EXHIBIT 2.1
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AGREEMENT AND PLAN
OF MERGER
DATED AS OF
JULY 27, 0000
XXXXX
XXXX XXXXXXXX CORPORATION,
BETA GAMMA CORPORATION
AND
GTE CORPORATION
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TABLE OF CONTENTS
ARTICLE I
THE MERGER
SECTION 1.1 The Merger.......................................................................2
SECTION 1.2 Effective Time...................................................................2
SECTION 1.3 Effect of the Merger.............................................................2
SECTION 1.4 Subsequent Actions...............................................................2
SECTION 1.5 Certificate of Incorporation; Bylaws; Directors and Officers of
Surviving Corporation............................................................3
ARTICLE II
EFFECT ON STOCK OF THE SURVIVING
CORPORATION AND THE MERGED CORPORATION
SECTION 2.1 Conversion of Securities.........................................................3
SECTION 2.2 Conversion of Shares.............................................................3
SECTION 2.3 Cancellation of Treasury Shares and Xxxx Atlantic-owned Shares...................4
SECTION 2.4 Conversion of Common Stock of the Merged Corporation into
Common Stock of the Surviving Corporation........................................4
SECTION 2.5 Exchange Procedures..............................................................4
SECTION 2.6 Transfer Books...................................................................5
SECTION 2.7 No Fractional Share Certificates.................................................6
SECTION 2.8 Options to Purchase GTE Common Stock.............................................7
SECTION 2.9 Restricted Stock.................................................................8
SECTION 2.10 Certain Adjustments..............................................................8
ARTICLE III
CERTAIN ADDITIONAL MATTERS
SECTION 3.1 Certificate of Incorporation and Bylaws of Xxxx Atlantic.........................9
SECTION 3.2 Dividends........................................................................9
SECTION 3.3 Headquarters.....................................................................9
SECTION 3.4 Corporate Identity...............................................................9
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF GTE
SECTION 4.1 Organization and Qualification; Subsidiaries.....................................9
SECTION 4.2 Certificate of Incorporation and Bylaws.........................................10
SECTION 4.3 Capitalization..................................................................10
SECTION 4.4 Authority Relative to this Agreement............................................11
SECTION 4.5 No Conflict; Required Filings and Consents......................................12
(i)
SECTION 4.6 SEC Filings; Financial Statements...............................................12
SECTION 4.7 Absence of Certain Changes or Events............................................13
SECTION 4.8 Litigation......................................................................13
SECTION 4.9 Permits; No Violation of Law....................................................13
SECTION 4.10 Joint Proxy Statement...........................................................14
SECTION 4.11 Employee Matters; ERISA.........................................................15
SECTION 4.12 Labor Matters...................................................................15
SECTION 4.13 Environmental Matters...........................................................16
SECTION 4.14 Board Action; Vote Required; Applicability of Section 912 ......................17
SECTION 4.15 Opinions of Financial Advisors..................................................17
SECTION 4.16 Brokers.........................................................................17
SECTION 4.17 Tax Matters.....................................................................17
SECTION 4.18 Intellectual Property; Year 2000................................................18
SECTION 4.19 Insurance.......................................................................19
SECTION 4.20 Ownership of Securities.........................................................20
SECTION 4.21 Certain Contracts...............................................................20
SECTION 4.22 Rights Agreement................................................................20
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF XXXX ATLANTIC
SECTION 5.1 Organization and Qualification; Subsidiaries....................................21
SECTION 5.2 Certificate of Incorporation and Bylaws.........................................21
SECTION 5.3 Capitalization..................................................................21
SECTION 5.4 Authority Relative to this Agreement............................................23
SECTION 5.5 No Conflict; Required Filings and Consents......................................23
SECTION 5.6 SEC Filings; Financial Statements...............................................24
SECTION 5.7 Absence of Certain Changes or Events............................................24
SECTION 5.8 Litigation......................................................................25
SECTION 5.9 Permits; No Violation of Law....................................................25
SECTION 5.10 Joint Proxy Statement...........................................................25
SECTION 5.11 Employee Matters; ERISA.........................................................26
SECTION 5.12 Labor Matters...................................................................27
SECTION 5.13 Environmental Matters...........................................................27
SECTION 5.14 Board Action; Vote Required.....................................................28
SECTION 5.15 Opinions of Financial Advisors..................................................28
SECTION 5.16 Brokers.........................................................................28
SECTION 5.17 Tax Matters.....................................................................28
SECTION 5.18 Intellectual Property...........................................................29
SECTION 5.19 Insurance.......................................................................30
SECTION 5.20 Ownership of Securities.........................................................30
SECTION 5.21 Certain Contracts...............................................................31
SECTION 5.22 Merger Subsidiary...............................................................31
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ARTICLE VI
CONDUCT OF BUSINESSES
PENDING THE MERGER
SECTION 6.1 Transition Planning.............................................................32
SECTION 6.2 Conduct of Business in the Ordinary Course......................................32
SECTION 6.3 No Solicitation.................................................................37
SECTION 6.4 Subsequent Financial Statements.................................................39
SECTION 6.5 Control of Operations...........................................................40
ARTICLE VII
ADDITIONAL AGREEMENTS
SECTION 7.1 Joint Proxy Statement and the Registration Statement............................40
SECTION 7.2 Xxxx Atlantic and GTE Stockholders' Meetings....................................41
SECTION 7.3 Consummation of Merger; Additional Agreements...................................43
SECTION 7.4 Notification of Certain Matters.................................................45
SECTION 7.5 Access to Information...........................................................45
SECTION 7.6 Public Announcements............................................................45
SECTION 7.7 Transfer Statutes...............................................................46
SECTION 7.8 Indemnification, Directors' and Officers' Insurance.............................46
SECTION 7.9 Employee Benefit Plans..........................................................47
SECTION 7.10 Succession......................................................................48
SECTION 7.11 Stock Exchange Listing..........................................................49
SECTION 7.12 Post-Merger Xxxx Atlantic Board of Directors....................................49
SECTION 7.13 No Shelf Registration...........................................................50
SECTION 7.14 Affiliates......................................................................50
SECTION 7.15 Blue Sky........................................................................51
SECTION 7.16 Pooling of Interests............................................................51
SECTION 7.17 Tax-Free Reorganization.........................................................51
ARTICLE VIII
CONDITIONS TO MERGER
SECTION 8.1 Conditions to Obligations of Each Party to Effect the Merger....................52
SECTION 8.2 Additional Conditions to Obligations of GTE.....................................53
SECTION 8.3 Additional Conditions to Obligations of Xxxx Atlantic...........................55
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
SECTION 9.1 Termination.....................................................................56
SECTION 9.2 Effect of Termination...........................................................57
SECTION 9.3 Amendment.......................................................................59
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SECTION 9.4 Waiver..........................................................................59
ARTICLE X
GENERAL PROVISIONS
SECTION 10.1 Non-Survival of Representations, Warranties
and Agreements................................................................60
SECTION 10.2 Notices.........................................................................60
SECTION 10.3 Expenses........................................................................61
SECTION 10.4 Certain Definitions.............................................................61
SECTION 10.5 Headings........................................................................63
SECTION 10.6 Severability....................................................................63
SECTION 10.7 Entire Agreement; No Third-Party Beneficiaries..................................63
SECTION 10.8 Assignment......................................................................64
SECTION 10.9 Governing Law...................................................................64
SECTION 10.10 Counterparts....................................................................64
SECTION 10.11 Interpretation..................................................................64
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INDEX OF DEFINED TERMS
Defined Term Page
------------ ----
$.....................................................................................................64
1933 Act..............................................................................................61
affiliate.............................................................................................62
Agreement............................................................................................. 1
Alternative Transaction...............................................................................39
Amended Bylaws........................................................................................48
Bear Xxxxxxx..........................................................................................28
Xxxx Atlantic ........................................................................................ 1
Xxxx Atlantic Disclosure Schedule...................................................................21
Xxxx Atlantic Acquisition Agreement...................................................................41
Xxxx Atlantic Common Stock............................................................................ 3
Xxxx Atlantic Contracts...............................................................................31
Xxxx Atlantic Director................................................................................50
Xxxx Atlantic Equity Rights...........................................................................22
Xxxx Atlantic ERISA Affiliate.........................................................................26
Xxxx Atlantic Filed SEC Reports.......................................................................24
Xxxx Atlantic Intellectual Property...................................................................29
Xxxx Atlantic Option Agreement........................................................................ 1
Xxxx Atlantic Plan....................................................................................26
Xxxx Atlantic SEC Reports.............................................................................24
Xxxx Atlantic Stockholder Approval....................................................................23
Xxxx Atlantic Stockholders' Meeting...................................................................41
Xxxx Atlantic Subsequent Determination................................................................41
Xxxx Atlantic Subsidiary..............................................................................63
Xxxx Atlantic Superior Proposal.......................................................................41
Xxxx Atlantic Termination Fee.........................................................................59
Benefit Plans.........................................................................................34
Bylaws Amendment...................................................................................... 9
Certificate Amendment................................................................................. 9
Closing...............................................................................................43
Closing Date..........................................................................................43
Code.................................................................................................. 1
commercially reasonable efforts.......................................................................62
Common Shares Trust................................................................................... 6
Computer Software ............................................................................... 19, 29
Consents..............................................................................................52
control...............................................................................................62
CPUC..................................................................................................52
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DGCL.................................................................................................. 9
Disclosure Schedules..................................................................................21
Effective Time........................................................................................ 2
Environmental Law.....................................................................................16
ERISA.................................................................................................15
Excess Shares......................................................................................... 6
Exchange Act..........................................................................................61
Exchange Agent........................................................................................ 4
Exchange Fund......................................................................................... 5
Exchange Ratio........................................................................................ 3
Extended Termination Date.............................................................................56
Final Termination Date................................................................................56
GAAP.................................................................................................. 1
Xxxxxxx Sachs.........................................................................................17
Governmental Entity...................................................................................12
GTE................................................................................................... 1
GTE Disclosure Schedule............................................................................. 9
GTE Acquisition Agreement.............................................................................42
GTE Common Stock...................................................................................... 3
GTE Contracts.........................................................................................20
GTE Director..........................................................................................50
GTE Equity Rights.....................................................................................10
GTE ERISA Affiliate...................................................................................15
GTE Filed SEC Reports.................................................................................13
GTE Intellectual Property.............................................................................18
GTE Option Agreement.................................................................................. 1
GTE Plan..............................................................................................15
GTE Rights Agreement..................................................................................10
GTE SEC Reports.......................................................................................13
GTE Stockholder Approval..............................................................................11
GTE Stockholders' Meeting.............................................................................42
GTE Subsequent Determination..........................................................................42
GTE Subsidiary........................................................................................63
GTE Superior Proposal.................................................................................43
GTE Termination Fee...................................................................................58
Hazardous Substance...................................................................................16
HSR Act...............................................................................................62
incentive stock options............................................................................... 8
Initial Termination Date..............................................................................56
interested stockholder................................................................................31
Joint Proxy Statement.................................................................................14
knowledge.............................................................................................62
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Legal Requirements....................................................................................13
Material Adverse Effect...............................................................................62
Material Investment...................................................................................62
Merged Corporation.................................................................................... 2
Merger................................................................................................ 2
Merger Subsidiary..................................................................................... 1
Xxxxxxx Xxxxx.........................................................................................28
Nondisclosure Agreement...............................................................................37
NYBCL................................................................................................. 2
NYSE.................................................................................................. 6
Old Certificate....................................................................................... 4
Option Agreements..................................................................................... 1
Parties............................................................................................... 2
Party................................................................................................. 2
Party Representatives.................................................................................45
Permits...............................................................................................14
person................................................................................................63
POR...................................................................................................63
Pre-Surrender Dividends............................................................................... 5
Registration Statement................................................................................14
Requisite Regulatory Approvals........................................................................52
Xxxxxxx Xxxxx Barney..................................................................................17
SAR................................................................................................... 8
SEC...................................................................................................12
Significant Subsidiary................................................................................63
Stock Issuance........................................................................................23
Subsidiary............................................................................................63
Surviving Corporation................................................................................. 2
Surviving Corporation Common Stock.................................................................... 4
Tax Return............................................................................................18
Taxes.................................................................................................18
Termination Date......................................................................................56
the date hereof....................................................................................... 1
Third Party...........................................................................................39
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of July
27, 1998 ("the date hereof"), is entered into by and among Xxxx Atlantic
Corporation, a Delaware corporation ("Xxxx Atlantic"), Beta Gamma Corporation, a
New York corporation and a wholly owned subsidiary of Xxxx Atlantic ("Merger
Subsidiary"), and GTE Corporation, a New York corporation ("GTE").
WHEREAS, the Board of Directors of each of Xxxx Atlantic, Merger
Subsidiary and GTE has determined that it is in the best interests of its
stockholders that Xxxx Atlantic and GTE enter into a business combination under
which a subsidiary of Xxxx Atlantic will merge with and into GTE pursuant to the
Merger (as defined in Section 1.1 hereof) and Xxxx Atlantic and GTE desire to
enter into the "merger of equals" transaction contemplated hereby, and, in
connection therewith, to make certain representations, warranties and
agreements;
WHEREAS, as a condition to, and immediately after, the execution of
this Agreement, and as a condition to the execution of the Xxxx Atlantic Option
Agreement (as defined below), GTE and Xxxx Atlantic are entering into a stock
option agreement (the "GTE Option Agreement") in the form attached hereto as
Exhibit A;
WHEREAS, as a condition to, and immediately after, the execution of
this Agreement, and as a condition to the execution of the GTE Option Agreement,
GTE and Xxxx Atlantic are entering into a stock option agreement (the "Xxxx
Atlantic Option Agreement", and together with the GTE Option Agreement, the
"Option Agreements") in the form attached hereto as Exhibit B;
WHEREAS, the Board of Directors of each of Xxxx Atlantic, Merger
Subsidiary and GTE has determined that the Merger and the other transactions
contemplated hereby are consistent with, and in furtherance of, its business
strategies and goals and has approved the Merger upon the terms and conditions
set forth herein;
WHEREAS, for federal income tax purposes, it is intended that the
Merger shall constitute a tax-free reorganization under Section 368 of the
Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, for accounting purposes, it is intended that the Merger shall
be accounted for as a pooling of interests under United States generally
accepted accounting principles ("GAAP");
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NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, the parties hereto hereby agree as follows:
ARTICLE I -- THE MERGER
SECTION 1.1 -- THE MERGER. At the Effective Time (as defined in Section
1.2 hereof) and subject to and upon the terms and conditions of this Agreement
and the New York Business Corporation Law ("NYBCL"), Merger Subsidiary will be
merged with and into GTE (the "Merger"), whereby the separate corporate
existence of Merger Subsidiary shall cease and GTE shall continue as the
surviving corporation which shall be a wholly-owned subsidiary of Xxxx Atlantic.
GTE as the surviving corporation after the Merger is herein sometimes referred
to as the "Surviving Corporation" and Merger Subsidiary as the non-surviving
corporation after the Merger is herein sometimes referred to as the "Merged
Corporation." GTE, Xxxx Atlantic and Merger Subsidiary are herein referred to
collectively as the "Parties" and each individually as a "Party."
SECTION 1.2 -- EFFECTIVE TIME. As promptly as practicable after the
satisfaction or waiver of the conditions set forth in Article VIII hereof and
the consummation of the Closing referred to in Section 7.2(b) hereof, the
Parties shall cause the Merger to be consummated by filing a Certificate of
Merger with the Secretary of State of the State of New York with respect to the
Merger, in such form as required by, and executed in accordance with, the
relevant provisions of the NYBCL (the time of such filing being the "Effective
Time").
SECTION 1.3 -- EFFECT OF THE MERGER. At the Effective Time, the effect
of the Merger shall be as provided in the applicable provisions of the NYBCL.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time all the property, rights, privileges, powers and franchises of
GTE and Merger Subsidiary shall continue with, or vest in, as the case may be,
GTE as the Surviving Corporation, and all debts, liabilities and duties of GTE
and Merger Subsidiary shall continue to be, or become, as the case may be, the
debts, liabilities and duties of GTE as the Surviving Corporation. As of the
Effective Time, the Surviving Corporation shall be a direct wholly-owned
subsidiary of Xxxx Atlantic.
SECTION 1.4 -- SUBSEQUENT ACTIONS. If at any time after the Effective
Time the Surviving Corporation shall consider or be advised that any deeds,
bills of sale, assignments, assurances or any other actions or things are
necessary or desirable to continue in, vest, perfect or confirm of record or
otherwise in the Surviving Corporation its right, title or interest in, to or
under any of the rights, properties, privileges, franchises or assets of either
of its constituent corporations acquired or to be acquired by the Surviving
Corporation as a result of, or in connection with, the Merger or otherwise to
carry out this Agreement, the officers and directors of the Surviving
Corporation shall be directed and authorized to execute and deliver, in the name
and on behalf of either of such constituent corporations, all such deeds, bills
of
2
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 in the Surviving Corporation or otherwise to carry out this
Agreement.
SECTION 1.5 -- CERTIFICATE OF INCORPORATION; BYLAWS; DIRECTORS AND
OFFICERS OF SURVIVING CORPORATION. Unless otherwise agreed by GTE and Xxxx
Atlantic before the Effective Time, at the Effective Time:
(a) the Certificate of Incorporation of GTE as the Surviving
Corporation shall be the Certificate of Incorporation of GTE as in effect
immediately prior to the Effective Time, until thereafter amended as provided by
law and such Certificate of Incorporation;
(b) the Bylaws of GTE as the Surviving Corporation shall be the Bylaws
of GTE immediately prior to the Effective Time, until thereafter amended as
provided by law and the Certificate of Incorporation and the Bylaws of such
Surviving Corporation; and
(c) the directors and officers of GTE 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 successors are elected or appointed and qualified or until their
resignation or removal. If at the Effective Time a vacancy shall exist on the
Board of Directors or in any office of the Surviving Corporation, such vacancy
may thereafter be filled in the manner provided by law and the Bylaws of the
Surviving Corporation.
ARTICLE II -- EFFECT ON STOCK OF THE SURVIVING
CORPORATION AND THE MERGED CORPORATION
SECTION 2.1 -- CONVERSION OF SECURITIES. The manner and basis of
converting the shares of common stock of the Surviving Corporation and of the
Merged Corporation 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) Subject to Section 2.7, each
share of common stock, par value $0.05 per share, of GTE ("GTE Common Stock")
issued and outstanding immediately before the Effective Time (excluding those
cancelled pursuant to Section 2.3) and all rights in respect thereof, shall at
the Effective Time, without any action on the part of any holder thereof, be
converted into and become 1.22 shares of common stock, par value $0.10 per
share, of Xxxx Atlantic ("Xxxx Atlantic Common Stock"). Such ratio of GTE Common
Stock to Xxxx Atlantic Common Stock is herein referred to as the "Exchange
Ratio."
3
(b) As of the Effective Time, all shares of GTE Common Stock converted
pursuant to Section 2.2(a) 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
GTE Common Stock shall cease to have any rights with respect thereto, except the
right to receive shares of Xxxx Atlantic Common Stock, in accordance with
Section 2.2(a), certain dividends or other distributions in accordance with
Section 2.5(b) and any cash in lieu of fractional shares of Xxxx Atlantic Common
Stock to be issued or paid in consideration therefor upon surrender of such
certificate in accordance with Section 2.5, without interest.
(c) For all purposes of this Agreement, unless otherwise specified,
each share of GTE Common Stock held by employee stock ownership plans of GTE (i)
shall be deemed to be issued and outstanding, (ii) shall not be deemed to be
held in the treasury of GTE and (iii) shall be converted into shares of Xxxx
Atlantic Common Stock in accordance with the Exchange Ratio.
SECTION 2.3 -- CANCELLATION OF TREASURY SHARES AND XXXX ATLANTIC-OWNED
SHARES. At the Effective Time, each share of GTE Common Stock held in the
treasury of GTE or owned by Xxxx Atlantic immediately prior to the Effective
Time shall be cancelled and retired and no shares of stock or other securities
of Xxxx Atlantic or the Surviving Corporation shall be issuable, and no payment
or other consideration shall be made, with respect thereto.
SECTION 2.4 -- CONVERSION OF COMMON STOCK OF THE MERGED CORPORATION
INTO COMMON STOCK OF THE SURVIVING CORPORATION. At the Effective Time, each
share of common stock of Merger Subsidiary issued and outstanding immediately
prior to the Effective Time, and all rights in respect thereof, shall, without
any action on the part of Xxxx Atlantic, forthwith cease to exist and be
converted into 1,000 validly issued, fully paid and nonassessable shares of
common stock, par value $0.05 per share, of the Surviving Corporation (the
"Surviving Corporation Common Stock"). Immediately after the Effective Time and
upon surrender by Xxxx Atlantic of the certificate representing the shares of
the common stock of Merger Subsidiary, GTE as the Surviving Corporation shall
deliver to Xxxx Atlantic an appropriate certificate or certificates representing
the Surviving Corporation Common Stock created by conversion of the common stock
of Merger Subsidiary owned by Xxxx Atlantic.
SECTION 2.5 -- EXCHANGE PROCEDURES. (a) Subject to the terms and
conditions hereof, at or prior to the Effective Time Xxxx Atlantic and GTE shall
jointly appoint an exchange agent (the "Exchange Agent") to effect the exchange
of Old Certificates for Xxxx Atlantic Common Stock in accordance with the
provisions of this Article II. At the Effective Time, Xxxx Atlantic shall
deposit, or cause to be deposited, with the Exchange Agent certificates
representing Xxxx Atlantic Common Stock for exchange for Old Certificates in
accordance with the provisions of Section 2.2 hereof (such certificates,
together with any dividends or distributions with
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respect thereto, being herein referred to as the "Exchange Fund"). Commencing
immediately after the Effective Time and until the appointment of the Exchange
Agent shall be terminated, each holder of an Old Certificate may surrender the
same to the Exchange Agent, and, after the appointment of the Exchange Agent
shall be terminated, any such holder may surrender any such certificate to Xxxx
Atlantic. Such holder shall be entitled upon such surrender to receive in
exchange therefor a certificate or certificates representing the number of whole
shares of Xxxx Atlantic Common Stock such holder has a right to receive in
accordance with Section 2.2 hereof, certain dividends or other distributions in
accordance with Section 2.5(b) hereof, and a cash payment in lieu of fractional
shares, if any, in accordance with Section 2.7 hereof, and such Old Certificate
shall forthwith be cancelled. The whole shares of Xxxx Atlantic 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.
Unless and until any such Old Certificate is so surrendered, and except as may
be determined by Xxxx Atlantic for a period not to exceed six months after the
Effective Time, no dividend or other distribution, if any, payable to the
holders of record of Xxxx Atlantic Common Stock as of any date subsequent to the
Effective Time shall be paid to the holder of such certificate in respect
thereof. Except as otherwise provided in Section 2.6 hereof, upon the surrender
of any such Old Certificate, however, the record holder of the certificate or
certificates representing shares of Xxxx Atlantic Common Stock issued in
exchange therefor shall receive from the Exchange Agent or from Xxxx Atlantic,
as the case may be, payment of the amount of dividends and other distributions,
if any, which as of any date subsequent to the Effective Time and until such
surrender shall have become payable and were not paid with respect to such
number of shares of Xxxx Atlantic Common Stock ("Pre-Surrender Dividends"). No
interest shall be payable with respect to the payment of Pre-Surrender Dividends
upon the surrender of Old Certificates. After the appointment of the Exchange
Agent shall have been terminated, any holders of Old Certificates which have not
received payment of Pre-Surrender Dividends shall look only to Xxxx Atlantic for
payment thereof. Notwithstanding the foregoing provisions of this Section 2.5
(b), neither the Exchange Agent nor any Party shall be liable to a holder of an
Old Certificate for any Xxxx Atlantic Common Stock, any dividends or
distributions thereon or any cash payment for fractional shares as contemplated
by Section 2.7, delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law or to a transferee pursuant to
Section 2.6 hereof.
(b) Notwithstanding anything herein to the contrary, certificates
surrendered for exchange by any "affiliate" of GTE shall not be exchanged until
Xxxx Atlantic shall have received a signed agreement from such "affiliate" as
provided in Section 7.14 hereof.
SECTION 2.6 -- TRANSFER BOOKS. The stock transfer books of GTE shall be
closed at the Effective Time and no transfer of any shares of GTE Common Stock
will thereafter be recorded on any of such stock transfer books. In the event of
a transfer of ownership of GTE
5
Common Stock that is not registered in the stock transfer records of GTE at the
Effective Time, a certificate or certificates representing the number of whole
shares of Xxxx Atlantic Common Stock into which such shares of GTE 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 2.7
hereof, and a cash payment in the amount of Pre-Surrender Dividends, if any, in
accordance with Section 2.5 (b) hereof, if the Old Certificate therefor is
surrendered as provided in Section 2.5 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 Xxxx Atlantic 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 2.7 -- NO FRACTIONAL SHARE CERTIFICATES. (a) No scrip or
fractional share certificate for Xxxx Atlantic Common Stock will be issued in
certificated or book entry form upon the surrender for exchange of Old
Certificates, and an outstanding fractional share interest will not entitle the
owner thereof to vote, to receive dividends or to any rights of a stockholder of
Xxxx Atlantic or of the Surviving Corporation with respect to such fractional
share interest.
(b) As promptly as practicable following the Effective Time, the
Exchange Agent shall determine the excess of (i) the number of whole shares of
Xxxx Atlantic Common Stock to be issued and delivered to the Exchange Agent
pursuant to Section 2.5 hereof over (ii) the aggregate number of whole shares of
Xxxx Atlantic Common Stock to be distributed to holders of GTE Common Stock
pursuant to Section 2.5 hereof (such excess being herein called "Excess
Shares"). Following the Effective Time, the Exchange Agent, as agent for the
holders of GTE Common Stock, shall sell the Excess Shares at then prevailing
prices on the New York Stock Exchange (the "NYSE"), all in the manner provided
in subsection (c) of this Section 2.7.
(c) The sale of the Excess Shares by the Exchange Agent shall be
executed on the NYSE through one or more member firms of the NYSE and shall be
executed in round lots to the extent practicable. The Exchange Agent shall use
all reasonable efforts to complete the sale of the Excess Shares as promptly
following the Effective Time as, in the Exchange Agent's reasonable judgment, is
practicable consistent with obtaining the best execution of such sales in light
of prevailing market conditions. The Exchange Agent shall, out of the proceeds
from the sale of the Excess Shares, pay all commissions, transfer taxes 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
Shares. Until the net proceeds of such sale or sales have been distributed to
the holders of GTE Common Stock, the Exchange Agent will hold such proceeds in
trust for the holders of GTE Common Stock (the "Common Shares Trust"). The
Exchange Agent shall determine the portion of the Common Shares Trust to which
each holder of GTE Common Stock shall be entitled, if any, by multiplying the
amount of the aggregate net proceeds comprising the Common Shares Trust by a
fraction the
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numerator of which is the amount of fractional share interests to which such
holder of GTE Common Stock is entitled (after taking into account all shares of
GTE Common Stock held at the Effective Time by such holder) and the denominator
of which is the aggregate amount of fractional share interests to which all
holders of GTE Common Stock are entitled.
(d) Notwithstanding the provisions of subsections (b) and (c) of this
Section 2.7, GTE and Xxxx Atlantic may agree at their option, exercised prior to
the Effective Time, in lieu of the issuance and sale of Excess Shares and the
making of the payments contemplated in such subsections, that Xxxx Atlantic
shall pay to the Exchange Agent an amount sufficient for the Exchange Agent to
pay each holder of GTE Common Stock an amount in cash equal to the product
obtained by multiplying (i) the fractional share interest to which such holder
would otherwise be entitled (after taking into account all shares of GTE Common
Stock held at the Effective Time by such holder) by (ii) the closing price for a
share of Xxxx Atlantic Common Stock on the NYSE Composite Transaction Tape on
the first business day immediately following the Effective Time, and, in such
case, all references herein to the cash proceeds of the sale of the Excess
Shares and similar references shall be deemed to mean and refer to the payments
calculated as set forth in this subsection (d). In such event, Excess Shares
shall not be issued or otherwise transferred to the Exchange Agent pursuant to
Section 2.5 (a) hereof or, if previously issued, shall be returned to Xxxx
Atlantic for cancellation.
(e) As soon as practicable after the determination of the amounts of
cash, if any, to be paid to holders of GTE Common Stock with respect to any
fractional share interests, the Exchange Agent shall make available such
amounts, net of any required withholding, to such holders of GTE Common Stock,
subject to and in accordance with the terms of Section 2.5 hereof.
(f) Any portion of the Exchange Fund and the Common Shares Trust which
remains undistributed for six months after the Effective Time shall be delivered
to Xxxx Atlantic, upon demand, and any holders of GTE Common Stock who have not
theretofore complied with the provisions of this Article II shall thereafter
look only to Xxxx Atlantic for satisfaction of their claims for Xxxx Atlantic
Common Stock, any cash in lieu of fractional shares of Xxxx Atlantic Common
Stock and any Pre-Surrender Dividends.
SECTION 2.8 -- OPTIONS TO PURCHASE GTE COMMON STOCK. (a) At the
Effective Time, each option or warrant granted by GTE to purchase shares of GTE
Common Stock which is outstanding and unexercised immediately prior to the
Effective Time shall be assumed by Xxxx Atlantic and converted into an option or
warrant to purchase shares of Xxxx Atlantic 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):
7
(i) the number of shares of Xxxx Atlantic Common Stock
to be subject to the new option or warrant shall be equal to
the product of (x) the number of shares of GTE Common Stock
subject to the original option or warrant and (y) the
Exchange Ratio;
(ii) the exercise price per share of Xxxx Atlantic
Common Stock under the new option or warrant shall be equal
to (x) the exercise price per share of the GTE Common Stock
under the original option or warrant divided by (y) the
Exchange Ratio; and
(iii) upon each exercise of options or warrants by a
holder thereof, the aggregate number of shares of Xxxx
Atlantic Common Stock deliverable upon such exercise shall be
rounded down, if necessary, to the nearest whole share and
the aggregate exercise price shall be rounded up, if
necessary, to the nearest cent.
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.
(b) At the Effective Time, each stock appreciation right ("SAR") with
respect to GTE Common Stock which is outstanding and unexercised immediately
before the Effective Time shall be converted into an SAR with respect to shares
of Xxxx Atlantic Common Stock on the same terms and conditions as are in effect
immediately prior to the Effective Time, with the adjustments set forth in
subsection (a) of this Section 2.8.
SECTION 2.9 -- RESTRICTED STOCK. At the Effective Time, any shares of
GTE Common Stock awarded pursuant to any plan, arrangement or transaction, and
outstanding immediately prior to the Effective Time shall be converted into
shares of Xxxx Atlantic Common Stock in accordance with Section 2.2 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.
SECTION 2.10 -- CERTAIN ADJUSTMENTS. If between the date hereof and the
Effective Time, the outstanding shares of GTE Common Stock or of Xxxx Atlantic
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 Exchange Ratio shall be adjusted
accordingly to provide to the holders of GTE Common Stock and Xxxx Atlantic
Common Stock the same economic effect as contemplated by this Agreement prior to
such reclassification, recapitalization, split-up, combination, exchange or
dividend.
8
ARTICLE III -- CERTAIN ADDITIONAL MATTERS
SECTION 3.1 -- CERTIFICATE OF INCORPORATION AND BYLAWS OF XXXX
ATLANTIC. At the Effective Time and subject to and upon the terms and conditions
of this Agreement and the General Corporation Law of the State of Delaware
("DGCL"), Xxxx Atlantic shall cause the Certificate of Incorporation of Xxxx
Atlantic and the Bylaws of Xxxx Atlantic to be amended and restated to
incorporate the provisions set forth in Appendices I-A and I-B hereto,
respectively. Such amendment and restatement of the Xxxx Atlantic Certificate of
Incorporation and amendment and restatement of the Xxxx Atlantic Bylaws are
referred to herein as the "Certificate Amendment" and the "Bylaws Amendment,"
respectively.
SECTION 3.2 -- DIVIDENDS. Each of GTE and Xxxx Atlantic shall
coordinate with the other the declaration of, and the setting of record dates
and payment dates for, dividends on GTE Common Stock and Xxxx Atlantic Common
Stock so that holders of GTE Common Stock do not (i) receive dividends on both
GTE Common Stock and Xxxx Atlantic Common Stock received in connection with the
Merger in respect of any calendar quarter or (ii) fail to receive a dividend on
either GTE Common Stock or Xxxx Atlantic Common Stock received in connection
with the Merger in respect of any calendar quarter.
SECTION 3.3 -- HEADQUARTERS. GTE and Xxxx Atlantic agree that
immediately following the Effective Time the headquarters of Xxxx Atlantic shall
be located in New York, New York.
SECTION 3.4 -- CORPORATE IDENTITY. GTE and Xxxx Atlantic agree that at
the Effective Time, the corporate name of Xxxx Atlantic shall be as shall have
been agreed by the Parties.
ARTICLE IV -- REPRESENTATIONS AND WARRANTIES OF GTE
Except as expressly disclosed in the GTE Filed SEC Reports (as defined
below) (including all exhibits referred to therein) or as set forth in the
disclosure schedule delivered by GTE to Xxxx Atlantic on the date hereof (the
"GTE Disclosure Schedule") (each section of which qualifies the correspondingly
numbered representation and warranty or covenant as specified therein), GTE
hereby represents and warrants to Xxxx Atlantic as follows:
SECTION 4.1 -- ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. Each of
GTE and each of its Significant Subsidiaries is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation or organization. Each of the GTE Subsidiaries which is not a
Significant Subsidiary is duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation or organization, except for
such failure which, when taken together with all other such failures, would not
reasonably be expected to have a Material Adverse Effect on GTE. Each of GTE and
its Subsidiaries has the
9
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 reasonably be
expected to have a Material Adverse Effect on GTE.
SECTION 4.2 -- CERTIFICATE OF INCORPORATION AND BYLAWS. GTE has
heretofore furnished, or otherwise made available, to Xxxx Atlantic a complete
and correct copy of the Certificate of Incorporation and the Bylaws, each as
amended to the date hereof, of GTE. Such Certificate of Incorporation and Bylaws
are in full force and effect. Neither GTE nor any of its Significant
Subsidiaries is in violation of any of the provisions of its respective
Certificate of Incorporation or, in any material respect, its Bylaws.
SECTION 4.3 -- CAPITALIZATION. (a) The authorized capital stock of GTE
consists of (i) 9,217,764 shares of preferred stock, par value $50.00 per share,
none of which are outstanding or reserved for issuance, (ii) 11,727,502 shares
of preferred stock, no par value per share, none of which are outstanding and
700,000 of which have been reserved for issuance in accordance with the Rights
Agreement (as defined below), and (iii) 2,000,000,000 shares of GTE Common
Stock, of which, as of June 30, 1998, (A) 963,241,244 shares were issued and
outstanding, (B) 25,658,980 shares were held in the treasury of GTE, (C) not
more than 50,000,000 shares were issuable upon the exercise of options
outstanding under the GTE option plans, and (D) 31,603,945 shares were reserved
for issuance in connection with other GTE Plans (as defined in Section 4.11(b)
below). Except for GTE Equity Rights issued to GTE employees in the ordinary
course of business or, after the date hereof, as permitted by Section 6.2 hereof
or pursuant to the Xxxx Atlantic Option Agreement, (i) since June 30, 1998, no
shares of GTE Common Stock have been issued, except upon the exercise of options
described in the immediately preceding sentence, and (ii) there are no
outstanding GTE Equity Rights. For purposes of this Agreement, "GTE Equity
Rights" shall mean subscriptions, options, warrants, calls, commitments,
agreements, conversion rights or other rights of any character (contingent or
otherwise) to purchase or otherwise acquire any shares of the capital stock of
GTE from GTE or any of GTE's Subsidiaries at any time, or upon the happening of
any stated event, except for rights granted under the Rights Agreement, dated as
of December 7, 1989 (the "GTE Rights Agreement"), between GTE and the Rights
Agent (as defined therein), and the Xxxx Atlantic Option Agreement. Section 4.3
of the GTE Disclosure Schedule sets forth a complete and accurate list of
certain information with respect to all outstanding GTE Equity Rights as of June
30, 1998.
(b) Except as set forth in Section 4.3 of the GTE Disclosure Schedule,
pursuant to the Xxxx Atlantic Option Agreement, or, after the date hereof, as
permitted by Section 6.2
10
hereof, there are no outstanding obligations of GTE or any of GTE's Subsidiaries
to repurchase, redeem or otherwise acquire any shares of capital stock of GTE.
(c) All of the issued and outstanding shares of GTE Common Stock are
validly issued, fully paid and nonassessable.
(d) All of the outstanding capital stock of each of GTE's Significant
Subsidiaries, and all of the outstanding capital stock of GTE's Subsidiaries
owned directly or indirectly by GTE, is duly authorized, validly issued, fully
paid and nonassessable. All of the outstanding capital stock of each of GTE's
Significant Subsidiaries is owned by GTE free and clear of any liens, security
interests, pledges, agreements, claims, charges or encumbrances. All of the
outstanding capital stock of GTE's Subsidiaries owned directly or indirectly by
GTE is owned free and clear of any liens, security interests, pledges,
agreements, claims, charges or encumbrances, except where such liens, security
interests, pledges, agreements, claims, charges or encumbrances would not,
individually or in the aggregate, have a Material Adverse Effect on GTE. Except
as hereafter issued or entered into in accordance with Section 6.2 hereof, there
are no existing subscriptions, options, warrants, calls, commitments,
agreements, conversion rights or other rights of any character (contingent or
otherwise) to purchase or otherwise acquire from GTE or any of GTE's
Subsidiaries at any time, or upon the happening of any stated event, any shares
of the capital stock of any GTE Subsidiary, whether or not presently issued or
outstanding (except for rights of first refusal to purchase interests in
Subsidiaries which are not wholly owned by GTE), or any of GTE's direct or
indirect interests in any Material Investment, and there are no outstanding
obligations of GTE or any of GTE's Subsidiaries to repurchase, redeem or
otherwise acquire any shares of capital stock of any of GTE's Subsidiaries or
securities related to any investments, other than such as would not,
individually or in the aggregate, have a Material Adverse Effect on GTE.
SECTION 4.4 -- AUTHORITY RELATIVE TO THIS AGREEMENT. GTE has the
necessary corporate power and authority to enter into this Agreement and,
subject to obtaining the requisite approval of the Merger Agreement by GTE's
stockholders required by the NYBCL (the "GTE Stockholder Approval"), to perform
its obligations hereunder. The execution and delivery of this Agreement by GTE,
and the consummation by GTE of the transactions contemplated hereby, have been
duly authorized by all necessary corporate action on the part of GTE, subject to
obtaining the GTE Stockholder Approval. This Agreement has been duly executed
and delivered by GTE and, assuming the due authorization, execution and delivery
thereof by each of Xxxx Atlantic and Merger Subsidiary, constitutes a legal,
valid and binding obligation of GTE, 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).
11
SECTION 4.5 -- NO CONFLICT; REQUIRED FILINGS AND CONSENTS. (a) Except
as described in subsection (b) below, the execution and delivery of this
Agreement by GTE do not, and the performance of this Agreement by GTE will not,
(i) violate or conflict with the Certificate of Incorporation or Bylaws of GTE,
(ii) conflict with or violate any law, regulation, court order, judgment or
decree applicable to GTE 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 Bylaws of any
of GTE's Subsidiaries, (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 GTE 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 GTE or any of its Subsidiaries
is a party or by which GTE, any of such Subsidiaries or any of their respective
property or assets (including investments) is bound or affected, except, in the
case of clauses (ii), (iii), and (iv) above, for conflicts, violations,
breaches, defaults, results or consents which, individually or in the aggregate,
would not have a Material Adverse Effect on GTE.
(b) 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 upon
which securities of GTE are listed, the Exchange Act, the premerger notification
requirements of the HSR Act, filing and recordation of appropriate merger or
other documents as required by the NYBCL and any filings required pursuant to
any state securities or "blue sky" laws or the rules of any applicable stock
exchanges, (i) neither GTE nor any of its Significant 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 GTE or
any of its Significant Subsidiaries in connection with its execution, delivery
or performance of this Agreement.
SECTION 4.6 -- SEC FILINGS; FINANCIAL STATEMENTS. (a) GTE has filed all
forms, reports and documents required to be filed with the Securities and
Exchange Commission ("SEC") since January 1, 1995, and has heretofore delivered
or made available to Xxxx Atlantic, in the form filed with the SEC, together
with any amendments thereto, its (i) Annual Reports on Form 10-K for the fiscal
years ended December 31, 1995, 1996 and 1997, (ii) all proxy statements relating
to GTE's meetings of stockholders (whether annual or special) held since January
1, 1995, (iii) Quarterly Report on Form 10-Q for the fiscal quarter ended March
12
31, 1998, and (iv) all other reports or registration statements filed by GTE
with the SEC since January 1, 1995, including without limitation all Annual
Reports on Form 11-K filed with respect to the GTE Plans (collectively, the "GTE
SEC Reports", with such GTE SEC Reports filed with the SEC prior to the date
hereof being referred to as "GTE Filed SEC Reports"). The GTE SEC Reports (i)
were prepared substantially in accordance with the requirements of the 1933 Act
or the Exchange Act (as defined in Section 10.4 hereof), 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 GTE SEC Reports (or incorporated by reference
therein) fairly present the consolidated financial position of GTE and its
Subsidiaries as at the respective dates thereof and the consolidated results of
operations and cash flows of GTE and its Subsidiaries for the periods indicated
in accordance with GAAP applied on a consistent basis throughout the periods
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.
SECTION 4.7 -- ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as
disclosed in the GTE Filed SEC Reports and in Section 4.7 of the GTE Disclosure
Schedule, since December 31, 1997, and except as permitted by this Agreement or
consented to hereunder, GTE and its Subsidiaries have not incurred any material
liability required to be disclosed on a balance sheet of GTE 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 change, or any event involving a prospective change,
in the business, financial condition or results of operations of GTE or any of
its Subsidiaries which has had, or is reasonably likely to have, a Material
Adverse Effect on GTE, and GTE and its Subsidiaries have conducted their
respective businesses in the ordinary course consistent with their past
practices.
SECTION 4.8 -- LITIGATION. There are no claims, actions, suits,
proceedings or investigations pending or, to GTE's knowledge, threatened against
GTE or any of its Subsidiaries, or any properties or rights of GTE or any of its
Subsidiaries, 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 GTE or prevent, materially delay or intentionally delay the
ability of GTE to consummate transactions contemplated hereby.
SECTION 4.9 -- PERMITS; NO VIOLATION OF LAW. The businesses of GTE 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 permits, franchises,
13
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 GTE. No
investigation or review by any Governmental Entity (including any stock exchange
or other self-regulatory body) with respect to GTE or its Subsidiaries in
relation to any alleged violation of law or regulation is pending or, to GTE'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 reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on GTE. Except as set forth in Section 4.9
of the GTE Disclosure Schedule, neither GTE 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 Agreement, consent Agreement 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 GTE, nor has GTE or any of its
Subsidiaries been advised that any Governmental Entity is considering issuing or
requesting any of the foregoing. None of the representations and warranties made
in this Section 4.9 are being made with respect to Environmental Laws.
SECTION 4.10 -- JOINT PROXY STATEMENT. None of the information supplied
or to be supplied by or on behalf of GTE for inclusion or incorporation by
reference in the registration statement to be filed with the SEC by Xxxx
Atlantic in connection with the issuance of shares of Xxxx Atlantic 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 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 GTE for inclusion or incorporation by
reference in the joint proxy statement, in definitive form, relating to the
meetings of GTE and Xxxx Atlantic stockholders to be held in connection with the
Merger, or in the related proxy and notice of meeting, or soliciting material
used in connection therewith (referred to herein collectively as the "Joint
Proxy Statement") will, at the dates mailed to stockholders and at the times of
the GTE stockholders' meeting and the Xxxx Atlantic 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 Joint Proxy Statement (except for
information relating solely to Xxxx Atlantic) 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.
14
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 GTE, (i) each GTE 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 GTE 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 GTE Plan
provides death or medical benefits (whether or not insured), with respect to
current or former employees of GTE or of any trade or business, whether or not
incorporated, which together with GTE would be deemed a "single employer" within
the meaning of Section 4001 of ERISA (a "GTE ERISA Affiliate"), beyond their
retirement or other termination of service, (iv) no liability under Title IV of
ERISA has been incurred by GTE or any GTE ERISA Affiliate that has not been
satisfied in full, and no condition exists that presents a material risk to GTE
or any GTE ERISA Affiliate of incurring any such liability (other than PBGC
premiums), (v) all contributions or other amounts due from GTE or any GTE ERISA
Affiliate with respect to each GTE Plan have been paid in full, (vi) neither GTE
nor any GTE ERISA Affiliate has engaged in a transaction in connection with
which GTE 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 of the Code, (vii) to the best
knowledge of GTE there are no pending, threatened or anticipated claims (other
than routine claims for benefits) by, on behalf of or against any GTE 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 GTE or any of its Subsidiaries under any GTE Plan or
otherwise, (B) materially increase any benefits otherwise payable under any GTE
Plan or (C) result in any acceleration of the time of payment or vesting of any
such benefits.
(b) For purposes of this Agreement, "GTE 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 GTE or by any
GTE ERISA Affiliate or to which GTE or any GTE ERISA Affiliate is party, whether
written or oral, for the benefit of any employee or former employee of GTE or
any GTE ERISA Affiliate.
SECTION 4.12 -- LABOR MATTERS. Neither GTE nor any of its Subsidiaries
is the subject of any material proceeding asserting that it or any of its
Subsidiaries has committed
15
an unfair labor practice or is seeking to compel it to bargain with any labor
union or labor organization nor is there pending or, to the actual knowledge of
its executive officers, threatened in writing, nor has there been for the past
five years, any labor strike, dispute, walkout, work stoppage, slow-down or
lockout involving it or any of its Subsidiaries, except in each case as is not,
individually or in the aggregate, reasonably likely to have a Material Adverse
Effect on GTE.
SECTION 4.13 -- ENVIRONMENTAL MATTERS. Except for such matters that,
individually or in the aggregate, are not reasonably likely to have a Material
Adverse Effect on GTE: (i) each of GTE and its Subsidiaries has complied with
all applicable Environmental Laws (as defined below); (ii) the properties
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 (as defined below); (iii) the properties formerly
owned or operated by it 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 it nor any of its Subsidiaries is subject to
liability for any Hazardous Substance disposal or contamination on any third
party property; (v) neither it nor any Subsidiary has been associated with any
release or threat of release of any Hazardous Substance; (vi) neither it 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 it 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 not
circumstances or conditions involving it 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.
As used herein and in Section 5.13, the term "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.
As used herein and in Section 5.13, the term "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.
16
SECTION 4.14 -- BOARD ACTION; VOTE REQUIRED; APPLICABILITY OF SECTION
912. The Board of Directors of GTE has unanimously determined that the
transactions contemplated by this Agreement and the Option Agreements are in the
best interests of GTE and its stockholders and has resolved to recommend to such
stockholders that they vote in favor thereof.
(b) The approval of the Merger Agreement by two-thirds of the votes of
all outstanding shares entitled to vote thereon by all holders of GTE Common
Stock is the only vote of the holders of any class or series of the capital
stock of GTE required to approve this Agreement, the Merger and the other
transactions contemplated hereby. The provisions of Section 11.A of the
Certificate of Incorporation of GTE will not apply to the transactions
contemplated by this Agreement and the Option Agreements.
(c) The provisions of Section 912 of the NYBCL will not, assuming the
accuracy of the representations contained in Section 5.20 hereof (without giving
effect to the knowledge qualification therein), apply to this Agreement or any
of the transactions contemplated hereby.
SECTION 4.15 -- OPINIONS OF FINANCIAL ADVISORS. GTE has received the
opinions of Xxxxxxx, Xxxxx & Co. ("Xxxxxxx Sachs"), and Xxxxxxx Xxxxx Xxxxxx
Inc. ("Xxxxxxx Xxxxx Barney"), each dated July 27, 1998, to the effect that, as
of such date, the Exchange Ratio is fair from a financial point of view to the
holders of GTE Common Stock.
SECTION 4.16 -- BROKERS. Except for Xxxxxxx Xxxxx, Xxxxxxx Xxxxx Xxxxxx
and Xxxxx Securities Inc., the arrangements with which have been disclosed to
Xxxx Atlantic prior to the date hereof, which have been engaged by GTE, 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 and the Option Agreements based upon
arrangements made by or on behalf of GTE or any of its Subsidiaries.
SECTION 4.17 -- TAX MATTERS. Except as set forth in Section 4.17 of the
GTE Disclosure Schedule:
(a) All material federal, state, local and foreign Tax Returns (as
defined herein) required to have been filed by GTE 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 subpart (a) of this Section 4.17
correctly and completely reflect all material Tax liabilities of GTE and its
Subsidiaries required to be shown thereon;
(c) All material Taxes (as defined herein) shown as due on those Tax
Returns referred to in subpart (a) of this Section 4.17 as well as any material
foreign withholding
17
Taxes imposed on or in respect of any amounts paid to or by GTE or any of its
Subsidiaries, whether or not such amounts or withholding Taxes are referred to
or shown on any Tax Returns referred to in Section 4.17 (a) hereof, have been
fully paid or adequately reflected as a liability on GTE's or its Subsidiaries'
financial statements included in the GTE 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, GTE and its Subsidiaries
have made due and sufficient accruals for such Taxes in their respective books
and records and financial statements;
(e) Neither GTE nor any of its affiliates has taken, agreed to take or
omitted to take any action that would prevent or impede the Merger from
qualifying as a tax-free reorganization under Section 368 of the Code;
(f) No deficiencies for any Taxes have been proposed, asserted or
assessed against GTE 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 GTE;
(g) GTE is not aware of any material liens for Taxes upon any assets of
GTE or any of its Subsidiaries apart from liens for Taxes not yet due and
payable; and
(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 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 4.18 -- SEC INTELLECTUAL PROPERTY; YEAR 2000.
(a) As used in this Agreement, "GTE Intellectual Property" means all of
the following which are necessary to conduct the business of GTE and its
Subsidiaries as presently conducted or as currently proposed to be conducted:
(i) trademarks, trade dress, service
18
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 GTE or any of its Subsidiaries is
a party which relate to any of the foregoing.
(b) GTE or its Subsidiaries owns or has the right to use, sell or
license all GTE Intellectual Property, free and clear of all liens or
encumbrances, and all registrations of GTE 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
GTE.
(c) To the knowledge of GTE, the conduct of GTE's and its Subsidiaries'
business and the use of the GTE Intellectual Property does not materially
infringe, violate 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 GTE nor any of its Subsidiaries has
received any notice, not satisfactorily resolved, of any claims or threats that
GTE's or its Subsidiaries' use of any of the GTE Intellectual Property
materially infringes, violates or misuses, or is otherwise in conflict with any
intellectual property or proprietary rights of any third party or that any of
the GTE Intellectual Property is invalid or unenforceable that would,
individually or in the aggregate, have a Material Adverse Effect on GTE.
(d) GTE and its Subsidiaries have used reasonable efforts to maintain
the confidentiality of their trade secrets and other confidential GTE
Intellectual Property.
(e) GTE has undertaken a concerted effort to ensure that all of the
Computer Software, computer firmware, computer hardware (whether general or
special purpose), and other similar or related items of automated, computerized,
and/or software system(s) that are to be used or relied on by GTE or by any of
its Subsidiaries in the conduct of their respective businesses will not
malfunction, will not cease to function, will not generate incorrect data, and
will not provide incorrect results when processing, providing and/or receiving
(i) date-related data into and between the twentieth and twenty-first centuries
and (ii) date-related data in connection with any valid date in the twentieth
and twenty-first centuries. GTE reasonably believes that such effort will be
successful.
SECTION 4.19 -- INSURANCE. Except as set forth in Section 4.19 of the
GTE Disclosure Schedule, each of GTE and each of its Significant Subsidiaries
is, and has been continuously since January 1, 1987 (or such later date as such
Significant Subsidiary was organized or acquired by GTE), 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
GTE and its Subsidiaries during such time period. Except as set forth in Section
4.19 of the GTE Disclosure Schedule, since January 1, 1995, neither GTE nor any
of its
19
Subsidiaries has received notice of cancellation or termination with respect to
any material insurance policy of GTE or its Subsidiaries. The insurance policies
of GTE and its Subsidiaries are valid and enforceable policies.
SECTION 4.20 -- OWNERSHIP OF SECURITIES. As of the date hereof, neither
GTE nor, to GTE's knowledge, any of its affiliates or associates (as such terms
are defined under the Exchange Act), (i) beneficially owns, directly or
indirectly, or (ii) is party to any agreement, arrangement or understanding for
the purpose of acquiring, holding, voting or disposing of, in each case, shares
of capital stock of Xxxx Atlantic, which in the aggregate represent 10% or more
of the outstanding shares of Xxxx Atlantic Common Stock (other than shares held
by GTE Plans and the Xxxx Atlantic Option Agreement).
SECTION 4.21 -- CERTAIN CONTRACTS. (a) All contracts described in Item
601(b)(10) of Regulation S-K to which GTE or its Subsidiaries is a party or may
be bound ("GTE Contracts") have been filed as exhibits to, or incorporated by
reference in, GTE's Annual Report on Form 10-K for the year ended December 31,
1997. All GTE 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 reasonably be expected to have a Material Adverse
Effect on GTE. Neither GTE 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 GTE Contract, except in each case for those GTE Contracts which,
individually and in the aggregate, would not reasonably be expected to result in
a Material Adverse Effect on GTE.
(b) Set forth in Section 4.21 of the GTE Disclosure Schedule is a list
of each contract, agreement or arrangement to which GTE or any of its
Subsidiaries is a party or may be bound which is an arrangement limiting or
restraining Xxxx Atlantic, GTE, any Xxxx Atlantic or GTE Subsidiary or any
successor thereto from engaging or competing in any business which has, or could
reasonably be expected to have in the foreseeable future, a Material Adverse
Effect on GTE, or to GTE's knowledge, on Xxxx Atlantic.
SECTION 4.22 -- RIGHTS AGREEMENT. (a) Neither Xxxx Atlantic nor Merger
Subsidiary shall be deemed to be an Acquiring Person (as such term is defined in
the Rights Agreement) and the Distribution Date (as defined in the Rights
Agreement) shall not be deemed to occur and the Rights will not separate from
GTE Common Stock, as a result of entering into this Agreement or the Option
Agreements or consummating the Merger and/or the other transactions contemplated
hereby or thereby.
(b) GTE has taken all necessary action with respect to all of the
outstanding Rights (as defined in the Rights Agreement) so that, as of
immediately prior to the Effective Time, as a result of entering into this
Agreement or consummating the Merger and/or the other
20
transactions contemplated by this Agreement and the Option Agreements, (i)
neither GTE nor Xxxx Atlantic will have any obligations under the Rights or the
Rights Agreement and (ii) the holders of the Rights will have no rights under
the Rights or the Rights Agreement.
ARTICLE V -- REPRESENTATIONS AND
WARRANTIES OF XXXX ATLANTIC
Except as expressly disclosed in the Xxxx Atlantic Filed SEC Reports
(as defined below) (including all exhibits referred to therein) or as set forth
in the disclosure schedule delivered by Xxxx Atlantic to GTE on the date hereof
(the "Xxxx Atlantic Disclosure Schedule" and together with the GTE Disclosure
Schedule, the "Disclosure Schedules") (each section of which qualifies the
correspondingly numbered representation and warranty or covenant as specified
therein), Xxxx Atlantic hereby represents and warrants to GTE as follows:
SECTION 5.1 -- ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. Each of
Xxxx Atlantic and each of its Significant Subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation or organization. Each of the Xxxx Atlantic
Subsidiaries which is not a Significant Subsidiary is duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation or organization, except for such failure which, when taken
together with all other such failures, would not reasonably be expected to have
a Material Adverse Effect on Xxxx Atlantic. Each of Xxxx Atlantic and its
Subsidiaries 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 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 reasonably be
expected to have a Material Adverse Effect on Xxxx Atlantic.
SECTION 5.2 -- CERTIFICATE OF INCORPORATION AND BYLAWS. Xxxx Atlantic
has heretofore furnished, or otherwise made available, to GTE a complete and
correct copy of the Certificate of Incorporation and the Bylaws, each as amended
to the date hereof, of Xxxx Atlantic. Such Certificate of Incorporation and
Bylaws are in full force and effect. Neither Xxxx Atlantic nor any of its
Significant Subsidiaries is in violation of any of the provisions of its
respective Certificate of Incorporation or, in any material respect, its Bylaws.
SECTION 5.3 -- CAPITALIZATION. (a) The authorized capital stock of Xxxx
Atlantic consists of (i) 250,000,000 shares of Series A Preferred Stock, par
value $.10 per share, none of which are outstanding or reserved for issuance,
and (ii) 2,250,000,000 shares of Xxxx Atlantic Common Stock, of which, as of
June 30, 1998, (A) 1,553,473,710 shares were issued
21
and outstanding, (B) 22,722,614 shares were held in the treasury of Xxxx
Atlantic and (C) 80,392,512 shares were issuable upon the exercise of options
outstanding under the Xxxx Atlantic option plans listed in Section 5.3 of the
Xxxx Atlantic Disclosure Schedule. Except for Xxxx Atlantic Equity Rights issued
to Xxxx Atlantic employees in the ordinary course of business or, after the date
hereof, as permitted by Section 6.2 hereof or pursuant to the Xxxx Atlantic
Option Agreement, (i) since June 30, 1998, no shares of Xxxx Atlantic Common
Stock have been issued, except upon the exercise of options and rights described
in the immediately preceding sentence, and (ii) there are no outstanding Xxxx
Atlantic Equity Rights. For purposes of this Agreement, "Xxxx Atlantic Equity
Rights" shall mean subscriptions, options, warrants, calls, commitments,
agreements, conversion rights or other rights of any character (contingent or
otherwise) to purchase or otherwise acquire, any shares of the capital stock of
Xxxx Atlantic from Xxxx Atlantic or any of Xxxx Atlantic's Subsidiaries at any
time, or upon the happening of any stated event, excluding the GTE Stock Option.
Section 5.3 of the Xxxx Atlantic Disclosure Schedule sets forth a complete and
accurate list of certain information with respect to all outstanding Xxxx
Atlantic Equity Rights as of June 30, 1998.
(b) Except as set forth in Section 5.3 of the Xxxx Atlantic Disclosure
Schedule, pursuant to the GTE Stock Option or, after the date hereof, as
permitted by Section 6.2 hereof, there are no outstanding obligations of Xxxx
Atlantic or any of Xxxx Atlantic's Subsidiaries to repurchase, redeem or
otherwise acquire any shares of capital stock of Xxxx Atlantic.
(c) All of the issued and outstanding shares of Xxxx Atlantic Common
Stock are validly issued, fully paid and nonassessable.
(d) All of the outstanding capital stock of each of Xxxx Atlantic's
Significant Subsidiaries, and all of the outstanding capital stock of Xxxx
Atlantic's Subsidiaries owned directly or indirectly by Xxxx Atlantic, is duly
authorized, validly issued, fully paid and nonassessable. All of the outstanding
capital stock of each of Xxxx Atlantic's Significant Subsidiaries is owned by
Xxxx Atlantic free and clear of any liens, security interests, pledges,
agreements, claims, charges or encumbrances. All of the outstanding capital
stock of Xxxx Atlantic's Subsidiaries owned directly or indirectly by Xxxx
Atlantic is owned free and clear of any liens, security interests, pledges,
agreements, claims, charges or encumbrances, except where such liens, security
interests, pledges, agreements, claims, charges or encumbrances would not,
individually or in the aggregate, have a Material Adverse Effect on Xxxx
Atlantic. Except as hereafter issued or entered into in accordance with Section
6.2 hereof, there are no existing subscriptions, options, warrants, calls,
commitments, agreements, conversion rights or other rights of any character
(contingent or otherwise) to purchase or otherwise acquire from Xxxx Atlantic or
any of Xxxx Atlantic's Subsidiaries at any time, or upon the happening of any
stated event, any shares of the capital stock of any Xxxx Atlantic Subsidiary,
whether or not presently issued or outstanding (except for rights of first
refusal to purchase interests in Subsidiaries which are not wholly owned by Xxxx
Atlantic), or any of GTE's direct or indirect interests in any Material
Investment, and there are no outstanding obligations of Xxxx
22
Atlantic or any of Xxxx Atlantic's Subsidiaries to repurchase, redeem or
otherwise acquire any shares of capital stock of any of Xxxx Atlantic's
Subsidiaries or securities related to any investments, other than such as would
not, individually or in the aggregate, have a Material Adverse Effect on GTE.
SECTION 5.4 -- AUTHORITY RELATIVE TO THIS AGREEMENT. Xxxx Atlantic has
the necessary corporate power and authority to enter into this Agreement and,
subject to obtaining the requisite stockholder approval of the issuance (the
"Stock Issuance") of Xxxx Atlantic Common Stock pursuant to the Merger Agreement
and the Certificate Amendment (collectively, the "Xxxx Atlantic Stockholder
Approval"), to perform its obligations hereunder. The execution and delivery of
this Agreement by Xxxx Atlantic and the consummation by Xxxx Atlantic of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Xxxx Atlantic, subject to obtaining the Xxxx
Atlantic Stockholder Approval. This Agreement has been duly executed and
delivered by Xxxx Atlantic and, assuming the due authorization, execution and
delivery thereof by the other Parties, constitutes a legal, valid and binding
obligation of Xxxx Atlantic, 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 5.5 -- NO CONFLICT; REQUIRED FILINGS AND CONSENTS. (a) Except
as described in subsection (b) below, the execution and delivery of this
Agreement by Xxxx Atlantic do not, and the performance of this Agreement by Xxxx
Atlantic will not, (i) violate or conflict with the Certificate of Incorporation
or Bylaws of Xxxx Atlantic, (ii) conflict with or violate any law, regulation,
court order, judgment or decree applicable to Xxxx Atlantic 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 Bylaws of any of Xxxx Atlantic'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 Xxxx Atlantic 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 Xxxx Atlantic or any of its Subsidiaries is a
party or by which Xxxx Atlantic, any of such Subsidiaries or any of their
respective property or assets (including investments) is bound or affected,
except, in the case of clauses (ii), (iii) and (iv) above, for conflicts,
violations, breaches, defaults, results or consents which, individually or in
the aggregate, would not have a Material Adverse Effect on Xxxx Atlantic.
(b) Except for applicable requirements, if any, of state or foreign
public utility commissions or laws or similar local or state foreign regulatory
bodies or laws, state or foreign antitrust or foreign investment laws and
commissions, the Federal Communications
23
Commission, stock exchanges upon which the securities of Xxxx Atlantic are
listed, the Exchange Act, the premerger notification requirements of the HSR
Act, filing and recordation of appropriate merger or other documents as required
by the NYBCL and any filings required pursuant to any state securities or "blue
sky" laws or the rules of any applicable stock exchanges, (i) neither Xxxx
Atlantic nor any of its Significant Subsidiaries 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 Xxxx Atlantic or any of its Significant Subsidiaries in connection
with its execution, delivery or performance of this Agreement
SECTION 5.6 -- SEC FILINGS; FINANCIAL STATEMENTS. (a) Xxxx Atlantic has
filed all forms, reports and documents required to be filed with the SEC since
January 1, 1995, and has heretofore delivered or made available to GTE, in the
form filed with the SEC, together with any amendments thereto, its (i) Annual
Reports on Form 10-K for the fiscal years ended December 31, 1995, 1996 and
1997, (ii) all proxy statements relating to Xxxx Atlantic's meetings of
stockholders (whether annual or special) held since January 1, 1995, (iii)
Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 1998, and
(iv) all other reports or registration statements filed by Xxxx Atlantic with
the SEC since January 1, 1995, including without limitation all Annual Reports
on Form 11-K filed with respect to the Xxxx Atlantic Plans (collectively, the
"Xxxx Atlantic SEC Reports", with such Xxxx Atlantic SEC Reports filed with the
SEC prior to the date hereof being referred to as "Xxxx Atlantic Filed SEC
Reports"). The Xxxx Atlantic 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 Xxxx Atlantic SEC Reports (or incorporated by
reference therein) fairly present the consolidated financial position of Xxxx
Atlantic and its Subsidiaries as at the respective dates thereof and the
consolidated results of operations and cash flows of Xxxx Atlantic and its
Subsidiaries for the periods indicated in accordance with GAAP applied on a
consistent basis throughout the periods 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.
SECTION 5.7 -- ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as
disclosed in the Xxxx Atlantic Filed SEC Reports and in Section 5.7 of the Xxxx
Atlantic Disclosure Schedule, since December 31, 1997, and except as permitted
by this Agreement or consented to hereunder, Xxxx Atlantic and its Subsidiaries
have not incurred any material liability required
24
to be disclosed on a balance sheet of Xxxx Atlantic 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 change, or any event involving a prospective change, in the
business, financial condition or results of operations of Xxxx Atlantic or any
of its Subsidiaries which has had, or is reasonably likely to have, a Material
Adverse Effect on Xxxx Atlantic, and Xxxx Atlantic and its Subsidiaries have
conducted their respective businesses in the ordinary course consistent with
their past practices.
SECTION 5.8 -- LITIGATION. There are no claims, actions, suits,
proceedings or investigations pending or, to Xxxx Atlantic's knowledge,
threatened against Xxxx Atlantic or any of its Subsidiaries, or any properties
or rights of Xxxx Atlantic or any of its Subsidiaries, 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 Xxxx Atlantic
or prevent, materially delay or intentionally delay the ability of GTE to
consummate the transactions contemplated hereby.
SECTION 5.9 -- PERMITS; NO VIOLATION OF LAW. The businesses of Xxxx
Atlantic and its Subsidiaries are not being conducted 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 expected to have a
Material Adverse Effect on Xxxx Atlantic. No investigation or review by any
Governmental Entity (including any stock exchange or other self-regulatory body)
with respect to Xxxx Atlantic or its Subsidiaries in relation to any alleged
violation of law or regulation is pending or, to Xxxx Atlantic'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
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on Xxxx Atlantic. Except as set forth in Section 5.9 of the Xxxx
Atlantic Disclosure Schedule, neither Xxxx Atlantic 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 Agreement, consent Agreement 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 Xxxx Atlantic, nor has Xxxx
Atlantic or any of its Subsidiaries been advised that any Governmental Entity is
considering issuing or requesting any of the foregoing. None of the
representations and warranties made in this Section 5.9 are being made with
respect to Environmental Laws.
SECTION 5.10 -- JOINT PROXY STATEMENT. None of the information supplied
or to be supplied by or on behalf of Xxxx Atlantic 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
25
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 Xxxx Atlantic
for inclusion or incorporation by reference in the Joint Proxy Statement will,
at the dates mailed to stockholders and at the times of the GTE stockholders'
meeting and the Xxxx Atlantic 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 Joint Proxy Statement (except for information
relating solely to GTE) 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 5.11 -- EMPLOYEE MATTERS; ERISA. (a) Except where the failure
to be true would not, individually or in the aggregate, have a Material Adverse
Effect on Xxxx Atlantic, (i) each Xxxx Atlantic Plan has been operated and
administered in accordance with applicable law, including but not limited to
ERISA and the Code, (ii) each Xxxx Atlantic 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 Xxxx Atlantic Plan provides death or medical benefits
(whether or not insured), with respect to current or former employees of Xxxx
Atlantic or of any trade or business, whether or not incorporated, which
together with Xxxx Atlantic would be deemed a "single employer" within the
meaning of Section 4001 of ERISA (a "Xxxx Atlantic ERISA Affiliate"), beyond
their retirement or other termination of service, (iv) no liability under Title
IV of ERISA has been incurred by Xxxx Atlantic or any Xxxx Atlantic ERISA
Affiliate that has not been satisfied in full, and no condition exists that
presents a material risk to Xxxx Atlantic or any Xxxx Atlantic ERISA Affiliate
of incurring any such liability (other than PBGC premiums), (v) all
contributions or other amounts due from Xxxx Atlantic or any Xxxx Atlantic ERISA
Affiliate with respect to each Xxxx Atlantic Plan have been paid in full, (vi)
neither Xxxx Atlantic nor any Xxxx Atlantic ERISA Affiliate has engaged in a
transaction in connection with which Xxxx Atlantic 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 of the Code, (vii) to the best knowledge of Xxxx Atlantic there are
no pending, threatened or anticipated claims (other than routine claims for
benefits) by, on behalf of or against any Xxxx Atlantic 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 Xxxx Atlantic or any of its Subsidiaries under any Xxxx Atlantic
Plan or otherwise, (B) materially increase any benefits otherwise payable under
any Xxxx Atlantic Plan G or (C) result in any acceleration of the time of
payment or vesting of any such benefits.
(b) For purposes of this Agreement, "Xxxx Atlantic Plan" shall mean
each deferred compensation, bonus or other incentive compensation, stock
purchase, stock option
26
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 Xxxx Atlantic or by any
Xxxx Atlantic ERISA Affiliate or to which Xxxx Atlantic or any Xxxx Atlantic
ERISA Affiliate is party, whether written or oral, for the benefit of any
employee or former employee of Xxxx Atlantic or any Xxxx Atlantic ERISA
Affiliate.
SECTION 5.12 -- LABOR MATTERS. Neither Xxxx Atlantic nor any of its
Subsidiaries is the subject of any material proceeding asserting that it or any
of its Subsidiaries has committed an unfair labor practice or is seeking to
compel it to bargain with any labor union or labor organization nor is there
pending or, to the actual knowledge of its executive officers, threatened in
writing, nor has there been for the past five years, any labor strike, dispute,
walkout, work stoppage, slow-down or lockout involving it or any of its
Subsidiaries, except in each case as is not, individually or in the aggregate,
reasonably likely to have a Material Adverse Effect on Xxxx Atlantic.
SECTION 5.13 -- ENVIRONMENTAL MATTERS. Except for such matters that,
individually or in the aggregate, are not reasonably likely to have a Material
Adverse Effect on Xxxx Atlantic: (i) each of Xxxx Atlantic and its Subsidiaries
has complied with all applicable Environmental Laws (as defined below); (ii) the
properties 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 (as defined below); (iii) the
properties formerly owned or operated by it 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 it nor any of its
Subsidiaries is subject to liability for any Hazardous Substance disposal or
contamination on any third party property; (v) neither it nor any Subsidiary has
been associated with any release or threat of release of any Hazardous
Substance; (vi) neither it 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 it 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 not circumstances or conditions involving it 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.
27
No representation is made by Xxxx Atlantic in this Section 5.13 for
which neither Xxxx Atlantic nor any of its Subsidiaries is (or would be, if a
claim were brought in a formal proceeding) a named defendant, but as to which
Xxxx Atlantic or any of its Subsidiaries may be liable for an allocable share of
any judgment rendered pursuant to the POR. No representation is made by Xxxx
Atlantic in subsection (i) of this Section 5.13 as to properties owned, leased
or operated by AT&T or any of its Subsidiaries except for such properties which
are, or at any time since November 1, 1983 were, owned, leased or operated by
Xxxx Atlantic or any of its Subsidiaries.
SECTION 5.14 -- BOARD ACTION; VOTE REQUIRED. (a) The Board of Directors
of Xxxx Atlantic has unanimously determined that the transactions contemplated
by this Agreement and the Option Agreements are in the best interests of Xxxx
Atlantic and its stockholders and has resolved to recommend to such stockholders
that they vote in favor thereof.
(b) The approval of the Certificate Amendment by a majority of the
votes entitled to be cast by all holders of Xxxx Atlantic Common Stock and the
approval of the Stock Issuance pursuant thereto by a majority of the votes cast
thereon, provided that the total votes cast thereon represents over 50% in
interest of all securities of Xxxx Atlantic entitled to vote thereon, are the
only votes of the holders of any class or series of the capital stock of Xxxx
Atlantic required to approve this Agreement, the Merger, the Certificate
Amendment, the Stock Issuance and the other transactions contemplated hereby.
SECTION 5.15 -- OPINIONS OF FINANCIAL ADVISORS. Xxxx Atlantic has
received the opinions of Bear, Xxxxxxx & Co. Inc. ("Bear Xxxxxxx") and Xxxxxxx
Lynch, Pierce, Xxxxxx & Xxxxx Incorporated ("Xxxxxxx Xxxxx"), each dated July
27, 1998, to the effect that, as of such date, the Exchange Ratio is fair from a
financial point of view to the holders of Xxxx Atlantic Common Stock.
SECTION 5.16 -- BROKERS. Except for Bear Xxxxxxx, Xxxxxxx Xxxxx and
Xxxxxx Xxxxxxx Xxxx Xxxxxx, the arrangements with which have been disclosed to
GTE prior to the date hereof, which have been engaged by Xxxx Atlantic, 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 and the Option Agreements based upon
arrangements made by or on behalf of Xxxx Atlantic or any of its Subsidiaries.
SECTION 5.17 -- TAX MATTERS. Except as set forth in Section 5.17 of the
Xxxx Atlantic Disclosure Schedule:
(a) All material federal, state, local and foreign Tax Returns required
to have been filed by Xxxx Atlantic or its Subsidiaries have been filed with the
appropriate governmental authorities by the due date thereof including
extensions;
28
(b) The Tax Returns referred to in subpart (a) of this Section 5.17
correctly and completely reflect all material Tax liabilities of Xxxx Atlantic
and its Subsidiaries required to be shown thereon;
(c) All material Taxes shown as due on those Tax Returns referred to in
subpart (a) of this Section 5.17, as well as any material foreign withholding
Taxes imposed on or in respect of any amounts paid to or by Xxxx Atlantic or any
of its Subsidiaries, whether or not such amounts or withholding Taxes are
referred to or shown on any Tax Returns referred to in Section 5.17 (a) hereof,
have been fully paid or adequately reflected as a liability on Xxxx Atlantic's
or its Subsidiaries' financial statements included in the Xxxx Atlantic SEC
Reports;
(d) With respect to any prior period for which Tax Returns have not yet
been filed, or for which Taxes are not yet due or owing, Xxxx Atlantic and its
Subsidiaries have made due and sufficient accruals for such Taxes in their
respective books and records and financial statements;
(e) Neither Xxxx Atlantic nor any of its affiliates has taken, agreed
to take or omitted to take any action that would prevent or impede the Merger
from qualifying as a tax-free reorganization under Section 368 of the Code;
(f) No deficiencies for any Taxes have been proposed, asserted or
assessed against Xxxx Atlantic 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 Xxxx Atlantic; and
(g) Xxxx Atlantic is not aware of any material liens for Taxes upon any
assets of Xxxx Atlantic or any of its Subsidiaries apart from liens for Taxes
not yet due and payable.
SECTION 5.18 -- INTELLECTUAL PROPERTY.
(a) As used in this Agreement, "Xxxx Atlantic Intellectual Property"
means all of the following which are necessary to conduct the business of Xxxx
Atlantic 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) Computer Software;
(iv) all technology, know-how and trade secrets; and (v) all material licenses
and agreements to which Xxxx Atlantic or any of its Subsidiaries is a party
which relate to any of the foregoing.
(b) Xxxx Atlantic or its Subsidiaries owns or has the right to use,
sell or license all Xxxx Atlantic Intellectual Property, free and clear of all
liens or encumbrances, and all registrations of Xxxx Atlantic Intellectual
Property are valid and enforceable and have been
29
duly recorded and maintained, except, in each case, as would not, individually
or in the aggregate, have a Material Adverse Effect on Xxxx Atlantic.
(c) To the knowledge of Xxxx Atlantic, the conduct of Xxxx Atlantic's
and its Subsidiaries' business and the use of the Xxxx Atlantic Intellectual
Property does not materially infringe, violate 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 Xxxx
Atlantic nor any of its Subsidiaries has received any notice, not satisfactorily
resolved, of any claims or threats that Xxxx Atlantic's or its Subsidiaries' use
of any of the Xxxx Atlantic Intellectual Property materially infringes, violates
or misuses, or is otherwise in conflict with any intellectual property or
proprietary rights of any third party or that any of the Xxxx Atlantic
Intellectual Property is invalid or unenforceable that would, individually or in
the aggregate, have a Material Adverse Effect on Xxxx Atlantic.
(d) Xxxx Atlantic and its Subsidiaries have used reasonable efforts to
maintain the confidentiality of their trade secrets and other confidential Xxxx
Atlantic Intellectual Property.
(e) Xxxx Atlantic has undertaken a concerted effort to ensure that all
of the Computer Software, computer firmware, computer hardware (whether general
or special purpose), and other similar or related items of automated,
computerized, and/or software system(s) that are to be used or relied on by Xxxx
Atlantic or by any of its Subsidiaries in the conduct of their respective
businesses will not malfunction, will not cease to function, will not generate
incorrect data, and will not provide incorrect results when processing,
providing and/or receiving (i) date-related data into and between the twentieth
and twenty-first centuries and (ii) date-related data in connection with any
valid date in the twentieth and twenty-first centuries. Xxxx Atlantic reasonably
believes that such effort will be successful.
SECTION 5.19 -- INSURANCE. Except as set forth in Section 5.19 of the
Xxxx Atlantic Disclosure Schedule, each of Xxxx Atlantic and each of its
Significant Subsidiaries is, and has been continuously since January 1, 1987 (or
such later date as such Significant Subsidiary was organized or acquired by Xxxx
Atlantic), 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 Xxxx Atlantic and its Subsidiaries during such time
period. Except as set forth in Section 5.19 of the Xxxx Atlantic Disclosure
Schedule, since January 1, 1995, neither Xxxx Atlantic nor any of its
Subsidiaries has received notice of cancellation or termination with respect to
any material insurance policy of Xxxx Atlantic or its Subsidiaries. The
insurance policies of Xxxx Atlantic and its Subsidiaries are valid and
enforceable policies.
SECTION 5.20 -- OWNERSHIP OF SECURITIES. As of the date hereof, neither
Xxxx Atlantic nor, to Xxxx Atlantic's knowledge, any of its affiliates or
associates (as such terms are defined under the Exchange Act), (a) (i)
beneficially owns, directly or indirectly, or (ii) is party to any agreement,
arrangement or understanding for the purpose of acquiring, holding, voting or
30
disposing of, in each case, shares of capital stock of GTE, which in the
aggregate represent 10% or more of the outstanding shares of GTE Common Stock
(other than shares held by Xxxx Atlantic Plans and the GTE Option Agreement),
nor (b) is an "interested stockholder" of GTE within the meaning of Section 912
of the NYBCL. Except as set forth in Section 5.20 of the Xxxx Atlantic
Disclosure Schedule, Xxxx Atlantic owns no shares of GTE Common Stock described
in the parenthetical clause of Section 2.2 (a) hereof which would be canceled
and retired without consideration pursuant to Section 2.3 (a) hereof.
SECTION 5.21 -- CERTAIN CONTRACTS. (a) All contracts described in Item
601(b)(10) of Regulation S-K to which Xxxx Atlantic or its Subsidiaries is a
party or may be bound ("Xxxx Atlantic Contracts") have been filed as exhibits
to, or incorporated by reference in, Xxxx Atlantic's Annual Report on Form 10-K
for the year ended December 31, 1997. All Xxxx Atlantic 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 reasonably be
expected to have a Material Adverse Effect on Xxxx Atlantic. Neither Xxxx
Atlantic 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 Xxxx Atlantic Contract,
except in each case for those Xxxx Atlantic Contracts which, individually and in
the aggregate, would not reasonably be expected to result in a Material Adverse
Effect on Xxxx Atlantic.
(b) Set forth in Section 5.21 of the Xxxx Atlantic Disclosure Schedule
is a list of each contract, agreement or arrangement to which Xxxx Atlantic or
any of its Subsidiaries is a party or may be bound which is an arrangement
limiting or restraining Xxxx Atlantic, GTE, any Xxxx Atlantic or GTE Subsidiary
or any successor thereto from engaging or competing in any business which has,
or could reasonably be expected to have in the foreseeable future, a Material
Adverse Effect on Xxxx Atlantic or, to Xxxx Atlantic's knowledge, on GTE.
SECTION 5.22 -- MERGER SUBSIDIARY. Xxxx Atlantic and Merger Subsidiary
represent and warrant to GTE as follows:
(a) ORGANIZATION AND CORPORATE POWER. Merger Subsidiary is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of New York. Merger Subsidiary is a direct, wholly owned
subsidiary of Xxxx Atlantic.
(b) CORPORATE AUTHORIZATION. Merger Subsidiary has all requisite
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance by
Merger Subsidiary of this Agreement and the consummation by Merger Subsidiary of
the transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Merger Subsidiary. This Agreement has been duly
executed and delivered by Merger Subsidiary and constitutes a valid
31
and binding agreement of Merger Subsidiary, enforceable against it in accordance
with its terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium and other similar laws relating to or
affecting creditors generally, by general equity principles (regardless of
whether such enforceability is considered in a proceeding in equity or at law)
or by an implied covenant of good faith and fair dealing.
(c) NON CONTRAVENTION. The execution, delivery and performance by
Merger Subsidiary of this Agreement and the consummation by Merger Subsidiary of
the transactions contemplated hereby do not and will not contravene or conflict
with the certificate of incorporation or by-laws of Merger Subsidiary.
(d) NO BUSINESS ACTIVITIES. Merger Subsidiary has not conducted any
activities other than in connection with the organization of Merger Subsidiary,
the negotiation and execution of this Agreement and the consummation of the
transactions contemplated hereby. Merger Subsidiary has no Subsidiaries.
ARTICLE VI -- CONDUCT OF BUSINESSES
PENDING THE MERGER
SECTION 6.1 -- TRANSITION PLANNING. Xxxx X. Xxxxxxxxxx and Xxxxxxx X.
Xxx, as Chief Executive Officers of Xxxx Atlantic and GTE, respectively, jointly
shall be responsible for coordinating all aspects of transition planning and
implementation relating to the Merger and the other transactions contemplated
hereby. If either such person ceases to be Chief Executive Officer of his
respective company for any reason, such person's successor as Chief Executive
Officer shall assume his predecessor's responsibilities under this Section 6.1.
During the period between the date hereof and the Effective Time, Messrs.
Xxxxxxxxxx and Xxx jointly shall (i) examine various alternatives regarding the
manner in which to best organize and manage the businesses of Xxxx Atlantic and
GTE after the Effective Time, and (ii) coordinate policies and strategies with
respect to regulatory authorities and bodies, in all cases subject to applicable
law.
SECTION 6.2 -- CONDUCT OF BUSINESS IN THE ORDINARY COURSE. Each of GTE
and Xxxx Atlantic covenants and agrees that, subject to the provisions of
Sections 7.16 and 7.17 hereof, between the date hereof and the Effective Time,
unless the other shall otherwise consent in writing, and except as described in
Section 6.2 of the Disclosure Schedules or as otherwise expressly contemplated
hereby, the business of such Party 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 GTE and
Xxxx Atlantic and their respective Subsidiaries will use their 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
32
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 6.2 of the Disclosure Schedules or as otherwise
expressly contemplated by this Agreement and the Option Agreements, and subject
to the provisions of Sections 7.16 and 7.17, each of GTE and Xxxx Atlantic
agrees on behalf of itself and its Subsidiaries that they will not, between the
date hereof and the Effective Time, directly or indirectly, do any of the
following without the prior written consent of the other:
(a) (i) except for (A) the issuance of shares of GTE Common Stock and
Xxxx Atlantic Common Stock in order to satisfy obligations under the GTE Plans
and Xxxx Atlantic Plans in effect on the date hereof and Xxxx Atlantic Equity
Rights or GTE Equity Rights issued thereunder and under existing dividend
reinvestment plans, which issuances shall be consistent with its existing policy
and past practice; (B) grants of stock options with respect to GTE Common Stock
or Xxxx Atlantic 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 to any person which is directly or
indirectly wholly owned by GTE or Xxxx Atlantic (as the case may be): 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, such Party or any of its Subsidiaries (excluding such as may arise
upon the exercise of existing rights); (ii) amend or propose to amend the
Certificate of Incorporation or Bylaws of such Party (other than by Xxxx
Atlantic as contemplated hereby) or any of its Subsidiaries (other than wholly
owned Subsidiaries) or adopt, amend or propose to amend any shareholder rights
plan or related rights agreement; (iii) split, combine or reclassify any
outstanding shares of GTE Common Stock and Xxxx Atlantic Common Stock, or
declare, set aside or pay any dividend or distribution payable in cash, stock,
property or otherwise with respect to shares of GTE Common Stock and Xxxx
Atlantic Common Stock, except for cash dividends to stockholders of GTE and Xxxx
Atlantic declared in accordance with existing dividend policy payable to
stockholders of record on the record dates consistently used in prior periods;
(iv) redeem, purchase or otherwise acquire or offer to redeem, purchase or
otherwise acquire any shares of its capital stock, except that each of GTE and
Xxxx Atlantic shall be permitted to acquire shares of GTE Common Stock or Xxxx
Atlantic Common Stock, as the case may be, from time to time in open market
transactions, consistent with past practice and in compliance with applicable
law and the provisions of any applicable employee benefit plan, program or
arrangement, for issuance upon the exercise of options and other rights granted,
and the lapsing of restrictions, under such Party's respective employee benefit
plans, programs and arrangements and dividend reinvestment plans; 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 6.2
(a);
33
(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 such Party as of the date hereof and other than
incorporation of a wholly owned Subsidiary), except for acquisitions or
investments which do not exceed $500,000,000 in the aggregate for all such
acquisitions or investments in any 12-month period; (ii) except in the ordinary
course of business and in a manner consistent with past practice, sell, pledge,
dispose of, or encumber or authorize or propose the sale, pledge, disposition or
encumbrance of any assets of such Party or any of its Subsidiaries, except for
transactions which do not exceed $500,000,000 in the aggregate in any 12-month
period and provided further that, unless and until it is mutually determined
that pooling of interests accounting is not available for the Merger, no Party
shall make any dispositions in excess of an aggregate of $100,000,000 except for
those dispositions that the management of either party has determined, with the
concurrence of its independent accountants, to be either in the ordinary course
of business or not in contemplation of the Merger, and therefore not a
disposition to be measured, individually and in the aggregate with other
dispositions, for material disposition of asset purposes, as required by
Accounting Principals Bulletin No. 16 and the authoritative interpretations
thereto; or (iii) authorize, enter into or amend any contract, agreement,
commitment or arrangement with respect to any of the matters prohibited by this
Section 6.2(b);
(c) incur indebtedness if, following the taking of such action, it is
reasonably anticipated that such Party's outstanding senior indebtedness would
be rated by Standard & Poor's at lower than A-, in the case of GTE, or at lower
than A, in the case of Xxxx Atlantic.
(d) enter into (i) leveraged derivative contracts (defined as contracts
that use a factor to multiply the underlying index exposure) or (ii) other
derivative contracts except for the purpose of hedging known interest rate and
foreign exchange exposures or otherwise reducing such Party's cost of financing;
(e) 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 GTE Plan, Xxxx Atlantic Plan (collectively with all GTE Plans,
"Benefit Plans") or any policies, arrangements and agreements of such Party
which were in effect on, or offered or approved to be offered by the board of
directors or senior management of the respective Party 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;
provided, however, that this subsection shall not prohibit GTE or Xxxx
Atlantic or their respective subsidiaries from taking any actions whatsoever
that are described in this Section 6.2(e) if (i) such actions are not
Merger-related and are in amounts not materially
34
greater than past practice or as otherwise required by Legal Requirements or
applicable provisions of the plan, policy or arrangement, and the Party taking
such action consults with the other Party (where such consultation is reasonable
and practicable) reasonably in advance of any such action, or (ii) such actions
are Merger-related, are taken to meet business needs, are consistent with
competitive market practices of large data transmission or telecommunications
companies, and the other Party gives its consent to such actions (such consent
not to be unreasonably withheld after being consulted by the Party proposing
such action (where such consultation is reasonable and practicable) reasonably
in advance of any such action);
provided, further, that on and after the date hereof, each of GTE
and Xxxx Atlantic will use its best efforts in good faith to develop and adopt
within 60 days of the date hereof, in concert with the other, a common set of
principles and guidelines for the design and implementation of merger-related
retention incentives and severance benefits for the purpose of enabling the
respective companies to implement complementary plans, programs and
arrangements, utilizing best competitive practices which each believes will
facilitate the convergence of the benefits and employment practices and policies
of the Parties and their respective subsidiaries during the period culminating
in the Effective Time, and as soon as practicable after such adoption, each such
Party shall comply, and cause their respective subsidiaries to comply, with such
principles and guidelines (and any amendments thereto which are mutually agreed
by the Parties thereafter);
(f) take any action with respect to increases in employee compensation,
or make any payments under any GTE Plan or any Xxxx Atlantic Plan, as the case
may be, to any director or employee of, or independent contractor or consultant
to, such Party or any of its Subsidiaries, adopt or otherwise materially amend
(except for amendments required or made advisable by Legal Requirements) any GTE
Plan or Xxxx Atlantic Plan, as the case may be, or enter into or amend any
employment or consulting agreement, or grant or establish any new awards under
any such existing GTE Plan or Xxxx Atlantic Plan or agreement;
provided, however, that this subsection shall not prohibit GTE or
Xxxx Atlantic or their respective subsidiaries from taking any actions
whatsoever that are described in this Section 6.2(f) if (i) such actions are not
Merger-related and are in amounts not materially greater than past practice or
as otherwise required by Legal Requirements or applicable provisions of the
plan, policy or arrangement, and, except in the case of increases in employee
compensation in the ordinary course of business consistent with past practice,
the Party taking such action consults with the other Party (where such
consultation is reasonable and practicable) reasonably in advance of any such
action, or (ii) such actions are taken to meet business needs, are consistent
with competitive market practices of large data transmission or
telecommunications companies, and the other Party gives its consent to such
actions (such consent not to be unreasonably withheld after being consulted by
the Party proposing such action (where such consultation is reasonable and
practicable) reasonably in advance of any such action);
35
(g) change in any material respect its accounting policies, methods or
procedures except as required by GAAP;
(h) 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 to obtain any approval of any Governmental Entity required to
consummate the transactions contemplated hereby;
(i) other than pursuant to this Agreement, take any action to cause the
shares of their respective Common Stock to cease to be quoted on any of the
stock exchanges on which such shares are now quoted;
(j) (i) other than as consistent with past practice, issue SARS, new
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, provided that Xxxx
Atlantic and GTE may enter into any such contracts that may be terminated within
two years; (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;
provided, however, that this subsection shall not prohibit GTE or
Xxxx Atlantic or their respective subsidiaries from taking any actions
whatsoever that are described in this Section 6.2(j) (with the exception of
clause (j)(i)) if such actions are in amounts not materially greater than past
practice or as otherwise required by Legal Requirements or applicable provisions
of the plan, policy or arrangement, and the Party taking such action consults
with the other Party (where such consultation is reasonable and practicable)
reasonably in advance of any such action; or
(k) take any action which it believes when taken would cause its
representations and warranties contained herein to become inaccurate in any
material respect.
36
GTE and Xxxx Atlantic agree that any written approval obtained under
this Section 6.2 may be relied upon by the other Party if signed by the Chief
Executive Officer or any other executive officer of the Party providing such
written approval.
SECTION 6.3 -- NO SOLICITATION. (a) From and after the date hereof,
Xxxx Atlantic shall not, nor shall it permit any of its Subsidiaries to, nor
shall it authorize or permit any of its 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 (as hereinafter defined) or (ii)
participate in any discussions regarding any Alternative Transaction; provided,
however, that if, at any time prior to approval of the Stock Issuance and the
Certificate Amendment by the holders of Xxxx Atlantic Common Stock, the Board of
Directors of Xxxx Atlantic determines in good faith, after receipt of advice
from outside counsel, that the failure to provide such information or
participate in such negotiations or discussions would result in a reasonable
possibility that the Board of Directors of Xxxx Atlantic would breach their
fiduciary duties to stockholders under applicable law, Xxxx Atlantic may, in
response to any such proposal that has been determined by it to be a Xxxx
Atlantic Superior Proposal (as defined in Section 7.2(b)), that was not
solicited by it and that did not otherwise result from a breach of this Section
6.3(a), and subject to Xxxx Atlantic giving GTE at least two business days
written notice of its intention to do so, (x) furnish information with respect
to Xxxx Atlantic 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 July 19, 1998 entered into between Xxxx
Atlantic and GTE (the "Nondisclosure Agreement"), provided that a copy of all
such information is delivered simultaneously to GTE, and (y) participate in
negotiations regarding such proposal. Xxxx Atlantic shall promptly notify GTE
orally and in writing of any request for information or of any proposal in
connection with an Alternative Transaction, the material 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. Xxxx Atlantic will keep GTE reasonably informed
of the status and details (including amendments or proposed amendments) of such
request or proposal on a current basis. Xxxx Atlantic shall immediately cease
and terminate any existing solicitation, initiation, encouragement, activity,
discussion or negotiation with any persons conducted heretofore by Xxxx Atlantic
or its representatives with respect to the foregoing. Xxxx Atlantic (i) agrees
not to release any Third Party (as defined below) 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 GTE shall be entitled to enforce Xxxx Atlantic'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 shall prohibit Xxxx
Atlantic (i) from taking and disclosing to its stockholders a position
contemplated by Rule
37
14e-9 or Rule 14e-2(a) promulgated under the Exchange Act or (ii) from making
any disclosure to its stockholders if, in the good faith judgment of the Board
of Directors of Xxxx Atlantic, after receipt of advice from outside counsel,
failure to disclose would result in a reasonable possibility that the Board of
Directors of Xxxx Atlantic would breach its fiduciary duties to Xxxx Atlantic's
stockholders under applicable law.
(b) From and after the date hereof, GTE shall not, nor shall it permit
any of its Subsidiaries to, nor shall it authorize or permit any of its
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 (as
hereinafter defined) or (ii) participate in any discussions regarding any
Alternative Transaction; provided, however, that if, at any time prior to
approval of this Agreement by the holders of GTE Common Stock, the Board of
Directors of GTE determines in good faith, after receipt of advice from outside
counsel, that the failure to provide such information or participate in such
negotiations or discussions would result in a reasonable possibility that the
Board of Directors of GTE would breach their fiduciary duties to stockholders
under applicable law, GTE may, in response to a proposal that has been
determined by it to be a GTE Superior Proposal (as defined in Section 7.2(d)),
that was not solicited by it and that did not otherwise result from a breach of
this Section 6.3(b), and subject to GTE giving Xxxx Atlantic at least two
business days written notice of its intention to do so, (x) furnish information
with respect to GTE and its Subsidiaries to any person pursuant to a customary
confidentiality agreement containing terms no less restrictive than the terms of
the Nondisclosure Agreement, provided that a copy of all such information is
delivered simultaneously to Xxxx Atlantic, and (y) participate in negotiations
regarding such proposal. GTE shall promptly notify Xxxx Atlantic orally and in
writing of any request for information or of any proposal in connection with an
Alternative Transaction, the material 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. GTE will keep Xxxx Atlantic reasonably informed of the
status and details (including amendments or proposed amendments) of such request
or proposal on a current basis. GTE shall immediately cease and terminate any
existing solicitation, initiation, encouragement, activity, discussion or
negotiation with any persons conducted heretofore by GTE or its representatives
with respect to the foregoing. GTE (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 Xxxx Atlantic shall be entitled to
enforce GTE'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(b) or in
Section 7.2 shall prohibit GTE (i) from taking and disclosing to its
stockholders a position contemplated by Rule 14e-9 or Rule 14e-2(a) promulgated
under the Exchange Act or (ii) from making any disclosure to its stockholders
38
if, in the good faith judgment of the Board of Directors of GTE, after receipt
of advice from outside counsel, failure to disclose would result in a reasonable
possibility that the Board of Directors of GTE would breach its fiduciary duties
to GTE's stockholders under applicable law.
(c) For purposes of this Agreement, "Alternative Transaction" means,
whether in the form of 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 Xxxx
Atlantic and its Subsidiaries and other than GTE and its 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 Xxxx Atlantic or GTE, as the case may be, whether from
Xxxx Atlantic or GTE or pursuant to a tender offer or exchange offer or
otherwise, (ii) any acquisition or proposed acquisition of, or business
combination with, Xxxx Atlantic or any of its Significant Subsidiaries or GTE or
any of its Significant Subsidiaries, as the case may be, by a merger or other
business combination (including any so-called "merger-of-equals" and whether or
not Xxxx Atlantic or any of its Significant Subsidiaries or GTE or any of its
Significant Subsidiaries, as the case may be, 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
assets (including for this purpose the outstanding equity securities of
Subsidiaries of Xxxx Atlantic or GTE, as the case may be, and any entity
surviving any merger or business combination including any of them) of Xxxx
Atlantic or any of its Subsidiaries or GTE or any of its Subsidiaries, as the
case may be, for consideration equal to 20% or more of the fair market value of
all of the outstanding shares of Xxxx Atlantic Common Stock or all of the
outstanding shares of GTE Common Stock, as the case may be, on the date of this
Agreement.
SECTION 6.4 -- SUBSEQUENT FINANCIAL STATEMENTS. Prior to the Effective
Time, each of GTE and Xxxx Atlantic (a) will consult with the other prior to
making publicly available its financial results for any period and (b) will
consult with the other prior to the filing of, and will timely file with the
SEC, each Annual Report on Form 10-K, Quarterly Report on Form 10-Q and Current
Report on Form 8-K required to be filed by such Party under the Exchange Act and
the rules and regulations promulgated thereunder and will promptly deliver to
the other copies of each such report filed with the SEC. As of their respective
dates, none of such reports shall contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading. The respective audited financial statements and
unaudited interim financial statements of each of GTE and Xxxx Atlantic, as the
case may be, included in such reports will fairly present the consolidated
financial position of such Party and its Subsidiaries as at the dates thereof
and the results of their operations and cash flows for the periods then ended in
accordance with GAAP applied on a consistent basis
39
and, subject, in the case of unaudited interim financial statements, to normal
year-end adjustments.
SECTION 6.5 -- CONTROL OF OPERATIONS. Nothing contained in this
Agreement shall give Xxxx Atlantic, directly or indirectly, the right to control
or direct GTE's operations prior to the Effective Time. Nothing contained in
this Agreement shall give GTE, directly or indirectly, the right to control or
direct Xxxx Atlantic's operations prior to the Effective Time. Prior to the
Effective Time, each of Xxxx Atlantic and GTE shall exercise, consistent with
the terms and conditions of this Agreement, complete control and supervision
over its respective operations.
ARTICLE VII -- ADDITIONAL AGREEMENTS
SECTION 7.1 -- JOINT PROXY STATEMENT AND THE REGISTRATION STATEMENT.
(a) As promptly as practicable after the execution and delivery of this
Agreement, the Parties shall prepare and file with the SEC, and shall use all
reasonable efforts to have cleared by the SEC, and promptly thereafter shall
mail to the holders of record of shares of Xxxx Atlantic Common Stock and GTE
Common Stock, the Joint Proxy Statement, provided, however, that GTE and Xxxx
Atlantic shall not mail or otherwise furnish the Joint Proxy Statement to their
respective stockholders unless and until:
(i) they have received notice from the SEC that the
Registration Statement is effective under the 1933 Act;
(ii) GTE shall have received a letter of
PricewaterhouseCoopers L.L.P., dated a date within two
business days prior to the date of the first mailing of the
Joint Proxy Statement, and addressed to GTE, in form and
substance reasonably satisfactory to GTE 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 Xxxx Atlantic included in the Joint
Proxy Statement and the Registration Statement; and
(iii) Xxxx Atlantic shall have received a letter of
Xxxxxx Xxxxxxxx LLP, dated a date within two business days
prior to the date of the first mailing of the Joint Proxy
Statement, and addressed to Xxxx Atlantic, in form and
substance reasonably satisfactory to Xxxx Atlantic 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 GTE included in the Joint Proxy
Statement and the Registration Statement.
40
(b) The Parties will cooperate in the preparation of the Joint Proxy
Statement and the Registration Statement and in having the Registration
Statement declared effective as soon as practicable.
SECTION 7.2 -- XXXX ATLANTIC AND GTE STOCKHOLDERS' MEETINGS.
(a) As promptly as practicable after the Registration Statement is
declared effective under the Securities Act, Xxxx Atlantic shall duly give
notice of, convene and hold a meeting of its stockholders (the "Xxxx Atlantic
Stockholders' Meeting") in accordance with the DGCL for the purpose of obtaining
the Xxxx Atlantic Stockholder Approval and shall, subject to the provisions of
Section 7.2(b) hereof, through its Board of Directors, recommend to its
stockholders the approval of the Stock Issuance and adoption of the Certificate
Amendment.
(b) Neither the Board of Directors of Xxxx Atlantic nor any committee
thereof shall (i) except as expressly permitted by this Section 7.2(b),
withdraw, qualify or modify, or propose publicly to withdraw, qualify or modify,
in a manner adverse to GTE, the approval or recommendation of such Board of
Directors or such committee of the Certificate Amendment or the Stock Issuance,
(ii) approve or recommend, or propose publicly to approve or recommend, any
Alternative Transaction or (iii) cause Xxxx Atlantic to enter into any letter of
intent, agreement in principle, acquisition agreement or other similar agreement
(each, a "Xxxx Atlantic Acquisition Agreement") related to any Alternative
Transaction. Notwithstanding the foregoing, in the event that prior to the
adoption of the Stock Issuance and the Certificate Amendment by the holders of
Xxxx Atlantic Common Stock the Board of Directors of Xxxx Atlantic determines in
good faith, after it has received a Xxxx Atlantic Superior Proposal (as defined
below) and after receipt of advice from outside counsel, that the failure to do
so would result in a reasonable possibility that the Board of Directors of Xxxx
Atlantic would breach its fiduciary duties to Xxxx Atlantic stockholders under
applicable law, the Board of Directors of Xxxx Atlantic may (subject to this and
the following sentences) inform Xxxx Atlantic stockholders that it no longer
believes that such adoption is advisable and no longer recommends approval (a
"Xxxx Atlantic Subsequent Determination"), but only at a time that is after the
fifth business day following GTE's receipt of written notice advising GTE that
the Board of Directors of Xxxx Atlantic has received a Xxxx Atlantic Superior
Proposal specifying the material terms and conditions of such Xxxx Atlantic
Superior Proposal (and including a copy thereof with all accompanying
documentation, if in writing), identifying the person making such Xxxx Atlantic
Superior Proposal and stating that it intends to make a Xxxx Atlantic Subsequent
Determination. After providing such notice, Xxxx Atlantic shall provide a
reasonable opportunity to GTE to make such adjustments in the terms and
conditions of this Agreement as would enable Xxxx Atlantic to proceed with its
recommendation to its stockholders without a Xxxx Atlantic Subsequent
Determination; provided, however, that any such adjustment shall be at the
discretion of the Parties at the time. For purposes of this Agreement, a "Xxxx
Atlantic Superior Proposal" means any proposal (on its most recently
41
amended or modified terms, if amended or modified) made by a Third Party to
enter into an Alternative Transaction which the Board of Directors of Xxxx
Atlantic determines in its good faith judgment (based on, among other things,
the advice of a financial advisor of nationally recognized reputation) to be
more favorable to Xxxx Atlantic's stockholders than the Merger taking into
account all relevant factors (including whether, in the good faith judgment of
the Board of Directors of Xxxx Atlantic, after obtaining the advice of a
financial advisor of nationally recognized reputation, the Third Party is
reasonably able to finance the transaction, and any proposed changes to this
Agreement that may be proposed by GTE in response to such Alternative
Transaction). Notwithstanding any other provision of this Agreement, Xxxx
Atlantic shall submit the Stock Issuance and the Certificate Amendment to its
stockholders whether or not the Board of Directors of Xxxx Atlantic makes a Xxxx
Atlantic Subsequent Determination.
(c) As promptly as practicable after the Registration Statement is
declared effective under the Securities Act, GTE shall duly give notice of,
convene and hold a meeting of its stockholders (the "GTE Stockholders' Meeting")
in accordance with the NYBCL for the purpose of obtaining the GTE Stockholder
Approval and shall, subject to the provisions of Section 7.2(d) hereof, through
its Board of Directors, recommend to its stockholders the approval and adoption
of this Agreement and the Merger.
(d) Neither the Board of Directors of GTE nor any committee thereof
shall (i) except as expressly permitted by this Section 7.2(d), withdraw,
qualify or modify, or propose publicly to withdraw, qualify or modify, in a
manner adverse to Xxxx Atlantic, the approval or recommendation of such Board of
Directors or such committee of the Merger or this Agreement, (ii) approve or
recommend, or propose publicly to approve or recommend, any Alternative
Transaction, or (iii) cause GTE to enter into any letter of intent, agreement in
principle, acquisition agreement or other similar agreement (each, a "GTE
Acquisition Agreement") related to any Alternative Transaction. Notwithstanding
the foregoing, in the event that prior to the adoption of this Agreement by the
holders of GTE Common Stock the Board of Directors of GTE determines in good
faith, after it has received a GTE Superior Proposal (as defined below) and
after receipt of advice from outside counsel, that the failure to do so would
result in a reasonable possibility that the Board of Directors of GTE would
breach its fiduciary duties to GTE stockholders under applicable law, the Board
of Directors of GTE may (subject to this and the following sentences) inform GTE
stockholders that it no longer believes that the Merger is advisable and no
longer recommends approval (a "GTE Subsequent Determination"), but only at a
time that is after the fifth business day following Xxxx Atlantic's receipt of
written notice advising Xxxx Atlantic that the Board of Directors of GTE has
received a GTE Superior Proposal specifying the material terms and conditions of
such GTE Superior Proposal (and including a copy thereof with all accompanying
documentation, if in writing), identifying the person making such GTE Superior
Proposal and stating that it intends to make a GTE Subsequent Determination.
After providing such notice, GTE shall provide a reasonable opportunity to Xxxx
Atlantic to make such adjustments in the
42
terms and conditions of this Agreement as would enable GTE to proceed with its
recommendation to its stockholders without a GTE Subsequent Determination;
provided, however, that any such adjustment shall be at the discretion of the
Parties at the time. For purposes of this Agreement, a "GTE Superior Proposal"
means any proposal (on its most recently amended or modified terms, if amended
or modified) made by a Third Party to enter into an Alternative Transaction
which the Board of Directors of GTE determines in its good faith judgment (based
on, among other things, the advice of a financial advisor of nationally
recognized reputation) to be more favorable to GTE's stockholders than the
Merger taking into account all relevant factors (including whether, in the good
faith judgment of the Board of Directors of GTE, after obtaining the advice of a
financial advisor of nationally recognized reputation, the Third Party is
reasonably able to finance the transaction, and any proposed changes to this
Agreement that may be proposed by Xxxx Atlantic in response to such Alternative
Transaction). Notwithstanding any other provision of this Agreement, GTE shall
submit this Agreement to its stockholders whether or not the Board of Directors
of GTE makes a GTE Subsequent Determination.
SECTION 7.3 -- CONSUMMATION OF MERGER; ADDITIONAL AGREEMENTS.
(a) Upon the terms and subject to the conditions hereof and as soon as
practicable after the conditions set forth in Article VIII hereof have been
fulfilled or waived, each of the Parties required required by the NYBCL and
deliver to and file with the Secretary of State of the State of New York such
instruments and agreements as may be required by the NYBCL and the Parties shall
take all such other and further actions as may be required by law to make the
Merger effective, and Xxxx Atlantic shall take all such other and further
actions as may be required by law to make the Certificate Amendment and the
Bylaws Amendment effective. Prior to the filings referred to in this Section
7.3(a), a closing (the "Closing") will be held at the offices of Xxxx Atlantic
(or such other place as the Parties may agree) for the purpose of confirming all
the foregoing. The Closing will take place upon the fulfillment or waiver of all
of the conditions to closing set forth in Article VIII of this Agreement, or as
soon thereafter as practicable (the date of the Closing being herein referred to
as the "Closing Date").
(b) 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
the Option Agreements and to effect all necessary filings under the 1933 Act,
the Exchange Act and the HSR Act. Without limiting the generality of
43
the foregoing, each of GTE and Xxxx Atlantic 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.
(c) Each of Xxxx Atlantic and GTE shall, in connection with the efforts
referenced in Section 7.3(a) and (b), (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.
(d) In furtherance and not in limitation of the covenants of the
parties contained in Sections 7.3(a), (b) and (c), 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 or the Option Agreements as violative of any
applicable law, or if any statute, rule, regulation, executive order, decree,
injunction or administrative order is enacted, entered or promulgated or
enforced by a Governmental Entity which would make the Merger or the other
transactions contemplated hereby or by the Option Agreements illegal or
otherwise prohibit or materially impair or delay consummation of the
transactions contemplated hereby or thereby, each of Xxxx Atlantic and GTE 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. 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 so long as such Party has up to then
complied in all respects with its obligations under this Section 7.3.
(e) If any objections are asserted with respect to the transactions
contemplated hereby under any applicable law or if any suit is instituted by any
Governmental Entity or any private party challenging any of the transactions
contemplated hereby as violative of any applicable law, each of Xxxx Atlantic
and GTE shall use its commercially reasonable efforts to resolve any such
objections or challenge as such Governmental Entity or private party may
44
have to such transactions under such law so as to permit consummation of the
transactions contemplated by this Agreement.
SECTION 7.4 -- NOTIFICATION OF CERTAIN MATTERS. Each of GTE and Xxxx
Atlantic shall give prompt notice to the other of the following:
(a) the occurrence or nonoccurrence of any event whose occurrence or
nonoccurrence would be likely to cause either (i) any representation or warranty
contained in this Agreement to be untrue or inaccurate in any material respect
at any time from the date hereof to the Effective Time, or (ii) directly or
indirectly, any Material Adverse Effect on such Party;
(b) any material failure of such Party, or any officer, director,
employee or Agent of any thereof, to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder, and
(c) any facts relating to such Party which would make it necessary or
advisable to amend the Joint Proxy Statement or the Registration Statement in
order to make the statements therein not misleading or to comply with applicable
law; provided, however, that the delivery of any notice pursuant to this Section
7.4 shall not limit or otherwise affect the remedies available hereunder to the
Party receiving such notice.
SECTION 7.5 -- ACCESS TO INFORMATION. (a) From the date hereof to the
Effective Time, each of GTE and Xxxx Atlantic shall, and shall cause its
respective Subsidiaries, and its and their officers, directors, employees,
auditors, counsel and agents to afford the officers, employees, auditors,
counsel and agents of the other Party complete access at all reasonable times to
such Party's and its Subsidiaries' officers, employees, auditors, counsel
agents, properties, offices and other facilities and to all of their respective
books and records, and shall furnish the other with all financial, operating and
other data and information as such other Party may reasonably request, including
in connection with confirmatory due diligence.
(b) Each of GTE and Xxxx Atlantic agrees that all information so
received from the other Party shall be deemed received pursuant to the
Nondisclosure Agreement and such Party shall, 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.
SECTION 7.6 -- PUBLIC ANNOUNCEMENTS. GTE and Xxxx Atlantic shall use
all reasonable efforts to develop a joint communications plan and each Party
shall use all reasonable efforts to ensure that all press releases and other
public statements with respect to
45
the transactions contemplated hereby shall be consistent with such joint
communications plan or, to the extent inconsistent therewith, shall have
received the prior written approval of the other.
SECTION 7.7 -- TRANSFER STATUTES. Each of GTE and Xxxx Atlantic agrees
to use its commercially reasonable efforts to comply promptly with all
requirements of the New Jersey and Connecticut Property Transfer Statutes, to
the extent applicable to the transactions contemplated hereby, and to take all
actions necessary to cause the transactions contemplated hereby to be effected
in compliance with the New Jersey and Connecticut Property Transfer Statutes.
GTE and Xxxx Atlantic agree that they will consult with each other to determine
what, if any, actions must be taken prior to or after the Effective Time to
ensure compliance with such statutes. Each of GTE and Xxxx Atlantic agrees to
provide the other with any documents to be submitted to the relevant state
agencies prior to submission and agrees not to take any action to comply with
the New Jersey and Connecticut Property Transfer Statutes without the other's
prior consent, which consent shall not be unreasonably withheld. Each Party
shall bear its respective costs and expenses incurred in connection with
compliance with the New Jersey and Connecticut Property Transfer Statutes. For
purposes of this section, the New Jersey and Connecticut Property Transfer
Statutes means the New Jersey Industrial Site Recovery Act, 1993 N.J. Laws 139,
and the Connecticut Transfer Act, Conn. Gen. Stat. Xxx. ss. 22a-134(b).
SECTION 7.8 INDEMNIFICATION, DIRECTORS' AND OFFICERS' INSURANCE. For a
period of six years after the Effective Time, Xxxx Atlantic shall cause GTE to,
and Xxxx Atlantic shall, maintain in effect the current policies of directors'
and officers' liability insurance and fiduciary liability insurance maintained
by GTE and Xxxx Atlantic, respectively (provided that Xxxx Atlantic 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. Xxxx Atlantic shall cause GTE to maintain in effect (a) the
current provisions regarding indemnification of officers and directors contained
in the charter and bylaws of GTE and each of its Subsidiaries until the statutes
of limitations for all possible claims have run; provided that Xxxx Atlantic
need not cause GTE to maintain in effect indemnification provisions contained in
the charter and bylaws of its Subsidiaries if and to the extent that Xxxx
Atlantic assumes such indemnity obligations; and (b) any directors, officers or
employees indemnification agreements of GTE and its respective Subsidiaries.
Xxxx Atlantic shall cause GTE to, and Xxxx Atlantic shall, indemnify the
directors and officers of GTE and Xxxx Atlantic, respectively, to the fullest
extent to which GTE and Xxxx Atlantic are permitted to indemnify such officers
and directors under their respective charters and bylaws and applicable law. As
of the Effective Time, Xxxx Atlantic shall unconditionally and irrevocably
guarantee for the benefit of such directors, officers and employees the
obligations of GTE under the foregoing indemnification arrangements.
46
SECTION 7.9 -- EMPLOYEE BENEFIT PLANS. (a) Except as otherwise provided
herein or set forth in Section 6.2 of the Disclosure Schedules, GTE and Xxxx
Atlantic agree that, unless otherwise mutually determined, the GTE Plans and the
Xxxx Atlantic Plans in effect at the date hereof shall remain in effect after
the Effective Time with respect to classes of employees covered by such plans
immediately prior to the Effective Time.
From time to time from the date hereof to the Effective Time, the
management of Xxxx Atlantic and GTE shall consult with one another for the
purpose of reviewing such Benefit Plans for management (non-represented)
employees of Xxxx Atlantic and GTE and their respective subsidiaries
("Management Employees"), and determining which of such Benefit Plans represent
best competitive practices, which should be terminated at the Effective Time (or
following a transition period thereafter), and which of such Benefit Plans
should be redesigned and/or extended to other employees at (or after) the
Effective Time. Notwithstanding the foregoing or any other provision of this
Agreement, (1) after the Effective Time, Xxxx Atlantic shall cause the
compensation and benefits provided to similarly-situated Management Employees of
each business unit to be at least as valuable as the aggregate compensation and
benefit package provided to such employees of that business unit immediately
prior to the Effective Time, except to the extent (i) such benefits and/or
compensation plans are replaced by one or more benefits and/or compensation
plans at least as valuable as those which are provided to similarly situated
employees of comparable business units of the other Party or its subsidiaries,
or (ii) corresponding benefits for similarly situated employees of the other
Party or its subsidiaries are eliminated, (2) from the Effective Time until the
first anniversary thereof, Xxxx Atlantic shall not, and shall ensure that each
of its Subsidiaries shall not, discontinue, or change eligibility provisions or
levels of benefits under, severance plans, policies and arrangements in which
such Management Employees participated immediately prior to the Effective Time,
and further agrees that any of such plans, policies or arrangements that expire
during such one-year period shall be extended for the duration of such one-year
period, and (3) for the 18-month period immediately following the Effective
Time, with respect to those GTE Management Employees who were relocated as part
of the consolidation of GTE's world headquarters to Texas, Xxxx Atlantic shall
not, and shall ensure that each of its Subsidiaries shall not, discontinue, or
change the relocation benefits program which was applicable to such Management
Employees as of the Effective Time. In addition, with respect to all Management
Employees, at and after the Effective Time (i) each such employee shall receive
full credit for their credited service with their respective employer prior to
the Effective Time for all purposes, including eligibility (including
eligibility for early retirement, disability and other benefits), vesting, level
of benefits and benefit accrual (except to the extent such benefit accrual would
be duplicative); (ii) any provisions which restrict benefits by reason of
pre-existing conditions, waiting periods or evidence of insurability shall be
waived and (iii) such employees shall receive credit under such plan for
co-payments and deductible during the applicable plan year.
47
(b) Except as otherwise set forth in Sections 2.8 and 2.9 hereof, in
the case of the GTE Plans under which the employees' interests are based upon
GTE Common Stock, or the respective market prices thereof (but which interests
do not constitute stock options), GTE and Xxxx Atlantic agree that such
interests shall, from and after the Effective Time, be based on Xxxx Atlantic
Common Stock in accordance with the Exchange Ratio.
(c) With respect to all GTE Plans which have entitlement or vesting
terms that are based upon the market price or value per share of GTE Common
Stock, GTE and Xxxx Atlantic agree that from and after the Effective Time, such
market price or value per share shall be adjusted by multiplying it by the
inverse of the Exchange Ratio.
(d) With respect to any GTE Plans maintained or contributed to outside
the United States for the benefit of non-United States citizens or residents,
the principles set forth in this Section 7.9 and in Section 6.2 of the
Disclosure Schedules shall apply to the extent the application of such
principles does not violate applicable foreign law.
(e) Without limiting the applicability of Sections 2.8 and 2.9 hereof,
each of the Parties shall take all actions as are necessary to ensure that GTE
will not at the Effective Time be bound by any stock options, SARS, warrants or
other rights or agreements which would entitle any person, other than Xxxx
Atlantic, to own any capital stock of the Surviving Corporation or to receive
any payment in respect thereof, and all GTE Plans conferring any rights with
respect to GTE Common Stock or other capital stock of GTE shall be deemed hereby
to be amended to be in conformity with this Section 7.9.
SECTION 7.10 -- SUCCESSION. (a) At the Effective Time, pursuant to the
terms of the Employment Agreements (as defined below) and subject to Section
5.11 of the Bylaws of Xxxx Atlantic reflecting the Bylaws Amendment (the
"Amended Bylaws") (i) Xxxxxxx X. Xxx shall hold the positions of Chairman and
Co-Chief Executive Officer of Xxxx Atlantic and (ii) Xxxx X. Xxxxxxxxxx shall
hold the positions of President and Co-Chief Executive Officer of Xxxx Atlantic.
Pursuant to the terms of the Employment Agreements and subject to Section 5.11
of the Amended Bylaws (A) on June 30, 2002, Xx. Xxxxxxxxxx shall become the sole
Chief Executive Officer of Xxxx Atlantic and (B) on June 30, 2004, Xx. Xxx shall
cease to be Chairman of Xxxx Atlantic and such position will be assumed by Xx.
Xxxxxxxxxx. If either of such persons is unable or unwilling to hold such
offices as set forth above, his successor shall be selected by the Board of
Directors of Xxxx Atlantic in accordance with the Amended Bylaws. The authority,
duties and responsibilities of the positions set forth above shall be set forth
in the Employment Agreements, which Employment Agreements shall also set forth
in their entirety the rights and remedies of Xx. Xxxxxxxxxx and Xx. Xxx with
respect to employment by Xxxx Atlantic. Neither Xx. Xxxxxxxxxx nor Xx. Xxx shall
have any right, remedy or cause of action under this Section 7.10, nor shall
they be third party beneficiaries of this Section 7.10.
48
(b) As soon as practicable after the date hereof, Xxxx Atlantic shall
enter into employment agreements effective as of the Effective Time (the
"Employment Agreements") with Messrs. Xxx and Xxxxxxxxxx containing arrangements
concerning management succession satisfactory to each Party.
SECTION 7.11 -- STOCK EXCHANGE LISTING. Each of the Parties shall use
its best efforts to obtain, prior to the Effective Time, the approval for
listing on the NYSE, effective upon official notice of issuance, of the shares
of Xxxx Atlantic Common Stock into which the GTE Common Stock will be converted
pursuant to Article II hereof and which will be issuable upon exercise of
options pursuant to Section 2.8 hereof.
SECTION 7.12 -- POST-MERGER XXXX ATLANTIC BOARD OF DIRECTORS. (a) At
the Effective Time, 50% of the directors of Xxxx Atlantic shall be directors
selected by Xxxx Atlantic, to the extent possible from current directors of Xxxx
Atlantic, and 50% shall be selected by GTE, to the extent possible from current
directors of GTE.
The persons to serve initially on the Board of Directors of Xxxx
Atlantic at the Effective Time who are GTE Directors (as defined below) shall be
selected solely by and at the absolute discretion of the Board of Directors of
GTE prior to the Effective Time; and the persons to serve on the Board of
Directors of Xxxx Atlantic at the Effective Time who are Xxxx Atlantic Directors
(as defined below) shall be selected solely by and at the absolute discretion of
the Board of Directors of Xxxx Atlantic prior to the Effective Time. In the
event that, prior to the Effective Time, any person so selected to serve on the
Board of Directors of Xxxx Atlantic after the Effective Time is unable or
unwilling to serve in such position, the Board of Directors which selected such
person shall designate another of its members to serve in such person's stead in
accordance with the provisions of the immediately preceding sentence.
(b) From and after the Effective Time and until July 1, 2002, the Board
of Directors of Xxxx Atlantic and each Committee of the Board of Directors of
Xxxx Atlantic as constituted following each election of Directors shall consist
of an equal number of GTE Directors and Xxxx Atlantic Directors and subject to
the fiduciary duties of the Directors, the Board of Directors shall nominate for
election at each stockholders meeting at which Directors are elected, an equal
number of GTE Directors and Xxxx Atlantic Directors. If, at any time prior to
July 1, 2002, the number of GTE Directors and Xxxx Atlantic Directors serving,
either as directors or as members of any Committee of the Board of Directors of
Xxxx Atlantic, would not be equal, then, subject to the fiduciary duties of the
directors, the Board of Directors shall appoint to fill any existing vacancy or
vacancies, as appropriate, such person or persons as may be requested by the
remaining GTE Directors (if the number of GTE Directors is, or would otherwise
become, less than the number of Xxxx Atlantic Directors) or by the remaining
Xxxx Atlantic Directors (if the number of Xxxx Atlantic Directors is, or would
otherwise become, less than the number of GTE Directors) to ensure that there
shall be an equal number of GTE Directors and Xxxx Atlantic Directors. The
provisions of the preceding two sentences
49
shall not apply in respect of any vacancy which occurs after July 1, 2002. The
term "GTE Director" means (i) any person serving as a director of GTE on the
date hereof who becomes a director of Xxxx Atlantic at the Effective Time and
(ii) any person who subsequently becomes a director of Xxxx Atlantic and who is
designated by the GTE Directors pursuant to this paragraph; and the term "Xxxx
Atlantic Director" means (i) any person serving as a director of Xxxx Atlantic
on the date hereof who continues as a director of Xxxx Atlantic after the
Effective Time and (ii) any person who becomes a director of Xxxx Atlantic and
who is designated by the Xxxx Atlantic Directors pursuant to this paragraph.
From the Effective Time through July 1, 2002, the Board of Directors shall
consist of an even number of Directors and such number of Directors shall not be
amended unless, immediately following such amendment, the number of GTE
Directors then in office is equal to the number of Xxxx Atlantic Directors then
in office.
(c) Each of GTE and Xxxx Atlantic shall take such action as shall
reasonably be deemed by either thereof to be advisable to give effect to the
provisions set forth in this section, including but not limited to incorporating
such provisions in the Bylaws of Xxxx Atlantic in effect at the Effective Time.
SECTION 7.13 -- NO SHELF REGISTRATION. Xxxx Atlantic shall not be
required to amend or maintain the effectiveness of the Registration Statement
for the purpose of permitting resale of the shares of Xxxx Atlantic Common Stock
received pursuant hereto by the persons who may be deemed to be "affiliates" of
GTE or Xxxx Atlantic within the meaning of Rule 145 promulgated under the 1933
Act. The shares of Xxxx Atlantic Common Stock issuable upon exercise of options
pursuant to Section 2.8 hereof shall be registered under the 1933 Act and such
registration shall be effective at the time of issuance.
SECTION 7.14 -- AFFILIATES. (a) Each of GTE and Xxxx Atlantic (i) has
disclosed to the other in Section 7.14 of the Disclosure Schedules all persons
who are, or may be, as of the date hereof its "affiliates" for purposes of Rule
145 under the Securities Act or SEC Accounting Series Release 135, and (ii)
shall use all reasonable efforts to cause each person who is identified as an
"affiliate" of it in Section 7.14 of the Disclosure Schedules to deliver to the
other as promptly as practicable but in no event later than 31 days prior to the
Closing Date, a signed Agreement substantially in the form attached hereto as
Exhibit 7.14(a), in the case of GTE, and 7.14(b), in the case of Xxxx Atlantic.
GTE and Xxxx Atlantic shall notify each other from time to time of any other
persons who then are, or may be, such an "affiliate" and use all reasonable
efforts to cause each additional person who is identified as an "affiliate" to
execute a signed Agreement as set forth in this Section 7.14(a).
(b) If the transactions contemplated by this Agreement and the Option
Agreements would otherwise qualify for pooling of interests accounting
treatment, shares of GTE Common Stock and shares of Xxxx Atlantic Common Stock
held by such "affiliates" of GTE or Xxxx Atlantic, as the case may be, shall not
be transferable during the 30 day period prior to the Effective Time, and shares
of Xxxx Atlantic Common Stock issued to, or as of the Effective
50
Time held by, such "affiliates" of GTE and Xxxx Atlantic shall not be
transferable until such time as financial results covering at least 30 days of
combined operations of GTE and Xxxx Atlantic have been published within the
meaning of Section 201.01 of the SEC's Codification of Financial Reporting
Policies, regardless of whether each such "affiliate" has provided the signed
Agreement referred to in Section 7.14 (a), except to the extent permitted by,
and in accordance with, SEC Accounting Series Release 135 and SEC Staff
Accounting Bulletins 65 and 76. Any Xxxx Atlantic Common Stock held by any such
"affiliate" shall not be transferable, regardless of whether such "affiliate"
has provided the applicable signed Agreement referred to in Section 7.14(a), if
such transfer, either alone or in the aggregate with other transfers by
"affiliates", would preclude the ability of the Parties to account for the
transactions contemplated by this Agreement and the Option Agreements as a
pooling of interests. Xxxx Atlantic shall not register the transfer of any
shares of Xxxx Atlantic Common Stock unless such transfer is made in compliance
with the foregoing.
SECTION 7.15 -- BLUE SKY. GTE and Xxxx Atlantic 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 Xxxx Atlantic
Common Stock to be issued in accordance with the provisions of this Agreement.
SECTION 7.16 -- POOLING OF INTERESTS. Each of the Parties will use its
best efforts to (a) cause the transactions contemplated by this Agreement to be
accounted for as a pooling of interests in accordance with GAAP, and such
accounting treatment to be accepted by Xxxx Atlantic's independent certified
public accountants, by the NYSE and by the SEC, respectively, and (b) not take
any action which could reasonably be expected to cause such accounting treatment
not to be obtained; provided that the foregoing shall not apply to any conduct
or the effect of any conduct to obtain all necessary waivers, approvals and
consents, and to avoid any contractual, legal, regulatory or other issues,
impediments or delays, to consummate the transactions contemplated by this
Agreement and the Option Agreements. Nothing in this Agreement shall restrict
the rights of any Party pursuant to the Option Agreements.
SECTION 7.17 -- TAX-FREE REORGANIZATION. (a) Each of the Parties will
use its best efforts to cause the Merger to qualify as a tax-free reorganization
under Section 368 of the Code. (b) Xxxx Atlantic will deliver an Officer's
Certificate substantially in the form of Exhibit 7.17(b)(i) executed as of the
Closing Date and GTE will deliver an Officer's Certificate substantially in the
form of Exhibit 7.17(b)(ii) executed as of the Closing Date.
51
ARTICLE VIII -- CONDITIONS TO MERGER
SECTION 8.1 -- CONDITIONS TO OBLIGATIONS OF EACH PARTY TO EFFECT THE
MERGER. The respective obligations of each Party to effect the Merger shall be
subject to the following conditions:
(a) STOCKHOLDER APPROVAL. Each of the GTE Stockholder Approval and the
Xxxx Atlantic 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 has the effect of (i) making the Merger illegal or otherwise
prohibiting the consummation of the Merger or (ii) creating a Material Adverse
Effect on GTE or Xxxx Atlantic, with or without including its ownership of GTE
and its Subsidiaries after the Effective Time;
(c) HSR ACT; CALIFORNIA PUC. Any waiting period applicable to the
consummation of the Merger under the HSR Act shall have expired or been
terminated and the decision and order of the California Public Utilities
Commission ("CPUC") authorizing the Merger and making any required
determinations under Section 854(a)-(c) of the California Public Utilities Code,
including its determination as to any required allocation of economic benefits,
if any, of the Merger, between shareholders and ratepayers, shall have become
final;
(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 Xxxx Atlantic, with or without including its ownership of GTE
and its Subsidiaries after the Merger, or GTE, 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 reasonably be expected to have a Material
Adverse Effect on either of (A) GTE or (B) Xxxx Atlantic (either with or without
including its ownership of GTE and its Subsidiaries after the Merger);
(e) REGISTRATION STATEMENT EFFECTIVE. The Registration Statement shall
have become effective prior to the mailing by each of GTE and Xxxx Atlantic of
the Joint Proxy
52
Statement to its respective 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;
(g) STOCK EXCHANGE LISTING. The shares of Xxxx Atlantic Common Stock
into which the GTE Common Stock will be converted pursuant to Article II hereof
and the shares of Xxxx Atlantic Common Stock issuable upon the exercise of
options pursuant to Section 2.8 hereof shall have been duly approved for listing
on the NYSE, subject to official notice of issuance;
(h) POOLING. Unless unable to be delivered due to actions taken by the
Parties which constitute mutually agreed commercially reasonable efforts or
commercially reasonable efforts with respect to wireless operations, (i) Xxxx
Atlantic shall have received a letter from PricewaterhouseCoopers L.L.P., dated
as of the Closing Date, to the effect that the transactions contemplated hereby
will qualify for pooling of interests accounting treatment; and (ii) GTE shall
have received a letter from Xxxxxx Xxxxxxxx LLP, dated as of the Closing Date,
to the effect that the transactions contemplated hereby will qualify for pooling
of interests accounting treatment;
(i) CONSENTS UNDER GTE AGREEMENTS. GTE 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 those which the failure to obtain would not,
individually or in the aggregate, have a Material Adverse Effect on Xxxx
Atlantic, including its ownership of GTE and its Subsidiaries after the Merger;
and
(j) CONSENTS UNDER XXXX ATLANTIC AGREEMENTS. Xxxx Atlantic 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 those which the
failure to obtain would not, individually or in the aggregate, have a Material
Adverse Effect on Xxxx Atlantic, including its ownership of GTE and its
Subsidiaries after the Merger.
SECTION 8.2 -- ADDITIONAL CONDITIONS TO OBLIGATIONS OF GTE. The
obligations of GTE to effect the Merger are also subject to the fulfillment of
the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Xxxx Atlantic 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)
53
shall also be true and correct on and as of the Closing Date, except for changes
permitted under Section 6.2 hereof or otherwise contemplated by this Agreement
and the Option Agreements, 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 would reasonably be expected to
result in a Material Adverse Effect on Xxxx Atlantic, either with or without
including its ownership of GTE and its Subsidiaries after the Merger;
(b) AGREEMENTS AND COVENANTS. Xxxx Atlantic and Merger Subsidiary shall
have performed or complied with all agreements and covenants required by this
Agreement to be performed or complied with by them on or before the Effective
Time, provided, however, that for purposes of this Section 8.2 (b) only, such
agreements and covenants shall be deemed to have been complied with unless the
failure or failures of such agreements and covenants to have been complied with
(without regard to materiality qualifiers contained therein), individually or in
the aggregate, results or would reasonably be expected to result in a Material
Adverse Effect on Xxxx Atlantic, either with or without including its ownership
of GTE and its Subsidiaries after the Merger;
(c) CERTIFICATES. GTE shall have received a certificate of an executive
officer of Xxxx Atlantic to the effect set forth in paragraphs (a) and (b)
above;
(d) TAX OPINION. GTE shall have received an opinion of O'Melveny &
Xxxxx LLP, special counsel to GTE, dated as of the Closing Date, in form and
substance reasonably satisfactory to GTE, substantially to the effect that, on
the basis of the facts, representations and assumptions set forth in such
opinion, the Merger constitutes a tax-free reorganization under Section 368 of
the Code and therefore: (A) no gain or loss will be recognized for federal
income tax purposes by Xxxx Atlantic, GTE or Merger Subsidiary as a result of
the formation of Merger Subsidiary and the Merger; and (B) no gain or loss will
be recognized for federal income tax purposes by the stockholders of GTE upon
their exchange of GTE Common Stock solely for Xxxx Atlantic Common Stock
pursuant to the Merger (except with respect to cash received in lieu of a
fractional share interest in Xxxx Atlantic Common Stock). In rendering such
opinion, O'Melveny & Xxxxx LLP may require and rely upon representations and
covenants including representations and covenants substantially in the form of
those contained in the GTE officer's certificate and the Xxxx Atlantic officer's
certificate attached hereto as Exhibit 7.17(b)(ii) and Exhibit 7.17(b)(i),
respectively;
(e) AFFILIATE AGREEMENTS. GTE shall have received the agreements
required by Section 7.14 hereof to be delivered by the Xxxx Atlantic
"affiliates," duly executed by each "affiliate" of Xxxx Atlantic; and
54
(f) BYLAWS AMENDMENT, BOARD OF DIRECTORS. Xxxx Atlantic shall have
taken all such actions as shall be necessary so that (i) the Bylaws Amendment
shall become effective not later than the Effective Time; and (ii) at the
Effective Time, the composition of Xxxx Atlantic's Board shall comply with
Section 7.12 hereof (assuming GTE has designated the GTE Directors as
contemplated by Section 7.12 hereof).
SECTION 8.3 -- ADDITIONAL CONDITIONS TO OBLIGATIONS OF XXXX ATLANTIC.
The obligations of Xxxx Atlantic to effect the Merger are also subject to the
fulfillment of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of GTE 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 or otherwise
contemplated by this Agreement and the Option Agreements, 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 would reasonably be expected to result in a Material Adverse Effect
on GTE or Xxxx Atlantic (only after including its ownership of GTE and its
Subsidiaries after the Merger);
(b) AGREEMENTS AND COVENANTS. GTE shall have performed or complied with
all agreements and covenants required by this Agreement to be performed or
complied with by them on or before the Effective Time, provided, however, that
for purposes of this Section 8.3 (b) only, such agreements and covenants shall
be deemed to have been complied with unless the failure or failures of such
agreements and covenants to have been complied with (without regard to
materiality qualifiers contained therein), individually or in the aggregate,
results or would reasonably be expected to result in a Material Adverse Effect
on GTE;
(c) CERTIFICATES. Xxxx Atlantic shall have received a certificate of an
executive officer of GTE to the effect set forth in paragraphs (a) and (b)
above;
(d) GTE RIGHTS AGREEMENT. The rights issued pursuant to the GTE Rights
Agreement shall not have become non-redeemable, exercisable, distributed or
triggered pursuant to the terms of such Agreement and would not become so upon
consummation of the transactions contemplated hereby;
(e) TAX OPINION. Xxxx Atlantic shall have received an opinion of
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP, special counsel to Xxxx Atlantic,
dated as of the Effective Time, in form and substance reasonably satisfactory to
Xxxx Atlantic, substantially to the effect that,
55
on the basis of the facts, representations and assumptions set forth in such
opinion, the Merger constitutes a tax-free reorganization under Section 368 of
the Code and therefore: (A) no gain or loss will be recognized for federal
income tax purposes by Xxxx Atlantic, GTE or Merger Subsidiary as a result of
the formation of Merger Subsidiary and the Merger; and (B) no gain or loss will
be recognized for federal income tax purposes by the stockholders of Xxxx
Atlantic as a result of the Merger, including the Certificate Amendment. 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 GTE officer's certificate
and the Xxxx Atlantic officer's certificate attached hereto as Exhibits
7.17(b)(ii) and 7.17(b)(i) respectively.
(f) AFFILIATE AGREEMENTS. Xxxx Atlantic shall have received the
agreements required by Section 7.14 hereof to be delivered by the GTE
"affiliates," duly executed by each "affiliate" of GTE.
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 GTE or Xxxx Atlantic:
(a) By mutual written consent of each of GTE and Xxxx Atlantic;
(b) By either GTE or Xxxx Atlantic if the Merger shall not have been
consummated on or before July 26, 1999 (the "Initial Termination Date" and as
such may be extended pursuant to this paragraph, the "Termination Date"),
provided, however, that if on the Termination Date the conditions to the Closing
set forth in Sections 8.1(b)(i), (c) or (d) shall not have been fulfilled, but
all other conditions to the Closing shall be fulfilled or shall be capable of
being fulfilled, then the Termination Date shall be extended to March 31, 2000,
(the "Extended Termination Date"); and provided further that if on the Extended
Termination Date the conditions to the Closing set forth in Sections 8.1(b)(i),
(c) or (d) shall not have been fulfilled, but all other conditions to the
Closing shall be fulfilled or shall be capable of being fulfilled, then the
Termination Date shall be extended to June 30, 2000 (the "Final Termination
Date"), unless within five days prior to the Extended Termination Date any Party
reasonably determines that it is substantially unlikely that the conditions to
the Closing set forth in Sections 8.1(b)(i), (c) and (d) will be fulfilled by
the Final Termination Date and delivers to the other Parties a notice to such
effect. 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;
56
(c) By either GTE or Xxxx Atlantic 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 Agreement and the Option Agreements, and such order,
decree, ruling or other action shall have become final and nonappealable;
(d) (i) by GTE, (A) if Xxxx Atlantic 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 Xxxx Atlantic prior to the
Termination Date and (2) renders any condition under Section 8.1 or 8.2
incapable of being satisfied prior to the Termination Date, or (B) if a
condition under Sections 8.1 or 8.2 to GTE's obligations hereunder cannot be
satisfied prior to the Termination Date;
(ii) by Xxxx Atlantic, (A) if GTE 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 GTE prior to the
Termination Date and (2) renders any condition under Sections 8.1 and 8.3
incapable of being satisfied prior to the Termination Date, or (B) if a
condition under Sections 8.1 or 8.3 to Xxxx Atlantic's obligations hereunder
cannot be satisfied prior to the Termination Date;
(e) By either GTE or Xxxx Atlantic if the Board of Directors of the
other or any committee of the Board of Directors of the other (i) shall fail to
include in the Joint Proxy Statement its recommendation without modification or
qualification that stockholders approve this Agreement and the Merger, in the
case of GTE, or the Stock Issuance and the Certificate Amendment, in the case of
Xxxx Atlantic Stock, (ii) shall withdraw or modify in any adverse manner its
approval or recommendation of this Agreement or the Merger, in the case of GTE,
or the Certificate Amendment or the Stock Issuance in the case of Xxxx Atlantic,
(iii) shall fail to reaffirm such approval or recommendation upon such Party'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 GTE or Xxxx Atlantic if any of the required approvals of
the stockholders of GTE or of Xxxx Atlantic shall fail to have been obtained at
a duly held stockholders meeting of either of such companies, 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 Sections 4.10, 4.16, 5.10,
57
5.16 and 10.3 hereof, and (ii) nothing herein shall relieve any Party from
liability for any willful breach hereof.
(b) If this Agreement (i) is terminated by GTE pursuant to Section
9.1(e) hereof, (ii) could have been (but was not) terminated by GTE pursuant to
Section 9.1(e) hereof and is subsequently terminated by Xxxx Atlantic or GTE
pursuant to Section 9.1(f) because of the failure to obtain the Xxxx Atlantic
Stockholder Approval, (iii)(A) could not have been terminated by GTE pursuant to
Section 9.1(e) hereof but is subsequently terminated by Xxxx Atlantic or GTE
pursuant to Section 9.1(f) because of the failure to obtain the Xxxx Atlantic
Stockholder Approval, (B) prior to the Xxxx Atlantic 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 (as defined in Section 6.3(c) hereof, except that for
the purposes of this Section 9.2(b), the applicable percentage in clause (i) of
such definition shall be fifty percent (50%)) involving Xxxx Atlantic or any of
Xxxx Atlantic's Subsidiaries, and (C) within 12 months after the termination of
this Agreement, Xxxx Atlantic enters into a definitive agreement with any Third
Party with respect to an Alternative Transaction, or (iv) is terminated by GTE
as a result of Xxxx Atlantic's material breach of Section 7.1, Section 7.2(a) or
Section 7.2(b) hereof which, in the case of Section 7.1 and Section 7.2(a) only,
is not cured within 30 days after notice thereof to Xxxx Atlantic, Xxxx Atlantic
shall pay to GTE a termination fee of one billion eight hundred million dollars
($1,800,000,000) (the "GTE Termination Fee").
(c) If this Agreement (i) is terminated by Xxxx Atlantic pursuant to
Section 9.1(e) hereof, (ii) could have been (but was not) terminated by Xxxx
Atlantic pursuant to Section 9.1(e) hereof and is subsequently terminated by GTE
or Xxxx Atlantic pursuant to Section 9.1(f) because of the failure to obtain the
GTE Stockholder Approval, (iii)(A) could not have been terminated by Xxxx
Atlantic pursuant to Section 9.1(e) hereof but is subsequently terminated by GTE
or Xxxx Atlantic pursuant to Section 9.1(f) because of the failure to obtain the
GTE Stockholder Approval, (B) prior to the GTE 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 (as defined in Section 6.3(c) hereof, except that for
the purposes of this Section 9.2(c), the applicable percentage in clause (i) of
such definition shall be fifty percent (50%)) involving GTE or any of GTE's
Subsidiaries, and (C) within 12 months after the termination of this Agreement,
GTE enters into a definitive agreement with any Third Party with respect to an
Alternative Transaction, or (iv) is terminated by Xxxx Atlantic as a result of
GTE's material breach of Section 7.1, Section 7.2(c) or Section 7.2(d) hereof
which, in the case of Section 7.1 and Section 7.2(c) only, is not cured within
30 days after notice
58
thereof to GTE, GTE shall pay to Xxxx Atlantic a termination fee of one billion
eight hundred million dollars ($1,800,000,000) (the "Xxxx Atlantic Termination
Fee").
(d) Each termination fee payable under Sections 9.2(b) and (c) above
shall be payable in cash, payable no later than one business day following the
delivery of notice of termination to the other Party, or, if such fee shall be
payable pursuant to clause (iii) of either of Section 9.2(b) or (c), such fee
shall be payable no later than one business day following the day such Party
enters into the definitive agreement referenced in such clause (iii).
(e) GTE and Xxxx Atlantic agree that the agreements contained in
Sections 9.2(b) and (c) above are an integral part of the transactions
contemplated by this Agreement and the Option Agreements and constitute
liquidated damages and not a penalty. In the event of any dispute as to whether
any fee due under such Sections 9.2(b) and (c) 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. 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 the Merger
Agreement by the stockholders of GTE or Xxxx Atlantic, whichever shall occur
first, no amendment may be made which would (a) alter or change the amount or
kinds of consideration to be received by the holders of GTE Common Stock upon
consummation of the Merger, (b) alter or change any term of the Certificate of
Incorporation of GTE or the Certificate of Incorporation of Xxxx Atlantic
(except for the implementation at the Effective Time of the Certificate
Amendment) or (c) 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 GTE or Xxxx Atlantic. This Agreement may not be
amended except by an instrument in writing signed by 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.
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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 and Sections 2.2, 2.4, 2.5, 2.6, 2.7, 2.8,
2.9, 7.8, 7.9 and 7.12 hereof shall survive the Effective Time indefinitely, (b)
the agreements and representations set forth in Sections 4.10, 4.16, 5.10, 5.16,
7.5 (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 GTE:
GTE Corporation
Xxx Xxxxxxxx Xxxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxx
Executive Vice President-Government
and Regulatory and General Counsel
Telecopy No.: (000) 000-0000
with a copy to:
O'Melveny & Xxxxx LLP
000 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxx, Esq.
Telecopy No.: (000) 000-0000
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(b) if to Xxxx Atlantic:
Xxxx Atlantic Corporation
1095 Avenue of the Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Vice President and General Counsel
Telecopy: (000) 000-0000
with a copy to:
Xxxx Atlantic Network Services, Inc.
0000 Xxxx Xxxxxx, 00X
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
Attention: Assistant General Counsel - Mergers and Acquisitions
Telecopy: (000) 000-0000
and
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxxx Xxxxx Xxxxxx, Esq.
Telecopy No.: (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 Joint Proxy Statement and 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 GTE and Xxxx Atlantic. GTE will pay any real property transfer or similar
Taxes imposed on the stockholders of GTE 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.
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(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.
(c) "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.
(d) "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.
(e) "HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as the same may be amended from time to time.
(f) "knowledge" of any Party shall mean the actual knowledge of the
executive officers of such Party.
(g) "Material Adverse Effect" means any change in or effect on the
business of the referenced corporation or any of its Subsidiaries that is or
will be materially adverse to the business, operations (including the income
statement), properties (including intangible properties), condition (financial
or otherwise), assets, liabilities or regulatory status of such referenced
corporation and its Subsidiaries taken as a whole, but shall not include (I) the
effects of changes that are generally applicable in (A) the telecommunications
industry, (B) the United States economy or (C) the United States securities
markets if, in any of (A), (B) or (C), the effect on GTE or Xxxx Atlantic,
determined without including its ownership of GTE after the Merger, (as the case
may be) and its respective Subsidiaries, taken as a whole, is not materially
disproportionate relative to the effect on the other and its Subsidiaries, taken
as a whole. All references to Material Adverse Effect on Xxxx Atlantic or its
Subsidiaries contained in Article IV, V or VI of this Agreement shall be deemed
to refer solely to Xxxx Atlantic and its Subsidiaries without including its
ownership of GTE and its Subsidiaries after the Merger.
(h) "Material Investment" means (a) as to GTE, any person which GTE
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 $100
million, excluding, however, any person which is a Subsidiary of GTE; and (b) as
to Xxxx Atlantic, any person which Xxxx Atlantic directly or indirectly holds
the stock of, or other equity interest in, provided the lesser
62
of the fair market value or book value of such interest exceeds $100 million,
excluding, however, any Person which is a Subsidiary of Xxxx Atlantic.
(i) "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).
(j) "POR" means the Plan of Reorganization approved by the United States
Court for the District of Columbia on August 5, 1983 and the Agreement
Concerning Contingent Liabilities, Tax Matters and Termination of Certain
Agreements dated as of November 1, 1983, as amended and supplemented.
(k) "Significant Subsidiary" with respect to GTE means any Subsidiary
which on the date of determination is a "significant subsidiary" within the
meaning of Rule 1-02(w) of Regulation S-X promulgated under the Exchange Act
and, with respect to Xxxx Atlantic means any Subsidiary which on the date of
determination is a "significant subsidiary" within the meaning of Rule 1-02(w)
of Regulation S-X promulgated under the Exchange Act.
(l) "Subsidiary", "GTE Subsidiary", or "Xxxx Atlantic Subsidiary" means
any corporation or other legal entity of which GTE or Xxxx Atlantic, as the case
may be (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. For purposes of this Agreement, Grupo Iusacell S.A. de
C.V. shall be deemed to be a Material Investment, and not a Subsidiary, of Xxxx
Atlantic.
SECTION 10.5 -- HEADINGS. The headings contained in this Agreement 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.
SECTION 10.7 -- ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES. This
Agreement, the Nondisclosure Agreement and the Stock Option Agreements
constitute the entire
63
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 7.8 (Indemnification, Directors' and Officers' Insurance) and
Section 7.12 (Post-Merger Xxxx Atlantic Board of Directors), is not intended to
confer upon any person other than GTE, Xxxx Atlantic, 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
operation of law or otherwise.
SECTION 10.9 -- GOVERNING LAW. This Agreement shall be governed by, 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; provided that the Merger
shall be governed by the laws of the State of New York 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 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.
(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 to this Agreement or any other agreement
or document shall include such party's successors and permitted assigns.
(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, GTE, Xxxx Atlantic and Beta Gamma Corporation have
caused this Agreement to be executed as of the date first written above by their
respective officers thereunto duly authorized.
GTE CORPORATION
By: /s/ XXXXXXX X. XXX
------------------------------------------
Name: Xxxxxxx X. Xxx
Title: Chairman and Chief Executive Officer
By: /s/ XXXXXXXX XXXXX
------------------------------------------
Name: Xxxxxxxx Xxxxx
Title: Secretary
XXXX ATLANTIC CORPORATION
By: /s/ XXXX XXXXXXXXXX
------------------------------------------
Name: Xxxx Xxxxxxxxxx
Title: Vice Chairman, President and Chief
Executive Officer
BETA GAMMA CORPORATION
By: /s/ XXXX XXXXXXXXXX
------------------------------------------
Name: Xxxx Xxxxxxxxxx
Title: President and Chief Executive Officer
