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In an apparent response to widespread criticism and a lawsuit, Comcast Corp. and AT&T Broadband have altered a controversial corporate governance provision included in their $72 billion merger agreement. The change gives shareholders greater sway over the combined company by subjecting directors to elections in 2004 rather than in 2005, as initially proposed. Comcast officials previously said they wanted to suspend elections for 2 1/2 years to give management time to make the merger work before having to worry about a hostile takeover attempt. Management will now have about 18 months, assuming federal regulators approve the deal by year’s end. A Capitol Hill source said senators planned to grill AT&T chairman C. Michael Armstrong and Comcast president Brian L. Roberts about the controversial governance provision at a Senate Judiciary antitrust subcommittee hearing scheduled for today. A Comcast spokesman declined to comment Sunday. The change in the merger agreement was first reported Saturday by The Washington Post, which also said the company plans to unveil the new agreement today. Other unusual corporate governance provisions remain, such as requiring a 75 percent vote of the board to fire either the chairman or chief executive officer and a prohibition on acquiring more than 10 percent of voting stock without board approval. The three corporate governance provisions would have made the new company essentially immune to a hostile takeover. New York-based TrueCourse Inc. estimated the company would score nine on its one to 10 scale, with 10 representing the toughest takeover defenses possible. The average score for cable companies is 1.8. The provisions prompted outrage from institutional investors, including large unions. The about-face comes just a week after the companies defeated an effort by two investors to block the merger on the grounds that suspending elections for directors until 2005 was illegal. A New York judge ruled the company had the right to delay elections provided shareholders could vote on the suspension as part of their approval of the overall merger. The investors have vowed to appeal. The companies unveiled the merger Dec. 19. Shareholders for AT&T Corp., which is merging its cable unit with Comcast, will receive .34 shares of AT&T Comcast Corp. stock for each AT&T share. Comcast shareholders will exchange their shares on a one-to-one basis. AT&T shareholders will end up owning 56 percent of the company. Copyright (c)2002 TDD, LLC. All rights reserved.

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