-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ULB48hsEFdW9w8a7Tcx3Q5Cejdkan41E7NDnRMW6+OoI90LdrsjY5FrMG158M654 UqC7wgGLeQr0lQHw6vLG+w== 0000950117-96-001050.txt : 19960903 0000950117-96-001050.hdr.sgml : 19960903 ACCESSION NUMBER: 0000950117-96-001050 CONFORMED SUBMISSION TYPE: DEFM14C PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 19960830 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: AT&T CAPITAL CORP /DE/ CENTRAL INDEX KEY: 0000897708 STANDARD INDUSTRIAL CLASSIFICATION: FINANCE SERVICES [6199] IRS NUMBER: 223211453 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: DEFM14C SEC ACT: 1934 Act SEC FILE NUMBER: 001-11237 FILM NUMBER: 96624761 BUSINESS ADDRESS: STREET 1: 44 WHIPPANY ROAD CITY: MORRISTOWN STATE: NJ ZIP: 07962-1982 BUSINESS PHONE: 2013973000 MAIL ADDRESS: STREET 1: 44 WHIPPANY RD CITY: MORRISTOWN STATE: NJ ZIP: 07962 DEFM14C 1 AT&T CAPITAL CORP DEFM14C SCHEDULE 14C (RULE 14c-101) INFORMATION REQUIRED IN INFORMATION STATEMENT SCHEDULE 14C INFORMATION INFORMATION STATEMENT PURSUANT TO SECTION 14(c) OF THE SECURITIES EXCHANGE ACT OF 1934 Check the appropriate box [ ] Preliminary Information Statement [x] Definitive Information Statement [ ] Confidential, for Use of the Commission Only (as permitted by Rule 14c-5(d)(2)) AT&T CAPITAL CORPORATION ________________________________________________________________________________ (NAME OF REGISTRANT AS SPECIFIED IN CHARTER) Payment of filing fee (Check the appropriate box): [ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14c-5(g). [ ] Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11. (1) Title of each class of securities to which transaction applies: ________________________________________________________________________________ (2) Aggregate number of securities to which transaction applies: ________________________________________________________________________________ (3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined): ________________________________________________________________________________ (4) Proposed maximum aggregate value of transaction: ________________________________________________________________________________ (5) Total fee paid: ________________________________________________________________________________ [x] Fee paid previously with preliminary materials. [ ] Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. (1) Amount Previously Paid:________________________________________________ (2) Form, Schedule or Registration Statement No.:__________________________ (3) Filing Party:__________________________________________________________ (4) Date Filed:____________________________________________________________ NOTE: This Schedule 14C also relates to certain amendments to the registrant's Share Performance Incentive Plan which have been approved by the written consent of the holders of approximately 86% of the registrant's outstanding shares of Common Stock. AT&T CAPITAL CORPORATION 44 Whippany Road Morristown, New Jersey 07962 August 30, 1996 Dear Stockholder: As you may be aware, on June 5, 1996, AT&T Capital Corporation (the 'Company') entered into an Agreement and Plan of Merger, as amended on August 20, 1996 (the 'Merger Agreement') providing for the merger (the 'Merger') of Antigua Acquisition Corporation, a wholly-owned subsidiary of Hercules Limited ('Holdings'), with and into the Company. The Merger Agreement is attached as Annex A to the accompanying Information Statement. The closing of the Merger is expected to occur on October 1, 1996, subject to satisfaction of certain closing conditions. Under the Merger Agreement, each share of Common Stock, par value $.01 per share, of the Company (the 'Company Common Stock') outstanding at the closing of the Merger will be converted into the right to receive $45.00 in cash, with interest payable thereon in certain circumstances as set forth in the Information Statement (the 'Merger Consideration'). YOU WILL BE RECEIVING ADDITIONAL INFORMATION AT A LATER TIME ON HOW TO RECEIVE PAYMENT FOR YOUR SHARES OF COMPANY COMMON STOCK IN CONNECTION WITH THE CLOSING. Each of the Board of Directors of the Company and the special committee of the Board of Directors of the Company, consisting of all of the directors of the Company who are not directors, officers or employees of AT&T Corp. ('AT&T') or its subsidiaries (other than the Company), or officers or employees of the Company (the 'Special Committee'), has carefully considered the terms and conditions of the Merger and has received the opinion of Goldman, Sachs & Co. ('Goldman Sachs') that, as of the date of its opinion, and based upon and subject to various qualifications and assumptions described therein, the Merger Consideration to be received in the Merger by the holders of Company Common Stock pursuant to the terms of the Merger Agreement is fair to such holders (other than AT&T and its affiliates). The full text of the opinion of Goldman Sachs, dated June 5, 1996, which sets forth the assumptions made, matters considered and limits on the review undertaken, is attached as Annex B to the accompanying Information Statement. The Company's stockholders are urged to read such opinion carefully and in its entirety. Each of the Board and the Special Committee believes the Merger to be fair to you and has approved the transaction. Upon consummation of the Merger, stockholders will no longer have an equity interest in the Company, except that certain members of the Company's management will be offered the opportunity by Holdings to maintain all or a portion of their equity investment in the Company and may be granted new options for the capital stock of the surviving corporation after the Merger. Subsidiaries of AT&T, owning beneficially and of record approximately 86% of the outstanding shares of the Company Common Stock (the 'AT&T Subsidiaries'), have provided their written consent and approval of the Merger, thereby satisfying the requirements of the Delaware General Corporation Law (the 'DGCL') and the Company's Restated Certificate of Incorporation for stockholder approval of the Merger. For this reason, the Company is not calling a special meeting of the stockholders in respect of the proposed transaction and is not asking you for a proxy or consent. Stockholders who follow the procedures specified in Section 262 of the DGCL ('Section 262'), which are described in the accompanying Information Statement, have the right to dissent from the Merger and will be entitled to have their shares of Company Common Stock appraised by the Delaware Court of Chancery and to receive payment of the 'fair value' of such shares as determined by such Court rather than the amount of the Merger Consideration stated above. The text of Section 262 is attached as Annex C to the accompanying Information Statement. The Merger Agreement provides for, among other things, certain amendments (the 'SPIP Amendments') to the Company's Share Performance Incentive Plan (the 'SPIP'). The SPIP Amendments were approved by the AT&T Subsidiaries, thereby satisfying the requirement of the SPIP for stockholder approval of the SPIP Amendments. Accordingly, the Company is not calling a special meeting of stockholders in respect of the SPIP Amendments and is not asking you for a proxy or consent. The SPIP Amendments are attached as Annex D to the accompanying Information Statement. WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY. The attached Information Statement is being provided to you pursuant to Rule 14c-2 under the Securities Exchange Act of 1934, as amended. The Information Statement contains a more detailed description of the Merger and the SPIP Amendments. I encourage you to read the Information Statement carefully. Very truly yours, Thomas C. Wajnert Chairman of the Board and Chief Executive Officer INFORMATION STATEMENT --------------------------------- AT&T CAPITAL CORPORATION 44 WHIPPANY ROAD MORRISTOWN, NEW JERSEY 07962 INTRODUCTION This Information Statement is being furnished to the holders of Common Stock, par value $.01 per share (the 'Company Common Stock'), of AT&T Capital Corporation, a Delaware corporation ('AT&T Capital' or the 'Company'), in connection with (i) the approval and adoption by written consent dated as of June 5, 1996 (the 'Merger Agreement Stockholders' Consent'), by AT&T Capital Holdings, Inc., a Delaware corporation ('Capital Holdings') and AT&T Credit Holdings, Inc., a Delaware corporation ('Credit Holdings' and, together with Capital Holdings, the 'AT&T Subsidiaries'), each of which is a wholly-owned subsidiary of AT&T Corp., a New York corporation ('AT&T'), as the holders of approximately 86% of the outstanding shares of Company Common Stock, of the Agreement and Plan of Merger, dated as of June 5, 1996, as amended August 20, 1996, among Hercules Limited, a Cayman Islands corporation ('Holdings'), Antigua Acquisition Corporation, a Delaware corporation and a wholly-owned subsidiary of Holdings ('Merger Sub'), AT&T and the Company (the 'Merger Agreement'), and (ii) the approval by written consent dated as of June 28, 1996 (the 'SPIP Amendments Stockholders' Consent', and together with the Merger Agreement Stockholders' Consent, the 'Stockholders' Consents') by the AT&T Subsidiaries of certain amendments (the 'SPIP Amendments'), provided for in the Merger Agreement, to the Company's Share Performance Incentive Plan (the 'SPIP'). A copy of the Merger Agreement is attached to this Information Statement as Annex A. A copy of the SPIP Amendments is attached to this Information Statement as Annex D. The effective time of the merger of Merger Sub with and into the Company (the 'Merger') will be the date and time of the filing of a Certificate of Merger with the Secretary of State of the State of Delaware (the 'Effective Time'), which is scheduled to occur following satisfaction of certain closing conditions, including receipt of certain regulatory approvals, but not earlier than October 1, 1996. The aggregate purchase price to be paid by Holdings pursuant to the Merger Agreement of approximately $2.16 billion in cash represents a purchase price of $45.00 per share of Company Common Stock plus interest thereon, payable in certain circumstances as described below, at the London Interbank Offered Rate ('LIBOR') plus 0.5% for the period from and including September 18, 1996 through but excluding the closing date of the Merger (the 'Merger Consideration'), based upon 47,012,036 shares of Company Common Stock and options to purchase 2,206,920 shares of Company Common Stock (the 'Options') issued and outstanding on August 5, 1996. After consummation of the Merger, the current stockholders of the Company will cease to be stockholders of the Company, except that certain members of the Company's management (the 'Management Offerees') will be offered the opportunity by Holdings to maintain all or a portion of their equity investment in the Company and may be granted new options for the common stock of the Surviving Corporation (as defined herein) after the Merger as described herein. In accordance with the Delaware General Corporation Law (the 'DGCL'), the Merger Agreement requires approval and adoption by the affirmative vote of the holders of a majority of the outstanding shares of Company Common Stock. Under the terms of the SPIP, the SPIP Amendments require approval by the affirmative vote of the holders of a majority of the outstanding shares of Company Common Stock. As of June 5, 1996, there were 46,992,783 shares of Company Common Stock issued and outstanding, each share of which was entitled to one vote on the proposals to approve and adopt the Merger Agreement and to approve the SPIP Amendments. The Stockholders' Consents, representing 40,250,000 shares of Company Common Stock, or approximately 86% of the outstanding shares of Company Common Stock, were executed by the AT&T Subsidiaries in favor of approval and adoption of the Merger Agreement and approval of the SPIP Amendments. Pursuant to Section 228 of the DGCL and the Company's Restated Certificate of Incorporation, no additional approval by the Company's stockholders is required with respect to the Merger Agreement or the SPIP Amendments. This Information Statement constitutes the notice required by Section 262(d) of the DGCL. THE TRANSACTIONS DESCRIBED HEREIN HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION (THE 'SEC') NOR HAS THE SEC PASSED UPON THE FAIRNESS OR MERITS OF SUCH TRANSACTIONS NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL. This Information Statement is expected to be mailed on or about August 30, 1996, to holders of record of Company Common Stock on June 5, 1996. There were approximately 490 holders of record of Company Common Stock on such date. WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY. STOCKHOLDERS ARE URGED HOWEVER TO READ CAREFULLY THIS INFORMATION STATEMENT IN ITS ENTIRETY. TABLE OF CONTENTS
SECTION PAGE NO. - ------------------------------------------------------------------------------------------------------- -------- Introduction........................................................................................... 1 Table of Contents...................................................................................... 2 Information Statement Summary.......................................................................... 4 General........................................................................................... 4 Background of the Merger.......................................................................... 4 The Parties to the Merger and Certain Related Parties............................................. 6 Approval and Fairness of the Merger; Purposes, Reasons and Effects of the Merger.................. 8 Opinion of Financial Advisor...................................................................... 9 Interests of Certain Persons in the Merger........................................................ 9 Financing of the Merger........................................................................... 11 Federal Income Tax Consequences................................................................... 12 Conditions to the Merger.......................................................................... 12 Payment for Shares of Company Common Stock........................................................ 12 Appraisal Rights.................................................................................. 12 The SPIP Amendments............................................................................... 12 Summary Selected Consolidated Financial Information of the Company................................ 13 Stock Price Information and Dividends............................................................. 13 Special Factors........................................................................................ 14 Background of the Merger.......................................................................... 14 Approval and Fairness of the Merger; Purposes of and Reasons for the Merger....................... 19 Certain Effects of the Merger..................................................................... 23 Opinion of Financial Advisor...................................................................... 23 Interests of Certain Persons in the Merger........................................................ 28 Interests in Company Common Stock and Options................................................ 28 Arrangements between Management and Merger Sub............................................... 29 Company Benefit Plans........................................................................ 31 Other Matters................................................................................ 32 Arrangements with AT&T....................................................................... 33 Plans for the Company After the Merger............................................................ 34 Regulatory Approvals.............................................................................. 35 Accounting Treatment for the Merger............................................................... 35 Certain Federal Income Tax Consequences........................................................... 35 Certain Projections............................................................................... 36 General...................................................................................... 36 Assumptions for Projections.................................................................. 37 Summary of Financial Projections............................................................. 37 The Merger Agreement................................................................................... 38 General........................................................................................... 38 Effective Time.................................................................................... 38 Payment of the Merger Consideration............................................................... 38 Representations and Warranties.................................................................... 40 Conditions to the Merger.......................................................................... 40 Covenants......................................................................................... 41 Regulatory Filings; Consents; Notification........................................................ 41 Additional Agreements............................................................................. 42 Employee Benefits................................................................................. 42 Indemnification................................................................................... 43 Transitional Services............................................................................. 43 Tax Matters....................................................................................... 43 Termination....................................................................................... 44
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SECTION PAGE NO. - ------------------------------------------------------------------------------------------------------- -------- Expenses.......................................................................................... 44 SPIP Amendments................................................................................... 44 First Amendment to the Merger Agreement........................................................... 45 Financing of the Merger................................................................................ 46 General........................................................................................... 46 Equity Subscriptions.............................................................................. 47 Asset Securitizations............................................................................. 47 Preferred Stock Issuance.......................................................................... 48 NIplc's Underwriting Letter....................................................................... 48 Future Dividends.................................................................................. 48 Expenses and Fees................................................................................. 48 Appraisal Rights of Stockholders....................................................................... 49 Information Concerning the Company..................................................................... 50 Market Prices of and Dividends on Company Common Stock................................................. 51 Information Concerning Merger Sub, Holdings, Holdings (UK), GRSH, NIplc and Nomura..................... 52 Security Ownership of Certain Beneficial Owners and Management......................................... 54 Selected Consolidated Financial Information of the Company............................................. 56 Available Information.................................................................................. 59 Incorporation of Certain Documents by Reference........................................................ 59 Schedule 13E-3 Statement............................................................................... 60 Annex A: The Merger Agreement.......................................................................... A-1 Annex B: Opinion of Goldman, Sachs & Co. .............................................................. B-1 Annex C: Section 262 of the Delaware General Corporation Law........................................... C-1 Annex D: Amendment to Share Performance Incentive Plan................................................. D-1 Annex E: Certain Information Regarding Directors and Executive Officers of the Company and AT&T........ E-1 Annex F: Certain Information Regarding Directors and Executive Officers of Merger Sub and Nomura....... F-1
3 INFORMATION STATEMENT SUMMARY GENERAL The following is a brief summary of certain information contained elsewhere, or incorporated by reference, in this Information Statement. Certain capitalized terms used in this Summary are defined elsewhere in this Information Statement. Reference is made to, and this Summary is qualified in its entirety by, the more detailed information contained in this Information Statement and in the Annexes hereto. Stockholders are urged to read carefully this Information Statement, including the Annexes hereto, in its entirety. BACKGROUND OF THE MERGER On September 20, 1995, AT&T, which beneficially owns approximately 86% of the outstanding Company Common Stock through the AT&T Subsidiaries, announced plans to separate itself into three publicly traded companies (AT&T, Lucent Technologies Inc. ('Lucent') and NCR Corporation ('NCR')) and to sell its remaining equity interest in the Company in a public or private sale. On October 3, 1995, the Board of Directors of the Company (the 'Board') authorized management to take action that would meet AT&T's objectives while maximizing value for all stockholders, and created a committee, consisting of all of the directors of the Company who were not directors, officers or employees of AT&T or its subsidiaries (other than the Company), or officers or employees of the Company (the 'Special Committee'), to ensure that the interests of the Company's minority stockholders were properly represented in the process. During October, 1995, Goldman, Sachs & Co. ('Goldman Sachs'), as financial advisor to the Board and the Special Committee, contacted approximately 65 prospective bidders. Of the entities originally contacted by Goldman Sachs, approximately 30 prospective bidders indicated a desire for more information regarding the Company and were sent copies of an offering memorandum (the 'Offering Memorandum'). In response to this dissemination, five entities indicated an interest in exploring a possible transaction. Bidders were asked to submit two bids, one assuming an election under Section 338(h)(10) of the Internal Revenue Code of 1986, as amended (the 'Code'), by AT&T and one assuming no such election. The making of a Section 338(h)(10) election can have negative tax consequences to the stockholder making the election. No bids were received from the five bidders which conformed with the general transaction parameters communicated to the bidders by Goldman Sachs. See 'Special Factors -- Background of the Merger.' On or about January 29, 1996, Nomura International plc ('NIplc') contacted Goldman Sachs and expressed preliminary interest in structuring an acquisition of the Company. On February 12, 1996, NIplc submitted a preliminary indication of interest for a purchase of all the outstanding Company Common Stock. NIplc indicated a preliminary value range of $32 to $37 per share. In mid-March, 1996, NIplc submitted a preliminary proposal which, among other things, contemplated the conversion of the Company to a limited liability company. This limited liability company proposal was later dropped. On April 12, 1996, AT&T notified the Company that it believed it might at that time be appropriate to pursue an underwritten public offering of shares of Company Common Stock held by the AT&T Subsidiaries while the Company continued to explore private sale alternatives. On April 30, 1996, AT&T formally exercised its registration rights by requesting the Company to register 30,879,656 shares of Company Common Stock with the SEC. On April 17, 1996, NIplc submitted a formal proposal to the Company to underwrite the acquisition of the Company through the merger with and into the Company of a newly-formed entity to be formed and financed by NIplc. The proposal included a price of $40 per share for all outstanding shares of Company Common Stock, conditioned upon AT&T making an election under Section 338(h)(10) of the Code. NIplc indicated that it would increase its valuation by $3 per share if the Operating Agreements between the Company and AT&T, Lucent and NCR (the 'Operating Agreements'), which, among other things, designate the Company as the 'preferred provider' of certain financing services for AT&T, Lucent and NCR, respectively, were to be extended for five years from their scheduled expiration in 2000 and if they were to be modified slightly to accommodate NIplc's 4 strategy. The bid indicated that retention of the Company's management was a condition to NIplc's proposal and that NIplc anticipated, as a condition to the proposal, requiring management to reinvest a significant portion of their proceeds from the transaction into the Company going forward. On April 26, 1996, AT&T sent a letter to the Company stating that AT&T did not believe NIplc's April 17 proposal was sufficiently attractive to warrant AT&T's agreement to make the Section 338(h)(10) election and to accept other conditions proposed by NIplc. Also on April 26, 1996, NIplc submitted a proposal revising its April 17, 1996 proposal which continued to provide for a $40 per share price but indicated that NIplc would permit the Company to declare a special dividend immediately prior to the closing in an amount equal to the lesser of $90 million or the Company's net after-tax earnings from January 1, 1996 through the closing date or, as an alternative, would permit the Company to pay AT&T that amount as an indemnity for costs associated with AT&T's making the Section 338(h)(10) election. Following NIplc's April 26th proposal, AT&T contacted Goldman Sachs and indicated that AT&T would be prepared to consider the transaction proposed by NIplc, including the Section 338(h)(10) election, but excluding the extension of the Operating Agreements, if, among other things, NIplc increased the price per share to $45. On May 13, 1996, NIplc submitted a revised proposal to the Company contemplating a merger of a newly-formed entity into the Company, pursuant to which each issued and outstanding share of Company Common Stock would be cancelled in exchange for $45 per share and each outstanding Option would be accelerated and cancelled in exchange for a cash payment equal to $45 per share subject to such Option less the applicable exercise price of such Option. The proposed transaction was conditioned on AT&T making a Section 338(h)(10) election. On May 15, 1996, AT&T notified the Company that it had received and considered NIplc's May 13, 1996 proposal and was ready to support the commencement of discussions between the Company and NIplc subject to certain conditions, including a more equitable sharing among the Company's stockholders of the costs of the Section 338(h)(10) election. AT&T later dropped its proposal to allocate a portion of the costs of this election to the non-AT&T stockholders. Between May 15, 1996 and June 5, 1996, the parties negotiated the terms of the definitive Merger Agreement and the Underwriting Letter (as defined herein) setting forth NIplc's irrevocable and unconditional obligation to underwrite the financing of the Merger. At a meeting on May 31, 1996, the Special Committee unanimously concluded that the proposed transaction was fair to the holders of Company Common Stock (other than AT&T and its affiliates) and recommended to the Board that the transaction be approved if the remaining issues among NIplc, AT&T and the Company could be satisfactorily resolved. The Special Committee also unanimously approved an amendment to the Intercompany Agreement, dated June 25, 1993, between the Company and AT&T (the 'Intercompany Agreement'), to permit AT&T to have all of its shares of Company Common Stock cashed out in the Merger. At a meeting on June 5, 1996, the Special Committee unanimously reaffirmed its May 31, 1996 conclusion and recommendation to the Board. The Board, by the unanimous vote of the directors present (other than Thomas C. Wajnert, the Chairman of the Board and Chief Executive Officer of the Company, who did not participate in the Board's deliberations or vote on the Merger Agreement in light of his anticipated participation in the transaction), then formally approved the Merger Agreement and submitted it to the AT&T Subsidiaries for their approval by written consent. The AT&T Subsidiaries executed and delivered the Merger Agreement Stockholders' Consent, dated June 5, 1996. The Merger Agreement was thereafter executed and delivered by the Company, AT&T, Holdings and Merger Sub. The amendment to the Intercompany Agreement was also executed and delivered and NIplc executed and delivered the Underwriting Letter. Following the execution and delivery of the Merger Agreement on June 5, 1996, the parties thereto determined that certain revisions to the Merger Agreement were necessary in order to accommodate changes to the proposed closing date and certain other matters. Accordingly, in the early part of August the parties negotiated an amendment to the Merger Agreement. On August 19, 1996, the Board of Directors of the Company (acting without the participation or vote of Mr. Wajnert), upon the 5 unanimous recommendation of the Special Committee, adopted and approved the First Amendment to the Agreement and Plan of Merger, dated as of August 20, 1996 (the 'Amendment'). The Amendment was thereafter executed and delivered by the Company, AT&T, Holdings and Merger Sub. The AT&T Subsidiaries executed and delivered to the Company a letter confirming the Merger Agreement Stockholders Consent with respect to the Merger Agreement, as amended by the Amendment. NIplc also executed and delivered the Confirmation Letter (as defined herein). The Amendment provides that the closing date for the Merger will be the later of (i) October 1, 1996 (as opposed to the September 17, 1996 date provided in the Merger Agreement as executed on June 5, 1996) and (ii) the first business day on which all of the conditions to the closing of the Merger have been satisfied or waived. The Amendment does not change the Merger Agreement's final deadline of October 31, 1996, for the closing of the Merger, following which date any of the parties may terminate the Merger Agreement under certain circumstances. The Amendment also provides that Holdings may, at its option, choose to postpone the closing of the Merger to a date no later than October 31, 1996, even if all of the conditions to closing are satisfied or waived prior to such date. If Holdings exercises such option, interest will be payable by Holdings on the $45 per share purchase price at a rate of LIBOR plus 0.5% for the period from and including September 18, 1996 through but excluding the closing date of the Merger. See 'The Merger Agreement -- First Amendment to the Merger Agreement.' The Amendment also requires that Holdings receive an additional $400 million capital contribution by September 18, 1996, increasing the capital contribution made to Holdings to a total of $500 million. A copy of the Amendment is attached to this Information Statement in Annex A. Unless otherwise noted herein and except with respect to references to the Merger Agreement as it existed prior to August 20, 1996, all references herein to the Merger Agreement refer to the Merger Agreement, as amended by the Amendment. THE PARTIES TO THE MERGER AND CERTAIN RELATED PARTIES The Company. AT&T Capital is a full-service, diversified equipment leasing and finance company that operates principally in the United States and also has operations in Europe, Canada, the Asia/Pacific Region and Latin America. The Company is one of the largest equipment leasing and finance companies in the United States, based on the aggregate value of equipment leased or financed, and is the largest lessor of telecommunications equipment in the United States. The Company leases and finances equipment manufactured and distributed by numerous vendors, including Lucent and NCR, currently subsidiaries of AT&T. In addition, the Company provides equipment leasing and financing and related services directly to end-user customers. The Company's approximately 500,000 customers include large global companies, small and mid-sized businesses and federal, state and local governments and their agencies. The principal executive offices of the Company are located at 44 Whippany Road, Morristown, New Jersey 07962 (telephone number 201-397-3000). AT&T. AT&T is principally engaged in global information movement and management and in financial services. On September 20, 1995, AT&T announced its intention to separate itself into three publicly traded companies by creating a new entity comprising AT&T's communications products and systems businesses, now known as Lucent, and by divesting itself of its interests in Lucent and NCR through an initial public offering by Lucent and distributions by AT&T of the Lucent stock and NCR stock held by AT&T to the shareowners of AT&T. At the same time, as part of its overall restructuring plan, AT&T announced its intention to sell its remaining equity interest in the Company in a public or private sale. Following its restructuring, AT&T will be principally engaged in the provision of communication services. The mailing address of AT&T's principal executive offices is 32 Avenue of the Americas, New York, New York 10013-2412 (telephone number 212-387-5400). Merger Sub. Merger Sub is a newly formed Delaware corporation organized at the direction of GRS Holding Company Limited, a private U.K. holding corporation ('GRSH'), in connection with the transactions contemplated by the Merger Agreement. All of the outstanding capital stock of Merger Sub is currently held by Holdings. As described under 'Special Factors -- Interests of Certain Persons in the Merger -- Arrangements between Management and Merger Sub,' it is anticipated that, immediately prior to the Effective Time, the Management Investors (as defined herein) will subscribe for and acquire newly issued shares of Merger Sub Common Stock in exchange for shares of Company Common Stock held by such Management Investors. Until the consummation of the Merger, it is not anticipated that Merger Sub will engage in any activities other than those incident to its formation and capitalization and 6 the other transactions contemplated by the Merger Agreement. The mailing address of Merger Sub's principal executive offices is 1209 Orange Street, Wilmington, Delaware 19801 (telephone number 302-658-7581). Holdings. Holdings is a newly formed Cayman Islands corporation organized at the direction of GRSH in connection with the transactions contemplated by the Merger Agreement. All of the outstanding capital stock of Holdings is currently held indirectly by GRSH through its wholly-owned subsidiary, Hercules Holdings (UK) Limited ('Holdings (UK)'). Until the consummation of the Merger, it is not anticipated that Holdings will engage in any activities other than those incident to its formation and capitalization and the other transactions contemplated by the Merger Agreement. As described under 'Information Concerning Merger Sub, Holdings, Holdings (UK), GRSH, NIplc and Nomura,' it is anticipated that, upon consummation of the Merger and on a fully diluted basis, NIplc would beneficially own approximately 70.0%, Holdings (UK) would beneficially own approximately 19.5% and, assuming that agreements can be reached with Babcock & Brown Holdings Inc., a San Francisco based leasing, asset and project financing advisory company ('Babcock & Brown'), Babcock & Brown would beneficially own approximately 10.5% of the total outstanding Holdings Common Stock (as defined herein), respectively. The mailing address of Holdings' principal executive offices is c/o Maples & Calder, P.O. Box 309, Ugland House, South Church Street, Grand Cayman, Cayman Islands, British West Indies (telephone number 809-946-8066). Holdings (UK). Holdings (UK) is a newly formed private limited company registered in England and organized at the direction of GRSH in connection with the transactions contemplated by the Merger Agreement. All of the outstanding capital stock of Holdings (UK) is owned by GRSH and, at and following the consummation of the Merger, Holdings (UK) will remain a wholly-owned subsidiary of GRSH. Until the consummation of the Merger, it is not anticipated that Holdings (UK) will engage in any activities other than those incident to its formation and capitalization and the other transactions contemplated by the Merger Agreement. The mailing address of the principal executive offices of Holdings (UK) is c/o GRS Holding Company Limited, Mitre House, 160 Aldersgate Street, London, England EC1A 4DD (telephone number 44-171-606-9000). GRSH. GRSH is a private limited company registered in England which, through its principal subsidiary, is engaged in the rail leasing business. All of the outstanding capital stock of GRSH is owned equally by Nicolas Lethbridge, an employee of Babcock & Brown, and Prideaux & Associates Limited ('Prideaux'), a London based business advisory company. On a fully diluted basis NIplc beneficially owns 85% of the capital stock of GRSH, while Babcock & Brown (UK) Holdings Limited, an affiliate of Babcock & Brown, beneficially owns 9.5%, and Prideaux and its affiliates, collectively beneficially own 5.5%, in each case, through instruments convertible into such capital stock. The mailing address of GRSH's principal executive offices is Mitre House, 160 Aldersgate Street, London, England EC1A 4DD (telephone number 44-171-606-9000). NIplc. NIplc, a private limited company registered in England, is a U.K. based investment bank, principally involved in managing and underwriting international securities issues, brokering and dealing in securities and providing investment advice and other services related to its international securities business. NIplc is a wholly-owned indirect subsidiary of The Nomura Securities Co., Ltd. ('Nomura'). NIplc currently beneficially owns (through convertible instruments) approximately 85% of the capital stock of GRSH on a fully diluted basis. NIplc effectively controls GRSH by means of contractual rights conferred in connection with its acquisition of such convertible instruments. NIplc has delivered an unconditional and irrevocable undertaking to underwrite an international capital markets issue on behalf of Holdings, or to purchase securities of Holdings, in an amount sufficient to allow Holdings to satisfy its obligations under the Merger Agreement. See 'Financing of the Merger -- NIplc's Underwriting Letter.' The mailing address of NIplc's principal executive offices is Nomura House, 1 St. Martin's-le-Grand, London, England EC1A 4NP (telephone number 44-171-236-8811). Nomura. Nomura, a company organized under Japanese law, was founded in 1925 in Osaka, Japan and is currently Japan's largest securities brokerage house. The principal activities of Nomura and its subsidiaries include securities brokerage, trading, investment banking and commercial banking in global financial markets. Through its subsidiaries and affiliates, Nomura advises its international clientele on a wide range of financial and strategic matters, including banking, asset management, leveraged leasing, 7 project finance, real estate, and mergers and acquisitions. Nomura has sole indirect ownership of NIplc through Nomura's wholly-owned direct subsidiary, Nomura Europe Holding plc ('Nomura Europe'). The mailing address of Nomura's principal executive offices is 1-9-1, Nihonbashi, Chuo-ku, Tokyo 103, Japan (telephone number 03-3211-1811). For further information concerning Holdings and Merger Sub and their affiliates, see 'Information Concerning Merger Sub, Holdings, Holdings (UK), GRSH, NIplc and Nomura.' APPROVAL AND FAIRNESS OF THE MERGER; PURPOSES, REASONS AND EFFECTS OF THE MERGER The Board, acting upon the recommendation of the Special Committee, authorized and approved the Merger Agreement and the transactions contemplated thereby and believes that the proposed Merger is fair to, and in the best interests of, the Company's stockholders. The AT&T Subsidiaries, as the holders of approximately 86% of the outstanding Company Common Stock, executed the Merger Agreement Stockholders' Consent approving the Merger Agreement. A copy of the Merger Agreement is attached to this Information Statement as Annex A. No additional approval of the Merger Agreement by the Company's stockholders is required. The Board's approval and Special Committee's recommendation was based upon a number of factors, including: (i) the Board's review of strategic alternatives available to the Company, (ii) recent and historical market prices of the Company Common Stock, (iii) the Board's knowledge of the business, operations, properties, assets and earnings, as well as the prospects, of the Company, (iv) the unconditional and irrevocable agreement of NIplc to underwrite an international capital markets issue on behalf of Holdings, or to purchase securities of Holdings, in an amount sufficient to allow Holdings to satisfy its obligations under the Merger Agreement, (v) the contractual relationships between the Company and each of AT&T, Lucent and NCR and the implications of AT&T's pending restructuring, (vi) the presentation of Goldman Sachs discussed elsewhere herein under 'Special Factors -- Opinion of Financial Advisor,' (vii) the opinion of Goldman Sachs that, as of the date of its opinion, and based upon and subject to various qualifications and assumptions described therein, the Merger Consideration to be received in the Merger by the holders of Company Common Stock pursuant to the terms of the Merger Agreement is fair to such holders (other than AT&T and its affiliates) and (viii) in the case of the Board, the recommendation of the Special Committee. The Board and Special Committee also considered that the extensive search for possible buyers of the Company failed to discover any other bidder interested in pursuing negotiations for the acquisition of the Company on terms which did not require amendments to the Operating Agreements which were unacceptable to AT&T, Lucent and NCR. In addition to the factors enumerated above, the Special Committee's recommendation was also based on the fact that AT&T had the immediate right to sell (in a public or private sale) shares of Company Common Stock it beneficially owned representing up to 66% of the outstanding Company Common Stock (and, under the terms of the Intercompany Agreement, all of its remaining shares in August 1998) without any consent or approval from the Company or the Company's independent directors, the fact that the AT&T Subsidiaries, as the owners of approximately 86% of the outstanding Company Common Stock, will receive the same cash price per share in the Merger as the non-AT&T stockholders, and the fact that AT&T was in favor of and willing to cause the AT&T Subsidiaries to vote to approve the Merger. In considering the fairness of the Merger, stockholders should be aware that the Company's current management has a substantial equity ownership position in the Company and will be offered an opportunity, not available to the Company's other stockholders, to participate in the equity of the Surviving Corporation. As of December 31, 1995 and as of March 31, 1996, the Management Offerees' aggregate interests, on a fully-diluted basis assuming the exercise of all Options, in the Company's net book value was $56.0 million (or 5.0%) and $57.7 million (or 5.0%), respectively, and, for the year ended December 31, 1995 and the three months ended March 31, 1996, the Management Offerees' aggregate interest in the Company's net income was $6.4 million (or 5.0%) and $1.9 million (or 5.0%), respectively. Assuming all Management Offerees participate in the Management Share Exchange and the Management Option Reinvestment and are granted the New Options, in each case, as referred to below, as of December 31, 1995 and as of March 31, 1996 (on a pro forma basis which gives effect to the consummation of the Merger), the Management Offerees' aggregate interest, on a fully-diluted basis 8 assuming the exercise of all Options and New Options, in the Company's net book value would be $156.3 million (or 14.0%) and $161.0 million (or 14.0%), respectively, and, for the year ended December 31, 1995 and the three months ended March 31, 1996, the Management Offerees' aggregate interest in the Company's net income would be $17.9 million (or 14.0%) and $5.2 million (or 14.0%), respectively. The directors and sole stockholder of Merger Sub and the directors of Holdings have approved the Merger Agreement. At the Effective Time, Merger Sub will be merged into the Company with the Company continuing its corporate existence under the DGCL as the surviving corporation (the 'Surviving Corporation') and each share of Company Common Stock, other than those shares owned by the Company, Holdings, Merger Sub or their respective wholly-owned subsidiaries or by any stockholders exercising appraisal rights in accordance with Section 262 of the DGCL (collectively, the 'Excluded Shares'), will be converted into the right to receive the Merger Consideration. Upon consummation of the Merger, Holdings will own all of the outstanding common stock of the Surviving Corporation ('Surviving Corporation Common Stock') (except for shares owned by the Management Investors (as defined herein)) and the present holders of the Company Common Stock (other than the Management Investors) will no longer have any equity interest in the Surviving Corporation, will not share in the results of the Surviving Corporation and will no longer have rights to vote on corporate matters. Once the Merger is effective, the Company Common Stock will no longer be traded on the New York Stock Exchange and registration of Company Common Stock under the Securities Exchange Act of 1934, as amended (the 'Exchange Act'), will terminate. However, for so long as certain publicly-held debt or other securities of the Surviving Corporation remain outstanding following the Merger, the Surviving Corporation will continue to file periodic reports with the SEC to the extent required under the Exchange Act. Each outstanding Option will be cancelled upon consummation of the Merger in exchange for cash in an amount equal to the excess of the Merger Consideration over the Option exercise price per share. See 'Special Factors -- Interests of Certain Persons in the Merger -- Arrangements between Management and Merger Sub.' OPINION OF FINANCIAL ADVISOR The Company engaged Goldman Sachs to act as financial advisor to the Board and the Special Committee in connection with the sale of the Company. Goldman Sachs has delivered to the Board and the Special Committee its written opinion dated June 5, 1996, the date of the Merger Agreement, to the effect that, as of such date, and based upon and subject to various qualifications and assumptions described therein, the Merger Consideration to be received in the Merger by the holders of Company Common Stock pursuant to the terms of the Merger Agreement is fair to such holders (other than AT&T and its affiliates). SUCH OPINION IS ATTACHED AS ANNEX B HERETO AND SHOULD BE READ IN ITS ENTIRETY. Goldman Sachs did not render any opinion as to the fairness of the Merger Consideration to AT&T and its affiliates. For additional information concerning Goldman Sachs' opinion and the fee to be received by Goldman Sachs in connection with this transaction, see 'Special Factors -- Opinion of Financial Advisor' and Annex B. INTERESTS OF CERTAIN PERSONS IN THE MERGER In considering the approval of the Board with respect to the Merger Agreement, stockholders should be aware that certain officers and directors of the Company, including Mr. Wajnert (who did not participate in the Board's deliberations or vote on the Merger Agreement in light of his anticipated participation in the transaction), have certain interests which may have presented them with potential conflicts of interest in connection with the Merger and the SPIP Amendments. In particular, as of August 5, 1996, executive officers and directors of the Company (comprised of 11 directors and six executive officers) collectively beneficially owned 357,666 shares of Company Common Stock (excluding shares issuable upon exercise of Options) and held Options to purchase 755,502 shares of Company Common Stock and, but for the Management Share Exchange and the Management Option 9 Reinvestment referred to below, would be entitled to receive upon consummation of the Merger an aggregate of up to approximately (i) $16,094,970 in cash in respect of such shares of Company Common Stock and (ii) $14,388,051 in cash in respect of the cancellation of such Options (in each case excluding any interest which may be payable on the $45 per share purchase price). As of August 5, 1996, the Management Offerees (a group which is expected to be comprised of the 31 senior managers of the Company who are members of the Company's Corporate Leadership Forum and the Corporate Leadership Team) collectively beneficially owned approximately 895,000 shares of Company Common Stock (excluding shares issuable upon exercise of Options) and held Options to purchase 1,578,051 shares of Company Common Stock, and but for the Management Share Exchange and Management Option Reinvestment referred to below, would be entitled to receive upon consummation of the Merger an aggregate of up to approximately (x) $40 million in cash in respect of such shares of Company Common Stock and (y) $29 million in cash in respect of the cancellation of such Options (in each case excluding any interest which may be payable on the $45 per share purchase price). In addition, Merger Sub expects to make the following offers and grants to the Management Offerees: (i) the Management Offerees will be offered the opportunity to enter into an exchange (the 'Management Share Exchange') in which, immediately prior to the Effective Time, up to an aggregate of approximately 883,419 shares of Company Common Stock currently held by such Management Offerees (or approximately $40 million in value, based on the $45 per share purchase price to which such holders would otherwise be entitled in connection with the Merger), may be exchanged for approximately $40 million of newly issued shares of common stock, par value $.01 per share, of Merger Sub ('Merger Sub Common Stock') (which will become shares of Surviving Corporation Common Stock upon consummation of the Merger); (ii) each Management Offeree who accepts such Management Share Exchange (each, a 'Management Investor') will be offered the opportunity, at his or her individual discretion, to invest some or all of the after-tax proceeds of the cash-out of Options held by such Management Investor (the 'Management Options') in additional shares of Surviving Corporation Common Stock immediately following the Effective Time (the 'Management Option Reinvestment'); (iii) following the Effective Time of the Merger, subject to ongoing discussions between Merger Sub and certain members of management, it is anticipated that certain of the Management Investors may be granted additional options to purchase shares of Surviving Corporation Common Stock ('New Options') giving them the right, subject to certain conditions, to purchase up to an additional $39 million of Surviving Corporation Common Stock; and (iv) over a five-year period following the Effective Time, Holdings expects to grant additional New Options to certain employees of the Surviving Corporation (possibly including certain of the Management Offerees) to purchase, subject to certain conditions, shares of Surviving Corporation Common Stock having an aggregate fair market value of up to $64 million on the applicable date of grant. As a result of the Management Share Exchange, the Management Option Reinvestment and the grant of New Options, immediately after the Effective Time, the Management Offerees could own or have the right to acquire, upon exercise of their New Options (assuming all Management Offerees were to participate and such New Options become exercisable prior to their termination), up to approximately 9.9% of the outstanding Surviving Corporation Common Stock on a fully diluted basis. For additional details with respect to the foregoing offers and grants which Merger Sub anticipates making to the Management Offerees, see 'Special Factors -- Interests of Certain Persons in the Merger -- Arrangements between Management and Merger Sub.' Certain members of management (including the Management Offerees) are participants in employee benefit plans of the Company which, in connection with a change in control of the Company, will vest or pay benefits or awards or provide the opportunity to receive future benefits or awards under certain circumstances. See 'Special Factors -- Interests of Certain Persons in the Merger -- Company Benefit Plans.' It is anticipated that each of the Company's executive officers will be asked by Holdings to continue as an officer of the Surviving Corporation following the Merger. There can be no assurance, however, that all of the current officers will elect to continue their employment with the Surviving Corporation. 10 Pursuant to the Merger Agreement, for six years after the Effective Time, Holdings will indemnify and hold harmless, to the fullest extent permitted under applicable law, each present and former director, officer and employee of the Company and its subsidiaries against any costs or expenses, including reasonable attorneys' fees, judgments, fines, losses, claims, damages or liabilities incurred in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, including, without limitation, any claim, action, suit, proceeding, or investigation under the federal securities laws, arising out of or pertaining to matters existing or occurring at or prior to the Effective Time, including the transactions contemplated by the Merger Agreement. The Merger Agreement also provides, in general, that AT&T shall maintain in place its current directors' and officers' liability insurance with respect to actions prior to the Merger until the Effective Time. After the Effective Time, the Surviving Corporation will establish officers' and directors' liability insurance for the Company's and its subsidiaries' officers and directors substantially similar to the insurance currently maintained for a period of six years so long as the annual premium is not in excess of $750,000 or, if the cost does exceed that amount, as much insurance as can be purchased for that amount. No director or officer of the Company currently has any relationship or affiliation with Holdings or Merger Sub or their affiliates, except for the anticipated participation of the Management Investors as described under 'Special Factors -- Interests of Certain Persons in the Merger.' FINANCING OF THE MERGER The total amount of funds required to consummate the Merger and to pay related fees and expenses and to repay or refinance certain indebtedness (assuming no interest is payable on the $45 per share purchase price) is approximately $2,365.3 million. Of such amount, approximately $2,158.0 million will be required to purchase outstanding shares of Company Common Stock pursuant to the Merger and to satisfy the Company's obligation under the Merger Agreement to cash-out its outstanding Options. In addition, approximately $22.0 million will be required to pay fees and expenses to be incurred in connection with the consummation of the Merger. Although not a condition to the Merger, the Company expects that approximately $185.3 million of the aggregate funds will be used to repay certain indebtedness of the Company which comes due on or in connection with the consummation of the Merger or to refinance other existing indebtedness of the Company. On June 7, 1996, Holdings received a capital contribution of $100.0 million which was made by Holdings (UK) from the proceeds of a note issuance of Holdings (UK) to NIplc. The remaining $2,265.3 million of the required funds will be obtained from: (i) the proceeds of the sale of shares of common stock, par value $1.00 per share, of Holdings ('Holdings Common Stock') to Holdings (UK) and to Babcock & Brown or its affiliates (assuming that agreements for such share subscriptions can be reached) in an aggregate amount of up to approximately $360.0 million; (ii) the Management Share Exchange by the Management Investors of shares of Company Common Stock for shares of Merger Sub Common Stock in the amount of up to approximately $40.0 million; (iii) the proceeds of a $400.0 million capital contribution which Holdings is required by the terms of the Merger Agreement to receive by September 18, 1996, and which will be made to Holdings by Holdings (UK) from the proceeds of a note issuance of Holdings (UK) to NIplc; and (iv) up to $1,465.3 million of proceeds of offerings of equipment receivable-backed securities by affiliates of the Surviving Corporation. The Merger Agreement is not subject to any financing condition. Holdings and Merger Sub are obligated to consummate the Merger upon the satisfaction (or waiver) of the conditions precedent included in the Merger Agreement. See 'The Merger Agreement -- Conditions to the Merger.' Holdings has received an unconditional and irrevocable undertaking from NIplc to underwrite or purchase an international capital markets issue on behalf of Holdings in an amount sufficient to satisfy Holdings' financial obligations under the Merger Agreement. See 'Financing of the Merger -- NIplc's Underwriting Letter.' If, for any reason, the proceeds of either the offerings of equipment receivable-backed securities by an affiliate of the Surviving Corporation, the sale of Holdings Common Stock to Holdings (UK) and to Babcock & Brown or its affiliates, or the Management Share Exchange by the Management Investors are not available to fund the aggregate Merger Consideration at the Closing, NIplc would be required to arrange alternative financing on behalf of Holdings in order to satisfy its obligations pursuant to such commitment. In such event, it is anticipated that NIplc would arrange a 11 short-term credit facility for Holdings on terms to be negotiated at such time, which would be refinanced from the proceeds of a subsequent offering of equipment receivable-backed securities. As soon as practicable following the Effective Time, Holdings expects to cause the Surviving Corporation or an affiliate of the Surviving Corporation to issue approximately $200.0 million of preferred securities. The proceeds of such issuance of preferred securities, as well as the excess proceeds from the sale of equipment receivable-backed securities by an affiliate of Merger Sub, may be used to repay or refinance other indebtedness of the Company. FEDERAL INCOME TAX CONSEQUENCES Generally, if the Merger is consummated, a holder of Company Common Stock will recognize taxable gain or loss per share for federal income tax purposes equal to any difference between the Merger Consideration (or the amount received in respect of dissenting shares) and the holder's tax basis in such share. However, the treatment of amounts in addition to the $45 per share purchase price, if any, received as a result of the postponement of the closing is not entirely clear under existing law. Each stockholder should consult his tax advisor as to the particular consequences of the Merger to such stockholder, including the application of state, local and other tax laws. See 'Special Factors -- Certain Federal Income Tax Consequences.' CONDITIONS TO THE MERGER Under the Merger Agreement, the respective obligations of Holdings, Merger Sub, AT&T and the Company to consummate the Merger are subject to the fulfillment or waiver, where permissible, of certain conditions at or prior to the Effective Time, including certain federal, state, local and foreign regulatory approvals. Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the 'HSR Act'), the Merger may not be consummated unless notice has been given and certain information has been furnished to the Antitrust Division of the Department of Justice (the 'Antitrust Division') and the Federal Trade Commission (the 'FTC') and certain waiting period requirements have been satisfied. The requisite notification and report forms under the HSR Act were filed with the Antitrust Division and FTC on July 30, 1996. The HSR Act waiting period was terminated by order of the FTC on August 9, 1996. See 'The Merger Agreement -- Conditions to the Merger' and 'Special Factors -- Regulatory Approvals.' PAYMENT FOR SHARES OF COMPANY COMMON STOCK Detailed instructions with regard to the surrender of certificates formerly evidencing shares of Company Common Stock ('Certificates'), together with a letter of transmittal, will be forwarded to holders of Certificates as promptly as practicable following the Effective Time by the Paying Agent (as defined herein). Payment will be made to such former holders of Company Common Stock as promptly as practicable following receipt by the Paying Agent of Certificates for their Company Common Stock and other required documents. No interest will be paid or accrued on the cash payable upon surrender of Certificates. STOCKHOLDERS SHOULD NOT SEND ANY STOCK CERTIFICATES AT THIS TIME. See 'The Merger Agreement -- Payment of the Merger Consideration.' APPRAISAL RIGHTS Under Section 262 of the DGCL, holders of Company Common Stock who file the required written demand for appraisal of their shares within 20 days after the date this Information Statement is first sent to stockholders will have the right to be paid the fair value of their shares as determined by the Delaware Court of Chancery in lieu of the Merger Consideration. SUCH APPRAISAL RIGHT WILL BE LOST, HOWEVER, IF THE PROCEDURAL REQUIREMENTS OF THE DGCL ARE NOT FULLY AND PRECISELY SATISFIED. This Information Statement constitutes the notice required by Section 262(d) of the DGCL. See 'Appraisal Rights of Stockholders' and Annex C attached hereto. THE SPIP AMENDMENTS The AT&T Subsidiaries, as the holders of approximately 86% of the outstanding shares of Company Common Stock, executed the SPIP Amendments Stockholders' Consent approving the SPIP Amendments. A copy of the SPIP Amendments is attached to this Information Statement as Annex D. No additional approval of the SPIP Amendments by the Company's stockholders is required. 12 The SPIP Amendments provide that upon the consummation of a transaction that has or will have the effect of the Company Common Stock no longer being publicly traded (a 'Private Sale'), the Company shall pay to each participant (a) for each pending performance period under the SPIP, an accelerated accrued payment equal to 100% of such participant's maximum payout for such period and (b) for each performance period completed within 12 months prior to a Private Sale, an amount equal to the excess of the participants' maximum payout for such period over the amount paid. The SPIP Amendments also provide that, upon consummation of the Merger, the Company will pay to each participant for each future performance period under the SPIP, an accelerated accrued payment equal to 100% of such participant's maximum payout for that period, provided that, for any participants who are not members of the Company's Leadership Forum, such payment shall not be made unless such participant has entered into an agreement with Holdings and the Surviving Corporation to modify the definition of 'Qualifying Termination' in the Leadership Severance Plan or the Member Severance Plan, as applicable. The consummation of the Merger will constitute a Private Sale. See 'The Merger Agreement -- SPIP Amendments.' SUMMARY SELECTED CONSOLIDATED FINANCIAL INFORMATION OF THE COMPANY For certain selected financial data concerning the Company for the five years ended December 31, 1995 and for the six months ended June 30, 1996 and June 30, 1995, see 'Selected Consolidated Financial Information of the Company.' STOCK PRICE INFORMATION AND DIVIDENDS Quarterly dividends on Company Common Stock have been paid since the fourth quarter of 1993, the Company's first full quarter of operations after its initial public offering in August 1993. Future cash dividends will be dependent upon the policies of the Board and the Company's earnings, financial condition and other factors. The Merger Agreement provides that the Company may not, without the written consent of Holdings, declare, set aside or pay any dividend or other distribution payable in cash, stock or property in respect of Company Common Stock, other than regular quarterly cash dividends not in excess of $.11 per share. On July 19, 1996, the Board declared a dividend of $.11 per share which is payable on August 30, 1996 to holders of record of Company Common Stock as of the close of business on August 9, 1996. On September 19, 1995, the last trading day prior to the public announcement by AT&T of its intention to dispose of its interest in the Company, the closing sale price per share of Company Common Stock as reported on the New York Stock Exchange -- Composite Tape ('NYSE') was $32.75. On June 5, 1996, the last trading day prior to the public announcement of the Merger, the closing sale price per share of Company Common Stock as reported on the NYSE was $41.00. The closing sale price per share of Company Common Stock as reported on the NYSE on August 29, 1996 was $44 5/8. See 'Market Prices of and Dividends on Company Common Stock.' 13 SPECIAL FACTORS BACKGROUND OF THE MERGER The Company was organized as an indirect wholly-owned subsidiary of AT&T on March 31, 1993. The Company's business represents a continuation of the operations of two predecessor corporations, Credit Holdings and Capital Holdings. Credit Holdings began operations in 1985, and Capital Holdings began operations in 1990 (at which time Credit Holdings became a wholly-owned subsidiary of Capital Holdings.) On August 4, 1993, the Company sold 6,601,716 shares of Company Common Stock at $21.50 per share (yielding gross proceeds to the Company of $141,936,894) in a registered public offering pursuant to which approximately 14% of the outstanding Company Common Stock became held by parties other than the AT&T Subsidiaries. On September 20, 1995, AT&T announced plans to separate itself into three publicly traded companies: AT&T, NCR and Lucent. At the same time, as part of its overall restructuring plan, AT&T announced its intention to sell its remaining interest in the Company in a public or private sale. On September 21, 1995, Richard W. Miller, Executive Vice President and Chief Financial Officer of AT&T, met with Mr. Wajnert, the Chairman of the Board and Chief Executive Officer of the Company, and stated that AT&T wished to work with the Board and management in effecting the disposition of its interest in an orderly manner which would maximize value for all of the Company's stockholders, and that AT&T would allow the Company to manage the sale process, including by selecting its own legal counsel and its own investment banking firm to assist it in evaluating its strategic alternatives. On October 3, 1995, the Board met to consider AT&T's September 20 announcement concerning its plan to sell its remaining interest in the Company. The Board authorized management to take action that would meet AT&T's objectives while maximizing value for all stockholders, including a possible public or private sale of the Company. The Board authorized the Company to examine possible public and private sale alternatives and created the Special Committee, consisting of all of the directors of the Company who were not directors, officers or employees of AT&T or its subsidiaries (other than the Company), or officers or employees of the Company, to ensure that the interests of the Company's minority stockholders were properly represented in the process. Additionally, the Company engaged legal counsel for, and retained Goldman Sachs to act as financial advisors to, the Special Committee and the Board. See ' -- Opinion of Financial Advisor.' During October, 1995, Goldman Sachs, together with the Company, identified a list of companies that they believed might have an interest in acquiring the Company. The Company prepared an Offering Memorandum describing the Company for use in the sale process. Goldman Sachs initially contacted approximately 65 prospective bidders to determine which entities would be interested in receiving information concerning the sale of the Company. Goldman Sachs began disseminating the Offering Memorandum on October 26, 1995 and requested bidders who were interested in pursuing a possible transaction involving the Company to respond not later than November 20, 1995. Of the entities originally contacted by Goldman Sachs, approximately 30 prospective bidders indicated a desire for more information regarding the Company and, upon execution of a standard confidentiality agreement, were sent copies of the Offering Memorandum. In response to this dissemination, five entities indicated an interest in exploring a possible transaction and receiving a bid package. Each of such five bidders was given an opportunity to conduct a 'due diligence' review of various corporate records and other Company documents as well as an opportunity to review more extensive financial information concerning the Company and to meet with senior management of the Company. On December 26, 1995, Goldman Sachs distributed a bid package to such five bidders. This bid package included financial and other information not disseminated to the original distributees and a draft merger agreement. Recipients were asked to submit definitive proposals by January 22, 1996, including a marked copy of the draft merger agreement. Based on discussions with AT&T in its capacity as the Company's major vendor-client, Goldman Sachs told bidders to assume that there would be no extension or other modifications to the Operating Agreements between the Company and AT&T, NCR and Lucent, the initial terms of each of which expire in August 2000. Bidders were invited to submit two bids, one assuming an election by AT&T pursuant to Section 338(h)(10) of the Code, and one assuming no such election. The making of a Section 338(h)(10) 14 election can have negative tax consequences to the stockholder making the election. From a stockholder's perspective, a merger is normally treated as a sale of stock with taxable gain equal to the difference between the merger price and the stockholder's tax basis in the shares. A Section 338(h)(10) election changes this tax result because it has the effect of treating a merger transaction as a sale by the company of all of its assets and a subsequent liquidating distribution of all of the proceeds to the electing stockholder. The election can only be made by an 80% or greater stockholder and results in that stockholder paying tax on 100% of the difference between the total merger consideration and the Company's tax basis in its assets. The election has no tax consequence to the other stockholders. While the Section 338(h)(10) election would have negative tax consequences to AT&T, it would provide substantial tax benefits to most purchasers primarily because it results in a 'step-up' in the tax basis of the Company's assets, which creates a higher depreciable asset base and permits the amortization for tax purposes of any goodwill generated by the transaction. No bids were received from the five second round bidders which conformed with the general transaction parameters communicated to the bidders by Goldman Sachs. One second round bidder submitted a proposal which, after two revisions, contemplated the acquisition of the Company at a price of $43 per share, subject to AT&T agreeing to make a Section 338(h)(10) election, AT&T bearing all costs (approximately $1.50 per share) associated with a 50% or greater workforce reduction, AT&T, Lucent and NCR agreeing to 16-year extensions of the Operating Agreements, and AT&T providing indemnities for certain pre-closing liabilities, events and circumstances. AT&T concluded that it was not interested in a sale on the proposed terms. Further exploration by Goldman Sachs did not result in any bids which conformed to the specified transaction parameters, except as described below. On or about January 29, 1996, NIplc contacted Goldman Sachs and expressed preliminary interest in structuring an acquisition of the Company. NIplc executed a confidentiality agreement with the Company on February 1, 1996 and met with representatives of Goldman Sachs on February 2, 1996. Goldman Sachs forwarded to NIplc a letter, dated February 7, 1996, containing instructions for submitting a preliminary bid. On February 12, 1996, NIplc submitted a preliminary indication of interest for a purchase of all of the outstanding shares of Company Common Stock. NIplc indicated a preliminary value range of $32 to $37 per share. NIplc also indicated that, without more extensive due diligence, it would not be in a position to submit a bid contemplating a Section 338(h)(10) election. From mid-February to early March, 1996, NIplc conducted a due diligence investigation of the Company including a more intensive review of documents and a management presentation. As due diligence proceeded, NIplc studied the benefits of a Section 338(h)(10) election and attempted to develop structures that might allow the capture of some or all of the tax benefits associated with such an election. NIplc met with representatives of the Company and Goldman Sachs as part of this study. In mid-March, 1996, NIplc submitted a preliminary proposal which, among other things, contemplated the conversion of the Company to a limited liability company. Representatives of Goldman Sachs and the Company met with NIplc from March 25 to March 28, 1996 to discuss the terms of a possible acquisition proposal, NIplc's and management's respective business plans and the limited liability company structure, as well as to provide additional information concerning the Company. The limited liability company structure was ultimately abandoned in light of its complexity, the consents and approvals which would have been required, and the fact that it would have resulted in AT&T receiving different, and potentially higher, consideration for its shares of Company Common Stock than the non-AT&T holders would have received for their shares. On April 2, 1996, a final bid instruction letter was delivered to NIplc by Goldman Sachs. In response, NIplc submitted to the Company and its counsel a mark-up of the draft merger agreement previously supplied to NIplc which reflected, among other things, certain indemnities and other concessions requested from AT&T. On April 12, 1996, AT&T notified the Company that it believed it might then be appropriate to pursue an underwritten public offering of shares of Company Common Stock held by the AT&T Subsidiaries while the Company continued to explore private sale alternatives. AT&T stated that it was not at that time formally exercising its rights under the Registration Rights Agreement, dated as of June 25, 1993, between the Company and AT&T (the 'Registration Rights Agreement'). On April 12, 1996, the Company issued a press release announcing its receipt of such notification. The Company 15 accelerated work on a registration statement for a possible underwritten secondary public offering of all or a portion of the shares of Company Common Stock held by the AT&T Subsidiaries. On April 17, 1996, NIplc submitted a formal proposal to the Company to underwrite the acquisition of the Company through the merger with and into the Company of a newly-formed entity to be formed and financed by NIplc. The proposal included a price of $40 per share for all outstanding shares of the Company and was conditioned upon AT&T making an election under Section 338(h)(10) of the Code. NIplc indicated that it would increase its valuation by $3 per share if the Operating Agreements with AT&T, Lucent and NCR were to be extended for five years from their scheduled expiration in 2000 and if they were modified slightly to accommodate NIplc's strategy. NIplc indicated that retention of the Company's management was a condition to NIplc's proposal and that NIplc anticipated, as a condition to the proposal, requiring members of management to reinvest a significant portion of their proceeds from the transaction into the Company going forward. The proposal indicated that the next step in the process would be the initiation of discussions with the Company's management related to employment contracts and potential investment and incentive programs. At a meeting of the Special Committee on April 18, 1996, the Special Committee considered the NIplc proposal. Management informed the Special Committee that it would not enter into any discussions with NIplc concerning retention or related issues unless authorized to do so in advance by the Special Committee and the Board. The Special Committee concluded that the NIplc proposal might represent an attractive alternative for all of the Company's stockholders and recommended to the Board that management be authorized to proceed with the next step to determine if a transaction with NIplc was feasible. At a meeting of the Board on April 19, 1996, the Board decided that, prior to authorizing management to proceed further, AT&T, as the beneficial owner of approximately 86% of the outstanding Company Common Stock, should be asked to determine whether it would be prepared to support a transaction on the terms proposed, including the making of the Section 338(h)(10) tax election. On April 26, 1996, AT&T sent a letter to the Company stating that AT&T did not believe NIplc's April 17 proposal was sufficiently attractive to warrant AT&T's agreement to the Section 338(h)(10) election and other conditions proposed by NIplc. Also, on April 26, 1996, NIplc submitted a revised proposal which continued to provide for a $40 per share price but indicated that NIplc would permit the Company to declare a special dividend immediately prior to the closing in an amount equal to the lesser of $90 million or the Company's net after-tax earnings from January 1, 1996 through the closing date or, as an alternative, would permit the Company to pay AT&T that amount as an indemnity for costs associated with AT&T's making the Section 338(h)(10) election. The letter also reiterated NIplc's view that the retention of management was crucial to the proposal and stated that NIplc desired permission to speak with management concerning equity reinvestment and retention issues. Following NIplc's April 26th proposal, AT&T contacted Goldman Sachs and indicated that AT&T would be prepared to consider the transaction proposed by NIplc, including the Section 338(h)(10) election, but excluding the extension of the Operating Agreements, if NIplc was willing to increase the price per share to $45, provide assurances as to the feasibility of the proposal and submit a new mark-up of the draft merger agreement containing proposed contractual terms and conditions more appropriate for the acquisition of a public company than those contained in NIplc's prior mark-up. Goldman Sachs communicated these points to NIplc. On April 30, 1996, AT&T formally exercised its registration rights under the Registration Rights Agreement by requesting the Company to register 30,879,656 shares of Company Common Stock with the SEC for offering to the public. AT&T also noted that it would be appropriate for the Company to continue to explore private sale alternatives. The Company stated in a press release that it expected to be in a position to file a registration statement with the SEC by the end of May. From mid-April through mid-May, 1996, work continued on the preparation of a registration statement and the finalization of related arrangements for the public offering of shares of Company Common Stock beneficially owned by AT&T, with the assistance of Merrill Lynch, Pierce, Fenner & Smith Incorporated and Morgan Stanley & Co. Incorporated, whom AT&T had indicated it would select as managing underwriters for such a public offering. 16 On May 12, 1996, the Company informed NIplc of the status of its consideration of NIplc's proposal. On May 13, 1996, NIplc submitted a revised proposal to the Company contemplating a merger of a newly-formed entity into the Company, pursuant to which each issued and outstanding share of Company Common Stock would be cancelled in exchange for $45 per share and each outstanding Option would be accelerated and cancelled in exchange for a cash payment equal to $45 per share subject to such Option less the applicable exercise price of such Option. The proposed transaction was conditioned on AT&T making a Section 338(h)(10) election. At a meeting on May 14, 1996, the Special Committee concluded that the NIplc proposal might represent an attractive alternative for all of the Company's stockholders and recommended to the Board that management be authorized to begin discussions with NIplc with a view towards determining whether NIplc's condition on management retention and equity participation could be achieved. On May 15, 1996, AT&T notified the Company that it had received and considered NIplc's May 13, 1996 proposal and was ready to support the commencement of discussions between the Company and NIplc subject to three conditions: first, AT&T noted the importance to the Company of a resolution of the private/public sale process, and indicated that the terms of management's participation in the NIplc proposal should be resolved within one week and, if it could not be, then it might be appropriate for efforts to be refocused on proceeding with the secondary public offering of AT&T's Company Common Stock; second, NIplc should be instructed to provide its comments on the existing draft merger agreement with a view towards specifying what it meant by a transaction structure appropriate for a public company acquisition, including not seeking indemnities or other post-closing contingencies or special concessions from AT&T not included in the Company's original draft of the merger agreement; and third, AT&T would agree to make the Section 338(h)(10) election, assuming all other issues could be resolved, but AT&T did not consider it appropriate that AT&T, as the majority stockholder of the Company, should be disproportionately affected thereby and AT&T believed that the costs of the election should be shared more equitably by all of the Company's stockholders (through a tax sharing payment from the Company to AT&T or through some other means). In subsequent discussions among representatives of the Company, NIplc and AT&T, AT&T's counsel conveyed AT&T's proposal on the sharing of the Section 338(h)(10) election costs. Specifically, AT&T proposed that the Company make a $125 million payment to AT&T immediately prior to the closing of the Merger. On the assumption that the total consideration payable in the Merger would be reduced by a comparable amount (approximately $2.50 per share), the proposed payment would have had the effect of allocating approximately $23 million of the tax costs associated with the Section 338(h)(10) election from AT&T to the holders of Company Common Stock other than AT&T. AT&T indicated that the $23 million of tax costs it proposed to allocate to stockholders other than AT&T and its affiliates constituted a percentage of the total tax costs associated with the Section 338(h)(10) election which was less than the percentage ownership by such other stockholders of Company Common Stock (i.e., 14%). In the negotiations that followed, AT&T withdrew its proposal, thereby agreeing in effect to receive a lower after tax per share price for its shares of Company Common Stock than the Company's other stockholders. At a meeting on May 15, 1996, the Board authorized management to begin discussions with NIplc on issues relating to their retention and involvement in the transaction, and agreed that the Company should reimburse management for up to $100,000 of legal expenses. Management was instructed to report back to the Board by the following week with a view as to whether management was interested in participating with NIplc in the proposed acquisition of the Company (as required by NIplc) and as to whether management and NIplc had reached an agreement in principle on the terms of management's equity reinvestment and retention. During the period from May 16, 1996 through May 22, 1996, representatives of management met with NIplc to discuss NIplc's business plan for the Company, its financing strategy, its proposals for a reinvestment by management of merger proceeds and retention issues. See ' -- Interests of Certain Persons in the Merger -- Arrangements Between Management and Merger Sub.' At a meeting of the Special Committee on May 23, 1996, Mr. Wajnert reported the results of the discussions with NIplc, indicating that, while no agreement had been reached, management believed that NIplc's business plan seemed to be feasible (although some questions remained to be analyzed) and 17 he was optimistic that a transaction could be structured that would satisfy NIplc's requirements for retention of management. The Special Committee again concluded that the proposed transaction might represent an attractive alternative to all of the Company's stockholders and recommended proceeding with the necessary steps to pursue the alternative. At a meeting of the Board on May 23, 1996, the Board heard the report of Mr. Wajnert, received the recommendations of the Special Committee and was advised of AT&T's agreement to defer the filing of a registration statement for a secondary public offering of the AT&T Subsidiaries' shares temporarily in order to pursue the transaction proposed by NIplc. The Board concluded that attempting to reach agreement with NIplc was in the best interests of all of the Company's stockholders. In view of the possibility that certain members of management would be offered the opportunity to reinvest all or a portion of their merger consideration in the surviving entity and thereby potentially have a conflict of interest with the Company's other stockholders, the Board directed that the Special Committee be solely responsible for negotiations with NIplc on behalf of the Company and that management of the Company thereafter be excluded from those negotiations and from access to other information concerning the sale process. It was recognized that AT&T would represent its own interests in the negotiations. During the period from May 24, 1996 through May 31, 1996, negotiation of definitive agreements among NIplc and Holdings, the Company and AT&T took place. Also, further discussions of equity reinvestment and retention issues occurred between NIplc and management representatives. At a meeting on May 31, 1996, the Board was informed that, while no agreement had been reached, NIplc was confident that arrangements satisfactory to it for the retention of management could be reached. The Board was also informed that certain significant issues existed between the Company and NIplc and between AT&T and NIplc. In addition, the Board was informed that all parties wished to obtain a better understanding of the long-term and short-term debt ratings that the Company would likely receive following the completion of the transaction. While these issues had not yet been resolved, it was decided that the Board would receive a detailed presentation concerning the Merger Agreement and the proposed transaction at the May 31, 1996 meeting because certain directors might be unavailable in the week that followed. The Board reviewed the terms of the proposed transaction and the provisions of the draft Merger Agreement and received the financial analysis and advice of Goldman Sachs and Goldman Sachs' preliminary views on the fairness of the proposed transaction price to the holders of Company Common Stock (other than AT&T and its affiliates). The Board meeting was adjourned and the Special Committee met in executive session. The Special Committee unanimously concluded that the proposed transaction was fair to the holders of the Company Common Stock (other than AT&T and its affiliates) and recommended to the Board that the transaction be approved, if the remaining issues could be satisfactorily resolved. The Special Committee had been informed that the transaction proposed by NIplc was conditioned upon Holdings acquiring all of the outstanding shares of Company Common Stock and that its transaction would not accommodate, nor would it wish to have, AT&T as a continuing stockholder. Accordingly, AT&T had requested that the Intercompany Agreement, which, among other things, required AT&T to own approximately 20% of the Company Common Stock until August 4, 1998, be amended to permit all of AT&T's shares of the Company Common Stock to be cashed out in the Merger. In order to permit consummation of the Merger, the Special Committee approved the proposed amendment to the Intercompany Agreement, conditioned upon final resolution of the terms of the Merger Agreement. The Board meeting was then reconvened. The Board was informed of the recommendation of the Special Committee, subject to resolution of the remaining open issues. In view of the open issues, the Board took no action. Extensive negotiations among the Company, AT&T and NIplc over the period from May 31, 1996 to June 5, 1996 led to a resolution of remaining significant issues. At a meeting of the Board on June 5, 1996, Goldman Sachs reviewed its presentation of May 31, 1996, covered various other matters and delivered its opinion that, as of such date, and based upon and subject to various qualifications and assumptions described therein, the Merger Consideration to be received in the Merger by the holders of Company Common Stock pursuant to the terms of the Merger Agreement is fair to such holders (other than AT&T and its affiliates). The Special Committee unanimously reaffirmed its May 31, 1996 conclusion and recommendations to the Board. The Board, by the unanimous vote of the directors present (other than Mr. Wajnert who did not participate in the 18 Board's deliberations or vote on the Merger Agreement in light of his anticipated participation in the transaction as a Management Investor), then formally approved the Merger Agreement and submitted it to the AT&T Subsidiaries for their approval by written consent. Mr. William B. Marx, Jr. did not attend or participate in the Board meeting. The AT&T Subsidiaries executed and delivered the Merger Agreement Stockholders' Consent approving the Merger Agreement. The Merger Agreement was thereafter executed and delivered by the Company, AT&T, Holdings and Merger Sub. The amendment to the Intercompany Agreement was also executed and delivered and NIplc executed and delivered the Underwriting Letter. See 'Financing of the Merger.' Following the execution and delivery of the Merger Agreement on June 5, 1996, the parties thereto determined that certain revisions to the Merger Agreement were necessary in order to accommodate changes to the proposed closing date and certain other matters. Accordingly, in the early part of August the parties negotiated the Amendment to the Merger Agreement. On August 19, 1996, the Board of Directors of the Company (acting without the participation or vote of Mr. Wajnert), upon the unanimous recommendation of the Special Committee, adopted and approved the Amendment. The Amendment was thereafter executed and delivered by the Company, AT&T, Holdings and Merger Sub as of August 20, 1996. The AT&T Subsidiaries executed and delivered to the Company a letter confirming the Merger Agreement Stockholders Consent with respect to the Merger Agreement, as amended by the Amendment. NIplc executed and delivered the Confirmation Letter (as defined herein). The Amendment provides that the closing date for the Merger will be the later of (i) October 1, 1996 (as opposed to the September 17, 1996 date provided in the Merger Agreement as executed on June 5, 1996) and (ii) the first business day on which all of the conditions to the closing of the Merger have been satisfied or waived. The Amendment does not change the Merger Agreement's final deadline of October 31, 1996, for the closing of the Merger, following which date any party may terminate the Merger Agreement under certain circumstances. The Amendment also provides that Holdings may, at its option, choose to postpone the closing of the Merger to a date no later than October 31, 1996, even if all of the conditions to closing are satisfied or waived prior to such date. If Holdings exercises such option, interest will be payable by Holdings on the Merger Consideration at a rate of LIBOR (as defined in the Amendment) plus 0.5% for the period from and including September 18, 1996 through but excluding the closing date of the Merger. See 'The Merger Agreement -- First Amendment to the Merger Agreement.' The Amendment also requires that Holdings receive an additional $400 million capital contribution by September 18, 1996, increasing the capital contributions made to Holdings to a total of $500 million. A copy of the Amendment is attached to this Information Statement in Annex A. Unless otherwise noted herein and except with reference to the Merger Agreement as it existed prior to August 20, 1996, all references herein to the Merger Agreement refer to the Merger Agreement as amended by the Amendment. APPROVAL AND FAIRNESS OF THE MERGER; PURPOSES OF AND REASONS FOR THE MERGER The Board (other than Mr. Wajnert, who did not participate in the Board's deliberations or vote on the Merger Agreement in light of his anticipated participation in the transaction as a Management Investor, and Mr. Marx who was not in attendance), acting upon the recommendation of the Special Committee, unanimously authorized and approved the Merger Agreement and the transactions contemplated thereby. The Board believes that the proposed Merger is fair to, and in the best interests of, the Company's stockholders. The AT&T Subsidiaries, as the holders of approximately 86% of the Company Common Stock, have executed the Merger Agreement Stockholders' Consent approving the Merger Agreement in accordance with the DGCL and the Company's Restated Certificate of Incorporation. Because no additional approval of the Merger Agreement by the Company's stockholders is required, no proxies or other authorizations are being solicited from the Company's other stockholders. The principal purpose of the proposed Merger is to provide all of the Company's stockholders with an equal opportunity to receive $45 per share in cash for each share of Company Common Stock, which represents (i) a 35.8% premium over the highest price at which the Company Common Stock had ever traded prior to the September 20, 1995 announcement of AT&T's plan to divest its interest in the Company, (ii) a 37.4% premium over the closing price of the Company Common Stock on September 19, 1995, the trading day prior to the AT&T announcement, and (iii) an 11.1% premium 19 over the closing price on the trading day prior to the announcement of the signing of the Merger Agreement (June 5, 1996). The Board's approval was based upon a number of factors, including: (i) the Board's review of strategic alternatives available to the Company, (ii) recent and historical market prices of the Company Common Stock, (iii) the Board's knowledge of the business, operations, properties, assets and earnings, as well as the prospects, of the Company, (iv) the unconditional and irrevocable agreement of NIplc to underwrite an international capital markets issue on behalf of Holdings or to purchase securities of Holdings, in an amount sufficient to allow Holdings to satisfy its obligations under the Merger Agreement, (v) the contractual relationships between the Company and each of AT&T, Lucent and NCR and the implications of AT&T's pending restructuring, (vi) the presentation of Goldman Sachs discussed elsewhere herein under ' -- Opinion of Financial Advisor', (vii) the opinion of Goldman Sachs that, as of the date of its opinion, and based upon and subject to various qualifications and assumptions described therein, the Merger Consideration to be received in the Merger by holders of Company Common Stock pursuant to the terms of the Merger Agreement is fair to such holders (other than AT&T and its affiliates), and (viii) the recommendation of the Special Committee. The Board also considered that the extensive search for possible buyers of the Company failed to discover any other bidder interested in pursuing negotiations for the acquisition of the Company on terms which did not require amendments to the Operating Agreements which were unacceptable to AT&T, Lucent and NCR. The Board recognized that, as a result of the proposed Merger, stockholders of the Company (other than the Management Investors) would cease to have an interest in an ongoing corporation with potential for future growth, and the Board therefore gave consideration to the Company's results of operations and current forecasts of future revenues and earnings in reaching its determination to approve the Merger Agreement. See ' -- Certain Projections.' The Board also recognized that the Management Investors will have an opportunity, subject to the risks of the Surviving Corporation's business and in consideration of their ongoing service to the Surviving Corporation, to benefit from any increases in the value of the Surviving Corporation following the Merger. The Board recognized that this represented a potential conflict between the interests of those officers and employees and the Company's other stockholders. However, the Board recognized that Holdings was willing to enter into the Merger Agreement and NIplc was willing to deliver the Underwriting Letter only if satisfactory arrangements for the retention of, and equity reinvestment by, management could be put in place. See ' -- Interests of Certain Persons in the Merger -- Arrangements Between Management and Merger Sub.' The Board recognized that the proposed Merger will enable all of the Company's stockholders to realize a substantial premium over the highest price at which the Company Common Stock had ever traded prior to the September 20, 1995 announcement by AT&T of its intention to dispose of its interest in the Company by public or private sale. For the range of prices of the Company Common Stock from 1993 through a recent date, see 'Market Prices of and Dividends on Company Common Stock.' The Board recognized that the aggregate fair market value of the Company's assets, including its property, might be significantly higher than their aggregate book value as represented in the Company's balance sheet. The book value per share of the Company Common Stock at December 31, 1995 was $23.76 and at March 31, 1996 was $24.47. See 'Selected Consolidated Financial Information of the Company' herein and the Consolidated Financial Statements included in the Company's March 31, 1996 Form 10-Q and 1995 Form 10-K, both of which are incorporated herein by reference. See 'Incorporation of Certain Documents by Reference.' The Board did not consider liquidation of the Company or a spin-off of operating units to be attractive alternatives principally because of uncertainties and delays inherent in such transactions, the relatively lower values that likely would have been realized through such transactions and, in the case of liquidation, because the Board wished to avoid the resulting disruption to the Company's operations and adverse effects on employees, customers and vendor-clients. The Special Committee, at its meeting on May 31, 1996, concluded that the proposed transaction was fair to, and in the best interests of, the Company's stockholders other than AT&T and its affiliates and recommended that the Board approve the Merger Agreement, assuming certain open issues were 20 resolved. The Special Committee reaffirmed its position on June 5, 1996. The Special Committee considered all of the matters considered by the Board described above. The Special Committee also considered that AT&T had the immediate right to sell shares of Company Common Stock it owned representing up to 66% of the outstanding Company Common Stock (and, under the terms of the Intercompany Agreement, all of its remaining shares in August, 1998) without any consent or approval from the Company or the Company's independent directors. Accordingly, if it chose to, AT&T would be in a position to sell a controlling interest in the Company in a private sale. Also, AT&T had formally exercised its right to require the Company to register shares of Company Common Stock representing 66% of the outstanding Company Common Stock and AT&T was poised to commence a public offering of those shares. The Special Committee believed that each of these alternatives was likely to lead to a less favorable outcome for the Company's non-AT&T stockholders than the transactions contemplated by the Merger Agreement. Finally, the Special Committee took into account the facts that AT&T, as the beneficial owner of approximately 86% of the outstanding Company Common Stock, will receive the same cash price per share in the Merger (which, the Special Committee was informed, may represent a lower after tax price to AT&T after taking into account the effects of the Section 338(h)(10) election) as the non-AT&T stockholders, and that AT&T was in favor of and willing to cause the AT&T Subsidiaries to vote to approve the Merger. In considering the fairness of the Merger, stockholders should be aware that the Company's current management has a substantial equity ownership position in the Company and will be offered an opportunity, not available to the Company's other stockholders, to participate in the equity of the Surviving Corporation. As of December 31, 1995 and as of March 31, 1996, the Management Offerees' aggregate interest, on a fully-diluted basis assuming the exercise of all Options, in the Company's net book value was $56.0 million (or 5.0%) and $57.7 million (or 5.0%), respectively, and, for the year ended December 31, 1995 and the three months ended March 31, 1996, the Management Offerees' aggregate interest in the Company's net income was $6.4 million (or 5.0%) and $1.9 million (or 5.0%), respectively. Assuming all Management Offerees participate in the Management Share Exchange and the Management Option Exchange and are granted the New Options, in each case, as referred to below, as of December 31, 1995 and as of March 31, 1996 (on a pro forma basis which gives effect to the consummation of the Merger), the Management Offerees' aggregate interest, on a fully-diluted basis assuming the exercise of all Options and New Options, in the Company's net book value would be $156.3 million (or 14.0%) and $161.0 million (or 14.0%), respectively, and, for the year ended December 31, 1995 and the three months ended March 31, 1996, the Management Offerees' aggregate interest in the Company's net income would be $17.9 million (or 14.0%) and $5.2 million (or 14.0%), respectively. The Merger Agreement was approved by the Board at its meeting on June 5, 1996 and the Amendment was approved by the Board at its meeting on August 19, 1996. None of the directors who voted in favor of approval of the Merger Agreement is, or will be, an investor in Holdings or the Surviving Corporation. The AT&T Subsidiaries, as the owners of approximately 86% of the outstanding Company Common Stock, executed the Merger Agreement Stockholders' Consent approving the Merger Agreement on June 5, 1996. AT&T and the AT&T Subsidiaries have, and will have, no equity interest in Holdings or the Surviving Corporation. The Special Committee, consisting entirely of those directors of the Company who are not officers, directors or employees of AT&T or its subsidiaries (other than the Company) or officers or employees of the Company and none of whom will be investors in Holdings or the Surviving Corporation, concluded that the Merger was fair to, and in the best interest of, the Company's stockholders other than AT&T and its affiliates. Goldman Sachs delivered an opinion that, as of the date of its opinion, and based upon and subject to various qualifications and assumptions described therein, the Merger Consideration to be received in the Merger by holders of Company Common Stock pursuant to terms of the Merger Agreement is fair to such holders (other than AT&T and its affiliates). In light of these approvals and factors, the Board did not consider it necessary to provide for the approval of the Merger Agreement by the affirmative vote of at least a majority of the unaffiliated stockholders of the Company. In addition, Holdings indicated that it would not agree to execute the Merger Agreement unless the Merger was approved by the written consent of the AT&T Subsidiaries, thereby effectively eliminating any uncertainty regarding, or time delay in obtaining, stockholder approval of the Merger. Also, in light of the foregoing approvals and factors and the role of 21 the Special Committee, the Board did not consider it necessary to retain an unaffiliated representative to act solely on behalf of unaffiliated stockholders of the Company for the purposes of negotiating the terms of the Merger or preparing a report concerning the fairness of the Merger. Neither the Board nor the Special Committee received an appraisal of the Company's properties in connection with its approval of the Merger. Neither the Board nor the Special Committee attached any relative weight to the various factors considered in reaching its decision and neither the Board nor the Special Committee articulated how each factor specifically supported its ultimate decision, except that substantial weight was placed on (i) the opinion of Goldman Sachs that, as of the date of its opinion, and based upon and subject to various qualifications and assumptions described therein, the Merger Consideration to be received in the Merger by the holders of Company Common Stock pursuant to the terms of the Merger Agreement is fair to such holders (other than AT&T and its affiliates), (ii) the fact that the AT&T Subsidiaries, as the owners of approximately 86% of the outstanding Company Common Stock, will receive the same cash price per share in the Merger (which may represent a lower after tax price to AT&T after taking into account the effects of the Section 338(h)(10) election) as the non-AT&T stockholders, (iii) the fact that AT&T was in favor of and willing to cause the AT&T Subsidiaries to vote to approve the Merger and (iv) the comprehensive, extended and public process by which the Company was auctioned. The Board and the Special Committee were aware that the analysis performed by Goldman Sachs in connection with rendering its opinion indicated that the price per share to book value ratio and the market capitalization premium over receivables ratio for AT&T Capital implied from the Merger Consideration did not fall within the ranges for such ratios for the Specialty Finance Companies (as defined below) analyzed by Goldman Sachs. However, in the course of considering the Merger, the Board and the Special Committee did not consider these two ratios in isolation but rather considered the financial analysis and opinion of Goldman Sachs and other relevant factors in their entirety. The form of the proposed Merger was structured so as to meet the business and financial objectives of Holdings and NIplc. Holdings has informed the Company that it entered into the Merger Agreement because it believes that an investment in the Company's business and assets will be a profitable investment. The rules of the SEC require Merger Sub to express its belief as to the fairness of the Merger to the Company's stockholders. While Merger Sub has undertaken no evaluation of the Merger from the standpoint of fairness to the Company's stockholders, it has considered the factors noted above which were taken into account by the Board and Special Committee, based however only on the more limited facts and information available to it. Although Merger Sub did not find it practicable to quantify or otherwise attach relative weights to the specific factors considered by the Board or the Special Committee, Merger Sub did consider in particular the fact that (i) the Merger Consideration represented a significant premium over the historical stock prices of Company Common Stock as described above in the discussion of the Board's approval, and (ii) the transaction was negotiated over a four-month period and was approved following direct negotiations with AT&T, the Company's principal stockholder. See 'Special Factors -- Background of the Merger.' Merger Sub also considered the fact that it required, as a condition to its execution and delivery of the Merger Agreement, the Board and the Special Committee to have determined that the Merger Agreement was fair to the Company's stockholders and to have obtained an opinion of Goldman Sachs that the Merger Consideration to be received in the Merger by holders of the Company Common Stock pursuant to the Merger Agreement is fair to such holders (other than AT&T and its affiliates). On the basis of the foregoing considerations, Merger Sub believes that the Merger is fair from a financial point of view to the Company's stockholders. The rules of the SEC require Mr. Wajnert to express his belief as to the fairness of the Merger to the Company's stockholders. While Mr. Wajnert has undertaken no evaluation of the Merger from the standpoint of fairness to the Company's stockholders, he has considered the factors noted above which were taken into account by the Board (of which Mr. Wajnert is a member) and Special Committee, based however only on the more limited facts and information available to him inasmuch as he did not participate in the deliberations of the Board with respect to the Merger. Although Mr. Wajnert did not find it practicable to quantify or otherwise attach relative weights to the specific factors considered by 22 the Board or the Special Committee, Mr. Wajnert did consider in particular the fact that (i) the Merger Consideration represented a significant premium over the historical stock prices of Company Common Stock as described above in the discussion of the Board's approval, and (ii) the transaction was negotiated over a four-month period and was approved following direct negotiations with AT&T, the Company's principal stockholder. See 'Special Factors -- Background of the Merger.' Mr. Wajnert also considered the fact that Merger Sub required, as a condition to its execution and delivery of the Merger Agreement, the Board and the Special Committee to have determined that the Merger Agreement was fair to the Company's stockholders and to have obtained an opinion of Goldman Sachs that the Merger Consideration to the received in the Merger by holders of the Company Common Stock pursuant to the Merger Agremeent is fair to such holders (other than AT&T and its affiliates). On the basis of the foregoing considerations, Mr. Wajnert believes that the Merger is fair from a financial point of view to the Company's stockholders. CERTAIN EFFECTS OF THE MERGER At the Effective Time, Merger Sub will be merged into the Company with the Company continuing its corporate existence under the DGCL as the Surviving Corporation and each share of Company Common Stock, other than Excluded Shares, will be converted into the right to receive the Merger Consideration. Upon consummation of the Merger, Holdings will own all of the outstanding shares of Surviving Corporation Common Stock (except for shares owned by the Management Investors) and would be entitled to all of the benefits and detriments resulting from that interest, including all income or losses generated by the Surviving Corporation's operations and any future increase or decrease in the Surviving Corporation's value which is attributable thereto. After the Merger is consummated, the present holders of the Company Common Stock (other than the Management Investors) will no longer have any equity interest in the Surviving Corporation, will not share in the results of the Surviving Corporation and will no longer have rights to vote on corporate maters. Once the Merger is effective, the Company Common Stock will no longer be traded on the New York Stock Exchange and registration of Company Common Stock under the Exchange Act will terminate. However, for so long as certain publicly-held debt or other securities of the Company remain outstanding following the Merger, the Surviving Corporation will continue to file periodic reports with the SEC to the extent required under the Exchange Act. Other than Options held by the Management Investors which may be exchanged for new options to purchase shares of Merger Sub Common Stock, each outstanding Option will be cancelled upon consummation of the Merger in exchange for cash in an amount equal to the excess of the Merger Consideration over the Option exercise price per share. See ' -- Interests of Certain Persons in the Merger -- Arrangements between Management and Merger Sub.' OPINION OF FINANCIAL ADVISOR At the June 5, 1996 meeting of the Special Committee and the Board, Goldman Sachs rendered an opinion that, as of such date, and based upon and subject to various qualifications and assumptions described therein, the Merger Consideration to be received in the Merger by the holders of Company Common Stock pursuant to the terms of the Merger Agreement is fair to such holders (other than AT&T and its affiliates). Goldman Sachs did not render any opinion as to the fairness of the Merger Consideration to AT&T and its affiliates. THE FULL TEXT OF THE WRITTEN OPINION OF GOLDMAN SACHS, DATED JUNE 5, 1996, WHICH SETS FORTH ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITS ON THE SCOPE OF REVIEW UNDERTAKEN, IS ATTACHED AS ANNEX B TO THIS INFORMATION STATEMENT. STOCKHOLDERS OF THE COMPANY ARE URGED TO READ THIS OPINION IN ITS ENTIRETY. NO LIMITATIONS WERE IMPOSED BY THE BOARD OR THE SPECIAL COMMITTEE UPON GOLDMAN SACHS WITH RESPECT TO THE INVESTIGATIONS MADE OR PROCEDURES FOLLOWED BY IT IN RENDERING ITS OPINION. GOLDMAN SACHS' OPINION, WHICH IS ADDRESSED TO THE BOARD AND THE SPECIAL COMMITTEE, IS DIRECTED ONLY TO THE FAIRNESS OF THE CONSIDERATION TO BE RECEIVED BY THE STOCKHOLDERS OF THE COMPANY (OTHER THAN 23 AT&T AND ITS AFFILIATES) AND DOES NOT ADDRESS ANY OTHER ASPECT OF THE PROPOSED MERGER OR ANY RELATED TRANSACTION. THE SUMMARY OF THE OPINION OF GOLDMAN SACHS SET FORTH IN THIS INFORMATION STATEMENT IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF SUCH OPINION. In connection with rendering its written opinion dated June 5, 1996, Goldman Sachs reviewed, among other things, the Merger Agreement; the Operating Agreements; the Intercompany Agreement; certain related agreements between the Company and each of AT&T, Lucent and NCR; certain federal and state tax sharing agreements between the Company and AT&T; Annual Reports on Form 10-K of the Company for the five years ended December 31, 1995; certain interim reports to stockholders and Quarterly Reports on Form 10-Q; certain other communications from the Company to its stockholders; and certain internal financial analyses and forecasts for the Company prepared by its management. Goldman Sachs also held discussions with members of the senior management of the Company regarding the past and current business operations, financial condition and future prospects of the Company. In addition, Goldman Sachs reviewed the reported price and trading activity for Company Common Stock, compared certain financial and stock market information for the Company with similar information for certain other companies the securities of which are publicly traded, reviewed the financial terms of certain recent business combinations in the commercial finance industry specifically and in other industries generally and performed such other studies and analyses as Goldman Sachs considered appropriate. Goldman Sachs relied without independent verification upon the accuracy and completeness of all information reviewed by it for purposes of its opinion. With respect to financial forecasts, including, without limitation, the analyses and forecasts of certain earnings projections, Goldman Sachs assumed that they were reasonably prepared on bases reflecting the best currently available estimates and judgments of the future competitive, operating and regulatory environments and related financial performance of the Company or the Selected Companies (as defined herein), and that such forecasts will be realized in the amounts and the times contemplated. Except for estimated 1996 earnings, the Company management estimates used by Goldman Sachs were the projections of the Company summarized elsewhere in this Information Statement. See ' -- Certain Projections'. For 1996, the Company's projections assumed a deconsolidation from AT&T as of January 1, 1996 with the concomitant loss of certain Gross Profit Tax Deferral benefits (as defined in ' -- Certain Projections'), whereas Goldman Sachs adjusted the Company management projections to assume a deconsolidation from AT&T as of July 1, 1996. In rendering its opinion, Goldman Sachs expressed no view as to the reasonableness of such forecasts or the assumptions on which they were based. In addition, Goldman Sachs did not make an independent evaluation or appraisal of the assets and liabilities of the Company or any of its subsidiaries and was not furnished with any such evaluation or appraisal. Goldman Sachs' opinion was based on economic, market and other conditions as in effect on, and the information available to it as of, the date of its opinion. Goldman Sachs' opinion did not address the relative merits of the Merger and alternative business transactions. The following summarizes the material financial comparative analyses presented by Goldman Sachs to the Board and the Special Committee at meetings on May 31, 1996 and June 5, 1996, which analyses were considered by Goldman Sachs in rendering its opinion on June 5, 1996. Analysis of Implied Transaction Multiples. Goldman Sachs reviewed the multiples implied by the Merger Consideration of $45.00 per share to be paid in the Merger, which represented an 11.1% premium over the closing price of Company Common Stock on May 29, 1996; a 37.4% premium over the closing price on September 19, 1995 (the trading day immediately preceding AT&T's announcement that it would split up into three companies and divest its interest in the Company); a 51.3% premium over the closing price on August 18, 1995 (one month before the AT&T announcement); and a 22.0% premium over the closing price on August 18, 1995, adjusting such price to reflect the market appreciation of the S&P 56 Financial Index since August 18, 1995. The Merger Consideration represents: (i) for 1995, a price to earnings multiple of 16.7 times; for the 12-month period ended March 31, 1996, a price to earnings multiple of 15.3 times; for estimated 1996 earnings, a price to earnings multiple of 13.8 times based on median earnings estimates provided by Institutional Broker Estimate Service, a data service that compiles estimates of securities research analysts ('IBES'), and of 13.4 24 times based on estimates provided by Company management; for estimated 1997 earnings, a price to earnings multiple of 11.8 times based on median estimates provided by IBES and of 11.6 times based on estimates provided by Company management; and for estimated 1998 earnings, a price to earnings multiple of 9.4 times, based on estimates provided by Company management; (ii) a price to common equity multiple at March 31, 1996 of 1.88 times; (iii) a price to tangible book value multiple at March 31, 1996 of 2.09 times; and (iv) a ratio of premium to net receivables at March 31, 1996 of 12.3%. Comparison with Selected Companies. Goldman Sachs reviewed selected market and operating information for the Company in comparison with corresponding information for selected publicly traded companies engaged in commercial finance and specialty finance. Goldman Sachs selected both commercial finance and specialty finance companies because, due to the mix of the Company's business, the Company shares similar characteristics with each of these types of finance companies. The commercial finance companies were: The FINOVA Group Inc. ('FINOVA'), Comdisco Inc., GATX Corporation, Winthrop Resources Corporation, and Financial Federal Corporation (collectively, the 'Commercial Finance Companies'). The specialty finance companies were: Associates First Capital Corporation, Household International, Inc., Green Tree Financial Corporation, Mercury Finance Company, and The Money Store Inc. (collectively, the 'Specialty Finance Companies' and together with the Commercial Finance Companies, the 'Selected Companies'). The purpose of these analyses was to show how shares of Company Common Stock compared to those of other finance and leasing companies in terms of their relationships to certain per share measures and other financial and operating indicators. The multiples and ratios for each of the Selected Companies were, unless otherwise indicated, based on the 12-month period ended March 31, 1996 and market prices as of May 29, 1996. Earnings estimates for the Selected Companies were based on median estimates of IBES. Earnings estimates of the Company were based on median estimates of IBES and estimates of the Company's management. The market statistics analysis indicated that: (i) for 1995 earnings, the median price to earnings multiple was 15.0 times (with a range from 10.7 times to 18.2 times) for the Commercial Finance Companies and 18.2 times (with a range from 15.9 times to 27.8 times) for the Specialty Finance Companies, as compared to 15.0 times for the Company in the public market and 16.7 times as implied in the Merger; for estimated 1996 earnings, the median price to earnings multiple was 12.5 times (with a range from 9.6 times to 16.2 times) for the Commercial Finance Companies and 15.2 times (with a range from 13.3 times to 21.1 times) for the Specialty Finance Companies, as compared to 12.4 times and 12.1 times for the Company in the public market and 13.8 times and 13.4 times as implied in the Merger (based in each case on IBES and the Company's management projections, respectively); for estimated 1997 earnings, the median price to earnings multiple was 10.7 times (with a range from 9.3 times to 13.8 times) for the Commercial Finance Companies and 12.6 times (with a range from 11.1 times to 17.0 times) for the Specialty Finance Companies, as compared to 10.7 times and 10.5 times for the Company in the public market and 11.8 times and 11.6 times as implied in the Merger (based in each case on IBES and the Company's management projections, respectively); (ii) the median price per share to book value per share ratio was 1.87 times for the Commercial Finance Companies (with a range from 1.23 times to 2.93 times) and 4.19 times (with a range from 2.47 times to 7.04 times) for the Specialty Finance Companies, as compared to 1.66 times for the Company in the public market and 1.88 times as implied in the Merger; (iii) the median market capitalization premium over receivables was 12.5% (with a range from 5.8% to 41.7%) for the Commercial Finance Companies and 80.7% (with a range from 18.6% to 276.6%) for the Specialty Finance Companies, as compared to 8.2% for the Company in the public market and 12.3% as implied in the Merger; (iv) the median dividend yield was 1.0% (with a range from 0.0% to 3.8%) for the Commercial Finance Companies and 0.8% (with a range from 0.4 % to 2.4%) for the Specialty Finance Companies, as compared to 1.1% for the Company; (v) the median dividend payout ratio based on estimated 1996 earnings was 13.8% (with a range from 0.0% to 36.8%) for the Commercial Finance Companies and 11.4% (with a range from 8.0% to 37.5%) for the Specialty Finance Companies, compared to 13.5% for the Company; and (vi) the median five-year estimated earnings growth rate was 17.9% (with a range from 11.5% to 20.0%) for the Commercial Finance Companies and 19.0% (with a range from 18.0% to 22.0%) for the Specialty Finance Companies, as compared to 15.8% and 20.0% for the Company (based on IBES and the Company's management projections, respectively). The operating statistics analysis showed that: (i) the median return on average assets was 2.3% (with a range from 1.5% to 4.4%) for the Commercial Finance 25 Companies and 3.2% (with a range from 1.5% to 11.8%) for the Specialty Finance Companies, as compared to 1.5% for the Company; (ii) the median return on average equity was 13.3% (with a range from 12.5% to 21.8%) for the Commercial Finance Companies and 21.4% (with a range from 17.9% to 43.3%) for the Specialty Finance Companies, as compared to 12.8% for the Company; (iii) the median net income to revenue ratio was 12.9% (with a range from 4.5% to 20.9%) for the Commercial Finance Companies and 11.6% (with a range from 9.4% to 35.9%) for the Specialty Finance Companies, as compared to 8.4% for the Company; (iv) the median operating expenses to average period end assets ratio was 2.4% (with a range from 1.8% to 4.7%) for the Commercial Finance Companies and 8.3% (with a range from 4.1% to 15.3%) for the Specialty Finance Companies, as compared to 5.3% for the Company; (v) the median debt to equity ratio was 4.0 times (with a range from 0.4 times to 6.8 times) for the Commercial Finance Companies and 3.5 times (with a range from 0.3 times to 12.3 times) for the Specialty Finance Companies, as compared to 6.2 times for the Company; and (vi) the median assets to equity ratio was 6.1 times (with a range from 4.9 times to 8.4 times) for the Commercial Finance Companies and 5.9 times for the Specialty Finance Companies (with a range from 2.6 times to 13.8 times), as compared to 8.4 times for the Company. Summary Stock Price Performance. Goldman Sachs reviewed the trading prices of the Company Common Stock since the Company became a public company and noted that the $45.00 per share to be received by the Company stockholders in the Merger exceeds the highest price at which the Company Common Stock had traded before the September 20, 1995, announcement by AT&T of its plan to divest its interest in the Company by 35.8%, and before June 5, 1996, the date of Goldman Sachs' opinion, by 1.1%. Goldman Sachs compared the increases in stock prices of the Company, FINOVA, the S&P 56 Financial Index and the S&P 500 for the period between September 19, 1995 and May 29, 1996, and for the period between August 18, 1995 and May 29, 1996. For the period commencing September 19, 1995, Company Common Stock showed an increase of 23.7%, as compared to increases of 16.0%, 12.9%, and 14.3% for FINOVA, the S&P 56 Financial Index and the S&P 500, respectively. If the price of Company Common Stock were to have increased by the same percentages as that of FINOVA, the S&P 56 Financial Index, and the S&P 500 during this period, Company Common Stock would have had a price of $38.00 per share, $36.97 per share and $37.44 per share, respectively, at the end of the period. For the period commencing August 18, 1995, Company Common Stock showed an increase of 36.1%, as compared to increases of 35.5%, 24.0% and 19.4% for FINOVA, the S&P 56 Financial Index and the S&P 500, respectively. If the price of Company Common Stock were to have increased by the same percentages as that of FINOVA, the S&P 56 Financial Index and the S&P 500, Company Common Stock would have had a price of $40.31 per share, $36.90 per share and $35.50 per share, respectively, at the end of the period. Discounted Cash Flow Analysis. Goldman Sachs reviewed a discounted cash flow analysis based on earnings estimates prepared by Company management and by IBES to determine the present value per share of Company Common Stock discounted to June 30, 1996. This present value consisted of the sum of (x) the present value of the assumed dividend stream on a share of Company Common Stock for the last six months of 1996 through the end of 2000 (for each of IBES and Company management estimates, assumed dividends were calculated based on the dividend payout ratio estimated by the Company's management) and (y) the present value of a share of Company Common Stock based on estimated 2000 earnings using terminal value multiples ranging from 10.0 times to 14.0 times, in each case using discount rates ranging from 12.5% to 17.5%. The Company only provided Goldman Sachs with earnings estimates for the years 1996 through 1998. For the analysis using Company management estimates, 1999 and 2000 earnings were assumed to have a 20% growth rate. IBES median earnings estimates were only available for 1996 and 1997. For the analysis using IBES earnings estimates, 1998 to 2000 earnings were assumed to have the IBES long-term earnings growth rate of 15.8%. The analysis indicated that, using terminal value multiples of earnings per share ranging from 10.0 times to 14.0 times, the present value of Company Common Stock (i) at a 12.5% discount rate ranged from $42.68 per share to $58.92 per share using Company management estimates and from $36.64 per share to $50.53 per share using IBES estimates; (ii) at a 15.0% discount rate ranged from $38.73 per share to $53.44 per share using Company management estimates and from $33.26 per share to $45.84 per share using IBES estimates; and (iii) at a 17.5% discount rate ranged from $35.23 per share to $48.58 per share using Company management estimates and from $30.26 per share to $41.68 per share using IBES estimates. 26 Analysis of Selected Acquisitions of Commercial Finance and Leasing Companies. Goldman Sachs reviewed and analyzed certain financial, operating, and stock market information relating to 13 selected acquisitions involving commercial finance and leasing companies from 1984 to present. These acquisitions were the acquisition of The Foothill Group, Inc. by Norwest Corp. (first announced on May 15, 1995), the acquisition of ITT Commercial Finance by Deutsche Bank AG (first announced on December 27, 1994), the acquisition of Barclays Business Credit, Inc. by Shawmut National Corp. (first announced on November 14, 1994), the acquisition of TriCon Capital Corp. by GFC Financial Corp. (first announced on May 2, 1994), the acquisition of Eastman Kodak Credit Corp. by General Electric Capital Corporation (first announced on November 23, 1992), the acquisition of The C.I.T. Group Holdings, Inc. by Dai-ichi Kangyo Bank, Limited (first announced on December 29, 1989), the acquisition of Commercial Alliance Corp. by ORIX (first announced on September 18, 1989), the acquisition of Eaton Financial Corp. by AT&T (first announced on March 16, 1989), the acquisition of Signal Capital Corp. by ITEL Corp. (first announced on September 23, 1988), the acquisition of Borg-Warner Acceptance Corp. by Transamerica Corporation (first announced on October 14, 1987), the acquisition of E.F. Hutton Credit Corporation by Chrysler Financial Corporation (first announced on August 1, 1985), the acquisition of C.I.T. Financial by Manufacturers Hanover Corporation (first announced on May 1, 1984), and the acquisition of Walter E. Heller & Company by The Fuji Bank, Limited (first announced on January 26, 1984). This analysis indicated that, for these transactions, (i) the median price to common equity multiple was 1.6 times (with a range from 1.0 to 4.9 times), as compared to 1.88 times as implied in the Merger; (ii) the median price to latest 12 months net income multiple was 12.8 times (with a range of 8.7 times to 19.4 times), as compared to 15.3 times for the Company for the 12-month period ended March 31, 1996 as implied in the Merger; and (iii) the median ratio of premium to net receivables was 13.0% (with a range of 1.0% to 31.0%), as compared to 12.3% for the Company as implied in the Merger. The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. Goldman Sachs believes that its analyses must be considered as a whole and that selecting portions of its analyses, without considering the analyses taken as a whole, would create an incomplete view of the process underlying the analyses set forth in its opinion. In addition, Goldman Sachs considered the results of all such analyses and did not assign relative weights to any of the analyses, so that the ranges of valuations resulting from any particular analysis described above should not be taken to be Goldman Sachs' view of the actual value of the Company. In performing its analysis, Goldman Sachs made numerous assumptions with respect to industry performance, general business, economic and regulatory conditions and other matters, many of which are beyond the control of the Company. The analyses performed by Goldman Sachs are not necessarily indicative of actual values, trading values or actual future results that might be achieved, all of which may be significantly more or less favorable than suggested by such analyses. No public company utilized as a comparison is identical to the Company, and none of the comparable acquisition transactions or other business combinations utilized as a comparison is identical to the transactions contemplated by the Merger Agreement. Accordingly, an analysis of publicly traded comparable companies and comparable business combinations resulting from the transactions is not mathematical; rather it involves complex considerations and judgments concerning differences in financial and operating characteristics of the comparable companies and other factors that could affect the public trading value of the comparable companies or the company or transaction to which they are being compared. In connection with the analyses, Goldman Sachs made, and were provided estimates and forecasts by the Company's management based upon, numerous assumptions with respect to industry performance, general business and economic conditions and other matters, many of which are beyond the control of the Company. Analyses based upon forecasts of future results are not necessarily indicative of actual future results, which may be significantly more or less favorable than suggested by such analyses. Because such analyses are inherently subject to uncertainty, being based upon numerous factors or events beyond the control of the Company or Goldman Sachs, neither the Company nor Goldman Sachs assumes responsibility if future results or actual values are materially different from these forecasts or assumptions. Such analyses were prepared solely as part of Goldman Sachs' analysis of the fairness of the Merger Consideration to be received in the Merger by the Company's stockholders (other than AT&T and its affiliates) and were provided to the Board and the Special Committee. The analyses do 27 not purport to be appraisals or to reflect the prices at which a company might be sold. The Board and the Special Committee placed no limits on the scope of the analysis performed, or opinions expressed, by Goldman Sachs. Goldman Sachs is an internationally recognized investment banking firm and, as part of its investment banking business, is continually engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, negotiated underwritings, competitive biddings, secondary distributions of listed and unlisted securities, private placements and valuations for estate, corporate and other purposes. Goldman Sachs is familiar with the Company, having acted as its financial advisor in connection with, and having participated in certain of the negotiations leading to, the Merger Agreement. Goldman Sachs also provided and is providing investment banking services to AT&T and its affiliates, including having acted as a joint global coordinator of the $3 billion initial public offering of the common stock of Lucent. Goldman Sachs may provide investment banking services in the future to both the Company and AT&T and their respective affiliates. On April 30, 1996, the Company announced that AT&T delivered a letter to the Company requesting it to register shares held by AT&T for sale in a secondary public offering as an alternative to the transactions contemplated by the Merger Agreement. Goldman Sachs had no role in advising AT&T in respect of this alternative transaction. Goldman Sachs, as a full service securities firm, may from time to time effect transactions, for its own account or the account of customers, and hold positions in securities or options on securities of the Company. Pursuant to the letter agreement dated January 11, 1996 (the 'Engagement Letter'), the Company engaged Goldman Sachs to act as financial advisor to the Board and the Special Committee with respect to a possible private sale of all or a portion of the stock or assets of the Company. Pursuant to the terms of the Engagement Letter, the Company has agreed to pay Goldman Sachs upon consummation of a transaction a fee based on an increasing percentage determined by the aggregate consideration to be received by stockholders of Company Common Stock in the transaction, which fee will be equal to 0.3% of the aggregate consideration in the Merger, amounting to a total fee of approximately $6.5 million. In addition, the Company has agreed to reimburse Goldman Sachs for its reasonable out-of-pocket expenses, including the reasonable fees and disbursements of its attorneys, plus any sales, use or similar taxes arising in connection with its engagement and to indemnify it and certain related persons against certain liabilities, including certain liabilities under the federal securities laws, arising out of its engagement. INTERESTS OF CERTAIN PERSONS IN THE MERGER INTERESTS IN COMPANY COMMON STOCK AND OPTIONS As of August 5, 1996, executive officers and directors of the Company collectively beneficially owned 357,666 shares of Company Common Stock (excluding shares issuable upon exercise of Options) and held Options to purchase 755,502 shares of Company Common Stock, and, but for the Management Share Exchange and the Management Option Exchange, would be entitled to receive upon consummation of the Merger an aggregate of up to approximately (i) $16,094,970 in cash in respect of the conversion of such shares in the Merger and (ii) $14,388,051 in cash in respect of the cancellation of such Options (in each case excluding any interest which may be payable on the $45 per share purchase price). In addition, as of August 5, 1996, the Management Offerees collectively beneficially owned approximately 895,000 shares of Company Common Stock (excluding shares issuable upon exercise of Options) and held Options to purchase 1,578,051 shares of Company Common Stock, and but for the Management Share Exchange and Management Option Reinvestment referred to below, would be entitled to receive upon consummation of the Merger an aggregate of up to approximately (x) $40 million in cash in respect of such shares of Company Common Stock and (y) $29 million in cash in respect of the cancellation of such Options (in each case excluding any interest which may be payable on the $45 per share purchase price). As described below, all or a portion of such shares of Company Common Stock may be used by the Management Offerees to acquire shares of Merger Sub Common Stock and thereby shares of Surviving Corporation Common Stock, and all or a portion of the proceeds 28 from such Options may be used to acquire directly shares of Surviving Corporation Common Stock. In addition, it is anticipated that all other participants in the Company's Option plans, excluding the Management Offerees, will receive an aggregate of approximately $14,522,037 (excluding any interest which may be payable on the $45 per share purchase price) in respect of the cancellation of such Options and any related stock appreciation rights. ARRANGEMENTS BETWEEN MANAGEMENT AND MERGER SUB Investment in Merger Sub Common Stock and Merger Sub Options. As an additional incentive for management of the Company to continue their employment with the Surviving Corporation following the Merger and to provide them with a stake in the future operations of the Surviving Corporation, Merger Sub intends to offer the Management Offerees the opportunity to obtain shares, and options on shares, of Surviving Corporation Common Stock upon consummation of the Merger. The Management Offerees are expected to include Thomas C. Wajnert (Chairman of the Board and Chief Executive Officer of the Company) and some or all of the other 30 members of the Company's Corporate Leadership Team and Leadership Forum. The Management Offerees are expected to be furnished with a private placement memorandum, including a form of subscription agreement and other documentation, pursuant to which: (i) The Management Offerees will be offered the opportunity to participate in the Management Share Exchange, in which immediately prior to the Effective Time, up to an aggregate of approximately 883,419 shares of Company Company Stock (or approximately $40 million in value based on the $45 per share purchase price to which such holders would otherwise be entitled in connection with the Merger) currently held by such Management Offerees, may be exchanged for approximately $40 million of newly issued shares of Merger Sub Common Stock (which will become shares of Surviving Corporation Common Stock upon consummation of the Merger), based on the same price being paid by Holdings for the shares of Merger Sub Common Stock being purchased by it (the 'Merger Sub Share Price'). The shares of Company Common Stock held by the Management Offerees were acquired pursuant to either the Company's Leveraged Stock Purchase Plan or its Long Term Incentive Plan, pursuant to which the Company loaned the Management Offerees approximately 88% to 98% of the purchase price of such shares. The Company would agree with each Management Offeree who accepts the Management Share Exchange (each, a Management Investor) to extend the terms of their loans to the year 2006 on terms substantially identical to those currently in place, provided, however, that the interest rate on such loans will be the lowest permissible rate sufficient to avoid imputed income to the Management Investors and the Surviving Corporation will defer interest payments on such loans. By virtue of the Management Share Exchange, the Management Offerees as a group would have the opportunity to obtain approximately 4.4% of the total outstanding Surviving Corporation Common Stock (4.2% on a fully diluted basis assuming Management Investors elect to reinvest all of the proceeds from their Management Options pursuant to the Management Option Reinvestment described below) immediately following the Merger. (ii) Each Management Investor will be offered the opportunity, at his or her individual discretion, to participate in the Management Option Reinvestment in which some or all of the after-tax proceeds of the cash-out of Management Options held by such Management Investor may be invested in additional shares of Surviving Corporation Common Stock at the Merger Sub Share Price immediately following the Effective Time. As of April 13, 1996, the Management Offerees held Management Options exercisable for an aggregate of 1,578,051 shares of Company Common Stock. Based on the average exercise price of such Management Options as of such date and based on the $45 per share purchase price), the Management Offerees would be entitled to in the aggregate approximately $29 million on a pre-tax basis under the terms of the Merger Agreement in respect of such Management Options. The after-tax proceeds are expected to enable the Management Investors to obtain (assuming all Management Offerees were to participate) up to an additional 1.7% of the total outstanding Surviving Corporation Common Stock on a fully diluted basis (in each case assuming that Holdings and the Management Investors invest an aggregate of $900 million in Merger Sub Common Stock before giving effect to the Management Option Reinvestment) immediately following the Merger. 29 The subscription agreements will provide for certain restrictions on each Management Investor's right to transfer shares of Surviving Corporation Common Stock, but related agreements with Nomura Europe will provide for certain put rights with respect to such shares in favor of the Management Investor and call rights with respect to such shares in favor of Nomura Europe and NIplc. The agreements with Nomura Europe will also provide for certain 'drag-along' rights with respect to such shares exercisable by Nomura Europe and its affiliates in connection with certain direct or indirect sales of its shares of Surviving Corporation Common Stock, as well as 'tag along' rights in favor of the Management Investors in certain circumstances in connection with certain direct or indirect private sales by Holdings of its shares of Surviving Corporation Common Stock. The subscription agreements will also provide the Management Investors with certain 'piggyback' registration rights in certain circumstances in connection with certain public sales by Holdings of its shares of Surviving Corporation Common Stock. Grants of New Options on Surviving Corporation Common Stock. In addition, it is currently anticipated that, subject to ongoing discussions among Merger Sub and certain members of management, as soon as practicable following the closing of the Merger, additional New Options to purchase shares of Surviving Corporation Common Stock will be granted to certain of the Management Investors giving them the right to purchase up to an additional $39 million of Surviving Corporation Common Stock (based on the Merger Sub Share Price), representing approximately 4.1% of the total outstanding Surviving Corporation Common Stock (on a fully diluted basis assuming all Management Offerees elect to participate in the Management Share Exchange and the Management Option Reinvestment) immediately following the Merger. Recommendations regarding the grants of New Options will be made by the Compensation Committee of the Board of Directors of the Surviving Corporation following discussions with members of the Company's Corporate Leadership Team. The New Options will generally vest with respect to 20% of the underlying shares each year during a five-year period after the grant date. The New Options, however, will not be exercisable for shares of Surviving Corporation Common Stock in any circumstances except that vested New Options may be exercised (i) following certain events that constitute a change of control of the Surviving Corporation and (ii) following a public offering of Surviving Corporation Common Stock; provided that in such latter event the number of shares for which New Options may be exercised will be limited to that percentage of the total number of shares underlying all New Options that have been granted to the Management Investor equal to twice the percentage of all outstanding shares of Surviving Corporation Common Stock that has been sold in public offerings. In addition, the exercisability of New Options held by Management Investors who at the relevant time are or formerly were members of the Company's Corporate Leadership Team will be generally conditioned on the Surviving Corporation having maintained certain investment grade ratings on its short-term and long-term debt. The New Options will expire upon the earliest of (i) the eleventh anniversary of the date of grant (or, if any New Options are not then exercisable, then, with respect to such New Options only, such later date that is 60 days following the date on which such New Options become exercisable), (ii) the date of cessation of the related Management Investor's employment for any reason other than death or permanent disability, normal retirement, termination without cause or resignation for good reason and (iii) 60 days after termination without cause or resignation for good reason (or, if any New Options are not then exercisable, then, with respect to such New Options only, such later date that is 60 days after the first date that both (a) such New Options are exercisable and (b) there are no applicable transfer restrictions on the shares underlying such New Options). All unvested New Options will terminate upon any cessation of the related Management Investor's employment. Other Share Options. Holdings also expects to establish additional equity based incentive programs for the benefit of employees ('Members') of the Surviving Corporation. Holdings expects to grant, over a five-year period following the Effective Time, New Options to Members of the Surviving Corporation (possibly including certain of the Management Offerees) to purchase shares of Surviving Corporation Common Stock having an aggregate fair market value of up to $64 million on the applicable date of grant. Such New Options would represent approximately 6.4% of the total outstanding Surviving Corporation Common Stock (on a fully diluted basis assuming a fair market value of $45 per share and that no Management Investors elect to participate in the Management Option Reinvestment) 30 immediately prior to the Merger, and would be available for grant as follows: New Options to purchase shares of Surviving Corporation Common Stock having a fair market value of up to $19.2 million on the date of grant would be granted as soon as practicable following the closing of the Merger; and New Options to purchase shares of Surviving Corporation Common Stock having a fair market value of up to $11.2 million on the date of grant would be granted on each of the next four dates following the first anniversary of the closing of the Merger on which annual bonuses are payable to Members in accordance with past practice. In addition, the Board of Directors of the Surviving Corporation may also consider granting additional New Options to Members of the Surviving Corporation (possibly including certain of the Management Offerees) from time to time after 1997 to purchase Shares of Surviving Corporation Common Stock having a fair market value of up to $13 million on the date of grant. As a result of the Management Share Exchange, the Management Option Reinvestment and the grant of New Options, immediately after the Effective Time, the Management Offerees could own or have the right to acquire upon exercise of their New Options (assuming all Management Offerees were to participate in both the Management Share Exchange and the Management Option Reinvestment and that the New Options become exercisable prior to their termination) up to approximately 9.9% of the outstanding Surviving Corporation Common Stock on a fully diluted basis. This opportunity to obtain a continuing interest in the equity of the Surviving Corporation may have presented management with actual or potential conflicts of interest in connection with the transactions contemplated by the Merger. The Board and the Special Committee were aware of this and considered it among the other factors described under 'Special Factors -- Approval and Fairness of the Merger; Purposes of and Reasons of the Merger.' Directorships; Employment Agreements. Subsequent to the Merger, Messrs. Wajnert, Rothman and Van Sickle are expected to become directors of the Surviving Corporation. Hiromi Yamaji, Guy Hands, John Appleton, Jeff Nash, David Banks, James Babcock, one additional director selected by NIplc and an independent director to be determined, who collectively will be the directors of Merger Sub immediately prior to the Effective Time, are expected to be the remaining initial directors of Surviving Corporation. In addition, it is currently anticipated that, effective upon the consummation of the Merger, the Surviving Corporation may enter into employment agreements with Messrs. Wajnert, Rothman and Van Sickle. The term of such agreements have not yet been reached. COMPANY BENEFIT PLANS Certain members of management (including the Management Offerees) are participants in employee benefit plans of the Company which, in connection with a change in control of the Company, will vest or pay benefits or awards or provide the opportunity to receive future benefits or awards under certain circumstances. Under the Company's Executive Benefit Plan (the 'EBP'), the accrued retirement benefits for Ms. Morey and Messrs. Wajnert, Dwyer, McCarthy, Rothman, Van Sickle and Andrews vest upon a 'Change in Control' (as defined in the EBP). The EBP provides for a maximum annual retirement benefit of 40% of a participant's 'Final Annual Pay' (as defined in the EBP), less retirement benefits provided under all other qualified and non-qualified sources from both AT&T and the Company. On December 14, 1995, a trust was established and funded with $10,651,000, to secure benefits under the EBP. The SPIP Amendments provide that, upon the consummation of the Merger, the Company shall pay to each participant for each pending performance period under the SPIP, an accelerated award payout equal to 100% of such participant's maximum payout for such period. Additionally, the SPIP Amendments provide, upon consummation of the Merger, for 100% maximum payout to officers with respect to the SPIP performance period which would have commenced after the Effective Time (with payment immediately following the Effective Time), provided that such payment will be made to those officers of the Company who are not members of the Company's Leadership Forum only if such officers, Holdings and the Surviving Corporation agree to an amendment of the definition of 'Qualifying 31 Termination' under the Leadership Severance Plan or Member Severance Plan, as applicable. See 'The Merger Agreement -- SPIP Amendments.' Under the Company's Leadership Severance Plan, in the event of a 'Qualifying Termination' (as defined in the Leadership Severance Plan and as amended described above for certain participants) of employment in connection with a change in control of the Company, each of the Company's executive officers would receive severance benefits equal to (i) the greater of (a) two weeks' compensation for each full year of continuous service and (b) 200% of Final Annual Pay and (ii) 135% of the premium which would be required to maintain 'COBRA' continuing medical and dental coverage for 24 months. Stockholder approval of the Merger Agreement constituted a change in control of the Company under the Leadership Severance Plan. Additional benefits upon severance include continued basic life insurance and supplemental life insurance (at the executive's cost) for 24 months. By executing a release of claims against the Company, the officer may receive an enhanced severance payment equal to 20% of the severance payment set forth in clause (i) above. If any payments from the Company under the Leadership Severance Plan or otherwise (other than with respect to 'Strategic Members') would be subject to an excise tax under Section 4999 of the Code, then the officer would be entitled to receive an additional payment such that such officer would retain an amount equal to the amount he or she would have received if the excise tax had not applied. In addition to the foregoing, it is anticipated that the Surviving Corporation would make available, following the consummation of the Merger, to some or all of the participants in the Leadership Severance Plan an aggregate payment of up to approximately $5 million (assuming all such participants agree) to induce such participants to continue their employment with the Company for specified periods of time and to modify certain rights under such plan to receive severance payments in connection with a Qualifying Termination based upon a constructive termination of employment. If the employment of Messrs. Wajnert, Rothman, Van Sickle and McCarthy, and Ms. Morey were to be terminated pursuant to a Qualifying Termination immediately following the Effective Time, they would receive severance payments equal to $1,880,118, $1,095,132, $999,544, $861,887, and $786,586, respectively. All executive officers as a group would receive $6,295,736 as severance upon such a termination of employment. The foregoing amounts do not include the enhanced severance amounts payable as described above to any such officer upon execution by such officer of a release of claims against the Company. With respect to the Company's Senior Executive Annual Incentive Plan (the 'SEAIP') and Annual Incentive Plan, pursuant to the Merger Agreement, officers will receive at least their target bonus for 1996. If an officer has a Qualifying Termination of employment prior to the end of a plan year in connection with a change in control, such officer will receive the greater of 110% of his target award or his bonus award for the prior plan year, unless such Qualifying Termination occurs after the plan year and the actual bonus award would be greater. If the employment of Messrs. Wajnert, Rothman, Van Sickle, and McCarthy, and Ms. Morey were to be terminated pursuant to a Qualifying Termination immediately following the Effective Time, they would be entitled to payments under the SEAIP equal to $677,808, $376,381, $346,900, $337,283 and $266,568, respectively. All executive officers as a group would receive $2,267,742 under the SEAIP upon such a termination of employment. OTHER MATTERS The Merger Agreement provides that Holdings will cause the Surviving Corporation to continue in effect through December 31, 1997, certain of the Company's compensation and retirement benefit plans without any adverse amendment or modification. The Merger Agreement further provides that Holdings will cause the Surviving Corporation to provide through December 31, 1997, welfare benefit and insurance plans or programs that are no less favorable in the aggregate than those provided by the Company immediately prior to the Effective Time. Pursuant to the Merger Agreement, for six years after the Effective Time, Holdings will indemnify and hold harmless, to the fullest extent permitted under applicable law, each present and former director, officer and employee of the Company and its subsidiaries against any costs or expenses, including reasonable attorneys' fees, judgments, fines, losses, claims, damages or liabilities incurred in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, 32 administrative or investigative, arising out of or pertaining to matters existing or occurring at or prior to the Effective Time, including the transactions contemplated by the Merger Agreement. The Merger Agreement also provides, in general, that AT&T shall maintain in place its current directors' and officers' liability insurance with respect to actions prior to the Merger until the Effective Time. After the Effective Time, the Surviving Corporation will establish officers' and directors' liability insurance for the Company's and its subsidiaries' officers and directors substantially similar to the insurance currently maintained for a period of six years so long as the annual premium is not in excess of $750,000 or, if the cost does exceed that amount, as much insurance as can be purchased for that amount. NIplc has guaranteed Holdings' performance of these obligations pursuant to a letter agreement dated the date of the Merger Agreement and filed as an exhibit to the Schedule 13E-3 referred to under 'Schedule 13E-3 Statement.' ARRANGEMENTS WITH AT&T Ownership of Company Common Stock; Affiliation of Company Directors with AT&T. The AT&T Subsidiaries, each a wholly-owned subsidiary of AT&T, collectively own directly 40,250,000 shares of Company Common Stock, representing approximately 86% of the total number of shares of Company Common Stock outstanding. AT&T does not own any Company Common Stock directly. To the best knowledge of AT&T, no director or executive officer of AT&T beneficially owns any shares of Company Common Stock, except as set forth in Annex E hereto. Each of the AT&T Subsidiaries has the sole power to vote, or to direct the vote, and the sole power to dispose of, or to direct the disposition of, shares of Company Common Stock owned by it. Because it controls the AT&T Subsidiaries, AT&T exercises the indirect power to vote and dispose of such shares of Company Common Stock. No person other than the AT&T Subsidiaries has the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, the shares of Company Common Stock owned by them. Six of the eleven members of the Board are employees of AT&T or its subsidiaries. On June 5, 1996, the date of the Merger Agreement, upon the recommendation of the Special Committee, the Board approved the Merger Agreement by the unanimous vote of all directors present (other than Mr. Wajnert, who did not participate in the deliberations or vote on the Merger Agreement in light of his anticipated participation in the transaction), and the AT&T Subsidiaries executed the Merger Agreement Stockholders' Consent, dated June 5, 1996, pursuant to Section 228 of the DGCL, in which they adopted a resolution to approve and adopt the Merger Agreement. On August 19, 1996, the Board of Directors of the Company (acting without the participation or vote of Mr. Wajnert), upon the unanimous recommendation of the Special Committee, adopted and approved the Amendment. The Amendment was thereafter executed as of August 20, 1996 and delivered by the Company, AT&T, Holdings and Merger Sub. See ' -- Background of the Merger' and ' -- Approval and Fairness of the Merger; Purposes of and Reasons for the Merger' and 'The Merger Agreement -- Conditions to the Merger.' On June 28, 1996 in order to effectuate the terms of the Merger Agreement, the AT&T Subsidiaries executed the SPIP Amendments Stockholders' Consent. Agreements between the Company and AT&T. The Company (or subsidiaries of the Company) and AT&T (or subsidiaries of AT&T) are parties to various agreements, including the Operating Agreement, the Intercompany Agreement and the License Agreement, dated June 25, 1993, between AT&T and the Company (the 'License Agreement'). In addition, in connection with the initial public offering of shares of AT&T's subsidiary, Lucent, and the proposed distribution by AT&T to its stockholders of its interests in Lucent and in its wholly-owned subsidiary NCR, the Company entered into the comparable Operating Agreements with each of Lucent and NCR as well as letter agreements extending the applicability of certain terms of AT&T's Intercompany Agreement and License Agreement to Lucent and NCR. See 'Incorporation of Certain Documents by Reference.' Under the Intercompany Agreement, AT&T had agreed, among other things, that it would own not less than 9,370,344 shares of Company Common Stock until August 4, 1998. In connection with entering into the Merger Agreement, the Company, acting upon the approval of the Special Committee, 33 entered into an amendment to the Intercompany Agreement with AT&T waiving such requirement solely in connection with the Merger. See ' -- Background of the Merger.' In the Merger Agreement, AT&T and the Company agreed that, effective immediately following the consummation of the Merger, they would amend the Operating Agreement and the License Agreement between AT&T and the Company in certain respects requested by Holdings and Merger Sub. See 'The Merger Agreement -- Additional Agreements.' The Merger Agreement provides that, subject to the terms and conditions set forth therein, all tax allocation and tax sharing agreements and arrangements between AT&T and the Company shall be terminated as of the date of the consummation of the Merger and upon payment of all amounts due thereunder, and that at or prior to the consummation of the Merger, and as a condition to AT&T's obligation to effect the consummation of the Merger, the Company will pay AT&T $35 million, subject to adjustment, in respect of taxes accrued on the Company's balance sheet through the date of the consummation of the Merger, in consideration for which AT&T will indemnify Holdings, the Company and the Company's subsidiaries against certain pre-closing combined or consolidated tax liabilities. See 'The Merger Agreement -- Tax Matters.' Pursuant to the tax allocation and tax sharing agreements between the Company and AT&T, AT&T has advanced interest-free loans to the Company in consideration of tax benefits received by AT&T in connection with certain intercompany transactions between AT&T and the Company. Upon consummation of the Merger, these agreements will be terminated and the Company will be obliged to repay such loans, which are expected to amount to approximately $249 million at that time. PLANS FOR THE COMPANY AFTER THE MERGER Except as described herein, Holdings and its affiliates currently have no plans or proposals which relate to or would result in an extraordinary corporate transaction involving the Surviving Corporation or any of its subsidiaries or any material change in the Company's present corporate structure, business or composition of its operating management. Holdings does not currently plan to replace any of the Company's management personnel. Holdings intends that the Company's employees will continue to receive compensation and benefits which, in the aggregate, are not materially less favorable than those presently received. Holdings does not anticipate any changes in the Company's Board prior to the Merger; however, as contemplated by the Merger Agreement, Merger Sub's then existing Board of Directors will replace the Board at the Effective Time. Holdings anticipates that, subsequent to the Merger, significant changes in the Company's financing strategy will be implemented. In particular, Holdings anticipates that approximately one-third of the Surviving Corporation's annual funding needs will be provided through off-balance sheet securitization transactions. Holdings anticipates that the cost of the Surviving Corporation's on-balance sheet financing will increase by virtue of its disaffiliation from AT&T and its lower debt ratings. Except in connection with the securitization transactions to be implemented upon or as soon as practicable following the closing of the Merger and the Surviving Corporation's program of ongoing securitization transactions, Holdings has no current plans to sell any substantial assets of the Surviving Corporation otherwise than in the ordinary course of the Company's business. However, following the closing of the Merger, Holdings may review opportunities from time to time to dispose of assets of the Surviving Corporation depending upon market conditions and other circumstances at such time. In addition, the Board of Directors and management of the Surviving Corporation will continue to evaluate the Surviving Corporation's corporate structure, business, management composition, operations, organization and other matters after the Merger and make such changes as are deemed appropriate. As a result of the consummation of the Merger, the terms of certain debt obligations of the Company and its subsidiaries (including certain debt owed to AT&T) would permit acceleration of the maturity of such obligations. The Company and Holdings expect to enter into negotiations with the holders of these obligations to obtain waivers or amendments of such provisions and/or to refinance such obligations in connection with the consummation of the Merger. The Company believes that the maximum amount of financing necessary to refinance all such obligations would be approximately 34 $185.3 million, which amount is reflected in the discussion of sources and uses of funds in 'Financing of the Merger.' Upon consummation of the Merger, it is anticipated that NIplc will receive certain fees from, and be reimbursed for certain expenses by, the Surviving Corporation in connection with the transactions contemplated by the Merger Agreement, including the Financing (as defined herein). Following the Effective Time, it is anticipated that NIplc and certain of its affiliates will receive customary banking and other fees from the Surviving Corporation from time to time for services rendered to the Surviving Corporation and its affiliates, including, without limitation, securitization transactions, acquisitions, dispositions and other transactions. REGULATORY APPROVALS In connection with the consummation of the Merger, each of the Company and Merger Sub and their respective affiliates will need to comply with and receive approvals from various federal, state, local and foreign governmental bodies and regulatory agencies, including (i) in the case of the Company and its affiliates, HSR Act filings with the Antitrust Division and the FTC, antitrust and other filings and approvals in connection with certain of the Company's foreign operations and filings and approvals for the Company's business operations in the United States, including approvals from the Small Business Administration (the 'SBA') for the Company's SBA lending activities, and (ii) in the case of Merger Sub and its affiliates, HSR Act filings with the Antitrust Division and the FTC and additional antitrust and other filings with and approvals from certain foreign jurisdictions. The HSR Act waiting period was terminated by order of the FTC on August 9, 1996. Each of the Company and Merger Sub believes that it will timely make all other necessary filings and receive all other necessary approvals which, in each case, are required in connection with the consummation of the Merger. See 'Merger Agreement -- Conditions to the Merger.' ACCOUNTING TREATMENT FOR THE MERGER The Merger will be accounted for by the Company as a recapitalization in which Surviving Corporation Common Stock will be issued to Holdings and currently outstanding shares of Company Common Stock will be retired in a treasury stock transaction. Accordingly, the assets and liabilities of the Company will continue to be accounted for on a historical cost basis. As a result of the Section 338(h)(10) election, the Company's deferred tax position will change from a net liability to a net asset, with a corresponding increase in stockholders' equity. CERTAIN FEDERAL INCOME TAX CONSEQUENCES The following discussion of the material United States federal income tax consequences of the Merger is for general information only. It is based on the Code, existing and proposed Treasury regulations and judicial and administrative determinations, all of which are subject to change at any time, possibly on a retroactive basis. It does not discuss the state, local or foreign tax consequences of the Merger, nor does it discuss tax consequences to categories of stockholders that are subject to special rules, such as foreign persons, tax-exempt organizations, insurance companies, banks, persons who received their Company Common Stock as compensation and dealers in stock and securities. It does not address the tax consequences to AT&T or its subsidiaries, including the AT&T Subsidiaries. Tax consequences may vary depending on the particular status of an investor. Purchase of Shares. The receipt of cash by a stockholder of the Company pursuant to the Merger or the exercise of dissenters' rights of appraisal will be a taxable event for federal income tax purposes and may also be a taxable transaction under applicable state, local, foreign or other tax laws. In general, and subject to the discussion below, a stockholder will recognize gain or loss equal to the difference, if any, between the stockholder's adjusted basis in his or her shares and the Merger Consideration or amounts received pursuant to the exercise of dissenters' rights. Such gain or loss will be capital gain or loss, provided that the shares are held as capital assets, and will be long-term capital gain or loss if the stockholder's holding period for such shares exceeds one year. The treatment of any amounts payable (in addition to the $45 per share purchase price) as a result of the postponement of the closing is not entirely clear under existing law. It is possible that the Internal Revenue Service would seek to treat these amounts as ordinary income rather than as amounts realized in respect of the sale of the shares. Under current law, net capital gains of individuals are, under certain circumstances, taxed at lower rates than items of ordinary income. The deductibility of capital losses is subject to limitations. Stockholders should consult their own tax advisors regarding the treatment of such additional amounts. 35 Backup Withholding and Information Reporting. In general, information reporting requirements will apply to payments of cash to a non-corporate stockholder of the Company pursuant to the Merger or pursuant to the exercise of dissenters' rights of appraisal, and 'backup withholding' at a rate of 31% will apply to such payments if the stockholder fails to provide an accurate taxpayer identification number or is informed by the Internal Revenue Service that such person is subject to backup withholding. EACH STOCKHOLDER SHOULD CONSULT HIS OR HER OWN TAX ADVISOR WITH RESPECT TO THE FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER IN HIS OR HER OWN INDIVIDUAL CIRCUMSTANCES AND WITH RESPECT TO THE STATE, LOCAL, FOREIGN OR OTHER TAX CONSEQUENCES OF THE MERGER. FURTHER, ANY STOCKHOLDER WHO IS A CITIZEN OR RESIDENT OF A COUNTRY OTHER THAN THE UNITED STATES SHOULD CONSULT HIS OR HER OWN TAX ADVISOR WITH RESPECT TO THE TAX TREATMENT IN SUCH COUNTRY OF THE MERGER AND WITH RESPECT TO THE QUESTION OF WHETHER TAX CONSEQUENCES OTHER THAN THOSE DESCRIBED ABOVE MAY APPLY BY REASON OF THE PROVISIONS OF THE CODE APPLICABLE TO FOREIGN PERSONS OR THE PROVISIONS OF ANY TAX TREATY APPLICABLE TO SUCH STOCKHOLDER. CERTAIN PROJECTIONS GENERAL The Company made available certain projected financial information to potential acquirors, including NIplc, and to the financial advisor to the Board and the Special Committee, Goldman Sachs, in connection with their consideration of possible bids to acquire the Company. See ' -- Background of the Merger.' The Company does not publicly disclose projected financial information as to future revenues, earnings or cash flows. The projections, which are summarized below, were not prepared in compliance with published guidelines of the SEC or the American Institute of Certified Public Accountants regarding forward-looking information or generally accepted accounting principles. The following summary is being provided solely because the projections were provided to potential acquirors and Goldman Sachs. The projections were based upon a variety of operating assumptions, as described below. The probable outcome of all of such assumptions is difficult to predict with certainty and, in many cases, is beyond the control of the Company. While the Company's management felt that such assumptions were reasonable when made, they may no longer be accurate. The projections were prepared in the fourth quarter of 1995 and have not been revised to reflect, among other things, the terms of the proposed Merger (or any financing or refinancing to be effected in connection therewith, including the sales of receivables referred to in ' -- Plans for the Company After the Merger' and 'Financing of the Merger') or any actual financial results of the Company since such date, revised prospects for the Company's businesses, changes in general business and economic conditions or any other transactions or events that have occurred or that may occur and that were not anticipated at the time such projections were prepared. The projections were not prepared with a view to public disclosure or compliance with any published guidelines of the SEC. The projections are not necessarily indicative of current values or future performance, which may be significantly more favorable or less favorable than as set forth below, and should not be regarded as representations that such values or performances will be achieved as indicated or at all. There can be no assurance that the results of operations reflected in any of the projections will be realized or that actual results will not be significantly different from those projected. Because of these inherent uncertainties, none of the Company, Holdings, Merger Sub or any other person assumes any responsibility for the accuracy of the projections, and the inclusion of a summary of the projected information in this Information Statement should not be regarded as an indication that the Company, Holdings, or Merger Sub considers such projected outcomes to be accurate or reliable. The Company's independent accountants did not examine, compile or apply any procedures to the projections and have not examined, compiled or applied any procedures to the following summary of 36 the projections and therefore express no opinion or any other form of assurance with respect to such summary and accordingly assume no responsibility for such summary. ASSUMPTIONS FOR PROJECTIONS The following projections necessarily make a number of assumptions, including the following material assumptions: Macro-Economic Assumptions. The projections assume that the United States economy remains stable with modestly slower growth. In international markets, the Company expects continued stable growth in its core markets of Canada, Europe, Hong Kong, Australia and a return to positive growth in Mexico. Interest Rate Assumptions. The Company projects United States interest rates to increase over the planning horizon. One-year Treasury rates are expected to increase from 5.45% in 1995, to 6.27% in 1996 and 6.50% in 1997, and five-year Treasuries are expected to increase from 5.92% in 1995, 6.78% in 1996, and 7.05% in 1997. Foreign exchange and interest rate relationships are expected to remain relatively stable. Capital Structure Assumptions. The projections assume that the Company deconsolidated from AT&T as of January 1, 1996, with two primary effects: (i) a 10 basis point increase in the Company's incremental cost of debt, representing the Company's view at the time the projections were prepared of the potential reaction of the debt markets to the disaffiliation with AT&T, and (ii) the loss of interest-free loans from AT&T in amounts equal to the deferral of taxes on the Company's gross profit that would have been payable on the purchase and lease by the Company of products manufactured by AT&T and its subsidiaries but for the fact that the Company is part of AT&T's consolidated tax group (the 'Gross Profit Tax Deferral'). The projections assume that all equity required by the business is generated internally and no new equity is raised. Other Plan Assumptions. The projections assume no new acquisitions or significant new market entries by the Company and that the Company continues as an independent, publicly-traded entity. If the Company had ceased to be a public company as of January 1, 1996, management estimated the Company would save $4 million to $5 million in its 1996 budget. These savings include, among other items, the elimination of (i) printing an annual report; (ii) holding an annual stockholders' meeting; (iii) an independent Board of Directors; and (iv) an investor relations group. The financial projections assume a continuation of the Company's current accounting policies. The Company's projected volume growth is constrained by its equity base. If the Company had access to greater equity or could deploy higher leverage, management believed that volume could be increased by 15% above those levels in the projections. The tax impacts of an election under Section 338(h)(10) of the Code were not reflected in the financial projections. SUMMARY OF FINANCIAL PROJECTIONS
PROJECTED AT OR FOR THE YEAR ENDING DECEMBER 31, --------------------------------------------- 1995E 1996E 1997E 1998E ------ ------- ------- ------- (DOLLARS IN MILLIONS) Total revenue................................................ $1,585 $ 1,910 $ 2,280 $ 2,667 Pre-tax income............................................... 193 245 289 353 Net income................................................... 116 153 183 226 Total assets................................................. 9,669 10,657 11,908 13,484 Total liabilities............................................ 8,562 9,411 10,508 11,888 Stockholders' equity......................................... 1,107(a) 1,246 1,400 1,596
- ------------ (a) The actual equity projected for December 31, 1995 is $1,117 million. The balance sheet has been restated as if the Gross Profit Tax Deferral was lost on January 1, 1995 and therefore, the lower net income reduces equity by $10 million. 37 THE MERGER AGREEMENT On June 5, 1996, the Company, AT&T, Holdings and Merger Sub entered into the Merger Agreement. The Merger Agreement was amended by the Amendment on August 20, 1996. See ' -- First Amendment to the Merger Agreement.' The following discussion of the Merger Agreement and the Merger does not purport to be complete and is qualified in its entirety by reference to the text of the Merger Agreement, a copy of which has been attached as Annex A hereto and is incorporated herein by reference. Defined terms used below and not defined herein have the respective meanings assigned to those terms in the Merger Agreement. All references in this section to the Merger Agreement refer to the Merger Agreement as amended by the Amendment, unless noted otherwise. GENERAL The Merger Agreement provides that, subject to the terms and conditions contained therein, at the Effective Time, Merger Sub will be merged with and into the Company and the separate corporate existence of Merger Sub will cease. The Company will be the Surviving Corporation in the Merger and the separate corporate existence of the Company with all its rights, privileges, immunities, powers and franchises will continue to be governed by the laws of the State of Delaware, unaffected by the Merger, except that the Certificate of Incorporation of Merger Sub in effect at the Effective Time will be the Certificate of Incorporation of the Surviving Corporation and the By-Laws of Merger Sub in effect at the Effective Time shall be the By-Laws of the Surviving Corporation. The directors of Merger Sub and the officers of the Company at the Effective Time will, from and after the Effective Time, be the directors and officers, respectively, of the Surviving Corporation until their successors have been duly elected or appointed and qualified or until their earlier death, resignation or removal in accordance with the Surviving Corporation's Certificate of Incorporation and By-Laws. Pursuant to the Merger Agreement, at the Effective Time, all shares of Company Common Stock will be cancelled and retired and will cease to exist, and each certificate representing shares of Company Common Stock (a 'Certificate') (other than Excluded Shares) will thereafter represent only the right to the Merger Consideration for such shares upon the surrender of such Certificate. At the Effective Time, each share of Merger Sub Common Stock issued and outstanding immediately prior to the Effective Time will, by virtue of the Merger and without any action on the part of Merger Sub or the holders of such shares, be converted into one share of Surviving Corporation Common Stock. EFFECTIVE TIME The Effective Time will be the time and date of the filing of the Certificate of Merger with the Secretary of State of Delaware in accordance with Section 251 of the DGCL. In no event will the Effective Time occur prior to October 1, 1996. PAYMENT OF THE MERGER CONSIDERATION As provided in the Merger Agreement, each share of Company Common Stock issued and outstanding at the Effective Time, other than Excluded Shares, will, by virtue of the Merger and without any action on the part of the holder thereof, be converted into the right to receive the Merger Consideration. Prior to the Effective Time, Holdings will designate a bank or trust company to act as a paying agent in the Merger (the 'Paying Agent'). Holdings will make available or cause to be made available to the Paying Agent an amount equal to the funds necessary to pay the aggregate Merger Consideration. Promptly after the Effective Time, stockholders of record of Company Common Stock at the Effective Time will be mailed a letter of transmittal and instructions for use in effecting the surrender of the Certificates in exchange for payment therefor. Upon surrender to the Paying Agent of such Certificates for cancellation and such letter of transmittal duly executed and completed in accordance with the instructions thereto, the Surviving Corporation shall promptly cause to be paid to the persons entitled thereto a check in the amount to which such persons are entitled, after giving effect to any required tax withholdings. No interest will be paid or will accrue on the amounts payable upon the surrender of Certificates. 38 If payment is to be made to a person other than the person in whose name the Certificate is registered, it will be a condition of payment that the Certificate so surrendered shall be properly endorsed or otherwise in proper form for transfer and that the person requesting such payment will pay any transfer or other taxes required by reason of the payment to a person other than the registered holder, or establish to the satisfaction of the Surviving Corporation or the Paying Agent that such tax has been paid or is not applicable. One hundred and eighty (180) days after the Effective Time, any remaining funds held by the Paying Agent may be released to the Surviving Corporation, in which case the Surviving Corporation shall thereafter act as Paying Agent with respect to the cash payable to holders upon surrender of their Certificates. In such case, however, holders of Certificates may look to the Surviving Corporation only as general creditors thereof with respect to the cash payable upon surrender of their Certificates. Neither the Paying Agent nor any party to the Merger Agreement will be liable to any holder of Certificates formerly representing shares of Company Common Stock for any amount paid to a public official pursuant to any applicable abandoned property, escheat or similar law. The Merger Agreement provides that no transfer of shares will be made on the stock transfer books of the Surviving Corporation at or after the Effective Time. Options and Restricted Shares. The Merger Agreement provides that, at the Effective Time, each Option to acquire shares of Company Common Stock, other than Options held by certain members of management of the Company who enter into agreements with Holdings prior to the Effective Time pursuant to which such members will agree to roll over their Options for Roll-Over Options, will, without any action on the part of the holder thereof, and whether or not then exercisable, be converted into the right to receive an amount in cash (the 'Option Amount'), if any, equal to the product of (x) (1) the excess of the Merger Consideration over (2) the current exercise price per share of such Option and (y) the number of shares of Company Common Stock subject to such Option, payable to the holder thereof at the Effective Time of the Merger, and such Option will be cancelled and retired and will cease to exist. Under the Merger Agreement, the Company will be entitled to withhold, in accordance with applicable law, from any cash payments any amounts required to be withheld under applicable law. To the extent required by the terms of the plans governing such Company Options or pursuant to the terms of any Company Option granted thereunder, the Company agrees to use all reasonable efforts to obtain the consent of each holder of outstanding Options to the foregoing treatment of such Options and to take any other action reasonably necessary to effectuate such provisions. As provided in the Merger Agreement, any cash payment received with respect to shares of restricted Common Stock ('Restricted Shares') held under the Company's 1993 Long-Term Incentive Plan (the 'LTIP') that have not been purchased by the holder will not be subject to any restrictions following the Effective Time. Moreover, any cash payment received with respect to purchased Restricted Shares held under the LTIP or under the Company's 1993 Leveraged Stock Purchase Plan (the 'LSPP') will first be applied to payment of any outstanding loan balances for such Restricted Shares including accrued interest and the Company shall withhold and deduct an amount equal to any such loan balance and accrued interest from the amount to be paid to the respective holder of Restricted Shares. Any remaining cash, after payment of any such loan balances, will not be subject to any restrictions following the Effective Time. Notwithstanding the foregoing, with respect to Restricted Shares held under the LSPP by executive officers of the Company subject to Section 16 ('Section 16') of the Exchange Act, to the extent restrictions must remain on such cash payment to avoid short-swing liability under Section 16, Holdings agrees to cause the Surviving Corporation to hold such payments with respect to such Restricted Shares pursuant to the provisions of the LSPP until such restrictions lapse. Appraisal Rights. The Company will give Holdings prompt notice of any stockholder who has properly exercised his or her appraisal rights and who is entitled to be paid the 'fair value' of his or her shares, as provided in Section 262 of the DGCL. Under the Merger Agreement, Holdings will have the right to direct all negotiations and proceedings with respect to any such demands. Neither the Company nor the Surviving Corporation will, except with the prior written consent of Holdings, voluntarily make any payment with respect to, or settle or offer to settle, any such demand for payment. Pursuant to the Merger Agreement, the shares held by any Dissenting Stockholder that fails to perfect, withdraws, or 39 loses the right to dissent will be treated as though such shares had been converted into the Merger Consideration. See 'Appraisal Rights of Stockholders' for a description of the appraisal procedures contained in Section 262 of the DGCL. REPRESENTATIONS AND WARRANTIES The Merger Agreement contains various customary representations and warranties of the parties. Representations and warranties of the Company include certain matters relating to the Company's organization, good standing and qualification to do business, capital structure, corporate authority to enter into the Merger Agreement and to consummate the transactions contemplated thereby, receipt of Goldman Sachs' fairness opinion, consents and approvals required for the execution and delivery of the Merger Agreement and the consummation of the transactions contemplated thereby, governmental filings, SEC reports and financial statements, the absence of certain changes (including any material adverse change in the Company) since December 31, 1995, litigation and liabilities, employee benefits matters, compliance with laws and licenses, receivables, material contracts, takeover statutes, environmental matters, taxes, labor matters, intellectual property, insurance, agreements with AT&T, transactions with affiliates, and brokers and finders. Representations and warranties of AT&T include certain matters relating to AT&T's organization, good standing and qualification to do business, share ownership of AT&T and its subsidiaries in the Company, corporate authority to enter into the Merger Agreement and to consummate the transactions contemplated thereby, consents and approvals required for the execution and delivery of the Merger Agreement and the consummation of the transactions contemplated thereby, governmental filings, agreements with the Company, brokers and finders, and the absence of 'excess parachute payments' under the Code. Representations and warranties of Holdings and Merger Sub include certain matters relating to their organization, good standing and qualification to do business, corporate authority to enter into the Merger Agreement and to consummate the transactions contemplated thereby, consents and approvals required for the execution and delivery of the Merger Agreement and the consummation of the transactions contemplated thereby, governmental filings, availability of funds sufficient to consummate the Merger, brokers and finders, and the absence of prior activities by either Holdings or Merger Sub other than its incorporation or organization, or the negotiation and consummation of the Merger Agreement. CONDITIONS TO THE MERGER Under the Merger Agreement, the respective obligations of Holdings, Merger Sub, AT&T and the Company to consummate the Merger are subject to the fulfillment or waiver, where permissible, of the following conditions at or prior to the Effective Time: (i) the expiration or termination of the waiting period applicable to the Merger under the HSR Act; (ii) the receipt of all required consents, registrations, approvals, permits and authorizations in full force and effect; and (iii) no court or governmental entity of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any statute, rule, regulation, judgment, decree, injunction or other order that is in effect and restrains, enjoins or otherwise prohibits consummation of the Merger Agreement. The obligations of Holdings to consummate the Merger are further conditioned on (i) the truth and accuracy in all material respects of the representations and warranties made by the Company and AT&T; (ii) the performance in all material respects of all obligations of the Company and AT&T; (iii) the receipt by the Company and AT&T of the consent or approval of each person whose consent or approval is required, except for those for which the failure to obtain such consent or approval is not reasonably likely to have a material adverse effect on the Company; (iv) the receipt by Holdings of the resignations of each director of the Company; and (v) AT&T and the Company having entered into a transitional services agreement. The obligations of the Company and AT&T to consummate the Merger are further conditioned on (i) the truth and accuracy in all material respects of the representations and warranties made by Holdings and Merger Sub; (ii) the performance in all material respects of all obligations of Holdings 40 and Merger Sub; and (iii) the receipt by Holdings of the consent or approval of each person whose consent or approval is required, except for those consents for which the failure to obtain such consent or approval is not reasonably likely to have a material adverse effect on the ability of Holdings or Merger Sub to consummate the Merger. COVENANTS Interim Operations. Pursuant to the Merger Agreement, the Company has agreed, among other things, that, prior to the Effective Time (unless Holdings shall otherwise approve in writing), the Company will conduct its business in the ordinary and usual course and, to the extent consistent therewith, will use its best efforts to preserve its business organization intact, and maintain its existing relations and goodwill with customers, suppliers, distributors, creditors, lessors, employees and business associates. The Company further agreed that it will not, other than as provided by the terms of the Merger Agreement, among other things, (i) sell or pledge any capital stock owned by it in any of its subsidiaries, (ii) amend its Certificate of Incorporation or By-laws, (iii) split, combine or reclassify, issue, sell, pledge, dispose of or encumber, or authorize or propose the issuance, sale, pledge, disposition or encumbrance of, any other securities in respect of, in lieu of or in substitution for, its outstanding shares of capital stock (iv) declare, set aside or pay dividends or other distributions, other than regular quarterly cash dividends of up to $.11 per share, (v) redeem or repurchase any shares of its capital stock, (vi) alter the Company Plans, employment agreements or salaries, wages or compensation except for those changes occurring in the ordinary and usual course of business or otherwise required by applicable law or the terms of such plans, or (vii) settle or compromise any claim or litigation for an amount in excess of $5,000,000 nor, other than in the ordinary and usual course of business, modify, amend or terminate any of its material contracts, acquire or dispose of properties or assets in excess of specified limits, waive, release or assign any material rights or claims, make any tax election or alter any insurance policy, accounting principle or enter into or modify any agreement with AT&T or any of its affiliates, except in each case as otherwise provided. The Company also agreed that it will (i) notify Holdings of any terminations of material contracts with customers and (ii) provide Holdings with reasonable assistance in Holdings' arranging, structuring and receiving financing in connection with the Merger. In addition, AT&T agreed that prior to the Effective Time it shall not sell, assign, pledge, dispose of or encumber any shares of Company Common Stock owned by it or any of its subsidiaries, except that AT&T may sell, assign or dispose of any or all such shares of Company Common Stock to one or more wholly-owned subsidiaries of AT&T. Acquisition Proposals. The Company and AT&T have each also agreed that neither it nor any of its subsidiaries will permit any of its officers, directors, employees, representatives or agents to solicit or initiate or encourage any discussions, proposals, offers or negotiations with, or participate in any negotiations or discussions with, or provide any information or data of any nature whatsoever to, or otherwise cooperate in any way with any other person concerning any transaction involving a merger, reorganization or similar transaction, or the sale of all or a significant portion of the assets or the equity securities of the Company. The Company and AT&T have agreed to notify Holdings upon receipt of any proposal received with respect to such a transaction. Information Supplied. The Company, AT&T and Holdings have each agreed, among other things, (i) that none of the information supplied or to be supplied by it for inclusion or incorporation by reference in this Information Statement will contain any untrue statement of a material fact or will omit to state any material fact required to be stated herein or necessary to make the statements herein, in light of the circumstances under which they were made, not misleading, and (ii) that each party will supplement or update this Information Statement as needed. REGULATORY FILINGS; CONSENTS; NOTIFICATION The Company, AT&T and Holdings have further agreed (i) to make any applicable regulatory filings and any other required submissions with respect to the Merger; (ii) to use best efforts to cooperate with each other, to take all action and do all other things necessary, proper or appropriate 41 under the Merger Agreement and all applicable laws and regulations to consummate and make effective the transactions contemplated by the Merger Agreement; and (iii) to give prompt notice of any change that is reasonably likely to result in a material adverse effect on the Company or the ability of Holdings or Merger Sub to consummate the Merger, as the case may be. The Company has further agreed to use reasonable best efforts to obtain the consents and approval necessary for the succession by the Surviving Corporation to any contract or license of the Company. ADDITIONAL AGREEMENTS Pursuant to the Merger Agreement, the Company has agreed to afford Holdings' officers, employees, counsel, accountants and other authorized representatives reasonable access to information concerning its business, properties and personnel as may reasonably be requested. Effective immediately following the consummation of the Merger, AT&T and the Company have agreed (i) to amend the Operating Agreement between the Company and AT&T to provide that AT&T will not unreasonably withhold its consent to any subsequent change of control of the Company (in the absence of such consent, AT&T would be entitled to terminate such Operating Agreement following such a change of control), and (ii) to amend the License Agreement to provide that AT&T must give two years' notice (rather than one year's notice) following the Merger of the termination of the Company's right to use the 'AT&T' name for certain corporate purposes, and to provide that AT&T's right to terminate the License Agreement due to a credit rating downgrade will not be triggered unless the Company is rated below Ba1 by Moody's Investor Services and below BB+ by Standard & Poor's Corporation. Pursuant to the Merger Agreement, the Company, AT&T and Holdings have agreed to consult with, and receive the prior approval of, the others prior to issuing any press releases with respect to the Merger and the transactions contemplated by the Merger Agreement, and prior to making any public filings. The Merger Agreement provides that neither AT&T nor any of its wholly-owned subsidiaries (so long as they remain wholly-owned subsidiaries) will induce or attempt to induce any employee of the Company to leave the employ of the Company or any of its subsidiaries until the fifth anniversary of the Closing Date. EMPLOYEE BENEFITS The Merger Agreement provides among other things that, from the Effective Time, Holdings and the Surviving Corporation will (i) honor in accordance with their terms all existing Company Plans; (ii) continue in effect through December 31, 1997 all Company Plans (other than the LSPP, the LTIP, the Employee Stock Purchase Plan, the SPIP and the 1993 Deferred Compensation Plan) without any adverse amendment or modification; (iii) provide welfare benefit and insurance plans or programs that are no less favorable in the aggregate than those provided by the Company immediately prior to the Effective Time; and (iv) continue in effect the LSPP and LTIP through at least August 6, 1996 to the extent any awards remain unvested under such plans. The Company has agreed to withdraw as a participating employer from all employee benefit plans, practices or policies sponsored by AT&T and its subsidiaries, effective as of the Closing Date, except as otherwise provided in the transitional services agreement to be entered into between AT&T and the Company prior to the Closing Date and the Benefits Agreement between AT&T and the Company dated as of January 1, 1994; provided, however, that such withdrawal does not affect the rights of any current retirees of the Company with respect to AT&T and its plans. Under the Merger Agreement, the Surviving Corporation has agreed to pay (and Holdings has agreed to cause the Surviving Corporation to pay), pursuant to the Company's SPIP Amendments, to each participant under the SPIP (and each recipient of share performance incentive awards under the LTIP) (a) for each pending performance period under the SPIP (or award), an accelerated award payout equal to 100% of such participant's maximum payout for such period, (b) for each performance period completed within 12 months prior to the Effective Time, an amount equal to the excess of the participant's maximum payout under the SPIP (or award) over the actual payout previously made for such completed performance period and (c) 100% maximum payout with respect to 42 all performance periods beginning after the Effective Time (with payment immediately following the Effective Time), provided that certain conditions may apply with respect to payments to employees who are not members of the Company's Leadership Forum. See 'The Merger Agreement -- SPIP Amendments.' The Surviving Corporation and Holdings have also agreed to: (i) amend the Company's annual incentive plans to provide that payments for 1996 will be no less than the participant's 1996 target award; (ii) eliminate the ability to amend the Supplemental Income Benefits Plan, the Supplemental Executive Retirement Plan and the Excess Benefit Plan to reduce accrued benefits, and (iii) vest benefits under the Excess Benefit Plan as of the Effective Time. To the extent employees of the Company become participants in employee benefit plans of Holdings or its affiliates, credit for service with the Company and its subsidiaries (including predecessor employers) will be provided to such employees for eligibility and vesting and other purposes under such plans, but not for benefit accrual under tax-qualified plans. INDEMNIFICATION Pursuant to the Merger Agreement, for six years after the Effective Time, Holdings will indemnify and hold harmless, to the fullest extent permitted under applicable law, each present and former director, officer and employee of the Company and its subsidiaries against any costs or expenses, including reasonable attorneys' fees, judgments, fines, losses, claims, damages or liabilities incurred in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, arising out of or pertaining to matters existing or occurring at or prior to the Effective Time, including the transactions contemplated by the Merger Agreement. The Merger Agreement also provides, in general, that AT&T shall maintain in place its current directors' and officers' liability insurance with respect to actions prior to the Merger until the Effective Time. After the Effective Time, the Surviving Corporation will establish officers' and directors' liability insurance for the Company's and its subsidiaries' officers and directors substantially similar to the insurance currently maintained for a period of six years so long as the annual premium is not in excess of $750,000 or, if the cost does exceed that amount, as much insurance as can be purchased for that amount. NIplc has agreed to cause Holdings to meet these indemnification and insurance obligations. TRANSITIONAL SERVICES Pursuant to the Merger Agreement, AT&T and Holdings will enter into a transitional services agreement governing certain transitional services to be provided by AT&T and its affiliates to the Company for up to one year from the Effective Time, including payroll and related services, human resources and benefits services, and human resources information systems services. The Company will have the option to terminate the provision of any such transitional service by at least thirty days' advance written notice to AT&T and the applicable AT&T entity providing such service. TAX MATTERS The Merger Agreement provides that AT&T and Holdings will jointly make timely and irrevocable elections under Section 338(h)(10) of the Code and AT&T, Holdings and the Company agree to execute any and all forms necessary to effectuate the elections at the Closing. The Merger Agreement outlines the manner in which AT&T and Holdings have agreed to allocate the Aggregate Deemed Sale Price of the assets of each of the Company and its Subsidiaries for which a Section 338(h)(10) election is made. The Merger Agreement also provides for (i) liability of taxes and related matters; (ii) filing of tax returns; (iii) termination of tax allocation or sharing agreements or arrangements; and (iv) allocation of payment of 1995 and 1996 taxes. AT&T and Holdings also agree to (i) assist in all reasonable respects the other party in preparing any Tax Returns or reports; (ii) cooperate in all reasonable respects in preparing for any audits or disputes, (iii) make available any requested information, records or documents relating to Taxes of the Company and each subsidiary of the Company; (iv) provide timely notice to the other in writing of any pending or threatened tax audit or assessments; and (v) furnish the other with copies of all correspondence received from any taxing authority in connection with any tax audit or information request. 43 TERMINATION The Merger Agreement provides that at any time prior to the Effective Time it may be terminated by mutual written consent of the Boards of Directors of the Company, AT&T, Holdings and Merger Sub. Holdings, AT&T and the Company also have the right to terminate the Merger Agreement by board action if (i) the Merger is not consummated by October 31, 1996 (the 'Termination Date') or (ii) any order permanently restraining, enjoining or otherwise prohibiting the Merger becomes final and non-appealable; provided that the party seeking to terminate the Merger Agreement has not breached in any material respect its obligations under the Merger Agreement in any manner that shall have proximately contributed to the occurrence of (i) or (ii). The Company or AT&T may terminate the Merger Agreement by board action if there is a material breach by Holdings or Merger Sub of any representation, warranty, agreement or covenant contained in the Merger Agreement that is not curable or, if curable, is not cured upon 30 days' notice. Likewise, Holdings may terminate the Agreement by board action if there is a material breach by the Company or AT&T of any representation, warranty, covenant or agreement that is not curable or, if curable, is not cured upon 30 days' notice. AT&T or the Company may terminate the Merger Agreement, if, at any time prior to consummation of the Merger, Holdings breaches its covenant to maintain the proceeds of the capital contribution, free of any liens, invested in short-term United States government securities. EXPENSES Whether or not the Merger is consummated, all costs and expenses incident to preparing for, entering into and carrying out the Merger Agreement and the consummation of the Merger will be paid by the party incurring such expense; provided that the reasonable legal fees and other professional expenses incurred by the management of the Company in connection with the negotiation of arrangements with Holdings and its affiliates will be reimbursed by the Company. Holdings or the Surviving Corporation will pay all charges and expenses of the Company following the Effective Time, including those of the Paying Agent and including the payment of the Merger Consideration and the fair value to stockholders who perfect their statutory appraisal rights. For a table setting forth the amounts of certain estimated expenses and fees to be incurred in connection with the Merger, see 'Financing of the Merger -- Expenses and Fees'. SPIP AMENDMENTS The SPIP was adopted on June 10, 1993. The purpose of the SPIP is to reward key members of the Company's management team for increases in stockholder value that exceed those of other financial services companies. Under the SPIP, eligible employees received awards entitling them to receive cash payouts with respect to each of the three-year 'performance periods' ending June 30, 1996, 1997, 1998, 1999 and 2000, respectively, depending upon the Company's total return to stockholders during each period as measured against two benchmarks: (i) the average total return during such performance period of a benchmark group of companies, each of which has a current market value relatively similar to that of the Company and is a competitor in the leasing or finance business and (ii) the interest rate on three-year Treasury Notes as of the beginning of the performance period. To receive any payout for a performance period the Company's total return must exceed the three-year Treasury Note interest rate by at least 3.0 percentage points. For participants to receive target payouts, the Company's total return must exceed the average total return of the benchmark group by 1.5 percentage points and to receive maximum payouts it must exceed such average total return by 3.0 percentage points. Approximately 110 key members of the Company's management team participate in the SPIP. The SPIP has been amended and the AT&T Subsidiaries have executed the SPIP Amendments Stockholders' Consent to provide that, upon the consummation of a Private Sale, the Company shall pay to each participant (a) for each pending performance period under the SPIP an accelerated accrued payment equal to 100% of such participant's maximum payout for such period and (b) for each performance period completed within 12 months prior to a Private Sale, an amount equal to the excess of the participants' maximum payout for such period over the amount paid. The SPIP Amendments also 44 provide that, upon consummation of the Merger, the Surviving Corporation will pay to each participant for each future performance period under the SPIP, an accelerated accrued payment equal to 100% of such participant's maximum payout for that period, provided that, for any participants who are not members of the Company's Leadership Forum, such payment shall not be made unless such participant has entered into an agreement with Holdings and the Surviving Corporation to modify the definition of 'Qualifying Termination' in the Leadership Severance Plan or the Member Severance Plan, as applicable. The consummation of the Merger will constitute a Private Sale. The following amounts represent the payments that will be made upon consummation of the Merger to the persons or groups set forth below under the SPIP, as amended by the SPIP Amendments. Such amounts do not include awards for the performance period ending June 30, 1996, which awards were paid on July 19, 1996.
DOLLAR VALUE NAME AND POSITION ($) - ------------------------------------------------------------------------------- ------------ Thomas C. Wajnert ............................................................. 3,606,639 Chairman of the Board and Chief Executive Officer Irving H. Rothman ............................................................. 2,018,215 Group President Charles D. Van Sickle ......................................................... 2,018,215 Group President G. Daniel McCarthy ............................................................ 1,602,245 Senior Vice President, General Counsel, Secretary, Chief Risk Management Officer Ruth A. Morey ................................................................. 1,602,245 Senior Vice President, Corporate Information and Resources Executive Officer Group........................................................ 11,740,621 Non-Executive Officer Group.................................................... 31,185,551
FIRST AMENDMENT TO THE MERGER AGREEMENT The Amendment, dated as of August 20, 1996, amended the Merger Agreement in the following respects. First, the Amendment provides that the closing date for the Merger will be the later of (i) October 1, 1996 (as opposed to the September 17, 1996 date provided in the Merger Agreement as executed on June 5, 1996) and (ii) the first business day on which all of the conditions to the closing of the Merger have been satisfied or waived. The Amendment did not change the Merger Agreement's final deadline of October 31, 1996, for the closing of the Merger, following which date any party may terminate the Merger Agreement under certain circumstances. Second, the Amendment provides that Holdings may, at its option, choose to postpone the closing of the Merger to a date no later than October 31, 1996, even if all of the conditions to closing are satisfied or waived prior to such date. If Holdings exercises such option, interest will be payable on the $45 per share purchase price at a rate of LIBOR plus 0.5% for the period from and including September 18, 1996 through but excluding the closing date of the Merger. Third, the Amendment requires that Holdings receive a $400 million capital contribution by September 18, 1996 in addition to the $100 million total capital contribution required by the Merger Agreement as executed on June 5, 1996 and made by Holdings (UK) on June 7, 1996. The Amendment restates the Merger Agreement's requirement that Holdings invest the proceeds of these two capital contributions in short-term United States government securities and free of any liens. 45 FINANCING OF THE MERGER GENERAL The total amount of funds required to consummate the Merger and to pay related fees and expenses and to repay or refinance certain indebtedness (assuming no interest is payable on the $45 per share purchase price) is approximately $2,365.3 million. Of such amount, approximately $2,158.0 million will be required to purchase outstanding shares of Company Common Stock pursuant to the Merger and to satisfy the Company's obligation under the Merger Agreement to cash-out its outstanding Options. In addition, $22.0 million will be required to pay fees and expenses to be incurred in connection with the consummation of the Merger. Although not a condition to the Merger, the Company expects that approximately $185.3 million will be used to repay certain indebtedness of the Company which comes due on or in connection with the consummation of the Merger or to refinance other existing indebtedness of the Company. On June 7, 1996, Holdings received a capital contribution of $100.0 million which was made by Holdings (UK) from the proceeds of a note issuance of Holdings (UK) to NIplc. The remaining $2,265.3 million of the required funds will be obtained from: (i) the proceeds of the sale of shares of Holdings Common Stock to Holdings (UK) and to Babcock & Brown or its affiliates, assuming that agreements for such share subscriptions can be reached, in an aggregate amount of up to approximately $360.0 million; (ii) the Management Share Exchange by the Management Investors of shares of Company Common Stock for shares of Merger Sub Common Stock in the amount of up to approximately $40.0 million; (iii) the proceeds of a $400.0 million capital contribution which Holdings is required by the terms of the Merger Agreement to receive by September 18, 1996, and which will be made to Holdings by Holdings (UK) from the proceeds of a note issuance of Holdings (UK) to NIplc (the amounts referred to in clauses (i), (ii) and (iii), together with the $100.0 million capital contribution already made to Holdings, are collectively referred to as the 'Equity Subscriptions'); and (iv) up to $1,465.3 million of proceeds of offerings of equipment receivable-backed securities by affiliates of the Surviving Corporation (the 'Asset Securitizations'). If Holdings is required to pay interest on the purchase price for the shares acquired in the Merger under the circumstances provided by the Amendment, the funds for such interest will be provided from the anticipated excess proceeds of the Asset Securitizations. Holdings anticipates that the Equity Subscriptions will be consummated immediately prior to the Effective Time. The equipment receivable-backed securities issued by an affiliate of the Surviving Corporation in connection with the Asset Securitizations will be issued a short time prior to the Effective Time and the proceeds therefrom will be held in escrow and invested in certain United States government and other highly rated securities pending consummation of the Merger. Upon consummation of the Merger, the proceeds from the Asset Securitizations will be released from escrow and used to purchase the underlying lease receivables from the Surviving Corporation and will thereupon become available for use by Holdings as contemplated above. If the Merger has not been consummated by a certain date (to be determined) following the commencement of such offering, or if certain other conditions precedent to the Asset Securitizations have not been met, the proceeds from the Asset Securitizations would be used to redeem the securities issued in connection with the Asset Securitizations. The Merger Agreement is not subject to any financing condition. Holdings and Merger Sub are obligated to consummate the Merger upon the satisfaction (or waiver) of the conditions precedent included in the Merger Agreement. See 'The Merger Agreement -- Conditions to the Merger.' As described below, Holdings has received an unconditional and irrevocable undertaking from NIplc to underwrite or purchase an international capital markets issue on behalf of Holdings in an amount sufficient to satisfy Holdings' financial obligations under the Merger Agreement. See ' -- NIplc's Underwriting Letter.' If, for any reason, the proceeds of either the Asset Securitizations or the Equity Subscriptions are not available to pay the aggregate Merger Consideration at the Closing, NIplc would be required to arrange alternative financing on behalf of Holdings in order to satisfy its obligations pursuant to such commitment. In such event, it is anticipated that NIplc would arrange a short-term credit facility for Holdings on terms to be negotiated at such time, which would be refinanced from the proceeds of a subsequent offering of equipment receivable-backed securities. 46 The Equity Subscriptions and the Asset Securitizations are collectively referred to herein as the 'Financing.' The sources and uses of the Financing are expected to be as follows (in millions): Sources of Funds: Equity Subscriptions.............................................................................. $ 900.0 Asset Securitizations............................................................................. 1,465.3 -------- $2,365.3 -------- -------- Use of Funds: Acquisition of shares of Company Common Stock and cancellation of Options......................... $2,158.0 Refinancing of existing debt(1)................................................................... 185.3 Merger and Financing related expenses............................................................. 22.0 -------- $2,365.3 -------- --------
- ------------ (1) Maximum amount of foreign bank and similar financings that would need to be refinanced if such banks do not consent to the Merger and related transactions. ------------------------ As soon as practicable following the Effective Time, Holdings expects to cause the Surviving Corporation or an affiliate of the Surviving Corporation to issue approximately $200.0 million of preferred securities (the 'Preferred Stock Issuance'). The proceeds of such Preferred Stock Issuance, as well as the excess proceeds from the Asset Securitizations, may be used to repay or refinance other indebtedness of the Company. Set forth below is a summary description of the Financing and the Preferred Stock Issuance, consummation of which is subject to, among other things, the negotiation and execution of definitive financing agreements on terms satisfactory to the parties thereto. There can be no assurance that the terms set forth or referred to below will be contained in such agreements or that such agreements will not contain materially different provisions. EQUITY SUBSCRIPTIONS The terms, conditions and other provisions contained in the Equity Subscriptions from the Management Investors are described under 'Special Factors -- Interests of Certain Persons in the Merger -- Arrangements Between Management and Merger Sub.' As discussed therein, Merger Sub may agree to extend certain existing loans from the Company to the Management Investors to enable them to maintain their equity interest in the Surviving Corporation. Financing for the $100.0 million capital contribution from Holdings (UK) to Holdings was provided by the proceeds of a note issuance of Holdings (UK) to NIplc, which notes mature on the scheduled termination date under the Merger Agreement, bear interest based on a fixed spread over the London interbank offered rate and are secured by the shares of Holdings Common Stock held by Holdings (UK). It is anticipated that the financing for the additional $400.0 million capital contribution from Holdings (UK) to Holdings will be provided in the same manner as the financing for the $100.0 million capital contribution from Holdings (UK) to Holdings. In addition, it is anticipated that all or a portion of the equity investments by (i) Babcock & Brown or its affiliates, assuming that agreements for such equity investments can be reached, in shares of Holdings Common Stock and (ii) GRSH in shares of the capital stock of Holdings (UK) (which equity investment will in turn be used to invest in shares of Holdings Common Stock), may in each case be made with financings arranged by NIplc. Although no agreements currently exist with respect to the terms and conditions of such financings, it is anticipated that such financings will be made on commercially reasonable arms' length terms and be secured by pledges of equity interests held by Babcock & Brown and GRSH, respectively. See 'Information Concerning Merger Sub, Holdings, Holdings (UK), GRSH, NIplc and Nomura.' ASSET SECURITIZATIONS At or as soon as practicable following the Effective Time of the Merger, Holdings intends to cause the Surviving Corporation to transfer to one or more newly created special purpose vehicles (collectively, the 'SPV') leases and lease receivables (including the equipment underlying such leases) 47 originated by the credit, leasing services and certain other divisions of the Company. The SPV will offer, in registered public offerings and private placements, various tranches of trust certificates, notes or other securities secured by the leases and the lease receivables, which offerings would be conditioned upon the consummation of the Merger. The Company will continue to service the transferred leases for a fee under one or more pooling and servicing agreements entered into with the SPV. Holdings intends to receive approximately $2,811.0 million of net proceeds from an equipment receivables-backed securitization of such assets in connection with the closing of the Merger, approximately $1,465.3 million of which would be applied to the Financing of the Merger as set forth above. It is anticipated that the excess securitization proceeds would be used to repay commercial paper and other short-term indebtedness of the Company and/or to fund the origination of new leases and financings. PREFERRED STOCK ISSUANCE In addition, at or as soon as practicable following the Effective Time, Holdings intends to cause the Surviving Corporation or an affiliate of the Surviving Corporation to issue approximately $200 million of preferred securities. The dividend rights and other terms of such preferred securities will be determined at a future date by Holdings and the Company. NIPLC'S UNDERWRITING LETTER Concurrently with the execution and delivery of the Merger Agreement, NIplc executed and delivered to each of Holdings, the Company and AT&T a letter (the 'Underwriting Letter') in which NIplc irrevocably and unconditionally agreed to underwrite or purchase securities of Holdings in amounts which are sufficient to allow Holdings to meet all of its obligations under the Merger Agreement. In addition, NIplc made certain representations, warranties and covenants to each of the Company and AT&T in the Underwriting Letter. In connection with the Amendment, NIplc executed and delivered to each of Holdings, the Company and AT&T a letter (the 'Confirmation Letter') confirming that the Amendment did not affect NIplc's obligations under the Underwriting Letter and that such obligations remain in full force and effect with respect to the Merger Agreement as amended by the Amendment. The foregoing description of the Underwriting Letter and the Confirmation Letter is qualified in its entirety by reference to the copy of the Underwriting Letter and the copy of the Confirmation Letter, each of which has been filed as an exhibit to the Schedule 13E-3 referred to under 'Schedule 13E-3 Statement.' See 'Available Information.' FUTURE DIVIDENDS Holdings anticipates that, following the consummation of the Merger, the Surviving Corporation will cease to pay dividends on the Surviving Corporation Common Stock and in addition the Surviving Corporation may incur certain obligations in connection with the Financing which may prohibit or restrict the payment of dividends on Surviving Corporation Common Stock. EXPENSES AND FEES The table set forth below contains an estimate of certain expenses and fees incurred or expected to be incurred in connection with consummation of the Merger. See 'The Merger Agreement -- Expenses.'
EXPENSES AND FEES - ----------------------------------------------------------------------- AMOUNT ------------- (IN MILLIONS) SEC Filing............................................................. $ 0.5 Other Filings.......................................................... 0.2 Legal.................................................................. 2.0 Accounting............................................................. 0.7 Financial Advisory..................................................... 6.5 Printing............................................................... 0.2 Other Advisory......................................................... 11.0 Miscellaneous.......................................................... 0.9 ------ Total........................................................ $22.0 ------ ------
48 APPRAISAL RIGHTS OF STOCKHOLDERS Stockholders of the Company who (i) hold shares of Company Common Stock on the date of making demand and continuously hold such shares through the Effective Time and (ii) follow the procedures specified in Section 262 of the DGCL ('Section 262') will be entitled to have their shares of Company Common Stock appraised by the Delaware Court of Chancery (the 'Court') and to receive payment of the 'fair value' of such shares, exclusive of any element of value arising from the accomplishment or expectation of the Merger, as determined by the Court. THE PROCEDURES SET FORTH IN SECTION 262 SHOULD BE STRICTLY COMPLIED WITH. FAILURE TO FOLLOW ANY OF SUCH PROCEDURES MAY RESULT IN A TERMINATION OR WAIVER OF APPRAISAL RIGHTS UNDER SECTION 262. The following discussion of the provisions of Section 262 is not intended to be a complete statement of its provisions and is qualified in its entirety by reference to the full text of that section, a copy of which is attached as Annex C hereto. Under Section 262, a stockholder of the Company electing to exercise appraisal rights must within 20 days after the date the Information Statement is first sent to Company Stockholders, demand in writing from the Company appraisal of his shares which reasonably informs the Company of the identity of the shareowner of record and that such record shareowner intends thereby to demand the appraisal of his shares of Company Common Stock. Such written demand for appraisal should be delivered either in person to the Corporate Secretary of the Company or by mail (certified mail, return receipt requested, being the recommended form of transmittal) to the Corporate Secretary, at AT&T Capital Corporation, 44 Whippany Road, Morristown, New Jersey 07962. Stockholders that have consented in writing to the proposal relating to the Merger Agreement, namely the AT&T Subsidiaries, are not eligible to demand appraisal of their shares. The written demand for appraisal must be made by or for the holder of record of Company Common Stock registered in his name. Accordingly, such demand should be executed by or for such stockholder of record, fully and correctly, as such stockholder's name appears on his stock certificates. If the stock is owned of record in a fiduciary capacity, such as by a trustee, guardian or custodian, execution of the demand should be made in such capacity and, if the stock is owned of record by more than one person as in a joint tenancy or tenancy in common, such demand should be executed by or for all owners. An authorized agent, including an agent for one or two or more joint owners or tenants in common, may execute the demand for appraisal for one or more stockholders of record. However, the agent must identify the record owner or owners and expressly disclose the fact that in executing the demand he is acting as agent for the record owner or owners. Within 120 days after the day of the Effective Time, the Surviving Corporation or any stockholder of the Company who has satisfied the foregoing conditions and who is otherwise entitled to appraisal rights under Section 262, may file a petition in the Court demanding a determination of the value of the shares of Company Common Stock held by all stockholders entitled to appraisal rights. If no such petition is filed, appraisal rights will be lost for all stockholders who had previously demanded appraisal of their shares. Stockholders of the Company seeking to exercise appraisal rights should not assume that the Surviving Corporation will file a petition with respect to the appraisal of the value of their shares or that the Company will file a petition with respect to the appraisal of the value of their shares or the Surviving Corporation will initiate any negotiations with respect to the 'fair value' of such shares. ACCORDINGLY, STOCKHOLDERS OF THE COMPANY WHO WISH TO EXERCISE THEIR APPRAISAL RIGHTS SHOULD REGARD IT AS THEIR OBLIGATION TO TAKE ALL STEPS NECESSARY TO PERFECT THEIR APPRAISAL RIGHTS IN THE MANNER PRESCRIBED IN SECTION 262. At any time within 60 days after the day of the Effective Time, any stockholder shall have the right to withdraw his demand for appraisal and to accept the Merger Consideration. Within 120 days after the day of the Effective Time, any stockholder who has complied with the provisions of Section 262 is entitled, upon written request, to receive from the Surviving Corporation a statement setting forth the aggregate number of shares of Company Common Stock which did not consent to the adoption of the Merger Agreement and with respect to which demands for appraisal have been received by the Surviving Corporation and the aggregate number of holders of such shares. Such statement must be mailed to the stockholder within 10 days after the written request therefor is 49 received by the Surviving Corporation or within 10 days after the expiration of the period for delivery of demands for appraisal under Section 262, whichever is later. If a stockholder files the petition for appraisal in a timely manner, the Surviving Corporation must file, within 20 days of service of the stockholder's petition, a verified list of the names and addresses of all stockholders who have demanded appraisal for their shares and with whom the Surviving Corporation has not reached an agreement regarding value. If the Surviving Corporation files a petition, it must be accompanied by a similar list. If so ordered by the Court, the Register of Chancery is required to provide notice by registered or certified mail of the hearing to stockholders shown on the list and to provide notice by publication. If a petition for an appraisal is timely filed, at the hearing on such petition, the Court will determine the stockholders of the Company entitled to appraisal rights and will appraise the value of Company Common Stock owned by such stockholders, determining its 'fair value' exclusive of any element of value arising from the accomplishment or expectation of the Merger. The Court will direct payment of the fair value of such shares together with a fair rate of interest, if any, on such fair value to stockholders entitled thereto upon surrender to the Surviving Corporation of share certificates. Upon application of a stockholder, the Court may, in its discretion, order that all or a portion of the expenses incurred by any stockholder in connection with an appraisal proceeding, including without limitation, reasonable attorneys' fees and the fees and expenses of experts, be charged pro rata against the value of all the shares entitled to appraisal. Although the Company believes that the Merger Consideration to be paid in the Merger is fair, it cannot make any representation as to the outcome of the appraisal of fair value as determined by the Court, and stockholders should recognize that such an appraisal could result in a determination of a lower, higher or equivalent value. Any stockholder of the Company who has duly demanded an appraisal in compliance with Section 262 will not, after the Effective Time, be entitled to vote his shares for any purpose nor be entitled to the payment of any dividends or other distributions on his shares (other than those payable to stockholders of record as of a date prior to the Effective Time). If no petition for an appraisal is filed within the time provided, or if a stockholder of the Company delivers to the Surviving Corporation a written withdrawal of his demand for an appraisal and an acceptance of the Merger, either within 60 days after the Effective Time or, with the written approval of the Company, thereafter, then the right of such stockholder to an appraisal will cease and such stockholder shall be entitled to receive in cash, without interest, the Merger Consideration for such stockholder's shares of Company Common Stock, the amount to which he would have been entitled had he not demanded appraisal of his shares. No appraisal proceeding in the Court will be dismissed as to any stockholder without the approval of the Court, which approval may be conditioned on such terms as the Court deems just. This Information Statement constitutes the notice required by Section 262(d) of the DGCL. INFORMATION CONCERNING THE COMPANY The Company is a full-service, diversified equipment leasing and finance company that operates principally in the United States and also has operations in Europe, Canada, the Asia/Pacific Region and Latin America. The Company is one of the largest equipment leasing and finance companies in the United States, based on the aggregate value of equipment leased or financed, and is the largest lessor of telecommunications equipment in the United States. The Company leases and finances equipment manufactured and distributed by numerous vendors, including Lucent and NCR. In addition, the Company provides equipment leasing and financing and related services directly to end-user customers. The Company's approximately 500,000 customers include large global companies, small and mid-sized business and federal, state and local governments and their agencies. The principal executive offices of the Company are located at 44 Whippany Road, Morristown, New Jersey 07962 (telephone number 201-397-3000). For additional information concerning the Company, see the documents filed by the Company with the SEC which are incorporated by reference herein as described under 'Incorporation of Certain Documents by Reference.' 50 MARKET PRICES OF AND DIVIDENDS ON COMPANY COMMON STOCK Quarterly dividends on Company Common Stock have been paid since the fourth quarter of 1993, the Company's first full quarter of operations after its initial public offering in August 1993. Future cash dividends will be dependent upon the policies of the Board and the Company's earnings, financial condition and other factors. The Merger Agreement provides that the Company may not, without the written consent of Holdings, declare, set aside or pay any dividend or other distribution payable in cash, stock or property in respect of Company Common Stock, other than regular quarterly cash dividends not in excess of $.11 per share. On July 19, 1996, the Board declared a dividend of $.11 per share which is payable on August 30, 1996 to holders of record of Company Common Stock as of the close of business on August 9, 1996. Holdings anticipates that, following the consummation of the Merger, the Surviving Corporation will cease to pay dividends on the Surviving Corporation Common Stock and in addition that the Surviving Corporation may incur certain obligations in connection with the Financing which may prohibit or restrict the payment of dividends on Surviving Corporation Common Stock. The following table shows, for the periods indicated, cash dividends paid and the range of the high and low trading prices of Company Common Stock based on composite transactions on the NYSE, as reported by the NYSE.
1996 --------------------------------- PRICE RANGE --------------- DIVIDENDS PAID HIGH LOW -------------- ----- ----- 3rd Qtr (through August 29)................................. -- $44 5/8 $43 3/4 2nd Qtr..................................................... $.11 $44 1/8 $35 7/8 1st Qtr..................................................... $.11 $44 1/2 $37 3/4
1995 --------------------------------- PRICE RANGE --------------- DIVIDENDS PAID HIGH LOW -------------- ----- ----- 4th Qtr..................................................... $.11 $40 1/2 $35 5/8 3rd Qtr..................................................... $.10 $39 1/4 $26 3/4* 2nd Qtr..................................................... $.10 $27 3/4 $23 5/8 1st Qtr..................................................... $.10 $27 1/4 $21 3/8
1994 --------------------------------- PRICE RANGE --------------- DIVIDENDS PAID HIGH LOW -------------- ----- ----- 4th Qtr..................................................... $.10 $24 5/8 $19 3/4 3rd Qtr..................................................... $.09 $24 3/8 $21 1/4 2nd Qtr..................................................... $.09 $24 3/4 $21 1/2 1st Qtr..................................................... $.09 $27 3/8 $22 1/4
- ------------ * On September 20, 1995, AT&T announced its plan to sell its remaining interest in the Company in a public or private sale. ------------------------ On June 5, 1996, the last trading day prior to the public announcement of the Merger, the closing sale price per share of Company Common Stock as reported on the NYSE was $41, and the high and low trading prices were $41 1/8 and $40 1/2, respectively. On September 19, 1995, the last trading day prior to the public announcement of AT&T's plan to divest its interest in the Company, the closing price per share of Company Common Stock as reported on the NYSE was $32 3/4. The closing price per share of Company Common Stock as reported on the NYSE on August 29, 1996 was $44 5/8. 51 INFORMATION CONCERNING MERGER SUB, HOLDINGS, HOLDINGS (UK), GRSH, NIPLC AND NOMURA Merger Sub. Merger Sub is a newly formed Delaware corporation organized at the direction of GRSH in connection with the transactions contemplated by the Merger Agreement. As of the date hereof, the authorized capital stock of Merger Sub consists of 100 shares of Merger Sub Common Stock, of which 50 shares are issued and held by Holdings. As described above under 'Special Factors -- Interests of Certain Persons in the Merger -- Arrangements between Management and Merger Sub,' it is anticipated that, immediately prior to the Effective Time, the Management Investors will subscribe for and acquire newly issued shares of Merger Sub Common Stock in exchange for shares of Company Common Stock held by such Management Investors. Until the consummation of the Merger, it is not anticipated that Merger Sub will engage in any activities other than those incident to its formation and capitalization and the other transactions contemplated by the Merger Agreement. Upon consummation of the Merger (and assuming all Management Offerees participate in the Management Share Exchange), Holdings and the Management Investors would own approximately 95.6% and 4.4% of the total outstanding Surviving Corporation Common Stock, respectively. On a fully diluted basis (as a result of the Management Share Exchange, the Management Option Exchange and the grant of the New Options), Holdings and the Management Investors would beneficially own approximately 85.1% and 14.9% of the total outstanding Surviving Corporation Common Stock, respectively. The mailing address of Merger Sub's principal executive offices is 1209 Orange Street, Wilmington, Delaware 19801 (telephone number 302-658-7581). Holdings. Holdings is a newly formed Cayman Islands corporation organized at the direction of GRSH in connection with the transactions contemplated by the Merger Agreement. As of the date hereof, the authorized capital stock of Holdings consists of 50,000 shares of Holdings Common Stock, of which 102 shares are issued and held by Holdings (UK). As contemplated by the Merger Agreement, Holdings received a capital contribution of $100.0 million on June 7, 1996, the proceeds of which were used to acquire United States government securities with maturities of one year or less. Pursuant to the Amendment, Holdings will receive an additional $400.0 million capital contribution not later than September 18, 1996, the proceeds of which will also be invested in short-term United States government securities. Until the consummation of the Merger, it is not anticipated that Holdings will engage in any activities other than those incident to its formation and capitalization and the other transactions contemplated by the Merger Agreement. Upon consummation of the Merger, it is intended that Holdings (UK) would own approximately 89.5% of the total outstanding Holdings Common Stock and, assuming that agreements can be reached with Babcock & Brown, Babcock & Brown or its affiliates would own approximately 10.5% of the total outstanding Holdings Common Stock. On a fully diluted basis (based on the exercise by NIplc of options on shares of Holdings Common Stock to be received by NIplc in connection with the Financing, which options are expected to be immediately exercisable (at an exercise price to be determined) and freely transferable at any time), NIplc would beneficially own approximately 70.0%, Holdings (UK) would beneficially own approximately 19.5% and Babcock & Brown would beneficially own approximately 10.5% of the total outstanding Holdings Common Stock, respectively. The mailing address of Holdings' principal executive offices is c/o Maples & Calder, P.O. Box 309, Ugland House, South Church Street, Grand Cayman, Cayman Islands, British West Indies (telephone number 809-946-8066). Holdings (UK). Holdings (UK) is a newly formed private limited company registered in England and organized at the direction of GRSH in connection with the transactions contemplated by the Merger Agreement. All of the outstanding capital stock of Holdings (UK) is owned by GRSH and, at and following the consummation of the Merger, Holdings (UK) will remain a wholly-owned subsidiary of GRSH. Until the consummation of the Merger, it is not anticipated that Holdings (UK) will engage in any activities other than those incident to its formation and capitalization and the other transactions contemplated by the Merger Agreement. The mailing address of the principal executive offices of Holdings (UK) is c/o GRS Holding Company Limited, Mitre House, 160 Aldersgate Street, London, England EC1A 4DD (telephone number 44-171-606-9000). GRSH. GRSH is a private limited company registered in England which, through its principal subsidiary, is engaged in the rail leasing business. All of the outstanding capital stock of GRSH is owned 52 equally by Nicolas Lethbridge, an employee of Babcock & Brown, and Prideaux & Associates Limited ('Prideaux'), a London based business advisory company. On a fully diluted basis NIplc beneficially owns 85% of the capital stock of GRSH, while Babcock & Brown (UK) Holdings Limited, an affiliate of Babcock & Brown, beneficially owns 9.5%, and Prideaux and its affiliates, collectively beneficially own 5.5%, in each case, through instruments convertible into such capital stock. The mailing address of GRSH's principal executive offices is Mitre House, 160 Aldersgate Street, London, England EC1A 4DD (telephone number 44-171-606-9000). NIplc. NIplc, a private limited company registered in England, is a U.K. based investment bank, principally involved in managing and underwriting international securities issues, brokering and dealing in securities and providing investment advice and other services related to its international securities business. NIplc is a wholly-owned indirect subsidiary of The Nomura Securities Co., Ltd. ('Nomura'). NIplc currently beneficially owns (through convertible instruments) approximately 85% of the capital stock of GRSH on a fully diluted basis. NIplc effectively controls GRSH by means of contractual rights conferred in connection with its acquisition of such convertible instruments. The mailing address of NIplc's principal executive offices is Nomura House, 1 St. Martin's-le-Grand, London, England EC1A 4NP (telephone number 44-171-236-8811). Upon consummation of the Merger, it is anticipated that NIplc will receive from the Surviving Corporation a fee of $8 million (plus reimbursement of expenses) for negotiating the Merger Agreement and arranging the financing for the Merger. Nomura. Nomura, a company organized under Japanese law, was founded in 1925 in Osaka, Japan and is currently Japan's largest securities brokerage house. The principal activities of Nomura and its subsidiaries include securities brokerage, trading, investment banking and commercial banking in global financial markets. Through its subsidiaries and affiliates, Nomura advises its international clientele on a wide range of financial and strategic matters, including banking, asset management, leveraged leasing, project finance, real estate, and mergers and acquisitions. Nomura has sole indirect ownership of NIplc through Nomura's wholly-owned direct subsidiary, Nomura Europe Holding plc. The mailing address of Nomura's principal executive offices is 1-9-1, Nihonbashi, Chuo-ku, Tokyo 103, Japan (telephone number 03-3211-1811). Except as set forth in this Information Statement, (i) neither Merger Sub, Holdings, Holdings (UK) GRSH, NIplc nor Nomura, nor, to the best knowledge of Merger Sub, any executive officer or director of either Merger Sub or Nomura beneficially owns or has a right to acquire any shares of Company Common Stock or any other equity securities of the Company; (ii) neither Merger Sub, Holdings, Holdings (UK), GRSH, NIplc nor Nomura, nor, to the best knowledge of Merger Sub, any of the other persons referred to in clause (i) above has effected any transaction in the shares of Company Common Stock or any other equity securities of the Company during the past 60 days; (iii) neither Merger Sub, Holdings, Holdings (UK), GRSH, NIplc nor Nomura, nor, to the best knowledge of Merger Sub, any of the other persons referred to in clause (i) above has any contract, arrangement, understanding or relationship with any other person with respect to any securities of the Company, including, but not limited to, the transfer or voting thereof, joint ventures, loan or option arrangements, puts or calls, guarantees of loans, guarantees against loss or the giving or withholding of proxies, consents or authorizations; (iv) since January 1, 1994, there have been no transactions which would require reporting under the rules and regulations of the SEC between Merger Sub, Holdings, Holdings (UK), GRSH, NIplc or Nomura, or, to the best knowledge of Merger Sub, any of the other persons referred to in clause (i) above, on the one hand, and the Company or any of its executive officers, directors or affiliates, on the other hand; and (v) since January 1, 1994, there have been no contacts, negotiations or transactions between Merger Sub, Holdings, Holdings (UK), GRSH, NIplc or Nomura or any of their respective subsidiaries or, to the best knowledge of Merger Sub, any of the other persons referred to in clause (i) above, on the one hand, and the Company or its subsidiaries or affiliates, on the other hand, concerning a merger, consolidation or acquisition, tender offer or other acquisition of securities, an election of directors or a sale or other transfer of a material amount of assets of the Company. For information on the directors and executive officers of each of Merger Sub and Nomura, see Annex F to this Information Statement. 53 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following tables set forth the information with respect to beneficial ownership of Company Common Stock as of August 5, 1996 by (i) each person who is known to be the beneficial owner of more than 5% of the outstanding Company Common Stock, and (ii) each director and executive officer of the Company and all directors and executive officers as a group. (A) SECURITY OWNERSHIP OF BENEFICIAL OWNERS OF MORE THAN 5% OF THE COMPANY'S VOTING SECURITIES
AMOUNT OF AND NATURE OF BENEFICIAL PERCENT NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP OF CLASS - ---------------------------------------------------------------------------------------- ------------- -------- AT&T Capital Holdings, Inc.(1) ......................................................... 34,212,500 72.8% 32 Loockerman Square, Suite L-100 Dover, DE 19901 AT&T Credit Holdings, Inc.(1) .......................................................... 6,037,500 12.8% 32 Loockerman Square, Suite L-100 Dover, DE 19901
- ------------ (1) Credit Holdings is a direct, wholly-owned subsidiary of Capital Holdings, which is a direct, wholly-owned subsidiary of AT&T. Accordingly, both AT&T and Capital Holdings may be deemed the beneficial owner of all 40,250,000 shares of Company Common Stock shown in the table. ------------------------ Except as set forth or incorporated by reference in this Information Statement, none of the Company, AT&T or Capital Holdings, or to the best knowledge of the Company any executive officer or director of the Company or AT&T: (i) beneficially owns or has a right to acquire any shares of Company Common Stock; (ii) has effected any transaction in shares of Company Common Stock during the 60 days immediately preceding the date of this Information Statement; or (iii) has any contract, arrangement, understanding or relationship in connection with the Merger with any other person with respect to any securities of the Company. (B) SECURITY OWNERSHIP OF DIRECTORS, NOMINEES FOR DIRECTOR AND MANAGEMENT
AMOUNT OF AND NATURE OF BENEFICIAL PERCENT NAME OF BENEFICIAL OWNER OWNERSHIP OF CLASS - ------------------------------------------------------------------------------------- ------------- -------- John P. Clancey, Director............................................................ 5,566(3) (1) Edward M. Dwyer, Senior Vice President and Chief Financial Officer................... 83,108(3) (1) James P. Kelly, Director............................................................. 8,647(3) (1) Gerald M. Lowrie, Director........................................................... 1,000 (1) William B. Marx, Jr., Director ...................................................... 0 (1) G. Daniel McCarthy, Senior Vice President, Chief Risk Management Officer, General Counsel and Secretary.............................................................. 113,177(2)(3) (1) Richard A. McGinn, Former Director................................................... 0 (1)(4) Joseph J. Melone, Director........................................................... 5,000(3) (1) Richard W. Miller, Director.......................................................... 2,000 (1) Ruth A. Morey, Senior Vice President -- Corporate Information and Resources.......... 105,178(2)(3) (1) S. Lawrence Prendergast, Director.................................................... 2,000 (1) Irving H. Rothman, Group President................................................... 159,112(2)(3) (1) Maureen B. Tart, Director............................................................ 2,000 (1) Charles D. Van Sickle, Group President............................................... 140,376(2)(3) (1)(4) Thomas C. Wajnert, Director, Chairman and Chief Executive Officer.................... 372,912(2) (1) Brooks Walker, Jr., Director......................................................... 12,897(3) (1) Marilyn J. Wasser, Director.......................................................... 0 (1) All directors and executive officers (17 persons) as a group, including the above.... 1,012,973(5) (1)
(footnotes on next page) 54 (footnotes from previous page) (1) Such ownership interests for each individual director and named executive officer and for all directors and executive officers as a group do not exceed 1% of the outstanding Company Common Stock. (2) Pursuant to the Company's Senior Management Share Ownership Policy, as amended (the 'Ownership Policy'), originally adopted by the Compensation Committee of the Board on July 23, 1993, as a condition to continued employment in any of certain senior management positions with the Company, each of the named executive officers, as well as other members of the Company's senior management team (i) were required to purchase the full number of shares offered to such executives under the LSPP and/or the LTIP and (ii) are prohibited from making any 'Disqualifying Disposition' of 'Eligible Shares' during the term of the Ownership Policy (i.e., until August 31, 2000). 'Disqualifying Disposition' means any sale or other disposition of any Eligible Shares unless, immediately following such disposition, the executive continues to own either (a) Eligible Shares with a market value at least equal to the aggregate purchase price paid by such executive for the shares purchased by him or her under the LSPP and/or LTIP or (b) a number of Eligible Shares at least equal to the number of such shares purchased under the LSPP and/or LTIP (adjusted for any stock dividends, stock splits or other combinations or subdivisions of Company Common Stock subsequent to the applicable purchase date). 'Eligible Shares' means all shares of Company Common Stock owned by the executive from time to time, including (a) any shares purchased under the LSPP and/or the LTIP, (b) any shares that have been issued upon the exercise of options granted under the LSPP and/or the LTIP or otherwise granted by the Company to such executive, (c) any restricted stock awarded to the executive and (d) any shares purchased in the market, but Eligible Shares do not include (i) any shares subject to options that have not yet been exercised or (ii) any performance shares awarded that have not been fully earned. Under the LSPP and/or the LTIP, the named executive officers were required to purchase (and did purchase) the following number of shares of the Company's Common Stock: Mr. Wajnert, 124,558 shares; Mr. Rothman, 53,372 shares; Mr. Van Sickle, 47,093 shares; Mr. McCarthy, 42,697 shares; and Ms. Morey, 38,930 shares. Such purchases were funded in large part by loans made by the Company to the named executive officers. The Ownership Policy terminates upon consummation of a transaction constituting a Private Sale, including the Merger. (3) Includes shares obtainable upon exercise of Options which are or will become exercisable prior to November 1, 1996 as follows: Mr. Clancey -- 3,000; Mr. Dwyer -- 50,508; Mr. Kelly -- 7,897; Mr. McCarthy -- 70,480; Mr. Melone -- 3,000; Ms. Morey -- 65,248; Mr. Rothman -- 105,740; Mr. Van Sickle -- 93,283; Mr. Walker -- 7,897; and Mr. Wajnert -- 248,254. (4) Mr. McGinn elected not to stand for re-election at the Annual Stockholders' Meeting held on April 19, 1996. Effective April 19, 1996, Ms. Tart was elected to the Board. (5) Includes beneficial ownership of 655,307 shares that may be acquired within 60 days pursuant to Options awarded under employee incentive compensation plans. For additional information on the directors and executive officers of each of the Company and AT&T, see Annex E to this Information Statement. 55 SELECTED CONSOLIDATED FINANCIAL INFORMATION OF THE COMPANY The Results of Operations Data, the Balance Sheet Data and the Other Data shown below at or for the years ended December 31, 1995, 1994, 1993, 1992 and 1991 are derived from the Consolidated Financial Statements of the Company at such dates or for such periods, which have been audited by Coopers & Lybrand L.L.P., independent accountants. Such data at or for the six months ended June 30, 1996 and 1995, are derived from unaudited consolidated financial information. In management's opinion, the Company's unaudited consolidated financial statements at or for the six months ended June 30, 1996 and 1995, include all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation. The results of operations for the six months ended June 30, 1996, are not necessarily indicative of the results for the entire year or any other interim period. The Selected Consolidated Financial Information of the Company as presented below should be read in conjunction with 'Management's Discussion and Analysis of Financial Condition and Results of Operations' and the Consolidated Financial Statements and related notes thereto included in the Company's June 30, 1996 Form 10-Q and 1995 Form 10-K, both of which are incorporated herein by reference.
UNAUDITED SIX MONTHS ENDED JUNE 30, YEARS ENDED DECEMBER 31, -------------------- ------------------------------------------------------------------ 1996 1995 1995 1994 1993 1992 1991 -------- -------- ---------- ---------- ---------- ---------- ---------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Results of Operations Data: Total revenues....... $899,884 $744,770 $1,577,035 $1,384,079 $1,359,589 $1,265,526 $1,160,150 Interest expense..... 230,072 194,804 411,040 271,812 236,335 252,545 275,650 Operating and administrative expenses........... 248,409 234,987 473,663 427,187 381,515 359,689 298,833 Provision for credit losses............. 48,536 39,678 86,214 80,888 123,678 111,715 108,635 Income before income taxes and cumulative effect on prior years of accounting change............. 120,267 88,842 208,239 173,614 138,040 114,875 82,559 Income before cumulative effect on prior years of accounting change and impact of tax rate change........ 74,823 52,994 127,555 100,336 83,911 73,572 54,199 Cumulative effect on prior years of accounting change(1).......... -- -- -- -- (2,914) -- -- Impact of 1993 tax rate change(1)..... -- -- -- -- (12,401) -- -- Net income(1)........ 74,823 52,994 127,555 100,336 68,596 73,572 54,199 Earnings per share(1)........... 1.58 1.13 2.70 2.14 1.60 1.83 1.35
UNAUDITED AT JUNE 30 AT DECEMBER 31, ------------------------- ------------------------------------------------------------------ 1996 1995 1995 1994 1993 1992 1991 ----------- ---------- ---------- ---------- ---------- ---------- ---------- (DOLLARS IN THOUSANDS) Balance Sheet Data: Total assets......... $10,097,187 $8,741,899 $9,541,259 $8,021,923 $6,409,726 $5,895,429 $5,197,245 Total debt(2)........ 7,491,185 6,226,242 6,928,409 5,556,458 4,262,405 4,089,483 3,594,247 Total liabilities(2)..... 8,916,912 7,691,106 8,425,134 7,013,705 5,485,283 5,158,808 4,647,979 Total stockholders' equity............. 1,180,275 1,050,793 1,116,125 1,008,218 924,443 736,621 549,266
56
UNAUDITED AT OR FOR THE SIX MONTHS ENDED JUNE 30, AT OR FOR THE YEAR ENDED DECEMBER 31, ------------------------ ------------------------------------------------------------------ 1996 1995 1995 1994 1993 1992 1991 ---------- ---------- ---------- ---------- ---------- ---------- ---------- (DOLLARS IN THOUSANDS, EXCEPT PERCENTAGE AMOUNTS AND RATIOS) Other Data: Return on average equity(3)(5)....... 13.0% 10.3% 12.1% 10.5% 8.5% 11.4% 10.7% Return on average assets(4)(5)....... 1.5% 1.3% 1.5% 1.4% 1.1% 1.3% 1.1% Portfolio Assets of the Company........ $9,777,855 $8,515,795 $9,328,623 $7,661,226 $6,236,624 $5,724,702 $5,050,797 Allowance for credit losses............. 238,553 202,661 223,220 176,428 159,819 123,961 93,967 Net Portfolio Assets of the Company..... 9,539,302 8,313,134 9,105,403 7,484,798 6,076,805 5,600,741 4,956,830 Assets of others managed by the Company............ 2,159,923 2,566,180 2,214,502 2,659,526 2,795,663 1,374,354 649,014 Volume of equipment financed(6)........ 2,503,135 1,979,706 4,567,000 4,251,000 3,467,000 3,253,000 2,453,000 Ratio of earnings to fixed charges(7)... 1.51x 1.45x 1.50x 1.62x 1.57x 1.44x 1.29x Ratio of total debt to stockholders' equity(8).......... 6.35x 5.95x 6.22x 5.51x 4.61x 5.55x 6.54x Ratio of allowance for credit losses to net charge-offs(9)..... 4.46x 3.94x 4.77x 3.18x 2.71x 1.58x 1.15x Ratio of net charge-offs to Portfolio Assets(9).......... 0.55% 0.60% 0.50% 0.73% 0.95% 1.37% 1.62% Ratio of allowance for credit losses to Portfolio Assets............. 2.44% 2.38% 2.39% 2.30% 2.56% 2.17% 1.86% Ratio of operating and administrative expenses to period-end total assets(10)......... 4.92% 5.38% 4.96% 5.33% 5.95% 6.10% 5.75%
- ------------ (1) Net income and earnings per share for 1993 were adversely impacted by the federal tax rate increase to 35% and a cumulative effect on prior years of accounting change. See Note 10 to the Consolidated Financial Statements included in the Company's 1995 Form 10-K which is incorporated herein by reference. Earnings per share without these charges for 1993 would have been $1.95 per share. (2) Total debt does not include, and total liabilities includes, certain interest-free loans from AT&T to the Company under certain tax agreements, in aggregate outstanding principal amounts of $248.9 million, $248.9 million, $248.9 million, $214.1 million, $188.6 million, $193.1 million and $206.6 million at June 30, 1996, June 30, 1995, December 31, 1995, 1994, 1993, 1992 and 1991, respectively. At the Effective Time, the Company will no longer receive such interest-free loans and will be required to repay such loans at the Effective Time. See note 8 below. (3) Net income (annualized in the case of the six months ended June 30, 1996 and 1995) divided by average total stockholders' equity. (4) Net income (annualized in the case of the six months ended June 30, 1996 and 1995) divided by average total assets. (5) In 1993 the Company's adjusted return on average equity and return on average assets, defined as income before cumulative effect on prior years of accounting change and impact of tax rate change as a percentage of average equity and average assets, respectively, was 10.3% and 1.4%, respectively. (footnotes continued on next page) 57 (footnotes continued from previous page) (6) Total principal amount of loans and total cost of equipment associated with finance and lease transactions recorded by the Company and the increase, if any, in outstanding inventory financing and asset-based lending transactions. (7) Earnings before income taxes and cumulative effect on prior years of accounting change plus the sum of interest on indebtedness and the portion of rentals representative of the interest factor divided by the sum of interest on indebtedness and the portion of rentals representative of the interest factor. A portion of the Company's indebtedness to AT&T does not bear interest. See note (2) above. (8) Total debt does not include certain interest-free loans from AT&T to the Company under certain tax agreements. If such loans were so included, the ratio of total debt to stockholders' equity would have been 6.56x, 6.16x, 6.45x, 5.72x, 4.81x, 5.81x and 6.92x at June 30, 1996, June 30, 1995, December 31, 1995, 1994, 1993, 1992 and 1991, respectively. See note 2 above. (9) Net charge-offs at June 30, 1996 and 1995 are calculated based on the 12 months then ended. (10) Operating and administrative expenses (annualized for the six-month periods ended June 30, 1996 and June 30, 1995) divided by period-end total assets. 58 AVAILABLE INFORMATION The Company is subject to the information and reporting requirements of the Exchange Act, and in accordance therewith files periodic reports, proxy statements and other documents and information with the SEC. The Company's officers, directors and principal stockholders are also presently subject to filing requirements, as well as certain restrictions, imposed under the Exchange Act. Such reports, proxy statements and other documents and information may be inspected and copied at the public reference facilities maintained by the SEC at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional offices of the SEC located at 7 World Trade Center, 13th Floor, New York, New York 10048 and Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material can be obtained from the Public Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. In addition, copies of such material can be obtained from the Commission's Web Site (http://www.sec.gov). The Company Common Stock is traded on the NYSE. Such reports, proxy statements and other information concerning the Company are also available for inspection at the offices of the New York Stock Exchange, 20 Broad Street, New York, New York 10005. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents heretofore filed by the Company under the Exchange Act with the SEC (File No.: 1-11237) are incorporated herein by reference: (1) The Company's Annual Report on Form 10-K for the year ended December 31, 1995; (2) The Company's Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 1996 and June 30, 1996; (3) The Company's Proxy Statement dated March 19, 1996; and (4) The Company's Current Reports on Form 8-K dated April 12, 1996, April 30, 1996, June 6, 1996 and August 20, 1996. The Company will provide without charge to each person, including any beneficial owner of such person, to whom a copy of this Information Statement has been delivered, on written or oral request, a copy of any and all of the documents referred to above that have been or may be incorporated by reference herein other than exhibits to such documents (unless such exhibits are specifically incorporated by reference herein). Requests for such copies should be directed to: AT&T Capital Corporation, Attention: Investor Relations Department, 44 Whippany Road, Morristown, New Jersey 07962 (telephone number 201-397-4444). All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Information Statement shall be deemed to be incorporated by reference herein and to be a part hereof from the date of filing of such documents. Any statement contained in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Information Statement to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Information Statement. 59 SCHEDULE 13E-3 STATEMENT The Company and Merger Sub have filed with the SEC a Transaction Statement on Schedule 13E-3 (as amended) pursuant to Rule 13e-3 under the Exchange Act, furnishing certain additional information with respect to the Merger. Such statement and amendments thereto may be examined and copies may be obtained at the places and in the manner set forth above under 'Available Information' (except that they will not be available in the regional offices of the SEC). Merger Sub does not concede as a result of providing such information or otherwise complying with Rule 13e-3 that it (or any of its affiliates) are affiliates of the Company or subject to the requirements of such Rule. By Order of the Board of Directors G. DANIEL MCCARTHY G. DANIEL MCCARTHY Senior Vice President, General Counsel, Secretary and Chief Risk Management Officer August 30, 1996 60 ANNEX A AGREEMENT AND PLAN OF MERGER AMONG AT&T CAPITAL CORPORATION, AT&T CORP., HERCULES LIMITED AND ANTIGUA ACQUISITION CORPORATION DATED AS OF JUNE 5, 1996 A-1 TABLE OF CONTENTS
PAGE ---- ARTICLE I The Merger; Closing; Effective Time................................................................ A-5 1.1. The Merger......................................................................................... A-5 1.2. Closing............................................................................................ A-5 1.3. Effective Time..................................................................................... A-5 ARTICLE II Certificate of Incorporation and By-Laws of the Surviving Corporation.............................. A-6 2.1. The Certificate of Incorporation................................................................... A-6 2.2. The By-Laws........................................................................................ A-6 ARTICLE III Officers and Directors of the Surviving Corporation................................................ A-6 3.1. Directors.......................................................................................... A-6 3.2. Officers........................................................................................... A-6 ARTICLE IV Effect of the Merger on Capital Stock; Exchange of Certificates.................................... A-6 4.1. Effect on Capital Stock............................................................................ A-6 (a) Merger Consideration......................................................................... A-6 (b) Options and Restricted Shares................................................................ A-6 (c) Cancellation of Shares....................................................................... A-7 (d) Merger Sub................................................................................... A-7 4.2. Payment for Shares................................................................................. A-7 4.3. Dissenters' Rights................................................................................. A-8 4.4. Transfer of Shares After the Effective Time........................................................ A-8 ARTICLE V Representations and Warranties..................................................................... A-8 5.1. Representations and Warranties of the Company...................................................... A-8 (a) Organization, Good Standing and Qualification................................................ A-8 (b) Capital Structure............................................................................ A-9 (c) Corporate Authority; Approval and Fairness................................................... A-9 (d) Governmental Filings; No Violations.......................................................... A-10 (e) Company Reports; Financial Statements........................................................ A-10 (f) Absence of Certain Changes................................................................... A-11 (g) Litigation and Liabilities................................................................... A-11 (h) Employee Benefits............................................................................ A-12 (i) Compliance with Laws; Licenses............................................................... A-13 (j) Receivables.................................................................................. A-14 (k) Material Contracts........................................................................... A-14 (l) Takeover Statutes............................................................................ A-15 (m) Environmental Matters........................................................................ A-15 (n) Taxes........................................................................................ A-15 (o) Labor Matters................................................................................ A-16 (p) Intellectual Property........................................................................ A-16 (q) Insurance.................................................................................... A-17 (r) AT&T Agreements; Transactions with Affiliates................................................ A-17 (s) Brokers and Finders.......................................................................... A-18 5.2. Representations and Warranties of AT&T............................................................. A-18 (a) Organization, Good Standing and Qualification................................................ A-18 (b) Share Ownership.............................................................................. A-18 (c) Corporate Authority; Approval and Fairness................................................... A-18 (d) Governmental Filings; No Violations.......................................................... A-18 (e) AT&T Agreements.............................................................................. A-19 (f) Brokers and Finders.......................................................................... A-19
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PAGE ---- (g) Employee Benefits............................................................................ A-19 5.3. Representations and Warranties of Parent and Merger Sub............................................ A-19 (a) Organization, Good Standing and Qualification................................................ A-19 (b) Corporate Authority; Board and Stockholder Approvals......................................... A-19 (c) Governmental Filings; No Violations.......................................................... A-20 (d) Available Funds.............................................................................. A-20 (e) Brokers and Finders.......................................................................... A-20 (f) No Prior Activities.......................................................................... A-20 ARTICLE VI Covenants.......................................................................................... A-20 6.1. Interim Operations................................................................................. A-20 6.2. Acquisition Proposals.............................................................................. A-22 6.3. Information Supplied............................................................................... A-22 6.4. Filings; Other Actions; Notification............................................................... A-23 6.5. Access............................................................................................. A-24 6.6. AT&T Operating Agreement and License Agreement..................................................... A-24 6.7. Publicity.......................................................................................... A-25 6.8. Employee Benefit Covenants......................................................................... A-25 (a) In General................................................................................... A-25 (b) Change in Control............................................................................ A-25 (c) Executive Benefit Plan....................................................................... A-25 (d) Equity-Based Plans........................................................................... A-26 (e) Share Performance Incentive Plan............................................................. A-26 (f) Annual Incentive Plan........................................................................ A-26 (g) Other Plans.................................................................................. A-26 (h) Credited Service............................................................................. A-26 (i) Plan Withdrawals............................................................................. A-26 (j) Survival..................................................................................... A-26 (k) Intended Beneficiaries....................................................................... A-26 6.9. Expenses........................................................................................... A-27 6.10. Indemnification; Directors' and Officers' Insurance................................................ A-27 6.11. Takeover Statute................................................................................... A-28 6.12. Reasonable Best Efforts and Cooperation............................................................ A-28 6.13. Tax Matters........................................................................................ A-28 (a) Section 338(h)(10) Election.................................................................. A-28 (b) Liability for Taxes and Related Matters...................................................... A-29 (c) Tax Returns.................................................................................. A-30 (d) Termination of Tax Allocation Agreements..................................................... A-30 (e) 1995 and 1996 Taxes.......................................................................... A-30 (f) Assistance and Cooperation................................................................... A-31 (g) Contests; Payment Procedure.................................................................. A-31 (h) Survival..................................................................................... A-31 6.14. No Solicitation of Employees....................................................................... A-31 6.15. Transitional Services.............................................................................. A-31 6.16. Existing Financing Arrangements.................................................................... A-31 6.17. Funding Parent..................................................................................... A-31 ARTICLE VII Conditions......................................................................................... A-32 7.1. Conditions to Each Party's Obligation to Effect the Merger......................................... A-32 (a) Regulatory Consents and Orders............................................................... A-32 7.2. Conditions to Obligation of Parent................................................................. A-32 (a) Representations and Warranties............................................................... A-32 (b) Performance of Obligations of the Company and AT&T........................................... A-32
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PAGE ---- (c) Consents Under Agreements and Licenses....................................................... A-32 (d) Resignations................................................................................. A-32 (e) Transitional Services Agreement.............................................................. A-32 7.3. Conditions to Obligation of the Company and AT&T................................................... A-33 (a) Representations and Warranties............................................................... A-33 (b) Performance of Obligations of Parent and Merger Sub.......................................... A-33 (c) Consents Under Agreements.................................................................... A-33 ARTICLE VIII Termination........................................................................................ A-33 8.1. Termination by Mutual Consent...................................................................... A-33 8.2. Termination by Parent, AT&T or the Company......................................................... A-33 8.3. Termination by the Company or AT&T................................................................. A-33 8.4. Termination by Parent.............................................................................. A-33 8.5. Effect of Termination and Abandonment.............................................................. A-33 ARTICLE IX Miscellaneous and General.......................................................................... A-34 9.1. Survival........................................................................................... A-34 9.2. Modification or Amendment.......................................................................... A-34 9.3. Waiver of Conditions............................................................................... A-34 9.4. Counterparts....................................................................................... A-34 9.5. GOVERNING LAW AND VENUE; WAIVER OF JURY TRIAL...................................................... A-34 9.6. Notices............................................................................................ A-35 9.7. Entire Agreement................................................................................... A-36 9.8. No Third Party Beneficiaries....................................................................... A-36 9.9. Obligations of Parent and of the Company; Limitations on Liability................................. A-36 9.10. Severability....................................................................................... A-36 9.11. Interpretation..................................................................................... A-36 9.12. Assignment......................................................................................... A-37
A-4 AGREEMENT AND PLAN OF MERGER AGREEMENT AND PLAN OF MERGER (hereinafter called this 'Agreement'), dated as of June 5, 1996, among AT&T Capital Corporation, a Delaware corporation (the 'Company'), AT&T Corp., a New York corporation ('AT&T'), Hercules Limited, a Cayman Island corporation ('Parent'), and Antigua Acquisition Corporation, a Delaware corporation and a wholly owned subsidiary of Parent ('Merger Sub,' the Company and Merger Sub sometimes being hereinafter collectively referred to as the 'Constituent Corporations'). RECITALS WHEREAS, the respective boards of directors of each of the Company, Parent and Merger Sub have approved the merger of Merger Sub with and into the Company (the 'Merger') and approved the Merger upon the terms and subject to the conditions set forth in this Agreement; WHEREAS, the Company's board of directors, upon the recommendation of the special committee of the Company's board of directors, has approved this Agreement and submitted this Agreement to AT&T, as the indirect owner of approximately 86% of the currently outstanding shares of voting common stock of the Company (the 'AT&T Shares'), for its consent, and AT&T has caused to be executed a written stockholder consent (the 'Stockholders' Consent') pursuant to Section 228 of the DGCL (as defined below) approving this Agreement; WHEREAS, the Company, AT&T, Parent and Merger Sub desire to make certain representations, warranties, covenants and agreements in connection with this Agreement. NOW, THEREFORE, in consideration of the premises, and of the representations, warranties, covenants and agreements contained herein, the parties hereto agree as follows: ARTICLE I THE MERGER; CLOSING; EFFECTIVE TIME 1.1. The Merger. Upon the terms and subject to the conditions set forth in this Agreement, at the Effective Time (as defined in Section 1.3) Merger Sub shall be merged with and into the Company and the separate corporate existence of Merger Sub shall thereupon cease. The Company shall be the surviving corporation in the Merger (sometimes hereinafter referred to as the 'Surviving Corporation') and shall continue to be governed by the laws of the State of Delaware, and the separate corporate existence of the Company with all its rights, privileges, immunities, powers and franchises shall continue unaffected by the Merger, except as set forth in Articles II and III hereof. The Merger shall have the effects specified in the Delaware General Corporation Law, as amended (the 'DGCL'). 1.2. Closing. The closing of the Merger (the 'Closing') shall take place (i) at the offices of Sullivan & Cromwell, 125 Broad Street, New York, New York at 9:00 A.M. on the later of (A) September 17, 1996 and (B) the first business day on which the last to be fulfilled or waived of the conditions set forth in Article VII hereof (other than those conditions that by their nature are to be satisfied at the Closing, but subject to the fulfillment or waiver of those conditions) shall be satisfied or waived in accordance with this Agreement or (ii) at such other place and time and/or on such other date as the Company and Parent may agree in writing (the 'Closing Date'). 1.3. Effective Time. As soon as practicable following the Closing, the Company and Parent will cause a Certificate of Merger (the 'Delaware Certificate of Merger') to be executed, acknowledged and filed with the Secretary of State of Delaware as provided in Section 251 of the DGCL. The Merger shall become effective at the time when the Delaware Certificate of Merger has been duly filed with the Secretary of State of Delaware (the 'Effective Time'). A-5 ARTICLE II CERTIFICATE OF INCORPORATION AND BY-LAWS OF THE SURVIVING CORPORATION 2.1. The Certificate of Incorporation. The certificate of incorporation of Merger Sub as in effect immediately prior to the Effective Time shall be the certificate of incorporation of the Surviving Corporation (the 'Charter'), until duly amended as provided therein or by applicable law, provided that Article I of the certificate of incorporation of the Surviving Corporation shall be amended in its entirety to read as follows: 'The name of the corporation is AT&T Capital Corporation.' 2.2. The By-Laws. The by-laws of Merger Sub in effect at the Effective Time shall be the by-laws of the Surviving Corporation (the 'By-Laws'), until thereafter amended as provided therein or by applicable law. ARTICLE III OFFICERS AND DIRECTORS OF THE SURVIVING CORPORATION 3.1. Directors. The directors of Merger Sub at the Effective Time shall, from and after the Effective Time, be the directors of the Surviving Corporation until their successors have been duly elected or appointed and qualified or until their earlier death, resignation or removal in accordance with the Charter and By-Laws. 3.2. Officers. Except as provided in Schedule 3.2, the officers of the Company at the Effective Time shall, from and after the Effective Time, be the officers of the Surviving Corporation until their successors have been duly elected or appointed and qualified or until their earlier death, resignation or removal in accordance with the Charter and By-Laws. ARTICLE IV EFFECT OF THE MERGER ON CAPITAL STOCK; EXCHANGE OF CERTIFICATES 4.1. Effect on Capital Stock. At the Effective Time, as a result of the Merger and without any action on the part of the holder of any capital stock of the Company: (a) Merger Consideration. Each share of the Common Stock, par value $.01 per share, of the Company (the 'Shares') issued and outstanding at the Effective Time (other than Shares owned by Parent, Merger Sub or any other direct or indirect wholly owned subsidiary of Parent (collectively, the 'Parent Companies') or Shares that are owned by the Company or any direct or indirect wholly owned subsidiary of the Company or Shares ('Dissenting Shares') that are held by stockholders ('Dissenting Stockholders') properly exercising appraisal rights pursuant to Section 262 of the DGCL (collectively, 'Excluded Shares')) shall be converted into the right to receive, without interest, an amount in cash equal to $45.00 (the 'Merger Consideration'). At the Effective Time, all Shares shall no longer be outstanding and shall be cancelled and retired and shall cease to exist, and each certificate (a 'Certificate') representing any of such Shares (other than Excluded Shares) shall thereafter represent only the right to the Merger Consideration for such Shares upon the surrender of such Certificate in accordance with Section 4.2. (b) Options and Restricted Shares. The Parent and Surviving Corporation, with the cooperation of the Company, shall take all necessary action to provide that at the Effective Time, each option or right to acquire Shares (each, a 'Company Option') (other than those Company Options ('Roll-over Options') held by certain members of management of the Company who enter into agreements with Parent prior to the Effective Time pursuant to which such members agree to roll-over such Roll-over Options for options or rights to acquire shares of Surviving Corporation), shall, without any action on the part of the holder thereof, and whether or not then exercisable, be converted into the right to receive an amount in cash (the 'Option Amount'), if any, equal to the product of (x) (1) the excess of the Merger Consideration over (2) the current exercise price per Share of such Company Option and (y) the number of Shares subject to such Company Option, payable to the holder thereof at the Effective Time, and such Company Option will be cancelled and retired and shall cease to exist; provided further, that the Company shall be entitled to A-6 withhold, in accordance with applicable law, from any such cash payment any amounts required to be withheld under applicable law. If and to the extent required by the terms of the plans governing such Company Options or pursuant to the terms of any Company Option granted thereunder, the Company shall use all reasonable efforts to obtain the consent of each holder of outstanding Company Options to the foregoing treatment of such Company Options and to take any other action reasonably necessary to effectuate the foregoing provisions. Any cash payment received pursuant to Section 4.2 with respect to shares of restricted Common Stock ('Restricted Shares') held under the Company's 1993 Long-Term Incentive Plan (the '1993 LTIP') that have not been purchased by the holder shall not be subject to any restrictions following the Effective Time. Any cash payment received pursuant to Section 4.2 with respect to purchased Restricted Shares held under the 1993 LTIP or under the Company's 1993 Leveraged Stock Purchase Plan (the '1993 LSPP') shall first be applied to payment of any outstanding loan balances for such Restricted Shares including accrued interest and the Company shall withhold and deduct an amount equal to any such loan balance and accrued interest from the amount to be paid to the respective holder of Restricted Shares, and any remaining cash (after payment of any such loan balances) shall not be subject to any restrictions following the Effective Time; provided, however, that with respect to Restricted Shares held under the 1993 LSPP by executive officers of the Company subject to Section 16 ('Section 16') of the Securities Exchange Act of 1934, as amended (the 'Exchange Act'), to the extent restrictions must remain on such cash payment to avoid short-swing liability under Section 16, the Parent shall cause the Surviving Corporation to hold such payments with respect to such Restricted Shares pursuant to the provisions of the 1993 LSPP until such restrictions lapse. (c) Cancellation of Shares. At the Effective Time, each Share issued and outstanding at the Effective Time and owned by any of the Parent Companies, or owned by the Company or by any direct or indirect wholly owned subsidiary of the Company, shall, by virtue of the Merger and without any action on the part of the holder thereof, cease to be outstanding, be cancelled and retired without payment of any consideration therefor and shall cease to exist. (d) Merger Sub. At the Effective Time, each share of Common Stock, par value $.01 per share, of Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted into one share of common stock of the Surviving Corporation. 4.2. Payment for Shares. Parent shall make available or cause to be made available to the paying agent appointed by Parent with the Company's prior approval (the 'Paying Agent') amounts sufficient in the aggregate to provide all funds necessary for the Paying Agent to make payments pursuant to Section 4.1(a) hereof to holders of Shares (other than Excluded Shares) issued and outstanding immediately prior to the Effective Time. Promptly after the Effective Time, the Surviving Corporation shall cause to be mailed to each person who was, at the Effective Time, a holder of record (other than any of the Parent Companies) of issued and outstanding Shares a form (mutually agreed to by Parent and the Company) of letter of transmittal and instructions for use in effecting the surrender of the Certificates which, immediately prior to the Effective Time, represented any of such Shares in exchange for payment therefor. Upon surrender to the Paying Agent of such Certificates for cancellation, together with such letter of transmittal, duly executed and completed in accordance with the instructions thereto, the Surviving Corporation shall promptly cause to be paid to the persons entitled thereto a check in the amount to which such persons are entitled, after giving effect to any withholdings required under Section 3406 of the Internal Revenue Code of 1986, as amended (the 'Code') or any other provisions of state, local or foreign tax law. To the extent that amounts are so withheld by Parent or the Paying Agent, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of Shares with respect to whom such deduction and withholding was made by Parent or the Paying Agent. No interest will be paid or will accrue on the amount payable upon the surrender of any such Certificate. Pending such payments, the Paying Agent shall invest the funds made available to it in U.S. government securities as directed by Parent, and any interest or other income resulting from such investments shall be paid to Parent. If payment is to be made to a person other than the registered holder of the Certificate surrendered, it shall be a condition of such payment that the Certificate so surrendered shall be properly endorsed or otherwise in proper form for transfer and that the person requesting such payment shall pay any transfer or other taxes required by reason of the payment to a A-7 person other than the registered holder of the Certificate surrendered or establish to the satisfaction of the Surviving Corporation or the Paying Agent that such tax has been paid or is not applicable. One hundred and eighty days following the Effective Time, the Surviving Corporation shall be entitled to cause the Paying Agent to deliver to it any funds (including any interest received with respect thereto) made available to the Paying Agent which have not been disbursed to holders of Certificates formerly representing Shares outstanding on the Effective Time, and thereafter such holders shall be entitled to look to the Surviving Corporation only as general creditors thereof with respect to the cash payable upon due surrender of their certificates. Notwithstanding the foregoing, neither the Paying Agent nor any party hereto shall be liable to any holder of Certificates formerly representing Shares for any amount paid to a public official pursuant to any applicable abandoned property, escheat or similar law. Parent or the Surviving Corporation shall pay all charges and expenses, including those of the Paying Agent, in connection with the exchange of cash for Shares. 4.3. Dissenters' Rights. If any Dissenting Stockholder shall be entitled to be paid the 'fair value' of his or her Shares, as provided in Section 262 of the DGCL, the Company shall give Parent prompt notice thereof (and shall also give Parent prompt notice of any withdrawals of such demands) and Parent shall have the right to direct all negotiations and proceedings with respect to any such demands. Neither the Company nor the Surviving Corporation shall, except with the prior written consent of Parent, voluntarily make any payment with respect to, or settle or offer to settle, any such demand for payment. If any Dissenting Stockholder shall fail to perfect or shall have effectively withdrawn or lost the right to dissent, the Shares held by such Dissenting Stockholder shall thereupon be treated as though such Shares had been converted into the Merger Consideration pursuant to Section 4.1. 4.4. Transfer of Shares After the Effective Time. No transfers of Shares shall be made on the stock transfer books of the Surviving Corporation at or after the Effective Time. ARTICLE V REPRESENTATIONS AND WARRANTIES 5.1. Representations and Warranties of the Company. The Company hereby represents and warrants to Parent and Merger Sub that, except as expressly set forth in the disclosure letter delivered to Parent by the Company on or prior to entering into this Agreement (the 'Company Disclosure Letter'): (a) Organization, Good Standing and Qualification. Each of the Company and its Material Subsidiaries (as defined below) is a corporation duly organized, validly existing and in good standing under the laws of its respective jurisdiction of organization and has all requisite corporate or similar power and authority to own and operate its properties and assets and to carry on its business as presently conducted and is qualified to do business and is in good standing as a foreign corporation in each jurisdiction where the ownership or operation of its properties or conduct of its business requires such qualification, except where the failure to be so qualified or in good standing, when taken together with all other such failures, would not reasonably be expected to have a Company Material Adverse Effect (as defined below). The Company has made available to Parent a complete and correct copy of the Company's and its Subsidiaries' certificates of incorporation and by-laws, each as amended to date. The Company's and its Subsidiaries' certificates of incorporation and by-laws so delivered are in full force and effect, and neither the Company nor any of its Subsidiaries is in default or violation of any provisions of its respective certificate of incorporation or by-laws. The Company Disclosure Letter contains a correct and complete list of each jurisdiction where the Company and each of its Subsidiaries is organized and qualified to do business. The only Subsidiaries of the Company are those set forth in the Company Disclosure Letter. Except as set forth in the Company Disclosure Letter, and except for securities acquired in the ordinary course of business, including in connection with the realization on collateral positions and the acquisition of securities as part of any financing transaction, neither the Company nor any of its Subsidiaries owns less than 100% of the outstanding voting securities or other equity interests of any corporation, joint venture or other entity (other than investments in marketable securities of any person, none of which exceed 5% of the outstanding capital stock or other equity interests of such person). A-8 As used in this Agreement, (i) the term 'Subsidiary' means, with respect to a party, any entity, whether incorporated or unincorporated, of which at least a majority of the securities or ownership interests having by their terms ordinary voting power to elect a majority of the board of directors or other persons performing similar functions is directly or indirectly owned or controlled by such party or by one or more of its respective Subsidiaries or by such party and any one or more of its respective Subsidiaries; (ii) the term 'Material Subsidiary' means AT&T Commercial Finance Corporation, AT&T Capital Leasing Services, Inc., AT&T Credit Corporation, AT&T Systems Leasing Corporation, AT&T Capital Canada, Inc., NCR Credit Corp., AT&T Capital Limited and The Capita Corporation Hong Kong Limited; and (iii) the term 'Company Material Adverse Effect' means a material adverse effect on the financial condition, business or results of operations of the Company and its Subsidiaries taken as a whole; provided, however, that any such effect resulting from any change prior to the Effective Time (i) in any law, rule, or regulation or generally accepted accounting principles or interpretations thereof that applies generally to companies operating in the same industries as the Company and (ii) in general economic or business conditions in the industries in which the Company operates, shall not be considered when determining if a Company Material Adverse Effect has occurred. (b) Capital Structure. The authorized capital stock of the Company consists of 100,000,000 Shares, of which 46,988,695 Shares were outstanding as of the close of business on May 28, 1996, and 10,000,000 shares of Preferred Stock, par $.01 value per share (the 'Preferred Shares'), of which none were outstanding as of the close of business on May 28, 1996. All of the outstanding Shares have been duly authorized and are validly issued, fully paid and nonassessable. The Company has no Shares or Preferred Shares reserved for issuance. As of April 30, 1996, there were 2,264,246 Shares subject to outstanding Company Options. Since May 28, 1996, no Shares have been issued except issuance of Shares upon the exercise of Company Options referred to herein, and since April 30, 1996 no Company Options have been authorized, issued or granted. The Company Disclosure Letter contains a correct and complete list of each outstanding Company Option, including the holder, date of grant, exercise price and number of Shares subject thereto. Each of the outstanding shares of capital stock or other equity securities of each of the Company's Subsidiaries is duly authorized, validly issued, fully paid and nonassessable and, except for directors' qualifying shares, owned by the Company or a direct or indirect wholly owned subsidiary of the Company, free and clear of any lien, pledge, security interest, claim or other encumbrance (each, a 'Lien'). Except as set forth above, there are no preemptive or other outstanding rights, options, warrants, conversion rights, stock appreciation rights, redemption rights, repurchase rights, agreements, arrangements or commitments to issue or sell any shares of capital stock or other equity securities of the Company or any of its Subsidiaries or any securities or obligations convertible or exchangeable into or exercisable for, or giving any person a right to subscribe for or acquire, any equity securities of the Company or any of its Subsidiaries, and no securities or obligations evidencing such rights are authorized, issued or outstanding. The Company does not have outstanding any bonds, debentures, notes or other obligations the holders of which have the right to vote (or which are convertible into or exercisable for securities having the right to vote) with the stockholders of the Company on any matter ('Voting Debt'). (c) Corporate Authority; Approval and Fairness. (i) The Company has all requisite corporate power and authority and has taken all corporate action necessary in order to execute, deliver and perform its obligations under this Agreement and to consummate the Merger and the other transactions contemplated by this Agreement. This Agreement is a valid and binding agreement of the Company enforceable against the Company in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles (the 'Bankruptcy and Equity Exception'). (ii) The special committee of the board of directors of the Company and the board of directors of the Company (A) have approved this Agreement (unanimously in the case of the special committee and, in the case of the board of directors, by the unanimous vote of all directors present and voting) and the Merger and the other transactions contemplated hereby and (B) have received the opinion of Goldman, Sachs & Co., dated the date of this Agreement, to the effect that the A-9 consideration to be received by the holders of the Shares in the Merger is fair to such holders (other than AT&T and its 'Affiliates' (as defined in Rule 12b-2 under the Exchange Act)), a copy of which opinion has been delivered to Parent. (iii) Subsidiaries of AT&T, as the majority stockholders of the Company, have approved, by delivering the Stockholders' Consent, this Agreement and no further action by the stockholders of the Company is necessary to give effect to such approval. (d) Governmental Filings; No Violations. (i) Other than the filings and/or notices (A) pursuant to Sections 1.3 and 6.4, (B) under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the 'HSR Act') and the Exchange Act, (C) required by the New York Stock Exchange and (D) set forth in the Company Disclosure Letter, no notices, reports or other filings are required to be made by the Company or any of its Subsidiaries with, nor are any consents, registrations, approvals, permits or authorizations required to be obtained by the Company or any of its Subsidiaries from, any United States or foreign governmental or regulatory authority, court, agency, ministry, commission, body or other governmental entity ('Governmental Entity'), in connection with the execution and delivery of this Agreement by the Company and the consummation by the Company of the Merger and the other transactions contemplated hereby, except those filings, notices, reports, consents, registrations, approvals, permits and authorizations as to which the failure to make or obtain would not be reasonably expected to have a material adverse effect on the financial condition, business or results of operations of the Company or of any Material Subsidiary, and those as to which the failure to make or obtain are not reasonably likely to prevent or materially delay or materially impair the ability of the Company to consummate the transactions contemplated by this Agreement. (ii) The execution, delivery and performance of this Agreement by the Company do not, and the consummation by the Company of the Merger and the other transactions contemplated hereby will not, constitute or result in (A) a breach or violation of, or a default under, the certificate of incorporation or By-Laws of the Company or the comparable governing instruments of any of its Subsidiaries, (B) a breach or violation of, or a default under, the acceleration of any obligations or the creation of a Lien on any material assets of the Company or any of its Subsidiaries (with or without notice, lapse of time or both) pursuant to, or give rise to a right of termination or cancellation under, any provision of any written agreement, lease, contract, note, mortgage, indenture, arrangement or other obligation not otherwise terminable on 90 days' or less notice ('Contracts') of the Company or any of its Subsidiaries or any Law (as defined in Section 5.1(i)) or governmental or non-governmental permit, franchise, concession or license (collectively, 'Licenses') to which the Company or any of its Subsidiaries is subject or (C) any change in the rights or obligations of any party under any of the Contracts, except, in the case of clause (B) or (C) above, for any breach, violation, default, acceleration, creation or change that, individually or in the aggregate, is not reasonably likely to have a Company Material Adverse Effect or prevent, materially delay or materially impair the ability of the Company to consummate the transactions contemplated by this Agreement (collectively, 'Material Breaches'). The Company Disclosure Letter sets forth a correct and complete list of each Contract and License of the Company and its Subsidiaries pursuant to which a consent or waiver is required prior to consummation of the transactions contemplated by this Agreement in order to avoid the occurrence of a Material Breach under such Contract or License. (iii) Neither the Company nor any of its Subsidiaries is in breach or default under any Contract other than such breaches or defaults that, individually or in the aggregate, would not reasonably be expected to have a Company Material Adverse Effect. No event has occurred (except for the execution of this Agreement) which either entitles, or would, upon notice or with the lapse of time or both, entitle the holder of any indebtedness of the Company or any of its Subsidiaries to accelerate, or which does accelerate, the maturity of any indebtedness which is material to the Company and its Subsidiaries taken as a whole. (e) Company Reports; Financial Statements. The Company has delivered to Parent each registration statement, report, proxy statement or information statement prepared by it since August 4, 1993 (the 'IPO Date'), each in the form (including exhibits, annexes and any A-10 amendments thereto) filed with the Securities and Exchange Commission (the 'SEC') (collectively, including any such reports filed subsequent to the date hereof, the 'Company Reports'). As of their respective dates, the Company Reports did not, and any Company Reports filed with the SEC subsequent to the date hereof will not, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances in which they were made, not misleading. As of their respective dates, the Company Reports complied, and any Company Reports filed with the SEC subsequent to the date hereof will comply, as to form, in all material respects with the requirements of the Securities Act or the Exchange Act, as the case may be. Each of the consolidated balance sheets included in or incorporated by reference into the Company Reports (including the related notes and schedules) fairly presents the consolidated financial position of the Company and its Subsidiaries as of its date and each of the consolidated statements of income and of changes in financial position included in or incorporated by reference into the Company Reports (including any related notes and schedules) fairly presents the results of operations, retained earnings and changes in financial position, as the case may be, of the Company and its Subsidiaries for the periods set forth therein (subject, in the case of unaudited statements, to normal year-end audit adjustments that are not expected to be material in amount or effect), in each case in accordance with generally accepted accounting principles ('GAAP') consistently applied during the periods involved (except as may be noted therein and except for the permitted omission of certain footnote disclosures in the unaudited financial statements). (f) Absence of Certain Changes. (i) Except as disclosed in the Company Reports prior to the date hereof, since December 31, 1995 (the 'Audit Date'), the Company and its Subsidiaries have conducted their respective businesses only in, and have not engaged in any transaction other than according to, the ordinary and usual course of such businesses and there is not and has not been (A) any change in the financial condition, properties, business or results of operations of the Company and its Subsidiaries; or (B) any damage, destruction or other casualty loss with respect to any material asset or property owned, leased or otherwise used by the Company or any of its Subsidiaries, whether or not covered by insurance, with such exceptions to this paragraph (f)(i) that would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect. (ii) Except as disclosed in the Company Reports prior to the date hereof, since the Audit Date to the date hereof, there is not and has not been (A) any declaration, setting aside or payment of any dividend or other distribution in respect of the capital stock of the Company other than quarterly cash dividends on the Shares paid from current or accumulated earnings consistent with past practices; (B) any change by the Company in accounting principles, practices or methods, except as required by law or GAAP; or (C) any event or action which, if it had taken place or been taken following the execution of this Agreement, would not have been permitted by Section 6.1 hereof without the prior written consent of Parent. (iii) From the Audit Date to the date hereof, except as provided for herein or as disclosed in the Company Reports prior to the date hereof, there has not been any increase in the cash compensation payable or that could become payable by the Company and its Subsidiaries to their executive officers or the members of the Corporate Leadership Forum or any amendment of any of the Company Plans (as hereinafter defined) other than increases or amendments in the ordinary course and compensation arrangements for newly-hired executives. (g) Litigation and Liabilities. (i) Except as disclosed in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995 (the '1995 Annual Report'), there are no civil, criminal or administrative actions, suits, claims, hearings, investigations or proceedings pending or, to the knowledge of the Company, threatened against the Company or any of its Subsidiaries or any other facts or circumstances which to the knowledge of the Company are reasonably likely to result in any such suits, claims, hearings, investigations or proceedings other than such suits, claims, hearings, investigations or proceedings that, individually or in the aggregate, would not reasonably be expected to have a Company Material Adverse Effect. There are no judgments, decrees, injunctions, rules or orders of any Governmental Entity outstanding against the Company or any of A-11 its Subsidiaries other than such judgments, decrees, injunctions, rules or orders that, individually or in the aggregate, would not reasonably be expected to have a Company Material Adverse Effect. There are no liabilities or obligations of any kind, whether accrued, absolute, fixed, contingent or otherwise, of the Company and its Subsidiaries that are not specifically reflected or reserved against in the most recent consolidated balance sheet of the Company included in the 1995 Annual Report, except such liabilities or obligations which would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect. (ii) Except as set forth in the Company Disclosure Letter or in the 1995 Annual Report, neither the Company nor any of its Subsidiaries has any indebtedness, obligation or liability of any kind relating to forward commodity contracts, commodity futures and options, currency futures and options, stock index futures and options, or interest rate swaps, options, caps, collars or floors, or any hybrids of the foregoing derivative products (collectively, 'Derivatives'), in each case which is material to the Company and its Subsidiaries taken as a whole. The Company Disclosure Letter sets forth as to each Derivative (A) the applicable notional amount, (B) the aggregate credit exposure of the Company or its Subsidiary, as the case may be, (C) the existence of any netting arrangements, and (D) the counterparties. (iii) The term 'knowledge' when used in this Agreement with respect to the Company shall mean the actual knowledge of the duly elected or appointed executive officers of the Company, and does not include information of which they may be deemed to have constructive knowledge only. (h) Employee Benefits. Except to the extent that any breach, failure or inaccuracy, individually or in the aggregate, would not reasonably be expected to have a Company Material Adverse Effect: (i) The Company Disclosure Letter contains a true and complete list of each 'employee benefit plan' (within the meaning of section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ('ERISA'), including, without limitation, multiemployer plans within the meaning of ERISA section 3(37)), stock purchase, stock option, severance, employment, change-in-control, fringe benefit, collective bargaining, bonus, incentive, deferred compensation and all other employee benefit plans, agreements, programs, policies or other arrangements, whether or not subject to ERISA (including any funding mechanism therefor now in effect or required in the future as a result of the transactions contemplated by this Agreement or otherwise), whether formal or informal, oral or written, under which the Company or any of its Subsidiaries has any present or future liability other than solely as a result of its status as an ERISA Affiliate (as defined below) of a plan sponsor or any contributing employer (provided, that, with respect to plans, agreements, programs, policies and arrangements maintained outside the United States, the Company Disclosure Letter contains a true and complete list of each plan, agreement, program, policy and arrangement). All such plans, agreements, programs, policies and arrangements shall be collectively referred to as the 'Company Plans'. (ii) With respect to each Company Plan, the Company has delivered or made available to Parent a current, accurate and complete copy (or, to the extent no such copy exists, an accurate description) thereof and, to the extent applicable: (A) any related trust agreement or other funding instrument; (B) the most recent determination letter, if applicable; (C) any summary plan description and other written communications (or a description of any oral communications) by the Company or any of its Subsidiaries to their employees concerning the extent of the benefits provided under a Company Plan; and (D) for the three most recent years (I) the Form 5500 and attached schedules, (II) audited financial statements, (III) actuarial valuation reports and (IV) attorney's response to an auditor's request for information. (iii) All Company Plans are in substantial compliance with all applicable laws, including the Code and ERISA. The Company has received a favorable determination letter from the Internal Revenue Service with respect to the qualified status of each Company Plan that is an 'employee pension benefit plan' within the meaning of Section 3(2) of ERISA (a 'Pension Plan') and that is intended to be qualified under Section 401(a) of the Code and the plan is so qualified and, nothing has occurred, whether by action or failure to act, that would be reasonably expected to cause the loss of such qualification. There is no pending or threatened A-12 action, suit or claim relating to the Company Plans and, to the knowledge of the Company, no facts exist which could give rise to any such action, suit or claim. Neither the Company nor any Subsidiary has engaged in any transactions with respect to any Company Plan that could reasonably be expected to subject the Company or any of its Subsidiaries to a tax or penalty imposed by Section 4975 of the Code. (iv) As of the date hereof, no liability under Title IV of ERISA has been or is expected to be incurred by the Company or any Subsidiary with respect to any ongoing, frozen or terminated 'single-employer plan', within the meaning of Section 4001(a)(15) of ERISA, currently or formerly maintained by any of them, or the single-employer plan of any entity which is considered one employer with the Company under Section 4001 of ERISA or Section 414 of the Code (an 'ERISA Affiliate') other than the payment of premiums to the Pension Benefit Guaranty Corporation. None of the Company, its Subsidiaries or any ERISA Affiliate have contributed, or been obligated to contribute, to a multiemployer plan under Subtitle E of Title IV of ERISA at any time during the six-year period prior to the date hereof. (v) (A) No event has occurred and no condition exists that would be reasonably likely to subject the Company or its Subsidiaries to any tax, fine, lien or penalty imposed by ERISA, the Code or other applicable laws, rules and regulations with respect to a Company Plan; and (B) for each Company Plan with respect to which a Form 5500 has been filed, no material change has occurred with respect to the matters covered by the most recent Form 5500 since the date thereof. (vi) All contributions required to be made by the Company or any of its Subsidiaries under the terms of any Company Plan have been timely made or have been reflected on the most recent consolidated balance sheet filed or incorporated by reference in the Company Reports prior to the date hereof. Neither any Company Plan nor any single-employer plan of an ERISA Affiliate has had an 'accumulated funding deficiency' (whether or not waived) within the meaning of Section 412 of the Code or Section 302 of ERISA. Neither the Company nor its Subsidiaries has provided, or is required to provide, security to any Pension Plan or to any single-employer plan of an ERISA Affiliate pursuant to Section 401(a)(29) of the Code. (vii) With respect to each single-employer plan of an ERISA Affiliate, as of the last day of the most recent plan year ended prior to the date hereof, the actuarially determined present value of all 'benefit liabilities' within the meaning of Section 4001(a)(16) of ERISA (as determined on the basis of the actuarial assumptions contained in such actuarial valuation) did not exceed the then current value of the assets of any such single-employer plan. Neither the Company nor its Subsidiaries maintain or contribute to a Company Plan subject to Title IV of ERISA. (viii) Neither the Company nor its Subsidiaries have any obligations for retiree health and life benefits under any Company Plan. (ix) The consummation of the Merger and the other transactions contemplated by this Agreement will not (x) entitle any of the Company's or any of its Subsidiaries' employees to severance pay or (y) accelerate or provide any other rights or credits under, or increase the amount payable or trigger any other obligation pursuant to, any of the Company Plans. (i) Compliance with Laws; Licenses. (i) Except as set forth in the Company Reports prior to the date hereof, the businesses of each of the Company and its Subsidiaries have not been, and are not being, conducted in violation of any law, ordinance, regulation, judgment, order, decree, arbitration award, license or permit of any Governmental Entity (collectively, 'Laws'), except for possible violations that are not, individually or in the aggregate, reasonably likely to have a Company Material Adverse Effect or prevent or materially burden or materially impair the ability of the Company to consummate the transactions contemplated by this Agreement. Except as set forth in the Company Reports prior to the date hereof, no investigation or review by any Governmental Entity with respect to the Company or any of its Subsidiaries is pending or, to the knowledge of the Company, threatened, nor has any Governmental Entity indicated to the Company an intention to conduct the same, except for those the outcome of which are not, A-13 individually or in the aggregate, reasonably likely to have a Company Material Adverse Effect or prevent or materially burden or materially impair the ability of the Company to consummate the transactions contemplated by this Agreement. To the knowledge of the Company, no material change is required in the Company's or any of its Material Subsidiaries' processes, properties or procedures in connection with any such Laws, and neither the Company nor any of its Material Subsidiaries has received any notice or communication of any material noncompliance with any such Laws that has not been cured in all material respects. (ii) The Company and its Subsidiaries hold all Licenses from, and have made all filings, applications and registrations with, each Governmental Entity and other persons necessary for the operation of their respective businesses as presently conducted, except in each case for such Licenses, filings, applications and registrations, the failure of which to hold or make, individually or in the aggregate, would not reasonably be expected to have a Company Material Adverse Effect; all such Licenses are in full force and effect, except for such Licenses, the failure of which to be in full force and effect, individually or in the aggregate, would not reasonably be expected to have a Company Material Adverse Effect and no proceedings are pending or, to the knowledge of the Company, threatened by any Governmental Entity or other person for the suspension, revocation or termination of any such License, except for such suspensions, revocations, and terminations that, individually or in the aggregate, would not reasonably be expected to have a Company Material Adverse Effect. Neither the Company nor any of its Subsidiaries is in default in any respect under any such License, except for such defaults that, individually or in the aggregate, would not reasonably be expected to have a Company Material Adverse Effect, and, except for statutory or regulatory restrictions of general application and except as set forth in the Company Disclosure Letter, no Governmental Entity has placed any restriction on the business or properties of the Company or any of its Subsidiaries, except for such restrictions that, individually or in the aggregate, would not reasonably be expected to have a Company Material Adverse Effect. (j) Receivables. As used herein, 'Receivables' means all loans, equipment leases, sale contracts, credit or financing agreements or arrangements, portfolio servicing agreements, account receivable invoices and other obligations or rights to payments owned by the Company or any of its Subsidiaries. All of the Receivables, together with any instruments securing the same, (i) were made for valuable consideration, (ii) to the knowledge of the Company, constitute valid obligations in all respects of the persons shown as indebted thereon by the records of the Company or its Subsidiaries and (iii) are legally enforceable in all respects according to their terms (except as affected by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally), except in the case of clauses (i), (ii) and (iii) for such Receivables, the failure of which to satisfy the requirements of such clauses, individually or in the aggregate, would not reasonably be expected to have a Company Material Adverse Effect. All of the Receivables, together with any instruments securing the same, (i) set forth on Attachment 5.1(j) of the Company Disclosure Letter hereto are freely assignable by the Company or the Subsidiary party thereto and (ii) are not subject to any valid rights of offset or similar claims, except in the case of clauses (i) and (ii) for such Receivables, the failure of which to satisfy the requirements of such clauses, individually or in the aggregate, would not reasonably be expected to have a Company Material Adverse Effect. The amounts shown on the records of the Company and its Subsidiaries to be owing and unpaid on the respective Receivables reflect, in all respects material to the Company, the true and correct outstanding balances owing and unpaid thereon as of the respective dates indicated therein. (k) Material Contracts. None of the Company or its Subsidiaries has entered into or is otherwise bound by (i) any Contract which contains restrictions with respect to payment of dividends or any other distributions in respect of its capital stock, (ii) any material guarantee or other contingent liability in respect of any indebtedness or obligation of any person (other than (A) the endorsement of negotiable instruments for collection in the ordinary course of business, (B) guarantees of letter of credit reimbursement obligations, purchase orders and similar obligations issued for the benefit of customers in the ordinary course of business and (C) guarantees of indebtedness of or performance by any wholly owned Subsidiary of the Company), (iii) any management service or consulting contract not terminable on less than 90 days' notice which is A-14 reasonably expected to involve the payment by the Company in any year of an amount in excess of $500,000, (iv) any Contract which would limit or restrict in any manner the right or ability of the Company or any Subsidiary after the Closing Date to engage in any line of business, or to compete with any persons, or (v) any Contract not entered into in the ordinary course of business which is reasonably expected to involve the payment by the Company of $2,500,000 or more in any year and is not cancelable without penalty within 90 days. Each Contract set forth in the Company Disclosure Letter in reference to this Section 5.1(k) is in full force and effect and there exist no defaults or events of default or event, occurrence, condition or act on the part of the Company or, to the Company's knowledge, any other party to such Contracts (including the consummation of the transactions contemplated hereby) which, with the giving of notice or the lapse of time, would reasonably be expected to result in a Company Material Adverse Effect. (l) Takeover Statutes. No 'fair price,' 'moratorium,' 'control share acquisition' or other similar anti-takeover statute or regulation (each a 'Takeover Statute') or any applicable anti-takeover provision in the Company's certificate of incorporation or By-Laws is, or at the Effective Time will be, applicable to the Company, the Shares, the Merger or the other transactions contemplated by this Agreement. (m) Environmental Matters. Except as disclosed in the Company Reports prior to the date hereof and except for such matters that, individually or in the aggregate, would not reasonably be expected to have a Company Material Adverse Effect, (i) to the Company's knowledge, the Company and its Subsidiaries are in compliance with all applicable Environmental Laws; (ii) to the Company's knowledge, all properties owned or operated by the Company or its Subsidiaries (the 'Properties') are not contaminated with any Hazardous Substance in violation of any applicable Environmental Law and have not been operated as a sanitary landfill or hazardous waste disposal site; (iii) neither the Company nor any of its Subsidiaries has received any notices, demand letters or requests for information from any Governmental Entity or any third party indicating that the Company may be in violation of any Environmental Law and none of the Company, its Subsidiaries or any of their Properties are subject to any court order, administrative order or decree arising under any Environmental Law and (iv) to the Company's knowledge, no Hazardous Substance has been disposed of, transferred, released or transported from any of the Properties during the time such Property was owned or operated by the Company or one of its Subsidiaries other than as permitted under applicable Environmental Law. As used in this Agreement, the term 'Environmental Law' means (i) any federal, state, foreign or local law, statute, ordinance, rule, regulation, code, license, permit, order, judgment, decree, injunction or agreement with any governmental entity (A) relating to the protection, preservation or restoration of the environment, (including air, water vapor, surface water, groundwater, drinking water supply, surface land, subsurface land, plant and animal life or any other natural resource), or (B) the use, storage, recycling, treatment, generation, transportation, processing, handling, labeling, production, release or disposal of Hazardous Substances, in each case as amended and as now in effect and (ii) the federal Comprehensive Environmental Response Compensation and Liability Act of 1980, the Superfund Amendments and Reauthorization Act, the Federal Water Pollution Control Act of 1972, the federal Clean Air Act, the federal Clean Water Act, the federal Resource Conservation and Recovery Act of 1976 (including the Hazardous and Solid Waste Amendments thereto), the federal Solid Waste Disposal and the federal Toxic Substances Control Act and the Federal Insecticide, Fungicide and Rodenticide Act, each as amended and as now in effect. As used in this Agreement, the term 'Hazardous Substance' means any substance presently listed, defined, designated or classified as hazardous, toxic, radioactive or dangerous, under any Environmental Law, including any toxic waste, hazardous substance, toxic substance, hazardous waste, petroleum radioactive material, friable asbestos and polychlorinated biphenyls. (n) Taxes. (i) Except to the extent that any breach, failure or inaccuracy, individually or in the aggregate, would not reasonably be expected to have a Company Material Adverse Effect: (A) all Tax A-15 Returns that are required to be filed by or with respect to the Company and each of its Subsidiaries have been duly filed and all such Tax Returns are complete and accurate; (B) all Taxes shown to be due on the Tax Returns referred to in clause (A) have been paid in full; (C) those of the Tax Returns referred to in clause (A) that are currently under examination by the Internal Revenue Service or the appropriate state, local or foreign Taxing authority are set forth in the Company Disclosure Letter; (D) all assessments made as a result of the examinations referred to in clause (C) have been paid in full; and (E) no waivers of statutes of limitation have been given by or requested with respect to any Tax Returns of the Company or any of its Subsidiaries other than those set forth in the Company Disclosure Letter. (ii) As used in this Agreement, (A) the term 'Tax' (including, with correlative meaning, the terms 'Taxes', and 'Taxable') includes all federal, state, local and foreign income, profits, franchise, gross receipts, environmental, customs duty, capital stock, severances, stamp, payroll, sales, employment, unemployment, disability, use, property, withholding, excise, production, value added, occupancy and other taxes, duties or assessments of any nature whatsoever, together with all interest, penalties and additions imposed with respect to such amounts and any interest in respect of such penalties and additions, and (B) the term 'Tax Return' includes all returns and reports (including elections, declarations, disclosures, schedules, estimates and information returns) required to be supplied to a Tax authority relating to Taxes. (o) Labor Matters. (i) Neither the Company nor any of its Subsidiaries is a party to or otherwise bound by any collective bargaining agreement, contract or other agreement or understanding with a labor union or labor organization relating to employees of the Company, nor is the Company or any of its Subsidiaries the subject of any proceeding asserting that the Company or any of its Subsidiaries has committed an unfair labor practice or is seeking to compel it to bargain with any labor union or labor organization nor is there, nor has there been for the past five years, any labor strike, dispute, walkout, work stoppage, slow-down or lockout involving the Company or any of its Subsidiaries pending or, to the knowledge of the Company, threatened, except in each case with those exceptions that would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect. There have been no material work stoppages or other such controversies during the past five years from the date hereof. The Company and its Subsidiaries are in compliance in all respects with all federal, state and other applicable laws, domestic or foreign, respecting employment and employment practices, terms and conditions of employment and wages and hours, and have not and are not engaged in any unfair labor practice, except in each case with those exceptions that would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect. (ii) The Company has made available to Parent schedules (as of December 31, 1995) which are accurate and complete in all material respects setting forth all persons employed by the Company and its Subsidiaries whose total 1995 cash compensation (including, without limitation, salary, bonus, and any commission or incentive compensation) exceeded $150,000. (p) Intellectual Property. (i) The Company Disclosure Letter lists, as of the date of this Agreement: (A) all material foreign and domestic patents and patent applications which are owned by the Company and its Subsidiaries; and (B) all material foreign and domestic copyright registrations, trademark registrations, trademark registration applications, service mark registrations, service mark registration applications and trade names which are owned by the Company and its Subsidiaries (collectively, the 'Company IP Rights'). The Company Disclosure Letter also lists: (1) all material license agreements of foreign or domestic patent, trademark or service mark rights entered into by or primarily for use by the Company and its Subsidiaries; and (2) all material computer programs, databases and other computer software utilized by the Company and its Subsidiaries as of the Closing Date (collectively, the 'Company License and Computer Rights'). (ii) Except as disclosed in the Company Reports filed with the SEC prior to the date hereof, the Company owns, or is licensed to use, all of the Company IP Rights and the Company License A-16 and Computer Rights, with such exceptions and would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect. (iii) Unless otherwise indicated in the Company Disclosure Letter: (A) there are no existing or, to the knowledge of the Company, threatened claims by any third party based on the use by, or challenging the ownership of, the Company or its Subsidiaries of any Company IP Rights or any Company License and Computer Rights; (B) to the knowledge of the Company, (I) none of the products, apparatus, methods or services which the Company or any of its Subsidiaries makes, offers, sells or provides infringes upon the intellectual property of others and (II) none of the intellectual property of the Company or its Subsidiaries is being infringed by others; (C) each item of Company IP Rights and Company License and Computer Rights has been duly registered with, filed in or issued by the appropriate domestic or foreign governmental agency, to the extent required to protect such property, and each such registration, filing and issuance remains in full force and effect; (D) none of the Company or its Subsidiaries has received any oral or written claim or demand from any person pertaining to or challenging the right of the Company or its Subsidiaries to use any Company IP Rights or Company License and Computer Rights, and no proceedings have been instituted, are pending or, to the knowledge of the Company, are threatened which challenge such rights; and (E) no litigation or claim is pending or, to the knowledge of the Company, threatened wherein the Company or any of its Subsidiaries is accused of infringing or otherwise violating the intellectual property right of another, or of breaching a contract conveying rights regarding intellectual property, except in the case of each of clause (A), (B), (C), (D) and (E) for such exceptions that would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect. Within the six year period immediately prior to the date of this Agreement, to the knowledge of the Company, neither the Company nor its Subsidiaries made use of any intellectual property material to the operation of their respective businesses at the Closing Date other than rights under the Company IP Rights and the Company License and Computer Rights, except as set forth in the Company Disclosure Letter and except such uses as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect. (q) Insurance. True and complete copies of all material insurance policies maintained by the Company and its Subsidiaries, together with written descriptions of all formal self-insurance policies and programs maintained for the benefit of the Company or any of its Subsidiaries by the Company, AT&T or any of their respective Affiliates, have been made available to Parent. Such material policies provide coverage for the operations of the Company and its Subsidiaries in amounts and covering such risks as the Company believes is necessary to conduct its business. Neither the Company nor any of its Subsidiaries has received formal notice that any such material policy is invalid or unenforceable. (r) AT&T Agreements; Transactions with Affiliates. (i) The Company Disclosure Letter sets forth a list of each Contract between the Company or any of its Subsidiaries, on the one hand, and AT&T or any of its Subsidiaries (other than the Company and its Subsidiaries), on the other hand, which (A) involves annual payments in excess of $250,000, (B) would limit or restrict in any manner the right or ability of the Company or any Subsidiary after the Closing Date to engage in any line of business, to conduct business with any person or to compete with any person, or would restrict the ability of the Company or such Subsidiary after the Closing Date to acquire any property or conduct business in any territory, or (C) has a term in excess of two years and which is not otherwise terminable by the Company with less than three months' notice, and which, in each case, will be in effect as of and immediately following the Effective Time (the 'AT&T Agreements'). Except as set forth in Section 6.13 or in the Transitional Services Agreement (as hereinafter defined), each AT&T Agreement will be in full force and effect at and immediately following the Effective Time (as and to the extent provided therein) and will be a valid and binding agreement of the parties thereto enforceable against each such party in accordance with its terms, subject to the Bankruptcy and Equity Exceptions. The Company has made available to Parent a true and complete copy of each AT&T Agreement in the form that such AT&T Agreement will be in effect at the Effective Time. (ii) Except as set forth in the Company Disclosure Letter, to the knowledge of the Company, no officer or director of the Company or any of its Subsidiaries is a party to any transaction with A-17 the Company or any of its Subsidiaries (A) providing for the rental of real or personal property from, or (B) otherwise requiring payments to (other than for services in their capacities as officers, directors or employees) any such person or any corporation, partnership, trust or other entity in which any such person has an interest as a stockholder (other than holdings of less than 1% of the shares of such corporation), officer, director, trustee or partner (other than holdings of less than 1% of the partnership interests in such partnership). (s) Brokers and Finders. Neither the Company nor any of its Subsidiaries nor any of their respective officers, directors or employees has employed any broker or finder or incurred any liability for any brokerage fees, commissions or finders fees in connection with the Merger or the other transactions contemplated in this Agreement except that the Company has employed Goldman, Sachs & Co. to act as the financial advisor to the Company's Board of Directors, the arrangements with which (including a copy of each engagement letter in respect thereof) have been disclosed to Parent prior to the date hereof. 5.2. Representations and Warranties of AT&T. AT&T hereby represents and warrants to Parent and Merger Sub that, except as expressly set forth in the disclosure letter delivered to Parent by AT&T on or prior to entering into this Agreement (the 'AT&T Disclosure Letter'): (a) Organization, Good Standing and Qualification. AT&T is a corporation duly organized, validly existing and in good standing under the laws of New York. AT&T has made available to Parent a complete and correct copy of its certificate of incorporation and by-laws, each as amended to date. The certificate of incorporation and by-laws so delivered are in full force and effect. (b) Share Ownership. AT&T or Subsidiaries of AT&T own beneficially and of record 40,250,000 Shares, free and clear of any lien and subject to no restriction with respect to the voting thereof (except as contemplated by this Agreement and the Intercompany Agreement, dated June 25, 1993 between AT&T and the Company (the 'Intercompany Agreement')). Such Subsidiaries of AT&T, as the majority stockholders of the Company, have approved, by delivering the written Stockholders' Consent, this Agreement and such Stockholders' Consent remains in full force and effect with no alterations or amendments thereto. (c) Corporate Authority; Approval and Fairness. AT&T has all requisite corporate power and authority and has taken all corporate action necessary in order to execute, deliver and perform its obligations under this Agreement and to cause the relevant AT&T Subsidiaries to deliver the Stockholders' Consent approving this Agreement. This Agreement is a valid and binding agreement of AT&T enforceable against AT&T in accordance with its terms, subject to the Bankruptcy and Equity Exception. (d) Governmental Filings; No Violations. (i) Other than the filings and/or notices (A) under the HSR Act and the Exchange Act and (B) set forth in the AT&T Disclosure Letter, no notices, reports or other filings are required to be made by AT&T with, nor are any consents, registrations, approvals, permits or authorizations required to be obtained by AT&T from, any Governmental Entity in connection with the execution and delivery of this Agreement by AT&T, the delivery of the Stockholders' Consent by the relevant AT&T Subsidiaries and the consummation by the Company of the Merger and the other transactions contemplated hereby, except those as to which the failure to make or obtain are not, individually or in the aggregate, reasonably likely to have a Company Material Adverse Effect or prevent, materially delay or materially impair the ability of the Company or AT&T to consummate the transactions contemplated by this Agreement. (ii) The execution, delivery and performance of this Agreement by AT&T and the delivery of the Stockholders' Consent by the relevant AT&T Subsidiaries do not, and the consummation by the Company of the Merger and the other transactions contemplated hereby will not, constitute or result in (A) a breach or violation of, or a default under, the certificate of incorporation or by-laws of AT&T, (B) a breach or violation of, or a default under, the acceleration of any obligations or the creation of a Lien on the assets of AT&T or any of its Subsidiaries, other than the Company and its Subsidiaries (with or without notice, lapse of time or both), pursuant to, or give rise to a right of termination or cancellation under, any provision of any Contracts of AT&T or any of its Subsidiaries (other than the Company and its Subsidiaries) or any Law or governmental or non- A-18 governmental permit or license to which AT&T or any of its Subsidiaries (other than the Company and its Subsidiaries) is subject or (C) any change in the rights or obligations of any party under any of such Contracts, except, in the case of clause (B) or (C) above, for any breach, violation, default, acceleration, creation or change that, individually or in the aggregate, would not reasonably be expected to have a Company Material Adverse Effect or prevent, materially delay or materially impair the ability of the Company or AT&T to consummate the transactions contemplated by this Agreement. The AT&T Disclosure Letter sets forth to the knowledge of AT&T, a correct and complete list of Contracts of AT&T and its Subsidiaries (other than the Company and its Subsidiaries) pursuant to which consents or waivers are or may be required prior to consummation of the transactions contemplated by this Agreement. (iii) The term 'knowledge' when used in this Agreement with respect to AT&T shall mean the actual knowledge of the duly elected or appointed executive officers of AT&T, and does not include information of which they may be deemed to have constructive knowledge only. (e) AT&T Agreements. The Company Disclosure Letter sets forth a list of each AT&T Agreement. Except as set forth in Section 6.13 or in the Transitional Services Agreement, each AT&T Agreement will be in full force and effect at the Effective Time (as and to the extent provided therein) and will be a valid and binding agreement of the parties thereto enforceable against each such party in accordance with its terms, subject to the Bankruptcy and Equity Exception. (f) Brokers and Finders. Neither AT&T nor any of its Subsidiaries (other than the Company or any of its Subsidiaries) nor any of their respective officers, directors or employees has employed any broker or finder or incurred any liability for any brokerage fees, commissions or finders fees in connection with the Merger or this Agreement except that AT&T has employed Morgan Stanley & Co. Incorporated to act as its financial advisor generally in connection with its restructuring, whose fees will be paid by AT&T. (g) Employee Benefits. The consummation of the Merger will not result in any payment which would reasonably be expected to be an 'excess parachute payment' under Section 280G of the Code. 5.3. Representations and Warranties of Parent and Merger Sub. Parent and Merger Sub each hereby represents and warrants to the Company that, except as set forth in the disclosure letter delivered to the Company by Parent on or prior to entering into this Agreement (the 'Parent Disclosure Letter'): (a) Organization, Good Standing and Qualification. Each of Parent and Merger Sub is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of organization and has all requisite corporate or similar power and authority to own and operate its properties and assets and to carry on its business as presently conducted and is qualified to do business and is in good standing as a foreign corporation in each jurisdiction where the ownership or operation of its properties or conduct of its business requires such qualification, except where the failure to be so qualified or in such good standing, when taken together with all other such failures, would not reasonably be expected to have a Parent Material Adverse Effect (as defined below). The term 'Parent Material Adverse Effect' means a material adverse effect on the ability of Parent or Merger Sub to consummate the transactions contemplated by this Agreement. (b) Corporate Authority; Board and Stockholder Approvals. (i) No vote of holders of capital stock or other voting securities of Parent is necessary to approve this Agreement and the Merger and the other transactions contemplated hereby (other than those which have been received prior to the date hereof). The Parent and Merger Sub each has all requisite corporate power and authority and each has taken all corporate action necessary in order to execute, deliver and perform its obligations under this Agreement and to consummate the Merger and the other transactions contemplated by this Agreement. This Agreement is a valid and binding agreement of Parent and Merger Sub, enforceable against each of Parent and Merger Sub in accordance with its terms, subject to the Bankruptcy and Equity Exception. A-19 (ii) The respective boards of directors of Parent and Merger Sub, and Parent as sole stockholder of Merger Sub, have unanimously approved the Merger and this Agreement and the consummation of the Merger and the other transactions contemplated hereby. (c) Governmental Filings; No Violations. (i) Other than the filings and/or notices (A) pursuant to Section 1.3, (B) under the HSR Act and the Exchange Act, (C) required to be made with the NYSE and (D) set forth in the Parent Disclosure Letter, no notices, reports or other filings are required to be made by Parent or Merger Sub or their respective Affiliates with, nor are any consents, registrations, approvals, permits or authorizations required to be obtained by Parent or Merger Sub or their respective Affiliates from, any Governmental Entity, in connection with the execution and delivery of this Agreement by Parent and Merger Sub and the consummation by Parent and Merger Sub of the Merger and the other transactions contemplated hereby, except those as to which the failure to make or obtain are not, individually or in the aggregate, reasonably likely to have a Parent Material Adverse Effect. (ii) The execution, delivery and performance of this Agreement by Parent and Merger Sub do not, and the consummation by Parent and Merger Sub of the Merger and the other transactions contemplated hereby will not, constitute or result in (A) a breach or violation of, or a default under, the certificate of incorporation or by-laws of Parent or Merger Sub or the comparable governing instruments of any of Parent's Subsidiaries, (B) a breach or violation of, or a default under, the acceleration of or the creation of a Lien on the assets of Parent, Merger Sub or any of Parent's Subsidiaries (with or without notice, lapse of time or both) pursuant to, any provision of any Contracts of Parent or any of its Subsidiaries or any Law to which Parent, Merger Sub or any of Parent's Subsidiaries is subject or (C) any change in the rights or obligations of any party under any of the Contracts, except, in the case of clause (B) or (C) above, for breach, violation, default, acceleration, creation or change that, individually or in the aggregate, is not reasonably likely to have a Parent Material Adverse Effect. The Parent Disclosure Letter sets forth, to the knowledge of Parent, a correct and complete list of Contracts of Parent and Merger Sub and their respective Subsidiaries pursuant to which consents or waivers are or may be required prior to consummation of the transactions contemplated by this Agreement. (iii) The term 'knowledge' when used in this Agreement with respect to Parent shall mean the actual knowledge of the duly elected or appointed executive officers of Parent, and does not include information of which they may be deemed to have constructive knowledge only. (d) Available Funds. Parent has or will have available to it all funds necessary to satisfy all of its obligations hereunder and in connection with the Merger and the other transactions contemplated by this Agreement. (e) Brokers and Finders. Neither Parent nor any of its Subsidiaries nor any of their respective officers, directors or employees has employed any broker or finder or incurred any liability for any brokerage fees, commissions or finders fees in connection with the Merger or the other transactions contemplated in this Agreement, except for any fees and expenses which are or may be payable by the Surviving Corporation to Nomura International plc or its Affiliates on or following the consummation of the Merger. (f) No Prior Activities. Except for obligations or liabilities incurred, and business and activities arising, in connection with its incorporation or organization or the negotiation and consummation of this Agreement and the transactions contemplated hereby, including the financing referred to in Section 6.1(x), each of Parent and Merger Sub has neither incurred any obligations or liabilities nor engaged in any business or activities of any type or kind whatsoever or entered into any agreements or arrangements with any person or entity. ARTICLE VI COVENANTS 6.1. Interim Operations. (a) The Company covenants and agrees as to itself and its Subsidiaries that, after the date hereof and prior to the Effective Time (unless Parent shall otherwise approve in writing, A-20 and except as otherwise expressly contemplated by this Agreement or Attachment 6.1(a) to the Company Disclosure Letter): (i) the business of it and its Subsidiaries shall be conducted in the ordinary and usual course and, to the extent consistent therewith, it and its Subsidiaries shall use all reasonable efforts to preserve its business organization intact and maintain its existing relations and goodwill with customers, suppliers, distributors, creditors, lessors, employees and business associates; (ii) it shall not (A) sell or pledge any capital stock owned by it in any of its Subsidiaries (other than pursuant to a merger of two or more wholly owned Subsidiaries); (B) amend its certificate of incorporation or by-laws; (C) split, combine or reclassify, or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for, its outstanding shares of capital stock; (D) declare, set aside or pay any dividend or other distribution payable in cash, stock or property in respect of any capital stock, other than regular quarterly cash dividends not in excess of $.11 per Share; or (E) repurchase, redeem or otherwise acquire, or permit any of its Subsidiaries to purchase or otherwise acquire, any shares of its capital stock or any securities convertible into or exchangeable or exercisable for any shares of its capital stock; (iii) neither it nor any of its Subsidiaries shall (A) issue, sell, pledge, dispose of or encumber, or authorize or propose the issuance, sale, pledge, disposition or encumbrance of, any shares of, or securities convertible into or exchangeable or exercisable for, or options, warrants, calls, commitments or rights of any kind to acquire, any shares of its capital stock of any class or any other property or assets (other than Shares issuable pursuant to Company Options outstanding on the date hereof); or (B) other than (x) pursuant to a merger of two or more wholly owned Subsidiaries, (y) in the ordinary and usual course of business in an amount not in excess of $10,000,000 in any transaction or series of related transactions, or (z) in the ordinary and usual course of business in connection with lease renewals or sales of leased property to the lessee thereof, transfer, lease, license, guarantee, sell, mortgage, pledge or dispose of any other property or assets (including capital stock of any of its Subsidiaries) or encumber any property or assets (including capital stock of any of its Subsidiaries) or (C) other than in the ordinary and usual course of business, incur or modify any material indebtedness or other liability; or (D) other than in the ordinary and usual course of business, purchase or acquire assets or other property having a fair market value in excess of $5,000,000 in any transaction or series of related transactions; (iv) neither it nor any of its Subsidiaries shall terminate, establish, adopt, enter into, make any new grants or awards under, amend or otherwise modify, any Company Plans or employment agreements or increase the salary, wage, bonus or other compensation of any employees (other than payments required or permitted under the Company's severance plans and annual incentive plans as in effect on the date hereof) except increases occurring in the ordinary and usual course of business (which shall include normal periodic performance reviews and related compensation and benefit increases) or otherwise required by applicable law or the terms of such plans; (v) neither it nor any of its Subsidiaries shall settle or compromise any claim or litigation for an amount in excess of $5,000,000 or, except in the ordinary and usual course of business modify, amend or terminate any of its material Contracts or waive, release or assign any material rights or claims; (vi) neither it nor any of its Subsidiaries shall make any Tax election or permit any insurance policy naming it as a beneficiary or loss-payable payee to be cancelled or terminated except in the ordinary and usual course of business; (vii) the Company and its Subsidiaries shall promptly notify the Company of receipt of any notice from any significant customer of the Company or any of its Subsidiaries of such customer's intention to terminate any material Contract with the Company or any of its Subsidiaries; (viii) neither it nor any of its Subsidiaries shall change any accounting principle used by the Company or any of its Subsidiaries, other than as required by GAAP or applicable law (in which case the Company will give Parent notice of such change); (ix) neither it nor any of its Subsidiaries shall enter into or modify any agreement with AT&T or any of its Affiliates except as contemplated hereby; A-21 (x) the Company and its Subsidiaries shall provide Parent with reasonable assistance in connection with Parent's arranging, structuring and receiving financing (including any asset-based financings) in connection with the Merger, including without limitation (A) assisting Parent in preparing any information memoranda or other offering materials which describe the Company, its business and its assets to be used in connection with such financings and (B) providing necessary information to and meeting with such potential investors, rating agencies, lenders and other financial institutions as may be reasonably requested by Parent; provided that the foregoing shall not be construed to require the Company or its Subsidiaries to take any action that (X) obligates the Company or any of its Subsidiaries to incur any indebtedness or other financing obligation that is effective prior to the Effective Time, (Y) affects any existing indebtedness or other financing of the Company and its Subsidiaries prior to the Effective Time or (Z) unduly disrupts the operation of the business of the Company and its Subsidiaries prior to the Effective Time; and (xi) neither it nor any of its Subsidiaries will authorize or enter into an agreement to do any of the foregoing. (b) AT&T covenants and agrees as to itself and its Subsidiaries that, after the date hereof and prior to the Effective Time (unless the Parent shall otherwise approve in writing) it shall not sell, assign, pledge, dispose of or encumber any Shares owned by it or any of its Subsidiaries; provided, however, that AT&T may sell, assign or dispose of any or all such Shares to one or more wholly owned Subsidiaries of AT&T. 6.2. Acquisition Proposals. The Company and AT&T each agrees that neither it nor any of its Subsidiaries nor any of the officers and directors of it or its Subsidiaries shall, and that it shall direct and use its best efforts to cause its and its Subsidiaries' employees, agents and representatives (including any investment banker, attorney or accountant retained by it or any of its Subsidiaries) not to, initiate, solicit or encourage any inquiries or the making of any proposal or offer with respect to a merger, reorganization, consolidation or similar transaction involving, or any purchase of all or any significant portion of the assets or the equity securities of the Company (any such proposal or offer being hereinafter referred to as an 'Acquisition Proposal'). The Company further agrees that neither it nor any of its Subsidiaries nor any of the officers and directors of it or its Subsidiaries shall, and that it shall direct and use its best efforts to cause its and its Subsidiaries' employees, agents and representatives (including any investment banker, attorney or accountant retained by it or any of its Subsidiaries) not to, directly or indirectly, engage in any negotiations concerning, or provide any confidential information or data to, or have any discussions with, any person relating to an Acquisition Proposal, or otherwise facilitate any effort or attempt to make or implement an Acquisition Proposal. AT&T further agrees that it shall not, and that it shall direct and use its best efforts to cause its Subsidiaries, and its Subsidiaries' directors, officers, employees, agents and representatives (including any investment banker, attorney or accountant retained by it or any of its Subsidiaries), not to, directly or indirectly, engage in any negotiations concerning, or provide any confidential information or data to, or have any discussions with, any person relating to an Acquisition Proposal, or otherwise facilitate any effort or attempt to make or implement an Acquisition Proposal. The Company and AT&T each agrees that it will immediately cease and cause to be terminated any existing activities, discus-sions or negotiations with any parties conducted heretofore with respect to any of the foregoing. The Company and AT&T each agrees that it will take the necessary steps to promptly inform the individuals or entities referred to in the first sentence hereof of the obligations undertaken in this Section 6.2 and in the Confidentiality Agreement (as defined in Section 9.7). The Company and AT&T each agrees that it will notify Parent if any such inquiries, proposals or offers are received by, any such information is requested from, or any such negotiations or discussions are sought to be initiated or continued with it. AT&T and the Company acknowledge that the remedy at law for breach of the provisions of this Section 6.2 will be inadequate and that, in addition to any other remedy Parent may have, it will be entitled to an injunction restraining any such breach or threatened breach, without any bond or other security being required. 6.3. Information Supplied. (a) The Company, AT&T and Parent each agrees, as to itself and, in the case of the Company and Parent, each of their respective Subsidiaries, that none of the information supplied or to be supplied by it or, in the case of the Company and Parent, each of their respective Subsidiaries, for inclusion or incorporation by reference in the Information Statement to be filed with A-22 the SEC by the Company will contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. (b) If at any time prior to the Effective Time any event or circumstance relating to the Company or to Parent or AT&T or any of their Affiliates, or their respective officers and directors, should be discovered by such party, that is required to be set forth in a supplement to the Information Statement, such party shall promptly inform the other parties. All documents that the Company is responsible for filing with the SEC in connection with the transactions contemplated herein will comply as to form and substance in all material respects with the applicable requirements of the Exchange Act and the rules and regulations thereunder. (c) The agreements contained in this Section 6.3 shall survive the consummation of the Merger until the first anniversary of the date of this Agreement. 6.4. Filings; Other Actions; Notification. (a) The Company shall promptly prepare and file with the SEC an Information Statement pursuant to Rule 14c-2 under the Exchange Act (the 'Information Statement') and shall comply with any other applicable requirements under the Exchange Act in connection with the Merger and the other transactions contemplated by this Agreement. The Company shall use its reasonable efforts to have the Information Statement reviewed and approved by the SEC as promptly as practicable after such filing, and promptly thereafter the Company shall mail the Information Statement to the stockholders of the Company. The Information Statement shall include a copy of the opinion of Goldman, Sachs & Co. referred to in Section 5.1(c)(ii), together with a description of the analyses and procedures utilized by Goldman, Sachs & Co. in arriving at their opinion. In addition, as promptly as practicable after the date hereof, the Company shall prepare a notice pursuant to Section 228(d) of the DGCL (the 'Notice'), and shall mail the Notice to the stockholders of the Company together with the Information Statement. Parent shall have the right and opportunity to review and make reasonable comments on the Information Statement prior to its filing with the SEC and the Company shall not file the Information Statement without the prior approval of Parent, which approval will not be unreasonably withheld. (b) The Company, AT&T and Parent each shall cooperate with each other and use (and cause their respective Subsidiaries to use) their respective best efforts to prepare and file as promptly as practicable all documentation to effect all necessary applications, notices, petitions, filings and other documents, including notification and report under the HSR Act, and to obtain as promptly as practicable all permits, consents, approvals and authorizations necessary or advisable to be obtained from any third party and/or any Governmental Entity in connection with the Merger and to consummate the other transactions contemplated by this Agreement. Subject to applicable laws relating to the exchange of information, the Company, AT&T and Parent shall have the right to review in advance, and to the extent practicable each will consult the other on, all the information relating to the Company, AT&T and Parent, as the case may be, and any of their respective Subsidiaries, that appear in any filing made with, or written materials submitted to, any third party and/or any Governmental Entity in connection with the Merger and the other transactions contemplated by this Agreement. In exercising the foregoing right, each of the Company, AT&T and Parent shall act reasonably and as promptly as practicable. (c) The Company, AT&T and Parent each shall, upon request by the other, furnish the other with all information concerning itself, its Subsidiaries, directors, officers and stockholders and such other matters as may be reasonably necessary or advisable in connection with the Information Statement or any other statement, filing, notice or application made by or on behalf of the Company, AT&T, Parent, or any of their respective Subsidiaries to any Governmental Entity in connection with the Merger and the transactions contemplated by this Agreement. (d) The Company, AT&T and Parent each shall keep the others apprised of the status of matters relating to completion of the transactions contemplated hereby, including promptly furnishing the others with copies of notices or other communications received by the Company, AT&T or Parent, as the case may be, or, in the case of Parent or the Company, any of their respective Subsidiaries, from any third party and/or any Governmental Entity with respect to the Merger and the other transactions contemplated by this Agreement. The Company, AT&T and Parent each shall give prompt notice to the A-23 other of any change that is reasonably likely to result in a Company Material Adverse Effect or Parent Material Adverse Effect, respectively. (e) The Company shall use its reasonable best efforts to obtain each consent or approval of each person whose consent or approval is required in order to permit the succession by the Surviving Corporation pursuant to the Merger to any obligation, right or interest of the Company or any Subsidiary of the Company under any Contract or License to which the Company or any of its Subsidiaries is a party or is subject. (f) Without limiting the generality of the undertakings pursuant to this Section 6.4, the Company and AT&T and Parent each agree to take or cause to be taken the following actions: (i) provide promptly to any and all federal, state, local or foreign court or Government Entity with jurisdiction over enforcement of any applicable antitrust laws ('Government Antitrust Entity') information and documents requested by any Government Antitrust Entity or necessary, proper or advisable to permit consummation of the Merger and the transactions contemplated by this Agreement; and (ii) take promptly, in the event that any permanent or preliminary injunction or other order is entered or becomes reasonably foreseeable to be entered in any proceeding that would make consummation of the Merger in accordance with the terms of this Agreement unlawful or that would prevent or delay consummation of the Merger or the other transaction contemplated by this Agreement, any and all commercially reasonable steps (including the appeal thereof or the posting of a bond, but not including the sale or other disposition of, or the holding separate of, any assets, categories of assets or businesses of the Company or Parent or either's respective Subsidiaries) necessary to vacate, modify or suspend such injunction or order so as to permit such consummation on a schedule as close as possible to that contemplated by this Agreement. 6.5. Access. Upon reasonable notice, and except as may otherwise be required by applicable law, the Company shall (and shall cause its Subsidiaries to) afford the Parent's officers, employees, counsel, accountants and other authorized representatives ('Representatives') reasonable access, during normal business hours throughout the period prior to the Effective Time, to its properties, books, Contracts, records, officers and employees and, during such period, shall (and shall cause its Subsidiaries to) furnish promptly to the Parent all information concerning its business, properties and personnel as may reasonably be requested, provided that no investigation pursuant to this Section shall affect or be deemed to modify any representation or warranty made by the Company or AT&T, and provided, further, that the foregoing shall not require the Company to permit any inspection, or to disclose any information, that in the reasonable judgment of the Company would result in the disclosure of any trade secrets of third parties or violate any of its obligations with respect to confidentiality. All requests for access or information made pursuant to this Section shall be directed to an executive officer of the Company or such person as may be designated by its executive officers, as the case may be. In addition, the Company shall permit Parent to have located at the Company's principal executive offices two representatives of Parent for the purpose of conducting preliminary work related to the financing of the Merger and the other transactions contemplated hereby; provided that such representatives shall be reasonably acceptable to the Company, shall conduct themselves in a reasonable manner and subject to such reasonable limitations as the Company may impose and shall have entered into an appropriate confidentiality agreement. 6.6. AT&T Operating Agreement and License Agreement. (a) Effective as of immediately following consummation of the Merger, AT&T and the Company shall amend Section 11.2(a)(iv) of the Operating Agreement, dated as of June 25, 1993, between AT&T and the Company to read in its entirety as follows: (iv) at the election of AT&T, by at least 180 days' prior notice to Capital, in the event that Capital at any time becomes a Subsidiary of any Person, other than the Person or an Affiliate of the Person which acquired Capital from the AT&T Entities, without the prior written consent of AT&T (it being understood that such consent shall not be unreasonably withheld or delayed); (b) Effective as of immediately following consummation of the Merger, AT&T and the Company shall amend Section 2.3(a) of the License Agreement, dated as of June 25, 1993 (the 'License Agreement'), between AT&T and the Company (i) to replace the words 'one year's' in the first A-24 sentence thereof with the words 'two year's' and (ii) to replace the words 'one-year' in the second sentence thereof with the words 'two-year'. (c) Effective as of immediately following consummation of the Merger, AT&T and the Company shall amend Section 6.2(iv) of the License Agreement (i) to replace the words 'investment grade' in the first sentence thereof with the words 'Ba1 by Moody's Investor Services and below BB+ by Standard & Poor's Corporation' and (ii) to delete the words 'by at least two nationally recognized statistical rating agencies' in the two places that such words appear in the first sentence thereof. (d) The parties understand and agree that the amendments to the License Agreement set forth in paragraphs (b) and (c) of this Section 6.6 shall not apply to the licenses granted by, or the rights and obligations of, Lucent Technologies Inc. ('Lucent') or NCR Corporation ('NCR') under the Letter Agreement dated April 2, 1996 between the Company and Lucent and the Letter Agreement dated April 18, 1996 between the Company and NCR. 6.7. Publicity. (a) The Company, AT&T and Parent each shall consult with, and receive the prior approval of, the others prior to issuing any press releases or otherwise making public announcements with respect to the Merger and the other transactions contemplated by this Agreement and prior to making any filings with any third party and/or any Governmental Entity (including any national securities exchange) with respect thereto, except as may be required by law or by obligations pursuant to any listing agreement with or rules of any national securities exchange. (b) AT&T agrees that all information concerning Parent, Merger Sub and their respective Affiliates furnished to AT&T or its representatives by or on behalf of Parent (other than information that would meet one of the exceptions to the definition of 'Evaluation Material' contained in the first paragraph of the Confidentiality Agreement referred to in Section 9.7 will be used solely in connection with the transactions contemplated by this Agreement and will be kept confidential by AT&T and its representatives; provided that disclosure of such information may be made (i) to the extent required by law, (ii) to the extent required in the Information Statement, subject to Section 6.4 hereof, (iii) to the extent required in any legal proceeding to enforce any rights of AT&T or the Company against Parent, Merger Sub or their respective Affiliates under this Agreement or any related agreement and (iv) as consented to in writing by Parent or Merger Sub. (c) The agreements contained in this Section 6.7 shall survive the consummation of the Merger for one month following the Closing. 6.8. Employee Benefit Covenants. (a) In General. Parent agrees to honor or cause the Surviving Corporation to honor all Company Plans pursuant to all of the terms of such Company Plans. In connection with the foregoing, except as otherwise specifically provided in this Section 6.8, to the extent not prohibited by law, the Surviving Corporation shall, and Parent shall cause the Surviving Corporation to, continue in effect through December 31, 1997 all Company Plans without any adverse amendment or modification (other than, subject to Section 6.8(e), the Company's 1993 LSPP, the 1993 LTIP, and the Company's Share Performance Incentive Plan (the 'SPIP') and Employee Stock Purchase Plan (the 'Equity-Based Plans') and the Company's 1993 Deferred Compensation Plan); provided, however, that the Company's Leadership Severance Plan and Member Severance Plan (the 'Severance Plans') shall be continued, except as modified by mutual written agreement with the affected employees, for at least twenty-seven (27) months from the Effective Time; provided, further, that in lieu of continuing specific welfare benefit and insurance plans or programs, the Surviving Corporation shall, and Parent shall cause the Surviving Corporation to, provide welfare benefit and insurance plans or programs that are no less favorable in the aggregate than those provided by the Company immediately prior to the Effective Time. (b) Change in Control. Parent, the Company and AT&T acknowledge and agree that approval of the Merger by the stockholders of the Company shall, where applicable, constitute a Change in Control and Sale of Control of the Company for purposes of the Company Plans. (c) Executive Benefit Plan. The Surviving Corporation shall, and Parent shall cause the Surviving Corporation to, continue the Company's Executive Benefit Plan and the grantor trust established to fund benefits thereunder in accordance with their terms until all benefits are paid under such plan to A-25 participants who are vested as of the Effective Time or become vested during the 2-year period following the Effective Time. (d) Equity-Based Plans. The Surviving Corporation shall, and Parent agrees to cause the Surviving Corporation to, continue in effect the 1993 LSPP and 1993 LTIP through at least August 6, 1996 to the extent any awards remain unvested under such plans. (e) Share Performance Incentive Plan. The Surviving Corporation shall, and Parent acknowledges and agrees that immediately following the Effective Time it shall cause the Surviving Corporation to, pay each participant in the SPIP (including recipients of share performance incentive awards under the 1993 LTIP) (i) 100% Maximum Payout (as defined in the SPIP) for each pending performance period (i.e., the second, third and fourth periods) and (ii) with respect to any performance period completed within twelve (12) months prior to the Effective Time the excess of (a) 100% of the Maximum Payout for such participant for such performance period over (B) the payment actually made to the participant for such performance period. The Surviving Corporaiton shall, and Parent further agrees to cause the Surviving Corporation to, amend the SPIP (and the share performance incentive awards under the 1993 LTIP) to provide for 100% Maximum Payout with respect to all future performance periods (beginning following the Effective Time) under the SPIP and such awards, with such amounts to be paid immediately following the Effective Time; provided, that, for those employees who are not members of the Company's Leadership Forum, any such 100% Maximum Payment for future performance periods shall be conditioned upon the employee entering into an agreement with Parent and the Surviving Corporation to revise the terms of the Company severance plan applicable to such employee to modify the definition of 'Qualifying Termination' under such plan. If no such agreement is reached with a particular employee, future performance periods under the SPIP or such share performance incentive awards will continue pursuant to their terms with respect to such employee. (f) Annual Incentive Plan. The Surviving Corporation shall, and Parent agrees to cause the Surviving Corporation to, amend the Company's Annual Incentive Plan and Senior Executive Annual Incentive Plan to provide that payments to each participant under such plans for the 1996 calendar year will be made at no less than such participant's target award for 1996. (g) Other Plans. The Surviving Corporation shall, and Parent agrees to cause the Surviving Corporation to, amend the Company's Supplemental Income Benefits Plan (the 'SIB'), Supplemental Executive Retirement Plan (the 'SERP'), and Excess Benefits Plan (the 'Excess Plan'), effective as of the Effective Time, to provide that (i) such plans may not be amended or terminated to reduce benefits accrued prior to such amendment or termination, and (ii) with respect to the Excess Plan, all benefits shall be vested as of the Effective Time. (h) Credited Service. If any Company Employee becomes a participant in any employee benefit plan, practice or policy of Parent, or any of Parent's affiliates (including the Surviving Corporation), such Company Employee shall be given credit under such plan for all service prior to the Effective Time with the Company and its Subsidiaries or any predecessor employer (including AT&T or any of its subsidiaries), which service has been recognized by the Company under similar plans, policies or practices, for purposes of eligibility and vesting and for all other purposes for which such service is either taken into account or recognized; provided, however, that such service shall not be credited for purposes of benefit accruals under tax-qualified plans. (i) Plan Withdrawals. The Company agrees to withdraw as a participating employer from all employee benefit plans, practices or policies sponsored by AT&T and its Subsidiaries (other than the Company) effective as of the Closing Date, except as otherwise provided in the Transitional Services Agreement and the Benefits Agreement between AT&T and the Company dated of of January 1, 1994; provided, however, that such withdrawal shall not affect the rights of any current retirees of the Company with respect to AT&T and its plans. (j) Survival. The agreements contained in this Section 6.8 shall survive the consummation of the Merger. (k) Intended Beneficiaries. The provisions of paragraph (e) of this Section 6.8 are intended to be for the benefit of, and shall be enforceable by, each participant in the SPIP and recipient of a share performance incentive award under the 1993 LTIP. A-26 6.9. Expenses. Parent or the Surviving Corporation shall pay all charges and expenses, including those of the Paying Agent, in connection with the transactions contemplated in Article IV. Subject to Section 9.1 hereof and except as otherwise provided herein, whether or not the Merger is consummated, all costs and expenses incurred in connection with this Agreement and the Merger and the other transactions contemplated by this Agreement shall be paid by the party incurring such expense; provided that the reasonable legal fees and other professional expenses incurred by the management of the Company in connection with the negotiation of arrangements with the Parent and its affiliates shall be reimbursed by the Company. The agreements contained in this Section 6.9 shall survive the consummation of the Merger. 6.10. Indemnification; Directors' and Officers' Insurance. (a) For six years after the Effective Time, Parent shall indemnify and hold harmless, to the fullest extent permitted under applicable law (and Parent shall also advance expenses as incurred to the fullest extent permitted under applicable law provided the person to whom expenses are advanced provides an undertaking to repay such advances if it is ultimately determined that such person is not entitled to indemnification), each present and former director, officer and employee of the Company and its Subsidiaries (collectively, the 'Indemnified Parties') against any costs or expenses (including reasonable attorneys' fees), judgments, fines, losses, claims, damages or liabilities (collectively, 'Costs') incurred in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, arising out of or pertaining to matters existing or occurring at or prior to the Effective Time, including the transactions contemplated by this Agreement. (b) Any Indemnified Party wishing to claim indemnification under paragraph (a) of this Section 6.10, upon learning of any such claim, action, suit, proceeding or investigation, shall promptly notify Parent thereof, but the failure to so notify shall not relieve Parent of any liability it may have to such Indemnified Party to the extent such failure does not materially prejudice Parent. In the event of any such claim, action, suit, proceeding or investigation (whether arising before or after the Effective Time), (i) Parent or the Surviving Corporation shall have the right to assume the defense thereof and Parent shall not be liable to such Indemnified Parties for any legal expenses of other counsel or any other expenses subsequently incurred by such Indemnified Parties in connection with the defense thereof, except that if Parent or the Surviving Corporation elects not to assume such defense or counsel for the Indemnified Parties advises that there are issues which raise conflicts of interest between Parent or the Surviving Corporation and the Indemnified Parties, the Indemnified Parties may retain counsel satisfactory to them, and Parent or the Surviving Corporation shall pay all reasonable fees and expenses of such counsel for the Indemnified Parties promptly as statements therefor are received; provided, however, that Parent shall be obligated pursuant to this paragraph (b) to pay for only one firm of counsel for all Indemnified Parties in any jurisdiction unless the use of one counsel for such Indemnified Parties would present such counsel with a conflict of interest, (ii) the Indemnified Parties will cooperate in the defense of any such matter and (iii) Parent shall not be liable for any settlement effected without its prior written consent; and provided, further, that Parent shall not have any obligation hereunder to any Indemnified Party if and when a court of competent jurisdiction shall ultimately determine, and such determination shall have become final, that the indemnification of such Indemnified Party in the manner contemplated hereby is prohibited by applicable law. If such indemnity is not available with respect to any Indemnified Party, then the Surviving Corporation and the Indemnified Party shall contribute to the amount payable in such proportion as is appropriate to reflect relative faults and benefits. (c) The Surviving Corporation shall from and after the Closing Date have in place officers' and directors' liability insurance providing insurance protection to the Company's and its Subsidiaries' officers and directors substantially similar (including as to scope, deductible and maximum liability) as the insurance currently maintained by or for the Company ('D&O Insurance') for a period of six years after the Effective Time so long as the annual premium therefor is not in excess of $750,000 (the 'Current Premium'); provided, however, if a future annual premium exceeds $750,000, the Surviving Corporation will use its best efforts to obtain as much D&O Insurance as can be obtained for the remainder of such period for a premium not in excess of $750,000. A-27 (d) Until the Effective Time, AT&T will maintain in place such D&O Insurance as is currently maintained by AT&T covering directors, officers and employees of the Company and its Subsidiaries, or renewals thereof in the ordinary course. From and after the Effective Time, AT&T will (and will cause its Subsidiaries to) cooperate reasonably with the Surviving Corporation in submitting claims (or pursuing claims previously made) on behalf of the Surviving Corporation under any such D&O Insurance in effect prior to the Effective Time; provided that the Surviving Corporation shall reimburse, indemnify and hold AT&T and its Subsidiaries (other than American Ridge in its capacity as an insurer or reinsurer) harmless from all liabilities, costs and expenses of any nature actually incurred by AT&T or its Subsidiaries as a result of any such claims made under such D&O Insurance as contemplated above; and provided, further, that neither the Surviving Corporation nor AT&T nor any of their respective Affiliates shall have any obligation to reimburse or indemnify the other with respect to any retrospective rating adjustments or deductibles. AT&T will also cooperate reasonably with the Company in connection with such arrangements as the Company may make to put in place D&O Insurance from and after the Closing Date, as contemplated by paragraph (c) of this Section 6.10, provided that AT&T makes no representation or warranty with respect to any such arrangements the Company may make, and provided, further, that AT&T's cooperation will not require it to expend any funds (unless promptly reimbursed by the Company) or to take any actions which would adversely affect its rights, or lead to the incurrence of additional costs, under any of AT&T's insurance policies. The provisions of this Section 6.10(d) shall remain in full force and effect notwithstanding any terms of the Transitional Services Agreement. (e) If the Surviving Corporation or any of its successors or assigns (i) shall consolidate with or merge into any other corporation or entity and shall not be the continuing or surviving corporation or entity of such consolidation or merger or (ii) shall transfer all or substantially all of its properties and assets to any individual, corporation or other entity, then and in each such case, proper provisions shall be made so that the successors and assigns of the Surviving Corporation shall assume all of the obligations set forth in this Section. (f) The provisions of this Section are intended to be for the benefit of, and shall be enforceable by, each of the Indemnified Parties, their heirs and their representatives. (g) The agreements contained in this Section 6.10 shall survive the consummation of the Merger. 6.11. Takeover Statute. If any Takeover Statute is or may become applicable to the Merger or the other transactions contemplated by this Agreement, each of Parent, AT&T and the Company and their respective boards of directors shall grant such approvals and take such reasonable actions as are necessary so that such transactions may be consummated as promptly as practicable on the terms contemplated by this Agreement or by the Merger and otherwise take such reasonable actions to eliminate or minimize the effects of such statute or regulation on such transactions. 6.12. Reasonable Best Efforts and Cooperation. The Company, Parent and Merger Sub each shall use (and shall cause its Subsidiaries to use) its reasonable best efforts and shall cooperate with each other to cause the conditions set forth in Article VII hereof to be satisfied and to consummate the Merger and the other transactions contemplated by this Agreement. 6.13. Tax Matters. (a) Section 338(h)(10) Election. (i) AT&T and Parent shall jointly make timely and irrevocable elections under Section 338(h)(10) of the Code and, if permissible, similar elections under any applicable state or local income tax laws. AT&T, Parent and the Company shall report the transactions consistent with such elections under Section 338(h)(10) of the Code or any similar state or local tax provision (the 'Elections') and shall take no position contrary thereto unless and to the extent required to do so pursuant to a determination (as defined in Section 1313(a) of the Code or any similar state or local tax provision). (ii) To the extent possible, AT&T, Parent and the Company shall execute at the Closing any and all forms necessary to effectuate the Elections (including, without limitation, Internal Revenue Service Form 8023 and any similar forms under applicable state and local income tax laws (the 'Section 338 Forms')). In the event, however, any Section 338 Forms are not executed at the Closing, AT&T, Parent and the Company shall prepare and complete each such Section 338 Form no later than 15 days prior to A-28 the date such Section 338 Form is required to be filed. AT&T, Parent and the Company shall each cause the Section 338 Forms to be duly executed by an authorized person for AT&T, Parent and the Company in each case, and shall duly and timely file the Section 338 Forms in accordance with applicable tax laws and the terms of this Agreement. (iii) AT&T and Parent agree to allocate the Aggregate Deemed Sale Price (as defined under applicable Treasury Regulations) of the assets of each of the Company and its Subsidiaries for which a Section 338(h)(10) Election is made as follows: AT&T and Parent agree that the fair market value of the Class I, Class II and Class III assets (each as defined in the Treasury Regulations under Code Section 1060) of the Company and each of its Subsidiaries shall equal the book value of such assets on the Closing Date. Any remaining Aggregate Deemed Sale Price will be allocated to the Class IV Assets. AT&T and Parent will accept such allocation and will reflect such allocation in all applicable tax returns filed by any of them, including but not limited to the Section 338 Forms. Parent and the Company shall not take a position before any taxing authority or otherwise (including in any Tax return) inconsistent with such allocation unless and to the extent required to do so pursuant to a determination (as defined in Section 1313(a) of the Code or any similar state or local law). (b) Liability for Taxes and Related Matters. (i) Except as set forth in the next sentence, liability for consolidated, combined or unitary federal, state and local income Taxes ('Consolidated Taxes') and entitlement to any refund for any taxable year or period that ends on or before the Closing Date and, with respect to any taxable year or period beginning before and ending after the Closing Date, the portion of such taxable year ending on and including the Closing Date (the 'Pre-Closing Periods') shall be allocated to AT&T and AT&T shall indemnify and hold harmless Parent, the Company and the Company's Subsidiaries for such Taxes. Parent, the Company and each of the Subsidiaries (the 'Parent Group') will pay to AT&T amounts determined in accordance with Section 6.13(e) hereof with respect to 1995 and 1996 Taxes; provided, however, that AT&T shall be liable for and indemnify Parent, the Company and each Subsidiary of the Company for all Taxes attributable to the election to be made under Section 338(h)(10) of the Code and any state law equivalent pursuant to Section 6.13(a) hereof. At or prior to Closing, the Company shall pay to AT&T $35 million in respect of the Taxes accrued on the balance sheet, (x) less amounts that are paid to AT&T under the existing tax sharing agreements set forth as Annex A hereto (the 'Tax Sharing Agreements') from the date hereof through the Closing Date in respect of years ended before 1995 and (y) plus amounts that are paid by AT&T to the Company and/or its Subsidiaries from the date hereof through the Closing Date under the Tax Sharing Agreements in respect of years ended before 1995. AT&T shall be entitled to all refunds with respect to Consolidated Taxes. (ii) Parent shall be liable for and indemnify AT&T for (x) the Taxes of the Company and each Subsidiary of the Company for any taxable year or period that begins after the Closing Date and, with respect to any taxable year or period beginning before and ending after the Closing Date, the portion of the taxable year beginning after the Closing Date and (y) all Taxes of the Company and each Subsidiary other than Consolidated Taxes ('Standalone Taxes'). (iii) For purposes of paragraphs (b)(i), (b)(ii) and (d), whenever it is necessary to determine the liability for Taxes of the Company or any Subsidiary of the Company for a portion of a taxable year or period that begins before and ends after the Closing Date, the determination of such Taxes for the portion of the year or period ending on, and the portion of the year or period beginning after, the Closing Date shall be determined by assuming that the Company or Subsidiary, as applicable, had a taxable year or period which ended at the close of the Closing Date, except that exemptions, allowances or deductions that are calculated on an annual basis, such as the deduction for depreciation, shall be apportioned on a time basis. (iv) Any payment by Parent or AT&T under this Section 6.13 will be an adjustment to the portion of the Merger Consideration allocable to the Shares that are held by AT&T immediately prior to the Effective Time. (v) For purposes of this Section 6.13, the term 'AT&T Group' means any 'affiliated group' (as defined in Section 1504(a) of the Code without regard to the limitations contained in Section 1504(b) of A-29 the Code) that includes AT&T or any predecessor of or successor to AT&T (or another such predecessor or successor). (c) Tax Returns. AT&T shall file or cause to be filed (including by causing the Company or the relevant subsidiary to file) when due all Tax Returns with respect to Consolidated Taxes that are required to be filed by or with respect to a member of the AT&T Group and any of the Company and/or any Subsidiary of the Company for taxable years or periods ending on or before the Closing Date, and Parent shall file or cause to be filed when due all other Tax Returns that are required to be filed by or with respect to the Company. (d) Termination of Tax Allocation Agreements. Except to the extent set forth in Section 6.13(e) hereof, any tax allocation or sharing agreement or arrangement, whether or not written, that may have been entered into by AT&T or any member of the AT&T Group and the Company or any Subsidiary of the Company shall be terminated as to the Company and each Subsidiary of the Company as of the Closing Date, and all amounts due from or to the Company or any Subsidiary of the Company under any such sharing agreement or arrangement shall be paid on or prior to the Closing Date. (e) 1995 and 1996 Taxes. For purposes of determining the amounts due to AT&T with respect to the taxable years of the Company and its Subsidiaries for the year ended December 31, 1995 and the year ending on the Closing Date, the existing Tax Sharing Agreements shall apply. However, in lieu of the procedures set forth in the Tax Sharing Agreements, the following procedures shall govern. With respect to the taxable year of AT&T ended December 31, 1995 and the period in 1996 prior to the Closing Date, Parent shall cause the Company promptly to prepare and provide to AT&T a package of tax information materials with respect to the Company and its Subsidiaries in the form requested by AT&T and on a basis consistent with past practices and a calculation of the tax sharing payments due with respect to Consolidated Taxes (the 'Tax Package'), which shall be completed (x) not later than the internal due date established by AT&T for the submission of such tax information to AT&T by its Subsidiaries with respect to the Federal income tax return of AT&T for 1995 and (y) not later than 45 days after the Closing Date for the taxable year of AT&T that includes the Closing Date (it being agreed and understood that with respect to subclause (y), such Tax Package will be in draft form and will be revised and finalized within 60 days thereafter). The Tax Package shall be reviewed by Arthur Andersen as to its accuracy prior to its submission to AT&T. Coopers & Lybrand on behalf of AT&T shall, within 45 days of AT&T's receipt of the Tax Package (in the case of the Tax Package for the year ended on the Closing Date, within 45 days of the receipt of the revised, finalized Tax Package), provide Parent with any comments on the Tax Package and shall provide its analysis of the amount payable by the Company and its Subsidiaries under the Tax Sharing Agreement. In the case of Consolidated Taxes for the Company's year ended on the Closing Date, the analysis of the tax sharing amount payable shall be based upon estimated results for AT&T (other than the Company) and apportionment factors for 1995 (the tax sharing payment so calculated shall be referred to as the 'Estimated Payments'). The Estimated Payments shall be refined and reviewed by Coopers & Lybrand by July 31, 1997, based upon actual apportionment factors and other results for 1996 and a final tax sharing payment amount shall be determined. Arthur Andersen and Parent shall agree or object to each of Coopers & Lybrand's responses hereunder within 10 days of receipt thereof. The tax sharing payments for 1995, and any Estimated Payments and adjustments thereto (resulting in the final payments for 1996), shall be made by Parent to AT&T within 5 days of such agreement. If Coopers & Lybrand and Arthur Andersen cannot reach agreement on the Estimated Payments and/or the tax sharing payment, then (i) Parent shall pay to AT&T any amount which is agreed to be payable within five (5) days and (ii) Coopers & Lybrand and Arthur Andersen jointly shall select promptly a third 'big six' accounting firm (the 'Neutral Firm') whose fees and expenses shall be shared equally by AT&T and the Company and whose determination of the amount payable and of the appropriate reserves shall be binding upon the parties. Any additional amounts determined thereby to be due shall be paid within 3 days of the determination of the Neutral Firm. Other than amounts owed to AT&T under the terms of this Section 6.13(e), Parent, Company and the Company's Subsidiaries shall have no liability with respect to 1995 and 1996 Consolidated Taxes (including any liabilities arising from an audit). The Tax Sharing Agreements with respect to 1995 and 1996 Taxes shall terminate upon payment of all amounts determined under this paragraph. A-30 (f) Assistance and Cooperation. After the Closing Date, each of AT&T and Parent shall: (i) assist in all reasonable respects (and cause their respective affiliates to assist) the other party in preparing any Tax Returns or reports which such other party is responsible for preparing and filing in accordance with this Section 6.13 (including in analyzing the Tax Package); (ii) cooperate in all reasonable respects in preparing for any audits of, or disputes with taxing authorities regarding, any Tax Returns of the Company or any Subsidiary of the Company; (iii) make available to the other and to any taxing authority as reasonably requested all information, records, and documents relating to Taxes of the Company and each Subsidiary of the Company; (iv) provide timely notice to the other in writing of any pending or threatened tax audits or assessments of the Company and each Subsidiary of the Company for taxable periods for which the other may have a liability under this Section 6.13; and (v) furnish the other with copies of all correspondence received from any taxing authority in connection with any tax audit or information request with respect to any such taxable period. (g) Contests; Payment Procedure. (i) AT&T shall control, manage and solely be responsible for any audit, contest, claim, proceeding or inquiry with respect to Consolidated Taxes and shall have the exclusive right to settle or contest in its sole discretion any such audit, contest, claim, proceeding or inquiry without the consent of any other party. (ii) Parent shall control, manage and solely be responsible for any audit, contest, claim, proceeding or inquiry with respect to Standalone Taxes and shall have the exclusive right to settle or contest any such audit, contest, claim, proceeding, or inquiry without the consent of any other party. (h) Survival. The indemnification provisions contained in this Section 6.13 (Tax Matters) shall survive the consummation of the Merger and shall not expire. 6.14. No Solicitation of Employees. From the date hereof through the fifth anniversary of the Closing Date, neither AT&T nor any of its wholly owned Subsidiaries, so long as they are wholly owned subsidiaries of AT&T, shall induce or attempt to induce any employee of the Company to leave the employ of the Company or any of its Subsidiaries; provided that the foregoing shall not be construed to prevent AT&T or any of its wholly owned Subsidiaries from (a) prior to the Effective Time complying with its covenants set forth in Article VIII of the Intercompany Agreement in a manner consistent with past practice or (b) employing former employees of the Company or its Subsidiaries, so long as AT&T and its wholly owned Subsidiaries did not induce or attempt to induce such former employees to leave the employ of the Company or any of its Subsidiaries. AT&T acknowledges and agrees that the covenant contained in this Section 6.14 is reasonable and necessary to protect the legitimate business interests of Parent. The agreements contained in this Section 6.14 shall survive the consummation of the Merger until the fifth anniversary of the Closing. 6.15. Transitional Services. AT&T and Parent shall enter into a transitional services agreement, containing such terms and conditions as AT&T and Parent may reasonably agree (including those terms and conditions set forth in Exhibit 6.15 hereto), governing the provision by AT&T and its Affiliates to the Surviving Corporation for a reasonable period after the Effective Time (not to exceed one year) of those services listed on Exhibit 6.15 hereto (the 'Transitional Services Agreement'). 6.16. Existing Financing Arrangements. Prior to the Closing, the Company agrees to: (a) use its reasonable best efforts to solicit and receive the requisite consents to, or waivers in respect of, the Merger and the other transactions contemplated by or resulting from this Agreement from the banks and other financial institutions parties to the agreements listed in Section A of Attachment 5.1(d)(ii) of the Company Disclosure Letter, or otherwise amend the terms of such agreements on terms reasonably satisfactory to Parent; and (b) to use its reasonable best efforts to cause to be delivered such certificates and opinions as may be required in connection with the Merger under any debt instruments or indentures to which it is a party. 6.17. Funding Parent. Parent covenants that not later than June 12, 1996, Parent shall receive a $100 million equity contribution in the form of cash or direct obligations of the government of the United States of America ('Government Securities'). Parent covenants that it shall utilize the proceeds of such A-31 equity contribution to purchase Government Securities having a maturity not later than one year after the date of purchase or receipt thereof by Parent. Parent covenants that it shall keep such proceeds so invested (free of any Liens) until the Effective Time. ARTICLE VII CONDITIONS 7.1. Conditions to Each Party's Obligation to Effect the Merger. The respective obligation of each party to effect the Merger is subject to the satisfaction or waiver at or prior to the Effective Time of each of the following conditions: (a) Regulatory Consents and Orders. The waiting period applicable to the consummation of the Merger under the HSR Act shall have expired or been terminated and all other notices, reports and other filings required to be made by the Company, its Subsidiaries, AT&T, Parent or Merger Sub with, and consents, registrations, approvals, permits and authorizations required to be obtained by the Company, its Subsidiaries, AT&T, Parent or Merger Sub from, any Governmental Entity, in each case as set forth on the Company Disclosure Letter, the AT&T Disclosure Letter or the Parent Disclosure Letter, as the case may be, shall have been made or obtained and shall be in full force and effect, and no court or Governmental Entity of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any statute, rule, regulation, judgment, decree, injunction or other order (whether temporary, preliminary or permanent) that is in effect and restrains, enjoins or otherwise prohibits consummation of the transactions contemplated by this Agreement (collectively, an 'Order'). 7.2. Conditions to Obligation of Parent. The obligation of Parent to effect the Merger is also subject to the satisfaction or waiver by Parent prior to the Effective Time of the following conditions: (a) Representations and Warranties. The representations and warranties of the Company and AT&T set forth in this Agreement shall be true and correct in all material respects as of the date of this Agreement and (except to the extent such representations and warranties speak as of an earlier date) as of the Closing Date as though made on and as of the Closing Date. Parent shall have received (i) a certificate signed on behalf of the Company by the Chief Executive Officer or any Senior Vice President of the Company to the effect of the previous sentence (with respect to the Company) and (ii) a certificate signed on behalf of AT&T by any Vice President of AT&T to the effect of the previous sentence (with respect to AT&T). (b) Performance of Obligations of the Company and AT&T. The Company and AT&T shall have performed in all material respects all obligations required to be performed by each of them under this Agreement at or prior to the Closing Date, and Parent shall have received (i) a certificate signed on behalf of the Company by the Chief Executive Officer or any Senior Vice President of the Company to such effect (as to performance by the Company) and (ii) a certificate signed on behalf of AT&T by any Vice President of AT&T to such effect (as to performance by AT&T). (c) Consents Under Agreements and Licenses. The Company and AT&T shall have obtained the consent or approval of each person whose consent or approval shall be required in order to permit the succession by the Surviving Corporation pursuant to the Merger to any obligation, right or interest of the Company or any Subsidiary of the Company under any Contract or License to which the Company or any of its Subsidiaries is a party or is subject, except those for which the failure to obtain such consent or approval is not reasonably likely to have, individually or in the aggregate, a Company Material Adverse Effect. (d) Resignations. Parent shall have received the resignations of each director of the Company. (e) Transitional Services Agreement. AT&T and the Company shall have entered into the Transitional Services Agreement. A-32 7.3. Conditions to Obligation of the Company and AT&T. The obligation of the Company and AT&T to effect the Merger is also subject to the satisfaction or waiver by the Company prior to the Effective Time of the following conditions: (a) Representations and Warranties. The representations and warranties of Parent and Merger Sub set forth in this Agreement shall be true and correct in all material respects as of the date of this Agreement and (except to the extent such representations and warranties speak as of an earlier date) as of the Closing Date as though made on and as of the Closing Date, and the Company and AT&T shall have received a certificate signed on behalf of Parent by an executive officer of Parent and Merger Sub to such effect. (b) Performance of Obligations of Parent and Merger Sub. Each of Parent and Merger Sub shall have performed in all material respects all obligations required to be performed by it under this Agreement at or prior to the Closing Date, and the Company and AT&T shall have received a certificate signed on behalf of Parent and Merger Sub by an executive officer of Parent to such effect. The obligation of AT&T to effect the Merger is also subject to receipt by AT&T of the payment referred to in the last sentence of Section 6.13(b)(i). (c) Consents Under Agreements. Parent shall have obtained the consent or approval of each person whose consent or approval shall be required in order to permit the succession by the Surviving Corporation pursuant to the Merger to any obligation, right or interest of Parent or any Subsidiary of Parent under any Contract to which Parent or any of its Subsidiaries is a party, except those for which failure to obtain such consents and approvals is not reasonably likely to have, individually or in the aggregate, a Parent Material Adverse Effect. ARTICLE VIII TERMINATION 8.1. Termination by Mutual Consent. This Agreement may be terminated and the Merger may be abandoned at any time prior to the Effective Time by mutual written consent of the Company, AT&T, Parent and Merger Sub, by action of their respective boards of directors. 8.2. Termination by Parent, AT&T or the Company. This Agreement may be terminated and the Merger may be abandoned at any time prior to the Effective Time by action of the board of directors of Parent, AT&T or the Company if (i) the Merger shall not have been consummated by October 31, 1996 (the 'Termination Date'), or (ii) any Order permanently restraining, enjoining or otherwise prohibiting the Merger shall become final and non-appealable; provided, that the right to terminate this Agreement pursuant to clause (i) and (ii) above shall not be available to any party that has breached in any material respect its obligations under this Agreement in any manner that shall have proximately contributed to the occurrence of the failure referred to in said clause. 8.3. Termination by the Company or AT&T. This Agreement may be terminated and the Merger may be abandoned at any time prior to the Effective Time, by action of the board of directors of the Company or AT&T if there has been a material breach by Parent or Merger Sub of any representation, warranty, covenant or agreement contained in this Agreement (other than Section 6.17) that is not curable or, if curable, is not cured within 30 days after written notice of such breach is given by the Company or AT&T to the party committing such breach. This Agreement may be terminated and the Merger may be abandoned at any time prior to the Effective Time by the Company or AT&T if there has been any breach of the covenant contained in Section 6.17. 8.4. Termination by Parent. This Agreement may be terminated and the Merger may be abandoned at any time prior to the Effective Time by action of the board of directors of Parent, if there has been a material breach by the Company or AT&T of any representation, warranty, covenant or agreement contained in this Agreement that is not curable or, if curable, is not cured within 30 days after written notice of such breach is given by Parent to the party committing such breach. 8.5. Effect of Termination and Abandonment. In the event of termination of this Agreement and the abandonment of the Merger pursuant to this Article VIII, this Agreement (other than as set forth in Section 9.1) shall become void and of no effect with no liability of any party hereto (or any of its A-33 directors, officers, employees, agents, legal and financial advisors or other representatives); however, except as otherwise provided herein, no such termination shall relieve any party hereto of any liability or damages resulting from any breach by that party of this Agreement. ARTICLE IX MISCELLANEOUS AND GENERAL 9.1. Survival. The representations of AT&T contained in Section 5.2 (except for Section 5.2(g)) shall survive the consummation of the Merger until the first anniversary of the date of this Agreement and the provisions of this Article IX shall survive the consummation of the Merger. The agreements and covenants of the parties made herein shall survive the consummation of the Merger to the extent so provided by their terms. The agreements of the parties contained in Section 6.7 (Publicity), Section 6.9 (Expenses), and Section 8.5 (Effect of Termination and Abandonment), and the representations contained in Sections 5.1(s), 5.2(f) and 5.3(e) (Brokers and Finders) and this Article IX shall survive the termination of this Agreement. All other representations, warranties, agreements and covenants in this Agreement shall not survive the consummation of the Merger or the termination of this Agreement. 9.2. Modification or Amendment. Subject to the provisions of applicable law, at any time prior to the Effective Time, the parties hereto may modify or amend this Agreement by written agreement executed and delivered by duly authorized officers of the respective parties. 9.3. Waiver of Conditions. The conditions to each of the parties' obligations to consummate the Merger are for the sole benefit of such party and may be waived by such party in whole or in part to the extent permitted by applicable law. 9.4. Counterparts. This Agreement may be executed in any number of counterparts, each such counterpart being deemed to be an original instrument, and all such counterparts shall together constitute the same agreement. 9.5. GOVERNING LAW AND VENUE; WAIVER OF JURY TRIAL. (A) THIS AGREEMENT SHALL BE DEEMED TO BE MADE IN AND IN ALL RESPECTS SHALL BE INTERPRETED, CONSTRUED AND GOVERNED BY AND IN ACCORDANCE WITH THE LAW OF THE STATE OF DELAWARE WITHOUT REGARD TO THE CONFLICT OF LAW PRINCIPLES THEREOF. The parties hereby irrevocably submit to the jurisdiction of the courts of the State of Delaware and the Federal courts of the United States of America located in the State of Delaware solely in respect of the interpretation and enforcement of the provisions of this Agreement and of the documents referred to in this Agreement, and in respect of the transactions contemplated hereby, and hereby waive, and agree not to assert, as a defense in any action, suit or proceeding for the interpretation or enforcement hereof or of any such document, that it is not subject thereto or that such action, suit or proceeding may not be brought or is not maintainable in said courts or that the venue thereof may not be appropriate or that this Agreement or any such document may not be enforced in or by such courts, and the parties hereto irrevocably agree that all claims with respect to such action or proceeding shall be heard and determined in such a Delaware State or Federal court. The parties hereby consent to and grant any such court jurisdiction over the person of such parties and over the subject matter of such dispute and agree that mailing of process or other papers in connection with any such action or proceeding in the manner provided in Section 9.6 or in such other manner as may be permitted by law, shall be valid and sufficient service thereof. (b) Parent hereby designates CT Corporation System as its authorized agent to accept and acknowledge on its behalf service of any and all process which may be served in any such suit, action or proceeding in any such court and agrees that service of process upon said agent at its office at 1209 Orange Street, Wilmington Delaware 19801, and written notice of said service to Parent, mailed or delivered to it, c/o Nomura International plc at the address set forth in Section 9.6, shall be deemed in every respect effective service of process upon Parent in any such suit, action or proceeding and shall be taken and held to be valid personal service upon Parent, whether or not Parent shall then be doing, or at any time shall have done, business within the State of Delaware, and that any such service of process shall be of the same force and validity as if service were made upon it according to the laws governing A-34 the validity and requirements of such service in such State, and waives all claim of error by reason of any such service. Said designation and appointment shall be irrevocable. (c) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH SUCH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (iv) EACH SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.5. 9.6. Notices. Any notice, request, instruction or other document to be given hereunder by any party to the others shall be in writing and delivered personally or sent by registered or certified mail, postage prepaid: if to Parent or Merger Sub c/o Nomura International plc, Nomura House 1 St. Martin's-le-Grand London, England ECIA 4NP Attention: Managing Director, Principal Finance Group and Attention: Transaction Management Group (with a copy to William R. Dougherty, Esq. Simpson Thacher & Bartlett 425 Lexington Avenue New York, New York 10017) if to the Company 44 Whippany Road, Morristown, NJ 07962-1983, Attention: General Counsel (with a copy to John P. Mead, Esq., Sullivan & Cromwell, 125 Broad Street, New York, NY 10004.) if to AT&T 295 North Maple Avenue, Basking Ridge, NJ 07920. Attention: Treasurer and 131 Morristown Road, Basking Ridge, NJ 07920. Attention: Vice President-Law and Secretary (with a copy to Steven A. Rosenblum, Esq., Wachtell, Lipton, Rosen & Katz 51 West 52nd Street New York, NY 10019.) A-35 or to such other persons or addresses as may be designated in writing by the party to receive such notice. 9.7. Entire Agreement. This Agreement (including the exhibits hereto), the Company Disclosure Letter, the AT&T Disclosure Letter, the Parent Disclosure Letter and the Confidentiality Agreement, dated January 31, 1996, between Nomura International plc and the Company (the 'Confidentiality Agreement') constitute the entire agreement, and supersede all other prior agreements, understandings, representations and warranties both written and oral, among the parties, with respect to the subject matter hereof. EACH PARTY HERETO AGREES THAT, EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS AGREEMENT (INCLUDING EXHIBITS HERETO AND DISCLOSURE LETTERS INCLUDED HEREWITH), NEITHER PARENT, MERGER SUB, THE COMPANY NOR AT&T MAKES ANY OTHER REPRESENTATIONS OR WARRANTIES, AND EACH HEREBY DISCLAIMS ANY OTHER REPRESENTATIONS OR WARRANTIES MADE BY ITSELF OR ANY OF ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, FINANCIAL AND LEGAL ADVISORS OR OTHER REPRESENTATIVES, WITH RESPECT TO THE EXECUTION AND DELIVERY OF THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY, NOTWITHSTANDING THE DELIVERY OR DISCLOSURE TO THE OTHER OR THE OTHER'S REPRESENTATIVES OF ANY DOCUMENTATION OR OTHER INFORMATION WITH RESPECT TO ANY ONE OR MORE OF THE FOREGOING. 9.8. No Third Party Beneficiaries. Except as provided in Section 6.8(k) and Section 6.10 (Indemnification; Directors' and Officers' Insurance), this Agreement is not intended to confer upon any person other than the parties hereto any rights or remedies hereunder. 9.9. Obligations of Parent and of the Company; Limitations on Liability. (a) Whenever this Agreement requires a Subsidiary of Parent to take any action, such requirement shall be deemed to include an undertaking on the part of Parent to cause such Subsidiary to take such action. Whenever this Agreement requires a Subsidiary of the Company to take any action, such requirement shall be deemed to include an undertaking on the part of the Company to cause such Subsidiary to take such action and, after the Effective Time, on the part of the Surviving Corporation to cause such Subsidiary to take such action. (b) Except as provided in the immediately following sentence, nothing in this Agreement is intended to or shall create any liability on the part of any stockholder, incorporator, officer or director of any party hereto except that Parent shall be responsible for acts or omissions of Merger Sub (or any other Subsidiary designated by Parent pursuant to Section 9.12) and the Company shall be responsible for acts or omissions of its Subsidiaries, in each case as provided in clause (a). AT&T shall have no liability hereunder except insofar as its own representations, warranties and covenants are concerned. Any notice, certificate or opinions of an officer of a party hereto delivered pursuant to this Agreement shall be deemed to be an act of the party and shall not create any personal liability on the part of the officer delivering such notice, certificate or opinion. 9.10. Severability. The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof. If any provision of this Agreement, or the application thereof to any person or any circumstance, is invalid or unenforceable, (a) a suitable and equitable provision shall be substituted therefor in order to carry out, so far as may be valid and enforceable, the intent and purpose of such invalid or unenforceable provision and (b) the remainder of this Agreement and the application of such provision to other persons or circumstances shall not be affected by such invalidity or unenforceability, nor shall such invalidity or unenforceability affect the validity or enforceability of such provision, or the application thereof, in any other jurisdiction. 9.11. Interpretation. The table of contents and headings herein are for convenience of reference only, do not constitute part of this Agreement and shall not be deemed to limit or otherwise affect any of the provisions hereof. Where a reference in this Agreement is made to a Section or Exhibit, such reference shall be to a Section of or Exhibit to this Agreement unless otherwise indicated. Whenever the words 'include,' 'includes' or 'including' are used in this Agreement, they shall be deemed to be followed by the words 'without limitation.' A-36 9.12. Assignment. This Agreement shall not be assignable by operation of law or otherwise without the prior written consent of the other parties; provided, however, that Parent may designate, by written notice to the Company, another wholly owned direct or indirect Subsidiary to be a Constituent Corporation in lieu of Merger Sub, in the event of which, all references herein to Merger Sub shall be deemed references to such other Subsidiary except that all representations and warranties made herein with respect to Merger Sub as of the date of this Agreement shall be deemed representations and warranties made with respect to such other Subsidiary as of the date of such designation and no designation under this Section 9.12 shall be valid or effective unless all such representations and warranties are true insofar as such new Subsidiary is concerned. IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the duly authorized officers of the parties hereto as of the date first written above. AT&T CAPITAL CORPORATION By: /s/ THOMAS C. WAJNERT ................................. Name: Thomas C. Wajnert Title: Chairman and Chief Executive Officer AT&T CORP. By: /s/ S. LAWRENCE PRENDERGAST ................................. Name: S. Lawrence Prendergast Title: Vice President and Treasurer HERCULES LIMITED By: /s/ GUY HANDS ................................. Name: Guy Hands Title: President and Chief Executive Officer ANTIGUA ACQUISITION CORPORATION By: /s/ GUY HANDS ................................. Name: Guy Hands Title: President and Chief Executive Officer A-37 FIRST AMENDMENT TO THE AGREEMENT AND PLAN OF MERGER First Amendment to the Agreement and Plan of Merger (hereinafter called this 'Amendment'), dated as of August 20, 1996, among AT&T Capital Corporation, a Delaware corporation (the 'Company'), AT&T Corp., a New York corporation ('AT&T'), Hercules Limited, a Cayman Island corporation ('Parent'), and Antigua Acquisition Corporation, a Delaware corporation and a wholly owned subsidiary of Parent ('Merger Sub'). RECITALS WHEREAS, the Company, AT&T, Parent and Merger Sub entered into the Agreement and Plan of Merger (the 'Original Agreement'), dated as of June 5, 1996; WHEREAS, the Company, AT&T, Parent and Merger Sub wish to amend the Original Agreement in the manner set forth herein; WHEREAS, the respective boards of directors of each of the Company, Parent and Merger Sub have approved this Agreement; WHEREAS, the Company's board of directors and the special committee of the Company's board of directors have approved and submitted this Amendment to AT&T, as the indirect owner of the AT&T Shares, for its consent, and AT&T has caused to be executed a written stockholder consent pursuant to Section 228 of the DGCL (as defined below) approving this Amendment. NOW, THEREFORE, in consideration of the premises, and of the representations, warranties, covenants and agreements contained herein, the parties hereto agree as follows: 1. Defined Terms. Unless otherwise defined herein, capitalized terms which are defined in the Original Agreement are used herein as therein defined. 2. Section 1.2. Section 1.2 of the Original Agreement is hereby amended by deleting it in its entirety and substituting in lieu thereof the following: 1.2. Closing. The closing of the Merger (the 'Closing') shall take place (i) at the offices of Sullivan & Cromwell, 125 Broad Street, New York, New York at 9:00 A.M. on the later of (A) October 1, 1996 and (B) the first business day on which the last to be fulfilled or waived of the conditions set forth in Article VII hereof (other than those conditions that by their nature are to be satisfied at the Closing, but subject to fulfillment or waiver of those conditions) shall be satisfied or waived in accordance with this Agreement (the later of such dates being referred to as the 'Scheduled Closing Date'); provided, however, that Parent may at its option (the 'Extension Option') extend the Closing to a date later than the Scheduled Closing Date as Parent shall determine (but in no event later than October 31, 1996) by providing written notice of such later date to the Company and AT&T not less than two business days' prior to the Scheduled Closing Date and agreeing to pay the Interest Amount referred to in Section 4.1(a) hereof (such agreement to be evidenced by the delivery of such written notice); or (ii) at such other place and time and/or on such other date as the Company and Parent may agree in writing (the 'Closing Date'). 3. Section 4.1(a) Section 4.1(a) of the Original Agreement is hereby amended by deleting the phrase '$45.00 (the 'Merger Consideration')' at the end of the first sentence thereof and substituting in lieu thereof the following: the sum of (i) $45.00 and (ii) in the event (but only in the event) that Parent exercises the Extension Option referred to in Section 1.2 hereof, an additional amount (the 'Interest Amount') equal to interest on such $45 amount for the period from and including September 18, 1996 through but excluding the Closing Date at a rate per annum (computed on the basis of the actual number of days elapsed over a year of 365 days) of LIBOR (as defined below) plus .50% (the 'Merger Consideration'). As used herein, 'LIBOR' means the London Interbank Offered Rate for deposits of U.S. dollars having a maturity of one month which appears on Telerate Access Service Page 3750 as of 11 A.M., London time, on the second business day preceding the Closing Date. A-38 4. Section 6.1(a)(ix) of the Original Agreement is hereby amended by adding the following at the end of that section: or except for any agreement entered into in the ordinary course of business relating to the purchase of equipment by the Company from AT&T and the lease thereof by the Company to customers of AT&T. 5. Section 6.17. Section 6.17 of the Original Agreement is hereby amended by deleting it in its entirety and substituting in lieu thereof the following: 6.17 Funding Parent. Parent covenants that (i) not later than June 12, 1996, Parent shall receive a $100 million equity contribution and (ii) not later than September 18, 1996, Parent shall receive an additional $400 million equity contribution, in each case in the form of cash or direct obligations of the government of the United States of America ('Government Securities'). Parent covenants that it shall utilize the proceeds of such equity contributions to purchase Government Securities having a maturity not later than one year after the date of purchase or receipt thereof by Parent. Parent covenants that it shall keep such proceeds so invested (free of any Liens) until the Effective Time. 6. Continuing Effect of Agreement. Except as expressly amended herein, all of the terms and conditions of the Original Agreement shall remain in full force and effect without amendment. 7. Counterparts. This Amendment may be executed in any number of counterparts, each such counterpart being deemed to be an original instrument, and all such counterparts shall together constitute the same agreement. 8. GOVERNING LAW. THIS AMENDMENT SHALL BE DEEMED TO BE MADE IN AND IN ALL RESPECTS SHALL BE INTERPRETED, CONSTRUED AND GOVERNED BY AND IN ACCORDANCE WITH THE LAW OF THE STATE OF DELAWARE WITHOUT REGARD TO THE CONFLICT OF LAW PRINCIPLES THEREOF. IN WITNESS WHEREOF, this Amendment has been duly executed and delivered by the duly authorized officers of the parties hereto as of the date first written above. AT&T CAPITAL CORPORATION By: /S/ THOMAS C. WAJNERT ................................. Name: Thomas C. Wajnert Title: Chairman and Chief Executive Officer AT&T CORP. By: /S/ S. LAWRENCE PRENDERGAST ................................. Name: S. Lawrence Prendergast Title: Vice President and Treasurer HERCULES LIMITED By: /S/ JEFF NASH ................................. Name: Jeff Nash Title: Director ANTIGUA ACQUISITION CORPORATION By: /S/ JEFF NASH ................................. Name: Jeff Nash Title: Vice President, Treasurer and Secretary A-39 ANNEX B PERSONAL AND CONFIDENTIAL June 5, 1996 Board of Directors Special Committee of the Board of Directors AT&T Capital Corporation 44 Whippany Road Morristown, New Jersey 07962 Gentlemen and Mesdames: You have requested our opinion as to the fairness to the holders (other than AT&T Corp. and its affiliates) of the outstanding shares of Common Stock, par value $0.01 per share (the 'Shares'), of AT&T Capital Corporation (the 'Company') of the $45.00 per Share in cash to be received by holders of Shares pursuant to the Agreement and Plan of Merger (the 'Merger') dated as of June 5, 1996 among Antigua Acquisition Corporation, a wholly owned subsidiary of Hercules Limited, the Company and AT&T Corp. (the 'Agreement'). Goldman, Sachs & Co., as part of its investment banking business, is continually engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, negotiated underwritings, competitive biddings, secondary distributions of listed and unlisted securities, private placements and valuations for estate, corporate and other purposes. We are familiar with the Company, having acted as its financial advisor in connection with, and having participated in certain of the negotiations leading to, the Agreement. We have also provided and are providing investment banking services to AT&T Corp. and its affiliates, including having acted as a joint global coordinator of the $3 billion initial public offering of the common stock of Lucent Technologies Inc. ('Lucent Technologies'), an affiliate of AT&T Corp. We may provide investment banking services in the future to both the Company and AT&T Corp. and its affiliates. On April 30, 1996, the Company announced that AT&T Corp. delivered a letter to the Company requesting it to register Shares held by AT&T Corp. for sale in a secondary public offering as an alternative to the transactions contemplated by the Agreement. We have had no role in advising AT&T Corp. in respect of this alternative transaction. In connection with this opinion, we have reviewed, among other things, the Agreement; the Operating Agreement dated August 4, 1993 between the Company and AT&T Corp.; the Lucent Technologies Operating Agreement dated April 2, 1996 between the Company and Lucent Technologies; the NCR Operating Agreement dated April 2, 1996 between the Company and NCR Corporation ('NCR'); the Intercompany Agreement dated August 4, 1993 between the Company and AT&T Corp.; certain related agreements between the Company and each of AT&T Corp., Lucent Technologies and NCR; certain federal and state tax sharing agreements between the Company and AT&T Corp.; Annual Reports on Form 10-K of the Company for the five years ended December 31, 1995; certain interim reports to stockholders and Quarterly Reports on Form 10-Q; certain other communications from the Company to its stockholders; and certain internal financial analyses and forecasts for the Company prepared by its management. We also have held discussions with members of the senior management of the Company regarding the past and current business operations, financial condition and future prospects of the Company. In addition, we have reviewed the reported price and B-1 trading activity for the Shares, compared certain financial and stock market information for the Company with similar information for certain other companies the securities of which are publicly traded, reviewed the financial terms of certain recent business combinations in the commercial finance industry specifically and in other industries generally and performed such other studies and analyses as we considered appropriate. We have relied without independent verification upon the accuracy and completeness of all of the financial and other information reviewed by us for purposes of this opinion. In addition, we have not made an independent evaluation or appraisal of the assets and liabilities of the Company or any of its subsidiaries and we have not been furnished with any such evaluation or appraisal. Based upon and subject to the foregoing and based upon such other matters as we consider relevant, it is our opinion that as of the date hereof the $45.00 per Share in cash to be received by the holders of Shares (other than AT&T Corp. and its affiliates) pursuant to the Agreement is fair to such holders. Very truly yours, /s/ GOLDMAN, SACHS & CO. ..................................... (Goldman, Sachs & Co.) B-2 ANNEX C SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW SS262. APPRAISAL RIGHTS (a) Any stockholder of a corporation of this State who holds shares of stock on the date of the making of a demand pursuant to subsection (d) of this section with respect to such shares, who continuously holds such shares through the effective date of the merger or consolidation, who has otherwise complied with subsection (d) of this section and who has neither voted in favor of the merger or consolidation nor consented thereto in writing pursuant to SS228 of this title shall be entitled to an appraisal by the Court of Chancery of the fair value of his shares of stock under the circumstances described in subsections (b) and (c) of this section. As used in this section, the word 'stockholder' means a holder of record of stock in a stock corporation and also a member of record of a nonstock corporation; the words 'stock' and 'share' mean and include what is ordinarily meant by those words and also membership or membership interest of a member of a nonstock corporation; and the words 'depository receipt' mean a receipt or other instrument issued by a depository representing an interest in one or more shares, or fractions thereof, solely of stock of a corporation, which stock is deposited with the depository. (b) Appraisal rights shall be available for the shares of any class or series of stock of a constituent corporation in a merger or consolidation to be effected pursuant to SSSS251 (other than a merger affected pursuant to subsection (g) of Section 251), 252, 254, 257, 258, 263 or 264 of this title: (1) Provided, however, that no appraisal rights under this section shall be available for the shares of any class or series of stock, which stock, or depository receipts in respect thereof, at the record date fixed to determine the stockholders entitled to receive notice of and to vote at the meeting of stockholders to act upon the agreement of merger or consolidation, were either (i) listed on a national securities exchange or designated as a national market system security on an interdealer quotation system by the National Association of Securities Dealers, Inc. or (ii) held of record by more than 2,000 holders; and further provided that no appraisal rights shall be available for any shares of stock of the constituent corporation surviving a merger if the merger did not require for its approval the vote of the holders of the surviving corporation as provided in subsection (f) of SS251 of this title. (2) Notwithstanding paragraph (1) of this subsection, appraisal rights under this section shall be available for the shares of any class or series of stock of a constituent corporation if the holders thereof are required by the terms of an agreement of merger or consolidation pursuant to SSSS251, 252, 254, 257, 258, 263 and 264 of this title to accept for such stock anything except: a. Shares of stock of the corporation surviving or resulting from such merger or consolidation, or depository receipts in respect thereof; b. Shares of stock of any other corporation, or depository receipts in respect thereof, which shares of stock or depository receipts at the effective date of the merger or consolidation will be either listed on a national securities exchange or designated as a national market system security on an interdealer quotation system by the National Association of Securities Dealers, Inc. or held of record by more than 2,000 holders; c. Cash in lieu of fractional shares or fractional depository receipts described in the foregoing subparagraphs a. and b. of this paragraph; or d. Any combination of the shares of stock, depository receipts and cash in lieu of fractional shares or fractional depository receipts described in the foregoing subparagraphs a., b. and c. of this paragraph. (3) In the event all of the stock of a subsidiary Delaware corporation party to a merger effected under SS253 of this title is not owned by the parent corporation immediately prior to the merger, appraisal rights shall be available for the shares of the subsidiary Delaware corporation. (c) Any corporation may provide in its certificate of incorporation that appraisal rights under this section shall be available for the shares of any class or series of its stock as a result of an amendment to its certificate of incorporation, any merger or consolidation in which the corporation is a constituent C-1 corporation or the sale of all or substantially all of the assets of the corporation. If the certificate of incorporation contains such a provision, the procedures of this section, including those set forth in subsections (d) and (e) of this section, shall apply as nearly as is practicable. (d) Appraisal rights shall be perfected as follows: (1) If a proposed merger or consolidation for which appraisal rights are provided under this section is to be submitted for approval at a meeting of stockholders, the corporation, not less than 20 days prior to the meeting, shall notify each of its stockholders who was such on the record date for such meeting with respect to shares for which appraisal rights are available pursuant to subsections (b) or (c) hereof that appraisal rights are available for any or all of the shares of the constituent corporations, and shall include in such notice a copy of this section. Each stockholder electing to demand the appraisal of his shares shall deliver to the corporation, before the taking of the vote on the merger or consolidation, a written demand for appraisal of his shares. Such demand will be sufficient if it reasonably informs the corporation of the identity of the stockholder and that the stockholder intends thereby to demand the appraisal of his shares. A proxy or vote against the merger or consolidation shall not constitute such a demand. A stockholder electing to take such action must do so by a separate written demand as herein provided. Within 10 days after the effective date of such merger or consolidation, the surviving or resulting corporation shall notify each stockholder of each constituent corporation who has complied with this subsection and has not voted in favor of or consented to the merger or consolidation of the date that the merger or consolidation has become effective; or (2) If the merger or consolidation was approved pursuant to SS228 or 253 of this title, the surviving or resulting corporation, either before the effective date of the merger or consolidation or within 10 days thereafter, shall notify each of the stockholders entitled to appraisal rights of the effective date of the merger or consolidation and that appraisal rights are available for any or all of the shares of the constituent corporation, and shall include in such notice a copy of this section. The notice shall be sent by certified or registered mail, return receipt requested, addressed to the stockholder at his address as it appears on the records of the corporation. Any stockholder entitled to appraisal rights may, within 20 days after the date of mailing of the notice, demand in writing from the surviving or resulting corporation the appraisal of his shares. Such demand will be sufficient if it reasonably informs the corporation of the identity of the stockholder and that the stockholder intends thereby to demand the appraisal of his shares. (e) Within 120 days after the effective date of the merger or consolidation, the surviving or resulting corporation or any stockholder who has complied with subsections (a) and (d) hereof and who is otherwise entitled to appraisal rights, may file a petition in the Court of Chancery demanding a determination of the value of the stock of all such stockholders. Notwithstanding the foregoing, at any time within 60 days after the effective date of the merger or consolidation, any stockholder shall have the right to withdraw his demand for appraisal and to accept the terms offered upon the merger or consolidation. Within 120 days after the effective date of the merger or consolidation, any stockholder who has complied with the requirements of subsections (a) and (d) hereof, upon written request, shall be entitled to receive from the corporation surviving the merger or resulting from the consolidation a statement setting forth the aggregate number of shares not voted in favor of the merger or consolidation and with respect to which demands for appraisal have been received and the aggregate number of holders of such shares. Such written statement shall be mailed to the stockholder within 10 days after his written request for such a statement is received by the surviving or resulting corporation or within 10 days after expiration of the period for delivery of demands for appraisal under subsection (d) hereof, whichever is later. (f) Upon the filing of any such petition by a stockholder, service of a copy thereof shall be made upon the surviving or resulting corporation, which shall within 20 days after such service file in the office of the Register in Chancery in which the petition was filed a duly verified list containing the names and addresses of all stockholders who have demanded payment for their shares and with whom agreements as to the value of their shares have not been reached by the surviving or resulting corporation. If the petition shall be filed by the surviving or resulting corporation, the petition shall be accompanied by such a duly verified list. The Register in Chancery, if so ordered by the Court, shall give notice of the time and place fixed for the hearing of such petition by registered or certified mail to the surviving or C-2 resulting corporation and to the stockholders shown on the list at the addresses therein stated. Such notice shall also be given by 1 or more publications at least 1 week before the day of the hearing, in a newspaper of general circulation published in the City of Wilmington, Delaware or such publication as the Court deems advisable. The forms of the notices by mail and by publication shall be approved by the Court, and the costs thereof shall be borne by the surviving or resulting corporation. (g) At the hearing on such petition, the Court shall determine the stockholders who have complied with this section and who have become entitled to appraisal rights. The Court may require the stockholders who have demanded an appraisal for their shares and who hold stock represented by certificates to submit their certificates of stock to the Register in Chancery for notation thereon of the pendency of the appraisal proceedings; and if any stockholder fails to comply with such direction, the Court may dismiss the proceedings as to such stockholder. (h) After determining the stockholders entitled to an appraisal, the Court shall appraise the shares, determining their fair value exclusive of any element of value arising from the accomplishment or expectation of the merger or consolidation, together with a fair rate of interest, if any, to be paid upon the amount determined to be the fair value. In determining such fair value, the Court shall take into account all relevant factors. In determining the fair rate of interest, the Court may consider all relevant factors, including the rate of interest which the surviving or resulting corporation would have had to pay to borrow money during the pendency of the proceeding. Upon application by the surviving or resulting corporation or by any stockholder entitled to participate in the appraisal proceeding, the Court may, in its discretion, permit discovery or other pretrial proceedings and may proceed to trial upon the appraisal prior to the final determination of the stockholder entitled to an appraisal. Any stockholder whose name appears on the list filed by the surviving or resulting corporation pursuant to subsection (f) of this section and who has submitted his certificates of stock to the Register in Chancery, if such is required, may participate fully in all proceedings until it is finally determined that he is not entitled to appraisal rights under this section. (i) The Court shall direct the payment of the fair value of the shares, together with interest, if any, by the surviving or resulting corporation to the stockholders entitled thereto. Interest may be simple or compound, as the Court may direct. Payment shall be so made to each such stockholder, in the case of holders of uncertificated stock forthwith, and the case of holders of shares represented by certificates upon the surrender to the corporation of the certificates representing such stock. The Court's decree may be enforced as other decrees in the Court of Chancery may be enforced, whether such surviving or resulting corporation be a corporation of this State or of any state. (j) The costs of the proceeding may be determined by the Court and taxed upon the parties as the Court deems equitable in the circumstances. Upon application of a stockholder, the Court may order all or a portion of the expenses incurred by any stockholder in connection with the appraisal proceeding, including, without limitation, reasonable attorney's fees and the fees and expenses of experts, to be charged pro rata against the value of all the shares entitled to an appraisal. (k) From and after the effective date of the merger or consolidation, no stockholder who has demanded his appraisal rights as provided in subsection (d) of this section shall be entitled to vote such stock for any purpose or to receive payment of dividends or other distributions on the stock (except dividends or other distributions payable to stockholders of record at a date which is prior to the effective date of the merger or consolidation); provided, however, that if no petition for an appraisal shall be filed within the time provided in subsection (e) of this section, or if such stockholder shall deliver to the surviving or resulting corporation a written withdrawal of his demand for an appraisal and an acceptance of the merger or consolidation, either within 60 days after the effective date of the merger or consolidation as provided in subsection (e) of this section or thereafter with the written approval of the corporation, then the right of such stockholder to an appraisal shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery shall be dismissed as to any stockholder without the approval of the Court, and such approval may be conditioned upon such terms as the Court deems just. (l) The shares of the surviving or resulting corporation to which the shares of such objecting stockholders would have been converted had they assented to the merger or consolidation shall have the status of authorized and unissued shares of the surviving or resulting corporation. (Last amended by Ch. 299, L. '95, eff. 2-1-96.) C-3 ANNEX D AMENDMENT TO 1993 SHARE PERFORMANCE INCENTIVE PLAN The AT&T Capital Corporation 1993 Share Performance Incentive Plan (the 'Plan') is hereby amended, effective as of June 5, 1996, as set forth below: 1. Section 2 of the Plan is amended by adding the following new paragraph (ap) at the end thereof: (ap) 'Private Sale' means any Change in Control that results in, or will have the result of, the Common Stock no longer being publicly traded on a national securities exchange or traded on the NASDAQ over-the-counter market. 2. Section 5 of the Plan is amended by adding the following Section 5.3 at the end thereof: 5.3 Private Sale. (a) Notwithstanding anything in Sections 5.1 or 5.2 to the contrary, upon the occurrence of a Private Sale during the term of the Plan, the Company shall pay to each Participant (i) 100% of such Participant's Maximum Payout (without discount) for each pending Performance Period under the Plan and (ii) with respect to any Performance Period completed within twelve (12) months prior to such Private Sale, the excess of (A) 100% of the Maximum Payout for such Participant for such Performance Period over (B) the payment actually made to the Participant for such Performance Period. (b) Except as provided in paragraph (c) below, and subject to Section 5.2 hereof, following any Award Payout for pending and completed Performance Periods under this Section 5.3, Award Payouts with respect to any Performance Periods beginning after the occurrence of a Private Sale will be determined in accordance with the provisions of Section 4 hereof without modification. (c) Notwithstanding paragraph (b) above, upon the consummation of the merger contemplated by the Agreement and Plan of Merger among AT&T Capital Corporation, AT&T Corp., Hercules Limited and Antigua Acquisition Corporation, dated as of June 5, 1996 (the 'Merger Agreement'), the Company shall pay to each Participant, 100% of such Participant's Maximum Payout (without discount) for each Performance Period under the Plan which had not commenced as of the consummation of such merger; provided, however, that for any Participant who is not a member of the Company's Leadership Forum, such payment will not be made unless such Participant has entered into an agreement with Hercules Limited and the 'Surviving Corporation' (as defined in the Merger Agreement) to revise the terms of the Company's Leadership Severance Plan or Company's Member Severance Plan to modify the definition of 'Qualifying Termination' in such plans, as it applies to such Participant. In the event an Award Payout is not made to a Participant pursuant to this paragraph (c), Performance Periods under the Plan beginning after the consummation of the merger contemplated by the Merger Agreement will continue pursuant to their terms with respect to such Participant. (d) All payments to be made under this Section 5.3 shall be made immediately following the consummation of the Private Sale or the merger contemplated by the Merger Agreement, as the case may be. D-1 ANNEX E CERTAIN INFORMATION REGARDING DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY AND AT&T DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY Except as noted below, (i) each of the persons named below is a citizen of the United States of America, (ii) each of the persons named below whose principal employment is with the Company or AT&T has held high level managerial positions with the Company or AT&T, as the case may be, or their respective affiliates, for more than the past five years and (iii) none of the persons named below is the beneficial owner of any Company Common Stock. Members of the Board of Directors of the Company are indicated with an asterisk. For each person whose principal employment is with the Company or AT&T, the principal business of such person's employer is described in 'Information Statement Summary -- The Parties to the Merger.'
PRINCIPAL OCCUPATION; BUSINESS ADDRESS; NAME PRINCIPAL BUSINESS OF EMPLOYER AND FIVE-YEAR EMPLOYMENT HISTORY - ------------------------------------ --------------------------------------------------------------------------- *John P. Clancey.................... President and Chief Executive Officer Sea-Land Service, Inc. 6000 Carnegie Boulevard Charlotte, NC 28209 Mr. Clancey owns 2,461 shares of Company Common Stock and 4,000 Options. Edward M. Dwyer..................... Senior Vice President and Chief Financial Officer AT&T Capital Corporation 44 Whippany Road Morristown, NJ 07962 From July 1994 to October 1995, Mr. Dwyer was Senior Vice President, Chief Financial Officer and Treasurer of the Company. From April 1993 to June 1994, he was Vice President and Treasurer of the Company and from July 1991 to March 1993 he was Vice President and Treasurer of Capital Holdings. Mr. Dwyer owns 32,600 shares of Company Common Stock and 50,508 Options. *James P. Kelly..................... Executive Vice President and Chief Operating Officer United Parcel Service of America, Inc. 55 Glenlake Parkway, N.E. Atlanta, GA 30328 Mr. Kelly owns 750 shares of Company Common Stock and 8,987 Options. *Gerald M. Lowrie................... Senior Vice President -- Federal Government Affairs AT&T Corp. 1120 20th Street, N.W. Washington, DC 20036 Mr. Lowrie owns 1,000 shares of Company Common Stock. *William B. Marx, Jr. .............. Senior Executive Vice President Lucent Technologies Inc. 600 Mountain Avenue Murray Hill, NJ 07974 Mr. Marx was Executive Vice President of AT&T and Chief Executive Officer of AT&T's Multimedia Products Group, from October 1994 to February 1996. He was Executive Vice President of AT&T and Chief Executive Officer of AT&T's Network Systems Group from July 1989 to September 1994.
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PRINCIPAL OCCUPATION; BUSINESS ADDRESS; NAME PRINCIPAL BUSINESS OF EMPLOYER AND FIVE-YEAR EMPLOYMENT HISTORY - ------------------------------------ --------------------------------------------------------------------------- G. Daniel McCarthy.................. Senior Vice President, General Counsel, Secretary and Chief Risk Management Officer AT&T Capital Corporation 44 Whippany Road Morristown, NJ 07962 From February 1990 to March 1993, Mr. McCarthy was Senior Vice President, General Counsel, Secretary, and Chief Risk Management Officer of Capital Holdings. Mr. McCarthy owns 42,697 shares of Company Common Stock and 70,480 Options. *Joseph J. Melone................... President and Chief Executive Officer The Equitable Companies, Incorporated 787 Seventh Avenue New York, NY 10019 Mr. Melone was President and Chief Operating Officer of The Equitable Companies, Inc. from November 1990 to January 1996. Mr. Melone owns 2,000 shares of Company Common Stock and 4,000 Options. *Richard W. Miller.................. Senior Executive Vice President and Chief Financial Officer AT&T Corp. 295 North Maple Avenue Basking Ridge, NJ 07920 Mr. Miller joined AT&T on August 3, 1993. Prior thereto, Mr. Miller was with Wang Laboratories, Inc., 1 Industrial Avenue, Lowell, MA 08151, an international computer company, from 1989 through 1993, serving as President and Chief Operating Officer and later Chairman, President and Chief Executive Officer. Mr. Miller owns 2,000 shares of Company Common Stock. Ruth A. Morey....................... Senior Vice President -- Corporate Information and Resources AT&T Capital Corporation 44 Whippany Road Morristown, NJ 07962 From February 1990 to March 1993, Ms. Morey served as Senior Vice President and Chief Administrative Officer of Capital Holdings. Ms. Morey owns 39,930 shares of Company Common Stock and 65,248 Options. *S. Lawrence Prendergast............ Vice President and Treasurer AT&T Corp. 295 North Maple Avenue Basking Ridge, NJ 97920 Mr. Prendergast owns 2,000 shares of Company Common Stock. Irving H. Rothman................... Group President AT&T Capital Corporation 44 Whippany Road Morristown, NJ 07962 From November 1991 to March 1993, Mr. Rothman was Group President of Capital Holdings. Mr. Rothman owns 53,372 shares of Company Common Stock and 105,740 Options. *Maureen B. Tart.................... Vice President and Controller AT&T Corp. 340 Mt. Kemble Avenue Morristown, NJ 07962
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PRINCIPAL OCCUPATION; BUSINESS ADDRESS; NAME PRINCIPAL BUSINESS OF EMPLOYER AND FIVE-YEAR EMPLOYMENT HISTORY - ------------------------------------ --------------------------------------------------------------------------- Ms. Tart has been Vice President and Controller of AT&T since March 1994. From April 1993 to February 1994, Ms. Tart was Senior Vice President and Chief Financial Officer of the Company. From February 1990 to March 1993, Ms. Tart was Senior Vice President and Chief Financial Officer of Capital Holdings. Ms. Tart owns 2,000 shares of Company Common Stock. Charles D. Van Sickle............... Group President AT&T Capital Corporation 44 Whippany Road Morristown, NJ 07962 From November 1991 to March 1993 Mr. Van Sickle was Group President of Capital Holdings. Mr. Van Sickle owns 47,093 shares of Company Common Stock and 93,283 Options. *Thomas C. Wajnert.................. Chairman and Chief Executive Officer AT&T Capital Corporation 44 Whippany Road Morristown, NJ 07962 Mr. Wajnert was President, Chief Executive Officer and Vice Chairman of the Company from April 1993 to July 1993. From February 1990 to March 1993, Mr. Wajnert was President and Chief Executive Officer of Capital Holdings. Mr. Wajnert owns 124,658 shares of Company Common Stock and 248,254 Options. *Brooks Walker, Jr.................. General Partner Walkers Investors 2930 Broadway San Francisco, CA 94115 Mr. Walker owns 5,000 shares of Company Common Stock and 8,897 Options. *Marilyn J. Wasser.................. Vice President -- Law and Secretary AT&T Corp. 131 Morristown Road Basking Ridge, NJ 07924
DIRECTORS AND EXECUTIVE OFFICERS OF AT&T Except as noted below, (i) each of the persons named below is a citizen of the United States of America, (ii) each of the persons named below whose principal employment is with AT&T has held high level managerial positions with AT&T or its affiliates for more than the past five years and (iii) none of the persons named below is the beneficial owner of any Company Common Stock. Members of the Board of Directors of AT&T are indicated with an asterisk. For each person whose principal employment is with AT&T, the principal business of such person's employer is described in 'Information Statement Summary -- The Parties to the Merger.'
PRINCIPAL OCCUPATION; BUSINESS ADDRESS; PRINCIPAL NAME BUSINESS OF EMPLOYER AND FIVE-YEAR EMPLOYMENT HISTORY - ------------------------------------ --------------------------------------------------------------------------- *Robert E. Allen.................... Chairman and Chief Executive Officer, AT&T Corp. 32 Avenue of the Americas New York, NY 10013-2412
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PRINCIPAL OCCUPATION; BUSINESS ADDRESS; PRINCIPAL NAME BUSINESS OF EMPLOYER AND FIVE-YEAR EMPLOYMENT HISTORY - ------------------------------------ --------------------------------------------------------------------------- Harold W. Burlingame................ Executive Vice President Human Resources, AT&T Corp. 295 North Maple Avenue Basking Ridge, NJ 07920 *Kenneth T. Derr.................... Chairman and Chief Executive Officer of Chevron Corporation (International Oil Company) 575 Market Street San Francisco, CA 94105 Mr. Derr has been Chairman and Chief Executive Officer of Chevron Corporation for more than the past five years. *M. Kathryn Eickhoff................ President of Eickhoff Economics, Inc. (Economic Consultants) 510 LaGuardia Place, Suite 400 New York, NY 10012 Ms. Eickhoff has been President of Eickhoff Economics Incorporated for more than the past five years. *Walter Y. Elisha................... Chairman & Chief Executive Officer of Springs Industries, Inc. (Textile Manufacturing) 205 North White Street P.O. Box 70 Fort Mill, SC 29715 Mr. Elisha has been the Chairman and Chief Executive Officer of Springs Industries, Inc. for more than the past five years. *Belton K. Johnson.................. Former Owners of Chaparrosa Ranch 100 West Houston Street Suite 1100 San Antonio, TX 78205 Mr. Johnson has been the Chairman of Belton K. Johnson Interests, a private investment company, for more than the past five years. *Ralph S. Larsen.................... Chairman and Chief Executive Officer of Johnson & Johnson (Pharmaceutical, Medical, and Consumer Products) One Johnson & Johnson Plaza New Brunswick, NJ 08933 Mr. Larsen has been Chairman and Chief Executive Officer of Johnson & Johnson for more than the past five years. Marilyn Laurie...................... Executive Vice President -- Public Relations AT&T Corp. 295 North Maple Avenue Basking Ridge, NJ 07920 Gail J. McGovern.................... Executive Vice President AT&T Corp. 55 Corporate Drive Bridgewater, NJ 08807 *Donald F. McHenry.................. President of IRC Group, Inc. (International Relations Consultants) Georgetown University School of Foreign Service ICC301 Washington, D.C. 20057 Mr. McHenry has been the President of IRC Group and the University Research Professor of Diplomacy and International Relations, Georgetown University for more than the past five years.
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PRINCIPAL OCCUPATION; BUSINESS ADDRESS; PRINCIPAL NAME BUSINESS OF EMPLOYER AND FIVE-YEAR EMPLOYMENT HISTORY - ------------------------------------ --------------------------------------------------------------------------- Richard W. Miller................... Senior Executive Vice President & Chief Financial Officer, AT&T Corp. 295 North Maple Avenue Basking Ridge, NJ 07920 Mr. Miller joined AT&T on August 3, 1993. Prior thereto, Mr. Miller was with Wang Laboratories, Inc., 1 Industrial Avenue, Lowell, MA 08151, an international computer company, from 1989 through 1993, serving as President and Chief Operating Officer and later Chairman, President and Chief Executive Officer. Mr. Miller owns 2,000 shares of Company Common Stock. Joseph P. Nacchio................... Executive Vice President AT&T Corp. 295 North Maple Avenue Basking Ridge, NJ 07920 Lars Nyberg......................... Chief Executive Officer of NCR Corporation NCR Corporation 1700 East Paterson Boulevard Dayton, OH 45479-0001 Prior to joining NCR, Mr. Nyberg was Chairman and Chief Executive Officer of Philips' Communications Systems Division of Philips Electronics NV, a telecommunications equipment company, from 1993 to 1995. From 1990 to 1993 he held other positions with Philips Electronics NV. John C. Petrillo.................... Executive Vice President AT&T 295 North Maple Avenue Basking Ridge, NJ 07920 Ronald J. Ponder.................... Executive Vice President AT&T 295 North Maple Avenue Basking Ridge, NJ 07920 Prior to joining AT&T, Mr. Ponder was Executive Vice President and Chief Information Officer for Sprint Corporation, a telecommunications company, from 1991 to 1993 and prior to that Mr. Ponder was Chief Information Officer with the Federal Express Company, an express delivery company. S. Lawrence Prendergast............. Vice President and Treasurer AT&T Corp. One Oak Way Berkeley Heights, NJ 07922-2724 Mr. Prendergast owns 2,000 shares of Company Common Stock. Henry B. Schacht.................... Chairman and Chief Executive Officer of Lucent Technologies Inc. Prior to joining Lucent Technologies, Mr. Schacht was Chairman of Cummins Engine Company, Inc., a manufacturer of diesel engines, from 1977 to 1995 and was Chief Executive Officer from 1973 to 1994. *Michael I. Sovern.................. President Emeritus & Chancellor Kent Professor of Law at Columbia University 435 W. 116th Street, Box B20 New York, NY 10027 Mr. Sovern has been President Emeritus & Chancellor Kent Professor of Law at Columbia University since 1993. Prior thereto Mr. Sovern was the President of Columbia University for more than five years.
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PRINCIPAL OCCUPATION; BUSINESS ADDRESS; PRINCIPAL NAME BUSINESS OF EMPLOYER AND FIVE-YEAR EMPLOYMENT HISTORY - ------------------------------------ --------------------------------------------------------------------------- Maureen B. Tart..................... Vice President and Controller, AT&T Corp. 340 Mt. Kemble Avenue Morristown, NJ 07962 Ms. Tart owns 2,000 shares of Company Common Stock. Marilyn J. Wasser................... Vice President -- Law and Secretary AT&T Corp. 131 Morristown Road Basking Ridge, NJ 07924 *Joseph D. Williams................. Retired Chairman and Chief Executive Officer of Warner-Lambert Co. (Pharmaceuticals, Health Care and Consumer Products) 182 Tabor Road Morris Plains, NJ 07950 Mr. Williams has been Chairman of the Executive Committee of Warner-Lambert Co. since 1991. Prior thereto Mr. Williams was Chairman and Chief Executive Officer from 1985 to 1991. *Thomas H. Wyman.................... Senior Advisor, SBC Warburg, Inc. (Investment Banking) 277 Park Avenue New York, NY 10172 Mr. Wyman was the Chairman of S.G. Warburg & Co. Inc. from 1992 to 1996, and was Vice Chairman of S.G. Warburg Group PLC (U.K.) from 1993 to 1995. Prior to 1992, Mr. Wyman was the Chairman of United Biscuits (Holdings) U.S. Ltd, a bakery products manufacturer. Mr. Wyman owns 1,500 shares of Company Common Stock. John D. Zeglis...................... General Counsel and Senior Executive Vice President -- Policy Development and Operations Support AT&T Corp. 295 North Maple Avenue Basking Ridge, NJ 07920
E-6 ANNEX F CERTAIN INFORMATION REGARDING DIRECTORS AND EXECUTIVE OFFICERS OF MERGER SUB AND NOMURA 1. DIRECTORS AND EXECUTIVE OFFICERS OF MERGER SUB Except as noted below, (i) each of the persons named below is a citizen of the United Kingdom, (ii) none of the persons named below is the beneficial owner of any Company Common Stock, (iii) none of the persons named below has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) in the last five years, and (iv) each of the persons named below is a member of the Board of Directors of Merger Sub.
PRINCIPAL OCCUPATION; BUSINESS ADDRESS; NAME PRINCIPAL BUSINESS OF EMPLOYER AND FIVE-YEAR EMPLOYMENT HISTORY - ------------------------------------ --------------------------------------------------------------------------- Guy Hands........................... Managing Director Nomura International plc Nomura House, 1 St. Martin's-le-Grand London, England EC1A 4NP Mr. Hands was Executive Director of Goldman Sachs International in London from July 1982 to November 1994. Jeff Nash........................... Director Nomura International plc Nomura House, 1 St. Martin's-le-Grand London, England EC1A 4NP Mr. Nash was Manager (Tax Services) at Arthur Andersen & Co. from 1990 to June 1994 in Budapest and London.
2. DIRECTORS AND EXECUTIVE OFFICERS OF NOMURA Except as noted below, (i) each of the persons named below is a citizen of Japan, (ii) none of the persons named below is the beneficial owner of any Company Common Stock, (iii) none of the persons named below has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) in the last five years, (iv) each of the persons named below is a member of the Board of Directors of Nomura, and (v) the business address for each of the persons named below is The Nomura Securities Co., Ltd., 1-9-1, Nihonbashi, Chuo-ku, Tokyo 103, Japan.
PRINCIPAL OCCUPATION; BUSINESS ADDRESS; NAME PRINCIPAL BUSINESS OF EMPLOYER AND FIVE-YEAR EMPLOYMENT HISTORY - ------------------------------------ --------------------------------------------------------------------------- Toshio Ando......................... Director The Nomura Securities Co., Ltd. Mr. Ando has been Director of the Tobu and Hokuriku Area Sales Promotion Headquarters of Nomura and Director of Nomura since June 1995. Prior to that, Mr. Ando held various managerial positions in the corporate communications department and at the Kyoto branch of Nomura. Takamichi Arata..................... Director The Nomura Securities Co., Ltd. Mr. Arata has been Director of the financial management and system planning department of Nomura and Director of Nomura since June 1996. Prior to that, Mr. Arata held various management positions in the system planning and controller's departments at Nomura.
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PRINCIPAL OCCUPATION; BUSINESS ADDRESS; NAME PRINCIPAL BUSINESS OF EMPLOYER AND FIVE-YEAR EMPLOYMENT HISTORY - ------------------------------------ --------------------------------------------------------------------------- Max C. Chapman, Jr.................. Managing Director The Nomura Securities Co., Ltd. 2 World Financial Center Building B New York, N.Y. 10281-1198 Mr. Chapman has been Chairman of Nomura Holding America Inc. and Managing Director of Nomura since June 1996. Prior to that, Mr. Chapman had been a Director of Nomura since June 1990. Mr. Chapman is a citizen of the United States. Heiji Endo.......................... Director The Nomura Securities Co., Ltd. Mr. Endo has been Director of the legal, corporate planning and secretarial departments of Nomura and Director of Nomura since June 1994. Prior to that, Mr. Endo had been Head of the secretarial department of Nomura. Nobutaka Fujikura................... Managing Director The Nomura Securities Co., Ltd. Mr. Fujikura has been Managing Director of Nomura since June 1996 and Director of the general services department of Nomura since October 1995. Prior to that, he held various positions in clearing and operations at Nomura. Takashi Fujita...................... Director The Nomura Securities Co., Ltd. Mr. Fujita has been Director of the Kinki Area Sales Promotion Headquarters of Nomura and Director of Nomura since June 1996. Prior to that, Mr. Fujita held various management positions in branches of Nomura and in the sales and investment services areas at Nomura. Toshiaki Ito........................ Managing Director The Nomura Securities Co., Ltd. Mr. Ito has been Director of Corporate Planning of Nomura since May 1996 and Managing Director of Nomura since June 1995. Prior to that, he held various positions in financial management and personnel at Nomura. Kiichiro Iwasaki.................... Executive Vice President The Nomura Securities Co., Ltd. 5-4, Kitahama 2-chome Chuo-Ku, Osaka 541 Japan Mr. Iwasaki has been Executive Vice President of Nomura since June 1993. Prior to that, Mr. Iwasaki had been Executive Managing Director of Nomura. Nobuyuki Katsuki.................... Statutory Auditor The Nomura Securities Co., Ltd. Mr. Katsuki has been Statutory Auditor of Nomura since June 1994. Prior to that, Mr. Katsuki held various management positions in the Nomura Group and China and overseas project departments of Nomura. Mr. Katsuki is not a member of the Board of Directors of Nomura.
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PRINCIPAL OCCUPATION; BUSINESS ADDRESS; NAME PRINCIPAL BUSINESS OF EMPLOYER AND FIVE-YEAR EMPLOYMENT HISTORY - ------------------------------------ --------------------------------------------------------------------------- Tomio Kezuka........................ Director The Nomura Securities Co., Ltd. Mr. Kezuka has been Director of the investment trust, employees' investment plan, and the market planning and sales promotion departments of Nomura since June 1996 and Director of Nomura since June 1993. Prior to June 1996, Mr. Kezuka held various positions in the sales, personnel and employee relations areas at Nomura. Shin Kijima......................... Director The Nomura Securities Co., Ltd. Mr. Kijima has been Director of the equity, products development and equity distribution departments of Nomura since June 1996 and Director of Nomura since June 1993. Prior to June 1996, Mr. Kijima held various positions in the product development, treasury and fixed income areas at Nomura. Masatoshi Kobayashi................. Director The Nomura Securities Co., Ltd. Mr. Kobayashi has been Director of the regional institutional sales department of Nomura since June 1996 and Director of Nomura since June 1994. From June 1994 to June 1996, Mr. Kobayashi was the Director of the Tokyo Area Sales Promotion Headquarters of Nomura. Prior to that, Mr. Kobayashi held various management positions in sales at Nomura. Nobuyuki Koga....................... Director The Nomura Securities Co., Ltd. Mr. Koga has been General Manager of the personnel department at Nomura and Director of Nomura since June 1995. Prior to that, Mr. Koga held various positions in the personnel and corporate planning areas at Nomura. Masaharu Koike...................... Managing Director The Nomura Securities Co., Ltd. Mr. Koike has been Managing Director, Director of Corporate Finance, and General Manager of Financial Technology Information of Nomura since June 1996. Prior to that, he held various positions in the treasury, fixed income and sales areas at Nomura. Taizo Kondo......................... Director The Nomura Securities Co., Ltd. Mr. Kondo has been Representative of the China Office of Nomura since June 1996 and Director of Nomura since June 1991. From June 1993 to June 1996 Mr. Kondo was General Manager of the Asia Oceania Headquarters of Nomura. Prior to that, Mr. Kondo held various positions in clearing and operations at Nomura. Shozo Kumano........................ Director The Nomura Securities Co., Ltd. Mr. Kumano has been Director of the Nomura Group department and Director of Nomura since June 1994. Prior to that, he held various legal and managerial positions at Nomura.
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PRINCIPAL OCCUPATION; BUSINESS ADDRESS; NAME PRINCIPAL BUSINESS OF EMPLOYER AND FIVE-YEAR EMPLOYMENT HISTORY - ------------------------------------ --------------------------------------------------------------------------- Tokujin Masuda...................... Statutory Auditor The Nomura Securities Co., Ltd. Mr. Masuda has been Statutory Auditor of Nomura since June 1996. From June 1994 to June 1996, Mr. Masuda was General Manager of the supervision and inspection department of Nomura. Prior to that, Mr. Masuda was General Manager of the Toranomon branch of Nomura. Mr. Masuda is not a member of the Board of Directors of Nomura. Shinpei Matsuki..................... Managing Director The Nomura Securities Co., Ltd. Mr. Matsuki has been Director of equity distribution at Nomura and Managing Director of Nomura since June 1995. Prior to that, Mr. Matsuki held various positions in equity sales and trading at Nomura. Haruhiko Moriyama................... Director The Nomura Securities Co., Ltd. Mr. Moriyama has been Director of the Chugoku, Shikoku and Kyushu Area Sales Promotion Headquarters of Nomura and Director of Nomura since June 1996. Prior to that, Mr. Moriyama held various management positions in the sales and fixed income areas at Nomura. Osamu Muramatsu..................... Director The Nomura Securities Co., Ltd. Mr. Muramatsu has been Deputy General Manager of the Osaka branch and Director of the Osaka corporate financial consulting and investment counseling department of Nomura and Director of Nomura since June 1996. Prior to that, Mr. Muramatsu held various management positions in the corporate finance area and at the Sapporo branch of Nomura. Naotaka Murasumi.................... Executive Vice President The Nomura Securities Co., Ltd. Mr. Murasumi was Executive Managing Director of Nomura from June 1990 to June 1993. Koji Nakagawa....................... Statutory Auditor The Nomura Securities Co., Ltd. Mr. Nakagawa has been Statutory Auditor of Nomura since June 1994. Prior to that, Mr. Nakagawa had been an Advisor of NRI. Mr. Nakagawa is not a member of the Board of Directors of Nomura. Kamezo Nakai........................ Director The Nomura Securities Co., Ltd. Mr. Nakai has been Director of the Tokyo Area Sales Promotion Headquarters of Nomura since June 1996 and Director of Nomura since June 1995. Prior to June 1996, Mr. Nakai held various management positions in the sales and investment management areas at Nomura.
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PRINCIPAL OCCUPATION; BUSINESS ADDRESS; NAME PRINCIPAL BUSINESS OF EMPLOYER AND FIVE-YEAR EMPLOYMENT HISTORY - ------------------------------------ --------------------------------------------------------------------------- Akio Nakaniwa....................... Director The Nomura Securities Co., Ltd. 19-22, Nishiki 2-chome Naka-Ku, Nagoya 460 Japan Mr. Nakaniwa has been Director of the Chubu Area Sales Promotion Headquarters, Deputy General Manager of the Nagoya branch and General Manager of the investment consulting department of the Nagoya branch of Nomura since June 1996 and Director of Nomura since June 1994. From June 1994 to June 1996, Mr. Nakaniwa was Director of the Tokyo Area Sales Promotion Headquarters of Nomura. Prior to that, Mr. Nakaniwa was General Manager of the Sales Department of the Osaka branch of Nomura. Nobuo Nakazawa...................... Executive Managing Director The Nomura Securities Co., Ltd. Mr. Nakazawa has been Executive Managing Director of Nomura, Chairman of Nomura Australia Ltd., and Chairman of Nomura Project Finance International Limited since June 1996. Mr. Nakazawa was Managing Director of Nomura from June 1990 to June 1996. Hisaji Nakazono..................... Managing Director The Nomura Securities Co., Ltd. Mr. Nakazono has been Director of Corporate Communications and Compliance Director of Nomura since June 1996 and Managing Director of Nomura since June 1995. Prior to June 1996, Mr. Nakazono held various financial management positions at Nomura. Fumihide Nomura..................... Statutory Auditor The Nomura Securities Co., Ltd. Mr. Nomura has been Statutory Auditor of Nomura since June 1982. Mr. Nomura is not a member of the Board of Directors of Nomura. Akira Ogino......................... Executive Managing Director The Nomura Securities Co., Ltd. Mr. Ogino was Managing Director of Nomura from June 1991 to June 1996. Kazuho Oya.......................... Director The Nomura Securities Co., Ltd. Mr. Oya has been Director of the Financial Institutions and Public Corporations Headquarters of Nomura since June 1995 and Director of Nomura since June 1994. Prior to June 1995, Mr. Oya held management positions in the institutional equity sales and financial institutions areas at Nomura. Atsushi Saito....................... Executive Vice President The Nomura Securities Co., Ltd. Mr. Saito has been Executive Vice President of Nomura and President of Nomura Human Resources since June 1995. Mr. Saito was Executive Managing Director of Nomura from December 1993 to June 1995, Managing Director of Nomura from December 1992 to December 1993, and Executive Managing Director of Nomura from June 1990 to December 1992.
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PRINCIPAL OCCUPATION; BUSINESS ADDRESS; NAME PRINCIPAL BUSINESS OF EMPLOYER AND FIVE-YEAR EMPLOYMENT HISTORY - ------------------------------------ --------------------------------------------------------------------------- Hideo Sakamaki...................... President and Chief Executive Officer The Nomura Securities Co., Ltd. Mr. Sakamaki has been President and Chief Executive Officer of Nomura since June 1991. Yasuhiko Sato....................... Managing Director The Nomura Securities Co., Ltd. 19-22, Nishiki 2-chome Naka-Ku, Nagoya 460 Japan Mr. Sato has been General Manager of the Nagoya branch of Nomura since June 1994 and Managing Director of Nomura since March 1993. Prior to that, Mr. Sato was General Manager of various other branches of Nomura. Nobuyuki Shigemune.................. Director The Nomura Securities Co., Ltd. 5-4 Kitahama 2-chome Chuo-Ku, Osaka 541 Japan Mr. Shigemune has been General Manager of the Osaka branch of Nomura since June 1996 and Director of Nomura since June 1993. Prior to June 1996, Mr. Shigemune held various positions in the corporate finance and sales areas at Nomura. Masashi Suzuki...................... Chairman The Nomura Securities Co., Ltd. Mr. Suzuki was Executive Vice Chairman of Nomura from June 1993 to June 1994. Prior to that he had been Executive Vice President of Nomura. Setsuya Tabuchi..................... Director-Counsellor The Nomura Securities Co., Ltd. Mr. Tabuchi has been Director-Counsellor of Nomura since June 1995. From July 1991 to June 1995, Mr. Tabuchi was Counsellor of Nomura. Yoshihisa Tabuchi................... Director-Counsellor The Nomura Securities Co., Ltd. Mr. Tabuchi has been Director-Counsellor of Nomura since June 1995. From July 1991 to June 1995, Mr. Tabuchi was Counsellor of Nomura. Makoto Takahashi.................... Director The Nomura Securities Co., Ltd. Mr. Takahashi has been Director of the Financial Market Headquarters and the products development department of Nomura and Director of Nomura since June 1996. Prior to that, Mr. Takahashi held various management positions in the investment and trading areas at Nomura. Katsuya Takanashi................... Executive Managing Director The Nomura Securities Co., Ltd. Mr. Takanashi has been Executive Managing Director of Nomura and Chairman or President of various international subsidiaries of Nomura since June 1993. Mr. Takanashi was Managing Director of Nomura from December 1988 to June 1993.
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PRINCIPAL OCCUPATION; BUSINESS ADDRESS; NAME PRINCIPAL BUSINESS OF EMPLOYER AND FIVE-YEAR EMPLOYMENT HISTORY - ------------------------------------ --------------------------------------------------------------------------- Jiro Takeshi........................ Managing Director The Nomura Securities Co., Ltd. Mr. Takeshi has been Managing Director of Nomura since June 1995 and General Manager of the Head Office of Nomura since June 1994. Prior to June 1994, Mr. Takeshi held various managerial positions at Nomura. Ken Tamura.......................... Executive Vice President The Nomura Securities Co., Ltd. Mr. Tamura was Executive Managing Director of Nomura from June 1993 to May 1996. Prior to that, Mr. Tamura had been Managing Director of Nomura since December 1988. Isao Teranishi...................... Managing Director The Nomura Securities Co., Ltd. Mr. Teranishi has been Director of the Financial Markets Headquarters of Nomura since June 1996 and Managing Director of Nomura since June 1995. Prior to June 1996, he held various positions in the treasury and fixed income areas at Nomura. Hitoshi Tonomura.................... Executive Vice President Nomura International plc Nomura House 1 St. Martin's-le-Grand London EC1A 4NP England Mr. Tonomura has been Chairman of Nomura International plc and of various other international subsidiaries of Nomura since June 1995, and Executive Managing Director of Nomura since December 1988. Mr. Tonomura was Executive Vice President of Nomura from June 1993 to March 1995. Akira Tsuda......................... Executive Managing Director The Nomura Securities Co., Ltd. Mr. Tsuda was Managing Director of Nomura from June 1990 to June 1996. Hiroshi Tsujimura................... Director The Nomura Securities Co., Ltd. 2 World Financial Center Building B New York, N.Y. 10281-1198 Mr. Tsujimura has been President of Nomura Holding America Inc. and of Nomura Securities International Inc. and Director of Nomura since June 1996. From June 1995 to June 1996, Mr. Tsujimura was General Manager of Nomura Securities International Inc. Prior to that, Mr. Tsujimura had been General Manager of the credit and risk analysis department at Nomura. Shigeharu Ueda...................... Director The Nomura Securities Co., Ltd. Mr. Ueda has been Director of the Tokyo Metropolitan Area Sales Promotion Headquarters of Nomura since June 1996 and Director of Nomura since June 1995. Prior to June 1996, Mr. Ueda held various sales and general management positions at various branches of Nomura.
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PRINCIPAL OCCUPATION; BUSINESS ADDRESS; NAME PRINCIPAL BUSINESS OF EMPLOYER AND FIVE-YEAR EMPLOYMENT HISTORY - ------------------------------------ --------------------------------------------------------------------------- Junichi Ujiie....................... Managing Director The Nomura Securities Co., Ltd. Mr. Ujiie has been Director of Risk Analysis at Nomura since June 1996 and Managing Director of Nomura since June 1995. From June 1992 to June 1996, Mr. Ujiie was General Manager of the United States Headquarters of Nomura. Prior to that, Mr. Ujiie has been a Director of Nomura. Shigehiko Yamamoto.................. Director The Nomura Securities Co., Ltd. Mr. Yamamoto has been Director of Nomura since June 1996 and General Manager of the initial public offering department of Nomura since June 1991. Iwane Yamazaki...................... Statutory Auditor The Nomura Securities Co., Ltd. Mr. Yamazaki has been Statutory Auditor of Nomura since June 1994. Prior to that, Mr. Yamazaki had been General Manager of the supervision and inspection department of Nomura. Mr. Yamazaki is not a member of the Board of Directors of Nomura.
F-8 STATEMENT OF DIFFERENCES The section mark symbol shall be expressed as ..................SS -----END PRIVACY-ENHANCED MESSAGE-----