22.16
</TABLE>
- ---------------
(1) Prices are adjusted to reflect the effects of TELEGLOBE's two-for-one stock
split by way of a stock dividend, effective June 15, 1998.
(2) With respect to EXCEL, from May 10, 1996.
(3) With respect to TELEGLOBE, from June 12, 1997 on the NYSE.
On June 12, 1998, the last full day of trading before the public
announcement of the proposed Merger, the closing price of the EXCEL Common Stock
was $27 9/16 per share as reported on the NYSE Composite Tape and the closing
price of the TELEGLOBE Common Shares was $25 13/16 per share (split-adjusted) as
reported on the NYSE Composite Tape. See "Dividends and Market Prices." During
the twenty consecutive trading days prior to and ending on June 12, 1998, the
average closing price of the EXCEL Common Stock as reported on the NYSE
Composite Tape was $23.74 per share and the average closing price of the
TELEGLOBE Common Shares as reported on the NYSE Composite Tape was $25.64 per
share (split-adjusted). On October 5, 1998, the closing price of the EXCEL
Common Stock as reported on the NYSE Composite Tape was $19 11/16 per share and
the closing price of the TELEGLOBE Common Shares as reported on the NYSE
Composite Tape was $22 9/16 per share. You should obtain more recent stock price
quotes from other sources of financial information.
12
<PAGE> 23
FINANCIAL STATEMENT PRESENTATION
AND EXCHANGE RATE INFORMATION
Unless otherwise indicated herein, all financial information relating to
EXCEL is presented in U.S. dollars and has been prepared in accordance with U.S.
GAAP, and all financial information relating to TELEGLOBE is derived from
financial statements presented in Canadian dollars and prepared in accordance
with Canadian GAAP. Canadian GAAP differs from U.S. GAAP in certain respects.
The differences between Canadian GAAP and U.S. GAAP may result in material
differences for TELEGLOBE. For a reconciliation to U.S. GAAP of TELEGLOBE's
financial statements for each of the three years ended December 31, 1997
(audited) and for the six months ended June 30, 1998 (unaudited), see
TELEGLOBE's Annual Information Form included in TELEGLOBE's Annual Report on
Form 40-F for the year ended December 31, 1997, as amended by Forms 40-F/A, and
TELEGLOBE's Current Report on Form 6-K dated September 3, 1998, as amended by
Form 6-K/A, each of which is incorporated by reference herein.
Following the Merger, it is expected that TELEGLOBE will continue to be a
"foreign private issuer" under the Exchange Act eligible to file reports under
the Exchange Act pursuant to the multi-jurisdictional disclosure system
("MJDS"). The MJDS facilitates cross-border offerings of securities and
continuous reporting by specified Canadian issuers. The system permits eligible
companies in the U.S. and Canada to offer securities in each other's country
using the disclosure documents of their home country. As a corporation governed
by the Canada Business Corporations Act ("CBCA") and subject to the reporting
requirements of the various securities regulatory authorities in Canada,
TELEGLOBE is required to prepare and file financial information under Canadian
GAAP. Following the Merger, it is expected that a substantial portion of the
TELEGLOBE Common Shares will be owned by U.S. residents. The Merger will be
accounted for as a pooling of interests under U.S. GAAP, but will be accounted
for as a purchase under Canadian GAAP. For the year ending December 31, 1998,
TELEGLOBE anticipates filing with the Securities and Exchange Commission (the
"Commission") consolidated U.S. GAAP financial statements in U.S. dollars, as
well as consolidated Canadian GAAP financial statements in CDN$. Beginning on
January 1, 1999, TELEGLOBE will use the U.S. dollar as its functional currency.
Accordingly, for periods ending after December 31, 1998, TELEGLOBE intends to
prepare and file with the Commission U.S. GAAP and Canadian GAAP consolidated
financial statements prepared in U.S. dollars.
Consistent with U.S. GAAP, all elements of TELEGLOBE's financial statements
for periods ending prior to January 1, 1999 will be translated using a current
exchange rate. For assets and liabilities, the exchange rate at each balance
sheet date will be used. For revenues, expenses, gains, and losses, an
appropriately weighted average exchange rate for the applicable period will be
used. Any translation adjustments resulting from the translation process will be
reported as a component of other comprehensive income. For financial statements
for periods ending after January 1, 1999, there will be no translation
adjustments, since the functional currency will be the same as the reporting
currency.
All dollar amounts set forth in this Information Statement/Prospectus are
in U.S. dollars, except where otherwise indicated. Except where defined in
headings to a table, references herein to "$," "dollars," "U.S.$," "US$," "U.S.
dollars," or "US dollars" are to United States dollars. References herein to
"CDN$" are to Canadian dollars.
The following table sets forth, for each period indicated, the high and low
exchange rates for one Canadian dollar expressed in U.S. dollars, the average of
such exchange rates on the last day of each month during such period, and the
exchange rate at the end of such period, based upon the Noon Buying Rate.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED
----------------------------------------------- JUNE 30,
1993 1994 1995 1996 1997 1998
------- ------- ------- ------- ------- ----------------
<S> <C> <C> <C> <C> <C> <C>
High................. $0.8046 $0.7632 $0.7527 $0.7513 $0.7487 $0.7105
Low.................. 0.7439 0.7103 0.7023 0.7235 0.6945 0.6784
Average.............. 0.7752 0.7321 0.7283 0.7331 0.7220 0.6949
Period End........... 0.7544 0.7128 0.7323 0.7301 0.7000 0.6795
</TABLE>
On October 5, 1998, the exchange rate for one Canadian dollar expressed in
U.S. dollars based on the Noon Buying Rate was $0.6423.
13
<PAGE> 24
THE COMPANIES
EXCEL
EXCEL provides long distance telecommunications and paging services to both
residential and commercial customers in the United States. EXCEL has developed
several marketing channels for its services, including direct sales to
residential, commercial and wholesale customers through independent
representatives ("IRs"), dealers and internal sales personnel, as well as direct
mail marketing of several dial-around products. These multiple distribution
channels, which target both residential and commercial customers, are a key
element of the EXCEL's business strategy, as they allow EXCEL to balance its
network traffic capacity and provide multiple avenues for growth.
EXCEL operates a nationwide telecommunications network consisting of eight
switches, leased transmission lines and sophisticated network management systems
designed to optimize traffic routing. This network currently originates traffic
in all or some part of 48 states and the District of Columbia and operates as an
"open network," meaning that any individual within EXCEL's originating service
area whose local exchange carrier ("LEC") provides equal access can access
EXCEL's long distance network by dialing either of EXCEL's carrier
identification codes ("CIC codes") or by presubscribing to EXCEL as their long
distance service provider.
EXCEL owns approximately 100,000 network miles of DS-3 capacity (under a
long-term right-to-use agreement) and also leases additional transmission lines
from a variety of facilities-based and resale long distance carriers. EXCEL's
contracts with these entities typically have terms ranging from 12 to 60 months.
EXCEL supplements its leased "on-network" capacity with "off-net" services from
a variety of resale and facilities-based long distance carriers. In addition,
EXCEL does not have any on-network international network arrangements and
exclusively resells the network capacity of other resale and facilities-based
long distance carriers to international destinations.
EXCEL, a Delaware corporation which was formed in 1988 and commenced
operations in 1989, has its principal executive offices at 8750 North Central
Expressway, Suite 2000, Dallas, Texas 75231 (telephone number 214-863-8000).
Internet users can obtain information about EXCEL and its services at
"http://www.excel.com."
TELEGLOBE
TELEGLOBE is an established and expanding global facilities-based provider
of international telecommunications services. TELEGLOBE has an international
network linking approximately 240 countries and territories. TELEGLOBE believes
that this network is one of the most extensive intercontinental facilities-
based networks among North American carriers. The services TELEGLOBE provides
include voice, data, Internet and value-added services, primarily on a wholesale
basis, to approximately 380 carriers and over 100 Internet service providers in
more than 140 countries. Historically, TELEGLOBE's primary market has been
Canada, where it was the sole authorized operator of Canadian facilities for
Canadian-overseas telecommunication services. See "Risk Factors -- End of
Canadian Exclusive Mandate." TELEGLOBE has expanded its corporate mission to be
a leading global provider of a broad range of international communications
services to carriers, businesses and consumers throughout the world. In
conjunction with the deregulation of the international telecommunications
markets, TELEGLOBE's exclusive mandate was eliminated on October 1, 1998.
TELEGLOBE provides telecommunications services worldwide through Teleglobe
Communications Corporation, which has principal offices in Montreal, Canada and
the Washington, D.C. metropolitan area. Global telecommunications strategy,
marketing and product development are managed from Teleglobe Communications
Corporation's principal office in the Washington, D.C. area. TELEGLOBE's global
development, network, information technology, processing services and support
groups, as well as other resources dedicated to the Canadian market, are based
at TELEGLOBE's head office in Montreal, Canada.
14
<PAGE> 25
TELEGLOBE's other business units are Teleglobe World Mobility, which
consists of interests in global mobile satellite voice and data communications
systems such as ORBCOMM, and Teleglobe Enterprises. Teleglobe Enterprises
consists of Teleglobe Marine Group, which maintains and repairs undersea cables,
and Teleglobe Media Enterprises, which develops applications to package, store
and deliver digital media content using TELEGLOBE's facilities and management
expertise.
TELEGLOBE is a corporation resulting from the amalgamation on December 31,
1985 of TELEGLOBE (then known as Memotec Data Inc.) and Real Time Datapro Ltd.
pursuant to the CBCA. TELEGLOBE has its principal executive offices at 1000, rue
de La Gauchetiere ouest, Montreal, Quebec H3B 4X5 (telephone number
514-868-8124). Internet users can obtain information about TELEGLOBE and its
services at "http://www.teleglobe.com."
NORTH MERGER SUB CORPORATION
North Merger Sub Corporation ("Merger Sub") is a Delaware corporation
formed by TELEGLOBE in June 1998 solely for the purpose of being merged with and
into EXCEL. Merger Sub is wholly owned by TELEGLOBE. The mailing address of
Merger Sub's principal executive offices is c/o Teleglobe Inc., 1000, rue de La
Gauchetiere ouest, Montreal, Quebec H3B 4X5 (telephone number 514-868-8124).
15
<PAGE> 26
RISK FACTORS
FIXED EXCHANGE RATIO
The Merger Agreement does not contain any provisions for adjustment of the
Exchange Ratio and does not provide for rights of termination by either party
based upon fluctuations in the per share price of the EXCEL Common Stock or the
TELEGLOBE Common Shares. Therefore, the value of the consideration to be
received by holders of EXCEL Common Stock upon the consummation of the Merger is
not presently ascertainable and will vary based upon the market price of
TELEGLOBE Common Shares at the Effective Time. Such variations may be the result
of changes in the business, operations or prospects of TELEGLOBE or EXCEL,
market assessments of the likelihood that the Merger will be consummated, the
timing thereof and the prospects for the post-Merger operations of the combined
company, regulatory considerations, general market and economic conditions and
other factors beyond the control of EXCEL or TELEGLOBE. Holders of EXCEL Common
Stock are urged to obtain current market quotations for their shares and for
TELEGLOBE Common Shares.
RISK OF NONREALIZATION OF SYNERGIES AND OTHER BENEFITS
The Merger involves the integration of two companies that have previously
operated independently. There can be no assurances that the companies will not
encounter significant difficulties in integrating their respective operations or
that the benefits expected from such integration will be realized. In addition,
the achievement of the benefits expected from such integration will require the
combined company to incur significant costs in connection with, among other
things, network and sales force expansion. The incurrence of such costs, as well
as other unexpected costs or delays, in connection with such integration, could
have a material adverse effect on the combined company's business, financial
condition or results of operations.
Among the factors considered by the EXCEL Board in connection with its
approval of the Merger Agreement were the opportunities for revenue growth and
operating cost savings that could result from the Merger. The companies' ability
to achieve the benefits expected from the Merger will in part be dependent upon
the ability of EXCEL's existing sales force to successfully market TELEGLOBE
products and the ability to implement EXCEL's sales techniques in markets
worldwide where TELEGLOBE operates or plans to operate. Regulatory constraints,
general economic conditions and other factors beyond the companies' control may
limit the companies' ability to achieve these benefits. The realization of
operating cost savings will be affected by the combined company's ability to
integrate each of EXCEL's and TELEGLOBE's networks and to migrate and direct
their traffic to such networks from various third party carriers in a timely
manner. The companies' ability to integrate the networks and to migrate this
traffic in a timely manner will be limited by operational and network
infrastructure limitations as well as by the continuing purchase commitment
requirements under EXCEL's agreements with third party carriers. Accordingly,
there can be no assurance as to whether or in what time frame any revenue growth
or anticipated savings will be realized.
END OF CANADIAN EXCLUSIVE MANDATE
Since its privatization in 1987 and until October 1, 1998, TELEGLOBE's
operating subsidiary, Teleglobe Canada Inc., operated under an exclusive mandate
from the Government of Canada to provide Canadian-overseas facilities-based
services. TELEGLOBE historically depended on this exclusive mandate and the
Canadian telecommunications market for a significant portion of its revenues
and, as recently as 1993, had derived approximately 62% of its telephony
revenues from outbound traffic originating in Canada. In the first half of 1998,
however, outbound traffic originating in Canada accounted for 36% of TELEGLOBE's
telephony revenues. As part of a multilateral agreement on trade in basic
telecommunication services reached by 69 World Trade Organization countries on
February 15, 1997 (the "WTO Agreement"), the Government of Canada agreed to end
Teleglobe Canada Inc.'s exclusive mandate as of October 1, 1998. The Government
of Canada also announced its intention to create a new licensing regime whereby
the Canadian Radio-television and Telecommunications Commission (the "CRTC")
would establish the conditions of operation applicable to all companies offering
international telecommunications services. On October 2, 1997, the CRTC
requested proposals and comments, among other things, on the regulatory regime
that should apply to the provision of
16
<PAGE> 27
international telecommunications services after October 1, 1998. On October 1,
1998, the CRTC issued Regulatory Regime for the Provision of International
Telecommunications Services, Telecom Decision CRTC 98-17, pursuant to which it
established various regulatory reforms relating to the provision of
international telecommunications services by service providers who operate in
Canada, including the following: (a) effective October 1, 1998, all routing
restrictions which formerly prevented the routing of Canada-Canada and
Canada-overseas basic telecommunications traffic through the United States were
eliminated; (b) Teleglobe Canada Inc. will continue to be regulated by the CRTC
in respect of its Canada-overseas services and it will continue to be required
to file tariffs with the CRTC setting out the rates, terms and conditions
associated with its Canada-overseas services; (c) effective October 1, 1998,
Teleglobe Canada Inc. will not be required to file tariffs with the CRTC for
approval of the rates, terms and conditions associated with its Canada-Canada
and Canada-US services and the CRTC will refrain from exercising its powers and
performing its duties under certain sections of the Telecommunications Act
(Canada) in respect of these services; (d) Teleglobe Canada Inc. will continue
to be required to make its international services and facilities available to
other service providers for interconnection, resale and sharing purposes; (e)
effective January 1, 1999, telecommunications service providers falling within
either of the following two classes will not be permitted to offer basic
international telecommunications services except in accordance with an
international telecommunications service license issued by the CRTC: (i) service
providers who operate telecommunications facilities, whether owned by them or
leased from a separate facilities provider, that are used in transporting basic
telecommunications service traffic between Canada and another country (Class A
licensees); and (ii) service providers who do not operate telecommunications
facilities owned by them or leased from a separate facilities provider that are
used in transporting basic telecommunications service traffic between Canada and
another country (Class B licensees). There can be no assurance as to the
implementation of the regulatory regime established by the CRTC to reform
international telecommunications services or as to the combined company's
ability to compete under this regime. The CRTC's regulatory regime may have a
material adverse effect on the combined company's business, financial condition
and results of operation.
In addition, in order for the Merger to be consummated, TELEGLOBE may be
required to divest or restructure its ownership interests in two affiliated
companies in order to ensure that these companies remain in compliance with
certain foreign ownership restrictions under Canadian law. See "The
Merger -- Canadian Foreign Ownership Considerations."
INTERNATIONAL LICENSING AND REGULATORY RISKS
The combined company's business will be subject to the authority of
regulatory bodies of the countries in which it will operate. Regulations
established by such regulatory bodies may impose impediments on the combined
company's operations, and there can be no assurance that such restrictions will
not be unduly burdensome. The combined company's business also may be adversely
affected by regulatory changes resulting from judicial decisions or adoption of
treaties, legislation or regulation by the national authorities where the
combined company will operate or seek to operate.
U.S. REGULATORY CHANGE
The operations of the combined company will continue to be affected by the
ongoing events associated with the U.S. 1996 Telecommunications Act. Such events
include access charge reform which could change existing transmission costs for
both the combined company and other long distance companies, the anticipated
entry by the Regional Bell Operating Companies into the long distance
marketplace, and the ability of long distance companies like the combined
company to begin marketing local telephone services. In conjunction with
upcoming expected local competition, incumbent local phone companies are not
likely to provide billing services for customers presubscribed to competitive
local phone companies. This would force the combined company to either bill
directly, enter into a billing and collection agreement with new local phone
companies or seek other billing alternatives.
17
<PAGE> 28
In addition, the FCC has mandated that all telecommunications companies
must migrate from their existing five-digit CIC codes (10+XXX) to seven-digit
CIC codes (10+10+XXX). This will require a change in the dialing patterns of the
dial-around customers of the combined company in order for such customers to
utilize the combined company's services. There can be no assurance that such
change will not adversely affect such customers' usage of the combined company's
dial-around services.
COMPETITION
The telecommunications industry is changing rapidly due to, among other
things, deregulation, privatization, consolidation, technological improvements,
expansion of infrastructure, the globalization of the worlds' economies, and the
expansion of free trade. These changes are creating new international
competitors as well as new competitive infrastructure and services. There can be
no assurance that the combined company will be able to compete effectively
under, or adjust its contemplated plan of development to meet, changing market
conditions, or that the combined company will be able to implement its strategy
or that its strategy will be successful in this rapidly evolving industry.
The telecommunications industry includes a variety of entities, many of
which have substantially greater financial, technological and other resources
than the combined company will have. Many of these competitors are also the
incumbent service providers in key global markets and may offer other products
and services which the combined company will not provide. There can be no
assurance that the combined company will be able to compete successfully in this
industry or against such competitors.
EXCEL has observed increased competition in all its distribution channels
as well as an increase in the number of promotional, discounted calling plans
available to all long distance consumers, particularly relating to residential
customers. The impact to EXCEL has included (i) a decline in EXCEL's residential
revenue per minute as EXCEL has responded to competitive pressures with lower
priced products, and (ii) a sequential decline in dial-around revenues.
DEPENDENCE ON THIRD-PARTY CARRIERS
On certain routes, an important portion of the combined company's traffic
will be carried through transmission lines leased by the combined company.
Historically, when there has been excess transmission capacity, lease rates have
declined and short term leases have been advantageous. Recently, capacity has
been somewhat constrained in certain regions of the world and the decline in
lease rates has slowed. As a result, longer term leases may become more
attractive. The combined company could suffer competitive disadvantages if it
entered into leases with inappropriate durations, leases based on per-minute
charges for high volume routes or leases with fixed monthly rates for low volume
routes. The combined company will also be vulnerable to service interruptions
and poor transmission quality from leased lines. In addition, on certain of the
combined company's routes, the combined company will be dependent on certain
carrier vendors to deliver its traffic. Furthermore, a significant portion of
EXCEL's traffic is carried by third-party carriers. There can be no assurance
that the combined company's relationship with such carrier vendors will not
deteriorate or terminate.
TAX RISKS ASSOCIATED WITH FOREIGN OPERATIONS
Distributions of earnings by way of dividends and other payments, including
interest, received from TELEGLOBE's subsidiaries and affiliates may be subject
to withholding taxes imposed by the jurisdictions in which such entities are
formed or operating, which may reduce the amount of after-tax cash TELEGLOBE can
receive from such entities. The ability to claim foreign tax credits for such
withholding taxes is, however, subject to numerous limitations, and TELEGLOBE
may incur incremental tax costs as a result of these limitations or if TELEGLOBE
is not in a tax-paying position in Canada. TELEGLOBE may also be required to
include in its income for tax purposes its proportionate share of certain
earnings of those foreign corporate subsidiaries that are classified as
"controlled foreign affiliates" without regard to whether distributions have
been actually received from such subsidiaries.
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RAPID EXPANSION AND GROWTH
As the combined company's business develops and expands, it will need to
implement enhanced operational and financial systems and will likely require
additional management, operational and financial resources. There can be no
assurance that the combined company will successfully implement and maintain
such operational and financial systems or successfully obtain, integrate and
utilize the management, operational and financial resources necessary to manage
a developing and expanding business in an evolving and increasingly competitive
industry. Failure to implement such systems successfully or use such resources
effectively could have a material adverse effect on the combined company's
business, financial condition or results of operations.
DEPENDENCE ON KEY PERSONNEL
Following the Merger, the combined company's business will be managed by a
number of key personnel. Kenny A. Troutt, who will continue to be the President
and Chief Executive Officer of EXCEL after the Merger, is the founder of EXCEL
and has made significant contributions to EXCEL's growth. Any loss of his
services could have a significant impact on the combined company's business and
its future operations. Charles Sirois will continue to be Chairman and Chief
Executive Officer of TELEGLOBE and Paolo Guidi will continue in his position as
President and Chief Executive Officer of Teleglobe Communications Corporation.
Any loss of their services could have a significant impact on the combined
company's business and future operations. As the combined company's business
develops and expands, its future success also will depend greatly on its
continued ability to attract and retain highly skilled and qualified personnel.
There can be no assurance that key personnel will continue to be employed by the
combined company or that it will be able to attract and retain qualified
personnel in the future. Failure by the combined company to retain or attract
such key personnel could have a material adverse effect on the combined
company's business, financial condition or results of operations.
SHARES ELIGIBLE FOR FUTURE SALE
Future sales of substantial amounts of the TELEGLOBE Common Shares, or the
perception that such sales may occur, could adversely affect the value of the
TELEGLOBE Common Shares to be issued in the Merger and could impair TELEGLOBE's
ability to raise additional capital in the future through the sale of equity
securities. The authorized share capital of TELEGLOBE consists of an unlimited
number of common shares, an unlimited number of Class A non-voting shares and an
unlimited number of preferred shares. Following the Merger, Troutt Partners,
Ltd., The Troutt Family Trust and Austex Enterprises, Ltd., who will
collectively own approximately 62,877,420 TELEGLOBE Common Shares (representing
approximately 25.5% of the outstanding TELEGLOBE Common Shares after giving
effect to the Merger based upon TELEGLOBE and EXCEL outstanding shares as of
October 5, 1998), will have the right pursuant to a registration rights
agreement to be entered into with TELEGLOBE, to require TELEGLOBE to register
the resale of their shares, subject to certain limited exceptions and other
limitations. See "Other Agreements -- Registration Rights Agreement."
INFLUENCE BY CERTAIN SHAREHOLDERS
Upon completion of the Merger, Telesystem Telecom Ltd., BCE and a related
group comprised of Troutt Partners Ltd. and The Troutt Family Trust will
beneficially own approximately 9.2%, 17.0% and 22.8%, respectively, of the
TELEGLOBE Common Shares (based on share calculations as of October 5, 1998).
Accordingly, these shareholders, although unrelated, would have the ability to
influence the outcome of elections and other matters presented for approval by
TELEGLOBE's shareholders. Such concentration of ownership could, if such
shareholders acted together, have the effect of preventing a change in control
of TELEGLOBE or otherwise limiting the price investors may be willing to pay in
the future for the TELEGLOBE Common Shares.
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Between the date of the Merger Agreement and July 6, 1998, BCE acquired
from certain existing stockholders of EXCEL an aggregate of 11,000,000 shares of
EXCEL Common Stock (representing approximately 8.3% of the issued and
outstanding shares of EXCEL Common Stock as of October 5, 1998).
In addition, pursuant to an agreement with TELEGLOBE to be amended as of
the Effective Time (the "BCE Agreement"), BCE has certain rights (i) to
designate for nomination to the TELEGLOBE Board of Directors (the "TELEGLOBE
Board") a number of directors which represents the proportion of the total
number of the TELEGLOBE Common Shares outstanding that are held by BCE and (ii)
to maintain up to a 20% equity interest in TELEGLOBE (which right is exercisable
in connection with any public or private offering by TELEGLOBE of any TELEGLOBE
Common Shares or securities convertible into such shares at the same price such
shares are publicly or privately offered by TELEGLOBE). Upon consummation of the
Merger, BCE may exercise this right and acquire TELEGLOBE Common Shares
representing up to an additional 3% of the TELEGLOBE Common Shares outstanding
(after giving effect to the Merger and any such acquisition of shares). The BCE
Agreement also provides that TELEGLOBE will not knowingly take or encourage any
action which will or could have the result of any person, including any
affiliate of such person, other than BCE and its affiliates, owning or
exercising direction or control over shares carrying more than one third of the
votes attaching to all shares of TELEGLOBE capital stock then outstanding. See
"The Merger -- Interests of Certain Persons in the Merger -- BCE."
ENFORCEABILITY OF CIVIL LIABILITIES
TELEGLOBE is a Canadian corporation with its principal place of business in
Montreal, Quebec, Canada. A majority of TELEGLOBE's directors and officers, and
certain experts named herein are residents of Canada and/or are organized under
the laws of Canada or a province thereof and all or a substantial portion of the
assets of such persons and of TELEGLOBE are located outside the United States.
Consequently, it may be difficult for United States investors to effect service
within the United States upon TELEGLOBE, its directors or officers, or to
realize in the United States upon judgments of courts of the United States
predicated upon civil liabilities under the Securities Act. In addition,
investors should not assume that courts in Canada (i) would enforce judgments of
U.S. courts obtained in actions against TELEGLOBE or such persons predicated
upon the civil liability provisions of the U.S. federal securities laws or the
securities or blue sky laws of any state within the United States or (ii) would
enforce, in original actions, liabilities against TELEGLOBE or such persons
predicated upon the U.S. federal securities laws or any state securities or blue
sky laws. TELEGLOBE has appointed CT Corporation System of New York, New York,
as agent for service of process, in any action in any U.S. federal or state
court brought against it under the securities laws of the United States arising
out of the registration of its common shares pursuant to the registration
statement of which this Information Statement/Prospectus forms a part.
CERTAIN STOCKHOLDER LITIGATION
Several stockholders of EXCEL have filed four separate lawsuits in the
Delaware Court of Chancery challenging the Merger: Adolph D. Schulz (C.A. No.
16448), Ronald K. Drucker (C.A. 16452), William Saxton (C.A. No. 16456), and
Richard T. Rosso and Edward Rosso (C.A. No. 16483NC). In each action, the named
defendants include EXCEL directors or officers Stephen G. Canton, J. Christopher
Dance, Nicholas A. Merrick, T. Allan McArtor, Ronald A. McDougall, Kenny A.
Troutt, Stephen R. Smith, and EXCEL. The actions brought by Drucker, Saxton, and
the Rossos also name TELEGLOBE as a defendant.
All four complaints allege that the directors of EXCEL breached their
fiduciary duties to EXCEL's stockholders in approving the Merger. The complaints
filed by Drucker, Saxton, and the Rossos also allege that TELEGLOBE knowingly
aided and abetted the alleged breaches of fiduciary duty committed by EXCEL's
directors. The plaintiffs in each action seek injunctive relief to prohibit the
defendants from completing the Merger, or to rescind it if it is consummated.
The plaintiffs also seek compensatory damages from the defendants in an amount
to be determined at trial. EXCEL and TELEGLOBE believe that these suits are
without merit with respect to each of them, respectively, and they intend to
defend these suits vigorously.
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REGULATION AND MANAGEMENT OF EXCEL'S INDEPENDENT REPRESENTATIVES
EXCEL's network marketing system is or may be subject to or affected by
extensive government regulation, including, without limitation, foreign, federal
and state regulation of the offer and sale of business franchises, business
opportunities and securities. Although EXCEL believes that its network marketing
system is in substantial compliance with the laws and regulations relating to
direct selling activities in all markets in which it currently operates, there
can be no assurance that legislation and regulations adopted in particular
jurisdictions in the future will not adversely affect EXCEL's operations, or
that EXCEL's marketing practices will be accepted in the jurisdictions in which
the combined company plans to operate. In addition, as the combined company
begins to expand its distribution channels internationally, EXCEL's network
marketing system will be subject to extensive foreign government regulation.
As the companies presently anticipate that after the Merger TELEGLOBE will
implement some of EXCEL's marketing techniques in connection with the sales and
marketing of TELEGLOBE's products, including the use of IRs for direct sales,
TELEGLOBE may be subject to or affected by the same government regulation that
applies to EXCEL's network marketing system.
INTERESTS OF MANAGEMENT
Certain members of EXCEL management and certain stockholders of EXCEL have
interests in the Merger that are in addition to the interests of EXCEL
stockholders generally. These persons include (i) the directors and officers of
EXCEL, who may benefit from certain indemnification and directors' and officers'
insurance provisions in the Merger Agreement, (ii) Nicholas A. Merrick, Stephen
G. Canton, J. Christopher Dance, Kenneth Hilton, Lester M. Lichter, Craig E.
Holmes and Paul D. Fletcher, officers and directors of EXCEL whose existing
stock options will, by their terms, become fully exercisable upon completion of
the Merger, (iii) certain persons who could be deemed to be affiliates of
TELEGLOBE after the Merger, who will receive registration rights for their
TELEGLOBE Common Shares received in the Merger, and (iv) BCE, a significant
shareholder of TELEGLOBE and EXCEL which has certain contract rights that will
be amended upon completion of the Merger. See "The Merger -- Interests of
Certain Persons in the Merger."
THE MERGER
We are furnishing this Information Statement/Prospectus to you in
connection with the Merger of Merger Sub with and into EXCEL, with EXCEL
surviving the Merger as a wholly owned subsidiary of TELEGLOBE. The Merger will
be carried out as provided in the Merger Agreement. A copy of the Merger
Agreement is attached as Appendix A to this Information Statement/Prospectus.
This Information Statement/Prospectus has been sent to you because you are
a holder of EXCEL Common Stock. The record date for the determination of your
status as a holder of EXCEL Common Stock was June 14, 1998.
In the Merger, each outstanding share of EXCEL Common Stock will be
converted into the right to receive .885 of a TELEGLOBE Common Share. If the
number of TELEGLOBE Common Shares that you would be entitled to receive under
the Exchange Ratio results in a fraction of one TELEGLOBE Common Share,
TELEGLOBE instead will pay for such fractional share in cash rather than give
you a fractional interest. The total aggregate amount of consideration to be
received by EXCEL's stockholders in the Merger, based on the per share closing
price on the NYSE Composite Tape of the TELEGLOBE Common Shares on October 5,
1998 and the total number of issued and outstanding shares of EXCEL Common Stock
on such date, is approximately $2.6 billion.
This Information Statement/Prospectus is to inform you of the Merger and
constitutes the notice of corporate action without a meeting required by Section
228 of the Delaware General Corporation Law (the "DGCL"). YOUR VOTE IS NOT
REQUIRED FOR THE MERGER because Troutt Partners, Ltd., The Troutt Family Trust
and Austex Enterprises, Ltd. (collectively, the "Majority EXCEL Stockholders")
executed and delivered to EXCEL, on June 14, 1998, a written consent in lieu of
a meeting of stockholders approving and adopting the Merger Agreement. The
Majority EXCEL Stockholders then held of record, in
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the aggregate, 71,047,933 shares of EXCEL Common Stock (entitled to one vote per
share), representing a majority of the outstanding shares of EXCEL Common Stock
entitled to consider and vote on the Merger Agreement. As a result, so long as
the Merger Agreement is not amended in a manner that would require the approval
of the stockholders of EXCEL under the DGCL, no further approval of stockholders
of EXCEL is necessary to effect the Merger. THE MERGER WILL BECOME EFFECTIVE NO
EARLIER THAN 20 BUSINESS DAYS AFTER THIS INFORMATION STATEMENT/PROSPECTUS IS
MAILED TO STOCKHOLDERS OF EXCEL, BUT ONLY AFTER SATISFACTION OR WAIVER (AS
PERMITTED) OF THE CONDITIONS TO THE MERGER CONTAINED IN THE MERGER AGREEMENT.
This Information Statement/Prospectus also constitutes a prospectus of
TELEGLOBE, which is a part of the Registration Statement on Form F-4 filed by
TELEGLOBE with the Commission under the Securities Act of 1933, as amended (the
"Securities Act"), in order to register in the United States the TELEGLOBE
Common Shares to be issued to EXCEL stockholders in the Merger. It is a
condition to the closing (the "Closing") of the Merger that the TELEGLOBE Common
Shares issuable to EXCEL's stockholders in the Merger be approved for listing on
the NYSE, subject to official notice of issuance, and on the ME and the TSE,
subject to customary requirements (which listings have been approved, subject to
official notice of issuance or customary requirements, as applicable).
BACKGROUND
For the past year, EXCEL, through its subsidiary Telco, has entered into
various arm's-length business arrangements with TELEGLOBE in the ordinary course
of business. These arrangements include the provision to EXCEL by TELEGLOBE for
resale by EXCEL of international termination services.
In February 1998, John J. McLaine, the former President and Chief Operating
Officer of EXCEL, and Paolo Guidi, the President and Chief Executive Officer of
Teleglobe Communications Corporation and Teleglobe Canada Inc., had telephone
discussions during which they discussed generally the business and operations of
EXCEL and TELEGLOBE and whether there might exist other commercial relationships
that the two companies could pursue in addition to the resale by EXCEL of
international termination services. Both Mr. McLaine and Mr. Guidi agreed that
further talks would be worthwhile after each reviewed the commercial needs of
their respective companies.
On April 14, 1998, Kenny A. Troutt, Chief Executive Officer and Chairman of
the Board of EXCEL, Nicholas A. Merrick, Executive Vice President and Chief
Financial Officer of EXCEL, Charles Sirois, Chief Executive Officer and Chairman
of the Board of TELEGLOBE, Mr. Guidi and Claude Seguin, Executive Vice
President, Finance and Chief Financial Officer of TELEGLOBE, met in New York and
discussed possible strategic alternatives for EXCEL and TELEGLOBE. These
alternatives included the possibility of entering into more significant resale
agreements, a traffic sharing alliance and preferred carrier arrangements.
On April 21, 1998, EXCEL and TELEGLOBE entered into a confidentiality
agreement with respect to information they might wish to exchange with respect
to their businesses.
On April 25 and 26, 1998, Mr. Sirois and Mr. Troutt met in Dallas, Texas,
to discuss a range of potential strategic relationships between EXCEL and
TELEGLOBE, which included those strategic alliances discussed on April 14, 1998
and a joint venture or a merger of equals transaction.
On May 19, 1998, Mr. Merrick, J. Christopher Dance, Executive Vice
President, General Counsel and Secretary of EXCEL, Craig E. Holmes, Vice
President and Chief Accounting Officer of EXCEL, and Todd B. Siegler, Assistant
General Counsel of EXCEL, met in Dallas, Texas, with Mr. Seguin, Francois
Laurin, Vice President, Finance and Corporate Controller of TELEGLOBE, Andre
Bourbonnais, Vice President, Legal Affairs and Corporate Secretary of TELEGLOBE,
Jean-Paul Tardif, Director, Financial Planning and Projects of TELEGLOBE, and
Francois Gauvin, Director, Corporate, International and Taxation Affairs of
TELEGLOBE. At this meeting, EXCEL and TELEGLOBE engaged in further general
discussions concerning a possible strategic relationship, continuing to evaluate
the merits of more significant resale agreements, a traffic sharing alliance,
preferred carrier arrangements, a joint venture and a merger of equals
transaction. In addition, the parties had general discussions regarding certain
tax, accounting, legal and
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regulatory issues related to each of such alternatives. Both companies agreed
that it would be advisable to have further discussions with regard to a
strategic relationship, particularly a merger of equals transaction.
On May 22, 1998, at the annual meeting of the EXCEL Board, Mr. Troutt
discussed with the EXCEL Board, among other things, a possible strategic
transaction with TELEGLOBE. Mr. Troutt gave an overview of TELEGLOBE's business
and the status of discussions with TELEGLOBE regarding such a possible strategic
transaction. Mr. Troutt reviewed each of the possible relationships with
TELEGLOBE and discussed with the EXCEL Board his recommendation that management
should further explore the possibility of a merger of equals transaction with
TELEGLOBE, as such a transaction could afford substantial benefits for
stockholders and customers through operating efficiencies and additional growth
opportunities.
On May 26 and 27, 1998, EXCEL management, TELEGLOBE management,
representatives of Lehman Brothers, the financial advisors of EXCEL, Ian Fisher
of Ian Fisher & Co Inc, the financial advisor to TELEGLOBE, a representative of
Swidler & Berlin, Chartered, U.S. regulatory counsel to EXCEL, and a
representative of Simpson Thacher & Bartlett, U.S. corporate counsel to
TELEGLOBE, met in Montreal, Quebec to discuss and review in depth the business
operations, regulatory environment, strategy, network operations, marketing and
financial information of TELEGLOBE.
On May 26, 1998, Mr. Troutt, Mr. Sirois, Mr. Merrick, Mr. Seguin, Mr. Dance
and Mr. Bourbonnais met separately in Montreal, Quebec to discuss more
specifically the terms of a possible merger of equals transaction.
On May 28 and 29, 1998, TELEGLOBE management, EXCEL management,
representatives of Lehman Brothers, Ian Fisher, representatives of Weil, Gotshal
& Manges LLP, U.S. corporate counsel to EXCEL, and representatives of Simpson
Thacher & Bartlett, met in Dallas, Texas, to discuss and review in depth the
business operations, regulatory environment, strategy, network operations,
marketing and financial information and projections of EXCEL.
From May 28, 1998 through June 4, 1998, representatives of EXCEL and
representatives of TELEGLOBE conducted a due diligence investigation of
financial, regulatory and legal issues concerning TELEGLOBE and EXCEL,
respectively.
On June 1, 1998, a draft of the Merger Agreement was circulated to
TELEGLOBE and EXCEL and each party's legal and financial advisors.
On June 4 and 5, 1998, EXCEL management, TELEGLOBE management and
representatives of Weil, Gotshal & Manges LLP, Simpson Thacher & Bartlett,
Osler, Hoskin & Harcourt, Canadian regulatory and Canadian corporate counsel to
EXCEL, Martineau Walker, Canadian corporate counsel to TELEGLOBE, and Lehman
Brothers met in New York to discuss the terms and conditions of the draft Merger
Agreement.
On June 6, 1998, Mr. Seguin, Mr. Tardif, Mr. Fisher and Mr. Michel
Cayouette, Vice President, Finance and Strategic Planning of Teleglobe
International Corporation, presented TELEGLOBE's financial projections to EXCEL
management by conference call.
On June 8, 1998, Mr. Troutt convened a special meeting of the EXCEL Board
to discuss the status of the discussions with TELEGLOBE. Present at the
invitation of the EXCEL Board, either in person or via teleconference, were Mr.
Holmes, Mr. Siegler, representatives from Lehman Brothers, and representatives
of Weil, Gotshal & Manges LLP. At the meeting, the EXCEL Board was briefed by
Weil, Gotshal & Manges LLP regarding the EXCEL Board's fiduciary duties and
other matters of Delaware corporate law. Lehman Brothers then reviewed with the
EXCEL Board the preliminary analysis of TELEGLOBE prepared by Lehman Brothers
(copies of which had been previously delivered to each of the directors). Lehman
Brothers' presentation included: strategic considerations for the proposed
transaction; an overview of TELEGLOBE's business, management, ownership,
industry position, financial performance, research overview, equity market
performance and related considerations; the potential synergies between
TELEGLOBE and EXCEL; and other significant issues regarding a business
combination of TELEGLOBE and EXCEL. Mr. Dance reviewed the status of the legal
due diligence review of TELEGLOBE and the material terms of the Merger
Agreement.
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On June 8, 1998, due diligence binders prepared by Osler, Hoskin &
Harcourt, Swidler & Berlin, Chartered, and Weil, Gotshal & Manges LLP were
delivered to each member of the EXCEL Board.
On June 9, 1998, TELEGLOBE management and EXCEL management met in Dallas,
Texas to discuss and review in more detail financial information and projections
of EXCEL.
On June 10, 1998, a special meeting of the TELEGLOBE Board was convened to
discuss the terms of the proposed Merger and the status of the negotiations with
EXCEL, but no corporate action was taken at such time.
From June 10 through June 14, 1998, EXCEL management, TELEGLOBE management
and each of EXCEL's and TELEGLOBE's financial and legal advisors negotiated and
reviewed the various terms and conditions of the Merger Agreement, the Voting
Agreements, the Stock Option Agreements, the Registration Rights Agreement and
related documents. See "Other Agreements -- Voting Agreements," "-- Stock Option
Agreements" and "-- Registration Rights Agreement."
On June 11, 1998, Mr. Merrick, Mr. Holmes, Mr. Seguin, Mr. Tardif and Mr.
Fisher discussed the parameters within which the exchange ratio for the Merger
would be negotiated.
After the close of business on June 12, 1998, Mr. Troutt and Mr. Sirois
negotiated the Exchange Ratio for approval of the respective Boards of Directors
of EXCEL and TELEGLOBE.
On the morning of June 13, 1998, Mr. Troutt convened a special meeting of
the EXCEL Board to discuss the status of negotiations with TELEGLOBE concerning
the Merger. Present at the invitation of the EXCEL Board, either in person or
via teleconference, were Mr. Holmes, Mr. Siegler, representatives from Lehman
Brothers and representatives of Weil, Gotshal & Manges LLP. At the meeting, Mr.
Dance and representatives of Weil, Gotshal & Manges LLP briefed the EXCEL Board
on (i) the status of the negotiations concerning the Merger Agreement, (ii) the
key terms and conditions of the Merger Agreement, the Voting Agreements, the
Stock Option Agreements, the Registration Rights Agreement and related documents
and (iii) the issues raised in connection with the due diligence investigation
of TELEGLOBE. During this discussion, the EXCEL Board discussed, among other
things, the following terms of the proposed transaction: (i) the proposed
Exchange Ratio, (ii) management of and board representation at the combined
company, (iii) accounting treatment for the transaction, (iv) the requisite
shareholder approval and the likelihood of the shareholders of EXCEL and
TELEGLOBE acting by written consent, (v) the proposed amendment to TELEGLOBE's
by-laws or articles of incorporation to adopt corporate governance and related
provisions, (vi) certain tax considerations, (vii) representations and
warranties, (viii) regulatory approvals and the likelihood of obtaining them,
(ix) no-shop provisions, (x) director and officer indemnification and insurance,
(xi) conditions to closing the transaction, (xii) termination events and fees
and (xiii) other key terms and provisions. Mr. Troutt then led the EXCEL Board
in an in-depth discussion of the reasons for the transaction, various
alternative strategic combinations with parties other than TELEGLOBE previously
considered by EXCEL (including possible commercial alliances or joint ventures
with several industry participants for the purpose of improving operating
efficiencies and exploring growth opportunities), the Exchange Ratio, EXCEL's
results to date for the second quarter of 1998 and the fact that such results
were below the consensus analysts expectations, and the reasons for agreeing
that the holders of a majority of EXCEL Common Stock and TELEGLOBE Common Shares
would sign written consents and the Voting Agreements and for entering into the
Stock Option Agreements. Lehman Brothers continued the presentation of its
analysis that began at the June 8, 1998 Board Meeting of EXCEL (updated copies
of which had been previously delivered to each of the directors), which included
a review of (i) Lehman Brothers' financial analysis of TELEGLOBE, EXCEL and the
combined company, (ii) the pro forma combined analysis of EXCEL and TELEGLOBE,
(iii) the key terms of the Merger Agreement, (iv) financial and operating
information regarding EXCEL and TELEGLOBE, (v) financial projections for EXCEL,
TELEGLOBE and the combined company and (vi) other financial considerations. The
EXCEL Board meeting was adjourned with the plan to reconvene the meeting the
next morning.
On June 14, 1998, Mr. Troutt reconvened the prior day's meeting of the
EXCEL Board to continue to discuss the proposed Merger. Present at the
invitation of the EXCEL Board, either in person or via
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teleconference, were Mr. Holmes, Mr. Siegler, representatives from Lehman
Brothers and representatives of Weil, Gotshal & Manges LLP. At the meeting,
representatives of Weil, Gotshal & Manges LLP reviewed with the EXCEL Board the
status of the Merger Agreement negotiations and the negotiations concerning the
Voting Agreements, the Stock Option Agreements and the Registration Rights
Agreement. Mr. Dance and Mr. Siegler discussed with the EXCEL Board the legal
due diligence review of TELEGLOBE. Mr. Merrick and Mr. Holmes discussed with the
EXCEL Board the financial due diligence review of TELEGLOBE. Lehman Brothers
delivered its opinion to the EXCEL Board (both orally and in writing) that, as
of such date, from a financial point of view, the Exchange Ratio was fair to the
stockholders of EXCEL. After these presentations on the final details of the
proposed transaction and after deliberation with respect thereto, the EXCEL
Board unanimously determined that the Merger Agreement was fair to and in the
best interests of EXCEL and EXCEL's stockholders and authorized the officers of
EXCEL to execute the Merger Agreement and the related agreements.
On June 14, 1998, a special meeting of the TELEGLOBE Board was convened to
discuss the final terms of the proposed Merger. Present at the invitation of the
TELEGLOBE Board, either in person or via teleconference, were Mr. Seguin, Mr.
Bourbonnais, Mr. Laurin, Mr. Tardif, Mr. Fisher, representatives of Simpson
Thacher & Bartlett, representatives of Martineau Walker and representatives of
Bear, Stearns & Co. Inc. The TELEGLOBE Board unanimously determined that the
Merger Agreement was fair to and in the best interests of TELEGLOBE and
TELEGLOBE's shareholders and authorized the officers of TELEGLOBE to execute the
Merger Agreement and the related agreements.
On June 14, 1998, following conclusion of the respective meetings of the
TELEGLOBE and EXCEL Boards of Directors, the Merger Agreement, the Voting
Agreements and the Stock Option Agreements were executed. Following execution of
these agreements, the Majority EXCEL Stockholders and the Majority TELEGLOBE
Shareholders executed written consents in favor of the Merger Agreement and the
Merger was publicly announced.
EXCEL'S AND TELEGLOBE'S REASONS FOR THE MERGER
The EXCEL and TELEGLOBE Boards believe that the Merger will create one of
the largest and most diverse facilities-based communications companies in North
America, with network infrastructure and customers spread throughout the world.
The combined company will have pro forma consolidated revenues of approximately
$3.5 billion, EBITDA of approximately $633 million (excluding transaction costs)
and approximately 15.7 billion minutes of use, based on results for the six
months ended June 30, 1998 annualized. The EXCEL and TELEGLOBE Boards further
believe that the Merger will provide opportunities to achieve substantial
benefits for the respective stockholders and customers of each company through
the more efficient utilization and the growth opportunities created by the
combination of the respective companies' assets and management. The combined
company, operating in the combined markets with the combined assets, financial
resources, management and technical expertise of both EXCEL and TELEGLOBE, is
expected to be better able to capitalize on growth opportunities in the
communications industry, both in North America and around the world. In
addition, the combined company should be better positioned to compete
effectively in the rapidly changing communications industry than either EXCEL or
TELEGLOBE on a stand-alone basis. See "Cautionary Statement Concerning
Forward-Looking Statements" and "Risk Factors."
FACTORS CONSIDERED BY THE EXCEL BOARD
The EXCEL Board believes that the Merger provides EXCEL with a strategic
opportunity to expand its business in a number of important ways and that
EXCEL's competitive position and overall performance will benefit from
TELEGLOBE's business, technological and financial resources. The EXCEL Board
agreed with the view of EXCEL management that EXCEL needed to align with a
global telecommunications company in order to position itself for an anticipated
expansion in demand for worldwide data transmission services and capacity. Prior
to the decision to approve the Merger, EXCEL had evaluated and discussed
possible commercial alliances and/or business combinations with other industry
participants. The EXCEL Board believed that because of TELEGLOBE's
profitability, and its vast international network, data products and other
services, a combination of EXCEL and TELEGLOBE presented a unique strategic
opportunity for
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EXCEL and its stockholders, who could continue to participate as stockholders of
the combined company. The EXCEL Board also believes that the Exchange Ratio
provides fair value for the EXCEL shares, and the combined enterprise will be
well positioned to take advantage of new opportunities and to meet competitive
challenges in the communications industry.
EXCEL and TELEGLOBE agreed that the Exchange Ratio for the Merger should
reflect the going-concern equity values of the companies. The negotiations led
to management of the two companies agreeing also to use as a component in
establishing the Exchange Ratio the average trading prices of the stock of the
two companies during the period from the announcement of first quarter earnings
(April 29, 1998 for EXCEL and May 14, 1998 for TELEGLOBE) until June 12, 1998,
the last trading day prior to the announcement of the Merger. However, during
the two-week period leading up to the signing of the Merger Agreement, there
were substantial increases in EXCEL's stock price and a CNBC report in early
June identifying EXCEL as a possible merger target, numerous speculative
communications available publicly over the Internet and, shortly before the
signing of the Merger Agreement, a Reuters news article on the same subject.
Based on the foregoing, in negotiating the Exchange Ratio, management of
EXCEL and TELEGLOBE discounted EXCEL's stock prices during the period in which
the stock price was affected by market speculation. The EXCEL Board carefully
considered this discounting, together with the various other factors discussed
below, as well as Lehman Brothers' analysis of the Exchange Ratio, the
comparison of the two companies' stock prices and EXCEL management's report that
second quarter earnings would fall short of the consensus analysts expectations
(as was announced by EXCEL at the time of the announcement of the Merger). On
this basis, the EXCEL Board determined that it was appropriate for management to
agree to discount the "spikes" in EXCEL's stock price in negotiating the
Exchange Ratio. EXCEL's average per share closing price on the NYSE for the
period from April 29, 1998 through and including May 29, 1998, the last trading
day before the period of increases in EXCEL's trading price, was $22.73. Using
TELEGLOBE's average per share closing price on the NYSE for the period from May
14, 1998 through and including June 12, 1998 of $25.56 (split-adjusted), each
share of EXCEL Common Stock, if exchanged based on such price, would be
exchanged for TELEGLOBE Common Shares having a market value of $22.62. Based in
part on this comparison and in part on the strategic benefits of the combination
and other factors described below, the Board of Directors of EXCEL concluded
that the Exchange Ratio constituted fair consideration for EXCEL's stockholders.
As the Exchange Ratio is fixed, it is not possible to determine the value
of the TELEGLOBE Common Shares that EXCEL's stockholders will receive in
exchange for their shares of EXCEL Common Stock. The actual value will be based
on the market price of the TELEGLOBE Common Shares at the Effective Time. See
"Risk Factors -- Fixed Exchange Ratio." EXCEL's per share closing price on the
NYSE was $19 11/16 on October 5, 1998 (the most recent practicable date prior to
the date of this Information Statement/Prospectus) and $27 9/16 on June 12, 1998
(the last full trading day prior to the announcement of the Merger). EXCEL's
average per share closing price on the NYSE for the twenty consecutive trading
days prior to and including June 12, 1998 was $23.74. Using the TELEGLOBE per
share closing price (split-adjusted) on the NYSE of $22 9/16 on October 5, 1998
and of $25 13/16 on June 12, 1998, each share of EXCEL Common Stock, if
exchanged based on such prices, would be exchanged for TELEGLOBE Common Shares
having a market value of $19.97 and $22.84, respectively. Using TELEGLOBE's
average per share closing price (split-adjusted) on the NYSE for the twenty
consecutive trading days prior to and including June 12, 1998 of $25.64, each
share of EXCEL Common Stock, if exchanged based on such price, would be
exchanged for TELEGLOBE Common Shares having a market value of $22.69.
Information and Factors Considered by the EXCEL Board. In reaching its
determination to approve and recommend the Merger, the EXCEL Board considered,
among other things, (i) information concerning the financial performance and
condition, business operations, capital levels, asset quality and prospects of
each company and EXCEL's projected future financial performance as a separate
entity and on a combined basis with TELEGLOBE (the EXCEL Board considered that
the combination of the two companies' assets and business operations would
provide growth opportunities unavailable on a stand-alone basis); (ii) current
industry, economic and market conditions and trends, including the likelihood of
continuing consolidation and increasing competition in the communications
industry (and the corresponding decrease in the number of
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suitable strategic merger partners); (iii) the importance of market position,
size, scope of services and the availability of financing resources to EXCEL's
ability to compete effectively in the changing environment in the global
communications market (the EXCEL Board considered TELEGLOBE's vast international
network and extensive involvement in Internet and global mobile satellite
communications to be complementary to the domestic long-distance communications
operations of EXCEL and to be consistent with EXCEL's desire to expand
globally); (iv) the fact that the Merger was structured as a merger of equals
and the continued role of EXCEL's officers and directors in the combined company
(which continued role the EXCEL Board believed would be perceived as a benefit
by EXCEL's stockholders); (v) the risks associated with achieving the operating
cost savings and revenue growth expected as a result of consummating the Merger
(see "Risk Factors -- Risk of Nonrealization of Synergies and Other Benefits");
(vi) the terms of the Merger Agreement and related documentation reflecting the
companies' commitment to complete the Merger (as set forth in the covenants
restricting competing offers, the Boards of Directors' recommendations and the
termination provisions, as well as the granting of reciprocal stock options to
purchase up to 19.9% of each other's shares upon certain termination events);
(vii) the current and historical market prices of the common stock of each
company, including the performance of each company's stock during the year
preceding the approval of the Merger (see "-- Opinion of the Financial Advisor
to the EXCEL Board"); (viii) the opinion of EXCEL's financial advisor described
below as to the fairness, from a financial point of view, of the Exchange Ratio
(which was determined through arm's-length negotiations between the companies);
(ix) the likelihood of obtaining required regulatory approvals (the EXCEL Board
considered that it was unlikely that there would be any significant antitrust or
other regulatory concerns with the Merger, thereby making the consummation of
the Merger more likely); (x) the changing regulatory environment in the domestic
telecommunications industry (see "Risk Factors -- U.S. Regulatory Change"); (xi)
the challenges of combining the business of two major corporations of this size
and the attendant risk of diverting management resources from other strategic
opportunities and from operational matters for an extended period of time; (xii)
the availability of alternative strategic transactions; and (xiii) the impact of
the Merger on the customers and employees of each company. In reaching its
decision to approve the Merger and to recommend the Merger to its stockholders,
the EXCEL Board did not assign any relative or specific weights to the various
factors considered and individual directors may have given different weights to
different factors. In addition to these factors, all of which together supported
the decision of the EXCEL Board to approve and recommend the Merger, the EXCEL
Board recognized that certain members of the EXCEL Board and management have
certain interests in the Merger that are in addition to or different from the
interests of EXCEL's stockholders generally. See "The Merger -- Interests of
Certain Persons in the Merger."
Besides these factors, the EXCEL Board considered a number of potential
risks relating to the Merger (see "Risk Factors"), including:
- costs incurred in connection with the Merger and potential difficulties
in realizing the benefits expected from the Merger in the amounts and in
the time frames expected;
- the termination on October 1, 1998 of TELEGLOBE's exclusive mandate to
provide Canadian-overseas facilities-based services and other regulatory
changes; and
- the other factors described under "Cautionary Statement Concerning
Forward-Looking Statements" and "Risk Factors."
The EXCEL Board believed that these potential risks and disadvantages were
greatly outweighed by the potential benefits anticipated from the Merger.
In considering the opinion of Lehman Brothers as to the fairness, from a
financial point of view, of the Exchange Ratio, the EXCEL Board considered
Lehman Brothers' analyses as a whole in the context of Lehman Brothers'
presentation to the EXCEL Board because, on the advice of Lehman Brothers,
considering any portion of such analyses and factors, without considering all
analyses and factors, could create a misleading or incomplete view of the value
of the EXCEL Common Stock. Regarding the Lehman Brothers' presentation, the
EXCEL Board reviewed the various analyses prepared by Lehman Brothers that are
described below under "Opinion of the Financial Advisor to the EXCEL Board" and
observed that the per share values for the EXCEL Common Stock calculated by
Lehman Brothers in its comparable company
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analysis, under both the EXCEL Management Case and the EXCEL Alternative Case,
were greater than $22.46, the value represented by the Exchange Ratio multiplied
by the $25.38 closing price per TELEGLOBE Common Share on June 11, 1998.
However, the EXCEL Board also observed that the EXCEL shares historically had
traded below the industry average and that there was no reason at that time to
expect that the multiple for the equity market value for EXCEL would change so
as to bring EXCEL closer to the median multiple for the EXCEL Comparable Public
Companies, and, therefore, the EXCEL Board discounted this analysis in
determining the fairness of the Exchange Ratio. Moreover, in taking into account
this analysis, the EXCEL Board also considered the potential impact on the
market price of the EXCEL Common Stock of the announcement that second quarter
earnings would fall short of the consensus analysts expectations (as was
announced by EXCEL at the time of the announcement of the Merger).
The following are the primary strategic advantages of the Merger that were
considered by the EXCEL Board in reaching its determination to recommend the
Merger.
Acceleration of Strategic Initiatives. The Merger is intended to allow both
companies to forego certain investments anticipated in the future and to employ
that capital for the development of new growth opportunities. Both companies had
intended to make significant investments in order to develop certain strategic
assets already owned by the other. For TELEGLOBE, this consisted primarily of
developing retail distribution channels catering to residential and commercial
customers, including the necessary investments in customer care and billing in
order to support these types of customers. For EXCEL, this consisted primarily
of preliminary plans to develop both an international telecommunications
transmission network as well as a data network within the United States. The
Merger should allow the combined company to exploit these assets much sooner
than either company could have on its own.
The EXCEL Board believes that EXCEL's ability to accelerate its entry both
into international telecommunications services as a facilities-based provider
and into data services is very important as these markets are among the fastest
growing revenue channels in the telecommunications industry. The EXCEL Board
also determined that it is imperative that EXCEL offer these services in order
to remain competitive with other large telecommunication companies and that it
would take EXCEL considerable time and expense to replicate these assets on a
stand-alone basis.
Leveraging TELEGLOBE's Global Network and Operating Licenses and EXCEL's
Distribution Channels. The EXCEL Board believes that TELEGLOBE's global network
and operating licenses in eighteen countries can be leveraged in order to
provide a platform for the expansion of EXCEL's distribution channels,
particularly its relationship marketing distribution channel, into new
geographic markets. This expansion would target retail market growth to both
residential and commercial customers in Europe, Asia, Latin America and Canada.
The EXCEL Board also believes that TELEGLOBE's name recognition, relationships
with foreign PTTs (Post Telegraph and Telephone Companies, which are government
owned or controlled monopolies that usually provide domestic as well as
international services) and 48 years of operating experience in the
international telecommunications market as a wholesale provider will greatly
enhance the combined company's ability to enter these foreign markets as a
retail provider.
Introduction of TELEGLOBE's Products and Services to EXCEL's Existing
Customers. The combined company intends to offer certain of TELEGLOBE's existing
products and services to EXCEL's existing customer base, thereby increasing and
enhancing its product offering. These products include more competitively-priced
international long distance services, operator services, calling cards, Internet
connectivity and other international business services. The EXCEL Board believes
that the ability to offer a wide array of competitively priced products to
retail customers on a bundled basis, particularly international and data/
Internet products combined with voice products, is becoming increasingly
important in the retail telecommunications market.
Integration of TELEGLOBE's Global and EXCEL's U.S. Network. The combined
company intends to integrate EXCEL's U.S. and TELEGLOBE's global networks in
order to reduce termination costs currently being paid to third party networks.
Both companies currently utilize third party networks for terminating
transmission services that the other can provide. The companies have established
a transition planning committee and have begun the process of integrating their
networks and exchanging vendor services, all on an arm's-length basis.
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The EXCEL Board established a strategy in 1997 that included increased
network ownership designed to reduce its per minute transmission costs and to
enhance its quality of service. The Telco merger was the first step in the
process and the Merger is intended to serve as the next step. EXCEL's customers
have increasingly sophisticated telecommunication requirements that can no
longer be adequately serviced on a predominantly reseller basis. The EXCEL Board
believes that each company's use of the network infrastructure of the other
could maximize revenue and profit opportunities for the combined company.
OPINION OF THE FINANCIAL ADVISOR TO THE EXCEL BOARD
Lehman Brothers served as financial advisor to EXCEL in connection with the
Merger and, in that capacity, delivered an oral opinion to the EXCEL Board on
June 13, 1998, subsequently confirmed in a written opinion to the EXCEL Board
dated June 14, 1998 (the "Lehman Brothers Opinion") to the effect that, as of
the date of the Lehman Brothers Opinion and based on and subject to the
assumptions, limitations and qualifications set forth therein, from a financial
point of view, the Exchange Ratio was fair to the stockholders of EXCEL. In its
presentation to the EXCEL Board, Lehman Brothers based its analyses on the facts
as they existed on and could be evaluated as of the time of such presentation.
In rendering the Lehman Brothers Opinion, Lehman Brothers based its conclusion
upon the Exchange Ratio.
The full text of the Lehman Brothers Opinion is attached as Appendix B to
this Information Statement/ Prospectus and is incorporated herein by reference.
EXCEL stockholders may read the Lehman Brothers Opinion in its entirety for
assumptions made, procedures followed and other matters considered by Lehman
Brothers. The summary of the Lehman Brothers Opinion set forth in this
Information Statement/Prospectus is qualified in its entirety by reference to
the full text of such opinion.
No limitations were imposed by EXCEL on the scope of Lehman Brothers'
investigation or the procedures to be followed by Lehman Brothers in rendering
its opinion. Lehman Brothers was not requested to and did not make any
recommendation to the EXCEL Board as to the form or amount of the consideration
to be received by the holders of EXCEL Common Stock in the Merger, which was
determined through arm's-length negotiations between the parties. In arriving at
its opinion, Lehman Brothers did not ascribe a specific range of values to EXCEL
or TELEGLOBE, but rather made its determination as to the fairness, from a
financial point of view, of the Exchange Ratio to the stockholders of EXCEL on
the basis of the financial and comparative analysis described below. Lehman
Brothers' opinion is for the use and benefit of the EXCEL Board and was rendered
to the EXCEL Board in connection with its consideration of the Merger. Lehman
Brothers' opinion was not intended to be and did not constitute a recommendation
to any holder of EXCEL Common Stock as to how such stockholder should have voted
with respect to the Merger. Lehman Brothers was not requested to opine as to,
and its opinion does not address, EXCEL's underlying business decision to
proceed with or effect the Merger.
In arriving at its opinion, Lehman Brothers reviewed and analyzed: (i) the
Merger Agreement and the specific terms of the Merger, including with respect to
the governance of TELEGLOBE following the consummation of the Merger, (ii) such
publicly available information concerning EXCEL and TELEGLOBE that Lehman
Brothers believed to be relevant to its analysis, (iii) non-public financial and
operating information with respect to the business, operations and prospects of
EXCEL furnished to Lehman Brothers by EXCEL (including, without limitation, the
anticipated financial results of EXCEL for the quarter ended June 30, 1998,
certain of which were publicly disclosed concurrently with the announcement of
the Merger), (iv) financial and operating information with respect to the
business, operations and prospects of TELEGLOBE furnished to Lehman Brothers by
TELEGLOBE and EXCEL, (v) a trading history of the EXCEL Common Stock from May
10, 1996 (the date of EXCEL's initial public offering) to June 11, 1998 and a
comparison of that trading history with those of other companies that Lehman
Brothers deemed relevant, (vi) a trading history of the TELEGLOBE Common Shares
from June 1, 1995 to June 11, 1998 and a comparison of that trading history with
those of other companies that Lehman Brothers deemed relevant, (vii) a
comparison of the historical financial results and present financial condition
of EXCEL with those of other companies that Lehman Brothers deemed relevant,
(viii) a comparison of the historical financial results and present financial
condition of TELEGLOBE with those of other companies that Lehman Brothers deemed
relevant, (ix) third-party research analysts' quarterly and annual earnings
estimates and recommen-
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dations for EXCEL and for TELEGLOBE, including a comparison of analysts'
estimates of the earnings of EXCEL with the current projections of management of
EXCEL for the second quarter of 1998 and subsequent quarters, (x) the potential
market performance of the EXCEL Common Stock in the absence of the Merger, (xi)
the potential pro forma financial effects of the Merger on EXCEL and TELEGLOBE,
including the strategic benefits, revenue enhancements, cost savings and other
synergies expected by the managements of EXCEL and TELEGLOBE to result from a
combination of the businesses of EXCEL and TELEGLOBE, (xii) the terms of certain
other transactions that Lehman Brothers deemed relevant, and (xiii) the results
of prior efforts to solicit indications of interest from third parties with
respect to a business combination or other strategic transaction with EXCEL. In
addition, Lehman Brothers had discussions with the managements of EXCEL and
TELEGLOBE concerning their respective businesses, operations, assets, financial
condition and prospects and undertook such other studies, analyses and
investigations as Lehman Brothers deemed appropriate.
In arriving at its opinion, Lehman Brothers assumed and relied upon the
accuracy and completeness of the financial and other information used by Lehman
Brothers without assuming any responsibility for independent verification of
such information and further relied upon the assurances of the managements of
EXCEL and TELEGLOBE that they were not aware of any facts or circumstances that
would make such information inaccurate or misleading. EXCEL management provided
to Lehman Brothers projections of its estimates of the future performance of
EXCEL for the period from January 1, 1998 to December 31, 2002, without giving
effect to the Merger. Based on these projections and with the consent of EXCEL,
Lehman Brothers extrapolated estimates for the one year period ending on
December 31, 2003 for purposes of its analyses, which, together with the
projections provided by the management of EXCEL, are referred to herein as the
"EXCEL Management Case." Upon advice of EXCEL, Lehman Brothers assumed that the
projections provided by EXCEL management had been reasonably prepared on a basis
reflecting the best currently available estimates and judgments of the
management of EXCEL as to the future financial performance of EXCEL. However,
given that EXCEL's recent financial performance had fallen short of management's
projections, Lehman Brothers also prepared and considered more conservative
projections for the period of January 1, 1998 to December 31, 2003 (the "EXCEL
Alternative Case") based upon the possibility that EXCEL would underperform
EXCEL management's projections in the future. The EXCEL Alternative Case
contained more conservative assumptions than the EXCEL Management Case with
respect to, among other things, revenue growth rates and operating profit
margins. Lehman Brothers discussed the EXCEL Alternative Case with EXCEL
management, and EXCEL management consented to the use of such projections, in
addition to the EXCEL Management Case, in performing Lehman Brothers' analysis.
With respect to the financial projections of TELEGLOBE without giving
effect to the Merger, TELEGLOBE management provided to Lehman Brothers
projections of the financial performance of TELEGLOBE for the period from
January 1, 1998 to December 31, 2001. Based on these projections and with the
consent of TELEGLOBE, Lehman Brothers extrapolated estimates for the two year
period ending on December 31, 2003 for purposes of its analysis which, together
with the projections provided by the management of TELEGLOBE, are referred to
herein as the "TELEGLOBE Management Case." Upon advice of EXCEL and TELEGLOBE,
Lehman Brothers assumed that the projections provided by management of TELEGLOBE
had been reasonably prepared on a basis reflecting the best currently available
estimates and judgments of the management of TELEGLOBE as to the future
financial performance of TELEGLOBE without giving effect to the Merger and that
TELEGLOBE would perform substantially in accordance with such projections.
With respect to the financial projections of TELEGLOBE following the
consummation of the Merger, including the strategic benefits, revenue
enhancements, cost savings and other synergies expected by the managements of
EXCEL and TELEGLOBE to result from a combination of the businesses of EXCEL and
TELEGLOBE, such projections were prepared by combining the EXCEL Management Case
projections or the EXCEL Alternative Case projections, as the case may be, with
the TELEGLOBE Management Case projections, and incorporating such strategic
benefits, revenue enhancements, cost savings and other synergies. Upon advice of
EXCEL and TELEGLOBE, Lehman Brothers assumed that such projections had been
reasonably prepared on a basis reflecting the best currently available estimates
and judgments of the
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managements of EXCEL and TELEGLOBE as to the future financial performance of
TELEGLOBE following the consummation of the Merger and that TELEGLOBE would
perform substantially in accordance with such projections post-Merger.
In arriving at its opinion, Lehman Brothers conducted only a limited
physical inspection of the properties and facilities of EXCEL and TELEGLOBE and
did not make or obtain any evaluations or appraisals of the assets or
liabilities of EXCEL or TELEGLOBE. Upon advice of EXCEL, Lehman Brothers assumed
that the Merger would qualify as a tax-free transaction to the stockholders of
EXCEL. The analyses described below assume that the Merger would be accounted
for as a pooling of interests. The Lehman Brothers Opinion necessarily was based
upon market, economic and other conditions as they existed on, and could be
evaluated as of, the date of such opinion.
In connection with its presentation to the EXCEL Board and the preparation
of its fairness opinion, Lehman Brothers performed a variety of financial and
comparative analyses, as described below. The preparation of a fairness opinion
involves various determinations as to the most appropriate and relevant methods
of financial and comparative analysis and the application of those methods to
the particular circumstances and, therefore, such an opinion is not readily
susceptible to summary description. Furthermore, in arriving at its opinion,
Lehman Brothers did not attribute any specific weight to any analysis or factor
considered by it, but rather made qualitative judgments as to the significance
and relevance of each analysis and factor. Accordingly, Lehman Brothers believes
that its analyses must be considered as a whole and that considering any portion
of such analyses and factors, without considering all analyses and factors,
could create a misleading or incomplete view of the process underlying its
opinion. In its analyses, Lehman Brothers made numerous assumptions with respect
to the industry performance, general business and economic conditions and other
matters, many of which are beyond the control of EXCEL and TELEGLOBE. Any
estimates contained in these analyses are not necessarily indicative of actual
values or predictive of future results or values, which may be significantly
more or less favorable than as set forth therein. In addition, analyses relating
to the value of businesses do not purport to be appraisals or to reflect the
prices at which businesses actually may be sold.
Historical Stock Trading Analysis and Exchange Ratio Analysis. Lehman
Brothers analyzed the historical trading prices for the EXCEL Common Stock from
May 10, 1996 (the date of EXCEL's initial public offering) to June 11, 1998 and
the historical trading prices for the TELEGLOBE Common Shares from June 1, 1995
to June 11, 1998. Lehman Brothers also analyzed the indexed historical trading
prices for the EXCEL Common Stock and the TELEGLOBE Common Shares from May 10,
1996 to June 11, 1998 to an index comprised of fONOROLA Inc. and Call-Net
Enterprises Inc., an index comprised of Esprit Telecom Group plc, IDT
Corporation, Pacific Gateway Exchange, Inc., Primus Telecommunications Group,
Inc., Telegroup, Inc. and Viatel, Inc., and an index comprised of Frontier
Corporation, IXC Communications, Inc., Qwest Communications International, Inc.
and Tel-Save Holdings, Inc. Lehman Brothers noted that during such period the
price performance per share of EXCEL Common Stock under-performed that of
TELEGLOBE Common Shares and each of the aforementioned indices, while the price
performance per share of TELEGLOBE Common Shares outperformed that of EXCEL
Common Stock and each of the aforementioned indices except for the index
comprised of fONOROLA Inc. and Call-Net Enterprises Inc. During such period, the
high and low prices per share of EXCEL Common Stock were $39.75 and $12.375,
respectively. During such period, the high and low prices per share of TELEGLOBE
Common Shares were $26.22 and $10.05, respectively. Lehman Brothers considered
the potential impact on the market price of EXCEL Common Stock of the
announcement of the earnings of EXCEL for the second quarter of 1998 without the
concurrent announcement of the Merger. Lehman Brothers also analyzed the
exchange ratios that would be derived from the market prices for EXCEL and
TELEGLOBE over the one year period from June 11, 1997 through June 11, 1998.
Comparable Company Analysis. Using publicly available information, Lehman
Brothers compared the financial performance and stock market valuation of EXCEL
with the following domestic long distance telecommunications companies: Frontier
Corporation, IXC Communications, Inc., Qwest Communications International, Inc.
(pro forma for the LCI International, Inc. acquisition) and Tel-Save Holdings,
Inc. (the "EXCEL Comparable Public Companies"). Estimates for the EXCEL
Comparable Public Companies were
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based upon research analysts' estimates. The median multiples for the equity
market value to projected 1998 and 1999 earnings were 33.9x and 16.2x,
respectively, for the EXCEL Comparable Public Companies versus 22.3x projected
1998 earnings and 13.4x projected 1999 earnings for EXCEL using the EXCEL
Management Case. Among other multiples, Lehman Brothers also calculated the
median multiples for the EXCEL Comparable Public Companies for the equity market
value plus net indebtedness, preferred stock and minority interests ("Firm
Value") to latest twelve months ("LTM") revenues and the Firm Value to projected
1998 and 1999 revenues. The median multiples of the EXCEL Comparable Public
Companies were 3.8x, 2.7x, and 2.2x for LTM revenue, projected 1998 revenue, and
projected 1999 revenue, respectively, versus 2.1x, 1.9x, and 1.5x for LTM
revenue, projected 1998 revenue, and projected 1999 revenue, respectively, for
EXCEL. Based on these multiples, Lehman Brothers calculated equity values per
share of EXCEL Common Stock ranging from $35.81 to $38.20 under the EXCEL
Management Case and ranging from $31.80 to $32.19 under the EXCEL Alternative
Case, as compared to $22.46 per share of EXCEL Common Stock (which represents
the Exchange Ratio multiplied by the $25.38 closing price per TELEGLOBE Common
Share on June 11, 1998).
Using publicly available information, Lehman Brothers also compared the
financial performance and stock market valuation of TELEGLOBE with the following
Canadian and international long distance telecommunications companies: Call-Net
Enterprises Inc., Esprit Telecom Group plc, fONOROLA Inc., IDT Corporation,
Pacific Gateway Exchange, Inc., Primus Telecommunications Group, Inc., RSL
Communications, Ltd., Startec Global Communications Corporation, STAR
Telecommunications, Inc., Telegroup, Inc., and Viatel, Inc. (the "TELEGLOBE
Comparable Public Companies"). Estimates for the TELEGLOBE Comparable Public
Companies were based upon research analysts' estimates. The median multiples for
the equity market value to projected 1998 and 1999 earnings were 38.3x and
25.0x, respectively, for the TELEGLOBE Comparable Public Companies versus 30.9x
projected 1998 earnings and 23.5x projected 1999 earnings for TELEGLOBE using
the TELEGLOBE Management Case. Among other multiples, Lehman Brothers also
calculated the median multiples for the TELEGLOBE Comparable Public Companies
for the Firm Value to LTM revenues, projected 1998 revenues and projected 1999
revenues. The median multiples of the TELEGLOBE Comparable Public Companies were
2.4x, 1.8x, and 1.3x for LTM revenue, projected 1998 revenue, and projected 1999
revenue, respectively, versus 2.5x, 2.3x, and 1.8x for LTM revenue, projected
1998 revenue, and projected 1999 revenue, respectively, for TELEGLOBE under the
TELEGLOBE Management Case.
Discounted Cash Flow Analyses of EXCEL and TELEGLOBE. Lehman Brothers
calculated the present value of the future streams of after-tax cash flows that
EXCEL and TELEGLOBE could be expected to produce over a five-year period ending
on December 31, 2003. Using the EXCEL Management Case projections, the EXCEL
Alternative Case projections, or the TELEGLOBE Management Case projections,
respectively, the after-tax cash flows for the five-year period beginning on
January 1, 1999 and ending on December 31, 2003 were calculated as unlevered
after-tax earnings plus depreciation and amortization less net changes in
non-cash, non-debt working capital and capital expenditures. Lehman Brothers
calculated terminal values for EXCEL and TELEGLOBE in 2003 by applying to
projected operating earnings before net interest expense, taxes, depreciation
and amortization ("EBITDA") a range of multiples. The cash flow streams and
terminal values were then discounted to present values using a range of discount
rates, which were chosen based on assumptions regarding factors such as the
inflation rates, interest rates, the inherent business risk and the cost of
capital for EXCEL and TELEGLOBE, respectively.
Based on these assumptions and discounting all cash flows to January 1,
1999, Lehman Brothers calculated equity values based upon the EXCEL Management
Case and the EXCEL Alternative Case of $21.39 to $27.26 and $16.56 to $21.33,
respectively, per EXCEL share (as compared to $22.46 per share of EXCEL Common
Stock, which represents the Exchange Ratio multiplied by the $25.38 closing
price per TELEGLOBE Common Share on June 11, 1998), and calculated equity values
based upon the TELEGLOBE Management Case of $41.09 to $48.29 per TELEGLOBE share
(split-adjusted). Based on the discounted cash flow analyses of EXCEL and
TELEGLOBE, the Exchange Ratio exceeded the implied exchange ratio derived from
the discounted cash flow analysis of the EXCEL Management Case relative to the
discounted cash flow analysis of the TELEGLOBE Management Case, and exceeded the
implied
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exchange ratio derived from the discounted cash flow analysis of the EXCEL
Alternative Case relative to the discounted cash flow analysis of the TELEGLOBE
Management Case.
Discounted Cash Flow Analysis of TELEGLOBE Post-Merger. Lehman Brothers
calculated the present value of the future streams of after-tax cash flows that
TELEGLOBE could be expected to produce over a five-year period ending on
December 31, 2003 after giving effect to the Merger. The analysis utilized the
EXCEL Management Case projections, the EXCEL Alternative Case projections and
the TELEGLOBE Management Case projections, and assumed, among other items, the
strategic benefits, revenue enhancements, cost savings and other synergies
anticipated to result from the Merger. The after-tax cash flows for the
five-year period beginning on January 1, 1999 and ending on December 31, 2003
were calculated as unlevered after-tax earnings plus depreciation and
amortization less net changes in non-cash, non-debt working capital and capital
expenditures. Lehman Brothers calculated terminal values for TELEGLOBE in 2003
by applying to projected EBITDA a range of multiples based on a blended average
of the terminal multiples for EXCEL and TELEGLOBE. The cash flow streams and
terminal values were then discounted to present values using a range of discount
rates, which were chosen based on assumptions regarding factors such as the
inflation rates, interest rates, the inherent business risk in TELEGLOBE's
business post-Merger, and the assumed cost of capital to TELEGLOBE post-Merger.
Lehman Brothers performed a discounted cash flow analysis (discounting all
cash flows to January 1, 1999) and calculated a TELEGLOBE post-Merger per share
equity value based upon the EXCEL Management Case and the TELEGLOBE Management
Case of $39.94 per post-Merger TELEGLOBE share (split-adjusted). Lehman Brothers
then applied the Exchange Ratio to the post-Merger TELEGLOBE share price, and
determined that, based on this analysis and all of its assumptions, a holder of
EXCEL Common Stock would receive $35.37 of implied value for each share of EXCEL
Common Stock which implied value exceeded the discounted cash flow analysis
equity value per share of EXCEL Common Stock under both the EXCEL Management
Case and the EXCEL Alternative Case, and also exceeded the market price per
share of EXCEL Common Stock as of June 11, 1998. Lehman Brothers performed a
discounted cash flow analysis (discounting all cash flows to January 1, 1999)
and calculated a TELEGLOBE post-Merger per share equity value based upon the
EXCEL Alternative Case and the TELEGLOBE Management Case of $36.58 per
post-Merger TELEGLOBE share (split-adjusted). Lehman Brothers then applied the
Exchange Ratio to the post-Merger TELEGLOBE share price, and determined that
based on this analysis and all of its assumptions, a holder of EXCEL Common
Stock would receive $32.40 of implied value for each share of EXCEL Common Stock
which implied value exceeded the discounted cash flow analysis equity value per
share of EXCEL Common Stock under both the EXCEL Management Case and the EXCEL
Alternative Case (see "-- Discounted Cash Flow Analyses of EXCEL and TELEGLOBE"
for equity value per share of EXCEL Common Stock), and also exceeded the market
price per share of EXCEL Common Stock of $25.63 as of June 11, 1998 and the
amount of $22.46 per share of EXCEL Common Stock (which represents the Exchange
Ratio multiplied by the $25.38 closing price per TELEGLOBE Common Share on June
11, 1998).
Pro Forma Ownership Analysis. Lehman Brothers analyzed the relative
ownership of TELEGLOBE shareholders after the Merger (based upon the Exchange
Ratio) on a fully diluted basis by present holders of EXCEL Common Stock and
present holders of TELEGLOBE Common Shares, employing certain assumptions as to
the exercise of options by the holders of EXCEL options and TELEGLOBE options.
This analysis indicated that holders of EXCEL Common Stock and holders of
TELEGLOBE Common Shares would own 48.6% and 51.4%, respectively, of TELEGLOBE
after the Merger on a fully diluted basis.
Contribution Analysis. Lehman Brothers analyzed, among other items, the
contribution to combined estimated revenues and EBITDA before strategic
benefits, revenue enhancements, cost savings and other synergies expected by the
managements of EXCEL and TELEGLOBE to result from a combination of the
businesses of EXCEL and TELEGLOBE for the LTM, the latest publicly disclosed
three months figure annualized, and for the projected years 1998 through 2003
(the "Relative Contribution Period"). Based on the EXCEL Management Case
projections and the TELEGLOBE Management Case projections, this analysis
indicated that in the Relative Contribution Period, EXCEL was projected to
contribute from 50.6% to 57.9%, and TELEGLOBE was projected to contribute from
42.1% to 49.4%, of estimated revenues before strategic benefits, revenue
enhancements, and other synergies. This analysis also indicated that in the
Relative
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Contribution Period, EXCEL was projected to contribute from 46.1% to 59.8%, and
TELEGLOBE was projected to contribute from 40.2% to 53.9%, of estimated EBITDA
before strategic benefits, revenue enhancements, cost savings and other
synergies. Based on the EXCEL Alternative Case projections and the TELEGLOBE
Management Case projections, this analysis indicated that in the Relative
Contribution Period, EXCEL was projected to contribute from 47.0% to 57.4%, and
TELEGLOBE was projected to contribute from 42.6% to 53.0%, of estimated revenues
before strategic benefits, revenue enhancements, and other synergies. This
analysis also indicated that in the Relative Contribution Period, EXCEL was
projected to contribute from 41.0% to 55.6%, and TELEGLOBE was projected to
contribute from 44.4% to 59.0%, of estimated EBITDA before strategic benefits,
revenue enhancements, cost savings and other synergies.
Lehman Brothers also analyzed the relative contribution to the equity value
of TELEGLOBE post-Merger, on a discounted cash flow basis, of the equity values
of EXCEL and TELEGLOBE. The discounted cash flow equity value of TELEGLOBE
post-Merger was assumed to be the sum of the discounted cash flow equity values
of EXCEL and TELEGLOBE. Using the EXCEL Management Case projections and the
TELEGLOBE Management Case projections, and excluding any of the strategic
benefits, revenue enhancements, cost savings and other synergies expected by the
managements of EXCEL and TELEGLOBE to result from a combination of the
businesses of EXCEL and TELEGLOBE, EXCEL and TELEGLOBE contributed 36.3% and
63.7%, respectively, of the discounted cash flow equity value of TELEGLOBE
post-Merger. Using the EXCEL Alternative Case projections and the TELEGLOBE
Management Case projections, and excluding any of the strategic benefits,
revenue enhancements, cost savings and other synergies expected by the
managements of EXCEL and TELEGLOBE to result from a combination of the
businesses of EXCEL and TELEGLOBE, EXCEL and TELEGLOBE contributed 30.7% and
69.3%, respectively, of the discounted cash flow equity value of TELEGLOBE
post-Merger.
Pro Forma Merger Analysis. Lehman Brothers analyzed, among other items, the
estimated pro forma financial results for TELEGLOBE assuming consummation of the
Merger as of December 31, 1998 and including the strategic benefits, revenue
enhancements, cost savings and other synergies anticipated to result from the
Merger. Lehman Brothers compared EXCEL's and TELEGLOBE's estimated earnings per
share ("EPS") for 1999, 2001 and 2003 on a stand-alone basis with EXCEL's and
TELEGLOBE's allocated EPS of TELEGLOBE post-Merger for 1999, 2001 and 2003.
Based on the EXCEL Management Case projections for 1999, 2001 and 2003 and the
TELEGLOBE Management Case projections for 1999, 2001 and 2003, Lehman Brothers
noted that the Merger would result in EPS dilution for current holders of EXCEL
Common Stock of 18.5% in 1999, 4.1% in 2001 and EPS accretion of 3.1% in 2003,
and EPS accretion for current holders of TELEGLOBE Common Shares of 62.5% in
1999, 29.8% in 2001 and 16.6% in 2003. Based on the EXCEL Alternative Case
projections for 1999, 2001 and 2003 and the TELEGLOBE Management Case
projections for 1999, 2001 and 2003, Lehman Brothers noted that the Merger would
result in EPS dilution for current holders of EXCEL Common Stock of 10.9% in
1999, EPS accretion of 7.0% in 2001 and 18.6% in 2003, and EPS accretion for
current holders of TELEGLOBE Common Shares of 47.8% in 1999, 18.7% in 2001 and
5.1% in 2003.
Has/Gets Analysis. Lehman Brothers calculated, among other items, the
effect that the Merger would have on the projected revenue, EBITDA, operating
earnings before net interest expense and taxes ("EBIT"), net income, EPS and
cash EPS (EPS prior to goodwill amortization) of EXCEL and TELEGLOBE on a
stand-alone basis before the Merger and as compared to the projected revenue,
EBITDA, EBIT, net income, EPS and cash EPS of TELEGLOBE after the Merger. This
analysis was based on the assumptions described above, including the realization
of the strategic benefits, revenue enhancements, cost savings and other
synergies anticipated to result from the Merger.
The analysis indicated that assuming the Exchange Ratio, the EXCEL
Management Case projections and the TELEGLOBE Management Case projections, the
Merger would result in a decrease in 1999 for EXCEL in projected revenue,
EBITDA, EBIT, net income, EPS and cash EPS ranging from 14.0% to 20.1% and an
increase in 1999 for TELEGLOBE in projected revenue, EBITDA, EBIT, net income,
EPS and cash EPS ranging from 25.5% to 66.6%. The analysis indicated that
assuming the Exchange Ratio, the EXCEL Management Case projections and the
TELEGLOBE Management Case projections, the Merger would result in a change in
2001 for EXCEL in projected revenue, EBITDA, EBIT, net income, EPS and cash EPS
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ranging from a decrease of 11.3% to an increase of 3.8% and an increase in 2001
for TELEGLOBE in projected revenue, EBITDA, EBIT, net income, EPS and cash EPS
ranging from 15.3% to 31.9%. The analysis indicated that assuming the Exchange
Ratio, the EXCEL Alternative Case projections and the TELEGLOBE Management Case
projections, the Merger would result in a decrease in 1999 for EXCEL in
projected revenue, EBITDA, EBIT, net income, EPS and cash EPS ranging from 6.8%
to 13.2% and an increase in 1999 for TELEGLOBE in projected revenue, EBITDA,
EBIT, net income, EPS and cash EPS ranging from 18.9% to 52.1%. The analysis
indicated that assuming the Exchange Ratio, the EXCEL Alternative Case
projections and the TELEGLOBE Management Case projections, the Merger would
result in a change in 2001 for EXCEL in projected revenue, EBITDA, EBIT, net
income, EPS and cash EPS ranging from a decrease of 6.0% to an increase of 13.5%
and an increase in 2001 for TELEGLOBE in projected revenue, EBITDA, EBIT, net
income, EPS and cash EPS ranging from 7.4% to 20.9%.
Analysis at Various Combined Company Trading Prices. Lehman Brothers
analyzed, among other items, the range of multiples of potential Firm Value for
TELEGLOBE post-Merger as a multiple of projected revenue and EBITDA for
TELEGLOBE post-Merger and the range of multiples of potential pro forma share
prices to projected EPS for TELEGLOBE post-Merger. For the purposes of this
analysis, Lehman Brothers assumed the realization of the strategic benefits,
revenue enhancements, cost savings and other synergies anticipated to result
from the Merger and certain other assumptions such as the Exchange Ratio. Based
on the foregoing and per-share prices for the combined company ranging from $23
to $35 per post-Merger TELEGLOBE Common Share (split-adjusted), this analysis
indicated that (i) the Firm Value of the combined company as a multiple of
projected 1999 revenue ranged from 1.4x to 2.1x and of projected 1999 EBITDA
ranged from 7.3x to 10.9x and (ii) the potential pro forma share prices of the
combined company as a multiple of projected 1999 EPS ranged from 14.4x to 21.9x.
Lehman Brothers then compared these multiples to those of the following
telecommunications companies: AT&T Corporation, British Telecommunications plc,
WorldCom, Inc./MCI Communications Corporation, Cable & Wireless plc, Frontier
Corporation, Qwest Communications International, Inc. (pro forma for the LCI
International, Inc. acquisition), an index comprised of RSL Communications,
Ltd., STAR Telecommunications, Inc., and Pacific Gateway Exchange, Inc., and an
index comprised of fONOROLA Inc. and Call-Net Enterprises Inc. (collectively,
the "post-Merger Comparable Public Companies"). The median multiples for the
Firm Value to projected 1999 revenue and EBITDA were 2.2x and 8.7x,
respectively, for the post-Merger Comparable Public Companies. The median
multiple for the current share price to projected 1999 EPS was 21.0x for the
post-Merger Comparable Public Companies.
Lehman Brothers is an internationally recognized investment banking firm
and, as part of its investment banking activities, is regularly engaged in the
evaluation of businesses and their securities in connection with mergers and
acquisitions, negotiated underwritings, competitive bids, secondary
distributions of listed and unlisted securities, private placements and
valuations for corporate and other purposes. The EXCEL Board selected Lehman
Brothers because of its expertise, reputation and familiarity with EXCEL in
particular and the telecommunications industry in general and because its
investment banking professionals have substantial experience in transactions
similar to the Merger.
As compensation for its services in connection with the Merger, EXCEL has
agreed to pay Lehman Brothers the following fees: (a) $500,000 upon delivery of
its opinion to the EXCEL Board, (b) $100,000 for any bring down opinion to the
EXCEL Board, (c) $4,500,000 less any amounts paid to Lehman Brothers pursuant to
(a) and (b), at the closing of a transaction with TELEGLOBE. In addition, EXCEL
has agreed to reimburse Lehman Brothers for reasonable out-of-pocket expenses
incurred in connection with the Merger and to indemnify Lehman Brothers and
certain related persons for certain liabilities that may arise out of its
engagement by EXCEL and the rendering of its opinion. Lehman Brothers has
performed various investment banking services for EXCEL in the past and has
received customary fees for such services.
In the ordinary course of its business, Lehman Brothers may actively trade
in EXCEL Common Stock and TELEGLOBE Common Shares for the accounts of its
customers and, accordingly, may at any time hold a long or short position in
such securities.
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TERMS OF THE MERGER
THE DESCRIPTION OF THE MERGER AGREEMENT SET FORTH BELOW IS QUALIFIED BY
REFERENCE TO THE COMPLETE TEXT OF THE MERGER AGREEMENT, A COPY OF WHICH IS
ATTACHED AS APPENDIX A TO THIS INFORMATION STATEMENT/PROSPECTUS AND INCORPORATED
HEREIN BY THIS REFERENCE.
The Merger. The Merger Agreement provides, among other things, for a merger
of equals transaction in which Merger Sub will merge with and into EXCEL, with
EXCEL surviving the Merger as a wholly owned subsidiary of TELEGLOBE (the
"Surviving Corporation"). The Merger will become effective at such time as the
Certificate of Merger for the Merger is filed with the Secretary of State of the
State of Delaware (or at such later time as may be specified in the Certificate
of Merger) (the "Effective Time"). The Effective Time is expected to occur as
soon as practicable after the last of the conditions precedent to the Merger set
forth in the Merger Agreement has been satisfied or waived. See "-- Conditions;
Waivers."
Certificate of Incorporation and By-Laws of Surviving Corporation. The
Merger Agreement provides that the certificate of incorporation of EXCEL as in
effect immediately prior to the Effective Time will become the certificate of
incorporation of the Surviving Corporation, as amended to reduce the authorized
number of shares of EXCEL Common Stock to an amount equal to the sum of the
actual number of such shares outstanding immediately prior to the Effective Time
plus 1,000 shares, and to eliminate a class of authorized preferred stock. The
By-Laws of Merger Sub as in effect immediately prior to the Effective Time will
become the by-laws of the Surviving Corporation.
Certificate of Incorporation and By-laws of TELEGLOBE. As contemplated by
the Merger Agreement, on August 10, 1998, TELEGLOBE's shareholders approved an
amendment to TELEGLOBE's articles of incorporation which will become effective
at the Effective Time and which includes (i) provisions requiring supermajority
approval for certain actions by the TELEGLOBE Board and (ii) provisions
concerning the composition of the Board of Directors of TELEGLOBE after the
Merger (the "TELEGLOBE Articles Amendment"). See "-- Other Covenants" and
"-- Interests of Certain Persons in the Merger -- Certain Other Matters."
Officers and Directors of the Surviving Corporation. The officers of EXCEL
immediately prior to the Effective Time will become the officers of the
Surviving Corporation, until their resignation or removal or until their
respective successors are duly elected or appointed and qualified, as the case
may be. The directors of Merger Sub immediately prior to the Effective Time
(which will be comprised of an equal number of representatives designated by
TELEGLOBE and EXCEL) will become the directors of the Surviving Corporation,
until the earlier of their resignation or removal or until their respective
successors are duly elected or appointed and qualified. See "Directors and
Management of TELEGLOBE Following the Merger."
Effect on EXCEL Common Stock. At the Effective Time, each share of EXCEL
Common Stock issued and outstanding immediately prior to the Effective Time will
be converted into the right to receive 0.885 of a TELEGLOBE Common Share,
rounded down to the nearest whole number (together with any cash payable in lieu
of fractional TELEGLOBE Common Shares as described below under "-- Fractional
Shares," the "Merger Consideration").
At the Effective Time, each option to purchase or right to receive EXCEL
Common Stock (an "EXCEL Stock Option") issued pursuant to EXCEL's stock or stock
option plans (the "EXCEL Stock Plans") and outstanding immediately prior to the
Effective Time, whether vested or unvested, will be assumed by TELEGLOBE and
will be deemed to constitute an option to acquire, on the same terms and
conditions as were applicable under such EXCEL Stock Option immediately prior to
the Effective Time (taking into account any acceleration of vesting as a result
of the Merger), that number of TELEGLOBE Common Shares which the holder of such
EXCEL Stock Option would have been entitled to receive pursuant to the Merger if
such holder had exercised such EXCEL Stock Option in full immediately prior to
the Effective Time (rounded up to the nearest whole number), at an exercise
price per share equal to (y) the exercise price per share for the shares of
EXCEL Common Stock purchasable pursuant to such EXCEL Stock Option divided by
(z) the Exchange Ratio (a "Converted Option"). The Merger Agreement provides
that
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TELEGLOBE will prepare and file with the Commission a registration statement on
Form S-8 under the Securities Act or on any other appropriate form with respect
to the TELEGLOBE Common Shares subject to EXCEL Stock Options issued or issuable
under such EXCEL Stock Plans and will use its best efforts to have such
registration statement declared effective immediately following the Effective
Time and to maintain the effectiveness of such registration statement or
registration statements covering such EXCEL Stock Options (and maintain the
current status of the prospectus or prospectuses contained therein) for so long
as such EXCEL Stock Options remain outstanding.
Fractional Shares. Each holder of shares of EXCEL Common Stock exchanged
pursuant to the Merger who or which would otherwise have been entitled to
receive a fraction of a TELEGLOBE Common Share will be entitled to receive, in
lieu thereof, cash (without interest) in an amount equal to the product of (i)
such fractional part of a TELEGLOBE Common Share and (ii) the average closing
price of the TELEGLOBE Common Shares on the NYSE, as reported on the NYSE
Composite Tape for the ten trading days prior to and ending on the trading day
immediately preceding the date on which the Effective Time occurs (the "Closing
Date"). As promptly as practicable after the determination of the amount of
cash, if any, to be paid to holders of fractional interests, the Exchange Agent
will notify TELEGLOBE, TELEGLOBE will deposit such amount with the Exchange
Agent and the Exchange Agent will forward such cash payments to such holders of
fractional interests.
EXCHANGE OF CERTIFICATES IN THE MERGER
Subject to the terms and conditions of the Merger Agreement, at or prior to
the Effective Time, TELEGLOBE will appoint an exchange agent reasonably
acceptable to EXCEL to effect the exchange of certificates representing shares
of EXCEL Common Stock for certificates representing shares of TELEGLOBE Common
Shares (the "Exchange Agent"). As soon as reasonably practicable after the
Effective Time, the Exchange Agent will mail to each holder of a certificate
representing shares of EXCEL Common Stock issued and outstanding immediately
prior to the Effective Time (each, a "Certificate") a letter of transmittal and
instructions for effecting the surrender of such Certificates in exchange for
the applicable Merger Consideration. Upon surrender of a Certificate to the
Exchange Agent together with such letter of transmittal, the holder of such
Certificate will be entitled to receive the TELEGLOBE Common Shares and cash
payment in lieu of fractional shares as described above under "-- Effect on
EXCEL Common Stock" and "-- Fractional Shares," together with any unpaid
dividends and other distributions to which such holder is entitled, and the
Certificate so surrendered will be canceled. WE REQUEST THAT YOU NOT SURRENDER
YOUR CERTIFICATES FOR EXCHANGE UNTIL YOU RECEIVE SUCH LETTER OF TRANSMITTAL AND
INSTRUCTIONS. No interest will be paid or will accrue on the Merger
Consideration. Holders of unexchanged shares of EXCEL Common Stock will not be
entitled to receive any dividends or other distributions payable by TELEGLOBE,
or cash in lieu of fractional shares, until their Certificates are surrendered.
Upon surrender, however, subject to applicable laws, such holders will receive
accumulated dividends and distributions, without interest, together with cash in
lieu of fractional shares to which they may be entitled.
LISTING OF THE TELEGLOBE COMMON SHARES
TELEGLOBE has agreed to use its best efforts to cause the TELEGLOBE Common
Shares to be issued in the Merger and the TELEGLOBE Common Shares to be reserved
for issuance upon exercise of the Converted Options to be approved for listing
on the NYSE, subject to official notice of issuance, and on the ME and the TSE,
subject to customary requirements. Such authorizations for listing are
conditions to the obligations of TELEGLOBE, Merger Sub and EXCEL to consummate
the Merger and have been satisfied. See "-- Conditions; Waivers."
REPRESENTATIONS AND WARRANTIES
The Merger Agreement includes representations and warranties by each of
EXCEL and TELEGLOBE as to (i) corporate organization, standing and power, (ii)
capital structure, (iii) authority to enter into the contemplated transactions
and the absence of conflicts between such transactions and its organizational
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documents, other material contracts and applicable laws, orders and regulatory
requirements, (iv) certain third party consents required in connection with the
consummation of the Merger, (v) possession and validity of permits, (vi) reports
filed with the Commission (and the Canadian securities authorities in the case
of TELEGLOBE) and financial statements, (vii) information supplied in connection
with the Registration Statement of TELEGLOBE on Form F-4 of which this
Information Statement/Prospectus forms a part (the "Form F-4"), (viii) the
absence of certain changes or events with respect to their respective
businesses, condition, assets, liabilities or results of operations since
December 31, 1997, (ix) Board approvals, (x) the stockholder votes required for
the contemplated transactions, (xi) brokers or finders, (xii) fairness opinions,
(xiii) the absence of undisclosed liabilities, (xiv) taxes, (xv) real property
and intellectual property, (xvi) material contracts, (xvii) litigation, (xviii)
environmental matters, (xix) employee benefit plans, (xx) compliance with laws,
(xxi) accounting and tax matters, (xxii) labor matters, (xxiii) insurance,
(xxiv) the absence of any pending Acquisition Proposals (as defined under "-- No
Solicitation"), (xxv) inapplicability of anti-takeover laws or devices, (xxvi)
year 2000 matters, (xxvii) pooling-of-interests accounting treatment and
(xxviii) regulatory matters.
The Merger Agreement also includes joint and several representations and
warranties by each of TELEGLOBE and Merger Sub with respect to Merger Sub as to
(i) corporate organization, standing and power, (ii) capital structure, (iii)
authority to enter into the contemplated transactions, (iv) the absence of
conflicts between such transactions and organizational documents, other material
contracts and applicable laws, orders and regulatory requirements and (v) the
absence of any business activities except for the purpose of consummating the
contemplated transactions.
BUSINESSES OF EXCEL AND TELEGLOBE PENDING THE MERGER
EXCEL and TELEGLOBE have agreed that, among other things, prior to the
Effective Time or earlier termination of the Merger Agreement, except as
permitted by the Merger Agreement or as otherwise agreed by either such party in
writing, each of EXCEL and TELEGLOBE will, and will cause each of its respective
subsidiaries to, carry on their businesses in the usual, regular and ordinary
course in all material respects, and will use all reasonable efforts to preserve
intact their present lines of business, maintain their rights and franchises and
preserve their relationships with customers, suppliers, regulators,
distributors, creditors, lessors, employees and others having business dealings
with them to the end that their ongoing businesses will not be impaired in any
material respect at the Effective Time.
Without limiting the foregoing, the Merger Agreement places restrictions on
each of EXCEL and TELEGLOBE and their respective subsidiaries with respect to
(i) changes in the fundamental nature of their businesses or entry into material
new lines of business outside the communications industry, (ii) capital
expenditures, (iii) dividends, changes in share capital or repurchases or
redemptions of capital stock, (iv) issuances of securities, (v) changes in
organizational documents, (vi) acquisitions other than for cash and acquisitions
for cash in existing or related lines of business where the fair market value
exceeds U.S. $100 million in the aggregate, (vii) dispositions or encumbrances
of material assets where the fair market value exceeds U.S. $100 million in the
aggregate, (viii) investments, incurrence of indebtedness and settlement of
litigation, (ix) actions which would reasonably be expected to prevent or impede
accounting for the Merger as a pooling-of-interests or which would cause the
representations regarding the tax-free reorganization treatment of the Merger to
be untrue, (x) actions reasonably expected to result in any of the conditions to
the contemplated transactions not being satisfied, (xi) changes in accounting
methods or income tax elections, (xii) changes in employee benefit plans,
benefits or grants and (xiii) actions which would cause a breach of any material
contract which would reasonably be expected to have a Material Adverse Effect
(as defined in the next paragraph) on the breaching party.
Under the Merger Agreement, "Material Adverse Effect" means, with respect
to any entity, a material adverse effect on the business, condition (financial
or otherwise), results of operations, assets or liabilities of such entity and
its subsidiaries taken as a whole.
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TRANSITION ARRANGEMENTS
In accordance with the Merger Agreement, TELEGLOBE and EXCEL have appointed
four officers, including their respective chief financial officers, to serve on
a committee responsible for coordinating all aspects of transition planning and
implementation relating to the Merger. The committee is charged with (i)
examining various alternatives regarding the manner in which to best organize
and manage the businesses of TELEGLOBE and EXCEL after the Effective Time, and
(ii) coordinating policies and strategies with respect to regulatory authorities
and other bodies governing the combined company.
TELEGLOBE and EXCEL have also begun transitioning EXCEL international
traffic onto the TELEGLOBE network, and transitioning TELEGLOBE U.S. traffic
onto the EXCEL network, in each case on an arm's-length basis.
OTHER COVENANTS
The Merger Agreement contains certain other covenants of the parties,
including covenants relating to (i) the preparation and distribution of this
Information Statement/Prospectus and the preparation of the Form F-4, (ii) the
execution of the Voting Agreements, (iii) the recommendations by the EXCEL Board
to its stockholders for approval of the Merger Agreement and the Merger and by
the TELEGLOBE Board to its shareholders for approval of the issuance of the
TELEGLOBE Common Shares pursuant to the Merger and for approval of the TELEGLOBE
Articles Amendment (or, if such amendment had not been approved by TELEGLOBE's
shareholders as occurred on August 10, 1998, an amendment to the by-laws of
TELEGLOBE containing the same provisions (the "TELEGLOBE By-Law Amendment"),
(iv) TELEGLOBE's obligation to call a special meeting of its shareholders within
60 days of the date of the Merger Agreement for the purpose of obtaining
shareholder approval of the TELEGLOBE Articles Amendment (and, if such approval
had not been obtained, to call a special meeting of its shareholders for the
purpose of obtaining shareholder approval of the TELEGLOBE By-Law Amendment),
(v) the obligation of the TELEGLOBE Board to take all action necessary to cause
the TELEGLOBE Board following the Merger to be constituted as set forth in the
TELEGLOBE Articles Amendment and to appoint Kenny A. Troutt as Vice-Chairman,
President and Chief Operating Officer of TELEGLOBE (in addition to retaining his
positions as Chairman, President and Chief Executive Officer of EXCEL), (vi)
access to information, (vii) the parties' obligations to use their respective
best efforts and cooperation to satisfy the conditions to Closing and otherwise
regarding certain filings with governmental and other agencies and
organizations, (viii) the obligations of TELEGLOBE to cause the Surviving
Corporation to maintain indemnification and insurance coverage for its directors
and officers at least equivalent to the coverage in effect on the date of the
Merger Agreement (subject to the limitation that in no event will the Surviving
Corporation be required to expend in any one year an amount in excess of 200% of
the annual premiums paid at the date of the Merger Agreement, but the Surviving
Corporation will be required to obtain the maximum coverage that may be
purchased in light of such limitation), (ix) public announcements, (x)
accountant's letters, (xi) the listing on the NYSE, subject to official notice
of issuance, and on the TSE and ME, subject to customary requirements, of the
TELEGLOBE Common Shares to be issued or issuable pursuant to the Merger, (xii)
cooperation with respect to stockholder litigation regarding the contemplated
transactions, (xiii) restrictions on TELEGLOBE's disposition, during the
two-year period beginning on the Closing Date, of any shares of capital stock of
the Surviving Corporation or all or a substantial portion of the assets of the
Surviving Corporation, other than certain permitted dispositions, (xiv)
compliance by EXCEL with Section 228(d) of the DGCL and (xv) execution of the
Registration Rights Agreement.
NO SOLICITATION
Each of TELEGLOBE and EXCEL has agreed that it will not, directly or
indirectly or through any officer, director, employee, stockholder, financial
advisor, agent or other representative (including any investment banker,
attorney or accountant retained by such party or by any of such party's
subsidiaries or stockholders) (i) solicit, initiate, encourage or knowingly
facilitate (including by way of furnishing information) any inquiries or
proposals that constitute, or could reasonably be expected to lead to, (x) a
breach of the Merger Agreement, the Voting Agreements or the Stock Option
Agreements, or otherwise interfere in any
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material respect with the completion of the Merger or (y) a proposal or offer by
a third party to acquire more than 10% of the outstanding shares of EXCEL Common
Stock or TELEGLOBE Common Shares or acquire control of EXCEL's or TELEGLOBE's
assets or businesses representing more than 10% of the fair market value of all
such assets or businesses, in each case taken as a whole (an "Acquisition
Proposal"), (ii) engage in negotiations or discussions concerning, or provide
any non-public information to any person relating to, or otherwise facilitate
any effort or attempt to make or implement, any Acquisition Proposal, or (iii)
agree to or recommend to its stockholders or shareholders, as applicable, any
Acquisition Proposal. Each of EXCEL and TELEGLOBE also agreed (i) to immediately
terminate any existing activities, discussions or negotiations with respect to
any Acquisition Proposal and (ii) not to release any third party from, or waive
any provision of, any standstill agreement to which it is a party or any
confidentiality agreement between it and another person who or which has made or
who or which may reasonably be considered likely to make an Acquisition
Proposal. Each of TELEGLOBE and EXCEL further agreed to notify the other party
immediately after receipt of any Acquisition Proposal or any request for
nonpublic information in connection with an Acquisition Proposal or for access
to the properties, books or records of such party by any person or entity that
informs such party that it is considering making, or has made, an Acquisition
Proposal.
CONDITIONS; WAIVERS
Conditions to Each Party's Obligations to Effect the Merger. The respective
obligations of EXCEL, TELEGLOBE and Merger Sub to effect the Merger are subject
to the satisfaction or waiver of the following conditions: (i) EXCEL shall have
obtained all required stockholder approvals (which already have been obtained by
virtue of the written consents delivered by the Majority EXCEL Stockholders),
(ii) no laws shall have been adopted or promulgated, and no temporary
restraining order, preliminary or permanent injunction or other order issued by
a court or other governmental entity of competent jurisdiction shall be in
effect, having the effect of making the Merger illegal or otherwise prohibiting
consummation of the Merger, (iii) the waiting period (and any extension thereof)
applicable to the Merger under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended (the "HSR Act"), shall have been terminated or shall have
expired, the waiting period prescribed under the Competition Act (Canada) shall
have expired, and the Director of Investigation and Research under the
Competition Act (Canada) shall have advised TELEGLOBE in writing that the
Director has determined not to make an application for an order under Section 92
thereof in respect of the Merger and no order shall have been issued by the
Canadian Competition Tribunal in connection with same, and all other consents
under applicable regulatory requirements (such other consents, together with the
approvals under the HSR Act and the Competition Act (Canada) collectively, the
"Required Consents") shall have been granted and be in full force and effect;
provided, however, that a Required Consent will not be deemed to have been
obtained if in connection with the grant thereof or in another proceeding there
has been an imposition by any governmental entity of any condition, requirement,
restriction or change of regulation, or any other action directly or indirectly
related to such grant taken by such governmental entity, which could reasonably
be expected to have a Material Adverse Effect on either of EXCEL or TELEGLOBE
(either with or without including TELEGLOBE's ownership of EXCEL and its
subsidiaries after the Merger) (as of the date of this Information
Statement/Prospectus, all of the Required Consents have been obtained), (iv) the
TELEGLOBE Common Shares to be issued in the Merger and to be reserved for
issuance in connection with the Merger Agreement shall have been approved for
listing on the NYSE (subject to official notice of issuance) and the TSE and the
ME (subject to customary requirements) (which listings have been approved) and
(v) the Form F-4 shall have been declared effective by the Commission under the
Securities Act and no stop order suspending the effectiveness of the Form F-4
shall have been issued by the Commission and no proceedings for that purpose
shall have been initiated or threatened by the Commission that shall have not
been withdrawn.
Additional Conditions to the Obligations of TELEGLOBE and Merger Sub. The
respective obligations of TELEGLOBE and Merger Sub to effect the Merger are
subject to the satisfaction or waiver of the following additional conditions:
(a) each of the representations and warranties of EXCEL in the Merger Agreement
shall be true and correct in all material respects as of the Closing Date and
TELEGLOBE shall have received a certificate of the chief executive officer and
the chief financial officer of EXCEL to such effect, (b) EXCEL shall have
performed or complied in all material respects with all agreements and
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covenants required to be performed by it under the Merger Agreement on or prior
to the Closing Date and TELEGLOBE shall have received a certificate of the chief
executive officer and the chief financial officer of EXCEL to such effect, (c)
TELEGLOBE shall have received an opinion of its counsel to the effect that (i)
the Merger will be treated for U.S. federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code, (ii) TELEGLOBE,
Merger Sub and EXCEL will each be a party to the reorganization within the
meaning of Section 368(b) of the Code and (iii) no gain or loss will be
recognized by TELEGLOBE, Merger Sub or EXCEL as a result of the Merger, (d)
since the date of the Merger Agreement, there shall not have occurred any event
or circumstance that shall have caused, or shall be reasonably likely to cause,
a material adverse change in the business, condition (financial or otherwise),
assets, liabilities or results of operations of EXCEL and its subsidiaries,
taken as a whole (without taking into account the Merger), other than any change
relating to (i) the economy, foreign exchange rates or securities markets in
general or (ii) the telecommunications industry, if, in any of (i) or (ii) the
effect on EXCEL and its subsidiaries, taken as a whole, is not either (A)
particularized or unique to EXCEL and its subsidiaries, taken as a whole, or (B)
disproportionate relative to the effect on TELEGLOBE and its subsidiaries, taken
as a whole (without taking into account the Merger), or relative to the effect
on the competitors of EXCEL and its subsidiaries, taken as a whole, (e) there
shall not have been a material breach of the EXCEL Consent and Voting Agreement
by any of the stockholders of EXCEL party thereto, (f) EXCEL or its subsidiaries
shall have obtained in writing certain third-party consents required for the
contemplated transactions and the same shall be in full force and effect at the
Closing.
Additional Conditions to the Obligations of EXCEL. The obligations of EXCEL
to effect the Merger are subject to the satisfaction or waiver of the following
additional conditions: (a) each of the representations and warranties of
TELEGLOBE and Merger Sub in the Merger Agreement shall be true and correct in
all material respects as of the Closing Date and EXCEL shall have received a
certificate of the chief executive officer and the chief financial officer of
TELEGLOBE to such effect, (b) TELEGLOBE shall have performed or complied in all
material respects with all agreements and covenants required to be performed by
it under the Merger Agreement on or prior to the Closing Date and EXCEL shall
have received a certificate of the chief executive officer and the chief
financial officer of TELEGLOBE to such effect, (c) EXCEL shall have received an
opinion of its counsel to the effect that (i) the Merger will be treated for
U.S. federal income tax purposes as a reorganization within the meaning of
Section 368(a) of the Code, (ii) TELEGLOBE, Merger Sub and EXCEL will each be a
party to the reorganization within the meaning of Section 368(b) of the Code and
(iii) no gain or loss will be recognized by the stockholders of EXCEL as a
result of the Merger (except with respect to any cash received in lieu of
fractional TELEGLOBE Common Shares), (d) since the date of the Merger Agreement,
there shall not have occurred any event or circumstance that shall have caused,
or shall be reasonably likely to cause, a material adverse change in the
business, condition (financial or otherwise), assets, liabilities or results of
operations of TELEGLOBE and its subsidiaries, taken as a whole (without taking
into account the Merger), other than any change relating to (i) the economy,
foreign exchange rates or securities markets in general or (ii) the
telecommunications industry, if, in any of (i) or (ii) the effect on TELEGLOBE
and its subsidiaries, taken as a whole without giving effect to the Merger, is
not either (A) particularized or unique to TELEGLOBE and its subsidiaries taken
as a whole, or (B) disproportionate relative to the effect on EXCEL and its
subsidiaries, taken as a whole, or relative to the effect on the competitors of
TELEGLOBE and its subsidiaries, taken as a whole (without taking into account
the Merger), (e) there shall not have been a material breach of any of the
TELEGLOBE Consent and Voting Agreements by any of the shareholders of TELEGLOBE
party thereto, (f) a ruling shall have been received from the IRS to the effect
that the Merger satisfies the conditions of Section 367 of the Code and the
treasury regulations promulgated thereunder ("Treasury Regulations") which
permit tax-free reorganization treatment for the Merger, (g) TELEGLOBE or its
subsidiaries shall have obtained in writing certain third-party consents
required for the contemplated transactions and the same shall be in full force
and effect at the Closing, (h) the Registration Rights Agreement shall have been
executed and delivered by TELEGLOBE, and either (i) the TELEGLOBE Articles
Amendment shall have been approved by TELEGLOBE's shareholders or (ii) the
TELEGLOBE By-Law Amendment shall have been approved by TELEGLOBE's shareholders
(which condition was met on August 10, 1998 when TELEGLOBE's shareholders
approved the
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TELEGLOBE Articles Amendment, which amendment will become effective in
accordance with the CBCA at the Effective Time).
It is a non-waivable condition to the obligations of EXCEL and TELEGLOBE to
consummate the Merger that each of EXCEL and TELEGLOBE receive legal opinions
about certain tax consequences of the Merger. See "United States Federal Income
Tax Consequences."
EXCEL and TELEGLOBE presently anticipate that the conditions to the Merger
set forth in the Merger Agreement will be satisfied in time to permit the
completion of the Merger before the end of November 1998.
AMENDMENT; TERMINATION
No amendment shall be made to the Merger Agreement which by law or in
accordance with the rules of any relevant stock exchange requires further
approval by the stockholders of EXCEL or the shareholders of TELEGLOBE without
the further approval of such stockholders or shareholders, as applicable. The
Merger Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties.
The Merger Agreement may be terminated at any time prior to the Effective
Time by action taken or authorized by the Boards of Directors of TELEGLOBE and
EXCEL by mutual written consent.
In addition, the Merger Agreement may be terminated at any time prior to
the Effective Time by action taken or authorized by the Board of Directors of
either TELEGLOBE or EXCEL if:
(a) the Effective Time shall not have occurred on or before June 14,
1999 (the "Termination Date"), except that the right to terminate the
Merger Agreement at such time will not be available to any party whose
failure to fulfill any obligation under the Merger Agreement has to any
extent been the cause of, or resulted in, the failure of the Effective Time
to occur on or before the Termination Date, and that if on the Termination
Date the conditions to the Closing relating to obtaining the Required
Consents have not been fulfilled but are capable of being fulfilled, but
all other conditions to the Closing have been fulfilled or are capable of
being fulfilled, then the Termination Date automatically will be extended
to December 31, 1999 (all of the Required Consents have been obtained as of
the date of this Information Statement/Prospectus);
(b) any governmental entity (i) shall have issued an order, decree or
ruling or taken any other action permanently restraining, enjoining or
otherwise prohibiting the transactions contemplated by the Merger
Agreement, and such order, decree, ruling or other action shall have become
final and nonappealable or (ii) shall have failed to issue an order, decree
or ruling or to take any other action, in the case of each of (i) and (ii),
which is necessary to fulfill the conditions to the Closing relating to
obtaining the Required Consents and such action or inaction shall have
become final and nonappealable; provided, however, that the right to
terminate the Merger Agreement under this provision will not be available
to any party whose failure to comply with its covenant to use its best
efforts to cause the satisfaction of the conditions to the Closing and
otherwise cooperate with respect to governmental filings under the Merger
Agreement has to any extent been the cause of such action or inaction; or
(c) (i) the other shall have materially breached or failed to comply
with any of its obligations under the Merger Agreement or (ii) any
representation or warranty made by the other that is qualified as to
materiality or Material Adverse Effect shall have been incorrect when made
or any representation or warranty not so qualified shall have been
incorrect in any material respect when made or in either case shall have
since ceased to be true and correct or true and correct in all material
respects, as the case may be, and such breach, failure or misrepresentation
has not been cured within 30 days after notice thereof and the continuance
of such breach, failure or misrepresentation would have a Material Adverse
Effect on EXCEL or TELEGLOBE (whether before or after giving effect to the
Merger).
The Merger Agreement may be terminated at any time prior to the Effective
Time by action taken or authorized by the EXCEL Board if: (a) neither the
TELEGLOBE Articles Amendment nor the TELEGLOBE By-Law Amendment has been
approved by TELEGLOBE's shareholders upon the taking of a
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vote at a duly held meeting of shareholders on or prior to the 150th day
following the date of the Merger Agreement (the TELEGLOBE Articles Amendment was
approved by TELEGLOBE's shareholders on August 10, 1998); or (b) if any person
or group shall have become the beneficial owner (determined in accordance with
Rule 13d-3 under the Exchange Act) of securities representing more than 25% of
the outstanding voting stock of TELEGLOBE, other than any such person or group
who or which satisfies such criteria as of the date of the Merger Agreement (a
"TELEGLOBE Competing Share Transaction").
The Merger Agreement may be terminated at any time prior to the Effective
Time by action taken or authorized by the TELEGLOBE Board if any person or group
shall have become the beneficial owner of securities representing more than 25%
of the outstanding voting stock of EXCEL, other than any such person or group
that satisfies such criteria as of the date of the Merger Agreement (an "EXCEL
Competing Share Transaction").
The right to terminate the Merger Agreement under the foregoing termination
provisions will not be available to any party (a) that is in material breach of
its obligations under the Merger Agreement or (b) whose failure to fulfill its
obligations or to comply with its covenants under the Merger Agreement has been
the cause of, or resulted in, the failure to satisfy any conditions to the
obligations of any party to the Merger Agreement.
TERMINATION FEES; EXPENSES
Termination Fees Payable by EXCEL. The Merger Agreement obligates EXCEL to
pay to TELEGLOBE $120 million in cash (the "Termination Fee") plus TELEGLOBE's
expenses relating to the Merger if TELEGLOBE terminates the Merger Agreement
upon the occurrence of an EXCEL Competing Share Transaction. Also see "Other
Agreements -- Stock Option Agreements."
Termination Fees Payable by TELEGLOBE. The Merger Agreement obligates
TELEGLOBE to pay to EXCEL the Termination Fee plus EXCEL's expenses relating to
the Merger if EXCEL terminates the Merger Agreement (i) upon the occurrence of a
TELEGLOBE Competing Share Transaction or (ii) as a result of TELEGLOBE's failure
to obtain shareholder approval for the TELEGLOBE Articles Amendment or the
TELEGLOBE By-Law Amendment by the 150th day following the date of the Merger
Agreement (the TELEGLOBE Articles Amendment was approved by TELEGLOBE's
shareholders on August 10, 1998) if at the time of the shareholders' meeting
called for such purpose an Acquisition Proposal is pending (provided that for
purposes of determining whether TELEGLOBE is obligated to pay EXCEL the
Termination Fee under this provision of the Merger Agreement the definition of
"Acquisition Proposal" is modified by replacing the number 10% therein with
25%). See "-- No Solicitation" and "Other Agreements -- Stock Option
Agreements."
Expenses. Except as provided above, each of TELEGLOBE and EXCEL will bear
its own expenses incurred in connection with the contemplated transactions
whether or not the Merger is consummated, except that (i) if the Merger is
consummated, the Surviving Corporation will pay (or cause to be paid), any and
all property or transfer taxes imposed on EXCEL or its subsidiaries, (ii)
expenses incurred in connection with the filing, printing and mailing of this
Information Statement/Prospectus will be shared equally by TELEGLOBE and EXCEL
and (iii) the filing fees under the HSR Act and the Competition Act (Canada)
will be shared equally by TELEGLOBE and EXCEL.
Stock Option Agreements. In addition, upon a termination of the Merger
Agreement in circumstances when the Termination Fee is payable, the party
receiving the fee will have the right to acquire up to 19.9% of the other
party's shares (calculated based on shares outstanding as of June 14, 1998). See
"Other Agreements -- Stock Option Agreements."
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following discussion of the material U.S. federal income tax
consequences of the Merger and of holding TELEGLOBE Common Shares is based on
the Code, the final, proposed and temporary Treasury Regulations, administrative
rulings and interpretations and judicial decisions, in each case as in effect as
of the
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date hereof. All of the foregoing are subject to change at any time, possibly
with retroactive effect and to differing interpretations. Except as specifically
provided below, the following discussion is limited to the U.S. federal income
tax consequences relevant to a holder of EXCEL Common Stock that is (i) an
individual who is a citizen or resident of the United States, (ii) a corporation
or partnership created or organized under the laws of the United States, or any
political subdivision thereof, (iii) an estate otherwise subject to U.S. federal
income taxation on its worldwide income or (iv) a trust if a court within the
United States is able to exercise primary supervision of the administration of
the trust and one or more United States persons have the authority to control
all substantial decisions of the trust (each a "U.S. Holder"). A Non-U.S. Holder
is any stockholder other than a U.S. Holder. The discussion set forth below does
not address all aspects of U.S. federal income taxation that may be relevant to
a particular holder of shares of EXCEL Common Stock in light of such holder's
particular circumstances or to holders subject to special treatment under the
U.S. federal income tax laws, such as Non-U.S. Holders, banks, other financial
institutions, insurance companies, dealers in securities, tax-exempt entities,
persons who hold EXCEL Common Stock or TELEGLOBE Common Shares as part of a
"straddle," "hedge" or "conversion transaction" or holders who acquired their
EXCEL Common Stock pursuant to the exercise of employee stock options or
otherwise as compensation, persons who hold, directly, constructively or by
attribution, 5% or more of either the total voting power or total value of the
capital stock of TELEGLOBE immediately after the Merger, or 10% or more of the
total voting power of the capital stock of TELEGLOBE at any time, taxpayers
whose functional currency is not the U.S. dollar, nor any consequences arising
under the laws of any state, locality or foreign jurisdiction. This discussion
assumes that the holders of EXCEL Common Stock hold their shares of stock as
capital assets within the meaning of Section 1221 of the Code.
It is a non-waivable condition to the obligations of EXCEL and TELEGLOBE to
consummate the Merger that each of EXCEL and TELEGLOBE shall have received
opinions, dated the Closing Date, (i) from Weil, Gotshal & Manges LLP and
Goodman, Phillips & Vineberg, respectively, to the effect that the Merger will
be treated for U.S. federal income tax purposes as a reorganization within the
meaning of Section 368(a) of the Code and that TELEGLOBE, Merger Sub and EXCEL
will each be a party to the reorganization within the meaning of Section 368(b)
of the Code, (ii) as to EXCEL, from Weil, Gotshal & Manges LLP, that no gain or
loss will be recognized by the holders of EXCEL Common Stock as a result of the
Merger (except with respect to any cash received in lieu of fractional shares)
and (iii) as to TELEGLOBE, from Goodman, Phillips & Vineberg, that no gain or
loss will be recognized by TELEGLOBE, Merger Sub or EXCEL as a result of the
Merger. The opinions of Weil, Gotshal & Manges LLP and Goodman, Phillips &
Vineberg will be based on facts existing on the date hereof and at the Effective
Time, will assume the absence of changes in existing facts and will rely on
representations and covenants made by EXCEL, TELEGLOBE, Merger Sub and others
and the IRS ruling referred to below.
Section 367 of the Code and the Treasury Regulations promulgated thereunder
impose additional requirements for tax-free reorganization treatment on
transactions where, as is the case in the Merger, stock of a U.S. corporation is
acquired by a foreign corporation. In general, for an exchange of EXCEL Common
Stock for TELEGLOBE Common Shares by a U.S. person in the Merger to qualify for
tax-free reorganization treatment (in addition to meeting the requirements of
Section 368 of the Code), the reporting requirements of Treasury Regulation
Section 1.367(a)-3(c)(6) must be satisfied and each of the following conditions
must be met: (i) fifty percent or less of both the total voting power and the
total value of the stock of the transferee foreign corporation is received, in
the aggregate, by the "U.S. transferors" (as defined in the Treasury
Regulations) in the transaction; (ii) fifty percent or less of the total voting
power and the total value of the stock of the transferee foreign corporation is
owned, in the aggregate, immediately after the transaction by U.S. persons that
are either officers or directors or "five-percent shareholders" (as defined
therein and computed taking into account direct, indirect and constructive
ownership) of the U.S. corporation; (iii) either (A) the U.S. person is not a
"five-percent shareholder" (computed taking into account direct, indirect and
constructive ownership) of the transferee foreign corporation or (B) the U.S.
person is a "five-percent shareholder" of the transferee foreign corporation and
enters into an agreement with the IRS to recognize gain under certain
circumstances; and (iv) a specified active trade or business test is satisfied.
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With respect to requirement (iii) above, Kenny A. Troutt and his affiliates
(collectively the "Troutt Stockholders") are the only U.S. Holders of EXCEL
Common Stock that will become "five-percent shareholders" of TELEGLOBE upon the
consummation of the Merger. The Troutt Stockholders have agreed to enter into
the requisite agreements with the IRS to ensure that requirement (iii) above is
met.
EXCEL has filed a request with the IRS, based upon factual representations
made by EXCEL and TELEGLOBE, for a ruling to the effect that the Merger
satisfies the conditions of Section 367 of the Code and the Treasury Regulations
promulgated thereunder which permit tax-free reorganization treatment for the
Merger. The receipt of such ruling is a condition to the obligation of EXCEL to
consummate the Merger.
Tax Implications of the Merger to U.S. Holders of EXCEL Common Stock. As
will be set forth in the opinion of Weil, Gotshal & Manges LLP referred to
above, no gain or loss will be recognized for U.S. federal income tax purposes
by holders of EXCEL Common Stock as a result of the Merger (except with respect
to any cash received in lieu of fractional shares).
Cash received in lieu of fractional share interests will be treated as
received in exchange for a fractional share of TELEGLOBE Common Shares. Gain or
loss recognized on such exchange will be measured by the difference between the
amount of cash received and the portion of the tax basis in the shares of the
EXCEL Common Stock surrendered that is allocable to such fractional share. Such
gain or loss will be capital gain or loss. Capital gains of individuals derived
with respect to capital assets held for more than one year are eligible for
reduced rates of taxation. The deductibility of capital losses is subject to
limitations.
Further, in the opinion of Weil, Gotshal & Manges LLP, the aggregate tax
basis of TELEGLOBE Common Shares received as a result of the Merger will be the
same as the holder's aggregate tax basis in the EXCEL Common Stock surrendered
in the Merger, decreased by the basis allocable to fractional shares for which
cash is received in the Merger. The holding period of the TELEGLOBE Common
Shares held by a former holder of EXCEL Common Stock as a result of the Merger
will include the period during which such holder held the EXCEL Common Stock
surrendered.
Tax Implications of Holding TELEGLOBE Common Shares. A U.S. Holder of
TELEGLOBE Common Shares will be required to include in gross income as foreign
source dividend income the amount of any distributions (including constructive
distributions) paid on the TELEGLOBE Common Shares (including any foreign taxes
withheld from the amount received) on the date such distribution is received to
the extent such distributions are paid out of TELEGLOBE's current or accumulated
earnings and profits. (Distributions in excess of such earnings and profits will
be applied against and will reduce the U.S. Holder's basis in the TELEGLOBE
Common Shares and, to the extent in excess of such basis, will be treated as
gain from the sale or exchange of the TELEGLOBE Common Shares.) Dividends paid
on the TELEGLOBE Common Shares generally will not qualify for the
dividends-received deduction available to corporations. Dividends paid in
foreign currency will be includible in the income of the U.S. Holder in a U.S.
dollar amount calculated by reference to the exchange rate on the day the
dividends are received. If the Canadian dollars received as a dividend are not
converted into U.S. dollars on the date of receipt, a U.S. Holder will have a
basis in Canadian dollars equal to its U.S. dollar value on the date of receipt.
Any gain or loss realized on a subsequent conversion or other disposition will
be treated as ordinary income or loss.
Generally, a U.S. Holder will have the option of claiming the amount of
Canadian tax withheld at source on the distribution of dividends on the
TELEGLOBE Common Shares as either a deduction from adjusted gross income or as a
dollar-for-dollar credit against the U.S. Holder's U.S. federal income tax
liability. If the U.S. Holder elects to claim a credit for such Canadian taxes,
the election will be binding for all foreign taxes paid or accrued by the U.S.
Holder for such taxable year. Individuals who claim the standard deduction
rather than itemized deductions may not claim a deduction for foreign taxes
withheld, but may claim such amount as a credit against the individual's U.S.
federal income tax liability. The foreign tax credit in any taxable year may not
offset more than 90% of a U.S. Holder's liability for U.S. individual or
corporate alternative minimum tax.
The amount of foreign income taxes for which a U.S. Holder may claim a
refund in any year is subject to complex limitations and restrictions that must
be determined on an individual basis by each U.S. Holder.
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These rules which limit foreign tax credits allowable with respect to specific
classes of income to the U.S. federal income taxes otherwise payable with
respect to each class of income. The total amount of allowable foreign tax
credits in any year generally cannot exceed regular U.S. tax liability for the
year attributable to certain foreign source income. However, this limitation on
the use of foreign tax credits generally will not apply to electing individual
U.S Holders whose creditable foreign taxes during the year do not exceed $300
($600 for joint filers) if such individual's gross income for the tax year from
non-U.S. sources consists solely of certain "passive income." Dividends paid by
TELEGLOBE generally will be foreign source "passive income" for U.S. foreign tax
credit purposes. As a result of recently enacted legislation, a U.S. Holder will
not be allowed a foreign withholding tax credit for foreign withholding taxes
imposed on dividends paid on TELEGLOBE Common Shares if such U.S. Holder (i) has
held TELEGLOBE Common Shares for less than a specified minimum period during
which it is not protected from risk of loss or (ii) is obligated to make certain
payments related to such dividends (whether pursuant to a short sale or
otherwise) with respect to a substantially similar or related property. Under
recent IRS guidance, a U.S. Holder will not be allowed a foreign tax credit for
foreign withholding taxes imposed on dividends paid on the TELEGLOBE Common
Shares if such U.S. Holder holds its TELEGLOBE Common Shares in arrangements in
which its expected economic profit is insubstantial compared to the foreign tax
credit claim.
For U.S. federal income tax purposes, a U.S. Holder will recognize taxable
gain or loss on any sale, exchange or other disposition of TELEGLOBE Common
Shares in an amount equal to the difference between the U.S. dollar value of the
amount realized on such sale, exchange or other disposition and such U.S.
Holder's basis in such shares. Any such gain or loss will be capital gain or
loss. Capital gains of individuals derived with respect to capital assets held
for more than one year are eligible for reduced rates of taxation depending on
the holding period of such capital assets. Pending legislation could eliminate
any required holding period beyond one year. The deductibility of capital losses
is subject to limitations. Any gain generally will be treated as U.S. source
income for U.S. foreign tax credit purposes. (Under current law, the source of a
loss on the sale, exchange or other disposition of such TELEGLOBE Common Shares
is unclear.) A U.S. Holder that receives foreign currency upon the disposition
of TELEGLOBE Common Shares and converts the currency into dollars subsequent to
receipt will generally have foreign exchange gain or loss based on any
appreciation or depreciation of the value of the foreign currency against the
U.S. dollar.
U.S. HOLDERS OF EXCEL COMMON STOCK SHOULD CONSULT THEIR OWN TAX ADVISORS AS
TO THE PARTICULAR TAX CONSEQUENCES TO THEM FROM THE MERGER AND FROM HOLDING
TELEGLOBE COMMON SHARES, INCLUDING THE APPLICABILITY AND EFFECT OF STATE, LOCAL,
FOREIGN AND OTHER TAX LAWS AND THE EFFECT OF ANY PROPOSED CHANGES IN THE TAX
LAWS.
CANADIAN FEDERAL INCOME TAX CONSEQUENCES
The following discussion of the material Canadian federal income tax
considerations is generally applicable to a U.S. Holder who acquires TELEGLOBE
Common Shares in the Merger and who, for the purposes of the Income Tax Act
(Canada) (the "ITA") and the Canada-United States Income Tax Convention (the
"Convention"), as applicable and at all relevant times, (i) is resident in the
United States and not resident in Canada, (ii) holds TELEGLOBE Common Shares as
capital property, (iii) does not have a "permanent establishment" or "fixed
base" in Canada (as defined in the Convention) and (iv) deals at arm's length
with TELEGLOBE. Special rules, which are not discussed below, may apply to
"financial institutions" (as defined in the ITA) and to non-resident insurers
carrying on an insurance business in Canada and elsewhere. A limited liability
company may not be, and a partnership will not be, a U.S. Holder to which this
discussion applies. U.S. Holders of EXCEL Common Stock should consult their own
tax advisors as to the particular Canadian tax consequences to them of acquiring
and holding TELEGLOBE Common Shares.
This discussion (i) is based on the current provisions of the ITA and the
regulations thereunder and the Convention, all specific proposals to amend the
ITA or the regulations thereunder announced by or on behalf of the Canadian
Minister of Finance prior to the date hereof and the current published
administrative practices of Revenue Canada and (ii) does not otherwise take into
account or anticipate any changes in law or administrative practice nor any
income tax laws or considerations of any province or territory of Canada or any
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<PAGE> 57
jurisdiction other than Canada, which may differ from the Canadian federal
income tax consequences described herein. Accordingly, U.S. Holders of EXCEL
Common Stock should consult their own tax advisors as to the particular Canadian
tax consequences to them of acquiring and holding TELEGLOBE Common Shares.
Dividends. Under the ITA and the Convention, dividends paid or credited, or
deemed to be paid or credited, on the TELEGLOBE Common Shares to a U.S. Holder
who owns less than 10% of TELEGLOBE's voting shares will be subject to Canadian
withholding tax at the rate of 15% of the gross amount of such dividends or
deemed dividends. If a U.S. Holder is a corporation and owns 10% or more of
TELEGLOBE's voting shares, the rate is reduced from 15% to 5%.
Under the Convention, dividends paid to certain religious, scientific,
charitable and similar tax exempt organizations and certain pension
organizations that are resident and exempt from tax in the United States and
that have complied with certain administrative procedures are exempt from this
Canadian withholding tax.
Disposition of TELEGLOBE Common Shares. A capital gain realized by a U.S.
Holder on a disposition or deemed disposition of TELEGLOBE Common Shares will
not be subject to tax under the ITA unless such TELEGLOBE Common Shares
constitute taxable Canadian property within the meaning of the ITA at the time
of the disposition or deemed disposition. In general, the TELEGLOBE Common
Shares will not be "taxable Canadian property" to a U.S. Holder unless they are
not listed on a prescribed stock exchange (which includes the NYSE, the ME and
the TSE) or even if so listed, if at any time within the five-year period
immediately preceding the disposition the U.S. Holder, persons with whom the
U.S. Holder did not deal at arm's length, or the U.S. Holder together with such
persons owned or had an interest in or a right to acquire more than 25% of any
class or series of TELEGLOBE's shares. A deemed disposition of TELEGLOBE Common
Shares will arise on the death of a U.S. Holder.
If the TELEGLOBE Common Shares are taxable Canadian property to a U.S.
Holder, any capital gain realized on a disposition or deemed disposition of such
TELEGLOBE Common Shares will generally be exempt from tax under the ITA by
virtue of the Convention if the value of the TELEGLOBE Common Shares at the time
of the disposition or deemed disposition is not derived principally from real
property (as defined by the Convention) situated in Canada. TELEGLOBE is of the
view that the TELEGLOBE Common Shares do not now derive their value principally
from real property situated in Canada; however, the determination as to whether
Canadian tax would be applicable on a disposition or deemed disposition of
TELEGLOBE Common Shares must be made at the time of the disposition or deemed
disposition.
REGULATORY APPROVALS
In order to complete the Merger, the companies must receive authorization
from various U.S., state and Canadian governmental agencies. Receipt of all
necessary regulatory approvals and consents (other than immaterial approvals and
consents) by each of EXCEL and TELEGLOBE is a condition to the obligations of
both EXCEL and TELEGLOBE to consummate the Merger, and either party may deem
that this condition has not been satisfied if any U.S. or Canadian regulatory
body conditions its approval upon concessions or satisfaction of conditions
which could reasonably be expected to have a Material Adverse Effect on EXCEL or
TELEGLOBE. All U.S. and Canadian regulatory approvals have been obtained as of
the date of this Information Statement/Prospectus.
Antitrust. The Merger is subject to the requirements of the HSR Act and the
rules and regulations thereunder, which provide that certain transactions may
not be consummated until required information and materials are furnished to the
Antitrust Division of the U.S. Department of Justice and the U.S. Federal Trade
Commission (the "FTC") and the requisite waiting period has expired or has been
terminated. The required information and materials were filed with the Antitrust
Division and the FTC effective on July 2, 1998, and early termination of the
waiting period was granted on July 14, 1998. Notwithstanding expiration of the
waiting periods, 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 or seeking the divestiture by TELEGLOBE of all or part of the stock or
assets of
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<PAGE> 58
EXCEL, or of other businesses conducted by TELEGLOBE. The Merger also is subject
to antitrust review under state law in each of the states in which EXCEL or
TELEGLOBE provides service.
The Merger is also subject to the requirements of the Competition Act
(Canada) (the "Competition Act") and the regulations thereunder, which provide
that certain transactions may not be consummated until (i) the required
information and materials are furnished to the Director of Investigation and
Research (the "Director") and the applicable waiting period has expired or (ii)
the Director has issued an Advance Ruling Certificate ("ARC") pursuant to
Section 102 of the Competition Act advising the parties that he does not have
sufficient grounds on which to apply to the Competition Tribunal for an order
under Section 92 of the statute in respect of the Merger. On July 12, 1998, the
parties requested that the Director issue an ARC in respect of the Merger. On
July 17, 1998, the parties filed a short form pre-merger notification pursuant
to Part IX of the Competition Act. This short-form pre-merger notification was
certified complete on July 24, 1998. On September 10, 1998, the Director issued
a no action letter confirming that there are not sufficient grounds to initiate
proceedings with respect to the Merger before the Competition Tribunal under the
merger provisions of the Competition Act. The Director determined that issuing a
no action letter rather than an ARC was more appropriate in light of the fact
that BCE is the parent company of Bell Canada, a significant competitor in the
domestic long distance telecommunications services market and a potential
competitor for Canadian overseas telecommunications services, and also given the
fact that BCE will maintain a significant interest and have Board representation
in TELEGLOBE. Under the Competition Act, a merger is subject to review by the
Director for a period of three years after it has been substantially completed.
Accordingly, because an ARC was not issued in respect of the Merger, the
Director will be able to review the Merger for a period of three years after the
Merger has been substantially completed.
Injunctions. The obligations of TELEGLOBE and EXCEL to consummate the
Merger are subject to the condition that there be no preliminary or permanent
injunction or law or other order of any court or governmental or regulatory
authority of competent jurisdiction, including any state governmental or state
regulatory authorities, prohibiting consummation of the Merger or permitting
such consummation only subject to any condition or restriction that has or would
have a Material Adverse Effect on EXCEL (or an effect on TELEGLOBE and its
subsidiaries that, if such effect applied to EXCEL and its subsidiaries, would
constitute a Material Adverse Effect on EXCEL).
Other State and Federal Regulatory Approvals. The Merger is subject to
certain other state and federal regulatory approvals. EXCEL has received
approval for the Merger from all applicable State Commissions governing
telecommunications services (the "State Commissions") as of the date of this
Information Statement/Prospectus. Although the Merger does not appear to require
approval of the State Commissions in the remaining states where EXCEL and/or
TELEGLOBE have authority or where applications to expand EXCEL's or TELEGLOBE's
existing regulatory authority are currently pending, notice of the Merger has
been filed with each of those State Commissions.
Subsidiaries of both EXCEL and TELEGLOBE hold authority from the FCC under
Section 214 of the Communications Act of 1934, as amended, to provide
international services, including facilities-based and resold switched
international long distance services, among other services. EXCEL and TELEGLOBE
have received approval from the FCC for the transfer of control to TELEGLOBE of
the international operating authorizations by certain EXCEL subsidiaries and the
continued classification of the company and its subsidiaries as a non-dominant
carrier on all international routes.
The companies do not believe that the Merger constitutes a transfer of
control of the international authorizations held by TELEGLOBE and accordingly do
not plan to file an application with the FCC otherwise required for a transfer
of control.
The FCC and certain State Commissions also require post-closing
notification of the consummation of the Merger.
Foreign Regulatory Approvals. TELEGLOBE has determined that no regulatory
approvals are required prior to conclusion of the Merger in countries other than
the United States and Canada. TELEGLOBE
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<PAGE> 59
affiliates may, in some instances, be required to provide a post-consummation
notice to regulatory authorities which have previously granted operating
authority.
In order for the Merger to be consummated, TELEGLOBE and its operating
subsidiary Teleglobe Canada Inc. must (i) obtain exemption from the application
of Canadian ownership and control requirements under the Telecommunications Act
(Canada) (the "Telecom Act"), and (ii) gain relief by way of legislative repeal
from foreign ownership restrictions currently contained in the Teleglobe Canada
Reorganization and Divestiture Act (Canada) (the "TCRDA"). "Bill C-17," which
embodies the needed amendments to both the Telecom Act and the TCRDA, has been
passed by Canada's Parliament and received Royal Assent by the Governor General
on May 12, 1998. On July 15, 1998, the Federal Cabinet of Ministers issued an
Order in Council No. 1998-1328 fixing July 31, 1998 as the date on which certain
provisions of Bill C-17 relating to the Telecom Act came into force. Then, on
October 1, 1998, the Federal Cabinet of Ministers issued an Order in Council No.
1998-1772/00 fixing October 1, 1998 as the date on which certain other
provisions of Bill C-17 relating to the Telecom Act and the TCRDA came into
force.
CANADIAN FOREIGN OWNERSHIP CONSIDERATIONS
Canada has also established foreign ownership restrictions and policies
under the Broadcasting Act (Canada) and the Radiocommunications Act (Canada).
TELEGLOBE currently holds a controlling interest in Look Communications Inc.,
which holds authorizations from the CRTC under the Broadcasting Act, and ORBCOMM
Canada Inc., which holds a radio spectrum license from the Canadian federal
department of Industry Canada under the Radiocommunications Act. In order for
Look Communications Inc. and ORBCOMM Canada Inc. to remain in compliance with
Canadian foreign ownership restrictions, TELEGLOBE may be required, among other
things, to restructure the ownership of these assets in order to effect the
Merger. There can be no assurance that the required regulatory approvals and
consents to such a restructuring will be obtained within the time frame
contemplated by the Merger Agreement.
RESALE OF TELEGLOBE COMMON SHARES ISSUED IN THE MERGER; AFFILIATES
The TELEGLOBE Common Shares to be issued to EXCEL stockholders in
connection with the Merger will be freely transferable under the Securities Act,
except for TELEGLOBE Common Shares issued to any person deemed to be an
affiliate of EXCEL for purposes of Rule 145 under the Securities Act (an
"Affiliate") at the time of the execution and delivery of the written consents
of the Majority EXCEL Stockholders. Affiliates may not sell TELEGLOBE Common
Shares acquired in connection with the Merger except pursuant to an effective
registration statement under the Securities Act covering such shares, or in
compliance with Rule 145 under the Securities Act or another applicable
exemption from the registration requirements of the Securities Act. Pursuant to
the Merger Agreement, EXCEL has delivered to TELEGLOBE a letter identifying all
persons who at the time of the execution and delivery of the written consents of
the Majority EXCEL Stockholders may be deemed to be Affiliates of EXCEL. EXCEL
has further agreed to use all reasonable efforts to cause each person who is so
identified as an Affiliate in such letter to deliver to TELEGLOBE on or prior to
the Effective Time a written agreement that such Affiliate will not sell,
pledge, transfer or otherwise dispose of, or hedge or otherwise reduce its risk
with respect to, any TELEGLOBE Common Shares or EXCEL Common Stock from the 30th
day prior to the Effective Time to such time as results covering at least 30
days of combined operations of TELEGLOBE and EXCEL have been published by
TELEGLOBE in the form of a quarterly earnings report, an effective registration
statement filed with the Commission, a report to the Commission on Form 40-F or
6-K, or any other public filing or announcement which includes the combined
results of operations, except for transfers or other dispositions that, in the
reasonable opinion of TELEGLOBE's independent public accountants will not
prevent TELEGLOBE from accounting for the Merger as a pooling-of-interests under
U.S. GAAP, taking into account the actions of TELEGLOBE, EXCEL and their other
stockholders and affiliates. See "-- Accounting Treatment."
TELEGLOBE has applied for and obtained orders and rulings from the various
securities commissions and regulatory authorities in the provinces of Canada,
where required, to the effect that the TELEGLOBE Common Shares to be issued to
EXCEL stockholders in connection with the Merger will be exempt from the
registration and prospectus requirements of applicable securities legislation
and to permit the resale of such
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shares by a former holder of EXCEL Common Stock issued in the Merger, other than
a holder who is a "control person," provided that no unusual effort is made to
prepare the market for any such resale or to create a demand for the securities
which are the subject of any such resale and no extraordinary commission or
consideration is paid in respect thereof. Applicable Canadian securities
legislation establishes a rebuttable presumption that a person or company is a
"control person" in relation to an issuer where the person or company alone or
in combination with others holds more than 20% of the outstanding voting
securities of the issuer.
STOCK EXCHANGES
The ME and the TSE have accepted notices filed by TELEGLOBE in respect of
TELEGLOBE Common Shares to be issued under the Merger Agreement and which may be
issued under the TELEGLOBE Stock Option Agreement. Application to the ME and the
TSE have been made to approve, and the ME and TSE have conditionally approved,
the listing and posting for trading of TELEGLOBE Common Shares to be issued
under the Merger Agreement and which may be issued under the TELEGLOBE Stock
Option Agreement and the TELEGLOBE Common Shares which may be issued upon the
exercise of the Converted Options, subject to compliance with their respective
customary requirements. TELEGLOBE has also received approval from the NYSE for
the listing, subject to official notice of issuance, of the TELEGLOBE Common
Shares to be issued in the Merger, as well as any TELEGLOBE Common Shares which
may be issued upon the exercise of any Converted Options.
DELISTING AND DEREGISTRATION OF EXCEL COMMON STOCK; CESSATION OF EXCEL PERIODIC
REPORTING
If the Merger is consummated, the EXCEL Common Stock will cease to be
listed on the NYSE. In such event, EXCEL intends to apply to the Commission for
the deregistration of such securities. Upon such deregistration, EXCEL will no
longer be required to make separate periodic filings with the Commission under
the Exchange Act.
ACCOUNTING TREATMENT
TELEGLOBE and EXCEL will account for the Merger using the pooling of
interests method of accounting in accordance with U.S. GAAP. However, the
availability of pooling of interests accounting is not a condition of the
Merger. In order to account for the Merger as a pooling of interests, the
combining companies must meet certain specified criteria, including, among
others, that no Affiliate of TELEGLOBE or EXCEL may dispose of any TELEGLOBE
Common Shares or EXCEL Common Stock during the period beginning 30 days prior to
the Closing of the Merger and ending upon the date of publication of financial
statements of TELEGLOBE covering operations of TELEGLOBE for at least 30 days
following the Closing of the Merger. Such activity is not within the control of
TELEGLOBE or EXCEL.
Under the pooling of interests method of accounting under U.S. GAAP, the
recorded assets and liabilities of EXCEL will be carried forward to TELEGLOBE at
their recorded amounts, income of TELEGLOBE for the fiscal year in which the
Closing of the Merger occurs will include income of EXCEL for such fiscal year
and reported income of the separate companies for prior periods will be combined
and restated as income of TELEGLOBE. No recognition of purchase price in excess
of the carrying value of the net assets of EXCEL is required of TELEGLOBE.
The Merger will be accounted for as a purchase under Canadian GAAP. The
rules for accounting for business combinations under Canadian GAAP differ in
many significant respects from the rules for accounting for business
combinations under U.S. GAAP. These rules require the Merger to be treated as a
purchase under Canadian GAAP. Under Canadian GAAP, when an "acquiror" is
identified in connection with a business combination, that combination must be
accounted for using the principles of purchase accounting. It has been
interpreted by Canadian regulators that, under Canadian GAAP, an acquiror will
be identified in connection with a business combination if 55% or more of the
voting shares of the combined entity are held by the previous shareholders of
one of the combining entities. Because it is anticipated that the current
TELEGLOBE shareholders will own in excess of 55% of the total number of
outstanding shares of the
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combined company, under Canadian GAAP, TELEGLOBE will be identified as the
acquiror, requiring the Merger to be accounted for as a purchase under Canadian
GAAP. The principles of pooling of interests accounting under U.S. GAAP do not
include provisions comparable to those discussed above. Accordingly, the Merger
will be accounted for as a pooling of interests under U.S. GAAP, and TELEGLOBE
cannot alternatively use purchase accounting under U.S. GAAP. The differences
between pooling and purchase accounting may be material. See "Unaudited Pro
Forma Condensed Combined Financial Statements" (and the notes thereto) for a
discussion of these differences.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
General. Certain officers, directors and stockholders of EXCEL and certain
shareholders of TELEGLOBE have certain interests in the Merger that are
different from, or in addition to, the interests of stockholders of EXCEL and
TELEGLOBE generally, as described below.
Indemnification and Insurance. In connection with the Merger, TELEGLOBE is
required to cause EXCEL to provide EXCEL's directors and officers with certain
indemnification and liability insurance coverage, the terms of which are
summarized herein under the caption "-- Other Covenants."
Stock Options of EXCEL. The Merger Agreement provides that, at the
Effective Time, each option granted by EXCEL to purchase shares of EXCEL Common
Stock which is outstanding and unexercised shall be assumed by TELEGLOBE and
converted into an option to purchase TELEGLOBE Common Shares in such amount and
at such exercise price as is described under "-- Terms of the Merger -- Effect
on EXCEL Common Stock" and otherwise having the same terms and conditions as are
in effect immediately prior to the Effective Time.
Pursuant to the existing terms of certain option grants by EXCEL, the
Merger will result in such options, whether or not fully vested, becoming fully
exercisable. Any such option not exercised will be assumed and converted into an
immediately exercisable option to purchase TELEGLOBE Common Shares on the terms
described above.
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The following table sets forth information with respect to the number of
vested options and the acceleration of exercisability of options as a result of
the Merger (based on options outstanding as of October 5, 1998) for (i) each of
the Executive Officers named in EXCEL's proxy statement for the 1998 annual
meeting of its stockholders, and (ii) all Executive Officers as a group.
<TABLE>
<CAPTION>
NUMBER OF
TELEGLOBE
COMMON
SHARES FOR
WHICH
NUMBER OF WEIGHTED VALUE OF EXCEL
EXCEL AVERAGE EXERCISE ALL EXCEL OPTIONS ARE
NUMBER OF OPTIONS PRICE PER OPTIONS EXERCISABLE
VESTED WHICH BECOME SHARE OF VESTED EXERCISABLE AFTER GIVING
EXCEL EXERCISABLE AT AND UNVESTED AT EFFECTIVE EFFECT TO
OPTIONS THE EFFECTIVE TIME EXCEL OPTIONS(2) TIME(1)(2) THE MERGER
--------- ------------------ ---------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Nicholas A. Merrick....... -- 200,000 $23.63 $ -- 177,000
Nicholas A. Merrick....... 252,625 -- $ 4.96 $ 3,720,535 223,573
Nicholas A. Merrick....... 75,950 -- $12.84 $ 520,068 67,216
Stephen G. Canton......... -- 500,000 $23.63 $ -- 442,500
Stephen G. Canton......... 806,970 -- $ 4.96 $11,884,651 714,168
J. Christopher Dance...... 78,000 297,000 $ 4.55 $ 5,676,563 331,875
Kenneth Hilton............ -- 100,000 $24.00 $ -- 88,500
Kenneth Hilton............ -- 50,000 $20.88 $ -- 44,250
Lester M. Lichter......... -- 100,000 $24.00 $ -- 88,500
Lester M. Lichter......... -- 100,000 $20.88 $ -- 88,500
Craig E. Holmes........... 49,300 207,900 $ 4.55 $ 3,893,365 227,622
Paul D. Fletcher.......... 3,334 6,666 $12.00 $ 76,875 8,850
Paul D. Fletcher.......... 6,000 9,000 $15.00 $ 70,313 13,275
Paul D. Fletcher.......... -- 25,000 $20.88 $ -- 22,125
Kenny A. Troutt........... -- -- -- -- --
Stephen R. Smith.......... -- -- -- -- --
T. Allan McArtor.......... 6,667 -- $23.00 $ -- 5,900
Ronald A. McDougall....... 13,333 -- $21.25 $ -- 11,800
Ronald A. McDougall....... 1,304 -- $19.13 $ 727 1,154
Ronald A. McDougall....... 1,446 -- $12.50 $ 10,393 1,280
--------- --------- ---------
Total........... 1,294,929 1,595,566 2,558,088(3)
========= ========= =========
</TABLE>
- ---------------
(1) Value is based upon the closing sale price for EXCEL Common Stock on the
NYSE on October 5, 1998 ($19 11/16), less the weighted average exercise
price per share of vested and unvested EXCEL options. More recent stock
prices should be obtained from other sources of financial information.
(2) Weighted average exercise price per share and the value of vested and
unvested EXCEL options will differ based on the value of TELEGLOBE Common
Shares received at the Exchange Ratio.
(3) These options are individually and in the aggregate less than 1% of the
total number of TELEGLOBE Common Shares and options outstanding after giving
effect to the Merger (258,954,354, based on TELEGLOBE and EXCEL shares and
options outstanding as of October 5, 1998 of 132,935,322 and 142,394,387,
respectively).
Employment Agreement with Kenny A. Troutt. On January 1, 1996, EXCEL
entered into an employment agreement with Kenny A. Troutt. In the event Mr.
Troutt is terminated without cause, he will be entitled to receive any amount
that would have been due to him through the scheduled termination of the
agreement or, if such a termination occurs within one year after a change of
control (as defined in the agreement), the greater of such amount and two times
the base salary for the year during which such
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termination occurs ("Severance Payment"). Furthermore, if Mr. Troutt terminates
his employment within one year after a change of control that is followed by
either a material increase or decrease in his duties from those that were
required of him prior to the change of control or the imposition of duties that
are inconsistent with his executive status, he will be entitled to the Severance
Payment. It is expected that the consummation of this Merger will result in a
change of control for purposes of this employment agreement. On June 14, 1998,
Mr. Troutt and TELEGLOBE executed a letter agreement whereby Mr. Troutt agreed
that his appointment to the positions of, and the assignment to him of the
duties associated with, Vice Chairman, President and Chief Operating Officer of
TELEGLOBE upon consummation of the Merger will not constitute a material
increase or decrease in his duties from those required prior to the change of
control. The initial term of Mr. Troutt's employment agreement expires on
December 31, 2000, but may automatically be renewed for successive one year
periods unless terminated by written notice from EXCEL or Mr. Troutt given at
least 30 days prior to the expiration of the initial term or any successive one
year term. For illustrative purposes only, if Mr. Troutt's employment was
terminated effective October 5, 1998, and such termination was without cause
within one year after a change of control, Mr. Troutt would be entitled to a
Severance Payment equal to $3.875 million.
Registration Rights Agreement. In connection with the Merger, certain
stockholders of EXCEL, including the entities through which Mr. Troutt holds his
shares of EXCEL Common Stock, will enter into a Registration Rights Agreement
with TELEGLOBE with respect to the registration of the resale of TELEGLOBE
Common Shares owned by such stockholders, the terms of which agreement are
summarized herein under the caption "Other Agreements -- Registration Rights
Agreement."
BCE. Pursuant to the BCE Agreement, BCE has certain rights (i) to designate
for nomination to the TELEGLOBE Board a number of directors which represents the
proportion of the total number of the TELEGLOBE Common Shares outstanding that
are held by BCE and (ii) to maintain up to a 20% equity interest in TELEGLOBE
(which right is exercisable in connection with any public or private offering by
TELEGLOBE of any TELEGLOBE Common Shares or securities convertible into such
shares at the same price such shares are publicly or privately offered by
TELEGLOBE). Upon consummation of the Merger, BCE may exercise this right to
acquire TELEGLOBE Common Shares representing up to an additional 3% of the
TELEGLOBE Common Shares outstanding (after giving effect to the Merger and any
such acquisition). The BCE Agreement also provides that TELEGLOBE will not
knowingly take or encourage any action which will or could have the result of
any person, including any affiliate of such person, other than BCE and its
affiliates, owning or exercising direction or control over shares carrying more
than one third of the votes attaching to all shares of TELEGLOBE then
outstanding.
Certain Other Matters. In accordance with the Merger Agreement, TELEGLOBE
convened a meeting of its shareholders on August 10, 1998 for the purpose of
taking a vote to approve the TELEGLOBE Articles Amendment to incorporate certain
provisions requiring supermajority approval for certain actions by, and
concerning the composition of, the TELEGLOBE Board after the Merger. At the
meeting, TELEGLOBE's shareholders approved the TELEGLOBE Articles Amendment.
The TELEGLOBE Articles Amendment provides that:
(a) at the Effective Time, the TELEGLOBE Board will consist of fifteen
members, of which (i) seven members will be designated for nomination by
TELEGLOBE (or by a majority of TELEGLOBE's then designees with respect to
any vacancy after the Effective Time) ("TELEGLOBE Directors")), (ii) seven
members will be designated for nomination by EXCEL (or by a majority of
EXCEL's then designees with respect to any vacancy after the Effective
Time) ("EXCEL Directors")) and (iii) one member will be designated for
nomination jointly by the TELEGLOBE Directors and the EXCEL Directors;
(b) in connection with any meeting of TELEGLOBE's shareholders for the
election of directors held during the period (the "Time Period") from the
Effective Time until December 31 of the fifth complete calendar year after
the calendar year in which the Effective Time occurs, (i) the EXCEL
Directors will be entitled to nominate five directors (or such greater
number to ensure that the nominees for EXCEL Directors represent at least
34% of the total number of directors comprising the entire Board
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of Directors (disregarding any vacancies) to stand for election at such
meeting, (ii) the TELEGLOBE Directors will be entitled to nominate five
directors (or such greater number equal to or, subject to the 34%
requirement in clause (i) above, greater than the number of directors
nominated pursuant to such clause (i) above) to stand for election at any
such meeting and (iii) the TELEGLOBE Directors and the EXCEL Directors will
be entitled to jointly nominate three directors to stand for election at
any such meeting;
(c) vacancies among the TELEGLOBE Directors and the EXCEL Directors
during the Time Period may be filled only by nomination of the then
remaining TELEGLOBE Directors or EXCEL Directors, as applicable;
(d) there will be no more than two members of the TELEGLOBE Board who
are employed by TELEGLOBE or its affiliates, one of whom will be the chief
executive officer of TELEGLOBE and the other of whom will be the chief
executive officer of EXCEL; and
(e) during the Time Period, any sale, disposition, transfer or pledge
of any shares of any U.S. subsidiary of TELEGLOBE which has a net book
value of more than U.S. $400 million, or any sale, disposition, lease,
transfer or mortgage of all or a substantial portion of the assets of any
such subsidiary, or any merger, consolidation, amalgamation, combination,
liquidation or dissolution involving any such subsidiary shall, in addition
to any other approval, require the approval by the affirmative vote of at
least 66 2/3% of the entire Board of Directors of TELEGLOBE (disregarding
any vacancies).
In addition, the Merger Agreement requires that TELEGLOBE take all
necessary action (i) so that the TELEGLOBE Board is constituted, at the
Effective Time, as set forth in the TELEGLOBE Articles Amendment, with the
members appointed in accordance therewith to serve until the next annual meeting
of its shareholders at which directors are elected, and (ii) to appoint Kenny A.
Troutt as Vice-Chairman, President and Chief Operating Officer of TELEGLOBE at
the Effective Time (in addition to retaining his positions as Chairman, Chief
Executive Officer and President of EXCEL after the Merger). Also see "Comparison
of Stockholders' Rights and Description of TELEGLOBE Common Shares Following the
Merger."
EXCEL DIRECTORS WHO WILL BECOME TELEGLOBE DIRECTORS AFTER THE MERGER
At the Effective Time, Kenny A. Troutt, Stephen R. Smith, T. Allan McArtor
and Ronald A. McDougall, each of whom currently is a director of EXCEL, and
three additional individuals to be designated by EXCEL who have not yet been
selected, will become directors of TELEGLOBE.
EXCEL DIRECTORS AFTER THE MERGER
Pursuant to the Merger Agreement, the directors of EXCEL immediately prior
to the Effective Time other than Kenny A. Troutt and Stephen R. Smith will
resign and Charles Sirois and one other representative to be appointed by
TELEGLOBE will become directors of EXCEL as of the Effective Time. As EXCEL will
be a wholly owned subsidiary of TELEGLOBE after the Merger, EXCEL and TELEGLOBE
have determined to reduce the size of the EXCEL Board after the Merger and, in
light of the Merger being a merger of equals, initially apportion the board
seats equally between EXCEL and TELEGLOBE representatives.
CERTAIN STOCKHOLDER LITIGATION
Several stockholders of EXCEL have filed four separate lawsuits in the
Delaware Court of Chancery challenging the Merger: Adolph D. Schulz (C.A. No.
16448), Ronald K. Drucker (C.A. 16452), William Saxton (C.A. No. 16456), and
Richard T. Rosso and Edward Rosso (C.A. No. 16483NC). In each action, the named
defendants include EXCEL directors or officers Stephen G. Canton, J. Christopher
Dance, Nicholas A. Merrick, T. Allan McArtor, Ronald A. McDougall, Kenny Troutt,
Stephen Smith, and EXCEL. The actions brought by Drucker, Saxton, and the Rossos
also name TELEGLOBE as a defendant.
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All four complaints allege that the directors of EXCEL breached their
fiduciary duties to EXCEL's stockholders in approving the Merger. The complaints
filed by Drucker, Saxton, and the Rossos also allege that TELEGLOBE knowingly
aided and abetted the alleged breaches of fiduciary duty committed by EXCEL's
directors. The plaintiffs in each action seek injunctive relief to prohibit the
defendants from completing the Merger, or to rescind it if it is consummated.
The plaintiffs also seek compensatory damages from the defendants in an amount
to be determined at trial.
EXCEL and TELEGLOBE believe that these suits are without merit with respect
to each of them, respectively, and they intend to defend these suits vigorously.
NO APPRAISAL RIGHTS
Under Delaware law, stockholders in a public company generally are not
entitled to appraisal rights in a merger if the shares of their company are
listed on a national securities exchange on the record date for the stockholder
action approving the merger and if the consideration they receive in the merger
consists only of shares of a company listed on a national securities exchange
and cash in lieu of fractional shares. Accordingly, holders of EXCEL Common
Stock are not entitled to appraisal rights in connection with the Merger because
the EXCEL Common Stock is listed on the NYSE and the consideration to be
received by EXCEL stockholders in the Merger consists of TELEGLOBE Common
Shares, which also are listed on the NYSE, and cash in lieu of fractional
shares.
OTHER AGREEMENTS
THE DESCRIPTIONS OF THE VOTING AGREEMENTS, THE STOCK OPTION AGREEMENTS AND
THE REGISTRATION RIGHTS AGREEMENT SET FORTH BELOW ARE QUALIFIED BY REFERENCE TO
THE COMPLETE TEXT OF SUCH AGREEMENTS, COPIES OF WHICH ARE APPENDICES HERETO AND
ARE INCORPORATED HEREIN BY THIS REFERENCE.
VOTING AGREEMENTS
EXCEL Consent and Voting Agreement. As an inducement to TELEGLOBE to enter
into (and cause Merger Sub to enter into) the Merger Agreement, and in reliance
on certain representations and warranties of TELEGLOBE contained in the Merger
Agreement, each of the Majority EXCEL Stockholders entered into the EXCEL
Consent and Voting Agreement, dated as of June 14, 1998, with TELEGLOBE (the
"EXCEL Consent and Voting Agreement"). As of June 14, 1998, the Majority EXCEL
Stockholders together owned 71,047,933 shares of EXCEL Common Stock representing
53.71% of the then outstanding shares of EXCEL Common Stock.
Pursuant to the EXCEL Consent and Voting Agreement, each Majority EXCEL
Stockholder executed an irrevocable written consent in lieu of a meeting of
stockholders approving the Merger Agreement. As a result, no further vote or
action by EXCEL's stockholders is necessary to approve the Merger. In addition,
each Majority EXCEL Stockholder agreed that, during the term of the EXCEL
Consent and Voting Agreement, if requested by TELEGLOBE, it would vote its
shares of EXCEL Common Stock in favor of approving the Merger Agreement at any
meeting of stockholders of the Company, however called, or provide a written
consent in favor of the same in lieu of voting at a meeting of the stockholders.
In furtherance of the foregoing, each Majority EXCEL Stockholder granted to
TELEGLOBE an irrevocable proxy, and appointed certain officers of TELEGLOBE as
its attorneys-in-fact, to vote its shares of EXCEL Common Stock in favor of
approving the Merger Agreement.
If the Merger Agreement is terminated in accordance with its terms, the
EXCEL Consent and Voting Agreement will terminate and be of no further force or
effect. Upon such termination, except for the rights that any party to the EXCEL
Consent and Voting Agreement may have in respect of any breach by any other
party under the EXCEL Consent and Voting Agreement, none of the parties will
have any further obligation or liability under the EXCEL Consent and Voting
Agreement; provided, however, (A) that any amendment
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by the parties to the Merger Agreement to (x) the Exchange Ratio or the Merger
Consideration, (y) the conditions to Closing contained in the Merger Agreement
or (z) the termination and amendment provisions of the Merger Agreement, or (B)
the waiver on or prior to the Closing Date by TELEGLOBE and/or EXCEL of any
material condition precedent set forth in the Merger Agreement, will require the
written consent of the Majority EXCEL Stockholders, failing which the EXCEL
Consent and Voting Agreement may be terminated in writing by any Majority EXCEL
Stockholder who has not consented to such amendment or such waiver (as to such
stockholder only). In any event, if the Effective Time shall not have occurred
on or before December 31, 1999, the EXCEL Consent and Voting Agreement may be
terminated in writing by any Majority EXCEL Stockholder as to such stockholder
only.
TELEGLOBE Consent and Voting Agreement. As an inducement to EXCEL to enter
into the Merger Agreement, and in reliance on certain representations and
warranties of EXCEL contained in the Merger Agreement, (i) BCE, the beneficial
owner of 32,200,372 (split-adjusted) TELEGLOBE Common Shares (representing
approximately 24.9% of the TELEGLOBE Common Shares outstanding as of June 14,
1998), (ii) Telesystem Telecom Ltd. ("Telesystem"), the beneficial owner of
22,629,966 (split-adjusted) TELEGLOBE Common Shares (representing approximately
17.5% of the TELEGLOBE Common Shares outstanding as of June 14, 1998), (iii)
Capital Communications CDPQ Inc. ("Capital"), the beneficial owner of 8,056,848
(split-adjusted) TELEGLOBE Common Shares (representing approximately 6.2% of the
TELEGLOBE Common Shares outstanding as of June 14, 1998), and (iv) Funds No. 650
and 724 ("Funds" and, together with BCE, Telesystem and Capital, the "Majority
TELEGLOBE Shareholders"), the beneficial owner of 4,962,800 (split-adjusted)
TELEGLOBE Common Shares (representing approximately 3.8% of the TELEGLOBE Common
Shares outstanding as of June 14, 1998), each entered into a separate, but
substantially similar, TELEGLOBE Consent and Voting Agreement with EXCEL dated
as of June 14, 1998 (collectively, the "TELEGLOBE Consent and Voting Agreements"
and, together with the EXCEL Consent and Voting Agreement, the "Voting
Agreements"). The TELEGLOBE Majority Shareholders beneficially owned an
aggregate of 67,849,986 (split-adjusted) TELEGLOBE Common Shares representing
52.5% of the TELEGLOBE Common Shares outstanding as of June 14, 1998.
Pursuant to the TELEGLOBE Consent and Voting Agreements, each Majority
TELEGLOBE Shareholder executed an irrevocable written consent in lieu of a
meeting of shareholders of TELEGLOBE approving the issuance of the TELEGLOBE
Common Shares pursuant to the Merger. In addition, each TELEGLOBE Majority
Shareholder agreed that, during the term of the TELEGLOBE Consent and Voting
Agreement to which such shareholder is a party, if requested by EXCEL, such
shareholder would vote its TELEGLOBE Common Shares in favor of the issuance of
the TELEGLOBE Common Shares pursuant to the Merger and in favor of the TELEGLOBE
Articles Amendment and the TELEGLOBE By-Law Amendment, as the case may be, at
any meeting of TELEGLOBE's shareholders, however called, or provide a written
consent in favor of the same in lieu of voting at a meeting of the shareholders,
as the case may be.
In furtherance of the foregoing, BCE and Telesystem (but not Capital or
Funds) each granted an irrevocable proxy, and appointed certain officers of
EXCEL its attorneys-in-fact, to vote its TELEGLOBE Common Shares in favor of the
issuance of the TELEGLOBE Common Shares pursuant to the Merger and in favor of
the TELEGLOBE Articles Amendment and the TELEGLOBE By-Law Amendment, as the case
may be.
If the Merger Agreement is terminated in accordance with its terms, the
TELEGLOBE Consent and Voting Agreements will terminate and be of no further
force or effect. Upon such termination, except for the rights that any party to
a TELEGLOBE Consent and Voting Agreement may have in respect of any breach by
any other party under such TELEGLOBE Consent and Voting Agreement, none of the
parties to such TELEGLOBE Consent and Voting Agreement will have any further
obligation or liability under such TELEGLOBE Consent and Voting Agreement;
provided, however, (A) that any amendment by the parties to the Merger Agreement
to (x) the Exchange Ratio or the Merger Consideration, (y) the conditions to
Closing contained in the Merger Agreement or (z) the termination and amendment
provisions of the Merger Agreement or (B) the waiver on or prior to the Closing
Date by TELEGLOBE of any material condition precedent set forth in the Merger
Agreement, will require the written consent of the Majority TELEGLOBE
Shareholder party to such TELEGLOBE Consent and Voting Agreement, failing which
such TELEGLOBE
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Consent and Voting Agreement may be terminated in writing by such Majority
TELEGLOBE Stockholder. In any event, the TELEGLOBE Consent and Voting Agreements
to which Telesystem and Funds each are parties may be terminated in writing by
such parties and such agreements shall be of no further force or effect if the
Effective Time shall not have occurred on or before December 31, 1999 (June 14,
1999 in the cases of the TELEGLOBE Consent and Voting Agreements to which BCE
and Capital are parties).
STOCK OPTION AGREEMENTS
EXCEL Stock Option Agreement. As an inducement to TELEGLOBE to enter into
the Merger Agreement, EXCEL entered into the EXCEL Stock Option Agreement with
TELEGLOBE, dated as of June 14, 1998 (the "EXCEL Stock Option Agreement"). Under
the EXCEL Stock Option Agreement, EXCEL granted to TELEGLOBE an irrevocable
option (the "EXCEL Option") to purchase up to 26,300,000 shares of EXCEL Common
Stock (representing 19.9% of the outstanding EXCEL Common Stock as of June 14,
1998) at a price of $27.563 per share. In certain circumstances, EXCEL may elect
to receive a cash payment in lieu of purchasing the TELEGLOBE Common Shares
subject to the EXCEL Option. Such cash payment will be equal to the difference
between the exercise price per share for the shares subject to the EXCEL Option
and the higher of (i) the highest price per share (including brokerage
commissions, transfer taxes and soliciting dealer's fees) paid by any person
pursuant to an Acquisition Proposal and (ii) the average of the closing prices
for the shares as reported on the NYSE Composite Tape for the ten trading days
ending on and including the fifth trading day prior to the date that EXCEL gives
TELEGLOBE notice of its election to receive such cash payment. In the event of
any change in the number of issued and outstanding shares of the EXCEL Common
Stock by reason of any stock dividend, stock split, split-up, recapitalization,
merger or any other change in the corporate or capital structure of EXCEL, the
number of shares of EXCEL Common Stock that may be purchased pursuant to the
EXCEL Option will be adjusted to restore TELEGLOBE's economic and other rights
arising from the EXCEL Stock Option Agreement. The EXCEL Option will become
exercisable upon the termination of the Merger Agreement in circumstances when
the Termination Fee is payable by EXCEL to TELEGLOBE thereunder or in the event
that the Merger Agreement is terminated by TELEGLOBE upon the material breach of
the Merger Agreement by EXCEL (without cure within thirty days after notice
thereof) or in the event of an incorrect representation or warranty of EXCEL if
an Acquisition Proposal is pending at the time of the termination. Also see "The
Merger -- No Solicitation," "-- Amendment; Termination" and "-- Termination
Fees; Expenses."
The EXCEL Option and the rights and obligations of the parties under the
EXCEL Stock Option Agreement will terminate upon the earliest to occur of (i)
the Effective Time, (ii) the termination of the Merger Agreement in
circumstances when TELEGLOBE is not entitled to receive the Termination Fee
thereunder, (iii) the date on which TELEGLOBE realizes a total profit equal to
the "Profit Limit" as set forth in the EXCEL Stock Option Agreement and (iv)
thirty days after the first anniversary of the date on which the Merger
Agreement is terminated. The term Profit Limit as used in the EXCEL Stock Option
Agreement is generally defined as U.S. $120 million, after taking into account
the Termination Fee paid by TELEGLOBE to EXCEL and the net cash received from a
sale of the shares acquired pursuant to the exercise of the EXCEL Option.
Beginning on June 14, 1999 and during the 30 days thereafter, EXCEL may
repurchase all, but not less than all, of any shares of stock acquired by
TELEGLOBE pursuant to the exercise of the EXCEL Option. The repurchase price
will be the greater of the price paid for such shares and the average closing
price per share on the NYSE for the ten trading days ending on or prior to the
date that written notice of exercise of the repurchase right is given.
TELEGLOBE Stock Option Agreement. As an inducement to EXCEL to enter into
the Merger Agreement, TELEGLOBE entered into the TELEGLOBE Stock Option
Agreement with EXCEL, dated as of June 14, 1998 (the "TELEGLOBE Stock Option
Agreement" and, together with the EXCEL Stock Option Agreement, the "Stock
Option Agreements"). Under the TELEGLOBE Stock Option Agreement, TELEGLOBE
granted to EXCEL an irrevocable option (the "TELEGLOBE Option") to purchase up
to 25,700,000 TELEGLOBE Common Shares (representing 19.9% of the outstanding
TELEGLOBE Common
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Shares as of June 14, 1998) at a price of $25.812 per share. In certain
circumstances, TELEGLOBE may elect to receive a cash payment in lieu of
purchasing the EXCEL Common Stock subject to the TELEGLOBE Option. Such cash
payment will be equal to the difference between the exercise price per share for
the shares subject to the TELEGLOBE Option and the higher of (i) the highest
price per share (including brokerage commissions, transfer taxes and soliciting
dealer's fees) paid by any person pursuant to an Acquisition Proposal and (ii)
the average of the closing prices for the shares as reported on the NYSE
Composite Tape for the ten trading days ending on and including the fifth
trading day prior to the date that TELEGLOBE gives EXCEL notice of its election
to receive such cash payment. In the event of any change in the number of issued
and outstanding TELEGLOBE Common Shares by reason of any stock dividend, stock
split, split-up, recapitalization, merger or any other change in the corporate
or capital structure of TELEGLOBE, the number of TELEGLOBE Common Shares that
may be purchased pursuant to the TELEGLOBE Option will be adjusted to restore
EXCEL's economic and other rights arising from the TELEGLOBE Stock Option
Agreement. The TELEGLOBE Option will become exercisable upon the termination of
the Merger Agreement in circumstances when the Termination Fee is payable by
TELEGLOBE to EXCEL thereunder or in the event that the Merger Agreement is
terminated by EXCEL upon the material breach of the Merger Agreement by
TELEGLOBE (without cure within thirty days after notice thereof) or in the event
of an incorrect representation or warranty of TELEGLOBE if an Acquisition
Proposal is pending at the time of the termination. Also see "The Merger -- No
Solicitation," "-- Amendment; Termination" and "-- Termination Fees; Expenses."
The TELEGLOBE Option and the rights and obligations of the parties under
the TELEGLOBE Stock Option Agreement will terminate upon the earliest to occur
of (i) the Effective Time, (ii) the termination of the Merger Agreement in
circumstances when EXCEL is not entitled to receive the Termination Fee, (iii)
the date on which EXCEL realizes a total profit equal to the Profit Limit as set
forth in the TELEGLOBE Stock Option Agreement (which is substantially the same
as set forth in the EXCEL Stock Option Agreement), and (iv) 30 days after the
first anniversary of the date on which the Merger Agreement is terminated.
Beginning on June 14, 1999 and during the 30 days thereafter, TELEGLOBE may
repurchase all, but not less than all, of any shares of stock acquired by EXCEL
pursuant to the exercise of the TELEGLOBE Option. The repurchase price will be
the greater of the price paid for such shares and the weighted average of the
closing prices per share on the NYSE, TSE and ME for the ten trading days ending
on or prior to the date that written notice of exercise of the repurchase right
is given.
REGISTRATION RIGHTS AGREEMENT
TELEGLOBE has agreed to enter into a Registration Rights Agreement (the
"Registration Rights Agreement") as of the Effective Time with certain
shareholders of EXCEL who or which are "Rule 145 Affiliates." Pursuant to the
Registration Rights Agreement, commencing with the Effective Time and ending on
the last day of the fifth calendar year following the calendar year in which the
Effective Time occurs, the shareholders party to the Registration Rights
Agreement will have the right to request (a "demand") that TELEGLOBE register
for sale under the Securities Act (and, if reasonably required by the managing
underwriter(s), file a prospectus under applicable Canadian securities laws) all
or part of the TELEGLOBE Common Shares received by such shareholders pursuant to
the Merger and owned at the time of the demand, as well as certain other
securities referred to in the Registration Rights Agreement. Each demand must
cover at least U.S. $50,000,000 in TELEGLOBE Common Shares (based on the closing
price for such shares on the NYSE Composite Tape for the last trading day
immediately preceding the date of the demand) and only five demands may be made
during the term of the Registration Rights Agreement. In addition, a demand for
registration is not permitted within 60 days following the effective date of any
registration statement for equity securities of TELEGLOBE (other than any
registration statement on Form F-4, Form S-4, Form S-8 or any successor or
equivalent form). The right of any shareholder party to the Registration Rights
Agreement to make a demand terminates as to such shareholder at such time as
such shareholder has received an aggregate of U.S. $750,000,000 in proceeds from
the sale of securities under the Registration Rights Agreement. For purposes of
the foregoing sentence, The Troutt Family Trust and Troutt Partners, Ltd. are
considered as one
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shareholder. TELEGLOBE is obligated to pay all expenses of any demand
registration, other than transfer taxes and discounts, commissions or fees of
underwriters, selling brokers and dealers.
TELEGLOBE is not obligated to register any securities under the
Registration Rights Agreement on a "shelf" registration statement pursuant to
Rule 415 under the Securities Act or otherwise to register securities on a
continuous or delayed basis. Shareholders party to the Registration Rights
Agreement will not have "piggyback" registration rights.
The Registration Rights Agreement provides that TELEGLOBE may include in
any demand registration other securities for sale for the account of any person
(including TELEGLOBE), subject to certain rights of the shareholders party to
the Registration Rights Agreement that apply if the managing underwriter(s)
determine that registration of such additional securities would impair or
interfere in any material respect with the marketing and sale of the securities
originally proposed to be offered pursuant to the demand registration. In no
event will any such shareholders be obligated to reduce the number of securities
to be included in such offering in order to accommodate the addition of any
other person (including TELEGLOBE).
TELEGLOBE may defer the filing or effectiveness of any demand registration
statement for a period of up to 135 days if (i) TELEGLOBE is working on an
underwritten public offering of its common shares and is advised by the managing
underwriter(s) that such offering would be adversely affected in any material
respect by the filing of the demand registration statement or (ii) the general
counsel of TELEGLOBE determines in good faith that the filing of a demand
registration statement would impair or interfere in any material respect with
any proposed financing, any other offer or sale of securities by TELEGLOBE, any
acquisition, any corporate reorganization or any other significant transaction
involving TELEGLOBE, or would require TELEGLOBE to make public disclosure of
information which would have a material adverse effect on TELEGLOBE.
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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following Unaudited Pro Forma Condensed Combined Balance Sheet as of
June 30, 1998 and Unaudited Pro Forma Condensed Combined Statements of Income
for each of the years ended December 31, 1995, 1996 and 1997 and for the six
months ended June 30, 1998 illustrate the effect of the Merger as if the Merger
had occurred on June 30, 1998 for purposes of the Unaudited Pro Forma Condensed
Combined Balance Sheet and as of the beginning of the earliest period presented
for purposes of the Unaudited Pro Forma Condensed Combined Statements of Income.
Pursuant to the terms of the Merger Agreement, each share of EXCEL Common
Stock will be converted into the right to receive .885 of a TELEGLOBE Common
Share. For more information regarding the Merger, see "The Merger."
The Merger will be accounted for as a pooling of interests under U.S. GAAP
and, accordingly, the Unaudited Pro Forma Condensed Combined Financial
Statements that follow are presented on the basis of pooling accounting. See
"Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements." The
Unaudited Pro Forma Condensed Combined Financial Statements should be read in
conjunction with the financial statements of EXCEL and TELEGLOBE, and the
related notes thereto, which are incorporated herein by reference. See "Where
You Can Find More Information" and "Financial Statement Presentation and
Exchange Rate Information."
As a result of the Merger, the combined company will incur certain
transaction costs for professional fees, registration fees and regulatory costs,
currently estimated at $17 million (pre-tax). Upon completion of the Merger, the
combined company will attempt to reorganize and restructure its management and
operations to eliminate duplicate facilities, abandon certain projects and to
take advantage of available synergies. The companies will incur certain costs
related to these reorganization and restructuring activities which are not yet
quantifiable, since the transition plans have not been fully formulated. The
costs of such activities may result in a charge to expense which is not
reflected in the Unaudited Pro Forma Condensed Combined Financial Statements.
Since its privatization in 1987, TELEGLOBE's operating subsidiary Teleglobe
Canada Inc. was operating under an exclusive mandate from the Government of
Canada to provide Canadian-overseas facilities-based services. As part of the
WTO Agreement, the Government of Canada agreed to end Teleglobe Canada Inc.'s
exclusive mandate as of October 1, 1998. The Government of Canada also announced
its intention to create a new licensing regime pursuant to which the CRTC would
establish the conditions of operations applicable to all companies offering
international telecommunications services. On October 2, 1997, the CRTC
requested proposals and comments on, among other things, the regulatory regime
that should apply to the provision of international telecommunications services
after October 1, 1998. On October 1, 1998, the CRTC issued Regulatory Regime for
the Provision of International Telecommunications Services, Telecom Decision
CRTC 98-17, pursuant to which it established various regulatory reforms relating
to the provision of international telecommunications services by service
providers who operate in Canada, including the following: (a) effective October
1, 1998, all routing restrictions which formerly prevented the routing of
Canada-Canada and Canada-overseas basic telecommunications traffic through the
United States were eliminated; (b) Teleglobe Canada Inc. will continue to be
regulated by the CRTC in respect of its Canada-overseas services and it will
continue to be required to file tariffs with the CRTC setting out the rates,
terms and conditions associated with its Canada-overseas services; (c) effective
October 1, 1998, Teleglobe Canada Inc. will not be required to file tariffs with
the CRTC for approval of the rates, terms and conditions associated with its
Canada-Canada and Canada-US services and the CRTC will refrain from exercising
its powers and performing its duties under certain sections of the
Telecommunications Act (Canada) in respect of these services; (d) Teleglobe
Canada Inc. will continue to be required to make its international services and
facilities available to other service providers for interconnection, resale and
sharing purposes; (e) effective January 1, 1999, telecommunications service
providers falling within either of the following two classes will not be
permitted to offer basic international telecommunications services except in
accordance with an international telecommunications service license issued by
the CRTC: (i) service providers who operate telecommunications facilities,
whether owned by them or leased from a separate facilities provider, that are
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used in transporting basic telecommunication service traffic between Canada and
another country (Class A licensees); and (ii) service providers who do not
operate telecommunications facilities owned by them or leased from a separate
facilities provider that are used in transporting basic telecommunications
service traffic between Canada and another country (Class B licensees). The
implementation of the regulatory regime established by the CRTC for
international telecommunications services could have a material adverse effect
on the combined company's operating environment and, therefore, on the
recoverability of Teleglobe Canada Inc.'s investment in assets, which could
result in a charge not reflected in the Unaudited Pro Forma Condensed Combined
Financial Statements.
The Unaudited Pro Forma Condensed Combined Financial Statements are
presented for comparative purposes only and do not give effect to any potential
cost savings and synergies that could result from the Merger. The pro forma data
are not intended to be indicative of actual results of operations or the
financial condition that would have been reported by the combined company had
the Merger been in effect during those periods or that may be reported in the
future.
61
<PAGE> 72
TELEGLOBE INC.
PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF JUNE 30, 1998
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL PRO FORMA PRO FORMA
EXCEL TELEGLOBE(7) ADJUSTMENTS COMBINED
---------- ------------ ----------- ----------
(IN THOUSANDS OF US DOLLARS)
<S> <C> <C> <C> <C>
Current Assets:
Cash and cash equivalents............. $ 18,197 $ 182,892 $ -- $ 201,089
Accounts receivable, net.............. 324,070 395,462 -- 719,532
Income tax receivable, net............ 35,864 -- -- 35,864
Deferred income tax asset............. 19,985 -- -- 19,985
Other current assets.................. 18,283 67,032 -- 85,315
---------- ---------- -------- ----------
Total current assets.......... 416,399 645,386 -- 1,061,785
---------- ---------- -------- ----------
Investments........................... -- 260,037 -- 260,037
Property and equipment, net........... 324,714 589,558 -- 914,272
Goodwill.............................. 931,490 66,076 -- 997,566
Other assets.......................... 43,562 60,811 -- 104,373
---------- ---------- -------- ----------
Total assets.................. $1,716,165 $1,621,868 $ -- $3,338,033
========== ========== ======== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued
liabilities........................ $ 337,894 $ 473,303 $ -- $ 811,197
Income taxes payable.................. -- 9,438 -- 9,438
Current portion of long-term debt and
capital lease obligations.......... 748 5,393 -- 6,141
---------- ---------- -------- ----------
Total current liabilities..... 338,642 488,134 -- 826,776
---------- ---------- -------- ----------
Long-term debt and capital lease
obligations, net of current
portion............................ 541,874 306,488 -- 848,362
Deferred management services fees and
other long-term liabilities........ 32,552 22,421 -- 54,973
Deferred income taxes payable......... 7,582 41,912 -- 49,494
Non-controlling interest.............. -- 13,360 -- 13,360
Stockholders' Equity:
Preferred stock....................... -- 84,938 -- 84,938
Common stock.......................... 133 432,727 530,575(4) 963,435
Additional paid-in capital............ 543,083 -- (543,083) --
Unrealized gain on securities
available for
sale............................... 31 -- -- 31
Treasury stock........................ (12,508) -- 12,508(5) --
Retained earnings..................... 264,776 231,888 -- 496,664
---------- ---------- -------- ----------
Total stockholders' equity.... 795,515 749,553 -- 1,545,068
---------- ---------- -------- ----------
Total liabilities and
stockholders' equity........ $1,716,165 $1,621,868 $ -- $3,338,033
========== ========== ======== ==========
</TABLE>
See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Statements.
62
<PAGE> 73
TELEGLOBE INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED
JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL PRO FORMA PRO FORMA
EXCEL TELEGLOBE(7) ADJUSTMENTS COMBINED
---------- ------------ ----------- ----------
(IN THOUSANDS OF US DOLLARS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenues:
Communication services................... $950,292 $758,063 $ -- $1,708,355
Marketing services....................... 33,935 -- -- 33,935
-------- -------- -------- ----------
Total revenues................... 984,227 758,063 -- 1,742,290
Operating expenses:
Communication and network................ 525,020 529,839 -- 1,054,859
Selling, general and administrative...... 312,903 93,026 -- 405,929
Depreciation and amortization............ 25,769 39,912 -- 65,681
Non-recurring item....................... -- (32,489) -- (32,489)
-------- -------- -------- ----------
Total operating expenses......... 863,692 630,288 -- 1,493,980
-------- -------- -------- ----------
Operating income........................... 120,535 127,775 -- 248,310
Interest expense........................... (18,879) (10,563) -- (29,442)
Other income............................... 962 2,829 -- 3,791
-------- -------- -------- ----------
Income before income taxes................. 102,618 120,041 -- 222,659
Provision for income taxes................. 42,846 46,610 -- 89,456
-------- -------- -------- ----------
Income from continuing operations.......... $ 59,772 $ 73,431 $ -- $ 133,203
======== ======== ======== ==========
Weighted average shares and share
equivalents outstanding(3)............... 135,250 131,161 (15,554) 250,857
Diluted income from continuing operations
per share................................ $ 0.44 $ 0.54 $ -- $ 0.52
</TABLE>
See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Statements.
63
<PAGE> 74
TELEGLOBE INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED
DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL PRO FORMA PRO FORMA
EXCEL TELEGLOBE(7) ADJUSTMENTS(2)(6) COMBINED
---------- ------------ ----------------- ----------
(IN THOUSANDS OF US DOLLARS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenues:
Communication services................ $1,333,101 $1,459,870 $443,188 $3,236,159
Marketing services.................... 121,251 -- -- 121,251
---------- ---------- -------- ----------
Total revenues................ 1,454,352 1,459,870 443,188 3,357,410
Operating expenses:
Communication......................... 716,781 1,028,297 255,697 2,000,775
Selling, general and administrative... 504,421 166,534 169,398 840,353
Depreciation and amortization......... 23,676 78,578 26,430 128,684
Non-recurring charges................. 64,637 91,384 -- 156,021
---------- ---------- -------- ----------
Total operating expenses...... 1,309,515 1,364,793 451,525 3,125,833
---------- ---------- -------- ----------
Operating income (loss)................. 144,837 95,077 (8,337) 231,577
Interest expense........................ (8,551) (22,939) (46,182) (77,672)
Other income (expense).................. 7,301 16,991 (319) 23,973
---------- ---------- -------- ----------
Income (loss) before income taxes....... 143,587 89,129 (54,838) 177,878
Provision for income taxes.............. 55,661 60,364 (12,991) 103,034
---------- ---------- -------- ----------
Income (loss) from continuing
operations(1)......................... $ 87,926 $ 28,765 $(41,847) $ 74,844
========== ========== ======== ==========
Weighted average shares and share
equivalents outstanding(3)............ 115,547 130,980 5,717 252,244
Diluted income from continuing
operations per share.................. $ 0.76 $ 0.18 $ 0.28
</TABLE>
See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Statements.
64
<PAGE> 75
TELEGLOBE INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED
DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL PRO FORMA PRO FORMA
EXCEL TELEGLOBE(7) ADJUSTMENTS(6) COMBINED
---------- ------------ -------------- ----------
(IN THOUSANDS OF US DOLLARS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenues:
Communication services............. $1,090,649 $1,118,263 $ -- $2,208,912
Marketing services................. 260,653 -- -- 260,653
---------- ---------- ------- ----------
Total revenues............. 1,351,302 1,118,263 -- 2,469,565
Operating expenses:
Communication...................... 596,598 777,724 -- 1,374,322
Selling, general and
administrative.................. 530,295 114,263 -- 644,558
Depreciation and amortization...... 6,880 105,736 -- 112,616
---------- ---------- ------- ----------
Total operating expenses... 1,133,773 997,723 -- 2,131,496
---------- ---------- ------- ----------
Operating income..................... 217,529 120,540 -- 338,069
Interest expense..................... (261) (18,284) -- (18,545)
Other income......................... 12,647 13,746 -- 26,393
---------- ---------- ------- ----------
Income before income taxes........... 229,915 116,002 -- 345,917
Provision for income taxes........... 85,488 30,924 -- 116,412
---------- ---------- ------- ----------
Income from continuing operations.... $ 144,427 $ 85,078 $ -- $ 229,505
========== ========== ======= ==========
Weighted average shares and share
equivalents outstanding(3)......... 107,247 131,065 (5,442) 232,870
Diluted income from continuing
operations per share............... $ 1.35 $ 0.61 $ -- $ 0.99
</TABLE>
See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Statements.
65
<PAGE> 76
TELEGLOBE INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED
DECEMBER 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL PRO FORMA PRO FORMA
EXCEL TELEGLOBE(7) ADJUSTMENTS COMBINED
---------- ------------ ----------- ----------
(IN THOUSANDS OF US DOLLARS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenues:
Communication services................... $363,301 $989,737 $ -- $1,353,038
Marketing services....................... 143,397 -- -- 143,397
-------- -------- -------- ----------
Total revenues................... 506,698 989,737 -- 1,496,435
Operating expenses:
Communication............................ 209,995 678,425 -- 888,420
Selling, general and administrative...... 217,751 122,645 -- 340,396
Depreciation and amortization............ 1,239 104,880 -- 106,119
-------- -------- -------- ----------
Total operating expenses......... 428,985 905,950 -- 1,334,935
-------- -------- -------- ----------
Operating income........................... 77,713 83,787 -- 161,500
Interest expense........................... (593) (20,284) -- (20,877)
Other income (expense)..................... (5,781) (851) -- (6,632)
-------- -------- -------- ----------
Income before income taxes................. 71,339 62,652 -- 133,991
Provision for income taxes................. 26,893 41,247 -- 68,140
-------- -------- -------- ----------
Income from continuing operations.......... $ 44,446 $ 21,405 $ -- $ 65,851
======== ======== ======== ==========
Weighted average shares and share
equivalents outstanding(3)............... 97,321 116,755 (11,192) 202,884
Diluted income from continuing operations
per share................................ $ 0.46 $ 0.10 $ -- $ 0.28
</TABLE>
See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Statements.
66
<PAGE> 77
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The Unaudited Pro Forma Condensed Combined Balance Sheet and Unaudited Pro
Forma Condensed Combined Statements of Income are presented as if the Merger had
been effective for all periods presented. Under the terms of the Merger
Agreement, TELEGLOBE shareholders will retain their shares and each share of
EXCEL Common Stock will be exchanged for .885 of a TELEGLOBE Common Share, after
giving effect to TELEGLOBE's previously announced two-for-one stock split by way
of a stock dividend for its shareholders of record on June 15, 1998.
The Unaudited Pro Forma Condensed Combined Financial Statements are based
on the historical consolidated financial statements of EXCEL and TELEGLOBE
giving effect to the Merger under the pooling of interests method of accounting.
The Merger will be accounted for as a "pooling of interests" in accordance with
U.S. GAAP. However, the Merger will be accounted for as a "purchase" under
Canadian GAAP. Accordingly, for Canadian GAAP presentation purposes, TELEGLOBE
will reflect a goodwill balance which is approximately $2.7 billion greater than
that reflected in statements prepared in accordance with U.S. GAAP. The annual
impact on operating income to reflect the forty-year amortization of such
additional goodwill is expected to be, for Canadian GAAP presentation purposes
only, approximately $68.6 million. In addition, any financial statements of
TELEGLOBE presented in Canadian GAAP will include EXCEL's financial results
beginning on the date on which the Effective Time of the Merger occurs. Certain
other differences exist between U.S. GAAP and Canadian GAAP. See "Financial
Statement Presentation and Exchange Rate Information."
The historical information as of and for the years ended December 31, 1995,
1996 and 1997 was derived from audited financial statements of EXCEL and
TELEGLOBE. The historical information as of and for the six months ended June
30, 1998 was derived from unaudited financial statements of EXCEL and TELEGLOBE,
which, in the opinion of EXCEL and TELEGLOBE management, contain all adjustments
(consisting only of normal recurring adjustments) necessary for a fair
presentation thereof. TELEGLOBE historical financial statements differ from
TELEGLOBE historical financial information presented in reports or other
documents incorporated by reference in this Information Statement/Prospectus as
the historical financial statements included in the Unaudited Pro Forma
Condensed Combined Financial Statements have been translated to U.S. dollars and
are presented in accordance with U.S. GAAP. The financial statements were
translated using the average exchange rate for the period for the statements of
income and the period end exchange rate for the balance sheet, in each case,
based upon the Noon Buying Rate. See Note 7 to the Unaudited Pro Forma Condensed
Combined Financial Statements for a detailed reconciliation of TELEGLOBE's
historical financial statements included in TELEGLOBE's Annual Report on Form
40-F for the year ended December 31, 1997, as amended by Forms 40-F/A, which is
incorporated by reference into this Information Statement/Prospectus as part of
the historical financial statements included in the Unaudited Pro Forma
Condensed Combined Financial Statements. The Unaudited Pro Forma Condensed
Combined Financial Statements do not purport to be indicative of the combined
historical or future results of operations or the financial condition that would
have been reported by the combined company had the Merger been in effect during
those periods or that may be reported in the future. See "Financial Statement
Presentation and Exchange Rate Information."
The Merger is expected to result in significant cost savings and
revenue-enhancement opportunities. The expected cost savings,
revenue-enhancement opportunities and transaction costs have not been reflected
in the Unaudited Pro Forma Condensed Combined Statements of Income. Transaction
costs, including fees for advisors, attorneys and other consultants and
incremental direct costs of completing the Merger, are estimated to be
approximately $17.0 million (pre-tax) and will be charged to expense upon
completion of the Merger.
(1) Effective January 1, 1997, EXCEL changed its method of accounting for
subscriber acquisition costs. Previously, EXCEL had deferred the portions of
commissions paid to IRs that directly related to the acquisition of long
distance and paging subscribers. Beginning January 1, 1997, EXCEL began fully
expensing subscriber acquisition costs in the period incurred in order to
present its operating results in a manner more consistent with other
telecommunications companies against which its results are compared.
67
<PAGE> 78
(2) On October 14, 1997, EXCEL acquired Telco in a business combination
accounted for as a purchase transaction. The pro forma adjustments included
herewithin for the year ended December 31, 1997 represent the historical
operating results of Telco from January 1, 1997 through October 14, 1997
combined with appropriate adjustments which give effect to incremental goodwill
amortization and interest expense incurred in connection with the Telco merger.
The pro forma adjustments also include non-recurring costs incurred as a result
of the Telco merger, which were required to be expensed prior to closing. These
included payments to Telco executives under the change in control provisions of
their employment contracts, legal fees, investment banking fees and other merger
related costs recorded in the third quarter of 1997. See "Where You Can Find
More Information" for the respective purchase accounting adjustments made.
(3) Pro forma per share data are based on the number of common shares of
the combined company common stock and per share equivalents that would have been
outstanding had the Merger occurred on the earliest date presented. Weighted
shares outstanding for TELEGLOBE have been retroactively adjusted for all
periods presented to reflect the two-for-one stock split by way of a stock
dividend effective as of June 15, 1998. For purposes of per share calculations,
income from continuing operations is net of preferred stock dividends declared.
(4) Pursuant to the Merger Agreement, each share of EXCEL Common Stock will
be converted into the right to receive .885 of a TELEGLOBE Common Share. The
Unaudited Pro Forma Condensed Combined Balance Sheet has been adjusted to
reflect the cancellation of 132,264,641 shares of EXCEL Common Stock outstanding
at June 30, 1998 in exchange for 117,054,207 TELEGLOBE Common Shares.
(5) All EXCEL treasury shares will be cancelled upon consummation of the
Merger in accordance with the Merger Agreement.
(6) In 1996, preferred shares of TELEGLOBE that were anti-dilutive for
TELEGLOBE on a stand-alone basis became dilutive on a pro forma basis and,
therefore, 6,891 shares were included in the weighted average share count. In
1997, the pro forma adjustments included 19,004 shares with respect to the Telco
acquisition, while TELEGLOBE'S preferred shares had no dilutive impact in that
year.
68
<PAGE> 79
(7) The following is a reconciliation of TELEGLOBE's historical financial
statements included in TELEGLOBE's Annual Report on Form 40-F for each of the
three years ended December 31, 1997, as amended by Forms 40-F/A, incorporated by
reference into this Information Statement/Prospectus and TELEGLOBE's Canadian
GAAP/Canadian dollar financial statements for the six months ended June 30, 1998
to TELEGLOBE's historical financial statements included in the unaudited Pro
Forma Condensed Combined Financial Statements:
RECONCILIATION OF TELEGLOBE CONSOLIDATED FINANCIAL STATEMENTS
FROM CDN GAAP/CDN$ TO US GAAP/US$
AS OF JUNE 30, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
FINANCIAL FINANCIAL FINANCIAL
STATEMENTS STATEMENTS STATEMENTS
CDN GAAP- US GAAP- CONVERSION US GAAP-
CDN$ ADJUSTMENTS CDN$ TO US$ US$
------------- ------------ ------------- ---------- ----------
<S> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents.................. CDN$ 284,941 CDN$ -- CDN$ 284,941 $ --
Joint ventures........................... -- (15,785)(1) (15,785) --
-------------
269,156 0.6795 182,892
Accounts receivable........................ 594,378 -- 594,378 --
Joint ventures........................... -- (12,388)(l) (12,388) --
-------------
581,990 0.6795 395,462
Prepaid expenses and other................. 102,375 -- 102,375 --
Development stage enterprises............ -- (257)(g) (257) --
Joint ventures........................... -- (3,470)(l) (3,470) --
-------------
98,648 0.6795 67,032
------------- ------------ ------------- ------ ----------
Total current assets............... 981,694 (31,900) 949,794 0.6795 645,386
------------- ------------ ------------- ------ ----------
Long-term receivables...................... 14,613 -- 14,613
Reclassification......................... -- (14,613)(n) (14,613)
-------------
-- 0.6795 --
Investments................................ 32,509 -- 32,509 --
Real estate joint venture................ -- (1,259)(f) (1,259) --
Development stage enterprises............ -- (60,680)(g) (60,680) --
Joint ventures........................... -- 412,119(l) 412,119 --
-------------
382,689 0.6795 260,037
Property and equipment, net................ 1,393,746 -- 1,393,746 --
Purchase accounting...................... -- (101)(c) (101) --
Joint ventures........................... -- (519,330)(l) (519,330) --
Venture accounting....................... -- (6,680)(i) (6,680) --
-------------
867,635 0.6795 589,558
Goodwill................................... 88,612 -- 88,612 --
Purchase price of an acquired
enterprise............................. -- 7,213(b) 7,213 --
Purchase accounting...................... -- 7,747(c) 7,747 --
Joint ventures........................... -- (6,330)(l) (6,330) --
-------------
97,242 0.6795 66,076
Deferred charges and others................ 161,467 161,467 --
Foreign exchange......................... -- (12,747)(a) (12,747) --
Development stage enterprises............ -- (12,647)(g) (12,647) --
Post-retirement benefits................. -- (73)(h) (73) --
Joint ventures........................... -- (61,120)(l) (61,120) --
Reclassification......................... -- 14,613(n) 14,613 --
-------------
89,493 0.6795 60,811
------------- ------------ ------------- ------ ----------
Total assets....................... CDN$2,672,641 CDN$(285,788) CDN$2,386,853 0.6795 $1,621,868
============= ============ ============= ====== ==========
</TABLE>
69
<PAGE> 80
<TABLE>
<CAPTION>
FINANCIAL FINANCIAL FINANCIAL
STATEMENTS STATEMENTS STATEMENTS
CDN GAAP- US GAAP- CONVERSION US GAAP-
CDN$ ADJUSTMENTS CDN$ TO US$ US$
------------- ------------ ------------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
LIABILITIES
Current Liabilities:
Accounts payable and accrued liabilities... CDN$ 727,294 CDN$ -- CDN$ 727,294 $ --
Rent escalation.......................... -- 7,108(e) 7,108 --
Development stage enterprises............ -- 5(g) 5 --
Joint ventures........................... -- (39,549)(l) (39,549) --
Reclassification......................... -- 1,688(n) 1,688 --
-------------
696,546 0.6795 473,303
Income taxes payable....................... 13,889 -- 13,889 0.6795 9,438
Dividend payable........................... 1,688 -- 1,688 --
Reclassification......................... -- (1,688)(n) (1,688) --
-------------
-- 0.6795 --
Current portion of long-term debt.......... 10,499 -- 10,499 --
Joint ventures........................... -- (2,563)(l) (2,563) --
-------------
7,936 0.6795 5,393
------------- ------------ ------------- ------ ----------
Total current liabilities.......... 753,370 (34,999) 718,371 0.6795 488,134
------------- ------------ ------------- ------ ----------
Long-term debt, net of current portion..... 613,570 -- 613,570 --
Joint ventures........................... -- (162,521)(l) (162,521) --
-------------
451,049 0.6795 306,488
Deferred Credits........................... 34,683 -- 34,683 --
Joint ventures........................... -- (1,685)(l) (1,685) --
-------------
32,998 0.6795 22,421
Deferred income taxes payable.............. 66,259 -- 66,259 --
Application of FAS 109................... -- (4,578)(d) (4,578) --
-------------
61,681 0.6795 41,912
Non-controlling interest................... 41,131 -- 41,131 --
Development stage enterprises............ -- (21,470)(g) (21,470) --
-------------
19,661 0.6795 13,360
------------- ------------ ------------- ------ ----------
Total liabilities.................. CDN$1,509,013 CDN$(225,253) CDN$1,283,760 0.6795 $ 872,315
SHAREHOLDERS' EQUITY
Shareholders' Equity:
Preferred shares........................... CDN$ 125,000 CDN$ -- CDN$ 125,000 0.6795 $ 84,938
Common shares.............................. 632,002 -- 632,002 --
Purchase price of an acquired
enterprise............................. -- 4,829(b) 4,829 --
-------------
636,831 0.6795 432,727
------------- ------------ ------------- ------ ----------
757,002 4,829 761,831 0.6795 517,665
Retained earnings.......................... 406,626 (65,364) 341,262 0.6795 231,888
------------- ------------ ------------- ------ ----------
Total shareholders' equity......... 1,163,628 (60,535) 1,103,093 0.6795 749,553
------------- ------------ ------------- ------ ----------
Total liabilities and shareholders'
equity........................... CDN$2,672,641 CDN$(285,788) CDN$2,386,853 0.6795 $1,621,868
============= ============ ============= ====== ==========
</TABLE>
70
<PAGE> 81
RECONCILIATION OF TELEGLOBE CONSOLIDATED FINANCIAL STATEMENTS
FROM CDN GAAP/CDN$ TO US GAAP/US$
FOR THE SIX MONTH PERIOD ENDED JUNE 30, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
FINANCIAL FINANCIAL FINANCIAL
STATEMENTS STATEMENTS STATEMENTS
CDN GAAP- US GAAP- CONVERSION US GAAP-
CDN$ ADJUSTMENTS CDN$ TO US$ US$
------------- ------------ ------------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Revenues......................... CDN$1,108,300 CDN$ -- CDN$1,108,300 $ --
Development stage
enterprises.................. -- 207(g) 207 --
Joint ventures................. -- (17,612)(l) (17,612) --
------------- ------------ ------------- --------
1,108,300 (17,405) 1,090,895 0.6949 758,063
Cost of revenues................. 697,788 -- 697,788 --
Development stage
enterprises.................. -- 278(g) 278 --
Reclassification............... -- (698,066)(n) (698,066) --
------------- ------------ ------------- --------
697,788 (697,788) -- 0.6949 --
------------- ------------ ------------- ------ --------
Gross margin..................... 410,512 680,383 1,090,895 0.6949 758,063
Operating expenses............... 252,563 -- 252,563 --
Purchase price of an acquired
enterprise................... -- 147(b) 147 --
Purchase accounting............ -- 131(c) 131 --
Real estate joint venture...... -- (70)(f) (70) --
Development stage
enterprises.................. -- 22,313(g) 22,313 --
Post-retirement benefits....... -- 105(h) 105 --
Joint ventures................. -- (16,570)(l) (16,570) --
Reclassification............... -- 695,155(n) 695,155 --
Non-recurring item:
Gain on disposal of
investment................... -- (46,754)(m) (46,754) --
------------- ------------ ------------- --------
Total operating
expenses............... 252,563 654,457 907,020 0.6949 630,288
------------- ------------ ------------- ------ --------
Income from operations........... 157,949 25,926 183,875 0.6949 127,775
Financial charges................ 13,585 -- 13,585 --
Foreign exchange............... -- 2,708(a) 2,708 --
Development stage
enterprises.................. -- (50)(g) (50) --
Joint ventures................. -- (1,042)(l) (1,042) --
------------- ------------ ------------- --------
13,585 1,616 15,201 0.6949 10,563
Other expense (income)........... -- -- -- --
Development stage
enterprises.................. -- (6,833)(g) (6,833) --
Reclassification............... -- 2,761(n) 2,761 --
------------- ------------ ------------- --------
-- (4,072) (4,072) 0.6949 (2,829)
------------- ------------ ------------- ------ --------
Income from continuing operations
before income taxes............ 144,364 28,382 172,746 0.6949 120,041
Provision for income taxes....... 60,014 60,014 --
Application of FAS 109......... -- 6,910(d) 6,910 --
Reclassification............... -- 150(n) 150 --
------------- ------------ ------------- --------
60,014 7,060 67,074 0.6949 46,610
------------- ------------ ------------- ------ --------
Income from continuing
operations..................... CDN$ 84,350 CDN$ 21,322 CDN$ 105,672 0.6949 $ 73,431
============= ============ ============= ====== ========
</TABLE>
71
<PAGE> 82
RECONCILIATION OF TELEGLOBE CONSOLIDATED FINANCIAL STATEMENTS
FROM CDN GAAP/CDN$ TO US GAAP/US$
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
FINANCIAL FINANCIAL FINANCIAL
STATEMENTS STATEMENTS STATEMENTS
CDN GAAP- US GAAP- CONVERSION US GAAP-
CDN$ ADJUSTMENTS CDN$ TO US$ US$
------------- -------------- -------------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Revenues......................... CDN$1,987,948 CDN$ -- CDN$ 1,987,948 $ --
Development stage
enterprises.................. -- 80(g) 80 --
Venture accounting............. -- 68,845(i) 68,845 --
Joint ventures................. -- (34,892)(l) (34,892) --
------------- -------------- --------------
1,987,948 34,033 2,021,981 0.7220 1,459,870
Cost of revenues................. 1,269,783 -- 1,269,783 --
Development stage
enterprises.................. -- 149(g) 149 --
Reclassification............... -- (1,269,932)(n) (1,269,932) --
------------- -------------- -------------- ------ ----------
1,269,783 (1,269,783) -- 0.7220 --
------------- -------------- -------------- ------ ----------
Gross margin..................... 718,165 1,303,816 2,021,981 0.7220 1,459,870
Operating expenses............... 436,396 -- 436,396 --
Purchase price of an acquired
enterprise................... -- 256(b) 256 --
Purchase accounting............ -- 211(c) 211 --
Rent escalation................ -- 300(e) 300 --
Real estate joint venture...... -- (800)(f) (800) --
Development stage
enterprises.................. -- 9,060(g) 9,060 --
Post-retirement benefits....... -- 210(h) 210 --
Venture accounting............. -- 66,552(i) 66,552 --
Joint ventures................. -- (32,592)(l) (32,592) --
Reclassification............... -- 1,284,131(n) 1,284,131 --
Non-recurring items:............. 17,708 -- 17,708 --
Venture accounting............. -- (12,702)(i) (12,702) --
Gain on disposal of
investment................... -- 121,565(m) 121,565 --
------------- -------------- -------------- ------ ----------
Total operating
expenses............... 454,104 1,436,191 1,890,295 0.7220 1,364,793
------------- -------------- -------------- ------ ----------
Income from operations........... 264,061 (132,375) 131,686 0.7220 95,077
Financial charges................ 35,350 -- 35,350 --
Foreign exchange............... -- (3,272)(a) (3,272) --
Venture accounting............. -- 3,510(i) 3,510 --
Second series preferred
shares....................... -- (1,516)(k) (1,516) --
Joint ventures................. -- (2,300)(l) (2,300) --
------------- -------------- --------------
35,350 (3,578) 31,772 0.7220 22,939
Other expense (income)........... -- -- -- --
Development stage
enterprises.................. -- (9,384)(g) (9,384) --
Reclassification............... -- (14,149)(n) (14,149) --
------------- -------------- -------------- ------ ----------
-- (23,533) (23,533) 0.7220 (16,991)
------------- -------------- -------------- ------ ----------
Income from continuing operations
before income taxes............ 228,711 (105,264) 123,447 0.7220 89,129
Provision for income taxes....... 110,300 -- 110,300 --
Application of FAS 109......... -- (26,643)(d) (26,643) --
Reclassification............... -- (50)(n) (50) --
------------- -------------- -------------- ------ ----------
110,300 (26,693) 83,607 0.7220 60,364
------------- -------------- -------------- ------ ----------
Income from continuing
operations..................... CDN $ 118,411 CDN$ (78,571) CDN$ 39,840 0.7220 $ 28,765
============= ============== ============== ====== ==========
</TABLE>
72
<PAGE> 83
RECONCILIATION OF TELEGLOBE CONSOLIDATED FINANCIAL STATEMENTS
FROM CDN GAAP/CDN$ TO US GAAP/US$
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
FINANCIAL FINANCIAL FINANCIAL
STATEMENTS STATEMENTS STATEMENTS
CDN GAAP- US GAAP- CONVERSION US GAAP-
CDN$ ADJUSTMENTS CDN$ TO US$ US$
------------- ------------ ------------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Revenues........................ CDN$1,562,678 CDN$ -- CDN$1,562,678 $ --
Development stage
enterprises................. -- 11(g) 11 --
Venture accounting............ -- 15,085(i) 15,085 --
Joint ventures................ -- (52,385)(l) (52,385) --
------------- ------------ ------------- ------ --------
1,562,678 (37,289) 1,525,389 0.7331 1,118,263
Cost of revenues................ 956,619 -- 956,619 --
Development stage
enterprises................. -- 9(g) 9 --
Joint ventures................ -- (15,541)(l) (15,541) --
Reclassification.............. -- (941,087)(n) (941,087) --
------------- ------------ ------------- ------ --------
956,619 (956,619) -- 0.7331 --
------------- ------------ ------------- ------ --------
Gross margin.................... 606,059 919,330 1,525,389 0.7331 1,118,263
Operating expenses.............. 391,984 -- 391,984 --
Purchase price of an acquired
enterprise.................. -- 246(b) 246 --
Purchase accounting........... -- 261(c) 261 --
Rent escalation............... -- 1,034(e) 1,034 --
Real estate joint venture..... -- (950)(f) (950) --
Development stage
enterprises................. -- 22,298(g) 22,298 --
Post-retirement benefits...... -- (41)(h) (41) --
Venture accounting............ -- 19,562(i) 19,562 --
Joint ventures................ -- (28,014)(l) (28,014) --
Reclassification.............. -- 954,584(n) 954,584 --
------------- ------------ ------------- ------ --------
Total operating
expenses.............. 391,984 968,980 1,360,964 0.7331 997,723
------------- ------------ ------------- ------ --------
Income from operations.......... 214,075 (49,650) 164,425 0.7331 120,540
Financial charges............... 34,421 -- 34,421 --
Foreign exchange.............. -- (616)(a) (616) --
Venture accounting............ -- 6,255(i) 6,255 --
Second series preferred
shares...................... -- (6,290)(k) (6,290) --
Joint ventures................ -- (8,830)(l) (8,830) --
------------- ------------ ------------- ------ --------
34,421 (9,481) 24,940 0.7331 18,284
Other expense (income).......... -- -- -- --
Development stage
enterprises................. -- (5,253)(g) (5,253) --
Reclassification.............. -- (13,497)(n) (13,497) --
------------- ------------ ------------- ------ --------
-- (18,750) (18,750) 0.7331 (13,746)
------------- ------------ ------------- ------ --------
Income from continuing
operations before income
taxes......................... 179,654 (21,419) 158,235 0.7331 116,002
Provision for income taxes...... 72,021 -- 72,021 --
Application of FAS 109........ -- (29,839)(d) (29,839) --
------------- ------------ ------------- ------ --------
72,021 (29,839) 42,182 0.7331 30,924
------------- ------------ ------------- ------ --------
Income from continuing
operations.................... CDN$ 107,633 CDN$ 8,420 CDN$ 116,053 0.7331 $ 85,078
============= ============ ============= ====== ========
</TABLE>
73
<PAGE> 84
RECONCILIATION OF TELEGLOBE CONSOLIDATED FINANCIAL STATEMENTS
FROM CDN GAAP/CDN$ TO US GAAP/US$
FOR THE YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
FINANCIAL FINANCIAL FINANCIAL
STATEMENTS STATEMENTS STATEMENTS
CDN GAAP- US GAAP- CONVERSION US GAAP-
CDN$ ADJUSTMENTS CDN$ TO US$ US$
------------- ------------ ------------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Revenues........................ CDN$1,398,317 CDN$ -- CDN$1,398,317 $ --
Venture accounting............ -- 12,399(i) 12,399 --
Joint ventures................ -- (51,747)(l) (51,747) --
------------- ------------ ------------- --------
1,398,317 (39,348) 1,358,969 0.7283 989,737
Cost of revenues................ 831,445 -- 831,445 --
Joint ventures................ -- (22,406)(l) (22,406) --
Reclassification.............. -- (809,039)(n) (809,039) --
------------- ------------ ------------- --------
831,445 (831,445) -- 0.7283 --
------------- ------------ ------------- ------ --------
Gross margin.................... 566,872 792,097 1,358,969 0.7283 989,737
Operating expenses.............. 409,629 -- 409,629 --
Purchase price of an acquired
enterprise.................. -- 246(b) 246 --
Purchase accounting........... -- (171)(c) (171) --
Rent escalation............... -- 1,672(e) 1,672 --
Real estate joint venture..... -- (1,741)(f) (1,741) --
Development stage
enterprises................. -- 16,064(g) 16,064 --
Post-retirement benefits...... -- (201)(h) (201) --
Venture accounting............ -- 14,296(i) 14,296 --
Joint ventures................ -- (3,641)(l) (3,641) --
Reclassification.............. -- 807,771(n) 807,771 --
Non-recurring items:............ (3,574) -- (3,574) --
Gain on dilution.............. -- 19,820(j) 19,820 --
Joint ventures................ -- (16,246)(l) (16,246) --
------------- ------------ ------------- ------ --------
Total operating
expenses.............. 406,055 837,869 1,243,924 0.7283 905,950
------------- ------------ ------------- ------ --------
Income from operations.......... 160,817 (45,772) 115,045 0.7283 83,787
Financial charges............... 38,174 -- 38,174 --
Foreign exchange.............. -- (6,066)(a) (6,066) --
Venture accounting............ -- 11,488(i) 11,488 --
Second series preferred
shares...................... -- (6,291)(k) (6,291) --
Joint ventures................ -- (9,454)(l) (9,454) --
------------- ------------ ------------- --------
38,174 (10,323) 27,851 0.7283 20,284
Other expense (income).......... -- --
Reclassification.............. -- 1,168(n) 1,168 --
------------- ------------ -------------
-- 1,168 1,168 0.7283 851
------------- ------------ ------------- ------ --------
Income from continuing
operations before income
taxes......................... 122,643 (36,617) 86,026 0.7283 62,652
Provision for income taxes...... 56,535 -- 56,535 --
Reclassification.............. -- 100(n) 100 --
------------- ------------ ------------- --------
56,535 100 56,635 0.7283 41,247
------------- ------------ ------------- ------ --------
Income from continuing
operations.................... CDN$ 66,108 CDN$ (36,717) CDN$ 29,391 0.7283 $ 21,405
============= ============ ============= ====== ========
</TABLE>
74
<PAGE> 85
NOTES TO RECONCILIATION OF TELEGLOBE CONSOLIDATED FINANCIAL
STATEMENTS FROM CDN GAAP/CDN$ TO US GAAP/US$
(a) Foreign exchange
U.S. GAAP requires immediate recognition in income of unrealized foreign
currency exchange gains and losses on long-term monetary items with a fixed
or ascertainable life, whereas Canadian GAAP requires that these unrealized
gains and losses be deferred and amortized.
(b) Purchase price of an acquired enterprise
Under U.S. GAAP, the difference between the discounted value and the face
value of an interest-free loan to employees under an employee share
purchase plan and the discount on the price of such shares issued in
contemplation of an acquisition of an enterprise must be considered in the
determination of the purchase price and consequently increase the goodwill.
(c) Purchase accounting
The deferred tax liability on non-deductible differences between the
recorded costs of acquired fixed assets and the tax bases of such assets
are recorded as goodwill under U.S. GAAP rather than recorded as fixed
assets under Canadian GAAP. Consequently, a difference in depreciation
expense occurs due to different periods of depreciation and amortization
and amounts of goodwill and fixed assets.
(d) Income taxes
Under U.S. GAAP, deferred income taxes are calculated based on the asset
and liability method and are revalued each period using currently enacted
tax rates. Deferred income taxes under Canadian GAAP, are measured based on
the deferral method, at tax rates prevailing at the time the provisions for
deferred taxes are made. In addition, the deferred tax impact of other
reconciling items are included.
(e) Rent escalation
U.S. GAAP requires that total rental payments, including any rent
escalation clauses, be amortized on a straight-line basis over the term of
the leases.
(f) Real estate joint venture
U.S. GAAP requires that the period of capitalization of costs cease on the
date the property is ready for its intended use. Under Canadian GAAP, that
period is determined to be the date when a satisfactory level of occupancy
has been achieved. Also, under U.S. GAAP, total rental revenues, including
any rent escalation clauses, are amortized on a straight-line basis over
the term of the leases.
(g) Development stage enterprises
U.S. GAAP requires that development stage enterprises present their
financial statements consistent with that of established operating
enterprises. Under Canadian GAAP, development stage enterprises may defer
expenditures during the pre-operating period.
(h) Post-retirement benefits
U.S. GAAP requires accounting for post-retirement benefit plans on the
accrual basis. Under Canadian GAAP, these costs are recorded when they are
incurred.
(i) Venture accounting
Under Canadian GAAP, under certain circumstances, projects undertaken meet
the criteria of venture accounting. Under this method, all costs and
revenues are recorded into one account and carried forward as a net figure
in the balance sheet until the final result of the venture can be
estimated. U.S. GAAP requires that certain costs which are capitalizable
under venture accounting, such as operating, maintenance and financing
costs, be expensed as incurred. Furthermore, all revenues received will be
recognized in the income statement when earned.
75
<PAGE> 86
(j) Gain on dilution
U.S. GAAP requires that the gain on dilution resulting from the reduction
of TELEGLOBE's ownership interest from 100% to 70% in Teleglobe Mobile
Partners, a U.S. general partnership and development stage enterprise, be
recorded as a distinct component of shareholders' equity. Under Canadian
GAAP, this transaction is recorded in the income statement.
(k) Second series preferred shares
U.S. GAAP requires presenting separately from shareholders' equity
preferred shares redeemable at the option of the holder. Under Canadian
GAAP, the second series preferred shares were classified as compound
instruments, with and the equity component related to the option to convert
the principal of the second series preferred shares into common shares
presented in shareholders' equity. Also, under U.S. GAAP the related
dividends and part VI.I tax are accounted for as a reduction of retained
earnings. Under Canadian GAAP, they are recorded as interest expense.
(l) Joint ventures
Interest in joint ventures are recognized using the proportionate
consolidation method under Canadian GAAP. Under U.S. GAAP, joint ventures
are accounted for using the equity method.
(m) Gain on sale of investment
U.S. GAAP requires that the closing date be the transaction date when
disposing of a financial asset. Under Canadian GAAP, the transaction date
is the effective date of the transaction and might be different from the
closing date. The sale of CGI shares is recorded in January 1998 for US
GAAP purposes, and December 1997 for Canadian GAAP purposes.
(n) Reclassification
Reclassification made to conform presentation to that used in the Unaudited
Pro Forma Condensed Combined Financial Statements included in this
Information Statement/Prospectus.
76
<PAGE> 87
DIVIDENDS AND MARKET PRICES
EXCEL
The EXCEL Common Stock has been traded on the NYSE under the symbol "ECI"
since May 1996. The table below sets forth for the periods indicated the high
and low sale prices per share of the EXCEL Common Stock on the NYSE (as reported
in published financial sources). EXCEL has not declared any cash dividends on
the EXCEL Common Stock since it became a publicly traded company. EXCEL does not
expect to pay any cash dividends with respect to the EXCEL Common Stock in the
foreseeable future. On June 12, 1998, the last full trading day prior to
announcement of the execution of the Merger Agreement, the closing price of the
EXCEL Common Stock as reported on the NYSE Composite Tape was $27 9/16 per
share. During the twenty consecutive trading days prior to and including June
12, 1998, the average closing price of the EXCEL Common Stock as reported on the
NYSE Composite Tape was $23.74 per share. On October 5, 1998, the most recent
available date prior to printing this Information Statement/Prospectus, the
closing price of the EXCEL Common Stock as reported on the NYSE Composite Tape
was $19 11/16 per share. We urge EXCEL stockholders to obtain current market
quotations.
<TABLE>
<CAPTION>
EXCEL COMMON STOCK
----------------------------------
CASH
DIVIDENDS
PER
HIGH LOW SHARE
---- --- ---------
(IN US DOLLARS)
<S> <C> <C> <C>
1996
Second Quarter (since May 1996)........................... $47 $25 1/2 --
Third Quarter............................................. 31 7/8 19 1/2 --
Fourth Quarter............................................ 35 1/2 20 --
1997
First Quarter............................................. $21 5/8 $13 --
Second Quarter............................................ 29 3/8 12 3/8 --
Third Quarter............................................. 28 7/8 20 11/16 --
Fourth Quarter............................................ 28 15/16 14 1/8 --
1998
First Quarter............................................. $25 5/16 $13 --
Second Quarter............................................ 27 13/16 20 1/4 --
Third Quarter............................................. 24 7/8 19 11/32 --
Fourth Quarter (through October 5)........................ 22 3/8 19 3/16 --
</TABLE>
77
<PAGE> 88
TELEGLOBE
The TELEGLOBE Common Shares are listed and traded on the NYSE, the ME and
the TSE under the symbol "TGO." The table below sets forth for the periods
indicated the high and low sale prices per TELEGLOBE Common Share on the NYSE
and on the ME and TSE (as reported in published financial sources) and the cash
dividends declared per TELEGLOBE Common Share. All figures reported in this
table reflect the two-for-one stock split by way of stock dividend that became
effective on June 15, 1998. All dollar amounts in this table are expressed in
U.S. dollars, which, in the case of prices on the ME and TSE, have been
converted to U.S.$ using a convenience translation rate based on the Noon Buying
Rate as of October 5, 1998 of CDN$1.00 = US$0.6423.
<TABLE>
<CAPTION>
TELEGLOBE COMMON SHARES
---------------------------------------------------------------
CASH
NYSE ME TSE DIVIDENDS
--------------- --------------- --------------- PER
HIGH LOW HIGH LOW HIGH LOW SHARE
------ ------ ------ ------ ------ ------ ---------
(IN US DOLLARS)
<S> <C> <C> <C> <C> <C> <C> <C>
1996
First Quarter................. N/A N/A $ 6.70 $ 5.58 $ 6.71 $ 5.58 $0.032
Second Quarter................ N/A N/A 6.97 6.13 6.99 6.13 0.038
Third Quarter................. N/A N/A 8.29 6.95 8.27 6.92 0.038
Fourth Quarter................ N/A N/A 13.17 7.71 13.17 7.71 0.038
1997
First Quarter................. N/A N/A $13.65 $12.04 $13.70 $11.97 $0.038
Second Quarter................ $19.88 $16.25 17.66 12.40 17.66 12.40 0.048
Third Quarter................. 20.31 15.88 17.98 13.98 17.98 14.05 0.048
Fourth Quarter................ 19.06 15.00 16.86 13.17 16.86 13.17 0.048
1998
First Quarter................. $23.75 $14.25 $21.34 $13.04 $20.87 $13.04 $0.048
Second Quarter................ 30.88 21.63 29.16 19.83 29.22 19.86 0.055
Third Quarter................. 29.63 23.31 28.90 23.12 28.93 23.12 0.055
Fourth Quarter (through
October 5)................. 25.75 22.25 25.11 22.16 25.11 22.16 --
</TABLE>
TELEGLOBE's Common Shares began trading on the NYSE on June 12, 1997 and
have been trading on the ME and the TSE since December 1985. On June 12, 1998,
the last full trading day prior to announcement of the execution of the Merger
Agreement, the closing price of the TELEGLOBE Common Shares as reported on the
NYSE Composite Tape was $25 13/16 per share (split-adjusted). During the twenty
consecutive trading days prior to and including June 12, 1998, the average
closing price of the TELEGLOBE Common Shares as reported on the NYSE Composite
Tape was $25.64 per share (split-adjusted). On October 5, 1998, the most recent
available date prior to printing this Information Statement/Prospectus, the
closing price of the TELEGLOBE Common Shares as reported on the NYSE Composite
Tape was $22 9/16 per share. EXCEL stockholders are urged to obtain current
market quotations.
TELEGLOBE's policy is to pay quarterly dividends of CDN$0.085 per share on
the TELEGLOBE Common Shares (approximately U.S.$0.055 based on the Noon Buying
Rate as of October 5, 1998). TELEGLOBE has paid cash dividends during the last
five financial years on the TELEGLOBE Common Shares, its First Series Preferred
shares (until June 14, 1998, when all such shares then outstanding were
converted into TELEGLOBE Common Shares) and its Second Series Preferred Shares
(until May 1997 when all such shares then outstanding were either converted into
TELEGLOBE Common Shares or redeemed by TELEGLOBE) and during the last three
quarters of 1994 and the last three fiscal years on its Third Series Preferred
Shares.
78
<PAGE> 89
SECURITY OWNERSHIP
It is anticipated that, after giving effect to the Merger, approximately
246,637,218 TELEGLOBE Common Shares will be issued and outstanding (based on
132,529,542 issued and outstanding shares of EXCEL Common Stock as of October 5,
1998 to be exchanged in the Merger at the Exchange Ratio for 117,288,645
TELEGLOBE Common Shares and based on 129,348,573 issued and outstanding
TELEGLOBE Common Shares as of October 5, 1998).
To the knowledge of the senior officers and directors of TELEGLOBE, after
giving effect to the Merger, the following will be the only persons or companies
who beneficially will own or exercise control or direction over shares carrying
more than 5% of the voting rights attached to all shares of TELEGLOBE capital
stock:
<TABLE>
<CAPTION>
PERCENTAGE OF
PERCENTAGE OF OUTSTANDING VOTING
APPROXIMATE OUTSTANDING VOTING SHARES REPRESENTED BY
NUMBER OF SHARES REPRESENTED BY THE SHARES SO OWNED,
VOTING SHARES THE SHARES SO OWNED, CONTROLLED OR DIRECTED
NAME OF SHAREHOLDER (COMMON SHARES) CONTROLLED OR DIRECTED (FULLY DILUTED)(1)
------------------- --------------- ---------------------- ----------------------
<S> <C> <C> <C>
BCE............................. 41,935,372 17.0% 16.2%
Telesystem Telecom Ltd.(2)...... 22,629,966 9.2% 8.7%
The Troutt Family Trust......... 9,451,800 3.8% 3.7%
Troutt Partners, Ltd............ 46,905,000 19.0% 18.1%
All directors, executive
officers and their affiliates,
as a group.................... 88,801,780 35.7% 35.6%
</TABLE>
- ---------------
(1) Based on 258,954,354 fully-diluted TELEGLOBE Common Shares, after giving
effect to the exercise of all outstanding options into 12,317,136 TELEGLOBE
Common Shares.
(2) Telesystem Telecom Ltd. is an indirect subsidiary of Telesystem Ltd., which
is controlled by Charles Sirois, the Chairman and Chief Executive Officer of
TELEGLOBE.
79
<PAGE> 90
DIRECTORS AND MANAGEMENT OF TELEGLOBE
FOLLOWING THE MERGER
The Merger Agreement provides that at or prior to the Effective Time, the
TELEGLOBE Board will take certain actions with respect to the composition of the
Board of Directors and certain management positions of TELEGLOBE. See "The
Merger -- Certain Other Matters."
STATEMENT OF TELEGLOBE CORPORATE GOVERNANCE PRACTICES
Background. The Board of Directors of TELEGLOBE considers good corporate
governance to be important to the effective operations of TELEGLOBE. The
TELEGLOBE Board formed, at its meeting of August 1, 1995, a Corporate Governance
Committee. This Committee provides guidance and recommendations regarding the
compliance of TELEGLOBE's practices with the guidelines adopted by the ME and
TSE ("Guidelines") and oversees disclosure obligations related thereto. The
Corporate Governance Committee is composed of four outside and unrelated
directors.
Role and Responsibilities of the Board. The TELEGLOBE Board oversees the
conduct and supervises the management of the business and affairs of TELEGLOBE
pursuant to the powers vested in it by the CBCA and in accordance with the
requirements of the CBCA. The TELEGLOBE Board holds regular meetings on a
quarterly basis as well as additional meetings to consider particular issues or
conduct specific reviews whenever deemed appropriate.
Before the start of every fiscal year, the TELEGLOBE Board receives and
approves an annual budget and corporate strategic objectives submitted by the
Chief Executive Officer.
In addition to those matters requiring the TELEGLOBE Board's approval
pursuant to Canadian law or the TELEGLOBE Articles and By-Laws, the TELEGLOBE
Board decides on significant matters such as those related to the annual budget,
strategic investments, appointments of senior executives as well as capital and
operating expenditures exceeding a predetermined amount. Responsibilities and
authority for other matters have been delegated to management by a resolution of
the TELEGLOBE Board.
TELEGLOBE BOARD AFTER THE MERGER
Board. At the Effective Time, the TELEGLOBE Board will consist of fifteen
members, of which (i) seven members will be TELEGLOBE Directors, (ii) seven
members will be EXCEL Directors and (iii) one member will be designated for
nomination jointly by the TELEGLOBE Directors and the EXCEL Directors.
Thereafter, in connection with any meeting of TELEGLOBE's shareholders for the
election of directors held during the Time Period, (i) the EXCEL Directors will
be entitled to nominate five directors (or such greater number to ensure that
the nominees for EXCEL Directors represent at least 34% of the total number of
directors comprising the entire Board of Directors (disregarding any vacancies)
to stand for election at such meeting, (ii) the TELEGLOBE Directors will be
entitled to nominate five directors (or such greater number equal to or, subject
to the 34% requirement in clause (i) above, greater than the number of directors
nominated pursuant to such clause (i) above) to stand for election at any such
meeting and (iii) the TELEGLOBE Directors and the EXCEL Directors will be
entitled to jointly nominate three directors to stand for election at any such
meeting. Vacancies among the TELEGLOBE Directors and the EXCEL Directors during
the Time Period may be filled only by nomination of the then remaining TELEGLOBE
Directors or EXCEL Directors, as applicable. In addition, there will be no more
than two members of the Board of Directors who are employed by TELEGLOBE or its
affiliates, one of whom will be the chief executive officer of TELEGLOBE and the
other of whom will be the chief executive officer of EXCEL. The members of the
TELEGLOBE Board at the Effective Time will be Charles Sirois, six additional
individuals to be designated by TELEGLOBE who have not yet been selected
(including two or three individuals to be appointed by BCE pursuant to the BCE
Agreement), Kenny A. Troutt, Stephen R. Smith, T. Allan McArtor, Ronald A.
McDougall, three individuals to be designated by EXCEL who have not yet been
selected, and one additional individual to be jointly designated by EXCEL and
TELEGLOBE who has not yet been selected. See "The Merger -- Interests of Certain
Persons in the Merger -- Certain Other Matters."
80
<PAGE> 91
Committees. The Audit Committee has a specific mandate to review and report
to the TELEGLOBE Board on the following matters: (i) annual and interim
consolidated financial statements; (ii) presentation of financial information,
accounting practices and financial controls and procedures; (iii) internal audit
activities; (iv) risks (other than financial risks) inherent to TELEGLOBE's
business and risk management program; (v) adequacy of TELEGLOBE's processes to
ensure the security of its assets and senior executives; and (vi) adequacy of
its internal processes to ensure the transition to the year 2000. The Audit
Committee meets regularly with the TELEGLOBE executive responsible for finances
and its external auditors. The Audit Committee consists of four directors, three
of whom are unrelated.
The Finance Committee reviews TELEGLOBE's financial strategies and
financing requirements. It is made up of four outside directors, three of whom
are unrelated. As part of its mandate, the Finance Committee reviews and advises
the TELEGLOBE Board on the work of the investor relations group. TELEGLOBE has
an investor relations group, supervised by the treasurer of TELEGLOBE, which
responds to inquiries from investors, both individual and institutional. As a
complement to the work of the investor relations group, TELEGLOBE has a
communications program to ensure appropriate dissemination to all shareholders
of the material information respecting the business and financial situation of
TELEGLOBE. Annual meetings allow shareholders to ask questions directly to the
Chief Executive Officer as well as to other senior executive officers.
The four outside and unrelated directors who make up the Corporate
Governance Committee also serve as a Related Party Transactions Review Committee
and, together with the Chief Executive Officer, as a Nominating Committee. The
mandate of the Corporate Governance Committee is to develop and monitor the
TELEGLOBE Board's approach to corporate governance, to annually recommend the
members proposed for election to the TELEGLOBE Board as well as the membership
and chairs of the committees of the TELEGLOBE Board, to develop a process to
periodically review the functioning of the TELEGLOBE Board and conduct a
periodic review of the powers, mandates and performance of committees, to review
annually the compensation of the directors, and finally, to review and approve
any material transaction with a "related party" having a significant impact on
the business and affairs of TELEGLOBE.
The Human Resources Committee is mandated to review and make
recommendations to the TELEGLOBE Board in connection with the appointment and
remuneration of senior officers of TELEGLOBE and of its subsidiaries, including
the Chief Executive Officer. In addition, the Human Resources Committee, which
consists of four directors, two of whom are unrelated, makes recommendations to
the TELEGLOBE Board with respect to the options to be granted under TELEGLOBE's
executive stock option plan. Finally, the Human Resources Committee reviews the
design and competitiveness of TELEGLOBE's total compensation plans and is
responsible for overseeing the establishment and management of retirement plans
and for ensuring appropriate and effective retirement fund investment policies.
The TELEGLOBE Board's Expectations of Management. The TELEGLOBE Board
expects management of TELEGLOBE to meet the following objectives: (i) report in
a comprehensive, accurate and timely fashion on the business and affairs of
TELEGLOBE generally, and on any specific matters that it considers of
significant material consequence for TELEGLOBE and its shareholders; (ii) take
timely action and make all appropriate decisions required by TELEGLOBE's
activities in accordance with all applicable requirements or obligations and
within the framework of the corporate policies in effect, with a view to
enhancing shareholder value; (iii) conduct a comprehensive annual budget process
and monitor closely TELEGLOBE's financial performance in conjunction with the
annual budget approved by the TELEGLOBE Board; and (iv) review on an on-going
basis TELEGLOBE's strategies and their implementation taking into account
changes to TELEGLOBE's business environment.
OFFICERS OF TELEGLOBE AFTER THE MERGER
TELEGLOBE will remain the parent and the public company following the
Merger. Charles Sirois will continue in his position of Chairman of the Board
and Chief Executive Officer of TELEGLOBE and Paolo Guidi will continue in his
position as President and Chief Executive Officer of Teleglobe Communications
Corporation. After the Merger, EXCEL will operate as a wholly owned subsidiary
of TELEGLOBE. Pursuant
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to the Merger Agreement, the officers of EXCEL will remain the officers of the
Surviving Corporation after the Merger until they resign or are removed or
otherwise cease to be officers. Under the Merger Agreement, TELEGLOBE has agreed
to cause Kenny A. Troutt, Chairman of the Board, President and Chief Executive
Officer of EXCEL, to be appointed Vice-Chairman, President and Chief Operating
Officer of TELEGLOBE as of the Effective Time.
COMPARISON OF STOCKHOLDERS' RIGHTS AND DESCRIPTION OF
TELEGLOBE COMMON SHARES FOLLOWING THE MERGER
At the Effective Time, the stockholders of EXCEL, whose rights are
currently governed by the DGCL and the EXCEL Certificate of Incorporation and
EXCEL By-Laws, will become shareholders of TELEGLOBE, and their rights will be
governed by the CBCA and TELEGLOBE's articles of incorporation (the "TELEGLOBE
Articles") and by-laws (the "TELEGLOBE By-Laws") as in effect at the Effective
Time. The following are summaries of certain material differences between the
rights of EXCEL stockholders and TELEGLOBE shareholders.
THE FOLLOWING DISCUSSION IS QUALIFIED BY REFERENCE TO THE COMPLETE TEXT OF
THE CBCA, THE TELEGLOBE ARTICLES AND THE TELEGLOBE BY-LAWS, THE DGCL AND THE
CERTIFICATE OF INCORPORATION AND BY-LAWS OF EXCEL (THE "EXCEL CHARTER" AND THE
"EXCEL BY-LAWS," RESPECTIVELY). FOR INFORMATION AS TO HOW YOU CAN OBTAIN COPIES
OF THE TELEGLOBE ARTICLES, THE TELEGLOBE BY-LAWS, THE EXCEL CHARTER AND THE
EXCEL BY-LAWS, SEE "WHERE YOU CAN FIND MORE INFORMATION."
CLASSES AND SERIES OF CAPITAL STOCK
EXCEL. The EXCEL Charter authorizes EXCEL to issue 500,000,000 shares of
EXCEL Common Stock and 10,000,000 shares of EXCEL preferred stock par value
$.001 per share. As of June 14, 1998, 132,259,389 shares of EXCEL Common Stock
were outstanding and no shares of EXCEL preferred stock were issued and
outstanding.
TELEGLOBE. The authorized share capital of TELEGLOBE consists of an
unlimited number of Common Shares without nominal or par value, an unlimited
number of Class A non-voting shares without nominal or par value (the
"Non-Voting Shares") and an unlimited number of preferred shares issuable in
series without nominal or par value (the "Preferred Shares") of which
129,306,908 Common Shares and 5,000,000 Third Series Preferred Shares were
issued and outstanding as of June 14, 1998.
The following is a summary of the attributes of the different classes and
series of shares in the share capital of TELEGLOBE and is given subject to the
more detailed provisions of the TELEGLOBE Articles.
TELEGLOBE COMMON SHARES AND NON-VOTING SHARES
The TELEGLOBE Common Shares entitle the holder thereof to one vote per
share in all instances except in the case of a separate vote of holders of the
Non-Voting Shares, or the Preferred Shares of TELEGLOBE or any series of them.
The holders of Non-Voting Shares are not entitled to vote at any meeting of
shareholders other than as provided by law. The TELEGLOBE Articles limit the
rights of the holders of Non-Voting Shares to a class vote. The TELEGLOBE Common
Shares and the Non-Voting Shares, subject to the priority of the holders of
Preferred Shares, entitle their respective holders to receive dividends and to
share the balance of the property of TELEGLOBE upon dissolution of TELEGLOBE on
a pari passu basis.
TELEGLOBE PREFERRED SHARES
Priority. The class provisions of the Preferred Shares provide that each
series of Preferred Shares ranks pari passu with every other series of Preferred
Shares and in priority to the TELEGLOBE Common Shares
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with respect to the payment of dividends and the distribution of assets in the
event of the liquidation, dissolution or winding-up of TELEGLOBE or other
distribution of its assets.
Voting Rights. The holders of Preferred Shares are not entitled to vote at
any meetings of the shareholders of TELEGLOBE other than as provided by law.
However, the TELEGLOBE Board may, for series of Preferred Shares created after
May 28, 1993, provide that the shares of such series will become voting shares
if a certain number of successive dividends are not paid to their holders.
In addition to the provisions attaching to the Preferred Shares, the Third
Series Preferred Shares have attached thereto, among others, provisions to the
following effect:
Dividends. The holders of Third Series Preferred Shares are entitled to
receive fixed cumulative preferential cash dividends, when and as declared by
the TELEGLOBE Board, at a rate of 5.4% per annum, paid in equal quarterly
installments on the first day of February, May, August and November in each
year.
Conversion Privilege. On April 1, 2001 and thereafter, the Third Series
Preferred Shares will be convertible at the option of TELEGLOBE, in whole or in
part at any time, into a number of TELEGLOBE Common Shares determined by
dividing CDN$25.00 plus an amount equal to all accrued and unpaid dividends
thereon, calculated to the date of conversion by the greater of CDN$3.00 and 95%
of the weighted average trading price of the TELEGLOBE Common Shares on the
fourth day immediately prior to the date specified for conversion. On and after
May 1, 2001, subject to the preemptive right of TELEGLOBE to redeem for cash or
to find substitute purchasers at CDN$25.00 per share, the shares are convertible
at the option of the holder into TELEGLOBE Common Shares based on the same
formula used for redemption. At any time, TELEGLOBE may offer holders of Third
Series Preferred Shares the right to convert into a further series of Preferred
Shares on a one-for-one basis. The provisions attaching to the Third Series
Preferred Shares provide for the adjustment of the conversion basis in certain
events.
Redemption. On April 1, 2001 and thereafter, the Third Series Preferred
Shares will be redeemable at the option of TELEGLOBE, subject to the provisions
of applicable law and the restrictions referred to below under "-- Restrictions
on Dividends and Retirement of Shares," in whole at any time or in part from
time to time at a price of CDN$25.00 per share plus, in each case, all accrued
and unpaid dividends thereon, calculated to the date of redemption.
Purchase for Cancellation. TELEGLOBE may at any time purchase for
cancellation any or all of the Third Series Preferred Shares in the open market,
subject to the provisions of applicable law and the restrictions referred to
below under "-- Restrictions on Dividends and Retirement of Shares," at the
lowest price or prices at which, in the opinion of the Board of Directors, the
shares are obtainable. Any Third Series Preferred Shares purchased by TELEGLOBE
shall be cancelled and shall not be reissued.
Liquidation Rights. In the event of the liquidation, dissolution or
winding-up of TELEGLOBE or other distribution of its assets among its
shareholders for the purpose of winding-up its affairs, before any payment or
distribution to the holders of the TELEGLOBE Common Shares and of Non-Voting
Shares, the holders of Third Series Preferred Shares will be entitled to receive
on the date of such distribution, the amount of CDN$25.00 per share, and all
accrued and unpaid dividends thereon calculated to such date. After such
payments to the holders of the Third Series Preferred Shares, they shall not be
entitled to share in any further distribution of property of TELEGLOBE.
Restrictions on Dividends and Retirement of Shares. Unless all dividends
accrued up to and including the most recent applicable dividend payment dates
shall have been declared and paid or made available for payment on the Third
Series Preferred Shares, TELEGLOBE will not, without prior approval of the
holders of the Third Series Preferred Shares:
(a) pay any dividends on the TELEGLOBE Common Shares or the Non-Voting
Shares (other than stock dividends);
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(b) redeem, purchase, otherwise retire or make any capital
distribution on or in respect of TELEGLOBE Common Shares or Non-Voting
Shares (except out of the net cash proceeds of a substantially concurrent
issue of shares of TELEGLOBE ranking junior to or on a parity with the
Preferred Shares or any series thereof);
(c) redeem, purchase or otherwise retire less than all of the Third
Series Preferred Shares then outstanding (except in connection with the
exercise of any retraction privilege attaching thereto); or
(d) redeem, purchase or otherwise retire (except in connection with
the exercise of any retraction privilege or mandatory redemption obligation
attaching thereto) any TELEGLOBE Common Shares or Non-Voting Shares.
Modifications. TELEGLOBE may not, without the authorization of the holders
of the Third Series Preferred Shares, amend any provision attaching to the Third
Series Preferred Shares as a series or create shares ranking in priority to the
Third Series Preferred Shares. The approval of any amendment to the provisions
attaching to the Third Series Preferred Shares as a series and any other
approval to be given by the holders of the Third Series Preferred Shares may be
given by a resolution carried by the affirmative vote of not less than 66 2/3%
of the votes cast at a meeting of the holders of the Third Series Preferred
Shares.
ANNUAL MEETING OF STOCKHOLDERS
EXCEL. Under the DGCL, if the annual meeting for the election of directors
is not held on the designated date, the directors are required to cause such
meeting to be held as soon thereafter as may be convenient. If they fail to do
so for a period of thirty days after the designated date, or if no date has been
designated for a period of thirteen months after the latest to occur of the
organization of the corporation, its last annual meeting or after the last
action by written consent to elect directors in lieu of an annual meeting, the
Court of Chancery may summarily order a meeting to be held upon application of
any stockholder or director. The shares of stock represented at such meeting,
either in person or by proxy, and entitled to vote thereat, shall constitute a
quorum for the purposes of such meeting, notwithstanding any provision of the
certificate of incorporation or by-laws to the contrary. However, the DGCL does
not provide for a stockholder to call such meeting other than by application to
the Court of Chancery.
TELEGLOBE. Under the CBCA, the directors of TELEGLOBE must call an annual
meeting of shareholders not later than fifteen months after holding the last
preceding annual meeting of TELEGLOBE shareholders. If an annual meeting is not
called at the required time by the directors, it may be called by the holders of
not less than 5% of the issued and voting shares of TELEGLOBE, under the CBCA
power of shareholders to requisition a meeting, as set out under the caption
"-- Special Meetings of Stockholders" below. If for any reason it is
impracticable to call such a meeting or to conduct such a meeting in the manner
prescribed by the TELEGLOBE By-Laws or the CBCA, any director or shareholder
entitled to vote at such a meeting or the Director appointed under section 260
of the CBCA may apply to a court for an order calling such a meeting.
SPECIAL MEETINGS OF STOCKHOLDERS
EXCEL. Under the DGCL, special meetings of stockholders may be called only
by the board of directors or such other persons as may be authorized by the
certificate of incorporation or by-laws. The EXCEL By-Laws provide that a
special meeting of stockholders may be called by the EXCEL Board or by the
Chairman of the Board, Chief Executive Officer or President.
TELEGLOBE. Under the CBCA, special meetings of shareholders may be called
by the board of directors. In addition, the holders of not less than 5% of the
issued and voting shares of TELEGLOBE may request that the directors call a
meeting of shareholders for any purpose. If the directors do not call a meeting
within 21 days after receiving the requisition, any shareholders who requested
the directors to call the meeting may call the meeting.
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QUORUM OF STOCKHOLDERS
EXCEL. Under the DGCL, a quorum consists of a majority of shares entitled
to vote present in person or represented by proxy unless the certificate of
incorporation or by-laws provide otherwise, but in no event may a quorum at any
stockholders' meeting be less than one-third (33 1/3%) of the issued and
outstanding stock of EXCEL entitled to vote at such meeting, present in person
or by proxy.
TELEGLOBE. Under the CBCA, unless the TELEGLOBE By-Laws otherwise provide,
a quorum of shareholders is present at a meeting, if the holders of a majority
of the shares entitled to vote at that meeting are present in person or
represented by proxy. The TELEGLOBE By-Laws provide that a quorum at any meeting
of shareholders shall be shareholders present in person and personally holding
or representing by proxy not less than ten percent (10%) of the issued and
outstanding shares of TELEGLOBE entitled to vote at the meeting.
STOCKHOLDER ACTION WITHOUT A MEETING
EXCEL. Under the DGCL, unless the certificate of incorporation provides
otherwise, any action required by the DGCL to be taken at any annual or special
meeting of the stockholders of a corporation, or any action which may be taken
at any annual or special meeting of the stockholders, may be taken without a
meeting, without prior notice and without a vote, if a consent in writing,
setting forth the action so taken, is signed by the holders of outstanding stock
having not less than the minimum number of votes that would be necessary to
authorize or take such action at a meeting at which all shares entitled to vote
thereon were present and voted. The EXCEL Charter does not alter these
provisions of the DGCL.
TELEGLOBE. Under the CBCA, shareholder action without a meeting may be
taken by written resolution signed by all shareholders who would be entitled to
vote thereon at a meeting.
NOTICE OF STOCKHOLDER PROPOSALS
EXCEL. Under the EXCEL By-Laws, for business to be properly brought before
a meeting by a stockholder, notice must generally be received by the company not
less than sixty days prior to the meeting and must contain certain specified
information concerning the matter to be brought before the meeting and
concerning the stockholder submitting the proposal.
TELEGLOBE. Under the CBCA, shareholder proposals may be submitted only at
annual meetings of shareholders; a shareholder entitled to vote at an annual
meeting of shareholders may submit to TELEGLOBE notice of any matter that the
shareholder proposes to raise at the meeting provided that the proposal is
submitted to TELEGLOBE at least ninety days before the anniversary date of
TELEGLOBE's previous annual meeting of shareholders.
TELEGLOBE expects to hold its next annual meeting of shareholders in the
second quarter of 1999.
Any TELEGLOBE shareholder who intends to submit a proposal for inclusion in
the management proxy material for the 1999 annual meeting of TELEGLOBE must
submit such proposal to the Secretary of TELEGLOBE by February 12, 1999.
ACCESS TO CORPORATE RECORDS AND FINANCIAL STATEMENTS
EXCEL. Under the DGCL, on written demand under oath, any stockholder may,
in person or by attorney or other agents for any proper purpose, inspect, during
usual business hours, the corporation's stock ledger, a list of stockholders and
its other books and records, and may make copies and extracts therefrom.
TELEGLOBE. Under the CBCA, a corporation is required to make available to
its shareholders and creditors, their agent and legal representatives, certain
prescribed books and records during usual business hours of the corporation.
Such persons may, free of charge, take extracts from these prescribed books and
records and, in the case of a corporation having outstanding securities which
were issued as part of a distribution to the public, such as TELEGLOBE, any
other person may take extracts from these books and records upon payment of a
reasonable fee. As well, in the case of a corporation, such as TELEGLOBE,
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shareholders and creditors, their agents and legal representatives, and any
other person, upon payment of a reasonable fee and sending to the corporation of
an affidavit, may require a corporation to furnish a list of shareholders. In
addition, directors of a corporation are entitled to examine certain additional
records, documents and instruments of the corporation.
CHARTER AMENDMENTS
EXCEL. Under the DGCL, unless its certificate of incorporation or by-laws
otherwise provide, amendments to a corporation's certificate of incorporation
generally require the approval of the holders of a majority of the outstanding
stock entitled to vote thereon and, if such amendments would affect certain
rights of holders of a particular class of stock, the approval of a majority of
the outstanding stock of such class. The EXCEL Charter and EXCEL By-laws do not
alter the provisions of the DGCL.
TELEGLOBE. Under the CBCA, any amendment to a corporation's articles of
incorporation generally requires approval by special resolution, which is a
resolution passed by a majority of not less than two-thirds of the votes cast by
shareholders of all voting shareholders entitled to vote on the resolution and,
if such amendment affects certain rights of holders of a particular class of
shares, a separate special resolution of those holders approved by the same vote
as to such particular class.
BY-LAW AMENDMENTS
EXCEL. Under the DGCL, the power to adopt, amend or repeal by-laws is
vested in the voting stockholders. The corporation may, however, in its
certificate of incorporation, confer the power to adopt, amend or repeal by-laws
upon the directors. The conferring of this power to the directors does not
divest the stockholders of the power, nor limit their power to adopt, amend or
repeal by-laws. The EXCEL Charter expressly grants the EXCEL Board the power to
adopt, amend and repeal the EXCEL By-laws.
TELEGLOBE. The TELEGLOBE Board may, by resolution, make, amend or repeal
any by-laws that regulate the business or affairs of TELEGLOBE. The directors
are required to submit a by-law, or an amendment or a repeal of a by-law, to the
shareholders at the next meeting of shareholders of TELEGLOBE and the
shareholders may, by ordinary resolution (a resolution passed by a majority of
votes cast), confirm, reject or amend the by-law, amendment or repeal. A by-law,
or an amendment or a repeal of a by-law, is effective from the date of the
resolution of the directors until it is confirmed, confirmed as amended or
rejected by the shareholders of TELEGLOBE or until it ceases to be effective. A
shareholder entitled to vote at an annual meeting of shareholders of TELEGLOBE
may make a proposal to make, amend or repeal a by-law.
SALE OR LEASE OF ASSETS
EXCEL. Under the DGCL, the EXCEL Board may by resolution sell, lease or
exchange all or substantially all the corporation's property and assets, when
and as authorized by a resolution adopted by the holders of a majority of the
outstanding stock.
TELEGLOBE. Under the CBCA, the sale, lease or exchange of all or
substantially all the property of a corporation other than in the ordinary
course of business requires, in addition to a resolution of the TELEGLOBE Board,
the general approval of the shareholders by special resolution, which is a
resolution by a majority of not less than two-thirds of the votes cast by the
shareholders, each share carrying the right to vote whether or not it otherwise
carries the right to vote. A separate special resolution is also required from
the holders of each class of shares which is particularly affected by the
transaction.
Under the TELEGLOBE Articles as modified by the TELEGLOBE Articles
Amendment, any sale, disposition, transfer or pledge of any shares of a U.S.
subsidiary (having a net book value of more than U.S.$400 million) or any sale,
disposition, lease, transfer or mortgage of all or a substantial portion of the
assets of such a subsidiary or any merger, consolidation, amalgamation,
combination, liquidation or dissolution involving any such subsidiary will, in
addition to any other approval, require approval by an affirmative vote of at
least 66 2/3% of the entire board of directors (disregarding vacancies) of
TELEGLOBE. This provision will
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remain in effect until December 31 of the fifth complete calendar year after the
calendar year in which the Effective Time occurs and may be amended, modified or
repealed in any manner provided for under applicable law if accompanied by an
affirmative vote of at least 66 2/3% of the entire board of directors
(disregarding vacancies) of TELEGLOBE.
PREEMPTIVE RIGHTS
EXCEL. The DGCL provides that security holders of a corporation only have
such preemptive rights as may be provided in the corporation's certificate of
incorporation. The EXCEL Charter does not provide for preemptive rights.
TELEGLOBE. The CBCA provides that shareholders may have a preemptive right
if the corporation's articles so provide. The TELEGLOBE Articles do not provide
for preemptive rights but the BCE Agreement states that BCE has the right to
maintain a 20% equity interest in TELEGLOBE (with certain exceptions). See "The
Merger -- Interests of Certain Persons in the Merger -- BCE."
DIVIDENDS AND DISTRIBUTIONS
EXCEL. Under the DGCL, subject to any restriction contained in a
corporation's certificate of incorporation, the board of directors may declare,
and the corporation may pay, dividends or other distributions upon the shares of
its capital stock either (i) out of "surplus" or (ii) in the event that there is
no surplus, out of the net profits for the fiscal year in which the dividend is
declared and/or the preceding fiscal year, unless net assets (total assets in
excess of total liabilities) are less than the capital of all outstanding
preferred stock. "Surplus" is defined as the excess of the net assets of the
corporation over the amount determined to be the capital of the corporation by
the board of directors (which amount cannot be less than the aggregate par value
of all issued shares of capital stock). The EXCEL Charter does not supplement or
alter the provisions of the DGCL.
TELEGLOBE. Under the CBCA, TELEGLOBE may declare or pay a dividend unless
there are reasonable grounds for believing that TELEGLOBE is, or would after the
payment be, unable to pay its liabilities as they become due or the realizable
value of TELEGLOBE's assets would thereby be less than the aggregate of
TELEGLOBE's liabilities and stated capital of all classes of shares of
TELEGLOBE.
APPRAISAL AND DISSENT RIGHTS
EXCEL. Stockholders of a Delaware corporation who dissent from a merger or
consolidation of the corporation for which a stockholder's vote is required are,
in certain instances, entitled to appraisal rights requiring the surviving
corporation to purchase the dissenting shares at fair value. There are, however,
no statutory rights of appraisal with respect to stockholders of a Delaware
corporation whose shares of stock, at the record date for the determination of
stockholders entitled to notice of and to vote at the meeting of stockholders to
act upon the merger or consolidation, or on the record date with respect to
action by written consent, are either (i) listed on a national securities
exchange or designated as a national market system security on an interdealer
quotation system by the National Association of Securities Dealers, Inc. (the
"NASD"), or (ii) held of record by more than 2,000 stockholders, unless the
agreement of merger or consolidation converts such shares into anything other
than (a) stock of the surviving corporation, (b) stock of another corporation
which is either listed on a national securities exchange or designated as a
national market system security on an interdealer quotation system by the NASD,
or held of record by more than 2,000 stockholders, (c) cash in lieu of
fractional shares, or (d) some combination of the above. Holders of EXCEL Common
Stock are not entitled to appraisal rights in connection with the Merger.
The EXCEL Charter and the EXCEL By-laws do not contain any additional
provisions relating to dissenters' rights of appraisal.
TELEGLOBE. The CBCA provides that shareholders of a CBCA corporation
entitled to vote on certain matters are entitled to exercise dissent rights and
to be paid the fair value of their shares in connection therewith. Such matters
include (i) any amalgamation with another corporation (other than with certain
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affiliated corporations), (ii) an amendment to the corporation's articles to
add, change or remove any provisions restricting the issue, transfer or
ownership of shares, (iii) an amendment to the corporation's articles to add,
change or remove any restriction upon the business or businesses that the
corporation may carry on, (iv) a continuance under the laws of another
jurisdiction, (v) a sale, lease or exchange of all or substantially all the
property of the corporation other than in the ordinary course of business, (vi)
a court order permitting a shareholder to dissent in connection with an
application to the court for an order approving an arrangement proposed by the
corporation, or (vii) certain amendments to the articles of a corporation which
require a separate class or series vote, provided that a shareholder is not
entitled to dissent if an amendment to the articles is effected by a court order
approving a reorganization (as defined in the CBCA) or by a court order made in
connection with an action for an oppression remedy. Under the CBCA, a
shareholder may, in addition to or instead of exercising dissent rights, seek an
oppression remedy (see below) for any act or omission of a corporation which is
oppressive, unfairly prejudicial to or that unfairly disregards a shareholder's
interest.
STOCK REPURCHASES
EXCEL. Under the DGCL, a corporation may not purchase or redeem its own
shares of capital stock when the capital of the corporation is impaired or when
such purchase or redemption would cause any impairment of the capital of the
corporation. However, a corporation may purchase or redeem out of capital any of
its own preferred shares if such shares will be retired upon the acquisition
thereof and the capital of the corporation will be thereby reduced.
TELEGLOBE. Under the CBCA, TELEGLOBE may purchase or otherwise acquire
shares issued by TELEGLOBE unless there are reasonable grounds for believing
that TELEGLOBE is, or would after the purchase be, unable to pay its liabilities
as they become due or the realizable value of TELEGLOBE's assets would after the
purchase be less than the aggregate of TELEGLOBE's liabilities and stated
capital of all classes of shares. Canadian securities laws restrict the ability
of a public corporation, such as TELEGLOBE, to selectively repurchase its
securities. Open market purchases of securities by TELEGLOBE (i.e., normal
course issuer bids) may be effected provided that such purchases do not exceed
prescribed annual (5%) and/or monthly limits (2%). Otherwise, issuer bid
purchases must be made pursuant to an offer extended on identical terms to all
holders of the subject securities.
NUMBER AND QUALIFICATION OF DIRECTORS
EXCEL. The DGCL provides that the minimum number of directors is one. The
number of directors is fixed by or in the manner provided in the by-laws, unless
the certificate of incorporation fixes the number of directors, in which case a
change in the number of directors may only be made by amendment to the
certificate of incorporation.
The EXCEL By-laws provide that the number of directors initially
constituting the entire EXCEL Board shall be two, or such larger or lesser
number (but not less than one) as may be fixed from time to time by action of
the stockholders or the EXCEL Board. The EXCEL By-laws provide that none of the
directors must be stockholders of EXCEL, residents of the State of Delaware or
citizens of the United States. Each director, however, must be at least eighteen
years of age.
TELEGLOBE. Under the CBCA, the TELEGLOBE Board must have not fewer than
three members, at least two of whom are not officers or employees of TELEGLOBE
or its affiliates. Under the TELEGLOBE Articles as modified by the TELEGLOBE
Articles Amendment, the minimum number of directors is seven and the maximum
number of directors is twenty-five. A majority of directors of TELEGLOBE must be
resident Canadians under the CBCA and, except in limited circumstances,
directors may not transact business at a meeting of directors (or a committee of
directors) at which a majority of the directors present are not resident
Canadians under the CBCA.
Under the TELEGLOBE Articles as modified by the TELEGLOBE Articles
Amendment, at the Effective Time, the TELEGLOBE Board will be comprised of
fifteen members, seven of whom will be TELEGLOBE Directors (as defined below),
seven of whom will be EXCEL Directors and one of whom will
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be jointly appointed. Under the BCE Agreement, BCE is entitled to nominate a
number of nominees for election to the TELEGLOBE Board proportionate to BCE's
ownership of TELEGLOBE Common Shares. The BCE Agreement also provides that BCE
shall not exercise its voting rights in respect of the election of directors
except in favor of its nominees. Directors nominated by BCE will constitute
TELEGLOBE Directors (and not EXCEL Directors).
Under the TELEGLOBE Articles as modified by the TELEGLOBE Articles
Amendment, during the Time Period, TELEGLOBE Directors and EXCEL Directors
shall, in connection with any meeting of shareholders of TELEGLOBE involving an
election of directors, be entitled to nominate a certain number of individuals
in the following manner:
(a) the EXCEL Directors will be entitled to nominate five qualified
individuals (or such greater number as shall be necessary to ensure that
the nominees for EXCEL Directors represent at least 34% of the total number
of directors comprising the board of directors of TELEGLOBE) to stand for
election at any such meeting;
(b) the TELEGLOBE Directors shall be entitled to nominate five
qualified individuals (or such greater number equal to or, subject to the
34% requirement in paragraph (a) above, greater than the number of
individuals nominated pursuant to such paragraph (a) above) to stand for
election at any such meeting; and
(c) the TELEGLOBE Directors and EXCEL Directors shall be entitled to
jointly nominate three qualified individuals to stand for election at any
such meeting.
For this purpose, a TELEGLOBE Director means any person serving as a
director of TELEGLOBE who was designated by the board of directors of TELEGLOBE
prior to the Effective Time of the Merger, any successor thereto or any person
nominated to fill a vacancy in the board of directors among the TELEGLOBE
Directors. An EXCEL Director means any person serving as a director of TELEGLOBE
who was designated by the board of directors of EXCEL prior to the Effective
Time of the Merger, any successor thereto or any person nominated to fill a
vacancy among the EXCEL Directors.
After the Time Period, the TELEGLOBE Board will not be subject to any
specific provisions in the TELEGLOBE Articles relating to its composition.
Management's representation on the TELEGLOBE Board will be limited to two
executive officers of TELEGLOBE and its affiliates, one of whom will be the
Chief Executive Officer of TELEGLOBE and the other of whom will be the Chief
Executive Officer of EXCEL.
FILLING VACANCIES ON THE BOARD OF DIRECTORS
EXCEL. The DGCL provides that vacancies and newly created directorships may
be filled by a majority of the directors then in office, although less than a
quorum, or by a sole remaining director, unless otherwise provided in the
certificate of incorporation or by-laws. If the certificate of incorporation
directs that a particular class is to elect such director, however, such vacancy
may be filled only by a majority of the other directors elected by such class
then in office, or by a sole remaining director so elected. If, at the time of
filling any vacancy or newly created directorship, the directors then in office
constitute less than a majority of the entire board (as constituted immediately
prior to such increase), the Delaware Court of Chancery may, upon application of
stockholders holding at least 10% of the total number of shares outstanding and
having the right to vote for such directors, order an election to be held to
fill any such vacancy or newly created directorship or to replace the directors
chosen by the directors then in office. The EXCEL Charter does not alter these
provisions of the DGCL.
TELEGLOBE. A quorum of directors may fill a vacancy among the directors
except a vacancy resulting from an increase in the minimum number of directors
of TELEGLOBE or from a failure to elect the minimum number of directors required
by the TELEGLOBE Articles. Under the TELEGLOBE Articles as modified by the
TELEGLOBE Articles Amendment, any vacancy in the TELEGLOBE Board among the
TELEGLOBE Directors or among the EXCEL Directors shall only be filled by the
TELEGLOBE Board
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with a qualified individual nominated by the remaining TELEGLOBE Directors or
remaining EXCEL Directors, as the case may be. For this purpose, a TELEGLOBE
Director means any person serving as a director of TELEGLOBE who was designated
by the TELEGLOBE Board prior to the Effective Time of the Merger to continue as
a director of TELEGLOBE, any successor thereto or any person nominated to fill a
vacancy in the TELEGLOBE Board among the TELEGLOBE Directors. An EXCEL Director
means any person serving as a director of TELEGLOBE who was designated by the
EXCEL Board prior to the Effective Time of the Merger to become a director of
TELEGLOBE, any successor thereto or any person nominated to fill a vacancy among
the EXCEL Directors.
REMOVAL OF DIRECTORS
EXCEL. Under the DGCL, directors may be removed with or without cause by a
majority of the stockholders entitled to vote at an election of directors,
except (i) unless the certificate of incorporation otherwise provides, if the
board of directors is classified, removal may be for cause only or (ii) where a
corporation has cumulative voting, if less than the entire board of directors is
removed, no director may be removed without cause if the votes cast against his
removal would be sufficient to elect him if then cumulatively voted at an
election of the entire board of directors.
The EXCEL Board is not classified and the stockholders of EXCEL do not have
the right to cumulate their votes in the election of directors. Directors are
elected by a plurality vote of all of the votes cast at the annual meeting of
stockholders. The EXCEL Charter does not alter the provisions of the DGCL
concerning removal for cause only.
TELEGLOBE. Under the CBCA, the shareholders of TELEGLOBE may by ordinary
resolution at a special meeting remove any director or directors from office.
TRANSACTIONS WITH DIRECTORS
EXCEL. The DGCL provides that no contract or transaction between a
corporation and one or more of its directors or officers, or between a
corporation and any other entity of which one or more of its directors or
officers are directors or officers, or in which one or more of its directors or
officers have a financial interest, is void or voidable if (i) the material
facts as to the director's or officer's relationship or interest and as to the
contract or transaction are disclosed or known to the board of directors or a
committee thereof, which authorizes the contract or transaction in good faith by
the affirmative vote of a majority of the disinterested directors, even though
the disinterested directors are less than a quorum, (ii) the material facts as
to the director's or officer's relationship or interest and as to the contract
or transaction are disclosed or known to the stockholders entitled to vote
thereon and the contract or transaction is specifically approved in good faith
by the stockholders or (iii) the contract or transaction is fair to the
corporation as of the time it is authorized, approved or ratified by the board
of directors, a committee thereof, or the stockholders.
A corporation may make loans to, guarantee the obligations of or otherwise
assist its officers or other employees and those of a subsidiary, including
directors who are also officers or employees of the corporation or a subsidiary,
when such action, in the judgment of the directors, may reasonably be expected
to benefit the corporation.
TELEGLOBE. The CBCA provides that a material contract between TELEGLOBE and
one or more of its directors or officers, or between TELEGLOBE and another
person of which a director or officer of TELEGLOBE is a director or officer or
in which he or she has a material interest, is neither void nor voidable by
reason only of that relationship or by reason only that a director with an
interest in the contract is present at or is counted to determine the presence
of a quorum at a meeting of directors or committee of directors that authorized
the contract, if the director or office disclosed his interest and the contract
was approved by the directors or the shareholders and the contract was
reasonable and fair to TELEGLOBE at the time the contract was approved.
Under the CBCA, TELEGLOBE may not give financial assistance by way of loan,
guarantee or otherwise to any director, officer or employee of the corporation
or of an affiliated corporation or to an
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associate of any such person where there are reasonable grounds for believing
that TELEGLOBE is, or would be after giving the financial assistance, unable to
pay its liabilities as they become due or that the realizable value of
TELEGLOBE's assets, excluding the amount of a financial assistance in the form
of a loan or in the form of assets pledged to secure a guarantee, after giving
the financial assistance, would be less than the aggregate of TELEGLOBE's
liability and stated capital of all classes.
DIRECTOR AND OFFICER LIABILITY AND INDEMNIFICATION
EXCEL. The DGCL allows a Delaware corporation to include a provision in its
certificate of incorporation limiting or eliminating the liability of directors
for monetary damages for a breach of their fiduciary duty, provided such
directors acted in good faith. However, limitation of liability for (i) breaches
of duty of loyalty, (ii) acts or omissions involving intentional misconduct or
knowing violations of law, (iii) the payment of unlawful dividends, stock
repurchases or redemptions or (iv) any transaction in which the director
received an improper personal benefit, is not allowed. Statutory authority is
granted to Delaware corporations to indemnify directors, officers and agents,
and mandates indemnification under limited circumstances. Indemnification
against expenses incurred by an officer, director or agent in connection with a
proceeding against such person for actions in such capacity is mandatory to the
extent that a person has been successful on the merits. Advancement of such
expenses is permissive only and such person must repay such expenses if it is
ultimately determined that such person is not entitled to indemnification.
The DGCL also permits a corporation to indemnify a director, officer or
agent for fines, judgments or settlements, as well as expenses in the context of
third-party actions, if such person acted in good faith and in a manner such
person reasonably believed to be in or not opposed to the best interest of the
corporation, or in the case of a criminal action, had no reasonable cause to
believe his conduct was unlawful. Indemnification in the context of derivative
actions is restricted to expenses only. Further, if an officer, director or
agent is adjudged liable to the corporation, expenses are not allowable, subject
to limited exceptions where a court deems the award of expenses appropriate.
Determinations regarding permissive indemnification are to be made by the
majority vote of disinterested directors (even if less than a quorum), or, if
there are no such directors, or if such directors so direct, by independent
legal counsel or by the stockholders.
The DGCL grants express authority to a Delaware corporation to purchase and
maintain insurance for director and officer liability. Such insurance may be
purchased for any officer, director or agent, regardless of whether that
individual is otherwise eligible for indemnification by the corporation.
The EXCEL Charter provides that, to the full extent permitted by law, a
director shall not be personally liable to the corporation or its stockholders
for or with respect to any acts or omissions in the performance of his or her
duties as a director, and provides that neither amendment nor repeal, nor the
adoption of any provision inconsistent with, the provisions relating to
limitation on director liability shall adversely affect any right or protection
in respect of any matter, or any cause of action, suit or claim that, but for
the limitation on liability, would accrue or arise prior to such amendment,
repeal or adoption.
The EXCEL Charter also provides that the corporation shall indemnify any
person who is or was a party or is threatened to be made a party to, or
testifies in, any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative in nature, by reason of
the fact that such person is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, employee benefit plan, 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 to the full extent permitted by law.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers or persons controlling EXCEL
pursuant to the foregoing provisions, EXCEL has been informed that in the
opinion to the Commission such indemnification is against public policy as
expressed in the Act and is therefore unenforceable.
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TELEGLOBE. Directors of corporations governed by the CBCA have fiduciary
obligations to the corporation. Pursuant to these fiduciary obligations, the
directors must act in accordance with the so-called duties of "care" and
"loyalty." The duty of care requires that the directors act in an informed and
deliberative manner and inform themselves, prior to making a business decision,
of all material information reasonably available to them. The duty of loyalty is
the duty to act in good faith in a manner which the directors reasonably believe
to be in the best interests of the corporation.
Under the CBCA, a corporation may not, in its articles, limit the liability
of its directors for breaches of their fiduciary duties. However, the
corporation may indemnify a director or officer, a former director or officer or
a person who acts or acted at the corporation's request as a director or officer
of a body corporate of which the corporation is or was a shareholder or
creditor, and his or her heirs and legal representatives (an "Indemnifiable
Person"), against all costs, charges and expenses, including an amount paid to
settle an action or satisfy a judgment, reasonably incurred by him or her in
respect of any civil, criminal or administrative action or proceeding to which
he or she is made a party by reason of being or having been a director or
officer of such corporation or such body corporate, if (i) such person acted
honestly and in good faith with a view to the best interests of the corporation
and (ii) in the case of a criminal or administrative action or proceeding that
is enforced by a monetary penalty, such person had reasonable grounds for
believing that his or her conduct was lawful. An Indemnifiable Person is
entitled to such indemnity from the corporation if such person was substantially
successful on the merits of his or her defense of the action or proceeding and
fulfilled the conditions set out in (i) and (ii) above. A corporation may, with
the approval of a court, also indemnify an Indemnifiable Person in respect of an
action by or on behalf of the corporation or body corporate to procure a
judgment in its favor, to which such person is made a party by reason of being
or having been a director or an officer of the corporation or body corporate, if
he or she fulfills the conditions set out in (i) and (ii) above. TELEGLOBE has
provided for indemnification of directors and officers to the fullest extent
authorized by the CBCA.
OPPRESSION REMEDY
EXCEL. The DGCL does not provide for an oppression remedy.
TELEGLOBE. The CBCA provides an oppression remedy that enables the court to
make any order, both interim and final, to rectify the matters complained of if
the court is satisfied upon application by a complainant (as defined below)
that, (i) any act or omission of the corporation or of its affiliates effects a
result, (ii) the business or affairs of the corporation or any of its affiliates
are or have been carried on or conducted in a manner, or (iii) the powers of the
directors of the corporation or any of its affiliates are or have been exercised
in a manner, that is oppressive or unfairly prejudicial to or that unfairly
disregards the interest of any security holder, creditor, director or officer of
the corporation. A complainant includes (a) a present or former registered
holder or beneficial owner of securities of a corporation or any of its
affiliates, (b) a present or former officer or director of the corporation or
any of its affiliates, (c) the director appointed under Section 260 of the CBCA,
and (d) any other person who in the discretion of the court is a proper person
to make such application.
Because of the breadth of the conduct which can be complained of and the
scope of the court's remedial powers, the oppression remedy is very flexible and
is sometimes relied upon to safeguard the interests of shareholders and other
complainants with a substantial interest in the corporation. Under the CBCA, it
is not necessary to prove that the directors of a corporation acted in bad faith
in order to seek an oppression remedy. Furthermore, the court may order the
corporation to pay the interim costs of a complainant seeking an oppression
remedy, including legal fees and disbursements, but the complainant may be held
accountable for such interim costs on final disposition of the complaint (as in
the case of a derivative action).
DERIVATIVE ACTION
EXCEL. Derivative actions may be brought in Delaware by a stockholder on
behalf of, and for the benefit of, the corporation. The DGCL provides that a
stockholder must aver in the complaint that he or she was a stockholder of the
corporation at the time of the transaction of which he or she complains. A
stockholder
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may not sue derivatively unless he or she first makes demand on the corporation
that it bring suit and such demand has been refused, unless it is shown that
such demand would have been futile.
TELEGLOBE. Under the CBCA, a complainant may apply to the court (as defined
in the CBCA) for leave to bring an action in the name of and on behalf of a
corporation or any subsidiary, or to intervene in an existing action to which
any such body corporate is a party, for the purpose of prosecuting, defending or
discontinuing the action on behalf of the body corporate. Under the CBCA, no
action may be brought and no intervention in an action may be made unless the
court is satisfied that (i) the complainant has given reasonable notice to the
directors of the corporation or its subsidiary of the complainant's intention to
apply to the court and if the directors of the corporation or its subsidiary do
not bring, diligently prosecute or defend or discontinue the action, (ii) the
complainant is acting in good faith, and (iii) it appears to be in the interest
of the corporation or its subsidiary that the action be brought, prosecuted,
defended or discontinued.
Under the CBCA, the court in a derivative action may make any order it
thinks fit. Additionally, under the CBCA, a court may order a corporation or its
subsidiary to pay the complainant's interim costs, including reasonable legal
fees. Although the complainant may be held accountable for the interim costs on
final disposition of the complaint, it is not required to give security for
costs in a derivative action.
ANTI-TAKEOVER LAWS
EXCEL. Section 203 of the DGCL ("Section 203") restricts the ability of an
"interested stockholder" to merge with or enter into other business combinations
with a corporation for a period of three years after becoming an "interested
stockholder." A person is deemed to be an "interested stockholder" upon
acquiring 15% or more of the outstanding voting stock of the target corporation.
However, Section 203 does not apply if (i) prior to the date the person became
an interested stockholder, the board of directors of the target corporation
approves either the combination or the transaction which results in the
stockholder becoming an interested stockholder, (ii) upon consummation of the
transaction which resulted in the stockholder becoming an interested
stockholder, the interested stockholder owned at least 85% of the voting stock
of the corporation outstanding at the time the transaction commenced (excluding
shares owned by directors, officers and certain employee stock plans) or (iii)
the combination is approved by the corporation's board of directors and the
holders of two-thirds of the corporation's voting stock at an annual or special
meeting of the stockholders and not by written consent, excluding shares owned
by the interested stockholder.
Section 203 applies to Delaware corporations, the stock of which is (i)
listed on a national securities exchange, (ii) designated as a national market
system security on an interdealer quotation system by the NASD or (iii) held of
record by more than 2,000 stockholders. However, Section 203 does not apply in
certain cases, including (i) if the corporation's original certificate of
incorporation contains a provision expressly electing not to be governed by
Section 203, (ii) the corporation, by action of its board of directors, adopted
within ninety days following the enactment of Section 203 an amendment to its
by-laws expressly electing not to be governed by the statute, (iii) the
corporation, by action of a majority of its stockholders, adopts an amendment to
its certificate of incorporation or by-laws expressly electing not to be
governed by the statute or (iv) the stockholder becomes an interested
stockholder inadvertently and divests itself of sufficient shares so that the
stockholder ceases to be an interested stockholder, provided that the
stockholder would not have been an interested stockholder (but for the
inadvertent acquisition) at any time within the three-year period immediately
prior to a business combination between the corporation and such stockholder.
A Delaware corporation may elect, by amendment to its certificate of
incorporation, not to be governed by Section 203. EXCEL has not made such an
election.
TELEGLOBE. The CBCA does not contain a comparable provision to Section 203
with respect to business combinations. However, policies of certain Canadian
securities regulatory authorities, including the Commission des valeurs
mobilieres du Quebec ("CVMQ") contain requirements in connection with related
party transactions. A related party transaction means, generally, any
transaction by which an issuer, directly or indirectly, acquires or transfers an
asset or acquires or issues treasury securities or assumes or transfers a
liability from or to, as the case may be, a related party by any means in any
one or any combination of
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transactions. "Related Party" is defined in the CVMQ Policy Statement Q-27
("Policy Statement Q-27") and includes directors, senior officers and holders of
at least 10% of the voting securities of the issuer.
Policy Statement Q-27 requires more detailed disclosure in the proxy
material sent to security holders in connection with a related party
transaction, and, subject to certain exceptions, the preparation of a formal
valuation of the subject matter of the related party transaction and any
non-cash consideration offered therefor and the inclusion of a summary of the
valuation in the proxy material. Policy Statement Q-27 also requires, subject to
certain exceptions, that the minority shareholders of the issuer separately
approve the transaction, by either a simple majority or two-thirds of the votes
cast, depending on the circumstances.
Under the BCE Agreement, TELEGLOBE is prohibited from taking any action
which would result in any person, other than BCE, owing or exercising direction
or control over shares carrying more than one-third of the votes attaching to
all voting securities of TELEGLOBE.
VOLUNTARY DISSOLUTION
EXCEL. The DGCL provides that, unless the board of directors approves a
proposal to dissolve a corporation, the dissolution must be consented to in
writing by stockholders holding 100% of the total voting power of the
corporation. If the dissolution is initiated by the board of directors, it need
only be approved by a majority of the outstanding stock of the corporation
entitled to vote thereon.
TELEGLOBE. Under the CBCA, the directors may propose, or a shareholder who
is entitled to vote at an annual meeting of shareholders of TELEGLOBE may make a
proposal for, the voluntary liquidation and dissolution of TELEGLOBE. A
voluntary dissolution of TELEGLOBE would require approval by special resolution
of the holders of each class of shares, whether or not they are otherwise
entitled to vote, of TELEGLOBE. A special resolution is a resolution passed at a
meeting by not less than two-thirds of the votes cast by the shareholders
entitled to vote on the resolution.
VOTE ON EXTRAORDINARY CORPORATE TRANSACTIONS
EXCEL. Under the DGCL, mergers or consolidations require the approval of
the holders of a majority of the outstanding stock of the corporation entitled
to vote thereon unless otherwise required by its certificate of incorporation.
Approval is not required: (i) by the holders of a corporation surviving a merger
where (a) the merger requires the issuance of common stock, if any, not
exceeding 20% of such corporation's shares outstanding immediately prior to the
merger, (b) each share of stock of such corporation outstanding prior to the
merger is to be an identical share of stock of the surviving corporation
following the merger and (c) the merger agreement does not amend in any respect
the survivor's certificate of incorporation and (ii) for either the acquired or
surviving corporation where the corporation surviving the merger is a 90% parent
of the other corporation.
TELEGLOBE. Under the CBCA, certain extraordinary corporate actions, such as
certain amalgamations, continuances, sales of substantially all the assets of a
corporation other than in the ordinary course of business, amendments to the
articles of incorporation and other extraordinary corporate actions such as
liquidations or dissolutions require authorization by special resolutions or by
the written consent of each shareholder entitled to vote.
LEGAL OPINIONS
The legality of the TELEGLOBE Common Shares to be issued in connection with
the Merger is being passed upon for TELEGLOBE by Martineau Walker, a general
partnership, Montreal, Quebec, Canada.
Certain of the tax consequences of the Merger will be passed upon at the
Effective Time, as a condition to the Merger, by Weil, Gotshal & Manges LLP, on
behalf of EXCEL, and Goodman, Phillips & Vineberg, on behalf of TELEGLOBE. See
"The Merger -- United States Federal Income Tax Consequences."
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EXPERTS
The financial statements of EXCEL as of December 31, 1995, 1996 and 1997
and for the years then ended have been audited by Arthur Andersen LLP,
independent auditors, as stated in their report, which is incorporated by
reference in this Information Statement/Prospectus, and have been so
incorporated by reference in reliance upon the report of such firm given upon
their authority as experts in accounting and auditing.
The financial statements of TELEGLOBE as of December 31, 1995, 1996 and
1997 and for the years then ended have been audited by Raymond Chabot Grant
Thornton, independent auditors, as stated in their report, which is incorporated
by reference in this Information Statement/Prospectus, and have been so
incorporated by reference in reliance upon the report of such firm given upon
their authority as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
TELEGLOBE and EXCEL file annual, quarterly and special reports, proxy
statements and other information with the Commission. In addition, TELEGLOBE
files such reports with the Canadian securities authorities (the "CSAs"). You
may read and copy any reports, statements or other information that the
companies file with the Commission at the Commission's public reference rooms in
Washington, D.C., New York, New York and Chicago, Illinois. Please call the
Commission at 1-800-SEC-0330 for further information on the public reference
rooms. These Commission filings are also available to the public from commercial
document retrieval services and at the Internet web site maintained by the
Commission at "http://www.sec.gov." You are also invited to read and copy any
reports, statements or other information that TELEGLOBE files with the CSAs at
the respective CSAs public reference rooms. The CVMQ public reference room is
located in Montreal, Quebec. These TELEGLOBE filings are also electronically
available to the public from the Canadian System for Electronic Document
Analysis and Retrieval ("SEDAR"), the Canadian equivalent of the Commission's
electronic document gathering and retrieval system. Reports, proxy statements
and other information should also be available for inspection at the offices of
the NYSE for EXCEL and TELEGLOBE. In addition, after the Merger TELEGLOBE will
continue to furnish to its shareholders the same periodic reports that are
currently furnished to TELEGLOBE shareholders as required by, and in compliance
with, Canadian law, including Annual Reports (which include audited annual
consolidated financial statements), unaudited quarterly consolidated financial
statements (unless notified by any TELEGLOBE shareholders of their desire not to
receive these reports) and proxy statements and related materials for annual and
special meetings of shareholders. In addition, you will be able to request
TELEGLOBE's Annual Information Form.
TELEGLOBE filed a Registration Statement on Form F-4 to register with the
Commission the TELEGLOBE Common Shares to be issued to EXCEL stockholders in the
Merger. This Information Statement/Prospectus is a part of the Form F-4 and
constitutes a prospectus of TELEGLOBE. As allowed by Commission rules, this
Information Statement/Prospectus does not contain all the information you can
find in TELEGLOBE's Registration Statement or the exhibits thereto.
The Commission allows EXCEL and TELEGLOBE to "incorporate by reference"
information into this Information Statement/Prospectus, which means that the
companies can disclose important information to you by referring you to another
document filed separately with the Commission. The information incorporated by
reference is considered part of this Information Statement/Prospectus, except
for any information superseded by information contained directly in this
Information Statement/Prospectus or in later filed documents incorporated by
reference in this Information Statement/Prospectus.
This Information Statement/Prospectus incorporates by reference the
documents set forth below that EXCEL and TELEGLOBE have previously filed with
the Commission. These documents contain important information about EXCEL and
TELEGLOBE and their finances. Some of these filings have been amended by later
filings, which are also listed.
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EXCEL COMMISSION FILINGS (FILE NO. 001-13433)
(a) Annual Report on Form 10-K for the year ended December 31, 1997;
(b) Quarterly Reports on Form 10-Q for the quarters ended March 31, 1998
and June 30, 1998; and
(c) Current Reports on Form 8-K, dated April 13, 1998 and June 14, 1998.
TELEGLOBE COMMISSION FILINGS (FILE NO. 001-14664)
(a) Annual Report on Form 40-F for the year ended December 31, 1997, as
amended by Forms 40-F/A; and
(b) Reports on Form 6-K dated May 20, 1998, as amended by Form 6-K/A, June
24, 1998 and September 3, 1998, as amended by Form 6-K/A.
EXCEL ALSO INCORPORATES BY REFERENCE ADDITIONAL DOCUMENTS THAT MAY BE FILED
WITH THE COMMISSION BETWEEN THE DATE OF THIS INFORMATION STATEMENT/PROSPECTUS
AND THE CONSUMMATION OF THE MERGER OR THE TERMINATION OF THE MERGER AGREEMENT.
THESE INCLUDE PERIODIC REPORTS, SUCH AS ANNUAL REPORTS ON FORM 10-K, QUARTERLY
REPORTS ON FORM 10-Q AND CURRENT REPORTS ON FORM 8-K.
TELEGLOBE ALSO INCORPORATES BY REFERENCE ADDITIONAL DOCUMENTS THAT MAY BE
FILED WITH THE COMMISSION BETWEEN THE DATE OF THIS INFORMATION
STATEMENT/PROSPECTUS AND THE EFFECTIVE TIME OR THE TERMINATION OF THE MERGER
AGREEMENT. THESE INCLUDE ANNUAL REPORTS ON FORM 40-F (AND ANY AMENDMENTS
THERETO) AND REPORTS ON FORM 6-K (AND ANY AMENDMENTS THERETO).
Any statement contained in this Prospectus or in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for the purpose of this Information Statement/Prospectus to the
extent that a statement contained herein, or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein,
modifies or supersedes that statement. Any statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Information Statement/Prospectus. The making of a modifying of
superseding statement shall not be deemed an admission for any purpose that the
modified or superseded statement, when made, constituted a misrepresentation, an
untrue statement of a material fact or an omission to state a material fact that
is required to be stated or that is necessary to make a statement not misleading
in light of the circumstances in which it is made.
TELEGLOBE has supplied all information contained or incorporated by
reference in this Information Statement/Prospectus relating to TELEGLOBE, and
EXCEL has supplied all such information relating to EXCEL and to any of the
Majority EXCEL Stockholders.
If you are a stockholder, we may have sent you some of the documents
incorporated by reference, but you can obtain any of them through the companies,
the Commission, the CVMQ or the Commission's Internet web site (Free Edgar) or
SEDAR as described above. Documents incorporated by reference are available from
the companies without charge, excluding all exhibits, except that if the
companies have specifically incorporated by reference an exhibit in this
Information Statement/Prospectus, the exhibit will also be available without
charge. Stockholders may obtain documents incorporated by reference in this
Information Statement/Prospectus by requesting them in writing or by telephone
from the appropriate company at the following addresses:
<TABLE>
<S> <C>
EXCEL Communications, Inc. Teleglobe Inc.
8750 North Central Expressway 1000, rue de La Gauchetiere ouest
Suite 2000 Montreal, Quebec, Canada H3B 4X5
Dallas, Texas 75231 (514) 868-8124
(214) 863-8000
</TABLE>
96
<PAGE> 107
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS INFORMATION STATEMENT/PROSPECTUS. WE HAVE NOT AUTHORIZED
ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT FROM WHAT IS CONTAINED
IN THIS INFORMATION STATEMENT/PROSPECTUS. THIS INFORMATION STATEMENT/PROSPECTUS
IS DATED OCTOBER 9, 1998. YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED
IN THIS INFORMATION STATEMENT/ PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN
THAT DATE. NEITHER THE MAILING OF THIS INFORMATION STATEMENT/PROSPECTUS TO
STOCKHOLDERS NOR THE ISSUANCE OF TELEGLOBE COMMON SHARES IN THE MERGER CREATES
ANY IMPLICATION TO THE CONTRARY.
97
<PAGE> 108
INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
TERM PAGE(S)
---- -------
<S> <C>
Acquisition Proposal........................................ 40
Affiliate................................................... 49
ARC......................................................... 48
BCE......................................................... 5
BCE Agreement............................................... 20
Bill C-17................................................... 49
Canadian GAAP............................................... 3
Capital..................................................... 56
CBCA........................................................ 13
Certificate................................................. 37
CIC codes................................................... 14
Closing..................................................... 22
Closing Date................................................ 37
Code........................................................ 3
Commission.................................................. 13
Competition Act............................................. 48
Convention.................................................. 46
Converted Option............................................ 36
CRTC........................................................ 16
CSAs........................................................ 95
CVMQ........................................................ 93
demand...................................................... 58
DGCL........................................................ 21
Director.................................................... 48
EBIT........................................................ 34
EBITDA...................................................... 32
Effective Time.............................................. 36
EPS......................................................... 34
EXCEL....................................................... i
EXCEL Alternative Case...................................... 30
EXCEL Board................................................. i
EXCEL By-Laws............................................... 82
EXCEL Charter............................................... 82
EXCEL Common Stock.......................................... i
EXCEL Comparable Public Companies........................... 31
EXCEL Competing Share Transaction........................... 43
EXCEL Consent and Voting Agreement.......................... 55
EXCEL Directors............................................. 53
EXCEL Management Case....................................... 30
EXCEL Option................................................ 57
EXCEL Stock Option.......................................... 36
EXCEL Stock Option Agreement................................ 57
EXCEL Stock Plans........................................... 36
Exchange Agent.............................................. 37
Exchange Ratio.............................................. ii
FCC......................................................... 3
Firm Value.................................................. 32
Form F-4.................................................... 38
FTC......................................................... 47
</TABLE>
98
<PAGE> 109
<TABLE>
<CAPTION>
TERM PAGE(S)
---- -------
<S> <C>
Funds....................................................... 56
Guidelines.................................................. 80
HSR Act..................................................... 40
Indemnifiable Person........................................ 92
IRS......................................................... 3
IRs......................................................... 14
ITA......................................................... 46
LEC......................................................... 14
Lehman Brothers Opinion..................................... 29
LTM......................................................... 32
Majority EXCEL Stockholders................................. 21
Majority TELEGLOBE Shareholders............................. 56
Material Adverse Effect..................................... 38
ME.......................................................... 3
Merger...................................................... ii
Merger Agreement............................................ 2
Merger Consideration........................................ 36
Merger Sub.................................................. 15
MJDS........................................................ 13
NASD........................................................ 87
Non-Voting Shares........................................... 82
Noon-Buying Rate............................................ 1
NYSE........................................................ 3
Policy Statement Q-27....................................... 94
Post-Merger Comparable Public Companies..................... 35
Preferred Shares............................................ 82
Registration Rights Agreement............................... 58
Related Party............................................... 94
Relative Contribution Period................................ 33
Required Consents........................................... 40
Rule 145 Affiliates......................................... 58
Section 203................................................. 93
Securities Act.............................................. 22
SEDAR....................................................... 96
Severance Payment........................................... 53
State Commissions........................................... 48
Stock Option Agreements..................................... 57
Surviving Corporation....................................... 36
Surplus..................................................... 87
TCRDA....................................................... 49
Telco....................................................... 7
Telecom Act................................................. 49
TELEGLOBE................................................... i
TELEGLOBE Articles.......................................... 82
TELEGLOBE Articles Amendment................................ 36
TELEGLOBE Board............................................. 20
TELEGLOBE By-Law Amendment.................................. 39
TELEGLOBE By-Laws........................................... 82
TELEGLOBE Common Shares..................................... 1
TELEGLOBE Comparable Public Companies....................... 32
TELEGLOBE Competing Share Transaction....................... 43
</TABLE>
99
<PAGE> 110
<TABLE>
<CAPTION>
TERM PAGE(S)
---- -------
<S> <C>
TELEGLOBE Consent and Voting Agreements..................... 56
TELEGLOBE Directors......................................... 53
TELEGLOBE Management Case................................... 30
TELEGLOBE Option............................................ 57
TELEGLOBE Stock Option Agreement............................ 57
Telesystem.................................................. 56
Termination Date............................................ 42
Termination Fee............................................. 43
Time Period................................................. 53
Treasury Regulations........................................ 41
Troutt Stockholders......................................... 44
TSE......................................................... 3
U.S. GAAP................................................... 3
U.S. Holder................................................. 44
Voting Agreements........................................... 56
WTO Agreement............................................... 16
</TABLE>
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<PAGE> 111
APPENDIX A
AGREEMENT AND PLAN OF MERGER
DATED AS OF JUNE 14, 1998
AMONG
TELEGLOBE INC.
NORTH MERGER SUB CORPORATION
AND
EXCEL COMMUNICATIONS, INC.
<PAGE> 112
TABLE OF CONTENTS
ARTICLE I
THE MERGER
<TABLE>
<C> <S> <C> <C>
1.1 The Merger......................................................... A-8
1.2 Closing............................................................ A-8
1.3 Effective Time..................................................... A-8
1.4 Effects of the Merger.............................................. A-9
1.5 Certificate of Incorporation....................................... A-9
1.6 By-Laws of Surviving Corporation................................... A-9
1.7 Officers and Directors of Surviving Corporation.................... A-9
1.8 Effect on Capital Stock............................................ A-9
1.9 Teleglobe Articles Amendment; Teleglobe By-Law Amendment........... A-11
ARTICLE II
EXCHANGE OF CERTIFICATES
2.1 Exchange Fund...................................................... A-11
2.2 Exchange Procedures................................................ A-11
2.3 Distributions with Respect to Unexchanged Shares................... A-11
2.4 No Further Ownership Rights in Excel Common Stock.................. A-12
2.5 No Fractional Teleglobe Common Shares.............................. A-12
2.6 Termination of Exchange Fund....................................... A-12
2.7 No Liability....................................................... A-12
2.8 Investment of the Exchange Fund.................................... A-13
2.9 Lost Certificates.................................................. A-13
2.10 Withholding Rights................................................. A-13
2.11 Further Assurances................................................. A-13
2.12 Stock Transfer Books............................................... A-13
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of Excel............................ A-14
(a) Organization, Standing and Power............................ A-14
(b) Subsidiaries................................................ A-14
(c) Capital Structure........................................... A-14
(d) Authority; No Conflicts..................................... A-15
(e) Reports and Financial Statements............................ A-16
(f) Information Supplied........................................ A-17
(g) Absence of Certain Changes or Events........................ A-17
(h) Board Approval.............................................. A-17
(i) Vote Required............................................... A-17
(j) Brokers or Finders.......................................... A-18
(k) Opinion of Excel Fairness Opinion Banker.................... A-18
(l) No Undisclosed Liabilities.................................. A-18
(m) Taxes....................................................... A-18
(n) Properties.................................................. A-19
(o) Intellectual Property....................................... A-19
(p) Agreements, Contracts and Commitments....................... A-19
(q) Litigation.................................................. A-20
(r) Environmental Matters....................................... A-20
</TABLE>
A-2
<PAGE> 113
<TABLE>
<C> <S> <C> <C>
(s) Employee Benefit Plans...................................... A-21
(t) Compliance With Laws........................................ A-21
(u) Accounting and Tax Matters.................................. A-22
(v) Labor Matters............................................... A-22
(w) Insurance................................................... A-22
(x) No Existing Discussions..................................... A-22
(y) Anti-Takeover Laws; Stockholder Rights Plan................. A-22
(z) DGCL Section 203............................................ A-22
(aa) Year 2000................................................... A-22
(ab) Pooling Letters............................................. A-23
(ac) Certain Regulatory Matters.................................. A-23
3.2 Representations and Warranties of Teleglobe........................ A-24
(a) Organization, Standing and Power............................ A-24
(b) Subsidiaries................................................ A-24
(c) Capital Structure........................................... A-24
(d) Authority; No Conflicts..................................... A-25
(e) Reports and Financial Statements............................ A-26
(f) Information Supplied........................................ A-26
(g) Absence of Certain Changes or Events........................ A-27
(h) Board Approval.............................................. A-27
(i) Vote Required............................................... A-27
(j) Brokers or Finders.......................................... A-27
(k) Opinion of Teleglobe Fairness Opinion Banker................ A-27
(l) No Undisclosed Liabilities.................................. A-28
(m) Taxes....................................................... A-28
(n) Properties.................................................. A-28
(o) Intellectual Property....................................... A-29
(p) Agreements, Contracts and Commitments....................... A-29
(q) Litigation.................................................. A-29
(r) Environmental Matters....................................... A-29
(s) US Employee Benefit Plans................................... A-30
(t) Canadian Employee Benefit Plans............................. A-31
(u) Compliance With Laws........................................ A-31
(v) Accounting and Tax Matters.................................. A-31
(w) Labor Matters............................................... A-32
(x) Insurance................................................... A-32
(y) No Existing Discussions..................................... A-32
(z) Anti-Takeover Laws; Shareholder Rights Plan................. A-32
(aa) Year 2000................................................... A-32
(ab) Pooling Letters............................................. A-32
(ac) Certain Regulatory Matters.................................. A-33
(ad) No Plan or Intention to Dispose of Surviving Corporation.... A-33
3.3 Representations and Warranties of Teleglobe and Merger Sub......... A-33
(a) Organization and Corporate Power............................ A-33
(b) Capital Structure........................................... A-33
(c) Corporate Authorization..................................... A-34
(d) Non-Contravention........................................... A-34
(e) No Business Activities...................................... A-34
</TABLE>
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<PAGE> 114
<TABLE>
<C> <S> <C> <C>
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
4.1 Covenants of Excel................................................. A-34
(a) Ordinary Course............................................. A-34
(b) Dividends; Changes in Share Capital......................... A-34
(c) Issuance of Securities...................................... A-35
(d) Governing Documents......................................... A-35
(e) No Acquisitions............................................. A-35
(f) No Dispositions............................................. A-35
(g) Investments; Indebtedness................................... A-35
(h) Pooling-of-Interests; Tax-Free Qualification................ A-35
(i) Other Actions............................................... A-36
(j) Accounting Methods; Income Tax Elections.................... A-36
(k) Excel Employee Plans........................................ A-36
(l) Contracts................................................... A-36
4.2 Covenants of Teleglobe............................................. A-36
(a) Ordinary Course............................................. A-36
(b) Dividends; Changes in Share Capital......................... A-36
(c) Issuance of Securities...................................... A-37
(d) Governing Documents......................................... A-37
(e) No Acquisitions............................................. A-37
(f) No Dispositions............................................. A-37
(g) Investments; Indebtedness................................... A-37
(h) Pooling-of-Interests; Tax-Free Qualification................ A-37
(i) Other Actions............................................... A-38
(j) Accounting Methods; Income Tax Elections.................... A-38
(k) Teleglobe Employee Plans.................................... A-38
(l) Contracts................................................... A-38
4.3 Advice of Changes; Governmental Filings............................ A-38
4.4 Transition Planning................................................ A-38
4.5 Control of Other Party's Business.................................. A-39
4.6 Network Transition................................................. A-39
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Preparation of Proxy Statement; Stockholders Approval.............. A-39
5.2 Teleglobe Board of Directors; Officers............................. A-40
5.3 Access to Information.............................................. A-40
5.4 Best Efforts....................................................... A-41
5.5 Acquisition Proposals.............................................. A-42
5.6 Fees and Expenses.................................................. A-43
5.7 Directors' and Officers' Indemnification and Insurance............. A-43
5.8 Public Announcements............................................... A-44
5.9 Accountants' Letters............................................... A-44
5.10 Listing of Teleglobe Common Shares................................. A-44
5.11 Rule 145 Affiliates of Teleglobe and Excel; Pooling Letters........ A-44
5.12 Stockholder Litigation............................................. A-44
5.13 Restriction on Certain Dispositions................................ A-45
5.14 Compliance with Section 228 of the DGCL............................ A-45
5.15 Registration Rights Agreement...................................... A-45
</TABLE>
A-4
<PAGE> 115
<TABLE>
<C> <S> <C> <C>
ARTICLE VI
CONDITIONS PRECEDENT
6.1 Conditions to Each Party's Obligation to Effect the Merger......... A-45
(a) Stockholder Approval........................................ A-45
(b) No Injunctions or Restraints, Illegality.................... A-46
(c) HSR Act; Competition Act (Canada); Required Consents........ A-46
(d) NYSE, TSE and ME Listings................................... A-46
(e) Effectiveness of the Form F-4............................... A-46
6.2 Additional Conditions to Obligations of Teleglobe and Merger Sub... A-46
(a) Representations and Warranties.............................. A-46
(b) Performance of Obligations of Excel......................... A-46
(c) Tax Opinion................................................. A-46
(d) No Material Adverse Change.................................. A-47
(e) Excel Consent and Voting Agreement.......................... A-47
(f) Third-Party Consents........................................ A-47
6.3 Additional Conditions to Obligations of Excel...................... A-47
(a) Representations and Warranties.............................. A-47
(b) Performance of Obligations of Teleglobe..................... A-47
(c) Tax Opinion................................................. A-47
(d) No Material Adverse Change.................................. A-47
(e) Teleglobe Consent and Voting Agreements..................... A-48
(f) IRS Ruling.................................................. A-48
(g) Third-Party Consents........................................ A-48
(h) Registration Rights Agreement............................... A-48
(i) Shareholder Approval........................................ A-48
ARTICLE VII
TERMINATION AND AMENDMENT
7.1 Termination........................................................ A-48
7.2 Effect of Termination.............................................. A-49
7.3 Payment by Excel................................................... A-49
7.4 Payment by Teleglobe............................................... A-50
7.5 Amendment.......................................................... A-50
7.6 Extension; Waiver.................................................. A-50
ARTICLE VIII
GENERAL PROVISIONS
8.1 Survival of Representations, Warranties and Covenants.............. A-51
8.2 Notices............................................................ A-51
8.3 Interpretation..................................................... A-51
8.4 Counterparts....................................................... A-52
8.5 Entire Agreement; No Third Party Beneficiaries..................... A-52
8.6 Governing Law...................................................... A-52
8.7 Severability....................................................... A-52
8.8 Assignment......................................................... A-52
8.9 Submission to Jurisdiction; Waivers................................ A-52
8.10 Enforcement........................................................ A-53
8.11 Definitions........................................................ A-53
8.12 Waiver of Jury Trial............................................... A-53
</TABLE>
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<PAGE> 116
<TABLE>
<S> <C>
Exhibits
Exhibit A Excel Consent and Voting Agreement
Exhibit B Teleglobe Consent and Voting Agreements
Exhibit C Excel Stock Option Agreement
Exhibit D Teleglobe Stock Option Agreement
Exhibit E Registration Rights Agreement
Exhibit F Teleglobe Articles Amendment; Teleglobe By-Law Amendment
Exhibit G Teleglobe Tax Certificate
Exhibit H Excel Tax Certificate
Exhibit I Excel Affiliates Letter
Exhibit J Teleglobe Affiliates Letter
</TABLE>
A-6
<PAGE> 117
AGREEMENT AND PLAN OF MERGER, dated as of June 14, 1998 (this "Agreement"),
among TELEGLOBE INC., a corporation governed by the Canada Business Corporations
Act (the "CBCA") ("Teleglobe"), NORTH MERGER SUB CORPORATION, a Delaware
corporation and a direct wholly owned subsidiary of Teleglobe ("Merger Sub"),
and EXCEL COMMUNICATIONS, INC., a Delaware corporation ("Excel"). Certain
capitalized terms used herein but not defined when used have the meanings
assigned to such terms in Section 8.11.
WITNESSETH:
WHEREAS, the Boards of Directors of Teleglobe and Excel deem it advisable
and in the best interests of each corporation and of their respective
shareholders that Teleglobe and Excel combine their respective businesses,
stockholders, managements, employees and other constituencies in a merger of
equals in order to advance the long-term business interests of Teleglobe and
Excel;
WHEREAS, the combination of Teleglobe and Excel shall be effected by the
terms of this Agreement through a merger as described below;
WHEREAS, in furtherance thereof, the respective Boards of Directors of
Teleglobe, Merger Sub and Excel have approved the merger of Merger Sub with and
into Excel (the "Merger"), with Excel to be the surviving corporation in such
Merger (the "Surviving Corporation"), upon the terms and subject to the
conditions set forth in this Agreement, pursuant to which each outstanding share
of common stock, par value $.001 per share, of Excel ("Excel Common Stock")
issued and outstanding immediately prior to the Effective Time (as defined in
Section 1.3), will be converted into the right to receive common shares, without
par value, of Teleglobe (all such shares to be issued in the Merger, "Teleglobe
Common Shares") based upon the Exchange Ratio (as defined in Section 1.8(a));
WHEREAS, the Board of Directors of Teleglobe deems it advisable and in the
best interest of Teleglobe and Excel to amend and restate as of the Effective
Time either Teleglobe's Articles of Incorporation (the "Teleglobe Articles
Amendment") or Teleglobe's by-laws (the "Teleglobe By-Law Amendment") to
incorporate certain governance provisions in respect of certain actions by and
the composition of the Board of Directors of Teleglobe;
WHEREAS, Teleglobe will receive at the Effective Time full equity ownership
of the outstanding stock of the Surviving Corporation through the simultaneous
conversion at the Effective Time of the issued and outstanding common stock of
Merger Sub into common stock of the Surviving Corporation and cancellation of
Excel Common Stock;
WHEREAS, the holders of shares of Excel Common Stock immediately prior to
the Effective Time have the right to receive Teleglobe Common Shares in the
Merger and, in consideration of Teleglobe's agreeing to deliver such Teleglobe
Common Shares to the Exchange Agent (as defined in Section 2.1), as set forth in
Section 2.1, and in exchange for their issuance, Teleglobe is entitled to
subscribe and will subscribe to a number of shares of common stock, par value
$.001 per share, of the Surviving Corporation ("Surviving Corporation Common
Stock") equivalent to the number of shares of Excel Common Stock outstanding
immediately prior to the Effective Time (the "Surviving Corporation Shares"), as
set forth in Section 1.8(f);
WHEREAS, Teleglobe, Merger Sub and Excel desire to make certain
representations, warranties, covenants and agreements in connection with the
transactions contemplated hereby and also to prescribe various conditions to the
transactions contemplated hereby;
WHEREAS, Teleglobe, Merger Sub and Excel intend that the Merger be
accounted for as a pooling-of-interests for financial statements purposes under
generally accepted accounting principles in the United States of America ("US
GAAP") and under generally accepted accounting principles in Canada ("Canadian
GAAP");
WHEREAS, Teleglobe, Merger Sub and Excel intend, by approving resolutions
authorizing this Agreement, to adopt this Agreement as a plan of reorganization
within the meaning of Section 368(a) of the
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<PAGE> 118
Internal Revenue Code of 1986, as amended (the "Code"), and the rules and
regulations promulgated thereunder;
WHEREAS, Teleglobe and Merger Sub have required, as a condition to their
willingness to enter into this Agreement, that certain stockholders of Excel
contemporaneously enter into the consent and voting agreement (the "Excel
Consent and Voting Agreement") attached hereto as Exhibit A and execute and
deliver the Excel Stockholders Consent (as defined herein) immediately following
the execution and delivery of this Agreement;
WHEREAS, Excel has required, as a condition to its willingness to enter
into this Agreement, that certain shareholders of Teleglobe contemporaneously
enter into consent and voting agreements in the forms attached hereto as Exhibit
B (the "Teleglobe Consent and Voting Agreements" and, together with the Excel
Consent and Voting Agreement, the "Voting Agreements") and execute and deliver
the Teleglobe Shareholders Consents (as defined herein) immediately following
the execution and delivery of this Agreement;
WHEREAS, concurrently with the execution and delivery of this Agreement and
as a condition and inducement to each of Teleglobe's and Excel's willingness to
enter into this Agreement, Teleglobe and Excel have entered into (i) a stock
option agreement dated as of the date of this Agreement and attached hereto as
Exhibit C (the "Excel Stock Option Agreement"), pursuant to which Excel granted
Teleglobe an option to purchase shares of Excel Common Stock under certain
circumstances, and (ii) a stock option agreement dated as of the date of this
Agreement and attached hereto as Exhibit D (the "Teleglobe Stock Option
Agreement" and, together with the Excel Stock Option Agreement, the "Stock
Option Agreements"), pursuant to which Teleglobe granted Excel an option to
purchase common shares of Teleglobe capital stock under certain circumstances;
and
WHEREAS, in connection with the Merger, Teleglobe desires to grant to
certain of Excel's affiliates (as defined for purposes of Rule 145 promulgated
under the Securities Act of 1933, as amended (the "Securities Act")) at the time
of execution of the Excel Stockholders Consent (including those persons
identified on the signature pages thereof) certain registration rights pursuant
to a Registration Rights Agreement to be entered into and delivered at the
Closing in the form attached hereto as Exhibit E (the "Registration Rights
Agreement");
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, and
intending to be legally bound hereby, the parties hereto agree as follows:
ARTICLE I
THE MERGER
1.1 THE MERGER. Upon the terms and subject to the conditions set forth in
this Agreement, and in accordance with the Delaware General Corporation Law (the
"DGCL"), Merger Sub shall be merged with and into Excel at the Effective Time.
Following the Merger, the separate corporate existence of Merger Sub shall cease
and Excel shall continue as the Surviving Corporation under the name "Excel
Communications, Inc."
1.2 CLOSING. The closing of the Merger (the "Closing") will take place at
10:00 a.m., New York time, on the fifth Business Day after the satisfaction or
waiver of the conditions (excluding conditions that, by their terms, cannot be
satisfied until the Closing Date, but subject to satisfaction or waiver of such
conditions) set forth in Article VI (the "Closing Date"), unless another time or
date is agreed to in writing by the parties hereto. The Closing shall be held at
the offices of Simpson Thacher & Bartlett, 425 Lexington Avenue, New York, New
York, 10017, unless another place is agreed to in writing by the parties hereto.
1.3 EFFECTIVE TIME. As soon as practicable following the Closing, the
parties shall (i) file a certificate of merger (the "Delaware Certificate of
Merger") in such form as is required by and executed in accordance with the
relevant provisions of the DGCL and (ii) make all other filings or recordings
required under the DGCL. The Merger shall become effective at such time as the
Delaware Certificate of Merger is
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<PAGE> 119
duly filed with the Delaware Secretary of State or at such subsequent time as
Teleglobe and Excel shall agree and be specified in the Delaware Certificate of
Merger (the date and time the Merger becomes effective being the "Effective
Time").
1.4 EFFECTS OF THE MERGER. At and after the Effective Time, the Merger
will have the effects set forth in the DGCL. Without limiting the generality of
the foregoing, and subject thereto, at the Effective Time all the property,
rights, privileges, powers and franchises of Excel and Merger Sub shall be
vested in the Surviving Corporation, and all debts, liabilities and duties of
Excel and Merger Sub shall become the debts, liabilities and duties of the
Surviving Corporation.
1.5 CERTIFICATE OF INCORPORATION OF SURVIVING CORPORATION. The certificate
of incorporation of Excel, as in effect immediately prior to the Effective Time,
shall be the certificate of incorporation of the Surviving Corporation, until
thereafter changed or amended as provided therein or by applicable Law (as
defined in Section 3.1(d)(ii)), except that Article Fourth of the Certificate of
Incorporation of the Surviving Corporation shall be amended to read in its
entirety as follows:
"The total number of shares of stock which the Corporation shall have
authority to issue is [insert actual number of shares of Excel Common Stock
outstanding at the Effective Time plus 1,000] shares of common stock, par
value $0.001 per share ("Common Stock").
(a) Each share of Common Stock of the Corporation shall have identical
rights and privileges in every respect. The holders of shares of Common
Stock shall be entitled to vote upon all matters submitted to a vote of the
stockholders of the Corporation and shall be entitled to one vote for each
share of Common Stock held.
(b) The holders of shares of Common Stock shall be entitled to receive
such dividends (payable in cash, stock or otherwise) as may be declared
thereon by the Board of Directors at any time and from time to time out of
any funds of the Corporation legally available therefor.
(c) In the event of any voluntary or involuntary liquidation,
dissolution or winding-up of the Corporation, the holders of shares of
Common Stock shall be entitled to receive all of the assets of the
Corporation available for distribution to its stockholders, ratably in
proportion to the number of shares of Common Stock held by them. A
liquidation, dissolution or winding-up of the Corporation, as such terms
are used in this Paragraph (c), shall not be deemed to be occasioned by or
to include any consolidation or merger of the Corporation with or into any
other corporation or corporations or other entity or a sale, lease,
exchange or conveyance of all or part of the assets of the Corporation."
1.6 BY-LAWS OF SURVIVING CORPORATION. The by-laws of Merger Sub, as in
effect immediately prior to the Effective Time, shall be the by-laws of the
Surviving Corporation until thereafter changed or amended as provided therein or
by applicable Law.
1.7 OFFICERS AND DIRECTORS OF SURVIVING CORPORATION. The officers of Excel
as of the Effective Time shall be the officers of the Surviving Corporation,
until the earlier of their resignation or removal or otherwise ceasing to be an
officer or until their respective successors are duly elected or appointed and
qualified, as the case may be. The directors of Merger Sub as of the Effective
Time (which shall be comprised of an equal number of representatives designated
by Teleglobe and Excel) shall be the directors of the Surviving Corporation
until the earlier of their resignation or removal or otherwise ceasing to be a
director or until their respective successors are duly elected or appointed and
qualified.
1.8 EFFECT ON CAPITAL STOCK. (a) At the Effective Time by virtue of the
Merger and without any action on the part of the holder thereof, each share of
Excel Common Stock issued and outstanding immediately prior to the Effective
Time shall be converted into the right to receive 0.885 (the "Exchange Ratio")
of a common share of Teleglobe capital stock (which together with any cash in
lieu of fractional Teleglobe Common Shares shall be the "Merger Consideration").
It is understood and agreed by the parties that on June 15, 1998, Teleglobe will
pay a dividend (the "Teleglobe Stock Dividend") of one common share of Teleglobe
capital stock in respect of each outstanding common share of Teleglobe capital
stock and of one First Series Preferred Share of Teleglobe capital stock in
respect of each outstanding First Series Preferred
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Share of Teleglobe capital stock to shareholders of record on such date, and
that the Exchange Ratio has been calculated after giving effect to such
dividend.
(b) As a result of the Merger and without any action on the part of the
holders thereof, at the Effective Time, all shares of Excel Common Stock shall
cease to be outstanding and shall be canceled and retired and shall cease to
exist, and each holder (other than Teleglobe, Merger Sub and Excel) of a
certificate which, immediately prior to the Effective Time, represented any such
shares of Excel Common Stock (a "Certificate") shall thereafter cease to have
any rights with respect to such shares of Excel Common Stock, except the right
to receive the applicable Merger Consideration in accordance with Article II
upon the surrender of such Certificate.
(c) Each share of Excel Common Stock issued and owned or held by Teleglobe,
Merger Sub or Excel at the Effective Time shall, by virtue of the Merger, cease
to be outstanding and shall be canceled and retired and no Teleglobe Common
Shares or other consideration shall be delivered in exchange therefor.
(d) Each share of common stock, par value $.001 per share, of Merger Sub
("Merger Sub Common Stock") issued and outstanding immediately prior to the
Effective Time shall be converted into and shall become one validly issued fully
paid and nonassessable share of Surviving Corporation Common Stock as of the
Effective Time, and the Surviving Corporation shall become a wholly owned
Subsidiary of Teleglobe.
(e) At the Effective Time, each outstanding option to purchase or right to
receive Excel Common Stock (an "Excel Stock Option") issued pursuant to the (a)
Excel Communications, Inc. Employee Ownership Plan, (b) Excelcom, Inc. 1995
Stock Option Plan, (c) Excelcom, Inc. 1997 Director Stock Option Plan, (d)
Excelcom, Inc. Director Stock Option Plan with Ronald A. McDougall, (e) Telco
Communications Group, Inc. Amended and Restated 1994 Stock Option Plan, (f)
Excel Communications, Inc. 1997 Stock Option Plan and (g) Excel Communications,
Inc. 1997 Director Stock Option Plan (collectively, the "Excel 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 Excel Stock
Option (taking into account any acceleration of vesting as a result of the
Merger), that number of common shares of Teleglobe capital stock which the
holder of such Excel Stock Option would have been entitled to receive pursuant
to the Merger if such holder had exercised such Excel Stock Option in full
immediately prior to the Effective Time (rounded up to the nearest whole
number), at an exercise price per share equal to (y) the exercise price per
share for the shares of Excel Common Stock purchasable pursuant to such Excel
Stock Option divided by (z) the Exchange Ratio (a "Converted Option"). Teleglobe
shall take such actions as are necessary for the assumption of the Excel Stock
Options pursuant to this Section 1.8(e), including the reservation, issuance and
listing of common shares of Teleglobe capital stock as are necessary to
effectuate the transactions contemplated by this Section 1.8(e). Teleglobe shall
prepare and file with the Securities and Exchange Commission (the "SEC") a
registration statement on Form S-8 or other appropriate form with respect to
common shares of Teleglobe capital stock subject to Excel Stock Options issued
under such Excel Stock Plans and shall use its best efforts to have such
registration statement declared effective immediately following the Effective
Time and to maintain the effectiveness of such registration statement or
registration statements covering such Excel Stock Options (and maintain the
current status of the prospectus or prospectuses contained therein) for so long
as such Excel Stock Options remain outstanding.
(f) In exchange for and in consideration of the issuance of the Teleglobe
Common Shares, Teleglobe will be entitled to subscribe and undertakes and agrees
to subscribe, at the Effective Time, for the Surviving Corporation Common Stock.
The Surviving Corporation Common Stock will at the Effective Time have been duly
authorized and, when issued to Teleglobe pursuant to this Agreement, will be
validly issued and outstanding as fully paid and non-assessable.
(g) At the Effective Time, the Registration Rights Agreement dated as of
October 14, 1997, between Excel and the stockholders of Excel named on the
signature pages thereto shall, by virtue of the Merger, become applicable to the
common shares of Teleglobe capital stock on the same terms and conditions
applicable to the Excel Common Stock and Teleglobe shall assume the obligations
of Excel with respect thereto.
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1.9 TELEGLOBE ARTICLES AMENDMENT; TELEGLOBE BY-LAW AMENDMENT. Subject to
the receipt of the Required Articles Amendment Vote or the Required By-Law
Amendment Vote (each as defined in Section 3.2(i)), the articles of
incorporation or the by-laws of Teleglobe, as in effect immediately prior to the
Effective Time, shall be amended and restated as of the Effective Time to
include the provisions set forth in Exhibit F.
ARTICLE II
EXCHANGE OF CERTIFICATES
2.1 EXCHANGE FUND. Prior to the Effective Time, Teleglobe shall appoint a
commercial bank or trust company reasonably acceptable to Excel having net
capital of not less than $100,000,000, to act as exchange agent hereunder for
the purpose of exchanging Certificates for the Merger Consideration (the
"Exchange Agent"). At or prior to the Effective Time, Teleglobe shall deposit
with the Exchange Agent, in trust for the benefit of holders of shares of Excel
Common Stock, certificates representing the Teleglobe Common Shares issuable
pursuant to Section 1.8(a) in exchange for outstanding shares of Excel Common
Stock. Teleglobe agrees to make available to the Exchange Agent from time to
time as needed, cash sufficient to pay cash in lieu of fractional shares
pursuant to Section 2.5 and any dividends and other distributions pursuant to
Section 2.3. Any cash and certificates representing Teleglobe Common Shares
deposited with the Exchange Agent shall hereinafter be referred to as the
"Exchange Fund." At the Effective Time, the Surviving Corporation shall deposit
with the Exchange Agent, in trust for the benefit of Teleglobe, a certificate
representing the Surviving Corporation Shares issuable pursuant to Section
1.8(f).
2.2 EXCHANGE PROCEDURES. As soon as reasonably practicable after the
Effective Time, Teleglobe shall cause the Exchange Agent to mail to each holder
of a Certificate (i) a letter of transmittal which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon due delivery of the Certificates and other required documents to the
Exchange Agent, and which letter shall be in customary form and have such other
provisions as Teleglobe may reasonably specify and (ii) instructions for
effecting the surrender of such Certificates in exchange for the applicable
Merger Consideration. Upon surrender of a Certificate to the Exchange Agent
together with such letter of transmittal, duly executed and completed in
accordance with the instructions thereto, and such other documents as may
reasonably be required by the Exchange Agent, the holder of such Certificate
shall be entitled to receive in exchange therefor (A) a certificate representing
one or more Teleglobe Common Shares representing, in the aggregate, the whole
number of shares that such holder has the right to receive pursuant to Section
1.8(a) (after taking into account all shares of Excel Common Stock then held by
such holder) and (B) a check in the amount (after giving effect to any required
tax withholdings) equal to the cash that such holder has the right to receive
pursuant to the provisions of this Article II, including cash in lieu of any
fractional Teleglobe Common Shares pursuant to Section 2.5 and any unpaid
dividends and other distributions to which such holder is entitled pursuant to
Section 2.3, and the Certificate so surrendered shall forthwith be canceled. No
interest will be paid or will accrue on any cash payable pursuant to Section 2.3
or Section 2.5. In the event of a transfer of ownership of Excel Common Stock
which is not registered in the transfer records of Excel, one or more
certificates evidencing, in the aggregate, the proper number of Teleglobe Common
Shares and a check in the proper amount of cash in lieu of any fractional
Teleglobe Common Shares pursuant to Section 2.5 and any dividends or other
distributions to which such holder is entitled pursuant to Section 2.3 may be
issued with respect to such Excel Common Stock to such a transferee if the
Certificate representing such shares of Excel Common Stock is presented to the
Exchange Agent, accompanied by all documents required to evidence and effect
such transfer and the ownership of such shares of Excel Common Stock by such
transferee and to evidence that any applicable stock transfer taxes have been
paid.
2.3 DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No dividends or
other distributions declared or made with respect to common shares of Teleglobe
capital stock with a record date after the Effective Time shall be paid to the
holder of any unsurrendered Certificate with respect to the Teleglobe Common
Shares that such holder would be entitled to receive upon surrender of such
Certificate pursuant to the Merger and no cash payment in lieu of fractional
Teleglobe Common Shares shall be paid to any such
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holder pursuant to Section 2.5 until such holder shall surrender such
Certificate in accordance with Section 2.2. Subject to the effect of applicable
Law, following surrender of any such Certificate, there shall be paid to such
holder, without interest, (a) promptly after the time of such surrender, the
amount of any cash payable in lieu of fractional Teleglobe Common Shares to
which such holder is entitled pursuant to Section 2.5 and the amount of
dividends or other distributions with a record date after the Effective Time
theretofore paid with respect to such whole Teleglobe Common Shares, and (b) at
the appropriate payment date, the amount of dividends or other distributions
with a record date after the Effective Time but prior to such surrender and a
payment date subsequent to such surrender payable with respect to such Teleglobe
Common Shares. For purposes of dividends or other distributions in respect of
common shares of Teleglobe capital stock, all Teleglobe Common Shares to be
issued pursuant to the Merger shall be deemed issued and outstanding as of the
Effective Time.
2.4 NO FURTHER OWNERSHIP RIGHTS IN EXCEL COMMON STOCK. All Teleglobe
Common Shares issued and cash paid upon conversion of shares of Excel Common
Stock in accordance with the terms of Article I and this Article II (including
any stock dividends or cash paid pursuant to Section 2.3 or cash paid pursuant
to Section 2.5) shall be issued or paid in full satisfaction of all rights
pertaining to the shares of Excel Common Stock.
2.5 NO FRACTIONAL TELEGLOBE COMMON SHARES. (a) No certificates or scrip or
Teleglobe Common Shares representing fractional Teleglobe Common Shares shall be
issued upon the surrender for exchange of Certificates and such fractional share
interests will not entitle the owner thereof to vote or to have any rights of a
shareholder of Teleglobe or a holder of Teleglobe Common Shares.
(b) Notwithstanding any other provision of this Agreement, each holder of
shares of Excel Common Stock exchanged pursuant to the Merger who would
otherwise have been entitled to receive a fraction of a Teleglobe Common Share
(after taking into account all Certificates delivered by such holder) shall be
entitled to receive, in lieu thereof, cash (without interest) in an amount equal
to the product of (i) such fractional part of a Teleglobe Common Share and (ii)
the average closing price of the Teleglobe Common Shares on the New York Stock
Exchange, Inc. (the "NYSE"), as reported on the NYSE Composite Tape for the ten
trading days prior to and ending on the trading day immediately preceding the
Closing Date (the "Average Price"). As promptly as practicable after the
determination of the amount of cash, if any, to be paid to holders of fractional
interests, the Exchange Agent shall so notify Teleglobe, and Teleglobe shall
deposit such amount with the Exchange Agent and shall cause the Exchange Agent
to forward payments to such holders of fractional interests subject to and in
accordance with the terms hereof.
2.6 TERMINATION OF EXCHANGE FUND. Any portion of the Exchange Fund which
remains undistributed to the holders of Certificates for twelve months after the
Effective Time shall be delivered to Teleglobe or otherwise on the instruction
of Teleglobe, and any holders of the Certificates who have not theretofore
complied with this Article II shall thereafter look only to Teleglobe for the
Merger Consideration with respect to the shares of Excel Common Stock formerly
represented thereby to which such holders are entitled pursuant to Section 1.8
and Section 2.2, including any cash in lieu of fractional Teleglobe Common
Shares to which such holders are entitled pursuant to Section 2.5, and any
dividends or distributions with respect to Teleglobe Common Shares to which such
holders are entitled pursuant to Section 2.3, in each case, without any interest
thereon. Any such portion of the Exchange Fund remaining unclaimed by holders of
shares of Excel Common Stock immediately prior to such time as such amounts
would otherwise escheat to or become property of any Governmental Entity (as
defined in Section 3.1(d)(iii)) shall, to the extent permitted by Law, become
the property of Teleglobe free and clear of any claims or interest of any Person
previously entitled thereto.
2.7 NO LIABILITY. None of Teleglobe, Merger Sub, Excel, the Surviving
Corporation or the Exchange Agent shall be liable to any Person in respect of
any Merger Consideration or any cash in respect of dividends or other
distributions from the Exchange Fund delivered to a public official pursuant to
any applicable abandoned property, escheat or similar Law.
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2.8 INVESTMENT OF THE EXCHANGE FUND. The Exchange Agent shall invest any
cash included in the Exchange Fund as directed by Teleglobe on a daily basis.
Any interest and other income resulting from such investments shall promptly be
paid to Teleglobe.
2.9 LOST CERTIFICATES. If any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the Person claiming
such Certificate to be lost, stolen or destroyed, and if required by Teleglobe,
the posting by such Person of a bond in such reasonable amount as Teleglobe may
direct as indemnity against any claim that may be made against it with respect
to such Certificate, the Exchange Agent will deliver in exchange for such lost,
stolen or destroyed Certificate the applicable Merger Consideration with respect
to the shares of Excel Common Stock formerly represented thereby (including any
cash in lieu of fractional Teleglobe Common Shares), and any unpaid dividends
and distributions on Teleglobe Common Shares deliverable in respect thereof,
pursuant to this Agreement.
2.10 WITHHOLDING RIGHTS. Each of the Surviving Corporation and Teleglobe
shall be entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Agreement to any holder of shares of Excel Common Stock
such amounts as it is required to deduct and withhold with respect to the making
of such payment under the Code and the rules and regulations promulgated
thereunder, or any other provision of applicable Law. To the extent that amounts
are so withheld by the Surviving Corporation or Teleglobe, as the case may be,
such withheld amounts shall be treated for all purposes of this Agreement as
having been paid to the holder of the shares of Excel Common Stock in respect of
which such deduction and withholding was made by the Surviving Corporation or
Teleglobe, as the case may be.
2.11 FURTHER ASSURANCES. At and after the Effective Time, the officers and
directors of the Surviving Corporation will be authorized to execute and
deliver, in the name and on behalf of Excel or Merger Sub, any deeds, bills of
sale, assignments or assurances and to take and do, in the name and on behalf of
Excel or Merger Sub, any other actions and things to vest, perfect or confirm of
record or otherwise in Teleglobe or in the Surviving Corporation any and all
right, title and interest in, to and under any of the rights, properties or
assets acquired or to be acquired by Teleglobe or the Surviving Corporation as a
result of, or in connection with, the Merger.
2.12 STOCK TRANSFER BOOKS. At the close of business, New York City time,
on the day the Effective Time occurs, the stock transfer books of Excel shall be
closed and there shall be no further registration of transfers of shares of
Excel Common Stock thereafter on the records of Excel. From and after the
Effective Time, the holders of Certificates shall cease to have any rights with
respect to such shares of Excel Common Stock formerly represented thereby,
except as otherwise provided herein or by applicable Law. Subject to Sections
2.6 and 2.7, on or after the Effective Time, any Certificates presented to the
Exchange Agent or Teleglobe for any reason shall be converted into the Merger
Consideration with respect to the shares of Excel Common Stock formerly
represented thereby (including any cash in lieu of fractional Teleglobe Common
Shares to which the holders thereof are entitled pursuant to Section 2.5) and
shall represent the right to receive dividends or other distributions to which
the holders thereof are entitled pursuant to Section 2.3.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 REPRESENTATIONS AND WARRANTIES OF EXCEL. Excel represents and warrants
to Teleglobe and Merger Sub that the statements contained in this Section 3.1
are true and correct except as set forth herein and in the disclosure schedule
delivered by Excel to Teleglobe (the "Excel Disclosure Schedule"). The Excel
Disclosure Schedule is arranged in paragraphs corresponding to the numbered and
lettered paragraphs contained in this Agreement and the section of the
disclosure schedule corresponding to any numbered and lettered paragraph shall
qualify other paragraphs in this Agreement only to the extent that it is
reasonably apparent from a reading of such disclosure that it also qualifies or
applies to such other paragraphs. Inclusion of information in the Excel
Disclosure Schedule shall not be construed as an admission that such information
is material to the operations or financial condition of Excel and its
Subsidiaries.
(a) Organization, Standing and Power. Each of Excel and each of its
Subsidiaries is a corporation or other entity duly incorporated or organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation or organization, has all requisite power and authority to own,
lease and operate its properties and to carry on its business as now being
conducted and is duly qualified and in good standing to do business in each
jurisdiction in which the nature of its business or the ownership or leasing of
its properties makes such qualification necessary other than in such
jurisdictions where the failure so to qualify or to be in good standing would
not, either individually or in the aggregate, have a Material Adverse Effect on
Excel. The copies of the certificate of incorporation and by-laws of Excel which
were previously furnished to Teleglobe are true, complete and correct copies of
such documents as in effect on the date of this Agreement.
(b) Subsidiaries. Excel does not own, directly or indirectly, any equity or
other ownership interest in any corporation, partnership, joint venture or other
entity or enterprise, except for the Subsidiaries and other entities set forth
in the Excel Disclosure Documents (as defined in Section 3.1(e)), which are all
the Subsidiaries of Excel that are "Significant Subsidiaries" as such term is
defined in Rule 1-02 of Regulation S-X under the Securities Exchange Act of
1934, as amended (the "Exchange Act"). Except as set forth in the Excel
Disclosure Documents filed prior to the date of this Agreement, neither Excel
nor any of its Subsidiaries is subject to any obligation or requirement to
provide a material amount of funds to or make any material investment (in the
form of a loan, capital contribution or otherwise) in any such entity that is
not directly or indirectly wholly owned by Excel. Except as would not, either
individually or in the aggregate, have a Material Adverse Effect on Excel, each
of the outstanding shares of capital stock (or other ownership interests having
by their terms ordinary voting power to elect directors or others performing
similar functions with respect to such Subsidiary) owned by Excel of each of
Excel's Subsidiaries is duly authorized, validly issued, fully paid and
nonassessable, and is owned directly or indirectly by Excel free and clear of
all liens, pledges, security interests, claims or other encumbrances of any kind
whatsoever (including voting, transfer or similar rights such as rights of first
offer or rights of first refusal).
(c) Capital Structure. (i) As of the date hereof, the authorized capital
stock of Excel consisted of (A) 500,000,000 shares of Excel Common Stock, of
which, at the close of business on June 14, 1998, 132,259,389 shares were
outstanding and 2,045,250 shares were reserved for issuance pursuant to options
or rights under the Excel Stock Plans (as defined in Section 1.8(e)) and (B)
10,000,000 shares of preferred stock, par value $.001 per share, of which at the
close of business on June 14, 1998, no shares were outstanding. All issued and
outstanding shares of the capital stock of Excel are duly authorized, validly
issued, fully paid and nonassessable, and no class of capital stock is entitled
to preemptive rights. There were outstanding as of June 14, 1998 no options,
warrants or other rights to acquire capital stock from Excel other than options
to acquire 9,459,032 shares of Common Stock. No Subsidiaries of Excel own any
shares of Excel Common Stock.
(ii) As of the date of this Agreement, no bonds, debentures, notes or other
indebtedness of Excel having the right to vote on any matters on which
shareholders may vote ("Excel Voting Debt") are issued or outstanding.
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(iii) Except as otherwise set forth in this Section 3.1(c), there are no
securities, options, warrants, calls, rights, commitments, agreements,
arrangements or undertakings of any kind to which Excel or any of its
Subsidiaries is a party or by which any of them is bound obligating Excel or any
of its Subsidiaries to issue, deliver or sell, or cause to be issued, delivered
or sold, additional shares of capital stock or other voting securities of Excel
or any of its Subsidiaries or obligating Excel or any of its Subsidiaries to
issue, grant, extend or enter into any such security, option, warrant, call,
right, commitment, agreement, arrangement or undertaking. There are no
outstanding obligations of Excel or any of its Subsidiaries to repurchase,
redeem or otherwise acquire any shares of capital stock of Excel or any of its
Subsidiaries. There are no agreements or arrangements pursuant to which Excel is
or could be required to register shares of Excel Common Stock or other
securities under the Securities Act, or other agreements or arrangements with or
among any securityholders of Excel with respect to securities of Excel. There
are no voting, sale, transfer or other similar agreements to which Excel or any
of its Subsidiaries is a party with respect to the capital stock of Excel or its
Subsidiaries or any other securities of Excel or its Subsidiaries which are
convertible or exchangeable into or exercisable for shares of the capital stock
of Excel or its Subsidiaries.
(d) Authority; No Conflicts. (i) Excel has all requisite corporate power
and authority to enter into this Agreement and the other Transaction Documents
to which it is or may become a party and to consummate the transactions
contemplated hereby and thereby, subject in the case of the consummation of the
Merger to the adoption of this Agreement by the Required Excel Vote (as defined
in Section 3.1(i)). The execution and delivery by Excel of this Agreement and
the other Transaction Documents to which it is or may become a party and the
consummation of the transactions contemplated hereby and thereby have been duly
authorized by all necessary corporate action on the part of Excel, subject in
the case of the consummation of the Merger to the approval and adoption of this
Agreement by the Required Excel Vote. This Agreement has been, and the other
Transaction Documents to which Excel is or may become a party have been or will
be when executed by Excel, duly executed and delivered by Excel, and each
constitutes or will constitute a valid and binding agreement of Excel,
enforceable against it in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws relating to or affecting creditors
generally, by general equity principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law) or by an
implied covenant of good faith and fair dealing.
(ii) The execution and delivery by Excel of this Agreement and the other
Transaction Documents to which it is or may become a party do not and will not,
and the consummation by Excel of the Merger and the other transactions
contemplated hereby or thereby will not, conflict with, or result in any
violation of, or constitute a default (with or without notice or lapse of time,
or both) under, or give rise to a right of termination, amendment, cancellation
or acceleration of any obligation or the loss of a material benefit under, or
the creation of a lien, pledge, security interest, charge or other encumbrance
on any assets (any such conflict, violation, default, right of termination,
amendment, cancellation or acceleration, loss or creation, a "Violation")
pursuant to (A) any provision of the certificate of incorporation or by-laws of
Excel or any Subsidiary of Excel or (B) except as are not, individually or in
the aggregate, reasonably likely to have a Material Adverse Effect on Excel or
prevent or materially delay the performance of this Agreement by Excel and,
subject to obtaining or making the consents, approvals, orders, authorizations,
registrations, declarations and filings referred to in paragraph (iii) below,
any loan or credit agreement, note, mortgage, bond, indenture, lease, benefit
plan or other agreement, obligation, commitment, contract or instrument (any of
the foregoing a "Contract"), Permit or Federal or national, state or provincial,
municipal or local law, rule, regulation, statute, ordinance, decree, order,
permit, authorization, opinion, judgment or other legislation, whether of the
U.S., Canada or another foreign jurisdiction ("Laws"), applicable to Excel or
any Subsidiary of Excel or their respective properties or assets. For purposes
of this agreement, "Permit" shall mean any franchise, concession, grant,
authorization, license, permit, easement, variance, exception, consent,
certificate, approval, clearance or order of any Governmental Entity required by
Law, including any Environmental Law.
(iii) No consent, approval, order or authorization of, or registration,
declaration or filing with, any Federal, national, state, provincial, municipal
or local government, any instrumentality, subdivision, court, administrative
agency or commission or other authority thereof, or any quasi-governmental or
private body
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exercising any regulatory, taxing, importing or any other governmental or
quasi-governmental authority, whether of the U.S., Canada or another foreign
jurisdiction (a "Governmental Entity"), is required by or with respect to Excel
or any Subsidiary of Excel in connection with the execution and delivery by
Excel of this Agreement and the other Transaction Documents to which it may be a
party or the consummation by Excel of the Merger and the other transactions
contemplated hereby or thereby, except for those required under or in relation
to (A) the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act") and the Competition Act (Canada), (B) the Communications Act of 1934,
as amended (the "Communications Act"), and any rules, regulations, orders,
practices and policies promulgated by the U.S. Federal Communications Commission
(the "FCC") (such rules the "Federal Communications Laws"), (C) state securities
or "blue sky" laws (the "Blue Sky Laws"), (D) the Securities Act, (E) the
Exchange Act, (F) the Canadian Securities Laws, (G) the DGCL with respect to the
filing of the Delaware Certificate of Merger, (H) the laws, rules, regulations,
orders, practices and policies of any state legislature or public utility or
service commission ("PUCs"), foreign (including multi-national)
telecommunications regulatory agencies or similar state or foreign regulatory
bodies, (I) rules and regulations of the NYSE, (J) antitrust or other
competition Laws of other jurisdictions and (K) such consents, approvals,
orders, authorizations, registrations, declarations and filings the failure of
which to make or obtain are not, individually or in the aggregate, reasonably
likely to have a Material Adverse Effect on Excel or prevent or materially delay
the performance of this Agreement by Excel. Consents, approvals, orders,
authorizations, registrations, declarations and filings required under or in
relation to any of the foregoing clauses (A) through (J) are hereinafter
referred to as the "Required Consents." Neither the execution and delivery by
Excel of this Agreement and the other Transaction Documents to which Excel is a
party nor the consummation and performance by Excel of the Merger and the other
transactions contemplated hereby or thereby will result in a violation of (a)
the Federal Communications Laws, (b) the laws, rules, regulations, orders,
practices or policies of any state legislature or PUC, foreign (including
multi-national) telecommunications regulatory agency or similar state or foreign
regulatory body or (c) any order, writ, judgment, injunction, decree or award of
the FCC, any entity listed in clause (b) above, or any court of competent
jurisdiction binding upon Excel, other than any violation which is not,
individually or in the aggregate, reasonably likely to have a Material Adverse
Effect on Excel.
(iv) Each of Excel and its Subsidiaries is in possession of all Permits
from appropriate Governmental Entities necessary for Excel or any of its
Subsidiaries to own, lease and operate its properties or to carry on their
respective businesses as they are now being conducted (the "Excel Permits"), and
all such Excel Permits are valid and in full force and effect, except where the
failure to have, or the suspension, cancellation or restriction of, any of the
Excel Permits does not and would not, individually or in the aggregate, (a) have
or be reasonably likely to have a Material Adverse Effect on Excel or (b)
prevent or materially delay the performance of this Agreement by Excel. No
suspension, cancellation or restriction of any of the Excel Permits is pending
or, to the actual knowledge of the executive officers of Excel, threatened,
except where the failure to have, or the suspension or cancellation of, any of
Excel Permits does not and would not, individually or in the aggregate, (x) have
or be reasonably likely to have a Material Adverse Effect on Excel or (y)
prevent or materially delay the performance of this Agreement by Excel. Neither
Excel nor any of its Subsidiaries is in conflict with, or in default, breach or
violation of, any Excel Permits, except for such conflicts, defaults, breaches
or violations that do not and would not, individually or in the aggregate, (A)
have or be reasonably likely to have a Material Adverse Effect on Excel or (B)
prevent or materially delay the performance of this Agreement by Excel.
(e) Reports and Financial Statements. Excel has filed all required reports,
schedules, forms, statements and other documents required to be filed by it with
the SEC since January 1, 1996 (collectively, including all exhibits thereto and
any registration statement filed with the SEC since such date, the "Excel
Disclosure Documents"). No Subsidiary of Excel is required to file any form,
report or other document with the SEC. None of the Excel Disclosure Documents
filed since January 1, 1998 (the "Recent Excel Disclosure Documents"), as of
their respective dates (and, if amended or superseded by a filing prior to the
date of this Agreement or the Closing Date, then on the date of such filing),
contained or will contain any untrue statement of a material fact or omitted or
will omit to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. Each of the financial statements (including the related
notes) included in the Excel Disclosure
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Documents presents fairly, in all material respects, the consolidated financial
position and consolidated results of operations and cash flows of Excel and its
Subsidiaries as of the respective dates or for the respective periods set forth
therein, all in conformity with US GAAP consistently applied during the periods
involved except as otherwise noted therein, and subject, in the case of the
unaudited interim financial statements, to normal and recurring year-end
adjustments that have not been and are not expected to be material in amount
(and except for the absence of footnotes in the case of such interim financial
statements). All of the Recent Excel Disclosure Documents, as of their
respective dates (and as of the date of any amendment to the respective Recent
Excel Disclosure Documents), complied as to form in all material respects with
the applicable requirements of the Securities Act and the Exchange Act and the
rules and regulations promulgated thereunder.
(f) Information Supplied. (i) None of the information supplied or to be
supplied by Excel for inclusion in, or incorporated by reference from the Excel
Disclosure Documents in, (A) the Form F-4 (as defined in Section 5.1) will, at
the time the Form F-4 is filed with the SEC, at any time it is amended or
supplemented or at the time it becomes effective under the Securities Act,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading and (B) the Joint Information Statement/Proxy
Statement/Prospectus (as defined in Section 5.1) will, on the date it is first
mailed to the stockholders of Excel or the shareholders of Teleglobe or at the
time of the Excel Stockholders Meeting, if any, or the Teleglobe Shareholders
Meeting (each as defined in Section 5.1), 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. The Form F-4 and the
Joint Information Statement/Proxy Statement/ Prospectus will comply as to form
in all material respects with the applicable requirements of the Exchange Act
and the Securities Act and the rules and regulations of the SEC thereunder.
(ii) Notwithstanding the foregoing provisions of this Section 3.1(f), no
representation or warranty is made by Excel with respect to statements made or
incorporated by reference in the Form F-4 or the Joint Information
Statement/Proxy Statement/Prospectus based on information supplied by Teleglobe
for inclusion or incorporation by reference therein.
(iii) If at any time prior to the Effective Time any event relating to
Excel or any of its Affiliates, officers or directors should be discovered by
Excel which should be set forth in an amendment to the Form F-4 or a supplement
to the Joint Information Statement/Proxy Statement/Prospectus, Excel shall
promptly inform Teleglobe.
(g) Absence of Certain Changes or Events. Except as disclosed in the Excel
Disclosure Documents filed prior to the date of this Agreement, since December
31, 1997, Excel and its Subsidiaries have in all material respects conducted
their business in the ordinary course consistent with past practice, and there
has not been any change in the business, condition (financial or otherwise),
assets, liabilities or results of operations of Excel or any of its Subsidiaries
or any event involving Excel or any of its Subsidiaries which has had, or is
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Excel.
(h) Board Approval. The Board of Directors of Excel, by resolutions adopted
at a meeting duly called and held and not subsequently rescinded or modified
(the "Excel Board Approval"), has (i) determined that this Agreement and the
other Transaction Documents to which Excel is a party and the transactions
contemplated hereby and thereby, including the Merger, are in the best interests
of Excel and its stockholders, (ii) approved this Agreement and the other
Transaction Documents to which Excel is a party and the transactions
contemplated hereby and thereby, including the Merger, and (iii) recommended
that the stockholders of Excel approve this Agreement and the Merger.
(i) Vote Required. The affirmative approval, by vote or written consent, of
the holders of a majority of the outstanding shares of Excel Common Stock to
approve the Merger (the "Required Excel Vote") is the only vote of the holders
of any class or series of Excel capital stock necessary to approve and adopt
this Agreement and approve the Merger and no other vote of the stockholders of
Excel is required to approve the
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other transactions contemplated hereby or by any other Transaction Documents to
which it is or may be a party.
(j) Brokers or Finders. No agent, broker, investment banker, financial
advisor or other firm or Person is or will be entitled to any broker's or
finder's fee or any other similar commission or fee in connection with any of
the transactions contemplated by this Agreement based upon arrangements made by
or on behalf of Excel, except Lehman Brothers Inc. (the "Excel Fairness Opinion
Banker") or Paine Webber Incorporated, whose fees and expenses will be paid by
Excel in accordance with Excel's agreements with such firms based upon
arrangements made by or on behalf of Excel and previously disclosed to
Teleglobe.
(k) Opinion of Excel Fairness Opinion Banker. Excel has received the
opinion of the Excel Fairness Opinion Banker, dated the date of this Agreement,
to the effect that, as of such date, the Exchange Ratio is fair, from a
financial point of view, to the holders of shares of Excel Common Stock (the
"Excel Fairness Opinion"), a copy of which opinion has been made available to
Teleglobe.
(l) No Undisclosed Liabilities. Except as disclosed in the Excel Disclosure
Documents filed prior to the date hereof, and except for normal or recurring
liabilities incurred since December 31, 1997 in the ordinary course of business
consistent with past practices, Excel and its Subsidiaries do not have any
liabilities, either accrued, contingent or otherwise (whether or not required to
be reflected in financial statements in accordance with US GAAP), and whether
due or to become due, which, individually or in the aggregate, are reasonably
likely to have a Material Adverse Effect on Excel.
(m) Taxes.
(i) Except for such matters that would not, individually or in the
aggregate, have a Material Adverse Effect on Excel: (A) Excel and each of its
Subsidiaries have (x) timely filed all Federal, national, state and local tax
returns and reports, whether U.S. or foreign, required to be filed by them prior
to the date of this Agreement (taking into account extensions), (y) timely paid
or accrued all Taxes due and payable thereon, and (z) timely paid or accrued all
Taxes for which a notice of assessment or collection has been received (other
than amounts being contested in good faith by appropriate proceedings); (B) no
tax return of Excel or any of its Subsidiaries contains a disclosure statement
under Section 6662(d)(2)(B)(ii)(l) of the Code or any similar provision of
applicable Law; (C) neither Excel nor any of its Subsidiaries currently is the
beneficiary of any extension of time within which to file any tax return, other
than with respect to the fiscal year ended December 31, 1997; (D) Excel has
delivered to Teleglobe correct and complete copies of all Federal tax returns,
examination reports and statements of deficiencies assessed against or agreed to
by Excel or any of its Subsidiaries for the past three taxable years of Excel;
(E) with respect to any period for which tax returns are not yet due (including
extensions), or for which Taxes are not yet due and owing, Excel and each of its
Subsidiaries has made due and sufficient current accruals for such Taxes in the
financial statements included in the Recent Excel Disclosure Documents; (F)
neither the Internal Revenue Service (the "IRS") nor any other taxing authority
has asserted in writing to Excel any claim for Taxes, or to the actual knowledge
of the executive officers of Excel, is threatening to assert any claims for
Taxes; (G) Excel and each of its Subsidiaries have withheld or collected and
paid over to the appropriate governmental authorities (or are properly holding
for such payment) all Taxes required by Law to be withheld or collected; (H)
neither Excel nor any of its Subsidiaries has made an election under Section
341(f) of the Code; (I) neither Excel nor any of its Subsidiaries has made any
payments, is obligated to make any payments, or is a party to any agreement that
under certain circumstances could obligate it to make any payments that will not
be deductible under Sections 162(m) or 280G of the Code or that will be subject
to excise tax under Section 4999 of the Code; (J) neither Excel nor any of its
Subsidiaries (x) has been a member of an affiliated group within the meaning of
Section 1504(a) of the Code (or any similar group defined under a similar
provision of applicable Law) other than an affiliated group the common parent of
which is Excel and (y) has any liability under Treasury Regulations Section
1.1502-6 (or any similar provision of applicable Law), as a transferee or
successor, by contract or otherwise for Taxes of any affiliated group of which
Excel is not the common parent; (K) there are no liens for Taxes upon the assets
of Excel or any of its Subsidiaries (other than liens for Taxes that are not yet
due or that are being contested in good faith by appropriate proceedings); (L)
neither Excel nor any of its Subsidiaries is the subject of any currently
ongoing Tax audit, other than in the ordinary course of business
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consistent with past practice; (M) there are no pending requests for waivers of
the time to assess any Tax, other than those made in the ordinary course and for
which payment has been made or there are adequate reserves; and (N) neither
Excel nor any of its Subsidiaries has waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency.
(ii) For the purposes of this Agreement, a "Tax" or, collectively, "Taxes,"
means any and all material Federal, state, local and foreign taxes, assessments
and other governmental charges, duties, impositions and liabilities, including
taxes based upon or measured by gross receipts, income, profits, sales, use and
occupation, and value added, ad valorem, transfer, gains, franchise,
withholding, payroll, recapture, employment, excise, unemployment insurance,
social security, business license, occupation, business organization, stamp,
environmental, customs duty, capital stock, severance, disability, production
and property taxes, together with all interest, penalties and additions imposed
with respect to such amounts and any obligations under any agreements or
arrangements with any other person with respect to such amounts and including
any liability for taxes of a predecessor entity.
(n) Properties.
(i) Section 3.1(n)(i) of the Excel Disclosure Schedule contains a true and
complete list of all real property leased by Excel or its Subsidiaries pursuant
to leases providing for the occupancy of facilities in excess of 20,000 square
feet (collectively "Material Leases"). Each of Excel and its Subsidiaries is not
in default under any of such leases, except where the existence of such
defaults, individually or in the aggregate, are not reasonably likely to have a
Material Adverse Effect on Excel.
(ii) The Excel Disclosure Schedule contains a true and complete list of all
real property that Excel or any of its Subsidiaries owns. With respect to each
such item of real property, except for such matters which are not reasonably
likely, individually or in the aggregate, to have a Material Adverse Effect on
Excel: (x) Excel or one of its Subsidiaries has good and marketable title to
such property, free and clear of any security interest, easement, covenant or
other restriction, except for recorded easements, covenants and other
restrictions which do not materially impair the current uses or occupancy of
such property; and (y) the improvements constructed on such property are in good
condition, and all mechanical and utility systems servicing such improvements
are in good condition, free in each case of material defects.
(o) Intellectual Property. To the actual knowledge of the executive
officers of Excel, Excel and its Subsidiaries own, or are licensed or otherwise
possess the rights to use, all intellectual property, including patents,
inventions, discoveries, technology, know-how, copyrights and copyrightable
works (including computer software, databases, code and related systems, files
and applications), trademarks, service marks, trade names, trade dress, Internet
domain names, trade secrets, confidential information, specifications and
designs that are necessary to conduct the business of Excel and its Subsidiaries
in all material respects as currently conducted (the "Excel Intellectual
Property"). All of the Excel Intellectual Property necessary to conduct the
business of Excel as currently conducted in all material respects is subsisting
and unexpired, has not been abandoned, does not infringe or otherwise impair the
intellectual property rights of any third party, is not subject to any lien or
other encumbrance, and does not require the consent of any other Person to be
used by the Surviving Corporation upon the consummation of the transactions
contemplated by this Agreement (except for any such consent already obtained).
No action, suit or proceeding is pending, or to the actual knowledge of the
executive officers of Excel, threatened by any third party or Governmental
Entity that seeks to limit, cancel or question the validity of, or Excel's
rights to, any Excel Intellectual Property. Excel has taken reasonable steps to
protect, maintain and safeguard the Excel Intellectual Property, including any
Excel Intellectual Property for which improper or unauthorized disclosure would
impair its value or validity. To the actual knowledge of the executive officers
of Excel, no other Person is infringing or otherwise impairing any of the Excel
Intellectual Property.
(p) Agreements, Contracts and Commitments. Neither Excel nor any of its
Subsidiaries has breached, or received in writing any claim or notice that it
has breached, any of the terms or conditions of any material Contract to which
it is a party ("Excel Material Contracts"), other than any breaches which,
individually or in
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the aggregate, would have a Material Adverse Effect on Excel. Each Excel
Material Contract that has not expired by its terms is in full force and effect.
(q) Litigation. Except as disclosed in the Excel Disclosure Documents filed
prior to the date hereof, as of the date hereof, there are no actions, suits,
investigations or proceedings (adjudicatory, rulemaking or otherwise) pending
or, to the actual knowledge of the executive officers of Excel, threatened, nor
any outstanding orders, decrees or judgments issued, against Excel or any of its
Subsidiaries (or any Employee Plan or Benefit Arrangement), or any property of
Excel or any such Subsidiary (including Excel Intellectual Property), before any
arbitrator of any kind or in or before or by any Governmental Entity, except
actions, suits, investigations, proceedings, orders, decrees or judgments,
which, individually and in the aggregate, do not and are not reasonably likely
to (a) have a Material Adverse Effect on Excel or (b) prevent or materially
delay the performance of this Agreement by Excel.
(r) Environmental Matters.
(i) Except for such matters that, individually or in the aggregate, are not
reasonably likely to have a Material Adverse Effect on Excel: (a) Excel and its
Subsidiaries comply and within all applicable statutes of limitations periods
have complied with all applicable Environmental Laws (as defined in Section
3.1(r)(iv)) and all applicable Permits under applicable Environmental Laws; (b)
Hazardous Substances (as defined in Section 3.1(r)(v)) are not present at any of
the properties (including soils, groundwater, surface water, buildings or other
structures) owned or operated by Excel or any of its Subsidiaries in violation
of or at concentrations that would require remediation under any Environmental
Law; (c) neither Excel nor any of its Subsidiaries is subject to liability for
any Hazardous Substance disposal or contamination on any third party property;
(d) neither Excel nor any of its Subsidiaries has been associated with any
release or threat of release of any Hazardous Substance in violation or
otherwise in excess of levels of concentration permitted by any Environmental
Laws; (e) neither Excel nor any of its Subsidiaries has received any written
notice, demand, letter, claim or request for information alleging that Excel or
any of its Subsidiaries may be in violation of or liable under any Environmental
Law; (f) neither Excel 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; (g)
there are no circumstances or conditions involving Excel or any of its
Subsidiaries that would reasonably be expected to result in any claims,
liability, investigations, costs or restrictions on the ownership, use or
transfer of any property of Excel or any of its Subsidiaries pursuant to any
Environmental Law; and (h) to the actual knowledge of the executive officers of
Excel and its Subsidiaries, the foregoing representations and warranties also
apply to any liability that Excel or any of its Subsidiaries retained or assumed
either contractually or by operation of law.
(ii) To the actual knowledge of the executive officers of Excel, (A) no
underground storage tanks are or have been located on any real property owned,
operated or leased by Excel or its Subsidiaries, except for those that are
maintained in material compliance with Environmental Laws and (B) no real
property owned, operated or leased by Excel or its Subsidiaries has been used or
is used as a landfill or waste disposal site.
(iii) Excel has made available to Teleglobe copies of all environmentally
related audits, assessments, studies, reports, analyses, and results of
investigations of any real property currently or formerly owned, operated or
leased by Excel or its Subsidiaries that are in the possession, custody or
control of Excel.
(iv) As used herein, the term "Environmental Law" means any Law or agency
requirement relating to: (x) the protection, investigation or restoration of the
environment, health and safety of workers or natural resources, (y) the
handling, use, presence, disposal, release or threatened release of any
Hazardous Substance or (z) noise, odor, wetlands, pollution, contamination or
any injury or threat of injury to persons or property in connection with any
Hazardous Substance.
(v) As used herein, the term "Hazardous Substance" means: (x) any substance
that is listed, classified or regulated pursuant to or that could result in
liability under any Environmental Law; (y) any petroleum product or by-product,
asbestos-containing material, lead-containing paint or plumbing, polychlorinated
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biphenyls, radioactive materials or radon; or (z) any other substance which is
the subject of regulatory action by any Governmental Entity pursuant to any
Environmental Law.
(s) Employee Benefit Plans.
(i) Excel has listed in Section 3.1(s) of the Excel Disclosure Schedule all
employee benefit plans (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) and all bonus, stock option,
stock purchase, incentive, deferred compensation, supplemental retirement,
severance and other similar employee benefit plans, and all unexpired severance
agreements, written or otherwise, for the benefit of, or relating to, any
current or former employee of Excel or any trade or business (whether or not
incorporated) which is a member or which is under common control with Excel
within the meaning of Section 414 of the Code, or any Subsidiary of Excel
(together, the "Excel Employee Plans").
(ii) With respect to each Excel Employee Plan, Excel has made available to
Teleglobe, a true and correct copy of (w) the most recent annual report (Form
5500) filed with the IRS, (x) such Excel Employee Plan, (y) each trust agreement
and group annuity contract, if any, relating to such Excel Employee Plan and (z)
the most recent actuarial report or valuation relating to an Excel Employee Plan
subject to Title IV of ERISA.
(iii) With respect to the Excel Employee Plans, individually and in the
aggregate, such plans are being administered in accordance with their terms and
applicable Laws and no event has occurred, and to the actual knowledge of the
executive officers of Excel, there exists no condition or set of circumstances
in connection with which Excel could be subject to any liability which would
have a Material Adverse Effect on Excel under ERISA, the Code or any other
applicable Law.
(iv) With respect to the Excel Employee Plans, individually and in the
aggregate, there are no funded benefit obligations for which contributions have
not been made or properly accrued under the terms of such plans and applicable
Laws and there are no unfunded benefit obligations which have not been accounted
for by reserves, or otherwise properly footnoted in accordance with US GAAP, on
the financial statements of Excel contained in the Excel Disclosure Documents,
except for any such funded or unfunded benefit obligations which are not
reasonably likely to have a Material Adverse Effect on Excel.
(v) Except as disclosed in Excel Disclosure Documents filed prior to the
date of this Agreement, and except as provided for in this Agreement, neither
Excel nor any of its Subsidiaries is a party to any oral or written (x)
agreement with any officer or other key employee of Excel or any of its
Subsidiaries, the benefits of which are contingent, or the terms of which are
materially altered, upon the occurrence of a transaction involving Excel of the
nature contemplated by this Agreement, (y) agreement with any officer of Excel
providing any term of employment or compensation guarantee extending for a
period longer than one year from the date hereof and for the payment of
compensation in excess of $100,000 per annum or (z) agreement or plan, including
any stock option plan, stock appreciation right plan, restricted stock plan or
stock purchase plan, any of the benefits of which will be increased, or the
vesting of the benefits of which will be accelerated, by the occurrence of any
of the transactions contemplated by this Agreement or the value of any of the
benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement.
(t) Compliance With Laws. (i) Excel has complied with, is not in violation
of, and has not received any written notices of violation with respect to, any
Law applicable to Excel or any of its Subsidiaries or by which any property,
asset or operation of Excel or any of its Subsidiaries is bound or affected with
respect to the conduct of its business, or the ownership or operation of its
business, except for failures to comply or violations which would not,
individually or in the aggregate, have a Material Adverse Effect on Excel.
(ii) Excel's marketing and direct sales programs, including Excel's
multi-level marketing program, have in all material respects been conducted in
accordance with all applicable Laws and there is not any action, suit,
proceeding, inquiry, arbitration or litigation pending or, to the actual
knowledge of the executive officers of Excel, threatened in connection with such
programs which, individually or in the aggregate, would have a Material Adverse
Effect on Excel.
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(iii) No action, suit, proceeding, inquiry, arbitration or litigation is
pending against Excel or, to the actual knowledge of the executive officers of
Excel, threatened by any Governmental Entity or individual regarding "slamming"
(i.e., changing customers' long-distance services without authorization) or
"cramming" (i.e., charging customers for services they have not requested),
which, individually or in the aggregate, would have a Material Adverse Effect on
Excel.
(u) Accounting and Tax Matters. Neither Excel nor any of its Subsidiaries
has taken or agreed to take any action which (i) would reasonably be expected to
prevent Teleglobe from accounting for the business combination to be effected by
the Merger as a pooling of interests under US GAAP or Canadian GAAP or (ii)
would cause any representation contained in the certificates relating to the
tax-free reorganization treatment attached hereto as Exhibits G and H to be
untrue.
(v) Labor Matters. Neither Excel nor any of its Subsidiaries is a party to
or otherwise bound by any collective bargaining agreement, contract or other
agreement or understanding with a labor union or labor organization, nor is any
such contract or agreement presently being negotiated, nor is there, nor has
there been in the last five years, any application for certification or
recognition by any union or organization respecting any of the employees of
Excel or its Subsidiaries, nor is Excel or any of its Subsidiaries a party to,
or bound by, any consent decree with, or citation by, any Governmental Entity
relating to employees or employment practices and, to the actual knowledge of
the executive officers of Excel, there are no campaigns being conducted to
solicit cards from employees of Excel or its Subsidiaries to authorize
representation by any labor organization. As of the date hereof, neither Excel
nor any of its Subsidiaries is the subject of any material proceeding asserting
that Excel 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, as of the date of this Agreement, is there pending or, to the actual
knowledge of the executive officers of Excel, threatened, any material labor
strike, dispute, walkout, work stoppage, slow-down or lockout involving Excel or
any of its Subsidiaries nor has there been one in the past five years.
(w) Insurance. All material fire and casualty, general liability, business
interruption, product liability, and sprinkler and water damage insurance
policies and directors and officers liability insurance policies maintained by
Excel or any of its Subsidiaries are with reputable insurance carriers, provide
full and adequate coverage for all normal risks incident to the business of
Excel and its Subsidiaries and their respective properties and assets, and are
in character and amount at least equivalent to that carried by persons engaged
in similar businesses and subject to the same or similar perils or hazards,
except for any such failures to maintain insurance policies that, individually
or in the aggregate, are not reasonably likely to have a Material Adverse Effect
on Excel.
(x) No Existing Discussions. As of the date hereof, Excel is not engaged,
directly or indirectly, in any discussions or negotiations with any other party
with respect to an Acquisition Proposal (as defined in Section 5.5).
(y) Anti-Takeover Laws; Stockholder Rights Plan. Except for Section 203 of
the DGCL, no "fair price," "moratorium," "control share acquisition" or other
similar anti-takeover statute or regulation is applicable, by reason of Excel's
being a party to the Merger, this Agreement or any of the other Transaction
Documents to which it is a party or the transactions contemplated hereby or
thereby or by reason of the execution by Excel's stockholders party thereto of
the Excel Consent and Voting Agreement and the transactions contemplated thereby
and neither Excel nor any of its Subsidiaries is a party to any "stockholder
rights" plan or any similar anti-takeover plan or device.
(z) DGCL Section 203. Prior to the time this Agreement was executed, the
Board of Directors of Excel has taken all action necessary, if any, to exempt
under or make not subject to Section 203 of the DGCL: (i) the execution of this
Agreement, the Excel Consent and Voting Agreement and the Excel Stock Option
Agreement, (ii) the Merger and (iii) the other transactions contemplated hereby
and by the other Transaction Documents.
(aa) Year 2000. Excel has developed and is in the process of implementing a
plan which it believes in good faith is sufficient to ensure that in all
material respects all hardware, software, firmware, systems, files,
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applications, interfaces, databases and other computer-related materials
("Software") that it owns, possesses and/or uses is or will be designed to be
used prior to, during and after the calendar year 2000 A.D., and will operate in
all material respects during each such time period, either on a stand-alone
basis, or by interacting or interoperating with third-party Software, without
material error relating to the processing, calculating, comparing, sequencing or
other use of date data, including (i) any material error relating to or
resulting from date data which represents or references more than one century
("Century-Based Data"); (ii) any abnormal ending or provision of materially
invalid or incorrect results as a result of any Century-Based Data; or (iii) any
material error relating to century recognition or calculations accommodating
Century-Based Data, values or formulae, and the implementation of such plan is
expected in good faith to be completed in a timely manner. Excel has performed
all necessary due diligence and is in the process of performing tests and
implementing modifications to all Software that it owns, possesses and/or uses
to design an appropriate plan and to ensure the accuracy of this representation
and warranty.
(ab) Pooling Letters. Excel has received two letters from Arthur Andersen
LLP, each addressed to Excel, regarding its concurrence with Excel's
management's conclusions as to the appropriateness of pooling of interests
accounting under US GAAP (under Accounting Principles Board Opinion No. 16) and
under Canadian GAAP (under Section 1580 of The Canadian Institute of Chartered
Accountants Handbook), respectively, for the Merger, as contemplated to be
effected as of the date of the letters.
(ac) Certain Regulatory Matters.
(i) Except for billing disputes with customers arising in the ordinary
course of business that in the aggregate involve immaterial amounts, there are
no proceedings or investigations pending or, to the actual knowledge of the
executive officers of Excel, threatened, before any Governmental Entity directed
specifically at Excel or, in the case of matters of general applicability to the
telecommunications industry, in which Excel is identified for possible disparate
treatment or whose outcome may have a disparate impact on Excel, in which any of
the following matters are being considered which are reasonably likely to have a
Material Adverse Effect on Excel, nor has Excel or any of its Subsidiaries
received written notice or inquiry from any Governmental Entity, indicating that
any of such matters should be considered or may become the object of
consideration or investigation specifically regarding Excel which are reasonably
likely to have a Material Adverse Effect on Excel or, in the case of matters of
general applicability to the telecommunications industry, in which Excel is
identified for possible disparate treatment or whose outcome may have a
disparate impact on Excel; (u) increases in access charges, universal service
contributions or the like; (v) traffic routing restrictions or restrictions on
use of facilities; (w) reduction or restriction of rates charged to customers;
(x) reduction of earnings; (y) refunds or other forfeitures of amounts
previously charged to customers; or (z) failure to meet any expense,
infrastructure, service quality or other commitments previously made to or
imposed by any Governmental Entity.
(ii) Neither Excel nor any of its Subsidiaries has any outstanding
commitments made in the context of a matter or proceeding related specifically
to Excel or, in the case of matters of general applicability to the
telecommunications industry, in which Excel is identified for possible disparate
treatment or whose outcome may have a disparate impact on Excel (and no such
obligations have been imposed upon Excel and remain outstanding), regarding; (u)
increases in access charges, universal service contributions or the like; (v)
traffic routing restrictions or restrictions on use of facilities; (w) reduction
or restriction of rates charged to customers; (x) reduction of earnings; (y)
refunds or other forfeitures of amounts previously charged to customers; or (z)
expenses, infrastructure expenditures, service quality or other regulatory
requirements, to or by any Governmental Entity, in each case which are
reasonably likely to have a Material Adverse Effect on Excel.
(iii) Other than in the context of a reorganization involving pro forma
transfer of authorizations, Excel has not transferred, sold any interest in or
otherwise taken action to reduce its control over any Federal or state
regulatory licenses, certificates, approvals or other authorizations under which
it operates, and the transfer of such authorizations, subject to regulatory
approval, would not violate the terms of any agreement to which Excel is a party
or by which Excel is bound, or impinge the rights of any third party.
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3.2 Representations and Warranties of Teleglobe. Teleglobe represents and
warrants to Excel that the statements contained in this Section 3.2 are true and
correct except as set forth herein and in the disclosure schedule delivered by
Teleglobe to Excel (the "Teleglobe Disclosure Schedule"). The Teleglobe
Disclosure Schedule is arranged in paragraphs corresponding to the numbered and
lettered paragraphs contained in this Agreement and the section of the
disclosure schedule corresponding to any numbered and lettered paragraph shall
qualify other paragraphs in this Agreement only to the extent that it is
reasonably apparent from a reading of such disclosure that it also qualifies or
applies to such other paragraphs. Inclusion of information in the Teleglobe
Disclosure Schedule shall not be construed as an admission that such information
is material to the operations or financial condition of Teleglobe and its
Subsidiaries.
(a) Organization, Standing and Power. Each of Teleglobe and each of its
Subsidiaries is a corporation or other entity duly incorporated or organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation or organization, has all requisite power and authority to own,
lease and operate its properties and to carry on its business as now being
conducted and is duly qualified and in good standing to do business in each
jurisdiction in which the nature of its business or the ownership or leasing of
its properties makes such qualification necessary other than in such
jurisdictions where the failure so to qualify or to be in good standing would
not, either individually or in the aggregate, have a Material Adverse Effect on
Teleglobe. The copies of the certificate of incorporation and by-laws, or
comparable documents, of Teleglobe which were previously furnished to Excel are
true, complete and correct copies of such documents as in effect on the date of
this Agreement.
(b) Subsidiaries. Teleglobe does not own, directly or indirectly, any
equity or other ownership interest in any corporation, partnership, joint
venture or other entity or enterprise, except for the Subsidiaries and other
entities set forth in the Teleglobe Disclosure Documents (as defined in Section
3.2(e)), which are all the Subsidiaries of Teleglobe that are required to be
disclosed pursuant to item 1 of Part II of Schedule IX of the Regulation
Respecting Securities enacted under the Securities Act (Quebec). Except as set
forth in the Teleglobe Disclosure Documents filed prior to the date of this
Agreement, neither Teleglobe nor any of its Subsidiaries is subject to any
obligation or requirement to provide a material amount of funds to or make any
material investment (in the form of a loan, capital contribution or otherwise)
in any such entity that is not directly or indirectly wholly owned by Teleglobe.
Except as would not, either individually or in the aggregate, have a Material
Adverse Effect on Teleglobe, each of the outstanding shares of capital stock (or
other ownership interests having by their terms ordinary voting power to elect
directors or others performing similar functions with respect to such
Subsidiary) owned by Teleglobe of each of Teleglobe's Subsidiaries is duly
authorized, validly issued, fully paid and nonassessable, and is owned directly
or indirectly by Teleglobe free and clear of all liens, pledges, security
interests, claims or other encumbrances of any kind whatsoever (including
voting, transfer or similar rights such as rights of first offer or rights of
first refusal).
(c) Capital Structure. (i) As of the date hereof, the authorized capital
stock of Teleglobe consisted of (A) an unlimited number of common shares of
Teleglobe capital stock, of which, at the close of business on June 14, 1998
(after giving effect to the Teleglobe Stock Dividend), 129,306,908 shares were
outstanding and 7,106,364 shares were reserved for issuance pursuant to options
or rights under Teleglobe's Executive Stock Option Plan (the "Teleglobe Option
Plan") and (B) an unlimited number of Class A non-voting shares and preferred
shares, all without par value, of which, at the close of business on June 14,
1998 (after giving effect to the Teleglobe Stock Dividend), 5,000,000 Third
Series Preferred Shares were outstanding. All issued and outstanding shares of
the capital stock of Teleglobe are duly authorized, validly issued, fully paid
and nonassessable and no class of capital stock is entitled to preemptive
rights. There were outstanding as of June 14, 1998 no options, warrants or other
rights to acquire capital stock from Teleglobe other than options or rights to
acquire 3,577,706 common shares of Teleglobe capital stock.
(ii) As of the date of this Agreement, no bonds, debentures, notes or other
indebtedness of Teleglobe having the right to vote on any matters on which
shareholders may vote ("Teleglobe Voting Debt") are issued or outstanding.
(iii) Except as otherwise set forth in this Section 3.2(c), there are no
securities, options, warrants, calls, rights, commitments, agreements,
arrangements or undertakings of any kind to which Teleglobe or any of its
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Subsidiaries is a party or by which any of them is bound obligating Teleglobe or
any of its Subsidiaries to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of capital stock or other voting securities
of Teleglobe or any of its Subsidiaries or obligating Teleglobe or any of its
Subsidiaries to issue, grant, extend or enter into any such security, option,
warrant, call, right, commitment, agreement, arrangement or undertaking. There
are no outstanding obligations of Teleglobe or any of its Subsidiaries to
repurchase, redeem or otherwise acquire any shares of capital stock of Teleglobe
or any of its Subsidiaries. There are no agreements or arrangements pursuant to
which Teleglobe is or could be required to register or qualify common shares of
Teleglobe capital stock or other securities under the Securities Act or any
Canadian Securities Laws, or other agreements or arrangements with or among any
securityholders of Teleglobe with respect to securities of Teleglobe. There are
no voting, sale, transfer or other similar agreements to which Teleglobe or any
of its Subsidiaries is a party with respect to the capital stock of Teleglobe or
Teleglobe's Subsidiaries or any other securities of Teleglobe or Teleglobe's
Subsidiaries which are convertible or exchangeable into or exercisable for
shares of the capital stock of Teleglobe or Teleglobe's Subsidiaries.
(d) Authority; No Conflicts. (i) Teleglobe has all requisite corporate
power and authority to enter into this Agreement and the other Transaction
Documents to which it is or may become a party and, subject to the approval by
the Required Articles Amendment Vote or the Required By-Law Amendment Vote of
the Teleglobe Articles Amendment or the Teleglobe By-Law Amendment,
respectively, to consummate the transactions contemplated hereby and thereby.
The execution and delivery of this Agreement and the other Transaction Documents
to which it is or may become a party and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action on the part of Teleglobe, subject in the case of the Teleglobe
Articles Amendment or the Teleglobe By-Law Amendment, as the case may be, to the
approval by the Required Articles Amendment Vote or the Required By-Law
Amendment Vote, as the case may be. This Agreement has been, and the other
Transaction Documents to which Teleglobe is or may become a party have been or
will be when executed by Teleglobe, duly executed and delivered by Teleglobe,
and each constitutes or will constitute a valid and binding agreement of
Teleglobe, enforceable against it in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws relating to or affecting creditors
generally, by general equity principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law) or by an
implied covenant of good faith and fair dealing.
(ii) The execution and delivery by Teleglobe of this Agreement and the
other Transaction Documents to which it is or may become a party do not and will
not, and the consummation by Teleglobe and Merger Sub of the Merger and the
other transactions contemplated hereby or thereby will not, conflict with, or
result in a Violation pursuant to: (A) any provision of the certificate of
incorporation or by-laws or similar constitutive documents of Teleglobe or any
Subsidiary of Teleglobe, or (B) except as are not, individually or in the
aggregate, reasonably likely to have a Material Adverse Effect on Teleglobe or
prevent or materially delay the performance of this Agreement by Teleglobe and,
subject to obtaining or making the consents, approvals, orders, authorizations,
registrations, declarations and filings referred to in paragraph (iii) below,
any Contract, Law or Permit applicable to Teleglobe or any Subsidiary of
Teleglobe or their respective properties or assets.
(iii) No consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity is required by or with
respect to Teleglobe or any Subsidiary of Teleglobe in connection with the
execution and delivery by Teleglobe of this Agreement and the other Transaction
Documents to which Teleglobe may be a party or the consummation by Teleglobe of
the Merger and the other transactions contemplated hereby or thereby, except for
the Required Consents, if applicable, and those required under or in relation to
the Telecommunications Act (Canada), the Radiocommunication Act (Canada) or the
Telegraphs Act (Canada), the Montreal Exchange (the "ME") and The Toronto Stock
Exchange (the "TSE" and, together with the ME and the NYSE, the "Exchanges") and
such consents, approvals, orders, authorizations, registrations, declarations
and filings the failure of which to make or obtain are not individually or in
the aggregate, reasonably likely to have a Material Adverse Effect on Teleglobe
or prevent or materially delay the performance of this Agreement by Teleglobe.
Neither the execution and delivery by Teleglobe of this Agreement, and the other
Transaction Documents to which Teleglobe is a party nor the consummation and
performance by Teleglobe of the Merger and the other transactions contemplated
hereby or thereby will
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result in a violation of (a) the Federal Communications Laws, (b) the laws,
rules, regulations, orders, practices or policies of any state legislature or
PUC, foreign (including multi-national) telecommunications regulatory agency or
similar state or foreign regulatory body, or (c) any order, writ, judgment,
injunction, decree or award of the FCC, any entity listed in clause (b) above,
or any court of competent jurisdiction binding upon Teleglobe, other than any
violation which is not, individually or in the aggregate, reasonably likely to
have a Material Adverse Effect on Teleglobe.
(iv) Each of Teleglobe and its Subsidiaries is in possession of all Permits
from appropriate Governmental Entities necessary for Teleglobe or any of its
Subsidiaries to own, lease and operate its properties or to carry on their
respective businesses as they are now being conducted (the "Teleglobe Permits"),
and all such Teleglobe Permits are valid and in full force and effect, except
where the failure to have, or the suspension, cancellation or restriction of,
any of the Teleglobe Permits does not and would not, individually or in the
aggregate, (a) have or be reasonably likely to have a Material Adverse Effect on
Teleglobe or (b) prevent or materially delay the performance of this Agreement
by Teleglobe. No suspension, cancellation or restriction of any of the Teleglobe
Permits is pending or, to the actual knowledge of the executive officers of
Teleglobe, threatened, except where the failure to have, or the suspension or
cancellation of, any of Teleglobe Permits does not and would not, individually
or in the aggregate, (x) have or be reasonably likely to have a Material Adverse
Effect on Teleglobe or (y) prevent or materially delay the performance of this
Agreement by Teleglobe. Neither Teleglobe nor any of its Subsidiaries is in
conflict with, or in default, breach or violation of any Teleglobe Permits,
except for such conflicts, defaults, breaches or violations that do not and
would not, individually or in the aggregate, (A) have or be reasonably likely to
have a Material Adverse Effect on Teleglobe or (B) prevent or materially delay
the performance of this Agreement by Teleglobe.
(e) Reports and Financial Statements. Teleglobe has filed all required
reports, schedules, forms, statements and other documents required to be filed
by it with the Canadian securities regulatory authorities (the "CSA") and, to
the extent applicable, the SEC since January 1, 1996 (collectively, including
all exhibits thereto and any registration statement filed since such date, the
"Teleglobe Disclosure Documents"). No Subsidiary of Teleglobe is required to
file any form, report or other document with the CSA or the SEC. None of the
Teleglobe Disclosure Documents filed since January 1, 1998 (the "Recent
Teleglobe Disclosure Documents"), as of their respective dates (and, if amended
or superseded by a filing prior to the date of this Agreement or the Closing
Date, then on the date of such filing), contained or will contain any untrue
statement of a material fact or omitted or will omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. Each of
the financial statements (including the related notes) included in the Teleglobe
Disclosure Documents presents fairly, in all material respects, the consolidated
financial position and consolidated results of operations and cash flows of
Teleglobe and its Subsidiaries as of the respective dates or for the respective
periods set forth therein, all in conformity with Canadian GAAP consistently
applied during the periods involved except as otherwise noted therein, and
subject, in the case of the unaudited interim financial statements, to normal
and recurring year-end adjustments that have not been and are not expected to be
material in amount (and except for the absence of footnotes in the case of such
interim financial statements). All of the Recent Teleglobe Disclosure Documents,
as of their respective dates (and as of the date of any amendment to the
respective Recent Teleglobe Disclosure Documents), complied as to form in all
material respects with the applicable requirements of the Canadian Securities
Laws and, to the extent applicable, to the Securities Act and the Exchange Act
and the rules and regulations promulgated thereunder.
(f) Information Supplied. (i) None of the information supplied or to be
supplied by Teleglobe for inclusion in, or incorporated by reference in, (A) the
Form F-4 will, at the time the Form F-4 is filed with the SEC, at any time it is
amended or supplemented or at the time it becomes effective under the Securities
Act, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, and (B) the Joint Information Statement/Proxy
Statement/Prospectus will, on the date it is first mailed to the stockholders of
Excel or the shareholders of Teleglobe or at the time of the Excel Stockholders
Meeting, if any, or the Teleglobe Shareholders Meeting, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were
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made, not misleading. The Form F-4 and the Joint Information Statement/Proxy
Statement/Prospectus will comply as to form in all material respects with the
applicable requirements of the Exchange Act and the Securities Act and the rules
and regulations of the SEC thereunder and with the applicable requirements of
the Canadian Securities Laws.
(ii) Notwithstanding the foregoing provisions of this Section 3.2(f), no
representation or warranty is made by Teleglobe with respect to statements made
or incorporated by reference in the Form F-4 or the Joint Information
Statement/Proxy Statement/Prospectus based on information supplied by Excel for
inclusion or incorporation by reference therein.
(iii) If at any time prior to the Effective Time any event relating to
Teleglobe or any of its Affiliates, officers or directors should be discovered
by Teleglobe which should be set forth in an amendment to the Form F-4 or a
supplement to the Joint Information Statement/Proxy Statement/Prospectus,
Teleglobe shall promptly inform Excel.
(g) Absence of Certain Changes or Events. Except as disclosed in the
Teleglobe Disclosure Documents filed prior to the date of this Agreement, since
December 31, 1997, Teleglobe and its Subsidiaries have in all material respects
conducted their business in the ordinary course consistent with past practice,
and there has not been any change in the business, condition (financial or
otherwise), assets, liabilities or results of operations of Teleglobe or any of
its Subsidiaries or any event involving Teleglobe or any of its Subsidiaries
which has had, or is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Teleglobe.
(h) Board Approval. The Board of Directors of Teleglobe, by resolutions
adopted at a meeting duly called and held and not subsequently rescinded or
modified (the "Teleglobe Board Approval"), has (i) determined that this
Agreement, and the other Transaction Documents to which Teleglobe is a party and
the transactions contemplated hereby and thereby, including the Share Issuance,
the Teleglobe Articles Amendment and the Teleglobe By-Law Amendment, are in the
best interests of Teleglobe and its shareholders, (ii) approved this Agreement
and the other Transaction Documents to which Teleglobe is a party and the
transactions contemplated hereby and thereby, including the Share Issuance, the
Teleglobe Articles Amendment and the Teleglobe By-Law Amendment, and (iii)
recommended that the shareholders of Teleglobe approve the Share Issuance, the
Teleglobe Articles Amendment and the Teleglobe By-Law Amendment.
(i) Vote Required. No vote of the holders of any class of Teleglobe capital
stock is required to approve the Share Issuance under applicable Canadian law or
the rules of the Exchanges. The affirmative vote of holders of common shares of
Teleglobe capital stock representing (i) two thirds of the total votes cast at a
meeting of the holders of outstanding common shares of Teleglobe capital stock
(such vote, the "Required Articles Amendment Vote") and (ii) a majority of the
total votes cast at a meeting of the holders of outstanding common shares of
Teleglobe capital stock (such vote, the "Required By-Law Amendment Vote") is the
only vote of the holders of any class or series of Teleglobe capital stock
necessary to approve the Teleglobe Articles Amendment and the Teleglobe By-Law
Amendment, respectively, and no other vote of the holders of any class of
capital stock of Teleglobe is required to approve the other transactions
contemplated hereby or by any other Transaction Documents to which it is or may
be a party.
(j) Brokers or Finders. No agent, broker, investment banker, financial
advisor or other firm or Person is or will be entitled to any broker's or
finder's fee or any other similar commission or fee in connection with any of
the transactions contemplated by this Agreement based upon arrangements made by
or on behalf of Teleglobe, except Bear, Stearns & Co. Inc. (the "Teleglobe
Fairness Opinion Banker") and Ian Fisher & Co Inc., each of whose fees and
expenses will be paid by Teleglobe in accordance with Teleglobe's agreements
with such firms based upon arrangements made by or on behalf of Teleglobe and
previously disclosed to Excel.
(k) Opinion of Teleglobe Fairness Opinion Banker. Teleglobe has received
the opinion of the Teleglobe Fairness Opinion Banker dated the date of this
Agreement, to the effect that, as of such date, the Exchange Ratio is fair, from
a financial point of view, to the holders of common shares of Teleglobe capital
stock (the "Teleglobe Fairness Opinion"), a copy of which opinion has been made
available to Excel.
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(l) No Undisclosed Liabilities. Except as disclosed in the Teleglobe
Disclosure Documents filed prior to the date hereof, and except for normal or
recurring liabilities incurred since December 31, 1997 in the ordinary course of
business consistent with past practices, Teleglobe and its Subsidiaries do not
have any liabilities, either accrued, contingent or otherwise (whether or not
required to be reflected in financial statements in accordance with Canadian
GAAP), and whether due or to become due, which, individually or in the
aggregate, are reasonably likely to have a Material Adverse Effect on Teleglobe.
(m) Taxes.
(i) Except for such matters that would not, individually or in the
aggregate, have a Material Adverse Effect on Teleglobe: (A) Teleglobe and each
of its Subsidiaries have (x) timely filed all Federal, national, state,
provincial and local tax returns and reports, whether of the U.S., Canada or
another foreign jurisdiction, required to be filed by them prior to the date of
this Agreement (taking into account extensions), (y) timely paid or accrued all
Taxes due and payable thereon, and (z) timely paid or accrued all Taxes for
which a notice of assessment or collection has been received (other than amounts
being contested in good faith by appropriate proceedings); (B) no tax return of
Teleglobe or any of its Subsidiaries contains a disclosure statement under
Section 6662(d)(2)(B)(ii)(l) of the Code or any similar provision of applicable
Law; (C) neither Teleglobe nor any of its Subsidiaries currently is the
beneficiary of any extension of time within which to file any tax return, other
than with respect to the fiscal year ended December 31, 1997; (D) Teleglobe has
delivered to Excel correct and complete copies of all Federal tax returns,
examination reports and statements of deficiencies assessed against or agreed to
by Teleglobe or any of its Subsidiaries for the past three taxable years of
Teleglobe; (E) with respect to any period for which tax returns are not yet due
(including extensions), or for which Taxes are not yet due and owing, Teleglobe
and each of its Subsidiaries has made due and sufficient current accruals for
such Taxes in the financial statements included in the Recent Teleglobe
Disclosure Documents; (F) neither the IRS nor any other taxing authority has
asserted in writing to Teleglobe any claim for Taxes, or to the actual knowledge
of the executive officers of Teleglobe, is threatening to assert any claims for
Taxes; (G) Teleglobe and each of its Subsidiaries have withheld or collected and
paid over to the appropriate governmental authorities (or are properly holding
for such payment) all Taxes required by Law to be withheld or collected; (H)
neither Teleglobe nor any of its Subsidiaries has made an election under Section
341(f) of the Code; (I) neither Teleglobe nor any of its Subsidiaries has made
any payments, is obligated to make any payments, or is a party to any agreement
that under certain circumstances could obligate it to make any payments that
will not be deductible under Sections 162(m) or 280G of the Code or that will be
subject to excise tax under Section 4999 of the Code; (J) neither Teleglobe nor
any of its Subsidiaries (x) has been a member of an affiliated group within the
meaning of Section 1504(a) of the Code (or any similar group defined under a
similar provision of applicable Law) other than an affiliated group the common
parent of which is Teleglobe and (y) has any liability under Treasury
Regulations Section 1.1502-6 (or any similar provision of applicable Law), as a
transferee or successor, by contract or otherwise for Taxes of any affiliated
group of which Teleglobe is not the common parent; (K) there are no liens for
Taxes upon the assets of Teleglobe or any of its Subsidiaries (other than liens
for Taxes that are not yet due or that are being contested in good faith by
appropriate proceedings); (L) neither Teleglobe nor any of its Subsidiaries is
the subject of any currently ongoing Tax audit, other than in the ordinary
course of business consistent with past practice; (M) there are no pending
requests for waivers of the time to assess any Tax, other than those made in the
ordinary course and for which payment has been made or there are adequate
reserves; and (N) neither Teleglobe nor any of its Subsidiaries has waived any
statute of limitations in respect of Taxes or agreed to any extension of time
with respect to a Tax assessment or deficiency.
(n) Properties.
(i) Section 3.2(n)(i) of the Teleglobe Disclosure Schedule contains a true
and complete list of all real property leased by Teleglobe or its Subsidiaries
pursuant to Material Leases. Each of Teleglobe and its Subsidiaries is not in
default under any of such leases, except where the existence of such defaults,
individually or in the aggregate, are not reasonably likely to have a Material
Adverse Effect on Teleglobe.
(ii) The Teleglobe Disclosure Schedule contains a true and complete list of
all real property that Teleglobe or any of its Subsidiaries owns. With respect
to each such item of real property, except for such
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matters which are not reasonably likely, individually or in the aggregate, to
have a Material Adverse Effect on Teleglobe: (x) Teleglobe or the identified
Subsidiary has good and marketable title to such property, free and clear of any
security interest, easement, covenant or other restriction, except for recorded
easements, covenants and other restrictions which do not materially impair the
current uses or occupancy of such property; and (y) the improvements constructed
on such property are in good condition, and all mechanical and utility systems
servicing such improvements are in good condition, free in each case of material
defects.
(o) Intellectual Property. To the actual knowledge of the executive
officers of Teleglobe, Teleglobe and its Subsidiaries own, or are licensed or
otherwise possess the rights to use, all intellectual property, including
patents, inventions, discoveries, technology, know-how, copyrights and
copyrightable works (including computer software, databases, code and related
systems, files and applications), trademarks, service marks, trade names, trade
dress, Internet domain names, trade secrets, confidential information,
specifications and designs that are necessary to conduct the business of
Teleglobe and its Subsidiaries in all material respects as currently conducted
(the "Teleglobe Intellectual Property"). All of the Teleglobe Intellectual
Property necessary to conduct the business of Teleglobe as currently conducted
in all material respects is subsisting and unexpired, has not been abandoned,
does not infringe or otherwise impair the intellectual property rights of any
third party, is not subject to any lien or other encumbrance, and does not
require the consent of any other Person to be used by Teleglobe upon the
consummation of the transactions contemplated by this Agreement (except for any
such consent already obtained). No action, suit or proceeding is pending, or to
the actual knowledge of the executive officers of Teleglobe, threatened by any
third party or any Governmental Entity that seeks to limit, cancel or question
the validity of, or Teleglobe's rights to, any Teleglobe Intellectual Property.
Teleglobe has taken reasonable steps to protect, maintain and safeguard the
Teleglobe Intellectual Property, including any Teleglobe Intellectual Property
for which improper or unauthorized disclosure would impair its value or
validity. To the actual knowledge of the executive officers of Teleglobe, no
other Person is infringing or otherwise impairing any of the Teleglobe
Intellectual Property.
(p) Agreements, Contracts and Commitments. Neither Teleglobe nor any of its
Subsidiaries has breached, or received in writing any claim or notice that it
has breached, any of the terms or conditions of any material Contract to which
it is a party ("Teleglobe Material Contracts"), other than any breaches which,
individually or in the aggregate, would have a Material Adverse Effect on
Teleglobe. Each Teleglobe Material Contract that has not expired by its terms is
in full force and effect.
(q) Litigation. Except as disclosed in the Teleglobe Disclosure Documents
filed prior to the date hereof, there are no actions, suits, investigations or
proceedings (adjudicatory, rulemaking or otherwise) pending or, to the actual
knowledge of the executive officers of Teleglobe, threatened, nor any orders,
decrees or judgments issued, against Teleglobe or any of its Subsidiaries (or
any Teleglobe Employee Plan), or any property of Teleglobe or any such
Subsidiary (including Teleglobe Intellectual Property), before any arbitrator of
any kind or in or before or by any Governmental Entity, except actions, suits,
investigations, proceedings orders, decrees or judgments which, individually or
in the aggregate, do not and are not reasonably likely to (a) have a Material
Adverse Effect on Teleglobe or (b) prevent or materially delay the performance
of this Agreement by Teleglobe.
(r) Environmental Matters.
(i) Except for such matters that, individually or in the aggregate, are not
reasonably likely to have a Material Adverse Effect on Teleglobe: (a) Teleglobe
and its Subsidiaries comply and within all applicable statutes of limitations
periods have complied with all applicable Environmental Laws and all applicable
Permits under applicable Environmental Laws; (b) Hazardous Substances are not
present at any of the properties (including soils, groundwater, surface water,
buildings or other structures) owned or operated by Teleglobe or any of its
Subsidiaries in violation of or at concentrations that would require remediation
under any Environmental Law; (c) neither Teleglobe nor its Subsidiaries is
subject to liability for any Hazardous Substance disposal or contamination on
any third party property; (d) neither Teleglobe nor any of its Subsidiaries has
been associated with any release or threat of release of any Hazardous Substance
in violation or otherwise in excess of levels of concentration permitted by any
Environmental Laws; (e) neither Teleglobe nor any of its Subsidiaries has
received any written notice, demand, letter, claim or request for information
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alleging that Teleglobe or any of its Subsidiaries may be in violation of or
liable under any Environmental Law; (f) neither Teleglobe 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; (g) there are no
circumstances or conditions involving Teleglobe or any of its Subsidiaries that
would reasonably be expected to result in any claims, liability, investigations,
costs or restrictions on the ownership, use or transfer of any property of
Teleglobe or any of its Subsidiaries pursuant to any Environmental Law and (h)
to the actual knowledge of the executive officers of Teleglobe and its
Subsidiaries, the foregoing representations and warranties also apply to any
liability that Teleglobe or any of its Subsidiaries retained or assumed either
contractually or by operation of law.
(ii) To the actual knowledge of the executive officers of Teleglobe, (A) no
underground storage tanks are or have been located on any real property owned,
operated or leased by Teleglobe or its Subsidiaries, except for those that are
maintained in material compliance with Environmental Laws and (B) no real
property owned, operated or leased by Teleglobe or its Subsidiaries has been
used or is used as a landfill or waste disposal site.
(iii) Teleglobe has made available to Excel copies of all environmentally
related audits, assessments, studies, reports, analyses and results of
investigations of any real property currently or formerly owned, operated or
leased by Teleglobe or its Subsidiaries that are in the possession, custody or
control of Teleglobe.
(s) US Employee Benefit Plans.
(i) Teleglobe has listed in Section 3.2(s) of the Teleglobe Disclosure
Schedule all employee benefit plans (as defined in Section 3(3) of ERISA) and
all bonus, stock option, stock purchase, incentive, deferred compensation,
supplemental retirement, severance and other similar US employee benefit plans,
and all unexpired severance agreements, written or otherwise, for the benefit
of, or relating to, any current or former US employee of Teleglobe or any trade
or business (whether or not incorporated) which is a member or which is under
common control with Teleglobe within the meaning of Section 414 of the Code, or
any Subsidiary of Teleglobe (together, the "US Teleglobe Employee Plans").
(ii) With respect to each US Teleglobe Employee Plan, Teleglobe has made
available to Excel, a true and correct copy of (w) the most recent annual report
(Form 5500) filed with the IRS, (x) such US Teleglobe Employee Plan, (y) each
trust agreement and group annuity contract, if any, relating to such US
Teleglobe Employee Plan and (z) the most recent actuarial report or valuation
relating to a US Teleglobe Employee Plan subject to Title IV of ERISA.
(iii) With respect to the US Teleglobe Employee Plans, individually and in
the aggregate, such plans are being administered in accordance with their terms
and applicable Laws and no event has occurred, and to the actual knowledge of
the executive officers of Teleglobe, there exists no condition or set of
circumstances in connection with which Teleglobe could be subject to any
liability which would have a Material Adverse Effect on Teleglobe under ERISA,
the Code or any other applicable Law.
(iv) With respect to the US Teleglobe Employee Plans, individually and in
the aggregate, there are no funded benefit obligations for which contributions
have not been made or properly accrued and there are no unfunded benefit
obligations which have not been accounted for by reserves, or otherwise properly
footnoted in accordance with Canadian GAAP, on the financial statements of
Teleglobe contained in the Teleglobe Disclosure Documents, except for any such
funded or unfunded benefit obligations which are not reasonably likely to have a
Material Adverse Effect on Teleglobe.
(v) Except as disclosed in Teleglobe Disclosure Documents filed prior to
the date of this Agreement, and except as provided for in this Agreement,
neither Teleglobe nor any of its Subsidiaries is a party to any oral or written
(x) agreement with any US officer or other US key employee of Teleglobe or any
of its Subsidiaries, the benefits of which are contingent, or the terms of which
are materially altered, upon the occurrence of a transaction involving Teleglobe
of the nature contemplated by this Agreement, (y) agreement with any US officer
of Teleglobe providing any term of employment or compensation guarantee
extending for a period longer than one year from the date hereof and for the
payment of compensation in excess of $100,000
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per annum or (z) US agreement or plan, including any stock option plan, stock
appreciation right plan, restricted stock plan or stock purchase plan, any of
the benefits of which will be increased, or the vesting of the benefits of which
will be accelerated, by the occurrence of any of the transactions contemplated
by this Agreement or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated by this
Agreement.
(t) Canadian Employee Benefit Plans. Teleglobe has listed in Section 3.2(t)
of the Teleglobe Disclosure Schedule a list of all pension, retirement, bonus,
profit sharing, compensation, incentive, stock purchase, stock option, savings,
insurance, medical, hospitalization, disability, death, and other similar plans,
programs, arrangements or practices (written or otherwise) covering any or all
of its Canadian employees or its Subsidiaries (the "Canadian Teleglobe Employee
Plans" and, together with the US Teleglobe Employee Plans, the "Teleglobe
Employee Plans").
(i) With respect to each Canadian Teleglobe Employee Plan, Teleglobe has
made available to Excel a true and correct copy of (x) such Canadian Teleglobe
Employee Plan and (y) the most recent actuarial report or valuation relating to
a Canadian Teleglobe Employee Plan, if any;
(ii) With respect to the Canadian Teleglobe Employee Plans, individually
and in the aggregate, such plans are being administered in accordance with their
terms and applicable Canadian Laws and no event has occurred, and to the actual
knowledge of the executive officers of Teleglobe, there exists no condition or
set of circumstances in connection with which Teleglobe could be subject to any
liability which would have a Material Adverse Effect on Teleglobe under any
applicable Canadian Law;
(iii) With respect to the Canadian Teleglobe Employee Plans, individually
and in the aggregate, there are no funded benefit obligations for which
contributions have not been made or properly accrued under the terms of such
plans and applicable Canadian Laws and there are no unfunded benefit obligations
which have not been accounted for by reserves, or otherwise properly footnoted
in accordance with Canadian GAAP, on the financial statements of Teleglobe
contained in the Teleglobe Disclosure Documents, which obligations would have a
Material Adverse Effect on Teleglobe;
(iv) Except as disclosed in Teleglobe Disclosure Documents filed prior to
the date of this Agreement, and except as provided for in this Agreement,
neither Teleglobe nor any of its Subsidiaries is a party to any oral or written
(x) agreement with any Canadian officer or other Canadian key employee of
Teleglobe or any of its Subsidiaries, the benefits of which are contingent, or
the terms of which are materially altered, upon the occurrence of a transaction
involving Teleglobe of the nature contemplated by this Agreement, (y) agreement
with any Canadian officer of Teleglobe providing any term of employment or
compensation guarantee extending for a period longer than one year from the date
thereof and for the payment of compensation in excess of $100,000 per annum, or
(z) Canadian agreement or plan, including any stock option plan, stock
appreciation right plan, restricted stock plan or stock purchase plan, any of
the benefits of which will be increased, or the vesting of the benefits of which
will be accelerated, by the occurrence of any of the transactions contemplated
by this Agreement or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated by this
Agreement.
(u) Compliance With Laws. Teleglobe has complied with, is not in violation
of, and has not received any written notices of violation with respect to, any
Law applicable to Teleglobe or any of its Subsidiaries or by which any property,
asset or operation of Teleglobe or any of its Subsidiaries is bound or affected
with respect to the conduct of its business, or the ownership or operation of
its business, except for failures to comply or violations which would not,
individually or in the aggregate, have a Material Adverse Effect on Teleglobe.
(v) Accounting and Tax Matters. Neither Teleglobe nor any of its
Subsidiaries has taken or agreed to take any action which (i) would reasonably
be expected to prevent Teleglobe from accounting for the business combination to
be effected by the Merger as a pooling of interests under US GAAP or Canadian
GAAP or (ii) would cause any representation contained in the certificates
relating to the tax-free reorganization treatment attached hereto as Exhibits G
and H to be untrue.
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(w) Labor Matters. Except as disclosed in the Teleglobe Disclosure
Documents filed prior to the date hereof, neither Teleglobe nor any of its
Subsidiaries is a party to or otherwise bound by any collective bargaining
agreement, contract or other agreement or understanding with a labor union or
labor organization, nor is any such contract or agreement presently being
negotiated, nor is there, nor has there been in the last five years, any
application for certification or recognition by any union or organization
respecting any of the employees of Teleglobe or its Subsidiaries, nor is
Teleglobe or any of its Subsidiaries a party to, or bound by, any consent decree
with, or citation by, any Governmental Entity relating to employees or
employment practices and, to the actual knowledge of the executive officers of
Teleglobe, there are no campaigns being conducted to solicit cards from
employees of Teleglobe or its Subsidiaries to authorize representation by any
labor organization. As of the date hereof, neither Teleglobe nor any of its
Subsidiaries is the subject of any material proceeding asserting that Teleglobe
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, as of
the date of this Agreement, is there pending or, to the actual knowledge of the
executive officers of Teleglobe, threatened, any material labor strike, dispute,
walkout, work stoppage, slow-down or lockout involving Teleglobe or any of its
Subsidiaries nor has there been one in the past five years.
(x) Insurance. All material fire and casualty, general liability, business
interruption, product liability, and sprinkler and water damage insurance
policies and directors and officers liability insurance policies maintained by
Teleglobe or any of its Subsidiaries are with reputable insurance carriers,
provide full and adequate coverage for all normal risks incident to the business
of Teleglobe and its Subsidiaries and their respective properties and assets,
and are in character and amount at least equivalent to that carried by Canadian
persons engaged in similar businesses and subject to the same or similar perils
or hazards, except for any such failures to maintain insurance policies that,
individually or in the aggregate, are not reasonably likely to have a Material
Adverse Effect on Teleglobe.
(y) No Existing Discussions. As of the date hereof, Teleglobe is not
engaged, directly or indirectly, in any discussions or negotiations with any
other party with respect to an Acquisition Proposal.
(z) Anti-Takeover Laws; Shareholder Rights Plan. No "fair price,"
"moratorium," "control share acquisition" or other similar anti-takeover statute
or regulation is applicable, by reason of Teleglobe's being a party to the
Merger, this Agreement or any of the other Transaction Documents to which it is
a party or the transactions contemplated hereby or thereby or by reason of the
execution by Teleglobe's shareholders party thereto of the Teleglobe Consent and
Voting Agreement and the transactions contemplated thereby and neither Teleglobe
nor its Subsidiaries is a party to any "shareholders rights" plan or similar
anti-takeover plan.
(aa) Year 2000. Teleglobe has developed and is in the process of
implementing a plan which it believes in good faith is sufficient to ensure that
in all material respects all Software that it owns, possesses and/or uses is or
will be designed to be used prior to, during and after the calendar year 2000
A.D., and will operate in all material respects during each such time period,
either on a stand-alone basis, or by interacting or interoperating with
third-party Software, without material error relating to the processing,
calculating, comparing, sequencing or other use of date data, including (i) any
material error relating to or resulting from Century-Based Data, (ii) any
abnormal ending or provision of materially invalid or incorrect results as a
result of any Century-Based Data or (iii) any material error relating to century
recognition or calculations accommodating Century-Based Data, values or
formulae, and that the implementation of such plan is expected in good faith to
be completed in a timely manner. Teleglobe has performed all necessary due
diligence and is in the process of performing tests and implementing
modifications to all Software that it owns, possesses and/or uses to design an
appropriate plan and to ensure the accuracy of this representation and warranty.
(ab) Pooling Letters. Teleglobe has received a letter from KPMG Peat
Marwick LLP addressed to Teleglobe regarding its concurrence with Teleglobe's
management's conclusions as to the appropriateness of the pooling of interests
accounting under US GAAP (under Accounting Principles Board Opinion No. 16) and
a letter from KPMG as to the appropriateness of pooling of interests accounting
under Canadian GAAP (under Section 1580 of The Canadian Institute of Chartered
Accountants Handbook), respectively, for the Merger, as contemplated to be
effected as of the date of the letters.
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(ac) Certain Regulatory Matters.
(i) Except for billing disputes with customers arising in the ordinary
course of business that in the aggregate involve immaterial amounts, there are
no proceedings or investigations pending or, to the actual knowledge of the
executive officers of Teleglobe, threatened, before any Governmental Entity
directed specifically at Teleglobe or, in the case of matters of general
applicability to the telecommunications industry, in which Teleglobe is
identified for possible disparate treatment, or whose outcome may have a
disparate impact on Teleglobe, in which any of the following matters are being
considered which are reasonably likely to have a Material Adverse Effect on
Teleglobe, nor has Teleglobe or any of its Subsidiaries received written notice
or inquiry from any Governmental Entity, indicating that any of such matters
should be considered or may become the object of consideration or investigation
specifically regarding Teleglobe which are reasonably likely to have a Material
Adverse Effect on Teleglobe or, in the case of matters of general applicability
to the telecommunications industry, in which Teleglobe is identified for
possible disparate treatment, or whose outcome may have a disparate impact on
Teleglobe: (u) increases in access charges, universal service contributions or
the like; (v) traffic routing restrictions or restrictions on use of facilities;
(w) reduction or restriction of rates charged to customers; (x) reduction of
earnings; (y) refunds or other forfeitures of amounts previously charged to
customers; or (z) failure to meet any expense, infrastructure, service quality
or other commitments previously made to or imposed by Governmental Entity.
(ii) Neither Teleglobe nor any of its Subsidiaries has any outstanding
commitments made in the context of a matter or proceeding related specifically
to Teleglobe or, in the case of matters of general applicability to the
telecommunications industry, in which Teleglobe is identified for possible
disparate treatment or whose outcome may have a disparate impact on Teleglobe
(and no such obligations have been imposed upon Teleglobe and remain
outstanding) regarding (u) increases in access charges, universal service
contributions or the like; (v) traffic routing restrictions or restrictions on
use of facilities; (w) reduction or restriction of rates charged to customers;
(x) reduction of earnings; (y) refunds or other forfeitures of amounts
previously charged to customers; or (z) expenses, infrastructure expenditures,
service quality or other regulatory requirements, to or by any Governmental
Entity, in each case which are reasonably likely to have a Material Adverse
Effect on Teleglobe.
(iii) Teleglobe has not transferred, sold any interest in or otherwise
taken any action to reduce its control over any Federal or national or state or
provincial regulatory licenses, certificates, approvals or other authorizations
under which it operates, U.S., Canadian or foreign, and the transfer of such
authorizations, subject to regulatory approval, would not violate the terms of
any agreement to which Teleglobe is a party or by which Teleglobe is bound, or
impinge the rights of any third party.
(ad) No Plan or Intention to Dispose of Surviving Corporation. Teleglobe
has no plan or intention to dispose in any manner of any of the Surviving
Corporation Common Stock or to dispose in any manner, or permit or cause the
Surviving Corporation to dispose in any manner, of any of the assets of the
Surviving Corporation, other than dispositions of assets of the Surviving
Corporation in the ordinary course of business which do not constitute
dispositions of all or a substantial portion (within the meaning of Treasury
Regulation Section 1.367(a)-3T(g)(3)) of the assets of the Surviving
Corporation.
3.3 REPRESENTATIONS AND WARRANTIES OF TELEGLOBE AND MERGER SUB. Each of
Teleglobe and Merger Sub, jointly and severally, represents and warrants to
Excel as follows:
(a) Organization and Corporate Power. Merger Sub was incorporated on June
11, 1998, and is a corporation duly incorporated, validly existing and in good
standing under the laws of Delaware. Merger Sub is a direct wholly owned
Subsidiary of Teleglobe.
(b) Capital Structure. (i) The authorized capital stock of Merger Sub
consists of 1,000 shares of Merger Sub Common Stock, of which 1,000 shares are
outstanding as of the date hereof. All issued and outstanding shares of the
capital stock of Merger Sub are duly authorized, validly issued, fully paid and
nonassessable. There are not as of the date hereof and there will not be as of
the Effective Time any outstanding or authorized options, warrants, calls,
rights, commitments or any other agreements of any
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character to or by which Merger Sub is a party or may be bound requiring it to
issue, transfer, sell, purchase, redeem or acquire any shares of capital stock
or any securities or rights convertible into, exchangeable for, or evidencing
the right to subscribe for or acquire, any shares of capital stock of Merger
Sub.
(c) Corporate Authorization. Merger Sub has all requisite corporate power
and authority to enter into this Agreement and any other Transaction Document to
which it may become a party and to consummate the transactions contemplated
hereby and thereby. The execution, delivery and performance by Merger Sub of
this Agreement and any other Transaction Document to which it may become a party
and the consummation of the transactions contemplated hereby and thereby have
been duly authorized by all necessary corporate action on the part of Merger
Sub. This Agreement has been, and any other Transaction Document to which it may
become a party will be, duly executed and delivered by Merger Sub and each
constitutes or will constitute a valid and binding agreement of Merger Sub,
enforceable against it in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and other similar laws relating to or affecting
creditors generally, by general equity principles (regardless or whether such
enforceability is considered in a proceeding in equity or at law) or by an
implied covenant of good faith and fair dealing.
(d) Non-Contravention. The execution, delivery and performance by Merger
Sub of this Agreement and any other Transaction Document to which it may be a
party and the consummation by Merger Sub of the transactions contemplated hereby
and thereby do not and will not contravene or conflict with the certificate of
incorporation or by-laws of Merger Sub or any Contract, Law or Permit applicable
to Merger Sub or its properties or assets.
(e) No Business Activities. Merger Sub was formed for the purpose of
consummating the transactions contemplated hereby and has not conducted any
activities other than in connection with the organization of Merger Sub, the
negotiation and execution of this Agreement and the consummation of the
transactions contemplated hereby. Merger Sub has no Subsidiaries and no material
assets or liabilities and is not a party to any agreement (except this
Agreement).
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
4.1 COVENANTS OF EXCEL. During the period from the date of this Agreement
and continuing until the Effective Time, Excel agrees as to itself and its
Subsidiaries that (except as expressly contemplated or permitted by this
Agreement or as set forth in the Excel Disclosure Schedule or to the extent that
Teleglobe shall otherwise consent in writing, which consent shall not
unreasonably be withheld):
(a) Ordinary Course. (i) Excel and its Subsidiaries shall carry on their
respective businesses in the usual, regular and ordinary course in all material
respects, in substantially the same manner as heretofore conducted, and shall
use all reasonable efforts to preserve intact their present lines of business,
maintain their rights and franchises and preserve their relationships with
customers, suppliers, regulators, distributors, creditors, lessors, employees
and others having business dealings with them to the end that their ongoing
businesses shall not be impaired in any material respect at the Effective Time;
provided, however, that no action by Excel or its Subsidiaries with respect to
matters specifically addressed by any other provision of this Section 4.1 shall
be deemed a breach of this Section 4.1(a)(i) unless such action would constitute
a breach of one or more of such other provisions.
(ii) Excel shall not, and shall not permit any of its Subsidiaries to, (A)
alter the fundamental nature of its business or enter into material new lines of
business outside the communications industry, except as disclosed in the Excel
Disclosure Documents or as set forth in Excel's current business plan, a copy of
which has been previously provided to Teleglobe, or (B) incur or commit to any
capital expenditures other than capital expenditures incurred or committed to in
the ordinary course of business consistent with past practice.
(b) Dividends; Changes in Share Capital. Excel shall not, and shall not
permit any of its Subsidiaries to, and shall not propose to, (i) declare, set
aside or pay any dividends on or make other distributions in
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respect of any of its capital stock, except dividends by wholly owned
Subsidiaries of Excel, (ii) split, combine, subdivide or reclassify any of its
capital stock or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution for, shares of its
capital stock, except for any such transaction by a wholly owned Subsidiary of
Excel, or (iii) repurchase, redeem or otherwise acquire any shares of its
capital stock or any securities convertible into or exercisable for any shares
of its capital stock.
(c) Issuance of Securities. Excel shall not, and shall not permit any of
its Subsidiaries to, issue, deliver, sell, transfer, pledge or otherwise
encumber or authorize or propose the issuance, delivery, sale, transfer, pledge
or encumbrance of, any shares of its capital stock of any class, any Excel
Voting Debt or any securities convertible into or exercisable for, or any
rights, warrants or options to acquire, any such shares or Excel Voting Debt, or
enter into any agreement with respect to any of the foregoing, other than (i)
the issuance of Excel Common Stock upon the exercise of stock options or in
connection with other stock-based benefits plans outstanding on the date hereof
in accordance with their current terms and (ii) issuances by a wholly owned
Subsidiary of Excel of capital stock to such Subsidiary's parent or another
wholly owned Subsidiary of Excel.
(d) Governing Documents. Except as expressly set forth herein or as
required by applicable Law, Excel and its Subsidiaries shall not amend, in the
case of Subsidiaries, in any material respect, or propose to amend their
respective certificates of incorporation, by-laws or other governing documents.
(e) No Acquisitions. Other than acquisitions for cash in existing or
related lines of business of Excel the fair market value of the total
consideration (including the value of indebtedness or other liability acquired
or assumed) for which does not exceed $100 million in the aggregate, Excel shall
not, and shall not permit any of its Subsidiaries to, acquire or agree to
acquire by merging or consolidating with, or by purchasing a substantial equity
interest in or a substantial portion of the assets of, or by any other manner,
any business or any corporation, partnership, association or other business
organization or division thereof or otherwise acquire or agree to acquire any
assets (other than the acquisition of assets used in the operations of the
business of Excel and its Subsidiaries in the ordinary course); provided,
however, that the foregoing shall not prohibit (x) internal reorganizations or
consolidations involving existing Subsidiaries of Excel or (y) the creation of
new Subsidiaries of Excel organized to conduct or continue activities otherwise
permitted by this Agreement.
(f) No Dispositions. Other than (i) internal reorganizations or
consolidations involving existing Subsidiaries of Excel, (ii) dispositions
referred to in the Excel Disclosure Documents filed prior to the date of this
Agreement or (iii) other dispositions of assets having a fair market value at
the time of disposition not in excess of $100,000,000, Excel shall not, and
shall not permit any Subsidiary of Excel to, sell, lease, encumber or otherwise
dispose of, or agree to sell, lease, encumber or otherwise dispose of, any of
its assets (including capital stock of Subsidiaries of Excel) which are
material, individually or in the aggregate, to Excel and its Subsidiaries, taken
as a whole.
(g) Investments; Indebtedness. Excel shall not, and shall not permit any of
its Subsidiaries to, (i) other than in connection with actions permitted by
Section 4.1(e), make any loans, advances or capital contributions to, or
investments in, any other Person, other than by Excel or a Subsidiary of Excel
to or in Excel or any wholly owned Subsidiary of Excel or (ii) pay, discharge or
satisfy any claims, liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), or settle any litigation, other than
indebtedness, issuances of debt securities, guarantees, loans, advances, capital
contributions, investments, payments, discharges or satisfactions incurred or
committed to in the ordinary course of business consistent with past practice.
(h) Pooling-of-Interests; Tax-Free Qualification. Excel shall not, and
shall not permit any of its Subsidiaries to, take any action which (i) would
reasonably be expected to prevent or impede the Merger from qualifying for
pooling-of-interests accounting treatment under US GAAP or Canadian GAAP or (ii)
would cause any representation contained in the certificates relating to the
tax-free reorganization treatment attached hereto as Exhibits G and H to be
untrue.
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(i) Other Actions. Excel shall not, and shall not permit any of its
Subsidiaries to, take any action that would reasonably be expected to result in
any of the conditions to the Merger set forth in Article VI not being satisfied.
(j) Accounting Methods; Income Tax Elections. Except as disclosed in the
Excel Disclosure Documents filed prior to the date of this Agreement, or as
required by a Governmental Entity, Excel shall not change its methods of
accounting in effect at March 31, 1998, except as required by changes in US GAAP
as concurred in by Excel's independent auditors. Excel shall not (i) change its
fiscal year or (ii) make any material Tax election, except as required by Law.
(k) Excel Employee Plans. Excel agrees as to itself and its Subsidiaries
that it will not (i) enter into, adopt, amend (except as may be required by
Law), renew or terminate any Excel Employee Plan, or any other employee benefit
plan or any agreement, arrangement, plan or policy between Excel or any of its
Subsidiaries and one or more of its directors or officers, (ii) increase or
accelerate the compensation or fringe benefits of any of its directors, officers
or employees, except for normal increases in salary or wages of employees of
Excel who are not directors or executive officers of Excel in the ordinary
course of business consistent with past practice that, in the aggregate, do not
result in a material increase in benefits or compensation expense to Excel,
(iii) grant any stock options, stock appreciation rights, restricted stock,
restricted stock units or performance units or shares other than as required by
existing agreements with individual employees, or enter into any contract,
agreement, commitment or arrangement to do any of the foregoing or (iv) enter
into or renew any contract, agreement, commitment or arrangement providing for
the payment to any director, officer or employee of such party of compensation
or benefits contingent, or the terms of which are materially altered, upon the
occurrence of any of the transactions contemplated by this Agreement.
(l) Contracts. Excel agrees, as to itself and its Subsidiaries, not to take
or omit to take any act which would cause a breach of any Contract if the result
would reasonably be expected to have a Material Adverse Effect on Excel.
4.2 COVENANTS OF TELEGLOBE. During the period from the date of this
Agreement and continuing until the Effective Time, Teleglobe agrees as to itself
and its Subsidiaries that (except as expressly contemplated or permitted by this
Agreement or as set forth in the Teleglobe Disclosure Schedule or to the extent
that Excel shall otherwise consent in writing, which consent shall not
unreasonably be withheld):
(a) Ordinary Course. (i) Teleglobe and its Subsidiaries shall carry on
their respective businesses in the usual, regular and ordinary course in all
material respects, in substantially the same manner as heretofore conducted, and
shall use all reasonable efforts to preserve intact their present lines of
business, maintain their rights and franchises and preserve their relationships
with customers, suppliers, regulators, distributors, creditors, lessors,
employees and others having business dealings with them to the end that their
ongoing businesses shall not be impaired in any material respect at the
Effective Time; provided, however, that no action by Teleglobe or its
Subsidiaries with respect to matters specifically addressed by any other
provision of this Section 4.2 shall be deemed a breach of this Section 4.2(a)(i)
unless such action would constitute a breach of one or more of such other
provisions.
(ii) Teleglobe shall not, and shall not permit any of its Subsidiaries to,
(A) alter the fundamental nature of its business or enter into material new
lines of business outside the communications industry, except as disclosed in
the Teleglobe Disclosure Documents or as set forth in Teleglobe's current
business plan, a copy of which has been previously provided to Excel, or (B)
incur or commit to any capital expenditures other than capital expenditures
incurred or committed to in the ordinary course of business consistent with past
practice.
(b) Dividends; Changes in Share Capital. Except for the Teleglobe Stock
Dividend, Teleglobe shall not, and shall not permit any of its Subsidiaries to,
and shall not propose to, (i) declare, set aside or pay any dividends on or make
other distributions in respect of any of its capital stock, except (A) Teleglobe
may continue the declaration and payment of regular quarterly cash dividends in
amounts and at times consistent with past practice (including increases in such
amounts consistent with past practice), (B) Teleglobe may declare and/or pay a
dividend for the period from the last dividend record date prior to the Closing
Date through, but not including, the Closing Date to Teleglobe shareholders of
record as of a date prior to the
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Closing Date in an amount not in excess of the product of (a) the quotient of
(I) the number of days from and including the last dividend payment date through
but not including the Closing Date over (II) the number of days in the quarter
in which such dividend is being paid and (b) the amount per common share of
Teleglobe capital stock of the dividend paid by Teleglobe in the immediately
preceding quarter and (C) dividends by wholly owned Subsidiaries of Teleglobe,
(ii) split, combine, subdivide or reclassify any of its capital stock or issue
or authorize or propose the issuance of any other securities in respect of, in
lieu of or in substitution for, shares of its capital stock, except for any such
transaction by a wholly owned Subsidiary of Teleglobe or (iii) repurchase,
redeem or otherwise acquire any shares of its capital stock or any securities
convertible into or exercisable for any shares of its capital stock.
(c) Issuance of Securities. Teleglobe shall not, and shall not permit any
of its Subsidiaries to, issue, deliver, sell, transfer, pledge or otherwise
encumber or authorize or propose the issuance, delivery, sale, transfer, pledge
or encumbrance of any shares of its capital stock of any class, any Teleglobe
Voting Debt or any securities convertible into or exercisable for, or any
rights, warrants or options to acquire, any such shares or Teleglobe Voting
Debt, or enter into any agreement with respect to any of the foregoing, other
than (i) the issuance of common shares of Teleglobe capital stock upon the
exercise of stock options or in connection with other stock-based benefits plans
outstanding on the date hereof in accordance with their current terms, (ii) the
conversion of shares of Convertible Preferred Stock of Teleglobe outstanding on
the date hereof and (iii) issuances by a wholly owned Subsidiary of Teleglobe of
capital stock to such Subsidiary's parent or another wholly owned Subsidiary of
Teleglobe.
(d) Governing Documents. Except as expressly set forth herein or as
required by applicable Law, Teleglobe and its Subsidiaries shall not amend, in
the case of Subsidiaries, in any material respect, or propose to amend their
respective certificates of incorporation, by-laws or other governing documents.
(e) No Acquisitions. Other than acquisitions for cash in existing or
related lines of business of Teleglobe the fair market value of the total
consideration (including the value of indebtedness or other liability acquired
or assumed) for which does not exceed $100 million in the aggregate, Teleglobe,
shall not, and shall not permit any of its Subsidiaries to, acquire or agree to
acquire by merging or consolidating with, or by purchasing a substantial equity
interest in or a substantial portion of the assets of, or by any other manner,
any business or any corporation, partnership, association or other business
organization or division thereof or otherwise acquire or agree to acquire any
assets (other than the acquisition of assets used in the operations of the
business of Teleglobe and its Subsidiaries in the ordinary course); provided,
however, that the foregoing shall not prohibit (x) internal reorganizations or
consolidations involving existing Subsidiaries of Teleglobe or (y) the creation
of new Subsidiaries of Teleglobe organized to conduct or continue activities
otherwise permitted by this Agreement.
(f) No Dispositions. Other than (i) internal reorganizations or
consolidations involving existing Subsidiaries of Teleglobe, (ii) dispositions
referred to in the Teleglobe Disclosure Documents filed prior to the date of
this Agreement or (iii) other dispositions of assets having a fair market value
at the time of disposition not in excess of $100,000,000, Teleglobe shall not,
and shall not permit any Subsidiary of Teleglobe to, sell, lease, encumber or
otherwise dispose of, or agree to sell, lease, encumber or otherwise dispose of,
any of its assets (including capital stock of Subsidiaries of Teleglobe) which
are material, individually or in the aggregate, to Teleglobe and its
Subsidiaries, taken as a whole.
(g) Investments; Indebtedness. Teleglobe shall not, and shall not permit
any of its Subsidiaries to, (i) other than in connection with actions permitted
by Section 4.2(e), make any loans, advances or capital contributions to, or
investments in, any other Person, other than by Teleglobe or a Subsidiary of
Teleglobe to or in Teleglobe or any wholly owned Subsidiary of Teleglobe or (ii)
pay, discharge or satisfy any claims, liabilities or obligations (absolute,
accrued, asserted or unasserted, contingent or otherwise), or settle any
litigation, other than indebtedness, issuances of debt securities, guarantees,
loans, advances, capital contributions, investments, payments, discharges or
satisfactions incurred or committed to in the ordinary course of business
consistent with past practice.
(h) Pooling-of-Interests; Tax-Free Qualification. Teleglobe shall not, and
shall not permit any of its Subsidiaries to, take any action which (i) would
reasonably be expected to prevent or impede the Merger from
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qualifying for pooling-of-interests accounting treatment under US GAAP or
Canadian GAAP (ii) would cause any representation contained in the certificates
relating to the tax-free reorganization treatment attached hereto as Exhibits G
and H to be untrue.
(i) Other Actions. Teleglobe shall not, and shall not permit any of its
Subsidiaries to, take any action that would reasonably be expected to result in
any of the conditions to the Merger set forth in Article VI not being satisfied.
(j) Accounting Methods; Income Tax Elections. Except as disclosed in the
Teleglobe Disclosure Documents filed prior to the date of this Agreement, or as
required by a Governmental Entity, Teleglobe shall not change its methods of
accounting in effect at March 31, 1998, except as required by changes in
Canadian GAAP as concurred in by Teleglobe's independent auditors. Teleglobe
shall not (i) change its fiscal year or (ii) make any material Tax election,
except as required by Law.
(k) Teleglobe Employee Plans. Teleglobe agrees as to itself and its
Subsidiaries that it will not (i) enter into, adopt, amend (except as may be
required by Law), renew or terminate any Teleglobe Employee Plan, or any other
employee benefit plan or any agreement, arrangement, plan or policy between
Teleglobe or any of its Subsidiaries and one or more of its directors or
officers, (ii) increase or accelerate the compensation or fringe benefits of any
of its directors, officers or employees, except for normal increases in salary
or wages of employees of Teleglobe who are not directors or executive officers
of Teleglobe in the ordinary course of business consistent with past practice
that, in the aggregate, do not result in a material increase in benefits or
compensation expense to Teleglobe, (iii) grant any stock options, stock
appreciation rights, restricted stock, restricted stock units or performance
units or shares other than as required by existing agreements with individual
employees, or enter into any contract, agreement, commitment or arrangement to
do any of the foregoing or (iv) enter into or renew any contract, agreement,
commitment or arrangement providing for the payment to any director, officer or
employee of such party of compensation or benefits contingent, or the terms of
which are materially altered, upon the occurrence of any of the transactions
contemplated by this Agreement.
(l) Contracts. Teleglobe agrees, as to itself and its Subsidiaries, not to
take or omit to take any act which could cause a breach of any Contract if the
result would reasonably be expected to have a Material Adverse Effect on
Teleglobe.
4.3 ADVICE OF CHANGES; GOVERNMENTAL FILINGS. Each party shall (a) confer
on a regular and frequent basis with the other and (b) report (to the extent
permitted by applicable Law or any applicable confidentiality agreement) on
operational matters. Excel and Teleglobe shall file all reports required to be
filed by each of them with the SEC and the CSA (and all other Governmental
Entities) between the date of this Agreement and the Effective Time and shall
(to the extent permitted by applicable Law or any applicable confidentiality
agreement) deliver to the other party copies of all such reports, announcements
and publications promptly after the same are filed. Subject to applicable Laws
relating to the exchange of information, each of Excel and Teleglobe shall have
the right to review in advance, and will consult with the other with respect to,
all the information relating to the other party and each of their respective
Subsidiaries which appears in any filings, announcements or publications made
with, or written materials submitted to, any third party or any Governmental
Entity in connection with the transactions contemplated by this Agreement. In
exercising the foregoing right, each of the parties hereto agrees to act
reasonably and as promptly as practicable. Each party agrees that, to the extent
practicable and as timely as practicable, it will consult with, and provide all
appropriate and necessary assistance to, the other party with respect to the
obtaining of all permits, consents, approvals and authorizations of all third
parties and Governmental Entities necessary or advisable to consummate the
transactions contemplated by this Agreement and each party will keep the other
party apprised of the status of matters relating to completion of the
transactions contemplated hereby.
4.4 TRANSITION PLANNING. Teleglobe and Excel shall each appoint four
officers, including in each case its chief financial officer, to serve from time
to time as their respective representatives on a committee that will be
responsible for coordinating transition planning and implementation relating to
the Merger. Either party may remove and replace its appointees at any time.
During the period between the date of this
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Agreement and the Effective Time, such committee shall (i) examine various
alternatives regarding the manner in which to best organize and manage the
businesses of Teleglobe and Excel after the Effective Time and (ii) coordinate
policies and strategies with respect to regulatory authorities and bodies, in
all cases subject to applicable law and regulation.
4.5 CONTROL OF OTHER PARTY'S BUSINESS. Nothing contained in this Agreement
shall give Excel, directly or indirectly, the right to control or direct
Teleglobe's operations prior to the Effective Time. Nothing contained in this
Agreement shall give Teleglobe, directly or indirectly, the right to control or
direct Excel's operations prior to the Effective Time. Prior to the Effective
Time, each of Excel and Teleglobe shall exercise, consistent with the terms and
conditions of this Agreement, complete control and supervision over its
respective operations.
4.6 NETWORK TRANSITION. Promptly following the date hereof, Teleglobe and
Excel shall, to the extent not violative in any material respect of any Law or
of any Contracts to which any party hereto or any of its Subsidiaries or
controlled Affiliates is a party, commence to negotiate in good faith an
agreement to transition Excel's international traffic onto Teleglobe's network,
offer Teleglobe's products through Excel's marketing and sales force and review
Teleglobe's and Excel's U.S. domestic network to obtain the maximum network
optimization and other synergies as necessary for Teleglobe's and Excel's future
business plans.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 PREPARATION OF PROXY STATEMENT; STOCKHOLDERS APPROVAL. (a) As promptly
as practicable following the date hereof, Teleglobe and Excel shall prepare and
file with the SEC preliminary proxy materials or an information statement, as
applicable, which shall constitute a joint information statement, proxy
statement and prospectus (such information statement/proxy statement/prospectus,
and any amendments or supplements thereto, the "Joint Information
Statement/Proxy Statement/Prospectus"), and Teleglobe shall, in cooperation with
Excel, prepare and file with the SEC a registration statement on Form F-4 with
respect to the issuance of Teleglobe Common Shares in the Merger (the "Form
F-4"). The Joint Information Statement/Proxy Statement/Prospectus will be
included in the Form F-4 as Teleglobe's prospectus. The Form F-4 and the Joint
Information Statement/Proxy Statement/Prospectus shall comply as to form in all
material respects with the applicable provisions of the Securities Act and the
Exchange Act and the rules and regulations thereunder, and the Joint Information
Statement/Proxy Statement/Prospectus shall comply as to form in all material
respects with the requirements of the Canadian Securities Laws. Each of
Teleglobe and Excel shall use all reasonable efforts to have the Form F-4
declared effective by the SEC as promptly as practicable after filing with the
SEC and to keep the Form F-4 effective as long as is necessary to consummate the
Merger. The parties shall promptly provide copies, consult with each other and
prepare written responses with respect to any written comments received from the
SEC with respect to the Joint Information Statement/Proxy Statement/Prospectus
and the Form F-4 and advise one another of any oral comments with respect to the
Joint Information Statement/Proxy Statement/Prospectus and the Form F-4 received
from the SEC. The parties will cooperate in preparing and filing with the SEC
any amendment or supplement to the Joint Information Statement/Proxy
Statement/Prospectus or the Form F-4. No amendment or supplement to the Joint
Information Statement/Proxy Statement/Prospectus shall be filed without the
approval of both parties, which approvals shall not be unreasonably withheld or
delayed. A copy of the Joint Information Statement/Proxy Statement/Prospectus
shall also be filed by Teleglobe with the CSA in accordance with the applicable
requirements of the Canadian Securities Laws.
(b) Each Stockholder who is a party to the Excel Consent and Voting
Agreement has agreed to execute, or cause to be executed, immediately following
execution and delivery of this Agreement, a written consent with respect to all
shares of Excel Common Stock owned by it or which it has the right to vote or
consent in favor of approval and adoption of the Merger and this Agreement (the
"Excel Stockholders Consent").
Notwithstanding the foregoing, if Teleglobe so requests, Excel shall, as
promptly as practicable following such request, take all action necessary in
accordance with applicable Law and its Certificate of Incorporation
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and By-Laws to duly call, give notice of and convene a meeting of its
stockholders (the "Excel Stockholders Meeting") to consider and vote upon the
approval and adoption of this Agreement and the Merger, and to submit this
Agreement to the stockholders of Excel for their approval, and Excel and its
Board of Directors shall take all lawful reasonable action to solicit, and use
all reasonable efforts to obtain, such approval. The Board of Directors of Excel
shall recommend approval of the Merger Agreement to the stockholders of Excel.
(c) Each Shareholder who is a party to a Teleglobe Consent and Voting
Agreement has agreed (i) to execute, or cause to be executed, immediately
following execution and delivery of this Agreement, a written consent with
respect to all Teleglobe Common Shares owned by it or which it has the right to
vote or consent in favor of approval of the Share Issuance (each a "Teleglobe
Shareholders Consent") and (ii) to vote or consent (or cause to be voted or
consented), in person or by proxy, all Teleglobe Common Shares owned by it or
which it has the right to vote or consent in favor of approval of the Teleglobe
Articles Amendment and the Teleglobe By-Law Amendment. Teleglobe shall, as
promptly as practicable following the execution of this Agreement, and in any
event within 60 days hereof in the case of the Teleglobe Articles Amendment,
duly call, give notice of and convene a meeting of its shareholders (the
"Teleglobe Shareholders Meeting") for the purpose of obtaining the Required
Articles Amendment Vote, shall recommend to its shareholders approval and
adoption thereof and shall take all lawful action to solicit the approval of the
Teleglobe Articles Amendment by the Required Articles Amendment Vote.
(d) The Board of Directors of Teleglobe shall recommend approval of the
Share Issuance and the Teleglobe Articles Amendment to the shareholders of
Teleglobe. Nothing in this Agreement shall permit either Teleglobe or Excel to
terminate this Agreement (except as specifically provided in Article VII hereof)
or recommend any other Acquisition Proposal or change or withdraw its
recommendation in favor of the Share Issuance, the Teleglobe Articles Amendment
or the Teleglobe By-Law Amendment or the approval and adoption of the Merger and
this Agreement, as the case may be.
(e) Teleglobe agrees that in the event the Required Articles Amendment Vote
is not obtained, it will duly call, give notice of and convene a meeting of its
shareholders for the purpose of obtaining the Required By-Law Amendment Vote,
shall recommend approval and adoption thereof and shall take all lawful action
to solicit the approval of its shareholders for the Teleglobe By-Law Amendment.
5.2 TELEGLOBE BOARD OF DIRECTORS; OFFICERS. At or prior to the Effective
Time, the Board of Directors of Teleglobe will take all necessary action (a) so
that the Board of Directors of Teleglobe shall be constituted as set forth in
Exhibit F hereto, the members thereof to serve until the next annual meeting of
shareholders of Teleglobe and (b) to appoint Kenny A. Troutt as Vice-Chairman,
President and Chief Operating Officer of Teleglobe, which office he will hold in
addition to his position as Chairman, Chief Executive Officer and President of
Excel. The composition and size of the Board of Directors of Teleglobe as set
forth in Exhibit F may be modified prior to the approval by Teleglobe's
shareholders of the Teleglobe By-Law Amendment or the Teleglobe Articles
Amendment without further amendment of this Agreement only by written approval
of the Chief Executive Officers of each of Teleglobe and Excel. From and after
the Effective Time until December 31 of the fifth calendar year following the
calendar year in which the Merger occurs, the slate of individuals nominated to
serve on the Board of Directors of Teleglobe shall be selected in accordance
with the provisions of the Teleglobe Articles Amendment or the Teleglobe By-Law
Amendment, as the case may be.
5.3 ACCESS TO INFORMATION. Upon reasonable notice, each party shall (and
shall cause its Subsidiaries to) afford to the officers, employees, accountants,
counsel, financial advisors and other representatives of the other party
reasonable access during normal business hours, during the period prior to the
Effective Time, to all its properties, books, contracts, commitments and records
and, during such period, such party shall (and shall cause its Subsidiaries to)
furnish promptly to the other party (a) a copy of each report, schedule,
registration statement and other document filed, published, announced or
received by it during such period pursuant to the requirements of applicable Law
(other than documents which such party is not permitted to disclose under
applicable Law), and (b) consistent with its legal obligations, all other
information concerning its business, properties and personnel as such other
party may reasonably request; provided, however, that either party may restrict
the foregoing access to the extent that (i) a Governmental
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Entity requires such party or any of its Subsidiaries to restrict access to any
properties or information reasonably related to any such contract on the basis
of applicable Laws with respect to national security matters or (ii) any
applicable Law requires such party or its Subsidiaries to restrict access to any
properties or information. The parties will hold any such information which is
non-public in confidence to the extent required by, and in accordance with, the
provisions of the agreement dated April 21, 1998 between Excel and Teleglobe
(the "Confidentiality Agreement"). Any investigation by Teleglobe or Excel shall
not affect the representations and warranties of Excel or Teleglobe or Merger
Sub, as the case may be.
5.4 BEST EFFORTS. (a) Subject to the terms and conditions of this
Agreement, each party will cooperate with each other and use (and shall cause
its Subsidiaries to use) its best efforts to take, or cause to be taken, all
actions and to do, or cause to be done, all things necessary, proper or
advisable under applicable Laws to cause the conditions to closing set forth in
Article VI to be satisfied and to consummate the Merger and the other
transactions contemplated by this Agreement as soon as practicable after the
date hereof. In furtherance and not in limitation of the foregoing, each party
hereto agrees to make an appropriate filing of a Notification and Report Form
pursuant to the HSR Act and the Competition Act (Canada) with respect to the
transactions contemplated hereby as promptly as practicable and in any event
within twenty Business Days after the date hereof and to supply as promptly as
practicable any additional information and documentary material that may be
requested pursuant to the HSR Act and the Competition Act (Canada) and to take
all other actions necessary to cause the expiration or termination of the
applicable waiting periods under the HSR Act and the Competition Act (Canada) as
soon as practicable. Each party shall, to the extent practicable, promptly
notify the other party of any communication to such party from any Governmental
Entity in connection with any required filing with, or approval or review by,
such Governmental Entity in connection with the Merger and shall, to the extent
practicable, permit the other party to review in advance any proposed
communication to any Governmental Entity in such connection to the extent
permitted by applicable Law.
(b) Each of Teleglobe and Excel shall, in connection with the efforts
referenced in this Section 5.4 to obtain all requisite approvals and
authorizations for the transactions contemplated by this Agreement under any
Regulatory Law (as defined below), use its best efforts to, to the extent
permitted by applicable Law, (i) cooperate in all respects with each other in
connection with any filing or submission and in connection with any
investigation or other inquiry, including any proceeding initiated by a private
party, (ii) promptly inform the other party of any communication received by
such party from, or given by such party to any Governmental Entity and of any
material communication received or given in connection with any proceeding by a
private party, in each case regarding any of the transactions contemplated
hereby, and (iii) permit the other party to review any communication given by it
to, and consult with each other in advance of any meeting or conference with any
Governmental Entity or, in connection with any proceeding by a private party,
with any other Person, and to the extent permitted by such Governmental Entity
or other Person, give the other party the opportunity to attend and participate
in such meetings and conferences. For purposes of this Agreement, "Regulatory
Law" means the Sherman Act, as amended, the Clayton Act, as amended, the HSR
Act, the U.S. Federal Trade Commission Act, as amended, the Federal
Communications Laws, the Telecommunications Act (Canada), the Teleglobe Act
(Canada), the Competition Act (Canada) and all other Laws that are designed or
intended to prohibit, restrict or regulate actions having the purpose or effect
of monopolization or restraint of trade or lessening of competition through
merger or acquisition or otherwise regulate the telecommunications industry.
(c) In furtherance and not in limitation of the covenants of the parties
contained in Sections 5.4(a) and 5.4(b), if any administrative or judicial
action or proceeding, including any proceeding by a private party, is instituted
(or threatened to be instituted) challenging any transaction contemplated by
this Agreement as violative of any Regulatory Law, each of Teleglobe and Excel
shall cooperate in all respects with each other and use its respective best
efforts to contest and resist any such pending or threatened action or
proceeding and to have vacated, lifted, reversed or overturned any decree,
judgment, injunction or other order, whether temporary, preliminary or
permanent, that is in effect and that prohibits, prevents or restricts
consummation of the transactions contemplated by this Agreement. Notwithstanding
the foregoing or any other provision of this Agreement, nothing in this Section
5.4 shall limit a party's right to terminate this Agreement pursuant to
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Section 7.1(b) or 7.1(c) so long as such party has up to then complied in all
material respects with its obligations under this Section 5.4.
(d) If any objections are asserted with respect to the transactions
contemplated hereby under any Regulatory Law or if any suit is instituted by any
Governmental Entity or any private party challenging any of the transactions
contemplated hereby as violative of any Regulatory Law, each of Teleglobe and
Excel shall use its best efforts to resolve any such objections or challenge as
such Governmental Entity or private party may have to such transactions under
such Regulatory Law so as to permit consummation of the transactions
contemplated by this Agreement, subject to Section 5.4(f).
(e) Each of Teleglobe, Merger Sub and Excel shall use its best efforts to
cause the Merger to qualify and will not (both before and after consummation of
the Merger) take any actions which could reasonably be expected to prevent the
Merger from qualifying for pooling-of-interests treatment under US GAAP and
Canadian GAAP and as a reorganization under the provisions of Section 368(a) of
the Code.
(f) Notwithstanding any other provision of this Agreement, in connection
with any filing or submission required or action to be taken by either Excel or
Teleglobe or any of their respective Subsidiaries to effect the Merger and to
consummate the other transactions contemplated hereby, neither Excel nor
Teleglobe nor any of their respective Subsidiaries shall be required to commit
to any divestiture or hold separate or similar transactions or otherwise take
(or refrain from taking) or commit to take (or refrain from committing to take)
any action that limits its freedom of action with respect to, or its ability to
retain, any of its Subsidiaries or any material portion of the business,
services, product lines or assets of Excel and its Subsidiaries or any material
portion of the business, services, product lines or assets of Teleglobe or any
of its Subsidiaries, or any other action, if any of the foregoing, individually
or in the aggregate would have a Material Adverse Effect on any of Excel or
Teleglobe (either with or without including Teleglobe's ownership of Excel after
the Merger).
5.5 ACQUISITION PROPOSALS.
(a) Teleglobe and Excel each shall not, directly or indirectly, through any
officer, director, employee, stockholder, financial advisor, agent or other
representative of such party (including any investment banker, attorney or
accountant retained by such party or by any of such party's Subsidiaries or
stockholders) (i) solicit, initiate, encourage or knowingly facilitate
(including by way of furnishing information) any inquiries or proposals that
constitute, or could reasonably be expected to lead to, (x) a breach of this
Agreement, either Voting Agreement or either Stock Option Agreement or otherwise
interfere in any material respect with the completion of the Merger or (y) a
proposal or offer for an Alternative Transaction (as defined below) involving
such party or any of its Subsidiaries (any of the foregoing inquiries or
proposals being referred to in this Agreement as an "Acquisition Proposal"),
(ii) engage in negotiations or discussions concerning, or provide any non-public
information to any Person relating to, or otherwise facilitate any effort or
attempt to make or implement, any Acquisition Proposal, or (iii) agree to or
recommend to its stockholders or shareholders, as applicable, any Acquisition
Proposal; provided, however, that nothing contained in this Agreement shall
prevent Teleglobe or Excel from complying with Rule 14e-2 under the Exchange Act
or similar provisions of the Canadian Securities Laws with respect to an
Acquisition Proposal. Each of Teleglobe and Excel agrees that it will
immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any parties conducted heretofore with respect
to any Acquisition Proposal. Each of Excel and Teleglobe agrees not to release
any third party from, or waive any provision of, any standstill agreement to
which it is a party or any confidentiality agreement between it and another
Person who has made or who may reasonably be considered likely to make an
Acquisition Proposal. Each of Teleglobe and Excel agrees that it will take the
necessary steps to inform promptly the individuals or entities referred to in
the first sentence of this Section 5.5 of the obligations undertaken in this
Section 5.5.
(b) Teleglobe and Excel shall each notify the other party immediately after
receipt by Teleglobe or Excel (or their advisors) of any Acquisition Proposal or
any request for nonpublic information in connection with an Acquisition Proposal
or for access to the properties, books or records of such party by any person or
entity that informs such party that it is considering making, or has made, an
Acquisition Proposal. Such notice
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shall be made orally and in writing and shall indicate in reasonable detail the
identity of the offeror and the terms and conditions of such proposal, inquiry
or contact.
(c) As used in this Agreement, "Alternative Transaction" means either (i) a
transaction pursuant to which any person (or group of persons) other than
Teleglobe or Excel or their respective Affiliates (a "Third Party"), would
acquire more than 10% of the outstanding shares of Excel Common Stock or common
shares of Teleglobe capital stock, as the case may be, whether pursuant to a
tender offer or exchange offer or otherwise, (ii) a merger or other business
combination involving Teleglobe or Excel pursuant to which any Third Party
acquires more than 10% of the outstanding shares of Excel Common Stock or common
shares of Teleglobe capital stock, as the case may be, or shares exercisable or
convertible into or exchangeable for more than 10% of the outstanding shares of
Excel Common Stock or common shares of Teleglobe capital stock, or of the entity
surviving such merger or business combination, (iii) any other transaction
pursuant to which any Third Party acquires control of assets or businesses
(including for this purpose the outstanding equity securities of Subsidiaries of
Teleglobe or Excel, and the entity surviving any merger or business combination
including any of them) of Teleglobe or Excel having a fair market value (as
determined by the Board of Directors of Teleglobe or Excel, as the case may be,
in good faith) equal to more than 10% of the fair market value of all the assets
or businesses of Teleglobe or Excel, as the case may be, and its Subsidiaries,
taken as a whole, immediately prior to such transaction, (iv) any
recapitalization, restructuring or other transaction which could reasonably be
expected to prevent or materially impair or delay the consummation of the Merger
or (v) any public announcement of a proposal, plan or intention to do any of the
foregoing or any agreement to engage in any of the foregoing.
5.6 FEES AND EXPENSES. Whether or not the Merger is consummated, all
Expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such Expenses, except
that (a) if the Merger is consummated, the Surviving Corporation shall pay, or
cause to be paid, any and all property or transfer taxes imposed on Excel or its
Subsidiaries, (b) Expenses incurred in connection with the filing, printing and
mailing of the Joint Information Statement/Proxy Statement/ Prospectus shall be
shared equally by Teleglobe and Excel and (c) the filing fees incurred pursuant
to the requirements of the HSR Act and the Competition Act (Canada), which shall
be shared equally by Teleglobe and Excel. As used in this Agreement, "Expenses"
includes all out-of-pocket expenses (including all fees and expenses of counsel,
accountants, investment bankers, experts and consultants to a party hereto and
its Affiliates) incurred by a party or on its behalf in connection with or
related to the authorization, preparation, negotiation, execution and
performance of this Agreement, the Voting Agreements, the Stock Option
Agreements and the transactions contemplated hereby and thereby, including the
preparation, printing, filing and mailing of the Joint Information
Statement/Proxy Statement/Prospectus, the solicitation of shareholder and
stockholder approvals and all other matters related to the transactions
contemplated hereby, including registration fees in connection with the Form
F-4, costs incurred in connection with any shareholder litigation or costs
incurred in the course of any contest involved in obtaining any Regulatory
Approvals.
5.7 DIRECTORS' AND OFFICERS' INDEMNIFICATION AND INSURANCE. Teleglobe
shall cause the Surviving Corporation to maintain in effect in its certificate
of incorporation and by-laws (i) for a period of six years after the Effective
Time, the current provisions regarding limitation of liability of directors and
indemnification of officers, directors and employees contained in the
certificate of incorporation and by-laws of Excel, and Teleglobe shall guarantee
such obligation of the Surviving Corporation and (ii) for a period of six years,
the current policies of directors' and officers' liability insurance and
fiduciary liability insurance maintained by Excel (provided that the Surviving
Corporation may substitute therefor policies of at least the same coverage and
amounts containing terms and conditions which are, in the aggregate, no less
advantageous to the insured) with respect to claims arising from facts or events
that occurred at or before the Effective Time; provided, however, that in no
event shall the Surviving Corporation be required to expend in any one year an
amount in excess of 200% of the annual premiums currently paid by Excel for such
insurance; and, provided, further, that if the annual premiums of such insurance
coverage exceed such amount, the Surviving Corporation shall be obligated to
obtain a policy with the greatest coverage available for a cost not exceeding
such amount.
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5.8 PUBLIC ANNOUNCEMENTS. Teleglobe and Excel shall use all reasonable
efforts to develop a joint communications plan and each party shall use all
reasonable efforts (i) to ensure that all press releases and other public
statements with respect to the transactions contemplated hereby shall be
consistent with such joint communications plan, and (ii) unless otherwise
required by applicable Law or by obligations pursuant to any listing agreement
with or rules of any securities exchange, to consult with each other before
issuing any press release or otherwise making any public statement with respect
to this Agreement or the transactions contemplated hereby.
5.9 ACCOUNTANTS' LETTERS. Upon reasonable notice from the other, Teleglobe
and Excel shall use their respective best efforts to cause Arthur Andersen LLP
and Raymond Chabot Grant Thornton, respectively, to deliver to Teleglobe or
Excel, as the case may be, a letter, dated within two Business Days of the date
of effectiveness of the Form F-4 covering such matters as are requested by
Teleglobe or Excel, as the case may be, and as are customarily addressed in
accountant's "comfort" letters. In connection with Teleglobe's efforts to obtain
such letter, if requested by Raymond Chabot Grant Thornton, Excel shall provide
a representation letter to Raymond Chabot Grant Thornton complying with the
statement on Auditing Standards No. 72 ("SAS 72") or the comparable Canadian
auditing standards, if then required. In connection with Excel's efforts to
obtain such letter, if requested by Arthur Andersen LLP, Teleglobe shall provide
a representation letter to Arthur Andersen LLP complying with SAS 72, if then
required.
5.10 LISTING OF TELEGLOBE COMMON SHARES. Teleglobe shall use its best
efforts to cause the Teleglobe Common Shares to be issued in the Merger and the
Teleglobe Common Shares to be reserved for issuance upon exercise of the
Converted Options to be approved for listing, subject to official notice of
issuance, on the NYSE, and subject to customary requirements, on the TSE and the
ME.
5.11 RULE 145 AFFILIATES OF TELEGLOBE AND EXCEL; POOLING
LETTERS. Concurrently with the execution of this Agreement, each of the
directors of Excel and of Teleglobe has executed an agreement in the form
attached hereto as Exhibit I or J or as applicable. No later than 30 days
following the date of this Agreement, Excel shall deliver to Teleglobe a letter
identifying all other Persons who, to Excel's knowledge, at the time of
execution of the Excel Stockholders Consent, at any Excel Stockholders Meeting
or at the Effective Time, may be deemed to be "affiliates" of Excel for purposes
of Rule 145 under the Securities Act or who may otherwise be deemed to be
Affiliates of Excel (the "Rule 145 Affiliates"). Excel shall use its best
efforts to cause each Person who is identified as a Rule 145 Affiliate in such
list to deliver to Teleglobe at or prior to the Effective Time a written
agreement to the effect that such Rule 145 Affiliate will not (a) sell, pledge,
transfer or otherwise dispose of any Teleglobe Common Shares issued to such Rule
145 Affiliate pursuant to the Merger, except pursuant to an effective
registration statement or in compliance with Rule 145 under the Securities Act
or an exemption from the registration requirements of the Securities Act, or (b)
sell, pledge, transfer or otherwise dispose of, or hedge or otherwise reduce its
risk with respect to, any common shares of Teleglobe capital stock or any shares
of Excel Common Stock from the 30th day prior to the Effective Time to such time
as results covering at least 30 days of combined operations of Teleglobe and
Excel have been published by Teleglobe in the form of a quarterly earnings
report, an effective registration statement filed with the SEC, a report to the
SEC on Form 6-K or any other public filing or announcement which includes the
combined results of operations of Teleglobe and Excel except for transfers or
other dispositions that, in the reasonable opinion of Teleglobe's independent
public accountants, will not prevent Teleglobe from accounting for the Merger as
a pooling of interests, taking into account the actions of other Affiliates of
Excel, Teleglobe or their respective Stockholders. Teleglobe shall use its best
efforts to cause each Person who would be deemed to be an Affiliate with respect
to Teleglobe other than its directors, no later than 30 days following the date
of this Agreement, to deliver to Excel a letter in the form attached hereto as
Exhibit J.
5.12 STOCKHOLDER LITIGATION. Teleglobe, Merger Sub and Excel shall
cooperate and consult with one another, to the fullest extent possible, in
connection with any stockholder litigation against any of them or any of their
respective directors or officers with respect to the transactions contemplated
by this Agreement. In furtherance of and without in any way limiting the
foregoing, each of Teleglobe and Excel shall use its respective best efforts to
defeat such litigation so as to permit the consummation of the transactions
contemplated by this Agreement in the manner contemplated by this Agreement. In
the event that an Acquisition Proposal shall be pending with respect to
Teleglobe or Excel, neither party shall make any
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material strategic decision with respect to any pending stockholder litigation
or any other third party litigation which challenges the enforceability of this
Agreement or otherwise seeks to impede, impair, delay or otherwise interfere
with the transaction contemplated hereby without the prior written consent of
the other party, which consent shall not unreasonably be withheld or delayed.
5.13 RESTRICTION ON CERTAIN DISPOSITIONS. In order to assist in ensuring
that all holders of shares of Excel Common Stock receive tax-free treatment
under the Code, Teleglobe agrees that during the two year period beginning on
the Closing Date (the "Restricted Period"), it will not dispose in any manner of
any shares of the Surviving Corporation Common Stock or dispose in any manner,
or cause or permit the Surviving Corporation to dispose in any manner, of any of
the assets of the Surviving Corporation, other than dispositions of assets of
the Surviving Corporation in the ordinary course of business which do not
constitute dispositions of "all or a substantial portion" of the assets of the
Surviving Corporation for purposes of Treasury Regulation Section
1.367(a)-3T(g)(3)(iii) and "Permitted Dispositions". "Permitted Dispositions"
shall be defined as: (a) transfers or successive transfers of Excel Common Stock
or Excel assets to one or more corporations controlled (within the meaning of
Section 368(c) of the Code) in each case by the transferor, provided such
transfer or transfers qualify under Treasury Regulation Section
1.367(a)-3T(g)(7), (b) a disposition made with respect to a liquidation of the
Surviving Corporation subject to the provisions of Treasury Regulation Section
1.367(a)-3T(g)(3)(iv) and (c) any other transaction for which Excel or Teleglobe
receives a private letter ruling from the IRS, holding that such transactions
will not result in the recognition of gain according to the gain recognition
agreements into which certain of the holders of Excel Common Stock will enter
under Treasury Regulation Section 1.367(a)-3T(g)(3); provided, however, that any
such transfer, disposition or transaction may be consummated only if the
transferee shall agree in writing beforehand (i) to be bound by Teleglobe's
agreements and covenants in this Section 5.13 during any then remaining portion
of the Restricted Period, (ii) not to effect any subsequent transfer,
disposition or transaction or any sale, disposition, lease, transfer, mortgage,
merger, consolidation, amalgamation, combination, liquidation or dissolution
referred to in paragraph 2 of the Teleglobe By-Law Amendment without the
affirmative vote of at least 66 2/3% of the entire Board of Directors
(disregarding vacancies) of Teleglobe and (iii) to cause any subsequent
transferee to agree to be bound by all of the foregoing; and, provided, further,
that no transfer, disposition or transaction entered into by Teleglobe in
accordance with this Section 5.13, or by any transferee of Teleglobe or any
subsequent transferee, shall relieve Teleglobe from any liability to any third
party beneficiary of this Section 5.13 that arises out of or is otherwise based
upon any violation of the provisions of this Section 5.13.
5.14 COMPLIANCE WITH SECTION 228 OF THE DGCL. Excel has delivered,
concurrently with the delivery to it of the Excel Stockholders Consent, a
certificate of its Secretary as to the sufficiency of the Excel Stockholders
Consent to adopt and approve the Merger Agreement and the Merger. Pursuant to
the Joint Information Statement/Proxy Statement/Prospectus, Excel shall notify
its Stockholders who have not consented in writing to the adoption and approval
of the Merger Agreement and the Merger and who, if such action had been taken at
a meeting, would have been entitled to notice of the meeting if the record date
for such meeting had been the date of the Excel Stockholder Consent.
5.15 REGISTRATION RIGHTS AGREEMENT. On or prior to the Closing Date
Teleglobe will execute and deliver the Registration Rights Agreement.
ARTICLE VI
CONDITIONS PRECEDENT
6.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
obligations of Teleglobe, Merger Sub and Excel to effect the Merger are subject
to the satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) Stockholder Approval. In connection with the approval and adoption of
this Agreement, Excel shall have obtained the Required Excel Vote in accordance
with applicable Law and the certificate of incorporation and by-laws of Excel.
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(b) No Injunctions or Restraints, Illegality. No Laws shall have been
adopted or promulgated, and no temporary restraining order, preliminary or
permanent injunction or other order issued by a court or other Governmental
Entity of competent jurisdiction shall be in effect, having the effect of making
the Merger illegal or otherwise prohibiting consummation of the Merger;
provided, however, that the provisions of this Section 6.1(b) shall not be
available to any party whose failure to fulfill its obligations pursuant to
Section 5.4 shall have been the cause of, or shall have resulted in, such order
or injunction.
(c) HSR Act; Competition Act (Canada); Required Consents. The waiting
period (and any extension thereof) applicable to the Merger under the HSR Act
shall have been terminated or shall have expired; the waiting period prescribed
under the Competition Act (Canada) shall have expired, and the Director of
Investigation and Research under said Act shall have advised Teleglobe in
writing that the Director has determined not to make an application for an order
under Section 92 of the Competition Act (Canada) in respect of the Merger and no
order shall have been issued by the Competition Tribunal in connection with
same; and all other Required Consents shall have been granted and be in full
force and effect; provided, however, that a Required Consent shall not be deemed
to have been obtained if in connection with the grant thereof or in another
proceeding there shall have been an imposition by any Governmental Entity of any
condition, requirement, restriction or change of regulation, or any other action
directly or indirectly related to such grant taken by such Governmental Entity,
which could reasonably be expected to have a Material Adverse Effect on either
of Excel or Teleglobe (either with or without including Teleglobe's ownership of
Excel and its Subsidiaries after the Merger).
(d) NYSE, TSE and ME Listings. The Teleglobe Common Shares to be issued in
the Merger and such other shares to be reserved for issuance in connection with
this Agreement shall have been approved for listing on the NYSE (subject to
official notice of issuance) and the TSE and the ME (subject to customary
requirements).
(e) Effectiveness of the Form F-4. The Form F-4 shall have been declared
effective by the SEC under the Securities Act. No stop order suspending the
effectiveness of the Form F-4 shall have been issued by the SEC and no
proceedings for that purpose shall have been initiated or threatened by the SEC
that have not been withdrawn.
6.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF TELEGLOBE AND MERGER SUB. The
obligations of Teleglobe and Merger Sub to effect the Merger are subject to the
satisfaction of, or waiver by Teleglobe on or prior to the Closing Date of the
following additional conditions:
(a) Representations and Warranties. Each of the representations and
warranties of Excel set forth in this Agreement that is qualified as to
materiality or Material Adverse Effect shall have been true and correct on the
date of this Agreement and (except to the extent such representations and
warranties speak as of an earlier date) as of the Closing Date as though made on
and as of the Closing Date, and each of the representations and warranties of
Excel that is not so qualified shall have been true and correct in all material
respects on the date of this Agreement and (except to the extent such
representations and warranties speak as of an earlier date) as of the Closing
Date as though made on and as of the Closing Date, and Teleglobe shall have
received a certificate of the chief executive officer and the chief financial
officer of Excel to such effect.
(b) Performance of Obligations of Excel. Excel shall have performed or
complied with all agreements and covenants required to be performed by it under
this Agreement at or prior to the Closing Date that are qualified as to
materiality and shall have performed or complied in all material respects with
all other agreements and covenants required to be performed by it under this
Agreement at or prior to the Closing Date that are not so qualified as to
materiality, and Teleglobe shall have received a certificate of the chief
executive officer and the chief financial officer of Excel to such effect.
(c) Tax Opinion. Teleglobe shall have received an opinion, dated the
Closing Date, based on the representations of Excel and Teleglobe attached
hereto as Exhibits G and H and appropriate representations of certain
shareholders of Excel and Teleglobe, of Goodman, Phillips & Vineberg, counsel to
Teleglobe, to the effect that (i) the Merger will be treated for U.S. Federal
income tax purposes as a reorganization within the meaning of Section 368(a) of
the Code, (ii) Teleglobe, Merger Sub and Excel will each be a party to the
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reorganization within the meaning of Section 368(b) of the Code and (iii) no
gain or loss will be recognized by Teleglobe, Merger Sub or Excel as a result of
the Merger.
(d) No Material Adverse Change. Since the date of this Agreement, there
shall not have occurred any event or circumstance that shall have caused, or
shall be reasonably likely to cause, a material adverse change in the business,
condition (financial or otherwise), assets, liabilities or results of operations
of Excel and its Subsidiaries, taken as a whole (without taking into account the
Merger), other than any change relating to (i) the economy, foreign exchange
rates or securities markets in general or (ii) the telecommunications industry,
if, in any of (i) or (ii) the effect on Excel and its Subsidiaries, taken as a
whole, is not either (A) particularized or unique to Excel and its Subsidiaries,
taken as a whole, or (B) disproportionate relative to the effect on Teleglobe
and its Subsidiaries, taken as a whole (without taking into account the Merger),
or relative to the effect on the competitors of Excel and its Subsidiaries,
taken as a whole.
(e) Excel Consent and Voting Agreement. There shall not have been a
material breach of the Excel Consent and Voting Agreement by any of the
stockholders of Excel party thereto.
(f) Third-Party Consents. Excel or its Subsidiaries shall have obtained in
writing any third-party consents identified with an asterisk on Section
3.1(d)(ii) of the Excel Disclosure Schedule and the same shall be in full force
and effect at the Closing.
6.3 ADDITIONAL CONDITIONS TO OBLIGATIONS OF EXCEL. The obligations of
Excel to effect the Merger are subject to the satisfaction or waiver by Excel,
on or prior to the Closing Date, of the following additional conditions:
(a) Representations and Warranties. Each of the representations and
warranties of Teleglobe and Merger Sub set forth in this Agreement that is
qualified as to materiality or Material Adverse Effect shall have been true and
correct on the date of this Agreement and (except to the extent such
representations and warranties speak as of an earlier date) as of the Closing
Date as though made on and as of the Closing Date, and each of the
representations and warranties of each of Teleglobe and Merger Sub that is not
so qualified shall have been true and correct in all material respects on the
date of this Agreement and (except to the extent such representations and
warranties speak as of an earlier date) as of the Closing Date as though made on
and as of the Closing Date, and Excel shall have received a certificate of the
chief executive officer and the chief financial officer of Teleglobe to such
effect.
(b) Performance of Obligations of Teleglobe. Teleglobe shall have performed
or complied with all agreements and covenants required to be performed by it
under this Agreement at or prior to the Closing Date that are qualified as to
materiality and shall have performed or complied in all material respects with
all agreements and covenants required to be performed by it under this Agreement
at or prior to the Closing Date that are not so qualified as to materiality, and
Excel shall have received a certificate of the chief executive officer and the
chief financial officer of Teleglobe to such effect.
(c) Tax Opinion. Excel shall have received an opinion, dated the Closing
Date, based on the representations of Excel and Teleglobe attached hereto as
Exhibits G and H and appropriate representations of certain shareholders of
Excel and Teleglobe, and based on the IRS ruling referred to in paragraph (f)
below, of Weil, Gotshal & Manges LLP, counsel to Excel, to the effect that (i)
the Merger will be treated for U.S. Federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code, (ii) Teleglobe,
Merger Sub and Excel will each be a party to the reorganization within the
meaning of Section 368(b) of the Code and (iii) no gain or loss will be
recognized by the shareholders of Excel as a result of the Merger (except with
respect to any cash received in lieu of fractional shares).
(d) No Material Adverse Change. Since the date of this Agreement, there
shall not have occurred any event or circumstance that shall have caused, or
shall be reasonably likely to cause, a material adverse change in the business,
condition (financial or otherwise), assets, liabilities or results of operations
of Teleglobe and its Subsidiaries, taken as a whole (without taking into account
the Merger), other than any change relating to (i) the economy, foreign exchange
rates or securities markets in general or (ii) the telecommunications industry,
if, in any of (i) or (ii) the effect on Teleglobe and its Subsidiaries, taken as
a whole without giving effect to the Merger, is not either (A) particularized or
unique to Teleglobe and its Subsidiaries taken as a
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whole, or (B) disproportionate relative to the effect on Excel and its
Subsidiaries, taken as a whole, or relative to the effect on the competitors of
Teleglobe and its Subsidiaries, taken as a whole (without taking into account
the Merger).
(e) Teleglobe Consent and Voting Agreements. There shall not have been a
material breach of the Teleglobe Consent and Voting Agreements by any of the
shareholders of Teleglobe party thereto.
(f) IRS Ruling. A ruling shall have been received from the IRS under
Treasury Regulation Section 1.367(a)-3(c)(9) to the effect that Excel is
substantially in compliance with the requirements of Treasury Regulation
sections 1.367(a)-3(c)(1)(ii)-(iv) within the meaning of Treasury Regulation
section 1.367-3(c)(9)(i); and the transfer of Excel Common Stock pursuant to the
Merger will be deemed to comply with the substantiality test requirement of the
active trade or business test described in Treasury Regulation Section
1.367-3(c)(1)(iv).
(g) Third-Party Consents. Teleglobe or its Subsidiaries shall have obtained
in writing any third-party consents identified with an asterisk on Section
3.2(d)(ii) of the Teleglobe Disclosure Schedule and the same shall be in full
force and effect at the Closing.
(h) Registration Rights Agreement. The Registration Rights Agreement shall
have been executed and delivered by Teleglobe.
(i) Shareholder Approval. Either (i) the Teleglobe Articles Amendment shall
have been approved by the Required Articles Amendment Vote or (ii) the Teleglobe
By-Law Amendment shall have been approved by the Required By-Law Amendment Vote,
in either case in accordance with applicable Law and the certificate of
incorporation and by-laws of Teleglobe.
ARTICLE VII
TERMINATION AND AMENDMENT
7.1 TERMINATION. This Agreement may be terminated at any time prior to the
Effective Time, by action taken or authorized by the Board of Directors of the
terminating party or parties, in the following circumstances:
(a) By mutual written consent of Teleglobe and Excel;
(b) By either Teleglobe or Excel if the Effective Time shall not have
occurred on or before June 14, 1999 (the "Termination Date"); provided, however,
that the right to terminate this Agreement under this Section 7.1(b) shall not
be available to any party whose failure to fulfill any obligation under this
Agreement (including Section 5.4) has to any extent been the cause of, or
resulted in, the failure of the Effective Time to occur on or before the
Termination Date; and provided, further, that if on the Termination Date the
conditions to the Closing set forth in Section 6.1(c) shall not have been
fulfilled but shall be capable of being fulfilled, but all other conditions to
the Closing shall be fulfilled or shall be capable of being fulfilled, then the
Termination Date shall be extended to December 31, 1999;
(c) By either Teleglobe or Excel if any Governmental Entity (i) shall have
issued an order, decree or ruling or taken any other action (which the parties
shall have used their best efforts to resist, resolve or lift, as applicable, in
accordance with Section 5.4) permanently restraining, enjoining or otherwise
prohibiting the transactions contemplated by this Agreement, and such order,
decree, ruling or other action shall have become final and nonappealable or (ii)
shall have failed to issue an order, decree or ruling or to take any other
action (which order, decree, ruling or other action the parties shall have used
their best efforts to obtain, in accordance with Section 5.4), in the case of
each of (i) and (ii), which is necessary to fulfill the condition set forth in
Section 6.1(c) and such action or inaction shall have become final and
nonappealable; provided, however, that the right to terminate this Agreement
under this Section 7.1(c) shall not be available to any party whose failure to
comply with Section 5.4 has to any extent been the cause of such action or
inaction;
(d) By Excel if neither (i) the Required Articles Amendment Vote shall have
been obtained nor (ii) the Required By-Law Amendment Vote shall have been
obtained by reason of the failure to obtain either such
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vote upon the taking of such vote at a duly held meeting of shareholders of
Teleglobe on or prior to the 150th day following the date of this Agreement;
(e) By Teleglobe or Excel if (i) the other party shall have materially
breached or failed to comply with any of its obligations under this Agreement or
(ii) any representation or warranty made by the other that is qualified as to
materiality or Material Adverse Effect shall have been incorrect when made or
any representation or warranty not so qualified shall have been incorrect in any
material respect when made or in either case shall have since ceased to be true
and correct or true and correct in all material respects, as the case may be,
and such breach, failure or misrepresentation has not been cured within 30 days
after notice thereof and the continuance of such breach, failure or
misrepresentation would have a Material Adverse Effect on Excel or Teleglobe
(whether before or after giving effect to the Merger);
(f) By Excel if any person or group shall have become the beneficial owner
(determined in accordance with Rule 13d-3 under the Exchange Act) of securities
representing more than 25% of the outstanding voting stock of Teleglobe, other
than any such person or group who satisfies such criteria as of the date of this
Agreement (a "Competing Share Transaction");
(g) By Teleglobe if any person or group shall have become the beneficial
owner (determined as set forth above) of securities representing more than 25%
of the outstanding voting stock of Excel, other than any such person or group
that satisfies such criteria as of the date of this Agreement.
Notwithstanding anything else contained in this Agreement, the right to
terminate this Agreement under this Section 7.1 shall not be available to any
party (a) that is in material breach of its obligations hereunder or (b) whose
failure to fulfill its obligations or to comply with its covenants under this
Agreement has been the cause of, or resulted in, the failure to satisfy any
conditions to the obligations of either party hereunder.
7.2 EFFECT OF TERMINATION. In the event of termination of this Agreement
by either Teleglobe or Excel as provided in Section 7.1, this Agreement shall
forthwith become void and there shall be no liability or obligation on the part
of Teleglobe or Excel or their respective officers or directors except (i) with
respect to Section 3.1(j), Section 3.2(j), the second sentence of Section 5.3,
Section 5.7, this Section 7.2, Section 7.3, Section 7.4 and Article VIII and
(ii) nothing herein will release any party from any liability arising from any
breach of this Agreement.
7.3 PAYMENT BY EXCEL. (a) Teleglobe and Excel agree that if Teleglobe
shall terminate this Agreement pursuant to Section 7.1(g), then Excel shall pay
to Teleglobe an amount equal to $120 million (the "Termination Fee") plus
Teleglobe's Expenses. Notwithstanding anything in this Agreement (including
Section 8.10) to the contrary, in the case of a termination pursuant to Section
7.1(g), the payment of any amount pursuant to this Section 7.3(a) shall
constitute liquidated damages in full and complete satisfaction of, and shall be
Teleglobe's sole and exclusive remedy, together with its rights under the Excel
Stock Option Agreement, against Excel for any loss, liability, damage or claim
arising out of or in connection with any such termination of this Agreement or
the facts and circumstances resulting in such termination or otherwise related
thereto or otherwise arising out of or in connection with this Agreement.
Excel acknowledges that the agreements contained in this Section 7.3(a) are
critical provisions of the transactions contemplated hereby and that without
these agreements Teleglobe and Merger Sub would not enter into this Agreement.
Accordingly, if Excel fails to pay promptly the Termination Fee and the Expenses
due pursuant to this Section 7.3(a) and, in order to obtain such payment,
Teleglobe or Merger Sub commences litigation which results in a judgment against
Excel for the Termination Fee and the Expenses, Excel shall pay to Teleglobe its
costs and expenses (including attorneys' fees) in connection with such
litigation, together with interest on the amount of the Termination Fee and the
Expenses at the prime rate of The Chase Manhattan Bank, N.A., in effect on the
date and from the date such amounts were originally required to have been paid.
(b) The Termination Fee required to be paid pursuant to Section 7.3(a)
shall be paid by Excel no later than two Business Days after Teleglobe shall
have notified Excel of such termination. The Expenses required to be paid
pursuant to Section 7.3(a) shall be paid to Teleglobe not later than two
Business Days after
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Teleglobe shall have provided Excel with an invoice for the Expenses. All
payments under Section 7.3(a) shall be made by wire transfer of immediately
available funds to an account designated by the party entitled to receive
payment.
7.4 PAYMENT BY TELEGLOBE. (a) Teleglobe and Excel agree that if (i) Excel
shall terminate this Agreement pursuant to Section 7.1(f) or (ii) Excel shall
terminate this Agreement pursuant to Section 7.1(d) and at the time of the
meeting of the shareholders of Teleglobe at which the Teleglobe By-Law Amendment
is considered an Acquisition Proposal (for purposes of this Section 7.4(a) only
with respect to the definition of Acquisition Proposal, replacing in the
definition of Alternative Transaction the number 10% with the number 25% in each
of the four instances such number appears therein) shall be pending with respect
to Teleglobe, then Teleglobe shall pay to Excel the Termination Fee plus Excel's
Expenses. Notwithstanding anything in this Agreement (including Section 8.10) to
the contrary, in the case of a termination pursuant to Section 7.1(f), the
payment of any amount pursuant to this Section 7.4(a) shall constitute
liquidated damages in full and complete satisfaction of, and shall be Excel's
sole and exclusive remedy, together with its rights under the Teleglobe Stock
Option Agreement, against Teleglobe for any loss, liability, damage or claim
arising out of or in connection with any such termination of this Agreement or
the facts and circumstances resulting in such termination or otherwise related
thereto or otherwise arising out of or in connection with this Agreement.
Teleglobe acknowledges that the agreements contained in this Section 7.4(a)
are critical provisions of the transactions contemplated hereby and that without
these agreements Excel would not enter into this Agreement. Accordingly, if
Teleglobe fails to pay promptly the Termination Fee and the Expenses due
pursuant to this Section 7.4(a) and, in order to obtain such payment, Excel
commences litigation which results in a judgment against Teleglobe for the
Termination Fee and the Expenses, Teleglobe shall pay to Excel its costs and
expenses (including attorneys' fees) in connection with such litigation,
together with interest on the amount of the Termination Fee and the Expenses at
the prime rate of The Chase Manhattan Bank, N.A. in effect on the date and from
the date such amounts were originally required to have been paid.
(b) The Termination Fee required to be paid pursuant to Section 7.4(a)
shall be paid by Teleglobe no later than two Business Days after Excel shall
have notified Teleglobe of such termination. The Expenses required to be paid
pursuant to Section 7.4(a) shall be paid to Excel not later than two Business
Days after Excel shall have provided Teleglobe with an invoice for the Expenses.
All payments under Section 7.4(a) shall be made by wire transfer of immediately
available funds to an account designated by Excel.
7.5 AMENDMENT. This Agreement may be amended by the parties hereto, by
action taken or authorized by their respective Boards of Directors, at any time
before or after approval of the matters presented in connection with the Merger
by the stockholders of Excel or the shareholders of Teleglobe, as the case may
be, but, after any such approval, no amendment shall be made which by Law or in
accordance with the rules of any relevant stock exchange requires further
approval by such stockholders or shareholders without such further approval.
This Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties hereto.
7.6 EXTENSION; WAIVER. At any time prior to the Effective Time, the
parties hereto, by action taken or authorized by their respective Boards of
Directors, may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto and (iii) waive compliance
with any of the agreements or conditions contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in a written instrument signed on behalf of such party. The failure of
any party to this Agreement to assert any of its rights under this Agreement or
otherwise shall not constitute a waiver of those rights nor shall any single or
partial exercise thereof include any other or further exercise thereof or the
exercise of any other right, power or privilege.
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ARTICLE VIII
GENERAL PROVISIONS
8.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. The respective
representations and warranties of the parties to this Agreement contained herein
or in any certificates or other documents delivered prior to or at the Closing
shall terminate at the Effective Time. The respective covenants and agreements
of the parties contained herein or in any certificates or other documents
delivered prior to or at the Closing shall survive the execution and delivery of
this Agreement and shall terminate only in accordance with their terms.
8.2 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed duly given (a) on the date of delivery if delivered
personally, or by telecopy or facsimile, upon confirmation of receipt, (b) on
the first Business Day following the date of dispatch if delivered by a
recognized next-day courier service, or (c) on the third Business Day following
the date of mailing if delivered by registered or certified mail, return receipt
requested, postage prepaid. All notices hereunder shall be delivered as set
forth below, or pursuant to such other instructions as may be designated in
writing by the party to receive such notice:
<TABLE>
<S> <C>
(a) if to Teleglobe or Merger Sub, to
Teleglobe Inc.
1000, rue de La Gauchetiere ouest
Montreal, Quebec H3B 4X5
Attention: Vice President, Legal Affairs
and Corporate Secretary
Facsimile: 514-868-7438
with a copy to
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: Philip T. Ruegger III, Esq.
Facsimile: 212-455-2502
(b) if to Excel, to
Excel Communications, Inc.
8750 North Central Expressway
Suite 2000
Dallas, Texas 75231
Attention: Executive Vice President, Secretary
and General Counsel
Facsimile: 214-863-8838
with a copy to
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attention: Frederick S. Green, Esq.
Facsimile: 212-310-8007
</TABLE>
8.3 INTERPRETATION. When a reference is made in this Agreement to
Articles, Sections or Exhibits, such reference shall be to an Article of,
Section of or Exhibit to this Agreement unless otherwise indicated. The table of
contents, glossary of defined terms and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the
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words "include", "includes" or "including" are used in this Agreement, they
shall be deemed to be followed by the words "without limitation". Whenever the
word "material" is used with respect to any Person and its Subsidiaries, it
shall mean, unless otherwise specified, such Person and its Subsidiaries taken
as a whole. All references herein to "$" or "dollars" shall be to U.S. dollars.
8.4 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original and all of which
shall be considered one and the same agreement and shall become effective when
one or more counterparts have been signed by each of the parties and delivered
to the other party, it being understood that both parties need not sign the same
counterpart.
8.5 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES. (a) This Agreement,
the Voting Agreements and the Stock Option Agreements and the Confidentiality
Agreement constitute the entire agreement among the parties and supersede all
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof and thereof.
(b) This Agreement shall be binding upon and inure solely to the benefit of
each party hereto, and nothing in this Agreement, express or implied, is
intended to or shall confer upon any other Person any right, benefit or remedy
of any nature whatsoever under or by reason of this Agreement, other than
Sections 3.2(ad), 5.7 and 5.13 (which are intended to be for the benefit of the
Persons covered thereby (including, where appropriate, the stockholders of Excel
and Teleglobe as of the date of this Agreement) and may be enforced by such
Persons at any time).
8.6 GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the Laws of the State of Delaware without regard to the
principles of conflicts of laws thereof.
8.7 SEVERABILITY. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any Law or public policy, all
other terms and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner in order that the
transactions contemplated hereby are consummated as originally contemplated to
the greatest extent possible.
8.8 ASSIGNMENT. Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto, in whole
or in part (whether by operation of law or otherwise), without the prior written
consent of the other party and the written undertaking of the assignee to be
bound by the terms of this Agreement, and any attempt to make any such
assignment without such consent shall be null and void, except that Merger Sub
may assign, in its sole discretion, any or all of its rights, interests and
obligations under this Agreement to any direct wholly owned Subsidiary of
Teleglobe without the consent of Excel; provided, however, that no such
assignment shall relieve Teleglobe of its obligations under this Agreement.
Subject to the preceding sentence, this Agreement will be binding upon, inure to
the benefit of and be enforceable by the parties and their respective successors
and permitted assigns.
8.9 SUBMISSION TO JURISDICTION; WAIVERS. Each of Teleglobe and Excel
irrevocably agrees that any legal action or proceeding with respect to this
Agreement or for recognition and enforcement of any judgment in respect hereof
brought by the other party hereto or its successors or assigns may be brought
and determined in the Chancery or other Courts of the State of Delaware, and
each of Teleglobe and Excel hereby irrevocably submits with regard to any such
action or proceeding for itself and in respect to its property, generally and
unconditionally, to the nonexclusive jurisdiction of the aforesaid courts. Each
of Teleglobe and Excel hereby irrevocably waives, and agrees not to assert, by
way of motion, as a defense, counterclaim or otherwise, in any action or
proceeding with respect to this Agreement, (a) any claim that it is not
personally subject to the jurisdiction of the above-named courts for any reason
other than the failure to serve process in accordance with this Section 8.9, (b)
that it or its property is exempt or immune from jurisdiction of any such court
or from any legal process commenced in such courts (whether through service of
notice, attachment prior to judgment, attachment in aid of execution of
judgment, execution of judgment or otherwise), and
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(c) to the fullest extent permitted by applicable Law, that (i) the suit, action
or proceeding in any such court is brought in an inconvenient forum, (ii) the
venue of such suit, action or proceeding is improper or (iii) this Agreement, or
the subject matter hereof, may not be enforced in or by such courts.
8.10 ENFORCEMENT. The parties agree that irreparable damage would occur in
the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms. It is accordingly agreed that the parties
shall be entitled to specific performance of the terms hereof, this being in
addition to any other remedy to which they are entitled at law or in equity,
provided that the party seeking such relief is not in material default of its
representations, warranties or covenants hereunder.
8.11 DEFINITIONS. As used in this Agreement:
(a) "Affiliates", when used with respect to any Person, means any other
Person directly or indirectly controlling, controlled by or under common control
with such Person. As used in the definition of Affiliate, the term control means
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
(b) "Board of Directors" means the Board of Directors of any specified
Person and any committees thereof.
(c) "Business Day" means any day (other than a Saturday or a Sunday) on
which banks are not required or authorized to close in either the City of New
York or the City of Montreal.
(d) "Canadian Securities Laws" means the CBCA, the Securities Act (Quebec)
and the equivalent legislation in the other provinces of Canada, all as now
enacted or as the same may from time to time be amended, re-enacted or replaced,
and the applicable rules, regulations, rulings, orders and forms made or
promulgated under such statutes and the published policies of the regulatory
authorities administering such statutes, as well as the rules, regulations,
by-laws and policies of the ME and the TSE.
(e) "Material Adverse Effect" means, with respect to any entity, a material
adverse effect on the business, condition (financial or otherwise), results of
operations, assets or liabilities of such entity and its Subsidiaries taken as a
whole.
(f) "the other party" means, with respect to Excel, Teleglobe and Merger
Sub and means, with respect to Teleglobe and Merger Sub, Excel.
(g) "Person" means an individual, corporation, limited liability company,
partnership, association, trust, unincorporated organization, other entity or
group (as defined in the Exchange Act).
(h) "Subsidiary" when used with respect to any party means any corporation
or other organization, whether incorporated or unincorporated, (i) of which such
party or any other Subsidiary of such party is a general partner (excluding
partnerships, the general partnership interests of which held by such party or
any Subsidiary of such party do not have a majority of the voting interests in
such partnership) or (ii) at least a majority of the securities or other
interests of which having by their terms ordinary voting power to elect a
majority of the Board of Directors or others performing similar functions with
respect to such corporation or other organization is directly or indirectly
owned or controlled by such party or by any one or more of its Subsidiaries, or
by such party and one or more of its Subsidiaries.
(i) "Transaction Documents" means, collectively, this Agreement, the Voting
Agreements, the Stock Option Agreements, the Registration Rights Agreement and
the documents, certificates or instruments to be delivered pursuant to the
transactions contemplated thereby.
8.12 WAIVER OF JURY TRIAL. Each party hereto waives, to the fullest extent
permitted by applicable law, any right it may have to a trial by jury in respect
of any litigation directly or indirectly arising out of, under or in connection
with this Agreement.
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IN WITNESS WHEREOF, Teleglobe, Merger Sub and Excel have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of June 14, 1998.
TELEGLOBE INC.
By: /s/ CHARLES SIROIS
----------------------------------
Name: Charles Sirois
Title: Chairman and Chief
Executive Officer
NORTH MERGER SUB CORPORATION
By: /s/ CLAUDE SEGUIN
----------------------------------
Name: Claude Seguin
Title: President
EXCEL COMMUNICATIONS, INC.
By: /s/ KENNY A. TROUTT
----------------------------------
Name: Kenny A. Troutt
Title: Chairman, President and
Chief Executive Officer
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<PAGE> 165
GLOSSARY OF DEFINED TERMS
<TABLE>
<CAPTION>
DEFINITION LOCATION OF DEFINITION
---------- ----------------------
<S> <C>
Acquisition Proposal........................................ sec. 5.5(a)(i)
Affiliates.................................................. sec.8.11
Agreement................................................... Preamble
Alternative Transaction..................................... sec.5.5(c)
Average Price............................................... sec.2.5(b)
Blue Sky Laws............................................... sec.3.1(d)(iii)
Board of Directors.......................................... sec.8.11(c)
Business Day................................................ sec.8.11(d)
CBCA........................................................ Preamble
Canadian GAAP............................................... Recitals
Canadian Securities Laws.................................... sec.8.11(e)
Canadian Teleglobe Employee Plans........................... sec.3.2(t)
Century-Based Data.......................................... sec.3.1(aa)
Certificate................................................. sec.1.8(b)
Closing..................................................... sec.1.2
Closing Date................................................ sec.1.2
Code........................................................ Recitals
Common Stock................................................ sec.1.5
Communications Act.......................................... sec.3.1(d)(iii)
Competing Share Transaction................................. sec.7.1(f)
Confidentiality Agreement................................... sec.5.3
Contract.................................................... sec.3.1(d)(ii)
Converted Option............................................ sec.1.8(e)
CSA......................................................... sec.3.2(e)
Delaware Certificate of Merger.............................. sec.1.3
DGCL........................................................ sec.1.1
Effective Time.............................................. sec.1.3
Environmental Law........................................... sec.3.1(r)(iv)
ERISA....................................................... sec.3.1(s)(i)
Excel....................................................... Preamble
Excel Board Approval........................................ sec.3.1(h)
Excel Common Stock.......................................... Recitals
Excel Consent and Voting Agreement.......................... Recitals
Excel Disclosure Documents.................................. sec.3.1(e)
Excel Disclosure Schedule................................... sec.3.1
Excel Employee Plans........................................ sec.3.1(s)(i)
Excel Fairness Opinion...................................... sec.3.1(k)
Excel Fairness Opinion Banker............................... sec.3.1(j)
Excel Intellectual Property................................. sec.3.1(o)
Excel Material Contracts.................................... sec.3.1(p)
Excel Permits............................................... sec.3.1(d)(iv)
Excel Stockholders Consent.................................. sec.5.1(b)
Excel Stockholders Meeting.................................. sec.5.1(b)
Excel Stock Option.......................................... sec.1.8(e)
Excel Stock Option Agreement................................ Recitals
Excel Stock Plans........................................... sec.1.8(e)
Excel Voting Debt........................................... sec.3.1(c)(ii)
Exchange Act................................................ sec.3.1(b)
Exchange Agent.............................................. sec.2.1
</TABLE>
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<PAGE> 166
<TABLE>
<CAPTION>
DEFINITION LOCATION OF DEFINITION
---------- ----------------------
<S> <C>
Exchange Fund............................................... sec.2.1
Exchange Ratio.............................................. sec.1.8(a)
Exchanges................................................... sec.3.2(d)(iii)
Expenses.................................................... sec.5.6
FCC......................................................... sec.3.1(d)(iii)
Federal Communications Laws................................. sec.3.1(d)(iii)
Form F-4.................................................... sec.5.1(a)
Governmental Entity......................................... sec.3.1(d)(iii)
HSR Act..................................................... sec.3.1(d)(iii)
Hazardous Substance......................................... sec.3.1(r)(v)
IRS......................................................... sec.3.1(m)(i)
Joint Information Statement/Proxy Statement/Prospectus...... sec.5.1(a)
Laws........................................................ sec.1.5
Material Adverse Effect..................................... sec.8.11(f)
Material Leases............................................. sec.3.1(n)(i)
ME.......................................................... sec.3.2(d)(iii)
Merger...................................................... Recitals
Merger Consideration........................................ sec.1.8(a)
Merger Sub.................................................. Preamble
Merger Sub Common Stock..................................... sec.1.8(d)
NYSE........................................................ sec.2.5(b)
Permit...................................................... sec.3.1(d)(ii)
Person...................................................... sec.8.11(h)
PUCs........................................................ sec.3.1(d)(iii)
Recent Excel Disclosure Documents........................... sec.3.1(e)
Recent Teleglobe Disclosure Documents....................... sec.3.2(e)
Registration Rights Agreement............................... Recitals
Regulatory Law.............................................. sec.5.4(b)
Required Articles Amendment Vote............................ sec.3.2(i)
Required By-Law Amendment Vote.............................. sec.3.2(d)(i)
Required Consents........................................... sec.3.1(d)(iii)
Required Excel Vote......................................... sec.3.l(i)
Required Share Issuance Vote................................ sec.3.2(i)
Required Teleglobe Vote..................................... sec.3.2(i)
Restricted Period........................................... sec.5.13
Rule 145 Affiliates......................................... sec.5.11
SAS 72...................................................... sec.5.9
SEC......................................................... sec.1.8(e)
Securities Act.............................................. Recitals
Share Issuance.............................................. sec.3.2(d)(i)
Software.................................................... sec.3.1(aa)
Stock Option Agreements..................................... Recitals
Subsidiary.................................................. sec.8.11(i)
Superior Proposal........................................... sec.5.5(a)
Surviving Corporation....................................... Recitals
Surviving Corporation Shares................................ Recitals
Surviving Corporation Stock................................. Recitals
Tax or Taxes................................................ sec.3.1(m)(ii)
Teleglobe................................................... Preamble
Teleglobe Articles Amendment................................ Recitals
Teleglobe Board Approval.................................... sec.3.2(h)
Teleglobe By-Law Amendment.................................. Recitals
</TABLE>
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<PAGE> 167
<TABLE>
<CAPTION>
DEFINITION LOCATION OF DEFINITION
---------- ----------------------
<S> <C>
Teleglobe Common Shares..................................... Recitals
Teleglobe Consent and Voting Agreements..................... Recitals
Teleglobe Disclosure Documents.............................. sec.3.2(e)
Teleglobe Disclosure Schedule............................... sec.3.2
Teleglobe Employee Plans.................................... sec.3.2(t)
Teleglobe Fairness Opinion.................................. sec.3.2(k)
Teleglobe Fairness Opinion Banker........................... sec.3.2(j)
Teleglobe Intellectual Property............................. sec.3.2(o)
Teleglobe Material Contracts................................ sec.3.2(p)
Teleglobe Option Plan....................................... sec.3.2(c)(i)
Teleglobe Permits........................................... sec.3.2(d)(iv)
Teleglobe Shareholders Consent.............................. sec.5.1(c)
Teleglobe Shareholders Meeting.............................. sec.5.1(c)
Teleglobe Stock Dividend.................................... sec.1.8(a)
Teleglobe Stock Option Agreement............................ Recitals
Teleglobe Voting Debt....................................... sec.3.2(c)(ii)
Termination Date............................................ sec.7.1(b)
Termination Fee............................................. sec.7.3(a)
the other party............................................. sec.8.11(g)
Third Party................................................. sec.5.5(c)
Transaction Documents....................................... sec.8.11(j)
TSE......................................................... sec.3.2(d)(iii)
US GAAP..................................................... Recitals
US Teleglobe Employee Plans................................. sec.3.2(s)(i)
Violation................................................... sec.3.1(d)(ii)
Voting Agreements........................................... Recitals
</TABLE>
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<PAGE> 168
APPENDIX B
LEHMAN BROTHERS
June 14, 1998
Board of Directors
EXCEL Communications, Inc.
8750 North Central Expressway
Dallas, TX 75231
Members of the Board:
We understand that EXCEL Communications, Inc. ("EXCEL" or the "Company")
and Teleglobe, Inc. ("Teleglobe") are proposing to enter into an Agreement and
Plan of Merger dated June 14, 1998 (the "Merger Agreement") pursuant to which a
U.S. wholly owned subsidiary of Teleglobe will merge with and into EXCEL (the
"Merger") and, upon the effectiveness of the Merger, each outstanding share of
common stock of EXCEL will be exchanged (the "Exchange Ratio") for .885 shares
of common stock of Teleglobe (the "Proposed Transaction"). The terms and
conditions of the Proposed Transaction are set forth in more detail in the
Merger Agreement.
We have been requested by the Board of Directors of the Company to render
our opinion with respect to the fairness, from a financial point of view, to the
Company's stockholders of the Exchange Ratio to be received by such stockholders
in the Proposed Transaction. We have not been requested to opine as to, and our
opinion does not in any manner address, the Company's underlying business
decision to proceed with or effect the Proposed Transaction.
In arriving at our opinion, we reviewed and analyzed: (1) the Merger
Agreement and the specific terms of the Proposed Transaction, including with
respect to the governance of the Combined Company (as defined below), (2) such
publicly available information concerning the Company and Teleglobe that we
believe to be relevant to our analysis, (3) financial and operating information
with respect to the business, operations and prospects of the Company furnished
to us by the Company (including, without limitation, the anticipated financial
results of the Company for the quarter ended June 30, 1998, certain of which we
understand will be disclosed concurrently with the announcement of the Proposed
Transaction), (4) financial and operating information with respect to the
business, operations and prospects of Teleglobe furnished to us by Teleglobe and
the Company, (5) a trading history of the common stock of the Company from May
10, 1996 (the date of EXCEL's initial public offering) to the present and a
comparison of that trading history with those of other companies that we deemed
relevant, (6) a trading history of the common stock of Teleglobe from June 1,
1995 to the present and a comparison of that trading history with those of other
companies that we deemed relevant, (7) a comparison of the historical financial
results and present financial condition of the Company with those of other
companies that we deemed relevant, (8) a comparison of the historical financial
results and present financial condition of Teleglobe with those of other
companies that we deemed relevant, (9) third party research analyst's quarterly
and annual earnings estimates and recommendations for the Company and for
Teleglobe, including a comparison of analysts' estimates of the earnings of the
Company with the current projections of management of the Company for the second
quarter of 1998 and subsequent quarters, (10) the potential market performance
of the Common Stock of the Company in the absence of the Proposed Transaction,
(11) the potential pro forma financial effects of the Proposed Transaction on
Teleglobe and the Company, including the strategic benefits, revenue
enhancements, cost savings and other synergies expected by the managements of
the Company and Teleglobe to result from a combination of the businesses of the
Company and Teleglobe, (12) the terms of certain other transactions that we
deemed relevant, and (13) the results of prior efforts to solicit indications of
interest from third parties with respect to a business combination or other
strategic transaction with the Company. In addition, we have had discussions
with the managements of the Company and Teleglobe concerning their respective
businesses, operations, assets, financial condition and prospects and have
undertaken such other studies, analyses and investigations as we deemed
appropriate.
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In arriving at our opinion, we have assumed and relied upon the accuracy
and completeness of the financial and other information used by us without
assuming any responsibility for independent verification of such information and
have further relied upon the assurances of management of the Company and of
Teleglobe that they are not aware of any facts or circumstances that would make
such information inaccurate or misleading. With respect to the financial
projections of the Company, upon advice of the Company we have assumed that such
projections have been reasonably prepared on a basis reflecting the best
currently available estimates and judgments of the management of the Company as
to the future financial performance of the Company. However, given that the
Company's recent financial performance has fallen short of management's
projections, we also have prepared and considered more conservative projections
based upon the possibility that the Company will underperform management's
projections in the future. We have discussed these adjusted projections with the
management of the Company and they have consented to the use of such adjusted
projections, in addition to the management's projections, in performing our
analysis. With respect to the financial projections of Teleglobe, upon advice of
the Company and Teleglobe we have assumed that such projections have been
reasonably prepared on a basis reflecting the best currently available estimates
and judgments of the management of Teleglobe as to the future financial
performance of Teleglobe and that Teleglobe will perform substantially in
accordance with such projections. With respect to the financial projections of
the combined company upon consummation of the Proposed Transaction (the
"Combined Company"), including the strategic benefits, revenue enhancements,
cost savings and other synergies expected by the managements of the Company and
Teleglobe to result from a combination of the businesses of the Company and
Teleglobe, upon advice of the Company and Teleglobe we have assumed that such
projections have been reasonably prepared on a basis reflecting the best
currently available estimates and judgments of the managements of the Company
and Teleglobe as to the future financial performance of the Combined Company and
that the Combined Company will perform substantially in accordance with such
projections. In arriving at our opinion, we have conducted only a limited
physical inspection of the properties and facilities of the Company and of
Teleglobe and have not made or obtained any evaluations or appraisals of the
assets or liabilities of the Company or of Teleglobe. Upon advice of the
Company, we have assumed that the merger will qualify as a tax-free transaction
to the stockholders of the Company. Our opinion necessarily is based upon
market, economic and other conditions as they exist on, and can be evaluated as
of, the date of this letter.
Based upon and subject to the foregoing, we are of the opinion as of the
date hereof that, from a financial point of view, the Exchange Ratio is fair to
the stockholders of the Company.
We have acted as financial advisor to the Company in connection with the
Proposed Transaction and will receive a fee for our services which is contingent
upon the consummation of the Proposed Transaction. In addition, the Company has
agreed to indemnify us for certain liabilities that may arise out of the
rendering of this opinion. We also have performed various investment banking
services for the Company in the past (including advising the Company on its
acquisition of Telco Communications Group, Inc.) and have received customary
fees for such services. In the ordinary course of our business, we actively
trade in the equity securities of the Company and Teleglobe for our own account
and for the accounts of our customers and, accordingly, may at any time hold a
long or short position in such securities.
This opinion is for the use and benefit of the Board of Directors of the
Company and is rendered to the Board of Directors in connection with its
consideration of the Proposed Transaction. This opinion is not intended to be
and does not constitute a recommendation to any stockholder of the Company as to
how such stockholder should vote with respect to the Proposed Transaction.
Very truly yours,
LEHMAN BROTHERS
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<PAGE> 170
APPENDIX C
TELEGLOBE INC.
BY-LAW OR ARTICLES AMENDMENT
Notwithstanding any other provision in the By-laws of the Corporation,
(1) (a) The Board of Directors of the Corporation shall consist at the
Effective Time (as defined in the Agreement and Plan of Merger (the "Merger
Agreement") dated as of June 14, 1998 among the Corporation, North Merger Sub
Corporation and Excel Communications, Inc. ("Excel"), a Delaware corporation) of
a total of fifteen members as follows:
(i) 7 members shall be Teleglobe Directors (as defined in paragraph
(e) below);
(ii) 7 members shall be Excel Directors (as defined in paragraph
(e) below); and
(iii) 1 member shall be named jointly by the Teleglobe Directors
and the Excel Directors.
(b) In connection with any annual, annual and special or special meeting
of shareholders of the Corporation during the period from the Effective Time
until December 31 of the fifth complete calendar year after the calendar year in
which the Effective Time occurs (the "Time Period") involving an election of
directors:
(i) the Excel Directors shall be entitled to nominate 5 qualified
individuals (or such greater number as shall be necessary to ensure that
the nominees for Excel Directors represent at least 34% of the total
number of directors comprising the Teleglobe Board) to stand for
election at any such meeting;
(ii) the Teleglobe Directors shall be entitled to nominate 5
qualified individuals (or such greater number equal to or, subject to
the 34% requirement in clause (b)(i) above, greater than the number of
individuals nominated pursuant to such clause (b)(i) above) to stand for
election at any such meeting; and
(iii) the Teleglobe Directors and Excel Directors shall be entitled
to jointly nominate 3 qualified individuals to stand for election at any
such meeting.
(c) Any vacancy in the Board of Directors among the Teleglobe Directors
during the Time Period shall be filled by the Board of Directors with a
qualified individual nominated by the remaining Teleglobe Directors.
(d) Any vacancy in the Board of Directors among the Excel Directors
during the Time Period shall be filled by the Board of Directors with a
qualified individual nominated by the remaining Excel Directors.
(e) For purposes of this section (1), a Teleglobe Director means (i) any
person serving as a director of the Corporation who is designated by the Board
of Directors of the Corporation prior to the Effective Time for purposes of
continuing as a director of the Corporation under clause (a)(i) above, and (ii)
any person who becomes a director of the Corporation in the manner contemplated
by either clause (b)(ii) or paragraph (c) above. For purposes of this section
(1), an Excel Director means (i) any person designated by the Board of Directors
of Excel prior to the Effective Time for purposes of becoming a director of the
Corporation under clause (a)(ii) above, and (ii) any person who becomes a
director of the Corporation in the manner contemplated by either clause (b)(i)
or paragraph (d) above.
(f) There shall at no time be more than two members of the Board of
Directors who are employed by the Corporation or its affiliates, one of whom
shall be the Chief Executive Officer of the Corporation and the other of whom
shall be the Chief Executive Officer of Excel.
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<PAGE> 171
(2) During the Time Period, any sale, disposition, transfer or pledge of
any shares of a Subsidiary (as defined below) or any sale, disposition, lease,
transfer or mortgage of all or a substantial portion of the assets of a
Subsidiary or any merger, consolidation, amalgamation, combination, liquidation
or dissolution involving any Subsidiary shall, in addition to any other
approval, require approval by an affirmative vote of at least 66 2/3% of the
entire Board of Directors (disregarding vacancies) of the Corporation.
For purposes of this section (2), Subsidiary means a subsidiary (as defined
in the Canada Business Corporations Act) of the Corporation which is
incorporated under the laws of one of the United States of America and has a net
book value of more than U.S. $400 million.
(3) This By-law shall come into force at the Effective Time and shall
remain in effect until the expiration of the Time Period and may be amended,
modified or repealed in any manner provided for under applicable law if
accompanied by an affirmative vote of at least 66 2/3% of the entire Board of
Directors (disregarding vacancies) of the Corporation.
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APPENDIX D
EXCEL CONSENT AND VOTING AGREEMENT
EXCEL CONSENT AND VOTING AGREEMENT, dated as of June 14, 1998 (this
"Agreement"), by and among TELEGLOBE INC., a corporation governed by the Canada
Business Corporations Act ("Teleglobe"), and each of the other signatories
hereto (each, a "Stockholder" and, collectively, the "Stockholders").
WHEREAS, concurrently herewith, Teleglobe, North Merger Sub Corporation, a
Delaware corporation and a wholly owned subsidiary of Teleglobe ("North Sub"),
and Excel Communications, Inc., a Delaware corporation (the "Company"), are
entering into an Agreement and Plan of Merger (the "Merger Agreement";
capitalized terms used without definition herein having the meanings ascribed
thereto in the Merger Agreement);
WHEREAS, each Stockholder is the record and beneficial owner of the number
of shares ("Shares") of common stock, par value $.001 per share, of the Company
("Company Common Stock") set forth opposite such Stockholder's name in Schedule
I hereto;
WHEREAS, approval and adoption of the Merger Agreement by the Company's
stockholders is a condition to the consummation of the Merger;
WHEREAS, the Board of Directors of the Company has, prior to the execution
of this Agreement, duly and validly approved and adopted the Merger Agreement
and approved this Agreement, and such approvals and adoption have not been
withdrawn;
WHEREAS, the Stockholders are executing this Agreement (i) as an inducement
to Teleglobe to enter into and execute and to cause North Sub to enter into and
execute the Merger Agreement and (ii) in reliance upon the representations,
warranties, agreements and covenants of Teleglobe set forth in Sections 3.2(ad)
and 5.13 thereof; and
WHEREAS, certain holders of common shares of Teleglobe capital stock are
concurrently executing the Teleglobe Consent and Voting Agreements as an
inducement to Excel to enter into and execute the Merger Agreement.
NOW THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements set forth herein, the parties hereto agree as follows:
SECTION 1. CONSENT AND AGREEMENT TO VOTE. Each Stockholder agrees (for
itself and not as to any other Stockholder) that immediately following the
execution and delivery of this Agreement and the Merger Agreement, it shall
execute and deliver, or cause to be executed and delivered by the record owner
thereof, in accordance with Section 228 of the DGCL, the Excel Stockholders
Consent in the form of Exhibit A hereto (the "Consent"), which shall be
irrevocable, with respect to all Shares that are owned beneficially or of record
by such Stockholder or as to which such Stockholder has, directly or indirectly,
the right to vote or direct the voting.
Each Stockholder hereby further agrees (for itself and not as to any other
Stockholder) that, during the term of this Agreement, it shall, from time to
time, at the request of Teleglobe, at any meeting (whether annual or special and
whether or not an adjourned or postponed meeting) of stockholders of the
Company, however called, or in connection with any written consent of the
holders of Company Common Stock, in either case, prior to the earlier of the
Effective Time and the termination of this Agreement, if a meeting is held,
appear at such meeting or otherwise cause the Shares to be counted as present
thereat for purposes of establishing a quorum, and it shall vote or consent (or
cause to be voted or consented), in person or by proxy, all Shares, and any
other voting securities of the Company (whether acquired heretofore or
hereafter), that are beneficially owned by such Stockholder or its wholly owned
Affiliates or as to which such Stockholder has, directly or indirectly, the
right to vote or direct the voting, in favor of the approval and adoption of the
Merger Agreement. Each Stockholder agrees, during the period commencing on the
date hereof and ending on the
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earlier of the Effective Time and the termination of this Agreement, not to, and
not to permit any of its wholly owned Affiliates to, vote or execute any written
consent in lieu of a stockholders meeting or vote of the Company, if such
consent or vote by the stockholders of the Company would be inconsistent with or
frustrate the purposes of the other agreements of such Stockholder pursuant to
this paragraph.
In furtherance and not in limitation of the foregoing, each Stockholder
hereby grants to, and appoints, Teleglobe and each of Claude Seguin, Francois
Laurin and Andre Bourbonnais, in their respective capacities as officers of
Teleglobe, and any individual who shall hereafter succeed to any such officer of
Teleglobe, and any other designee of Teleglobe, each of them individually, its
irrevocable proxy and attorney-in-fact (with full power of substitution) to vote
the Shares as indicated in this Section 1. Each Stockholder intends this proxy
to be irrevocable and coupled with an interest and will take such further action
and execute such other instruments as may be necessary to effectuate the intent
of this proxy.
Each Stockholder hereby revokes any and all previous proxies with respect
to such Person's Shares or any other voting securities of the Company that
relate to the approval of the Merger Agreement.
SECTION 2. SECURITIES ACT COVENANTS AND REPRESENTATIONS. In addition to,
and not in lieu of, the other covenants and representations set forth herein,
each Stockholder hereby agrees and represents to Teleglobe that such Stockholder
understands that, to the extent such Stockholder is an "affiliate" (as such term
is defined in Rule 405 under the Securities Act) of the Company at the time the
Consent is executed or the Merger Agreement is submitted for a vote of the
stockholders of the Company, any public offering, sale or other disposition by
such Stockholder or any of its wholly owned Affiliates of any Teleglobe Common
Shares received by such Person in the Merger (collectively, the "Restricted
Sales") will, under current law, require any of (i) the further registration
under the Securities Act of any Teleglobe Common Shares to be sold by such
Person, (ii) compliance with applicable provisions of Rule 145 promulgated by
the SEC under the Securities Act or (iii) the availability of another exemption
from such registration under the Securities Act. Each Stockholder agrees not to,
and not to cause or permit any of its wholly owned Affiliates to, make any
Restricted Sale unless the conditions of clause (i), (ii) or (iii) are met.
SECTION 3. POOLING COVENANTS AND REPRESENTATIONS. In addition to, and not
in lieu of, the other covenants and representations set forth herein, each
Stockholder that is an "affiliate" of the Company hereby agrees and represents
to Teleglobe that from and after the date hereof, such Stockholder will not, and
will not permit any of its wholly owned Affiliates to, sell, pledge, transfer or
otherwise dispose of, or hedge or otherwise reduce its risk with respect to, any
Shares (whether owned as of the date hereof or hereafter acquired) or any
Teleglobe Common Shares received by such Stockholder in the Merger or other
shares of capital stock of Teleglobe, from the 30th day prior to the Effective
Time to such time as results covering at least 30 days of combined operations of
the Company and Teleglobe have been published by Teleglobe in the form of a
quarterly earnings report, an effective registration statement filed with the
SEC, a report to the SEC on Form 6-K or any other public filing or announcement
which includes the combined results of operations of Teleglobe and Excel, except
for transfers or other dispositions that, in the reasonable opinion of Excel's
or Teleglobe's independent accountants, will not prevent Teleglobe from
accounting for the Merger as a pooling of interests, taking into account the
actions of other wholly owned Affiliates of the Company, Teleglobe or the
Stockholders.
SECTION 4. FURTHER ASSURANCES. Each party shall execute and deliver such
additional instruments and other documents and shall take such further actions
as may be necessary or appropriate to effectuate, carry out and comply with all
of its obligations under this Agreement. Without limiting the generality of the
foregoing, none of the parties hereto shall enter into any agreement or
arrangement (or alter, amend or terminate any existing agreement or arrangement)
if such action would materially impair the ability of such party to effectuate,
carry out or comply with all of the terms of this Agreement.
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SECTION 5. REPRESENTATIONS AND WARRANTIES OF TELEGLOBE. Teleglobe
represents and warrants to each Stockholder as follows:
(a) This Agreement has been approved by the Board of Directors of
Teleglobe, representing all necessary corporate action on the part of Teleglobe
for the execution and performance hereof and thereof by Teleglobe (no action by
the stockholders of Teleglobe being required).
(b) This Agreement has been duly executed and delivered by a duly
authorized officer of Teleglobe.
(c) This Agreement constitute a valid and binding agreement of
Teleglobe, enforceable against Teleglobe in accordance with their terms, except
as such enforceability may be limited by bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws relating to or affecting
creditors generally by general equity principles (regardless of whether
enforceability is considered in a proceeding in equity or at law) or by an
implied covenant of good faith and fair dealing.
(d) The execution and delivery of this Agreement by Teleglobe does not
violate or breach, and will not give rise to any violation or breach, of
Teleglobe's charter or bylaws, or, except as will not materially impair its
ability to effectuate, carry out or comply with all of the terms of this
Agreement, any Law, Governmental Entity approval or Contract by which Teleglobe
or its Subsidiaries or their respective assets or properties may be bound.
SECTION 6. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS. Each
Stockholder, as to such Stockholder only, represents and warrants to Teleglobe
as follows:
(a) Schedule I sets forth, opposite such Stockholder's name, the number
and type of Shares of which such Stockholder is the record or beneficial owner.
Such Stockholder is the lawful owner of such Shares, free and clear of all
liens, charges, options, rights, encumbrances, stockholders agreements, voting
agreements, agreements to transfer or otherwise dispose of such Shares and
commitments of every kind, other than this Agreement and as disclosed in
Schedule I and has the sole power to vote (or cause to be voted) the Shares as
set forth in this Agreement and the Consent. Except as set forth on such
Schedule I, neither such Stockholder nor any of its Affiliates owns or holds any
rights to acquire any additional shares of Company Common Stock or other
securities of the Company or any interest therein or any voting rights with
respect to any additional shares of Company Common Stock or any other securities
of the Company.
(b) This Agreement and the Consent each have been duly executed and
delivered by a duly authorized officer of such Stockholder or, if the
Stockholder is a natural person, the Stockholder has the legal capacity to
execute this Agreement.
(c) This Agreement and the Consent constitute the valid and binding
agreements of such Stockholder, enforceable against such Stockholder in
accordance with their terms, except as such enforceability may be limited by
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws relating to or affecting creditors generally by general equity
principles (regardless of whether enforceability is considered in a proceeding
in equity or at law) or by an implied covenant of good faith and fair dealing.
(d) The execution and delivery of this Agreement and the Consent by such
Stockholder does not violate or breach, and will not give rise to any violation
or breach, of such Stockholder's charter, by-laws, trust instrument or
partnership agreement, to the extent applicable or, except as will not
materially impair the ability of such Stockholder to effectuate, carry out or
comply with all of the terms of this Agreement, any Law, third party consent,
Governmental Entity approval or Contract by which such Stockholder or its assets
or properties may be bound.
SECTION 7. EFFECTIVENESS AND TERMINATION. In the event the Merger Agreement
is terminated in accordance with its terms, this Agreement shall automatically
terminate and be of no further force or effect. Upon such termination, except
for any rights any party may have in respect of any breach by any other party of
its obligations hereunder, none of the parties hereto shall have any further
obligation or liability hereunder; provided however (A) that any amendment by
the parties to the Merger Agreement to (x) the Exchange Ratio or the Merger
Consideration (each as defined in Section 1.8(a) of the Merger Agreement),
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(y) Article VI of the Merger Agreement entitled "Conditions Precedent" or (z)
Article VII of the Merger Agreement entitled "Termination and Amendment" or (B)
the waiver on or prior to the Closing Date by Teleglobe and/or Excel of any
material Condition Precedent set forth in Article VI of the Merger Agreement,
shall require the written consent of the Shareholders, failing which this
Agreement may be terminated in writing by any Shareholder who has not consented
to such amendment or such waiver. In any event, if the Effective Time shall not
have occurred on or before December 31, 1999, this Agreement may be terminated
in writing by any Shareholder and it shall be of no further force or effect as
to such Shareholder.
SECTION 8. MISCELLANEOUS.
(a) Notices. All notices, requests and other communications hereunder
shall be in writing and shall be deemed duly given (a) on the date of delivery
if delivered personally, or by telecopy or facsimile, upon confirmation of
receipt, (b) on the first Business Day following the date of dispatch if
delivered by a recognized next-day courier service or (c) on the third Business
Day following the date of mailing if delivered by registered or certified mail,
return receipt requested, postage prepaid. All notices hereunder shall be
delivered as set forth below, or pursuant to such other instructions as may be
designated in writing by the party to receive such notice:
<TABLE>
<S> <C>
(i) if to Teleglobe, to
Teleglobe Inc.
1000, rue de La Gauchetiere ouest
Montreal, Quebec H3B 4X5
Attention: Vice President, Legal Affairs
and Corporate Secretary
Facsimile: 514-868-7438
with a copy to
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: Philip T. Ruegger III, Esq.
Facsimile: 212-455-2502
(ii) if to any Stockholder, to
Excel Communications, Inc.
8750 North Central Expressway
Suite 2000
Dallas, Texas 75231
Attention: Executive Vice President, Secretary
and General Counsel
Facsimile: 214-863-8838
with a copy to
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153-0119
Attention: Frederick S. Green, Esq.
Facsimile: 212-310-8007
</TABLE>
(b) Interpretation. When a reference is made in this Agreement to
Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
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Whenever the words "include", "includes" or "including" are used in this
Agreement, they shall be deemed to be followed by the words "without
limitation".
(c) Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that both
parties need not sign the same counterpart.
(d) Entire Agreement; No Third Party Beneficiaries. This Agreement
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof. This Agreement shall be binding upon and inure solely to
the benefit of each party hereto, and nothing in this Agreement, express or
implied, is intended to or shall confer upon any other Person any right, benefit
or remedy of any nature whatsoever under or by reason of this Agreement.
(e) Waiver of Jury Trial. Each party hereto waives, to the fullest
extent permitted by applicable law, any right it may have to a trial by jury in
respect of any litigation directly or indirectly arising out of, under or in
connection with this Agreement.
(f) Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware, without regard to the
principles of conflicts of laws of such state.
(g) Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any law or public policy, all
other terms and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner in order that the
transactions contemplated hereby are consummated as originally contemplated to
the greatest extent possible.
(h) Assignment. Neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by any of the parties hereto, in
whole or in part (whether by operation of law or otherwise), without the prior
written consent of the other party and the written undertaking of the assignee
to be bound by the terms of this Agreement, and any attempt to make any such
assignment without such consent shall be null and void. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of and be
enforceable by the parties and their respective successors and permitted
assigns.
(i) Submission to Jurisdiction; Waivers. Each of Teleglobe and each
Stockholder irrevocably agrees that any legal action or proceeding with respect
to this Agreement or for recognition and enforcement of any judgment in respect
hereof brought by the other party hereto or its successors or assigns may be
brought and determined in the Chancery or other Courts of the State of Delaware,
and each of Teleglobe and each Stockholder hereby irrevocably submits with
regard to any such action or proceeding for itself and in respect to its
property, generally and unconditionally, to the exclusive jurisdiction of the
aforesaid courts. Each of Teleglobe and each Stockholder hereby irrevocably
waives, and agrees not to assert, by way of motion, as a defense, counterclaim
or otherwise, in any action or proceeding with respect to this Agreement, (a)
any claim that it is not personally subject to the jurisdiction of the
above-named courts for any reason other than the failure to serve process in
accordance with this Section 8(i), (b) that it or its property is exempt or
immune from jurisdiction of any such court or from any legal process commenced
in such courts (whether through service of notice, attachment prior to judgment,
attachment in aid of execution of judgment, execution of judgment or otherwise),
and (c) to the fullest extent permitted by applicable law, that (i) the suit,
action or proceeding in any such court is brought in an inconvenient forum, (ii)
the venue of such suit, action or proceeding is improper or (iii) this
Agreement, or the subject matter hereof, may not be enforced in or by such
courts.
(j) Specific Performance. Each party acknowledges that if it fails to
perform any of its obligations under this Agreement, immediate and irreparable
harm or injury would be caused to the other party for which money damages would
not be an adequate remedy. In such event, each party agrees that the other party
shall
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<PAGE> 177
have the right, in addition to any other rights it may have, to specific
performance of this Agreement. Accordingly, if either party should institute an
action or proceeding seeking specific enforcement of the provisions hereof, the
other party in respect of such claim hereby waives the claim or defense that the
other party has an adequate remedy at law and hereby agrees not to assert in any
such action or proceeding the claim or defense that such a remedy at law exists.
Each party further agrees to waive any requirements for the securing or posting
of any bond in connection with obtaining any such equitable relief.
(k) Expenses. Each of Teleglobe and each Stockholder shall bear its own
expenses incurred in connection with this Agreement and the transactions
contemplated hereby.
(l) Action in Stockholder Capacity Only. No Stockholder makes any
agreement or understanding herein as a director or officer of the Company or in
any capacity other than as a stockholder of the Company. Each Stockholder signs
solely in its capacity as a record holder and beneficial owner of Shares and
nothing herein shall limit or affect any actions taken by a representative of
such Stockholder in such representative's capacity as an officer or director of
the Company.
(m) Obligations Several. The obligations of each Stockholder under this
Agreement shall be several and not joint. No Stockholder shall have any
liability, duty or obligation arising out of or resulting from any failure by
any other Stockholder (or any Affiliate thereof) to comply with the terms and
conditions of this Agreement.
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<PAGE> 178
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first above written.
TELEGLOBE INC.
By: /s/ CHARLES SIROIS
----------------------------------
Name: Charles Sirois
Title: Chairman and Chief
Executive Officer
TROUTT PARTNERS, LTD.
By: The Troutt Family Trust, its
general partner
By: /s/ KENNY A. TROUTT
--------------------------------
Name: Kenny A. Troutt
Title: Trustee
THE TROUTT FAMILY TRUST
By: /s/ KENNY A. TROUTT
----------------------------------
Name: Kenny A. Troutt
Title: Trustee
AUSTEX ENTERPRISES, LTD.
By: Starah Corporation, its general
partner
By: /s/ STEPHEN R. SMITH
--------------------------------
Name: Stephen R. Smith
Title: President
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<PAGE> 179
EXHIBIT A
STOCKHOLDER CONSENT
ACTION TAKEN BY THE WRITTEN
CONSENT OF STOCKHOLDERS
OF EXCEL
June 14, 1998
The undersigned stockholders of Excel, a Delaware corporation, acting by
written consent in lieu of a meeting pursuant to Section 228 of the General
Corporation Law of the State of Delaware, hereby irrevocably consent to the
adoption of and adopt the following resolution with respect to the shares of the
common stock, par value $.001 per share, of Excel owned of record by such
stockholders on the date hereof:
RESOLVED, that the Merger Agreement, dated as of June 14, 1998 (the "Merger
Agreement"), among Teleglobe, a corporation amalgamated under the Canada
Business Corporations Act, North Sub, a direct and wholly-owned subsidiary of
Teleglobe, and Excel, a Delaware corporation, a copy of which has been furnished
to the undersigned stockholders, be, and it hereby is, adopted and approved by
the undersigned stockholders.
The action of the stockholders of Excel approved pursuant hereto shall
become effective when one or more consents have been (a) signed by stockholders
holding shares having a majority of the outstanding shares of Excel Common
Stock, being not less than the minimum number of votes that would be necessary
to authorize or take such action at a meeting at which all shares entitled to
vote thereon were present and voted and (b) delivered to Excel at its principal
place of business.
(Print Name)
By:
------------------------------------
Name:
Title:
Number of Shares:
Address of the stockholder:
Date of Execution:
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<PAGE> 180
SCHEDULE I
SHARE OWNERSHIP
<TABLE>
<CAPTION>
NUMBER OF
SHARES
NAME AND ADDRESS BENEFICIALLY
OF SHAREHOLDER OWNED
---------------- ------------
<S> <C>
Troutt Partners, Ltd........................................ 53,000,000
8750 North Central Expressway
Suite 2000
Dallas, Texas 75231
Troutt Family Trust......................................... 10,680,000
8750 North Central Expressway
Suite 2000
Dallas, Texas 75231
Austex Enterprises, Ltd..................................... 7,367,933
8750 North Central Expressway
Suite 2000
Dallas, Texas 75231
</TABLE>
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<PAGE> 181
SCHEDULE II
LIENS ON SHARES
[Austex has liens on portions of shares.]
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<PAGE> 182
APPENDIX E
TELEGLOBE CONSENT AND VOTING AGREEMENT
RE: FUNDS NO. 650 AND 724
TELEGLOBE CONSENT AND VOTING AGREEMENT, dated as of June 14, 1998 (this
"Agreement"), by and among Excel Communications, Inc., a Delaware corporation
("Excel"), and Funds No. 650 and 724 by its manager, Mackenzie Financial
Corporation, (the "Shareholder").
WHEREAS, concurrently herewith, Excel, Teleglobe Inc., a corporation
governed by the Canada Business Corporations Act (the "Corporation"), and North
Merger Sub Corporation, a Delaware corporation and a wholly-owned subsidiary of
the Corporation ("Merger Sub"), are entering into an Agreement and Plan of
Merger (the "Merger Agreement"; capitalized terms used without definition herein
having the meanings ascribed thereto in the Merger Agreement);
WHEREAS, the Shareholder is the beneficial owner of the number of common
shares of the capital stock of the Corporation ("Shares") set forth in Schedule
I hereto;
WHEREAS, the Share Issuance has to be approved by the Corporation's
shareholders prior to the consummation of the Merger to satisfy the listing
requirements of the Exchanges;
WHEREAS, the Teleglobe By-Law Amendment has to be approved by the
Corporation's shareholders prior to the consummation of the Merger under
Canadian law;
WHEREAS, Teleglobe will in due course convene its shareholders to approve
the Teleglobe Articles Amendment;
WHEREAS, the Board of Directors of the Corporation has, prior to the
execution of this Agreement, duly and validly approved and adopted the Merger
Agreement and the transactions contemplated thereby and approved this Agreement
and the Teleglobe Articles of Amendment and the Teleglobe By-Law Amendment (and
has recommended approval of the same to the Shareholders), and such approvals
and adoption have not been withdrawn;
WHEREAS, the Shareholder is executing this Agreement (i) as an inducement
to Excel to enter into and execute the Merger Agreement; and (ii) as an
inducement to certain holders of shares of Excel Common Stock (the "Excel
Stockholders") to enter into and execute the Excel Consent and Voting Agreement;
WHEREAS, approval and adoption of the Merger Agreement by Excel's
stockholders is also a condition to the consummation of the Merger; and
WHEREAS, the Excel Stockholders are concurrently executing the Excel
Consent and Voting Agreement as an inducement to The Corporation to enter into
and execute the Merger Agreement.
NOW THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements set forth herein, the parties hereto agree as follows:
SECTION 1. CONSENT AND AGREEMENT TO VOTE. In order to provide the Exchanges
with evidence that holders of more than 50% of the voting shares of The
Corporation are in favour of the Merger, the Shareholder hereby agrees that
immediately upon the execution and delivery of this Agreement and the Merger
Agreement, it shall execute and deliver or cause to be executed and delivered by
the record owner thereof, a Shareholder's Consent in the form of Schedule II
hereto, which shall be irrevocable, with respect to all Shares that are owned
beneficially or of record by the Shareholder or as to which the Shareholder has,
directly or indirectly, the right to vote or direct the voting, such Consent to
be executed in lieu of a formal approval of the shareholders at a meeting duly
held therefor.
The Shareholder also agrees that, during the term of this Agreement, it
shall, from time to time at the request of Excel, at any meeting (whether annual
or special and whether or not an adjourned or postponed meeting) of shareholders
of the Corporation however called, or in connection with any written consent of
the holders of Shares (if required by any of the Exchanges), for the purposes of
the approval of the Share
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<PAGE> 183
Issuance, the Teleglobe By-Law Amendment and/or the Teleglobe Articles Amendment
or any action required in furtherance thereof or in furtherance of the Merger,
in either case, prior to the earlier of the Effective Time and the termination
of this Agreement, appear at the meeting or otherwise cause the Shares to be
counted as present thereat for purposes of establishing a quorum, and shall vote
or consent (or cause to be voted or consented), in person or by proxy, all
Shares, and any other voting securities of the Corporation (whether acquired
heretofore or hereafter), that are beneficially owned by such Shareholder or its
wholly-owned Affiliates or as to which such Shareholder has, directly or
indirectly, the right to vote or direct the voting, in favour of the approval of
the Share Issuance, the Teleglobe By-Law Amendment and/or the Teleglobe Articles
Amendment and any other action required in furtherance thereof or in furtherance
of the Merger Agreement, the Merger, each of the actions contemplated by the
Merger Agreement and any other action required in furtherance thereof or hereof.
The Shareholder agrees, during the period commencing on the date hereof and
ending on the earlier of the Effective Time and the termination of this
Agreement, not to, and not to permit any of its wholly-owned Affiliates to, vote
or execute any written consent in lieu of a shareholders meeting or vote of the
Corporation, if such consent or vote by the shareholders of the Corporation
would be inconsistent with or frustrate the purposes of the other agreements of
such Shareholder pursuant to this paragraph.
In furtherance of the agreements in the foregoing paragraphs, the
Shareholder hereby agrees to, and to cause its respective wholly-owned
Affiliates to, cooperate with Excel and the Corporation in connection with the
Merger Agreement and the consummation of the transactions contemplated thereby.
Excel agrees to cooperate with the Shareholder in connection with any filings
required to be made by such Shareholder pursuant to the HSR Act and the
Competition Act (Canada) in connection with the Merger Agreement and
consummation of the transactions contemplated thereby, including in connection
with any filing with Governmental Entities or otherwise in connection with
Section 5.4 of the Merger Agreement.
SECTION 2. FURTHER ASSURANCES. Each party shall execute and deliver such
additional instruments and other documents and shall take such further actions
as may be necessary or appropriate to effectuate, carry out and comply with all
of its obligations under this Agreement, including making such modifications as
the Exchanges acting reasonably may require as to the form of the Consent (none
of which shall affect the validity or enforceability of the Consent). Without
limiting the generality of the foregoing, none of the parties hereto shall enter
into any agreement or arrangement (or alter, amend or terminate any existing
agreement or arrangement) if such action would materially impair the ability of
such party to effectuate, carry out or comply with all of the terms of this
Agreement.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF EXCEL. Excel represents and
warrants to the Shareholder as follows:
(a) This Agreement has been approved by the Board of Directors of Excel,
representing all necessary corporate action on the part of Excel for the
execution and performance hereof and thereof by Excel (no action by the
stockholders of Excel being required).
(b) This Agreement has been duly executed and delivered by a duly
authorized officer of Excel.
(c) This Agreement constitutes a valid and binding agreement of Excel,
enforceable against Excel in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws relating to or affecting creditors
generally by general equity principles (regardless of whether enforceability is
considered in a proceeding in equity or at law) or by an implied covenant of
good faith and fair dealing.
(d) The execution and delivery of this Agreement by Excel does not
violate or breach, and will not give rise to any violation or breach, of Excel's
charter or by-laws or, except as will not materially impair its ability to
effectuate, carry out or comply with all of the terms of this Agreement, any
Law, Governmental Entity approval or Contract by which Excel or its Subsidiaries
or their respective assets or properties may be bound.
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SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER. The
Shareholder represents and warrants to Excel as follows:
(a) Schedule I sets forth the number of Shares of which the Shareholder
is the record or beneficial owner. Such Shareholder is the lawful owner of such
Shares, free and clear of all liens, charges, encumbrances, shareholders
agreements, voting agreements, agreements to transfer such Shares and, to the
actual knowledge of the Shareholder, commitments of every other kind, to which
the Shareholder is a party, other than this Agreement and as disclosed in
Schedule I and has the sole power to vote (or cause to be voted) the Shares as
set forth in this Agreement and the Consent. Except as set forth on such
Schedule I, neither the Shareholder nor any of its Affiliates owns or holds any
rights to acquire any additional common shares or other securities of the
capital stock of the Corporation or any interest therein or any voting rights
with respect to any additional common shares or any other securities of the
capital stock of the Corporation.
(b) This Agreement and the Consent have been duly executed and delivered
by a duly authorized officer of such Shareholder.
(c) This Agreement and the Consent constitute valid and binding
agreements of the Shareholder, enforceable against such Shareholder in
accordance with their terms, except as such enforceability may be limited by
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws relating to or affecting creditors generally by general equity
principles (regardless of whether enforceability is considered in a proceeding
in equity or at law) or by an implied covenant of good faith and fair dealing.
(d) The execution and delivery of this Agreement and the Consent by the
Shareholder do not violate or breach, and will not give rise to any violation or
breach, of such Shareholder's charter, by-laws, trust instrument or partnership
agreement, to the extent applicable or, except as will not materially impair (x)
the ability of such Shareholder to effectuate, carry out or comply with all of
the terms of this Agreement or (y) its business activities, any Law, third party
consent, Governmental Entity approval or Contract by which such Shareholder or
its properties or assets may be bound.
SECTION 5. EFFECTIVENESS AND TERMINATION. In the event the Merger Agreement
is terminated in accordance with its terms, this Agreement shall automatically
terminate and be of no further force or effect. Upon such termination, except
for any rights any party may have in respect of any breach by any other party of
its obligations hereunder, none of the parties hereto shall have any further
obligation or liability hereunder; provided however (A) that any amendment by
the parties to the Merger Agreement to (x) the Exchange Ratio or the Merger
Consideration (each as defined in Section 1.8(a) of the Merger Agreement), (y)
Article VI of the Merger Agreement entitled "Conditions Precedent" or (z)
Article VII of the Merger Agreement entitled "Termination and Amendment" or (B)
the waiver on or prior to the Closing Date by The Corporation of any material
condition precedent set forth in Article VI of the Merger Agreement, shall
require the written consent of the Shareholder, failing which this Agreement may
be terminated in writing by the Shareholder. In any event, this Agreement may be
terminated in writing by the Shareholder and it shall be of no further force or
effect if the Effective Time shall not have occurred on or before December 31,
1999.
SECTION 6. MISCELLANEOUS.
(a) Notices. All notices, requests and other communications hereunder
shall be in writing and shall be deemed duly given (a) on the date of delivery
if delivered personally, or by telecopy or facsimile, upon confirmation of
receipt, (b) on the first Business Day following the date of dispatch if
delivered by a recognized next-day courier service or (c) on the third Business
Day following the date of mailing if delivered by registered or certified mail,
return receipt requested, postage prepaid. All notices hereunder shall be
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<PAGE> 185
delivered as set forth below, or pursuant to such other instructions as may be
designated in writing by the party to receive such notice:
<TABLE>
<S> <C>
(i) If to Excel, to:
EXCEL COMMUNICATIONS, INC.
8750 North Central Expressway
Suite 2000
Dallas, Texas 75231
Attention: J. Christopher Dance
Facsimile: 214-863-8831
with a copy to:
WEIL, GOTSHAL & MANGES LLP
767 Fifth Avenue
New York, New York 10153-09119
Attention: Frederick S. Green, Esq.
Facsimile: 212-310-8007
(ii) If to the Shareholder, to
MACKENZIE FINANCIAL CORPORATION
150 Bloor Street West
Suite 815
Toronto, Ontario
M5S 3B5
Attention: Sian Brown
Facsimile: 416-922-7062
</TABLE>
(b) Interpretation. When a reference is made in this Agreement to
Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. Whenever the words "include", "includes" or "including" are used
in this Agreement, they shall be deemed to be followed by the words "without
limitation".
(c) Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that both
parties need not sign the same counterpart.
(d) Entire Agreement; No Third Party Beneficiaries. This Agreement
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof. This Agreement shall be binding upon and inure solely to
the benefit of each party hereto, and nothing in this Agreement, express or
implied, is intended to or shall confer upon any other Person any right, benefit
or remedy of any nature whatsoever under or by reason of this Agreement.
(e) Governing Law. This Agreement shall be governed and construed in
accordance with the laws in force in the Province of Ontario, Canada.
(f) Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any law or public policy, all
other terms and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an
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<PAGE> 186
acceptable manner in order that the transactions contemplated hereby are
consummated as originally contemplated to the greatest extent possible.
(g) Assignment. Neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by any of the parties hereto, in
whole or in part (whether by operation of law or otherwise), without the prior
written consent of the other party and the written undertaking of the assignee
to be bound by the terms of this Agreement, and any attempt to make any such
assignment without such consent shall be null and void. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of and be
enforceable by the parties and their respective successors and permitted
assigns.
(h) Submission to Jurisdiction; Waivers. Each of Excel and the
Shareholder irrevocably agrees that any legal action or proceeding with respect
to this Agreement or for recognition and enforcement of any judgment in respect
hereof brought by the other party hereto or its successors or assigns may be
brought and determined in any court of competent jurisdiction of the Province of
Ontario and each of Excel and the Shareholder hereby irrevocably submits with
regard to any such action or proceeding for itself and in respect to its
property, generally and unconditionally, to the exclusive jurisdiction of the
aforesaid courts. Each of Excel and the Shareholder hereby irrevocably waives,
and agrees not to assert, by way of motion, as a defence, counterclaim or
otherwise, in any action or proceeding with respect to this Agreement, (a) any
claim that it is not personally subject to the jurisdiction of the above-named
courts for any reason other than the failure to serve proceedings in accordance
with this Section 7(h), (b) that it or its property is exempt or immune from
jurisdiction of any such court or from any legal proceedings commenced in such
courts, and (c) to the fullest extent permitted by applicable law, that (i) the
suit, action or proceeding in any such court is brought in an inconvenient
forum, (ii) the venue of such suit, action or proceeding is improper or (iii)
this Agreement, or the subject matter hereof, may not be enforced in or by such
courts.
(i) Specific Performance. Each party acknowledges that if it fails to
perform any of its obligations under this Agreement, except if such
non-performance by the Shareholder is due to fiduciary duties owed to its
unitholders, immediate and irreparable harm or injury would be caused to the
other party for which money damages would not be an adequate remedy. In such
event, each party agrees that the other party shall have the right, in addition
to any other rights it may have, to specific performance of this Agreement.
Accordingly, if any party should institute an action or proceeding, seeking
specific enforcement of the provisions hereof, each party in respect of such
claim hereby waives the claim or defence that the other party has an adequate
remedy at law and hereby agrees not to assert in any such action or proceeding
the claim or defence that such a remedy at law exists. Each party further agrees
to waive any requirements for the securing or posting of any bond in connection
with obtaining any such equitable relief.
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<PAGE> 187
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first above written.
EXCEL COMMUNICATIONS, INC.
By: /s/ KENNY A. TROUTT
----------------------------------
Name: Kenny A. Troutt
Title: President and Chief
Executive Officer
FUND NO. 650 AND 724
By Its Manager, MacKenzie
Financial Corporation
By: /s/ DINA DEGEER
----------------------------------
Name: Dina DeGeer
Title: Officer, Bluewater
Investment
Management Inc., proxy holder
for
Mackenzie Financial Corporation
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<PAGE> 188
SCHEDULE I
SHARE OWNERSHIP
<TABLE>
<CAPTION>
NUMBER OF SHARES RIGHTS TO ACQUIRE
BENEFICIALLY OWNED LIENS ADDITIONAL SHARES
------------------ ----- -----------------
<S> <C> <C>
2,481,400(1) None None
</TABLE>
- ---------------
(1) Before giving effect to the Teleglobe Stock Dividend.
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<PAGE> 189
SCHEDULE II
SHAREHOLDER CONSENT
June 14, 1998
The undersigned shareholder of Teleglobe Inc. ("Teleglobe") hereby
irrevocably consents to the adoption of and adopt the following resolutions with
respect to the common shares of the capital stock of Teleglobe owned
beneficially by the undersigned on the date hereof as listed below.
RESOLVED, that the Share Issuance, as defined in the Merger Agreement,
dated as of June 14, 1998, among Teleglobe, North Merger Sub Corporation, a
wholly-owned subsidiary of Teleglobe, and Excel Communications, Inc., a Delaware
corporation, a copy of which has been furnished to the undersigned shareholder,
be, and it hereby is, approved by the undersigned shareholder.
FUNDS NO 650 AND 724 by its manager,
Mackenzie Financial Corporation
(Print Name)
By:
----------------------------------
Name: Dina DeGeer
Title: Officer, Bluewater
Investment
Management Inc., proxy holder
for
Mackenzie Financial Corporation
Number of Shares: 2,481,400 Common
Shares(1)
Address of the shareholder:
150 King Street West
Suite 1502, Box 63
Toronto, Ontario
M5H 1J9
Date of Execution: June 14, 1998
- ---------------
(1) Before giving effect to the Teleglobe Stock Dividend.
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<PAGE> 190
APPENDIX F
TRANSLATION
TELEGLOBE CONSENT AND VOTING AGREEMENT
RE: CAPITAL COMMUNICATIONS CDPQ INC.
TELEGLOBE CONSENT AND VOTING AGREEMENT, dated as of June 14, 1998 (this
"Agreement"), by and among Excel Communications, Inc., a Delaware corporation
("Excel"), and Capital Communications CDPQ Inc. (the "Shareholder").
WHEREAS, concurrently herewith, Excel, Teleglobe Inc., a corporation
governed by the Canada Business Corporations Act (the "Corporation"), and North
Merger Sub Corporation, a Delaware corporation and a wholly owned subsidiary of
the Corporation ("Merger Sub"), are entering into an Agreement and Plan of
Merger (the "Merger Agreement"; capitalized terms used without definition herein
having the meanings ascribed thereto in the Merger Agreement);
WHEREAS, the Shareholder is the beneficial owner of the number of common
shares of the capital stock of the Corporation ("Shares") set forth in Schedule
I hereto;
WHEREAS, the Share Issuance has to be approved by the Corporation's
shareholders prior to the consummation of the Merger to satisfy the listing
requirements of the Exchanges;
WHEREAS, the Teleglobe By-Law Amendment has to be approved by the
Corporation's shareholders prior to the consummation of the Merger under
Canadian law;
WHEREAS, Teleglobe will in due course convene its shareholders to approve
the Teleglobe Articles Amendment;
WHEREAS, the Board of Directors of the Corporation has, prior to the
execution of this Agreement, duly and validly approved and adopted the Merger
Agreement and the transactions contemplated thereby and approved this Agreement
and the Teleglobe Articles of Amendment and the Teleglobe By-Law Amendment (and
has recommended approval of the same to the Shareholders), and such approvals
and adoption have not been withdrawn;
WHEREAS, the Shareholder is executing this Agreement (i) as an inducement
to Excel to enter into and execute the Merger Agreement; and (ii) as an
inducement to certain holders of shares of Excel Common Stock (the "Excel
Stockholders") to enter into and execute the Excel Consent and Voting Agreement;
WHEREAS, approval and adoption of the Merger Agreement by Excel's
stockholders is a condition to the consummation of the Merger; and
WHEREAS, the Excel Stockholders are concurrently executing the Excel
Consent and Voting Agreement as an inducement to the Corporation to enter into
and execute the Merger Agreement.
NOW THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements set forth herein, the parties hereto agree as follows:
SECTION 1. CONSENT AND AGREEMENT TO VOTE. In order to provide the Exchanges
with evidence that holders of more than 50% of the voting shares of the
Corporation are in favour of the Merger, the Shareholder hereby agrees that
immediately upon the execution and delivery of this Agreement and the Merger
Agreement, it shall execute and deliver or cause to be executed and delivered by
the record owner thereof, a Shareholder's Consent in the form of Schedule II
hereto, which shall be irrevocable, with respect to all Shares that are owned
beneficially or of record by the Shareholder or as to which the Shareholder has,
directly or indirectly, the right to vote or direct the voting, such Consent to
be executed in lieu of a formal approval of the shareholders at a meeting duly
held therefor.
The Shareholder also agrees that, during the term of this Agreement, it
shall, from time to time at the request of Excel, at any meeting (whether annual
or special and whether or not an adjourned or postponed meeting) of shareholders
of the Corporation however called, or in connection with any written consent of
the
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<PAGE> 191
holders of Shares (if required by any of the Exchanges), for the purposes of the
approval of the Share Issuance, the Teleglobe By-Law Amendment and/or the
Teleglobe Articles Amendment or any action required in furtherance thereof or in
furtherance of the Merger, in either case, prior to the earlier of the Effective
Time and the termination of this Agreement, appear at the meeting or otherwise
cause the Shares to be counted as present thereat for purposes of establishing a
quorum, and shall vote or consent (or cause to be voted or consented), in person
or by proxy, all Shares, and any other voting securities of the Corporation
(whether acquired heretofore or hereafter), that are beneficially owned by such
Shareholder or its wholly-owned Affiliates or as to which such Shareholder has,
directly or indirectly, the right to vote or direct the voting, in favour of the
approval of the Share Issuance, the Teleglobe By-Law Amendment and/or the
Teleglobe Articles Amendment and any other action required in furtherance
thereof or in furtherance of the Merger Agreement, the Merger, each of the
actions contemplated by the Merger Agreement and any other action required in
furtherance thereof or hereof. The Shareholder agrees, during the period
commencing on the date hereof and ending on the earlier of the Effective Time
and the termination of this Agreement, not to, and not to permit any of its
wholly-owned Affiliates to, vote or execute any written consent in lieu of a
shareholders meeting or vote of the Corporation, if such consent or vote by the
shareholders of the Corporation would be inconsistent with or frustrate the
purposes of the other agreements of such Shareholder pursuant to this paragraph.
In furtherance of the agreements in the foregoing paragraphs, the
Shareholder hereby agrees to, and to cause its respective wholly-owned
Affiliates to, cooperate with Excel and the Corporation in connection with the
Merger Agreement and the consummation of the transactions contemplated thereby.
Excel agrees to cooperate with the Shareholder in connection with any filings
required to be made by such Shareholder pursuant to the HSR Act and the
Competition Act (Canada) in connection with the Merger Agreement and
consummation of the transactions contemplated thereby, including in connection
with any filing with Governmental Entities or otherwise in connection with
Section 5.4 of the Merger Agreement.
SECTION 2. FURTHER ASSURANCES. Each party shall execute and deliver such
additional instruments and other documents and shall take such further actions
as may be necessary or appropriate to effectuate, carry out and comply with all
of its obligations under this Agreement, including making such modifications as
the Exchanges may require as to the form of the Consent (none of which shall
affect the validity or enforceability of the Consent). Without limiting the
generality of the foregoing, none of the parties hereto shall enter into any
agreement or arrangement (or alter, amend or terminate any existing agreement or
arrangement) if such action would materially impair the ability of such party to
effectuate, carry out or comply with all of the terms of this Agreement,
provided that the Shareholder shall in no way be limited to sell or otherwise
dispose of any of the Shares during the term of this Agreement.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF EXCEL. Excel represents and
warrants to the Shareholder as follows:
(a) This Agreement has been approved by the Board of Directors of Excel,
representing all necessary corporate action on the part of Excel for the
execution and performance hereof and thereof by Excel (no action by the
stockholders of Excel being required).
(b) This Agreement has been duly executed and delivered by a duly
authorized officer of Excel.
(c) This Agreement constitutes a valid and binding agreement of Excel,
enforceable against Excel in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws relating to or affecting creditors
generally by general equity principles (regardless of whether enforceability is
considered in a proceeding in equity or at law) or by an implied covenant of
good faith and fair dealing.
(d) The execution and delivery of this Agreement by Excel does not
violate or breach, and will not give rise to any violation or breach, of Excel's
charter or by-laws or, except as will not materially impair its ability to
effectuate, carry out or comply with all of the terms of this Agreement, any
Law, Governmental Entity approval or Contract by which Excel or its Subsidiaries
or their respective assets or properties may be bound.
F-2
<PAGE> 192
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER. The
Shareholder represents and warrants to Excel as follows:
(a) Schedule I sets forth the number of Shares of which the Shareholder
is the beneficial owner. Such Shareholder is the lawful owner of such Shares,
free and clear of all liens, charges, encumbrances, shareholders agreements,
voting agreements, agreements to transfer such Shares and commitments of every
kind to which the Shareholder is a party, other than this Agreement and as
disclosed in Schedule I and has the sole power to vote (or cause to be voted)
the Shares as set forth in this Agreement and the Consent. Except as set forth
on such Schedule I, neither the Shareholder nor any of its Affiliates owns or
holds any rights to acquire any additional common shares or other securities of
the capital stock of the Corporation or any interest therein or any voting
rights with respect to any additional common shares or any other securities of
the capital stock of the Corporation.
(b) This Agreement and the Consent have been duly executed and delivered
by a duly authorized officer of such Shareholder.
(c) This Agreement and the Consent constitute valid and binding
agreements of the Shareholder, enforceable against such Shareholder in
accordance with their terms, except as such enforceability may be limited by
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws relating to or affecting creditors generally by general equity
principles (regardless of whether enforceability is considered in a proceeding
in equity or at law) or by an implied covenant of good faith and fair dealing
and are subject to Crown privilege.
(d) The execution and delivery of this Agreement and the Consent by the
Shareholder do not violate or breach, and will not give rise to any violation or
breach, of such Shareholder's charter, by-laws, trust instrument or partnership
agreement, to the extent applicable or, except as will not materially impair (x)
the ability of such Shareholder to effectuate, carry out or comply with all of
the terms of this Agreement and the Consent or (y) its business activities, any
Law, third party consent, Governmental Entity approval or Contract by which such
Shareholder or its properties or assets may be bound.
SECTION 5. EFFECTIVENESS AND TERMINATION. In the event the Merger Agreement
is terminated in accordance with its terms, this Agreement shall automatically
terminate and be of no further force or effect. Upon such termination, except
for any rights any party may have in respect of any breach by any other party of
its obligations hereunder, none of the parties hereto shall have any further
obligation or liability hereunder; provided however (A) that any amendment by
the parties to the Merger Agreement to (x) the Exchange Ratio or the Merger
Consideration (each as defined in Section 1.8(a) of the Merger Agreement), (y)
Article VI of the Merger Agreement entitled "Conditions Precedent" or (z)
Article VII of the Merger Agreement entitled "Termination and Amendment" or (B)
the waiver on or prior to the Closing Date by the Corporation of any material
condition precedent set forth in Article VI of the Merger Agreement, shall
require the written consent of the Shareholder, failing which this Agreement may
be terminated in writing by the Shareholder. In any event, this Agreement may be
terminated in writing by the Shareholder and it shall be of no further force or
effect if the Effective Time shall not have occurred on or before June 14, 1999.
SECTION 6. MISCELLANEOUS.
(a) Notices. All notices, requests and other communications hereunder
shall be in writing and shall be deemed duly given (a) on the date of delivery
if delivered personally, or by telecopy or facsimile, upon confirmation of
receipt, (b) on the first Business Day following the date of dispatch if
delivered by a recognized next-day courier service or (c) on the third Business
Day following the date of mailing if delivered by registered or certified mail,
return receipt requested, postage prepaid. All notices hereunder shall be
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<PAGE> 193
delivered as set forth below, or pursuant to such other instructions as may be
designated in writing by the party to receive such notice:
<TABLE>
<S> <C>
(i) If to Excel, to:
EXCEL COMMUNICATIONS, INC.
8750 North Central Expressway
Suite 2000
Dallas, Texas 75231
Attention: J. Christopher Dance
Facsimile: 214-863-8831
with a copy to:
WEIL, GOTSHAL & MANGES LLP
767 Fifth Avenue
New York, New York 10153-09119
Attention: Frederick S. Green, Esq.
Facsimile: 212-310-8007
(ii) If to the Shareholder, to
CAPITAL COMMUNICATIONS CDPQ INC.
1981 McGill College Avenue
6th floor
Montreal, Quebec
H3A 3C7
Attention: The President
Facsimile: 514-847-5980
with a copy to:
CAISSE DE DEPOT ET PLACEMENT DU QUEBEC
1981 McGill College Avenue
8th floor
Montreal, Quebec
H3A 3C7
Attention: Claude Bergeron
Facsimile: 514-847-2498
</TABLE>
(b) Interpretation. When a reference is made in this Agreement to
Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. Whenever the words "include", "includes" or "including" are used
in this Agreement, they shall be deemed to be followed by the words "without
limitation".
(c) Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that both
parties need not sign the same counterpart.
(d) Entire Agreement; No Third Party Beneficiaries. This Agreement
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof. This Agreement shall be binding upon and inure solely to
the benefit of each party hereto, and nothing in this Agreement, express or
implied, is intended to or shall confer upon any other Person any right, benefit
or remedy of any nature whatsoever under or by reason of this Agreement.
F-4
<PAGE> 194
(e) Governing Law. This Agreement shall be governed and construed in
accordance with the laws in force in the Province of Quebec, Canada.
(f) Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any law or public policy, all
other terms and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner in order that the
transactions contemplated hereby are consummated as originally contemplated to
the greatest extent possible.
(g) Assignment. Neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by any of the parties hereto, in
whole or in part (whether by operation of law or otherwise), without the prior
written consent of the other party and the written undertaking of the assignee
to be bound by the terms of this Agreement, and any attempt to make any such
assignment without such consent shall be null and void. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of and be
enforceable by the parties and their respective successors and permitted
assigns.
(h) Submission to Jurisdiction; Waivers. Each of Excel and the
Shareholder irrevocably agrees that any legal action or proceeding with respect
to this Agreement or for recognition and enforcement of any judgment in respect
hereof brought by the other party hereto or its successors or assigns may be
brought and determined in any court of competent jurisdiction of the Province of
Quebec and each of Excel and the Shareholder hereby irrevocably submits with
regard to any such action or proceeding for itself and in respect to its
property, generally and unconditionally, to the exclusive jurisdiction of the
aforesaid courts which constitutes a submission to the jurisdiction of a Quebec
authority as provided for in Section 3148(5) of the Civil Code of Quebec. Each
of Excel and the Shareholder hereby irrevocably waives, and agrees not to
assert, by way of motion, as a defence, counterclaim or otherwise, in any action
or proceeding with respect to this Agreement, (a) any claim that it is not
personally subject to the jurisdiction of the above-named courts for any reason
other than the failure to serve proceedings in accordance with this Section
7(h), (b) that it or its property is exempt or immune from jurisdiction of any
such court or from any legal proceedings commenced in such courts (whether
through service of a writ of seizure, seizure prior to judgment, post-judgment
seizure, execution of judgment or otherwise), and (c) to the fullest extent
permitted by applicable law, that (i) the suit, action or proceeding in any such
court is brought in an inconvenient forum, (ii) the venue of such suit, action
or proceeding is improper or (iii) this Agreement, or the subject matter hereof,
may not be enforced in or by such courts.
(i) Specific Performance. Each party acknowledges that if it fails to
perform any of its obligations under this Agreement, immediate and irreparable
harm or injury would be caused to the other party for which money damages would
not be an adequate remedy. In such event, each party agrees that the other party
shall have the right, in addition to any other rights it may have, to specific
performance of this Agreement. Accordingly, if any party should institute an
action or proceeding, seeking specific enforcement of the provisions hereof,
each party in respect of such claim hereby waives the claim or defence that the
other party has an adequate remedy at law and hereby agrees not to assert in any
such action or proceeding the claim or defence that such a remedy at law exists.
Each party further agrees to waive any requirements for the securing or posting
of any bond in connection with obtaining any such equitable relief.
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<PAGE> 195
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first above written.
EXCEL COMMUNICATIONS, INC.
By: /s/ KENNY A. TROUTT
----------------------------------
Name: Kenny A. Troutt
Title: President and Chief
Executive Officer
CAPITAL COMMUNICATIONS
CDPQ INC.
By: /s/ GINETTE DEPELTEAU
----------------------------------
Name: Ginette Depelteau
By: /s/ PIERRE BELANGER
----------------------------------
Name: Pierre Belanger
Title: President
We hereby consent to Capital Communications CDPQ Inc. taking in our name
the undertakings contained in this Agreement.
CAISSE DE DEPOT ET PLACEMENT
DU QUEBEC
By: /s/ CLAUDE BERGERON
----------------------------------
Name: Claude Bergeron
By: /s/ GINETTE DEPELTEAU
----------------------------------
Name: Ginette Depelteau
F-6
<PAGE> 196
SCHEDULE I
SHARE OWNERSHIP
<TABLE>
<CAPTION>
NUMBER OF SHARES RIGHTS TO ACQUIRE
BENEFICIALLY OWNED LIENS ADDITIONAL SHARES
------------------ ----- -----------------
<S> <C> <C>
4,028,424(1) None None
</TABLE>
- ---------------
(1) 8,056,848 giving effect to the Teleglobe Stock Dividend.
F-7
<PAGE> 197
SCHEDULE II
SHAREHOLDER CONSENT
June 14, 1998
The undersigned shareholder of Teleglobe Inc. ("Teleglobe") hereby
irrevocably consents to the adoption of and adopt the following resolution with
respect to the common shares of the capital stock of Teleglobe owned
beneficially or of record by the undersigned on the date hereof as listed below.
RESOLVED, that the Share Issuance, as defined in the Merger Agreement,
dated as of June 14, 1998 among Teleglobe, North Merger Sub Corporation, a
wholly-owned subsidiary of Teleglobe, and Excel Communications, Inc., a Delaware
corporation, a copy of which has been furnished to the undersigned shareholder,
be, and it hereby is, approved by the undersigned shareholder.
CAPITAL COMMUNICATIONS CDPQ INC.
(Print Name)
By:
----------------------------------
Name: Pierre Belanger
Title: President
By:
----------------------------------
Name: Ginette Depelteau
Number of Shares: 4,028,424 Common
Shares(1)
Address of the shareholder:
1981 McGill College Avenue
6th Floor
Montreal, Quebec
H3A 3C7
Date of Execution: June 14, 1998
- ---------------
(1) 8,056,848 giving effect to the Teleglobe Stock Dividend.
F-8
<PAGE> 198
APPENDIX G
TELEGLOBE CONSENT AND VOTING AGREEMENT
RE: BCE INC.
TELEGLOBE CONSENT AND VOTING AGREEMENT, dated as of June 14, 1998 (this
"Agreement"), by and among Excel Communications, Inc., a Delaware corporation
("Excel"), and BCE Inc. (the "Shareholder").
WHEREAS, concurrently herewith, Excel, Teleglobe Inc., a corporation
governed by the Canada Business Corporations Act (the "Corporation"), and North
Merger Sub Corporation, a Delaware corporation and a wholly owned subsidiary of
the Corporation ("Merger Sub"), are entering into an Agreement and Plan of
Merger (the "Merger Agreement"; capitalized terms used without definition herein
having the meanings ascribed thereto in the Merger Agreement);
WHEREAS, the Shareholder is the beneficial owner of the number of common
shares of the capital stock of the Corporation ("Shares") set forth in Schedule
I hereto;
WHEREAS, the Share Issuance has to be approved by the Corporation's
shareholders prior to the consummation of the Merger to satisfy the listing
requirements of the Exchanges;
WHEREAS, the Teleglobe By-Law Amendment has to be approved by the
Corporation's shareholders prior to the consummation of the Merger under
Canadian law;
WHEREAS, Teleglobe will in due course convene its shareholders to approve
the Teleglobe Articles Amendment;
WHEREAS, the Board of Directors of the Corporation has, prior to the
execution of this Agreement, duly and validly approved and adopted the Merger
Agreement and the transactions contemplated thereby and approved this Agreement
and the Teleglobe Articles of Amendment and the Teleglobe By-Law Amendment (and
has recommended approval of the same to the Shareholders), and such approvals
and adoption have not been withdrawn;
WHEREAS, the Shareholder is executing this Agreement (i) as an inducement
to Excel to enter into and execute the Merger Agreement; and (ii) as an
inducement to certain holders of shares of Excel Common Stock (the "Excel
Stockholders") to enter into and execute the Excel Consent and Voting Agreement;
WHEREAS, approval and adoption of the Merger Agreement by Excel's
stockholders is also a condition to the consummation of the Merger; and
WHEREAS, the Excel Stockholders are concurrently executing the Excel
Consent and Voting Agreement as an inducement to the Corporation to enter into
and execute the Merger Agreement.
NOW THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements set forth herein, the parties hereto agree as follows:
SECTION 1. CONSENT AND AGREEMENT TO VOTE. In order to provide the Exchanges
with evidence that holders of more than 50% of the voting shares of the
Corporation are in favour of the Merger, the Shareholder hereby agrees that
immediately upon the execution and delivery of this Agreement and the Merger
Agreement, it shall execute and deliver or cause to be executed and delivered by
the record owner thereof, a Shareholder's Consent in the form of Schedule II
hereto, which shall be irrevocable, with respect to all Shares that are owned
beneficially or of record by the Shareholder or as to which the Shareholder has,
directly or indirectly, the right to vote or direct the voting, such Consent to
be executed in lieu of a formal approval of the shareholders at a meeting duly
held therefor.
The Shareholder also agrees that, during the term of this Agreement, it
shall, from time to time at the request of Excel, at any meeting (whether annual
or special and whether or not an adjourned or postponed meeting) of shareholders
of the Corporation however called, or in connection with any written consent of
the holders of Shares (if required by any of the Exchanges), for the purposes of
the approval of the Share
G-1
<PAGE> 199
Issuance, the Teleglobe By-Law Amendment and/or the Teleglobe Articles Amendment
or any action required in furtherance thereof or in furtherance of the Merger,
in either case, prior to the earlier of the Effective Time and the termination
of this Agreement, appear at the meeting or otherwise cause the Shares to be
counted as present thereat for purposes of establishing a quorum, and shall vote
or consent (or cause to be voted or consented), in person or by proxy, all
Shares, and any other voting securities of the Corporation (whether acquired
heretofore or hereafter), that are beneficially owned by such Shareholder or its
wholly-owned Affiliates or as to which such Shareholder has, directly or
indirectly, the right to vote or direct the voting, in favour of the approval of
the Share Issuance, the Teleglobe By-Law Amendment and/or the Teleglobe Articles
Amendment and any other action required in furtherance thereof or in furtherance
of the Merger Agreement, the Merger, each of the actions contemplated by the
Merger Agreement and any other action required in furtherance thereof or hereof.
The Shareholder agrees, during the period commencing on the date hereof and
ending on the earlier of the Effective Time and the termination of this
Agreement, not to, and not to permit any of its wholly-owned Affiliates to, vote
or execute any written consent in lieu of a shareholders meeting or vote of the
Corporation, if such consent or vote by the shareholders of the Corporation
would be inconsistent with or frustrate the purposes of the other agreements of
such Shareholder pursuant to this paragraph.
In furtherance and not in limitation of the foregoing, the Shareholder
hereby grants to, and appoints, Excel and each of Kenny A. Troutt, Nicholas A.
Merrick and J. Christopher Dance in their respective capacities as officers of
Excel, and any individual who shall hereafter succeed to any such officer of
Excel, and any other designee of Excel, each of them individually, its
irrevocable proxy and attorney-in-fact (with full power of substitution) to vote
the Shares, if applicable, as indicated in this Section 1. The Shareholder
intends this proxy to be irrevocable and coupled with an interest and will take
such further action and execute such other instruments as may be necessary to
effectuate the intent of this proxy.
(a) In furtherance of the agreements in the foregoing paragraphs, the
Shareholder hereby agrees to, and to cause its respective wholly-owned
Affiliates to, cooperate with Excel and the Corporation in connection with the
Merger Agreement and the consummation of the transactions contemplated thereby.
Excel agrees to cooperate with the Shareholder in connection with any filings
required to be made by such Shareholder pursuant to the HSR Act and the
Competition Act (Canada) in connection with the Merger Agreement and
consummation of the transactions contemplated thereby, including in connection
with any filing with Governmental Entities or otherwise in connection with
Section 5.4 of the Merger Agreement.
(b) The Shareholder hereby revokes any and all previous proxies with
respect to its Shares or any other voting securities of the Corporation that
relate to the approval of the Share Issuance, the Teleglobe By-Law Amendment
and/or the Teleglobe Articles Amendment or any other action required in
furtherance thereof or in furtherance of the transactions contemplated hereby or
by the Merger Agreement.
SECTION 2. POOLING COVENANTS AND REPRESENTATIONS. In addition to, and not
in lieu of, the other covenants and representations set forth herein, if the
Shareholder is an "affiliate" (as such term is defined in Rule 405 under the
Securities Act) of the Corporation, it hereby agrees and represents to Excel
that from and after the date hereof, such Shareholder will not, and will not
permit any of its wholly-owned Affiliates to, sell, pledge, transfer, or
otherwise dispose of, or hedge or otherwise reduce its risk with respect to, any
Shares (whether owned as of the date hereof or thereafter acquired) or other
shares of the capital stock of the Corporation, from the 30th day prior to the
Effective Time to such time as results covering at least 30 days of combined
operations of the Corporation and Excel have been published by the Corporation
in the form of a quarterly earnings report, an effective registration statement
filed with the SEC, a report to the SEC on Form 6-K or any other public filing
or announcement which includes the combined results of operations, except for
transfers or other dispositions that, in that reasonable opinion of Excel's or
the Corporation's independent accountants, will not prevent the Corporation from
accounting for the Merger as a pooling of interests, taking into account the
actions of other Affiliates of the Corporation, Excel or the Shareholder.
SECTION 3. FURTHER ASSURANCES. Each party shall execute and deliver such
additional instruments and other documents and shall take such further actions
as may be necessary or appropriate to effectuate, carry out and comply with all
of its obligations under this Agreement, including making such
G-2
<PAGE> 200
modifications as the Exchanges may require as to the form of the Consent (none
of which shall affect the validity or enforceability of the Consent). Without
limiting the generality of the foregoing, none of the parties hereto shall enter
into any agreement or arrangement (or alter, amend or terminate any existing
agreement or arrangement) if such action would materially impair the ability of
such party to effectuate, carry out or comply with all of the terms of this
Agreement.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF EXCEL. Excel represents and
warrants to the Shareholder as follows:
(a) This Agreement has been approved by the Board of Directors of Excel,
representing all necessary corporate action on the part of Excel for the
execution and performance hereof and thereof by Excel (no action by the
stockholders of Excel being required).
(b) This Agreement has been duly executed and delivered by a duly
authorized officer of Excel.
(c) This Agreement constitutes a valid and binding agreement of Excel,
enforceable against Excel in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws relating to or affecting creditors
generally by general equity principles (regardless of whether enforceability is
considered in a proceeding in equity or at law) or by an implied covenant of
good faith and fair dealing.
(d) The execution and delivery of this Agreement by Excel does not
violate or breach, and will not give rise to any violation or breach, of Excel's
charter or by-laws or, except as will not materially impair its ability to
effectuate, carry out or comply with all of the terms of this Agreement, any
Law, Governmental Entity approval or Contract by which Excel or its Subsidiaries
or their respective assets or properties may be bound.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER. The
Shareholder represents and warrants to Excel as follows:
(a) Schedule I sets forth the number of Shares of which the Shareholder
is the record or beneficial owner. Such Shareholder is the lawful owner of such
Shares, free and clear of all liens, charges, encumbrances, shareholders
agreements, voting agreements, agreements to transfer such Shares and
commitments of every kind to which the Shareholder is a party, other than this
Agreement and as disclosed in Schedule I and has the sole power to vote (or
cause to be voted) the Shares as set forth in this Agreement and the Consent.
Except as set forth on such Schedule I, neither the Shareholder nor any of its
Affiliates owns or holds any rights to acquire any additional common shares or
other securities of the capital stock of the Corporation or any interest therein
or any voting rights with respect to any additional common shares or any other
securities of the capital stock of the Corporation.
(b) This Agreement and the Consent have been duly executed and delivered
by a duly authorized officer of such Shareholder.
(c) This Agreement and the Consent constitute valid and binding
agreements of the Shareholder, enforceable against such Shareholder in
accordance with their terms, except as such enforceability may be limited by
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws relating to or affecting creditors generally by general equity
principles (regardless of whether enforceability is considered in a proceeding
in equity or at law) or by an implied covenant of good faith and fair dealing.
(d) The execution and delivery of this Agreement and the Consent by the
Shareholder do not violate or breach, and will not give rise to any violation or
breach, of such Shareholder's charter, by-laws, trust instrument or partnership
agreement, to the extent applicable or, except as will not materially impair (x)
the ability of such Shareholder to effectuate, carry out or comply with all of
the terms of this Agreement or (y) its business activities, any Law, third party
consent, Governmental Entity approval or Contract by which such Shareholder or
its properties or assets may be bound.
G-3
<PAGE> 201
SECTION 6. EFFECTIVENESS AND TERMINATION. In the event the Merger Agreement
is terminated in accordance with its terms, this Agreement shall automatically
terminate and be of no further force or effect. Upon such termination, except
for any rights any party may have in respect of any breach by any other party of
its obligations hereunder, none of the parties hereto shall have any further
obligation or liability hereunder; provided however (A) that any amendment by
the parties to the Merger Agreement to (x) the Exchange Ratio or the Merger
Consideration (each as defined in Section 1.8(a) of the Merger Agreement), (y)
Article VI of the Merger Agreement entitled "Conditions Precedent" or (z)
Article VII of the Merger Agreement entitled "Termination and Amendment" or (B)
the waiver on or prior to the Closing Date by the Corporation of any material
condition precedent set forth in Article VI of the Merger Agreement, shall
require the written consent of the Shareholder, failing which this Agreement may
be terminated in writing by the Shareholder. In any event, this Agreement may be
terminated in writing by the Shareholder and it shall be of no further force or
effect if the Effective Time shall not have occurred on or before June 14, 1999.
SECTION 7. MISCELLANEOUS.
(a) Notices. All notices, requests and other communications hereunder
shall be in writing and shall be deemed duly given (a) on the date of delivery
if delivered personally, or by telecopy or facsimile, upon confirmation of
receipt, (b) on the first Business Day following the date of dispatch if
delivered by a recognized next-day courier service or (c) on the third Business
Day following the date of mailing if delivered by registered or certified mail,
return receipt requested, postage prepaid. All notices hereunder shall be
delivered as set forth below, or pursuant to such other instructions as may be
designated in writing by the party to receive such notice:
<TABLE>
<S> <C>
(i) If to Excel, to:
EXCEL COMMUNICATIONS, INC.
8750 North Central Expressway
Suite 2000
Dallas, Texas 75231
Attention: J. Christopher Dance
Facsimile: 214-863-8831
with a copy to:
WEIL, GOTSHAL & MANGES LLP
767 Fifth Avenue
New York, New York 10153-09119
Attention: Frederick S. Green, Esq.
Facsimile: 212-310-8007
(ii) If to BCE, to
BCE INC.
1000 de la Gauchetiere Street West
Suite 3700
Montreal, Quebec
H3B 4Y7
Attention: J. Marc Ryan
Facsimile: 514-397-7263
</TABLE>
(b) Interpretation. When a reference is made in this Agreement to
Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. Whenever the words "include", "includes" or "including" are used
in this Agreement, they shall be deemed to be followed by the words "without
limitation".
G-4
<PAGE> 202
(c) Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that both
parties need not sign the same counterpart.
(d) Entire Agreement; No Third Party Beneficiaries. This Agreement
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof. This Agreement shall be binding upon and inure solely to
the benefit of each party hereto, and nothing in this Agreement, express or
implied, is intended to or shall confer upon any other Person any right, benefit
or remedy of any nature whatsoever under or by reason of this Agreement.
(e) Governing Law. This Agreement shall be governed and construed in
accordance with the laws in force in the Province of Ontario, Canada.
(f) Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any law or public policy, all
other terms and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner in order that the
transactions contemplated hereby are consummated as originally contemplated to
the greatest extent possible.
(g) Assignment. Neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by any of the parties hereto, in
whole or in part (whether by operation of law or otherwise), without the prior
written consent of the other party and the written undertaking of the assignee
to be bound by the terms of this Agreement, and any attempt to make any such
assignment without such consent shall be null and void. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of and be
enforceable by the parties and their respective successors and permitted
assigns.
(h) Submission to Jurisdiction; Waivers. Each of Excel and the
Shareholder irrevocably agrees that any legal action or proceeding with respect
to this Agreement or for recognition and enforcement of any judgment in respect
hereof brought by the other party hereto or its successors or assigns may be
brought and determined in any court of competent jurisdiction of the Province of
Ontario and each of Excel and the Shareholder hereby irrevocably submits with
regard to any such action or proceeding for itself and in respect to its
property, generally and unconditionally, to the exclusive jurisdiction of the
aforesaid courts. Each of Excel and the Shareholder hereby irrevocably waives,
and agrees not to assert, by way of motion, as a defence, counterclaim or
otherwise, in any action or proceeding with respect to this Agreement, (a) any
claim that it is not personally subject to the jurisdiction of the above-named
courts for any reason other than the failure to serve proceedings in accordance
with this Section 7(h), (b) that it or its property is exempt or immune from
jurisdiction of any such court or from any legal proceedings commenced in such
courts, and (c) to the fullest extent permitted by applicable law, that (i) the
suit, action or proceeding in any such court is brought in an inconvenient
forum, (ii) the venue of such suit, action or proceeding is improper or (iii)
this Agreement, or the subject matter hereof, may not be enforced in or by such
courts.
(i) Specific Performance. Each party acknowledges that if it fails to
perform any of its obligations under this Agreement, immediate and irreparable
harm or injury would be caused to the other party for which money damages would
not be an adequate remedy. In such event, each party agrees that the other party
shall have the right, in addition to any other rights it may have, to specific
performance of this Agreement. Accordingly, if any party should institute an
action or proceeding, seeking specific enforcement of the provisions hereof,
each party in respect of such claim hereby waives the claim or defence that the
other party has an adequate remedy at law and hereby agrees not to assert in any
such action or proceeding the claim or defence that such a remedy at law exists.
Each party further agrees to waive any requirements for the securing or posting
of any bond in connection with obtaining any such equitable relief.
G-5
<PAGE> 203
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first above written.
EXCEL COMMUNICATIONS, INC.
By: /s/ KENNY A. TROUTT
------------------------------------
Name: Kenny A. Troutt
Title: President and Chief
Executive Officer
BCE INC.
By: /s/ WILLIAM D. ANDERSON
------------------------------------
Name: William D. Anderson
Title: Chief Financial Officer
G-6
<PAGE> 204
SCHEDULE I
SHARE OWNERSHIP
<TABLE>
<CAPTION>
NUMBER OF SHARES RIGHTS TO ACQUIRE
BENEFICIALLY OWNED LIENS ADDITIONAL SHARES
- ------------------ ----- -----------------
<S> <C> <C>
14,815,186(1) None None
1,285,000(2) None None
</TABLE>
- ---------------
(1) 29,630,372 giving effect to the Teleglobe Stock Dividend.
(2) 1,285,000 First Series Preferred Shares (2,570,000 giving effect to the
Teleglobe Stock Dividend). The Shareholder has given unconditional and
irrevocable notice to convert its 1,285,000 First Series Preferred Shares of
the capital stock of the Corporation into an equal number of Common Shares
of the capital stock of the Corporation (2,570,000 giving effect to the
Teleglobe Stock Dividend) and hereby agrees that it will vote the converted
shares as provided in this Agreement.
G-7
<PAGE> 205
SCHEDULE II
SHAREHOLDER CONSENT
June 14, 1998
The undersigned shareholder of Teleglobe Inc. ("Teleglobe") hereby
irrevocably consents in accordance with the Teleglobe Consent and Voting
Agreement executed as of the date hereof to the adoption of and adopt the
following resolution with respect to the common shares of the capital stock of
Teleglobe owned beneficially by the undersigned on the date hereof as listed
below.
RESOLVED, that the Share Issuance, as defined in the Merger Agreement,
dated as of June 14, 1998, among Teleglobe, North Merger Sub Corporation, a
wholly-owned subsidiary of Teleglobe, and Excel Communications, Inc., a Delaware
corporation, a copy of which has been furnished to the undersigned shareholder,
be, and it hereby is, approved by the undersigned shareholder.
BCE INC.
(Print Name)
By:
------------------------------------
Name: William D. Anderson
Title: Chief Financial Officer
Number of Shares: 14,815,186 Common
Shares(1) and 1,285,000 First Series
Preferred Shares(2)
Address of the shareholder:
1000 de La Gauchetiere Street West
Suite 3700
Montreal, Quebec, H3B 4Y7
Date of Execution: June 14, 1998
- ---------------
(1) 29,630,372 giving effect to the Teleglobe Stock Dividend.
(2) 2,570,000 giving effect to the Teleglobe Stock Dividend. The Shareholder has
given unconditional and irrevocable notice to convert its 1,285,000 First
Series Preferred Shares of the capital stock of the Corporation into an
equal number of Common Shares of the capital stock of the Corporation
(2,570,000 giving effect to the Teleglobe Stock Dividend) and hereby agrees
that it will vote the converted shares as provided in this Agreement.
G-8
<PAGE> 206
APPENDIX H
TELEGLOBE CONSENT AND VOTING AGREEMENT
RE: TELESYSTEM TELECOM LTD.
TELEGLOBE CONSENT AND VOTING AGREEMENT, dated as of June 14, 1998 (this
"Agreement"), by and among Excel Communications, Inc., a Delaware corporation
("Excel"), and Telesystem Telecom Ltd. (the "Shareholder").
WHEREAS, concurrently herewith, Excel, Teleglobe Inc., a corporation
governed by the Canada Business Corporations Act (the "Corporation"), and North
Merger Sub Corporation, a Delaware corporation and a wholly-owned subsidiary of
the Corporation ("Merger Sub"), are entering into an Agreement and Plan of
Merger (the "Merger Agreement"; capitalized terms used without definition herein
having the meanings ascribed thereto in the Merger Agreement);
WHEREAS, the Shareholder is the beneficial owner of the number of common
shares of the capital stock of the Corporation ("Shares") set forth in Schedule
I hereto;
WHEREAS, the Share Issuance has to be approved by the Corporation's
shareholders prior to the consummation of the Merger to satisfy the listing
requirements of the Exchanges;
WHEREAS, the Teleglobe By-Law Amendment has to be approved by the
Corporation's shareholders prior to the consummation of the Merger under
Canadian law;
WHEREAS, Teleglobe will in due course convene its shareholders to approve
the Teleglobe Articles Amendment;
WHEREAS, the Board of Directors of the Corporation has, prior to the
execution of this Agreement, duly and validly approved and adopted the Merger
Agreement and the transactions contemplated thereby and approved this Agreement
and the Teleglobe Articles of Amendment and the Teleglobe By-Law Amendment (and
has recommended approval of the same to the Shareholders), and such approvals
and adoption have not been withdrawn;
WHEREAS, the Shareholder is executing this Agreement (i) as an inducement
to Excel to enter into and execute the Merger Agreement; and (ii) as an
inducement to certain holders of shares of Excel Common Stock (the "Excel
Stockholders") to enter into and execute the Excel Consent and Voting Agreement;
WHEREAS, approval and adoption of the Merger Agreement by Excel's
stockholders is also a condition to the consummation of the Merger; and
WHEREAS, the Excel Stockholders are concurrently executing the Excel
Consent and Voting Agreement as an inducement to the Corporation to enter into
and execute the Merger Agreement.
NOW THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements set forth herein, the parties hereto agree as follows:
SECTION 1. CONSENT AND AGREEMENT TO VOTE. In order to provide the Exchanges
with evidence that holders of more than 50% of the voting shares of the
Corporation are in favour of the Merger, the Shareholder hereby agrees that
immediately upon the execution and delivery of this Agreement and the Merger
Agreement, it shall execute and deliver or cause to be executed and delivered by
the record owner thereof, a Shareholder's Consent in the form of Schedule II
hereto, which shall be irrevocable, with respect to all Shares that are owned
beneficially or of record by the Shareholder or as to which the Shareholder has,
directly or indirectly, the right to vote or direct the voting, such Consent to
be executed in lieu of a formal approval of the shareholders at a meeting duly
held therefor.
The Shareholder also agrees that, during the term of this Agreement, it
shall, from time to time at the request of Excel, at any meeting (whether annual
or special and whether or not an adjourned or postponed meeting) of shareholders
of the Corporation however called, or in connection with any written consent of
the holders of Shares (if required by any of the Exchanges), for the purposes of
the approval of the Share
H-1
<PAGE> 207
Issuance, the Teleglobe By-Law Amendment and/or the Teleglobe Articles Amendment
or any action required in furtherance thereof or in furtherance of the Merger,
in either case, prior to the earlier of the Effective Time and the termination
of this Agreement, appear at the meeting or otherwise cause the Shares to be
counted as present thereat for purposes of establishing a quorum, and shall vote
or consent (or cause to be voted or consented), in person or by proxy, all
Shares, and any other voting securities of the Corporation (whether acquired
heretofore or hereafter), that are beneficially owned by such Shareholder or its
wholly-owned Affiliates or as to which such Shareholder has, directly or
indirectly, the right to vote or direct the voting, in favour of the approval of
the Share Issuance, the Teleglobe By-Law Amendment and/or the Teleglobe Articles
Amendment and any other action required in furtherance thereof or in furtherance
of the Merger Agreement, the Merger, each of the actions contemplated by the
Merger Agreement and any other action required in furtherance thereof or hereof.
The Shareholder agrees, during the period commencing on the date hereof and
ending on the earlier of the Effective Time and the termination of this
Agreement, not to, and not to permit any of its wholly-owned Affiliates to, vote
or execute any written consent in lieu of a shareholders meeting or vote of the
Corporation, if such consent or vote by the shareholders of the Corporation
would be inconsistent with or frustrate the purposes of the other agreements of
such Shareholder pursuant to this paragraph.
In furtherance and not in limitation of the foregoing, the Shareholder
hereby grants to, and appoints, Excel and each of Kenny A. Troutt, Nicholas A.
Merrick and J. Christopher Dance, in their respective capacities as officers of
Excel, and any individual who shall hereafter succeed to any such officer of
Excel, and any other designee of Excel, each of them individually, its
irrevocable proxy and attorney-in-fact (with full power of substitution) to vote
the Shares, if applicable, as indicated in this Section 1. The Shareholder
intends this proxy to be irrevocable and coupled with an interest and will take
such further action and execute such other instruments as may be necessary to
effectuate the intent of this proxy.
(a) In furtherance of the agreements in the foregoing paragraphs, the
Shareholder hereby agrees to, and to cause its respective wholly-owned
Affiliates to, cooperate with Excel and the Corporation in connection with the
Merger Agreement and the consummation of the transactions contemplated thereby.
Excel agrees to cooperate with the Shareholder in connection with any filings
required to be made by such Shareholder pursuant to the HSR Act and the
Competition Act (Canada) in connection with the Merger Agreement and
consummation of the transactions contemplated thereby, including in connection
with any filing with Governmental Entities or otherwise in connection with
Section 5.4 of the Merger Agreement.
(b) The Shareholder hereby revokes any and all previous proxies with
respect to its Shares or any other voting securities of the Corporation that
relate to the approval of the Share Issuance, the Teleglobe By-Law Amendment
and/or the Teleglobe Articles Amendment or any other action required in
furtherance thereof or in furtherance of the transactions contemplated hereby or
by the Merger Agreement.
SECTION 2. POOLING COVENANTS AND REPRESENTATIONS. In addition to, and not
in lieu of, the other covenants and representations set forth herein, the
Shareholder that is an "affiliate" (as such term is defined in Rule 405 under
the Securities Act) of the Corporation hereby agrees and represents to Excel
that from and after the date hereof, such Shareholder will not, and will not
permit any of its Affiliates to, sell, pledge Shares as collateral for a
non-recourse loan (or for any recourse loan the effect of which would cause the
loss of pooling of interests accounting treatment for the Merger), transfer, or
otherwise dispose of, or hedge or otherwise reduce its risk with respect to, any
Shares (whether owned as of the date hereof or thereafter acquired) or other
shares of the capital stock of the Corporation, from the 30th day prior to the
Effective Time to such time as results covering at least 30 days of combined
operations of the Corporation and Excel have been published by the Corporation
in the form of a quarterly earnings report, an effective registration statement
filed with the SEC, a report to the SEC on Form 6-K or any other public filing
or announcement which includes the combined results of operations, except for
transfers or other dispositions that, in that reasonable opinion of Excel's or
the Corporation's independent accountants, will not prevent the Corporation from
accounting for the Merger as a pooling of interests, taking into account the
actions of other Affiliates of the Corporation, Excel or the Shareholder.
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SECTION 3. FURTHER ASSURANCES. Each party shall execute and deliver such
additional instruments and other documents and shall take such further actions
as may be necessary or appropriate to effectuate, carry out and comply with all
of its obligations under this Agreement, including making such modifications as
the Exchanges may require as to the form of the Consent (none of which shall
affect the validity or enforceability of the Consent). Without limiting the
generality of the foregoing, none of the parties hereto shall enter into any
agreement or arrangement (or alter, amend or terminate any existing agreement or
arrangement) if such action would materially impair the ability of such party to
effectuate, carry out or comply with all of the terms of this Agreement.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF EXCEL. Excel represents and
warrants to the Shareholder as follows:
(a) This Agreement has been approved by the Board of Directors of Excel,
representing all necessary corporate action on the part of Excel for the
execution and performance hereof and thereof by Excel (no action by the
stockholders of Excel being required).
(b) This Agreement has been duly executed and delivered by a duly
authorized officer of Excel.
(c) This Agreement constitutes a valid and binding agreement of Excel,
enforceable against Excel in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws relating to or affecting creditors
generally by general equity principles (regardless of whether enforceability is
considered in a proceeding in equity or at law) or by an implied covenant of
good faith and fair dealing.
(d) The execution and delivery of this Agreement by Excel does not
violate or breach, and will not give rise to any violation or breach, of Excel's
charter or by-laws or, except as will not materially impair its ability to
effectuate, carry out or comply with all of the terms of this Agreement, any
Law, Governmental Entity approval or Contract by which Excel or its Subsidiaries
or their respective assets or properties may be bound.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER. The
Shareholder represents and warrants to Excel as follows:
(a) Schedule I sets forth the number of Shares of which the Shareholder
is the record or beneficial owner. Such Shareholder is the lawful owner of such
Shares, free and clear of all liens, charges, encumbrances, shareholders
agreements, voting agreements, agreements to transfer such Shares and
commitments of every kind to which the Shareholder is a party, other than this
Agreement and as disclosed in Schedule I and has the sole power to vote (or
cause to be voted) the Shares as set forth in this Agreement and the Consent.
Except as set forth on such Schedule I, neither the Shareholder nor any of its
Affiliates owns or holds any rights to acquire any additional common shares or
other securities of the capital stock of the Corporation or any interest therein
or any voting rights with respect to any additional common shares or any other
securities of the capital stock of the Corporation.
(b) This Agreement and the Consent have been duly executed and delivered
by a duly authorized officer of such Shareholder.
(c) This Agreement and the Consent constitute valid and binding
agreements of the Shareholder, enforceable against such Shareholder in
accordance with their terms, except as such enforceability may be limited by
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws relating to or affecting creditors generally by general equity
principles (regardless of whether enforceability is considered in a proceeding
in equity or at law) or by an implied covenant of good faith and fair dealing.
(d) The execution and delivery of this Agreement and the Consent by the
Shareholder do not violate or breach, and will not give rise to any violation or
breach, of such Shareholder's charter, by-laws, trust instrument or partnership
agreement, to the extent applicable or, except as will not materially impair (x)
the ability of such Shareholder to effectuate, carry out or comply with all of
the terms of this Agreement or (y) its
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business activities, any Law, third party consent, Governmental Entity approval
or Contract by which such Shareholder or its properties or assets may be bound.
SECTION 6. EFFECTIVENESS AND TERMINATION. In the event the Merger Agreement
is terminated in accordance with its terms, this Agreement shall automatically
terminate and be of no further force or effect. Upon such termination, except
for any rights any party may have in respect of any breach by any other party of
its obligations hereunder, none of the parties hereto shall have any further
obligation or liability hereunder; provided however (A) that any amendment by
the parties to the Merger Agreement to (x) the Exchange Ratio or the Merger
Consideration (each as defined in Section 1.8(a) of the Merger Agreement), (y)
Article VI of the Merger Agreement entitled "Conditions Precedent" or (z)
Article VII of the Merger Agreement entitled "Termination and Amendment" or (B)
the waiver on or prior to the Closing Date by the Corporation of any material
condition precedent set forth in Article VI of the Merger Agreement, shall
require the written consent of the Shareholder, failing which this Agreement may
be terminated in writing by the Shareholder. In any event, this Agreement may be
terminated in writing by the Shareholder and it shall be of no further force or
effect if the Effective Time shall not have occurred on or before December 31,
1999.
SECTION 7. MISCELLANEOUS.
(a) Notices. All notices, requests and other communications hereunder
shall be in writing and shall be deemed duly given (a) on the date of delivery
if delivered personally, or by telecopy or facsimile, upon confirmation of
receipt, (b) on the first Business Day following the date of dispatch if
delivered by a recognized next-day courier service or (c) on the third Business
Day following the date of mailing if delivered by registered or certified mail,
return receipt requested, postage prepaid. All notices hereunder shall be
delivered as set forth below, or pursuant to such other instructions as may be
designated in writing by the party to receive such notice:
<TABLE>
<S> <C>
(i) If to Excel, to:
EXCEL COMMUNICATIONS, INC.
8750 North Central Expressway
Suite 2000
Dallas, Texas 75231
Attention: J. Christopher Dance
Facsimile: 214-863-8831
with a copy to:
WEIL, GOTSHAL & MANGES LLP
767 Fifth Avenue
New York, New York 10153-09119
Attention: Frederick S. Green, Esq.
Facsimile: 212-310-8007
(ii) If to the Shareholder, to
TELESYSTEM TELECOM LTD.
1000 de La Gauchetiere Street West
25th Floor
Montreal, Quebec
H3B 4W5
Attention: Jean-Marc Fortier
Facsimile: 514-397-0089
</TABLE>
(b) Interpretation. When a reference is made in this Agreement to
Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
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Whenever the words "include", "includes" or "including" are used in this
Agreement, they shall be deemed to be followed by the words "without
limitation".
(c) Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that both
parties need not sign the same counterpart.
(d) Entire Agreement; No Third Party Beneficiaries. This Agreement
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof. This Agreement shall be binding upon and inure solely to
the benefit of each party hereto, and nothing in this Agreement, express or
implied, is intended to or shall confer upon any other Person any right, benefit
or remedy of any nature whatsoever under or by reason of this Agreement.
(e) Governing Law. This Agreement shall be governed and construed in
accordance with the laws in force in the Province of Ontario, Canada.
(f) Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any law or public policy, all
other terms and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner in order that the
transactions contemplated hereby are consummated as originally contemplated to
the greatest extent possible.
(g) Assignment. Neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by any of the parties hereto, in
whole or in part (whether by operation of law or otherwise), without the prior
written consent of the other party and the written undertaking of the assignee
to be bound by the terms of this Agreement, and any attempt to make any such
assignment without such consent shall be null and void. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of and be
enforceable by the parties and their respective successors and permitted
assigns.
(h) Submission to Jurisdiction; Waivers. Each of Excel and the
Shareholder irrevocably agrees that any legal action or proceeding with respect
to this Agreement or for recognition and enforcement of any judgment in respect
hereof brought by the other party hereto or its successors or assigns may be
brought and determined in any court of competent jurisdiction of the Province of
Ontario and each of Excel and the Shareholder hereby irrevocably submits with
regard to any such action or proceeding for itself and in respect to its
property, generally and unconditionally, to the exclusive jurisdiction of the
aforesaid courts. Each of Excel and the Shareholder hereby irrevocably waives,
and agrees not to assert, by way of motion, as a defence, counterclaim or
otherwise, in any action or proceeding with respect to this Agreement, (a) any
claim that it is not personally subject to the jurisdiction of the above-named
courts for any reason other than the failure to serve proceedings in accordance
with this Section 7(h), (b) that it or its property is exempt or immune from
jurisdiction of any such court or from any legal proceedings commenced in such
courts, and (c) to the fullest extent permitted by applicable law, that (i) the
suit, action or proceeding in any such court is brought in an inconvenient
forum, (ii) the venue of such suit, action or proceeding is improper or (iii)
this Agreement, or the subject matter hereof, may not be enforced in or by such
courts.
(i) Specific Performance. Each party acknowledges that if it fails to
perform any of its obligations under this Agreement, immediate and irreparable
harm or injury would be caused to the other party for which money damages would
not be an adequate remedy. In such event, each party agrees that the other party
shall have the right, in addition to any other rights it may have, to specific
performance of this Agreement. Accordingly, if any party should institute an
action or proceeding, seeking specific enforcement of the provisions hereof,
each party in respect of such claim hereby waives the claim or defence that the
other party has an adequate remedy at law and hereby agrees not to assert in any
such action or proceeding the claim or
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defence that such a remedy at law exists. Each party further agrees to waive any
requirements for the securing or posting of any bond in connection with
obtaining any such equitable relief.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first above written.
EXCEL COMMUNICATIONS, INC.
By: /s/ KENNY A. TROUTT
----------------------------------
Name: Kenny A. Troutt
Title: President and Chief
Executive Officer
TELESYSTEM TELECOM LTD.
By: /s/ CHARLES SIROIS
----------------------------------
Name: Charles Sirois
Title: President and Chairman of
the Board
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<PAGE> 212
SCHEDULE I
SHARE OWNERSHIP
<TABLE>
<CAPTION>
RIGHTS TO
NUMBER OF SHARES ACQUIRE
BENEFICIALLY OWNED LIENS(2) ADDITIONAL SHARES
- ------------------ -------- -----------------
<C> <S> <C>
11,314,983(1) 1,531,536 shares pledged with Montreal Trust (in connection n/a
with the issuance of Exchangeable Debentures on November 18,
1992)
2,000,000 shares pledged with Montreal Trust (in connection
with the issuance of Series 1 First Ranking Preferred Shares
on August 31, 1993)
1,500,000 shares pledged with Royal Bank (in connection with
a credit agreement dated April 23, 1996)
1,500,000 shares pledged with Scotia Bank (in connection
with a credit agreement dated April 23, 1996)
4,783,447 shares pledged with Syndicate (in connection with
a credit agreement dated April 22, 1997)
</TABLE>
- ---------------
(1) 22,629,966 Common Shares after giving effect to the Teleglobe Stock
Dividend.
(2) Before giving effect to the Teleglobe Stock Dividend.
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<PAGE> 213
SCHEDULE II
SHAREHOLDER CONSENT
June 14, 1998
The undersigned shareholder of Teleglobe Inc. ("Teleglobe") hereby
irrevocably consents to the adoption of and adopt the following resolutions with
respect to the common shares of the capital stock of Teleglobe owned
beneficially by the undersigned on the date hereof as listed below.
RESOLVED, that the Share Issuance, as defined in the Merger Agreement,
dated as of June 14, 1998, among Teleglobe, North Merger Sub Corporation, a
wholly-owned subsidiary of Teleglobe, and Excel Communications, Inc., a Delaware
corporation, a copy of which has been furnished to the undersigned shareholder,
be, and it hereby is, approved by the undersigned shareholder.
TELESYSTEM TELECOM LTD.
(Print Name)
By:
------------------------------------
Name: Charles Sirois
Title: President and Chairman of the
Board
Number of Shares: 11,314,983 Common
Shares(1)
Address of the shareholder:
1000 de La Gauchetiere Street
West 25th Floor
Montreal, Quebec H3B 4W5
Date of Execution: June 14, 1998
- ---------------
(1) 22,629,966 Common Shares after giving effect to the Teleglobe Stock
Dividend.
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<PAGE> 214
APPENDIX I
EXCEL STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of June 14, 1998 (the "Agreement"),
between TELEGLOBE INC., a corporation governed by the Canada Business
Corporations Act (the "Grantee"), and EXCEL COMMUNICATIONS, INC., a Delaware
corporation (the "Grantor").
WHEREAS, the Grantee, the Grantor and North Merger Sub Corporation, a
Delaware corporation and a wholly owned subsidiary of the Grantee ("Merger
Sub"), are, concurrently with the execution and delivery of this Agreement,
entering into an Agreement and Plan of Merger, dated as of the date hereof (the
"Merger Agreement"; capitalized terms used without definition herein have the
meanings assigned to them in the Merger Agreement), which provides, among other
things, for the merger (the "Merger") of Merger Sub with and into Grantor;
WHEREAS, as a condition to its willingness to enter into the Merger
Agreement, the Grantee has requested that the Grantor grant to the Grantee an
option to purchase the shares of Common Stock, $.001 par value per share, of the
Grantor (the "Common Stock") covered hereby, upon the terms and subject to the
conditions hereof; and
WHEREAS, in order to induce the Grantee to enter into the Merger Agreement,
the Grantor is willing to grant the Grantee the requested option.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements set forth herein, the parties hereto agree as follows:
1. The Option; Exercise; Adjustments; Payment of Spread; Termination.
(a) Subject to the other terms and conditions set forth herein, the
Grantor hereby grants to the Grantee an irrevocable option (the "Option") to
purchase up to 26,300,000 duly authorized, validly issued, fully paid and
nonassessable shares of Common Stock (the "Shares") (representing 19.9%, rounded
down to the nearest whole multiple of 50,000 shares, of the outstanding shares
of Common Stock as of the date hereof) at a cash purchase price equal to $27.563
per Share (the "Purchase Price"). The Option may be exercised by the Grantee, in
whole or in part, at any time, or from time to time, following the occurrence of
the event referred to in Section 2(c) hereof and prior to the expiration of the
Option in accordance with Section 1(e) of this Agreement.
(b) In the event of any change in the number of issued and outstanding
Shares of Common Stock by reason of any stock dividend, stock split, split-up,
recapitalization, merger or other change in the corporate or capital structure
of the Grantor, the number of Shares subject to the Option and the Purchase
Price shall be appropriately adjusted to restore the Grantee to its economic and
other rights hereunder.
(c) In the event the Grantee wishes to exercise the Option, the Grantee
shall send a written notice to the Grantor (the "Exercise Notice") specifying a
date (subject to the requirements of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act")) not later than 10 Business
Days and not earlier than two Business Days following the date such notice is
given for the closing of such purchase.
(d) If an Acquisition Proposal involving Grantor is consummated within
12 months after termination of the Merger Agreement, then the Grantee may, at
any time the Option is then exercisable pursuant to the terms of Section 1(a)
hereof, elect, in lieu of exercising the Option to purchase Shares provided in
Section 1(a) hereof, to send a written notice to the Grantor (the "Cash Exercise
Notice") specifying a date not later than 20 Business Days and not earlier than
10 Business Days following the date such notice is given on which date the
Grantor shall pay to the Grantee an amount in cash in United States dollars
equal to the Spread (as hereinafter defined) multiplied by all or such portion
of the Shares subject to the Option as Grantee shall specify. As used herein
"Spread" shall mean the excess, if any, over the Purchase Price of the higher of
(x) if applicable, the highest price per share of Common Stock (including any
brokerage
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<PAGE> 215
commissions, transfer taxes and soliciting dealers' fees) paid by any person in
an Acquisition Proposal (the "Alternative Purchase Price") or (y) the average of
the closing sales prices of the Shares of Common Stock on the NYSE Composite
Tape for the ten trading days ending on and including the fifth trading day
prior to the date of the Cash Exercise Notice. If the Alternative Purchase Price
includes any property other than cash, the Alternative Purchase Price shall be
the sum of (A) the fixed cash amount, if any, included in the Alternative
Purchase Price plus (B) the fair market value of such other property determined
in accordance with the procedures set forth in Section 6(b) hereof (but using
the date of the Cash Exercise Notice). Upon exercise of the Grantee's right to
receive cash pursuant to this Section 1(d) and the payment of such cash to the
Grantee, the obligations of the Grantor to deliver Shares pursuant to Section 3
hereof shall be terminated with respect to such number of Shares for which the
Grantee shall have elected to be paid the Spread.
(e) The Option and the rights and obligations of the parties hereunder
shall terminate at the earliest of (i) the Effective Time (as defined in the
Merger Agreement), (ii) the termination of the Merger Agreement pursuant to
circumstances under which the Grantee is not entitled to receive the Termination
Fee in accordance with Section 7.3 of the Merger Agreement (other than a
termination by Teleglobe pursuant to Section 7.1(e) if an Acquisition Proposal
with respect to Excel shall be pending at the time of such termination), (iii)
the date on which the Grantee realizes a Total Profit equal to the Profit Limit
(as such terms are defined in Section 9) and (iv) 30 days after the first
anniversary of the date (the "Merger Termination Date") on which the Merger
Agreement is terminated (the date referred to in clause (iii) being hereinafter
referred to as the "Option Expiration Date"); provided that if the Option cannot
be exercised or the Shares cannot be delivered to Grantee upon such exercise
because the conditions set forth in Section 2(a) or Section 2(b) hereof have not
yet been satisfied (other than because of a permanent injunction or final
unappealable order of a Governmental Entity of competent jurisdiction
prohibiting delivery of the Shares), the Option Expiration Date shall be
extended until 30 days after such impediment to exercise has been removed.
(f) The Grantor will not, by amendment of its certificate of
incorporation or through any consolidation, merger, reorganization, transfer of
assets, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms of this
Agreement, or diminish the economic value of the Option, but will at all times
in good faith assist in the carrying out of all such terms and in the taking of
all action as may be necessary or appropriate in order to protect the rights of
the Grantee against dilution or other impairment. In furtherance and not in
limitation of the foregoing, in the event that after the date of this Agreement,
the Grantor shall issue Shares of Common Stock at a price below their fair
market value (as such term is used in Section 6(b) hereof) at such time, the
Purchase Price shall be adjusted accordingly so that the economic value of the
Option relative to the fair market value of the Shares at the time of such
issuance shall be maintained.
2. Conditions to Delivery of Shares. The Grantor's obligation to deliver
Shares upon exercise of the Option is subject only to the conditions that:
(a) No preliminary or permanent injunction or other order issued by any
federal or state court of competent jurisdiction in the United States
prohibiting the delivery of the Shares shall be in effect; and
(b) Any applicable waiting periods under the HSR Act shall have expired
or been terminated; and
(c) The Termination Fee shall be payable pursuant to Section 7.3 of the
Merger Agreement or the Merger Agreement shall have been terminated by Teleglobe
pursuant to Section 7.1(e) thereof and an Acquisition Proposal with respect to
Excel shall have been pending at the time of such termination.
3. The Closing.
(a) Any closing hereunder shall take place on the date specified by the
Grantee in its Exercise Notice at 9:00 A.M., local time, at the offices of
Simpson Thacher & Bartlett LLP, 425 Lexington Avenue, New York, New York 10017,
or, if the conditions set forth in Section 2(a) or 2(b) have not then been
satisfied, on the second Business Day following the satisfaction of such
conditions, or at such other time and place as the parties hereto may agree (the
"Closing Date"). On the Closing Date, the Grantor will deliver to
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the Grantee a certificate or certificates, duly endorsed (or accompanied by duly
executed stock powers), representing the Shares in the denominations designated
by the Grantee in its Exercise Notice and the Grantee will purchase such Shares
from the Grantor at the price per Share equal to the Purchase Price, subject to
Section 9. Any payment made by the Grantee to the Grantor, or by the Grantor to
the Grantee, pursuant to this Agreement shall be made by certified or official
bank check or by wire transfer of federal funds to a bank designated by the
party receiving such funds.
(b) The certificates representing the Shares may bear an appropriate
legend relating to the fact that such Shares have not been registered under the
Securities Act.
4. Representations and Warranties of the Grantee. The Grantee represents
and warrants to the Grantor that the Grantee (a) is a sophisticated investor
capable of evaluating the merits and risks of an investment in the Option and
Common Stock and (b) is acquiring the Option and, if and when it exercises the
Option, will be acquiring the Shares issuable upon the exercise thereof for its
own account and not with a view to distribution or resale in any manner which
would be in violation of the Securities Act or any "blue sky" or state
securities laws.
5. Listing of Shares; HSR Act Filings; Governmental Consents. Subject to
applicable law and the rules and regulations of the NYSE, the Grantor shall (i)
promptly file a notice to list the Shares on the NYSE and (ii) make, as promptly
as practicable, all necessary filings by the Grantor under the HSR Act and use
its reasonable best efforts to obtain all necessary approvals thereunder as
promptly as practicable in respect of the grant of the Option, exercise of the
Option and listing of the underlying shares of Excel Common Stock; provided,
however, that if the Grantor is unable to effect such listing on the NYSE by the
Closing Date, the Grantor will nevertheless be obligated to deliver the Shares
upon the Closing Date. Each of the parties hereto will use its best efforts to
obtain consents of all third parties and Governmental Entities, if any,
necessary to the consummation of the transactions contemplated hereby.
6. Right of First Refusal. If the Grantee, at any time prior to 30 days
after the first anniversary of the Merger Termination Date, seeks to sell,
transfer or dispose of all or any part of the Shares to any third person in any
type of transaction, it shall give the Grantor (or a designee of the Grantor)
the opportunity, in the following manner, to purchase such Shares:
(a) The Grantee shall give notice to the Grantor in writing of its
intent to sell Shares (a "Disposition Notice"), specifying the number of Shares
to be sold, the price and, if applicable, the material terms of any agreement
relating thereto. For purposes of this Section 6, if the Disposition Notice is
given with respect to the sale of the Shares pursuant to a tender or exchange
offer, it shall be assumed that all Shares tendered will be accepted for
payment. The Disposition Notice may be given at any time, including prior to the
giving of any Exercise Notice.
(b) The Grantor or its designee shall have the right, exercisable by
written notice given to the Grantee within fifteen Business Days after receipt
of a Disposition Notice (or, if applicable, in the case of a proposed sale
pursuant to a tender or exchange offer for shares of Common Stock, by written
notice given to the Grantee at least two Business Days prior to the then
announced expiration date of such tender or exchange offer (the "Expiration
Date"), it being understood that any such Disposition Notice in the case of a
tender or exchange offer shall be given at least four Business Days prior to
such Expiration Date), to purchase all, but not less than all, of the Shares
specified in the Disposition Notice at the price set forth in the Disposition
Notice. If the purchase price specified in the Disposition Notice includes any
property other than cash, the purchase price to be paid by the Grantor shall be
an amount of cash in United States dollars equal to the sum of (i) the cash
included in the purchase price plus (ii) the fair market value of such other
property at the date of the Disposition Notice. If such other property consists
of securities with an existing public trading market, the average closing price
(or the average closing bid and asked price if closing prices are unavailable)
for such securities on their principal public trading market for the five
trading days ending five days prior to the date of the Disposition Notice shall
be deemed to equal the fair market value of such property. If such other
property consists of something other than cash or securities with an existing
public trading market and at the time of the closing referred to in paragraph
(c) below, agreement on the value of such other property has not been reached,
the higher of (i) the cash included in the purchase price and (ii) the average
closing price of the
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Common Stock on the New York Stock Exchange for the five trading days ending
five days prior to the date of the Disposition Notice shall be used as the per
share purchase price; provided, however, that promptly after the closing, the
Grantee and the Grantor or its designee, as the case may be, shall settle any
additional amounts to be paid or returned as a result of the determination of
fair market value of such other property made by a nationally recognized
investment banking firm selected by the Grantor and approved by the Grantee
within 30 days of the closing. Such determination shall be final and binding on
all parties hereto.
(c) If the Grantor exercises its right of first refusal hereunder, the
closing of the purchase of the Shares with respect to which such right has been
exercised shall take place within twenty Business Days after the notice of such
exercise (or, if applicable, in the case of a tender or exchange offer, no later
than one Business Day prior to the expiration date of the offer if written
notice was given within the time set forth in the parenthetical in the first
sentence of paragraph (b) above).
(d) If the Grantor does not exercise its right of first refusal
hereunder within the time specified for such exercise, the Grantee shall be free
for 90 days following the expiration of such time for exercise to sell the
Shares (or enter into an agreement to sell the Shares) specified in the
Disposition Notice, at the price specified in the Disposition Notice or any
price in excess thereof and otherwise on substantially the same terms set forth
in the Disposition Notice; provided, that if such sale is not consummated within
such 90-day period (or the agreement to sell entered into in such 90 day period
is not thereafter performed in accordance with its terms), then the provisions
of this Section 6 will again apply to the sale of such Shares.
7. Repurchase of Shares. Beginning on the first anniversary date of the
Merger Termination Date, the Grantor shall have the right to purchase (the
"Repurchase Right") all, but not less than all, of the Shares at the greater of
(i) the Purchase Price or (ii) the average closing price of the Common Stock on
the NYSE for the ten trading days ending on and including the fifth trading day
prior to the date the Grantor gives written notice of its intention to exercise
the Repurchase Right. If the Grantor does not exercise the Repurchase Right
within 30 days following the first anniversary of the Merger Termination Date,
the Repurchase Right shall terminate. In the event the Grantor wishes to
exercise the Repurchase Right, the Grantor shall send a written notice to the
Grantee specifying a date (not later than 10 Business Days and not earlier than
two Business Days following the date such notice is given) for the closing of
such purchase.
8. Registration Rights.
(a) In the event that the Grantee shall desire to sell 25% or more of
the Shares within two years after the purchase of such Shares pursuant hereto,
and such sale requires, in the opinion of counsel to the Grantee, which opinion
shall be reasonably satisfactory to the Grantor and its counsel, registration of
such Shares under the Securities Act, the Grantor shall, at its option, either
repurchase said shares at a price established pursuant to the procedure set
forth in Section 7, or cooperate with the Grantee and any underwriters in
registering such Shares for resale in a bona fide firm commitment underwritten
public offering in which the Grantee and the underwriters will effect as wide a
distribution of such Shares as is reasonably practicable and shall use their
best efforts to prevent any person from purchasing through such offering more
than 2% of the outstanding Shares, including, without limitation, promptly
filing a registration statement which complies with the requirements of
applicable foreign, federal and state securities laws and entering into an
underwriting agreement with such underwriters upon such terms and conditions as
are customarily contained in underwriting agreements with respect to secondary
distributions; provided that the Grantor shall not be required to have declared
effective more than two registration statements hereunder and shall be entitled
to delay the filing or effectiveness of any registration statement for up to 135
days if the offering would, in the judgment of the Board of Directors of the
Grantor, require premature disclosure of any material corporate development or
otherwise interfere with or adversely affect any pending or proposed offering of
securities of the Grantor or any other material transaction involving the
Grantor.
(b) If the Common Stock is registered pursuant to the provisions of this
Section 8, the Grantor agrees (i) to furnish copies of the registration
statement and the prospectus relating to the Shares covered thereby in such
numbers as the Grantee may from time to time reasonably request and (ii) if any
event shall occur as a result of which it becomes necessary to amend or
supplement any registration statement or
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prospectus, to prepare and file under the applicable securities laws such
amendments and supplements as may be necessary to keep available for at least 90
days a prospectus covering the Common Stock meeting the requirements of such
securities laws, and to furnish to the Grantee such numbers of copies of the
registration statement as amended or supplemented as may reasonably be
requested. The Grantor shall bear the cost of the registration, including, but
not limited to, all registration and filing fees, printing expenses, and fees
and disbursements of counsel and accountants for the Grantor, except that the
Grantee shall pay the fees and disbursements of its counsel and the underwriting
fees and selling commissions applicable to the Shares sold by the Grantee. The
Grantor shall indemnify and hold harmless Grantee, its affiliates and its
officers and directors from and against any and all losses, claims, damages,
liabilities and expenses arising out of or based upon any statements contained
in, omissions or alleged omissions from, each registration statement filed
pursuant to this paragraph; provided, however, that this provision does not
apply to any loss, liability, claim, damage or expense to the extent it arises
out of any statement or omission made in reliance upon and in conformity with
written information furnished to the Grantor by the Grantee, its affiliates or
its officers expressly for use in any registration statement (or any amendment
thereto) or any preliminary or final prospectus filed pursuant to this paragraph
("Grantee Information"). The Grantee shall indemnify and hold harmless Grantor,
its affiliates and its officers and directors from and against any and all
losses, claims, damages, liabilities and expenses arising out of or based upon
any Grantee Information. The Grantor shall also indemnify and hold harmless each
underwriter and each person who controls any underwriter within the meaning of
either the Securities Act or the Exchange Act against any and all losses,
claims, damages, liabilities and expenses arising out of or based upon any
statements contained in, omissions or alleged omissions from, each registration
statement and prospectus filed pursuant to this paragraph; provided, however,
that this provision does not apply to any loss, liability, claim, damage or
expense to the extent it arises out of any statement or omission made in
reliance upon and in conformity with written information furnished to the
Grantor by the underwriters expressly for use in any registration statement (or
any amendment thereto) or any preliminary or final prospectus filed pursuant to
this paragraph.
9. Profit Limitation.
(a) Notwithstanding any other provision of this Agreement, in no event
shall the Grantee's Total Profit (as hereinafter defined) exceed $120,000,000
(the "Profit Limit") and, if it otherwise would exceed such amount, the Grantee,
at its sole election, shall either (i) deliver to the Grantor for cancellation
Shares previously purchased by Grantee, (ii) pay cash or other consideration to
the Grantor or (iii) undertake any combination thereof, so that Grantee's Total
Profit shall not exceed the Profit Limit after taking into account the foregoing
actions.
(b) Notwithstanding any other provision of this Agreement, the Option
may not be exercised for a number of Shares as would, as of the date of the
Exercise Notice, result in a Notional Total Profit (as defined below) of more
than the Profit Limit. If exercise of the Option otherwise would exceed the
Profit Limit, the Grantee, at its discretion, may increase the Purchase Price
for that number of Shares set forth in the Exercise Notice so that the Notional
Total Profit shall not exceed the Profit Limit, or elect to reduce the amount of
the Termination Fee payable to Grantee pursuant to Section 7.3 of the Merger
Agreement; provided that nothing in this sentence shall be construed to restrict
any exercise of the Option permitted hereby on any subsequent date at the
Purchase Price set forth in Section 1(a) hereof or to reduce the amount of the
Termination Fee payable to Grantee pursuant to Section 7.3 of the Merger
Agreement on any subsequent date.
(c) As used herein, the term "Total Profit" shall mean the aggregate
amount (before taxes) of the following: (i) the amount of cash to be received by
Grantee pursuant to Section 7.3 of the Merger Agreement, (ii) (x) the amount
received by Grantee pursuant to the Grantor's repurchase of Shares pursuant to
Sections 1(d), 6 or 7 hereof, less (y) the Purchase Price, (iii) the amount
received by Grantee in respect of a Cash Exercise Notice pursuant to Section
1(d) hereof, and (iv) (x) the net cash amounts received by Grantee pursuant to
the sale of Shares (or any other securities into which such Shares are converted
or exchanged) to any unaffiliated party, less (y) the Purchase Price.
(d) As used herein, the term "Notional Total Profit" with respect to any
number of Shares as to which Grantee may propose to exercise the Option shall be
the Total Profit determined as of the date of the
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Exercise Notice assuming that the Option was exercised on such date for such
number of Shares and assuming that such Shares, together with all other Shares
held by Grantee and its affiliates as of such date, were sold for cash at the
closing market price for the Common Stock as of the close of business on the
preceding trading day (less customary brokerage commissions).
10. Expenses. Each party hereto shall pay its own expenses incurred in
connection with this Agreement, except as otherwise specifically provided
herein.
11. Specific Performance. Each party acknowledges that if it fails to
perform any of its obligations under this Agreement, immediate and irreparable
harm or injury would be caused to the other party for which money damages would
not be an adequate remedy. In such event, each party agrees that the other party
shall have the right, in addition to any other rights it may have, to specific
performance of this Agreement. Accordingly, if either party should institute an
action or proceeding seeking specific enforcement of the provisions hereof, the
other party in respect of such claim hereby waives the claim or defense that the
other party has an adequate remedy at law and hereby agrees not to assert in any
such action or proceeding the claim or defense that such a remedy at law exists.
Each party further agrees to waive any requirements for the securing or posting
of any bond in connection with obtaining any such equitable relief.
12. Notices. All notices and other communications hereunder shall be in
writing and shall be deemed duly given (a) on the date of delivery if delivered
personally, or by telecopy or facsimile, upon confirmation of receipt, (b) on
the first Business Day following the date of dispatch if delivered by a
recognized next-day courier service, or (c) on the third Business Day following
the date of mailing if delivered by registered or certified mail, return receipt
requested, postage prepaid. All notices hereunder shall be delivered as set
forth below, or pursuant to such other instructions as may be designated in
writing by the party to receive such notice:
<TABLE>
<S> <C>
(a) if to the Grantee, to
Teleglobe Inc.
1000 rue de La Gauchetiere ouest
Montreal, Quebec H3B 4X5
Attention: Vice President, Legal Affairs
and Corporate Secretary
Facsimile: 514-868-7438
with a copy to
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: Philip T. Ruegger III, Esq.
Facsimile: 212-455-2502
</TABLE>
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<TABLE>
<S> <C>
(b) if to the Grantor, to
Excel Communications, Inc.
8750 North Central Expressway
Suite 2000
Dallas, Texas 75231
Attention: Executive Vice President, Secretary
and General Counsel
Facsimile: 214-863-8838
with a copy to
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attention: Frederick S. Green, Esq.
Facsimile: 212-310-8007
</TABLE>
13. Interpretation. When a reference is made in this Agreement to Sections,
such reference shall be to a Section of this Agreement unless otherwise
indicated. The headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include", "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation".
14. Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that both
parties need not sign the same counterpart.
15. Entire Agreement; No Third Party Beneficiaries. (a) This Agreement, the
Teleglobe Inc. Stock Option Agreement, the Voting Agreements, the Merger
Agreement, the Registration Rights Agreement and the Confidentiality Agreement
constitute the entire agreement and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof. This Agreement shall be binding upon and inure solely to
the benefit of each party hereto, and nothing in this Agreement, express or
implied, is intended to or shall confer upon any other Person any right, benefit
or remedy of any nature whatsoever under or by reason of this Agreement.
16. Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware, without regard to the
principles of conflicts of laws of such state.
17. Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any law or public policy, all
other terms and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner in order that the
transactions contemplated hereby are consummated as originally contemplated to
the greatest extent possible.
18. Assignment. Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto, in whole
or in part (whether by operation of law or otherwise), without the prior written
consent of the other party, and any attempt to make any such assignment without
such consent shall be null and void. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and assigns.
19. Submission to Jurisdiction; Waivers. Each of the Grantee and the
Grantor irrevocably agree that any legal action or proceeding with respect to
this Agreement or for recognition and enforcement of any
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judgment in respect hereof brought by the other party hereto or its successors
or assigns may be brought and determined in the Chancery or other Courts of the
State of Delaware, and each of the Grantee and the Grantor hereby irrevocably
submit with regard to any such action or proceeding for itself and in respect to
its property, generally and unconditionally, to the nonexclusive jurisdiction of
the aforesaid courts. Each of the Grantee and the Grantor hereby irrevocably
waive, and agree not to assert, by way of motion, as a defense, counterclaim or
otherwise, in any action or proceeding with respect to this Agreement, (a) any
claim that it is not personally subject to the jurisdiction of the above-named
courts for any reason other than the failure to serve process in accordance with
this Section 19, (b) that it or its property is exempt or immune from
jurisdiction of any such court or from any legal proceedings commenced in such
courts (whether through service of notice, attachment prior to judgment,
attachment in aid of execution of judgment, execution of judgment or otherwise),
and (c) to the fullest extent permitted by applicable law, that (i) the suit,
action or proceeding in any such court is brought in an inconvenient forum, (ii)
the venue of such suit, action or proceeding is improper and (iii) this
Agreement, or the subject matter hereof, may not be enforced in or by such
courts.
20. Waiver of Jury Trial. Each party hereto hereby waives, to the fullest
extent permitted by applicable law, any right it may have to a trial by jury in
respect of any litigation directly or indirectly arising out of, under or in
connection with this Agreement.
IN WITNESS WHEREOF, the Grantee and the Grantor have caused this Agreement
to be duly executed and delivered on the day and year first above written.
TELEGLOBE INC.
By: /s/ CHARLES SIROIS
----------------------------------
Name: Charles Sirois
Title: Chairman and Chief
Executive Officer
EXCEL COMMUNICATIONS, INC.
By: /s/ KENNY A. TROUTT
----------------------------------
Name: Kenny A. Troutt
Title: Chairman, Chief Executive
Officer, and President
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APPENDIX J
TELEGLOBE STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of June 14, 1998 (the "Agreement"),
between TELEGLOBE, INC., a corporation governed by the Canada Business
Corporations Act (the "Grantor" or the "Corporation"), and EXCEL COMMUNICATIONS,
INC., a Delaware corporation (the "Grantee").
WHEREAS, the Grantee, the Grantor and North Merger Sub Corporation, a
Delaware corporation and a wholly owned subsidiary of the Grantor ("Merger Sub")
are, concurrently with the execution and delivery of this Agreement, entering
into an Agreement and Plan of Merger, dated as of the date hereof (the "Merger
Agreement"; capitalized terms used without definition herein have the meanings
assigned to them in the Merger Agreement), which provides, among other things,
for the merger (the "Merger") of Merger Sub with and into Grantee;
WHEREAS, as a condition to its willingness to enter into the Merger
Agreement, the Grantee has requested that the Grantor grant to the Grantee an
option to purchase Common Shares of the capital stock of the Grantor (the
"Common Shares"), upon the terms and subject to the conditions hereof; and
WHEREAS, in order to induce the Grantee to enter into the Merger Agreement,
the Grantor is willing to grant the Grantee the requested option.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements set forth herein, the parties hereto agree as follows:
1. The Option; Exercise; Adjustments; Payment of Spread; Termination.
(a) Subject to the other terms and conditions set forth herein, the
Grantor hereby grants to the Grantee an irrevocable option (the "Option") to
purchase up to 25,700,000 duly authorized, validly issued, fully paid and
non-assessable Common Shares (representing 19.9%, rounded down to the nearest
whole multiple of 50,000 Common Shares, of the outstanding Common Shares of the
capital stock of the Grantor as of the date hereof) at a cash purchase price
equal to $25.812 per Common Share (the "Purchase Price"). (The number of Common
Shares and the Purchase Price specified in the immediately preceding sentence
have been determined after giving effect to the Teleglobe Stock Dividend). The
Option may be exercised by the Grantee, in whole or in part, at any time, or
from time to time, following the occurrence of the event referred to in Section
2(c) hereof and prior to the expiration of the Option in accordance with Section
1(e) of this Agreement.
(b) In the event of any change in the number of issued and outstanding
Common Shares by reason of any stock dividend, stock split, split-up,
recapitalization, merger or other change in the corporate or capital structure
of the Grantor (other than the Teleglobe Stock Dividend), the number of Common
Shares subject to the Option and the Purchase Price shall be appropriately
adjusted to restore the Grantee to its economic and other rights hereunder.
(c) In the event the Grantee wishes to exercise the Option, the Grantee
shall send a written notice to the Grantor (the "Exercise Notice") specifying a
date (subject to the requirements of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act") and the Competition Act
(Canada) (the "Competition Act")) not later than 10 Business Days and not
earlier than two Business Days following the date such notice is given for the
closing of such purchase.
(d) If an Acquisition Proposal involving Grantor is consummated within
12 months after termination of the Merger Agreement, then the Grantee may, at
any time the Option is then exercisable pursuant to the terms of Section 1(a)
hereof, elect, in lieu of exercising the Option to purchase Common Shares
provided in Section 1(a) hereof, to send a written notice to the Grantor (the
"Cash Exercise Notice") specifying a date not later than 20 Business Days and
not earlier than 10 Business Days following the date such notice is given on
which date the Grantor shall pay to the Grantee an amount in cash in United
States dollars equal to the Spread (as hereinafter defined) multiplied by all or
such portion of the Common Shares subject to the Option
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as Grantee shall specify. As used herein "Spread" shall mean the excess, if any,
over the Purchase Price of the higher of (x) if applicable, the highest price
per Common Share (including any brokerage commissions, transfer taxes and
soliciting dealers' fees) paid by any person in an Acquisition Proposal (the
"Alternative Purchase Price") or (y) the weighted average of the closing sales
prices of the Common Shares on the NYSE, TSE and ME, for the ten trading days
ending on and including the fifth trading day prior to the date of the Cash
Exercise Notice converted, in the case of the TSE and ME, to United States
dollars using, in the weighted average formula, the Bank of Canada's noontime
currency conversion rate for each of the days concerned. If the Alternative
Purchase Price includes any property other than cash, the Alternative Purchase
Price shall be the sum of (A) the fixed cash amount, if any, included in the
Alternative Purchase Price plus (B) the fair market value of such other property
determined in accordance with the procedures set forth in Section 6(b) hereof
(but using the date of the Cash Exercise Notice). Upon exercise of the Grantee's
right to receive cash pursuant to this Section 1(d) and the payment of such cash
to the Grantee, the obligations of the Grantor to deliver Common Shares pursuant
to Section 3 hereof shall be terminated with respect to such number of Common
Shares for which the Grantee shall have elected to be paid the Spread.
If the Grantee receives official notice that all approvals of the
Exchanges in respect of the granting of the Option or the issuance of the Common
Shares purchasable upon the exercise thereof will not be granted or issued (or,
if the Option is then exercisable and a reasonable period of time has lapsed
without receiving such official notice after application therefor has been
made), then the Grantee shall be entitled to receive, and shall receive at any
time the Option is then exercisable pursuant to the terms of Section 1(a)
hereof, in lieu of the grant of the Option or the exercise of the Option to
purchase the Common Shares subject thereto, an amount in cash equal to the
Spread multiplied by such number of the Common Shares subject to the Option as
Grantee shall specify in a written notice to the Grantor. Such cash amount shall
be payable by the Grantor to the Grantee within two business days of such
notice.
(e) The Option and the rights and obligations of the parties hereunder
shall terminate at the earliest of (i) the Effective Time (as defined in the
Merger Agreement), (ii) the termination of the Merger Agreement pursuant to
circumstances under which the Grantee is not entitled to receive the Termination
Fee in accordance with Section 7.4 of the Merger Agreement (other than a
termination by Excel pursuant to Section 7.1(e) if an Acquisition Proposal with
respect to Teleglobe shall be pending at the time of such termination), and
(iii) the date on which Grantee realizes a Total Profit equal to the Profit
Limit (as such terms are defined in Section 9) and (iv) 30 days after the first
anniversary of the date (the "Merger Termination Date") on which the Merger
Agreement is terminated (the date referred to in clause (iii) being hereinafter
referred to as the "Option Expiration Date"); provided that if the Option cannot
be exercised or the Common Shares cannot be delivered to Grantee upon such
exercise because the conditions set forth in Section 2(a) or Section 2(b) hereof
have not yet been satisfied (other than because of a permanent injunction or
final unappealable order of a Governmental Entity of competent jurisdiction
prohibiting delivery of the Shares), the Option Expiration Date shall be
extended until 30 days after such impediment to exercise has been removed.
(f) The Grantor will not, by amendment of its certificate of
incorporation or through any consolidation, merger, reorganization, transfer of
assets, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms of this
Agreement or diminish the economic value of the Option, but will at all times in
good faith assist in the carrying out of all such terms and in the taking of all
action as may be necessary or appropriate in order to protect the rights of the
Grantee against dilution or other impairment. In furtherance and not in
limitation of the foregoing, in the event that after the date of this Agreement,
the Grantor shall issue Common Shares at a price below their fair market value
(as such term is used in Section 6(b) hereof) at such time, the Purchase Price
shall be adjusted accordingly so that the economic value of the Option relative
to the fair market value of the Common Shares at the time of such issuance shall
be maintained.
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2. Conditions to Delivery of the Common Shares. The Grantor's obligation to
deliver the Common Shares upon exercise of the Option is subject only to the
conditions that:
(a) No preliminary or permanent injunction or other order issued by any
federal, state or provincial court of competent jurisdiction prohibiting the
delivery of the Common Shares shall be in effect; and
(b) Any applicable waiting periods under the HSR Act and the Competition
Act shall have expired or been terminated; and
(c) The Termination Fee shall be payable pursuant to Section 7.4 of the
Merger Agreement or the Merger Agreement shall have been terminated by Excel
pursuant to Section 7.1(e) thereof and an Acquisition Proposal with respect to
Teleglobe shall have been pending at the time of such termination.
3. The Closing.
(a) Any closing hereunder shall take place on the date specified by the
Grantee in its Exercise Notice at 9:00 A.M., local time, at the offices of Weil,
Gotshal & Manges LLP, 767 Fifth Avenue, New York, New York, 10157, if the
conditions set forth in Section 2(a) or 2(b) have not then been satisfied, on
the second Business Day following the satisfaction of such conditions, or at
such other time and place as the parties hereto may agree (the "Closing Date").
On the Closing Date, the Grantor will deliver to the Grantee a certificate or
certificates, duly endorsed (or accompanied by duly executed stock powers),
representing the Common Shares in the denominations designated by the Grantee in
its Exercise Notice and the Grantee will purchase such Common Shares from the
Grantor at the price per Common Share equal to the Purchase Price. Any payment
made by the Grantee to the Grantor, or by the Grantor to the Grantee, pursuant
to this Agreement shall be made by certified or official bank check or by wire
transfer of funds to a bank designated by the party receiving such funds.
(b) The certificates representing the Common Shares may bear an
appropriate legend relating to the fact that such Common Shares have not been
registered under the Securities Act.
4. Representations and Warranties of the Grantee. The Grantee represents
and warrants to the Grantor that the Grantee (a) is a sophisticated investor
capable of evaluating the merits and risks of an investment in the Option and
the capital stock of the Grantor and (b) is acquiring the Option and, if and
when it exercises the Option, will be acquiring the Common Shares issuable upon
the exercise thereof for its own account and not with a view to distribution or
resale in any manner which would be in violation of the Securities Act, any
"blue sky" or state securities law or the Canadian Securities Laws.
5. Listing of the Underlying Shares; HSR Act and Competition Act Filings;
Governmental Consents. Subject to applicable law and the rules and regulations
of the NYSE, the TSE and the ME, the Grantor shall promptly file a notice to
reserve for listing the Common Shares on the NYSE, the TSE and the ME, provided,
however that if the Grantor is unable to effect the listings on the NYSE, the
TSE and the ME by the Closing Date, the Grantor will nevertheless be obligated
to deliver the Common Shares upon the Closing Date. Each of the Grantor and the
Grantee shall make, as promptly as practicable, all necessary filings under (i)
the HSR Act, (ii) the Competition Act and (iii) the Canadian Securities Laws,
and use its best efforts to obtain all necessary approvals thereunder in respect
of the grant of the Option, exercise of the option and listing of the underlying
Common Shares as promptly as practicable. Each of the parties hereto will use
its best efforts to obtain consents of all third parties and Governmental
Entities, if any, necessary to the consummation of the transactions contemplated
hereby.
6. Right of First Refusal. If the Grantee, at any time prior to 30 days
after the first anniversary of the Merger Termination Date, seeks to sell,
transfer or dispose of all or any part of the Common Shares to any third person
in any type of transaction, it shall give the Grantor (or a designee of the
Grantor) the opportunity, in the following manner, to purchase such Common
Shares:
(a) The Grantee shall give notice to the Grantor in writing of its
intent to sell Common Shares (a "Disposition Notice"), specifying the number of
Common Shares to be sold, the price and, if applicable, the material terms of
any agreement relating thereto. For purposes of this Section 6, if the
Disposition Notice is
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given with respect to the sale of the Common Shares pursuant to a tender or
exchange offer, it shall be assumed that all Common Shares tendered will be
accepted for payment. The Disposition Notice may be given at any time, including
prior to the giving of any Exercise Notice.
(b) The Grantor or its designee shall have the right, exercisable by
written notice given to the Grantee within fifteen Business Days after receipt
of a Disposition Notice (or, if applicable, in the case of a proposed sale
pursuant to a tender or exchange offer for Common Shares, by written notice
given to the Grantee at least two Business Days prior to the then announced
expiration date of such tender or exchange offer (the "Expiration Date"), it
being understood that any such Disposition Notice in the case of a tender or
exchange offer shall be given at least four Business Days prior to such
Expiration Date), to purchase all, but not less than all, of the Common Shares
specified in the Disposition Notice at the price set forth in the Disposition
Notice. If the purchase price specified in the Disposition Notice includes any
property other than cash, the purchase price to be paid by the Grantor shall be
an amount of cash in United States dollars equal to the sum of (i) the cash
included in the purchase price plus (ii) the fair market value of such other
property at the date of the Disposition Notice. If such other property consists
of securities with an existing public trading market, the average closing price
(or the average closing bid and asked price if closing prices are unavailable)
for such securities on their principal public trading market for the five
trading days ending five days prior to the date of the Disposition Notice shall
be deemed to equal the fair market value of such property. If such other
property consists of something other than cash or securities with an existing
public trading market and at the time of the closing referred to in paragraph
(c) below, agreement on the value of such other property has not been reached,
the higher of (i) the cash included in the purchase price and (ii) the weighted
average of the closing sales price of the Common Shares on the NYSE, TSE and ME
for the ten trading days ending on and including the fifth trading day prior to
the date of the Disposition Notice shall be used as the per share purchase
price, in the case of the MSE and the TE, to United States dollars using, in the
weighted average formula, the Bank of Canada's noontime currency conversion rate
for each of the days concerned, provided, however, that promptly after the
closing, the Grantee and the Grantor or its designee, as the case may be, shall
settle any additional amounts to be paid or returned as a result of the
determination of fair market value of such other property made by a nationally
recognized investment banking firm selected by the Grantor and approved by the
Grantee within 30 days of the closing. Such determination shall be final and
binding on all parties hereto.
(c) If the Grantor exercises its right of first refusal hereunder, the
closing of the purchase of the Common Shares with respect to which such right
has been exercised shall take place within twenty Business Days after the notice
of such exercise (or, if applicable, in the case of a tender or exchange offer,
no later than one Business Day prior to the expiration date of the offer if
written notice was given within the time set forth in the parenthetical in the
first sentence of paragraph (b) above).
(d) If the Grantor does not exercise its right of first refusal
hereunder within the time specified for such exercise, the Grantee shall be free
for 90 days following the expiration of such time for exercise to sell the
Common Shares (or enter into an agreement to sell the Common Shares) specified
in the Disposition Notice, at the price specified in the Disposition Notice or
any price in excess thereof and otherwise on substantially the same terms set
forth in the Disposition Notice; provided, that if such sale is not consummated
within such 90-day period (or the agreement to sell entered into in such 90 day
period is not thereafter performed in accordance with its terms), then the
provisions of this Section 6 will again apply to the sale of such Common Shares.
7. Repurchase of Shares. Beginning on the first anniversary date of the
Merger Termination Date, the Grantor shall have the right to purchase (the
"Repurchase Right") all, but not less than all, of the Common Shares at the
greater of (i) the Purchase Price or (ii) the weighted average of the closing
price of the Common Shares on the NYSE, TSE and ME for the ten trading days
ending on and including the fifth trading day prior to the date the Grantor
gives written notice of its intention to exercise the Repurchase Right. If the
Grantor does not exercise the Repurchase Right within 30 days following the
first anniversary of the Merger Termination Date, the Repurchase Right shall
terminate. In the event the Grantor wishes to exercise the Repurchase Right, the
Grantor shall send a written notice to the Grantee specifying a date (not later
than
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10 Business Days and not earlier than two Business Days following the date such
notice is given) for the closing of such purchase.
8. Registration Rights.
(a) In the event that the Grantee shall desire to sell 25% or more of
the Common Shares within two years after the purchase of such shares pursuant
hereto, and such sale requires, in the opinion of counsel to the Grantee, which
opinion shall be reasonably satisfactory to the Grantor and its counsel,
registration of such Common Shares under the Securities Act, the Grantor shall,
at its option, either repurchase said Common Shares at a price established
pursuant to the procedure set forth in Section 7, or cooperate with the Grantee
and any underwriters in registering such Common Shares for resale in a bona fide
firm commitment underwritten public offering in which the Grantees and the
underwriters will effect as wide a distribution of such Common Shares as is
reasonably practicable and shall use their best efforts to prevent any person
from purchasing through such offering more than 2% of such outstanding shares,
including, without limitation, promptly filing a registration statement which
complies with the requirements of applicable foreign, federal and state
securities laws and entering into an underwriting agreement with such
underwriters upon such terms and conditions as are customarily contained in
underwriting agreements with respect to secondary distributions; provided that
the Grantor shall not be required to have declared effective more than two
registration statements hereunder and shall be entitled to delay the filing or
effectiveness of any registration statement for up to 135 days if the offering
would, in the judgment of the Board of Directors of the Grantor, require
premature disclosure of any material corporate development or otherwise
interfere with or adversely affect any pending or proposed offering of
securities of the Grantor or any other material transaction involving the
Grantor.
(b) If the Common Shares are registered pursuant to the provisions of
this Section 8, the Grantor agrees (i) to furnish copies of the registration
statement and the prospectus relating to the Common Shares covered thereby in
such numbers as the Grantee may from time to time reasonably request and (ii) if
any event shall occur as a result of which it becomes necessary to amend or
supplement any registration statement or prospectus, to prepare and file under
the applicable securities laws such amendments and supplements as may be
necessary to keep available for at least 90 days a prospectus covering the
Common Shares meeting the requirements of such securities laws, and to furnish
to the Grantee such numbers of copies of the registration statement as amended
or supplemented as may reasonably be requested. The Grantor shall bear the cost
of the registration, including, but not limited to, all registration and filing
fees, printing expenses, and fees and disbursements of counsel and accountants
for the Grantor, except that the Grantee shall pay the fees and disbursements of
its counsel and the underwriting fees and selling commissions applicable to the
Common Shares sold by the Grantee. The Grantor shall indemnify and hold harmless
Grantee, its affiliates and its officers and directors from and against any and
all losses, claims, damages, liabilities and expenses arising out of or based
upon any statements contained in, omissions or alleged omissions from, each
registration statement filed pursuant to this paragraph; provided, however, that
this provision does not apply to any loss, liability, claim, damage or expense
to the extent it arises out of any statement or omission made in reliance upon
and in conformity with written information furnished to the Grantor by the
Grantee, its affiliates or its officers expressly for use in any registration
statement (or any amendment thereto) or any preliminary or final prospectus
filed pursuant to this paragraph ("Grantee Information"). The Grantee shall
indemnify and hold harmless Grantor, its affiliates and officers and directors
from and against any and all losses, claims, damages, liabilities and expenses
arising out of or based upon any Grantee Information. The Grantor shall also
indemnify and hold harmless each underwriter and each person who controls any
underwriter within the meaning of either the Securities Act or the Exchange Act
against any and all losses, claims, damages, liabilities and expenses arising
out of or based upon any statements contained in, omissions or alleged omissions
from, each registration statement and prospectus filed pursuant to this
paragraph; provided, however, that this provision does not apply to any loss,
liability, claim, damage or expense to the extent it arises out of any statement
or omission made in reliance upon and in conformity with written information
furnished to the Grantor by the underwriters expressly for use in any
registration statement (or any amendment thereto) or any preliminary or final
prospectus filed pursuant to this paragraph.
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9. Profit Limitation.
(a) Notwithstanding any other provision of this Agreement, in no event
shall the Grantee's Total Profit (as hereinafter defined) exceed
U.S.$120,000,000 (the "Profit Limit") and, if it otherwise would exceed such
amount, the Grantee, at its sole election, shall either (i) deliver to the
Grantor for cancellation Shares previously purchased by Grantee, (ii) pay cash
or other consideration to the Grantor or (iii) undertake any combination
thereof, so that Grantee's Total Profit shall not exceed the Profit Limit after
taking into account the foregoing actions.
(b) Notwithstanding any other provision of this Agreement, the Option
may not be exercised for a number of Shares as would, as of the date of the
Exercise Notice, result in a Notional Total Profit (as defined below) of more
than the Profit Limit. If exercise of the Option otherwise would exceed the
Profit Limit, the Grantee, at its discretion, may increase the Purchase Price
for that number of Shares set forth in the Exercise Notice so that the Notional
Total Profit shall not exceed the Profit Limit, or elect to reduce the amount of
the Termination Fee payable to Grantee pursuant to Section 7.4 of the Merger
Agreement; provided that nothing in this sentence shall be construed to restrict
any exercise of the Option permitted hereby on any subsequent date at the
Purchase Price set forth in Section 1(a) hereof or to reduce the amount of the
Termination Fee payable to Grantee pursuant to Section 7.4 of the Merger
Agreement on any subsequent date.
(c) As used herein, the term "Total Profit" shall mean the aggregate
amount (before taxes) of the following: (i) the amount of cash to be received by
Grantee pursuant to Section 7.4 of the Merger Agreement, (ii) (x) the amount
received by Grantee pursuant to the Grantor's repurchase of Shares pursuant to
Sections 1(d), 6 or 7 hereof, less (y) the Purchase Price, (iii) the amount
received by Grantee in respect of a Cash Exercise Notice pursuant to Section
1(d) hereof, and (iv) (x) the net cash amounts received by Grantee pursuant to
the sale of Shares (or any other securities into which such Shares are converted
or exchanged) to any unaffiliated party, less (y) the Purchase Price.
(d) As used herein, the term "Notional Total Profit" with respect to any
number of Shares as to which Grantee may propose to exercise the Option shall be
the Total Profit determined as of the date of the Exercise Notice assuming that
the Option was exercised on such date for such number of Shares and assuming
that such Shares, together with all other Shares held by Grantee and its
affiliates as of such date, were sold for cash at the closing market price for
the Common Stock as of the close of business on the preceding trading day (less
customary brokerage commissions).
10. Expenses. Each party hereto shall pay its own expenses incurred in
connection with this Agreement, except as otherwise specifically provided
herein.
11. Specific Performance. Each party acknowledges that if it fails to
perform any of its obligations under this Agreement, immediate and irreparable
harm or injury would be caused to the other party for which money damages would
not be an adequate remedy. In such event, each party agrees that the other party
shall have the right, in addition to any other rights it may have, to specific
performance of this Agreement. Accordingly, if either party should institute an
action or proceeding, seeking specific enforcement of the provisions hereof, the
other party in respect of such claim hereby waives the claim or defense that the
other party has an adequate remedy at law and hereby agrees not to assert in any
such action or proceeding the claim or defense that such a remedy at law exists.
Each party further agrees to waive any requirements for the securing or posting
of any bond in connection with obtaining any such equitable relief.
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12. Notices. All notices and other communications hereunder shall be in
writing and shall be deemed duly given (a) on the date of delivery if delivered
personally, or by telecopy or facsimile, upon confirmation of receipt, (b) on
the first Business Day following the date of dispatch if delivered by a
recognized next-day courier service, or (c) on the third Business Day following
the date of mailing if delivered by registered or certified mail, return receipt
requested, postage prepaid. All notices hereunder shall be delivered as set
forth below, or pursuant to such other instructions as may be designated in
writing by the party to receive such notice:
<TABLE>
<S> <C>
(a) if to the Grantee, to
Excel Communications, Inc.
8750 North Central Expressway
Suite 2000
Dallas, Texas 75231
Attention: Executive Vice President, Secretary and General
Counsel
Facsimile: 214-863-8838
with a copy to
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10157
Attention: Frederick S. Green
Facsimile: 212-310-8007
(b) if to the Grantor, to
Teleglobe Inc.
1000, rue de La Gauchetiere ouest
Montreal, Quebec H3B 4X5
Attention: Vice President, Legal Affairs and Corporate
Secretary
Facsimile: 514-868-7438
with a copy to
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: Philip T. Ruegger
Facsimile: 212-455-2502
</TABLE>
13. Interpretation. When a reference is made in this Agreement to Sections,
such reference shall be to a Section of this Agreement unless otherwise
indicated. The headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include", "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation".
14. Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that both
parties need not sign the same counterpart.
15. Entire Agreement; No Third Party Beneficiaries. (a) This Agreement, the
Excel Communications, Inc. Stock Option Agreement, the Voting Agreements, the
Merger Agreement, the Registration Rights Agreement and the Confidentiality
Agreement constitute the entire agreement and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof. This Agreement shall be binding upon and inure solely to
the benefit of each party hereto, and nothing
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in this Agreement, express or implied, is intended to or shall confer upon any
other Person any right, benefit or remedy of any nature whatsoever under or by
reason of this Agreement.
16. Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the Province of Quebec, Canada, without regard to
the principles of conflicts of laws of such jurisdiction.
17. Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any law or public policy, all
other terms and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner in order that the
transactions contemplated hereby are consummated as originally contemplated to
the greatest extent possible.
18. Assignment. Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto, in whole
or in part (whether by operation of law or otherwise), without the prior written
consent of the other party, and any attempt to make any such assignment without
such consent shall be null and void. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and assigns.
19. Submission to Jurisdiction; Waivers. Each of the Grantee and the
Grantor irrevocably agree that any legal action or proceeding with respect to
this Agreement or for recognition and enforcement of any judgment in respect
hereof brought by the other party hereto or its successors or assigns may be
brought and determined in any court of competent jurisdiction of the Province of
Ontario and each of the Grantee and the Grantor hereby irrevocably submit with
regard to any such action or proceeding for itself and in respect to its
property, generally and unconditionally, to the nonexclusive jurisdiction of the
aforesaid courts which constitutes a submission to the jurisdiction of the
Province of Ontario. Each of the Grantee and the Grantor hereby irrevocably
waive, and agree not to assert, by way of motion, as a defence, counterclaim or
otherwise, in any action or proceeding with respect to this Agreement, (a) any
claim that it is not personally subject to the jurisdiction of the above-named
courts for any reason other than the failure to serve process in accordance with
this Section 19, (b) that it or its property is exempt or immune from
jurisdiction of any such court or from any legal proceedings commenced in such
courts (whether through service of a writ of seizure, seizure prior to judgment,
post-judgment seizure, execution of judgment or otherwise), and (c) to the
fullest extent permitted by applicable law, that (i) the suit, action or
proceeding in any such court is brought in an inconvenient forum, (ii) the venue
of such suit, action or proceeding is improper and (iii) this Agreement, or the
subject matter hereof, may not be enforced in or by such courts.
20. Waiver of Jury Trial. Each party hereto hereby waives, to the fullest
extent permitted by applicable law, any right it may have to a trial by jury in
respect of any litigation directly or indirectly arising out of, under or in
connection with this Agreement.
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IN WITNESS WHEREOF, the Grantee and the Grantor have caused this Agreement
to be duly executed and delivered on the day and year first above written.
TELEGLOBE INC.
By: /s/ CHARLES SIROIS
----------------------------------
Name: Charles Sirois
Title: Chairman and Chief
Executive Officer
EXCEL COMMUNICATIONS, INC.
By: /s/ KENNY A. TROUTT
----------------------------------
Name: Kenny A. Troutt
Title: Chairman, Chief Executive
Officer and President
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APPENDIX K
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of , 199 (this
"Agreement"), among TELEGLOBE INC., a corporation governed by the Canada
Business Corporations Act (the "Company"), and the holders signatory hereto (the
"Shareholders") of common shares of Company capital stock (the "Company Common
Shares").
WITNESSETH:
WHEREAS, in connection with and pursuant to Section 6.3(h) of the Agreement
and Plan of Merger, dated as of June 14, 1998 (the "Merger Agreement"), among
the Company, North Merger Sub Corporation, a Delaware corporation ("North Sub"),
and Excel Communications, Inc., a Delaware corporation ("Excel"), the Company
agreed to enter into this Agreement for the benefit of the Shareholders;
WHEREAS, pursuant to the Merger, North Sub was merged with and into Excel,
with Excel surviving the Merger as a wholly owned subsidiary of the Company, and
the shares of the Common Stock, par value $.001 per share, of Excel (the "Excel
Common Stock") that were outstanding immediately prior to the Merger were
automatically converted pursuant to the Merger into Company Common Shares based
on the Exchange Ratio;
WHEREAS, pursuant to the Merger Agreement, the Company has agreed to grant
to the Shareholders certain registration rights with respect to the Company
Common Shares issued to the Shareholders in the Merger and constitute
Registrable Securities (as hereinafter defined), as well as certain other
securities to which the Shareholders may be entitled as provided below, upon the
terms and subject to the conditions set forth herein; and
WHEREAS, it is intended by the Company that this Agreement shall become
effective immediately;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company, intending to be
legally bound hereby, hereby agrees as follows:
1. DEFINITIONS. Capitalized terms used but not defined in this Agreement
shall have the meanings assigned to such terms in the Merger Agreement.
2. REGISTRATION RIGHTS.
(a) Registration Upon Request. (i) At anytime, and from time to time,
commencing with the Effective Time and ending on December 31, 200 [INSERT FIFTH
CALENDAR YEAR FOLLOWING THE CALENDAR YEAR IN WHICH THE MERGER OCCURRED] (the
"Effective Period"), upon the written request (a "demand") of any Qualified
Holder(s) (as hereinafter defined) requesting that the Company effect the
registration for sale under the Securities Act of 1933, as amended (the
"Securities Act"), of Registrable Securities held by such holders (or qualify
such Registrable Securities for distribution under the securities laws of any
Canadian jurisdiction), the Company promptly shall use its best efforts to
register under the Securities Act (a "Demand Registration") and, if reasonably
required by the Managing Underwriter(s) (as such term is defined in Rule 12b-2
under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) to
file a prospectus under applicable Canadian securities laws, the Registrable
Securities which the Company has been requested to register, all to the extent
necessary to permit the disposition of such Registrable Securities in accordance
with the methods intended by the sellers thereof; provided that (i) each such
demand shall cover at least U.S. $50,000,000 in Company Common Shares based on
the closing price for the Company Common Shares on the NYSE Composite Tape for
the last trading day immediately preceding the date of the demand, (ii) the
Qualified Holder(s) shall not be permitted to make a demand within 60 days
following the effective date of any registration statement for equity securities
of the Company (other than on Form F-4, Form S-4 or Form S-8 or any successor or
equivalent form) and (iii) the Company shall not be
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required to effect more than five Demand Registrations for the Shareholders
pursuant to this Section 2(a). An exercise of a Demand Registration right will
not count as the use of such right unless the registration statement to which it
relates is declared effective under the Securities Act. However, an exercise of
a Demand Registration right will count as the use of such right even though the
registration statement to which it relates is declared effective if such
effective registration statement is interfered with by any stop order,
injunction or other order or requirement of the Securities and Exchange
Commission (the "Commission") or of another governmental agency or court due to
a material misrepresentation in or material omission from information provided
in writing by such Qualified Holder expressly for inclusion by such Qualified
Holder in such registration statement.
(ii) As used in this Agreement, the term "Registrable Securities"
means any and all (A) Company Common Shares acquired by the Qualified Holders
pursuant to the Merger and (B) any other securities issued or issuable with
respect to any shares of the Company Common Shares described in clause (A) of
this paragraph by way of a stock dividend or stock split or in connection with a
combination, exchange, reorganization, recapitalization or reclassification of
any securities of the Company, or pursuant to a merger, consolidation or other
similar business combination transaction involving the Company.
(iii) As to any particular Registrable Securities, such securities
shall cease to constitute Registrable Securities when (A) a registration
statement with respect to the sale of such securities shall have been declared
effective under the Securities Act and such securities shall have been disposed
of in accordance with the plan of distribution contemplated by the registration
statement, (B) such securities shall have been sold in satisfaction of all
applicable conditions to the resale provisions of Rule 144 under the Securities
Act (or any successor provision thereto), (C) such securities shall have been
transferred, sold or disposed of by a Qualified Holder to any person that is not
a Qualified Holder or (iv) such securities shall have ceased to be issued and
outstanding.
(iv) (A) The term "Qualified Holder(s)" means any holder of
Registrable Securities and any transferee of any such holder who or which has
agreed to be bound by the terms of this Agreement and has succeeded to the
interest of such Shareholder by gift or by virtue of the laws of descent and
distribution.
(v) The Company shall be required to register the Company Common
Shares pursuant to Section 2(a) only if such Company Common Shares are to be
offered and sold in a Broad Public Distribution. For purposes hereof, "Broad
Public Distribution" means an underwritten distribution registered under the
Securities Act or a distribution exempt from registration thereunder in which
the Qualified Holders making the demand use their best efforts to cause the
Managing Underwriter(s) expressly to agree in writing that they collectively
will not sell Company Common Shares to any "person" within the meaning of
Section 13(d)(3) of the Exchange Act who, to the best of such underwriters'
knowledge after inquiry, would own, immediately after such distribution, common
shares or other voting securities of the Company having aggregate voting power
of more than 5% of the voting power of all the then outstanding common shares or
other voting securities.
(B) The term "Majority Qualified Holder(s)" means a majority in
interest of the Qualified Holders participating in a registration of Registrable
Securities pursuant hereto.
(vi) It is hereby further agreed that with respect to any Demand
Registration requested pursuant to this Section 2(a), the Company may defer the
filing or effectiveness of the registration statement for a period of up to 135
days if (A) the Company is, at such time, working on an underwritten public
offering of the Company Common Shares and is advised by its Managing
Underwriter(s) that such offering would in such Managing Underwriter(s) opinion
be adversely affected in any material respect by such filing or (B) the general
counsel of the Company, in his good faith judgment, determines that any such
filing or the offering of any Registrable Securities would impair or interfere
in any material respect with any proposed financing, other offer or sale of
securities, acquisition, corporate reorganization or other significant
transaction involving the Company, or would require the Company to make public
disclosure of information which would have an material adverse effect on the
Company.
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(vii) The Company shall have the right to cause the registration of
additional securities for sale for the account of any person (including the
Company) in any registration of Registrable Securities requested by the
Qualified Holder(s) pursuant to Section 2(a); provided, that the Company shall
not have the right to cause the registration of such additional securities to
the extent the Qualified Holder(s) is advised in writing (with a copy to the
Company) by the Managing Underwriter(s) for such Demand Registration that, in
such firm's opinion, registration of such additional securities would impair or
interfere in any material respect with the marketing and sale of the Registrable
Securities proposed to be registered in the offering by the Qualified Holder(s),
and in no event shall any Qualified Holder be obligated to reduce the number of
Registrable Securities to be included in any offering in order to accommodate
the addition of any other person (including the Company). The Qualified
Holder(s) may require that any such additional securities be included in the
offering proposed by the Qualified Holder(s) on the same terms and conditions as
the Registrable Securities that are included therein.
(viii) If the Managing Underwriter(s) for a Demand Registration
pursuant to this Section 2(a) that involves an underwritten offering shall
advise the Company or the Shareholders on whose behalf the offering is to be
effected that, in its opinion, the inclusion of the amount and kind of
Registrable Securities to be sold for the account of Qualified Holders would
impair or interfere in any material respect with the marketing and sale of the
securities proposed to be registered in the offering, then the number and kind
of Registrable Securities to be sold for the account of such Qualified Holders
shall be reduced (and may be reduced to zero), pro rata among all requesting
Qualified Holders on the basis of the relative number of shares of such
Registrable Securities owned of record or beneficially by each such Qualified
Holder at the time of the request for a Demand Registration. If, as a result of
these proration provisions, any Qualified Holder shall not be entitled to
include all Registrable Securities in a registration pursuant to this Section
2(a)(vii) that such Qualified Holder has requested be included, such Qualified
Holder may elect to withdraw its Registrable Securities from the registration;
provided, however, that such withdrawal election shall be irrevocable and, after
making a withdrawal election, a Qualified Holder shall no longer have any right
to include Registrable Securities in the registration as to which such
withdrawal election was made.
(b) Registration Procedures. If and whenever the Company is required by
the provisions of this Agreement to effect or cause the registration of any
Registrable Securities under the Securities Act as provided in this Agreement,
the Company shall use its best efforts to:
(i) prepare and file with the Commission a registration statement on
a form which is available for the sale of Registrable Securities by the holders
thereof in accordance with the intended plan of distribution therefor (subject
to Section 2(a)(v)), and is reasonably acceptable to the Majority Qualified
Holders of Registrable Securities participating therein (and, if reasonably
requested by the Managing Underwriter(s), prepare and file with the applicable
securities regulatory authority in each Canadian province or with the Director
under the CBCA, preliminary and final prospectuses), and use its best efforts to
cause such registration statement to become and remain effective under the
Securities Act for not less than a period of 60 days (unless the Registrable
Securities registered thereunder have been sold or disposed of prior to the
expiration of such 60-day period); provided, however, that with respect to any
demand for registration pursuant to Section 2(a) made within the period
commencing 60 days next preceding the end of the Company's fiscal year and
ending 90 days after the end of the Company's fiscal year only, if the Company
is not then eligible to effect a registration under the Securities Act by use of
Form F-3, Form F-10 or Form S-3 (or other comparable short-form registration
statement), the Company shall be entitled to delay such registration until ten
days after the earlier of (x) such time as the Company receives audited
financial statements for such fiscal year and (y) the expiration of 75 days
after the last day of such fiscal year;
(ii) prepare and file with the Commission such amendments,
post-effective amendments and supplements to such registration statement and the
prospectus used in connection therewith as may be necessary to keep such
registration statement effective for such period of time as is necessary to
complete the offering and the distribution of the securities covered thereby
(but, in no event, longer than 60 days after such registration statement becomes
effective) in each case exclusive of any period during which the prospectus used
in connection with such registration statement shall not comply with the
requirements of Section 10 of
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the Securities Act; and to comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by such registration
statement during said 60-day period;
(iii) furnish to each seller of Registrable Securities and each
underwriter of the securities being sold by such seller, (A) such number of
copies of such registration statement and of each such amendment thereof and
supplement thereto (including all annexes, appendices, schedules and exhibits),
(B) such number of copies of the prospectus used in connection with such
registration statement (including each preliminary prospectus and any summary
prospectus and the final prospectus filed pursuant to Rule 424(b) under the
Securities Act) and (C) such number of copies of other documents, as such seller
and underwriter may reasonably request in order to facilitate the disposition of
Registrable Securities in accordance with the methods intended by the sellers
thereof and, in each of the foregoing cases, afford the seller a reasonable
opportunity to review and comment on drafts of each of the foregoing documents
prior to their filing or distribution, as the case may be;
(iv) register or qualify the Registrable Securities covered by such
registration statement under the securities or "blue sky" laws of such
jurisdictions as any seller and each underwriter of the Registrable Securities
shall reasonably request, and do any and all other acts and things which may be
necessary or desirable to enable such seller and underwriter to consummate the
offering and disposition of Registrable Securities in such jurisdictions;
provided, however, the Company shall not be required to qualify generally to do
business as a foreign corporation, subject itself to taxation, or consent to
general service of process, in any jurisdiction wherein it would not, but for
the requirements of this Section 2(b), be obligated to be qualified;
(v) cause the Registrable Securities covered by such registration
statement to be registered with, or approved by, such other public, governmental
or regulatory authorities as may be necessary to facilitate the disposition of
such Registrable Securities in accordance with the methods of disposition
intended by the sellers thereof;
(vi) notify each seller of any Registrable Securities covered by such
registration statement and the Managing Underwriter(s), if any, promptly and, if
requested by any such person, confirm such notification in writing, (A) when a
prospectus or any prospectus supplement has been filed with the Commission, and,
with respect to a registration statement or any post-effective amendment
thereto, when the same has been declared effective by the Commission, (B) of any
request by the Commission for amendments or supplements to a registration
statement or related prospectus, or for additional information, (C) of the
issuance by the Commission of any stop order or the initiation of any
proceedings for such or a similar purpose (and the Company shall make every
reasonable effort to obtain the withdrawal of any such order at the earliest
practicable moment), (D) of the receipt by the Company of any notification with
respect to the suspension of the qualification of any of the Registrable
Securities for sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose (and the Company shall make every reasonable effort
to obtain the withdrawal of any such suspension at the earliest practicable
moment), (E) of the occurrence of any event which requires the making of any
changes to a registration statement or related prospectus so that such documents
will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading (and the Company shall as promptly as practicable prepare and furnish
to such seller and the Managing Underwriter(s) a reasonable number of copies of
a supplemented or amended prospectus such that, as thereafter delivered to the
purchasers of such Registrable Securities, such prospectus shall not include an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading), and (F) of the
Company's determination that the filing of a post-effective amendment to the
Registration Statement shall be necessary or appropriate. Each holder of
Registrable Securities agrees that such holder will, as expeditiously as
possible, notify the Company at any time when a prospectus relating to a
registration statement covering such seller's Registrable Securities is required
to be delivered under the Securities Act, of the happening of any event of the
kind described in this Section 2(b)(vi) as a result of any information provided
by such seller in writing specifically for inclusion in such prospectus included
in such registration statement and, at the request of the Company, promptly
prepare and furnish to it such information as may be necessary so that, after
incorporation into a supplement or amendment of such prospectus as
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thereafter delivered to the purchasers of such securities, the information
provided by such seller shall not include an 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 the light of the circumstances under which
they were made, not misleading. Each holder of Registrable Securities shall be
deemed to have agreed by acquisition of such Registrable Securities that upon
the receipt of any notice from the Company of the occurrence of any event of the
kind described in clause (E) of this Section 2(b)(vi), such holder shall
forthwith discontinue such holder's offer and disposition of Registrable
Securities pursuant to the registration statement covering such Registrable
Securities until such holder shall have received copies of a supplemented or
amended prospectus which is no longer defective as contemplated by clause (E) of
this Section 2(b)(vi) and, if so directed by the Company, shall deliver to the
Company, at the Company's expense, all copies (other than permanent file copies)
of the defective prospectus covering such Registrable Securities which are then
in such holder's possession. In the event the Company shall provide any notice
of the type referred to in the preceding sentence, the 60-day period mentioned
in Sections 2(b)(i) and 2(b)(ii) shall be extended by the number of days from
and including the date such notice is provided, to and including the date when
each seller of any Registrable Securities covered by such registration statement
shall have received copies of the corrected prospectus contemplated by clause
(E) of this Section 2(b)(vi);
(vii) use its reasonable best efforts to comply with all applicable
rules and regulations of the Commission, as the same may hereafter be amended,
and make available to its security holders, as soon as reasonably practicable,
an earnings statement, which shall satisfy the provisions of Section 11(a) of
the Securities Act;
(viii) in the case of a qualification under Canadian securities laws,
take such reasonable actions as may be necessary to facilitate the sale of
Registrable Securities on a public basis in Canada, including making any
necessary filings with Canadian securities authorities or any Canadian stock
exchange on which the Registrable Securities may be listed from time to time;
(ix) cause all such Registrable Securities covered by such
registration statement to be listed on each securities exchange on which similar
securities issued by the Company are then listed, if the listing of such
Registrable Securities is then permitted under the rules and regulations of such
exchange;
(x) engage and provide a transfer agent (which may be an existing
transfer agent) for all Registrable Securities covered by such registration
statement not later than the effective date of such registration statement;
(xi) enter into one or more underwriting agreements (in customary
form and substance) and take all such other actions (including, without
limitation, to the extent reasonably consistent with work commitments but
without diminishment of the Company's obligations hereunder, and upon reasonable
notice, participation in a reasonable number of "roadshow" presentations) as the
participating holders shall reasonably request in order to expedite or
facilitate the disposition of such Registrable Securities in accordance with the
plan of distribution intended by the sellers thereof; it being hereby
acknowledged and agreed that in all cases the selection of any Managing
Underwriter(s) shall be made by the Company with the consent of the Majority
Qualified Holders (which consent may not be unreasonably withheld or delayed);
and
(xii) obtain an opinion from counsel to the Company, and a "cold
comfort" letter from an independent certified public accounting firm of Canadian
or U.S. national recognition and standing who have certified the Company's
financial statements included in the registration statement or any amendment
thereto, in each case in form and substance reasonably satisfactory to the
Majority Qualified Holders, and covering such matters of the type customarily
covered by such opinions and "cold comfort" letters as the Majority Qualified
Holders shall reasonably request.
(c) Custody Agreement and Power of Attorney. Upon the Company's request,
the Qualified Holder(s) will execute and deliver a custody agreement and power
of attorney in form and substance reasonably satisfactory to the Company with
respect to the Registrable Securities to be registered pursuant to this Section
2 (a "Custody Agreement and Power of Attorney"). The Custody Agreement and Power
of Attorney will provide, among other things, that the Qualified Holders will
deliver to and deposit in custody
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with the custodian and attorney-in-fact named therein a certificate or
certificates representing such shares of Registrable Securities (duly endorsed
in blank by the registered owner or owners thereof or accompanied by duly
executed stock powers in blank) and irrevocably appoint said custodian and
attorney-in-fact as the Qualified Holder's agent and attorney-in-fact with full
power and authority to act under the Custody Agreement and Power of Attorney on
behalf of the Qualified Holders with respect to the matters specified therein.
(d) Registration Expenses. Whether or not any registration statement
prepared and filed pursuant to this Section 2 is declared effective by the
Commission, the Company shall pay (A) all Commission, Canadian securities
regulatory authority, CBCA and any NYSE, TSE or ME registration and filing fees
and expenses; (B) all listing, transfer and/or exchange agent and registrar
fees; (C) fees and expenses in connection with the qualification of the
Registrable Securities under securities or "blue sky" laws including reasonable
fees, disbursements and related charges of counsel for the underwriters in
connection therewith; (D) printing expenses; (E) messenger and delivery
expenses; (F) fees and out-of-pocket expenses of counsel for the Company and its
independent certified public accountants (including the expenses of any audit,
review and/or "cold comfort" letters) and other persons, including special
experts, retained by the Company; (G) the reasonable fees and disbursements of
one counsel in each of the U.S. and Canada, other than the Company's counsel,
selected by the Majority Qualified Holders of the Registrable Securities being
registered to represent all Qualified Holders of the Registrable Securities
being registered in connection with each such registration (it being understood
that any Qualified Holder may, at its own expense, retain separate counsel to
represent it in connection with such registration); and (H) any other costs and
expenses of such registration and the disposition of the securities pursuant to
the registration statement therefor (collectively, clauses (A) through (H),
"Registration Expenses"); provided, however, that the Company shall not be
required to pay, and the Qualified Holders shall pay, all transfer taxes and all
discounts, commissions or fees of underwriters, selling brokers and dealers.
(e) Indemnification; Contribution.
(i) The Company shall indemnify and hold harmless, to the fullest
extent permitted by law, each holder (a "Participating Holder") of Registrable
Securities registered pursuant to Section 2(a) or Section 2(b) hereof, its
officers and directors, if any, and each person, if any, who controls such
holder within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act, from and against all losses, claims, damages, liabilities (or
proceedings in respect thereof) and expenses (including the reasonable costs of
investigation and reasonable attorneys' fees, disbursements and related charges)
(under the Securities Act, the Canadian Securities Acts, common law and
otherwise) (collectively, "Claims"), joint or several, which arise out of or are
based upon (A) any untrue statement or alleged untrue statement of a material
fact contained in any registration statement, prospectus, preliminary
prospectus, any amendment or supplement thereto or any document incorporated by
reference or in any filing made in connection with the registration or
qualification of the offering under "blue sky" or other securities laws of
jurisdictions in which the Participating Holder's Registrable Securities are
offered (collectively, "Security Filings"), or any omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, and (B) any untrue statement or
alleged untrue statement of a material fact contained in any preliminary
prospectus, if used prior to the effective date of such registration statement
(unless such statement is corrected in the final prospectus and the Company has
previously furnished copies thereof to any Participating Holder seeking such
indemnification and to the underwriters of the registration in question), or
contained in the final prospectus (as amended or supplemented if the Company
shall have filed with the Commission any amendment thereof or supplement
thereto) if used within the period during which the Company is required to keep
the registration statement to which such prospectus relates current, or the
omission or alleged omission to state therein a material fact necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading; and the Company shall, and it hereby agrees to,
reimburse such holders for any legal or other expenses reasonably incurred by
them in connection with investigating or defending any such claim or proceeding;
provided, however, that such indemnification shall not extend to any Claims
which are caused by any untrue statement or alleged untrue
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<PAGE> 237
statement contained in, or by any omission or alleged omission from, information
furnished in writing to the Company by any Qualified Holder expressly for use in
any such Security Filing.
(ii) In the case of an underwritten offering in which the
registration statement covers Registrable Securities, the Company agrees to
enter into an underwriting agreement in customary form and substance with such
underwriters and to indemnify the underwriters, their officers and directors, if
any, and each person, if any, who controls such underwriters within the meaning
of Section 15 of the Securities Act or Section 20 of the Exchange Act, to the
same extent as provided in the preceding paragraph with respect to the
indemnification of the holders of Registrable Securities; provided, however, the
Company shall not be required to indemnify any such underwriter, or any officer
or director of such underwriter or any person who controls such underwriter
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act, to the extent that the loss, claim, damage, liability (or
proceedings in respect thereof) or expense for which indemnification is sought
results from (i) such underwriter's failure to deliver or otherwise provide a
copy of the final prospectus to the person asserting an untrue statement or
omission or alleged untrue statement or omission at or prior to the written
confirmation of the sale of securities to such person, if such statement or
omission was in fact corrected in such final prospectus or (ii) an untrue
statement or omission or alleged untrue statement or omission relating to
information furnished in writing by such underwriter expressly for inclusion in
any Security Filing.
(iii) Each Participating Holder shall furnish to the Company in
writing such information regarding such holder and the intended method of
distribution as shall be reasonably requested by the Company and as required by
law or the Commission for use in any Security Filing (and the Company may
exclude from registration the Registrable Securities of any such Participating
Holder if such holder fails to furnish such information within a reasonable time
after receiving such request) and hereby severally indemnifies, to the fullest
extent permitted by law, the Company, its officers and directors and each
person, if any, who controls the Company within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, against any Claims resulting
from any untrue statement or alleged untrue statement of a material fact or any
omission or alleged omission of a material fact required to be stated or
necessary to make the statements in the registration statement or prospectus, or
any amendment thereof or supplement thereto (in the case of any prospectus or
supplement thereto, in light of the circumstances under which they were made)
not misleading; provided, however, (A) each such Participating Holder shall be
liable hereunder if and only to the extent that any such Claim arises out of or
is based upon any such untrue statement or omission made in reliance upon and in
conformity with information pertaining to such holder that is furnished in
writing to the Company by such holder expressly for use in any such Security
Filing and (B) no such Participating Holder shall be liable hereunder in an
amount exceeding the net proceeds to be received by such Participating Holder
(before deducting expenses) from the sale of Registrable Securities hereunder.
(iv) In the case of an underwritten offering of Registrable
Securities, each Participating Holder, as a condition to its right to
participate in such offering, shall enter into an underwriting agreement in
customary form and substance with such underwriters, and agree to indemnify such
underwriters, their officers and directors, if any, and each person, if any, who
controls such underwriters within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act, to the same extent and subject to the
same limitations as provided in the preceding paragraph with respect to
indemnification by such holder to the Company, but subject to the same
limitation as provided in Section 2(e)(ii) with respect to indemnification by
the Company of such underwriters, officers, directors and control persons;
provided, however, that no such Participating Holder shall be liable hereunder
in an amount exceeding the net proceeds to be received by such Participating
Holder (before deducting expenses) from the sale of Registrable Securities
hereunder.
(v) Any person seeking indemnification under the provisions of this
Section 2(e) shall, promptly after receipt by such person of notice of the
commencement of any action, suit, claim or proceeding, notify each party against
whom indemnification is to be sought in writing of the commencement thereof;
provided, however, the failure so to notify an indemnifying party shall not
relieve the indemnifying party from any liability which it may have under this
Section 2(e) (except to the extent that it has been materially prejudiced by
such failure) or from any liability which the indemnifying party may otherwise
have. In case any such action, suit, claim or proceeding is brought against any
indemnified party, and it notifies an indemnifying
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<PAGE> 238
party of the commencement thereof, the indemnifying party shall be entitled to
participate therein and, to the extent it may elect by written notice delivered
to the indemnified party promptly after receiving the aforesaid notice from such
indemnified party, to assume the defense thereof with counsel reasonably
satisfactory to such indemnified party. Notwithstanding the foregoing, the
indemnified party shall have the right to employ its own counsel in any such
case, but the fees and expenses of such counsel shall be at the expense of such
indemnified party unless (A) the employment of such counsel shall have been
authorized in writing by the indemnifying party in connection with the defense
of such suit, action, claim or proceeding, (B) the indemnifying party shall not
have employed counsel (reasonably satisfactory to the indemnified party) to take
charge of the defense of such action, suit, claim or proceeding within a
reasonable time after notice of commencement of the action, suit, claim or
proceeding, or (C) such indemnified party shall have reasonably concluded that
there may be defenses available to it which are different from or additional to
those available to the indemnifying party which, if the indemnifying party and
the indemnified party were to be represented by the same counsel, could result
in a conflict of interest for such counsel or materially prejudice the
prosecution of the defenses available to such indemnified party. If any of the
events specified in clauses (B) or (C) of the preceding sentence shall have
occurred or shall otherwise be applicable, then the reasonable fees,
disbursements and related charges of one counsel or firm of counsel selected by
a majority in interest of the indemnified parties shall be borne by the
indemnifying party. The indemnifying party shall have the right to direct the
defense of such action, suit, claim or proceeding on behalf of the indemnified
party whether or not the indemnified party employs separate counsel, unless the
indemnifying party has failed to perform his or its indemnification obligations
hereunder. Anything in this paragraph to the contrary notwithstanding, an
indemnifying party shall not be liable for the settlement of any action, suit,
claim or proceeding effected without its prior written consent (which consent in
the case of an action, suit, claim or proceeding exclusively seeking monetary
relief shall not be unreasonably withheld or delayed). Such indemnification
shall remain in full force and effect irrespective of any investigation made by
or on behalf of an indemnified party.
(vi) If the indemnification from the indemnifying party as provided
in this Section 2(e) is unavailable or is otherwise insufficient to hold
harmless an indemnified party in respect of any losses, claims, damages,
liabilities or expenses referred to therein, then the indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities or expenses in such proportion as
is appropriate to reflect the relative benefits received by and the relative
fault of the indemnifying party and indemnified parties in connection with the
actions which resulted in such losses, claims, damages, liabilities or expenses.
The relative fault of such indemnifying party shall be determined by reference
to, among other things, whether any action in question, including any untrue (or
alleged untrue) statement of a material fact or omission (or alleged omission)
to state a material fact, has been made, or relates to information supplied by
such indemnifying party or such indemnified party, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such action. The amount paid or payable by a party as a result of the losses,
claims, damages, liabilities and expenses referred to above shall be deemed to
include, subject to the limitations set forth in Section 2(e)(v) hereof, any
legal or other fees or expenses reasonably incurred by such party in connection
with any such investigation or proceeding. Notwithstanding the foregoing, no
Participating Holder shall be liable hereunder in an amount exceeding the net
proceeds to be received by such Participating Holder (before deducting expenses)
from the sale of Registrable Securities hereunder.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 2(c) were determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations described above. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
If, however, indemnification is available under this Section 2(e),
the indemnifying parties shall indemnify each indemnified party to the fullest
extent provided in Sections 2(e)(i) through 2(e)(v) hereof without regard to the
relative fault of said indemnifying party or indemnified party or any other
equitable consideration.
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<PAGE> 239
(f) Certain Requirements in Connection with Registration Rights. If the
holders of Registrable Securities initially requesting such Demand Registration
have entered into one or more underwriting agreements in connection therewith,
or if a proposed registration under Section 2(b) involves an underwritten
offering, all shares constituting Registrable Securities to be included in such
registration shall be subject to such underwriting agreements and no person may
participate in such registration unless such person agrees to sell his or its
securities on the basis provided in the underwriting arrangements and completes
all questionnaires, powers of attorney, indemnities, underwriting agreements,
"lock up" letters and other documents which are reasonable and customary under
the circumstances.
3. RULE 144(C).
The Company shall file the reports required to be filed by it under the
Securities Act and the Exchange Act and the rules and the regulations of the
Commission thereunder so as to make available current public information to the
extent required to enable any Qualified Holder to sell Registrable Securities
without registration under the Securities Act pursuant to Rule 144 (or any
similar rule or regulation); provided, however, that the Company's compliance
with the requirements of this Section 3 and the availability of Rule 144 for the
sale of any Qualified Holders securities shall not limit a Shareholder's rights
to request registration under this Agreement so long as such person's securities
constitute Registrable Securities within the meaning thereof under this
Agreement.
4. NOTICES.
Except as otherwise provided below, whenever it is provided in this
Agreement that any notice, demand, request, consent, approval, declaration or
other communication shall or may be given to or served upon any of the parties
hereto, or whenever any of the parties hereto, desires to provide to or serve
upon any person any other communication with respect to this Agreement, each
such notice, demand, request, consent, approval, declaration or other
communication shall be in writing and either shall be delivered in person with
receipt acknowledged or sent by registered or certified mail (return receipt
requested, postage prepaid), or by overnight mail, courier, or delivery service
or by telecopy and confirmed by telecopy addressed as follows:
(a) If to the Company, to:
TELEGLOBE INC.
1000, rue de La Gauchetiere ouest
Montreal, Quebec H3B 4X5
Telephone: 514-868-8124
Facsimile: 514-868-7438
Attention: Vice President, Legal Affairs and
Corporate Secretary
With a copy to
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Telephone: 212-455-2000
Facsimile: 212-455-2502
Attention: Philip T. Ruegger III, Esq.
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<PAGE> 240
(b) If to the Shareholders to:
Their respective addresses set forth in the stock records of the
Company prepared pursuant to the Merger for purposes of the exchange
of the Excel Common Stock into the Company Common Shares, as changed
from time to time pursuant to procedures established by the Company
or the transfer agent of the Company, as the case may be
With a copy to
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Telephone: (212) 310-8000
Facsimile: (212) 310-8007
Attention: Frederick S. Green, Esq.
or at such other address as may be substituted by notice delivered as provided
herein. The furnishing of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration or other communication hereunder shall be deemed
to have been duly furnished or served on (i) the date on which personally
delivered, with receipt acknowledged, (ii) the date on which telecopied and
confirmed by telecopy answerback, (iii) the next business day if delivered by
overnight or express mail, courier or delivery service, or (iv) three business
days after the same shall have been deposited in the United States mail, as the
case may be. Failure or delay in delivering copies of any notice, demand,
request, consent, approval, declaration or other communication to the persons
designated above to receive copies shall in no way adversely affect the
effectiveness of such notice, demand, request, consent, approval, declaration or
other communication.
5. ENTIRE AGREEMENT.
This Agreement represents the entire agreement and understanding among the
parties hereto with respect to the subject matter hereof and supersedes any and
all prior oral and written agreements, arrangements and understandings among the
parties hereto with respect to such subject matter; and can be amended,
supplemented or changed, and any provision hereof can be waived, only by a
written instrument making specific reference to this Agreement signed by the
Company on the one hand, and the holders of a majority of the Registrable
Securities on the other hand.
6. ASSIGNS AND SUCCESSORS.
This Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective assigns and successors.
7. PARAGRAPH HEADINGS.
The paragraph headings contained in this Agreement are for general
reference purposes only and shall not affect in any manner the meaning,
interpretation or construction of the terms or other provisions of this
Agreement.
8. APPLICABLE LAW.
This Agreement shall be governed by, construed and enforced in accordance
with the laws of the State of New York, applicable to contracts to be made,
executed, delivered and performed wholly within such state and, in any case,
without regard to the conflicts of law principles and policies of such state.
9. SEVERABILITY.
If at any time subsequent to the date hereof, any provision of this
Agreement shall be held by any court of competent jurisdiction to be illegal,
void or unenforceable, such provision shall be of no force and effect, but the
illegality or unenforceability of such provision shall have no effect upon and
shall not impair the enforceability of any other provision of this Agreement.
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<PAGE> 241
10. NO WAIVER.
The failure of any party at any time or times to require performance of any
provision hereof shall not affect the right at a later time to enforce the same.
No waiver by any party of any condition, and no breach of any provision, term,
covenant, representation or warranty contained in this Agreement, whether by
conduct or otherwise, in any one or more instances, shall be deemed to be
construed as a further or continuing waiver of any such condition or of the
breach of any other provision, term, covenant, representation or warranty of
this Agreement.
11. COUNTERPARTS.
This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute but one
and the same original instrument.
12. NO INCONSISTENT RIGHTS.
The Company will not hereafter enter into any agreement with respect to its
securities which is inconsistent in any material respect with the rights granted
to the holders of Registrable Securities in this Agreement. The Company is not a
party to any agreement, with respect to any of its securities, granting any
registration rights to any person, which agreement is inconsistent with the
rights granted to the holders of Registrable Securities in this Agreement and is
in effect on the date hereof.
13. LIMIT ON INDIVIDUAL SHAREHOLDERS.
Notwithstanding anything to the contrary contained in this Agreement, the
rights granted to each Shareholder under Section 2(a) hereof shall terminate and
cease to apply to such Shareholder at such time as such Shareholder has received
an aggregate of U.S. $750,000,000 in proceeds from the sale of Registrable
Securities pursuant to this Agreement.
14. EXECUTION BY SHAREHOLDERS.
The obligations of the Company under this Agreement shall be irrevocable
but the rights of any Shareholder under this Agreement with respect thereto
shall be and become effective only upon the delivery to the Company by any
Qualified Holder requesting registration under this Agreement of a duly executed
counterpart signature page to this Agreement.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
and delivered by its officers thereunto duly authorized as of the date first
above written.
TELEGLOBE INC.
By:
----------------------------------
Name:
Title:
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<PAGE> 242
1693-IS98
<PAGE> 243
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Under the Canada Business Corporation Act, the Registrant may indemnify a
present or former director or officer or a person who acts or acted at the
Registrant's request as a director or officer of another corporation of which
the Registrant is or was a stockholder or creditor, and his heirs and legal
representatives, against all costs, charges and expenses, including an amount
paid to settle an action or satisfy a judgment, reasonably incurred by him in
respect of any civil, criminal or administrative action or proceeding to which
he is made a party by reason of his position with the Registrant or such other
corporation and provided that the director or officer acted honestly and in good
faith with a view to the best interests of the Registrant and, in the case of a
criminal or administrative action or proceeding that is enforced by a monetary
penalty, had reasonable grounds for believing that his conduct was lawful. Such
indemnification may be made in connection with a derivative action only with
court approval. A director or officer is entitled to indemnification from the
Registrant as a matter of right if he was substantially successful on the merits
and fulfilled the conditions set forth above.
In accordance with the Canada Business Corporation Act, the by-laws of the
Registrant provide that the Registrant shall indemnify a director or officer, a
former director or officer, or a person who acts or acted at the Registrant's
request as a director or officer of a body corporate of which the Registrant is
or was a shareholder or creditor (or a person who undertakes or has undertaken
any liability on behalf of the Registrant or any such body corporate) and the
heirs, executors, administrators and legal representatives of such person, from
and against all costs, charges and expenses whatsoever, including all amounts
paid to settle an action or satisfy a judgment sustained or reasonably incurred
by him in respect of any civil, criminal or administrative action or proceeding
to which he is made a party by reason of being or having been director or
officer of the Registrant or such body corporate if he acted honestly and in
good faith with a view to the best interest of the Registrant and in the case of
a criminal or administrative action or proceeding that is enforce by a monetary
penalty, he had reasonable grounds for believing that his conduct was lawful.
A policy of directors, and officers' liability insurance is maintained by
the Registrant which insures directors and officers of the Registrant and its
subsidiaries for losses as a result of claims based upon the acts or omissions
as directors and officers of the Registrant, including liabilities arising under
the Securities Act of 1933, and also reimburses the Registrant for payments made
pursuant to the indemnity provisions under the Canada Business Corporation Act.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers or persons controlling the
Registrant pursuant to the foregoing provisions, the Registrant has been
informed that in the opinion to the United States Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is therefore unenforceable.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following exhibits are filed herewith or incorporated herein by
reference:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
2.1 -- Agreement and Plan of Merger, dated as of June 14, 1998,
among Teleglobe Inc., North Merger Sub Corporation and
EXCEL Communications, Inc. (filed as Appendix A to the
Information Statement/Prospectus which forms a part of
this Registration Statement).
2.2 -- EXCEL Consent and Voting Agreement, dated as of June 14,
1998, by and among Teleglobe Inc. and the other
signatories thereto (filed as Appendix D to the
Information Statement/Prospectus which forms a part of
this Registration Statement).
</TABLE>
II-1
<PAGE> 244
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
2.3 -- TELEGLOBE Consent and Voting Agreement, dated as of June
14, 1998, by and among EXCEL Communications, Inc. and
Funds Nos. 650 and 724, by its manager, Mackenzie
Financial Corporation (filed as Appendix E to the
Information Statement/Prospectus which forms a part of
this Registration Statement).
2.4 -- TELEGLOBE Consent and Voting Agreement, dated as of June
14, 1998, by and among EXCEL Communications, Inc. and
Capital Communications CDPQ Inc. (filed as Appendix F to
the Information Statement/Prospectus which forms a part
of this Registration Statement).
2.5 -- TELEGLOBE Consent and Voting Agreement, dated as of June
14, 1998, by and among EXCEL Communications, Inc. and BCE
Inc. (filed as Appendix G to the Information
Statement/Prospectus which forms a part of this
Registration Statement).
2.6 -- TELEGLOBE Consent and Voting Agreement, dated as of June
14, 1998, by and among EXCEL Communications, Inc. and
Telesystem Telecom Ltd. (filed as Appendix H to the
Information Statement/Prospectus which forms a part of
this Registration Statement).
2.7 -- EXCEL Stock Option Agreement, dated as of June 14, 1998,
between Teleglobe Inc. and EXCEL Communications, Inc.
(filed as Appendix I to the Information
Statement/Prospectus which forms a part of this
Registration Statement).
2.8 -- TELEGLOBE Stock Option Agreement, dated as of June 14,
1998, between EXCEL Communications, Inc. and Teleglobe
Inc. (filed as Appendix J to the Information
Statement/Prospectus which forms a part of this
Registration Statement).
3.1 -- Teleglobe Inc. Restated Articles of Incorporation, as
amended.*
5.1 -- Opinion of Martineau Walker as to legality of TELEGLOBE
Common Shares.*
23.1 -- Consent of Raymond Chabot Grant Thornton.
23.2 -- Consent of Arthur Andersen LLP.
23.3 -- Consent of Martineau Walker (included in Exhibit 5.1).*
23.4 -- Consent of Weil, Gotshal & Manges LLP.
23.5 -- Consent of Goodman, Phillips & Vineberg.
23.6 -- Consent of Lehman Brothers.*
24.1 -- Powers of Attorney executed by the TELEGLOBE Directors.**
99.1 -- Opinion of Lehman Brothers (filed as Appendix B to the
Information Statement/Prospectus which forms a part of
this Registration Statement).
99.2 -- By-Laws of North Merger Sub Corporation.*
99.3 -- Form of Registration Rights Agreement among Teleglobe
Inc. and the signatories thereto (filed as Appendix K to
the Information Statement/ Prospectus which forms a part
of this Registration Statement).
</TABLE>
- ---------------
* Previously filed.
** C. Sirois, J. B. Aune, B. Ducharme; others previously filed.
II-2
<PAGE> 245
ITEM 22. UNDERTAKINGS.
1. The undersigned Registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price 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;
(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;
(b) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(c) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(d) To file a post-effective amendment to the registration statement
to include any financial statements required by Rule 3-19 of Regulation S-X
at the start of any delayed offering or throughout a continuous offering.
2. 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 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(a) 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.
(b) The registrant 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 if effective, and that, for purposes of
determining any liability under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
II-3
<PAGE> 246
3. 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 United States 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.
4. The undersigned registrant hereby undertakes: (i) to respond to requests
for information that is incorporated by reference into the information
statement/prospectus pursuant to Items 4, 10(b), 11 or 13 of this Form, within
one business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means, and (ii) to arrange
or provide for a facility in the United States for the purpose of responding to
such requests. The undertakings in clause (i) hereinabove include information
contained in documents filed subsequent to the effective date of the
registration statement through the date of responding to the request.
5. The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning the transaction and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-4
<PAGE> 247
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Montreal, Quebec, on October 9, 1998.
TELEGLOBE INC.
By: /s/ Andre Bourbonnais
----------------------------------
Name: Andre Bourbonnais
Title: Vice President,
Legal Affairs and
Corporate Secretary
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY
--------- --------
<C> <S>
Principal Executive Officer:
Charles Sirois* Chairman and Chief Executive Officer
Principal Financial Officer:
/s/ Claude Seguin Executive Vice-President and Chief Financial
- ----------------------------------------------------- Officer
Claude Seguin
Principal Accounting Officer:
/s/ Francois Laurin Vice-President, Finance and Corporate
- ----------------------------------------------------- Controller
Francois Laurin
</TABLE>
II-5
<PAGE> 248
Directors:
J. Brian Aune*
Derek H. Burney*
J.V. Raymond Cyr*
Bruno Ducharme*
George A. Fierheller*
Pierre MacDonald*
C. Edward Medland*
Jean C. Monty*
Carmand Normand*
Charles Sirois*
H. Arnold Steinberg*
Peter G. White*
Lynton R. Wilson*
*By: /s/ Andre Bourbonnais
-----------------------------------
Name: Andre Bourbonnais
(Attorney-in-Fact)
October 9, 1998
II-6
<PAGE> 249
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
2.1 -- Agreement and Plan of Merger, dated as of June 14, 1998,
among Teleglobe Inc., North Merger Sub Corporation and
EXCEL Communications, Inc. (filed as Appendix A to the
Information Statement/Prospectus which forms a part of
this Registration Statement).
2.2 -- EXCEL Consent and Voting Agreement, dated as of June 14,
1998, by and among Teleglobe Inc. and the other
signatories thereto (filed as Appendix D to the
Information Statement/Prospectus which forms a part of
this Registration Statement).
2.3 -- TELEGLOBE Consent and Voting Agreement, dated as of June
14, 1998, by and among EXCEL Communications, Inc. and
Funds Nos. 650 and 724, by its manager, Mackenzie
Financial Corporation (filed as Appendix E to the
Information Statement/Prospectus which forms a part of
this Registration Statement).
2.4 -- TELEGLOBE Consent and Voting Agreement, dated as of June
14, 1998, by and among EXCEL Communications, Inc. and
Capital Communications CDPQ Inc. (filed as Appendix F to
the Information Statement/Prospectus which forms a part
of this Registration Statement).
2.5 -- TELEGLOBE Consent and Voting Agreement, dated as of June
14, 1998, by and among EXCEL Communications, Inc. and BCE
Inc. (filed as Appendix G to the Information
Statement/Prospectus which forms a part of this
Registration Statement).
2.6 -- TELEGLOBE Consent and Voting Agreement, dated as of June
14, 1998, by and among EXCEL Communications, Inc. and
Telesystem Telecom Ltd. (filed as Appendix H to the
Information Statement/Prospectus which forms a part of
this Registration Statement).
2.7 -- EXCEL Stock Option Agreement, dated as of June 14, 1998,
between Teleglobe Inc. and EXCEL Communications, Inc.
(filed as Appendix I to the Information
Statement/Prospectus which forms a part of this
Registration Statement).
2.8 -- TELEGLOBE Stock Option Agreement, dated as of June 14,
1998, between EXCEL Communications, Inc. and Teleglobe
Inc. (filed as Appendix J to the Information
Statement/Prospectus which forms a part of this
Registration Statement).
3.1 -- Teleglobe Inc. Restated Articles of Incorporation, as
amended.*
5.1 -- Opinion of Martineau Walker as to legality of TELEGLOBE
Common Shares.*
23.1 -- Consent of Raymond Chabot Grant Thornton.
23.2 -- Consent of Arthur Andersen LLP.
23.3 -- Consent of Martineau Walker (included in Exhibit 5.1).*
23.4 -- Consent of Weil, Gotshal & Manges LLP.
23.5 -- Consent of Goodman, Phillips & Vineberg.
23.6 -- Consent of Lehman Brothers.*
24.1 -- Powers of Attorney executed by the TELEGLOBE Directors.**
99.1 -- Opinion of Lehman Brothers (filed as Appendix B to the
Information Statement/Prospectus which forms a part of
this Registration Statement).
99.2 -- By-Laws of North Merger Sub Corporation.*
99.3 -- Form of Registration Rights Agreement among Teleglobe
Inc. and the signatories thereto (filed as Appendix K to
the Information Statement/ Prospectus which forms a part
of this Registration Statement).
</TABLE>
- ---------------
* Previously filed.
** C. Sirois, J. B. Aune, B. Ducharme; others previously filed.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement
of Teleglobe Inc. on Form F-4 of our report dated February 8, 1998, on our
audits of the consolidated financial statements and financial statement schedule
of TELEGLOBE as of December 31, 1997 and 1996 and for the years ended December
31, 1997, 1996 and 1995, which report is incorporated by reference herein from
TELEGLOBE's Annual Report on Form 40-F for the year ended December 31, 1997. We
also consent to the references to our firm under the caption "Experts" contained
in such registration statement.
/s/ RAYMOND CHABOT GRANT THORNTON
Montreal, Quebec
October 9, 1998
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement
of Teleglobe Inc. on Form F-4 of our report dated January 26, 1998, on our
audits of the consolidated financial statements and financial statement schedule
of EXCEL Communications, Inc. ("EXCEL"), as of December 31, 1997 and 1996 and
for the years ended December 31, 1997, 1996, and 1995, which report is
incorporated by reference herein from EXCEL's Annual Report on Form 10-K for the
year ended December 31, 1997. We also consent to the references to our firm
under the caption "Experts" contained in such registration statement.
/s/ ARTHUR ANDERSEN LLP
Dallas, Texas
October 9, 1998
<PAGE> 1
EXHIBIT 23.4
CONSENT OF LEGAL COUNSEL
We hereby consent to the use of our name in the registration statement of
Teleglobe Inc. on Form F-4 under the captions "The Merger -- United States
Federal Income Tax Consequences," "Legal Opinions" and elsewhere in the
registration statement.
/s/ WEIL, GOTSHAL & MANGES LLP
New York, New York
October 9, 1998
<PAGE> 1
EXHIBIT 23.5
CONSENT OF LEGAL COUNSEL
We hereby consent to the use of our name in the registration statement of
Teleglobe Inc. on Form F-4 under the captions "The Merger -- United States
Federal Income Tax Consequences," "Legal Opinions" and elsewhere in the
registration statement.
/s/ GOODMAN, PHILLIPS & VINEBERG
New York, New York
October 9, 1998
<PAGE> 1
EXHIBIT 24.1
TELEGLOBE INC.
POWER OF ATTORNEY
We, the undersigned directors and officers of Teleglobe Inc. (the
"Company"), do hereby constitute and appoint Andre Bourbonnais and Francois
Laurin, or either of them, our true and lawful attorneys and agents, to do any
and all acts and all things and to execute any and all instruments which said
attorneys and agents, or either of them, may deem necessary or desirable to
enable the Company to comply with the Securities Act of 1933, as amended (the
"Act"), and any rules, regulations and requirements of the Securities and
Exchange Commission thereunder in connection with the registration under the Act
of shares of common stock of the Company ("Common Stock"), including, without
limitation, the power and authority to sign the name of each of the undersigned
in the capacities indicated below to Registration Statements on Form F-4 and
Form S-8 (or any other form) relating to the sale of such Common Stock, to be
filed with the Securities and Exchange Commission with respect to such Common
Stock, to any and all amendments or supplements to such Registration Statements,
whether such amendments or supplements are filed before or after the effective
date of such Registration Statements, and to any and all instruments or
documents filed as part of or in connection with such Registration Statements or
any and all amendments or supplements thereto; and each of the undersigned
hereby ratifies and confirms all that said attorneys and agents, or either of
them, shall do or cause to be done by virtue hereof.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<C> <S> <C>
/s/ CHARLES SIROIS Chairman and Chief Executive September 3, 1998
- ----------------------------------------------------- Officer
Charles Sirois
/s/ CLAUDE SEGUIN Executive Vice President, September 2, 1998
- ----------------------------------------------------- Finance and Chief Financial
Claude Seguin Officer
/s/ FRANCOIS LAURIN Vice President, Finance and September 3, 1998
- ----------------------------------------------------- Controller
Francois Laurin
/s/ J. BRIAN AUNE Director September 4, 1998
- -----------------------------------------------------
J. Brian Aune
/s/ DEREK H. BURNEY Director September 1, 1998
- -----------------------------------------------------
Derek H. Burney
/s/ J.V. RAYMOND CYR Director September 1, 1998
- -----------------------------------------------------
J.V. Raymond Cyr
/s/ BRUNO DUCHARME Director September 4, 1998
- -----------------------------------------------------
Bruno Ducharme
/s/ GEORGE A. FIERHELLER Director September 1, 1998
- -----------------------------------------------------
George A. Fierheller
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<C> <S> <C>
/s/ PIERRE MACDONALD Director September 2, 1998
- -----------------------------------------------------
Pierre MacDonald
/s/ C. EDWARD MEDLAND Director September 1, 1998
- -----------------------------------------------------
C. Edward Medland
/s/ JEAN C. MONTY Director September 2, 1998
- -----------------------------------------------------
Jean C. Monty
/s/ CARMAND NORMAND Director September 1, 1998
- -----------------------------------------------------
Carmand Normand
/s/ H. ARNOLD STEINBERG Director September 1, 1998
- -----------------------------------------------------
H. Arnold Steinberg
/s/ PETER G. WHITE Director September 1, 1998
- -----------------------------------------------------
Peter G. White
/s/ LYNTON R. WILSON Director September 2, 1998
- -----------------------------------------------------
Lynton R. Wilson
</TABLE>
