AGREEMENT
AND PLAN OF MERGER
THIS
AGREEMENT AND PLAN OF MERGER, dated as of May 13, 2009 (this “
Agreement
”), is by
and among VERIZON COMMUNICATIONS INC., a Delaware corporation (“
Verizon
”), NEW
COMMUNICATIONS HOLDINGS INC., a Delaware corporation (“
Spinco
”), and
FRONTIER COMMUNICATIONS CORPORATION, a Delaware corporation (the “
Company
”).
WHEREAS,
Spinco is a newly formed, wholly-owned, direct Subsidiary of
Verizon;
WHEREAS,
on or prior to the Distribution Date (as such term, and each other capitalized
term used herein and not defined, is defined in Article I hereof), and
subject to the terms and conditions set forth in the Distribution Agreement
entered into by and between Verizon and Spinco on the date hereof (the “
Distribution
Agreement
”), GTE Corporation, a New York corporation (“
GTE
”), which is a
majority-owned, direct Subsidiary of Verizon, will cause the formation of New
Communications ILEC Holdings Inc. (“
ILEC Spinco
Holdings
”), which will be a wholly-owned direct Subsidiary of
GTE;
WHEREAS,
on or prior to the Distribution Date, Verizon and GTE
will transfer or cause
to be transferred to ILEC Spinco Holdings certain Spinco Assets (including all
of the capital stock of the ILEC Spinco Subsidiaries) and Spinco Liabilities in
the manner set forth in the Distribution Agreement and will distribute all of
the capital stock of ILEC Spinco Holdings to Verizon (such transfers and the
distribution, the “
Internal Spinoff
”,
and, together with any other internal distribution of stock made by the Verizon
Group and any transfer of Spinco Assets and Spinco Liabilities made to the ILEC
Spinco Subsidiaries in connection with the transactions contemplated by this
Agreement and the Distribution Agreement, the “
Internal
Spinoffs
”);
WHEREAS,
on or prior to the Distribution Date, certain Subsidiaries of Verizon will
transfer to Verizon or GTE, as the case may be, via intercompany distributions
or sales or otherwise, certain Spinco Assets and Spinco Liabilities in the
manner set forth in the Distribution Agreement (the “
Internal
Restructuring
”);
WHEREAS,
on or prior to the Distribution Date, Spinco will distribute to Verizon the
Spinco Securities and pay to Verizon the Special Payment, all of which will
occur in exchange for Verizon transferring to Spinco all of the capital stock of
ILEC Spinco Holdings and certain other Spinco Assets and Spinco Liabilities
relating to the non-ILEC portion of the Spinco Business in the manner set forth
in the Distribution Agreement (the transactions described in this recital,
collectively, the “
Contribution
”);
WHEREAS,
upon the terms and subject to the conditions set forth in the Distribution
Agreement, on the Distribution Date, Verizon will distribute all of the issued
and outstanding shares of Spinco Common Stock to the Distribution Agent for the
benefit of the holders of the outstanding Verizon Common Stock (the “
Distribution
”);
WHEREAS,
at the Effective Time and immediately after the Distribution, the parties will
effect the merger of Spinco with and into the Company, with the Company
continuing as the surviving corporation, all upon the terms and subject to the
conditions set forth herein;
WHEREAS,
the Board of Directors of the Company has (
i
) determined
that the Merger and this Agreement are advisable, fair to, and in the best
interests of, the Company and its stockholders and has approved this Agreement
and the transactions contemplated hereby, including the Merger, and the issuance
of shares of Company Common Stock pursuant to the Merger, and (
ii
) recommended
the adoption by the stockholders of the Company of this Agreement;
WHEREAS,
the Board of Directors of Spinco has (
i
) determined
that the Merger and this Agreement are advisable, fair to, and in the best
interests of, Spinco and its sole stockholder, Verizon, and has approved this
Agreement and the Distribution Agreement and the transactions contemplated
hereby and thereby, including the Contribution, the Distribution and the Merger,
and (
ii
) recommended
the adoption by Verizon, as the sole stockholder of Spinco, of this
Agreement;
WHEREAS,
the Board of Directors of Verizon has approved this Agreement and the
Distribution Agreement and the transactions contemplated hereby and thereby,
including the Internal Spinoffs, the Internal Restructuring, the Contribution,
the Distribution and the Merger;
WHEREAS,
the parties to this Agreement intend that (
i
) each
Internal Spinoff qualify
as a distribution eligible for nonrecognition under Sections 355(a), 355(c)
and/or 361(c) of the Code, as applicable; (
ii
) the
Contribution, together with the Distribution, qualify as a tax-free
reorganization under Section 368(a)(1)(D) of the Code, (
iii
) the Distribution
qualify as a distribution of Spinco stock to Verizon stockholders eligible for
nonrecognition under Sections 355(a) and 361(c) of the Code, (
iv
) no gain or loss
be recognized by Verizon for federal income tax purposes in connection with the
receipt of the Spinco Securities (as defined herein) or the consummation of the
Debt Exchange (as defined herein), (
v
) the Special
Payment qualify as money transferred to creditors or distributed to shareholders
in connection with the reorganization within the meaning of Section 361(b)(1) of
the Code, to the extent that Verizon distributes the Special Payment to its
creditors and/or shareholders in connection with the Contribution, (
vi
) the Merger
qualify as a tax-free reorganization pursuant to Section 368 of the Code, and
(
vii
) no gain
or loss be recognized as a result of such transactions for federal income tax
purposes by any of Verizon, Spinco, and their respective stockholders and
Subsidiaries (except to the extent of cash received in lieu of fractional
shares); and
WHEREAS,
the parties to this Agreement intend that, except as set forth in
Section 2.3 of the Distribution Agreement, throughout the internal
restructurings taken in contemplation of this Agreement, including the Internal
Spinoffs, the Internal Restructurings, the Contribution and the Distribution,
and throughout the Merger, the Spinco Business Employees shall maintain
uninterrupted continuity of employment, compensation and benefits, and also for
union represented employees, uninterrupted continuity of coverage under their
collective bargaining agreements, in each case as contemplated by and provided
in the Employee Matters Agreement.
NOW,
THEREFORE, in consideration of these premises, the representations, warranties,
covenants and agreements set forth in this Agreement, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties, intending to be legally bound hereby, agree as
follows:
DEFINITIONS
1.1 “
Action
” has the
meaning set forth in Section 7.12(c).
1.2 “
Additional Company SEC
Documents
” has the meaning set forth in Section 6.4(b).
1.3 “
Affiliate
” means a
Person that, directly or indirectly, through one or more intermediaries,
controls or is controlled by, or is under common control with, a specified
Person. The term “control” (including, with correlative meanings, the
terms “controlled by” and “under common control with”), as applied to any
Person, means the possession, direct or indirect, of the power to direct or
cause the direction of the management and policies of such Person, whether
through the ownership of voting securities or other ownership interest, by
contract or otherwise;
provided
,
however
, that for
purposes of this Agreement, (
i
) from and
after the Distribution Date, no member of either Group shall be deemed an
Affiliate of any member of the other Group and (
ii
) none of Cellco
Partnership or any of its Subsidiaries shall be deemed Affiliates or
Subsidiaries of Verizon.
1.4 “
Aggregate Merger
Consideration
” has the meaning set forth in
Section 3.1(a).
1.5 “
Agreement
” has the
meaning set forth in the Preamble hereto.
1.6 “
Approved for Listing
”
means, with respect to the shares of Company Common Stock to be issued pursuant
to the Merger, that such shares have been approved for listing on the NYSE,
subject to official notice of issuance.
1.7 “
Assets
” has the
meaning set forth in the Distribution Agreement.
1.8 “
Back Office Support Services
Agreement
” has the meaning set forth in Section 7.22.
1.9 “
Blended Customer
Contracts
” has the meaning set forth in the Distribution
Agreement.
1.10 “
Business Day
” means a
day, other than Saturday, Sunday or other day on which commercial banks in New
York, New York are authorized or required by applicable Law to
close.
1.11 “
CALEA
” has the
meaning set forth in Section 5.19(b).
1.12 “
Certificate of
Merger
” has the meaning set forth in Section 2.3.
1.13 “
Change of Board
Recommendation
” has the meaning set forth in
Section 7.4(b).
1.14 “
Closing
” has the
meaning set forth in Section 2.2.
1.15 “
Closing Date
” has the
meaning set forth in Section 2.2.
1.16 “
Closing Statement
”
has the meaning set forth in Section 3.1(a).
1.17 “
Code
” means the
Internal Revenue Code of 1986, as amended from time to time.
1.18 “
Communications Act
”
means the Communications Act of 1934, as amended.
1.19 “
Company
” has the
meaning set forth in the Preamble hereto.
1.20 “
Company Acquisition
”
means, in each case other than the Merger or as otherwise specifically
contemplated by this Agreement, (
i
) any merger,
consolidation, share exchange, business combination, recapitalization or other
similar transaction or series of related transactions involving the Company or
any of its Significant Subsidiaries; (
ii
) any direct
or indirect purchase or sale, lease, exchange, transfer or other disposition of
the consolidated assets (including stock of the Company Subsidiaries) of the
Company and the Company Subsidiaries, taken as a whole, constituting 15% or more
of the total consolidated assets of the Company and the Company Subsidiaries,
taken as a whole, or accounting for 15% or more of the total consolidated
revenues of the Company and the Company Subsidiaries, taken as a whole, in any
one transaction or in a series of transactions; (
iii
) any direct
or indirect purchase or sale of or tender offer, exchange offer or any similar
transaction or series of related transactions engaged in by any Person following
which any Person (including any “group” as defined in Section 13(d)(3) of
the Exchange Act) owns 15% or more of the outstanding shares of Company Common
Stock; or (
iv
) any other
substantially similar transaction or series of related transactions that would
reasonably be expected to prevent or materially impair or delay the consummation
of the transactions contemplated by this Agreement or the other Transaction
Agreements.
1.21 “
Company Acquisition
Proposal
” means any proposal regarding a Company
Acquisition.
1.22 “
Company Approvals
”
has the meaning set forth in Section 6.3(d).
1.23 “
Company Average
Price
” means the average of the volume weighted averages of the trading
prices of the Company Common Stock, as such prices are reported on the NYSE
Composite Transactions Tape (as reported by Bloomberg Financial Markets or such
other source as the parties shall agree in writing), for the 30 consecutive
trading days ending on the third trading day immediately preceding the Effective
Time;
provided
,
however
, that
(x) if an ex-dividend date is set for the Company Common Stock during this
30-day period, then the trading price for a share of Company Common Stock for
each day during the portion of such period that precedes such ex-dividend date
shall be reduced by the amount of the dividend payable on a share of Company
Common Stock, (y) if such average of the volume weighted averages of the trading
prices of the Company Common Stock exceeds $8.50, then the Company Average Price
shall equal $8.50 and (z) if such average of the volume weighted averages of the
trading prices of the Company Common Stock is less than $7.00, then the Company
Average Price shall equal $7.00.
1.24 “
Company Benefit
Agreements
” has the meaning set forth in
Section 6.12(a).
1.25 “
Company Benefit
Plans
” has the meaning set forth in Section 6.12(a).
1.26 “
Company Board
Recommendation
” has the meaning set forth in Section 7.4(b).
1.27 “
Company Common Stock
”
means the common stock, par value $0.25 per share, of the Company.
1.28 “
Company Credit
Agreements
” means (i) the Credit Agreement, dated as of March 10, 2008,
among the Company, CoBank, ACB, as the administrative agent, the lead arranger
and a lender, and the other lenders party thereto, (ii) the Credit Agreement,
dated as of May 18, 2007, among the Company, the lenders party thereto and
Deutsche Bank AG New York Branch, as the administrative agent, (iii) the Credit
Agreement, dated as of December 6, 2006, among the Company, CoBank, ACB, as the
administrative agent, the lead arranger and a lender, and the other lenders
party thereto and (iv) the Loan Agreement, dated as of October 24, 2001, by and
between the Company and Rural Telephone Finance Cooperative, as amended, in each
case as such agreement may be amended, supplemented or otherwise modified from
time to time.
1.29 “
Company Disclosure
Letter
” has the meaning set forth in the first paragraph of
Article VI.
1.30 “
Company Employee
” has
the meaning set forth in Section 6.12(a).
1.31 “
Company Financial
Statements
” has the meaning set forth in
Section 6.4(a)(i).
1.32 “
Company Licenses
” has
the meaning set forth in Section 6.15(a).
1.33 “
Company Material
Contracts
” has the meaning set forth in
Section 6.16(a).
1.34 “
Company Owned Real
Property
” means all real property owned by the Company or the Company
Subsidiaries.
1.35 “
Company Registration
Statement
” means the registration statement on Form S-4, including the
Proxy Statement/Prospectus forming a part thereof, to be filed by the Company
with the SEC to effect the registration under the Securities Act of the issuance
of the shares of Company Common Stock into which shares of Spinco Common Stock
will be converted pursuant to the Merger (as amended and supplemented from time
to time).
1.36 “
Company SEC
Documents
” has the meaning set forth in
Section 6.4(a)(iv).
1.37 “
Company Stockholders
Meeting
” has the meaning set forth in Section 7.4(a).
1.38 “
Company Subsidiaries
”
means all direct and indirect Subsidiaries of the Company;
provided
,
however
, that none of
Mohave Cellular Limited Partnership and its Subsidiaries shall be deemed
Subsidiaries of the Company.
1.39 “
Company Superior
Proposal
” has the meaning set forth in Section 7.11(b).
1.40 “
Company Tax Counsel
”
means Cravath, Swaine & Moore LLP or any other nationally recognized law
firm reasonably acceptable to Verizon.
1.41 “
Company Third Party
Intellectual Property
” means any and all Intellectual Property Rights
owned by any Person other than the Company or any of its Subsidiaries that is
used or held for use in the conduct of the business of the Company.
1.42 “
Company Voting Debt
”
has the meaning set forth in Section 6.2(b).
1.43 “
Company’s Knowledge
”
has the meaning set forth in Section 11.13.
1.44 “
Confidentiality
Agreement
” means the March 19, 2009 Nondisclosure Agreement between
Verizon and the Company.
1.45 “
Contract
” or “
agreement
” means any
loan or credit agreement, note, bond, indenture, mortgage, deed of trust, lease,
sublease, franchise, permit, authorization, license, contract (including
collective bargaining agreements, side letters, memoranda of agreement or
understanding or any agreement of any kind), instrument, employee benefit plan
or other binding commitment, obligation or arrangement, whether written or oral,
but excluding any franchise, permit, authorization or license constituting a
Company License or a Spinco License.
1.46 “
Contributing
Companies
” has the meaning set forth in the Distribution
Agreement.
1.47 “
Contribution
” has the
meaning set forth in the fifth recital hereto.
1.48 “
Controlling Person
”
has the meaning set forth in Section 10.2(a).
1.49 “
Customer Data
” means
all customer information obtained in connection with the Spinco Business, in the
form and content existing as of the Closing, related to the provisioning of
products and services by Spinco or Spinco Subsidiaries in the Territory included
in the Spinco Business to current and future customers in the Territory,
including name, postal address, email address, telephone number, date of birth,
account data, transaction data, demographic data, customer service data, and
correspondence, together with any documents and information containing the
foregoing; provided, however, the foregoing shall not include (i) any of the
foregoing to the extent it is in the possession of Licensor or any U.S.
Affiliate and was collected or used other than in connection with the operation
of the Spinco Business, (ii) any information included in yellow or white pages
listings or directories, in any form, (iii) any information required to be
retained by Licensor and/or its Affiliates to comply with applicable law or
regulation, (iv) any information publicly available, and (v) any information
received by Licensor or its Affiliates from third parties.
1.50 “
Cutover Plan Support
Agreement
” has the meaning set forth in the Distribution
Agreement.
1.51 “
Debt Exchange
” has
the meaning set forth in the Distribution Agreement.
1.52 “
DGCL
” means the
General Corporation Law of the State of Delaware.
1.53 “
Direct Claim
” has the
meaning set forth in Section 10.4(b).
1.54 “
Directories
” has the
meaning set forth in Section 7.23.
1.55 “
Directories
Agreements
” has the meaning set forth in Section 7.23.
1.56 “
Disclosure Letters
”
means, collectively, the Verizon Disclosure Letter, the Spinco Disclosure Letter
and the Company Disclosure Letter.
1.57 “
Distribution
” has the
meaning set forth in the recitals hereto.
1.58 “
Distribution
Agreement
” has the meaning set forth in the recitals hereto.
1.59 “
Distribution Date
”
means the date that the Distribution becomes effective.
1.60 “
Distribution Date Spinco
Indebtedness
” means the aggregate amount of Indebtedness, other than (i)
any Indebtedness incurred to make the Special Payment and any Indebtedness
represented by the Spinco Securities and (ii) any accrued and unpaid interest on
any Indebtedness, in each case of Spinco and its Subsidiaries as of the opening
of business on the Distribution Date, calculated pro forma for the
Contribution.
1.61 “
Distribution Fund
”
has the meaning set forth in Section 3.2(a).
1.62 “
Distribution Tax
Opinion
” means a written opinion of Verizon Tax Counsel, addressed to
Verizon and Spinco and dated as of the Distribution Date, in form and substance
reasonably satisfactory to Verizon and (solely with respect to issues (i) as to
whether Spinco recognizes gain or loss or (ii) for which the Company or Spinco
may be liable under the Transaction Agreements) the Company, to the effect that
(
i
) each of the
Internal Spinoffs will qualify as a distribution eligible for nonrecognition
under Sections 355(a), 355(c) and/or 361(c) of the Code, as applicable, (
ii
) the
Distribution will qualify as a distribution of Spinco stock to the stockholders
of Verizon eligible for nonrecognition under Sections 355(a) and 361(c) of the
Code, pursuant to which no gain or loss will be recognized for federal income
tax purposes by any of Verizon, Spinco or the stockholders of Verizon, except as
to cash received in lieu of fractional shares by the stockholders of Verizon,
and (
iii
)
neither Verizon nor any member of the Verizon Group will recognize gain or loss
for federal income tax purposes in connection with the receipt of the Spinco
Securities or the consummation of the Debt Exchange.
1.63 “
Distribution Tax
Representations
” has the meaning set forth in
Section 7.9(c).
1.64 “
Distribution/Merger Transfer
Taxes
” means (i) any sales, use, transfer, registration, recording,
stamp, value added or other similar taxes or fees arising out of or attributable
to the Internal Spinoffs, the Contribution, the Distribution, the Debt Exchange
or the Internal Restructuring and (ii) any sales, use, transfer,
registration, recording, stamp, value added or similar taxes or fees arising out
of or attributable to the Merger.
1.65 “
Effective Time
” has
the meaning set forth in Section 2.3.
1.66 “
Employee Matters
Agreement
” means the Employee Matters Agreement entered into among
Verizon, Spinco and the Company, dated as of the date hereof, as it may be
amended from time to time.
1.67 “
End Date
” has the
meaning set forth in Section 91(b).
1.68 “
Environmental Claim
”
means administrative or judicial actions, suits, orders, liens, notices,
violations or proceedings related to any applicable Environmental Law or
Environmental Permit brought, issued or asserted by a Governmental Authority or
any third party for compliance, damages, penalties, removal, response, remedial
or other action pursuant to any applicable Environmental Law or resulting from
the release of a Hazardous Material.
1.69 “
Environmental Law
”
means any Law now in effect relating to the environment or Hazardous Materials,
including the Comprehensive Environmental Response Compensation and Liability
Act, 42 U.S.C. §6901
et
seq.
; the Resource Conservation and Recovery Act, 42 U.S.C. §6901
et seq.
; the Federal Water
Pollution Control Act, 33 U.S.C. §1251
et seq.
; the Toxic Substances
Control Act, 15 U.S.C. §2601
et seq
.; the Clean Air Act,
42 U.S.C. §7401
et
seq.
; the Safe Drinking Water Act, 42 U.S.C. §3803
et seq.
; the Oil Pollution
Act of 1990, 33 U.S.C. §2701
et seq.
; the Emergency
Planning and the Community Right-to-Know Act of 1986, 42 U.S.C. §1101
et seq.
; the Hazardous
Material Transportation Act, 49 U.S.C. §1801
et seq.
; and any state or
local counterparts or equivalents, in each case as amended from time to
time.
1.70 “
Environmental
Permits
” means all permits, licenses, approvals, authorizations or
consents required by or issued 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.
1.71 “
ERISA
” means the
Employee Retirement Income Security Act of 1974, as amended.
1.72 “
ERISA Affiliate
”
means, with respect to any Person, any other Person or any trade or business,
whether or not incorporated, that, together with such first Person, would be
deemed a “single employer” within the meaning of section 4001(b) of
ERISA.
1.73 “
Excess Shares
” has
the meaning set forth in Section 3.3(b).
1.74 “
Exchange Act
” means
the Securities Exchange Act of 1934, as amended, together with the rules and
regulations of the SEC promulgated thereunder.
1.75 “
FCC
” means the
Federal Communications Commission.
1.76 “
FCC Applications
” has
the meaning set forth in Section 7.6(b).
1.77 “
FCC Rules
” has the
meaning set forth in Section 4.2(c).
1.78 “
Financial Market
Deferral
” has the meaning set forth in Section 7.18(b).
1.79 “
FiOS
” has the meaning
set forth in the Distribution Agreement.
1.80 “
FiOS Intellectual Property
Agreement
” has the meaning set forth in the Distribution
Agreement.
1.81 “
FiOS Software License
Agreement
” has the meaning set forth in the Distribution
Agreement.
1.82 “
FiOS Trademark License
Agreement
” has the meaning set forth in the Distribution
Agreement.
1.83 “
Fort Wayne Data
Center
” has the meaning set forth in Section 7.24(c).
1.84 “
Fully Diluted Number of
Shares
” means as of any date, the aggregate number of shares of Company
Common Stock outstanding on such date (including any shares of restricted stock)
assuming: (
i
) the prior
exercise of all options and similar rights to purchase Company Common Stock;
(
ii
) the
prior conversion into, or exchange for, shares of Company Common Stock of all
then issued and outstanding securities which are convertible into, or
exchangeable for, shares of Company Common Stock; and (
iii
) the prior
exercise of any similar subscription or other rights to acquire, or to cause the
Company to issue, shares of Company Common Stock;
provided
,
however
, that
notwithstanding the foregoing, “Fully Diluted Number of Shares” shall not prior
to the occurrence of a Triggering Event (as defined in the Rights Plan) include
shares of Company Common Stock issuable in connection with any exercise of
rights to purchase Company Common Stock under the Rights Plan.
1.85 “
GAAP
” means United
States generally accepted accounting principles.
1.86 “
Governmental
Authority
” means any foreign, federal, state or local court,
administrative agency, official board, bureau, governmental or
quasi-governmental entities having competent jurisdiction over Verizon, Spinco
or the Company, any of their respective Subsidiaries and any other tribunal or
commission or other governmental department, authority or instrumentality or any
subdivision, agency, mediator, commission or authority of competent
jurisdiction.
1.87 “
Governmental Customer
Contract
” means any Contract to which a federal, state, county or
municipal government, or any agency of any of the same, is party and pursuant to
which the government or agency is the recipient of products or
services.
1.88 “
Group
” means the
Verizon Group or the Spinco Group, as the case may be.
1.89 “
GTE
” has the meaning
set forth in the recitals hereto.
1.90 “
Hazardous Material
”
means (
a
)
substances that are defined or listed in, or otherwise classified pursuant to,
any applicable laws or regulations as “hazardous substances,” “hazardous
materials,” “hazardous wastes,” “toxic substances,” “pollutants,”
“contaminants,” or any other similar term that defines, lists, or classifies a
substance by reason of such substance’s ignitability, corrosivity, reactivity,
carcinogenicity, reproductive toxicity, “EP toxicity” or adverse effect on human
health or the environment, (
b
) oil, petroleum, or
petroleum-derived substances, natural gas, natural gas liquids, synthetic gas,
drilling fluids, produced waters, and other wastes associated with the
exploration, development, or production of crude oil, natural gas, or geothermal
resources, (
c
)
any radioactive materials, (
d
) polychlorinated
biphenyls, and (
e
) infectious
waste.
1.91 “
HSR Act
” means the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules
and regulations promulgated thereunder.
1.92 “
Identified Persons
”
has the meaning set forth in Section 7.12(a).
1.93 “
Identified Persons
Releasors
” has the meaning set forth in
Section 7.12(b).
1.94 “
ILEC
” has the meaning
set forth in the Distribution Agreement.
1.95 “
ILEC Spinco Holdings
”
has the meaning set forth in the recitals hereto.
1.96 “
ILEC Spinco
Subsidiaries
” has the meaning set forth in the Distribution
Agreement.
1.97 “
Indebtedness
” means
all indebtedness for borrowed money, including the aggregate principal amount
thereof, and any accrued interest thereon.
1.98 “
Indemnification
Payment
” means any amount of Losses required to be paid pursuant to this
Agreement.
1.99 “
Indemnitee
” means any
Person entitled to indemnification under this Agreement.
1.100 “
Indemnitor
” means any
person or entity required to provide indemnification under this
Agreement.
1.101 “
Intellectual Property
Agreement
” means the Intellectual Property Agreement to be entered into
among Licensor, Spinco and the Company, in the form attached to the Distribution
Agreement.
1.102 “
Intellectual Property
Rights
” means all United States and foreign issued and pending patents,
trademarks, service marks, slogans, logos, trade names, service names, Internet
domain names, trade styles, trade dress and other indicia of origin, and all
goodwill associated with any of the foregoing, copyrights, copyrightable works,
trade secrets, know-how, processes, methods, designs, computer programs, plans,
specifications, data, inventions (whether or not patentable or reduced to
practice), improvements, confidential, business and other information and all
intangible property, proprietary rights and other intellectual property, and all
registrations, applications and renewals (including divisionals, continuations,
continuations-in-part, reissues, renewals, registrations, re-examinations and
extensions) for, and tangible embodiments of, and all rights with respect to,
any of the foregoing.
1.103 “
Internal
Restructuring
” has the meaning set forth in the recitals
hereto.
1.104 “
Internal Spinoff
” and
“
Internal
Spinoffs
” have the meaning set forth in the recitals hereto.
1.105 “
IRS
” means the United
States Internal Revenue Service or any successor agency thereto, including its
agents, representatives and attorneys.
1.106 “
IRS Ruling
” means a
private letter ruling from the IRS to the effect that (
i
) each
Internal Spinoff will
qualify as a distribution eligible for nonrecognition under Sections 355(a),
355(c) and/or 361(c) of the Code, as applicable; (
ii
) the Contribution,
together with the Distribution, will qualify as a tax-free reorganization under
Section 368(a)(1)(D) of the Code; (
iii
) the Distribution
will qualify as a distribution of Spinco stock to Verizon stockholders eligible
for nonrecognition under Sections 355(a) and 361(c) of the Code; (
iv
) neither Verizon
nor any member of the Verizon Group will recognize gain or loss for federal
income tax purposes in connection with the receipt of the Spinco Securities or
the consummation of the Debt Exchange; (
v
) the Special
Payment will qualify as money transferred to creditors or distributed to
shareholders in connection with the reorganization within the meaning of
Section 361(b)(1) of the Code, to the extent that Verizon distributes the
Special Payment to its creditors and/or shareholders in connection with the
transactions; and (
vi
) no gain or loss
will be recognized as a result of such transactions for federal income tax
purposes by any of Verizon, Spinco, and their respective stockholders and
Subsidiaries (except to the extent of cash received in lieu of fractional
shares).
1.107 “
IRS Submission
” has
the meaning set forth in Section 7.9(a).
1.108 “
Joint Defense
Agreement
” has the meaning set forth in Section 7.26.
1.109 “
Law
” means any
federal, state, local or foreign law (including common law), statute, code,
ordinance, rule, regulation, judgment, order, injunction, decree, arbitration
award, agency requirement, license or permit of any Governmental
Authority.
1.110 “
Leased Real Property
”
has the meaning set forth in the Distribution Agreement.
1.111 “
Leases
” means all
leases, subleases, licenses, concessions and other agreements (written or oral),
including all amendments, extensions, renewals, guaranties and other agreements
with respect thereto, pursuant to which any Person holds any Leased Real
Property.
1.112 “
Liabilities
” has the
meaning set forth in the Distribution Agreement.
1.113 “
Licensor
” means
Verizon Patent and Licensing Inc.
1.114 “
Liens
” means all
mortgages, deeds of trust, liens, security interests, pledges, capital leases,
conditional sale contracts, sale-and-leaseback transactions, charges,
hypothecations, assignments, easements, zoning restrictions, rights of way,
deposit arrangements, purchase options, rights of first refusal and other
encumbrances of every kind. For the avoidance of doubt, the license
of Intellectual Property Rights shall not itself constitute a Lien.
1.115 “
Losses
” means any
losses, liabilities, damages, deficiencies, costs and expenses (including
reasonable out-of-pocket attorneys’ fees and expenses and including the
reasonable costs and expenses of investigating and defending any indemnification
claim), including all Taxes resulting from indemnification payments hereunder,
(
1
) reduced by
the amount of insurance proceeds recovered from any Person with respect thereto
(after deducting related costs and expenses) and (
2
) 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.
1.116 “
Material Adverse
Effect
” means, with respect to any business or Person, any state of
facts, change, development, event, effect, condition or occurrence that,
individually or in the aggregate, has had or would reasonably be expected to
have a materially adverse effect on the business, assets, properties,
liabilities or condition (financial or otherwise) of such business or Person and
its Subsidiaries, as applicable, taken as a whole, or that, directly or
indirectly, prevents or materially impairs or delays the ability of such Person
to perform its obligations under this Agreement;
provided
,
however
, that
Material Adverse Effect shall not include facts, changes, developments, events,
effects, conditions or occurrences (
i
) (
A
) generally
affecting the rural, regional or nationwide wireline voice and data industry in
the United States, including access line loss, regulatory and political
developments and changes in Law or GAAP, or (
B
) generally
affecting the economy or financial markets in the United States or the states
where either Verizon operates the Spinco Business or the Company operates, (ii)
resulting from the taking of any action required by this Agreement or the other
Transaction Agreements in connection with the Merger; or (
iii
) resulting
from any natural disaster, or any engagement by the United States in
hostilities, whether or not pursuant to the declaration of a national emergency
or war, or the occurrence of any act or acts of terrorism (in each case, so long
as any such facts, changes, developments, events, effects, conditions or
occurrences referenced in clause (i) or (iii) do not materially
disproportionately impact such business or Person relative to others in the
incumbent local exchange communications industry). Notwithstanding
the foregoing, any fluctuation in the market price of such Person’s publicly
traded common stock, separately and by itself, shall not be deemed to constitute
or contribute to a Material Adverse Effect (it being understood that the
foregoing shall not prevent a party from asserting that any fact, change,
development, event, effect, condition or occurrence that may have contributed to
such fluctuation in market price independently constitutes or contributes to a
Material Adverse Effect).
1.117 “
Material Company Owned Real
Property
” has the meaning set forth in Section 6.17(a).
1.118 “
Materially Adverse
Regulatory Condition
” means any condition, obligation or restriction
sought to be imposed on any of Spinco, any Spinco Subsidiary, Verizon, any
Verizon Subsidiary or the Company or any Company Subsidiary in connection with
obtaining a Telecommunications Regulatory Consent that, taken together with any
other conditions or restrictions sought to be imposed to obtain any other
Telecommunications Regulatory Consent, would reasonably be expected to be
materially adverse to the Company, to Spinco or to Verizon (assuming for this
purpose that the business, assets, properties and liabilities of each of (i)
Verizon and all Verizon Subsidiaries and (ii) the Company and all Company
Subsidiaries are comparable in size to those of Spinco and all Spinco
Subsidiaries), disregarding for this purpose any condition or requirement on the
Company or the Surviving Corporation (a) to make capital expenditures
substantially consistent with the amounts and general categories of expenditures
set forth in (
x
) the Company’s 2009
capital expenditure budget set forth in Section 7.1(h) of the Company Disclosure
Letter or (
y
)
Verizon’s 2009 capital expenditure budget for the Spinco Business set forth in
Section 7.2(f) of the Spinco Disclosure Letter, (b) that is offered by the
Company in its discretion at any time within nine months of the date hereof in
an application for an order approving the transactions contemplated hereby or in
any related filing or testimony made within nine months of the date hereof or
(c) to abide by any written binding commitments made by Verizon or any Verizon
Subsidiary with respect to the Spinco Business, or by the Company or any of its
Subsidiaries, to any Governmental Authority prior to the date
hereof.
1.119 “
Merger
” has the
meaning set forth in Section 2.1.
1.120 “
Merger Tax Opinion
”
has the meaning set forth in Section 7.9(d).
1.121
“
Minimum Aggregate
Consideration
” means the number of shares of Company Common Stock that
would equal 51% of the Fully Diluted Number of Shares of the Surviving
Corporation immediately following the Merger.
1.122 “
Minimum Aggregate
Consideration Value
” means the dollar value of a number of shares of
Company Common Stock equal to the Minimum Aggregate Consideration, valued for
this purpose using the Company Average Price.
1.123 “
Network Element
”
means any port network device, computer, server or other processing device
connected to or used in support of the public switched voice, data, digital
subscriber line and other networks of the Spinco Business, to the extent such
element is located in the Territory and is used primarily in the support of the
Spinco Business.
1.124 “
Network Element
Software
” means the Verizon Third Party Intellectual Property consisting
of system software and any application software, in each case in the form and
content it exists as of the Closing Date, as and to the extent installed on
Network Elements owned or leased by Spinco or the Spinco Subsidiaries as of the
Closing, certain of which software is listed on Section 1.124 of the Spinco
Disclosure Letter along with the Network Elements in which they are installed,
but excluding any application software (other than application software that has
been specifically designed and dedicated for a Network Element and is required
for a Network Element to perform its video, voice or data function) which is
licensed pursuant to a Retained Contract that (i) is licensed by any Person
other than the Network Element supplier or (
ii
) is identified on
Section 1.124 (ii) of the Spinco Disclosure Letter.
1.125 “
Non-ILEC Spinco
Subsidiary
” has the meaning set forth in the Distribution
Agreement.
1.126 “
Non-Statutory Intellectual
Property
” means all unpatented inventions (whether or not patentable),
trade secrets, know-how and proprietary information, including but not limited
to (in whatever form or medium), discoveries, ideas, compositions, formulas,
computer programs (including source and object codes), technical know-how,
computer software documentation, database, drawings, designs, plans, business
plans, product development and marketing plans, projections, engineering
drawings and plans, network architecture drawings and
plans, proposals, specifications, photographs, samples, models,
processes, procedures, data, information, manuals, reports, financial, marketing
and business data, and sales, pricing, and cost information, correspondence and
notes; provided, however, that, notwithstanding anything to the contrary, the
definition of “Non-Statutory Intellectual Property” shall not include any
Statutory Intellectual Property.
1.127 “
Notice Period
” has
the meaning set forth in Section 7.11(c)(i).
1.128 “
NYSE
” has the meaning
set forth in Section 3.3(b).
1.129 “
Order
” means any
decree, judgment, injunction, writ, ruling or other order of any Governmental
Authority.
1.130 “
Owned Real Property
”
has the meaning set forth in the Distribution Agreement.
1.131 “
PBGC
” means the U.S.
Pension Benefit Guaranty Corporation.
1.132 “
Per Share Merger
Consideration
” has the meaning set forth in
Section 3.1(a).
1.133 “
Permitted
Encumbrances
” means (
A
) statutory
Liens for Taxes that are not due and payable as of the Closing Date, or that are
being contested in good faith and for which appropriate reserves have been
established in accordance with GAAP; (
B
) mechanics
liens and similar Liens for labor, materials or supplies provided, incurred in
the ordinary course of business for amounts which are not due and payable or are
subject to dispute and with respect to which reserves have been established in
accordance with GAAP; (
C
) zoning
restrictions, building codes and other land use Laws regulating the use or
occupancy of such real property or the activities conducted thereon which are
imposed by any Governmental Authority having jurisdiction over such real
property which are not violated by the current use or occupancy of such real
property or the operation of the business thereon; (
D
) easements,
covenants, conditions, restrictions and other similar matters of record
affecting title to any real property which do not or would not materially impair
the use or occupancy of such real property in the operation of the business
conducted thereon; (
E
) Liens arising
under original purchase price conditional sales contracts and equipment leases
with third parties entered into in the ordinary course of business; and (
F
) Liens
disclosed in the Company SEC Documents or the Spinco Financial Statements, as
applicable.
1.134 “
Person
” or “
person
” means a
natural person, corporation, company, joint venture, individual business trust,
trust association, partnership, limited partnership, limited liability company
or other entity, including a Governmental Authority.
1.135 “
Proprietary Business
Information
” means any and all non-technical, non-public information
included in the Non-Statutory Intellectual Property which is owned by Licensor
or its U.S. Affiliates as of the Closing, after giving effect to the assignment
contemplated by Section 2.1(a) of the Intellectual Property Agreement, and was
used in the Spinco Business at any time during the 12 months prior to the
Closing Date; provided, however, that Proprietary Business Information shall not
include Spinco Customer Listing Data (as defined in the Intellectual Property
Agreement).
1.136 “
Proxy
Statement/Prospectus
” means the letters to Company stockholders, notices
of meeting, proxy statement and forms of proxies to be distributed to Company
stockholders in connection with the Merger and the transactions contemplated by
this Agreement and any additional soliciting material or schedules required to
be filed with the SEC in connection therewith, and that may be included in the
Company Registration Statement, it being understood that it is possible that the
Company Registration Statement will not be declared effective and mailed to the
Verizon stockholders substantially contemporaneously with the mailing of the
Proxy Statement/Prospectus to the Company stockholders, and, if it is not so
contemporaneously mailed to the Verizon stockholders, the prospectus included in
the Company Registration Statement at the time of its mailing to the Verizon
stockholders may be different than the Proxy Statement/Prospectus mailed to the
Company stockholders. This Proxy Statement/Prospectus shall not
incorporate any disclosure by reference to any other filings with the
SEC.
1.137 “
Realignment
” has the
meaning set forth in Section 7.24.
1.138 “
Real Property
Interests
” means all easements, rights of way, and licenses in the real
property of Spinco that are used primarily in the operation of the Spinco
Business, and excluding all Spinco Owned Real Property and property and
interests subject to Spinco Leases and Spinco Subleases.
1.139 “
Record Date
” has the
meaning set forth in the Distribution Agreement.
1.140 “
Redactable
Information
” has the meaning set forth in Section 7.9(a).
1.141 “
Registration
Statements
” means the Company Registration Statement and the Spinco
Registration Statement.
1.142 “
Regulation S-K
” means
Regulation S-K promulgated under the Exchange Act.
1.143 “
Regulatory Law
” has
the meaning set forth in Section 7.6(h).
1.144 “
Required Payment
Amount
” means the aggregate amount, if any, of all amounts required to be
paid, refunded, deferred, escrowed, or foregone pursuant to an order, settlement
agreement or otherwise (including in the form of any contribution or transfer of
Assets or assumption or retention of Liabilities, measured at fair market value
and assuming the maximum amount of any contingent amount is paid or foregone and
the full amount of any deferred, contingent or escrowed amount is not received)
by Verizon or its Subsidiaries, other than post-Closing obligations of Spinco or
any Spinco Subsidiary, as a condition to obtaining any consent of any
Governmental Authority in the Territory required to consummate the Distribution
or the Merger or to complying with any order approving the Distribution and the
Merger.
1.145 “
Requisite Approval
”
has the meaning set forth in Section 6.22.
1.146 “
Restraint
” has the
meaning set forth in Section 8.1(h).
1.147 “
Retained Contract
”
has the meaning set forth in the Distribution Agreement.
1.148 “
Retained Customer
Accounts
” has the meaning set forth in the Distribution
Agreement.
1.149 “
Rights Plan
” means
the stockholder rights plan described in the Rights Agreement, dated as of March
6, 2002, between the Company and Mellon Investor Services LLC, as
amended.
1.150 “
Ruling Request
” has
the meaning set forth in Section 7.9(a).
1.151 “
Sarbanes-Oxley Act
”
has the meaning set forth in Section 6.4(c).
1.152 “
SEC
” means the U.S.
Securities and Exchange Commission.
1.153 “
Securities Act
” means
the Securities Act of 1933, as amended, together with the rules and regulations
promulgated thereunder.
1.154 “
Settlement
Requirements
” has the meaning set forth in
Section 10.4(a).
1.155 “
Significant
Subsidiary
” has the meaning set forth in Rule 1-02 of Regulation S-X
promulgated under the Exchange Act.
1.156 “
Software License
Agreement
” means the Software License Agreement to be entered into
between an Affiliate of Verizon, Spinco and the Company, in the form attached to
the Distribution Agreement.
1.157 “
Solvency Opinion
” has
the meaning set forth in Section 8.1(k).
1.158 “
Special Payment
” has
the meaning set forth in the Distribution Agreement.
1.159 “
Special Payment
Financing
” has the meaning set forth in
Section 7.18(a).
1.160 “
Specified Contract
”
has the meaning set forth in Section7.6(j).
1.161 “
Spinco
” has the
meaning set forth in the Preamble hereto.
1.162 “
Spinco Assets
” has
the meaning set forth in the Distribution Agreement.
1.163 “
Spinco Benefit
Agreements
” has the meaning set forth in
Section 5.12(a).
1.164 “
Spinco Benefit Plans
”
has the meaning set forth in Section 5.12(a).
1.165 “
Spinco Business
” has
the meaning set forth in the Distribution Agreement.
1.166
“
Spinco Business
Employees
” has the meaning set forth in
Section 5.12(a).
1.167
“
Spinco Closing Equity
Value
” means the amount equal to the sum of (A) $5.247 billion
plus (B) the
Required Payment Amount, if any.
1.168
“
Spinco Common
Stock
” means the common stock, par value $0.01 per share, of
Spinco.
1.169 “
Spinco Disclosure
Letter
” has the meaning set forth in the first paragraph of
Article V.
1.170 “
Spinco Financial
Statements
” has the meaning set forth in Section 5.4(a).
1.171 “
Spinco Group
” means
Spinco and the Spinco Subsidiaries.
1.172 “
Spinco Leases
” has
the meaning set forth in Section 5.18(b).
1.173 “
Spinco Liabilities
”
has the meaning set forth in the Distribution Agreement.
1.174 “
Spinco Licenses
” has
the meaning set forth in Section 5.19(a).
1.175 “
Spinco Material
Contracts
” has the meaning set forth in
Section 5.15(a).
1.176
“
Spinco Owned Real
Property
” means all Owned Real Property of Spinco or Spinco Subsidiaries
after giving effect to the Contribution.
1.177 “
Spinco Registration
Statement
” means any registration statement on Form S-1 or such other
form, if any, as may be required by the Securities Act to be filed by Spinco
with the SEC to effect the registration under the Securities Act of the issuance
of the shares of Spinco Common Stock to be issued in the Distribution; any
registration statement on Form 10 or such other form, if any, as may be required
by the Exchange Act to be filed by Spinco with the SEC to effect the
registration of the Spinco Common Stock pursuant to the requirements of the
SEC’s Staff Legal Bulletin No. 4; and/or any such other form as may be permitted
or required to be filed by the SEC in connection with the issuance or
distribution of the Spinco Common Stock (in each case, as amended and
supplemented from time to time).
1.178 “
Spinco Securities
”
has the meaning set forth in the Distribution Agreement.
1.179 “
Spinco Stockholder
Approval
” has the meaning set forth in Section 5.16.
1.180 “
Spinco Subleases
” has
the meaning set forth in Section 5.18(b).
1.181 “
Spinco Subsidiaries
”
means all direct and indirect Subsidiaries of Spinco immediately following the
Contribution.
1.182 “
Spinco Value
Shortfall
” means the amount, if any, by which (i) the Minimum Aggregate
Consideration Value exceeds (ii) the Spinco Closing Equity Value.
1.183 “
Spinco Voting Debt
”
has the meaning set forth in Section 5.2(c).
1.184 “
Spinco’s Knowledge
”
has the meaning set forth in Section 11.13.
1.185 “
State PUC
Application
” has the meaning set forth in Section 7.6(b).
1.186 “
State Regulators
” has
the meaning set forth in Section 5.19(a).
1.187 “
Statutory Intellectual
Property
” means all (i) United States patents and patent applications of
any kind, (ii) United States works of authorship, mask-works, copyrights, and
copyright and mask work registrations and applications for registration, (iii)
Trademarks, and (iv) any rights or licenses in the foregoing.
1.188 “
Subsidiary
” means,
with respect to any Person (but subject to the proviso in the definition of
Affiliate), a corporation, partnership, association, limited liability company,
trust or other form of legal entity in which such Person, a Subsidiary of such
Person or such Person and one or more Subsidiaries of such Person, directly or
indirectly, has either (
i
) a majority
ownership in the equity thereof, (
ii
) the power,
under ordinary circumstances, to elect, or to direct the election of, a majority
of the board of directors or other analogous governing body of such entity, or
(
iii
) the
title or function of general partner or manager, or the right to designate the
Person having such title or function.
1.189 “
Surviving
Corporation
” has the meaning set forth in Section 2.1.
1.190 “
Surviving Corporation
Indemnitees
” means the Surviving Corporation, each Affiliate of the
Surviving Corporation (including all Subsidiaries of the Surviving Corporation)
and their respective directors, officers, agents and employees.
1.191 “
Surviving Corporation
Releasors
” has the meaning set forth in
Section 7.12(b).
1.192 “
Tariffs
” has the
meaning set forth in Section 7.6(j).
1.193 “
Tax
” or “
Taxes
” means (
i
) all taxes,
charges, fees, duties, levies, imposts, required deposits, rates or other
assessments or governmental charges of any kind imposed by any federal, state,
local or foreign Taxing Authority, including income, gross receipts, employment,
excise, severance, stamp, occupation, premium, windfall profits, environmental
(including Taxes under Section 59A of the Code), custom duties, property
(including real, personal or intangible), sales, use, license, capital stock,
transfer, franchise, registration, payroll, withholding, social security (or
similar), unemployment, disability, value added, alternative or add-on minimum
or other taxes, whether disputed or not, and including any interest, penalties
or additions attributable thereto; (
ii
) liability
for the payment of any amount of the type described in clause (i) above
arising as a result of being (or having been) a member of any consolidated,
combined, unitary or similar group or being (or having been) included or
required to be included in any Tax Return related thereto (including pursuant to
U.S. Treasury Regulation § 1.1502-6); and (
iii
) liability
for the payment of any amount of the type described in clauses (i)
or (ii) above as a result of any express or implied obligation to indemnify
or otherwise assume or succeed to the liability of any other
Person.
1.194 “
Tax-Free Status of the
Transactions
” means each of the intended tax consequences specified in
the eleventh recital hereto.
1.195 “
Tax Return
” means any
return, report, certificate, form or similar statement or document (including
any related or supporting information or schedule attached thereto and any
information return, amended tax return, claim for refund or declaration of
estimated tax) required to be supplied to, or filed with, a Taxing Authority in
connection with the determination, assessment or collection of any Tax or the
administration of any laws, regulations or administrative requirements relating
to any Tax.
1.196 “
Tax Sharing
Agreement
” means the Tax Sharing Agreement entered into on the date
hereof, among Verizon, the Company, Spinco and the ILEC Spinco Subsidiaries, as
such agreement may be amended from time to time.
1.197 “
Taxing Authority
”
means any Governmental Authority or any quasi-governmental or private body
having jurisdiction over the assessment, determination, collection or imposition
of any Tax (including the IRS).
1.198 “
Telecommunications
Regulatory Consents
” has the meaning set forth in Section
7.6(c).
1.199 “
Termination Date
”
means the date, if any, on which this Agreement is terminated pursuant to
Section 9.1.
1.200 “
Territory
” has the
meaning set forth in the Distribution Agreement.
1.201 “
Third Party Claim
”
has the meaning set forth in Section 10.4(a).
1.202 “
Transaction
Agreements
” means this Agreement, the Distribution Agreement, the Cutover
Plan Support Agreement, the Employee Matters Agreement, the Intellectual
Property Agreement, the Software License Agreement, the FiOS Intellectual
Property Agreement, the FiOS Software License Agreement, the FiOS Trademark
License Agreement, the Joint Defense Agreement and the Tax Sharing
Agreement.
1.203 “
Trademarks
” means
trademarks, tradenames, applications for trademark registration, service marks,
applications for service mark registration, domain names, registrations and
applications for registrations pertaining thereto, and all goodwill associated
therewith.
1.204
“
Transferred Affiliate
Arrangement
” has the meaning set forth in the Distribution
Agreement.
1.205 “
U.S. Affiliate
” means
any Affiliate of Verizon that is incorporated in and operates solely in the
United States, but specifically excluding Verizon Wireless and any of its
Subsidiaries.
1.206 “
Verizon
” has the
meaning set forth in the Preamble hereto.
1.207 “
Verizon Approvals
”
has the meaning set forth in Section 4.2(c).
1.208 “
Verizon Common Stock
”
means the common stock, par value $0.10 per share, of Verizon.
1.209 “
Verizon Disclosure
Letter
” has the meaning set forth in the first paragraph of
Article IV.
1.210 “
Verizon Group
” means
Verizon and the Verizon Subsidiaries.
1.211 “
Verizon Indemnitees
”
means Verizon, each Affiliate of Verizon (including all Verizon Subsidiaries)
and their respective directors, officers, agents and employees.
1.212 “
Verizon Interconnection
Agreements
” has the meaning set forth in
Section 7.6(k).
1.213 “
Verizon IP Consent
”
means any authorizations, approvals, consents or waivers required by any Person,
other than Verizon or any of its Subsidiaries, pursuant to their Contract rights
(including any right to receive upgrades or maintenance, support or similar
services, if any) in respect of any Verizon Third Party Intellectual Property in
connection with the consummation by Verizon and its Subsidiaries of the
transactions contemplated by the Distribution Agreement or this
Agreement.
1.214 “
Verizon IP Consent
Costs
” has the meaning set forth in Section 7.8(b).
1.215 “
Verizon Subsidiaries
”
means all direct and indirect Subsidiaries of Verizon immediately after the
Distribution Date, assuming that the Distribution has occurred in accordance
with the Distribution Agreement.
1.216 “
Verizon Tax Counsel
”
means Debevoise & Plimpton LLP.
1.217 “
Verizon Third Party
Consents
” means the authorizations, approvals, consents or waivers
required by any Person, other than Verizon or any of its Subsidiaries, pursuant
to their Contract rights (other than authorizations, approvals, consents or
waivers in respect of any Verizon Third Party Intellectual Property or
constituting Telecommunications Regulatory Consents or other consents in respect
of telecommunications regulatory matters) in connection with the consummation by
Verizon and its Subsidiaries of the transactions contemplated by the
Distribution Agreement or this Agreement.
1.218 “
Verizon Third Party
Intellectual Property
” means any and all Intellectual Property Rights
owned by any Person other than Verizon or any of its Subsidiaries, that is used
or held for use in the conduct of the Spinco Business, without regard as to
whether Verizon or any of its Subsidiaries has any rights therein or the right
to assign such rights to Spinco or the Spinco Subsidiaries.
1.219 “
Verizon Wireless
”
means Cellco Partnership d/b/a Verizon Wireless, a Delaware general
partnership.
1.220 “
Video Transport Service
Agreement
” has the meaning set forth in Section 7.22.
1.221 “
Volume Commitments
”
has the meaning set forth in Section 7.6(j).
1.222 “
WARN Act
” means the
Worker Adjustment and Retraining Notification Act of 1988, as amended, and any
similar state or local law, regulation or ordinance.
THE
MERGER
2.1
The
Merger
. At the Effective Time and upon the terms
and subject to the conditions of this Agreement, Spinco shall be merged with and
into the Company (the “
Merger
”) in
accordance with the applicable provisions of the DGCL, the separate existence of
Spinco shall cease and the Company shall continue as the surviving corporation
of the Merger (sometimes referred to herein as the “
Surviving
Corporation
”) and shall succeed to and assume all the rights, powers and
privileges and be subject to all of the obligations of Spinco in accordance with
the DGCL and upon the terms set forth in this Agreement.
2.2
Closing
. Unless
the transactions herein contemplated shall have been abandoned and this
Agreement terminated pursuant to Section 9.1, the closing of the Merger and
the other transactions contemplated hereby (the “
Closing
”) shall take
place, subject to Section 7.18, no later than 2:00 p.m., prevailing eastern
time, on the last Business Day of the month in which, on such last Business Day,
the conditions set forth in Article VIII (other than those that are to be
satisfied by action at the Closing) are satisfied or, to the extent permitted by
applicable Law, waived (but in any event not earlier than the last Business Day
of April 2010), unless otherwise agreed upon in writing by the parties (the
“
Closing
Date
”), at the offices of counsel to Verizon or such other location as
may be agreed upon in writing by the parties.
2.3
Effective
Time
. Upon the terms and subject to the conditions of this
Agreement, on the Closing Date, a certificate of merger shall be filed with the
Secretary of State of the State of Delaware with respect to the Merger (the
“
Certificate of
Merger
”), in such form as is required by, and executed in accordance
with, the applicable provisions of the DGCL. The Merger shall become
effective at the time of filing of the Certificate of Merger or at such later
time as the parties hereto may agree and as is provided in the Certificate of
Merger. The date and time at which the Merger shall become so
effective is herein referred to as the “
Effective
Time
.”
2.4
Effects of the
Merger
. At the Effective Time, the effects of the Merger
shall be as provided in this Agreement, the Certificate of Merger and the
applicable provisions of the DGCL. Without limiting the generality of
the foregoing, at the Effective Time, all the property, rights, privileges,
powers and franchises of the Company and Spinco shall vest in the Surviving
Corporation, and all debts, liabilities, duties and obligations of the Company
and Spinco shall become the debts, liabilities, duties and obligations of the
Surviving Corporation.
(a) At
the Effective Time, the certificate of incorporation of the Company as in effect
immediately prior to the Effective Time shall be the certificate of
incorporation of the Surviving Corporation until thereafter duly amended in
accordance with such certificate of incorporation and applicable
Law.
(b) At
the Effective Time, the bylaws of the Company as in effect immediately prior to
the Effective Time shall be the bylaws of the Surviving Corporation until
thereafter duly amended in accordance with the certificate of incorporation of
the Surviving Corporation, such bylaws and applicable Law.
2.6
Directors and Officers of
the Surviving Corporation
. Subject to Section 7.17,
the directors of the Company at the Effective Time shall, from and after the
Effective Time, be the initial directors of the Surviving
Corporation. The officers of the Company at the Effective Time shall,
from and after the Effective Time, be the initial officers of the Surviving
Corporation. Such directors and officers shall serve until their
successors have been duly elected or appointed and qualified or until their
earlier death, resignation or removal in accordance with the Surviving
Corporation’s certificate of incorporation and bylaws.
2.7
Potential Restructuring of
Transactions
. If, prior to the date on which the Company
intends to commence solicitation of proxies for use at the Company Stockholders
Meeting, the IRS notifies Verizon that the IRS will not issue the IRS Ruling in
whole or in part, then, during the ensuing 30-day period, the parties will
collaborate reasonably and in good faith in order to determine a possible
alternative structure for the transactions contemplated hereby that the parties
determine, with the assistance of their respective tax advisors, will either
make likely the receipt from the IRS of the IRS Ruling or eliminate the
necessity for an IRS Ruling, in either case, without (
a
) substantially
increasing the costs to any party associated with the transactions contemplated
hereby, (
b
) causing the
performance of the covenants and agreements of any party hereunder to become
substantially more burdensome, (
c
) substantially
increasing the regulatory or other consents or approvals required to consummate
the transactions contemplated hereby, or (
d
) otherwise
resulting in any substantial impediment to the consummation of the transactions
contemplated hereby. In the event the parties reasonably, and in good
faith, agree upon such an alternative structure, they shall be obligated, as
soon as practicable thereafter, to modify the covenants and agreements set forth
in this Agreement and the other Transaction Agreements accordingly to reflect
the change in transaction structure referenced in the immediately preceding
sentence. In furtherance of the foregoing, each of the parties shall
take all action reasonably necessary to modify the Ruling Request to reflect the
transactions as so modified and effectuate the change in transaction structure
contemplated by this Section 2.7, and each such party shall use all
commercially reasonable efforts to cause the transactions contemplated hereby,
as so modified, to be consummated as soon as practicable
thereafter. To the extent that the filing or effectiveness of the
materials necessary for the solicitation of proxies for use at the Company
Stockholders Meeting is delayed in order to afford the parties the time
necessary to obtain a response with respect to the IRS Ruling such delay will be
deemed to not constitute, nor constitute any basis for a claim of, a breach of
the Company’s covenants under Article VII hereof or
otherwise. The parties acknowledge that, subject to the limitations
set forth in Section 2.4(d) of the Distribution Agreement, Verizon may
elect pursuant to Section 2.4(d) of the Distribution Agreement to change
the structure of certain transactions contemplated in the recitals hereto and to
make amendments to this Agreement in order to reflect such changes.
3.1
Effect on Capital
Stock
. At the Effective Time, by virtue of the Merger and
without any action on the part of Spinco, the Company or any holder of any
Spinco Common Stock or Company Common Stock:
(a) All
of the shares of Spinco Common Stock issued and outstanding immediately prior to
the Effective Time (other than shares canceled in accordance with
Section 3.1(b)) shall be automatically converted into an aggregate number
of duly authorized, validly issued, fully paid and nonassessable shares of
Company Common Stock equal to the quotient of (
x
) the Spinco Closing
Equity Value divided by (y) the Company Average Price (the “
Aggregate Merger
Consideration
”);
provided
,
however
, that to the
extent the Aggregate Merger Consideration would be less than the Minimum
Aggregate Consideration, then (i) the Minimum Aggregate Consideration shall
be used in place of the Aggregate Merger Consideration and (ii) Verizon
shall, at its option, either make a payment in cash to the Surviving Corporation
on the Closing Date equal to the Spinco Value Shortfall or reduce the aggregate
amount of the Spinco Securities and/or the Special Payment by the Spinco Value
Shortfall. In connection with the foregoing, no later than three
Business Days prior to the Effective Time, Verizon and Spinco shall deliver to
the Company a statement (the “
Closing Statement
”),
certified by an officer of Verizon and accompanied by reasonable supporting
detail, setting forth the amount of, and identifying, all Distribution Date
Spinco Indebtedness. Each share of Spinco Common Stock issued and
outstanding immediately prior to the Effective Time shall be automatically
converted into a number of shares of Company Common Stock equal to (
1
) the Aggregate
Merger Consideration (or, if applicable, the Minimum Aggregate Consideration)
divided by (
2
) the aggregate
number of shares of Spinco Common Stock issued and outstanding as of immediately
prior to the Effective Time (the “
Per Share Merger
Consideration
”).
(b) Each
share of Spinco Common Stock held by Spinco as treasury stock immediately prior
to the Effective Time shall be canceled and shall cease to exist and no stock or
other consideration shall be issued or delivered in exchange
therefor.
(c) Each
share of Spinco Common Stock issued and outstanding immediately prior to the
Effective Time, when converted in accordance with this Section 3.1, shall
no longer be outstanding and shall automatically be canceled and shall cease to
exist.
(d) Each
share of Company Common Stock that is issued and outstanding immediately prior
to and at the Effective Time shall remain outstanding following the Effective
Time.
(a)
Agent
. Prior
to or at the Effective Time, the Company shall deposit with the Agent (as
defined in the Distribution Agreement), for the benefit of persons entitled to
receive shares of Spinco Common Stock in the Distribution and for distribution
in accordance with this Article III, through the Agent, certificates or
book-entry authorizations representing the shares of Company Common Stock (such
shares of Company Common Stock being hereinafter referred to as the “
Distribution Fund
”)
issuable pursuant to Section 3.1 upon conversion of outstanding shares of
Spinco Common Stock. The Agent shall, pursuant to irrevocable
instructions, deliver the Company Common Stock contemplated to be issued
pursuant to Section 3.1 from the shares of Company Common Stock held in the
Distribution Fund. If the Company deposits such shares into the
Distribution Fund prior to the Effective Time and the Merger is not consummated,
the Agent shall promptly return such shares to the Company. The
Distribution Fund shall not be used for any other purpose.
(b)
Distribution
Procedures
. At the Effective Time, all shares of Spinco Common
Stock shall be converted into shares of Company Common Stock pursuant to, and in
accordance with the terms of, this Agreement, immediately following which the
Agent shall distribute on the same basis as the shares of Spinco Common Stock
would have been distributed in the Distribution and to the persons entitled to
receive Spinco Common Stock in the Distribution, in respect of the outstanding
shares of Verizon Common Stock held by holders of record of Verizon Common Stock
on the Record Date, all of the shares of Company Common Stock into which the
shares of Spinco Common Stock that otherwise would have been distributed in the
Distribution have been converted pursuant to the Merger. Each person
entitled to receive Spinco Common Stock in the Distribution shall be entitled to
receive in respect of the shares of Spinco Common Stock otherwise distributable
to such person a certificate or book-entry authorization representing the number
of whole shares of Company Common Stock that such holder has the right to
receive pursuant to this Article III (and cash in lieu of fractional shares
of Company Common Stock, as contemplated by Section 3.3) (and any dividends
or distributions pursuant to Section 3.2(c)). The Agent shall
not be entitled to vote or exercise any rights of ownership with respect to the
Company Common Stock held by it from time to time hereunder. The
Company agrees that, from and after the Effective Time, those holders of record
of Verizon Common Stock who have become holders of record of Company Common
Stock by virtue of the Distribution and the Merger shall be holders of record of
Company Common Stock for all purposes for so long as they hold such Company
Common Stock.
(c)
Distributions with Respect
to Undistributed Shares
. No dividends or other distributions
declared or made after the Effective Time with respect to Company Common Stock
with a record date after the Effective Time shall be paid with respect to any
shares of Company Common Stock that have not been distributed by the Agent
promptly after the Effective Time, whether due to a legal impediment to such
distribution or otherwise. Subject to the effect of applicable Laws,
following the distribution of any such previously undistributed shares of
Company Common Stock, there shall be paid to the record holder of such shares of
Company Common Stock, without interest (
i
) at the time
of such distribution, the amount of cash payable in lieu of fractional shares of
Company Common Stock to which such holder is entitled pursuant to
Section 3.3 and the amount of dividends or other distributions with a
record date after the Effective Time theretofore paid with respect to such whole
shares of Company Common Stock and (
ii
) at the
appropriate payment date therefor, the amount of dividends or other
distributions with a record date after the Effective Time but prior to the
distribution of such shares and a payment date subsequent to the distribution of
such shares payable with respect to such whole shares of Company Common
Stock.
(d)
No Further Ownership Rights
in Spinco Common Stock
. All shares of Company Common Stock
issued in respect of shares of Spinco Common Stock (including any cash paid
pursuant to Section 3.3) shall be deemed to have been issued in full
satisfaction of all rights pertaining to such shares of Spinco Common
Stock.
(e)
Termination of Distribution
Fund
. Any portion of the Distribution Fund made available to
the Agent that remains undistributed to the former stockholders of Spinco on the
one-year anniversary of the Effective Time shall be delivered to the Company,
upon demand, and any former stockholders of Spinco who have not received shares
of Company Common Stock in accordance with this Article III shall
thereafter look only to the Company for payment of their claim for shares of
Company Common Stock and any dividends, distributions or cash in lieu of
fractional shares with respect to such Company Common Stock (subject to any
applicable abandoned property, escheat or similar Law). If and to the
extent the Company does not receive the Distribution Fund from the Agent, the
former stockholders of Spinco shall look only to the Agent to complete the
transfer or payment.
(f)
No
Liability
. None of Spinco, the Surviving Corporation or the
Agent shall be liable to any holder of shares of Spinco Common Stock or any
holder of shares of Verizon Common Stock for any shares of Company Common Stock
(or dividends or distributions with respect thereto or with respect to shares of
Spinco Common Stock) or cash delivered to a public official pursuant to any
applicable abandoned property, escheat or similar Law.
(g)
Closing of Transfer
Books
. From and after the Effective Time, the stock transfer
books of Spinco shall be closed and no transfer shall be made of any shares of
capital stock of Spinco that were outstanding immediately prior to the Effective
Time.
(h)
Withholding
Rights
. Spinco, the Company and the Surviving Corporation
shall be entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Agreement to any holder of Spinco Common Stock such
amounts as they determine in good faith are required to be deducted and withheld
with respect to the making of such payment under the Code, or under any
provision of state, local or foreign Tax Law. To the extent that
amounts are so withheld and paid over to the appropriate Taxing Authority, such
withheld amounts will be treated for all purposes of this Agreement as having
been paid to the recipient.
(a) No
fractional shares of Company Common Stock shall be issued in the Merger and no
dividend or distribution with respect to Company Common Stock shall be payable
on or with respect to any fractional share interests and such fractional share
interests will not entitle the owner thereof to any rights of a stockholder of
the Company.
(b) As
promptly as practicable following the Effective Time, the Agent shall determine
the excess of (
x
) the number of
shares of Company Common Stock delivered to the Agent by the Company pursuant to
Section 3.2(a) over (
y
) the aggregate
number of whole shares of Company Common Stock to be distributed in respect of
shares of Spinco Common Stock pursuant to Section 3.2(b) (such excess, the
“
Excess
Shares
”). As soon after the Effective Time as practicable, the
Agent, as agent for the applicable holders, shall sell the Excess Shares at the
then prevailing prices on the New York Stock Exchange (the “
NYSE
”), in the manner
provided in paragraph (c) of this Section 3.3.
(c) The
sale of the Excess Shares by the Agent shall be executed on the NYSE through one
or more member firms of the NYSE and shall be executed in round lots to the
extent practicable. The Agent shall use all reasonable efforts to
complete the sale of the Excess Shares as promptly following the Effective Time
as is practicable consistent with obtaining the best execution of such sales in
light of prevailing market conditions. Until the net proceeds of any
such sale or sales have been distributed in respect of such shares of Spinco
Common Stock, the Agent will hold such proceeds in trust for the applicable
holders. The Surviving Corporation shall pay all commissions,
transfer taxes and other out-of-pocket transaction costs of the Agent incurred
in connection with such sale or sales of Excess Shares. In addition,
the Surviving Corporation shall pay the Agent’s compensation and expenses in
connection with such sale or sales. The Agent shall determine the
portion of such net proceeds to which each applicable holder shall be entitled,
if any, by multiplying the amount of the aggregate net proceeds by a fraction
the numerator of which is the amount of the fractional share interest to which
such holder of Spinco Common Stock is entitled (after taking into account all
shares of Spinco Common Stock then held by such holder) and the denominator of
which is the aggregate amount of fractional share interests to which all holders
of Spinco Common Stock are entitled.
(d) As
soon as practicable after the determination of the amount of cash, if any, to be
paid in respect of Spinco Common Stock with respect to any fractional share
interests, the Agent shall pay such amounts to the applicable
holders.
REPRESENTATIONS AND
WARRANTIES OF VERIZON
Except as
disclosed in the corresponding section of the Disclosure Letter delivered by
Verizon to the Company immediately prior to the execution of this Agreement (the
“
Verizon Disclosure
Letter
”), Verizon hereby represents and warrants to the Company as
follows:
4.1
Organization;
Qualification
. Verizon is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Delaware. Each of Verizon and its Subsidiaries has all requisite
corporate power and authority to own, lease and operate the Spinco
Assets. Each of the Contributing Companies is duly qualified or
licensed to do business and is in good standing in each jurisdiction in which
the Spinco Assets or the nature of the Spinco Business operated by it makes such
qualification necessary, except in such jurisdictions where the failure to be so
qualified or licensed or in good standing would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on Spinco or
the Spinco Business.
(a) Verizon
has the corporate power and authority to enter into this Agreement and each
other Transaction Agreement to which it is or as of the Effective Time will be a
party and to carry out its obligations hereunder and thereunder. The
execution, delivery and performance by Verizon of this Agreement and each other
Transaction Agreement to which it is or as of the Effective Time will be a party
and the consummation of the transactions contemplated hereby and thereby have
been duly authorized by all requisite corporate action on the part of Verizon,
except for such further action of the Board of Directors of Verizon required to
establish the Record Date and the Distribution Date, and the effectiveness of
the declaration of the Distribution by the Board of Directors of Verizon (which
is subject to the satisfaction or, to the extent permitted by applicable Law,
waiver of the conditions set forth in the Distribution
Agreement). This Agreement has been duly executed and delivered by
Verizon and, assuming the due authorization, execution and delivery by the
Company, constitutes a legal, valid and binding agreement of Verizon,
enforceable against Verizon in accordance with its terms (except insofar as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar Laws affecting creditors’ rights
generally, or by principles governing the availability of equitable
remedies). As of the Distribution Date, each other Transaction
Agreement to which Verizon or one of its Subsidiaries is a party will have been
duly executed and delivered by Verizon or such Subsidiary and, assuming the due
authorization, execution and delivery by the other parties thereto, will
constitute a legal, valid and binding agreement of Verizon or such Subsidiary,
as applicable, enforceable against Verizon or such Subsidiary, as applicable, in
accordance with its terms (except insofar as such enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or similar Laws
affecting creditors’ rights generally, or by principles governing the
availability of equitable remedies).
(b) Neither
the execution and delivery by Verizon of this Agreement and other Transaction
Agreements to which it is or as of the Effective Time will be a party nor the
consummation by Verizon of the transactions contemplated hereby or thereby, or
performance by Verizon of any of the provisions hereof or thereof, will (
i
) violate or
conflict with any provisions of Verizon’s certificate of incorporation or
bylaws; (
ii
) assuming the
consents and approvals contemplated by Section 4.2(c) are obtained, result
in a default (or an event that, with notice or lapse of time or both, would
become a default) or give rise to any right of termination by any third party,
cancellation, amendment or acceleration of any obligation or the loss of any
benefit under, any Contract to which Verizon or any of its Subsidiaries is a
party or by which Verizon or any of its Subsidiaries is bound or affected;
(
iii
) result in
the creation of a Lien on any of the issued and outstanding shares of Spinco
Common Stock, capital stock of any Spinco Subsidiary or on any of the Spinco
Assets pursuant to any Contract to which Verizon or any of its Subsidiaries
(including Spinco and its Subsidiaries) is a party or by which Verizon or its
Subsidiaries is bound or affected; or (
iv
) assuming the
consents and approvals contemplated by Section 4.2(c) are obtained, violate
or conflict with any Order or Law applicable to Verizon or any of its
Subsidiaries (including Spinco and its Subsidiaries), or any of the properties,
business or assets of any of the foregoing, other than, in the case of each of
clauses (ii) through (iv), any such violation, conflict, default, right,
loss or Lien which would not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect on Spinco or the Spinco
Business.
(c) Other
than in connection with or in compliance with (
i
) the
provisions of the DGCL, (
ii
) the
Securities Act, (
iii
) the
Exchange Act, (
iv
) the HSR Act,
(
v
) the
Communications Act and applicable rules and regulations thereunder and the
rules, regulations, written policies, instructions and orders of the FCC (the
“
FCC Rules
”),
(
vi
) approvals
required in connection with the transfer of Real Property Interests and the
assignment or novation of Governmental Customer Contracts and (
vii
) the
approvals set forth on Section 4.2(c) of the Verizon Disclosure Letter (the
approvals contemplated by clauses (i) through (vii), collectively, the “
Verizon Approvals
”),
no authorization, consent or approval of, or filing with, any Governmental
Authority is necessary for the consummation by Verizon or Spinco or any of the
Contributing Companies of the transactions contemplated by this Agreement and
the other Transaction Agreements, except for such authorizations, consents,
approvals or filings that, if not obtained or made, would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect on
Spinco or the Spinco Business. Notwithstanding the foregoing,
although the approvals set forth in Section 4.2(c) of the Verizon
Disclosure Letter constitute all those authorizations, consents, approvals and
filings that Verizon reasonably believes, as of the date of this Agreement, are
necessary to obtain or make prior to consummation of the transactions
contemplated by this Agreement, additional State Regulators or other
Governmental Authorities not set forth in Section 4.2(c) of the Verizon
Disclosure Letter may require or seek to require Verizon to obtain
authorizations, consents or approvals, or make filings, prior to consummation of
the transactions contemplated by this Agreement, and if such additional
authorizations, consents, approval or filings are required, Verizon’s
representations and warranties in this Section 4.2(c) shall not be deemed
to have failed to be true and correct on account of such requirement with
respect to authorizations, consents, approvals or filings not set forth in
Section 4.2(c) of the Verizon Disclosure Letter.
4.3
Information
Supplied
. All documents that Verizon or any Verizon
Subsidiary is responsible for filing with any Governmental Authority in
connection with the transactions contemplated hereby and by each other
Transaction Agreement will comply in all material respects with the provisions
of applicable Law. All information supplied or to be supplied by
Verizon or any Verizon Subsidiary in any document, other than the Proxy
Statement/Prospectus or the Registration Statements (which are addressed in
Section 5.8 hereof), filed with any Governmental Authority in connection
with the transactions contemplated hereby and by the other Transaction
Agreements will be, at the time of filing, at the Distribution Date and at the
Effective Time, true and correct in all material respects.
4.4
Brokers or
Finders
. Other than any arrangement that may be entered
into after the date hereof (which shall be the exclusive liability and
obligation of Verizon and not any other party hereto), the material terms of
which shall be disclosed to the Company, no agent, broker, investment banker,
financial advisor or other similar Person is or will be entitled, by reason of
any agreement, act or statement by Verizon or any of its Subsidiaries,
directors, officers or employees, to any financial advisory, broker’s, finder’s
or similar fee or commission, to reimbursement of expenses or to indemnification
or contribution in connection with any of the transactions contemplated by this
Agreement or other Transaction Agreement.
REPRESENTATIONS AND
WARRANTIES OF VERIZON AND SPINCO
Except as
disclosed in the corresponding section of the Disclosure Letter delivered by
Spinco to the Company immediately prior to the execution of this Agreement (the
“
Spinco Disclosure
Letter
”), Verizon and Spinco, jointly and severally, represent and
warrant to the Company as follows:
(a) Spinco
and each of the Spinco Subsidiaries (i) is, or on the date of its
incorporation will be, a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation,
(ii) has, or will have, all requisite power and authority to own, lease and
operate its properties and assets and to carry on its business as presently
conducted or as proposed to be conducted, and (iii) is, or will be, duly
qualified and licensed to do business and is, or will be, in good standing in
each jurisdiction in which the ownership or leasing of its property or the
conduct of its business requires such qualification, except for jurisdictions in
which the failure to be so qualified or to be in good standing would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on Spinco or the Spinco Business. The copies of the
Spinco certificate of incorporation and bylaws and the certificate of
incorporation and bylaws (or other similar organizational documents) of each
Spinco Subsidiary previously made available to the Company are complete and
correct copies of such documents as in full force and effect on the date
hereof.
(b) Section 5.1(b)
of the Spinco Disclosure Letter sets forth a list of the Spinco Subsidiaries and
their respective jurisdictions of incorporation or organization.
(a) Spinco
is a direct, wholly-owned Subsidiary of Verizon, and, as of the Effective Time,
shall own or hold no assets (other than the capital stock of the Spinco
Subsidiaries and any rights held in connection with the Special Payment
Financing, the Spinco Securities, this Agreement or any other Transaction
Agreement).
(b) As
of the date hereof, the authorized capital stock of Spinco consists of 1,000
shares of Spinco Common Stock, and 1,000 shares of Spinco Common Stock are
issued and outstanding. No shares of Spinco Common Stock are held by
Spinco in its treasury. All of the issued and outstanding shares of
Spinco Common Stock are, and immediately prior to the Effective Time will be,
validly issued, fully paid and nonassessable and free of preemptive
rights.
(c) No
bonds, debentures, notes or other indebtedness of Spinco or any of the Spinco
Subsidiaries having the right to vote (or convertible into or exercisable for
securities having the right to vote) on any matters on which holders of shares
of capital stock of Spinco (including Spinco Common Stock) may vote (“
Spinco Voting Debt
”)
are, or at the Distribution Date will be, issued or outstanding.
(d) Except
in connection with the Merger or as otherwise provided for in the Transaction
Agreements, there are not, and immediately prior to the Effective Time there
will not be, any outstanding securities, options, warrants, convertible
securities, calls, rights, commitments or Contracts of any kind to which Spinco
or any Spinco Subsidiary is a party or by which any of them is bound obligating
Spinco or any Spinco Subsidiary to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of capital stock, Spinco Voting
Debt or other voting securities of Spinco or any Spinco Subsidiary or obligating
Spinco or any Spinco Subsidiary to issue, grant, extend, redeem, acquire or
enter into any such security, option, warrant, convertible security, call,
right, commitment or Contract.
(e) There
are not, and immediately prior to the Effective Time there will not be, any
stockholder agreements, voting trusts or other Contracts (other than the
Distribution Agreement) to which Spinco is a party or by which it is bound
relating to voting or transfer of any shares of capital stock of Spinco or the
Spinco Subsidiaries.
(a) Spinco
has the corporate power and authority to enter into this Agreement and each of
Spinco and each Spinco Subsidiary has the corporate power and authority to enter
into each other Transaction Agreement to which it is, or as of the Effective
Time will be, a party, and to carry out its obligations hereunder and
thereunder. The execution, delivery and performance by Spinco of this
Agreement and by Spinco and each applicable Spinco Subsidiary of each other
Transaction Agreement to which it is or as of the Effective Time will be a party
and the consummation of the transactions contemplated hereby and thereby have
been duly authorized by all requisite corporate action on the part of Spinco and
the Spinco Subsidiaries, except for such further action by the Board of
Directors of Spinco required to effect the reclassification of the Spinco Common
Stock, the distribution of the Spinco Securities to Verizon and the payment of
the Special Payment, each as contemplated by the Distribution
Agreement.
(b) This
Agreement has been duly executed and delivered by Spinco and, assuming the due
authorization, execution and delivery by the Company, constitutes a legal, valid
and binding agreement of Spinco, enforceable against Spinco in accordance with
its terms (except insofar as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar Laws affecting
creditors’ rights generally, or by principles governing the availability of
equitable remedies). As of immediately prior to the Effective Time,
each other Transaction Agreement to which Spinco or any Spinco Subsidiary is a
party will have been duly executed and delivered by Spinco or the applicable
Spinco Subsidiary and will, assuming the due authorization, execution and
delivery by the other parties thereto, constitute a legal, valid and binding
agreement of Spinco or the applicable Spinco Subsidiary, enforceable against
Spinco or the applicable Spinco Subsidiary in accordance with its terms (except
insofar as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar Laws affecting creditors’
rights generally, or by principles governing the availability of equitable
remedies).
(c) Neither
the execution and delivery by Spinco of this Agreement and by Spinco and each
applicable Spinco Subsidiary of each other Transaction Agreement to which Spinco
or the applicable Spinco Subsidiary is, or as of the Effective Time will be, a
party, nor the consummation by Spinco or the applicable Spinco Subsidiary of the
transactions contemplated hereby or thereby, or performance by Spinco or the
applicable Spinco Subsidiary of the provisions hereof or thereof, will (
i
) violate or
conflict with any provision of Spinco’s or the applicable Spinco Subsidiary’s
certificate of incorporation or bylaws (or other similar organizational
documents); (
ii
) assuming the
consents and approvals referred to in Section 5.3(d) are obtained, result
in a default (or an event that, with notice or lapse of time or both, would
become a default) or give rise to any right of termination or buy-out by any
third party, cancellation, amendment or acceleration of any obligation or the
loss of any benefit under any Contract which, if it existed on the Distribution
Date, would constitute a Spinco Asset; (
iii
) result in
the creation of a Lien, pledge, security interest, claim or other encumbrance on
any of the issued and outstanding shares of Spinco Common Stock or capital stock
of any Spinco Subsidiary or on any of the Spinco Assets pursuant to any Contract
to which Spinco or any Spinco Subsidiary is a party or by which Spinco or any
Spinco Subsidiary or any of the Spinco Assets is bound or affected; or (
iv
) assuming the
consents and approvals contemplated by Section 5.3(d) are obtained, violate
or conflict with any Order or Law applicable to Spinco or any Spinco Subsidiary,
or any of the properties, businesses or assets of any of the foregoing, other
than, in the case of each of clauses (ii) through (iv), any such violation,
conflict, default, right, loss or Lien which would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on Spinco or
the Spinco Business.
(d) Other
than the Verizon Approvals, no authorization, consent or approval of, or filing
with, any Governmental Authority is necessary for the consummation by Spinco or
any Spinco Subsidiary of the transactions contemplated by this Agreement and the
other Transaction Agreements to which Spinco or any Spinco Subsidiary is a
party, except for such authorizations, consents, approvals or filings that, if
not obtained or made, would not reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect on Spinco or the Spinco
Business.
(a) Verizon
and Spinco have previously made available to the Company complete and correct
copies of the audited combined Statements of Selected Assets, Selected
Liabilities and Parent Funding of the local exchange businesses and related
landline activities of Verizon in the Territory (including Internet access and
certain long distance services provided to customers in those states) for the
fiscal years ended December 31, 2007 and 2008, and the related audited combined
statements of income, cash flows and parent funding for the fiscal years ended
December 31, 2006, 2007 and 2008, including the notes thereto (collectively, the
“
Spinco Financial
Statements
”).
(b) The
Spinco Financial Statements fairly present in all material respects, and any
other financial statements prepared and delivered in accordance with
Section 7.3(h) or Section 7.16 will fairly present in all material
respects, the financial position of the Spinco Business as of the respective
dates thereof, and the results of operations and changes in cash flows, changes
in parent funding or other information included therein for the respective
periods or as of the respective dates then ended, in each case except as
otherwise noted therein and subject, in the case of unaudited interim
statements, to normal year-end audit adjustments. The Spinco
Financial Statements and such other financial statements have been or will be
prepared in accordance with GAAP, applied on a consistent basis, except as
otherwise noted therein.
(c) As
of the date hereof, neither Spinco nor any of the Spinco Subsidiaries is
required to file any form, report, registration statement, prospectus or other
document with the SEC.
(d) Except
as set forth in the Spinco Financial Statements, since December 31, 2008,
Verizon and its Subsidiaries conducting the Spinco Business have not incurred
any liabilities or obligations arising from the Spinco Business that are of a
nature that would be required to be disclosed on a combined balance sheet
prepared consistently with the Spinco Financial Statements or in the notes
thereto prepared in conformity with GAAP, other than liabilities or obligations
that have not had and would not reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect on Spinco or the Spinco
Business.
5.5
Absence of Certain Changes
or Events
. Except as specifically contemplated by this
Agreement or the other Transaction Agreements, since December 31, 2008, the
Spinco Business has been conducted in the ordinary course, consistent with past
practice, and there has not been any state of facts, change, development, event,
effect, condition or occurrence that has had, or would reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on Spinco or
the Spinco Business. From December 31, 2008 to the date hereof, none
of Verizon, Spinco or any of their respective Subsidiaries has taken any action
or failed to take any action, which action or failure, as the case may be, would
constitute a breach of Section 7.2 if taken without the Company’s consent
after the date hereof.
(a) There
is no material investigation or review pending (or, to Spinco’s Knowledge,
threatened) by any Governmental Authority (including, for this purpose only, the
Universal Service Administrative Company and any other administrators designated
by the FCC or a State Regulator) with respect to Spinco or any of the Spinco
Subsidiaries, or with respect to Verizon or any Verizon Subsidiary relating to
the Spinco Business.
(b) There
are no actions, suits, grievances, arbitrations, investigations or proceedings
pending (or, to Spinco’s Knowledge, threatened) against or affecting Spinco or
any of the Spinco Subsidiaries or any of their respective properties or
otherwise affecting the Spinco Business at law or in equity before, and there
are no Orders of any Governmental Authority, in each case, which has had or
would reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on Spinco or the Spinco Business.
5.7
Compliance with
Laws
. The Subsidiaries of Verizon conducting the Spinco
Business are and since January 1, 2006 have been, in compliance with all, and
have received no notice of any violation (as yet unremedied) of any, Laws
applicable to such Subsidiaries of Verizon or any of their respective properties
or assets or otherwise affecting the Spinco Business, except where such
non-compliance, default or violation has not had, and would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect on
Spinco or the Spinco Business. Notwithstanding anything contained in
this Section 5.7, no representation or warranty shall be deemed to be made
in this Section 5.7 in respect of environmental, Tax, employee benefits,
labor or communications Laws matters, which are the subject of the
representations and warranties made in Sections 5.10, 5.11, 5.12, 5.13 and 5.19
of this Agreement, respectively.
5.8
Proxy Statement/Prospectus;
Registration Statements
. None of the information regarding
Verizon or its Subsidiaries, Spinco or the Spinco Subsidiaries, or the Spinco
Business, or the transactions contemplated by this Agreement or any other
Transaction Agreement that is provided by Verizon or Spinco or any of their
respective Subsidiaries specifically for inclusion in, or incorporation by
reference into, the Proxy Statement/Prospectus or the Registration Statements
will, in the case of the definitive Proxy Statement/Prospectus or any amendment
or supplement thereto, at the time of the mailing of the definitive Proxy
Statement/Prospectus and any amendment or supplement thereto, and at the time of
the Company Stockholders Meeting, or, in the case of the Registration
Statements, at the time such registration statement becomes effective, at the
time of the Company Stockholders Meeting (in the case of the Company
Registration Statement), at the Distribution Date and at the Effective Time,
contain an untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they are made, not
misleading. The Spinco Registration Statement will comply in all
material respects with the applicable provisions of the Securities Act or the
Exchange Act, as the case may be, and the rules and regulations promulgated
thereunder, except that no representation is made by Verizon or Spinco with
respect to information provided by the Company specifically for inclusion in, or
incorporation by reference into, the Spinco Registration Statement.
5.9
Information
Supplied
. All documents that Spinco or any Spinco
Subsidiary is responsible for filing with any Governmental Authority in
connection with the transactions contemplated hereby or by any other Transaction
Agreement will comply in all material respects with the provisions of applicable
Law. All information supplied or to be supplied by Spinco or any
Spinco Subsidiary in any document, other than the Proxy Statement/Prospectus and
the Registration Statements, which are addressed in Section 5.8, filed with
any Governmental Authority in connection with the transactions contemplated
hereby and by the other Transaction Agreements will be, at the time of filing,
at the Distribution Date and at the Effective Time, true and correct in all
material respects.
(a) All
material Environmental Permits required pursuant to any Environmental Law for
operation of the Spinco Business (
i
) have been obtained
by the Subsidiaries of Verizon conducting the Spinco Business and (
ii
) are currently in
full force and effect. Subsidiaries of Verizon conducting the Spinco
Business are in material compliance with all material Environmental Permits
required pursuant to any Environmental Law for operation of the Spinco
Business.
(b) To
Spinco’s Knowledge, the Subsidiaries of Verizon conducting the Spinco Business
are, and at the Effective Time Spinco and each of the Spinco Subsidiaries will
be, in material compliance with all applicable Environmental Laws with respect
to the Spinco Business. To Spinco’s Knowledge, there are no events,
conditions, circumstances, activities, practices or incidents related to the
Spinco Business which have given, or would reasonably be likely to give, rise to
any Environmental Claim that has had or would reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Spinco or the
Spinco Business.
(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 Spinco’s Knowledge, threatened against the
Subsidiaries of Verizon conducting the Spinco Business related to any
Environmental Permit or any applicable Environmental Law or any plan, order,
decree, judgment, injunction, notice or demand letter issued, entered,
promulgated or approved thereunder, that has had or would reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect on Spinco
or the Spinco Business.
(d) To
Spinco’s Knowledge, the Subsidiaries of Verizon conducting the Spinco Business
have not generated, stored, used, emitted, discharged or disposed of any
Hazardous Material in the conduct of the Spinco Business except in material
compliance with applicable Environmental Law. To Spinco’s Knowledge,
Verizon and its Subsidiaries have made available to the Company for its review
copies of those reports, audits, studies or analyses in their possession,
custody or control that are material to the representations made in this
Section 5.10.
(e) The
Subsidiaries of Verizon conducting the Spinco Business (
i
) have not,
within the past seven years, received any written request for information, and
have not been notified that they are a potentially responsible party, under the
Comprehensive Environmental Response, Compensation or Liability Law in
connection with the conduct of the Spinco Business and (
ii
) to Spinco’s
Knowledge, have not, within the past seven years, been, and are not reasonably
expected to be, subject to liability for any Environmental Claim arising under
or pursuant to such Laws in connection with the conduct of the Spinco
Business.
(a) Except
as would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on Spinco or the Spinco Business, (
i
) all Tax
Returns relating to the Spinco Business required to be filed have been filed,
(
ii
) all
such Tax Returns are true and correct in all respects as filed or have been
subsequently amended to make such Tax Returns true and correct and not further
amended, (
iii
) all Taxes
shown as due and payable on such Tax Returns, and all Taxes (whether or not
reflected on such Tax Returns) relating to the Spinco Business required to be
paid, have been timely paid in full, (
iv
) all Taxes
relating to the Spinco Business for any taxable period (or a portion thereof)
beginning on or prior to the Closing Date (which are not yet due and payable)
have been properly accrued for in the Spinco Financial Statements and other
books and records of Spinco and (
v
) Verizon and
the Subsidiaries of Verizon conducting the Spinco Business have duly and timely
withheld all Taxes required to be withheld in respect of the Spinco Business and
such withheld Taxes have been either duly and timely paid to the proper Taxing
Authority or properly set aside in accounts for such purpose and will be duly
and timely paid to the proper Taxing Authority.
(b) No
written agreement or other written document waiving or extending, or having the
effect of waiving or extending, the statute of limitations or the period of
assessment or collection of any Taxes relating to the Spinco Business or any
Subsidiary of Verizon conducting the Spinco Business that will be transferred to
Spinco, and no power of attorney with respect to any such Taxes, has been filed
or entered into with any Taxing Authority.
(c) (
i
) No
audits or other administrative proceedings or proceedings before any Taxing
Authority are presently pending with regard to any Taxes or Tax Return of the
Spinco Business or any Subsidiary of Verizon conducting the Spinco Business that
will be transferred to Spinco, as to which any Taxing Authority has asserted in
writing any claim which, if adversely determined, would reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect on Spinco
or the Spinco Business, and (
ii
) no Taxing
Authority is now asserting in writing any deficiency or claim for Taxes or any
adjustment to Taxes with respect to which the Spinco Business or any Subsidiary
of Verizon conducting the Spinco Business that will be transferred to Spinco may
be liable with respect to income or other material Taxes which has not been
fully paid or finally settled.
(d) No
Subsidiary of Verizon conducting the Spinco Business (
i
) is a party to
or bound by or has any obligation under any Tax separation, sharing or similar
agreement or arrangement other than the Tax Sharing Agreement, (
ii
) is or has
been a member of any consolidated, combined or unitary group for purposes of
filing Tax Returns or paying Taxes (other than a group of which Verizon is the
common parent corporation) or has any potential liability for Taxes of another
Person (other than Verizon or any of the Verizon Subsidiaries) under Treasury
Regulations § 1.1502-6 or (
iii
) has entered
into a closing agreement pursuant to Section 7121 of the Code, or any
predecessor provision or any similar provision of state or local
law.
(e) None
of the Spinco Assets is subject to any Tax lien (other than liens for Taxes that
are not yet due and payable).
(f) Section 5.11(f)
of the Spinco Disclosure Letter lists, as of the date hereof, all foreign
jurisdictions in which any Subsidiary of Verizon conducting the Spinco Business
files a material Tax Return.
(g) No
Subsidiary of Verizon conducting the Spinco Business has agreed to make or is
required to make any adjustment for a taxable period ending after the Effective
Time under Section 481(a) of the Code by reason of a change in accounting
method or otherwise, except where such adjustments have not had, and would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on Spinco or the Spinco Business.
(h) No
Subsidiary of Verizon conducting the Spinco Business has constituted either a
“distributing corporation” or a “controlled corporation” (within the meaning of
Section 355(a)(1)(A) of the Code) in a distribution of stock (other than
the Distribution or any Internal Spinoff) qualifying for tax-free treatment
under Section 355 of the Code (
i
) in the two
years prior to the date of this Agreement or (
ii
) in a
distribution that could otherwise constitute part of a “plan” or “series of
related transactions” (within the meaning of Section 355(e) of the Code) in
connection with the Merger.
(i) No
Subsidiary of Verizon conducting the Spinco Business does so through, and no
Spinco Assets are held by, a partnership, limited liability company treated as a
partnership for tax purposes, or any other flow-through entity that, in each
case, is not wholly-owned by Verizon or wholly-owned by Subsidiaries of
Verizon.
(j) None
of Verizon or any Subsidiary of Verizon conducting the Spinco Business has taken
or agreed to take any action that is reasonably likely to (nor is any of them
aware of any agreement, plan or other circumstance that would) prevent the
Tax-Free Status of the Transactions.
(k) No
Subsidiary of Verizon conducting the Spinco Business has engaged in any listed
transaction, or any reportable transaction the principal purpose of which was
tax avoidance, within the meaning of Sections 6011, 6111 and 6112 of the
Code.
(l) At
the Effective Time, Spinco will not be and will not have been a United States
real property holding corporation within the meaning of Section 897(c)(2) of the
Code during the applicable period specified in Section 897(c)(1)(A)(ii) of the
Code.
(a) Section 5.12(a)(i)
of the Spinco Disclosure Letter lists, as of the date hereof, each “employee
benefit plan” (as defined in Section 3(3) of ERISA), and all other benefit,
bonus, incentive, deferred compensation, stock option (or other equity-based
compensation), severance, retention, change in control, welfare (including
post-retirement medical and life insurance), fringe benefit and similar plans,
programs, policies and arrangements, whether or not subject to ERISA and whether
written or oral, sponsored, maintained or contributed to or required to be
maintained or contributed to by Verizon or any Subsidiary of Verizon and
(x) that will (or will be required to) be maintained or contributed to by
Spinco or any of the Spinco Subsidiaries on the Distribution Date, as provided
in the Employee Matters Agreement, (y) with respect to which any Person who
is currently, has been or, on or prior to the Effective Time, is expected to
become, an employee of any Subsidiary of Verizon conducting the Spinco Business
or is (or will become on the Distribution Date) an employee of Spinco or any
Spinco Subsidiary (collectively, “
Spinco Business
Employees
”) is (or will be) entitled to any benefit or (z) with
respect to which Spinco, Spinco Subsidiary or any Subsidiary of Verizon
conducting the Spinco Business has any liability (the “
Spinco Benefit
Plans
”); provided, however, that no employee benefit plan shall be
treated as a Spinco Benefit Plan if pursuant to the Employee Matters Agreement
neither Spinco, any Spinco Subsidiary nor any Subsidiary of Verizon conducting
the Spinco Business has or will have any liability with respect to such
plan. Section 5.12(a)(ii) of the Spinco Disclosure Letter sets forth,
as of the date hereof, a complete and accurate list of each material employment,
consulting, severance, change in control, retention, termination or other
material bilateral contract between any Spinco Business Employee, on the one
hand, and Spinco, any Spinco Subsidiary or any Subsidiary of Verizon conducting
the Spinco Business, on the other hand, in each case, that is not a Spinco
Benefit Plan (collectively, the “
Spinco Benefit
Agreements
”). With respect to each Spinco Benefit Plan and
Spinco Benefit Agreement, Verizon has provided to the Company complete and
accurate copies of (A) such Spinco Benefit Plan or Spinco Benefit Agreement,
including any amendment thereto, (B) each trust, insurance, annuity or other
funding contract related thereto, (C) the most recent financial statements and
actuarial or other valuation reports prepared with respect thereto and (D) the
two most recent annual reports on Form 5500 required to be filed with the IRS
with respect thereto (if any).
(b) No
material liability under Title IV (including Sections 4069 and 4212(c) of ERISA)
or Section 302 of ERISA, or Section 412 of the Code, has been or as of the
Effective Time will have been incurred by Spinco, any Subsidiary of Verizon
conducting the Spinco Business or any ERISA Affiliate of any of them, and no
condition exists that would reasonably be expected to result in Spinco, any
Subsidiary of Verizon conducting the Spinco Business or any ERISA Affiliate of
any of them incurring any such liability, other than liability for premiums due
to the PBGC as of the Distribution Date. The present value of accrued
benefits under each Spinco Benefit Plan that is subject to Title IV of ERISA,
determined as of the date of, and based upon the actuarial assumptions used for
funding purposes in, the most recent actuarial report prepared by such plan’s
actuary with respect to such plan (dated May, 2009), did not exceed the value of
the assets (as determined as of the last business day of the last calendar month
ended prior to the date hereof) of such plan allocable to such accrued
benefits.
(c) (
i
) No
Spinco Benefit Plan is or will be at the Effective Time a “multiemployer plan,”
as defined in Section 3(37) of ERISA and (
ii
) none of
Spinco, the Subsidiaries of Verizon conducting the Spinco Business or any ERISA
Affiliate of any of them has made or suffered or will as of the Effective Time
(including as a result of the consummation of the transactions contemplated by
the Transaction Agreements (including the Distribution)) have made or suffered a
“complete withdrawal” or a “partial withdrawal,” as such terms are respectively
defined in Section 4203 and 4205 of ERISA, the liability for which has not
been satisfied in full.
(d) Each
Spinco Benefit Plan and each Spinco Benefit Agreement has been, or for periods
on or prior to the Distribution Date will have been, operated and administered
in all material respects in accordance with its terms and applicable Law,
including ERISA and the Code. All contributions and premium payments
required to be made with respect to any Spinco Benefit Plan or Spinco Benefit
Agreement have now been, or on the Distribution Date will have been, timely
made, except for (A) any contributions in respect of benefits that have
become due but that are not yet payable under the terms of the applicable Spinco
Benefit Plan or Spinco Benefit Agreement or (B) any contributions in lieu
of which pension plan asset transfers will be made under the terms of the
Employee Matters Agreement. Appropriate reserves or accruals have
been taken on the Spinco financial statements in accordance with GAAP in respect
of any unpaid liabilities incurred or accrued under or in respect of any Spinco
Benefit Plan or Spinco Benefit Agreement. There are no pending or, to
Spinco’s Knowledge, threatened claims by, on behalf of or against any of the
Spinco Benefit Plans in effect as of the date hereof or any Assets thereof,
that, if adversely determined, would reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Spinco or the
Spinco Business, and no matter is pending (other than routine qualification
determination filings, copies of which have been furnished to the Company or
will be promptly furnished to the Company when made) before the IRS, the United
States Department of Labor or the PBGC with respect to any Spinco Benefit
Plan.
(e) Each
Spinco Benefit Plan intended to be “qualified” within the meaning of
Section 401(a) of the Code is so qualified and the trusts maintained
thereunder are exempt from taxation under Section 501(a) of the Code, each
trust maintained under any Spinco Benefit Plan intended to satisfy the
requirements of Section 501(c)(9) of the Code has satisfied such
requirements and, in either such case, no event has occurred or condition is
known to exist that would reasonably be expected to have a material adverse
effect on such tax-qualified status for any such Spinco Benefit Plan or any such
trust.
(f) Except
as contemplated by this Agreement and each other Transaction Agreement, no
Spinco Benefit Plan or Spinco Benefit Agreement, no plan or arrangement
sponsored or maintained by Verizon in which any Spinco Business Employee is, or
on the Distribution Date will be, a participant and no contractual arrangement
between any Subsidiary of Verizon conducting the Spinco Business and any third
party exists, or on the Distribution Date will exist, that could result in (i)
the payment to any current, former or future director, officer, stockholder or
employee of Spinco, any Spinco Subsidiary or any of the Subsidiaries of Verizon
conducting the Spinco Business or of any entity the assets or capital stock of
which have been acquired by a Subsidiary of Verizon conducting the Spinco
Business, of any money or other property or benefits, (ii) the acceleration of
the time of payment or vesting, or trigger any funding, of any compensation or
benefits under any Spinco Benefit Plan or Spinco Benefit Agreement or
(iii) the breach or violation of, default under or limitation on the Company’s
right to amend, modify or terminate any Spinco Benefit Plan or Spinco Benefit
Agreement, in each case as a result of the consummation of the transactions
contemplated by the Transaction Agreements (including the Distribution), whether
or not (a) such payment, acceleration or provision would constitute a “parachute
payment” (within the meaning of Section 280G of the Code) or (b) some other
action or event (including separation from service) would be required to cause
such payment, acceleration or provision to be triggered.
5.13
Labor
Matters
. None of Spinco, any Spinco Subsidiary or any
Subsidiary of Verizon conducting the Spinco Business is a party to, or bound by,
any collective bargaining agreement, employment agreement or other Contract, in
each case, with a labor union or labor organization and no such agreement is
currently being negotiated. To Spinco’s Knowledge, as of the date
hereof no union organizing campaign is in progress with respect to the Spinco
Business Employees. Except for such matters which have not had, and
would not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on Spinco or the Spinco Business, (
a
) as of the
date hereof, there are no strikes or lockouts with respect to Spinco Business
Employees, (
b
) there is no
unfair labor practice, charge, complaint, labor dispute (other than routine
individual grievances) or labor arbitration proceeding pending or, to Spinco’s
Knowledge, threatened against any of Spinco, any Spinco Subsidiary or any
Subsidiaries of Verizon conducting the Spinco Business, (
c
) there are no
actual or, to Spinco’s Knowledge, threatened claims, arbitrations, litigation or
consent decrees relating to employment Laws, terms and conditions of employment
and wages and hours pertaining to Spinco Business Employees or employment
practices affecting Spinco Business Employees in the Spinco Business and (
d
) Spinco, the
Spinco Subsidiaries and the Subsidiaries of Verizon conducting the Spinco
Business are in compliance with all applicable Laws respecting (
i
) employment
and employment practices, (
ii
) terms and
conditions of employment and wages and hours, (
iii
) collective
bargaining and labor relations practices, (
iv
) layoffs, and
(
v
)
immigration. As of the date hereof, none of Spinco, any Spinco
Subsidiary or any Subsidiary of Verizon conducting the Spinco Business has any
liabilities under the WARN Act as a result of any action taken by Spinco, any
Spinco Subsidiary or any Subsidiary of Verizon conducting the Spinco Business
and that has had, or would reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect on Spinco or the Spinco
Business.
(a) Section
5.14(a) of the Spinco Disclosure Letter contains, as of the date hereof, a
complete and accurate list of all registered trademarks owned by Verizon or
any of its U.S. Affiliates used in the Spinco Business. For the
avoidance of doubt, the post-Closing ownership of and/or rights in such
Statutory Intellectual Property and other intellectual property shall be
apportioned between Spinco and the Spinco Subsidiaries, on the one hand, and
Verizon and its other Affiliates, on the other, in accordance with the
Intellectual Property Agreement. Section 5.14(a) of the Spinco
Disclosure Letter contains a complete and accurate list of all Statutory
Intellectual Property owned by Spinco. For the avoidance of doubt,
the post-Closing ownership of and/or rights in such Statutory Intellectual
Property and other intellectual property shall be apportioned between Spinco and
the Spinco Subsidiaries, on the one hand, and Verizon and its other Affiliates,
on the other, in accordance with the Intellectual Property
Agreement.
(b) Neither
Verizon nor any of its U.S. Affiliates, including the Subsidiaries of Verizon
conducting the Spinco Business, have received since January 1, 2006 any written
charge, complaint, claim, demand or notice alleging any infringement,
misappropriation or violation by the Spinco Business of (including any claim
that the Subsidiaries of Verizon conducting the Spinco Business must license or
refrain from using) any Verizon Third Party Intellectual Property material to
the Spinco Business.
(c) To
Spinco’s Knowledge, there are no Liens on any Customer Data, personnel data of
Spinco Business Employees who become employees of the Surviving Corporation or
its Subsidiaries at Closing, or Proprietary Business Information.
(d) Subject
to obtaining the required Verizon IP Consents and to complying with the terms
and conditions of any Contracts applicable to Network Element Software, the
Surviving Corporation and its Subsidiaries, immediately after the Effective
Time, shall have the right to use the Network Element Software in accordance
with such Verizon IP Consents and such Contracts.
(e) The
following software, information, and other Intellectual Property (as defined in
the Intellectual Property Agreement and in the FiOS Intellectual Property
Agreement) will be sufficient to permit the Surviving Corporation and its
Subsidiaries to operate the Spinco Business and the Spinco FS Business (as
defined in the FiOS Intellectual Property Agreement) immediately following the
Effective Time in a manner consistent with the operation of the Spinco Business
and the Spinco FS Business immediately prior to the Effective Time: (1) the
Software as licensed to the Surviving Corporation and its
Subsidiaries (including the restrictions and limitations contained in the
Software License Agreement); (2) the FiOS Software as licensed to the Surviving
Corporation and its Subsidiaries (including the restrictions and limitations
contained in the FiOS Software License Agreement); (3) the Licensed Intellectual
Property (as defined in the Intellectual Property Agreement and the FiOS
Intellectual Property Agreement) as licensed to the Surviving
Corporation and its Subsidiaries (including the restrictions and limitations
contained in the Intellectual Property Agreement and the FiOS Intellectual
Property Agreement); (4) the Proprietary Business Information, the Designated
Spinco Statutory Intellectual Property, Designated Spinco Intellectual Property,
and the Spinco Customer Listing Data (each as defined in the Intellectual
Property Agreement) in each case as licensed or transferred to the Surviving
Corporation and its Subsidiaries (including the restrictions and limitations
contained in the Intellectual Property Agreement); (5) the Proprietary FS
Business Information, Spinco FS Intellectual Property, and the Spinco FS
Customer Listing Data (each as defined in the FiOS Intellectual Property
Agreement) in each case as licensed or transferred to the Surviving Corporation
and its Subsidiaries (including the restrictions and limitations contained in
the FiOS Intellectual Property Agreement); (6) the licenses set forth in the
Intellectual Property Agreement with respect to the Licensed Excluded Marks (as
defined in the Intellectual Property Agreement); (7) the Licensed Intellectual
Property (as defined in the FiOS Intellectual Property Agreement) as licensed to
the Surviving Corporation and its Subsidiaries (including the restrictions and
limitations contained in the FiOS Intellectual Property Agreement, and the
licenses set forth in the FiOS Trademark License Agreement attached as an
Exhibit to the FiOS Intellectual Property Agreement); (8) the West
Third Party Intellectual Property (as defined in the Intellectual Property
Agreement and the FiOS Intellectual Property Agreement); and (9) the Third Party
Software.
(a) Section
5.15(a) of the Spinco Disclosure Letter sets forth, and Verizon has made
available to the Company true and complete copies of, all Spinco Material
Contracts in effect as of the date of this Agreement. For purposes of
this Agreement, the term “
Spinco Material
Contracts
” means any of the following Contracts (other than this
Agreement, each other Transaction Agreement, the documents relating to the
Special Payment Financing and the Spinco Securities, the Spinco Benefit Plans
and the Spinco Benefit Agreements), whether entered into prior to or after the
date hereof, to which Verizon or any Verizon Subsidiary, with respect to the
Spinco Business only, is a party: (
i
) any “material
contract” (as defined in item 601(b)(10) of Regulation S-K of the SEC) as such
term would be applied to the Spinco Business as if it is a separate entity,
(
ii
) any
non-competition agreement or any other Contract that restricts in any material
respect the conduct of any line of business, (
iii
) any
partnership, joint venture or similar Contract material to the Spinco Business,
and (iv) any Contract that will govern the terms of any Indebtedness (or
guarantees thereof) of Spinco or any Spinco Subsidiary after the Effective Time
in excess of $50,000,000.
(b) (
i
) Neither
Verizon nor any Subsidiary of Verizon is in breach of or default under the terms
of any Spinco Material Contract where such breach or default has had, or would
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on Spinco or the Spinco Business, (
ii
) to Spinco’s
Knowledge, no other party to any Spinco Material Contract is in breach of or in
default under the terms of any Spinco Material Contract where such breach or
default has had, or would reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on Spinco or the Spinco Business and (
iii
) each Spinco
Material Contract is a valid and binding obligation of Verizon or any Subsidiary
of Verizon which is a party thereto and, to Spinco’s Knowledge, of each other
party thereto, and is in full force and effect, except insofar as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar Laws affecting creditors’ rights
generally, or by principles governing the availability of equitable
remedies.
5.16
Board and Stockholder
Approval
. The Boards of Directors of Verizon and Spinco,
in each case, at a meeting duly called, have unanimously approved this Agreement
and declared it advisable. As of the date hereof, the sole
stockholder of Spinco is Verizon. Immediately after execution of this
Agreement, Verizon will approve and adopt (the “
Spinco Stockholder
Approval
”), as Spinco’s sole stockholder, all aspects of this Agreement
and the other Transaction Agreements and the transactions contemplated hereby
and thereby which require the consent of Spinco’s stockholder under the DGCL,
Spinco’s certificate of incorporation or Spinco’s bylaws. The
approval of Verizon’s stockholders is not required to effect the transactions
contemplated by the Distribution Agreement, this Agreement or the other
Transaction Agreements. Upon obtaining the Spinco Stockholder
Approval, the approval of Spinco’s stockholders after the Distribution Date will
not be required to effect the transactions contemplated by this Agreement,
including the Merger, unless this Agreement is amended in accordance with
Section 251(d) of the DGCL after the Distribution Date and such approval is
required, solely as a result of such amendment, under the DGCL or by the
IRS.
(a) After
giving effect to the Contribution and the other transactions described in or
contemplated by the Distribution Agreement, and subject to the receipt of all
applicable approvals and consents, including those contemplated by
Section 5.3(d), Spinco, together with the Spinco Subsidiaries, will have,
in all material respects, good and valid title to, or in the case of leased
property, valid leasehold interests in, all of the material Spinco
Assets.
(b) Subject
to the immediately following sentence, the assets of Spinco and the Spinco
Subsidiaries as at the Closing Date (assuming the consummation of the
Contribution), together with the licenses and services to be made available
pursuant to the Transaction Agreements, will be sufficient to permit the
Surviving Corporation and its Subsidiaries to operate the Spinco Business
independent from Verizon and its Subsidiaries (including having the ability to
interact with retail and carrier customers, to provide for acceptances, orders
and trouble reports and to dispatch personnel to care for those orders and
trouble reports, to bill for services and to collect accounts receivable)
immediately following the Effective Time (
x
) in all
material respects, in compliance with Law and (
y
) in a manner
substantially consistent with the operation of the Spinco Business on the date
hereof and immediately prior to the Effective Time. Notwithstanding
the foregoing, it is understood and agreed that:
(i) the
Company and the Surviving Corporation may not be assigned those assets and
services listed or described in Section 5.17(b)(i) of the Spinco Disclosure
Letter, which are necessary for the conduct of the Spinco Business;
(ii) the
Company and the Surviving Corporation are not being assigned the Retained
Contracts and the services provided under the Retained Contracts are necessary
for the conduct of the Spinco Business;
provided
that the
material services provided to the Spinco Business under the Retained Contracts
will be provided as part of the Realignment by means of entering into Contracts
on behalf of Spinco with third party vendors (whether or not the same as those
under the Retained Contracts) or with Verizon or Subsidiaries of Verizon unless
(x) they are listed on Section 5.17(b)(ii) of the Spinco Disclosure Letter, (y)
the Company and Verizon agree pursuant to Section 7.24 to omit such services as
part of the Realignment or (z) they involve Verizon Third Party Intellectual
Property;
(iii) as
contemplated by the Employee Matters Agreement, certain of the administrative
and regional headquarters management employees currently operating or advising
the Spinco Business may not be transferred to Spinco and the Spinco Subsidiaries
and the immediately preceding sentence assumes that the Surviving Corporation
will provide such equivalent personnel as may be appropriate for the benefit of
the Spinco Business;
(iv) Verizon
Third Party Intellectual Property are needed to operate the Spinco Business and
the immediately preceding sentence assumes that the Surviving Corporation will
procure rights and/or licenses in such Verizon Third Party Intellectual
Property;
(v) the
Realignment may alter the manner in which certain aspects of the Spinco Business
are conducted, and such alterations may include outsourcing to third party
vendors or to Verizon or Subsidiaries of Verizon certain services and activities
previously provided to the Spinco Business by Verizon or Subsidiaries of
Verizon, provided that such alterations (X) shall not involve any material
alterations to the manner in which customers engage with the Spinco Business for
sales and service, the manner in which the Spinco Business delivers such sales
and service, billing and remittance processing, credit and collections, field
service and dispatch, network design, network configuration, employee training,
payphone administration, the manner of wholesale customer interfacing and
related provisioning, fleet operations and real estate management and (Y) shall
not materially diminish the overall standards of quality, timeliness and
efficiency for customer services from those prevailing immediately prior to such
Realignment, taking into account reasonable fluctuations that occur from month
to month;
(vi) the
Company and Verizon may agree prior to the completion of the Realignment to omit
certain operational functions from the Spinco Business to the extent the Company
wishes to integrate such functions with the Company’s existing operations as of
the Closing and the foregoing sentence assumes the completion of any such
integration;
(vii) the
only assets that will be held by Spinco and the Spinco Subsidiaries as of the
Closing with respect to the activities described in clauses (ii)(B) and (ii)(C)
of the definition of “Spinco Business” will be customer relationships (and, in
the case of Clause (ii)(C), those assets listed in item (G) of the definition of
Spinco Assets) and the Surviving Corporation will need to procure all other
assets needed to undertake such activities;
(viii) the
Spinco Business conducted in West Virginia will need to be integrated with the
operations of the Company on the Closing Date and the immediately preceding
sentence assumes that such integration has occurred without any services or
licenses from Verizon or any Verizon Subsidiaries after the Effective
Time;
(ix) the
manner in which the Spinco Business is conducted between the date hereof and the
Effective Time may change on a basis consistent with changes made in the
ordinary course of business during such period to the business of other
Affiliates of GTE Corporation offering local exchange telecommunications
services;
(x) the
immediately preceding sentence shall not be deemed a representation or warranty
as to any revenue, costs or expenses associated with the conduct of the Spinco
Business immediately following the Effective Time; and
(xi) the
immediately preceding sentence assumes the receipt of all necessary
authorizations, approvals, consents or waivers required by Law, by Governmental
Authorities or other third Persons pursuant to their Contract rights in
connection with the transactions contemplated by the Distribution Agreement and
this Agreement and pursuant to the Transaction Agreements.
(a) Section 5.18(a)
of the Spinco Disclosure Letter sets forth the address of all real property that
is, or will be following the Contribution, Spinco Owned Real Property the loss
of which would be material and adverse to the Spinco Business. After
giving effect to the Contribution and the other transactions contemplated by the
Distribution Agreement and subject to the receipt of all applicable consents or
approvals, Spinco, or the Spinco Subsidiaries, will have, in all material
respects, good and valid and marketable title to all of the Spinco Owned Real
Property identified on Section 5.18(a) of the Spinco Disclosure Letter,
free and clear of all encumbrances other than Permitted
Encumbrances. Neither Verizon nor any of its Subsidiaries has leased
or otherwise granted any third party any right to use or occupy any of the
Spinco Owned Real Property identified on Section 5.18(a) of the Spinco
Disclosure Letter, and there are no outstanding options, rights of refusal,
rights of first offer, rights of reverter or other third party rights in Spinco
Owned Real Property identified on Section 5.18(a) of the Spinco Disclosure
Letter.
(b) Section 5.18(b)
of the Spinco Disclosure Letter sets forth a list of the real property leases
which are, or will be following the Contribution (assuming the Contribution
occurred on the date hereof), leases of Spinco or a Spinco Subsidiary (“
Spinco
Leases
”). Section 5.18(b) of the Spinco Disclosure Letter
sets forth the subleases in respect of Spinco Leases as of the date hereof (the
“
Spinco
Subleases
”). Spinco has previously made available to the
Company complete and correct copies of each of the Spinco Leases and Spinco
Subleases. With respect to Spinco Leases and Spinco Subleases, (
i
) each is
enforceable in accordance with its terms, except insofar as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or similar Laws affecting creditors’ rights generally, or by principles
governing the availability of equitable remedies, (
ii
) there is no
material default or material breach of a covenant by Verizon or any of its
Subsidiaries, (
iii
) no event has
occurred which with or without the giving of notice or lapse of time, or both,
would constitute such a material default or material breach and (
iv
) there has been no
collateral assignment or other security interest and they are not subject to any
encumbrance other than Permitted Encumbrances.
(a) Spinco
and the Spinco Subsidiaries hold, or on the Distribution Date will hold, all
permits, licenses, franchises, waivers, orders, approvals, concessions,
registrations and other authorizations issued or provided by the FCC, state
public service or public utility commissions or other similar state regulatory
bodies (the “
State
Regulators
”) or any other Governmental Authority relating to
communications regulatory matters (including multichannel video) under all Laws
currently in effect that are necessary for Spinco and/or the Spinco Subsidiaries
to own their respective assets or operate the applicable portion of the Spinco
Business as currently conducted (“
Spinco Licenses
”),
except such Spinco Licenses the failure of which to so hold has not had and
would not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on Spinco or the Spinco Business.
(b) Verizon
and each of the Contributing Companies in the conduct of the Spinco Business has
complied since January 1, 2006 with, and currently is not in violation of, any
requirement of Law relating to communications regulatory matters (including
multichannel video) to which Spinco or the Spinco Business is subject, except to
the extent that any such non-compliance or violation has not resulted and would
not reasonably be expected to result in any material burden, fine or consequence
on the Spinco Business. Without limiting the foregoing, there is not
pending, nor to Spinco’s Knowledge, threatened against Verizon or any of its
Subsidiaries any application, action, petition, objection or other pleading, or
any proceeding by or before the FCC or any State Regulators which questions or
contests the validity of, or any rights of the holder under, or seeks the
non-renewal, revocation or suspension of any Spinco License. Since
January 1, 2006, neither Verizon nor any of the Contributing Companies has
received written notice of an investigation or review by any Governmental
Authority (including, for this purpose only, the Universal Service
Administrative Company and any other administrators designated by the FCC or a
State Regulator) relating to communications regulatory matters (including
multichannel video) with respect to a material violation by Verizon or any of
the Contributing Companies (with respect to the use or operation of the Spinco
Assets) of any requirement of Law relating to the Spinco Business, excluding any
notice in respect of a matter that has been withdrawn or resolved without the
imposition of material penalties, burdens or fines. Spinco (
a
) is capable of
providing local number portability in material compliance with 47 U.S.C.
§ 251(b)(2) and the implementing rules of the FCC; (
b
) complies in all
material respects with the requirements of the Communications Assistance for Law
Enforcement Act, 47 U.S.C. § 1001
et seq
., and the implementing
rules of the FCC (“
CALEA
”); and (
c
) is capable of
providing 911 service in material compliance with 47 U.S.C. § 251(e)(3) and the
implementing rules of the FCC and applicable state Laws of the State
Regulators.
(c) As
of the date hereof, none of Verizon or any Verizon Subsidiary has, with respect
to the Spinco Business, (i) received notice from any Governmental Authority
with respect to an intention to enforce multichannel video customer service
standards pursuant to the Communications Act or (ii) agreed with any
Governmental Authority to establish multichannel video customer service
standards that exceed the standards in the Communications Act.
5.20
Company Common
Stock
. Neither Verizon nor Spinco owns (directly or
indirectly, beneficially or of record) or is a party to any agreement,
arrangement or understanding for the purpose of acquiring, holding, voting or
disposing of, in each case, any shares of capital stock of the Company (other
than as contemplated by this Agreement), in each case other than any ownership
by pension or other benefit plans sponsored for employees of Verizon and/or its
Subsidiaries.
5.21
Affiliate
Transactions
. There are no transactions or Contracts of
the type that would be required to be disclosed by Subsidiaries of Verizon
conducting the Spinco Business under Item 404 of Regulation S-K if such
companies were a company subject to such Item between or among (
a
) Verizon,
Spinco or any Spinco Subsidiary, on the one hand, and (
b
) any
individual who is a “named executive officer” (as such term is defined in
Section 402 of Regulation S-K) of Verizon, Spinco or any Spinco Subsidiary,
on the other hand, in each case to the extent such transactions or Contracts
relate to the Spinco Business but in each case excluding compensation received
as an employee in the ordinary course.
REPRESENTATIONS AND
WARRANTIES OF THE COMPANY
Except as
disclosed (i) in the Company SEC Documents (including the exhibits thereto),
other than disclosures in the “Risk Factors” or “Forward-Looking Statements”
sections thereof, or (ii) in the corresponding section of the Disclosure Letter
delivered by the Company to Verizon and Spinco immediately prior to the
execution of this Agreement (the “
Company Disclosure
Letter
”), the Company represents and warrants to Verizon and Spinco as
follows:
(a) The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware, has all requisite power and authority
to own, lease and operate its properties and assets and to carry on its business
as presently conducted, and is duly qualified and licensed to do business and is
in good standing in each jurisdiction in which the ownership or leasing of its
property or the conduct of its business requires such qualification, except for
jurisdictions in which the failure to be so qualified or to be in good standing
would not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on the Company. The copies of the Company’s
certificate of incorporation and bylaws and the certificate of incorporation and
bylaws (or other similar organizational documents) of any Company Subsidiary
that is a Significant Subsidiary of the Company previously made available to
Verizon and Spinco are complete and correct copies of such documents as in full
force and effect on the date hereof.
(b) Section 6.1(b)
of the Company Disclosure Letter sets forth, as of the date hereof, a list of
the Company Subsidiaries and their respective jurisdictions of incorporation or
organization, together with a designation of those Company Subsidiaries
constituting Significant Subsidiaries of the Company.
(a) As
of the date hereof, the authorized capital stock of the Company consists of
600,000,000 shares of Company Common Stock and 50,000,000
shares of preferred
stock of the Company. As of May 11, 2009, 312,356,567 shares of Company
Common Stock were issued and outstanding, 6,995,305 shares of Company Common
Stock were reserved for issuance and no share of preferred stock of the Company
were issued or outstanding. All of the issued and outstanding shares of
Company Common Stock are validly issued, fully paid and nonassessable and free
of preemptive rights and were issued in compliance with all applicable
securities Laws, including all applicable registration requirements under the
Securities Act (unless an exemption from registration was available for a
particular issuance).
(b) No
bonds, debentures, notes or other indebtedness of the Company or any of the
Company Subsidiaries having the right to vote (or convertible into or
exercisable for securities having the right to vote) on any matters on which
holders of shares of capital stock of the Company (including Company Common
Stock) may vote (“
Company Voting Debt
”)
are, or at the Distribution Date will be, issued or outstanding.
(c) Except
as set forth in Section 6.2(a) above, there are no outstanding securities,
options, warrants, convertible securities, calls, rights, commitments or
Contracts of any kind to which the Company or any of the Company Subsidiaries is
a party or by which any of them is bound obligating the Company or any of the
Company Subsidiaries to issue, deliver or sell, or cause to be issued, delivered
or sold, additional shares of Company Common Stock, Company Voting Debt or other
voting securities of the Company or any of the Company Subsidiaries or
obligating the Company or any of the Company Subsidiaries to issue, grant,
extend, redeem, acquire or enter into any such security, option, warrant,
convertible security, call, right, commitment or Contract.
(d) Except
as contemplated by this Agreement, there are no stockholders agreements, voting
trusts or other Contracts to which the Company is a party or by which it is
bound relating to voting or transfer of any shares of capital stock of the
Company or the nomination of any directors thereof.
(a) The
Company has the corporate power and authority to enter into this Agreement and
each other Transaction Agreement to which it is, or as of the Effective Time
will be, a party, and subject to obtaining the Requisite Approval, to carry out
its obligations hereunder and thereunder. The execution, delivery and
performance by the Company of this Agreement and each other Transaction
Agreement to which it is, or as of the Effective Time will be, a party and the
consummation of the transactions contemplated hereby and thereby have been duly
authorized by all requisite corporate action on the part of the Company, subject
to obtaining the Requisite Approval.
(b) This
Agreement has been duly executed and delivered by the Company and, assuming the
due authorization, execution and delivery by Verizon and Spinco, constitutes a
legal, valid and binding agreement of the Company, enforceable against the
Company in accordance with its terms (except insofar as such enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar Laws affecting creditors’ rights generally, or by principles governing
the availability of equitable remedies). As of immediately prior to
the Effective Time, each other Transaction Agreement to which the Company is a
party will have been duly executed and delivered by the Company and will,
assuming the due authorization, execution and delivery by the other parties
thereto, constitute a legal, valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms (except insofar as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar Laws affecting creditors’ rights
generally, or by principles governing the availability of equitable
remedies).
(c) Neither
the execution and delivery by the Company of this Agreement and each other
Transaction Agreement to which the Company is, or as of the Effective Time will
be, a party, nor the consummation by the Company of the transactions
contemplated hereby or thereby, or performance by the Company of any of the
provisions hereof or thereof, will (
i
) violate or
conflict with any provision of the Company’s certificate of incorporation or
bylaws; (
ii
) assuming the
consents and approvals referred to in Section 6.3(d) below are obtained,
result in a default (or an event that, with notice or lapse of time or both,
would become a default) or give rise to any right of termination by any third
party, cancellation, amendment or acceleration of any obligation or the loss of
any benefit under, any Contract to which the Company or any of the Company
Subsidiaries is a party or by which the Company or any of the Company
Subsidiaries is bound or affected; (
iii
) result in
the creation of a Lien, pledge, security interest, claim or other encumbrance on
any of the issued and outstanding shares of Company Common Stock or on any of
the assets of the Company or any of the Company Subsidiaries pursuant to any
Contract to which the Company or any of the Company Subsidiaries is a party or
by which the Company or the Company Subsidiaries is bound or affected; or (
iv
) assuming the
consents and approvals contemplated by Section 6.3(d) below are obtained,
violate or conflict with any Order or Law applicable to the Company or any of
the Company Subsidiaries, or any of the properties, business or assets of any of
the foregoing, other than, in the case of each of clauses (ii) through
(iv), any such violation, conflict, default, right, loss or Lien which would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on the Company.
(d) Other
than in connection with or in compliance with (
i
) the
provisions of the DGCL, (
ii
) the
Securities Act, (
iii
) the
Exchange Act, (
iv
) the HSR Act,
(
v
) the
Communications Act and applicable rules and regulations thereunder and the FCC
Rules, (
vi
) the
approvals set forth in Section 6.3(d) of the Company Disclosure Letter and
(
vii
) the
Requisite Approval (collectively, the “
Company Approvals
”),
no authorization, consent or approval of, or filing with, any Governmental
Authority is necessary for the consummation by the Company of the transactions
contemplated by this Agreement, except for such authorizations, consents,
approvals or filings that, if not obtained or made, have not had and would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on the Company. Notwithstanding the foregoing,
although the approvals set forth in Section 6.3(d) of the Company
Disclosure Letter constitute all those authorizations, consents, approvals and
filings that the Company reasonably believes, as of the date of this Agreement,
are necessary to obtain or make prior to consummation of the transactions
contemplated by this Agreement, additional State Regulators or other
Governmental Authorities not set forth in Section 6.3(d) of the Company
Disclosure Letter may require or seek to require the Company to obtain
authorizations, consents or approvals, or make filings, prior to consummation of
the transactions contemplated by this Agreement, and if such additional
authorizations, consents, approval or filings are required, the Company’s
representations and warranties in this Section 6.3(d) shall not be deemed
to have failed to be true and correct on account of such requirement with
respect to authorizations, consents, approvals or filings not set forth in
Section 6.3(d) of the Company Disclosure Letter.
(a) The
Company has previously made available to Spinco complete and correct copies
of:
(i) the
Company’s Annual Report on Form 10-K filed with the SEC under the Exchange Act
for the year ended December 31, 2008, including the Company’s audited
consolidated balance sheet as of December 31, 2007 and 2008, and the related
audited consolidated statements of operations, cash flows and stockholders’
equity for the fiscal years ended December 31, 2008, 2007 and 2006 (the “
Company Financial
Statements
”);
(ii) the
definitive proxy statement in respect of the Company’s 2009 annual meeting of
stockholders, filed by the Company with the SEC under the Exchange Act on
April 6,
2009;
(iii) all
current reports on Form 8-K (excluding any Form 8-K that is deemed “furnished”
under the Exchange Act) filed by the Company with the SEC under the Exchange Act
since January 1, 2009 and prior to the date hereof; and
(iv) each
other form, report, schedule, registration statement and definitive proxy
statement filed by the Company or any of its Subsidiaries with the SEC since
January 1, 2009 and prior to the date hereof (collectively, and together with
the items specified in clauses (i) through (iii) above, the “
Company SEC
Documents
”).
(b) As
of their respective filing dates (and if amended or superseded by a filing prior
to the date of this Agreement, then on the date of such filing), the Company SEC
Documents complied in all material respects, and each other form, report,
schedule, registration statement and definitive proxy statement filed by the
Company or any of its Subsidiaries after the date hereof and prior to the
Effective Time (the “
Additional Company SEC
Documents
”) will comply in all material respects, with the requirements
of the Securities Act or the Exchange Act, as the case may be, and, subject to
the last sentence of Section 6.8, none of such Company SEC Documents when
filed contained, or will contain, an untrue statement of a material fact or
omitted, or will omit, to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading. The audited consolidated
financial statements and unaudited consolidated interim financial statements
included in the Company SEC Documents and the Additional Company SEC Documents
(including any related notes and schedules) fairly present in all material
respects, or will fairly present in all material respects, the financial
position of the Company and its consolidated Subsidiaries as of the respective
dates thereof and the results of operations and changes in cash flows, changes
in stockholders’ equity or other information included therein for the respective
periods or as of the respective dates then ended, in each case except as
otherwise noted therein and subject, in the case of unaudited interim
statements, to normal year-end audit adjustments. The Company
Financial Statements and such other financial statements have been or will be
prepared in accordance with GAAP, consistently applied, except as otherwise
noted therein. Since January 1, 2006, the Company has timely filed
all reports, registration statements and other filings required to be filed with
the SEC under the rules and regulations of the SEC. Since December
31, 2008, the Company and the Company Subsidiaries have not incurred any
liabilities or obligations that are of a nature that would be required to be
disclosed on a consolidated balance sheet prepared consistently with the Company
Financial Statements or in the notes thereto prepared in conformity with GAAP,
other than liabilities or obligations that have not had and would not reasonably
be expected to have, individually or in the aggregate, a Material Adverse Effect
on the Company.
(c) The
Company and the Company Subsidiaries have designed and maintain a system of
internal controls over financial reporting (as defined in Rules 13a-15(f) and
15d-15(f) of the Exchange Act) sufficient to provide reasonable assurances
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
GAAP. The Company has designed and maintains disclosure controls
and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act)
to ensure that material information required to be disclosed by the Company in
the reports that it files or submits under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in the
SEC’s rules and regulations and is accumulated and communicated to the Company’s
management as appropriate to allow timely decisions regarding required
disclosure and to make the certifications of the principal executive officer and
principal financial officer of the Company required pursuant to Sections 302 and
906 of the Sarbanes-Oxley Act of 2002, as amended (the “
Sarbanes-Oxley
Act
”).
6.5
Absence of Certain Changes
or Events
. Except as specifically contemplated by this
Agreement or the other Transaction Agreements, since December 31, 2008,
each of the Company and the Company Subsidiaries has conducted its business in
the ordinary course, consistent with past practice, and there has not been any
state of facts, change, development, event, effect, condition or occurrence that
has had, or would reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on the Company. From December
31, 2008 to the date hereof, none of the Company or any of the Company
Subsidiaries has taken any action or failed to take any action, which action or
failure, as the case may be, would constitute a breach of Section 7.1 if
taken without the consent of Verizon and Spinco after the date
hereof.
(a) There
is no material investigation or review pending (or, to the Company’s Knowledge,
threatened) by any Governmental Authority (including, for this purpose only, the
Universal Service Administrative Company and any other administrators designated
by the FCC or a State Regulator) with respect to the Company or any of the
Company Subsidiaries.
(b) There
are no actions, suits, grievances, arbitrations, investigations or proceedings
pending (or, to the Company’s Knowledge, threatened) against or affecting the
Company or any of the Company Subsidiaries or any of their respective properties
at law or in equity before, and there are no Orders of any Governmental
Authority, in each case, which has had or would reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on the
Company.
6.7
Compliance with
Laws
. The Company and the Company Subsidiaries are and
since January 1, 2006 have been, in compliance with all, and have received no
notice of any violation (as yet unremedied) of any, Laws applicable to the
Company, such Company Subsidiaries or any of their respective properties or
assets, except where such non-compliance, default or violation has not had, and
would not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on the Company. Notwithstanding anything
contained in this Section 6.7, no representation or warranty shall be
deemed to be made in this Section 6.7 in respect of environmental,
Tax, employee benefits, labor or communications Laws matters, which
are the subject of the representations and warranties made in Sections
6.10, 6.11, 6.12, 6.13 and 6.15 of this
Agreement, respectively.
6.8
Proxy Statement/Prospectus;
Registration Statements
. None of the information regarding
the Company or the Company Subsidiaries or the transactions contemplated by this
Agreement provided by the Company specifically for inclusion in, or
incorporation by reference into, the Proxy Statement/Prospectus or the
Registration Statements will, in the case of the definitive Proxy
Statement/Prospectus or any amendment or supplement thereto, at the time of the
mailing of the definitive Proxy Statement/Prospectus and any amendment or
supplement thereto, and at the time of the Company Stockholders Meeting, or, in
the case of the Registration Statements, at the time such registration statement
becomes effective, at the time of the Company Stockholders Meeting (in the case
of the Company Registration Statement), at the Distribution Date and at the
Effective Time, contain an untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in the light of the circumstances under which they are
made, not misleading. The Company Registration Statement and the
Proxy Statement/Prospectus will comply in all material respects with the
applicable provisions of the Securities Act and the Exchange Act and the rules
and regulations promulgated thereunder, except that no representation is made by
the Company with respect to information provided by Verizon or Spinco
specifically for inclusion in, or incorporation by reference into, the Company
Registration Statement or the Proxy Statement/Prospectus.
6.9
Information
Supplied
. All documents that the Company is responsible
for filing with any Governmental Authority in connection with the transactions
contemplated hereby or by any other Transaction Agreement will comply in all
material respects with the provisions of applicable Law. All
information supplied or to be supplied by the Company in any document, other
than the Proxy Statement/Prospectus and the Registration Statements, which are
addressed in Section 6.8, filed with any Governmental Authority in
connection with the transactions contemplated hereby and by the other
Transaction Agreements will be, at the time of filing, at the Distribution Date
and at the Effective Time, true and correct in all material
respects.
(a) All
material Environmental Permits required pursuant to any Environmental Law for
operation of the business of the Company (
i
) have been obtained
by the Company and the Company Subsidiaries and (
ii
) are currently in
full force and effect. The Company and each of the Company
Subsidiaries are in material compliance with all material Environmental Permits
required pursuant to any Environmental Law for operation of the business of the
Company.
(b) To
the Company’s Knowledge, the Company and each of the Company Subsidiaries are,
and at the Effective Time will be, in material compliance with all applicable
Environmental Laws with respect to the business of the Company . To
the Company’s Knowledge, there are no events, conditions, circumstances,
activities, practices or incidents related to the business of the Company which
have given, or would reasonably be likely to give, rise to any Environmental
Claim that has had or would reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect on the Company.
(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 Company’s Knowledge, threatened against the
Company or any of the Company Subsidiaries 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, that has had or would reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on the
Company.
(d) To
the Company’s Knowledge, the Company and the Company Subsidiaries have not
generated, stored, used, emitted, discharged or disposed of any Hazardous
Material except in material compliance with applicable Environmental
Law. To the Company’s Knowledge, the Company and the Company
Subsidiaries have made available to Verizon for its review copies of those
reports, audits, studies or analyses in their possession, custody or control
that are material to the representations made in this
Section 6.10.
(e) The
Company and each of the Company Subsidiaries (
i
) have not, within
the past seven years, received any written request for information, and have not
been notified that they are a potentially responsible party, under the
Comprehensive Environmental Response, Compensation or Liability Law and (
ii
) to the
Company’s Knowledge, have not, within the past seven years, been, and are not
reasonably expected to be, subject to liability for any Environmental Claim
arising under or pursuant to such Laws.
(a) Except
as would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on the Company, (
i
) all Tax
Returns relating to the Company and the Company Subsidiaries required to be
filed have been filed, (
ii
) all such Tax
Returns are true and correct in all respects as filed or have been subsequently
amended to make such Tax Returns true and correct and not further amended,
(
iii
) all
Taxes shown as due and payable on such Tax Returns, and all Taxes (whether or
not reflected on such Tax Returns) relating to the Company or any the Company
Subsidiary required to be paid, have been timely paid in full, (
iv
) all Taxes
relating to the Company and the Company Subsidiaries for any taxable period (or
a portion thereof) beginning on or prior to the Closing Date (which are not yet
due and payable) have been properly accrued for in the books and records of the
Company, and (
v
) the Company
and the Company Subsidiaries have duly and timely withheld all Taxes required to
be withheld and such withheld Taxes have been either duly and timely paid to the
proper Taxing Authority or properly set aside in accounts for such purpose and
will be duly and timely paid to the proper Taxing Authority.
(b) No
written agreement or other written document waiving or extending, or having the
effect of waiving or extending, the statute of limitations or the period of
assessment or collection of any Taxes relating to the Company or any Company
Subsidiary, and no power of attorney with respect to any such Taxes, has been
filed or entered into with any Taxing Authority.
(c) (i) No
audits or other administrative proceedings or proceedings before any Taxing
Authority are presently pending with regard to any Taxes or Tax Return of the
Company or any Company Subsidiary, as to which any Taxing Authority has asserted
in writing any claim which, if adversely determined, would reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect on
the Company, and (ii) no Taxing Authority is now asserting in writing any
deficiency or claim for Taxes or any adjustment to Taxes with respect to which
the Company or any Company Subsidiary may be liable with respect to income or
other material Taxes which has not been fully paid or finally
settled.
(d) Neither
the Company nor any Company Subsidiary (
i
) is a party to
or bound by or has any obligation under any Tax separation, sharing or similar
agreement or arrangement other than the Tax Sharing Agreement and the Company
Tax Sharing Agreement, (
ii
) is or has
been a member of any consolidated, combined or unitary group for purposes of
filing Tax Returns or paying Taxes (other than a group of which the Company is
the common parent corporation) or has any potential liability for Taxes of
another Person (other than the Company or any of the Company Subsidiaries under
Treasury Regulations § 1.1502-6) or (
iii
) has entered
into a closing agreement pursuant to Section 7121 of the Code, or any
predecessor provision or any similar provision of state or local
law.
(e) None
of the assets of the Company or any of the Company Subsidiaries is subject to
any Tax lien (other than liens for Taxes that are not yet due and
payable).
(f) Section 6.11(f)
of the Company Disclosure Letter lists, as of the date hereof, all foreign
jurisdictions in which the Company or any Company Subsidiary files a material
Tax Return.
(g) Neither
the Company nor any Company Subsidiary has agreed to make or is required to make
any adjustment for a taxable period ending after the Effective Time under
Section 481(a) of the Code by reason of a change in accounting method or
otherwise, except where such adjustments have not had, and would not reasonably
be expected to have, individually or in the aggregate, a Material Adverse Effect
on the Company.
(h) Neither
the Company nor any Company Subsidiary has constituted either a “distributing
corporation” or a “controlled corporation” (within the meaning of
Section 355(a)(1)(A) of the Code) in a distribution of stock qualifying for
tax-free treatment under Section 355 of the Code (i) in the two years prior
to the date of this Agreement or (ii) in a distribution that could otherwise
constitute part of a “plan” or “series of related transactions” (within the
meaning of Section 355(e) of the Code) in connection with the
Merger.
(i) Neither
the Company nor any of the Company Subsidiaries has taken or agreed to take any
action that is reasonably likely to (nor are any of them aware of any agreement,
plan or other circumstance that would) prevent the Tax-Free Status of the
Transactions.
(j) Neither
the Company nor any Company Subsidiary has engaged in any listed transaction, or
any reportable transaction the principal purpose of which was tax avoidance,
within the meaning of Sections 6011, 6111 and 6112 of the Code.
(a) Section
6.12(a)(i)of the Company Disclosure Letter lists, as of the date hereof, each
“employee benefit plan” (as defined in Section 3(3) of ERISA), and all other
benefit, bonus, incentive, deferred compensation, stock option (or other
equity-based compensation), severance, retention, change in control, welfare
(including post-retirement medical and life insurance), fringe benefit and
similar plans, programs, policies and arrangements, whether or not subject to
ERISA and whether written or oral, sponsored, maintained or contributed to or
required to be maintained or contributed to by the Company or any of the Company
Subsidiaries, or with respect to which any Person who is currently, has been or,
prior to the Effective Time, is expected to become, an employee of the Company
or any of the Company Subsidiaries (collectively, “
Company Employees
”)
is entitled to any benefit (the “
Company Benefit
Plans
”), or with respect to which the Company or any of the Company
Subsidiaries has any liability. Section 6.12(a)(ii) of the Company
Disclosure Letter sets forth, as of the date hereof, a complete and accurate
list of each material employment, consulting, severance, change in control,
retention, termination or other material bilateral contract between any Company
Employee, on the one hand, and the Company or any Company Subsidiary, on the
other hand, in each case, that is not a Company Benefit Plan (collectively, the
“
Company Benefit
Agreements
”). With respect to each Company Benefit Plan and
Company Benefit Agreement, the Company has provided to Verizon complete and
accurate copies of (A) such Company Benefit Plan or Company Benefit Agreement,
including any amendment thereto, (B) each trust, insurance, annuity or other
funding contract related thereto, (C) the most recent financial statements and
actuarial or other valuation reports prepared with respect thereto and (D) the
two most recent annual reports on Form 5500 required to be filed with the IRS
with respect thereto (if any).
(b) No
material liability under Title IV (including Sections 4069 and 4212(c) of ERISA)
or Section 302 of ERISA, or Section 412 of the Code, has been incurred
by the Company, any of the Company Subsidiaries or any ERISA Affiliate of any of
them, and no condition exists that would reasonably be expected to result in the
Company, any of the Company Subsidiaries or any ERISA Affiliate of any of them
incurring any such liability, other than liability for premiums due to the
PBGC. The present value of accrued benefits under each Company
Benefit Plan that is subject to Title IV of ERISA, determined based upon the
actuarial assumptions used for funding purposes in the most recent actuarial
report prepared by such plan’s actuary with respect to such plan, did not
exceed, as of its latest valuation date, the then current value of the assets of
such plan allocable to such accrued benefits.
(c) (
i
) No
Company Benefit Plan is a “multiemployer plan,” as defined in Section 3(37)
of ERISA and (
ii
) none of the
Company, the Company Subsidiaries or any ERISA Affiliate of any of them has made
or suffered a “complete withdrawal” or a “partial withdrawal,” as such terms are
respectively defined in Sections 4203 and 4205 of ERISA, the liability for which
has not been satisfied in full.
(d) Each
Company Benefit Plan and Company Benefit Agreement has been operated and
administered in all material respects in accordance with its terms and
applicable Law, including ERISA and the Code. All contributions and
premium payments required to be made with respect to any Company Benefit Plan or
Company Benefit Agreement have been timely made, except for any contributions in
respect of benefits that have become due but that are not yet payable under the
terms of the applicable Company Benefit Plan or Company Benefit
Agreement. Appropriate reserves or accruals have been taken on the
Company’s financial statements in accordance with GAAP in respect of any unpaid
liabilities incurred or accrued under or in respect of any Company Benefit Plan
or Company Benefit Agreement. There are no pending or, to the
Company’s Knowledge, threatened claims by, on behalf of or against any of the
Company Benefit Plans in effect as of the date hereof or any Assets thereof,
that, if adversely determined would reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect on the Company, and no matter is
pending (other than routine qualification determination filings, copies of which
have been furnished to Verizon and Spinco or will be promptly furnished to
Verizon and Spinco when made) with respect to any of the Company Benefit Plans
before the IRS, the United States Department of Labor or the PBGC.
(e) Each
Company Benefit Plan intended to be “qualified” within the meaning of
Section 401(a) of the Code is so qualified and the trusts maintained
thereunder are exempt from taxation under Section 501(a) of the Code, each
trust maintained under any Company Benefit Plan intended to satisfy the
requirements of Section 501(c)(9) of the Code has satisfied such
requirements and, in either such case, no event has occurred or condition is
known to exist that would reasonably be expected to have a material adverse
effect on such tax-qualified status for any such Company Benefit Plan or any
such trust.
(f) No
Company Benefit Plan or Company Benefit Agreement, and no contractual
arrangements between the Company and any third party, exists that could result
in (i) the payment to any current, former or future director, officer,
stockholder or employee of the Company or any of the Company Subsidiaries, or of
any entity the assets or capital stock of which have been acquired by the
Company or a Company Subsidiary, of any money or other property or benefits,
(ii) the acceleration of the time of payment or vesting, or trigger any
funding, of any compensation or benefits under any Company Benefit Plan
or Company Benefit Agreement or (iii) the breach or violation
of, default under or limitation on the Company’s right to amend, modify or
terminate any Company Benefit Plan or Company Benefit Agreement, in each case as
a result of the consummation of the transactions contemplated by the Transaction
Agreements whether or not (
a
) such payment,
acceleration or provision would constitute a “parachute payment” (within the
meaning of Section 280G of the Code) or (
b
) some other
action or event (including separation from service) would be required to cause
such payment, acceleration or provision to be triggered.
6.13
Labor
Matters
. Neither the Company nor any of the Company
Subsidiaries is a party to, or bound by, any collective bargaining agreement,
employment agreement or other Contract, in each case, with a labor union or
labor organization and no such agreement is currently being
negotiated. To the Company’s Knowledge, as of the date hereof no
union organizing campaign is in progress with respect to the Company
Employees. Except for such matters which have not had, and would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on the Company, (
a
) as of the
date hereof, there are no strikes or lockouts with respect to Company Employees,
(
b
) there
is no unfair labor practice, charges, complaint, labor dispute (other than
routine individual grievances) or labor arbitration proceeding pending or, to
the Company’s Knowledge, threatened against the Company or any of the Company
Subsidiaries, (
c
) there are no
actual or, to the Company’s Knowledge, threatened claims, arbitrations,
litigation or consent decrees relating to employment Laws, terms and conditions
of employment and wages and hours pertaining to employees of the Company or its
Subsidiaries or employment practices affecting such employees and (
d
) the Company and
the Company Subsidiaries are in compliance with all applicable Laws respecting
(
i
) employment
and employment practices, (
ii
) terms and
conditions of employment and wages and hours, (
iii
) collective
bargaining and labor relations practices, (
iv
) layoffs, and
(
v
) immigration. As
of the date hereof, neither the Company nor any of the Company Subsidiaries has
any liabilities under the WARN Act as a result of any action taken by the
Company and that has had, or would reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect on the Company.
(a) Section
6.14(a) of the Company Disclosure Letter contains, as of the date hereof, a
complete and accurate list of all Statutory Intellectual Property owned by the
Company or any of the Company Subsidiaries.
(b) Neither
the Company nor any Company Subsidiaries has received since January 1, 2006
any written charge, complaint, claim, demand or notice alleging any
infringement, misappropriation or violation by the business of the Company of
(including any claim that the Company Subsidiaries conducting the business of
the Company must license or refrain from using) any Company Third Party
Intellectual Property material to the business of the Company.
(c) To
the Company’s Knowledge, there are no Liens on any Intellectual Property owned
by the Company or any of the Company Subsidiaries.
(a) The
Company and the Company Subsidiaries hold, and on the Distribution Date will
hold, all permits, licenses, franchises, waivers, orders, approvals,
concessions, registrations and other authorizations issued or provided by the
FCC, the State Regulators or any other Governmental Authority relating to
communications regulatory matters (including multichannel video) under all Laws
currently in effect that are necessary for the Company and/or the Company
Subsidiaries to own their respective assets or operate the applicable portion of
the business of the Company as currently conducted (“
Company Licenses
”),
except such Company Licenses the failure of which to so hold has not had and
would not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on the Company. The Company has in full force
and effect, or will have in full force and effect as of the Closing Date,
authority to provide non-facilities-based international services between the
U.S. and all permitted international points pursuant to 47 U.S.C. § 214 and 47
C.F.R. § 63.18.
(b) The
Company and each of the Company Subsidiaries in the conduct of its business has
complied since January 1, 2006 with, and currently is not in violation of, any
requirement of Law relating to communications regulatory matters (including
multichannel video) to which the Company or any of the Company Subsidiaries is
subject, except to the extent that any such non-compliance or violation has not
resulted and would not reasonably be expected to result in any burden, fine or
consequence on the business of the Company. Without limiting the
foregoing, there is not pending, nor to the Company’s Knowledge, threatened
against the Company or any of the Company Subsidiaries any application, action,
petition, objection or other pleading, or any proceeding by or before the FCC or
any State Regulators which questions or contests the validity of, or any rights
of the holder under, or seeks the non-renewal, revocation or suspension of any
Company License. Since January 1, 2006, neither the Company nor any
of the Company Subsidiaries has received written notice of an investigation or
review by any Governmental Authority (including, for this purpose only, the
Universal Service Administrative Company and any other administrators designated
by the FCC or a State Regulator) relating to communications regulatory matters
(including multichannel video) with respect to a material violation by the
Company or any of the Company Subsidiaries of any requirement of Law, excluding
any notice in respect of a matter that has been withdrawn or resolved without
the imposition of material penalties, burdens or fines. The Company
(
a
) is capable
of providing local number portability in material compliance with 47 U.S.C.
§ 251(b)(2) and the implementing rules of the FCC; (
b
) complies in
all material respects with the requirements of the CALEA; and (
c
) is capable of
providing 911 service in material compliance with 47 U.S.C. § 251(e)(3) and the
implementing rules of the FCC and applicable state Laws of the State
Regulators.
(a) Section
6.16(a) of the Company Disclosure Letter sets forth, and the Company has made
available to Verizon true and complete copies of, all Company Material Contracts
in effect as of the date of this Agreement. For purposes of this
Agreement, the term “
Company Material
Contracts
” means any of the following Contracts (other than this
Agreement, each other Transaction Agreement, the Company Benefit Plans and the
Company Benefit Agreements), whether entered into prior to or after the date
hereof, to which the Company or any Company Subsidiary is a
party: (
i
) any “material
contract” (as defined in item 601(b)(10) of Regulation S-K of the SEC),
(
ii
) any
non-competition agreement or any other Contract that restricts in any material
respect the conduct of any line of business, (
iii
) any
partnership, joint venture or similar Contract material to the business of the
Company, and (iv) any Contract (other than Contracts relating to the Spinco
Payment Financing and the Spinco Securities) that will govern the terms of any
Indebtedness (or guarantees thereof) of the Surviving Corporation or any of its
Subsidiaries after the Effective Time in excess of $50,000,000.
(b) Assuming
the accuracy of the representations and warranties of Verizon and Spinco in
Section 5.17 and compliance by Verizon and Spinco with Section 7.24,
the Company represents that, as of the Closing Date, it will have the capability
to assume responsibility for all of the operations of the Spinco
Business. The Company represents that as of the Closing it will have
the capability to deliver comparable products and services comprising the Spinco
Business to customers at service levels and at a quality no less favorable than
those provided by the Contributing Companies
in the Territory as of
immediately prior to the Closing.
(c) (
i
) Neither
the Company nor any Company Subsidiary is in breach of or default under the
terms of any Company Material Contract where such breach or default has had, or
would reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on the Company, (
ii
) to the Company’s
Knowledge, no other party to any Company Material Contract is in breach of or in
default under the terms of any Company Material Contract where such breach or
default has had, or would reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on the Company and (
iii
) each
Company Material Contract is a valid and binding obligation of the Company or
any Company Subsidiary which is a party thereto and, to the Company’s Knowledge,
of each other party thereto, and is in full force and effect, except insofar as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar Laws affecting creditors’ rights
generally, or by principles governing the availability of equitable
remedies.
(a) The
Company or a Company Subsidiary has, in all material respects, good and valid
and marketable title to all of the Company Owned Real Property the loss of which
would be material and adverse to the business of the Company (such Company Owned
Real Property, the “
Material Company Owned Real
Property
”), free and clear of all encumbrances other than Permitted
Encumbrances. None of the Company or the Company Subsidiaries has
leased or otherwise granted any third party any right to use or occupy any of
the Material Company Owned Real Property, and there are no outstanding options,
rights of refusal, rights of first offer or rights of reverter or other third
party rights in any of the Material Company Owned Real Property.
(b) With
respect to leases and subleases of real property to which the Company or its
Subsidiaries is a party, (
i
) each is
enforceable in accordance with its terms, except insofar as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or similar Laws affecting creditors’ rights generally, or by principles
governing the availability of equitable remedies, (
ii
) there is no
material default or material breach of a covenant by the Company or any Company
Subsidiaries, (
iii
) no event has
occurred which with or without the giving of notice or lapse of time, or both,
would constitute such a material default or material breach and (
iv
) there has
been no collateral assignment or other security interest and they are not
subject to any encumbrance other than Permitted Encumbrances.
6.18
Opinions of Company
Financial Advisors
. The Company has received the written
opinion of
each of
Citigroup Global Markets Inc. and Evercore Partners, to the effect that, as of
the date thereof, and based upon and subject to the assumptions and matters set
forth therein, the Aggregate Merger Consideration to be delivered by the Company
in respect of the Spinco Common Stock pursuant to the Merger Agreement is fair,
from a financial point of view, to the Company and the holders of Company Common
Stock. The Company will deliver copies of such written opinions to
Verizon promptly upon receipt.
6.19
Brokers or
Finders
. Except with respect to the Persons set forth in
Section 6.18, no agent, broker, investment banker, financial advisor or other
similar Person is or will be entitled, by reason of any agreement, act or
statement by the Company, or any of the Company Subsidiaries, directors,
officers or employees, to any financial advisory, broker’s, finder’s or similar
fee or commission, to reimbursement of expenses or to indemnification or
contribution in connection with any of the transactions contemplated by this
Agreement or any other Transaction Agreement. The material terms of
the engagement letters between each of the Company’s financial advisors and the
Company have been provided to Verizon.
6.20
Takeover
Statutes
. Other than Section 203 of the DGCL, no
“fair price,” “moratorium,” “control share acquisition,” “business combination,”
“stockholder protection” or other similar anti-takeover statute or regulation
enacted under Delaware law, or, to the Company’s Knowledge, under the law of any
other jurisdiction, will apply to this Agreement, the Merger or the transactions
contemplated hereby or thereby. The action of the Board of Directors
of the Company in approving this Agreement and the transactions provided for
herein is sufficient to render inapplicable to this Agreement, the Merger and
the transactions contemplated hereby or thereby and the transactions provided
for herein, the restrictions on “business combinations” (as defined in
Section 203 of the DGCL) as set forth in Section 203 of the
DGCL.
6.21
Certain Board
Findings
. The Board of Directors of the Company, at a
meeting duly called and held, (
i
) has
determined that this Agreement and the transactions contemplated hereby,
including the Merger, and the issuance of shares of Company Common Stock
pursuant to the Merger, are advisable, fair to and in the best interests of the
Company and the stockholders of the Company, (
ii
) approved
this Agreement and the transactions contemplated hereby, including the Merger,
and (
iii
) has
resolved to recommend that the stockholders of the Company entitled to vote
thereon adopt this Agreement at the Company Stockholders Meeting.
6.22
Vote
Required
. The only vote of the stockholders of the Company
required under the DGCL, the NYSE rules or the Company’s certificate of
incorporation for (a) adoption of this Agreement, (b) amendment of the
Company’s certificate of incorporation to increase the number of authorized
shares of Company Common Stock in connection with the issuance of the Aggregate
Merger Consideration and (c) the issuance of the Aggregate Merger
Consideration is the affirmative vote of the holders of a majority in voting
power of all outstanding shares of Company Common Stock at the Company
Stockholders Meeting (collectively, the “
Requisite
Approval
”). The consummation of the transactions contemplated
hereby have been approved by the Company’s Board of Directors such that such
consummation and the issuance of shares of Company Common Stock in the Merger
shall be exempted from the terms of the Rights Plan.
6.23
Affiliate
Transactions
. There are no transactions or Contracts of
the type required to be disclosed by the Company under Item 404 of Regulation
S-K between or among (
a
) the Company
or any Company Subsidiary, on the one hand, and (
b
) any
individual who is a “named executive officer” or director of the Company (as
such term is defined in Section 402 of Regulation S-K), on the other
hand.
COVENANTS AND
AGREEMENTS
7.1
Conduct of Business by the
Company Pending the Merger
. Following the date of this
Agreement and prior to the earlier of the Effective Time and the date on which
this Agreement is terminated pursuant to Section 9.1, except as may be
consented to in writing by Verizon (which consent shall not be unreasonably
withheld, conditioned or delayed) or as expressly contemplated by a Transaction
Agreement or as set forth in Section 7.1 of the Company Disclosure Letter,
the Company covenants and agrees that the Company and each of the Company
Subsidiaries shall conduct its operations in accordance with its ordinary course
of business, consistent with past practice and in compliance with all Laws
applicable to it or to the conduct of its business, and use all commercially
reasonable efforts to preserve intact its present business organization,
maintain rights and franchises, keep available the services of its current
officers and key employees and preserve its relationships with customers and
vendors in such a manner that its goodwill and ongoing businesses would not
reasonably be anticipated to be impaired in any material
respect. Following the date of this Agreement and prior to the
earlier of the Effective Time and the date on which this Agreement is terminated
pursuant to Section 9.1 (and notwithstanding the immediately preceding sentence)
except (
i
) as may be
required by Law or to comply with any Order relating to the transactions
contemplated hereby, (
ii
) as may be
consented to in writing by Verizon (which consent shall not be unreasonably
withheld, conditioned or delayed, except in the case of clauses (a), (b) and (d)
and, in respect of the foregoing clauses, (p) of this Section 7.1, with respect
to which such consent may be withheld in Verizon’s sole discretion), (
iii
) as may be
expressly contemplated by this Agreement or the other Transaction Agreements, or
(
iv
) as
set forth in Section 7.1 of the Company Disclosure Letter, the Company
shall not, nor shall it permit any of the Company Subsidiaries to:
(a) (
i
) declare or pay any
dividends on or make other distributions in respect of any shares of its capital
stock or partnership interests (whether in cash, securities or property), except
for the declaration and payment of (A) cash dividends or distributions paid
on or with respect to a class of capital stock or partnership interests all of
which shares of capital stock or partnership interests, as the case may be, of
the applicable corporation or partnership are owned directly or indirectly by
the Company and (B) regular quarterly dividends on the Company Common Stock
each quarter in an amount not to exceed $0.25 per share at times consistent with
the dividend payment practices of the Company in 2008 (including a final partial
regular quarterly dividend to the extent permitted under the Company Credit
Agreements and paid from existing funds or existing borrowing capacity, to be
declared and paid to pre-Closing Company stockholders, pro rated for the number
of days elapsed between (
x
) the beginning
of the quarterly period in which the Effective Time occurs and (
y
) the day
immediately preceding the Effective Time); (
ii
) split,
combine or reclassify any of its capital stock or issue or authorize or propose
the issuance of any other securities in respect of, in lieu of, or in
substitution for, shares of its capital stock; or (
iii
) redeem,
repurchase or otherwise acquire, or permit any Subsidiary to redeem, repurchase
or otherwise acquire, any shares of its capital stock (including any securities
convertible or exchangeable into such capital stock), except (A) pursuant to the
terms of the securities outstanding on the date hereof or any securities issued
after the date hereof not in violation of this Agreement and (B) pursuant to the
existing terms of a Company Benefit Plan or any awards thereunder outstanding on
the date hereof or granted thereunder after the date hereof in accordance with
this Agreement;
provided
,
however
, that this
Section 7.1(a) shall not prohibit any such action effected pursuant to the
Rights Plan;
(b) issue,
deliver or sell, or authorize any shares of its capital stock of any class, any
Company Voting Debt or any securities convertible into, or any rights, warrants
or options to acquire, any such shares or other Company Voting Debt or
convertible securities, other than (i) pursuant to the Rights Plan, (
ii
) the issuance
of shares of Company Common Stock upon the exercise of stock options or the
vesting of restricted stock units that are outstanding on the date hereof
pursuant to the Company Benefit Plans or granted after the date hereof pursuant
to clause (iv) below; (
iii
) issuances
by a wholly-owned Subsidiary of the Company of its capital stock to such
Subsidiary’s parent or another wholly-owned Subsidiary of the Company; and
(
iv
) the
granting of stock options, or the granting of restricted stock units or
restricted stock in the ordinary course of business, consistent with the
Company’s past practices,
provided
that in no
event shall the vesting and exercisability of any such newly granted option,
restricted stock unit or restricted stock accelerate or shall any additional
rights be conveyed with respect thereto on account of the transactions
contemplated hereby;
(c) amend
the Company’s certificate of incorporation or bylaws (other than amend the
Company’s certificate of incorporation to increase the number of authorized
shares of Company Common Stock in connection with the issuance of the Aggregate
Merger Consideration), or amend any Company Subsidiary’s certificate of
incorporation or bylaws (or other similar organizational documents) in any
manner that would prevent or materially impair or delay the consummation of the
transactions contemplated by this Agreement;
(d) acquire
or agree to acquire by merger or consolidation, or by purchasing a substantial
or controlling equity interest in, or the assets of, or by any other manner, any
business or any corporation, partnership, limited liability entity, joint
venture, association or other business organization or division or business unit
thereof or otherwise acquire or agree to acquire any assets (other than the
acquisition of equipment and other assets used in the operations of the business
of the Company in the ordinary course consistent with past
practice);
(e) sell,
lease, license or otherwise encumber or subject to any Lien or otherwise dispose
of, or agree to sell, lease, license or otherwise encumber or subject to any
Lien or otherwise dispose of, any of its assets (including capital stock of
Subsidiaries of the Company but excluding (
i
) surplus real
property not used in telephone operations, (
ii
) inventory and
obsolete equipment, in each case, in the ordinary course of business consistent
with past practice, (
iii
) any Lien
required to be created pursuant to the Company Credit Agreements and (
iv
) Permitted
Encumbrances);
(f) incur
any Indebtedness or guarantee or otherwise become contingently liable for any
Indebtedness or issue or sell any debt securities or warrants or rights to
acquire any debt securities of the Company or any of its Subsidiaries or
guarantee any debt securities of others or enter into any material Lease
(whether such Lease is an operating or capital Lease) or enter into any interest
rate hedge, other than (
i
) the
incurrence of Indebtedness under the Company Credit Agreements, (
ii
) subject to
clause (g) below, in order to refinance any Indebtedness of the Company or any
of its Subsidiaries outstanding as of the date hereof, provided that any such
refinancing shall be unsecured and shall not include covenants or other terms
that would conflict with or preclude the Special Payment Financing or the Spinco
Securities, (iii) pursuant to any customer Contract, vendor Contract or
real property Lease entered into in the ordinary course of business consistent
with past practice, (
iv
) in
connection with equipment leasing in the ordinary course of business, consistent
with past practice and (
v
) Indebtedness
owed to the Company or any of its Subsidiaries;
(g) without
limiting clause (f) above, from and after March 1, 2010, offer or solicit or
engage in any discussion or negotiations concerning any potential issuance of
debt securities by the Company or its Subsidiaries (or the Surviving
Corporation), or authorize any marketing of any potential issuance of debt
securities other than the Special Payment Financing and the issuance of the
Spinco Securities;
(h) except
in the ordinary course of business, consistent with past practice, incur or
commit to capital expenditures or obligations or liabilities in connection with
any capital expenditure in the aggregate in excess of $10,000,000, other than
(i) capital expenditures or obligations or liabilities in connection therewith
to repair or replace facilities destroyed or damaged due to casualty or accident
(whether or not covered by insurance), (ii) as contemplated by the Company’s
2009 capital expenditure budget, which is set forth in Section 7.1(h) of the
Company Disclosure Letter, or the 2010 capital expenditure budget, to the extent
it is substantially similar in all material respects to the 2009 capital
expenditure budget and (iii) capital expenditures incurred in connection with
integrating the Spinco Assets and the Spinco Business into the Company and its
business,
provided
that this
Section 7.1(h) shall not permit any action otherwise prohibited by
Section 7.1(d);
(i)
(
i
) other than in
the ordinary course of business, consistent with past practice, or as required
or contemplated by a Company Benefit Plan or Company Benefit Agreement, grant
any increases in the compensation of any of its directors, officers or
employees; (
ii
) other than
in the ordinary course of business, consistent with past practice, pay or agree
to pay to any director, officer or employee, whether past or present, any
pension, retirement allowance, change in control, severance or other employee
benefit not required or contemplated by any Company Benefit Plan or Company
Benefit Agreement or any other existing benefit, severance, termination, pension
or employment plans, Contracts or arrangements as in effect on the date hereof
or as adopted, entered into or amended in accordance with clause (iii) of this
Section 7.1(i) after the date hereof; (
iii
) other than
in the ordinary course of business, consistent with past practice, adopt or
enter into any new, or materially amend any, Company Benefit Plan or Company
Benefit Agreement or any other employment or severance or termination Contract
with any director, officer or employee; (
iv
) accelerate
the vesting of, or the lapsing of restrictions with respect to, any stock
options or other stock-based compensation; or (
v
) other than as
required or contemplated under the terms of the applicable Company Benefit Plan,
Company Benefit Agreement or collective bargaining agreement, or other employee
plan, agreement, Contract or arrangement (in each case, as in effect on the date
hereof or as adopted, entered into or amended in accordance with clause (iii) of
this Section 7.1(i) after the date hereof), take any action to fund or in any
other way secure the payment of compensation or benefits under any Company
Benefit Plan, Company Benefit Agreement or collective bargaining agreement, or
any other employee plan, agreement, Contract or arrangement;
(j)
authorize, recommend, propose or announce an intention to adopt a plan of
complete or partial liquidation or dissolution of the Company or any of the
Company Subsidiaries;
(k) make
any material change in its methods of accounting in effect at December 31, 2008
or change its fiscal year except for changes required by a change in GAAP or
required by the auditors of the Company and the Company
Subsidiaries;
(l)
enter into or amend any agreement or arrangement with any Affiliate of the
Company or any Company Subsidiary (other than with wholly-owned Company
Subsidiaries) on terms less favorable to the Company or such Company Subsidiary,
as the case may be, than could be reasonably expected to have been obtained with
an unaffiliated third party on an arm’s-length basis;
(m) except
in the ordinary course of business, consistent with past practice, or as
required by Law, modify, amend or terminate any Company Material Contract to
which the Company or any of the Company Subsidiaries is a party or waive,
release or assign any material rights or claims thereunder or enter into any
Company Material Contract;
(n)
except as would not be expected to materially and adversely affect the Company
or any of its Affiliates or the Surviving Corporation on a going-forward basis
after the Effective Time, (
i
) make or
rescind any material express or deemed election relating to Taxes, including
elections for any and all joint ventures, partnerships, limited liability
companies or other investments where the Company has the capacity to make such
binding election, (
ii
) settle or
compromise any material claim, action, suit, litigation, proceeding,
arbitration, investigation, audit or controversy relating to Taxes, (
iii
) amend any
material Tax Returns or (
iv
) change in
any material respect any of its methods of reporting income or deductions for
federal income tax purposes from those expected to be employed in the
preparation of its federal income tax return for the taxable year ending
December 31, 2008 (unless such change is required by Law);
(o)
pay, discharge or satisfy any material claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), except for
the payment, discharge or satisfaction (which includes the payment of final and
unappealable judgments) in the ordinary course of business, consistent with past
practice, or in accordance with their terms, of liabilities (x) reflected
or reserved against in, or contemplated by, the most recent consolidated
financial statements (or the notes thereto) of the Company included in the
Company’s Annual Report on Form 10-K for the fiscal year ended December 31,
2008, or (y) incurred in the ordinary course of business since the date of
such financial statements; or
(p)
agree or commit to do any of the foregoing
actions.
7.2
Conduct of
Spinco Business Pending the Merger
. Following the date of
this Agreement and prior to the earlier of the Effective Time and the date on
which this Agreement is terminated pursuant to Section 9.1, except as may
be consented to in writing by the Company (which consent shall not be
unreasonably withheld, conditioned or delayed) or as expressly contemplated by a
Transaction Agreement or as set forth in Section 7.2 of the Spinco
Disclosure Letter, Verizon and Spinco jointly and severally covenant and agree
that Verizon and each of the Contributing Companies (in regard to the Spinco
Business only) and Spinco and each of the Spinco Subsidiaries shall conduct its
operations in accordance with its ordinary course of business, consistent with
past practice and in compliance with all Laws applicable to it or to the conduct
of its business, and use all commercially reasonable efforts to preserve intact
its present business organization, maintain rights and franchises, keep
available the services of its current officers and key employees and preserve
its relationships with customers and vendors in such a manner that its goodwill
and ongoing businesses would not reasonably be anticipated to be impaired in any
material respect. Following the date of this Agreement and prior to
the earlier of the Effective Time and the date on which this Agreement is
terminated pursuant to Section 9.1 (and notwithstanding the immediately
preceding sentence) except (
i
) as may be
required by Law or to comply with any Order relating to the transactions
contemplated hereby, (
ii
) as may be
consented to in writing by the Company (which consent shall not be unreasonably
withheld, conditioned or delayed, except in the case of clauses (a), (c) and (e)
and, in respect of the foregoing clauses, (p) of this Section 7.2, with
respect to which such consent may be withheld in the Company’s sole discretion),
(
iii
) as
may be expressly contemplated by this Agreement or the other Transaction
Agreements, (iv) as required to permit the ordinary course operation of
Verizon’s cash management system prior to the Effective Time, including any
distributions of cash in connection therewith, or (
v
) as set forth
in Section 7.2 of the Spinco Disclosure Letter, Spinco shall not, nor shall
Verizon or Spinco permit any of the Spinco Subsidiaries or, to the extent
applicable, any of the Contributing Companies with respect to the Spinco
Business to:
(a)
issue, deliver or sell, or authorize any shares of Spinco’s capital stock or
other voting or convertible securities or capital stock or other voting or
convertible securities of any Spinco Subsidiary of any class, or any rights,
warrants or options to acquire, any such shares or securities (including
additional options or other equity-based awards that could be converted into any
option to acquire Spinco Common Stock or the capital stock of any Spinco
Subsidiary pursuant to the Employee Matters Agreement or otherwise), other than
(
i
) pursuant to
this Agreement, pursuant to the Distribution Agreement or required in connection
with the Contribution and (
ii
) issuances by
a wholly-owned Subsidiary of Spinco of its capital stock to such Subsidiary’s
parent or another wholly-owned Subsidiary of Spinco;
(b) adopt
any provision of, or otherwise amend, the certificate of incorporation or bylaws
(or other similar organizational documents) of Spinco or any Spinco Subsidiary
in any manner that would prevent or materially impair or delay the consummation
of the transactions contemplated by this Agreement;
(c) acquire
or agree to acquire by merger or consolidation, or by purchasing a substantial
or controlling equity interest in, or the assets of, or by any other manner, any
business or any corporation, partnership, limited liability entity, joint
venture, association or other business organization or division or business unit
thereof or otherwise acquire or agree to acquire any assets (other than the
acquisition of equipment and other assets used in the operations of the Spinco
Business in the ordinary course consistent with past practice);
(d) sell,
lease, license or otherwise encumber or subject to any Lien or otherwise dispose
of, or agree to sell, lease, license or otherwise encumber or subject to any
Lien or otherwise dispose of, any of the assets that would constitute Spinco
Assets as of the Distribution Date (including capital stock of Spinco
Subsidiaries but excluding (
i
) surplus real
property not used in telephone operations, (
ii
) inventory and
obsolete equipment, in each case, in the ordinary course of business consistent
with past practice and (iii) Permitted Encumbrances);
(e) incur
any Indebtedness or guarantee or otherwise become contingently liable for any
Indebtedness or issue or sell any debt securities or warrants or rights to
acquire any debt securities of Spinco or any of its Subsidiaries or guarantee
any debt securities of others or enter into any material Lease (whether such
Lease is an operating or capital Lease) or enter into any interest rate hedge,
other than (
i
) pursuant to
any customer Contract, vendor Contract or real property Lease entered into in
the ordinary course of business consistent with past practice, (
ii
) in
connection with equipment leasing in the ordinary course of business consistent
with past practice and (
iii
) in connection
with the Special Payment Financing and/or the issuance of the Spinco Securities,
as contemplated by the Distribution Agreement;
(f) except
in the ordinary course of business, consistent with past practice, incur or
commit to capital expenditures or obligations or liabilities in connection with
any capital expenditure in the aggregate in excess of $10,000,000, in each case,
other than (i) capital expenditures or obligations or liabilities in
connection therewith to repair or replace facilities destroyed or damaged due to
casualty or accident (whether or not covered by insurance) and (ii) as
contemplated by the 2009 capital expenditure budget of Verizon for the Spinco
Business, which is set forth in Section 7.2(f) of the Spinco Disclosure Letter,
or the 2010 capital expenditure budget, to the extent it is substantially
similar in all material respects to the 2009 capital expenditure budget (except
as set forth in Section 7.2(f) of the Spinco Disclosure Letter),
provided
that this
Section 7.2(f) shall not permit any action otherwise prohibited by
Section 7.2(c);
(g) authorize,
recommend, propose or announce an intention to adopt a plan of complete or
partial liquidation or dissolution of Spinco or any Spinco
Subsidiary;
(h) (
i
) other than in
the ordinary course of business, consistent with past practice, or as required
or contemplated by a Spinco Benefit Plan or Spinco Benefit Agreement, grant any
increases in the compensation of any of its directors, officers or employees;
(
ii
) other
than in the ordinary course of business, consistent with past practice, pay or
agree to pay to any director, officer or employee, whether past or present, any
pension, retirement allowance, change in control, severance or other employee
benefit not required or contemplated by any Spinco Benefit Plan or Spinco
Benefit Agreement or any other existing benefit, severance, termination, pension
or employment plans, Contracts or arrangements as in effect on the date hereof
or as adopted, entered into or amended in accordance with clause (iii) of this
Section 7.2(h) after the date hereof; (
iii
) other than
in the ordinary course of business, consistent with past practice, adopt or
enter into any new, or materially amend any, Spinco Benefit Plan or Spinco
Benefit Agreement or any other employment, severance or termination Contract
with any director, officer or employee; (
iv
) accelerate
the vesting of, or the lapsing of restrictions with respect to, any stock
options or other stock-based compensation; or (
v
) other than as
required or contemplated under the terms of the applicable Spinco Benefit Plan,
Spinco Benefit Agreement or collective bargaining agreement, or other employee
plan, agreement, Contract or arrangement (in each case, as in effect on the date
hereof or as adopted or entered into or amended in accordance with clause (iii)
of this Section 7.2(h) after the date hereof), take any action to fund or in any
other way secure the payment of compensation or benefits under any Spinco
Benefit Plan, Spinco Benefit Agreement or collective bargaining agreement, or
any other employee plan, agreement, Contract or arrangement;
(i)
other than in the ordinary course of business, consistent with past practice,
establish, adopt, enter into, terminate or amend any collective bargaining
agreement, plan, trust, fund, policy or arrangement for the benefit of any
current or former directors, officers, employees or any of their beneficiaries,
except, in each case, as contemplated by the Employee Matters Agreement, as is
necessary to comply with applicable Law, or as would not result in a material
increase in the cost of maintaining such collective bargaining agreement, plan,
trust, fund, policy or arrangement;
(j) make
any material change in Verizon’s methods of accounting with respect to the
Spinco Business in effect on December 31, 2008 or change the fiscal year of the
Spinco Business except for changes required by a change in GAAP or required by
the auditors of Verizon and the Verizon Subsidiaries;
(k) except
as would not be expected to materially and adversely affect Spinco or any of its
Subsidiaries or the Spinco Business, or the Surviving Corporation on a
going-forward basis after the Effective Time, (
i
) make or
rescind any material express or deemed election relating to Taxes of Spinco or
any of its Subsidiaries or the Spinco Business, including elections for any and
all joint ventures, partnerships, limited liability companies or other
investments where Verizon or Spinco has the capacity to make such binding
election (other than any election necessary in order to obtain the IRS Ruling
and/or the Distribution Tax Opinion), (
ii
) settle or
compromise any material claim, action, suit, litigation, proceeding,
arbitration, investigation, audit or controversy relating to Taxes of Spinco or
any of its Subsidiaries or the Spinco Business, (
iii
) amend any
material Tax Returns of Spinco or any of its Subsidiaries or relating to the
Spinco Business or (
iv
) change in
any material respect any method of reporting income or deductions of Spinco or
any of its Subsidiaries or the Spinco Business for federal income tax purposes
from those expected to be employed in the preparation of its federal income tax
return for the taxable year ending December 31, 2008 (unless such change is
required by Law);
(l)
pay, discharge or satisfy any material claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), except for
the payment, discharge or satisfaction (which includes the payment of final and
unappealable judgments) in the ordinary course of business, consistent with past
practice, or in accordance with their terms, of liabilities (x) reflected
or reserved against in, or contemplated by, the Spinco Financial Statements (or
the notes thereto) or (y) incurred in the ordinary course of business since
the date of such financial statements;
(m) enter
into or amend any agreement or arrangement relating to the Spinco Business that
would constitute a Transferred Affiliate Arrangement and which constitutes a
Spinco Asset or Spinco Liability with any Affiliate of Verizon or any Verizon
Subsidiary (other than Spinco or a Spinco Subsidiary), on terms less favorable
to Spinco or such Spinco Subsidiary, as the case may be, than could be
reasonably expected to have been obtained with an unaffiliated third party on an
arm’s-length basis;
(n) except
in the ordinary course of business, consistent with past practice, or as
required by Law, modify, amend or terminate any Spinco Material Contract or
waive, release or assign any material rights or claims thereunder or enter into
any Spinco Material Contract;
(o) amend
the Distribution Agreement; or
(p) agree
to commit to take any of the foregoing actions.
(a) As
promptly as practicable following the date hereof, the Company, Verizon and
Spinco shall prepare, and the Company shall file with the SEC, the Company
Registration Statement, including the Proxy Statement/Prospectus with respect to
the transactions contemplated by this Agreement, and the Company shall use all
commercially reasonable efforts to have such Proxy Statement/Prospectus cleared
by the SEC under the Exchange Act and the Company Registration Statement
declared effective by the SEC under the Securities Act, as promptly as
practicable after such filings or at such other time as Verizon, Spinco and the
Company may agree; and
(b) As
promptly as practicable after obtaining the Requisite Approval, if required
under the Securities Act and/or Exchange Act (or otherwise required by the SEC)
Verizon, Spinco and the Company shall prepare, and Spinco shall file with the
SEC, the Spinco Registration Statement and Spinco shall use all commercially
reasonable efforts to have such Spinco Registration Statement declared effective
by the SEC under the Securities Act, as promptly as practicable after such
filings or at such other time as Verizon, Spinco and the Company may agree, but
in any case prior to the Distribution Date.
(c) The
Company shall, as promptly as practicable after receipt thereof, provide to
Verizon copies of any written comments and advise Verizon of any oral comments
with respect to the Proxy Statement/Prospectus and the Company Registration
Statement received from the SEC. Spinco shall, as promptly as
practicable after receipt thereof, provide to the Company copies of any written
comments and advise the Company of any oral comments with respect to the Spinco
Registration Statement received from the SEC. All parties shall have
the right to participate in conferences with the SEC with respect to the
Registration Statements.
(d) The
Company shall provide Verizon with a reasonable opportunity to review and
comment on any amendment or supplement to the Proxy Statement/Prospectus or
Company Registration Statement prior to filing the same with the SEC, and with a
copy of all such filings made with the SEC. No amendment or
supplement to the Proxy Statement/Prospectus or the Company Registration
Statement will be made by the Company without the approval of Verizon (such
approval not to be unreasonably withheld, conditioned or
delayed). The Company will advise Verizon, promptly after it receives
notice thereof, of the time when the Company Registration Statement has become
effective or any supplement or amendment has been filed, of the issuance of any
stop order, of the suspension of the qualification of the Company Common Stock
issuable in connection with the Merger for offering or sale in any jurisdiction,
or of any request by the SEC for amendment of the Proxy Statement/Prospectus or
the Company Registration Statement or requests by the SEC for additional
information.
(e) Spinco
shall provide the Company with a reasonable opportunity to review and comment on
any amendment or supplement to any Spinco Registration Statement prior to filing
the same with the SEC, and with a copy of all such filings made with the
SEC. No amendment or supplement to any Spinco Registration Statement
will be made by Spinco without the approval of the Company (such approval not to
be unreasonably withheld, conditioned or delayed). Spinco will advise
the Company, promptly after it receives notice thereof, of the time when any
Spinco Registration Statement has become effective or any supplement or
amendment has been filed, of the issuance of any stop order, of the suspension
of the qualification of the Spinco Common Stock issuable in connection with the
Distribution for offering or sale in any jurisdiction, or of any request by the
SEC for amendment of the Spinco Registration Statement or requests by the SEC
for additional information.
(f) As
promptly as practicable after the date on which the SEC shall clear (whether
orally or in writing) the Proxy Statement/Prospectus and, if required by the SEC
as a condition to the mailing of the Proxy Statement/Prospectus, the date on
which the Company Registration Statement shall have been declared effective, the
Company shall mail, or cause to be mailed, the Proxy Statement/Prospectus to its
stockholders.
(g) If,
at any time prior to the Effective Time, any event or circumstance should occur
that results in the Proxy Statement/Prospectus or one or both of the
Registration Statements containing an untrue statement of a material fact or
omitting to state any material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
are made, not misleading, or that otherwise should be described in an amendment
or supplement to the Proxy Statement/Prospectus or one or both of the
Registration Statements, Verizon and the Company shall promptly notify each
other of the occurrence of such event and then the applicable party shall
promptly prepare, file and clear with the SEC and, in the case of the Proxy
Statement/Prospectus, mail, or cause to be mailed, to the Company’s stockholders
each such amendment or supplement.
(h) Verizon
and Spinco agree to promptly provide the Company with the information concerning
Verizon, Spinco and their respective Affiliates required to be included in the
Proxy Statement/Prospectus and the Company Registration Statement. In
furtherance of the foregoing, Verizon and Spinco shall use all commercially
reasonable efforts to, or shall use all commercially reasonable efforts to cause
their representatives to, furnish as promptly as practicable to the Company such
additional financial and operating data and other information concerning the
Spinco Business as the Company may reasonably request to complete the Proxy
Statement/Prospectus and the Company Registration Statement in accordance with
the Securities Act and/or Exchange Act (including any financial statements
required to be included therein).
(i) The
Company agrees to promptly provide Spinco with the information concerning the
Company and its Affiliates required to be included in the Spinco Registration
Statement. In furtherance of the foregoing, the Company shall use all
commercially reasonable efforts to, or shall use all commercially reasonable
efforts to cause its representatives to, furnish as promptly as practicable to
Spinco such additional financial and operating data and other information
concerning the business of the Company as Spinco may reasonably request to
complete the Spinco Registration Statement in accordance with the Securities Act
and/or Exchange Act (including any financial statements required to be included
therein).
(a) As
promptly as practicable following the date hereof and the date on which the SEC
shall clear (whether orally or in writing) the Proxy Statement/Prospectus and,
if required by the SEC as a condition to the mailing of the Proxy
Statement/Prospectus, the Company Registration Statement shall have been
declared effective, the Company shall call a special meeting of its stockholders
(the “
Company
Stockholders Meeting
”) to be held as promptly as practicable for the
purpose of voting upon (
i
) the adoption
of this Agreement, (ii) the amendment of the Company’s certificate of
incorporation to increase the number of authorized shares of Company Common
Stock in connection with the issuance of the Aggregate Merger Consideration and
(
iii
) the
issuance of shares of Company Common Stock pursuant to the
Merger. This Agreement shall be submitted for adoption to the
stockholders of the Company at such special meeting. The Company
shall deliver, or cause to be delivered, to the Company’s stockholders the Proxy
Statement/Prospectus in definitive form in connection with the Company
Stockholders Meeting at the time and in the manner provided by the applicable
provisions of the DGCL, the Exchange Act and the Company’s certificate of
incorporation and bylaws and shall conduct the Company Stockholders Meeting and
the solicitation of proxies in connection therewith in compliance with such
statutes, certificate of incorporation and bylaws.
(b) The
Board of Directors of the Company shall recommend that the Company’s
stockholders vote in favor of the items in Section 7.4(a)(i)-(iii) (the “
Company Board
Recommendation
”) and shall not withdraw, modify or qualify or publicly
propose to withdraw, modify or qualify, in any manner adverse to Verizon, the
Company Board Recommendation, including approving or recommending a Company
Acquisition Proposal or a Company Superior Proposal or any other alternative
course of action (any such action, a “
Change of Board
Recommendation
”); provided that the Board of Directors of the Company may
make a Change of Board Recommendation pursuant to and in conformity with Section
7.11(c). For the avoidance of doubt, the obligation of the Company to
call and hold the Company Stockholder Meeting for the purpose of voting upon the
items in Section 7.4(a)(i)-(iii) shall not be affected by a Change of Board
Recommendation.
7.5
Efforts to
Close
. Subject to the terms and conditions of the
applicable Transaction Agreement, each of the parties agrees to use all
commercially reasonable efforts to take, or cause to be taken, all actions and
to do, or cause to be done, all things necessary, proper or advisable to
consummate and make effective in accordance with the terms of the Transaction
Agreements the transactions contemplated by the Transaction Agreements,
including executing such documents, instruments or conveyances of any kind that
may be reasonably necessary or advisable on the terms set forth herein to carry
out any of the transactions contemplated by the Transaction Agreements;
provided
,
however
, that such
additional documents, instruments and conveyances shall not (
w
) provide for
additional representations or warranties, (
x
) impose
additional obligations or liabilities on any party, (
y
) delay the
consummation of the transactions contemplated by this Agreement or (
z
) be inconsistent
with the express terms of any Transaction Agreement.
(a) Subject
to the terms and conditions set forth in this Agreement, each of Verizon, Spinco
and the Company shall use all commercially reasonable efforts (subject to, and
in accordance with, applicable Law) to take promptly, or cause to be taken, all
actions, and to do promptly, or cause to be done, and to assist and cooperate
with the other party in doing, all things necessary, proper or advisable under
applicable Laws and regulations to consummate and make effective the Merger and
the other transactions contemplated by this Agreement (including, subject to
Section 7.18, consummating the Special Payment Financing), on the express
terms set forth herein, including (
i
) the obtaining
of all necessary actions, waivers, consents and approvals from any Governmental
Authority and the making of all necessary registrations and filings and the
taking of all steps as may be necessary to obtain an approval or waiver from, or
to avoid an action or proceeding by, any Governmental Authority, and (
ii
) the
defending of any lawsuits or other legal proceedings, whether judicial or
administrative, challenging this Agreement or the consummation of the
transactions contemplated by this Agreement.
(b) Subject
to the terms and conditions herein provided and without limiting the foregoing,
each of Verizon, Spinco and the Company shall (i) promptly (but in no event
later than 60 days after the date hereof) file all applications requiring prior
approval or other submissions required to be filed with (x) the FCC (the “
FCC Applications
”),
except those submissions addressed in Sections 7.6(i) below and 7.6(j), which
shall be made as set forth in those Sections, and except those applications that
may be filed with the FCC for “immediate approval” under 47 C.F.R. Section
1.948(j)(2) or for approval that permits operation upon application under 47
C.F.R. Section 90.159(c) and (y) the State Regulators in the states listed in
Section 4.2(c) of the Verizon Disclosure Letter and Section 6.3(d) of the
Company Disclosure Letter (each, a “
State PUC
Application
”), in each case to effect the transfer of control of the
Spinco Business and to cause such authorities to permit consummation of each of
the transactions contemplated hereby or by the Distribution Agreement, and
respond as promptly as practicable to any additional requests for information
received from the FCC or any State Regulator or by any party to a FCC
Application or a State PUC Application, (ii) use all commercially reasonable
efforts to cure not later than the Effective Time any violations or defaults
under any FCC Rules or rules of any State Regulator, (iii) use all commercially
reasonable efforts to cooperate with each other in (A) determining whether any
filings are required to be made with, or consents, permits, authorizations or
approvals are required to be obtained from, any other Governmental Authorities
in connection with the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby and (B) timely making all
such filings and timely seeking all such consents, permits, authorizations or
approvals. All such filings shall be joint filings, unless Verizon
and the Company mutually agree otherwise.
(c) Each
of the Company and Verizon shall use all commercially reasonable efforts to
obtain the consents of the FCC, the State Regulators in the states listed in
Section 4.2(c) of the Verizon Disclosure Letter and Section 6.3(d) of the
Company Disclosure Letter, any other State Regulators or other Governmental
Authorities relating to communications regulatory matters (including
multichannel video) that may require consents, permits, authorizations or
approvals and any local municipal and county franchise authorities with respect
to video franchises, in each case as are required to effect the transfer of
control of the Spinco Business and permit the consummation of each of the
transactions contemplated hereby or by the Distribution Agreement (such consents
collectively, the “
Telecommunications
Regulatory Consents
”), and the parties agree to cooperate fully with each
other and with the applicable Governmental Authorities to obtain the
Telecommunications Regulatory Consents at the earliest practicable
date. The Company and Verizon shall cooperate in seeking to
demonstrate that the transactions contemplated hereby meet all applicable
regulatory standards (as they may be in effect from time to time) and to obtain
all Telecommunications Regulatory Consents without any changes or the imposition
of any conditions or restrictions, other than those (i) the Company may offer in
its discretion in any application for an Order approving the transactions
contemplated hereby or in any related filing or testimony or (ii) that would not
reasonably be expected to constitute a Materially Adverse Regulatory
Condition. In the event any Governmental Authority imposes any such
material change, condition or restriction on the grant or receipt of any
Telecommunications Regulatory Consents, each of the Company and Verizon shall
use all commercially reasonable efforts to seek modification or removal of such
change, condition or restriction.
(d) Within
120 days after the date of this Agreement, or such other time as the parties may
agree, the parties will make such filings, if any, 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 practicable after the execution and delivery of this
Agreement. The Company shall pay all application fees required in
connection with any filings under the HSR Act.
(e) Verizon
and the Company 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 or with respect to any
Telecommunications Regulatory Consents.
(f) Verizon
and the Company 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 transactions, except for documents filed pursuant to Item 4(c) of the
Hart-Scott-Rodino Notification and Report Form or communications regarding the
same, and except for documents or information submitted in response to any
request for additional information or documents pursuant to the HSR Act which
reveal Verizon’s or the Company’s negotiating objectives or strategies or
purchase price expectations.
(g) The
parties shall use all commercially reasonable efforts to cooperate with each
other in their communications with any Governmental Authority and related
parties, consultants and advisors relative to matters that relate directly to or
may affect the consummation of Merger or the transactions contemplated
hereby. No party or its advisor shall initiate communications, orally or
in writing, with, or respond to any inquiry or request of, any Governmental
Authority, including the FCC, the U.S. Department of Justice, State Regulators,
state attorney generals and local franchising authorities, or any consumer
advocate which is, or may reasonably be expected to be, a party to a proceeding
before a Governmental Authority, or any third-party consultant or advisor to any
of the foregoing, regarding the Merger or the transactions contemplated hereby,
without providing the other party, when reasonably practicable, with reasonable
advance notice of the communication or response. If a Governmental
Authority or any consumer advocate or any third-party consultant or advisor to
any of the foregoing initiates communications on matters that relate directly to
or may affect the Merger or the transactions contemplated hereby, the contents
or substance of that communication shall be disclosed as promptly as practicable
to the other parties by providing a copy of any written communication and a
summary of any oral communication.
(h) If
any objections are asserted with respect to the transactions contemplated hereby
or the Transaction Agreements under any Regulatory Law or if any suit is
instituted (or threatened to be instituted) by any Governmental Authority or any
private party recommending or seeking to deny the granting of any
Telecommunications Regulatory Consent or challenging any of the transactions
contemplated hereby as violative of any Regulatory Law or otherwise, each of the
Company, Verizon and Spinco shall cooperate in all respects with the other and
shall use all commercially reasonable efforts to contest and resist any such
action or proceeding and to have vacated, lifted, reversed or overturned any
decree, judgment, injunction or other order, whether temporary, preliminary or
permanent, that is in effect and that prohibits, prevents or restricts
consummation of the transactions contemplated by this Agreement on the express
terms contemplated hereby and by the Transaction Agreements without any changes
or the imposition of any conditions or restrictions, other than those (i) the
Company may offer in its discretion in any application for an order approving
the transaction contemplated hereby or in any related filing or testimony or
(ii) that would not reasonably be expected to constitute a Materially
Adverse Regulatory Condition;
provided
,
however
, that the
foregoing obligations shall not apply to a final Order of the FCC or any State
Regulators. Neither Verizon nor the Company shall settle any such
action, suit or proceeding or fail to perfect on a timely basis any right to
appeal any judgment rendered or order entered against such party therein without
having previously consulted with the other party. Notwithstanding the
foregoing or any other provision of this Agreement, nothing in this
Section 7.6 shall limit a party’s right to terminate this Agreement
pursuant to Section 9.1 so long as such party has, prior to such termination,
complied in all respects with its obligations under this
Section 7.6. For purposes of this Agreement, “
Regulatory Law
” means
the Sherman Antitrust Act, as amended, the Clayton Antitrust Act of 1914, as
amended, the HSR Act, the Federal Trade Commission Act of 1914, as amended, the
Communications Act of 1934, as amended, and all other federal, state or foreign,
if any, statutes, rules, regulations, orders, decrees, administrative and
judicial doctrines and other Laws that relate to the granting of regulatory
consents in respect of telecommunications matters or that are designed or
intended to prohibit, restrict or regulate actions having the purpose or effect
of monopolization or restraint of trade or lessening competition, whether in the
communications industry or otherwise through merger or acquisition.
(i) To
the extent necessary to comply with state laws and regulations and FCC Rules,
including those prohibiting “slamming” as set forth in 47 C.F.R.
Section 64.1120, at least 60 days prior to the estimated Closing Date (as
reasonably estimated by the parties), (
i
) the Company shall,
at its own expense, prepare and deliver to Verizon a draft notice providing the
information required by 47 C.F.R. Section 64.1120(e) addressed to the
telecommunications customers of Spinco and the Spinco Subsidiaries, after giving
effect to the Contribution, it being understood that Verizon shall have the
opportunity to review and comment on the contents of such notice; and (
ii
) Verizon
shall, at the Company’s cost and expense (which shall be a reimbursement of
Verizon’s out-of-pocket costs and expenses), cause such notice to be delivered
to such customers at least 30 days before the estimated Closing Date (as
reasonably estimated by the parties) by a direct mailing or in accordance with
such method of notice and notification period that the FCC or State Regulators
may order or require. Verizon and/or Spinco will be responsible for
preparing, distributing, and filing (at the Company’s expense) any notices
relating to “discontinuance, reduction, or impairment” of service to the
customers of Spinco and the Spinco Subsidiaries after giving effect to the
Contribution required by 47 C.F.R. Sections 63.19 and 63.71.
(j) On
or prior to the Closing Date, the Company, at its own expense, shall adopt (to
the extent permitted by State Regulators) the tariffs, price lists, schedules of
rates, or other statements of terms and conditions, including special customer
arrangements, special assemblies, price flex arrangements, and individual
customer-based arrangements of Verizon and other Verizon Affiliates for
telecommunications services, which are applicable in whole or in part in the
Territory, are effective under applicable Laws, and are in effect immediately
prior to the Closing (collectively, the “
Tariffs
”). The
Company shall maintain the Tariffs in effect at least until the end of the
service term specified in (
i
) the Tariffs (to
the extent permitted by State Regulators), (
ii
) agreements
implementing such Tariffs with customers served by Verizon’s Affiliates under
retained Blended Customer Contracts and the agreements of customers who do not
provide Third Party Consents under this Agreement (each a “
Specified Contract
”)
and (
iii
)
agreements implementing such Tariffs with Persons who are Affiliates of Verizon
on or before the Closing Date, and any optional renewal term exercisable by
customers which are party to a Specified Contract or such Affiliates in such
agreements or Tariffs. The Company further agrees that, to the extent
such Tariffs or agreements implementing such Tariffs contain rates and charges
or other terms and conditions based on volume of service, amount of purchase or
spend, or similar volume commitments by the customers which are party to a
Specified Contract or such Affiliates (the “
Volume Commitments
”),
the Company will reduce such Volume Commitments pro-rata, without a change in
rates and charges or other terms and conditions under such Tariffs or
agreements, to reflect the fact that the customers who are party to a Specified
Contract or such Affiliates may, after Closing, take service from both Verizon
Affiliates and the Company and not from Verizon Affiliates or the Company
alone. The pro-rata reduction shall be equal to or exceed the amount
of the Volume Commitment provided by Verizon Affiliates after
Closing. By way of example, and not by limitation, if after Closing,
such customer or Affiliate purchased 75% of a Volume Commitment from the Company
and 25% of a Volume Commitment from Verizon Affiliates, then the Company would
reduce the Volume Commitment by 25% in affected Tariffs and agreements
implementing such Tariffs. At its own expense, the Company shall make
all filings and take all other actions as may be required by applicable Laws to
make the Tariffs and pro-rata reductions of Volume Commitments adopted or made
by the Company under this Section 7.6(j) legally effective not later than
the Effective Time. If the applicable State Regulators do not permit,
in whole or in part, the adoption of such Tariffs by the Company or the
maintenance of such Tariffs during the service terms described above in this
Section 7.6(j), then from and after the Effective Time and through the date
on which the Company would no longer have been required under this
Section 7.6(j) to maintain the applicable Tariffs had such State Regulators
permitted their adoption, the Company will provide service terms, rates and
services equivalent to the applicable Tariffs, including reductions in Volume
Commitments, by means and methods acceptable to the applicable State
Regulators.
(k) In
cases in which Verizon or any of its Affiliates is a party to a Contract with a
competitive local exchange carrier, a local exchange carrier, or an
interexchange carrier for interconnection services within the Territory
(collectively, the “
Verizon Interconnection
Agreements
”), Verizon and the Company agree that until Closing and for a
period of six months following the Closing Date, each of Verizon and the Company
shall use all commercially reasonable efforts to facilitate the negotiation of
similar agreements or modifications to and assignments of the Verizon
Interconnection Agreements that will transfer the benefits and obligations of
Verizon contained in such Verizon Interconnection Agreements to the Company
after Closing.
7.7
Employee
Matters
. Verizon, Spinco and the Company agree that
throughout the internal restructurings taken in contemplation of this Agreement,
including the Internal Spinoffs and Internal Restructurings, the Contribution,
Distribution, and the Merger, the Spinco Business Employees shall maintain
uninterrupted continuity of employment, compensation and benefits, and, also for
union-represented employees, uninterrupted continuity of representation for
purposes of collective bargaining and uninterrupted continuity of coverage under
their collective bargaining agreements, in each case as contemplated by and
provided in the Employee Matters Agreement and other than as set forth in
Section 2.3 of the Distribution Agreement.
(a) Verizon
and Spinco shall use all commercially reasonable efforts to identify and obtain
prior to the Closing any material Verizon Third Party Consents necessary to be
obtained to authorize, approve or permit the consummation of the transactions
contemplated by the Distribution Agreement or this Agreement. If such
Verizon Third Party Consents have not been obtained prior to the Closing,
Verizon and the Surviving Corporation shall use all commercially reasonable
efforts thereafter to obtain such Verizon Third Party Consents within six months
following the Closing Date;
provided
,
however
, that any
consent costs or other considerations to be paid by Verizon and the Company (or,
for periods following the Closing, the Surviving Corporation) to obtain Verizon
Third Party Consents sought pursuant to this Section 7.8(a) and Verizon IP
Consents sought pursuant to Section 7.8(b), together with costs associated
with the separation of any Blended Customer Contract as provided in
Section 7.8(e), shall be borne by the parties as provided in
Section 7.8(a) of the Verizon Disclosure Letter;
provided
further
,
however
, that
(x) such limitation shall not apply to any filing, recordation or similar
fees payable to any Governmental Authority, which filing, recordation or similar
fees shall be shared equally between Verizon, on the one hand, and the Company
or the Surviving Corporation, on the other hand, and (y) such calculation
of amounts for which the parties have agreed to share shall exclude any amounts
payable by the Surviving Corporation pursuant to the Software License
Agreement.
(b) Promptly
following the date hereof and, if the Closing occurs, for a period of six months
following the Closing Date, Verizon shall use, and shall cause its Affiliates to
use, all commercially reasonable efforts, in cooperation with the Company or the
Surviving Corporation, to identify and thereafter obtain Verizon IP
Consents. The parties shall bear the costs of obtaining any Verizon
IP Consent (collectively, the “
Verizon IP Consent
Costs
”) as provided in Section 7.8(a) of the Verizon Disclosure
Letter. For the avoidance of doubt, (
i
) Verizon IP
Consents shall include any authorization, approval, consent, waiver or
replacement license of a third Person required to permit the Surviving
Corporation and its Subsidiaries, as applicable, to retain rights after the
Closing to any material Network Element Software that is made available to one
or more Contributing Companies pursuant to a Retained Contract and (
ii
) except to the
extent provided otherwise in Section 7.8(a) of the Verizon Disclosure
Letter, Verizon IP Consent Costs shall not include the costs attributable to
obtaining for the benefit of the Surviving Corporation or its Subsidiaries any
upgrade or maintenance, support or other service used or useful in the operation
of material Network Element Software following the Closing or the costs
attributable to any licenses under Verizon Third Party Intellectual Property
required to receive and use services pursuant to the Software License
Agreement.
(c) Notwithstanding
anything to the contrary contained herein, but subject to the obligations set
forth in this Section 7.8(a) and, with respect to the circumstances
described in the first sentence of Section 7.8(f), to the provisions of
Section 7.8(f), to the extent any Verizon Third Party Consent or Verizon IP
Consent is required in connection with the consummation of the transactions
contemplated by the Distribution Agreement or this Agreement and such Verizon
Third Party Consent or Verizon IP Consent is not received at or prior to the
Closing, then, (
i
) if applicable, the
Contract that is the subject of such Verizon Third Party Consent shall not be
assigned in the Contribution and (
ii
) if applicable, to
the extent any such Contract requiring a Verizon Third Party Consent may only be
enjoyed by Verizon or an Affiliate of Verizon, such Contract shall be
transferred to Verizon or another Affiliate of Verizon, and Verizon agrees in
each case to use all commercially reasonable efforts to make the benefits of any
such Contract available to the Surviving Corporation for the remaining term
thereof (it being understood that Verizon shall not be obligated to renew or
extend any such Contract other than those that are up for renewal or extension
within six months following the Closing Date) and its Subsidiaries following the
Closing Date, subject to (
x
) the assumption of
obligations in respect of such Contract (to the extent such obligations relate
to or arise from the benefits of such Contract that have been made available to
the Surviving Corporation and its Subsidiaries) by the Surviving Corporation and
its Subsidiaries and (
y
) the limitations on
required payments set forth in Sections 7.8(a) and 7.8(b).
(d) Verizon
shall use all commercially reasonable efforts to deliver to the Company within
60 days of the date hereof (
i
) a list of all
third parties who are counterparties to a Retained Contract and which Verizon
reasonably believes were paid an aggregate of $250,000 or more in calendar year
2008 by Verizon or its Subsidiaries as indicated in the accounts payable system
of Verizon in respect of such Contract and (
ii
) to the extent not
prohibited pursuant to confidentiality obligations contained in any such
Contract, either (
A
) a copy of such
Contract (if such Contract is in writing) or (
B
) a description of
the products/services which are the subject of the Contract.
(e) With
respect to Blended Customer Contracts, Verizon and the Company will use all
commercially reasonable efforts to obtain prior to the Closing or, if not
obtained, will use all commercially reasonable efforts to obtain within six
months following the Closing Date, from the counterparty to each Blended
Customer Contract any needed consent to separate the portion of such Contract
that relates to the goods or services purchased from or supplied to the Spinco
Business under such Blended Customer Contract, it being agreed that Verizon and
the Company shall not be required to grant any consideration to any counterparty
to such a Blended Customer Contract except to the extent of any consent costs
that are included in the amounts for which Verizon has agreed to be responsible
pursuant to Section 7.8(a). The Contract constituting the
separated portion of any Blended Customer Contract that relates to the Spinco
Business as described in the preceding sentence shall be assumed by and become
the responsibility of Spinco (or the Surviving Corporation to the extent it is
separated following the Closing).
(f) With
respect to (x) any Contract associated with a Retained Customer Account, (y) any
failure to assign any customer Contract that would have been assigned in the
Contribution as a Spinco Asset but for the failure to obtain a Verizon Third
Party Consent or (z) any failure to assume any Blended Customer Contract that
would have been assumed in part by Spinco pursuant to Section 7.8(e) but for the
failure of the counterparty to consent to such assumption, then (
i
) to the extent such
Contract involves the provision to the customer thereunder of ILEC services that
are a part of the Spinco Business, Verizon shall use the Surviving Corporation
and its Subsidiaries succeeding to the Spinco Business to provide such services
to such customer subject to the rights, if any, of such customer under such
Contract to consent thereto and (
ii
) to the extent
such Contract involves the provision to the customer thereunder of non-ILEC
services, Verizon shall continue to provide such services to such customer in
accordance with such Contract. With respect to ILEC services
delivered by the Surviving Corporation and its Subsidiaries in respect of such
Contracts, Verizon shall either (
A
) remit to the
Surviving Corporation amounts received from the applicable customers in
accordance with the applicable Tariff (which the Surviving Corporation shall
have mirrored in accordance with Section 7.6(j)) or, if applicable, in
accordance with Section 7.6(j), in each case including as to payment terms or
(
B
) make
payment to the Surviving Corporation in accordance with the terms of the
applicable Transferred Affiliate Arrangement, including as to payment
terms. With respect to non-ILEC services and ILEC services delivered
by Verizon or its Subsidiaries under such Contracts without the assistance of
the Surviving Corporation or its Subsidiaries, Verizon shall remit to the
Surviving Corporation its net amounts received (after payment of third party
costs and any applicable taxes) in respect of the delivery of such services to
such customers, which payment shall be made by Verizon promptly after its
receipt of such revenues and in any event no later than 45 days
thereafter. The provisions of this Section 7.8(f) shall
exclusively govern the circumstances described in the first sentence hereof,
notwithstanding any other provision of this Agreement or the Distribution
Agreement.
(g) Verizon
will use all commercially reasonable efforts to identify to the Company prior to
the Closing any Verizon Guarantees (as defined in the Distribution Agreement)
and any Spinco Guarantees (as defined in the Distribution
Agreement).
(h) Within
ninety days of the date hereof, Verizon shall deliver to Company, to the best of
its knowledge after reasonable diligence, a complete and accurate list, as of
the date of delivery of such list, of all Third Party Software (as defined in
the Software License Agreement and the FiOS Software License Agreement) used in
or with the Software (as defined in the Software License Agreement), the FS
Software (as defined in the FiOS Software License Agreement), and other material
Third Party Software. Such list shall include the name of the
vendor/supplier of each such item of Third Party Software, the type of license
(e.g., facilities based, seat, location based, etc.), and a good faith estimate
of the license fees for each such item of Third Party Software on such
list. Verizon shall update the list promptly if any additional Third
Party Software is used as described above at any time after the delivery of the
initial list and prior to the Closing. Prior to the Closing, Verizon
shall cooperate with Company as reasonably requested by Company in obtaining
licenses to such Third Party Software, including by waiving any provisions in
its agreements with the vendors/suppliers of the Third Party Software that would
prohibit such vendors/suppliers from licensing such software to Company or its
Affiliates.
(i) The
Parties covenant to work in good faith to complete Schedule A of the Software
License Agreement within 30 days of the date hereof. Schedule A shall
include (1) a description of the services to be performed, (2) the Software to
which such services shall be applied, and (3) a breakdown of the Annual
Maintenance Fee (as defined in the Software License Agreement) by each portion
of Software. Verizon shall update the list promptly if any additional
Maintenance Services (as defined in the Software License Agreement) become
applicable to the Software or the FS Software, respectively, as each is used
in the Spinco Business and the Spinco FS Business (as defined in the
FiOS Software License Agreement) at any time after the delivery of the initial
list and prior to the Closing.
(a) As
soon as reasonably practicable after the date of this Agreement, Verizon and the
Company, as to matters germane to the Merger, shall submit to the IRS a request
(the “
Ruling
Request
”) for (
i
) the IRS
Ruling, and (
ii
) any other
ruling in connection with the Contribution, the Distribution or the Merger that
Verizon, in consultation with the Company, deems to be
appropriate. The initial Ruling Request and any supplemental
materials submitted to the IRS relating thereto (each, an “
IRS Submission
”)
shall be prepared by Verizon. Verizon shall provide the Company with
a reasonable opportunity to review and comment on each IRS Submission prior to
the filing of such IRS Submission with the IRS as contemplated by
Section 10.01(b) of the Tax Sharing Agreement;
provided
that Verizon
may redact from any IRS Submission any information (“
Redactable
Information
”) that (
A
) Verizon, in
its good faith judgment, considers to be confidential and not germane to the
Company’s or Spinco’s obligations under this Agreement or any of the other
Transaction Agreements, and (
B
) is not a part
of any other publicly available information, including any non-confidential
filing.
(b) Verizon
shall provide the Company with copies of each IRS Submission as filed with the
IRS promptly following the filing thereof;
provided
that Verizon
may redact any Redactable Information from the IRS Submission. Each
of Verizon, Spinco and the Company agrees to use all commercially reasonable
efforts to obtain the IRS Ruling and the other rulings set forth in the Ruling
Request, including providing such appropriate information and representations as
the IRS shall require in connection with the Ruling Request and any IRS
Submissions. Solely for the avoidance of doubt, nothing in this
Section 7.9(b) shall provide grounds for Verizon, Spinco or the Company to
alter any obligation or limitation imposed upon it under this
Agreement.
(c) Each
of Verizon, Spinco and the Company agrees to use all commercially reasonable
efforts to obtain the Distribution Tax Opinion. The Distribution Tax
Opinion shall be based upon the IRS Ruling, any other rulings issued by the IRS
in connection with the Ruling Request, and customary representations and
covenants, including those contained in certificates of Verizon, Spinco, the
Company and others, reasonably satisfactory in form and substance to Verizon Tax
Counsel (such representations and covenants, the “
Distribution Tax
Representations
”). Each of Verizon, Spinco and the Company
shall deliver to Verizon Tax Counsel, for purposes of the Distribution Tax
Opinion, the Distribution Tax Representations.
(d) Verizon
and Spinco, on the one hand, and the Company, on the other hand, shall cooperate
with each other in obtaining, and shall use all their respective commercially
reasonable efforts to obtain, a written opinion of their respective tax counsel,
Company Tax Counsel, in the case of the Company, and Verizon Tax Counsel, in the
case of Verizon and Spinco, in form and substance reasonably satisfactory to the
Company and Verizon, respectively (each such opinion, a “
Merger Tax Opinion
”),
dated as of the Effective Time, to the effect that, on the basis of facts,
representations and assumptions set forth in such opinion, the Merger will be
treated as a tax-free reorganization within the meaning of Section 368(a)
of the Code, and no gain or loss will be recognized by Spinco or its
stockholders (except to the extent of cash in lieu of fractional share
interests) in the Merger. Each of the Company, Verizon and Spinco
shall deliver to Company Tax Counsel and Verizon Tax Counsel for purposes of the
Merger Tax Opinions customary representations and covenants, including those
contained in certificates of the Company, Verizon, Spinco and others, reasonably
satisfactory in form and substance to Company Tax Counsel and Verizon Tax
Counsel.
(e) Prior
to the Effective Time, each of Verizon, Spinco and the Company agrees to use all
commercially reasonable efforts to cause the Tax-Free Status of the
Transactions.
7.10
Access to
Information
. Upon reasonable notice, each of Verizon,
Spinco and the Company shall, subject to applicable Law, afford to each other
and to each other’s respective officers, employees, accountants, counsel and
other authorized representatives, reasonable access during normal business
hours, from the date hereof through to the date which is the earlier of the
Effective Time or the date on which this Agreement is terminated pursuant to
Section 9.1, to its and its Subsidiaries’ officers, employees, accountants,
consultants, representatives, plants, properties, Contracts (other than Retained
Contracts), commitments, books, records (including Tax Returns) and any report,
schedule or other document filed or received by it pursuant to the requirements
of the federal or state securities laws, and shall use all commercially
reasonable efforts to cause its respective representatives to furnish promptly
to the others such additional financial and operating data and other information
in its possession, as to its and its Subsidiaries’ respective businesses and
properties as the others or their respective duly authorized representatives, as
the case may be, may reasonably request, it being understood that in no event
will any party be required to provide access to its accountants’ work papers or
to customers proprietary network information (other than as the parties may
mutually agree in a separate written agreement and, with respect to customer
proprietary network information, to the extent permitted by the FCC Rules) and,
in the case of Spinco and Verizon, the foregoing obligations will be limited to
information regarding the Spinco Business.
(a) Except
as set forth in Sections 7.11(b) through (d) hereof, the Company agrees
that, following the date of this Agreement and prior to the earlier of the
Effective Time or the date on which this Agreement is terminated pursuant to
Section 9.1, neither it nor any Company Subsidiary shall, and that it shall
use all commercially reasonable efforts to cause its and each of the Company
Subsidiary’s officers, directors, employees, advisors and agents not to,
directly or indirectly, (
i
) knowingly
solicit, initiate or encourage any inquiry or proposal that constitutes or could
reasonably be expected to lead to a Company Acquisition Proposal, (
ii
) provide any
non-public information or data to any Person relating to or in connection with a
Company Acquisition Proposal, engage in any discussions or negotiations
concerning a Company Acquisition Proposal, or otherwise knowingly facilitate any
effort or attempt to make or implement a Company Acquisition Proposal, (
iii
) approve,
recommend, agree to or accept, or propose publicly to approve, recommend, agree
to or accept, any Company Acquisition Proposal, or (
iv
) approve,
recommend, agree to or accept, or propose to approve, recommend, agree to or
accept, or execute or enter into, any letter of intent, agreement in principle,
merger agreement, acquisition agreement, option agreement or other similar
agreement related to any Company Acquisition Proposal. Without
limiting the foregoing, any violation of the restrictions set forth in the
preceding sentence by any of the Company Subsidiaries or any of the Company’s or
the Company Subsidiaries’ officers, directors, employees, agents or
representatives (including any investment banker, attorney or accountant
retained by the Company or the Company Subsidiaries) shall be a breach of this
Section 7.11(a) by the Company. The Company agrees that it will
immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any Persons conducted heretofore with respect
to any Company Acquisition Proposal (except with respect to the transactions
contemplated by this Agreement).
(b) Nothing
contained in this Agreement shall prevent the Company or the Company’s Board of
Directors from, prior to the receipt of the Requisite Approval, engaging in any
discussions or negotiations with, or providing any non-public information to,
any Person, if and only to the extent that (
i
) the Company
receives from such Person a bona fide Company Superior Proposal or a Company
Acquisition Proposal that the Company’s Board of Directors determines in good
faith (after consultation with a financial advisor of nationally recognized
reputation) would reasonably be expected to lead to a Company Superior Proposal
and in either case that was not solicited after the date of this Agreement,
(
ii
) the
Company’s Board of Directors determines in good faith (after consultation with
its legal advisors) that its failure to do so would reasonably be expected to
result in a breach of the Board of Directors’ fiduciary duties under applicable
Law, (
iii
) prior to
providing any information or data to any Person in connection with a proposal by
any such Person, such information has been provided to Verizon (or is provided
to Verizon at the same time it is provided to such Person, to the extent not
previously provided or made available to Verizon) and (
iv
) prior to
providing any non-public information or data to any Person or entering into
discussions or negotiations with any Person, the Company’s Board of Directors
notifies Verizon promptly of any such inquiry, proposal or offer received by,
any such information requested from, or any such discussions or negotiations
sought to be initiated or continued with, the Company, any Company Subsidiary or
any of their officers, directors, employees, advisors and agents after the date
of this Agreement indicating, in connection with such notice, the material terms
and conditions of the Company Acquisition Proposal and the identity of the
Person making such Company Acquisition Proposal. The Company agrees
that it shall keep Verizon reasonably informed, on a reasonably prompt basis
(and in any event within 24 hours following receipt of any Company Acquisition
Proposal or any changes thereto), of the status and material terms of any such
proposals or offers, any changes thereto, and the status of any such discussions
or negotiations and will notify Verizon promptly of any determination by the
Company’s Board of Directors that a Company Superior Proposal has been
made. For purposes of this Agreement, a “
Company Superior
Proposal
” means any proposal or offer made by a third party to acquire,
directly or indirectly, by merger, consolidation or otherwise, for consideration
consisting of cash and/or securities, at least a majority of the shares of the
Company Common Stock then outstanding or all or substantially all of the assets
of the Company and the Company Subsidiaries and otherwise on terms which the
Board of Directors of the Company (after consultation with its legal and
financial advisors) determines in its good faith judgment to be more favorable
to the Company’s stockholders than the Merger (taking into account all of the
terms and conditions of such proposal and of this Agreement as well as any other
factors deemed relevant by the Board of Directors of the Company) and reasonably
capable of being consummated on the terms so proposed, taking into account all
financial, regulatory, legal and other aspects of such proposal.
(c) Notwithstanding
anything to the contrary contained herein, but subject to compliance with this
Section 7.11(c), prior to the receipt of the Requisite Approval, the Board of
Directors of the Company may, if it concludes in good faith (after consultation
with its legal advisors) that failure to do so would reasonably be expected
(taking into account any new or revised proposals made by Verizon) to result in
a breach of its fiduciary duties under applicable Law, effect a Change of Board
Recommendation, but only if:
(i) the
Company shall have provided prior written notice to Verizon of its intention to
take any such action at least five Business Days in advance of taking such
action (the “
Notice
Period
”), which notice shall specify (A) if such Change of Board
Recommendation is not being made as a result of a Company Superior Proposal, the
Board of Directors’ reasons for taking such action, and (B) if such Change of
Board Recommendation is being made as a result of a Company Superior Proposal,
or involves the recommendation of a Company Superior Proposal, the material
terms and conditions of any such Company Superior Proposal (including the
identity of the party making such Company Superior Proposal); and
(ii) prior
to effecting such Change of Board Recommendation or recommending such Company
Superior Proposal the Company shall provide Verizon the opportunity to submit an
amended written proposal or to make a new written proposal to the Board of
Directors of the Company during the Notice Period.
In the
event of any material revisions to the Company Superior Proposal, the Company
shall be required to deliver a new written notice to Verizon and to comply with
the requirements of this Section 7.11(c) with respect to such new written notice
except that the Notice Period shall be reduced to two Business
Days.
(d) Nothing
in this Agreement shall prohibit the Company from taking and disclosing to its
stockholders a position contemplated by Rule 14d-9 and Rule 14e-2(a) promulgated
under the Exchange Act or from making any disclosure to the Company stockholders
if, in the good faith judgment of the Board of Directors of the Company (after
consultation with its legal advisors), it is required to do so in order to
comply with its fiduciary duties to the Company’s stockholders under applicable
Law;
provided
,
however
, that any
disclosure other than a “stop, look and listen” or similar communication of the
type contemplated by Rule 14d-9(f) under the Exchange Act, unless accompanied by
an express rejection of any applicable Company Acquisition Proposal or an
express reaffirmation of the Company Board Recommendation, shall be deemed to be
a Change of Board Recommendation subject to Section 7.11.
(a) From
and after the date hereof, the Company, the Surviving Corporation and their
respective Subsidiaries shall provide such cooperation and assistance as Verizon
may reasonably request to enable, if Verizon so chooses, Verizon or a Subsidiary
thereof to maintain following the Closing, at Verizon’s expense, directors’ and
officers’ liability insurance policies and fiduciary liability insurance
policies covering each person who is, or has been at any time prior to the
Effective Time, an officer or director of Verizon or a Contributing Company and
each person who served at the request of a Contributing Company as a director,
officer, trustee or fiduciary of another corporation, partnership, joint
venture, trust, pension or other employee benefit plan or enterprise, including
any person serving in such capacity with respect to Spinco or a Spinco
Subsidiary (the “
Identified
Persons
”).
(b) At
the Closing, the Surviving Corporation will, on behalf of itself, its
Subsidiaries and their respective successors and assigns and for all parties
claiming by, through or under them (the “
Surviving Corporation
Releasors
”), execute and deliver to each Identified Person a release
irrevocably releasing, remising and forever discharging such Identified Person,
and its estates and heirs, of and from any and all claims, whether presently
known or unknown, which any Surviving Corporation Releasor has or may have of
any kind arising out of or pertaining to acts or omissions, or alleged acts or
omissions, by such Identified Person in the capacities specified in Section
7.12(a) prior to the Effective Time;
provided
,
however
, that such
release shall also include a release, executed by such Identified Person, on
behalf of itself and its estates and heirs and for all parties claiming by,
through or under them (the “
Identified Persons
Releasors
”), irrevocably releasing, remising and forever discharging the
Surviving Corporation, its Subsidiaries and their respective successors and
assigns, of and from any and all claims, whether presently known or unknown,
which any Identified Persons Releasor has or may have of any kind.
(c) In
the event of any claim, action, suit, arbitration, proceeding or investigation
(“
Action
”)
arising out of or pertaining to acts or omissions, or alleged acts or omissions,
by the Identified Persons in the capacities specified in Section 7.12(a)
prior to the Closing, from and after the Effective Time the Surviving
Corporation and its Subsidiaries shall provide reasonable cooperation, at
Verizon’s expense, in defense of any such Action.
7.13
Public
Announcements
. Verizon and the Company shall consult with
each other and shall mutually agree upon any press release or public
announcement relating to the transactions contemplated by this
Agreement. Neither of them shall issue any such press release or make
any such public announcement or statement (including through any advertising,
press conference, media appearance or other forum) prior to such consultation
and agreement, except as may be required by applicable Law or by obligations
pursuant to any listing agreement with any national securities exchange or
automated inter-dealer quotation system, in which case the party proposing to
issue such press release or make such public announcement shall use all
commercially reasonable efforts to consult in good faith with the other party
before issuing any such press release or making any such public
announcement.
(a) Verizon
shall give notice to the Company, and the Company shall give notice to Verizon,
of any occurrence or non-occurrence of any fact or event that would reasonably
be expected to cause the failure of Verizon or its Affiliates or the Company or
its Affiliates, as the case may be, to comply with or satisfy, in any material
respect, any closing condition set forth in Article VIII.
(b) Each
of the parties hereto shall keep the others informed on a timely basis as to
(
i
) the status
of the transactions contemplated by the Transaction Agreements and the obtaining
of all necessary and appropriate exemptions, rulings, consents, authorizations
and waivers related thereto, including the Telecommunications Regulatory
Consents and (
ii
) the status of any
other material regulatory proceeding pending as of the date hereof or arising
prior to the Effective Time, affecting the Spinco Business or the business of
the Company, as applicable.
7.15
Control of Other Party’s
Business
. Nothing contained in this Agreement shall give
Verizon or Spinco, directly or indirectly, the right to control or direct the
Company’s operations prior to the Effective Time. Nothing contained
in this Agreement shall give the Company, directly or indirectly, the right to
control or direct the operations of the Spinco Business prior to the Effective
Time. Prior to the Effective Time, Verizon and the Company shall
exercise, consistent with the terms and conditions of this Agreement, complete
control and supervision over their respective operations.
(a) Beginning
with the fiscal quarter ending on March 31, 2009, Verizon will deliver to the
Company, (
i
) with respect
to each fiscal quarter other than the last fiscal quarter of a fiscal year,
promptly upon their being prepared (and in any event no later than 40 days after
the end of such fiscal quarter), unaudited combined Statements of Selected
Assets, Selected Liabilities and Parent Funding of the local exchange businesses
and related landline activities of Verizon in the Territory (including Internet
access and certain long distance services provided to customers in those
states), together with the related unaudited combined statements of income, cash
flows and parent funding for the portion of the fiscal year then ended and
(
ii
) with
respect to the last fiscal quarter of a fiscal year, promptly upon their being
prepared (and in any event no later than 75 days after the end of such fiscal
quarter), audited combined Statements of Selected Assets, Selected Liabilities
and Parent Funding of the local exchange businesses and related landline
activities of Verizon in the Territory (including Internet access and certain
long distance services provided to customers in those states), together with the
related audited combined statements of income, cash flows and parent funding for
such fiscal year. Such statements shall be prepared from the books
and records of Verizon and the Contributing Companies (to the extent relating to
the Spinco Business) in accordance with GAAP applied on a consistent basis
throughout the periods involved using the same accounting principles, practices,
methodologies and policies used in preparing the Spinco Financial Statements
(except as may otherwise be required under GAAP), shall satisfy the requirements
of Regulation S-X under the Exchange Act and present fairly, in all
material respects, the financial position and operating results and changes in
cash flows and changes in parent funding of the Spinco Business as of the dates
and for the periods indicated therein.
7.17
Directors of the Surviving
Corporation
. The Company, Verizon and Spinco shall take
all action reasonably necessary to cause the Board of Directors of the Company
immediately prior to the Effective Time to consist of twelve members, (
i
) three of whom
shall be designated by Verizon and (
ii
) nine of whom
shall be designated by the Company, which directors shall be the Board of
Directors of the Surviving Corporation. One of the Company’s
designees shall serve as chairman of the board. Within six months
following the date of this Agreement, Verizon shall give the Company written
notice setting forth its designees to the Surviving Corporation’s Board of
Directors and such information with respect to each of its designees as is
required to be disclosed in the Proxy Statement/Prospectus or would be required
to be disclosed in a proxy statement for an annual meeting. Promptly
after Verizon gives such notice to the Company, and in any event within 20 days
thereafter, the Company shall notify Verizon of its designees to the Surviving
Corporation’s Board of Directors. Without limiting the foregoing and
prior to the Effective Time, the Company shall take all actions necessary to
obtain the resignations of all members of its Board of Directors who will not be
directors of the Surviving Corporation and for the Board of Directors of the
Company to fill such vacancies with the new directors contemplated by this
Section 7.17. Verizon’s director nominees under this Section
7.17 will (
x
) not be
employees of Verizon, its Affiliates or Cellco Partnership or any of its
Subsidiaries and (
y
) will satisfy
the requirements for director independence under the rules and regulations of
the SEC and the NYSE.
(a) The
parties acknowledge that it is contemplated that the Special Payment shall be
financed through the incurrence of one or more term loan bank borrowings and/or
capital markets issuances by Spinco prior to or substantially contemporaneous
with the Distribution (collectively, the “
Special Payment
Financing
”) and that in connection with the Distribution Spinco may issue
to Verizon or a Verizon Subsidiary Spinco Securities. From time to
time following the date hereof, Verizon and the Company shall meet to discuss
strategy and timing for seeking proposals from reputable lenders and/or
underwriters to provide, arrange and/or underwrite the Special Payment
Financing, which financing may be negotiated, drawn down and/or issued in one or
more tranches.
(b) Verizon
and the Company shall jointly solicit proposals from reputable financing sources
no later than nine months after the date hereof (and, at such time, Verizon
shall provide the Company with its then-current estimate of its Distribution
Date tax basis in Spinco) and the Company shall select from among the proposals
received one or more which the Company reasonably determines to be the most
favorable. Promptly thereafter, the Company and Verizon shall
commence negotiations with the financing sources thereunder. The
Company shall take the lead in such negotiations and shall keep Verizon informed
of all material developments and provide Verizon with an opportunity to
participate in all negotiations. The Company and Verizon shall use
all commercially reasonable efforts to finalize all documentation with respect
to the Special Payment Financing. The Company agrees to discuss and
consider from time to time, at the request of Verizon, the possibility of
causing Spinco to incur a portion of the Special Payment Financing in advance of
the Closing, it being understood that the Company shall be under no obligation
to do so. Subject to Section 7.18(e) and the following proviso, the
Company and Verizon shall be required to accept and execute documentation
relating to (and cause Spinco to execute documentation relating to) the Special
Payment Financing and, if applicable, the Spinco Securities,
provided
that if at
the time proposed for acceptance and execution of documentation relating to the
Special Payment Financing and, if applicable, the Spinco Securities, the
negotiated terms thereof do not satisfy the requirements of clauses (i) or
(ii) of Section 7.18(e), and if as of such time, the parties would
otherwise be obligated to close the transactions contemplated hereby due to the
satisfaction of the conditions set forth in Article VIII (other than those that
would be satisfied by action at the Closing and other than the condition in
Section 8.2(d)), the Company shall promptly so notify Verizon and either the
Company or Verizon may elect to defer the Closing (subject to the satisfaction
of such closing conditions on such deferral date) until the final Business Day
of the next calendar month (a “
Financial Market
Deferral
”). If elected, the parties shall cooperate in seeking
to improve the proposed terms of the Special Payment Financing and, if
applicable, the Spinco Securities during such deferral period. A
Financial Market Deferral may be elected on one or more occasions but no more
than four times in total by the Company and Verizon, and, notwithstanding the
foregoing, if elected for a fourth time, the period of such deferral shall last
until the final Business Day of the second calendar month following the date on
which such deferral is elected.
(c) If
Verizon notifies the Company that Spinco Securities are to be issued, the
Company shall take the lead in the negotiation of the terms and conditions
thereof with the financial institutions selected by Verizon to be party to any
Debt Exchange elected to be consummated by Verizon and shall keep Verizon
informed of all material developments and provide Verizon with an opportunity to
participate in all negotiations relating to the terms of such Spinco
Securities. In such event, the Company shall, in consultation with
Verizon, determine the final form of the Spinco Securities and related
agreements (including registration rights arrangements and indenture) consistent
with the terms set forth in Exhibit G of the Distribution Agreement;
provided
that the
covenants and economic terms thereof would reasonably be expected to result in
the Spinco Securities being exchanged for Verizon obligations in an equal
principal amount. If Verizon elects to consummate the Debt Exchange,
it shall have the sole right to structure the arrangements relating thereto with
underwriters, arrangers and other third parties relating to the Debt Exchange;
provided
that
Verizon shall keep the Company reasonably informed regarding such
arrangements.
(d) Notwithstanding
the provisions of Sections 7.18(b) and 7.18(c) above, in the event that
(i) all of the conditions set forth in Article VIII (other than those
that would be satisfied by action at the Closing and other than the condition in
Section 8.2(d)) have been satisfied and (ii) the Company (A) is
not actively conducting negotiations with financing sources with respect to the
Special Payment Financing and, if applicable, the Spinco Securities, and
(B) fails to commence such negotiations promptly following notice from
Verizon that Verizon reasonably believes the Company is not actively conducting
such negotiations, then Verizon shall be entitled to assume the lead role in
conducting such negotiations (and shall keep the Company informed of all
material developments with respect thereto) until the Company so
acts.
(e) Notwithstanding
the provisions of Section 7.18(b) and Section 7.18(c):
(i) The
Company shall not be obligated to accept or execute documentation relating to
the Special Payment Financing or, if applicable, the Spinco Securities if (w)
either (A) the weighted average life of the aggregate of such financing and
securities, together with the Distribution Date Spinco Indebtedness, is less
than five years or (B) any of the Special Payment Financing or the Spinco
Securities would have a final maturity of earlier than January 1, 2014,
other than any bridge financing with a maturity of at least 364 days in an
aggregate amount not in excess of $600 million, (x) such financing or securities
or the Distribution Date Spinco Indebtedness would be secured by any assets of
any operating company, (y) the terms or provisions of such financing or
securities or the Distribution Date Spinco Indebtedness would cause their
incurrence or assumption by the Company in or as a result of the Merger to be
prohibited by or cause (with or without notice or the lapse of time) a default
under the Company’s existing credit agreements or indentures as in effect on the
date hereof, or (z) both (I) the proposed covenants and other terms and
conditions in such documentation (excluding (A) any terms of the Spinco
Securities set forth in Exhibit G of the Distribution Agreement and (B) the
rate, yield or tenor thereof) are not, in the aggregate, substantially in
accordance with then prevailing market terms for similarly sized term loan bank
borrowings and/or capital market issuances by companies of a size and with
credit ratings similar to the Surviving Corporation and (II) the effect of such
covenants and other terms and conditions that are not in accordance with the
prevailing market terms (excluding (A) any terms of the Spinco Securities set
forth in Exhibit G of the Distribution Agreement and (B) the rate, yield or
tenor thereof) would, in the aggregate, be materially adverse to the Surviving
Corporation.
(ii) The
Company shall not be obligated to accept or execute documentation relating to
the Special Payment Financing or the Spinco Securities if as a result thereof
the weighted average annual cash interest rate (including annual accretion of
original issue discount with respect to Indebtedness issued with a material
amount of original issue discount) payable on the aggregate of the Special
Payment Financing, the Spinco Securities and the Distribution Date Spinco
Indebtedness (the “
Coverage Costs
”)
would exceed 9.5%, unless the Company reasonably determines in good faith that
such Coverage Costs would not be unduly burdensome.
(f) Each
of Verizon, Spinco and the Company shall cooperate in connection with the
preparation of all documents and the making of all filings required in
connection with the Special Payment Financing, the Spinco Securities and the
Debt Exchange (if Verizon elects to consummate the Debt Exchange) and shall use
all commercially reasonable efforts to take, or cause to be taken, all actions
and to do, or cause to be done, all other things necessary, proper or advisable
to consummate the Special Payment Financing, the issuance of the Spinco
Securities and the Debt Exchange (if Verizon elects to consummate the Debt
Exchange) and the other transactions contemplated in connection
therewith. Without limiting the generality of the foregoing, each of
Verizon, Spinco and the Company shall use all commercially reasonable efforts to
cause their respective employees, accountants, counsel and other representatives
to cooperate with each other in (
i
) participating
in meetings, drafting sessions, due diligence sessions, management presentation
sessions, “road shows” and sessions with rating agencies in connection with the
syndication or marketing of the Special Payment Financing, the Spinco Securities
and the Debt Exchange (if Verizon elects to consummate the Debt Exchange),
(
ii
) preparing
offering memoranda, private placement memoranda, prospectuses and similar
documents deemed reasonably necessary by Verizon, Spinco or the Company, to be
used in connection with consummating the Special Payment Financing, the issuance
of the Spinco Securities and the Debt Exchange (if Verizon elects to consummate
the Debt Exchange), (
iii
) executing
and delivering all documents and instruments deemed reasonably necessary by
Verizon, Spinco or the Company to consummate the Special Payment Financing, the
issuance of the Spinco Securities and the Debt Exchange (if Verizon elects to
consummate the Debt Exchange), including any underwriting or placement
agreements, pledge and security documents, other definitive financing documents,
including any intercreditor or indemnity agreements, or other requested
certificates or documents as may be reasonably requested in connection with the
Special Payment Financing, the Spinco Securities or the Debt Exchange (if
Verizon elects to consummate the Debt Exchange),
provided, however
,
that (
A
) no
such agreements or documents shall impose any monetary obligation or liability
on Spinco or the Company prior to the Effective Time and (
B
) Verizon shall not
be obligated to incur any obligations in connection with the Special Payment
Financing (other than the obligation to pay Spinco Debt Expenses as provided in
the Distribution Agreement and the non-monetary cooperation obligations set
forth above in this Section 7.18(f)), (
iv
) disclosing
the terms and conditions of the Special Payment Financing, the Spinco Securities
and the Debt Exchange (if Verizon elects to consummate the Debt Exchange), as
reasonably appropriate, in the Registration Statements, and (
v
) taking all
other actions reasonably necessary in connection with the Special Payment
Financing, including any such actions required to permit the assumption by the
Surviving Corporation of the debt that is part of the Special Payment Financing
and the Spinco Securities at the Effective Time.
(g) Not
later than 60 days prior to the reasonably anticipated Closing Date, Verizon
shall deliver to the Company a certificate setting forth the anticipated amount
of the Special Payment, along with Verizon’s then-current estimates of
(i) Distribution Date Spinco Indebtedness and (ii) its tax basis in
Spinco as of the Distribution Date. Verizon shall have the right to
update such certificate from time to time in advance of the Closing (but no
later than 15 days prior to the Closing) in light of any updated information of
Verizon regarding its tax basis in Spinco and the amount of the Distribution
Date Spinco Indebtedness.
(a) In
connection with the information regarding the Spinco Business or the
transactions contemplated by this Agreement provided by Spinco specifically for
inclusion in, or incorporation by reference into, the Proxy Statement/Prospectus
and the Registration Statements, Verizon shall use all commercially reasonable
efforts to cause to be delivered to the Company letters of Ernst & Young
LLP, dated the date on which each of the Registration Statements shall become
effective, the date on which the Proxy Statement/Prospectus or any Registration
Statement is mailed to the Company’s stockholders and the Closing Date, and
addressed to the Company, in form and substance reasonably satisfactory to the
Company and customary in scope and substance for letters delivered by
independent public accountants in connection with registration statements
similar to the Registration Statements. In the event that Spinco is
treated as the acquiring entity for accounting purposes pursuant to GAAP, then
Verizon shall use all commercially reasonable efforts to cause any such letter
to include such negative assurance statements regarding the pro forma financial
information included in the Proxy Statement/Prospectus and the Registration
Statements as are customary in scope and substance for letters delivered by
independent public accountants in connection with registration statements
similar to the Registration Statements.
(b) The
Company shall use all commercially reasonable efforts to cause KPMG LLP, the
independent auditors of the Company, to provide any unqualified opinions,
consents or customary comfort letters with respect to the financial statements
of the Company needed in connection with the Special Payment Financing, the
Registration Statements and/or the Debt Exchange (if Verizon elects to
consummate the Debt Exchange). The Company agrees to allow Verizon’s
accounting representatives the opportunity to review any such financial
statements required in connection therewith and to allow such representatives
reasonable access to the Company and the Company Subsidiaries and supporting
documentation with respect to the preparation of such financial statements;
provided that such access shall not include any right to review the working
papers of the independent auditors of the Company and the Company
Subsidiaries. The Company shall use all commercially reasonable
efforts to cause KPMG LLP to participate in the preparation of any pro forma
financial statements necessary or desirable for inclusion in, or incorporation
by reference into, the Registration Statements and for use in connection with
the Special Payment Financing and/or the Debt Exchange (if Verizon elects to
consummate the Debt Exchange).
(c) In
connection with the information regarding the Company or the Company
Subsidiaries or the transactions contemplated by this Agreement provided by the
Company specifically for inclusion in, or incorporation by reference into, the
Proxy Statement/Prospectus and the Registration Statements, the Company shall
use all commercially reasonable efforts to cause to be delivered to Spinco
letters of KPMG LLP, dated the date on which each of the Registration Statements
shall become effective, the date on which the Proxy Statement/Prospectus or any
Registration Statement is mailed to the Company’s stockholders and the Closing
Date, and addressed to Verizon and Spinco, in form and substance reasonably
satisfactory to Verizon and customary in scope and substance for letters
delivered by independent public accountants in connection with registration
statements similar to the Registration Statements. In the event that
the Company is treated as the acquiring entity for accounting purposes pursuant
to GAAP, then the Company shall use all commercially reasonable efforts to cause
any such letter to include such negative assurance statements regarding the pro
forma financial information included in the Proxy Statement/Prospectus and the
Registration Statements as are customary in scope and substance for letters
delivered by independent public accountants in connection with registration
statements similar to the Registration Statements.
(d) Verizon
shall use all commercially reasonable efforts to cause Ernst & Young LLP,
the independent auditors of Spinco, to provide any unqualified opinions,
consents or customary comfort letters with respect to the financial statements
regarding the Spinco Business needed in connection with the Special Payment
Financing, the Proxy Statement/Prospectus, the Registration Statements and/or
the Debt Exchange (if Verizon elects to consummate the Debt
Exchange). Verizon agrees to allow the Company’s accounting
representatives the opportunity to review any such financial statements required
in connection therewith and to allow such representatives reasonable access to
records of the Contributing Companies and supporting documentation with respect
to the preparation of such financial statements;
provided
,
however
, that such
access shall not include any right to review the working papers of the
independent auditors of Verizon and its Subsidiaries. Verizon shall
use all commercially reasonable efforts to cause Ernst & Young LLP to
participate in the preparation of any pro forma financial statements necessary
or desirable for inclusion in, or incorporation by reference into, the
Registration Statements and for use in connection with the Special Payment
Financing and/or the Debt Exchange (if Verizon elects to consummate the Debt
Exchange).
7.20
Disclosure
Controls
. Each of Verizon and the Company shall use all
commercially reasonable efforts to enable the Company to implement such programs
and take such steps as are reasonably necessary to (
i
) develop a
system of internal controls over financial reporting (as defined in Rules
13a-15(f) and 15d-15(f) of the Exchange Act) intended to ensure that after the
Effective Time material information relating to the Surviving Corporation is
timely made known to the management of the Surviving Corporation by others
within those entities, (
ii
) cooperate
reasonably with each other in preparing for the transition and integration of
the financial reporting systems of Spinco and the Spinco Subsidiaries with the
Company’s financial reporting systems following the Effective Time and (
iii
) otherwise
enable the Surviving Corporation to maintain compliance with the provisions of
Section 404 of the Sarbanes-Oxley Act.
7.21
Listing
. As
promptly as reasonably practicable following the date hereof and at least 30
days prior to the date that any party reasonably expects all of the required
regulatory approvals to have been obtained, the Company shall make application
to the NYSE for the listing of the shares of Company Common Stock to be issued
pursuant to the transactions contemplated by this Agreement and use all
commercially reasonable efforts to cause such shares to be Approved for
Listing.
(a) At
the Company’s request, which shall be made, if at all, prior to March 31, 2010,
Verizon and the Company shall cause their respective Affiliates to enter into an
agreement with respect to Video Transport Service incorporating the terms set
forth on the term sheet attached as Exhibit D and such other terms as may be
reasonably related thereto and agreed by their respective Affiliates (the “
Video Transport Service
Agreement
”).
(b) Verizon
and the Company shall cause their respective Affiliates to enter into an
agreement with respect to Back Office Support Services incorporating the terms
set forth on the term sheet attached as Exhibit E and such other terms as may
reasonably related thereto and agreed by their respective Affiliates (the “
Back Office Support Services
Agreement
”).
7.23
Directories
Agreements
. Prior to the Merger, Spinco shall offer to
Directories Media Inc. (“
Directories
”) to
enter into the proposed Publishing Agreement, the Non-Competition Agreement and
the Branding Agreement, between Directories and Spinco (or Subsidiaries of
Spinco, as applicable), that are in the form attached hereto as Exhibits F, G
and H (the “
Directories
Agreements
”);
provided
,
however
, that Spinco
shall not have any obligation to enter into (or offer to enter into) any such
agreement to the extent the terms of such agreement are not binding upon the
Spinco Business as of immediately prior to the Effective Time. If
such agreements are required but are not entered into prior to the Merger, the
Surviving Corporation (or Subsidiaries of the Surviving Corporation, as
applicable) will offer to enter into such agreements with Directories within 90
days following the Merger to the extent Directories notifies the Surviving
Corporation within such time period that it wishes to enter into such
agreements.
(a) Following
the date hereof, Verizon shall undertake to segregate the operation of the
Spinco Business in the Territory (other than West Virginia) from the Verizon
Business (including the completion of the actions contemplated by Section
7.24(c) and the identification, testing and validation of personnel, processes
and systems to be working properly) such that the representation set forth in
Section 5.17 shall be accurate as of the Closing in accordance with the
standards set forth in Section 8.3(b) (the “
Realignment
”). Verizon
shall keep the Company reasonably updated from time to time with respect to the
Realignment and shall discuss with the Company its plans for implementing the
various aspects of the Realignment on an ongoing basis once Verizon has
developed its initial plan for effecting the Realignment. If in
connection with the Realignment the Company wishes to remove or omit particular
functions or services that are used or held for use in the conduct of the Spinco
Business or to replace certain third party vendors of the Spinco business with
other third party vendors, the Company will promptly notify Verizon in writing
to this effect. Verizon will have the right to disapprove such
proposed omissions or replacements to the extent Verizon determines that such
omissions or replacements may materially delay or increase the expense of
completing the Realignment. No later than 60 days prior to the
reasonably anticipated Closing Date, Verizon shall provide written notice to the
Company stating that Verizon and its Subsidiaries have completed the Realignment
as of the date of such notice. The Company shall be granted
reasonable rights of access from time to time prior to the Closing in accordance
with Section 7.10 to validate and confirm the completion of the Realignment
(including the functioning of principal operating systems) in accordance with
the first sentence of this Section 7.24.
(b) In
connection with the Realignment, Verizon shall not take any action that would
result in any material increase in the number of employees performing each
material function of the Spinco Business above the number of such employees
performing such function on behalf of the Spinco Business on the date
hereof.
(c) Prior
to March 31, 2010, Verizon shall create a separate instance in the
Fort Wayne, Indiana data center (the “
Fort Wayne Data
Center
”) of Verizon proprietary software systems that will enable Spinco
(and following the Merger, the Surviving Corporation) in all states in the
Territory (other than West Virginia) to provide functionality substantially
similar to, but no less favorable to the Spinco Business than, that which the
Spinco Business received from Verizon and its Affiliates as of the date of this
Agreement. As of the Closing Date, the Fort Wayne Data Center (i)
shall be owned by the Surviving Corporation or an Affiliate thereof and (ii)
shall have on site a majority of the hardware reasonably required to
provide functionality to the Spinco Business in accordance with the foregoing
(and the balance of such hardware, if not held at the Fort Wayne Data Center,
shall be available on a firewall basis from Verizon or a Verizon Subsidiary for
up to one year following the Closing to allow for Verizon to transfer such
hardware to the Fort Wayne Data Center within one year following the
Closing).
7.25
California
Disclosure
. Notwithstanding anything herein to the
contrary, the parties acknowledge that the Verizon Disclosure Letter and the
Spinco Disclosure Letter and the Disclosure Letter under the Distribution
Agreement contain no information regarding the portion of the Spinco Business
conducted in California and that such failure shall not constitute a breach of
any representation or warranty herein or any breach of the Distribution
Agreement. Verizon and Spinco shall have the right to update such
Disclosure Letters within 45 days of the date hereof to incorporate any
applicable disclosure relating to portion of the Spinco Business conducted in
California, whereupon such disclosure will be deemed to have been made as of the
date hereof;
provided
,
however
, that this
Section 7.25 and any disclosure made hereunder shall have no effect with
respect to the representations and warranties made in Section 5.5 or
Section 5.17.
7.26
J
oint Defense
Agreement
. Within 30 days following the date hereof,
Verizon and the Company shall negotiate in good faith the terms of, and enter
into, a joint defense agreement regarding certain matters of common interest
arising from the transactions contemplated by the Transaction Agreements (the
“Joint Defense Agreement”).
CONDITIONS TO THE
MERGER
(a) Each
of the Internal Spinoffs, the Internal Restructuring, the Contribution and the
Distribution shall have been consummated, in each case, in accordance with the
Distribution Agreement, the IRS Ruling (unless the parties agree in writing
upon, and implement, an alternative structure for the transactions contemplated
hereby that eliminates the need for an IRS Ruling as contemplated by
Section 2.7 hereof) and the Distribution Tax Opinion;
provided
,
however
, that this
Section 8.1(a) shall not be a condition to the consummation of the Merger
by any party whose failure to comply with its obligations and/or covenants set
forth in this Agreement, the Tax Sharing Agreement or the Distribution Agreement
gives rise to the failure of the Internal Spinoffs, the Internal Restructuring,
the Contribution or the Distribution to have been consummated in accordance with
the foregoing.
(b) Any
applicable waiting period under the HSR Act shall have expired or been
terminated.
(c) (
i
) No regulatory
proceeding before any State Regulator that is pending as of the date hereof or
arises prior to the Effective Time, and affects either the Spinco Business or
the business of the Company, shall have been resolved by final order of the
applicable regulator on terms that, and (
ii
) no condition
shall have been imposed in connection with obtaining any Telecommunications
Regulatory Consent that, in either case, constitutes a Materially Adverse
Regulatory Condition.
(d) All
of the Telecommunications Regulatory Consents shall be final and in full force
and effect.
(e) The
Registration Statements shall have become effective in accordance with the
Securities Act or the Exchange Act, as applicable, and shall not be the subject
of any stop order or proceedings seeking a stop order; and the shares of Company
Common Stock to be issued, and such other shares required to be reserved for
issuance, pursuant to the Merger shall have been Approved
for Listing.
(f) The
Requisite Approval shall have been obtained, in accordance with applicable Law
and the rules and regulations of the NYSE.
(g) No
court of competent jurisdiction or other Governmental Authority shall have
issued an Order that is still in effect restraining, enjoining or prohibiting
the Contribution, the Distribution or the Merger.
(h) No
action shall have been taken, and no statute, rule, regulation or executive
order shall have been enacted, entered, promulgated or enforced, by any
Governmental Authority with respect to the Contribution, the Distribution or the
Merger or the other transactions contemplated hereby or by the Distribution
Agreement or the Employee Matters Agreement that, individually or in the
aggregate, would (
i
) restrain,
enjoin or prohibit the consummation of the Internal Spinoffs, the Internal
Restructuring, the Contribution, the Distribution or the Merger or the other
transactions contemplated hereby or by the Distribution Agreement or the
Employee Matters Agreement or (
ii
) impose any
burdens, liabilities, restrictions or requirements thereon or on Verizon, Spinco
or the Company with respect thereto that has had or would reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect on Verizon
(assuming for such purposes that the business, assets, properties and
liabilities of Verizon were comparable in size to that of the Surviving
Corporation) or the Surviving Corporation (collectively, a “
Restraint
”), and no
Governmental Authority shall have instituted or threatened to institute and not
withdrawn any proceeding seeking any such Restraint.
(i) Unless
the parties agree in writing upon and implement an alternative structure for the
transactions contemplated hereby that eliminates the need for an IRS Ruling as
contemplated by Section 2.7 hereof, Verizon and Spinco (and, to the extent
applicable, the Company) shall have received the IRS Ruling in form and
substance reasonably satisfactory to Verizon, Spinco and the Company, and such
IRS Ruling shall continue to be valid and in full force and effect.
(j) The
Company shall have received a Merger Tax Opinion from Company Tax Counsel, in
form and substance reasonably satisfactory to the Company, and Verizon shall
have received a Merger Tax Opinion from Verizon Tax Counsel, in form and
substance reasonably satisfactory to Verizon, and Verizon Tax Counsel shall have
issued the Distribution Tax Opinion.
(k) Verizon
and the Company shall have received the opinion of a nationally recognized
independent valuation firm selected by Verizon (and reasonably acceptable to the
Company) attesting to the solvency of the Surviving Corporation on a pro forma
basis immediately after the Effective Time, which opinion shall be in customary
form (the “
Solvency
Opinion
”).
(a) The
Company shall have performed in all material respects all obligations and
complied in all material respects with all covenants required by this Agreement
to be performed or complied with by it at or prior to the Effective
Time.
(b) Each
of the representations and warranties of the Company (
i
) set forth in
Article VI (other than Sections 6.3(a) and 6.3(b)) of this Agreement shall
be true and correct as of the date of this Agreement and as of the Closing Date
as though such representations and warranties were made on and as of the Closing
Date, except for representations and warranties that speak as of an earlier date
or period (which shall be true and correct as of such earlier date or period);
provided
,
however
, that for
purposes of this clause (i), such representations and warranties shall be
deemed to be true and correct unless the failure or failures of all such
representations and warranties to be so true and correct, without giving effect
to any qualification as to materiality or Material Adverse Effect set forth in
such representations or warranties, has had or would reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on the Company
and (
ii
) set forth in
Sections 6.3(a) and 6.3(b) of this Agreement shall be true and correct in
all material respects as of the date of this Agreement and as of the Closing
Date as though made on and as of the Closing Date.
(c) The
Company shall have delivered to Verizon a certificate, dated as of the Effective
Time, of a senior officer of the Company certifying the satisfaction by the
Company of the conditions set forth in subsections (a) and (b) of this
Section 8.2.
(d) Verizon
shall have received in connection with the Distribution the Special Payment and,
if applicable, a principal amount of Spinco Securities that, together with the
Special Payment (and the amount of any Distribution Date Spinco Indebtedness),
equal $3.333 billion in the aggregate and, if Spinco Securities are issued and
if Verizon desires to consummate the Debt Exchange, the Debt Exchange shall have
been consummated with respect to a principal amount of Spinco Securities equal
to (
x
) $3.333
billion minus (
y
) the sum of
(
A
) the
total amount of the Special Payment and (
B
) the amount of
Distribution Date Spinco Indebtedness.
(e) Except
as disclosed in the Company Disclosure Letter or as expressly contemplated by
the Transaction Agreements, since December 31, 2008, there shall have been no
state of facts, change, development, event, effect, condition or occurrence that
has had or would reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on the Company.
(f) The
Company shall have entered into the applicable Transaction Agreements, and to
the extent applicable, timely performed them in all material respects, and each
such agreement shall be in full force and effect.
8.3
Additional Conditions to the
Obligations of the Company
. The obligation of the Company
to consummate the Merger shall be subject to the fulfillment (or, to the extent
permitted by applicable Law, waiver by the Company) at or prior to the Effective
Time of the following additional conditions:
(a) Spinco
and Verizon shall have performed in all material respects all obligations and
complied in all material respects with all covenants required by this Agreement
to be performed or complied with by them at or prior to the Effective
Time.
(b) Each
of the representations and warranties of Verizon and Spinco (
i
) set forth in
Article IV and Article V (other than Sections 4.2(a), 5.2(b), 5.3(a),
5.3(b) and 5.17) of this Agreement shall be true and correct as of the date of
this Agreement and as of the Closing Date as though such representations and
warranties were made on and as of the Closing Date, except for representations
and warranties that speak as of an earlier date or period (which shall be true
and correct as of such earlier date or period);
provided
,
however
, that for
purposes of this clause (i), such representations and warranties shall be
deemed to be true and correct unless the failure or failures of all such
representations and warranties to be so true and correct, without giving effect
to any qualification as to materiality or Material Adverse Effect set forth in
such representations or warranties, has had or would reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on Verizon,
Spinco or the Spinco Business and (
ii
) set forth in
Sections 4.2(a), 5.2(b), 5.3(a), 5.3(b) and 5.17 of this Agreement shall be true
and correct in all material respects as of the date of this Agreement and as of
the Closing Date as though made on and as of the Closing Date.
(c) Verizon
and Spinco shall have delivered to the Company a certificate, dated as of the
Effective Time, of a senior officer of each of Verizon and Spinco certifying the
satisfaction of the conditions set forth in subsections (a) and (b) of
this Section 8.3.
(d) Spinco
and Verizon (or a Subsidiary thereof) shall have entered into the applicable
Transaction Agreements, and to the extent timely, performed them in all material
respects, and each such agreement shall be in full force and
effect.
(e) Except
as disclosed in the Spinco Disclosure Letter or as expressly contemplated by the
Transaction Agreements, since December 31, 2008, there shall have been no state
of facts, change, development, event, effect, condition or occurrence that has
had or would reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on Spinco or the Spinco Business.
TERMINATION, AMENDMENT AND
WAIVERS
9.1
Termination
. Notwithstanding
anything contained in this Agreement to the contrary, this Agreement may be
terminated and the transactions contemplated hereby may be abandoned prior to
the Effective Time, whether before or after the Requisite Approval:
(a) by
the mutual written consent of each party hereto, which consent shall be effected
by action of the Board of Directors of each such party;
(b) by
any party hereto if the Effective Time shall not have occurred on or before July
31, 2010 (as such date may be extended in accordance with the terms of this
Agreement, the “
End
Date
”);
provided
,
however
, that if as
of such date (i) all Closing conditions (ignoring for this purpose
Section 8.2(d)) other than the conditions in Section 8.1(c) or 8.1(d),
are satisfied or capable of being satisfied as of such date (assuming for such
purpose that such date were the Closing Date), or (ii) a Financial Market
Deferral is then in effect pursuant to Section 7.18(b), then the End Date
may be extended by Verizon or the Company upon written notice and the period of
such extension shall be (x) in the case of clause (i), for one or more one
month periods, not to exceed four calendar months in the aggregate, to obtain
such Telecommunications Regulatory Consents in a manner that satisfies the
conditions in Sections 8.1(c) and 8.1(d) and (y) in the case of clause
(ii), for one month (or two month, if applicable pursuant to Section 7.18(b))
periods, to the extent permitted to do so pursuant to Section 7.18(b);
provided
further
,
however
, that the
right to terminate this Agreement pursuant to this Section 9.1(b) shall not
be available to any party whose failure to perform any of its obligations under
this Agreement required to be performed by it at or prior to such date has been
a substantial cause of, or substantially contributed to, the failure of the
Merger to have become effective on or before such date;
(c) by
any party hereto if (
i
) a statute,
rule, regulation or executive order shall have been enacted, entered or
promulgated prohibiting the consummation of the Merger or (
ii
) an Order
shall have been entered that either (A) would result in a failure of a condition
set forth in Section 8.1(c) or (B) permanently restrains, enjoins or otherwise
prohibits the consummation of the Merger, and in each case such Order shall have
become final and non-appealable and the party seeking to terminate this
Agreement pursuant to this clause 9.1(c)(ii) shall have used all
commercially reasonable efforts to remove such Order in accordance with and to
the extent required by Section 7.6(h) insofar as such Section relates to, a
final order of the FCC or a State Regulator in the Territory or in the states
listed in Section 6.3(d) of the Company Disclosure Letter;
(d) by
the Company, if either Verizon or Spinco shall have breached or failed to
perform in any material respect any of its representations, warranties,
covenants or other agreements contained in this Agreement, which breach or
failure to perform (
i
) would result
in a failure of a condition set forth in Section 8.1 or Section 8.3
and (
ii
) cannot be
cured by the End Date;
provided
,
however
, that the
Company shall have given Verizon and Spinco written notice, delivered at least
30 days prior to such termination, stating the Company’s intention to
terminate this Agreement pursuant to this Section 9.1(d) and the basis for
such termination;
(e) by
Verizon and Spinco, if the Company shall have breached or failed to perform in
any material respect any of its representations, warranties, covenants or other
agreements contained in this Agreement, which breach or failure to perform
(
i
) would
result in a failure of a condition set forth in Section 8.1 or
Section 8.2 and (
ii
) cannot be
cured by the End Date;
provided
,
however
, that Verizon
and Spinco shall have given the Company written notice, delivered at least
30 days prior to such termination, stating Verizon and Spinco’s intention
to terminate the Agreement pursuant to this Section 9.1(e) and the basis
for such termination;
(f) by
Verizon and Spinco, on the one hand, or the Company, on the other hand, if, at
the Company Stockholders Meeting (after giving effect to any adjournment,
continuation or postponement thereof), the Requisite Approval is not obtained;
provided
,
however
, that the
right to terminate this Agreement under this Section 9.1(f) shall not be
available to the Company where such failure to obtain the Requisite Approval
shall have been caused by the action or failure to act of the Company and such
action or failure to act constitutes a material breach by the Company of this
Agreement;
(g) by
Verizon and Spinco, if (
i
) the Board of
Directors of the Company (or any committee thereof) shall have effected a Change
of Board Recommendation or resolved to effect a Change of Board Recommentation
or (
ii
) the Company
fails to call and hold the Company Stockholders Meeting within 60 days
after the date on which the SEC shall clear (whether orally or in writing) the
Proxy Statement/Prospectus and, if required by the SEC as a condition to the
mailing of the Proxy Statement/Prospectus, the date of effectiveness of the
Company Registration Statement; or
(h) by
Verizon and Spinco on any date, if on such date (i) the average of the
volume weighted averages of the trading prices of the Company Common Stock for
any period of 60 consecutive trading days that ended within three Business Days
prior to such date is below $3.87 and (ii) Verizon and Spinco notify the
Company in writing that they are terminating this Agreement in accordance with
this Section 9.1(h).
9.2
Effect of
Termination
. In the event of termination of this Agreement
pursuant to Section 9.1, this Agreement shall terminate (except for the
Confidentiality Agreement referred to in Section 10.1, the provisions of
Section 9.3 and Article XI), without any liability on the part of any
party except as set forth in Section 9.3;
provided
,
however
, that nothing
in this Agreement shall relieve any party of liability for fraud or willful and
knowing breach of this Agreement or the Distribution Agreement prior to such
termination.
9.3
Amounts Payable in Certain
Circumstances
. In the event that (
i
) Verizon and
Spinco terminate this Agreement pursuant to Section 9.1(g) or (
ii
) (
A
) any Person (other
than Verizon, Spinco or any of their Affiliates) shall have made a Company
Acquisition Proposal after the date hereof and prior to the Termination Date,
and thereafter this Agreement is terminated by any party pursuant to
Section 9.1(b) or by Verizon or Spinco pursuant to Section 9.1(e) as a
result of a breach by the Company of Section 7.6 or Section 7.18 or
by any party pursuant to Section 9.1(f) (and a Company Acquisition
Proposal shall have been publicly announced prior to the Company Stockholders
Meeting) and (
B
) within
twelve months after the termination of this Agreement, any Company
Acquisition shall have been consummated or any definitive agreement with respect
to any Company Acquisition Proposal (other than, in each case, with Verizon,
Spinco or any of their Affiliates) shall have been entered into, then the
Company shall pay Verizon a fee, in immediately available funds, in the amount
of $80 million at the time of such termination, in the case of a
termination described in clause (i) above, or upon the occurrence of the
earliest event described in clause (ii)(B), in the event of a termination
described in clause (ii), and in each case the Company shall be fully released
and discharged from any other liability or obligation resulting from or under
this Agreement, except with respect to any fraud or willful and knowing breach
of this Agreement;
provided
,
however
, that for
purposes of clause (ii)(B) of this Section 9.3 only, (
i
) all
references to 15% in the definition of Company Acquisition shall be deemed to be
references to 50% and (
ii
) clause (i)
of the definition of Company Acquisition shall read as follows: “any
merger, consolidation, share exchange, business combination, recapitalization or
other similar transaction or series of related transactions involving the
Company or any of its Significant Subsidiaries following which the stockholders
of the Company or any such Significant Subsidiary immediately prior to such
transactions (or series of transactions) do not hold and own greater than 70% of
the issued and outstanding equity securities of the Company or such Significant
Subsidiary (or the successor thereof), as the case may be”.
9.4
Amendment
. This
Agreement may be amended by Verizon, Spinco and the Company at any time before
or after receipt of the Requisite Approval;
provided
,
however
, that after
receipt of the Requisite Approval, no amendment shall be made that by Law or in
accordance with the rules of any relevant stock exchange or automated
inter-dealer quotation system requires further approval by stockholders of the
Company without such further approval of such stockholders. This
Agreement may not be amended except by an instrument in writing signed by each
of Verizon, Spinco and the Company.
9.5
W
aivers
. At
any time prior to the Effective Time, Verizon and Spinco, on the one hand, and
the Company, on the other hand, may, to the extent legally allowed, (
i
) extend the
time for the performance of any of the obligations or acts of Verizon and Spinco
or the Company, as applicable; (
ii
) waive any
inaccuracies in the representations and warranties of Verizon and Spinco or the
Company, as applicable, contained herein or in any document delivered pursuant
to this Agreement; and (
iii
) waive
compliance with any of the agreements or conditions of Verizon and Spinco or the
Company, as applicable, contained herein;
provided
,
however
, that no
failure or delay by Verizon, Spinco or the Company in exercising any right
hereunder shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right hereunder. Any agreement on the part of Verizon,
Spinco or the Company to any such extension or waiver shall be valid only if set
forth in an instrument in writing signed on behalf of such party.
SURVIVAL;
INDEMNIFICATION
10.1
Survival of
Representations, Warranties and Agreements
. The covenants
and agreements that expressly state that they are to be performed following the
Effective Time pursuant to the Distribution Agreement or this
Agreement (including Sections 10.2 to 10.6 hereof) shall survive the
Effective Time in accordance with their respective terms, and all other
covenants and agreements herein and therein shall terminate and shall not
survive the Effective Time. None of the representations or warranties
in this Agreement or in any certificate or instrument delivered pursuant to this
Agreement or any other covenant or agreement set forth herein shall survive the
Effective Time. The Confidentiality Agreement shall survive the
execution and delivery of this Agreement and any termination of this Agreement,
and the provisions of the Confidentiality Agreement shall apply to all
information and material furnished by any party or its representatives
thereunder or hereunder.
(a) If
the Closing occurs, the Surviving Corporation shall indemnify, defend and hold
harmless (i) the Verizon Indemnitees from and against all Losses arising out of
or due to the failure of any member of the Spinco Group (
A
) to timely pay
or satisfy any Spinco Liabilities, or (
B
) to perform
any of its obligations under this Agreement or the Distribution Agreement
and (
ii
)
Verizon and each Person, if any, who controls, within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act
(any such Person being hereinafter referred to as a “
Controlling Person
”),
Verizon from and against, and pay or reimburse each of the foregoing for, all
Losses, arising out of or resulting from, directly or indirectly, or in
connection with, any untrue statement or alleged untrue statement of a material
fact contained in or incorporated by reference into either of the Registration
Statements or the Proxy Statement/Prospectus (or any amendment or supplement
thereto) or any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading;
provided
,
however
, that the
Surviving Corporation shall not be responsible for information provided by
Verizon (or its Affiliates) as to itself and its Subsidiaries, including Spinco,
specifically for inclusion in, or incorporation by reference into, any such
Proxy Statement/Prospectus or Registration Statement.
(b) If
the Closing occurs, Verizon shall indemnify, defend and hold harmless (
i
) the Surviving
Corporation Indemnitees from and against all Losses arising out of or due to (x)
the failure of any member of the Verizon Group (
A
) to timely pay
or satisfy any Verizon Liabilities, or (
B
) to perform
any of its obligations under this Agreement or the Distribution Agreement or
(y) the actual amount of Distribution Date Spinco Indebtedness exceeding
the amount of Distribution Date Spinco Indebtedness set forth by Verizon and
Spinco in the Closing Statement, and (
ii
) the
Surviving Corporation and each Controlling Person of the Surviving Corporation
from and against, and pay or reimburse each of the foregoing for, all Losses
arising out of or resulting from, directly or indirectly, or in connection with,
any untrue statement or alleged untrue statement of a material fact contained in
or incorporated by reference into either of the Registration Statements or the
Proxy Statement/Prospectus (or any amendment or supplement thereto) or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, but only with respect
to information provided by Verizon (or its Affiliates) as to itself and its
Subsidiaries, including Spinco, specifically for inclusion in, or incorporation
by reference into, any such Proxy Statement/Prospectus or Registration
Statement.
(c) Notwithstanding
anything to the contrary set forth herein, indemnification or other claims
relating to any Transaction Agreement (other than the Distribution Agreement) or
relating to any ongoing commercial agreement between any member of the Verizon
Group and any member of the Spinco Group shall be governed by the terms of such
agreement and not by this Article X (except to the extend expressly so
stated in such Transaction Agreement), and indemnification for all matters
relating to Taxes shall be governed by terms, provisions and procedures of the
Tax Sharing Agreement and not this Article X.
(a) No
claim may be asserted by any Surviving Corporation Indemnitee under this
Article X arising from any failure to transfer any Spinco Asset to Spinco
unless such claim is asserted, if at all, within 18 months from the Closing
Date.
(b) No
Indemnitor shall be liable to or obligated to indemnify any Indemnitee hereunder
for any consequential, special, punitive or exemplary damages including, but not
limited to, damages arising from loss or interruption of business, profits,
business opportunities or goodwill, or any cost or expense related thereto,
except to the extent such damages are payable to or 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 X.
(c) Verizon
and the Company 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 (or its Affiliates) hereunder, including by using all commercially
reasonable efforts to mitigate the Losses and resolve any such claim or
liability prior to initiating litigation.
(a)
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 Surviving Corporation Indemnitee or a Verizon Indemnitee (each,
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 prompt written notice thereof, but in any event not later
than ten 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 at such Indemnitor’s expense with
counsel reasonably satisfactory to the Indemnitee;
provided
,
however
, that the
Indemnitor shall not have the right to assume the defense of any Third Party
Claim in the event such Third Party Claim is primarily for injunctive relief or
criminal penalty of the Indemnitee, in which case the reasonable fees and
expenses of counsel to the Indemnitee in connection with such Third Party Claim
shall be considered “Losses” for purposes of this Agreement. 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
(
1
) the
employment of such separate counsel has been specifically authorized in writing
by the Indemnitor; (
2
) the
Indemnitor has failed to assume the defense of such Third Party Claim within 20
calendar days after receipt of notice thereof with counsel reasonably
satisfactory to such Indemnitee; or (
3
) the named
parties to the proceeding in which such Third Party Claim 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 good faith defenses that
may be available to the Indemnitee that are in conflict with those available to
the Indemnitor or that the Indemnitor and Indemnitee have actual material
conflicting interests with respect to such Third Party
Claim. 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,
which shall not be unreasonably withheld, conditioned or delayed, the Indemnitor
will not enter into any settlement of or consent to the entry of judgment in
connection with any Third Party Claim that (
i
) would lead to
liability or create any financial or other obligation on the part of the
Indemnitee, (
ii
) does not
contain, 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
not dismissed against the Indemnitee with prejudice and without the imposition
of any financial or other obligation on the Indemnitee or (
iii
) admits the
liability or fault of the Indemnitee (the “
Settlement
Requirements
”). If a settlement offer solely for money damages
(and otherwise satisfying the Settlement Requirements) 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 and if the Indemnitee fails to consent to such settlement offer
within ten calendar days after its receipt of such notice, 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 and (
y
) the aggregate
Losses of the Indemnitee with respect to such claim. The party
controlling any defense shall keep the other party advised of the status of such
Third Party Claim and the defense thereof and shall consider in good faith all
reasonable recommendations made by the other party with respect
thereto.
(b)
Direct
Claims
. Any claim by an Indemnitee for Losses that do not
result from a Third Party Claim (each, a “Direct Claim”) shall be asserted by
giving the Indemnitor prompt written notice thereof, but in any event not later
than 60 calendar days after the incurrence thereof or such Indemnitee’s actual
knowledge of such event (whichever is later); 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), and the Indemnitor will have a period of 30 calendar days within
which to respond in writing to such Direct Claim. If the Indemnitor
does not so respond within such 30 calendar day period, the Indemnitor will be
deemed to have accepted such claim. If the Indemnitor rejects such
claim, 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 X.
10.5
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) as and when
actually received by the Indemnitee 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
,
however
, 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 X, 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.
10.6
Other Rights and
Remedies
. Following the Closing, the sole and exclusive
remedy at law for Verizon or the Company and all Affiliates thereof for any
claim (whether such claim is framed in tort, contract or otherwise) arising out
of a breach of this Agreement or the Distribution Agreement (to the
extent permitted in Section 6.1 of the Distribution Agreement), other than a
claim for fraud or willful and knowing misconduct, shall be a claim by Verizon
or the Company for indemnification pursuant to this Article X.
MISCELLANEOUS
11.1
Expenses
. Except
as expressly set forth in any Transaction Agreement, each party shall bear its
own fees and expenses in connection with the transactions contemplated hereby;
provided
,
however
,
that:
(i) if
the Merger is consummated, Verizon and the Company shall each bear and be
responsible for 50% of all Distribution/Merger Transfer Taxes and all
recording, application and filing fees associated with the transfer of the
Spinco Assets in connection with the transactions contemplated by the
Distribution Agreement (including the transfer of Spinco Owned Real Property and
Real Property Interests such as railroad crossing rights and
easements);
(ii) if
the Debt Exchange is consummated, (A) Verizon shall pay and be responsible
for all fees and expenses of its exchange counterparties and financial and legal
advisors and (B) Verizon and the Company shall each bear and be responsible
for 50% of all other costs and expenses in connection with the Debt Exchange
(including any printing costs, trustees fees and roadshow
expenses);
(iii) Verizon
shall pay the fees and reimbursable expenses of the independent valuation firm
referred to in Section 8.1(k) that are incurred in connection with the
preparation and delivery of the Solvency Opinion; and
(iv) the
costs of any filing fees or any advisor or consultant hired by any Governmental
Agency with the mutual consent of Verizon and the Company (or to which neither
party has the right to disapprove), as contemplated by Section 7.6,
regardless of which party is allocated such costs under Law, shall be considered
joint costs and the non-paying party shall reimburse the paying party for 50% of
such costs within 30 days of receipt of an invoice for same.
If any
party pays an amount that is the responsibility of another party pursuant to
this Section 11.1, such paying party shall be promptly reimbursed by the
party responsible for such amount. If the Closing occurs, such
reimbursement shall occur on the Closing Date to the extent the paying party
provides evidence of such payments at least 10 Business Days prior to the
Closing Date.
11.2
Notices
.
Any notice required to be given to a party hereunder shall be sufficient
if in writing, and sent by facsimile transmission (with receipt confirmed,
provided
that any
notice received by facsimile transmission at the addressee’s location on any
Business Day after 5:00 p.m. (addressee’s local time) shall be deemed to have
been received at 9:00 a.m. (addressee’s local time) on the next Business Day),
by reliable overnight delivery service (with proof of service), hand delivery or
certified or registered mail (return receipt requested and first-class postage
prepaid), addressed as follows:
If to
Spinco (prior to the Effective Time) or Verizon, to:
Verizon
Communications Inc.
140 West
Street
New York,
NY 10007
Facsimile:
(908) 766-3813
Attn:
Marianne Drost
Senior Vice President, Deputy General
Counsel and Corporate Secretary
With a
copy to (which shall not constitute notice):
Debevoise
& Plimpton LLP
919 Third
Avenue
New York,
NY 10022
Facsimile:
(212) 909-6836
Attn: Jeffrey
J. Rosen
Kevin M. Schmidt
If to the
Company, to:
Frontier
Communications Corporation
3 High
Ridge Park
Stamford,
CT 06905
Facsimile:
(203) 614-4661
Attn: Donald
R. Shassian
Executive Vice President and Chief
Financial Officer
and
Frontier
Communications Corporation
3 High
Ridge Park
Stamford,
CT 06905
Facsimile:
(203) 614-4651
Attn: Hilary
E. Glassman, Senior Vice President, General Counsel and Secretary
With a
copy to (which shall not constitute notice):
Cravath,
Swaine & Moore LLP
825
Eighth Avenue
New York,
NY 10019
Facsimile:
(212) 474-3700
Attn: Robert
I. Townsend, III
Craig F. Arcella
or to
such other address as any such party shall specify by written notice so given,
and such notice shall be deemed to have been delivered as of the date so
telecommunicated, delivered or mailed. Any party to this Agreement
may notify any other party of any changes to the address or any of the other
details specified in this paragraph;
provided
,
however
, that such
notification shall only be effective on the date specified in such notice or
five Business Days after the notice is given, whichever is
later. Rejection or other refusal to accept or the inability to
deliver because of changed address of which no notice was given shall be deemed
to be receipt of the notice as of the date of such rejection, refusal or
inability to deliver. Verizon and Spinco shall provide to the Company
in a manner consistent with this Section 11.2 copies of any notices that either
may deliver to the other under the Distribution Agreement.
(a) When
a reference is made in this Agreement to an Article or Section, such reference
shall be to an Article or Section of this Agreement unless otherwise
indicated. The table of contents to this Agreement, and the Article
and Section headings contained in this Agreement, are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words “include,” “includes” or “including”
are used in this Agreement, they shall be deemed to be followed by the words
“without limitation.” 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. The term “or” is not exclusive. All terms
defined in this Agreement shall have the defined meanings when used in any
certificate or other document made or delivered pursuant hereto unless otherwise
defined herein. The definitions contained in this Agreement are
applicable to the singular as well as the plural forms of such terms and to the
masculine as well as to the feminine and neuter genders of such
terms. Unless otherwise specified, any agreement, instrument or
statute defined or referred to herein or in any agreement or instrument that is
referred to herein means such agreement, instrument or statute as from time to
time amended, modified or supplemented, including (in the case of agreements or
instruments) by waiver or consent and (in the case of statutes) by succession of
comparable successor statutes and includes all attachments thereto and
instruments incorporated therein. References to a person are also to
its permitted successors and assigns.
(b) Each
of the parties hereto has participated in the drafting and negotiation of this
Agreement. If an ambiguity or question of intent or interpretation
arises, this Agreement must be construed as if it is drafted by all the parties
hereto and no presumption or burden of proof shall arise favoring or disfavoring
any party by virtue of authorship of any of the provisions of this
Agreement. For the avoidance of doubt, (i) “the business of the
Company” or similar terms means the business of the Company and its
Subsidiaries, taken as a whole and (ii) “consistent with past practice” when
used with respect to Spinco or any of its Subsidiaries shall mean the past
practice of Verizon and its Subsidiaries with respect to the conduct of the
Spinco Business.
(c) Any
matter disclosed in any particular Section or Subsection of the Spinco
Disclosure Letter, the Verizon Disclosure Letter or the Company Disclosure
Letter shall be deemed to have been disclosed in any other Section or
Subsection of this Agreement with respect to which such matter is relevant so
long as the applicability of such matter to such other Section or Subsection of
this Agreement is reasonably apparent on its face.
(d) Unless
otherwise expressly stated in this Agreement, any right of consent, approval or
election given to any party hereto may be exercised by such party in its sole
discretion.
11.4
Severability
. If
any provision of this Agreement or the application of any such provision to any
Person or circumstance shall be declared judicially to be invalid, unenforceable
or void, such decision shall not have the effect of invalidating or voiding the
remainder of this Agreement, it being the intent and agreement of the parties
hereto that this Agreement shall be deemed amended by modifying such provision
to the extent necessary to render it valid, legal and enforceable while
preserving its intent or, if such modification is not possible, by substituting
therefor another provision that is valid, legal and enforceable and that
achieves the original intent of the parties hereto.
11.5
Assignment; Binding
Effect
. Neither this Agreement nor any of the rights,
benefits or obligations hereunder may be assigned by any of the parties hereto
(whether by operation of law or otherwise) without the prior written consent of
all of the other parties, and any purported assignment without such consent
shall be null and void. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties hereto and their respective successors and
permitted assigns.
11.6
No Third Party
Beneficiaries
. Nothing in this Agreement, express or
implied, is intended to or shall confer upon any Person (other than Verizon,
Spinco and the Company and their respective successors and permitted assigns)
any legal or equitable right, benefit or remedy of any nature whatsoever under
or by reason of this Agreement, and, except as provided in Article X with
respect to Indemnitees, no Person shall be deemed a third party beneficiary
under or by reason of this Agreement.
11.7
Limited
Liability
. Notwithstanding any other provision of this
Agreement, no stockholder, director, officer, Affiliate, agent or representative
of any of the parties hereto, in its capacity as such, shall have any liability
in respect of or relating to the covenants, obligations, representations or
warranties of such party under this Agreement or in respect of any certificate
delivered with respect hereto or thereto and, to the fullest extent legally
permissible, each of the parties hereto, for itself and its stockholders,
directors, officers and Affiliates, waives and agrees not to seek to assert or
enforce any such liability that any such Person otherwise might have pursuant to
applicable Law.
11.8
Entire
Agreement
. This Agreement (together with the other
Transaction Agreements, the Confidentiality Agreement, the exhibits and the
Disclosure Letters and the other documents delivered pursuant hereto)
constitutes the entire agreement of all the parties hereto and supersedes all
prior agreements and understandings, both written and oral, between or among the
parties, or any of them, with respect to the subject matter hereof.
11.9
Governing
Law
. Except to the extent relating to the consummation of
the Merger, which shall be consummated in accordance with the DGCL, this
Agreement shall be governed by, and construed in accordance with, the laws of
the State of New York without giving effect to the conflicts of law principles
thereof.
11.10
Counterparts
. This
Agreement may be executed in two or more counterparts, each of which shall be
deemed to be an original, but all of which together shall constitute one
agreement binding on the parties hereto, notwithstanding that not all parties
are signatories to the original or the same counterpart.
11.11
Waiver of Jury
Trial
. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES ALL
RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM (WHETHER
BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE ACTIONS OF THE PARTIES HERETO IN THE NEGOTIATION,
ADMINISTRATION, PERFORMANCE AND ENFORCEMENT HEREOF.
11.12
Jurisdiction; Enforcement;
Service of Process
. THE PARTIES HERETO AGREE THAT
IRREPARABLE DAMAGE WOULD OCCUR IN THE EVENT THAT ANY OF THE PROVISIONS OF THIS
AGREEMENT WERE NOT PERFORMED IN ACCORDANCE WITH THEIR SPECIFIC TERMS OR WERE
OTHERWISE BREACHED. IT IS ACCORDINGLY AGREED THAT THE PARTIES HERETO
SHALL BE ENTITLED TO AN INJUNCTION OR INJUNCTIONS TO PREVENT BREACHES OF THIS
AGREEMENT AND TO ENFORCE SPECIFICALLY THE TERMS AND PROVISIONS OF THIS AGREEMENT
IN ANY FEDERAL COURT LOCATED IN THE STATE OF NEW YORK OR, IF SUCH FEDERAL COURTS
DO NOT HAVE SUBJECT MATTER JURISDICTION, OF ANY NEW YORK STATE COURT, THIS BEING
IN ADDITION TO ANY OTHER REMEDY TO WHICH THEY ARE ENTITLED AT LAW OR IN
EQUITY. IN ADDITION, EACH OF THE PARTIES HERETO (
A
) CONSENTS TO
SUBMIT ITSELF TO THE PERSONAL JURISDICTION OF ANY FEDERAL COURT LOCATED IN THE
STATE OF NEW YORK OR, IF SUCH FEDERAL COURTS DO NOT HAVE SUBJECT MATTER
JURISDICTION, OF ANY NEW YORK STATE COURT IN THE EVENT ANY DISPUTE ARISES OUT OF
THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, (
B
) AGREES THAT
IT WILL NOT ATTEMPT TO DENY OR DEFEAT SUCH PERSONAL JURISDICTION BY MOTION OR
OTHER REQUEST FOR LEAVE FROM ANY SUCH COURT AND (
C
) AGREES THAT
IT WILL NOT BRING ANY ACTION RELATING TO THIS AGREEMENT OR ANY OF THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT IN ANY COURT OTHER THAN A FEDERAL
COURT SITTING IN THE STATE OF NEW YORK OR, IF SUCH FEDERAL COURTS DO NOT HAVE
SUBJECT MATTER JURISDICTION, A NEW YORK STATE COURT. THE PARTIES
HEREBY AGREE THAT MAILING OF PROCESS OR OTHER PAPERS IN CONNECTION WITH ANY SUCH
ACTION OR PROCEEDING IN THE MANNER PROVIDED IN SECTION 11.2, OR IN SUCH
OTHER MANNER AS MAY BE PERMITTED BY LAW, SHALL BE VALID AND SUFFICIENT SERVICE
THEREOF AND HEREBY WAIVE ANY OBJECTIONS TO SERVICE ACCOMPLISHED IN THE MANNER
HEREIN PROVIDED.
11.13
Knowledge
Convention
. As used herein, the phrase “
Spinco’s Knowledge
”
and similar phrases shall mean all matters actually known to the following
individuals: Stephen E. Smith, J. Goodwin Bennett, Thomas R. Parker, Karen
Zacharia, Leonard Suchyta, David Feldman and Dale M. Chamberlain. As
used herein, the phrase “
Company’s Knowledge
”
and similar phrases shall mean all matters actually known to the following
individuals: Hilary Glassman, Dan McCarthy, Don Shassian and Celia
McKenney.
[
SIGNATURE PAGE FOLLOWS
]
IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date
first above written.
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VERIZON
COMMUNICATIONS INC.,
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|
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By:
|
/s/
John W. Diercksen
|
|
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John
W. Diercksen
|
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|
Executive
Vice President Strategy,
Planning
and
Development
|
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NEW
COMMUNICATIONS HOLDINGS INC.,
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By:
|
/s/
Stephen E. Smith
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Stephen
E. Smith
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Vice
President
|
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FRONTIER
COMMUNICATIONS CORPORATION,
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By:
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/s/ Mary
Agnes Wilderotter
|
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Mary
Agnes Wilderotter
|
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Chairman of the
Board of Directors, President and
Chief Executive Officer
|
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