EXHIBIT 2.2
AMENDED AND RESTATED AGREEMENT OF MERGER
DATED AS OF DECEMBER 7, 2001,
AS AMENDED AND RESTATED AS OF JANUARY 14, 2002
AMONG
TSI TELECOMMUNICATION HOLDINGS, INC.,
TSI MERGER SUB, INC.
VERIZON INFORMATION SERVICES INC.,
AND
TSI TELECOMMUNICATION SERVICES INC.
ARTICLE I
DEFINITIONS; THE MERGER
1.1 Definitions.....................................................................2
1.2 The Merger.....................................................................11
1.3 The Closing....................................................................11
1.4 The Effective Time.............................................................11
1.5 Effects of the Merger..........................................................12
1.6 Certificate of Incorporation; By-Laws; Directors and Officers of the
Surviving Corporation..........................................................12
1.7 Effect of the Merger on the Capital Stock of the Constituent Corporations......12
1.8 Further Assurances.............................................................13
1.9 Closing Date Dividend; Merger Consideration and Adjustment.....................13
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
2.1 Organization and Related Matters...............................................15
2.2 Stock..........................................................................16
2.3 Financial Statements; Changes; Contingencies...................................16
2.4 Tax Returns and Reports........................................................17
2.5 Material Contracts.............................................................18
2.6 Real and Personal Property; Title to Property; Leases..........................19
2.7 Intellectual Property..........................................................19
2.8 Authorization; No Conflicts....................................................20
2.9 Legal Proceedings..............................................................21
2.10 Labor Matters..................................................................21
2.11 Insurance......................................................................21
2.12 Permits........................................................................21
2.13 Compliance with Law............................................................22
2.14 Environmental Compliance.......................................................22
2.15 Employee Benefits..............................................................22
2.16 Intercompany Obligations.......................................................23
2.17 No Brokers or Finders..........................................................24
2.18 Operation in the Ordinary Course...............................................24
2.19 Affiliate Transactions.........................................................24
2.20 Bank Accounts..................................................................25
2.21 Suppliers and Customers........................................................25
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER AND MERGER SUB
3.1 Organization and Related Matters...............................................25
3.2 Authorization..................................................................26
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3.3 No Conflicts...................................................................26
3.4 No Brokers or Finders..........................................................26
3.5 Legal Proceedings..............................................................26
3.6 Financing......................................................................27
3.7 Insurance Matters..............................................................27
3.8 Investment Representation......................................................28
3.9 Investigation; No Other Representations or Warranties..........................28
3.10 No Knowledge of Indebtedness...................................................29
ARTICLE IV
COVENANTS WITH RESPECT TO THE PERIOD PRIOR TO CLOSING
4.1 Access.........................................................................29
4.2 Reports........................................................................29
4.3 Conduct of Business............................................................29
4.4 Control of the Business of the Company.........................................31
4.5 Permits, Approvals and Government Filings......................................31
4.6 Elimination of Intercompany and Affiliate Liabilities..........................32
4.7 Accuracy of Information........................................................32
4.8 Buyer's Financing..............................................................33
4.9 Non-Solicitation...............................................................33
4.10 Supplemental Disclosure........................................................33
4.11 Business Software..............................................................34
ARTICLE V
ADDITIONAL CONTINUING COVENANTS
5.1 Cooperation....................................................................34
5.2 Powers of Attorney.............................................................34
5.3 Tax Matters....................................................................34
5.4 Use of Verizon and GTE Name and Marks..........................................41
5.5 Transition Services............................................................42
5.6 Non-Competition................................................................42
5.7 Non-Solicitation of Employees..................................................44
5.8 Assignment of Nondisclosure Agreements.........................................44
5.9 Confidentiality................................................................45
ARTICLE VI
EMPLOYEE BENEFITS
6.1 Employee Matters...............................................................45
6.2 Employee Benefit Matters.......................................................47
6.3 Vacation.......................................................................50
6.4 Employee Rights................................................................50
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6.5 WARN Act Requirements..........................................................51
6.6 Successors and Assigns; Outsourcing............................................51
6.7 COBRA Liability................................................................51
6.8 Stock Options..................................................................52
6.9 Executive Compensation.........................................................52
6.10 Indemnity for Certain ERISA Liabilities........................................52
6.11 Employee Indemnity.............................................................53
ARTICLE VII
CONDITIONS OF PURCHASE
7.1 General Conditions.............................................................53
7.2 Conditions to Obligations of Buyer and Merger Sub..............................54
7.3 Conditions to Obligations of Seller and the Company............................55
ARTICLE VIII
TERMINATION OF OBLIGATIONS; SURVIVAL
8.1 Termination of Agreement.......................................................56
8.2 Effect of Termination..........................................................56
ARTICLE IX
INDEMNIFICATION
9.1 Obligations of Seller..........................................................57
9.2 Obligations of Buyer...........................................................57
9.3 Procedure......................................................................58
9.4 Survival.......................................................................59
9.5 Limitations on Indemnification.................................................59
9.6 Treatment of Payments..........................................................60
9.7 Remedies Exclusive.............................................................60
9.8 Mitigation.....................................................................60
9.9 Tax Effect.....................................................................60
9.10 Assignment of Insurance Proceeds...............................................61
ARTICLE X
GENERAL
10.1 Usage..........................................................................62
10.2 Amendments; Waivers............................................................62
10.3 Schedules; Exhibits............................................................62
10.4 Further Assurances.............................................................63
10.5 Governing Law..................................................................63
10.6 Headings.......................................................................63
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10.7 Counterparts...................................................................63
10.8 Parties in Interest............................................................63
10.9 Performance by Subsidiaries....................................................64
10.10 Remedies; Waiver...............................................................64
10.11 Severability...................................................................64
10.12 No Punitive Damages............................................................64
10.13 Knowledge Convention...........................................................64
10.14 Notices........................................................................65
10.15 Publicity and Reports..........................................................66
10.16 Integration....................................................................67
10.17 Expenses.......................................................................67
10.18 No Assignment..................................................................67
10.19 Representation By Counsel; Interpretation......................................67
10.20 Reference of Disputes to Senior Officers of Seller and Buyer...................67
10.21 Resolution of Disputes.........................................................68
10.22 Restatement Effective Date.....................................................68
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EXHIBITS
EXHIBIT A Form of Opinions of Counsel to Seller
EXHIBIT B Form of Opinion of Counsel to Buyer and Merger Sub
EXHIBIT C Form of Intellectual Property Agreement
EXHIBIT D Form of Transition Services Agreement
EXHIBIT E Form of Wireless Guaranty
EXHIBIT F Debt Financing Commitment Letter
EXHIBIT G Equity Financing Commitment Letter
EXHIBIT H Terms of Data Processing Agreement
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EXHIBIT 2.2
AMENDED AND RESTATED
AGREEMENT OF MERGER
Amended and Restated
Agreement of Merger dated as of December 7, 2001,
as amended and restated as of January ___, 2002, by and among TSI
TELECOMMUNICATION HOLDINGS, INC., a Delaware corporation ("BUYER"), TSI MERGER
SUB, INC., a Delaware corporation ("MERGER SUB"), VERIZON INFORMATION SERVICES
INC., a Delaware corporation ("SELLER"), and TSI TELECOMMUNICATION SERVICES
INC., a Delaware corporation (the "COMPANY").
R E C I T A L S
WHEREAS, the Company provides interoperability solutions, clearing and
settlement services and related services to telecommunications companies and
other third parties;
WHEREAS, Seller owns all of the issued and outstanding capital stock
(the "STOCK") of the Company;
WHEREAS, Buyer is a newly organized, wholly owned Subsidiary of TSI
Telecommunication Holdings, LLC, a Delaware limited liability company;
WHEREAS, Merger Sub is a newly organized, wholly owned Subsidiary of
Buyer;
WHEREAS, Buyer and Seller entered into that certain Stock Purchase
Agreement dated as of December 7, 2001 (the "EXISTING STOCK PURCHASE
AGREEMENT"), pursuant to which Buyer agreed to purchase all of the Stock from
Seller;
WHEREAS, Buyer and Seller desire to structure the transactions
contemplated by the Existing Stock Purchase Agreement such that Buyer will
acquire the Company through a merger in which Merger Sub merges with and into
the Company, with the Company being the surviving corporation (such merger, the
"MERGER");
WHEREAS, Buyer, Merger Sub, Seller and the Company desire to amend and
restate the Existing Stock Purchase Agreement as provided herein to (i) set
forth the terms and conditions of the Merger and (ii) supersede and replace the
Existing Stock Purchase Agreement with effect from December 7, 2001; and
WHEREAS, the respective Boards of Directors of Buyer, Merger Sub and
the Company have each determined that the Merger is advisable and in the best
interests of their respective stockholders, and such Boards of Directors have
approved the Merger, upon the terms and subject to the conditions set forth in
this Agreement.
A G R E E M E N T
NOW, THEREFORE, IT IS AGREED that the Existing Stock Purchase
Agreement shall be and is hereby amended and restated in its entirety as
follows:
In consideration of the mutual promises contained herein and intending
to be legally bound, the parties agree as follows:
ARTICLE I
DEFINITIONS; THE MERGER
1.1 DEFINITIONS.
For all purposes of this Agreement and the Exhibits and Disclosure
Schedules delivered pursuant to this Agreement, and except as otherwise
expressly provided, the following definitions shall apply:
"ACQUISITION TRANSACTION" has the meaning set forth in Section 4.9.
"ACTION" means any action, complaint, petition, investigation, suit or
other proceeding, whether civil or criminal, in law or in equity, or before any
arbitrator or Governmental Entity.
"ADJUSTMENT" has the meaning set forth in Section 5.3(d).
"ADVERSE TAX CONSEQUENCES" has the meaning set forth in Section
5.3(c).
"AFFILIATE" means, with respect to a specified Person, a Person that
directly, or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, the specified Person. For the
avoidance of doubt, Verizon Wireless shall be deemed to be an Affiliate of
Seller and Verizon for purposes of this Agreement.
"AFFILIATE CONTRACT" has the meaning set forth in Section 2.19(a).
"AFFILIATED GROUP" means an affiliated group as defined in Section
1504 of the Code (or any analogous combined, consolidated or unitary group
defined under state, local or foreign income Tax law) of which the Company is or
has been a member.
"AGREEMENT" means this Amended and Restated
Agreement of Merger dated
as of December 7, 2001, as amended and restated as of January ___, 2002 and as
further amended or supplemented, together with all Exhibits and Schedules
attached hereto or expressly incorporated herein by reference.
"AGREEMENT ACCOUNTING PRINCIPLES" means, except to the extent
otherwise provided in Section 1.4 of the Seller Disclosure Schedule, GAAP,
applied in the manner consistent with the principles set forth in the Section
1.4 of the Seller Disclosure Schedule and with all other principles used in
preparing the September 30 Balance Sheet.
"ALLOCATION" has the meaning set forth in Section 5.3(j)(1).
"APPROVAL" means any approval, authorization, consent, qualification
or registration, or any extension, modification, amendment or waiver of any of
the foregoing,
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required to be obtained from, or any notice, statement or other communication
required to be filed with or delivered to, any Governmental Entity.
"ARBITER" has the meaning set forth in Section 1.9(e)(3).
"BALANCE SHEET TAXES" has the meaning set forth in Section 5.3(b)(2).
"BASE AMOUNT" has the meaning set forth in Section 1.9(b).
"BENEFIT PLANS" has the meaning set forth in Section 2.15(a).
"BUSINESS" means the business of the Company as it is conducted on the
date hereof.
"BUSINESS NON-STATUTORY INTELLECTUAL PROPERTY" means the Non-Statutory
Intellectual Property that is used in or required for use in the Business and
is: (i) owned by the Company, or (ii) owned by Seller or its Affiliates (other
than the Company).
"BUSINESS SOFTWARE" means the proprietary software (including source
code, object code and related documentation) that is listed in Section 2.7 of
the Seller Disclosure Schedule.
"BUSINESS STATUTORY INTELLECTUAL PROPERTY" means the Statutory
Intellectual Property, excluding Excluded Marks, that is used in or required for
use in the Business and is: (i) owned by the Company, or (ii) owned by Seller or
its Affiliates (other than the Company).
"BUYER" has the meaning set forth in the Preamble hereto.
"BUYER INDEMNITEES" has the meaning set forth in Section 9.1.
"BUYER SAVINGS PLAN" has the meaning set forth in Section 6.2(b)(2).
"BUYER WELFARE PLANS" has the meaning set forth in Section 6.2(c)(1).
"CARRYBACK" has the meaning set forth in Section 5.3(c).
"CINGULAR" means Cingular Wireless, a joint venture between SBC
Communications Inc. and BellSouth Corporation.
"CLOSING" has the meaning set forth in Section 1.3(a).
"CLOSING BALANCE SHEET" has the meaning set forth in Section
1.9(e)(1).
"CLOSING DATE" has the meaning set forth in Section 1.3(b).
"CLOSING DATE DIVIDEND" has the meaning set forth in Section 1.9(a).
"CLOSING DATE STATEMENT" has the meaning set forth in Section
1.9(e)(1).
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"CLOSING DATE NET WORKING CAPITAL" means Net Working Capital as of the
close of business on the business day immediately preceding the Closing Date
after giving effect to the Closing Date Dividend and the transactions
contemplated by Section 4.6.
"COBRA" has the meaning set forth in Section 6.7.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMPANY" has the meaning set forth in the Preamble hereto.
"COMPETITIVE BUSINESS" has the meaning set forth in Section 5.6(b).
"CONFIDENTIALITY AGREEMENT" has the meaning set forth in Section 4.1.
"CONSISTENCY REQUIREMENT" has the meaning set forth in Section
5.3(a)(3).
"CONTRACT" means any agreement, arrangement, bond, commitment,
indemnity, indenture, instrument, lease, license or understanding, whether or
not in writing.
"CONTROL" (including the correlative terms "Controls," "Controlled
by," "Controlled," "Controlling" and "under common Control with") means with
respect to any Person, possession of the power, directly or indirectly, either
to (i) vote a majority of the voting shares or other voting interests in such
Person for the election of directors of such Person or (ii) direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities or by contract.
"CURRENT ASSETS" means, as of any date of determination, the current
assets set forth on the Company's balance sheet as of such date, determined in
accordance with Agreement Accounting Principles.
"CURRENT LIABILITIES" means, as of any date of determination, the
current liabilities set forth on the Company's balance sheet as of such date,
determined in accordance with Agreement Accounting Principles.
"CUSTOMERS" has the meaning set forth in Section 5.6(a).
"DEBT FINANCING" has the meaning set forth in Section 3.6(a).
"DEBT FINANCING COMMITMENT LETTER" has the meaning set forth in
Section 3.6(a).
"DGCL" has the meaning set forth in Section 1.2.
"E&Y" has the meaning set forth in Section 1.9(e)(1).
"EFFECTIVE TIME" has the meaning set forth in Section 1.4.
"EMPLOYEE" has the meaning set forth in Section 2.15(a).
4
"ENCUMBRANCE" means any claim, charge, easement, encumbrance, lease,
covenant, security interest, lien, option, pledge, rights of others, license or
restriction (whether on voting, sale, transfer, disposition or otherwise),
except for any restrictions on transfer generally arising under any applicable
federal or state securities law; PROVIDED, however, that, except for purposes of
the second sentence of Section 2.2, Encumbrance shall not include any matter
that (i) is disclosed in the September 30 Balance Sheet, (ii) is not material in
amount, (iii) constitutes a statutory lien arising in the ordinary course of
business for sums not yet due and payable, (iv) is in respect of current Taxes
not yet due and payable, (v) arises as a result of any zoning, entitlement or
other land use or environmental regulation promulgated by a Governmental Entity
or (vi) does not singly or in the aggregate with other such items materially
detract from the value of the property or materially detract from or interfere
with the use of property in the ordinary conduct of business as presently
conducted.
"ENVIRONMENTAL LAWS" means all applicable federal, state, local and
foreign laws and regulations relating to pollution, protection of human health
or the environment (including air, surface water, ground water, land surface and
subsurface strata) or occupational health and safety, including laws and
regulations relating to emissions, discharges, releases or threatened releases
of Regulated Substances; or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transportation or handling of
Regulated Substances.
"EQUITY FINANCING" has the meaning set forth in Section 3.6(a).
"EQUITY FINANCING COMMITMENT LETTER" has the meaning set forth in
Section 3.6(a).
"EQUITY SECURITIES" means any capital stock or other equity interest
or any securities convertible into or exchangeable for capital stock, or any
other rights, warrants or options to acquire any of the foregoing securities.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA AFFILIATE" has the meaning set forth in Section 6.10.
"ERISA PLANS" has the meaning set forth in Section 2.15(a).
"ESTIMATED NET WORKING CAPITAL AMOUNT" has the meaning set forth in
Section 1.9(d).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXCLUDED MARKS" means all Trademarks owned by Seller or an Affiliate
of Seller (other than the Company), or licensed to Seller or an Affiliate of
Seller (other than the Company) by any Person (other than the Company) and any
Trademarks confusingly similar to the foregoing.
"EXECUTIVE COMPENSATION PLANS" has the meaning set forth in Section
6.9.
5
"EXISTING STOCK PURCHASE AGREEMENT" has the meaning set forth in the
Recitals.
"EXISTING VDS AGREEMENT" means, collectively, that certain Agreement
dated as of April 1, 1989 between Verizon Data Services Incorporated (as
successor to GTE Data Services Incorporated) and the Company (as successor to
GTE Telecommunication Services Inc.), the revised proposal dated April 20, 2001
from Verizon Data Services to the Company and the letter dated May 24, 2001 from
the Company to Verizon accepting such proposal.
"FINAL NET WORKING CAPITAL AMOUNT" has the meaning set forth in
Section 1.9(e)(3).
"FINANCIAL STATEMENTS" has the meaning set forth in Section 2.3(a).
"FINANCING" has the meaning set forth in Section 3.6(a).
"FOREIGN PLANS" has the meaning set forth in Section 2.15(a).
"FRP" has the meaning set forth in Section 6.2(c)(5).
"GAAP" means generally accepted accounting principles in the United
States.
"GOVERNMENTAL ENTITY" means any government or any agency, bureau,
board, commission, court, department, official, political subdivision, tribunal
or other instrumentality of any government, whether federal, interstate, state
or local, domestic or foreign.
"GTE" means GTE Corporation, a
New York corporation.
"XXXX-XXXXX-XXXXXX ACT" means the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended, and the related regulations and published
interpretations.
"INCOME TAXES" means any U. S. federal, foreign, state or local,
capital gains, franchise Taxes or other Taxes based on or measured by net income
(including any interest and penalties and additions to tax (civil or criminal)
related thereto or to the nonpayment thereof), excluding withholding taxes.
"INCOME TAX RETURN" means a Tax Return filed or required to be filed
with a Governmental Entity with respect to Income Taxes including, where
permitted or required, combined or consolidated returns for any group of Persons
that includes the Company or any of its Subsidiaries, if any.
"INDEBTEDNESS" means at a particular time, without duplication, (i)
any indebtedness for borrowed money or issued in substitution for or exchange of
indebtedness for borrowed money, (ii) any indebtedness evidenced by any note,
bond, debenture or other debt security, (iii) any indebtedness guaranteed in any
manner by a Person and (iv) any obligations under capitalized leases or purchase
money financing with respect to which a Person is liable, contingently or
otherwise, as obligor, guarantor or otherwise; PROVIDED that Indebtedness shall
not include any of the Company's obligations, contingent or otherwise, under the
Existing VDS Agreement.
6
"INDEMNIFIABLE CLAIM" means any Loss for or against which any party is
entitled to indemnification under this Agreement.
"INDEMNIFIED PARTY" means a party entitled to indemnification under
this Agreement.
"INDEMNIFYING PARTY" means a party obligated to provide
indemnification under this Agreement.
"INFORMATION MEMORANDUM" has the meaning set forth in Section 3.9(b).
"INTELLECTUAL PROPERTY" means all Statutory Intellectual Property and
Non-Statutory Intellectual Property.
"INTELLECTUAL PROPERTY AGREEMENT" means the Intellectual Property
Agreement to be dated as of the Closing Date, substantially in the form of
Exhibit C attached hereto.
"IRS" means the Internal Revenue Service or any successor entity.
"LAW" means any constitutional provision, statute or other law, rule,
regulation or interpretation of any Governmental Entity and any Order.
"LICENSED THIRD PARTY INTELLECTUAL PROPERTY" means that portion of
Third Party Intellectual Property licensed to Verizon, Seller or their
respective Affiliates (other than the Company) that is used in or required for
use in the Business that Verizon or Seller has the right to license to the
Company after the Closing Date without the payment of compensation or other
consideration to any Person and that is listed in Section 2.7(IV) of the Seller
Disclosure Schedule.
"LOSS" means any action, cost, damage, disbursement, expense,
liability, Tax, loss, deficiency, diminution in value, obligation, penalty or
settlement of any kind or nature, including interest or other carrying costs,
penalties, legal, accounting and other professional fees and expenses incurred
in the investigation, collection, prosecution and defense of claims and amounts
paid in settlement, that may be imposed on or otherwise incurred or suffered by
the specified person.
"MATERIAL ADVERSE CIRCUMSTANCE" means any fact, circumstance or
condition that has, or would reasonably be expected to have, a material adverse
effect on the Business, operations, assets or financial condition of the
Company, but excluding any fact, circumstance or condition that (i) is generally
applicable to the United States economy or securities, financial or capital
markets, (ii) subject to Section 10.3, is set forth in the applicable Section of
the Seller Disclosure Schedule or (iii) results from the execution of this
Agreement or the announcement of this Agreement or the transactions contemplated
hereby or the identity of Buyer; PROVIDED that in no event shall the non-renewal
or termination of any Contract with Verizon Wireless, any of its Controlled
Affiliates in the United States of America or Cingular (or a material reduction
in revenue from such Persons) be deemed a Material Adverse Circumstance.
"MATERIAL CONTRACT" has the meaning set forth in Section 2.5.
7
"MATERIAL CUSTOMER" has the meaning set forth in Section 2.21.
"MATERIAL SUPPLIER" has the meaning set forth in Section 2.21.
"MERGER" has the meaning set forth in the Recitals.
"MERGER CONSIDERATION" has the meaning set forth in Section 1.9(b).
"MERGER SUB" has the meaning set forth in the Preamble hereto.
"NET TAX BENEFIT" has the meaning set forth in Section 9.9.
"NET TAX DETRIMENT" has the meaning set forth in Section 9.9.
"NET WORKING CAPITAL" means, as of any date of determination, the
amount by which Current Assets as of such date exceeds Current Liabilities as of
such date.
"NON-COMPETE TERM" has the meaning set forth in Section 5.6(a).
"NON-STATUTORY INTELLECTUAL PROPERTY" means all unpatented inventions
(whether or not patentable), trade secrets, know-how and proprietary
information, including (in whatever form or medium), discoveries, ideas,
compositions, formulas, computer software (including source and object codes),
computer software documentation, databases, drawings, designs, plans, proposals,
specifications, photographs, samples, models, processes, procedures, data,
information, manuals, reports, financial, marketing and business data, and
pricing and cost information, correspondence and notes, and any rights or
licenses in the foregoing.
"ORDER" means any decree, injunction, judgment, order, ruling,
assessment or writ.
"OTHER TAXES" means all Taxes other than Income Taxes, including
withholding Taxes.
"PBGC" means the Pension Benefit Guaranty Corporation or any successor
thereto.
"PERMIT" means any license, permit, franchise, certificate of
authority, or order, or any extension, modification, amendment or waiver of the
foregoing, required to be issued by any Governmental Entity.
"PERSON" means an association, a corporation, an individual, a
partnership, a limited liability company, a trust or any other entity or
organization, including a Governmental Entity.
"PORTIONS OF BUSINESS SOFTWARE" means individual or collections of
routines or modules of Business Software that do not fully or substantially
comprise any one full item of Business Software and that are used by or in
possession of Seller or its Affiliates (other than the
8
Company) as of the date hereof, other than Business Software solely used or
possessed by Seller or its Affiliates (other than the Company) for the purpose
of providing services to the Company.
"PRE-CLOSING TAX REFUNDS" has the meaning set forth in Section 5.3(c).
"PRIME RATE" means the rate that X.X. Xxxxxx Xxxxx (or any successor
entity) announces from time to time as its prime lending rate, as in effect from
time to time.
"PROHIBITED ACTIVITY" has the meaning set forth in Section 5.6(a)(2).
"PROPOSED FINAL NET WORKING CAPITAL AMOUNT" has the meaning set forth
in Section 1.9(e)(1).
"REGULATED SUBSTANCE" means (i) any "hazardous substance" or
"pollutant" or "contaminant," as said terms are defined in the Comprehensive
Environmental Response, Compensation and Liability Act (Title 42 United States
Code Section 601 et seq.), or Title 40 Code of Federal Regulations Part 302 or
any other Environmental Law; (ii) any toxic or hazardous substance, material or
waste (whether solid, liquid or gaseous); (iii) "petroleum," as that term is
defined in the Resource Conservation and Recovery Act, as amended (Title 00
Xxxxxx Xxxxxx Code Section 6691 et seq.), or Title 40 Code of Federal
Regulations Section 280.1; or (iv) any other substance, material or waste which
is regulated under any applicable Environmental Law with respect to its
collection, storage, transportation for disposal, treatment or disposal.
"RELATED AGREEMENTS" means the Intellectual Property Agreement, the
Wireless Guaranty and the Transition Services Agreement.
"RESTATEMENT EFFECTIVE DATE" has the meaning set forth in Section
10.22.
"SECTION 338(h)(10) ELECTION" has the meaning set forth in Section
5.3(j)(1).
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SELLER" has the meaning set forth in the Preamble hereto.
"SELLER DISCLOSURE SCHEDULE" means the disclosure schedule delivered
by Seller to Buyer on the date hereof, as it may be amended from time to time in
accordance with Section 4.10 hereof.
"SELLER PENSION PLAN" has the meaning set forth in Section 6.2(a)(1).
"SELLER RETIREE WELFARE PLANS" has the meaning set forth in Section
6.2(c)(2).
"SELLER SAVINGS PLANS" has the meaning set forth in Section 6.2(b)(1).
"SELLER WELFARE PLANS" has the meaning set forth in Section 6.2(c)(1).
"SEPTEMBER 30 BALANCE SHEET" means the unaudited balance sheet of the
Company as of September 30, 2001 included in the Financial Statements.
9
"SERVICES" has the meaning set forth in Section 5.6(a)(1).
"STATUTORY INTELLECTUAL PROPERTY" means any and all United States and
foreign patents and patent applications of any kind, United States and foreign
Trademarks, United States and foreign works of authorship, mask-works,
copyrights, and copyright and mask work registrations and applications for
registration, and any rights or licenses in the foregoing; PROVIDED, however,
that Statutory Intellectual Property shall not include software source code,
object code or related documentation.
"STOCK" has the meaning set forth in the Recitals of this Agreement.
"SUBSIDIARY" means, with respect to any Person, any Person in which
such Person has a direct or indirect equity or ownership interest in excess of
50%.
"SURVIVING CORPORATION" has the meaning set forth in Section 1.2.
"TARGET NET WORKING CAPITAL AMOUNT" means $51,000,000.
"TAX" means any foreign, federal, state, or local income, capital
gains, sales and use, transfer, excise, franchise, stamp duty, real and personal
property, ad valorem, gross receipt, capital stock, production, business and
occupation, disability, employment, payroll, severance or withholding tax or any
other tax or charge of any kind whatsoever, whether computed on a separate or
consolidated, unitary or combined basis or in any other manner, imposed by any
Governmental Entity, and any interest, penalties and additions to tax (civil or
criminal) related thereto or to the nonpayment thereof.
"TAX CONTEST" has the meaning set forth in Section 5.3(e).
"TAX RETURN" means a report, return or other information filed or
required to be filed with a Governmental Entity with respect to Taxes,
including, where permitted or required, combined or consolidated returns for any
group of entities that includes the Company or any Subsidiary.
"THIRD PARTY ACCOUNTANT" has the meaning set forth in Section
5.3(j)(1).
"THIRD PARTY INTELLECTUAL PROPERTY" means any and all Intellectual
Property owned by any Person, other than Seller, Affiliates of Seller or the
Company, without regard as to whether Seller has any rights therein or the right
to assign such rights to the Company.
"TRADEMARKS" means trademarks, trade names, 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.
"TRANSFERRED EMPLOYEES" has the meaning set forth in Section
6.1(a)(3).
"TRANSFERRED PARTICIPANT" has the meaning set forth in Section
6.2(a)(1).
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"TRANSITION SERVICES AGREEMENT" means the Transition Services
Agreement to be dated as of the Closing Date, substantially in the form of
Exhibit D attached hereto.
"VIT SERVICES AGREEMENTS" has the meaning set forth in Section 7.2(j).
"VERIZON" means Verizon Communications Inc., a Delaware corporation.
"VERIZON CORPORATE POLICIES" has the meaning set forth in Section 3.7.
"VERIZON WIRELESS" means Cellco Partnership d/b/a Verizon Wireless, a
Delaware partnership, and its successors and assigns.
"WIRELESS GUARANTY" means the Guaranty of Wireless Revenue to be dated
as of the Closing Date, substantially in the form of Exhibit E attached hereto.
1.2 THE MERGER.
Upon the terms and subject to the conditions set forth in this
Agreement and the Delaware General Corporation Law (the "DGCL"), Merger Sub
shall be merged with and into the Company at the Effective Time. Following the
Merger, the separate corporate existence of Merger Sub shall cease, and the
Company shall continue as the surviving corporation (the "SURVIVING
CORPORATION") and succeed to and assume all the rights and obligations of Merger
Sub in accordance with the DGCL.
1.3 THE CLOSING.
(a) Unless this Agreement shall have been terminated and the
transactions herein have been abandoned pursuant to Article VIII of this
Agreement, the Merger shall take place at a closing (the "CLOSING") to be held
at the offices of O'Melveny & Xxxxx LLP, 000 Xxxx 00xx Xxxxxx, 00xx Xxxxx, Xxx
Xxxx, XX 00000 or at such other location as may be agreed upon by Buyer and
Seller.
(b) The Closing shall take place on the business day following the
satisfaction or waiver of the conditions contained in Article VII of this
Agreement (other than conditions that, by their nature, are to be satisfied on
the Closing Date), or on such later date as may be agreed upon by Buyer and
Seller (the date on which the Closing occurs is herein referred to as the
"CLOSING DATE").
1.4 THE EFFECTIVE TIME.
At the Closing but not prior to Seller's receipt of the Closing Date
Dividend, the parties hereto shall cause the Merger to be consummated by filing
a Certificate of Merger with the Secretary of State of the State of Delaware
with respect to the Merger, in such form as required by, and executed in
accordance with, the relevant provisions of the DGCL (the time of such filing
being the "EFFECTIVE TIME").
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1.5 EFFECTS OF THE MERGER.
At the Effective Time, the effect of the Merger shall be as provided
in the applicable provisions of the DGCL. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time all the property, rights,
privileges, powers and franchises of the Company and Merger Sub shall continue
with, or vest in, as the case may be, the Company as the Surviving Corporation,
and all debts, liabilities and duties of the Company and Merger Sub shall
continue to be, or become, as the case may be, the debts, liabilities and duties
of the Company as the Surviving Corporation. As of the Effective Time, the
Surviving Corporation shall be a direct, wholly owned Subsidiary of Buyer.
1.6 CERTIFICATE OF INCORPORATION; BY-LAWS; DIRECTORS AND OFFICERS OF
THE SURVIVING CORPORATION.
Unless otherwise agreed by Seller and Buyer before the Effective Time,
at the Effective Time:
(a) The Certificate of Incorporation and By-Laws of Merger Sub as in
effect immediately prior to the Effective Time shall become the Certificate of
Incorporation and By-Laws of the Surviving Corporation from and after the
Effective Time, and thereafter may be amended as provided therein and as
permitted by law.
(b) The directors of Merger Sub immediately prior to the Effective
Time and the officers of the Company immediately prior to the Effective Time
shall become the directors and officers of the Surviving Corporation,
respectively, until the earlier of their resignation or removal or until their
respective successors are duly elected and qualified, as the case may be;
PROVIDED that notwithstanding the foregoing, the chief executive officer of
Merger Sub immediately prior to the Effective Time shall become the chief
executive officer of the Surviving Corporation, until the earlier of his
resignation or removal or until his successor is duly elected and qualified, as
the case may be.
1.7 EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT
CORPORATIONS.
(a) CONVERSION OF THE CAPITAL STOCK OF MERGER SUB. At the Effective
Time, by virtue of the Merger and without any action on the part of Seller or
the holder of any shares of capital stock of Merger Sub, each share of common
stock, no par value, of Merger Sub issued and outstanding immediately prior to
the Effective Time shall be converted into and become one fully paid and
non-assessable share of common stock, no par value, of the Surviving
Corporation.
(b) CONVERSION OF THE STOCK. At the Effective Time, by virtue of the
Merger and without any action on the part of Seller or the holder of any shares
of capital stock of Merger Sub, all of the Stock shall be converted into and
become the right to receive the Merger Consideration in accordance with Section
1.9. At the Effective Time, all of the Stock shall be canceled and retired
automatically and shall cease to exist and be outstanding. Seller shall cease to
have any rights with respect thereto, except the right to receive the Merger
Consideration in accordance with Section 1.9.
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1.8 FURTHER ASSURANCES.
If, at any time after the Effective Time, the Surviving Corporation
shall consider or be advised that any deeds, bills of sale, assignments,
assurances or any other actions or things are necessary or desirable to vest,
perfect or confirm of record or otherwise in the Surviving Corporation its
right, title or interest in, to or under any of the rights, properties or assets
of either of Merger Sub or the Company acquired or to be acquired by the
Surviving Corporation as a result of, or in connection with, the Merger or
otherwise to carry out this Agreement, the officers of the Surviving Corporation
shall be authorized to execute and deliver, in the name and on behalf of each of
Merger Sub and the Company or otherwise, all such deeds, bills of sale,
assignments and assurances and to take and do, in such names and on such
behalves or otherwise, all such other actions and things as may be necessary or
desirable to vest, perfect or confirm any and all right, title and interest in,
to and under such rights, properties or assets in the Surviving Corporation or
otherwise to carry out the purposes of this Agreement.
1.9 CLOSING DATE DIVIDEND; MERGER CONSIDERATION AND ADJUSTMENT.
(a) CLOSING DATE DIVIDEND. On the Closing Date, the Company shall
pay a cash dividend (the "CLOSING DATE DIVIDEND") to Seller in an aggregate
amount equal to the amount of all cash and cash equivalents, if any, of the
Company on hand as of the close of business on the business day immediately
preceding the Closing Date (including cash received by the Company in respect of
the notes receivable from Seller and its Affiliates which shall have been repaid
by Seller and its Affiliates to the Company pursuant to Section 4.6 hereof). The
Closing Date Dividend shall be paid on the Closing Date immediately prior to the
Effective Time by wire transfer of immediately available funds in U.S. Dollars
to an account designated by Seller.
(b) MERGER CONSIDERATION. The consideration to be delivered to
Seller in exchange for all of the Stock pursuant to Section 1.7(b) shall consist
of cash in an amount equal to $770,000,000.00 (the "BASE AMOUNT"), subject to
adjustment pursuant to Section 1.9(e) (as adjusted, the "MERGER CONSIDERATION").
(c) PAYMENT AT CLOSING. At the Effective Time, Buyer shall cause the
Surviving Corporation to pay to Seller, and the Surviving Corporation (as
successor to the Company) shall pay to Seller, an amount equal to the Base
Amount plus (1) the amount by which the Estimated Net Working Capital Amount is
greater than the Target Net Working Capital Amount, if any, or minus (2) the
amount by which the Estimated Net Working Capital Amount is less than the Target
Net Working Capital Amount, if any. Such payment shall be made by wire transfer
of immediately available funds in U.S. Dollars to an account designated by
Seller to Buyer at least one business day prior to the Closing Date.
(d) CLOSING ESTIMATE. Not more than five, nor less than two,
business days prior to the Closing Date, Seller and Buyer shall, in good faith,
jointly determine an estimate of the amount of Closing Date Net Working Capital;
PROVIDED, however, that if Seller and Buyer cannot agree on an estimate of the
amount of Closing Date Net Working Capital, such estimate shall be deemed to be
equal to $51,000,000 (such estimated amount, as either jointly determined
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or the amount referred to above, as the case may be, the "ESTIMATED NET WORKING
CAPITAL AMOUNT").
(e) ADJUSTMENT AFTER CLOSING.
(1) Promptly following the Closing Date, but in no event later
than 90 days after the Closing Date, Seller shall prepare and submit to Buyer a
balance sheet of the Company as of the close of business on the day immediately
preceding the Closing Date (provided that such balance sheet shall be prepared
as if the Closing Date Dividend and the transactions contemplated by Section 4.6
had occurred on the day preceding the Closing Date) (the "CLOSING BALANCE
SHEET"), together with Seller's calculation of Closing Date Net Working Capital
(the "PROPOSED FINAL NET WORKING CAPITAL AMOUNT") (such calculation, together
with the Closing Balance Sheet being referred to herein as the "CLOSING DATE
STATEMENT"). Seller shall prepare the Closing Date Statement in accordance with
Agreement Accounting Principles. The Closing Date Statement will be accompanied
by a report of Ernst & Young LLP ("E&Y") based upon an audit of the Closing Date
Statement stating that such statement presents fairly, in all material respects,
the Closing Date Net Working Capital, in conformity with Agreement Accounting
Principles. All fees and expenses of E&Y in auditing the Closing Date Statement
shall be borne by Seller. Buyer shall cause the Surviving Corporation and its
respective employees and agents to assist Seller and E&Y in the preparation and
audit of the Closing Date Statement and shall provide Seller and E&Y access at
reasonable times and upon reasonable notice to the personnel, properties, books
and records of the Surviving Corporation for such purpose.
(2) If Buyer disputes the correctness of the Proposed Final Net
Working Capital Amount and the aggregate amount of all of Buyer's proposed
adjustments to the Proposed Final Net Working Capital Amount would exceed
$50,000, Buyer shall notify Seller in writing and in reasonable detail of the
reasons for Buyer's objections on or before the 120th day after Buyer's receipt
of the Closing Date Statement. Buyer agrees that it shall not propose
adjustments to or dispute portions of the Closing Date Statement prepared by
Seller if such adjustments or disputes involve changes in or question the
accounting principles, methodology or practices of the Company that are in
conformity with Agreement Accounting Principles in determining the carrying
value of the Current Assets and Current Liabilities. Any proposed adjustments by
Buyer shall be accompanied by a statement of an independent public accounting
firm that is nationally recognized in the United States, stating that such
adjustments are required for the Closing Date Statement to comply with Agreement
Accounting Principles. To the extent Buyer does not object to a matter in the
Closing Date Statement in writing and with reasonable specificity in accordance
with and within the time period contemplated by this Section 1.9(e)(2), Buyer
shall be deemed to have accepted Seller's calculation and presentation in
respect of the matter, and the matter shall not be disputed.
(3) Seller and Buyer shall endeavor in good faith to resolve any
disputed matters within 20 days after Seller's receipt of Buyer's notice of
objections. If Seller and Buyer are unable to resolve the disputed matters,
Seller and Buyer shall, not later than 10 days after the expiration of such 20
day period, select a nationally known independent accounting firm (which firm
shall not be E&Y or the then regular auditors of the Surviving Corporation (if
different from E&Y) or Buyer) (the "ARBITER") to resolve the matters in dispute
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(in a manner consistent with Section 1.9(e) and with any matters not in
dispute). The determination of the Arbiter in respect of the correctness of each
matter remaining in dispute shall be conclusive and binding on Seller and Buyer.
The determination of the Arbiter shall be based solely on presentations by
Seller and Buyer and shall not be by independent review. The fees, costs and
expenses of the Arbiter (x) shall be borne by Buyer in the proportion that the
aggregate dollar amount of such items submitted to the Arbiter that are
unsuccessfully disputed by Buyer (as finally determined by the Arbiter) bears to
the aggregate dollar amount of such items so submitted and (y) shall be borne by
the Seller in the proportion that the aggregate dollar amount of such items so
submitted that are successfully disputed by Buyer (as finally determined by the
Arbiter) bears to the aggregate dollar amount of such items so submitted. The
amount of Closing Date Net Working Capital, as finally determined pursuant to
this Section 1.9(e) (whether by failure of Buyer to deliver notice of objection,
by agreement of Seller and Buyer or by determination of the Arbiter), is
referred to herein as the "FINAL NET WORKING CAPITAL AMOUNT."
(4) If the Final Net Working Capital Amount is greater than the
Estimated Net Working Capital Amount, Buyer shall cause the Surviving
Corporation to pay to Seller, and the Surviving Corporation (as successor to the
Company) shall pay to Seller, the amount of such difference, with simple
interest thereon, based on the number of calendar days from the Closing Date to
the date of payment at a floating rate per 360-day period equal to the Prime
Rate. If the Final Net Working Capital Amount is less than the Estimated Net
Working Capital Amount, Seller shall pay to the Surviving Corporation the amount
of such difference, with simple interest thereon based on the number of calendar
days from the Closing Date to the date of payment at a floating rate per 360-day
period equal to the Prime Rate. Such payment shall be made not later than five
business days after the determination of the Final Net Working Capital Amount by
wire transfer of immediately available funds in U.S. Dollars to a bank account
designated in writing by the party entitled to receive the payment.
(5) To the extent not available from the Surviving Corporation,
Seller shall make available to Buyer and, upon request, to the Arbiter, the
books, records, documents and, after Buyer's receipt of the Closing Date
Statement, the work papers and back-up materials, in each case underlying the
preparation of the Closing Date Statement. Buyer shall make available to Seller
and, upon request, to the Arbiter, the books, records, documents and work papers
created or prepared by or for Buyer in connection with the review of the Closing
Date Statement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Except as otherwise indicated in the Seller Disclosure Schedule,
Seller represents and warrants, as of the date hereof and as of the Closing
Date, as follows:
2.1 ORGANIZATION AND RELATED MATTERS.
Each of Seller and the Company is a corporation duly organized,
validly existing and in good standing under the respective laws of the
jurisdiction of their incorporation or organization. Seller has all necessary
corporate power and authority to execute, deliver and
15
perform this Agreement and the Related Agreements to which it is or will be a
party. There are no Subsidiaries of the Company. The Company has no direct or
indirect equity participation in any corporation, partnership, trust or other
business association. The Company has all necessary corporate power and
authority to own, lease or operate its properties and assets and to carry on its
businesses as now conducted. The Company is duly qualified or licensed to do
business as a foreign corporation in good standing in all jurisdictions in which
the character or the location of its owned or leased assets or the nature of the
business it conducts requires licensing or qualification, except where the
failure to be so qualified or licensed is not a Material Adverse Circumstance.
All resolutions adopted by the Company's board of directors during the five
years preceding the date hereof have been included in the Company's minute
books, copies of which have been furnished to Buyer. True, correct and complete
copies of the certificate of incorporation and bylaws of the Company, as in
effect on the date hereof, have been furnished to Buyer. The Company is not a
registered or reporting company under the Exchange Act.
2.2 STOCK.
Seller owns, beneficially and of record, all of the Stock. Other than
the Stock, there are no outstanding Equity Securities of the Company. The Stock
is owned free and clear of any Encumbrance. The authorized capital stock of the
Company and number of shares of Stock outstanding are set forth in Section 2.1
of the Seller Disclosure Schedule. There are no outstanding Contracts or other
rights to subscribe for or purchase, or Contracts or other obligations to issue
or grant any rights to acquire, any Equity Securities of the Company. There are
no outstanding Contracts of Seller or the Company to repurchase, redeem or
otherwise acquire any Equity Securities of the Company. The Stock is duly
authorized, validly issued and outstanding and is fully paid and nonassessable.
There are no preemptive rights in respect of the Stock.
2.3 FINANCIAL STATEMENTS; CHANGES; CONTINGENCIES.
(a) FINANCIAL STATEMENTS. Section 2.3(a) of the Seller Disclosure
Schedule sets forth audited consolidated balance sheets for the Company as at
December 31, 1999 and as at December 31, 2000, and audited consolidated
statements of income for the 12 months ended December 31, 1998, December 31,
1999 and December 31, 2000 and an unaudited balance sheet for the Company as at
September 30, 2001 and unaudited statements of income for the nine months ended
September 30, 2001 (the foregoing, collectively, and together with the notes
thereto, the "FINANCIAL STATEMENTS"). Such Financial Statements have been
prepared from the books and records of the Company (and its Affiliates) in
accordance with GAAP (except, in the case of the September 30, 2001 Financial
Statements, subject to normal year-end adjustments and the absence of footnotes)
applied on a consistent basis throughout the periods involved and present
fairly, in all material respects, the financial position of the Company as of
the dates and for the periods indicated therein. Since September 30, 2001 the
Company has not (i) changed any method of accounting or its accounting policies,
other than those changes required by GAAP, or (ii) revalued any of its material
assets.
(b) PRO FORMA BALANCE SHEET. Attached as Section 2.3(b) of the
Seller Disclosure Schedule is the pro forma balance sheet of the Company as of
September 30, 2001 adjusted to eliminate liabilities for those pensions and
vacation, bonus plan and retirement plan
16
benefits (including other pension and employee benefits, or OPEBs) accrued on
the September 30 Balance Sheet which will either be paid by Seller or its
Affiliates (other than the Company) on or prior to the Closing Date or be
retained or assumed by Seller or its Affiliates (other than the Company) on the
Closing Date.
(c) CERTAIN CHANGES. Since September 30, 2001 there has not been,
occurred or arisen any change in or event affecting the Company that constitutes
a Material Adverse Circumstance.
(d) NO OTHER LIABILITIES. As of the date hereof, the Company has no
liabilities (whether accrued, absolute, contingent, unliquidated, known or
unknown) except liabilities (1) that are reflected or disclosed in the September
30 Balance Sheet, (2) that are disclosed in this Agreement, any Related
Agreement, the Schedules thereto or Section 2.3(d) of the Seller Disclosure
Schedule, (3) that were incurred after September 30, 2001 in the ordinary course
of business or (4) that are for Taxes.
(e) NO INDEBTEDNESS. As of the date hereof, the Company has no
Indebtedness.
2.4 TAX RETURNS AND REPORTS.
(a) The Company has timely filed all material Tax Returns required
to be filed by it, either separately or as a member of an Affiliated Group, and
all such Tax Returns have been prepared in compliance with all applicable laws
and regulations and are true and accurate in all material respects, and has paid
all material Taxes due and payable (whether or not shown to be due on such Tax
Returns), except Taxes that are being disputed in good faith or, to the extent
accrued through the date hereof, are set forth in the Financial Statements.
(b) Section 2.4 of the Seller Disclosure Schedule lists all Income
Tax Returns prepared with respect to the Company for taxable periods ended on or
after December 31, 1998, indicates those separate state Income Tax Returns that
have been audited, and indicates such Income Tax Returns that currently are the
subject of audit. Seller has made available to Buyer correct and complete copies
of all of the federal Income Tax Returns with respect to the Company for taxable
periods ending on or after December 31, 1998 and has made available to Buyer
correct and complete copies of all the Company's separate state income tax
returns for taxable periods ending on or after December 31, 1999, and has made
available to Buyer correct and complete copies of all examination reports and
statements of deficiencies assessed against or agreed to by the Company for all
Taxes for taxable periods ending on or after December 31, 1998.
(c) Except as set forth on Section 2.4 of the Seller Disclosure
Schedule, (1) other than with respect to Taxes for which Seller is responsible
under Section 5.3(b)(1), no statute of limitations in respect of Income Taxes of
the Company nor any extension of time with respect to which Taxes may be
assessed or collected by an Taxing authority against the Company has been waived
or extended, (2) there is no Tax deficiency or proposed adjustment asserted
against the Company that has not been settled and (3) there is no material
action, suit,
17
Taxing authority proceeding or audit now in progress, pending or, to the
knowledge of Seller, threatened against or with respect to the Company.
(d) The Company is not a party to any Tax allocation or sharing
agreement that will be in effect following the Closing Date.
2.5 MATERIAL CONTRACTS.
Section 2.5 of the Seller Disclosure Schedule lists, as of the date
hereof, each Material Contract. For purposes hereof, "MATERIAL CONTRACT" means
each Contract to which the Company is a party or to which the Company or any of
its properties is subject or by which any thereof is bound that (a) is for the
purchase of materials, supplies, goods, services, equipment or other assets that
(x)(1) has a remaining term, as of the date of this Agreement, of over one year
in length of obligation on the part of the Company or which is not terminable by
the Company within one year without penalty, and (2) provides for a payment by
the Company in any year of $1,000,000 or more, or (y) provides for aggregate
payments by the Company of $2,500,000 or more; (b) is a sales, distribution,
services or other similar agreement (or group of related agreements) providing
for the sale by the Company to a Person and its Affiliates of materials,
supplies, goods, services, equipment or other assets that resulted in payments
to the Company of $1,000,000 or more in the aggregate for the year ended
September 30, 2001; (c) is a lease that (x) has a remaining term, as of the date
of this Agreement, of over one year in length of obligation on the part of the
Company or which is not terminable by the Company within one year without
penalty, and (y) provides for annual rentals of $1,000,000 or more; (d) limits
or restricts the ability of the Company to compete or otherwise to conduct its
Business in any material manner or place; (e) is a Contract relating to
indebtedness for borrowed money or the deferred purchase price of property
(whether incurred, assumed, guaranteed or secured by any asset), except
Contracts relating to indebtedness incurred in the ordinary course of business
in an amount not exceeding $1,000,000; (f) provides for a guaranty for borrowed
money by the Company or in respect of any Person other than the Company; (g)
creates a partnership or joint venture; (h) is a material confidentiality or
nondisclosure agreement that (x) was entered into other than in the ordinary
course of business and (y) is not related to a proposed merger, consolidation or
other business combination involving the Company, a proposed sale of the Stock
or all or substantially all of the Company's assets or the evaluation of any
such merger, consolidation, business combination or sale; (i) is a Contract for
the acquisition of any material asset or business having a purchase price in
excess of $1,000,000; (j) is a material agreement of indemnification or similar
commitment with respect to the obligations or liabilities of any other Person in
an aggregate amount in excess of $1,000,000; or (k) is a currency exchange
agreement or other hedging arrangement. The listing in Section 2.5 of the Seller
Disclosure Schedule of Contracts not meeting any of the foregoing requirements
shall not constitute a representation that such Contract is a Material Contract.
True copies of the Material Contracts listed in Section 2.5 of the Seller
Disclosure Schedule, including all amendments and supplements, have been
furnished to Buyer. As of the date hereof, each Material Contract is valid and
in full force and effect according to its terms. The Company has performed its
obligations under each Material Contract in all material respects (to the extent
such obligations have accrued) and is not in material default or breach under
any Material Contract. Each Material Contract is enforceable in accordance with
its terms against the Company and, to the knowledge of Seller, the other parties
thereto, except as the enforcement thereof may be limited by applicable
bankruptcy, insolvency,
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reorganization or other similar laws affecting the enforcement of creditors'
rights generally or by general equitable principles (regardless of whether the
issue of enforceability is considered in a proceeding in equity or at law). To
the knowledge of Seller, no party to a Material Contract has notified the
Company of a material dispute with respect to the performance of such Material
Contract. Except as set forth in Section 2.5 of the Seller Disclosure Schedule,
the execution, delivery and performance of this Agreement and the Related
Agreements and the consummation of the transactions contemplated by this
Agreement will not (and will not give any person a right to) terminate or modify
any material rights of, or accelerate or augment any material obligation of, the
Company under any Material Contract to which the Company is a party.
2.6 REAL AND PERSONAL PROPERTY; TITLE TO PROPERTY; LEASES.
The Company has good and marketable title to, a valid leasehold
interest in or other valid right to use, free of Encumbrances, (i) all items of
real property used primarily in the Business since January 1, 2001 and necessary
to the conduct of the Business, including fees, leaseholds and all other
interests in such real property and (ii) such other tangible assets and
properties used primarily in the Business since January 1, 2001 and necessary to
the conduct of the Business, including all such tangible assets that it purports
to own or have the right to use as reflected in the September 30 Balance Sheet
or that were thereafter acquired, except, in any such case, for (a) matters
otherwise described in Section 2.6 of the Seller Disclosure Schedule (whether or
not such matters constitute Encumbrances) and (b) assets and properties not
material to the Business that were disposed of since September 30, 2001 in the
ordinary course of business. The tangible properties of the Company that are
material to the Business are in a good state of maintenance and repair (except
for ordinary wear and tear) and are adequate for such Business. The material
leasehold properties held by the Company as lessee are held under valid, binding
and enforceable leases, subject only to such exceptions as are not, individually
or in the aggregate, material to the Business.
2.7 INTELLECTUAL PROPERTY.
(a) Section 2.7 of the Seller Disclosure Schedule sets forth a
complete and correct list of all Business Statutory Intellectual Property,
Business Software and all Third Party Intellectual Property used in or required
for use in the Business (and indicates with respect to each whether the Company
owns or licenses such Intellectual Property and the details of any such license
(including licensor name and term)) and Licensed Third Party Intellectual
Property. Except as set forth in Section 2.7 of the Seller Disclosure Schedule:
(1) Business Statutory Intellectual Property, Business Non-Statutory
Intellectual Property, Business Software and Third Party Intellectual Property
identified in Section 2.7 of the Seller Disclosure Schedule constitute all of
the Intellectual Property that is used in or required to be used in the
Business; (2) the Company owns or has the right to use, as of the Closing, all
Third Party Intellectual Property identified in Section 2.7 of the Seller
Disclosure Schedule, all Business Software, all Business Statutory Intellectual
Property and all Business Non-Statutory Intellectual Property; and (3) the
Company's ownership and use rights in Business Statutory Intellectual Property,
Business Non-Statutory Intellectual Property, Business Software and Licensed
Third Party Intellectual Property shall survive Closing.
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(b) Except as set forth in Section 2.7 of the Seller Disclosure
Schedule: (1) none of the Business Statutory Intellectual Property, Business
Software or Business Non-Statutory Intellectual Property is subject to any
Encumbrance; (2) none of the Business Statutory Intellectual Property, Business
Software or Business Non-Statutory Intellectual Property is subject to any
exclusive license granted to any Person; (3) neither the Company, as of the date
hereof, nor the Business has infringed, misappropriated or otherwise conflicted
with, and neither the Company, as of the date hereof, nor the Business does
infringe, misappropriate or otherwise conflict with, any Intellectual Property
of any Person; (4) to the knowledge of Seller, no Person has infringed or
misappropriated, in any material way, any of the Business Statutory Intellectual
Property, Business Software or Business Non-Statutory Intellectual Property; (5)
the Company has, consistent with the customary practices used by Seller, taken
actions to maintain and protect the Intellectual Property owned by the Company;
and (6) neither the Business nor the business of the Company as it is
anticipated to be conducted pursuant to the Company's Long-Term Strategic
Analysis 2001 - 2005 violates in any material respect the terms of the Amended
and Restated Software and Related Technology and Services Agreement dated
January 1, 2001 with Telus Corporation.
2.8 AUTHORIZATION; NO CONFLICTS.
The execution, delivery and performance of this Agreement and the
Related Agreements by Seller, the Company and their respective Affiliates have
been duly and validly authorized by the Boards of Directors of Seller and the
Company and by all other necessary corporate action on the part of Seller, the
Company and Verizon. This Agreement and, when executed, the Related Agreements
to which Seller, the Company or their respective Affiliates are or will be a
party constitute, or will constitute, legally valid and binding obligations of
Seller, the Company, or their respective Affiliates, as applicable, enforceable
against Seller, the Company or their respective Affiliates, as applicable, in
accordance with their terms; PROVIDED that (i) such enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium and other similar
laws and equitable principles relating to or limiting creditors rights generally
and (ii) enforcement of the non-competition covenant contained in Section 5.6
may be limited by applicable Law with respect to its scope, term and territory.
None of (a) the execution, delivery and performance of this Agreement and the
Related Agreements to which the Company, Seller or Seller's Affiliates is or
will be a party by the Company, Seller or Seller's Affiliates, as applicable,
(b) the consummation of the transactions contemplated by this Agreement or the
Related Agreements or (c) the compliance by the Company, Seller or Seller's
Affiliates with any of the provisions hereof or thereof will (i) violate, or
constitute a breach or default (whether upon lapse of time or the occurrence of
any act or event or otherwise) under, the certificate of incorporation or
by-laws of any of such entities, (ii) violate, or constitute a breach or default
(whether upon lapse of time or the occurrence of any act or event or otherwise)
under, any Contract to which Seller or any of Seller's Affiliates (other than
the Company) is a party, (iii) result in the imposition of any Encumbrance
against any material assets or properties of the Company or (iv) violate any Law
in any material respect. Except for matters identified in Section 2.8 of the
Seller Disclosure Schedule, any filings or approvals required under the
Xxxx-Xxxxx-Xxxxxx Act and the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware, the execution, delivery and
performance of this Agreement and the Related Agreements by Seller, the Company
or their respective Affiliates will not require any Approvals to be obtained by
Seller or the Company except for any such Approvals the failure of which to
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receive would not in the aggregate (x) have a material adverse effect on the
ability of Seller to consummate the transactions contemplated by this Agreement
and the Related Agreements or (y) constitute a Material Adverse Circumstance.
2.9 LEGAL PROCEEDINGS.
As of the date hereof, there is no Order or Action pending or, to the
knowledge of Seller, threatened against or affecting the Company that
individually or when aggregated with one or more other Orders or Actions would
(i) reasonably be expected to have a material adverse effect on the ability of
Seller to consummate the transactions contemplated by this Agreement and the
Related Agreements or (ii) constitute a Material Adverse Circumstance. To the
knowledge of Seller, Section 2.9 of the Seller Disclosure Schedule lists each
Order and each Action that (i) involves a claim or potential claim of liability
in excess of $250,000 against or affecting the Company or any of its tangible
properties or assets or (ii) enjoins or seeks to enjoin any activity by the
Company if such injunction constitutes, or if entered would constitute, a
Material Adverse Circumstance.
2.10 LABOR MATTERS.
There is no organized labor strike, dispute, slowdown or stoppage, or
collective bargaining or unfair labor practice claim, pending or, to the
knowledge of Seller, threatened against or affecting the Company or the Business
that constitutes or would constitute a Material Adverse Circumstance. The
Company is not a party to a collective bargaining agreement.
2.11 INSURANCE.
The Company is, and at all times during the past five years has been,
insured by its Affiliates with reputable insurers (or self-insured) against all
risks normally insured against by companies in similar lines of business.
Section 2.11 of the Seller Disclosure Schedule identifies each of the material
categories of risks self-insured by the Company. All of the insurance policies
and bonds required to be maintained by the Company are in full force and effect,
and all premiums with respect thereto covering all periods up to and including
the Closing Date that are due and payable will have been paid. As of the date
hereof, neither Seller nor, to the knowledge of Seller, the Company has received
any notice of cancellation or termination with respect to any such policy,
except for policies that have been or will be replaced on substantially similar
terms.
2.12 PERMITS.
The Company holds all material Permits that are required by any
Governmental Entity to permit the Company to conduct the Business and the
business of the Company as it is conducted on the Closing Date, and all such
material Permits are valid and in full force and effect, subject to the filings
and approvals contemplated by Section 4.5. To the knowledge of Seller, no
suspension, cancellation or termination of any of such material Permits is
threatened or imminent. The Company is in compliance in all material respects
with the terms and conditions of such material Permits.
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2.13 COMPLIANCE WITH LAW.
Since January 1, 1997, the Company has complied in all material
respects with all Laws, to the extent applicable to the conduct of the Business.
2.14 ENVIRONMENTAL COMPLIANCE.
The Company (i) has obtained all material, environmental, health and
safety permits, authorizations and other Licenses required under all
Environmental Laws to carry on its business as conducted on the date hereof;
(ii) is in compliance in all material respects with the terms and conditions of
all such permits, authorizations and other Licenses; and (iii) is in compliance
in all material respects with all applicable Environmental Laws. The Company has
not treated, stored, disposed of or released any Regulated Substance in
violation of any Environmental Law. The Company has not owned or operated any
property or facility in violation of any Environmental Law. To the knowledge of
Seller, there are no conditions that have or would give rise to any current
material liability under any Environmental Law with respect to the Company.
Neither Seller nor the Company has received any notice of or other information
relating to any such liability. Seller has provided to Buyer all environmental
documents, including correspondence with Governmental Entities and environmental
assessment reports and audits, concerning the Company or its facilities that are
in the Company's possession, custody or control.
2.15 EMPLOYEE BENEFITS.
(a) Section 2.15(a) of the Seller Disclosure Schedule lists (and
identifies the sponsor of) each "employee pension benefit plan," as that term is
defined in Section 3(2) of ERISA, each "employee welfare benefit plan," as that
term is defined in Section 3(1) of ERISA (such plans being hereinafter referred
to collectively as the "ERISA PLANS"), each other retirement, pension,
profit-sharing, money purchase, deferred compensation, incentive compensation,
bonus, stock option, stock purchase, severance pay, unemployment benefit,
vacation pay, health, life or other insurance, fringe benefit, or other employee
benefit plan, program, agreement, or arrangement maintained or contributed to by
the Company or its Affiliates in respect of or for the benefit of any employee
of the Company or any employee of Seller or its Affiliates who provides
substantially all of his or her services to or for the Business (an "EMPLOYEE")
or former Employee (collectively, together with the ERISA Plans, referred to
hereinafter as the "BENEFIT PLANS"). Section 2.15(a) of the Seller Disclosure
Schedule also lists any such plan, program, agreement, or arrangement maintained
or contributed to solely in respect of or for the benefit of Employees or former
Employees employed or formerly employed by the Company outside of the United
States, as of the date hereof (collectively, together with the ERISA Plans,
referred to hereinafter as the "FOREIGN PLANS").
(b) Except as set forth in Section 2.15(b) of the Seller Disclosure
Schedule, with respect to the ERISA Plans:
(1) neither the Company nor any of its Affiliates, any of the
ERISA Plans, any trust created thereunder, or any trustee or administrator
thereof, has engaged in any transaction as a result of which the Company could
be subject to any liability pursuant to Section
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409 of ERISA or to either a civil penalty assessed pursuant to Section 502(i) of
ERISA or a tax imposed pursuant to Section 4975 of the Code; and
(2) since the effective date of ERISA, no liability under Title
IV of ERISA has been incurred by the Company (other than liability for premiums
due to the PBGC) unless such liability has been, or prior to the Closing Date
will be, satisfied in full.
(c) Except as set forth in Section 2.15(c) of the Seller Disclosure
Schedule, with respect to the ERISA Plans:
(1) each of the ERISA Plans that are intended to be "qualified"
within the meaning of Section 401(a) of the Code has been determined by the IRS
to be so qualified, nothing has occurred since the date of the most recent such
determination that would adversely affect the qualified status of any of such
ERISA Plans, and each such ERISA Plan has been or will be submitted to the IRS
within the applicable remedial amendment period (as determined under Code
Section 401(b)) for a determination that such ERISA Plan remains qualified under
the provisions of the "GUST" legislative requirements; and
(2) as of the date hereof, there are no pending claims by or on
behalf of any of the ERISA Plans, by any employee or beneficiary covered under
any such ERISA Plan against any such ERISA Plan, or otherwise involving any such
ERISA Plan (other than immaterial or routine claims for benefits and routine
expenses).
(d) Each of the Benefit Plans has been operated and administered in
all material respects in accordance with its provisions and with all applicable
laws (including, to the extent applicable, ERISA and the Code).
(e) Each Foreign Plan is in compliance in all material respects with
all applicable laws.
(f) Except for the Sales Incentive Compensation Plan(s), (1) none of
the Benefit Plans are sponsored by the Company, (2) all of the Benefit Plans are
sponsored by Seller or its Affiliates, and (3) except as provided in Article VI
or as disclosed on the Closing Balance Sheet, no benefit liabilities under any
Benefit Plan will be assumed by Buyer as a result of the consummation of the
transaction contemplated herein.
2.16 INTERCOMPANY OBLIGATIONS.
Other than as contemplated by Sections 1.9(a), 1.9(c), 1.9(e), Section
4.6, Article IX and the Related Agreements, the consummation of the transactions
contemplated by this Agreement will not (either alone, or upon the occurrence of
any act or event (other than an act taken by the Surviving Corporation after the
Effective Time), or with the lapse of time, or both) result in any payment
arising or becoming due from the Company or the Surviving Corporation to Seller
or any Affiliate of Seller.
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2.17 NO BROKERS OR FINDERS.
No agent, broker, finder, or investment or commercial banker, or other
Person or firm engaged by or acting on behalf of Seller or the Company or any of
their respective Affiliates in connection with the negotiation, execution or
performance of this Agreement or the transactions contemplated by this
Agreement, is or will be entitled to any broker's or finder's or similar fee or
other commission as a result of this Agreement or such transactions except for
Xxxxxxx Xxxxx Xxxxxx Inc., as to which Seller shall have full responsibility and
neither Buyer nor the Surviving Corporation shall have any liability.
2.18 OPERATION IN THE ORDINARY COURSE.
Except as set forth in Section 2.18 of the Seller Disclosure Schedule,
since September 30, 2001 the Company has operated its business in the ordinary
course and consistent with past practice.
2.19 AFFILIATE TRANSACTIONS.
(a) Except as disclosed in Sections 2.5, 2.7, 2.15 or 2.19 of the
Seller Disclosure Schedule, as of the date hereof:
(1) None of Seller, Verizon or any their respective Affiliates
(other than the Company) is a party to any Contract with the Company for the
sale or provision of materials, supplies, goods, services, equipment, facilities
or other assets to the Company that (x) provides for a payment by the Company in
any year of $250,000 or more or (y) provides for (or would reasonably be
expected to result in) aggregate payments by the Company during the term of such
agreement, without giving effect to any renewal or extension thereof, of
$500,000 or more;
(2) The Company is not a party to any Contract for the sale or
provision of materials, supplies, goods, services, equipment, facilities or
other assets to Seller, Verizon or any of their respective Affiliates (other
than the Company) that (x)(A) has a remaining term, as of the date of this
Agreement, of over one year in length of obligation on the part of the Company
or is not terminable by the Company within one year without penalty, and (B)
provides for (or would reasonably be expected to result in) a payment to the
Company in any year of $250,000 or more or (y) provides for (or would reasonably
be expected to result in) aggregate payments to the Company during the term of
such agreement, without giving effect to any renewal or extension thereof, of
$500,000 or more; and
(3) None of Seller, Verizon or any of their respective
Affiliates (other than the Company) is a party to any Contract that relates to
the provision to the Company of any interconnection or other material
telecommunications services (the foregoing Contracts referenced in clauses (1),
(2) and (3), the "AFFILIATE CONTRACTS").
(b) True copies of each Affiliate Contract to which the Company is a
party, including all amendments and supplements, have been furnished to Buyer.
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(c) Each Affiliate Contract is enforceable in accordance with its
terms against the Company and the other parties thereto, except as the
enforcement thereof may be limited by applicable bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement of creditors'
rights generally or by general equitable principles (regardless of whether the
issue of enforceability is considered in a proceeding in equity or at law).
2.20 BANK ACCOUNTS.
Section 2.20 of the Seller Disclosure Schedule contains a complete and
correct list of the names and locations of all banks in which the Company has
accounts or safe deposit boxes and the names of all Persons authorized to draw
thereon or to have access thereto.
2.21 SUPPLIERS AND CUSTOMERS.
Section 2.21 of the Seller Disclosure Schedule lists, by dollar volume
accrued or payable for the twelve months ended on September 30, 2001, the
Company's ten largest customers (aggregating such customer and its Affiliates)
other than customers that are Affiliates of Verizon (each, a "MATERIAL
CUSTOMER") and ten largest suppliers (each, a "MATERIAL SUPPLIER"). For each
Material Customer, Section 2.5 of the Seller Disclosure Schedule shows the
effective date and termination date of each Contract between the Company and
such Material Customer, and Section 2.21 of the Seller Disclosure Schedule shows
the aggregate amount of revenues accrued by the Company from such Material
Customer during the twelve months ended on September 30, 2001. To the knowledge
of Seller, as of the date hereof, the Company has not received any notice that
(i) any Material Customer has ceased or has materially reduced, or intends to
cease or materially reduce, its use of the Company's services or (ii) any
Material Supplier has ceased supplying or has materially reduced the supply of,
or intends to cease supplying or materially reduce the supply of, any products,
goods or services necessary to conduct the Business.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
AND MERGER SUB
Buyer and Merger Sub jointly and severally represent, warrant and
agree, as of the date hereof and as of the Closing Date, as follows:
3.1 ORGANIZATION AND RELATED MATTERS.
Each of Buyer and Merger Sub is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization. Buyer and Merger Sub have all necessary corporate
power and authority to carry on their respective businesses as now conducted.
Buyer and Merger Sub have the necessary corporate power and authority to
execute, deliver and perform this Agreement and the Related Agreements.
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3.2 AUTHORIZATION.
The execution, delivery and performance of this Agreement and the
Related Agreements by each of Buyer and Merger Sub have been duly and validly
authorized by its respective Board of Directors, by Buyer as the sole
stockholder of Merger Sub and by all other necessary corporate action on its
part. This Agreement and, when executed, the Related Agreements constitute
legally valid and binding obligations of Buyer and Merger Sub, enforceable
against Buyer and Merger Sub in accordance with their terms except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and other similar laws and equitable principles relating to or
limiting creditors' rights generally.
3.3 NO CONFLICTS.
The execution, delivery and performance of this Agreement and the
Related Agreements by Buyer and Merger Sub will not violate the provisions of,
or constitute a breach or default whether upon lapse of time or the occurrence
of any act or event or otherwise under, (a) the certificate of incorporation or
bylaws of Buyer or Merger Sub, (b) any Law to which Buyer or Merger Sub is
subject or (c) any Contract to which Buyer or Merger Sub is a party, provided
(as to clauses (b) and (c) respectively) that the appropriate regulatory
approvals are received as contemplated by Section 7.1. Except for any filings or
approvals required under the Xxxx-Xxxxx-Xxxxxx Act and the filing of the
Certificate of Merger with the Secretary of State of the State of Delaware, the
execution, delivery and performance of this Agreement and the Related Agreements
by Buyer and Merger Sub will not require any Approvals to be obtained except for
any such Approvals the failure of which to receive would not in the aggregate
have a material adverse effect on the ability of Buyer or Merger Sub to
consummate the transactions contemplated by this Agreement or the Related
Agreements.
3.4 NO BROKERS OR FINDERS.
No agent, broker, finder or investment or commercial banker, or other
Person or firms engaged by or acting on behalf of Buyer, Merger Sub or their
respective Affiliates in connection with the negotiation, execution or
performance of this Agreement or the transactions contemplated by this
Agreement, is or will be entitled to any broker's or finder's or similar fees or
other commissions as a result of this Agreement or such transactions, except for
Xxxxxx Brothers Inc., as to which neither Seller nor, prior to the Closing Date,
the Company shall have any liability.
3.5 LEGAL PROCEEDINGS.
There is no Order or Action pending or to the knowledge of Buyer,
threatened against or affecting Buyer or Merger Sub that individually or when
aggregated with one or more other Orders or Actions has or could reasonably be
expected to have a material adverse effect on Buyer's or Merger Sub's ability to
consummate the transactions contemplated by this Agreement and the Related
Agreements.
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3.6 FINANCING.
(a) Merger Sub has received, accepted and agreed to, and paid, to
the extent due, all applicable commitment fees for, (1) a valid and binding
commitment letter from certain lenders (the "DEBT FINANCING COMMITMENT LETTER"),
committing them to provide debt financing for the transactions contemplated by
this Agreement to Merger Sub in an aggregate amount of $545,000,000.00, subject
to the terms and conditions set forth therein (such debt financing, the "DEBT
FINANCING") and (2) a valid, binding and irrevocable commitment letter from
certain equity investors (the "EQUITY FINANCING COMMITMENT LETTER"), committing
them to provide equity financing to Merger Sub in the amount of $255,000,000.00,
subject to the terms and conditions set forth therein (such equity financing,
the "EQUITY FINANCING" and together with the Debt Financing, the "FINANCING"),
and, in the case of the Equity Financing Commitment Letter, naming Seller as a
third-party beneficiary thereof. True and complete copies of the Debt Financing
Commitment Letter and Equity Financing Commitment Letter are attached hereto as
Exhibit F and Exhibit G, respectively. Buyer has also delivered to Seller a true
and complete copy of each fee letter referred to in the Debt Financing
Commitment Letter; PROVIDED that the amount of fees payable by Buyer and Merger
Sub pursuant to such fee letters and certain other terms has been redacted
therefrom. The aggregate proceeds of the Financing, together with cash and cash
equivalents otherwise available to Merger Sub and the Surviving Corporation
after the Closing Date Dividend and the Closing, will be sufficient to (i) pay
the Merger Consideration, (ii) provide the Surviving Corporation with sufficient
working capital and (iii) pay all fees and expenses of Buyer and its Affiliates
(including, after the Closing Date, the Surviving Corporation) incurred in
connection with the transactions contemplated by this Agreement. As of the date
hereof, neither Buyer nor Merger Sub is aware of any fact or circumstance that
would indicate it will not be able to satisfy the conditions to funding set
forth in the Debt Financing Commitment Letter and the fee letters referred to
therein.
(b) Buyer, Merger Sub and their respective Affiliates have no
Indebtedness, and, except for this Agreement, the Related Agreements, and other
agreements entered into in connection with the Debt Financing, the Equity
Financing (including agreements related to equity investments in Buyer or its
Affiliates by certain co-investors and agreements related to the employment of
and equity investments by certain prospective members of the Company's
management) or the consummation of the transactions contemplated by this
Agreement, none of Buyer, Merger Sub and their respective Affiliates are a party
to any other Contracts.
3.7 INSURANCE MATTERS.
Buyer and Merger Sub acknowledge that the policies and insurance
coverage maintained on behalf of the entities comprising the Business are part
of the corporate insurance program maintained by Verizon (the "VERIZON CORPORATE
POLICIES"). Verizon Corporate Policies will not be available (except for matters
arising from activities on or prior to the Closing Date) or transferred to Buyer
or the Surviving Corporation after the Closing. It is understood that Verizon
shall be free at its discretion at any time to cancel prospectively or not renew
any of the Corporate Policies as to coverage relating to events subsequent to
the Closing Date or insured risks other than those associated with the Company
prior to the Closing Date.
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3.8 INVESTMENT REPRESENTATION.
Buyer acknowledges that the common stock of the Surviving Corporation
will not be registered under the Securities Act. Buyer is an "accredited
investor" as defined under the Securities Act and possesses such knowledge and
experience in financial and business matters that it is capable of evaluating
the merits and risks of its investments hereunder. Buyer is acquiring the common
stock of the Surviving Corporation for its own account, for investment purposes
only and not with a view to the distribution thereof (other than in compliance
with all applicable federal and state securities laws). Buyer agrees that the
common stock of the Surviving Corporation will not be sold, transferred, offered
for sale, pledged, hypothecated or otherwise disposed of without registration
under the Securities Act, except pursuant to a valid exemption from registration
under the Securities Act.
3.9 INVESTIGATION; NO OTHER REPRESENTATIONS OR WARRANTIES.
(a) Buyer and Merger Sub have conducted a thorough review and
analysis of the business, operations, assets, liabilities, results of
operations, financial condition, software, technology and prospects of the
Company and acknowledge that Buyer and Merger Sub have been provided access to
the personnel, properties, premises and records of the Company and relevant
personnel and records of the Seller for such purpose.
(b) Except for the representations and warranties expressly set
forth in this Agreement, Buyer and Merger Sub acknowledge that none of Seller,
any of its Affiliates or any other Person makes any other express or implied
representation or warranty with respect to the Stock, the Company, the Business
or otherwise or with respect to any other information provided to Buyer, Merger
Sub or their respective Affiliates, agents or representatives, whether on behalf
of Seller or such other Persons, including as to (a) the operation of the
Business by the Surviving Corporation after the Closing in any manner other than
as used and operated by the Company or (b) the probable success or profitability
of the ownership, use or operation of the Surviving Corporation or the Business
by Buyer after the Closing, including the profitability of the Material
Contracts, either individually or in the aggregate. FOR THE AVOIDANCE OF DOUBT,
BUYER AND MERGER SUB ACKNOWLEDGE THAT NONE OF SELLER, THE COMPANY, ANY OF THEIR
RESPECTIVE AFFILIATES OR ANY OTHER PERSON MAKES ANY EXPRESS OR IMPLIED
REPRESENTATION OR WARRANTY WITH RESPECT TO THE STOCK, THE COMPANY, THE BUSINESS
OR OTHERWISE WITH RESPECT TO MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR USE
OR PURPOSE. In the absence of fraud on the part of Seller and subject to the
initial sentence of this paragraph, neither Seller nor any other Person will
have or be subject to any liability or indemnification obligation to Buyer or
any other Person resulting from the distribution to Buyer, Merger Sub or
Buyer's, Merger Sub's or their respective Affiliates', agents', representatives'
or other Persons' use of, any information, including the Confidential
Information Memorandum dated June 2001 circulated by Xxxxxxx Xxxxx Barney Inc.
(the "INFORMATION MEMORANDUM"), related to the Business and any information,
document or material furnished or made available to Buyer or Merger Sub in
certain "data rooms," management presentations or in any other form in
anticipation of or in connection with the transactions contemplated by this
Agreement.
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3.10 NO KNOWLEDGE OF INDEBTEDNESS.
To the knowledge of Buyer and Merger Sub, the Company had no
Indebtedness as of September 30, 2001.
ARTICLE IV
COVENANTS WITH RESPECT TO THE PERIOD PRIOR TO CLOSING
4.1 ACCESS.
Subject to the non-disclosure agreement dated July 20, 2001, between
Buyer (or its Affiliate) and Seller (or its Affiliate) (the "CONFIDENTIALITY
AGREEMENT"), applicable Laws and doctrines of attorney-client privilege, prior
to the Closing Seller shall cause the Company to authorize and permit Buyer and
its representatives (which term shall be deemed to include its independent
accountants, counsel and financing sources and its financing sources' counsel,
provided that such Persons are obligated to protect the confidentiality of the
Company's information) to have reasonable access during normal business hours,
upon reasonable notice and in such manner as will not unreasonably interfere
with the conduct of the Company's business, to all of its properties, books,
records, operating instructions and procedures, separate Company Tax Returns,
Tax Returns for Other Taxes and all other information with respect to the
Business as Buyer may from time to time reasonably request (including work
papers and management letters of the Company's accountants generated in
connection with their preparation of the Company's Financial Statements), and to
make copies of such books, records and other documents and to discuss the
Company's business with such other Persons, including the Company's directors,
officers, employees, accountants and counsel, as Buyer considers necessary or
appropriate, in the exercise of its reasonable business judgment.
4.2 REPORTS.
Subject to the Confidentiality Agreement, prior to the Closing Seller
will furnish to Buyer within five (5) business days of its submission,
publication or completion (a) copies of all reports, renewals, filings,
certificates, statements and other documents filed with any Governmental Entity
relating to the Company (other than confidential portions relating to the sale
of the Stock and the transactions contemplated hereby and Tax Returns other than
separate Company Tax Returns and Tax Returns for Other Taxes) and (b) monthly
unaudited, condensed balance sheets and income statements for the Company. Each
of the financial statements delivered pursuant to clause (b) of this Section 4.2
shall be prepared on a basis consistent with the September 30, 2001 Financial
Statements delivered pursuant to Section 2.3.
4.3 CONDUCT OF BUSINESS.
Except as set forth in Section 4.3 of the Seller Disclosure Schedule,
from and after the date hereof until the Closing, Seller agrees with and for the
benefit of Buyer that the Company shall not, without the prior consent in
writing of Buyer, which may not be unreasonably withheld:
(a) conduct the Business in any manner except in the ordinary course
of business; or
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(b) (1) amend or terminate any Material Contract except in the
ordinary course of business, (2) enter into any Contract with Verizon or any of
its Affiliates (other than the Company) that, either individually or when
aggregated together with all other such Contracts, Seller would have been
required to disclose on Section 2.5 or 2.19 of the Seller Disclosure Schedule
had it been entered into prior to the date hereof except for the Related
Agreements and Contracts required to satisfy the conditions stated in Sections
7.2(i) and 7.2(j) or (3) enter into or renegotiate any Material Contract with
any Person other than Verizon and its Affiliates (other than the Company);
PROVIDED that, notwithstanding the foregoing clause (3), the Company shall be
permitted to enter into or renegotiate any Material Contract if, prior to the
execution thereof, Seller or the Company has used commercially reasonable
efforts to inform Buyer of the proposed material terms of such Material Contract
and provided Buyer with a reasonable opportunity to discuss the terms of such
Material Contract with Seller or the Company; or
(c) terminate or fail to use reasonable efforts to renew or preserve
any material Permits; or
(d) incur or agree to incur any obligation or liability (absolute or
contingent), excluding Indebtedness, that calls for payment by the Company of
more than $1,000,000 in any individual case or more than $2,500,000 in the
aggregate, except for (1) trade payables incurred in the ordinary course of
business, (2) obligations and liabilities that will be retained or assumed by
Seller and its Affiliates pursuant to Article VI and (3) obligations and
liabilities to Verizon and its Affiliates that either (x) are incurred in the
ordinary course of business or (y) will be terminated on or prior to the Closing
Date pursuant to Section 4.6; or
(e) make any loan, guaranty or other extension of credit, or enter
into any commitment to make any loan, guaranty or other extension of credit
(other than a plan loan under and in accordance with the terms of the Seller
Savings Plans), to or for the benefit of any director, officer, employee,
stockholder or any of their respective Affiliates, except for (1) loans,
guarantees, extensions of credit or commitments therefor made to officers or
employees for moving, relocation and travel expenses consistent with past
practice and (2) any note payable to Seller to be cancelled prior to the Closing
Date pursuant to Section 4.6; or
(f) except (1) as set forth in Section 4.3 of the Seller Disclosure
Schedule or (2) in the ordinary course of business (which shall be deemed to
include changes made in connection with new Verizon pension, savings, retiree
welfare and related benefits communicated to Employees prior to the Closing) or
(3) as required by Law or the terms of this Agreement or any Contract set forth
in Section 2.5 or 2.15 of the Seller Disclosure Schedule, (x) grant any general
or uniform increase in the rates of pay or benefits to officers, directors or
employees (or a class thereof), (y) grant any increase in salary or benefits of
any officer or director or pay any special bonus to any person or (z) enter into
any (i) employment agreement having a term in excess of six months (other than
agreements with employees relating primarily to confidentiality or the
assignment of rights to Intellectual Property to the Company) or requiring the
Company to make payments after the Closing Date in excess of $150,000 in the
aggregate, (ii) collective bargaining agreement or (iii) severance agreement; or
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(g) sell, transfer, mortgage, encumber or otherwise dispose of any
assets or any liabilities, except (1) for dispositions of property not greater
than $2,500,000 in the aggregate or (2) as contemplated by this Agreement or the
Related Agreements; or
(h) issue, sell, redeem or acquire for value, or agree to issue,
sell, redeem or acquire for value, any Equity Securities of the Company; or
(i) make, in any calendar month, capital expenditures in excess of
$1,000,000 individually or $2,000,000 in the aggregate; or
(j) make any investment, by purchase, contributions to capital,
property transfers or otherwise, in any other Person that is in excess of
$500,000 individually or $1,500,000 in the aggregate; or
(k) effect any recapitalization, reclassification, stock split or
like change in the capitalization of the Company, except as may result from the
consummation of the Merger; or
(l) amend the certificate of incorporation or by-laws of the
Company; or
(m) subject to any Encumbrance, any of the material properties or
assets of the Company; or
(n) incur or agree to incur any Indebtedness; or
(o) transfer any Business Statutory Intellectual Property or
Business Non-Statutory Intellectual Property to any Person other than the
Company or voluntarily abandon or permit to lapse, other than in the normal
course of prosecution, any registrations, applications for registration, patents
or patent applications included in the Business Statutory Intellectual Property;
or
(p) agree to take or make any commitment to take any actions
prohibited by this Section 4.3.
Notwithstanding the foregoing, this Section 4.3 shall not prohibit the
Company from repairing or replacing assets in the event of an emergency or
casualty loss where necessary to preserve the business of the Company and time
is of the essence.
4.4 CONTROL OF THE BUSINESS OF THE COMPANY.
Nothing contained in this Agreement shall give Buyer or Merger Sub,
directly or indirectly, the right to control or direct the Company's operations
prior to the Closing Date.
4.5 PERMITS, APPROVALS AND GOVERNMENT FILINGS.
Seller and Buyer shall cooperate and use commercially reasonable
efforts to obtain all (and will promptly prepare all registrations, filings and
applications, requests and notices preliminary to all) Approvals and Permits and
to make any filings that may be necessary to effect the Merger and the other
transactions contemplated by this Agreement, including any
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and all filings required under the Xxxx-Xxxxx-Xxxxxx Act. Seller and Buyer shall
furnish each other such necessary information and reasonable assistance as the
other may reasonably request in connection with its preparation of necessary
filings or submissions under the provisions of such laws. Seller and Buyer shall
supply to each other copies of all correspondence, filings or communications,
including file memoranda evidencing telephonic conferences, by such party or its
Affiliates with any Governmental Entity or members of its staff, with respect to
the transactions contemplated by this Agreement and any related or contemplated
transactions, except for documents filed pursuant to Item 4(c) of the Xxxx-Xxxxx
Xxxxxx Notification and Report Form or communications regarding the same or
documents or information submitted in response to any request for additional
information or documents pursuant to the Xxxx-Xxxxx-Xxxxxx Act which reveal
Seller's or Buyer's negotiating objectives or strategies or purchase price
expectations. Buyer shall pay all Xxxx-Xxxxx-Xxxxxx Act filing fees.
4.6 ELIMINATION OF INTERCOMPANY AND AFFILIATE LIABILITIES.
(a) Prior to the Closing Date, Seller shall purchase, cause to be
repaid or, with respect to guarantees, assume liability for any and all loans or
other extensions of credit made or guaranteed by the Company to or for the
benefit of any director, officer or employee of Verizon or Seller after the
Closing Date.
(b) As of the close of business on the business day immediately
prior to the Closing Date, the principal amount of any note receivable and all
other intercompany loans, together with any accrued interest, payable to the
Company by Seller or Verizon shall be paid.
(c) As of the close of business on the business day immediately
prior to the Closing Date, the principal amount of any note payable and all
other intercompany loans, together with any accrued interest, payable by the
Company to Seller or Verizon (or any of their respective Affiliates other than
the Company) shall be cancelled, and the Company shall assume liability for any
and all guarantees or other extensions of credit support made by Seller or
Verizon (or any of their respective Affiliates other than the Company) to or for
the benefit of the Company to the extent set forth in Section 4.6 of the Seller
Disclosure Schedule.
(d) The provisions of this Section 4.6 shall not apply to (i) any
intercompany trade accounts payable or receivable, including amounts payable by
or to Verizon Wireless or its Affiliates (or other Persons in which Verizon
beneficially owns capital stock) under Contracts for the provisions of clearing,
settlement and other services, (ii) any reimbursements due for corporate
services under the pro-rate agreement or arrangement with Verizon consistent
with past practice, or (iii) any other liability or obligation set forth in
Section 4.6 of the Seller Disclosure Schedule.
4.7 ACCURACY OF INFORMATION.
All documents required to be filed by any of the parties or any of
their respective Subsidiaries with any Governmental Entity in connection with
this Agreement or the transactions contemplated by this Agreement will comply in
all material respects with the provisions of applicable Law.
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4.8 BUYER'S FINANCING.
(a) Buyer will promptly notify Seller of any proposal by any of the
lenders named in the Debt Financing Commitment Letter to withdraw, terminate or
make a material change in the amount or terms of the Debt Financing Commitment
Letter. In addition, upon Seller's request, but no more frequently than once per
month, Buyer shall advise and update Seller, in a level of detail reasonably
satisfactory to Seller, with respect to the status, proposed closing date and
material terms of the proposed Debt Financing. Neither Buyer nor Merger Sub
shall consent to any amendment, modification or early termination of the Equity
Financing Commitment Letter or any termination of the Debt Financing Commitment
Letter.
(b) Buyer and Merger Sub shall, and shall cause their respective
Affiliates to, use all commercially reasonable efforts to (1) maintain the
effectiveness of the Debt Financing Commitment Letter, (2) cause to be made
available to Merger Sub the Debt Financing or other debt financing in an
aggregate principal amount equal to the principal amount of the Debt Financing
and on material economic terms no less favorable in the aggregate to Merger Sub
than the material economic terms reflected in the term sheets attached to the
Debt Financing Commitment Letter and (3) satisfy all funding conditions to the
Debt Financing or such other debt financing set forth in the definitive
documentation with respect to the Debt Financing or such other debt financing.
4.9 NON-SOLICITATION.
From the date hereof until the earlier of (x) the Effective Time or
(y) the termination of this Agreement, Seller will not, and will not permit the
Company to, directly or indirectly, including through Verizon or Xxxxxxx Xxxxx
Barney Inc., (i) enter into, either as the surviving, merged, acquiring or
acquired corporation, any transaction involving a merger, consolidation or
business combination involving the Company or a purchase or disposition of all
or substantially all of the Company's assets or capital stock other than the
transactions contemplated by this Agreement (an "ACQUISITION TRANSACTION") or
(ii) solicit submissions of proposals or offers, or initiate or participate in
discussions or negotiations, in respect of a proposed Acquisition Transaction
with any Person (other than Buyer and its Affiliates and Buyer's or Merger Sub's
proposed lenders).
4.10 SUPPLEMENTAL DISCLOSURE.
(a) Seller shall have the right from time to time prior to the
Closing to supplement Section 2.3(c) of the Seller Disclosure Schedule with
respect to any matter that arises after the date hereof and that would have been
required or permitted to be set forth or described in Section 2.3(c) of the
Seller Disclosure Schedule had such matter existed or been known as of the date
of this Agreement. Any such supplemental disclosure will be deemed to have cured
any breach of the representation and warranty made in Section 2.3(c) for all
purposes hereunder other than determining whether the condition set forth in
Section 7.2(a) has been satisfied. Notwithstanding anything to the contrary in
this Agreement or in the Seller Disclosure Schedule, supplements to Section
2.3(c) of the Seller Disclosure Schedule shall not update any other Section of
the Seller Disclosure Schedule.
33
(b) To the extent provided in Section 6.1(a), Seller shall have the
right from time to time prior to the Closing to amend or supplement Sections
6.1(a)(1) and 6.1(a)(2) of the Seller Disclosure Schedule.
4.11 BUSINESS SOFTWARE.
(a) Prior to the Closing Date, Seller shall use commercially
reasonable efforts to locate (including in response to specific requests by the
Company) and return to the Company all copies of Business Software in the
possession of Seller and all of its Affiliates (other than the Company) except
for Portions of Business Software.
(b) From and after the date hereof until the Closing, Seller agrees
with and for the benefit of Buyer that neither Seller nor the Company shall
disclose for any purpose or otherwise make available Business Software to
Verizon Wireless or its Controlled Affiliates.
ARTICLE V
ADDITIONAL CONTINUING COVENANTS
5.1 COOPERATION.
After the Closing Date, upon Seller's request (and at Seller's
expense) and without necessity of subpoena, the Surviving Corporation shall, and
Buyer shall cause the Surviving Corporation and any of its Subsidiaries and
their representatives and counsel to, cooperate fully with Seller and its
representatives and counsel for purposes of permitting Seller to address and
respond to any matters involving Seller that arise as a result of Seller's prior
ownership of the Company, whether or not related to this Agreement, including
claims made by or against Seller and involving any Governmental Entity or third
party. Such cooperation shall include (subject to customary obligations of
confidentiality) (i) reasonable access during normal business hours and upon
reasonable notice to, without limitation, the Surviving Corporation's and any of
its Subsidiaries' officers, directors, employees, auditors, counsel,
representatives, properties, books, records and operating instructions and
procedures and (ii) the right to make and retain copies of all pertinent
documents and records relating to any such matters. Buyer's obligations under
this Section 5.1 are in addition to Buyer's other obligations to cooperate with
Seller contained in this Agreement, including Buyer's obligations under Section
5.3(f).
5.2 POWERS OF ATTORNEY.
On and after the Closing Date, Seller and its Affiliates shall not,
without the prior consent of Buyer or the Surviving Corporation, exercise, or
permit any other Person to exercise, any power of attorney granted to Seller or
any of its Affiliates by the Company.
5.3 TAX MATTERS.
(a) TAX RETURNS.
(1) Seller shall properly prepare or cause to be properly
prepared and shall timely file or cause to be timely filed all Tax Returns for
the Company and its Subsidiaries for all periods ending on or prior to the
Closing Date; PROVIDED, however, (A) the requirement to
34
"properly prepare" Tax Returns set forth in the preceding clause of this
sentence shall not apply with respect to (i) Tax Returns with respect to federal
Income Taxes, and (ii) Tax Returns with respect to Income Taxes imposed by
jurisdictions that recognize an election under Section 338(h)(10) of the Code
(or any comparable provisions of state or local law), and (B) preparation of Tax
Returns other than those described in clauses (i) and (ii) above by Verizon
consistent with Verizon's or GTE's past practice shall be deemed to be "properly
prepared" for purposes of this section. At least 20 days prior to the due date
(including extensions thereof) for filing a Tax Return required to be filed as
described in the preceding sentence other than those described in clauses (i)
and (ii) above (and, in the case of an amended Tax Return, at least 20 days
prior to the date on which Verizon or Seller shall file such amended Tax
Return), if Verizon or Seller is taking a position inconsistent with any such
Tax Return for periods ending on or prior to the Closing Date which position
would materially and adversely affect the Tax Liability of the Company or Buyer
for any post-Closing period, Seller shall provide Buyer with a copy of such Tax
Return, and Buyer shall have the right to review and approve each such Tax
Return to the extent it relates to the Company, which approval shall not be
unreasonably withheld. Except as required by a change in applicable law, or as
required as a result of an election under Section 338(h)(10) of the Code, all
Tax Returns required to be filed as described in the first sentence of this
Section 5.3(a), other than those described in clauses (i) and (ii) above, shall
be prepared and filed by Verizon or Seller in a manner that is consistent with
prior practice with respect to those portions of such Tax Returns which relate
to the Company and its Subsidiaries, or if inconsistent and in a manner that
would materially and adversely affect the Tax Liability of the Company for any
post-Closing period, Buyer shall have the right to review and approve each such
Tax Return to the extent it relates to the Company, which approval shall not be
unreasonably withheld. Buyer shall prepare or cause to be prepared and file or
cause to be filed all Tax Returns for the Company and its Subsidiaries for all
periods ending after the Closing Date. In no event shall Buyer or the Company,
or any Affiliate of Buyer or the Company, file any Tax Return for the Company in
jurisdictions outside of the United States (i) for periods ending prior to the
Closing Date or (ii) for periods that begin prior to and end after the Closing
Date to the extent such Tax Return would affect the Tax liability or Tax
attributes of the Company for periods prior to the Closing Date. With respect to
any Tax Return for the Company in jurisdictions outside of the United States,
for periods following the Closing Date, other than those described in clause
(ii) of the preceding sentence, and, except with respect to jurisdictions in
which the Company has filed Tax Returns for periods prior to the Closing Date,
Buyer and the Company and the Affiliates of Buyer and the Company will only file
Tax Returns for the Company in jurisdictions outside of the United States to the
extent reasonably required by law in the good faith determination of the Buyer
after consultation with its tax counsel.
(2) Notwithstanding Section 5.3(a)(1) hereof, at Verizon's,
GTE's or Seller's option, if Verizon, GTE or Seller provides written notice to
Buyer at least 60 days prior to the due date of such Tax Return and at Seller's
expense, Buyer shall prepare or cause to be prepared and file or cause to be
filed any Tax Returns for Other Taxes of the Company and its Subsidiaries for
periods ending on or prior to the Closing Date which are required to be filed
after the Closing Date.
(3) With respect to (A) (i) Tax Returns required to be filed by
Buyer for the Company and its Subsidiaries pursuant to Section 5.3(a)(1) for
periods that begin prior to and end after the Closing Date for which Verizon,
GTE or Seller has liability for more than 50
35
percent of the Taxes due (including pursuant to its indemnity obligations
hereunder), and (ii) Tax Returns filed by Buyer pursuant to Section 5.3(a)(2),
such Tax Returns will be properly and timely filed and shall be prepared and
filed in a manner that is consistent with prior practice, and Buyer shall
furnish a completed copy of such Tax Returns to Seller for Seller's approval not
later than 20 days before the due date for filing such returns (including
extensions thereof), which approval shall not be unreasonably withheld; and (B)
Tax Returns required to be filed by Buyer for the Company and its Subsidiaries
other than those described in clause (A), such Tax Returns will be properly and
timely filed and shall be prepared and filed in a manner that is consistent with
prior practice, PROVIDED, however, that preparation of such Tax Returns by Buyer
consistent with Verizon's, GTE's or Seller's past practice shall be deemed to be
"properly prepared" for purposes of this clause (B), and if Buyer is taking a
position inconsistent with any such Tax Return which position would materially
and adversely affect the Tax liability of the Company or Seller for any
pre-Closing period, Buyer shall provide Seller with a copy of such Tax Return
not later than 20 days before the due date for filing such returns (including
extensions thereof) and Seller shall have the right to review and approve each
such Tax Return. Furthermore, with respect to Tax Returns filed by the Company
pursuant to Section 5.3(a)(1) or (2), Buyer shall not take (and shall cause the
Company and its Subsidiaries not to take) a position with respect to any item on
any such Tax Return relating to the determination of the taxable income or
taxable value of the Company or any of its Subsidiaries which is inconsistent
with the position taken with respect to such item on a prior Tax Return or, if
inconsistent, will obtain Seller's prior written consent to such inconsistent
position if such inconsistent position would materially and adversely affect the
Tax liability of Verizon, GTE or Seller (including pursuant to any indemnity
obligations hereunder) (collectively, the "CONSISTENCY REQUIREMENT"), except
that the Consistency Requirement shall not apply (i) to Tax Returns with respect
to federal Income Taxes, (ii) to Tax Returns with respect to Income Taxes
imposed by jurisdictions that recognize an election under Section 338(h)(10) of
the Code (or any comparable provisions of state or local law), (iii) if an
inconsistent position is required by law in Buyer's good faith determination
after consultation with its tax counsel, (iv) to the extent the position taken
with respect to such item on the prior Tax Return was in violation of applicable
law in Buyer's good faith determination after consultation with its tax counsel,
and (v) for any Tax Return required to be filed with respect to any taxable
period beginning after one full taxable year after the Closing Date.
(4) Subject to the Section 338(h)(10) Election, Buyer and Seller
agree to treat the Merger, for all Tax purposes, including for purposes of
reporting the transaction on any Tax Return, as the purchase and sale of stock
of the Company, and neither Buyer nor Seller will take any position for Tax
purposes inconsistent with such treatment.
(b) LIABILITY FOR TAXES.
(1) Seller shall be liable for and shall hold Buyer and the
Company harmless from any and all Taxes and Losses with respect to any liability
for or with respect to (i) any Taxes payable by or attributable to the Company
and its Subsidiaries or their assets and operations for periods (or portions
thereof) ending on or prior to the Closing Date (except for any liability
associated with transfer taxes for which Buyer is responsible under Section
5.3(g) hereof) except for the Balance Sheet Taxes (as defined in Section
5.3(b)(2)), treating for purposes of this Section 5.3 (in the case that the
Closing Date is not the end of the taxable year under applicable law) the
Closing Date as the end of a short taxable year, and determining the tax
36
liability for such year (x) in the case of Income Taxes, as an amount equal to
the amount of Income Taxes that would be payable if the period for which such
Income Tax is assessed ended as of the end of the Closing Date, and (y) in the
case of Taxes other than Taxes described in clause (x) hereof, as an amount
equal to the amount of such Taxes for the entire period multiplied by a
fraction, the numerator of which is the number of calendar days in the period
ending as of the end of the day immediately preceding the Closing Date and the
denominator of which is the number of calendar days in the entire period, (ii)
any Tax imposed on the Company pursuant to Treasury Regulation Section 1.1502-6
with respect to the taxable income of any Affiliated Group (or any corresponding
provision of state, local or foreign law), (iii) any tax caused by or resulting
from an election pursuant to Section 338(h)(10) of the Code or any corresponding
provision of state, local or foreign Law and (iv) any Tax allocation or Tax
sharing or similar agreement, as a transferee or successor, by contract or
otherwise. Notwithstanding any other provision of this Agreement, the
indemnification under this Section 5.3 shall not be subject to the
indemnification limitations set forth in Section 9.5. Buyer shall prepare, and
permit Seller to audit, such analyses as are reasonably requested by Seller to
support any claim for indemnification under this Section.
(2) Buyer and the Company shall be liable for, and shall hold
Verizon, GTE and Seller harmless from, (i) any and all Taxes that become due or
payable with respect to the Company or any of its Subsidiaries for any period
(or portion thereof) beginning after the Closing Date, (ii) any and all Taxes
(other than Income Taxes) that become due and payable with respect to the
Company or its Subsidiaries for periods (or portions thereof) ending on or prior
to the Closing Date to the extent reflected on the Closing Balance Sheet
("BALANCE SHEET TAXES"), and (iii) one half of all Taxes described in Section
5.3(g) hereof.
(3) Buyer shall not cause or permit the Company or any of its
Subsidiaries to take any action on the Closing Date for the remaining part of
the day after the time of the Closing outside the ordinary course of business of
the Company, other than transactions contemplated by this Agreement and the
agreements contemplated hereby (including the incurrence of additional
indebtedness) relating to the Company that could give rise to any Tax liability
to Verizon, GTE or Seller (including pursuant to any indemnity obligations
hereunder), and shall, and shall cause the Company to, indemnify and hold
Verizon, GTE and Seller harmless from any such Tax.
(c) REFUNDS. Except with respect to any refund arising from the
carryback of any post-Closing Tax loss, deduction or credit of the Company, any
refunds or credits of Taxes with respect to the Company or any of its
Subsidiaries for any period (or portion thereof) ending on or before the Closing
Date (other than Balance Sheet Taxes, which shall be for Buyer's account) shall
be for the account of Seller ("PRE-CLOSING TAX REFUNDS"). Buyer shall (1) if
Seller so requests in writing and at Seller's expense, cause the relevant entity
(Buyer, Company, Subsidiary or any successor) to file for and obtain any
Pre-Closing Tax Refunds, including through the prosecution of any administrative
or judicial proceeding which Seller, in its sole and absolute discretion,
chooses to direct such entity to pursue, and (2) permit Seller to control (at
Seller's expense) the prosecution of any claim for Pre-Closing Tax Refunds, and
when deemed appropriate by Seller, shall cause the relevant entity to authorize
by appropriate power of attorney such person as Seller shall designate to
represent such entity with respect to such refund claimed; PROVIDED that, if
filing for and obtaining such Pre-Closing Tax Refund would materially
37
and adversely affect the Tax liability or Tax attributes of the Company or any
Subsidiary for any Tax period (or portion thereof) ending after the Closing Date
("ADVERSE TAX CONSEQUENCES"), Buyer shall have no obligation, and Seller shall
have no right to cause or request Buyer to file for and obtain any Pre-Closing
Tax Refund, unless Seller agrees in writing reasonably acceptable to Buyer to
reimburse and indemnify Buyer against any such Adverse Tax Consequences;
PROVIDED, however, that Seller shall have no obligation to provide such written
agreement or to reimburse and indemnify Buyer against any such Adverse Tax
Consequences unless Buyer, at Seller's request, provides Seller with a written
description of the nature of and good faith estimate of the amount of such
Adverse Tax Consequences based on information reasonably available to the Buyer
at the time of such request; AND FURTHER PROVIDED that, with respect to the
description of claims for the specifically identified Pre-Closing Tax Refunds
set forth in Section 5.3 of the Seller Disclosure Schedule, Buyer has agreed
that there are no Adverse Tax Consequences, other than liability for any Taxes,
interest or other reasonable expenses that may be incurred with respect to
obtaining or receiving such refund. Buyer shall forward to Seller any such
refund, less, in each case, any Taxes, interest or other reasonable expenses of
Buyer with respect to obtaining or receiving such refund, promptly after the
refund is received or any such credit at the time such credit results in an
actual reduction of Taxes otherwise payable by Buyer or the Company. If Buyer,
the Company or any of its Subsidiaries becomes aware of a reasonable basis for
claiming a Pre-Closing Tax Refund to which Seller is entitled hereunder, Buyer
shall notify Seller of any such Pre-Closing Tax Refund (it being understood that
Buyer, the Company and its Subsidiaries shall not have any duty to investigate
the existence of any such potential Pre-Closing Tax Refund). Buyer shall be
entitled to any refund or credit of Taxes arising from the carryback of any
post-Closing Tax losses, deductions, or credit of the Company (a "CARRYBACK"),
and Seller and its Affiliates shall promptly forward such refund to Buyer after
the refund is received or any such credit at the time such credit results in an
actual reduction of Taxes otherwise payable by Seller or its Affiliates, less,
in each case, any Taxes, interest or other reasonable expenses of Seller with
respect to obtaining or receiving such refund; PROVIDED, however, that if,
notwithstanding the provisions of Section 5.3(i) hereof, Seller consents to the
filing of an amended Tax Return for the purpose of permitting Buyer to obtain a
refund from a Carryback, then Buyer shall agree in writing to indemnify Seller
against any material and adverse effect of the filing for and obtaining such
Carryback on the Tax liability or Tax attributes of Seller. Notwithstanding the
foregoing, the control of the prosecution of a claim for refund or credit for
Taxes paid pursuant to a deficiency assessed subsequent to the Closing Date as
the result of an audit shall be governed by the provisions of Section 5.3(e).
(d) ADJUSTMENTS DUE TO AUDIT, ETC. If an audit adjustment, amended
return or amended assessment ("ADJUSTMENT") after the Closing Date shall both
increase a Tax liability which is allocated to Verizon, GTE or Seller under
Section 5.3(b) (or reduce losses or credits otherwise available to Verizon, GTE
or Seller) and decrease a Tax liability of (or increase losses or credits
otherwise available to) Buyer or the Company or any of its Subsidiaries for a
period ending after the Closing Date, then Buyer shall pay to Seller an amount
equal to the Net Tax Benefit actually realized by the Buyer (or the Company)
less the Net Tax Detriment suffered by the Buyer (or the Company), calculated in
a manner consistent with the principles set forth in Section 9.9 hereof.
Similarly, if an Adjustment shall both decrease a Tax liability which is
allocated to Verizon, GTE or Seller under Section 5.3(b) (or increase losses or
credits of Verizon, GTE or Seller) for a period ending on or before the Closing
Date and increase the Tax liability of Buyer, the Company or any of its
Subsidiaries (or reduce losses or credits otherwise
38
available to any such corporation after taking into account this Agreement) for
a period ending after the Closing Date, then Seller shall pay to Buyer an amount
equal to the Net Tax Benefit actually realized by Seller less the Net Tax
Detriment suffered by Seller, calculated in a manner consistent with the
principles set forth in Section 9.9 hereof. This subsection (d) shall be
effective with respect to increases and decreases in Tax liability as long as
permitted under applicable law. Buyer and Seller agree to use commercially
reasonable efforts to obtain the Net Tax Benefit that would result in a payment
to the other under this Section 5.3(d).
(e) CONTESTS. If an audit is commenced or any other claim is made by
any Tax authority with respect to a Tax liability of the Company or any of its
Subsidiaries for which Verizon, GTE or Seller could be liable under Section
5.3(b) (a "TAX CONTEST"), Buyer shall promptly notify Seller of such Tax Contest
(unless Verizon, GTE or Seller previously was notified in writing directly by
the relevant Tax authority). If Seller so requests in writing and at Seller's
expense, Buyer (1) shall cause the relevant entity (Buyer, the Company, any
Subsidiary or any successor) to contest such Tax Contest on audit or by
appropriate claim for refund or credit of Taxes or in a related administrative
or judicial proceeding which Seller in its sole and absolute discretion chooses
to direct such entity to pursue, and (2) shall permit Seller, at its expense, to
control the prosecution and settlement of any such audit or refund claim or
related administrative or judicial proceeding with respect to such Tax Contest;
and, where deemed necessary by Seller, Buyer shall cause the relevant entity to
authorize by appropriate powers of attorney such persons as Seller shall
designate to represent such entity with respect to such audit or refund claim or
related administrative or judicial proceeding and to settle or otherwise resolve
any such proceeding; PROVIDED that in any case under this subsection, (x) Seller
shall not, without the prior written consent of Buyer, which consent shall not
be unreasonably withheld, accept any proposed adjustment or enter into any
settlement or agreement in compromise or otherwise dispose of any such audit or
refund claim or related administrative or judicial proceeding in a manner that
would purport to bind the Company if such actions would materially and adversely
affect the Tax liability or Tax basis, depreciation, amortization, useful lives,
net operating losses, or similar Tax items of Buyer, the Company or any of its
Subsidiaries for Taxable periods or portions thereof ending after the Closing
Date and (y) Seller shall keep Buyer informed as to the progress of any audit or
refund claim or related administrative or judicial proceeding which Seller has
taken control of and Buyer shall have the right to consult with Seller during
such proceedings at its own expense. Buyer shall further execute and deliver, or
cause to be executed and delivered, to Seller or its designee all instruments
and documents reasonably requested by Seller to implement the provisions of this
subsection. Any refund of Taxes obtained by Buyer or the affected entity with
respect to any Tax period (or portion thereof) of the Company ending on or
before the Closing Date shall be paid promptly to Seller in accordance with
Section 5.3(c) hereof.
(f) INFORMATION AND COOPERATION. Subject to the provisions of
Section 5.9 and the Confidentiality Agreement, from and after the Closing Date,
Buyer shall deliver to Seller or its designee (including for purposes of this
sentence, Seller's Tax advisors), such information and data that are in the
possession of Buyer or the Company after the Closing Date and that are
reasonably available concerning the pre-Closing Date operations of the Company
and its Subsidiaries and make available such knowledgeable employees of Buyer
and the Company and its Subsidiaries as Seller may reasonably request, including
providing the full and complete information and data required by Seller's
customary Tax and accounting information requests
39
with respect to the Company to the extent such customary Tax and accounting
information requests are consistent with past practice of the Company and are
submitted to Buyer not later than 60 days prior to the due date (including
extensions) of such Tax Return for which such information is required and is
reasonably available, in order to enable Verizon, GTE and Seller fully to
complete and file all Tax Returns that they may be required to file with respect
to the activities of the Company and its Subsidiaries, to respond to and contest
audits by any Taxing authorities with respect to such activities, to prosecute
any claim for refund or credit to which Verizon, GTE or Seller is entitled
hereunder and to otherwise enable Verizon, GTE and Seller fully to satisfy their
accounting and Tax requirements. From and after the Closing Date, Seller shall
deliver to Buyer or its designee (including for purposes of this sentence,
Buyer's Tax advisors), such information and data that are in the possession of
Seller or its Affiliates after the Closing Date and that are reasonably
available concerning any Tax matters of the Company or any of its Subsidiaries
and make available such knowledgeable employees of Seller and its Affiliates as
Buyer may reasonably request in order to enable Buyer to complete and file all
Tax Returns that it may be required to file with respect to the activities of
Buyer or the Company or any of its Subsidiaries, to respond to and contest
audits by any Taxing authorities with respect to such activities, to prosecute
any claim for refund or credit to which Buyer or the Company (when owned by
Buyer), or one of its Subsidiaries is entitled and to otherwise enable Buyer and
the Company and its Subsidiaries to satisfy their accounting and Tax
requirements. Seller shall execute and Buyer shall execute (and shall cause the
Company and each of its Subsidiaries to execute) such documents as may be
necessary to file any Tax Returns, to respond to or contest any audit, to
prosecute any claim for refund or credit and to otherwise satisfy any Tax
requirements relating to the Company or any of its Subsidiaries. Seller and
Buyer, the Company and each of its Subsidiaries shall retain, and shall provide
the other party with reasonable access to, the books and records relating to the
Company and its Subsidiaries for ten years from the Closing Date and for such
additional period as Seller or Buyer may reasonably request of the other.
(g) TRANSFER TAXES. Notwithstanding anything herein to the contrary,
Buyer and Seller each shall be responsible for one half of all sales, use, gross
receipts, registration, transfer, stamp duty, documentary, securities
transactions, real estate, and similar taxes and notarial fees assessed or
payable in connection with the transfer of the Stock, regardless of whether such
taxes become due or payable on or after the Closing Date, including, without
limitation, Florida Real Estate Transfer Tax, and any similar tax, imposed as a
result of such transfer (including any such taxes resulting from an election or
a deemed election under Section 338 of the Code or any comparable provision of
state, local or foreign law) and shall be responsible for interest, penalties
and additions to Taxes related to such Taxes.
(h) TAX SHARING AGREEMENTS, ETC. All Tax sharing, Tax allocation and
similar agreements, policies, arrangements and practices between Seller or an
Affiliate of Seller and the Company and its Subsidiaries shall be terminated as
of the time of the Closing on the Closing Date.
(i) AMENDMENTS TO TAX RETURNS. Buyer shall not, and shall not permit
the Company or any of its Subsidiaries to, amend any Tax Return covering any
period ending on or before the Closing Date without the prior written consent of
Seller.
40
(j) SECTION 338(h)(10) ELECTION.
(1) Buyer will make, and Seller will cause Verizon to join with
Buyer in making, an election under Section 338(h)(10) of the Code (and any
comparable election under state or local Tax law) with respect to the Merger
(collectively, the "SECTION 338(h)(10) ELECTION"). Seller and Buyer agree to
allocate the Merger Consideration and the respective liabilities of the Company
among the respective assets of the Company in accordance with Code Section 338
and Treasury regulations thereunder (and any comparable provisions of state and
local law, as appropriate) (the "ALLOCATION"). Buyer shall be responsible for
determining and preparing the Allocation and shall submit such Allocation to
Seller for its consent; provided that, if Seller does not object within 30 days
after their receipt of the Allocation from Buyer, such Allocation shall be
treated as the agreed final Allocation. If Seller does object to the Allocation
by delivering written notice to Buyer within 30 days after Seller's receipt
thereof, Buyer and Seller shall work in good faith and shall use commercially
reasonable efforts to agree on mutually agreed Allocation; PROVIDED that, if
Buyer and Seller cannot, within 30 days, agree on mutually agreed Allocation,
all items of such Allocation on which the parties do not mutually agree shall be
submitted to a nationally known independent accounting firm mutually acceptable
to Buyer and Seller (the "THIRD PARTY ACCOUNTANT") for resolution within 10 days
of submission thereto, which resolution shall be made based solely upon the
submissions made by Buyer and Seller, and not upon an independent determination
by the Third Party Accountant, and Buyer and Seller shall pay equal shares of
the costs of the Third Party Accountant. Buyer and Seller shall report, act, and
file in all respects and for all purposes consistent with the Allocation, unless
otherwise required by Law. Seller shall timely execute and deliver to Buyer such
documents or statements, and other forms that are required to be submitted to
any federal, state or local Tax authority in connection with the Section
338(h)(10) Election, including IRS Form 8023 or any successor form (together
with any schedules or attachments thereto) that are required pursuant to
Treasury regulations (or comparable provision of state and local law) as Buyer
shall reasonably request or as are required by applicable law for an effective
Section 338(h)(10) Election.
(2) Seller shall timely prepare and deliver all documents and
other information Buyer may reasonably request to prepare the Allocation and
shall also provide any other assistance reasonably requested by Buyer in making
the Section 338(h)(10) Election. Seller hereby agrees to consult with Buyer and
to act in good faith to take all actions reasonably necessary to effectuate the
Section 338(h)(10) Election.
5.4 USE OF VERIZON AND GTE NAME AND MARKS.
(a) Buyer shall cease, and shall cause the Surviving Corporation to
cease, any and all use of the designation "Verizon" or "GTE" in any fashion or
combination, including words and designs related to Verizon or GTE, as well as
eliminate the use of any other designation indicating affiliation with Verizon
or GTE or Seller or any of their respective Subsidiaries, as soon as practicable
after the Closing Date, but not more than 30 days after the Closing Date;
PROVIDED, however, that with respect to stationery, contracts, purchase orders,
agreements and other business forms and writings which could result after the
Closing Date in a legal commitment of Verizon, GTE or Seller or any of their
Subsidiaries, Buyer shall, and shall cause the Surviving Corporation to, cease
immediately after the Closing Date any use of the designation "Verizon" or
"GTE," in any fashion or combination, as well as of any other
41
designation indicating affiliation after the Closing Date with Verizon or GTE or
Seller or any of their respective Subsidiaries. Within 30 business days after
the Closing Date, Buyer shall notify or shall cause the Surviving Corporation to
notify, in writing, all customers, suppliers and financial institutions having
current business relationships with the Company that the Company has been
acquired from the Seller by the Buyer through the Merger.
(b) As of the Closing Date, neither Buyer nor the Surviving
Corporation (or its Subsidiaries) shall use or include the Excluded Marks,
including "GTE" or "Verizon," as or in their corporate, popular or trade names,
or in any advertising or publications placed or published after the Closing
Date. Any such advertising and publications placed or published on or before the
Closing Date shall be discontinued and not be renewed after the Closing Date.
(c) As of the Closing Date, Buyer shall cease, and shall cause the
Company and its Subsidiaries to cease, selling any products, offering any
services or otherwise using any Excluded Xxxx, including "Verizon," "GTE" or any
other trademark, service xxxx or indication of origin or any xxxx or indication
of origin confusingly similar thereto.
(d) Buyer agrees not to use or seek to register, or permit the
Surviving Corporation to use or seek to register, any trade name, service xxxx,
trademark or domain name identical with or confusingly similar to Excluded
Marks, including "Verizon" or "GTE." Buyer agrees that it will never directly or
indirectly challenge, contest or call into question or raise any questions
concerning the validity or ownership of Excluded Marks, including "Verizon" or
"GTE," by Verizon or GTE or any registration or application for registration of
Excluded Marks, including "Verizon" or "GTE." Buyer agrees that nothing herein
shall give Buyer or the Surviving Corporation any right to or interest in any
Excluded Marks, including "Verizon" or "GTE," except the right to use the same
in accordance with the express provisions of Section 5.4 of this Agreement, and
that all and any uses of Excluded Marks, including "Verizon" or "GTE," by Buyer
or the Surviving Corporation shall inure to the benefit of Verizon.
5.5 TRANSITION SERVICES.
On the Closing Date, Seller and the Surviving Corporation shall enter
into a Transition Services Agreement substantially in the form of Exhibit D
attached hereto, pursuant to which Seller or its Affiliates shall provide
certain services to the Surviving Corporation on the terms and conditions
therein set forth.
5.6 NON-COMPETITION.
(a) For a period of one year after the Closing Date (the
"NON-COMPETE TERM"), neither Seller nor any of its Affiliates shall, without the
prior written approval of the Surviving Corporation, either:
(1) provide, or enter into a Contract to provide, in the United
States of America any material services for clearing and settlement, roaming,
network solutions support or fraud detection for the wireless telecommunications
business of the type provided as of the Closing Date by the Company pursuant to
customer contracts listed in Section 2.5 of the Seller Disclosure Schedule
("SERVICES") to any Person (other than Seller and its Affiliates, including
Verizon Wireless, its Affiliates and Persons with which Verizon Wireless or its
Affiliates has a
42
management contract or affiliation agreement) that is a customer of the Company
as of the date hereof and that purchased more than $2,000,000 in Services in the
twelve months ended September 30, 2001 (together with its successors and
assigns, "CUSTOMERS"); or
(2) induce or attempt to induce any such Customer to cease
purchasing Services from the Surviving Corporation (each of such activities in
clause (1) and (2), a "PROHIBITED ACTIVITY").
(b) Notwithstanding Section 5.6(a), this Section 5.6 shall not
prohibit the Seller or any of its Affiliates from:
(1) acquiring the stock or assets of (or merging with), or
entering into an agreement to acquire or merge with, any Person which derived
less than 30% of its revenues from products or services that compete with the
Services (as modified or updated after the Closing Date) in the last full fiscal
year prior to the date of such acquisition (a "COMPETITIVE BUSINESS"); PROVIDED
that during the Non-Compete Term any such Competitive Business may provide
products or services that compete with the Services (as modified or updated
after the Closing Date) only to Persons that were customers of the Competitive
Business as of the date immediately prior to the date of such acquisition or
merger;
(2) owning less than 10% of the outstanding stock of any class
which is entitled to vote for the election of directors generally of any company
which is publicly traded and which engages in the provision of products or
services that compete with the Services (as modified or updated after the
Closing Date);
(3) providing any Services pursuant to any Contract between
Seller or any of its Affiliates (other than the Company) and any Person existing
on the date hereof which has been disclosed in the Seller Disclosure Schedule
(without giving effect to any amendment of such Contract after the date hereof);
(4) providing telecommunications services, products or service
or support functions for such services, products or functions as part of or
incidental to its primary business of offering telecommunications or related
services, including the provision of interconnection services, transport
services, access services, Signaling System 7 services, long distance services,
data transmission, Internet services, network monitoring, and billing services
(including, with respect to wireline operations only, xxxx verification and
fraud detection), including any of the foregoing provided pursuant to any
intercarrier agreement, end user agreement, tariff service arrangement, or
interconnection agreement; or
(5) providing any service required to be provided by Seller or
its Affiliates by applicable federal or state law or regulations.
(c) Notwithstanding Section 5.6(a), the obligations of Verizon as an
Affiliate of Seller with respect to Verizon Wireless (and its successors and
assigns) pursuant to Section 5.6(a) shall be limited to the exercise of such
rights of approval or disapproval as it may have pursuant to partnership,
stockholder or other agreements or applicable Law, to the fullest extent
permitted by law, to prohibit Verizon Wireless from engaging in or participating
in any such Prohibited Activity (subject to the foregoing exceptions contained
in Section 5.6(b)).
43
(d) Buyer shall cause the Surviving Corporation to use commercially
reasonable efforts to notify the Seller promptly after it learns that Seller or
its Affiliates are engaged, or propose to engage, in a Prohibited Activity.
Seller and its Affiliates shall have an opportunity to cure any breach within 30
days after receipt of notice of such breach or alleged breach.
(e) The parties acknowledge and agree that the covenants set forth
in this Section 5.6 are reasonable in all respects and are necessary to protect
the goodwill of the Business. If in any judicial proceeding any of the
restrictions stated in this Section 5.6 are found to be unenforceable, the
period, scope or geographical area, as the case may be, shall be reduced to the
extent necessary to permit such provision to be enforceable.
5.7 NON-SOLICITATION OF EMPLOYEES.
(a) For a period of one year after the Closing Date, neither Seller
nor any of its Affiliates shall, without the prior written approval of the
Surviving Corporation, hire or solicit for hire any employee of the Surviving
Corporation or any of its Subsidiaries at the career band of director level or
above; PROVIDED, however, that nothing shall prohibit Seller and its Affiliates
from (1) employing any person (other than an employee of the Surviving
Corporation or any of its Subsidiaries at the career band of director level or
above) who contacts Seller or any of its Affiliates on his or her own initiative
without any solicitation by, or on behalf of, Seller or any of its Affiliates
and (2) performing, or having performed on its behalf, a general solicitation
for employees not specifically focused at the Surviving Corporation's employees
through the use of media, advertisement, electronic job boards or other general,
public solicitations.
(b) For a period of one year after the Closing Date, none of Buyer,
the Surviving Corporation or any of their respective Affiliates shall, without
the prior written approval of Seller, hire or solicit for hire any employee of
Seller, Verizon (including Verizon Services Group) or any of their respective
Affiliates at the career band of director level or above; PROVIDED, however,
that nothing shall prohibit Buyer, the Surviving Corporation and their
respective Affiliates from (1) employing any employee or former employee of
Seller or any of its Affiliates who provides or provided during the latest
twelve months substantially all of his or her services to or for the Business
and (2) performing, or having performed on its behalf, a general solicitation
for employees not specifically focused at employees of Seller and its Affiliates
through the use of media, advertisement, electronic job boards or other general,
public solicitations.
5.8 ASSIGNMENT OF NONDISCLOSURE AGREEMENTS.
On the Closing Date, Seller shall assign and delegate to Buyer or the
Surviving Corporation all of its rights and obligations under all
confidentiality and nondisclosure agreements between Seller or its Affiliates,
on the one hand, and prospective purchasers of the Stock or their Affiliates, on
the other hand, entered into in connection with the sale of the Stock or the
evaluation of such sale; PROVIDED, however, that the foregoing shall not apply
to (a) any right to protect information relating to Verizon and its Affiliates
(other than the Company) and (b) any right to enforce non-solicitation covenants
protecting the employees of Verizon and its Affiliates (other than the Company).
44
5.9 CONFIDENTIALITY.
Each of Buyer and Seller agree that, after the Closing, it will, and
will cause its respective Affiliates to, (a) maintain the confidentiality of the
information, documents and instruments delivered to it by any other party hereto
and such other party's Affiliates and agents in connection with the performance
of the obligations of such other party and such other party's Affiliates under
this Agreement and the Related Agreements and (b) only disclose such
information, documents and instruments to its duly authorized officers,
directors, representatives and agents; PROVIDED that this Section 5.9 shall not
apply to any information, document or instrument that (i) is or becomes
generally available and known to the public, without restriction on use or
disclosure by the disclosing party, (ii) is rightfully received by the receiving
party without restriction on use or disclosure and without breach of any
obligation to the disclosing party, (iii) is independently developed by or for
the receiving party or any of its Affiliates without reference to or use of
information, documents or instruments protected by this Section 5.9, (iv) is the
subject of prior written approval of the disclosing party, or (v) is disclosed
or made available after the Closing Date by the disclosing party to any Person
without restriction on use or disclosure. In the event of a conflict between
this Section 5.9 and Section 5.1 of the Intellectual Property Agreement, Section
5.1 of the Intellectual Property Agreement shall prevail.
ARTICLE VI
EMPLOYEE BENEFITS
6.1 EMPLOYEE MATTERS.
(a) (1) Section 6.1(a)(1) of the Seller Disclosure Schedule
identifies each active Employee as of the date of this Agreement (other than
retained Employees identified in Section 6.1(a)(2) of the Seller Disclosure
Schedule), together with the Employee's title or job position, service,
compensation and such other information as is required to be provided by this
Article VI with respect to such Employee. Section 6.1(a)(1) of the Seller
Disclosure Schedule shall be updated by Seller on or before the Closing Date to
identify individuals who become active Employees after the date of this
Agreement (and who are not identified on an updated Section 6.1(a)(2) of the
Seller Disclosure Schedule) and to remove those individuals who cease to be
active Employees prior to the Closing (without regard to the reason or
circumstance for such termination of active Employee status). In hiring new
Employees and terminating Employees after the date of this Agreement, Seller and
the Company shall follow their usual and ordinary course of business in
accordance with past practice. For purposes of this Section, the term "active
Employees" shall include all full-time and part-time employees; casual
employees; employees on workers' compensation, military leave, maternity leave,
leave under the Family and Medical Leave Act of 1993, short-term disability
(subject to Section 6.1(g)), or layoff with recall rights; and employees on
other approved leaves of absence with a legal or contractual right to
reinstatement.
(2) Section 6.1(a)(2) of the Seller Disclosure Schedule
identifies those Employees as of the date of this Agreement who will be retained
by Seller and who shall not in any event be considered "Transferred Employees"
for purposes of this Agreement. Section 6.1(a)(2) of the Seller Disclosure
Schedule may be updated by Seller in its sole discretion prior to the Closing
Date to identify additional retained Employees who are employed after the date
of
45
this Agreement. Buyer shall have no liability with respect to the active
Employees listed in Section 6.1(a)(2) of the Seller Disclosure Schedule.
(3) Buyer shall cause all Employees listed in Section 6.1(a)(1)
of the Seller Disclosure Schedule (hereinafter collectively referred to as
"TRANSFERRED EMPLOYEES") to remain employed by (or remain the responsibility of,
as applicable) the Surviving Corporation and its Subsidiaries as of the Closing
Date in the same or comparable positions, and with at least the same base pay
and comparable total compensation and benefits (taking into account base pay,
bonus, and other incentive compensation) as was in effect immediately prior to
the Closing Date. The foregoing shall not limit Buyer's ability to change a
Transferred Employee's position, compensation or benefits for
performance-related or similar business reasons or require Buyer to continue the
employment of a Transferred Employee for any particular period of time after the
Closing.
(b) Buyer shall not be required to assume liability for retention
agreements between the Company and any of the Transferred Employees, and Seller
shall retain liability for all obligations under such retention agreements.
(c) Except as otherwise specifically provided herein, on and after
the Closing Date, Buyer shall cause the Surviving Corporation and its
Subsidiaries to recognize the service of each Transferred Employee for the
Company and its Subsidiaries and Affiliates before the Closing Date for all
employment-related purposes. Section 6.1(a)(1) of the Seller Disclosure Schedule
shall list such service of each Transferred Employee.
(d) Except to the extent otherwise provided in Sections 6.2(a)(1)
and 6.2(c), Transferred Employees shall not accrue benefits under any employee
benefit policies, plans, arrangements, programs, practices, or agreements of
Seller or any of its Affiliates after the Closing Date. In determining any
bonuses payable to Transferred Employees for the year in which the Closing
occurs, Buyer shall comply with the provisions of Section 6.1(a)(3) requiring
Buyer to cause the Surviving Corporation to provide comparable total
compensation to each Transferred Employee.
(e) Nothing in this Agreement shall cause duplicate benefits to be
paid or provided to or with respect to a Transferred Employee under any employee
benefit policies, plans, arrangements, programs, practices, or agreements.
References herein to a benefit with respect to a Transferred Employee shall
include, where applicable, benefits with respect to any eligible dependents and
beneficiaries of such Transferred Employee under the same employee benefit
policy, plan, arrangement, program, practice or agreement.
(f) If any Employee identified in Section 6.1(a)(1) of the Seller
Disclosure Schedule is an employee of an Affiliate of Seller other than the
Company, he or she shall be transferred to the employment of the Company prior
to the Closing Date, shall be considered a Transferred Employee, and shall be
treated under this Agreement in a manner that is comparable to the treatment
given to the Transferred Employees who are employed by the Company. Any such
Employees are specifically identified in Section 6.1(a)(1) of the Seller
Disclosure Schedule as "affiliate employees."
46
(g) If a Transferred Employee who is on short-term disability leave
on the Closing Date subsequently goes on long-term disability due to the
pre-Closing condition resulting in short-term disability leave, Seller (or a
Seller Welfare Plan) shall be responsible for providing long term disability
coverage, and such employee shall not be considered a Transferred Employee, and
neither Buyer nor, after the Closing Date, the Surviving Corporation shall have
any liability with respect to such employee except as otherwise provided in the
immediately following sentence. Any individual who would be a "Transferred
Employee" but for being on long-term disability shall be offered a comparable
position by the Surviving Corporation and shall be treated as a Transferred
Employee in the event he or she recovers within 12 months after the Closing
Date. Neither Buyer nor, after the Closing Date, the Surviving Corporation shall
have any liability with respect to such an individual who does not recover from
long-term disability within 12 months after the Closing Date. Employees on
long-term disability are identified (and will be identified) in Section
6.1(a)(1) of the Seller Disclosure Schedule.
6.2 EMPLOYEE BENEFIT MATTERS.
(a) DEFINED BENEFIT PLANS.
(1) SELLER PENSION PLAN. As of the date of this Agreement,
Seller or its Affiliates have adopted the following single-employer defined
benefit pension plan maintained in the United States: the Verizon GTE Service
Corporation Plan for Employees' Pensions (together with any successor plan
effective after January 1, 2002, the "SELLER PENSION PLAN"). A Transferred
Employee who is a participant in the Seller Pension Plan as of the Closing Date
and who, as of the Closing Date, is within three years of eligibility for early
retirement benefits under the Seller Pension Plan shall be referred to herein as
a "TRANSFERRED PARTICIPANT." For a period of three years after the Closing Date,
Seller shall cause the Seller Pension Plan to recognize service with Buyer and
the Surviving Corporation after the Closing Date by Transferred Participants for
the purpose of determining eligibility for any pension benefit payable under the
terms of the Seller Pension Plan, including early retirement benefits, survivor
benefits, and surviving spouse benefits. Except as determined otherwise by
Seller in its sole discretion, the amount of any pension payable under the
Seller Pension Plan shall be determined for a Transferred Participant based on
the length of continuous service and earnings (as defined under the Seller
Pension Plan) of such Transferred Participant as of the Closing Date. Within ten
business days after the Closing Date, Seller shall provide Buyer with a copy of
the amendment to the Seller Pension Plan reflecting the provisions of this
Section 6.2(a)(1). Nothing herein shall prevent Seller in its sole discretion
from crediting such service with Buyer and the Surviving Corporation to other
Transferred Employees or shall require Seller to provide greater benefits to
Transferred Participants than are provided to other participants in the Seller
Pension Plan who are actively employed by Seller and its Affiliates after the
Closing Date. Nothing herein shall require Buyer to establish a defined benefit
plan with respect to the Transferred Participants.
(2) BUYER OBLIGATIONS. Effective immediately after the Closing
Date, the Transferred Employees who were eligible to participate prior to the
Closing in the Seller Pension Plan will be eligible to participate under a
tax-qualified defined benefit pension plan established or maintained by Buyer or
its Affiliates to the same extent (if any) as similarly-situated employees of
Buyer and its Affiliates; PROVIDED that such employees shall not be
47
credited with prior service with Seller and its Affiliates for benefit accrual
purposes under such Buyer pension plan. No assets or liabilities will be
transferred in connection with this Agreement from the Seller Pension Plan to
Buyer or its Affiliates or any employee benefit plan of Buyer or its Affiliates.
(b) SAVINGS PLANS.
(1) As of the date of this Agreement, Seller or its Affiliates
have adopted and made contributions with respect to the Transferred Employees to
one or more qualified retirement savings plans (collectively referred to as the
"SELLER SAVINGS PLANS"). Except as provided in Section 6.2(b)(3), Transferred
Employees shall not be entitled to make contributions to or to benefit from
matching or other contributions under the Seller Savings Plans on and after the
Closing Date.
(2) Buyer shall take all action necessary and appropriate to
ensure that, as of the Closing Date, Buyer or the Surviving Corporation (or one
of Buyer's Affiliates) maintains one or more qualified retirement savings plans
(hereinafter referred to in the aggregate as the "BUYER SAVINGS PLANS" and
individually as the "BUYER SAVINGS PLAN") that will accept rollovers from each
Transferred Employee who receives a distribution from a Seller Savings Plan and
who is employed by the Buyer (or any of its Affiliates) at the time of such
distribution. With respect to compensation paid through the end of the calendar
year following the calendar year in which the Closing Date occurs, the Buyer
Savings Plans shall provide for an allocation of an employer non-elective
contribution for each plan year (or partial plan year) to each Transferred
Employee who is a participant in such plan and who is an active employee of
Buyer or any of its Affiliates on the last day of the plan year (or partial plan
year) in an amount equal to not less than two percent (2%) of such employee's
compensation for such year (or partial plan year).
(3) Seller shall make all required matching contributions with
respect to the Transferred Employees' contributions to the Seller Savings Plans
that are (A) eligible for matching and (B) made before the Closing Date. Such
matching contributions shall be made not later than the date on which all other
matching contributions are made to the Seller Savings Plans with respect to
contributions made at the same time as the Transferred Employees' contributions.
(c) WELFARE PLANS.
(1) Buyer shall take all action necessary and appropriate to
ensure that, as soon as practicable after the Closing Date, the Surviving
Corporation maintains or adopts, as of the Closing Date, one or more employee
welfare benefit plans, including medical, health, dental, flexible spending
account, accident, life, short-term disability, and long-term disability and
other employee welfare benefit plans for the benefit of the Transferred
Employees (the "BUYER WELFARE PLANS"). The Buyer Welfare Plans shall provide as
of the Closing Date pre-retirement benefits to Transferred Employees (and their
dependents and beneficiaries) that, in the aggregate, are comparable to the
welfare benefits provided by other employers in the same industry as the
Company. Any restrictions on coverage for pre-existing conditions or
requirements for evidence of insurability under the Buyer Welfare Plans shall be
waived for Transferred Employees to the extent satisfied under the employee
welfare benefit plans
48
maintained by Verizon on the Closing Date (hereinafter referred to collectively
as the "SELLER WELFARE PLANS"), and Transferred Employees shall receive credit
under the Buyer Welfare Plans for co-payments and payments under a deductible
limit made by them and for out-of-pocket maximums applicable to them during the
plan year of the applicable Seller Welfare Plans in accordance with the
corresponding Seller Welfare Plans. As soon as practicable after the Closing
Date, Seller shall deliver to Buyer a list of each Transferred Employee's
co-payment amounts and deductible and out-of-pocket limits under the Seller
Welfare Plans.
(2) For a period of three years after the Closing Date, Seller
shall cause the Seller Welfare Plans providing retiree medical, health, and life
benefits to former Employees as of the Closing Date (the "SELLER RETIREE WELFARE
PLANS") to recognize service with Buyer and the Surviving Corporation after the
Closing Date by Transferred Participants for the purpose of determining
eligibility for retiree welfare benefits under the then applicable terms of the
Seller Retiree Welfare Plans. To the extent such service crediting requires an
amendment to the Seller Retiree Welfare Plans, Seller shall provide Buyer,
within ten business days after the Closing Date, with a copy of such amendment.
Nothing herein shall prevent Seller in its sole discretion from crediting such
service with Buyer and the Surviving Corporation to other Transferred Employees
or shall require Seller to provide greater benefits to Transferred Participants
than are provided to other participants in the Seller Retiree Welfare Plans who
are actively employed by Seller and its Affiliates after the Closing Date.
(3) Seller, Buyer, their respective Affiliates, and the Seller
Welfare Plans and the Buyer Welfare Plans shall assist and cooperate with each
other in the disposition of claims made under the Seller Welfare Plans and the
Buyer Welfare Plans, and in providing each other with any records, documents, or
other information within its control or to which it has access that is
reasonably requested by any other as necessary or appropriate to the
disposition, settlement, or defense of such claims. Seller shall be and remain
solely responsible and liable for any and all claims under any Seller Welfare
Plan incurred on or prior to the Closing Date by any Transferred Employee. Buyer
shall be and remain solely responsible and liable for any and all claims under
any Buyer Welfare Plan incurred after the Closing Date by any Transferred
Employee. For purposes of this Agreement: (i) a claim for health benefits
(including claims for medical, prescription drug and dental expenses) will be
deemed to have been incurred on the date on which the related medical service or
material was rendered to or received by the individual claiming such benefit;
(ii) a claim for sickness, accident or disability benefits will be deemed to
have been incurred on the date on which all events (other than the filing of a
claim or similar procedural requirements) entitling the claimant to benefits
have occurred; and (iii) in the case of any claim for benefits other than health
benefits and sickness, accident or disability benefits (e.g., life insurance
benefits), a claim will be deemed to have been incurred upon the occurrence of
the event giving rise to such claim.
(4) Except as provided in Section 6.2(c)(5) below, nothing in
this Agreement shall require Seller or its Affiliates to transfer assets or
reserves with respect to the Seller Welfare Plans (including the Seller Retiree
Welfare Plans) to Buyer or its Affiliates or the Buyer Welfare Plans.
(5) As of the Closing Date, Seller shall cause the portion of
the GTE Flexible Reimbursement Plan providing for medical and dependent care
flexible spending
49
accounts (the "FRP") applicable to Transferred Employees to be segregated into a
separate component and all liabilities and account balances of the Transferred
Employees in the FRP shall be transferred to a flexible reimbursement plan that
Buyer shall cause to be maintained for the duration of the calendar year in
which the Closing Date occurs.
(6) Transferred Employees who are involuntarily terminated
(other than for cause, which may include poor performance) by the Surviving
Corporation or any of its Affiliates within the 12-month period beginning on the
Closing Date shall be eligible for benefits under a Surviving Corporation
severance or separation pay policy or plan that provides a severance benefit of
at least two weeks of pay (including cash incentives and bonuses) for each year
of service (credited with Buyer, Seller, and their respective Affiliates),
subject to a maximum benefit of 35 weeks of pay (including cash incentives and
bonuses) and to a minimum severance benefit of 26 weeks of pay (including cash
incentives and bonuses) for those Transferred Employees listed in Section
6.2(c)(6) of the Seller Disclosure Schedule. Subject to the foregoing, such
benefits may be provided in the manner and under the plan or policy designated
by Buyer in its discretion. Except as specifically provided otherwise in the
relevant Seller severance pay plan, each Transferred Employee listed in Section
6.1(a)(1) of the Seller Disclosure Schedule shall be treated as a "Transferred
Employee" for purposes of the Seller Pension Plan and shall not be entitled to
severance benefits (including under the Qualified Involuntary Separation
Program) from Seller or any of its Affiliates (other than, after the Closing
Date, the Surviving Corporation) or any plan or policy maintained by any of such
Persons. Seller shall take any actions necessary or appropriate in respect of
the immediately preceding sentence.
6.3 VACATION.
On or after the Closing Date, Buyer and the Surviving Corporation
shall allow Transferred Employees to receive paid time off for any unused
vacation time accrued prior to the Closing Date in accordance with the Company's
policies as of the Closing Date and not otherwise paid by the Company in
accordance with applicable Law. Except as required otherwise by applicable Law,
Seller and its Affiliates (other than, after the Closing Date, the Surviving
Corporation) shall have no liability to Transferred Employees for the vacation
payments described in the immediately preceding sentence. Seller or its
Affiliates (other than the Surviving Corporation) shall pay Transferred
Employees any banked vacation as soon as practicable after the Closing Date.
Section 6.1(a)(1) of the Seller Disclosure Schedule shall list the accrued but
unused vacation pay, as of the Closing Date, of each Transferred Employee for
the calendar year in which the Closing Date occurs.
6.4 EMPLOYEE RIGHTS.
(a) Nothing expressed or implied in this Article VI shall confer
upon any employee of Seller or its Affiliates, or Buyer or its Affiliates, or
upon any legal representative of such employee, any rights or remedies,
including any right to employment or continued employment for any specified
period, of any nature or kind whatsoever under or by reason of this Agreement.
Except as provided in Section 10.8 hereof, nothing in this Agreement, express or
implied, shall create a third party beneficiary relationship or otherwise confer
any benefit, entitlement, or right upon any person or entity other than the
parties hereto.
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(b) Nothing in this Agreement shall be deemed to confer upon any
person (or any beneficiary thereof) any rights under or with respect to any
plan, program, or arrangement described in or contemplated by this Article VI,
and each person (and any beneficiary thereof) shall be entitled to look only to
the express terms of any such plan, program, or arrangement for his or her
rights thereunder.
(c) Nothing in this Agreement shall cause Buyer or its Affiliates or
Seller or its Affiliates to have any obligation to provide employment or any
employee benefits to any individual who is not a Transferred Employee or, except
as otherwise provided in subsection 6.1(b) with respect to retention agreements,
to continue to employ any Transferred Employee for any period of time following
the Closing Date.
6.5 WARN ACT REQUIREMENTS.
On and after the Closing Date, Buyer and the Surviving Corporation
shall be responsible with respect to Transferred Employees and their
beneficiaries for compliance with The Worker Adjustment and Retraining
Notification Act of 1988 and any other applicable law, including any requirement
to provide for and discharge any and all notifications, benefits, and
liabilities to Transferred Employees and government agencies that might be
imposed as a result of the consummation of the transactions contemplated by this
Agreement or otherwise.
6.6 SUCCESSORS AND ASSIGNS; OUTSOURCING.
In the event the Surviving Corporation or any of its successors and
assigns (a) consolidates with or merges into any other Person and shall not be
the continuing or surviving corporation or entity in such consolidation or
merger or (b) transfers all or substantially all of its properties and assets to
any Person, then, and in each case, proper provision shall be made so that such
successors and assigns of the Surviving Corporation honor the obligations of
Buyer and its Affiliates (including the Surviving Corporation) set forth in this
Article VI. In the event the Surviving Corporation outsources any of the
Transferred Employees during the 12-month period described in Section 6.2(c)(6),
and such employees are not paid a severance benefit in accordance with Section
6.2(c)(6) then, and in each case, proper provision shall be made so that the
outsourcing vendor maintains a severance pay plan or policy that provides a
severance benefit for each Transferred Employee who is involuntarily terminated
by the outsourcing vendor during such 12-month period, which benefit is the same
as the severance benefits that would otherwise have been provided to such
employees in accordance with Section 6.2(c)(6). For purposes of this Section
6.6, a Transferred Employee shall be considered to have been outsourced if the
employee is hired by the outsourcing vendor pursuant to or in connection with an
agreement entered into between the Surviving Corporation or any of its
Affiliates, on the one hand, and the outsourcing vendor, on the other hand,
whereby the outsourcing vendor will provide services to or for the Surviving
Corporation or any of its Affiliates.
6.7 COBRA LIABILITY.
A Seller Welfare Plan shall, as applicable, become or remain solely
responsible and liable for satisfying the continuation coverage requirements for
group health plans under Part 6 of Subtitle B of Title I of ERISA and Section
4980B of the Code ("COBRA") for each
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Employee or former Employee who is receiving COBRA continuation coverage as of
the Closing Date and for each Employee or former Employee (including Transferred
Employees, to the extent applicable) who is entitled to elect such coverage on
account of a qualifying event occurring on or before the Closing Date. Buyer and
the Surviving Corporation shall not have any liability for satisfying such COBRA
obligations for such Employees and former Employees.
6.8 STOCK OPTIONS.
Seller shall fully vest all outstanding stock options held by
Transferred Employees as of the Closing Date and, subject to the provisions of
such options (and the related option plans) relating to the maximum period of
exercise, shall permit Transferred Employees to exercise such options for a
period of up to five years following the Closing Date.
6.9 EXECUTIVE COMPENSATION.
With respect to all periods of employment through the Closing Date,
Seller shall make a pro-rata contribution to each Benefit Plan that is a funded
or unfunded non-qualified deferred compensation plan or supplemental executive
retirement plan (the "EXECUTIVE COMPENSATION PLANS") maintained by Seller or any
of its Affiliates in which any Transferred Employee is a participant or
beneficiary. Seller shall fully distribute any such benefits to such Transferred
Employees as soon as administratively practicable following the Closing Date.
Notwithstanding the foregoing, a Transferred Employee's benefits under the
Executive Compensation Plans will not be funded or distributed to the extent
such funding or distribution is not permitted by the terms of such plans. Seller
shall not be required to fully vest the benefits of eligible Transferred
Employees under the Executive Compensation Plans; PROVIDED that each Transferred
Employee who participates in the non-qualified defined contribution Executive
Compensation Plan will be fully vested in his benefit under such plan as of
December 31, 2001.
6.10 INDEMNITY FOR CERTAIN ERISA LIABILITIES.
From and after the Closing, Seller agrees to indemnify and hold
harmless Buyer, the Surviving Corporation and their respective directors,
officers, employees, affiliates, agents and assigns from and against any and all
Losses based upon or arising from any of the following with respect to any
"employee benefit plan" (as such term is defined in Section 3(3) of ERISA)
subject to Title IV of ERISA that, prior to the Closing, is maintained,
sponsored or contributed to (or required to be contributed to) by the Company or
any entity that, prior to the Closing, is treated as a single employer with the
Company pursuant to Section 414 of the Code (an "ERISA AFFILIATE"), or with
respect to which the Company or any of its ERISA Affiliates has any liability or
potential liability prior to the Closing:
(a) a violation or waiver of the minimum funding standards imposed
by Section 302 of ERISA or Section 412 of the Code;
(b) an "accumulated funding deficiency" within the meaning of
Section 412 of the Code;
52
(c) a "reportable event" (as defined in Section 4043 of ERISA)
within the 12-month period ending on the Closing Date, other than a reportable
event for which the 30-day reporting requirement has been waived or extended;
(d) a lien on any asset of the Company or any of its ERISA
Affiliates that is imposed under ERISA or the Code with respect to any such
plan;
(e) any liability under Title IV of ERISA that, on or after the
Closing Date, becomes or remains a liability of the Surviving Corporation or
Buyer (as a result of its Control or ownership of the Surviving Corporation);
(f) any liability on account of a "partial withdrawal" or a
"complete withdrawal" (within the meaning of Sections 4205 and 4203,
respectively, of ERISA) or otherwise with respect to any "multiemployer plan"
(as such term is defined in Section 3(37) of ERISA); and
(g) any obligation or liability under Section 4204 of ERISA.
6.11 EMPLOYEE INDEMNITY.
From and after the Closing, Seller shall indemnify and hold harmless
Buyer, the Surviving Corporation and their respective directors, officers,
employees, Affiliates, agents and assigns from and against any and all Losses
based upon or arising from any employment or employee benefits-related claims
that are made by any employee or former employee of the Company who does not
become a Transferred Employee (other than as a result of a breach of any of
Buyer's or, after the Closing Date, the Surviving Corporation's obligations
under Section 6.1) and that arise at any time.
ARTICLE VII
CONDITIONS OF PURCHASE
7.1 GENERAL CONDITIONS.
The obligations of Buyer, Merger Sub, Seller and the Company to effect
the Closing shall be subject to the following conditions, unless waived in
writing by Buyer and Merger Sub, on the one hand, and Seller and the Company, on
the other hand:
(a) NO ORDERS; LEGAL PROCEEDINGS. No Law or Order shall have been
enacted, entered, issued, promulgated or enforced by any Governmental Entity,
which prohibits or enjoins the Merger. No Action shall be pending by any
Governmental Entity having jurisdiction over the Company or any material portion
of its Business, which seeks to prohibit or enjoin the consummation of the
transactions contemplated hereby.
(b) APPROVALS. All Permits and Approvals required by applicable Law
to be obtained from any Governmental Entity to effect the Merger which are
identified in Section 2.8 of the Seller Disclosure Schedule shall have been
received or obtained on or prior to the Closing Date, and any applicable waiting
period under the Xxxx-Xxxxx-Xxxxxx Act shall have expired or been terminated.
53
7.2 CONDITIONS TO OBLIGATIONS OF BUYER AND MERGER SUB.
The obligations of Buyer and Merger Sub to effect the Closing shall be
subject to the following conditions, except to the extent waived in writing by
Buyer:
(a) REPRESENTATIONS AND WARRANTIES OF SELLER. The representations
and warranties of Seller contained herein shall be true and correct on the
Closing Date as though made on the Closing Date (without regard to any
materiality or Material Adverse Circumstance qualifiers set forth therein),
except to the extent such representations and warranties by their terms speak as
of an earlier date, in which case they shall be true and correct as of such
earlier date (without regard to any materiality or Material Adverse Circumstance
qualifiers set forth therein), except in each case to the extent that the
failure of such representations and warranties to be true and correct would not,
individually or in the aggregate, constitute a Material Adverse Circumstance.
(b) COVENANTS OF SELLER. Seller shall have in all material respects
performed all obligations and complied with all covenants set forth in this
Agreement which are required to be performed or complied with by it at or prior
to the Closing.
(c) OFFICER'S CERTIFICATE. Buyer shall have received a certificate
of Seller signed by an authorized officer of Seller to the effect that the
conditions in Sections 7.2(a) and 7.2(b) have been satisfied, and certifying as
to the accuracy of the resolutions of Seller's board of directors authorizing
the execution, delivery and performance of this Agreement and the Related
Agreements to which Seller is or will be a party and the consummation of the
transactions contemplated hereby and thereby.
(d) NO MATERIAL ADVERSE CHANGES. From the date hereof to the Closing
Date, there shall not have been any change in or event affecting the Company
that constitutes a Material Adverse Circumstance.
(e) FINANCING. There shall have been made available to Buyer or
Merger Sub the Debt Financing or other debt financing in an aggregate principal
amount equal to the principal amount of the Debt Financing and on material
economic terms no less favorable in the aggregate to Merger Sub than the
material economic terms reflected in the term sheets attached to the Debt
Financing Commitment Letter, and all funding conditions to the Debt Financing or
such other debt financing set forth in the definitive documentation with respect
to the Debt Financing or such other debt financing shall have been satisfied.
(f) OPINIONS OF COUNSEL. Merger Sub shall have received at the
Closing from O'Melveny & Xxxxx LLP, counsel to Seller, and from the Vice
President and Associate General Counsel-Strategic Transactions of Verizon
opinions dated the Closing Date, in substance substantially as set forth in
Exhibit A.
(g) TERMINATION OF AFFILIATED AGREEMENTS. (1) The Company and
Verizon shall have terminated (effective as of the Closing Date) the pro-rate
agreement or arrangement as it relates to the Company, (2) Verizon shall have
released the Company from any further liability thereunder which would accrue on
or after the Closing Date and (3) the Company shall have released Seller and its
Affiliates from all obligations thereunder.
54
(h) RELATED AGREEMENTS. Seller or one or more of its Affiliates
shall have executed and tendered delivery of each of the Related Agreements.
(i) INTERCONNECTION AGREEMENTS. The Company shall have entered into
agreements having, in each case, a term not in excess of one year (unless
otherwise consented to by Buyer) for the purchase of network services or
circuits with each of AT&T, Sprint and MCI Worldcom (or another qualified
network provider to replace one or more of the foregoing) to the extent
necessary to permit the Surviving Corporation to continue to conduct the
Business after the Closing Date.
(j) DATA PROCESSING AGREEMENTS. (1) The Company shall have entered
into agreements with Verizon Information Technologies Inc. to obtain distributed
processing computing services and mainframe computing and help desk services
substantially on the terms contained in Exhibit H (the "VIT SERVICES
AGREEMENTS"), (2) the other terms and conditions of the VIT Services Agreements
shall be in form reasonably satisfactory to the Buyer, (3) the Existing VDS
Agreement shall have been terminated without the exercise of any put right
thereunder by Verizon Data Services Inc. and (4) to the extent there are any
billing disputes under the Existing VDS Agreement, such disputes shall have been
finally settled.
For purposes of Sections 7.2(a), 7.2(b) and 7.2(d), any inaccuracy in
a representation or warranty resulting in a Material Adverse Circumstance, any
material breach of a covenant or any change in or event affecting the Company
that constitutes a Material Adverse Circumstance shall not excuse Buyer and
Merger Sub from their respective obligations to complete the Closing if such
event gives rise solely to money damages in an amount mutually agreed upon by
Buyer and Seller, and on the Closing Date Seller agrees to reduce the Merger
Consideration by such amount.
7.3 CONDITIONS TO OBLIGATIONS OF SELLER AND THE COMPANY.
The obligations of Seller and the Company to effect the Closing shall
be subject to the following conditions, except to the extent waived in writing
by Seller:
(a) REPRESENTATIONS AND WARRANTIES OF BUYER AND MERGER SUB. The
representations and warranties of Buyer and Merger Sub contained herein shall be
true and correct on the Closing Date as though made on the Closing Date (without
regard to any materiality or Material Adverse Circumstance qualifiers set forth
therein), except to the extent such representations and warranties by their
terms speak as of an earlier date, in which case they shall be true and correct
as of such earlier date (without regard to any materiality or Material Adverse
Circumstance qualifiers set forth therein), except to the extent that the
failure of such representations and warranties to be true and correct would not,
individually or in the aggregate, have a material adverse effect on Buyer's or
Merger Sub's ability to perform this Agreement.
(b) COVENANTS OF BUYER AND MERGER SUB. Buyer and Merger Sub shall
have in all material respects performed all obligations and complied with all
covenants set forth in this Agreement which are required to be performed or
complied with by them at or prior to the Closing.
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(c) OFFICER'S CERTIFICATE. Seller shall have received a certificate
of each of Buyer and Merger Sub signed by an authorized officer of Buyer and
Merger Sub, respectively, to the effect that the conditions in Sections 7.3(a)
and 7.3(b) have been satisfied, and certifying as to the accuracy of the
resolutions of Buyer's and Merger Sub's board of directors and Buyer, as Merger
Sub's sole stockholder, authorizing the execution, delivery and performance of
this Agreement and the Related Agreements to which they are a party and the
consummation of the transactions contemplated hereby and thereby.
(d) OPINION OF COUNSEL. Seller shall have received at the Closing
from Xxxxxxxx & Xxxxx, counsel to Buyer and Merger Sub, an opinion dated the
Closing Date, in form and substance substantially as set forth in Exhibit B.
ARTICLE VIII
TERMINATION OF OBLIGATIONS; SURVIVAL
8.1 TERMINATION OF AGREEMENT.
Anything herein to the contrary notwithstanding, unless extended by
mutual consent in writing of Buyer and Seller, this Agreement may be terminated
at any time before the Closing as follows and in no other manner:
(a) MUTUAL CONSENT. By mutual consent in writing of Buyer and
Seller.
(b) CLOSING NOT CONSUMMATED BY AGREED DATE. By Seller or Buyer at
any time after February 15, 2002 if the Closing shall not have occurred prior to
such date, unless extended by mutual consent in writing of Buyer and Seller;
PROVIDED that no party shall have the right to terminate this Agreement pursuant
to this Section 8.1(b) if such party's failure to fulfill any obligation under
this Agreement has been the proximate cause of, or resulted in, the failure of
the Closing to occur by such date.
(c) CONDITIONS TO BUYER'S AND MERGER SUB'S PERFORMANCE NOT MET. By
Buyer upon written notice to Seller if any event occurs or condition exists
which would render impossible the satisfaction of one or more conditions to the
obligations of Buyer or Merger Sub to consummate the Closing contemplated by
this Agreement as set forth in Article VII.
(d) CONDITIONS TO SELLER'S AND THE COMPANY'S PERFORMANCE NOT MET. By
Seller upon written notice to Buyer if any event occurs or condition exists
which would render impossible the satisfaction of one or more conditions to the
obligations of Seller or the Company to consummate the Closing contemplated by
this Agreement as set forth in Article VII.
8.2 EFFECT OF TERMINATION.
In the event that this Agreement shall be terminated pursuant to
Section 8.1, all future obligations of the parties under this Agreement shall
terminate without further liability of any party to another; PROVIDED that the
obligations of the parties contained in Section 10.17 (Expenses) and the
Confidentiality Agreement shall survive any such termination. A termination
under Section 8.1 shall not relieve any party of any liability for any
intentional misrepresentation under this Agreement or any breach of a covenant,
or be deemed to constitute a waiver of any
56
available remedy (including specific performance if available) for any such
intentional misrepresentation or breach of covenant. Except as set forth in the
immediately preceding sentence, in the event of a termination under Section 8.1,
no party shall have any liability under this Agreement because of the failure of
any representation or warranty made by such party hereunder to be true and
correct.
ARTICLE IX
INDEMNIFICATION
9.1 OBLIGATIONS OF SELLER.
From and after the Effective Time, Seller will indemnify and hold
harmless Buyer, the Surviving Corporation and their respective directors,
officers, employees, Affiliates, agents and assigns ("BUYER INDEMNITEES") from
and against any and all Losses based upon or arising from:
(a) any inaccuracy in any of the representations and warranties made
in this Agreement by Seller on the Closing Date;
(b) any breach or nonperformance of any of the covenants of Seller
contained in Sections 4.3, 4.6, or 4.7, Article I, Article V, Article VI,
Article IX or Article X;
(c) any other matter as to which Seller in other provisions of this
Agreement (including Sections 5.3, 6.10 and 6.11) has expressly agreed to
indemnify Buyer or (subsequent to Closing) the Surviving Corporation.
The provisions of this Section 9.1 do not limit any rights that Seller
may have against any Buyer Indemnitee that was a director, officer, employee,
Affiliate or agent of the Company prior to the Closing resulting from, based
upon or arising from actions or omissions of any such Person prior to the
Closing, and no indemnification will be available under this Section 9.1 for any
such Person as a result of any such actions or omissions.
9.2 OBLIGATIONS OF BUYER.
From and after the Effective Time, Buyer and the Surviving Corporation
(as successor to the Company) will indemnify and hold harmless Seller, and its
respective directors, officers, employees, affiliates, agents and assigns from
and against any Losses based upon or arising from:
(a) any inaccuracy in any of the representations and warranties made
in this Agreement by Buyer or Merger Sub on the Closing Date;
(b) any breach or nonperformance of any of the covenants of Buyer or
Merger Sub contained in Section 4.7, Article I, Article V, Article VI, Article
IX or Article X;
(c) any claim arising on or after the Closing Date relating to the
conduct of the business of the Surviving Corporation on or after the Closing
Date; or
57
(d) any other matter as to which Buyer in other provisions of this
Agreement (including Section 5.3) has expressly agreed to indemnify Seller.
9.3 PROCEDURE.
(a) NOTICE OF THIRD PARTY CLAIMS. Any party seeking indemnification
of any Loss or potential Loss arising from a claim asserted by a third party
shall give written notice to the party from whom indemnification is sought.
Written notice to the Indemnifying Party of the existence of a third-party claim
shall be given by the Indemnified Party promptly after its receipt of an
assertion of liability from the third party, and in any event within 15 days of
such assertion; PROVIDED that no delay on the part of the Indemnified Party in
notifying the Indemnifying Party shall relieve the Indemnifying Party from any
obligation hereunder unless, and then solely to the extent that, the
Indemnifying Party is prejudiced thereby. In the event the provisions of Section
5.3 conflict with the provisions of this Section 9.3, the provisions of Section
5.3 shall govern.
(b) DEFENSE. The Indemnifying Party may, at its option, control the
defense of an Indemnifiable Claim. If the Indemnifying Party does not assume
such defense or the Indemnifying Party so notifies the Indemnified Party within
30 days, the Indemnified Party may control the defense of such claim. In all
cases, the party without the right to control the defense of the Indemnified
Claim may retain counsel of its choice at its own expense and may participate in
the defense of such claim. Notwithstanding the foregoing sentence, if the
Indemnifying Party assumes control of such defense and the Indemnified Party
reasonably concludes, based on advice from counsel, that the Indemnifying Party
and the Indemnified Party have conflicting interests with respect to such
action, suit, proceeding or claim, the reasonable fees and expenses of counsel
to the Indemnified Party solely in connection therewith shall be considered
Losses for purposes of this Agreement; PROVIDED, however, that in no event shall
the Indemnifying Party be responsible for the fees and expenses of more than one
counsel for all Indemnified Parties.
(c) SETTLEMENT LIMITATIONS. Notwithstanding anything in this Section
9.3 to the contrary, neither the Indemnifying Party nor the Indemnified Party
shall, without the written consent of the other party, settle or compromise any
Indemnifiable Claim or permit a default judgment or consent to entry of any
judgment. If a settlement offer solely for money damages is made by the
applicable third party claimant, and the Indemnifying Party notifies the
Indemnified Party in writing of the Indemnifying Party's willingness to accept
the settlement offer and pay the amount called for by such offer without
reservation of any rights or defenses against the Indemnified Party, the
Indemnified Party may decline to accept the settlement offer and may continue to
contest such claim, free of any participation by the Indemnifying Party, and the
amount of any ultimate liability with respect to such Indemnifiable Claim that
the Indemnifying Party has an obligation to pay hereunder shall be limited to
the lesser of (A) the amount of the settlement offer that the Indemnified Party
declined to accept plus the Losses of the Indemnified Party relating to such
Indemnifiable Claim through the date of its rejection of the settlement offer or
(B) the aggregate Losses of the Indemnified Party with respect to such claim. If
the Indemnifying Party makes any payment on any claim, the Indemnifying Party
shall be subrogated, to the extent of such payment, to all rights and remedies
of the Indemnified Party to any insurance benefits or other claims of the
Indemnified Party with respect to such claim.
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9.4 SURVIVAL.
The representations and warranties contained in or made pursuant to
this Agreement shall expire at 11:59 p.m. on June 1, 2003, except that (i) the
representations and warranties contained in Sections 2.4 (Tax Returns and
Reports) and 2.15 (Employee Benefits) shall survive until sixty days after the
expiration of the applicable statute of limitations; PROVIDED that if there is
no statute of limitations applicable to any such representation or warranty,
such representation or warranty shall expire sixty days after the fifth
anniversary of the Closing and (ii) the representations and warranties contained
in Sections 2.1 (Organization and Related Matters), 2.2. (Stock), 2.8
(Authorization; No Conflicts) (only with respect to the first two sentences
thereof), 2.17 (No Brokers or Finders), 3.1 (Organization and Related Matters),
3.4 (No Brokers or Finders), 3.7 (Insurance Matters), 3.8 (Investment
Representation), 3.9 (Investigation; No Other Representations or Warranties) and
3.10 (No Knowledge of Indebtedness) shall remain in full force and effect
indefinitely. This Article IX shall survive the Closing and shall remain in
effect (a) with respect to Sections 9.1(a) and 9.2(a), so long as the relevant
representations and warranties survive, (b) with respect to Sections 9.1(b) and
9.2(b) to the extent those Sections relate to the covenants set forth in Article
IV, until and including June 1, 2003, (c) with respect to Sections 9.1(b) and
9.2(b) to the extent those Sections relate to covenants other than those set
forth in Article IV, so long as the applicable covenant survives and (d) with
respect to Sections 9.1(c), 9.2(c) and 9.2(d), indefinitely. Any matter as to
which a claim has been asserted by notice to the other party that is pending or
unresolved at the end of any applicable limitation period shall continue to be
covered by this Article IX notwithstanding any applicable statute of limitations
(which the parties hereby waive) until such matter is finally terminated or
otherwise resolved by the parties under this Agreement or by a court of
competent jurisdiction and any amounts payable hereunder are finally determined
and paid.
9.5 LIMITATIONS ON INDEMNIFICATION.
(a) Seller shall not be required to indemnify any Person under
Section 9.1(a) unless the aggregate amount of all Losses for which indemnity
would otherwise be payable by Seller under Section 9.1(a) exceeds $10,000,000,
and in such event, Seller shall be responsible for only the amount in excess of
such amount. In no event shall the total indemnification to be paid by Seller
under Section 9.1(a) exceed $100,000,000. Seller shall not be required to
indemnify any Person under Section 9.1(b) unless the aggregate of all Losses for
which indemnity would otherwise be payable by Seller under Section 9.1(b)
exceeds $250,000, and in such event, Seller shall be responsible for only the
amount in excess of such amount. The foregoing limitations, however, shall not
apply to any claims arising out of Section 2.2 (Stock), 2.3(e) (No
Indebtedness), 2.8 (Authorization; No Conflicts) (only with respect to the first
two sentences thereof), 2.17 (No Brokers or Finders), Section 5.3(b) (Liability
for Taxes), Section 6.10 (Indemnity for Certain ERISA Liabilities) and Section
6.11 (Employee Indemnity), for which (subject to the terms and conditions
thereof) Seller shall indemnify the Indemnified Party for the full amount of any
Loss. Any amounts required to be paid by Seller pursuant to Section 5.3 of this
Agreement shall not be deemed to be an indemnification payment for purposes of
this Section 9.5.
(b) Notwithstanding anything to the contrary contained herein, no
party shall, prior to or after the date on which the Final Net Working Capital
Amount is determined pursuant
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to Section 1.9, make any claim for indemnification with respect to the breach of
any representation or warranty contained in Article II (including Section 2.3)
or any covenant or agreement contained in Section 4.3 or Section 4.6 if the
facts underlying such claim were or could have been the basis for an objection
by Buyer to the Proposed Final Net Working Capital Amount pursuant to Section
1.9(e)(2).
9.6 TREATMENT OF PAYMENTS.
All payments made pursuant to this Article IX and any payments with
respect to Taxes under Article V shall be treated as adjustments to the Merger
Consideration, to the extent permitted by law.
9.7 REMEDIES EXCLUSIVE.
The remedies provided for in this Article IX shall constitute the sole
and exclusive remedy for any post-Closing claims made for breach of this
Agreement or in connection with the transactions contemplated hereby, except for
(a) claims for equitable remedies (including injunctive relief) arising out of
any breach of the Confidentiality Agreement, the Intellectual Property
Agreement, Section 5.6, Section 5.7, Section 6.10, Section 6.11 or this Article
IX and (b) claims for fraud. In no event shall a breach of a representation or
warranty be used as evidence of or deemed to constitute bad faith, misconduct or
an intent to defraud, even in the event that it is shown that any party or its
Affiliates or any of their respective directors, employees, officers,
representatives, advisors or agents knew or should have known of the existence
of information which was inconsistent with any of the representations and
warranties made herein. Each party hereby waives any provision of Law to the
extent that it would limit or restrict the agreement contained in this Section
9.7.
9.8 MITIGATION.
The parties shall cooperate with each other with respect to resolving
any claim or liability with respect to which one party is obligated to indemnify
the other party hereunder, including by making commercially reasonable efforts
to mitigate or resolve any such claim or liability. Each party shall use
commercially reasonable efforts to address any liabilities that may provide a
basis for an indemnifiable claim such that each party shall respond to any
liabilities in the same manner it would respond to such liabilities in the
absence of the indemnification provisions of this Agreement. In the event that
any party shall fail to make such commercially reasonable efforts to mitigate or
resolve any claim or liability, then notwithstanding anything else to the
contrary contained herein, the other party shall not be required to indemnify
any Person for that portion of any indemnifiable Loss that could reasonably be
expected to have been avoided if such party had made such efforts. Any request
for indemnification shall include any invoices and all supporting documents
containing reasonably detailed information about such Losses and costs,
including the basis therefor and the method of calculation of any Losses or
costs.
9.9 TAX EFFECT.
The amount of a Loss with respect to which the Indemnified Party is to
be indemnified pursuant to Section 9.1 or 9.2 initially shall be determined
without regard to any Tax benefit. However, to the extent that the Indemnified
Party recognizes a Tax benefit with respect
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to payments made by the Indemnifying Party with respect to any payment for
Losses made hereunder (a "NET TAX BENEFIT"), the Indemnifying Party shall be
entitled to such Net Tax Benefit, and the Indemnified Party shall pay to the
Indemnifying Party the amount of such Net Tax Benefit (but not in excess of the
indemnification payment or payments actually received from the Indemnifying
Party with respect to such Losses) at such time or times as and to the extent
that the Indemnified Party or any Affiliate of Indemnified Party actually
realizes such Net Tax Benefit through a refund of Tax or reduction in the actual
amount of Taxes which the Indemnified Party or any Affiliate of Indemnified
Party would otherwise have had to pay if such payment for Losses had not been
made, calculated by computing the amount of Taxes before and after inclusion of
any Tax items attributable to such Losses for which indemnification was made and
treating such Tax items as the last items claimed for any taxable year; PROVIDED
that, any such Net Tax Benefit shall be reduced by the amount of Tax detriment
(including the tax effect of any item of income or gain or other item (including
the tax effect of any decrease in Tax basis) that increases any amounts paid or
payable with respect to Taxes, any reduction in the amount of any refund of Tax
which would otherwise have been available, the tax effect of the utilization of
any net operating loss or capital loss or the tax effect of the utilization of
any Tax credits or other Tax attributes) that the Indemnified Party suffered as
a result of any Losses (a "NET TAX DETRIMENT") calculating the amount of any
such detriment by computing the amount of Taxes before and after inclusion of
any Tax items attributable to such Net Tax Detriment for which indemnification
was made and treating such Tax items as the last items claimed for any taxable
year. If any subsequent adjustments are made to any Tax Return relating to the
Indemnified Party for any taxable period as a result of or in settlement of any
audit, other administrative proceeding or judicial proceeding or as a result of
the filing of an amended return to reflect the consequences of any determination
made in connection with any such audit or proceeding and if such adjustment
results in any change in the amount of any Net Tax Benefit or Net Tax Detriment
to the Indemnified Party, appropriate payments will be made between the
Indemnifying Party and the Indemnified Party in accordance with the previous
sentence to properly reflect such adjustment amount. Upon the Indemnifying
Party's request, the Indemnified Party shall use its commercially reasonable
efforts, and shall cause its Affiliates to use their commercially reasonable
efforts, to realize any Net Tax Benefit and to avoid realizing any Net Tax
Detriment. Buyer and the Surviving Corporation (as successor to the Company), on
the one hand, and Seller, on the other hand, agree to provide the other or its
designated representatives with assistance and such documents and records
reasonably requested by them that are relevant to their ability to determine
when an amount is payable to the other party pursuant to this Section 9.9,
including copies of Tax Returns, estimated tax payments, schedules, and related
supporting documents.
9.10 ASSIGNMENT OF INSURANCE PROCEEDS.
Notwithstanding anything contained herein to the contrary, Buyer shall
assign to Seller, and shall cause the Surviving Corporation to assign to Seller,
and shall use, and shall cause the Surviving Corporation to use, commercially
reasonable efforts to enable Seller to collect, all insurance proceeds payable
pursuant to any insurance policy maintained by the Company on or prior to the
Closing Date with respect to any Loss for which indemnity is payable by Seller
under this Article IX.
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ARTICLE X
GENERAL
10.1 USAGE.
All terms defined herein have the meanings assigned to them herein for
all purposes, and such meanings are equally applicable to both the singular and
plural forms of the terms defined. "Include," "includes" and "including" shall
be deemed to be followed by "without limitation" whether or not they are in fact
followed by such words or words of like import. "Writing," "written" and
comparable terms refer to printing, typing, lithography and other means of
reproducing words in a visible form. Any instrument or Law defined or referred
to herein means such instrument or Law as from time to time amended, modified or
supplemented, including (in the case of instruments) by waiver or consent and
(in the case of any Law) by succession of comparable successor Laws and includes
(in the case of instruments) references to all attachments thereto and
instruments incorporated therein. References to a Person are, unless the context
otherwise requires, also to its successors and assigns. Any term defined herein
by reference to any instrument or Law has such meaning whether or not such
instrument or Law is in effect. "Shall" and "will" have equal force and effect.
"Hereof," "herein," "hereunder" and comparable terms refer to the entire
instrument in which such terms are used and not to any particular article,
section or other subdivision thereof or attachment thereto. References to "the
date hereof" or "the date of this Agreement" shall mean December 7, 2001.
References in an instrument to "Article," "Section" or another subdivision or to
an attachment are, unless the context otherwise requires, to an article, section
or subdivision of or an attachment to such instrument. References to any gender
include, unless the context otherwise requires, references to all genders, and
references to the singular include, unless the context otherwise requires,
references to the plural and vice versa. All accounting terms not otherwise
defined herein have the meaning assigned under generally accepted accounting
principles in the United States which have effective dates on or prior to the
date of the applicable or related financial statement.
10.2 AMENDMENTS; WAIVERS.
This Agreement and any Disclosure Schedule, schedule or exhibit
attached hereto or delivered on the date hereof may be amended (except as
contemplated in Article IV and Article VI) only by agreement in writing of all
parties. The parties hereto agree that, after the Closing, this Agreement shall
not be amended in a manner adverse to Xxxxxx Commercial Paper Inc., as
administrative agent for Merger Sub's senior secured credit facility, without
such entity's written consent, such consent not to be unreasonably withheld. No
waiver of any provision nor consent to any exception to the terms of this
Agreement or any agreement contemplated hereby shall be effective unless in
writing and signed by the party to be bound and then only to the specific
purpose, extent and instance so provided.
10.3 SCHEDULES; EXHIBITS.
Each Disclosure Schedule, schedule and exhibit delivered pursuant to
the terms of this Agreement shall be in writing and shall qualify this
Agreement, although schedules need not be attached to each copy of this
Agreement. The mere inclusion of an item in a Disclosure
62
Schedule as an exception to a representation or warranty shall not be deemed an
admission by Seller that such item represents an exception or material fact,
event or circumstance or that such item is reasonably likely to constitute a
Material Adverse Circumstance. Subject to the last sentence of Section 4.10(a),
any fact or item which is clearly disclosed in any Section of the Seller
Disclosure Schedule or in the Financial Statements in a way as to make its
relevance or applicability to information called for by any other Section or
Sections of the Seller Disclosure Schedule reasonably apparent shall be deemed
to be disclosed in such other Section or Sections of the Seller Disclosure
Schedule, notwithstanding the omission of a reference or cross-reference
thereto.
10.4 FURTHER ASSURANCES.
Each party shall use all commercially reasonable efforts to cause all
conditions to its and the other parties' obligations hereunder, the Debt
Financing and the Equity Financing to be timely satisfied and to perform and
fulfill all obligations on its part to be performed and fulfilled under this
Agreement, to the end that the transactions contemplated by this Agreement shall
be effected substantially in accordance with its terms as soon as reasonably
practicable. The parties shall cooperate with each other in such actions and in
securing any requisite Approvals. Each party shall execute and deliver after the
Closing such further certificates, agreements and other documents and take such
other commercially reasonable actions as the other party may reasonably request
to consummate or implement the transactions contemplated hereby or to evidence
such events or matters.
10.5 GOVERNING LAW.
This Agreement and the legal relations between the parties shall be
governed by and construed in accordance with the laws of the State of
New York
applicable to contracts made and performed in such State and without regard to
conflicts of law doctrines (other than
New York General Obligations Law, Section
5-1401); PROVIDED that the Merger shall be consummated in accordance with the
DGCL.
10.6 HEADINGS.
The descriptive headings of the Articles, Sections and subsections of
this Agreement are for convenience only and do not constitute a part of this
Agreement.
10.7 COUNTERPARTS.
This Agreement and any amendment hereto or any other agreement (or
document) delivered pursuant hereto may be executed in one or more counterparts
and by different parties in separate counterparts. All of such counterparts
shall constitute one and the same agreement (or other document) and shall become
effective (unless otherwise provided therein) when one or more counterparts have
been signed by each party and delivered to the other party.
10.8 PARTIES IN INTEREST.
This Agreement shall be binding upon and inure to the benefit of each
party, and nothing in this Agreement, express or implied, is intended to confer
upon any other Person any
63
rights or remedies of any nature whatsoever under or by reason of this
Agreement, except that Verizon shall be a third party beneficiary with respect
to Sections 5.3, 5.4, 5.7 and 5.8 and Article VI hereof. Nothing in this
Agreement is intended to relieve or discharge the obligation of any third person
to any party to this Agreement.
10.9 PERFORMANCE BY SUBSIDIARIES.
Each party agrees to cause its Subsidiaries, if any, to comply with
any obligations hereunder relating to such Subsidiaries and to cause its
Subsidiaries to take any other action which may be necessary or reasonably
requested by the other party in order to consummate the transactions
contemplated by this Agreement.
10.10 REMEDIES; WAIVER.
No failure on the part of any party to exercise or delay in exercising
any right hereunder shall be deemed a waiver thereof, nor shall any single or
partial exercise preclude any further or other exercise of such or any other
right.
10.11 SEVERABILITY.
If any provision of this Agreement is determined to be invalid,
illegal or unenforceable by any Governmental Entity, the remaining provisions of
this Agreement to the extent permitted by Law shall remain in full force and
effect provided that the essential terms and conditions of this Agreement for
all parties remain valid, binding and enforceable and provided that the economic
and legal substance of the transactions contemplated is not affected in any
manner materially adverse to any party. In the event of any such determination,
the parties agree to negotiate in good faith to modify this Agreement to fulfill
as closely as possible the original intents and purposes hereof. To the extent
permitted by Law, the parties hereby to the same extent waive any provision of
Law that renders any provision hereof prohibited or unenforceable in any
respect.
10.12 NO PUNITIVE DAMAGES.
Notwithstanding anything to the contrary elsewhere in this Agreement,
no party (or its Affiliates) shall, in any event, be liable to any other party
(or its Affiliates) for any punitive damages; PROVIDED, however, that this
Section 10.12 will not apply to any Indemnifiable Claim payable to an
Indemnified Party pursuant to this Agreement for any Losses payable by such
Indemnified Party to a third party based upon or arising from a claim made by
such third party.
10.13 KNOWLEDGE CONVENTION.
Whenever any statement herein or in any schedule, exhibit, certificate
or other document delivered pursuant to this Agreement is made "to the knowledge
of Seller" or words of similar intent or effect, such statement shall be deemed
to be made with respect to the actual knowledge of the Executive Vice President
- Strategy, Development & Planning of Verizon, the Senior Vice President & Chief
Financial Officer - International & Information Services of Verizon, the Vice
President and Associate General Counsel - Strategic Transactions of Verizon
64
or the Vice President and Associate General Counsel - Intellectual Property of
Verizon after due inquiry made to the Controller of the Company, the Vice
President - Associate General Counsel of the Company, the Vice President -
Marketing of the Company and the Vice President - Business Development of the
Company. The names of each of the foregoing officers of Verizon and the Company
are set forth in Section 10.13 of the Seller Disclosure Schedule. Whenever any
statement herein or in any schedule, exhibit, certificate or other document
delivered pursuant to this Agreement is made "to the knowledge of Buyer" or
words of similar intent or effect, such statement shall be deemed to be made
with respect to the actual knowledge of senior officers or representatives of
the Buyer comparable to those of Seller identified above after comparable due
inquiry.
10.14 NOTICES.
Any notice or other communication hereunder must be given in writing
and (a) delivered in person, (b) transmitted by telex, telefax or
telecommunications mechanism, provided that any notice so given is also mailed
by certified or registered mail (postage prepaid), receipt requested, or (c)
sent by nationally recognized express delivery service to the parties and at the
addresses specified herein or to such other address or to such other person as
either party shall have last designated by such notice to the other party. Each
such notice or other communication shall be effective (i) if given by
telecommunication, when transmitted to the applicable number so specified herein
and an appropriate answerback is received, or (ii) if given by any other means,
when actually received at such address. Any notice or other communication
hereunder shall be delivered as follows:
If to Buyer, Merger Sub or the Surviving Corporation, addressed to:
TSI Telecommunication Holdings, Inc.
c/o GTCR Xxxxxx Xxxxxx, L.L.C.
0000 Xxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxx
Xxxxxx X. Xxxxx
Facsimile: (000) 000-0000
With a copy to:
Xxxxxxxx & Xxxxx
000 Xxxx Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx
Facsimile: (000) 000-0000
and, after the Closing only,
Xxxxxx Commercial Paper Inc.
0 Xxxxx Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
65
Attention: Xxxxxx Xxxxx
Facsimile: (000) 000-0000
and
TSI Telecommunication Services, Inc.
000 X. Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxx, Xxxxxxx 00000
Attention: Associate General Counsel
Facsimile: (000) 000-0000
If to Seller at any time, or the Company prior to the Effective Time:
Verizon Information Services
c/o Verizon Communications Inc.
1095 Avenue of the Xxxxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxxx Xxxxx
Facsimile: (000) 000-0000
With copies to:
Verizon Communications Inc.
1095 Avenue of the Xxxxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: X. Xxxxxxx Xxxxxxx
Facsimile: (000) 000-0000
and
O'Melveny & Xxxxx LLP
000 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxx, Xx.
Facsimile: (000) 000-0000
10.15 PUBLICITY AND REPORTS.
Seller and Buyer shall coordinate all publicity relating to the
transactions contemplated by this Agreement, and no party shall issue any press
release, publicity statement or other public notice relating to this Agreement,
or the transactions contemplated by this Agreement, without consulting with the
other parties; PROVIDED that to the extent that independent legal counsel to
Seller or Buyer, as the case may be, shall deliver a written opinion to the
other parties that a particular action is required by applicable law, the
parties shall be obligated only to use commercially reasonable efforts to
consult with the other parties prior to issuing any such press release,
publicity statement or other public notice. Each party shall obtain
66
the prior consent of the other parties to the form and content of any
information included in any application or report made to any Governmental
Entity or which relates to this Agreement.
10.16 INTEGRATION.
This Agreement and the Related Agreements, together with the schedules
and exhibits thereto, (i) constitute the entire agreement between the parties
pertaining to the subject matter hereof and (ii) supersede all prior agreements
and understandings of the parties in connection therewith, except for the
Confidentiality Agreement, which remains in full force and effect.
10.17 EXPENSES.
Seller, on the one hand, and Buyer and Merger Sub, on the other hand,
pay their own expenses incident to the evaluation of the Company and the
Business and the negotiation, preparation and performance of this Agreement and
the transactions contemplated hereby, including the fees, expenses and
disbursements of their respective investment bankers, accountants and counsel.
The expenses of the Company incurred prior to the Closing Date for accountants
and legal counsel in connection with the negotiation, execution, delivery and
performance of this Agreement shall be for the account of Seller.
10.18 NO ASSIGNMENT.
Neither this Agreement nor any rights or obligations under it are
assignable or delegable by Buyer or Merger Sub except that Buyer and Merger Sub
may assign their express rights hereunder to (i) any wholly-owned subsidiary of
Merger Sub and (ii) any of Merger Sub's lenders providing financing for the
transactions contemplated hereby (and all extensions, renewals, replacements,
refinancings and refundings thereof in whole or in part) as collateral security
for such financing. Buyer and Merger Sub shall remain liable to Seller for
causing the payment of the consideration set forth herein by the Surviving
Corporation and other obligations of Buyer and Merger Sub hereunder
notwithstanding a permitted assignment.
10.19 REPRESENTATION BY COUNSEL; INTERPRETATION.
Each party hereto acknowledges that each other party to this Agreement
has been represented by counsel in connection with this Agreement and the
transactions contemplated by this Agreement. Accordingly, any rule of Law or any
legal decision that would require interpretation of any claimed ambiguities in
this Agreement against the party that drafted it has no application and is
expressly waived. The provisions of this Agreement shall be interpreted in a
reasonable manner to effect the intent of the parties hereto.
10.20 REFERENCE OF DISPUTES TO SENIOR OFFICERS OF SELLER AND BUYER.
Any dispute among any of the parties hereto arising out of or in
connection with this Agreement or the Related Agreements or any alleged breach
hereof or thereof may, at the option of either Seller or Buyer, be submitted for
discussion and possible resolution by senior officers of Seller and Buyer, as
designated by their respective chief executive officers, for a
67
period of 30 days (or such longer period as the parties may mutually agree in
particular cases) before initiating any litigation pursuant to Section 10.21
hereof.
10.21 RESOLUTION OF DISPUTES.
(a) All litigation relating to or arising under or in connection
with this Agreement or any of the Related Agreements shall be brought only in
the federal or state courts located in the State and County of
New York, which,
except as expressly provided in Section 1.9(e), Section 5.3(j) and Section 8 of
the Wireless Guaranty, shall have exclusive jurisdiction to resolve any disputes
with respect to this Agreement or the Related Agreements, with each party
irrevocably consenting to the jurisdiction thereof for any actions, suits or
proceedings arising out of or relating to this Agreement or the Related
Agreements.
(b) The parties irrevocably waive trial by jury in any legal action
or proceeding relating to this Agreement or any other agreement entered into in
connection therewith and for any counterclaim with respect thereto.
(c) In the event of any breach of the provisions of this Agreement
or the Related Agreements, a non-breaching party shall be entitled to seek
equitable relief, including in the form of injunctions and orders for specific
performance, where the applicable legal standards for such relief in such courts
are met, in addition to all other remedies available to such non-breaching party
with respect thereto at law or in equity.
10.22 RESTATEMENT EFFECTIVE DATE.
This Agreement shall become effective on the date (the "RESTATEMENT
EFFECTIVE DATE") on which each of Buyer, Merger Sub, Seller and the Company
shall have signed a counterpart hereof (whether the same or different
counterparts) and shall have delivered such counterpart to the other parties
hereto. On and as of the occurrence of the Restatement Effective Date in
accordance with this Section 10.22, (a) the Existing Stock Purchase Agreement
shall be deemed to be amended and restated in its entirety and superseded by
this Agreement with effect from and after December 7, 2001 or, in the case of
the Company and Merger Sub, from and after January ___, 2002 and (b) each
reference in any Related Agreement to the Existing Stock Purchase Agreement
shall be deemed to be a reference to this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be executed by its duly authorized officer(s) as of the day and year first above
written.
TSI TELECOMMUNICATION HOLDINGS, INC.
By: /s/ Xxxxx X. Xxxxx
Name: Xxxxx X. Xxxxx
Title: Vice President
TSI MERGER SUB, INC.
By: /s/ Xxxxx X. Xxxxx
Name: Xxxxx X. Xxxxx
Title: Vice President
VERIZON INFORMATION SERVICES INC.
By: /s/ Xxxxx Xxxxxxx
Name: Xxxxx Xxxxxxx
Title: President
By: /s/ Xxxxx Xxxxxxxxxxxx
Name: Xxxxx Xxxxxxxxxxxx
Title: Vice President--Finance
TSI TELECOMMUNICATION SERVICES, INC.
By: /s/ Xxxxxxx X. Xxxxxxxx
Name: Xxxxxxx X. Xxxxxxxx
Title: President
By: /s/ Xxxxxx Xxxxxx, Jr.
Name: Xxxxxx Xxxxxx, Jr.
Title: Assistant Secretary
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