AGREEMENT AND PLAN OF MERGER, dated as of November 3, 1996
(this "Agreement"), among BRITISH TELECOMMUNICATIONS plc, a public limited
company incorporated under the laws of England and Wales ("BT"), MCI
COMMUNICATIONS CORPORATION, a Delaware corporation ("MCI"), and TADWORTH
CORPORATION, a Delaware corporation and a wholly owned subsidiary of BT ("Merger
Sub").
W I T N E S S E T H :
WHEREAS, the respective Boards of Directors of BT, MCI and
Merger Sub have each determined that the Merger is in the best interests of
their respective shareholders and have approved the Merger upon the terms and
subject to the conditions set forth in this Agreement, whereby each issued and
outstanding share of common stock, par value $.10 per share, of MCI ("MCI Common
Stock"), other than shares owned directly or indirectly by BT or by MCI, will be
converted into the right to receive ordinary shares of BT represented by
American Depositary Shares of BT ("BT ADSs"), each representing ten ordinary
shares of 25p each of BT ("BT Ordinary Shares") and evidenced by American
Depositary Receipts ("BT ADRs") and cash;
WHEREAS, in order to effectuate the foregoing, MCI, upon the
terms and subject to the conditions of this Agreement and in accordance with the
General Corporation Law of the State of Delaware (the "DGCL"), will merge with
and into Merger Sub (the "Merger");
WHEREAS, BT, MCI and Merger Sub desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger; and
WHEREAS, for United States Federal income tax purposes, it is
intended that the Merger shall qualify as a reorganization under the provisions
of Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code")
and that this Agreement constitute a plan of reorganization within the meaning
of Section 1.368-2(g) of the income tax regulations promulgated under the Code.
NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants and agreements set forth
herein, and intending to be legally bound hereby, the parties hereto agree as
follows:
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ARTICLE I
THE MERGER
1.1. The Merger. Upon the terms and subject to the conditions
set forth in this Agreement, and in accordance with the DGCL, MCI shall be
merged with and into Merger Sub at the Effective Time. Following the Merger, the
separate corporate existence of MCI shall cease and Merger Sub shall continue as
the surviving corporation (the "Surviving Corporation").
1.2. Closing. The closing of the Merger (the "Closing") will
take place on the fifth Business Day after satisfaction or waiver (subject to
applicable law) of the conditions (excluding conditions that, by their terms,
cannot be satisfied until the Closing Date) set forth in Article VI (the
"Closing Date"), unless another time or date is agreed to in writing by the
parties hereto. The Closing shall be held at the offices of Shearman & Sterling,
000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, unless another place is agreed
to in writing by the parties hereto.
1.3. Effective Time. As soon as practicable following the
Closing, the parties shall (i) take all steps to obtain admission to the
official list of the London Stock Exchange (the "LSE") of the BT Ordinary Shares
to be issued in connection with the Merger and (if possible) simultaneously with
such admission file a certificate of merger (the "Delaware Certificate of
Merger") in such form as is required by and executed in accordance with the
relevant provisions of the DGCL and (ii) make all other filings or recordings
required under the DGCL. The Merger shall become effective at such time as the
Delaware Certificate of Merger is duly filed with the Delaware Secretary of
State or at such other time as BT and MCI shall agree in writing should be
specified in the Delaware Certificate of Merger (the date and time the Merger
becomes effective being the "Effective Time").
1.4. Effects of the Merger. At and after the Effective Time,
the Merger will have the effects set forth in the DGCL. Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time all the
property, rights, privileges, powers and franchises of MCI and Merger Sub shall
be vested in the Surviving Corporation, and all debts, liabilities and duties of
MCI and Merger Sub shall become the debts, liabilities and duties of the
Surviving Corporation.
1.5. 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
(except that Article I of the Certificate of Incorporation shall be amended as
of the Effective Time to read as follows: "The name of the Corporation is MCI
Communications Corporation"), until thereafter changed or amended as provided
therein or by applicable law.
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1.6. By-Laws. The by-laws of Merger Sub as in effect at the Effective Time
shall be the by-laws of the Surviving Corporation until thereafter changed or
amended as provided therein or by applicable law.
1.7. Officers of Surviving Corporation. The officers of MCI as
of the Effective Time shall be the officers of the Surviving Corporation, until
the earlier of their resignation or removal or otherwise ceasing to be an
officer or until their respective successors are duly elected and qualified, as
the case may be, and BT and the Surviving Corporation shall use all reasonable
efforts to cause such officers to be elected as of the Effective Time.
1.8. Effect on Capital Stock. As of the Effective Time, by
virtue of the Merger and without any action on the part of the holders of (i)
any shares of MCI Common Stock, (ii) any shares of Class A Common Stock, par
value $.10 per share, of MCI ("MCI Class A Common Stock") or (iii) any shares of
common stock, par value $.01 per share, of Merger Sub:
(a) Cancellation of Treasury Stock and BT-Owned Stock. Each
share of MCI Common Stock that is owned by MCI as treasury stock and
each share of MCI Common Stock and each share of MCI Class A Common
Stock that are owned by BT or any wholly owned Subsidiary of BT
(together, in each case, with the associated Right) shall automatically
be cancelled and retired and shall cease to exist and no stock of BT or
(subject to Section 1.8(c)) other consideration shall be delivered in
exchange therefor.
(b) Conversion of MCI Common Stock. Subject to Section 2.5 and
Section 2.14, each issued and outstanding share of MCI Common Stock
(other than shares to be cancelled in accordance with Section 1.8(a))
together with the associated Right shall be converted into the right to
receive 0.54 BT ADSs (the "Stock Consideration") and $6.00 in cash (the
"Cash Consideration" and, collectively with the Stock Consideration,
the "Merger Consideration"). As of the Effective Time, all such shares
of MCI Common Stock (and the associated Rights) shall no longer be
outstanding and shall automatically be cancelled and retired and shall
cease to exist, and each holder of a certificate representing any such
shares of MCI Common Stock (and the associated Rights) shall cease to
have any rights with respect thereto, except the right to receive, upon
surrender of such certificate in accordance with Section 2.2, the
Merger Consideration with respect to the shares of MCI Common Stock
formerly represented thereby to which such holder is entitled pursuant
to this Section 1.8 and a check in the amount of any cash in lieu of
fractional BT ADSs to which such holder is entitled pursuant to Section
2.5(b), without interest.
(c) Allotment of BT Ordinary Shares. In consideration of and in exchange for the
issuance to BT by the Surviving Corporation of such number of shares of common
stock of the Surviving Corporation as BT shall specify, BT shall (i) allot and
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issue the number of BT Ordinary Shares represented by BT ADSs to be
issued in the Merger to the ADR Depositary on behalf of the holders of
MCI Common Stock entitled thereto for the purposes of giving effect to
the conversion and exchange referred to in this Article I, (ii) cause
the Surviving Corporation to pay cash in the amount required to be
exchanged for shares of MCI Common Stock in the Merger pursuant to this
Section 1.8 and any cash in lieu of fractional BT ADSs and (iii) agree
to the cancellation of the MCI Class A Common Stock. Holders of BT ADSs
to be issued in the Merger shall not be entitled to receive the
forecast dividend, whether paid as an interim or final dividend, of
11.95p per BT Ordinary Share (the "Second Dividend") to be recommended
for payment in respect of its financial year ending March 31, 1997 and
BT shall in respect of the Second Dividend notify the LSE to xxxx the
BT Ordinary Shares "ex-dividend" in the Stock Exchange Daily Official
List on a date prior to the Effective Time. If the Effective Time shall
be prior to March 31, 1998, such holders shall be entitled to receive
the interim dividend payable by BT on the BT Ordinary Shares for the
year ending March 31, 1998 (normally paid in February of each year)
which shall be payable on the later of (i) the payment date for such
dividend or (ii) at the Effective Time to the ADR Depositary
concurrently with payment of the Merger Consideration pursuant to
Section 2.1. Holders of BT ADSs to be issued in the Merger shall not be
entitled to receive the special dividend or dividends payable on each
BT Ordinary Share referred to in Section 4.2(b)(i)(C).
ARTICLE II
EXCHANGE OF CERTIFICATES
2.1. Exchange Fund. At the Effective Time, (a) BT shall issue
to and deposit with BT's United States depositary (the "ADR Depositary"), for
the benefit of the holders of shares of MCI Common Stock converted in accordance
with Article I, BT Ordinary Shares in an amount sufficient to permit the ADR
Depositary to issue BT ADRs representing the number of BT ADSs issuable pursuant
to Section 1.8 and (b) the Surviving Corporation shall deposit with such bank or
trust company as may be designated by BT and be reasonably acceptable to MCI
(the "Exchange Agent") cash in the amount required to be exchanged for shares of
MCI Common Stock in the Merger pursuant to Section 1.8 and any cash in lieu of
fractional BT ADSs. BT shall cause the ADR Depositary to issue upon the
instructions of the Exchange Agent, for the benefit of the holders of shares of
MCI Common Stock converted in accordance with Article I, through the Exchange
Agent, BT ADRs representing the number of BT ADSs issuable pursuant to Section
1.8, as soon as practicable after the Effective Time, and the Exchange Agent
shall deliver cash contemplated to be paid pursuant to Section 1.8 and, from
time to time as required to make payments in lieu of fractional BT ADSs pursuant
to Section 2.5(b) (such cash and BT ADRs representing BT ADSs, together with any
dividends or distributions with respect thereto, being hereinafter
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referred to as the "Exchange Fund") in exchange for outstanding shares of MCI
Common Stock.
2.2. Exchange Procedures. As soon as reasonably practicable
after the Effective Time, the Exchange Agent shall mail to each holder of record
of a certificate or certificates which immediately prior to the Effective Time
represented outstanding shares of MCI Common Stock (and the associated Rights)
(the "Certificates") that were converted into the right to receive BT ADSs
pursuant to Section 1.8(b), (i) a letter of transmittal (which shall specify
that delivery shall be effected, and risk of loss and title to the Certificates
shall pass, only upon delivery of the Certificates to the Exchange Agent, and
which shall be in such form and have such other provisions as BT may reasonably
specify) and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for BT ADRs. Upon surrender of a Certificate for
cancellation to the Exchange Agent together with such letter of transmittal,
duly executed and completed in accordance with the instructions thereto, and
such other documents as may reasonably be required by the Exchange Agent, the
holder of such Certificate shall be entitled to receive in exchange therefor (A)
one or more BT ADRs representing, in the aggregate, the whole number of BT ADSs
that such holder has the right to receive pursuant to the provisions of Article
I (after taking into account all shares of MCI Common Stock then held by such
holder) and (B) a check in the amount equal to the cash that such holder has the
right to receive pursuant to the provisions of Article I and this Article II,
including cash in lieu of any fractional BT ADSs pursuant to Section 2.5, and
the Certificate so surrendered shall forthwith be cancelled. In the event of a
transfer of ownership of MCI Common Stock that is not registered in the transfer
records of MCI, one or more BT ADRs evidencing, in the aggregate, the proper
number of BT ADSs may be issued, a check in the proper amount of cash may be
paid pursuant to Section 1.8 and cash in lieu of any fractional BT ADSs and any
dividends or other distributions to which such holder is entitled pursuant to
Section 2.3 may be paid to a Person other than the Person in whose name the
Certificate so surrendered is registered if the Certificate representing such
MCI Common Stock is presented to the Exchange Agent, accompanied by all
documents required to evidence and effect such transfer and evidence that any
applicable stock transfer taxes have been paid. Until surrendered as
contemplated by this Article II, each Certificate shall be deemed at any time
after the Effective Time to represent only the right to receive upon surrender
the Merger Consideration with respect to the shares of MCI Common Stock formerly
represented thereby to which such holder is entitled pursuant to Section 1.8(b),
cash in lieu of any fractional BT ADSs to which such holder is entitled pursuant
to Section 2.5 and any dividends or other distributions to which such holder is
entitled pursuant to Section 2.3. No interest will be paid or will accrue on any
cash payable in lieu of any fractional BT ADSs payable pursuant to Section 2.5
or any dividends or other distributions payable pursuant to Section 2.3.
2.3. Distributions with Respect to Unexchanged Shares. No
dividends or other distributions declared or made with respect to BT Ordinary
Shares with a record date after the Effective Time shall be paid to the holder
of any unsurrendered Certificate with respect to the BT ADSs that such holder
would be entitled to receive upon surrender of such
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Certificate and no cash payment in lieu of fractional BT ADSs shall be paid to
any such holder pursuant to Section 2.5 until such holder shall surrender such
Certificate in accordance with Section 2.2. Subject to the effect of applicable
laws, following surrender of any such Certificate, there shall be paid to the
holder of BT ADSs issued in exchange therefor, without interest, (a) promptly
after the time of such surrender, the amount of any cash payable in lieu of
fractional BT ADSs to which such holder is entitled pursuant to Section 2.5 and
the amount of dividends or other distributions with a record date after the
Effective Time theretofore paid with respect to such whole BT ADSs, and (b) at
the appropriate payment date, the amount of dividends or other distributions
with a record date after the Effective Time but prior to such surrender and a
payment date subsequent to such surrender payable with respect to such BT ADSs.
2.4. No Further Ownership Rights in MCI Common Stock. All BT
ADRs (and the BT ADSs represented by such BT ADRs) issued and cash paid upon
conversion of shares of MCI Common Stock in accordance with the terms of Article
I and this Article II (including any cash paid pursuant to Sections 2.3 or 2.5)
shall be deemed to have been issued or paid in full satisfaction of all rights
pertaining to the shares of MCI Common Stock (and the Rights associated
therewith).
2.5. No Fractional BT ADSs. (a) No certificates or scrip or BT
ADRs representing fractional BT ADSs shall be issued upon the surrender for
exchange of Certificates and such fractional share interests will not entitle
the owner thereof to vote or to have any rights of a shareholder of BT or a
holder of BT ADRs or BT ADSs.
(b) Notwithstanding any other provision of this Agreement,
each holder of shares of MCI Common Stock exchanged pursuant to the Merger who
would otherwise have been entitled to receive a fraction of a BT ADS (after
taking into account all Certificates delivered by such holder) shall receive, in
lieu thereof, cash (without interest) in an amount equal to the product of (i)
such fractional part of a BT ADS multiplied by (ii) the last sales price per BT
ADS on the New York Stock Exchange, Inc. (the "NYSE") Composite Transaction Tape
for the Closing Date. As promptly as practicable after the determination of the
amount of cash, if any, to be paid to holders of fractional interests, the
Exchange Agent shall so notify BT, and BT shall cause the Surviving Corporation
to deposit such amount with the Exchange Agent and shall cause the Exchange
Agent to forward payments to such holders of fractional interests subject to and
in accordance with the terms hereof.
2.6. Termination of Exchange Fund. Any portion of the Exchange
Fund which remains undistributed to the holders of Certificates for twelve
months after the Effective Time shall be delivered to the Surviving Corporation
or otherwise on the instruction of the Surviving Corporation, and any holders of
the Certificates who have not theretofore complied with this Article II shall
thereafter look only to the Surviving Corporation or BT for the Merger
Consideration with respect to the shares of MCI Common Stock formerly
represented thereby to which such holders are entitled pursuant to Section 2.2,
any cash in lieu of fractional BT ADSs to which such holders are entitled
7
pursuant to Section 2.5 and any dividends or distributions with respect to BT
ADSs to which such holders are entitled pursuant to Section 2.3. Any such former
portion of the Exchange Fund remaining unclaimed by holders of shares of MCI
Common Stock five years after the Effective Time (or such earlier date
immediately prior to such time as such amounts would otherwise escheat to or
become property of any Governmental Entity) shall, to the extent permitted by
applicable law, become the property of the Surviving Corporation free and clear
of any claims or interest of any Person previously entitled thereto.
2.7. No Liability. None of BT, Merger Sub, MCI, the ADR
Depositary, the Surviving Corporation or the Exchange Agent shall be liable to
any Person in respect of any BT ADRs (or dividends or distributions with respect
to BT ADSs) or cash from the Exchange Fund delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
2.8. Investment of Exchange Fund. The Exchange Agent shall invest any cash
included in the Exchange Fund as directed by the Surviving Corporation on a
daily basis. Any interest and other income resulting from such investments shall
promptly be paid to the Surviving Corporation.
2.9. Lost Certificates. If any Certificate shall have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by the
Person claiming such Certificate to be lost, stolen or destroyed and, if
required by BT, the posting by such Person of a bond in such reasonable amount
as BT may direct as indemnity against any claim that may be made against it with
respect to such Certificate, the Exchange Agent will deliver in exchange for
such lost, stolen or destroyed Certificate the applicable Merger Consideration
with respect to the shares of MCI Common Stock formerly represented thereby, any
cash in lieu of fractional BT ADSs, and unpaid dividends and distributions on BT
ADSs deliverable in respect thereof, pursuant to this Agreement.
2.10. Withholding Rights. Each of the Surviving Corporation
and BT shall be entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Agreement to any holder of shares of MCI Common Stock
such amounts as it is required to deduct and withhold with respect to the making
of such payment under the Code, or any provision of state, local or foreign tax
law, including the tax laws of the United Kingdom. To the extent that amounts
are so withheld by the Surviving Corporation or BT, as the case may be, such
withheld amounts shall be treated for all purposes of this Agreement as having
been paid to the holder of the shares of MCI Common Stock in respect of which
such deduction and withholding was made by the Surviving Corporation or BT, as
the case may be.
2.11. Further Assurances. At and after the Effective Time, the officers and
directors of the Surviving Corporation will be authorized to execute and
deliver, in the name and on behalf of MCI or Merger Sub, any deeds, bills of
sale, assignments or assurances and to take and do, in the name and on behalf of
MCI or Merger Sub, any other actions and
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things to vest, perfect or confirm of record or otherwise in the Surviving
Corporation any and all right, title and interest in, to and under any of the
rights, properties or assets acquired or to be acquired by the Surviving
Corporation as a result of, or in connection with, the Merger.
2.12. Stock Transfer Books. At the close of business, New York
City time, on the day the Effective Time occurs, the stock transfer books of MCI
shall be closed and there shall be no further registration of transfers of
shares of MCI Common Stock thereafter on the records of MCI. From and after the
Effective Time, the holders of Certificates shall cease to have any rights with
respect to such shares of MCI Common Stock formerly represented thereby, except
as otherwise provided herein or by law. On or after the Effective Time, any
Certificates presented to the Exchange Agent or BT for any reason shall be
converted into the Merger Consideration with respect to the shares of MCI Common
Stock formerly represented thereby, any cash in lieu of fractional BT ADSs to
which the holders thereof are entitled pursuant to Section 2.5 and any dividends
or other distributions to which the holders thereof are entitled pursuant to
Section 2.3.
2.13. Restricted BT ADRs. Notwithstanding anything contained
in Article I or this Article II, stockholders of MCI who are affiliates ("Rule
145 Affiliates") of MCI as of the Effective Time within the meaning of Rule 145
under the Securities Act of 1933, as amended (the "Securities Act"), will
receive restricted BT ADRs ("Restricted BT ADRs") pursuant to this Section 2.13
and all references to BT ADRs to be received pursuant to Articles I and II by
Rule 145 Affiliates shall be deemed to be references to Restricted BT ADRs.
2.14. Shares of Dissenting Stockholders. Notwithstanding
anything in this Agreement to the contrary, any shares of MCI Common Stock that
are outstanding immediately prior to the Effective Time and that are held by
stockholders who shall not have voted in favor of the Merger or consented
thereto in writing and who shall have demanded properly in writing appraisal for
such shares in accordance with Section 262 of the DGCL (collectively, the
"Dissenting Shares") shall not be converted into or represent the right to
receive the Merger Consideration. Such stockholders shall be entitled to receive
payment of the appraised value of such shares of MCI Common Stock held by them
in accordance with the provisions of Section 262 of the DGCL, except that all
Dissenting Shares held by stockholders who shall have failed to perfect or who
effectively shall have withdrawn or lost their rights to appraisal of such
shares of MCI Common Stock under such Section 262 shall thereupon be deemed to
have been converted into and to have become exchangeable, as of the Effective
Time, for the right to receive, without any interest thereon, the Merger
Consideration. MCI shall give BT (i) prompt notice of any notice or demands for
appraisal or payment for shares of MCI Common Stock received by MCI and (ii) the
opportunity to participate in and direct all negotiations and proceedings with
respect to any such demands or notices. MCI shall not, without the prior written
consent of BT, make any payment with respect to, or settle, offer to settle or
otherwise negotiate, any such demands.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1. Representations and Warranties of MCI. Except as set
forth in the MCI Disclosure Schedule delivered by MCI to BT at or prior to the
execution of this Agreement (the "MCI Disclosure Schedule") (each section of
which qualifies the correspondingly numbered representation and warranty or
covenant to the extent specified therein), MCI represents and warrants to BT as
follows:
(a) Organization, Standing and Power. Each of MCI and each of
its Subsidiaries is a corporation duly organized, validly existing and
in good standing under the laws of its jurisdiction of incorporation or
organization, has all requisite power and authority to own, lease and
operate its properties and to carry on its business as now being
conducted and is duly qualified and in good standing to do business in
each jurisdiction in which the nature of its business or the ownership
or leasing of its properties makes such qualification necessary other
than in such jurisdictions where the failure so to qualify would not,
either individually or in the aggregate, have a Material Adverse Effect
on MCI. The copies of the certificate of incorporation and by-laws of
MCI which were previously furnished to BT are true, complete and
correct copies of such documents as in effect on the date of this
Agreement.
(b) Capital Structure.
(i) As of September 30, 1996, the authorized capital
stock of MCI consists of (A) 2,000,000,000 shares of MCI
Common Stock, of which 548,903,285 shares are outstanding, (B)
500,000,000 shares of MCI Class A Common Stock, of which
135,998,932 shares are outstanding and (C) 50,000,000 shares
of designated preferred stock, of which 10,000,000 shares of
Series E Junior Participating Preferred Stock have been
designated and reserved for issuance upon exercise of the
rights (the "Rights") distributed to the holders of MCI Common
Stock pursuant to the Rights Agreement dated as of September
30, 1994 between MCI and Mellon Bank, N.A., as rights agent
(the "Rights Agreement"). Since September 30, 1996 to the date
of this Agreement, there have been no issuances of shares of
the capital stock of MCI or any other securities of MCI other
than issuances of shares pursuant to options or rights
outstanding as of September 30, 1996 under the MCI Benefit
Plans. All issued and outstanding shares of the capital stock
of MCI are duly authorized, validly issued, fully paid and
nonassessable, and no class of capital stock (other than MCI
Class A Common Stock) is entitled to preemptive rights. There
were outstanding as of September 30, 1996 no options, warrants
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or other rights to acquire capital stock from MCI other than
(x) options representing in the aggregate the right to
purchase 78,036,440 shares of MCI Common Stock under the 1989
MCI Stock Option Plan, the MCI 1988 Directors' Stock Option
Plan and the MCI 1979 Stock Option Plan (collectively, the
"MCI Stock Option Plans") and (y) rights to purchase an
aggregate of 19,068,621 shares of MCI Common Stock under the
ESPP. No options or warrants or other rights to acquire
capital stock from MCI have been issued or granted since
September 30, 1996 to the date of this Agreement.
(ii) As of the date of this Agreement, no bonds,
debentures, notes or other indebtedness of MCI having the
right to vote on any matters on which stockholders may vote
("MCI Voting Debt") are issued or outstanding.
(iii) Except as otherwise set forth in this Section
3.1(b), as of the date of this Agreement, there are no
securities, options, warrants, calls, rights, commitments,
agreements, arrangements or undertakings of any kind to which
MCI or any of its Subsidiaries is a party or by which any of
them is bound obligating MCI or any of its Subsidiaries to
issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of capital stock or other voting
securities of MCI or any of its Subsidiaries or obligating MCI
or any of its Subsidiaries to issue, grant, extend or enter
into any such security, option, warrant, call, right,
commitment, agreement, arrangement or undertaking. As of the
date of this Agreement, there are no outstanding obligations
of MCI or any of its Subsidiaries to repurchase, redeem or
otherwise acquire any shares of capital stock of MCI or any of
its Subsidiaries.
(c) Authority; No Conflicts.
(i) MCI has all requisite corporate power and
authority to enter into this Agreement and, subject to the
adoption of this Agreement by the requisite vote of the
holders of MCI Common Stock and the requisite vote of the
holders of MCI Class A Common Stock, voting separately as a
class, to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of
MCI, subject in the case of the consummation of the Merger to
the adoption of this Agreement by the stockholders of MCI.
This Agreement has been duly executed and delivered by MCI and
constitutes a valid and binding agreement of MCI, enforceable
against it in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and similar laws relating to or
affecting creditors generally, by general equity principles
(regardless of whether such enforceability is
11
considered in a proceeding in equity or at law) or by an
implied covenant of good faith and fair dealing.
(ii) The execution and delivery of this Agreement
does not or will not, as the case may be, and the consummation
of the transactions contemplated hereby will not, conflict
with, or result in any violation of, or constitute a default
(with or without notice or lapse of time, or both) under, or
give rise to a right of termination, amendment, cancellation
or acceleration of any obligation or the loss of a material
benefit under, or the creation of a lien, pledge, security
interest, charge or other encumbrance on any assets (any such
conflict, violation, default, right of termination, amendment,
cancellation or acceleration, loss or creation, a "Violation")
pursuant to: (A) any provision of the certificate of
incorporation or by-laws of MCI or any Subsidiary of MCI or
(B) except as would not have a Material Adverse Effect on MCI
and, subject to obtaining or making the consents, approvals,
orders, authorizations, registrations, declarations and
filings referred to in paragraph (iii) below, any loan or
credit agreement, note, mortgage, bond, indenture, lease,
benefit plan or other agreement, obligation, instrument,
permit, concession, franchise, license, judgment, order,
decree, statute, law, ordinance, rule or regulation applicable
to MCI or any Subsidiary of MCI or their respective properties
or assets.
(iii) No consent, approval, order or authorization
of, or registration, declaration or filing with, any
supra-national, national, state, municipal or local
government, any instrumentality, subdivision, court,
administrative agency or commission or other authority
thereof, or any quasi-governmental or private body exercising
any regulatory, taxing, importing or other governmental or
quasi-governmental authority, including the European Union (a
"Governmental Entity"), is required by or with respect to MCI
or any Subsidiary of MCI in connection with the execution and
delivery of this Agreement by MCI or the consummation by MCI
of the transactions contemplated hereby, except for those
required under or in relation to (A) the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act of 1976, as amended (the "HSR Act")
and Council Regulation (EEC) No. 4064/89 ("Regulation
4064/89"), (B) the Communications Act of 1934, as amended (the
"Communications Act"), and any rules and regulations
promulgated by the Federal Communications Commission ("FCC"),
(C) state securities or "blue sky" laws, (D) the Securities
Act, (E) the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), (F) the DGCL with respect to the filing and
recordation of appropriate merger or other documents, (G)
rules and regulations of any state or foreign public service
commissions or similar state or foreign regulatory bodies, (H)
Section 721 of the Defense Production Act of 1950, as amended,
and the rules promulgated thereunder ("Exon-Xxxxxx") and the
rules and regulations promulgated by the Department of
Defense, (I) rules and
12
regulations of the Nasdaq National Market ("NASDAQ"), (J) the
Fair Trading Act of 1973, (K) the Restrictive Trade Practices
Xxx 0000, (L) antitrust or other competition laws of other
jurisdictions, and (M) such consents, approvals, orders,
authorizations, registrations, declarations and filings the
failure of which to make or obtain would not have a Material
Adverse Effect on MCI. Consents, approvals, orders,
authorizations, registrations, declarations and filings
required under or in relation to any of the foregoing clauses
(A) through (L) are hereinafter referred to as "Required
Consents."
(d) Reports and Financial Statements.
(i) MCI has filed all required reports, schedules,
forms, statements and other documents required to be filed by
it with the SEC since January 1, 1995 (collectively, including
all exhibits thereto, the "MCI SEC Reports"). No Subsidiary of
MCI is required to file any form, report or other document
with the SEC. None of the MCI SEC Reports, as of their
respective dates (and, if amended or superseded by a filing
prior to the date of this Agreement or of the Closing Date,
then on the date of such filing), contained or will contain
any untrue statement of a material fact or omitted or will
omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. Each
of the financial statements (including the related notes)
included in the MCI SEC Reports presents fairly, in all
material respects, the consolidated financial position and
consolidated results of operations and cash flows of MCI and
its Subsidiaries as of the respective dates or for the
respective periods set forth therein, all in conformity with
United States generally accepted accounting principles ("U.S.
GAAP") consistently applied during the periods involved except
as otherwise noted therein, and subject, in the case of the
unaudited interim financial statements, to normal and
recurring year-end adjustments that have not been and are not
expected to be material in amount. All of such MCI SEC
Reports, as of their respective dates (and as of the date of
any amendment to the respective MCI SEC Report), complied as
to form in all material respects with the applicable
requirements of the Securities Act and the Exchange Act and
the rules and regulations promulgated thereunder.
(ii) Except as set forth in the MCI SEC Reports filed
prior to the date of this Agreement, and except for
liabilities and obligations incurred in the ordinary course of
business consistent with past practice since December 31,
1995, neither MCI nor any of its Subsidiaries has any
liabilities or obligations of any nature (whether accrued,
absolute, contingent or otherwise) which, individually or in
the aggregate, would have a Material Adverse Effect on MCI or
would prevent or materially delay the performance of this
Agreement by MCI.
13
(e) Information Supplied.
(i) None of the information supplied or to be
supplied by MCI for inclusion or incorporation by reference in
(A) the registration statement on Form F-4 to be filed with
the SEC by BT in connection with the issuance of BT ADSs in
the Merger (the "Form F-4") will, at the time the Form F-4 is
filed with the SEC, at any time it is amended or supplemented
or at the time it becomes effective under the Securities Act,
contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or
necessary to make the statements therein not misleading and
(B) the proxy statement/prospectus included in the Form F-4
related to the MCI Stockholders Meeting) (the "Proxy
Statement/Prospectus") and, if applicable, the Schedule 13E-3
will, on the date it is first mailed to MCI stockholders or at
the time of the MCI Stockholders Meeting, contain any untrue
statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances
under which they were made, not misleading. The Proxy
Statement/Prospectus will comply as to form in all material
respects with the requirements of the Exchange Act and the
Securities Act and the rules and regulations of the SEC
thereunder.
(ii) The information supplied or to be supplied by
MCI for inclusion in the Super Class 1 Shareholder Circular
(comprising listing particulars under Part IV of the Financial
Services Xxx 0000 of the United Kingdom, as amended (the
"FSA")) (the "BT Disclosure Document") will, on the date the
BT Disclosure Document is first mailed to shareholders of BT
and at the time of the BT Shareholder Meeting, include all
such information within the knowledge of each of the directors
of MCI (or which it would be reasonable for them to obtain by
making enquiries) as investors and their professional advisers
reasonably require and expect to find, for the purpose of
making an informed assessment of the assets and liabilities,
financial position, profits and losses and prospects of BT and
of the rights attaching to the securities to which the BT
Disclosure Document relates.
(iii) Notwithstanding the foregoing provisions of
this Section 3.1(e), no representation or warranty is made by
MCI with respect to statements made or incorporated by
reference in the F-4, the Proxy Statement/Prospectus, the
Schedule 13E-3 (if applicable) or the BT Disclosure Document
based on information supplied by BT for inclusion or
incorporation by reference therein.
(f) Compliance with Applicable Laws; Regulatory Matters. MCI and its
Subsidiaries hold all permits, licenses, certificates, franchises,
registrations, variances, exemptions, orders and approvals of all Governmental
Entities which are material to the operation of the businesses of MCI and its
Subsidiaries, taken as a whole (the
14
"MCI Permits"). MCI and its Subsidiaries are in compliance with the
terms of the MCI Permits, except where the failure so to comply,
individually or in the aggregate, would not have a Material Adverse
Effect on MCI. Except as disclosed in the MCI SEC Reports filed prior
to the date of this Agreement, the businesses of MCI and its
Subsidiaries are not being and have not been conducted in violation of
any law, ordinance, regulation, judgment, decree, injunction, rule or
order of any Governmental Entity, except for violations which,
individually or in the aggregate, would not have a Material Adverse
Effect on MCI. As of the date of this Agreement, no investigation
(other than with respect to Taxes) by any Governmental Entity with
respect to MCI or any of its Subsidiaries is pending or, to the best
knowledge of MCI, threatened, other than investigations which,
individually or in the aggregate, would not have a Material Adverse
Effect on MCI. Since December 31, 1994, MCI and each of its
Subsidiaries required to make filings under all applicable laws
regulating the telephone, mobile cellular, paging or other
telecommunications business has filed with all applicable Governmental
Entities (including the applicable public utilities commissions or the
FCC, as the case may be) all material forms, statements, reports and
documents (including exhibits, annexes and any amendments thereto)
required to be filed by them, and each such filing complied with all
applicable laws, rules and regulations, except for such noncompliance
which would not, individually or in the aggregate, have a Material
Adverse Effect on MCI or prevent or materially delay the performance of
this Agreement by MCI.
(g) Litigation. Except as disclosed in the MCI SEC Reports
filed prior to the date of this Agreement, there is no litigation,
arbitration, claim, suit, action, investigation or proceeding pending
or, to the knowledge of MCI, threatened, against or affecting MCI or
any Subsidiary of MCI which, individually or in the aggregate, has had
or would have a Material Adverse Effect on MCI, nor is there any
judgment, award, decree, injunction, rule or order of any Governmental
Entity or arbitrator outstanding against MCI or any Subsidiary of MCI
which, individually or in the aggregate, has had or would have a
Material Adverse Effect on MCI.
(h) Taxes. (i) MCI and each of its Subsidiaries have prepared
in good faith and duly and timely filed (taking into account any
extension of time within which to file) all material Tax Returns
required to be filed by any of them and all such filed Tax Returns are
complete and accurate in all material respects; (ii) MCI and each of
its Subsidiaries have paid all Taxes that are shown as due on such
filed Tax Returns or that MCI or any of its Subsidiaries is obligated
to withhold from amounts owing to any employee, creditor or third
party, except with respect to matters contested in good faith or for
such amounts that, individually or in the aggregate, would not have a
Material Adverse Effect on MCI; (iii) as of the date of this Agreement,
there are no pending or, to the best knowledge of MCI, threatened in
writing material audits, examinations, investigations or other
proceedings in respect of Taxes or Tax matters relating to MCI or any
of its Subsidiaries; (iv) there are not, to the best knowledge of MCI,
any unresolved questions or claims concerning its or any
15
of its Subsidiaries' Tax liability that, individually or in the
aggregate, would have a Material Adverse Effect on MCI and there are no
deficiencies or claims for any Taxes that have been proposed, asserted
or assessed against MCI or any of its Subsidiaries which, if such
deficiencies or claims were finally resolved against MCI or any of its
Subsidiaries would, individually or in the aggregate, have a Material
Adverse Effect on MCI; (v) neither MCI nor any of its Subsidiaries has
any liability with respect to Taxes in excess of the amounts accrued in
respect thereof that are reflected in the financial statements included
in the MCI SEC Reports, except such excess liabilities as would not,
individually or in the aggregate, have a Material Adverse Effect on
MCI; (vi) there are no material Liens for Taxes upon the assets of MCI
or any of its Subsidiaries, other than Liens for current Taxes not yet
due and payable and Liens for Taxes that are being contested in good
faith by appropriate proceedings; (vii) neither MCI nor any of its
Subsidiaries has agreed to or is required to make any adjustment under
Section 481(a) of the Code; and (viii) neither MCI nor any of its
Subsidiaries has made an election under Section 341(f) of the Code.
(i) Subsidiaries and Equity Interests. Exhibit 21 to MCI's
Annual Report on Form 10-K for the fiscal year ended December 31, 1995
includes all the Subsidiaries of MCI as of the date of this Agreement
required to be included on such exhibit by the rules and regulations of
the SEC, were it to be filed as of the date of this Agreement. Unless
otherwise described therein, MCI owns, directly or indirectly,
beneficially and of record 100% of the issued and outstanding voting
securities of each such Subsidiary (other than directors' qualifying
shares, if any). Section 3.1(i) of the MCI Disclosure Schedule lists
each corporation, partnership, limited liability company or similar
entity with respect to which, as of the date of this Agreement, MCI or
any Subsidiary of MCI owns more than 5% but less than a majority of the
voting equity or similar voting interest or any interest convertible
into, or exchangeable or exercisable for, more than 5% but less than a
majority of the voting equity or similar voting interest and which
interest is carried on MCI's most recent financial statements (or if
not held as of the date thereof, would be carried on MCI's financial
statements if prepared as of the date hereof) at a value in excess of
$10,000,000 (collectively, the "MCI Equity Interests"). There are no
plans to restructure in any material respect any of the MCI Equity
Interests. All of the shares of capital stock of each of the
Subsidiaries and all the MCI Equity Interests held by MCI and each
Subsidiary of MCI are fully paid and nonassessable and are owned by MCI
or such Subsidiary free and clear of any security interest, pledge,
option, right of first refusal, limitation on MCI's or such
Subsidiary's voting rights, charge, claim, lien or other encumbrance of
any nature whatsoever (collectively, "Liens"). There are no material
outstanding contractual obligations of MCI or any of its Subsidiaries
to provide funds to, or make any investment (in the form of a loan,
capital contribution or otherwise) in, any Subsidiary of MCI, any
entity in which MCI or any Subsidiary of MCI owns an MCI Equity
Interest, or any other Person, except such obligations as would not
require any investment or provision of funds or assets in an
16
amount or having a fair market value in excess of $10,000,000 for any
such investment or $50,000,000 in the aggregate for all such
investments.
(j) Absence of Certain Changes or Events.
(i) Except as disclosed in the MCI SEC Reports filed
prior to the date of this Agreement: (A) since December 31,
1995, MCI and its Subsidiaries have conducted their respective
businesses in the ordinary course consistent with their past
practices and have not incurred any material liability, except
in the ordinary course of their respective businesses
consistent with their past practices; (B) since December 31,
1995 to the date of this Agreement, there has not been any
change in or effect on, or any event or circumstance involving
a prospective change in or effect on, the business, financial
condition or results of operations of MCI or any of its
Subsidiaries, that has had, or would have, a Material Adverse
Effect on MCI; and (C) since December 31, 1995, there has not
been any change in or effect on, or any event or circumstance
involving a prospective change in or effect on, the business,
financial condition or results of operations of MCI or any of
its Subsidiaries that has had, or is reasonably likely to
have, a material adverse effect on the business, operations,
assets, liabilities (including, without limitation, contingent
liabilities), financial condition or results of operations of
MCI and its Subsidiaries, taken as a whole, other than as a
result of (1) changes after the date of this Agreement in
general economic conditions or the securities markets, and (2)
legal or regulatory changes effective after the date of this
Agreement affecting the telecommunications industry generally.
(ii) As of the date of this Agreement, no plans or
proposals are under consideration by MCI to announce or
implement any restructuring or other similar actions by MCI or
any of its Subsidiaries which would be reasonably likely to
result in material charges or write-offs to the consolidated
financial statements of MCI or material reductions in the
anticipated consolidated revenues or operating income of MCI.
(k) Section 203 of the DGCL Not Applicable. The Board of
Directors of MCI has approved the Merger and this Agreement, and such
approval is sufficient to render inapplicable to the Merger and this
Agreement and the transactions contemplated by this Agreement the
provisions of Section 203 of the DGCL. To the best knowledge of MCI, no
other state takeover statute or similar statute or regulation applies
or purports to apply to the Merger, this Agreement or any of the
transactions contemplated by this Agreement.
(l) Vote Required. The affirmative vote of the holders of a majority of the
outstanding shares of MCI Common Stock and the affirmative vote of the holders
of a majority of the outstanding shares of MCI Class A Common Stock, each voting
as a
17
separate class (the "Required MCI Votes"), are the only votes of the
holders of any class or series of MCI capital stock necessary to
approve this Agreement and the transactions contemplated hereby
(assuming for purposes of this representation the accuracy of the
representations contained in Section 3.2(o), without giving effect to
the knowledge qualification thereto).
(m) MCI Rights Agreement. The MCI Rights Agreement has been
amended so as to provide that neither BT nor Merger Sub will become an
"Acquiring Person" and that no "Stock Acquisition Date" or
"Distribution Date" (as such terms are defined in the MCI Rights
Agreement) will occur as a result of the approval, execution or
delivery of this Agreement or the consummation of the Merger.
(n) Certain Agreements.
(i) All contracts listed or which would be required
to be listed as an exhibit to MCI's Annual Report on Form 10-K
under the rules and regulations of the SEC relating to the
business of MCI and its Subsidiaries and any contracts that
would be required to be so listed but for the exception with
respect to listing contracts made in the ordinary course of
business (the "MCI Material Contracts") are valid and in full
force and effect except to the extent they have previously
expired in accordance with their terms, and neither MCI nor
any of its Subsidiaries has violated any provision of, or
committed or failed to perform any act which, with or without
notice, lapse of time, or both, would constitute a default
under the provisions of, any such MCI Material Contract,
except for defaults which, individually or in the aggregate,
would not have a Material Adverse Effect on MCI. To the best
knowledge of MCI, no counterparty to any such MCI Material
Contract has violated any provision of, or committed or failed
to perform any act which, with or without notice, lapse of
time, or both, would constitute a default or other breach
under the provisions of, such MCI Material Contract, except
for defaults or breaches which, individually or in the
aggregate, would not have a Material Adverse Effect on MCI.
(ii) Except for existing agreements between MCI and
BT, as of the date of this Agreement neither MCI nor any of
its Subsidiaries nor any of their respective affiliates has
entered into any agreement or arrangement limiting or
otherwise restricting MCI or any of its Subsidiaries or any of
their respective affiliates or successors from engaging or
competing in any line of business or in any geographic area.
18
(o) Employee Benefit Plans; Labor Matters.
(i) With respect to each employee benefit plan,
program, arrangement and contract (including, without
limitation, any "employee benefit plan," as defined in Section
3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA") and any bonus, deferred compensation,
stock bonus, stock purchase, restricted stock, stock option,
employment, termination, change in control and severance plan,
program, arrangement and contract), to which MCI or any of its
Subsidiaries is a party, which is maintained or contributed to
by MCI or any of its Subsidiaries, or with respect to which
MCI or any of its Subsidiaries could incur material liability
under Section 4069, 4201 or 4212(c) of ERISA (the "MCI Benefit
Plans"), MCI has made available to BT a true and complete copy
of (A) such MCI Benefit Plan, (B) the most recent annual
report (Form 5500) filed with the Internal Revenue Service
(the "IRS"), (C) each trust or other funding arrangement
relating to such MCI Benefit Plan, (D) the most recent summary
plan description related to each MCI Benefit Plan for which a
summary plan description is required, (E) the most recent
actuarial report (if applicable) relating to an MCI Benefit
Plan and (F) the most recent determination letter, if any,
issued by the IRS with respect to any MCI Benefit Plan
qualified under Section 401(a) of the Code.
(ii) Each of the MCI Benefit Plans that is an
"employee pension benefit plan" within the meaning of Section
3(2) of ERISA and that is intended to be qualified under
Section 401(a) of the Code has received a favorable
determination letter from the IRS, and MCI is not aware of any
circumstances likely to result in the revocation of any such
favorable determination letter that would have a Material
Adverse Effect on MCI.
(iii) With respect to the MCI Benefit Plans, no event
has occurred and, to the knowledge of MCI, there exists no
condition or set of circumstances, in connection with which
MCI or any of its Subsidiaries could be subject to any
liability under the terms of such MCI Benefit Plans, ERISA,
the Code or any other applicable law which, individually or in
the aggregate, would have a Material Adverse Effect on MCI.
(iv) MCI has made available to BT all collective
bargaining or other labor union contracts to which MCI or any
of its Subsidiaries is a party applicable to persons employed
by MCI or any of its Subsidiaries and no collective bargaining
agreement is being negotiated by MCI or any of its
Subsidiaries. There is no pending or threatened in writing
labor dispute, strike or work stoppage against MCI or any of
its Subsidiaries which may interfere with the respective
business activities of MCI or any of its Subsidiaries, except
where such dispute, strike or work stoppage would not have a
Material
19
Adverse Effect on MCI. To the knowledge of MCI, neither MCI
nor any of its Subsidiaries, nor their respective
representatives or employees, has committed any unfair labor
practices in connection with the operation of the respective
businesses of MCI or any of its Subsidiaries, and there is no
pending or threatened in writing charge or complaint against
MCI or any of its Subsidiaries by the National Labor Relations
Board or any comparable state agency, except where such unfair
labor practice, charge or complaint would not have a Material
Adverse Effect on MCI.
(p) Brokers or Finders. No agent, broker, investment banker,
financial advisor or other firm or Person is or will be entitled to any
broker's or finder's fee or any other similar commission or fee in
connection with any of the transactions contemplated by this Agreement,
except Lazard Freres & Co. LLC, whose fees and expenses will be paid by
MCI in accordance with MCI's agreement with such firm, based upon
arrangements made by or on behalf of MCI.
(q) Opinion of Financial Advisor. MCI has received the opinion
of Lazard Freres & Co. LLC, dated the date of this Agreement, to the
effect that, as of such date, the Merger Consideration is fair to the
holders of MCI Common Stock (other than BT), a copy of which opinion
has been made available to BT.
(r) Intellectual Property Rights.
(i) Neither MCI nor any of its Subsidiaries (a) has
licensed Intellectual Property Rights owned by them (or
licensed to them by a third party) to any Person in a manner
that would have a Material Adverse Effect on MCI; or (b) is in
breach of any agreements related to licenses from MCI or its
Subsidiaries of Intellectual Property Rights owned by them (or
licensed to them by a third party) which breach would have a
Material Adverse Effect on MCI, and the transactions
contemplated by this Agreement will not constitute such a
breach or otherwise reduce or impair, in any material respect,
the rights of MCI and its Subsidiaries under such license
agreements.
(ii) The terms of licenses of Intellectual Property
Rights by third parties to MCI and its Subsidiaries are
sufficient to allow MCI and its Subsidiaries to conduct, and
to continue to conduct, their businesses in all material
respects as currently conducted. Neither MCI nor any of its
Subsidiaries is in breach of any of the agreements relating to
such licenses which breach would have a Material Adverse
Effect on MCI, and the transactions contemplated by this
Agreement will not constitute such a breach or otherwise
impair, in any material respect, the rights of MCI and its
Subsidiaries under such license agreements. For purposes of
this clause (ii), joint ownership of Intellectual Property
Rights between MCI and its
20
Subsidiaries, on the one hand, and any other Person, on the
other hand, shall be deemed to be a license from such Person
to MCI and its Subsidiaries.
(iii) Neither MCI nor any of its Subsidiaries has
received any written notice from any Person regarding any
actual or potential infringements by MCI or any of its
Subsidiaries of any Intellectual Property Rights of any other
Person which infringements, individually or in the aggregate,
would if proven have a Material Adverse Effect on MCI. For
purposes of this paragraph (iii), a challenge by a Person to
the ownership of Intellectual Property Rights of MCI and its
Subsidiaries shall be deemed to be an allegation by the Person
so challenging of actual or potential infringement by MCI and
its Subsidiaries.
(iv) No claims are pending or, to the best knowledge
of MCI, threatened by any Person with respect to the
ownership, validity or enforceability of any Intellectual
Property Rights or challenging or questioning the right of MCI
or any of its Subsidiaries to use any Intellectual Property
Rights, except as would not, individually or in the aggregate,
have a Material Adverse Effect on MCI.
(v) Neither MCI nor any of its Subsidiaries has, as
of the date of this Agreement, any outstanding claim against
it of an infringement, the loss of which would have a Material
Adverse Effect on MCI; and neither MCI nor any of its
Subsidiaries has made any still outstanding claim against a
Person of a violation or infringement, the loss of which would
have a Material Adverse Effect on MCI.
(vi) The ownership of Intellectual Property Rights
and the right to secure such rights (including the right to
apply for patents) currently enjoyed by MCI and its
Subsidiaries will not be affected by the transactions
contemplated by this Agreement in any manner that would have a
Material Adverse Effect on MCI.
(vii) "Intellectual Property Rights" means:
trademarks, trade names, and service marks whether registered
or not and applications to register them; patents (including
xxxxx patents) and applications therefor; industrial models
(including U.S. design patents and registered designs) and
applications therefor; copyrights; unregistered design rights
(in the United Kingdom and like countries); sui generis rights
in databases, semiconductor topographies and mask works; and
rights in confidential information and trade secrets.
3.2. Representations and Warranties of BT. Except as set forth in the BT
Disclosure Schedule delivered by BT to MCI at or prior to the execution of this
Agreement (the "BT Disclosure Schedule") (each section of which qualifies the
correspondingly
21
numbered representation and warranty or covenant to the extent specified
therein), BT represents and warrants to MCI as follows:
(a) Organization, Standing and Power. Each of BT and each of
its Subsidiaries is a corporation duly organized and validly existing
under the laws of its jurisdiction of incorporation or organization and
each of its Subsidiaries incorporated outside the United Kingdom is in
good standing (with respect to jurisdictions which recognize the
concept of good standing) under the laws of its jurisdiction of
incorporation or organization, has all requisite power and authority to
own, lease and operate its properties and to carry on its business as
now being conducted and is duly qualified and in good standing (with
respect to jurisdictions which recognize the concept of good standing)
to do business in each jurisdiction in which the nature of its business
or the ownership or leasing of its properties makes such qualification
necessary other than in such jurisdictions where the failure so to
qualify would not, either individually or in the aggregate, have a
Material Adverse Effect on BT. The copies of the memorandum and
articles of association of BT which were previously furnished to MCI
are true, complete and correct copies of such documents as in effect on
the date of this Agreement.
(b) Capital Structure.
(i) As of September 30, 1996, the authorized share
capital of BT consists of (A) 10,500,000,000 BT Ordinary
Shares, of which 6,347,488,575 shares have been issued and (B)
one Special Rights Redeemable Preference Share of (pound)1
(the "Special Share"), which has been issued and is held by
Her Majesty's Government of the United Kingdom ("HM
Government"). Since September 30, 1996 to the date of this
Agreement, there have been no issuances of shares of BT or any
other securities of BT other than issuances of shares pursuant
to options or rights outstanding as of such date to subscribe
or purchase BT Ordinary Shares. All issued shares of BT are
duly authorized, validly issued and fully paid, and no class
of share is entitled to preemptive rights, save as provided by
Section 89 Companies Xxx 0000 of the United Kingdom (the
"Companies Act"). There were outstanding as of September 30,
1996 no options, warrants or other rights to acquire share
capital from BT other than options representing, in the
aggregate, the right to subscribe or purchase 277,400,188 BT
Ordinary Shares. No options or warrants or other rights to
acquire share capital from BT have been issued or granted
since September 30, 1996 to the date of this Agreement.
(ii) As of the date of this Agreement, no bonds,
debentures, notes or other indebtedness of BT having the right
to vote on any matters on which shareholders may vote ("BT
Voting Debt") are issued or outstanding.
22
(iii) Except as otherwise set forth in this Section
3.2(b), as of the date of this Agreement, there are no
securities, options, warrants, calls, rights, commitments,
agreements, arrangements or undertakings of any kind to which
BT or any of its Subsidiaries is a party or by which any of
them is bound obligating BT or any of its Subsidiaries to
issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares or other voting securities of BT or
any of its Subsidiaries or obligating BT or any of its
Subsidiaries to issue, grant, extend or enter into any such
security, option, warrant, call, right, commitment, agreement,
arrangement or undertaking. As of the date of this Agreement,
there are no outstanding obligations of BT or any of its
Subsidiaries to repurchase, redeem or otherwise acquire any
shares of BT or any of its Subsidiaries, except such
obligations of BT with respect to shares of its wholly owned
Subsidiaries or of wholly owned Subsidiaries of BT with
respect to shares of other wholly owned Subsidiaries of BT.
(c) Authority; No Conflicts.
(i) BT has all requisite corporate power and
authority to enter into this Agreement and, subject to
approval of the Merger by the Required BT Vote, to consummate
the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by
all necessary corporate action on the part of BT, subject to
the approval by the shareholders of BT of the Merger and this
Agreement and the matters referred to in Section 5.16 and the
creation and issue of a sufficient amount of authorized
ordinary share capital of BT, the granting of authority
pursuant to Section 80 Companies Act and the issuance upon
conversion of MCI Common Stock, of BT ADSs, appropriate
alterations to the Articles of Association of BT and the
change of name referred to in Section 5.17. This Agreement has
been duly executed and delivered by BT and constitutes a valid
and binding agreement of BT, enforceable against it in
accordance with its terms, except as such enforceability may
be limited by bankruptcy, insolvency, reorganization,
moratorium and other similar laws relating to or affecting
creditors generally, by general equity principles (regardless
of whether such enforceability is considered in a proceeding
in equity or at law) or by an implied covenant of good faith
and fair dealing.
(ii) The execution and delivery of this Agreement
does not or will not, as the case may be, and the consummation
of the transactions contemplated hereby will not, result in
any Violation of: (A) any provision of the memorandum or
articles of association of BT or comparable charter or
organizational documents of any Subsidiary of BT or (B) except
as would not have a Material Adverse Effect on BT and subject
to obtaining or making the consents, approvals, orders,
authorizations, registrations, declarations and
23
filings referred to in paragraph (iii) below, any loan or
credit agreement, note, mortgage, bond, indenture, lease,
benefit plan or other agreement, obligation, instrument,
permit, concession, franchise, license, judgment, order,
decree, statute, law, ordinance, rule or regulation applicable
to BT or any Subsidiary of BT or their respective properties
or assets.
(iii) No consent, approval, order or authorization
of, or registration, declaration or filing with, any
Governmental Entity is required by or with respect to BT or
any Subsidiary of BT in connection with the execution and
delivery of this Agreement by BT or the consummation by BT of
the transactions contemplated hereby, except for (A) the
Required Consents, (B) the appropriate applications, filings
and notices to, and approval of, the LSE and the NYSE, (C)
those required under the Companies Act and the FSA, (D) the
consent of H.M. Treasury pursuant to Section 765(1)(c) of the
Income and Corporation Taxes Act 1988 and (E) such consents,
approvals, orders, authorizations, registrations, declarations
and filings the failure of which to make or obtain would not
have a Material Adverse Effect on BT.
(d) Reports and Financial Statements.
(i) BT has filed all required reports, schedules,
forms, statements and other documents required to be filed by
it with the SEC since April 1, 1995 (collectively, including
all exhibits thereto, the "BT SEC Reports"). No Subsidiary of
BT is required to file any form, report or other document with
the SEC. None of the BT SEC Reports, as of their respective
dates (and, if amended or superseded by a filing prior to the
date of this Agreement or of the Closing Date, then on the
date of such filing), contained or will contain any untrue
statement of a material fact or omitted or will omit to state
a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances
under which they were made, not misleading. Each of the
financial statements (including the related notes) included in
the BT SEC Reports presents fairly, in all material respects,
the consolidated financial position and consolidated results
of operations and cash flows of BT and its Subsidiaries as of
the respective dates or for the respective periods set forth
therein, all in conformity with accounting principles and
practices generally accepted in the United Kingdom ("UK GAAP")
consistently applied during the periods involved, except as
otherwise noted therein. The financial information contained
in the unaudited interim financial statements for the three
months ended June 30, 1996 has been prepared with all due care
and attention and in accordance with UK GAAP (on a basis
consistent with the financial statements included in the BT
SEC Reports) insofar as appropriate in the preparation of an
unaudited interim statement and all statements of fact
contained in such statement relating to BT and its
Subsidiaries are, in the context of such statement, true and
accurate in all material respects and not
24
misleading in any material respect and all expressions of
opinion, intention and expectation contained therein are fair
and honestly held and have been made after due and careful
enquiry and consideration. All of the BT SEC Reports, as of
their respective dates (and as of the date of any amendment to
the respective BT SEC Report), complied as to form in all
material respects with the applicable requirements of the
Securities Act and the Exchange Act and the rules and
regulations promulgated thereunder.
(ii) Except as set forth in the BT SEC Reports filed
prior to the date of this Agreement, and except for
liabilities and obligations incurred in the ordinary course of
business consistent with past practice since March 31, 1996,
neither BT nor any of its Subsidiaries has any liabilities or
obligations of any nature (whether accrued, absolute,
contingent or otherwise) which, individually or in the
aggregate, would have a Material Adverse Effect on BT or would
prevent or materially delay the performance of this Agreement
by BT.
(e) Information Supplied.
(i) None of the information supplied or to be
supplied by BT for inclusion or incorporation by reference in
(A) the Form F-4 will, at the time the Form F-4 is filed with
the SEC, at any time it is amended or supplemented or at the
time it becomes effective under the Securities Act, contain
any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to
make the statements therein not misleading and (B) the Proxy
Statement/Prospectus and, if applicable, the Schedule 13E-3
will, at the date it is first mailed to MCI stockholders or at
the time of the MCI Stockholders Meeting, contain any untrue
statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances
under which they were made, not misleading. The BT Disclosure
Document and any supplements thereto and any other circulars
or documents issued to shareholders, employees or
debentureholders of BT will contain all particulars relating
to BT and MCI required to comply in all material respects with
all United Kingdom statutory and other legal provisions
(including, without limitation, the Companies Act, the FSA and
the rules and regulations made thereunder and the rules and
requirements of the LSE) and all such information contained in
such documents will be substantially in accordance with the
facts and will not omit anything material likely to affect the
import of such information. The Form F-4 and the Proxy
Statement/Prospectus will comply as to form in all material
respects with the requirements of the Exchange Act and the
Securities Act and the rules and regulations of the SEC
thereunder.
25
(ii) The information supplied or to be supplied by BT
for inclusion in the BT Disclosure Document will, on the date
the BT Disclosure Document is first mailed to shareholders of
BT, and at the time of the BT Shareholder Meeting, comply with
the provisions of section 146 of the FSA.
(iii) Notwithstanding the foregoing provisions of
this Section 3.2(e), no representation or warranty is made by
BT with respect to statements made or incorporated by
reference in the Form F-4, the Proxy Statement/Prospectus, the
Schedule 13E-3 (if applicable) or the BT Disclosure Document
based on information supplied by MCI for inclusion or
incorporation by reference therein.
(f) Compliance with Applicable Laws; Regulatory Matters. BT
and its Subsidiaries hold all permits, licenses, certificates,
franchises, registrations, variances, exemptions, orders and approvals
of all Governmental Entities which are material to the operation of the
businesses of BT and its Subsidiaries, taken as a whole (the "BT
Permits"). BT and its Subsidiaries are in compliance with the terms of
the BT Permits, except where the failure so to comply, individually or
in the aggregate, would not have a Material Adverse Effect on BT.
Except as disclosed in the BT SEC Reports filed prior to the date of
this Agreement, the businesses of BT and its Subsidiaries are not being
and have not been conducted in violation of any law, ordinance,
regulation, judgment, decree, injunction, rule or order of any
Governmental Entity, except for violations which, individually or in
the aggregate, would not have a Material Adverse Effect on BT. As of
the date of this Agreement, no investigation (other than with respect
to Taxes) by any Governmental Entity with respect to BT or any of its
Subsidiaries is pending or, to the best knowledge of BT, threatened,
other than investigations which, individually or in the aggregate,
would not have a Material Adverse Effect on BT. Since December 31,
1994, BT and each of its Subsidiaries required to make filings under
all applicable laws regulating the telephone, mobile cellular, paging
or other telecommunications business has filed with all applicable
Governmental Entities all material forms, statements, reports and
documents (including exhibits, annexes and any amendments thereto)
required to be filed by them, and each such filing complied with all
applicable laws, rules and regulations, except for such noncompliance
which would not, individually or in the aggregate, have a Material
Adverse Effect on BT or prevent or materially delay the performance of
this Agreement by BT.
(g) Litigation. Except as disclosed in the BT SEC Reports
filed prior to the date of this Agreement, there is no litigation,
arbitration, claim, suit, action, investigation or proceeding pending
or, to the knowledge of BT, threatened, against or affecting BT or any
Subsidiary of BT which, individually or in the aggregate, has had or
would have a Material Adverse Effect on BT, nor is there any judgment,
award, decree, injunction, rule or order of any Governmental Entity or
arbitrator
26
outstanding against BT or any Subsidiary of BT which, individually or
in the aggregate, has had or would have a Material Adverse Effect on
BT.
(h) Taxes. (i) BT and each of its Subsidiaries have prepared
in good faith and duly and timely filed (taking into account any
extension of time within which to file) all material Tax Returns
required to be filed by any of them and all such filed Tax Returns are
complete and accurate in all material respects; (ii) BT and each of its
Subsidiaries have paid all Taxes that are shown as due on such filed
Tax Returns or that BT or any of its Subsidiaries is obligated to
withhold from amounts owing to any employee, creditor or third party,
except with respect to matters contested in good faith or for such
amounts that, individually or in the aggregate, would not have a
Material Adverse Effect on BT; (iii) as of the date of this Agreement,
there are no pending or, to the best knowledge of BT, threatened in
writing material audits, examinations, investigations or other
proceedings in respect of Taxes or Tax matters relating to BT or any of
its Subsidiaries; (iv) there are not, to the best knowledge of BT, any
unresolved questions or claims concerning its or any of its
Subsidiaries' Tax liability that would, individually or in the
aggregate, have a Material Adverse Effect on BT and there are no
deficiencies or claims for any Taxes that have been proposed, asserted
or assessed against BT or any of its Subsidiaries which, if such
deficiencies or claims were finally resolved against BT or any of its
Subsidiaries, would, individually or in the aggregate, have a Material
Adverse Effect on BT; (v) neither BT nor any of its Subsidiaries has
any liability with respect to Taxes in excess of the amounts accrued in
respect thereof that are reflected in the financial statements included
in the BT SEC Reports, except such excess liabilities as would not,
individually or in the aggregate, have a Material Adverse Effect on BT;
and (vi) there are no material Liens for Taxes upon the assets of BT or
any of its Subsidiaries, other than Liens for current Taxes not yet due
and payable and Liens for Taxes that are being contested in good faith
by appropriate proceedings.
(i) Subsidiaries and Equity Interests. Note 31 of the
Consolidated Financial Statements of BT filed as part of BT's Annual
Report on Form 20-F for the fiscal year ended March 31, 1996 includes
all the Subsidiaries of BT as of the date of this Agreement required to
be included on such exhibit by the rules and regulations of the SEC,
were it to be filed on the date of this Agreement. Unless otherwise
described therein, BT owns, directly or indirectly, beneficially and of
record 100% of the issued and outstanding voting securities of each
such Subsidiary (other than directors' qualifying shares, if any).
Section 3.2(i) of the BT Disclosure Schedule lists each corporation,
partnership, limited liability company or similar entity with respect
to which, as of the date of this Agreement, BT or any Subsidiary of BT
owns more than 5% but less than a majority of the voting equity or
similar voting interest or any interest convertible into, or
exchangeable or exercisable for, more than 5% but less than a majority
of the voting equity or similar voting interest and which interest is
carried on BT's most recent financial statements (or if not held as of
the date thereof, would be carried on BT's financial statements if
prepared as of the date
27
hereof) at a value in excess of (pound)10,000,000 (collectively, the
"BT Equity Interests"). There are no plans to restructure in any
material respect any of the BT Equity Interests. All of the shares of
capital stock of each of the Subsidiaries and all of the BT Equity
Interests held by BT and each Subsidiary of BT are fully paid and
nonassessable (with respect to jurisdictions that recognize the concept
of nonassessability) and are owned by BT or such Subsidiary free and
clear of any Lien. There are no outstanding contractual obligations of
BT or any of its Subsidiaries to provide funds to, or make any
investment (in the form of a loan, capital contribution or otherwise)
in, any Subsidiary of BT (other than wholly owned Subsidiaries of BT),
any entity in which BT or any Subsidiary of BT owns a BT Equity
Interest, or any other Person, except such obligations as would not
require any investment or provision of funds or assets in an amount or
having a fair market value in excess of (pound)10,000,000 for any such
investment or (pound)50,000,000 in the aggregate for all such
investments.
(j) Absence of Certain Changes or Events.
(i) Except as disclosed in the BT SEC Reports filed
and publicly available prior to the date of this Agreement or
disclosed in LSE announcements prior to the date of this
Agreement: (A) since March 31, 1996, BT and its Subsidiaries
have conducted their respective businesses in the ordinary
course consistent with their past practices and have not
incurred any material liability, except in the ordinary course
of their respective businesses consistent with their past
practices; (B) since March 31, 1996 to the date of this
Agreement, there has not been any change in or effect on, or
any event or circumstance involving a prospective change in or
effect on, the business, financial condition or results of
operations of BT or any of its Subsidiaries, that has had, or
would have, a Material Adverse Effect on BT; and (C) since
March 31, 1996, there has not been any change in or effect on,
or any event or circumstance involving a prospective change in
or effect on, the business, financial condition or results of
operations of BT or any of its Subsidiaries that has had, or
is reasonably likely to have, a material adverse effect on the
business, operations, assets, liabilities (including, without
limitation, contingent liabilities), financial condition or
results of operations of BT and its Subsidiaries, taken as a
whole, other than as a result of (1) changes after the date of
this Agreement in general economic conditions or the
securities markets, and (2) legal or regulatory changes
effective after the date of this Agreement affecting the
telecommunications industry generally.
(ii) As of the date of this Agreement, no plans or
proposals are under consideration by BT to announce or
implement any restructuring or other similar actions by BT or
any of its Subsidiaries which would be reasonably likely to
result in material charges or write-offs to the consolidated
28
financial statements of BT or material reductions in the
anticipated consolidated revenues or operating income of BT.
(k) Vote Required. The affirmative vote of not less than
three-fourths of such members of BT as (being entitled to do so) vote
at the BT Shareholder Meeting (the "Required BT Vote") is the only vote
or approval of the holders of any class of BT shares necessary to
approve this Agreement and the transactions contemplated hereby.
(l) Certain Agreements.
(i) All contracts listed or which would be required
to be listed as an exhibit to BT's most recent Annual Report
on Form 20-F under the rules and regulations of the SEC
relating to the business of BT and its Subsidiaries and any
contracts that would be required to be so listed but for the
exception with respect to listing contracts made in the
ordinary course of business (the "BT Material Contracts") are
valid and in full force and effect except to the extent they
have previously expired in accordance with their terms, and
neither BT nor any of its Subsidiaries has violated any
provision of, or committed or failed to perform any act which,
with or without notice, lapse of time, or both, would
constitute a default under the provisions of, any BT Material
Contract, except for defaults which, individually or in the
aggregate, would not have a Material Adverse Effect on BT. To
the best knowledge of BT, no counterparty to any such BT
Material Contract has violated any provision of, or committed
or failed to perform any act which, with or without notice,
lapse of time, or both, would constitute a default or other
breach under the provisions of, such BT Material Contract,
except for defaults or breaches which, individually or in the
aggregate, would not have a Material Adverse Effect on BT.
(ii) Except for existing agreements between MCI and
BT, as of the date of this Agreement neither BT nor any of its
Subsidiaries nor any of their respective affiliates has
entered into any agreement or arrangement limiting or
otherwise restricting BT or any of its Subsidiaries or any of
their respective affiliates or successors from engaging or
competing in any line of business or in any geographic area.
(m) Employee Benefit Plans; Labor Matters.
(i) Trade Disputes. Neither BT nor any of its
Subsidiaries is involved in, and, to the knowledge of BT,
there are no circumstances likely to give rise to, any
industrial or trade dispute or any dispute or negotiation
regarding a claim of material importance with any trade union
or other body which has had or would have a Material Adverse
Effect on BT.
29
(ii) Pensions. BT has made available to MCI copies,
as of the date of this Agreement, of: (A) the current trust
deeds and rules of each of the material schemes to which BT
and its Subsidiaries make or could become liable to make
payments for providing retirement, death, disability or life
assurance benefits (the "BT Schemes") (including any draft
amendments); (B) the most recently prepared explanatory
booklets and announcements relating to each of the BT Schemes;
and (C) a copy of the actuary's report on the latest actuarial
valuation of the BT Schemes, if applicable. With respect to
the BT Schemes, no event has occurred and, to the knowledge of
BT, there exists no condition or set of circumstances, in
connection with which BT or any of its Subsidiaries could be
subject to any liability under the terms of such BT Schemes,
the Pension Schemes Act of 1993 or any other applicable law
which, individually or in the aggregate, would have a Material
Adverse Effect on BT.
(n) Brokers or Finders. No agent, broker, investment banker,
financial advisor or other firm or Person is or will be entitled to any
broker's or finder's fee or any other similar commission or fee in
connection with any of the transactions contemplated by this Agreement,
except N M Rothschild & Sons Limited, Rothschild Inc., Xxxxxx Xxxxxxx &
Co. Limited and Cazenove & Co., whose fees and expenses will be paid by
BT in accordance with BT's agreements with such firms, based upon
arrangements made by or on behalf of BT.
(o) Ownership of MCI Common Stock. As of the date of this
Agreement, except as contemplated by that certain Amended and Restated
Investment Agreement dated as of January 31, 1994 (the "Investment
Agreement") between BT and MCI, neither BT nor, to the best of its
knowledge, any of its affiliates or associates (as such terms are
defined under the Exchange Act) (i) beneficially owns, directly or
indirectly or (ii) is party to any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or
disposing of, in case of either clause (i) or (ii), shares of capital
stock of MCI.
(p) Intellectual Property Rights.
(i) Neither BT nor any of its Subsidiaries (a) has
licensed Intellectual Property Rights owned by them (or
licensed to them by a third party) to any Person in a manner
that would have a Material Adverse Effect on BT; or (b) is in
breach of any agreements related to licenses from BT or its
Subsidiaries of Intellectual Property Rights owned by them (or
licensed to them by a third party) which breach would have a
Material Adverse Effect on BT, and the transactions
contemplated by this Agreement will not constitute such a
breach or otherwise reduce or impair, in any material respect,
the rights of BT and its Subsidiaries under such license
agreements.
30
(ii) The terms of licenses of Intellectual Property
Rights by third parties to BT and its Subsidiaries are
sufficient to allow BT and its Subsidiaries to conduct, and to
continue to conduct, their businesses in all material respects
as currently conducted. Neither BT nor any of its Subsidiaries
is in breach of any of the agreements relating to such
licenses which breach would have a Material Adverse Effect on
BT, and the transactions contemplated by this Agreement will
not constitute such a breach or otherwise impair, in any
material respect, the rights of BT and its Subsidiaries under
such license agreements. For purposes of this clause (ii),
joint ownership of Intellectual Property Rights between BT and
its Subsidiaries, on the one hand, and any other Person, on
the other hand, shall be deemed to be a license from such
Person to BT and its Subsidiaries.
(iii) Neither BT nor any of its Subsidiaries has
received any written notice from any Person regarding any
actual or potential infringements by BT or any of its
Subsidiaries of any Intellectual Property Rights of any other
Person which infringements, individually or in the aggregate,
would if proven have a Material Adverse Effect on BT. For
purposes of this paragraph (iii), a challenge by a Person to
the ownership of Intellectual Property Rights of BT and its
Subsidiaries shall be deemed to be an allegation by the Person
so challenging of actual or potential infringement by BT and
its Subsidiaries.
(iv) No claims are pending or, to the best knowledge
of BT, threatened by any Person with respect to the ownership,
validity or enforceability of any Intellectual Property Rights
or challenging or questioning the right of BT or any of its
Subsidiaries to use any Intellectual Property Rights, except
as would not, individually or in the aggregate, have a
Material Adverse Effect on BT.
(v) Neither BT nor any of its Subsidiaries has, as of
the date of this Agreement, any outstanding claim against it
of an infringement, the loss of which would have a Material
Adverse Effect on BT; and neither BT nor any of its
Subsidiaries has made any still outstanding claim against a
Person of a violation or infringement, the loss of which would
have a Material Adverse Effect on BT.
(vi) The ownership of Intellectual Property Rights
and the right to secure such rights (including the right to
apply for patents) currently enjoyed by BT and its
Subsidiaries will not be affected by the transactions
contemplated by this Agreement in any manner that would have a
Material Adverse Effect on BT.
3.3. Representations and Warranties of BT and Merger Sub. BT and Merger Sub
represent and warrant to MCI as follows:
31
(a) Organization and Corporate Power. Merger Sub is a corporation duly
incorporated, validly existing and in good standing under the laws of Delaware.
(b) Corporate Authorization. Merger Sub has all requisite
corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby. The execution,
delivery and performance by Merger Sub of this Agreement and the
consummation by Merger Sub of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of
Merger Sub. This Agreement has been duly executed and delivered by
Merger Sub and constitutes a valid and binding agreement of Merger Sub,
enforceable against it in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws relating to or
affecting creditors generally, by general equity principles (regardless
of whether such enforceability is considered in a proceeding in equity
or at law) or by an implied covenant of good faith and fair dealing.
(c) Non-Contravention. The execution, delivery and performance
by Merger Sub of this Agreement and the consummation by Merger Sub of
the transactions contemplated hereby do not and will not contravene or
conflict with the certificate of incorporation or by-laws of Merger
Sub.
(d) No Business Activities. Merger Sub has not conducted any activities
other than in connection with the organization of Merger Sub, the negotiation
and execution of this Agreement and the consummation of the transactions
contemplated hereby. Merger Sub has no Subsidiaries.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
4.1. Covenants of MCI. During the period from the date of this
Agreement and continuing until the Effective Time, MCI agrees as to itself and
its Subsidiaries that (except as expressly contemplated or permitted by this
Agreement or as otherwise indicated on the MCI Disclosure Schedule or to the
extent that BT shall otherwise consent in writing):
(a) Ordinary Course.
(i) MCI and its Subsidiaries shall carry on their
respective businesses in the usual, regular and ordinary
course in all material respects, in substantially the same
manner as heretofore conducted, and shall use all reasonable
efforts to preserve intact their present lines of business,
maintain their rights and franchises and preserve their
relationships with customers,
32
suppliers and others having business dealings with them to the
end that their ongoing businesses shall not be impaired in any
material respect at the Effective Time; provided, however,
that no action by MCI or its Subsidiaries with respect to
matters specifically addressed by any other provision of this
Section 4.1 shall be deemed a breach of this Section 4.1(a)(i)
unless such action would constitute a breach of one or more of
such other provisions.
(ii) MCI shall not, and shall not permit any of its
Subsidiaries to, (A) enter into any new material line of
business or (B) incur or commit to any capital expenditures
other than capital expenditures incurred or committed to in
the ordinary course of business consistent with past practice
and which, together with all such expenditures incurred or
committed to during any fiscal year, are not in excess of 115%
of the aggregate amounts set forth in Section 4.1(a) of the
MCI Disclosure Schedule.
(b) Dividends; Changes in Share Capital. MCI shall not, and
shall not permit any of its Subsidiaries to, and shall not propose to,
(i) declare or pay any dividends on or make other distributions in
respect of any of its capital stock, except (A) MCI may continue the
declaration and payment of regular semiannual cash dividends not in
excess of $0.025 per share of MCI Common Stock, in each case with usual
record and payment dates for such dividends in accordance with MCI's
past practice and (B) dividends by wholly owned Subsidiaries of MCI,
(ii) split, combine or reclassify any of its capital stock or issue or
authorize or propose the issuance of any other securities in respect
of, in lieu of or in substitution for, shares of its capital stock,
except for any such transaction by a wholly owned Subsidiary of MCI
which remains a wholly owned Subsidiary after consummation of such
transaction, or (iii) repurchase, redeem or otherwise acquire any
shares of its capital stock or any securities convertible into or
exercisable for any shares of its capital stock except for the purchase
from time to time by MCI of MCI Common Stock in the ordinary course of
business consistent with past practice in connection with the MCI
Benefit Plans.
(c) Issuance of Securities. Except as set forth in Sections
5.8 and 5.9(b), MCI shall not and shall not permit any of its
Subsidiaries to, issue, deliver or sell, or authorize or propose the
issuance, delivery or sale of, any shares of its capital stock of any
class, any MCI Voting Debt or any securities convertible into or
exercisable for, or any rights, warrants or options to acquire, any
such shares or MCI Voting Debt, or enter into any agreement with
respect to any of the foregoing and shall not amend any equity-related
awards issued pursuant to the MCI Benefit Plans, other than (i) the
issuance of MCI Common Stock (and the associated Rights) upon the
exercise of stock options issued in the ordinary course of business and
consistent with past practice in accordance with the terms of the MCI
Stock Option Plans as in effect on the date of this Agreement, (ii)
issuances by a wholly owned Subsidiary of MCI of capital stock to such
Subsidiary's parent and (iii) issuances of options, rights or other
awards, and amendments to equity-related awards, in the ordinary course
of business
33
and consistent with past practice pursuant to the MCI Stock Option
Plans as in effect on the date of this Agreement.
(d) Governing Documents. Except to the extent required to
comply with their respective obligations hereunder, required by law or
required by the rules and regulations of NASDAQ, MCI and its
Subsidiaries shall not amend or propose to amend their respective
certificates of incorporation, by-laws or other governing documents.
(e) No Acquisitions. Other than acquisitions in existing or
related lines of business of MCI the fair market value of the total
consideration (including the value of indebtedness or other liability
acquired or assumed) for which does not exceed $50,000,000 individually
or $200,000,000 in the aggregate, MCI shall not, and shall not permit
any of its Subsidiaries to, acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial equity interest in
or a substantial portion of the assets of, or by any other manner, any
business or any corporation, partnership, association or other business
organization or division thereof or otherwise acquire or agree to
acquire any assets (other than the acquisition of assets used in the
operations of the business of MCI and its Subsidiaries in the ordinary
course); provided, however, that the foregoing shall not prohibit (x)
internal reorganizations or consolidations involving existing
Subsidiaries of MCI or (y) the creation of new Subsidiaries of MCI
organized to conduct or continue activities otherwise permitted by this
Agreement.
(f) No Dispositions. Other than (i) internal reorganizations
or consolidations involving existing Subsidiaries of MCI, (ii)
dispositions referred to in MCI SEC Reports filed prior to the date of
this Agreement and (iii) as may be required by law in order to permit
the consummation of the transactions contemplated hereby, MCI shall
not, and shall not permit any Subsidiary of MCI to, sell, lease,
encumber or otherwise dispose of, or agree to sell, lease, encumber or
otherwise dispose of, any of its assets (including capital stock of
Subsidiaries of MCI) which are material, individually or in the
aggregate, to MCI.
(g) Indebtedness. MCI shall not, and shall not permit any of
its Subsidiaries to, (i) incur or suffer to exist any indebtedness for
borrowed money or guarantee any such indebtedness or issue or sell any
debt securities or warrants or rights to acquire any debt securities of
MCI or any of its Subsidiaries or guarantee any debt securities of
other Persons other than indebtedness of MCI or any Subsidiary of MCI
to MCI or any wholly owned Subsidiary of MCI and other than as
permitted pursuant to Section 4.1(g) of the MCI Disclosure Schedule,
(ii) make any loans, advances or capital contributions to, or
investments in, any other Person, other than by MCI or a Subsidiary of
MCI to or in MCI or any Subsidiary of MCI or (iii) pay, discharge or
satisfy any claims, liabilities or obligations (absolute, accrued,
asserted or unasserted, contingent or otherwise), other than in the
case of clauses (ii) and (iii),
34
loans, advances, capital contributions, investments, payments,
discharges or satisfactions incurred or committed to in the ordinary
course of business consistent with past practice.
(h) Benefit Plans. Subject to Sections 5.8 and 5.9(b), MCI
shall not, and shall not permit any of its Subsidiaries to, (i)
increase the compensation payable or to become payable to any of its
executive officers or employees or (ii) take any action with respect to
the grant of any severance or termination pay, or stay, bonus or other
incentive arrangement (other than pursuant to benefit plans and
policies in effect on the date of this Agreement), except any such
increases or grants made in the ordinary course of business and in
accordance with past practice.
(i) Other Actions. MCI shall not, and shall not permit any of
its Subsidiaries to, take any action that would, or that could
reasonably be expected to, result in (i) any of the representations or
warranties of MCI set forth in this Agreement that are qualified as to
materiality becoming untrue, (ii) any of such representations or
warranties that are not so qualified becoming untrue in any material
respect or (iii) except as otherwise permitted by Section 5.7, any of
the conditions to the Merger set forth in Article VI not being
satisfied.
(j) Accounting Methods; Income Tax Elections. Except as
disclosed in MCI SEC Reports filed prior to the date of this Agreement,
or as required by a Governmental Entity, MCI shall not change its
methods of accounting in effect at December 31, 1995, except as
required by changes in US GAAP as concurred in by MCI's independent
auditors. MCI shall not (i) change its fiscal year or (ii) make any
material Tax election, other than in the ordinary course of business
consistent with past practice, without consultation with BT.
(k) Tax-Free Qualification. MCI shall not, and shall not
permit any of its Subsidiaries to, take any action that would prevent
or impede (i) the Merger from qualifying as a tax-free reorganization
under Section 368 of the Code or (ii) either party from obtaining the
Required Consents.
(l) Certain Agreements. MCI shall not, and shall not permit
any of its Subsidiaries to, enter into any agreement or arrangement
that limits or otherwise restricts MCI or any of its Subsidiaries or
any of their respective affiliates or any successor thereto or that
could, after the Closing, limit or restrict BT or any of its affiliates
or any successor thereto from engaging or competing in any line of
business or in any geographic area.
4.2. Covenants of BT. During the period from the date of this
Agreement and continuing until the Effective Time, BT agrees as to itself and
its Subsidiaries that (except as expressly contemplated or permitted by this
Agreement or as otherwise indicated on the BT Disclosure Schedule or to the
extent that MCI shall otherwise consent in writing):
35
(a) Ordinary Course.
(i) BT and its Subsidiaries shall carry on their
respective businesses in the usual, regular and ordinary
course in all material respects, in substantially the same
manner as heretofore conducted, and shall use all reasonable
efforts to preserve intact their present lines of business,
maintain their rights and franchises and preserve their
relationships with customers, suppliers and others having
business dealings with them to the end that their ongoing
businesses shall not be impaired in any material respect at
the Effective Time; provided, however, that no action by BT or
its Subsidiaries with respect to matters specifically
addressed by any other provision of this Section 4.2 shall be
deemed a breach of this Section 4.2(a) unless such action
would constitute a breach of one or more of such other
provisions.
(ii) BT shall not, and shall not permit any of its
Subsidiaries to, (A) enter into any new material line of
business or (B) incur or commit to any capital expenditures
other than capital expenditures incurred or committed to in
the ordinary course of business consistent with past practice
and which, together with all such expenditures incurred or
committed to during any fiscal year, are not in excess of 115%
of the aggregate amount of capital expenditures reflected in
BT's capital expenditure budget for the applicable fiscal
year.
(b) Dividends; Changes in Stock. BT shall not, and shall not
permit any of its Subsidiaries to, and shall not propose to, (i)
declare or pay any dividends on or make other distributions in respect
of any of its share capital, except (A) BT may continue the declaration
and payment of regular semiannual cash dividends in amounts consistent
with past practice (including increases in such amounts in accordance
with past practice), in each case with usual record and payment dates
for such dividends in accordance with BT's past dividend practice,
provided that, notwithstanding the exception in Section 4.2(b)(i)(A),
BT shall in respect of the Second Dividend notify the LSE to xxxx the
BT Ordinary Shares "ex-dividend" in the Stock Exchange Daily Official
List on a date prior to the Effective Time, (B) dividends by wholly
owned Subsidiaries of BT and (C) BT may declare and pay one or more
special dividends in an aggregate amount not to exceed 35p per BT
Ordinary Share (net), (ii) split, combine or reclassify any of its
share capital or issue or authorize or propose the issuance of any
other securities in respect of, in lieu of or in substitution for
shares, except for any such transaction by a wholly owned Subsidiary of
BT which remains a wholly owned Subsidiary after consummation of such
transaction, or (iii) repurchase, redeem or otherwise acquire, or
permit any Subsidiary of BT to purchase or otherwise acquire, any
shares of its capital stock or any securities convertible into or
exercisable for any shares of its capital stock except the purchase
from time to time by BT of BT Ordinary Shares in the ordinary course of
business consistent with past practice in
36
connection with share options, share incentive schemes or profit
sharing schemes of BT.
(c) Issuance of Securities. BT shall not, and shall not permit
any of its Subsidiaries to, issue, deliver or sell, or authorize or
propose the issuance, delivery or sale of, any shares of any class, any
BT Voting Debt or any securities convertible into or exercisable for,
or any rights, warrants or options to acquire, any such shares or BT
Voting Debt, or enter into any agreement with respect to any of the
foregoing, other than (i) the issuance of BT Ordinary Shares upon the
exercise of stock options, (ii) issuances by a wholly owned Subsidiary
of BT of share capital to such Subsidiary's parent or to another wholly
owned Subsidiary of BT and (iii) issuances of options, rights or other
awards pursuant to the BT benefit plans as in effect from time to time.
(d) Governing Documents. Except to the extent required to
comply with their respective obligations hereunder, required by law or
required by the rules and regulations of the LSE or the NYSE, BT and
its Subsidiaries shall not amend or propose to amend their respective
memoranda and articles of association or other governing documents in
any manner which would be adverse (i) to the interests of MCI or the
stockholders of MCI, unless such amendment is equally adverse to the
shareholders of BT or (ii) to MCI's ability to consummate the
transactions contemplated hereby.
(e) No Acquisitions. Other than acquisitions in existing or
related lines of business of BT the fair market value of the total
consideration (including the value of indebtedness or other liability
acquired or assumed) for which does not exceed (pound)50,000,000
individually or (pound)200,000,000 in the aggregate, BT shall not, and
shall not permit any of its Subsidiaries to, acquire or agree to
acquire by merging or consolidating with, or by purchasing a
substantial equity interest in or a substantial portion of the assets
of, or by any other manner, any business or any corporation,
partnership, association or other business organization or division
thereof or otherwise acquire or agree to acquire any assets (other than
the acquisition of assets used in the operations of the business of BT
and its Subsidiaries in the ordinary course); provided, however, that
the foregoing shall not prohibit (x) internal reorganizations or
consolidations involving existing Subsidiaries of BT or (y) the
creation of new Subsidiaries of BT organized to conduct or continue
activities otherwise permitted by this Agreement.
(f) No Dispositions. Other than (i) internal reorganizations
or consolidations involving existing Subsidiaries of BT, (ii)
dispositions referred to in BT SEC Reports filed prior to the date of
this Agreement and (iii) as may be required by law in order to permit
the consummation of the transactions contemplated hereby, BT shall not,
and shall not permit any Subsidiary of BT to, sell, lease, encumber or
otherwise dispose of, or agree to sell, lease, encumber or otherwise
dispose of, any of
37
its assets (including capital stock of Subsidiaries of BT) which are
material, individually or in the aggregate, to BT.
(g) Indebtedness. BT shall not, and shall not permit any of
its Subsidiaries to, (i) incur or suffer to exist any indebtedness for
borrowed money or guarantee any such indebtedness or issue or sell any
debt securities or warrants or rights to acquire any debt securities of
BT or any of its Subsidiaries or guarantee any debt securities of other
Persons other than indebtedness of BT or any Subsidiary of BT to BT or
any wholly owned Subsidiary of BT and other than as permitted pursuant
to Section 4.2(g) of the BT Disclosure Schedule, (ii) make any loans,
advances or capital contributions to, or investments in, any other
Person, other than by BT or a Subsidiary of BT to or in BT or any
Subsidiary of BT or (iii) pay, discharge or satisfy any claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than in the case of clauses (ii) and
(iii), loans, advances, capital contributions, investments, payments,
discharges or satisfactions incurred or committed to in the ordinary
course of business consistent with past practice.
(h) Benefit Plans. BT shall, to the extent permitted by law or
regulations or any applicable confidentiality agreement, consult with
MCI in advance with respect to any proposed material changes in BT's
benefits plans, and shall consider in good faith MCI's views with
respect to the foregoing.
(i) Other Actions. BT shall not, and shall not permit any of
its Subsidiaries to, take any action that would, or that could
reasonably be expected to, result in (i) any of the representations or
warranties of BT set forth in this Agreement that are qualified as to
materiality becoming untrue, (ii) any of such representations or
warranties that are not so qualified becoming untrue in any material
respect or (iii) except as otherwise permitted by Section 5.7, any of
the conditions to the Merger set forth in Article VI not being
satisfied.
(j) Accounting Methods; Income Tax Elections. Except as
disclosed in BT SEC Reports filed prior to the date of this Agreement,
or as required by a Governmental Entity, BT shall not change its
accounting policies in effect at March 31, 1996, except as required or
permitted by changes in UK GAAP as concurred in by BT's independent
auditors. BT shall not (i) change its fiscal year (unless otherwise
required by law) or (ii) make any material Tax elections, other than in
the ordinary course of business consistent with past practice, without
consultation with MCI.
(k) Tax-Free Qualification. BT shall not, and shall not permit
any of its Subsidiaries to, take any action that would prevent or
impede (i) the Merger from qualifying as a tax-free reorganization
under Section 368 of the Code or (ii) either party from obtaining the
Required Consents.
38
(l) Certain Agreements. BT shall not, and shall not permit any
of its Subsidiaries to, enter into any agreement or arrangement that
limits or otherwise restricts BT or any of its Subsidiaries or any
successor thereto from engaging or competing in any line of business or
in any geographic area which would have a Material Adverse Effect on
BT.
(m) Certain Arrangements. BT shall take reasonable steps to
implement and maintain arrangements under which holders of BT ADSs who
satisfy the conditions for the application of such arrangements will
receive a Tax Treaty Payment to which they are entitled directly from
BT rather than from the Inland Revenue at the same time as and together
with the payment of the associated cash dividend. For the purposes of
this Section 4.2(m) the Tax Treaty Payment is that part of the tax
credit attaching to the relevant dividend that would, but for these
arrangements, be reclaimed by the holder of BT ADSs from the United
Kingdom Inland Revenue under the income tax convention between the
United States and the United Kingdom.
4.3. Advice of Changes; Government Filings. Each party shall
(a) confer on a regular and frequent basis with the other, (b) report (to the
extent permitted by law or regulation or any applicable confidentiality
agreement) on operational matters and (c) promptly advise the other orally and
in writing of (i) any representation or warranty made by it contained in this
Agreement that is qualified as to materiality becoming untrue or inaccurate in
any respect or any such representation or warranty that is not so qualified
becoming untrue or inaccurate in any material respect, (ii) the failure by it
(A) to comply with or satisfy in any respect any covenant, condition or
agreement required to be complied with or satisfied by it under this Agreement
that is qualified as to materiality or (B) to comply with or satisfy in any
material respect any covenant, condition or agreement required to be complied
with or satisfied by it under this Agreement that is not so qualified as to
materiality or (iii) any change, event or circumstance that has had or would
have a Material Adverse Effect on such party; provided, however, that no such
notification shall affect the representations, warranties, covenants or
agreements of the parties or the conditions to the obligations of the parties
under this Agreement. MCI and BT shall file all reports required to be filed by
each of them with the SEC (and all other Governmental Entities) and shall
announce or publish all information required to be announced or published by the
LSE (including pursuant to the Listing Rules of the LSE) between the date of
this Agreement and the Effective Time and shall (to the extent permitted by law
or regulation or any applicable confidentiality agreement) deliver to the other
party copies of all such reports, announcements and publications promptly after
the same are filed, announced or published. Subject to applicable laws relating
to the exchange of information, each of MCI and BT shall have the right to
review in advance, and to the extent practicable each will consult with the
other, with respect to all the information relating to the other party and each
of their respective Subsidiaries, which appears in any filings, announcements or
publications made with, or written materials submitted to, any third party or
any Governmental Entity in connection with the transactions contemplated by this
Agreement. In exercising the foregoing right, each of the parties hereto agrees
to act reasonably and as promptly as
39
practicable. Each party agrees that, to the extent practicable, it will consult
with the other party with respect to the obtaining of all permits, consents,
approvals and authorizations of all third parties and Governmental Entities
necessary or advisable to consummate the transactions contemplated by this
Agreement and each party will keep the other party apprised of the status of
matters relating to completion of the transactions contemplated hereby.
4.4. Transition Planning. Xxx Xxxxx Xxxxxxxx, as Chief
Executive Officer of BT, and Xxxxxx X. Xxxxxx, as President of MCI, jointly
shall be responsible for coordinating all aspects of transition planning and
implementation relating to the Merger and the other transactions contemplated
hereby. If either such person ceases to be Chief Executive Officer or President,
respectively, of his company for any reason, such person's successor shall
assume his predecessor's responsibilities under this Section 4.4. During the
period between the date of this Agreement and the Effective Time, Messrs.
Xxxxxxxx and Xxxxxx jointly shall (i) examine various alternatives regarding the
manner in which to best organize and manage the businesses of BT and MCI after
the Effective Time and (ii) coordinate policies and strategies with respect to
regulatory authorities and bodies, in all cases subject to applicable law.
4.5. Control of Other Party's Business. Nothing contained in
this Agreement shall give MCI, directly or indirectly, the right to control or
direct BT's operations prior to the Effective Time. Nothing contained in this
Agreement shall give BT, directly or indirectly, the right to control or direct
MCI's operations prior to the Effective Time. Prior to the Effective Time, each
of MCI and BT shall exercise, consistent with the terms and conditions of this
Agreement, complete control and supervision over its respective operations.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1. Preparation of Disclosure Documents; MCI Stockholder and BT
Shareholder Meetings.
(a) As soon as practicable following the date of this
Agreement, MCI and BT shall prepare the Proxy Statement/Prospectus. MCI
shall, in cooperation with BT, file the Proxy Statement/Prospectus with
the SEC as its preliminary Proxy Statement and BT shall, in cooperation
with MCI, prepare and file with the SEC the Form F-4, in which the
Proxy Statement/Prospectus will be included as BT's prospectus. If
required under the Exchange Act, BT, Merger Sub and MCI shall together
prepare and file a Transaction Statement on Schedule 13E-3 (the
"Schedule 13E-3") under the Exchange Act at the time of the filing of
the preliminary Proxy
40
Statement. At the time of the filing of any amended preliminary Proxy
Statement and at the time of the filing of the Form F-4 and any
amendment to the Form F-4, the parties shall file with the SEC an
appropriate amendment to the Schedule 13E-3 which includes as an
exhibit thereto and incorporates by reference such amended preliminary
Proxy Statement or such Proxy Statement/Prospectus, or any amendment or
supplement thereto. Each of MCI and BT shall use all reasonable efforts
to have the Form F-4 declared effective under the Securities Act as
promptly as practicable after such filing and to keep the Form F-4
effective as long as is necessary to consummate the Merger. BT shall
also, as promptly as practicable, use all reasonable efforts to cause
the ADR Depositary to file with the SEC a registration statement on
Form F-6 (the "Form F-6") with respect to the BT ADRs to be issued in
connection with the Merger under the Securities Act and use all
reasonable efforts to have the Form F-6 declared effective as soon as
practicable after such filing. MCI shall mail the Proxy
Statement/Prospectus to MCI's stockholders as promptly as practicable
after the Form F-4 is declared effective under the Securities Act and,
if necessary, after the Proxy Statement/Prospectus shall have been so
mailed, promptly circulate amended, supplemental or supplemented proxy
material, and, if required in connection therewith, resolicit proxies,
it being understood that MCI shall not be required to hold more than
one meeting of stockholders. BT shall also take any action (other than
qualifying to do business in any jurisdiction in which BT is not now so
qualified) required to be taken under any applicable United States
state securities laws in connection with the issuance of BT ADSs and BT
ADRs in connection with the Merger and under the MCI Benefit Plans and
MCI shall furnish all information concerning MCI and the holders of MCI
Common Stock as may be reasonably requested in connection with any such
action.
(b) Unless otherwise required pursuant to the applicable
fiduciary duties of the Board of Directors of MCI to the stockholders
of MCI (as determined in good faith by the Board of Directors of MCI
based upon the advice of outside counsel) (i) MCI shall, as soon as
practicable following the date of this Agreement and the effectiveness
of the Form F-4, duly call, give notice of, convene and hold a meeting
of its stockholders (the "MCI Stockholders Meeting") for the purpose of
obtaining the Required MCI Votes with respect to this Agreement, (ii)
the Board of Directors of MCI shall recommend adoption of this
Agreement by the Stockholders of MCI and (iii) MCI shall take all
lawful action to solicit such adoption.
(c) Unless otherwise required pursuant to the applicable
fiduciary duties of the Board of Directors of BT to the shareholders of
BT (as determined in good faith by the Board of Directors of BT based
upon the advice of counsel), (i) BT shall, as soon as practicable
following the date of this Agreement, convene and hold a meeting of the
holders of BT Ordinary Shares (the "BT Shareholder Meeting") for the
purpose of obtaining the Required BT Vote with respect to the Merger,
the share repurchase authorization referred to in Section 5.16 and the
other transactions contemplated hereby and (ii) the Board of Directors
of BT shall recommend approval of the
41
Merger, the share repurchase authorization and the other transactions
contemplated hereby.
(d) In connection with the BT Shareholder Meeting, to the
extent required by applicable law, (i) BT shall, as soon as practicable
after the date of this Agreement and in accordance with the listing
rules of the LSE, prepare and submit to the LSE for approval the BT
Disclosure Document, and shall use all reasonable efforts to have such
document formally approved by the LSE and shall thereafter publish the
BT Disclosure Document and mail the same to its shareholders in
compliance with all legal requirements applicable to the BT Shareholder
Meeting and the listing rules of the LSE and (ii) if necessary, after
the BT Disclosure Document has been so posted, promptly circulate
amended, supplemental or supplemented materials and, if required in
connection therewith, resolicit votes, it being understood that BT
shall not be required to hold more than one meeting of shareholders.
(e) Except as required by law, no amendment or supplement to
the Proxy Statement/Prospectus or the Form F-4 or, if applicable, the
Schedule 13E-3 shall be made by BT or MCI without the approval of the
other party (which shall not be unreasonably withheld). Each party
shall advise the other party, promptly after it receives notice
thereof, of the time when the Form F-4 has become effective or any
supplement or amendment has been filed, of the issuance of any stop
order, of the suspension of the qualification of BT ADSs or BT ADRs
issuable in connection with the Merger for offering or sale in any
jurisdiction, or of any request by the SEC or the LSE for amendment of
the Proxy Statement/Prospectus or the Form F-4 or comments thereon and
responses thereto or requests by the SEC or the LSE for additional
information.
5.2. BT Board of Directors; Officers; Headquarters.
(a) BT shall take all necessary action to reconstitute the
Board of Directors of BT as of the Effective Time in accordance with
Exhibit 5.2(a).
(b) BT shall take all necessary action to cause Xxx Xxxx Xxxxxxxx and Xxxx
X. Xxxxxxx, Xx. to be appointed Co-Chairmen of BT as of the Effective Time and
to amend the Articles of Association of BT to provide for Co-Chairmen.
(c) BT will have, after the Closing, United Kingdom and United States
headquarters.
(d) BT shall take all reasonable steps to ensure that, after
the Effective Time, five out of the first ten meetings of the Board of
Directors of BT each year will be held in the United Kingdom with Xxx
Xxxx Xxxxxxxx (or his successor) acting as the Chairman and presiding
at such five meetings and the remaining five meetings will be held in
the United States with Xxxx X. Xxxxxxx, Xx. (or his successor) acting
as the
42
Chairman and presiding at such five meetings, and any additional
meetings of the Board of Directors of BT each year will be held in the
United Kingdom with Xxx Xxxx Xxxxxxxx (or his successor) acting as the
Chairman and presiding at such additional meetings.
(e) BT shall take reasonable steps after the Effective Time to
enable United States holders of BT ADSs to attend and, at the
invitation of the Chairman, speak (but not vote) by means of video
conference, conference telephone or other similar communications
equipment, at any shareholder meeting of BT held in the United Kingdom;
provided, however, that (i) in no event will the failure to so provide
such United States holders with such opportunity or any mechanical
failure of the video conference, conference telephone or other similar
communication equipment during the course of a shareholder meeting
affect the validity of such shareholder meeting or any action taken
pursuant thereto and (ii) under no circumstances will the provision of
such opportunity for such attendance by any United States holder of BT
ADSs (in his capacity as a holder of BT ADSs or in any other capacity)
be taken to constitute an additional place for the holding of any
General Meeting with the meaning of Article 62(c)(ii) of BT's Articles
of Association.
5.3. Access to Information. Upon reasonable notice, MCI and BT
shall each (and shall cause each of their respective Subsidiaries to) afford to
the officers, employees, accountants, counsel, financial advisors and other
representatives of the other reasonable access during normal business hours,
during the period prior to the Effective Time, to all its properties, books,
contracts, commitments and records and, during such period, each of MCI and BT
shall (and shall cause each of their respective Subsidiaries to) furnish
promptly to the other (a) a copy of each report, schedule, registration
statement and other document filed, published, announced or received by it
during such period pursuant to the requirements of Federal or state securities
laws, the LSE or the FSA, as applicable (other than reports or documents which
such party is not permitted to disclose under applicable law) and (b) consistent
with its legal obligations, all other information concerning its business,
properties and personnel as such other party may reasonably request; provided,
however, that BT or MCI may restrict the foregoing access to the extent that (i)
a Governmental Entity requires such party or any of its Subsidiaries to restrict
access to any properties or information reasonably related to any such contract
on the basis of applicable laws and regulations with respect to national
security matters or (ii) any law, treaty, rule or regulation of any Governmental
Entity applicable to such party requires such party or its Subsidiaries to
restrict access to any properties or information. The parties will hold any such
information which is non-public in confidence to the extent required by, and in
accordance with, the provisions of the letter dated October 4, 1996 between MCI
and BT (the "Confidentiality Agreement"). Any investigation by either BT or MCI
shall not affect the representations and warranties of the other.
5.4. Approvals and Consents; Cooperation. (a) MCI and BT shall cooperate
with each other and use (and shall cause their respective Subsidiaries to use)
all
43
reasonable best efforts to take or cause to be taken all actions, and do or
cause to be done all things, necessary, proper or advisable on their part under
this Agreement and applicable laws to consummate and make effective the Merger
and the other transactions contemplated by this Agreement as soon as
practicable, including (i) preparing and filing as promptly as practicable all
documentation to effect all necessary applications, notices, petitions, filings,
tax ruling requests and other documents and to obtain as promptly as practicable
all consents, waivers, licenses, orders, registrations, approvals, permits, tax
rulings and authorizations necessary or advisable to be obtained from any third
party and/or any Governmental Entity in order to consummate the Merger or any of
the other transactions contemplated by this Agreement and (ii) taking all
reasonable steps as may be necessary to obtain all such consents, waivers,
licenses, registrations, permits, authorizations, tax rulings, orders and
approvals. Without limiting the generality of the foregoing, MCI and BT agree to
make all necessary filings in connection with the Required Regulatory Approvals
as promptly as practicable after the date of this Agreement, and to use all
reasonable best efforts to furnish or cause to be furnished, as promptly as
practicable, all information and documents requested with respect to such
Required Regulatory Approvals and shall otherwise cooperate with the applicable
Governmental Entity in order to obtain any Required Regulatory Approvals in as
expeditious a manner as possible. Each of MCI and BT shall use all reasonable
best efforts to resolve such objections, if any, as any Governmental Entity may
assert with respect to this Agreement and the transactions contemplated hereby
in connection with the Required Regulatory Approvals. In the event that a suit
is instituted by a Person or Governmental Entity challenging this Agreement and
the transactions contemplated hereby as violative of applicable antitrust or
competition laws or the Communications Act, each of MCI and BT shall use its
reasonable best efforts to resist or resolve such suit. Notwithstanding anything
to the contrary in this Section 5.4(a), (i) neither MCI nor BT shall be required
to agree to the imposition of a Combined Company Burdensome Condition, (ii) MCI
shall not agree to the imposition of an MCI Burdensome Condition without BT's
prior written consent and (iii) BT shall not agree to the imposition of a BT
Burdensome Condition without MCI's prior written consent.
(b) MCI and BT 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 reasonably be necessary
or advisable in connection with the BT Disclosure Document, the Form F-4, the
Form F-6 and the Proxy Statement/Prospectus and, if applicable, the Schedule
13E-3 (collectively, the "Disclosure Documents") or any other statement, filing,
tax ruling request, notice or application made by or on behalf of MCI, BT or any
of their respective Subsidiaries to any third party and/or any Governmental
Entity in connection with the Merger or the other transactions contemplated by
this Agreement.
5.5. Affiliates' and Auditors' Letters. (a) Prior to the Closing Date, MCI
shall deliver to BT a letter identifying all Persons who are, immediately prior
to the Effective Time, Rule 145 Affiliates of MCI. MCI shall use all reasonable
efforts to cause each such
44
Person to deliver to BT on or prior to the Closing Date a written agreement in
the form customarily obtained from such affiliates for purposes of Rule 145.
(b) MCI and BT each shall use all reasonable efforts to cause
to be delivered to the other party and such other party's directors a letter of
its independent auditors, dated the date on which the Form F-4 shall become
effective, and addressed to the other party and such other party's directors, in
form and substance customary for "comfort" letters delivered by independent
public accountants in connection with registration statements similar to the
Form F-4.
5.6. Stock Exchange Listings. (a) BT shall, as promptly as
practicable, prepare and submit to the LSE a listing application covering the BT
Ordinary Shares to be represented by the BT ADSs to be issued in the Merger, and
shall use all reasonable efforts to obtain, prior to the Effective Time,
agreement by the LSE for the admission of such BT Ordinary Shares to the
Official List of the London Stock Exchange, and MCI shall cooperate with BT with
respect to such listing.
(b) BT shall, if necessary, promptly prepare and submit to the
NYSE or NASDAQ (as shall be agreed between the parties prior to the Closing) a
listing application covering the BT ADSs to be issued in the Merger, and shall
use all reasonable efforts to obtain, prior to the Effective Time, approval for
the listing of such BT ADSs, subject to official notice of issuance, and MCI
shall cooperate with BT with respect to such listing.
5.7. Acquisition Proposals. (a) MCI and BT 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, directly or indirectly, initiate, solicit,
encourage or otherwise facilitate (including by way of furnishing information)
any inquiries or the making of any proposal, or offer with respect to a merger,
reorganization, share exchange, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction involving, or
any purchase or sale of all or any significant portion of the assets or 10% or
more of the equity securities of, it or any of its Subsidiaries that, in any
such case, could reasonably be expected to interfere with the completion of the
Merger or the other transactions contemplated by this Agreement (any such
proposal or offer being hereinafter referred to as an "Acquisition Proposal").
MCI and BT each further agrees that neither it nor any of its Subsidiaries nor
any of the officers and directors of it or its Subsidiaries shall, and that it
shall direct and use its best efforts to cause its and its Subsidiaries'
employees, agents and representatives (including any investment banker, attorney
or accountant retained by it or any of its Subsidiaries) not to, directly or
indirectly, have any discussion with or provide any confidential information or
data to any Person relating to an Acquisition Proposal or engage in any
negotiations concerning an Acquisition Proposal, or otherwise facilitate any
effort or attempt to make or implement an Acquisition Proposal or accept an
Acquisition Proposal; provided, however, that nothing contained in this
Agreement shall
45
prevent either MCI or BT or its Board of Directors from (A) complying with Rule
14e-2 promulgated under the Exchange Act or complying with the City Code, as
applicable, with regard to an Acquisition Proposal; (B) engaging in any
discussions or negotiations with, or providing any information to, any Person in
response to an unsolicited bona fide written Acquisition Proposal by any such
Person; or (C) recommending such an unsolicited bona fide written Acquisition
Proposal to the stockholders of MCI or BT, as the case may be, if and only to
the extent that, in any such case as is referred to in clause (B) or (C), (i)
the Board of Directors of MCI or BT, as the case may be, concludes in good faith
(after consultation with its financial advisors) that such Acquisition Proposal
is reasonably capable of being completed, taking into account all legal,
financial, regulatory and other aspects of the proposal and the Person making
the proposal, and would, if consummated, result in a transaction more favorable
to MCI's or BT's stockholders, as the case may be, from a financial and
strategic point of view than the transaction contemplated by this Agreement (any
such more favorable Acquisition Proposal being referred to in this Agreement as
a "Superior Proposal"), (ii) the Board of Directors of MCI or BT, as the case
may be, determines in good faith after consultation with legal counsel that such
action is necessary for its Board of Directors to act in a manner consistent
with its fiduciary duties under applicable law, (iii) prior to providing any
information or data to any Person in connection with an Acquisition Proposal by
any such Person, such Board of Directors receives from such Person an executed
confidentiality agreement on terms substantially similar to those contained in
the confidentiality agreement previously entered into between BT and MCI in
connection with their consideration of the Merger and (iv) prior to providing
any information or data to any Person or entering into discussions or
negotiations with any Person, the Board of Directors of MCI or BT, as the case
may be, notifies the other party, immediately of such inquiries, proposals or
offers received by, any such information requested from, or any such discussions
or negotiations sought to be initiated or continued with, any of its
representatives indicating, in connection with such notice, the name of such
Person and the terms and conditions of any proposals or offers. MCI and BT each
agrees that it will immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any parties conducted heretofore
with respect to any Acquisition Proposal. MCI and BT 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
5.7. MCI and BT each agrees that it shall keep the other informed, on a current
basis, of the status and terms of any such proposals or offers and the status of
any such discussions or negotiations.
(b) Except in connection with any potential change in the
terms of this Agreement in response to any Acquisition Proposal as contemplated
by Section 5.7(a) and Section 7.1(f), neither MCI nor BT will take any
initiatives involving the other party that would otherwise require such other
party to make a public announcement, make any public comment or proposal with
respect to any Acquisition Proposal with respect to such other party, become a
member of a "group" within the meaning of Section 13(d) of the Exchange Act,
enter into any discussions, negotiations, arrangements or understanding with any
third party with respect to any of the foregoing or otherwise seek to control or
influence the other party, in all cases except as expressly contemplated by this
Agreement or, in the case of BT,
46
the Investment Agreement. MCI and BT agree that each will notify the other
immediately if any inquiries or proposals are received by, any information is
requested from, or any negotiations or discussions are sought to be initiated or
continued with, either MCI or BT or any of their respective affiliates or
representatives regarding any Acquisition Proposal with respect to such other
party.
(c) BT agrees that, while this Agreement remains in effect,
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, (i) directly or indirectly, initiate, solicit,
encourage or otherwise facilitate any inquiries or the making of any proposal or
offer with respect to the purchase or sale of any shares of MCI Class A Common
Stock owned by BT or any of its Subsidiaries or (ii) sell, transfer, pledge or
assign, or grant any proxy with respect to, any shares of MCI Class A Common
Stock owned by BT or any of its Subsidiaries.
(d) BT agrees that, while this Agreement remains in effect, at
any meeting of the holders of shares of MCI Common Stock at which BT shall have
the right to vote its shares of MCI Class A Common Stock or at any meeting of
the holders of shares of MCI Class A Common Stock, however called, or in
connection with any written consent of the holders of shares of MCI Common Stock
or MCI Class A Common Stock, BT shall vote (or cause to be voted) the shares of
MCI Class A Common Stock held by it, to the extent voting rights exist with
respect to the proposals to be acted upon, in favor of adoption of this
Agreement and approval of the other transactions contemplated by this Agreement.
5.8. Stock Options and Other Stock Plans. (a) During the
period from the date of this Agreement to the Effective Time, MCI may grant to
certain of its employees, pursuant to the MCI 1989 Stock Option Plan, Senior
Retention ISUs, 1997 ISUs and 1997 Options (as each such term is defined in
Annex A hereto) substantially on the terms and conditions described in Annexes A
and B hereto. MCI and BT will discuss any equity-related award to be issued by
MCI during the period from the date of this Agreement to the Effective Time that
affects employees at the level of vice president and above and is significant in
the context of such employee's compensation.
(b) On or prior to the Effective Time, MCI shall take all
action necessary to cause each option to purchase shares of MCI Common Stock
(each, an "MCI Stock Option") that was granted pursuant to the MCI Stock Option
Plans prior to the date of this Agreement and which remains outstanding
immediately prior to the Effective Time to be immediately vested and fully
exercisable immediately prior to the Effective Time (it being understood that
MCI and BT will develop a mechanism to permit any such accelerated option to be
exercised immediately prior to the Effective Time so as to enable the holder to
receive the Merger Consideration with respect to the underlying option shares).
Each MCI Stock Option (including each 1997 Option) which is outstanding at the
Effective Time shall be converted, at the Effective Time, into an option to
acquire, on the same terms and conditions
47
as were applicable under the MCI Stock Option Plans (as modified by this Section
5.8 and Annex A hereto), that number of BT ADSs determined by multiplying the
number of shares of MCI Common Stock subject to such MCI Stock Option by the
Conversion Ratio, rounded, if necessary, up to the nearest whole BT ADS, at a
price per share equal to (y) the aggregate exercise price for the shares of MCI
Common Stock subject to such MCI Stock Option divided by (z) the number of BT
ADSs deemed to be subject to such MCI Stock Option; provided, however, that in
the case of any MCI Stock Option to which section 421 of the Code applies by
reason of its qualification under section 422 of the Code, the option price, the
number of shares subject to such option and the terms and conditions of exercise
of such option shall be determined in a manner consistent with the requirements
of section 424(a) of the Code. For purposes of this Section 5.8, the "Conversion
Ratio" means the sum of (i) 0.54 and (ii) the quotient determined by dividing
the amount of the Cash Consideration by the average of the last sales prices on
the NYSE Composite Transaction Tape of the BT ADSs on each of the five
consecutive trading days ending on the last trading day immediately prior to the
day on which the Effective Time occurs.
(c) Each option to acquire a BT ADS which has been converted
from an MCI Stock Option pursuant to the terms of Section 5.8(b) shall be
amended as of the Effective Time to provide for the payment (or, in certain
cases, elective deferral) of dividend equivalents equal to the amount of any
dividends that would have been paid to the holder thereof following the
Effective Time had the BT ADSs underlying such options been delivered and
outstanding on the applicable dividend record date; provided, however, that any
such dividend equivalents shall be credited to a bookkeeping account in the name
of the option holder and shall be paid to such option holder (with interest at
the prime rate as published by Chase Manhattan Bank, N.A.) when the related
option is exercised (or, if elected by such option holder, further deferred
under the terms of MCI's deferred compensation program); provided further,
however, that any such dividend equivalents that are credited to such a
bookkeeping account in respect of any option that is not subsequently exercised
shall be forfeited upon the expiration or forfeiture of such option in
accordance with its terms.
(d) Each holder of a restricted share of MCI Common Stock (an
"MCI Restricted Share") issued pursuant to the MCI Stock Option Plans shall be
offered, prior to the Effective Time, the opportunity to convert such MCI
Restricted Share into an incentive stock unit (a "Converted ISU") that
represents a contractual right to receive one share of MCI Common Stock on the
terms and conditions specified in Annex B hereto, subject to the same terms and
conditions as were applicable to the MCI Restricted Share immediately prior to
the Effective Time (as modified by this Section 5.8 and Annex B hereto). Each
holder of an MCI Restricted Share that has not been converted in accordance with
the terms of the previous sentence shall be entitled to receive, as of the
Effective Time, for each Restricted Share held by such holder immediately prior
to the Effective Time, (i) 0.54 restricted BT ADSs on the same terms and
conditions applicable to the MCI Restricted Shares immediately prior to the
Effective Time (as modified by this Section 5.8) and (ii) the Cash Consideration
which shall be paid promptly after the Effective Time.
48
(e) Effective as of the Effective Time, each Converted ISU,
Senior Retention ISU and 1997 ISU outstanding immediately prior to the Effective
Time (collectively, the "MCI ISUs") shall be converted into (i) an incentive
stock unit to receive 0.54 BT ADSs, on the same terms and conditions applicable
to the MCI ISUs immediately prior to the Effective Time (as modified by this
Section 5.8 and Annex B hereto) and (ii) the Cash Consideration which shall be
paid promptly after the Effective Time.
(f) As soon as practicable after the Effective Time, BT shall
deliver to the holders of MCI Stock Options, MCI Restricted Shares and MCI ISUs
(collectively, the "MCI Awards") appropriate notices setting forth such holders'
rights pursuant to the applicable MCI Benefit Plans and the agreements pursuant
to which such MCI Awards were issued and the agreements evidencing the grants of
such MCI Awards shall continue in effect on the same terms and conditions as
specified with respect to such MCI Awards as of the Effective Time in the
applicable MCI Benefit Plan governing such MCI Awards (subject to the
adjustments and amendments required by this Section 5.8 and Annexes A and B
hereto, and after giving effect to the Merger and the conversion as set forth
above). It is the intention of the parties that, subject to applicable law, each
MCI Stock Option which qualified as an incentive stock option under section 422
of the Code prior to the Effective Time continue to qualify as an incentive
stock option of BT after the Effective Time.
(g) BT shall take all corporate action necessary to have
available for delivery a sufficient number of BT Ordinary Shares represented by
BT ADSs to be delivered upon exercise, vesting or payment, as applicable, of the
MCI Awards converted in accordance with this Section 5.8. As soon as practicable
after the Effective Time, BT shall file a registration statement on Form S-8 (or
any successor or other appropriate form) with respect to the delivery of such BT
ADSs and shall use its best efforts to maintain the effectiveness of such
registration statement or registration statements (and maintain the current
status of the prospectus or prospectuses contained therein) for so long as such
MCI Awards remain outstanding.
(h) Prior to the Effective Time, BT and MCI shall cooperate to
take all such other action as may be necessary to carry out the terms of this
Section 5.8.
5.9. Employment Agreements; Employee Benefits Matters. (a) MCI
has entered into employment agreements (the "Employment Agreements") with the
eight senior executives whose names have been provided to BT prior to the date
of this Agreement, and in the forms provided to BT prior to the date of this
Agreement. Promptly after the date of this Agreement, BT and MCI shall cooperate
in good faith to resolve any tax issues that may arise with regard to the
identity of the employer for purposes of the Employment Agreements. MCI shall
use its reasonable efforts in good faith to amend the Employment Agreements to
reflect the foregoing resolution.
49
(b) Annexes A and B hereto set forth certain additional
agreements among the parties hereto with respect to employee benefits matters
and are hereby incorporated herein by reference.
5.10. Fees and Expenses. Whether or not the Merger is
consummated, all Expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
Expenses, except (a) if the Merger is consummated, the Surviving Corporation
shall pay, or cause to be paid, any and all property or transfer taxes imposed
on MCI or its Subsidiaries and any real property transfer tax imposed on any
holder of shares of capital stock of MCI resulting from the Merger, (b) Expenses
incurred in connection with filing, printing and mailing the Disclosure
Documents and with listing on the NYSE the BT ADSs into which MCI Common Stock
shall be converted shall be shared equally by BT and MCI and (c) as provided in
Section 7.2. As used in this Agreement, "Expenses" includes all out-of-pocket
expenses (including, without limitation, all fees and expenses of counsel,
accountants, investment bankers, experts and consultants to a party hereto and
its affiliates) incurred by a party or on its behalf in connection with or
related to the authorization, preparation, negotiation, execution and
performance of this Agreement and the transactions contemplated hereby,
including the preparation, printing, filing and mailing of the Disclosure
Documents and the solicitation of stockholder approvals and all other matters
related to the transactions contemplated hereby.
5.11. Indemnification; Directors' and Officers' Insurance. The
Surviving Corporation shall cause to be maintained in effect (i) for a period of
six years after the Effective Time, the current provisions regarding
indemnification of officers and directors contained in the certificate of
incorporation and by-laws of MCI and (ii) for a period of six years, the current
policies of directors' and officers' liability insurance and fiduciary liability
insurance maintained by MCI (provided that the Surviving Corporation may
substitute therefor policies of at least the same coverage and amounts
containing terms and conditions which are, in the aggregate, no less
advantageous to the insured) with respect to claims arising from facts or events
that occurred on or before the Effective Time; provided, however, that in no
event shall the Surviving Corporation be required to expend in any one year an
amount in excess of 200% of the annual premiums currently paid by MCI for such
insurance; and, provided, further, that if the annual premiums of such insurance
coverage exceed such amount, the Surviving Corporation shall be obligated to
obtain a policy with the greatest coverage available for a cost not exceeding
such amount.
5.12. Rights Agreement. The Board of Directors of MCI shall
take all further action (in addition to that referred to in Section 3.1(m))
necessary (including redeeming the Rights immediately prior to the Effective
Time or amending the Rights Agreement) in order to render the Rights
inapplicable to the Merger and the other transactions contemplated by this
Agreement.
5.13. Interim Cooperative Arrangements. BT and MCI agree to use all
reasonable efforts to negotiate and implement such interim cooperative
arrangements as may
50
be appropriate to enable the parties, prior to Closing, to realize to the extent
practicable the benefits anticipated from the Merger.
5.14. Public Announcements. MCI and BT shall use all
reasonable efforts to develop a joint communications plan and each party shall
use all reasonable efforts (i) to ensure that all press releases and other
public statements with respect to the transactions contemplated hereby shall be
consistent with such joint communications plan, and (ii) unless otherwise
required by applicable law or by obligations pursuant to any listing agreement
with or rules of any securities exchange, to consult with each other before
issuing any press release or otherwise making any public statement with respect
to this Agreement or the transactions contemplated hereby.
5.15. Investment Agreement. MCI hereby waives compliance by BT
with the provisions of Section 7 of the Investment Agreement as required in
order to permit the consummation of the transactions contemplated by this
Agreement. Immediately prior to the Effective Time, the Investment Agreement
shall be deemed to have been amended to delete Section 7 thereof in its
entirety. BT hereby waives compliance by MCI with the provisions of Sections
9.4(a) and 9.5(d) of the Investment Agreement (i) from the date of this
Agreement until termination of this Agreement in accordance with its terms and
(ii) for such period of time after a termination of this Agreement by MCI in
accordance with the terms of Section 7.1(f) as would be required in order to
permit the consummation of the Superior Transaction proposed at the time of such
termination; provided, however, that the waiver of compliance contained in this
sentence shall not be effective if MCI is in breach of this Agreement. Except as
provided in this Section 5.15, the Investment Agreement shall remain in full
force and effect, and the parties shall continue to abide by their respective
covenants and other obligations thereunder.
5.16. Repurchase Authorization. BT shall seek shareholder
approval at the BT Shareholder Meeting of a resolution empowering BT to purchase
from time to time up to approximately 990,000,000 BT Ordinary Shares following
the Effective Time in accordance with Section 166 Companies Act. BT will
consider favourably making such purchases following the Effective Time, as
market conditions warrant.
5.17. Holding Company Structure; Name. The parties' intent is to create to
the extent practicable at or following the Effective Time a holding company
structure for the combined businesses of BT and MCI. In furtherance thereof:
(a) As of the Effective Time, BT's name will be changed to Concert plc;
(b) As of the Effective Time, BT will form a wholly owned subsidiary to be
named British Telecommunications plc; and
(c) Pending the Effective Time, the parties shall use all reasonable
efforts to cause the respective local and long distance businesses of BT
and MCI to be
51
operated or managed following the Effective Time or as soon thereafter
as practicable through wholly owned United Kingdom and United States
subsidiaries; provided that, with respect to the United Kingdom
business, BT is satisfied in its reasonable judgment, after
consultation with MCI, that there are no adverse tax or regulatory
consequences (except for immaterial consequences).
5.18. Global Activities. MCI and BT hereby agree that,
effective as of the date of this Agreement and pending the Closing, MCI's
Chairman of the Board of Directors, on behalf of the boards of directors of MCI
and BT, will assume management and oversight of the integration planning of the
two companies' global activities to the extent permissible under antitrust and
regulatory laws.
ARTICLE VI
CONDITIONS PRECEDENT
6.1. Conditions to Each Party's Obligation to Effect the Merger. The
obligations of MCI, BT and Merger Sub to effect the Merger are subject to the
satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) Stockholder Approvals. (i) MCI shall have obtained all
approvals of holders of shares of capital stock of MCI necessary to
approve this Agreement and all the transactions contemplated hereby
(including the Merger) and (ii) BT shall have obtained all approvals of
holders of share capital of BT necessary to approve this Agreement and
all the transactions contemplated hereby (including the Merger and the
share repurchase authorization referred to in Section 5.16).
(b) Stock Exchange Listings. The LSE shall have agreed to
admit to the Official List (subject to allotment) the new BT Ordinary
Shares to be issued in connection with the Merger and such agreement
shall not have been withdrawn, and the BT ADSs to be issued in the
Merger shall have been authorized for listing on the NYSE, subject to
official notice of issuance.
(c) HSR Act. The waiting period (and any extension thereof)
applicable to the Merger under the HSR Act shall have been terminated
or shall have expired.
(d) FCC Order. If then legally required, an FCC Order shall
have been obtained, which has not been revoked or stayed as of the
Closing Date.
52
(e) Exon-Xxxxxx. Review and investigation under Exon-Xxxxxx
shall have been terminated and the President shall have taken no action
authorized under Exon-Xxxxxx.
(f) Securities Law. The Form F-4 filed by BT and the Form F-6
filed by the ADR Depositary shall have become effective under the
Securities Act and no stop order suspending the effectiveness of such
registration statements shall have been issued by the SEC and no
proceeding for that purpose shall then be threatened by the SEC or
shall have been initiated by the SEC and not concluded or withdrawn,
and all state securities or "blue sky" authorizations necessary to
carry out the transactions contemplated hereby shall have been obtained
and be in full force and effect.
(g) No Injunctions or Restraints, Illegality. No temporary
restraining order, preliminary or permanent injunction or other order
issued by a court or other Governmental Entity of competent
jurisdiction shall be in effect and have the effect of making the
Merger illegal or otherwise prohibiting consummation of the Merger;
provided, however, that the provisions of this Section 6.1(g) shall not
be available to any party whose failure to fulfill its obligations
pursuant to Section 5.4 shall have been the cause of, or shall have
resulted in, such order or injunction.
(h) No Litigation. There shall not be pending or overtly
threatened any suit, action, investigation or proceeding to which a
Governmental Entity is a party (i) seeking to restrain or prohibit the
consummation of the Merger or any of the other transactions
contemplated by this Agreement or seeking to obtain from MCI or BT or
any of their respective Subsidiaries any damages that are material in
relation to MCI and its Subsidiaries taken as a whole or BT and its
Subsidiaries, taken as a whole, as applicable, (ii) seeking to prohibit
or limit the ownership or operation by MCI or BT or any of their
respective Subsidiaries of any material portion of the business or
assets of MCI and its Subsidiaries taken as a whole, or BT and its
Subsidiaries taken as a whole, or seeking to require MCI or BT or any
of their respective Subsidiaries to dispose of or hold separate any
material portion of the business or assets of MCI and its Subsidiaries
taken as a whole or BT and its Subsidiaries taken as a whole, as a
result of the Merger or any of the other transactions contemplated by
this Agreement, (iii) seeking to prohibit BT or any of its Subsidiaries
from effectively controlling in any material respect the business or
operations of MCI and its Subsidiaries taken as a whole, or BT and its
Subsidiaries taken as a whole, or (iv) which otherwise would have a
Material Adverse Effect on either MCI or BT; provided, however, that
the provisions of this Section 6.1(h) shall not be available to any
party whose failure to fulfill its obligations pursuant to Section 5.4
shall have been the cause of, or shall have resulted in, such suit,
action, investigation or proceeding.
(i) EU Antitrust. BT and MCI shall have received in respect of the Merger
and any matters arising therefrom: (i) confirmation by way of a decision from
the Commission of the European Communities under Regulation 4064/89 (with
53
or without the initiation of proceedings under Article 6(1)(c) thereof)
that the Merger and any matters arising therefrom are compatible with
the common market; or (ii) confirmation either: (A) in writing from the
office of Fair Trading that it is not the intention of the Secretary of
State for Trade and Industry to refer the Merger and any matters
arising therefrom to the Monopolies and Mergers Commission pursuant to
part V of the Fair Trading Xxx 0000; or (B) following such a reference,
that the Secretary of State for Trade and Industry has permitted the
merger and any matters arising therefrom to take place; such
confirmation being subject in each of Sections 6.1(i)(i) and
6.1(i)(ii)(A) and (B) above to the imposition of no conditions or
undertakings or obligations or to the imposition only of conditions or
undertakings or obligations which: (1) unless BT agrees otherwise, do
not constitute a MCI Burdensome Condition; (2) unless MCI agrees
otherwise, do not constitute a BT Burdensome Condition; (3) unless both
BT and MCI agree otherwise, do not constitute a Combined Company
Burdensome Condition .
(j) United Kingdom Treasury Consent. H.M. Treasury shall have consented
pursuant to section 765(1)(c) of the Income and Corporation Taxes Xxx 0000, or
H.M. Treasury or the Inland Revenue shall have confirmed that no such consent is
required, to the issue of Common Stock of the Surviving Corporation contemplated
by Section 1.8.
6.2. Additional Conditions to Obligations of BT and Merger Sub. The
obligations of BT and Merger Sub to effect the Merger are subject to the
satisfaction of, or waiver by BT, on or prior to the Closing Date of the
following additional conditions:
(a) Representations and Warranties. Each of the
representations and warranties of MCI set forth in this Agreement that
is qualified as to materiality shall have been true and correct when
made and shall be true and correct on and as of the Closing Date as if
made on and as of such date (other than representations and warranties
which address matters only as of a certain date which shall be true and
correct as of such certain date), and each of the representations and
warranties of MCI that is not so qualified shall have been true and
correct in all material respects when made and shall be true and
correct in all material respects on and as of the Closing Date as if
made on and as of such date (other than representations and warranties
which address matters only as of a certain date which shall be true and
correct in all material respects as of such certain date), and BT shall
have received a certificate of the chief executive officer and the
chief financial officer of MCI to such effect.
(b) Performance of Obligations of MCI. MCI shall have
performed or complied with all agreements and covenants required to be
performed by it under this Agreement at or prior to the Closing Date
that are qualified as to materiality and shall have performed or
complied in all material respects with all other agreements and
covenants required to be performed by it under this Agreement at or
prior to the
54
Closing Date that are not so qualified as to materiality, and BT shall
have received a certificate of the chief executive officer and the
chief financial officer of MCI to such effect.
(c) Tax Opinion. BT shall have received the opinion of
Shearman & Sterling, counsel to BT, to the effect that, on the basis of
the facts, representations and assumptions set forth in such opinion
(i) the Merger will be treated for United States Federal income tax
purposes as a reorganization within the meaning of Section 368(a) of
the Code, (ii) each of MCI, BT and Merger Sub will be a party to that
reorganization within the meaning of Section 368(b) of the Code and
(iii) no gain or loss will be recognized on the exchange of shares of
MCI Common Stock for the Merger Consideration, except that gain, if
any, shall be recognized to the extent of the Cash Consideration
received, which opinion shall be dated on or about the date that is two
Business Days prior to the date the Proxy Statement/Prospectus is first
mailed to stockholders of MCI and which shall not have been withdrawn
or modified in any material respect as of the Closing Date. The
issuance of such opinion shall be conditioned on receipt of
representation letters from each of MCI and BT. The specific provisions
of each such representation letter shall be in form and substance
satisfactory to Shearman & Sterling and Xxxxxxx Xxxxxxx & Xxxxxxxx, and
each such representation letter shall be dated on or before the date of
such opinion and shall not have been withdrawn or modified in any
material respect as of the Closing Date.
(d) Inland Revenue Ruling. BT shall have received a ruling
from the Inland Revenue confirming that no stamp duty reserve tax will
be payable in respect of the issuance of BT Ordinary Shares to the ADR
Depositary for the benefit of holders of MCI Common Stock.
(e) Required Regulatory Approvals. All Required Consents and
all other authorizations, consents, orders and approvals of, and
declarations and filings with, and all expirations of waiting periods
imposed by, any Governmental Entity which, if not obtained in
connection with the consummation of the transactions contemplated
hereby, would have a Material Adverse Effect on MCI or BT (with or
without including MCI as a Subsidiary after the Merger) (collectively,
"Required Regulatory Approvals") shall have been obtained, have been
declared or filed or have occurred, as the case may be, and all such
Required Regulatory Approvals shall be in full force and effect;
provided, however, that a Required Regulatory Approval shall not be
deemed to have been obtained if in connection with the grant thereof
there shall have been an imposition by any Governmental Entity of any
condition, requirement, restriction or change of regulation, or any
other action directly or indirectly related to such grant taken by such
Governmental Entity (including with respect to divestitures of assets
or Subsidiaries), which would either (i) have a Material Adverse Effect
on MCI (an "MCI Burdensome Condition") or (ii) have a Material Adverse
Effect on BT including MCI as a Subsidiary after the Merger (a
"Combined Company Burdensome Condition").
55
(f) Burdensome Condition. There shall not have been any action
taken or overtly threatened, or any statute, rule, regulation, order or
decree enacted, entered, enforced or deemed applicable to the Merger by
any Governmental Entity which imposes or seeks to impose any MCI
Burdensome Condition or Combined Company Burdensome Condition.
6.3. Additional Conditions to Obligations of MCI. The obligations of MCI to
effect the Merger are subject to the satisfaction of, or waiver by MCI, on or
prior to the Closing Date of the following additional conditions:
(a) Representations and Warranties. Each of the
representations and warranties of BT and Merger Sub set forth in this
Agreement that is qualified as to materiality shall have been true and
correct when made and shall be true and correct on and as of the
Closing Date as if made on and as of such date (other than
representations and warranties which address matters only as of a
certain date which shall be true and correct as of such certain date),
and each of the representations and warranties of each of BT and Merger
Sub that is not so qualified shall have been true and correct in all
material respects when made and shall be true and correct in all
material respects on and as of the Closing Date as if made on and as of
such date (other than representations and warranties which address
matters only as of a certain date which shall be true and correct in
all material respects as of such certain date), and MCI shall have
received a certificate of the chief executive officer and the chief
financial officer of BT to such effect.
(b) Performance of Obligations of BT. BT shall have performed
or complied with all agreements and covenants required to be performed
by it under this Agreement at or prior to the Closing Date that are
qualified as to materiality and shall have performed or complied in all
material respects with all agreements and covenants required to be
performed by it under this Agreement at or prior to the Closing Date
that are not so qualified as to materiality, and MCI shall have
received a certificate of the chief executive officer and the chief
financial officer of BT to such effect.
(c) Tax Opinion. MCI shall have received the opinion of
Xxxxxxx Xxxxxxx & Xxxxxxxx, counsel to MCI, to the effect that, on the
basis of the facts, representations and assumptions set forth in such
opinion, (i) the Merger will be treated for Federal income tax purposes
as a reorganization within the meaning of Section 368(a) of the Code,
(ii) each of MCI, BT and Merger Sub will be a party to that
reorganization within the meaning of Section 368(b) of the Code and
(iii) no gain or loss will be recognized on the exchange of shares of
MCI Common Stock for the Merger Consideration, except that gain, if
any, shall be recognized to the extent of the Cash Consideration
received, which opinion shall be dated on or about the date that is two
Business Days prior to the date the Proxy Statement/Prospectus is first
mailed to stockholders of MCI and which shall not have been withdrawn
or modified in any material respect as of the Closing Date. The
issuance of such opinion shall be
56
conditioned on receipt of representation letters from each of MCI and
BT. The specific provisions of each such representation letter shall be
in form and substance satisfactory to Shearman & Sterling and Xxxxxxx
Xxxxxxx & Xxxxxxxx, and each such representation letter shall be dated
on or before the date of such opinion and shall not have been withdrawn
or modified in any material respect as of the Closing Date.
(d) Required Regulatory Approvals. All Required Consents and
all other authorizations, consents, orders and approvals of, and
declarations and filings with, and all expirations of waiting periods
imposed by, any Governmental Entity which, if not obtained in
connection with the consummation of the transactions contemplated
hereby, would have a Material Adverse Effect on BT after the Merger,
including MCI as a Subsidiary (collectively, "Regulatory Approvals
Required"), shall have been obtained, have been declared or filed or
have occurred, as the case may be, and all such Regulatory Approvals
Required shall be in full force and effect; provided, however, that a
Regulatory Approval Required shall not be deemed to have been obtained
if in connection with the grant thereof there shall have been an
imposition by any Governmental Entity of any condition, requirement,
restriction or change of regulation, or any other action directly or
indirectly related to such grant taken by such Governmental Entity
(including with respect to divestitures of assets or Subsidiaries),
which would either (i) have a Material Adverse Effect on BT (a "BT
Burdensome Condition") or (ii) constitute a Combined Company Burdensome
Condition.
(e) Burdensome Condition. There shall not have been any action
taken or overtly threatened, or any statute, rule, regulation, order or
decree enacted, entered, enforced or deemed applicable to the Merger by
any Governmental Entity which imposes or seeks to impose any BT
Burdensome Condition or Combined Company Burdensome Condition.
ARTICLE VII
TERMINATION AND AMENDMENT
7.1. Termination. This Agreement may be terminated at any time prior to the
Effective Time, by action taken or authorized by the Board of Directors of the
terminating party or parties, whether before or after approval of the matters
presented in connection with the Merger by the stockholders of MCI and by the
shareholders of BT:
(a) By mutual written consent of BT and MCI, by action of their respective
Boards of Directors;
57
(b) By either MCI or BT if the Effective Time shall not have
occurred on or before October 31, 1997 (the "Termination Date");
provided, however, that the right to terminate this Agreement under
this Section 7.1(b) shall not be available to any party whose failure
to fulfill any obligation under this Agreement has been the cause of,
or resulted in, the failure of the Effective Time to occur on or before
the Termination Date; and provided, further, that if on the Termination
Date any conditions to the Closing set forth in Sections 6.1(c), (d),
(e), (i) and (j), Section 6.2(e) and (f) and Section 6.3(d) and (e)
shall not have been fulfilled, but all other conditions to the Closing
shall be fulfilled or shall be capable of being fulfilled, then the
Termination Date shall be extended to April 30, 1998;
(c) By either MCI or BT if any Governmental Entity (i) shall
have issued an order, decree or ruling or taken any other action (which
order, decree, ruling or other action the parties shall have used all
reasonable best efforts to resist, resolve or lift, as applicable,
subject to the provisions of Section 5.4) permanently restraining,
enjoining or otherwise prohibiting the transactions contemplated by
this Agreement, and such order, decree, ruling or other action shall
have become final and nonappealable or (ii) shall have failed to issue
an order, decree or ruling or to take any other action (which order,
decree or ruling or other action the parties shall have used all
reasonable best efforts to obtain, subject to the provisions of Section
5.4), in each case necessary to fulfill the conditions to the Closing
set forth in Sections 6.1(c), (d), (e), (i) and (j), Section 6.2(e) and
(f) and Section 6.3(d) and (e), as applicable, and such denial of a
request to issue such order, decree, ruling or take such other action
shall have become final and nonappealable;
(d) By either BT or MCI if the approval by the stockholders of
MCI or of BT required for the consummation of the Merger or the other
transactions contemplated hereby shall not have been obtained by reason
of the failure to obtain the required vote at a duly held meeting of
stockholders or at any adjournment thereof;
(e) By either MCI or BT if the Board of Directors of the other
party (i) shall withdraw or modify in any adverse manner its approval
or recommendation of this Agreement or the Merger, (ii) shall fail to
reaffirm such approval or recommendation upon such party's request,
(iii) shall approve or recommend any acquisition of such other party or
a material portion of its assets or any tender offer for shares of its
capital stock, in each case, other than by a party hereto or an
affiliate thereof, or (iv) shall resolve to take any of the actions
specified in clauses (i) through (iii) above;
(f) By either MCI or BT, upon five Business Days' prior notice
to the other, if, as a result of a Superior Proposal received by such
party from a Person other than a party to this Agreement or any of its
affiliates, the Board of Directors of such party determines in good
faith that their fiduciary obligations under applicable
58
law require that such Superior Proposal be accepted; provided, however,
that (i) the Board of Directors of such party shall have concluded in
good faith, after considering applicable provisions of law and after
giving effect to all concessions which may be offered by the other
party pursuant to clause (ii) below, on the basis of advice of counsel,
that such action is necessary for such Board of Directors to act in a
manner consistent with its fiduciary duties under applicable laws and
(ii) prior to any such termination, such party shall, and shall cause
its respective financial and legal advisors to, negotiate with the
other party to this Agreement to make such adjustments in the terms and
conditions of this Agreement as would enable such party to proceed with
the transactions contemplated hereby; provided, however, that it shall
be a condition to termination by BT pursuant to this Section 7.1(f)
that BT shall have made the payment of the Alternative Transaction Fee
to MCI required by Section 7.2(b), and it shall be a condition to
termination by MCI pursuant to this Section 7.1(f) that MCI shall have
made the payment of the Alternative Transaction Fee to BT required by
Section 7.2(c);
(g) By BT, upon a breach of any representation, warranty,
covenant or agreement on the part of MCI set forth in this Agreement,
or if any representation or warranty of MCI shall have become untrue,
in either case such that the conditions set forth in Section 6.2(a) or
Section 6.2(b) would not be satisfied (a "Terminating MCI Breach");
provided, however, that, if such Terminating MCI Breach is capable of
being cured by MCI prior to October 31, 1997 through the exercise of
its best efforts and for so long as MCI continues to exercise such best
efforts, BT may not terminate this Agreement under this Section 7.1(g);
or
(h) By MCI, upon breach of any material representation,
warranty, covenant or agreement on the part of BT and Merger Sub set
forth in this Agreement, or if any representation or warranty of BT and
Merger Sub shall have become untrue, in either case such that the
conditions set forth in Section 6.3(a) or Section 6.3(b) would not be
satisfied ("Terminating BT Breach"); provided, however, that, if such
Terminating BT Breach is capable of being cured by BT prior to October
31, 1997 through the exercise of best efforts, so long as BT continues
to exercise such best efforts, MCI may not terminate this Agreement
under this Section 7.1(h).
7.2. Effect of Termination.
(a) In the event of termination of this Agreement by either
MCI or BT as provided in Section 7.1, this Agreement shall forthwith
become void and there shall be no liability or obligation on the part
of BT or MCI or their respective officers or directors except (i) with
respect to Sections 3.1(p), 3.2(n), the second sentence of Section 5.3,
Section 5.10, this Section 7.2 and Article VIII and (ii) with respect
to any liabilities or damages incurred or suffered by a party as a
result of the willful breach by the other party of any of its
representations, warranties, covenants or other agreements set forth in
this Agreement.
59
(b) BT and MCI agree that (i) if MCI shall terminate this
Agreement pursuant to Section 7.1(e) and, at the time of the occurrence
of the circumstance permitting termination pursuant to such Section,
there shall exist an Acquisition Proposal with respect to BT or (ii) if
BT shall terminate this Agreement pursuant to Section 7.1(f) or (iii)
if (A) BT or MCI shall terminate this Agreement pursuant to Section
7.1(d) due to the failure of BT's shareholders to approve and adopt
this Agreement and (B) at the time of such failure to so approve and
adopt this Agreement there shall exist an Acquisition Proposal with
respect to BT and, within 12 months of the termination of this
Agreement, BT enters into a definitive agreement with any third party
with respect to an Acquisition Proposal, then BT shall pay to MCI an
amount equal to the sum of (w) $450,000,000 (the "Alternative
Transaction Fee") and (x) all of MCI's Expenses up to an amount equal
to $15,000,000 (the "Expense Amount"). BT and MCI agree that, if MCI
shall terminate this Agreement pursuant to Section 7.1(e) in
circumstances in which the Alternative Transaction Fee is not payable,
then BT shall pay to MCI an amount equal to the sum of (y) $150,000,000
(the "Termination Fee") and (z) all of MCI's Expenses up to an amount
equal to the Expense Amount.
(c) BT and MCI agree that (i) if BT shall terminate this
Agreement pursuant to Section 7.1(e) and, at the time of the occurrence
of the circumstance permitting termination pursuant to such Section,
there shall exist an Acquisition Proposal with respect to MCI or (ii)
if MCI shall terminate this Agreement pursuant to Section 7.1(f) or
(iii) if (A) MCI or BT shall terminate this Agreement pursuant to
Section 7.1(d) due to the failure of MCI's stockholders to approve and
adopt this Agreement and (B) at the time of such failure to so approve
and adopt this Agreement there shall exist an Acquisition Proposal with
respect to MCI and, within 12 months of the termination of this
Agreement, MCI enters into a definitive agreement with any third party
with respect to an Acquisition Proposal, then MCI shall pay to BT an
amount equal to the sum of (w) the Alternative Transaction Fee and (x)
all of BT's Expenses up to an amount equal to the Expense Amount. BT
and MCI agree that, if BT shall terminate this Agreement pursuant to
Section 7.1(e) in circumstances in which the Alternative Transaction
Fee is not payable, then MCI shall pay to BT an amount equal to the sum
of (y) the Termination Fee and (z) all of BT's Expenses up to an amount
equal to the Expense Amount.
(d) The Alternative Transaction Fee required to be paid
pursuant to Section 7.2(b)(ii) or 7.2(c)(ii), as applicable, shall be
made prior to, and shall be a precondition to effectiveness of
termination of this Agreement pursuant such Sections and the
Alternative Transaction Fee required to be paid pursuant to Section
7.2(b)(iii) or 7.2(c)(iii), as applicable, shall be made to the party
entitled to receive such payment on the next Business Day after a
definitive agreement is entered into with a third party with respect to
an Acquisition Proposal. Any payment of an Alternative Transaction Fee
or a Termination Fee otherwise required to be made pursuant to
60
Section 7.2(b) or 7.2(c) shall be made to the party entitled to receive
such payment not later than two Business Days after termination of this
Agreement. Payment of Expenses pursuant to Section 7.2(b) or 7.2(c)
shall be made not later than two Business Days after delivery to the
other party of notice of demand for payment and an itemization setting
forth in reasonable detail all Expenses of the party entitled to
receive payment (which itemization may be supplemented and updated from
time to time by such party until the 60th day after such party delivers
such notice of demand for payment). All payments under this Section 7.2
shall be made by wire transfer of immediately available funds to an
account designated by the party entitled to receive payment.
7.3. Amendment. This Agreement may be amended by the parties
hereto, by action taken or authorized by their respective Boards of Directors,
at any time before or after approval of the matters presented in connection with
the Merger by the stockholders of MCI or of BT, but, after any such approval, no
amendment shall be made which by law or in accordance with the rules of any
relevant stock exchange requires further approval by such stockholders without
such further approval. This Agreement may not be amended except by an instrument
in writing signed on behalf of each of the parties hereto.
7.4. Extension; Waiver. At any time prior to the Effective
Time, the parties hereto, by action taken or authorized by their respective
Boards of Directors, may, to the extent legally allowed, (i) extend the time for
the performance of any of the obligations or other acts of the other parties
hereto, (ii) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto and (iii) waive
compliance with any of the agreements or conditions contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in a written instrument signed on behalf of such party.
The failure of any party to this Agreement to assert any of its rights under
this Agreement or otherwise shall not constitute a waiver of those rights.
ARTICLE VIII
GENERAL PROVISIONS
8.1. Non-Survival of Representations, Warranties and
Agreements. None of the representations, warranties, covenants and other
agreements in this Agreement or in any instrument delivered pursuant to this
Agreement, including any rights arising out of any breach of such
representations, warranties, covenants and other agreements, shall survive the
Effective Time, except for those covenants and agreements contained herein and
therein that by their terms apply or are to be performed in whole or in part
after the Effective Time and this Article VIII. Nothing in this Section 8.1
shall relieve any party for any breach of any
61
representation, warranty, covenant or other agreement in this Agreement
occurring prior to termination.
8.2. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed duly given (a) on the date of delivery
if delivered personally, or by telecopy or telefacsimile, upon confirmation of
receipt, (b) on the first Business Day following the date of dispatch if
delivered by a recognized next-day courier service, or (c) on the tenth Business
Day following the date of mailing if delivered by registered or certified mail,
return receipt requested, postage prepaid. All notices hereunder shall be
delivered as set forth below, or pursuant to such other instructions as may be
designated in writing by the party to receive such notice:
(a) if to BT or Merger Sub, to
British Telecommunications plc
BT Centre
00 Xxxxxxx Xxxxxx
Attention: Xxxxx X. Xxxxx, Secretary and
Chief Legal Adviser
Facsimile No.: 011-44-171-356-6135
with copies to
Shearman & Sterling
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxxxx O'X. Xxxxxx
Facsimile No.: (000) 000-0000
and
Shearman & Sterling
000 Xxxxxxxxxxx
Xxxxxx XX0X 0XX
Xxxxxxx
Attention: W. Xxxxxxx Xxxxxxxx
Facsimile No.: 011-44-171-920-9020
62
(b) if to MCI, to
MCI Communications Corporation
0000 Xxxxxxxxxxxx Xxxxxx, XX
Attention: Xxxxxxx Xxxxxxxx, Executive Vice President
and General Counsel
Facsimile No.: 000-000-0000
with a copy to
Xxxxxxx Xxxxxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxx
Facsimile No.: (000) 000-0000
8.3. Interpretation. When a reference is made in this
Agreement to Sections, Exhibits or Schedules, such reference shall be to a
Section of or Exhibit or Schedule to this Agreement unless otherwise indicated.
The table of contents, glossary of defined terms and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "include",
"includes" or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation". The phrases "the date of this
Agreement" and "the date hereof" shall be deemed to refer to November 3, 1996.
The parties agree that the Closing conditions set forth in Section 6.2(a) and
6.2(b), respectively, shall be deemed not to be satisfied in the event the
aggregate number of outstanding shares of MCI Common Stock and shares of MCI
Common Stock subject to outstanding options, warrants and rights (i) as of the
date of execution of this Agreement, or (ii) issued between the date of this
Agreement and the Effective Time, in either case aggregates 500,000 or more
shares than as represented by MCI under Section 3.1(b) or as permitted pursuant
Section 4.1(c), respectively.
8.4. Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when one or more counterparts have been signed by
each of the parties and delivered to the other party, it being understood that
both parties need not sign the same counterpart.
8.5. Entire Agreement; No Third Party Beneficiaries. (a) This
Agreement constitutes the entire agreement and supersedes all prior agreements
and understandings, both written and oral, among the parties with respect to the
subject matter hereof, other than the Confidentiality Agreement, which shall
survive the execution and delivery of this Agreement.
63
(b) This Agreement shall be binding upon and inure solely to
the benefit of each party hereto, and nothing in this Agreement, express or
implied, is intended to or shall confer upon any other Person any right, benefit
or remedy of any nature whatsoever under or by reason of this Agreement, other
than Section 5.11 (which is intended to be for the benefit of the Persons
covered thereby and may be enforced by such Persons).
8.6. Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of New York.
8.7. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any law or
public policy, all other terms and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner in
order that the transactions contemplated hereby are consummated as originally
contemplated to the greatest extent possible.
8.8. Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto, in whole or in part (whether by operation of law or otherwise), without
the prior written consent of the other party, and any attempt to make any such
assignment without such consent shall be null and void, except that Merger Sub
may assign, in its sole discretion, any or all of its rights, interests and
obligations under this Agreement to any direct or indirect wholly owned
Subsidiary of BT without the consent of MCI, but no such assignment shall
relieve Merger Sub of any of its obligations under this Agreement. Subject to
the preceding sentence, this Agreement will be binding upon, inure to the
benefit of and be enforceable by the parties and their respective successors and
assigns.
8.9. Restrictive Trade Practices. Notwithstanding any other
provisions of this Agreement, each party declares that it shall not give effect,
and shall procure that none of its Subsidiaries shall give effect, to any
restriction or restrictions contained in this Agreement which cause this
Agreement to be registrable under the Restrictive Trade Practices Act 1976 until
one day after particulars of this Agreement shall have been furnished to the
Director General of Fair Trading. For the purposes of this Section 8.9,
"Agreement" shall include any other agreement which, together with this
Agreement, may form part of an agreement for the purposes of the Restrictive
Trade Practices Xxx 0000.
8.10. Submission to Jurisdiction; Waivers. Each of BT and MCI
irrevocably agrees that any legal action or proceeding with respect to this
Agreement or for recognition and enforcement of any judgment in respect hereof
brought by the other party hereto or its successors or assigns may be brought
and determined in the Supreme Court of the State of New York in New York County
or in the United States District Court for the Southern
64
District of New York, and each of BT and MCI hereby irrevocably submits with
regard to any such action or proceeding for itself and in respect to its
property, generally and unconditionally, to the nonexclusive jurisdiction of the
aforesaid courts. Each of BT and MCI hereby irrevocably waives, and agrees not
to assert, by way of motion, as a defense, counterclaim or otherwise, in any
action or proceeding with respect to this Agreement, (a) the defense of
sovereign immunity, (b) any claim that it is not personally subject to the
jurisdiction of the above-named courts for any reason other than the failure to
serve process in accordance with this Section 8.10, (c) that it or its property
is exempt or immune from jurisdiction of any such court or from any legal
process commenced in such courts (whether through service of notice, attachment
prior to judgment, attachment in aid of execution of judgment, execution of
judgment or otherwise), and (d) to the fullest extent permitted by applicable
law, that (i) the suit, action or proceeding in any such court is brought in an
inconvenient forum, (ii) the venue of such suit, action or proceeding is
improper and (iii) this Agreement, or the subject matter hereof, may not be
enforced in or by such courts.
8.11. Enforcement. The parties agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms. It is accordingly agreed that
the parties shall be entitled to specific performance of the terms hereof, this
being in addition to any other remedy to which they are entitled at law or in
equity.
8.12. Definitions. As used in this Agreement:
(a) "Board of Directors" means the Board of Directors of
any specified Person and any committees thereof.
(b) "Business Day" means any day on which banks are not
required or authorized to close in either the City of New York or the
City of London.
(c) "FCC Order" means either:
(i) A written order or other determination from the
staff of the FCC (either in the first instance or upon review,
reconsideration or other action subsequent to an order or
other determination of the staff) either approving the
consummation of the transactions contemplated by this
Agreement or stating that no such approval is required (or, in
the case of such review, reconsideration or other subsequent
action, a written order or other determination to the effect
set forth above or affirming or upholding, or having the
effect of affirming or upholding, whether by dismissing or
denying a petition for reconsideration or terminating the
consideration thereof or otherwise, a previous order or
determination to the effect set forth in this paragraph (i)),
which order or determination shall no longer be subject to
further administrative review by the FCC; or
65
(ii) A written or other determination from the FCC
itself (either in the first instance or upon review,
reconsideration or other action subsequent to an order or
other determination of the staff of the FCC) either approving
the consummation of the transactions contemplated by this
Agreement or stating that no such approval is required (or, in
the case of such review, reconsideration or other action
subsequent to an order or determination of the staff of the
FCC, a written order or other determination from the FCC
itself to the effect set forth above or affirming, upholding
or having the effect of affirming or upholding, whether by
dismissing or denying a petition for reconsideration or
application for review or terminating the consideration
thereof or otherwise, an order or other determination of the
staff of the FCC to the effect set forth in paragraph (i)).
For purposes of this definition, an order or other determination of the
staff shall be deemed no longer subject to further administrative
review by the FCC:
(x) If no petition for reconsideration or application
for review by the FCC of the order or determination of the
staff has been filed within 30 days after the date of public
notice of the order or determination, as such 30- day period
is computed and as such date is defined in sections 1.104 and
1.4, as applicable, of the FCC's rules, and the FCC has not
initiated review of the order or determination of the staff on
its own motion within 40 days after the date of public notice
of the order or determination, as such 40-day period is
computed and as such date is defined in sections 1.117 and 1.4
of the FCC's rules, or
(y) If any such petition for reconsideration or
application for review has been filed, or, if the FCC has
initiated review of the order or determination of the staff on
its own motion, the FCC itself has issued a written order or
other determination or taken other action to the effect set
forth in paragraph (ii) above.
(d) "Material Adverse Effect" means, with respect to any
entity, any adverse change, circumstance or effect that, individually
or in the aggregate with all other adverse changes, circumstances and
effects, is or is reasonably likely to be materially adverse to the
business, operations, assets, liabilities (including, without
limitation, contingent liabilities), financial condition or results of
operations of such entity and its Subsidiaries taken as a whole.
(e) "the other party" means, with respect to MCI, BT and
means, with respect to BT, MCI.
(f) "Person" means an individual, corporation, partnership,
association, trust, unincorporated organization, entity or group (as
defined in the Exchange Act).
66
(g) "Subsidiary" when used with respect to any party means any
corporation or other organization, whether incorporated or
unincorporated, (i) of which such party or any other Subsidiary of such
party is a general partner (excluding partnerships, the general
partnership interests of which held by such party or any Subsidiary of
such party do not have a majority of the voting interests in such
partnership) or (ii) at least a majority of the securities or other
interests of which having by their terms ordinary voting power to elect
a majority of the Board of Directors or others performing similar
functions with respect to such corporation or other organization is
directly or indirectly owned or controlled by such party or by any one
or more of its Subsidiaries, or by such party and one or more of its
Subsidiaries.
(h) (i) "Tax" (including, with correlative meaning, the terms
"Taxes" and "Taxable") means all federal, state, local and foreign
income, profits, franchise, gross receipts, environmental, customs
duty, capital stock, severance, stamp, payroll, sales, employment,
unemployment disability, use, property, withholding, excise,
production, value added, occupancy and other taxes, duties or
assessments of any nature whatsoever, together with all interest,
penalties, fines and additions to tax imposed with respect to such
amounts and any interest in respect of such penalties and additions to
tax, and (ii) "Tax Return" means all returns and reports (including
elections, claims, declarations, disclosures, schedules, estimates,
computations and information returns) required to be supplied to a Tax
authority in any jurisdiction relating to Taxes.
8.13. Other Agreements. The parties hereto acknowledge and
agree that, except as otherwise expressly set forth in this Agreement, the
rights and obligations of MCI and BT under the Investment Agreement, the
Modified Joint Venture Agreement made the 14th day of June, 1994 between BT,
Moorgate (Twelve) Limited, MCI, MCI Ventures Corporation, Shepperton
Communications Company and any other agreement between the parties shall not be
affected by any provision of this Agreement.
67
8.14. Waiver of Jury Trial. Each of the parties hereto irrevocably and
unconditionally waives trial by jury in any legal action or proceeding relating
to this Agreement or the transactions contemplated hereby and for any
counterclaim therein.
IN WITNESS WHEREOF, BT, MCI and Merger Sub have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of November 3, 1996.
BRITISH TELECOMMUNICATIONS plc
ATTEST BY:
By:
Name:
___________________ Title:
MCI COMMUNICATIONS CORPORATION
ATTEST BY:
By:
Name:
___________________ Title:
TADWORTH CORPORATION
ATTEST BY:
By:
Name:
___________________ Title:
TABLE OF CONTENTS
Page
ARTICLE I
THE MERGER
1.1. The Merger................................................ 2
1.2. Closing................................................... 2
1.3. Effective Time............................................ 2
1.4. Effects of the Merger..................................... 2
1.5. Certificate of Incorporation.............................. 2
1.6. By-Laws................................................... 3
1.7. Officers of Surviving Corporation......................... 3
1.8. Effect on Capital Stock................................... 3
(a) Cancellation of Treasury Stock and BT-Owned Stock 3
(b) Conversion of MCI Common Stock................... 3
(c) Allotment of BT Ordinary Shares.................. 3
ARTICLE II
EXCHANGE OF CERTIFICATES
2.1. Exchange Fund............................................. 4
2.2. Exchange Procedures....................................... 5
2.3. Distributions with Respect to Unexchanged Shares.......... 5
2.4. No Further Ownership Rights in MCI Common Stock........... 6
2.5. No Fractional BT ADSs..................................... 6
2.6. Termination of Exchange Fund.............................. 6
2.7. No Liability.............................................. 7
2.8. Investment of Exchange Fund............................... 7
2.9. Lost Certificates......................................... 7
2.10. Withholding Rights........................................ 7
2.11. Further Assurances........................................ 7
2.12. Stock Transfer Books...................................... 8
2.13. Restricted BT ADRs........................................ 8
2.14. Shares of Dissenting Stockholders......................... 8
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1. Representations and Warranties of MCI..................... 9
(a) Organization, Standing and Power................. 9
(b) Capital Structure................................ 9
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(c) Authority; No Conflicts.......................... 10
(d) Reports and Financial Statements................. 12
(e) Information Supplied............................. 13
(f) Compliance with Applicable Laws;Regulatory Matters 13
(g) Litigation........................................ 14
(h) Taxes............................................. 14
(i) Subsidiaries and Equity Interests................. 15
(j) Absence of Certain Changes or Events.............. 16
(k) Section 203 of the DGCL Not Applicable............ 16
(l) Vote Required..................................... 16
(m) MCI Rights Agreement.............................. 17
(n) Certain Agreements................................ 17
(o) Employee Benefit Plans; Labor Matters..............18
(p) Brokers or Finders.................................19
(q) Opinion of Financial Advisor.......................19
(r) Intellectual Property Rights.......................19
3.2. Representations and Warranties of BT...........................20
(a) Organization, Standing and Power...................21
(b) Capital Structure..................................21
(c) Authority; No Conflicts............................22
(d) Reports and Financial Statements...................23
(e) Information Supplied...............................24
(f) Compliance with Applicable Laws;Regulatory Matters.25
(g) Litigation.........................................25
(h) Taxes..............................................26
(i) Subsidiaries and Equity Interests..................26
(j) Absence of Certain Changes or Events...............27
(k) Vote Required......................................28
(l) Certain Agreements.................................28
(m) Employee Benefit Plans; Labor Matters..............28
(n) Brokers or Finders.................................29
(o) Ownership of MCI Common Stock......................29
(p) Intellectual Property Rights.......................29
3.3. Representations and Warranties of BT and Merger Sub.........30
(a) Organization and Corporate Power...................31
(b) Corporate Authorization............................31
(c) Non-Contravention..................................31
(d) No Business Activities.............................31
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
4.1. Covenants of MCI........................................... 31
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(a) Ordinary Course................................... 31
(b) Dividends; Changes in Share Capital............... 32
(c) Issuance of Securities............................ 32
(d) Governing Documents............................... 33
(e) No Acquisitions................................... 33
(f) No Dispositions................................... 33
(g) Indebtedness...................................... 33
(h) Benefit Plans..................................... 34
(i) Other Actions..................................... 34
(j) Accounting Methods; Income Tax Elections...........34
(k) Tax-Free Qualification.............................34
(l) Certain Agreements.................................34
4.2. Covenants of BT.............................................34
(a) Ordinary Course....................................35
(b) Dividends; Changes in Stock........................35
(c) Issuance of Securities.............................36
(d) Governing Documents................................36
(e) No Acquisitions....................................36
(f) No Dispositions....................................36
(g) Indebtedness.......................................37
(h) Benefit Plans......................................37
(i) Other Actions......................................37
(j) Accounting Methods; Income Tax Elections...........37
(k) Tax-Free Qualification.............................37
(l) Certain Agreements.................................38
(m) Certain Arrangements...............................38
4.3. Advice of Changes; Government Filings.......................38
4.4. Transition Planning.........................................39
4.5. Control of Other Party's Business...........................39
ARTICLE V
ADDITIONAL AGREEMENTS
5.1. Preparation of Disclosure Documents; MCI Stockholder and BT
Shareholder Meetings....................................... 39
5.2. BT Board of Directors; Officers; Headquarters.............. 41
5.3. Access to Information...................................... 42
5.4. Approvals and Consents; Cooperation........................ 42
5.5. Affiliates' and Auditors' Letters.......................... 43
5.6. Stock Exchange Listings.................................... 44
5.7. Acquisition Proposals...................................... 44
5.8. Stock Options and Other Stock Plans........................ 46
5.9. Employment Agreements; Employee Benefits Matters........... 48
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5.10. Fees and Expenses.......................................... 49
5.11. Indemnification; Directors' and Officers' Insurance........ 49
5.12. Rights Agreement........................................... 49
5.13. Interim Cooperative Arrangements........................... 49
5.14. Public Announcements....................................... 50
5.15. Investment Agreement....................................... 50
5.16. Repurchase Authorization................................... 50
5.17. Holding Company Structure; Name............................ 50
5.18. Global Activities.......................................... 51
ARTICLE VI
CONDITIONS PRECEDENT
6.1. Conditions to Each Party's Obligation to Effect the Merger. 51
(a) Stockholder Approvals............................. 51
(b) Stock Exchange Listings........................... 51
(c) HSR Act........................................... 51
(d) FCC Order......................................... 51
(e) Exon-Xxxxxx....................................... 52
(f) Securities Law.................................... 52
(g) No Injunctions or Restraints, Illegality.......... 52
(h) No Litigation..................................... 52
(i) EU Antitrust...................................... 52
(j) United Kingdom Treasury Consent................... 53
6.2. Additional Conditions to Obligations of BT and Merger Sub.. 53
(a) Representations and Warranties.................... 53
(b) Performance of Obligations of MCI................. 53
(c) Tax Opinion....................................... 54
(d) Inland Revenue Ruling............................. 54
(e) Required Regulatory Approvals..................... 54
(f) Burdensome Condition.............................. 55
6.3. Additional Conditions to Obligations of MCI................ 55
(a) Representations and Warranties.................... 55
(b) Performance of Obligations of BT.................. 55
(c) Tax Opinion....................................... 55
(d) Required Regulatory Approvals..................... 56
(e) Burdensome Condition.............................. 56
ARTICLE VII
TERMINATION AND AMENDMENT
7.1. Termination................................................ 56
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7.2. Effect of Termination..................................... 58
7.3. Amendment.................................................. 60
7.4. Extension; Waiver.......................................... 60
ARTICLE VIII
GENERAL PROVISIONS
8.1. Non-Survival of Representations, Warranties and Agreements. 60
8.2. Notices.................................................... 61
8.3. Interpretation............................................. 62
8.4. Counterparts............................................... 62
8.5. Entire Agreement; No Third Party Beneficiaries............. 62
8.6. Governing Law.............................................. 63
8.7. Severability............................................... 63
8.8. Assignment................................................. 63
8.9. Restrictive Trade Practices................................ 63
8.10. Submission to Jurisdiction; Waivers........................ 63
8.11. Enforcement................................................ 64
8.12. Definitions................................................ 64
8.13. Other Agreements........................................... 66
8.14. Waiver of Jury Trial....................................... 67
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List of Exhibits
Exhibit Title
5.2(a) Reconstitution of the Board of Directors of BT
List of Annexes
Annex Title
A Employee Benefits Matters
B Summary of Terms and Conditions of Senior Retention
ISUs, 1997 ISUs and Converted ISUs to Be Granted
Pursuant to the Agreement and Annex A Thereto
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Glossary of Defined Terms
Definition
Acquisition Proposal.......................................... ss. 5.7(a)
ADR Depositary................................................ ss. 2.1
Agreement..................................................... Preamble
Alternative Transaction Fee................................... ss. 7.2(b)
Board of Directors............................................ ss. 8.12(a)
BT............................................................ Preamble
BT ADRs....................................................... Recitals
BT ADSs....................................................... Recitals
BT Burdensome Condition....................................... ss. 6.3(d)
BT Disclosure Document........................................ ss.3.1(e)(ii)
BT Disclosure Schedule........................................ ss. 3.2
BT Equity Interests........................................... ss. 3.2(i)
BT Material Contracts......................................... ss. 3.2(l)(i)
BT Ordinary Shares............................................ Recitals
BT Permits.................................................... ss. 3.2(f)
BT Schemes.................................................... ss. 3.2(m)(ii)
BT SEC Reports................................................ ss. 3.2(d)(i)
BT Shareholder Meeting........................................ ss. 5.1(c)
BT Voting Debt................................................ ss. 3.2(b)(ii)
Business Day.................................................. ss. 8.12(b)
Cash Consideration............................................ ss. 1.8(b)
Cause......................................................... Exh. B to
Certificates.................................................. ss. 2.2
Closing....................................................... ss. 1.2
Closing Date.................................................. ss. 1.2
Code.......................................................... Recitals
Combined Company Burdensome Condition......................... ss. 6.2(e)
Communications Act............................................ ss. 3.1(c)(iii)
Companies Act................................................. ss. 3.2(b)(i)
Confidentiality Agreement..................................... ss. 5.3
Constructive Discharge........................................ Exh. B to Annex A
Certificates.................................................. ss. 2.2
Conversion Ratio.............................................. ss. 5.8(b)
Converted ISU................................................. ss. 5.8(d)
Covered Executives............................................ Annex A
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Definition
Delaware Certificate of Merger................................ ss. 1.3
DGCL.......................................................... Recitals
Disclosure Documents.......................................... ss. 5.4(b)
Dissenting Shares............................................. ss. 2.14
Effective Time................................................ ss. 1.3
Employment Agreements......................................... ss. 5.9(a)
ERISA......................................................... ss. 3.1(o)(i)
ESPP.......................................................... Annex A
Exchange Act.................................................. ss. 3.1(c)(iii)
Exchange Agent................................................ ss. 2.1
Exchange Fund................................................. ss. 2.1
Executive Retention Program................................... Annex A
Executive Severance Program................................... Annex A
Exon-Xxxxxx................................................... ss. 3.1(c)(iii)
Expense Amount................................................ ss. 7.2(b)
Expenses...................................................... ss. 5.10
FCC........................................................... ss. 3.1(c)(iii)
FCC Order..................................................... ss. 8.12(c)
Form F-4...................................................... ss. 3.1(e)(i)
Form F-6...................................................... ss. 5.1(a)
FSA........................................................... ss. 3.1(e)(ii)
Governmental Entity........................................... ss. 3.1(c)(iii)
HM Government................................................. ss. 3.2(b)(i)
HSR Act....................................................... ss. 3.1(c)(iii)
Intellectual Property Rights.................................. ss. 3.1(r)(vii)
Investment Agreement.......................................... ss. 3.2(o)
IRS........................................................... ss. 3.1(o)(i)
Liens......................................................... ss. 3.1(i)
LSE........................................................... ss. 1.3
Management Employee Bonus Program............................. Annex A
Material Adverse Effect....................................... ss. 8.12(d)
MCI........................................................... Preamble
MCI Awards.................................................... ss. 5.8(f)
MCI Benefit Plans............................................. ss. 3.1(o)(i)
MCI Burdensome Condition...................................... ss. 6.2(e)
MCI Class A Common Stock...................................... ss. 1.8
MCI Common Stock.............................................. Recitals
MCI Disclosure Schedule....................................... ss. 3.1
MCI Equity Interests.......................................... ss. 3.1(i)
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Location of
Defined Term
Definition
MCI ISUs...................................................... ss. 5.8(e)
MCI Material Contracts........................................ ss. 3.1(l)(i)
MCI Permits................................................... ss. 3.1(f)
MCI Restricted Share.......................................... ss. 5.8(d)
MCI SEC Reports............................................... ss. 3.1(d)(i)
MCI Stockholders Meeting...................................... ss. 5.1(b)
MCI Stock Option.............................................. ss. 5.8(b)
MCI Stock Option Plans........................................ ss. 3.1(b)(i)
MCI Voting Debt............................................... ss. 3.1(b)(ii)
Merger........................................................ Recitals
Merger Consideration.......................................... ss. 1.8(b)
Merger Sub.................................................... Preamble
NASDAQ........................................................ ss. 3.1(c)(iii)
1996 Program.................................................. Annex A
1997 ISUs..................................................... Annex A
1997 Options.................................................. Annex A
NYSE.......................................................... ss. 2.5(b)
Other Employee Bonus Program.................................. Annex A
Person........................................................ ss. 8.12(f)
Proxy Statement/Prospectus.................................... ss. 3.1(e)(i)
Purchase Date................................................. Annex A
Regulation 4064/89............................................ ss. 3.1(c)(iii)
Regulatory Approvals Required................................. ss. 6.3(d)
Restricted BT ADRs............................................ ss. 2.13
Required BT Vote.............................................. ss. 3.2(k)
Required Consents............................................. ss. 3.1(c)(iii)
Required MCI Votes............................................ ss. 3.1(l)
Required Regulatory Approvals................................. ss. 6.2(e)
Retention Bonus Pool.......................................... Annex A
Rights........................................................ ss. 3.1(b)(i)
Rights Agreement.............................................. ss. 3.1(b)(i)
Rule 145 Affiliates........................................... ss. 2.13
Schedule 13E-3................................................ ss. 5.1(a)
Securities Act................................................ ss. 2.13
Second Dividend............................................... ss. 1.8(c)
Senior Retention ISUs......................................... Annex A
Special Share................................................. ss. 3.2(b)(i)
Stock Consideration........................................... ss. 1.8(b)
Subsidiary.................................................... ss. 8.12(g)
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Location of
Defined Term
Definition
Superior Proposal............................................ ss. 5.7(a)
Surviving Corporation........................................ ss. 1.1
Tax.......................................................... ss. 8.12(h)
Taxable...................................................... ss. 8.12(h)
Tax Return................................................... ss. 8.12(h)
Terminating BT Breach........................................ ss. 7.1(h)
Terminating MCI Breach....................................... ss. 7.1(g)
Termination Date............................................. ss. 7.1(b)
Termination Fee.............................................. ss. 7.2(b)
the other party.............................................. ss. 8.12(e)
U.K. GAAP.................................................... ss. 3.2(d)(i)
U.S. GAAP.................................................... ss. 3.1(d)(i)
Violation.................................................... ss. 3.1(c)(ii)
AGREEMENT AND PLAN OF MERGER
dated as of November 3, 1996
among
BRITISH TELECOMMUNICATIONS plc,
MCI COMMUNICATIONS CORPORATION
and
TADWORTH CORPORATION
Reconstitution of the Board of Directors of BT
The Board of Directors of BT, as of the Effective Time, shall consist of the
following persons:
Xxx Xxxx Xxxxxxxx
Xxxx X. Xxxxxxx, Xx.
Xxx Xxxxx Xxxxxxxx
Xxxxxx X. Xxxxxx
Sir Xxxxx Xxxxxxxx
Xxxxxxx X. Maine
Xxxxxx X. Xxxxx
and eight other members, four of whom shall be designated by BT from among the
directors of BT and four of whom shall be designated by MCI from among the
directors of MCI; provided that the persons designated by each party shall be
reasonably acceptable to the other party.
If prior to the Effective Time, any of Messrs. Xxxxxxx, Xxxxxx or Maine or any
other person designated by MCI shall decline or be unable to serve as a director
of BT, MCI shall designate another person who is a then current director of MCI;
provided that such designated person shall be reasonably acceptable to BT. If
prior to the Effective Time, any of Messrs. Vallance, Bonfield, Xxxxxxxx or
Brace or any other person designated by BT shall decline or be unable to serve
as a director of BT, BT shall designate another person who is a then current
director of BT; provided that such designated person shall be reasonably
acceptable to MCI.
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ANNEX A
EMPLOYEE BENEFITS MATTERS
MCI and BT agree to the following with respect to the compensation and
benefits programs of MCI and its Subsidiaries:
1. Executive Severance Program. Effective as of the date of
this Agreement, MCI shall establish an executive severance program (the
"Executive Severance Program") for the benefit of approximately 20 of
its senior executive officers (other than those eight individuals who
are entering into Employment Agreements) (the "Covered Executives").
The Executive Severance Program shall have the terms and conditions set
forth in Exhibit A to this Annex A.
2. Retention Bonuses for Senior Executives. Effective as of
the date of this Agreement, MCI shall establish a retention bonus
program (the "Executive Retention Program") for the benefit of up to 80
key executives (including those 8 executives who are entering into
Employment Agreements and each of the Covered Executives). The
Executive Retention Program shall provide for the granting of retention
bonuses in the form of incentive stock units of MCI ("Senior Retention
ISUs") entitling the holders to receive up to 3,035,000 shares of MCI
Common Stock in the aggregate. The Senior Retention ISUs shall
otherwise have the terms and conditions specified in Annex B to this
Agreement.
3. Retention Bonuses for Management Employees. Effective as of
the date of this Agreement, MCI shall establish a retention bonus
program (the "Management Employee Bonus Program") for the benefit of up
to 150 of its management employees who do not participate in the
Executive Retention Program. The Management Employee Bonus Program
shall provide for the payment of cash bonuses, as follows: each
participant shall receive, as promptly as practicable after the
Effective Time, a cash bonus in an amount equal to 50% of such
management employee's base salary as of the Effective Time. Each such
participant shall receive a second cash bonus as of the first
anniversary of the Effective Time in an amount equal to 50% of such
employee's base salary. Such bonuses will not be payable to any
participant whose employment terminates for any reason other than a
termination by MCI without "cause" (as defined in Exhibit B to this
Annex A ("Exhibit B")) on or prior to the applicable payment date.
4. Retention Bonuses for Other Employees. Effective as of the date of this
Agreement, MCI shall establish a retention bonus program (the "Other Employee
Bonus Program") for the benefit of up to 200 of its management employees who do
not participate in the Executive Retention Program or the Management Employee
Bonus Program. The Other Employee Bonus Program shall provide for the payment
A-2
of cash bonuses as follows: each participant shall receive, as promptly
as practicable after the Effective Time, a cash bonus in an amount
equal to 25% of such participant's base salary as of the Effective
Time. Each such participant shall receive a second cash bonus as of the
first anniversary of the Effective Time in an amount equal to 25% of
such employee's base salary. Such bonuses will not be payable to any
participant whose employment terminates for any reason other than a
termination by MCI without "cause" (as defined in Exhibit B) on or
prior to the applicable payment date.
5. Discretionary Retention Bonus Pool. Effective as of the
date of this Agreement, MCI shall establish, in consultation with BT, a
discretionary retention bonus pool (the "Retention Bonus Pool") in a
budgeted amount of up to $100 million, to be utilized for purposes of
retaining and incentivizing key employees (other than those 8
individuals who are entering into Employment Agreements, and it being
understood that it is intended that the Covered Executives generally
will not be eligible to participate). The Retention Bonus Pool shall be
awarded to participating key employees as follows: (i) up to 1/3 shall
be awarded during the period commencing as of the date of this
Agreement and ending as of the Effective Time, (ii) up to 1/3 shall be
awarded during the one-year period commencing as of the Effective Time
and (iii) up to 1/3 shall be awarded during the one-year period
commencing as of the first anniversary of the Effective Time; provided,
however, that the allocation of the Retention Bonus Pool among such
periods may be altered if necessary to reflect MCI's business needs.
6. 1997 and 1998 ISUs. During 1997, MCI shall grant incentive
stock units of MCI (the "1997 ISUs") in accordance with the incentive
program in effect prior to the date of this Agreement (the "1996
Program"), and with an aggregate value (determined as of the date of
grant) of approximately $30 million. The 1997 ISUs shall have the terms
and conditions specified in Annex B to this Agreement. It is understood
that it is the intention of MCI to put into effect a short-term
incentive compensation program in 1997 comparable to the 1996 Program,
under which awards may be payable in the form of incentive stock units
of MCI. Any such incentive stock units shall have terms consistent with
the 1997 ISUs, and shall be awarded by MCI in consultation with BT.
7. 1997 Options. During 1997, MCI shall grant, pursuant to
MCI's Stock Option Plan, options to purchase up to an aggregate of 14
million shares of MCI Common Stock (the "1997 Options") to
approximately 7,000 employees of MCI. The 1997 Options shall vest in
equal annual installments on each of the first three anniversaries of
the date of grant; provided, however, that the unvested portion of an
optionee's 1997 Options shall become fully vested in the event that the
employment of such optionee is terminated without "cause" (as defined
in Exhibit B). All 1997 Options that are outstanding as of the
Effective Time shall be treated in the manner specified in Section
5.8(b) of the Agreement.
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8. MCI 1990 Stock Purchase Plan. MCI shall take such actions
as are necessary to cause any Offer (as such term is used in the MCI
1990 Stock Purchase Plan (the "ESPP")) to expire as of the last trading
day on which the MCI Common Stock is quoted on the NASDAQ National
Market immediately prior to the Effective Time (the Purchase Date");
provided, however, that such change shall be conditioned upon the
consummation of the Merger. On the Purchase Date, MCI shall apply the
funds credited as of such date under the ESPP within each participant's
payroll withholdings account to the purchase of whole shares of MCI
Common Stock in accordance with the terms of the ESPP, and shall return
any residual cash.
9. Establishment of Compensation and Benefits Programs.
Following the date of this Agreement, BT and MCI shall undertake a
review of the compensation and benefits programs for employees of MCI
and its Subsidiaries, and shall cooperate to determine the compensation
and benefits programs that will be implemented for employees of MCI and
its Subsidiaries as of and following the Effective Time. It is the
intention of the parties to work together to establish new long and
short-term incentive compensation and other employee benefit programs
for employees of MCI and its Subsidiaries as of the Effective Time.
Such programs are intended to be competitive within the industry and
the locales in which MCI conducts its business, and, with respect to
long and short-term incentive compensation programs, to reflect
(subject to applicable requirements) the important role that
equity-based compensation arrangements have played in the overall
compensation philosophy of MCI. Such programs shall provide, through
the second anniversary of the date of this Agreement, a level of
benefits that is comparable in the aggregate to that provided under the
MCI Benefit Plans as in effect immediately prior to the date of this
Agreement. BT and MCI will discuss in general terms the approach that
will be taken with respect to MCI's compensation and benefits programs
(including any compensation and benefits programs to be adopted prior
to the Effective Time), and the manner in which such programs will be
implemented in practice. Notwithstanding the foregoing, to the extent
that the existing MCI Benefit Plans, including the ESPP, have not been
replaced by new compensation and benefits programs as of the Effective
Time, such MCI Benefit Plans will continue in effect until such
replacement programs have been finalized or, if earlier, the second
anniversary of the date of this Agreement; provided, however, that
changes may be made to any such MCI Benefit Plans that continue in
effect to reflect applicable requirements.
10. Employment Agreements and Retention Arrangements. From and
after the Effective Time, BT shall honor, and shall cause the Surviving
Corporation to honor in accordance with their terms, all employment
agreements and retention arrangements with current and former employees
of MCI and its Subsidiaries, to the extent such agreements and
arrangements are to be entered into or adopted by MCI pursuant to
Section 5.9(a) of the Agreement or this Annex A.
Exhibit A to Annex A
For purposes of Annexes A and B to the Merger Agreement, the following
terms are defined as set forth below:
ISU Holders.
Cause. For purposes of the Converted ISUs and the 1997 ISUs, "Cause" shall
mean (i) "Cause" as defined in the participant's employment agreement, or if
applicable to such participant, the Executive Severance Program, and (ii) with
respect to any other participant,:
(a) a deliberate and material act or omission by the participant with
respect to the participant's duties and responsibilities with MCI that results
in demonstrable harm to MCI, which act or omission is (A) either the product of
willful malfeasance or gross neglect, (B) committed in bad faith or without
reasonable belief that such act or omission is in, or not contrary to, the best
interests of MCI and (C) not remedied within 30 days after receipt of written
notice from MCI specifying such breach, or
(b) the participant's plea of guilty or nolo contendere to, or
nonappealable conviction of, a felony, which conviction or plea causes material
damage to the reputation or financial position of MCI.
Constructive Discharge.
For purposes of the Converted ISUs and the 1997 ISUs, "Constructive
Discharge" shall mean (i) "good reason" as defined in the participant's
employment agreement or, if applicable to such participant, the Executive
Severance Program, and (ii) with respect to any other participant, the
occurrence of any of the following without the participant's express written
consent:
(a) The assignment to the participant of any duties materially inconsistent
with the participant's current position, duties or responsibilities with MCI and
its subsidiaries to the detriment of the participant, provided that no change in
-------- the participant's position, duties or responsibilities that occurs as a
result of MCI no longer being a public company or becoming a subsidiary after
the Merger shall constitute Constructive Discharge hereunder; or
(b) A material reduction in the sum of the participant's base salary,
target annual bonus and long-term incentive, as such salary and incentive may be
increased from time to time;
provided, however, that an event specified in (a) or (b) above shall not
constitute "Constructive Discharge" if it is remedied within 30 days after
receipt of written notice from the participant specifying such event.
Optionholders; Management Employee Bonus Program and Other Employee Bonus
Program.
With respect to options held by employees of MCI not holding
Converted ISUs or 1997 ISUs (and bonuses to be paid to employees of MCI under
the Management Employee Bonus Program and Other Employee Bonus Program), the
concept of Constructive Discharge shall not apply and the definition of "Cause"
set forth below shall apply.
Cause. "Cause" shall mean:
(1) a failure by the employee to perform his or her employment duties and
responsibilities with MCI; or
(2) the employee's plea of guilty or nolo contendere to, or nonappealable
conviction of, a felony.
ANNEX B
SUMMARY OF TERMS AND CONDITIONS OF SENIOR RETENTION ISUs,
1997 ISUs AND CONVERTED ISUs TO BE GRANTED
PURSUANT TO THIS AGREEMENT AND ANNEX A HERETO
1. In General
o All MCI ISUs will be granted pursuant to the MCI 1989 Stock
Option Plan.
o Each MCI ISU will entitle the holder to receive an
unrestricted, fully transferable share of MCI Common Stock as
of the applicable payment date specified in the award
agreement, or cash in the event the ISU is deferred by the
holder and diversified into fixed income or equity investments
offered by MCI.
o MCI ISU's will vest on the terms and conditions described
below.
o In the event of a termination of the holder's employment for
any reason, any MCI ISUs that have not previously vested (and
which do not vest by reason of such termination, as described
below) will be forfeited and cancelled.
o MCI ISUs will not be transferable other than by will or the
laws of descent and distribution.
o The Cash Consideration that would have been paid to a holder
of an MCI ISU pursuant to Section 5.8(e) of this Agreement
shall, at the election of the holder, be credited to an
account providing for deferral into certain equity or fixed
income investments offered by MCI.
o Payment in respect of an MCI ISU will be subject to applicable
withholding taxes.
o All MCI ISUs that remain outstanding as of the Effective Time
will be treated in the manner specified in Section 5.8(e) of
this Agreement.
2. Converted ISUs
o Each Converted ISU will vest in accordance with the original
vesting schedule for the related MCI Restricted Share;
provided, however, that each such Converted ISU will become
100% vested on the third anniversary of the date of this
Agreement.
B-2
o Upon a termination of the holder's employment, the unvested
portion of such holder's Converted ISUs will only be forfeited
in the event that such termination is for "cause," or such
holder's resignation is not due to "constructive discharge"
(as such terms are defined in Exhibit B); each such Converted
ISU would fully vest upon any other termination of employment
(including death or disability).
o Each Converted ISU will provide for the payment, deferral or
reinvestment, at the holder's election pursuant to a program
established by MCI prior to the Effective Time, of dividend
equivalents equal to the amount of any dividends that would
have been paid to the holder thereof following the Effective
Time had the BT ADSs underlying such Converted ISUs been
issued and outstanding on the applicable dividend record date.
3. Senior Retention ISUs
o Each Senior Retention ISU will vest over three years: 1/3 as
of the Effective Time, 1/3 on the first anniversary of the
Effective Time and 1/3 on the second anniversary of the
Effective Time.
4. 1997 ISUs
o Each 1997 ISU will vest in equal annual installments on each
of the first three anniversaries of the date of grant.
o Upon a termination of the holder's employment, the unvested
portion of such holder's 1997 ISUs will only be forfeited in
the event that such termination is for "cause," or if such
holder's resignation is not due to "constructive discharge"
(as such terms are defined in Exhibit B); each such 1997 ISU
would fully vest upon any other termination of employment
(including death or disability).
o Each 1997 ISU will provide for the payment, deferral or
reinvestment, at the holder's election pursuant to a program
established by MCI prior to the Effective Time, of dividend
equivalents equal to the amount of any dividends that would
have been paid to the holder thereof following the Effective
Time had the BT ADSs underlying such 1997 ISUs been issued and
outstanding on the applicable dividend record date.
