DISTRIBUTION AGREEMENT BY AND BETWEEN VERIZON COMMUNICATIONS INC. AND NEW COMMUNICATIONS HOLDINGS INC. DATED AS OF May 13, 2009
Exhibit
10.1
BY AND
BETWEEN
VERIZON
COMMUNICATIONS INC.
AND
NEW
COMMUNICATIONS HOLDINGS INC.
DATED AS
OF May 13, 2009
Page
i
Table of
Contents
(continued)
Page
ii
Table of
Contents
(continued)
Page
Exhibit
A Disclosure
Letter
Exhibit
B Form
of FiOS Intellectual Property Agreement
Exhibit
C Form
of FiOS Software License Agreement
Exhibit
D Form
of FiOS Trademark License Agreement
Exhibit
E Form
of Intellectual Property Agreement
Exhibit
F Form
of Software License Agreement
Exhibit
G Terms
of Spinco Securities
iii
This
DISTRIBUTION AGREEMENT (this “Agreement”), dated as
of May 13, 2009, by and between Verizon Communications Inc., a Delaware
corporation (“Verizon”), and New
Communications Holdings Inc., a Delaware corporation and a wholly-owned
subsidiary of Verizon (“Spinco” and, together
with Verizon, the “Parties”).
RECITALS
WHEREAS,
Spinco is a newly-formed, wholly-owned, direct Subsidiary of
Verizon;
WHEREAS,
Verizon, Spinco and Frontier Communications Corporation, a Delaware corporation
(the “Company”), have
entered into an Agreement and Plan of Merger, of even date herewith (as such
agreement may be amended from time to time, the “Merger Agreement”),
pursuant to which, at the Effective Time, Spinco will merge with and into the
Company, with the Company continuing as the surviving corporation (the “Merger”);
WHEREAS,
this Agreement and the other Transaction Agreements (as defined herein) set
forth certain transactions that are conditions to consummation of the
Merger;
WHEREAS,
prior to the Distribution (as defined herein) upon the terms and subject to the
conditions set forth in this Agreement, Verizon will, pursuant to a series of
restructuring transactions that will occur prior to the Distribution, (a) transfer or cause
to be transferred (i) to Spinco and
(ii) by Spinco
to the Non-ILEC Spinco Subsidiary (as defined herein) and to one or more
wholly-owned Subsidiaries of the Non-ILEC Spinco Subsidiary (as may be
designated by the Non-ILEC Spinco Subsidiary) all of the Non-ILEC Spinco Assets
(as defined herein), each such transfer to be subject to the assumption by such
entity or entities of the Non-ILEC Spinco Liabilities (as defined herein),
(b) to the
extent the ILEC Spinco Assets and the ILEC Spinco Liabilities are not currently
located within an ILEC Spinco Subsidiary, transfer or cause to be transferred,
including by one or more of its Subsidiaries, to the ILEC Spinco Subsidiaries
(as defined herein) all of the ILEC Spinco Assets (as defined herein), subject
to the assumption by such entities of the ILEC Spinco Liabilities (as defined
herein), and shall directly or indirectly transfer the ILEC Spinco Subsidiaries
(after receiving the stock of a Subsidiary holding certain ILEC Spinco
Subsidiaries from its Subsidiaries in a series of internal distributions) to
Spinco and (c)
to the extent any Assets that are not Spinco Assets and any Liabilities that are
not Spinco Liabilities are currently located within an ILEC Spinco Subsidiary,
transfer or cause to be transferred by any such ILEC Spinco Subsidiary such
Assets or Liabilities to Verizon or an Affiliate of Verizon;
WHEREAS,
in exchange for the transfers contemplated by the immediately preceding recital,
Spinco will (a)
pay to Verizon the Special Payment (as defined herein) and (b) if applicable,
distribute to Verizon the Spinco Securities (as defined herein), all upon the
terms and subject to the conditions set forth in this Agreement (the
transactions described in this recital and in the immediately preceding recital,
collectively, the “Contribution”);
WHEREAS,
upon the terms and subject to the conditions set forth in this Agreement,
Verizon will distribute (the “Distribution”) all of
the issued and outstanding shares of common stock, par value $.01 per share, of Spinco
(“Spinco Common
Stock”) to the holders as of the Record Date (as defined herein) of the
outstanding shares of common stock, par value $.10 per share, of Verizon (“Verizon Common
Stock”) and, to the extent applicable, to such persons who received
Verizon Common Stock pursuant to the exercise of Record Date Options (as defined
below);
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) 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 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, the Company 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
hereof, throughout the internal restructurings taken in contemplation of this
Agreement, including the Internal Spinoffs, the Internal Restructurings, the
Contribution, and the Distribution, the Spinco 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, as contemplated by and provided in the
Employee Matters Agreement.
2
NOW,
THEREFORE, in consideration of these premises, and of the representations,
warranties, covenants and agreements set forth herein, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties hereby agree as follows:
Definitions
Section 1.1 General. As
used in this Agreement, the following terms shall have the following meanings
(such meanings to be equally applicable to both the singular and plural forms of
the terms defined):
“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 (d/b/a Verizon Wireless) or any of its Subsidiaries shall be deemed
Affiliates or Subsidiaries of Verizon.
“Agent” means the
distribution agent agreed upon by Verizon and the Company, to be appointed by
Verizon to distribute the shares of Spinco Common Stock pursuant to the
Distribution.
“Agreement” has the
meaning set forth in the Preamble.
“Applicable Rate”
means the three-month LIBOR rate published by Bloomberg as “Ticker US001M” (or
any successor page) at approximately 11:00 a.m. London time on the date
which is two days prior to the date such rate is determined plus 200 basis
points, such rate to be reset every 90 days.
“Asset” means any and
all assets, properties and rights, wherever located, whether real, personal or
mixed, tangible or intangible, including the following (in each case, whether or
not recorded or reflected or required to be recorded or reflected on the books
and records or financial statements of any Person): (i) accounts
and notes receivable (whether current or non-current); (ii) Cash and Cash
Equivalents, debentures, bonds, notes, evidences of indebtedness, certificates
of interest or participation in profit-sharing agreements, collateral-trust
certificates, preorganization certificates or subscriptions, transferable
shares, investment contracts, letters of credit and performance and surety
bonds, voting-trust certificates, puts, calls, straddles, options and other
securities of any kind, and all loans, advances or other extensions of credit or
capital contributions to any other Person; (iii) rights under leases
(including real property leases), contracts, licenses, permits, distribution
arrangements, sales and purchase agreements, joint operating agreements, other
agreements and business arrangements; (iv) owned real property; (v) leased real
property, fixtures, trade fixtures, machinery, equipment (including oil and gas,
transportation and office equipment), tools, dies and furniture; (vi) office
supplies, production supplies, spare parts, other miscellaneous supplies and
other tangible property of any kind, including all antennas, apparatus, cables,
electrical devices, fixtures, equipment, furniture, office equipment, broadcast
towers, motor vehicles and other transportation equipment, special and general
tools, test devices, transmitters and other tangible personal property; (vii)
computers and other data processing equipment and software; (viii) raw
materials, work-in-process, finished goods, consigned goods and other
inventories; (ix) prepayments or prepaid expenses; (x) claims, causes of action,
rights under express or implied warranties, rights of recovery and rights of
setoff of any kind; (xi) Information; (xii) advertising materials and other
printed or written materials; (xiii) goodwill as a going concern and other
intangible properties; and (xiv) licenses and authorizations issued by any
Governmental Authority. “Assets” shall not include any Excluded
Assets.
“Blended Customer
Contracts” means Contracts with customers of Verizon or one of its
Subsidiaries, in each case to which Verizon, one of the Contributing Companies
or another Subsidiary of Verizon is a party, and in each case which provide for
such customers to receive one or more products or services that are offered by
the Spinco Business as well as one or more products or services that are offered
by the Verizon Business, other than Contracts relating to Retained Customer
Accounts listed on Section 1.1(a) of the Disclosure Letter.
“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.
“Cash and Cash
Equivalents” means, as of any date of determination, all cash and cash
equivalents, including certificates of deposit or bankers’ acceptances maturing
within one year from the date of acquisition thereof, and marketable direct
obligations issued by, or unconditionally guaranteed by, the United States
government or an agency thereof, and investments in money market funds and other
liquid investments, including all deposited but uncleared bank
deposits.
“Claims Made Policies”
has the meaning set forth in Section 6.5(a).
“Closing” has the
meaning set forth in the Merger Agreement.
“Closing Date” has the
meaning set forth in the Merger Agreement.
“Closing Statement”
has the meaning set forth in Section 5.1(a).
“Code” means the
Internal Revenue Code of 1986, as amended from time to time.
“Company” has the
meaning set forth in the Recitals.
“Company Common Stock”
has the meaning set forth in the Merger Agreement.
“Company Third Party
Intellectual Property” has the meaning set forth in the Merger
Agreement.
“Contract” means any
contract, agreement or binding arrangement or understanding, whether written or
oral and whether express or implied.
“Contributing
Companies” means Verizon North Inc., a Wisconsin corporation, Verizon
Northwest Inc., a Washington corporation, Verizon West Coast Inc., a California
corporation, Contel of the South, Inc., a Georgia corporation, Verizon
California Inc., a California corporation, Verizon South Inc., a Virginia
corporation, Verizon West Virginia Inc., a West Virginia corporation, Verizon
Enterprise Solutions LLC, a Delaware limited liability company, Verizon Long
Distance LLC, a Delaware limited liability company, Verizon Online LLC, a
Delaware limited liability company, and Verizon Credit Inc., a Delaware
corporation, and any other Subsidiary of Verizon that employs Spinco Business
Employees (as defined in the Merger Agreement) as of the Closing
Date.
“Contribution” has the
meaning set forth in the Recitals.
“Current Assets” means
total current assets of the Spinco Business, determined in accordance with the
last sentence of Section 5.1(a), as of the opening of business on the
Distribution Date.
“Current Liabilities”
means the total current liabilities of the Spinco Business, determined in
accordance with the last sentence of Section 5.1(a) as of the opening of
business on the Distribution Date.
“Cutover Plan Support
Agreement” means the Cutover Plan Support Agreement entered into on the
date hereof, between Verizon Information Technologies LLC and the Company as such
agreement may be amended from time to time.
“Debt Exchange” has
the meaning set forth in Section 2.4(c).
“Disclosure Letter”
means the schedule prepared and delivered by Verizon to Spinco as of the date of
this Agreement.
“Dispute Resolution
Request” has the meaning set forth in Section 5.1(c).
“Distribution” has the
meaning set forth in the Recitals.
“Distribution Date”
means the date that the Distribution shall become effective.
“Distribution Date Spinco
Indebtedness” has the meaning set forth in the Merger
Agreement.
“Distribution Date Working
Capital” means the amount, if any, by which Current Assets exceeds
Current Liabilities (or, if Current Liabilities exceeds Current Assets, the
amount of such excess expressed as a negative number) as of the opening of
business on the Distribution Date prior to the application of purchase
accounting entries to the Surviving Corporation’s opening balance
sheet.
“Effective Time” has
the meaning set forth in the Merger Agreement.
“Election” has the
meaning set forth in Section 2.4(d).
“Employee Matters
Agreement” means the Employee Matters Agreement entered into among
Verizon, Spinco and the Company on the date hereof, as such agreement may be
hereafter amended from time to time.
“Excluded Assets”
means (i) all
Intellectual Property Assets, which shall be governed exclusively by the
Intellectual Property Agreement, (ii) all assets
relating to Taxes (except to the extent included in Current Assets), and (iii) all assets
consisting of or relating to any benefits or any benefit plans, programs,
agreements or arrangements, which shall be governed exclusively by the Employee
Matters Agreement and, to the extent applicable, the Merger
Agreement.
“Excluded Liabilities”
means (i) all
liabilities for or in respect of any Intellectual Property Assets, (ii) all liabilities
for or in respect of Taxes (except to the extent included in Current
Liabilities) and (iii) all liabilities
for or in respect of any benefits or any benefit plans, programs, agreements or
arrangements, which shall be governed exclusively by the Employee Matters
Agreement and, to the extent applicable, the Merger Agreement.
“Final Closing
Statement” has the meaning set forth in Section 5.1(c).
“Final Distribution Date
Working Capital” has the meaning set forth in Section
5.1(d).
“Financial
Instruments” means credit facilities, guarantees, commercial paper,
interest rate swap agreements, foreign currency forward exchange contracts,
letters of credit, surety bonds and similar instruments.
“FiOS Intellectual Property
Agreement” means the FS Intellectual Property Agreement to be entered
into among Verizon Patent and Licensing Inc., Spinco and the Company,
substantially in the form of Exhibit B hereto.
“FiOS Software License
Agreement” means the FS Software License Agreement to be
entered into among Verizon Information Technologies LLC, Spinco and the Company,
substantially in the form of Exhibit C hereto.
“FiOS Trademark License
Agreement” means the FS Trademark License Agreement to be
entered into between Verizon Licensing Company and the Company, substantially in
the form of Exhibit D hereto.
“GAAP” means United
States generally accepted accounting principles.
“Governmental
Authority” has the meaning set forth in the Merger
Agreement.
“Group” means the
Verizon Group or the Spinco Group, as the case may be.
“GTE” means GTE
Corporation, a New York corporation.
“ILEC” means an
incumbent local exchange carrier, as defined in 47 U.S.C.
§ 251(h).
“ILEC Spinco Assets”
means Spinco Assets which are subject to regulations applicable to ILECs
promulgated by one or more of the public utility commissions in the states of
Arizona, California, Idaho, Illinois, Indiana, Michigan, Nevada, North Carolina,
Ohio, Oregon, South Carolina, Washington, West Virginia and
Wisconsin.
“ILEC Spinco
Liabilities” means Spinco Liabilities to the extent arising from or
relating to ILEC Spinco Assets.
“ILEC Spinco
Subsidiaries” means Verizon North Inc., a Wisconsin corporation, Verizon
Northwest Inc., a Washington corporation, Verizon West Coast Inc., a California
corporation, Contel of the South, Inc., a Georgia corporation, New
Communications of the Southwest Inc., a newly formed Delaware corporation, New
Communications of the Carolinas Inc., a newly formed Delaware corporation, and
Verizon West Virginia Inc., a West Virginia corporation.
“Indebtedness” means,
with respect to Spinco and the Spinco Subsidiaries, all indebtedness for
borrowed money, including the aggregate principal amount thereof, and any
accrued interest thereon.
“Information” means
all lists of customers, records pertaining to customers and accounts, copies of
Contracts, personnel records, lists and records pertaining to customers,
suppliers and agents, and all accounting and other books, records, ledgers,
files and business records, data and other information of every kind (whether in
paper, microfilm, computer tape or disc, magnetic tape or any other
form).
“Information
Statement” means the information statement forming part of Spinco’s
Registration Statement on Form 10.
“Intellectual Property
Agreement” means the Intellectual Property Agreement to be entered into
among Verizon Patent and Licensing Inc., Spinco and the Company in the form of
Exhibit E hereto.
“Intellectual Property
Assets” means all Statutory Intellectual Property and Non-Statutory
Intellectual Property.
“Internal
Restructurings” has the meaning set forth in the Merger
Agreement.
“Internal Spinoffs”
has the meaning set forth in the Merger Agreement.
“Law” has the meaning
set forth in the Merger Agreement.
“Leased Real Property”
means all leasehold or subleasehold estates and other rights of Verizon or its
Affiliates to use or occupy any land, buildings or structures located in the
Territory that are used primarily in the conduct of the Spinco Business,
including those listed in Section 1.1(b) of the Disclosure Letter.
“Liability” or “Liabilities” means
all debts, liabilities and obligations (including those arising under Contracts)
whether absolute or contingent, matured or unmatured, liquidated or
unliquidated, accrued or unaccrued, known or unknown, whenever arising, and
whether or not the same would properly be reflected on a balance
sheet. “Liabilities” shall not include any Excluded
Liabilities.
“Litigation Matters”
means all pending or threatened litigation, investigations, claims or other
legal matters that have been or may be asserted against, or otherwise adversely
affect, Verizon or Spinco (or members of either Group).
“Merger” has the
meaning set forth in the Recitals.
“Merger Agreement” has
the meaning set forth in the Recitals.
“Non-ILEC Spinco
Assets” means Spinco Assets other than ILEC Spinco Assets.
“Non-ILEC Spinco
Liabilities” means Spinco Liabilities other than ILEC Spinco
Liabilities.
“Non-ILEC Spinco
Subsidiary” means New Communications
Online and Long Distance Inc., a newly formed Delaware corporation and a
wholly-owned Subsidiary of Spinco.
“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), computer software
documentation, database, drawings, designs, plans, proposals, specifications,
photographs, samples, models, processes, procedures, data, information, manuals,
reports, financial, marketing and business data, information, manuals, reports
and pricing and cost information, correspondence and notes, and any rights or
licenses in the foregoing which may be granted without the payment of
compensation or other consideration to any Person; provided, however, that,
notwithstanding anything to the contrary, the definition of “Non-Statutory
Intellectual Property” shall not include any Statutory Intellectual
Property.
“Occurrence Basis
Policies” has the meaning set forth in Section 6.5(a).
“Owned Real Property”
means all land in the Territory that is owned by Verizon or its Affiliates and
used primarily in the conduct of the Spinco Business, together with all
buildings, structures, improvements and fixtures located thereon, subject to all
easements and other rights and interests appurtenant thereto, including existing
third party rights and interests.
“Parties” has the
meaning set forth in the Preamble.
“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.
“Policies” means all
insurance policies, insurance contracts and claim administration contracts of
any kind of Verizon and its Subsidiaries (including members of the Spinco Group)
and their predecessors which were or are in effect at any time at or prior to
the Distribution Date, including commercial general liability, automobile,
workers’ compensation, excess and umbrella, aircraft, crime, property and
business interruption, directors’ and officers’ liability, fiduciary liability,
employment practices liability, errors and omissions, special accident,
environmental, inland and marine, and captive insurance company arrangements,
together with all rights, benefits and privileges thereunder.
“Privileged
Information” means with respect to either Group, Information regarding a
member of such Group or any of its operations, Assets or Liabilities (whether in
documents or stored in any other form or known to its employees or agents) that
is or may be protected from disclosure pursuant to the attorney-client
privilege, the work product doctrine or another applicable privilege, that a
member of the other Group may come into possession of or obtain access to
pursuant to this Agreement or otherwise.
“Real Property
Interests” means all easements, rights of way, and licenses (whether as
licensee or licensor) in real property that are used primarily in the conduct of
the Spinco Business, and excluding all Owned Real Property and property and
interests subject to Real Property Leases.
“Real Property Leases”
means all leases, subleases, concessions and other agreements (written or oral)
pursuant to which any Leased Real Property is held, including the right to all
security deposits and other amounts and instruments deposited
thereunder.
“Reclassification” has
the meaning set forth in Section 4.2.
“Record Date” means
the close of business on the date to be determined by the Board of Directors of
Verizon as the record date for determining stockholders of Verizon entitled to
participate in the Distribution, which date shall be a Business Day preceding
the Distribution Date.
“Record Date Options”
has the meaning set forth in the Employee Matters Agreement.
“Representative” means
with respect to any Person, any of such Person’s directors, managers or persons
acting in a similar capacity, officers, employees, agents, consultants,
financial and other advisors, accountants, attorneys and other
representatives.
“Retained Contract”
means (i) any Contract entered into by Verizon or any Subsidiary of Verizon
(other than Spinco or a Spinco Subsidiary), on the one hand, with a
non-Affiliate of Verizon, on the other hand, which is used or held for use in
the conduct of the Spinco Business as well as the Verizon Business, other than
any Blended Customer Contract; and (ii) any Contract entered into solely between
or among Verizon and/or Affiliates of Verizon, other than (a) Transferred
Affiliate Arrangements, including, in each case, those Contracts listed in
Section 1.1(c) of the Disclosure Letter and (b) Contracts governing Retained
Customer Accounts.
“Retained Customer
Accounts” means those customer accounts identified on Section 1.1(a) of
the Disclosure Letter.
“Software License
Agreement” means the Verizon Software License Agreement to be entered
into among Verizon Information Technologies LLC, Spinco and the Company, in the
form of Exhibit F hereto.
“Special Payment”
means a payment made by Spinco to West in an amount which shall not exceed (i)
the lesser of (x) $3.333 billion and (y) West’s
estimate of its tax basis in Spinco minus (ii) the amount
of Distribution Date Spinco Indebtedness, such amount to be set forth in a
certificate delivered pursuant to Section 7.18(g) of the Merger Agreement (as
updated in accordance with such section).
“Special Payment
Financing” has the meaning set forth in the Merger
Agreement.
“Spinco” has the
meaning set forth in the Preamble; provided that, with respect to any period
following the Effective Time, all references to Spinco herein shall be deemed to
be references to the Surviving Corporation.
“Spinco Assets” means,
subject to Section 2.1(c), collectively:
(i) all
of the right, title and interest of Verizon and its Affiliates in all Assets
that are primarily used or held for use in, or that primarily arise from, the
conduct of the Spinco Business, including:
(A) those
set forth on the Spinco Audited Balance Sheet to the extent held on the
Distribution Date;
(B) the
Current Assets;
(C) all
Owned Real Property and all Leased Real Property, together with all buildings,
towers, facilities and other structures and improvements located
thereon;
(D) all
Real Property Interests;
(E) all
Telephone Plant;
(F) all
Contracts;
(G) all
existing fiber-to-the-premises (“FiOS”) network
elements from and including the video hub office(s) (“VHO”) to the end-user
customers consisting primarily of elements of the VHO, trunks and other
connecting facilities from the VHO to the serving offices and all connections
from serving offices to end-user customers in the states of Indiana, Oregon and
Washington;
(ii)
all other Assets of Spinco and the Spinco
Subsidiaries to the extent specifically assigned to any member of the Spinco
Group pursuant to this Agreement or any other Transaction
Agreement;
(iii) the
capital stock of each Spinco Subsidiary (it being agreed that the physical
certificates representing such capital stock shall be delivered to Spinco by
Verizon no later than the Distribution Date);
(iv) all
rights of the Contributing Companies in respect of the Transferred Affiliate
Arrangements;
(v)
those rights in the Blended Customer Contracts as are allocated to Spinco
as contemplated by Section 7.8(e) of the Merger Agreement and the obligations of
Verizon described in Section 7.8(f) of the Merger Agreement;
(vi) all
claims, causes of action and rights (or any share thereof) to the extent related
to or arising from any other Spinco Asset or Spinco Liability; and
(vii) any
additional Assets set forth on Section 1.1(d) of the Disclosure
Letter;
provided that,
notwithstanding the foregoing, in no event will the Spinco Assets
include:
I. any
Excluded Assets and Verizon Third Party Intellectual Property or Company Third
Party Intellectual Property;
II. any
Verizon Assets;
III. any
Retained Contracts and any Contracts governing Retained Customer
Accounts;
IV. any
Cash and Cash Equivalents or short-term investments;
V. any
Assets of Verizon Business Global LLC, f/k/a MCI, LLC, which is the successor to
the business of MCI, Inc., and direct and indirect Subsidiaries of Verizon
Business Global LLC;
VI. any
Assets of Verizon Network Integration Corp.;
VII. any
Assets of Verizon Federal Inc.;
VIII. any
Assets of Federal Network Systems LLC;
IX. any
Assets of Verizon Global Networks Inc.;
X. any
Assets of Verizon Select Services Inc.; and
XI. any
Assets of Cellco Partnership (d/b/a Verizon Wireless).
“Spinco Audited Balance
Sheet” means the audited Combined Statements of Selected Assets, Selected
Liabilities and Parent Funding as of December 31, 2008 for 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).
“Spinco Business”
means:
(i) all
of the incumbent local exchange carrier business activities and operations of
Verizon and its Affiliates in the Territory (consisting of local exchange
service, “intraLATA” toll service, network access service, enhanced voice and
data services, digital subscriber line (“DSL”) services,
wholesale services, operator services, directory assistance services, customer
service to end users, and, in connection with any of the foregoing, repairs,
billing and collections); and
(ii) all
of the following activities of Verizon and its Affiliates in the
Territory:
(A) originating
central office voice switched Long Distance (“LD”) services in the
Territory switched by wire centers that are otherwise Spinco Assets;
and
(B) the
provision by Verizon Online LLC of dial-up, DSL and dedicated Internet access
services and related value added services taken by DSL customers located in the
Territory;
(C) the
resale of satellite to terrestrial video services, but only to the extent of the
assets described in clause (i)(G) of the definition of Spinco
Assets.
provided that, for
the avoidance of doubt, “Spinco Business” shall not include any other business
activities or operations of Verizon or its Affiliates whether or
not conducted in the Territory, including:
(A) the
offering of wireless voice, data and other services by Cellco Partnership (d/b/a
Verizon Wireless) and its Affiliates;
(B) publishing
and printing telephone directories and publishing electronic
directories;
(C) monitoring,
installation, maintenance and repair of customer premises equipment and
software, structured cabling, call center solutions and professional and other
services as provided by Verizon Network Integration Corp. or Verizon Select
Services Corp.;
(D)
multi-dwelling unit voice, data and
video services as provided generally by Verizon Avenue Corp., other than
services provided pursuant to contracts entered into by Verizon Avenue Corp. as
agent for, or on behalf of, a Contributing Company;
(E)
wireless telecommunications services, customer premises
equipment, inside wiring and cabling, and consulting services to or for federal
government agencies offered by Federal Network Systems LLC, and customer
premises inside wiring and cabling, and consulting services to or for federal
government agencies offered by Verizon Federal Inc.;
(F)
interstate, intrastate and local exchange
services offered by Verizon or its Affiliates (other than the Contributing
Companies) consisting primarily of those services conducted by them as
successors to the business of MCI, Inc.;
(G)
monitoring, provision, maintenance and
repair of intrastate, interstate and international telecommunications and
information services, managed services, internet protocol services, data center
services, professional services, hosting services, web infrastructure and
application management and other products, services and software as provided
generally by Verizon Business Global LLC, f/k/a MCI, LLC, which is the successor
to the business of MCI, Inc., or direct and indirect Subsidiaries of Verizon
Business Global LLC;
(H)
consumer and small business customer premises equipment sales and
services;
(I)
long haul switching, routing and transmission and other carrier
services as provided generally by Verizon Global Networks Inc.;
(J) prepaid
card products, payphone dial around services (VSSI-CARD) and dedicated Internet
access services as provided generally by Verizon Select Services
Inc.;
(K)
Verizon “Voice Over Internet Protocol” service, “iobi”
service and smart touch service as provided generally by Verizon Long Distance
LLC and Verizon Enterprise Solutions LLC;
(L)
security services as provided generally by Cybertrust, Inc. and its
Affiliates;
(M)
any former MCI or Verizon Select Services Inc.
business;
(N)
operator services and directory assistance services to
wireless carriers, including Cellco Partnership (d/b/a Verizon Wireless) and any
third-party wireless carrier;
(O)
Verizon Smart Phone service as provided generally by Verizon
Online LLC;
(P)
any “interLATA” non-ILEC switched or data
services provided by Verizon Long Distance LLC and Verizon Enterprise Solutions
LLC, which includes private line, asynchronous transfer mode (“ATM”), frame relay,
Ethernet and dedicated access voice services or any services that Verizon Long
Distance LLC and Verizon Enterprise Solutions LLC provide through separate third
party Agreements; or
(Q)
similar activities conducted by successors to any
of the foregoing named entities.
“Spinco Common Stock”
has the meaning set forth in the Recitals.
“Spinco Debt Expenses”
means the aggregate amount of all fees and expenses payable to lenders or
lenders’ advisors by Spinco or the Surviving Corporation pursuant to the terms
of the Special Payment Financing or otherwise arising directly from the
consummation of the Special Payment Financing.
“Spinco Employees” has
the meaning set forth in the Employee Matters Agreement.
“Spinco Group” means
Spinco and the Spinco Subsidiaries.
“Spinco Guarantees”
has the meaning set forth in Section 6.4(b).
“Spinco Liabilities”
means, subject to Section 2.1(c), collectively:
(i) all
Liabilities of Verizon or any of its Subsidiaries (including Spinco and the
Spinco Subsidiaries) to the extent relating to or arising from the Spinco
Business, including the Liabilities set forth on the Spinco Audited Balance
Sheet and the
Liabilities of Spinco under the Transaction Agreements;
(ii) all
Liabilities to the extent relating to or arising from any Spinco
Assets;
(iii) all
Liabilities of the Spinco Business in respect of the Transferred Affiliate
Arrangements;
(iv) all Current
Liabilities;
(v) those
Liabilities under the Blended Customer Contracts that are assigned to and
assumed by the Company pursuant to Section 7.8(e) or described in Section 7.8(f)
of the Merger Agreement;
(vi) all
Liabilities relating to or arising from any Verizon Guarantee;
(vii) all Distribution
Date Spinco Indebtedness; and
(viii)
all Liabilities set forth in Section 1.1(e) of
the Disclosure Letter.
Notwithstanding
the foregoing, the Spinco Liabilities shall not include any Liabilities
specifically agreed not to be assumed by Spinco under any other Transaction
Agreement. For the avoidance of doubt, Spinco Liabilities shall not
include any Verizon Liabilities or Excluded Liabilities.
“Spinco Securities”
means any notes issued by Spinco to Verizon, as contemplated in Section 2.4
hereof and having the principal terms set forth on Exhibit G hereto and
other terms determined in accordance with Section 7.18 of the Merger
Agreement.
“Spinco Subsidiaries”
means, collectively, the Non-ILEC Spinco Subsidiary and the ILEC Spinco
Subsidiaries.
“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.
“Subsidiary” has the
meaning set forth in the Merger Agreement.
“Surviving
Corporation” has the meaning set forth in the Merger
Agreement.
“Target Working
Capital” means $0.
“Taxes” has the
meaning set forth in the Merger Agreement.
“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.
“Telephone Plant”
means all plant, systems, structures, regulated construction work in progress,
telephone cable (whether in service or under construction), microwave facilities
(including frequency spectrum assignment), telephone line facilities, machinery,
furniture, fixtures, tools, implements, conduits, stations, substations,
equipment (excluding customer premises equipment, but including all local
exchange equipment that serves (i) cell towers, (ii) data equipment (excluding
customer premises equipment, but including all equipment necessary to provide
data services (including dial-up, digital subscriber line and dedicated Internet
access services and related value-added services)), including the broadband
router aggregation system, (iii) ATM switch routers and (iv) network facilities
located in the Territory), central office equipment and other equipment in
general other than customer premises equipment, instruments and house wiring
connections located in the Territory used in the Spinco Business (to the extent
not transferred to customers as inside wiring), other than the portion thereof
relating to the FiOS network.
“Territory” means the
local franchise area of the Contributing Companies in the states of Arizona,
Idaho, Illinois, Indiana, Michigan, Nevada, North Carolina, Ohio, Oregon, South
Carolina, Washington, West Virginia and Wisconsin, the franchise area of Verizon
West Coast Inc. and the franchise areas in California covered by the following
wirecenters:
(i) bordering
Nevada:
WDFRCAXFRS1 WDFRAXF
PYVLCAAARLO PYVLCAAA
WDFRCAAARLO WDFRCAAA
CEVLLAFRS6 CEVLCAXF
(ii) bordering
Arizona:
BGRVLAFRLO BGRVCAXF
HVSUCAXFRS1 HVSUCAXF
BLTLAXF9ZK BLYTLAXF
“Total Verizon Shares”
means (i) the
total number of shares of Verizon Common Stock as of the Record Date plus (ii) the total number
of shares of Verizon Common Stock issued to all persons who acquired such
Verizon Common Stock pursuant to the exercise of Record Date Options on or prior
to the Distribution Date.
“Trademarks” means
trademarks, tradenames, applications for trademark registration, service marks,
applications for service xxxx registration, domain names, registrations and
applications for registrations pertaining thereto, and all goodwill associated
therewith.
“Transaction
Agreements” has the meaning set forth in the Merger
Agreement.
“Transferred Affiliate
Arrangements” means (i) all
Transaction Agreements and all arrangements expressly contemplated by a
Transaction Agreement, (ii) all Affiliate
interconnection Contracts and (iii) all Contracts
listed on Section 1.1(f) of the Disclosure Letter.
“Verizon” has the
meaning set forth in the Preamble.
“Verizon Assets”
means, subject to Section 2.1(c), collectively,
(i) all
of the right, title and interest of Verizon and its Subsidiaries in all Assets
held by them other than those identified in clauses (i) through (vii) of the
definition of Spinco Assets, it being acknowledged that Verizon Assets
include:
(A) all
Retained Contracts (it being agreed that Spinco and the Spinco Subsidiaries
shall be permitted to (x) retain any product or license under a Retained
Contract delivered and paid for prior to the Closing in the conduct of the
Spinco Business and (y) receive any product or license under a Retained Contract
that was ordered and paid for prior to the Closing in the conduct of the Spinco
Business but which shall be delivered after the Closing);
(B) all
Contracts between Verizon and the Verizon Subsidiaries on one hand and Spinco
and the Spinco Subsidiaries on the other hand (other than to the extent they
constitute Transferred Affiliate Arrangements);
(C) any
Asset, other than any customer relationships, of the dial-up, DSL, and dedicated
Internet access, related DSL value added services and LD portions of the Spinco
Business;
(D) all
FiOS network assets not specifically described as a Spinco Asset, including the
Satellite Head End located in Illinois; and
(E) tangible
Assets used exclusively by personnel who are retained by Verizon but who work in
one of the work centers or other locations located in the Territory which serve
both the Spinco Business and the Verizon Business, which locations are set forth
in Section 1.1(g) of the Disclosure Letter;
(ii)
all other Assets of Verizon and Verizon Subsidiaries to the extent specifically
assigned to or retained by any member of the Verizon Group pursuant to this
Agreement or any other Transaction Agreement;
(iii) the
capital stock of each Verizon Subsidiary;
(iv) all
rights of Verizon under the Transaction Agreements;
(v)
all defenses and counterclaims relating to any Liability retained by Verizon or
its Affiliates;
(vi) all
claims, causes of action and rights (or any share thereof) to the extent related
to or arising from any other Verizon Asset or Verizon Liability;
and
(vii) any
additional Assets set forth on Section 1.1(h) of the Disclosure
Letter;
provided
that, notwithstanding the foregoing, in no event will the Verizon Assets include
any Spinco Assets.
“Verizon Business”
means all of the businesses and operations conducted by Verizon and the Verizon
Subsidiaries (other than the Spinco Business) at any time, whether prior to, on
or after the Distribution Date.
“Verizon Common Stock”
has the meaning set forth in the Recitals.
“Verizon Group” means
Verizon and the Verizon Subsidiaries.
“Verizon Guarantees”
has the meaning set forth in Section 6.4(a).
“Verizon Liabilities”
means, subject to Section 2.1(c) collectively, (i) all Liabilities of Verizon or
any of its Subsidiaries (including Spinco and the Spinco Subsidiaries) relating
to or arising from the Verizon Business, including the Liabilities of Verizon
under the Transaction Agreements, in each case other than the Spinco
Liabilities, (ii) all Liabilities in respect of the Transferred Affiliate
Arrangements other than the Spinco Liabilities related thereto, (iii) all
Liabilities under the Blended Customer Contracts except to the extent assumed by
the Company pursuant to Section 7.8(e) of the Merger Agreement, (iv) all
Liabilities in respect of Retained Contracts, (v) all Liabilities relating
to or arising from any Spinco Guarantee, (vi) all expenses allocated to
Verizon pursuant to Section 11.1 of the Merger Agreement and (vii) all
Liabilities listed in Section 1.1(i) of the Disclosure Letter. For
the avoidance of doubt, the Verizon Liabilities shall not include any Spinco
Liabilities.
“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 terms hereof.
“Verizon Third Party
Intellectual Property” has the meaning set forth in the Merger
Agreement.
Section 1.2 Interpretation. 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 including all attachments thereto and
instruments incorporated therein. References to a person are also to
its permitted successors and assigns.
Section 1.3 References to
Time. All references in this Agreement to times of the day
shall be to New York City time.
The
Contribution
Section 2.1 Transfers of Spinco Assets
and Spinco Liabilities.
(a) Subject
to Section 2.1(b) and, in the case of Information, Article VII, on or prior to
the Distribution Date, Verizon shall take or cause to be taken all actions
necessary to cause the transfer, assignment, delivery and conveyance of (i) the Non-ILEC
Spinco Assets and the Non-ILEC Spinco Liabilities to the Non-ILEC Spinco
Subsidiary, (ii) the ILEC
Spinco Assets and the ILEC Spinco Liabilities to the ILEC Spinco Subsidiaries
and (iii) the ILEC
Spinco Subsidiaries to Spinco (including by contributing stock of an entity
holding one or more ILEC Spinco Subsidiaries). Spinco shall assume or
cause the applicable Spinco Subsidiaries to assume, and thereafter timely pay,
perform and discharge, when and as due, or cause the applicable Spinco
Subsidiaries to thereafter timely pay, perform and discharge, when and as due,
all of the Spinco Liabilities.
(b) Nothing
in this Agreement (including, for the avoidance of doubt, Section 6.6) shall be
deemed to require the transfer of any Assets or the assumption of any
Liabilities which by their terms or operation of law cannot be transferred or
assumed until such time as all legal impediments to such transfer or assumption
have been removed. The rights and obligations of the Parties in
respect of removing such impediments (including pursuing and obtaining all
applicable consents, waivers and approvals in connection with the Contribution)
and in respect of such Assets and Liabilities to the extent not transferred on
the Distribution Date are set forth in the Merger Agreement and no additional
rights or obligations shall be deemed to arise under this Agreement in
connection therewith.
(c) The
rights and obligations of the Parties with respect to Intellectual Property
Assets shall be governed exclusively by the Intellectual Property
Agreement. Accordingly, Intellectual Property Assets and liabilities
relating to Intellectual Property Assets shall not be treated as Assets or
Liabilities for purposes of, or otherwise be governed by, this
Agreement. In the event of any inconsistency between this Agreement
and the Intellectual Property Agreement, the terms of the Intellectual Property
Agreement shall control. The rights and obligations of the Parties
with respect to Taxes shall be governed exclusively by the Tax Sharing Agreement
and, to the extent applicable, the Merger Agreement. Accordingly,
assets and liabilities relating to Taxes shall not be treated as Assets or
Liabilities for purposes of, or otherwise be governed by, this Agreement (except
to the extent included in Current Assets or Current Liabilities as provided
herein). In the event of any inconsistency between this Agreement and
the Tax Sharing Agreement or the Merger Agreement, the terms of the Tax Sharing
Agreement or the Merger Agreement, as the case may be, shall
control. Except in the case of Section 2.3 of this Agreement, the
rights and obligations of the Parties with respect to any current or former
directors, officers or employees, any compensation or benefits and any benefit
plans, programs, agreements or arrangements shall be governed exclusively by the
Employee Matters Agreement and, to the extent applicable, the Merger Agreement.
Accordingly, assets and liabilities relating to current or former directors,
officers or employees, and compensation or benefits and any benefit plans,
programs, agreements and arrangements shall not be treated as Assets or
Liabilities for purposes of, or otherwise be governed by, this
Agreement. The rights and obligations of the Parties with respect to
collective bargaining agreements and practices, including collective bargaining
agreements of the Spinco Business, memoranda of agreement and memoranda of
understanding, and the rights and obligations arising under those contracts and
practices on benefit plans, programs, agreements and arrangements shall not be
treated as Assets or Liabilities for purposes of, or otherwise be governed by,
this Agreement, and shall be governed exclusively by the Employee Matters
Agreement and, to the extent applicable, the Merger Agreement. In the
event of any inconsistency between this Agreement and the Employee Matters
Agreement or the Merger Agreement, the Employee Matters Agreement or the Merger
Agreement, as the case may be, shall control.
Section 2.2 Conveyancing and Assumption
Agreements. In connection with the transfer of the Spinco
Assets and the assumption of the Spinco Liabilities contemplated by this Article
II, Verizon and Spinco shall execute, or cause to be executed by the appropriate
entities, conveyancing and assumption instruments, including quit claim deeds,
as Verizon may deem necessary or desirable (provided that such
instruments shall not impose obligations on either Party or grant rights,
through representations or otherwise, beyond those set forth in this
Agreement).
Section 2.3 Certain
Resignations. At or prior to the Distribution Date, Verizon
shall cause each employee and director of Verizon and its Subsidiaries who will
not be employed by Spinco or a Spinco Subsidiary after the Distribution Date to
resign, effective not later than the Distribution Date, from all boards of
directors or similar governing bodies of Spinco or any Spinco Subsidiary on
which they serve, and from all positions as officers of Spinco or any Spinco
Subsidiary in which they serve. At or prior to the Distribution Date,
Spinco will cause each employee and director of Spinco and its Subsidiaries who
will not be employed by Verizon or any Verizon Subsidiary after the Distribution
Date to resign, effective not later than the Distribution Date, from all boards
of directors or similar governing bodies of Verizon or any Verizon Subsidiary on
which they serve, and from all positions as officers of Verizon or any Verizon
Subsidiary in which they serve.
Section 2.4 Special Payment Financing;
Debt Exchange.
(a) At
or prior to the Distribution Date, Spinco will, in exchange for Verizon causing
the transfer to Spinco of the ILEC Spinco Subsidiaries and the Non-ILEC Spinco
Assets, (i) enter into
the agreements associated with the Special Payment Financing (in accordance with
Section 7.18 of the Merger Agreement) and use the proceeds thereof to pay
the Special Payment and (ii) if the total
amount of the Special Payment is less than (w) $3.333
billion minus
(x) the
amount of Distribution Date Spinco Indebtedness, distribute Spinco Securities to
Verizon having a principal amount equal to (y) $3.333
billion minus
(z) the
sum of (A) the total
amount of the Special Payment and (B) the amount of
Distribution Date Spinco Indebtedness. Verizon shall not be obligated
to consummate the Distribution unless Verizon shall receive in connection
therewith the Special Payment and a principal amount of Spinco Securities that
together total $3.333 billion minus the amount of
Distribution Date Spinco Indebtedness.
(b) The
rights and obligations of the Parties in respect of pursuing and obtaining the
Special Payment Financing are set forth in the Merger Agreement, and no
additional rights or obligations shall be deemed to arise under this Agreement
in connection therewith.
(c) The
Parties acknowledge that Verizon reserves the right (in accordance with
Section 7.18 of the Merger Agreement) to enter into arrangements prior to
or following the Distribution Date providing for the exchange of Spinco
Securities held by Verizon for debt obligations of Verizon or its Affiliates, or
for the transfer of Spinco Securities to other Verizon creditors or stockholders
(the “Debt
Exchange”), provided that, the
parties further acknowledge that (i) if Verizon desires
to consummate the Debt Exchange concurrently with the Distribution, Verizon
shall not be obligated to consummate the Distribution unless the Debt Exchange
shall be consummated concurrently with the Distribution 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 and (ii) if Verizon
elects not to pursue the Debt Exchange at the time of the Distribution or
thereafter, Verizon may dispose of Spinco Securities in another manner, but will
in any event dispose of all of its interest in any Spinco Securities within 360
days following the Distribution Date.
(d) At
Verizon’s election (the “Election”), to be
exercised by Verizon no later than 15 days prior to the Distribution Date (provided that Verizon
shall have provided the Company no less than 15 days’ prior written notice of
its intention to make the Election), notwithstanding any other provision of the
Transaction Agreements, the following alternative transaction structure may be
adopted in lieu of the transaction steps currently described in the Transaction
Documents to the extent that such alternative transaction structure does not
result in Spinco or the Surviving Corporation incurring incremental costs or
liabilities that are not reimbursed by Verizon:
(i) the
entity referred to as Spinco shall be formed by GTE, instead of by
Verizon;
(ii) the
Special Payment shall be an amount paid by Spinco to GTE, instead of being paid
by Spinco to Verizon;
(iii) Spinco
Securities shall be notes issued by Spinco to GTE, instead of being issued by
Spinco to Verizon;
(iv) the
Debt Exchange may be undertaken by GTE with its creditors or stockholders,
instead of being undertaken by Verizon with Verizon’s creditors or
stockholders;
(v) Verizon
and GTE shall transfer or cause to be transferred to Spinco (or to Subsidiaries
thereof) all of the Spinco Assets and Liabilities in such a manner that,
immediately prior to the Merger, no assets or liabilities (other than stock or
other equity interests in Subsidiaries) shall be held directly by Spinco;
and
(vi) Spinco
shall be distributed in the Internal Spinoffs and in the Distribution and shall
participate in the Merger.
(e) If
Verizon makes the Election, all applicable provisions of this Agreement and the
other Transaction Agreements shall be amended by the parties thereto as
appropriate to reflect the Election. For example, the definition of
the Special Payment shall be revised to refer to GTE’s estimate of its tax basis
in Spinco, instead of Verizon’s estimate of its tax basis in
Spinco.
(f) Verizon
shall pay all Spinco Debt Expenses (i) on the Closing
Date or (ii) on
such subsequent date when the fees and expenses are payable to lenders or the
lenders’ advisors pursuant to the terms of, or otherwise in connection with, the
Special Payment Financing.
Conditions
Section 3.1 Conditions to the
Distribution. The obligations of Verizon pursuant to this
Agreement to effect the Distribution shall be subject to the fulfillment (or
waiver by Verizon) on or prior to the Distribution Date (provided that certain
of such conditions will occur substantially contemporaneously with the
Distribution) of each of the conditions set forth in Section 2.4 hereof and in
Section 8.1 and Section 8.2 of the Merger Agreement (except the consummation of
the Contribution and the Distribution).
Section 3.2 Waiver of
Conditions. To the extent permitted by applicable Law, the
condition set forth in Section 3.1 hereof may be waived in the sole discretion
of Verizon. The condition set forth in Section 3.1 is for the sole
benefit of Verizon and shall not give rise to or create any duty on the part of
Verizon to waive or not waive such condition.
The
Distribution
Section 4.1 Record Date and Distribution
Date. Subject to the satisfaction, or to the extent permitted
by applicable Law, waiver, of the conditions set forth in Section 3.1, the Board
of Directors of Verizon, consistent with the Merger Agreement and Delaware law,
shall establish the Record Date and the Distribution Date and any necessary or
appropriate procedures in connection with the Distribution.
Section 4.2 Spinco
Reclassification. Immediately prior to the Distribution Date,
Verizon and Spinco shall take all actions necessary to issue to Verizon such
number of shares of Spinco Common Stock, including, if applicable, by
reclassifying the outstanding shares of Spinco Common Stock or by declaring a
dividend payable to Verizon in shares of Spinco Common Stock (the “Reclassification”),
for the purpose of increasing the outstanding shares of Spinco Common Stock such
that, immediately prior to the Distribution Date, Spinco will have an aggregate
number of shares of Spinco Common Stock to be determined by Verizon and Spinco
prior to the Distribution Date, all of which will be held by
Verizon.
Section 4.3 The
Agent. Prior to the Distribution Date, Verizon shall enter
into an agreement with the Agent on terms reasonably satisfactory to Spinco and
the Company providing for, among other things, the distribution to the holders
of Verizon Common Stock in accordance with this Article IV of the shares of
Company Common Stock into which the shares of Spinco Common Stock that would
otherwise be distributed in the Distribution will be converted pursuant to the
Merger.
Section 4.4 Delivery of Shares to the
Agent. At or prior to the Distribution Date, Verizon shall
authorize the book-entry transfer by the Agent of all of the outstanding shares
of Spinco Common Stock to be distributed in connection with the
Distribution. After the Distribution Date, upon the request of the
Agent, Spinco shall provide all book-entry transfer authorizations that the
Agent shall require in order to effect the distribution of the shares of Company
Common Stock into which the shares of Spinco Common Stock that would otherwise
be distributed in the Distribution will be converted pursuant to the
Merger.
Section 4.5 The
Distribution. Upon the terms and subject to the conditions of
this Agreement, following consummation of the Reclassification, Verizon shall
declare and pay the Distribution consisting of:
(i) to
the holders of shares of Verizon Common Stock as of the Record Date, such
percentage of the total number of shares of Spinco Common Stock held by Verizon
as of the time of the Distribution as is equal to a fraction, the numerator of
which is the total number of shares of Verizon Common Stock held by such holders
as of the Record Date and the denominator of which is the number of Total
Verizon Shares; and
(ii) to
the holders of shares of Verizon Common Stock who acquired such Verizon Common
Stock pursuant to the exercise of Record Date Options, such percentage of the
total number of shares of Spinco Common Stock held by Verizon as of the time of
the Distribution as is equal to a fraction, the numerator of which is the total
number of shares of Verizon Common Stock held by such holders that were acquired
pursuant to the exercise of Record Date Options on or prior to the Distribution
Date and the denominator of which is the number of Total Verizon
Shares.
Immediately
after the Distribution, at the Effective Time, all such shares of Spinco Common
Stock shall be converted into the right to receive shares of Company Common
Stock pursuant to, and in accordance with the terms of, the Merger Agreement,
immediately following which the Agent shall distribute by book-entry transfer in
respect of the outstanding shares of Verizon Common Stock held by (x) holders of record
of Verizon Common Stock on the Record Date and (y) persons who
acquired Verizon Common Stock pursuant to the exercise of Record Date Options,
all of the shares of Company Common Stock into which the shares of Spinco Common
Stock that would otherwise be distributed in the Distribution have been
converted pursuant to the Merger. The Agent shall make cash payments
in lieu of any fractional shares resulting from the conversion of Spinco Common
Stock into Company Common Stock in the Merger pursuant to, and in accordance
with, the terms of the Merger Agreement.
Post Closing
Adjustments
Section 5.1 Post-Closing
Adjustments.
(a) Within
90 days after the Closing Date, Verizon shall cause to be prepared and delivered
to the Surviving Corporation a statement derived from the books and records of
Verizon and its Affiliates (the “Closing Statement”),
setting forth Distribution Date Working Capital, including reasonable detail
regarding the calculation thereof. The Distribution Date Working
Capital shall be calculated in accordance with GAAP, consistently applied, using
the same accounting principles, methodologies and policies used in the
preparation of the Spinco Audited Balance Sheet, pro forma for the completion of
the Contribution, as modified by the principles, methodologies and policies set
forth in Section 5.1 of the Disclosure Letter.
(b) Verizon
shall give the Surviving Corporation and each of its Representatives access at
all reasonable times and on reasonable advance notice to Verizon’s books and
records to the extent reasonably required to permit the Surviving Corporation to
review the Closing Statement. Within 60 days after receipt of the
Closing Statement, the Surviving Corporation shall, in a written notice to
Verizon, describe in reasonable detail any proposed adjustments to the items set
forth on the Closing Statement and the reasons therefor (it being agreed that
the only permitted reasons for such adjustments shall be mathematical error or
the failure to compute items set forth therein in accordance with this Article
V). The Surviving Corporation shall have the right to discuss the
Closing Statement with Verizon’s accountants, it being understood that in
connection with such discussion, the Surviving Corporation will not have access
to the work papers of such accountants. If Verizon shall not have
received a notice of proposed adjustments (provided that any and all proposed
adjustments to the calculation of Distribution Date Working Capital must in the
aggregate exceed two hundred fifty thousand dollars ($250,000) or more) within
such 60-day period, the Surviving Corporation will be deemed to have accepted
irrevocably such Closing Statement.
(c) Verizon
and the Surviving Corporation shall negotiate in good faith to resolve any
disputes over any proposed adjustments to the Closing Statement, during the 30
days following Verizon’s receipt of the proposed adjustments. If the
parties are unable to resolve such dispute within such 30-day period, then, at
the written request of either party (the “Dispute Resolution
Request”), each party shall appoint a knowledgeable, responsible
representative to meet in person and negotiate in good faith to resolve the
disputed matters. The parties intend that these negotiations be
conducted by experienced business representatives empowered to decide the
issues. Such negotiations shall take place during the 15-day period
following the date of the Dispute Resolution Request. If the business
representatives resolve the dispute, such resolution shall be memorialized in a
written agreement (the Closing Statement, as revised by such negotiations,
written agreement or the final decision of the accounting firm referred to
below, the “Final
Closing Statement”), executed within five days thereafter. If
the business representatives do not resolve the dispute, within five days the
Surviving Corporation and Verizon shall jointly select a nationally recognized
independent
public accounting firm (which is not the regular independent public accounting
firm of either Verizon or the Surviving Corporation) to arbitrate and resolve
such disputes, which resolution shall be final, binding and enforceable in
accordance with Section 9.13. If the Surviving Corporation and
Verizon do not jointly select such firm within five days, a nationally
recognized accounting firm shall be selected by lot from among those nationally
recognized firms which are not the regular firm of either Verizon or the
Surviving Corporation. Such accounting firm shall arbitrate and
resolve such dispute based solely on the written submission forwarded by Verizon
and the Surviving Corporation and shall only consider whether the Closing
Statement was prepared in accordance with this Article V and (only with
respect to disputed matters submitted to the accounting firm) whether and to
what extent the Closing Statement requires adjustment. The fees and
expenses of such accounting firm shall be shared by the Surviving Corporation
and Verizon in inverse proportion to the relative amounts of the disputed amount
determined to be for the account of the Surviving Corporation and Verizon,
respectively.
(d) If
the amount of the Distribution Date Working Capital, as set forth in the Final
Closing Statement (the “Final
Distribution Date Working Capital”) exceeds the Target Working Capital,
no payment shall be made by either party with respect thereto and, if the amount
of the Final Distribution Date Working Capital is less than the Target Working
Capital, Verizon shall pay to the Surviving Corporation an amount equal to such
deficit. All such amounts shall bear interest from the Distribution
Date through but excluding the date of payment at the Applicable Rate; such
interest shall accrue daily on the basis of a 365 day year calculated for the
actual number of days for which payment is due and such payment shall be payable
together with the amount payable pursuant to the foregoing
sentence. Any amounts payable pursuant to this Section 5.1(d) shall
be made via wire transfer of immediately available funds within five Business
Days after the date upon which the Closing Statement becomes a Final Closing
Statement.
(e) To
the extent that Verizon makes any payment of an amount which constitutes a
Current Liability between the Closing Date and the date any payment is due under
Section 5.1(d), then Verizon shall have a right to offset the aggregate of all
such amounts against the amount, if any, payable to the Surviving Corporation
under Section 5.1(d); provided that Verizon has provided evidence of the
payment of such amounts prior to making any offset.
Additional
Covenants
Section 6.1 Survival; Exclusive
Remedy. The covenants and agreements contained herein to be
performed following the Closing shall survive the Effective Time in accordance
with their respective terms and all other terms shall expire as of the Effective
Time (other than the obligation to convey the Spinco Assets and the Spinco
Liabilities in accordance with Section 2.1). The Parties hereby agree
that the sole and exclusive remedy for any claim (whether such claim is framed
in tort, contract or otherwise), arising out of a breach of this Agreement shall
be asserted pursuant to Section 10.2 of the Merger Agreement (or if this
Agreement and the Merger Agreement are terminated, Section 9.3 of the
Merger Agreement) and only to the extent expressly contemplated
therein.
Section 6.2 Mutual
Release. Effective as of the Distribution Date and except as
otherwise specifically set forth in the other Transaction Agreements or the
Transferred Affiliate Arrangements, each of Verizon, on behalf of itself and
each of the Verizon Subsidiaries, on the one hand, and Spinco, on behalf of
itself and each of the Spinco Subsidiaries, on the other hand, hereby releases
and forever discharges the other Party and its Subsidiaries, and its and their
respective officers, directors, managers or other persons acting in a similar
capacity, agents, record and beneficial security holders (including trustees and
beneficiaries of trusts holding such securities), advisors and Representatives
(in each case, in their respective capacities as such) and their respective
heirs, executors, administrators, successors and assigns, of and from all debts
(including intercompany cash balances and accounts and notes payable), demands,
actions, causes of action, suits, accounts, covenants, contracts, agreements,
damages, claims and other Liabilities whatsoever of every name and nature, both
in law and in equity, which the releasing Party has or ever had or ever will
have, which exist or arise out of or relate to events, circumstances or actions
taken by such other Party occurring or failing to occur or any conditions
existing at or prior to the Distribution Date whether or not known on the
Distribution Date, including in connection with the transactions and all other
activities to implement the Contribution and the Distribution; provided, however, that the
foregoing general release shall not apply to (i) any
Liabilities or other obligations (including Liabilities with respect to payment,
reimbursement, indemnification or contribution) under this Agreement or the
other Transaction Agreements or Transferred Affiliate Arrangements or any
Contracts (as defined therein) contemplated thereby, or assumed, transferred,
assigned, allocated or arising under any of this Agreement or the other
Transaction Agreements or Transferred Affiliate Arrangements or any Contract
contemplated thereby, in each case subject to the terms thereof, or any Person’s
right to enforce this Agreement or the other Transaction Agreements, Transferred
Affiliate Arrangements or the Contracts contemplated thereby in accordance with
their terms, or (ii) any Liability the
release of which would result in the release of any Person other than a Person
released pursuant to this Section 6.2. Each Party agrees, for itself
and each member of its Group, not to make any claim or demand or commence any
action or assert any claim against any member of the other Party’s Group with
respect to the Liabilities released pursuant to this Section 6.2.
Section 6.3 Intercompany
Agreements. Except for the Transaction Agreements, any
agreements entered into pursuant to the Merger Agreement (including pursuant to
Sections 7.8 and 7.24 thereof) and the other Transferred Affiliate
Arrangements, and except as contemplated by paragraph (iv) of
Section 5.17 of the Merger Agreement, all contracts, licenses, agreements,
commitments and other arrangements, formal and informal (including with respect
to intercompany cash balances and accounts and notes payable), (x) between any member
of the Verizon Group, on the one hand, and any member of the Spinco Group, on
the other hand, or (y) between Cellco
Partnership (d/b/a Verizon Wireless) or any of its Subsidiaries, on the one
hand, and any member of Spinco Group, on the other hand, in each case in
existence as of the Distribution Date, shall terminate as of the close of
business on the day prior to the Distribution Date. No such
terminated agreement (including any provision thereof that purports to survive
termination) shall be of any further force or effect after the Distribution Date
and all parties thereto shall be released from all obligations
thereunder. From and after the Distribution Date, no member of either
Group shall have any rights or obligations under any such terminated agreement
with any member of the other Group, except as specifically provided herein or in
the other Transaction Agreements.
Section 6.4 Guarantee Obligations and
Liens.
(a) Verizon
and Spinco shall, upon Verizon’s request, cooperate, and shall cause their
respective Groups to cooperate and use their respective commercially reasonable
efforts to: (x) terminate, or
to cause Spinco, as the appropriate member of the Spinco Group, to be
substituted in all respects for Verizon or the applicable member of the Verizon
Group in respect of, all obligations of any member of the Verizon Group under
any Spinco Liabilities identified by Verizon for which such member of the
Verizon Group may be liable, as guarantor, original tenant, primary obligor or
otherwise (including Spinco Liabilities under any Financial Instrument) (“Verizon Guarantees”),
and (y)
terminate, or to cause Spinco Assets to be substituted in all respects for any
Verizon Assets in respect of, any liens or encumbrances identified by Verizon on
Verizon Assets which are securing any Spinco Liabilities. If such a
termination or substitution is not effected by the Distribution Date, without
the prior written consent of Verizon, from and after the Distribution Date,
Spinco shall not, and shall not permit any member of the Spinco Group to, renew
or extend the term of, increase its obligations under, or transfer to a third
party, any loan, lease, contract or other obligation for which a member of the
Verizon Group is or may be liable or for which any Verizon Asset is or may be
encumbered unless all obligations of the Verizon Group and all liens and
encumbrances on any Verizon Asset with respect thereto are thereupon terminated
by documentation reasonably satisfactory in form and substance to
Verizon.
(b) Verizon
and Spinco shall, upon Spinco’s request, cooperate, and shall cause their
respective Groups to cooperate and use their respective commercially reasonable
efforts to: (x) terminate, or to
cause a member of the Verizon Group to be substituted in all respects for any
member of Spinco Group in respect of, all obligations of any member of the
Spinco Group under any Verizon Liabilities for which such member of the Spinco
Group may be liable, as guarantor, original tenant, primary obligor or otherwise
(including Verizon Liabilities under any Financial Instrument) (“Spinco Guarantees”),
and (y)
terminate, or to cause Verizon Assets to be substituted in all respects for any
Spinco Assets in respect of, any liens or encumbrances on Spinco Assets which
are securing any Verizon Liabilities. If such a termination or
substitution is not effected by the Distribution Date, without the prior written
consent of Spinco, from and after the Distribution Date, Verizon shall not, and
shall not permit any member of the Verizon Group to, renew or extend the term
of, increase its obligations under, or transfer to a third party, any loan,
lease, contract or other obligation for which a member of the Spinco Group is or
may be liable or for which any Spinco Asset is or may be encumbered unless all
obligations of the Spinco Group and all liens and encumbrances on any Spinco
Asset with respect thereto are thereupon terminated by documentation reasonably
satisfactory in form and substance to Spinco.
Section 6.5 Insurance.
(a) Notwithstanding
any other provision of this Agreement, from and after the Distribution Date,
Spinco and the Spinco Subsidiaries will have no rights with respect to any
Policies, except that (i) Verizon will use
its commercially reasonable efforts, at Spinco’s request, to assert claims on
behalf of Spinco and the Spinco Subsidiaries for any loss, liability or damage
identified by Spinco with respect to the Spinco Assets or Spinco Liabilities
under Policies with third-party insurers which are “occurrence basis” insurance
policies (“Occurrence
Basis Policies”) arising out of insured incidents occurring from the date
coverage thereunder first commenced until the Distribution Date to the extent
that the terms and conditions of any such Occurrence Basis Policies and
agreements relating thereto so allow and (ii) Verizon will use
its commercially reasonable efforts to obtain from the relevant third-party
insurer an assignment to Spinco of any rights to prosecute claims identified by
Spinco properly asserted with respect to the Spinco Assets or Spinco Liabilities
with an insurer prior to the Distribution Date under Policies with third-party
insurers which are insurance policies written on a “claims made” basis (“Claims Made
Policies”) arising out of insured incidents occurring from the date
coverage thereunder first commenced until the Distribution Date to the extent
that the terms and conditions of any such Claims Made Policies and agreements
relating thereto so allow; provided that, in the
case of both clauses (i) and (ii) above, (A) all of Verizon’s
and each Verizon Subsidiary’s reasonable out-of-pocket costs and expenses
incurred in connection with the foregoing are promptly paid by Spinco (it being
agreed that Verizon will not incur material expenditures above reasonable
amounts specified by Spinco unless authorized by Spinco), (B) Verizon and the
Verizon Subsidiaries may, at any time, without liability or obligation to Spinco
or any Spinco Subsidiary (other than as set forth in Section 6.5(c)), amend,
commute, terminate, buy out, extinguish liability under or otherwise modify any
Occurrence Basis Policies or Claims Made Policies (and such claims shall be
subject to any such amendments, commutations, terminations, buy-outs,
extinguishments and modifications), in each case to the extent that such
modifications do not disproportionately adversely affect any claim subject to
clause (i) or (ii) with respect to the Spinco Assets or Spinco Liabilities
relative to a comparable claim with respect to the Verizon Assets or Verizon
Liabilities and (C) any such claim
will be subject to all of the terms and conditions of the applicable
Policy.
(b) Nothing
in this Section 6.5 will be construed to limit or otherwise alter in any way the
indemnity obligations of the Parties, including those created by this Agreement,
by operation of law or otherwise.
(c) This
Agreement is not intended as an attempted assignment of any policy of insurance
or as a contract of insurance and shall not be construed to waive any right or
remedy of any member of the Verizon Group in respect of any insurance policy or
any other contract or policy of insurance.
(d) Verizon
agrees to use its commercially reasonable efforts to recover damages or to
assist Spinco in connection with any efforts by Spinco to recover damages, as
the case may be, under any Policy with respect to the Spinco Business for
incidents occurring prior to the Distribution Date; provided that all of
Verizon’s reasonable out-of-pocket costs and expenses incurred in connection
with the foregoing are promptly paid by Spinco (it being agreed that Verizon
will not incur material expenditures above reasonable amounts specified by
Spinco unless authorized by Spinco).
(e)
If an extended reporting period for
Claims Made Policies is available for Verizon to purchase, if the Surviving
Corporation requests following the Closing Date, Verizon shall cause to be
purchased at the Surviving Corporation’s expense (using funds provided by the
Surviving Corporation) an extended reporting period with respect to such
insurance for the benefit of Spinco and the Spinco Subsidiaries as
insureds.
(f)
In the event that a Policy provides coverage for both Verizon or a
Verizon Subsidiary, on the one hand, and the Spinco Business, Spinco Assets and
Spinco Liabilities, on the other hand, relating to the same
occurrence: (i) Verizon agrees, to
the extent requested by Spinco, to jointly defend Spinco or any applicable
Spinco Subsidiaries where no conflicts exist between the Parties; and (ii) Spinco shall pay
that portion of all out-of-pocket fees and expenses, in excess of any insurance
or insurance reimbursement, attributable to the Spinco Assets and Spinco
Liabilities.
(g) The
obligations of Verizon and its Subsidiaries under this Section 6.5 shall
terminate on the seventh anniversary of
the Effective Time.
Section 6.6 Subsequent
Transfers. In the event that at any time during the 18-month
period following the Distribution Date a member of the Verizon Group becomes
aware that it possesses any Spinco Assets (except (i) for assets, rights
and properties provided by members of the Verizon Group pursuant to the Cutover
Plan Support Agreement or (ii) as otherwise
contemplated by the Transaction Agreements), Verizon shall cause the prompt
transfer of such Spinco Assets to Spinco. Prior to any such transfer,
Verizon shall hold such Spinco Assets in trust for Spinco. In the
event that at any time during the 18-month period following the Distribution
Date, a member of the Spinco Group becomes aware that it possesses any Verizon
Assets (except as otherwise contemplated by the Transaction Agreements), the
Spinco Group shall cause the prompt transfer of such Verizon Assets to Verizon
or a member of the Verizon Group. Prior to any such transfer, the
Spinco Group shall hold such Verizon Assets in trust for Verizon.
Section 6.7 Further
Assurances. From time to time after the Distribution Date, and
for no further consideration, each of the Parties shall execute, acknowledge and
deliver such assignments, transfers, consents, assumptions and other documents
and instruments and take such other actions as may be necessary to consummate
and make effective the transactions contemplated by this Agreement; provided that no such
documents or instruments shall impose obligations on any Party broader than or
additive to those in any Transaction Agreement.
Section 6.8 Use of
Names.
(a) Except
as otherwise provided in any of the other Transaction Agreements, after the
Distribution Date, neither Verizon nor any Subsidiary of Verizon (i) shall use any
material showing any affiliation or connection of Verizon or any member of the
Verizon Group with Spinco or any member of the Spinco Group or (ii) shall
represent to third parties that any of them is affiliated or connected with
Spinco or any member of the Spinco Group. The restrictions contained
in this Section 6.8(a) shall not apply to filings, reports and other documents
required by applicable Law or regulations of securities exchanges to be filed or
made publicly available.
(b) Except
as otherwise provided in any of the other Transaction Agreements, after the
Distribution Date, neither Spinco nor any Subsidiary of Spinco (i) shall use any
material showing any affiliation of Spinco or any member of the Spinco Group
with Verizon or any member of the Verizon Group or (ii) shall
represent to third parties that any of them is affiliated with Verizon or any
member of the Verizon Group. The restrictions contained in this
Section 6.8(b) shall not apply to filings, reports and other documents required
by applicable Law or regulations of securities exchanges to be filed or made
publicly available. Without limiting the generality of the foregoing,
prior to the Distribution Date, Verizon shall have the right to change the names
of all of the Spinco Subsidiaries to remove the name Verizon. The
Surviving Corporation shall undertake such name changes promptly following the
Merger to the extent such changes are not completed prior to such
time.
Access to
Information
Section 7.1 Provision of
Information. Notwithstanding anything herein to the contrary,
the Parties agree that the obligation of Verizon to deliver Information that is
part of the Spinco Assets to Spinco from and after the Distribution will be
governed by this Article VII. Subject to the terms of this Article
VII:
(a) No
later than five Business Days following the Closing Date, Verizon shall deliver
to Spinco at the address specified for notices to the Company in the Merger
Agreement (or to such other address in the continental United States as may be
designated by the Company to Verizon no less than 10 days prior to the
Distribution Date), (i) copies of the
Information constituting Spinco Assets that are continuing property records,
(ii) copies of
the Information constituting Spinco Assets that is contained in the electronic
data room provided by Intralinks and which the Company has had access prior to
the date hereof, together with such other information to be made available
between the date hereof and the Distribution Date in the data room located in
Irving, Texas, and such additional Information constituting Spinco Assets that
is in the same general categories as the existing Information in such data room
and is added to the data room by Verizon (using reasonable commercial efforts to
do so) immediately prior to the Closing Date and (iii) minute
books and organizational documents of Spinco and the Spinco
Subsidiaries.
(b) Following
the Distribution Date, Verizon shall deliver or make available to Spinco from
time to time, upon the request of Spinco, Information in Verizon’s possession
and not provided pursuant to Section 7.1(a) relating directly to the Spinco
Assets, the Spinco Business, or the Spinco Liabilities that consist of: (i) active
Contracts, (ii)
active litigation files and (iii) all other
Information that constitutes Spinco Assets or relates directly to any Spinco
Liability, in each case to the extent they are material to the conduct of the
Spinco Business following the Distribution Date. Verizon also will
cooperate with Spinco to accommodate Spinco’s reasonable requests from time to
time following the Distribution Date for other Information relating directly to
the Spinco Assets, the Spinco Business or the Spinco
Liabilities. Subject to Section 7.5, Verizon may retain complete and
accurate copies of such Information. Verizon shall maintain all such
Information consistently with Verizon’s standard retention policies except to
the extent that any such Information has already been provided to the Surviving
Corporation or has been offered to and declined by the Surviving
Corporation. The out of pocket costs and expenses incurred in the
identification, isolation and provision of Information to the Spinco Group (and
in the case of any Information provided pursuant to the second sentence of this
paragraph, a reasonable internal cost allocation) shall be paid for by the
Spinco Group. Information shall be provided as promptly as
practicable upon request, with due regard for other commitments of Verizon
personnel and the materiality of the information to Spinco (including the need
to comply with any legal or regulatory requirement of any Governmental
Authority).
(c) Notwithstanding
anything in this Agreement to the contrary, (x) the provision
of returns and other Information relating to Tax matters shall be governed by
the Tax Sharing Agreement and to the extent applicable, the Merger Agreement,
and not this Agreement, (y) the provision of
Information relating to personnel and personnel maters will be governed by the
Employee Matters Agreement and, to the extent applicable, the Merger Agreement,
and not this Agreement and (z) the ownership and
use of any Information that constitutes an Intellectual Property Asset shall be
governed by the Intellectual Property Agreement.
Section 7.2 Privileged
Information.
(a) Each
Party acknowledges that: (i) each of Verizon
and Spinco (and the members of the Verizon Group and the Spinco Group,
respectively) has or may obtain Privileged Information; (ii) there are or may
be a number of Litigation Matters affecting each or both of Verizon and Spinco;
(iii) both
Verizon and Spinco have a common legal interest in Litigation Matters, in the
Privileged Information and in the preservation of the confidential status of the
Privileged Information, in each case relating to the pre-Distribution Spinco
Business or Verizon Business or, in the case of the Spinco Group, relating to or
arising in connection with the relationship among Verizon and its Subsidiaries
on or prior to the Distribution Date; and (iv) both Verizon
and Spinco intend that the transactions contemplated hereby and by the Merger
Agreement and the other Transaction Agreements and any transfer of Privileged
Information in connection therewith shall not operate as a waiver of any
potentially applicable privilege.
(b) Each
of Verizon and Spinco agrees, on behalf of itself and each member of the Group
of which it is a member, not to disclose or otherwise waive any privilege
attaching to any Privileged Information relating to the pre-Distribution Spinco
Business or Verizon Business, as applicable, or, in the case of the Spinco
Group, relating to or arising in connection with the relationship among Verizon
and its Subsidiaries on or prior to the Distribution Date, without providing
prompt written notice to and obtaining the prior written consent of the other
Party, which consent shall not be unreasonably withheld, conditioned or delayed
and shall not be withheld, conditioned or delayed if the other Party certifies
that such disclosure is to be made in response to a likely threat of suspension
or debarment or similar action; provided, however, that Verizon
and Spinco shall not be required to give any such notice or obtain any such
consent and may make such disclosure or waiver with respect to Privileged
Information if such Privileged Information relates solely to the
pre-Distribution Spinco Business or Verizon Business, as
applicable. In the event of a disagreement between any member of the
Verizon Group and any member of the Spinco Group concerning the reasonableness
of withholding such consent, no disclosure shall be made prior to a resolution
of such disagreement by a court of competent jurisdiction, provided that the
limitations in this sentence shall not apply in the case of disclosure required
by Law and so certified as provided in the first sentence of this
paragraph.
(c) Upon
any member of the Verizon Group or any member of the Spinco Group receiving any
subpoena or other compulsory disclosure notice from a court or other
Governmental Authority which requests disclosure of Privileged Information, in
each case relating to pre-Distribution Spinco Business or Verizon Business, as
applicable, or, in the case of the Spinco Group, relating to or arising in
connection with the relationship among Verizon and its Subsidiaries on or prior
to the Distribution Date, the recipient of the notice shall (to the extent
consent is required in connection with the disclosure of such Privileged
Information under paragraph (b) of this Section) as promptly as practicable
provide to the other Group (following the notice provisions set forth herein) a
copy of such notice, the intended response, and all materials or information
relating to the other Group that might be disclosed and the proposed date of
disclosure. In the event of a disagreement as to the intended
response or disclosure, unless and until the disagreement is resolved as
provided in paragraph (b) of this Section, the Parties shall cooperate to assert
all defenses to disclosure claimed by either Party’s Group, and shall not
disclose any disputed documents or information until all legal defenses and
claims of privilege have been finally determined, except as otherwise required
by a court order requiring such disclosure.
Section 7.3 Production of
Witnesses. Subject to Section 7.2, after the Distribution
Date, each of Verizon and Spinco shall, and shall cause each member of its Group
to, make available to Spinco or Verizon or any member of the Spinco Group or of
the Verizon Group, as the case may be, upon reasonable prior written request,
such Group’s directors, managers or other persons acting in a similar capacity,
officers, employees and agents as witnesses to the extent that any such Person
may reasonably be required in connection with any Litigation Matters,
administrative or other proceedings in which the requesting Party may from time
to time be involved and relating to the pre-Distribution Spinco Business or the
Verizon Business, as applicable, or, in the case of the Spinco Group, relating
to or in connection with the relationship among Verizon and its Subsidiaries on
or prior to the Distribution Date. The out-of-pocket costs and
expenses incurred in the provision of such witnesses shall be paid by the Party
requesting the availability of such persons.
Section 7.4 Retention of
Information. Except as otherwise agreed in writing, or as
otherwise provided in the other Transaction Agreements, each of Verizon and
Spinco shall, and shall cause each member of its Group to, retain all
Information in such Party’s Group’s possession or under its control, relating
directly and primarily to the pre-Distribution business, Assets or Liabilities
of the other Party’s Group for so long as such Information is retained pursuant
to such Party’s general document retention policies as of such time or such
later date as may be required by Law, except that if, prior to the expiration of
such period, any member of either Party’s Group wishes to destroy or dispose of
any such Information that is at least three years old, prior to destroying or
disposing of any of such Information, (a) the Party whose
Group is proposing to dispose of or destroy any such Information shall provide
no less than 30 days’ prior written notice to the other Party, specifying the
Information proposed to be destroyed or disposed of, and (b) if, prior to the
scheduled date for such destruction or disposal, the other Party requests in
writing that any of the Information proposed to be destroyed or disposed of be
delivered to such other Party, the Party whose Group is proposing to dispose of
or destroy such Information promptly shall arrange for the delivery of the
requested Information to a location specified by, and at the expense of, the
requesting Party. This Section 7.4 shall not apply to Information
referred to in clauses (x) and (y) of Section 7.1(c).
Section 7.5 Confidentiality. Subject
to Section 7.2, which shall govern Privileged Information, from and after the
Distribution Date, each of Verizon and Spinco shall hold, and shall use
commercially reasonable efforts to cause its Affiliates and Representatives to
hold, in strict confidence all Information concerning the other Party’s Group
obtained by it or furnished to it by such other Party’s Group pursuant to this
Agreement or the other Transaction Agreements and shall not release or disclose
such Information to any other Person, except its Affiliates and Representatives,
who shall be advised of the provisions of this Section 7.5, and each Party shall
be responsible for a breach by any of its Affiliates or Representatives; provided, however, that any
member of the Verizon Group or the Spinco Group may disclose such Information to
the extent that (a) disclosure is
compelled by judicial or administrative process or, based on advice of such
Person’s counsel, by other requirements of Law, including filing requirements
with the U.S. Securities and Exchange Commission, or (b) such Party
can show that such Information was (i) in the public
domain through no fault of such Person or (ii) lawfully acquired
by such Person from another source after the time that it was furnished to such
Person by the other Party’s Group, and not acquired from such source subject to
any confidentiality obligation on the part of such source known to the
acquiror. Notwithstanding the foregoing, each of Verizon and Spinco
shall be deemed to have satisfied its obligations under this Section 7.5 with
respect to any Information (other than Privileged Information) if it exercises
the same care with regard to such Information as it takes to preserve
confidentiality for its own similar Information.
Section 7.6 Cooperation with Respect to
Government Reports and Filings. Verizon, on behalf of itself
and each member of the Verizon Group, agrees to provide any member of the Spinco
Group, and Spinco, on behalf of itself and each member of the Spinco Group,
agrees to provide any member of the Verizon Group, with such cooperation and
Information (in each case, with respect to the Spinco Business only) as may be
reasonably requested by the other in connection with the preparation or filing
of any government report or other government filing contemplated by this
Agreement or in conducting or responding to any other government proceeding
relating to the pre-Distribution business of the Verizon Group or the Spinco
Group, Assets or Liabilities of either Group or relating to or in connection
with the relationship between the Groups on or prior to the Distribution
Date. Such cooperation and Information shall include promptly
forwarding copies of appropriate notices, forms and other communications
received from or sent to any Governmental Authority that relate to the Verizon
Group, in the case of the Spinco Group, or the Spinco Group, in the case of the
Verizon Group. All cooperation provided under this section shall be
provided at the expense of the Party requesting such
cooperation. Each Party shall make its employees and facilities
available during normal business hours and on reasonable prior notice to provide
explanation of any documents or Information provided hereunder.
No Representations or
Warranties
Section 8.1 No Representations or
Warranties. Except as expressly set forth in any Transaction
Agreement, Spinco and Verizon understand and agree that no member of the Verizon
Group is representing or warranting to Spinco or any member of the Spinco Group
in any way as to the Spinco Assets, the Spinco Business or the Spinco
Liabilities. Except as expressly set forth in the Merger Agreement,
Verizon and Spinco understand and agree that no member of the Spinco Group is
representing or warranting to Verizon or any member of the Verizon Group in any
way as to the Verizon Assets, the Verizon Business or the Verizon
Liabilities.
Miscellaneous
Section 9.1 Expenses. All
fees and expenses and any other costs incurred by the Parties in connection with
the transactions contemplated hereby and by the Transaction Agreements shall be
paid as set forth in Section 11.1 of the Merger Agreement, provided, however, that (i)
Spinco shall reimburse Verizon for and indemnify Verizon against, all costs
invoiced by a financial printer in connection with the preparation and filing of
the Information Statement, including all amendments thereto and any Current
Report on Form 8-K that shall be filed by Spinco which shall include the
Information Statement as an exhibit thereto, and all costs of preparing,
printing and delivering the Information Statement to Verizon’s record and
beneficial stockholders (other than attorneys’ fees and fees of other advisors
to Verizon) and (ii) Spinco shall pay all Spinco Debt Expenses. If
the Distribution occurs, (i) to the extent that
invoices from Verizon for such costs, fees and expenses shall be available and
furnished to Spinco and the Company no later than 10 Business Days prior to the
Closing Date, Spinco or the Surviving Corporation shall reimburse Verizon for
such costs on the Closing Date, and (ii) to the extent
that invoices from Verizon for such costs, fees and expenses are provided by
Verizon to the Surviving Corporation following the Closing Date, the Surviving
Corporation shall reimburse Verizon for such costs within 10 Business Days
following receipt of such invoices from Verizon.
Section 9.2 Notices. Prior
to Closing under the Merger Agreement, all notices and other communications
required or permitted to be given hereunder shall be in writing and shall be
deemed given upon (a) a transmitter’s
confirmation of a receipt of a facsimile transmission (but only if followed by
confirmed delivery of a standard overnight courier the following Business Day or
if delivered by hand the following Business Day), (b) confirmed delivery
of a standard overnight courier or when delivered by hand or (c) the expiration of
five Business Days after the date mailed by certified or registered mail (return
receipt requested), postage prepaid, to the Parties at such addresses as may be
specified by the Parties from time to time. Following the Closing,
notices shall be sent to Verizon and the Surviving Corporation (as successor by
merger to Spinco) in accordance with Section 11.2 of the Merger Agreement,
or to such other address as either Party may have furnished to the other Party
by a notice in writing in accordance with this Section.
Section 9.3 Interpretation. Each
Party 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 both Parties 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.
Section 9.4 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
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.
Section 9.5 Assignment; Binding
Effect. Neither this Agreement nor any of the rights, benefits
or obligations hereunder may be assigned by either of the Parties (whether by
operation of law or otherwise) without the prior written consent of the other
Party and the prior written consent of the Company, not to be unreasonably
withheld, delayed or conditioned, 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 and their respective successors and
permitted assigns.
Section 9.6 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 Section 6.2 with respect to the
release of certain Liabilities, no Person shall be deemed a third party
beneficiary under or by reason of this Agreement.
Section 9.7 Entire
Agreement. This Agreement, the Exhibits and the Disclosure
Letter hereto, the other Transaction Agreements and other documents referred to
herein shall constitute the entire agreement between the Parties with respect to
the subject matter hereof and shall supersede all previous negotiations,
commitments and writings with respect to such subject matter. In the
case of any conflict between the terms of this Agreement and the terms of any
other Transaction Agreement, the terms of such other Transaction Agreement shall
control.
Section 9.8 Governing
Law. 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.
Section 9.9 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, notwithstanding that not all Parties are
signatories to the original or the same counterpart.
Section 9.10 Amendments;
Waivers. This Agreement may not be amended except by an
instrument in writing signed by Verizon and Spinco. No failure or
delay by Verizon or Spinco 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 or Spinco to any such
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such Party.
Section 9.11 Termination. Notwithstanding
any provision hereof, in the event of termination of the Merger Agreement, this
Agreement may be terminated and the Distribution abandoned at any time prior to
the Distribution by and in the sole discretion of Verizon. In the
event of such termination, no Party or any party to any other Transaction
Agreement (other than the Merger Agreement to the extent provided therein) shall
have any Liability to any Person by reason of this Agreement or any other
Transaction Agreement (other than the Merger Agreement to the extent provided
therein).
Section 9.12 Waiver of Jury
Trial. EACH OF THE PARTIES 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 IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND
ENFORCEMENT HEREOF.
Section 9.13 Jurisdiction; Service of
Process. EACH OF THE PARTIES (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 9.2, 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. NOTWITHSTANDING
THIS SECTION 9.13, ANY DISPUTE REGARDING THE CLOSING STATEMENT SHALL BE RESOLVED
IN ACCORDANCE WITH ARTICLE V; PROVIDED THAT THE TERMS OF
ARTICLE V MAY BE ENFORCED BY EITHER PARTY IN ACCORDANCE WITH THE TERMS OF
THIS SECTION 9.13.
[SIGNATURE
PAGE FOLLOWS]
IN
WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed as
of the date first above written.
VERIZON
COMMUNICATIONS INC.
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By:
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/s/ Xxxx X. Xxxxxxxxx |
and Development |
NEW
COMMUNICATIONS HOLDINGS INC.
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By:
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/s/ Xxxxxxx X. Xxxxx |
Xxxxxxx
X. Xxxxx
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Vice
President
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