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SCHEDULE 14C
(RULE 14c-101)
INFORMATION REQUIRED IN INFORMATION STATEMENT
SCHEDULE 14C INFORMATION
INFORMATION STATEMENT PURSUANT TO SECTION 14(c) OF THE SECURITIES EXCHANGE ACT
OF 1934
Check the appropriate box
[ ] Preliminary Information Statement
[x] Definitive Information Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14c-5(d)(2))
AT&T CAPITAL CORPORATION
________________________________________________________________________________
(NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
Payment of filing fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14c-5(g).
[ ] Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
(1) Title of each class of securities to which transaction applies:
________________________________________________________________________________
(2) Aggregate number of securities to which transaction applies:
________________________________________________________________________________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
________________________________________________________________________________
(4) Proposed maximum aggregate value of transaction:
________________________________________________________________________________
(5) Total fee paid:
________________________________________________________________________________
[x] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:________________________________________________
(2) Form, Schedule or Registration Statement No.:__________________________
(3) Filing Party:__________________________________________________________
(4) Date Filed:____________________________________________________________
NOTE: This Schedule 14C also relates to certain amendments to the registrant's
Share Performance Incentive Plan which have been approved by the written consent
of the holders of approximately 86% of the registrant's outstanding shares of
Common Stock.
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AT&T CAPITAL CORPORATION
44 Whippany Road
Morristown, New Jersey 07962
August 30, 1996
Dear Stockholder:
As you may be aware, on June 5, 1996, AT&T Capital Corporation (the
'Company') entered into an Agreement and Plan of Merger, as amended on August
20, 1996 (the 'Merger Agreement') providing for the merger (the 'Merger') of
Antigua Acquisition Corporation, a wholly-owned subsidiary of Hercules Limited
('Holdings'), with and into the Company. The Merger Agreement is attached as
Annex A to the accompanying Information Statement. The closing of the Merger is
expected to occur on October 1, 1996, subject to satisfaction of certain closing
conditions. Under the Merger Agreement, each share of Common Stock, par value
$.01 per share, of the Company (the 'Company Common Stock') outstanding at the
closing of the Merger will be converted into the right to receive $45.00 in
cash, with interest payable thereon in certain circumstances as set forth in the
Information Statement (the 'Merger Consideration'). YOU WILL BE RECEIVING
ADDITIONAL INFORMATION AT A LATER TIME ON HOW TO RECEIVE PAYMENT FOR YOUR SHARES
OF COMPANY COMMON STOCK IN CONNECTION WITH THE CLOSING.
Each of the Board of Directors of the Company and the special committee of
the Board of Directors of the Company, consisting of all of the directors of the
Company who are not directors, officers or employees of AT&T Corp. ('AT&T') or
its subsidiaries (other than the Company), or officers or employees of the
Company (the 'Special Committee'), has carefully considered the terms and
conditions of the Merger and has received the opinion of Goldman, Sachs & Co.
('Goldman Sachs') that, as of the date of its opinion, and based upon and
subject to various qualifications and assumptions described therein, the Merger
Consideration to be received in the Merger by the holders of Company Common
Stock pursuant to the terms of the Merger Agreement is fair to such holders
(other than AT&T and its affiliates). The full text of the opinion of Goldman
Sachs, dated June 5, 1996, which sets forth the assumptions made, matters
considered and limits on the review undertaken, is attached as Annex B to the
accompanying Information Statement. The Company's stockholders are urged to read
such opinion carefully and in its entirety. Each of the Board and the Special
Committee believes the Merger to be fair to you and has approved the
transaction. Upon consummation of the Merger, stockholders will no longer have
an equity interest in the Company, except that certain members of the Company's
management will be offered the opportunity by Holdings to maintain all or a
portion of their equity investment in the Company and may be granted new options
for the capital stock of the surviving corporation after the Merger.
Subsidiaries of AT&T, owning beneficially and of record approximately 86%
of the outstanding shares of the Company Common Stock (the 'AT&T Subsidiaries'),
have provided their written consent and approval of the Merger, thereby
satisfying the requirements of the Delaware General Corporation Law (the 'DGCL')
and the Company's Restated Certificate of Incorporation for stockholder approval
of the Merger. For this reason, the Company is not calling a special meeting of
the stockholders in respect of the proposed transaction and is not asking you
for a proxy or consent.
Stockholders who follow the procedures specified in Section 262 of the DGCL
('Section 262'), which are described in the accompanying Information Statement,
have the right to dissent from the Merger and will be entitled to have their
shares of Company Common Stock appraised by the Delaware Court of Chancery and
to receive payment of the 'fair value' of such shares as determined by such
Court rather than the amount of the Merger Consideration stated above. The text
of Section 262 is attached as Annex C to the accompanying Information Statement.
The Merger Agreement provides for, among other things, certain amendments
(the 'SPIP Amendments') to the Company's Share Performance Incentive Plan (the
'SPIP'). The SPIP Amendments were approved by the AT&T Subsidiaries, thereby
satisfying the requirement of the SPIP for stockholder approval of the SPIP
Amendments. Accordingly, the Company is not calling a special meeting of
stockholders in respect of the SPIP Amendments and is not asking you for a proxy
or consent. The SPIP Amendments are attached as Annex D to the accompanying
Information Statement.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A
PROXY.
The attached Information Statement is being provided to you pursuant to
Rule 14c-2 under the Securities Exchange Act of 1934, as amended. The
Information Statement contains a more detailed description of the Merger and the
SPIP Amendments. I encourage you to read the Information Statement carefully.
Very truly yours,
Thomas C. Wajnert
Chairman of the Board and
Chief Executive Officer
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INFORMATION STATEMENT
---------------------------------
AT&T CAPITAL CORPORATION
44 WHIPPANY ROAD
MORRISTOWN, NEW JERSEY 07962
INTRODUCTION
This Information Statement is being furnished to the holders of Common
Stock, par value $.01 per share (the 'Company Common Stock'), of AT&T Capital
Corporation, a Delaware corporation ('AT&T Capital' or the 'Company'), in
connection with (i) the approval and adoption by written consent dated as of
June 5, 1996 (the 'Merger Agreement Stockholders' Consent'), by AT&T Capital
Holdings, Inc., a Delaware corporation ('Capital Holdings') and AT&T Credit
Holdings, Inc., a Delaware corporation ('Credit Holdings' and, together with
Capital Holdings, the 'AT&T Subsidiaries'), each of which is a wholly-owned
subsidiary of AT&T Corp., a New York corporation ('AT&T'), as the holders of
approximately 86% of the outstanding shares of Company Common Stock, of the
Agreement and Plan of Merger, dated as of June 5, 1996, as amended August 20,
1996, among Hercules Limited, a Cayman Islands corporation ('Holdings'), Antigua
Acquisition Corporation, a Delaware corporation and a wholly-owned subsidiary of
Holdings ('Merger Sub'), AT&T and the Company (the 'Merger Agreement'), and (ii)
the approval by written consent dated as of June 28, 1996 (the 'SPIP Amendments
Stockholders' Consent', and together with the Merger Agreement Stockholders'
Consent, the 'Stockholders' Consents') by the AT&T Subsidiaries of certain
amendments (the 'SPIP Amendments'), provided for in the Merger Agreement, to the
Company's Share Performance Incentive Plan (the 'SPIP'). A copy of the Merger
Agreement is attached to this Information Statement as Annex A. A copy of the
SPIP Amendments is attached to this Information Statement as Annex D. The
effective time of the merger of Merger Sub with and into the Company (the
'Merger') will be the date and time of the filing of a Certificate of Merger
with the Secretary of State of the State of Delaware (the 'Effective Time'),
which is scheduled to occur following satisfaction of certain closing
conditions, including receipt of certain regulatory approvals, but not earlier
than October 1, 1996.
The aggregate purchase price to be paid by Holdings pursuant to the Merger
Agreement of approximately $2.16 billion in cash represents a purchase price of
$45.00 per share of Company Common Stock plus interest thereon, payable in
certain circumstances as described below, at the London Interbank Offered Rate
('LIBOR') plus 0.5% for the period from and including September 18, 1996 through
but excluding the closing date of the Merger (the 'Merger Consideration'), based
upon 47,012,036 shares of Company Common Stock and options to purchase 2,206,920
shares of Company Common Stock (the 'Options') issued and outstanding on August
5, 1996. After consummation of the Merger, the current stockholders of the
Company will cease to be stockholders of the Company, except that certain
members of the Company's management (the 'Management Offerees') will be offered
the opportunity by Holdings to maintain all or a portion of their equity
investment in the Company and may be granted new options for the common stock of
the Surviving Corporation (as defined herein) after the Merger as described
herein.
In accordance with the Delaware General Corporation Law (the 'DGCL'), the
Merger Agreement requires approval and adoption by the affirmative vote of the
holders of a majority of the outstanding shares of Company Common Stock. Under
the terms of the SPIP, the SPIP Amendments require approval by the affirmative
vote of the holders of a majority of the outstanding shares of Company Common
Stock. As of June 5, 1996, there were 46,992,783 shares of Company Common Stock
issued and outstanding, each share of which was entitled to one vote on the
proposals to approve and adopt the Merger Agreement and to approve the SPIP
Amendments. The Stockholders' Consents, representing 40,250,000 shares of
Company Common Stock, or approximately 86% of the outstanding shares of Company
Common Stock, were executed by the AT&T Subsidiaries in favor of approval and
adoption of the Merger Agreement and approval of the SPIP Amendments. Pursuant
to Section 228 of the DGCL and the Company's Restated Certificate of
Incorporation, no additional approval by the Company's stockholders is required
with respect to the Merger Agreement or the SPIP Amendments. This Information
Statement constitutes the notice required by Section 262(d) of the DGCL.
THE TRANSACTIONS DESCRIBED HEREIN HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION (THE 'SEC') NOR HAS THE SEC PASSED UPON
THE FAIRNESS OR MERITS OF SUCH TRANSACTIONS NOR UPON THE ACCURACY OR ADEQUACY OF
THE INFORMATION CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY
IS UNLAWFUL.
This Information Statement is expected to be mailed on or about August 30,
1996, to holders of record of Company Common Stock on June 5, 1996. There were
approximately 490 holders of record of Company Common Stock on such date.
WE ARE NOT ASKING YOU FOR A PROXY AND
YOU ARE REQUESTED NOT TO SEND US A PROXY.
STOCKHOLDERS ARE URGED HOWEVER TO READ CAREFULLY
THIS INFORMATION STATEMENT IN ITS ENTIRETY.
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TABLE OF CONTENTS
<TABLE>
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SECTION PAGE NO.
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Introduction........................................................................................... 1
Table of Contents...................................................................................... 2
Information Statement Summary.......................................................................... 4
General........................................................................................... 4
Background of the Merger.......................................................................... 4
The Parties to the Merger and Certain Related Parties............................................. 6
Approval and Fairness of the Merger; Purposes, Reasons and Effects of the Merger.................. 8
Opinion of Financial Advisor...................................................................... 9
Interests of Certain Persons in the Merger........................................................ 9
Financing of the Merger........................................................................... 11
Federal Income Tax Consequences................................................................... 12
Conditions to the Merger.......................................................................... 12
Payment for Shares of Company Common Stock........................................................ 12
Appraisal Rights.................................................................................. 12
The SPIP Amendments............................................................................... 12
Summary Selected Consolidated Financial Information of the Company................................ 13
Stock Price Information and Dividends............................................................. 13
Special Factors........................................................................................ 14
Background of the Merger.......................................................................... 14
Approval and Fairness of the Merger; Purposes of and Reasons for the Merger....................... 19
Certain Effects of the Merger..................................................................... 23
Opinion of Financial Advisor...................................................................... 23
Interests of Certain Persons in the Merger........................................................ 28
Interests in Company Common Stock and Options................................................ 28
Arrangements between Management and Merger Sub............................................... 29
Company Benefit Plans........................................................................ 31
Other Matters................................................................................ 32
Arrangements with AT&T....................................................................... 33
Plans for the Company After the Merger............................................................ 34
Regulatory Approvals.............................................................................. 35
Accounting Treatment for the Merger............................................................... 35
Certain Federal Income Tax Consequences........................................................... 35
Certain Projections............................................................................... 36
General...................................................................................... 36
Assumptions for Projections.................................................................. 37
Summary of Financial Projections............................................................. 37
The Merger Agreement................................................................................... 38
General........................................................................................... 38
Effective Time.................................................................................... 38
Payment of the Merger Consideration............................................................... 38
Representations and Warranties.................................................................... 40
Conditions to the Merger.......................................................................... 40
Covenants......................................................................................... 41
Regulatory Filings; Consents; Notification........................................................ 41
Additional Agreements............................................................................. 42
Employee Benefits................................................................................. 42
Indemnification................................................................................... 43
Transitional Services............................................................................. 43
Tax Matters....................................................................................... 43
Termination....................................................................................... 44
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Expenses.......................................................................................... 44
SPIP Amendments................................................................................... 44
First Amendment to the Merger Agreement........................................................... 45
Financing of the Merger................................................................................ 46
General........................................................................................... 46
Equity Subscriptions.............................................................................. 47
Asset Securitizations............................................................................. 47
Preferred Stock Issuance.......................................................................... 48
NIplc's Underwriting Letter....................................................................... 48
Future Dividends.................................................................................. 48
Expenses and Fees................................................................................. 48
Appraisal Rights of Stockholders....................................................................... 49
Information Concerning the Company..................................................................... 50
Market Prices of and Dividends on Company Common Stock................................................. 51
Information Concerning Merger Sub, Holdings, Holdings (UK), GRSH, NIplc and Nomura..................... 52
Security Ownership of Certain Beneficial Owners and Management......................................... 54
Selected Consolidated Financial Information of the Company............................................. 56
Available Information.................................................................................. 59
Incorporation of Certain Documents by Reference........................................................ 59
Schedule 13E-3 Statement............................................................................... 60
Annex A: The Merger Agreement.......................................................................... A-1
Annex B: Opinion of Goldman, Sachs & Co. .............................................................. B-1
Annex C: Section 262 of the Delaware General Corporation Law........................................... C-1
Annex D: Amendment to Share Performance Incentive Plan................................................. D-1
Annex E: Certain Information Regarding Directors and Executive Officers of the Company and AT&T........ E-1
Annex F: Certain Information Regarding Directors and Executive Officers of Merger Sub and Nomura....... F-1
</TABLE>
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INFORMATION STATEMENT SUMMARY
GENERAL
The following is a brief summary of certain information contained
elsewhere, or incorporated by reference, in this Information Statement. Certain
capitalized terms used in this Summary are defined elsewhere in this Information
Statement. Reference is made to, and this Summary is qualified in its entirety
by, the more detailed information contained in this Information Statement and in
the Annexes hereto. Stockholders are urged to read carefully this Information
Statement, including the Annexes hereto, in its entirety.
BACKGROUND OF THE MERGER
On September 20, 1995, AT&T, which beneficially owns approximately 86% of
the outstanding Company Common Stock through the AT&T Subsidiaries, announced
plans to separate itself into three publicly traded companies (AT&T, Lucent
Technologies Inc. ('Lucent') and NCR Corporation ('NCR')) and to sell its
remaining equity interest in the Company in a public or private sale.
On October 3, 1995, the Board of Directors of the Company (the 'Board')
authorized management to take action that would meet AT&T's objectives while
maximizing value for all stockholders, and created a committee, consisting of
all of the directors of the Company who were not directors, officers or
employees of AT&T or its subsidiaries (other than the Company), or officers or
employees of the Company (the 'Special Committee'), to ensure that the interests
of the Company's minority stockholders were properly represented in the process.
During October, 1995, Goldman, Sachs & Co. ('Goldman Sachs'), as financial
advisor to the Board and the Special Committee, contacted approximately 65
prospective bidders. Of the entities originally contacted by Goldman Sachs,
approximately 30 prospective bidders indicated a desire for more information
regarding the Company and were sent copies of an offering memorandum (the
'Offering Memorandum'). In response to this dissemination, five entities
indicated an interest in exploring a possible transaction. Bidders were asked to
submit two bids, one assuming an election under Section 338(h)(10) of the
Internal Revenue Code of 1986, as amended (the 'Code'), by AT&T and one assuming
no such election. The making of a Section 338(h)(10) election can have negative
tax consequences to the stockholder making the election. No bids were received
from the five bidders which conformed with the general transaction parameters
communicated to the bidders by Goldman Sachs. See 'Special Factors -- Background
of the Merger.'
On or about January 29, 1996, Nomura International plc ('NIplc') contacted
Goldman Sachs and expressed preliminary interest in structuring an acquisition
of the Company. On February 12, 1996, NIplc submitted a preliminary indication
of interest for a purchase of all the outstanding Company Common Stock. NIplc
indicated a preliminary value range of $32 to $37 per share. In mid-March, 1996,
NIplc submitted a preliminary proposal which, among other things, contemplated
the conversion of the Company to a limited liability company. This limited
liability company proposal was later dropped.
On April 12, 1996, AT&T notified the Company that it believed it might at
that time be appropriate to pursue an underwritten public offering of shares of
Company Common Stock held by the AT&T Subsidiaries while the Company continued
to explore private sale alternatives. On April 30, 1996, AT&T formally exercised
its registration rights by requesting the Company to register 30,879,656 shares
of Company Common Stock with the SEC.
On April 17, 1996, NIplc submitted a formal proposal to the Company to
underwrite the acquisition of the Company through the merger with and into the
Company of a newly-formed entity to be formed and financed by NIplc. The
proposal included a price of $40 per share for all outstanding shares of Company
Common Stock, conditioned upon AT&T making an election under Section 338(h)(10)
of the Code. NIplc indicated that it would increase its valuation by $3 per
share if the Operating Agreements between the Company and AT&T, Lucent and NCR
(the 'Operating Agreements'), which, among other things, designate the Company
as the 'preferred provider' of certain financing services for AT&T, Lucent and
NCR, respectively, were to be extended for five years from their scheduled
expiration in 2000 and if they were to be modified slightly to accommodate
NIplc's
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strategy. The bid indicated that retention of the Company's management was a
condition to NIplc's proposal and that NIplc anticipated, as a condition to the
proposal, requiring management to reinvest a significant portion of their
proceeds from the transaction into the Company going forward.
On April 26, 1996, AT&T sent a letter to the Company stating that AT&T did
not believe NIplc's April 17 proposal was sufficiently attractive to warrant
AT&T's agreement to make the Section 338(h)(10) election and to accept other
conditions proposed by NIplc. Also on April 26, 1996, NIplc submitted a proposal
revising its April 17, 1996 proposal which continued to provide for a $40 per
share price but indicated that NIplc would permit the Company to declare a
special dividend immediately prior to the closing in an amount equal to the
lesser of $90 million or the Company's net after-tax earnings from January 1,
1996 through the closing date or, as an alternative, would permit the Company to
pay AT&T that amount as an indemnity for costs associated with AT&T's making the
Section 338(h)(10) election.
Following NIplc's April 26th proposal, AT&T contacted Goldman Sachs and
indicated that AT&T would be prepared to consider the transaction proposed by
NIplc, including the Section 338(h)(10) election, but excluding the extension of
the Operating Agreements, if, among other things, NIplc increased the price per
share to $45.
On May 13, 1996, NIplc submitted a revised proposal to the Company
contemplating a merger of a newly-formed entity into the Company, pursuant to
which each issued and outstanding share of Company Common Stock would be
cancelled in exchange for $45 per share and each outstanding Option would be
accelerated and cancelled in exchange for a cash payment equal to $45 per share
subject to such Option less the applicable exercise price of such Option. The
proposed transaction was conditioned on AT&T making a Section 338(h)(10)
election.
On May 15, 1996, AT&T notified the Company that it had received and
considered NIplc's May 13, 1996 proposal and was ready to support the
commencement of discussions between the Company and NIplc subject to certain
conditions, including a more equitable sharing among the Company's stockholders
of the costs of the Section 338(h)(10) election. AT&T later dropped its proposal
to allocate a portion of the costs of this election to the non-AT&T
stockholders.
Between May 15, 1996 and June 5, 1996, the parties negotiated the terms of
the definitive Merger Agreement and the Underwriting Letter (as defined herein)
setting forth NIplc's irrevocable and unconditional obligation to underwrite the
financing of the Merger.
At a meeting on May 31, 1996, the Special Committee unanimously concluded
that the proposed transaction was fair to the holders of Company Common Stock
(other than AT&T and its affiliates) and recommended to the Board that the
transaction be approved if the remaining issues among NIplc, AT&T and the
Company could be satisfactorily resolved. The Special Committee also unanimously
approved an amendment to the Intercompany Agreement, dated June 25, 1993,
between the Company and AT&T (the 'Intercompany Agreement'), to permit AT&T to
have all of its shares of Company Common Stock cashed out in the Merger.
At a meeting on June 5, 1996, the Special Committee unanimously reaffirmed
its May 31, 1996 conclusion and recommendation to the Board. The Board, by the
unanimous vote of the directors present (other than Thomas C. Wajnert, the
Chairman of the Board and Chief Executive Officer of the Company, who did not
participate in the Board's deliberations or vote on the Merger Agreement in
light of his anticipated participation in the transaction), then formally
approved the Merger Agreement and submitted it to the AT&T Subsidiaries for
their approval by written consent. The AT&T Subsidiaries executed and delivered
the Merger Agreement Stockholders' Consent, dated June 5, 1996. The Merger
Agreement was thereafter executed and delivered by the Company, AT&T, Holdings
and Merger Sub. The amendment to the Intercompany Agreement was also executed
and delivered and NIplc executed and delivered the Underwriting Letter.
Following the execution and delivery of the Merger Agreement on June 5,
1996, the parties thereto determined that certain revisions to the Merger
Agreement were necessary in order to accommodate changes to the proposed closing
date and certain other matters. Accordingly, in the early part of August the
parties negotiated an amendment to the Merger Agreement. On August 19, 1996, the
Board of Directors of the Company (acting without the participation or vote of
Mr. Wajnert), upon the
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unanimous recommendation of the Special Committee, adopted and approved the
First Amendment to the Agreement and Plan of Merger, dated as of August 20, 1996
(the 'Amendment'). The Amendment was thereafter executed and delivered by the
Company, AT&T, Holdings and Merger Sub. The AT&T Subsidiaries executed and
delivered to the Company a letter confirming the Merger Agreement Stockholders
Consent with respect to the Merger Agreement, as amended by the Amendment. NIplc
also executed and delivered the Confirmation Letter (as defined herein).
The Amendment provides that the closing date for the Merger will be the
later of (i) October 1, 1996 (as opposed to the September 17, 1996 date provided
in the Merger Agreement as executed on June 5, 1996) and (ii) the first business
day on which all of the conditions to the closing of the Merger have been
satisfied or waived. The Amendment does not change the Merger Agreement's final
deadline of October 31, 1996, for the closing of the Merger, following which
date any of the parties may terminate the Merger Agreement under certain
circumstances. The Amendment also provides that Holdings may, at its option,
choose to postpone the closing of the Merger to a date no later than October 31,
1996, even if all of the conditions to closing are satisfied or waived prior to
such date. If Holdings exercises such option, interest will be payable by
Holdings on the $45 per share purchase price at a rate of LIBOR plus 0.5% for
the period from and including September 18, 1996 through but excluding the
closing date of the Merger. See 'The Merger Agreement -- First Amendment to the
Merger Agreement.' The Amendment also requires that Holdings receive an
additional $400 million capital contribution by September 18, 1996, increasing
the capital contribution made to Holdings to a total of $500 million. A copy of
the Amendment is attached to this Information Statement in Annex A. Unless
otherwise noted herein and except with respect to references to the Merger
Agreement as it existed prior to August 20, 1996, all references herein to the
Merger Agreement refer to the Merger Agreement, as amended by the Amendment.
THE PARTIES TO THE MERGER AND CERTAIN RELATED PARTIES
The Company. AT&T Capital is a full-service, diversified equipment leasing
and finance company that operates principally in the United States and also has
operations in Europe, Canada, the Asia/Pacific Region and Latin America. The
Company is one of the largest equipment leasing and finance companies in the
United States, based on the aggregate value of equipment leased or financed, and
is the largest lessor of telecommunications equipment in the United States. The
Company leases and finances equipment manufactured and distributed by numerous
vendors, including Lucent and NCR, currently subsidiaries of AT&T. In addition,
the Company provides equipment leasing and financing and related services
directly to end-user customers. The Company's approximately 500,000 customers
include large global companies, small and mid-sized businesses and federal,
state and local governments and their agencies. The principal executive offices
of the Company are located at 44 Whippany Road, Morristown, New Jersey 07962
(telephone number 201-397-3000).
AT&T. AT&T is principally engaged in global information movement and
management and in financial services. On September 20, 1995, AT&T announced its
intention to separate itself into three publicly traded companies by creating a
new entity comprising AT&T's communications products and systems businesses, now
known as Lucent, and by divesting itself of its interests in Lucent and NCR
through an initial public offering by Lucent and distributions by AT&T of the
Lucent stock and NCR stock held by AT&T to the shareowners of AT&T. At the same
time, as part of its overall restructuring plan, AT&T announced its intention to
sell its remaining equity interest in the Company in a public or private sale.
Following its restructuring, AT&T will be principally engaged in the provision
of communication services. The mailing address of AT&T's principal executive
offices is 32 Avenue of the Americas, New York, New York 10013-2412 (telephone
number 212-387-5400).
Merger Sub. Merger Sub is a newly formed Delaware corporation organized at
the direction of GRS Holding Company Limited, a private U.K. holding corporation
('GRSH'), in connection with the transactions contemplated by the Merger
Agreement. All of the outstanding capital stock of Merger Sub is currently held
by Holdings. As described under 'Special Factors -- Interests of Certain Persons
in the Merger -- Arrangements between Management and Merger Sub,' it is
anticipated that, immediately prior to the Effective Time, the Management
Investors (as defined herein) will subscribe for and acquire newly issued shares
of Merger Sub Common Stock in exchange for shares of Company Common Stock held
by such Management Investors. Until the consummation of the Merger, it is not
anticipated that Merger Sub will engage in any activities other than those
incident to its formation and capitalization and
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the other transactions contemplated by the Merger Agreement. The mailing address
of Merger Sub's principal executive offices is 1209 Orange Street, Wilmington,
Delaware 19801 (telephone number 302-658-7581).
Holdings. Holdings is a newly formed Cayman Islands corporation organized
at the direction of GRSH in connection with the transactions contemplated by the
Merger Agreement. All of the outstanding capital stock of Holdings is currently
held indirectly by GRSH through its wholly-owned subsidiary, Hercules Holdings
(UK) Limited ('Holdings (UK)'). Until the consummation of the Merger, it is not
anticipated that Holdings will engage in any activities other than those
incident to its formation and capitalization and the other transactions
contemplated by the Merger Agreement. As described under 'Information Concerning
Merger Sub, Holdings, Holdings (UK), GRSH, NIplc and Nomura,' it is anticipated
that, upon consummation of the Merger and on a fully diluted basis, NIplc would
beneficially own approximately 70.0%, Holdings (UK) would beneficially own
approximately 19.5% and, assuming that agreements can be reached with Babcock &
Brown Holdings Inc., a San Francisco based leasing, asset and project financing
advisory company ('Babcock & Brown'), Babcock & Brown would beneficially own
approximately 10.5% of the total outstanding Holdings Common Stock (as defined
herein), respectively. The mailing address of Holdings' principal executive
offices is c/o Maples & Calder, P.O. Box 309, Ugland House, South Church Street,
Grand Cayman, Cayman Islands, British West Indies (telephone number
809-946-8066).
Holdings (UK). Holdings (UK) is a newly formed private limited company
registered in England and organized at the direction of GRSH in connection with
the transactions contemplated by the Merger Agreement. All of the outstanding
capital stock of Holdings (UK) is owned by GRSH and, at and following the
consummation of the Merger, Holdings (UK) will remain a wholly-owned subsidiary
of GRSH. Until the consummation of the Merger, it is not anticipated that
Holdings (UK) will engage in any activities other than those incident to its
formation and capitalization and the other transactions contemplated by the
Merger Agreement. The mailing address of the principal executive offices of
Holdings (UK) is c/o GRS Holding Company Limited, Mitre House, 160 Aldersgate
Street, London, England EC1A 4DD (telephone number 44-171-606-9000).
GRSH. GRSH is a private limited company registered in England which,
through its principal subsidiary, is engaged in the rail leasing business. All
of the outstanding capital stock of GRSH is owned equally by Nicolas Lethbridge,
an employee of Babcock & Brown, and Prideaux & Associates Limited ('Prideaux'),
a London based business advisory company. On a fully diluted basis NIplc
beneficially owns 85% of the capital stock of GRSH, while Babcock & Brown (UK)
Holdings Limited, an affiliate of Babcock & Brown, beneficially owns 9.5%, and
Prideaux and its affiliates, collectively beneficially own 5.5%, in each case,
through instruments convertible into such capital stock. The mailing address of
GRSH's principal executive offices is Mitre House, 160 Aldersgate Street,
London, England EC1A 4DD (telephone number 44-171-606-9000).
NIplc. NIplc, a private limited company registered in England, is a U.K.
based investment bank, principally involved in managing and underwriting
international securities issues, brokering and dealing in securities and
providing investment advice and other services related to its international
securities business. NIplc is a wholly-owned indirect subsidiary of The Nomura
Securities Co., Ltd. ('Nomura'). NIplc currently beneficially owns (through
convertible instruments) approximately 85% of the capital stock of GRSH on a
fully diluted basis. NIplc effectively controls GRSH by means of contractual
rights conferred in connection with its acquisition of such convertible
instruments. NIplc has delivered an unconditional and irrevocable undertaking to
underwrite an international capital markets issue on behalf of Holdings, or to
purchase securities of Holdings, in an amount sufficient to allow Holdings to
satisfy its obligations under the Merger Agreement. See 'Financing of the
Merger -- NIplc's Underwriting Letter.' The mailing address of NIplc's principal
executive offices is Nomura House, 1 St. Martin's-le-Grand, London, England EC1A
4NP (telephone number 44-171-236-8811).
Nomura. Nomura, a company organized under Japanese law, was founded in 1925
in Osaka, Japan and is currently Japan's largest securities brokerage house. The
principal activities of Nomura and its subsidiaries include securities
brokerage, trading, investment banking and commercial banking in global
financial markets. Through its subsidiaries and affiliates, Nomura advises its
international clientele on a wide range of financial and strategic matters,
including banking, asset management, leveraged leasing,
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project finance, real estate, and mergers and acquisitions. Nomura has sole
indirect ownership of NIplc through Nomura's wholly-owned direct subsidiary,
Nomura Europe Holding plc ('Nomura Europe'). The mailing address of Nomura's
principal executive offices is 1-9-1, Nihonbashi, Chuo-ku, Tokyo 103, Japan
(telephone number 03-3211-1811).
For further information concerning Holdings and Merger Sub and their
affiliates, see 'Information Concerning Merger Sub, Holdings, Holdings (UK),
GRSH, NIplc and Nomura.'
APPROVAL AND FAIRNESS OF THE MERGER; PURPOSES, REASONS AND EFFECTS OF THE MERGER
The Board, acting upon the recommendation of the Special Committee,
authorized and approved the Merger Agreement and the transactions contemplated
thereby and believes that the proposed Merger is fair to, and in the best
interests of, the Company's stockholders. The AT&T Subsidiaries, as the holders
of approximately 86% of the outstanding Company Common Stock, executed the
Merger Agreement Stockholders' Consent approving the Merger Agreement. A copy of
the Merger Agreement is attached to this Information Statement as Annex A. No
additional approval of the Merger Agreement by the Company's stockholders is
required.
The Board's approval and Special Committee's recommendation was based upon
a number of factors, including: (i) the Board's review of strategic alternatives
available to the Company, (ii) recent and historical market prices of the
Company Common Stock, (iii) the Board's knowledge of the business, operations,
properties, assets and earnings, as well as the prospects, of the Company, (iv)
the unconditional and irrevocable agreement of NIplc to underwrite an
international capital markets issue on behalf of Holdings, or to purchase
securities of Holdings, in an amount sufficient to allow Holdings to satisfy its
obligations under the Merger Agreement, (v) the contractual relationships
between the Company and each of AT&T, Lucent and NCR and the implications of
AT&T's pending restructuring, (vi) the presentation of Goldman Sachs discussed
elsewhere herein under 'Special Factors -- Opinion of Financial Advisor,' (vii)
the opinion of Goldman Sachs that, as of the date of its opinion, and based upon
and subject to various qualifications and assumptions described therein, the
Merger Consideration to be received in the Merger by the holders of Company
Common Stock pursuant to the terms of the Merger Agreement is fair to such
holders (other than AT&T and its affiliates) and (viii) in the case of the
Board, the recommendation of the Special Committee. The Board and Special
Committee also considered that the extensive search for possible buyers of the
Company failed to discover any other bidder interested in pursuing negotiations
for the acquisition of the Company on terms which did not require amendments to
the Operating Agreements which were unacceptable to AT&T, Lucent and NCR. In
addition to the factors enumerated above, the Special Committee's recommendation
was also based on the fact that AT&T had the immediate right to sell (in a
public or private sale) shares of Company Common Stock it beneficially owned
representing up to 66% of the outstanding Company Common Stock (and, under the
terms of the Intercompany Agreement, all of its remaining shares in August 1998)
without any consent or approval from the Company or the Company's independent
directors, the fact that the AT&T Subsidiaries, as the owners of approximately
86% of the outstanding Company Common Stock, will receive the same cash price
per share in the Merger as the non-AT&T stockholders, and the fact that AT&T was
in favor of and willing to cause the AT&T Subsidiaries to vote to approve the
Merger.
In considering the fairness of the Merger, stockholders should be aware
that the Company's current management has a substantial equity ownership
position in the Company and will be offered an opportunity, not available to the
Company's other stockholders, to participate in the equity of the Surviving
Corporation. As of December 31, 1995 and as of March 31, 1996, the Management
Offerees' aggregate interests, on a fully-diluted basis assuming the exercise of
all Options, in the Company's net book value was $56.0 million (or 5.0%) and
$57.7 million (or 5.0%), respectively, and, for the year ended December 31, 1995
and the three months ended March 31, 1996, the Management Offerees' aggregate
interest in the Company's net income was $6.4 million (or 5.0%) and $1.9 million
(or 5.0%), respectively. Assuming all Management Offerees participate in the
Management Share Exchange and the Management Option Reinvestment and are granted
the New Options, in each case, as referred to below, as of December 31, 1995 and
as of March 31, 1996 (on a pro forma basis which gives effect to the
consummation of the Merger), the Management Offerees' aggregate interest, on a
fully-diluted basis
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assuming the exercise of all Options and New Options, in the Company's net book
value would be $156.3 million (or 14.0%) and $161.0 million (or 14.0%),
respectively, and, for the year ended December 31, 1995 and the three months
ended March 31, 1996, the Management Offerees' aggregate interest in the
Company's net income would be $17.9 million (or 14.0%) and $5.2 million (or
14.0%), respectively.
The directors and sole stockholder of Merger Sub and the directors of
Holdings have approved the Merger Agreement.
At the Effective Time, Merger Sub will be merged into the Company with the
Company continuing its corporate existence under the DGCL as the surviving
corporation (the 'Surviving Corporation') and each share of Company Common
Stock, other than those shares owned by the Company, Holdings, Merger Sub or
their respective wholly-owned subsidiaries or by any stockholders exercising
appraisal rights in accordance with Section 262 of the DGCL (collectively, the
'Excluded Shares'), will be converted into the right to receive the Merger
Consideration. Upon consummation of the Merger, Holdings will own all of the
outstanding common stock of the Surviving Corporation ('Surviving Corporation
Common Stock') (except for shares owned by the Management Investors (as defined
herein)) and the present holders of the Company Common Stock (other than the
Management Investors) will no longer have any equity interest in the Surviving
Corporation, will not share in the results of the Surviving Corporation and will
no longer have rights to vote on corporate matters. Once the Merger is
effective, the Company Common Stock will no longer be traded on the New York
Stock Exchange and registration of Company Common Stock under the Securities
Exchange Act of 1934, as amended (the 'Exchange Act'), will terminate. However,
for so long as certain publicly-held debt or other securities of the Surviving
Corporation remain outstanding following the Merger, the Surviving Corporation
will continue to file periodic reports with the SEC to the extent required under
the Exchange Act.
Each outstanding Option will be cancelled upon consummation of the Merger
in exchange for cash in an amount equal to the excess of the Merger
Consideration over the Option exercise price per share. See 'Special
Factors -- Interests of Certain Persons in the Merger -- Arrangements between
Management and Merger Sub.'
OPINION OF FINANCIAL ADVISOR
The Company engaged Goldman Sachs to act as financial advisor to the Board
and the Special Committee in connection with the sale of the Company. Goldman
Sachs has delivered to the Board and the Special Committee its written opinion
dated June 5, 1996, the date of the Merger Agreement, to the effect that, as of
such date, and based upon and subject to various qualifications and assumptions
described therein, the Merger Consideration to be received in the Merger by the
holders of Company Common Stock pursuant to the terms of the Merger Agreement is
fair to such holders (other than AT&T and its affiliates). SUCH OPINION IS
ATTACHED AS ANNEX B HERETO AND SHOULD BE READ IN ITS ENTIRETY. Goldman Sachs did
not render any opinion as to the fairness of the Merger Consideration to AT&T
and its affiliates. For additional information concerning Goldman Sachs' opinion
and the fee to be received by Goldman Sachs in connection with this transaction,
see 'Special Factors -- Opinion of Financial Advisor' and Annex B.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the approval of the Board with respect to the Merger
Agreement, stockholders should be aware that certain officers and directors of
the Company, including Mr. Wajnert (who did not participate in the Board's
deliberations or vote on the Merger Agreement in light of his anticipated
participation in the transaction), have certain interests which may have
presented them with potential conflicts of interest in connection with the
Merger and the SPIP Amendments. In particular, as of August 5, 1996, executive
officers and directors of the Company (comprised of 11 directors and six
executive officers) collectively beneficially owned 357,666 shares of Company
Common Stock (excluding shares issuable upon exercise of Options) and held
Options to purchase 755,502 shares of Company Common Stock and, but for the
Management Share Exchange and the Management Option
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Reinvestment referred to below, would be entitled to receive upon consummation
of the Merger an aggregate of up to approximately (i) $16,094,970 in cash in
respect of such shares of Company Common Stock and (ii) $14,388,051 in cash in
respect of the cancellation of such Options (in each case excluding any interest
which may be payable on the $45 per share purchase price).
As of August 5, 1996, the Management Offerees (a group which is expected to
be comprised of the 31 senior managers of the Company who are members of the
Company's Corporate Leadership Forum and the Corporate Leadership Team)
collectively beneficially owned approximately 895,000 shares of Company Common
Stock (excluding shares issuable upon exercise of Options) and held Options to
purchase 1,578,051 shares of Company Common Stock, and but for the Management
Share Exchange and Management Option Reinvestment referred to below, would be
entitled to receive upon consummation of the Merger an aggregate of up to
approximately (x) $40 million in cash in respect of such shares of Company
Common Stock and (y) $29 million in cash in respect of the cancellation of such
Options (in each case excluding any interest which may be payable on the $45 per
share purchase price).
In addition, Merger Sub expects to make the following offers and grants to
the Management Offerees: (i) the Management Offerees will be offered the
opportunity to enter into an exchange (the 'Management Share Exchange') in
which, immediately prior to the Effective Time, up to an aggregate of
approximately 883,419 shares of Company Common Stock currently held by such
Management Offerees (or approximately $40 million in value, based on the $45 per
share purchase price to which such holders would otherwise be entitled in
connection with the Merger), may be exchanged for approximately $40 million of
newly issued shares of common stock, par value $.01 per share, of Merger Sub
('Merger Sub Common Stock') (which will become shares of Surviving Corporation
Common Stock upon consummation of the Merger); (ii) each Management Offeree who
accepts such Management Share Exchange (each, a 'Management Investor') will be
offered the opportunity, at his or her individual discretion, to invest some or
all of the after-tax proceeds of the cash-out of Options held by such Management
Investor (the 'Management Options') in additional shares of Surviving
Corporation Common Stock immediately following the Effective Time (the
'Management Option Reinvestment'); (iii) following the Effective Time of the
Merger, subject to ongoing discussions between Merger Sub and certain members of
management, it is anticipated that certain of the Management Investors may be
granted additional options to purchase shares of Surviving Corporation Common
Stock ('New Options') giving them the right, subject to certain conditions, to
purchase up to an additional $39 million of Surviving Corporation Common Stock;
and (iv) over a five-year period following the Effective Time, Holdings expects
to grant additional New Options to certain employees of the Surviving
Corporation (possibly including certain of the Management Offerees) to purchase,
subject to certain conditions, shares of Surviving Corporation Common Stock
having an aggregate fair market value of up to $64 million on the applicable
date of grant.
As a result of the Management Share Exchange, the Management Option
Reinvestment and the grant of New Options, immediately after the Effective Time,
the Management Offerees could own or have the right to acquire, upon exercise of
their New Options (assuming all Management Offerees were to participate and such
New Options become exercisable prior to their termination), up to approximately
9.9% of the outstanding Surviving Corporation Common Stock on a fully diluted
basis. For additional details with respect to the foregoing offers and grants
which Merger Sub anticipates making to the Management Offerees, see 'Special
Factors -- Interests of Certain Persons in the Merger -- Arrangements between
Management and Merger Sub.'
Certain members of management (including the Management Offerees) are
participants in employee benefit plans of the Company which, in connection with
a change in control of the Company, will vest or pay benefits or awards or
provide the opportunity to receive future benefits or awards under certain
circumstances. See 'Special Factors -- Interests of Certain Persons in the
Merger -- Company Benefit Plans.'
It is anticipated that each of the Company's executive officers will be
asked by Holdings to continue as an officer of the Surviving Corporation
following the Merger. There can be no assurance, however, that all of the
current officers will elect to continue their employment with the Surviving
Corporation.
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Pursuant to the Merger Agreement, for six years after the Effective Time,
Holdings will indemnify and hold harmless, to the fullest extent permitted under
applicable law, each present and former director, officer and employee of the
Company and its subsidiaries against any costs or expenses, including reasonable
attorneys' fees, judgments, fines, losses, claims, damages or liabilities
incurred in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative,
including, without limitation, any claim, action, suit, proceeding, or
investigation under the federal securities laws, arising out of or pertaining to
matters existing or occurring at or prior to the Effective Time, including the
transactions contemplated by the Merger Agreement. The Merger Agreement also
provides, in general, that AT&T shall maintain in place its current directors'
and officers' liability insurance with respect to actions prior to the Merger
until the Effective Time. After the Effective Time, the Surviving Corporation
will establish officers' and directors' liability insurance for the Company's
and its subsidiaries' officers and directors substantially similar to the
insurance currently maintained for a period of six years so long as the annual
premium is not in excess of $750,000 or, if the cost does exceed that amount, as
much insurance as can be purchased for that amount.
No director or officer of the Company currently has any relationship or
affiliation with Holdings or Merger Sub or their affiliates, except for the
anticipated participation of the Management Investors as described under
'Special Factors -- Interests of Certain Persons in the Merger.'
FINANCING OF THE MERGER
The total amount of funds required to consummate the Merger and to pay
related fees and expenses and to repay or refinance certain indebtedness
(assuming no interest is payable on the $45 per share purchase price) is
approximately $2,365.3 million. Of such amount, approximately $2,158.0 million
will be required to purchase outstanding shares of Company Common Stock pursuant
to the Merger and to satisfy the Company's obligation under the Merger Agreement
to cash-out its outstanding Options. In addition, approximately $22.0 million
will be required to pay fees and expenses to be incurred in connection with the
consummation of the Merger. Although not a condition to the Merger, the Company
expects that approximately $185.3 million of the aggregate funds will be used to
repay certain indebtedness of the Company which comes due on or in connection
with the consummation of the Merger or to refinance other existing indebtedness
of the Company.
On June 7, 1996, Holdings received a capital contribution of $100.0 million
which was made by Holdings (UK) from the proceeds of a note issuance of Holdings
(UK) to NIplc. The remaining $2,265.3 million of the required funds will be
obtained from: (i) the proceeds of the sale of shares of common stock, par value
$1.00 per share, of Holdings ('Holdings Common Stock') to Holdings (UK) and to
Babcock & Brown or its affiliates (assuming that agreements for such share
subscriptions can be reached) in an aggregate amount of up to approximately
$360.0 million; (ii) the Management Share Exchange by the Management Investors
of shares of Company Common Stock for shares of Merger Sub Common Stock in the
amount of up to approximately $40.0 million; (iii) the proceeds of a $400.0
million capital contribution which Holdings is required by the terms of the
Merger Agreement to receive by September 18, 1996, and which will be made to
Holdings by Holdings (UK) from the proceeds of a note issuance of Holdings (UK)
to NIplc; and (iv) up to $1,465.3 million of proceeds of offerings of equipment
receivable-backed securities by affiliates of the Surviving Corporation.
The Merger Agreement is not subject to any financing condition. Holdings
and Merger Sub are obligated to consummate the Merger upon the satisfaction (or
waiver) of the conditions precedent included in the Merger Agreement. See 'The
Merger Agreement -- Conditions to the Merger.' Holdings has received an
unconditional and irrevocable undertaking from NIplc to underwrite or purchase
an international capital markets issue on behalf of Holdings in an amount
sufficient to satisfy Holdings' financial obligations under the Merger
Agreement. See 'Financing of the Merger -- NIplc's Underwriting Letter.' If, for
any reason, the proceeds of either the offerings of equipment receivable-backed
securities by an affiliate of the Surviving Corporation, the sale of Holdings
Common Stock to Holdings (UK) and to Babcock & Brown or its affiliates, or the
Management Share Exchange by the Management Investors are not available to fund
the aggregate Merger Consideration at the Closing, NIplc would be required to
arrange alternative financing on behalf of Holdings in order to satisfy its
obligations pursuant to such commitment. In such event, it is anticipated that
NIplc would arrange a
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short-term credit facility for Holdings on terms to be negotiated at such time,
which would be refinanced from the proceeds of a subsequent offering of
equipment receivable-backed securities.
As soon as practicable following the Effective Time, Holdings expects to
cause the Surviving Corporation or an affiliate of the Surviving Corporation to
issue approximately $200.0 million of preferred securities. The proceeds of such
issuance of preferred securities, as well as the excess proceeds from the sale
of equipment receivable-backed securities by an affiliate of Merger Sub, may be
used to repay or refinance other indebtedness of the Company.
FEDERAL INCOME TAX CONSEQUENCES
Generally, if the Merger is consummated, a holder of Company Common Stock
will recognize taxable gain or loss per share for federal income tax purposes
equal to any difference between the Merger Consideration (or the amount received
in respect of dissenting shares) and the holder's tax basis in such share.
However, the treatment of amounts in addition to the $45 per share purchase
price, if any, received as a result of the postponement of the closing is not
entirely clear under existing law. Each stockholder should consult his tax
advisor as to the particular consequences of the Merger to such stockholder,
including the application of state, local and other tax laws. See 'Special
Factors -- Certain Federal Income Tax Consequences.'
CONDITIONS TO THE MERGER
Under the Merger Agreement, the respective obligations of Holdings, Merger
Sub, AT&T and the Company to consummate the Merger are subject to the
fulfillment or waiver, where permissible, of certain conditions at or prior to
the Effective Time, including certain federal, state, local and foreign
regulatory approvals. Under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the 'HSR Act'), the Merger may not be consummated unless
notice has been given and certain information has been furnished to the
Antitrust Division of the Department of Justice (the 'Antitrust Division') and
the Federal Trade Commission (the 'FTC') and certain waiting period requirements
have been satisfied. The requisite notification and report forms under the HSR
Act were filed with the Antitrust Division and FTC on July 30, 1996. The HSR Act
waiting period was terminated by order of the FTC on August 9, 1996. See 'The
Merger Agreement -- Conditions to the Merger' and 'Special Factors -- Regulatory
Approvals.'
PAYMENT FOR SHARES OF COMPANY COMMON STOCK
Detailed instructions with regard to the surrender of certificates formerly
evidencing shares of Company Common Stock ('Certificates'), together with a
letter of transmittal, will be forwarded to holders of Certificates as promptly
as practicable following the Effective Time by the Paying Agent (as defined
herein). Payment will be made to such former holders of Company Common Stock as
promptly as practicable following receipt by the Paying Agent of Certificates
for their Company Common Stock and other required documents. No interest will be
paid or accrued on the cash payable upon surrender of Certificates. STOCKHOLDERS
SHOULD NOT SEND ANY STOCK CERTIFICATES AT THIS TIME. See 'The Merger
Agreement -- Payment of the Merger Consideration.'
APPRAISAL RIGHTS
Under Section 262 of the DGCL, holders of Company Common Stock who file the
required written demand for appraisal of their shares within 20 days after the
date this Information Statement is first sent to stockholders will have the
right to be paid the fair value of their shares as determined by the Delaware
Court of Chancery in lieu of the Merger Consideration. SUCH APPRAISAL RIGHT WILL
BE LOST, HOWEVER, IF THE PROCEDURAL REQUIREMENTS OF THE DGCL ARE NOT FULLY AND
PRECISELY SATISFIED. This Information Statement constitutes the notice required
by Section 262(d) of the DGCL. See 'Appraisal Rights of Stockholders' and Annex
C attached hereto.
THE SPIP AMENDMENTS
The AT&T Subsidiaries, as the holders of approximately 86% of the
outstanding shares of Company Common Stock, executed the SPIP Amendments
Stockholders' Consent approving the SPIP Amendments. A copy of the SPIP
Amendments is attached to this Information Statement as Annex D. No additional
approval of the SPIP Amendments by the Company's stockholders is required.
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The SPIP Amendments provide that upon the consummation of a transaction
that has or will have the effect of the Company Common Stock no longer being
publicly traded (a 'Private Sale'), the Company shall pay to each participant
(a) for each pending performance period under the SPIP, an accelerated accrued
payment equal to 100% of such participant's maximum payout for such period and
(b) for each performance period completed within 12 months prior to a Private
Sale, an amount equal to the excess of the participants' maximum payout for such
period over the amount paid. The SPIP Amendments also provide that, upon
consummation of the Merger, the Company will pay to each participant for each
future performance period under the SPIP, an accelerated accrued payment equal
to 100% of such participant's maximum payout for that period, provided that, for
any participants who are not members of the Company's Leadership Forum, such
payment shall not be made unless such participant has entered into an agreement
with Holdings and the Surviving Corporation to modify the definition of
'Qualifying Termination' in the Leadership Severance Plan or the Member
Severance Plan, as applicable. The consummation of the Merger will constitute a
Private Sale. See 'The Merger Agreement -- SPIP Amendments.'
SUMMARY SELECTED CONSOLIDATED FINANCIAL INFORMATION OF THE COMPANY
For certain selected financial data concerning the Company for the five
years ended December 31, 1995 and for the six months ended June 30, 1996 and
June 30, 1995, see 'Selected Consolidated Financial Information of the Company.'
STOCK PRICE INFORMATION AND DIVIDENDS
Quarterly dividends on Company Common Stock have been paid since the fourth
quarter of 1993, the Company's first full quarter of operations after its
initial public offering in August 1993. Future cash dividends will be dependent
upon the policies of the Board and the Company's earnings, financial condition
and other factors. The Merger Agreement provides that the Company may not,
without the written consent of Holdings, declare, set aside or pay any dividend
or other distribution payable in cash, stock or property in respect of Company
Common Stock, other than regular quarterly cash dividends not in excess of $.11
per share. On July 19, 1996, the Board declared a dividend of $.11 per share
which is payable on August 30, 1996 to holders of record of Company Common Stock
as of the close of business on August 9, 1996.
On September 19, 1995, the last trading day prior to the public
announcement by AT&T of its intention to dispose of its interest in the Company,
the closing sale price per share of Company Common Stock as reported on the New
York Stock Exchange -- Composite Tape ('NYSE') was $32.75. On June 5, 1996, the
last trading day prior to the public announcement of the Merger, the closing
sale price per share of Company Common Stock as reported on the NYSE was $41.00.
The closing sale price per share of Company Common Stock as reported on the NYSE
on August 29, 1996 was $44 5/8. See 'Market Prices of and Dividends on Company
Common Stock.'
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SPECIAL FACTORS
BACKGROUND OF THE MERGER
The Company was organized as an indirect wholly-owned subsidiary of AT&T on
March 31, 1993. The Company's business represents a continuation of the
operations of two predecessor corporations, Credit Holdings and Capital
Holdings. Credit Holdings began operations in 1985, and Capital Holdings began
operations in 1990 (at which time Credit Holdings became a wholly-owned
subsidiary of Capital Holdings.) On August 4, 1993, the Company sold 6,601,716
shares of Company Common Stock at $21.50 per share (yielding gross proceeds to
the Company of $141,936,894) in a registered public offering pursuant to which
approximately 14% of the outstanding Company Common Stock became held by parties
other than the AT&T Subsidiaries.
On September 20, 1995, AT&T announced plans to separate itself into three
publicly traded companies: AT&T, NCR and Lucent. At the same time, as part of
its overall restructuring plan, AT&T announced its intention to sell its
remaining interest in the Company in a public or private sale.
On September 21, 1995, Richard W. Miller, Executive Vice President and
Chief Financial Officer of AT&T, met with Mr. Wajnert, the Chairman of the Board
and Chief Executive Officer of the Company, and stated that AT&T wished to work
with the Board and management in effecting the disposition of its interest in an
orderly manner which would maximize value for all of the Company's stockholders,
and that AT&T would allow the Company to manage the sale process, including by
selecting its own legal counsel and its own investment banking firm to assist it
in evaluating its strategic alternatives.
On October 3, 1995, the Board met to consider AT&T's September 20
announcement concerning its plan to sell its remaining interest in the Company.
The Board authorized management to take action that would meet AT&T's objectives
while maximizing value for all stockholders, including a possible public or
private sale of the Company. The Board authorized the Company to examine
possible public and private sale alternatives and created the Special Committee,
consisting of all of the directors of the Company who were not directors,
officers or employees of AT&T or its subsidiaries (other than the Company), or
officers or employees of the Company, to ensure that the interests of the
Company's minority stockholders were properly represented in the process.
Additionally, the Company engaged legal counsel for, and retained Goldman Sachs
to act as financial advisors to, the Special Committee and the Board. See
' -- Opinion of Financial Advisor.'
During October, 1995, Goldman Sachs, together with the Company, identified
a list of companies that they believed might have an interest in acquiring the
Company. The Company prepared an Offering Memorandum describing the Company for
use in the sale process. Goldman Sachs initially contacted approximately 65
prospective bidders to determine which entities would be interested in receiving
information concerning the sale of the Company. Goldman Sachs began
disseminating the Offering Memorandum on October 26, 1995 and requested bidders
who were interested in pursuing a possible transaction involving the Company to
respond not later than November 20, 1995. Of the entities originally contacted
by Goldman Sachs, approximately 30 prospective bidders indicated a desire for
more information regarding the Company and, upon execution of a standard
confidentiality agreement, were sent copies of the Offering Memorandum. In
response to this dissemination, five entities indicated an interest in exploring
a possible transaction and receiving a bid package. Each of such five bidders
was given an opportunity to conduct a 'due diligence' review of various
corporate records and other Company documents as well as an opportunity to
review more extensive financial information concerning the Company and to meet
with senior management of the Company. On December 26, 1995, Goldman Sachs
distributed a bid package to such five bidders. This bid package included
financial and other information not disseminated to the original distributees
and a draft merger agreement. Recipients were asked to submit definitive
proposals by January 22, 1996, including a marked copy of the draft merger
agreement. Based on discussions with AT&T in its capacity as the Company's major
vendor-client, Goldman Sachs told bidders to assume that there would be no
extension or other modifications to the Operating Agreements between the Company
and AT&T, NCR and Lucent, the initial terms of each of which expire in August
2000.
Bidders were invited to submit two bids, one assuming an election by AT&T
pursuant to Section 338(h)(10) of the Code, and one assuming no such election.
The making of a Section 338(h)(10)
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election can have negative tax consequences to the stockholder making the
election. From a stockholder's perspective, a merger is normally treated as a
sale of stock with taxable gain equal to the difference between the merger price
and the stockholder's tax basis in the shares. A Section 338(h)(10) election
changes this tax result because it has the effect of treating a merger
transaction as a sale by the company of all of its assets and a subsequent
liquidating distribution of all of the proceeds to the electing stockholder. The
election can only be made by an 80% or greater stockholder and results in that
stockholder paying tax on 100% of the difference between the total merger
consideration and the Company's tax basis in its assets. The election has no tax
consequence to the other stockholders. While the Section 338(h)(10) election
would have negative tax consequences to AT&T, it would provide substantial tax
benefits to most purchasers primarily because it results in a 'step-up' in the
tax basis of the Company's assets, which creates a higher depreciable asset base
and permits the amortization for tax purposes of any goodwill generated by the
transaction.
No bids were received from the five second round bidders which conformed
with the general transaction parameters communicated to the bidders by Goldman
Sachs. One second round bidder submitted a proposal which, after two revisions,
contemplated the acquisition of the Company at a price of $43 per share, subject
to AT&T agreeing to make a Section 338(h)(10) election, AT&T bearing all costs
(approximately $1.50 per share) associated with a 50% or greater workforce
reduction, AT&T, Lucent and NCR agreeing to 16-year extensions of the Operating
Agreements, and AT&T providing indemnities for certain pre-closing liabilities,
events and circumstances. AT&T concluded that it was not interested in a sale on
the proposed terms. Further exploration by Goldman Sachs did not result in any
bids which conformed to the specified transaction parameters, except as
described below.
On or about January 29, 1996, NIplc contacted Goldman Sachs and expressed
preliminary interest in structuring an acquisition of the Company. NIplc
executed a confidentiality agreement with the Company on February 1, 1996 and
met with representatives of Goldman Sachs on February 2, 1996. Goldman Sachs
forwarded to NIplc a letter, dated February 7, 1996, containing instructions for
submitting a preliminary bid.
On February 12, 1996, NIplc submitted a preliminary indication of interest
for a purchase of all of the outstanding shares of Company Common Stock. NIplc
indicated a preliminary value range of $32 to $37 per share. NIplc also
indicated that, without more extensive due diligence, it would not be in a
position to submit a bid contemplating a Section 338(h)(10) election. From
mid-February to early March, 1996, NIplc conducted a due diligence investigation
of the Company including a more intensive review of documents and a management
presentation. As due diligence proceeded, NIplc studied the benefits of a
Section 338(h)(10) election and attempted to develop structures that might allow
the capture of some or all of the tax benefits associated with such an election.
NIplc met with representatives of the Company and Goldman Sachs as part of this
study. In mid-March, 1996, NIplc submitted a preliminary proposal which, among
other things, contemplated the conversion of the Company to a limited liability
company. Representatives of Goldman Sachs and the Company met with NIplc from
March 25 to March 28, 1996 to discuss the terms of a possible acquisition
proposal, NIplc's and management's respective business plans and the limited
liability company structure, as well as to provide additional information
concerning the Company. The limited liability company structure was ultimately
abandoned in light of its complexity, the consents and approvals which would
have been required, and the fact that it would have resulted in AT&T receiving
different, and potentially higher, consideration for its shares of Company
Common Stock than the non-AT&T holders would have received for their shares. On
April 2, 1996, a final bid instruction letter was delivered to NIplc by Goldman
Sachs. In response, NIplc submitted to the Company and its counsel a mark-up of
the draft merger agreement previously supplied to NIplc which reflected, among
other things, certain indemnities and other concessions requested from AT&T.
On April 12, 1996, AT&T notified the Company that it believed it might then
be appropriate to pursue an underwritten public offering of shares of Company
Common Stock held by the AT&T Subsidiaries while the Company continued to
explore private sale alternatives. AT&T stated that it was not at that time
formally exercising its rights under the Registration Rights Agreement, dated as
of June 25, 1993, between the Company and AT&T (the 'Registration Rights
Agreement'). On April 12, 1996, the Company issued a press release announcing
its receipt of such notification. The Company
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accelerated work on a registration statement for a possible underwritten
secondary public offering of all or a portion of the shares of Company Common
Stock held by the AT&T Subsidiaries.
On April 17, 1996, NIplc submitted a formal proposal to the Company to
underwrite the acquisition of the Company through the merger with and into the
Company of a newly-formed entity to be formed and financed by NIplc. The
proposal included a price of $40 per share for all outstanding shares of the
Company and was conditioned upon AT&T making an election under Section
338(h)(10) of the Code. NIplc indicated that it would increase its valuation by
$3 per share if the Operating Agreements with AT&T, Lucent and NCR were to be
extended for five years from their scheduled expiration in 2000 and if they were
modified slightly to accommodate NIplc's strategy. NIplc indicated that
retention of the Company's management was a condition to NIplc's proposal and
that NIplc anticipated, as a condition to the proposal, requiring members of
management to reinvest a significant portion of their proceeds from the
transaction into the Company going forward. The proposal indicated that the next
step in the process would be the initiation of discussions with the Company's
management related to employment contracts and potential investment and
incentive programs.
At a meeting of the Special Committee on April 18, 1996, the Special
Committee considered the NIplc proposal. Management informed the Special
Committee that it would not enter into any discussions with NIplc concerning
retention or related issues unless authorized to do so in advance by the Special
Committee and the Board. The Special Committee concluded that the NIplc proposal
might represent an attractive alternative for all of the Company's stockholders
and recommended to the Board that management be authorized to proceed with the
next step to determine if a transaction with NIplc was feasible. At a meeting of
the Board on April 19, 1996, the Board decided that, prior to authorizing
management to proceed further, AT&T, as the beneficial owner of approximately
86% of the outstanding Company Common Stock, should be asked to determine
whether it would be prepared to support a transaction on the terms proposed,
including the making of the Section 338(h)(10) tax election.
On April 26, 1996, AT&T sent a letter to the Company stating that AT&T did
not believe NIplc's April 17 proposal was sufficiently attractive to warrant
AT&T's agreement to the Section 338(h)(10) election and other conditions
proposed by NIplc. Also, on April 26, 1996, NIplc submitted a revised proposal
which continued to provide for a $40 per share price but indicated that NIplc
would permit the Company to declare a special dividend immediately prior to the
closing in an amount equal to the lesser of $90 million or the Company's net
after-tax earnings from January 1, 1996 through the closing date or, as an
alternative, would permit the Company to pay AT&T that amount as an indemnity
for costs associated with AT&T's making the Section 338(h)(10) election. The
letter also reiterated NIplc's view that the retention of management was crucial
to the proposal and stated that NIplc desired permission to speak with
management concerning equity reinvestment and retention issues.
Following NIplc's April 26th proposal, AT&T contacted Goldman Sachs and
indicated that AT&T would be prepared to consider the transaction proposed by
NIplc, including the Section 338(h)(10) election, but excluding the extension of
the Operating Agreements, if NIplc was willing to increase the price per share
to $45, provide assurances as to the feasibility of the proposal and submit a
new mark-up of the draft merger agreement containing proposed contractual terms
and conditions more appropriate for the acquisition of a public company than
those contained in NIplc's prior mark-up. Goldman Sachs communicated these
points to NIplc.
On April 30, 1996, AT&T formally exercised its registration rights under
the Registration Rights Agreement by requesting the Company to register
30,879,656 shares of Company Common Stock with the SEC for offering to the
public. AT&T also noted that it would be appropriate for the Company to continue
to explore private sale alternatives. The Company stated in a press release that
it expected to be in a position to file a registration statement with the SEC by
the end of May.
From mid-April through mid-May, 1996, work continued on the preparation of
a registration statement and the finalization of related arrangements for the
public offering of shares of Company Common Stock beneficially owned by AT&T,
with the assistance of Merrill Lynch, Pierce, Fenner & Smith Incorporated and
Morgan Stanley & Co. Incorporated, whom AT&T had indicated it would select as
managing underwriters for such a public offering.
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On May 12, 1996, the Company informed NIplc of the status of its
consideration of NIplc's proposal. On May 13, 1996, NIplc submitted a revised
proposal to the Company contemplating a merger of a newly-formed entity into the
Company, pursuant to which each issued and outstanding share of Company Common
Stock would be cancelled in exchange for $45 per share and each outstanding
Option would be accelerated and cancelled in exchange for a cash payment equal
to $45 per share subject to such Option less the applicable exercise price of
such Option. The proposed transaction was conditioned on AT&T making a Section
338(h)(10) election.
At a meeting on May 14, 1996, the Special Committee concluded that the
NIplc proposal might represent an attractive alternative for all of the
Company's stockholders and recommended to the Board that management be
authorized to begin discussions with NIplc with a view towards determining
whether NIplc's condition on management retention and equity participation could
be achieved.
On May 15, 1996, AT&T notified the Company that it had received and
considered NIplc's May 13, 1996 proposal and was ready to support the
commencement of discussions between the Company and NIplc subject to three
conditions: first, AT&T noted the importance to the Company of a resolution of
the private/public sale process, and indicated that the terms of management's
participation in the NIplc proposal should be resolved within one week and, if
it could not be, then it might be appropriate for efforts to be refocused on
proceeding with the secondary public offering of AT&T's Company Common Stock;
second, NIplc should be instructed to provide its comments on the existing draft
merger agreement with a view towards specifying what it meant by a transaction
structure appropriate for a public company acquisition, including not seeking
indemnities or other post-closing contingencies or special concessions from AT&T
not included in the Company's original draft of the merger agreement; and third,
AT&T would agree to make the Section 338(h)(10) election, assuming all other
issues could be resolved, but AT&T did not consider it appropriate that AT&T, as
the majority stockholder of the Company, should be disproportionately affected
thereby and AT&T believed that the costs of the election should be shared more
equitably by all of the Company's stockholders (through a tax sharing payment
from the Company to AT&T or through some other means).
In subsequent discussions among representatives of the Company, NIplc and
AT&T, AT&T's counsel conveyed AT&T's proposal on the sharing of the Section
338(h)(10) election costs. Specifically, AT&T proposed that the Company make a
$125 million payment to AT&T immediately prior to the closing of the Merger. On
the assumption that the total consideration payable in the Merger would be
reduced by a comparable amount (approximately $2.50 per share), the proposed
payment would have had the effect of allocating approximately $23 million of the
tax costs associated with the Section 338(h)(10) election from AT&T to the
holders of Company Common Stock other than AT&T. AT&T indicated that the $23
million of tax costs it proposed to allocate to stockholders other than AT&T and
its affiliates constituted a percentage of the total tax costs associated with
the Section 338(h)(10) election which was less than the percentage ownership by
such other stockholders of Company Common Stock (i.e., 14%). In the negotiations
that followed, AT&T withdrew its proposal, thereby agreeing in effect to receive
a lower after tax per share price for its shares of Company Common Stock than
the Company's other stockholders.
At a meeting on May 15, 1996, the Board authorized management to begin
discussions with NIplc on issues relating to their retention and involvement in
the transaction, and agreed that the Company should reimburse management for up
to $100,000 of legal expenses. Management was instructed to report back to the
Board by the following week with a view as to whether management was interested
in participating with NIplc in the proposed acquisition of the Company (as
required by NIplc) and as to whether management and NIplc had reached an
agreement in principle on the terms of management's equity reinvestment and
retention.
During the period from May 16, 1996 through May 22, 1996, representatives
of management met with NIplc to discuss NIplc's business plan for the Company,
its financing strategy, its proposals for a reinvestment by management of merger
proceeds and retention issues. See ' -- Interests of Certain Persons in the
Merger -- Arrangements Between Management and Merger Sub.'
At a meeting of the Special Committee on May 23, 1996, Mr. Wajnert reported
the results of the discussions with NIplc, indicating that, while no agreement
had been reached, management believed that NIplc's business plan seemed to be
feasible (although some questions remained to be analyzed) and
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he was optimistic that a transaction could be structured that would satisfy
NIplc's requirements for retention of management. The Special Committee again
concluded that the proposed transaction might represent an attractive
alternative to all of the Company's stockholders and recommended proceeding with
the necessary steps to pursue the alternative. At a meeting of the Board on May
23, 1996, the Board heard the report of Mr. Wajnert, received the
recommendations of the Special Committee and was advised of AT&T's agreement to
defer the filing of a registration statement for a secondary public offering of
the AT&T Subsidiaries' shares temporarily in order to pursue the transaction
proposed by NIplc. The Board concluded that attempting to reach agreement with
NIplc was in the best interests of all of the Company's stockholders. In view of
the possibility that certain members of management would be offered the
opportunity to reinvest all or a portion of their merger consideration in the
surviving entity and thereby potentially have a conflict of interest with the
Company's other stockholders, the Board directed that the Special Committee be
solely responsible for negotiations with NIplc on behalf of the Company and that
management of the Company thereafter be excluded from those negotiations and
from access to other information concerning the sale process. It was recognized
that AT&T would represent its own interests in the negotiations.
During the period from May 24, 1996 through May 31, 1996, negotiation of
definitive agreements among NIplc and Holdings, the Company and AT&T took place.
Also, further discussions of equity reinvestment and retention issues occurred
between NIplc and management representatives.
At a meeting on May 31, 1996, the Board was informed that, while no
agreement had been reached, NIplc was confident that arrangements satisfactory
to it for the retention of management could be reached. The Board was also
informed that certain significant issues existed between the Company and NIplc
and between AT&T and NIplc. In addition, the Board was informed that all parties
wished to obtain a better understanding of the long-term and short-term debt
ratings that the Company would likely receive following the completion of the
transaction. While these issues had not yet been resolved, it was decided that
the Board would receive a detailed presentation concerning the Merger Agreement
and the proposed transaction at the May 31, 1996 meeting because certain
directors might be unavailable in the week that followed. The Board reviewed the
terms of the proposed transaction and the provisions of the draft Merger
Agreement and received the financial analysis and advice of Goldman Sachs and
Goldman Sachs' preliminary views on the fairness of the proposed transaction
price to the holders of Company Common Stock (other than AT&T and its
affiliates). The Board meeting was adjourned and the Special Committee met in
executive session. The Special Committee unanimously concluded that the proposed
transaction was fair to the holders of the Company Common Stock (other than AT&T
and its affiliates) and recommended to the Board that the transaction be
approved, if the remaining issues could be satisfactorily resolved. The Special
Committee had been informed that the transaction proposed by NIplc was
conditioned upon Holdings acquiring all of the outstanding shares of Company
Common Stock and that its transaction would not accommodate, nor would it wish
to have, AT&T as a continuing stockholder. Accordingly, AT&T had requested that
the Intercompany Agreement, which, among other things, required AT&T to own
approximately 20% of the Company Common Stock until August 4, 1998, be amended
to permit all of AT&T's shares of the Company Common Stock to be cashed out in
the Merger. In order to permit consummation of the Merger, the Special Committee
approved the proposed amendment to the Intercompany Agreement, conditioned upon
final resolution of the terms of the Merger Agreement. The Board meeting was
then reconvened. The Board was informed of the recommendation of the Special
Committee, subject to resolution of the remaining open issues. In view of the
open issues, the Board took no action.
Extensive negotiations among the Company, AT&T and NIplc over the period
from May 31, 1996 to June 5, 1996 led to a resolution of remaining significant
issues.
At a meeting of the Board on June 5, 1996, Goldman Sachs reviewed its
presentation of May 31, 1996, covered various other matters and delivered its
opinion that, as of such date, and based upon and subject to various
qualifications and assumptions described therein, the Merger Consideration to be
received in the Merger by the holders of Company Common Stock pursuant to the
terms of the Merger Agreement is fair to such holders (other than AT&T and its
affiliates). The Special Committee unanimously reaffirmed its May 31, 1996
conclusion and recommendations to the Board. The Board, by the unanimous vote of
the directors present (other than Mr. Wajnert who did not participate in the
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Board's deliberations or vote on the Merger Agreement in light of his
anticipated participation in the transaction as a Management Investor), then
formally approved the Merger Agreement and submitted it to the AT&T Subsidiaries
for their approval by written consent. Mr. William B. Marx, Jr. did not attend
or participate in the Board meeting. The AT&T Subsidiaries executed and
delivered the Merger Agreement Stockholders' Consent approving the Merger
Agreement. The Merger Agreement was thereafter executed and delivered by the
Company, AT&T, Holdings and Merger Sub. The amendment to the Intercompany
Agreement was also executed and delivered and NIplc executed and delivered the
Underwriting Letter. See 'Financing of the Merger.'
Following the execution and delivery of the Merger Agreement on June 5,
1996, the parties thereto determined that certain revisions to the Merger
Agreement were necessary in order to accommodate changes to the proposed closing
date and certain other matters. Accordingly, in the early part of August the
parties negotiated the Amendment to the Merger Agreement. On August 19, 1996,
the Board of Directors of the Company (acting without the participation or vote
of Mr. Wajnert), upon the unanimous recommendation of the Special Committee,
adopted and approved the Amendment. The Amendment was thereafter executed and
delivered by the Company, AT&T, Holdings and Merger Sub as of August 20, 1996.
The AT&T Subsidiaries executed and delivered to the Company a letter confirming
the Merger Agreement Stockholders Consent with respect to the Merger Agreement,
as amended by the Amendment. NIplc executed and delivered the Confirmation
Letter (as defined herein).
The Amendment provides that the closing date for the Merger will be the
later of (i) October 1, 1996 (as opposed to the September 17, 1996 date provided
in the Merger Agreement as executed on June 5, 1996) and (ii) the first business
day on which all of the conditions to the closing of the Merger have been
satisfied or waived. The Amendment does not change the Merger Agreement's final
deadline of October 31, 1996, for the closing of the Merger, following which
date any party may terminate the Merger Agreement under certain circumstances.
The Amendment also provides that Holdings may, at its option, choose to postpone
the closing of the Merger to a date no later than October 31, 1996, even if all
of the conditions to closing are satisfied or waived prior to such date. If
Holdings exercises such option, interest will be payable by Holdings on the
Merger Consideration at a rate of LIBOR (as defined in the Amendment) plus 0.5%
for the period from and including September 18, 1996 through but excluding the
closing date of the Merger. See 'The Merger Agreement -- First Amendment to the
Merger Agreement.' The Amendment also requires that Holdings receive an
additional $400 million capital contribution by September 18, 1996, increasing
the capital contributions made to Holdings to a total of $500 million. A copy of
the Amendment is attached to this Information Statement in Annex A. Unless
otherwise noted herein and except with reference to the Merger Agreement as it
existed prior to August 20, 1996, all references herein to the Merger
Agreement refer to the Merger Agreement as amended by the Amendment.
APPROVAL AND FAIRNESS OF THE MERGER; PURPOSES OF AND REASONS FOR THE MERGER
The Board (other than Mr. Wajnert, who did not participate in the Board's
deliberations or vote on the Merger Agreement in light of his anticipated
participation in the transaction as a Management Investor, and Mr. Marx who was
not in attendance), acting upon the recommendation of the Special Committee,
unanimously authorized and approved the Merger Agreement and the transactions
contemplated thereby. The Board believes that the proposed Merger is fair to,
and in the best interests of, the Company's stockholders. The AT&T Subsidiaries,
as the holders of approximately 86% of the Company Common Stock, have executed
the Merger Agreement Stockholders' Consent approving the Merger Agreement in
accordance with the DGCL and the Company's Restated Certificate of
Incorporation. Because no additional approval of the Merger Agreement by the
Company's stockholders is required, no proxies or other authorizations are being
solicited from the Company's other stockholders.
The principal purpose of the proposed Merger is to provide all of the
Company's stockholders with an equal opportunity to receive $45 per share in
cash for each share of Company Common Stock, which represents (i) a 35.8%
premium over the highest price at which the Company Common Stock had ever traded
prior to the September 20, 1995 announcement of AT&T's plan to divest its
interest in the Company, (ii) a 37.4% premium over the closing price of the
Company Common Stock on September 19, 1995, the trading day prior to the AT&T
announcement, and (iii) an 11.1% premium
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over the closing price on the trading day prior to the announcement of the
signing of the Merger Agreement (June 5, 1996).
The Board's approval was based upon a number of factors, including: (i) the
Board's review of strategic alternatives available to the Company, (ii) recent
and historical market prices of the Company Common Stock, (iii) the Board's
knowledge of the business, operations, properties, assets and earnings, as well
as the prospects, of the Company, (iv) the unconditional and irrevocable
agreement of NIplc to underwrite an international capital markets issue on
behalf of Holdings or to purchase securities of Holdings, in an amount
sufficient to allow Holdings to satisfy its obligations under the Merger
Agreement, (v) the contractual relationships between the Company and each of
AT&T, Lucent and NCR and the implications of AT&T's pending restructuring, (vi)
the presentation of Goldman Sachs discussed elsewhere herein under ' -- Opinion
of Financial Advisor', (vii) the opinion of Goldman Sachs that, as of the date
of its opinion, and based upon and subject to various qualifications and
assumptions described therein, the Merger Consideration to be received in the
Merger by holders of Company Common Stock pursuant to the terms of the Merger
Agreement is fair to such holders (other than AT&T and its affiliates), and
(viii) the recommendation of the Special Committee. The Board also considered
that the extensive search for possible buyers of the Company failed to discover
any other bidder interested in pursuing negotiations for the acquisition of the
Company on terms which did not require amendments to the Operating Agreements
which were unacceptable to AT&T, Lucent and NCR.
The Board recognized that, as a result of the proposed Merger, stockholders
of the Company (other than the Management Investors) would cease to have an
interest in an ongoing corporation with potential for future growth, and the
Board therefore gave consideration to the Company's results of operations and
current forecasts of future revenues and earnings in reaching its determination
to approve the Merger Agreement. See ' -- Certain Projections.' The Board also
recognized that the Management Investors will have an opportunity, subject to
the risks of the Surviving Corporation's business and in consideration of their
ongoing service to the Surviving Corporation, to benefit from any increases in
the value of the Surviving Corporation following the Merger. The Board
recognized that this represented a potential conflict between the interests of
those officers and employees and the Company's other stockholders. However, the
Board recognized that Holdings was willing to enter into the Merger Agreement
and NIplc was willing to deliver the Underwriting Letter only if satisfactory
arrangements for the retention of, and equity reinvestment by, management could
be put in place. See ' -- Interests of Certain Persons in the
Merger -- Arrangements Between Management and Merger Sub.'
The Board recognized that the proposed Merger will enable all of the
Company's stockholders to realize a substantial premium over the highest price
at which the Company Common Stock had ever traded prior to the September 20,
1995 announcement by AT&T of its intention to dispose of its interest in the
Company by public or private sale. For the range of prices of the Company Common
Stock from 1993 through a recent date, see 'Market Prices of and Dividends on
Company Common Stock.'
The Board recognized that the aggregate fair market value of the Company's
assets, including its property, might be significantly higher than their
aggregate book value as represented in the Company's balance sheet. The book
value per share of the Company Common Stock at December 31, 1995 was $23.76 and
at March 31, 1996 was $24.47. See 'Selected Consolidated Financial Information
of the Company' herein and the Consolidated Financial Statements included in the
Company's March 31, 1996 Form 10-Q and 1995 Form 10-K, both of which are
incorporated herein by reference. See 'Incorporation of Certain Documents by
Reference.' The Board did not consider liquidation of the Company or a spin-off
of operating units to be attractive alternatives principally because of
uncertainties and delays inherent in such transactions, the relatively lower
values that likely would have been realized through such transactions and, in
the case of liquidation, because the Board wished to avoid the resulting
disruption to the Company's operations and adverse effects on employees,
customers and vendor-clients.
The Special Committee, at its meeting on May 31, 1996, concluded that the
proposed transaction was fair to, and in the best interests of, the Company's
stockholders other than AT&T and its affiliates and recommended that the Board
approve the Merger Agreement, assuming certain open issues were
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resolved. The Special Committee reaffirmed its position on June 5, 1996. The
Special Committee considered all of the matters considered by the Board
described above. The Special Committee also considered that AT&T had the
immediate right to sell shares of Company Common Stock it owned representing up
to 66% of the outstanding Company Common Stock (and, under the terms of the
Intercompany Agreement, all of its remaining shares in August, 1998) without any
consent or approval from the Company or the Company's independent directors.
Accordingly, if it chose to, AT&T would be in a position to sell a controlling
interest in the Company in a private sale. Also, AT&T had formally exercised its
right to require the Company to register shares of Company Common Stock
representing 66% of the outstanding Company Common Stock and AT&T was poised to
commence a public offering of those shares. The Special Committee believed that
each of these alternatives was likely to lead to a less favorable outcome for
the Company's non-AT&T stockholders than the transactions contemplated by the
Merger Agreement. Finally, the Special Committee took into account the facts
that AT&T, as the beneficial owner of approximately 86% of the outstanding
Company Common Stock, will receive the same cash price per share in the Merger
(which, the Special Committee was informed, may represent a lower after tax
price to AT&T after taking into account the effects of the Section 338(h)(10)
election) as the non-AT&T stockholders, and that AT&T was in favor of and
willing to cause the AT&T Subsidiaries to vote to approve the Merger.
In considering the fairness of the Merger, stockholders should be aware
that the Company's current management has a substantial equity ownership
position in the Company and will be offered an opportunity, not available to the
Company's other stockholders, to participate in the equity of the Surviving
Corporation. As of December 31, 1995 and as of March 31, 1996, the Management
Offerees' aggregate interest, on a fully-diluted basis assuming the exercise of
all Options, in the Company's net book value was $56.0 million (or 5.0%) and
$57.7 million (or 5.0%), respectively, and, for the year ended December 31, 1995
and the three months ended March 31, 1996, the Management Offerees' aggregate
interest in the Company's net income was $6.4 million (or 5.0%) and $1.9 million
(or 5.0%), respectively. Assuming all Management Offerees participate in the
Management Share Exchange and the Management Option Exchange and are granted the
New Options, in each case, as referred to below, as of December 31, 1995 and as
of March 31, 1996 (on a pro forma basis which gives effect to the consummation
of the Merger), the Management Offerees' aggregate interest, on a fully-diluted
basis assuming the exercise of all Options and New Options, in the Company's net
book value would be $156.3 million (or 14.0%) and $161.0 million (or 14.0%),
respectively, and, for the year ended December 31, 1995 and the three months
ended March 31, 1996, the Management Offerees' aggregate interest in the
Company's net income would be $17.9 million (or 14.0%) and $5.2 million (or
14.0%), respectively.
The Merger Agreement was approved by the Board at its meeting on June 5,
1996 and the Amendment was approved by the Board at its meeting on August 19,
1996. None of the directors who voted in favor of approval of the Merger
Agreement is, or will be, an investor in Holdings or the Surviving Corporation.
The AT&T Subsidiaries, as the owners of approximately 86% of the outstanding
Company Common Stock, executed the Merger Agreement Stockholders' Consent
approving the Merger Agreement on June 5, 1996. AT&T and the AT&T Subsidiaries
have, and will have, no equity interest in Holdings or the Surviving
Corporation. The Special Committee, consisting entirely of those directors of
the Company who are not officers, directors or employees of AT&T or its
subsidiaries (other than the Company) or officers or employees of the Company
and none of whom will be investors in Holdings or the Surviving Corporation,
concluded that the Merger was fair to, and in the best interest of, the
Company's stockholders other than AT&T and its affiliates. Goldman Sachs
delivered an opinion that, as of the date of its opinion, and based upon and
subject to various qualifications and assumptions described therein, the Merger
Consideration to be received in the Merger by holders of Company Common Stock
pursuant to terms of the Merger Agreement is fair to such holders (other than
AT&T and its affiliates). In light of these approvals and factors, the Board did
not consider it necessary to provide for the approval of the Merger Agreement by
the affirmative vote of at least a majority of the unaffiliated stockholders of
the Company. In addition, Holdings indicated that it would not agree to execute
the Merger Agreement unless the Merger was approved by the written consent of
the AT&T Subsidiaries, thereby effectively eliminating any uncertainty
regarding, or time delay in obtaining, stockholder approval of the Merger. Also,
in light of the foregoing approvals and factors and the role of
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the Special Committee, the Board did not consider it necessary to retain an
unaffiliated representative to act solely on behalf of unaffiliated stockholders
of the Company for the purposes of negotiating the terms of the Merger or
preparing a report concerning the fairness of the Merger. Neither the Board nor
the Special Committee received an appraisal of the Company's properties in
connection with its approval of the Merger.
Neither the Board nor the Special Committee attached any relative weight to
the various factors considered in reaching its decision and neither the Board
nor the Special Committee articulated how each factor specifically supported its
ultimate decision, except that substantial weight was placed on (i) the opinion
of Goldman Sachs that, as of the date of its opinion, and based upon and subject
to various qualifications and assumptions described therein, the Merger
Consideration to be received in the Merger by the holders of Company Common
Stock pursuant to the terms of the Merger Agreement is fair to such holders
(other than AT&T and its affiliates), (ii) the fact that the AT&T Subsidiaries,
as the owners of approximately 86% of the outstanding Company Common Stock, will
receive the same cash price per share in the Merger (which may represent a lower
after tax price to AT&T after taking into account the effects of the Section
338(h)(10) election) as the non-AT&T stockholders, (iii) the fact that AT&T was
in favor of and willing to cause the AT&T Subsidiaries to vote to approve the
Merger and (iv) the comprehensive, extended and public process by which the
Company was auctioned.
The Board and the Special Committee were aware that the analysis performed
by Goldman Sachs in connection with rendering its opinion indicated that the
price per share to book value ratio and the market capitalization premium over
receivables ratio for AT&T Capital implied from the Merger Consideration did not
fall within the ranges for such ratios for the Specialty Finance Companies (as
defined below) analyzed by Goldman Sachs. However, in the course of considering
the Merger, the Board and the Special Committee did not consider these two
ratios in isolation but rather considered the financial analysis and opinion of
Goldman Sachs and other relevant factors in their entirety.
The form of the proposed Merger was structured so as to meet the business
and financial objectives of Holdings and NIplc. Holdings has informed the
Company that it entered into the Merger Agreement because it believes that an
investment in the Company's business and assets will be a profitable investment.
The rules of the SEC require Merger Sub to express its belief as to the
fairness of the Merger to the Company's stockholders. While Merger Sub has
undertaken no evaluation of the Merger from the standpoint of fairness to the
Company's stockholders, it has considered the factors noted above which were
taken into account by the Board and Special Committee, based however only on the
more limited facts and information available to it. Although Merger Sub did not
find it practicable to quantify or otherwise attach relative weights to the
specific factors considered by the Board or the Special Committee, Merger Sub
did consider in particular the fact that (i) the Merger Consideration
represented a significant premium over the historical stock prices of Company
Common Stock as described above in the discussion of the Board's approval, and
(ii) the transaction was negotiated over a four-month period and was approved
following direct negotiations with AT&T, the Company's principal stockholder.
See 'Special Factors -- Background of the Merger.' Merger Sub also considered
the fact that it required, as a condition to its execution and delivery of the
Merger Agreement, the Board and the Special Committee to have determined that
the Merger Agreement was fair to the Company's stockholders and to have obtained
an opinion of Goldman Sachs that the Merger Consideration to be received in the
Merger by holders of the Company Common Stock pursuant to the Merger Agreement
is fair to such holders (other than AT&T and its affiliates). On the basis of
the foregoing considerations, Merger Sub believes that the Merger is fair from a
financial point of view to the Company's stockholders.
The rules of the SEC require Mr. Wajnert to express his belief as to the
fairness of the Merger to the Company's stockholders. While Mr. Wajnert has
undertaken no evaluation of the Merger from the standpoint of fairness to the
Company's stockholders, he has considered the factors noted above which were
taken into account by the Board (of which Mr. Wajnert is a member) and Special
Committee, based however only on the more limited facts and information
available to him inasmuch as he did not participate in the deliberations of the
Board with respect to the Merger. Although Mr. Wajnert did not find it
practicable to quantify or otherwise attach relative weights to the specific
factors considered by
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the Board or the Special Committee, Mr. Wajnert did consider in particular the
fact that (i) the Merger Consideration represented a significant premium over
the historical stock prices of Company Common Stock as described above in the
discussion of the Board's approval, and (ii) the transaction was negotiated over
a four-month period and was approved following direct negotiations with AT&T,
the Company's principal stockholder. See 'Special Factors -- Background of the
Merger.' Mr. Wajnert also considered the fact that Merger Sub required, as a
condition to its execution and delivery of the Merger Agreement, the Board and
the Special Committee to have determined that the Merger Agreement was fair to
the Company's stockholders and to have obtained an opinion of Goldman Sachs that
the Merger Consideration to the received in the Merger by holders of the Company
Common Stock pursuant to the Merger Agremeent is fair to such holders (other
than AT&T and its affiliates). On the basis of the foregoing considerations, Mr.
Wajnert believes that the Merger is fair from a financial point of view to the
Company's stockholders.
CERTAIN EFFECTS OF THE MERGER
At the Effective Time, Merger Sub will be merged into the Company with the
Company continuing its corporate existence under the DGCL as the Surviving
Corporation and each share of Company Common Stock, other than Excluded Shares,
will be converted into the right to receive the Merger Consideration. Upon
consummation of the Merger, Holdings will own all of the outstanding shares of
Surviving Corporation Common Stock (except for shares owned by the Management
Investors) and would be entitled to all of the benefits and detriments resulting
from that interest, including all income or losses generated by the Surviving
Corporation's operations and any future increase or decrease in the Surviving
Corporation's value which is attributable thereto. After the Merger is
consummated, the present holders of the Company Common Stock (other than the
Management Investors) will no longer have any equity interest in the Surviving
Corporation, will not share in the results of the Surviving Corporation and will
no longer have rights to vote on corporate maters. Once the Merger is effective,
the Company Common Stock will no longer be traded on the New York Stock Exchange
and registration of Company Common Stock under the Exchange Act will terminate.
However, for so long as certain publicly-held debt or other securities of the
Company remain outstanding following the Merger, the Surviving Corporation will
continue to file periodic reports with the SEC to the extent required under the
Exchange Act.
Other than Options held by the Management Investors which may be exchanged
for new options to purchase shares of Merger Sub Common Stock, each outstanding
Option will be cancelled upon consummation of the Merger in exchange for cash in
an amount equal to the excess of the Merger Consideration over the Option
exercise price per share. See ' -- Interests of Certain Persons in the
Merger -- Arrangements between Management and Merger Sub.'
OPINION OF FINANCIAL ADVISOR
At the June 5, 1996 meeting of the Special Committee and the Board, Goldman
Sachs rendered an opinion that, as of such date, and based upon and subject to
various qualifications and assumptions described therein, the Merger
Consideration to be received in the Merger by the holders of Company Common
Stock pursuant to the terms of the Merger Agreement is fair to such holders
(other than AT&T and its affiliates). Goldman Sachs did not render any opinion
as to the fairness of the Merger Consideration to AT&T and its affiliates.
THE FULL TEXT OF THE WRITTEN OPINION OF GOLDMAN SACHS, DATED JUNE 5, 1996,
WHICH SETS FORTH ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITS ON THE SCOPE OF
REVIEW UNDERTAKEN, IS ATTACHED AS ANNEX B TO THIS INFORMATION STATEMENT.
STOCKHOLDERS OF THE COMPANY ARE URGED TO READ THIS OPINION IN ITS ENTIRETY. NO
LIMITATIONS WERE IMPOSED BY THE BOARD OR THE SPECIAL COMMITTEE UPON GOLDMAN
SACHS WITH RESPECT TO THE INVESTIGATIONS MADE OR PROCEDURES FOLLOWED BY IT IN
RENDERING ITS OPINION. GOLDMAN SACHS' OPINION, WHICH IS ADDRESSED TO THE BOARD
AND THE SPECIAL COMMITTEE, IS DIRECTED ONLY TO THE FAIRNESS OF THE CONSIDERATION
TO BE RECEIVED BY THE STOCKHOLDERS OF THE COMPANY (OTHER THAN
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AT&T AND ITS AFFILIATES) AND DOES NOT ADDRESS ANY OTHER ASPECT OF THE PROPOSED
MERGER OR ANY RELATED TRANSACTION. THE SUMMARY OF THE OPINION OF GOLDMAN SACHS
SET FORTH IN THIS INFORMATION STATEMENT IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE FULL TEXT OF SUCH OPINION.
In connection with rendering its written opinion dated June 5, 1996,
Goldman Sachs reviewed, among other things, the Merger Agreement; the Operating
Agreements; the Intercompany Agreement; certain related agreements between the
Company and each of AT&T, Lucent and NCR; certain federal and state tax sharing
agreements between the Company and AT&T; Annual Reports on Form 10-K of the
Company for the five years ended December 31, 1995; certain interim reports to
stockholders and Quarterly Reports on Form 10-Q; certain other communications
from the Company to its stockholders; and certain internal financial analyses
and forecasts for the Company prepared by its management. Goldman Sachs also
held discussions with members of the senior management of the Company regarding
the past and current business operations, financial condition and future
prospects of the Company. In addition, Goldman Sachs reviewed the reported price
and trading activity for Company Common Stock, compared certain financial and
stock market information for the Company with similar information for certain
other companies the securities of which are publicly traded, reviewed the
financial terms of certain recent business combinations in the commercial
finance industry specifically and in other industries generally and performed
such other studies and analyses as Goldman Sachs considered appropriate.
Goldman Sachs relied without independent verification upon the accuracy and
completeness of all information reviewed by it for purposes of its opinion. With
respect to financial forecasts, including, without limitation, the analyses and
forecasts of certain earnings projections, Goldman Sachs assumed that they were
reasonably prepared on bases reflecting the best currently available estimates
and judgments of the future competitive, operating and regulatory environments
and related financial performance of the Company or the Selected Companies (as
defined herein), and that such forecasts will be realized in the amounts and the
times contemplated. Except for estimated 1996 earnings, the Company management
estimates used by Goldman Sachs were the projections of the Company summarized
elsewhere in this Information Statement. See ' -- Certain Projections'. For
1996, the Company's projections assumed a deconsolidation from AT&T as of
January 1, 1996 with the concomitant loss of certain Gross Profit Tax Deferral
benefits (as defined in ' -- Certain Projections'), whereas Goldman Sachs
adjusted the Company management projections to assume a deconsolidation from
AT&T as of July 1, 1996. In rendering its opinion, Goldman Sachs expressed no
view as to the reasonableness of such forecasts or the assumptions on which they
were based. In addition, Goldman Sachs did not make an independent evaluation or
appraisal of the assets and liabilities of the Company or any of its
subsidiaries and was not furnished with any such evaluation or appraisal.
Goldman Sachs' opinion was based on economic, market and other conditions as in
effect on, and the information available to it as of, the date of its opinion.
Goldman Sachs' opinion did not address the relative merits of the Merger and
alternative business transactions.
The following summarizes the material financial comparative analyses
presented by Goldman Sachs to the Board and the Special Committee at meetings on
May 31, 1996 and June 5, 1996, which analyses were considered by Goldman Sachs
in rendering its opinion on June 5, 1996.
Analysis of Implied Transaction Multiples. Goldman Sachs reviewed the
multiples implied by the Merger Consideration of $45.00 per share to be paid in
the Merger, which represented an 11.1% premium over the closing price of Company
Common Stock on May 29, 1996; a 37.4% premium over the closing price on
September 19, 1995 (the trading day immediately preceding AT&T's announcement
that it would split up into three companies and divest its interest in the
Company); a 51.3% premium over the closing price on August 18, 1995 (one month
before the AT&T announcement); and a 22.0% premium over the closing price on
August 18, 1995, adjusting such price to reflect the market appreciation of the
S&P 56 Financial Index since August 18, 1995. The Merger Consideration
represents: (i) for 1995, a price to earnings multiple of 16.7 times; for the
12-month period ended March 31, 1996, a price to earnings multiple of 15.3
times; for estimated 1996 earnings, a price to earnings multiple of 13.8 times
based on median earnings estimates provided by Institutional Broker Estimate
Service, a data service that compiles estimates of securities research analysts
('IBES'), and of 13.4
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times based on estimates provided by Company management; for estimated 1997
earnings, a price to earnings multiple of 11.8 times based on median estimates
provided by IBES and of 11.6 times based on estimates provided by Company
management; and for estimated 1998 earnings, a price to earnings multiple of 9.4
times, based on estimates provided by Company management; (ii) a price to common
equity multiple at March 31, 1996 of 1.88 times; (iii) a price to tangible book
value multiple at March 31, 1996 of 2.09 times; and (iv) a ratio of premium to
net receivables at March 31, 1996 of 12.3%.
Comparison with Selected Companies. Goldman Sachs reviewed selected market
and operating information for the Company in comparison with corresponding
information for selected publicly traded companies engaged in commercial finance
and specialty finance. Goldman Sachs selected both commercial finance and
specialty finance companies because, due to the mix of the Company's business,
the Company shares similar characteristics with each of these types of finance
companies. The commercial finance companies were: The FINOVA Group Inc.
('FINOVA'), Comdisco Inc., GATX Corporation, Winthrop Resources Corporation, and
Financial Federal Corporation (collectively, the 'Commercial Finance
Companies'). The specialty finance companies were: Associates First Capital
Corporation, Household International, Inc., Green Tree Financial Corporation,
Mercury Finance Company, and The Money Store Inc. (collectively, the 'Specialty
Finance Companies' and together with the Commercial Finance Companies, the
'Selected Companies'). The purpose of these analyses was to show how shares of
Company Common Stock compared to those of other finance and leasing companies in
terms of their relationships to certain per share measures and other financial
and operating indicators. The multiples and ratios for each of the Selected
Companies were, unless otherwise indicated, based on the 12-month period ended
March 31, 1996 and market prices as of May 29, 1996. Earnings estimates for the
Selected Companies were based on median estimates of IBES. Earnings estimates of
the Company were based on median estimates of IBES and estimates of the
Company's management. The market statistics analysis indicated that: (i) for
1995 earnings, the median price to earnings multiple was 15.0 times (with a
range from 10.7 times to 18.2 times) for the Commercial Finance Companies and
18.2 times (with a range from 15.9 times to 27.8 times) for the Specialty
Finance Companies, as compared to 15.0 times for the Company in the public
market and 16.7 times as implied in the Merger; for estimated 1996 earnings, the
median price to earnings multiple was 12.5 times (with a range from 9.6 times to
16.2 times) for the Commercial Finance Companies and 15.2 times (with a range
from 13.3 times to 21.1 times) for the Specialty Finance Companies, as compared
to 12.4 times and 12.1 times for the Company in the public market and 13.8 times
and 13.4 times as implied in the Merger (based in each case on IBES and the
Company's management projections, respectively); for estimated 1997 earnings,
the median price to earnings multiple was 10.7 times (with a range from 9.3
times to 13.8 times) for the Commercial Finance Companies and 12.6 times (with a
range from 11.1 times to 17.0 times) for the Specialty Finance Companies, as
compared to 10.7 times and 10.5 times for the Company in the public market and
11.8 times and 11.6 times as implied in the Merger (based in each case on IBES
and the Company's management projections, respectively); (ii) the median price
per share to book value per share ratio was 1.87 times for the Commercial
Finance Companies (with a range from 1.23 times to 2.93 times) and 4.19 times
(with a range from 2.47 times to 7.04 times) for the Specialty Finance
Companies, as compared to 1.66 times for the Company in the public market and
1.88 times as implied in the Merger; (iii) the median market capitalization
premium over receivables was 12.5% (with a range from 5.8% to 41.7%) for the
Commercial Finance Companies and 80.7% (with a range from 18.6% to 276.6%) for
the Specialty Finance Companies, as compared to 8.2% for the Company in the
public market and 12.3% as implied in the Merger; (iv) the median dividend yield
was 1.0% (with a range from 0.0% to 3.8%) for the Commercial Finance Companies
and 0.8% (with a range from 0.4 % to 2.4%) for the Specialty Finance Companies,
as compared to 1.1% for the Company; (v) the median dividend payout ratio based
on estimated 1996 earnings was 13.8% (with a range from 0.0% to 36.8%) for the
Commercial Finance Companies and 11.4% (with a range from 8.0% to 37.5%) for the
Specialty Finance Companies, compared to 13.5% for the Company; and (vi) the
median five-year estimated earnings growth rate was 17.9% (with a range from
11.5% to 20.0%) for the Commercial Finance Companies and 19.0% (with a range
from 18.0% to 22.0%) for the Specialty Finance Companies, as compared to 15.8%
and 20.0% for the Company (based on IBES and the Company's management
projections, respectively). The operating statistics analysis showed that: (i)
the median return on average assets was 2.3% (with a range from 1.5% to 4.4%)
for the Commercial Finance
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Companies and 3.2% (with a range from 1.5% to 11.8%) for the Specialty Finance
Companies, as compared to 1.5% for the Company; (ii) the median return on
average equity was 13.3% (with a range from 12.5% to 21.8%) for the Commercial
Finance Companies and 21.4% (with a range from 17.9% to 43.3%) for the Specialty
Finance Companies, as compared to 12.8% for the Company; (iii) the median net
income to revenue ratio was 12.9% (with a range from 4.5% to 20.9%) for the
Commercial Finance Companies and 11.6% (with a range from 9.4% to 35.9%) for the
Specialty Finance Companies, as compared to 8.4% for the Company; (iv) the
median operating expenses to average period end assets ratio was 2.4% (with a
range from 1.8% to 4.7%) for the Commercial Finance Companies and 8.3% (with a
range from 4.1% to 15.3%) for the Specialty Finance Companies, as compared to
5.3% for the Company; (v) the median debt to equity ratio was 4.0 times (with a
range from 0.4 times to 6.8 times) for the Commercial Finance Companies and 3.5
times (with a range from 0.3 times to 12.3 times) for the Specialty Finance
Companies, as compared to 6.2 times for the Company; and (vi) the median assets
to equity ratio was 6.1 times (with a range from 4.9 times to 8.4 times) for the
Commercial Finance Companies and 5.9 times for the Specialty Finance Companies
(with a range from 2.6 times to 13.8 times), as compared to 8.4 times for the
Company.
Summary Stock Price Performance. Goldman Sachs reviewed the trading prices
of the Company Common Stock since the Company became a public company and noted
that the $45.00 per share to be received by the Company stockholders in the
Merger exceeds the highest price at which the Company Common Stock had traded
before the September 20, 1995, announcement by AT&T of its plan to divest its
interest in the Company by 35.8%, and before June 5, 1996, the date of Goldman
Sachs' opinion, by 1.1%. Goldman Sachs compared the increases in stock prices of
the Company, FINOVA, the S&P 56 Financial Index and the S&P 500 for the period
between September 19, 1995 and May 29, 1996, and for the period between August
18, 1995 and May 29, 1996. For the period commencing September 19, 1995, Company
Common Stock showed an increase of 23.7%, as compared to increases of 16.0%,
12.9%, and 14.3% for FINOVA, the S&P 56 Financial Index and the S&P 500,
respectively. If the price of Company Common Stock were to have increased by the
same percentages as that of FINOVA, the S&P 56 Financial Index, and the S&P 500
during this period, Company Common Stock would have had a price of $38.00 per
share, $36.97 per share and $37.44 per share, respectively, at the end of the
period. For the period commencing August 18, 1995, Company Common Stock showed
an increase of 36.1%, as compared to increases of 35.5%, 24.0% and 19.4% for
FINOVA, the S&P 56 Financial Index and the S&P 500, respectively. If the price
of Company Common Stock were to have increased by the same percentages as that
of FINOVA, the S&P 56 Financial Index and the S&P 500, Company Common Stock
would have had a price of $40.31 per share, $36.90 per share and $35.50 per
share, respectively, at the end of the period.
Discounted Cash Flow Analysis. Goldman Sachs reviewed a discounted cash
flow analysis based on earnings estimates prepared by Company management and by
IBES to determine the present value per share of Company Common Stock discounted
to June 30, 1996. This present value consisted of the sum of (x) the present
value of the assumed dividend stream on a share of Company Common Stock for the
last six months of 1996 through the end of 2000 (for each of IBES and Company
management estimates, assumed dividends were calculated based on the dividend
payout ratio estimated by the Company's management) and (y) the present value of
a share of Company Common Stock based on estimated 2000 earnings using terminal
value multiples ranging from 10.0 times to 14.0 times, in each case using
discount rates ranging from 12.5% to 17.5%. The Company only provided Goldman
Sachs with earnings estimates for the years 1996 through 1998. For the analysis
using Company management estimates, 1999 and 2000 earnings were assumed to have
a 20% growth rate. IBES median earnings estimates were only available for 1996
and 1997. For the analysis using IBES earnings estimates, 1998 to 2000 earnings
were assumed to have the IBES long-term earnings growth rate of 15.8%. The
analysis indicated that, using terminal value multiples of earnings per share
ranging from 10.0 times to 14.0 times, the present value of Company Common Stock
(i) at a 12.5% discount rate ranged from $42.68 per share to $58.92 per share
using Company management estimates and from $36.64 per share to $50.53 per share
using IBES estimates; (ii) at a 15.0% discount rate ranged from $38.73 per share
to $53.44 per share using Company management estimates and from $33.26 per share
to $45.84 per share using IBES estimates; and (iii) at a 17.5% discount rate
ranged from $35.23 per share to $48.58 per share using Company management
estimates and from $30.26 per share to $41.68 per share using IBES estimates.
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Analysis of Selected Acquisitions of Commercial Finance and Leasing
Companies. Goldman Sachs reviewed and analyzed certain financial, operating, and
stock market information relating to 13 selected acquisitions involving
commercial finance and leasing companies from 1984 to present. These
acquisitions were the acquisition of The Foothill Group, Inc. by Norwest Corp.
(first announced on May 15, 1995), the acquisition of ITT Commercial Finance by
Deutsche Bank AG (first announced on December 27, 1994), the acquisition of
Barclays Business Credit, Inc. by Shawmut National Corp. (first announced on
November 14, 1994), the acquisition of TriCon Capital Corp. by GFC Financial
Corp. (first announced on May 2, 1994), the acquisition of Eastman Kodak Credit
Corp. by General Electric Capital Corporation (first announced on November 23,
1992), the acquisition of The C.I.T. Group Holdings, Inc. by Dai-ichi Kangyo
Bank, Limited (first announced on December 29, 1989), the acquisition of
Commercial Alliance Corp. by ORIX (first announced on September 18, 1989), the
acquisition of Eaton Financial Corp. by AT&T (first announced on March 16,
1989), the acquisition of Signal Capital Corp. by ITEL Corp. (first announced on
September 23, 1988), the acquisition of Borg-Warner Acceptance Corp. by
Transamerica Corporation (first announced on October 14, 1987), the acquisition
of E.F. Hutton Credit Corporation by Chrysler Financial Corporation (first
announced on August 1, 1985), the acquisition of C.I.T. Financial by
Manufacturers Hanover Corporation (first announced on May 1, 1984), and the
acquisition of Walter E. Heller & Company by The Fuji Bank, Limited (first
announced on January 26, 1984). This analysis indicated that, for these
transactions, (i) the median price to common equity multiple was 1.6 times (with
a range from 1.0 to 4.9 times), as compared to 1.88 times as implied in the
Merger; (ii) the median price to latest 12 months net income multiple was 12.8
times (with a range of 8.7 times to 19.4 times), as compared to 15.3 times for
the Company for the 12-month period ended March 31, 1996 as implied in the
Merger; and (iii) the median ratio of premium to net receivables was 13.0% (with
a range of 1.0% to 31.0%), as compared to 12.3% for the Company as implied in
the Merger.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. Goldman
Sachs believes that its analyses must be considered as a whole and that
selecting portions of its analyses, without considering the analyses taken as a
whole, would create an incomplete view of the process underlying the analyses
set forth in its opinion. In addition, Goldman Sachs considered the results of
all such analyses and did not assign relative weights to any of the analyses, so
that the ranges of valuations resulting from any particular analysis described
above should not be taken to be Goldman Sachs' view of the actual value of the
Company.
In performing its analysis, Goldman Sachs made numerous assumptions with
respect to industry performance, general business, economic and regulatory
conditions and other matters, many of which are beyond the control of the
Company. The analyses performed by Goldman Sachs are not necessarily indicative
of actual values, trading values or actual future results that might be
achieved, all of which may be significantly more or less favorable than
suggested by such analyses. No public company utilized as a comparison is
identical to the Company, and none of the comparable acquisition transactions or
other business combinations utilized as a comparison is identical to the
transactions contemplated by the Merger Agreement. Accordingly, an analysis of
publicly traded comparable companies and comparable business combinations
resulting from the transactions is not mathematical; rather it involves complex
considerations and judgments concerning differences in financial and operating
characteristics of the comparable companies and other factors that could affect
the public trading value of the comparable companies or the company or
transaction to which they are being compared. In connection with the analyses,
Goldman Sachs made, and were provided estimates and forecasts by the Company's
management based upon, numerous assumptions with respect to industry
performance, general business and economic conditions and other matters, many of
which are beyond the control of the Company. Analyses based upon forecasts of
future results are not necessarily indicative of actual future results, which
may be significantly more or less favorable than suggested by such analyses.
Because such analyses are inherently subject to uncertainty, being based upon
numerous factors or events beyond the control of the Company or Goldman Sachs,
neither the Company nor Goldman Sachs assumes responsibility if future results
or actual values are materially different from these forecasts or assumptions.
Such analyses were prepared solely as part of Goldman Sachs' analysis of the
fairness of the Merger Consideration to be received in the Merger by the
Company's stockholders (other than AT&T and its affiliates) and were provided to
the Board and the Special Committee. The analyses do
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not purport to be appraisals or to reflect the prices at which a company might
be sold. The Board and the Special Committee placed no limits on the scope of
the analysis performed, or opinions expressed, by Goldman Sachs.
Goldman Sachs is an internationally recognized investment banking firm and,
as part of its investment banking business, is continually engaged in the
valuation of businesses and their securities in connection with mergers and
acquisitions, negotiated underwritings, competitive biddings, secondary
distributions of listed and unlisted securities, private placements and
valuations for estate, corporate and other purposes. Goldman Sachs is familiar
with the Company, having acted as its financial advisor in connection with, and
having participated in certain of the negotiations leading to, the Merger
Agreement. Goldman Sachs also provided and is providing investment banking
services to AT&T and its affiliates, including having acted as a joint global
coordinator of the $3 billion initial public offering of the common stock of
Lucent. Goldman Sachs may provide investment banking services in the future to
both the Company and AT&T and their respective affiliates. On April 30, 1996,
the Company announced that AT&T delivered a letter to the Company requesting it
to register shares held by AT&T for sale in a secondary public offering as an
alternative to the transactions contemplated by the Merger Agreement. Goldman
Sachs had no role in advising AT&T in respect of this alternative transaction.
Goldman Sachs, as a full service securities firm, may from time to time effect
transactions, for its own account or the account of customers, and hold
positions in securities or options on securities of the Company.
Pursuant to the letter agreement dated January 11, 1996 (the 'Engagement
Letter'), the Company engaged Goldman Sachs to act as financial advisor to the
Board and the Special Committee with respect to a possible private sale of all
or a portion of the stock or assets of the Company. Pursuant to the terms of the
Engagement Letter, the Company has agreed to pay Goldman Sachs upon consummation
of a transaction a fee based on an increasing percentage determined by the
aggregate consideration to be received by stockholders of Company Common Stock
in the transaction, which fee will be equal to 0.3% of the aggregate
consideration in the Merger, amounting to a total fee of approximately $6.5
million. In addition, the Company has agreed to reimburse Goldman Sachs for its
reasonable out-of-pocket expenses, including the reasonable fees and
disbursements of its attorneys, plus any sales, use or similar taxes arising in
connection with its engagement and to indemnify it and certain related persons
against certain liabilities, including certain liabilities under the federal
securities laws, arising out of its engagement.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
INTERESTS IN COMPANY COMMON STOCK AND OPTIONS
As of August 5, 1996, executive officers and directors of the Company
collectively beneficially owned 357,666 shares of Company Common Stock
(excluding shares issuable upon exercise of Options) and held Options to
purchase 755,502 shares of Company Common Stock, and, but for the Management
Share Exchange and the Management Option Exchange, would be entitled to receive
upon consummation of the Merger an aggregate of up to approximately (i)
$16,094,970 in cash in respect of the conversion of such shares in the Merger
and (ii) $14,388,051 in cash in respect of the cancellation of such Options (in
each case excluding any interest which may be payable on the $45 per share
purchase price).
In addition, as of August 5, 1996, the Management Offerees collectively
beneficially owned approximately 895,000 shares of Company Common Stock
(excluding shares issuable upon exercise of Options) and held Options to
purchase 1,578,051 shares of Company Common Stock, and but for the Management
Share Exchange and Management Option Reinvestment referred to below, would be
entitled to receive upon consummation of the Merger an aggregate of up to
approximately (x) $40 million in cash in respect of such shares of Company
Common Stock and (y) $29 million in cash in respect of the cancellation of such
Options (in each case excluding any interest which may be payable on the $45 per
share purchase price). As described below, all or a portion of such shares of
Company Common Stock may be used by the Management Offerees to acquire shares of
Merger Sub Common Stock and thereby shares of Surviving Corporation Common
Stock, and all or a portion of the proceeds
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from such Options may be used to acquire directly shares of Surviving
Corporation Common Stock. In addition, it is anticipated that all other
participants in the Company's Option plans, excluding the Management Offerees,
will receive an aggregate of approximately $14,522,037 (excluding any interest
which may be payable on the $45 per share purchase price) in respect of the
cancellation of such Options and any related stock appreciation rights.
ARRANGEMENTS BETWEEN MANAGEMENT AND MERGER SUB
Investment in Merger Sub Common Stock and Merger Sub Options. As an
additional incentive for management of the Company to continue their employment
with the Surviving Corporation following the Merger and to provide them with a
stake in the future operations of the Surviving Corporation, Merger Sub intends
to offer the Management Offerees the opportunity to obtain shares, and options
on shares, of Surviving Corporation Common Stock upon consummation of the
Merger. The Management Offerees are expected to include Thomas C. Wajnert
(Chairman of the Board and Chief Executive Officer of the Company) and some or
all of the other 30 members of the Company's Corporate Leadership Team and
Leadership Forum. The Management Offerees are expected to be furnished with a
private placement memorandum, including a form of subscription agreement and
other documentation, pursuant to which:
(i) The Management Offerees will be offered the opportunity to
participate in the Management Share Exchange, in which immediately prior to
the Effective Time, up to an aggregate of approximately 883,419 shares of
Company Company Stock (or approximately $40 million in value based on the
$45 per share purchase price to which such holders would otherwise be
entitled in connection with the Merger) currently held by such Management
Offerees, may be exchanged for approximately $40 million of newly issued
shares of Merger Sub Common Stock (which will become shares of Surviving
Corporation Common Stock upon consummation of the Merger), based on the
same price being paid by Holdings for the shares of Merger Sub Common Stock
being purchased by it (the 'Merger Sub Share Price'). The shares of Company
Common Stock held by the Management Offerees were acquired pursuant to
either the Company's Leveraged Stock Purchase Plan or its Long Term
Incentive Plan, pursuant to which the Company loaned the Management
Offerees approximately 88% to 98% of the purchase price of such shares. The
Company would agree with each Management Offeree who accepts the Management
Share Exchange (each, a Management Investor) to extend the terms of their
loans to the year 2006 on terms substantially identical to those currently
in place, provided, however, that the interest rate on such loans will be
the lowest permissible rate sufficient to avoid imputed income to the
Management Investors and the Surviving Corporation will defer interest
payments on such loans. By virtue of the Management Share Exchange, the
Management Offerees as a group would have the opportunity to obtain
approximately 4.4% of the total outstanding Surviving Corporation Common
Stock (4.2% on a fully diluted basis assuming Management Investors elect to
reinvest all of the proceeds from their Management Options pursuant to the
Management Option Reinvestment described below) immediately following the
Merger.
(ii) Each Management Investor will be offered the opportunity, at his
or her individual discretion, to participate in the Management Option
Reinvestment in which some or all of the after-tax proceeds of the cash-out
of Management Options held by such Management Investor may be invested in
additional shares of Surviving Corporation Common Stock at the Merger Sub
Share Price immediately following the Effective Time. As of April 13, 1996,
the Management Offerees held Management Options exercisable for an
aggregate of 1,578,051 shares of Company Common Stock. Based on the average
exercise price of such Management Options as of such date and based
on the $45 per share purchase price), the Management Offerees would be
entitled to in the aggregate approximately $29 million on a pre-tax basis
under the terms of the Merger Agreement in respect of such Management
Options. The after-tax proceeds are expected to enable the Management
Investors to obtain (assuming all Management Offerees were to participate)
up to an additional 1.7% of the total outstanding Surviving Corporation
Common Stock on a fully diluted basis (in each case assuming that Holdings
and the Management Investors invest an aggregate of $900 million in Merger
Sub Common Stock before giving effect to the Management Option
Reinvestment) immediately following the Merger.
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The subscription agreements will provide for certain restrictions on each
Management Investor's right to transfer shares of Surviving Corporation Common
Stock, but related agreements with Nomura Europe will provide for certain put
rights with respect to such shares in favor of the Management Investor and call
rights with respect to such shares in favor of Nomura Europe and NIplc. The
agreements with Nomura Europe will also provide for certain 'drag-along' rights
with respect to such shares exercisable by Nomura Europe and its affiliates in
connection with certain direct or indirect sales of its shares of Surviving
Corporation Common Stock, as well as 'tag along' rights in favor of the
Management Investors in certain circumstances in connection with certain direct
or indirect private sales by Holdings of its shares of Surviving Corporation
Common Stock. The subscription agreements will also provide the Management
Investors with certain 'piggyback' registration rights in certain circumstances
in connection with certain public sales by Holdings of its shares of Surviving
Corporation Common Stock.
Grants of New Options on Surviving Corporation Common Stock. In addition,
it is currently anticipated that, subject to ongoing discussions among Merger
Sub and certain members of management, as soon as practicable following the
closing of the Merger, additional New Options to purchase shares of Surviving
Corporation Common Stock will be granted to certain of the Management Investors
giving them the right to purchase up to an additional $39 million of Surviving
Corporation Common Stock (based on the Merger Sub Share Price), representing
approximately 4.1% of the total outstanding Surviving Corporation Common Stock
(on a fully diluted basis assuming all Management Offerees elect to participate
in the Management Share Exchange and the Management Option Reinvestment)
immediately following the Merger. Recommendations regarding the grants of New
Options will be made by the Compensation Committee of the Board of Directors of
the Surviving Corporation following discussions with members of the Company's
Corporate Leadership Team.
The New Options will generally vest with respect to 20% of the underlying
shares each year during a five-year period after the grant date. The New
Options, however, will not be exercisable for shares of Surviving Corporation
Common Stock in any circumstances except that vested New Options may be
exercised (i) following certain events that constitute a change of control of
the Surviving Corporation and (ii) following a public offering of Surviving
Corporation Common Stock; provided that in such latter event the number of
shares for which New Options may be exercised will be limited to that percentage
of the total number of shares underlying all New Options that have been granted
to the Management Investor equal to twice the percentage of all outstanding
shares of Surviving Corporation Common Stock that has been sold in public
offerings. In addition, the exercisability of New Options held by Management
Investors who at the relevant time are or formerly were members of the Company's
Corporate Leadership Team will be generally conditioned on the Surviving
Corporation having maintained certain investment grade ratings on its short-term
and long-term debt.
The New Options will expire upon the earliest of (i) the eleventh
anniversary of the date of grant (or, if any New Options are not then
exercisable, then, with respect to such New Options only, such later date that
is 60 days following the date on which such New Options become exercisable),
(ii) the date of cessation of the related Management Investor's employment for
any reason other than death or permanent disability, normal retirement,
termination without cause or resignation for good reason and (iii) 60 days after
termination without cause or resignation for good reason (or, if any New Options
are not then exercisable, then, with respect to such New Options only, such
later date that is 60 days after the first date that both (a) such New Options
are exercisable and (b) there are no applicable transfer restrictions on the
shares underlying such New Options). All unvested New Options will terminate
upon any cessation of the related Management Investor's employment.
Other Share Options. Holdings also expects to establish additional equity
based incentive programs for the benefit of employees ('Members') of the
Surviving Corporation. Holdings expects to grant, over a five-year period
following the Effective Time, New Options to Members of the Surviving
Corporation (possibly including certain of the Management Offerees) to purchase
shares of Surviving Corporation Common Stock having an aggregate fair market
value of up to $64 million on the applicable date of grant. Such New Options
would represent approximately 6.4% of the total outstanding Surviving
Corporation Common Stock (on a fully diluted basis assuming a fair market value
of $45 per share and that no Management Investors elect to participate in
the Management Option Reinvestment)
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immediately prior to the Merger, and would be available for grant
as follows: New Options to purchase shares of Surviving Corporation Common Stock
having a fair market value of up to $19.2 million on the date of grant would be
granted as soon as practicable following the closing of the Merger; and New
Options to purchase shares of Surviving Corporation Common Stock having a fair
market value of up to $11.2 million on the date of grant would be granted on
each of the next four dates following the first anniversary of the closing of
the Merger on which annual bonuses are payable to Members in accordance with
past practice.
In addition, the Board of Directors of the Surviving Corporation may also
consider granting additional New Options to Members of the Surviving Corporation
(possibly including certain of the Management Offerees) from time to time after
1997 to purchase Shares of Surviving Corporation Common Stock having a fair
market value of up to $13 million on the date of grant.
As a result of the Management Share Exchange, the Management Option
Reinvestment and the grant of New Options, immediately after the Effective Time,
the Management Offerees could own or have the right to acquire upon exercise of
their New Options (assuming all Management Offerees were to participate in both
the Management Share Exchange and the Management Option Reinvestment and that
the New Options become exercisable prior to their termination) up to
approximately 9.9% of the outstanding Surviving Corporation Common Stock on a
fully diluted basis. This opportunity to obtain a continuing interest in the
equity of the Surviving Corporation may have presented management with actual or
potential conflicts of interest in connection with the transactions contemplated
by the Merger. The Board and the Special Committee were aware of this and
considered it among the other factors described under 'Special
Factors -- Approval and Fairness of the Merger; Purposes of and Reasons of the
Merger.'
Directorships; Employment Agreements. Subsequent to the Merger, Messrs.
Wajnert, Rothman and Van Sickle are expected to become directors of the
Surviving Corporation. Hiromi Yamaji, Guy Hands, John Appleton, Jeff Nash, David
Banks, James Babcock, one additional director selected by NIplc and an
independent director to be determined, who collectively will be the directors of
Merger Sub immediately prior to the Effective Time, are expected to be the
remaining initial directors of Surviving Corporation. In addition, it is
currently anticipated that, effective upon the consummation of the Merger, the
Surviving Corporation may enter into employment agreements with Messrs. Wajnert,
Rothman and Van Sickle. The term of such agreements have not yet been reached.
COMPANY BENEFIT PLANS
Certain members of management (including the Management Offerees) are
participants in employee benefit plans of the Company which, in connection with
a change in control of the Company, will vest or pay benefits or awards or
provide the opportunity to receive future benefits or awards under certain
circumstances.
Under the Company's Executive Benefit Plan (the 'EBP'), the accrued
retirement benefits for Ms. Morey and Messrs. Wajnert, Dwyer, McCarthy, Rothman,
Van Sickle and Andrews vest upon a 'Change in Control' (as defined in the EBP).
The EBP provides for a maximum annual retirement benefit of 40% of a
participant's 'Final Annual Pay' (as defined in the EBP), less retirement
benefits provided under all other qualified and non-qualified sources from both
AT&T and the Company. On December 14, 1995, a trust was established and funded
with $10,651,000, to secure benefits under the EBP.
The SPIP Amendments provide that, upon the consummation of the Merger, the
Company shall pay to each participant for each pending performance period under
the SPIP, an accelerated award payout equal to 100% of such participant's
maximum payout for such period. Additionally, the SPIP Amendments provide, upon
consummation of the Merger, for 100% maximum payout to officers with respect to
the SPIP performance period which would have commenced after the Effective Time
(with payment immediately following the Effective Time), provided that such
payment will be made to those officers of the Company who are not members of the
Company's Leadership Forum only if such officers, Holdings and the Surviving
Corporation agree to an amendment of the definition of 'Qualifying
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Termination' under the Leadership Severance Plan or Member Severance Plan, as
applicable. See 'The Merger Agreement -- SPIP Amendments.'
Under the Company's Leadership Severance Plan, in the event of a
'Qualifying Termination' (as defined in the Leadership Severance Plan and as
amended described above for certain participants) of employment in connection
with a change in control of the Company, each of the Company's executive
officers would receive severance benefits equal to (i) the greater of (a) two
weeks' compensation for each full year of continuous service and (b) 200% of
Final Annual Pay and (ii) 135% of the premium which would be required to
maintain 'COBRA' continuing medical and dental coverage for 24 months.
Stockholder approval of the Merger Agreement constituted a change in control of
the Company under the Leadership Severance Plan. Additional benefits upon
severance include continued basic life insurance and supplemental life insurance
(at the executive's cost) for 24 months. By executing a release of claims
against the Company, the officer may receive an enhanced severance payment equal
to 20% of the severance payment set forth in clause (i) above. If any payments
from the Company under the Leadership Severance Plan or otherwise (other than
with respect to 'Strategic Members') would be subject to an excise tax under
Section 4999 of the Code, then the officer would be entitled to receive an
additional payment such that such officer would retain an amount equal to the
amount he or she would have received if the excise tax had not applied. In
addition to the foregoing, it is anticipated that the Surviving Corporation
would make available, following the consummation of the Merger, to some or all
of the participants in the Leadership Severance Plan an aggregate payment of up
to approximately $5 million (assuming all such participants agree) to induce
such participants to continue their employment with the Company for specified
periods of time and to modify certain rights under such plan to receive
severance payments in connection with a Qualifying Termination based upon a
constructive termination of employment.
If the employment of Messrs. Wajnert, Rothman, Van Sickle and McCarthy, and
Ms. Morey were to be terminated pursuant to a Qualifying Termination immediately
following the Effective Time, they would receive severance payments equal to
$1,880,118, $1,095,132, $999,544, $861,887, and $786,586, respectively. All
executive officers as a group would receive $6,295,736 as severance upon such a
termination of employment. The foregoing amounts do not include the enhanced
severance amounts payable as described above to any such officer upon execution
by such officer of a release of claims against the Company.
With respect to the Company's Senior Executive Annual Incentive Plan (the
'SEAIP') and Annual Incentive Plan, pursuant to the Merger Agreement, officers
will receive at least their target bonus for 1996. If an officer has a
Qualifying Termination of employment prior to the end of a plan year in
connection with a change in control, such officer will receive the greater of
110% of his target award or his bonus award for the prior plan year, unless such
Qualifying Termination occurs after the plan year and the actual bonus award
would be greater. If the employment of Messrs. Wajnert, Rothman, Van Sickle, and
McCarthy, and Ms. Morey were to be terminated pursuant to a Qualifying
Termination immediately following the Effective Time, they would be entitled to
payments under the SEAIP equal to $677,808, $376,381, $346,900, $337,283 and
$266,568, respectively. All executive officers as a group would receive
$2,267,742 under the SEAIP upon such a termination of employment.
OTHER MATTERS
The Merger Agreement provides that Holdings will cause the Surviving
Corporation to continue in effect through December 31, 1997, certain of the
Company's compensation and retirement benefit plans without any adverse
amendment or modification. The Merger Agreement further provides that Holdings
will cause the Surviving Corporation to provide through December 31, 1997,
welfare benefit and insurance plans or programs that are no less favorable in
the aggregate than those provided by the Company immediately prior to the
Effective Time.
Pursuant to the Merger Agreement, for six years after the Effective Time,
Holdings will indemnify and hold harmless, to the fullest extent permitted under
applicable law, each present and former director, officer and employee of the
Company and its subsidiaries against any costs or expenses, including reasonable
attorneys' fees, judgments, fines, losses, claims, damages or liabilities
incurred in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal,
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administrative or investigative, arising out of or pertaining to matters
existing or occurring at or prior to the Effective Time, including the
transactions contemplated by the Merger Agreement. The Merger Agreement also
provides, in general, that AT&T shall maintain in place its current directors'
and officers' liability insurance with respect to actions prior to the Merger
until the Effective Time. After the Effective Time, the Surviving Corporation
will establish officers' and directors' liability insurance for the Company's
and its subsidiaries' officers and directors substantially similar to the
insurance currently maintained for a period of six years so long as the annual
premium is not in excess of $750,000 or, if the cost does exceed that amount, as
much insurance as can be purchased for that amount. NIplc has guaranteed
Holdings' performance of these obligations pursuant to a letter agreement dated
the date of the Merger Agreement and filed as an exhibit to the Schedule 13E-3
referred to under 'Schedule 13E-3 Statement.'
ARRANGEMENTS WITH AT&T
Ownership of Company Common Stock; Affiliation of Company Directors with
AT&T. The AT&T Subsidiaries, each a wholly-owned subsidiary of AT&T,
collectively own directly 40,250,000 shares of Company Common Stock,
representing approximately 86% of the total number of shares of Company Common
Stock outstanding. AT&T does not own any Company Common Stock directly. To the
best knowledge of AT&T, no director or executive officer of AT&T beneficially
owns any shares of Company Common Stock, except as set forth in Annex E hereto.
Each of the AT&T Subsidiaries has the sole power to vote, or to direct the vote,
and the sole power to dispose of, or to direct the disposition of, shares of
Company Common Stock owned by it. Because it controls the AT&T Subsidiaries,
AT&T exercises the indirect power to vote and dispose of such shares of Company
Common Stock. No person other than the AT&T Subsidiaries has the right to
receive or the power to direct the receipt of dividends from, or the proceeds
from the sale of, the shares of Company Common Stock owned by them. Six of the
eleven members of the Board are employees of AT&T or its subsidiaries.
On June 5, 1996, the date of the Merger Agreement, upon the recommendation
of the Special Committee, the Board approved the Merger Agreement by the
unanimous vote of all directors present (other than Mr. Wajnert, who did not
participate in the deliberations or vote on the Merger Agreement in light of his
anticipated participation in the transaction), and the AT&T Subsidiaries
executed the Merger Agreement Stockholders' Consent, dated June 5, 1996,
pursuant to Section 228 of the DGCL, in which they adopted a resolution to
approve and adopt the Merger Agreement. On August 19, 1996, the Board of
Directors of the Company (acting without the participation or vote of Mr.
Wajnert), upon the unanimous recommendation of the Special Committee, adopted
and approved the Amendment. The Amendment was thereafter executed as of August
20, 1996 and delivered by the Company, AT&T, Holdings and Merger Sub. See
' -- Background of the Merger' and ' -- Approval and Fairness of the Merger;
Purposes of and Reasons for the Merger' and 'The Merger Agreement -- Conditions
to the Merger.'
On June 28, 1996 in order to effectuate the terms of the Merger Agreement,
the AT&T Subsidiaries executed the SPIP Amendments Stockholders' Consent.
Agreements between the Company and AT&T. The Company (or subsidiaries of
the Company) and AT&T (or subsidiaries of AT&T) are parties to various
agreements, including the Operating Agreement, the Intercompany Agreement and
the License Agreement, dated June 25, 1993, between AT&T and the Company (the
'License Agreement'). In addition, in connection with the initial public
offering of shares of AT&T's subsidiary, Lucent, and the proposed distribution
by AT&T to its stockholders of its interests in Lucent and in its wholly-owned
subsidiary NCR, the Company entered into the comparable Operating Agreements
with each of Lucent and NCR as well as letter agreements extending the
applicability of certain terms of AT&T's Intercompany Agreement and License
Agreement to Lucent and NCR. See 'Incorporation of Certain Documents by
Reference.'
Under the Intercompany Agreement, AT&T had agreed, among other things, that
it would own not less than 9,370,344 shares of Company Common Stock until August
4, 1998. In connection with entering into the Merger Agreement, the Company,
acting upon the approval of the Special Committee,
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entered into an amendment to the Intercompany Agreement with AT&T waiving such
requirement solely in connection with the Merger. See ' -- Background of the
Merger.'
In the Merger Agreement, AT&T and the Company agreed that, effective
immediately following the consummation of the Merger, they would amend the
Operating Agreement and the License Agreement between AT&T and the Company in
certain respects requested by Holdings and Merger Sub. See 'The Merger
Agreement -- Additional Agreements.'
The Merger Agreement provides that, subject to the terms and conditions set
forth therein, all tax allocation and tax sharing agreements and arrangements
between AT&T and the Company shall be terminated as of the date of the
consummation of the Merger and upon payment of all amounts due thereunder, and
that at or prior to the consummation of the Merger, and as a condition to AT&T's
obligation to effect the consummation of the Merger, the Company will pay AT&T
$35 million, subject to adjustment, in respect of taxes accrued on the Company's
balance sheet through the date of the consummation of the Merger, in
consideration for which AT&T will indemnify Holdings, the Company and the
Company's subsidiaries against certain pre-closing combined or consolidated tax
liabilities. See 'The Merger Agreement -- Tax Matters.'
Pursuant to the tax allocation and tax sharing agreements between the
Company and AT&T, AT&T has advanced interest-free loans to the Company in
consideration of tax benefits received by AT&T in connection with certain
intercompany transactions between AT&T and the Company. Upon consummation of the
Merger, these agreements will be terminated and the Company will be obliged to
repay such loans, which are expected to amount to approximately $249 million at
that time.
PLANS FOR THE COMPANY AFTER THE MERGER
Except as described herein, Holdings and its affiliates currently have no
plans or proposals which relate to or would result in an extraordinary corporate
transaction involving the Surviving Corporation or any of its subsidiaries or
any material change in the Company's present corporate structure, business or
composition of its operating management. Holdings does not currently plan to
replace any of the Company's management personnel. Holdings intends that the
Company's employees will continue to receive compensation and benefits which, in
the aggregate, are not materially less favorable than those presently received.
Holdings does not anticipate any changes in the Company's Board prior to the
Merger; however, as contemplated by the Merger Agreement, Merger Sub's then
existing Board of Directors will replace the Board at the Effective Time.
Holdings anticipates that, subsequent to the Merger, significant changes in
the Company's financing strategy will be implemented. In particular, Holdings
anticipates that approximately one-third of the Surviving Corporation's annual
funding needs will be provided through off-balance sheet securitization
transactions. Holdings anticipates that the cost of the Surviving Corporation's
on-balance sheet financing will increase by virtue of its disaffiliation from
AT&T and its lower debt ratings.
Except in connection with the securitization transactions to be implemented
upon or as soon as practicable following the closing of the Merger and the
Surviving Corporation's program of ongoing securitization transactions, Holdings
has no current plans to sell any substantial assets of the Surviving Corporation
otherwise than in the ordinary course of the Company's business. However,
following the closing of the Merger, Holdings may review opportunities from time
to time to dispose of assets of the Surviving Corporation depending upon market
conditions and other circumstances at such time. In addition, the Board of
Directors and management of the Surviving Corporation will continue to evaluate
the Surviving Corporation's corporate structure, business, management
composition, operations, organization and other matters after the Merger and
make such changes as are deemed appropriate.
As a result of the consummation of the Merger, the terms of certain debt
obligations of the Company and its subsidiaries (including certain debt owed to
AT&T) would permit acceleration of the maturity of such obligations. The Company
and Holdings expect to enter into negotiations with the holders of these
obligations to obtain waivers or amendments of such provisions and/or to
refinance such obligations in connection with the consummation of the Merger.
The Company believes that the maximum amount of financing necessary to refinance
all such obligations would be approximately
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$185.3 million, which amount is reflected in the discussion of sources and uses
of funds in 'Financing of the Merger.'
Upon consummation of the Merger, it is anticipated that NIplc will receive
certain fees from, and be reimbursed for certain expenses by, the Surviving
Corporation in connection with the transactions contemplated by the Merger
Agreement, including the Financing (as defined herein). Following the Effective
Time, it is anticipated that NIplc and certain of its affiliates will receive
customary banking and other fees from the Surviving Corporation from time to
time for services rendered to the Surviving Corporation and its affiliates,
including, without limitation, securitization transactions, acquisitions,
dispositions and other transactions.
REGULATORY APPROVALS
In connection with the consummation of the Merger, each of the Company and
Merger Sub and their respective affiliates will need to comply with and receive
approvals from various federal, state, local and foreign governmental bodies and
regulatory agencies, including (i) in the case of the Company and its
affiliates, HSR Act filings with the Antitrust Division and the FTC, antitrust
and other filings and approvals in connection with certain of the Company's
foreign operations and filings and approvals for the Company's business
operations in the United States, including approvals from the Small Business
Administration (the 'SBA') for the Company's SBA lending activities, and (ii) in
the case of Merger Sub and its affiliates, HSR Act filings with the Antitrust
Division and the FTC and additional antitrust and other filings with and
approvals from certain foreign jurisdictions. The HSR Act waiting period was
terminated by order of the FTC on August 9, 1996. Each of the Company and Merger
Sub believes that it will timely make all other necessary filings and receive
all other necessary approvals which, in each case, are required in connection
with the consummation of the Merger. See 'Merger Agreement -- Conditions to the
Merger.'
ACCOUNTING TREATMENT FOR THE MERGER
The Merger will be accounted for by the Company as a recapitalization in
which Surviving Corporation Common Stock will be issued to Holdings and
currently outstanding shares of Company Common Stock will be retired in a
treasury stock transaction. Accordingly, the assets and liabilities of the
Company will continue to be accounted for on a historical cost basis. As a
result of the Section 338(h)(10) election, the Company's deferred tax position
will change from a net liability to a net asset, with a corresponding increase
in stockholders' equity.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion of the material United States federal income tax
consequences of the Merger is for general information only. It is based on the
Code, existing and proposed Treasury regulations and judicial and administrative
determinations, all of which are subject to change at any time, possibly on a
retroactive basis. It does not discuss the state, local or foreign tax
consequences of the Merger, nor does it discuss tax consequences to categories
of stockholders that are subject to special rules, such as foreign persons,
tax-exempt organizations, insurance companies, banks, persons who received their
Company Common Stock as compensation and dealers in stock and securities. It
does not address the tax consequences to AT&T or its subsidiaries, including the
AT&T Subsidiaries. Tax consequences may vary depending on the particular status
of an investor.
Purchase of Shares. The receipt of cash by a stockholder of the Company
pursuant to the Merger or the exercise of dissenters' rights of appraisal will
be a taxable event for federal income tax purposes and may also be a taxable
transaction under applicable state, local, foreign or other tax laws. In
general, and subject to the discussion below, a stockholder will recognize gain
or loss equal to the difference, if any, between the stockholder's adjusted
basis in his or her shares and the Merger Consideration or amounts received
pursuant to the exercise of dissenters' rights. Such gain or loss will be
capital gain or loss, provided that the shares are held as capital assets, and
will be long-term capital gain or loss if the stockholder's holding period for
such shares exceeds one year.
The treatment of any amounts payable (in addition to the $45 per share
purchase price) as a result of the postponement of the closing is not entirely
clear under existing law. It is possible that the Internal Revenue Service would
seek to treat these amounts as ordinary income rather than as amounts realized
in respect of the sale of the shares. Under current law, net capital gains of
individuals are, under certain circumstances, taxed at lower rates than items
of ordinary income. The deductibility of capital losses is subject to
limitations. Stockholders should consult their own tax advisors regarding the
treatment of such additional amounts.
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Backup Withholding and Information Reporting. In general, information
reporting requirements will apply to payments of cash to a non-corporate
stockholder of the Company pursuant to the Merger or pursuant to the exercise of
dissenters' rights of appraisal, and 'backup withholding' at a rate of 31% will
apply to such payments if the stockholder fails to provide an accurate taxpayer
identification number or is informed by the Internal Revenue Service that such
person is subject to backup withholding.
EACH STOCKHOLDER SHOULD CONSULT HIS OR HER OWN TAX ADVISOR WITH RESPECT TO
THE FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER IN HIS OR HER OWN INDIVIDUAL
CIRCUMSTANCES AND WITH RESPECT TO THE STATE, LOCAL, FOREIGN OR OTHER TAX
CONSEQUENCES OF THE MERGER. FURTHER, ANY STOCKHOLDER WHO IS A CITIZEN OR
RESIDENT OF A COUNTRY OTHER THAN THE UNITED STATES SHOULD CONSULT HIS OR HER OWN
TAX ADVISOR WITH RESPECT TO THE TAX TREATMENT IN SUCH COUNTRY OF THE MERGER AND
WITH RESPECT TO THE QUESTION OF WHETHER TAX CONSEQUENCES OTHER THAN THOSE
DESCRIBED ABOVE MAY APPLY BY REASON OF THE PROVISIONS OF THE CODE APPLICABLE TO
FOREIGN PERSONS OR THE PROVISIONS OF ANY TAX TREATY APPLICABLE TO SUCH
STOCKHOLDER.
CERTAIN PROJECTIONS
GENERAL
The Company made available certain projected financial information to
potential acquirors, including NIplc, and to the financial advisor to the Board
and the Special Committee, Goldman Sachs, in connection with their consideration
of possible bids to acquire the Company. See ' -- Background of the Merger.' The
Company does not publicly disclose projected financial information as to future
revenues, earnings or cash flows. The projections, which are summarized below,
were not prepared in compliance with published guidelines of the SEC or the
American Institute of Certified Public Accountants regarding forward-looking
information or generally accepted accounting principles. The following summary
is being provided solely because the projections were provided to potential
acquirors and Goldman Sachs.
The projections were based upon a variety of operating assumptions, as
described below. The probable outcome of all of such assumptions is difficult to
predict with certainty and, in many cases, is beyond the control of the Company.
While the Company's management felt that such assumptions were reasonable when
made, they may no longer be accurate. The projections were prepared in the
fourth quarter of 1995 and have not been revised to reflect, among other things,
the terms of the proposed Merger (or any financing or refinancing to be effected
in connection therewith, including the sales of receivables referred to in
' -- Plans for the Company After the Merger' and 'Financing of the Merger') or
any actual financial results of the Company since such date, revised prospects
for the Company's businesses, changes in general business and economic
conditions or any other transactions or events that have occurred or that may
occur and that were not anticipated at the time such projections were prepared.
The projections were not prepared with a view to public disclosure or compliance
with any published guidelines of the SEC. The projections are not necessarily
indicative of current values or future performance, which may be significantly
more favorable or less favorable than as set forth below, and should not be
regarded as representations that such values or performances will be achieved as
indicated or at all. There can be no assurance that the results of operations
reflected in any of the projections will be realized or that actual results will
not be significantly different from those projected. Because of these inherent
uncertainties, none of the Company, Holdings, Merger Sub or any other person
assumes any responsibility for the accuracy of the projections, and the
inclusion of a summary of the projected information in this Information
Statement should not be regarded as an indication that the Company, Holdings, or
Merger Sub considers such projected outcomes to be accurate or reliable.
The Company's independent accountants did not examine, compile or apply any
procedures to the projections and have not examined, compiled or applied any
procedures to the following summary of
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the projections and therefore express no opinion or any other form of assurance
with respect to such summary and accordingly assume no responsibility for such
summary.
ASSUMPTIONS FOR PROJECTIONS
The following projections necessarily make a number of assumptions,
including the following material assumptions:
Macro-Economic Assumptions. The projections assume that the United States
economy remains stable with modestly slower growth. In international markets,
the Company expects continued stable growth in its core markets of Canada,
Europe, Hong Kong, Australia and a return to positive growth in Mexico.
Interest Rate Assumptions. The Company projects United States interest
rates to increase over the planning horizon. One-year Treasury rates are
expected to increase from 5.45% in 1995, to 6.27% in 1996 and 6.50% in 1997, and
five-year Treasuries are expected to increase from 5.92% in 1995, 6.78% in 1996,
and 7.05% in 1997. Foreign exchange and interest rate relationships are expected
to remain relatively stable.
Capital Structure Assumptions. The projections assume that the Company
deconsolidated from AT&T as of January 1, 1996, with two primary effects: (i) a
10 basis point increase in the Company's incremental cost of debt, representing
the Company's view at the time the projections were prepared of the potential
reaction of the debt markets to the disaffiliation with AT&T, and (ii) the loss
of interest-free loans from AT&T in amounts equal to the deferral of taxes on
the Company's gross profit that would have been payable on the purchase and
lease by the Company of products manufactured by AT&T and its subsidiaries but
for the fact that the Company is part of AT&T's consolidated tax group (the
'Gross Profit Tax Deferral'). The projections assume that all equity required by
the business is generated internally and no new equity is raised.
Other Plan Assumptions. The projections assume no new acquisitions or
significant new market entries by the Company and that the Company continues as
an independent, publicly-traded entity. If the Company had ceased to be a public
company as of January 1, 1996, management estimated the Company would save $4
million to $5 million in its 1996 budget. These savings include, among other
items, the elimination of (i) printing an annual report; (ii) holding an annual
stockholders' meeting; (iii) an independent Board of Directors; and (iv) an
investor relations group. The financial projections assume a continuation of the
Company's current accounting policies. The Company's projected volume growth is
constrained by its equity base. If the Company had access to greater equity or
could deploy higher leverage, management believed that volume could be increased
by 15% above those levels in the projections. The tax impacts of an election
under Section 338(h)(10) of the Code were not reflected in the financial
projections.
SUMMARY OF FINANCIAL PROJECTIONS
<TABLE>
<CAPTION>
PROJECTED AT OR FOR THE YEAR ENDING DECEMBER
31,
---------------------------------------------
1995E 1996E 1997E 1998E
------ ------- ------- -------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
Total revenue................................................ $1,585 $ 1,910 $ 2,280 $ 2,667
Pre-tax income............................................... 193 245 289 353
Net income................................................... 116 153 183 226
Total assets................................................. 9,669 10,657 11,908 13,484
Total liabilities............................................ 8,562 9,411 10,508 11,888
Stockholders' equity......................................... 1,107(a) 1,246 1,400 1,596
</TABLE>
- ------------
(a) The actual equity projected for December 31, 1995 is $1,117 million. The
balance sheet has been restated as if the Gross Profit Tax Deferral was
lost on January 1, 1995 and therefore, the lower net income reduces equity
by $10 million.
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THE MERGER AGREEMENT
On June 5, 1996, the Company, AT&T, Holdings and Merger Sub entered into
the Merger Agreement. The Merger Agreement was amended by the Amendment on
August 20, 1996. See ' -- First Amendment to the Merger Agreement.' The
following discussion of the Merger Agreement and the Merger does not purport to
be complete and is qualified in its entirety by reference to the text of the
Merger Agreement, a copy of which has been attached as Annex A hereto and is
incorporated herein by reference. Defined terms used below and not defined
herein have the respective meanings assigned to those terms in the Merger
Agreement. All references in this section to the Merger Agreement refer to the
Merger Agreement as amended by the Amendment, unless noted otherwise.
GENERAL
The Merger Agreement provides that, subject to the terms and conditions
contained therein, at the Effective Time, Merger Sub will be merged with and
into the Company and the separate corporate existence of Merger Sub will cease.
The Company will be the Surviving Corporation in the Merger and the separate
corporate existence of the Company with all its rights, privileges, immunities,
powers and franchises will continue to be governed by the laws of the State of
Delaware, unaffected by the Merger, except that the Certificate of Incorporation
of Merger Sub in effect at the Effective Time will be the Certificate of
Incorporation of the Surviving Corporation and the By-Laws of Merger Sub in
effect at the Effective Time shall be the By-Laws of the Surviving Corporation.
The directors of Merger Sub and the officers of the Company at the Effective
Time will, from and after the Effective Time, be the directors and officers,
respectively, of the Surviving Corporation until their successors have been duly
elected or appointed and qualified or until their earlier death, resignation or
removal in accordance with the Surviving Corporation's Certificate of
Incorporation and By-Laws.
Pursuant to the Merger Agreement, at the Effective Time, all shares of
Company Common Stock will be cancelled and retired and will cease to exist, and
each certificate representing shares of Company Common Stock (a 'Certificate')
(other than Excluded Shares) will thereafter represent only the right to the
Merger Consideration for such shares upon the surrender of such Certificate. At
the Effective Time, each share of Merger Sub Common Stock issued and outstanding
immediately prior to the Effective Time will, by virtue of the Merger and
without any action on the part of Merger Sub or the holders of such shares, be
converted into one share of Surviving Corporation Common Stock.
EFFECTIVE TIME
The Effective Time will be the time and date of the filing of the
Certificate of Merger with the Secretary of State of Delaware in accordance with
Section 251 of the DGCL. In no event will the Effective Time occur prior to
October 1, 1996.
PAYMENT OF THE MERGER CONSIDERATION
As provided in the Merger Agreement, each share of Company Common Stock
issued and outstanding at the Effective Time, other than Excluded Shares, will,
by virtue of the Merger and without any action on the part of the holder
thereof, be converted into the right to receive the Merger Consideration. Prior
to the Effective Time, Holdings will designate a bank or trust company to act as
a paying agent in the Merger (the 'Paying Agent'). Holdings will make available
or cause to be made available to the Paying Agent an amount equal to the funds
necessary to pay the aggregate Merger Consideration.
Promptly after the Effective Time, stockholders of record of Company Common
Stock at the Effective Time will be mailed a letter of transmittal and
instructions for use in effecting the surrender of the Certificates in exchange
for payment therefor. Upon surrender to the Paying Agent of such Certificates
for cancellation and such letter of transmittal duly executed and completed in
accordance with the instructions thereto, the Surviving Corporation shall
promptly cause to be paid to the persons entitled thereto a check in the amount
to which such persons are entitled, after giving effect to any required tax
withholdings. No interest will be paid or will accrue on the amounts payable
upon the surrender of Certificates.
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If payment is to be made to a person other than the person in whose name
the Certificate is registered, it will be a condition of payment that the
Certificate so surrendered shall be properly endorsed or otherwise in proper
form for transfer and that the person requesting such payment will pay any
transfer or other taxes required by reason of the payment to a person other than
the registered holder, or establish to the satisfaction of the Surviving
Corporation or the Paying Agent that such tax has been paid or is not
applicable.
One hundred and eighty (180) days after the Effective Time, any remaining
funds held by the Paying Agent may be released to the Surviving Corporation, in
which case the Surviving Corporation shall thereafter act as Paying Agent with
respect to the cash payable to holders upon surrender of their Certificates. In
such case, however, holders of Certificates may look to the Surviving
Corporation only as general creditors thereof with respect to the cash payable
upon surrender of their Certificates. Neither the Paying Agent nor any party to
the Merger Agreement will be liable to any holder of Certificates formerly
representing shares of Company Common Stock for any amount paid to a public
official pursuant to any applicable abandoned property, escheat or similar law.
The Merger Agreement provides that no transfer of shares will be made on the
stock transfer books of the Surviving Corporation at or after the Effective
Time.
Options and Restricted Shares. The Merger Agreement provides that, at the
Effective Time, each Option to acquire shares of Company Common Stock, other
than Options held by certain members of management of the Company who enter into
agreements with Holdings prior to the Effective Time pursuant to which such
members will agree to roll over their Options for Roll-Over Options, will,
without any action on the part of the holder thereof, and whether or not then
exercisable, be converted into the right to receive an amount in cash (the
'Option Amount'), if any, equal to the product of (x) (1) the excess of the
Merger Consideration over (2) the current exercise price per share of such
Option and (y) the number of shares of Company Common Stock subject to such
Option, payable to the holder thereof at the Effective Time of the Merger, and
such Option will be cancelled and retired and will cease to exist.
Under the Merger Agreement, the Company will be entitled to withhold, in
accordance with applicable law, from any cash payments any amounts required to
be withheld under applicable law. To the extent required by the terms of the
plans governing such Company Options or pursuant to the terms of any Company
Option granted thereunder, the Company agrees to use all reasonable efforts to
obtain the consent of each holder of outstanding Options to the foregoing
treatment of such Options and to take any other action reasonably necessary to
effectuate such provisions. As provided in the Merger Agreement, any cash
payment received with respect to shares of restricted Common Stock ('Restricted
Shares') held under the Company's 1993 Long-Term Incentive Plan (the 'LTIP')
that have not been purchased by the holder will not be subject to any
restrictions following the Effective Time. Moreover, any cash payment received
with respect to purchased Restricted Shares held under the LTIP or under the
Company's 1993 Leveraged Stock Purchase Plan (the 'LSPP') will first be applied
to payment of any outstanding loan balances for such Restricted Shares including
accrued interest and the Company shall withhold and deduct an amount equal to
any such loan balance and accrued interest from the amount to be paid to the
respective holder of Restricted Shares. Any remaining cash, after payment of any
such loan balances, will not be subject to any restrictions following the
Effective Time.
Notwithstanding the foregoing, with respect to Restricted Shares held under
the LSPP by executive officers of the Company subject to Section 16 ('Section
16') of the Exchange Act, to the extent restrictions must remain on such cash
payment to avoid short-swing liability under Section 16, Holdings agrees to
cause the Surviving Corporation to hold such payments with respect to such
Restricted Shares pursuant to the provisions of the LSPP until such restrictions
lapse.
Appraisal Rights. The Company will give Holdings prompt notice of any
stockholder who has properly exercised his or her appraisal rights and who is
entitled to be paid the 'fair value' of his or her shares, as provided in
Section 262 of the DGCL. Under the Merger Agreement, Holdings will have the
right to direct all negotiations and proceedings with respect to any such
demands. Neither the Company nor the Surviving Corporation will, except with the
prior written consent of Holdings, voluntarily make any payment with respect to,
or settle or offer to settle, any such demand for payment. Pursuant to the
Merger Agreement, the shares held by any Dissenting Stockholder that fails to
perfect, withdraws, or
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loses the right to dissent will be treated as though such shares had been
converted into the Merger Consideration. See 'Appraisal Rights of Stockholders'
for a description of the appraisal procedures contained in Section 262 of the
DGCL.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various customary representations and
warranties of the parties. Representations and warranties of the Company include
certain matters relating to the Company's organization, good standing and
qualification to do business, capital structure, corporate authority to enter
into the Merger Agreement and to consummate the transactions contemplated
thereby, receipt of Goldman Sachs' fairness opinion, consents and approvals
required for the execution and delivery of the Merger Agreement and the
consummation of the transactions contemplated thereby, governmental filings, SEC
reports and financial statements, the absence of certain changes (including any
material adverse change in the Company) since December 31, 1995, litigation and
liabilities, employee benefits matters, compliance with laws and licenses,
receivables, material contracts, takeover statutes, environmental matters,
taxes, labor matters, intellectual property, insurance, agreements with AT&T,
transactions with affiliates, and brokers and finders.
Representations and warranties of AT&T include certain matters relating to
AT&T's organization, good standing and qualification to do business, share
ownership of AT&T and its subsidiaries in the Company, corporate authority to
enter into the Merger Agreement and to consummate the transactions contemplated
thereby, consents and approvals required for the execution and delivery of the
Merger Agreement and the consummation of the transactions contemplated thereby,
governmental filings, agreements with the Company, brokers and finders, and the
absence of 'excess parachute payments' under the Code.
Representations and warranties of Holdings and Merger Sub include certain
matters relating to their organization, good standing and qualification to do
business, corporate authority to enter into the Merger Agreement and to
consummate the transactions contemplated thereby, consents and approvals
required for the execution and delivery of the Merger Agreement and the
consummation of the transactions contemplated thereby, governmental filings,
availability of funds sufficient to consummate the Merger, brokers and finders,
and the absence of prior activities by either Holdings or Merger Sub other than
its incorporation or organization, or the negotiation and consummation of the
Merger Agreement.
CONDITIONS TO THE MERGER
Under the Merger Agreement, the respective obligations of Holdings, Merger
Sub, AT&T and the Company to consummate the Merger are subject to the
fulfillment or waiver, where permissible, of the following conditions at or
prior to the Effective Time: (i) the expiration or termination of the waiting
period applicable to the Merger under the HSR Act; (ii) the receipt of all
required consents, registrations, approvals, permits and authorizations in full
force and effect; and (iii) no court or governmental entity of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
statute, rule, regulation, judgment, decree, injunction or other order that is
in effect and restrains, enjoins or otherwise prohibits consummation of the
Merger Agreement.
The obligations of Holdings to consummate the Merger are further
conditioned on (i) the truth and accuracy in all material respects of the
representations and warranties made by the Company and AT&T; (ii) the
performance in all material respects of all obligations of the Company and AT&T;
(iii) the receipt by the Company and AT&T of the consent or approval of each
person whose consent or approval is required, except for those for which the
failure to obtain such consent or approval is not reasonably likely to have a
material adverse effect on the Company; (iv) the receipt by Holdings of the
resignations of each director of the Company; and (v) AT&T and the Company
having entered into a transitional services agreement.
The obligations of the Company and AT&T to consummate the Merger are
further conditioned on (i) the truth and accuracy in all material respects of
the representations and warranties made by Holdings and Merger Sub; (ii) the
performance in all material respects of all obligations of Holdings
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and Merger Sub; and (iii) the receipt by Holdings of the consent or approval of
each person whose consent or approval is required, except for those consents for
which the failure to obtain such consent or approval is not reasonably likely to
have a material adverse effect on the ability of Holdings or Merger Sub to
consummate the Merger.
COVENANTS
Interim Operations. Pursuant to the Merger Agreement, the Company has
agreed, among other things, that, prior to the Effective Time (unless Holdings
shall otherwise approve in writing), the Company will conduct its business in
the ordinary and usual course and, to the extent consistent therewith, will use
its best efforts to preserve its business organization intact, and maintain its
existing relations and goodwill with customers, suppliers, distributors,
creditors, lessors, employees and business associates. The Company further
agreed that it will not, other than as provided by the terms of the Merger
Agreement, among other things, (i) sell or pledge any capital stock owned by it
in any of its subsidiaries, (ii) amend its Certificate of Incorporation or
By-laws, (iii) split, combine or reclassify, issue, sell, pledge, dispose of or
encumber, or authorize or propose the issuance, sale, pledge, disposition or
encumbrance of, any other securities in respect of, in lieu of or in
substitution for, its outstanding shares of capital stock (iv) declare, set
aside or pay dividends or other distributions, other than regular quarterly cash
dividends of up to $.11 per share, (v) redeem or repurchase any shares of its
capital stock, (vi) alter the Company Plans, employment agreements or salaries,
wages or compensation except for those changes occurring in the ordinary and
usual course of business or otherwise required by applicable law or the terms of
such plans, or (vii) settle or compromise any claim or litigation for an amount
in excess of $5,000,000 nor, other than in the ordinary and usual course of
business, modify, amend or terminate any of its material contracts, acquire or
dispose of properties or assets in excess of specified limits, waive, release or
assign any material rights or claims, make any tax election or alter any
insurance policy, accounting principle or enter into or modify any agreement
with AT&T or any of its affiliates, except in each case as otherwise provided.
The Company also agreed that it will (i) notify Holdings of any
terminations of material contracts with customers and (ii) provide Holdings with
reasonable assistance in Holdings' arranging, structuring and receiving
financing in connection with the Merger.
In addition, AT&T agreed that prior to the Effective Time it shall not
sell, assign, pledge, dispose of or encumber any shares of Company Common Stock
owned by it or any of its subsidiaries, except that AT&T may sell, assign or
dispose of any or all such shares of Company Common Stock to one or more
wholly-owned subsidiaries of AT&T.
Acquisition Proposals. The Company and AT&T have each also agreed that
neither it nor any of its subsidiaries will permit any of its officers,
directors, employees, representatives or agents to solicit or initiate or
encourage any discussions, proposals, offers or negotiations with, or
participate in any negotiations or discussions with, or provide any information
or data of any nature whatsoever to, or otherwise cooperate in any way with any
other person concerning any transaction involving a merger, reorganization or
similar transaction, or the sale of all or a significant portion of the assets
or the equity securities of the Company. The Company and AT&T have agreed to
notify Holdings upon receipt of any proposal received with respect to such a
transaction.
Information Supplied. The Company, AT&T and Holdings have each agreed,
among other things, (i) that none of the information supplied or to be supplied
by it for inclusion or incorporation by reference in this Information Statement
will contain any untrue statement of a material fact or will omit to state any
material fact required to be stated herein or necessary to make the statements
herein, in light of the circumstances under which they were made, not
misleading, and (ii) that each party will supplement or update this Information
Statement as needed.
REGULATORY FILINGS; CONSENTS; NOTIFICATION
The Company, AT&T and Holdings have further agreed (i) to make any
applicable regulatory filings and any other required submissions with respect to
the Merger; (ii) to use best efforts to cooperate with each other, to take all
action and do all other things necessary, proper or appropriate
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under the Merger Agreement and all applicable laws and regulations to consummate
and make effective the transactions contemplated by the Merger Agreement; and
(iii) to give prompt notice of any change that is reasonably likely to result in
a material adverse effect on the Company or the ability of Holdings or Merger
Sub to consummate the Merger, as the case may be. The Company has further agreed
to use reasonable best efforts to obtain the consents and approval necessary for
the succession by the Surviving Corporation to any contract or license of the
Company.
ADDITIONAL AGREEMENTS
Pursuant to the Merger Agreement, the Company has agreed to afford
Holdings' officers, employees, counsel, accountants and other authorized
representatives reasonable access to information concerning its business,
properties and personnel as may reasonably be requested.
Effective immediately following the consummation of the Merger, AT&T and
the Company have agreed (i) to amend the Operating Agreement between the Company
and AT&T to provide that AT&T will not unreasonably withhold its consent to any
subsequent change of control of the Company (in the absence of such consent,
AT&T would be entitled to terminate such Operating Agreement following such a
change of control), and (ii) to amend the License Agreement to provide that AT&T
must give two years' notice (rather than one year's notice) following the Merger
of the termination of the Company's right to use the 'AT&T' name for certain
corporate purposes, and to provide that AT&T's right to terminate the License
Agreement due to a credit rating downgrade will not be triggered unless the
Company is rated below Ba1 by Moody's Investor Services and below BB+ by
Standard & Poor's Corporation.
Pursuant to the Merger Agreement, the Company, AT&T and Holdings have
agreed to consult with, and receive the prior approval of, the others prior to
issuing any press releases with respect to the Merger and the transactions
contemplated by the Merger Agreement, and prior to making any public filings.
The Merger Agreement provides that neither AT&T nor any of its wholly-owned
subsidiaries (so long as they remain wholly-owned subsidiaries) will induce or
attempt to induce any employee of the Company to leave the employ of the Company
or any of its subsidiaries until the fifth anniversary of the Closing Date.
EMPLOYEE BENEFITS
The Merger Agreement provides among other things that, from the Effective
Time, Holdings and the Surviving Corporation will (i) honor in accordance with
their terms all existing Company Plans; (ii) continue in effect through December
31, 1997 all Company Plans (other than the LSPP, the LTIP, the Employee Stock
Purchase Plan, the SPIP and the 1993 Deferred Compensation Plan) without any
adverse amendment or modification; (iii) provide welfare benefit and insurance
plans or programs that are no less favorable in the aggregate than those
provided by the Company immediately prior to the Effective Time; and (iv)
continue in effect the LSPP and LTIP through at least August 6, 1996 to the
extent any awards remain unvested under such plans. The Company has agreed to
withdraw as a participating employer from all employee benefit plans, practices
or policies sponsored by AT&T and its subsidiaries, effective as of the Closing
Date, except as otherwise provided in the transitional services agreement to be
entered into between AT&T and the Company prior to the Closing Date and the
Benefits Agreement between AT&T and the Company dated as of January 1, 1994;
provided, however, that such withdrawal does not affect the rights of any
current retirees of the Company with respect to AT&T and its plans. Under the
Merger Agreement, the Surviving Corporation has agreed to pay (and Holdings has
agreed to cause the Surviving Corporation to pay), pursuant to the Company's
SPIP Amendments, to each participant under the SPIP (and each recipient of share
performance incentive awards under the LTIP) (a) for each pending performance
period under the SPIP (or award), an accelerated award payout equal to 100% of
such participant's maximum payout for such period, (b) for each performance
period completed within 12 months prior to the Effective Time, an amount equal
to the excess of the participant's maximum payout under the SPIP (or award) over
the actual payout previously made for such completed performance period and (c)
100% maximum payout with respect to
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all performance periods beginning after the Effective Time (with payment
immediately following the Effective Time), provided that certain conditions may
apply with respect to payments to employees who are not members of the Company's
Leadership Forum. See 'The Merger Agreement -- SPIP Amendments.' The Surviving
Corporation and Holdings have also agreed to: (i) amend the Company's annual
incentive plans to provide that payments for 1996 will be no less than the
participant's 1996 target award; (ii) eliminate the ability to amend the
Supplemental Income Benefits Plan, the Supplemental Executive Retirement Plan
and the Excess Benefit Plan to reduce accrued benefits, and (iii) vest benefits
under the Excess Benefit Plan as of the Effective Time. To the extent employees
of the Company become participants in employee benefit plans of Holdings or its
affiliates, credit for service with the Company and its subsidiaries (including
predecessor employers) will be provided to such employees for eligibility and
vesting and other purposes under such plans, but not for benefit accrual under
tax-qualified plans.
INDEMNIFICATION
Pursuant to the Merger Agreement, for six years after the Effective Time,
Holdings will indemnify and hold harmless, to the fullest extent permitted under
applicable law, each present and former director, officer and employee of the
Company and its subsidiaries against any costs or expenses, including reasonable
attorneys' fees, judgments, fines, losses, claims, damages or liabilities
incurred in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative, arising
out of or pertaining to matters existing or occurring at or prior to the
Effective Time, including the transactions contemplated by the Merger Agreement.
The Merger Agreement also provides, in general, that AT&T shall maintain in
place its current directors' and officers' liability insurance with respect to
actions prior to the Merger until the Effective Time. After the Effective Time,
the Surviving Corporation will establish officers' and directors' liability
insurance for the Company's and its subsidiaries' officers and directors
substantially similar to the insurance currently maintained for a period of six
years so long as the annual premium is not in excess of $750,000 or, if the cost
does exceed that amount, as much insurance as can be purchased for that amount.
NIplc has agreed to cause Holdings to meet these indemnification and insurance
obligations.
TRANSITIONAL SERVICES
Pursuant to the Merger Agreement, AT&T and Holdings will enter into a
transitional services agreement governing certain transitional services to be
provided by AT&T and its affiliates to the Company for up to one year from the
Effective Time, including payroll and related services, human resources and
benefits services, and human resources information systems services. The Company
will have the option to terminate the provision of any such transitional service
by at least thirty days' advance written notice to AT&T and the applicable AT&T
entity providing such service.
TAX MATTERS
The Merger Agreement provides that AT&T and Holdings will jointly make
timely and irrevocable elections under Section 338(h)(10) of the Code and AT&T,
Holdings and the Company agree to execute any and all forms necessary to
effectuate the elections at the Closing. The Merger Agreement outlines the
manner in which AT&T and Holdings have agreed to allocate the Aggregate Deemed
Sale Price of the assets of each of the Company and its Subsidiaries for which a
Section 338(h)(10) election is made.
The Merger Agreement also provides for (i) liability of taxes and related
matters; (ii) filing of tax returns; (iii) termination of tax allocation or
sharing agreements or arrangements; and (iv) allocation of payment of 1995 and
1996 taxes. AT&T and Holdings also agree to (i) assist in all reasonable
respects the other party in preparing any Tax Returns or reports; (ii) cooperate
in all reasonable respects in preparing for any audits or disputes, (iii) make
available any requested information, records or documents relating to Taxes of
the Company and each subsidiary of the Company; (iv) provide timely notice to
the other in writing of any pending or threatened tax audit or assessments; and
(v) furnish the other with copies of all correspondence received from any taxing
authority in connection with any tax audit or information request.
43
<PAGE>
<PAGE>
TERMINATION
The Merger Agreement provides that at any time prior to the Effective Time
it may be terminated by mutual written consent of the Boards of Directors of the
Company, AT&T, Holdings and Merger Sub. Holdings, AT&T and the Company also have
the right to terminate the Merger Agreement by board action if (i) the Merger is
not consummated by October 31, 1996 (the 'Termination Date') or (ii) any order
permanently restraining, enjoining or otherwise prohibiting the Merger becomes
final and non-appealable; provided that the party seeking to terminate the
Merger Agreement has not breached in any material respect its obligations under
the Merger Agreement in any manner that shall have proximately contributed to
the occurrence of (i) or (ii).
The Company or AT&T may terminate the Merger Agreement by board action if
there is a material breach by Holdings or Merger Sub of any representation,
warranty, agreement or covenant contained in the Merger Agreement that is not
curable or, if curable, is not cured upon 30 days' notice. Likewise, Holdings
may terminate the Agreement by board action if there is a material breach by the
Company or AT&T of any representation, warranty, covenant or agreement that is
not curable or, if curable, is not cured upon 30 days' notice. AT&T or the
Company may terminate the Merger Agreement, if, at any time prior to
consummation of the Merger, Holdings breaches its covenant to maintain the
proceeds of the capital contribution, free of any liens, invested in short-term
United States government securities.
EXPENSES
Whether or not the Merger is consummated, all costs and expenses incident
to preparing for, entering into and carrying out the Merger Agreement and the
consummation of the Merger will be paid by the party incurring such expense;
provided that the reasonable legal fees and other professional expenses incurred
by the management of the Company in connection with the negotiation of
arrangements with Holdings and its affiliates will be reimbursed by the Company.
Holdings or the Surviving Corporation will pay all charges and expenses of the
Company following the Effective Time, including those of the Paying Agent and
including the payment of the Merger Consideration and the fair value to
stockholders who perfect their statutory appraisal rights. For a table setting
forth the amounts of certain estimated expenses and fees to be incurred in
connection with the Merger, see 'Financing of the Merger -- Expenses and Fees'.
SPIP AMENDMENTS
The SPIP was adopted on June 10, 1993. The purpose of the SPIP is to reward
key members of the Company's management team for increases in stockholder value
that exceed those of other financial services companies. Under the SPIP,
eligible employees received awards entitling them to receive cash payouts with
respect to each of the three-year 'performance periods' ending June 30, 1996,
1997, 1998, 1999 and 2000, respectively, depending upon the Company's total
return to stockholders during each period as measured against two benchmarks:
(i) the average total return during such performance period of a benchmark group
of companies, each of which has a current market value relatively similar to
that of the Company and is a competitor in the leasing or finance business and
(ii) the interest rate on three-year Treasury Notes as of the beginning of the
performance period. To receive any payout for a performance period the Company's
total return must exceed the three-year Treasury Note interest rate by at least
3.0 percentage points. For participants to receive target payouts, the Company's
total return must exceed the average total return of the benchmark group by 1.5
percentage points and to receive maximum payouts it must exceed such average
total return by 3.0 percentage points. Approximately 110 key members of the
Company's management team participate in the SPIP.
The SPIP has been amended and the AT&T Subsidiaries have executed the SPIP
Amendments Stockholders' Consent to provide that, upon the consummation of a
Private Sale, the Company shall pay to each participant (a) for each pending
performance period under the SPIP an accelerated accrued payment equal to 100%
of such participant's maximum payout for such period and (b) for each
performance period completed within 12 months prior to a Private Sale, an amount
equal to the excess of the participants' maximum payout for such period over the
amount paid. The SPIP Amendments also
44
<PAGE>
<PAGE>
provide that, upon consummation of the Merger, the Surviving Corporation will
pay to each participant for each future performance period under the SPIP, an
accelerated accrued payment equal to 100% of such participant's maximum payout
for that period, provided that, for any participants who are not members of the
Company's Leadership Forum, such payment shall not be made unless such
participant has entered into an agreement with Holdings and the Surviving
Corporation to modify the definition of 'Qualifying Termination' in the
Leadership Severance Plan or the Member Severance Plan, as applicable. The
consummation of the Merger will constitute a Private Sale.
The following amounts represent the payments that will be made upon
consummation of the Merger to the persons or groups set forth below under the
SPIP, as amended by the SPIP Amendments. Such amounts do not include awards for
the performance period ending June 30, 1996, which awards were paid on July 19,
1996.
<TABLE>
<CAPTION>
DOLLAR VALUE
NAME AND POSITION ($)
- ------------------------------------------------------------------------------- ------------
<S> <C>
Thomas C. Wajnert ............................................................. 3,606,639
Chairman of the Board and Chief Executive Officer
Irving H. Rothman ............................................................. 2,018,215
Group President
Charles D. Van Sickle ......................................................... 2,018,215
Group President
G. Daniel McCarthy ............................................................ 1,602,245
Senior Vice President, General Counsel, Secretary, Chief Risk Management
Officer
Ruth A. Morey ................................................................. 1,602,245
Senior Vice President, Corporate Information and Resources
Executive Officer Group........................................................ 11,740,621
Non-Executive Officer Group.................................................... 31,185,551
</TABLE>
FIRST AMENDMENT TO THE MERGER AGREEMENT
The Amendment, dated as of August 20, 1996, amended the Merger Agreement in
the following respects. First, the Amendment provides that the closing date for
the Merger will be the later of (i) October 1, 1996 (as opposed to the September
17, 1996 date provided in the Merger Agreement as executed on June 5, 1996) and
(ii) the first business day on which all of the conditions to the closing of the
Merger have been satisfied or waived. The Amendment did not change the Merger
Agreement's final deadline of October 31, 1996, for the closing of the Merger,
following which date any party may terminate the Merger Agreement under certain
circumstances.
Second, the Amendment provides that Holdings may, at its option, choose to
postpone the closing of the Merger to a date no later than October 31, 1996,
even if all of the conditions to closing are satisfied or waived prior to such
date. If Holdings exercises such option, interest will be payable on the $45 per
share purchase price at a rate of LIBOR plus 0.5% for the period from and
including September 18, 1996 through but excluding the closing date of the
Merger.
Third, the Amendment requires that Holdings receive a $400 million capital
contribution by September 18, 1996 in addition to the $100 million total capital
contribution required by the Merger Agreement as executed on June 5, 1996 and
made by Holdings (UK) on June 7, 1996. The Amendment restates the Merger
Agreement's requirement that Holdings invest the proceeds of these two capital
contributions in short-term United States government securities and free of any
liens.
45
<PAGE>
<PAGE>
FINANCING OF THE MERGER
GENERAL
The total amount of funds required to consummate the Merger and to pay
related fees and expenses and to repay or refinance certain indebtedness
(assuming no interest is payable on the $45 per share purchase price) is
approximately $2,365.3 million. Of such amount, approximately $2,158.0 million
will be required to purchase outstanding shares of Company Common Stock pursuant
to the Merger and to satisfy the Company's obligation under the Merger Agreement
to cash-out its outstanding Options. In addition, $22.0 million will be required
to pay fees and expenses to be incurred in connection with the consummation of
the Merger. Although not a condition to the Merger, the Company expects that
approximately $185.3 million will be used to repay certain indebtedness of the
Company which comes due on or in connection with the consummation of the Merger
or to refinance other existing indebtedness of the Company.
On June 7, 1996, Holdings received a capital contribution of $100.0 million
which was made by Holdings (UK) from the proceeds of a note issuance of Holdings
(UK) to NIplc. The remaining $2,265.3 million of the required funds will be
obtained from: (i) the proceeds of the sale of shares of Holdings Common Stock
to Holdings (UK) and to Babcock & Brown or its affiliates, assuming that
agreements for such share subscriptions can be reached, in an aggregate amount
of up to approximately $360.0 million; (ii) the Management Share Exchange by the
Management Investors of shares of Company Common Stock for shares of Merger Sub
Common Stock in the amount of up to approximately $40.0 million; (iii) the
proceeds of a $400.0 million capital contribution which Holdings is required by
the terms of the Merger Agreement to receive by September 18, 1996, and which
will be made to Holdings by Holdings (UK) from the proceeds of a note issuance
of Holdings (UK) to NIplc (the amounts referred to in clauses (i), (ii) and
(iii), together with the $100.0 million capital contribution already made to
Holdings, are collectively referred to as the 'Equity Subscriptions'); and (iv)
up to $1,465.3 million of proceeds of offerings of equipment receivable-backed
securities by affiliates of the Surviving Corporation (the 'Asset
Securitizations'). If Holdings is required to pay interest on the purchase price
for the shares acquired in the Merger under the circumstances provided by the
Amendment, the funds for such interest will be provided from the anticipated
excess proceeds of the Asset Securitizations.
Holdings anticipates that the Equity Subscriptions will be consummated
immediately prior to the Effective Time. The equipment receivable-backed
securities issued by an affiliate of the Surviving Corporation in connection
with the Asset Securitizations will be issued a short time prior to the
Effective Time and the proceeds therefrom will be held in escrow and invested in
certain United States government and other highly rated securities pending
consummation of the Merger. Upon consummation of the Merger, the proceeds from
the Asset Securitizations will be released from escrow and used to purchase the
underlying lease receivables from the Surviving Corporation and will thereupon
become available for use by Holdings as contemplated above. If the Merger has
not been consummated by a certain date (to be determined) following the
commencement of such offering, or if certain other conditions precedent to the
Asset Securitizations have not been met, the proceeds from the Asset
Securitizations would be used to redeem the securities issued in connection
with the Asset Securitizations.
The Merger Agreement is not subject to any financing condition. Holdings
and Merger Sub are obligated to consummate the Merger upon the satisfaction (or
waiver) of the conditions precedent included in the Merger Agreement. See 'The
Merger Agreement -- Conditions to the Merger.' As described below, Holdings has
received an unconditional and irrevocable undertaking from NIplc to underwrite
or purchase an international capital markets issue on behalf of Holdings in an
amount sufficient to satisfy Holdings' financial obligations under the Merger
Agreement. See ' -- NIplc's Underwriting Letter.' If, for any reason, the
proceeds of either the Asset Securitizations or the Equity Subscriptions are not
available to pay the aggregate Merger Consideration at the Closing, NIplc would
be required to arrange alternative financing on behalf of Holdings in order to
satisfy its obligations pursuant to such commitment. In such event, it is
anticipated that NIplc would arrange a short-term credit facility for Holdings
on terms to be negotiated at such time, which would be refinanced from the
proceeds of a subsequent offering of equipment receivable-backed securities.
46
<PAGE>
<PAGE>
The Equity Subscriptions and the Asset Securitizations are collectively
referred to herein as the 'Financing.' The sources and uses of the Financing are
expected to be as follows (in millions):
<TABLE>
<S> <C>
Sources of Funds:
Equity Subscriptions.............................................................................. $ 900.0
Asset Securitizations............................................................................. 1,465.3
--------
$2,365.3
--------
--------
Use of Funds:
Acquisition of shares of Company Common Stock and cancellation of Options......................... $2,158.0
Refinancing of existing debt(1)................................................................... 185.3
Merger and Financing related expenses............................................................. 22.0
--------
$2,365.3
--------
--------
</TABLE>
- ------------
(1) Maximum amount of foreign bank and similar financings that would need to be
refinanced if such banks do not consent to the Merger and related
transactions.
------------------------
As soon as practicable following the Effective Time, Holdings expects to
cause the Surviving Corporation or an affiliate of the Surviving Corporation to
issue approximately $200.0 million of preferred securities (the 'Preferred Stock
Issuance'). The proceeds of such Preferred Stock Issuance, as well as the excess
proceeds from the Asset Securitizations, may be used to repay or refinance other
indebtedness of the Company.
Set forth below is a summary description of the Financing and the Preferred
Stock Issuance, consummation of which is subject to, among other things, the
negotiation and execution of definitive financing agreements on terms
satisfactory to the parties thereto. There can be no assurance that the terms
set forth or referred to below will be contained in such agreements or that such
agreements will not contain materially different provisions.
EQUITY SUBSCRIPTIONS
The terms, conditions and other provisions contained in the Equity
Subscriptions from the Management Investors are described under 'Special
Factors -- Interests of Certain Persons in the Merger -- Arrangements Between
Management and Merger Sub.' As discussed therein, Merger Sub may agree to extend
certain existing loans from the Company to the Management Investors to enable
them to maintain their equity interest in the Surviving Corporation. Financing
for the $100.0 million capital contribution from Holdings (UK) to Holdings was
provided by the proceeds of a note issuance of Holdings (UK) to NIplc, which
notes mature on the scheduled termination date under the Merger Agreement, bear
interest based on a fixed spread over the London interbank offered rate and are
secured by the shares of Holdings Common Stock held by Holdings (UK). It is
anticipated that the financing for the additional $400.0 million capital
contribution from Holdings (UK) to Holdings will be provided in the same manner
as the financing for the $100.0 million capital contribution from Holdings (UK)
to Holdings. In addition, it is anticipated that all or a portion of the equity
investments by (i) Babcock & Brown or its affiliates, assuming that agreements
for such equity investments can be reached, in shares of Holdings Common Stock
and (ii) GRSH in shares of the capital stock of Holdings (UK) (which equity
investment will in turn be used to invest in shares of Holdings Common Stock),
may in each case be made with financings arranged by NIplc. Although no
agreements currently exist with respect to the terms and conditions of such
financings, it is anticipated that such financings will be made on commercially
reasonable arms' length terms and be secured by pledges of equity interests held
by Babcock & Brown and GRSH, respectively. See 'Information Concerning Merger
Sub, Holdings, Holdings (UK), GRSH, NIplc and Nomura.'
ASSET SECURITIZATIONS
At or as soon as practicable following the Effective Time of the Merger,
Holdings intends to cause the Surviving Corporation to transfer to one or more
newly created special purpose vehicles (collectively, the 'SPV') leases and
lease receivables (including the equipment underlying such leases)
47
<PAGE>
<PAGE>
originated by the credit, leasing services and certain other divisions of the
Company. The SPV will offer, in registered public offerings and private
placements, various tranches of trust certificates, notes or other securities
secured by the leases and the lease receivables, which offerings would be
conditioned upon the consummation of the Merger. The Company will continue to
service the transferred leases for a fee under one or more pooling and servicing
agreements entered into with the SPV. Holdings intends to receive approximately
$2,811.0 million of net proceeds from an equipment receivables-backed
securitization of such assets in connection with the closing of the Merger,
approximately $1,465.3 million of which would be applied to the Financing of the
Merger as set forth above. It is anticipated that the excess securitization
proceeds would be used to repay commercial paper and other short-term
indebtedness of the Company and/or to fund the origination of new leases and
financings.
PREFERRED STOCK ISSUANCE
In addition, at or as soon as practicable following the Effective Time,
Holdings intends to cause the Surviving Corporation or an affiliate of the
Surviving Corporation to issue approximately $200 million of preferred
securities. The dividend rights and other terms of such preferred securities
will be determined at a future date by Holdings and the Company.
NIPLC'S UNDERWRITING LETTER
Concurrently with the execution and delivery of the Merger Agreement, NIplc
executed and delivered to each of Holdings, the Company and AT&T a letter (the
'Underwriting Letter') in which NIplc irrevocably and unconditionally agreed to
underwrite or purchase securities of Holdings in amounts which are sufficient to
allow Holdings to meet all of its obligations under the Merger Agreement. In
addition, NIplc made certain representations, warranties and covenants to each
of the Company and AT&T in the Underwriting Letter. In connection with the
Amendment, NIplc executed and delivered to each of Holdings, the Company and
AT&T a letter (the 'Confirmation Letter') confirming that the Amendment did not
affect NIplc's obligations under the Underwriting Letter and that such
obligations remain in full force and effect with respect to the Merger Agreement
as amended by the Amendment. The foregoing description of the Underwriting
Letter and the Confirmation Letter is qualified in its entirety by reference to
the copy of the Underwriting Letter and the copy of the Confirmation Letter,
each of which has been filed as an exhibit to the Schedule 13E-3 referred to
under 'Schedule 13E-3 Statement.' See 'Available Information.'
FUTURE DIVIDENDS
Holdings anticipates that, following the consummation of the Merger, the
Surviving Corporation will cease to pay dividends on the Surviving Corporation
Common Stock and in addition the Surviving Corporation may incur certain
obligations in connection with the Financing which may prohibit or restrict the
payment of dividends on Surviving Corporation Common Stock.
EXPENSES AND FEES
The table set forth below contains an estimate of certain expenses and fees
incurred or expected to be incurred in connection with consummation of the
Merger. See 'The Merger Agreement -- Expenses.'
<TABLE>
<CAPTION>
EXPENSES AND FEES
- ----------------------------------------------------------------------- AMOUNT
-------------
(IN MILLIONS)
<S> <C>
SEC Filing............................................................. $ 0.5
Other Filings.......................................................... 0.2
Legal.................................................................. 2.0
Accounting............................................................. 0.7
Financial Advisory..................................................... 6.5
Printing............................................................... 0.2
Other Advisory......................................................... 11.0
Miscellaneous.......................................................... 0.9
------
Total........................................................ $22.0
------
------
</TABLE>
48
<PAGE>
<PAGE>
APPRAISAL RIGHTS OF STOCKHOLDERS
Stockholders of the Company who (i) hold shares of Company Common Stock on
the date of making demand and continuously hold such shares through the
Effective Time and (ii) follow the procedures specified in Section 262 of the
DGCL ('Section 262') will be entitled to have their shares of Company Common
Stock appraised by the Delaware Court of Chancery (the 'Court') and to receive
payment of the 'fair value' of such shares, exclusive of any element of value
arising from the accomplishment or expectation of the Merger, as determined by
the Court. THE PROCEDURES SET FORTH IN SECTION 262 SHOULD BE STRICTLY COMPLIED
WITH. FAILURE TO FOLLOW ANY OF SUCH PROCEDURES MAY RESULT IN A TERMINATION OR
WAIVER OF APPRAISAL RIGHTS UNDER SECTION 262.
The following discussion of the provisions of Section 262 is not intended
to be a complete statement of its provisions and is qualified in its entirety by
reference to the full text of that section, a copy of which is attached as Annex
C hereto.
Under Section 262, a stockholder of the Company electing to exercise
appraisal rights must within 20 days after the date the Information Statement is
first sent to Company Stockholders, demand in writing from the Company appraisal
of his shares which reasonably informs the Company of the identity of the
shareowner of record and that such record shareowner intends thereby to demand
the appraisal of his shares of Company Common Stock. Such written demand for
appraisal should be delivered either in person to the Corporate Secretary of the
Company or by mail (certified mail, return receipt requested, being the
recommended form of transmittal) to the Corporate Secretary, at AT&T Capital
Corporation, 44 Whippany Road, Morristown, New Jersey 07962. Stockholders that
have consented in writing to the proposal relating to the Merger Agreement,
namely the AT&T Subsidiaries, are not eligible to demand appraisal of their
shares.
The written demand for appraisal must be made by or for the holder of
record of Company Common Stock registered in his name. Accordingly, such demand
should be executed by or for such stockholder of record, fully and correctly, as
such stockholder's name appears on his stock certificates. If the stock is owned
of record in a fiduciary capacity, such as by a trustee, guardian or custodian,
execution of the demand should be made in such capacity and, if the stock is
owned of record by more than one person as in a joint tenancy or tenancy in
common, such demand should be executed by or for all owners. An authorized
agent, including an agent for one or two or more joint owners or tenants in
common, may execute the demand for appraisal for one or more stockholders of
record. However, the agent must identify the record owner or owners and
expressly disclose the fact that in executing the demand he is acting as agent
for the record owner or owners.
Within 120 days after the day of the Effective Time, the Surviving
Corporation or any stockholder of the Company who has satisfied the foregoing
conditions and who is otherwise entitled to appraisal rights under Section 262,
may file a petition in the Court demanding a determination of the value of the
shares of Company Common Stock held by all stockholders entitled to appraisal
rights. If no such petition is filed, appraisal rights will be lost for all
stockholders who had previously demanded appraisal of their shares. Stockholders
of the Company seeking to exercise appraisal rights should not assume that the
Surviving Corporation will file a petition with respect to the appraisal of the
value of their shares or that the Company will file a petition with respect to
the appraisal of the value of their shares or the Surviving Corporation will
initiate any negotiations with respect to the 'fair value' of such shares.
ACCORDINGLY, STOCKHOLDERS OF THE COMPANY WHO WISH TO EXERCISE THEIR APPRAISAL
RIGHTS SHOULD REGARD IT AS THEIR OBLIGATION TO TAKE ALL STEPS NECESSARY TO
PERFECT THEIR APPRAISAL RIGHTS IN THE MANNER PRESCRIBED IN SECTION 262.
At any time within 60 days after the day of the Effective Time, any
stockholder shall have the right to withdraw his demand for appraisal and to
accept the Merger Consideration.
Within 120 days after the day of the Effective Time, any stockholder who
has complied with the provisions of Section 262 is entitled, upon written
request, to receive from the Surviving Corporation a statement setting forth the
aggregate number of shares of Company Common Stock which did not consent to the
adoption of the Merger Agreement and with respect to which demands for appraisal
have been received by the Surviving Corporation and the aggregate number of
holders of such shares. Such statement must be mailed to the stockholder within
10 days after the written request therefor is
49
<PAGE>
<PAGE>
received by the Surviving Corporation or within 10 days after the expiration of
the period for delivery of demands for appraisal under Section 262, whichever is
later.
If a stockholder files the petition for appraisal in a timely manner, the
Surviving Corporation must file, within 20 days of service of the stockholder's
petition, a verified list of the names and addresses of all stockholders who
have demanded appraisal for their shares and with whom the Surviving Corporation
has not reached an agreement regarding value. If the Surviving Corporation files
a petition, it must be accompanied by a similar list. If so ordered by the
Court, the Register of Chancery is required to provide notice by registered or
certified mail of the hearing to stockholders shown on the list and to provide
notice by publication.
If a petition for an appraisal is timely filed, at the hearing on such
petition, the Court will determine the stockholders of the Company entitled to
appraisal rights and will appraise the value of Company Common Stock owned by
such stockholders, determining its 'fair value' exclusive of any element of
value arising from the accomplishment or expectation of the Merger. The Court
will direct payment of the fair value of such shares together with a fair rate
of interest, if any, on such fair value to stockholders entitled thereto upon
surrender to the Surviving Corporation of share certificates. Upon application
of a stockholder, the Court may, in its discretion, order that all or a portion
of the expenses incurred by any stockholder in connection with an appraisal
proceeding, including without limitation, reasonable attorneys' fees and the
fees and expenses of experts, be charged pro rata against the value of all the
shares entitled to appraisal.
Although the Company believes that the Merger Consideration to be paid in
the Merger is fair, it cannot make any representation as to the outcome of the
appraisal of fair value as determined by the Court, and stockholders should
recognize that such an appraisal could result in a determination of a lower,
higher or equivalent value.
Any stockholder of the Company who has duly demanded an appraisal in
compliance with Section 262 will not, after the Effective Time, be entitled to
vote his shares for any purpose nor be entitled to the payment of any dividends
or other distributions on his shares (other than those payable to stockholders
of record as of a date prior to the Effective Time).
If no petition for an appraisal is filed within the time provided, or if a
stockholder of the Company delivers to the Surviving Corporation a written
withdrawal of his demand for an appraisal and an acceptance of the Merger,
either within 60 days after the Effective Time or, with the written approval of
the Company, thereafter, then the right of such stockholder to an appraisal will
cease and such stockholder shall be entitled to receive in cash, without
interest, the Merger Consideration for such stockholder's shares of Company
Common Stock, the amount to which he would have been entitled had he not
demanded appraisal of his shares. No appraisal proceeding in the Court will be
dismissed as to any stockholder without the approval of the Court, which
approval may be conditioned on such terms as the Court deems just.
This Information Statement constitutes the notice required by Section
262(d) of the DGCL.
INFORMATION CONCERNING THE COMPANY
The Company is a full-service, diversified equipment leasing and finance
company that operates principally in the United States and also has operations
in Europe, Canada, the Asia/Pacific Region and Latin America. The Company is one
of the largest equipment leasing and finance companies in the United States,
based on the aggregate value of equipment leased or financed, and is the largest
lessor of telecommunications equipment in the United States.
The Company leases and finances equipment manufactured and distributed by
numerous vendors, including Lucent and NCR. In addition, the Company provides
equipment leasing and financing and related services directly to end-user
customers. The Company's approximately 500,000 customers include large global
companies, small and mid-sized business and federal, state and local governments
and their agencies.
The principal executive offices of the Company are located at 44 Whippany
Road, Morristown, New Jersey 07962 (telephone number 201-397-3000).
For additional information concerning the Company, see the documents filed
by the Company with the SEC which are incorporated by reference herein as
described under 'Incorporation of Certain Documents by Reference.'
50
<PAGE>
<PAGE>
MARKET PRICES OF AND DIVIDENDS ON COMPANY COMMON STOCK
Quarterly dividends on Company Common Stock have been paid since the fourth
quarter of 1993, the Company's first full quarter of operations after its
initial public offering in August 1993. Future cash dividends will be dependent
upon the policies of the Board and the Company's earnings, financial condition
and other factors. The Merger Agreement provides that the Company may not,
without the written consent of Holdings, declare, set aside or pay any dividend
or other distribution payable in cash, stock or property in respect of Company
Common Stock, other than regular quarterly cash dividends not in excess of $.11
per share. On July 19, 1996, the Board declared a dividend of $.11 per share
which is payable on August 30, 1996 to holders of record of Company Common Stock
as of the close of business on August 9, 1996. Holdings anticipates that,
following the consummation of the Merger, the Surviving Corporation will cease
to pay dividends on the Surviving Corporation Common Stock and in addition that
the Surviving Corporation may incur certain obligations in connection with the
Financing which may prohibit or restrict the payment of dividends on Surviving
Corporation Common Stock.
The following table shows, for the periods indicated, cash dividends paid
and the range of the high and low trading prices of Company Common Stock based
on composite transactions on the NYSE, as reported by the NYSE.
<TABLE>
<CAPTION>
1996
---------------------------------
PRICE RANGE
---------------
DIVIDENDS PAID HIGH LOW
-------------- ----- -----
<S> <C> <C> <C>
3rd Qtr (through August 29)................................. -- $44 5/8 $43 3/4
2nd Qtr..................................................... $.11 $44 1/8 $35 7/8
1st Qtr..................................................... $.11 $44 1/2 $37 3/4
</TABLE>
<TABLE>
<CAPTION>
1995
---------------------------------
PRICE RANGE
---------------
DIVIDENDS PAID HIGH LOW
-------------- ----- -----
<S> <C> <C> <C>
4th Qtr..................................................... $.11 $40 1/2 $35 5/8
3rd Qtr..................................................... $.10 $39 1/4 $26 3/4*
2nd Qtr..................................................... $.10 $27 3/4 $23 5/8
1st Qtr..................................................... $.10 $27 1/4 $21 3/8
</TABLE>
<TABLE>
<CAPTION>
1994
---------------------------------
PRICE RANGE
---------------
DIVIDENDS PAID HIGH LOW
-------------- ----- -----
<S> <C> <C> <C>
4th Qtr..................................................... $.10 $24 5/8 $19 3/4
3rd Qtr..................................................... $.09 $24 3/8 $21 1/4
2nd Qtr..................................................... $.09 $24 3/4 $21 1/2
1st Qtr..................................................... $.09 $27 3/8 $22 1/4
</TABLE>
- ------------
* On September 20, 1995, AT&T announced its plan to sell its remaining interest
in the Company in a public or private sale.
------------------------
On June 5, 1996, the last trading day prior to the public announcement of
the Merger, the closing sale price per share of Company Common Stock as reported
on the NYSE was $41, and the high and low trading prices were $41 1/8 and
$40 1/2, respectively. On September 19, 1995, the last trading day prior to the
public announcement of AT&T's plan to divest its interest in the Company, the
closing price per share of Company Common Stock as reported on the NYSE was
$32 3/4. The closing price per share of Company Common Stock as reported on the
NYSE on August 29, 1996 was $44 5/8.
51
<PAGE>
<PAGE>
INFORMATION CONCERNING MERGER SUB, HOLDINGS, HOLDINGS (UK),
GRSH, NIPLC AND NOMURA
Merger Sub. Merger Sub is a newly formed Delaware corporation organized at
the direction of GRSH in connection with the transactions contemplated by the
Merger Agreement. As of the date hereof, the authorized capital stock of Merger
Sub consists of 100 shares of Merger Sub Common Stock, of which 50 shares are
issued and held by Holdings. As described above under 'Special Factors --
Interests of Certain Persons in the Merger -- Arrangements between Management
and Merger Sub,' it is anticipated that, immediately prior to the Effective
Time, the Management Investors will subscribe for and acquire newly issued
shares of Merger Sub Common Stock in exchange for shares of Company Common Stock
held by such Management Investors. Until the consummation of the Merger, it is
not anticipated that Merger Sub will engage in any activities other than those
incident to its formation and capitalization and the other transactions
contemplated by the Merger Agreement. Upon consummation of the Merger (and
assuming all Management Offerees participate in the Management Share Exchange),
Holdings and the Management Investors would own approximately 95.6% and 4.4% of
the total outstanding Surviving Corporation Common Stock, respectively. On a
fully diluted basis (as a result of the Management Share Exchange, the
Management Option Exchange and the grant of the New Options), Holdings and the
Management Investors would beneficially own approximately 85.1% and 14.9% of the
total outstanding Surviving Corporation Common Stock, respectively. The mailing
address of Merger Sub's principal executive offices is 1209 Orange Street,
Wilmington, Delaware 19801 (telephone number 302-658-7581).
Holdings. Holdings is a newly formed Cayman Islands corporation organized
at the direction of GRSH in connection with the transactions contemplated by the
Merger Agreement. As of the date hereof, the authorized capital stock of
Holdings consists of 50,000 shares of Holdings Common Stock, of which 102 shares
are issued and held by Holdings (UK). As contemplated by the Merger Agreement,
Holdings received a capital contribution of $100.0 million on June 7, 1996, the
proceeds of which were used to acquire United States government securities with
maturities of one year or less. Pursuant to the Amendment, Holdings will receive
an additional $400.0 million capital contribution not later than September 18,
1996, the proceeds of which will also be invested in short-term United States
government securities. Until the consummation of the Merger, it is not
anticipated that Holdings will engage in any activities other than those
incident to its formation and capitalization and the other transactions
contemplated by the Merger Agreement. Upon consummation of the Merger, it is
intended that Holdings (UK) would own approximately 89.5% of the total
outstanding Holdings Common Stock and, assuming that agreements can be reached
with Babcock & Brown, Babcock & Brown or its affiliates would own approximately
10.5% of the total outstanding Holdings Common Stock. On a fully diluted basis
(based on the exercise by NIplc of options on shares of Holdings Common Stock to
be received by NIplc in connection with the Financing, which options are
expected to be immediately exercisable (at an exercise price to be determined)
and freely transferable at any time), NIplc would beneficially own approximately
70.0%, Holdings (UK) would beneficially own approximately 19.5% and Babcock &
Brown would beneficially own approximately 10.5% of the total outstanding
Holdings Common Stock, respectively. The mailing address of Holdings' principal
executive offices is c/o Maples & Calder, P.O. Box 309, Ugland House, South
Church Street, Grand Cayman, Cayman Islands, British West Indies (telephone
number 809-946-8066).
Holdings (UK). Holdings (UK) is a newly formed private limited company
registered in England and organized at the direction of GRSH in connection with
the transactions contemplated by the Merger Agreement. All of the outstanding
capital stock of Holdings (UK) is owned by GRSH and, at and following the
consummation of the Merger, Holdings (UK) will remain a wholly-owned subsidiary
of GRSH. Until the consummation of the Merger, it is not anticipated that
Holdings (UK) will engage in any activities other than those incident to its
formation and capitalization and the other transactions contemplated by the
Merger Agreement. The mailing address of the principal executive offices of
Holdings (UK) is c/o GRS Holding Company Limited, Mitre House, 160 Aldersgate
Street, London, England EC1A 4DD (telephone number 44-171-606-9000).
GRSH. GRSH is a private limited company registered in England which,
through its principal subsidiary, is engaged in the rail leasing business. All
of the outstanding capital stock of GRSH is owned
52
<PAGE>
<PAGE>
equally by Nicolas Lethbridge, an employee of Babcock & Brown, and Prideaux &
Associates Limited ('Prideaux'), a London based business advisory company. On a
fully diluted basis NIplc beneficially owns 85% of the capital stock of GRSH,
while Babcock & Brown (UK) Holdings Limited, an affiliate of Babcock & Brown,
beneficially owns 9.5%, and Prideaux and its affiliates, collectively
beneficially own 5.5%, in each case, through instruments convertible into such
capital stock. The mailing address of GRSH's principal executive offices is
Mitre House, 160 Aldersgate Street, London, England EC1A 4DD (telephone number
44-171-606-9000).
NIplc. NIplc, a private limited company registered in England, is a U.K.
based investment bank, principally involved in managing and underwriting
international securities issues, brokering and dealing in securities and
providing investment advice and other services related to its international
securities business. NIplc is a wholly-owned indirect subsidiary of The Nomura
Securities Co., Ltd. ('Nomura'). NIplc currently beneficially owns (through
convertible instruments) approximately 85% of the capital stock of GRSH on a
fully diluted basis. NIplc effectively controls GRSH by means of contractual
rights conferred in connection with its acquisition of such convertible
instruments. The mailing address of NIplc's principal executive offices is
Nomura House, 1 St. Martin's-le-Grand, London, England EC1A 4NP (telephone
number 44-171-236-8811).
Upon consummation of the Merger, it is anticipated that NIplc will receive
from the Surviving Corporation a fee of $8 million (plus reimbursement of
expenses) for negotiating the Merger Agreement and arranging the financing for
the Merger.
Nomura. Nomura, a company organized under Japanese law, was founded in 1925
in Osaka, Japan and is currently Japan's largest securities brokerage house. The
principal activities of Nomura and its subsidiaries include securities
brokerage, trading, investment banking and commercial banking in global
financial markets. Through its subsidiaries and affiliates, Nomura advises its
international clientele on a wide range of financial and strategic matters,
including banking, asset management, leveraged leasing, project finance, real
estate, and mergers and acquisitions. Nomura has sole indirect ownership of
NIplc through Nomura's wholly-owned direct subsidiary, Nomura Europe Holding
plc. The mailing address of Nomura's principal executive offices is 1-9-1,
Nihonbashi, Chuo-ku, Tokyo 103, Japan (telephone number 03-3211-1811).
Except as set forth in this Information Statement, (i) neither Merger Sub,
Holdings, Holdings (UK) GRSH, NIplc nor Nomura, nor, to the best knowledge of
Merger Sub, any executive officer or director of either Merger Sub or Nomura
beneficially owns or has a right to acquire any shares of Company Common Stock
or any other equity securities of the Company; (ii) neither Merger Sub,
Holdings, Holdings (UK), GRSH, NIplc nor Nomura, nor, to the best knowledge of
Merger Sub, any of the other persons referred to in clause (i) above has
effected any transaction in the shares of Company Common Stock or any other
equity securities of the Company during the past 60 days; (iii) neither Merger
Sub, Holdings, Holdings (UK), GRSH, NIplc nor Nomura, nor, to the best knowledge
of Merger Sub, any of the other persons referred to in clause (i) above has any
contract, arrangement, understanding or relationship with any other person with
respect to any securities of the Company, including, but not limited to, the
transfer or voting thereof, joint ventures, loan or option arrangements, puts or
calls, guarantees of loans, guarantees against loss or the giving or withholding
of proxies, consents or authorizations; (iv) since January 1, 1994, there have
been no transactions which would require reporting under the rules and
regulations of the SEC between Merger Sub, Holdings, Holdings (UK), GRSH, NIplc
or Nomura, or, to the best knowledge of Merger Sub, any of the other persons
referred to in clause (i) above, on the one hand, and the Company or any of its
executive officers, directors or affiliates, on the other hand; and (v) since
January 1, 1994, there have been no contacts, negotiations or transactions
between Merger Sub, Holdings, Holdings (UK), GRSH, NIplc or Nomura or any of
their respective subsidiaries or, to the best knowledge of Merger Sub, any of
the other persons referred to in clause (i) above, on the one hand, and the
Company or its subsidiaries or affiliates, on the other hand, concerning a
merger, consolidation or acquisition, tender offer or other acquisition of
securities, an election of directors or a sale or other transfer of a material
amount of assets of the Company.
For information on the directors and executive officers of each of Merger
Sub and Nomura, see Annex F to this Information Statement.
53
<PAGE>
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following tables set forth the information with respect to beneficial
ownership of Company Common Stock as of August 5, 1996 by (i) each person who is
known to be the beneficial owner of more than 5% of the outstanding Company
Common Stock, and (ii) each director and executive officer of the Company and
all directors and executive officers as a group.
(A) SECURITY OWNERSHIP OF BENEFICIAL OWNERS OF MORE THAN 5% OF THE COMPANY'S
VOTING SECURITIES
<TABLE>
<CAPTION>
AMOUNT OF
AND NATURE OF
BENEFICIAL PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP OF CLASS
- ---------------------------------------------------------------------------------------- ------------- --------
<S> <C> <C>
AT&T Capital Holdings, Inc.(1) ......................................................... 34,212,500 72.8%
32 Loockerman Square, Suite L-100
Dover, DE 19901
AT&T Credit Holdings, Inc.(1) .......................................................... 6,037,500 12.8%
32 Loockerman Square, Suite L-100
Dover, DE 19901
</TABLE>
- ------------
(1) Credit Holdings is a direct, wholly-owned subsidiary of Capital Holdings,
which is a direct, wholly-owned subsidiary of AT&T. Accordingly, both AT&T
and Capital Holdings may be deemed the beneficial owner of all 40,250,000
shares of Company Common Stock shown in the table.
------------------------
Except as set forth or incorporated by reference in this Information
Statement, none of the Company, AT&T or Capital Holdings, or to the best
knowledge of the Company any executive officer or director of the Company or
AT&T: (i) beneficially owns or has a right to acquire any shares of Company
Common Stock; (ii) has effected any transaction in shares of Company Common
Stock during the 60 days immediately preceding the date of this Information
Statement; or (iii) has any contract, arrangement, understanding or relationship
in connection with the Merger with any other person with respect to any
securities of the Company.
(B) SECURITY OWNERSHIP OF DIRECTORS, NOMINEES FOR DIRECTOR AND MANAGEMENT
<TABLE>
<CAPTION>
AMOUNT OF
AND NATURE OF
BENEFICIAL PERCENT
NAME OF BENEFICIAL OWNER OWNERSHIP OF CLASS
- ------------------------------------------------------------------------------------- ------------- --------
<S> <C> <C>
John P. Clancey, Director............................................................ 5,566(3) (1)
Edward M. Dwyer, Senior Vice President and Chief Financial Officer................... 83,108(3) (1)
James P. Kelly, Director............................................................. 8,647(3) (1)
Gerald M. Lowrie, Director........................................................... 1,000 (1)
William B. Marx, Jr., Director ...................................................... 0 (1)
G. Daniel McCarthy, Senior Vice President, Chief Risk Management Officer, General
Counsel and Secretary.............................................................. 113,177(2)(3) (1)
Richard A. McGinn, Former Director................................................... 0 (1)(4)
Joseph J. Melone, Director........................................................... 5,000(3) (1)
Richard W. Miller, Director.......................................................... 2,000 (1)
Ruth A. Morey, Senior Vice President -- Corporate Information and Resources.......... 105,178(2)(3) (1)
S. Lawrence Prendergast, Director.................................................... 2,000 (1)
Irving H. Rothman, Group President................................................... 159,112(2)(3) (1)
Maureen B. Tart, Director............................................................ 2,000 (1)
Charles D. Van Sickle, Group President............................................... 140,376(2)(3) (1)(4)
Thomas C. Wajnert, Director, Chairman and Chief Executive Officer.................... 372,912(2) (1)
Brooks Walker, Jr., Director......................................................... 12,897(3) (1)
Marilyn J. Wasser, Director.......................................................... 0 (1)
All directors and executive officers (17 persons) as a group, including the above.... 1,012,973(5) (1)
</TABLE>
(footnotes on next page)
54
<PAGE>
<PAGE>
(footnotes from previous page)
(1) Such ownership interests for each individual director and named executive
officer and for all directors and executive officers as a group do not
exceed 1% of the outstanding Company Common Stock.
(2) Pursuant to the Company's Senior Management Share Ownership Policy, as
amended (the 'Ownership Policy'), originally adopted by the Compensation
Committee of the Board on July 23, 1993, as a condition to continued
employment in any of certain senior management positions with the Company,
each of the named executive officers, as well as other members of the
Company's senior management team (i) were required to purchase the full
number of shares offered to such executives under the LSPP and/or the LTIP
and (ii) are prohibited from making any 'Disqualifying Disposition' of
'Eligible Shares' during the term of the Ownership Policy (i.e., until
August 31, 2000). 'Disqualifying Disposition' means any sale or other
disposition of any Eligible Shares unless, immediately following such
disposition, the executive continues to own either (a) Eligible Shares with
a market value at least equal to the aggregate purchase price paid by such
executive for the shares purchased by him or her under the LSPP and/or LTIP
or (b) a number of Eligible Shares at least equal to the number of such
shares purchased under the LSPP and/or LTIP (adjusted for any stock
dividends, stock splits or other combinations or subdivisions of Company
Common Stock subsequent to the applicable purchase date). 'Eligible Shares'
means all shares of Company Common Stock owned by the executive from time to
time, including (a) any shares purchased under the LSPP and/or the LTIP, (b)
any shares that have been issued upon the exercise of options granted under
the LSPP and/or the LTIP or otherwise granted by the Company to such
executive, (c) any restricted stock awarded to the executive and (d) any
shares purchased in the market, but Eligible Shares do not include (i) any
shares subject to options that have not yet been exercised or (ii) any
performance shares awarded that have not been fully earned. Under the LSPP
and/or the LTIP, the named executive officers were required to purchase (and
did purchase) the following number of shares of the Company's Common Stock:
Mr. Wajnert, 124,558 shares; Mr. Rothman, 53,372 shares; Mr. Van Sickle,
47,093 shares; Mr. McCarthy, 42,697 shares; and Ms. Morey, 38,930 shares.
Such purchases were funded in large part by loans made by the Company to the
named executive officers. The Ownership Policy terminates upon consummation
of a transaction constituting a Private Sale, including the Merger.
(3) Includes shares obtainable upon exercise of Options which are or will become
exercisable prior to November 1, 1996 as follows: Mr. Clancey -- 3,000; Mr.
Dwyer -- 50,508; Mr. Kelly -- 7,897; Mr. McCarthy -- 70,480; Mr.
Melone -- 3,000; Ms. Morey -- 65,248; Mr. Rothman -- 105,740; Mr. Van
Sickle -- 93,283; Mr. Walker -- 7,897; and Mr. Wajnert -- 248,254.
(4) Mr. McGinn elected not to stand for re-election at the Annual Stockholders'
Meeting held on April 19, 1996. Effective April 19, 1996, Ms. Tart was
elected to the Board.
(5) Includes beneficial ownership of 655,307 shares that may be acquired within
60 days pursuant to Options awarded under employee incentive compensation
plans.
For additional information on the directors and executive officers of each
of the Company and AT&T, see Annex E to this Information Statement.
55
<PAGE>
<PAGE>
SELECTED CONSOLIDATED FINANCIAL INFORMATION OF THE COMPANY
The Results of Operations Data, the Balance Sheet Data and the Other Data
shown below at or for the years ended December 31, 1995, 1994, 1993, 1992 and
1991 are derived from the Consolidated Financial Statements of the Company at
such dates or for such periods, which have been audited by Coopers & Lybrand
L.L.P., independent accountants. Such data at or for the six months ended June
30, 1996 and 1995, are derived from unaudited consolidated financial
information. In management's opinion, the Company's unaudited consolidated
financial statements at or for the six months ended June 30, 1996 and 1995,
include all adjustments (consisting of normal recurring adjustments) necessary
for a fair presentation. The results of operations for the six months ended June
30, 1996, are not necessarily indicative of the results for the entire year or
any other interim period.
The Selected Consolidated Financial Information of the Company as presented
below should be read in conjunction with 'Management's Discussion and Analysis
of Financial Condition and Results of Operations' and the Consolidated Financial
Statements and related notes thereto included in the Company's June 30, 1996
Form 10-Q and 1995 Form 10-K, both of which are incorporated herein by
reference.
<TABLE>
<CAPTION>
UNAUDITED SIX
MONTHS ENDED
JUNE 30, YEARS ENDED DECEMBER 31,
-------------------- ------------------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
-------- -------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
Results of Operations
Data:
Total revenues....... $899,884 $744,770 $1,577,035 $1,384,079 $1,359,589 $1,265,526 $1,160,150
Interest expense..... 230,072 194,804 411,040 271,812 236,335 252,545 275,650
Operating and
administrative
expenses........... 248,409 234,987 473,663 427,187 381,515 359,689 298,833
Provision for credit
losses............. 48,536 39,678 86,214 80,888 123,678 111,715 108,635
Income before income
taxes and
cumulative effect
on prior years of
accounting
change............. 120,267 88,842 208,239 173,614 138,040 114,875 82,559
Income before
cumulative effect
on prior years of
accounting change
and impact of tax
rate change........ 74,823 52,994 127,555 100,336 83,911 73,572 54,199
Cumulative effect on
prior years of
accounting
change(1).......... -- -- -- -- (2,914) -- --
Impact of 1993 tax
rate change(1)..... -- -- -- -- (12,401) -- --
Net income(1)........ 74,823 52,994 127,555 100,336 68,596 73,572 54,199
Earnings per
share(1)........... 1.58 1.13 2.70 2.14 1.60 1.83 1.35
</TABLE>
<TABLE>
<CAPTION>
UNAUDITED AT JUNE 30 AT DECEMBER 31,
------------------------- ------------------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
----------- ---------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Total assets......... $10,097,187 $8,741,899 $9,541,259 $8,021,923 $6,409,726 $5,895,429 $5,197,245
Total debt(2)........ 7,491,185 6,226,242 6,928,409 5,556,458 4,262,405 4,089,483 3,594,247
Total
liabilities(2)..... 8,916,912 7,691,106 8,425,134 7,013,705 5,485,283 5,158,808 4,647,979
Total stockholders'
equity............. 1,180,275 1,050,793 1,116,125 1,008,218 924,443 736,621 549,266
</TABLE>
56
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
UNAUDITED AT OR FOR THE
SIX MONTHS ENDED
JUNE 30, AT OR FOR THE YEAR ENDED DECEMBER 31,
------------------------ ------------------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PERCENTAGE AMOUNTS AND RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
Other Data:
Return on average
equity(3)(5)....... 13.0% 10.3% 12.1% 10.5% 8.5% 11.4% 10.7%
Return on average
assets(4)(5)....... 1.5% 1.3% 1.5% 1.4% 1.1% 1.3% 1.1%
Portfolio Assets of
the Company........ $9,777,855 $8,515,795 $9,328,623 $7,661,226 $6,236,624 $5,724,702 $5,050,797
Allowance for credit
losses............. 238,553 202,661 223,220 176,428 159,819 123,961 93,967
Net Portfolio Assets
of the Company..... 9,539,302 8,313,134 9,105,403 7,484,798 6,076,805 5,600,741 4,956,830
Assets of others
managed by the
Company............ 2,159,923 2,566,180 2,214,502 2,659,526 2,795,663 1,374,354 649,014
Volume of equipment
financed(6)........ 2,503,135 1,979,706 4,567,000 4,251,000 3,467,000 3,253,000 2,453,000
Ratio of earnings to
fixed charges(7)... 1.51x 1.45x 1.50x 1.62x 1.57x 1.44x 1.29x
Ratio of total debt
to stockholders'
equity(8).......... 6.35x 5.95x 6.22x 5.51x 4.61x 5.55x 6.54x
Ratio of allowance
for credit losses
to net
charge-offs(9)..... 4.46x 3.94x 4.77x 3.18x 2.71x 1.58x 1.15x
Ratio of net
charge-offs to
Portfolio
Assets(9).......... 0.55% 0.60% 0.50% 0.73% 0.95% 1.37% 1.62%
Ratio of allowance
for credit losses
to Portfolio
Assets............. 2.44% 2.38% 2.39% 2.30% 2.56% 2.17% 1.86%
Ratio of operating
and administrative
expenses to
period-end total
assets(10)......... 4.92% 5.38% 4.96% 5.33% 5.95% 6.10% 5.75%
</TABLE>
- ------------
(1) Net income and earnings per share for 1993 were adversely impacted by the
federal tax rate increase to 35% and a cumulative effect on prior years of
accounting change. See Note 10 to the Consolidated Financial Statements
included in the Company's 1995 Form 10-K which is incorporated herein by
reference. Earnings per share without these charges for 1993 would have
been $1.95 per share.
(2) Total debt does not include, and total liabilities includes, certain
interest-free loans from AT&T to the Company under certain tax agreements,
in aggregate outstanding principal amounts of $248.9 million, $248.9
million, $248.9 million, $214.1 million, $188.6 million, $193.1 million and
$206.6 million at June 30, 1996, June 30, 1995, December 31, 1995, 1994,
1993, 1992 and 1991, respectively. At the Effective Time, the Company will
no longer receive such interest-free loans and will be required to repay
such loans at the Effective Time. See note 8 below.
(3) Net income (annualized in the case of the six months ended June 30, 1996
and 1995) divided by average total stockholders' equity.
(4) Net income (annualized in the case of the six months ended June 30, 1996
and 1995) divided by average total assets.
(5) In 1993 the Company's adjusted return on average equity and return on
average assets, defined as income before cumulative effect on prior years
of accounting change and impact of tax rate change as a percentage of
average equity and average assets, respectively, was 10.3% and 1.4%,
respectively.
(footnotes continued on next page)
57
<PAGE>
<PAGE>
(footnotes continued from previous page)
(6) Total principal amount of loans and total cost of equipment associated with
finance and lease transactions recorded by the Company and the increase, if
any, in outstanding inventory financing and asset-based lending
transactions.
(7) Earnings before income taxes and cumulative effect on prior years of
accounting change plus the sum of interest on indebtedness and the portion
of rentals representative of the interest factor divided by the sum of
interest on indebtedness and the portion of rentals representative of the
interest factor. A portion of the Company's indebtedness to AT&T does not
bear interest. See note (2) above.
(8) Total debt does not include certain interest-free loans from AT&T to the
Company under certain tax agreements. If such loans were so included, the
ratio of total debt to stockholders' equity would have been 6.56x, 6.16x,
6.45x, 5.72x, 4.81x, 5.81x and 6.92x at June 30, 1996, June 30, 1995,
December 31, 1995, 1994, 1993, 1992 and 1991, respectively. See note 2
above.
(9) Net charge-offs at June 30, 1996 and 1995 are calculated based on the 12
months then ended.
(10) Operating and administrative expenses (annualized for the six-month periods
ended June 30, 1996 and June 30, 1995) divided by period-end total assets.
58
<PAGE>
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the information and reporting requirements of the
Exchange Act, and in accordance therewith files periodic reports, proxy
statements and other documents and information with the SEC. The Company's
officers, directors and principal stockholders are also presently subject to
filing requirements, as well as certain restrictions, imposed under the Exchange
Act. Such reports, proxy statements and other documents and information may be
inspected and copied at the public reference facilities maintained by the SEC at
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and
at the regional offices of the SEC located at 7 World Trade Center, 13th Floor,
New York, New York 10048 and Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Copies of such material can be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549 at prescribed rates. In addition, copies of
such material can be obtained from the Commission's Web Site
(http://www.sec.gov). The Company Common Stock is traded on the NYSE. Such
reports, proxy statements and other information concerning the Company are also
available for inspection at the offices of the New York Stock Exchange, 20 Broad
Street, New York, New York 10005.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed by the Company under the Exchange
Act with the SEC (File No.: 1-11237) are incorporated herein by reference:
(1) The Company's Annual Report on Form 10-K for the year ended
December 31, 1995;
(2) The Company's Quarterly Reports on Form 10-Q for the quarterly
periods ended March 31, 1996 and June 30, 1996;
(3) The Company's Proxy Statement dated March 19, 1996; and
(4) The Company's Current Reports on Form 8-K dated April 12, 1996,
April 30, 1996, June 6, 1996 and August 20, 1996.
The Company will provide without charge to each person, including any
beneficial owner of such person, to whom a copy of this Information Statement
has been delivered, on written or oral request, a copy of any and all of the
documents referred to above that have been or may be incorporated by reference
herein other than exhibits to such documents (unless such exhibits are
specifically incorporated by reference herein). Requests for such copies should
be directed to: AT&T Capital Corporation, Attention: Investor Relations
Department, 44 Whippany Road, Morristown, New Jersey 07962 (telephone number
201-397-4444).
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Information Statement
shall be deemed to be incorporated by reference herein and to be a part hereof
from the date of filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Information Statement 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 such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Information Statement.
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SCHEDULE 13E-3 STATEMENT
The Company and Merger Sub have filed with the SEC a Transaction Statement
on Schedule 13E-3 (as amended) pursuant to Rule 13e-3 under the Exchange Act,
furnishing certain additional information with respect to the Merger. Such
statement and amendments thereto may be examined and copies may be obtained at
the places and in the manner set forth above under 'Available Information'
(except that they will not be available in the regional offices of the SEC).
Merger Sub does not concede as a result of providing such information or
otherwise complying with Rule 13e-3 that it (or any of its affiliates) are
affiliates of the Company or subject to the requirements of such Rule.
By Order of the Board of Directors
G. DANIEL MCCARTHY
G. DANIEL MCCARTHY
Senior Vice President, General
Counsel, Secretary and Chief
Risk Management Officer
August 30, 1996
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ANNEX A
AGREEMENT AND PLAN OF MERGER
AMONG
AT&T CAPITAL CORPORATION,
AT&T CORP.,
HERCULES LIMITED
AND
ANTIGUA ACQUISITION CORPORATION
DATED AS OF JUNE 5, 1996
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TABLE OF CONTENTS
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ARTICLE I
The Merger; Closing; Effective Time................................................................ A-5
1.1. The Merger......................................................................................... A-5
1.2. Closing............................................................................................ A-5
1.3. Effective Time..................................................................................... A-5
ARTICLE II
Certificate of Incorporation and By-Laws of the Surviving Corporation.............................. A-6
2.1. The Certificate of Incorporation................................................................... A-6
2.2. The By-Laws........................................................................................ A-6
ARTICLE III
Officers and Directors of the Surviving Corporation................................................ A-6
3.1. Directors.......................................................................................... A-6
3.2. Officers........................................................................................... A-6
ARTICLE IV
Effect of the Merger on Capital Stock; Exchange of Certificates.................................... A-6
4.1. Effect on Capital Stock............................................................................ A-6
(a) Merger Consideration......................................................................... A-6
(b) Options and Restricted Shares................................................................ A-6
(c) Cancellation of Shares....................................................................... A-7
(d) Merger Sub................................................................................... A-7
4.2. Payment for Shares................................................................................. A-7
4.3. Dissenters' Rights................................................................................. A-8
4.4. Transfer of Shares After the Effective Time........................................................ A-8
ARTICLE V
Representations and Warranties..................................................................... A-8
5.1. Representations and Warranties of the Company...................................................... A-8
(a) Organization, Good Standing and Qualification................................................ A-8
(b) Capital Structure............................................................................ A-9
(c) Corporate Authority; Approval and Fairness................................................... A-9
(d) Governmental Filings; No Violations.......................................................... A-10
(e) Company Reports; Financial Statements........................................................ A-10
(f) Absence of Certain Changes................................................................... A-11
(g) Litigation and Liabilities................................................................... A-11
(h) Employee Benefits............................................................................ A-12
(i) Compliance with Laws; Licenses............................................................... A-13
(j) Receivables.................................................................................. A-14
(k) Material Contracts........................................................................... A-14
(l) Takeover Statutes............................................................................ A-15
(m) Environmental Matters........................................................................ A-15
(n) Taxes........................................................................................ A-15
(o) Labor Matters................................................................................ A-16
(p) Intellectual Property........................................................................ A-16
(q) Insurance.................................................................................... A-17
(r) AT&T Agreements; Transactions with Affiliates................................................ A-17
(s) Brokers and Finders.......................................................................... A-18
5.2. Representations and Warranties of AT&T............................................................. A-18
(a) Organization, Good Standing and Qualification................................................ A-18
(b) Share Ownership.............................................................................. A-18
(c) Corporate Authority; Approval and Fairness................................................... A-18
(d) Governmental Filings; No Violations.......................................................... A-18
(e) AT&T Agreements.............................................................................. A-19
(f) Brokers and Finders.......................................................................... A-19
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(g) Employee Benefits............................................................................ A-19
5.3. Representations and Warranties of Parent and Merger Sub............................................ A-19
(a) Organization, Good Standing and Qualification................................................ A-19
(b) Corporate Authority; Board and Stockholder Approvals......................................... A-19
(c) Governmental Filings; No Violations.......................................................... A-20
(d) Available Funds.............................................................................. A-20
(e) Brokers and Finders.......................................................................... A-20
(f) No Prior Activities.......................................................................... A-20
ARTICLE VI
Covenants.......................................................................................... A-20
6.1. Interim Operations................................................................................. A-20
6.2. Acquisition Proposals.............................................................................. A-22
6.3. Information Supplied............................................................................... A-22
6.4. Filings; Other Actions; Notification............................................................... A-23
6.5. Access............................................................................................. A-24
6.6. AT&T Operating Agreement and License Agreement..................................................... A-24
6.7. Publicity.......................................................................................... A-25
6.8. Employee Benefit Covenants......................................................................... A-25
(a) In General................................................................................... A-25
(b) Change in Control............................................................................ A-25
(c) Executive Benefit Plan....................................................................... A-25
(d) Equity-Based Plans........................................................................... A-26
(e) Share Performance Incentive Plan............................................................. A-26
(f) Annual Incentive Plan........................................................................ A-26
(g) Other Plans.................................................................................. A-26
(h) Credited Service............................................................................. A-26
(i) Plan Withdrawals............................................................................. A-26
(j) Survival..................................................................................... A-26
(k) Intended Beneficiaries....................................................................... A-26
6.9. Expenses........................................................................................... A-27
6.10. Indemnification; Directors' and Officers' Insurance................................................ A-27
6.11. Takeover Statute................................................................................... A-28
6.12. Reasonable Best Efforts and Cooperation............................................................ A-28
6.13. Tax Matters........................................................................................ A-28
(a) Section 338(h)(10) Election.................................................................. A-28
(b) Liability for Taxes and Related Matters...................................................... A-29
(c) Tax Returns.................................................................................. A-30
(d) Termination of Tax Allocation Agreements..................................................... A-30
(e) 1995 and 1996 Taxes.......................................................................... A-30
(f) Assistance and Cooperation................................................................... A-31
(g) Contests; Payment Procedure.................................................................. A-31
(h) Survival..................................................................................... A-31
6.14. No Solicitation of Employees....................................................................... A-31
6.15. Transitional Services.............................................................................. A-31
6.16. Existing Financing Arrangements.................................................................... A-31
6.17. Funding Parent..................................................................................... A-31
ARTICLE VII
Conditions......................................................................................... A-32
7.1. Conditions to Each Party's Obligation to Effect the Merger......................................... A-32
(a) Regulatory Consents and Orders............................................................... A-32
7.2. Conditions to Obligation of Parent................................................................. A-32
(a) Representations and Warranties............................................................... A-32
(b) Performance of Obligations of the Company and AT&T........................................... A-32
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(c) Consents Under Agreements and Licenses....................................................... A-32
(d) Resignations................................................................................. A-32
(e) Transitional Services Agreement.............................................................. A-32
7.3. Conditions to Obligation of the Company and AT&T................................................... A-33
(a) Representations and Warranties............................................................... A-33
(b) Performance of Obligations of Parent and Merger Sub.......................................... A-33
(c) Consents Under Agreements.................................................................... A-33
ARTICLE VIII
Termination........................................................................................ A-33
8.1. Termination by Mutual Consent...................................................................... A-33
8.2. Termination by Parent, AT&T or the Company......................................................... A-33
8.3. Termination by the Company or AT&T................................................................. A-33
8.4. Termination by Parent.............................................................................. A-33
8.5. Effect of Termination and Abandonment.............................................................. A-33
ARTICLE IX
Miscellaneous and General.......................................................................... A-34
9.1. Survival........................................................................................... A-34
9.2. Modification or Amendment.......................................................................... A-34
9.3. Waiver of Conditions............................................................................... A-34
9.4. Counterparts....................................................................................... A-34
9.5. GOVERNING LAW AND VENUE; WAIVER OF JURY TRIAL...................................................... A-34
9.6. Notices............................................................................................ A-35
9.7. Entire Agreement................................................................................... A-36
9.8. No Third Party Beneficiaries....................................................................... A-36
9.9. Obligations of Parent and of the Company; Limitations on Liability................................. A-36
9.10. Severability....................................................................................... A-36
9.11. Interpretation..................................................................................... A-36
9.12. Assignment......................................................................................... A-37
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (hereinafter called this 'Agreement'), dated
as of June 5, 1996, among AT&T Capital Corporation, a Delaware corporation (the
'Company'), AT&T Corp., a New York corporation ('AT&T'), Hercules Limited, a
Cayman Island corporation ('Parent'), and Antigua Acquisition Corporation, a
Delaware corporation and a wholly owned subsidiary of Parent ('Merger Sub,' the
Company and Merger Sub sometimes being hereinafter collectively referred to as
the 'Constituent Corporations').
RECITALS
WHEREAS, the respective boards of directors of each of the Company, Parent
and Merger Sub have approved the merger of Merger Sub with and into the Company
(the 'Merger') and approved the Merger upon the terms and subject to the
conditions set forth in this Agreement;
WHEREAS, the Company's board of directors, upon the recommendation of the
special committee of the Company's board of directors, has approved this
Agreement and submitted this Agreement to AT&T, as the indirect owner of
approximately 86% of the currently outstanding shares of voting common stock of
the Company (the 'AT&T Shares'), for its consent, and AT&T has caused to be
executed a written stockholder consent (the 'Stockholders' Consent') pursuant to
Section 228 of the DGCL (as defined below) approving this Agreement;
WHEREAS, the Company, AT&T, Parent and Merger Sub desire to make certain
representations, warranties, covenants and agreements in connection with this
Agreement.
NOW, THEREFORE, in consideration of the premises, and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto agree as follows:
ARTICLE I
THE MERGER; CLOSING; EFFECTIVE TIME
1.1. The Merger. Upon the terms and subject to the conditions set
forth in this Agreement, at the Effective Time (as defined in Section 1.3)
Merger Sub shall be merged with and into the Company and the separate
corporate existence of Merger Sub shall thereupon cease. The Company shall
be the surviving corporation in the Merger (sometimes hereinafter referred
to as the 'Surviving Corporation') and shall continue to be governed by the
laws of the State of Delaware, and the separate corporate existence of the
Company with all its rights, privileges, immunities, powers and franchises
shall continue unaffected by the Merger, except as set forth in Articles II
and III hereof. The Merger shall have the effects specified in the Delaware
General Corporation Law, as amended (the 'DGCL').
1.2. Closing. The closing of the Merger (the 'Closing') shall take
place (i) at the offices of Sullivan & Cromwell, 125 Broad Street, New
York, New York at 9:00 A.M. on the later of (A) September 17, 1996 and (B)
the first business day on which the last to be fulfilled or waived of the
conditions set forth in Article VII hereof (other than those conditions
that by their nature are to be satisfied at the Closing, but subject to the
fulfillment or waiver of those conditions) shall be satisfied or waived in
accordance with this Agreement or (ii) at such other place and time and/or
on such other date as the Company and Parent may agree in writing (the
'Closing Date').
1.3. Effective Time. As soon as practicable following the Closing, the
Company and Parent will cause a Certificate of Merger (the 'Delaware
Certificate of Merger') to be executed, acknowledged and filed with the
Secretary of State of Delaware as provided in Section 251 of the DGCL. The
Merger shall become effective at the time when the Delaware Certificate of
Merger has been duly filed with the Secretary of State of Delaware (the
'Effective Time').
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ARTICLE II
CERTIFICATE OF INCORPORATION AND BY-LAWS
OF THE SURVIVING CORPORATION
2.1. The Certificate of Incorporation. The certificate of incorporation of
Merger Sub as in effect immediately prior to the Effective Time shall be the
certificate of incorporation of the Surviving Corporation (the 'Charter'), until
duly amended as provided therein or by applicable law, provided that Article I
of the certificate of incorporation of the Surviving Corporation shall be
amended in its entirety to read as follows: 'The name of the corporation is AT&T
Capital Corporation.'
2.2. The By-Laws. The by-laws of Merger Sub in effect at the Effective Time
shall be the by-laws of the Surviving Corporation (the 'By-Laws'), until
thereafter amended as provided therein or by applicable law.
ARTICLE III
OFFICERS AND DIRECTORS OF THE SURVIVING CORPORATION
3.1. Directors. The directors of Merger Sub at the Effective Time shall,
from and after the Effective Time, be the directors of the Surviving Corporation
until their successors have been duly elected or appointed and qualified or
until their earlier death, resignation or removal in accordance with the Charter
and By-Laws.
3.2. Officers. Except as provided in Schedule 3.2, the officers of the
Company at the Effective Time shall, from and after the Effective Time, be the
officers of the Surviving Corporation until their successors have been duly
elected or appointed and qualified or until their earlier death, resignation or
removal in accordance with the Charter and By-Laws.
ARTICLE IV
EFFECT OF THE MERGER ON CAPITAL STOCK; EXCHANGE OF CERTIFICATES
4.1. Effect on Capital Stock. At the Effective Time, as a result of the
Merger and without any action on the part of the holder of any capital stock of
the Company:
(a) Merger Consideration. Each share of the Common Stock, par value
$.01 per share, of the Company (the 'Shares') issued and outstanding at the
Effective Time (other than Shares owned by Parent, Merger Sub or any other
direct or indirect wholly owned subsidiary of Parent (collectively, the
'Parent Companies') or Shares that are owned by the Company or any direct
or indirect wholly owned subsidiary of the Company or Shares ('Dissenting
Shares') that are held by stockholders ('Dissenting Stockholders') properly
exercising appraisal rights pursuant to Section 262 of the DGCL
(collectively, 'Excluded Shares')) shall be converted into the right to
receive, without interest, an amount in cash equal to $45.00 (the 'Merger
Consideration'). At the Effective Time, all Shares shall no longer be
outstanding and shall be cancelled and retired and shall cease to exist,
and each certificate (a 'Certificate') representing any of such Shares
(other than Excluded Shares) shall thereafter represent only the right to
the Merger Consideration for such Shares upon the surrender of such
Certificate in accordance with Section 4.2.
(b) Options and Restricted Shares. The Parent and Surviving
Corporation, with the cooperation of the Company, shall take all necessary
action to provide that at the Effective Time, each option or right to
acquire Shares (each, a 'Company Option') (other than those Company Options
('Roll-over Options') held by certain members of management of the Company
who enter into agreements with Parent prior to the Effective Time pursuant
to which such members agree to roll-over such Roll-over Options for options
or rights to acquire shares of Surviving Corporation), shall, without any
action on the part of the holder thereof, and whether or not then
exercisable, be converted into the right to receive an amount in cash (the
'Option Amount'), if any, equal to the product of (x) (1) the excess of the
Merger Consideration over (2) the current exercise price per Share of such
Company Option and (y) the number of Shares subject to such Company Option,
payable to the holder thereof at the Effective Time, and such Company
Option will be cancelled and retired and shall cease to exist; provided
further, that the Company shall be entitled to
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withhold, in accordance with applicable law, from any such cash payment any
amounts required to be withheld under applicable law. If and to the extent
required by the terms of the plans governing such Company Options or
pursuant to the terms of any Company Option granted thereunder, the Company
shall use all reasonable efforts to obtain the consent of each holder of
outstanding Company Options to the foregoing treatment of such Company
Options and to take any other action reasonably necessary to effectuate the
foregoing provisions. Any cash payment received pursuant to Section 4.2
with respect to shares of restricted Common Stock ('Restricted Shares')
held under the Company's 1993 Long-Term Incentive Plan (the '1993 LTIP')
that have not been purchased by the holder shall not be subject to any
restrictions following the Effective Time. Any cash payment received
pursuant to Section 4.2 with respect to purchased Restricted Shares held
under the 1993 LTIP or under the Company's 1993 Leveraged Stock Purchase
Plan (the '1993 LSPP') shall first be applied to payment of any outstanding
loan balances for such Restricted Shares including accrued interest and the
Company shall withhold and deduct an amount equal to any such loan balance
and accrued interest from the amount to be paid to the respective holder of
Restricted Shares, and any remaining cash (after payment of any such loan
balances) shall not be subject to any restrictions following the Effective
Time; provided, however, that with respect to Restricted Shares held under
the 1993 LSPP by executive officers of the Company subject to Section 16
('Section 16') of the Securities Exchange Act of 1934, as amended (the
'Exchange Act'), to the extent restrictions must remain on such cash
payment to avoid short-swing liability under Section 16, the Parent shall
cause the Surviving Corporation to hold such payments with respect to such
Restricted Shares pursuant to the provisions of the 1993 LSPP until such
restrictions lapse.
(c) Cancellation of Shares. At the Effective Time, each Share issued
and outstanding at the Effective Time and owned by any of the Parent
Companies, or owned by the Company or by any direct or indirect wholly
owned subsidiary of the Company, shall, by virtue of the Merger and without
any action on the part of the holder thereof, cease to be outstanding, be
cancelled and retired without payment of any consideration therefor and
shall cease to exist.
(d) Merger Sub. At the Effective Time, each share of Common Stock, par
value $.01 per share, of Merger Sub issued and outstanding immediately
prior to the Effective Time shall be converted into one share of common
stock of the Surviving Corporation.
4.2. Payment for Shares. Parent shall make available or cause to be made
available to the paying agent appointed by Parent with the Company's prior
approval (the 'Paying Agent') amounts sufficient in the aggregate to provide all
funds necessary for the Paying Agent to make payments pursuant to Section 4.1(a)
hereof to holders of Shares (other than Excluded Shares) issued and outstanding
immediately prior to the Effective Time. Promptly after the Effective Time, the
Surviving Corporation shall cause to be mailed to each person who was, at the
Effective Time, a holder of record (other than any of the Parent Companies) of
issued and outstanding Shares a form (mutually agreed to by Parent and the
Company) of letter of transmittal and instructions for use in effecting the
surrender of the Certificates which, immediately prior to the Effective Time,
represented any of such Shares in exchange for payment therefor. Upon surrender
to the Paying Agent of such Certificates for cancellation, together with such
letter of transmittal, duly executed and completed in accordance with the
instructions thereto, the Surviving Corporation shall promptly cause to be paid
to the persons entitled thereto a check in the amount to which such persons are
entitled, after giving effect to any withholdings required under Section 3406 of
the Internal Revenue Code of 1986, as amended (the 'Code') or any other
provisions of state, local or foreign tax law. To the extent that amounts are so
withheld by Parent or the Paying Agent, such withheld amounts shall be treated
for all purposes of this Agreement as having been paid to the holder of Shares
with respect to whom such deduction and withholding was made by Parent or the
Paying Agent. No interest will be paid or will accrue on the amount payable upon
the surrender of any such Certificate. Pending such payments, the Paying Agent
shall invest the funds made available to it in U.S. government securities as
directed by Parent, and any interest or other income resulting from such
investments shall be paid to Parent. If payment is to be made to a person other
than the registered holder of the Certificate surrendered, it shall be a
condition of such payment that the Certificate so surrendered shall be properly
endorsed or otherwise in proper form for transfer and that the person requesting
such payment shall pay any transfer or other taxes required by reason of the
payment to a
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person other than the registered holder of the Certificate surrendered or
establish to the satisfaction of the Surviving Corporation or the Paying Agent
that such tax has been paid or is not applicable. One hundred and eighty days
following the Effective Time, the Surviving Corporation shall be entitled to
cause the Paying Agent to deliver to it any funds (including any interest
received with respect thereto) made available to the Paying Agent which have not
been disbursed to holders of Certificates formerly representing Shares
outstanding on the Effective Time, and thereafter such holders shall be entitled
to look to the Surviving Corporation only as general creditors thereof with
respect to the cash payable upon due surrender of their certificates.
Notwithstanding the foregoing, neither the Paying Agent nor any party hereto
shall be liable to any holder of Certificates formerly representing Shares for
any amount paid to a public official pursuant to any applicable abandoned
property, escheat or similar law. Parent or the Surviving Corporation shall pay
all charges and expenses, including those of the Paying Agent, in connection
with the exchange of cash for Shares.
4.3. Dissenters' Rights. If any Dissenting Stockholder shall be entitled to
be paid the 'fair value' of his or her Shares, as provided in Section 262 of the
DGCL, the Company shall give Parent prompt notice thereof (and shall also give
Parent prompt notice of any withdrawals of such demands) and Parent shall have
the right to direct all negotiations and proceedings with respect to any such
demands. Neither the Company nor the Surviving Corporation shall, except with
the prior written consent of Parent, voluntarily make any payment with respect
to, or settle or offer to settle, any such demand for payment. If any Dissenting
Stockholder shall fail to perfect or shall have effectively withdrawn or lost
the right to dissent, the Shares held by such Dissenting Stockholder shall
thereupon be treated as though such Shares had been converted into the Merger
Consideration pursuant to Section 4.1.
4.4. Transfer of Shares After the Effective Time. No transfers of Shares
shall be made on the stock transfer books of the Surviving Corporation at or
after the Effective Time.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.1. Representations and Warranties of the Company. The Company hereby
represents and warrants to Parent and Merger Sub that, except as expressly set
forth in the disclosure letter delivered to Parent by the Company on or prior to
entering into this Agreement (the 'Company Disclosure Letter'):
(a) Organization, Good Standing and Qualification. Each of the Company
and its Material Subsidiaries (as defined below) is a corporation duly
organized, validly existing and in good standing under the laws of its
respective jurisdiction of organization and has all requisite corporate or
similar power and authority to own and operate its properties and assets
and to carry on its business as presently conducted and is qualified to do
business and is in good standing as a foreign corporation in each
jurisdiction where the ownership or operation of its properties or conduct
of its business requires such qualification, except where the failure to be
so qualified or in good standing, when taken together with all other such
failures, would not reasonably be expected to have a Company Material
Adverse Effect (as defined below). The Company has made available to Parent
a complete and correct copy of the Company's and its Subsidiaries'
certificates of incorporation and by-laws, each as amended to date. The
Company's and its Subsidiaries' certificates of incorporation and by-laws
so delivered are in full force and effect, and neither the Company nor any
of its Subsidiaries is in default or violation of any provisions of its
respective certificate of incorporation or by-laws. The Company Disclosure
Letter contains a correct and complete list of each jurisdiction where the
Company and each of its Subsidiaries is organized and qualified to do
business. The only Subsidiaries of the Company are those set forth in the
Company Disclosure Letter. Except as set forth in the Company Disclosure
Letter, and except for securities acquired in the ordinary course of
business, including in connection with the realization on collateral
positions and the acquisition of securities as part of any financing
transaction, neither the Company nor any of its Subsidiaries owns less than
100% of the outstanding voting securities or other equity interests of any
corporation, joint venture or other entity (other than investments in
marketable securities of any person, none of which exceed 5% of the
outstanding capital stock or other equity interests of such person).
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As used in this Agreement, (i) the term 'Subsidiary' means, with
respect to a party, any entity, whether incorporated or unincorporated, of
which at least a majority of the securities or ownership interests having
by their terms ordinary voting power to elect a majority of the board of
directors or other persons performing similar functions is directly or
indirectly owned or controlled by such party or by one or more of its
respective Subsidiaries or by such party and any one or more of its
respective Subsidiaries; (ii) the term 'Material Subsidiary' means AT&T
Commercial Finance Corporation, AT&T Capital Leasing Services, Inc., AT&T
Credit Corporation, AT&T Systems Leasing Corporation, AT&T Capital Canada,
Inc., NCR Credit Corp., AT&T Capital Limited and The Capita Corporation
Hong Kong Limited; and (iii) the term 'Company Material Adverse Effect'
means a material adverse effect on the financial condition, business or
results of operations of the Company and its Subsidiaries taken as a whole;
provided, however, that any such effect resulting from any change prior to
the Effective Time (i) in any law, rule, or regulation or generally
accepted accounting principles or interpretations thereof that applies
generally to companies operating in the same industries as the Company and
(ii) in general economic or business conditions in the industries in which
the Company operates, shall not be considered when determining if a Company
Material Adverse Effect has occurred.
(b) Capital Structure. The authorized capital stock of the Company
consists of 100,000,000 Shares, of which 46,988,695 Shares were outstanding
as of the close of business on May 28, 1996, and 10,000,000 shares of
Preferred Stock, par $.01 value per share (the 'Preferred Shares'), of
which none were outstanding as of the close of business on May 28, 1996.
All of the outstanding Shares have been duly authorized and are validly
issued, fully paid and nonassessable. The Company has no Shares or
Preferred Shares reserved for issuance. As of April 30, 1996, there were
2,264,246 Shares subject to outstanding Company Options. Since May 28,
1996, no Shares have been issued except issuance of Shares upon the
exercise of Company Options referred to herein, and since April 30, 1996 no
Company Options have been authorized, issued or granted. The Company
Disclosure Letter contains a correct and complete list of each outstanding
Company Option, including the holder, date of grant, exercise price and
number of Shares subject thereto. Each of the outstanding shares of capital
stock or other equity securities of each of the Company's Subsidiaries is
duly authorized, validly issued, fully paid and nonassessable and, except
for directors' qualifying shares, owned by the Company or a direct or
indirect wholly owned subsidiary of the Company, free and clear of any
lien, pledge, security interest, claim or other encumbrance (each, a
'Lien'). Except as set forth above, there are no preemptive or other
outstanding rights, options, warrants, conversion rights, stock
appreciation rights, redemption rights, repurchase rights, agreements,
arrangements or commitments to issue or sell any shares of capital stock or
other equity securities of the Company or any of its Subsidiaries or any
securities or obligations convertible or exchangeable into or exercisable
for, or giving any person a right to subscribe for or acquire, any equity
securities of the Company or any of its Subsidiaries, and no securities or
obligations evidencing such rights are authorized, issued or outstanding.
The Company does not have outstanding any bonds, debentures, notes or other
obligations the holders of which have the right to vote (or which are
convertible into or exercisable for securities having the right to vote)
with the stockholders of the Company on any matter ('Voting Debt').
(c) Corporate Authority; Approval and Fairness. (i) The Company has
all requisite corporate power and authority and has taken all corporate
action necessary in order to execute, deliver and perform its obligations
under this Agreement and to consummate the Merger and the other
transactions contemplated by this Agreement. This Agreement is a valid and
binding agreement of the Company enforceable against the Company in
accordance with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general
equity principles (the 'Bankruptcy and Equity Exception').
(ii) The special committee of the board of directors of the Company
and the board of directors of the Company (A) have approved this Agreement
(unanimously in the case of the special committee and, in the case of the
board of directors, by the unanimous vote of all directors present and
voting) and the Merger and the other transactions contemplated hereby and
(B) have received the opinion of Goldman, Sachs & Co., dated the date of
this Agreement, to the effect that the
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consideration to be received by the holders of the Shares in the Merger is
fair to such holders (other than AT&T and its 'Affiliates' (as defined in
Rule 12b-2 under the Exchange Act)), a copy of which opinion has been
delivered to Parent.
(iii) Subsidiaries of AT&T, as the majority stockholders of the
Company, have approved, by delivering the Stockholders' Consent, this
Agreement and no further action by the stockholders of the Company is
necessary to give effect to such approval.
(d) Governmental Filings; No Violations. (i) Other than the filings
and/or notices (A) pursuant to Sections 1.3 and 6.4, (B) under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the 'HSR
Act') and the Exchange Act, (C) required by the New York Stock Exchange and
(D) set forth in the Company Disclosure Letter, no notices, reports or
other filings are required to be made by the Company or any of its
Subsidiaries with, nor are any consents, registrations, approvals, permits
or authorizations required to be obtained by the Company or any of its
Subsidiaries from, any United States or foreign governmental or regulatory
authority, court, agency, ministry, commission, body or other governmental
entity ('Governmental Entity'), in connection with the execution and
delivery of this Agreement by the Company and the consummation by the
Company of the Merger and the other transactions contemplated hereby,
except those filings, notices, reports, consents, registrations, approvals,
permits and authorizations as to which the failure to make or obtain would
not be reasonably expected to have a material adverse effect on the
financial condition, business or results of operations of the Company or of
any Material Subsidiary, and those as to which the failure to make or
obtain are not reasonably likely to prevent or materially delay or
materially impair the ability of the Company to consummate the transactions
contemplated by this Agreement.
(ii) The execution, delivery and performance of this Agreement by the
Company do not, and the consummation by the Company of the Merger and the
other transactions contemplated hereby will not, constitute or result in
(A) a breach or violation of, or a default under, the certificate of
incorporation or By-Laws of the Company or the comparable governing
instruments of any of its Subsidiaries, (B) a breach or violation of, or a
default under, the acceleration of any obligations or the creation of a
Lien on any material assets of the Company or any of its Subsidiaries (with
or without notice, lapse of time or both) pursuant to, or give rise to a
right of termination or cancellation under, any provision of any written
agreement, lease, contract, note, mortgage, indenture, arrangement or other
obligation not otherwise terminable on 90 days' or less notice
('Contracts') of the Company or any of its Subsidiaries or any Law (as
defined in Section 5.1(i)) or governmental or non-governmental permit,
franchise, concession or license (collectively, 'Licenses') to which the
Company or any of its Subsidiaries is subject or (C) any change in the
rights or obligations of any party under any of the Contracts, except, in
the case of clause (B) or (C) above, for any breach, violation, default,
acceleration, creation or change that, individually or in the aggregate, is
not reasonably likely to have a Company Material Adverse Effect or prevent,
materially delay or materially impair the ability of the Company to
consummate the transactions contemplated by this Agreement (collectively,
'Material Breaches'). The Company Disclosure Letter sets forth a correct
and complete list of each Contract and License of the Company and its
Subsidiaries pursuant to which a consent or waiver is required prior to
consummation of the transactions contemplated by this Agreement in order to
avoid the occurrence of a Material Breach under such Contract or License.
(iii) Neither the Company nor any of its Subsidiaries is in breach or
default under any Contract other than such breaches or defaults that,
individually or in the aggregate, would not reasonably be expected to have
a Company Material Adverse Effect. No event has occurred (except for the
execution of this Agreement) which either entitles, or would, upon notice
or with the lapse of time or both, entitle the holder of any indebtedness
of the Company or any of its Subsidiaries to accelerate, or which does
accelerate, the maturity of any indebtedness which is material to the
Company and its Subsidiaries taken as a whole.
(e) Company Reports; Financial Statements. The Company has delivered
to Parent each registration statement, report, proxy statement or
information statement prepared by it since August 4, 1993 (the 'IPO Date'),
each in the form (including exhibits, annexes and any
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amendments thereto) filed with the Securities and Exchange Commission (the
'SEC') (collectively, including any such reports filed subsequent to the
date hereof, the 'Company Reports'). As of their respective dates, the
Company Reports did not, and any Company Reports filed with the SEC
subsequent to the date hereof will not, contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements made therein, in light of the
circumstances in which they were made, not misleading. As of their
respective dates, the Company Reports complied, and any Company Reports
filed with the SEC subsequent to the date hereof will comply, as to form,
in all material respects with the requirements of the Securities Act or the
Exchange Act, as the case may be. Each of the consolidated balance sheets
included in or incorporated by reference into the Company Reports
(including the related notes and schedules) fairly presents the
consolidated financial position of the Company and its Subsidiaries as of
its date and each of the consolidated statements of income and of changes
in financial position included in or incorporated by reference into the
Company Reports (including any related notes and schedules) fairly presents
the results of operations, retained earnings and changes in financial
position, as the case may be, of the Company and its Subsidiaries for the
periods set forth therein (subject, in the case of unaudited statements, to
normal year-end audit adjustments that are not expected to be material in
amount or effect), in each case in accordance with generally accepted
accounting principles ('GAAP') consistently applied during the periods
involved (except as may be noted therein and except for the permitted
omission of certain footnote disclosures in the unaudited financial
statements).
(f) Absence of Certain Changes. (i) Except as disclosed in the Company
Reports prior to the date hereof, since December 31, 1995 (the 'Audit
Date'), the Company and its Subsidiaries have conducted their respective
businesses only in, and have not engaged in any transaction other than
according to, the ordinary and usual course of such businesses and there is
not and has not been (A) any change in the financial condition, properties,
business or results of operations of the Company and its Subsidiaries; or
(B) any damage, destruction or other casualty loss with respect to any
material asset or property owned, leased or otherwise used by the Company
or any of its Subsidiaries, whether or not covered by insurance, with such
exceptions to this paragraph (f)(i) that would not, individually or in the
aggregate, reasonably be expected to have a Company Material Adverse
Effect.
(ii) Except as disclosed in the Company Reports prior to the date
hereof, since the Audit Date to the date hereof, there is not and has not
been (A) any declaration, setting aside or payment of any dividend or other
distribution in respect of the capital stock of the Company other than
quarterly cash dividends on the Shares paid from current or accumulated
earnings consistent with past practices; (B) any change by the Company in
accounting principles, practices or methods, except as required by law or
GAAP; or (C) any event or action which, if it had taken place or been taken
following the execution of this Agreement, would not have been permitted by
Section 6.1 hereof without the prior written consent of Parent.
(iii) From the Audit Date to the date hereof, except as provided for
herein or as disclosed in the Company Reports prior to the date hereof,
there has not been any increase in the cash compensation payable or that
could become payable by the Company and its Subsidiaries to their executive
officers or the members of the Corporate Leadership Forum or any amendment
of any of the Company Plans (as hereinafter defined) other than increases
or amendments in the ordinary course and compensation arrangements for
newly-hired executives.
(g) Litigation and Liabilities. (i) Except as disclosed in the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1995 (the '1995 Annual Report'), there are no civil, criminal or
administrative actions, suits, claims, hearings, investigations or
proceedings pending or, to the knowledge of the Company, threatened against
the Company or any of its Subsidiaries or any other facts or circumstances
which to the knowledge of the Company are reasonably likely to result in
any such suits, claims, hearings, investigations or proceedings other than
such suits, claims, hearings, investigations or proceedings that,
individually or in the aggregate, would not reasonably be expected to have
a Company Material Adverse Effect. There are no judgments, decrees,
injunctions, rules or orders of any Governmental Entity outstanding against
the Company or any of
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its Subsidiaries other than such judgments, decrees, injunctions, rules or
orders that, individually or in the aggregate, would not reasonably be
expected to have a Company Material Adverse Effect. There are no
liabilities or obligations of any kind, whether accrued, absolute, fixed,
contingent or otherwise, of the Company and its Subsidiaries that are not
specifically reflected or reserved against in the most recent consolidated
balance sheet of the Company included in the 1995 Annual Report, except
such liabilities or obligations which would not, individually or in the
aggregate, reasonably be expected to have a Company Material Adverse
Effect.
(ii) Except as set forth in the Company Disclosure Letter or in the
1995 Annual Report, neither the Company nor any of its Subsidiaries has any
indebtedness, obligation or liability of any kind relating to forward
commodity contracts, commodity futures and options, currency futures and
options, stock index futures and options, or interest rate swaps, options,
caps, collars or floors, or any hybrids of the foregoing derivative
products (collectively, 'Derivatives'), in each case which is material to
the Company and its Subsidiaries taken as a whole. The Company Disclosure
Letter sets forth as to each Derivative (A) the applicable notional amount,
(B) the aggregate credit exposure of the Company or its Subsidiary, as the
case may be, (C) the existence of any netting arrangements, and (D) the
counterparties.
(iii) The term 'knowledge' when used in this Agreement with respect to
the Company shall mean the actual knowledge of the duly elected or
appointed executive officers of the Company, and does not include
information of which they may be deemed to have constructive knowledge
only.
(h) Employee Benefits. Except to the extent that any breach, failure
or inaccuracy, individually or in the aggregate, would not reasonably be
expected to have a Company Material Adverse Effect:
(i) The Company Disclosure Letter contains a true and complete list
of each 'employee benefit plan' (within the meaning of section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended
('ERISA'), including, without limitation, multiemployer plans within the
meaning of ERISA section 3(37)), stock purchase, stock option,
severance, employment, change-in-control, fringe benefit, collective
bargaining, bonus, incentive, deferred compensation and all other
employee benefit plans, agreements, programs, policies or other
arrangements, whether or not subject to ERISA (including any funding
mechanism therefor now in effect or required in the future as a result
of the transactions contemplated by this Agreement or otherwise),
whether formal or informal, oral or written, under which the Company or
any of its Subsidiaries has any present or future liability other than
solely as a result of its status as an ERISA Affiliate (as defined
below) of a plan sponsor or any contributing employer (provided, that,
with respect to plans, agreements, programs, policies and arrangements
maintained outside the United States, the Company Disclosure Letter
contains a true and complete list of each plan, agreement, program,
policy and arrangement). All such plans, agreements, programs, policies
and arrangements shall be collectively referred to as the 'Company
Plans'.
(ii) With respect to each Company Plan, the Company has delivered
or made available to Parent a current, accurate and complete copy (or,
to the extent no such copy exists, an accurate description) thereof and,
to the extent applicable: (A) any related trust agreement or other
funding instrument; (B) the most recent determination letter, if
applicable; (C) any summary plan description and other written
communications (or a description of any oral communications) by the
Company or any of its Subsidiaries to their employees concerning the
extent of the benefits provided under a Company Plan; and (D) for the
three most recent years (I) the Form 5500 and attached schedules, (II)
audited financial statements, (III) actuarial valuation reports and (IV)
attorney's response to an auditor's request for information.
(iii) All Company Plans are in substantial compliance with all
applicable laws, including the Code and ERISA. The Company has received
a favorable determination letter from the Internal Revenue Service with
respect to the qualified status of each Company Plan that is an
'employee pension benefit plan' within the meaning of Section 3(2) of
ERISA (a 'Pension Plan') and that is intended to be qualified under
Section 401(a) of the Code and the plan is so qualified and, nothing has
occurred, whether by action or failure to act, that would be reasonably
expected to cause the loss of such qualification. There is no pending or
threatened
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action, suit or claim relating to the Company Plans and, to the
knowledge of the Company, no facts exist which could give rise to any
such action, suit or claim. Neither the Company nor any Subsidiary has
engaged in any transactions with respect to any Company Plan that could
reasonably be expected to subject the Company or any of its Subsidiaries
to a tax or penalty imposed by Section 4975 of the Code.
(iv) As of the date hereof, no liability under Title IV of ERISA
has been or is expected to be incurred by the Company or any Subsidiary
with respect to any ongoing, frozen or terminated 'single-employer
plan', within the meaning of Section 4001(a)(15) of ERISA, currently or
formerly maintained by any of them, or the single-employer plan of any
entity which is considered one employer with the Company under Section
4001 of ERISA or Section 414 of the Code (an 'ERISA Affiliate') other
than the payment of premiums to the Pension Benefit Guaranty
Corporation. None of the Company, its Subsidiaries or any ERISA
Affiliate have contributed, or been obligated to contribute, to a
multiemployer plan under Subtitle E of Title IV of ERISA at any time
during the six-year period prior to the date hereof.
(v) (A) No event has occurred and no condition exists that would be
reasonably likely to subject the Company or its Subsidiaries to any tax,
fine, lien or penalty imposed by ERISA, the Code or other applicable
laws, rules and regulations with respect to a Company Plan; and (B) for
each Company Plan with respect to which a Form 5500 has been filed, no
material change has occurred with respect to the matters covered by the
most recent Form 5500 since the date thereof.
(vi) All contributions required to be made by the Company or any of
its Subsidiaries under the terms of any Company Plan have been timely
made or have been reflected on the most recent consolidated balance
sheet filed or incorporated by reference in the Company Reports prior to
the date hereof. Neither any Company Plan nor any single-employer plan
of an ERISA Affiliate has had an 'accumulated funding deficiency'
(whether or not waived) within the meaning of Section 412 of the Code or
Section 302 of ERISA. Neither the Company nor its Subsidiaries has
provided, or is required to provide, security to any Pension Plan or to
any single-employer plan of an ERISA Affiliate pursuant to Section
401(a)(29) of the Code.
(vii) With respect to each single-employer plan of an ERISA
Affiliate, as of the last day of the most recent plan year ended prior
to the date hereof, the actuarially determined present value of all
'benefit liabilities' within the meaning of Section 4001(a)(16) of ERISA
(as determined on the basis of the actuarial assumptions contained in
such actuarial valuation) did not exceed the then current value of the
assets of any such single-employer plan. Neither the Company nor its
Subsidiaries maintain or contribute to a Company Plan subject to Title
IV of ERISA.
(viii) Neither the Company nor its Subsidiaries have any
obligations for retiree health and life benefits under any Company Plan.
(ix) The consummation of the Merger and the other transactions
contemplated by this Agreement will not (x) entitle any of the Company's
or any of its Subsidiaries' employees to severance pay or (y) accelerate
or provide any other rights or credits under, or increase the amount
payable or trigger any other obligation pursuant to, any of the Company
Plans.
(i) Compliance with Laws; Licenses. (i) Except as set forth in the
Company Reports prior to the date hereof, the businesses of each of the
Company and its Subsidiaries have not been, and are not being, conducted in
violation of any law, ordinance, regulation, judgment, order, decree,
arbitration award, license or permit of any Governmental Entity
(collectively, 'Laws'), except for possible violations that are not,
individually or in the aggregate, reasonably likely to have a Company
Material Adverse Effect or prevent or materially burden or materially
impair the ability of the Company to consummate the transactions
contemplated by this Agreement. Except as set forth in the Company Reports
prior to the date hereof, no investigation or review by any Governmental
Entity with respect to the Company or any of its Subsidiaries is pending
or, to the knowledge of the Company, threatened, nor has any Governmental
Entity indicated to the Company an intention to conduct the same, except
for those the outcome of which are not,
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individually or in the aggregate, reasonably likely to have a Company
Material Adverse Effect or prevent or materially burden or materially
impair the ability of the Company to consummate the transactions
contemplated by this Agreement. To the knowledge of the Company, no
material change is required in the Company's or any of its Material
Subsidiaries' processes, properties or procedures in connection with any
such Laws, and neither the Company nor any of its Material Subsidiaries has
received any notice or communication of any material noncompliance with any
such Laws that has not been cured in all material respects.
(ii) The Company and its Subsidiaries hold all Licenses from, and have
made all filings, applications and registrations with, each Governmental
Entity and other persons necessary for the operation of their respective
businesses as presently conducted, except in each case for such Licenses,
filings, applications and registrations, the failure of which to hold or
make, individually or in the aggregate, would not reasonably be expected to
have a Company Material Adverse Effect; all such Licenses are in full force
and effect, except for such Licenses, the failure of which to be in full
force and effect, individually or in the aggregate, would not reasonably be
expected to have a Company Material Adverse Effect and no proceedings are
pending or, to the knowledge of the Company, threatened by any Governmental
Entity or other person for the suspension, revocation or termination of any
such License, except for such suspensions, revocations, and terminations
that, individually or in the aggregate, would not reasonably be expected to
have a Company Material Adverse Effect. Neither the Company nor any of its
Subsidiaries is in default in any respect under any such License, except
for such defaults that, individually or in the aggregate, would not
reasonably be expected to have a Company Material Adverse Effect, and,
except for statutory or regulatory restrictions of general application and
except as set forth in the Company Disclosure Letter, no Governmental
Entity has placed any restriction on the business or properties of the
Company or any of its Subsidiaries, except for such restrictions that,
individually or in the aggregate, would not reasonably be expected to have
a Company Material Adverse Effect.
(j) Receivables. As used herein, 'Receivables' means all loans,
equipment leases, sale contracts, credit or financing agreements or
arrangements, portfolio servicing agreements, account receivable invoices
and other obligations or rights to payments owned by the Company or any of
its Subsidiaries. All of the Receivables, together with any instruments
securing the same, (i) were made for valuable consideration, (ii) to the
knowledge of the Company, constitute valid obligations in all respects of
the persons shown as indebted thereon by the records of the Company or its
Subsidiaries and (iii) are legally enforceable in all respects according to
their terms (except as affected by bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws relating to
or affecting creditors' rights generally), except in the case of clauses
(i), (ii) and (iii) for such Receivables, the failure of which to satisfy
the requirements of such clauses, individually or in the aggregate, would
not reasonably be expected to have a Company Material Adverse Effect. All
of the Receivables, together with any instruments securing the same, (i)
set forth on Attachment 5.1(j) of the Company Disclosure Letter hereto are
freely assignable by the Company or the Subsidiary party thereto and (ii)
are not subject to any valid rights of offset or similar claims, except in
the case of clauses (i) and (ii) for such Receivables, the failure of which
to satisfy the requirements of such clauses, individually or in the
aggregate, would not reasonably be expected to have a Company Material
Adverse Effect. The amounts shown on the records of the Company and its
Subsidiaries to be owing and unpaid on the respective Receivables reflect,
in all respects material to the Company, the true and correct outstanding
balances owing and unpaid thereon as of the respective dates indicated
therein.
(k) Material Contracts. None of the Company or its Subsidiaries has
entered into or is otherwise bound by (i) any Contract which contains
restrictions with respect to payment of dividends or any other
distributions in respect of its capital stock, (ii) any material guarantee
or other contingent liability in respect of any indebtedness or obligation
of any person (other than (A) the endorsement of negotiable instruments for
collection in the ordinary course of business, (B) guarantees of letter of
credit reimbursement obligations, purchase orders and similar obligations
issued for the benefit of customers in the ordinary course of business and
(C) guarantees of indebtedness of or performance by any wholly owned
Subsidiary of the Company), (iii) any management service or consulting
contract not terminable on less than 90 days' notice which is
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reasonably expected to involve the payment by the Company in any year of an
amount in excess of $500,000, (iv) any Contract which would limit or
restrict in any manner the right or ability of the Company or any
Subsidiary after the Closing Date to engage in any line of business, or to
compete with any persons, or (v) any Contract not entered into in the
ordinary course of business which is reasonably expected to involve the
payment by the Company of $2,500,000 or more in any year and is not
cancelable without penalty within 90 days. Each Contract set forth in the
Company Disclosure Letter in reference to this Section 5.1(k) is in full
force and effect and there exist no defaults or events of default or event,
occurrence, condition or act on the part of the Company or, to the
Company's knowledge, any other party to such Contracts (including the
consummation of the transactions contemplated hereby) which, with the
giving of notice or the lapse of time, would reasonably be expected to
result in a Company Material Adverse Effect.
(l) Takeover Statutes. No 'fair price,' 'moratorium,' 'control share
acquisition' or other similar anti-takeover statute or regulation (each a
'Takeover Statute') or any applicable anti-takeover provision in the
Company's certificate of incorporation or By-Laws is, or at the Effective
Time will be, applicable to the Company, the Shares, the Merger or the
other transactions contemplated by this Agreement.
(m) Environmental Matters. Except as disclosed in the Company Reports
prior to the date hereof and except for such matters that, individually or
in the aggregate, would not reasonably be expected to have a Company
Material Adverse Effect, (i) to the Company's knowledge, the Company and
its Subsidiaries are in compliance with all applicable Environmental Laws;
(ii) to the Company's knowledge, all properties owned or operated by the
Company or its Subsidiaries (the 'Properties') are not contaminated with
any Hazardous Substance in violation of any applicable Environmental Law
and have not been operated as a sanitary landfill or hazardous waste
disposal site; (iii) neither the Company nor any of its Subsidiaries has
received any notices, demand letters or requests for information from any
Governmental Entity or any third party indicating that the Company may be
in violation of any Environmental Law and none of the Company, its
Subsidiaries or any of their Properties are subject to any court order,
administrative order or decree arising under any Environmental Law and (iv)
to the Company's knowledge, no Hazardous Substance has been disposed of,
transferred, released or transported from any of the Properties during the
time such Property was owned or operated by the Company or one of its
Subsidiaries other than as permitted under applicable Environmental Law.
As used in this Agreement, the term 'Environmental Law' means (i) any
federal, state, foreign or local law, statute, ordinance, rule, regulation,
code, license, permit, order, judgment, decree, injunction or agreement
with any governmental entity (A) relating to the protection, preservation
or restoration of the environment, (including air, water vapor, surface
water, groundwater, drinking water supply, surface land, subsurface land,
plant and animal life or any other natural resource), or (B) the use,
storage, recycling, treatment, generation, transportation, processing,
handling, labeling, production, release or disposal of Hazardous
Substances, in each case as amended and as now in effect and (ii) the
federal Comprehensive Environmental Response Compensation and Liability Act
of 1980, the Superfund Amendments and Reauthorization Act, the Federal
Water Pollution Control Act of 1972, the federal Clean Air Act, the federal
Clean Water Act, the federal Resource Conservation and Recovery Act of 1976
(including the Hazardous and Solid Waste Amendments thereto), the federal
Solid Waste Disposal and the federal Toxic Substances Control Act and the
Federal Insecticide, Fungicide and Rodenticide Act, each as amended and as
now in effect.
As used in this Agreement, the term 'Hazardous Substance' means any
substance presently listed, defined, designated or classified as hazardous,
toxic, radioactive or dangerous, under any Environmental Law, including any
toxic waste, hazardous substance, toxic substance, hazardous waste,
petroleum radioactive material, friable asbestos and polychlorinated
biphenyls.
(n) Taxes.
(i) Except to the extent that any breach, failure or inaccuracy,
individually or in the aggregate, would not reasonably be expected to have
a Company Material Adverse Effect: (A) all Tax
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Returns that are required to be filed by or with respect to the Company and
each of its Subsidiaries have been duly filed and all such Tax Returns are
complete and accurate;
(B) all Taxes shown to be due on the Tax Returns referred to in
clause (A) have been paid in full;
(C) those of the Tax Returns referred to in clause (A) that are
currently under examination by the Internal Revenue Service or the
appropriate state, local or foreign Taxing authority are set forth in
the Company Disclosure Letter;
(D) all assessments made as a result of the examinations referred
to in clause (C) have been paid in full; and
(E) no waivers of statutes of limitation have been given by or
requested with respect to any Tax Returns of the Company or any of its
Subsidiaries other than those set forth in the Company Disclosure
Letter.
(ii) As used in this Agreement, (A) the term 'Tax' (including, with
correlative meaning, the terms 'Taxes', and 'Taxable') includes all
federal, state, local and foreign income, profits, franchise, gross
receipts, environmental, customs duty, capital stock, severances, stamp,
payroll, sales, employment, unemployment, disability, use, property,
withholding, excise, production, value added, occupancy and other taxes,
duties or assessments of any nature whatsoever, together with all interest,
penalties and additions imposed with respect to such amounts and any
interest in respect of such penalties and additions, and (B) the term 'Tax
Return' includes all returns and reports (including elections,
declarations, disclosures, schedules, estimates and information returns)
required to be supplied to a Tax authority relating to Taxes.
(o) Labor Matters. (i) Neither the Company 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
relating to employees of the Company, nor is the Company or any of its
Subsidiaries the subject of any proceeding asserting that the Company or any of
its Subsidiaries has committed an unfair labor practice or is seeking to compel
it to bargain with any labor union or labor organization nor is there, nor has
there been for the past five years, any labor strike, dispute, walkout, work
stoppage, slow-down or lockout involving the Company or any of its Subsidiaries
pending or, to the knowledge of the Company, threatened, except in each case
with those exceptions that would not, individually or in the aggregate,
reasonably be expected to have a Company Material Adverse Effect. There have
been no material work stoppages or other such controversies during the past five
years from the date hereof. The Company and its Subsidiaries are in compliance
in all respects with all federal, state and other applicable laws, domestic or
foreign, respecting employment and employment practices, terms and conditions of
employment and wages and hours, and have not and are not engaged in any unfair
labor practice, except in each case with those exceptions that would not,
individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect.
(ii) The Company has made available to Parent schedules (as of
December 31, 1995) which are accurate and complete in all material respects
setting forth all persons employed by the Company and its Subsidiaries
whose total 1995 cash compensation (including, without limitation, salary,
bonus, and any commission or incentive compensation) exceeded $150,000.
(p) Intellectual Property. (i) The Company Disclosure Letter lists, as of
the date of this Agreement: (A) all material foreign and domestic patents and
patent applications which are owned by the Company and its Subsidiaries; and (B)
all material foreign and domestic copyright registrations, trademark
registrations, trademark registration applications, service mark registrations,
service mark registration applications and trade names which are owned by the
Company and its Subsidiaries (collectively, the 'Company IP Rights'). The
Company Disclosure Letter also lists: (1) all material license agreements of
foreign or domestic patent, trademark or service mark rights entered into by or
primarily for use by the Company and its Subsidiaries; and (2) all material
computer programs, databases and other computer software utilized by the Company
and its Subsidiaries as of the Closing Date (collectively, the 'Company License
and Computer Rights').
(ii) Except as disclosed in the Company Reports filed with the SEC
prior to the date hereof, the Company owns, or is licensed to use, all of
the Company IP Rights and the Company License
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and Computer Rights, with such exceptions and would not, individually or in
the aggregate, reasonably be expected to have a Company Material Adverse
Effect.
(iii) Unless otherwise indicated in the Company Disclosure Letter: (A)
there are no existing or, to the knowledge of the Company, threatened
claims by any third party based on the use by, or challenging the ownership
of, the Company or its Subsidiaries of any Company IP Rights or any Company
License and Computer Rights; (B) to the knowledge of the Company, (I) none
of the products, apparatus, methods or services which the Company or any of
its Subsidiaries makes, offers, sells or provides infringes upon the
intellectual property of others and (II) none of the intellectual property
of the Company or its Subsidiaries is being infringed by others; (C) each
item of Company IP Rights and Company License and Computer Rights has been
duly registered with, filed in or issued by the appropriate domestic or
foreign governmental agency, to the extent required to protect such
property, and each such registration, filing and issuance remains in full
force and effect; (D) none of the Company or its Subsidiaries has received
any oral or written claim or demand from any person pertaining to or
challenging the right of the Company or its Subsidiaries to use any Company
IP Rights or Company License and Computer Rights, and no proceedings have
been instituted, are pending or, to the knowledge of the Company, are
threatened which challenge such rights; and (E) no litigation or claim is
pending or, to the knowledge of the Company, threatened wherein the Company
or any of its Subsidiaries is accused of infringing or otherwise violating
the intellectual property right of another, or of breaching a contract
conveying rights regarding intellectual property, except in the case of
each of clause (A), (B), (C), (D) and (E) for such exceptions that would
not, individually or in the aggregate, reasonably be expected to have a
Company Material Adverse Effect. Within the six year period immediately
prior to the date of this Agreement, to the knowledge of the Company,
neither the Company nor its Subsidiaries made use of any intellectual
property material to the operation of their respective businesses at the
Closing Date other than rights under the Company IP Rights and the Company
License and Computer Rights, except as set forth in the Company Disclosure
Letter and except such uses as would not, individually or in the aggregate,
reasonably be expected to have a Company Material Adverse Effect.
(q) Insurance. True and complete copies of all material insurance policies
maintained by the Company and its Subsidiaries, together with written
descriptions of all formal self-insurance policies and programs maintained for
the benefit of the Company or any of its Subsidiaries by the Company, AT&T or
any of their respective Affiliates, have been made available to Parent. Such
material policies provide coverage for the operations of the Company and its
Subsidiaries in amounts and covering such risks as the Company believes is
necessary to conduct its business. Neither the Company nor any of its
Subsidiaries has received formal notice that any such material policy is invalid
or unenforceable.
(r) AT&T Agreements; Transactions with Affiliates. (i) The Company
Disclosure Letter sets forth a list of each Contract between the Company or any
of its Subsidiaries, on the one hand, and AT&T or any of its Subsidiaries (other
than the Company and its Subsidiaries), on the other hand, which (A) involves
annual payments in excess of $250,000, (B) would limit or restrict in any manner
the right or ability of the Company or any Subsidiary after the Closing Date to
engage in any line of business, to conduct business with any person or to
compete with any person, or would restrict the ability of the Company or such
Subsidiary after the Closing Date to acquire any property or conduct business in
any territory, or (C) has a term in excess of two years and which is not
otherwise terminable by the Company with less than three months' notice, and
which, in each case, will be in effect as of and immediately following the
Effective Time (the 'AT&T Agreements'). Except as set forth in Section 6.13 or
in the Transitional Services Agreement (as hereinafter defined), each AT&T
Agreement will be in full force and effect at and immediately following the
Effective Time (as and to the extent provided therein) and will be a valid and
binding agreement of the parties thereto enforceable against each such party in
accordance with its terms, subject to the Bankruptcy and Equity Exceptions. The
Company has made available to Parent a true and complete copy of each AT&T
Agreement in the form that such AT&T Agreement will be in effect at the
Effective Time.
(ii) Except as set forth in the Company Disclosure Letter, to the
knowledge of the Company, no officer or director of the Company or any of
its Subsidiaries is a party to any transaction with
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the Company or any of its Subsidiaries (A) providing for the rental of real
or personal property from, or (B) otherwise requiring payments to (other
than for services in their capacities as officers, directors or employees)
any such person or any corporation, partnership, trust or other entity in
which any such person has an interest as a stockholder (other than holdings
of less than 1% of the shares of such corporation), officer, director,
trustee or partner (other than holdings of less than 1% of the partnership
interests in such partnership).
(s) Brokers and Finders. Neither the Company nor any of its Subsidiaries
nor any of their respective officers, directors or employees has employed any
broker or finder or incurred any liability for any brokerage fees, commissions
or finders fees in connection with the Merger or the other transactions
contemplated in this Agreement except that the Company has employed Goldman,
Sachs & Co. to act as the financial advisor to the Company's Board of Directors,
the arrangements with which (including a copy of each engagement letter in
respect thereof) have been disclosed to Parent prior to the date hereof.
5.2. Representations and Warranties of AT&T. AT&T hereby represents and
warrants to Parent and Merger Sub that, except as expressly set forth in the
disclosure letter delivered to Parent by AT&T on or prior to entering into this
Agreement (the 'AT&T Disclosure Letter'):
(a) Organization, Good Standing and Qualification. AT&T is a
corporation duly organized, validly existing and in good standing under the
laws of New York. AT&T has made available to Parent a complete and correct
copy of its certificate of incorporation and by-laws, each as amended to
date. The certificate of incorporation and by-laws so delivered are in full
force and effect.
(b) Share Ownership. AT&T or Subsidiaries of AT&T own beneficially and
of record 40,250,000 Shares, free and clear of any lien and subject to no
restriction with respect to the voting thereof (except as contemplated by
this Agreement and the Intercompany Agreement, dated June 25, 1993 between
AT&T and the Company (the 'Intercompany Agreement')). Such Subsidiaries of
AT&T, as the majority stockholders of the Company, have approved, by
delivering the written Stockholders' Consent, this Agreement and such
Stockholders' Consent remains in full force and effect with no alterations
or amendments thereto.
(c) Corporate Authority; Approval and Fairness. AT&T has all requisite
corporate power and authority and has taken all corporate action necessary
in order to execute, deliver and perform its obligations under this
Agreement and to cause the relevant AT&T Subsidiaries to deliver the
Stockholders' Consent approving this Agreement. This Agreement is a valid
and binding agreement of AT&T enforceable against AT&T in accordance with
its terms, subject to the Bankruptcy and Equity Exception.
(d) Governmental Filings; No Violations. (i) Other than the filings
and/or notices (A) under the HSR Act and the Exchange Act and (B) set forth
in the AT&T Disclosure Letter, no notices, reports or other filings are
required to be made by AT&T with, nor are any consents, registrations,
approvals, permits or authorizations required to be obtained by AT&T from,
any Governmental Entity in connection with the execution and delivery of
this Agreement by AT&T, the delivery of the Stockholders' Consent by the
relevant AT&T Subsidiaries and the consummation by the Company of the
Merger and the other transactions contemplated hereby, except those as to
which the failure to make or obtain are not, individually or in the
aggregate, reasonably likely to have a Company Material Adverse Effect or
prevent, materially delay or materially impair the ability of the Company
or AT&T to consummate the transactions contemplated by this Agreement.
(ii) The execution, delivery and performance of this Agreement by AT&T
and the delivery of the Stockholders' Consent by the relevant AT&T
Subsidiaries do not, and the consummation by the Company of the Merger and
the other transactions contemplated hereby will not, constitute or result
in (A) a breach or violation of, or a default under, the certificate of
incorporation or by-laws of AT&T, (B) a breach or violation of, or a
default under, the acceleration of any obligations or the creation of a
Lien on the assets of AT&T or any of its Subsidiaries, other than the
Company and its Subsidiaries (with or without notice, lapse of time or
both), pursuant to, or give rise to a right of termination or cancellation
under, any provision of any Contracts of AT&T or any of its Subsidiaries
(other than the Company and its Subsidiaries) or any Law or governmental or
non-
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governmental permit or license to which AT&T or any of its Subsidiaries
(other than the Company and its Subsidiaries) is subject or (C) any change
in the rights or obligations of any party under any of such Contracts,
except, in the case of clause (B) or (C) above, for any breach, violation,
default, acceleration, creation or change that, individually or in the
aggregate, would not reasonably be expected to have a Company Material
Adverse Effect or prevent, materially delay or materially impair the
ability of the Company or AT&T to consummate the transactions contemplated
by this Agreement. The AT&T Disclosure Letter sets forth to the knowledge
of AT&T, a correct and complete list of Contracts of AT&T and its
Subsidiaries (other than the Company and its Subsidiaries) pursuant to
which consents or waivers are or may be required prior to consummation of
the transactions contemplated by this Agreement.
(iii) The term 'knowledge' when used in this Agreement with respect to
AT&T shall mean the actual knowledge of the duly elected or appointed
executive officers of AT&T, and does not include information of which they
may be deemed to have constructive knowledge only.
(e) AT&T Agreements. The Company Disclosure Letter sets forth a list
of each AT&T Agreement. Except as set forth in Section 6.13 or in the
Transitional Services Agreement, each AT&T Agreement will be in full force
and effect at the Effective Time (as and to the extent provided therein)
and will be a valid and binding agreement of the parties thereto
enforceable against each such party in accordance with its terms, subject
to the Bankruptcy and Equity Exception.
(f) Brokers and Finders. Neither AT&T nor any of its Subsidiaries
(other than the Company or any of its Subsidiaries) nor any of their
respective officers, directors or employees has employed any broker or
finder or incurred any liability for any brokerage fees, commissions or
finders fees in connection with the Merger or this Agreement except that
AT&T has employed Morgan Stanley & Co. Incorporated to act as its financial
advisor generally in connection with its restructuring, whose fees will be
paid by AT&T.
(g) Employee Benefits. The consummation of the Merger will not result
in any payment which would reasonably be expected to be an 'excess
parachute payment' under Section 280G of the Code.
5.3. Representations and Warranties of Parent and Merger Sub. Parent and
Merger Sub each hereby represents and warrants to the Company that, except as
set forth in the disclosure letter delivered to the Company by Parent on or
prior to entering into this Agreement (the 'Parent Disclosure Letter'):
(a) Organization, Good Standing and Qualification. Each of Parent and
Merger Sub is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization and has all
requisite corporate or similar power and authority to own and operate its
properties and assets and to carry on its business as presently conducted
and is qualified to do business and is in good standing as a foreign
corporation in each jurisdiction where the ownership or operation of its
properties or conduct of its business requires such qualification, except
where the failure to be so qualified or in such good standing, when taken
together with all other such failures, would not reasonably be expected to
have a Parent Material Adverse Effect (as defined below).
The term 'Parent Material Adverse Effect' means a material adverse
effect on the ability of Parent or Merger Sub to consummate the
transactions contemplated by this Agreement.
(b) Corporate Authority; Board and Stockholder Approvals.
(i) No vote of holders of capital stock or other voting securities of
Parent is necessary to approve this Agreement and the Merger and the other
transactions contemplated hereby (other than those which have been received
prior to the date hereof). The Parent and Merger Sub each has all requisite
corporate power and authority and each has taken all corporate action
necessary in order to execute, deliver and perform its obligations under
this Agreement and to consummate the Merger and the other transactions
contemplated by this Agreement. This Agreement is a valid and binding
agreement of Parent and Merger Sub, enforceable against each of Parent and
Merger Sub in accordance with its terms, subject to the Bankruptcy and
Equity Exception.
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(ii) The respective boards of directors of Parent and Merger Sub, and
Parent as sole stockholder of Merger Sub, have unanimously approved the
Merger and this Agreement and the consummation of the Merger and the other
transactions contemplated hereby.
(c) Governmental Filings; No Violations. (i) Other than the filings
and/or notices (A) pursuant to Section 1.3, (B) under the HSR Act and the
Exchange Act, (C) required to be made with the NYSE and (D) set forth in
the Parent Disclosure Letter, no notices, reports or other filings are
required to be made by Parent or Merger Sub or their respective Affiliates
with, nor are any consents, registrations, approvals, permits or
authorizations required to be obtained by Parent or Merger Sub or their
respective Affiliates from, any Governmental Entity, in connection with the
execution and delivery of this Agreement by Parent and Merger Sub and the
consummation by Parent and Merger Sub of the Merger and the other
transactions contemplated hereby, except those as to which the failure to
make or obtain are not, individually or in the aggregate, reasonably likely
to have a Parent Material Adverse Effect.
(ii) The execution, delivery and performance of this Agreement by
Parent and Merger Sub do not, and the consummation by Parent and Merger Sub
of the Merger and the other transactions contemplated hereby will not,
constitute or result in (A) a breach or violation of, or a default under,
the certificate of incorporation or by-laws of Parent or Merger Sub or the
comparable governing instruments of any of Parent's Subsidiaries, (B) a
breach or violation of, or a default under, the acceleration of or the
creation of a Lien on the assets of Parent, Merger Sub or any of Parent's
Subsidiaries (with or without notice, lapse of time or both) pursuant to,
any provision of any Contracts of Parent or any of its Subsidiaries or any
Law to which Parent, Merger Sub or any of Parent's Subsidiaries is subject
or (C) any change in the rights or obligations of any party under any of
the Contracts, except, in the case of clause (B) or (C) above, for breach,
violation, default, acceleration, creation or change that, individually or
in the aggregate, is not reasonably likely to have a Parent Material
Adverse Effect. The Parent Disclosure Letter sets forth, to the knowledge
of Parent, a correct and complete list of Contracts of Parent and Merger
Sub and their respective Subsidiaries pursuant to which consents or waivers
are or may be required prior to consummation of the transactions
contemplated by this Agreement.
(iii) The term 'knowledge' when used in this Agreement with respect to
Parent shall mean the actual knowledge of the duly elected or appointed
executive officers of Parent, and does not include information of which
they may be deemed to have constructive knowledge only.
(d) Available Funds. Parent has or will have available to it all funds
necessary to satisfy all of its obligations hereunder and in connection
with the Merger and the other transactions contemplated by this Agreement.
(e) Brokers and Finders. Neither Parent nor any of its Subsidiaries
nor any of their respective officers, directors or employees has employed
any broker or finder or incurred any liability for any brokerage fees,
commissions or finders fees in connection with the Merger or the other
transactions contemplated in this Agreement, except for any fees and
expenses which are or may be payable by the Surviving Corporation to Nomura
International plc or its Affiliates on or following the consummation of the
Merger.
(f) No Prior Activities. Except for obligations or liabilities
incurred, and business and activities arising, in connection with its
incorporation or organization or the negotiation and consummation of this
Agreement and the transactions contemplated hereby, including the financing
referred to in Section 6.1(x), each of Parent and Merger Sub has neither
incurred any obligations or liabilities nor engaged in any business or
activities of any type or kind whatsoever or entered into any agreements or
arrangements with any person or entity.
ARTICLE VI
COVENANTS
6.1. Interim Operations. (a) The Company covenants and agrees as to itself
and its Subsidiaries that, after the date hereof and prior to the Effective Time
(unless Parent shall otherwise approve in writing,
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and except as otherwise expressly contemplated by this Agreement or Attachment
6.1(a) to the Company Disclosure Letter):
(i) the business of it and its Subsidiaries shall be conducted in the
ordinary and usual course and, to the extent consistent therewith, it and
its Subsidiaries shall use all reasonable efforts to preserve its business
organization intact and maintain its existing relations and goodwill with
customers, suppliers, distributors, creditors, lessors, employees and
business associates;
(ii) it shall not (A) sell or pledge any capital stock owned by it in
any of its Subsidiaries (other than pursuant to a merger of two or more
wholly owned Subsidiaries); (B) amend its certificate of incorporation or
by-laws; (C) split, combine or reclassify, or issue or authorize the
issuance of any other securities in respect of, in lieu of or in
substitution for, its outstanding shares of capital stock; (D) declare, set
aside or pay any dividend or other distribution payable in cash, stock or
property in respect of any capital stock, other than regular quarterly cash
dividends not in excess of $.11 per Share; or (E) repurchase, redeem or
otherwise acquire, or permit any of its Subsidiaries to purchase or
otherwise acquire, any shares of its capital stock or any securities
convertible into or exchangeable or exercisable for any shares of its
capital stock;
(iii) neither it nor any of its Subsidiaries shall (A) issue, sell,
pledge, dispose of or encumber, or authorize or propose the issuance, sale,
pledge, disposition or encumbrance of, any shares of, or securities
convertible into or exchangeable or exercisable for, or options, warrants,
calls, commitments or rights of any kind to acquire, any shares of its
capital stock of any class or any other property or assets (other than
Shares issuable pursuant to Company Options outstanding on the date
hereof); or (B) other than (x) pursuant to a merger of two or more wholly
owned Subsidiaries, (y) in the ordinary and usual course of business in an
amount not in excess of $10,000,000 in any transaction or series of related
transactions, or (z) in the ordinary and usual course of business in
connection with lease renewals or sales of leased property to the lessee
thereof, transfer, lease, license, guarantee, sell, mortgage, pledge or
dispose of any other property or assets (including capital stock of any of
its Subsidiaries) or encumber any property or assets (including capital
stock of any of its Subsidiaries) or (C) other than in the ordinary and
usual course of business, incur or modify any material indebtedness or
other liability; or (D) other than in the ordinary and usual course of
business, purchase or acquire assets or other property having a fair market
value in excess of $5,000,000 in any transaction or series of related
transactions;
(iv) neither it nor any of its Subsidiaries shall terminate,
establish, adopt, enter into, make any new grants or awards under, amend or
otherwise modify, any Company Plans or employment agreements or increase
the salary, wage, bonus or other compensation of any employees (other than
payments required or permitted under the Company's severance plans and
annual incentive plans as in effect on the date hereof) except increases
occurring in the ordinary and usual course of business (which shall include
normal periodic performance reviews and related compensation and benefit
increases) or otherwise required by applicable law or the terms of such
plans;
(v) neither it nor any of its Subsidiaries shall settle or compromise
any claim or litigation for an amount in excess of $5,000,000 or, except in
the ordinary and usual course of business modify, amend or terminate any of
its material Contracts or waive, release or assign any material rights or
claims;
(vi) neither it nor any of its Subsidiaries shall make any Tax
election or permit any insurance policy naming it as a beneficiary or
loss-payable payee to be cancelled or terminated except in the ordinary and
usual course of business;
(vii) the Company and its Subsidiaries shall promptly notify the
Company of receipt of any notice from any significant customer of the
Company or any of its Subsidiaries of such customer's intention to
terminate any material Contract with the Company or any of its
Subsidiaries;
(viii) neither it nor any of its Subsidiaries shall change any
accounting principle used by the Company or any of its Subsidiaries, other
than as required by GAAP or applicable law (in which case the Company will
give Parent notice of such change);
(ix) neither it nor any of its Subsidiaries shall enter into or modify
any agreement with AT&T or any of its Affiliates except as contemplated
hereby;
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(x) the Company and its Subsidiaries shall provide Parent with
reasonable assistance in connection with Parent's arranging, structuring
and receiving financing (including any asset-based financings) in
connection with the Merger, including without limitation (A) assisting
Parent in preparing any information memoranda or other offering materials
which describe the Company, its business and its assets to be used in
connection with such financings and (B) providing necessary information to
and meeting with such potential investors, rating agencies, lenders and
other financial institutions as may be reasonably requested by Parent;
provided that the foregoing shall not be construed to require the Company
or its Subsidiaries to take any action that (X) obligates the Company or
any of its Subsidiaries to incur any indebtedness or other financing
obligation that is effective prior to the Effective Time, (Y) affects any
existing indebtedness or other financing of the Company and its
Subsidiaries prior to the Effective Time or (Z) unduly disrupts the
operation of the business of the Company and its Subsidiaries prior to the
Effective Time; and
(xi) neither it nor any of its Subsidiaries will authorize or enter
into an agreement to do any of the foregoing.
(b) AT&T covenants and agrees as to itself and its Subsidiaries that,
after the date hereof and prior to the Effective Time (unless the Parent
shall otherwise approve in writing) it shall not sell, assign, pledge,
dispose of or encumber any Shares owned by it or any of its Subsidiaries;
provided, however, that AT&T may sell, assign or dispose of any or all such
Shares to one or more wholly owned Subsidiaries of AT&T.
6.2. Acquisition Proposals. The Company and AT&T each agrees that neither
it nor any of its Subsidiaries nor any of the officers and directors of it or
its Subsidiaries shall, and that it shall direct and use its best efforts to
cause its and its Subsidiaries' employees, agents and representatives (including
any investment banker, attorney or accountant retained by it or any of its
Subsidiaries) not to, initiate, solicit or encourage any inquiries or the making
of any proposal or offer with respect to a merger, reorganization, consolidation
or similar transaction involving, or any purchase of all or any significant
portion of the assets or the equity securities of the Company (any such proposal
or offer being hereinafter referred to as an 'Acquisition Proposal'). The
Company further agrees that neither it nor any of its Subsidiaries nor any of
the officers and directors of it or its Subsidiaries shall, and that it shall
direct and use its best efforts to cause its and its Subsidiaries' employees,
agents and representatives (including any investment banker, attorney or
accountant retained by it or any of its Subsidiaries) not to, directly or
indirectly, engage in any negotiations concerning, or provide any confidential
information or data to, or have any discussions with, any person relating to an
Acquisition Proposal, or otherwise facilitate any effort or attempt to make or
implement an Acquisition Proposal. AT&T further agrees that it shall not, and
that it shall direct and use its best efforts to cause its Subsidiaries, and its
Subsidiaries' directors, officers, employees, agents and representatives
(including any investment banker, attorney or accountant retained by it or any
of its Subsidiaries), not to, directly or indirectly, engage in any negotiations
concerning, or provide any confidential information or data to, or have any
discussions with, any person relating to an Acquisition Proposal, or otherwise
facilitate any effort or attempt to make or implement an Acquisition Proposal.
The Company and AT&T each agrees that it will immediately cease and cause to be
terminated any existing activities, discus-sions or negotiations with any
parties conducted heretofore with respect to any of the foregoing. The Company
and AT&T each agrees that it will take the necessary steps to promptly inform
the individuals or entities referred to in the first sentence hereof of the
obligations undertaken in this Section 6.2 and in the Confidentiality Agreement
(as defined in Section 9.7). The Company and AT&T each agrees that it will
notify Parent if any such inquiries, proposals or offers are received by, any
such information is requested from, or any such negotiations or discussions are
sought to be initiated or continued with it. AT&T and the Company acknowledge
that the remedy at law for breach of the provisions of this Section 6.2 will be
inadequate and that, in addition to any other remedy Parent may have, it will be
entitled to an injunction restraining any such breach or threatened breach,
without any bond or other security being required.
6.3. Information Supplied. (a) The Company, AT&T and Parent each agrees, as
to itself and, in the case of the Company and Parent, each of their respective
Subsidiaries, that none of the information supplied or to be supplied by it or,
in the case of the Company and Parent, each of their respective Subsidiaries,
for inclusion or incorporation by reference in the Information Statement to be
filed with
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the SEC by the Company will 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.
(b) If at any time prior to the Effective Time any event or circumstance
relating to the Company or to Parent or AT&T or any of their Affiliates, or
their respective officers and directors, should be discovered by such party,
that is required to be set forth in a supplement to the Information Statement,
such party shall promptly inform the other parties. All documents that the
Company is responsible for filing with the SEC in connection with the
transactions contemplated herein will comply as to form and substance in all
material respects with the applicable requirements of the Exchange Act and the
rules and regulations thereunder.
(c) The agreements contained in this Section 6.3 shall survive the
consummation of the Merger until the first anniversary of the date of this
Agreement.
6.4. Filings; Other Actions; Notification. (a) The Company shall promptly
prepare and file with the SEC an Information Statement pursuant to Rule 14c-2
under the Exchange Act (the 'Information Statement') and shall comply with any
other applicable requirements under the Exchange Act in connection with the
Merger and the other transactions contemplated by this Agreement. The Company
shall use its reasonable efforts to have the Information Statement reviewed and
approved by the SEC as promptly as practicable after such filing, and promptly
thereafter the Company shall mail the Information Statement to the stockholders
of the Company. The Information Statement shall include a copy of the opinion of
Goldman, Sachs & Co. referred to in Section 5.1(c)(ii), together with a
description of the analyses and procedures utilized by Goldman, Sachs & Co. in
arriving at their opinion. In addition, as promptly as practicable after the
date hereof, the Company shall prepare a notice pursuant to Section 228(d) of
the DGCL (the 'Notice'), and shall mail the Notice to the stockholders of the
Company together with the Information Statement. Parent shall have the right and
opportunity to review and make reasonable comments on the Information Statement
prior to its filing with the SEC and the Company shall not file the Information
Statement without the prior approval of Parent, which approval will not be
unreasonably withheld.
(b) The Company, AT&T and Parent each shall cooperate with each other and
use (and cause their respective Subsidiaries to use) their respective best
efforts to prepare and file as promptly as practicable all documentation to
effect all necessary applications, notices, petitions, filings and other
documents, including notification and report under the HSR Act, and to obtain as
promptly as practicable all permits, consents, approvals and authorizations
necessary or advisable to be obtained from any third party and/or any
Governmental Entity in connection with the Merger and to consummate the other
transactions contemplated by this Agreement. Subject to applicable laws relating
to the exchange of information, the Company, AT&T and Parent shall have the
right to review in advance, and to the extent practicable each will consult the
other on, all the information relating to the Company, AT&T and Parent, as the
case may be, and any of their respective Subsidiaries, that appear in any filing
made with, or written materials submitted to, any third party and/or any
Governmental Entity in connection with the Merger and the other transactions
contemplated by this Agreement. In exercising the foregoing right, each of the
Company, AT&T and Parent shall act reasonably and as promptly as practicable.
(c) The Company, AT&T and Parent each shall, upon request by the other,
furnish the other with all information concerning itself, its Subsidiaries,
directors, officers and stockholders and such other matters as may be reasonably
necessary or advisable in connection with the Information Statement or any other
statement, filing, notice or application made by or on behalf of the Company,
AT&T, Parent, or any of their respective Subsidiaries to any Governmental Entity
in connection with the Merger and the transactions contemplated by this
Agreement.
(d) The Company, AT&T and Parent each shall keep the others apprised of the
status of matters relating to completion of the transactions contemplated
hereby, including promptly furnishing the others with copies of notices or other
communications received by the Company, AT&T or Parent, as the case may be, or,
in the case of Parent or the Company, any of their respective Subsidiaries, from
any third party and/or any Governmental Entity with respect to the Merger and
the other transactions contemplated by this Agreement. The Company, AT&T and
Parent each shall give prompt notice to the
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other of any change that is reasonably likely to result in a Company Material
Adverse Effect or Parent Material Adverse Effect, respectively.
(e) The Company shall use its reasonable best efforts to obtain each
consent or approval of each person whose consent or approval is required in
order to permit the succession by the Surviving Corporation pursuant to the
Merger to any obligation, right or interest of the Company or any Subsidiary of
the Company under any Contract or License to which the Company or any of its
Subsidiaries is a party or is subject.
(f) Without limiting the generality of the undertakings pursuant to this
Section 6.4, the Company and AT&T and Parent each agree to take or cause to be
taken the following actions: (i) provide promptly to any and all federal, state,
local or foreign court or Government Entity with jurisdiction over enforcement
of any applicable antitrust laws ('Government Antitrust Entity') information and
documents requested by any Government Antitrust Entity or necessary, proper or
advisable to permit consummation of the Merger and the transactions contemplated
by this Agreement; and (ii) take promptly, in the event that any permanent or
preliminary injunction or other order is entered or becomes reasonably
foreseeable to be entered in any proceeding that would make consummation of the
Merger in accordance with the terms of this Agreement unlawful or that would
prevent or delay consummation of the Merger or the other transaction
contemplated by this Agreement, any and all commercially reasonable steps
(including the appeal thereof or the posting of a bond, but not including the
sale or other disposition of, or the holding separate of, any assets, categories
of assets or businesses of the Company or Parent or either's respective
Subsidiaries) necessary to vacate, modify or suspend such injunction or order so
as to permit such consummation on a schedule as close as possible to that
contemplated by this Agreement.
6.5. Access. Upon reasonable notice, and except as may otherwise be
required by applicable law, the Company shall (and shall cause its Subsidiaries
to) afford the Parent's officers, employees, counsel, accountants and other
authorized representatives ('Representatives') reasonable access, during normal
business hours throughout the period prior to the Effective Time, to its
properties, books, Contracts, records, officers and employees and, during such
period, shall (and shall cause its Subsidiaries to) furnish promptly to the
Parent all information concerning its business, properties and personnel as may
reasonably be requested, provided that no investigation pursuant to this Section
shall affect or be deemed to modify any representation or warranty made by the
Company or AT&T, and provided, further, that the foregoing shall not require the
Company to permit any inspection, or to disclose any information, that in the
reasonable judgment of the Company would result in the disclosure of any trade
secrets of third parties or violate any of its obligations with respect to
confidentiality. All requests for access or information made pursuant to this
Section shall be directed to an executive officer of the Company or such person
as may be designated by its executive officers, as the case may be. In addition,
the Company shall permit Parent to have located at the Company's principal
executive offices two representatives of Parent for the purpose of conducting
preliminary work related to the financing of the Merger and the other
transactions contemplated hereby; provided that such representatives shall be
reasonably acceptable to the Company, shall conduct themselves in a reasonable
manner and subject to such reasonable limitations as the Company may impose and
shall have entered into an appropriate confidentiality agreement.
6.6. AT&T Operating Agreement and License Agreement.
(a) Effective as of immediately following consummation of the Merger, AT&T
and the Company shall amend Section 11.2(a)(iv) of the Operating Agreement,
dated as of June 25, 1993, between AT&T and the Company to read in its entirety
as follows:
(iv) at the election of AT&T, by at least 180 days' prior notice to
Capital, in the event that Capital at any time becomes a Subsidiary of any
Person, other than the Person or an Affiliate of the Person which acquired
Capital from the AT&T Entities, without the prior written consent of AT&T
(it being understood that such consent shall not be unreasonably withheld
or delayed);
(b) Effective as of immediately following consummation of the Merger, AT&T
and the Company shall amend Section 2.3(a) of the License Agreement, dated as of
June 25, 1993 (the 'License Agreement'), between AT&T and the Company (i) to
replace the words 'one year's' in the first
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sentence thereof with the words 'two year's' and (ii) to replace the words
'one-year' in the second sentence thereof with the words 'two-year'.
(c) Effective as of immediately following consummation of the Merger, AT&T
and the Company shall amend Section 6.2(iv) of the License Agreement (i) to
replace the words 'investment grade' in the first sentence thereof with the
words 'Ba1 by Moody's Investor Services and below BB+ by Standard & Poor's
Corporation' and (ii) to delete the words 'by at least two nationally recognized
statistical rating agencies' in the two places that such words appear in the
first sentence thereof.
(d) The parties understand and agree that the amendments to the License
Agreement set forth in paragraphs (b) and (c) of this Section 6.6 shall not
apply to the licenses granted by, or the rights and obligations of, Lucent
Technologies Inc. ('Lucent') or NCR Corporation ('NCR') under the Letter
Agreement dated April 2, 1996 between the Company and Lucent and the Letter
Agreement dated April 18, 1996 between the Company and NCR.
6.7. Publicity. (a) The Company, AT&T and Parent each shall consult with,
and receive the prior approval of, the others prior to issuing any press
releases or otherwise making public announcements with respect to the Merger and
the other transactions contemplated by this Agreement and prior to making any
filings with any third party and/or any Governmental Entity (including any
national securities exchange) with respect thereto, except as may be required by
law or by obligations pursuant to any listing agreement with or rules of any
national securities exchange.
(b) AT&T agrees that all information concerning Parent, Merger Sub and
their respective Affiliates furnished to AT&T or its representatives by or on
behalf of Parent (other than information that would meet one of the exceptions
to the definition of 'Evaluation Material' contained in the first paragraph of
the Confidentiality Agreement referred to in Section 9.7 will be used solely in
connection with the transactions contemplated by this Agreement and will be kept
confidential by AT&T and its representatives; provided that disclosure of such
information may be made (i) to the extent required by law, (ii) to the extent
required in the Information Statement, subject to Section 6.4 hereof, (iii) to
the extent required in any legal proceeding to enforce any rights of AT&T or the
Company against Parent, Merger Sub or their respective Affiliates under this
Agreement or any related agreement and (iv) as consented to in writing by Parent
or Merger Sub.
(c) The agreements contained in this Section 6.7 shall survive the
consummation of the Merger for one month following the Closing.
6.8. Employee Benefit Covenants.
(a) In General. Parent agrees to honor or cause the Surviving Corporation
to honor all Company Plans pursuant to all of the terms of such Company Plans.
In connection with the foregoing, except as otherwise specifically provided in
this Section 6.8, to the extent not prohibited by law, the Surviving Corporation
shall, and Parent shall cause the Surviving Corporation to, continue in effect
through December 31, 1997 all Company Plans without any adverse amendment or
modification (other than, subject to Section 6.8(e), the Company's 1993 LSPP,
the 1993 LTIP, and the Company's Share Performance Incentive Plan (the 'SPIP')
and Employee Stock Purchase Plan (the 'Equity-Based Plans') and the Company's
1993 Deferred Compensation Plan); provided, however, that the Company's
Leadership Severance Plan and Member Severance Plan (the 'Severance Plans')
shall be continued, except as modified by mutual written agreement with the
affected employees, for at least twenty-seven (27) months from the Effective
Time; provided, further, that in lieu of continuing specific welfare benefit and
insurance plans or programs, the Surviving Corporation shall, and Parent shall
cause the Surviving Corporation to, provide welfare benefit and insurance plans
or programs that are no less favorable in the aggregate than those provided by
the Company immediately prior to the Effective Time.
(b) Change in Control. Parent, the Company and AT&T acknowledge and agree
that approval of the Merger by the stockholders of the Company shall, where
applicable, constitute a Change in Control and Sale of Control of the Company
for purposes of the Company Plans.
(c) Executive Benefit Plan. The Surviving Corporation shall, and Parent
shall cause the Surviving Corporation to, continue the Company's Executive
Benefit Plan and the grantor trust established to fund benefits thereunder in
accordance with their terms until all benefits are paid under such plan to
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participants who are vested as of the Effective Time or become vested during the
2-year period following the Effective Time.
(d) Equity-Based Plans. The Surviving Corporation shall, and Parent agrees
to cause the Surviving Corporation to, continue in effect the 1993 LSPP and 1993
LTIP through at least August 6, 1996 to the extent any awards remain unvested
under such plans.
(e) Share Performance Incentive Plan. The Surviving Corporation shall, and
Parent acknowledges and agrees that immediately following the Effective Time it
shall cause the Surviving Corporation to, pay each participant in the SPIP
(including recipients of share performance incentive awards under the 1993 LTIP)
(i) 100% Maximum Payout (as defined in the SPIP) for each pending performance
period (i.e., the second, third and fourth periods) and (ii) with respect to any
performance period completed within twelve (12) months prior to the Effective
Time the excess of (a) 100% of the Maximum Payout for such participant for such
performance period over (B) the payment actually made to the participant for
such performance period. The Surviving Corporaiton shall, and Parent further
agrees to cause the Surviving Corporation to, amend the SPIP (and the share
performance incentive awards under the 1993 LTIP) to provide for 100% Maximum
Payout with respect to all future performance periods (beginning following the
Effective Time) under the SPIP and such awards, with such amounts to be paid
immediately following the Effective Time; provided, that, for those employees
who are not members of the Company's Leadership Forum, any such 100% Maximum
Payment for future performance periods shall be conditioned upon the employee
entering into an agreement with Parent and the Surviving Corporation to revise
the terms of the Company severance plan applicable to such employee to modify
the definition of 'Qualifying Termination' under such plan. If no such agreement
is reached with a particular employee, future performance periods under the SPIP
or such share performance incentive awards will continue pursuant to their terms
with respect to such employee.
(f) Annual Incentive Plan. The Surviving Corporation shall, and Parent
agrees to cause the Surviving Corporation to, amend the Company's Annual
Incentive Plan and Senior Executive Annual Incentive Plan to provide that
payments to each participant under such plans for the 1996 calendar year will be
made at no less than such participant's target award for 1996.
(g) Other Plans. The Surviving Corporation shall, and Parent agrees to
cause the Surviving Corporation to, amend the Company's Supplemental Income
Benefits Plan (the 'SIB'), Supplemental Executive Retirement Plan (the 'SERP'),
and Excess Benefits Plan (the 'Excess Plan'), effective as of the Effective
Time, to provide that (i) such plans may not be amended or terminated to reduce
benefits accrued prior to such amendment or termination, and (ii) with respect
to the Excess Plan, all benefits shall be vested as of the Effective Time.
(h) Credited Service. If any Company Employee becomes a participant in any
employee benefit plan, practice or policy of Parent, or any of Parent's
affiliates (including the Surviving Corporation), such Company Employee shall be
given credit under such plan for all service prior to the Effective Time with
the Company and its Subsidiaries or any predecessor employer (including AT&T or
any of its subsidiaries), which service has been recognized by the Company under
similar plans, policies or practices, for purposes of eligibility and vesting
and for all other purposes for which such service is either taken into account
or recognized; provided, however, that such service shall not be credited for
purposes of benefit accruals under tax-qualified plans.
(i) Plan Withdrawals. The Company agrees to withdraw as a participating
employer from all employee benefit plans, practices or policies sponsored by
AT&T and its Subsidiaries (other than the Company) effective as of the Closing
Date, except as otherwise provided in the Transitional Services Agreement and
the Benefits Agreement between AT&T and the Company dated of of January 1, 1994;
provided, however, that such withdrawal shall not affect the rights of any
current retirees of the Company with respect to AT&T and its plans.
(j) Survival. The agreements contained in this Section 6.8 shall survive
the consummation of the Merger.
(k) Intended Beneficiaries. The provisions of paragraph (e) of this Section
6.8 are intended to be for the benefit of, and shall be enforceable by, each
participant in the SPIP and recipient of a share performance incentive award
under the 1993 LTIP.
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6.9. Expenses. Parent or the Surviving Corporation shall pay all charges
and expenses, including those of the Paying Agent, in connection with the
transactions contemplated in Article IV. Subject to Section 9.1 hereof and
except as otherwise provided herein, whether or not the Merger is consummated,
all costs and expenses incurred in connection with this Agreement and the Merger
and the other transactions contemplated by this Agreement shall be paid by the
party incurring such expense; provided that the reasonable legal fees and other
professional expenses incurred by the management of the Company in connection
with the negotiation of arrangements with the Parent and its affiliates shall be
reimbursed by the Company. The agreements contained in this Section 6.9 shall
survive the consummation of the Merger.
6.10. Indemnification; Directors' and Officers' Insurance. (a) For six
years after the Effective Time, Parent shall indemnify and hold harmless, to the
fullest extent permitted under applicable law (and Parent shall also advance
expenses as incurred to the fullest extent permitted under applicable law
provided the person to whom expenses are advanced provides an undertaking to
repay such advances if it is ultimately determined that such person is not
entitled to indemnification), each present and former director, officer and
employee of the Company and its Subsidiaries (collectively, the 'Indemnified
Parties') against any costs or expenses (including reasonable attorneys' fees),
judgments, fines, losses, claims, damages or liabilities (collectively, 'Costs')
incurred in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative, arising
out of or pertaining to matters existing or occurring at or prior to the
Effective Time, including the transactions contemplated by this Agreement.
(b) Any Indemnified Party wishing to claim indemnification under paragraph
(a) of this Section 6.10, upon learning of any such claim, action, suit,
proceeding or investigation, shall promptly notify Parent thereof, but the
failure to so notify shall not relieve Parent of any liability it may have to
such Indemnified Party to the extent such failure does not materially prejudice
Parent. In the event of any such claim, action, suit, proceeding or
investigation (whether arising before or after the Effective Time), (i) Parent
or the Surviving Corporation shall have the right to assume the defense thereof
and Parent shall not be liable to such Indemnified Parties for any legal
expenses of other counsel or any other expenses subsequently incurred by such
Indemnified Parties in connection with the defense thereof, except that if
Parent or the Surviving Corporation elects not to assume such defense or counsel
for the Indemnified Parties advises that there are issues which raise conflicts
of interest between Parent or the Surviving Corporation and the Indemnified
Parties, the Indemnified Parties may retain counsel satisfactory to them, and
Parent or the Surviving Corporation shall pay all reasonable fees and expenses
of such counsel for the Indemnified Parties promptly as statements therefor are
received; provided, however, that Parent shall be obligated pursuant to this
paragraph (b) to pay for only one firm of counsel for all Indemnified Parties in
any jurisdiction unless the use of one counsel for such Indemnified Parties
would present such counsel with a conflict of interest, (ii) the Indemnified
Parties will cooperate in the defense of any such matter and (iii) Parent shall
not be liable for any settlement effected without its prior written consent; and
provided, further, that Parent shall not have any obligation hereunder to any
Indemnified Party if and when a court of competent jurisdiction shall ultimately
determine, and such determination shall have become final, that the
indemnification of such Indemnified Party in the manner contemplated hereby is
prohibited by applicable law. If such indemnity is not available with respect to
any Indemnified Party, then the Surviving Corporation and the Indemnified Party
shall contribute to the amount payable in such proportion as is appropriate to
reflect relative faults and benefits.
(c) The Surviving Corporation shall from and after the Closing Date have in
place officers' and directors' liability insurance providing insurance
protection to the Company's and its Subsidiaries' officers and directors
substantially similar (including as to scope, deductible and maximum liability)
as the insurance currently maintained by or for the Company ('D&O Insurance')
for a period of six years after the Effective Time so long as the annual premium
therefor is not in excess of $750,000 (the 'Current Premium'); provided,
however, if a future annual premium exceeds $750,000, the Surviving Corporation
will use its best efforts to obtain as much D&O Insurance as can be obtained for
the remainder of such period for a premium not in excess of $750,000.
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(d) Until the Effective Time, AT&T will maintain in place such D&O
Insurance as is currently maintained by AT&T covering directors, officers and
employees of the Company and its Subsidiaries, or renewals thereof in the
ordinary course. From and after the Effective Time, AT&T will (and will cause
its Subsidiaries to) cooperate reasonably with the Surviving Corporation in
submitting claims (or pursuing claims previously made) on behalf of the
Surviving Corporation under any such D&O Insurance in effect prior to the
Effective Time; provided that the Surviving Corporation shall reimburse,
indemnify and hold AT&T and its Subsidiaries (other than American Ridge in its
capacity as an insurer or reinsurer) harmless from all liabilities, costs and
expenses of any nature actually incurred by AT&T or its Subsidiaries as a result
of any such claims made under such D&O Insurance as contemplated above; and
provided, further, that neither the Surviving Corporation nor AT&T nor any of
their respective Affiliates shall have any obligation to reimburse or indemnify
the other with respect to any retrospective rating adjustments or deductibles.
AT&T will also cooperate reasonably with the Company in connection with such
arrangements as the Company may make to put in place D&O Insurance from and
after the Closing Date, as contemplated by paragraph (c) of this Section 6.10,
provided that AT&T makes no representation or warranty with respect to any such
arrangements the Company may make, and provided, further, that AT&T's
cooperation will not require it to expend any funds (unless promptly reimbursed
by the Company) or to take any actions which would adversely affect its rights,
or lead to the incurrence of additional costs, under any of AT&T's insurance
policies. The provisions of this Section 6.10(d) shall remain in full force and
effect notwithstanding any terms of the Transitional Services Agreement.
(e) If the Surviving Corporation or any of its successors or assigns (i)
shall consolidate with or merge into any other corporation or entity and shall
not be the continuing or surviving corporation or entity of such consolidation
or merger or (ii) shall transfer all or substantially all of its properties and
assets to any individual, corporation or other entity, then and in each such
case, proper provisions shall be made so that the successors and assigns of the
Surviving Corporation shall assume all of the obligations set forth in this
Section.
(f) The provisions of this Section are intended to be for the benefit of,
and shall be enforceable by, each of the Indemnified Parties, their heirs and
their representatives.
(g) The agreements contained in this Section 6.10 shall survive the
consummation of the Merger.
6.11. Takeover Statute. If any Takeover Statute is or may become applicable
to the Merger or the other transactions contemplated by this Agreement, each of
Parent, AT&T and the Company and their respective boards of directors shall
grant such approvals and take such reasonable actions as are necessary so that
such transactions may be consummated as promptly as practicable on the terms
contemplated by this Agreement or by the Merger and otherwise take such
reasonable actions to eliminate or minimize the effects of such statute or
regulation on such transactions.
6.12. Reasonable Best Efforts and Cooperation. The Company, Parent and
Merger Sub each shall use (and shall cause its Subsidiaries to use) its
reasonable best efforts and shall cooperate with each other to cause the
conditions set forth in Article VII hereof to be satisfied and to consummate the
Merger and the other transactions contemplated by this Agreement.
6.13. Tax Matters.
(a) Section 338(h)(10) Election. (i) AT&T and Parent shall jointly make
timely and irrevocable elections under Section 338(h)(10) of the Code and, if
permissible, similar elections under any applicable state or local income tax
laws. AT&T, Parent and the Company shall report the transactions consistent with
such elections under Section 338(h)(10) of the Code or any similar state or
local tax provision (the 'Elections') and shall take no position contrary
thereto unless and to the extent required to do so pursuant to a determination
(as defined in Section 1313(a) of the Code or any similar state or local tax
provision).
(ii) To the extent possible, AT&T, Parent and the Company shall execute at
the Closing any and all forms necessary to effectuate the Elections (including,
without limitation, Internal Revenue Service Form 8023 and any similar forms
under applicable state and local income tax laws (the 'Section 338 Forms')). In
the event, however, any Section 338 Forms are not executed at the Closing, AT&T,
Parent and the Company shall prepare and complete each such Section 338 Form no
later than 15 days prior to
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the date such Section 338 Form is required to be filed. AT&T, Parent and the
Company shall each cause the Section 338 Forms to be duly executed by an
authorized person for AT&T, Parent and the Company in each case, and shall duly
and timely file the Section 338 Forms in accordance with applicable tax laws and
the terms of this Agreement.
(iii) AT&T and Parent agree to allocate the Aggregate Deemed Sale Price (as
defined under applicable Treasury Regulations) of the assets of each of the
Company and its Subsidiaries for which a Section 338(h)(10) Election is made as
follows: AT&T and Parent agree that the fair market value of the Class I, Class
II and Class III assets (each as defined in the Treasury Regulations under Code
Section 1060) of the Company and each of its Subsidiaries shall equal the book
value of such assets on the Closing Date. Any remaining Aggregate Deemed Sale
Price will be allocated to the Class IV Assets. AT&T and Parent will accept such
allocation and will reflect such allocation in all applicable tax returns filed
by any of them, including but not limited to the Section 338 Forms. Parent and
the Company shall not take a position before any taxing authority or otherwise
(including in any Tax return) inconsistent with such allocation unless and to
the extent required to do so pursuant to a determination (as defined in Section
1313(a) of the Code or any similar state or local law).
(b) Liability for Taxes and Related Matters.
(i) Except as set forth in the next sentence, liability for consolidated,
combined or unitary federal, state and local income Taxes ('Consolidated Taxes')
and entitlement to any refund for any taxable year or period that ends on or
before the Closing Date and, with respect to any taxable year or period
beginning before and ending after the Closing Date, the portion of such taxable
year ending on and including the Closing Date (the 'Pre-Closing Periods') shall
be allocated to AT&T and AT&T shall indemnify and hold harmless Parent, the
Company and the Company's Subsidiaries for such Taxes. Parent, the Company and
each of the Subsidiaries (the 'Parent Group') will pay to AT&T amounts
determined in accordance with Section 6.13(e) hereof with respect to 1995 and
1996 Taxes; provided, however, that AT&T shall be liable for and indemnify
Parent, the Company and each Subsidiary of the Company for all Taxes
attributable to the election to be made under Section 338(h)(10) of the Code and
any state law equivalent pursuant to Section 6.13(a) hereof. At or prior to
Closing, the Company shall pay to AT&T $35 million in respect of the Taxes
accrued on the balance sheet, (x) less amounts that are paid to AT&T under the
existing tax sharing agreements set forth as Annex A hereto (the 'Tax Sharing
Agreements') from the date hereof through the Closing Date in respect of years
ended before 1995 and (y) plus amounts that are paid by AT&T to the Company
and/or its Subsidiaries from the date hereof through the Closing Date under the
Tax Sharing Agreements in respect of years ended before 1995. AT&T shall be
entitled to all refunds with respect to Consolidated Taxes.
(ii) Parent shall be liable for and indemnify AT&T for (x) the Taxes of the
Company and each Subsidiary of the Company for any taxable year or period that
begins after the Closing Date and, with respect to any taxable year or period
beginning before and ending after the Closing Date, the portion of the taxable
year beginning after the Closing Date and (y) all Taxes of the Company and each
Subsidiary other than Consolidated Taxes ('Standalone Taxes').
(iii) For purposes of paragraphs (b)(i), (b)(ii) and (d), whenever it is
necessary to determine the liability for Taxes of the Company or any Subsidiary
of the Company for a portion of a taxable year or period that begins before and
ends after the Closing Date, the determination of such Taxes for the portion of
the year or period ending on, and the portion of the year or period beginning
after, the Closing Date shall be determined by assuming that the Company or
Subsidiary, as applicable, had a taxable year or period which ended at the close
of the Closing Date, except that exemptions, allowances or deductions that are
calculated on an annual basis, such as the deduction for depreciation, shall be
apportioned on a time basis.
(iv) Any payment by Parent or AT&T under this Section 6.13 will be an
adjustment to the portion of the Merger Consideration allocable to the Shares
that are held by AT&T immediately prior to the Effective Time.
(v) For purposes of this Section 6.13, the term 'AT&T Group' means any
'affiliated group' (as defined in Section 1504(a) of the Code without regard to
the limitations contained in Section 1504(b) of
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the Code) that includes AT&T or any predecessor of or successor to AT&T (or
another such predecessor or successor).
(c) Tax Returns. AT&T shall file or cause to be filed (including by causing
the Company or the relevant subsidiary to file) when due all Tax Returns with
respect to Consolidated Taxes that are required to be filed by or with respect
to a member of the AT&T Group and any of the Company and/or any Subsidiary of
the Company for taxable years or periods ending on or before the Closing Date,
and Parent shall file or cause to be filed when due all other Tax Returns that
are required to be filed by or with respect to the Company.
(d) Termination of Tax Allocation Agreements. Except to the extent set
forth in Section 6.13(e) hereof, any tax allocation or sharing agreement or
arrangement, whether or not written, that may have been entered into by AT&T or
any member of the AT&T Group and the Company or any Subsidiary of the Company
shall be terminated as to the Company and each Subsidiary of the Company as of
the Closing Date, and all amounts due from or to the Company or any Subsidiary
of the Company under any such sharing agreement or arrangement shall be paid on
or prior to the Closing Date.
(e) 1995 and 1996 Taxes. For purposes of determining the amounts due to
AT&T with respect to the taxable years of the Company and its Subsidiaries for
the year ended December 31, 1995 and the year ending on the Closing Date, the
existing Tax Sharing Agreements shall apply. However, in lieu of the procedures
set forth in the Tax Sharing Agreements, the following procedures shall govern.
With respect to the taxable year of AT&T ended December 31, 1995 and the period
in 1996 prior to the Closing Date, Parent shall cause the Company promptly to
prepare and provide to AT&T a package of tax information materials with respect
to the Company and its Subsidiaries in the form requested by AT&T and on a basis
consistent with past practices and a calculation of the tax sharing payments due
with respect to Consolidated Taxes (the 'Tax Package'), which shall be completed
(x) not later than the internal due date established by AT&T for the submission
of such tax information to AT&T by its Subsidiaries with respect to the Federal
income tax return of AT&T for 1995 and (y) not later than 45 days after the
Closing Date for the taxable year of AT&T that includes the Closing Date (it
being agreed and understood that with respect to subclause (y), such Tax Package
will be in draft form and will be revised and finalized within 60 days
thereafter). The Tax Package shall be reviewed by Arthur Andersen as to its
accuracy prior to its submission to AT&T. Coopers & Lybrand on behalf of AT&T
shall, within 45 days of AT&T's receipt of the Tax Package (in the case of the
Tax Package for the year ended on the Closing Date, within 45 days of the
receipt of the revised, finalized Tax Package), provide Parent with any comments
on the Tax Package and shall provide its analysis of the amount payable by the
Company and its Subsidiaries under the Tax Sharing Agreement. In the case of
Consolidated Taxes for the Company's year ended on the Closing Date, the
analysis of the tax sharing amount payable shall be based upon estimated results
for AT&T (other than the Company) and apportionment factors for 1995 (the tax
sharing payment so calculated shall be referred to as the 'Estimated Payments').
The Estimated Payments shall be refined and reviewed by Coopers & Lybrand by
July 31, 1997, based upon actual apportionment factors and other results for
1996 and a final tax sharing payment amount shall be determined. Arthur Andersen
and Parent shall agree or object to each of Coopers & Lybrand's responses
hereunder within 10 days of receipt thereof. The tax sharing payments for 1995,
and any Estimated Payments and adjustments thereto (resulting in the final
payments for 1996), shall be made by Parent to AT&T within 5 days of such
agreement. If Coopers & Lybrand and Arthur Andersen cannot reach agreement on
the Estimated Payments and/or the tax sharing payment, then (i) Parent shall pay
to AT&T any amount which is agreed to be payable within five (5) days and (ii)
Coopers & Lybrand and Arthur Andersen jointly shall select promptly a third 'big
six' accounting firm (the 'Neutral Firm') whose fees and expenses shall be
shared equally by AT&T and the Company and whose determination of the amount
payable and of the appropriate reserves shall be binding upon the parties. Any
additional amounts determined thereby to be due shall be paid within 3 days of
the determination of the Neutral Firm. Other than amounts owed to AT&T under the
terms of this Section 6.13(e), Parent, Company and the Company's Subsidiaries
shall have no liability with respect to 1995 and 1996 Consolidated Taxes
(including any liabilities arising from an audit). The Tax Sharing Agreements
with respect to 1995 and 1996 Taxes shall terminate upon payment of all amounts
determined under this paragraph.
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(f) Assistance and Cooperation. After the Closing Date, each of AT&T and
Parent shall:
(i) assist in all reasonable respects (and cause their respective
affiliates to assist) the other party in preparing any Tax Returns or
reports which such other party is responsible for preparing and filing in
accordance with this Section 6.13 (including in analyzing the Tax Package);
(ii) cooperate in all reasonable respects in preparing for any audits
of, or disputes with taxing authorities regarding, any Tax Returns of the
Company or any Subsidiary of the Company;
(iii) make available to the other and to any taxing authority as
reasonably requested all information, records, and documents relating to
Taxes of the Company and each Subsidiary of the Company;
(iv) provide timely notice to the other in writing of any pending or
threatened tax audits or assessments of the Company and each Subsidiary of
the Company for taxable periods for which the other may have a liability
under this Section 6.13; and
(v) furnish the other with copies of all correspondence received from
any taxing authority in connection with any tax audit or information
request with respect to any such taxable period.
(g) Contests; Payment Procedure. (i) AT&T shall control, manage and solely
be responsible for any audit, contest, claim, proceeding or inquiry with respect
to Consolidated Taxes and shall have the exclusive right to settle or contest in
its sole discretion any such audit, contest, claim, proceeding or inquiry
without the consent of any other party.
(ii) Parent shall control, manage and solely be responsible for any audit,
contest, claim, proceeding or inquiry with respect to Standalone Taxes and shall
have the exclusive right to settle or contest any such audit, contest, claim,
proceeding, or inquiry without the consent of any other party.
(h) Survival. The indemnification provisions contained in this Section 6.13
(Tax Matters) shall survive the consummation of the Merger and shall not expire.
6.14. No Solicitation of Employees. From the date hereof through the fifth
anniversary of the Closing Date, neither AT&T nor any of its wholly owned
Subsidiaries, so long as they are wholly owned subsidiaries of AT&T, shall
induce or attempt to induce any employee of the Company to leave the employ of
the Company or any of its Subsidiaries; provided that the foregoing shall not be
construed to prevent AT&T or any of its wholly owned Subsidiaries from (a) prior
to the Effective Time complying with its covenants set forth in Article VIII of
the Intercompany Agreement in a manner consistent with past practice or (b)
employing former employees of the Company or its Subsidiaries, so long as AT&T
and its wholly owned Subsidiaries did not induce or attempt to induce such
former employees to leave the employ of the Company or any of its Subsidiaries.
AT&T acknowledges and agrees that the covenant contained in this Section 6.14 is
reasonable and necessary to protect the legitimate business interests of Parent.
The agreements contained in this Section 6.14 shall survive the consummation of
the Merger until the fifth anniversary of the Closing.
6.15. Transitional Services. AT&T and Parent shall enter into a
transitional services agreement, containing such terms and conditions as AT&T
and Parent may reasonably agree (including those terms and conditions set forth
in Exhibit 6.15 hereto), governing the provision by AT&T and its Affiliates to
the Surviving Corporation for a reasonable period after the Effective Time (not
to exceed one year) of those services listed on Exhibit 6.15 hereto (the
'Transitional Services Agreement').
6.16. Existing Financing Arrangements. Prior to the Closing, the Company
agrees to: (a) use its reasonable best efforts to solicit and receive the
requisite consents to, or waivers in respect of, the Merger and the other
transactions contemplated by or resulting from this Agreement from the banks and
other financial institutions parties to the agreements listed in Section A of
Attachment 5.1(d)(ii) of the Company Disclosure Letter, or otherwise amend the
terms of such agreements on terms reasonably satisfactory to Parent; and (b) to
use its reasonable best efforts to cause to be delivered such certificates and
opinions as may be required in connection with the Merger under any debt
instruments or indentures to which it is a party.
6.17. Funding Parent. Parent covenants that not later than June 12, 1996,
Parent shall receive a $100 million equity contribution in the form of cash or
direct obligations of the government of the United States of America
('Government Securities'). Parent covenants that it shall utilize the proceeds
of such
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equity contribution to purchase Government Securities having a maturity not
later than one year after the date of purchase or receipt thereof by Parent.
Parent covenants that it shall keep such proceeds so invested (free of any
Liens) until the Effective Time.
ARTICLE VII
CONDITIONS
7.1. Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each party to effect the Merger is subject to the
satisfaction or waiver at or prior to the Effective Time of each of the
following conditions:
(a) Regulatory Consents and Orders. The waiting period applicable to
the consummation of the Merger under the HSR Act shall have expired or been
terminated and all other notices, reports and other filings required to be
made by the Company, its Subsidiaries, AT&T, Parent or Merger Sub with, and
consents, registrations, approvals, permits and authorizations required to
be obtained by the Company, its Subsidiaries, AT&T, Parent or Merger Sub
from, any Governmental Entity, in each case as set forth on the Company
Disclosure Letter, the AT&T Disclosure Letter or the Parent Disclosure
Letter, as the case may be, shall have been made or obtained and shall be
in full force and effect, and no court or Governmental Entity of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered
any statute, rule, regulation, judgment, decree, injunction or other order
(whether temporary, preliminary or permanent) that is in effect and
restrains, enjoins or otherwise prohibits consummation of the transactions
contemplated by this Agreement (collectively, an 'Order').
7.2. Conditions to Obligation of Parent. The obligation of Parent to effect
the Merger is also subject to the satisfaction or waiver by Parent prior to the
Effective Time of the following conditions:
(a) Representations and Warranties. The representations and warranties
of the Company and AT&T set forth in this Agreement shall be true and
correct in all material respects as of the date of this Agreement and
(except to the extent such representations and warranties speak as of an
earlier date) as of the Closing Date as though made on and as of the
Closing Date. Parent shall have received (i) a certificate signed on behalf
of the Company by the Chief Executive Officer or any Senior Vice President
of the Company to the effect of the previous sentence (with respect to the
Company) and (ii) a certificate signed on behalf of AT&T by any Vice
President of AT&T to the effect of the previous sentence (with respect to
AT&T).
(b) Performance of Obligations of the Company and AT&T. The Company
and AT&T shall have performed in all material respects all obligations
required to be performed by each of them under this Agreement at or prior
to the Closing Date, and Parent shall have received (i) a certificate
signed on behalf of the Company by the Chief Executive Officer or any
Senior Vice President of the Company to such effect (as to performance by
the Company) and (ii) a certificate signed on behalf of AT&T by any Vice
President of AT&T to such effect (as to performance by AT&T).
(c) Consents Under Agreements and Licenses. The Company and AT&T shall
have obtained the consent or approval of each person whose consent or
approval shall be required in order to permit the succession by the
Surviving Corporation pursuant to the Merger to any obligation, right or
interest of the Company or any Subsidiary of the Company under any Contract
or License to which the Company or any of its Subsidiaries is a party or is
subject, except those for which the failure to obtain such consent or
approval is not reasonably likely to have, individually or in the
aggregate, a Company Material Adverse Effect.
(d) Resignations. Parent shall have received the resignations of each
director of the Company.
(e) Transitional Services Agreement. AT&T and the Company shall have
entered into the Transitional Services Agreement.
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7.3. Conditions to Obligation of the Company and AT&T. The obligation of
the Company and AT&T to effect the Merger is also subject to the satisfaction or
waiver by the Company prior to the Effective Time of the following conditions:
(a) Representations and Warranties. The representations and warranties
of Parent and Merger Sub set forth in this Agreement shall be true and
correct in all material respects as of the date of this Agreement and
(except to the extent such representations and warranties speak as of an
earlier date) as of the Closing Date as though made on and as of the
Closing Date, and the Company and AT&T shall have received a certificate
signed on behalf of Parent by an executive officer of Parent and Merger Sub
to such effect.
(b) Performance of Obligations of Parent and Merger Sub. Each of
Parent and Merger Sub shall have performed in all material respects all
obligations required to be performed by it under this Agreement at or prior
to the Closing Date, and the Company and AT&T shall have received a
certificate signed on behalf of Parent and Merger Sub by an executive
officer of Parent to such effect. The obligation of AT&T to effect the
Merger is also subject to receipt by AT&T of the payment referred to in the
last sentence of Section 6.13(b)(i).
(c) Consents Under Agreements. Parent shall have obtained the consent
or approval of each person whose consent or approval shall be required in
order to permit the succession by the Surviving Corporation pursuant to the
Merger to any obligation, right or interest of Parent or any Subsidiary of
Parent under any Contract to which Parent or any of its Subsidiaries is a
party, except those for which failure to obtain such consents and approvals
is not reasonably likely to have, individually or in the aggregate, a
Parent Material Adverse Effect.
ARTICLE VIII
TERMINATION
8.1. Termination by Mutual Consent. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time by mutual
written consent of the Company, AT&T, Parent and Merger Sub, by action of their
respective boards of directors.
8.2. Termination by Parent, AT&T or the Company. This Agreement may be
terminated and the Merger may be abandoned at any time prior to the Effective
Time by action of the board of directors of Parent, AT&T or the Company if (i)
the Merger shall not have been consummated by October 31, 1996 (the 'Termination
Date'), or (ii) any Order permanently restraining, enjoining or otherwise
prohibiting the Merger shall become final and non-appealable; provided, that the
right to terminate this Agreement pursuant to clause (i) and (ii) above shall
not be available to any party that has breached in any material respect its
obligations under this Agreement in any manner that shall have proximately
contributed to the occurrence of the failure referred to in said clause.
8.3. Termination by the Company or AT&T. This Agreement may be terminated
and the Merger may be abandoned at any time prior to the Effective Time, by
action of the board of directors of the Company or AT&T if there has been a
material breach by Parent or Merger Sub of any representation, warranty,
covenant or agreement contained in this Agreement (other than Section 6.17) that
is not curable or, if curable, is not cured within 30 days after written notice
of such breach is given by the Company or AT&T to the party committing such
breach. This Agreement may be terminated and the Merger may be abandoned at any
time prior to the Effective Time by the Company or AT&T if there has been any
breach of the covenant contained in Section 6.17.
8.4. Termination by Parent. This Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Time by action of the board
of directors of Parent, if there has been a material breach by the Company or
AT&T of any representation, warranty, covenant or agreement contained in this
Agreement that is not curable or, if curable, is not cured within 30 days after
written notice of such breach is given by Parent to the party committing such
breach.
8.5. Effect of Termination and Abandonment. In the event of termination of
this Agreement and the abandonment of the Merger pursuant to this Article VIII,
this Agreement (other than as set forth in Section 9.1) shall become void and of
no effect with no liability of any party hereto (or any of its
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directors, officers, employees, agents, legal and financial advisors or other
representatives); however, except as otherwise provided herein, no such
termination shall relieve any party hereto of any liability or damages resulting
from any breach by that party of this Agreement.
ARTICLE IX
MISCELLANEOUS AND GENERAL
9.1. Survival. The representations of AT&T contained in Section 5.2 (except
for Section 5.2(g)) shall survive the consummation of the Merger until the first
anniversary of the date of this Agreement and the provisions of this Article IX
shall survive the consummation of the Merger. The agreements and covenants of
the parties made herein shall survive the consummation of the Merger to the
extent so provided by their terms. The agreements of the parties contained in
Section 6.7 (Publicity), Section 6.9 (Expenses), and Section 8.5 (Effect of
Termination and Abandonment), and the representations contained in Sections
5.1(s), 5.2(f) and 5.3(e) (Brokers and Finders) and this Article IX shall
survive the termination of this Agreement. All other representations,
warranties, agreements and covenants in this Agreement shall not survive the
consummation of the Merger or the termination of this Agreement.
9.2. Modification or Amendment. Subject to the provisions of applicable
law, at any time prior to the Effective Time, the parties hereto may modify or
amend this Agreement by written agreement executed and delivered by duly
authorized officers of the respective parties.
9.3. Waiver of Conditions. The conditions to each of the parties'
obligations to consummate the Merger are for the sole benefit of such party and
may be waived by such party in whole or in part to the extent permitted by
applicable law.
9.4. Counterparts. This Agreement may be executed in any number of
counterparts, each such counterpart being deemed to be an original instrument,
and all such counterparts shall together constitute the same agreement.
9.5. GOVERNING LAW AND VENUE; WAIVER OF JURY TRIAL. (A) THIS AGREEMENT
SHALL BE DEEMED TO BE MADE IN AND IN ALL RESPECTS SHALL BE INTERPRETED,
CONSTRUED AND GOVERNED BY AND IN ACCORDANCE WITH THE LAW OF THE STATE OF
DELAWARE WITHOUT REGARD TO THE CONFLICT OF LAW PRINCIPLES THEREOF. The parties
hereby irrevocably submit to the jurisdiction of the courts of the State of
Delaware and the Federal courts of the United States of America located in the
State of Delaware solely in respect of the interpretation and enforcement of the
provisions of this Agreement and of the documents referred to in this Agreement,
and in respect of the transactions contemplated hereby, and hereby waive, and
agree not to assert, as a defense in any action, suit or proceeding for the
interpretation or enforcement hereof or of any such document, that it is not
subject thereto or that such action, suit or proceeding may not be brought or is
not maintainable in said courts or that the venue thereof may not be appropriate
or that this Agreement or any such document may not be enforced in or by such
courts, and the parties hereto irrevocably agree that all claims with respect to
such action or proceeding shall be heard and determined in such a Delaware State
or Federal court. The parties hereby consent to and grant any such court
jurisdiction over the person of such parties and over the subject matter of such
dispute and agree that mailing of process or other papers in connection with any
such action or proceeding in the manner provided in Section 9.6 or in such other
manner as may be permitted by law, shall be valid and sufficient service
thereof.
(b) Parent hereby designates CT Corporation System as its authorized agent
to accept and acknowledge on its behalf service of any and all process which may
be served in any such suit, action or proceeding in any such court and agrees
that service of process upon said agent at its office at 1209 Orange Street,
Wilmington Delaware 19801, and written notice of said service to Parent, mailed
or delivered to it, c/o Nomura International plc at the address set forth in
Section 9.6, shall be deemed in every respect effective service of process upon
Parent in any such suit, action or proceeding and shall be taken and held to be
valid personal service upon Parent, whether or not Parent shall then be doing,
or at any time shall have done, business within the State of Delaware, and that
any such service of process shall be of the same force and validity as if
service were made upon it according to the laws governing
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the validity and requirements of such service in such State, and waives all
claim of error by reason of any such service. Said designation and appointment
shall be irrevocable.
(c) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE
UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND
THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY
RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND
ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH SUCH PARTY
UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH SUCH
PARTY MAKES THIS WAIVER VOLUNTARILY, AND (iv) EACH SUCH PARTY HAS BEEN INDUCED
TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION 9.5.
9.6. Notices. Any notice, request, instruction or other document to be
given hereunder by any party to the others shall be in writing and delivered
personally or sent by registered or certified mail, postage prepaid:
if to Parent or Merger Sub
c/o Nomura International plc,
Nomura House
1 St. Martin's-le-Grand
London, England ECIA 4NP
Attention: Managing Director,
Principal Finance Group
and
Attention: Transaction Management Group
(with a copy to William R. Dougherty, Esq.
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017)
if to the Company
44 Whippany Road,
Morristown, NJ 07962-1983,
Attention: General Counsel
(with a copy to John P. Mead, Esq.,
Sullivan & Cromwell,
125 Broad Street,
New York, NY 10004.)
if to AT&T
295 North Maple Avenue,
Basking Ridge, NJ 07920.
Attention: Treasurer
and
131 Morristown Road,
Basking Ridge, NJ 07920.
Attention: Vice President-Law and Secretary
(with a copy to Steven A. Rosenblum, Esq.,
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, NY 10019.)
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or to such other persons or addresses as may be designated in writing by the
party to receive such notice.
9.7. Entire Agreement. This Agreement (including the exhibits hereto), the
Company Disclosure Letter, the AT&T Disclosure Letter, the Parent Disclosure
Letter and the Confidentiality Agreement, dated January 31, 1996, between Nomura
International plc and the Company (the 'Confidentiality Agreement') constitute
the entire agreement, and supersede all other prior agreements, understandings,
representations and warranties both written and oral, among the parties, with
respect to the subject matter hereof. EACH PARTY HERETO AGREES THAT, EXCEPT FOR
THE REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS AGREEMENT (INCLUDING
EXHIBITS HERETO AND DISCLOSURE LETTERS INCLUDED HEREWITH), NEITHER PARENT,
MERGER SUB, THE COMPANY NOR AT&T MAKES ANY OTHER REPRESENTATIONS OR WARRANTIES,
AND EACH HEREBY DISCLAIMS ANY OTHER REPRESENTATIONS OR WARRANTIES MADE BY ITSELF
OR ANY OF ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, FINANCIAL AND LEGAL
ADVISORS OR OTHER REPRESENTATIVES, WITH RESPECT TO THE EXECUTION AND DELIVERY OF
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY, NOTWITHSTANDING THE
DELIVERY OR DISCLOSURE TO THE OTHER OR THE OTHER'S REPRESENTATIVES OF ANY
DOCUMENTATION OR OTHER INFORMATION WITH RESPECT TO ANY ONE OR MORE OF THE
FOREGOING.
9.8. No Third Party Beneficiaries. Except as provided in Section 6.8(k) and
Section 6.10 (Indemnification; Directors' and Officers' Insurance), this
Agreement is not intended to confer upon any person other than the parties
hereto any rights or remedies hereunder.
9.9. Obligations of Parent and of the Company; Limitations on Liability.
(a) Whenever this Agreement requires a Subsidiary of Parent to take any action,
such requirement shall be deemed to include an undertaking on the part of Parent
to cause such Subsidiary to take such action. Whenever this Agreement requires a
Subsidiary of the Company to take any action, such requirement shall be deemed
to include an undertaking on the part of the Company to cause such Subsidiary to
take such action and, after the Effective Time, on the part of the Surviving
Corporation to cause such Subsidiary to take such action.
(b) Except as provided in the immediately following sentence, nothing in
this Agreement is intended to or shall create any liability on the part of any
stockholder, incorporator, officer or director of any party hereto except that
Parent shall be responsible for acts or omissions of Merger Sub (or any other
Subsidiary designated by Parent pursuant to Section 9.12) and the Company shall
be responsible for acts or omissions of its Subsidiaries, in each case as
provided in clause (a). AT&T shall have no liability hereunder except insofar as
its own representations, warranties and covenants are concerned. Any notice,
certificate or opinions of an officer of a party hereto delivered pursuant to
this Agreement shall be deemed to be an act of the party and shall not create
any personal liability on the part of the officer delivering such notice,
certificate or opinion.
9.10. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof. If any
provision of this Agreement, or the application thereof to any person or any
circumstance, is invalid or unenforceable, (a) a suitable and equitable
provision shall be substituted therefor in order to carry out, so far as may be
valid and enforceable, the intent and purpose of such invalid or unenforceable
provision and (b) the remainder of this Agreement and the application of such
provision to other persons or circumstances shall not be affected by such
invalidity or unenforceability, nor shall such invalidity or unenforceability
affect the validity or enforceability of such provision, or the application
thereof, in any other jurisdiction.
9.11. Interpretation. The table of contents and headings herein are for
convenience of reference only, do not constitute part of this Agreement and
shall not be deemed to limit or otherwise affect any of the provisions hereof.
Where a reference in this Agreement is made to a Section or Exhibit, such
reference shall be to a Section of or Exhibit to this Agreement unless otherwise
indicated. Whenever the words 'include,' 'includes' or 'including' are used in
this Agreement, they shall be deemed to be followed by the words 'without
limitation.'
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9.12. Assignment. This Agreement shall not be assignable by operation of
law or otherwise without the prior written consent of the other parties;
provided, however, that Parent may designate, by written notice to the Company,
another wholly owned direct or indirect Subsidiary to be a Constituent
Corporation in lieu of Merger Sub, in the event of which, all references herein
to Merger Sub shall be deemed references to such other Subsidiary except that
all representations and warranties made herein with respect to Merger Sub as of
the date of this Agreement shall be deemed representations and warranties made
with respect to such other Subsidiary as of the date of such designation and no
designation under this Section 9.12 shall be valid or effective unless all such
representations and warranties are true insofar as such new Subsidiary is
concerned.
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the duly authorized officers of the parties hereto as of the date first written
above.
AT&T CAPITAL CORPORATION
By: /s/ THOMAS C. WAJNERT
.................................
Name: Thomas C. Wajnert
Title: Chairman and Chief
Executive Officer
AT&T CORP.
By: /s/ S. LAWRENCE PRENDERGAST
.................................
Name: S. Lawrence Prendergast
Title: Vice President and Treasurer
HERCULES LIMITED
By: /s/ GUY HANDS
.................................
Name: Guy Hands
Title: President and Chief
Executive Officer
ANTIGUA ACQUISITION CORPORATION
By: /s/ GUY HANDS
.................................
Name: Guy Hands
Title: President and Chief
Executive Officer
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FIRST AMENDMENT TO THE AGREEMENT AND PLAN OF MERGER
First Amendment to the Agreement and Plan of Merger (hereinafter called
this 'Amendment'), dated as of August 20, 1996, among AT&T Capital Corporation,
a Delaware corporation (the 'Company'), AT&T Corp., a New York corporation
('AT&T'), Hercules Limited, a Cayman Island corporation ('Parent'), and Antigua
Acquisition Corporation, a Delaware corporation and a wholly owned subsidiary of
Parent ('Merger Sub').
RECITALS
WHEREAS, the Company, AT&T, Parent and Merger Sub entered into the
Agreement and Plan of Merger (the 'Original Agreement'), dated as of June 5,
1996;
WHEREAS, the Company, AT&T, Parent and Merger Sub wish to amend the
Original Agreement in the manner set forth herein;
WHEREAS, the respective boards of directors of each of the Company, Parent
and Merger Sub have approved this Agreement;
WHEREAS, the Company's board of directors and the special committee of the
Company's board of directors have approved and submitted this Amendment to AT&T,
as the indirect owner of the AT&T Shares, for its consent, and AT&T has caused
to be executed a written stockholder consent pursuant to Section 228 of the DGCL
(as defined below) approving this Amendment.
NOW, THEREFORE, in consideration of the premises, and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto agree as follows:
1. Defined Terms. Unless otherwise defined herein, capitalized terms
which are defined in the Original Agreement are used herein as therein
defined.
2. Section 1.2. Section 1.2 of the Original Agreement is hereby
amended by deleting it in its entirety and substituting in lieu thereof the
following:
1.2. Closing. The closing of the Merger (the 'Closing') shall take
place (i) at the offices of Sullivan & Cromwell, 125 Broad Street, New
York, New York at 9:00 A.M. on the later of (A) October 1, 1996 and (B)
the first business day on which the last to be fulfilled or waived of
the conditions set forth in Article VII hereof (other than those
conditions that by their nature are to be satisfied at the Closing, but
subject to fulfillment or waiver of those conditions) shall be satisfied
or waived in accordance with this Agreement (the later of such dates
being referred to as the 'Scheduled Closing Date'); provided, however,
that Parent may at its option (the 'Extension Option') extend the
Closing to a date later than the Scheduled Closing Date as Parent shall
determine (but in no event later than October 31, 1996) by providing
written notice of such later date to the Company and AT&T not less than
two business days' prior to the Scheduled Closing Date and agreeing to
pay the Interest Amount referred to in Section 4.1(a) hereof (such
agreement to be evidenced by the delivery of such written notice); or
(ii) at such other place and time and/or on such other date as the
Company and Parent may agree in writing (the 'Closing Date').
3. Section 4.1(a) Section 4.1(a) of the Original Agreement is hereby
amended by deleting the phrase '$45.00 (the 'Merger Consideration')' at the
end of the first sentence thereof and substituting in lieu thereof the
following:
the sum of (i) $45.00 and (ii) in the event (but only in the event)
that Parent exercises the Extension Option referred to in Section
1.2 hereof, an additional amount (the 'Interest Amount') equal to
interest on such $45 amount for the period from and including
September 18, 1996 through but excluding the Closing Date at a rate
per annum (computed on the basis of the actual number of days
elapsed over a year of 365 days) of LIBOR (as defined below) plus
.50% (the 'Merger Consideration'). As used herein, 'LIBOR' means the
London Interbank Offered Rate for deposits of U.S. dollars having a
maturity of one month which appears on Telerate Access Service Page
3750 as of 11 A.M., London time, on the second business day
preceding the Closing Date.
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4. Section 6.1(a)(ix) of the Original Agreement is hereby amended by
adding the following at the end of that section:
or except for any agreement entered into in the ordinary course of
business relating to the purchase of equipment by the Company from
AT&T and the lease thereof by the Company to customers of AT&T.
5. Section 6.17. Section 6.17 of the Original Agreement is hereby
amended by deleting it in its entirety and substituting in lieu thereof the
following:
6.17 Funding Parent. Parent covenants that (i) not later than June
12, 1996, Parent shall receive a $100 million equity contribution and
(ii) not later than September 18, 1996, Parent shall receive an
additional $400 million equity contribution, in each case in the form of
cash or direct obligations of the government of the United States of
America ('Government Securities'). Parent covenants that it shall
utilize the proceeds of such equity contributions to purchase Government
Securities having a maturity not later than one year after the date of
purchase or receipt thereof by Parent. Parent covenants that it shall
keep such proceeds so invested (free of any Liens) until the Effective
Time.
6. Continuing Effect of Agreement. Except as expressly amended herein,
all of the terms and conditions of the Original Agreement shall remain in
full force and effect without amendment.
7. Counterparts. This Amendment may be executed in any number of
counterparts, each such counterpart being deemed to be an original
instrument, and all such counterparts shall together constitute the same
agreement.
8. GOVERNING LAW. THIS AMENDMENT SHALL BE DEEMED TO BE MADE IN AND IN
ALL RESPECTS SHALL BE INTERPRETED, CONSTRUED AND GOVERNED BY AND IN
ACCORDANCE WITH THE LAW OF THE STATE OF DELAWARE WITHOUT REGARD TO THE
CONFLICT OF LAW PRINCIPLES THEREOF.
IN WITNESS WHEREOF, this Amendment has been duly executed and
delivered by the duly authorized officers of the parties hereto as of the
date first written above.
AT&T CAPITAL CORPORATION
By: /S/ THOMAS C. WAJNERT
.................................
Name: Thomas C. Wajnert
Title: Chairman and Chief Executive
Officer
AT&T CORP.
By: /S/ S. LAWRENCE PRENDERGAST
.................................
Name: S. Lawrence Prendergast
Title: Vice President and Treasurer
HERCULES LIMITED
By: /S/ JEFF NASH
.................................
Name: Jeff Nash
Title: Director
ANTIGUA ACQUISITION CORPORATION
By: /S/ JEFF NASH
.................................
Name: Jeff Nash
Title: Vice President, Treasurer
and Secretary
A-39
<PAGE>
<PAGE>
ANNEX B
PERSONAL AND CONFIDENTIAL
June 5, 1996
Board of Directors
Special Committee of the Board of Directors
AT&T Capital Corporation
44 Whippany Road
Morristown, New Jersey 07962
Gentlemen and Mesdames:
You have requested our opinion as to the fairness to the holders (other
than AT&T Corp. and its affiliates) of the outstanding shares of Common Stock,
par value $0.01 per share (the 'Shares'), of AT&T Capital Corporation (the
'Company') of the $45.00 per Share in cash to be received by holders of Shares
pursuant to the Agreement and Plan of Merger (the 'Merger') dated as of June 5,
1996 among Antigua Acquisition Corporation, a wholly owned subsidiary of
Hercules Limited, the Company and AT&T Corp. (the 'Agreement').
Goldman, Sachs & Co., as part of its investment banking business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other purposes. We are
familiar with the Company, having acted as its financial advisor in connection
with, and having participated in certain of the negotiations leading to, the
Agreement. We have also provided and are providing investment banking services
to AT&T Corp. and its affiliates, including having acted as a joint global
coordinator of the $3 billion initial public offering of the common stock of
Lucent Technologies Inc. ('Lucent Technologies'), an affiliate of AT&T Corp. We
may provide investment banking services in the future to both the Company and
AT&T Corp. and its affiliates. On April 30, 1996, the Company announced that
AT&T Corp. delivered a letter to the Company requesting it to register Shares
held by AT&T Corp. for sale in a secondary public offering as an alternative to
the transactions contemplated by the Agreement. We have had no role in advising
AT&T Corp. in respect of this alternative transaction.
In connection with this opinion, we have reviewed, among other things, the
Agreement; the Operating Agreement dated August 4, 1993 between the Company and
AT&T Corp.; the Lucent Technologies Operating Agreement dated April 2, 1996
between the Company and Lucent Technologies; the NCR Operating Agreement dated
April 2, 1996 between the Company and NCR Corporation ('NCR'); the Intercompany
Agreement dated August 4, 1993 between the Company and AT&T Corp.; certain
related agreements between the Company and each of AT&T Corp., Lucent
Technologies and NCR; certain federal and state tax sharing agreements between
the Company and AT&T Corp.; Annual Reports on Form 10-K of the Company for the
five years ended December 31, 1995; certain interim reports to stockholders and
Quarterly Reports on Form 10-Q; certain other communications from the Company to
its stockholders; and certain internal financial analyses and forecasts for the
Company prepared by its management. We also have held discussions with members
of the senior management of the Company regarding the past and current business
operations, financial condition and future prospects of the Company. In
addition, we have reviewed the reported price and
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<PAGE>
trading activity for the Shares, compared certain financial and stock market
information for the Company with similar information for certain other companies
the securities of which are publicly traded, reviewed the financial terms of
certain recent business combinations in the commercial finance industry
specifically and in other industries generally and performed such other studies
and analyses as we considered appropriate.
We have relied without independent verification upon the accuracy and
completeness of all of the financial and other information reviewed by us for
purposes of this opinion. In addition, we have not made an independent
evaluation or appraisal of the assets and liabilities of the Company or any of
its subsidiaries and we have not been furnished with any such evaluation or
appraisal.
Based upon and subject to the foregoing and based upon such other matters
as we consider relevant, it is our opinion that as of the date hereof the $45.00
per Share in cash to be received by the holders of Shares (other than AT&T Corp.
and its affiliates) pursuant to the Agreement is fair to such holders.
Very truly yours,
/s/ GOLDMAN, SACHS & CO.
.....................................
(Goldman, Sachs & Co.)
B-2
<PAGE>
<PAGE>
ANNEX C
SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW
SS262. APPRAISAL RIGHTS
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares through
the effective date of the merger or consolidation, who has otherwise complied
with subsection (d) of this section and who has neither voted in favor of the
merger or consolidation nor consented thereto in writing pursuant to SS228 of
this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of his shares of stock under the circumstances described in
subsections (b) and (c) of this section. As used in this section, the word
'stockholder' means a holder of record of stock in a stock corporation and also
a member of record of a nonstock corporation; the words 'stock' and 'share' mean
and include what is ordinarily meant by those words and also membership or
membership interest of a member of a nonstock corporation; and the words
'depository receipt' mean a receipt or other instrument issued by a depository
representing an interest in one or more shares, or fractions thereof, solely of
stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to SSSS251 (other than a merger affected pursuant to
subsection (g) of Section 251), 252, 254, 257, 258, 263 or 264 of this title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock, which
stock, or depository receipts in respect thereof, at the record date fixed
to determine the stockholders entitled to receive notice of and to vote at
the meeting of stockholders to act upon the agreement of merger or
consolidation, were 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. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the holders of the surviving corporation as
provided in subsection (f) of SS251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to
SSSS251, 252, 254, 257, 258, 263 and 264 of this title to accept for such
stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock or depository receipts at the
effective date of the merger or consolidation will be either 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. or held of record by more than 2,000
holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under SS253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall
be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent
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corporation or the sale of all or substantially all of the assets of the
corporation. If the certificate of incorporation contains such a provision, the
procedures of this section, including those set forth in subsections (d) and (e)
of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to
the meeting, shall notify each of its stockholders who was such on the
record date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsections (b) or (c) hereof that
appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of this
section. Each stockholder electing to demand the appraisal of his shares
shall deliver to the corporation, before the taking of the vote on the
merger or consolidation, a written demand for appraisal of his shares. Such
demand will be sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends thereby to
demand the appraisal of his shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as herein
provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to SS228 or
253 of this title, the surviving or resulting corporation, either before
the effective date of the merger or consolidation or within 10 days
thereafter, shall notify each of the stockholders entitled to appraisal
rights of the effective date of the merger or consolidation and that
appraisal rights are available for any or all of the shares of the
constituent corporation, and shall include in such notice a copy of this
section. The notice shall be sent by certified or registered mail, return
receipt requested, addressed to the stockholder at his address as it
appears on the records of the corporation. Any stockholder entitled to
appraisal rights may, within 20 days after the date of mailing of the
notice, demand in writing from the surviving or resulting corporation the
appraisal of his shares. Such demand will be sufficient if it reasonably
informs the corporation of the identity of the stockholder and that the
stockholder intends thereby to demand the appraisal of his shares.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw his demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not voted
in favor of the merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares.
Such written statement shall be mailed to the stockholder within 10 days after
his written request for such a statement is received by the surviving or
resulting corporation or within 10 days after expiration of the period for
delivery of demands for appraisal under subsection (d) hereof, whichever is
later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
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resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted his
certificates of stock to the Register in Chancery, if such is required, may
participate fully in all proceedings until it is finally determined that he is
not entitled to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection (d)
of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section, or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of his demand for
an appraisal and an acceptance of the merger or consolidation, either within 60
days after the effective date of the merger or consolidation as provided in
subsection (e) of this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery
shall be dismissed as to any stockholder without the approval of the Court, and
such approval may be conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation. (Last amended by Ch.
299, L. '95, eff. 2-1-96.)
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ANNEX D
AMENDMENT TO 1993 SHARE PERFORMANCE INCENTIVE PLAN
The AT&T Capital Corporation 1993 Share Performance Incentive Plan (the
'Plan') is hereby amended, effective as of June 5, 1996, as set forth below:
1. Section 2 of the Plan is amended by adding the following new paragraph
(ap) at the end thereof:
(ap) 'Private Sale' means any Change in Control that results in, or
will have the result of, the Common Stock no longer being publicly traded
on a national securities exchange or traded on the NASDAQ over-the-counter
market.
2. Section 5 of the Plan is amended by adding the following Section 5.3 at
the end thereof:
5.3 Private Sale. (a) Notwithstanding anything in Sections 5.1 or 5.2
to the contrary, upon the occurrence of a Private Sale during the term of
the Plan, the Company shall pay to each Participant (i) 100% of such
Participant's Maximum Payout (without discount) for each pending
Performance Period under the Plan and (ii) with respect to any Performance
Period completed within twelve (12) months prior to such Private Sale, the
excess of (A) 100% of the Maximum Payout for such Participant for such
Performance Period over (B) the payment actually made to the Participant
for such Performance Period.
(b) Except as provided in paragraph (c) below, and subject to Section
5.2 hereof, following any Award Payout for pending and completed
Performance Periods under this Section 5.3, Award Payouts with respect to
any Performance Periods beginning after the occurrence of a Private Sale
will be determined in accordance with the provisions of Section 4 hereof
without modification.
(c) Notwithstanding paragraph (b) above, upon the consummation of the
merger contemplated by the Agreement and Plan of Merger among AT&T Capital
Corporation, AT&T Corp., Hercules Limited and Antigua Acquisition
Corporation, dated as of June 5, 1996 (the 'Merger Agreement'), the Company
shall pay to each Participant, 100% of such Participant's Maximum Payout
(without discount) for each Performance Period under the Plan which had not
commenced as of the consummation of such merger; provided, however, that
for any Participant who is not a member of the Company's Leadership Forum,
such payment will not be made unless such Participant has entered into an
agreement with Hercules Limited and the 'Surviving Corporation' (as defined
in the Merger Agreement) to revise the terms of the Company's Leadership
Severance Plan or Company's Member Severance Plan to modify the definition
of 'Qualifying Termination' in such plans, as it applies to such
Participant. In the event an Award Payout is not made to a Participant
pursuant to this paragraph (c), Performance Periods under the Plan
beginning after the consummation of the merger contemplated by the Merger
Agreement will continue pursuant to their terms with respect to such
Participant.
(d) All payments to be made under this Section 5.3 shall be made
immediately following the consummation of the Private Sale or the merger
contemplated by the Merger Agreement, as the case may be.
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<PAGE>
ANNEX E
CERTAIN INFORMATION REGARDING DIRECTORS
AND EXECUTIVE OFFICERS OF THE COMPANY AND AT&T
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
Except as noted below, (i) each of the persons named below is a citizen of
the United States of America, (ii) each of the persons named below whose
principal employment is with the Company or AT&T has held high level managerial
positions with the Company or AT&T, as the case may be, or their respective
affiliates, for more than the past five years and (iii) none of the persons
named below is the beneficial owner of any Company Common Stock. Members of the
Board of Directors of the Company are indicated with an asterisk. For each
person whose principal employment is with the Company or AT&T, the principal
business of such person's employer is described in 'Information Statement
Summary -- The Parties to the Merger.'
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION; BUSINESS ADDRESS;
NAME PRINCIPAL BUSINESS OF EMPLOYER AND FIVE-YEAR EMPLOYMENT HISTORY
- ------------------------------------ ---------------------------------------------------------------------------
<S> <C>
*John P. Clancey.................... President and Chief Executive Officer
Sea-Land Service, Inc.
6000 Carnegie Boulevard
Charlotte, NC 28209
Mr. Clancey owns 2,461 shares of Company Common Stock and 4,000 Options.
Edward M. Dwyer..................... Senior Vice President and Chief Financial Officer
AT&T Capital Corporation
44 Whippany Road
Morristown, NJ 07962
From July 1994 to October 1995, Mr. Dwyer was Senior Vice President, Chief
Financial Officer and Treasurer of the Company. From April 1993 to June
1994, he was Vice President and Treasurer of the Company and from July 1991
to March 1993 he was Vice President and Treasurer of Capital Holdings.
Mr. Dwyer owns 32,600 shares of Company Common Stock and 50,508 Options.
*James P. Kelly..................... Executive Vice President and Chief Operating Officer
United Parcel Service of America, Inc.
55 Glenlake Parkway, N.E.
Atlanta, GA 30328
Mr. Kelly owns 750 shares of Company Common Stock and 8,987 Options.
*Gerald M. Lowrie................... Senior Vice President -- Federal Government Affairs
AT&T Corp.
1120 20th Street, N.W.
Washington, DC 20036
Mr. Lowrie owns 1,000 shares of Company Common Stock.
*William B. Marx, Jr. .............. Senior Executive Vice President
Lucent Technologies Inc.
600 Mountain Avenue
Murray Hill, NJ 07974
Mr. Marx was Executive Vice President of AT&T and Chief Executive Officer
of AT&T's Multimedia Products Group, from October 1994 to February 1996. He
was Executive Vice President of AT&T and Chief Executive Officer of AT&T's
Network Systems Group from July 1989 to September 1994.
</TABLE>
E-1
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<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION; BUSINESS ADDRESS;
NAME PRINCIPAL BUSINESS OF EMPLOYER AND FIVE-YEAR EMPLOYMENT HISTORY
- ------------------------------------ ---------------------------------------------------------------------------
<S> <C>
G. Daniel McCarthy.................. Senior Vice President, General Counsel, Secretary and Chief Risk Management
Officer
AT&T Capital Corporation
44 Whippany Road
Morristown, NJ 07962
From February 1990 to March 1993, Mr. McCarthy was Senior Vice President,
General Counsel, Secretary, and Chief Risk Management Officer of Capital
Holdings.
Mr. McCarthy owns 42,697 shares of Company Common Stock and 70,480 Options.
*Joseph J. Melone................... President and Chief Executive Officer
The Equitable Companies, Incorporated
787 Seventh Avenue
New York, NY 10019
Mr. Melone was President and Chief Operating Officer of The Equitable
Companies, Inc. from November 1990 to January 1996.
Mr. Melone owns 2,000 shares of Company Common Stock and 4,000 Options.
*Richard W. Miller.................. Senior Executive Vice President and Chief Financial Officer
AT&T Corp.
295 North Maple Avenue
Basking Ridge, NJ 07920
Mr. Miller joined AT&T on August 3, 1993. Prior thereto, Mr. Miller was
with Wang Laboratories, Inc., 1 Industrial Avenue, Lowell, MA 08151, an
international computer company, from 1989 through 1993, serving as
President and Chief Operating Officer and later Chairman, President and
Chief Executive Officer.
Mr. Miller owns 2,000 shares of Company Common Stock.
Ruth A. Morey....................... Senior Vice President -- Corporate Information and Resources
AT&T Capital Corporation
44 Whippany Road
Morristown, NJ 07962
From February 1990 to March 1993, Ms. Morey served as Senior Vice President
and Chief Administrative Officer of Capital Holdings.
Ms. Morey owns 39,930 shares of Company Common Stock and 65,248 Options.
*S. Lawrence Prendergast............ Vice President and Treasurer
AT&T Corp.
295 North Maple Avenue
Basking Ridge, NJ 97920
Mr. Prendergast owns 2,000 shares of Company Common Stock.
Irving H. Rothman................... Group President
AT&T Capital Corporation
44 Whippany Road
Morristown, NJ 07962
From November 1991 to March 1993, Mr. Rothman was Group President of
Capital Holdings.
Mr. Rothman owns 53,372 shares of Company Common Stock and 105,740 Options.
*Maureen B. Tart.................... Vice President and Controller
AT&T Corp.
340 Mt. Kemble Avenue
Morristown, NJ 07962
</TABLE>
E-2
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<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION; BUSINESS ADDRESS;
NAME PRINCIPAL BUSINESS OF EMPLOYER AND FIVE-YEAR EMPLOYMENT HISTORY
- ------------------------------------ ---------------------------------------------------------------------------
<S> <C>
Ms. Tart has been Vice President and Controller of AT&T since March 1994.
From April 1993 to February 1994, Ms. Tart was Senior Vice President and
Chief Financial Officer of the Company. From February 1990 to March 1993,
Ms. Tart was Senior Vice President and Chief Financial Officer of Capital
Holdings.
Ms. Tart owns 2,000 shares of Company Common Stock.
Charles D. Van Sickle............... Group President
AT&T Capital Corporation
44 Whippany Road
Morristown, NJ 07962
From November 1991 to March 1993 Mr. Van Sickle was Group President of
Capital Holdings.
Mr. Van Sickle owns 47,093 shares of Company Common Stock and 93,283
Options.
*Thomas C. Wajnert.................. Chairman and Chief Executive Officer
AT&T Capital Corporation
44 Whippany Road
Morristown, NJ 07962
Mr. Wajnert was President, Chief Executive Officer and Vice Chairman of the
Company from April 1993 to July 1993. From February 1990 to March 1993, Mr.
Wajnert was President and Chief Executive Officer of Capital Holdings.
Mr. Wajnert owns 124,658 shares of Company Common Stock and 248,254
Options.
*Brooks Walker, Jr.................. General Partner
Walkers Investors
2930 Broadway
San Francisco, CA 94115
Mr. Walker owns 5,000 shares of Company Common Stock and 8,897 Options.
*Marilyn J. Wasser.................. Vice President -- Law and Secretary
AT&T Corp.
131 Morristown Road
Basking Ridge, NJ 07924
</TABLE>
DIRECTORS AND EXECUTIVE OFFICERS OF AT&T
Except as noted below, (i) each of the persons named below is a citizen of
the United States of America, (ii) each of the persons named below whose
principal employment is with AT&T has held high level managerial positions with
AT&T or its affiliates for more than the past five years and (iii) none of the
persons named below is the beneficial owner of any Company Common Stock. Members
of the Board of Directors of AT&T are indicated with an asterisk. For each
person whose principal employment is with AT&T, the principal business of such
person's employer is described in 'Information Statement Summary -- The Parties
to the Merger.'
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION; BUSINESS ADDRESS; PRINCIPAL
NAME BUSINESS OF EMPLOYER AND FIVE-YEAR EMPLOYMENT HISTORY
- ------------------------------------ ---------------------------------------------------------------------------
<S> <C>
*Robert E. Allen.................... Chairman and Chief Executive Officer,
AT&T Corp.
32 Avenue of the Americas
New York, NY 10013-2412
</TABLE>
E-3
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<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION; BUSINESS ADDRESS; PRINCIPAL
NAME BUSINESS OF EMPLOYER AND FIVE-YEAR EMPLOYMENT HISTORY
- ------------------------------------ ---------------------------------------------------------------------------
<S> <C>
Harold W. Burlingame................ Executive Vice President
Human Resources,
AT&T Corp.
295 North Maple Avenue
Basking Ridge, NJ 07920
*Kenneth T. Derr.................... Chairman and Chief Executive Officer of Chevron
Corporation (International Oil Company)
575 Market Street
San Francisco, CA 94105
Mr. Derr has been Chairman and Chief Executive Officer of Chevron
Corporation for more than the past five years.
*M. Kathryn Eickhoff................ President of Eickhoff Economics, Inc.
(Economic Consultants)
510 LaGuardia Place, Suite 400
New York, NY 10012
Ms. Eickhoff has been President of Eickhoff Economics Incorporated for more
than the past five years.
*Walter Y. Elisha................... Chairman & Chief Executive Officer of Springs Industries, Inc.
(Textile Manufacturing)
205 North White Street P.O. Box 70
Fort Mill, SC 29715
Mr. Elisha has been the Chairman and Chief Executive Officer of Springs
Industries, Inc. for more than the past five years.
*Belton K. Johnson.................. Former Owners of Chaparrosa Ranch
100 West Houston Street
Suite 1100
San Antonio, TX 78205
Mr. Johnson has been the Chairman of Belton K. Johnson Interests, a private
investment company, for more than the past five years.
*Ralph S. Larsen.................... Chairman and Chief Executive Officer of Johnson & Johnson (Pharmaceutical,
Medical, and Consumer Products)
One Johnson & Johnson Plaza
New Brunswick, NJ 08933
Mr. Larsen has been Chairman and Chief Executive Officer of Johnson &
Johnson for more than the past five years.
Marilyn Laurie...................... Executive Vice President -- Public Relations
AT&T Corp.
295 North Maple Avenue
Basking Ridge, NJ 07920
Gail J. McGovern.................... Executive Vice President
AT&T Corp.
55 Corporate Drive
Bridgewater, NJ 08807
*Donald F. McHenry.................. President of IRC Group, Inc. (International Relations Consultants)
Georgetown University
School of Foreign Service
ICC301
Washington, D.C. 20057
Mr. McHenry has been the President of IRC Group and the University Research
Professor of Diplomacy and International Relations, Georgetown University
for more than the past five years.
</TABLE>
E-4
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION; BUSINESS ADDRESS; PRINCIPAL
NAME BUSINESS OF EMPLOYER AND FIVE-YEAR EMPLOYMENT HISTORY
- ------------------------------------ ---------------------------------------------------------------------------
<S> <C>
Richard W. Miller................... Senior Executive Vice President & Chief Financial Officer,
AT&T Corp.
295 North Maple Avenue
Basking Ridge, NJ 07920
Mr. Miller joined AT&T on August 3, 1993. Prior thereto, Mr. Miller was
with Wang Laboratories, Inc., 1 Industrial Avenue, Lowell, MA 08151, an
international computer company, from 1989 through 1993, serving as
President and Chief Operating Officer and later Chairman, President and
Chief Executive Officer.
Mr. Miller owns 2,000 shares of Company Common Stock.
Joseph P. Nacchio................... Executive Vice President
AT&T Corp.
295 North Maple Avenue
Basking Ridge, NJ 07920
Lars Nyberg......................... Chief Executive Officer of NCR Corporation
NCR Corporation
1700 East Paterson Boulevard
Dayton, OH 45479-0001
Prior to joining NCR, Mr. Nyberg was Chairman and Chief Executive Officer
of Philips' Communications Systems Division of Philips Electronics NV, a
telecommunications equipment company, from 1993 to 1995. From 1990 to 1993
he held other positions with Philips Electronics NV.
John C. Petrillo.................... Executive Vice President
AT&T
295 North Maple Avenue
Basking Ridge, NJ 07920
Ronald J. Ponder.................... Executive Vice President
AT&T
295 North Maple Avenue
Basking Ridge, NJ 07920
Prior to joining AT&T, Mr. Ponder was Executive Vice President and Chief
Information Officer for Sprint Corporation, a telecommunications company,
from 1991 to 1993 and prior to that Mr. Ponder was Chief Information
Officer with the Federal Express Company, an express delivery company.
S. Lawrence Prendergast............. Vice President and Treasurer
AT&T Corp.
One Oak Way
Berkeley Heights, NJ 07922-2724
Mr. Prendergast owns 2,000 shares of Company Common Stock.
Henry B. Schacht.................... Chairman and Chief Executive Officer of Lucent Technologies Inc.
Prior to joining Lucent Technologies, Mr. Schacht was Chairman of Cummins
Engine Company, Inc., a manufacturer of diesel engines, from 1977 to 1995
and was Chief Executive Officer from 1973 to 1994.
*Michael I. Sovern.................. President Emeritus & Chancellor
Kent Professor of Law at
Columbia University
435 W. 116th Street, Box B20
New York, NY 10027
Mr. Sovern has been President Emeritus & Chancellor Kent Professor of Law
at Columbia University since 1993. Prior thereto Mr. Sovern was the
President of Columbia University for more than five years.
</TABLE>
E-5
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION; BUSINESS ADDRESS; PRINCIPAL
NAME BUSINESS OF EMPLOYER AND FIVE-YEAR EMPLOYMENT HISTORY
- ------------------------------------ ---------------------------------------------------------------------------
<S> <C>
Maureen B. Tart..................... Vice President and Controller,
AT&T Corp.
340 Mt. Kemble Avenue
Morristown, NJ 07962
Ms. Tart owns 2,000 shares of Company Common Stock.
Marilyn J. Wasser................... Vice President -- Law and Secretary
AT&T Corp.
131 Morristown Road
Basking Ridge, NJ 07924
*Joseph D. Williams................. Retired Chairman and Chief Executive Officer of Warner-Lambert Co.
(Pharmaceuticals, Health Care and Consumer Products)
182 Tabor Road
Morris Plains, NJ 07950
Mr. Williams has been Chairman of the Executive Committee of Warner-Lambert
Co. since 1991. Prior thereto Mr. Williams was Chairman and Chief Executive
Officer from 1985 to 1991.
*Thomas H. Wyman.................... Senior Advisor, SBC Warburg, Inc. (Investment Banking)
277 Park Avenue
New York, NY 10172
Mr. Wyman was the Chairman of S.G. Warburg & Co. Inc. from 1992 to 1996,
and was Vice Chairman of S.G. Warburg Group PLC (U.K.) from 1993 to 1995.
Prior to 1992, Mr. Wyman was the Chairman of United Biscuits (Holdings)
U.S. Ltd, a bakery products manufacturer.
Mr. Wyman owns 1,500 shares of Company Common Stock.
John D. Zeglis...................... General Counsel and Senior Executive Vice President -- Policy Development
and Operations Support
AT&T Corp.
295 North Maple Avenue
Basking Ridge, NJ 07920
</TABLE>
E-6
<PAGE>
<PAGE>
ANNEX F
CERTAIN INFORMATION REGARDING DIRECTORS
AND EXECUTIVE OFFICERS OF MERGER SUB AND NOMURA
1. DIRECTORS AND EXECUTIVE OFFICERS OF MERGER SUB
Except as noted below, (i) each of the persons named below is a citizen of
the United Kingdom, (ii) none of the persons named below is the beneficial owner
of any Company Common Stock, (iii) none of the persons named below has been
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors) in the last five years, and (iv) each of the persons named below
is a member of the Board of Directors of Merger Sub.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION; BUSINESS ADDRESS;
NAME PRINCIPAL BUSINESS OF EMPLOYER AND FIVE-YEAR EMPLOYMENT HISTORY
- ------------------------------------ ---------------------------------------------------------------------------
<S> <C>
Guy Hands........................... Managing Director
Nomura International plc
Nomura House, 1 St. Martin's-le-Grand
London, England EC1A 4NP
Mr. Hands was Executive Director of Goldman Sachs International in London
from July 1982 to November 1994.
Jeff Nash........................... Director
Nomura International plc
Nomura House, 1 St. Martin's-le-Grand
London, England EC1A 4NP
Mr. Nash was Manager (Tax Services) at Arthur Andersen & Co. from 1990 to
June 1994 in Budapest and London.
</TABLE>
2. DIRECTORS AND EXECUTIVE OFFICERS OF NOMURA
Except as noted below, (i) each of the persons named below is a citizen of
Japan, (ii) none of the persons named below is the beneficial owner of any
Company Common Stock, (iii) none of the persons named below has been convicted
in a criminal proceeding (excluding traffic violations or similar misdemeanors)
in the last five years, (iv) each of the persons named below is a member of the
Board of Directors of Nomura, and (v) the business address for each of the
persons named below is The Nomura Securities Co., Ltd., 1-9-1, Nihonbashi,
Chuo-ku, Tokyo 103, Japan.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION; BUSINESS ADDRESS;
NAME PRINCIPAL BUSINESS OF EMPLOYER AND FIVE-YEAR EMPLOYMENT HISTORY
- ------------------------------------ ---------------------------------------------------------------------------
<S> <C>
Toshio Ando......................... Director
The Nomura Securities Co., Ltd.
Mr. Ando has been Director of the Tobu and Hokuriku Area Sales Promotion
Headquarters of Nomura and Director of Nomura since June 1995. Prior to
that, Mr. Ando held various managerial positions in the corporate
communications department and at the Kyoto branch of Nomura.
Takamichi Arata..................... Director
The Nomura Securities Co., Ltd.
Mr. Arata has been Director of the financial management and system planning
department of Nomura and Director of Nomura since June 1996. Prior to that,
Mr. Arata held various management positions in the system planning and
controller's departments at Nomura.
</TABLE>
F-1
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION; BUSINESS ADDRESS;
NAME PRINCIPAL BUSINESS OF EMPLOYER AND FIVE-YEAR EMPLOYMENT HISTORY
- ------------------------------------ ---------------------------------------------------------------------------
<S> <C>
Max C. Chapman, Jr.................. Managing Director
The Nomura Securities Co., Ltd.
2 World Financial Center
Building B
New York, N.Y. 10281-1198
Mr. Chapman has been Chairman of Nomura Holding America Inc. and Managing
Director of Nomura since June 1996. Prior to that, Mr. Chapman had been a
Director of Nomura since June 1990.
Mr. Chapman is a citizen of the United States.
Heiji Endo.......................... Director
The Nomura Securities Co., Ltd.
Mr. Endo has been Director of the legal, corporate planning and secretarial
departments of Nomura and Director of Nomura since June 1994. Prior to
that, Mr. Endo had been Head of the secretarial department of Nomura.
Nobutaka Fujikura................... Managing Director
The Nomura Securities Co., Ltd.
Mr. Fujikura has been Managing Director of Nomura since June 1996 and
Director of the general services department of Nomura since October 1995.
Prior to that, he held various positions in clearing and operations at
Nomura.
Takashi Fujita...................... Director
The Nomura Securities Co., Ltd.
Mr. Fujita has been Director of the Kinki Area Sales Promotion Headquarters
of Nomura and Director of Nomura since June 1996. Prior to that, Mr. Fujita
held various management positions in branches of Nomura and in the sales
and investment services areas at Nomura.
Toshiaki Ito........................ Managing Director
The Nomura Securities Co., Ltd.
Mr. Ito has been Director of Corporate Planning of Nomura since May 1996
and Managing Director of Nomura since June 1995. Prior to that, he held
various positions in financial management and personnel at Nomura.
Kiichiro Iwasaki.................... Executive Vice President
The Nomura Securities Co., Ltd.
5-4, Kitahama 2-chome
Chuo-Ku, Osaka 541
Japan
Mr. Iwasaki has been Executive Vice President of Nomura since June 1993.
Prior to that, Mr. Iwasaki had been Executive Managing Director of Nomura.
Nobuyuki Katsuki.................... Statutory Auditor
The Nomura Securities Co., Ltd.
Mr. Katsuki has been Statutory Auditor of Nomura since June 1994. Prior to
that, Mr. Katsuki held various management positions in the Nomura Group and
China and overseas project departments of Nomura.
Mr. Katsuki is not a member of the Board of Directors of Nomura.
</TABLE>
F-2
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION; BUSINESS ADDRESS;
NAME PRINCIPAL BUSINESS OF EMPLOYER AND FIVE-YEAR EMPLOYMENT HISTORY
- ------------------------------------ ---------------------------------------------------------------------------
<S> <C>
Tomio Kezuka........................ Director
The Nomura Securities Co., Ltd.
Mr. Kezuka has been Director of the investment trust, employees' investment
plan, and the market planning and sales promotion departments of Nomura
since June 1996 and Director of Nomura since June 1993. Prior to June 1996,
Mr. Kezuka held various positions in the sales, personnel and employee
relations areas at Nomura.
Shin Kijima......................... Director
The Nomura Securities Co., Ltd.
Mr. Kijima has been Director of the equity, products development and equity
distribution departments of Nomura since June 1996 and Director of Nomura
since June 1993. Prior to June 1996, Mr. Kijima held various positions in
the product development, treasury and fixed income areas at Nomura.
Masatoshi Kobayashi................. Director
The Nomura Securities Co., Ltd.
Mr. Kobayashi has been Director of the regional institutional sales
department of Nomura since June 1996 and Director of Nomura since June
1994. From June 1994 to June 1996, Mr. Kobayashi was the Director of the
Tokyo Area Sales Promotion Headquarters of Nomura. Prior to that, Mr.
Kobayashi held various management positions in sales at Nomura.
Nobuyuki Koga....................... Director
The Nomura Securities Co., Ltd.
Mr. Koga has been General Manager of the personnel department at Nomura and
Director of Nomura since June 1995. Prior to that, Mr. Koga held various
positions in the personnel and corporate planning areas at Nomura.
Masaharu Koike...................... Managing Director
The Nomura Securities Co., Ltd.
Mr. Koike has been Managing Director, Director of Corporate Finance, and
General Manager of Financial Technology Information of Nomura since June
1996. Prior to that, he held various positions in the treasury, fixed
income and sales areas at Nomura.
Taizo Kondo......................... Director
The Nomura Securities Co., Ltd.
Mr. Kondo has been Representative of the China Office of Nomura since June
1996 and Director of Nomura since June 1991. From June 1993 to June 1996
Mr. Kondo was General Manager of the Asia Oceania Headquarters of Nomura.
Prior to that, Mr. Kondo held various positions in clearing and operations
at Nomura.
Shozo Kumano........................ Director
The Nomura Securities Co., Ltd.
Mr. Kumano has been Director of the Nomura Group department and Director of
Nomura since June 1994. Prior to that, he held various legal and managerial
positions at Nomura.
</TABLE>
F-3
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION; BUSINESS ADDRESS;
NAME PRINCIPAL BUSINESS OF EMPLOYER AND FIVE-YEAR EMPLOYMENT HISTORY
- ------------------------------------ ---------------------------------------------------------------------------
<S> <C>
Tokujin Masuda...................... Statutory Auditor
The Nomura Securities Co., Ltd.
Mr. Masuda has been Statutory Auditor of Nomura since June 1996. From June
1994 to June 1996, Mr. Masuda was General Manager of the supervision and
inspection department of Nomura. Prior to that, Mr. Masuda was General
Manager of the Toranomon branch of Nomura.
Mr. Masuda is not a member of the Board of Directors of Nomura.
Shinpei Matsuki..................... Managing Director
The Nomura Securities Co., Ltd.
Mr. Matsuki has been Director of equity distribution at Nomura and Managing
Director of Nomura since June 1995. Prior to that, Mr. Matsuki held various
positions in equity sales and trading at Nomura.
Haruhiko Moriyama................... Director
The Nomura Securities Co., Ltd.
Mr. Moriyama has been Director of the Chugoku, Shikoku and Kyushu Area
Sales Promotion Headquarters of Nomura and Director of Nomura since June
1996. Prior to that, Mr. Moriyama held various management positions in the
sales and fixed income areas at Nomura.
Osamu Muramatsu..................... Director
The Nomura Securities Co., Ltd.
Mr. Muramatsu has been Deputy General Manager of the Osaka branch and
Director of the Osaka corporate financial consulting and investment
counseling department of Nomura and Director of Nomura since June 1996.
Prior to that, Mr. Muramatsu held various management positions in the
corporate finance area and at the Sapporo branch of Nomura.
Naotaka Murasumi.................... Executive Vice President
The Nomura Securities Co., Ltd.
Mr. Murasumi was Executive Managing Director of Nomura from June 1990 to
June 1993.
Koji Nakagawa....................... Statutory Auditor
The Nomura Securities Co., Ltd.
Mr. Nakagawa has been Statutory Auditor of Nomura since June 1994. Prior to
that, Mr. Nakagawa had been an Advisor of NRI.
Mr. Nakagawa is not a member of the Board of Directors of Nomura.
Kamezo Nakai........................ Director
The Nomura Securities Co., Ltd.
Mr. Nakai has been Director of the Tokyo Area Sales Promotion Headquarters
of Nomura since June 1996 and Director of Nomura since June 1995. Prior to
June 1996, Mr. Nakai held various management positions in the sales and
investment management areas at Nomura.
</TABLE>
F-4
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION; BUSINESS ADDRESS;
NAME PRINCIPAL BUSINESS OF EMPLOYER AND FIVE-YEAR EMPLOYMENT HISTORY
- ------------------------------------ ---------------------------------------------------------------------------
<S> <C>
Akio Nakaniwa....................... Director
The Nomura Securities Co., Ltd.
19-22, Nishiki 2-chome
Naka-Ku, Nagoya 460
Japan
Mr. Nakaniwa has been Director of the Chubu Area Sales Promotion
Headquarters, Deputy General Manager of the Nagoya branch and General
Manager of the investment consulting department of the Nagoya branch of
Nomura since June 1996 and Director of Nomura since June 1994. From June
1994 to June 1996, Mr. Nakaniwa was Director of the Tokyo Area Sales
Promotion Headquarters of Nomura. Prior to that, Mr. Nakaniwa was General
Manager of the Sales Department of the Osaka branch of Nomura.
Nobuo Nakazawa...................... Executive Managing Director
The Nomura Securities Co., Ltd.
Mr. Nakazawa has been Executive Managing Director of Nomura, Chairman of
Nomura Australia Ltd., and Chairman of Nomura Project Finance International
Limited since June 1996. Mr. Nakazawa was Managing Director of Nomura from
June 1990 to June 1996.
Hisaji Nakazono..................... Managing Director
The Nomura Securities Co., Ltd.
Mr. Nakazono has been Director of Corporate Communications and Compliance
Director of Nomura since June 1996 and Managing Director of Nomura since
June 1995. Prior to June 1996, Mr. Nakazono held various financial
management positions at Nomura.
Fumihide Nomura..................... Statutory Auditor
The Nomura Securities Co., Ltd.
Mr. Nomura has been Statutory Auditor of Nomura since June 1982.
Mr. Nomura is not a member of the Board of Directors of Nomura.
Akira Ogino......................... Executive Managing Director
The Nomura Securities Co., Ltd.
Mr. Ogino was Managing Director of Nomura from June 1991 to June 1996.
Kazuho Oya.......................... Director
The Nomura Securities Co., Ltd.
Mr. Oya has been Director of the Financial Institutions and Public
Corporations Headquarters of Nomura since June 1995 and Director of Nomura
since June 1994. Prior to June 1995, Mr. Oya held management positions in
the institutional equity sales and financial institutions areas at Nomura.
Atsushi Saito....................... Executive Vice President
The Nomura Securities Co., Ltd.
Mr. Saito has been Executive Vice President of Nomura and President of
Nomura Human Resources since June 1995. Mr. Saito was Executive Managing
Director of Nomura from December 1993 to June 1995, Managing Director of
Nomura from December 1992 to December 1993, and Executive Managing Director
of Nomura from June 1990 to December 1992.
</TABLE>
F-5
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION; BUSINESS ADDRESS;
NAME PRINCIPAL BUSINESS OF EMPLOYER AND FIVE-YEAR EMPLOYMENT HISTORY
- ------------------------------------ ---------------------------------------------------------------------------
<S> <C>
Hideo Sakamaki...................... President and Chief Executive Officer
The Nomura Securities Co., Ltd.
Mr. Sakamaki has been President and Chief Executive Officer of Nomura since
June 1991.
Yasuhiko Sato....................... Managing Director
The Nomura Securities Co., Ltd.
19-22, Nishiki 2-chome
Naka-Ku, Nagoya 460
Japan
Mr. Sato has been General Manager of the Nagoya branch of Nomura since June
1994 and Managing Director of Nomura since March 1993. Prior to that, Mr.
Sato was General Manager of various other branches of Nomura.
Nobuyuki Shigemune.................. Director
The Nomura Securities Co., Ltd.
5-4 Kitahama 2-chome
Chuo-Ku, Osaka 541
Japan
Mr. Shigemune has been General Manager of the Osaka branch of Nomura since
June 1996 and Director of Nomura since June 1993. Prior to June 1996, Mr.
Shigemune held various positions in the corporate finance and sales areas
at Nomura.
Masashi Suzuki...................... Chairman
The Nomura Securities Co., Ltd.
Mr. Suzuki was Executive Vice Chairman of Nomura from June 1993 to June
1994. Prior to that he had been Executive Vice President of Nomura.
Setsuya Tabuchi..................... Director-Counsellor
The Nomura Securities Co., Ltd.
Mr. Tabuchi has been Director-Counsellor of Nomura since June 1995. From
July 1991 to June 1995, Mr. Tabuchi was Counsellor of Nomura.
Yoshihisa Tabuchi................... Director-Counsellor
The Nomura Securities Co., Ltd.
Mr. Tabuchi has been Director-Counsellor of Nomura since June 1995. From
July 1991 to June 1995, Mr. Tabuchi was Counsellor of Nomura.
Makoto Takahashi.................... Director
The Nomura Securities Co., Ltd.
Mr. Takahashi has been Director of the Financial Market Headquarters and
the products development department of Nomura and Director of Nomura since
June 1996. Prior to that, Mr. Takahashi held various management positions
in the investment and trading areas at Nomura.
Katsuya Takanashi................... Executive Managing Director
The Nomura Securities Co., Ltd.
Mr. Takanashi has been Executive Managing Director of Nomura and Chairman
or President of various international subsidiaries of Nomura since June
1993. Mr. Takanashi was Managing Director of Nomura from December 1988 to
June 1993.
</TABLE>
F-6
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION; BUSINESS ADDRESS;
NAME PRINCIPAL BUSINESS OF EMPLOYER AND FIVE-YEAR EMPLOYMENT HISTORY
- ------------------------------------ ---------------------------------------------------------------------------
<S> <C>
Jiro Takeshi........................ Managing Director
The Nomura Securities Co., Ltd.
Mr. Takeshi has been Managing Director of Nomura since June 1995 and
General Manager of the Head Office of Nomura since June 1994. Prior to June
1994, Mr. Takeshi held various managerial positions at Nomura.
Ken Tamura.......................... Executive Vice President
The Nomura Securities Co., Ltd.
Mr. Tamura was Executive Managing Director of Nomura from June 1993 to May
1996. Prior to that, Mr. Tamura had been Managing Director of Nomura since
December 1988.
Isao Teranishi...................... Managing Director
The Nomura Securities Co., Ltd.
Mr. Teranishi has been Director of the Financial Markets Headquarters of
Nomura since June 1996 and Managing Director of Nomura since June 1995.
Prior to June 1996, he held various positions in the treasury and fixed
income areas at Nomura.
Hitoshi Tonomura.................... Executive Vice President
Nomura International plc
Nomura House
1 St. Martin's-le-Grand
London EC1A 4NP
England
Mr. Tonomura has been Chairman of Nomura International plc and of various
other international subsidiaries of Nomura since June 1995, and Executive
Managing Director of Nomura since December 1988. Mr. Tonomura was Executive
Vice President of Nomura from June 1993 to March 1995.
Akira Tsuda......................... Executive Managing Director
The Nomura Securities Co., Ltd.
Mr. Tsuda was Managing Director of Nomura from June 1990 to June 1996.
Hiroshi Tsujimura................... Director
The Nomura Securities Co., Ltd.
2 World Financial Center
Building B
New York, N.Y. 10281-1198
Mr. Tsujimura has been President of Nomura Holding America Inc. and of
Nomura Securities International Inc. and Director of Nomura since June
1996. From June 1995 to June 1996, Mr. Tsujimura was General Manager of
Nomura Securities International Inc. Prior to that, Mr. Tsujimura had been
General Manager of the credit and risk analysis department at Nomura.
Shigeharu Ueda...................... Director
The Nomura Securities Co., Ltd.
Mr. Ueda has been Director of the Tokyo Metropolitan Area Sales Promotion
Headquarters of Nomura since June 1996 and Director of Nomura since June
1995. Prior to June 1996, Mr. Ueda held various sales and general
management positions at various branches of Nomura.
</TABLE>
F-7
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION; BUSINESS ADDRESS;
NAME PRINCIPAL BUSINESS OF EMPLOYER AND FIVE-YEAR EMPLOYMENT HISTORY
- ------------------------------------ ---------------------------------------------------------------------------
<S> <C>
Junichi Ujiie....................... Managing Director
The Nomura Securities Co., Ltd.
Mr. Ujiie has been Director of Risk Analysis at Nomura since June 1996 and
Managing Director of Nomura since June 1995. From June 1992 to June 1996,
Mr. Ujiie was General Manager of the United States Headquarters of Nomura.
Prior to that, Mr. Ujiie has been a Director of Nomura.
Shigehiko Yamamoto.................. Director
The Nomura Securities Co., Ltd.
Mr. Yamamoto has been Director of Nomura since June 1996 and General
Manager of the initial public offering department of Nomura since June
1991.
Iwane Yamazaki...................... Statutory Auditor
The Nomura Securities Co., Ltd.
Mr. Yamazaki has been Statutory Auditor of Nomura since June 1994. Prior to
that, Mr. Yamazaki had been General Manager of the supervision and
inspection department of Nomura.
Mr. Yamazaki is not a member of the Board of Directors of Nomura.
</TABLE>
F-8
STATEMENT OF DIFFERENCES
The section mark symbol shall be expressed as ..................SS
