Exhibit 2.1
EXECUTION - KENTUCKY
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ASSET PURCHASE AGREEMENT
Between
VERIZON SOUTH INC.
and
ALLTEL NEWCO NO. 1, INC.
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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 ................................................................ 15
2.3.1 Assumed Liabilities ............................................................. 15
2.3.2 Retained Liabilities ............................................................ 16
2.4 Regarding Consents ....................................................................... 17
2.5 The Closing .............................................................................. 17
2.6 Deliveries and Proceedings at Closing .................................................... 18
2.6.1 Deliveries by Seller ............................................................ 18
2.6.2 Deliveries by Buyer ............................................................. 18
ARTICLE III PURCHASE PRICE ........................................................................... 19
3.1 Purchase Price ........................................................................... 19
3.2 Closing Date Estimate .................................................................... 19
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 ................................................................ 21
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 ............................................................ 22
4.1.3 Litigation ...................................................................... 22
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 ................................... 23
4.1.7 Tangible Assets ................................................................. 23
4.1.8 Schedules of Telephone Plant and Material and Supply Inventory .................. 24
4.1.9 Material Contracts .............................................................. 24
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 ............................................................ 30
4.1.16 No Material Adverse Change ...................................................... 30
4.1.17 Joint Construction Projects ..................................................... 30
4.1.18 Brokers ......................................................................... 30
4.1.19 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. ..................................................................... 31
4.2.3 Validity of Contemplated Transactions ........................................... 31
4.2.4 Financial Capabilities .......................................................... 31
4.2.5 Brokers ......................................................................... 32
4.2.6 Financial Statements ............................................................ 32
4.2.7 Investigation; Acknowledgment ................................................... 32
4.2.8 No Other Representations and Warranties ......................................... 33
ARTICLE V COVENANTS AND AGREEMENTS PENDING CLOSING ................................................. 33
5.1 Agreement of Seller Pending the Closing .................................................. 33
5.1.1 Conduct of the Business in the Ordinary Course .................................. 33
5.1.2 Access .......................................................................... 35
5.1.3 Consents ........................................................................ 35
5.1.4 Debtholder Consents ............................................................. 35
5.1.5 Capital Expenditures ............................................................ 35
5.1.6 VADI Assets ..................................................................... 36
5.1.7 Release of Liens ................................................................ 36
5.1.8 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 ........................................................ 37
5.3 Covenants of Seller and Buyer ............................................................ 37
5.3.1 State Regulatory Approval ....................................................... 37
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
5.3.9 Cooperation ..................................................................... 39
5.3.10 Financial Statements ............................................................ 39
ARTICLE VI CONDITIONS PRECEDENT TO THE CLOSING ......................................................... 39
6.1 Conditions Precedent to Obligations of Buyer ............................................. 39
6.1.1 Representations and Warranties True as of Closing ............................... 39
6.1.2 Compliance with this Agreement .................................................. 39
6.1.3 Closing Certificate ............................................................. 40
6.1.4 Other Agreements ................................................................ 40
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6.1.5 No Material Adverse Effect ...................................................... 40
6.2 Conditions Precedent to Obligations of Seller ............................................ 40
6.2.1 Representations and Warranties True as of Closing ............................... 40
6.2.2 Compliance with this Agreement .................................................. 40
6.2.3 Closing Certificate ............................................................. 40
6.2.4 Purchase Price .................................................................. 40
6.2.5 Other Agreements ................................................................ 40
6.3 Conditions Precedent to the Obligations of Buyer and Seller .............................. 41
6.3.1 HSR Act Waiting Period .......................................................... 41
6.3.2 Required Consents ............................................................... 41
6.3.3 No Governmental Order ........................................................... 41
6.3.4 Assumption of Labor Contract Obligations ........................................ 41
ARTICLE VII INDEMNIFICATION .......................................................................... 41
7.1 Survival of Representations and Warranties ............................................... 41
7.1.1 Survival Period ................................................................. 41
7.1.2 Period for Claims ............................................................... 41
7.2 Indemnification .......................................................................... 42
7.2.1 Indemnification Obligation of Seller ............................................ 42
7.2.2 Indemnification Obligation of Buyer ............................................. 42
7.2.3 Definitions. .................................................................... 42
7.3 Limitation on Claims for Indemnifiable Losses ............................................ 43
7.3.1 Matters Known Prior to Closing .................................................. 43
7.3.2 Limitation of Liability ......................................................... 43
7.4 Defense of Claims ........................................................................ 44
7.4.1 Third Party Claims .............................................................. 44
7.4.2 Direct Claims ................................................................... 45
7.4.3 Subrogation ..................................................................... 45
7.5 No Indemnifiable Claims Resulting from Governmental Authority Action ..................... 45
7.6 Other Rights and Remedies ................................................................ 45
ARTICLE VIII EMPLOYEES AND EMPLOYEE MATTERS ........................................................... 46
8.1 Employment of Transferred Employees ...................................................... 46
8.1.1 Assumption of Labor Contract Obligations ........................................ 47
8.1.2 Assumption of Employment and Other Agreements ................................... 47
8.1.3 No Creation of Objection Rights ................................................. 47
8.1.4 Recognition of Transferred Employee Service ..................................... 47
8.1.5 Assumption of Obligation to Pay Bonuses ......................................... 47
8.1.6 No Duplicate Benefits ........................................................... 48
8.1.7 Affiliate Employees ............................................................. 48
8.2 Transferred Employee Benefit Matters ..................................................... 48
8.2.1 Defined Benefit Plans ........................................................... 48
8.2.2 Savings Plans ................................................................... 51
8.2.3 Welfare Plans ................................................................... 51
8.3 Severance Benefits ....................................................................... 53
8.4 Vacation Benefits ........................................................................ 53
8.5 Employee Rights .......................................................................... 53
8.6 Successors and Assigns ................................................................... 54
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ARTICLE IX CONTINUING BUSINESS RELATIONSHIPS ....................................................... 54
9.1 Transition Plan Support Agreement ....................................................... 54
9.2 Directory Publishing .................................................................... 54
9.2.1 Certain Directory Publishing Agreement Rights and Obligations .................. 54
9.2.2 Co-Bound Directories Acknowledgement ........................................... 55
ARTICLE X ADDITIONAL AGREEMENTS OF THE PARTIES .................................................... 55
10.1 Intellectual Property ................................................................... 55
10.1.1 No License ..................................................................... 55
10.1.2 Infringement ................................................................... 55
10.1.3 Trademark Phaseout ............................................................. 55
10.1.4 Third Party Software ........................................................... 57
10.2 Confidentiality ......................................................................... 57
10.3 Further Assurances ...................................................................... 57
10.4 Prorations. ............................................................................. 57
10.5 Cost Studies/Toll and Access Settlement Matters ......................................... 59
10.5.1 Prior to Closing ............................................................... 59
10.5.2 From and After Closing ......................................................... 59
10.6 Access to Books and Records ............................................................. 59
10.6.1 Retention Period ............................................................... 59
10.6.2 Access ......................................................................... 59
10.7 Purchase Price Allocation ............................................................... 60
10.8 Owned Real Property Transfers ........................................................... 60
10.9 Transaction Taxes and Tax Refunds ....................................................... 61
10.10 Bulk Sales Laws ......................................................................... 61
10.11 Prepaid Non-Regulated Maintenance Agreements ............................................ 62
10.12 Vehicle Registration .................................................................... 62
10.13 CABS Accounts Receivable Transition ..................................................... 62
10.14 CBSS and SSB Billing and Accounts Receivable Transition ................................. 62
10.14.1 Transfer of Records ............................................................ 62
10.14.2 Settlement of Accounts Receivable .............................................. 62
10.14.3 Updated Statements ............................................................. 63
10.14.4 Resolution of Material Discrepancies ........................................... 63
10.14.5 Exclusive Remedies ............................................................. 63
10.15 Environmental Remediation ............................................................... 63
10.16 Customer Deposits ....................................................................... 63
ARTICLE XI TERMINATION ............................................................................. 64
11.1 Termination Rights ...................................................................... 64
11.2 Good Faith Performance .................................................................. 64
11.3 Effect of Termination ................................................................... 65
11.3.1 Mutual Termination or Termination upon Governmental Order ...................... 65
11.3.2 Termination by Buyer ........................................................... 65
11.3.3 Termination by Seller .......................................................... 65
11.3.4 Compliance with Non-Disclosure Agreement ....................................... 65
11.3.5 Survival ....................................................................... 65
ARTICLE XII MISCELLANEOUS ........................................................................... 66
12.1 Notices ................................................................................. 66
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12.2 Information Releases ..................................................................... 67
12.3 Expenses ................................................................................. 67
12.4 Successors and Assigns ................................................................... 67
12.5 Amendments ............................................................................... 67
12.6 Captions ................................................................................. 67
12.7 Entire Agreement ......................................................................... 67
12.8 Waiver ................................................................................... 67
12.9 Third Parties ............................................................................ 68
12.10 Counterparts ............................................................................. 68
12.11 Governing Law ............................................................................ 68
12.12 Further Assurances ....................................................................... 68
12.13 Severability ............................................................................. 68
12.14 Schedules; Exhibits ...................................................................... 69
12.15 Knowledge Convention ..................................................................... 69
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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 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 4.1.17 Joint Construction Projects
Schedule 5.1.1(j) Benefit and Compensation Changes
Schedule 5.1.8 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 31,
2001, is entered into between ALLTEL NEWCO NO. 1, INC., a Delaware corporation
(together with its permitted successors and assigns, the "Buyer"), and VERIZON
SOUTH INC., a Virginia corporation ("Seller").
RECITALS
WHEREAS, Seller has been authorized by the Kentucky 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 Kentucky as set forth on Exhibit A attached hereto (the "Seller
Exchanges"); and
WHEREAS, Seller is 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; customer premise equipment sales and service; access and intraLATA toll
services presubscribed to Seller; 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 Seller, is referred to
herein as the "Business"); and
WHEREAS, Seller desires to sell, assign and transfer to Buyer, and
Buyer desires to purchase and accept from Seller, 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.
"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.
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"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 Seller or a Seller
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 Seller 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.
"▇▇▇▇/GTE Merger" means that transaction consummated June 30, 2000
pursuant to the Merger Agreement, dated July 27, 1998, between GTE Corporation
and ▇▇▇▇ Atlantic Corporation.
"▇▇▇▇ 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 Seller and
its 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
5.1.5.
"CBSS" means the Customer Billing Support System operated by Seller and
its 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 Seller's provision
of service on or before the Closing Date that have been billed, or are billable,
through Seller's 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 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.
"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 five percent (5%).
"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.
3
"Closing Date Payment" has the meaning set forth in Section 3.2.
"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 Seller 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 Seller 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 (i) billing and collection agreements,
interconnection agreements, National Account Agreements, billing media
agreements, vehicle leasing agreements and (ii) 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 Seller or an Affiliate of Seller, or licensed to
Seller or an Affiliate of Seller 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 Seller 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,
5
department, authority or instrumentality exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government.
"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.
"Joint Construction Projects" has the meaning set forth in Section
2.3.1(d).
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"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.
"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 Seller 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
Seller, and Third Party Intellectual Property licensed to Seller or a Seller
Affiliate which Seller 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).
7
"National Account Agreement" means a national service agreement
pursuant to which Seller 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.
"Non-Disclosure Agreement" means that certain Non-Disclosure Agreement
between Buyer and Verizon dated as of April 5, 2001.
"Non-Regulated Construction Work in Process" means equipment procured
and construction work performed in relation to non-tariffed activities
undertaken by Seller 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 Seller 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 Seller.
"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).
8
"Publisher" has the meaning set forth in Section 9.2.1.
"Publishing Agreement" means the Publishing Agreement between Buyer and
Publisher 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 Seller 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 Seller and its Affiliates, the general ledger, all records
required by Law to be retained by Seller 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
5.3.10.
"Seller Consents" has the meaning set forth in Section 4.1.4.
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"Seller Exchanges" has the meaning set forth in the Recitals hereto.
"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).
"Seller's Actuary" has the meaning set forth in Section 8.2.1(d)(ii).
"SSB" means the Separate Subsidiary Billing System operated by Seller
and its 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 one and one-half percent (1.5%).
"Switch Software" means that portion of Third Party Intellectual
Property which is telephone switch software licensed to Seller which software is
necessary to Seller's 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.
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"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, 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 Seller's performance of its obligations set forth in
Section 5.1.7, 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 Seller or Seller's Affiliates. Without limiting the generality
of the foregoing, Telephone Plant includes the assets owned by Seller 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 Seller, without regard as to whether Seller has 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 Seller's customer or
subscriber lists and records, accounts and billing records, continuing property
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 E 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.
(c) References to Seller contained herein with
reference to the past or current ownership or operation of the Acquired Assets
or the Business shall be deemed to include (i) predecessors in interest which
are or were an Affiliate of Seller and (ii) any Affiliate of Seller which owns
or holds an interest in any Acquired Asset.
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, Seller shall sell, grant, convey,
transfer, assign and deliver to Buyer and Buyer shall purchase and receive all
right, title and interest of Seller 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;
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(d) FCC Licenses and Assigned Permits;
(e) Assigned Contracts of Seller and any Seller
Affiliate including, without limitation, those Contracts set forth in Schedule
2.1.1(e);
(f) Transferred Books and Records, subject to
Seller's right to retain copies thereof;
(g) all Owned Real Property and all Leased Real
Property created by leases of real property under which 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 Seller 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 Seller's fulfillment of the obligations set
forth in Section 5.1.6, 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 Seller or its Affiliates (collectively, the "Excluded Assets"):
(a) all cash, cash equivalents and marketable
securities and bonds;
(b) all rights which accrue or will accrue to Seller
and its Affiliates under this Agreement, the Ancillary Documents and the
certificates and other documents delivered to Seller 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;
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(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 Seller) and internet access service or internet related services (to
the extent provided by Verizon Affiliates other than Seller 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
Seller and its 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 Seller and its Affiliates in rendering services to Seller
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 Seller or its 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. Seller shall
transfer the Acquired Assets to Buyer at the Closing in exchange and in
consideration for the payment by Buyer to Seller 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.
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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:
(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 Seller and
a third party for the construction of shared transmission facilities between
various switching points included in the Seller Exchanges, all of which are set
forth on Schedule 4.1.17 as of the date hereof (the "Joint Construction
Projects");
(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 Seller as judicially determined by
a final order of a court or Governmental Authority of competent jurisdiction; or
(ii) conduct by Seller 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 Seller's
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
15
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 Seller as judicially determined by a final order of a court or
Governmental Authority of competent jurisdiction, or (ii) conduct by Seller that
was not reasonably prudent based on then-prevailing circumstances, ("Retained
Interim Capital Expenditure Obligations"); and, provided further, that Seller's
reliance on a reasonable interpretation of existing Law or practice shall be
deemed reasonably prudent. Seller shall notify 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. Seller shall retain and shall
pay, perform and discharge when due, the following liabilities, responsibilities
and obligations of 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 Seller that relate to the operation of the Business on or prior
to the Closing Date;
(b) all long-term debt of Seller (including
indebtedness to the Lienholders) and debt of Seller 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 Seller or its 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;
16
(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 Seller); provided, however,
Seller shall have no liability for claims by third parties which have not been
asserted within five (5) years after the Closing Date;
(f) all liabilities, responsibilities and obligations
with respect to the Excluded Assets and Excluded Contracts; and
(g) all liabilities, responsibilities and obligations
arising out of or relating to conditions, restrictions or requirements imposed
by the Commission on the Seller or its Affiliates related to Louisville,
Kentucky in connection with the approval of the ▇▇▇▇/GTE Merger.
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, Seller, 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 each other, 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 Seller
and Buyer, Seller 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 Seller's 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
17
(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:
2.6.1 Deliveries by Seller. Seller shall deliver (or cause
to be delivered) to Buyer:
(a) subject to Permitted Encumbrances, deeds in
recordable form under which Seller warrants title against all persons lawfully
claiming title by, through or under Seller for each parcel of Owned Real
Property to be conveyed hereunder, duly executed by Seller;
(b) the ▇▇▇▇ of Sale, Assignment and Assumption
Agreement, License Agreement and Publishing Agreement, duly executed by Seller
(or the appropriate Seller Affiliate);
(c) such other instruments and documents of
conveyance, assignment and transfer, duly executed by Seller and in a form
reasonably satisfactory to Buyer, as shall be necessary and effective to
transfer, convey and assign to Buyer all of Seller's right, title and interest
in and to the Acquired Assets, including without limitation, all of Seller's
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 Seller:
(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 Seller may reasonably
request.
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ARTICLE III
PURCHASE PRICE
3.1 Purchase Price. The purchase price for the Acquired Assets shall be
the sum of (a) One Billion Nine Hundred Seven Million Dollars ($1,907,000,000)
(the "Base Purchase Price"), plus (b) amounts expended by Seller 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, Seller shall deliver to Buyer a notice, setting forth
Seller's good faith estimate as of the Closing Date of (a) the Regulatory
Obligation Amount (the "Estimated Regulatory Obligation Amount"), (b) 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 Seller 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 Seller shall
designate to Buyer at least two (2) Business Days prior to the Closing Date.
Payments from Buyer to Seller for CBSS and SSB Accounts Receivable and from
Seller 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, Seller 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 Seller, describe in reasonable detail any proposed adjustments
to the Closing Date Statement and the reasons therefor. If Seller 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. 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
Seller's 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
19
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 Seller 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
Seller in inverse proportion to the relative amounts of the disputed amount
determined to be for the account of Buyer and Seller, 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 Seller the amount of such difference. If the
Purchase Price as determined above is less than the Closing Date Payment, Seller
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 Seller, 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 Seller.
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
Seller by wire transfer of immediately available funds the sum of One Hundred
Ninety Million Seven Hundred Thousand Dollars ($190,700,000), 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 Seller
against payment
20
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 Seller 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 Seller, (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 Seller. 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 Seller 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 furnished in accordance with the provisions of
this Section 3.4.2), Buyer shall deliver to Seller 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 Seller 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
Seller. Buyer acknowledges that Seller has 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, Seller shall draw down the full
amount of the Deposit L/C at the Closing to be credited against the Base
Purchase Price, and 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. Seller represents
and warrants to Buyer as follows:
4.1.1 Corporate Organization and Related Matters. Seller is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and is duly qualified to conduct
business in the state of Kentucky. Seller has the requisite power and authority
to own its properties and to carry on the Business as it is now being conducted.
Seller holds 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. Seller 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 Seller of this
Agreement and the Ancillary Documents executed or to be executed by Seller have
been duly authorized by all necessary corporate action on the part of Seller and
Verizon. This Agreement
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has been, and the Ancillary Documents when executed will be, duly executed and
delivered by Seller 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 Seller (or its Affiliate
named therein), enforceable against it (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, Seller in its conduct of the Business has complied since January 1, 1997
in all material respects with, and is 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 or, to the Knowledge of Seller, threatened
against the Seller, 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
Seller to consummate the transactions contemplated hereby. Seller is not a party
to nor is it 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 Seller 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 Seller 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 Seller, (b) any
existing Requirement of Law to which Seller 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) any Material Contract or Real Estate Lease, or give any party with rights
thereunder the right to terminate, modify, accelerate or otherwise change the
existing rights or obligations of Seller thereunder.
4.1.5 Title to Owned Real Property.
(a) Seller has good, valid and marketable title
to all of the 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). Seller represents that the only lienholders (other than Permitted
Encumbrances) on any of the Owned Real Property are the Lienholders
22
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 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 Seller under any of the Real Property
Leases.
(b) To the knowledge of Seller, 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, Seller has, 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, Seller has 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, SELLER MAKES
NO REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, AS TO THE CONDITION OR
FITNESS OF THE TANGIBLE ACQUIRED ASSETS AND HEREBY DISCLAIMS ANY WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR WARRANTY AGAINST
INFRINGEMENT.
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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 Seller 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:
(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
Seller 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 Seller, 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 Seller or Seller's
Affiliates, as applicable, against any other party thereto in accordance with
its terms, except to the extent that such enforcement may be limited by
24
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 Seller nor any of its
Affiliates that is a party to a Material Contract is, and to the Knowledge of
Seller, 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 Seller
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 its 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.
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 Seller's 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) Seller has 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) Seller has 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) Seller is not a
"foreign person" within the meaning of Section 1445(b)(2) of the Code; (e) all
Tax returns required to be filed by Seller 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 Seller 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 Seller 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 Seller's Knowledge, any threatened cancellation or
termination in connection therewith, nor is Seller 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
25
approved by the Commission or any Governmental Authority having jurisdiction
thereof. Seller is not in material default under the terms and conditions of any
such tariff and there is no basis for any claim of default by Seller 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 Seller 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 Seller's
opinion, would reasonably be expected to have a Material Adverse Effect. To the
Knowledge of Seller, 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 Seller 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
Seller's 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 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 Seller or complaints or
petitions by others or proceedings pending or threatened before the FCC relating
to the Business or the FCC Licenses that, in Seller's 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
Seller or its Affiliates in respect of or for the benefit of any employee who,
upon the Closing, will be a Transferred Employee or former employee of Seller,
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 Seller 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 Seller and
its Affiliates and any employee who, upon the Closing, will be a Transferred
Employee (the "Employment Agreements"), and (ii) each collective bargaining
agreement between Seller and its Affiliates and collective bargaining
representatives for those employees who, upon the Closing, will be Transferred
Employees (the
26
"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 Seller and the performance of this Agreement by
Seller 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 its 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 Seller 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 Seller (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).
27
(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), Seller has not made or incurred, and the transactions
contemplated by this Agreement will not result in Seller 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 Seller.
(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)
Seller is 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 Seller, during the twelve (12) months preceding
the date of this Agreement, there have not been any union organizational
campaigns by or directed at employees who, upon the Closing, will be Transferred
Employees.
(f) Seller 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 Seller, 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 Seller 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
Seller and (ii) are currently in full force and effect. The Seller is in
compliance with all Environmental Permits required pursuant to any Environmental
Law for operation of the Business.
(b) Seller is 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 Seller, 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 Seller,
threatened against the Seller or the Business
28
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 Seller, in the operation of the Business, has 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 Material at, to or from any facility
of Seller's Business or any real property upon which any current facility of the
Seller 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.(S)1251 et seq. (33 U.S.C.(S)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.(S)6901 et seq. (42 U.S.C.(S) 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.(S)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.(S)
6901 et seq. (42 U.S.C.(S)6991); or (viii) otherwise regulated under the Toxic
Substances Control Act, 15 U.S.C.(S) 2601 et seq., the Clean Air Act, as
amended, 42 U.S.C.(S)7401, et seq., the Hazardous Materials Transportation Act,
as amended, 49 U.S.C.(S)1801, et seq., or the Federal Insecticide, Fungicide and
Rodenticide Act, as amended, 7 U.S.C.(S)136, et seq.
29
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 Seller. 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 Seller,
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, Seller has 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.
(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 Seller's systems and, to
the Knowledge of Seller, 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 Joint Construction Projects. Schedule 4.1.17 sets forth a list of
all Joint Construction Projects as of the date hereof for which Buyer is to
assume liability after the Closing.
4.1.18 Brokers. Seller 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 Buyer for any broker's or finder's fees
or similar fees or expenses.
4.1.19 No Other Representations and Warranties. Except for the
representations and warranties contained in this Agreement, neither Seller 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.
4.2 Representations and Warranties of Buyer. Buyer represents and warrants
to Seller as follows:
4.2.1 Corporate Organization and Related Matters. Buyer is a
corporation duly organized, validly existing and in good standing under the laws
of Delaware. Buyer has the requisite corporate power and authority to own, lease
or otherwise hold the assets owned, leased
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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.
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. Buyer shall be entitled, upon written consent of Seller, which consent
shall not be unreasonably withheld, to deliver to Seller replacement highly
confident letters identifying alternative financing sources and/or forms of
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financing, which replacement highly confident letters shall become the Highly
Confident Letters upon Seller's approval. Such alternative highly confident
letters shall be from comparable sources to those contained in the Highly
Confident Letters attached hereto, and reasonably acceptable to Seller.
(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 Seller 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 Seller (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 Seller, 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 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 Seller 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 its Affiliates nor any other Person makes any other
express or implied representation or warranty with respect to the Seller, the
Business, the Acquired Assets or otherwise or with respect to any other
information provided to Buyer, whether on behalf of Seller 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 Seller 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
32
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 Seller, 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
Seller 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 Seller 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. Seller shall
conduct the Business in the ordinary course except as expressly contemplated by
this Agreement or the Ancillary Agreements or as required by applicable laws,
regulations, orders or decrees. Without limiting the generality of the
foregoing, Seller shall:
(a) keep available to the Business those services of Seller's
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 Seller's 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;
33
(e) maintain the material insurance policies with respect to the
Acquired Assets consistent with past practice; provided that the parties
acknowledge that Seller 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 5.1.5 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 encumber, or make any
contract for the sale, lease, encumbrance, or disposition of any material
Acquired Asset, nor permit the imposition of any Lien on the Acquired Assets
other than Permitted Encumbrances, and 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 (i) as required by Law, (ii)
pursuant to any Contract to which Seller is a party existing on the date hereof,
(iii) in the ordinary course of business of Seller 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 Seller 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 Seller 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;
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(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 Seller
as "unpaid final" consistent with past practice.
5.1.2 Access. Prior to the Closing, Seller 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 Seller 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. Seller shall use its 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 Seller in obtaining the Seller Consents.
5.1.4 Debtholder Consents. Seller shall use its 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 termination or release being hereinafter
referred to as the "Debtholder Consents"). Buyer agrees to cooperate in good
faith with Seller in obtaining the required Debtholder Consents.
5.1.5 Capital Expenditures. Seller 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
Eighty-nine Million Dollars ($89,000,000) during calendar year 2001, and not
less than Sixty-nine Million Dollars ($69,000,000) 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 Seller's actual 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 Seller 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
35
date of this Agreement and the Closing Date, Seller will notify Buyer of any
project involving Non-Regulated Construction Work in Process in excess of
$50,000.
5.1.6 VADI Assets. Prior to the Closing, Seller shall cause VADI
to contribute to Seller 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 5.1.6 or to constitute a
breach of any provision of this Agreement, including without limitation Section
5.1.1.
5.1.7 Release of Liens. On or prior to the Closing, Seller shall
cause to be satisfied and released those Liens identified in Part 1 of Schedule
4.1.7, such that Seller transfers 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.
5.1.8 Interim Reports. Until the Closing or termination of this
Agreement, Seller shall deliver to Buyer certain information regarding the
operations of the Business and the condition of the Acquired Assets. Seller
agrees to deliver the information set forth on Schedule 5.1.8 at the time
intervals specified in such schedule, and such other information as Buyer
reasonably requests, provided, however, that unless set forth on Schedule 5.1.8,
Seller shall not be obligated to provide any information to Buyer which is not
customarily provide by Seller 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 Seller by obligated to provide quarterly
reports prior to Verizon's earnings announcement for such quarter. All
information provided in accordance with this Section 5.1.8 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
Seller:
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 Seller or its Affiliates prior to the Closing. Prior to
the Closing, Seller 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 Seller, which shall not be unreasonably withheld, contact any
employee, customer or supplier of Seller 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 and provided, further
nothing in this Agreement shall prohibit Buyer from contacting any employees or
customers as provided in the Transition Plan Support Agreement.
36
5.2.3 Highly Confident Letters. On a quarterly basis, from the
date hereof until Closing, Buyer shall provide updated Highly Confident Letters
in form and substance satisfactory to Seller in its 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 Seller upon the
termination or modification of any Highly Confident Letter provided to Seller
either pursuant to Section 4.2.4 or this Section 5.2.3.
5.3 Covenants of Seller and Buyer. Seller and Buyer further covenant
and agree that, except as otherwise agreed to in writing by Seller 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
Seller shall use commercially 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 Seller 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 Seller 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 Seller 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 Seller 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
37
transactions contemplated by this Agreement. Buyer agrees to pay all application
fees required in connection with any filings under the HSR Act.
(b) Seller 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. Seller 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 Seller's or Buyer's negotiating objectives or strategies or
purchase price expectations.
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 Seller shall (and shall use commercially reasonable efforts to cause
its applicable Affiliate to) execute and deliver to the counter-party the
Transition Plan Support Agreement, 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 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"), Seller and Buyer agree that
until Closing and for a period of ninety (90) days after the Closing Date, each
of Seller 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 Seller 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.
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5.3.9 Cooperation. The parties shall cooperate with each other
and use commercially reasonable efforts to cause all of the conditions to the
obligations of the parties under this Agreement to be satisfied on or prior to
the Closing Date.
5.3.10 Financial Statements. To the extent Buyer requires at any
time prior to the Closing and for a period of forty-five (45) days thereafter,
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 as a
condition to financing required by Buyer to complete the transaction
contemplated by this Agreement (the "SEC Basis Financial Statements"), Seller
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. Seller's
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 and delivery of one or more representation
letters from Seller to such auditors as may be reasonably required by such
auditors to perform an audit in accordance with generally accepted auditing
standards or a review in accordance with AICPA standards and to render an
opinion acceptable to the SEC with respect to the audit or review of the SEC
Basis Financial Statements, it being understood that such representation letters
shall acknowledge (i) Seller's use of estimates and allocations in the
preparation of the SEC Basis Financial Statements, and (ii) Seller's belief that
the SEC Basis Financial Statements represent the financial conditions and
results of operations of the Business, and that such estimates and allocations
were made on a reasonable basis. Buyer will bear the cost of preparation of the
SEC Basis Financial Statements and any audit.
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 Seller 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.
6.1.2 Compliance with this Agreement. Seller 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 Seller
prior to or at the Closing, except to the extent that the
39
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 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. Seller and/or its applicable Affiliate
shall have tendered an executed ▇▇▇▇ of Sale, Assignment and Assumption
Agreement and the License Agreement substantially in the forms attached hereto;
together with those agreements set forth on Schedule 5.3.5.
6.1.5 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.
6.2 Conditions Precedent to Obligations of Seller. The obligations
of Seller 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 Seller:
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 Seller.
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 Seller.
6.2.3 Closing Certificate. Seller 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 Seller, 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 and the License Agreement
substantially in the forms attached hereto, together with those agreements set
forth on Schedule 5.3.5.
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6.3 Conditions Precedent to the Obligations of Buyer and Seller. All
obligations of Buyer and Seller 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 5.1.7, 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 Seller or its Affiliates or result in the waiver of rights
asserted by any of the foregoing that would reasonably be likely to be
materially adverse to Seller or its Affiliates in the reasonable judgment of
Seller. 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.
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 Closing
Date, and provided, further, that the representations and warranties contained
in Sections 4.1.1, 4.1.18, 4.1.19, 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)
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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 that it is based upon a Direct Claim made prior
to the expiration of the survival period for such representation or warranty,
then only 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 Seller. From and after the
Closing, and subject to the other provisions of this Article VII, Seller 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 Seller of any covenant
of Seller contained in this Agreement, which covenant requires performance by
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 Seller and its 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.
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;
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(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 Seller on or before the Closing Date.
7.3.2 Limitation of Liability. Notwithstanding anything to the
contrary contained herein:
(a) Seller 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 Seller
shall be liable for all such Included Claims in excess of the Seller Threshold.
The aggregate liability of Seller 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) Regardless of whether the Closing occurs, in no event
shall either party hereto be liable 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 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) Seller 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.
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(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 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.
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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 (provided
that any failure to give such notice will not waive any rights of the Indemnitee
except to the extent the rights of the Indemnitor are actually prejudiced
thereby), 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 Seller's 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 Seller as judicially determined by a final
order of a court or Governmental Authority of competent jurisdiction; or (ii)
conduct by Seller that was not reasonably prudent based on then-prevailing
circumstances and, provided further that Seller's reliance on a reasonable
interpretation of existing Law or practice shall be deemed reasonably prudent.
7.6 Other Rights and Remedies. Following the Closing, the sole and
exclusive remedy at law for Seller 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 Seller or Buyer for indemnification pursuant to this Article VII.
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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 Seller or its 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, Seller and its Affiliates shall
follow their usual and ordinary course of business in accordance with past
practice. An Active Employee who terminates employment with Seller 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, an updated Schedule 8.1 shall be provided to Buyer once every ninety
(90) days after the date hereof, or as reasonably requested by Buyer, and 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 Seller or an
Affiliate of Seller 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 Seller and its 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 Seller on the basis of a standard workweek and
taking into account all employees of Seller and its 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,
Seller shall be responsible for providing such coverage. Notwithstanding the
foregoing, individuals who would otherwise be considered "Active Employees" but
who are designated by Seller as "Retained Employees" on 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 Seller 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
46
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. Seller 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,
Seller and its 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 Seller
of the representations or covenants contained in Sections 4.1.9, 4.1.13 or 5.1.1
hereof, Buyer, as successor employer to Seller, shall assume all obligations
under and be bound by the provisions of each offer of employment by Seller and
its Affiliates relating to the Business, each Employment Agreement or any other
agreement by Seller or any of its Affiliates relating to conditions of
employment, Intellectual Property, employment separation, severance, or employee
benefits in connection with the Business; provided, however, Seller and its
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
Seller's 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 Seller and its 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, practices, or agreements of Seller or any of its
Affiliates after the Closing Date. Seller shall retain or assume the obligation
to pay to the Transferred Employees bonuses with respect to the calendar year in
which the Closing occurs on a pro rata basis for the portion of the calendar
year prior to the Closing Date, such bonuses to be paid in the ordinary course.
Buyer shall not assume any obligation to pay any bonuses to the Transferred
Employees with respect to services
47
provided prior to the Closing Date. In determining any bonuses payable to the
Transferred Employees for services rendered on and after the Closing Date, Buyer
shall comply with the provisions of Section 8.1 requiring Buyer to provide
substantially comparable total compensation to each Transferred Employee.
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 Seller, 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 Seller. Seller and its 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 Seller 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 Seller and its 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 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")
48
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 Seller with a written certification, in a form acceptable to
Seller, 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, Seller 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) Seller 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 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
Seller 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
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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) Seller shall appoint an actuary
("Seller's 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 Seller's Actuary. Within
thirty (30) days after the date Seller informs Buyer of the amount of the
Pension Assets, Seller's Actuary shall provide Buyer's Actuary with a computer
file containing all the employee data used by Seller's Actuary to calculate the
Pension Assets. If Buyer's Actuary is unable to agree with Seller's Actuary on
the amount of the transfer within sixty (60) days after Seller informs Buyer of
the amount to be transferred, Seller and Buyer shall jointly select a third
actuary, whose determination shall be binding on Seller and Buyer. Each of
Seller 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 Seller 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, Seller 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 Seller (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 Seller 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 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.
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(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, Seller 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) Seller, 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, Seller
participates 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) Seller 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 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 Non-Union Welfare Plans shall
provide benefits that are at least as favorable as the welfare benefits
applicable to similarly situated employees of
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Buyer. 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 employee welfare
benefit plans maintained by Seller on the Closing Date (the "Seller Welfare
Plans"). As soon as practicable after the Closing Date, Seller 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 Seller 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), Seller 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 Seller 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 Seller for the cost of the retiree medical,
health and life coverage for which Seller is responsible and that Seller
actually provides pursuant to this subsection (b)(ii). For each year for which
Buyer is required to reimburse Seller under this subsection (b)(ii), Buyer shall
pay Seller annually in arrears, within thirty (30) days after Seller provides 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
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) Seller, 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
52
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 Seller or its 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, Seller 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
Seller and its 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 Seller or any plan or
policy it maintains. Seller 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. Seller
and its Affiliates shall have no liability to Transferred Employees for the
vacation payments described the immediately preceding sentence. Seller 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.
8.5 Employee Rights. Nothing herein expressed or implied shall confer
upon any employee of Seller or its 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
53
(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
Seller or its 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.
9.2 Directory Publishing.
9.2.1 Certain Directory Publishing Agreement Rights and
Obligations. Seller is 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 in the form attached hereto as Exhibit D (the "Publishing
Agreement"). Such Publishing Agreement shall
54
provide Buyer with a fifty-two percent (52%) revenue share in print directory
advertising for 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 cycles 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 Seller's 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 Seller acknowledge and agree
that, except and to the extent expressly set forth in writing in the License
Agreement and in Section 10.1.3, Seller has not granted any rights or licenses,
express or implied, and nothing shall constitute or be construed as a license or
other right by Seller under any Intellectual Property now or hereafter owned,
obtained or licensable by Seller or under any Third Party Intellectual Property.
10.1.2 Infringement.
(a) Notwithstanding anything in this Agreement
to the contrary, Seller 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 Seller and its Affiliates from and against any and all Indemnifiable
Losses resulting from any obligation, proceeding or suit based upon any claim
alleging or asserting direct or contributory infringement, or misuse or
misappropriation of, or inducement to infringe by Seller or any of its
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 Seller or
its Affiliates are the legal and beneficial owners of Excluded Marks that
qualify as Excluded Assets under Section
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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 Seller and its 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 Seller and its 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
Seller, 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 Seller 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 Seller.
(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 License Agreement and
that the same shall not reflect adversely upon the good name of Seller or its
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 Seller and
its 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, Seller and its 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.
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(e) Neither Buyer nor its Affiliates shall contest the
ownership or validity of any rights of Seller or its Affiliates in the Excluded
Marks.
10.1.4 Third Party Software. To the extent that the transfer of
Acquired Assets by Seller 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
Seller 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"), Seller agrees 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, Seller agrees 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
Seller has the right or obtains 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 Seller 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.
Seller makes 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, Seller shall use its commercially reasonable efforts to
furnish to Buyer such other 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 Seller 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
57
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 Seller 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 Seller 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 Seller shall pay or be reimbursed for real, personal and other
periodic property taxes (including instances in which such 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 Seller 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 Seller and Buyer.
(b) Notwithstanding the foregoing provisions of
Section 10.4(a), Seller 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) Seller 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 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 Seller 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.
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10.5 Cost Studies/Toll and Access Settlement Matters.
10.5.1 Prior to Closing. Seller agrees that, with respect to
all toll, access or other such revenues or expenses, settlements, pools,
separations studies, USF funds or similar activities, Seller 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, Seller 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 Seller, Seller 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, Seller 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 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 Seller to substantiate any claim for Tax credits or
refunds); provided, however, that nothing contained herein shall obligate any
party
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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. Seller 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 Seller a draft Purchase Price allocation (the
"Purchase Price Allocation"). Seller 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,
Seller shall be deemed to have agreed to the Purchase Price Allocation. If any
such changes are proposed, Seller 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 Seller and Buyer cannot agree upon
a Purchase Price Allocation, Seller and Buyer covenant and agree to file, and
cause their respective Affiliates to file, all Tax Returns consistent with each
of Seller's 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 Seller and Buyer reach an agreement on
the Purchase Price Allocation as provided above, Seller 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, Seller 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, Seller shall deliver to Buyer copies of all existing title
insurance policies covering the Owned Real Property. Thereafter, no later than
sixty (60) days before the estimated Closing Date, Seller shall deliver (at its
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 Seller
purports to own fee title which (a) is presently used by 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
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identified in subparts (a), (b) and (c) of the preceding sentence, then Seller
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, Seller shall, at its expense, use its
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
Seller 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.
Seller shall also deliver to Buyer (at Seller's 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, Seller shall deliver to Buyer a final title insurance
policy paid for by Seller covering the Owned Real Property included in the
preliminary title binder and providing coverage consistent with the foregoing
provisions.
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 Seller 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. Seller 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, Seller 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. Seller shall not negotiate a settlement or
compromise of any Transaction Taxes without the written consent of Buyer, which
consent shall not be unreasonably withheld.
(b) Buyer shall cooperate with all reasonable requests made by
Seller with respect to pursuing any Tax refund, including the filing of refund
claims and of amended Tax Returns.
10.10 Bulk Sales Laws. Seller 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.
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10.11 Prepaid Non-Regulated Maintenance Agreements. Within thirty (30) days
following Closing, Seller 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 Seller's customers included in
the Business 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 Seller's 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. Seller shall render its own
final bills for minutes, messages and other applicable charges billable through
CABS for periods prior to and including the Closing Date. Seller 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 Seller's 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. Seller 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. Seller will promptly forward to Buyer the customer payments and related
remittance documents received by Seller 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, Seller 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 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
Seller 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
Seller fails to deliver the Accounts Receivable Settlement Statement within the
time
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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 Seller's 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, Seller 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 Seller discovers any
material discrepancy in the Accounts Receivable Settlement Statement, Seller 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 Seller 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 Seller shall
determine, in its 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 Seller's use of such property as of the date hereof, and
do not unreasonably interfere with Buyer's continued use thereof. Buyer shall
provide Seller and Seller's agents such access to the affected property as
Seller reasonably requests to perform the Remediation Activities. Buyer shall
sign any and all documents that Seller or its 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 Seller agrees to indemnify
Buyer). Buyer shall not interfere with Seller's Remediation Activities or
Seller's 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, Seller
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 Seller's 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 Seller.
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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 Seller 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 Seller 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 Seller;
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 Seller (i) if any obligations of Buyer provided in Article
3 become incapable of being fulfilled in the reasonable judgment of Seller, (ii)
upon Buyer's failure or inability to comply with the provisions of Section 5.2.3
or (iii) upon Seller's 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 Seller 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.
11.2 Good Faith Performance. Neither 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.
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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 either party or
their respective Affiliates, directors, officers, shareholders, agents or other
representatives. Upon such termination, Seller 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 either party or their respective
Affiliates, directors, officers, shareholders, agents or other representatives;
provided, however, that no such termination shall relieve Seller of liability
for any claims, damages or losses suffered by Buyer as a result of the negligent
or willful failure of Seller to perform any obligations required to be performed
by it hereunder on or prior to the date of termination. Upon such termination,
Seller 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.
11.3.3 Termination by Seller. If this Agreement is terminated by
Seller 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 either 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 Seller 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), Seller shall be
entitled to retain the Deposit as liquidated damages and as Seller's 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:
ALLTEL Corporation
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No: ▇▇▇-▇▇▇-▇▇▇▇
Attention: President
With a copy to:
ALLTEL Corporation
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
Attention: General Counsel
(b) If to Seller, 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.
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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. Neither party
shall issue or cause the publication of any press release, public announcement
or media response without the prior written consent of the other party;
provided, however, that, after allowing the other party notice and a reasonable
time to comment prior to issuance, nothing herein will prohibit either 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 party, which may be withheld in its sole
discretion; provided, that either party may assign this Agreement to an
Affiliate of such party without the consent of the other.
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.
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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 party will use its
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 Seller 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
Seller" 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-Kentucky 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 Seller 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 - President and Chief Operating
Officer, Group President-Communications, Executive Vice President-External
Affairs, General Counsel and Secretary, and Senior Vice President-Chief
Financial Officer, and all matters which were the subject of written notice
actually received by Buyer from any third party.
THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.
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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
ALLTEL NEWCO NO. 1, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
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Name: ▇▇▇▇▇ ▇. ▇▇▇▇
Title: President
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JOINDER
ALLTEL Corporation, a Delaware 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 shares 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.
ALLTEL CORPORATION
Date: October 31, 2001 By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
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Name: ▇▇▇▇▇ ▇. ▇▇▇▇
Title: President and Chief Operating
Officer
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