EXHIBIT 99.1
AGREEMENT AND PLAN OF MERGER
among
XXXX ATLANTIC CORPORATION
(D/B/A VERIZON COMMUNICATIONS)
VERIZON VENTURES I INC.
VERIZON VENTURES II INC.
and
NORTHPOINT COMMUNICATIONS GROUP, INC.
Dated as of August 7, 2000
TABLE OF CONTENTS
Page
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ARTICLE I THE TRANSACTIONS;
CLOSING
Section 1.1 The Asset Contribution..................................................2
Section 1.2 The Merger..............................................................9
Section 1.3 Closing................................................................10
Section 1.4 Effective Time of the Merger...........................................11
Section 1.5 Effects of the Merger..................................................11
Section 1.6 Subsequent Actions.....................................................11
Section 1.7 Certificate of Incorporation; By-laws; Directors and
Officers of the Surviving Corporation..................................12
ARTICLE II EFFECT ON THE STOCK OF NORTHPOINT AND MERGER SUBSIDIAR
Section 2.1 Conversion of Securities...............................................12
Section 2.2 Conversion of Shares...................................................12
Section 2.3 Exchange Procedures....................................................14
Section 2.4 Transfer Books.........................................................17
Section 2.5 Transfer Taxes; Withholding............................................17
Section 2.6 Dissenting Shares......................................................18
Section 2.7 Options to Purchase NorthPoint Common Stock............................18
Section 2.8 Restricted Stock.......................................................19
Section 2.9 Certain Adjustments....................................................20
ARTICLE III CERTAIN ADDITIONAL MATTERS
Section 3.1 Certificate of Incorporation and By-laws of Parent.....................20
Section 3.2 Corporate Headquarters.................................................20
Section 3.3 Corporate Identity.....................................................20
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF NORTHPOINT
Section 4.1 Organization and Qualification; Subsidiaries...........................21
Section 4.2 Certificate of Incorporation and By-laws...............................21
Section 4.3 Capitalization.........................................................21
Section 4.4 Authority Relative to this Agreement...................................22
Section 4.5 No Conflict; Required Filings and Consents.............................23
Section 4.6 SEC Filings; Financial Statements......................................24
Section 4.7 Absence of Certain Changes or Events...................................25
Section 4.8 Litigation.............................................................25
Section 4.9 Permits; No Violation of Law...........................................25
Section 4.10 Proxy Statement........................................................26
Section 4.11 Employee Matters; ERISA................................................27
Section 4.12 Labor Matters..........................................................28
Section 4.13 Environmental Matters..................................................29
Section 4.14 Tax Matters............................................................29
Section 4.15 Intellectual Property..................................................31
Section 4.16 Insurance..............................................................32
Section 4.17 Certain Contracts......................................................32
Section 4.18 Board Action; Vote Required; Applicability of Section 203..............33
Section 4.19 Opinions of Financial Advisors.........................................33
Section 4.20 Brokers................................................................34
ARTICLE V REPRESENTATIONS AND WARRANTIES OF VERIZON
Section 5.1 Organization and Qualification; Subsidiaries...........................34
Section 5.2 Authority Relative to this Agreement...................................34
Section 5.3 No Conflict; Required Filings and Consents.............................35
Section 5.4 Litigation.............................................................36
Section 5.5 Permits; No Violation of Law...........................................36
Section 5.6 Proxy Statement........................................................37
Section 5.7 Labor Matters..........................................................37
Section 5.8 Environmental Matters..................................................38
Section 5.9 Assets.................................................................39
Section 5.10 Certain Contracts......................................................39
Section 5.11 Intellectual Property..................................................40
Section 5.12 Brokers................................................................41
Section 5.13 Tax Matters............................................................41
Section 5.14 Insurance..............................................................41
Section 5.15 No Business Activities.................................................41
ARTICLE VI COVENANTS AND AGREEMENTS
Section 6.1 Conduct of Business of NorthPoint Pending the Effective Time...........42
Section 6.2 Conduct of the Verizon DSL Business Pending the
Effective Time.........................................................45
Section 6.3 No Solicitation........................................................46
Section 6.4 Regulatory Compliance Costs............................................48
Section 6.5 Real Estate Matters....................................................49
Section 6.6 Facilities Related Payments............................................50
Section 6.7 Systems Assets.........................................................53
Section 6.8 Future Contracts.......................................................53
Section 6.9 Master Services Agreement..............................................53
Section 6.10 Vendor Contracts.......................................................53
ARTICLE VII ADDITIONAL AGREEMENTS
Section 7.1 Proxy Statement and Registration Statement.............................54
Section 7.2 NorthPoint Stockholder Meeting.........................................55
Section 7.3 Additional Agreements..................................................57
Section 7.4 Access to Information..................................................58
Section 7.5 Public Announcements...................................................59
Section 7.6 Indemnification; Maintenance of NorthPoint's
Indemnification, Directors' and Officers' Insurance....................60
Section 7.7 Stock Market Listing...................................................60
Section 7.8 Post-Merger Parent Board of Directors..................................61
Section 7.9 No Shelf Registration..................................................61
Section 7.10 Affiliates.............................................................61
Section 7.11 Blue Sky...............................................................62
Section 7.12 Tax-Free Reorganization................................................62
Section 7.13 Employment and Employee Benefits Matters...............................62
Section 7.14 Indemnification by Verizon.............................................63
Section 7.15 Preemptive Right.......................................................65
Section 7.16 Further Assurances.....................................................65
ARTICLE VIII CONDITIONS TO THE ASSET CONTRIBUTION AND THE MERGER
Section 8.1 Conditions to Each Party's Obligation to Effect the Merger.............65
Section 8.2 Additional Conditions to Obligations of NorthPoint.....................67
Section 8.3 Additional Conditions to Obligations of Verizon........................68
ARTICLE IX TERMINATION, AMENDMENT AND WAIVER
Section 9.1 Termination............................................................70
Section 9.2 Effect of Termination..................................................71
Section 9.3 Amendment..............................................................73
Section 9.4 Waiver.................................................................73
ARTICLE X GENERAL PROVISIONS
Section 10.1 Non-Survival of Representations, Warranties and Agreements.............73
Section 10.2 Notices................................................................74
Section 10.3 Expenses...............................................................75
Section 10.4 Certain Definitions....................................................75
Section 10.5 Headings...............................................................79
Section 10.6 Severability...........................................................79
Section 10.7 Entire Agreement; No Third-Party Beneficiaries.........................80
Section 10.8 Assignment.............................................................80
Section 10.9 Governing Law..........................................................80
Section 10.10 Counterparts...........................................................80
Section 10.11 Interpretation.........................................................80
AGREEMENT AND PLAN OF MERGER
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This AGREEMENT AND PLAN OF MERGER, dated as of August 7, 2000 (this
"Agreement"), by and among Xxxx Atlantic Corporation (d/b/a Verizon
Communications), a Delaware corporation ("Verizon"), Verizon Ventures I Inc., a
Delaware corporation ("Parent"), Verizon Ventures II Inc., a Delaware
corporation and wholly owned subsidiary of Parent ("Merger Subsidiary"), and
NorthPoint Communications Group, Inc., a Delaware corporation ("NorthPoint").
WHEREAS, the Boards of Directors of Verizon and NorthPoint have
determined that it is in the best interests of their respective stockholders to
combine their respective digital subscriber line ("DSL") operations in a
business combination transaction in which (i) Verizon will contribute, or will
cause to be contributed, to Parent (A) the Cash Amount (as defined below), of
which $350 million will be used to fund the Merger Consideration (as defined
below), and (B) certain of the assets used by Verizon in connection with its
wholesale DSL operations, in exchange for shares of common stock of Parent (the
"Asset Contribution") and (ii) Merger Subsidiary will be merged with and into
NorthPoint, with NorthPoint surviving as a wholly owned subsidiary of Parent as
provided in this Agreement (the "Merger");
WHEREAS, concurrently with entering into this Agreement, Verizon is
entering into (i) a commitment letter relating to a $200 million senior secured
debt facility (the "Debt Financing") and (ii) a securities purchase agreement
relating to the purchase by Verizon of $150 million of 9% Convertible Preferred
Stock of NorthPoint (the "Preferred Financing");
WHEREAS, for U.S. federal income tax purposes, it is intended that (i)
the Asset Contribution and the Merger each will qualify as a transaction
described in Section 351 of the Internal Revenue Code of 1986, as amended (the
"Code"), and (ii) the Merger will qualify as a transaction described in Section
368(a) of the Code;
WHEREAS, for financial accounting purposes, it is intended that the
transactions contemplated by this Agreement will be accounted for as a purchase
transaction in accordance with United States generally accepted accounting
principles ("GAAP"); and
WHEREAS, concurrently with the execution of this Agreement, Parent and
certain stockholders of NorthPoint (including certain NorthPoint officers
and directors) are entering into a Voting and Lock-Up Agreement in the form
attached as Exhibit A hereto.
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NOW, THEREFORE, in consideration of the foregoing and the agreements
contained in this Agreement, and intending to be legally bound hereby, the
parties agree as follows:
ARTICLE I
THE TRANSACTIONS; CLOSING
Section 1.1 The Asset Contribution.
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(a) Effective as of the Closing (as defined in Section 1.3 hereof),
upon the terms and subject to the conditions set forth in this Agreement and in
accordance with the Delaware General Corporation Law (the "DGCL") Verizon shall,
or shall cause one or more of its Subsidiaries to, (A) contribute to Parent cash
in an amount equal to $800 million less (i) the aggregate principal amount of
the Debt Financing and the Preferred Financing outstanding as of the Closing
Date (as defined below) and (ii) any accrued and unpaid interest and dividends
thereon through such date, and subject to adjustment pursuant to Sections 1.1(g)
and 1.1(h) hereof (the "Cash Amount"), and (B) sell, convey, assign, transfer
and deliver to Parent all of the right, title and interest of Verizon and its
Subsidiaries in and to all of the business, assets, properties, rights and
interests (of whatever kind and nature, real or personal, tangible or
intangible), other than the Excluded Verizon Assets (as defined below), that are
owned, held or used by Verizon and/or any of its Subsidiaries on the Closing
Date (as defined below) and relate exclusively to or are used exclusively by
Verizon or its Subsidiaries in connection with, the Verizon DSL Business
(collectively, the "Verizon DSL Assets"). Subject to Section 1.1(b) hereof, it
is agreed and understood that the Verizon DSL Assets shall include the
following:
(i) Verizon Network Equipment Assets. The network equipment
assets used exclusively by the Verizon DSL Business and identified by category
in Section 1.1(a)(i) of the Verizon Disclosure Schedule (the "Verizon Network
Equipment Assets"), which assets are generally located at the central offices
listed in Section 1.1(a)(i) of the Verizon Disclosure Schedule (the "Verizon
Central Offices");
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(ii) Permits. To the extent assignable, all material consents,
permits, licenses, orders, registrations, franchises, certificates, approvals or
other similar rights from any federal, state or local regulatory agencies
related exclusively to the Verizon DSL Business;
(iii) Contracts. Except as the parties may otherwise agree, the
contracts, leases, indentures, agreements, commitments and all other legally
binding agreements (including without limitation real estate, capital and
operating leases) either described by category or identified in Section
1.1(a)(iii) of the Verizon Disclosure Schedule (the "Assumed Verizon
Contracts");
(iv) Books and Records. Subject to any applicable legal
restrictions, all books, records and files related exclusively to the Verizon
DSL Business, including customer and supplier lists, sales and other records,
promotional material, operating manuals and guidelines, equipment maintenance
and warranty information, software manuals and documentation, files, documents,
papers, data stored in electronic, optical or magnetic form, agreements, books
of account, contracts, specifications and all correspondence with any customers,
suppliers, employees or governmental entities or agencies related exclusively to
the Verizon DSL Business and personnel records related to the Verizon DSL
Employees;
(v) Certain Indebtedness. All of Verizon's rights with respect
to any amounts outstanding under the Debt Financing at the Effective Time,
including any accrued and unpaid interest thereon; and
(vi) Intellectual Property. (A) The intellectual property used
by Verizon and its Subsidiaries exclusively in connection with the Verizon DSL
Business and identified in Section 1.1(a)(vi) of the Verizon Disclosure Schedule
and (B) any additional intellectual property developed after the date hereof and
prior to the Effective Time which is used by Verizon and its Subsidiaries
exclusively in connection with the Verizon DSL Business, all of which shall be
listed in a closing schedule to be delivered by Verizon to NorthPoint at the
Effective Time.
(b) Notwithstanding anything herein to the contrary, from and after
the Closing, Verizon and each of its Subsidiaries shall retain all their
respective right, title and interest in and to, and there shall be excluded from
the sale, conveyance, assignment or transfer to Parent hereunder, and the
Verizon DSL Assets shall not include, the following (collectively, the "Excluded
Verizon Assets"):
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(i) any property or assets of Verizon or its Subsidiaries which are
(A) used in the general administration of Verizon's or its Subsidiaries'
businesses or (B) not used exclusively for the benefit of the Verizon DSL
Business or its activities;
(ii) all rights of Verizon or its Subsidiaries under this
Agreement or any other agreements, instruments and certificates delivered in
connection with this Agreement;
(iii) copies of all records prepared by Verizon and/or any of its
Subsidiaries and counsel and advisors thereto in connection with the sale of
the Verizon DSL Assets contemplated hereby;
(iv) all rights, claims, demands and judgments to the extent
relating to, arising out of or used in connection with the Excluded Verizon
Assets;
(v) all rights to claims for refunds of income taxes relating to the
Verizon DSL Business for any taxable period ending on or before the Closing Date
or the portion ending on the Closing Date of any taxable period that includes
(but does not end on) such date;
(vi) all accounts receivable, notes receivable and all notes, bonds
and other evidences of indebtedness of and rights to receive payments from any
Person, in each case arising out of the conduct of the Verizon DSL Business
prior to the Effective Time, and, except as provided in the Employee Matters
Agreement, all cash and cash equivalents of the Verizon DSL Business as of the
Effective Time; and
(vii) any and all rights and licenses in third party intellectual
property which are not used in connection with the Verizon DSL Business or, if
used in connection with the Verizon DSL Business, which cannot be conveyed or
assigned to Parent by reason of: (A) the requested consent of such third party
not having been obtained; (B) any requirement of payment of compensation or
other consideration to any third party; or (C) any adverse effect on Verizon and
its Subsidiaries.
(c) Notwithstanding anything herein to the contrary, Verizon shall not
assign, and Parent shall not assume or undertake, any liabilities or obligations
of Verizon, whether relating to the Verizon DSL Business or otherwise, except as
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expressly set forth in this Agreement. Parent shall assume the following
obligations and liabilities:
(i) Contracts and Leases. All obligations and liabilities of Verizon
and its Subsidiaries under the Assumed Verizon Contracts arising or to be
performed after the Effective Time, including those under any real estate,
operating or capital lease or arrangement identified as an Assumed Verizon
Contract;
(ii) Operational Liabilities. All obligations and liabilities
related to, arising from, or with respect to, the operation of the Verizon DSL
Business from and after the Effective Time or any and all products or services
sold (whether or not under warranty) by the Verizon DSL Business after the
Effective Time, including obligations and liabilities for and with respect to
(whether entered into before or after the Effective Time) outstanding
commitments (in the form of accepted purchase orders or otherwise) to sell
services, or outstanding quotations, proposals or bids with respect to the sale
of services, any refunds, adjustments, allowances, repairs, exchanges, returns
and warranty, merchantability, products liability and other claims;
(iii) Employee Liabilities. Subject to the provisions of the
Employee Matters Agreement among Parent, NorthPoint and Verizon (the "Employee
Matters Agreement"), all liabilities and obligations relating to the Verizon DSL
Employees who will be employed by Parent, to the extent arising from and after
the Effective Time; and
(iv) Tax Liabilities. All liabilities and obligations relating
to federal, state, local, foreign or other governmental taxes, assessments,
duties, fees, levies or similar charges of any kind, including all interest,
penalties and additions thereto, to the extent related to the operation of the
Verizon DSL Business from and after the Effective Time.
(d) It is the intention of the Parties that the Asset Contribution shall
not include any working capital items. The amount of (A) any current liabilities
associated with the Verizon DSL Assets that cannot be excluded from the Verizon
DSL Assets (such as an accrued and unpaid payment obligation under any Assumed
Verizon Contract) and (B) any current assets associated with the Verizon DSL
Assets that cannot be excluded from the Verizon DSL Assets (such as pre-paid
expenses) shall be netted against each other and settled in cash between the
Parties on the Closing Date or as promptly as practicable thereafter (it being
understood and
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agreed that if clause (A) exceeds clause (B), Verizon shall pay Parent the
difference between clause (A) and clause (B); and that if clause (B) exceeds
clause (A), Parent shall pay to Verizon the difference between (A) and (B)).
(e) In consideration of the contribution of the Cash Amount, the
contribution to Parent of the Verizon DSL Assets and the conversion of
convertible preferred stock (and any securities of NorthPoint issued upon
conversion thereof) held by Verizon pursuant to Section 2.2(a)(ii) hereof,
Parent shall issue to Verizon at the Effective Time that number of fully paid
and nonassessable shares of Parent Common Stock (the "Verizon Shares") such that
Verizon's ownership interest in the issued and outstanding shares of Parent
Common Stock immediately after giving effect to the Merger set forth in Section
1.2 hereof (the "Verizon Ownership Percentage") shall be equal to 55%, subject
to upward adjustment as provided in Section 1.1(g)(iii) hereof. The Verizon
Shares shall be validly issued, fully paid and nonassessable immediately upon
issuance.
(f) (i) In further consideration of the contribution of the Cash
Amount, the contribution to Parent of the Verizon DSL Assets and the conversion
of convertible preferred stock held by Verizon pursuant to Section 2.2(a)(ii)
hereof, from and after the Effective Time, immediately upon the exercise of any
NorthPoint Equity Right outstanding immediately prior to the Effective Time
(each a "Mirror Equity Right"), Parent shall issue to Verizon that number of
shares of Parent Common Stock (the "Mirror Shares") equal to (A) the Mirror
Share Number (as defined below) multiplied by (B) the difference (if positive)
obtained by subtracting (x) the number of shares of Parent Common Stock, if any,
repurchased in the open market (the "Repurchased Shares") on the date of
issuance of shares pursuant to the Mirror Equity Right with the proceeds
received by NorthPoint upon exercise of such Mirror Equity Right from (y) the
number of shares of Parent Common Stock issued on such date in respect of such
Mirror Equity Right; provided, however, that if at any time Parent shall fail to
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issue to Verizon the appropriate number of Mirror Shares on the date of issuance
of shares pursuant to any Mirror Equity Right, then the number of Repurchased
Shares shall thereafter be deemed to be zero for all future issuances of shares
of Parent Common Stock upon the exercise of any Mirror Equity Right. The Mirror
Shares and the Verizon Shares are being issued to Verizon in consideration of
the aforementioned transactions and shall be validly issued, fully paid and
nonassessable immediately upon issuance.
(ii) For purposes of this Agreement, the "Mirror Share Number"
shall be equal to (A) the percentage of the issued and outstanding shares of
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Parent Common Stock owned by Verizon immediately following the Effective Time
after giving effect to any adjustments to reflect the NorthPoint Shortfall
Amount (as defined in Section 1.1(g) hereof), if any, divided by (B) the
percentage of the issued and outstanding shares of Parent Common Stock owned by
all stockholders of Parent other than Verizon immediately following the
Effective Time after giving effect to any adjustments to reflect the NorthPoint
Shortfall Amount, if any.
(iii) For a period of two years after the date hereof, upon
the exercise of any Mirror Equity Right, Parent shall provide Verizon with a
report setting forth in reasonable detail the number of shares of Parent Common
Stock issued upon each exercise of a Mirror Equity Right, the proceeds received
by Parent upon such exercise, the number of Repurchased Shares (if any) in
respect of that Mirror Equity Right, the price paid for the Repurchased Shares
and the number of Mirror Shares issued to Verizon. The Mirror Shares shall be
issued to Verizon automatically, without any further action on the part of
Verizon and without payment of any further consideration.
(iv) The number or type of Mirror Shares shall be adjusted if
and whenever Parent shall (A) subdivide or combine its securities, (B) declare a
stock dividend or (C) effect a reorganization, reclassification,
recapitalization, consolidation or merger, in the same manner and in accordance
with the same terms as the number or type of shares issuable upon exercise of
the Mirror Equity Right shall be adjusted pursuant to the terms of the Mirror
Equity Right. Parent will not enter into a transaction or agreement for the
acquisition of a majority of the capital stock or voting power of Parent by
another person or entity by means of any transaction or series of related
transactions (including, without limitation, any reorganization, merger,
consolidation or purchase of stock) unless the person or entity resulting from
such reorganization, merger or consolidation or the person or entity purchasing
such capital stock or voting power shall expressly assume the due and punctual
performance and observance of Parent's obligation to issue the Mirror Shares
pursuant to this Section 1.1(f) and agrees not to treat Verizon less favorably
than any holders of an Equity Right, by supplemental agreement satisfactory in
form and substance to Verizon and executed and delivered to Verizon.
(v) Parent shall issue the Mirror Shares only as whole shares
of Parent Common Stock in certificated form to Verizon. To the extent that
Verizon is entitled to receive a fractional share upon exercise of a Mirror
Equity Right, Parent shall add such fractional share to any future issuances of
Mirror Shares.
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(vi) Parent shall not, by amendment of its organizational
documents or through any reorganization, transfer of assets, consolidation,
merger, issue or sale of securities or otherwise, avoid or take any action which
would have the effect of avoiding the observance or performance of any of the
terms to be observed or performed by Parent with respect to Verizon's right to
receive the Mirror Shares, but will at all times in good faith assist in
carrying out all of the provisions of such right and in taking of all such
action as may be necessary or appropriate in order to protect Verizon's right to
receive the Mirror Shares against dilution or other impairment.
(vii) Each of the Parties hereto agrees that in the event of
any breach or default or threatened breach or threatened default by Parent of
any covenant, agreement, obligation or other provision relating to Verizon's
right to receive the Mirror Shares, monetary damages are not adequate remedies
to compensate Verizon, and Verizon shall be entitled (in addition to any other
remedy that may be available to it) to (A) a decree or order of specific
performance of such right, and (B) an injunction restraining such breach or
threatened breach, without, in either case, the posting of any bond and, to the
extent permissible by applicable law, each Party waives any objection to the
imposition of such relief.
(g) (i) On or prior to December 31, 2000, an inventory of the used
and useful Verizon Network Equipment Assets shall be conducted by an independent
appraiser selected by Verizon and such inventory shall be brought down by such
appraiser to a date that is not more than five business days prior to the
earlier of the Closing and December 31, 2000 (the "Verizon Asset Inventory").
Verizon shall bear the cost of conducting the Verizon Asset Inventory. The
gross book value (including any capitalized labor and other costs associated
with the installation, provisioning, modification and upgrading of equipment) of
the Verizon Network Equipment Assets reflected in the Verizon Asset Inventory as
of the date thereof is herein referred to as the "Verizon Network Equipment
Asset Value." The term "Verizon Network Equipment Asset Value" does not include
Capitalized Co-Location Fees (as defined in Section 6.6 hereof).
(ii) If the Closing occurs on or after December 31, 2000, to
the extent that the Verizon Network Equipment Asset Value is less than $513.5
million, the Cash Amount shall be increased by the amount of such difference. If
the Closing occurs before December 31, 2000, to the extent that the Verizon
Network Equipment Asset Value is less than (x) $513.5 million minus (y) $277
million divided by 365 and multiplied by the number of days remaining in the
year 2000
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after the Closing, the Cash Amount shall be increased by the amount of
such difference.
(iii) The number of shares of Parent Common Stock to be
issued to Verizon pursuant to Section 1.1(e) hereof shall be increased in an
amount equal to the NorthPoint Shortfall Amount (as defined below) divided by
the average of the closing prices of NorthPoint Common Stock on the Nasdaq
National Market ("Nasdaq") (as reported in The Wall Street Journal) on the 30
trading days immediately prior to the Closing Date and all references in this
Agreement to the Verizon Ownership Percentage as of the Effective Time shall be
adjusted to be references to a percentage equal to such increased number of
shares divided by the issued and outstanding shares of Parent Common Stock
immediately after giving effect to the Merger. If the Closing occurs on or
after December 31, 2000, if and to the extent that the audited consolidated
balance sheet of NorthPoint as of December 31, 2000 reflects gross property,
plant and equipment of less than $513.5 million, the "NorthPoint Shortfall
Amount" shall be equal to the difference obtained by subtracting NorthPoint's
gross property, plant and equipment from $513.5 million. If the Closing occurs
prior to December 31, 2000, if and to the extent that the audited consolidated
balance sheet of NorthPoint as of the Closing Date reflects gross property,
plant and equipment of less than (x) $513.5 million minus (y) $270 million
divided by 365 and multiplied by the number of days remaining in the year 2000
after the Closing (the "2000 Target Amount"), the "NorthPoint Shortfall Amount"
shall be equal to the difference between the gross property, plant and equipment
of NorthPoint as of the Closing Date and the 2000 Target Amount.
(iv) In the event that it is impossible to determine the
NorthPoint Shortfall Amount at the Closing Date because of the unavailability of
an audited balance sheet as contemplated by this Section 1.1.(g), the
adjustments referred to herein shall be made as soon as practicable after the
Closing Date and shall be retroactive in all respects to the Effective Time.
(h) The Cash Amount shall be further adjusted with respect to
Regulatory Compliance Costs in accordance with Section 6.4 hereof.
Section 1.2 The Merger. At the Effective Time, upon the terms and
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subject to the conditions set forth in this Agreement and in accordance with the
DGCL, Merger Subsidiary shall merge with and into NorthPoint. NorthPoint shall
be the surviving corporation in the Merger (the "Surviving Corporation") and
shall thereupon become a direct, wholly owned subsidiary of Parent.
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Section 1.3 Closing.
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(a) The closing (the "Closing") of the Asset Contribution and the
Merger shall take place no later than the second business day after satisfaction
or waiver of the conditions set forth in Article VIII unless another time or
date is agreed to by the parties hereto (the date of the Closing being referred
to as the "Closing Date"). The Closing shall be held at the offices of Skadden,
Arps, Slate, Xxxxxxx & Xxxx LLP, Four Times Square, New York, New York, unless
another place is agreed to by the Parties.
(b) At the Closing:
(i) Verizon shall deliver or cause to be delivered to
Parent (unless previously delivered), such appropriately executed bills of sale
for the Verizon DSL Assets, instruments of assignment and assumption with
respect to the Assumed Verizon Contracts and such other documents of title,
assignments, instruments of sale, conveyance or transfer or other documents and
certificates as may be reasonably requested by any Party prior to the Closing
with respect to the Verizon DSL Business or the Assumed Verizon Contracts; and
(ii) Parent shall deliver to Verizon stock certificates
representing the Verizon Shares and such appropriately executed bills of sale
for the Verizon DSL Assets, instruments of assignment and assumption with
respect to the Assumed Verizon Contracts and such other documents of title,
assignments, instruments of sale, conveyance or transfer or other documents and
certificates as may be reasonably requested by NorthPoint prior to the Closing
with respect to the Verizon DSL Business or the Assumed Verizon Contracts.
(iii) In consideration of the agreements contained in this
Agreement and for other good and valuable consideration, Verizon shall deliver
an executed intellectual property agreement (the "Intellectual Property
Agreement") which grants to Parent, for so long as Parent is a majority-owned
subsidiary of Verizon, a non-exclusive license to use all intellectual property
owned by Verizon and its Subsidiaries which is used in connection with (but not
exclusively in connection with) the Verizon DSL Business as of the Closing Date,
including the intellectual property described in Section 1.3(b)(iii) of the
Verizon Disclosure Schedule; provided that such license shall be limited to the
use or uses to which
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Verizon employs such intellectual property at the Effective
Time in connection with the Verizon DSL Business.
Section 1.4 Effective Time of the Merger. Subject to the
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provisions of this Agreement, as soon as practicable on the Closing Date, the
parties shall file with the Secretary of State of the State of Delaware a
certificate of merger duly completed and executed in accordance with the
relevant provisions of the DGCL and shall make all other filings required under
the DGCL to effect the Merger. The Merger shall become effective at the actual
time of the filing of such certificate of merger, or at such other later time as
is specified in the certificate of merger and agreed to by the parties hereto
(the time at which the Merger has become fully effective being hereinafter
referred to as the "Effective Time").
Section 1.5 Effects of the Merger. The Merger shall have the
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effects set forth in Section 259 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 NorthPoint and Merger Subsidiary
shall continue with, or vest in, as the case may be, NorthPoint as the Surviving
Corporation, and all debts, liabilities and duties of NorthPoint and Merger
Subsidiary shall continue to be, or become, as the case may be, the debts,
liabilities and duties of NorthPoint as the Surviving Corporation.
Section 1.6 Subsequent Actions. If at any time after the Effective
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Time, the Surviving Corporation or Parent shall consider or be advised that any
deeds, bills of sale, assignments, assurances or any other actions or things are
necessary or desirable to continue in, vest, perfect or confirm of record or
otherwise in the Surviving Corporation or Parent, as the case may be, its right,
title or interest in, to or under any of the rights, properties, privileges,
franchises or assets to be acquired by the Surviving Corporation or Parent as a
result of, or in connection with, the Asset Contribution or the Merger or to
otherwise to carry out this Agreement, the officers of Verizon and the officers
and directors of each of Parent and the Surviving Corporation shall be directed
and authorized to execute and deliver all such deeds, bills of sale, assignments
and assurances and to take and do, in the name and on behalf of each of such
corporations 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, privileges, franchises or assets or
otherwise to carry out this Agreement.
11
Section 1.7 Certificate of Incorporation; By-laws; Directors and
----------------------------------------------------
Officers of the Surviving Corporation. Unless otherwise agreed to by NorthPoint
-------------------------------------
and Verizon before the Effective Time, at the Effective Time:
(a) The Certificate of Incorporation and the By-laws of Merger
Subsidiary, as in effect immediately prior to the Effective Time, shall be the
Certificate of Incorporation and By-laws, respectively, of the Surviving
Corporation.
(b) The directors of Merger Subsidiary immediately prior to the
Effective Time shall be the directors of the Surviving Corporation until the
next annual meeting of stockholders of the Surviving Corporation (or their
earlier resignation or removal) and until their respective successors are duly
elected and qualified, as the case may be.
(c) The officers of NorthPoint immediately prior to the Effective
Time shall continue to serve in their respective offices of the Surviving
Corporation from and after the Effective Time, in each case until their
respective successors are duly elected or appointed and qualified or until their
resignation or removal.
ARTICLE II
EFFECT ON THE STOCK OF NORTHPOINT AND MERGER SUBSIDIARY
Section 2.1 Conversion of Securities. The manner and basis of
------------------------
converting the shares of common stock of NorthPoint and of Merger Subsidiary at
the Effective Time, by virtue of the Merger and without any action on the part
of any of the Parties or the holder of any of such securities, shall be as
hereinafter set forth in this Article II.
Section 2.2 Conversion of Shares.
--------------------
(a) Cancellation of Treasury Shares and Convertible Preferred Shares
Held by Verizon. (i) At the Effective Time, each share of NorthPoint Common
Stock held in the treasury of NorthPoint or beneficially owned by NorthPoint
immediately prior to the Effective Time shall be cancelled and retired and no
shares of stock or other securities of Parent or the Surviving Corporation shall
be issuable, and no payment or other consideration shall be made, with respect
thereto.
12
(ii) At the Effective Time, each share of 9% Convertible PIK
Preferred Stock of NorthPoint (the "NorthPoint Preferred Stock") held by Verizon
immediately prior to the Effective Time shall cease to exist and shall be
converted into shares of Parent Common Stock in accordance with Section 1.1(e)
hereof.
(b) Conversion of Common Stock of Merger Subsidiary into Common Stock
of the Surviving Corporation. As of the Effective Time, each share of common
stock, par value $0.01, of Merger Subsidiary (the "Merger Subsidiary Common
Stock") issued and outstanding immediately prior to the Effective Time, and all
rights in respect thereof, shall, without any action of any holder thereof,
forthwith cease to exist and be converted into one validly issued, fully paid
and nonassessable share of common stock, par value $0.01 per share, of the
Surviving Corporation (the "Surviving Corporation Common Stock"). Immediately
after the Effective Time and upon surrender by Parent of the certificate
representing the shares of Merger Subsidiary Common Stock, NorthPoint as the
Surviving Corporation shall deliver to Parent an appropriate certificate or
certificates representing the Surviving Corporation Common Stock created by
conversion of the Merger Subsidiary Common Stock owned by Parent.
(c) Conversion of NorthPoint Common Stock. Subject to Sections 2.3(g)
and 2.6 hereof, each share of common stock, par value $0.001, of NorthPoint
("NorthPoint Common Stock") issued and outstanding immediately before the
Effective Time (excluding those cancelled or converted pursuant to Section
2.2(a) hereof) and all rights in respect thereof, shall at the Effective Time,
without any action on the part of any holder thereof, forthwith cease to exist
and be converted into and become one validly issued, fully paid and
nonassessable share of common stock, par value $0.001 per share, of Parent
("Parent Common Stock") and the right to receive an amount in cash (the "Cash
Consideration Amount") equal to (i) $350 million divided by (ii) the number of
issued and outstanding shares of NorthPoint Common Stock immediately prior to
the Effective Time plus the number of shares of NorthPoint Common Stock subject
to warrants and convertible securities outstanding (excluding stock options
issued pursuant to any NorthPoint Plan and excluding NorthPoint's Preferred
Stock) immediately prior to the Effective Time (collectively, the "Merger
Consideration").
(d) Cancellation of NorthPoint Common Stock. As of the Effective
Time, all shares of NorthPoint Common Stock converted pursuant to
13
Section 2.2(c) hereof shall no longer be outstanding and shall automatically be
cancelled and retired and shall cease to exist, and each holder of a certificate
(each, an "Old Certificate") representing any such shares of NorthPoint Common
Stock shall cease to have any rights with respect thereto, except the right to
receive the Merger Consideration, in accordance with Section 2.2(c) hereof,
certain dividends or other distributions in accordance with Section 2.3(f)
hereof and any cash in lieu of fractional shares of Parent Common Stock to be
issued or paid in consideration therefor upon surrender of such certificate in
accordance with Section 2.3(g) hereof, without interest.
Section 2.3 Exchange Procedures.
-------------------
(a) Subject to the terms and conditions hereof, at or prior to the
Effective Time, Parent shall appoint a bank or trust company to act as exchange
agent (the "Exchange Agent") to effect the payment of the Merger Consideration
in accordance with the provisions of this Article II.
(b) As soon as practicable following the Effective Time, Parent shall
deposit, or cause to be deposited, with the Exchange Agent a sufficient amount
of cash and certificates representing Parent Common Stock for exchange for Old
Certificates in accordance with the provisions of Section 2.2(c) hereof,
including any Excess Parent Shares to be used to pay cash in lieu of fractional
shares of Parent Common Stock (such cash and certificates, together with any
dividends or distributions with respect thereto, being herein referred to as the
"Exchange Fund").
(c) Promptly following the Effective Time, Parent shall cause the
Exchange Agent to mail (and to make available for collection by hand) to each
holder of an Old Certificate (i) a letter of transmittal (which shall specify
that delivery shall be effected, and risk of loss and title to each Old
Certificate shall pass, only upon proper delivery of such Old Certificate to the
Exchange Agent and which shall be in the form and have such other provisions as
Parent may reasonably specify) and (ii) instructions for use in effecting the
surrender of the Old Certificates in exchange for the Merger Consideration (or
cash in lieu of fractional shares of Parent Common Stock).
(d) Upon surrender of an Old Certificate for cancellation to the
Exchange Agent, together with a letter of transmittal duly completed and validly
executed in accordance with the instructions thereto, and such other documents
as may be required pursuant to such instructions, the holder of such Old
Certificate
14
shall be entitled to receive in exchange therefor the Merger Consideration for
each share of NorthPoint Common Stock formerly represented by such Old
Certificate, to be mailed (or made available for collection by hand if so
elected by the surrendering holder) within three business days of receipt
thereof, and the Old Certificate so surrendered shall be forthwith cancelled.
(e) The Exchange Agent shall accept such Old Certificates upon
compliance with such reasonable terms and conditions as the Exchange Agent may
impose to effect an orderly exchange thereof in accordance with normal exchange
practices. No interest shall be paid or accrued for the benefit of holders of
the Old Certificates on the Merger Consideration (or the cash pursuant to
subsections (f) and (g) below) payable upon the surrender of the Certificates.
(f) No dividends or other distributions with respect to Parent Common
Stock with a record date on or after the Effective Time shall be paid to the
holder of any unsurrendered Old Certificate with respect to the shares of Parent
Common Stock represented thereby ("Pre-Surrender Dividends") by reason of the
conversion of shares of NorthPoint Common Stock pursuant to Section 2.2(c)
hereof and no cash payment in lieu of fractional shares of Parent Common Stock
shall be paid to any such holder pursuant to Section 2.3(g) hereof until such
Old Certificate is surrendered in accordance with this Article II. Subject to
the effect of applicable laws, following surrender of any such Old Certificate,
there shall be paid, without interest, to the Person in whose name the shares of
Parent Common Stock representing such securities are registered (i) at the time
of such surrender or as promptly after the sale of the Excess Parent Shares as
practicable, the amount of any cash payable in lieu of fractional shares of
Parent Common Stock to which such holder is entitled pursuant to Section 2.3(g)
hereof and the proportionate amount of Pre-Surrender Dividends, and (ii) at the
appropriate payment date or as promptly as practicable thereafter, the
proportionate amount of dividends or other distributions with a record date
after the Effective Time but prior to such surrender and a payment date
subsequent to such surrender payable with respect to such shares of Parent
Common Stock.
(g) Notwithstanding any other provision of this Agreement, no
fraction of a share of Parent Common Stock will be issued and no dividend or
other distribution, stock split or interest with respect to shares of Parent
Common Stock shall relate to any fractional share of Parent Common Stock, and
such fractional interest shall not entitle the owner thereof to vote or to any
rights as a holder of the shares of Parent Common Stock. In lieu of any such
fractional security, each holder
15
of Parent Common Stock otherwise entitled to a fraction of a share of Parent
Common Stock will be entitled to receive in accordance with the provisions of
this Section 2.3 from the Exchange Agent a cash payment representing such
holder's proportionate interest in the net proceeds from the sale by the
Exchange Agent on behalf of all such holders of the aggregate of the fractions
of shares of Parent Common Stock which would otherwise be issued (the "Excess
Parent Shares"). The sale of the Excess Parent Shares by the Exchange Agent
shall be executed on Nasdaq and shall be executed in round lots to the extent
practicable. Until the net proceeds of such sale or sales have been distributed
to the holders of shares of NorthPoint Common Stock, the Exchange Agent will,
subject to Section 2.3(h) hereof, hold such proceeds in trust for the holders of
shares of NorthPoint Common Stock (the "Parent Shares Trust"). NorthPoint shall
pay all commissions, transfer taxes (other than those transfer taxes for which
NorthPoint's stockholders are solely liable) and other out-of-pocket transaction
costs, including the expenses and compensation, of the Exchange Agent incurred
in connection with such sale of the Excess Parent Shares. As soon as practicable
after the determination of the amount of cash, if any, to be paid to holders of
shares of NorthPoint Common Stock in lieu of any fractional Parent Common Stock
interests, the Exchange Agent shall make available such amounts to such holders
of shares of NorthPoint Common Stock without interest.
(h) Any portion of the Merger Consideration in the Exchange Fund
which remains undistributed to the holders of the Old Certificates for six
months after the Effective Time shall be delivered to Parent, upon demand, and
any holders of shares of NorthPoint Common Stock prior to the Merger who have
not theretofore complied with this Article II shall thereafter look for payment
of their claim, as general creditors thereof, only to Parent for their claim for
(i) cash, (ii) shares of Parent Common Stock, (iii) any cash, to be paid, in
lieu of any fractional shares of Parent Common Stock and (iv) any dividends or
other distributions with respect to shares of Parent Common Stock to which such
holders may be entitled.
(i) None of Parent, Verizon, NorthPoint, Merger Subsidiary or the
Exchange Agent shall be liable to any Person in respect of any shares of Parent
Common Stock or cash held in the Exchange Fund (and any cash, dividends and
other distributions payable in respect thereof) delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law. If any
Old Certificates shall not have been surrendered prior to one year after the
Effective Time (or immediately prior to such earlier date on which (i) any cash,
(ii) any shares of Parent Common Stock, (iii) any cash in lieu of fractional
shares of Parent Common Stock or (iv) any dividends or distributions with
respect to shares of Parent Common Stock in
16
respect of such Certificate would otherwise escheat to or become the property of
any Governmental Entity (as defined herein)), any such shares of Parent Common
Stock, cash, dividends or distributions in respect of such Certificate shall, to
the extent permitted by applicable law, become the property of Parent, free and
clear of all claims or interest of any Person previously entitled thereto.
(j) The Exchange Agent shall invest any cash included in the
Exchange Fund, as directed by Parent on a daily basis. Any interest and other
income resulting from such investments shall be paid to Parent. Nothing
contained in this Section 2.3(j) shall relieve Parent or the Exchange Agent from
making the payments required by this Article II to be made to the holders of
shares of Common Stock.
Section 2.4 Transfer Books. The stock transfer books of
--------------
NorthPoint shall be closed at the Effective Time and no transfer of any shares
of NorthPoint Common Stock will thereafter be recorded on any of such stock
transfer books. In the event of a transfer of ownership of NorthPoint Common
Stock that is not registered in the stock transfer records of NorthPoint at the
Effective Time, the Merger Consideration into which such shares of NorthPoint
Common Stock shall have been converted shall be issued to the transferee
together with a cash payment in lieu of fractional shares, if any, in accordance
with Section 2.3(g) hereof, and a cash payment in the amount of Pre-Surrender
Dividends, if any, in accordance with Section 2.3(f) hereof, if the Old
Certificate therefor is surrendered as provided in Section 2.3 hereof,
accompanied by all documents required to evidence and effect such transfer and
by evidence of payment of any applicable stock transfer tax. The whole shares of
Parent Common Stock to be delivered to such holder shall be delivered in book-
entry form, unless such holder shall timely elect in writing to receive the
certificates representing such shares.
Section 2.5 Transfer Taxes; Withholding. If any certificate for a
---------------------------
share of Parent Common Stock is to be issued to, or cash is to be remitted to, a
Person (other than the Person in whose name the Old Certificate surrendered in
exchange therefor is registered), it shall be a condition of such exchange that
the Old Certificate so surrendered shall be properly endorsed and otherwise in
proper form for transfer and that the Person requesting such exchange shall pay
to the Exchange Agent any transfer or other Taxes (as defined herein) required
by reason of the payment of the Merger Consideration to a Person other than the
registered holder of the Old Certificate so surrendered, or shall establish to
the satisfaction of the Exchange Agent that such Tax either has been paid or is
not applicable. Parent or the
17
Exchange Agent shall be entitled to deduct and withhold from the shares of
Parent Common Stock (or cash in lieu of fractional shares of Parent Common
Stock) otherwise payable pursuant to this Agreement to any holder of shares of
NorthPoint Common Stock such amounts as Parent or the Exchange Agent are
required to deduct and withhold under the Code, or any provision of state, local
or foreign Tax law, with respect to the making of such payment. To the extent
that amounts are so withheld by Parent or the Exchange Agent, such withheld
amounts shall be treated for all purposes of this Agreement as having been paid
to the holder of shares of NorthPoint Common Stock in respect of whom such
deduction and withholding was made by Parent or the Exchange Agent.
Section 2.6 Dissenting Shares. Notwithstanding Section 2.2
-----------------
hereof, shares of NorthPoint Common Stock issued and outstanding immediately
prior to the Effective Time and held by a holder who has properly exercised and
perfected his or her demand for appraisal rights under Section 262 of the DGCL
(the "Dissenting Shares") shall not be converted into the right to receive the
Merger Consideration, but the holders of Dissenting Shares shall be entitled to
receive from NorthPoint such consideration as shall be determined pursuant to
Section 262 of the DGCL; provided, however, that if any such holder shall have
-------- -------
failed to perfect or shall effectively withdraw or lose his or her right to
appraisal and payment under the DGCL, such holder's shares of NorthPoint Common
Stock shall thereupon be deemed to have been converted as of the Effective Time
into the right to receive the Merger Consideration, without any interest
thereon, and such shares shall not be deemed to be Dissenting Shares.
Section 2.7 Options to Purchase NorthPoint Common Stock. At the
-------------------------------------------
Effective Time, each option granted pursuant to a NorthPoint Plan by NorthPoint
to purchase shares of NorthPoint Common Stock (including, without limitation,
any option to purchase shares of NorthPoint Common Stock outstanding under any
employee stock purchase plan maintained by NorthPoint which is intended to
constitute an "employee stock purchase plan" (as defined in Section 423 of the
Code)) which is outstanding and unexercised immediately prior to the Effective
Time shall be converted into an option to purchase shares of Parent Common Stock
in such amount and at such exercise price as provided below and otherwise having
the same terms and conditions as are in effect immediately prior to the
Effective Time (except to the extent that such terms, conditions and
restrictions may be altered in accordance with their terms as a result of the
transactions contemplated hereby). At the Effective Time, the NorthPoint Plans,
and each outstanding option to purchase shares of NorthPoint Common Stock under
the NorthPoint Plans, whether vested or unvested,
18
will be assumed by Parent. Notwithstanding anything to the contrary, no cash
shall be paid pursuant to Section 2.2(c) hereof with respect to the options so
assumed and converted pursuant to the following sentence. Each such option so
assumed by Parent under this Agreement shall continue to have, and be subject
to, the same terms and conditions set forth in the NorthPoint Plans and the
applicable stock option agreement as in effect immediately prior to the
Effective Time, except that:
(i) the number of whole shares of Parent Common Stock for which the
option will be exercisable immediately after the Effective Time shall be equal
to the number of shares of NorthPoint Common Stock subject to such option
immediately prior to the Effective Time multiplied by a fraction the numerator
of which is the Cash Consideration Amount plus the Closing Market Value and the
denominator of which is the Closing Market Value (such fraction, the "Option
Ratio"), with the resulting number of shares of Parent Common Stock subject to
the assumed option to be rounded down to the next whole number of shares of
Parent Common Stock, and
(ii) the per share exercise price for the shares of Parent Common Stock
issuable upon exercise of such assumed option will be equal to the quotient
determined by dividing the original exercise price by the Option Ratio, with
such adjusted per share exercise price to be rounded up to the next whole cent.
(iii) "Closing Market Value" means the average of the last sale prices
for a share of Parent Common Stock as quoted on the Nasdaq National Market (as
reported in The Wall Street Journal) for the first five full trading days
immediately following the Effective Time.
The adjustments provided herein with respect to any options which
are "incentive stock options" (as defined in Section 422 of the Code) shall be
effected in a manner consistent with Section 424(a) of the Code or which are
options granted under an employee stock purchase plan (as defined in Section 423
of the Code) .
Section 2.8 Restricted Stock. At the Effective Time, any shares
----------------
of NorthPoint Common Stock awarded pursuant to any plan, arrangement or
transaction, and outstanding immediately prior to the Effective Time shall be
converted into cash and shares of Parent Common Stock in accordance with Section
2.2(c) hereof, subject to the same terms, conditions and restrictions as in
effect immediately prior to the Effective Time, except to the extent that such
terms, conditions and restrictions may be altered in accordance with their terms
as a result of the transactions contemplated hereby.
19
Section 2.9 Certain Adjustments. If between the date hereof and
-------------------
the Effective Time, the outstanding shares of NorthPoint Common Stock or of
Parent Common Stock shall be changed into a different number of shares by reason
of any reclassification, recapitalization, split-up, combination or exchange of
shares, or any dividend payable in stock or other securities shall be declared
thereon with a record date within such period, the Merger Consideration shall be
adjusted accordingly to provide to the holders of NorthPoint Common Stock and
NorthPoint Preferred Stock the same economic effect as contemplated by this
Agreement prior to such reclassification, recapitalization, split-up,
combination, exchange or dividend.
ARTICLE III
CERTAIN ADDITIONAL MATTERS
Section 3.1 Certificate of Incorporation and By-laws of Parent.
--------------------------------------------------
Prior to the Effective Time and subject to and upon the terms and conditions of
this Agreement, Verizon shall cause the Certificate of Incorporation and By-laws
of Parent to be amended and restated to be in the form of Exhibit B and Exhibit
--------- -------
C, respectively.
-
Section 3.2 Corporate Headquarters. Immediately following the
----------------------
Effective Time, the headquarters of Parent shall be located at the current
corporate headquarters of NorthPoint.
Section 3.3 Corporate Identity. At the Effective Time, the
------------------
corporate name of Parent shall be NorthPoint Communications Group, Inc.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF NORTHPOINT
Except as set forth in the disclosure schedule delivered by NorthPoint
to Verizon on the date hereof (the "NorthPoint Disclosure Schedule") (each
section of which qualifies the correspondingly numbered representation and
warranty or covenant as specified therein), NorthPoint hereby represents and
warrants to Verizon as follows:
20
Section 4.1 Organization and Qualification; Subsidiaries. Each of
--------------------------------------------
NorthPoint and its Subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation or organization. Each of NorthPoint and its Subsidiaries has the
requisite corporate power and authority and any necessary governmental
authority, franchise, license, certificate or permit to own, operate or lease
the properties that it purports to own, operate or lease and to carry on its
business as it is now being conducted, and is duly qualified as a foreign
corporation to do business, and is in good standing, in each jurisdiction where
the character of its properties owned, operated or leased or the nature of its
activities makes such qualification necessary, except for such failure which,
when taken together with all other such failures, would not have a Material
Adverse Effect on NorthPoint.
Section 4.2 Certificate of Incorporation and By-laws. NorthPoint
----------------------------------------
has heretofore furnished, or otherwise made available, to Verizon a complete and
correct copy of the Certificate of Incorporation and the By-laws of NorthPoint,
each as amended to the date hereof. Such Certificate of Incorporation and By-
laws are in full force and effect. Neither NorthPoint nor any of its
Subsidiaries is in violation of any of the provisions of its respective
Certificate of Incorporation or its By-laws.
Section 4.3 Capitalization.
--------------
(a) The authorized capital stock of NorthPoint consists of (i)
281,250,000 shares of common stock, par value $0.001 per share, of which, as of
August 4, 2000, (A) 132,742,066 shares are outstanding, (B) 200,000 shares are
held in the treasury of NorthPoint, (C) not more than 21,093,985 shares are
issuable upon the exercise of options outstanding under the NorthPoint option
plans, (D) 13,388,155 shares are reserved for issuance in connection with the
NorthPoint Plans (as defined in Section 4.11(b) hereof), and (ii) 24,276,843
shares of preferred stock, par value $0.001 per share, 1,500,000 of which are
designated as 9% Convertible Preferred Stock and none of which is currently
outstanding or reserved for issuance. Except as permitted by Section 6.1 hereof
and except in connection with the Preferred Financing, since June 20, 2000, no
shares of NorthPoint Common Stock or NorthPoint preferred stock have been
issued, except upon the exercise of options described in the immediately
preceding sentence or as contemplated by this Agreement. Section 4.3(a) of the
NorthPoint Disclosure Schedule sets forth a complete and accurate list, as of
the date hereof, of all NorthPoint Equity Rights, including the holders thereof,
the number of shares of NorthPoint capital stock subject to each such NorthPoint
Equity Right, the exercise or vesting schedule, the
21
exercise price per share and the term of each such NorthPoint Equity Right. On
the day immediately preceding the Closing Date, NorthPoint shall deliver to
Parent an updated Section 4.3(a) of the NorthPoint Disclosure Schedule, current
as of the Closing Date. Except as set forth in Section 4.3(a) of the NorthPoint
Disclosure Schedule, there are no NorthPoint Equity Rights outstanding as of the
date hereof.
(b) Except as set forth in Section 4.3(b) of the NorthPoint
Disclosure Schedule, or, after the date hereof, as permitted by Section 6.1
hereof, there are no outstanding obligations of NorthPoint or any of
NorthPoint's Subsidiaries to repurchase, redeem or otherwise acquire any shares
of capital stock of NorthPoint.
(c) All of the issued and outstanding shares of NorthPoint Common
Stock are validly issued, fully paid and nonassessable.
(d) All of the outstanding capital stock of each of NorthPoint's
Subsidiaries is owned directly or indirectly by NorthPoint and is duly
authorized, validly issued, fully paid and nonassessable. Except as set forth
in Section 4.3(d) of the NorthPoint Disclosure Schedule, all of the outstanding
capital stock of each of NorthPoint's Subsidiaries is owned by NorthPoint free
and clear of any liens, security interests, pledges, agreements, claims, charges
or encumbrances ("Liens"). Except as hereafter issued or entered into in
accordance with Section 6.1 hereof, there are no Equity Rights to purchase or
otherwise acquire from NorthPoint or any of NorthPoint's Subsidiaries at any
time, or upon the happening of any stated event, any shares of the capital stock
of any NorthPoint Subsidiary, whether or not presently issued or outstanding, or
any of NorthPoint's direct or indirect interests in any Material Investment, and
there are no outstanding obligations of NorthPoint or any of NorthPoint's
Subsidiaries to repurchase, redeem or otherwise acquire any shares of capital
stock of any of NorthPoint's Subsidiaries or securities related to any
investments.
Section 4.4 Authority Relative to this Agreement. NorthPoint has
------------------------------------
the necessary corporate power and authority to enter into this Agreement and,
subject to obtaining the requisite approval of this Agreement by NorthPoint's
stockholders required by the DGCL (the "NorthPoint Stockholder Approval"), to
perform its obligations hereunder. The execution and delivery of this Agreement
by NorthPoint, and the consummation by NorthPoint of the transactions
contemplated hereby, have been duly authorized by all necessary corporate action
on the part of NorthPoint, subject to obtaining the NorthPoint Stockholder
Approval. This Agreement has been
22
duly executed and delivered by NorthPoint and, assuming the due authorization,
execution and delivery thereof by each of Verizon, Parent and Merger Subsidiary,
constitutes a legal, valid and binding obligation of NorthPoint, enforceable
against it in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium or other laws relating to or affecting
the rights and remedies of creditors generally and to general principles of
equity (regardless of whether considered in a proceeding in equity or at law).
Section 4.5 No Conflict; Required Filings and Consents.
------------------------------------------
(a) Except as described in subsection (b) below or except as set
forth in Section 4.5 of the NorthPoint Disclosure Schedule, the execution and
delivery of this Agreement by NorthPoint do not, and the performance of this
Agreement by NorthPoint will not, (i) violate or conflict with the Certificate
of Incorporation or By-laws of NorthPoint, (ii) conflict with or violate any
law, regulation, court order, judgment or decree applicable to NorthPoint or any
of its Subsidiaries or by which any of their respective property or assets
(including investments) is bound or affected, (iii) violate or conflict with the
Certificate of Incorporation or By-laws of any of NorthPoint's Subsidiaries, or
(iv) result in any breach of or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination or cancellation of, or result in the creation of a
lien or encumbrance on any of the properties or assets (including investments)
of NorthPoint or any of its Subsidiaries pursuant to, result in the loss of any
material benefit under, or result in any modification or alteration of, or
require the consent of any other party to, any contract, instrument, permit,
license or franchise to which NorthPoint or any of its Subsidiaries is a party
or by which NorthPoint, any of such Subsidiaries or any of their respective
property or assets (including investments) is bound or affected, except in the
case of this clause (iv) for conflicts, violations, breaches, defaults, results
or consents which, individually or in the aggregate, would not have a Material
Adverse Effect on NorthPoint.
(b) Except as set forth in Section 4.5 of the NorthPoint Disclosure
Schedule and except for applicable requirements, if any, of state or foreign
public utility commissions or laws or similar local or state or foreign
regulatory bodies or laws, state or foreign antitrust or foreign investment laws
and commissions, the Federal Communications Commission, stock exchanges or other
self-regulatory body upon which securities of NorthPoint are listed, the
Exchange Act, the premerger notification requirements of the HSR Act, filing and
recordation of appropriate
23
merger or other documents as required by the DGCL and any filings required
pursuant to any state securities or "blue sky" laws or the rules of any
applicable stock exchanges or other self-regulatory body, (i) neither NorthPoint
nor any of its Subsidiaries is required to submit any notice, report or other
filing with any federal, state, local or foreign government, any court,
administrative, regulatory or other governmental agency, commission or authority
or any non-governmental U.S. or foreign self- regulatory agency, commission or
authority or any arbitral tribunal (each, a "Governmental Entity") in connection
with the execution, delivery or performance of this Agreement and (ii) no
waiver, consent, approval or authorization of any Governmental Entity is
required to be obtained by NorthPoint or any of its Subsidiaries in connection
with its execution, delivery or performance of this Agreement.
Section 4.6 SEC Filings; Financial Statements.
---------------------------------
(a) NorthPoint has filed all forms, reports and documents required to
be filed with the Securities and Exchange Commission ("SEC") since May 16, 1997,
and has heretofore delivered or made available to Verizon, in the form filed
with the SEC, together with any amendments thereto, its (i) Annual Reports on
Form 10-K for the fiscal year ended December 31, 1999, (ii) all proxy statements
relating to NorthPoint's meetings of stockholders (whether annual or special)
held since May 16, 1997, (iii) Quarterly Report on Form 10-Q for the fiscal
quarter ended March 31, 2000, and (iv) all other reports or registration
statements filed by NorthPoint with the SEC since May 16, 1997 (collectively,
the "NorthPoint SEC Reports", with such NorthPoint SEC Reports filed with the
SEC prior to the date hereof being referred to as "NorthPoint Filed SEC
Reports"). The NorthPoint SEC Reports (i) were prepared substantially in
accordance with the requirements of the 1933 Act or the Exchange Act, as the
case may be, and the rules and regulations promulgated under each of such
respective acts, and (ii) did not at the time they were filed contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
(b) The financial statements, including all related notes and
schedules, contained in the NorthPoint SEC Reports (or incorporated by reference
therein) fairly present the consolidated financial position of NorthPoint and
its Subsidiaries as at the respective dates thereof and the consolidated results
of operations and cash flows of NorthPoint and its Subsidiaries for the periods
indicated in accordance with GAAP applied on a consistent basis throughout the
periods
24
involved (except for changes in accounting principles disclosed in the notes
thereto) and subject in the case of interim financial statements to normal year-
end adjustments. The books and records of NorthPoint and its Subsidiaries have
been kept in accordance with sound business practices, including the maintenance
of an adequate system of internal controls for recording revenue and expenses in
accordance with GAAP applied on a consistent basis throughout the periods
involved.
Section 4.7 Absence of Certain Changes or Events. Except as
------------------------------------
disclosed in the NorthPoint Filed SEC Reports and in Section 4.7 of the
NorthPoint Disclosure Schedule, since December 31, 1999, and except as permitted
by this Agreement or consented to by Verizon hereunder, NorthPoint and its
Subsidiaries have not incurred any liability required to be disclosed on a
balance sheet of NorthPoint and its Subsidiaries or the footnotes thereto
prepared in conformity with GAAP, except in the ordinary course of their
businesses consistent with their past practices, and there has not been any
Material Adverse Effect on NorthPoint, and NorthPoint and its Subsidiaries have
conducted their respective businesses in the ordinary course consistent with
their past practices, except as set forth in the Master Services Agreement
attached as Exhibit H hereto.
---------
Section 4.8 Litigation. There are no claims, actions, suits,
----------
proceedings or investigations pending or, to NorthPoint's knowledge, threatened
against NorthPoint or any of its Subsidiaries, or any properties or rights of
NorthPoint or any of its Subsidiaries, by or before any Governmental Entity,
except for those that do not, individually or in the aggregate, have a Material
Adverse Effect on NorthPoint or prevent or materially delay the ability of
NorthPoint to consummate the transactions contemplated hereby.
Section 4.9 Permits; No Violation of Law.
----------------------------
(a) NorthPoint and its Subsidiaries have all Federal Communications
Commission ("FCC") licenses and authorizations and all state governmental
authorizations and certificates, and have filed all required federal and state
notifications (all of the above being collectively referred to as "Governmental
Approvals") necessary for the operation of their currently conducted
telecommunications businesses in the United States, except for those Government
Approvals the absence of which, individually or in the aggregate, would not have
a Material Adverse Effect on NorthPoint. All material Governmental Approvals
granted to NorthPoint and its Subsidiaries are listed in Section 4.9 of the
NorthPoint
25
Disclosure Schedule and remain in full force and effect, and have not been
revoked, suspended, cancelled or modified in any adverse way, and are not
subject to any conditions or requirements that are not generally imposed by the
FCC or the issuing state communications regulatory agency upon the holders of
such Government Approvals.
(b) The businesses of NorthPoint and its Subsidiaries are not being
conducted in violation of any statute, law, ordinance, regulation, judgment,
order or decree of any Governmental Entity (including any stock exchange or
other self-regulatory body) ("Legal Requirements"), or in violation of any
Government Approvals or other permits, franchises, licenses, authorizations,
certificates, variances, exemptions, orders, registrations or consents that are
granted by any Governmental Entity (including any stock exchange or other self-
regulatory body) ("Permits"), except for possible violations none of which,
individually or in the aggregate, may reasonably be expected to have a Material
Adverse Effect on NorthPoint. No investigation or review by any Governmental
Entity (including any stock exchange or other self-regulatory body) with respect
to NorthPoint or its Subsidiaries in relation to any alleged violation of law or
regulation is pending or, to NorthPoint's knowledge, threatened, nor has any
Governmental Entity (including any stock exchange or other self-regulatory body)
indicated an intention to conduct the same, except for such investigations
which, if they resulted in adverse findings, would not have, individually or in
the aggregate, a Material Adverse Effect on NorthPoint. Except as set forth in
Section 4.9 of the NorthPoint Disclosure Schedule, neither NorthPoint nor any of
its Subsidiaries is subject to any cease and desist or other order, judgment,
injunction or decree issued by, or is a party to any written or oral Agreement,
consent or memorandum of understanding with, or is a party to any commitment
letter or similar undertaking to, or is subject to any order or directive by, or
has adopted any board resolutions at the request of, any Governmental Entity
that materially restricts the conduct of its business or which may reasonably be
expected to have a Material Adverse Effect on NorthPoint, nor has NorthPoint or
any of its Subsidiaries been advised that any Governmental Entity is considering
issuing or requesting any of the foregoing.
Section 4.10 Proxy Statement. None of the information supplied or
---------------
to be supplied by or on behalf of NorthPoint for inclusion or incorporation by
reference in the registration statement to be filed with the SEC by Parent in
connection with the issuance of shares of Parent Common Stock in the Merger (the
"Registration Statement") will, at the time the Registration Statement becomes
effective under the 1933 Act, contain any untrue statement of a material fact or
omit
26
to state any material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading. None of the information supplied or to be supplied by or
on behalf of NorthPoint for inclusion or incorporation by reference in the proxy
statement, in definitive form as it may be supplemented or amended, relating to
the NorthPoint Stockholders' Meeting or in the related proxy and notice of
meeting, or soliciting material used in connection therewith (referred to herein
collectively as the "Proxy Statement") will, at the dates mailed to stockholders
and at the time of the NorthPoint Stockholders' Meeting, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading. The
Registration Statement and the Proxy Statement (except for information relating
solely to Verizon) will comply as to form in all material respects with the
provisions of the 1933 Act and the Exchange Act and the rules and regulations
promulgated thereunder.
Section 4.11 Employee Matters; ERISA.
-----------------------
(a) Except where the failure to be true would not, individually or in
the aggregate, have a Material Adverse Effect on NorthPoint, (i) each NorthPoint
Plan has been operated and administered in accordance with applicable law,
including but not limited to the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), and the Code, (ii) each NorthPoint Plan intended to
be "qualified" within the meaning of Section 401(a) of the Code is so qualified,
(iii) except as required by COBRA, no NorthPoint Plan provides death or medical
benefits (whether or not insured), with respect to current or former employees
of NorthPoint or of any trade or business, whether or not incorporated, which
together with NorthPoint would be deemed a "single employer" within the meaning
of Section 4001 of ERISA (a "NorthPoint ERISA Affiliate"), beyond their
retirement or other termination of service, (iv) no liability under Title IV of
ERISA has been incurred by NorthPoint or any NorthPoint ERISA Affiliate that has
not been satisfied in full, and no condition exists that presents a material
risk to NorthPoint or any NorthPoint ERISA Affiliate of incurring any such
liability (other than PBGC premiums), (v) all contributions or other amounts due
from NorthPoint or any NorthPoint ERISA Affiliate with respect to each
NorthPoint Plan have been paid in full, (vi) neither NorthPoint nor any
NorthPoint ERISA Affiliate has engaged in a transaction in connection with which
NorthPoint or any of its Subsidiaries could reasonably be expected to be subject
to either a civil penalty assessed pursuant to Section 409 or 502(i) of ERISA or
a tax imposed pursuant to Section 4975 or 4976
27
of the Code, (vii) to the best knowledge of NorthPoint, there are no pending,
threatened or anticipated claims (other than routine claims for benefits) by, on
behalf of or against any NorthPoint Plan or any trusts related thereto, and
(viii) neither the execution and delivery of this Agreement nor the consummation
of the transactions contemplated hereby will (A) result in any payment
(including, without limitation, severance, unemployment compensation, golden
parachute or otherwise) becoming due to any director or any employee of
NorthPoint or any of its Subsidiaries under any NorthPoint Plan or otherwise,
(B) materially increase any benefits otherwise payable under any NorthPoint Plan
or (C) result in any acceleration of the time of payment or vesting of any such
benefits.
(b) For purposes of this Agreement, "NorthPoint Plan" shall mean each
deferred compensation, bonus or other incentive compensation, stock purchase,
stock option or other equity compensation plan, program, agreement or
arrangement; each severance or termination pay, medical, surgical,
hospitalization, life insurance or other "welfare" plan, fund or program (within
the meaning of section 3(1) of ERISA); each profit-sharing, stock bonus or other
"pension" plan, fund or program (within the meaning of section 3(2) of ERISA);
each employment, termination or severance agreement; and each other employee
benefit plan, fund, program, agreement or arrangement, in each case, that is
sponsored, maintained or contributed to or required to be contributed to by
NorthPoint or by any NorthPoint ERISA Affiliate or to which NorthPoint or any
NorthPoint ERISA Affiliate is party, whether written or oral, for the benefit of
any employee or former employee of NorthPoint or any NorthPoint ERISA Affiliate.
Section 4.12 Labor Matters.
-------------
(a) Neither NorthPoint nor any of its Subsidiaries is a party to any
collective bargaining or other labor union contract applicable to Persons
employed by NorthPoint or any of its Subsidiaries and no collective bargaining
agreement is being negotiated by NorthPoint or any of its Subsidiaries. There
has not been, since NorthPoint's or any of its Subsidiaries' inception, any
labor strike, dispute, walkout, work stoppage, slow-down or lockout against
NorthPoint or any of its Subsidiaries, nor is there one pending or, to the
knowledge of NorthPoint, threatened, which may interfere with the respective
business activities of NorthPoint or any of its Subsidiaries.
(b) To the knowledge of NorthPoint, there is no charge, complaint or
investigation against NorthPoint or any of its Subsidiaries (i) before the
National
28
Labor Relations Board or any comparable Governmental Entity pending or
threatened in writing or (ii) asserting that it or any of its Subsidiaries has
committed an unfair labor practice nor is NorthPoint or any of its Subsidiaries
the subject of any proceeding seeking to compel it to bargain with any labor
union or labor organization. To the knowledge of NorthPoint, none of
NorthPoint, any of its Subsidiaries or any of their respective representatives
or employees has committed any unfair labor practice in connection with the
operation of the respective business of NorthPoint or any of its Subsidiaries.
Section 4.13 Environmental Matters. Except as could not,
---------------------
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on NorthPoint, (i) each of NorthPoint and its Subsidiaries has
complied with all applicable Environmental Laws (as defined below); (ii) the
properties currently owned or operated by NorthPoint or any of its Subsidiaries
(including soils, groundwater, surface water, buildings or other structures) are
not contaminated with any Hazardous Substances (as defined below); (iii) the
properties formerly owned or operated by NorthPoint or any of its Subsidiaries
were not contaminated with Hazardous Substances during the period of ownership
or operation by it or any of its Subsidiaries; (iv) neither NorthPoint nor any
of its Subsidiaries is subject to liability for any Hazardous Substance disposal
or contamination on any third party property; (v) neither NorthPoint nor any
Subsidiary has been associated with any release or threat of release of any
Hazardous Substance that is reasonably expected to result in liability; (vi)
neither NorthPoint nor any Subsidiary has received any notice, demand, letter,
claim or request for information alleging that it or any of its Subsidiaries may
be in violation of or liable under any Environmental Law (including any claims
relating to electromagnetic fields or microwave transmissions); (vii) neither
NorthPoint nor any of its Subsidiaries is subject to any orders, decrees,
injunctions or other arrangements with any Governmental Entity or is subject to
any indemnity or other agreement with any third party relating to liability
under any Environmental Law or relating to Hazardous Substances; and (viii)
there are no circumstances or conditions involving NorthPoint or any of its
Subsidiaries that could reasonably be expected to result in any claims,
liability, investigations, costs or restrictions on the ownership, use, or
transfer of any of its properties pursuant to any Environmental Law.
Section 4.14 Tax Matters. Except as set forth in Section 4.14 of
-----------
the NorthPoint Disclosure Schedule:
29
(a) All material federal, state, local and foreign Tax Returns (as
defined herein) required to have been filed by NorthPoint or its Subsidiaries
have been filed with the appropriate governmental authorities by the due date
thereof including extensions;
(b) The Tax Returns referred to in paragraph (a) of this Section 4.14
were true, correct and complete in all material respects;
(c) All material Taxes shown as due on those Tax Returns referred to
in paragraph (a) of this Section 4.14 as well as material withholding Taxes
imposed on or in respect of any amounts paid to or by NorthPoint or any of its
Subsidiaries, whether or not such withholding Taxes are referred to or shown on
any Tax Returns referred to in Section 4.14 (a) hereof, have been fully paid or
adequately reflected as a liability on NorthPoint's or its Subsidiaries'
financial statements included in the NorthPoint SEC Reports;
(d) With respect to any period for which Tax Returns have not yet
been filed, or for which Taxes are not yet due or owing, NorthPoint and its
Subsidiaries have made due and sufficient accruals in accordance with GAAP for
such Taxes in their respective books and records and financial statements;
(e) Neither NorthPoint nor any of its Affiliates has taken, agreed to
take or omitted to take any action that would prevent or impede the Asset
Contribution and the Merger from qualifying as either (i) a tax-free
reorganization under Section 368(a) of the Code or (ii) a transaction described
in Section 351 of the Code (it being agreed that it shall not be a violation of
this Section 4.14(e) if the payment of the Cash Consideration Amount causes the
Merger not to qualify as a tax-free reorganization under Section 368(a) of the
Code);
(f) No deficiencies for any Taxes have been proposed, asserted or
assessed against NorthPoint or any of its Subsidiaries that are not adequately
reserved for under GAAP, except for deficiencies that individually or in the
aggregate would not have a Material Adverse Effect on NorthPoint;
(g) NorthPoint is not aware of any material liens for Taxes upon any
assets of NorthPoint or any of its Subsidiaries apart from liens for Taxes not
yet due and payable; and
30
(h) As used in this Agreement, "Taxes" shall include all (x) federal,
state, local or foreign income, property, sales, excise, use, occupation,
service, transfer, payroll, franchise, withholding and other taxes or similar
governmental charges, fees, levies or other assessments including any interest,
penalties or additions with respect thereto, (y) liability for the payment of
any amounts of the type described in clause (x) as a result of being a member of
an affiliated, consolidated, combined or unitary group, and (z) liability for
the payment of any amounts as a result of being party to any tax sharing
agreement or as a result of any express or implied obligation to indemnify any
other Person with respect to the payment of any amounts of the type described in
clause (x) or (y). As used in this Agreement, "Tax Return" shall include any
declaration, return, report, schedule, certificate, statement or other similar
document (including relating or supporting information) required to be filed
with a taxing authority or, where none is required to be filed with a taxing
authority, the statement or other document issued by a taxing authority in
connection with any Tax, including any information return, claim for refund,
amended return or declaration of estimated Tax.
Section 4.15 Intellectual Property.
---------------------
(a) As used in this Agreement, "NorthPoint Intellectual Property"
means all of the following which are necessary to conduct the business of
NorthPoint and its Subsidiaries as presently conducted or as currently proposed
to be conducted: (i) trademarks, trade dress, service marks, copyrights, logos,
trade names, corporate names and all registrations and applications to register
the same; (ii) patents and pending patent applications; (iii) all computer
software programs, databases and compilations (collectively, "Computer
Software"); (iv) all technology, know-how and trade secrets; and (v) all
material licenses and agreements to which NorthPoint or any of its Subsidiaries
is a party which relate to any of the foregoing.
(b) Except as set forth in Section 4.15(b) of the NorthPoint
Disclosure Schedule, NorthPoint or its Subsidiaries owns or has the right to
use, sell or license all NorthPoint Intellectual Property, free and clear of all
liens or encumbrances, and all registrations of NorthPoint Intellectual Property
are valid and enforceable and have been duly recorded and maintained, except, in
each case, as would not, individually or in the aggregate, have a Material
Adverse Effect on NorthPoint.
(c) Except as set forth in Section 4.15(c) of the NorthPoint
Disclosure Schedule, to the knowledge of NorthPoint, the conduct of NorthPoint's
31
and its Subsidiaries' business or the use of the NorthPoint Intellectual
Property does not infringe, violate, misappropriate or misuse any intellectual
property rights or any other proprietary right of any Person or give rise to any
obligations to any Person as a result of co-authorship, and neither NorthPoint
nor any of its Subsidiaries has received any notice of, not satisfactorily
resolved, any claims or charges of infringement or misappropriation or threats
that the conduct of NorthPoint's or its Subsidiaries' business or NorthPoint's
or its Subsidiaries' use of any of the NorthPoint Intellectual Property
materially infringes, violates, misappropriates or misuses, or is otherwise in
conflict with, any intellectual property or proprietary rights of any Person or
that any of the NorthPoint Intellectual Property is invalid or unenforceable.
(d) NorthPoint and its Subsidiaries have used reasonable efforts to
maintain the confidentiality of their trade secrets and other confidential
NorthPoint Intellectual Property.
Section 4.16 Insurance. Except as set forth in Section 4.16 of the
---------
NorthPoint Disclosure Schedule, each of NorthPoint and each of its Subsidiaries
is, and has been continuously since December 31, 1999 (or such later date as
such Subsidiary was organized or acquired by NorthPoint), insured with
financially responsible insurers in such amounts and against such risks and
losses as are customary for companies conducting the business as conducted by
NorthPoint and its Subsidiaries during such time period. Except as set forth in
Section 4.16 of the NorthPoint Disclosure Schedule, since December 31, 1999,
neither NorthPoint nor any of its Subsidiaries has received notice of
cancellation or termination with respect to any material insurance policy of
NorthPoint or its Subsidiaries. The insurance policies of NorthPoint and its
Subsidiaries are valid and enforceable policies.
Section 4.17 Certain Contracts.
-----------------
(a) Section 4.17(a) of the NorthPoint Disclosure Schedule and
NorthPoint's Annual Report on Form 10-K for the year ended December 31, 1999 and
the Quarterly Report on Form 10-Q for the quarter ended March 31, 2000 together
set forth a true and complete list of (i) all strategic and joint venture
agreements, material DSL service contracts and agreements with DSL equipment
vendors to which NorthPoint or any of its Subsidiaries is a party or may be
bound and (ii) all contracts described in Item 601(b)(10) of Regulation S-K to
which NorthPoint or its Subsidiaries is a party or may be bound (collectively,
the "NorthPoint Contracts"). All NorthPoint Contracts are valid and in full
force and
32
effect on the date hereof except to the extent they have previously expired in
accordance with their terms or if the failure to be in full force and effect,
individually and in the aggregate, would not have a Material Adverse Effect on
NorthPoint. Neither NorthPoint nor any of its Subsidiaries has violated any
provision of, or committed or failed to perform any act which with or without
notice, lapse of time or both would constitute a default under the provisions
of, any NorthPoint Contract, except in each case for those NorthPoint Contracts
which, individually and in the aggregate, would not result in a Material Adverse
Effect on NorthPoint.
(b) Set forth in Section 4.17 (b) of the NorthPoint Disclosure
Schedule is a list of each contract, agreement or arrangement to which
NorthPoint or any of its Subsidiaries is a party or may be bound which limits or
restrains Verizon, NorthPoint, any Verizon or NorthPoint Subsidiary or any
successor thereto from engaging or competing in any business which arrangement
has, or could reasonably be expected to have in the foreseeable future, a
Material Adverse Effect on NorthPoint, or to NorthPoint's knowledge, on Verizon.
Section 4.18 Board Action; Vote Required; Applicability of Section
-----------------------------------------------------
203.
---
(a) The Board of Directors of NorthPoint has unanimously determined
that the transactions contemplated by this Agreement are in the best interests
of NorthPoint and its stockholders and has resolved to recommend to such
stockholders that they vote in favor of this Agreement and the Merger.
(b) The approval of this Agreement and the Merger by a majority of
the outstanding shares entitled to vote thereon by all holders of NorthPoint
Common Stock and, if then entitled to vote, the 9% Convertible Preferred Stock
of NorthPoint, voting together as a single class, is the only vote of the
holders of any class or series of the capital stock of NorthPoint required to
approve this Agreement, the Merger and the other transactions contemplated
hereby.
(c) The provisions of Section 203 of the DGCL will not apply to this
Agreement or any of the transactions contemplated hereby.
Section 4.19 Opinions of Financial Advisors. NorthPoint has
------------------------------
received the opinion of Xxxxxxx, Xxxxx & Co., dated as of August 7, 2000, to the
effect that, as of such date, the Merger Consideration to be received by the
holders of
00
XxxxxXxxxx Xxxxxx Stock pursuant to this Agreement is fair from a financial
point of view to such holders.
Section 4.20 Brokers. Except for Xxxxxxx Sachs & Co., a true and
-------
complete copy of whose engagement letter has been provided to Verizon prior to
the execution hereof, and Xxxxx Xxxxx, the terms of whose engagement have been
disclosed to Verizon prior to the execution hereof, no broker, finder or
investment banker is entitled to any brokerage, finder's, investment banking or
other fee or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of NorthPoint or any of
its Subsidiaries.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF VERIZON
Except as set forth in the disclosure schedule delivered by Verizon to
NorthPoint on the date hereof (the "Verizon Disclosure Schedule") (each section
of which qualifies the correspondingly numbered representation and warranty or
covenant as specified therein), Verizon hereby represents and warrants to
NorthPoint as follows:
Section 5.1 Organization and Qualification; Subsidiaries. Each of
--------------------------------------------
Verizon, Parent and Merger Subsidiary is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation or organization. Verizon has the requisite corporate power and
authority and any necessary governmental authority, franchise, license or permit
to own, operate or lease the properties that it purports to own, operate or
lease and to carry on the Verizon DSL Business as it is now being conducted, and
is duly qualified as a foreign corporation to do business, and is in good
standing, in each jurisdiction where the character of its DSL properties owned,
operated or leased or the nature of its DSL activities makes such qualification
necessary, except for such failures which, when taken together with all other
such failures, would not have a Material Adverse Effect on the Verizon DSL
Business.
34
Section 5.2 Authority Relative to this Agreement. Each of
------------------------------------
Verizon, Parent and Merger Subsidiary has the necessary corporate power and
authority to enter into this Agreement to perform its obligations hereunder. The
execution and delivery of this Agreement by Verizon, Parent and Merger
Subsidiary and the consummation by Verizon, Parent and Merger Subsidiary of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Verizon, Parent and Merger Subsidiary. This
Agreement has been duly executed and delivered by Verizon, Parent and Merger
Subsidiary and, assuming the due authorization, execution and delivery thereof
by the other Parties, constitutes a legal, valid and binding obligation of
Verizon, Parent and Merger Subsidiary, enforceable against each of them in
accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other laws relating to or affecting the rights and
remedies of creditors generally and to general principles of equity (regardless
of whether considered in a proceeding in equity or at law).
Section 5.3 No Conflict; Required Filings and Consents.
------------------------------------------
(a) Except as described in subsection (b) below, the execution and
delivery of this Agreement by Verizon, Parent and Merger Subsidiary do not, and
the performance of this Agreement by Verizon, Parent and Merger Subsidiary will
not, (i) violate or conflict with the Certificate of Incorporation or By-laws of
Verizon, Parent or Merger Subsidiary, (ii) conflict with or violate any law,
regulation, court order, judgment or decree applicable to Verizon, Parent or
Merger Subsidiary or by which any of their respective property or assets
(including investments) is bound or affected, or (iii) result in any breach of
or constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination or
cancellation of, or result in the creation of a lien or encumbrance on any of
the properties or assets (including investments) of Verizon or Parent pursuant
to, result in the loss of any material benefit under, or result in any
modification or alteration of, or require the consent of any other party to, any
contract, instrument, permit, license or franchise to which Verizon or Parent is
a party or by which Verizon or Parent or any of their respective property or
assets (including investments) is bound or affected, except in the case of this
clause (iii) for conflicts, violations, breaches, defaults, results or consents
which, individually or in the aggregate, would not have a Material Adverse
Effect on the Verizon DSL Business.
(b) Except for applicable requirements, if any, of state or foreign
public utility commissions or laws or similar local or state foreign regulatory
bodies
35
or laws, state or foreign antitrust or foreign investment laws and commissions,
the Federal Communications Commission, the Exchange Act, the premerger
notification requirements of the HSR Act, filing and recordation of appropriate
merger or other documents as required by the DGCL and any filings required
pursuant to any state securities or "blue sky" laws or the rules of any
applicable stock exchanges or other self-regulatory body, (i) none of Verizon,
Parent or Merger Subsidiary is required to submit any notice, report or other
filing with any Governmental Entity in connection with the execution, delivery
or performance of this Agreement and (ii) no waiver, consent, approval or
authorization of any Governmental Entity is required to be obtained by Verizon
or Parent in connection with its execution, delivery or performance of this
Agreement.
Section 5.4 Litigation. Except as set forth in Section 5.4 of the
----------
Verizon Disclosure Schedule, there are no claims, actions, suits, proceedings or
investigations pending or, to Verizon's knowledge, threatened against Verizon or
Parent in respect of the Verizon DSL Business, or to which any properties or
rights of Verizon included in the Verizon DSL Assets are subject, by or before
any Governmental Entity, except for those that are not, individually or in the
aggregate, reasonably likely to have a Material Adverse Effect on the Verizon
DSL Business or prevent, materially delay or intentionally delay the ability of
Verizon to consummate the transactions contemplated hereby.
Section 5.5 Permits; No Violation of Law.
----------------------------
(a) Verizon or one or more of its Subsidiaries have all Governmental
Approvals necessary for the operation of the Verizon DSL Business, except for
those Government Approvals the absence of which, individually or in the
aggregate, would not have a Material Adverse Effect on the Verizon DSL Business.
All material Government Approvals granted to Verizon and its Subsidiaries with
respect to the Verizon DSL Business are listed in Section 5.5 of the Verizon
Disclosure Schedule and remain in full force and effect, and have not been
revoked, suspended, cancelled or modified in any adverse way, and are not
subject to any conditions or requirements that are not generally imposed by the
FCC or the issuing state communications regulatory agency upon the holders of
such Government Approvals.
(b) The Verizon DSL Business is not being operated in violation of any
Legal Requirements or in violation of any Permits, except for possible
violations none of which, individually or in the aggregate, may reasonably be
36
expected to have a Material Adverse Effect on the Verizon DSL Business. No
investigation or review by any Governmental Entity (including any stock exchange
or other self-regulatory body) with respect to Verizon in relation to any
alleged violation of law or regulation is pending or, to Verizon's knowledge,
threatened, nor has any Governmental Entity (including any stock exchange or
other self-regulatory body) indicated an intention to conduct the same, except
for such investigations which, if they resulted in adverse findings, would not
have, individually or in the aggregate, a Material Adverse Effect on the Verizon
DSL Business. Except as set forth in Section 5.5 of the Verizon Disclosure
Schedule, neither Verizon nor any of its Subsidiaries is subject to any cease
and desist or other order, judgment, injunction or decree issued by, or is a
party to any written or oral Agreement, consent or memorandum of understanding
with, or is a party to any commitment letter or similar undertaking to, or is
subject to any order or directive by, or has adopted any board resolutions at
the request of, any Governmental Entity that materially restricts the ownership
or operation of the Verizon DSL Business or which may reasonably be expected to
have a Material Adverse Effect on the Verizon DSL Business, nor has Verizon or
any of its Subsidiaries been advised that any Governmental Entity is considering
issuing or requesting any of the foregoing.
Section 5.6 Proxy Statement. None of the information supplied or
---------------
to be supplied by or on behalf of Verizon for inclusion or incorporation by
reference in the Registration Statement will, at the time the Registration
Statement becomes effective under the 1933 Act, contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading. None of the information supplied or
to be supplied by or on behalf of Verizon for inclusion or incorporation by
reference in the Proxy Statement will, at the dates mailed to stockholders and
at the times of the NorthPoint stockholders' meeting, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading. The
Registration Statement and the Proxy Statement (except for information relating
solely to NorthPoint) will comply as to form in all material respects with the
provisions of the 1933 Act and the Exchange Act and the rules and regulations
promulgated thereunder.
37
Section 5.7 Labor Matters.
-------------
(a) Except as set forth in Section 5.7 of the Verizon Disclosure
Schedule, neither Verizon nor any of its Subsidiaries is a party to any
collective bargaining or other labor union contract applicable to Verizon DSL
Employees and no collective bargaining agreement is being negotiated by Verizon
or any of its Subsidiaries which would affect Verizon DSL Employees. Since
January 1, 1997, there has not been any labor strike, dispute, walkout, work
stoppage, slow-down or lockout against Verizon or any of its Subsidiaries by any
Verizon DSL Employees, nor is there one pending or, to the knowledge of Verizon,
threatened, which interfere with the Verizon DSL Business, except where such
strike, dispute, walkout, work stoppage, slow-down or lockout individually or in
the aggregate is not reasonably likely to have a Material Adverse Effect on the
Verizon DSL Business.
(b) To the knowledge of Verizon, there is no charge, complaint or
investigation related to the Verizon DSL Business against Verizon or any of its
Subsidiaries (i) before the National Labor Relations Board or any comparable
Governmental Entity pending or threatened in writing or (ii) asserting that it
or any of its Subsidiaries has committed an unfair labor practice nor is Verizon
or any of its Subsidiaries the subject of any proceeding seeking to compel it to
bargain with any labor union or labor organization, except in each case as is
not, individually or in the aggregate, reasonably likely to have a Material
Adverse Effect on the Verizon DSL Business. To the knowledge of Verizon, none
of Verizon, any of its Subsidiaries or any Verizon DSL Employees has committed
any unfair labor practice in connection with the Verizon DSL Business.
Section 5.8 Environmental Matters. Except as could not,
---------------------
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on the Verizon DSL Business, (i) each of Verizon and its
Subsidiaries has owned and operated the Verizon DSL Business in compliance with
all applicable Environmental Laws; (ii) the properties included in the Verizon
DSL Assets which are currently owned or operated by it or any of its
Subsidiaries (including soils, groundwater, surface water, buildings or other
structures) are not contaminated with any Hazardous Substances; (iii) the
properties formerly owned or operated by Verizon or any of its Subsidiaries in
connection with the Verizon DSL Business were not contaminated with Hazardous
Substances during the period of ownership or operation by Verizon or any of its
Subsidiaries; (iv) the Verizon DSL Business is not subject to liability for any
Hazardous Substance disposal or contamination on any third party property; (v)
the Verizon DSL Business has not been associated with any
38
release or threat of release of any Hazardous Substance; (vi) neither Verizon
nor any of its Subsidiaries has received any notice, demand, letter, claim or
request for information alleging that it or any of its Subsidiaries may be in
violation of or liable under any Environmental Law (including any claims
relating to electromagnetic fields or microwave transmissions) with respect to
the Verizon DSL Business; (vii) neither Verizon nor any of its Subsidiaries is
subject to any orders, decrees, injunctions or other arrangements with any
Governmental Entity or is subject to any indemnity or other agreement with any
third party relating to liability under any Environmental Law or relating to
Hazardous Substances with respect to the Verizon DSL Business; and (viii) there
are no circumstances or conditions involving Verizon or any of its Subsidiaries
that could reasonably be expected to result in any claims, liability,
investigations, costs or restrictions on the ownership, use, or transfer of any
of the Verizon DSL Assets pursuant to any Environmental Law.
Section 5.9 Assets. Verizon or one or more of its Subsidiaries
------
has, and at or prior to the Closing will deliver to Parent, good and valid title
to, or valid leasehold interests in, all of the Verizon DSL Assets, free and
clear of all Liens (except for Liens to be assumed by Parent pursuant to this
Agreement, including Liens associated with leased equipment and Liens securing
maintenance and similar contracts). The Verizon Network Equipment Assets and
Facilities Assets are in good working order, normal wear and tear excepted, and
are fit for their intended purposes, except as would not have a Material Adverse
Effect on the Verizon DSL Business. Verizon believes in good faith that (i) the
Verizon Network Equipment Assets, (ii) the DSL subscriber contracts to which
Verizon or one of its Subsidiaries is a party, (iii) the Transferred Employees,
(iv) the assets used exclusively by the Transferred Employees, (v) the Assumed
Verizon Contracts, (vi) the OSS Support Agreement, (vii) the commercial
contracts and arrangements at tarriffed rates relating exclusively to the
Verizon DSL Business, (viii) the future contracts with respect to assets which
are not used exclusively in the Verizon DSL Business that may be entered into
pursuant to Section 6.8 hereof, (ix) the Facilities Assets, (x) Capitalized Co-
Location Fees and (xi) the Verizon DSL Assets (to the extent not listed above),
taken together in the aggregate, will be sufficient to provide services in a
manner substantially similar to those provided by the Verizon DSL Business prior
to the Effective Time.
39
Section 5.10 Certain Contracts.
-----------------
(a) All Assumed Verizon Contracts are valid and in full force and
effect on the date hereof except to the extent they have previously expired in
accordance with their terms or if the failure to be in full force and effect,
individually and in the aggregate would not have a Material Adverse Effect on
the Verizon DSL Business. Neither Verizon nor any of its Subsidiaries has
violated any provision of, or committed or failed to perform any act which with
or without notice, lapse of time or both would constitute a default under the
provisions of, any Assumed Verizon Contract, except in each case for those
Assumed Verizon Contracts which, individually and in the aggregate, would not
result in a Material Adverse Effect on the Verizon DSL Business.
(b) Set forth in Section 5.10 of the Verizon Disclosure Schedule is a
list of each contract, agreement or arrangement to which Verizon or any of its
Subsidiaries is a party or may be bound which is an arrangement limiting or
restraining Verizon, NorthPoint, any Verizon or NorthPoint Subsidiary or any
successor thereto from engaging or competing in any business which arrangement
has, or could reasonably be expected to have in the foreseeable future, a
Material Adverse Effect on the Verizon DSL Business.
Section 5.11 Intellectual Property.
---------------------
(a) As used in this Agreement, "Verizon Intellectual Property" means
all of the intellectual property included in the Verizon DSL Assets and
identified in Section 1.1(a)(vi) of the Verizon Disclosure Schedule. The
Verizon Intellectual Property constitutes all of the intellectual property used
by Verizon or its Subsidiaries on the date hereof exclusively in connection with
Verizon DSL Business.
(b) Except as set forth in Section 5.11(b) of the Verizon Disclosure
Schedule, Verizon or its Subsidiaries owns or has the right to use, sell or
license all Verizon Intellectual Property, free and clear of all liens or
encumbrances.
(c) Except as set forth in Section 5.11(c) of the Verizon Disclosure
Schedule, to the knowledge of Verizon, the ownership and operation of the
Verizon DSL Business does not materially infringe, violate or misuse any
intellectual property rights or any other proprietary right of any Person or
give rise to
40
any obligations to any Person as a result of co-authorship, and neither Verizon
nor any of its Subsidiaries has received any notice, not satisfactorily
resolved, of any claims or threats that the Verizon DSL Business or the use of
any Verizon Intellectual Property in the Verizon DSL Business materially
infringes, violates, misappropriates or misuses, or is otherwise in conflict
with any intellectual property or proprietary rights of any Person.
(d) Verizon and its Subsidiaries have used reasonable efforts to
maintain the confidentiality of the trade secrets and other confidential Verizon
Intellectual Property which is included in the Verizon Intellectual Property.
Section 5.12 Brokers. Except for Xxxxxx Xxxxxxx & Co. Incorporated,
-------
the fees of which will be paid by Verizon, no broker, finder or investment
banker is entitled to any brokerage, finder's, investment banking or other fee
or commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of Verizon or any of its
Subsidiaries.
Section 5.13 Tax Matters. Except as set forth in Section 5.13 of
-----------
the Verizon Disclosure Schedule:
(a) Verizon has paid in full or discharged, or caused to be paid in
full or discharged, all Taxes (i) related to the Verizon DSL Assets or arising
out of the conduct of the Verizon DSL Business that are required to be paid
(whether or not such Taxes are shown as due on any Tax Return) and (ii) the non-
payment of which has resulted in or which could result in a lien on the Verizon
DSL Assets in the hands of Parent.
(b) Neither Verizon nor any of its Affiliates has taken, agreed to
take or omitted to take any action that would prevent or impede the Asset
Contribution and the Merger from qualifying as either a (i) tax-free
reorganization under Section 368(a) of the Code or (ii) transaction described in
Section 351 of the Code (it being agreed that it shall not be a violation of
this Section 5.13(b) if the payment of the Cash Consideration Amount causes the
Merger not to qualify as a tax-free reorganization under Section 368(a) of the
Code).
Section 5.14 Insurance. Except as set forth in Section 5.14 of the
---------
Verizon Disclosure Schedule, the Verizon DSL Business is, and has been
continuously since December 31, 1999, insured with financially responsible
insurers in such amounts and against such risks and losses as are customary for
companies conducting the business as conducted by Verizon and its Subsidiaries
during such time period. Except as set forth in Section 5.14 of the Verizon
Disclosure Schedule, since December 31, 1999, neither Verizon nor any of its
Subsidiaries has received notice of cancellation or termination with respect to
any material insurance policy covering the Verizon DSL Business. The insurance
policies of Verizon and its Subsidiaries with respect to the Verizon DSL
Business are valid and enforceable policies.
Section 5.15 No Business Activities. Merger Subsidiary and Parent
----------------------
have not conducted any activities and have no obligations and liabilities, in
each case
41
other than in connection with their organization, the negotiation and execution
of this Agreement and the consummation of the transactions contemplated hereby.
Merger Subsidiary has no Subsidiaries and Parent has no Subsidiaries other than
Merger Subsidiary.
ARTICLE VI
COVENANTS AND AGREEMENTS
Section 6.1 Conduct of Business of NorthPoint Pending the Effective
-------------------------------------------------------
Time. NorthPoint covenants and agrees that between the date hereof and the
----
Effective Time, unless Verizon shall otherwise consent in writing, and except as
described in Section 6.1 of the NorthPoint Disclosure Schedule or as otherwise
expressly contemplated hereby, the business of NorthPoint and its Subsidiaries
shall be conducted only in, and such entities shall not take any action except
in, the ordinary course of business and in a manner consistent with past
practice; and each of NorthPoint and its Subsidiaries will use its commercially
reasonable efforts to preserve substantially intact their business
organizations, to keep available the services of those of their present
officers, employees and consultants who are integral to the operation of their
businesses as presently conducted and to preserve their present relationships
with significant customers and suppliers and with other Persons with whom they
have significant business relations. By way of amplification and not limitation,
except as set forth in Section 6.1 of the NorthPoint Disclosure Schedule or as
otherwise expressly contemplated by this Agreement or in the Employee Matters
42
Agreement, NorthPoint and its Subsidiaries will not, between the date hereof and
the Effective Time, directly or indirectly, do any of the following without the
prior written consent of Verizon:
(a) (i) issue, sell, pledge, dispose of, encumber, authorize, or
propose the issuance, sale, pledge, disposition, encumbrance or authorization of
any shares of capital stock of any class, or any options, warrants, convertible
securities or other rights of any kind to acquire any shares of capital stock
of, or any other ownership interest in, NorthPoint or any of its Subsidiaries
(excluding such as may arise upon the exercise of existing rights), except for
(A) the issuance of shares of NorthPoint Common Stock in order to satisfy
obligations under the NorthPoint Plans in effect on the date hereof and
NorthPoint Equity Rights issued thereunder, which issuances shall be consistent
with its existing policy and past practice; (B) grants of stock options with
respect to NorthPoint Common Stock to employees in the ordinary course of
business and in amounts and in a manner consistent with past practice; and (C)
the issuance of securities by a Subsidiary of NorthPoint to any Person which is
directly or indirectly wholly owned by NorthPoint; (ii) amend or propose to
amend the Certificate of Incorporation or By-laws of NorthPoint or any of its
Subsidiaries or adopt, amend or propose to amend any stockholder rights plan or
related rights agreement; (iii) split, combine or reclassify any outstanding
shares of NorthPoint Common Stock, or declare, set aside or pay any dividend or
distribution payable in cash, stock, property or otherwise with respect to
shares of NorthPoint Common Stock; (iv) redeem, purchase or otherwise acquire or
offer to redeem, purchase or otherwise acquire any shares of its capital stock
(provided that in the case of any repurchase of shares of NorthPoint Common
Stock upon the termination of employment of one of the five founders of
NorthPoint at the contractual price but in no event more than $0.08 per share,
Verizon shall be deemed to have consented to such repurchase five business days
after receiving written notice from NorthPoint of its intent to effect such
repurchase, unless Verizon shall have objected to such repurchase within such
five business day period); or (v) authorize or propose or enter into any
contract, agreement, commitment or arrangement with respect to any of the
matters prohibited by this Section 6.1(a);
(b) (i) acquire (by merger, consolidation, or acquisition of stock or
assets) any corporation, partnership or other business organization or division
thereof or make any investment in another entity (other than an entity which is
a wholly owned Subsidiary of NorthPoint as of the date hereof and other than
incorporation of a wholly owned Subsidiary of NorthPoint), except for
acquisitions or investments in NorthPoint's Line of Business which do not exceed
$5,000,000 individually or
43
$10,000,000 in the aggregate for all such acquisitions or investments; (ii)
sell, pledge, dispose of, or encumber or authorize or propose the sale, pledge,
disposition or encumbrance of any assets of NorthPoint or any of its
Subsidiaries, except in the ordinary course of business consistent with past
practice; (iii) otherwise enter into any line of business which is outside of
NorthPoint's Line of Business; or (iv) authorize, enter into or amend any
contract, agreement, commitment or arrangement with respect to any of the
matters prohibited by this Section 6.1(b);
(c) incur any indebtedness other than borrowings under the Debt
Financing, the Preferred Financing and the Company's existing senior secured
credit facility (as in effect on the date hereof); provided, however, that the
-------- -------
Company may incur indebtedness (excluding indebtedness convertible into equity
of NorthPoint) after January 1, 2001, if such indebtedness is incurred on an
arm's length basis with nationally recognized financial institutions or with
Verizon and the incurrence of such indebtedness does not exceed, individually or
in the aggregate with all other incurrences of indebtedness (including any
indebtedness incurred under the Debt Financing), $200,000,000 per calendar
quarter;
(d) except as provided in a side letter to be entered into by Verizon
and NorthPoint within thirty days after the date hereof, take any action with
respect to the grant of any severance or termination pay, stay bonus, or other
incentive arrangements (otherwise than pursuant to any NorthPoint Plan or any
policies, arrangements and agreements of NorthPoint which were in effect on, or
offered or approved to be offered by the board of directors or senior management
of NorthPoint prior to the date hereof, or pursuant to any renewal or extension
subsequent to the date hereof of the duration of the term of any such benefit
plans, policies, arrangements or agreements), or with respect to any increase in
benefits payable under its severance or termination pay policies, or stay bonus
or other incentive arrangements in effect on the date hereof;
(e) except in the ordinary course of business consistent with past
practice, take any action with respect to increases in employee compensation,
take any action to adjust the exercise price or number of shares underlying
options awarded under any NorthPoint Plan or make any payments under any
NorthPoint Plan to any director or employee of, or independent contractor or
consultant to, NorthPoint or any of its Subsidiaries, adopt or otherwise
materially amend any NorthPoint Plan or enter into or amend any employment or
consulting agreement, or grant or establish any new awards under any such
existing NorthPoint Plan or agreement;
44
(f) change in any material respect its accounting policies, methods or
procedures except as required by GAAP or change any material Tax election or
enter into any material settlement for Taxes;
(g) take any action which it believes when taken could reasonably be
expected to adversely affect or delay in any material respect the ability of any
of the parties hereto to obtain any approval of any Governmental Entity required
to consummate the transactions contemplated hereby;
(h) other than pursuant to this Agreement, take any action to cause
the shares of NorthPoint Common Stock to cease to be quoted on Nasdaq;
(i) (i) other than as consistent with past practice, issue stock
appreciation rights, performance shares, restricted stock, or similar equity
based rights; (ii) materially modify (with materiality to be determined with
respect to the benefit plan in question) any actuarial cost method, assumption
or practice used in determining benefit obligations, annual expense and funding
for any Benefit Plan, except to the extent required by GAAP; (iii) materially
modify (with materiality to be determined with respect to the Benefit Plan trust
in question) the investment philosophy of the Benefit Plan trusts or maintain an
asset allocation which is not consistent with such philosophy, subject to any
ERISA fiduciary obligation; (iv) subject to any ERISA fiduciary obligation,
enter into any outsourcing agreement, or any other material contract relating to
the Benefit Plans or management of the Benefit Plan trusts; (v) offer any new or
extend any existing retirement incentive, "window" or similar benefit program;
(vi) grant any ad hoc pension increase; (vii) establish any new or fund any
existing "rabbi" or similar trust (except in accordance with the current terms
of such trust), or enter into any other arrangement for the purpose of securing
non-qualified benefits or deferred compensation; (viii) adopt any corporate
owned life insurance program; or (ix) adopt or implement any "split dollar" life
insurance program; or
(j) take any action which it believes when taken would cause its
representations and warranties contained herein to become inaccurate in any
material respect.
Nothing in this Section 6.1 shall restrict the ability of NorthPoint's
wholly owned
45
Subsidiaries to do any of the following: (a) pay dividends (in cash or
otherwise), or make any other distributions, to NorthPoint or any of its wholly
owned Subsidiaries in respect of its capital stock or in respect of any other
interest participating in, or measured by, its profits or pay any indebtedness
owed to NorthPoint or any of its Subsidiaries; (b) make loans or advances to
NorthPoint or any of its wholly owned Subsidiaries; or (c) transfer any of its
property or assets to NorthPoint or any of its wholly owned Subsidiaries.
Section 6.2 Conduct of the Verizon DSL Business Pending the
-----------------------------------------------
Effective Time. Verizon covenants and agrees that between the date hereof and
--------------
the Effective Time, unless NorthPoint shall otherwise consent in writing, except
as described in Schedule 6.2 and except in connection with the transactions
contemplated hereby, Verizon and its Subsidiaries shall own and operate the
Verizon DSL Business only in a manner consistent with past practices, and such
entities shall not take any action except in the ordinary course of business and
in a manner consistent with the capital expenditure program previously delivered
by Verizon to NorthPoint; and each of Verizon and its Subsidiaries will use its
commercially reasonable efforts to keep available the services of those of their
present officers, employees and consultants who are integral to the operation of
the Verizon DSL Business as presently conducted and to preserve their present
relationships with significant customers and suppliers of the Verizon DSL
Business and with other Persons with whom they have significant business
relations with respect to the Verizon DSL Business. By way of amplification and
not limitation, except as set forth in Schedule 6.2 or as otherwise expressly
contemplated by this Agreement, Verizon and its Subsidiaries will not, between
the date hereof and the Effective Time, directly or indirectly, do any of the
following without the prior written consent of NorthPoint:
(a) except in the ordinary course of business consistent with past
practice, take any action with respect to increases in compensation of the
Transferred Employees, excluding employees who are covered by a collective
bargaining agreement to which Verizon or one of its Subsidiaries is a party (the
"Non-represented DSL Employees"), take any action to adjust the exercise price
or number of shares underlying options awarded to any Non-represented DSL
Employee or make any other payments to any Non-represented DSL Employee;
(b) take any action which it believes when taken could reasonably be
expected to adversely affect or delay in any material respect the ability of any
of the parties hereto to obtain any approval of any Governmental Entity required
to consummate the transactions contemplated hereby; or
46
(c) take any action which it believes when taken would cause its
representations and warranties contained herein to become inaccurate in any
material respect.
Section 6.3 No Solicitation. From and after the date hereof,
---------------
NorthPoint shall not, nor shall it permit any of its Subsidiaries to, nor shall
it authorize or permit any of its, or any of its Subsidiaries', officers,
directors or employees or any investment banker, financial advisor, attorney,
accountants or other representatives retained by it or any of its Subsidiaries
to, directly or indirectly through another Person, (i) solicit, initiate or
encourage (including by way of furnishing information), or knowingly take any
other action designed to facilitate, any Alternative Transaction or (ii)
participate in any discussion with or provide any confidential information or
data to any Person relating to an Alternative Transaction, or engage in any
negotiations concerning an Alternative Transaction, or knowingly facilitate any
effort or attempt to make or implement an Alternative Transaction or accept an
Alternative Transaction; provided, however, that if, at any time prior to
-------- -------
approval of the Merger by the holders of NorthPoint Common Stock, (A) NorthPoint
has received an unsolicited bona fide written proposal relating to an
Alternative Transaction which did not result from a breach of this Section 6.3,
(B) the Board of Directors of NorthPoint concludes in good faith (after
consultation with a financial advisor of nationally recognized reputation and
receiving the advice of its outside counsel) (I) that such proposal constitutes
a NorthPoint Superior Proposal and (II) that the failure to provide such
information or participate in such negotiations or discussions would result in a
breach by the Board of Directors of NorthPoint of its fiduciary duties to
NorthPoint stockholders under applicable law, NorthPoint may, subject to giving
Verizon at least five business days' written notice of its intention to do so,
(x) furnish information with respect to NorthPoint and its Subsidiaries to any
Person pursuant to a customary confidentiality agreement containing terms no
less restrictive than the terms of the Nondisclosure Agreement dated April 7,
2000 entered into among NorthPoint, Xxxx Atlantic Corporation and GTE
Corporation, as amended (the "Nondisclosure Agreement"), provided that a copy of
--------
all such information is delivered simultaneously to Verizon if it has not
previously been so furnished to Verizon, and (y) participate in negotiations
regarding such proposal. NorthPoint shall as soon as practicable (and in any
event within 24 hours) notify Verizon orally and in writing of any request for
information or of any proposal in connection with an Alternative Transaction,
the terms and conditions of such request or proposal (including a copy thereof,
if in writing, and all other documentation and any related correspondence) and
the identity of the Person making such request or proposal. NorthPoint will keep
Verizon fully informed of the status and details
47
(including amendments or proposed amendments) of such request or proposal, and
any discussions relating thereto, on a current basis. NorthPoint shall, and
shall cause its officers, directors and representatives to, immediately cease
and terminate any existing solicitation, initiation, encouragement, activity,
discussion or negotiation with any Persons conducted heretofore by NorthPoint or
its representatives with respect to the foregoing. NorthPoint agrees that it
will use its commercially reasonable efforts to promptly inform its directors,
officers, employees and representatives of the obligations undertaken in this
Section 6.3. NorthPoint (i) agrees not to release any Third Party from, or waive
any provision of, or fail to enforce, any standstill agreement or similar
agreements to which it is a party related to, or which could affect, an
Alternative Transaction and agrees that Verizon shall be entitled to enforce
NorthPoint's rights and remedies under and in connection with such agreements
and (ii) acknowledges that the provisions of clause (i) are an important and
integral part of this Agreement. Nothing contained in this Section 6.3(a) or
Section 7.2 hereof shall prohibit NorthPoint from taking and disclosing to its
stockholders a position as required by Rule 14e-9 or Rule 14e-2(a) promulgated
under the Exchange Act. Notwithstanding anything herein to the contrary,
NorthPoint shall submit this Agreement to the stockholders of NorthPoint at the
NorthPoint Stockholders' Meeting for the purposes of adopting this Agreement and
approving the Merger whether or not the Board of Directors of NorthPoint makes a
determination that a proposal constitutes a NorthPoint Superior Proposal.
Section 6.4 Regulatory Compliance Costs.
---------------------------
(a) Within 60 days after the date hereof, NorthPoint and Verizon shall
agree on a plan (the "Regulatory Compliance Plan") to bring NorthPoint's then-
existing network into compliance with any and all state and federal regulations
applicable to Verizon that would become applicable to the operations of
NorthPoint from and after the Effective Time as a result of the consummation of
the Asset Contribution and the Merger. Both Parties shall use all commercially
reasonable efforts to minimize the cost of implementing the Regulatory
Compliance Plan. The Regulatory Compliance Plan shall include the cost of (i)
incremental network facilities, (ii) incremental equipment in existing
facilities, (iii) non-recurring and monthly recurring charges of new
transportation circuits for NorthPoint's customers, (iv) non-recurring and
monthly recurring charges for new transportation circuits for NorthPoint's
backbone network, (v) operating support systems changes, and (vi) personnel time
and materials required to effect such changes (the "Compliance Expenses"). At
the beginning of each calendar month, NorthPoint shall submit to Verizon a
detailed report of all Compliance Expenses, describing the nature, date,
48
amount and location of each Compliance Expense paid during the immediately
preceding calendar month and, within five business days of receipt of such
report, Verizon shall reimburse NorthPoint for Compliance Expenses incurred
during such preceding month which are in accordance with the Regulatory
Compliance Plan.
(b) At the Closing, the Cash Amount shall be reduced by an amount
equal to 45% of the Compliance Expenses theretofore reimbursed by Verizon.
(c) In the event that this Agreement is terminated pursuant to Section
9.1(d)(i)(A) hereof, in addition to any other remedies contained herein,
NorthPoint shall be entitled to retain any reimbursement payments made by
Verizon in respect of Compliance Expenses.
(d) In the event that this Agreement is terminated pursuant to Section
9.1(d)(ii)(A) hereof, in addition to any other remedies contained herein,
NorthPoint shall make a cash payment to Verizon within five business days of
such termination in an amount equal to 100% of the reimbursement payments
previously made by Verizon in respect of Compliance Expenses.
(e) In the event this Agreement is terminated for any reason other
than pursuant to Section 9.1(d)(i)(A) or 9.1(d)(ii)(A) hereof, NorthPoint shall
make a cash payment to Verizon within five business days of such termination in
an amount equal to 50% of the reimbursement payments previously made by Verizon
in respect of Compliance Expenses.
Section 6.5 Real Estate Matters.
-------------------
(a) All leases, contracts and arrangements with respect to occupancy
by the Verizon Network Equipment Assets of space in the Verizon Central Offices
shall be transferred to Parent at the Effective Time and included in the Assumed
Verizon Contracts, substantially at the rates offered by Verizon to DLECs
generally in the market in which such Verizon Central Office is located. In the
event that any rack located in an Verizon Central Office is used in connection
with the Verizon DSL Business and is shared with any other Affiliate of Verizon
as of the Effective Time (any such Affiliate of Verizon, together with Parent,
are referred to as the "Sharing Parties"), from and after the Effective Time,
the Sharing Party which is the primary user of such rack shall retain the
payment obligations to the owner of such Verizon Central Office with respect
thereto and the Sharing Party
49
which is not the primary user of such rack shall reimburse such primary user in
a manner to be agreed upon.
(b) (i) All leases, contracts and arrangements with respect to
the occupancy of premises not located in an Verizon Central Office which are
used exclusively in connection with the Verizon DSL Business as of the Effective
Time shall be transferred to Parent at the Effective Time and included in the
Assumed Verizon Contracts, except to the extent subject to a regulatory
prohibition or the imposition of incremental obligations on Verizon or its
Affiliates, including a non-discrimination obligation. Any changes from and
after the Effective Time with respect to such leases, contracts and arrangements
relating to such facilities shall be made at the sole discretion of, and the
expense of, Parent.
(ii) All leases, contracts and arrangements with respect to the
occupancy of premises not located in an Verizon Central Office which at the
Effective Time are shared by the Verizon DSL Business with another Affiliate or
business of Verizon (the "Shared Facilities") shall be transferred to Parent at
the Effective Time (provided that Parent shall assume only a pro rated portion
of the obligations under such leases, contracts and arrangements based on the
relative uses of such premises) and included in the Assumed Verizon Contracts,
except to the extent subject to a regulatory prohibition or the imposition of
incremental obligations on Verizon or its Affiliates, including a non-
discrimination obligation; provided, however, that as soon as practicable
-------- -------
following the Closing Date, but in no event later than the six-month anniversary
of the Closing Date, Parent shall have the right, exercisable one time, to
notify Verizon (the "Lease Rejection Notice") that it desires to reassign to
Verizon any of the leases, contracts and arrangements related to Shared
Facilities that in the sole discretion of Parent it does not choose to continue
to use. The Lease Rejection Notice shall specify all Shared Leases to be
reassigned. Such reassignment of each such Shared Lease shall be effected
promptly upon vacation of the particular subject premises by Parent, and Parent
shall be responsible for the payment of all amounts accrued with respect to such
Shared Lease up to the date of such reassignment.
(iii) Transferred Employees that at the Effective Time are in
facilities covered by Shared Leases included in the Lease Rejection Notice are
referred to herein as "Relocated Employees."
50
Section 6.6 Facilities Related Payments.
---------------------------
(a) Commencing as soon as practicable after the date hereof,
NorthPoint will use its commercially reasonable efforts to review the facilities
locations of the Verizon DSL Business with a view toward determining what
infrastructure Parent shall require and shall submit to Verizon, not later than
the six-month anniversary of the Closing Date, a detailed listing by facility of
the Facilities Related Payments (as defined below). Upon the written request of
any Party, the Parties will resolve any dispute, controversy or claim arising
out of or relating to the determination of the Facilities Related Payments (a
"Dispute") in accordance with the procedures set forth in Section 6.6(d) hereof.
Within five business days of the final determination of the amount of the
Facilities Related Payments, Verizon will reimburse NorthPoint in cash in an
amount, if any, equal to the lesser of (x) the Facilities Related Payments and
(y) $20 million. The term "Facilities Related Payments" shall mean the sum of
the Facilities Assets Amounts plus any Capitalized Co-Location Fees paid by
NorthPoint as a direct result of the transactions contemplated by this
Agreement, reduced by any payments made by Verizon or an Affiliate of Verizon
with respect to Capitalized Co-Location Fees directly resulting from the
transactions contemplated by this Agreement.
(b) "Facilities Assets" means tenant improvements, shared information
technology ("IT") infrastructure (e.g., local area network/wide area network,
printer, copier, fax), individual IT infrastructure (e.g., personal computer,
software licenses, telephone, PBX, pager), office furniture (e.g., cubicle,
desk, chair, filing cabinet and common area furnishings), office supply
inventory, and field technician assets (e.g., tools, test equipment, field
vehicles).
(c) "Capitalized Co-Location Fees" means capitalized central office
co-location fees and co-location application fees, capitalized engineering
charges related to central office co-location, and capitalized upfront ILEC
technician training expenses for any of the Verizon Central Offices, but shall
not include capitalized labor and other costs associated with the installation,
provisioning, modification and upgrading of equipment.
51
(d) (i) The Parties agree to seek resolution of any Dispute in
accordance with the procedures set forth in this Section 6.6(d) upon the written
request of any Party. The Parties shall first attempt in good faith to reach
resolution of such Dispute through discussions at the non-executive level. If
such Dispute is not resolved within 15 days after the date of receipt by any
Party of a written request for discussions at the non-executive level, the
matter may be referred to a senior-level employee at the level of vice president
or above of each Party (each a "Dispute Representative") in accordance with the
following procedures. Either Party may submit a written notice ("Second Written
Notice") following the end of the 15 day period referred to above. The notice
shall set out the nature of the Dispute and shall identify the Dispute
Representative in the notifying Party's organization, who shall have the
authority to agree to final resolution of the Dispute. Within five business
days of receipt of such notice, the receiving Party shall respond in writing
with designation of its Dispute Representative, who shall have the authority to
agree to final resolution of the Dispute. The Dispute Representatives shall
meet within five business days after the receiving party's notice was received
and shall negotiate to resolve the Dispute. The discussions shall be left to
the discretion of the Dispute Representatives, who may agree to utilize other
alternative dispute resolution procedures such as mediation to assist in the
negotiations. Discussions and correspondence among the Dispute Representatives
for purposes of these negotiations shall be treated as confidential information
developed for purposes of settlement, shall be exempt from discovery and
production, and shall not be admissible in any arbitration or lawsuit without
the concurrence of all Parties. Documents identified in or provided with such
communications, which are not prepared for purposes of the negotiations, are not
so exempted and may, if otherwise admissible, be admitted in evidence in an
arbitration or lawsuit. The Parties agree to pursue resolution under this
section for a minimum of 45 days following the Second Written Notice requesting
initiation of these dispute resolution procedures before pursing arbitration as
set forth in Section 6.6(d)(ii) below.
(ii) If the Parties cannot resolve the claim or dispute covered
by the procedure set forth in Section 6.6(d)(i) above in accordance with the
negotiation procedure set forth therein, any Party shall have the right to cause
the other Parties to enter into binding arbitration in accordance with the rules
of the American Arbitration Association then in effect. A Party must initiate
such arbitration no later than 30 days following conclusion of the dispute
resolution process set forth in Section 6.6(d)(i) above. The arbitration shall
be conducted on an expedited basis in the County of New York, in the State of
New York. Three
52
arbitrators, each having at least five years of experience in the
telecommunications field, shall be appointed, one by each Party, and then one
selected jointly by those two arbitrators, for such arbitration. Any award
rendered therein shall specify the findings of fact of the arbitrators and the
reasons for such award, with reference to and reliance on relevant law. The
award, if any, shall be final and binding upon the Parties, and shall be the
sole and exclusive remedy between the Parties regarding the claim or dispute
submitted for arbitration pursuant to this Section 6.6(d)(ii). Judgment upon any
award may be entered in any court having jurisdiction. The Parties shall each be
responsible for their own costs in the arbitration and shall share equally in
the cost of the arbitrator and any related costs such as meeting space and the
like.
(e) Verizon will provide Facilities Assets for Transferred Employees
either through the transfer of pre-existing used and useful Facilities Assets or
through the payment of Facilities Assets Amounts as hereinafter set forth. Under
no circumstances will Facilities Assets Amounts be payable with respect to any
employees other than Relocated Employees or any facilities not included in the
Lease Rejection Notice.
(f) "Facilities Assets Amounts" shall mean, with respect to Relocated
Employees only, a one-time fee of $26,600 per management employee, $19,200 per
non-management employee, and $19,500 per field technician employee, offset in
each case by the net book value of any Facilities Assets associated with such
Relocated Employee.
Section 6.7 Systems Assets. After the Closing Date, operations
--------------
support systems ("OSS") will be obtained by Parent from Verizon or its
Affiliates on a service bureau basis. These systems and services will be of the
type described on Schedule 6.7. The systems and services will be provided
through a contract, which shall include appropriate service level standards, at
a cost not to exceed $4 million per month for base functionality at the Closing
Date, increasing by $333,333 per month commencing on the thirteenth month
following the Closing Date, and such contract shall be for a term of not in
excess of 18 months. Any additional enhancements and features beyond those
provided for in the contract shall be separately negotiated and will be provided
on an arm's-length basis. Such contract will be terminable by Parent on 90 days
prior written notice.
53
Section 6.8 Future Contracts. The parties hereto acknowledge that
----------------
after the Closing from time to time Parent may desire to contract with Verizon
or its Affiliates for certain ongoing services. The parties agree to use
commercially reasonable efforts to negotiate arm's-length contracts or
arrangements relating to the provision of any such services as may be requested
by Parent from time to time.
Section 6.9 Master Services Agreement. Concurrently with the
-------------------------
execution of this Agreement, the parties hereto are entering into a Master
Services Agreement in the form attached as Exhibit H hereto.
---------
Section 6.10 Vendor Contracts. Verizon shall use its commercially
----------------
reasonable efforts (including requesting consents from vendors where required)
to enable Parent, from and after the Effective Time, to make purchases under
vendor contracts applicable to Affiliates of Verizon to the extent permitted by
such vendor contracts, provided that the making by Parent of such purchases
would not (i) require the payment of compensation or other consideration by
Verizon and its Affiliates other than Parent to any third party or (ii) have any
adverse effect upon Verizon and its Affiliates.
ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1 Proxy Statement and Registration Statement.
------------------------------------------
(a) As promptly as practicable after the execution and delivery of
this Agreement, the Parties shall, in compliance with applicable law, (x)
prepare and file with the SEC and any applicable blue sky authorities the
Registration Statement, and shall use all commercially reasonable efforts to
cause the Registration Statement to be declared effective by the SEC and such
authorities; and (y) prepare and file with the SEC and shall use all
commercially reasonable efforts to have cleared by the SEC, and promptly
thereafter NorthPoint shall mail to the holders of record of shares of
NorthPoint Common Stock, the Proxy Statement, provided, however, that NorthPoint
-------- -------
shall not mail or otherwise furnish the Proxy Statement to its stockholders
unless and until:
(i) it has received notice from the SEC that the Registration
Statement has been declared effective under the 1933 Act;
54
(ii) Parent shall have received a letter of PricewaterhouseCoopers
LLP, dated a date within two business days prior to the date of the first
mailing of the Proxy Statement, and addressed to Parent, in form and substance
reasonably satisfactory to Parent and customary in scope and substance for "cold
comfort" letters delivered by independent public accountants in connection with
registration statements on Form S-4 with respect to the financial statements of
NorthPoint included in the Proxy Statement and the Registration Statement;
(b) The parties will cooperate in the preparation of the Proxy
Statement (including the preparation of the financial statements contained
therein) and the Registration Statement and in having the Registration Statement
declared effective as soon as practicable; and
(c) Each Party will promptly inform the other Parties of the receipt
by it of any comments from the SEC or its staff and of any request by the SEC
for amendments or supplements to the Proxy Statement or the Registration
Statement or for additional information and will supply the other Parties hereto
with copies of all correspondence between it and its representatives, on the one
hand, and the SEC or the members of its staff or any other governmental
official, on the other hand, with respect to the Proxy Statement or the
Registration Statement.
Section 7.2 NorthPoint Stockholder Meeting.
------------------------------
(a) As promptly as practicable after the Registration Statement is
declared effective under the Securities Act, NorthPoint (i) shall duly take all
lawful action to call, give notice of, convene and hold a meeting of its
stockholders on a date determined in accordance with the mutual agreement of
NorthPoint and Verizon (the "NorthPoint Stockholders' Meeting") for the purpose
of obtaining the NorthPoint Stockholder Approval, (ii) shall take all lawful
action to solicit the adoption of this Agreement and (iii) shall, subject to the
provisions of Section 7.2(b) hereof, through its Board of Directors, recommend
to its stockholders the approval of the Merger. If on the date of the
NorthPoint Stockholders' Meeting, NorthPoint has not received duly executed
proxies which, when added to the number of votes represented in Person at the
meeting by Persons who intend to vote to adopt this Agreement, will constitute a
sufficient number of votes to adopt this Agreement, then NorthPoint shall take
all action necessary or appropriate to adjourn such meeting until the date ten
days after the originally scheduled date of such meeting.
55
(b) Except as expressly permitted by this Section 7.2(b), neither the
Board of Directors of NorthPoint nor any committee thereof shall (i) withdraw,
qualify or modify, or propose to withdraw, qualify or modify, in a manner
adverse to Verizon, the approval or recommendation of such Board of Directors or
such committee of the Merger or take any action or make any statement in
connection with the NorthPoint Stockholders' Meeting inconsistent with such
approval or recommendation, (ii) approve or recommend, or propose publicly to
approve or recommend, any Alternative Transaction or (iii) cause NorthPoint to
enter into any letter of intent, agreement in principle, acquisition agreement
or other similar agreement (each, a "NorthPoint Acquisition Agreement") related
to any Alternative Transaction, provided that if prior to the adoption of the
--------
Merger by the holders of NorthPoint Common Stock the Board of Directors of
NorthPoint determines in good faith, after it has received a NorthPoint Superior
Proposal and after receipt of advice from outside counsel, that the failure to
do so would result in a breach by the Board of Directors of NorthPoint of its
fiduciary duties to NorthPoint stockholders under applicable law, the Board of
Directors of NorthPoint may (subject to this and the following sentences) inform
NorthPoint stockholders that it no longer believes that such adoption is
advisable and no longer recommends approval (a "NorthPoint Subsequent
Determination"), but only at a time that is after the fifth business day
following delivery by NorthPoint to Verizon of written notice advising Verizon
that the Board of Directors of NorthPoint has received a NorthPoint Superior
Proposal specifying the terms and conditions of such NorthPoint Superior
Proposal (and including a copy thereof with all accompanying documentation, if
in writing), identifying the Person making such NorthPoint Superior Proposal and
stating that it intends to make a NorthPoint Subsequent Determination. After
providing such notice, NorthPoint shall provide a reasonable opportunity to
Verizon, and shall cooperate in good faith with Verizon, to make such
adjustments in the terms and conditions of this Agreement as would enable
NorthPoint to proceed with its recommendation to its stockholders without a
NorthPoint Subsequent Determination; provided, however, that any such adjustment
-------- -------
shall be at the discretion of the parties at the time. Notwithstanding any
NorthPoint Subsequent Determination, this Agreement shall be submitted by
NorthPoint to the stockholders of NorthPoint at the NorthPoint Stockholders'
Meeting for the purpose of adopting this Agreement and approving the Merger and
nothing herein will be deemed to relieve NorthPoint of such obligation.
(c) For purposes of this Agreement, a NorthPoint Subsequent
Determination shall be deemed to include, without limitation, any action or
activity described in clauses (i), (ii) or (iii) of paragraph (b) of this
Section 7.2.
56
Section 7.3 Additional Agreements.
---------------------
(a) Each of the Parties will comply in all material respects with all
applicable laws and with all applicable rules and regulations of any
Governmental Entity in connection with its execution, delivery and performance
of this Agreement and the transactions contemplated hereby. Each of the Parties
agrees to use all commercially reasonable efforts to obtain in a timely manner
all necessary waivers, consents and approvals and to effect all necessary
registrations and filings, and to use all commercially reasonable efforts to
take, or cause to be taken, all other actions and to do, or cause to be done,
all other things necessary, proper or advisable to consummate and make effective
as promptly as practicable the transactions contemplated by this Agreement and
to effect all necessary filings under the 1933 Act, the Exchange Act and the HSR
Act. Without limiting the generality of the foregoing, each of Verizon and
NorthPoint shall promptly prepare and file a Premerger Notification in
accordance with the HSR Act, shall promptly comply with any requests for
additional information, and shall use its commercially reasonable efforts to
obtain termination of the waiting period thereunder as promptly as practicable.
(b) Each of Verizon and NorthPoint shall, in connection with the
efforts referenced in Section 7.3(a) hereof, (i) cooperate in all respects with
each other in connection with any filing or submission and in connection with
any investigation or other inquiry, including any proceeding initiated by a
private party; (ii) promptly inform the other party of any material
communication received by such party from, or given by such party to any
Governmental Entity and of any material communication received or given in
connection with any proceeding by a private party, in each case regarding any of
the transactions contemplated hereby and (iii) consult with each other in
advance of any meeting or conference with any such Governmental Entity or, in
connection with any proceeding by a private party, with any other Person, and to
the extent permitted by the applicable Governmental Entity or other Person, give
the other Party the opportunity to attend and participate in such meetings and
conferences.
(c) In furtherance and not in limitation of the covenants of the
parties contained in Sections 7.3(a) and (b) hereof, if any administrative or
judicial action or proceeding, including any proceeding by a private party, is
instituted (or threatened to be instituted) challenging any transaction
contemplated by this Agreement as violative of any applicable law, or if any
statute, rule, regulation,
57
executive order, decree, injunction or administrative order is enacted, entered
or promulgated or enforced by a Governmental Entity which would make the Merger,
the Asset Contribution or the other transactions contemplated hereby illegal or
otherwise prohibit or materially impair or delay consummation of the
transactions contemplated hereby, each of Verizon and NorthPoint shall cooperate
in all respects with each other and use all commercially reasonable efforts to
contest and resist any such action or proceeding, to have vacated, lifted,
reversed or overturned any decree, judgment, injunction or other order, whether
temporary, preliminary or permanent, that is in effect and that prohibits,
prevents or restricts consummation of the transactions contemplated by this
Agreement and to have such statute, rule, regulation, executive order, decree,
injunction or administrative order repealed, rescinded or made inapplicable.
(d) Nothing in this Agreement shall require Parent, NorthPoint,
Verizon or their respective Subsidiaries to sell, hold separate or otherwise
dispose of or conduct their business in a manner, or agree to sell, hold
separate or otherwise dispose of or conduct their business in a specified manner
or permit the sale, holding separate or other disposition, of any assets of
Parent, NorthPoint, Verizon or their respective Subsidiaries or the conduct of
their business in a specified manner, whether as a condition to obtaining any
approval from a Government Entity or any other Person or for any other reason,
if such sale, holding separate or other disposition or the conduct of their
business in a specified manner, in the aggregate, would have a Material Adverse
Effect on Parent, NorthPoint, Verizon or the Verizon DSL Business, after giving
effect to the Merger.
(e) Notwithstanding the foregoing or any other provision of this
Agreement, nothing in this Section 7.3 shall limit a Party's right to terminate
this Agreement pursuant to Section 9.1 hereof so long as such Party has up to
then complied in all respects with its obligations under this Section 7.3.
Section 7.4 Access to Information.
---------------------
(a) Upon reasonable notice by Verizon, NorthPoint shall, and shall
cause its Subsidiaries, and its and their officers, directors, employees,
auditors, counsel and agents to, afford the officers, employees, auditors,
counsel and agents of Verizon with reasonable access during normal business
hours to NorthPoint's and its Subsidiaries' officers, employees, auditors,
counsel agents, properties, offices and other facilities and to their respective
books and records, and shall furnish Verizon
58
with financial, operating and other data and information as Verizon may
reasonably request, including in connection with confirmatory due diligence.
(b) Verizon agrees that all information received from NorthPoint
pursuant to Section 7.4(a) hereof shall be deemed received pursuant to the
Nondisclosure Agreement and Verizon shall comply, and shall cause its
Subsidiaries and each of its and their respective officers, directors,
employees, financial advisors and agents ("Party Representatives") to comply,
with the provisions of the Nondisclosure Agreement with respect to such
information and the provisions of the Nondisclosure Agreement are hereby
incorporated herein by reference with the same effect as if fully set forth
herein, provided that such information may be used for any purpose contemplated
hereby.
(c) Upon reasonable notice by NorthPoint, Verizon shall afford, and
shall cause its Subsidiaries and its and their officers, directors, employees,
auditors, counsel and agents to afford, the officers, employees, auditors,
counsel and agents of NorthPoint with reasonable access during normal business
hours to Verizon's and its Subsidiaries' officers, employees, auditors, counsel
agents, properties, offices and other facilities and to their respective books
and records, but in each case only to the extent related to the Verizon DSL
Business, and shall furnish NorthPoint with financial, operating and other data
and information regarding the Verizon DSL Business as NorthPoint may reasonably
request, including in connection with confirmatory due diligence.
(d) NorthPoint agrees that all information received from Verizon
pursuant to Section 7.4(c) hereof shall be deemed received pursuant to the
Nondisclosure Agreement and NorthPoint shall comply, and shall cause its
Subsidiaries and each of its and their Party Representatives to comply, with the
provisions of the Nondisclosure Agreement with respect to such information and
the provisions of the Nondisclosure Agreement are hereby incorporated herein by
reference with the same effect as if fully set forth herein, provided that such
information may be used for any purpose contemplated hereby.
Section 7.5 Public Announcements. None of the Parties shall issue
--------------------
any press release or public statement with respect to this Agreement or the
transactions contemplated hereby, including the Merger and the other agreements
referred to herein, without the other Parties' prior consent, except as may be
required by applicable law or court process. In addition, the Parties will
consult with each other, and will provide each other with a reasonable
opportunity to review and
59
comment upon, any such press release or other public statements prior to their
issuance. The Parties agree that the initial press release or releases to be
issued with respect to the transactions contemplated by this Agreement shall be
mutually agreed upon prior to the issuance thereof.
Section 7.6 Indemnification; Maintenance of NorthPoint's
--------------------------------------------
Indemnification, Directors' and Officers' Insurance. For a period of six years
---------------------------------------------------
after the Effective Time, Parent shall cause NorthPoint to, and Parent shall,
maintain in effect the current policies of directors' and officers' liability
insurance and fiduciary liability insurance maintained by NorthPoint (provided
that Parent may substitute therefor policies of at least the same coverage and
amounts containing terms and conditions which are, in the aggregate, no less
advantageous to the insured in any material respect) with respect to all
possible claims arising from facts or events which occurred on or before the
Effective Time. Parent shall cause NorthPoint to maintain in effect (a) the
current provisions regarding indemnification of officers and directors contained
in the charter and by-laws of NorthPoint and each of its Subsidiaries until the
statutes of limitations for all possible claims have run; provided that Parent
need not cause NorthPoint to maintain in effect indemnification provisions
contained in the charter and by-laws of its Subsidiaries if and to the extent
that Parent assumes such indemnity obligations; and (b) any directors, officers
or employees indemnification agreements of NorthPoint and its respective
Subsidiaries. Parent shall cause NorthPoint to, and Parent shall, indemnify the
directors and officers of NorthPoint and Parent, respectively, to the fullest
extent to which NorthPoint and Parent are permitted to indemnify such officers
and directors under applicable law. As of the Effective Time, Parent shall
unconditionally and irrevocably guarantee for the benefit of such directors,
officers and employees the obligations of NorthPoint under the foregoing
indemnification arrangements.
Section 7.7 Stock Market Listing. Each of the Parties shall use
--------------------
its commercially reasonable best efforts to obtain, prior to the Effective Time,
the approval for listing on Nasdaq, effective upon official notice of issuance,
of the shares of Parent Common Stock into which the NorthPoint Common Stock will
be converted pursuant to Article II hereof and which will be issuable upon
exercise of options pursuant to Section 2.7 hereof.
60
Section 7.8 Post-Merger Parent Board of Directors.
-------------------------------------
(a) At the Effective Time, the Board of Directors of Parent shall
consist of nine directors, of which six directors shall be individuals selected
by Verizon (three of whom shall be independent directors within the meaning of
the rules of Nasdaq) and three directors shall be individuals selected by
NorthPoint.
(b) For a period of 18 months following the Closing, Verizon shall
vote all of its shares of capital stock of Parent at each regular or special
meeting of the stockholders of Parent called for the purpose of filling a
position on the Board of Directors of Parent, or in any written consent executed
in lieu of such meeting of stockholders, and shall use its reasonable efforts to
cause each and every NorthPoint Nominee (as defined in the By-laws of Parent
attached hereto as Exhibit C) to be elected to the Board of Parent in accordance
---------
with By-laws of Parent, as amended from time to time.
Section 7.9 No Shelf Registration. Parent shall not be required to
---------------------
amend or maintain the effectiveness of the Registration Statement for the
purpose of permitting resale of the shares of Parent Common Stock received
pursuant hereto by the Persons who may be deemed to be Rule 145 Affiliates of
NorthPoint or Verizon. The shares of Parent Common Stock issuable upon exercise
of options issuable pursuant to Section 2.7 hereof shall be registered under the
1933 Act and such registration shall be effective at the time of issuance.
Section 7.10 Affiliates. NorthPoint (i) has disclosed to Verizon in
----------
Section 7.10 of the NorthPoint Disclosure Schedule all Persons who are, or may
be, as of the date hereof its Rule 145 Affiliates under the Securities Act, and
(ii) shall use all commercially reasonable efforts to cause each Person who is
identified as an "affiliate" of it in Section 7.10 of the NorthPoint Disclosure
Schedule to deliver to Verizon as promptly as practicable but in no event later
than 48 hours prior to the Closing Date, a signed agreement substantially in the
form attached hereto as Exhibit D. NorthPoint shall notify Verizon from time to
---------
time of any other Persons who then are, or may be, such an "affiliate" and use
all commercially reasonable efforts to cause each additional Person who is
identified as an "affiliate" to execute a signed agreement as set forth in this
Section 7.10.
61
Section 7.11 Blue Sky. Verizon, NorthPoint and Parent will use
--------
their best efforts to obtain prior to the Effective Time all necessary blue sky
permits and approvals required to permit the distribution of the shares of
Parent Common Stock to be issued in accordance with the provisions of this
Agreement.
Section 7.12 Tax-Free Reorganization.
-----------------------
(a) Each of the Parties will use its best efforts to cause (i) the
Asset Contribution and the Merger to qualify as a transaction described in
Section 351 of the Code and (ii) the Merger to qualify as a transaction
described in Section 351 of the Code and a tax-free reorganization under Section
368(a) of the Code, and none of the Parties will take any action that would
cause (A) the Merger to fail to qualify as either (x) a transaction qualifying
under Section 351 of the Code or (y) a tax-free reorganization under Section
368(a) of the Code or (B) the Asset Contribution to qualify as a transaction
qualifying under Section 351 of the Code (it being agreed that it shall not be a
violation of this Section 7.12(a) if the payment of the Cash Consideration
Amount causes the Merger not to qualify as a tax-free reorganization under
Section 368(a) of the Code).
(b) NorthPoint will deliver an Officer's Certificate substantially in
the form of Exhibit E, Parent will deliver an Officer's Certificate
---------
substantially in the form of Exhibit F and Verizon will deliver an Officer's
---------
Certificate substantially in the form of Exhibit G, in each case executed as of
---------
the date of the Proxy Statement and as of the Closing Date, and as may be
reasonably requested by counsel to any Party. NorthPoint will use its
commercially reasonable efforts to procure from each NorthPoint stockholder that
will hold five percent or more of the Parent Common Stock outstanding
immediately following the Merger and Asset Contribution, a certificate, executed
as of the date of the Proxy Statement and the Closing Date, substantially to the
effect that such stockholder has no plan or intention to sell or otherwise
dispose of such Parent Common Stock received in the Merger.
Section 7.13 Employment and Employee Benefits Matters. Concurrently
----------------------------------------
with the execution of this Agreement, NorthPoint and Verizon are entering into
an Employee Matters Agreement substantially in the form attached as Exhibit I
---------
hereto.
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Section 7.14 Indemnification by Verizon.
--------------------------
(a) Verizon shall indemnify, save and hold harmless NorthPoint and its
Subsidiaries, and their respective directors, officers, stockholders and
employees (the "NorthPoint Indemnified Parties"), from and against any and all
losses, liabilities, damages, lawsuits, claims, demands and expenses (including
without limitation reasonable attorneys' fees and all reasonable amounts paid in
investigation, defense or settlement) incurred by the NorthPoint Indemnified
Parties in connection with, arising out of, or resulting from any claims against
Verizon that have been or will be asserted in respect of the Verizon DSL Assets
in actions captioned Covad Communications Co. et al. x. Xxxx Atlantic
------------------------------------------------
Corporation, District Court for the District of Columbia, Xxxxxxxxxxx Xxxxxx v.
----------- ---------------------
Xxxx Atlantic Corporation, Supreme Court of New York, and Xxxxxx Xxxxx et al. v.
------------------------- ----------------------
Xxxx Atlantic Corporation and Xxxx Atlantic Internet Solutions, Inc., Supreme
-------------------------------------------------------------------
Court of New York, but only to the extent arising out of claims against the
Verizon DSL Assets in respect of actions taken by Verizon prior to the Effective
Time.
(b) If a NorthPoint Indemnified Party shall receive notice or
otherwise learn of the assertion by a Person who is not a party to this
Agreement of any claim or of the commencement by any such Person of any Action
(a "Third Party Claim") with respect to which Verizon may be obligated to
provide indemnification, such NorthPoint Indemnified Party shall give Verizon
written notice thereof promptly after becoming aware of such Third Party Claim.
Such notice shall describe the Third Party Claim in reasonable detail, and shall
indicate the amount (estimated if necessary) of the loss that has been or may be
sustained by or is claimed against such NorthPoint Indemnified Party. Such
notice shall be a condition precedent to any liability by Verizon for any Third
Party Claim under the provisions for indemnification contained in this
Agreement.
(c) Verizon may, in its sole discretion, elect to compromise, settle
or defend, at Verizon's own expense and by Verizon's own counsel, any Third
Party Claim without the prior consent of any NorthPoint Indemnified Party.
(d) If Verizon chooses to defend any claim, the applicable NorthPoint
Indemnified Party shall make available to Verizon any personnel or any books,
records or other documents within its control that are necessary or appropriate
for such defense.
63
(e) Notwithstanding anything else in this Section 7.14, if an offer of
compromise or settlement is received by Verizon with respect to a Third Party
Claim and Verizon notifies the applicable NorthPoint Indemnified Party in
writing of Verizon's willingness to compromise or settle such Third Party Claim
as to Verizon and such NorthPoint Indemnified Party declines to accept such
compromise or settlement as applied to such Indemnified Third Party following
Verizon's entering into such compromise or settlement, such NorthPoint
Indemnified Party may continue to contest such Third Party Claim as to itself,
free of any participation by Verizon, at such NorthPoint Indemnified Party's
sole expense. In such event, the obligation of Verizon to such NorthPoint
Indemnified Party with respect to such Third Party Claim shall be equal to the
lesser of (i) the amount of the offer of compromise or settlement which such
NorthPoint Indemnified Party declined to accept plus the costs and expenses of
such NorthPoint Indemnified Party prior to the date Verizon notifies such
NorthPoint Indemnified Party of the offer to compromise or settle and (ii) the
actual out-of-pocket amount such NorthPoint Indemnified Party is obligated to
pay as a result of such NorthPoint Indemnified Party's continuing to contest
such Third Party Claim. Verizon shall be entitled to recover (by setoff or
otherwise) from an NorthPoint Indemnified Party any additional expenses incurred
by Verizon as a result of such NorthPoint Indemnified Party's decision to
continue to contest such Third Party Claim.
(f) If the amount of any indemnifiable loss shall, at any time
subsequent to payment pursuant to this Agreement, be reduced by recovery,
settlement or otherwise, the amount of such reduction, less any expenses
incurred in connection therewith, shall promptly be repaid by the applicable
NorthPoint Indemnified Party to Verizon.
(g) In the event of payment by Verizon to any NorthPoint Indemnified
Party in connection with any Third Party Claim, Verizon shall be subrogated to
and shall stand in the place of such NorthPoint Indemnified Party as to any
events or circumstances in respect of which such NorthPoint Indemnified Party
may have any right or claim relating to such Third Party Claim. Such NorthPoint
Indemnified Party shall cooperate with Verizon in a reasonable manner, and, at
the cost and expense of Verizon, in prosecuting any subrogated right or claim.
64
Section 7.15 Preemptive Right. If, from and after the Effective
----------------
Time and until the second anniversary of the date hereof, Parent determines to
issue any shares of any class of capital stock or any securities convertible
into capital stock (other than (i) issuances of pro rata stock dividends to
holders of Parent Common Stock and (ii) stock issued upon the exercise of a
Mirror Equity Right), Verizon shall be entitled to purchase, at a price and on
such terms as are no less favorable to Verizon than offered by Parent to the
proposed transferee, additional shares of such capital stock or securities
convertible into capital stock in such amounts as is necessary to maintain
Verizon's percentage ownership of the outstanding Parent Common Stock equal to
the Verizon Ownership Percentage as of the Effective Time; provided, that in the
event that Verizon exercises its preemptive right in connection with the
issuance of shares issued by NorthPoint upon the exercise of options granted
after the Effective Time, the applicable purchase price for such shares shall be
the last sale price on Nasdaq (as reported in The Wall Street Journal) on the
business day immediately preceding the date of such issuance. In connection
with Verizon's preemptive right, Parent shall provide written notice to Verizon
no later than ten days prior to any issuance giving rise to such preemptive
right.
Section 7.16 Further Assurances. In case at any time after the
------------------
Effective Time any further action is necessary or desirable to carry out the
purposes of this Agreement, the proper officers and directors of each of the
parties to this Agreement shall take all such necessary action.
ARTICLE VIII
CONDITIONS TO THE ASSET CONTRIBUTION AND THE MERGER
Section 8.1 Conditions to Each Party's Obligation to Effect the
---------------------------------------------------
Merger. The respective obligations of each Party to effect the Asset
------
Contribution and the Merger shall be subject to the fulfillment at or prior to
the Effective Time of the following conditions:
(a) Stockholder Approval. The NorthPoint Stockholder Approval shall
--------------------
have been obtained;
(b) Legality. No federal, state or foreign statute, rule, regulation,
--------
executive order, decree, injunction or administrative order shall have been
enacted, entered, promulgated or enforced by any Governmental Entity which is in
effect and
65
has the effect of making the Asset Contribution or the Merger illegal or
otherwise prohibiting the consummation of the Merger;
(c) HSR Act. Any waiting period applicable to the consummation of the
-------
Asset Contribution and the Merger under the HSR Act shall have expired or been
terminated;
(d) Regulatory Matters. All authorizations, consents, orders, permits
------------------
or approvals of, or declarations or filings with, and all expirations of waiting
periods imposed by, any Governmental Entity (all of the foregoing, "Consents")
which are necessary for the consummation of the transactions contemplated
hereby, other than Consents which, if not obtained, would not have a Material
Adverse Effect on any of Parent (after the Effective Time), the Verizon DSL
Business or NorthPoint, shall have been filed, have occurred or have been
obtained (all such Consents being referred to as the "Requisite Regulatory
Approvals") and all such Requisite Regulatory Approvals shall be in full force
and effect, provided, however, that a Requisite Regulatory Approval shall not be
deemed to have been obtained if in connection with the grant thereof there shall
have been an imposition by any Governmental Entity of any condition,
requirement, restriction or change of regulation, or any other action directly
or indirectly related to such grant taken by such Governmental Entity, which
would (or if implemented would) constitute a Material Adverse Effect on any of
Parent, the Verizon DSL Business, Verizon or NorthPoint;
(e) Registration Statement Effective. The Registration Statement
--------------------------------
shall have become effective prior to the mailing by NorthPoint of the Proxy
Statement to its stockholders, no stop order suspending the effectiveness of the
Registration Statement shall then be in effect, and no proceedings for that
purpose shall then be threatened by the SEC or shall have been initiated by the
SEC and not concluded or withdrawn;
(f) Blue Sky. All state securities or blue sky permits or approvals
--------
required to carry out the transactions contemplated hereby shall have been
received; and
(g) Stock Exchange Listing. The shares of Parent Common Stock (i)
----------------------
into which the NorthPoint Common Stock will be converted pursuant to Article II
hereof, (ii) to be issued to Verizon pursuant to Article II hereof and (iii)
issuable upon the exercise of options issuable pursuant to Section 2.7 hereof,
shall have been duly approved for listing on Nasdaq, subject to official notice
of issuance.
66
Section 8.2 Additional Conditions to Obligations of NorthPoint. The
--------------------------------------------------
obligations of NorthPoint to effect the Merger are also subject to the
fulfillment of the following conditions:
(a) Representations and Warranties. The representations and
------------------------------
warranties of Verizon contained in this Agreement shall be true and correct on
the date hereof and (except to the extent such representations and warranties
speak as of a date earlier than the date hereof) shall also be true and correct
on and as of the Closing Date, except for changes permitted under Section 6.2
hereof, as applicable, or otherwise contemplated by this Agreement, with the
same force and effect as if made on and as of the Closing Date, provided,
however, that for purposes of this Section 8.2(a) only, such representations and
warranties shall be deemed to be true and correct unless the failure or failures
of such representations and warranties to be so true and correct (without regard
to materiality qualifiers contained therein), individually or in the aggregate,
results or will result in a Material Adverse Effect on the Verizon DSL Business;
(b) Agreements and Covenants. Verizon shall have performed or
------------------------
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by it on or before the Effective
Time;
(c) Certificates. NorthPoint shall have received a certificate of an
------------
executive officer of Verizon to the effect set forth in paragraphs (a) and (b)
above;
(d) Tax Opinion. NorthPoint shall have received an opinion of Xxxxxx
------------
& Xxxxxxx, special counsel to NorthPoint, dated as of the Closing Date, in form
and substance reasonably satisfactory to NorthPoint, substantially to the effect
that, on the basis of the facts, representations and assumptions set forth in
such opinion, the Merger constitutes a non-recognition transaction under Section
368 and/or Section 351 of the Code and therefore: (i) no gain or loss will be
recognized for federal income tax purposes by Parent, Merger Subsidiary or
NorthPoint as a result of the formation of Merger Subsidiary and the Merger; and
(ii) no gain or loss will be recognized for federal income tax purposes by the
stockholders of NorthPoint (other than Verizon or any Affiliate of Verizon, the
tax consequences to which will be addressed in a separate opinion of tax counsel
to Verizon) upon their exchange of NorthPoint Common Stock and NorthPoint
Preferred Stock solely for Parent Common Stock pursuant to the Merger, except
with respect to cash received in the Merger. In rendering such opinion, Xxxxxx &
Xxxxxxx may require and rely upon
67
representations and covenants including representations and covenants
substantially in the form of those contained in the NorthPoint, Parent and
Verizon officer's certificates attached hereto as Exhibit E, Exhibit F and
--------- ---------
Exhibit G, respectively, and representations and covenants of holders of five
---------
percent of the Parent Common Stock outstanding immediately following the Merger
and the Asset Contribution substantially to the effect that each such
stockholder has no plan or intention to sell or otherwise dispose of such Parent
Common Stock received in the Merger;
(e) Asset Contribution. Verizon shall have contributed the Verizon
------------------
DSL Assets to Parent as provided herein; and
(f) Consents Under Verizon Agreements. Verizon shall have obtained
---------------------------------
the consent or approval of any Person whose consent or approval shall be
required under any agreement or instrument in order to permit the consummation
of the transactions contemplated hereby, except for the Consents referred to in
Section 8.1(d) hereof and except for those consents or approvals the failure to
obtain would not, individually or in the aggregate, have a Material Adverse
Effect on the Verizon DSL Business.
Section 8.3 Additional Conditions to Obligations of Verizon. The
-----------------------------------------------
obligations of Verizon to effect the Merger and the Asset Contribution are also
subject to the fulfillment of the following conditions:
(a) Representations and Warranties. The representations and
------------------------------
warranties of NorthPoint contained in this Agreement shall be true and correct
on the date hereof and (except to the extent such representations and warranties
speak as of a date earlier than the date hereof) shall also be true and correct
on and as of the Closing Date, except for changes permitted under Section 6.1
hereof, as applicable, or otherwise contemplated by this Agreement, with the
same force and effect as if made on and as of the Closing Date, provided,
--------
however, that for purposes of this Section 8.3(a) only, such representations and
-------
warranties shall be deemed to be true and correct unless the failure or failures
of such representations and warranties to be so true and correct (without regard
to materiality qualifiers contained therein), individually or in the aggregate,
results or will result in a Material Adverse Effect on NorthPoint;
(b) Agreements and Covenants. NorthPoint shall have performed or
------------------------
complied in all material respects with all agreements and covenants required
by
68
this Agreement to be performed or complied with by it on or before the Effective
Time;
(c) Certificates. Verizon shall have received a certificate of an
------------
executive officer of NorthPoint to the effect set forth in paragraphs (a) and
(b) above;
(d) Tax Opinion. Verizon shall have received an opinion of Skadden,
-----------
Arps, Slate, Xxxxxxx & Xxxx LLP, special counsel to Verizon, dated as of the
Effective Time, in form and substance reasonably satisfactory to Verizon,
substantially to the effect that, on the basis of the facts, representations and
assumptions set forth in such opinion, the Asset Contribution together with the
Merger constitutes a transfer of property under Section 351(a) of the Code and
therefore no gain or loss will be recognized for federal income tax purposes by
Verizon or Parent as a result of the Asset Contribution or the Merger. In
rendering such opinion, Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP may require and
rely upon representations and covenants including representations and covenants
substantially in the form of those contained in the NorthPoint, Parent and
Verizon officer's certificates attached hereto as Exhibit E, Exhibit F and
--------- ---------
Exhibit G, respectively, and representations and covenants of holders of five
---------
percent or more of the Parent Common Stock outstanding immediately following the
Merger and the Asset Contribution, substantially to the effect that each such
stockholder has no plan or intention to sell or otherwise dispose of such Parent
Common Stock received in the Merger.
(e) Affiliate Agreements. Verizon shall have received the agreements
--------------------
required by Section 7.10 hereof to be delivered by the NorthPoint Rule 145
Affiliates, duly executed by each NorthPoint Rule 145 Affiliate.
(f) Dissenting Shares. The number of shares of NorthPoint Common
-----------------
Stock in respect of which the holders have taken all steps required to be taken
prior to the Effective Time, to the extent such steps are necessary, to permit
such shares to be deemed Dissenting Shares shall not exceed 10% of the number of
outstanding shares of NorthPoint Common Stock as of the record date of the
NorthPoint Stockholders' Meeting.
(g) Material Adverse Effect. There shall not have occurred any
-----------------------
Material Adverse Effect on NorthPoint.
69
(h) Consents Under NorthPoint Agreements. NorthPoint shall have
------------------------------------
obtained the consent or approval of any Person whose consent or approval shall
be required under any agreement or instrument in order to permit the
consummation of the transactions contemplated hereby, except for the Consents
referred to in Section 8.1(d) hereof and except for those consents or approvals
which the failure to obtain would not, individually or in the aggregate, have a
Material Adverse Effect on NorthPoint.
(i) Employment Agreements. NorthPoint shall have entered into
---------------------
employment agreements with such senior management employees of NorthPoint as
Verizon shall reasonably determine, which agreements shall be in form and
substance reasonably satisfactory to Verizon.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
Section 9.1 Termination. This Agreement may be terminated at any
-----------
time before the Effective Time, in each case as authorized by the respective
Board of Directors of Verizon or NorthPoint:
(a) By mutual written consent of each of Verizon and NorthPoint;
(b) By either of Verizon or NorthPoint if the Merger shall not have
been consummated on or before the one year anniversary of the date hereof,
provided that the Parties may mutually agree to extend such date to a date no
--------
later than the date that is eighteen months from the date hereof (such
termination date, as it may be extended upon mutual agreement of the Parties, is
referred to as the "Termination Date"). The right to terminate this Agreement
under this Section 9.1(b) shall not be available to any Party whose failure to
fulfill any obligation under this Agreement has been the cause of, or resulted
in, the failure of any condition to be satisfied;
(c) By either of Verizon or NorthPoint if after the date hereof a
court of competent jurisdiction or Governmental Entity shall have issued an
order, decree or ruling or taken any other action (which order, decree or ruling
the Parties shall use their commercially reasonable efforts to lift), in each
case permanently restraining, enjoining or otherwise prohibiting the
transactions contemplated by this
70
Agreement, and such order, decree, ruling or other action shall have become
final and nonappealable;
(d) (i) by NorthPoint, (A) if Verizon shall have breached or failed to
perform in any material respect any of its representations, warranties,
covenants or other agreements contained in this Agreement, which breach or
failure to perform (1) is incapable of being cured by Verizon prior to the
Termination Date and (2) renders any condition under Section 8.1 or 8.2 hereof
incapable of being satisfied prior to the Termination Date, or (B) if a
condition under Section 8.1 or 8.2 hereof to NorthPoint's obligations hereunder
cannot be satisfied prior to the Termination Date;
(ii) by Verizon, (A) if NorthPoint shall have breached or failed
to perform in any material respect any of its representations, warranties,
covenants or other agreements contained in this Agreement, which breach or
failure to perform (1) is incapable of being cured by NorthPoint prior to the
Termination Date and (2) renders any condition under Section 8.1 or 8.3 hereof
incapable of being satisfied prior to the Termination Date, or (B) if a
condition under Section 8.1 or 8.3 hereof to Verizon's obligations hereunder
cannot be satisfied prior to the Termination Date;
(e) By Verizon if the Board of Directors of NorthPoint (i) shall fail
to include in the Proxy Statement its recommendation without modification or
qualification that stockholders approve this Agreement and the Merger, (ii)
shall withdraw or modify in any adverse manner its approval or recommendation of
this Agreement or the Merger, (iii) shall fail to reaffirm such approval or
recommendation upon Verizon's request, (iv) shall approve or recommend any
Alternative Transaction or (v) shall resolve to take any of the actions
specified in this Section 9.1(e); or
(f) By either of Verizon or NorthPoint if the required approval of the
stockholders of NorthPoint shall fail to have been obtained at a duly held
stockholders meeting of such company, including any adjournments thereof.
Section 9.2 Effect of Termination.
---------------------
(a) In the event of termination of this Agreement as provided in
Section 9.1 hereof, and subject to the provisions of Section 10.1 hereof, this
Agreement shall forthwith become void and there shall be no liability on the
part of any of the Parties, except (i) as set forth in this Section 9.2 and in
Section 10.3
71
hereof, (ii) for breaches of the confidentiality obligations set forth in
Section 7.4 hereof and (iii) nothing herein shall relieve any Party from
liability for any willful breach hereof.
(b) If this Agreement (i) is terminated by Verizon pursuant to
Section 9.1(e) hereof, (ii) could have been (but was not) terminated by Verizon
pursuant to Section 9.1(e) hereof and is subsequently terminated by Verizon or
NorthPoint pursuant to Section 9.1(f) hereof because of the failure to obtain
the NorthPoint Stockholder Approval, (iii)(A) could not have been terminated by
Verizon pursuant to Section 9.1(e) hereof but is subsequently terminated by
Verizon or NorthPoint pursuant to Section 9.1(f) hereof because of the failure
to obtain the NorthPoint Stockholder Approval, (B) prior to the NorthPoint
Stockholders' Meeting there shall have been an offer or proposal for, an
announcement of any intention with respect to (including the filing of a
statement of beneficial ownership on Schedule 13D discussing the possibility of
or reserving the right to engage in), or any agreement with respect to, a
transaction that would constitute an Alternative Transaction, involving
NorthPoint or any of NorthPoint's Subsidiaries, and (C) within 12 months after
the termination of this Agreement, NorthPoint enters into a definitive agreement
with any Third Party with respect to an Alternative Transaction, or (iv) is
terminated by Verizon as a result of NorthPoint's material breach of Section 7.1
or Section 7.2(b) hereof which, in the case of Section 7.1 only, is not cured
within 10 days after notice thereof to NorthPoint, NorthPoint shall pay to
Verizon a termination fee of $100 million (the "Verizon Termination Fee").
(c) The Verizon Termination Fee payable under Section 9.2(b) hereof
shall be payable in cash, payable no later than one business day following the
delivery of notice of termination to NorthPoint, or, if such fee shall be
payable pursuant to clause (iii) of Section 9.2(b) hereof, such fee shall be
payable no later than one business day following the day NorthPoint enters into
the definitive agreement referenced in such clause (iii).
(d) Verizon and NorthPoint agree that the agreements contained in
Section 9.2(b) hereof are an integral part of the transactions contemplated by
this Agreement and constitute liquidated damages and not a penalty. In the
event of any dispute as to whether any fee due under such Section 9.2(b) is due
and payable, the prevailing Party shall be entitled to receive from the other
Party the costs and expenses (including legal fees and expenses) in connection
with any action, including the filing of any lawsuit or other legal action,
relating to such dispute.
72
Interest shall be paid on the amount of any unpaid fee at the publicly announced
prime rate of Citibank, N.A. from the date such fee was required to be paid.
Section 9.3 Amendment. This Agreement may be amended by the
---------
Parties pursuant to a writing adopted by action taken by all of the Parties at
any time before the Effective Time; provided, however, that, after approval of
-------- -------
this Agreement by the stockholders of NorthPoint, no amendment may be made which
would (a) alter or change the amount or kinds of consideration to be received by
the holders of NorthPoint Common Stock upon consummation of the Merger, or (b)
alter or change any of the terms and conditions of this Agreement if such
alteration or change would adversely affect the holders of any class or series
of securities of NorthPoint (it being understood and agreed that any agreement
by the Parties to extend the Termination Date shall not be deemed to adversely
affect the holders of any class or series of securities of NorthPoint). This
Agreement may not be amended except by an instrument in writing signed by each
of the Parties.
Section 9.4 Waiver. At any time before the Effective Time, any
------
Party may (a) extend the time for the performance of any of the obligations or
other acts of the other Parties, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto and (c) waive compliance with any of the agreements or
conditions contained herein. Any agreement on the part of a Party to any such
extension or waiver shall be valid only as against such Party and only if set
forth in an instrument in writing signed by such Party.
ARTICLE X
GENERAL PROVISIONS
Section 10.1 Non-Survival of Representations, Warranties and
-----------------------------------------------
Agreements. The representations, warranties and agreements in this Agreement
----------
shall terminate at the Effective Time or upon the termination of this Agreement
pursuant to Section 9.1 hereof, as the case may be, except that (a) the
agreements set forth in Article I, Article III and Sections 2.2, 2.3, 2.4, 2.5,
2.6, 2.7, 2.8, 2.9, 3.2, 3.3, 6.4, 6.5, 6.6, 6.7, 6.8, 7.6, 7.8, 7.12, 7.14,
7.15 and 7.16 hereof and the representations in the NorthPoint and Verizon
officers' certificates delivered in accordance with Section 7.12 hereof shall
survive
73
the Effective Time indefinitely, (b) the agreements and representations
set forth in Sections 7.4(b), 9.2 and 10.3 hereof shall survive termination
indefinitely and (c) nothing contained herein shall limit any covenant or
Agreement of the Parties which by its terms contemplates performance after the
Effective Time.
Section 10.2 Notices. All notices and other communications given
-------
or made pursuant hereto shall be in writing and shall be deemed to have been
duly given or made as of the date of receipt and shall be delivered personally
or mailed by registered or certified mail (postage prepaid, return receipt
requested), sent by overnight courier or sent by telecopy, to the Parties at the
following addresses or telecopy numbers (or at such other address or telecopy
number for a Party as shall be specified by like notice):
(a) if to Verizon, Parent or Merger Subsidiary:
Xxxx Atlantic Corporation
(d/b/a Verizon Communications)
0000 Xxxx Xxxxxx, 00/xx/ Xxxxx
Xxxxxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxx
Telecopy No.: (000) 000-0000
with copies to:
Xxxx Atlantic Corporation
(d/b/a Verizon Communications)
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxxx Xxxxx
Telecopy No.: (000) 000-0000
and
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
Xxxx Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx Xxxxx Xxxxxx, Esq.
Xxxxxx X. XxXxxxx, Esq.
Telecopy No.: (000) 000-0000
74
(b) if to NorthPoint:
NorthPoint Communications Group, Inc.
000 Xxxxxx Xxxxxx, Xxxxx Xxxxx
Xxx Xxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxx
Telecopy No.: (000) 000-0000
with a copy to:
Xxxxxx & Xxxxxxx
0000 Xxxxxxxxxxxx Xxxxxx, X.X.
Xxxxx 0000
Xxxxxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxx, Esq.
Telecopy: (000) 000-0000
Section 10.3 Expenses. Except as otherwise provided in this
--------
Agreement, all costs and expenses incurred in connection with this Agreement and
the transactions contemplated hereby shall be paid by the Party incurring such
costs and expenses, except that those expenses incurred in connection with the
printing of the Proxy Statement and the prospectus included in the Registration
Statement, as well as the filing fees related thereto and any filing fee
required in connection with the filing of Premerger Notifications under the HSR
Act, shall be shared equally by Verizon and NorthPoint. NorthPoint will pay any
real property transfer or similar Taxes imposed on it in connection with this
Agreement and the transactions contemplated hereby.
Section 10.4 Certain Definitions. For purposes of this Agreement,
-------------------
the following terms shall have the following meanings:
(a) "1933 Act" means the Securities Act of 1933, as the same may be
amended from time to time, and "Exchange Act" means the Securities Exchange Act
of 1934, as the same may be amended from time to time.
(b) "Affiliate" of a Person means a Person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, the first mentioned Person.
75
(c) "Alternative Transaction" means, whether in the form of an
inquiry, a proposal or intended proposal, a signed agreement or completed
action, as the case may be, any of (i) a transaction or series of transactions
pursuant to which any Person (or group of Persons) other than Verizon and its
respective Subsidiaries (a "Third Party") acquires or would acquire, directly or
indirectly, beneficial ownership (as defined in Rule 13d-3 under the Exchange
Act) of more than 20% of the outstanding shares of NorthPoint, whether from
Verizon or pursuant to a tender offer or exchange offer or otherwise, (ii) any
acquisition or proposed acquisition of, or business combination with, NorthPoint
or any of its Subsidiaries by a merger or other business combination (including
any so-called "merger-of-equals" and whether or not NorthPoint or any of its
Subsidiaries is the entity surviving any such merger or business combination) or
(iii) any other transaction pursuant to which any Third Party acquires or would
acquire, directly or indirectly, control of 20% or more in value of the assets
(including for this purpose the outstanding equity securities of Subsidiaries of
NorthPoint and any entity surviving any merger or business combination including
any of them) of NorthPoint or any of its Subsidiaries.
(d) "commercially reasonable efforts" shall mean those efforts
necessary or advisable to advance the interests of the Parties in achieving the
purposes and specific requirements and satisfying the conditions of this
Agreement, provided that such efforts will not require or include either expense
or conduct not ordinarily incurred or engaged in by Parties seeking to implement
agreements of this type unless part of a separate mutual understanding of the
Parties not contained in this Agreement whether reached before or after the
Agreement is executed.
(e) "control" (including the terms "controlled by" and "under common
control with") means the possession, direct or indirect, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of stock, as trustee or executor, by contract or credit
arrangement or otherwise.
(f) "Environmental Law" means any law relating to: (A) the protection,
investigation or restoration of the environment, health, safety, or natural
resources, (B) the handling, use, presence, disposal, release or threatened
release of any Hazardous Substance or (C) noise, odor, wetlands, pollution,
contamination or any injury or threat of injury to Persons or property in
connection with any Hazardous Substance.
76
(g) "Equity Right" means any subscription, option, warrant, call,
commitment, agreement, conversion right or other right of any character
(contingent or otherwise) to purchase or otherwise acquire any shares of the
capital stock of a Person.
(h) "Hazardous Substance" means any substance that is: listed,
classified or regulated pursuant to any Environmental Law, including any
petroleum product or by-product, asbestos-containing material, lead-containing
paint or plumbing, polychlorinated biphenyls, radioactive materials or radon.
(i) "HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act
of 1976, as the same may be amended from time to time.
(j) "knowledge" of any Party shall mean the actual knowledge of the
executive officers of such Party.
(k) "Material Adverse Effect" means
(i) in the case of NorthPoint or Parent, any fact, event,
change or effect having, or which will have, a material adverse effect on the
business, operations, properties (including intangible properties), financial
condition, assets or liabilities of NorthPoint or Parent, as the case may be,
and its Subsidiaries taken as a whole, but shall not include facts, events,
changes or effects that are generally applicable to (A) the data industry, (B)
the United States economy or (C) the United States securities markets generally
or the Nasdaq Technology Index in particular, nor shall it include any fact,
event, change or effect caused predominantly by Verizon's involvement in the
transactions contemplated by this Agreement; and
(ii) in the case of the Verizon DSL Business or Verizon, any
fact, event, change or effect having, or which will have, a material adverse
effect on the business, operations, properties (including intangible
properties), financial condition, assets or liabilities of the Verizon DSL
Business or Verizon, as the case may be, but shall not include facts, events,
changes or effects that are generally applicable to (A) the data industry, (B)
the United States economy or (C) the United States securities markets generally
or the Nasdaq Technology Index in particular, nor shall it include any fact,
event, change or effect caused predominantly by NorthPoint's involvement in the
transactions contemplated by this Agreement.
77
(l) "Material Investment" means, as to NorthPoint, any Person which
NorthPoint directly or indirectly holds the stock of, or other equity interest
in, provided the lesser of the fair market value or book value of such interest
exceeds $2 million, excluding, however, any Person which is a Subsidiary of
NorthPoint.
(m) "NorthPoint Equity Right" means any Equity Right to purchase or
otherwise acquire any shares of capital stock of NorthPoint from NorthPoint or
any of its Subsidiaries, at any time or upon the happening of any stated event,
including any right to purchase shares of NorthPoint Common Stock under any
employee stock purchase plan of NorthPoint.
(n) "NorthPoint's Line of Business" means data transport services
(including but not limited to xDSL, asynchronous transfer mode, frame relay,
internet protocol), and associated value-added services (including but not
limited to virtual private networks, content delivery, applications service
delivery, webcasting, web hosting, video conferencing, voice over DSL, local
area network and customer network setup and support, network security
applications) on a wholesale basis, as well as OSS and consumer premises
equipment sales, leasing and training.
(o) "NorthPoint Superior Proposal" means any written proposal (on its
most recently amended or modified terms, if amended or modified) made by a Third
Party to enter into an Alternative Transaction (provided that (A) for the
purposes of this definition, the applicable percentage in clause (i) of the
definition of Alternative Transaction shall be fifty percent (50%) and (B) such
Alternative Transaction provides for the acquisition of all outstanding
preferred equity of NorthPoint held by Verizon and the repayment of all
outstanding indebtedness owed by NorthPoint to Verizon) which the Board of
Directors of NorthPoint in good faith concludes (after consultation with a
financial advisor of nationally recognized reputation and receiving the advice
of its outside counsel), taking into account, among other things, all legal,
financial, regulatory and other aspects of the proposal and the Third Party
making the proposal (i) would, if consummated, result in a transaction that is
more favorable to NorthPoint stockholders (in their capacities as stockholders),
from a financial point of view, than the transactions contemplated by this
Agreement and (ii) is reasonably capable of being completed.
(p) "Parties" means Verizon, Parent, Merger Subsidiary and
NorthPoint.
78
(q) "Person" means an individual, corporation, partnership,
association, trust, estate, limited liability company, labor union,
unincorporated organization, entity or group (as defined in the Exchange Act).
(r) "Rule 145 Affiliates" means an affiliate within the meaning of
Rule 145 promulgated under the 1933 Act.
(s) "Subsidiary" means with respect to any Person, any corporation or
other legal entity of which such Person (either alone or through or together
with any other Subsidiary or Subsidiaries) owns, directly or indirectly, more
than 50% of the stock or other equity interests the holders of which are
generally entitled to vote for the election of the board of directors or other
governing body of such corporation or other legal entity.
(t) "Transferred Employee" means the Verizon DSL Employees who shall
be employed by Parent or any of its Subsidiaries at the Effective Time pursuant
to the Employee Matters Agreement.
(u) "Verizon DSL Business" shall mean the DSL wholesale business
operations of Verizon and its Subsidiaries as conducted on the date hereof.
(v) "Verizon DSL Employees" shall mean the employees of Verizon who,
in their capacity as employees, have responsibilities related exclusively to the
Verizon DSL Business.
Section 10.5 Headings. The headings contained in this Agreement
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are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
Section 10.6 Severability. If any term or other provision of this
------------
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any Party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the Parties shall negotiate
in good faith to modify this Agreement so as to effect the original intent of
the Parties as closely as possible in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the maximum extent possible.
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Section 10.7 Entire Agreement; No Third-Party Beneficiaries. This
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Agreement, together with the Exhibits hereto, and the Nondisclosure Agreement
constitute the entire agreement and, except as expressly set forth herein,
supersedes any and all other prior agreements and undertakings, both written and
oral, among the Parties, or any of them, with respect to the subject matter
hereof and, except for Section 7.6 and Section 7.8 hereof, is not intended to
confer upon any Person other than Verizon, NorthPoint, Parent and Merger
Subsidiary and, after the Effective Time, their respective stockholders, any
rights or remedies hereunder.
Section 10.8 Assignment. This Agreement shall not be assigned by
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operation of law or otherwise without the prior written consent of the other
Parties hereto, provided that Verizon may designate one or more of its
Affiliates to hold the shares of Parent Common Stock issuable to Verizon
hereunder.
Section 10.9 Governing Law. This Agreement shall be governed by,
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and construed in accordance with, the laws of the State of Delaware applicable
to contracts executed in and to be performed entirely within that State, without
regard to the conflicts of laws provisions thereof.
Section 10.10 Counterparts. This Agreement may be executed in two
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or more counterparts, and by the different Parties in separate counterparts,
each of which when executed shall be deemed to be an original, but all of which
shall constitute one and the same Agreement.
Section 10.11 Interpretation.
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(a) Whenever the words "include", "includes" or "including" are used
in this Agreement they shall be deemed to be followed by the words "without
limitation."
(b) Words denoting any gender shall include all genders. Where a word
or phrase is defined herein, each of its other grammatical forms shall have a
corresponding meaning.
(c) A reference to any Party or to any party and to any other
agreement or document shall include such party's successors and permitted
assigns.
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(d) A reference to any legislation or to any provision of any
legislation shall include any modification or re-enactment thereof, any
legislative provision substituted therefor and all regulations and statutory
instruments issued thereunder or pursuant thereto.
(e) All references to "$" and dollars shall be deemed to refer to
United States currency unless otherwise specifically provided.
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IN WITNESS WHEREOF, Verizon, NorthPoint, Parent and Merger Subsidiary
have caused this Agreement to be executed as of the date first written above by
their respective officers thereunto duly authorized.
NORTHPOINT COMMUNICATIONS GROUP, INC
By: _______________________
Name:
Title:
XXXX ATLANTIC CORPORORATION
(D/B/A VERIZON COMMUNICATIONS)
By: ____________________________________
Name:
Title:
VERIZON VENTURES I INC.
By: ____________________________________
Name:
Title:
VERIZON VENTURES II INC.
By: ____________________________________
Name:
Title:
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