EXHIBIT 2.1
EXECUTION - ALABAMA
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ASSET PURCHASE AGREEMENT
Between
VERIZON SOUTH INC.
and
CONTEL OF THE SOUTH, INC. D/B/A
VERIZON MID-STATES
and
CENTURYTEL OF ALABAMA, L.L.C.
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TABLE OF CONTENTS
ARTICLE I DEFINITIONS............................................................... 1
1.1 Defined Terms............................................................. 1
1.2 Other Definitional Provisions............................................. 12
ARTICLE II PURCHASE AND SALE OF ASSETS; CLOSING...................................... 12
2.1 Purchase and Sale of Assets; Excluded Assets.............................. 12
2.1.1 Acquired Assets.................................................. 12
2.1.2 Excluded Assets.................................................. 13
2.2 Consideration for Transfer of the Acquired Assets......................... 14
2.3 Assumption of Liabilities................................................. 14
2.3.1 Assumed Liabilities.............................................. 14
2.3.2 Retained Liabilities............................................. 16
2.4 Regarding Consents........................................................ 17
2.5 The Closing............................................................... 17
2.6 Deliveries and Proceedings at Closing..................................... 17
2.6.1 Deliveries by Seller............................................. 18
2.6.2 Deliveries by Buyer.............................................. 18
ARTICLE III PURCHASE PRICE............................................................ 18
3.1 Purchase Price............................................................ 18
3.2 Closing Date Estimate..................................................... 18
3.3 Calculation of Final Purchase Price....................................... 19
3.3.1 Closing Date Statement........................................... 19
3.3.2 Disputes Regarding Closing Date Statement........................ 19
3.3.3 Final Determination of Purchase Price............................ 20
3.3.4 Interest on Final Payment........................................ 20
3.3.5 Payments......................................................... 20
3.4 Performance Deposit....................................................... 20
3.4.1 Deposit.......................................................... 20
3.4.2 Letter of Credit................................................. 20
ARTICLE IV REPRESENTATIONS AND WARRANTIES............................................ 21
4.1 Representations and Warranties of Seller.................................. 21
4.1.1 Corporate Organization and Related Matters....................... 21
4.1.2 Compliance with Laws............................................. 21
4.1.3 Litigation....................................................... 21
4.1.4 Validity of Contemplated Transactions............................ 22
4.1.5 Title to Owned Real Property..................................... 22
4.1.6 Leased Real Property; Real Property Interests.................... 22
4.1.7 Tangible Assets.................................................. 23
4.1.8 Schedules of Telephone Plant and Material and Supply Inventory... 23
4.1.9 Material Contracts............................................... 23
4.1.10 Insurance........................................................ 25
4.1.11 Taxes............................................................ 25
4.1.12 Tariffs; FCC Licenses............................................ 25
4.1.13 Employee Matters................................................. 26
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4.1.14 Environmental Matters....................................... 28
4.1.15 Financial Statements........................................ 29
4.1.16 No Material Adverse Change.................................. 30
4.1.17 Brokers..................................................... 30
4.1.18 No Other Representations and Warranties..................... 30
4.2 Representations and Warranties of Buyer.............................. 30
4.2.1 Corporate Organization and Related Matters.................. 30
4.2.2 Litigation.................................................. 30
4.2.3 Validity of Contemplated Transactions....................... 31
4.2.4 Financial Capabilities...................................... 31
4.2.5 Brokers..................................................... 31
4.2.6 Financial Statements........................................ 31
4.2.7 Investigation; Acknowledgment............................... 32
4.2.8 No Other Representations and Warranties..................... 32
ARTICLE V COVENANTS AND AGREEMENTS PENDING CLOSING............................. 32
5.1 Agreement of Seller Pending the Closing.............................. 32
5.1.1 Conduct of the Business in the Ordinary Course.............. 32
5.1.2 Access...................................................... 34
5.1.3 Consents.................................................... 34
5.1.4 Debtholder Consents......................................... 34
5.1.5 Financial Statements........................................ 35
5.1.6 Capital Expenditures........................................ 35
5.1.7 VADI Assets................................................. 35
5.1.8 Release of Liens............................................ 35
5.1.9 Interim Reports............................................. 36
5.2 Agreement of Buyer Pending the Closing............................... 36
5.2.1 Control of Business Pending Closing......................... 36
5.2.2 Contacts by Buyer........................................... 36
5.2.3 Highly Confident Letters.................................... 36
5.3 Covenants of Seller and Buyer........................................ 36
5.3.1 State Regulatory Approval................................... 36
5.3.2 FCC Consents................................................ 37
5.3.3 HSR Act Review.............................................. 37
5.3.4 Landlord Consents........................................... 38
5.3.5 Other Agreements............................................ 38
5.3.6 Insurance Coverage.......................................... 38
5.3.7 Interconnection Agreements.................................. 38
5.3.8 Designated Representative................................... 38
ARTICLE VI CONDITIONS PRECEDENT TO THE CLOSING.................................. 38
6.1 Conditions Precedent to Obligations of Buyer......................... 38
6.1.1 Representations and Warranties True as of Closing........... 38
6.1.2 Compliance with this Agreement.............................. 39
6.1.3 Closing Certificate......................................... 39
6.1.4 Other Agreements............................................ 39
6.2 Conditions Precedent to Obligations of Seller........................ 39
6.2.1 Representations and Warranties True as of Closing........... 39
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6.2.2 Compliance with this Agreement ............................................... 39
6.2.3 Closing Certificate .......................................................... 39
6.2.4 Purchase Price ............................................................... 39
6.2.5 Other Agreements ............................................................. 39
6.3 Conditions Precedent to the Obligations of Buyer and Seller .......................... 40
6.3.1 HSR Act Waiting Period ....................................................... 40
6.3.2 Required Consents ............................................................ 40
6.3.3 No Governmental Order ........................................................ 40
6.3.4 Assumption of Labor Contract Obligations ..................................... 40
6.3.5 No Material Adverse Effect ................................................... 40
ARTICLE VII INDEMNIFICATION ...................................................................... 40
7.1 Survival of Representations and Warranties ........................................... 40
7.1.1 Survival Period .............................................................. 40
7.1.2 Period for Claims ............................................................ 41
7.2 Indemnification ...................................................................... 41
7.2.1 Indemnification Obligation of Seller ......................................... 41
7.2.2 Indemnification Obligation of Buyer .......................................... 41
7.2.3 Definitions .................................................................. 42
7.3 Limitation on Claims for Indemnifiable Losses ........................................ 42
7.3.1 Matters Known Prior to Closing ............................................... 42
7.3.2 Limitation of Liability ...................................................... 42
7.4 Defense of Claims .................................................................... 43
7.4.1 Third Party Claims ........................................................... 43
7.4.2 Direct Claims ................................................................ 44
7.4.3 Subrogation .................................................................. 44
7.5 No Indemnifiable Claims Resulting from Governmental Authority Action ................. 44
7.6 Other Rights and Remedies ............................................................ 45
ARTICLE VIII EMPLOYEES AND EMPLOYEE MATTERS ....................................................... 45
8.1 Employment of Transferred Employees .................................................. 45
8.1.1 Assumption of Labor Contract Obligations ..................................... 46
8.1.2 Assumption of Employment and Other Agreements ................................ 46
8.1.3 No Creation of Objection Rights .............................................. 46
8.1.4 Recognition of Transferred Employee Service .................................. 46
8.1.5 Assumption of Obligation to Pay Bonuses ...................................... 46
8.1.6 No Duplicate Benefits ........................................................ 47
8.1.7 Affiliate Employees .......................................................... 47
8.2 Transferred Employee Benefit Matters ................................................. 47
8.2.1 Defined Benefit Plans ........................................................ 47
8.2.2 Savings Plans ................................................................ 50
8.2.3 Welfare Plans ................................................................ 50
8.3 Severance Benefits ................................................................... 52
8.4 Vacation Benefits .................................................................... 52
8.5 Employee Rights ...................................................................... 53
8.6 Successors and Assigns ............................................................... 53
ARTICLE IX CONTINUING BUSINESS RELATIONSHIPS .................................................... 53
9.1 Transition Plan Support Agreement .................................................... 53
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9.2 Directory Publishing ....................................................... 54
9.2.1 Certain Directory Publishing Agreement Rights and Obligations ...... 54
9.2.2 Co-Bound Directories Acknowledgement ............................... 54
ARTICLE X ADDITIONAL AGREEMENTS OF THE PARTIES ....................................... 54
10.1 Intellectual Property ...................................................... 54
10.1.1 No License ......................................................... 54
10.1.2 Infringement ....................................................... 54
10.1.3 Trademark Phaseout ................................................. 55
10.1.4 Third Party Software ............................................... 56
10.2 Confidentiality ............................................................ 56
10.3 Further Assurances ......................................................... 56
10.4 Prorations ................................................................. 57
10.5 Cost Studies/Toll and Access Settlement Matters ............................ 58
10.5.1 Prior to Closing ................................................... 58
10.5.2 From and After Closing ............................................. 58
10.6 Access to Books and Records ................................................ 58
10.6.1 Retention Period ................................................... 58
10.6.2 Access ............................................................. 58
10.7 Purchase Price Allocation .................................................. 59
10.8 Owned Real Property Transfers .............................................. 59
10.9 Transaction Taxes and Tax Refunds .......................................... 60
10.10 Bulk Sales Laws ............................................................ 61
10.11 Prepaid Non-Regulated Maintenance Agreements ............................... 61
10.12 Vehicle Registration ....................................................... 61
10.13 CABS Accounts Receivable Transition ........................................ 61
10.14 CBSS and SSB Billing and Accounts Receivable Transition .................... 61
10.14.1 Transfer of Records ................................................ 61
10.14.2 Settlement of Accounts Receivable .................................. 61
10.14.3 Updated Statements ................................................. 62
10.14.4 Resolution of Material Discrepancies ............................... 62
10.14.5 Exclusive Remedies ................................................. 62
10.15 Environmental Remediation .................................................. 62
10.16 Customer Deposits .......................................................... 63
ARTICLE XI TERMINATION ................................................................ 63
11.1 Termination Rights ......................................................... 63
11.2 Good Faith Performance ..................................................... 64
11.3 Effect of Termination ...................................................... 64
11.3.1 Mutual Termination or Termination upon Governmental Order .......... 64
11.3.2 Termination by Buyer ............................................... 64
11.3.3 Termination by Seller .............................................. 64
11.3.4 Compliance with Non-Disclosure Agreement ........................... 64
11.3.5 Survival ........................................................... 64
ARTICLE XII MISCELLANEOUS .............................................................. 65
12.1 Notices .................................................................... 65
12.2 Information Releases ....................................................... 66
12.3 Expenses ................................................................... 66
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12.4 Successors and Assigns ....................................... 66
12.5 Amendments ................................................... 66
12.6 Captions ..................................................... 66
12.7 Entire Agreement ............................................. 66
12.8 Waiver ....................................................... 66
12.9 Third Parties ................................................ 67
12.10 Counterparts ................................................. 67
12.11 Governing Law ................................................ 67
12.12 Further Assurances ........................................... 67
12.13 Severability ................................................. 67
12.14 Schedules; Exhibits .......................................... 68
12.15 Knowledge Convention ......................................... 68
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LIST OF EXHIBITS
Exhibit A List of Seller Exchanges
Exhibit B Form of Assignment and Assumption Agreement
Exhibit C Form of Intellectual Property License Agreement
Exhibit D Form of Publishing Agreement
Exhibit E Transition Plan Support Agreement
Exhibit F Buyer Highly Confident Letters
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SELLER DISCLOSURE SCHEDULES
Schedule 2.1.1(e) Assigned Contracts
Schedule 2.1.2(g) Other Excluded Assets
Schedule 2.1.2(h) Excluded Contracts
Schedule 4.1.2 Compliance with Laws
Schedule 4.1.3 Litigation
Schedule 4.1.4 Consents
Schedule 4.1.5(a) Lienholders
Schedule 4.1.5(b) Owned Real Property
Schedule 4.1.6(a) Real Property Leases
Schedule 4.1.6(b) Real Property Interests
Schedule 4.1.7 Tangible Assets; Exceptions to Title
Schedule 4.1.8 Telephone Plant and Material and Supply Inventory
Schedule 4.1.9(a) Material Contracts
Schedule 4.1.9(b) Material Contracts - Defaults
Schedule 4.1.11 Taxes
Schedule 4.1.12 Regulatory Tariffs
Schedule 4.1.12(a) Pending or Threatened Commission Proceedings
Schedule 4.1.12(b) FCC Licenses
Schedule 4.1.13(a) ERISA Plans
Schedule 4.1.13(b) ERISA Material Liabilities
Schedule 4.1.13(c) ERISA Plans - Exceptions
Schedule 4.1.13(d) Multiemployer Plans
Schedule 4.1.13(e) Labor Unions
Schedule 4.1.14 Environmental Matters
Schedule 4.1.15(a) Financial Statements
Schedule 4.1.15(b) Transfers and Assignments
Schedule 4.1.15(c) June 30 Financial Data
Schedule 4.1.16 Material Adverse Change
Schedule 5.1.1(j) Benefit and Compensation Changes
Schedule 5.1.9 Interim Reports
Schedule 5.3.2 FCC Waivers
Schedule 5.3.5 Other Agreements
Schedule 8.1 Transferred Employees
Schedule 8.1(a) Retained Employees
Schedule 8.1(b) Included Employees
Schedule 8.1.2 Assumption of Employment Agreements - Exceptions
Schedule 8.2.1(d)(i) Pension Transfer Assumptions
Schedule 8.3 Executive Minimum Severance Benefits
Schedule 9.2.2 Co-Bound Directories
Schedule 10.1.4 Switch Software
Schedule 10.8 Title Policies
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") dated as of October 22,
2001, is entered into by and between, on the one hand, CENTURYTEL OF ALABAMA,
L.L.C., a Louisiana limited liability company (together with its permitted
successors and assigns, the "Buyer"), and, on the other hand, VERIZON SOUTH
INC., a Virginia corporation and CONTEL OF THE SOUTH, INC. d/b/a VERIZON
MID-STATES, a Georgia corporation ("each a "Seller" and collectively, the
Sellers").
RECITALS
WHEREAS, Sellers have been authorized by the Alabama Public Service
Commission ("Commission") as an in-franchise provider of regulated local
exchange, access and toll telephone service in certain exchanges within the
state of Alabama as set forth on Exhibit A attached hereto (the "Seller
Exchanges"); and
WHEREAS, Sellers are or will be prior to Closing the owner of telephone
network assets in the Seller Exchanges and, in connection therewith, is engaged
in the business of marketing, selling and providing local exchange telephone
service; access and intraLATA toll services presubscribed to Sellers; and
dedicated and special access, ATM, frame relay, digital subscriber line and
other high speed data services; each within the Seller Exchanges to end users,
interexchange carriers and other local exchange carriers (such business, as
conducted by the Sellers, is referred to herein as the "Business"); and
WHEREAS, Sellers desire to sell, assign and transfer to Buyer, and Buyer
desires to purchase and accept from Sellers, certain of its regulated telephone
properties and related assets used in the Business, upon the terms and
conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and undertakings
contained herein, and on the terms and conditions herein set forth, the parties,
intending to be legally bound, agree as follows:
ARTICLE I
DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the following terms shall
have the meanings set forth or referenced below:
"Accounts Receivable Settlement Statement" has the meaning set forth in
Section 10.14.2.
"Acquired Assets" has the meaning set forth in Section 2.1.1.
"Active Employees" has the meaning set forth in Section 8.1.
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"Affiliate" means as to any Person, any other Person that, directly or
indirectly, through one or more intermediaries, Controls, is Controlled by, or
is under common Control with, such Person.
"Agreement" means this Asset Purchase Agreement and all Schedules and
Exhibits hereto, as amended, modified or supplemented from time to time in
accordance with the terms hereof.
"Ancillary Documents" means the Transition Plan Support Agreement, the
License Agreement, the Publishing Agreement and the ▇▇▇▇ of Sale, Assignment and
Assumption Agreement.
"Applicable Rate" means the three-month LIBOR rate as published on Telerate
Page 3750 as of 11:00 a.m., London time, on the date which is two days prior to
the date such rate is determined, less 10 basis points, such rate to be reset
every 90 days.
"Assigned Contracts" means Contracts to which Sellers or a Sellers'
Affiliate is a party that (i) relate primarily to the operation of the Business
(other than the Excluded Contracts, Real Property Interests, Real Property
Leases and Third Party Intellectual Property Contracts), and (ii) any other
contract that is expressly identified on Schedule 2.1.1(e).
"Assigned Permits" means, to the extent assignable, all permits, licenses,
franchises, approvals, waivers and authorizations issued or granted by any
Governmental Authority to Sellers or any Affiliate thereof that relate primarily
to the operation of the Business, other than the FCC Licenses.
"Assumed Liabilities" has the meaning set forth in Section 2.3.1.
"Bargained Welfare Plans" has the meaning set forth in Section 8.2.3(a).
"Base Purchase Price" has the meaning set forth in Section 3.1.
"▇▇▇▇ of Sale, Assignment and Assumption Agreement" means the ▇▇▇▇ of Sale,
Assignment and Assumption Agreement in the form attached as Exhibit B hereto.
"Business" has the meaning set forth in the Recitals hereto.
"Business Day" means any day other than a Saturday, a Sunday or a day on
which banks in the city of New York are authorized or required to be closed.
"Buyer" has the meaning set forth in the Preamble hereto.
"Buyer Consents" has the meaning set forth in Section 4.2.3.
"Buyer Indemnitee" has the meaning set forth in Section 7.2.1.
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"Buyer Pension Plan" and "Buyer Pension Plans" have the meanings set forth
in Section 8.2.1(b).
"Buyer Savings Plan" and "Buyer Savings Plans" have the meanings set forth
in Section 8.2.2(b).
"Buyer Welfare Plans" has the meaning set forth in Section 8.2.3(a).
"Buyer's Actuary" has the meaning set forth in Section 8.2.1(d)(ii).
"CABS" means the Carrier Access Billing System operated by Sellers and
their Affiliates which is utilized primarily to render bills to carriers for
services provided by the Business.
"CALEA" means the Communications Assistance for Law Enforcement Act.
"Capital Expenditure Deficiency" has the meaning set forth in Section
5.1.6.
"CBSS" means the Customer Billing Support System operated by Sellers and
their Affiliates which is utilized primarily to render bills for services
provided by the Business.
"CBSS Accounts Receivable" means accounts receivable arising primarily from
the operation of the Business that are attributable to Sellers' provision of
service on or before the Closing Date that have been billed, or are billable,
through Sellers' CBSS system. CBSS Accounts Receivable shall not include amounts
billed or billable through CABS or SSB. CBSS Accounts Receivable includes those
categories of accounts receivable identified in Sellers' systems as "current,"
"unpaid live" and "unpaid final," and shall include amounts resulting from
▇▇▇▇▇▇▇▇ pursuant to billing and collection agreements with third parties.
"CBSS Accounts Receivable Amount" means the aggregate amount of all CBSS
Accounts Receivable as of the Closing Date, less a discount for anticipated
uncollectible CBSS Accounts Receivable in an amount equal to the CBSS
Uncollectible Factor multiplied by the CBSS Accounts Receivable as of the
Closing Date; provided, however, that to the extent the percentage of CBSS
Accounts Receivable which are classified as past due for more than ninety (90)
days at Closing exceeds nine and one-half percent (9.5%) of the total CBSS
Accounts Receivable, the CBSS Accounts Receivable shall be reduced to the extent
of such excess for purposes of calculating the CBSS Accounts Receivable Amount.
"CBSS Uncollectible Factor" means seven percent (7%).
"Closing" has the meaning set forth in Section 2.5.
"Closing Consents" has the meaning set forth in Section 2.5.
"Closing Date" has the meaning set forth in Section 2.5.
"Closing Date Payment" has the meaning set forth in Section 3.2.
3
"Closing Date Statement" has the meaning set forth in Section 3.3.1.
"Co-Bound Directory" has the meaning set forth in Section 9.2.2.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" has the meaning set forth in the Recitals hereto.
"Consent Fees" has the meaning set forth in Section 2.4.
"Construction Advances" means advances collected by Sellers for the future
performance of non-regulated construction in the Seller Exchanges.
"Contract" means any contract, agreement, arrangement, bond, commitment,
note, loan, mortgage, lease or other agreement legally binding on the parties
thereto.
"Control" (including the correlative terms "Controls," "Controlled by,"
"Controlling" and "under common Control with") shall mean with respect to any
Person, possession of the power, directly or indirectly, either to (A) vote a
majority of the voting shares or other voting interest in such Person for the
election of directors of such Person or (B) direct or cause the direction of the
management and policies of such Person, whether through the ownership of voting
securities, by contract or otherwise.
"Customer Deposits" has the meaning set forth in Section 10.16.
"Customer Prepayments" means payments arising from the operation of the
Business that have been billed and collected by the Sellers as of the Closing
Date but which relate to the provision of service after the Closing Date.
"Debtholder Consents" has the meaning set forth in Section 5.1.4.
"Deposit" has the meaning set forth in Section 3.4.1.
"Deposit L/C" has the meaning set forth in Section 3.4.2.
"Direct Claim" has the meaning set forth in Section 7.4.2.
"Dispute Resolution Request" has the meaning set forth in Section 3.3.2.
"Employment Agreements" has the meaning set forth in Section 4.1.13(a).
"Environmental Claims" has the meaning set forth in Section 4.1.14(e).
"Environmental Laws" has the meaning set forth in Section 4.1.14(e).
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"Environmental Permits" has the meaning set forth in Section 4.1.14(e).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Plans" has the meaning set forth in Section 4.1.13(a).
"Estimated Non-Regulated Construction Work in Process Amount" has the
meaning set forth in Section 3.2.
"Estimated Regulatory Obligation Amount" has the meaning set forth in
Section 3.2.
"Excluded Assets" has the meaning set forth in Section 2.1.2.
"Excluded Contracts" means all billing and collection agreements,
interconnection agreements, National Account Agreements, billing media
agreements, vehicle leasing agreements and other contracts listed on Schedule
2.1.2(h).
"Excluded Marks" means all trademarks, applications for trademark
registration, common law trademarks, service marks, applications for service
▇▇▇▇ registration, common law service marks, trade names, domain names and
related registrations owned by Sellers or an Affiliate of Sellers, or licensed
to Sellers or an Affiliate of Sellers by any Person, any derivations of the
foregoing and any marks or names similar to the foregoing.
"Expiration Date" has the meaning set forth in Section 7.1.1.
"Final Closing Date Statement" has the meaning set forth in Section 3.3.2.
"Financial Statements" has the meaning set forth in Section 4.1.15(a).
"FCC" means the Federal Communications Commission.
"FCC Consents" has the meaning set forth in Section 5.3.2.
"FCC Licenses" means all licenses, certificates, permits or other
authorizations granted to Sellers or a Seller Affiliate by the FCC that are used
primarily in the operation of the Business.
"FRP" has the meaning set forth in Section 8.2.3(d).
"Future Regulatory Obligations" has the meaning set forth in Section
2.3.1(g).
"GAAP" means United States generally accepted accounting principles.
"Governmental Authority" means any nation or government, any state or other
political subdivision thereof or any entity, including without limitation, a
court, regulatory body, agency, department, authority or instrumentality
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
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"Governmental Order" means, as to any Person, any judgment, injunction,
decree, order or other determination of an arbitrator or a court or other
Governmental Authority, in each case applicable to or binding upon such Person
or any of its property or to which such Person or any of its property or assets
is subject.
"Hazardous Material" has the meaning set forth in Section 4.1.14(e).
"Highly Confident Letters" has the meaning set forth in Section 4.2.4(a).
"HSR Act" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976,
as amended.
"Included Claims" has the meaning set forth in Section 7.3.2(a).
"Included Employees" has the meaning set forth in Section 8.1.
"Indemnification Payment" has the meaning set forth in Section 7.2.3(a).
"Indemnitee" has the meaning set forth in Section 7.2.3(b).
"Indemnitor" has the meaning set forth in Section 7.2.3(c).
"Intellectual Property" means all inventions (whether patentable or not and
whether or not such inventions are described or claimed in any patent or patent
application), designs (useful or ornamental), and works subject to copyright
protection, invention disclosures, specifications, manuals, drawings, functional
or system block diagrams, flow charts, circuit diagrams, design or user
documentation, engineering notebooks, schematics, test programs, documented
procedures, documented processes, documented flows, devices, software (in any
form), firmware, or proprietary information and all intellectual property rights
in or based upon the foregoing, including patents, patent applications
(including continuations, continuations-in-part, divisions, reissues),
reexamined patents and extensions thereof, copyrights (whether registered or
unregistered), and trade secrets.
"Interim Capital Expenditure Obligations" has the meaning set forth in
Section 2.3.1(h).
"Interim Reports" has the meaning set forth in Section 5.1.9.
"Inter-Unit Services Employees" has the meaning set forth in Section 8.1.
"IRS" means the Internal Revenue Service.
"June 30 Financial Data" has the meaning set forth in Section 4.1.15(c).
"Knowledge" or "knowledge" has the meaning set forth in Section 12.15.
6
"Labor Contracts" has the meaning set forth in Section 4.1.13(a).
"Law" or "Laws" means any statute, rule, regulation, mandate, order or
ordinance of any Governmental Authority.
"Leased Real Property" means the real property leased to Sellers or a
Seller Affiliate in accordance with the terms of the Real Property Leases and
used primarily in the operation of the Business.
"License Agreement" means the Intellectual Property License Agreement in
the form attached hereto as Exhibit C.
"Licensed Intellectual Property" means Intellectual Property owned by
Sellers, and Third Party Intellectual Property licensed to Sellers or a Seller
Affiliate which Sellers or Seller Affiliate has the right to sublicense to Buyer
without the payment of compensation or other consideration to any Person, and
which Intellectual Property and Third Party Intellectual Property are required
for the use or maintenance (to the extent not provided by the owner or licensor
of the Third Party Intellectual Property) of the Acquired Assets in the
operation of the Business as of the Closing; provided that Licensed Intellectual
Property shall at all times be an Excluded Asset.
"Lien" means any lien, charge, pledge, option, mortgage, security interest,
lease obligation or other encumbrance other than Permitted Encumbrances.
"Lienholders" means those Persons holding indebtedness issued under
indentures or other instruments, and identified on Schedule 4.1.5(a).
"Losses" has the meaning set forth in Section 7.2.3(d).
"Material Adverse Change" and "Material Adverse Effect" mean any change,
effect or circumstance that is materially adverse to the Business or the
Acquired Assets taken as a whole, but shall not include matters arising from the
execution or public announcement of this Agreement, the identity of Buyer, or
the effects of changes that are generally applicable (A) in the
telecommunications industry generally, (B) to the United States economy or the
economy generally prevailing in the geographic area of the Seller Exchanges, or
(C) to the United States securities or financial markets.
"Material and Supply Inventory" means items defined in the FCC's Part 32
Uniform System of Accounts that are held for use primarily in the Business.
"Material Contracts" has the meaning set forth in Section 4.1.9(b).
"National Account Agreement" means a national service agreement pursuant to
which Sellers or any Affiliate provides telecommunications service in multiple
exchanges (including the Seller Exchanges) to employees or other designees of a
Person who is a party to such service agreement.
7
"Non-Disclosure Agreement" means that certain Non-Disclosure Agreement
between Buyer and Verizon dated as of April 6, 2001.
"Non-Regulated Construction Work in Process" means equipment procured and
construction work performed in relation to non-tariffed activities undertaken by
Sellers prior to the Closing Date but not yet completed or billed as of the
Closing Date.
"Non-Regulated Construction Work in Process Amount" means amounts expended
by Seller for Non-Regulated Construction Work in Process net of Construction
Advances related to such construction work, and billable by Buyer to third
parties, following the Closing Date.
"Non-Union Welfare Plans" has the meaning set forth in Section 8.2.3(a).
"Owned Real Property" means the real property owned in fee by Sellers or a
Seller Affiliate and used primarily in the operation of the Business, including
all land, buildings, structures, appurtenances and improvements located thereon.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Pension Assets" has the meaning set forth in Section 8.2.1(d)(i).
"Permitted Encumbrances" means (A) liens for Taxes and assessments not yet
delinquent, or the amount or validity of which is being contested in good faith
by appropriate proceedings during which collection or enforcement against the
relevant property is stayed, (B) standard utility easements, covenants and
restrictions of record that do not individually or in the aggregate materially
interfere with the operation of the Business as presently conducted on the Owned
Real Property affected thereby, (C) mechanics', carriers', workers', repairers'
and other statutory Liens, (D) existing zoning or similar Laws that do not
materially interfere with the operation of the Business, (E) leases otherwise
disclosed herein, and (F) any other Liens that do not materially interfere,
individually or in the aggregate, with the operation of the Business or Acquired
Assets in a manner consistent with the current use by Sellers.
"Person" means an individual, corporation, partnership, trust, joint stock
company, unincorporated association, limited liability company, joint venture,
or other entity or organization.
"Phaseout Period" has the meaning set forth in Section 10.1.3(a).
"Plans" has the meaning set forth in Section 4.1.13(a).
"Proration Periods" has the meaning set forth in Section 10.4(a).
"Publisher" has the meaning set forth in Section 9.2.1.
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"Publishing Agreement" means the Publishing Agreement between Buyer and
Publisher substantially in the form attached as Exhibit D hereto and as more
particularly described in Section 9.2.1.
"Purchase Price" has the meaning set forth in Section 3.1.
"Purchase Price Allocation" has the meaning set forth in Section 10.7(a).
"Quarterly Updates" has the meaning set forth in Section 5.2.3.
"Real Property Interests" means all easements, rights of way, licenses or
other interests in real property of Sellers that are used primarily in the
operation of the Business, other than Owned Real Property or Leased Real
Property.
"Real Property Leases" has the meaning set forth in Section 2.1.1(g).
"Regulatory Approvals" has the meaning set forth in Section 5.3.1.
"Remediation Activities" has the meaning set forth in Section 10.15.
"Regulatory Obligation Amount" has the meaning set forth in Section 3.1.
"Requirement of Law" means, as to any Person, any permit, license,
judgment, order, decree, statute, law, ordinance, rule, regulation or
arbitration award in each case applicable to or binding upon such Person or any
of its property or assets or to which such Person or any of its property or
assets is subject.
"Retained Books and Records" means, collectively, all corporate records and
stock books of Sellers and their Affiliates, the general ledger, all records
required by Law to be retained by Sellers and all books and records relating to
(A) Tax Returns and Tax records, (B) Excluded Assets, (C) attorney work product,
and (D) the Retained Liabilities.
"Retained Employees" has the meaning set forth in Section 8.1.
"Retained Future Regulatory Obligations" has the meaning set forth in
Section 2.3.1(g).
"Retained Interim Capital Expenditure Obligation" has the meaning set forth
in Section 2.3.1(h).
"Retained Liabilities" has the meaning set forth in Section 2.3.2.
"SEC Basis Financial Statements" has the meaning set forth in Section
5.1.5.
"Seller Consents" has the meaning set forth in Section 4.1.4.
"Seller Exchanges" has the meaning set forth in the Recitals hereto.
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"Seller Hourly Pension Plan" has the meaning set forth in Section 8.2.1(b).
"Seller Indemnification Limit" has the meaning set forth in Section
7.3.2(a).
"Seller Indemnitee" has the meaning set forth in Section 7.2.2.
"Seller Interconnection Agreements" has the meaning set forth in Section
5.3.7.
"Seller Salaried Pension Plan" has the meaning set forth in Section
8.2.1(a)(i).
"Seller Savings Plan" has the meaning set forth in Section 8.2.2(a).
"Seller Threshold" has the meaning set forth in Section 7.3.2(a).
"Seller Welfare Plan" has the meaning set forth in Section 8.2.3(a).
"Sellers' Actuary" has the meaning set forth in Section 8.2.1(d)(ii).
"SSB" means the Separate Subsidiary Billing System operated by Sellers and
their Affiliates which is utilized primarily to render bills for services
provided by the Business.
"SSB Accounts Receivable" means accounts receivable arising primarily from
the operation of the Business that are attributable to Seller's provision of
service on or before the Closing Date that have been billed, or are billable,
through Seller's SSB System. SSB Accounts Receivable shall not include amounts
billed or billable through CABS or CBSS. SSB Accounts Receivable includes those
categories of accounts receivable identified in Seller's systems as "current,"
"unpaid live" and "unpaid final," and shall include amounts resulting from
▇▇▇▇▇▇▇▇ pursuant to billing and collection agreements with third parties.
"SSB Accounts Receivable Amount" means the aggregate amount of all SSB
Accounts Receivable as of the Closing Date, less a discount for anticipated
uncollectible SSB Accounts Receivable in an amount equal to the SSB
Uncollectible Factor multiplied by the SSB Accounts Receivable as of the Closing
Date.
"SSB Uncollectible Factor" means nine-tenths of one percent (0.9%).
"Switch Software" means that portion of Third Party Intellectual Property
which is telephone switch software licensed to Sellers which software is
necessary to Sellers' current operation and use of any telephone switching
equipment in the Seller Exchanges and which equipment is included in Telephone
Plant.
"Switch Software Vendor" means any licensor of any Switch Software.
"Tax" or "Taxes" means with respect to the Business or the Acquired Assets
all taxes including, without limitation, any federal, state, local or foreign
income, profits, license,
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severance, occupation, windfall profits, capital gains, capital stock, transfer,
registration, social security, ad valorem, franchise, gross receipts, payroll,
sales, use, employment, property, real property, personal property, excise,
value added, stamp, alternative or add-on minimum, withholding and any other
tax, with all interest, penalties and additions imposed with respect to such
amounts.
"Tax Returns" means any return, declaration, report, form, certificate,
claim for refund, information return or statement with respect to Taxes
including any schedule, attachment or work papers thereto, and including any
amendment thereof.
"Telephone Plant" means all machinery, equipment, inventory, vehicles
(including, subject to Sellers' performance of their obligations set forth in
Section 5.1.8, leased vehicles), and all other assets and properties used
primarily in the operation of the Business, including, without limitation, all
plant, systems, structures, regulated construction work in progress, telephone
cable (whether in service or under construction), microwave facilities
(including frequency spectrum assignment), telephone line facilities, machinery,
furniture, fixtures, tools, implements, conduits, stations, substations,
equipment (including central office equipment, subscriber station equipment and
other equipment in general), instruments, house wiring connections and other
personal property used primarily in the operation of the Business, in every case
whether owned by Sellers or Sellers' Affiliates. Without limiting the generality
of the foregoing, Telephone Plant includes the assets owned by Sellers that
would be properly included in the fixed assets referenced in Part 32 of the FCC
Rules and Regulations (47 CFR, Part 32), as such accounts are reflected in
Schedule 4.1.8.
"Third Party Claim" has the meaning set forth in Section 7.4.1.
"Third Party Consents" has the meaning set forth in Section 2.4.
"Third Party Intellectual Property" means Intellectual Property owned by
any Person, other than Sellers, without regard as to whether Sellers have any
rights therein or the right to assign such rights to Buyer including any such
Intellectual Property included in or with the Acquired Assets.
"Third Party Intellectual Property Contracts" has the meaning set forth in
Section 10.1.4.
"Transaction Taxes" has the meaning set forth in Section 10.9.
"Transferred Books and Records" means all of Sellers' customer or
subscriber lists and records, accounts and billing records, plans, blueprints,
specifications, drawings, surveys, engineering reports, personnel records for
Transferred Employees (where applicable) and all other documents, computer data
and records, in each case relating primarily to the operation of the Business,
other than the Retained Books and Records.
"Transferred Employees" has the meaning set forth in Section 8.1.
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"Transition Plan Support Agreement" means the Transition Plan Support
Agreement in the form attached as Exhibit D hereto.
"VADI" means Verizon Advanced Data Inc.
"VADI Assets" means those assets held as of the date of this Agreement by
VADI primarily for the provision of ATM, frame relay, digital subscriber line
and other high speed data services within the Seller Exchanges.
"Verizon" means Verizon Communications Inc.
1.2 Other Definitional Provisions.
(a) The words "hereof," "herein" and "hereunder" and words
of similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, and Section,
Schedule and Exhibit references are to this Agreement unless otherwise
specified.
(b) The meanings given to terms defined herein shall be
equally applicable to both the singular and plural forms of such terms.
ARTICLE II
PURCHASE AND SALE OF ASSETS; CLOSING
2.1 Purchase and Sale of Assets; Excluded Assets.
2.1.1 Acquired Assets. Subject to the terms and conditions
hereinafter set forth, at the Closing, Sellers shall sell, grant, convey,
transfer, assign and deliver to Buyer and Buyer shall purchase and receive all
right, title and interest of Sellers and, to the extent stated, any Seller
Affiliate free and clear of all Liens, other than Permitted Encumbrances, in and
to the following assets, properties and rights used primarily in the operation
of the Business and in existence as of the Closing Date (except as otherwise
expressly set forth in Section 2.1.2), which assets, properties and rights are
referred to herein as the "Acquired Assets":
(a) Telephone Plant;
(b) all Material and Supply Inventory located within the
Seller Exchanges;
(c) Non-Regulated Construction Work in Process;
(d) FCC Licenses and Assigned Permits;
(e) Assigned Contracts of Sellers and any Seller Affiliate
including, without limitation, those Contracts set forth in Schedule 2.1.1(e);
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(f) Transferred Books and Records, subject to
Sellers' right to retain copies thereof;
(g) all Owned Real Property and all Leased Real
Property created by leases of real property under which either Seller or any
Seller Affiliate is a lessee (the "Real Property Leases"), together with all
appurtenances thereto;
(h) all buildings, towers, facilities and other
structures and improvements held by Sellers and located on the Owned Real
Property or Leased Real Property (but only to the extent permitted by the Real
Property Leases) and which are used primarily in the Business;
(i) all Real Property Interests;
(j) upon Sellers' fulfillment of the obligations set
forth in Section 5.1.7, the VADI Assets;
(k) insurance proceeds relating to any loss, damage
or destruction of any of the Acquired Assets prior to the Closing to the extent
not replaced prior to the Closing; and
(l) all other property, assets and rights relating
exclusively to the Business or the Seller Exchanges but excluding all
Intellectual Property and Excluded Marks.
2.1.2 Excluded Assets. Notwithstanding anything to the
contrary in Section 2.1.1 or in any other provision of this Agreement, the
Acquired Assets shall not include any of the following assets, properties and
rights of Sellers or their Affiliates (collectively, the "Excluded Assets"):
(a) all cash, cash equivalents and marketable
securities and bonds;
(b) all rights which accrue or will accrue to
Sellers and their Affiliates under this Agreement, the Ancillary Documents and
the certificates and other documents delivered to Sellers by Buyer in connection
with this Agreement;
(c) all records prepared in connection with the sale
of the Business, including bids received from third parties and analysis
relating to the Business;
(d) all rights, including all defenses,
counterclaims and rights of indemnity, reimbursement and subrogation, related to
the Retained Liabilities;
(e) the Retained Books and Records;
(f) interests in any business other than the
Business, including the provision of wireless service (cellular and PCS); long
distance (interLATA and intraLATA to the extent provided by Verizon Affiliates
other than Sellers) and internet access service or internet
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related services (to the extent provided by Verizon Affiliates other than
Sellers or VADI); air-to-ground communications (air phone service);
installation, maintenance and equipment service related to the sale of
telecommunications equipment by Affiliates to customers located outside the
geographic area comprising the Seller Exchanges; any permits related to any of
the foregoing; all assets of Sellers and their Affiliates used in connection
with any such business or related to any of the foregoing, including but not
limited to any common or shared systems used in conjunction with other Verizon
Affiliates on a national basis; and all assets used by Sellers and their
Affiliates in rendering services to Sellers or the Business that are located
outside the geographic area comprising the Seller Exchanges;
(g) such other assets, if any, as set forth on
Schedule 2.1.2(g), including, without limitation, those which are described by
general category;
(h) the Excluded Contracts including those contracts
set forth on Schedule 2.1.2(h);
(i) the Excluded Marks;
(j) all Intellectual Property, including the
Licensed Intellectual Property and Third Party Intellectual Property, and all
claims against any Person for infringement or misappropriation of such
Intellectual Property;
(k) subject to the provisions of Section 2.1.1(k),
all rights and claims under insurance policies of Sellers or their Affiliates
arising in connection with the operation of the Business or the Acquired Assets
on or prior to the Closing Date;
(1) all rights to Tax refunds and/or Tax credits
(including all interest related thereto) relating to the operation of the
Business or the Acquired Assets for Tax periods (or portions thereof) ending on
or prior to the Closing Date; and
(m) all rights and claims for support payments
pursuant to any Universal Service or similar fund for periods of operation
ending on or prior to the Closing Date.
2.2 Consideration for Transfer of the Acquired Assets. Sellers shall
transfer the Acquired Assets to Buyer at the Closing in exchange and in
consideration for the payment by Buyer to Sellers at the Closing of the Purchase
Price calculated in accordance with the provisions of Section 3.1 and the
assumption by Buyer of the Assumed Liabilities.
2.3 Assumption of Liabilities.
2.3.1 Assumed Liabilities. Upon the terms and subject to conditions
set forth herein, Buyer shall assume, as of the Closing Date, and agrees to pay,
perform and discharge, as and when due, the following liabilities,
responsibilities and obligations:
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(a) all liabilities, responsibilities and
obligations (including Taxes), arising out of, accruing or resulting from the
operation of the Business or the use, ownership or operation of the Acquired
Assets after the Closing Date;
(b) all liabilities, responsibilities and
obligations of Buyer as provided in Article VIII with respect to Transferred
Employees;
(c) all liabilities, responsibilities and
obligations that arise after the Closing Date in connection with the performance
of the Assigned Contracts, Real Property Interests and the Real Property Leases;
(d) all liabilities, responsibilities and
obligations to third parties that relate to arrangements and commitments between
Sellers and a third party for the construction of shared transmission facilities
between various switching points included in the Seller Exchanges;
(e) all liabilities, responsibilities and
obligations relating to post-Closing engineering and construction required to
complete scheduled construction and other capital expenditure projects for the
Seller Exchanges;
(f) all liabilities, responsibilities and
obligations relating to Customer Prepayments, Customer Deposits and Construction
Advances;
(g) all liabilities, responsibilities and
obligations, other than Interim Capital Expenditure Obligations, related to the
Seller Exchanges arising out of any Law of any Governmental Authority after the
Closing Date regardless of whether the action taken by the Governmental
Authority is or purports to be based on conduct or actions that occurred at any
time prior to the Closing Date ("Future Regulatory Obligations"); provided,
however, Buyer shall not be liable for any Future Regulatory Obligation arising
directly out of any (i) willful misconduct by Sellers as judicially determined
by a final order of a court or Governmental Authority of competent jurisdiction;
or (ii) conduct by Sellers that was not reasonably prudent based on
then-prevailing circumstances, in either case which conduct occurred prior to
the Closing Date ("Retained Future Regulatory Obligations"); and provided
further, that Sellers' reliance on a reasonable interpretation of existing Law
or practice shall be deemed reasonably prudent;
(h) all liabilities, responsibilities and
obligations related to the Seller Exchanges arising out of any Law of any
Governmental Authority requiring any capital expenditure after the date of this
Agreement, regardless of whether the action taken by the Governmental Authority
is or purports to be based on conduct, facts or actions that occurred at any
time prior to the date of this Agreement ("Interim Capital Expenditure
Obligations"); provided, however, Buyer shall not be liable for any Interim
Capital Expenditure Obligation arising directly out of any (i) willful
misconduct by Sellers as judicially determined by a final order of a court or
Governmental Authority of competent jurisdiction, or (ii) conduct by Sellers
that was not reasonably prudent based on then-prevailing circumstances,
("Retained Interim Capital Expenditure Obligations"); and, provided further,
that Sellers' reliance on a reasonable interpretation of existing Law or
practice shall be deemed reasonably prudent. Sellers shall notify
15
Buyer of all material Interim Capital Expenditure Obligations within a
reasonable time after publication of said obligations by a Governmental
Authority; and
(i) all liabilities and obligations for litigation and claims by
third parties arising out of an occurrence after the Closing Date, including any
claims for infringement of Third Party Intellectual Property for acts occurring
after the Closing Date;
(collectively, the "Assumed Liabilities"). Notwithstanding anything in this
Section 2.3.1 to the contrary, Assumed Liabilities shall not include any
liabilities, responsibilities or obligations expressly included in Retained
Liabilities pursuant to Section 2.3.2.
2.3.2 Retained Liabilities. Each Seller shall retain and shall pay,
perform and discharge when due, the following liabilities, responsibilities and
obligations of such Seller (the "Retained Liabilities"):
(a) subject to the provisions of Section 10.4 or as expressly set
forth in this Agreement, all trade payables and other payment obligations of
Sellers that relate to the operation of the Business on or prior to the Closing
Date;
(b) all long-term debt of Sellers (including indebtedness to the
Lienholders) and debt of Sellers owed to any one or more of its Affiliates, but
excluding liabilities assumed pursuant to Article VIII hereof;
(c) subject to the provisions of Sections 10.4 and 10.9, all
Taxes of Sellers or their Affiliates attributable to the operation of the
Business or the use, ownership or operation of the Acquired Assets for all Tax
periods (or portions thereof), ending on or prior to the Closing Date;
(d) except to the extent otherwise provided in Article VIII, all
liabilities and obligations arising on or prior to the Closing Date with respect
to employees who, upon Closing, will be Transferred Employees, including (i) all
liabilities, responsibilities and obligations relating to collective bargaining
agreements or other union contracts, and (ii) any such liabilities or
obligations that arise on or after the Closing Date to the extent that such
liabilities and obligations relate to facts, circumstances or conditions arising
or occurring on or prior to the Closing Date, but excluding any Future
Regulatory Obligations with respect to the Transferred Employees;
(e) all liabilities, responsibilities and obligations for
litigation and claims of third parties arising out of an occurrence on or prior
to the Closing Date, other than litigation and claims related to Future
Regulatory Obligations and Interim Capital Expenditure Obligations (except
Retained Future Regulatory Obligations and Retained Interim Capital Expenditure
Obligations which shall remain the liability of Sellers); provided, however,
Sellers shall have no liability for claims by third parties which have not been
asserted within five (5) years after the Closing Date; and
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(f) all liabilities, responsibilities and obligations with
respect to the Excluded Assets and Excluded Contracts.
2.4 Regarding Consents. Notwithstanding anything to the contrary contained
in this Agreement, to the extent that the sale, conveyance, transfer, assignment
or delivery or attempted sale, conveyance, transfer, assignment or delivery to
Buyer of any Acquired Asset is prohibited by any applicable Law or would require
any governmental or third-party authorizations, approvals, consents or waivers
(other than authorizations, approvals, consents or waivers related to Third
Party Intellectual Property, and other than required Regulatory Approvals and
FCC Consents) (collectively, the "Third Party Consents") and such Third Party
Consents shall not have been obtained prior to the Closing, this Agreement shall
not constitute an agreement to assign same if any of the foregoing would
constitute a breach thereof or be unlawful. If any Third Party Consent shall not
be obtained or if any attempted assignment would be ineffective or would impair
Buyer's rights under the Acquired Asset in question so that Buyer would not
acquire the benefit of all such rights, Sellers, to the extent permitted by Law,
shall act after the Closing as Buyer's agent in order to preserve and obtain for
Buyer the benefits thereunder and shall cooperate, to the extent permitted by
Law, with Buyer in any other commercially reasonable arrangement designed to
provide such benefits to Buyer. For a period of ninety (90) days following the
Closing, the parties shall use their commercially reasonable efforts, and shall
cooperate with one another, to obtain promptly such Third Party Consents;
provided, however, that should any Third Party Consent from any railroad be
conditioned on the payment of any consideration therefor (the "Consent Fees")
other than filing, recordation or similar fees payable to any Governmental
Authority, which filing fees shall be shared equally by Sellers and Buyer,
Sellers and Buyer agree to share on an equal basis any Consent Fee to the extent
such Consent Fee is in an amount not greater than $300; and provided, further,
that Sellers' aggregate obligation to share in the payment of Consent Fees shall
not exceed One Hundred Thousand Dollars ($100,000.00).
2.5 The Closing. Unless this Agreement shall have been earlier terminated
in accordance with the provisions of Article XI, the closing under this
Agreement (the "Closing") shall be held at 9:00 A.M. local time at the offices
of Verizon Services Group, at ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, on the date
agreed upon by the parties, which date shall be (a) the last Business Day of a
month, and (b) at least five (5) Business Days, but not more than ninety (90)
days, after the date either party notifies the other party in writing of its
determination that all required Regulatory Approvals, Debtholder Consents and
FCC Consents (collectively, the "Closing Consents") have been obtained, or at
such other time and place as the parties may agree in writing; provided,
however, the parties shall take all commercially reasonable actions to cause the
Closing to occur promptly after all Closing Consents have been obtained, but in
no event shall the Closing be required to occur (i) prior to June 30, 2002 or
(ii) on the same date as the closing of any other transaction involving the sale
or purchase of wireline assets between Affiliates of the parties hereto. The
date of the Closing is referred to herein as the "Closing Date." Such Closing
shall be deemed to have occurred as of 11:59 P.M. on the Closing Date.
2.6 Deliveries and Proceedings at Closing. At the Closing, and subject to
the terms and conditions herein contained:
17
2.6.1 Deliveries by Seller. Sellers shall deliver (or cause to be
delivered) to Buyer:
(a) subject to Permitted Encumbrances, deeds in recordable form
under which each Seller warrants title against all persons lawfully claiming
title by, through or under such Seller for each parcel of Owned Real Property to
be conveyed hereunder, duly executed by such Seller;
(b) the ▇▇▇▇ of Sale, Assignment and Assumption Agreement,
License Agreement and Publishing Agreement, duly executed by Sellers (or the
appropriate Seller Affiliate);
(c) such other instruments and documents of conveyance,
assignment and transfer, duly executed by Sellers and in a form reasonably
satisfactory to Buyer, as shall be necessary and effective to transfer, convey
and assign to Buyer all of Sellers' right, title and interest in and to the
Acquired Assets, including without limitation, all of Sellers' rights under all
Assigned Contracts, in all cases subject to Section 2.4 above;
(d) to the extent obtained, the Seller Consents in form and
substance reasonably satisfactory to Buyer; and
(e) such other documents as Buyer may reasonably request.
2.6.2 Deliveries by Buyer. Buyer shall deliver (or cause to be
delivered) to Sellers:
(a) the Closing Date Payment in accordance with the provisions of
Section 3.2;
(b) the ▇▇▇▇ of Sale, Assignment and Assumption Agreement,
License Agreement and Publishing Agreement, duly executed by Buyer; and
(c) such other documents as Sellers may reasonably request.
ARTICLE III
PURCHASE PRICE
3.1 Purchase Price. The purchase price for the Acquired Assets shall be the
sum of (a) One Billion Dollars ($1,000,000,000) (the "Base Purchase Price"),
plus (b) amounts expended by Sellers to comply with Interim Capital Expenditure
Obligations (the "Regulatory Obligation Amount"), plus (c) the Non-Regulated
Construction Work in Process Amount minus (d) any Capital Expenditure Deficiency
(collectively, the "Purchase Price").
3.2 Closing Date Estimate. Not less than three (3) Business Days prior to
the Closing Date, Sellers shall deliver to Buyer a notice, setting forth
Sellers' good faith estimate as of the Closing Date of (a) the Regulatory
Obligation Amount (the "Estimated ▇▇▇▇▇▇▇▇▇▇
▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇"), (▇) the Non-Regulated Construction Work in Process Amount
(the "Estimated Non-Regulated Construction Work in Process Amount") and (c) any
Capital Expenditure Deficiency. On the Closing Date, Buyer shall pay to Sellers
an amount equal to the sum of (x) the Base Purchase Price, (y) the Estimated
Regulatory Obligation Amount, and (z) the Estimated Non-Regulated Construction
Work in Process Amount, less the Deposit and any Capital Expenditure Deficiency
(the "Closing Date Payment"). The Closing Date Payment shall be made by wire
transfer of immediately available funds to such account or accounts as Sellers
shall designate to Buyer at least two (2) Business Days prior to the Closing
Date. Payments from Buyer to Sellers for CBSS and SSB Accounts Receivable and
from Sellers to Buyer for Customer Prepayments and Customer Deposits will occur
subsequent to Closing in accordance with Article X.
3.3 Calculation of Final Purchase Price.
3.3.1 Closing Date Statement. Within sixty (60) days after the Closing
Date, Sellers shall prepare and deliver to Buyer a written statement reasonably
detailing the Regulatory Obligation Amount, the Non-Regulated Construction Work
in Process Amount and any Capital Expenditure Deficiency, together with
supporting documentation (the "Closing Date Statement"). Absent manifest error,
the Closing Date Statement shall be deemed correct. Within thirty (30) days
after receipt of the Closing Date Statement, Buyer shall, in a written notice to
Sellers, describe in reasonable detail any proposed adjustments to the Closing
Date Statement and the reasons therefor. If Sellers shall not have received a
notice of proposed adjustments aggregating Fifty Thousand Dollars ($50,000) or
more within such thirty (30) day period, Buyer will be deemed to have accepted
irrevocably such Closing Date Statement.
3.3.2 Disputes Regarding Closing Date Statement. Each Seller and Buyer
shall negotiate in good faith to resolve any disputes over any proposed
adjustments to the Closing Date Statement, during the thirty (30) days following
Sellers' receipt of the proposed adjustments. If the parties are unable to
resolve such dispute within such thirty (30) day period, then, at the written
request of either party (the "Dispute Resolution Request"), each party shall
appoint a knowledgeable, responsible representative to meet in person and
negotiate in good faith to resolve the disputed matters. The parties intend that
these negotiations be conducted by experienced business representatives
empowered to decide the issues. Such negotiations shall take place during the
fifteen (15) day period following the date of the Dispute Resolution Request. If
the business representatives resolve the dispute, such resolution shall be
memorialized in a written agreement (the "Final Closing Date Statement"),
executed within five (5) Business Days thereafter. If the business
representatives do not resolve the dispute, within five (5) Business Days, Buyer
and Sellers shall jointly select a nationally recognized independent public
accounting firm (which is not the regular independent public accounting firm of
either party) to resolve such disputes, which resolution shall be final and
binding. Such accounting firm shall resolve such dispute by reference to the
records of Seller used to calculate the amounts appearing on the Closing Date
Statement, the provisions contained herein regarding items properly included in
the Regulatory Obligation Amount and the Non-Regulated Construction Work in
Process Amount and, based on the foregoing, such other records as such firm, in
its reasonable judgment, deems appropriate. The fees and expenses of such
accounting firm shall be (a) shared by Buyer and Sellers in inverse proportion
to the relative amounts of the disputed
19
amount determined to be for the account of Buyer and Sellers, respectively or
(b) paid by the Buyer if the final amount of any adjustment is less than
$50,000.
3.3.3 Final Determination of Purchase Price. Upon the acceptance of
the Closing Date Statement by Buyer, or upon resolution of any disputed amount
in accordance with the provisions of Section 3.3.2 above, the parties shall,
based thereupon, calculate the final Purchase Price. If the Purchase Price as
finally determined is greater than the Closing Date Payment, Buyer shall
promptly, but no later than three (3) Business Days after such acceptance or
resolution, pay to Sellers the amount of such difference. If the Purchase Price
as determined above is less than the Closing Date Payment, Sellers shall
promptly, but no later than three (3) Business Days after such acceptance or
resolution, pay to Buyer the amount of such difference.
3.3.4 Interest on Final Payment. Any amount paid pursuant to this
Section 3.3 after the Closing Date shall bear interest from the Closing Date
through but excluding the date of payment, at the Applicable Rate. Such interest
shall accrue daily on the basis of a year of three hundred sixty-five (365) days
calculated for the actual number of days for which due and shall be payable
together with the amount payable pursuant to this Section 3.3.
3.3.5 Payments. All amounts payable pursuant to this Section 3.3
shall, in the case of amounts payable to Sellers, be paid in accordance with the
provisions set forth in Section 3.2 above and, in the case of amounts payable to
Buyer, to such account of Buyer as Buyer shall designate in writing to Sellers.
3.4 Performance Deposit.
3.4.1 Deposit. Concurrent with the execution and delivery hereof, and
subject to the provisions of Section 3.4.2 below, Buyer shall pay to Sellers by
wire transfer of immediately available funds the sum of One Hundred Million
Dollars ($100,000,000), an amount equal to ten percent (10%) of the Base
Purchase Price, which amount shall bear interest from the date hereof until the
earlier of the Closing Date or the termination of this Agreement in accordance
with the provisions of Article XI at the Applicable Rate (the "Deposit"). Such
Deposit shall be held by Sellers against payment of the Purchase Price and as
security for the performance by Buyer of its obligations under this Agreement,
and shall be nonrefundable except as described in Section 11.3.
3.4.2 Letter of Credit. Buyer may elect to deliver the Deposit to
Sellers in cash or in the form of an irrevocable, standby letter of credit for
the same amount (the "Deposit L/C"). The Deposit L/C shall be (a) in a form
reasonably acceptable to Sellers, (b) issued in favor of Seller under this
Agreement and (c) issued by a bank that has a long-term unsecured debt rating as
of the date of issuance of at least A+ by Standard & Poor's Rating Information
Services and A1 by ▇▇▇▇▇'▇ Investors Service and that is otherwise reasonably
satisfactory to Sellers. The Deposit L/C (and any replacement thereof furnished
in accordance with this Section 3.4.2) shall have an expiration date no earlier
than the first anniversary of the date of issuance thereof and shall be
automatically renewed from year to year unless stated not to be so renewed by
the issuer thereof in a written notice given to the Sellers not less than 30
days prior to the expiration thereof. In the event of the termination of the
Deposit L/C (and any replacement thereof
20
furnished in accordance with the provisions of this Section 3.4.2), Buyer shall
deliver to Sellers a replacement letter or letters of credit in lieu thereof no
later than 30 days prior to the expiration of the preceding letter of credit. If
Buyer shall fail to obtain any replacement of the Deposit L/C (and/or any
replacement thereof furnished in accordance with the provisions of this Section
3.4.2), then Sellers shall draw down the full amount of the existing Deposit L/C
and retain the same as security for the covenants, agreements and obligations of
Buyer under this Agreement. Any replacement of any Deposit L/C shall be in a
form reasonably acceptable to Sellers. Buyer acknowledges that Sellers have
agreed to accept the Deposit L/C in lieu of a cash down payment against the
Purchase Price solely as an accommodation to Buyer. Buyer acknowledges that, in
the event Buyer elects to provide a Deposit L/C in lieu of a cash Deposit, Buyer
shall not be entitled to interest at the Applicable Rate as provided in Section
3.4.1 of this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of Seller. Sellers represent and
warrant to Buyer as follows:
4.1.1 Corporate Organization and Related Matters. Each Seller is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation. Each Seller has the requisite power
and authority to own its properties and to carry on the Business as it is now
being conducted. Sellers hold valid permits, licenses, franchises, approvals and
authorizations issued or granted by any Governmental Authority and adequate for
the operation of the Business as currently conducted, except to the extent
absence of any such permit, license, franchise, approval or authorization would
not have a Material Adverse Effect. Sellers have the requisite power, authority
and legal right to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance by
Sellers of this Agreement and the Ancillary Documents executed or to be executed
by Sellers have been duly authorized by all necessary corporate action on the
part of Sellers and Verizon. This Agreement has been, and the Ancillary
Documents when executed will be, duly executed and delivered by Sellers and any
applicable Seller Affiliate and this Agreement constitutes, and the Ancillary
Documents when executed and delivered will constitute, the legal, valid and
binding obligations of Sellers (or their Affiliate named therein), enforceable
against either of them (or such Seller Affiliate) in accordance with their
respective terms, except as such enforceability may be limited by bankruptcy
laws and other similar laws affecting creditors' rights generally, and subject
to the exercise of judicial discretion in accordance with principles of equity.
4.1.2 Compliance with Laws. Except as set forth in Schedule 4.1.2,
Sellers in their conduct of the Business have complied since January 1, 1997 in
all material respects with, and are currently not in violation of, any
Requirement of Law of a Governmental Authority to which the Business is subject,
except for any such noncompliance or violation which would not be reasonably
likely to constitute a Material Adverse Effect.
4.1.3 Litigation. Except as set forth in Schedule 4.1.3, there is no
litigation, arbitration, investigation or other proceeding of or before any
Governmental Authority pending
21
or, to the Knowledge of Sellers, threatened against the Sellers, the Business or
any of the Acquired Assets, the result of which, individually or in the
aggregate, would reasonably be likely to have a Material Adverse Effect or to
prevent, materially delay or impair the ability of Sellers to consummate the
transactions contemplated hereby. Neither Seller is a party to nor is either
Seller or the Business subject to the provisions of any judgment, order, writ,
injunction, decree or award of any Governmental Authority which would reasonably
be likely to have a Material Adverse Effect or to prevent, materially delay or
impair the ability of Sellers to consummate the transactions contemplated
hereby.
4.1.4 Validity of Contemplated Transactions. Upon the receipt of
requisite FCC Consents as described in Section 5.3.2, the Regulatory Approvals
as described in Section 5.3.1, compliance with any applicable requirement of the
HSR Act and the receipt of the consents set forth on Schedule 4.1.4 (the "Seller
Consents"), the execution, delivery and performance of this Agreement and the
Ancillary Documents by Sellers do not and will not violate, conflict with,
result in the creation of a Lien under or result in the breach of any term,
condition or provision of, or require the consent of any other Person under, (a)
the charter and other organizational documents of Sellers, (b) any existing
Requirement of Law to which Sellers or the Business is subject, (c) any
judgment, order, writ, injunction, decree or award of any Governmental Authority
or any other Governmental Order or Law which is applicable to the Business, or
(d) except as provided expressly in any Material Contract, any Material
Contract, or give any party with rights thereunder the right to terminate,
modify, accelerate or otherwise change the existing rights or obligations of
Sellers thereunder.
4.1.5 Title to Owned Real Property.
(a) Each Seller has good, valid and marketable title to all of
its material Owned Real Property, free and clear of all Liens other than
Permitted Encumbrances and Liens of the Lienholders identified on Schedule
4.1.5(a). Sellers represent that the only lienholders (other than Permitted
Encumbrances) on any of the Owned Real Property are the Lienholders identified
on Schedule 4.1.5(a) except as would not reasonably be likely to be materially
adverse to the Business.
(b) Schedule 4.1.5(b) lists all Owned Real Property as of the
date hereof, including the address, and a description suitable to identify the
property. Such Owned Real Property constitutes substantially all of the Owned
Real Property used primarily in the operation of the Business as of June 30,
2001, except as such (i) has been disposed of since January 1, 2001 in the
ordinary course of business or (ii) is not material to the operation of the
Business.
4.1.6 Leased Real Property; Real Property Interests.
(a) Schedule 4.1.6(a) lists all of the Real Property Leases as
of the date hereof. Such Leased Real Property constitutes substantially all of
the Leased Real Property used primarily in the operation of the Business as of
June 30, 2001, except as such (i) has been disposed of since January 1, 2001 in
the ordinary course of business or (ii) is not material to the operation of the
Business. Each of the Real Property Leases is enforceable in accordance with its
22
terms, subject to bankruptcy, insolvency and other similar laws affecting the
rights of creditors generally and subject to the exercise of judicial discretion
in accordance with the principles of equity. Except as otherwise disclosed in
Schedule 4.1.6(a), there is no material default or material breach of a covenant
by Sellers under any of the Real Property Leases.
(b) To the knowledge of Sellers, Schedule 4.1.6(b) sets forth a
true and accurate list of all its Real Property Interests within the geographic
area covered by the Seller Exchanges. Such Real Property Interests constitute
substantially all of the Real Property Interests used primarily in the operation
of the Business as of June 30, 2001, except as such (i) has been disposed of
since January 1, 2001 in the ordinary course of business or (ii) is not material
to the operation of the Business.
4.1.7 Tangible Assets. Except as set forth in Schedule 4.1.7, all of
the material tangible Acquired Assets are in good operating condition and
repair, normal wear and tear excepted, and are useable in the regular and
ordinary course of business consistent with past practice. Except as set forth
in Schedule 4.1.7 or elsewhere in this Agreement, Sellers have, or on or prior
to the Closing Date will have, good and marketable title to each of the material
tangible Acquired Assets (other than office equipment subject to leases, and
other than Third Party Intellectual Property included in or with the material
tangible Acquired Assets) free and clear of any Lien other than Permitted
Encumbrances. Except as set forth on Schedule 4.1.7, Sellers have not received
any written notice within the twelve (12) months prior to the date hereof of a
violation of any ordinances, regulations or building, zoning and other similar
Laws with respect to such assets that would have a Material Adverse Effect.
EXCEPT AS EXPRESSLY PROVIDED IN THIS SECTION 4.1.7, SELLERS MAKE NO
REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, AS TO THE CONDITION OR
FITNESS OF THE TANGIBLE ACQUIRED ASSETS AND HEREBY DISCLAIM ANY WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR WARRANTY AGAINST
INFRINGEMENT.
4.1.8 Schedules of Telephone Plant and Material and Supply Inventory.
Schedule 4.1.8 sets forth a materially accurate summary of the Telephone Plant
and Material and Supply Inventory as of June 30, 2001 as maintained by Sellers
in accordance with past practice. Such Telephone Plant constitutes substantially
all of the Telephone Plant used primarily in the operation of the Business as of
June 30, 2001, except as such (i) has been disposed of since January 1, 2001 in
the ordinary course of business or (ii) is not material to the operation of the
Business.
4.1.9 Material Contracts.
(a) Except as listed and set forth in Schedule 4.1.9(a) (such
schedule to be updated on or prior to the Closing Date to identify Assigned
Contracts entered into after the date hereof consistent with the provisions of
Section 5.1.1 and which are required to be scheduled by the provisions of this
Section 4.1.9(a)) or any other Schedule, there is no Assigned Contract (other
than the Assigned Contracts entered into after the date of this Agreement
consistent with the provisions of Section 5.1.1(b) hereof) that is:
23
(i) an agreement expressly limiting or restraining the
freedom of Buyer following the Closing to compete in any material respect with
respect to the Business with any Person, other than any such agreement or
covenant which does not materially impair the continued operation of the
Business as it is currently conducted;
(ii) an agreement granting a Lien (other than a Permitted
Encumbrance or Lien of a Lienholder);
(iii) an agreement for the sale of any material Acquired
Asset or grant of any preferential rights to purchase any material Acquired
Asset, in each case outside the ordinary course of business;
(iv) an agreement for the lease, sublease or stand-alone
co-location of any Owned Real Property or Leased Real Property by Sellers to any
other Person;
(v) an agreement with respect to the provision of 911
services or E911 services;
(vi) an agreement or other contractual obligation other
than as set forth above with respect to which the aggregate amount to be
received or paid thereunder with respect to calendar year 2001 is expected to
exceed $250,000 based on the payments which have been made under such agreement
with respect to calendar year 2000 to the extent applicable;
(b) Except as set forth on Schedule 4.1.9(b), to the Knowledge
of Sellers, each of the Assigned Contracts listed on Schedule 4.1.9(a) in
response to the foregoing (collectively, the "Material Contracts") is valid,
binding and in full force and effect and is enforceable by Sellers or Sellers'
Affiliates, as applicable, against any other party thereto in accordance with
its terms, except to the extent that such enforcement may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium and other similar
Laws affecting creditors' rights generally and by general principles of equity
(regardless of whether enforceability is considered in a proceeding in equity or
at law), and except for any such failure to be valid, binding, in full force and
effect or enforceable that is not reasonably likely to have a Material Adverse
Effect. Except as set forth on Schedule 4.1.9(b), neither Sellers nor any of
their Affiliates that is a party to a Material Contract is, and to the Knowledge
of Sellers, no other party thereto is in default in the performance, observance
or fulfillment of any material obligation, covenant or condition contained in
the Material Contracts, and no event has occurred which with or without the
giving of notice or lapse of time, or both, would constitute a default by
Sellers thereunder, in each case except for such noncompliance, breaches and
defaults that, individually or in the aggregate, are not reasonably likely to
have a Material Adverse Effect. As of the date hereof, except as disclosed on
Schedule 4.1.9(b), neither Seller nor any of their Affiliates have received any
written notice of the intention of any party to terminate any Material Contract.
Complete and correct copies of all Material Contracts, together with all
modifications and amendments thereto to the date of this Agreement, have been
made available to Buyer or its representatives.
24
4.1.10 Insurance. The Acquired Assets of an insurable nature and of a
character usually insured by companies carrying on similar businesses is insured
under insurance policies or self insured in such amounts and against such losses
or casualties as is usual in Sellers' industry.
4.1.11 Taxes. Except as set forth on Schedule 4.1.11, and with regard
to the Business and the Acquired Assets, (a) there are no Liens with respect to
Taxes upon any of the Acquired Assets; (b) Sellers have collected all material
sales, use, excise and receipts Taxes required to be collected and has remitted,
or will remit on a timely basis, such amounts to the appropriate Governmental
Authority; (c) Sellers have duly and timely withheld from employee salaries,
wages and other compensation and paid over to the appropriate Governmental
Authorities all amounts required to be so withheld and paid over for all periods
under any applicable Requirement of Law; (d) neither Seller is a "foreign
person" within the meaning of Section 1445(b)(2) of the Code; (e) all Tax
returns required to be filed by Sellers or any Seller Affiliate with respect to
the Business or the Acquired Assets on or before the Closing Date have been or
will have been filed and all Taxes shown as due and payable have been or will be
paid by Sellers or such Seller Affiliate as required by Law; and (f) no
deficiencies or assessments for any Taxes (other than those being disputed in
good faith) have been asserted in writing to Sellers or any Seller Affiliate
that remain unpaid and that relate to the Business or the Acquired Assets.
4.1.12 Tariffs; FCC Licenses.
(a) Schedule 4.1.12 sets forth a list of all regulatory tariffs
applicable to the Business. The regulatory tariffs applicable to the Business
stand in full force and effect on the date of this Agreement in accordance with
their terms, and there is no outstanding notice of cancellation or termination
or, to Sellers' Knowledge, any threatened cancellation or termination in
connection therewith, nor are Sellers subject to any restrictions or conditions
applicable to its regulatory tariffs that limit or would limit the operation of
the Business (other than restrictions or conditions generally applicable to
tariffs of that type). Each such tariff has been duly and validly approved by
the Commission or any Governmental Authority having jurisdiction thereof.
Sellers are not in material default under the terms and conditions of any such
tariff and there is no basis for any claim of default by Sellers in any material
respect under any such tariff. Except as set forth in Schedule 4.1.12(a), as of
the date hereof, there are no applications by Sellers or complaints (other than
routine or immaterial End-User complaints), or petitions by others or
proceedings pending or threatened before the Commission relating to the Business
or its operations or the regulatory tariffs that, in Sellers' opinion, would
reasonably be expected to have a Material Adverse Effect. To the Knowledge of
Sellers, there are no material violations by subscribers or others under any
such tariff. A true and correct copy of each tariff applicable to the Business
has been made available to Buyer.
(b) Schedule 4.1.12(b) identifies each of the FCC Licenses held
by Sellers and used in the operation of the Business. Each such FCC License is
in full force and effect on the date of this Agreement in accordance with its
terms, and there is no outstanding notice of cancellation or termination or, to
Sellers' Knowledge, any threatened cancellation or termination in connection
therewith, nor are any of such FCC Licenses subject to any restrictions or
conditions that limit the operation of the Business (other than restrictions or
conditions
25
generally applicable to licenses of that type). Subject to the Communications
Act of 1934, as amended, and the regulations thereunder, the FCC Licenses are
free from all security interests, liens, claims, or encumbrances of any nature
whatsoever. There are no applications by Sellers or complaints or petitions by
others or proceedings pending or threatened before the FCC relating to the
Business or the FCC Licenses that, in Sellers' opinion, would reasonably be
expected to have a Material Adverse Effect.
4.1.13 Employee Matters.
(a) Schedule 4.1.13(a) lists as of the date hereof (and
identifies the sponsor of) each material "Employee Pension Benefit Plan," as
that term is defined in Section 3(2) of the ERISA, each material "Employee
Welfare Benefit Plan," as that term is defined in Section 3(1) of ERISA (such
plans being hereinafter referred to collectively as the "ERISA Plans"), and each
other material retirement, pension, profit-sharing, money purchase, deferred
compensation, incentive compensation, bonus, stock option, stock purchase,
severance pay, unemployment benefit, vacation pay, savings, medical, dental,
post-retirement medical, accident, disability, weekly income, salary
continuation, health, life or other insurance, fringe benefit, or other employee
benefit plan, program, agreement, or arrangement maintained or contributed to by
Sellers or their Affiliates in respect of or for the benefit of any employee
who, upon the Closing, will be a Transferred Employee or former employee of
Sellers, excluding any such plan, program, agreement, or arrangement maintained
or contributed to solely in respect of or for the benefit of employees who, upon
the Closing, will be Transferred Employees or former employees employed or
formerly employed by Sellers outside of the United States, as of the date hereof
(collectively, together with the ERISA Plans, referred to hereinafter as the
"Plans.") Schedule 4.1.13(a) also includes a list of (i) each material written
employment, severance, termination or similar-type agreement between Sellers and
their Affiliates and any employee who, upon the Closing, will be a Transferred
Employee (the "Employment Agreements"), and (ii) each collective bargaining
agreement between Sellers and their Affiliates and collective bargaining
representatives for those employees who, upon the Closing, will be Transferred
Employees (the "Labor Contracts"). Except for retention bonuses, if any, paid or
payable in connection with the Closing of the transactions contemplated by this
Agreement and except as otherwise set forth in Schedule 4.1.13(a), the execution
and delivery of this Agreement by Sellers and the performance of this Agreement
by Sellers will not directly result now or at any time in the future in the
payment to any employee who, upon the Closing, will be a Transferred Employee of
any severance, termination, or similar payments or benefits.
(b) Except as set forth on Schedule 4.1.13(b):
(i) Neither Seller nor any of their Affiliates,
any of the ERISA Plans, any trust created thereunder, or any trustee or
administrator thereof, has engaged in any transaction as a result of which
Sellers could be subject to any material liability pursuant to Section 409 of
ERISA or to either a civil penalty assessed pursuant to Section 502(i) of ERISA
or a tax imposed pursuant to Section 4975 of the Code; and
(ii) Since the effective date of ERISA, no material
liability under Title IV of ERISA has been incurred or is reasonably expected to
be incurred by Sellers
26
(other than liability for premiums due to the PBGC), unless such liability has
been, or prior to the Closing Date will be, satisfied in full.
(c) Except as set forth on Schedule 4.1.13(c), with
respect to the ERISA Plans, other than those ERISA Plans identified on Schedule
4.1.13(d) as "multiemployer plans":
(i) the PBGC has not instituted proceedings to
terminate any Plan that is subject to Title IV of ERISA;
(ii) none of the ERISA Plans has incurred an
"accumulated funding deficiency" (as defined in Section 302 of ERISA and Section
412 of the Code), whether or not waived, as of the last day of the most recent
fiscal year of each of the ERISA Plans ended prior to the date of this
Agreement;
(iii) Each of the ERISA Plans has been operated and
administered in all material respects in accordance with its provisions and with
all applicable Laws;
(iv) Each of the ERISA Plans that is intended to be
"qualified" within the meaning of Section 401(a) of the Code and, to the extent
applicable, Section 401(k) of the Code, has been determined by the IRS to be so
qualified, and nothing has occurred since the date of the most recent such
determination (other than the effective date of certain amendments to the Code,
the remedial amendment period for which has not yet expired) that would
adversely affect the qualified status of any of such ERISA Plans; and
(v) There are no pending material claims against
any of the ERISA Plans by any employee or beneficiary covered under any such
ERISA Plan, or otherwise involving any such ERISA Plan (other than routine
claims for benefits and routine expenses).
(d) Except as set forth on Schedule 4.1.13(d), none of
the ERISA Plans is a "multiemployer plan," as that term is defined in Section
3(37) of ERISA, and with respect to any such multiemployer plans (as so defined)
listed in Schedule 4.1.13(d), Sellers have not made or incurred, and the
transactions contemplated by this Agreement will not result in Sellers making or
incurring, a "complete withdrawal" or a "partial withdrawal," as such terms are
respectively defined in Sections 4203 and 4205 of ERISA that would result in the
incurrence of a material liability by Sellers.
(e) Except as set forth on Schedule 4.1.13(e), as of the
date hereof, (i) none of the employees who, upon the Closing, will be
Transferred Employees are represented by a labor union or labor organization,
and (ii) Sellers are not subject to any collective bargaining agreement covering
any employee who, upon the Closing, will be a Transferred Employee. As of the
date hereof, there are no strikes, slowdowns, work stoppages or lockouts by or
with respect to any employee who, upon the Closing, will be a Transferred
Employee covered by collective bargaining agreements. Except as set forth on
Schedule 4.1.13(e), to the Knowledge of Sellers, during the twelve (12) months
preceding the date of this Agreement, there have not been any
27
union organizational campaigns by or directed at employees who, upon the
Closing, will be Transferred Employees.
(f) Sellers will make available to Buyer, not less than five
(5) days prior to the Closing Date, a list of those employees who, upon Closing,
will be Transferred Employees and who are participating in or have participated
in the health or dependent care reimbursement accounts of Sellers, together with
the elections made prior to the Closing Date with respect to such accounts
through the Closing Date.
4.1.14 Environmental Matters. Except as set forth on Schedule
4.1.14 or otherwise contained in this Section 4.1.14 which exceptions,
individually or in the aggregate, would not, or would not reasonably be likely
to have a Material Adverse Effect or prevent, materially delay or impair the
ability of Sellers to consummate the transactions contemplated hereby:
(a) All Environmental Permits required pursuant to any
Environmental Law for operation of the Business (i) have been obtained by the
Sellers and (ii) are currently in full force and effect. The Sellers are in
compliance with all Environmental Permits required pursuant to any Environmental
Law for operation of the Business.
(b) Sellers are in compliance with all Environmental Laws
with respect to the operation of the Business and the ownership of the Acquired
Assets. To the Knowledge of Sellers, there are no events, conditions,
circumstances, activities, practices or incidents related to the Business which
would, or would reasonably be likely to, give rise to any Environmental Claim.
(c) There is no civil, criminal or administrative action,
suit, demand, Environmental Claim, hearing, notice or demand letter, notice of
violation, investigation or proceeding pending or, to the Knowledge of Sellers,
threatened against the Sellers or the Business related to any Environmental
Permit or any applicable Environmental Law or any plan, order, decree, judgment,
injunction, notice or demand letter issued, entered, promulgated or approved
thereunder.
(d) The Sellers, in the operation of the Business, have not
generated, stored, used, emitted, discharged or disposed of any Hazardous
Material except in material compliance with applicable Environmental Laws.
(e) As used herein:
"Environmental Claims" means any and all administrative
or judicial actions, suits, orders, claims, Liens, notices, violations or
proceedings related to any applicable Environmental Law or any Environmental
Permit brought, issued or asserted by: (i) a Governmental Authority for
compliance, damages, penalties, removal, response, remedial or other action
pursuant to any applicable Environmental Law or Environmental Permit; or (ii) a
third party seeking damages, contribution, remediation or other action for
personal injury or property damage relating to any Environmental Law or
resulting from the release of a Hazardous
28
Material at, to or from any facility of Sellers' Business or any real property
upon which any current facility of the Sellers which is primarily used in the
Business is located.
"Environmental Laws" means all applicable federal,
state and local laws, statutes, ordinances, codes, rules and regulations related
to protection of the environment and/or the handling, presence, use, generation,
treatment, storage, transportation, release, discharge, emission or disposal of
Hazardous Materials in effect as of the date hereof.
"Environmental Permits" means all permits, licenses,
approvals, authorizations, or consents required by any Governmental Authority
under any applicable Environmental Law and includes any and all orders, consent
orders or binding agreements issued or entered into by a Governmental Authority
under any applicable Environmental Law.
"Hazardous Material" means any hazardous or toxic
substance, material or waste which is regulated as of the Closing Date by any
Governmental Authority, including, without limitation, any material or substance
that is: (i) defined as a "hazardous substance" under applicable state law; (ii)
petroleum; (iii) friable asbestos; (iv) designated as a "hazardous substance"
pursuant to Section 311 of the Federal Water Pollution Control Act, as amended,
33 U.S.C.ss.1251 et seq. (33 ▇.▇.▇.▇▇. 1321); (v) defined as a "hazardous waste"
pursuant to Section 1004 of the Federal Resource Conservation and Recovery Act,
as amended, 42 U.S.C.ss.6901 et seq. (42 U.S.C.ss.6903); (vi) defined as a
"hazardous substance" pursuant to Section 101 of the Comprehensive Environmental
Response, Compensation and Liability Act, as amended, 42 U.S.C.ss.9601 et seq.
("CERCLA"); (vii) defined as a "regulated substance" pursuant to Section 9001 of
the Federal Resource Conservation and Recovery Act, as amended, 42 U.S.C.ss.6901
et seq. (42 U.S.C.ss.6991); or (viii) otherwise regulated under the Toxic
Substances Control Act, 15 U.S.C.ss.2601 et seq., the Clean Air Act, as amended,
42 U.S.C.ss.7401, et seq., the Hazardous Materials Transportation Act, as
amended, 49 U.S.C.ss.1801, et seq., or the Federal Insecticide, Fungicide and
Rodenticide Act, as amended, 7 U.S.C.ss.136, et seq.
4.1.15 Financial Statements.
(a) Schedule 4.1.15(a) contains the financial statements
for the Business for the years ended December 31, 1998, December 31, 1999 and
December 31, 2000 (collectively the "Financial Statements"). The Financial
Statements have been prepared based on the books and records of Sellers. Such
books and records have been maintained in accordance with GAAP, adjusted as
necessary to comply with regulatory accounting rules prescribed by the FCC
and/or the Commission. However, because the Business represents only a portion
of Sellers, the Financial Statements reflect the use of estimates and
allocations which estimates and allocations are reasonable and necessary to
cause the Financial Statements to materially reflect the results of operations
for the periods set forth therein.
(b) Except as set forth on Schedule 4.1.15(b), since
December 31, 2000, Sellers have not undertaken any transaction, transfer or
assignment, the effect of which is to transfer, assign or move revenue reflected
in the Financial Statements to any Seller Affiliate.
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(c) Schedule 4.1.15(c) contains certain financial data
for the Business for the six month period ended June 30, 2001 (the "June 30
Financial Data"). The June 30 Financial Data was prepared from Sellers' systems
and, to the Knowledge of Sellers, is a materially accurate reflection of the
items presented for the time period represented.
4.1.16 No Material Adverse Change. Except as set forth in Schedule
4.1.16 between December 31, 2000 and the date hereof there has not occurred any
event or condition which has resulted, or would reasonably be expected to
result, in a Material Adverse Effect.
4.1.17 Brokers. Sellers have not paid or become obligated to pay
any fee or commission to any broker, finder, investment banker or other
intermediary in connection with the transactions contemplated by this Agreement
in such a manner as to give rise to a valid claim against Buyer for any broker's
or finder's fees or similar fees or expenses.
4.1.18 No Other Representations and Warranties. Except for the
representations and warranties contained in this Agreement, neither Seller nor
any of their Affiliates nor any other Person makes any other express or implied
representation or warranty with respect to the transaction contemplated hereby.
4.2 Representations and Warranties of Buyer. Buyer represents and warrants
to Sellers as follows:
4.2.1 Corporate Organization and Related Matters. Buyer is a
limited liability company duly organized, validly existing and in good standing
under the laws of Louisiana. Buyer has the requisite corporate power and
authority to own, lease or otherwise hold the assets owned, leased or held by
it. Buyer has the requisite power, authority and legal right to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution, delivery and performance by Buyer of this Agreement and the
Ancillary Documents executed or to be executed by Buyer have been duly
authorized by all necessary corporate action on the part of Buyer. This
Agreement has been, and the Ancillary Documents when executed will be, duly
executed and delivered by Buyer and this Agreement constitutes, and the
Ancillary Documents when executed and delivered will constitute, the legal,
valid and binding obligations of Buyer, enforceable against it in accordance
with their respective terms, except as such enforceability may be limited by
bankruptcy laws and other similar laws affecting creditors' rights generally,
and subject to the exercise of judicial discretion in accordance with principles
of equity.
4.2.2 Litigation. There is no suit, action or other proceeding, or
injunction or final judgment relating thereto, pending, or to the Knowledge of
Buyer or its Affiliates, threatened against Buyer, before any Governmental
Authority in which it is sought to restrain or prohibit or to obtain damages or
other relief in connection with this Agreement or the consummation of the
transactions contemplated hereby, and no investigation that would be reasonably
likely to result in any such suit, action or proceeding is pending or, to the
Knowledge of Buyer or its Affiliates, threatened.
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4.2.3 Validity of Contemplated Transactions. Upon the receipt of
requisite FCC Consents as described in Section 5.3.2, the Regulatory Approvals
as described in Section 5.3.1, compliance with any applicable requirement of the
HSR Act, and the receipt of the consents set forth on Schedule 4.2.3 (the "Buyer
Consents"), the execution, delivery and performance of this Agreement and the
Ancillary Documents by Buyer do not and will not violate, conflict with or
result in the breach of any term, condition or provision of, or require the
consent of any other Person under, (a) the charter and other organizational
documents of Buyer, (b) any existing Requirement of Law to which Buyer is
subject, or (c) any judgment, order, writ, injunction, decree or award of any
Governmental Authority or any other Governmental Order which is applicable to
Buyer.
4.2.4 Financial Capabilities.
(a) Except as contemplated by the next sentence, Buyer has cash
or other available sources of funds sufficient to pay in full the Purchase Price
in the manner specified in Sections 3.1 and 3.2, together with all related fees
and expenses. In addition, if and to the extent Buyer is relying upon any
financing to be provided by third parties in order to pay any part of the
Purchase Price and related fees and expenses, Buyer has received letters from
reputable lenders indicating they are highly confident they can arrange binding
financing commitments (the "Highly Confident Letters") in amounts which,
together with immediately available funds in cash or cash equivalents of Buyer
are and will at the Closing be sufficient to pay the Purchase Price and to pay
any other amounts payable pursuant to this Agreement and to consummate the
transactions contemplated by this Agreement. True and correct copies of the
Highly Confident Letters are attached hereto as Exhibit F, and the Highly
Confident Letters are current and valid and have not been modified in any
respect.
(b) Buyer has sufficient financial resources to operate the
Business after the Closing Date. Without limiting the generality of the
foregoing, Buyer has sufficient, liquid financial resources to satisfy any
applicable requirement relating to financial capacity or capital imposed by any
Governmental Authority in the state in which the Business is conducted. Buyer is
solvent, is able to pay its debts as they become due, and owns property that has
both a fair value and a fair saleable value in excess of the amount required to
pay its debts as they become due.
4.2.5 Brokers. Buyer has not paid or become obligated to pay any fee
or commission to any broker, finder, investment banker or other intermediary in
connection with the transactions contemplated by this Agreement in such a manner
as to give rise to a valid claim against Sellers for any broker's or finder's
fees or similar fees or expenses.
4.2.6 Financial Statements. Without limiting the effect of Section
4.1.15 hereof, Buyer acknowledges that, with respect to the Financial Statements
received from Sellers (a) while based upon books and records that have been
maintained in accordance with GAAP, the Financial Statements themselves may not
be consistent with GAAP, or the applicable regulations of the FCC or state
regulatory authorities, and (b) because the Business represents only a portion
of Sellers, the Buyer is not acquiring significant support elements located
outside the Seller Exchanges, and Buyer will or may operate under new tariffs,
carrier contracts and
31
other conditions that will or may significantly impact the future revenue of the
Business, the Financial Statements and June 30 Financial Data may not be
representative of the financial performance of the Business during future
periods. Except to the extent that the Financial Statements or the June 30
Financial Data reflect intentional misrepresentation or fraud, Buyer agrees not
to make any claims with respect to the Financial Statements, including without
limitation, any claim based on the performance of the Business after the date of
the Financial Statements on the basis of a comparison to the Financial
Statements.
4.2.7 Investigation; Acknowledgment. Buyer has conducted a review and
analysis of the business, operations, assets, liabilities, results of
operations, financial condition, software, and technology of the Business and
the Acquired Assets and acknowledges that Buyer has been provided access to the
personnel and facilities of Sellers and Verizon and a "data room" set up for the
purpose of the transaction contemplated by this Agreement. Except for the
representations and warranties contained in this Agreement, Buyer acknowledges
that neither Seller, any of their Affiliates nor any other Person makes any
other express or implied representation or warranty with respect to the Sellers,
the Business, the Acquired Assets or otherwise or with respect to any other
information provided to Buyer, whether on behalf of Sellers or such other
Persons, including as to (a) merchantability or fitness for any particular use
or purpose, (b) the operation of the Business by Buyer after the Closing in any
manner other than as used and operated by Sellers or (c) the probable success or
profitability of the ownership, use or operation of the Business or the Acquired
Assets by Buyer after the Closing except for those representations and
warranties set forth in this Agreement. Neither Seller nor any other Person
shall have or be subject to any liability or indemnification obligation to Buyer
or any other Person resulting from the distribution to Buyer, or Buyer's use of,
any such information, including the Confidential Information Summary dated
April, 2001 prepared by Verizon related to the Business and any information,
document or material made available to Buyer in certain "data rooms," management
presentations, conference calls or discussions with employees of Sellers,
responses to questions submitted on behalf of Buyer, whether orally or in
writing, or in any other form in expectation of the transactions contemplated by
this Agreement, except to the extent any such data or information is expressly
contained in a representation or warranty made by Sellers in Section 4.1 hereof.
4.2.8 No Other Representations and Warranties. Except for the
representations and warranties contained in this Agreement, neither Buyer nor
any of its Affiliates nor any other Person makes any other express or implied
representation or warranty with respect to the transaction contemplated hereby.
ARTICLE V
COVENANTS AND AGREEMENTS PENDING CLOSING
5.1 Agreement of Sellers Pending the Closing. From the date of this
Agreement until the Closing, and except as otherwise consented to in writing by
Buyer (which consent shall not be unreasonably withheld):
5.1.1 Conduct of the Business in the Ordinary Course. Sellers shall
conduct the Business in the ordinary course except as expressly contemplated by
this Agreement or the
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Ancillary Agreements or as required by applicable laws, regulations, orders or
decrees. Without limiting the generality of the foregoing, Sellers shall:
(a) keep available to the Business those services of Sellers'
Affiliates to the same extent generally available on the date hereof;
(b) operate the Business in substantially the same manner as it
is currently being conducted and, with respect to the Business, refrain from
entering into any Contract that would be a Material Contract other than in the
ordinary course of business;
(c) not institute any proceeding with respect to, or otherwise
materially change, amend or supplement any of its local exchange, intrastate
toll or intrastate and interstate access tariffs affecting the Business (other
than Verizon-wide proceedings with the FCC, subject to Sellers' commercially
reasonable efforts, upon Buyer's request, to exempt from such filings the Seller
Exchanges) without the prior written consent of Buyer, which consent shall not
be unreasonably withheld or make any other filings with the Commission except in
the ordinary course of business, and except as set forth in Schedule 4.1.12(a);
(d) maintain the tangible Acquired Assets in good repair, order
and condition, reasonable wear and tear excepted;
(e) maintain the material insurance policies with respect to the
Acquired Assets consistent with past practice; provided that the parties
acknowledge that Sellers or Verizon may at any time cancel prospectively or not
renew any of the Verizon corporate insurance programs as to coverage relating to
events after the Closing Date or insured risks other than those associated with
the Business on or prior to the Closing Date;
(f) make capital expenditures as required to maintain the current
operation of the Business and to support normal customer growth in a manner
consistent with the provisions of Section 5.1.6 hereof;
(g) maintain the books and records of the Business substantially
in accordance with prior practice, except as changes are mandated by
Governmental Authorities or required by GAAP;
(h) not make any change in the general lines of business of the
Business;
(i) not sell, lease or dispose of, or make any contract for the
sale, lease or disposition of any material Acquired Asset, nor permit the
imposition of any Lien on the Acquired Assets, other than in the ordinary course
of business consistent with past practice;
(j) not materially increase the number of employees who, upon the
Closing, are expected to become Transferred Employees or materially modify the
benefit provided under any Plans concerning employee benefits or materially
increase the general rates of compensation of its employees who, upon the
Closing, will be Transferred Employees, except
33
(i) as required by Law, (ii) pursuant to any Contract to which either Seller is
a party existing on the date hereof, (iii) in the ordinary course of business of
Sellers consistent with past practice, (iv) as ancillary to Verizon wide Plan
changes, or (v) as listed or described on Schedule 5.1.1(j);
(k) not materially amend, modify or terminate any Material
Contract other than in the ordinary course of business;
(l) except as permitted by Section 5.1.1(j) with respect to Plan
changes, not enter into any new written employment agreement, or collective
bargaining agreement with, or commitment to, those employees who, upon Closing,
shall be Transferred Employees , provided that Sellers may, after consulting
with Buyer, enter into, or become bound by, any new collective bargaining
agreements to the extent the new collective bargaining agreements succeed any
collective bargaining agreement that expires prior to the Closing and, provided
further that Sellers may enter into customary agreements relating to
Intellectual Property with current and new employees;
(m) file any report or make any modification or adjustment to
any procedure that would have a material adverse effect on any amounts to be
received by Buyer under those matters addressed in Section 10.5.1 of the
Agreement for periods after the Closing Date; (n) use commercially reasonable
efforts to generally maintain service level standards consistent with past
practice and maintain reasonable levels of Material and Supply Inventory;
(o) enter into any transaction with its Affiliates (other than
as expressly contemplated herein) which is not terminable, at Buyer's election,
upon sixty (60) days prior written notice; and
(p) write off its CBSS Accounts Receivable classified by Sellers
as "unpaid final" consistent with past practice.
5.1.2 Access. Prior to the Closing, Sellers shall permit Buyer and its
authorized representatives to have reasonable access, during regular business
hours and upon reasonable advance notice, to the Transferred Books and Records,
Owned Real Property, Leased Real Property and other Acquired Assets, and to
those employees of Sellers as Buyer reasonably requests, to the extent that such
access does not materially interfere with the Business; provided, that Buyer and
any such representatives comply with the confidentiality and nondisclosure
obligations set forth in this Agreement.
5.1.3 Consents. Sellers shall use their commercially reasonable
efforts, subject to the conditions set forth in Section 2.4 of this Agreement,
to obtain prior to Closing the Seller Consents. Buyer agrees to cooperate in
good faith with Sellers in obtaining the Seller Consents.
5.1.4 Debtholder Consents. Sellers shall use their commercially
reasonable efforts to obtain from its Lienholders the termination or release or
defeasance, at Closing, of all security agreements, mortgages and financing
statements relating to the Acquired Assets (such
34
termination or release being hereinafter referred to as the "Debtholder
Consents"). Buyer agrees to cooperate in good faith with Sellers in obtaining
the required Debtholder Consents.
5.1.5 Financial Statements. To the extent Buyer requires the
preparation and/or audit of financial statements with respect to the Business in
order to comply with the reporting requirements of the Securities and Exchange
Commission under Regulations S-K and S-X or as required by any Financing
Commitment (the "SEC Basis Financial Statements"), Sellers will, upon Buyer's
request, assist Buyer in the preparation of the SEC Basis Financial Statements,
and cooperate with any independent auditors chosen by Buyer to prepare and/or
audit the SEC Basis Financial Statements. Sellers' cooperation will include
access to workpapers and other supporting documents used in the preparation of
the Financial Statements or such documents as may be reasonably required by such
auditors to prepare such SEC Basis Financial Statements or to render an opinion.
Buyer will bear the cost of preparation of the SEC Basis Financial Statements
and any audit.
5.1.6 Capital Expenditures. Sellers shall be obligated to make capital
expenditures with respect to the Business required to support normal maintenance
and customer growth in a manner consistent with established regulatory
performance objectives, which expenditures (exclusive of any Future Capital
Expenditure Obligations or Future Regulatory Obligations) shall not be less than
Fifty-five Million Dollars ($55 Million) in the aggregate during calendar year
2001, and not less than Forty-Three Million Dollars ($43,000,000) in the
aggregate, during calendar year 2002, and which amount shall be discounted on a
pro rata daily basis to the extent that the Closing Date occurs prior to
December 31, 2002 (the "Capital Expenditure Amount"). The Capital Expenditure
Amount shall be deemed to include and not be in addition to any USF funds
designated for capital projects. The Purchase Price shall be adjusted down, on a
dollar-for-dollar basis, to the extent that Sellers' actual aggregate capital
expenditures are less than the Capital Expenditure Amount (a "Capital
Expenditure Deficiency"). In the event the Closing does not occur prior to
January 1, 2003, the Capital Expenditure Amount shall be increased on a pro rata
daily basis and Sellers shall be obligated to make capital expenditures during
fiscal year 2003 in the same relative amount, and the Purchase Price shall be
adjusted in the same manner described above for any Capital Expenditure
Deficiency occurring during the period after January 1, 2003. Between the date
of this Agreement and the Closing Date, Sellers will notify Buyer of any project
involving Non-Regulated Construction Work in Process in excess of $50,000.
5.1.7 VADI Assets. Prior to the Closing, Sellers shall cause VADI to
contribute to Sellers all of its right, title and interest in and to the VADI
Assets, and shall assume all liabilities of VADI that are Assumed Liabilities
hereunder pursuant to a Contribution, Assignment and Assumption Agreement in
form and substance reasonably satisfactory to Buyer. The parties acknowledge and
agree that nothing in this Agreement shall be deemed to prohibit the
consummation of the transfer described in this Section 5.1.7 or to constitute a
breach of any provision of this Agreement, including without limitation Section
5.1.1.
5.1.8 Release of Liens. On or prior to the Closing, Sellers shall
cause to be satisfied and released those Liens identified in Part 1 of Schedule
4.1.7, such that Sellers transfer
35
to the Buyer, free and clear of any lease or other Liens (other than Permitted
Encumbrances), the vehicles and equipment subject thereto as an Acquired Asset.
5.1.9 Interim Reports. Until the Closing or termination of this
Agreement, Sellers shall deliver to Buyer certain information regarding the
operations of the Business and the condition of the Acquired Assets. Sellers
agree to deliver the information set forth on Schedule 5.1.9 at the time
intervals specified in such schedule, and such other information as Buyer
reasonably requests, provided, however, that unless set forth on Schedule 5.1.9,
Sellers shall not be obligated to provide any information to Buyer which is not
customarily provide by Sellers to its own management. Such reports shall be
provided to Buyer within fifteen (15) Business Days following the end of a
calendar month, in the case of monthly reports, or within twenty (20) Business
Days following the end of a calendar quarter, in the case of quarterly reports;
provided, however, in no event shall Sellers be obligated to provide quarterly
reports prior to Verizon's earnings announcement for such quarter. All
information provided in accordance with this Section 5.1.9 shall be subject to
compliance with the Non-Disclosure Agreement and all applicable Laws.
5.2 Agreement of Buyer Pending the Closing. From the date of this
Agreement until the Closing and except as otherwise consented to in writing by
Sellers:
5.2.1 Control of Business Pending Closing. Nothing contained in this
Agreement shall give Buyer, directly or indirectly, rights to control or direct
the operations of Sellers or their Affiliates prior to the Closing. Prior to the
Closing, Sellers shall exercise, consistent with the terms and conditions of
this Agreement and subject to the express limitations of Section 5.1.1, complete
control and supervision of the operation of the Business.
5.2.2 Contacts by Buyer. Buyer will not without the prior consent of
Sellers, which shall not be unreasonably withheld, contact any employee,
customer or supplier of Sellers with respect to this Agreement, the transactions
contemplated hereby or the Acquired Assets; provided, Buyer may contact unions
representing those employees who, upon the Closing, will be Transferred
Employees in accordance with Section 8.1.1.
5.2.3 Highly Confident Letters. Upon request by Sellers, which request
shall be no more frequently than quarterly, from the date hereof until Closing,
Buyer shall provide updated Highly Confident Letters in form and substance
satisfactory to Sellers in their sole discretion (the "Quarterly Updates"). Such
Quarterly Updates shall also contain a certificate from an authorized officer of
Buyer certifying that the representations set forth in Section 4.2.4 are true
and correct as of the date of such certificate. Notwithstanding the foregoing,
Buyer shall immediately notify Sellers upon the termination or modification of
any Highly Confident Letter provided to Sellers either pursuant to Section 4.2.4
or this Section 5.2.3.
5.3 Covenants of Seller and Buyer. Sellers and Buyer further covenant and
agree that, except as otherwise agreed to in writing by Sellers and Buyer:
5.3.1 State Regulatory Approval. Promptly after the date of this
Agreement, but no later than thirty (30) days after the date hereof, Buyer and
Sellers shall use commercially
36
reasonable efforts to file the appropriate applications and notices with the
Commission seeking orders permitting the transfer of service in the Seller
Exchanges to Buyer (collectively, the "Regulatory Approvals"). Buyer shall be
responsible for seeking to establish the tariff for its post-Closing operations
in the Seller Exchanges. Each of Buyer and Sellers shall use its commercially
reasonable efforts to obtain the Regulatory Approvals and the parties agree to
cooperate fully with each other and with the applicable regulatory agency to
obtain the Regulatory Approvals at the earliest practicable date. In the event
the Commission imposes any condition, term or restriction as more particularly
described in clauses (a) and (b) of Section 6.3.2, each of Buyer and Sellers
shall use its commercially reasonable efforts to seek modification or removal of
such condition such that the Regulatory Approvals shall conform to the standards
set forth in Section 6.3.2.
5.3.2 FCC Consents. Promptly after the date of this Agreement, but no
later than thirty (30) days after the date hereof, the parties shall use their
commercially reasonable efforts to obtain (a) the FCC's consent to the transfer
of the FCC Licenses from Sellers to Buyer and (b) the FCC waivers set forth on
Schedule 5.3.2 (all such consents or waivers are collectively referred to as the
"FCC Consents").
5.3.3 HSR Act Review.
(a) Within thirty (30) Business Days after the date of this
Agreement, or such other time as the parties may agree, the parties will make
such filings as may be required by the HSR Act with respect to the transactions
contemplated by this Agreement. Thereafter, the parties will file as promptly as
practicable all reports or other documents required or requested by the U.S.
Federal Trade Commission or the U.S. Department of Justice pursuant to the HSR
Act or otherwise including requests for additional information concerning such
transactions, so that the waiting period specified in the HSR Act will expire as
soon as reasonably possible after the execution and delivery of this Agreement.
Without limiting the foregoing, each of Sellers and Buyer shall use its
commercially reasonable efforts to cooperate and oppose any preliminary
injunction sought by any Governmental Authority preventing the consummation of
the transactions contemplated by this Agreement. Buyer agrees to pay all
application fees required in connection with any filings under the HSR Act.
(b) Sellers and Buyer shall each cause their respective counsel
to furnish the other party such necessary information and reasonable assistance
as the other may reasonably request in connection with its preparation of
necessary filings or submissions under the provisions of the HSR Act. Sellers
and Buyer shall each cause their respective counsel to supply to the other party
copies of all correspondence, filings or written communications by such party or
its Affiliates with any Governmental Authority or staff members thereof, with
respect to the transactions contemplated by this Agreement and any related or
contemplated transactions, except for documents filed pursuant to Item 4(c) of
the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Notification and Report Form or communications regarding
the same, documents or information submitted in response to any request for
additional information or documents pursuant to the HSR Act which reveal
Sellers' or Buyer's negotiating objectives or strategies or purchase price
expectations.
37
5.3.4 Landlord Consents. Promptly after the date hereof, the parties
shall use their commercially reasonable efforts to mutually seek the consent of
the lessor to any Real Property Leases that require consent as a condition to an
assignment of the lease which consents are identified in Schedule 4.1.6(a). If a
lessor refuses to consent to a lease assignment, and if the applicable lease
permits a sublease without the consent of the lessor, the parties hereto shall,
effective as of the Closing, enter into a sublease upon terms and conditions as
similar and comparable to an assignment of the lease as is reasonably feasible.
5.3.5 Other Agreements. Prior to or at the Closing, each of Buyer and
Sellers shall (and shall use commercially reasonable efforts to cause its
applicable Affiliate to) execute and deliver to the counter-party the License
Agreement, and the Publishing Agreement substantially in the forms attached
hereto and such other agreements as are set forth on Schedule 5.3.5.
5.3.6 Insurance Coverage. On the Closing Date, the coverage under the
insurance policies and programs applicable to the Acquired Assets will be
terminated, and Buyer will be responsible for providing all insurance coverage
for the Acquired Assets.
5.3.7 Interconnection Agreements. In cases in which either Seller or
any Affiliate is a party to a contract with a competitive local exchange carrier
or an interexchange carrier for interconnection services within the Seller
Exchanges (the "Seller Interconnection Agreements"), Sellers and Buyer agree
that until Closing and for a period of ninety (90) days after the Closing Date,
each of Sellers and Buyer shall use its commercially reasonable efforts to
facilitate the negotiation of similar agreements and/or modifications to and
assignments of the Seller Interconnection Agreements that will transfer the
benefits and obligations of Sellers contained in such Seller Interconnection
Agreements to Buyer after Closing.
5.3.8 Designated Representative. Within fifteen (15) days of the date
of this Agreement, the parties shall each appoint a knowledgeable representative
with the necessary authority to respond to matters requiring such party's
consent. No consent shall be valid if received from a Person other than a
party's designated representative.
ARTICLE VI
CONDITIONS PRECEDENT TO THE CLOSING
6.1 Conditions Precedent to Obligations of Buyer. The obligations of Buyer
to consummate the Closing shall be subject to the fulfillment or satisfaction
prior to or at the Closing, of each of the following conditions precedent which
may be waived in writing in whole or in part only by Buyer:
6.1.1 Representations and Warranties True as of Closing. All of the
representations and warranties of Sellers contained in this Agreement shall be
true and correct as of the Closing Date, other than any such representations and
warranties made as of a specified date, which shall be true and correct as of
such date, except to the extent that the failure to be true and correct shall
not have had or would not reasonably be expected to have a Material Adverse
Effect.
38
6.1.2 Compliance with this Agreement. Sellers shall have performed and
complied in all material respects (or shall have cured any material
nonperformance or noncompliance) with all covenants, agreements and conditions
required by this Agreement to be performed or complied with by Sellers prior to
or at the Closing, except to the extent that the failure to do so shall not have
had or would not reasonably be expected to have a Material Adverse Effect.
6.1.3 Closing Certificate. Buyer shall have received a certificate
from an authorized officer of each Seller, dated the Closing Date, certifying
that the conditions specified in Sections 6.1.1 and 6.1.2 have been fulfilled.
6.1.4 Other Agreements. Sellers and/or their applicable Affiliate
shall have tendered an executed ▇▇▇▇ of Sale, Assignment and Assumption
Agreement, the Publishing Agreement and License Agreement substantially in the
forms attached hereto; together with those agreements set forth on Schedule
5.3.5.
6.2 Conditions Precedent to Obligations of Seller. The obligations of
Sellers to consummate the Closing shall be subject to the fulfillment or
satisfaction prior to or at the Closing, of each of the following conditions
precedent, which may be waived in writing in whole or in part only by Sellers:
6.2.1 Representations and Warranties True as of Closing. All of the
representations and warranties of Buyer contained in this Agreement shall be
true and correct as of the Closing Date, other than any such representations and
warranties made as of a specified date, which shall be true and correct as of
such date, except to the extent that the failure to be true and correct shall
not have had or would not reasonably be expected to have a material adverse
effect on Sellers.
6.2.2 Compliance with this Agreement. Buyer shall have performed and
complied in all material respects (or shall have cured any material
nonperformance or noncompliance) with all covenants, agreements and conditions
required by this Agreement to be performed or complied with by Buyer prior to or
at the Closing, except to the extent that the failure to do so shall not have
had or would not reasonably be expected to have a material adverse effect on
Sellers.
6.2.3 Closing Certificate. Sellers shall have received a certificate
from an authorized officer of Buyer, dated the Closing Date, certifying that the
conditions specified in Sections 6.2.1 and 6.2.2 have been fulfilled.
6.2.4 Purchase Price. Buyer shall have tendered to Sellers, in the
manner specified in Section 3.2, the Closing Date Payment.
6.2.5 Other Agreements. Buyer shall have executed and tendered the
▇▇▇▇ of Sale, Assignment and Assumption Agreement, the Publishing Agreement, and
the License
39
Agreement substantially in the forms attached hereto, together with those
agreements set forth on Schedule 5.3.5.
6.3 Conditions Precedent to the Obligations of Buyer and Seller. All
obligations of Buyer and Sellers under this Agreement are subject to the
fulfillment or satisfaction, prior to or at the Closing, of each of the
following conditions precedent:
6.3.1 HSR Act Waiting Period. All required waiting periods under the
HSR Act relating to the transactions contemplated by this Agreement shall have
expired or been earlier terminated.
6.3.2 Required Consents. Each of the required Debtholder Consents
shall have been obtained, each of the Liens satisfied in accordance with the
provisions of Section 5.1.8, and each of the required Regulatory Approvals and
FCC Consents shall have been obtained; provided that such Regulatory Approvals
and FCC Consents shall neither (a) require or be conditioned upon Buyer's
agreement to or compliance with any term, condition or restriction that would
reasonably be likely to have a Material Adverse Effect on the Business nor (b)
impose any term, condition or restriction on the business or operations of
Sellers or their Affiliates or result in the waiver of rights asserted by any of
the foregoing that would reasonably be likely to be materially adverse to
Sellers or their Affiliates in the reasonable judgment of Sellers. For purposes
of this Agreement, all such approvals and consents shall be deemed to have been
obtained upon the granting thereof, and the expiration of any appeals period.
6.3.3 No Governmental Order. On the Closing Date, there shall not have
been entered a preliminary or permanent injunction, temporary restraining order
or other judicial or administrative order or decree by any Governmental
Authority having jurisdiction over the Business, the effect of which prohibits
the Closing.
6.3.4 Assumption of Labor Contract Obligations. Buyer shall have been
able to assume its obligations under Section 8.1.1 without change to the terms
of any Labor Contract, but only to the extent such change has resulted, or would
reasonably be expected to result, in a Material Adverse Effect.
6.3.5 No Material Adverse Effect. There shall not have occurred any
event or condition which individually or in the aggregate has resulted, or would
reasonably be expected to result, in a Material Adverse Effect.
ARTICLE VII
INDEMNIFICATION
7.1 Survival of Representations and Warranties.
7.1.1 Survival Period. All representations and warranties made by the
parties in this Agreement shall survive the Closing Date until the later of (a)
one (1) year following the Closing Date or (b) the completion of Buyer's first
audit cycle (the "Expiration Date"); provided, however, in no event shall the
Expiration Date extend beyond fifteen (15) months following the
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Closing Date, and provided, further, that the representations and warranties
contained in Sections 4.1.1, 4.1.17, 4.1.18, 4.2.1, 4.2.5, 4.2.7 and 4.2.8 shall
survive the Closing without limitation.
7.1.2 Period for Claims. This Article VII shall survive any
termination of this Agreement and the indemnification contained in this Article
VII shall survive the Closing and shall remain in effect (a) with respect to any
claim related to the breach of any representation and warranty, until the
expiration of the applicable survival period set forth in Section 7.1.1; and (b)
indefinitely (except to the extent expressly set forth in this Agreement), with
respect to any claim arising under Section 2.3.2 (Retained Liabilities) or 2.3.1
(Assumed Liabilities). Unless a claim for indemnification with respect to any
alleged breach of any representation or warranty is asserted by notice given as
herein provided that specifically identifies a particular breach and the
underlying facts relating thereto, which notice is given within the applicable
period of survival for such representation or warranty, such claim may not be
pursued and is irrevocably waived after such time. Without limiting the
generality or effect of the foregoing, no claim for indemnification with respect
to any representation or warranty will be deemed to have been properly made
except (i) to the extent it is based upon a Third Party Claim made or brought
prior to the expiration of the survival period for such representation or
warranty, or (ii) to the extent based on Losses actually incurred by an
Indemnitee prior to the expiration of the survival period for such
representation or warranty.
7.2 Indemnification.
7.2.1 Indemnification Obligation of Sellers. From and after the
Closing, and subject to the other provisions of this Article VII, Sellers shall
indemnify, defend and hold harmless Buyer and its Affiliates and their
respective directors, officers, agents and employees (each, a "Buyer Indemnitee"
and collectively the "Buyer Indemnitees") from and against all Losses incurred
or suffered by any Buyer Indemnitee relating to, resulting from or arising out
of (a) any inaccuracy in any of the representations and warranties made by
Seller in Section 4.1 of this Agreement, (b) a breach by Sellers of any covenant
of Sellers contained in this Agreement, which covenant requires performance by
such Seller at or after the Closing, and (c) any of the Retained Liabilities.
7.2.2 Indemnification Obligation of Buyer. From and after the Closing
and subject to the other provisions of this Article VII, Buyer shall indemnify,
defend and hold harmless Sellers and their Affiliates and their respective
directors, officers, agents and employees (each a "Seller Indemnitee" and
collectively the "Seller Indemnitees") from and against all Losses incurred or
suffered by any Seller Indemnitee relating to, resulting from or arising out of
(a) any inaccuracy in any of the representations or warranties made by Buyer in
Section 4.2 of this Agreement, (b) a breach by Buyer of any covenant of Buyer
contained in this Agreement, which covenant requires performance by Buyer at or
after the Closing, (c) any of the Assumed Liabilities, (d) items payable under
Section 10.9 of this Agreement and (e) infringement or misappropriation of Third
Party Intellectual Property.
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7.2.3 Definitions For purposes of this Agreement:
(a) "Indemnification Payment" means any amount of Losses
required to be paid pursuant to this Agreement;
(b) "Indemnitee" means any Person entitled to indemnification
under this Agreement, either a Seller Indemnitee or a Buyer Indemnitee as the
case may be;
(c) "Indemnitor" means any person or entity required to
provide indemnification under this Agreement; and
(d) "Losses" means any losses, liabilities, damages, costs and
expenses (including reasonable out-of-pocket attorneys' fees and expenses)
actually incurred in connection with any actions, suits, demands, assessments,
judgments and settlements, in any such case (i) reduced by the amount of
insurance proceeds recovered from any Person with respect thereto; and (ii)
excluding any such losses, liabilities damages, costs and expenses to the extent
that the underlying liability or obligation is the result of any action taken or
omitted to be taken by any Indemnitee.
7.3 Limitation on Claims for Indemnifiable Losses.
7.3.1 Matters Known Prior to Closing. Notwithstanding anything to the
contrary contained in this Agreement, if the Closing occurs, (i) no claim for
indemnification may be asserted under Section 7.2.1 with respect to any matter
discovered by or known to Buyer on or before the Closing Date, and (ii) no claim
for indemnification may be asserted under Section 7.2.2 with respect to any
matter discovered by or known to Sellers on or before the Closing Date.
7.3.2 Limitation of Liability. Notwithstanding anything to the
contrary contained herein:
(a) Sellers shall not be liable for any Losses with respect to
any claims by a Buyer Indemnitee under Section 7.2.1 unless, with respect to any
individual claim or series of related claims, the amount of Losses (not
otherwise indemnified) resulting therefrom exceeds Fifty Thousand Dollars
($50,000) (the "Included Claims") and (ii) unless and until the total of all
Included Claims for indemnity or damages with respect thereto exceeds two
percent (2%) of the Purchase Price (the "Seller Threshold"), and then Sellers
shall be liable for all such Included Claims in excess of the Seller Threshold.
The aggregate liability of Sellers for indemnifiable Losses with respect to any
Included Claims under Section 7.2.1 hereof shall not exceed the amount which is
ten percent (10%) of the Purchase Price (the "Seller Indemnification Limit")
(b) No Indemnitor shall be liable to or obligated to indemnify
any Indemnitee hereunder for any consequential, special, multiple, punitive or
exemplary damages including, but not limited to, damages arising from loss or
interruption of business, profits, business opportunities or goodwill, loss of
use of facilities, loss of capital, claims of customers, or any cost or expense
related thereto, except to the extent such damages have been recovered by
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a third person and are the subject of a Third Party Claim for which
indemnification is available under the express terms of this Article VII.
(c) Sellers and Buyer shall cooperate with each other with
respect to resolving any claim or liability with respect to which one party is
obligated to indemnify the other party hereunder, including by making
commercially reasonable efforts to mitigate the Losses and resolve any such
claim or liability.
(d) The provisions of this Section 7.3 shall not apply to
obligations associated with the Assumed Liabilities or the Retained Liabilities.
7.4 Defense of Claims.
7.4.1 Third Party Claims. If any Indemnitee receives notice of
the assertion of any claim or of the commencement of any action or proceeding by
any entity that is not either a Buyer Indemnitee or a Seller Indemnitee (a
"Third Party Claim") against such Indemnitee, with respect to which an
Indemnitor is obligated to provide indemnification under this Agreement, the
Indemnitee will give such Indemnitor reasonably prompt written notice thereof,
but in any event not later than ten (10) calendar days after receipt of notice
of such Third Party Claim; provided, however, that the failure of an Indemnitee
to notify the Indemnitor within the time period set forth herein shall only
relieve the Indemnitor from its obligation to indemnify to the extent that the
Indemnitor is materially prejudiced by such failure or delay (whether as a
result of the forfeiture of substantive rights or defenses or otherwise). Upon
receipt of notification of a Third Party Claim, the Indemnitor shall be
entitled, upon written notice to the Indemnitee, to assume the investigation and
defense thereof with counsel reasonably satisfactory to the Indemnitee. Whether
or not the Indemnitor elects to assume the investigation and defense of any
Third Party Claim, the Indemnitee shall have the right to employ separate
counsel and to participate in the investigation and defense thereof; provided,
however, that the Indemnitee shall pay the fees and disbursements of such
separate counsel unless (a) the employment of such separate counsel has been
specifically authorized in writing by the Indemnitor; (b) the Indemnitor has
failed to assume the defense of such Third Party Claim within a reasonable time
after receipt of notice thereof with counsel reasonably satisfactory to such
Indemnitee; or (c) the named parties to the proceeding in which such claim,
demand, action or cause of action has been asserted include both the Indemnitor
and such Indemnitee and, in the reasonable judgment of counsel to such
Indemnitee, there exists one or more defenses that may be available to the
Indemnitee that are in conflict with those available to the Indemnitor.
Notwithstanding the foregoing, the Indemnitor shall not be liable for the fees
and disbursements of more than one counsel for all Indemnitees in connection
with any one proceeding or any similar or related proceedings arising from the
same general allegations or circumstances. Without the prior written consent of
an Indemnitee, the Indemnitor will not enter into any settlement of any Third
Party Claim that would lead to liability or create any financial or other
obligation on the part of the Indemnitee unless such settlement includes, as an
unconditional term thereof, the release of the Indemnitee from all liability in
respect of such Third Party Claim or such Third Party Claim is dismissed against
the Indemnitee with prejudice and without the imposition of any financial or
other obligation on the Indemnitee. If a settlement offer solely for money
damages is made to resolve a Third Party Claim and the Indemnitor notifies the
Indemnitee in writing of the Indemnitor's willingness to accept the
43
settlement offer and pay the amount called for by such offer without reservation
of any rights or defenses against the Indemnitee, the Indemnitee may continue to
contest such claim, free of any participation by the Indemnitor, and the amount
of any ultimate liability with respect to such Third Party Claim that the
Indemnitor has an obligation to pay hereunder shall be limited to the lesser of
(x) the amount of the settlement offer that the Indemnitee declined to accept
plus the Losses of the Indemnitee relating to such Third Party Claim through the
date of its rejection of the settlement offer or (y) the aggregate Losses of the
Indemnitee with respect to such claim.
7.4.2 Direct Claims. Any claim by an Indemnitee for Losses
that do not result from a Third Party Claim (a "Direct Claim") shall be asserted
by giving the Indemnitor reasonably prompt written notice thereof, but in any
event not later than thirty (30) calendar days after the incurrence thereof, and
the Indemnitor will have a period of thirty (30) calendar days within which to
respond in writing to such Direct Claim. If the Indemnitor does not so respond
within such thirty (30) calendar day period, the Indemnitor will be deemed to
have rejected such claim, in which event the Indemnitee will be free to pursue
such remedies as may be available to the Indemnitee on the terms and subject to
the provisions of this Article VII.
7.4.3 Subrogation. If after the making of any Indemnification
Payment the amount of the Losses to which such payment relates is reduced by
recovery, settlement or otherwise under any insurance coverage, or pursuant to
any claim, recovery, settlement or payment by or against any other Person, the
amount of such reduction (less any costs, expenses, premiums or Taxes incurred
in connection therewith) will promptly be repaid by the Indemnitee to the
Indemnitor. Upon making any Indemnification Payment, the Indemnitor will, to the
extent of such Indemnification Payment, be subrogated to all rights of the
Indemnitee against any third party that is not an Affiliate of the Indemnitee in
respect of the Losses to which the Indemnification Payment relates; provided
that (a) the Indemnitor shall then be in compliance with its obligations under
this Agreement in respect of such Losses, and (b) until the Indemnitee recovers
full payment of its Losses, all claims of the Indemnitor against any such third
party on account of said Indemnification Payment will be subrogated and
subordinated in right of payment to the Indemnitee's rights against such third
party. Without limiting the generality or effect of any other provision of this
Article VII, each such Indemnitee and Indemnitor will duly execute upon request
all instruments reasonably necessary to evidence and perfect the above-described
subrogation and subordination rights.
7.5 No Indemnifiable Claims Resulting from Governmental Authority
Action. Neither Buyer nor any of its Affiliates shall have any indemnifiable or
otherwise compensable claim that any of Sellers' representations or warranties
in this Agreement are inaccurate, or that any covenant has been breached, if
such claim is predicated on any action by a Governmental Authority (other than a
tax authority) undertaken after Closing or any action a Governmental Authority
(other than a tax authority) requires Buyer to undertake after Closing;
provided, however, that such limitation shall not apply to the extent such
action by a Governmental Authority (other than a tax authority) arises directly
out of any (a) willful misconduct by Sellers as judicially determined by a final
order of a court or Governmental Authority of competent jurisdiction; or (ii)
conduct by Sellers that was not reasonably prudent based on then-prevailing
circumstances and, provided further that Sellers' reliance on a reasonable
interpretation of existing Law or practice shall be deemed reasonably prudent.
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7.6 Other Rights and Remedies. Following the Closing, the sole and
exclusive remedy at law for Sellers or Buyer for any claim (whether such claim
is framed in tort, contract or otherwise) arising out of a breach of any
representation, warranty, covenant or other agreement in this Agreement shall be
a claim by Sellers or Buyer for indemnification pursuant to this Article VII.
ARTICLE VIII
EMPLOYEES AND EMPLOYEE MATTERS
8.1 Employment of Transferred Employees. Schedule 8.1 lists the Active
Employees (as defined below) of the Business as of the date of this Agreement,
together with their job positions, service and compensation. An employee hired
by Sellers or their Affiliate after the date of this Agreement who would be an
Active Employee but for not being employed on the date of this Agreement shall
become an Active Employee as of his or her date of hire. In hiring new employees
and terminating employees of the Business, Sellers and their Affiliates shall
follow their usual and ordinary course of business in accordance with past
practice. An Active Employee who terminates employment with Sellers prior to the
Closing shall no longer be considered an Active Employee (without regard to the
reason or circumstance for such termination). To the extent required by the
foregoing, a final updated Schedule 8.1 shall be provided to Buyer on or
immediately prior to the Closing Date. All Active Employees of the Business on
the Closing Date (collectively, the "Transferred Employees") shall be employed
by (or become the responsibility of, as applicable) Buyer as of the Closing Date
in the same or comparable positions, and at the same or comparable total
compensation (including base pay and bonus), as were in effect on the Closing
Date, except as otherwise provided in this Agreement. An individual shall be
considered an "Active Employee" of the Business if the individual is employed by
Sellers or an Affiliate of Sellers and (i) provides substantially all of his or
her services to or for the Business or (ii) provides inter-unit support services
to the Business and/or similar businesses of the Sellers and their Affiliates
and is designated as an "Inter-Unit Services Employee" on Schedule 8.1. The
number of Inter-Unit Services Employees designated on Schedule 8.1 for each job
function of the Business shall be equal to the whole number of full-time
equivalent positions (as reasonably determined by Sellers on the basis of a
standard workweek and taking into account all employees of Sellers and their
Affiliates who provide more than de minimis services for the Business other than
those employees listed on Schedule 8.1 pursuant to subparagraph (i) above)
utilized in the Business for such job function. The determination of "Active
Employees" shall include all full-time and part-time employees, employees on
workers' compensation, military leave, maternity leave, leave under the Family
and Medical Leave Act of 1993, short-term disability (except to the extent that
any such employee subsequently goes on long-term disability due to the
pre-Closing condition resulting in short-term disability leave), or layoff with
recall rights, and employees on other approved leaves of absence with a legal or
contractual right to reinstatement. Any individuals who would be "Transferred
Employees" but for their being on long-term disability shall be offered a
position by Buyer in the event they recover within twelve (12) months after the
Closing Date; provided that if any such employee subsequently returns to
long-term disability as a result of the pre-Closing condition resulting in such
long-term disability, Sellers shall be responsible for providing such coverage.
Notwithstanding the foregoing, individuals who would otherwise be considered
"Active Employees" but who are designated by Sellers as "Retained Employees" on
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Schedule 8.1(a) shall not be considered "Active Employees" for purposes of this
Agreement, and individuals who would not otherwise be considered "Active
Employees" but who are designated by Sellers as "Included Employees" on Schedule
8.1(b) shall be considered "Active Employees" for purposes of this Agreement.
For a period of twelve (12) months following the Closing Date, Buyer shall not
employ, and Buyer shall not permit any of its Affiliates to employ, any person
who retires or otherwise terminates from any employment at or in association
with the Business during the six-(6) month period beginning three (3) months
before the Closing Date.
8.1.1 Assumption of Labor Contract Obligations. On and after the
Closing Date, Buyer shall assume all of the employer's obligations under, and be
bound by the provisions of, each Labor Contract covering Transferred Employees.
Sellers shall cooperate with Buyer in Buyer's efforts to contact the unions
representing Transferred Employees. If a union representing Transferred
Employees objects to Buyer's assumption of, or refuses to allow Buyer to assume,
the provisions of any existing collective bargaining agreement that covers such
Transferred Employees immediately before the Closing Date, or objects to any
change in or termination of employee benefits on or after the Closing Date,
Sellers and their Affiliates shall have no liability or obligation to Buyer by
reason of such objection or refusal.
8.1.2 Assumption of Employment and Other Agreements. On and after the
Closing Date, except (a) as otherwise provided in this Agreement or in Schedule
8.1.2 or (b) to the extent arising as a result of the breach by Sellers of the
representations or covenants contained in Sections 4.1.9, 4.1.13 or 5.1.1
hereof, Buyer, as successor employer to Sellers, shall assume all obligations
under and be bound by the provisions of each offer of employment by Sellers and
their Affiliates relating to the Business, each Employment Agreement or any
other agreement by Sellers or any of their Affiliates relating to conditions of
employment, Intellectual Property, employment separation, severance, or employee
benefits in connection with the Business; provided, however, Sellers and their
Affiliates shall retain the right to enforce agreements relating to Intellectual
Property. Schedule 8.1.2 lists the obligations, as of the date hereof, to be
assumed by Buyer pursuant to this Section 8.1.2.
8.1.3 No Creation of Objection Rights. This Agreement does not create
any right of an employee or union to object or to refuse to assent to the
Sellers' assignment of or Buyer's assumption of or succession to any Employment
Agreement, Labor Contract, or other agreement relating to conditions of
employment, employment separation, severance or employee benefits, nor shall
this Agreement be construed as recognizing that any such rights exist.
8.1.4 Recognition of Transferred Employee Service. Except as
otherwise provided herein, on and after the Closing Date, and subject to the
provisions of any applicable collective bargaining agreement, Buyer shall
recognize for all employment-related purposes the service of each Transferred
Employee with Sellers and their Affiliates. Schedule 8.1 shall list such service
for each Transferred Employee. Except to the extent required by Section 8.2.1,
Buyer shall not be required to credit any Transferred Employee with prior
service for purposes of benefit accrual or contributions under any defined
benefit pension plan or other retirement plan.
8.1.5 Assumption of Obligation to Pay Bonuses. Transferred Employees
shall not accrue benefits under any employee benefit policies, plans,
arrangements, programs,
46
practices, or agreements of Sellers or any of their Affiliates after the Closing
Date. Buyer shall assume the obligation to pay to Transferred Employees a
pro-rated portion of any bonuses that would have been payable to the Transferred
Employees with respect to the calendar year in which the Closing Date occurs had
the Transferred Employees remained employees of Sellers or one of their
Affiliates. Such pro-rated portion shall be equal to the portion of the bonus
that would have accrued during the portion of the calendar year occurring after
the Closing Date in accordance with the provisions of the applicable bonus
policy, plan, arrangement, program, practice or agreement of Sellers and their
Affiliates. Sellers shall pay the remaining pro-rated portion of such bonuses in
the ordinary course and at the time such bonuses would have been paid without
regard to this Agreement.
8.1.6 No Duplicate Benefits. Nothing in this Agreement shall cause
duplicate benefits to be paid or provided to or with respect to a Transferred
Employee under any employee benefit policies, plans, arrangements, programs,
practices, or agreements. References herein to a benefit with respect to a
Transferred Employee shall include, where applicable, benefits with respect to
any eligible dependents and beneficiaries of such Transferred Employee under the
same employee benefit policy, plan, arrangement, program, practice or agreement.
8.1.7 Affiliate Employees. If any employee identified in Schedule 8.1
is an employee of an Affiliate of Sellers, he or she shall be considered a
Transferred Employee and shall be treated under this Agreement in a manner that
is comparable to the treatment given to the Transferred Employees who are
employed by Sellers. Sellers and their Affiliates shall take and/or cause to be
taken any action necessary to ensure that the Transferred Employees and any
Included Employees are employed by or transferred to Sellers no later than
immediately prior to the Closing to allow Buyer to assume the employment
obligations contemplated by Section 8.1.
8.2 Transferred Employee Benefit Matters.
8.2.1 Defined Benefit Plans.
(a) Management Employees. Effective immediately after the
Closing Date, the Transferred Employees who participate in the Verizon GTE
Service Corporation Plan for Employees' Pensions (the "Seller Salaried Pension
Plan") will be eligible to participate under a tax-qualified defined benefit
pension plan established or maintained by Buyer to the same extent (if any) as
similarly-situated employees of Buyer. Such Transferred Employees shall receive
credit for their service with Sellers and their Affiliates under such Buyer
pension plan for all purposes other than benefit accrual service. Other than
direct rollover distributions, if any are permitted, no assets or liabilities
will be transferred in connection with this Agreement from the Seller Salaried
Pension Plan to Buyer or any benefit plan of buyer.
(b) Represented Employees. Buyer shall take all actions
necessary and appropriate to ensure that, as soon as practicable after the
Closing Date, Buyer maintains or adopts one or more pension plans (hereinafter
referred to in the aggregate as the "Buyer Pension Plans" and individually as
the "Buyer Pension Plan") and to ensure that each Buyer Pension Plan satisfies
the following requirements as of the Closing Date: (i) the Buyer Pension Plan is
a qualified, single-employer defined benefit plan under Section 401(a) of the
Code; (ii) any Buyer
47
Pension Plan that was in effect before the Closing Date shall not have any
"accumulated funding deficiency," as defined in Section 302 of ERISA and Section
412 of the Code, whether or not waived, immediately before the Closing Date;
(iii) the Buyer Pension Plan is not the subject of termination proceedings or a
notice of termination under Title IV of ERISA; (iv) the Buyer Pension Plan does
not exclude Transferred Employees who were participants in the "GTE South, Inc.
(Southeast) Plan for Hourly-Paid Employees' Pensions" (the "Seller Hourly
Pension Plan") on the Closing Date from eligibility to participate therein; (v)
the Buyer Pension Plan does not violate the requirements of any applicable
collective bargaining agreement; and (vi) with respect to Transferred Employees
who were participants in the Seller Hourly Pension Plan on the Closing Date, the
terms of the Buyer Pension Plan are substantially identical in all material
respects to the terms of the Seller Hourly Pension Plan. Within the thirty (30)
day period immediately preceding any transfer of assets and liabilities from the
Seller Hourly Pension Plan to a Buyer Pension Plan pursuant to Section 8.2.1,
Buyer shall provide Sellers with a written certification, in a form acceptable
to Sellers, that the Buyer Pension Plan satisfies each of the requirements set
forth in this Section 8.2.1(b).
(c) Transfer of Liabilities.
(i) Buyer shall cause the Buyer Pension Plans to accept
all liabilities for benefits under the Seller Hourly Pension Plan whether or not
vested, that would have been paid or payable (but for the transfer of assets and
liabilities pursuant to this Section 8.2.1) to or with respect to the
Transferred Employees under the terms of the Seller Hourly Pension Plan that
have accrued under the Seller Hourly Pension Plan to or with respect to the
Transferred Employees based on accredited service and compensation under the
Seller Pension Plans as of the Closing Date.
(ii) For purposes of eligibility and vesting under the
Buyer Pension Plans, each Transferred Employee whose accrued benefit is
transferred from a Seller Hourly Pension Plan to a Buyer Pension Plan shall be
credited with service and compensation as of the Closing Date as determined
under the terms of the Seller Hourly Pension Plan. The benefit under the Buyer
Pension Plan for each Transferred Employee who, on the Closing Date,
participates in the Seller Hourly Pension Plan, shall be calculated under terms
of the Buyer Pension Plan that are substantially identical in all material
respects to the terms of the Seller Hourly Pension Plan.
(iii) As soon as practicable after the Closing Date,
Sellers shall deliver to Buyer a list reflecting each Transferred Employee's
service and compensation under the Seller Hourly Pension Plan.
(d) Transfer of Assets.
(i) Sellers shall direct the trustee of the Seller
Hourly Pension Plan to transfer to the trustee or funding agent of the Buyer
Pension Plan the amount required to be transferred by Section 414(1) of the Code
and the regulations thereunder for all Transferred Employees whose accrued
benefits are transferred to a Buyer Pension Plan pursuant to subsection (c) of
this Section 8.2.1, determined using the assumptions used by the PBGC with
48
respect to a plan termination occurring on the Closing Date (the "Pension
Assets"), as set forth on Schedule 8.2.1(d)(i), subject to any adjustment
pursuant to subsection (d)(vi) of this Section 8.2. The Pension Assets shall be
in the form of cash or marketable obligations. Under no circumstances shall
Sellers or the Seller Hourly Pension Plan be liable to transfer any additional
amount to Buyer or a Buyer Pension Plan or any other Person in respect of the
accrued benefits transferred to a Buyer Pension Plan pursuant to subsection (c)
of this Section 8.2.1, including but not limited to any circumstance under which
any Person (including a Governmental Authority) states a claim to some portion
or all of the Pension Assets.
(ii) Sellers shall appoint an actuary ("Sellers'
Actuary") to determine the amount to be transferred pursuant to subsection
(d)(i) of this Section 8.2.1 and shall provide such determination to Buyer.
Buyer shall appoint an actuary ("Buyer's Actuary") who shall have the right to
audit and review the determination made by Sellers' Actuary. Within thirty (30)
days after the date Sellers inform Buyer of the amount of the Pension Assets,
Sellers' Actuary shall provide Buyer's Actuary with a computer file containing
all the employee data used by Sellers' Actuary to calculate the Pension Assets.
If Buyer's Actuary is unable to agree with Sellers' Actuary on the amount of the
transfer within sixty (60) days after Sellers inform Buyer of the amount to be
transferred, Sellers and Buyer shall jointly select a third actuary, whose
determination shall be binding on Sellers and Buyer. Each of Sellers and Buyer
shall bear the fees, costs and expenses of their respective actuaries, and the
fees, costs and expense of the third actuary shall be borne one-half by Sellers
and one-half by Buyer.
(iii) The Pension Assets shall be credited with interest
from the Closing Date to the actual date of transfer at the assumed discount
rate used in accordance with paragraph (i) of this subsection (d); provided that
any Pension Assets that are distributed from the Seller Hourly Pension Plan
before the date of transfer pursuant to subsection (d)(vi) of this Section 8.2.1
shall be credited with interest (such interest to be credited to the Buyer
Pension Plans) only from the Closing Date to the date of distribution.
(iv) Under the terms of the Buyer Pension Plan, the
accrued benefit of each Transferred Employee immediately after the transfer of
assets and liabilities pursuant to this Section 8.2.1 shall not be less than the
sum of each Transferred Employee's accrued benefits under the applicable Seller
Hourly Pension Plan and the Buyer Pension Plan (if any) immediately before the
transfer of assets and liabilities.
(v) In connection with the transfer of assets and
liabilities pursuant to this Section 8.2.1, Sellers and Buyer shall cooperate
with each other in making all appropriate filings required by the Code or ERISA
and the regulations thereunder, and the transfer of assets and liabilities
pursuant to this Section 8.2.1 shall not take place until as soon as practicable
after the latest of (A) the expiration of the thirty (30) day period following
the filing of any required notices with the IRS pursuant to Section 6058(b) of
the Code, or (B) the date Buyer has delivered to Sellers (xx) a copy of the
Buyer Pension Plan and a copy of the most recent determination letter from the
IRS to the effect that the Buyer Pension Plan is qualified under Section 401(a)
of the Code, together with documentation reasonably satisfactory to Sellers of
the due adoption of any amendments to the Buyer Pension Plan required by the IRS
as a condition to such qualification and a certification from Buyer that no
events have occurred that
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adversely affect the continued validity of such determination letter (apart from
the enactment of any Federal law for which the remedial amendment period under
Section 401(b) of the Code has not yet expired), and (yy) information enabling
the enrolled actuary for the Buyer Pension Plan to issue the certification
required by Section 6058(b) of the Code.
(vi) If, after the Closing Date and before the date of
transfer of assets and liabilities from the Seller Hourly Pension Plan pursuant
to this Section 8.2.1, the accrued benefit as of the Closing Date becomes
payable under the Seller Hourly Pension Plan to or with respect to a Transferred
Employee, Sellers shall instruct the trustee of the Seller Hourly Pension Plan
to pay such benefits, and the assets to be transferred from the Seller Hourly
Pension Plan shall be reduced accordingly.
(vii) Sellers, Buyer, the Seller Hourly Pension Plan and
the Buyer Pensions Plans shall assist and cooperate with each other in the
transfer of Pension Assets and the disposition of claims made under the Buyer
Pension Plans and Sourly Hourly Pension Plan pursuant to this Section 8.2.1 and
in providing each other with any record, documents or other information within
its control that is reasonably requested by any other party as necessary to the
disposition, settlement or defense of such claim.
8.2.2 Savings Plans.
(a) As of the date of this Agreement, Sellers participate in
the Verizon GTE Savings Plan and the Verizon GTE Hourly Savings Plan
(collectively referred to as the "Seller Savings Plans"). Except as provided in
subsection (c) below, Transferred Employees shall not be entitled to make
contributions to or to benefit from matching or other contributions under the
Seller Savings Plans on and after the Closing Date.
(b) Buyer shall take all action necessary and appropriate to
ensure that, as of the Closing Date, Buyer maintains one or more savings plans
(hereinafter referred to in the aggregate as the "Buyer Savings Plans" and
individually as the "Buyer Savings Plan") that will accept rollovers from
Transferred Employees who receive distributions from the Seller Savings Plans.
(c) Sellers shall make all required matching contributions
with respect to the Transferred Employees' contributions to the Seller Savings
Plans that are (i) eligible for matching and (ii) made before the Closing Date.
Such matching contributions shall be made not later than the date on which all
other matching contributions are made to the Seller Savings Plans with respect
to contributions made at the same time as the Transferred Employees'
contributions.
8.2.3 Welfare Plans.
(a) Buyer shall take all action necessary and appropriate to
ensure that, as soon as practicable after the Closing Date, Buyer maintains or
adopts, as of the Closing Date, one or more
employee welfare benefit plans, including medical, health, dental, flexible
spending account, accident, life, short-term disability, and long-term
disability and other employee welfare benefit plans for the benefit of (i) the
non-bargained Transferred Employees (the "Non-Union
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Welfare Plans") and (ii) the union-represented Transferred Employees in
accordance with the provisions of applicable collective bargaining agreements
(the "Bargained Welfare Plans"). The Non-Union Welfare Plans and the Bargained
Welfare Plans are hereinafter referred to collectively as the "Buyer Welfare
Plans." The Buyer Welfare Plans shall provide as of the Closing Date
pre-retirement benefits to Transferred Employees (and their dependents and
beneficiaries) that, in the aggregate, are comparable to the pre-retirement
benefits to which they were entitled under the corresponding employee welfare
benefit plans maintained by Sellers on the Closing Date (hereinafter referred to
collectively as the "Seller Welfare Plans"). Any restrictions on coverage for
pre-existing conditions or requirements for evidence of insurability under the
Buyer Welfare Plans shall be waived for Transferred Employees, and Transferred
Employees shall receive credit under the Buyer Welfare Plans for co-payments and
payments under a deductible limit made by them and for out-of-pocket maximums
applicable to them during the plan year of the Seller Welfare Plan in accordance
with the corresponding Seller Welfare Plans. As soon as practicable after the
Closing Date, Sellers shall deliver to Buyer a list of each Transferred
Employee's co-payment amounts, and deductible and out-of-pocket limits under the
Seller Welfare Plans.
(b) (i) Except as otherwise provided in subsection (b)(ii) of
this Section (b) or in an applicable collective bargaining agreement, Buyer
shall provide or cause to be provided retiree medical, health, and life benefits
to each Transferred Employee under substantially comparable terms and conditions
as apply to similarly situated employees of Buyer as of the date of this
Agreement, and Sellers shall have no obligation to provide retiree medical and
life benefits to any Transferred Employee on or after the Closing Date.
(ii) Following the termination of employment from Buyer and
its Affiliates of a Transferred Employee who is not covered by a Labor Contract
and who, as of the Closing Date, has at least fifteen (15) years of accredited
service (within the meaning of the Seller Salaried Pension Plan) and combined
years of age and accredited service of at least 74 (within the meaning of the
Seller Salaried Pension Plan), Sellers shall provide or cause to be provided to
each such Transferred Employee (or the dependents or beneficiaries of such
Transferred Employee) retiree medical, health, and life benefits under the terms
and conditions of the corresponding programs then offered by Sellers to its
similarly situated non-collectively bargained employees retiring at such time;
provided that nothing in this subsection (b)(ii) shall be construed to prevent
any such Transferred Employee (or his or her dependents or beneficiaries) from
voluntarily relinquishing such benefits. Buyer shall reimburse Sellers for the
cost of the retiree medical, health and life coverage for which Sellers are
responsible and that Sellers actually provide pursuant to this subsection
(b)(ii). For each year for which Buyer is required to reimburse Sellers under
this subsection (b)(ii), Buyer shall pay Sellers annually in arrears, within
thirty (30) days after Sellers provide a statement therefor to Buyer: (A) $4,500
with respect to each eligible Transferred Employee who has not yet attained age
65 during the year for which the payment is made and $4,500 with respect to each
spouse who is covered with respect to an eligible Transferred Employee and who
has not yet attained 65 during the year for which the payment is made, and (B)
$2,000 with respect to each eligible Transferred Employee who has attained at
least age 65 during the year for which the payment is made and $2,000 with
respect to each spouse who is covered with respect to an eligible Transferred
Employee and who has attained at least age 65 during the year for which the
payment is made. No reimbursement
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shall be due with respect to any dependent, other than a spouse, covered with
respect to an eligible Transferred Employee. The reimbursement obligation for
partial years shall be prorated based on the portion of the year covered by the
obligation.
(c) Sellers, Buyer, their respective Affiliates, and the Seller
Welfare Plans and the Buyer Welfare Plans shall assist and cooperate with each
other in the disposition of claims made under the Seller Welfare Plans or the
Buyer Welfare Plans and in providing each other with any records, documents, or
other information within its control or to which it has access that is
reasonably requested by any other as necessary or appropriate to the
disposition, settlement, or defense of such claims.
(d) Except for the Flexible Reimbursement Plan (the "FRP")
account balances described in Section 8.2.3(e), nothing in this Agreement shall
require Sellers or their Affiliates to transfer assets or reserves with respect
to the Seller Welfare Plans to Buyer or the Buyer Welfare Plans.
(e) As of the Closing Date, Sellers shall cause the portion of
the FRP applicable to Transferred Employees to be segregated into a separate
component and all account balances of the Transferred Employees in the FRP shall
be transferred to a flexible reimbursement plan that Buyer shall cause to be
maintained for the duration of the calendar year in which the Closing Date
occurs.
8.3 Severance Benefits. On and for a period of at least three (3) years
after the Closing Date, Transferred Employees not subject to a collective
bargaining agreement shall be eligible for benefits under a Buyer severance or
separation pay policy or plans that provides a benefit of two weeks of base
compensation for each year of service (plus a prorated amount for each partial
year of service, such service determined by taking into account service with
Sellers and their Affiliates and service with Buyer and its Affiliates), up to a
maximum of fifty-two (52) weeks, to employees who separate from service for any
reason other than cause; provided that the amount of the severance benefit shall
not be less than the executive minimum severance benefit for the employees
listed on Schedule 8.3. Except as specifically provided otherwise in the
relevant Seller severance pay plan, each Transferred Employee listed on Schedule
8.1 shall be treated as a "Transferred Employee" for purposes of the Seller
Salaried Pension Plan and shall not be entitled to severance benefits (including
under the Qualified Involuntary Separation Program) from Sellers or any plan or
policy it maintains. Sellers shall take any actions necessary or appropriate in
respect of the immediately preceding sentence.
8.4 Vacation Benefits. On or after the Closing Date, Buyer shall allow
Transferred Employees to receive paid time off in the calendar year of the
Closing for any unused vacation time accrued prior to the Closing Date. Sellers
and their Affiliates shall have no liability to Transferred Employees for the
vacation payments described the immediately preceding sentence. Sellers shall
pay Transferred Employees any banked vacation on or as soon as practicable after
the Closing Date, and Buyer shall have no liability for such banked vacation
benefits. Schedule 8.1 referenced above shall list the accrued but unused
vacation pay, as of the Closing Date, of each Transferred Employee for the
calendar year in which the Closing Date occurs.
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8.5 Employee Rights. Nothing herein expressed or implied shall confer upon
any employee of Sellers or their Affiliates, or Buyer or its Affiliates, or upon
any legal representative of such employee, or upon any collective bargaining
agent, any rights or remedies, including any right to employment or continued
employment for any specified period, of any nature or kind whatsoever under or
by reason of this Agreement. Nothing in this Agreement shall be deemed to confer
upon any person (nor any beneficiary thereof) any rights under or with respect
to any plan, program, or arrangement described in or contemplated by this
Agreement, and each person (and any beneficiary thereof) shall be entitled to
look only to the express terms of any such plan, program, or arrangement for his
or her rights thereunder. Nothing in this Agreement shall cause Buyer or its
Affiliates, nor Sellers or their Affiliates to have any obligation to provide
employment or any employee benefits to any individual who is not a Transferred
Employee or, except as otherwise provided in Section 8.1.2 with respect to
employment agreements, to continue to employ any Transferred Employee for any
period of time following the Closing Date.
8.6 Successors and Assigns. In the event Buyer or any of its successors
and assigns (a) consolidates with or merges into any other Person and shall not
be the continuing or surviving corporation or entity in such consolidation or
merger or (b) transfers all or substantially all of its properties and assets to
any Person, then, and in each case, proper provision shall be made so that such
successors and assigns of Buyer honor the obligations of Buyer and its
Affiliates set forth in this Article VIII. In the event Buyer outsources any of
the Transferred Employees during the three-year period described in Section 8.3,
and such employees are not paid a severance benefit in accordance with Section
8.3, then, and in each case, proper provision shall be made so that the
outsourcing vendor maintains a severance pay plan or policy that provides a
severance benefit for each Transferred Employee who is involuntarily terminated
by the outsourcing vendor during such three-year period, which benefit is the
same as the severance benefits that would otherwise have been provided to such
employees in accordance with Section 8.3. For purposes of this Section 8.6, a
Transferred Employee shall be considered to have been outsourced if the employee
is hired by the outsourcing vendor pursuant to or in connection with an
agreement entered into between Buyer or any of its Affiliates and the
outsourcing vendor whereby the outsourcing vendor will provide services to or
for the Buyer or any of its Affiliates.
ARTICLE IX
CONTINUING BUSINESS RELATIONSHIPS
9.1 Transition Plan Support Agreement. The parties agree to cooperate with
one another to ensure that the transition of the ownership of the Acquired
Assets proceeds with minimal disruption to the services being provided to
subscribers in the Seller Exchanges. The parties agree that it may be necessary
for Seller to assist Buyer in converting Seller's systems and processes with
respect to the Acquired Assets to Buyer's systems and processes. Seller and
Buyer agree to execute on or before the Closing Date a separate "Transition Plan
Support Agreement" substantially in the form attached hereto as Exhibit E for
the provision of such services.
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9.2 Directory Publishing.
9.2.1 Certain Directory Publishing Agreement Rights and Obligations.
Sellers are party to that certain publishing agreement dated January 1, 2000
with Verizon Information Services Inc. f/k/a GTE Information Services
Incorporated ("Publisher"). Pursuant to this agreement Publisher has the right
to sell advertising, and the obligation to publish, print and distribute
directories containing telephone numbers relating to the Seller Exchanges. Buyer
and Publisher shall execute a new publishing agreement on or before the Closing
Date effective as of the Closing as it relates to the Seller Exchanges, which
agreement shall be substantially in the form attached hereto as Exhibit D (the
"Publishing Agreement"). Such Publishing Agreement shall provide Buyer with a
fifty-two percent (52%) revenue share in print directory advertising relating to
the period after Closing for all directories in use at the time of Closing
(i.e., having been published within the twelve (12) month period prior to the
Closing Date), and those Verizon-branded directories in current sales campaigns
or post-sales publishing cycle at Closing.
9.2.2 Co-Bound Directories Acknowledgement. Buyer acknowledges that
Publisher may have a pre-existing obligation (which Publisher may choose to
continue) to sell advertising, publish, print and distribute the telephone
numbers of third party local exchange telephone companies in the same directory
as the Seller Exchanges ("Co-Bound Directory"). Verizon Information Services
Inc. has informed Seller that all such arrangements are as set forth on Schedule
9.2.2 and, to Sellers' knowledge, no arrangements exist except as are identified
on Schedule 9.2.2.
ARTICLE X
ADDITIONAL AGREEMENTS OF THE PARTIES
10.1 Intellectual Property.
10.1.1 No License. Buyer and Sellers acknowledge and agree that,
except and to the extent expressly set forth in writing in the License Agreement
and in Section 10.1.3, Sellers have not granted any rights or licenses, express
or implied, and nothing shall constitute or be construed as a license or other
right by Sellers under any Intellectual Property now or hereafter owned,
obtained or licensable by Sellers or under any Third Party Intellectual
Property.
10.1.2 Infringement.
(a) Notwithstanding anything in this Agreement to the
contrary, Sellers shall have no obligation to defend, indemnify or hold harmless
Buyer, any of its Affiliates or any of their customers, from any damages, costs
or expenses resulting from any obligation, proceeding or suit based upon any
claim that any activity subsequent to the Closing Date engaged in by Buyer, a
customer of Buyer's, or anyone claiming under Buyer, constitutes direct or
contributory infringement, misuse or misappropriation of, or inducement to
infringe, any Third Party Intellectual Property.
(b) Buyer shall defend, indemnify and hold harmless Sellers
and their Affiliates from and against any and all Indemnifiable Losses resulting
from any obligation,
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proceeding or suit based upon any claim alleging or asserting direct or
contributory infringement, or misuse or misappropriation of, or inducement to
infringe by Sellers or any of their Affiliates of any Third Party Intellectual
Property, to the extent that such claim is based on, or would not have arisen
but for, activity conducted or engaged in subsequent to the Closing Date by
Buyer, a customer of Buyer's or anyone claiming under Buyer.
10.1.3 Trademark Phaseout.
(a) Buyer acknowledges and agrees that Sellers or their
Affiliates are the legal and beneficial owners of Excluded Marks that qualify as
Excluded Assets under Section 2.1.2. Buyer acknowledges and agrees that the
Excluded Marks, or any right to or license of the Excluded Marks, including any
right to use, are not being transferred or conveyed to Buyer pursuant to this
Agreement. Buyer acknowledges the exclusive and proprietary rights of Sellers
and their Affiliates in the use of the Excluded Marks, and Buyer agrees that it
shall not use the Excluded Marks (or any names, domain names, marks or indicia
confusingly similar to the Excluded Marks) except and to the extent expressly
set forth in this Section 10.1.3, or otherwise assert any rights or claims in
such Excluded Marks (or in any names, domain names, marks or when confusingly
similar to the Excluded Marks). Except as set forth in the last sentence of this
Section 10.1.3(a), after the Closing, all Excluded Marks of Sellers and their
Affiliates shall be replaced by Buyer, at Buyer's expense, as soon as possible,
but in no event later than ninety (90) days after the Closing Date (the
"Phaseout Period") for items existing as of the Closing Date with Excluded Marks
affixed to them which Buyer has continued to use in Buyer's operation of the
Business, including buildings, vehicles, heavy equipment, hard hats, tools, tool
boxes, kits (safety and others) signs, public (pay) telephones, manual covers
and notebooks. After the Closing, Buyer will not use, and will immediately
destroy or deliver to Sellers, all items with Excluded Marks affixed to them
that have no valid continuing use in Buyer's operation of the Business,
including items affecting customer or employee relations or items that do not
reflect Buyer's true identity. Specific items to be destroyed or returned
include giveaways; order, purchase or materials forms; requisitions; invoices;
statements; time sheets/labor reports; ▇▇▇▇ inserts; stationery; personalized
note pads; business cards; maps; organization charts; bulletins/releases;
sales/price literature; manuals or catalogs; report covers/folders; program
materials; and materials such as media contact lists/cards. The Phaseout Period
for replacement of Excluded Marks affixed to telephone directories that were
already published or closed for publication at the Closing Date shall be
extended to the expiration date of such directories.
(b) Buyer recognizes the great value of the goodwill
associated with the Excluded Marks, and acknowledges and agrees that the
Excluded Marks and all rights therein and the goodwill pertaining thereto belong
exclusively to Sellers and that the Excluded Marks have a secondary meaning in
the minds of the public. Buyer further agrees that any and all permitted use of
the Excluded Marks pursuant to this Agreement shall inure to the sole and
exclusive benefit of Sellers.
(c) Buyer agrees that any permitted use of the Excluded Marks
in the operation of the Business after the Closing shall be provided in
accordance with all applicable federal, state and local Laws, and to the
additional terms and conditions as set forth in the
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License Agreement and that the same shall not reflect adversely upon the good
name of Sellers or their Affiliates, and that the operation of the Business will
be of a high standard and skill.
(d) Buyer acknowledges that its failure to cease use of the
Excluded Marks as provided in this Agreement, or its improper use of the
Excluded Marks, will result in immediate and irreparable harm to Sellers and
their Affiliates. Buyer acknowledges and admits that there is no adequate remedy
at law for such failure to terminate use of the Excluded Marks, or for such
improper use of the Excluded Marks. Buyer agrees that in the event of such
failure or improper use, Sellers and their Affiliates shall be entitled to
equitable relief by way of temporary restraining order, or preliminary or
permanent injunction, or any other relief available under this Agreement.
(e) Neither Buyer nor its Affiliates shall contest the
ownership or validity of any rights of Sellers or their Affiliates in the
Excluded Marks.
10.1.4 Third Party Software. To the extent that the transfer of
Acquired Assets by Sellers to Buyer under this Agreement results in the transfer
of possession to Buyer of software that, at the Closing Date, is Third Party
Intellectual Property, which software was located in and rightfully used by
Sellers in the geographical area of the Seller Exchanges prior to the Closing
Date in the normal and ordinary operation of the Business pursuant to Contracts
with the owners or licensors of such software ("Third Party Intellectual
Property Contracts"), Sellers agree to provide reasonable assistance to Buyer in
securing license rights in such Third Party Intellectual Property on terms and
conditions similar to those set forth in the Third Party Intellectual Property
Contracts; provided, however, Sellers agree to assign to Buyer, at Buyer's
expense, the Third Party Intellectual Property Contracts with Switch Software
Vendors for the Switch Software used with the Acquired Assets, to the extent
Sellers have the right or obtain the right to do so, and Buyer agrees to comply
with the terms and conditions of such Third Party Intellectual Property
Contracts and to indemnify Sellers for any breaches thereof or failures to
comply therewith from and after the Closing. Such Third Party Intellectual
Property Contracts with Switch Software Vendors are as set forth on Schedule
10.1.4. Buyer understands and agrees that, except and to the extent the Third
Party Intellectual Property Contracts for such Switch Software are assigned to
Buyer, no rights or licenses to use or possess such software or any Third Party
Intellectual Property are transferred to Buyer. Buyer shall properly dispose of,
and shall not use, any software or other Third Party Intellectual Property of
which Buyer acquires possession or control in connection with Acquired Assets
unless and to the extent Buyer enters into written agreements with such third
parties for the use of such software or other Third Party Intellectual Property.
Sellers make no warranty or representation as to any matter relating to Third
Party Intellectual Property or Third Party Intellectual Property Contracts.
10.2 Confidentiality. Whether or not the Closing occurs, the parties and
their respective officers, directors, employees and representatives shall comply
with the Non-Disclosure Agreement, the provisions of which are expressly
incorporated herein in their entirety by this reference.
10.3 Further Assurances. For a period of one hundred eighty (180) days
after the Closing, Sellers shall use their commercially reasonable efforts to
furnish to Buyer such other
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instruments and information as Buyer may reasonably request in order to convey
to Buyer title to the Acquired Assets, to be delivered from time to time upon
Buyer's reasonable request.
10.4 Prorations.
(a) Subject to the limitations set forth in this Section 10.4(a),
any liability that calls for periodic payments shall be prorated between Sellers
and Buyer including, without limitation: (i) utility charges (which shall
include water, sewer, electricity, gas and other utility charges) with respect
to the Owned Real Property, the property subject to the Real Property Leases and
customer owned equipment, (ii) rental charges (which shall include rental
charges and other lease payments under the Real Property Leases), (iii) personal
services (where the services charged for straddle the period both before and
after the Closing Date, including charges for contract labor), and (iv) real and
personal property taxes, ad valorem taxes and other similar taxes imposed on a
periodic basis, (v) franchise fees, regulatory assessments or taxes and (vi)
such other liability that individually calls for periodic payments in excess of
Ten Thousand Dollars ($10,000). With respect to measurement periods during which
the Closing Date occurs (all such periods of time being hereinafter called
"Proration Periods"). The liabilities described in clauses (i), (ii), (iii), (v)
and (vi) of the preceding sentence shall be apportioned between Sellers and
Buyer as of the Closing Date, with Buyer bearing only the expense thereof in
direct proportion to the number of days remaining in the applicable Proration
Period including and following the Closing Date in comparison to the total
number of days covered by such Proration Period. The liabilities described in
clause (iv) of the preceding sentence shall be prorated between Buyer and
Sellers based on the relative periods the Acquired Assets was owned by each
respective party during the fiscal period for which such taxes were imposed by
the taxing jurisdiction (as such fiscal period is reflected on the ▇▇▇▇ rendered
by such taxing jurisdiction). Buyer and Sellers shall pay or be reimbursed for
real and personal property taxes (including instances in which such property
taxes have been paid before the Closing Date) on this prorated basis. If a
payment on a tax ▇▇▇▇ is due after the Closing, the party that is legally
required to make such payment shall make such payment and promptly forward an
invoice to the other party for its pro rata share, if any. If the other party
does not pay the invoice within thirty (30) calendar days of receipt, the amount
of such payment shall bear interest at the Applicable Rate. Similarly, all
prepayments made by Sellers with respect to service or maintenance agreements
with third parties or license or other fees payable to third parties and
assigned to Buyer hereunder shall be prorated on an appropriate basis between
Sellers and Buyer.
(b) Notwithstanding the foregoing provisions of Section 10.4(a),
Sellers shall not be responsible to pay, or to indemnify Buyer for, any federal
universal service fund charge which is due after the Closing Date with respect
to the Business, and all such charges shall be the responsibility of Buyer and
shall be considered to be Assumed Liabilities which are described in Section
2.3.1. For purposes of the immediately preceding sentence, the due date of a
federal universal service fund charge shall be the date by which payment of such
charge must be received by the Universal Service Administrative Company
("USAC"), or any successor thereto, in order to avoid late payment charges, as
per the statement of account from USAC. Notwithstanding the foregoing provisions
of this Section 10.4(b), (i) Sellers shall be responsible to pay and shall
indemnify Buyer for any billed federal universal service fund charge with
respect to the Business for every month reflected on such statement of account
that ends on
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or prior to the Closing Date and for the pro rata portion of any month during
which the Closing Date occurs; and (ii) Buyer shall be responsible to pay and
shall indemnify Sellers for any billed federal universal service contribution
liability assessed by USAC with respect to the Business for every month
reflected on such statement of account that ends after the Closing Date and for
the pro rata portion of any month during which the Closing Date occurs, it being
understood by Buyer that such assessments may be based on operations of the
Business prior to the Closing Date.
10.5 Cost Studies/Toll and Access Settlement Matters.
10.5.1 Prior to Closing. Sellers agree that, with respect to all
toll, access or other such revenues or expenses, settlements, pools, separations
studies, USF funds or similar activities, Sellers shall be responsible for (and
shall receive the benefit or suffer the burden of) any payment adjustments to
contributions, or receipt of funds resulting from any such activities that are
related to the operation of the Business or the ownership or operation of the
Acquired Assets on or prior to the Closing Date and as a result of this
transaction, and in accordance with FCC rules and regulations in effect at the
Closing Date. Specifically, this paragraph shall apply, but shall not be limited
to, any matters related to USAC, the National Exchange Carrier Association
("NECA") including the Universal Service Fund ("USF"), Long Term Support
("LTS"), Local Switching Support ("LSS"), Coalition for Affordable Local and
Long Distance Service ("CALLS") interstate access fund and Telecommunications
Relay Services funds established by the FCC.
10.5.2 From and After Closing.
(a) Upon Closing, Sellers shall direct all appropriate
Persons that all payments discussed in Section 10.5.1 that relate to the
operation of the Business after the Closing Date with respect to the Study
Area(s) comprising the Seller Exchanges shall be paid to Buyer. In the event any
such Person fails to make such payment to Buyer and pays Sellers, Sellers shall
immediately deliver such funds to Buyer.
(b) From and after Closing, the parties shall make all data
and other submissions required by FCC rules with respect to USF and other high
cost reimbursement programs. The parties shall cooperate and provide any data or
information related to the foregoing as may reasonably be requested by the other
party hereto.
10.6 Access to Books and Records.
10.6.1 Retention Period. After the Closing, Sellers shall retain all
Retained Books and Records for a period of three (3) years, except for Tax
returns and supporting documentation which shall be retained until sixty (60)
days after the expiration of the applicable statute of limitations, and Buyer
shall retain all Transferred Books and Records for a period of five (5) years.
10.6.2 Access. After the Closing, upon reasonable notice and subject
to the Non-Disclosure Agreement, the parties will give to the representatives,
employees, counsel and
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accountants of the other access, during normal business hours, to books and
records relating to the Business and the Acquired Assets, and will permit such
persons to examine and copy such records, in each case to the extent reasonably
requested by the other party in connection with Tax and financial reporting
matters (including appropriate portions of Tax Returns and related information,
but not attorney work product), audits, legal proceedings, governmental
investigations and other proper business purposes (including such financial
information and any receipts evidencing payment of Taxes as may be requested by
Sellers to substantiate any claim for Tax credits or refunds); provided,
however, that nothing contained herein shall obligate any party to take actions
that would unreasonably disrupt the normal course of its business or violate the
terms of any agreement to which it is a party or to which it or any of its
assets is subject. Sellers and Buyer will cooperate with each other in the
conduct of any Tax audit or similar proceedings involving or otherwise relating
to the Business (or the income therefrom or assets thereof) with respect to any
Tax, and each will execute and deliver such powers of attorney and other
documents as are necessary to carry out the intent of this Section 10.6.2.
10.7 Purchase Price Allocation.
(a) Within ninety (90) days after the Closing Date, Buyer shall
provide to Sellers a draft Purchase Price allocation (the "Purchase Price
Allocation"). Sellers shall propose to Buyer any changes in the draft Purchase
Price Allocation within 30 days of the receipt thereof. In the event that no
such changes are proposed in writing to Buyer within such time, Sellers shall be
deemed to have agreed to the Purchase Price Allocation. If any such changes are
proposed, Sellers and Buyer shall negotiate in good faith and shall use their
reasonable efforts to agree upon the final Purchase Price Allocation.
Notwithstanding the foregoing, if Sellers and Buyer cannot agree upon a Purchase
Price Allocation, Sellers and Buyer covenant and agree to file, and cause their
respective Affiliates to file, all Tax Returns consistent with each of Sellers'
and Buyer's good faith allocations, unless otherwise required by law. For
purposes of this subsection 10.7(a), the Purchase Price Allocation shall be done
in a manner consistent with section 1060 of the Code and the Treasury
regulations promulgated thereunder.
(b) If Sellers and Buyer reach an agreement on the Purchase Price
Allocation as provided above, Sellers and Buyer agree to act in accordance with
such Purchase Price Allocation for all purposes, including for purposes of any
Tax Return. Except as otherwise required by a Governmental Authority or by a
Taxing authority pursuant to a "determination" as defined in Section 1313(a) of
the Code (or any comparable provision of state, local or foreign law) or the
execution of an IRS Form 870-AD, Sellers and Buyer agree to report the
transactions contemplated by this Agreement in a manner consistent with such
Purchase Price Allocation, and agree not to take any position on any Tax Return
inconsistent therewith, and to conduct any audit, Tax proceeding or Tax
litigation relating thereto in a manner consistent with such Purchase Price
Allocation.
(c) The Purchase Price Allocation shall be adjusted if the Purchase
Price is adjusted under any provision of this Agreement.
10.8 Owned Real Property Transfers. Within ninety (90) days of the date of
this Agreement, Sellers shall deliver to Buyer copies of all existing title
insurance policies covering
59
the Owned Real Property. Thereafter, no later than sixty (60) days before the
estimated Closing Date, Sellers shall deliver (at their expense) to Buyer a
preliminary title binder (on a standard form) issued by a title insurance
company reasonably acceptable to Buyer, solely with respect to the Owned Real
Property included in the Acquired Assets and in which Sellers purport to own fee
title which (a) is presently used by either Seller as a central office facility,
(b) is requested by Buyer as a requirement of any financing for all or a
significant part of the Purchase Price or (c) such other Owned Real Property as
expressly set forth on Schedule 10.8. To the extent Buyer requests preliminary
title binders for Owned Real Property in addition to the Owned Real Property
identified in subparts (a) and (b) of the preceding sentence, then Sellers and
Buyer shall each bear fifty percent (50%) of the costs and expenses associated
therewith. Such title binders shall be reasonably satisfactory to counsel for
Buyer, subject to the standard exceptions set forth in the following sentence.
Such title binders shall reflect that, upon consummation of the sale
contemplated by this Agreement, Buyer will be vested with good, fee simple,
indefeasible and insurable title to such Owned Real Property, subject only to
Permitted Encumbrances. If a preliminary title binder indicates an exception
other than a Permitted Encumbrance, Sellers shall, at their expense, use their
commercially reasonable efforts to cause such exception to be removed on or
before the Closing Date. With respect to each parcel of Owned Real Property
covered by a preliminary title binder, the amount of title insurance provided by
Sellers shall be the fair market value of the property, which shall be
determined by Buyer at its sole cost and expense using commercially reasonable
methods of valuation, provided that all such valuations shall be consistent with
all allocations of the Purchase Price made hereunder or pursuant to this
Agreement. Sellers shall also deliver to Buyer (at Sellers' expense and on or
prior to the Closing Date) a certified current survey. By no later than
forty-five (45) days after the Closing Date, Sellers shall deliver to Buyer a
final title insurance policy paid for by Sellers covering the Owned Real
Property included in the preliminary title binder.
10.9 Transaction Taxes and Tax Refunds.
(a) Buyer shall bear and be responsible for paying any sales, use,
stamp, conveyance, transfer, documentary, registration, business and occupation
and other similar taxes (including related penalties additions to tax and
interest) imposed by any Governmental Authorities with respect to the transfer
of the Business and/or the Acquired Assets to Buyer (including the Owned Real
Property) ("Transaction Taxes"), regardless of whether the Governmental
Authority seeks to collect such taxes from Sellers or Buyer. Buyer shall also be
responsible for (i) administering the payment of such Transaction Taxes, (ii)
defending or pursuing any proceedings related thereto, and (iii) paying any
expenses related thereto. Sellers shall give prompt written notice to Buyer of
any proposed adjustment or assessment of any Transaction Taxes with respect to
the transaction, or of any examination of said transaction in a sales, use,
transfer or similar tax audit. In any proceedings, whether formal or informal,
Sellers shall permit Buyer to participate and control the defense of such
proceeding, and shall take all actions and execute all documents required to
allow such participation. Sellers shall not negotiate a settlement or compromise
of any Transaction Taxes without the written consent of Buyer, which consent
shall not be unreasonably withheld.
60
(b) Buyer shall cooperate with all reasonable requests made by
Sellers with respect to pursuing any Tax refund, including the filing of refund
claims and of amended Tax Returns.
10.10 Bulk Sales Laws. Sellers and Buyer waive compliance with applicable
Laws under any version of Article 6 of the Uniform Commercial Code adopted by
any state or any similar Law relating to the sale of inventory, equipment or
other assets in bulk in connection with the sale of the Acquired Assets.
10.11 Prepaid Non-Regulated Maintenance Agreements. Within thirty (30) days
following Closing, Sellers shall provide reasonably detailed supporting
documentation related to and pay to Buyer an amount equal to the pro rata
portion of all prepaid but unearned revenues from Sellers' customers for all
non-regulated maintenance agreements assumed by Buyer hereunder as of the
Closing Date.
10.12 Vehicle Registration. Buyer shall use its commercially reasonable
efforts to file promptly the appropriate vehicle title applications and
registrations to change the name of the titled owner on each vehicle title
certificate and change the motor vehicle registration (with respect to license
plate information) on each vehicle being transferred to Buyer from Seller
pursuant to this Agreement. Buyer shall remove and destroy Sellers' existing
license plates from all vehicles received upon the later of receipt of new
license plates or ninety (90) days following Closing.
10.13 CABS Accounts Receivable Transition. Sellers shall render their own
final bills for minutes, messages and other applicable charges billable through
CABS for periods prior to and including the Closing Date. Sellers shall be
responsible for collecting and settling any disputes associated with its final
CABS bills.
10.14 CBSS and SSB Billing and Accounts Receivable Transition. Buyer shall
purchase Sellers' CBSS Accounts Receivable and SSB Accounts Receivable and make
payment to Seller for those accounts in the manner described below.
10.14.1 Transfer of Records. Sellers shall transfer to Buyer, as soon
as reasonably available after Closing, all customer account records related to
CBSS and SSB as of the Closing Date. Following the Closing, Buyer will be
responsible for administering those records including the application of cash
receipts to customer accounts, whether related to services rendered before or
after the Closing, and submission of appropriate accounts to customary
collection treatment, including collection efforts by external collection
agents. Sellers will promptly forward to Buyer the customer payments and related
remittance documents received by Sellers with respect to such end-user customer
accounts after the Closing for processing by Buyer.
10.14.2 Settlement of Accounts Receivable. Within twenty (20) days
following the Closing, Sellers shall provide an accounting to Buyer of the CBSS
Accounts Receivable and SSB Accounts Receivable, the Customer Prepayments and
the resulting calculation of the CBSS Accounts Receivable Amount and SSB
Accounts Receivable Amount
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based on the CBSS Uncollectible Factor and the SSB Uncollectible Factor
respectively, which shall be summarized in an accounts receivable settlement
statement (the "Accounts Receivable Settlement Statement"). Within thirty (30)
days following the Closing, Buyer shall remit to Sellers an amount equal to
eighty percent (80%) of the aggregate of the CBSS Accounts Receivable Amount and
SSB Accounts Receivable Amount less the full amount of the Customer Prepayments.
Within sixty (60) days following the Closing, Buyer shall remit an additional
fifteen percent (15%) of the aggregate of the CBSS Accounts Receivable Amount
and SSB Accounts Receivable Amount and within ninety (90) days will remit the
final five percent (5%). In the event Sellers fail to deliver the Accounts
Receivable Settlement Statement within the time period set forth herein, Buyer
shall be entitled to delay its payment obligations pursuant to this Section
10.14 for the number of days equal to the period of Sellers' delay.
10.14.3 Updated Statements. Not later than ten (10) days prior to the
due dates for the payments referred to in Section 10.14.2 above, Sellers shall
provide Buyer with an updated Accounts Receivable Settlement Statement
reflecting any adjustments based upon non-sufficient funds checks, billing
adjustments or other facts that have become known after the original statement
that relate to pre-closing activity.
10.14.4 Resolution of Material Discrepancies. If at any time during
the ninety (90) day period following the Closing, Buyer or Sellers discover any
material discrepancy in the Accounts Receivable Settlement Statement, Sellers
and Buyer shall use commercially reasonable efforts to resolve any discrepancy
in a timely manner, and further agree to make payments related to any undisputed
amounts as set forth above.
10.14.5 Exclusive Remedies. The parties agree that the provisions of
this Section 10.14 set forth the sole and exclusive remedy for any claim
(whether such claim is framed in tort, contract or otherwise) regarding the CBSS
Accounts Receivable and SSB Accounts Receivable, and Buyer shall not be entitled
to seek indemnification pursuant to Article VII for a breach of any
representation, warranty, covenant or other agreement contained herein.
10.15 Environmental Remediation. Subject to the provisions of Section
2.3.2(e), in the event that any Owned Real Property, Leased Real Property and/or
Real Estate Interests transferred by Sellers to Buyer pursuant to this Agreement
requires remediation (including as the result of regulatory action by any
Governmental Authority), either as the result of a claim made by Buyer pursuant
to Section 7.2 or as the result of a Retained Liability, then Sellers shall
determine, in their discretion, the appropriate remedial activities (the
"Remediation Activities"), provided, that such Remediation Activities are in
compliance with any applicable Requirement of Law, and provided further, that
such Remediation Activities permit Buyer to use the affected property in a
manner consistent with Sellers' use of such property as of the date hereof.
Buyer shall provide Sellers and Sellers' agents such access to the affected
property as Sellers reasonably request to perform the Remediation Activities.
Buyer shall sign any and all documents that Sellers or their agents state are
reasonably necessary to carry out the Remediation Activities, provided that such
documents do not require Buyer to undertake additional obligations or
liabilities (other than those obligations or liabilities for which Sellers agree
to indemnify Buyer). Buyer shall not interfere with Sellers' Remediation
Activities or Sellers'
62
efforts to gain the approval of any Governmental Authority to perform such
Remediation Activities in accordance with this Agreement.
10.16 Customer Deposits. Within thirty (30) days after Closing, Sellers
shall transfer to Buyer the customer deposits together with any interest accrued
thereon (collectively, the "Customer Deposits") for the period ending on the
Closing Date, together with all of Sellers' rights and obligations to hold the
Customer Deposits of the Business. Buyer shall hold and disburse such Customer
Deposits so delivered to it as if it were Sellers.
ARTICLE XI
TERMINATION
11.1 Termination Rights. Anything herein or elsewhere notwithstanding,
this Agreement may be terminated, subject to the provisions of Section 11.2
below, at any time prior to the Closing Date only as follows:
(a) by mutual written consent of Sellers and Buyer;
(b) by Buyer if any of the conditions provided in Sections 6.1 and
6.3 of this Agreement have not been satisfied within twelve (12) months after
the date hereof and such conditions have not been waived by Buyer; provided,
however, such period shall be extended to eighteen (18) months solely with
respect to the FCC Consent and/or the Regulatory Approvals on terms in
accordance with the provisions of Section 6.3.2.
(c) by Sellers if any of the conditions provided in Sections 6.2 and
6.3 of this Agreement have not been satisfied within twelve (12) months after
the date hereof and such conditions have not been waived by Sellers; provided,
however, such period shall be extended to eighteen (18) months solely with
respect to the FCC Consent and/or the Regulatory Approvals on terms in
accordance with the provisions of Section 6.3.2.
(d) by Sellers (i) if any obligations of Buyer provided in Article 3
become incapable of being fulfilled in the reasonable judgment of Sellers, (ii)
upon Buyer's failure or inability to comply with the provisions of Section 5.2.3
or (iii) upon Sellers' receipt of the notice required by the last sentence of
Section 5.2.3 and Buyer's failure to obtain substitute Highly Confident Letters
within thirty (30) days thereafter;
(e) by Buyer or Sellers if any Governmental Authority (i) shall have
issued an order, decree or ruling or taken any other action permanently
restraining, enjoining or otherwise prohibiting the transactions contemplated by
this Agreement, and such order, decree, ruling or other action shall have become
final and nonappealable or (ii) shall have failed to issue by the date which is
eighteen (18) months after the date hereof, an order, decree or ruling or to
take any other action, as applicable, and such denial of a request to issue such
order, decree, ruling or take such other action shall have become final and
nonappealable, in the case of each of (i) and (ii) which is necessary to fulfill
the conditions set forth in Article VI.
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11.2 Good Faith Performance. No party shall be entitled to exercise any
right of termination pursuant to section 11.1 above if such party shall not have
performed diligently and in good faith the obligations required to be performed
by such party hereunder prior to the date of termination or whose failure to
comply with Section 5.3 has been the proximate cause of such action or inaction.
11.3 Effect of Termination.
11.3.1 Mutual Termination or Termination upon Governmental Order. If
this Agreement is terminated as a result of Section 11.1(a) or 11.1(e), this
Agreement shall be of no further force and effect and there shall be no further
liability hereunder (except the obligations under the Non-Disclosure Agreement
and the liability for breach of such obligations) on the part of any party or
their respective Affiliates, directors, officers, shareholders, agents or other
representatives. Upon such termination, Sellers shall within five (5) Business
Days deliver to Buyer either (a) the Deposit, together with interest at the
Applicable Rate as provided in Section 3.4.1, or (b) the Deposit L/C.
11.3.2 Termination by Buyer. If this Agreement is terminated by Buyer
pursuant to Section 11.1(b), this Agreement shall be of no further force and
effect and there shall be no further obligations or liability hereunder (except
the obligations under the Non-Disclosure Agreement and the liability for breach
of such obligations) on the part of any party or their respective Affiliates,
directors, officers, shareholders, agents or other representatives; provided,
however, that no such termination shall relieve Sellers of liability for any
claims, damages or losses suffered by Buyer as a result of the negligent or
willful failure of Sellers to perform any obligations required to be performed
by it hereunder on or prior to the date of termination.
11.3.3 Termination by Seller. If this Agreement is terminated by
Sellers pursuant to Section 11.1(c) or (d), this Agreement shall be of no
further force and effect, and except as provided in this Section 11.3.3, there
shall be no further obligations or liability hereunder (except the obligations
under the Non-Disclosure Agreement and the liability for breach of such
obligations) on the part of any party or their respective Affiliates, directors,
officers, shareholders, agents or other representatives; provided, however, that
no such termination shall relieve Buyer of liability for any claims, damages or
losses suffered by Sellers as a result of the negligent or willful failure of
Buyer to perform any obligations required to be performed by it hereunder on or
prior to the date of termination. Notwithstanding anything to the contrary in
Section 7.3, in the event of termination pursuant to Section 11.1(d), Sellers
shall be entitled to retain the Deposit as liquidated damages and as Sellers'
exclusive remedy.
11.3.4 Compliance with Non-Disclosure Agreement. Upon any termination
of the Agreement, each of the parties shall promptly comply with the obligations
of the Non-Disclosure Agreement regarding return or destruction of Evaluation
Material of the other party.
11.3.5 Survival. Notwithstanding anything to the contrary contained
herein, the provisions of this Section 11.3 and of Sections 12.1, 12.2, 12.3,
12.8, 12.11, 12.13 and 12.14, shall survive any termination of this Agreement.
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ARTICLE XII
MISCELLANEOUS
12.1 Notices. All notices and other communications required or permitted
hereunder shall be in writing and, unless otherwise provided in this Agreement,
will be deemed to have been given when delivered in person or dispatched by
electronic facsimile transfer (confirmed in writing by certified mail,
concurrently dispatched) or one business day after having been dispatched for
next-day delivery by a nationally recognized overnight courier service to the
appropriate party at the address specified below:
(a) If to Buyer, to:
CenturyTel, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
Attention: R. ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇.
With a copy to:
CenturyTel, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇
(b) If to Sellers, to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Group Vice President - Business Development
Verizon Domestic Telecom
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇/▇▇/ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Assistant General Counsel
Verizon Services Group
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
or to such other address or addresses as such party may from time to time
designate by like notice.
65
12.2 Information Releases. The parties shall consult with each other (and
allow the other party notice, and a reasonable time to comment) in preparing any
employee announcement, press release, public announcement, news media response
or other form of release of information concerning this Agreement or the
transactions contemplated hereby that is intended to provide such information to
the employees generally, news media or the public. No party shall issue or cause
the publication of any press release, public announcement or media response
without the prior written consent of the other parties; provided, however, that,
after allowing the other parties notice and a reasonable time to comment prior
to issuance, nothing herein will prohibit any party from making an employee
announcement, or issuing or causing publication of any press release, public
announcement or media response to the extent that such action is required by
applicable Law or the rules of any national stock exchange applicable to such
party or its Affiliates.
12.3 Expenses. Whether or not the transactions contemplated hereby are
consummated, and except as otherwise expressly provided herein, each party shall
pay any expenses (including attorneys' fees) incurred by it incidental to this
Agreement and in consummating the transactions provided for herein.
12.4 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
permitted assigns, but is not assignable or delegable by any party without the
prior written consent of the other parties, which may be withheld in such
party's sole discretion; provided, that any party may assign this Agreement to
an Affiliate of such party without the consent of the other parties.
12.5 Amendments. This Agreement may be amended or modified only by a
subsequent writing signed by authorized representatives of both parties.
12.6 Captions. The captions set forth in this Agreement are for convenience
only and shall not be considered as part of this Agreement, nor as in any way
limiting or amplifying the terms and provisions hereof.
12.7 Entire Agreement. This Agreement supersedes and revokes any prior
discussions and representations, other agreements, commitments, arrangements or
understandings of any sort whatsoever, whether written or oral, that may have
been made or entered into by the parties relating to the matters contemplated
hereby. This Agreement, the Non Disclosure Agreement and the Ancillary Documents
constitute the entire agreement by and between the parties with respect to the
subject matter hereof, and there are no representations, warranties, agreements,
commitments, arrangements or understandings except as expressly set forth herein
or therein.
12.8 Waiver. Except as otherwise expressly provided in this Agreement,
neither the failure nor any delay on the part of any party to exercise any
right, power or privilege hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise or waiver of any such right, power or privilege
preclude any other or further exercise thereof, or the exercise of any other
right, power or privilege available to each party at law or in equity.
66
12.9 Third Parties. Except as expressly provided herein, nothing contained
in this Agreement is intended to confer upon any Person, other than the parties
hereto and their successors and permitted assigns, any rights or remedies under
or by reason of this Agreement.
12.10 Counterparts. This Agreement may be executed in one or more
counterparts, any or all of which shall constitute one and the same instrument.
12.11 Governing Law. This Agreement and the Ancillary Agreements shall in
all respects be governed by and construed in accordance with the laws of the
state of New York (except that no effect shall be given to any conflicts of law
principles of the state of New York that would require the application of the
laws of any other jurisdiction). The parties irrevocably submit to the exclusive
jurisdiction of any New York State Court or any Federal Court located in the
borough of Manhattan in the city of New York for purposes of any suit, action or
other proceeding arising out of this Agreement, the Ancillary Agreements or any
transaction contemplated hereby or thereby. The parties agree that service of
process, summons or notice or document by U.S. registered mail to such party's
respective address set forth in Section 12.1 shall be effective service of
process for any action, suit or proceeding in New York with respect to any
matters to which it has submitted to jurisdiction as set forth above in the
immediately preceding sentence. THE PARTIES HERETO IRREVOCABLY AND
UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING
TO THIS AGREEMENT OR ANY OTHER AGREEMENT ENTERED INTO IN CONNECTION THEREWITH
AND FOR ANY COUNTERCLAIM WITH RESPECT THERETO. In the event of any breach of the
provisions of this Agreement or any other agreement entered into in connection
therewith, the non-breaching party shall be entitled to equitable relief,
including in the form of injunctions and orders for specific performance, where
the applicable legal standards for such relief in such courts are met, in
addition to all other remedies available to the non-breaching party with respect
thereto at law or in equity.
12.12 Further Assurances. From time to time after the Closing Date, as and
when requested by one of the parties, the other parties will use their
commercially reasonable efforts to execute and deliver, or cause to be executed
and delivered, all such documents and instruments as may be reasonably necessary
or appropriate, in the reasonable opinion of counsel for Sellers and Buyer, to
consummate and make effective the transactions contemplated by this Agreement.
12.13 Severability. If any provision of this Agreement is determined to be
invalid, illegal or unenforceable by any Governmental Authority, the remaining
provisions of this Agreement to the extent permitted by law shall remain in full
force and effect provided that the essential terms and conditions of this
Agreement for both parties remain valid, binding and enforceable and provided
that the essential terms and conditions of this Agreement for both parties
remain valid, binding and enforceable and provided that the economic and legal
substance of the transactions contemplated is not affected in any manner
materially adverse to any party. In the event of any such determination, the
parties agree to negotiate in good faith to modify this Agreement to fulfill as
closely as possible the original intents and purposes hereof. To the extent
permitted by Law, the parties hereby to the same extent waive any provision of
Law that renders any provision hereof prohibited or unenforceable in any
respect.
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12.14 Schedules; Exhibits. Each Schedule and Exhibit delivered pursuant to
the terms of this Agreement shall be in writing and shall constitute a part of
this Agreement, although schedules need not be attached to each copy of this
Agreement. The mere inclusion of an item in a Schedule as an exception to a
representation or warranty shall not be deemed an admission by Seller that such
item represents an exception or material fact, event or circumstance or that
such item is reasonably likely to constitute a Material Adverse Effect. Further,
any fact or item which is clearly disclosed on any Schedule to this Agreement or
in the Financial Statements in such a way as to make its relevance or
applicability to information called for by another Schedule or other Schedules
to this Agreement reasonably apparent shall be deemed to be disclosed on such
other Schedule or Schedules, as the case may be, notwithstanding the omission of
a reference or cross-reference thereto.
12.15 Knowledge Convention. As used herein, the phrase "knowledge of
Sellers" and similar phrases shall mean all matters actually known to the Group
Vice President-Business Development Domestic Telecom or the Assistant General
Counsel-Strategic Transactions, or actually known or that reasonably should have
been known based on facts actually known to the individuals holding each of the
following positions immediately prior to the date hereof -- the Director-Alabama
Operations, the Sr. Vice President-Engineering & Planning, and the Executive
Director-Corporate Books, Domestic Telecom, and all matters which were the
subject of written notice actually received by Sellers from any third party. The
phrase "knowledge of Buyer" and similar phrases shall mean all matters actually
known to the individuals holding each of the following positions immediately
prior to the date hereof -- the Executive Vice President and Chief Financial
Officer, the Vice President and Assistant General Counsel, and the Vice
President - Corporate Development, and all matters which were the subject of
written notice actually received by Buyer from any third party.
IN WITNESS WHEREOF, the parties, acting through their duly authorized
agents, have caused this Agreement to be duly executed and delivered as of the
date first above written.
VERIZON SOUTH INC.
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President-Finance &
Planning
By: /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Title: Secretary
68
CONTEL OF THE SOUTH, INC. D/B/A
VERIZON MID-STATES
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President-Finance
& Planning
By: /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
---------------------------
Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Title: Secretary
CENTURYTEL OF ALABAMA, L.L.C.
By: /s/ R. ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇.
---------------------------
Name: R. ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇.
Title: Executive Vice President
69
JOINDER
CenturyTel, Inc., a Louisiana corporation and parent of Buyer, hereby joins in
the execution and delivery of this Agreement for the following limited purposes:
the undersigned hereby (a) represents and warrants that it owns, directly or
indirectly, all of the outstanding membership interests of the Buyer and (b)
agrees to perform and to cause Buyer or any applicable Affiliate of Buyer to
perform, the obligations of Buyer contained in this Agreement and the Ancillary
Documents, including without limitation, those payment obligations set forth
herein.
CENTURYTEL, INC.
Date: October 22, 2001 By: /s/ R. ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇.
-------------------------
Name: R. ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇.
-------------------------
Title: Executive Vice President
-------------------------
70