As filed with the Securites and Exchange Commission on September 4, 1998
Registration No. 333-___________________
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM F-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
TELEGLOBE INC.
(Exact name of registrant as specified in its charter)
CANADA 4813 98-0115049
(State or other
jurisdiction (Primary Standard (I.R.S. Employer
of incorporation or Industrial Classification Identification No.)
organization) Code Number)
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)
---------------------------------
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)
-----------------------------
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) 455-2502 (212) 310-8524
------------------------
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 (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.
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
============================================ ================= ======================== ========================== =================
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TO BE REGISTERED REGISTERED(1) OFFERING PRICE PER AGGREGATE OFFERING PRICE REGISTRATION
UNIT(2) FEE(3)
============================================ ================= ======================== ========================== =================
<S> <C> <C> <C> <C>
Common Shares 123,742,124 $20.125 $2,813,909,881.00 $830,130.00
============================================ ================= ======================== ========================== =================
</TABLE>
(1) Determined on the basis of the exchange ratio for the Merger (.885
of a common share of capital stock, without par value, of Teleglobe
Inc. for each outstanding share of common stock, par value $0.001
per share, of EXCEL Communications, Inc. ("EXCEL Common Stock") and
the maximum number of shares of EXCEL Common Stock (139,821,609) to
be exchanged, assuming that all stock options or other rights to
receive shares of EXCEL Common Stock that are or prior to the
effective time of the Merger will be exercisable, will be exercised
prior thereto.
(2) Estimated, pursuant to Rule 457(c) of the Securities Act of 1933, as
amended (the "Act"), on the basis of the market value of the EXCEL
Common Stock to be exchanged in the Merger ($20.125 per share, which
is the average of the reported high and low sales prices of the
EXCEL Common Stock on The New York Stock Exchange, Inc. Composite
Transaction Tape on September 1, 1998).
(3) The registration fee was calculated, pursuant to Section 6(b) of the
Act and Rule 457(f)(1) thereunder, as follows: at a rate of $295 per
$1,000,000 of the proposed maximum aggregate price (139,821,609
shares of EXCEL Common Stock multiplied by $20.125 per share). In
accordance with Rule 457(b) under the Act, the total registration
fee of $830,130.00 has been reduced by $600,979.54, which was paid
on July 17, 1998 upon the filing of related preliminary information
statement materials of EXCEL pursuant to the Securities Exchange Act
of 1934, as amended. The registration fee payable upon the filing of
the Registration Statement is $229,150.46.
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.
================================================================================
<PAGE>
PRELIMINARY INFORMATION STATEMENT/PROSPECTUS
DATED SEPTEMBER 4, 1998
SUBJECT TO CHANGE
EXCEL COMMUNICATIONS, INC. TELEGLOBE INC.
September ___, 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 more than 275 carriers.
On June 14, 1998, holders of a majority of the outstanding shares of
EXCEL common stock executed written consents approving a Merger Agreement dated
the same date, providing for the merger of EXCEL with a subsidiary of TELEGLOBE,
with EXCEL surviving the merger as a wholly owned subsidiary of TELEGLOBE.
ACCORDINGLY, NO FURTHER VOTE OF THE EXCEL STOCKHOLDERS IS REQUIRED TO APPROVE
THE MERGER OR THE MERGER AGREEMENT. Under the Merger Agreement, 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 early in the fourth quarter of 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 companies.
Very truly yours,
Kenny A. Troutt Charles Sirois
Chairman and Chief Executive Officer Chairman and Chief Executive Officer
EXCEL Communications, Inc. Teleglobe Inc.
<PAGE>
PRELIMINARY INFORMATION STATEMENT/PROSPECTUS
DATED SEPTEMBER 4, 1998
EXCEL COMMUNICATIONS, INC.
INFORMATION STATEMENT
----------------
TELEGLOBE INC.
PROSPECTUS
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 a number of conditions,
including receiving various regulatory approvals. We cannot predict with
certainty when we will complete the merger, but we hope to complete it early in
the fourth quarter of 1998. SEE "RISK FACTORS" BEGINNING ON PAGE 17 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 September __, 1998, and was
first mailed to stockholders of EXCEL on or about September __, 1998.
<PAGE>
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
August 28, 1998, the total value of the common shares that TELEGLOBE will issue
in the Merger will be about $3.1 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. 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.
ii
<PAGE>
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.$0.054 per common share based on the CDN$/US$ exchange rate
as of August 28, 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. It is expected that 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. It is expected that 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 69, "Financial Statement Presentation and Exchange Rate
Information" on page 14 and "The Merger--Accounting Treatment" on page 52 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.
Q. WHEN DO YOU EXPECT TO COMPLETE THE MERGER?
A. We must still obtain certain regulatory approvals before we can complete the
Merger, but we hope to complete the Merger early in the fourth quarter of this
year. However, delays in obtaining regulatory approvals 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 91 of this Information Statement/Prospectus.
iii
<PAGE>
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 17.
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.
iv
<PAGE>
TABLE OF CONTENTS
PAGE
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QUESTIONS AND ANSWERS ABOUT THE MERGER..................................... ii
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS................. iv
ENFORCEMENT OF CERTAIN CIVIL LIABILITIES................................... iv
SUMMARY.................................................................... 1
FINANCIAL STATEMENT PRESENTATION AND EXCHANGE RATE INFORMATION............. 14
THE COMPANIES.............................................................. 15
EXCEL ............................................................... 15
TELEGLOBE............................................................ 15
North Merger Sub Corporation......................................... 16
RISK FACTORS............................................................... 17
Fixed Exchange Ratio................................................. 17
Risk of Nonrealization of Synergies and Other Benefits............... 17
End of Canadian Exclusive Mandate.................................... 17
International Licensing and Regulatory Risks......................... 18
U.S. Regulatory Change............................................... 18
Competition.......................................................... 18
Dependence on Third-Party Carriers................................... 19
Tax Risks Associated with Foreign Operations......................... 19
Rapid Expansion and Growth........................................... 19
Dependence on Key Personnel.......................................... 20
Shares Eligible for Future Sale...................................... 20
Influence by Certain Shareholders.................................... 20
Enforceability of Civil Liabilities.................................. 21
Certain Stockholder Litigation....................................... 21
Regulation and Management of EXCEL's Independent Representatives..... 21
Interests of Management.............................................. 22
THE MERGER................................................................. 23
Background........................................................... 23
EXCEL's and TELEGLOBE's Reasons for the Merger....................... 27
Factors Considered by the EXCEL Board................................ 27
Opinion of the Financial Advisor to the EXCEL Board.................. 30
Terms of the Merger.................................................. 37
Exchange of Certificates in the Merger............................... 38
Listing of the TELEGLOBE Common Shares............................... 38
Representations and Warranties....................................... 39
Businesses of EXCEL and TELEGLOBE Pending the Merger................. 39
Transition Arrangements.............................................. 40
Other Covenants...................................................... 40
No Solicitation...................................................... 41
Conditions; Waivers.................................................. 41
Amendment; Termination............................................... 43
Termination Fees; Expenses........................................... 44
United States Federal Income Tax Consequences........................ 45
Canadian Federal Income Tax Consequences............................. 48
Regulatory Approvals................................................. 49
v
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PAGE
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Canadian Foreign Ownership Considerations............................ 51
Resale of TELEGLOBE Common Shares Issued in the Merger; Affiliates... 51
Stock Exchanges...................................................... 52
Delisting and Deregistration of EXCEL Common Stock; Cessation of
EXCEL Periodic Reporting......................................... 52
Accounting Treatment................................................. 52
Interests of Certain Persons in the Merger........................... 53
EXCEL Directors Who Will Become TELEGLOBE Directors After the Merger. 56
EXCEL Directors After the Merger..................................... 56
Certain Stockholder Litigation....................................... 57
No Appraisal Rights.................................................. 57
OTHER AGREEMENTS........................................................... 58
Voting Agreements.................................................... 58
Stock Option Agreements.............................................. 59
Registration Rights Agreement........................................ 61
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS................ 63
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS....... 69
DIVIDENDS AND MARKET PRICES................................................ 70
EXCEL ............................................................... 70
TELEGLOBE............................................................ 72
SECURITY OWNERSHIP......................................................... 73
DIRECTORS AND MANAGEMENT OF TELEGLOBE FOLLOWING THE MERGER................. 74
Statement of TELEGLOBE Corporate Governance Practices................ 74
TELEGLOBE Board After the Merger..................................... 74
Officers of TELEGLOBE After the Merger............................... 76
COMPARISON OF STOCKHOLDERS' RIGHTS AND DESCRIPTION OF TELEGLOBE COMMON
SHARES FOLLOWING THE MERGER............................................. 77
Classes and Series of Capital Stock.................................. 77
TELEGLOBE Common Shares and Non-Voting Shares........................ 77
TELEGLOBE Preferred Shares........................................... 77
Annual Meeting of Stockholders....................................... 79
Special Meetings of Stockholders..................................... 80
Quorum of Stockholders............................................... 80
Stockholder Action Without a Meeting................................. 80
Notice of Stockholder Proposals...................................... 80
Access to Corporate Records and Financial Statements................. 81
Charter Amendments................................................... 81
By-law Amendments.................................................... 81
Sale or Lease of Assets.............................................. 82
Preemptive Rights.................................................... 82
Dividends and Distributions.......................................... 82
Appraisal and Dissent Rights......................................... 83
Stock Repurchases.................................................... 83
Number and Qualification of Directors................................ 84
Filling Vacancies on the Board of Directors.......................... 85
vi
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PAGE
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Removal of Directors................................................. 86
Transactions with Directors.......................................... 86
Director and Officer Liability and Indemnification................... 87
Oppression Remedy.................................................... 88
Derivative Action.................................................... 88
Anti-Takeover Laws................................................... 89
Voluntary Dissolution................................................ 90
Vote on Extraordinary Corporate Transactions......................... 90
LEGAL OPINIONS............................................................. 91
EXPERTS.................................................................... 91
WHERE YOU CAN FIND MORE INFORMATION........................................ 91
INDEX OF DEFINED TERMS..................................................... 94
vii
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APPENDICES
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
viii
<PAGE>
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 94 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 August 28, 1998 (the most recent
practicable date) was CDN $1.00 = $0.6373. 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 over 250 carriers and over 100 Internet service providers in more than 140
countries.
EXCEL's Reasons For the Merger (see page 27)
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
1
<PAGE>
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 iv.
No Further Stockholder Approval Required; EXCEL Board Approval (see page 23)
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 30)
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 17)
We refer you to "Risk Factors" on page 17 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:
o the potential effect of market fluctuations on the value of the
TELEGLOBE Common Shares to be received in the Merger;
o 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;
o the termination on October 1, 1998 of TELEGLOBE's exclusive mandate
to provide Canadian-overseas facilities-based services;
o international licensing and regulatory risks; and
o (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.
2
<PAGE>
THE MERGER
The Merger Agreement (see page 37)
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 41)
The completion of the Merger depends upon meeting a number of conditions,
all of which are waivable, including, among others, the following:
o receipt of regulatory approvals and consents under applicable U.S.
and Canadian law;
o receipt of legal opinions about certain tax consequences of the
Merger;
o receipt of a ruling from the Internal Revenue Service (the "IRS")
concerning certain tax consequences of the Merger;
o 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"); and
o the absence of certain material adverse changes in EXCEL or
TELEGLOBE.
The Merger Agreement will terminate on June 14, 1999 if the conditions to
the Merger are not satisfied by such time (December 31, 1999 if the delay beyond
June 14, 1999 is caused solely by the regulatory approval process). 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 early in the fourth quarter of this year.
Regulatory Approvals (see page 49)
In order to complete the Merger, EXCEL and TELEGLOBE must receive
authorization from various U.S. and Canadian federal and state or provincial
governmental agencies. These authorizations relate primarily to:
o competition and securities law issues; and
o the approval of transfer of control with respect to licenses granted
by the Federal Communications Commission (the "FCC") and state
public utility commissions.
In addition, in order for the Merger to be consummated, TELEGLOBE must
obtain exemptive or other relief from certain foreign ownership restrictions
under Canadian law that would be exceeded as a result of the issuance of the
TELEGLOBE Common Shares in the Merger, or take other action in order to ensure
compliance with such restrictions. Legislation has been adopted by the
Parliament of Canada that would eliminate these restrictions, but such
legislation is not expected to become effective in full prior to October 1,
1998. See "The Merger--Canadian Foreign Ownership Considerations."
3
<PAGE>
United States Federal Income Tax Consequences (see page 45)
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 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 52)
We expect that TELEGLOBE will account for the Merger 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. We expect that
TELEGLOBE will account for the Merger as a "purchase" under Canadian generally
accepted accounting principles ("Canadian 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 43)
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 (December 31, 1999 if the delay beyond June 14, 1999
is caused solely by the regulatory approval process);
(iii) by TELEGLOBE or EXCEL if any law or court order permanently
prohibits the Merger or required regulatory approvals are not
obtained;
(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.
4
<PAGE>
Termination Fees and Expenses (see page 44)
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 59)
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 (vi) under "Termination" above.
Effects of the Merger on the Rights of EXCEL Stockholders (see page 77)
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 77.
Interests of Certain Officers, Directors and Stockholders in the Merger
(see page 53)
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 53 for more information concerning these persons and these
interests.
5
<PAGE>
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 has 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>
(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>
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."
<TABLE>
<CAPTION>
SIX MONTHS ENDED
CANADIAN GAAP: YEAR ENDED DECEMBER 31, JUNE 30,
--------------------------------------------------------------------- -------------------------------
1993 1994 1995 1996 1997 1997(1) 1997 1998 1998(1)
----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -------
(IN MILLIONS OF CDN$, EXCEPT PER SHARE AND CONVENIENCE TRANSLATION DATA)
<S> <C> <C> <C> <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 CDN$897.3 CDN$1,108.3 $753.1
Costs of revenues 888.3 863.0 831.4 956.7 1,269.7 862.8 571.0 697.8 474.2
----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -------
Gross margin... 431.7 501.8 566.9 606.0 718.2 488.0 326.3 410.5 278.9
Expenses:
Operating expenses 208.9 238.1 245.4 228.6 306.8 208.5 125.6 180.5 122.6
Depreciation and
amortization 103.9 129.3 164.3 163.4 129.6 88.1 80.2 72.1 49.0
----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -------
Total expenses. 312.8 367.4 409.7 392.0 436.4 296.6 205.8 252.6 171.6
----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -------
Income from operations
before unusual items 118.9 134.4 157.2 214.0 281.8 191.4 120.5 157.9 107.3
Unusual items.. -- (8.5) 3.6 -- (17.7) (12.0) -- -- --
----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -------
Income from operations 118.9 125.9 160.8 214.0 264.1 179.4 120.5 157.9 107.3
Financial charges (18.0) (14.3) (38.2) (34.4) (35.4) (24.1) (20.4) (13.5) (9.2)
----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -------
Income from continuing
operations before
income taxes.. 100.9 111.6 122.6 179.6 228.7 155.3 100.1 144.4 98.1
Provision for income taxes 42.8 42.8 56.5 72.0 110.3 74.9 43.6 60.0 40.8
----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -------
Income from continuing
operations.... 58.1 68.8 66.1 107.6 118.4 80.4 56.5 84.4 57.3
Income from discontinued
operations.... 11.0 15.8 23.3 4.9 22.1 15.0 3.7 -- --
----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -------
Net income..... 69.1 84.6 89.4 112.5 140.5 95.4 60.2 84.4 57.3
Preferred dividends -- 5.4 6.8 6.8 6.8 4.6 3.4 3.4 2.3
----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -------
Net income to common
shareholders. CDN$69.1 CDN$79.2 CDN$82.6 CDN$105.7 CDN$ 133.7 $ 90.8 CDN$56.8 CDN$81.0 $ 55.0
=========== =========== =========== =========== =========== =========== =========== =========== =======
Basic net income
per share(2).. CDN$0.62 CDN$0.68 CDN$0.71 CDN$0.90 CDN$ 1.06 $ 0.72 CDN$0.47 CDN$0.62 $ 0.42
Diluted net income
per common and
equivalent shares:(2)
Income from continuing
operations before
unusual items net
of related taxes CDN$ 0.51 CDN$0.55 CDN$0.47 CDN$0.80 CDN$0.99 $ 0.67 CDN$0.42 CDN$ 0.61 $ 0.41
Income from continuing
operations.. 0.51 0.52 0.50 0.80 0.85 0.58 0.42 0.61 0.41
Net income... 0.60 0.62 0.65 0.84 1.02 0.69 0.44 0.61 0.41
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 CDN$0.14 CDN$0.16 $ 0.11
8
</TABLE>
<PAGE>
(Continued)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
CANADIAN GAAP: YEAR ENDED DECEMBER 31, JUNE 30,
--------------------------------------------------------------------- -------------------------------
1993 1994 1995 1996 1997 1997(1) 1997 1998 1998(1)
----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -------
(IN MILLIONS OF CDN$, EXCEPT PER SHARE AND CONVENIENCE TRANSLATION DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Second series preferred 2.00 2.00 2.00 2.00 0.67 0.46 0.67 -- --
Third series preferred -- 1.08 1.35 1.35 1.35 0.92 0.675 0.675 0.459
</TABLE>
9
<PAGE>
(Continued)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
-----------------------------------------------------------------------------------------------
1993 1994 1995 1996 1997 1997 1998 1998(1)
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
(IN MILLIONS OF CDN$, EXCEPT MINUTE AND CONVENIENCE TRANSLATION DATA)
<S> <C> <C> <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 1,112.4 527.7 568.0
International
Inbound................ 503.4 543.8 603.4 671.3 736.5 350.4 366.8
Global................. 39.0 63.7 112.5 446.9 951.5 393.8 735.7
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total international..... 542.4 607.5 715.9 1,118.2 1,688 744.2 1,102.5
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total telephone traffic. 1,303.9 1,468.7 1,613.8 2,032.8 2,800.4 1,271.9 1,670.5
=========== =========== =========== =========== =========== =========== ===========
BALANCE SHEET DATA
(AT PERIOD END):
Working capital.......... CDN$(103.1) CDN$(57.5) CDN$255.7 CDN$322.0 CDN$325.0 CDN$459.2 CDN$228.3 $155.1
Property and equipment, net 1,240.3 1,330.7 1,146.4 1,107.6 1,267.0 1,093.1 1,393.7 947.0
Total assets............. 1,768.2 1,934.4 2,080.3 2,310.4 2,584.0 2,455.6 2,672.6 1,816.0
Long-term obligations, net of
current portion........ 669.6 631.9 675.4 717.3 605.5 708.0 613.6 416.9
Stockholders' equity..... 630.9 811.7 873.5 939.2 1,114.5 1,052.0 1,163.6 790.7
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
-----------------------------------------------------------------------
U.S. GAAP 1995 1996 1997 1997(1) 1998 1998(1)
----------- ----------- ----------- ----------- ----------- -----------
(IN MILLIONS OF CDN$, EXCEPT PER SHARE AND CONVENIENCE TRANSLATION DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues.............. CDN$1,346.6 CDN$1,510.3 CDN$1,953.1 $ 1,327.1 CDN$1,090.9 $ 741.3
Income from continuing
operations.......... 42.8 126.8 125.1 85.0 67.0 45.5
Net income............ 66.1 101.6 147.2 $ 100.0 67.0 $ 45.5
Basic net income per share(2) 0.45 0.76 1.10 $ 0.75 0.49 $ 0.33
Diluted income from continuing
operations per common and
equivalent share:(2) 0.25 0.91 0.90 $ 0.61 0.48 $ 0.33
BALANCE SHEET DATA
(AT PERIOD END):
Total assets........ CDN$1,895.4 CDN$2,082.0 CDN$2,342.9 $ 1,592.0 CDN$2,393.5 $ 1,626.4
Long-term obligations, net
of current portion 572.5 567.5 452.5 307.5 451.0 306.5
</TABLE>
- ------------------------
(1) 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.
10
<PAGE>
SUMMARY UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL DATA
The following unaudited pro forma balance sheet and income statement 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 on June 30, 1998, for purposes
of the pro forma balance sheet data, and at the beginning of the earliest period
presented, for purposes of the pro forma income statement 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 OR
FOR THE
SIX MONTHS
AS OF OR 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................... $1,487,674 $2,458,959 $3,306,386 $1,742,424
Operating income................. 162,905 341,401 308,092 215,681
Income from continuing operations 75,608 237,411 136,219 106,282
Income from continuing operations per share 0.32 1.02 0.52 0.41
Cash dividends declared per common share 0.18 0.08 0.10 0.06
BALANCE SHEET DATA:
Working capital.................................................. $235,424
Property and equipment, net...................................... 920,378
Total assets..................................................... 3,346,859
Long-term debt and capital lease obligations,
net of current portion.......................................... 849,170
Stockholders' equity............................................. 1,549,685
SUPPLEMENTAL OPERATING DATA:
Total telephone traffic
(in millions of minutes) 3,715.0 8,304.0 10,702.6 7,849.3
</TABLE>
11
<PAGE>
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 "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 Data."
<TABLE>
<CAPTION>
AS OF OR
FOR THE
SIX MONTHS
AS OF OR ENDED
FOR THE YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------- --------
1995 1996 1997 1998
------ ------ ------ ------
(US DOLLARS)
<S> <C> <C> <C>
UNAUDITED PRO FORMA COMBINED(1)
Income from continuing operations per
share(2)(3) $0.32 $1.02 $0.52 $0.41
Cash dividends declared per share(3) 0.18 0.08 0.10 0.06
Book value per share............... 6.18
EXCEL PER SHARE EQUIVALENTS(4)
Income from continuing operations
per share(2)(3)................... $0.28 $0.90 $0.46 $0.36
Cash dividends declared per share(3) 0.16 0.07 0.09 0.05
Book value per share............... 5.47
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) $0.18 $0.67 $0.65 $ 0.34
Cash dividends declared per share(3) 0.14 0.17 0.21 0.11
Book value per share............... 5.75 5.75
</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.
12
<PAGE>
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 August 28, 1998 of CDN$1.00 = US$0.6373.
MARKET PRICE PER SHARE
--------------------------------------------------------
EXCEL TELEGLOBE(1)
------------- ----------------------------------------
NYSE NYSE ME TSE
------ --------- ----- -----
HIGH LOW HIGH LOW HIGH LOW HIGH LOW
------ ---- ----- ---- ----- ---- ----- ----
(US DOLLARS)
1996
First Quarter......... N/A N/A N/A N/A $ 6.65 $5.54 $6.65 $5.54
Second Quarter(2).....$47.00 $25.50 N/A N/A 6.92 6.09 6.94 6.09
Third Quarter......... 31.88 19.50 N/A N/A 8.22 6.90 8.21 6.87
Fourth Quarter........ 35.50 20.00 N/A N/A 13.06 7.64 13.06 7.64
1997
First Quarter.........$21.63 $13.00 N/A N/A $13.54 $11.95 $13.59 $11.88
Second Quarter(3)..... 29.38 12.38 $19.88 $16.25 17.53 12.30 17.53 12.30
Third Quarter......... 28.88 20.69 20.31 15.88 17.84 13.88 17.84 13.95
Fourth Quarter........ 28.94 14.13 19.06 15.00 16.73 13.06 16.73 13.06
1998
First Quarter.........$25.31 $13.00 $23.75 $14.25 $21.18 $12.94 $20.72 $12.94
Second Quarter........ 27.81 20.25 30.88 21.63 28.93 19.68 29.00 19.71
Third Quarter
(through August 28). 24.88 20.06 29.63 24.00 28.68 22.94 28.71 22.94
- ----------------------
(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 August 28, 1998, the closing price of the EXCEL
Common Stock as reported on the NYSE Composite Tape was $21-3/4 per share and
the closing price of the TELEGLOBE Common Shares as reported on the NYSE
Composite Tape was $26-5/16 per share. You should obtain more recent stock price
quotes from other sources of financial information.
13
<PAGE>
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 an unaudited reconciliation to U.S. GAAP of
TELEGLOBE's financial statements for each of the five years ended December 31,
1997 and for the six months ended June 30, 1998, see TELEGLOBE's Annual
Information Form included in TELEGLOBE's Annual Report on Form 40-F/A for the
year ended December 31, 1997, and TELEGLOBE's Current Report on Form 6-K, 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") 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. It is expected that the
Merger will be accounted for as a pooling of interests under U.S. GAAP whereas
the Merger is likely to 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 Canadian dollars which will include a U.S.$ conversion
using average rates for the most recent three years, as well as consolidated
Canadian GAAP financial statements in CDN$. Beginning on January 1, 1999,
TELEGLOBE will use the U.S. dollar as its functional currency. Accordingly, for
periods ending after December 31, 1998, TELEGLOBE intends to prepare and file
with the Commission U.S. GAAP and Canadian GAAP consolidated financial
statements prepared in U.S. dollars.
All dollar amounts set forth in this Information Statement/Prospectus are
in U.S. dollars, except where otherwise indicated. Except where defined in
headings to a table, references herein to "$," "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>
Six Months Ended
Year Ended December 31, 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 August 28, 1998, the exchange rate for one Canadian dollar expressed in
U.S. dollars based on the Noon Buying Rate was $0.6373.
14
<PAGE>
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 over 250 carriers and over 100 Internet service providers in more than 140
countries. Historically, TELEGLOBE's primary market has been Canada, where it is
currently the sole authorized operator of Canadian facilities for
Canadian-overseas telecommunication services. 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 will no longer have its Canadian exclusive
mandate as of 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.
15
<PAGE>
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).
16
<PAGE>
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 price of the EXCEL Common Stock or the TELEGLOBE
Common Shares. Accordingly, 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, TELEGLOBE's operating subsidiary
Teleglobe Canada Inc. has been operating under an exclusive mandate from the
Government of Canada to provide Canadian-overseas facilities-based services.
TELEGLOBE has 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 has agreed to
end Teleglobe Canada Inc.'s exclusive mandate effective October 1, 1998. The
Government of Canada announced its intention to create a new licensing regime
whereby the Canadian Radio-television and Telecommunications
17
<PAGE>
Commission (the "CRTC") will 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 international
telecommunications services after October 1, 1998. TELEGLOBE expects the terms
of the new licensing regime to become publicly available by the end of the third
quarter of 1998. There can be no assurance as to the outcome of any regulatory
reform of the international telecommunications services regime by the CRTC or as
to the combined company's ability to compete under any such reformed regime. The
CRTC's regulatory reform 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 must
obtain exemptive or other relief from certain foreign ownership restrictions
under Canadian law that would be exceeded as a result of the issuance of the
TELEGLOBE Common Shares in the Merger or take other action in order to ensure
compliance with such restrictions. Legislation has been adopted by the
Parliament of Canada that would eliminate these restrictions, but such
legislation is not expected to become effective in full prior to October 1,
1998. 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 entry by the
Regional Bell Operating Companies into the long distance marketplace, and the
ability of long distance companies like TELEGLOBE 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 alternatives.
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
18
<PAGE>
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.
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.
19
<PAGE>
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
August 28, 1998), will have the right pursuant to a registration rights
agreement to be entered into with the 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 August 28, 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.
Between the date of the Merger Agreement and July 14, 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 August 28, 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 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
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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.
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
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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."
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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 August 28,
1998 and the total number of issued and outstanding shares of EXCEL Common Stock
on such date, is approximately $3.1 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 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.
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
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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 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.
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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.
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."
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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 (xii) 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 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.
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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 controlling EXCEL stockholders and the controlling
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 $571 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.
Factors Considered by the EXCEL Board
EXCEL's 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. 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.
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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 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 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 $21-3/4 on August 28, 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 $26-5/16 on August 28, 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 $23.29 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, (ii) current industry, economic
and market conditions and trends, including the likelihood of continuing
consolidation and increasing competition in the communications industry (and the
corresponding decrease in the number of suitable strategic merger partners);
(iii) the importance of market position, significant scale and scope and
financial resources to EXCEL's ability to compete effectively in the changing
environment in the global communications market; (iv) the fact that the Merger
was structured as a merger of equals and the contemplated role of EXCEL's
officers and directors in the combined company; (v) the risks associated with
achieving the operating cost savings and revenue growth expected as a result of
consummating the Merger; (vi) the terms of the Merger Agreement and related
documentation; (vii) the current and historical market prices of the common
stock of each company; (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 EXCEL and
TELEGLOBE companies); (ix) the likelihood of obtaining required regulatory
approvals; (x) the changing regulatory environment in the domestic
telecommunications industry; (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; and (xii) the availability of
alternative strategic transactions; (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
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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.
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 companies' 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
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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
recommendations 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,
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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 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 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 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
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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.
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, 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 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
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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, and also exceeded the market price per share of EXCEL Common
Stock as of 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 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
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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
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
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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 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 Board of Directors of EXCEL, (b) $100,000 for any bring down
opinion to the Board of Directors of EXCEL, (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."
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
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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 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. See "--Conditions; Waivers."
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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
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.
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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.
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.
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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 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 (TELEGLOBE and EXCEL received notice of early
termination of the waiting period for their filings under the HSR Act for the
Merger on July 14, 1998), the waiting period prescribed under the Competition
Act (Canada) shall have expired (which occurred on July 24, 1998), 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),
(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) and (v) the Form F-4 shall have been
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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 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
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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 TELEGLOBE
Articles Amendment, which amendment will become effective in accordance with the
CBCA at the Effective Time.
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 early in the fourth quarter of this year.
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;
(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
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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 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.
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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 is a general summary of the material U.S. federal
income tax consequences of the Merger and of holding TELEGLOBE Common Shares and
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 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 holds 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 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
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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.
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.
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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. 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.
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Canadian Federal Income Tax Consequences
The following is a general summary of the material Canadian federal income
tax considerations generally applicable to holding TELEGLOBE Common Shares
acquired in the Merger by a U.S. Holder 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 in this summary, 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 summary applies.
This summary 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. This summary does not
otherwise take into account or anticipate any changes in law or administrative
practice nor does it take into account income tax laws or considerations of any
province or territory of Canada or any jurisdiction other than Canada, which may
differ from the federal income tax consequences described herein. This summary
is of a general nature only and is not intended to be, and should not be
interpreted as, legal or tax advice to any particular holder of 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 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.
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Regulatory Approvals
In order to complete the Merger, the companies must receive authorization
from various U.S., state and Canadian governmental agencies. It is possible that
the FCC or one or more other U.S. or Canadian governmental entities may fail to
provide the requested approvals or may seek, as a condition of approval, various
regulatory concessions. 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. There can be
no assurance that the required regulatory approvals and consents will be
obtained within the time frame contemplated by the Merger Agreement or on terms
that are satisfactory to the parties.
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 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 and,
as a result, the parties are entitled to close the Merger. 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, unless an ARC is 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. Twenty-one requests for
approval have been filed and EXCEL has received approval for the Merger from ten
state commissions governing telecommunications services (the "State
Commissions") as of
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September 1, 1998. 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. The governing legal standard varies from
state to state, but approval of the Merger generally requires a showing that it
is consistent with the public interest, convenience and necessity. As part of
that evaluation, the State Commissions may examine the impact of the Merger on
competition, and its effect on the customers and employees of EXCEL, TELEGLOBE
and the local telephone company or incumbent local exchange carrier. Although
there can be no guarantee of the timing of the receipt of any necessary
approvals, the companies generally expect to receive such approvals within one
to three months in those states in which an application is not opposed.
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. As a result, the
Merger will require the prior approval of the FCC. On July 17, 1998, EXCEL and
TELEGLOBE filed an application with the FCC seeking approval of 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. In
evaluating the application, the FCC will consider whether TELEGLOBE is qualified
to control such licenses and authorizations and whether the public interest,
convenience and necessity will be served by such transfer of control.
The parties believe that under current United States policy as articulated
by the FCC, there are no foreign ownership considerations which would cause the
FCC to deny or specially condition the application for transfer of control of
the EXCEL international authorizations to TELEGLOBE. TELEGLOBE's U.S. affiliate
has already secured a full complement of international authorizations in its own
right. The FCC has also determined that no special operational or other
conditions need apply to TELEGLOBE's affiliates' operations in the United
States, and the facts underlying this determination are unchanged by the Merger.
On August 5, 1998, the FCC placed the EXCEL and TELEGLOBE application on public
notice for "streamlined" treatment, which will expedite action on the
application. Under this procedure, a party would have had to oppose formally the
application by August 26, 1998. In the absence of such an opposition, or of FCC
action on its own motion by September 2, 1998, the application will be deemed
granted on September 9, 1998. It is the understanding of EXCEL and TELEGLOBE
that no opposition to the application was filed, and that the FCC will continue
to grant the application streamlined treatment.
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.
In April 1998, the United States Trade Representative ("USTR") issued a
determination that it views current Canadian policy which restricts the routing
of Canadian originating international traffic via the United States to be
contrary to Canada's trade commitments. The USTR at that time stated that it
would initiate dispute settlement proceedings against Canada at the World Trade
Organization in Geneva if the issue was not resolved by August 1, 1998; however,
as of August 28, 1998, no dispute resolution proceeding has commenced,
notwithstanding that the routing restrictions have not been resolved. If such
dispute resolution were to be commenced, it would not have a direct bearing upon
the FCC's consideration of the TELEGLOBE and EXCEL transfer of control
application, but could result in delay in the event that the USTR requests the
FCC to delay consideration pending the outcome of the dispute resolution.
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 affiliates
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<PAGE>
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. To become effective, the Federal Cabinet of Ministers needs to
approve an Order in Council which will fix the date on which the various
provisions of Bill C-17 will come into force. TELEGLOBE expects the Cabinet to
take such action in September 1998 and that those portions of the legislation
amending the Telecom Act and relating to the TCRDA may become law on or prior to
October 1, 1998. However, there can be no assurance that all relevant portions
of Bill C-17 will be proclaimed into law within the time frame contemplated by
the Merger Agreement.
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 licenses 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."
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<PAGE>
TELEGLOBE has applied for 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 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 EXCEL Stock Options, subject to compliance with their respective
customary requirements. TELEGLOBE has applied to 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 intend to account for the Merger using the pooling of
interests method of accounting in accordance with U.S. GAAP. 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 may dispose of any TELEGLOBE Common Shares 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.
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 occurrence of certain events may preclude accounting for the Merger as
a pooling of interests. These events generally are not within the control of
TELEGLOBE or EXCEL. The availability of pooling of interests accounting is not a
condition of the Merger.
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It is expected that, under Canadian GAAP, the Merger will be accounted for
as a purchase. 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 August 28, 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
NUMBER OF WEIGHTED VALUE OF TELEGLOBE
EXCEL AVERAGE EXERCISE ALL EXCEL OPTIONS
NUMBER OF OPTIONS PRICE PER OPTIONS EXERCISABLE
VESTED WHICH BECOME SHARE OF VESTE 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>
Nicholas A. Merrick -- 200,000 $ 23.63 $ -- 177,000
Nicholas A. Merrick 252,625 -- $ 4.96 $ 4,241,574 223,573
Nicholas A. Merrick 75,950 -- $ 12.84 $ 676,715 67,216
Stephen G. Canton -- 500,000 $ 23.63 $ -- 442,500
Stephen G. Canton 806,970 -- $ 4.96 $13,549,026 714,168
J. Christopher Dance 78,000 297,000 $ 4.55 $ 6,450,000 331,875
Kenneth Hilton. -- 100,000 $ 24.00 $ -- 88,500
Kenneth Hilton. -- 50,000 $ 20.88 $ 43,500 44,250
Lester M. Lichter -- 100,000 $ 24.00 $ -- 88,500
Lester M. Lichter -- 100,000 $ 20.88 $ 87,000 88,500
Craig E. Holmes 49,300 207,900 $ 4.55 $ 4,423,840 227,622
Paul D. Fletcher 3,334 6,666 $ 12.00 $ 97,500 8,850
Paul D. Fletcher 6,000 9,000 $ 15.00 $ 101,250 13,275
Paul D. Fletcher -- 25,000 $ 20.88 $ 21,750 22,125
Kenny A. Troutt -- -- -- -- --
Stephen R. Smith -- -- -- -- --
T. Allan McArtor 6,667 -- $ 23.00 $ -- 5,900
Ronald A. McDougall 13,333 -- $ 21.25 $ 6,667 11,800
Ronald A. McDougall 1,304 -- $ 19.13 $ 3,416 1,154
Ronald A. McDougall 1,446 -- $ 12.50 $ 13,376 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 August 28, 1998 ($21-3/4), 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 (258,944,785, based on TELEGLOBE and EXCEL
shares and options outstanding as of August 28, 1998 of 132,946,356 and
142,371,106, respectively).
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<PAGE>
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 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 August 28, 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;
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<PAGE>
(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 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 a 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.
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<PAGE>
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.
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.
57
<PAGE>
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 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 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
TELEGLOBE Common Shares (representing approximately 6.2% of the TELEGLOBE Common
Shares outstanding as of June 14, 1998),
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<PAGE>
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 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 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 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
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<PAGE>
(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 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
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<PAGE>
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 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
61
<PAGE>
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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<PAGE>
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."
It is currently expected that 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.
In addition, TELEGLOBE's operating subsidiary Teleglobe Canada Inc. has
been operating under an exclusive mandate from the Government of Canada to
provide Canadian-overseas facilities-based services since its privatization in
1987. As part of the WTO Agreement, the Government of Canada has agreed to end
Teleglobe Canada Inc.'s exclusive mandate effective October 1, 1998. The
Government of Canada announced its intention to create a new licensing regime
pursuant to which the CRTC will 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. TELEGLOBE
expects the terms of the new licensing regime to become publicly available by
the end of September 1998. The outcome of any regulatory reform of the
international telecommunications services regime by the CRTC could have a
significant impact 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.
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<PAGE>
TELEGLOBE INC.
PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL PRO FORMA PRO FORMA
EXCEL TELEGLOBE ADJUSTMENTS COMBINED
----------- ---------- ----------- ---------
(IN THOUSANDS OF US DOLLARS)
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents............ $ 18,197 $ 183,374 $ -- $ 201,571
Accounts receivable, net............. 324,070 396,505 -- 720,575
Income tax receivable, net........... 35,864 -- -- 35,864
Deferred income tax asset............ 19,985 -- -- 19,985
Other current assets................. 18,283 67,208 -- 85,491
----------- ---------- ----------- ---------
Total current assets................ 416,399 647,087 -- 1,063,486
----------- ---------- ----------- ---------
Investments............................ -- 260,723 -- 260,723
Property and equipment, net............ 324,714 595,664 -- 920,378
Goodwill............................... 931,490 66,250 -- 997,740
Other assets........................... 43,562 60,970 -- 104,532
----------- ---------- ----------- ---------
Total assets........................ $ 1,716,165 $ 1,630,694 $ -- $3,346,859
=========== ========== =========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 337,894 $ 474,551 $ -- $ 812,445
Income taxes payable................. -- 9,462 -- 9,462
Current portion of long-term debt and
capital lease obligations............ 748 5,407 -- 6,155
----------- ---------- ----------- ---------
Total current liabilities........... 338,642 489,420 -- 828,062
----------- ---------- ----------- ---------
Long-term debt and capital lease obligations,
net of current portion............... 541,874 307,296 -- 849,170
Deferred management services fees and other
long-term liabilities................ 32,552 22,481 -- 55,033
Non-controlling interest............... -- 13,395 -- 13,395
Deferred income taxes payable.......... 7,582 43,932 -- 51,514
STOCKHOLDERS' EQUITY:
Preferred stock........................ -- 85,161 -- 85,161
Common stock........................... 133 433,868 530,575(4) 964,576
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...................... 264,776 235,141 -- 499,917
----------- ---------- ----------- ---------
Total stockholders' equity.......... 795,515 754,170 -- 1,549,685
----------- ---------- ----------- ---------
Total liabilities and stockholders'
equity $ 1,716,165 $1,630,694 $ -- $3,346,859
=========== ========== =========== ==========
</TABLE>
See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Statements.
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<PAGE>
TELEGLOBE INC.
PRO FORMA CONDENSED COMBINED BALANCE SHEET
FOR SIX MONTHS ENDED
AS OF JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL PRO FORMA PRO FORMA
EXCEL TELEGLOBE ADJUSTMENTS COMBINED
----------- ---------- ----------- -----------
(IN THOUSANDS OF US DOLLARS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenues:
Communication services............... $ 950,292 $ 758,197 $ -- $ 1,708,489
Marketing services................... 33,935 -- -- 33,935
----------- ---------- ----------- -----------
Total revenues......................... 984,227 758,197 -- 1,742,424
Operating expenses:
Communication and network............ 525,020 530,004 -- 1,055,024
Selling, general and administrative.. 312,903 93,131 -- 406,034
Depreciation and amortization........ 25,769 39,916 -- 65,685
----------- ---------- ----------- -----------
Total operating expenses............... 863,692 663,051 -- 1,526,743
----------- ---------- ----------- -----------
Operating income....................... 120,535 95,146 -- 215,681
Interest expense....................... (18,879) (10,549) -- (29,428)
Other income (expense)................. 962 2,983 -- 3,945
----------- ---------- ----------- -----------
Income before income taxes............. 102,618 87,580 -- 190,198
Provision for income taxes............. 42,846 41,070 -- 83,916
----------- ---------- ----------- -----------
Income from continuing operations...... $ 59,772 $ 46,510 $ -- $ 106,282
=========== ========== =========== ===========
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 $ 0.34 $ -- $ 0.41
</TABLE>
See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Statements.
65
<PAGE>
TELEGLOBE INC.
PRO FORMA CONDENSED COMBINED BALANCE SHEET
FOR THE YEAR ENDED
DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL PRO FORMA PRO FORMA
EXCEL TELEGLOBE ADJUSTMENTS(2) COMBINED
----------- ---------- -------------- -----------
(IN THOUSANDS OF US DOLLARS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenues:
Communication services............... $ 1,333,101 $1,408,846 $ 443,188 $ 3,185,135
Marketing services................... 121,251 -- -- 121,251
----------- ---------- -------------- -----------
Total revenues......................... 1,454,352 1,408,846 443,188 3,306,386
Operating expenses:
Communication........................ 716,781 995,331 255,697 1,967,809
Selling, general and administrative.. 504,421 150,361 169,398 824,180
Depreciation and amortization........ 23,676 78,993 26,430 129,099
Non-recurring charges................ 64,637 -- -- 64,637
----------- ---------- -------------- -----------
Total operating expenses............... 1,309,515 1,224,685 451,525 2,985,725
----------- ---------- -------------- -----------
Income (loss) from operations before
unusual items: 144,837 184,161 (8,337) 320,661
Unusual items.......................... -- 12,569 -- 12,569
----------- ---------- -------------- -----------
Operating income (loss)................ 144,837 171,592 (8,337) 308,092
Interest expense....................... (8,551) (20,458) (46,182) (75,191)
Other income (expense)................. 7,301 17,063 (319) 24,045
----------- ---------- -------------- -----------
Income (loss) before income taxes...... 143,587 168,197 (54,838) 256,946
Provision for income taxes............. 55,661 78,057 (12,991) 120,727
----------- ---------- -------------- -----------
Income (loss) from continuing operations(1) $ 87,926 $90,140 $ (41,847) $ 136,219
=========== ========== ============== ===========
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 $ 0.65 $0.52
</TABLE>
See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Statements.
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<PAGE>
TELEGLOBE INC.
PRO FORMA CONDENSED COMBINED BALANCE SHEET
FOR THE YEAR ENDED
DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL PRO FORMA PRO FORMA
EXCEL TELEGLOBE ADJUSTMENTS(6) COMBINED
----------- ---------- -------------- -----------
(IN THOUSANDS OF US DOLLARS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenues:
Communication services............... $ 1,090,649 $1,107,657 $ -- $ 2,198,306
Marketing services................... 260,653 -- -- 260,653
----------- ---------- -------------- -----------
Total revenues......................... 1,351,302 1,107,657 -- 2,458,959
Operating expenses:
Communication........................ 596,598 772,965 -- 1,369,563
Selling, general and administrative.. 530,295 105,040 -- 635,335
Depreciation and amortization........ 6,880 105,780 -- 112,660
----------- ---------- -------------- -----------
Total operating expenses............... 1,133,773 983,785 -- 2,117,558
----------- ---------- -------------- -----------
Operating income....................... 217,529 123,872 -- 341,401
Interest expense....................... (261) (13,704) -- (13,965)
Other income (expense)................. 12,647 13,752 -- 26,399
----------- ---------- -------------- -----------
Income before income taxes............. 229,915 123,920 -- 353,835
Provision for income taxes............. 85,488 30,936 -- 116,424
----------- ---------- -------------- -----------
Income from continuing operations...... $144,427 $ 92,984 $ -- $ 237,411
=========== ========== ============== ===========
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 $ 0.67 $ -- $ 1.02
</TABLE>
See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Statements.
67
<PAGE>
<TABLE>
<CAPTION>
TELEGLOBE INC.
PRO FORMA CONDENSED COMBINED BALANCE SHEET
FOR THE YEAR ENDED
DECEMBER 31, 1997
(UNAUDITED)
HISTORICAL HISTORICAL PRO FORMA PRO FORMA
EXCEL TELEGLOBE ADJUSTMENTS COMBINED
----------- ---------- -------------- -----------
(IN THOUSANDS OF US DOLLARS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenues:
Communication services............... $ 363,301 $ 980,976 $ -- $ 1,344,277
Marketing services................... 143,397 -- -- 143,397
----------- ---------- -------------- -----------
Total revenues......................... 506,698 980,976 -- 1,487,674
Operating expenses:
Communication........................ 209,995 675,516 -- 885,511
Selling, general and administrative.. 217,751 115,359 -- 333,110
Depreciation and amortization........ 1,239 104,909 -- 106,148
----------- ---------- -------------- -----------
Total operating expenses............... 428,985 895,784 -- 1,324,769
----------- ---------- -------------- -----------
Operating income....................... 77,713 85,192 -- 162,905
Interest expense....................... (593) (11,920) -- (12,513)
Other income (expense)................. (5,781) (851) -- (6,632)
----------- ---------- -------------- -----------
Income before income taxes............. 71,339 72,421 -- 143,760
Provision for income taxes............. 26,893 41,259 -- 68,152
----------- ---------- -------------- -----------
Income from continuing operations...... $ 44,446 $ 31,162 $ -- $ 75,608
============ ========== ============== ===========
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 $ 0.18 $ -- $ 0.32
</TABLE>
See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Statements.
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<PAGE>
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 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.
It is expected that the Merger will be accounted for as a "pooling of interests"
in accordance with U.S. GAAP. However, it is likely that 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. 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 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.
(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
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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 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 are therefore
included in the weighted average share count.
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 August 28, 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 $21-3/4 per share. We urge EXCEL stockholders to obtain current market
quotations.
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EXCEL COMMON STOCK
---------------------------------
CASH
DIVIDENDS
HIGH LOW PER SHARE
------- ----- -----------
(IN US DOLLARS)
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 (through August 28).......... 24-7/8 20-1/16 --
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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 August 28, 1998 of CDN$1.00 = US$0.6373.
<TABLE>
<CAPTION>
TELEGLOBE COMMON SHARES
-------------------------------------------------------
CASH
NYSE ME TS DIVIDENDS
------------ ------------- --------------
HIGH LOW HIGH LOW HIGH LOW PER SHARE
------ ----- ------ ----- ------ ----- ---------
(IN US DOLLARS)
<S> <C> <C> <C> <C> <C> <C> <C>
1996
First Quarter............... N/A N/A $ 6.65 $5.54 $ 6.65 $ 5.54 $ 0.032
Second Quarter.............. N/A N/A 6.92 6.09 6.94 6.09 0.038
Third Quarter............... N/A N/A 8.22 6.90 8.21 6.87 0.038
Fourth Quarter.............. N/A N/A 13.06 7.64 13.06 7.64 0.038
1997
First Quarter............... N/A N/A $13.54 $11.95 $13.59 $11.88 $ 0.038
Second Quarter.............. $ 19.88 $ 16.25 17.53 12.30 17.53 12.30 0.048
Third Quarter............... 20.31 15.88 17.84 13.88 17.84 13.95 0.048
Fourth Quarter.............. 19.06 15.00 16.73 13.06 16.73 13.06 0.048
1998
First Quarter............... $ 23.75 $ 14.25 $21.18 $12.94 $20.72 $12.94 $ 0.048
Second Quarter.............. 30.88 21.63 28.93 19.68 29.00 19.71 0.054
Third Quarter
(through August 28) 29.63 24.00 28.68 22.94 28.71 22.94 --
</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 August 28, 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 $26-5/16 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.$0.054 based on the Noon Buying
Rate as of August 28, 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.
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SECURITY OWNERSHIP
It is anticipated that, after giving effect to the Merger, approximately
246,594,138 TELEGLOBE Common Shares will be issued and outstanding (based on
132,480,864 issued and outstanding shares of EXCEL Common Stock as of August 28,
1998 to be exchanged in the Merger at the Exchange Ratio for 117,245,565
TELEGLOBE Common Shares and based on 129,348,573 issued and outstanding
TELEGLOBE Common Shares as of August 28, 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....................... 87,662,912 35.5% 36.0%
</TABLE>
- -------------------
(1) Based on 258,944,785 fully-diluted TELEGLOBE Common Shares, after giving
effect to the exercise of all outstanding options into 12,350,647 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.
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DIRECTORS AND MANAGEMENT OF TELEGLOBE
FOLLOWING THE MERGER
The Merger Agreement provides that at or prior to the Effective Time, the
Board of Directors of TELEGLOBE 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. TELEGLOBE's
Board of Directors 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
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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."
Committees. The Audit Committee has a specific mandate to review and
report to the 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
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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 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.
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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 of
incorporation 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 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.
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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
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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);
(b) redeem, purchase, otherwise retire or make any capital distribution
on or in respect of Common Shares, 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 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.
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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.
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.
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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,
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 board of directors of TELEGLOBE 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
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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 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.
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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
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.
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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 board of directors of TELEGLOBE 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 be jointly appointed.
Under the BCE Agreement, BCE is entitled to nominate a number of nominees for
election to the board of directors of TELEGLOBE 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;
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(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 board of directors among the
TELEGLOBE Directors or among the EXCEL Directors shall only be filled by the
board of directors 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 board of directors of TELEGLOBE 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 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 to become a director of
TELEGLOBE, any successor thereto or any person nominated to fill a vacancy among
the EXCEL Directors.
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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 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.
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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.
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
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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 may
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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.
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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 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.
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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."
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 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.
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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.
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, as amended by Form 40-F/A, for the year
ended December 31, 1997; and
(b) Reports on Form 6-K dated May 20, 1998, June 24, 1998 and September
3, 1998.
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 CONSUMMATION OF THE MERGER OR THE TERMINATION OF
THE MERGER AGREEMENT. THESE INCLUDE ANNUAL REPORTS ON FORM 40-F AND REPORTS ON
FORM 6-K.
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.
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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:
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
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 SEPTEMBER __, 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.
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INDEX OF DEFINED TERMS
TERM PAGE(S)
- ---- -------
Acquisition Proposal........................................................41
Affiliate...................................................................51
ARC.........................................................................49
BCE......................................................................... 5
BCE Agreement...............................................................20
Bill C-17...................................................................51
Canadian GAAP................................................................4
Capital.....................................................................58
CBCA........................................................................14
Certificate.................................................................38
CIC codes...................................................................15
Closing.....................................................................23
Closing Date................................................................38
Code.........................................................................4
Commission..................................................................14
Competition Act.............................................................49
Convention..................................................................48
Converted Option............................................................38
CRTC........................................................................18
CSAs........................................................................91
CVMQ........................................................................90
demand......................................................................61
DGCL........................................................................23
Director....................................................................49
EBIT........................................................................35
EBITDA......................................................................33
Effective Time..............................................................37
EPS.........................................................................35
EXCEL........................................................................i
EXCEL Alternative Case......................................................31
EXCEL Board .................................................................1
EXCEL By-Laws...............................................................77
EXCEL Charter...............................................................77
EXCEL Common Stock...........................................................1
EXCEL Comparable Public Companies...........................................32
EXCEL Competing Share Transaction...........................................44
EXCEL Consent and Voting Agreement..........................................58
EXCEL Directors.............................................................55
EXCEL Management Case.......................................................31
EXCEL Option................................................................59
EXCEL Stock Option..........................................................37
EXCEL Stock Option Agreement................................................59
EXCEL Stock Plans...........................................................37
Exchange Agent..............................................................38
Exchange Ratio..............................................................ii
FCC..........................................................................3
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TERM PAGE(S)
- ---- -------
Firm Value..................................................................33
Form F-4....................................................................39
FTC.........................................................................49
Funds.......................................................................59
Guidelines..................................................................74
HSR Act.....................................................................41
Indemnifiable Person........................................................88
IRS..........................................................................3
IRs.........................................................................15
ITA.........................................................................48
LEC.........................................................................15
Lehman Brothers Opinion.....................................................30
LTM.........................................................................33
Majority EXCEL Stockholders.................................................23
Majority TELEGLOBE Shareholders.............................................59
Material Adverse Effect.....................................................40
ME...........................................................................3
Merger......................................................................ii
Merger Agreement.............................................................3
Merger Sub..................................................................16
MJDS........................................................................14
NASD........................................................................83
Non-Voting Shares...........................................................77
Noon-Buying Rate.............................................................1
NYSE.........................................................................3
Policy Statement Q-27.......................................................90
Post-Merger Comparable Public Companies.....................................36
Preferred Shares............................................................77
Registration Rights Agreement...............................................61
Related Party...............................................................90
Relative Contribution Period................................................34
Required Consents...........................................................41
Rule 145 Affiliates.........................................................61
Section 203.................................................................89
Securities Act..............................................................23
SEDAR.......................................................................91
Severance Payment...........................................................55
State Commissions...........................................................49
Stock Option Agreements.....................................................60
Surviving Corporation.......................................................37
Surplus.....................................................................82
TCRDA.......................................................................51
Telco........................................................................7
Telecom Act.................................................................51
TELEGLOBE....................................................................i
TELEGLOBE Articles..........................................................77
TELEGLOBE Articles Amendment................................................37
TELEGLOBE By-Law Amendment..................................................40
TELEGLOBE By-Laws...........................................................77
TELEGLOBE Common Shares......................................................1
TELEGLOBE Comparable Public Companies.......................................33
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TERM PAGE(S)
- ---- -------
TELEGLOBE Competing Share Transaction.......................................44
TELEGLOBE Consent and Voting Agreements.....................................59
TELEGLOBE Directors.........................................................55
TELEGLOBE Management Case...................................................31
TELEGLOBE Option............................................................60
TELEGLOBE Stock Option Agreement............................................60
Telesystem..................................................................58
Termination Date............................................................43
Termination Fee.............................................................44
Time Period.................................................................56
Treasury Regulations........................................................43
Troutt Stockholders.........................................................46
TSE..........................................................................3
U.S. GAAP....................................................................4
U.S. Holder.................................................................45
USTR........................................................................50
Voting Agreements...........................................................59
WTO Agreement...............................................................17
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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 he 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:
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 this 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 this Information Statement/Prospectus which forms a part of this
Registration Statement).
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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 this
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 this 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 this
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 this 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 this
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 this
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.
8.1 Opinion of Weil, Gotshal & Manges LLP as to tax matters.*
8.2 Opinion of Goodman, Phillips & Vineberg as to tax matters.*
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 (included in Exhibit 8.1).*
23.5 Consent of Goodman, Phillips & Vineberg (included in Exhibit 8.2).*
23.6 Consent of Lehman Brothers.
24.1 Power of Attorney executed by the TELEGLOBE Directors.
99.1 Opinion of Lehman Brothers (filed as Appendix B to this Information
Statement/Prospectus which forms a part of this Registration Statement).
- ---------------
* To be filed by amendment.
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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 this Information
Statement/Prospectus which forms a part of this Registration Statement).
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.
99
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(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.
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.
100
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Montreal, Quebec, on
September 3, 1998.
TELEGLOBE INC.
By: /s/ Andre Bourbonnais
---------------------------------
Name: Andre Bourbonnais
Vice President, Legal Affairs and
Corporate Secretary
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the date indicated.
Signature Capacity
- --------- --------
Principal Executive Officer:
/s/ Charles Sirois
- -------------------------------
Charles Sirois Chairman and Chief Executive Officer
Principal Financial Officer:
/s/ Claude Seguin
- -------------------------------
Claude Seguin Executive Vice-President and
Chief Financial Officer
Principal Accounting Officer:
/s/ Francois Laurin
- -------------------------------
Francois Laurin Vice-President, Finance and
Corporate Controller
101
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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:
(Attorney-in-Fact)
September 3, 1998
102
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APPENDIX A
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
DATED AS OF JUNE 14, 1998
AMONG
TELEGLOBE INC.
NORTH MERGER SUB CORPORATION
and
EXCEL COMMUNICATIONS, INC.
<PAGE>
TABLE OF CONTENTS
ARTICLE I
THE MERGER...............A 3
1.1 The Merger.....................................................A 3
1.2 Closing........................................................A 3
1.3 Effective Time.................................................A 3
1.4 Effects of the Merger..........................................A 3
1.5 Certificate of Incorporation...................................A 4
1.6 By-Laws of Surviving Corporation...............................A 4
1.7 Officers and Directors of Surviving Corporation................A 4
1.8 Effect on Capital Stock........................................A 5
1.9 Teleglobe Articles Amendment; Teleglobe By-Law Amendment.......A 6
ARTICLE II
EXCHANGE OF CERTIFICATES........A 6
2.1 Exchange Fund..................................................A 6
2.2 Exchange Procedures............................................A 7
2.3 Distributions with Respect to Unexchanged Shares...............A 7
2.4 No Further Ownership Rights in Excel Common Stock .............A 8
2.5 No Fractional Teleglobe Common Shares..........................A 8
2.6 Termination of Exchange Fund...................................A 8
2.7 No Liability...................................................A 9
2.8 Investment of the Exchange Fund................................A 9
2.9 Lost Certificates..............................................A 9
2.10 Withholding Rights.............................................A 9
2.11 Further Assurances.............................................A 9
2.12 Stock Transfer Books..........................................A 10
ARTICLE III
REPRESENTATIONS AND WARRANTIES....A 10
3.1 Representations and Warranties of Excel.......................A 10
(a) Organization, Standing and Power.....................A 10
(b) Subsidiaries.........................................A 10
(c) Capital Structure....................................A 11
(d) Authority; No Conflicts..............................A 12
(e) Reports and Financial Statements.....................A 14
(f) Information Supplied.................................A 14
(g) Absence of Certain Changes or Events.................A 15
(h) Board Approval.......................................A 15
(i) Vote Required........................................A 15
(j) Brokers or Finders...................................A 15
(k) Opinion of Excel Fairness Opinion Banker.............A 16
(l) No Undisclosed Liabilities...........................A 16
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(m) Taxes..............................................A 16
(n) Properties.........................................A 17
(o) Intellectual Property..............................A 17
(p) Agreements, Contracts and Commitments..............A 18
(q) Litigation.........................................A 18
(r) Environmental Matters..............................A 18
(s) Employee Benefit Plans.............................A 19
(t) Compliance With Laws...............................A 20
(u) Accounting and Tax Matters.........................A 21
(v) Labor Matters......................................A 21
(w) Insurance..........................................A 21
(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 22
(ac) Certain Regulatory Matters.........................A 23
3.2 Representations and Warranties of Teleglobe...................A 23
(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 27
(f) Information Supplied.................................A 27
(g) Absence of Certain Changes or Events.................A 28
(h) Board Approval.......................................A 28
(i) Vote Required........................................A 28
(j) Brokers or Finders...................................A 29
(k) Opinion of Teleglobe Fairness Opinion Banker.........A 29
(l) No Undisclosed Liabilities...........................A 29
(m) Taxes................................................A29
(n) Properties...........................................A 30
(o) Intellectual Property................................A 30
(p) Agreements, Contracts and Commitments................A 31
(q) Litigation...........................................A 31
(r) Environmental Matters................................A 31
(s) US Employee Benefit Plans............................A 32
(t) Canadian Employee Benefit Plans......................A 33
(u) Compliance With Laws.................................A 34
(v) Accounting and Tax Matters...........................A 34
(w) Labor Matters........................................A 34
(x) Insurance............................................A 35
(y) No Existing Discussions..............................A 35
(z) Anti-Takeover Laws; Shareholder Rights Plan..........A 35
(aa) Year 2000............................................A 35
(ab) Pooling Letters......................................A 36
(ac) Certain Regulatory Matters...........................A 36
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(ad) No Plan or Intention to Dispose of Surviving
Corporation..........................................A 37
3.3 Representations and Warranties of Teleglobe and Merger Sub....A 37
(a) Organization and Corporate Power.....................A 37
(b) Capital Structure....................................A 37
(c) Corporate Authorization..............................A 37
(d) Non-Contravention....................................A 38
(e) No Business Activities...............................A 38
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS.A 38
4.1 Covenants of Excel............................................A 38
(a) Ordinary Course......................................A 38
(b) Dividends; Changes in Share Capital..................A 39
(c) Issuance of Securities...............................A 39
(d) Governing Documents..................................A 39
(e) No Acquisitions......................................A 39
(f) No Dispositions......................................A 39
(g) Investments; Indebtedness............................A 40
(h) Pooling-of-Interests; Tax-Free Qualification.........A 40
(i) Other Actions........................................A 40
(j) Accounting Methods; Income Tax Elections.............A 40
(k) Excel Employee Plans.................................A 40
4.2 Covenants of Teleglobe........................................A 41
(a) Ordinary Course......................................A 41
(b) Dividends; Changes in Share Capital..................A 41
(c) Issuance of Securities...............................A 42
(d) Governing Documents..................................A 42
(e) No Acquisitions......................................A 42
(f) No Dispositions......................................A 42
(g) Investments; Indebtedness............................A 42
(h) Pooling-of-Interests; Tax-Free Qualification.........A 43
(i) Other Actions........................................A 43
(j) Accounting Methods; Income Tax Elections.............A 43
(k) Teleglobe Employee Plans.............................A 43
4.3 Advice of Changes; Governmental Filings.......................A 44
4.4 Transition Planning...........................................A 44
4.5 Control of Other Party's Business.............................A 44
4.6 Network Transition............................................A 44
ARTICLE V
ADDITIONAL AGREEMENTS........A 45
5.1 Preparation of Proxy Statement; Stockholders Approval.........A 45
5.2 Teleglobe Board of Directors; Officers........................A 46
5.3 Access to Information.........................................A 47
5.4 Best Efforts..................................................A 47
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5.5 Acquisition Proposals.........................................A 49
5.6 Fees and Expenses.............................................A 50
5.7 Directors' and Officers' Indemnification and Insurance........A 50
5.8 Public Announcements..........................................A 51
5.9 Accountants' Letters..........................................A 51
5.10 Listing of Teleglobe Common Shares............................A 51
5.11 Rule 145 Affiliates of Teleglobe and Excel; Pooling Letters...A 51
5.12 Stockholder Litigation........................................A 52
5.13 Restriction on Certain Dispositions...........................A 52
5.14 Compliance with Section 228 of the DGCL.......................A 53
5.15 Registration Rights Agreement.................................A 53
ARTICLE VI
CONDITIONS PRECEDENT.........A 53
6.1 Conditions to Each Party's Obligation to Effect the Merger....A 53
(a) Stockholder Approval.................................A 53
(b) No Injunctions or Restraints, Illegality.............A 54
(c) HSR Act; Competition Act (Canada); Required Consents.A 54
(d) NYSE, TSE and ME Listings............................A 54
(e) Effectiveness of the Form F-4........................A 54
6.2 Additional Conditions to Obligations of Teleglobe and
Merger Sub...................................................A 54
(a) Representations and Warranties.......................A 54
(b) Performance of Obligations of Excel..................A 55
(c) Tax Opinion..........................................A 55
(d) No Material Adverse Change...........................A 55
(e) Excel Consent and Voting Agreement...................A 55
(f) Third-Party Consents.................................A 55
6.3 Additional Conditions to Obligations of Excel.................A 55
(a) Representations and Warranties.......................A 55
(b) Performance of Obligations of Teleglobe..............A 56
(c) Tax Opinion..........................................A 56
(d) No Material Adverse Change...........................A 56
(e) Teleglobe Consent and Voting Agreements.............A 56
(f) IRS Ruling...........................................A 56
(g) Third-Party Consents.................................A 57
ARTICLE VII
TERMINATION AND AMENDMENT......A 57
7.1 Termination...................................................A 57
7.2 Effect of Termination.........................................A 58
7.3 Payment by Excel..............................................A 59
7.4 Payment by Teleglobe..........................................A 59
7.5 Amendment.....................................................A 60
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7.6 Extension; Waiver.............................................A 60
ARTICLE VIII
GENERAL PROVISIONS......... A 60
8.1 Survival of Representations, Warranties and Covenants.........A 60
8.2 Notices.......................................................A 61
8.3 Interpretation................................................A 62
8.4 Counterparts..................................................A 62
8.5 Entire Agreement; No Third Party Beneficiaries................A 62
8.6 Governing Law.................................................A 63
8.7 Severability..................................................A 63
8.8 Assignment....................................................A 63
8.9 Submission to Jurisdiction; Waivers...........................A 63
8.10 Enforcement...................................................A 64
8.11 Definitions...................................................A 64
8.12 Waiver of Jury Trial..........................................A 65
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
A-v
<PAGE>
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.
W I T N E S S E T H:
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
<PAGE>
A-2
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 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
<PAGE>
A-3
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 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.
<PAGE>
A-4
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 share 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
<PAGE>
A-5
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
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
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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.
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
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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
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lieu of fractional Teleglobe Common Shares shall be paid to any such 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
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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.
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
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A-10
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.
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
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A-11
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.
(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
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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.
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(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 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
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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
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
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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 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.
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(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
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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
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
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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 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
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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 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
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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
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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.
(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
<PAGE>
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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,
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
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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.
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
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"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
<PAGE>
A-25
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 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
<PAGE>
A-26
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 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
<PAGE>
A-27
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
<PAGE>
A-28
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 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
<PAGE>
A-29
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.
(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
<PAGE>
A-30
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 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
<PAGE>
A-31
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
<PAGE>
A-32
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 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
<PAGE>
A-33
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 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;
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(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.
(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
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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
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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.
(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
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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 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
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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
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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
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,
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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.
(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
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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
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
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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.
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(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
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.
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(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 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
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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").
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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 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
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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 ByLaw 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 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
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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 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).
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(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.
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(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 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
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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.
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.
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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 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
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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.
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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.
(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.
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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
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.
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(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
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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) 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
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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 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
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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 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.
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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
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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.
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:
(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
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(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
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 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
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A-63
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 (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.
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A-64
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
<PAGE>
A-65
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.
<PAGE>
A-66
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
<PAGE>
GLOSSARY OF DEFINED TERMS
Definition Location of Definition
Acquisition Proposal.............................................ss. 5.5(a)(i)
Affiliates.......................................................ss. 8.11
Agreement........................................................Preamble
Alternative Transaction..........................................ss. 5.5(c)
Average Price....................................................ss. 2.5(b)
Blue Sky Laws....................................................ss. 3.1(d)(iii)
Board of Directors...............................................ss. 8.11(c)
Business Day.....................................................ss. 8.11(d)
CBCA.............................................................Preamble
Canadian GAAP....................................................Recitals
Canadian Securities Laws.........................................ss. 8.11(e)
Canadian Teleglobe Employee Plans................................ss. 3.2(t)
Century-Based Data...............................................ss. 3.1(aa)
Certificate......................................................ss. 1.8(b)
Closing..........................................................ss. 1.2
Closing Date.....................................................ss. 1.2
Code.............................................................Recitals
Common Stock ....................................................ss. 1.5
Communications Act...............................................ss. 3.1(d)(iii)
Competing Share Transaction......................................ss. 7.1(f)
Confidentiality Agreement........................................ss. 5.3
Contract.........................................................ss. 3.1(d)(ii)
Converted Option.................................................ss. 1.8(e)
CSA..............................................................ss.3.2(e)
Delaware Certificate of Merger...................................ss. 1.3
DGCL.............................................................ss. 1.1
Effective Time...................................................ss. 1.3
Environmental Law................................................ss. 3.1(r)(iv)
ERISA............................................................ss. 3.1(s)(i)
Excel............................................................Preamble
Excel Board Approval.............................................ss. 3.1(h)
Excel Common Stock...............................................Recitals
Excel Consent and Voting Agreement...............................Recitals
Excel Disclosure Documents.......................................ss. 3.1(e)
Excel Disclosure Schedule........................................ss. 3.1
Excel Employee Plans.............................................ss. 3.1(s)(i)
Excel Fairness Opinion...........................................ss. 3.1(k)
Excel Fairness Opinion Banker....................................ss. 3.1(j)
Excel Intellectual Property......................................ss. 3.1(o)
Excel Material Contracts.........................................ss. 3.1(p)
Excel Permits....................................................ss. 3.1(d)(iv)
Excel Stockholders Consent.......................................ss. 5.1(b)
Excel Stockholders Meeting.......................................ss. 5.1(b)
<PAGE>
Definition Location of Definition
Excel Stock Option..............................................ss. 1.8(e)
Excel Stock Option Agreement....................................Recitals
Excel Stock Plans...............................................ss. 1.8(e)
Excel Voting Debt...............................................ss. 3.1(c)(ii)
Exchange Act....................................................ss. 3.1(b)
Exchange Agent..................................................ss. 2.1
Exchange Fund...................................................ss. 2.1
Exchange Ratio..................................................ss. 1.8(a)
Exchanges ......................................................ss. 3.2(d)(iii)
Expenses........................................................ss. 5.6
FCC.............................................................ss. 3.1(d)(iii)
Federal Communications Laws.....................................ss. 3.1(d)(iii)
Form F-4........................................................ss. 5.1(a)
Governmental Entity ............................................ss. 3.1(d)(iii)
HSR Act.........................................................ss. 3.1(d)(iii)
Hazardous Substance.............................................ss. 3.1(r)(v)
IRS.............................................................ss. 3.1(m)(i)
Joint Information Statement/Proxy Statement/Prospectus..........ss. 5.1(a)
Laws............................................................ss. 1.5
Material Adverse Effect.........................................ss. 8.11(f)
Material Leases.................................................ss. 3.1(n)(i)
ME..............................................................ss. 3.2(d)(iii)
Merger..........................................................Recitals
Merger Consideration............................................ss. 1.8(a)
Merger Sub......................................................Preamble
Merger Sub Common Stock.........................................ss. 1.8(d)
NYSE............................................................ss. 2.5(b)
Permit..........................................................ss. 3.1(d)(ii)
Person..........................................................ss. 8.11(h)
PUCs............................................................ss. 3.1(d)(iii)
Recent Excel Disclosure Documents...............................ss. 3.1(e)
Recent Teleglobe Disclosure Documents...........................ss. 3.2(e)
Registration Rights Agreement ..................................Recitals
Regulatory Law..................................................ss. 5.4(b)
Required Articles Amendment Vote................................ss. 3.2(i)
Required By-Law Amendment Vote..................................ss. 3.2(d)(i)
Required Consents...............................................ss. 3.1(d)(iii)
Required Excel Vote.............................................ss. 3.l(i)
Required Share Issuance Vote ...................................ss. 3.2(i)
Required Teleglobe Vote.........................................ss. 3.2(i)
Restricted Period...............................................ss. 5.13
Rule 145 Affiliates.............................................ss. 5.11
ii
<PAGE>
Definition Location of Definition
SAS 72...........................................................ss. 5.9
SEC..............................................................ss. 1.8(e)
Securities Act...................................................Recitals
Share Issuance...................................................ss. 3.2(d)(i)
Software.........................................................ss.3.1(aa)
Stock Option Agreements..........................................Recitals
Subsidiary.......................................................ss. 8.11(i)
Superior Proposal................................................ss. 5.5(a)
Surviving Corporation............................................Recitals
Surviving Corporation Shares.....................................Recitals
Surviving Corporation Stock .....................................Recitals
Tax or Taxes.....................................................ss. 3.1(m)(ii)
Teleglobe........................................................Preamble
Teleglobe Articles Amendment.....................................Recitals
Teleglobe Board Approval.........................................ss. 3.2(h)
Teleglobe By-Law Amendment.......................................Recitals
Teleglobe Common Shares..........................................Recitals
Teleglobe Consent and Voting Agreements..........................Recitals
Teleglobe Disclosure Documents...................................ss. 3.2(e)
Teleglobe Disclosure Schedule....................................ss. 3.2
Teleglobe Employee Plans.........................................ss. 3.2(t)
Teleglobe Fairness Opinion.......................................ss. 3.2(k)
Teleglobe Fairness Opinion Banker................................ss. 3.2(j)
Teleglobe Intellectual Property..................................ss. 3.2(o)
Teleglobe Material Contracts.....................................ss. 3.2(p)
Teleglobe Option Plan............................................ss. 3.2(c)(i)
Teleglobe Permits................................................ss. 3.2(d)(iv)
Teleglobe Shareholders Consent...................................ss. 5.1(c)
Teleglobe Shareholders Meeting...................................ss. 5.1(c)
Teleglobe Stock Dividend.........................................ss. 1.8(a)
Teleglobe Stock Option Agreement.................................Recitals
Teleglobe Voting Debt............................................ss.3.2(c)(ii)
Termination Date.................................................ss. 7.1(b)
Termination Fee..................................................ss. 7.3(a)
the other party..................................................ss. 8.11(g)
Third Party......................................................ss. 5.5(c)
Transaction Documents ...........................................ss. 8.11(j)
TSE..............................................................ss. 3.2(d)(iii)
US GAAP..........................................................Recitals
US Teleglobe Employee Plans......................................ss. 3.2(s)(i)
Violation........................................................ss. 3.1(d)(ii)
Voting Agreements................................................Recitals
iii
<PAGE>
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
B-1
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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.
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.
B-2
<PAGE>
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
B-3
<PAGE>
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:
<PAGE>
(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
C-2
<PAGE>
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.
(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.
C-3
<PAGE>
(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.
C-4
<PAGE>
APPENDIX D
EXECUTION COPY
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.
<PAGE>
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 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
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<PAGE>
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
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<PAGE>
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.
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
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<PAGE>
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
D-5
<PAGE>
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), (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
D-6
<PAGE>
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:
(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, TX 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
(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
D-7
<PAGE>
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
D-8
<PAGE>
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 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
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<PAGE>
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>
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>
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>
Schedule I
Share Ownership
Name and Address Number of Shares
of Shareholder Beneficially Owned
- ---------------- ------------------
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
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<PAGE>
Schedule II
Liens on Shares
[Austex has liens on portions of shares.]
D-14
<PAGE>
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;
<PAGE>
E-2
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 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
<PAGE>
E-3
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
<PAGE>
E-4
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 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
<PAGE>
E-5
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
delivered as set forth below, or pursuant to such other instructions as may be
designated in writing by the party to receive such notice:
(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
<PAGE>
E-6
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
(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.
<PAGE>
E-7
(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, except if such
non-performance by the Shareholder is due to fiduciary duties owed to its
unitholders, immediate and irreparable harm or injury
<PAGE>
E-8
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.
<PAGE>
E-9
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
<PAGE>
SCHEDULE I
SHARE OWNERSHIP
Number of Shares Rights to Acquire
Beneficially Owned Liens Additional Shares
------------------ ----- -----------------
2,481,400(1) None None
- -------------------------
1. Before giving effect to the Teleglobe Stock Dividend.
<PAGE>
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.
<PAGE>
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;
<PAGE>
F-2 TRANSLATION
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 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.
<PAGE>
F-3 TRANSLATION
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.
<PAGE>
F-4 TRANSLATION
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
<PAGE>
F-5 TRANSLATION
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
delivered as set forth below, or pursuant to such other instructions as may be
designated in writing by the party to receive such notice:
(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
<PAGE>
F-6 TRANSLATION
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
(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 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
<PAGE>
F-7 TRANSLATION
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.
<PAGE>
F-8 TRANSLATION
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
<PAGE>
SCHEDULE I TRANSLATION
SHARE OWNERSHIP
Number of Shares Rights to Acquire
Beneficially Owned Liens Additional Shares
------------------ ----- -----------------
4,028,424(1) None None
1. 8,056,848 giving effect to the Teleglobe Stock Dividend.
<PAGE>
SCHEDULE II TRANSLATION
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: /s/ Pierre Belanger
------------------------------
Name: Pierre Belanger
Title: President
By: /s/ Ginette Depelteau
-------------------------------
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.
<PAGE>
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;
<PAGE>
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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 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.
<PAGE>
G-3
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
<PAGE>
G-4
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
<PAGE>
G-5
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 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
<PAGE>
G-6
below, or pursuant to such other instructions as may be designated in writing by
the party to receive such notice:
(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
(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
<PAGE>
G-7
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.
<PAGE>
G-8
(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.
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:
<PAGE>
SCHEDULE I
SHARE OWNERSHIP
Number of Shares Rights to Acquire
Beneficially Owned Liens Additional Shares
- ------------------- ----- -----------------
14,815,186(1) None None
1,285,000(2) None None
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.
<PAGE>
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.
<PAGE>
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
<PAGE>
H-2
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 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
<PAGE>
H-3
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.
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
<PAGE>
H-4
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.
<PAGE>
H-5
(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 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:
<PAGE>
H-6
(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
(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.
<PAGE>
H-7
(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,
<PAGE>
H-8
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.
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
<PAGE>
SCHEDULE I
SHARE OWNERSHIP
<TABLE>
<CAPTION>
NUMBER OF SHARES RIGHTS TO ACQUIRE
BENEFICIALLY OWNED LIENS(2) ADDITIONAL SHARES
- ------------------ -------- -----------------
<S> <C> <C>
11,314,983(1) 1,531,536 shares pledged with Montreal n/a
Trust (in connection 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.
<PAGE>
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.
<PAGE>
APPENDIX I
EXECUTION COPY
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
<PAGE>
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 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
I-2
<PAGE>
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:
I-3
<PAGE>
(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 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
I-4
<PAGE>
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
I-5
<PAGE>
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 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
I-6
<PAGE>
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
I-7
<PAGE>
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 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
I-8
<PAGE>
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
Exercise Notice
I-9
<PAGE>
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:
(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
I-10
<PAGE>
with a copy to
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: Philip T. Ruegger III, Esq.
Facsimile No.: 212-455-2502
(b) if to the Grantor, to
Excel Communications, Inc.
8750 North Central Expressway
Suite 2000
Dallas, TX 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 No.: 212-310-8007
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.
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<PAGE>
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 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
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<PAGE>
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.
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<PAGE>
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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<PAGE>
APPENDIX J
EXECUTION COPY
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.
<PAGE>
J-2
(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 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.
<PAGE>
J-3
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.
<PAGE>
J-4
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
<PAGE>
J-5
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 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
<PAGE>
J-6
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.
<PAGE>
J-7
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 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
<PAGE>
J-8
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.
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.
<PAGE>
J-9
(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
<PAGE>
J-10
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:
(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
<PAGE>
J-11
with a copy to
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: Philip T. Ruegger
Facsimile: 212-455-2502
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 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
<PAGE>
J-12
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.
<PAGE>
J-13
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
<PAGE>
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").
W I T N E S S E T H :
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:
<PAGE>
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 any time, 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 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
K-2
<PAGE>
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
K-3
<PAGE>
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.
(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
K-4
<PAGE>
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
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<PAGE>
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 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
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<PAGE>
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
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<PAGE>
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 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
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<PAGE>
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' 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
K-9
<PAGE>
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 with the custodian and
attorney-in-fact named therein a certificate or certificates representing such
shares of
K-10
<PAGE>
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
K-11
<PAGE>
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
statement contained in, or by any omission or alleged omission from, information
furnished in writing to the
K-12
<PAGE>
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
K-13
<PAGE>
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
K-14
<PAGE>
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 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
K-15
<PAGE>
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.
K-16
<PAGE>
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.
(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
K-17
<PAGE>
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 del La Gauchetiere ouest
Montreal, Quebec H3B 4X5
Telephone: 514-
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.
(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.
K-18
<PAGE>
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.
K-19
<PAGE>
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.
K-20
<PAGE>
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
K-21
<PAGE>
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.
K-22
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Agreement to
be executed and delivered by its duly officers thereunto duly authorized as of
the date first above written.
TELEGLOBE, INC.
By:__________________________
Name:
Title:
-----------------------------
K-23
<PAGE>
EXHIBIT INDEX
Exhibit No. Document Description Page No.
- ----------- -------------------- --------
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 this 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
signatories therein (filed as Appendix D to this
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 this 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 this 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 this
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 this 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 this
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 this
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 re: legality of
TELEGLOBE Common Shares.............................
103
<PAGE>
Exhibit No. Document Description Page No.
- ----------- -------------------- --------
8.1 Opinion of Weil, Gotshal & Manges LLP re: tax
matters*.......................................
8.2 Opinion of Goodman, Phillips & Vineberg re: tax
matters*.......................................
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 (included
in Exhibit 8.1)*...............................
23.5 Consent of Goodman, Phillips & Vineberg (included
in Exhibit 8.2)*...............................
23.6 Consent of Lehman Brothers.....................
24.1 Power of Attorney: Teleglobe Directors.........
99.1 Opinion of Lehman Brothers Inc. (filed as Appendix B
to this 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 this Information Statement/Prospectus
which forms a part of this Registration Statement)
- --------------------
* To be filed by amendment.
104
Exhibit 3.1
Restated Certificate Certificat
of Incorporation de constitation a jour
Canada Business Loi regissant les societes
Corporations Act par actions de regime federal
- --------------------------------------------------------------------------------
TELEGLOBE INC. 200851-3
TELEGLOBE INC.
- ------------------------------------ -------------------------------------
Name of corporation-Denomination de Corporation number-Numero de la
la societe societe
I hereby certify that the articles Je certifie que les statuts
of incorporation of the above-named constitutifs de la societe
corporation were restated under susmentionnee ont ete mis a jour en
section 180 of the Canada Business vertu de l'artcle 180 de la Loi
Corporations Act as set out in the regissant les societe par actions de
attached restated articles of regime federal, tel qu'il est
incorporation. indique dans les status mis a jour
ci-joints.
June 28, 1994/le 28 juin 1994
Director - Directeur Effective Date of Restatement -
Date d'entree en vigueur de la mise
a jour
- --------------------------------------------------------------------------------
NYFS05...:\41\44241\0005\2097\OUT9018U.340
<PAGE>
2
CANADA BUSINESS
CORPORATIONS ACT
FORM 7
RESTATED ARTICLES OF INCORPORATION
(Section 180)
----------------------------------
1- Name of Corporation
TELEGLOBE INC.
2- Corporation No.
200851-3
3- The place in Canada where the registered office is situated
Montreal Urban Community, Province of Quebec
4- The classes and any maximum number of shares that the
Corporation is authorized to issue
I- An unlimited number of common shares, Class A Non-Voting Shares and
Preferred Shares, all without nominal or par value.
The rights, privileges, restrictions and conditions attaching to the
common shares and to the Class A Non-Voting Shares shall be as follows:
1. Dividends: Subject to the prior rights of any other shares ranking senior
to the common shares and to the Class A Non- Voting Shares (hereinafter
the "Non-Voting Shares") in respect of priority in the payment of
dividends, the holders of common shares and the holders of the Non-Voting
Shares shall be entitled to participate equally, share for share, at the
same time, in any dividend, whether in cash, in shares of the Corporation
or otherwise, which may be declared or paid on any class of such shares,
including, without limitation, with respect to the amount per share of any
such dividend.
2. Winding-up: In the event of the liquidation, dissolution or winding-up of
the Corporation, or other distribution of assets among its shareholders
for the purpose of winding-up its affairs, whether voluntary or
involuntary, all the remaining property of the Corporation available for
<PAGE>
3
distribution to the holders of the common shares and to the holders of
Non-Voting Shares shall, subject to the prior rights of any other shares
ranking senior to the common shares and to the Non-Voting Shares in
respect of any such distribution on liquidation, dissolution or winding-up
of the Corporation or other distribution of assets among its shareholders
for the purpose of winding-up its affairs, whether voluntary or
involuntary, be paid or distributed equally, share for share, to the
holders of the common shares and to the holders of Non-Voting Shares,
without preference or distinction.
3. Voting Rights: At all meetings of shareholders of the Corporation, except
meetings at which only holders of another class of shares are entitled to
vote, the holders of the common shares shall be entitled to one (1) vote
in respect of each common share. Non-Voting Shares shall not have attached
to them any right to vote at any meeting of shareholders other than
provided for pursuant to the Canada Business Corporations Act.
4. Limitation on Voting Rights: Where the Corporation's articles are to be
amended as provided for in paragraphs (a), (b) or (e) of subsection (1) of
section 176 of the Canada Business Corporations Act, the holders of
Non-Voting Shares will not have the right to vote separately as a class.
The rights, privileges, restrictions and conditions attaching to the
preferred shares shall be as follows:
5. Issuable in Series: The preferred shares may at any time and from time to
time be issued in one or more series, each series to consist of such
number of shares as may, before the issue thereof, be determined by
resolution of the Board of Directors of the Corporation.
6. Rights of Each Series: The Board of Directors of the Corporation shall, by
resolution duly passed before the issue of any preferred shares of any
series, determine the designation, rights, privileges, restrictions, and
conditions to be attached to the preferred shares of the such series,
including, but without in any way limiting or restricting the generality
of the foregoing, the rate of preferential dividends, the dates of payment
thereof, the terms and conditions of redemption, if any, and conversion
rights, if any, the whole as may be confirmed and declared by Articles of
Amendment. Notwithstanding the foregoing, no preferred
<PAGE>
4
shares shall have attached to them any right to vote at any meeting of
shareholders other than:
(i) as provided for pursuant to the Canada Business Corporations Act; and
(ii) as may be provided for in the rights, privileges, restrictions and
conditions attached to any new series of preferred shares created by the
Board of Directors of the Corporation but in such case, voting rights
shall be attached to the preferred shares of such series if, and only if,
the Corporation fails to pay a certain number of dividends, as previously
determined by the Board of Directors of the Corporation, from time to
time.
7. Redemption Price: For the purposes hereof, the term "redemption price" for
any preferred shares shall mean:
(i)(A) where such share was issued for money, the amount for which such
shares was issued; or
(ii) where such share was issued in whole or in part for a consideration
other than money, then the amount in money (if any) paid for the issue of
such shares, plus an amount equal to the fair market value of such other
consideration received; such fair market value shall be calculated as at
the date of issue of such shares and shall be determined in accordance
with recognized standards of valuation.
The redemption price shall be reduced by the amount of any return of
capital paid to the holder of any preferred share as of the date of such
return of capital.
8. Priority The preferred shares of each series shall, with respect to
priority in payment of dividends and in the distribution of assets in the
event of the liquidation, dissolution or winding-up of the Corporation,
whether voluntary or involuntary, or any other distribution of the assets
of the corporation among shareholders for the purpose of winding-up its
affairs, be entitled to a preference over the common shares of the
Corporation and over any other shares ranking junior to the preferred
shares as may be determined as to their respective series authorized to be
issued.
9. Parity with Other Series: The preferred shares of each series shall rank
on a parity with the preferred shares of every other series with respect
to priority in payment of
<PAGE>
5
dividends and in the distribution of assets in the event of the
liquidation, dissolution or winding-up of the Corporation, whether
voluntary or involuntary, or any other distribution of the assets of the
Corporation among its shareholders for the purpose of winding-up its
affairs.
10. Winding-Up: In the event of the liquidation, dissolution or winding-up of
the Corporation or any other distribution of the assets of the Corporation
among its shareholders for the purpose or winding up its affairs, the
holders of the preferred shares shall be entitled to receive, before any
distribution of the assets is made among the holders of the common shares
and any other class of shares ranking junior to the preferred shares, an
amount equal to the redemption price for such shares plus an amount equal
to all accrued and unpaid dividends thereon, whether or not declared
(which for such purposes shall be calculated up to the date of such
distribution), and no more.
11. Modification to Series: Subject to the issuance of a certificate by the
Director under the Canada Business Corporations Act, the Corporation may
at any time or times or from time to time pass a special resolution or
resolutions whereby the terms hereof and the foregoing paragraph may be
altered, amended or repealed or the application thereof suspended in any
particular case and changes may be made to the rights, privileges,
restrictions and conditions, attaching to the preferred shares, but no
such special resolution shall have any force or effect until after it has
been sanctioned by the affirmative vote of the holders of not less than
two thirds (2/3) of the preferred shares then outstanding at a meeting
duly called for such purpose, in addition to such other vote of other
classes of other shareholders as may be required by the Canada Business
Corporations Act.
II- A series of preferred shares of the Corporation designated as the "First
Series Preferred Shares".
The rights, privileges, restrictions and conditions attaching to the First
Series Preferred Shares in addition to those attaching the preferred
shares of the Corporation as a class, shall be as follows:
1. Dividends: No dividend may be declared and made payable on the common
shares unless an equal and rateable dividend has been declared and made
payable on the First Series Preferred Shares;
<PAGE>
6
2. Conversion: Each First Series Preferred Share may at any time, at the
option of the holder, be converted into one (1) common share; the
conversion privilege for which provision is made herein shall be exercised
by notice in writing given to the Corporation or its transfer agent
accompanied by the certificate or certificates representing the First
Series Preferred Shares in respect of which the holder desires to exercise
such conversation privilege; such notice shall be signed by the holder of
the First Series Preferred Shares in respect of which such right is being
exercised or by its duly authorized representative and shall specify the
number of First Series Preferred Shares which the holder desires to have
converted; upon receipt of such notice and certificate or certificates,
the Corporation shall, effective as of the date of such receipt, issue or
cause to be issued a certificate or certificates representing fully paid
common shares upon the basis above prescribed to the holder of such First
Series Preferred Shares; if less than all of the First Series Preferred
Shares represented by any certificate are to be converted, the holder
shall be entitled to receive a new certificate representing the First
Series Preferred Shares comprised in the original certificate which are
not to be converted;
3. Fully Paid Shares: All shares resulting from any conversion of First
Series Preferred Shares into common shares shall be deemed to be fully
paid and non-assessable;
4. Right to Stock Dividend: In the event that a holder of First Series
Preferred Shares exercises its right to convert any First Series Preferred
Shares in accordance with the terms hereof at any time following payment
by the Corporation of any dividend on any outstanding common shares
payable in shares of the Corporation (a "Stock Dividend") and provided no
equivalent Stock Dividend has been declared and paid on the outstanding
First Series Preferred Shares, such holder of First Series Preferred
Shares shall be entitled to receive, in addition to the common shares to
which it would otherwise be entitled on conversion had no Stock Dividend
been paid, an additional number of common shares equal to the number of
common shares which would have been payable to such holder of First Series
Preferred Shares as a Stock Dividend had the conversion rights giving rise
to the issuance of shares been exercised at or prior to the record date
for payment of the said Stock Dividend;
5. Subdivision: In the event of any subdivision or re-division or change of
the common shares of the Corporation at any time
<PAGE>
7
while any of the First Series Preferred Shares are outstanding, into a
greater number of common shares, provided always that there has not been,
concurrently therewith, an equal or equivalent subdivision, re-division or
change of the First Series Preferred Shares into a greater number of First
Series Preferred Shares (or into such other shares into which First Series
Preferred Shares are changed), the number of common shares required to be
issued and delivered by the Corporation on the exercise thereafter of the
right of conversion shall be increased to such number of common shares as
would have resulted from such subdivision, re-division or change if the
right of conversion had been exercised prior to the date of such
subdivision, re-division or change.
6. Consolidation: In the event of any consolidation or change of the common
shares at any time when any First Series Preferred Share is outstanding
and convertible as provided herein, into a lesser number of shares, the
number of common shares required to be issued and delivered by the
Corporation on the exercise thereafter of the right of conversion shall be
reduced to such number of common shares as would have resulted from such
consolidation or change if the right of conversion had been exercised by
the holder of First Series Preferred Shares prior to the date of such
consolidation or change;
III- Divisions
1. Common Shares: As of August 13, 1987, all of the issued and outstanding
Common Shares of the capital stock of the Corporation are subdivided on a
two-for-one basis, such that each issued and outstanding Common Share in
the capital stock of the Corporation is subdivided into two (2) such
Common Shares.
2. First Series Preferred Shares: As of August 13, 1987, all of the issued
and outstanding First Series Preferred Shares in the capital stock of the
Corporation are subdivided on a two-for-one basis, such that each issued
and outstanding First Series Preferred share in the capital stock of the
Corporation is subdivided into two (2) such First Series Preferred Shares.
IV- A series of preferred shares of the Corporation designated as the "Second
Series Preferred Shares", which shall consist of 3,000,000 shares.
<PAGE>
8
The rights, privileges, restrictions, and conditions attaching to the
Second Series Preferred Shares, in addition to those attaching to the
preferred shares of the Corporation as a class, shall be as follows:
1. Dividend
1.1 Payment: The holders of the Second Series Preferred Shares shall be
entitled to receive (in priority to the holders of any shares ranking
junior to the Second Series Preferred Shares) fixed cumulative
preferential cash dividends as and when declared by the Board of Directors
on behalf of the Corporation, out of moneys properly applicable to the
payment of dividends, at the rate of eight per cent (8%) per annum, being
Two Dollars ($2) per share per annum, such dividends to be payable (except
for the first of such dividends in an amount calculated in accordance with
Section 1.2 of this paragraph 1 in equal amounts of fifty cents ($0.50)
per share, quarterly, in respect of each twelve (12) month period on the
first day of February, May, August and November (each of which dates is
hereinafter referred to as a "Dividend Payment Date"). Dividends on the
Second Series Preferred Shares shall accrue, as the case may be, from and
including the date of issue thereof, or from and including the last
Dividend Payment Date in respect of which dividends have been paid in
full. Cheques of the Corporation payable at par in lawful money of Canada
at any branch in Canada of the Corporation's bankers shall be issued in
respect of such dividends (less any taxes required to be deducted) to the
holders of the Second Series Preferred Shares entitled thereto and the
mailing of such cheques to the registered holders of Second Series
Preferred Shares by the Corporation shall constitute satisfaction of
payment of such dividends to the extent of the respective amounts
represented thereby unless any such cheques are not paid upon due
presentation. If on any Dividend Payment Date the dividends provided for
herein as payable on such date are not paid in full on all the Second
Series Preferred Shares then issued and outstanding, such dividends or the
unpaid part thereof shall be paid on a subsequent date or dates as
determined by the Board of Directors. The holders of the Second Series
Preferred Shares shall not be entitled to any dividends other than or in
excess of the cash dividends hereinbefore provided for. A dividend which
is represented by a cheque which has not been presented for payment within
six (6) years after it was issued, or that otherwise remains unclaimed for
a period of six (6) years from the date on which it was declared to be
<PAGE>
9
payable and set apart for payment, shall be forfeited to the
Corporation.
1.2 Calculation for the First Quarterly Dividend: The amount of the
dividend accrued to and payable on August 1, 1991 on each Second Series
Preferred Shares shall be that proportion (rounded to the nearest one
hundredth (1/100th) of one cent) of Two dollars ($2) which the number of
days from and including the date issued to but excluding August 1, 1991 is
to Three Hundred and Sixty-Five (365).
1.3 Election respecting Part VI.I Tax: The Corporation shall make an
election, in the manner and within the time provided under the Income Tax
Act (Canada),(the "Act") under Section 191.2 of the said Act or any
successor or replacement provision of similar effect, and take all other
necessary action under such Act, to pay tax at a rate such that no holder
of Second Series Preferred Shares will be required to pay tax on dividends
received on the Second Series Preferred Shares under Section 187.2 of such
Act or any successor or replacement provision of similar effect.
2. Restriction on Dividends and Retirement of Shares: Without the prior
approval of the holders of outstanding Second Series Preferred Shares
given as hereinafter set forth at Paragraph 12 of this Article IV:
a) the Corporation shall not pay or set apart for payment any dividends
(other than stock dividends in shares of the Corporation ranking junior to
the preferred Shares of the Corporation) on any shares of the Corporation
ranking junior to the preferred shares of the Corporation or any series
thereof;
b) the Corporation shall not call for redemption, redeem, purchase or
otherwise retire or make any capital distribution on or in respect of any
shares ranking junior to or on a parity with the preferred shares of the
Corporation or any series thereof (except out of the net cash proceeds of
a substantially concurrent issue of shares of the Corporation ranking
junior to or on a parity with the preferred shares of the Corporation or
any series thereof);
c) except in connection with the redemption of Second Series Preferred
Shares as set forth in Paragraph 6 of this Article IV, the Corporation
shall not call for redemption, redeem, or otherwise retire less than all
of the Second Series Preferred Shares; or
<PAGE>
10
d) except in connection with the exercise of a reaction privilege of a
shareholder or mandatory redemption obligation of the Corporation
attaching thereto, the Corporation shall not call for redemption, redeem,
or other wise retire any shares of any class or series ranking prior to or
on a parity with the preferred shares of the Corporation or any series
thereof;
unless, in each such case, all cumulative preferential dividends accrued
on outstanding Second Series Preferred Shares and on all other outstanding
shares of the Corporation ranking in priority to or on a parity with the
Second Series Preferred Shares up to and including the dividend payable on
the last preceding date applicable to any such shares for the payment of
dividends shall have been declared and paid or made available for payment
at the date of such declaration or payment or setting apart or call for
redemption or purchase for cancellation.
3. Liquidation: The holders of the Second Series Preferred Shares shall be
entitled on the liquidation, dissolution or winding-up of the Corporation
or other distribution of assets of the Corporation among its shareholders
for the purpose of winding up its affairs (in priority to the holders of
shares ranking junior to the Second Series Preferred Shares) to the
payment of twenty-five dollars ($25) in respect of each share together
with an amount equal to all accrued and unpaid cumulative preferential
dividends thereon, whether or not declared, calculated to the date of such
distribution. After payment to the holders of the Second Series Preferred
Shares as aforesaid such holder shall not be entitled to share in any
further distribution of the assets of the Corporation.
4. Redemption at the Option of the Corporation
4.1 No Redemption: The Corporation may not redeem any Second Series
Preferred Shares prior to May 2, 1997.
4.2 Right to Redeem: Subject to Paragraph 2 of this Article IV, the
Corporation, upon giving notice as hereinafter provided, may, on or after
May 2, 1997, redeem all at any time and part from time to time of the
Second Series Preferred Shares on payment for each shares to be redeemed
of a price of Twenty-five Dollars ($25), plus in each case an amount equal
to all accrued and unpaid cumulative preferential dividends thereon,
whether or not declared, calculated to the date of redemption (the whole
constituting the "Second Series Redemption Price").
<PAGE>
11
4.3 Partial Redemption: If less than all outstanding Second Series
Preferred Shares are to be redeemed pursuant to Section 4.2 of this
Paragraph 4, the shares to be redeemed shall be selected by lot, or
redeemed pro rata in such manner as the Board of Directors may in its
discretion by resolution determine.
4.4 Procedure: The Corporation shall give at least sixty (60) days prior
notice in writing to each person who, at the date of giving such notice,
is the registered holder of the Second Series Preferred Shares to be
redeemed, of the intention of the Corporation to redeem such shares. Such
notice shall be given, at the option of the Corporation, by personal
delivery or by posting the same in a postage paid envelope addressed to
each holder of Second Series Preferred Shares to be redeemed at the last
address of such holder as it appears on the books of the Corporation or,
in the event of the address of any holder not so appearing, then to the
address of such holder last known to the Corporation, provided that the
accidental failure or omission to give any such notice as aforesaid to one
or more of such holders shall not affect the validity of the redemption,
and upon any such failure or omission being discovered the Corporation
shall give notice as aforesaid and such notice shall have the same force
and effect as if given correctly and in due time. Such notice shall set
out the Second Series Redemption Price, the Conversion Rate in effect on
the date of the mailing of the notice, the time, place and manner of
redemption and, in the case of partial redemption, the number of Second
Series Preferred Shares held by the person to whom it is addressed which
are to be redeemed.
4.5 Payment: On and after the date so fixed for redemption, the
Corporation shall pay or cause to be paid to the holders of such Second
Series Preferred Shares to be redeemed the applicable Second Series
Redemption Price on presentation and surrender at the head office of the
Corporation, or at any other place or places within Canada designated by
such notice, of the certificate or certificates for such Second Series
Preferred Shares so called for redemption. Such payment shall be made by
cheque payable at par at any branch in Canada of the Corporation's bankers
and the delivery of such cheques shall be deemed to constitute
satisfaction of the respective amounts represented thereby (plus any tax
required to be and deducted or withheld therefrom). From and after the
date fixed for redemption in any such notice, the Second Series Preferred
Shares called for redemption shall be deemed to have been redeemed and the
holders thereof shall
<PAGE>
12
cease to be entitled to dividends or to exercise any of the rights of
shareholders in respect thereof unless any such cheques are not paid on
due presentation, in which event the rights of the holders of such shares
shall remain unimpaired.
4.6 Deposit of Second Series Redemption Price: At any time after notice of
redemption is given as aforesaid, the Corporation shall have the right to
deposit the Second Series Redemption Price of any and all Second Series
Preferred Shares to be redeemed with any chartered bank or banks or with
any trust company or trust companies in Canada named in the notice of
redemption to the credit of a special account or accounts in trust for the
respective holders or such shares, to be paid to them respectively upon
presentation and surrender to such bank or banks or trust company or trust
companies of the certificate or certificates representing the same. Upon
such deposit or deposits being made or upon the date fixed for redemption
in such notice, whichever is later, the shares in respect of which such
deposit shall have been made shall be deemed to have been redeemed and the
rights of each holder thereof shall be limited to receiving the proportion
(less any tax required to be and deducted or withheld therefrom) of the
amounts so deposited applicable to such shares, without interest, any
interest allowed on any such deposit belonging the Corporation.
4.7 New Certificate upon Partial Redemption: If a part of the Second
Series Preferred Shares represented by any certificate shall be redeemed,
a new certificate for the balance shall be issued without charge.
5. Purchase for Cancellation
5.1 Right to Purchase: Subject to the terms of Paragraph 2 of this Article
IV, the Corporation may, at any time, purchase in the open market for
cancellation any or all of the Second Series Preferred Shares at a price
not exceeding twenty-five dollars ($25) plus all accrued and unpaid
dividends thereon, whether or not declared calculated to the date of such
purchase for cancellation. Any Second Series Preferred Shares so purchased
by the Corporation shall be cancelled and shall not be reissued.
5.2 Partial Purchase for Cancellation: If a part only of the Second Series
Preferred Shares represented by any certificate shall be purchased for
cancellation, a new certificate for the balance shall be issued without
charge.
<PAGE>
13
6. Redemption at Option of Holder
6.1 Holder's Right to Require Redemption: Each holder of Second Series
Preferred Shares shall be entitled, subject to and upon compliance with
the provisions of this Paragraph 6, to require to the Corporation to
redeem all or any part of the Second Series Preferred Shares registered in
the name of that holder on May 1, 1997 (the "Retraction Date") at price
equal to twenty-five dollars ($25) per share plus an amount equal to all
accrued and unpaid dividends thereon, whether or not declared, calculated
to the date of redemption, the whole constituting the "Retraction Price"
6.2 Procedure: The Corporation or the transfer agent for the time being of
the Second Series Preferred Shares shall, at least sixty (60) days and not
more than ninety (90) days prior to the Retraction Date, give written
notice of the right provided for in Section 6.1 of this Paragraph 6 to the
registered holders of the Second Series Preferred Shares. Such notice
shall set out the Retraction Price and particulars of the procedure to be
followed by any holder wishing to exercise such right, including the time,
place and manner of exercise of such right as hereinafter set out. If, on
the date of such notice, the Corporation, acting in good faith, has reason
to believe that the Corporation will be unable, under applicable law, to
redeem all of the Second Series Preferred Shares on the Retraction Date,
such notice shall contain a statement to that effect, as well as an
estimate of the number of Second Series Preferred Shares which the
Corporation expects to be in a position to redeem on the Retraction Date.
Each holder of Second Series Preferred Shares who elects to have the
Corporation redeem any or all Second Series Preferred Shares registered in
the name of that holder must, prior to the close of business on April 15,
1997, deposit the certificates representing the Second Series Preferred
Shares which that holder desires to have redeemed with the transfer agent
for the Second Series Preferred Shares at any place where a transfer
registry is maintained and must, at the time of such deposit, have
signified his election and the number of shares which he desires to have
redeemed by duly completing the holder's election contained in the
retraction panel contained on the certificates for Second Series Preferred
Shares.
6.3 Payment: Subject to Section 6.4 of this Paragraph 6, the Corporation
shall redeem on the Retraction Date the number of Second Series Preferred
Shares for which certificates have been deposited and with respect to
which the holders have
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14
signified their election as aforesaid by paying to the holder entitled
thereto or by depositing the Retraction Price, both as set forth in
Paragraph 4 of this Article IV. The Second Series Preferred Shares in
respect of which such payment or deposit is made shall be deemed to have
been redeemed on the Retraction Date and the holder thereof shall cease to
be entitled to dividends or to exercise any of the rights of holders
thereof, unless payment or deposit of the Retraction Price is not made as
aforesaid, in which event (but subject to Sections 6.5 and 6.6 of this
Paragraph 6 the rights of the holders of such shares shall remain
unimpaired.
6.4 Limitation: If the redemption by the Corporation of all Second Series
Preferred Shares required to be redeemed on the Retraction Date under this
Paragraph 6 would be contrary to applicable law, the Corporation shall
redeem pro rata (to the nearest whole share) the maximum number of Second
Series Preferred Shares (rounded to the next lower multiple of One Hundred
(100) shares) which the Corporation is then permitted to redeem.
Thereafter, the Corporation shall redeem pro rata (to the nearest whole
share) on each succeeding Dividend Payment Date the maximum number of
shares (rounded to the next lower multiple of One Hundred (100) shares)
which the Corporation is then permitted to redeem, and so on until all
Second Series Preferred Shares which have been deposited for redemption
under this Paragraph 6 and which have not been released from deposit under
Section 6.6 of this Paragraph 6 have been redeemed. Redemptions under
Section 6.4 of this Paragraph 6 shall be in accordance with Paragraph 4 of
this Article IV, except that the shares to be redeemed shall be shares
which have been deposited for redemption under this Paragraph 6 and which
have not been released from deposit under Section 6.6 of this Paragraph 6.
6.5 Partial Redemption: Upon any redemption of part but not all Second
Series Preferred Shares represented by any certificate(s) deposited as
aforesaid, the Corporation shall issue a new certificate to the holder
representing the number of Second Series Preferred Shares not redeemed and
remaining outstanding, provided that any certificate issued in respect of
shares not released from deposit under Section 6.6 of this Paragraph 6
shall remain on deposit pending redemption under Section 6.4 of this
Paragraph 6.
6.6 Election Irrevocable:
6.6.1 Subject to clause 6.6.2, the election by the holder to require
the Corporation to redeem any Second
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15
Series Preferred Shares shall be irrevocable upon receipt by the
Corporation of the certificates for the shares to be redeemed and
the signification of election of the holder as aforesaid.
6.6.2 To the extent that the Corporation has not redeemed shares
deposited for redemption due to the operation of Section 6.4 of this
Paragraph 6, any holder who made an original deposit may elect to
withdraw all but not less than all the number of shares so deposited
by him, and not redeemed, by giving notice to that effect at least
five (5) business days prior to any succeeding Dividend Payment Date
on which such shares may be subject to redemption by the Corporation
as in this Paragraph 6 provided. Any such notice shall be deemed to
be validly given if the same is duly executed by or on behalf of the
registered holder of such shares and delivered to the transfer agent
of the Corporation at any office where transfers of such shares may
be registered and the date of delivery of such notice shall be
deemed to be the date of giving same, in which case, such holder
shall be deemed to have elected not to have the unredeemed balance
of his deposited shares redeemed under Section 6.4 of this Paragraph
6; such number of shares deposited and not redeemed shall be
released from the deposit and the Corporation shall thereafter have
no obligation to redeem pursuant to Section 6.4 of this Paragraph 6
any of the shares so released.
6.7 No Affected Dividends: The inability of the Corporation to effect a
redemption in whole on the Retraction Date or a subsequent Dividend
Payment Date shall not affect or limit the obligation of the Corporation
to pay any dividends accrued or accruing on the Second Series Preferred
Shares from time to time not redeemed and remaining outstanding.
7. Conversion Rights
7.1 Right to Convert: Subject to and upon compliance with the provisions
of this Paragraph 7, the holder of any Second Series Preferred Shares may
elect at any time including, in case the Second Series Preferred Shares
are called for redemption by the Corporation, up to the close of business
on the third business day prior to the date fixed for redemption, that
such Second Series Preferred Shares be converted into fully paid and
non-assessable common shares of the Corporation (the "Common Shares") at a
conversion rate of 2.32558 Common Shares for each Second Series Preferred
Share
<PAGE>
16
so converted, representing an effective conversion price of $10.75 for
each Common Share as currently constituted. As used herein, "Conversion
Rate" shall mean the conversion rate set forth in this Section 7.1 of this
Paragraph 7 as adjusted from time to time in accordance with Paragraph 8
of this Article IV.
7.2 Conversion Procedure: In order to exercise the conversion privilege
herein provided for, the holder of any Second Series Preferred Shares to
be converted shall surrender the certificate or certificates representing
such Second Series Preferred Shares to Corporation or the transfer agent
for the time being of the Second Series Preferred Shares with the election
of conversion privilege panel contained on the certificates for Second
Series Preferred Shares duly completed by the said holder or his agent
specifying the number of Second Series Preferred Shares which the holder
desires to convert. If any Common Shares into which such Second Series
Preferred Shares are to be converted are to be issued to a person or
persons other than the registered holder thereof, such election of
conversion privilege shall be accompanied by payment to the Corporation of
any transfer tax which may be payable by reason thereof. The endorsement
of the election of conversion privilege by the holder of any Second Series
Preferred Shares and the surrender of the certificate or certificates
representing the Second Series Preferred Shares which that holder desires
to convert shall be deemed to constitute a contract between the holder of
the Second Series Preferred Shares to be converted and the Corporation
whereby: (a) the holder of such Second Series Preferred Shares subscribes
for the number of Common Shares which he shall be entitled to receive upon
such conversion; and (b) the Corporation agrees that the surrender of the
certificate or certificates representing the Second Series Preferred
Shares in the manner aforesaid for conversion, in whole or in part,
constitutes full payment of the subscription price for the Common Shares
issuable on such conversion and to the extent thereof.
As promptly as possible after the date of conversion, but subject to
Paragraph 8 of the article IV, the corporation shall issue or cause to be
issued and deliver or cause to be delivered to the holder whose Second
Series Preferred Shares are so surrendered, a certificate or certificates
in the name or names of the person or persons specified in the election of
conversion privilege for the number of Common Shares deliverable upon te
conversion of such Second Series Preferred Shares, or the specified
portion thereof, as the
<PAGE>
17
case may be, together with new certificates representing the Second Series
Preferred Shares, where applicable, that remain unconverted. Upon
conversion the rights of the holder of such Second Series Preferred Shares
to receive any payment in respect of the Second Series Redemption Price
thereon or any dividend (other than dividends accrued and unpaid thereon,
whether or not declared, calculated to the date of such conversion), shall
cease and the holder or the other person or persons in whose name or names
any certificate or certificates for Common Shares shall be deliverable
upon such conversion shall be deemed to have become on such date the
holder or holders of record of the Common Shares represented thereby.
The right of a holder of Second Series Preferred Shares to convert such
shares into Common Shares shall be deemed to have been exercised and the
holder of Second Series Preferred Shares to be converted (or any person in
whose name such holder of Second Series Preferred Shares shall have
directed that a certificate or certificates representing Common Shares be
issued as provided in this Paragraph 7) shall be deemed to have become a
holder of Common Shares for all purposes, on the date or dates of receipt
by the transfer agent of the certificate or certificates representing
Second Series Preferred Shares as herein provided, notwithstanding any
delay in the delivery of the certificate or certificates representing the
Common Shares into which such Second Series Preferred Shares have been
converted. The registered holder of any Second Series Preferred Shares on
the record date for any dividend payable on such shares shall be entitled
to such dividend notwithstanding that such shares shall have been
converted into Common Shares after such record date and before the payment
date of such dividend, and the registered holder of a Common Share
resulting from such conversion shall be entitled to rank equally with the
registered holders of all other Common Shares from and after the date of
such conversion. Subject to the foregoing, upon conversion of any Second
Series Preferred Shares there shall be no adjustment by the Corporation or
by any holder of Second Series Preferred Shares on account of any dividend
on the Second Series Preferred Shares so converted or on any Common Shares
resulting from such conversion.
The holder of any Second Series Preferred Shares converted in accordance
with the provisions hereof shall be deemed to remain a holder of such
Second Series Preferred Shares in respect of all entitlement to accrued
and unpaid dividends
<PAGE>
18
thereon, whether or not declared, as herein provided, calculated to the
date of such conversion.
Upon surrender to the Corporation or the transfer agent of the Corporation
for the time being of the certificate or certificates representing the
Second Series Preferred Shares which are to be converted in part only, the
holder thereof shall be entitled to receive, without expense to such
holder, one or more new certificates representing the unconverted portion
of the Second Series Preferred Shares so surrendered.
7.3 No Fractional Shares: Notwithstanding anything herein contained, the
Corporation shall in no case be required to issue fractional Common Shares
upon the conversion of any Second Series Preferred Shares. If, except for
the provisions of this part, any fractional Common Shares would be
deliverable upon the conversion of any Second Series Preferred Shares, the
Corporation shall adjust for such fraction by either, at its sole
discretion:
7.3.1 paying to the holder of such surrendered Second Series
Preferred Shares an amount in cash equal to the value thereof (to
the nearest cent), such value to be determined by the amount of the
fraction in relation to the conversion price; or
7.3.2 issuing or causing to be issued in respect of such fraction or
fractions a scrip certificate, transferable by delivery, entitling
the holder thereof and other similar scrip certificates aggregating
one (1) full Common Share, (upon surrender of such scrip
certificates at such place as may be designed therein), to obtain
from the Corporation a full Common Share and to receive a share
certificate therefor. Such scrip certificate shall be in such form
and terms and shall be subject to such conditions as the Corporation
may determine, and shall provide that the holder thereof shall not
be a shareholder or be entitled to receive dividends or to any other
rights of a shareholder.
7.4 Conversion Rights Prior to Redemption: In the event that the Second
Series Preferred Shares are called for redemption, any right of conversion
thereof shall terminate at the close of business on the third business day
immediately prior to the date fixed for redemption, provided, however,
that in the event the Corporation shall fail to redeem such Second Series
Preferred Shares in accordance with the notice of redemption, the right of
conversion shall thereupon be restored.
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19
7.5 Fully Paid and Non-Assessable: All Common Shares resulting from any
conversion of Second Series Preferred Shares shall be deemed to be fully
paid and shall be non-assessable.
8. Adjustments: The number of Common Shares which may be issued upon an
election by a holder of Second Series Preferred Shares to convert as
herein provided shall be subject to adjustment from time to time as
follows:
8.1 Stock Dividends, Subdivision, Consolidation, etc.: In case the
Corporation shall:
8.1.1 except as provided in Subsection 8.7.1 of this Paragraph 8,
issue Common Shares of the Corporation to all or substantially all
the holders of Common Shares by way of a stock dividend or
otherwise; or
8.1.2 subdivide its outstanding Common Shares into a greater number
of shares; or
8.1.3 reduce, combine or consolidate its outstanding Common Shares
into a smaller number of shares; or
8.1.4 reclassify its outstanding Common Shares;
a holder of Second Series Preferred Shares shall be entitled to receive
upon conversion the number of Common Shares which he would have owned or
been entitled to receive had such Second Series Preferred Shares been
converted immediately prior to such time. Any dividend or distribution in
Common Shares declared on the Common Shares shall be deemed to have been
issued or made immediately prior to the time of the record date for such
dividend or distribution for purposes of calculating the number of
outstanding Common Shares under Sections 8.2 and 8.3 of this Paragraph 8.
Such adjustments shall be made successively whenever any event listed
above shall occur.
8.2 Adjustment of Conversion Rate: In case the Corporation shall fix a
record date for the issuance of options, rights or warrants to all or
substantially all the holders of its Common Shares entitling them (for a
period expiring within forty-five (45) days after such record date) to
subscribe for or purchase Common Shares (or securities convertible into or
exchangeable for Common Shares) at a price per share (or having a
conversion or exchange price per share) less than ninety-five per cent
(95%) of the Current Market Price (as
<PAGE>
20
herein defined) of a Common Share on such record date, the Conversion Rate
in effect on such record date shall be adjusted immediately thereafter so
that it shall equal the price determined by multiplying the Conversion
Rate in effect on such record date by a fraction, of which the denominator
shall be the total number of Common Shares outstanding on such record date
plus a number of Common Shares equal to the number arrived at by dividing
the aggregate price of the total number of additional Common Shares so
offered (or the aggregate conversion or exchange price of the convertible
or exchangeable securities so offered) by such Current Market Price per
Common Share and of which the numerator shall be the total number of
Common Shares outstanding on such record date plus the total number of
additional Common Shares offered for subscription or purchase (or into
which the convertible or exchangeable securities so offered are
convertible or exchangeable, as the case may be). Common Shares owned by
or held for the account of the Corporation shall be deemed not to be
outstanding for the purpose of any such computation. Such adjustment shall
be made successively whenever such a record date is fixed. To the extent
that such options, rights or warrants are not so issued or such options,
rights or warrants are not exercised prior to the expiration thereof, the
Conversion Rate shall be readjusted to the Conversion Rate which would
then be in effect based upon the number of Common Shares (or securities
convertible or exchangeable into Common Shares), if any, actually
delivered upon the exercise of such options, rights or warrants.
8.3 Record Date: In case the Corporation shall fix a record date for the
making of a distribution to all or substantially all the holders of its
Common Shares (a) of any shares of any class not included in the
definition of Common Shares, or (b) of evidence of indebtedness, or (c) of
assets (excluding cash dividends paid in the ordinary course out of
earnings and excluding dividends or distributions of common Shares as
provided in Section 8.1 of this Paragraph 8 and stock dividends to holders
of Common Shares as provided in subsection 8.7.1 of this Paragraph 8 or
(d) of options, rights or warrants for a period expiring more than
forty-five (45) days after such record date, then, in each such case the
Conversion Rate shall be adjusted immediately after such record date so
that it shall equal the price determined by multiplying the Conversion
Rate in effect on such record date by a fraction, of which the denominator
shall be the total number of Common Shares or evidences of indebtedness or
assets or options, rights or warrants so distributed and of
<PAGE>
21
which the numerator shall be the total number of Common Shares outstanding
on such record date multiplied by the Current Market Price of a Common
Share on such record date, less the aggregate fair market value (as
determined by the board of directors, whose determination shall be
conclusive) of said shares or evidences of indebtedness or assets or
options, rights or warrants so distributed and of which the numerator
shall be the total number of Common Shares outstanding on such record date
multiplied by such Current Market Price of each such Common Share on such
record date. Common Shares owned by or held for the account of the
Corporation shall be deemed not to be outstanding for the purpose of any
such computation. Such adjustment shall be made successively whenever such
a record date is fixed. To the extent that such distribution is not so
made, the Conversion Rate shall be readjusted to the Conversion Rate which
would then be in effect based upon the said shares or evidences of
indebtedness or assets or options, rights or warrants actually
distributed.
8.4 No Adjustments: No adjustments of the Conversion Rate shall be made
pursuant to Subsection 8.1.1 or pursuant to Sections 8.2 and 8.3 of this
paragraph 8 if the holders of the Second Series Preferred Shares are
permitted to participate in such dividend or distribution on the Common
Shares of the Corporation in Common Shares or in the issue of such
options, rights, warrants or in such distribution, as the case may be, as
though and to the same effect as if they had converted their Second Series
Preferred Shares into Common Shares prior to the record date for such
dividend or distribution or the issue of such options, rights or warrants
or such distribution, as the case may be.
8.5 Other Adjustments: In any case in which this Paragraph 8 shall require
that an adjustment shall become effective immediately after a record date
for an event referred to herein, until the occurrence of such event, the
Corporation may defer (a) issuing to the holder of any Second Series
Preferred Shares converted after such record date and before the
occurrence of such event the additional Common Shares issuable upon such
conversion by reason of the adjustment required by such event in addition
to the Common Shares issuable upon such conversion before giving effect to
such adjustment, and (b) paying to such holder cash in lieu of any
fractional interest to which he is entitled pursuant to Paragraph 7 of
this Article IV above provided, however, that the Corporation shall
deliver to such holder an appropriate instrument evidencing such holder's
rights to receive such
<PAGE>
22
additional Common Shares and such cash, upon the occurrence of the event
requiring such adjustment.
8.6 De Minimis Exception: No adjustment in the Conversion Rate shall be
required unless such adjustment would result in an increase or decrease of
at least one percent (1%) in such conversion price; provided, however,
that any adjustments which by reason of this Section 8.6 are not required
to be made shall be carried forward and taken into account in any
subsequent adjustment.
8.7 Adjustment Exclusion: For greater certainty, nothing contained in this
Paragraph 8 or elsewhere herein shall be construed as requiring adjustment
in the Conversion Rate where an increase in the number of issued Common
Shares results from:
8.7.1 the payment of a dividend in the form of additional Common
Shares to the holders thereof who exercise a rights or option given
to all or substantially all the holders of Common Shares to receive
equivalent dividends in shares in lieu of cash dividends paid in the
ordinary course; or
8.7.2 the exercise of any non-transferable right, option or warrant
extended or given to employees of the Corporation from time to time
to subscribe for or purchase Common Shares or other shares of the
Corporation; or
8.7.3 the exercise of the right already or in future extended or
given to all or substantially all the holders of common Shares to
purchase additional Common Shares at a discount of up to and
including ten percent (10%) pursuant to any employee stock option
plan or plans of the Corporation in effect from time to time; or
8.7.4 the exercise of any right to convert any debenture or other
evidence of indebtedness of the Corporation into Common Shares; or
8.7.5 the exercise of any warrant to purchase Common Shares of the
Corporation; or
8.7.6 the exercise of any right to convert into Common Shares any
shares of any class of shares, other than Common Shares that may be
issued and outstanding from time to time; or
<PAGE>
23
8.7.7 the issuance of any Common Shares or the issuance of any
options, rights, warrants, evidence of indebtedness or other
securities which could result in the subsequent issuance of Common
Shares, in circumstances other than those prescribed in this
Paragraph 8.
8.8 "Current Market Price" and "Weighted Average Daily Market Price"
Defined
8.8.1 "Current Market Price" at any date means a price per Common
Share equal to at least the Weighted Average Daily Market Price as
defined herein, at which the Common Shares on The Toronto Stock
Exchange or, if the Common Shares are not then listed on The Toronto
Stock Exchange, on a stock exchange in Canada on which the Common
Shares are listed as may be selected for such purposes by the Board
of Directors of the Corporation, during any period of thirty (30)
consecutive trading days commencing forty-five (45) trading days
before such date preceding the applicable record date referred to in
Sections 8.2 or 8.3 of this Paragraph 8.
8.8.2 "Weighted Average Daily Market Price", for the purposes of
this Paragraph 8, for a given period, means the sum of the daily
amounts resulting from the multiplication of the daily volume of
Common Shares traded on a Stock Exchange(s) by the arithmetic
average of the high and low at which they have traded on such Stock
Exchange during that day, divided by the total number of Common
Shares traded on such Stock Exchange(s) during such given period.
8.9 Notice of Adjustment: Forthwith after the occurrence of any adjustment
in the Conversion Rate as provided herein, the Corporation shall file with
the transfer agent of the Corporation for the Second Series Preferred
Shares a certificate certifying the amount of such adjustment and, in
reasonable detail, the event requiring and the manner of computing such
adjustment; the Corporation shall also at such time give written notice to
the holders of Second Series Preferred Shares of the Conversion Rate
following such adjustment (in the manner set out at Paragraph 10 of this
Article IV).
9. Corporation to Give Notice to Holders of Second Series Preferred Shares in
Certain Events
<PAGE>
24
If:
a) the Corporation shall declare a dividend or make a distribution on its
Common Shares in Common Shares of the Corporation (other than a stock
dividend to the holders of Common Shares who exercise an option to receive
equivalent dividends in shares in lieu of receiving cash dividends paid in
the ordinary course); or
b) any of the events mentioned in Sections 8.2 and 8.3 of Paragraph 8 of
this Article IV occurs;
then, in each such case the Corporation shall give notice, in the manner
specified herein, to each holder of Second Series Preferred Shares of the
action proposed to be taken and the date on which the books of the
Corporation shall close or a record shall be taken for such dividends,
distribution, subscription rights or other options, rights or warrants, as
the case may be, provided that the Corporation shall only be required to
specify in such notice such particulars of such action as shall have been
fixed and determined at the date on which such notice is given. Such
notice shall also specify the date as of which the holders of Common
Shares of record shall participate in such dividend, distribution,
subscription rights or other rights or warrants, or shall be entitled to
exchange their Common Shares for securities or other property deliverable
upon such reclassification, change, amalgamation, merger, sale, transfer
or other disposition, dissolution, liquidation or winding up, as the case
may be. Such written notice shall be given, with respect to the actions
described above, not less than fourteen (14) days prior to the record date
or the date on which the Corporation's transfer books are to be closed
with respect thereto.
10. Notices
10.1 Methods of Delivery: Subject to clause 10.2 of this Paragraph 10 and
unless otherwise specifically provided elsewhere in the articles of the
Corporation, any notice or other communication from the Corporation herein
provided for shall be sufficiently given if delivered or if sent by
ordinary unregistered mail, postage prepaid, or, in the case of a notice
of redemption, by prepaid registered mail, to the holders of the Second
Series Preferred Shares at their respective addresses appearing on the
books of the Corporation or, at the address of such last holder known to
the Corporation. Accidental failure to give any such notice
<PAGE>
25
or other communication to one or more holders of the Second Series
Preferred Shares shall not affect the validity of the notices or other
communications properly given or any action taken pursuant to such notice
or other communication but, upon such failure being discovered, the notice
or other communication, as the case may be, shall be sent forthwith to
such holder or holders.
10.2 Disruption of Mail Services: If there exists any actual or
apprehended disruption of mail services in any Province in which there are
holders of Second Series Preferred Shares whose addresses appear on the
books of the Corporation to be in such Province, notice may (but need not)
be given to the holders in such Province by means of publication once in
each of two successive weeks in a newspaper of general circulation
published or distributed in the capital city of such Province, or if the
Corporation maintains a register of transfers for the Second Series
Preferred Shares in such Province, then in the city in such Province where
the register of transfers is maintained. Notice given by publication shall
be deemed for all purposes to be proper notice.
10.3 Deemed Delivery: Notice given by mail shall be deemed to be given on
the day upon which it is mailed unless on the day of or the day following
such mailing an actual disruption of mail services has occurred in the
Province from or to which such notice is mailed. Notice given by
publication shall be deemed to be given on the day on which the first
publication is completed in any city in which notice is published.
10.4 Other Requirements: Nothing in this Paragraph 10 shall derogate from
any specific notice requirements otherwise set forth in these articles.
11. Interpretation
11.1 Ranking: For the purposes hereof, the use of the terms "ranking in
priority to", or "ranking on a parity with" or "ranking junior" or similar
terms, whether used independently or in combination, refer to the ranking
of shares of different classes or series in the capital of the Corporation
with respect to the payment of dividends and the distribution of assets in
the event of the liquidation, dissolution or winding up of the
Corporation, voluntary or involuntary, or any other distribution of assets
of the Corporation among its shareholders for the purpose of winding up it
affairs.
<PAGE>
26
11.2 Days: In the event any payment or other action required to be made or
taken by the Corporation pursuant to the provisions hereof would require
to be made or taken on a day other than a business day, such payment or
other action may be made or taken on the next business day. For the
purposes of these provisions, "business day" shall mean a day other than a
Saturday, Sunday or statutory holiday in the jurisdiction in which the
head office of the Corporation is located.
12. Modification to Series: The Corporation may at any time or times or from
time to time pass a special resolution or resolutions whereby the terms
hereof respecting the Second Series Preferred Shares may be altered,
amended or repealed or the application thereof suspended in any particular
case and changes may be made to the rights, privileges, restrictions and
conditions, attaching to the Second Series Preferred Shares, but no such
special resolution shall have any force or effect until after it has been
sanctioned by the affirmative vote of the holders of not less than two
thirds (2/3) of the Second Series Preferred Shares represented and voted
at a meeting duly called for such purpose, in addition to such other vote
of other classes or series of classes of other shareholders as may be
required by the Canada Business Corporations Act.
V- A series of Preferred Shares of the Corporation designed as the "Third
Series Preferred Shares", which shall consist of 5,000,000 shares.
The rights, privileges, restrictions, and conditions attaching to the
Third Series Preferred Shares, in addition to those attaching to the
preferred shares of the Corporation as a class, shall be as follows:
1. Dividends
1.1 Dividend Payment Dates and Dividend Periods: The dividend payment
dates (the "Dividend Payment Dates") in respect of the dividends payable
on the Third Series Preferred Shares shall be the first day of each of the
months of February, May, August and November in each year. A "Dividend
Period" shall mean the period from and including the date of issue of the
Third Series Preferred Shares to but excluding August 1, 1994, being the
first Dividend Payment Date and, thereafter, the period from and including
each Dividend Payment Date to but excluding the next succeeding Dividend
Payment Date.
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27
1.2 Payment of Dividends: The holders of Third Series Preferred Shares
shall be entitled to receive, and the Corporation shall pay thereon, as
and when declared by the board of directors of the Corporation, out of
moneys of the Corporation properly applicable to the payment of dividends,
cumulative, preferential cash dividends (the "Quarterly Dividends")
payable, with respect to each Dividend Period, on the Dividend Payment
Date immediately following the end of such Dividend Period, the first of
such dividends to be payable on August 1, 1994 and to be in an amount per
share determined in accordance with Section 1.3 of this Paragraph 1. For
all subsequent Dividend Periods, dividends, subject to Section 1.3 of this
Paragraph 1, shall be in an amount per Third Series Preferred Share equal
to $0.3375 per share.
1.3 Dividend for Other than a Full Dividend Period: The Quarterly
Dividends for any period which is more or less than a full Dividend Period
shall be determined as follows:
1.3.1 an initial dividend in respect of the period from and
including the date of the initial issue of the Third Series
Preferred Shares to but excluding August 1, 1994 (the "Initial
Dividend Period") equal to the amount obtained (rounded to four
decimal places) when $1.35 is multiplied by a fraction the numerator
of which is the number of days in the Initial Dividend Period and
the denominator of which is 365; which, if the Third Series
Preferred Shares are issued on March 15, 1994, shall be $0.5141 per
share; and a dividend in an amount per share with respect to any
Third Series Preferred Share:
a) which is issued, redeemed, purchased or converted
during any Dividend Period; or
b) where the assets of the Corporation are distributed to the
holders of the Third Series Preferred Shares pursuant to the
provisions attaching to the Preferred Shares as a class with an
effective date during any Dividend Period;
equal to the amount obtained (rounded to four decimal places) when
$1.35 is multiplied by a fraction the numerator of which is the
number of days in such Dividend Period that such share has been
outstanding (excluding the date of issue, redemption, purchase or
conversion or the effective date for the distribution of assets) and
the denominator of which is the number of days in the year in which
such Dividend Period falls.
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28
1.4 Accrual and Cumulation of Dividends: If on any Dividend Payment Date,
the dividend payable on that date is not paid in full on all the Third
Series Preferred Shares then issued and outstanding as set forth in
Sections 1.2 and 1.3 of this Paragraph 1, dividends shall accrue day by
day from and including the date of initial issue of the last Dividend
Payment Date for which payment in full is made, whichever is later, and
the dividend or the unpaid part of it shall be paid on a subsequent date
or dates as determined by the board of directors out of moneys properly
applicable to the payment of dividends.
1.5 Payment Procedure: The Corporation shall pay the dividends on the
Third Series Preferred Shares to the holders of record thereof at the
close of business on the fifth business day immediately preceding the
relevant Dividend Payment Date on or such other date as the board of
directors may determine (less any tax required to be deducted or withheld
by the Corporation) (i) by mailing or delivering cheques dated the
relevant Dividend Payment Date drawn on a Canadian chartered bank and
payable in lawful money of Canada at any branch of such bank in Canada or
(ii) at the registered holder's option, by electronic transfer of funds on
the relevant Dividend Payment Date. The delivery or mailing of any cheque
to a holder of Third Series Preferred Shares shall be a full and complete
discharge of the Corporation's obligation to pay the dividends to such
holder (including any tax required to be and in fact deducted and withheld
therefrom and remitted to the proper taxing authority) unless such cheque
is not honoured when presented for payment. Dividends which are
represented by a cheque which has not been presented to the Corporation's
bankers for payment or that otherwise remain unclaimed for a period of
three years from the date on which they were declared to be payable may be
reclaimed and used by the Corporation for its own purposes and shall
thereupon be forfeited to the Corporation (except as otherwise provided by
law).
2. Redemption, conversion and purchase
2.1 General:
2.1.1 Subject to Paragraph 5 of this Article V and to the extent
permitted by applicable law, the Third Series Preferred Shares may
be redeemed, converted or purchased by the Corporation as provided
in this Paragraph 2 and in Section 3.3 of Paragraph 3 of this
Article V hereof but not otherwise.
<PAGE>
29
2.1.2 For the purposes hereof, the "Common Shares" of the
Corporation shall mean such common shares as currently constituted
and any shares resulting from a reclassification of the common
shares of the Corporation or which result from a capital
reorganization or a consolidation, amalgamation or merger of the
Corporation with or into any other corporation (other than a capital
reorganization, consolidation, amalgamation or merger which does not
result in any reclassification of the common shares or a change of
the common shares into other shares or securities).
2.2 Redemption and Conversion Rights:
2.2.1 The Third Series Preferred Shares shall not be redeemable
prior to April 1, 2001. The Corporation may, subject to the
provisions of any shares of the Corporation ranking prior to or pari
passu with the Third Series Preferred Shares and subject to
Paragraph 5 of this Article V, upon giving notice as hereinafter
provided, redeem on or after April 1, 2001 at any time the whole or
from time to time any part of the then outstanding Third Series
Preferred Shares, by the payment of an amount in cash for each Third
Series Preferred Share so redeemed equal to the sum of $25.00 plus
an amount equal to all accrued but undeclared cumulative
preferential dividends thereon, up to but excluding the date fixed
for redemption (the "Redemption Price").
2.2.2 The Third Series Preferred Shares shall not be convertible at
the option of the Corporation prior to April 1, 2001. Subject to the
approvals of The Montreal Exchange ("ME") and The Toronto Stock
Exchange (the "TSE"), and subject to the provisions of any shares of
the Corporation ranking prior to or pari passu with the Third Series
Preferred Shares, the Corporation may, by giving notice as
hereinafter provided, convert on or after April 1, 2001, at any
time, the whole or any part of the then outstanding Third Series
Preferred Shares into fully paid, non-assessable and freely
tradeable (in all provinces of Canada) Common Shares of the
Corporation on the basis that each Third Series Preferred Share of
each holder called for conversion by the Corporation will be
converted into (subject to that exception as to fractions contained
in Section 2.7 of this Paragraph 2) that number (the "Common Shares
<PAGE>
30
Conversion Number") of Common Shares as is equal to the number
obtained when:
(A) $25.00 plus an amount equal to all accrued but undeclared
cumulative preferential dividends thereon per Third Series Preferred
Share up to but excluding the date fixed for conversion,
is divided by
(B) the greater of (I) $3.00 and (II) 95% of the weighted average
trading price of all Common Shares of the Corporation on the ME and
the TSE for the 20 consecutive trading days ending on the fourth day
immediately prior to the date specified for conversion or, if such
day is not a trading day on the ME and the TSE, then the last
trading day on the ME and the TSE ending immediately prior to such
fourth day (the "Market Price"),
with the result of that calculation being rounded upward to the
nearest 1/100 of a Common Share.
2.2.3 If less than all of the outstanding Third Series Preferred
Shares are to be redeemed or converted, the shares to be redeemed or
converted shall be selected, pro rata (disregarding fractions) or in
such other manner as the board of directors or a committee thereof
in its sole discretion shall by resolution determine.
2.3 Manner of Redemption or Conversion:
2.3.1 Notice of redemption or conversion of Third Series Preferred
Shares shall be given by the Corporation not less than 30 nor more
than 60 calendar days prior to the date fixed for redemption and not
less than 40 nor more than 60 calendar days prior to the date fixed
for conversion, to each holder of Third Series Preferred Shares to
be redeemed or converted, as the case may be. Such notice shall set
out (i) the date (the "Redemption/Conversion Date") on which the
redemption or conversion is to take place; (ii) unless all the Third
Series Preferred Shares held by the holder to whom it is addressed
are to be redeemed or converted, the number of Third Series
Preferred Shares so held which are to be redeemed or converted;
(iii) whether the Corporation shall redeem or convert such Third
Series
<PAGE>
31
Preferred Shares; (iv) the Redemption Price or the method of
determining the Common Share Conversion Number, as the case may be;
and (v) where the Third Series Preferred Shares are to be converted
into Common Shares, the advice that such Common Shares will be
registered in the name of the registered holder of the Third Series
Preferred Shares to be converted unless the Transfer Agent for the
Third Series Preferred Shares (the "Transfer Agent") receives from
such holder, on or before the tenth calendar day prior to the date
fixed for conversion (the "Transferee Notice Date"), at the
principal transfer office of the Transfer Agent in any of the cities
of Halifax, Montreal, Toronto, Winnipeg, Calgary or Vancouver,
written notice in a form and executed in a manner satisfactory to
the Transfer Agent directing the Corporation to register such Common
Shares in some other name or names (the "Transferee") and stating
the name or names (with addresses) accompanied by payment to the
Transfer Agent of any transfer tax that may be payable by reason
thereof and a written declaration of such matters as may be required
by law in order to determine the entitlement of such Transferee to
hold such Common Shares. The Corporation shall, within 24 hours of
the end of the 20 trading day period for calculation of the Market
Price, announce the Common Share Conversion Number by either i)
issuing and delivering to one or more Canadian business news
services a press release, or ii) publishing a notice a La Presse and
in The National Edition of the Globe and Mail.
2.3.2 In the case of a redemption, on and after the
Redemption/Conversion Date the Corporation shall pay or cause to be
paid to the holders of the Third Series Preferred Shares so called
for redemption the Redemption Price therefor (less any tax or other
amount required by law to be deducted or withheld by the
Corporation) on presentation and delivery at the principal transfer
office of the Transfer Agent in any of the cities of Halifax,
Montreal, Toronto, Winnipeg, Calgary or Vancouver, or such other
place or places in Canada designated in the notice referred to in
subsection 2.3.1 of this Paragraph 2, of the certificate or
certificates representing the Third Series Preferred Shares so
called for redemption. Such payment shall be made by cheque mailed
or delivered to the holder in accordance with Paragraph 8 of this
Article V and shall be a full and complete discharge of the
Corporation's obligation to
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32
pay the Redemption Price owed to the holders of Third Series
Preferred Shares so called for redemption unless the cheque is not
honoured when presented for payment. From and after the
Redemption/Conversion Date, the holders of Third Series Preferred
Shares called for redemption shall cease to be entitled to dividends
or to exercise any of the rights of holders of Third Series
Preferred Shares in respect of such shares except the right to
receive therefor the Redemption Price, provided that if payment of
such Redemption Price is not duly made in accordance with the
provisions hereof, then the rights of such of such holders shall
remain unimpaired.
2.3.3 In the case of a redemption, the Corporation shall have the
right at any time after giving a notice of redemption to deposit the
aggregate Redemption Price of the Third Series Preferred Shares
thereby called for redemption, or such part therefor as at the time
of deposit that has not been claimed by the holders entitled
thereto, in a special account with a Canadian chartered bank for the
holders of such shares. If the Corporation deposits moneys pursuant
to this section representing the Redemption Price to which a holder
of Third Series Preferred Shares is entitled, the Corporation shall
promptly give the holder notice of the deposit, including a
description of the manner in which the moneys may be claimed by the
holder. Any interest on any such deposit shall belong to the
Corporation. Redemption moneys which remain unclaimed for a period
of three years from the Redemption/ Conversion Date may be reclaimed
and used by the Corporation for its own purposes and shall thereupon
be forfeited to the Corporation (except as otherwise provided by
law).
2.3.4 In the case of a conversion of Third Series Preferred Shares
into Common Shares, on and after the Redemption/Conversion Date, the
Corporation shall deliver the Common Share Conversion Number of
Common Shares on presentation and delivery by the holder at the
principal transfer office of the Transfer Agent in any of the cities
of Halifax, Montreal, Toronto, Winnipeg, Calgary or Vancouver, or
such other place or places in Canada designated in the notice
referred to in subsection 2.3.1 of this Paragraph 2, of the
certificate of certificates representing the Third Series Preferred
Shares so called for conversion. The Corporation shall deliver or
cause to be delivered certificates representing such Common Shares
registered in the name
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33
of the registered holders of Third Series Preferred Shares to be
converted, or as such holders shall have directed as aforesaid.
Third Series Preferred Shares so converted shall be converted
effective on the Redemption/Conversion Date.
2.3.5 From and after the Redemption/Conversion Date, the holders of
Third Series Preferred Shares so converted who have not presented
and delivered the certificate or certificates representing such
shares as herein required shall cease to be entitled to dividends on
such Third Series Preferred Shares or to exercise any of the rights
of holders of Third Series Preferred Shares in respect of such
shares except the right to receive therefor the Common Share
Conversion Number of Common Shares and any payment with respect to a
fraction of a Third Series Preferred Share.
2.3.6 If less than all Third Series Preferred Shares represented by
any certificate shall be redeemed or converted, a new certificate
for the balance shall be issued without cost to the holder.
2.3.7 The Corporation shall not exercise its right to convert any
Third Series Preferred Shares into Common Shares if on the date for
giving notice or on the Redemption/Conversion Date the Common Shares
are not listed on the ME or TSE and are not freely tradeable under
applicable securities laws in the ten provinces of Canada.
2.4 Purchase: The Corporation may purchase at any time all or from time to
time any number of the outstanding Third Series Preferred Shares in the
open market (including purchases through or from an investment dealer or
firm holding membership on a stock exchange) or pursuant to tenders
received by the Corporation upon an invitation for tenders addressed to
all holders of the Third Series Preferred Shares, at the lowest price or
prices at which, in the opinion of the board of directors or a committee
thereof, the shares are obtainable. If upon any invitation for tenders,
the Corporation receives tenders for Third Series Preferred Shares at the
same price in an aggregate number greater than the number for which the
Corporation is prepared to accept tenders, the shares to be purchased
shall be selected from the shares offered at such price as nearly as may
be pro rata (to the nearest 10 shares) according to the number of Third
Series Preferred Shares offered in each such
<PAGE>
34
tender, in such manner as the board of directors or a committee thereof in
its sole discretion shall by resolution determine. If part only of the
Third Series Preferred Shares represented by any certificate shall be
purchased, a new certificate for the balance of such shares shall be
issued without cost to the holder.
2.5 Conversion into Another Series of Preferred Shares: The Corporation
may at any time designate a further series of Preferred Shares (the "New
Preferred Shares") and notify the holders of Third Series Preferred Shares
that they have the right pursuant to the terms of the Third Series
Preferred Shares, at their option, to convert their Third Series Preferred
Shares into fully paid, non-assessable and freely tradeable (in all
provinces of Canada) New Preferred Shares on a share from share basis on a
date specified by the Corporation in such notice (the "Exchange Date").
Such notice shall provide the details of the terms and conditions of the
New Preferred Shares and instructions on how to convert Third Series
Preferred Shares into New Preferred Shares and shall be accompanied by the
proper form of instrument of surrender. The Third Series Preferred Shares
will be so convertible into New Preferred Shares only if such New
Preferred Shares are not, and the Corporation will ensure that such New
Preferred Shares will not, if issued, be or be deemed to be, "term
preferred shares" within the meaning of the Income Tax Act (Canada) if
such definition were read without reference to paragraph (f) of the
definition of "term preferred shares" set out in subsection 248(1) of such
Act.
2.6 Manner of Conversion into Another Series of Preferred Shares: Third
Series Preferred Shares may be converted into New Preferred Shares by the
holder of such shares tendering to the Corporation on or prior to the
Exchange Date the certificate or certificates representing the Third
Series Preferred Shares to be so converted and the written instrument of
surrender in form satisfactory to the Corporation and duly executed by the
registered holder of the Third Series Preferred Shares represented by the
certificate or certificates so surrendered in which instrument the holder
may elect to convert all or a portion of the Third Series Preferred Shares
represented by such certificate or certificates into New Preferred Shares.
Any holder of Third Series Preferred Shares who has delivered a notice of
conversion with respect to the conversion of Third Series Preferred Shares
into Common Shares will be entitled to accept any such offer to convert
Third Series Preferred Shares into New Preferred Shares up to the
Conversion Date.
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35
The rights, privileges, restrictions and conditions attaching to the New
Preferred Shares shall provide that any accrued and undeclared dividends,
on each Third Series Preferred Share converted into New Preferred Share,
shall be deemed to be an accrued and undeclared dividend on the New
Preferred Share into which it is converted. The holder of Third Series
Preferred Shares to be converted to New Preferred Shares shall be entitled
to receive on the day immediately preceding the Exchange Date any declared
but unpaid dividends on the Third Series Preferred Shares.
The Corporation shall, on presentation and delivery at the principal
transfer office of the Transfer Agent in any of the cities of Halifax,
Montreal, Toronto, Winnipeg, Calgary or Vancouver, or such other place or
places in Canada as the Corporation may agree of the certificate or
certificates representing the Third Series Preferred Shares to be
converted, issue and deliver or cause to be delivered as soon as is
reasonably practicable after the Exchange Date a certificate or
certificates representing the New Preferred Shares into which such Third
Series Preferred Shares have been converted. Such certificate or
certificates shall be registered in the name of the holder of the Third
Series Preferred Shares so converted or in such name or names as he may
specify in the written instrument accompanying the Third Series Preferred
Shares to be converted. The Third Series Preferred Shares so converted
shall be converted, and the holder thereof shall become a holder of record
of New Preferred Shares, effective on the Exchange Date. The provisions of
subsection 2.3.6 of this Paragraph 2 shall apply, mutatis mutandis, in the
event of a conversion into New Preferred Shares of less than all of the
Third Series Preferred Shares represented by a particular share
certificate.
2.7 Avoidance of Fractional Shares: In any case where a fraction of a
Common Share would otherwise be issuable on conversion of one or more
Third Series Preferred Shares, the Corporation shall adjust such
fractional interest (rounded upward to the nearest 1/100 of a Common
Share) by payment by cheque in an amount equal to the then Market Price of
such fractional interest.
3. Holder's conversion right
3.1 Conversion Right: Subject to the option of the Corporation in Section
3.3 of this Paragraph 3, each Third Series Preferred Share shall, on and
after May 1, 2001, at
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36
the option of the holder, be convertible on the first day of February,
May, August and November in each year (a "permitted conversion date") into
(subject to the exception as to fractions contained in Section 3.4 of this
Paragraph 3) fully paid, non-assessable and freely tradeable (in all
provinces of Canada) Common Shares of the Corporation on the basis that
each Third Series Preferred Share will be converted into the Common Share
Conversion Number of Common Shares.
Not less than 60 nor more than 120 calendar days prior to May 1, 2001, the
Corporation shall give to the registered holders of the Third Series
Preferred Shares notice of the conversion right containing instructions to
such holders as to the method by which such conversion right may be
exercised, as set out in Section 3.2 of this Paragraph 3.
The registered holder of Common Shares resulting from the conversion shall
be entitled to rank equally with the registered holders of all other
Common Shares on any date on or after the permitted conversion date.
3.2 Manner of Conversion:
3.2.1 Third Series Preferred Shares may be converted by the holder
of such shares delivering to the principal transfer office of the
Transfer Agent in any of the cities of Halifax, Montreal, Toronto,
Winnipeg, Calgary or Vancouver, or such other place as the
Corporation may agree, not less than 60 calendar days prior to the
date (which must be a permitted conversion date) fixed for
conversion by such holder the certificate or certificates for the
Third Series Preferred Shares to be converted with the notice of
conversion on the reverse side thereof (the "Conversion Notice")
duly completed. Subject to Section 3.3 of this Paragraph 3 and to
the right and to the right to accept an offer to convert Third
Series Preferred Shares into New Preferred Shares under Section 2.5
of Paragraph 2 of this Article V, such Conversion Notice shall be
irrevocable once it has been delivered and shall set out:
a) the date (the "Conversion Date") on which the conversion is to
take place;
b) unless all the Third Series Preferred Shares held by the holder
by whom such notice is given are to be converted, the number of
Third Series Preferred Shares so held which are to be converted; and
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37
c) an acknowledgement that the Common Shares into which the Third
Series Preferred Shares are to converted are to be registered in the
name of the registered holder of the Third Series Preferred Shares
to be converted unless such holder, on or before the tenth calendar
day prior to the Conversion Date (the "Transferee Notice Date")
provides notice to the Transfer Agent at the principal transfer
office of the Transfer Agent in any of the cities of Halifax,
Montreal, Toronto, Winnipeg, Vancouver or Calgary, a written notice
in a form and executed in a manner satisfactory to the Transfer
Agent directing the Transfer Agent to register such Common Shares in
some other name or names (the "Transferee") and stating the name or
names (with addresses) accompanied by payment to the Transfer Agent
of any transfer tax that may be payable by reason thereof and a
written declaration of such matters as may be required by law in
order to determine the entitlement of such Transferee to hold such
Common Shares.
3.2.2 Subject to Section 3.3 of this Paragraph 3, the Corporation
shall, on presentation and delivery at the principal transfer office
of the Transfer Agent in any of the cities of Halifax, Montreal,
Toronto, Winnipeg, Calgary or Vancouver, or such other place or
places in Canada as the Corporation may agree of the certificate or
certificates representing the Third Series Preferred Shares so
surrendered for conversion, deliver or cause to be delivered
certificates representing the Common Share Conversion Number of
Common Shares into which such Third Series Preferred Shares are to
be converted, registered in the name of the holder of the Third
Series Preferred Shares to be converted, or as such holder shall
have directed as aforesaid, as the case may be, on the Conversion
Date. The Third Series Preferred Shares so converted shall be
converted, and the holder thereof shall become a holder of Common
Shares of record, effective on the Conversion Date.
3.2.3 If less than all the Third Series Preferred Shares represented
by any certificate shall be converted, a new certificate for the
balance shall be issued without cost to the holder.
3.2.4 The delivery of a Conversion Notice by a holder of Third
Series Preferred Shares shall constitute
<PAGE>
38
the holder's irrevocable authority to the Corporation to have the
Third Series Preferred Shares which are the subject of the notice
sold to a Substitute Purchaser if the Corporation exercises its
option subsection 3.3.2 of this Paragraph 3 in respect of the
shares.
3.3 Options of the Corporation: Prior to any Conversion Date, the
Corporation may, by notice given not less than 40 calendar days before
such Conversion Date to all holders who have given a Conversion Notice.
3.3.1 redeem on the Conversion Date all or any part of the Third
Series Preferred Shares forming the subject matter of the applicable
Conversion Notice at the Redemption Price provided for in Paragraph
2 of this Article V, in which event such redemption shall be made on
the Conversion Date by mailing or delivering in accordance with
Section 8.1 of Paragraph 8 of this Article V, a cheque of the
Corporation or of the Transfer Agent in an amount equal to the
Redemption Price to the holder of the Third Series Preferred Shares
entitled thereto; or
3.3.2 request such holders to sell on the Conversion Date all or any
part of such Third Series Preferred Shares to another purchaser or
purchasers in the event that a purchaser or purchasers willing to
purchase all or any part of such Third Series Preferred Shares at a
price equal to the Redemption Price is or are found by the
Corporation and such holders shall sell such Third Series Preferred
Shares at a price equal to the Redemption Price to such purchaser or
purchasers ("Substitute Purchasers"), in which event the provisions
of Section 3.5 of this Paragraph 3 shall apply.
The notice given by the Corporation shall set out:
a) the number of Third Series Preferred Shares tendered for
conversion on the Conversion Date;
b) the number of Third Series Preferred Shares which the Corporation
has determined to redeem;
c) the number of Third Series Preferred Shares which the Corporation
has required to be sold to a Substitute Purchaser;
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39
d) the number of Third Series Preferred Shares to be converted into
Common Shares; and
e) the Redemption Price.
If less than all the Third Series Preferred Shares tendered for
conversion on a permitted conversion date are to be redeemed or
purchased by a Substitute Purchaser, the Third Series Preferred
Shares to be redeemed or purchased shall be selected pro rata
(disregarding fractions of shares) or in such other manner as the
board of directors or a committee thereof in its sole discretion
shall by resolution determine.
The provisions of subsection 2.3.6 of Paragraph 2 of this Article V
shall apply, mutatis mutandis, in the event of a redemption or
purchase of less than all the Third Series Preferred Shares
represented by a
particular share certificate.
The Third Series Preferred Shares so purchased or redeemed shall not
be converted on the Conversion Date. In the event that for any
reason the redemption or purchase provided for in this section is
not effected in respect of a Third Series Preferred Share or Shares
on the Conversion Date, the option of the Corporation in respect of
such Third Series Preferred Share or Shares shall lapse and such
Third Series Preferred Share or Shares shall be deemed to have been
converted on the Conversion Date.
3.4 Avoidance of Fractional Shares: In any case where the fraction of a
Common Share would otherwise be issuable on conversion of one or more
Third Series Preferred Shares under this Article 3, the Corporation shall
adjust such fractional interest by payment by cheque in an amount equal to
the then Market Price of such fractional interest (rounded upward to the
nearest 1/100 of a Common Share) determined in respect of the relevant
Conversion Date.
3.5 Manner of Purchase By A Substitute Purchaser: The Corporation shall
receive and hold on behalf of the Substitute Purchaser the purchase price
to be paid to the holder of a Third Series Preferred Share to be acquired
by such Substitute Purchaser determined in accordance with the provisions
of Section 3.3 of this Paragraph 3. On the date on which the sale of such
Third Series Preferred Share to a Substitute Purchaser is to be effected,
the Corporation shall
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40
pay or cause to be paid to the holder of such Third Series Preferred Share
the purchase price for such share recieved from the Substitute Purchaser
on behalf of the Substitute Purchaser acquiring such share. Such payment
shall be made by cheque mailed to the holder of such Third Series
Preferred Share in accordance with Paragraph 8 of this Article V and shall
be a full and complete payment of the purchase price for the Third Series
Preferred Share to be sold by such holder to such Substitute Purchaser
unless the cheque is not honoured when presented for payment. From and
after the date on which the cheque is mailed in payment for such Third
Series Preferred Share, the Substitute Purchaser shall be treated by the
Corporation as the registered holder of the Third Series Preferred Share
which has been sold to such Substitute Purchaser in accordance with the
provisions of this Paragraph 3.
3.6 Continuance of Conversion Right: In the event that the Corporation
exercises its right pursuant to subsection 3.3.2 of this Paragraph 3 to
require a Third Series Preferred Share tendered for conversion to be sold
by the holder thereof to a Substitute Purchaser, such Third Series
Preferred Share shall continue to be convertible into Common Shares
pursuant to section 3.1 after having been sold to a Subsitute Purchaser
notwithstanding its having been tendered for conversion by the previous
holder thereof.
4. Voting rights: Except as otherwise provided herein or in the conditions
attaching to the Preferred Shares as a class, the holders of Third Series
Preferred Shares shall not be entitled as such to receive notice of or to
attend or to vote at any meeting of shareholders of the Corporation. In
the event that the Corporation fails to pay in the aggregate Quarterly
Dividends for eight Dividend Period on or before the last day of such
Dividend Periods, whether or not consecutive, whether or not such
dividends have been declared and whether or not there are any monies of
the Corporation properly applicable to the payment of dividends, the
holders of the Third Series Preferred Shares shall have the right to
receive notice of and to attend each meeting of shareholders of the
Corporation at which directors of the Corporation are to be elected, the
record date for notice of which occurs after the end of such Dividend
Periods (other than meetings at which only holders of another specified
series or class of shares are entitled to vote), and such holders shall
have the right at any such meeting to vote in the election of two
directors to be elected in conjunction with the holders of any other
series of Preferred Shares which may have such
<PAGE>
41
right. The right to receive notice of, attend and vote at such meetings
shall continue until such time as the Corporation declares and pays the
full amount of a Quarterly Dividend for a Dividend Period, after which
payment such rights to receive notice of, attend and vote at such meetings
shall forthwith expire. At such time as the Corporation may again fail to
pay the full amount in the aggregate of eight Quarterly Dividends, such
voting rights shall become effective again and so on from time to time.
Each Third Series Preferred Share shall entitle the holder thereof to one
vote at any such meeting, provided that if the shares of any other series
of Preferred Shares (which may have a similar right to vote) entitle their
holder thereof to a number of vote greater than one vote per 25.00 dollars
received by the Corporation as consideration for the issue of a share of
such series, the number of votes per Third Series Preferred Share will be
adjusted pro rata.
Nothing herein contained shall be deemed to limit the right of the
Corporation from time to time to increase or decrease the number of its
directors in accordance with the procedures prescribed by its Articles.
Any vacancy occurring among the directors elected in accordance with the
foregoing provisions of this Paragraph 4 to represent the holders of the
series of Preferred Shares which may have such right may be filled by the
board of directors with the consent and approval of any remaining director
elected to represent the holders of such series of Preferred Shares. If
there is no such remaining director, the board of directors may appoint a
holder or holders of the series of Preferred Shares which may have such
right to fill the vacancy or vacancies. Whether or not vacancies are so
filled by the board of directors, the registered holders of at least 10%
of the issued and outstanding series of Preferred Shares which may have
such right shall have the right to require the secretary of the
Corporation to call a meeting for the purpose of filling the vacancies or
replacing all or any of the persons who have been appointed by the board
of directors.
5. Restrictions on dividends and retirement of shares: So long as any of the
Third Series Preferred Shares are outstanding, the Corporation shall not,
without the prior approval of the holders of such outstanding Third Series
Preferred Shares given in the manner hereinafter specified:
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42
a) pay or set apart for payment any dividends (other than stock dividends
in shares of the Corporation ranking junior to the Preferred Shares of the
Corporation) on any shares of the Corporation ranking junior to or on a
parity with the Preferred Shares of the Corporation on any series thereof;
b) call for redemption, redeem, purchase or otherwise retire or make any
capital distribution on or in respect of any shares ranking junior to the
Preferred Shares of the Corporation or any series thereof (except out of
the net cash proceeds of a substantially concurrent issue of shares of the
Corporation ranking junior to the Preferred Shares of the Corporation or
any series thereof);
c) call for redemption, redeem, or otherwise retire less than all of the
Third Series Preferred Shares then outstanding; or
d) except in connection with the exercise of a retraction privilege of a
shareholder or mandatory redemption obligation of the Corporation
attaching thereto, call for redemption, redeem, purchase or otherwise
retire any shares of any class or series ranking on a parity with the
Preferred Shares of the Corporation or any series thereof;
unless in each such case, all cumulative preferential dividends accrued on
outstanding Third Series Preferred Shares up to and including the latest
Dividend Payment Date shall have been declared an paid or made available
for payment at the date of such declaration or payment or setting apart or
call for redemption or purchase for cancellation.
6. Issue price: The price or consideration for which each Third Series
Preferred Share shall be issued is $25.00 and, upon payment of such price,
each such share shall be issued as fully paid and non-assessable.
7. Election under the Income Tax Act: The Corporation shall elect under
subsection 191.2(1) of the Income Tax Act (Canada) or any successor or
replacement provision of similar effect, and take all other necessary
action under such Act, to pay tax under Section 1911 of such Act, or any
successor or replacement provision of similar effect at a rate such that
no holder of the Third Series Preferred Shares will be required to pay tax
on dividends received on the Third Series Preferred Shares under Section
187.2 of Part IV.1 of such Act or any successor or replacement provision
of similar effect. Such election shall be made in the manner prescribed by
such
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43
Act and shall be filed within the time provided under paragraph
191.2(1)(a) of such Act.
8. Notice and interpretation
8.1 Notices:
8.1.1 Any notice, cheque, invitation for tenders or other
communication from the Corporation herein provided for shall be
sufficiently given if delivered or if sent by first class
unregistered mail, postage prepaid, to the holders of the Third
Series Preferred Shares at their respective addresses appearing on
the books of the Corporation or, in the event of the address of any
of such holders not so appearing, then at the last address of such
holder known to the Corporation. Accidental failure to give such
notice, invitation for tenders or other communication to one or more
holders of the Third Series Preferred Shares shall not affect the
validity of the notices, invitations for tenders or other
communications properly given or any action taken pursuant to such
notice, invitation for tender or other communication but, upon such
failure being discovered, the notice, invitation for tenders or
other communication, as the case may be, shall be sent forthwith to
such holder or holders.
8.1.2 If any notice, cheque, invitation for tenders or other
communication from the Corporation given to a holder of Third Series
Preferred Shares pursuant to subsection 8.1.1 is returned on three
consecutive occasions because he cannot be found, the Corporation
shall not be required to give or mail any further notices, cheques,
invitations for tenders or other communications to such shareholder
until he informs the Corporation in writing of his new address.
8.2 Interpretation
8.2.1 In the event that any day on which any dividend on the Third
Series Preferred Shares is payable or on or by which any other
action is required to be taken hereunder is not a business day, then
such dividend shall be payable or such other action shall be
required to be taken on or before the next succeeding day that is a
business day. A "business day" means a day other than a Saturday, a
Sunday or any other day
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44
that is a statutory or civic holiday in the place where the
Corporation has its head office.
8.2.2 All references herein to a holder of Third Series Preferred
Shares shall be interpreted as referring to a registered holder of
the Third Series Preferred Shares.
9. Modification: The provisions attaching to the Third Series Preferred
Shares may be deleted, varied, modified, amended or amplified with the
prior approval of the holders of Third Series Preferred Shares given in
accordance with Paragraph 10 of this Article V.
10. Approval of third series preferred shareholders: Any approval required or
permitted to be given by the holders of the Third Series Preferred Shares
with respect to any and all matters referred to herein shall be deemed to
have been sufficiently given by the holders of the Third Series Preferred
Shares if given in the manner provided in the by-laws of the Corporation,
provided that the quorum for any meeting of holders of Third Series
Preferred Shares shall be shareholders represented in person or by proxy
holding at least 25% of the outstanding Third Series Preferred Shares. If
at any such meeting the holders of at least 25% of the outstanding Third
Series Preferred Shares are not present or represented by proxy within
one-half hour after the time appointed for such meeting, then the meeting
shall be adjourned to such date not less than 15 days thereafter and to
such time and place as may be designated by the chairman of such meeting,
and not less than 10 days' written notice shall be given of such adjourned
meeting. At such adjourned meeting the holders of Third Series Preferred
Shares present or represented by proxy may transact the business for which
the meeting was originally called. A resolution passed at a meeting or an
adjourned meeting by the affirmative vote of not less than 66 2/3% of the
votes cast at such meeting shall constitute the approval of the holders of
the Third Series Preferred Shares.
11. Rights on liquidation: In the event of the liquidation, dissolution or
winding-up of the Corporation or other distribution of assets of the
Corporation among its shareholders for the purpose of winding up its
affairs, whether voluntary or involuntary, the holders of the Third Series
Preferred Shares shall be entitled to receive an amount equal to $25.00
per Third Series Preferred Share, together with all accrued and unpaid
dividends, whether or
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45
not declared, up to and excluding the date of payment, before any amount
is paid or any assets of the Corporation are distributed to the holders of
Common Shares or shares of any other class of the Corporation ranking
junior to the Third Series Preferred Shares. After payment to the holders
of the Third Series Preferred Shares of the amounts so payable to them,
they shall not be entitled to share in any further distribution of the
assets of the Corporation.
5- Restrictions if any on share transfers
There shall be no restrictions upon the right to transfer any shares of
the Corporation.
6- Number (or minimum and maximum number) of directors
A minimum of five (5) and a maximum of fifteen (15).
7- Restrictions if any on business the Corporation may carry on
N/A
8- Other provisions if any
The directors of the Corporation may from time to time:
(A) borrow money upon the credit of the Corporation;
(B) limit or increase the amount to be borrowed;
(C) issue debentures or other securities of the Corporation;
(D) pledge or sell such debentures or other securities for such sums
and at such prices as may be deemed expedient;
(E) secure any such debentures, or other securities, or any other
present or future borrowing or liability of the Corporation, by
mortgage, hypotec, charge or pledge of all or any currently owned or
subsequently acquired real and personal, moveable and immoveable,
property of the Corporation, and the undertaking and rights of the
Corporation.
The directors of the Corporation may from time to time delegate to such
one or more of the directors or officers of the Corporation as may be
designated by the directors all or
<PAGE>
46
any of the powers conferred on the directors above to such extent and in
such manner as the directors shall determine at the time of such
delegation.
- --------------------------------------------------------------------------------
The foregoing restated articles of incorporation correctly set out, without
substantive change, the corresponding provisions of the articles of
incorporation as amended and supersede the original articles of incorporation.
Date Signature
/s/ Guthrie J. Stewart
June 14, 1994 ------------------------------------
Guthrie J. Stewart
Description of office
Executive Vice President
Corporate Development and Corporate Secretary
- --------------------------------------------------------------------------------
FOR DEPARTMENTAL USE ONLY
<PAGE>
[INDUSTRY CANADA LOGO]
Certificate Certificat
of Amendment de modification
Canada Business Loi canadienne sur
Corporations Act les societes par actions
- --------------------------------------------------------------------------------
TELEGLOBE INC. 200851-3
TELEGLOBE INC.
- -------------------------------------- ------------------------------------
Name of corporation-Denomination de Corporation number-Numero de la
la societe societe
I hereby certify that the articles Je certifie que les statuts de la
of the above named corporation were societe susmentionnee ont ete
amended modifies:
(a) under section 13 of the Canada [ ] a) en vertu de l'article 13 de la
Business Corporations Act in Loi canadienne sur les societes par
accordance with the attached notice; actions, conformement a l'avis
ci-joint;
(b) under section 27 of the Canada [ ] b) en vertu de l'article 27 de la
Business Corporations Act as set out Loi canadienne sur les societe par
in the attached articles of actions, tel qu'il est indique dans
amendment designating a series of les clauses modificatrices
shares; ci-jointes designant une seire
d'actions;
(c) under section 179 of the Canada [X] c) en vertu de l'article 179 de la
Business Corporations Act as set out Loi canadienne sur les societes par
in the attached articles of actions, tel qu'il est indiques dans
amendment; les clauses modificatrices
ci-jointes;
(d) under section 191 of the Canada [ ] d) en vertu de l'article 191 de la
Business Corporations Act as set out Loi canadienne sur les societes par
in the attached articles of actions, tel qu'il est indiques dans
reorganization. les clauses de reorganisation
ci-jointes.
June 6, 1996/le 6 juin 1996
Director - Directeur Date of Amendment - Date de
modification
- --------------------------------------------------------------------------------
<PAGE>
CANADA BUSINESS CORPORATIONS ACT
FORM 4
ARTICLES OF AMENDMENT
(SECTION 27-177)
- --------------------------------------------------------------------------------
1. Name of Corporation
TELEGLOBE INC.
2. Corporation No.
200851-3
3. The articles of the above-named Corporation are amended as follows:
Section 8 of the English version of the Restated Articles of Incorporation
dated June 28, 1994 be and the same is hereby deleted and replaced by the
following:
"8- Other provisions if any
The directors of the Corporation may from time to time:
(A) borrow money upon the credit of the Corporation;
(B) limit or increase the amount to be borrowed; (C) issue
debentures or other securities of the Corporation;
(D) pledge or sell such debentures or other securities for
such sums and at such prices as may be deemed expedient;
(E) secure any such debentures, or other securities, or any
other present or future borrowing or liability of the
Corporation, by mortgage, hypothec, charge or pledge of
all or any currently owned or subsequently acquired real
and personal, moveable and immoveable, property of the
Corporation, and the undertaking and rights of the
Corporation.
<PAGE>
Form 4 Page 2
- --------------------------------------------------------------------------------
The directors may from time to time delegate to such one or more of
the directors or officers of the Corporation as may be designated by
the directors all or any of the powers conferred on the directors
above to such extent and in such manner as the directors shall
determine at the time of such delegation.
The directors of the Corporation may from time to time appoint one
or more directors, who shall hold office for a term expiring not
later than the close of the next annual meeting of shareholders, but
the total number of directors so appointed may not exceed one third
of the number of directors elected at the previous annual meeting of
shareholders."
And Section 8 of the French version of the Restated Articles of
Incorporation dated June 28, 1994 and the same is hereby deleted and
replaced by the following:
"8- Autres dispositions, s'il y a lieu
Les administrateurs de la Societe peuvent:
(A) emprunter sur le credit de la Societe;
(B) restreindre ou augmenter les sommes a emprunter;
(C) emettre des debentures ou d'autres titres de la Societe;
(D) donner en garantie ou vendre ces debentures ou d'autres
titres pour les sommes et les prix qui seront juges
convenables;
(E) hypothequer, donner en nantissement, en gage ou en
garantie la totalite ou une partie des biens reels et
personnels, des enterprises et des droits, presents ou
futurs, de la Societe, ou toutes sommes empruntees ou
devant l'etre ou toute obligation ou tout engagement,
presents ou futurs, de la Societe.
Les administrateurs de la Societe peuvent, a l'occasion, deleguer a
un ou plusieurs administrateurs ou dirigeants de la Societe la
totalite ou une partie des pouvoirs qui leur sont conferes dans la
mesure qu'ils etablissent au moment de la delegation.
<PAGE>
Form 4 Page 3
- --------------------------------------------------------------------------------
Les administrateurs de la Societe peuvent nommer, a
l'occasion, un ou plusieurs administrateurs dont le
mandat expire au plus tard a la cloture de la prochaine
assemblee annuelle, a condition que le nombre total des
administrateurs ainsi nommes pas le tiers du nombre des
administrateurs elus a la derniere assemblee annuelle."
May 29, 1996
/s/ Guthrie J. Stewart
- --------------------------------------
Guthrie J. Stewart
Executive Vice-President, Corporate
Development and Corporate Secretary
EXHIBIT 5.1
September 2, 1998
[LETTER HEAD OF MARTINEAU WALKER]
TELEGLOBE INC.
1000 de la Gauchetiere Street West
23rd Floor
Montreal, Quebec
Canada H3B 4X5
Ladies and Gentlemen:
With respect to the Registration Statement on Form F-4 (the
"Registration Statement") of Teleglobe Inc., a Canadian corporation (the
"Company"), relating to the issuance of the Teleglobe common shares, without par
value ("Teleglobe Common Shares"), pursuant to an Agreement and Plan of Merger,
dated as of June 14, 1998 (the "Merger Agreement"), by and among the Company,
North Merger Sub Corporation, a Delaware corporation, and Excel Communications,
Inc., a Delaware corporation ("Excel"), we are of the opinion that when the
Teleglobe Common Shares to be issued to the stockholders of Excel pursuant to
the Merger Agreement (the "Shares") have been issued in accordance with the
Merger Agreement and in the manner contemplated by the Registration Statement
(including the declaration and maintenance of the effectiveness of the
Registration Statement and the obtaining and maintenance of all requisite
corporate, governmental and other authorizations), the Shares will be legally
issued, fully paid and non-assessable.
We are advocates qualified to practice law only in the Province of
Quebec and are not admitted to practice in any other jurisdiction, nor are we or
do we purport to be experts on the laws of any other jurisdiction. The opinions
expressed herein are rendered solely with respect to the laws of the Province of
Quebec and the federal laws of Canada applicable therein.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference of this firm appearing in the
Registration Statement under the caption "Legal Opinions".
Very truly yours,
Martineau Walker
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
September 3, 1998
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
September 3, 1998
EXHIBIT 23.6
CONSENT OF FINANCIAL ADVISOR
We hereby consent to the use of our opinion dated June 14, 1998 to the
Board of Directors of EXCEL attached as Appendix B to Teleglobe Inc.'s
Registration Statement on Form F-4 and the references to our firm in the
Registration Statement under the caption "The Merger--Opinion of the Financial
Advisor to the EXCEL Board" and elsewhere contained in such Registration
Statement. In giving such consent, we do not admit that we come within the
category of persons whose consent is required under Section 7 of the Securities
Act of 1933, as amended, or the rules and regulations of the Securities and
Exchange Commission thereunder and we do not thereby admit that we are experts
with respect to any part of the Registration Statement under the meaning of the
term "expert" as used in the Securities Act.
/s/ LEHMAN BROTHERS INC.
New York, New York
September 2, 1998
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.
September __, 1998
-------------------------------------
Name: Charles Sirois
Title: Chairman and Chief Executive Officer
/s/ Claude Seguin September 2, 1998
-------------------------------------
Name: Claude Seguin
Title: Executive Vice President, Finance and
Chief Financial Officer
/s/ Francois Laurin September 3, 1998
-------------------------------------
Name: Francois Laurin
Title: Vice President, Finance and
Controller
September __, 1998
-------------------------------------
Name: J. Brian Aune
Title: Director
/s/ Derek H. Burney September 1, 1998
-------------------------------------
Name: Derek H. Burney
Title: Director
<PAGE>
2
/s/ J.V. Raymond Cyr September 1, 1998
-------------------------------------
Name: J.V. Raymond Cyr
Title: Director
September __, 1998
-------------------------------------
Name: Bruno Ducharme
Title: Director
/s/ George A. Fierheller September 1, 1998
-------------------------------------
Name: George A. Fierheller
Title: Director
/s/ Pierre MacDonald September 2, 1998
-------------------------------------
Name: Pierre MacDonald
Title: Director
/s/ C. Edward Medland September 1, 1998
-------------------------------------
Name: C. Edward Medland
Title: Director
/s/ Jean C. Monty September 2, 1998
-------------------------------------
Name: Jean C. Monty
Title: Director
/s/ Carmand Normand September 1, 1998
-------------------------------------
Name: Carmand Normand
Title: Director
/s/ H. Arnold Steinberg September 1, 1998
-------------------------------------
Name: H. Arnold Steinberg
Title: Director
/s/ Peter G. White September 1, 1998
-------------------------------------
Name: Peter G. White
Title: Director
/s/ Lynton R. Wilson September 2, 1998
-------------------------------------
Name: Lynton R. Wilson
Title: Director
EXHIBIT 99.2
NORTH MERGER SUB CORPORATION
BY-LAWS
ARTICLE I
MEETING OF STOCKHOLDERS
-----------------------
Section 1. Place of Meeting and Notice. Meetings of the stockholders
of the Corporation shall be held at such place either within or without the
State of Delaware as the Board of Directors may determine.
Section 2. Annual and Special Meetings. Annual meetings of
stockholders shall be held, at a date, time and place fixed by the Board of
Directors and stated in the notice of meeting, to elect a Board of Directors and
to transact such other business as may properly come before the meeting. Special
meetings of the stockholders may be called by the President for any purpose and
shall be called by the President or Secretary if directed by the Board of
Directors or requested in writing by the holders of not less than 25% of the
capital stock of the Corporation. Each such stockholder request shall state the
purpose of the proposed meeting.
Section 3. Notice. Except as otherwise provided by law, at least 10
and not more than 60 days before each meeting of stockholders, written notice of
the time, date and place of the meeting, and, in the case of a special meeting,
the purpose or purposes for which the meeting is called, shall be given to each
stockholder.
Section 4. Quorum. At any meeting of stockholders, the holders of
record, present in person or by proxy, of a majority of the Corporation's issued
and outstanding capital stock shall constitute a quorum for the transaction of
business, except as otherwise provided by law. In the absence of a quorum, any
officer entitled to preside at or to act as secretary of the meeting shall have
power to adjourn the meeting from time to time until a quorum is present.
Section 5. Voting. Except as otherwise provided by law, all matters
submitted to a meeting of stockholders shall be decided by vote of the holders
of record, present in person or by proxy, of a majority of the Corporation's
issued and outstanding capital stock.
<PAGE>
2
ARTICLE II
DIRECTORS
---------
Section 1. Number, Election and Removal of Directors. The number of
Directors that shall constitute the Board of Directors shall be not less than
one nor more than fifteen. The first Board of Directors shall consist of 3
Directors. Thereafter, within the limits specified above, the number of
Directors shall be determined by the Board of Directors or by the stockholders.
The Directors shall be elected by the stockholders at their annual meeting.
Vacancies and newly created directorships resulting from any increase in the
number of Directors may be filled by a majority of the Directors then in office,
although less than a quorum, or by the sole remaining Director or by the
stockholders. A Director may be removed with or without cause by the
stockholders.
Section 2. Meetings. Regular meetings of the Board of Directors
shall be held at such times and places as may from time to time be fixed by the
Board of Directors or as may be specified in a notice of meeting. Special
meetings of the Board of Directors may be held at any time upon the call of the
President and shall be called by the President or Secretary if directed by the
Board of Directors. Oral, telephonic, telegraphic, written or facsimile notice
of each special meeting of the Board of Directors shall be sent to each Director
not less than two days before such meeting. Reasonable efforts shall be made to
ensure that each Director receives timely notice of any meeting. A meeting of
the Board of Directors may be held without notice immediately after the annual
meeting of the stockholders. Notice need not be given of regular meetings of the
Board of Directors.
Section 3. Quorum. One-third of the total number of Directors shall
constitute a quorum for the transaction of business. If a quorum is not present
at any meeting of the Board of Directors, the Directors present may adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until such a quorum is present. Except as otherwise provided by law,
the Certificate of Incorporation of the Corporation, these By-Laws or any
contract or agreement to which the Corporation is a party, the act of a majority
of the Directors present at any meeting at which there is a quorum shall be the
act of the Board of Directors.
Section 4. Committees of Directors. The Board of Directors may, by
resolution adopted by a majority of the whole Board, designate one or more
committees, including without limitation an Executive Committee, to have and
exercise such power and authority as the Board of Directors shall specify. In
the absence or disqualification of a member of a committee, the member or
members thereof present at any meeting and not disqualified from voting, whether
or not he or they constitute a
<PAGE>
3
quorum, may unanimously appoint another Director to act at the meeting in place
of any such absent or disqualified member.
ARTICLE III
OFFICERS
--------
The officers of the Corporation shall consist of a President, a
Secretary, a Treasurer and such other additional officers with such titles as
the Board of Directors shall determine, all of whom shall be chosen by and shall
serve at the pleasure of the Board of Directors. Such officers shall have the
usual powers and shall perform all the usual duties incident to their respective
offices. All officers shall be subject to the supervision and direction of the
Board of Directors. The authority, duties or responsibilities of any officer of
the Corporation may be suspended by the President with or without cause. Any
officer elected or appointed by the Board of Directors may be removed by the
Board of Directors with or without cause.
ARTICLE IV
INDEMNIFICATION
---------------
(a) A director of the Corporation shall not be personally liable
either to the Corporation or to any stockholder for monetary damages for breach
of fiduciary duty as a director, except (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, or (ii) for acts or
omissions which are not in good faith or which involve intentional misconduct or
knowing violation of the law, or (iii) for any matter in respect of which such
director shall be liable under Section 174 of Title 8 of the General Corporation
Law of the State of Delaware or any amendment thereto or successor provision
thereto, or (iv) for any transaction from which the director shall have derived
an improper personal benefit. Neither amendment nor repeal of this paragraph
(a), nor the adoption of any provision of this Amended and Restated Certificate
of Incorporation inconsistent with this paragraph (a) shall eliminate or reduce
the effect of this paragraph (a) in respect of any matter occurring, or any
cause of action, suit or claim that, but for this paragraph (a), would accrue or
arise, prior to such amendment, repeal or adoption of an inconsistent provision.
(b) The Corporation shall indemnify any person who was or is 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
<PAGE>
4
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, and the Corporation may
adopt bylaws or enter into agreements with any such person for the purpose of
providing for such indemnification.
(c) To the extent that a director or officer of the Corporation has
been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in paragraph (b) of this Article, or in defense of any
claim, issue or matter therein, such person shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by such
person in connection therewith.
(d) Expenses incurred by an officer, director, employee or agent in
defending or testifying in a civil, criminal, administrative or investigative
action, suit or proceeding may be paid by the Corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount if
it shall ultimately be determined that such director or officer is not entitled
to be indemnified by the Corporation against such expense as authorized by this
Article, and the Corporation may adopt bylaws or enter into agreements with such
persons for the purpose of providing for such advances.
ARTICLE V
GENERAL PROVISIONS
------------------
Section 1. Notices. Whenever any statute, the Certificate of
Incorporation or these By-Laws require notice to be given to any Director or
stockholder, such notice may be given in writing by mail, addressed to such
Director or stockholder at his address as it appears on the records of the
Corporation, with postage thereon prepaid. Such notice shall be deemed to have
been given when it is deposited in the United States mail. Notice to Directors
may also be given by telegram.
Section 2. Fiscal Year. The fiscal year of the
Corporation shall be fixed by the Board of Directors.
