Check the appropriate box below if the
Form 8-K filing is intended to simultaneously satisfy the filing obligation
of
the registrant under any of the following provisions:
Distribution
Agreement
Pursuant
to the Distribution Agreement, and subject to the terms and conditions set
forth
therein, the Company will engage in a series of preliminary restructuring
transactions to effect the transfer to Spinco's subsidiaries of all of the
assets relating to the Spinco Business and the transfer to the Company's
subsidiaries of all assets not relating to the Spinco Business. Following
these
preliminary restructuring transactions, and immediately prior to the effective
time of the Valor merger described below, the Company will contribute (the
"Contribution") all of the stock of the Spinco subsidiaries to Spinco in
exchange for: (i) the issuance to the Company of Spinco common stock to be
distributed to the Company's stockholders pro rata in the spin-off (the
"Distribution"), (ii) the payment of a special dividend to the Company in
an
amount not to exceed the Company's tax basis in Spinco (the "Special
Dividend"), and (iii) the distribution by Spinco to the Company of certain
Spinco debt securities (the "Spinco Exchange Notes") in an amount equal to
the
difference between the Spinco Financing amount and the Special Dividend,
which
the Company intends to exchange for outstanding Company debt securities or
otherwise transfer to the Company's creditors (the "Debt Exchange"). The
separation of the assets and liabilities of the Spinco Business from the
Company's remaining assets, as well as the terms of the various separation
agreements and similar arrangements, between the Company and Spinco will
be
subject to the review of a steering committee comprised of representatives
designated by the Company, Spinco and Valor.
Prior
to
the Distribution, Spinco will consummate certain financing transactions (the
"Spinco Financing") pursuant to which Spinco will borrow approximately $3.965
billion through a new senior credit agreement, the issuance of high yield
debt
securities in an offering under Rule 144A or a public offering and the
distribution of the Spinco Exchange Notes to the Company. The proceeds of
the
Spinco Financing will be used to pay the Special Dividend and for other
purposes. The Company has received a commitment letter (the "Commitment Letter")
from J.P. Morgan Securities Inc., JPMorgan Chase Bank, N.A. (collectively,
"JP
Morgan"), Merrill Lynch, Pierce, Fenner & Smith Incorporated and Merrill
Lynch Capital Corporation (collectively, "Merrill Lynch") to provide the
Company
with up to $4.2 billion in senior secured credit facilities comprised of
term
loan facilities in an aggregate amount of up to $3.7 billion and a revolving
credit facility of up to $500 million. The maximum principal amount available
under the term loan facilities will be reduced in the event that the Company
elects to fund a portion of its capital requirements through the issuance
of
high yield debt securities in an offering under Rule 144A or a public offering.
The commitment letter is subject to customary conditions to consummation,
including the absence of any event or circumstance that, individually or
in the
aggregate, is materially adverse to the business, assets, properties,
liabilities or condition (financial or otherwise), of Spinco and its
subsidiaries or Valor and its subsidiaries since September 30, 2005. The
Company
has agreed to pay JP Morgan and Merrill Lynch certain fees in connection
with
the commitment letter and has agreed to indemnify JP Morgan and Merrill Lynch
against certain liabilities.
2
The
Distribution Agreement provides for a post-Closing adjustment to the extent
that
the net indebtedness of Spinco immediately following the Distribution is
more or
less than $4.2 billion.
In
connection with the transactions contemplated by the Distribution Agreement
and
the Merger Agreement, the Company, Spinco and Valor will enter into certain
related agreements, including a Tax Sharing Agreement, an Employee Benefits
Agreement, one or more Transition Services Agreements, and amendments to
the
Valor charter and by-laws, copies or the terms of which are attached as exhibits
to the Merger Agreement or the Distribution Agreement, as the case may be.
Consummation of the Distribution is subject to the satisfaction of the
conditions applicable to the Company and Spinco contained in the Merger
Agreement, as described below.
In
connection
with the execution of the Distribution Agreement, the Company and Spinco
entered
into the Employee Benefits Agreement pursuant to which the parties agreed
to
establish certain benefit plans, programs and arrangements for employees
of the
Company that will be employees of Spinco after the Distribution. The Employee
Benefits Agreement provides for, among other things, the establishment by
Spinco, and/or transfer by the Company to Spinco, of certain employee benefit
plans, policies and compensation programs, including defined benefit and
contribution retirement plans, health and welfare plans, incentive and
stock-based compensation plans and certain executive benefit plans. The Employee
Benefits Agreement also provides for the separation of assets and liabilities
related to benefit plans to be assumed by Spinco at the time of the Distribution
and addresses the treatment of Company employees that will be employed by
Spinco. Subject to certain exceptions, the Employee Benefits Agreement also
provides for reciprocal indemnification with respect to certain losses relating
to (i) the transfer of assets and liabilities under the Employee Benefits
Agreement, (ii) certain administrative errors or failures of the parties
and
(iii) certain claims for benefits under the Spinco employee benefit plans,
policies and compensation programs.
Merger
Agreement
Pursuant
to the Merger Agreement, and subject to the terms and conditions set forth
therein, immediately after the consummation of the Spinco Financing, the
payment
of the Special Dividend, the distribution to the Company of the Spinco Exchange
Notes and the consummation of the Distribution, Spinco will merge (the "Merger")
with and into Valor, with Valor continuing as the surviving corporation (the
"Surviving Corporation"). As a result of the Merger, all of the issued and
outstanding shares of Spinco common stock will be converted into the right
to
receive an aggregate number of shares of common stock of Valor that will
result
in the Company's stockholders holding 85% of the outstanding equity interests
of
the Surviving Corporation immediately after the Merger and the stockholders
of
Valor holding the remaining 15% of such equity interests (subject , in each
case, to dilution from compensatory equity grants and other
issuances).
The
Merger Agreement provides that, following the Merger, Jeffrey Gardener, who
currently serves as Executive Vice President - Chief Financial Officer of
the
Company, will serve as the Chief Executive Officer of the Surviving Corporation,
and Francis X. Frantz, who currently serves as the Executive Vice President
-
External Affairs, General Counsel and Secretary of the Company will serve
as
Chairman of the Board of Directors of the Surviving Corporation. The Merger
Agreement also provides that following the Merger, the Board of Directors
of the
Surviving Corporation will consist of nine members: Messrs. Frantz and Gardener,
six directors to be designated by the Company and one director to be designated
by Valor, with a majority of the Board being "independent" within the meaning
of
the NYSE's rules.
3
The
Merger Agreement contains customary representations and warranties between
the
Company and Spinco, on the one hand, and Valor, on the other, including with
respect to accuracy of financial statements, the absence of undisclosed
liabilities and similar matters. The parties have also agreed to a variety
of
customary covenants and agreements, including with respect to confidentiality,
cooperation, public disclosure, regulatory cooperation and similar matters.
Subject to Delaware law, the initial quarterly dividend rate of the Surviving
Corporation following the merger will be $0.25 per share.
Under
the
terms of the Merger Agreement, Spinco and Valor are restricted from taking
certain actions prior to the effective time of the Merger that could adversely
affect the tax-free treatment of the Distribution and related transactions.
In
addition, the Surviving Corporation will indemnify the Company for any such
actions that disqualify the Distribution for such tax-free treatment.
Unless
the Merger Agreement is earlier terminated, Valor is required to submit the
Merger Agreement to a stockholder vote even if the Valor Board has withdrawn
its
recommendation of the Merger. Valor is generally prohibited from soliciting
competing acquisition proposals and may not discuss a competing acquisition
proposal unless the proposal is superior to the Merger or the Valor Board
of
Directors determines in good faith that the proposal could lead to a superior
proposal. In such event, Valor may engage in discussions with the prospective
acquirer, provided certain information is given to the Company, and Valor
may
terminate the Merger Agreement to accept a superior proposal, subject to
certain
conditions and the payment of the termination fee described below.
The
Merger Agreement may be terminated: (i) by mutual consent of the parties,
(ii)
by any of the parties if the Merger has not been completed by December 8,
2006
(the "Termination Date"), (iii) by any of the parties if the Merger is enjoined,
(iv) by the Company and Spinco, on the one hand, or Valor, on the other hand,
upon an incurable material breach of the Merger Agreement by the other party
or
parties, (v) by any party if the Company's stockholders fail to approve the
Merger, (vi) by the Company or Spinco if Valor withdraws its recommendation
of
the Merger or fails to hold its stockholder meeting within 60 days after
effectiveness of the registration statement, or (vii) by the Company to accept
a
superior acquisition proposal, provided that Valor gives the Company prior
notice and attempts to renegotiate the transaction, and upon termination
Valor
enters into a competing transaction.
In
the
event that (i) Valor terminates the Merger Agreement to accept a superior
acquisition proposal, (ii) the Company and Spinco terminate the Merger Agreement
because Valor has withdrawn its recommendation of the Merger, (iii) any of
the
parties terminates the Merger Agreement because the Termination Date has
passed
or AT Co. and Spinco terminate the Merger Agreement because the Company fails
to
hold its stockholder meeting, or (iv) any of the parties terminates the Merger
Agreement because the Company's stockholders fail to approve the Merger,
and in
the case of clauses (iii) and (iv) Valor agrees to or consummates a business
combination transaction within one year after termination, then Valor must
pay
the Company a $35 million termination fee. If any party terminates the Merger
Agreement because the termination date has passed or the Company terminates
the
Merger Agreement because of a material breach by the Company or Spinco and,
in
either case, at the time of termination substantially all other conditions
to
the Merger have been satisfied but the required IRS rulings or tax opinions
for
the transaction have not been received, then the Company must pay Valor a
$20
million termination fee and, if the Spinco Financing condition has not been
satisfied at the time of termination, then the Company must pay Valor an
increased termination fee of $35 million.
4
Consummation
of the Merger is subject to the satisfaction of certain conditions, including,
among others, (i) the approval of the Merger by the stockholders of Valor,
(ii)
the receipt of required regulatory approvals, including the approval of the
Federal Communications Commission and the expiration of the applicable waiting
period under the Hart-Scott Rodino Antitrust Improvements Act of 1976, as
amended, (iii) consummation of the Contribution, the Distribution and the
Debt
Exchange, (iv) consummation of the Spinco Financing, (v) receipt of surplus,
solvency and certain other opinions and (vi) receipt of certain rulings from
the
Internal Revenue Service. The Merger and the other transactions contemplated
by
the Merger Agreement and the Distribution Agreement are expected to be completed
in the second quarter of 2006.
Voting
Agreement
In
connection with the execution of the Distribution Agreement and the Merger
Agreement, Spinco entered in a Voting Agreement (the "Voting Agreement")
with
certain stockholders of Valor who collectively own approximately 39% of Valor's
outstanding common shares. Pursuant to the Voting Agreement, these stockholders
have agreed to vote all of their shares of Valor common stock (i) in favor
of
the approval of the Merger and the approval and adoption of the Merger Agreement
and (ii) except with the written consent of Spinco, against certain alternative
proposals that may be submitted to a vote of the stockholders of Valor regarding
an acquisition of Valor. In the event that the Merger Agreement terminates
for
any reason, the Voting Agreement will automatically terminate.
The
foregoing descriptions of the Distribution Agreement, the Merger Agreement,
the
Voting Agreement, the Employee Benefits Agreement and the Commitment Letter
are
qualified in their entirety by reference to the full text of the Distribution
Agreement, the Merger Agreement, the Voting Agreement, the Employee
Benefits Agreement and the Commitment Letter, copies of which are
attached
hereto as Exhibits 2.1, 2.2, 10.1, 10.2, and 10.3 , respectively,
and
incorporated herein by reference.
ITEM
7.01 Regulation FD Disclosure
On
December 8, 2005, the Company issued a press release announcing the transactions
contemplated by the Distribution Agreement and the Merger Agreement (the
"Press
Release"). A copy of the Press Release is attached hereto as Exhibit 99.1
and
incorporated herein by reference.
The
information contained in this Item 7.01 is not filed for purposes of the
Securities Exchange Act of 1934 and is not deemed incorporated by reference
by
any general statements incorporating by reference this report or future
filings
into any filings under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, except to the extent the Company specifically
incorporates the information by reference. By including this Item 7.01
disclosure in the filing of this Current Report on Form 8-K and furnishing
this
information, we make no admission as to the materiality of any information
in
this report that is required to be disclosed solely by reason of Regulation
FD.
The
information contained herein is summary information that is intended to
be
considered in the context of our SEC filings and other public announcements
that
we may make, by press release or otherwise, from time to time. We undertake
no
duty or obligation to publicly update or revise the information contained
in
this report, although we may do so from time to time as we believe is warranted.
Any such updating may be made through the filing of other reports or documents
with the Securities and Exchange Commission, through press releases or
through
other public disclosures.