EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
DATED AS OF FEBRUARY 14, 2005
AMONG
VERIZON COMMUNICATIONS INC.,
XXX ACQUISITION, LLC
AND
MCI, INC.
LIST OF EXHIBITS
Exhibit Title
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A Form of Affiliate Agreement
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER, dated as of February 14, 2005 (this
"Agreement"), is among VERIZON COMMUNICATIONS INC., a Delaware corporation
("Parent"), XXX ACQUISITION, LLC, a Delaware limited liability company and a
direct, wholly owned subsidiary of Parent ("Merger Sub"), and MCI, INC., a
Delaware corporation (the "Company" and, collectively with Parent and Merger
Sub, the "parties").
RECITALS
WHEREAS, the respective Boards of Directors of the Company, Parent and
Merger Sub have deemed it advisable and in the best interests of their
respective companies and stockholders that the Company and Parent engage in a
business combination;
WHEREAS, in furtherance thereof, the respective Boards of Directors of the
Company, Parent and Merger Sub have approved and declared advisable this
Agreement and the merger of the Company with and into Merger Sub (the "Merger")
in accordance with the applicable provisions of the Delaware General Corporation
Law (the "DGCL"), and the Delaware Limited Liability Company Act (the "LLC Act")
and upon the terms and subject to the conditions set forth in this Agreement;
and
WHEREAS, it is intended that, for U.S. federal income tax purposes, the
Merger (to the extent effected as a merger of the Company with and into Merger
Sub and not pursuant to the alternative merger structure set forth in Section
1.9) shall qualify as a reorganization under Section 368(a) of the Code;
NOW, THEREFORE, in consideration of the foregoing and their respective
representations, warranties, covenants and agreements set forth in this
Agreement, and intending to be legally bound hereby, the parties agree as
follows:
ARTICLE I
THE MERGER; CERTAIN RELATED MATTERS
Section 1.1 The Merger. Upon the terms and subject to the conditions set
forth in this Agreement, at the Effective Time, the Company shall be merged with
and into Merger Sub and the separate corporate existence of the Company shall
thereupon cease. Merger Sub shall be the surviving entity in the Merger (with
respect to all post-Closing periods, the "Surviving Entity"). At the Effective
Time, the effect of the Merger shall be as provided in this Agreement, the
Certificate of Merger and the applicable provisions of the DGCL and the LLC Act.
Without limiting the generality of the foregoing, and
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subject thereto, at the Effective Time, all the property, rights, privileges,
powers and franchises of the Company and Merger Sub shall vest in the Surviving
Entity, and all debts, liabilities and duties of the Company and Merger Sub
shall become the debts, liabilities and duties of the Surviving Entity.
Section 1.2 Closing. The closing of the Merger (the "Closing") shall,
subject to the fulfillment or waiver of the conditions set forth in Article VII,
take place at the offices of Debevoise & Xxxxxxxx LLP, 000 Xxxxx Xxxxxx, Xxx
Xxxx, Xxx Xxxx, at 9:00 a.m., New York City time, on the third Business Day
after all of the conditions set forth in Article VII have been fulfilled or
waived (other than those conditions that by their nature are to be satisfied at
the Closing) in accordance with this Agreement or at such other place and time
and/or on such other date as the Company and Parent may agree in writing (the
"Closing Date").
Section 1.3 Effective Time. Subject to the provisions of this Agreement,
as soon as practicable on the Closing Date, the parties hereto shall file a
certificate of merger as contemplated by the DGCL and the LLC Act (the
"Certificate of Merger"), together with any required related certificates, with
the Secretary of State of the State of Delaware, in such form as required by,
and executed in accordance with, the DGCL and the LLC Act. The Merger shall
become effective at such time as the Certificate of Merger is duly filed with
such Secretary of State on the Closing Date, or at such later time as Parent and
the Company shall agree and specify in the Certificate of Merger. As used
herein, the "Effective Time" shall mean the time at which the Merger shall
become effective.
Section 1.4 Certificate of Formation. The certificate of formation of
Merger Sub, as in effect immediately prior to the Effective Time, shall be the
certificate of formation of the Surviving Entity until thereafter changed or
amended as provided therein or by the LLC Act or applicable Law (the
"Certificate of Formation"), except that the Certificate of Formation shall be
amended to provide that the name of the Surviving Entity shall become MCI, LLC.
Section 1.5 By-Laws. The by-laws (if any) of Merger Sub in effect
immediately prior to the Effective Time shall be the by-laws of the Surviving
Entity (the "By-Laws") until thereafter amended as provided therein or by
applicable Law.
Section 1.6 Directors. The directors of Merger Sub immediately prior to
the Effective Time shall, from and after the Effective Time, be the directors of
the Surviving Entity until their successors have been duly elected or appointed
and qualified or until their earlier death, resignation or removal in accordance
with the Certificate of Incorporation and the By-Laws.
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Section 1.7 Officers. The officers of the Company immediately prior to the
Effective Time shall, from and after the Effective Time, be the officers of the
Surviving Entity until their successors have been duly elected or appointed and
qualified or until their earlier death, resignation or removal in accordance
with the Certificate of Incorporation and the By-Laws.
Section 1.8 Effect on Capital Stock.
(a) At the Effective Time, by virtue of the Merger and without any
action on the part of the holder thereof, each share of Company Common Stock
issued and outstanding immediately prior to the Effective Time (excluding any
Company Restricted Shares and Excluded Shares) shall be converted into the right
to receive (i) 0.4062 (the "Exchange Ratio") validly issued, fully paid and
non-assessable shares of Parent Common Stock (the "Stock Consideration") and
(ii) $1.50 in cash (the "Per Share Cash Amount"), without interest, together
with any cash in lieu of fractional shares of Parent Common Stock to be paid
pursuant to Section 2.5 (such shares and cash, the "Base Merger Consideration").
The Exchange Ratio and Base Merger Consideration shall be subject to adjustment
pursuant to Section 1.10 (as so adjusted, the "Merger Consideration").
(b) As a result of the Merger and without any action on the part of
the holders thereof, at the Effective Time, all shares of Company Common Stock
(other than Company Restricted Shares and Excluded Shares) shall cease to be
outstanding and shall be canceled and retired, and each certificate that
immediately prior to the Effective Time represented any such shares of Company
Common Stock (the "Certificates") shall thereafter represent only the right to
receive the Merger Consideration with respect to the shares of Company Common
Stock (other than Company Restricted Shares and Excluded Shares) formerly
represented thereby, and any dividends or other distributions to which the
holders thereof are entitled pursuant to Section 2.3.
(c) Each Excluded Share at the Effective Time shall, by virtue of
the Merger and without any action on the part of the holder thereof, cease to be
outstanding and shall be canceled and retired and no stock of Parent or other
consideration shall be delivered in exchange therefor.
(d) At the Effective Time, each limited liability company interest
of Merger Sub issued and outstanding immediately prior to the Effective Time
shall continue to be issued and outstanding and shall constitute the only issued
and outstanding interests of the Surviving Entity.
Section 1.9 Alternative Merger Structure. Notwithstanding any other
provision of this Agreement, if (i) either of the conditions specified in
Section 7.4 fails to be duly satisfied or waived or (ii) at any time prior to
the Effective Time, Parent
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reasonably determines in good faith that effecting the Merger as a merger of the
Company into Merger Sub with Merger Sub surviving would result in a material
risk of materially adverse regulatory or other materially adverse consequences,
the transactions contemplated herein shall be effected (subject to other
conditions contained herein) by merging the Company with a Delaware corporation
wholly owned by Parent, with the Company as the surviving corporation (the
"Alternative Merger"). In such event, the conversion of the outstanding Company
securities will occur as provided in this Article, and following the Effective
Time all outstanding stock of the surviving corporation will be owned by Parent.
The other provisions of this Agreement will continue to apply in the event of
the Alternative Merger, mutatis mutandis.
Section 1.10 Adjustment for Specified Included Liabilities at Closing.
(a) Determination of Remaining Specified Included Liabilities
Amount. At such time as either Company or Parent reasonably believes in good
faith that the Closing Date will occur within 120 days, such party may deliver
notice (a "Trigger Notice") to the other party requesting commencement of the
procedure set forth in this Section 1.10 to determine the best estimate of the
amount of cash in U.S. dollars (the "Remaining Specified Included Liabilities
Amount") that will actually be required, from and after the Closing Date, to
satisfy in full all remaining Specified Included Liabilities. Promptly after
delivery of the Trigger Notice, (i) the Company shall deliver to Parent a
schedule setting forth all Specified Included Liabilities and the status thereof
and (ii) the parties will agree on and jointly engage an independent valuation
firm reasonably satisfactory to Parent and the Company to act as arbitrator with
respect to the Bankruptcy Claims (other than any claims relating to Taxes) (the
"Bankruptcy Claims Valuation Firm"), and PricewaterhouseCoopers LLP to act as
arbitrator with respect to any claims related to Taxes (the "Specified Tax
Liabilities Valuation Firm" and, together with the Bankruptcy Claims Valuation
Firm, the "Neutral Valuation Firms"), pursuant to Section 1.10(c) and 1.10(d) in
the event the parties are unable to agree on the Remaining Specified Included
Liabilities Amount; provided that if the parties are unable to agree on a
Bankruptcy Claims Valuation Firm within 30 days of delivery of the Trigger
Notice, then either party may request that the American Arbitration Association
select an independent valuation firm to act as arbitrator and the firm so
selected shall be the Bankruptcy Claims Valuation Firm. If
PricewaterhouseCoopers LLP is unavailable or declines to serve as the Specified
Tax Liabilities Valuation Firm, then either party may request the American
Arbitration Association to select an independent accounting firm to serve as the
Specified Tax Liabilities Valuation Firm, and the firm so selected shall be the
Specified Tax Liabilities Valuation Firm.
(b) Best Efforts. Parent and the Company shall, during the period
following the delivery of the Trigger Notice until such date as all conditions
to Closing under Article VII (other than Section 7.1(f)) are satisfied or
waived, use their best efforts to reach agreement on the Remaining Specified
Included Liabilities Amount, including
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giving full access to all relevant information, with due consideration being
given to privilege issues and techniques for resolving them. If Parent and the
Company agree on the calculation of the Remaining Specified Included Liabilities
Amount, then such Remaining Specified Included Liabilities Amount shall become
final and binding on the parties.
(c) Submission to Neutral Valuation Firms. If Parent and the Company
are unable to agree on the calculation of the Remaining Specified Included
Liabilities Amount within 60 days of the date of the Trigger Notice, the parties
will refer the matter to the Neutral Valuation Firms and will make submissions
to the Neutral Valuation Firms so that the Neutral Valuation Firms are in a
position to make a final determination of the Remaining Specified Included
Liabilities Amount within the period set forth in Section 1.10(d). Parent and
Company shall cooperate and assist the Neutral Valuation Firms in their review
of the Remaining Specified Included Liabilities and the calculation of the
Remaining Specified Included Liabilities Amount, including giving full access to
all relevant information, with due consideration being given to privilege issues
and techniques for resolving them.
(d) Determination by Neutral Valuation Firms. If Parent and the
Company are unable to agree on the calculation of the Remaining Specified
Included Liabilities Amount by such date as all conditions to Closing under
Article VII (other than Section 7.1(f)) are satisfied or waived, each of Parent
and the Company will, at a mutually agreed time within three Business Days
following such date, simultaneously submit to the Neutral Valuation Firms its
final proposal (which proposal shall specify the items as to which the parties
have been able to agree pursuant to Section 1.10(b) and such party's proposal as
to the items in dispute) as to (i) the Remaining Specified Included Liabilities
Amount (to the extent relating to non-Tax Bankruptcy Claims) (the "Bankruptcy
Claims Proposals") and (ii) the Remaining Specified Included Liabilities Amount
(to the extent relating to Tax claims) (the "Specified Tax Liabilities
Proposals"), provided, however, that the Specified Tax Liabilities Proposals
shall not be translated into U.S. dollars. Within 10 Business Days of such final
submissions, (x) the Bankruptcy Claims Valuation Firm will select one of the two
Bankruptcy Claims Proposals as being most representative of the Remaining
Specified Included Liabilities Amount (to the extent relating to Bankruptcy
Claims) and (y) the Specified Tax Liabilities Valuation Firm will select one of
the two Specified Tax Liabilities Proposals as being most representative of the
Remaining Specified Included Liabilities Amount (to the extent relating to Tax
claims), and the amounts so selected shall be final and binding on the parties.
In making such determination, the Neutral Valuation Firms shall consider only
those items or amounts as to which the parties have been unable to agree
pursuant to Section 1.10(b).
(e) Paid Specified Included Liabilities Amount. Five days prior to
the anticipated Closing Date, the Company shall provide to Parent a schedule of
the Paid
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Specified Included Liabilities Amount and detailing each item comprising the
Paid Specified Included Liabilities Amount, together with reasonable supporting
documentation.
(f) Postponement of Closing. If applicable, the Closing Date shall
be postponed to the Business Day following the final determination of the
Remaining Specified Included Liabilities Amount pursuant to the procedures set
forth in Section 1.10(d). In addition, if the Closing Date does not occur within
a period of 90 days from the date on which the Final Remaining Specified
Included Liabilities Amount was determined, the Specified Included Liabilities
Amount shall be redetermined pursuant to the procedures set forth in this
Section 1.10.
(g) Adjustments to the Merger Consideration. Upon determination of
the Specified Included Liabilities Amount, the Base Merger Consideration shall
be adjusted as follows: If the Specified Included Liabilities Amount is greater
than $1,725,000,000, then the Per Share Cash Amount shall be reduced by an
amount equal to the quotient obtained by dividing (x) the difference between the
Specified Included Liabilities Amount and $1,725,000,000 by (y) the sum of (A)
the number of shares of Company Common Stock issued and outstanding immediately
prior to the Effective Time (excluding any Excluded Shares other than Dissenting
Shares) and (B) the number of shares reserved for issuance pursuant to the
Chapter 11 Plan that are unissued immediately prior to the Effective Time (which
number shall not exceed 5,375,000 minus the number of shares so issued after the
date hereof) provided that if, pursuant to the foregoing adjustment, the Per
Share Cash Amount would otherwise be less than zero (the amount by which the Per
Share Cash Amount would otherwise be less than zero, the "Incremental Amount"),
the Per Share Cash Amount shall be reduced to zero, and there shall be a further
adjustment made to the Exchange Ratio such that the Exchange Ratio shall be
equal to the product of (x) 0.4062 and (y) the quotient obtained by dividing (1)
the Aggregate Base Merger Consideration minus the Aggregate Incremental Amount
by (2) the Aggregate Base Merger Consideration. For the avoidance of doubt, if
the Specified Included Liabilities Amount is $1,725,000,000 or less, there shall
be no adjustment made to the Base Merger Consideration.
For the purposes hereof, the "Aggregate Base Merger Consideration" shall
equal $14.75 multiplied by the sum of (x) the number of shares of Company Common
Stock issued and outstanding immediately prior to the Effective Time (excluding
any Excluded Shares other than Dissenting Shares) and (y) the number of shares
reserved for issuance pursuant to the Chapter 11 Plan that are unissued
immediately prior to the Effective Time (which number shall not exceed 5,375,000
minus the number of shares so issued after the date hereof).
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Section 1.11 Treatment of Company Restricted Shares and Other Equity-Based
Awards.
(a) Restricted Shares. At the Effective Time, by virtue of the
Merger and without any action on the part of the holder thereof, each then
outstanding Company Restricted Share shall be converted into (i) that number of
restricted shares of Parent Common Stock ("Parent Restricted Shares") equal to
the Exchange Ratio, as adjusted pursuant to Section 1.10(g), plus (ii) a cash
payment to the holder of any Company Restricted Share of an amount equal to the
Per Share Cash Amount. Notwithstanding the fact that part of each holder's
Company Restricted Shares will be settled in cash as provided in the immediately
preceding sentence, each Parent Restricted Share issued pursuant to this Section
1.11(a) will have, and be subject to, the same terms and conditions as in effect
immediately prior to the Effective Time with respect to the corresponding
Company Restricted Shares (and shall bear a legend containing the same
restrictions on transferability).
(b) Other Equity-Based Awards. As of the Effective Time, by virtue
of the Merger and without any action on the part of the holder thereof, each
then outstanding equity-based award (other than Company Restricted Shares or
rights under the ESPP) providing for a cash or stock payment measured by the
value of Company Common Stock (an "Other Company Equity-Based Award") shall be
deemed to refer to (or be measured by) (i) the number of shares of Parent Common
Stock equal to the result determined by multiplying such number of shares of
Company Common Stock covered by the Other Company Equity-Based Award by the
Exchange Ratio as adjusted pursuant to Section 1.10(g), plus (ii) a cash payment
to the holder of any Other Company Equity-Based Award in an amount equal to the
product of the Per Share Cash Amount and the number of shares of Company Common
Stock covered by such Other Company Equity-Based Award. Notwithstanding the fact
that part of each holder's Other Company Equity-Based Award will be settled in
cash as provided in the immediately preceding sentence, the rights of any person
with respect to Parent Common Stock under each Other Company Equity-Based Award
shall be on the same terms, conditions and restrictions, if any, as were
applicable to such Other Company Equity-Based Award immediately prior to the
Effective Time.
(c) ESPP. The Company shall establish a date on or before December
31, 2005 as the final purchase date under the terms of the Company's Employee
Stock Purchase Plan (the "ESPP"), and shall cause all accumulated cash balances
standing to the credit of each participant under the ESPP on such final purchase
date to be applied to purchase the number of shares of Company Common Stock that
could be purchased with such amounts on such date pursuant to the ESPP. The
Company shall take any and all actions necessary or appropriate to cause the
ESPP to terminate on such final purchase date, after giving effect to the
purchases of Company Common Stock contemplated by this Section 1.11(c), and
shall not thereafter offer any plan, program or arrangement for
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the purchase of shares of Company Common Stock. Each participant who would
otherwise have been entitled to receive a fractional share of Company Common
Stock, after giving effect to the purchase of Company Common Stock contemplated
by this Section 1.11(c), shall receive, in lieu thereof, a cash disbursement
(without interest) of such participant's contributions credited to his or her
account and not applied to such purchase.
Section 1.12 Certain Adjustments. If, between the date of this Agreement
and the Effective Time, the outstanding Parent Common Stock or Company Common
Stock shall have been changed into a different number of shares or different
class by reason of any reclassification, recapitalization, stock split,
split-up, combination or exchange of shares, or a stock dividend or dividend
payable in any other securities shall be declared with a record date within such
period, or any similar event shall have occurred, the Exchange Ratio and the Per
Share Cash Amount shall be appropriately adjusted to provide to the holders of
Company Common Stock the same economic effect as contemplated by this Agreement
prior to such event.
Section 1.13 Appraisal Rights. No holder of Dissenting Shares (a
"Dissenting Stockholder") shall be entitled to any Merger Consideration or
dividends or other distributions pursuant to Section 2.3 in respect of such
Dissenting Shares unless and until such holder shall have failed to perfect or
shall have effectively withdrawn or lost such holder's right to seek appraisal
of its Dissenting Shares under the DGCL, and any Dissenting Stockholder shall be
entitled to receive only the payment provided by Section 262 of the DGCL with
respect to the Dissenting Shares owned by such Dissenting Stockholder. If any
Person who otherwise would be deemed a Dissenting Stockholder shall have failed
properly to perfect or shall have effectively withdrawn or lost the right to
seek appraisal with respect to any Dissenting Shares, such Dissenting Shares
shall thereupon be treated as though such Dissenting Shares had been converted
into the Merger Consideration pursuant to Section 1.8. The Company shall give
Parent (i) prompt notice of any written demands for appraisal, attempted
withdrawals of such demands, and any other instruments served pursuant to
applicable Law received by the Company relating to stockholders' rights of
appraisal and (ii) the opportunity to direct all negotiations and proceedings
with respect to demand for appraisal under the DGCL. The Company shall not,
except with the prior written consent of Parent, voluntarily make any payment
with respect to any demands for appraisals of Dissenting Shares, offer to settle
or settle any such demands or approve any withdrawal of any such demands.
Section 1.14 Associated Rights. References in Article I and Article II of
this Agreement to Company Common Stock shall include, unless the context
requires otherwise, the associated Company Rights.
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ARTICLE II
EXCHANGE OF CERTIFICATES
Section 2.1 Exchange Fund. Prior to the Effective Time, Parent shall
appoint a commercial bank or trust company reasonably acceptable to the Company
to act as exchange agent hereunder for the purpose of exchanging Certificates
for the Merger Consideration (the "Exchange Agent"). At or prior to the
Effective Time, Parent shall deposit with the Exchange Agent, in trust for the
benefit of holders of shares of Company Common Stock, certificates representing
the Parent Common Stock issuable pursuant to Section 1.8 in exchange for
outstanding shares of Company Common Stock and an amount of cash representing
the aggregate cash consideration payable pursuant to Section 1.8. Parent agrees
to make available, or to cause the Surviving Entity to make available, to the
Exchange Agent from time to time as needed, cash sufficient to make cash
payments for the cash consideration pursuant to Section 1.8, in lieu of
fractional shares pursuant to Section 2.5 and any dividends and other
distributions pursuant to Section 2.3. Any cash and certificates of Parent
Common Stock deposited with the Exchange Agent shall hereinafter be referred to
as the "Exchange Fund."
Section 2.2 Exchange Procedures. Promptly after the Effective Time, the
Surviving Entity shall cause the Exchange Agent to mail to each holder of record
of one or more Certificates (a) a letter of transmittal that shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon proper delivery of the Certificates to the Exchange Agent, which
letter shall be in customary form and have such other provisions as Parent may
reasonably specify and which letter shall be reasonably acceptable to the
Company prior to the Effective Time and (b) instructions for effecting the
surrender of such Certificates in exchange for the Merger Consideration. Upon
surrender of a Certificate to the Exchange Agent together with such letter of
transmittal, duly executed and completed in accordance with the instructions
thereto, and such other documents as may reasonably be required by the Exchange
Agent, the holder of such Certificate shall be entitled to receive in exchange
therefor (i) one or more shares of Parent Common Stock which shall be in
uncertificated book-entry form unless a physical certificate is requested and
which shall represent, in the aggregate, the whole number of shares that such
holder has the right to receive pursuant to Section 1.8 (after taking into
account all shares of Company Common Stock then held by such holder) and (ii) a
check in the amount equal to any cash that such holder has the right to receive
pursuant to the provisions of Section 1.8 and this Article II, consisting of the
cash consideration pursuant to Section 1.8, cash in lieu of any fractional
shares of Parent Common Stock, as the case may be, pursuant to Section 2.5 and
dividends and other distributions pursuant to Section 2.3. No interest will be
paid or will accrue on any cash payable pursuant to Section 1.8, Section 2.3 or
Section 2.5. In the event of a transfer of ownership of Company Common Stock
that is not registered in the transfer records of the Company, one or more
shares of Parent Common Stock evidencing, in the aggregate, the
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proper number of shares of Parent Common Stock and a check in the proper amount
of any cash consideration pursuant to Section 1.8, cash in lieu of any
fractional shares of Parent Common Stock pursuant to Section 2.5 and any
dividends or other distributions to which such holder is entitled pursuant to
Section 2.3, may be issued with respect to such Company Common Stock, as the
case may be, to such a transferee if the Certificate representing such shares of
Company Common Stock is presented to the Exchange Agent, accompanied by all
documents required to evidence and effect such transfer and to evidence that any
applicable stock transfer taxes have been paid.
Section 2.3 Distributions with Respect to Unexchanged Shares. All shares
of Parent Common Stock to be issued pursuant to the Merger (which shall exclude
shares issued pursuant to the Bankruptcy Court Order) shall be deemed issued and
outstanding as of the Effective Time. No dividends or other distributions
declared or made in respect of the Parent Common Stock shall be paid to the
holder of any Certificate until the holder of such Certificate shall surrender
such Certificate in accordance with this Article II. Subject to applicable Law,
following surrender of any such Certificate, there shall be paid to such holder
of shares of Parent Common Stock issuable in exchange therefor, without
interest, (a) promptly after the time of surrender the number of whole shares of
Parent Common Stock issuable in exchange therefor pursuant to this Article II,
together with the cash consideration payable pursuant to Section 1.8, cash in
lieu of a fractional share of Parent Common Stock to which such holder is
entitled pursuant to Section 2.5 and the amount of dividends or other
distributions with a record date after the Effective Time theretofore paid with
respect to such whole shares of Parent Common Stock and (b) at the appropriate
payment date the amount of dividends or other distributions with a record date
after the Effective Time but prior to such surrender and a payment date
subsequent to such surrender payable with respect to such shares of Parent
Common Stock.
Section 2.4 No Further Ownership Rights in Company Common Stock. All
shares of Parent Common Stock issued and cash paid upon conversion of shares of
Company Common Stock in accordance with the terms of this Article II (including
any cash paid pursuant to Section 2.3 or Section 2.5) shall be deemed to have
been issued or paid in full satisfaction of all rights pertaining to the shares
of Company Common Stock previously represented by such Certificates.
Section 2.5 No Fractional Shares of Parent Common Stock.
(a) No certificates or scrip or shares of Parent Common Stock
representing fractional shares of Parent Common Stock or book-entry credit of
the same shall be issued upon the surrender for exchange of Certificates and
such fractional share interests will not entitle the owner thereof to vote or to
have any rights of a stockholder of Parent.
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(b) Notwithstanding any other provision of this Agreement, each
holder of shares of Company Common Stock exchanged pursuant to the Merger who
would otherwise have been entitled to receive a fractional share of Parent
Common Stock (after taking into account all Certificates delivered by such
holder) shall receive, in lieu thereof, cash (without interest) in an amount
equal to the product of (i) such fractional part of a share of Parent Common
Stock multiplied by (ii) the closing price for a share of Parent Common Stock on
the New York Stock Exchange, Inc. ("NYSE") Composite Transactions Tape on the
Closing Date.
(c) As promptly as practicable after the determination of the amount
of cash, if any, to be paid to holders of fractional interests, the Exchange
Agent shall so notify Parent, and Parent shall deposit or cause the Surviving
Entity to deposit such amount with the Exchange Agent and shall cause the
Exchange Agent to forward payments to such holders of fractional interests
subject to and in accordance with the terms hereof.
Section 2.6 Termination of Exchange Fund. Any portion of the Exchange Fund
that remains undistributed to the holders of Certificates for six months after
the Effective Time shall be delivered to Parent or otherwise on the instruction
of Parent, and any holders of the Certificates who have not theretofore complied
with this Article II shall thereafter look only to Parent for the Merger
Consideration with respect to the shares of Company Common Stock formerly
represented thereby to which such holders are entitled pursuant to Section 1.8
and Section 2.3, cash in lieu of fractional shares of Parent Common Stock to
which such holders are entitled pursuant to Section 2.5 and any dividends or
distributions with respect to shares of Parent Common Stock to which such
holders are entitled pursuant to Section 2.3, the cash consideration to which
such holders are entitled pursuant to Section 1.8. Any such portion of the
Exchange Fund remaining unclaimed by holders of shares of Company Common Stock
five years after the Effective Time (or such earlier date immediately prior to
such time as such amounts would otherwise escheat to or become property of any
Governmental Entity) shall, to the extent permitted by applicable Law, become
the property of the Surviving Entity free and clear of any claims or interest of
any Person previously entitled thereto.
Section 2.7 No Liability. None of Parent, Merger Sub, the Company, the
Surviving Entity or the Exchange Agent shall be liable to any Person in respect
of any Merger Consideration from the Exchange Fund delivered to a public
official or Governmental Entity pursuant to any applicable abandoned property,
escheat or similar Law.
Section 2.8 Investment of the Exchange Fund. The Exchange Agent shall
invest any cash included in the Exchange Fund as directed by Parent on a daily
basis; provided that no such gain or loss thereon shall affect the amounts
payable to the
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stockholders of the Company pursuant to Article I or this Article II. Any
interest and other income resulting from such investments shall promptly be paid
to Parent.
Section 2.9 Lost Certificates. If any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the Person
claiming such Certificate to be lost, stolen or destroyed and, if required by
the Surviving Entity, the posting by such Person of a bond in such reasonable
amount as the Surviving Entity may direct as indemnity against any claim that
may be made against it with respect to such Certificate, the Exchange Agent
shall deliver in exchange for such lost, stolen or destroyed Certificate the
applicable Merger Consideration with respect to the shares of Company Common
Stock formerly represented thereby, any cash in lieu of fractional shares of
Parent Common Stock to which such holders are entitled pursuant to Section 2.5
and any dividends and distributions with respect to shares of Parent Common
Stock to which such holders are entitled pursuant to Section 2.3.
Section 2.10 Withholding Rights. Each of the Surviving Entity and Parent
shall be entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Agreement to any holder of shares of Company Common
Stock, Company Restricted Shares or any other equity rights in the Company such
amounts as it is required to deduct and withhold with respect to the making of
such payment under the Code and the rules and regulations promulgated
thereunder, or any provision of state, local or non-U.S. Law and shall further
be entitled to sell Parent Common Stock otherwise payable pursuant to this
Agreement to satisfy any such withholding requirement. To the extent that
amounts are so withheld by the Surviving Entity or Parent, as the case may be,
such withheld amounts shall be treated for all purposes of this Agreement as
having been paid to the holder of the shares of Company Common Stock in respect
of which such deduction and withholding was made by the Surviving Entity or
Parent, as the case may be.
Section 2.11 Further Assurances. After the Effective Time, the officers
and directors of the Surviving Entity will be authorized to execute and deliver,
in the name and on behalf of the Company or Merger Sub, any deeds, bills of
sale, assignments or assurances and to take and do, in the name and on behalf of
the Company or Merger Sub, any other actions and things to vest, perfect or
confirm of record or otherwise in the Surviving Entity any and all right, title
and interest in, to and under any of the rights, properties or assets acquired
or to be acquired by the Surviving Entity as a result of, or in connection with,
the Merger.
Section 2.12 Stock Transfer Books. The stock transfer books of the Company
shall be closed immediately upon the Effective Time and there shall be no
further registration of transfers of shares of Company Common Stock thereafter
on the records of the Company. At or after the Effective Time, any Certificates
presented to the Exchange Agent or Parent for any reason shall be converted into
the right to receive the Merger Consideration with respect to the shares of
Company Common Stock formerly
12
represented thereby (including any cash in lieu of fractional shares of Parent
Common Stock to which the holders thereof are entitled to pursuant to Section
2.5 and any dividends or other distributions to which the holders thereof are
entitled pursuant to Section 2.3).
Section 2.13 Affiliates. Notwithstanding anything to the contrary herein,
to the fullest extent permitted by Law, no certificates representing shares of
Parent Common Stock or cash shall be delivered to a Person who may be deemed an
"affiliate" of the Company in accordance with Section 6.13 hereof for purposes
of Rule 145 under the Securities Act, until such Person has executed and
delivered an Affiliate Agreement to Parent.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as otherwise disclosed to Parent in a letter (the "Company
Disclosure Letter") delivered to it by the Company prior to the execution of
this Agreement (with specific reference to the representations and warranties in
this Article III to which the information in such letter relates, subject to
Section 9.3(b)) or as set forth in the Company SEC Documents filed prior to the
date hereof (excluding any disclosures included in any such Company SEC Document
that are predictive or forward-looking in nature), the Company represents and
warrants to Parent and Merger Sub as follows:
Section 3.1 Organization. The Company is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Delaware
and has all requisite corporate power and authority to own, lease and operate
its properties and assets and to carry on its business as now being conducted.
The Company delivered or has made available to Parent and Merger Sub true,
correct and complete copies of its certificate of incorporation and by-laws, as
amended and in effect on the date of this Agreement.
Section 3.2 Subsidiaries.
(a) Exhibit 21.1 to the Company's Annual Report on Form 10-K for the
year ended December 31, 2003 includes all the Subsidiaries of the Company
(individually, a "Company Subsidiary" and collectively, the "Company
Subsidiaries"), which as of the date thereof were "Significant Subsidiaries" (as
defined in Rule 1-02 of Regulation S-X of the SEC). Each Company Subsidiary is a
corporation, limited liability company or partnership, as the case may be, duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization, as the case may be, and has
all requisite corporate, limited liability company or partnership power and
authority, as the case may be, to own, lease and operate its properties and
assets and
13
to carry on its business as now being conducted, except where the failure to be
so organized, validly existing, qualified or in good standing, or to have such
power or authority, would not, individually or in the aggregate, reasonably be
expected to have a Company Material Adverse Effect. The Company has made
available to Parent true, correct and complete copies of the certificate of
incorporation, the by-laws, and all other organizational documents of each
Company Subsidiary, as amended and in effect on the date of this Agreement.
(b) Except as set forth in Section 3.2(b) of the Company Disclosure
Letter or in Exhibit 21.1 to the Company's Annual Report on Form 10-K for the
year ended December 31, 2003, the Company is, directly or indirectly, the record
and beneficial owner of all of the outstanding shares of capital stock or other
equity interests of each of the Significant Subsidiaries, free and clear of any
Liens. All of such shares and other equity interests so owned by the Company are
validly issued, fully paid and nonassessable (and no such shares have been
issued in violation of any preemptive or similar rights).
Section 3.3 Capitalization.
(a) As of the date of this Agreement, the authorized capital stock
of the Company consists of 3,000,000,000 shares of Company Common Stock.
(b) At the close of business on February 11, 2005, (i) 321,422,248
shares of Company Common Stock were issued and outstanding and (ii) no shares of
Company Common Stock were held in treasury by the Company.
(c) The Company has delivered or made available to Parent a complete
and correct copy of the Rights Agreement as in effect on the date hereof.
(d) Section 3.3(d) of the Company Disclosure Letter contains a
schedule as of February 9, 2005 setting forth the aggregate number of shares of
Company Common Stock relating to outstanding awards of Company Restricted Shares
and Other Company Equity-Based Awards. As soon as practicable (but not later
than 20 Business Days) after the date hereof, the Company shall provide Parent
with a copy of the form of agreement related to each such award. Each of the
Company's equity compensation plans (the "Company Stock Plans"), are set forth
in Section 3.3(d) of the Company Disclosure Letter. As of February 11, 2005,
5,005,144 shares of Company Common Stock were reserved for issuance pursuant to
the Chapter 11 Plan. Except as set forth above, at the close of business on
February 11, 2005 no shares of capital stock of the Company were issued,
reserved for issuance or outstanding. All issued and outstanding shares of
Company Common Stock are duly authorized, validly issued, fully paid and
nonassessable.
14
(e) There are no preemptive or similar rights on the part of any
holder of any class of securities of the Company or any Company Subsidiary.
Neither the Company nor any Company Subsidiary has outstanding any bonds,
debentures, notes or other obligations the holders of which have the right to
vote (or which are convertible into or exercisable for securities having the
right to vote) with the stockholders of the Company or any such Company
Subsidiary on any matter submitted to shareholders or a separate class of
holders of capital stock. Except as set forth in Sections 3.3(d) or 3.3(e) of
the Company Disclosure Letter and other than the rights to purchase Company
Common Stock outstanding under the terms of the ESPP, as of the date of this
Agreement, there are no options, warrants, calls, rights, convertible or
exchangeable securities, "phantom" stock rights, stock appreciation rights,
stock-based performance units, commitments, contracts, arrangements or
undertakings of any kind to which the Company or any of the Company Subsidiaries
is a party or by which any of them is bound (i) obligating the Company or any of
the Company Subsidiaries to issue, deliver, sell or transfer or repurchase,
redeem or otherwise acquire, or cause to be issued, delivered, sold or
transferred or repurchased, redeemed or otherwise acquired, any shares of
capital stock of the Company or any Company Subsidiary, any additional shares of
capital stock of, or other equity interests in, or any security convertible or
exercisable for or exchangeable into any capital stock of, or other equity
interest in, the Company or any Company Subsidiary, (ii) obligating the Company
or any Company Subsidiary to issue, grant, extend or enter into any such option,
warrant, call, right, security, commitment, contract, arrangement or undertaking
or (iii) that give any Person the right to receive any economic benefit or right
similar to or derived from the economic benefits and rights accruing to holders
of capital stock of, or other equity interests in, the Company or any Company
Subsidiary. As of the date of this Agreement, there are no outstanding
contractual obligations of the Company or any of the Company Subsidiaries to
repurchase, redeem or otherwise acquire any shares of capital stock of, or other
equity interests in, the Company or any of the Company Subsidiaries. There are
no proxies, voting trusts or other agreements or understandings to which the
Company is a party or is bound with respect to the voting of the capital stock
of, or other equity interests in, the Company.
Section 3.4 Authorization.
(a) The Company has all requisite corporate power and authority to
execute and deliver this Agreement, to perform its obligations hereunder and,
subject to receipt of approval by the holders of a majority of the outstanding
shares of Common Stock entitled to vote in accordance with the DGCL and the
Company's Constituent Documents (the "Company Stockholder Approval"), to
consummate the transactions contemplated hereby. The execution, delivery and
performance of this Agreement and the consummation of the Merger and the other
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action, and no other corporate proceedings on the part of
the Company are necessary for it to authorize this Agreement
15
or to consummate the transactions contemplated hereby, except for the adoption
of this Agreement and the transactions contemplated hereby by Company
Stockholder Approval. This Agreement has been duly and validly executed and
delivered by the Company and, assuming due authorization, execution and delivery
by Parent and Merger Sub, is a legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms, subject
to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors' rights
and to general equity principles.
(b) The Board of Directors of the Company, at a meeting duly called
and held, duly and unanimously adopted resolutions (i) approving this Agreement,
the Merger and the other transactions contemplated by this Agreement, (ii)
determining that the terms of the Merger and the other transactions contemplated
by this Agreement are fair to and in the best interests of the Company and its
stockholders, (iii) recommending that the Company's stockholders adopt this
Agreement and (iv) declaring that this Agreement is advisable.
Section 3.5 Takeover Statute, No Restrictions on the Merger.
(a) Except as set forth in Section 3.5(a) of the Company Disclosure
Letter, no state "fair price," "moratorium," "control share acquisition" or
similar anti-takeover statute is applicable to the Merger or the other
transactions contemplated by this Agreement.
(b) The Board of Directors has taken all necessary action to render
the restrictions on business combinations contained in Section 203 of the DGCL
hereby inapplicable to this Agreement and the transactions contemplated by this
Agreement.
Section 3.6 Rights Agreement. The Board of Directors of the Company has
taken all necessary action to render the Rights Agreement inapplicable to the
Merger and the transactions contemplated hereby, and neither the execution and
delivery of this Agreement nor the consummation of any of the transactions
contemplated hereby will result in the occurrence of a Distribution Date, as
defined in the Rights Agreement, or otherwise cause the Company Rights to become
exercisable by the holders thereof.
Section 3.7 Consents and Approvals; No Violations.
(a) The execution and delivery of this Agreement by the Company does
not and the consummation by the Company of the transactions contemplated hereby
will not (i) conflict with any provisions of the Company's Constituent Documents
or, except as, individually or in the aggregate, would not reasonably be
expected to have a Company Material Adverse Effect, the certificate of
incorporation or by-laws or any other organizational documents of any Company
Subsidiary; (ii) violate any Law or
16
Order (assuming compliance with the matters set forth in Section 3.7(b)); (iii)
result in any violation or default or loss of a benefit under, or permit the
acceleration or termination of any obligation under, any mortgage, indenture,
lease, agreement or other instrument, permit, concession, grant, franchise or
license; (iv) result in the creation or imposition of any Lien upon any
properties or assets of the Company or any Company Subsidiary; or (v) cause the
suspension or revocation of any permit, license, governmental authorization,
consent or approval necessary for the Company or any Company Subsidiary to
conduct its business as currently conducted, except, in the case of clauses
(ii), (iii) (iv) and (v), as, individually or in the aggregate, has not had and
would not reasonably be expected to result in a Company Material Adverse Effect
and as would not reasonably be expected to materially delay or impair the
consummation of the Merger.
(b) No consent, approval, order or authorization of, or declaration,
registration or filing with, or notice to any Governmental Entity is required to
be made or obtained by the Company or any Company Subsidiary in connection with
the execution or delivery of this Agreement by the Company or the consummation
by the Company of the transactions contemplated hereby, except for (i)
compliance by the Company with the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act
of 1976, as amended ("HSR Act"), and such foreign antitrust and competition law
requirements described in Section 3.7(b)(i) of the Company Disclosure Letter;
(ii) the filing of the Certificate of Merger with the Secretary of State of the
State of Delaware in accordance with the DGCL, (iii) the filings with the
Securities and Exchange Commission ("SEC") of (A) the Proxy Statement and
Prospectus in accordance with Regulation 14A promulgated under the Exchange Act,
(B) the registration statement on Form S-4 promulgated under the Securities Act
and (C) such reports under and such other compliance with the Exchange Act and
the Securities Act and the rules and regulations thereunder as may be required
in connection with this Agreement and the transactions contemplated hereby, (iv)
with or to the Federal Communications Commission (the "FCC"), (v) with or to
those State public service or public utility commissions or similar State
regulatory bodies set forth in Section 3.7(b)(v) of the Company Disclosure
Letter ("State Commissions"); (vi) with or to those foreign Governmental
Entities regulating competition and telecommunications businesses or the use of
radio spectrum or regulating or limiting investment set forth in Section
3.7(b)(vi) of the Company Disclosure Letter; (vii) with or to those State
agencies or departments or local governments that have issued competitive access
provider or other telecommunications franchises or any other similar
authorizations; and (viii) any consent, approval, order or authorization of, or
declaration, registration or filing with, or notice to any Governmental Entity
(other than any of the foregoing addressed in clauses (i) through (vii) above),
the failure to make or obtain would not, individually or in the aggregate,
reasonably be expected to have a Company Material Adverse Effect.
17
(c) The representations contained in Section 3.7(a) and 3.7(b) are
true without taking into account the possibility of effecting the transactions
under this Agreement in the form of the Alternative Merger.
(d) Effecting the transactions contemplated hereby in the form of
the Merger will not be materially more burdensome to Parent and its Subsidiaries
taken as a whole, or the Company and its Subsidiaries taken as a whole as
compared to effecting such transactions in the form of the Alternative Merger.
Section 3.8 SEC Reports; Company Financial Statements.
(a) The Company and each Company Subsidiary has filed or furnished
all reports, schedules, forms, statements and other documents required to be
filed or furnished by it with or to the SEC since April 20, 2004 (the "Company
SEC Documents"). As of its respective date, each of the Company SEC Documents,
including any financial statements or schedules included or incorporated by
reference therein, complied when filed or furnished and as amended in all
material respects with the requirements of the Exchange Act or the Securities
Act and the rules and regulations of the SEC promulgated thereunder applicable
to such Company SEC Documents, and did not, and any Company SEC Documents filed
with the SEC subsequent to the date hereof will not, contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or incorporated by reference therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
(b) The Company Financial Statements have been derived from the
accounting books and records of the Company and the Company Subsidiaries and
have been prepared in accordance with United States generally accepted
accounting principles ("GAAP") applied on a consistent basis throughout the
periods presented, except as otherwise noted therein and subject, in the case of
the unaudited interim financial statements, to the absence of notes. The
consolidated balance sheets (including the related notes) included in the
Company Financial Statements present fairly in all material respects the
financial position of the Company and the Company Subsidiaries as at the
respective dates thereof, and the consolidated statements of income,
consolidated statements of shareholders' equity and consolidated statements of
cash flows (in each case including the related notes) included in such Company
Financial Statements present fairly in all material respects the results of
operations, shareholders' equity and cash flows of the Company and the Company
Subsidiaries for the respective periods indicated, in each case subject to
normal year-end adjustments that have not been and are not expected to be
material in amount.
Section 3.9 Absence of Undisclosed Liabilities. The Company and the
Company Subsidiaries do not have any liabilities or obligations, known or
unknown,
18
contingent or otherwise, except (a) Specified Included Liabilities, (b)
liabilities and obligations in the respective amounts reflected on or reserved
against in the consolidated balance sheet of the Company and the Company
Subsidiaries included in the Company Financial Statements (or readily apparent
in the notes thereto), (c) liabilities and obligations incurred in a
commercially reasonable manner consistent with industry practice since the date
of such balance sheet, and (d) liabilities and obligations that would not,
individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect.
Section 3.10 Form S-4; Proxy Statement/Prospectus. None of the information
supplied or to be supplied by the Company for inclusion or incorporation by
reference in (i) the registration statement on Form S-4 to be filed with the SEC
by Parent in connection with the issuance of shares of Parent Common Stock in
the Merger (the "Form S-4") will, at the time the Form S-4 is filed with the SEC
or at any time it is supplemented or amended or at the time it becomes effective
under the Securities 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 light of the circumstances under which they are
made, not misleading, or (ii) the Proxy Statement/Prospectus will, at the date
mailed to stockholders of the Company and at the time of the Company Stockholder
Meeting to be held in connection with the Merger, contain any untrue statement
of a fact or omit to state any fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they are made, not misleading.
Section 3.11 Absence of Certain Changes. Except for liabilities incurred
in connection with this Agreement or the transactions contemplated hereby, for
the period beginning September 30, 2004 until the date hereof, (i) the Company
and the Company Subsidiaries have conducted their respective businesses only in
a commercially reasonable manner consistent with industry practice; (ii) there
has not been any declaration, setting aside or payment of any dividend or other
distribution in cash, stock or property in respect of the Company's capital
stock, other than regular quarterly dividends and the $0.40 per share dividend
declared on February 11, 2005; (iii) there has not been any action taken by the
Company or any of the Company Subsidiaries that, if taken during the period from
the date of this Agreement through the Effective Time, would constitute a
material breach of Section 5.1; and (iv) except as required by GAAP, there has
not been any change by the Company in its accounting principles, practices or
methods. Since September 30, 2004 until the date hereof, there have not been any
changes, circumstances or events that, individually and in the aggregate, have
had or would reasonably be expected to result in a Company Material Adverse
Effect.
Section 3.12 Litigation. Except as set forth in Section 3.12 of the
Company Disclosure Letter, there is no suit, action, proceeding, claim, review
or investigation (whether at law or in equity, before or by any Governmental
Entity or before any
19
arbitrator) pending, affecting or, to the knowledge of the Company, threatened
in writing against the Company or any of the Company Subsidiaries, or their
respective properties or rights that, individually and in the aggregate for any
such matters premised on common legal theories and similar facts, would
reasonably be expected to result in a Company Material Adverse Effect. Except as
set forth in Section 3.12 of the Company Disclosure Letter, there is no Order of
any Governmental Entity or arbitrator outstanding against the Company or any of
the Company Subsidiaries which would, individually or in the aggregate,
reasonably be expected to result in a Company Material Adverse Effect.
Section 3.13 Compliance with Laws.
(a) Each of the Company and the Company Subsidiaries is, and since
April 20, 2004, has been in compliance in all material respects with applicable
Laws and, to the knowledge of the Company, is not under investigation with
respect to, and has not been threatened to be charged with or given notice of,
any material violation of any Law, in each case except for such failures to be
in compliance, such investigations or such violations as would not, individually
or in the aggregate, reasonably be expected to result in a Company Material
Adverse Effect.
(b) Since December 31, 2003 (or such later date, if the Company only
became subject to the applicable provisions, rules and regulations subsequent to
December 31, 2003), the principal executive officer and the principal financial
officer of the Company have complied in all material respects with (i) the
applicable provisions of the Xxxxxxxx-Xxxxx Act of 2002 and the related rules
and regulations promulgated under such Act (the "Xxxxxxxx-Xxxxx Act") and under
the Exchange Act and (ii) the applicable listing and corporate governance rules
and regulations of Nasdaq. The principal executive officer and the principal
financial officer of the Company have made all certifications required by
Sections 302 and 906 of the Xxxxxxxx-Xxxxx Act with respect to each Company SEC
Document filed by the Company. For purposes of the preceding sentence,
"principal executive officer" and "principal financial officer" shall have the
meanings given to such terms in the Xxxxxxxx-Xxxxx Act. Except as permitted by
the Exchange Act, including Sections 13(k)(2) and (3), since the enactment of
the Xxxxxxxx-Xxxxx Act, neither the Company nor any of its Affiliates has
directly or indirectly extended or maintained credit, arranged for the extension
of credit, renewed an extension of credit or materially modified an extension of
credit in the form of personal loans to any executive officer or director (or
equivalent thereof) of the Company or any Company Subsidiaries.
(c) The Company has (i) implemented disclosure controls and
procedures (as defined in Rule 13a-15(e) of the Exchange Act) to ensure that
material information relating to the Company is made known to the management of
the Company by others within those entities, and (ii) has disclosed, based on
its most recent evaluation, to the Company's outside auditors and the audit
committee of the Board of Directors of
20
the Company (A) all significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting (as defined in
Rule 13a-15(f) of the Exchange Act) that are reasonably likely to adversely
affect the Company's ability to record, process, summarize and report financial
data and (B) any fraud, whether or not material, that involves management or
other employees who have a significant role in the Company's internal control
over financial reporting.
(d) The Company has prepared a plan to comply with the requirements
of Section 404 of the Xxxxxxxx-Xxxxx Act on the date by which they must comply
with such requirements. The Company is not aware of any reason it will not
comply with the requirements of Section 404 of the Xxxxxxxx-Xxxxx Act on the
applicable compliance date.
(e) The Company has delivered to Parent copies of any written
notifications it has received to date since December 31, 2003 of a (i)
"significant deficiency" or (ii) "material weakness" in the Company's internal
controls. For purposes of this Agreement, the terms "significant deficiency" and
"material weakness" shall have the meanings assigned to them in the Statements
of Auditing Standards No. 60, as in effect on the date hereof.
Section 3.14 Taxes.
(a) The Company and each Company Subsidiary have (i) duly and timely
filed with the appropriate Governmental Entities all Tax Returns required to be
filed by it in respect of any material Taxes, which Tax Returns were true,
correct and complete in all material respects, (ii) duly and timely paid in full
all Taxes shown as due on such Tax Returns, (iii) duly and timely paid in full
or withheld, or established adequate reserves in accordance with GAAP for, all
material Taxes that are due and payable by it, (iv) established reserves in
accordance with GAAP that are adequate for the payment of all material Taxes not
yet due and payable with respect to the results of operations of the Company and
each Company Subsidiary through the date of this Agreement and (v) complied in
all material respects with all laws applicable to the withholding and payment
over of Taxes and has timely withheld and paid over to, or, where amounts have
not been so withheld, established an adequate reserve under GAAP for the payment
to, the respective proper Governmental Entities all material amounts required to
be so withheld and paid over.
(b) There (i) is no deficiency, claim, audit, suit, proceeding,
request for information or investigation now pending, outstanding or threatened
against or with respect to the Company or any Company Subsidiary in respect of
any material Taxes or material Tax Returns, and (ii) are no requests for rulings
or determinations in respect of any material Taxes or material Tax Returns
pending between the Company or any Company Subsidiary and any authority
responsible for such Taxes or Tax Returns.
21
(c) The federal income Tax Returns of the Company and the Company
Subsidiaries have been examined by the Internal Revenue Service (or the
applicable statutes of limitation for the assessment of federal income Taxes for
such periods have expired) for all periods through and including December 31,
1991, and no material deficiencies were asserted as a result of such
examinations that have not been resolved and fully paid.
(d) Neither the Company nor any Company Subsidiary has any material
liability as a result of being a party to any material tax sharing, tax
indemnity or other agreement or arrangement with any entity not included in the
most recent Company Financial Statements.
(e) None of the Company or any of the Company Subsidiaries has any
liability for material Taxes as a result of having been a member of any
affiliated group within the meaning of Section 1504(a) of the Code, or any
similar affiliated or consolidated group for tax purposes under state, local or
foreign law (other than a group the common parent of which is the Company), or
has any liability for the Taxes of any Person (other than the Company and the
Company Subsidiaries) under Treasury Regulations Section 1.1502-6 or any similar
provision of state, local or foreign law, or as a transferee or successor, by
contract or otherwise.
(f) There are no material adjustments under Section 481 of the Code
(or similar or analogous provision of state, local or foreign law) for income
tax purposes applicable to or required to be made by the Company or any of the
Company Subsidiaries as a result of changes in methods of accounting or other
events occurring on or before the date hereof.
(g) There are no Liens on any of the assets or properties of the
Company or any Company Subsidiary that arose in connection with any failure (or
alleged failure) to pay any material Tax.
(h) Neither the Company nor any Company Subsidiary has participated
in a "listed transaction" within the meaning of Treasury Regulations
Section1.6011-4(b)(2) that has not been properly disclosed pursuant to such
Regulation on a Tax Return previously made available to Parent.
Section 3.15 ESPP. No officer, employee, director, consultant, or other
service provider to the Company or any of the Company Subsidiaries has any
outstanding options to purchase any capital stock of the Company or any of the
Company Subsidiaries, other than the rights to purchase Company Common Stock
outstanding under the terms of the Company's ESPP.
22
Section 3.16 Sufficiency of Real Property, etc. The Owned Real Property
and the Leased Real Property (collectively, the "Real Property") constitute all
the fee and leasehold interests in real property required for the conduct of the
Business as currently conducted. Except in any such case as would not,
individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect, all buildings, structures, fixtures and improvements
included within the Real Property (the "Improvements") are in good repair and
operating condition, subject only to ordinary wear and tear, and are adequate
and suitable for the purposes for which they are presently being used or held
for use, and to the knowledge of the Company, there are no facts or conditions
affecting any of the Improvements that, in the aggregate, would reasonably be
expected to interfere with the current use, occupancy or operation thereof.
Section 3.17 Right-of-Way Agreements and Network Facilities.
(a) Except in any such case as would not, individually or in the
aggregate, reasonably be expected to have a Company Material Adverse Effect, (i)
each right-of-way agreement, license agreement or other agreement permitting or
requiring the Company or any of its Subsidiaries to lay, build, operate,
maintain or place cable, wires, conduits or other equipment and facilities over
land, underwater or underground (each, a "Right-of-Way Agreement") is valid,
legally binding, enforceable and in full force and effect, and none of the
Company or any of its Subsidiaries is in breach of or default under any
Right-of-Way Agreement, (ii) no event has occurred which, with notice or lapse
of time, would constitute a breach or default by any of the Company or its
Subsidiaries or permit termination, modification or acceleration by any third
party thereunder and (iii) no third party has repudiated or has the right to
terminate or repudiate any Right-of-Way Agreement.
(b) To the knowledge of the Company, the Company is not in violation
of any Laws which, individually or in combination with any others, would
materially and adversely affect the ability of the Company or any of its
Subsidiaries to use any of the rights associated with the Right-of-Way
Agreements, taken as a whole, in the manner and scope in which such rights are
now being used.
(c) Except in any such case as would not, individually or in the
aggregate, reasonably be expected to have a Company Material Adverse Effect:
(i) All Owned Network Facilities and Leased Network Facilities: (x)
are in good working order and condition ("Good Condition") individually
and in combination; (y) are, individually and in combination, operated,
installed, and maintained by the Company, the Company Subsidiaries, or
their contractors in a manner that is in compliance with (a) generally
accepted industry standards for the United States telecommunications and
foreign telecommunications industries (the latter with respect to Owned
Network Facilities and Leased Network
23
Facilities outside the United States) (together "Industry Standards"), (b)
performance requirements in service agreements with customers of Company
and its Subsidiaries ("Customer Requirements"), and (c) all Laws, and (z)
comply, individually and in combination, with applicable performance
standards. The Company and the Company Subsidiaries will maintain or cause
Owned Network Facilities and Leased Network Facilities, individually and
in combination, to be maintained in Good Condition and in compliance with
Performance Standards, Industry Standards, Customer Requirements, and all
Laws through the Closing Date.
(ii) The Company owns, free of liens and other encumbrances, other
than Permitted Liens, all right, title, and interest in Owned Network
Facilities and will maintain the same through the Closing Date. No third
Person can revoke or otherwise encumber or interfere with such right,
title, and interest.
(iii) (x) Each Network Facility Agreement is valid, legally binding,
enforceable and in full force and effect, and none of the Company or any
of the Company Subsidiaries is in breach of or default under any Network
Facility Agreement, (y) no event has occurred which, with notice or lapse
of time, would constitute a breach or default by any of the Company or the
Company Subsidiaries or permit termination, revocation, other interference
with performance of, modification or acceleration by any third party of
any Network Facility Agreement, and (z) no third Person has repudiated,
revoked, terminated, or otherwise interfered with performance of or has
the right to terminate, repudiate, revoke, or otherwise interfere with the
performance of any Network Facility Agreement.
Section 3.18 Brokers. No Persons other than Xxxxxxxxx & Co., LLC
("Xxxxxxxxx"), Lazard, Freres & Co. LLC ("Lazard") and X. X. Xxxxxx Securities
Inc. ("JPMorgan," and collectively with Xxxxxxxxx and Lazard, the "Company
Financial Advisors") are entitled to any brokerage, financial advisory, finder's
or similar fee or commission payable by any party hereto in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Company or any Company Subsidiary. The Company has furnished to
Parent and Merger Sub a true, correct and complete copy of each agreement
between the Company, any Company Subsidiary and each Company Financial Advisor
relating to the Merger and the other transactions contemplated by this
Agreement.
Section 3.19 Employee Benefit Plans and Related Matters; ERISA.
(a) As soon as practicable (but not later than 20 Business Days)
after the date hereof, the Company shall provide Parent with a schedule that
sets forth a complete and correct list of the Company Benefit Plans. With
respect to each such
24
Company Benefit Plan, on or before the date such schedule is provided, the
Company shall provide to Parent a complete and correct copy of such Company
Benefit Plan, if written, or a description of such Company Benefit Plan if not
written, and to the extent applicable, (i) all trust agreements, insurance
contracts or other funding arrangements, (ii) the most recent actuarial and
trust report for both ERISA funding and financial statement purposes, (iii) the
most recent Form 5500 with all attachments required to have been filed with the
IRS or the Department of Labor or any similar report filed with any comparable
governmental authority in any non-U.S. jurisdiction having jurisdiction over any
Company Benefit Plan and all schedules thereto, (iv) the most recent IRS
determination letter, (v) all current summary plan descriptions, (vi) all
material communications received from or sent to the IRS, the Pension Benefit
Guaranty Corporation or the Department of Labor, (vii) the most recent actuarial
study of any pension, disability, post-employment life or medical benefits
provided under any such Company Benefit Plan, (viii) all current employee
handbooks and manuals, (ix) statements or other communications regarding
withdrawal or other multiemployer plan liabilities (or similar liabilities
pertaining to any non-U.S. employee benefit plan sponsored by the Company or any
Company Subsidiary, if any), (x) all amendments and modifications to any such
Company Benefit Plan or related document and (xi) in the case of any such
Company Benefit Plan that is maintained primarily for the benefit of employees
whose employment is principally outside the United States, information that is
substantially comparable (taking into account differences arising from
differences in applicable law and practices) to the information required to be
provided in the foregoing subclauses of this Section 3.19(a).
(b) Qualification. Each Company Benefit Plan intended to be
qualified under section 401(a) of the Code, and the trust (if any) forming a
part thereof, has received a favorable determination letter from the IRS, and no
event has occurred or circumstance exists since the date of such determination
that would adversely affect such qualification. To the knowledge of the Company,
each Company Benefit Plan that is maintained outside of the United States meets
the conditions to qualify for tax exempt status, if applicable, or for such
other favorable classification available in respect of such Company Benefit Plan
under applicable Law. All amendments and actions required to bring each Company
Benefit Plan into material conformity with the applicable provisions of ERISA,
the Code and other applicable Law have been made or taken, except to the extent
such amendments or actions are not required by Law to be made or taken until
after the Closing Date. Each Company Benefit Plan has been operated in all
material respects in accordance with applicable Law.
(c) Liability. There has been no event or circumstance that has
resulted in any material liability to the Company or any of the Company
Subsidiaries under or pursuant to Title I or IV of ERISA, the penalty, excise
Tax or joint and several liability provisions of the Code relating to employee
benefit plans or any applicable provision of Law in any jurisdiction outside of
the United States. There has not been any
25
event or circumstance that could reasonably be expected to result in any
material liability (other than for the payment of benefits in a commercially
reasonable manner consistent with industry practice) in respect of the Company
Benefit Plans. Except as is otherwise reflected in the Financial Statements,
there are no "unfunded benefits liabilities" in respect of any Company Benefit
Plan that is a defined benefit or similar type plan.
(d) Acceleration or Increases in Compensation. There is no contract,
agreement, plan or arrangement to which the Company or any of the Company
Subsidiaries is a party covering any employee, former employee, officer,
director, shareholder or contract worker of the Company or any of the Company
Subsidiaries, which, individually or collectively, could give rise to the
payment of any material amount that would not be deductible pursuant to Section
280G of the Code or would otherwise result in the acceleration of payment of any
benefits or a material increase in the amount of benefits (including, without
limitation, any indemnity or redundancy pay) payable, whether pursuant to the
terms of any such Company Benefit Plan, at Law, by contract or otherwise, the
entering into, or the consummation of the transactions contemplated by, this
Agreement.
(e) Independent Contractors. The Company and each of the Company
Subsidiaries has properly classified all individuals (including but not limited
to independent contractors and leased employees) under applicable Law, except
where failure to properly classify such person would not result in material
employment or benefit liability to the Company or the Company Subsidiaries. Any
person (other than the non-employee members of the Company's board of directors)
providing services to the Company or any of the Company Subsidiaries who has not
been classified as an employee is not eligible to participate in any Company
Benefit Plan and is not entitled to receive any benefits or other compensation
under or pursuant to any such Company Benefit Plan in respect of such
non-employee service.
Section 3.20 Employees, Labor Matters. As soon as practicable (but not
later than 20 Business Days) after the date hereof, the Company shall provide
Parent with a schedule that sets forth a complete and correct list of each
collective bargaining agreement to which any of the Company or any of the
Company Subsidiaries is party or by which any such entity may be bound. Since
April 20, 2004, there has not occurred nor, to the knowledge of the Company has
there been threatened, any material strike, slowdown, picketing, work stoppage,
concerted refusal to work overtime or other similar labor activity or organizing
campaign with respect to any employees of the Company or any of the Company
Subsidiaries. There are no material labor disputes currently subject to any
grievance procedure, arbitration or litigation and there is no representation
petition pending or, to the knowledge of the Company, threatened with respect to
any employee of the Company or any of the Company Subsidiaries.
26
Section 3.21 Intellectual Property Rights. Except as would not,
individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect:
(a) The Company and the Company Subsidiaries are the exclusive
owners of all Owned Intellectual Property that is issued as a patent, the
subject of a patent application, registered or subject to an application for
registration, free and clear of any Liens other than Permitted Liens. The Owned
Intellectual Property, together with the Intellectual Property used pursuant to
the Intellectual Property Licenses, constitutes all of the Intellectual Property
necessary to the conduct of the Business as currently conducted. Immediately
after the Effective Time, the Company and the Company Subsidiaries shall own or
have licensed to them all the Company Intellectual Property, in each case free
from Liens other than Permitted Liens, on the same terms and conditions as in
effect prior to the Effective Time. "Owned Intellectual Property" means all
material Intellectual Property owned by the Company or any of the Company
Subsidiaries.
(b) To the knowledge of the Company, the conduct of the Business
does not infringe or otherwise conflict with the rights of any Person in respect
of any Intellectual Property. To the knowledge of the Company, none of the
Company Intellectual Property is being infringed or otherwise used or being made
available for use by any Person without a license or permission from the
Company. None of the Company Intellectual Property is subject to any outstanding
Order by or with any court, tribunal, arbitrator or other Governmental Entity.
(c) The Company or one of the Company Subsidiaries has taken all
actions reasonably necessary to ensure full ownership (including by assignment
from employees and from other Persons performing services for the Company or any
Company Subsidiary), protection and enforceability of the Owned Intellectual
Property under any applicable Law (including making and maintaining in full
force and effect all necessary filings, registrations and issuances). Each of
the Company and each Company Subsidiary has taken all actions reasonably
necessary to maintain the secrecy of all non-public Intellectual Property,
including Trade Secrets, used in the Business (including requiring the execution
of valid and enforceable confidentiality agreements by employees or any other
Person to whom such non-public Intellectual Property is made available). To the
knowledge of the Company, none of the Company or any Company Subsidiary is using
or enforcing any Owned Intellectual Property in a manner that would reasonably
be expected to result in the cancellation or unenforceability of such Owned
Intellectual Property or Trade Secret.
Section 3.22 Contracts.
(a) Except as listed in Section 3.22(a) of the Company Disclosure
Letter, and except for Company Benefit Plans, neither the Company nor any
Company Subsidiary is a party to or bound by, as of the date hereof:
27
(i) any agreement relating to Indebtedness (other than agreements
among direct or indirect wholly owned Company Subsidiaries) in excess of
$10,000,000;
(ii) any joint venture, partnership, limited liability company or
other similar agreements or arrangements relating to the formation,
creation, operation, management or control of any partnership or joint
venture material to the Company or any of its Subsidiaries in which the
Company or any Company Subsidiary owns any interest valued at more than
$10,000,000 without regard to percentage voting or economic interest
(unless pursuant to such agreement or arrangement the Company and/or the
Company Subsidiaries, as the case may be, do not have a future funding
obligation likely to require funding of more than $10,000,000 in the
aggregate);
(iii) any agreement or series of related agreements, including any
option agreement, relating to the acquisition or disposition of any
material business or material real property (whether by merger, sale of
stock, sale of assets or otherwise);
(iv) any material agreement other than an agreement with respect to
compensation or similar arrangements not involving a director of the
Company or one of the officers of the Company for purposes of Section 16
of the Exchange Act and any agreement entered into in a commercially
reasonable manner consistent with industry practice with (A) any Person
directly or indirectly owning, controlling or holding with power to vote,
5% or more of the outstanding voting securities of the Company or any
Company Subsidiary, (B) any Person 5% or more of the outstanding voting
securities of which are directly or indirectly owned, controlled or held
with power to vote by the Company or any Company Subsidiary or (C) any
current or former director or officer of the Company or any Company
Subsidiary;
(v) any agreement (including any exclusivity agreement) that
purports to limit or restrict in any material respect either the type of
business in which the Company or the Company Subsidiaries (or, after the
Effective Time, Parent or its Subsidiaries) may engage or the manner or
locations in which any of them may so engage in any business including any
covenant not to compete or could require the disposition of any material
assets or line of business of the Company or the Company Subsidiaries;
(vi) any sales, distribution, agency or other similar agreement
providing for the sale by the Company or any Company Subsidiary of
materials, supplies, goods, services, equipment or other assets that are
material to the
28
Company and the Company Subsidiaries taken as a whole and involving
payments to the Company in excess of $17,500,000 annually;
(vii) any agreement relating to any material interest rate, currency
or commodity derivatives or hedging transaction;
(viii) any agreement (including keepwell agreement) under which (A)
any Person (other than the Company or a Company Subsidiary) has directly
or indirectly guaranteed any liabilities or obligations of the Company or
any Company Subsidiary or (B) the Company or any Company Subsidiary has
directly or indirectly guaranteed liabilities or obligations of any other
Person (other than the Company or a Company Subsidiary) (in each case
other than endorsements for the purpose of collection in a commercially
reasonable manner consistent with industry practice), unless such
guarantor obligation is less than $10,000,000;
(ix) any material "take-or-pay" agreements; or
(x) any agreement the termination or breach of which or the failure
to obtain consent in respect of is likely to have a Company Material
Adverse Effect.
(b) The agreements, commitments, arrangements and plans listed or
required to be listed in Section 3.22(a) of the Company Disclosure Letter are
referred to herein as the "Company Contracts." Each Company Contract is a valid
and binding agreement of the Company or a Company Subsidiary, as the case may
be, and is in full force and effect, and none of the Company, any Company
Subsidiary or, to the knowledge of the Company, any other party thereto is in
default or breach in any material respect under the terms of any such Company
Contract. True, correct and complete copies of (i) each such Company Contract
(including all modifications and amendments thereto and waivers thereunder) and
(ii) all form contracts, agreements or instruments used in and material to the
Business have been made available to Parent.
Section 3.23 Environmental Laws and Regulations. Except as disclosed in
Section 3.23 of the Company Disclosure Letter or as would not, individually or
in the aggregate, reasonably be expected to have a Company Material Adverse
Effect:
(a) The Company and each Company Subsidiary has complied and is in
compliance in all material respects with all applicable Environmental Laws and
has obtained and is in compliance in all material respects with all
Environmental Permits.
(b) No notice of violation, notification of liability, demand,
request for information, citation, summons or order has been received by the
Company or any Company Subsidiary, no complaint has been filed, no penalty or
fine has been assessed, and no investigation, action, claim, suit or proceeding
is pending or, to the knowledge of
29
the Company, threatened by any Person involving the Company or any Company
Subsidiary relating to or arising out of any Environmental Law.
(c) No Hazardous Substances are or were located and no disposal or
Releases of Hazardous Substances have occurred at, on, above, under or from any
properties currently or, to the knowledge of the Company at the time of the
cessation of such ownership, lease, operation or use, formerly owned, leased,
operated or used by the Company, any Company Subsidiary or any predecessors in
interest that, in each case, has resulted in or would reasonably be expected to
result in any material cost, liability or obligation of the Company or any
Company Subsidiary under any Environmental Law.
(d) Neither the Company nor any Company Subsidiary, nor, to the
knowledge of the Company, any other Person, has caused or taken any action that
could reasonably be expected to result in any material liability or obligation
relating to (i) the environmental conditions at, on, above, under, or about any
properties or assets currently or formerly owned, leased, operated or used by
the Company or any Company Subsidiary or any of their respective predecessors in
interest, or (ii) the past or present use, management, handling, transport,
treatment, generation, storage, disposal, Release or threatened Release of
Hazardous Substances.
(e) The Company has provided to Parent all material environmental
site assessments, audits, investigations and studies in the possession, custody
or control of the Company or any Company Subsidiary relating to properties or
assets currently or formerly owned, leased, operated or used by the Company or
any Company Subsidiary.
(f) Neither the Company nor any Company Subsidiary has been in
businesses other than those related to the provision of telecommunication
services that would reasonably be expected to present environmental issues of a
materially different scope or magnitude than those presented in the provision of
telecommunication services. Without limiting the generality of the foregoing,
neither the Company nor any Company Subsidiary has operated or currently
operates: (i) any manufacturing facilities; (ii) any facilities that are or have
been permitted under the Resource Conservation and Recovery Act; or (iii) any
business that manages the hazardous wastes of any unrelated party. The
representations contained in this Section 3.23(f) shall not deemed to be
breached unless the operation or ownership of such other business or businesses
has resulted in any material cost, liability or obligation of the Company or any
Company Subsidiary under any Environmental Law.
Section 3.24 Insurance Coverage. The Company and the Company Subsidiaries
maintain policies of insurance in such amounts and against such risks as are
customary in the industries in which the Company and the Company Subsidiaries
operate. Except as would not reasonably be expected to have a Company Material
Adverse Effect, all such insurance policies are in full force and effect and
will not in any way be affected by, or
30
terminate or lapse by reason of, this Agreement or the consummation of any of
the transactions contemplated hereby.
Section 3.25 Consent Decrees. Section 3.25 of the Company Disclosure
Letter sets forth a list of all material consent decrees to which the Company
and the Company Subsidiaries are subject and any material voluntary agreements
with any state or federal agency that impose any continuing duties on the
Company, including any additional reporting or monitoring requirements.
Section 3.26 Foreign Corrupt Practices and International Trade Sanctions.
Neither the Company, nor any Company Subsidiaries, nor any of their respective
directors, officers, agents, employees or any other Persons acting on their
behalf has, in connection with the operation of their respective businesses, (i)
used any corporate or other funds for unlawful contributions, payments, gifts or
entertainment, or made any unlawful expenditures relating to political activity
to government officials, candidates or members of political parties or
organizations, or established or maintained any unlawful or unrecorded funds in
violation of Section 104 of the Foreign Corrupt Practices Act of 1977, as
amended, or any other similar applicable foreign, Federal or state Law, (ii)
paid, accepted or received any unlawful contributions, payments, expenditures or
gifts, or (iii) violated or operated in noncompliance with any export
restrictions, anti-boycott regulations, embargo regulations or other applicable
domestic or foreign Laws, in each case, except as is not, individually or in the
aggregate, reasonably likely to have a Company Material Adverse Effect.
Section 3.27 Compliance with Governance Requirements. The Company is in
compliance in all material respects with the permanent injunction entered by the
United States District Court for the Southern District of New York against the
Company's predecessor company on November 26, 2002 and such court's related June
11, 2003 and December 17, 2003 orders.
Section 3.28 Opinions of Financial Advisors. The Company has received
opinions from Xxxxxxxxx, Lazard and JPMorgan, dated as of February 13, 2005, to
the effect that, as of the date of such opinions and subject to the procedures
followed, and the qualifications and limitations set forth therein, the Merger
Consideration (without giving effect to any adjustment pursuant to Section
1.10), the Special Cash Dividend and the $0.40 per share cash dividend declared
by the Board of Directors of the Company on February 11, 2005, taken together,
are fair, from a financial point of view to the holders of shares of Company
Common Stock.
31
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Except as otherwise disclosed to the Company in a letter (the "Parent
Disclosure Letter") delivered to it by Parent and Merger Sub prior to the
execution of this Agreement (with specific reference to the representations and
warranties in this Article IV to which the information in such letter relates)
or as set forth in the Parent SEC Documents filed prior to the date hereof
(excluding any disclosures included in any such Parent SEC Document that are
predictive or forward-looking in nature), Parent and Merger Sub represent and
warrant to the Company as follows:
Section 4.1 Organization. Each of Parent and Merger Sub is duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Each of Parent and Merger Sub have all requisite corporate power and authority
to own, lease and operate its properties and assets and to carry on its business
as currently conducted.
Section 4.2 Capitalization.
(a) Parent owns all right, title and interest in and to all the
outstanding membership interests of Merger Sub free and clear of any Liens.
(b) As of the date of this Agreement, the authorized capital stock
of Parent consists of 4,250,000,000 shares of Parent Common Stock and
250,000,000 shares of preferred stock, par value $ 0.10 per share ("Parent
Preferred Stock"). At the close of business on February 11, 2005, (i)
2,774,865,381 shares of Parent Common Stock were issued and outstanding, (ii) no
shares of Parent Preferred Stock were issued and outstanding, (iii) 5,623,033
shares of Parent Common Stock were held in treasury by Parent, and (iv)
200,000,000 shares of Parent Common Stock were reserved for issuance pursuant to
Parent's stock option plans. Except as set forth above, as of February 11, 2005,
no shares of capital stock of Parent were issued, reserved for issuance or
outstanding. All issued and outstanding shares of Parent Common Stock and Parent
Preferred Stock are, and all shares of Parent Common Stock that may be issued
pursuant to the exercise of outstanding options will be, when issued in
accordance with the terms thereof, duly authorized, validly issued, fully paid
and nonassessable and subject to no preemptive or similar rights.
(c) There are no preemptive or similar rights on the part of any
holder of any class of securities of the Parent or any of its Significant
Subsidiaries. Neither the Parent nor any of its Significant Subsidiaries has
outstanding any bonds, debentures, notes or other obligations the holders of
which have the right to vote (or which are convertible into or exercisable for
securities having the right to vote) with the stockholders of the Parent or any
such Significant Subsidiary on any matter submitted to
32
shareholders or a separate class of holders of capital stock. Except as set
forth in Section 4.2(c) of the Parent Disclosure Letter, as of the date of this
Agreement, there are no options, warrants, calls, rights, convertible or
exchangeable securities, "phantom" stock rights, stock appreciation rights,
stock-based performance units, commitments, contracts, arrangements or
undertakings of any kind to which the Parent or any of the Significant
Subsidiaries is a party or by which any of them is bound (i) obligating the
Parent or any of the Significant Subsidiaries to issue, deliver, sell or
transfer or repurchase, redeem or otherwise acquire, or cause to be issued,
delivered, sold or transferred or repurchased, redeemed or otherwise acquired,
any shares of the capital stock of the Parent or any Significant Subsidiary, any
additional shares of capital stock of, or other equity interests in, or any
security convertible or exercisable for or exchangeable into any capital stock
of, or other equity interest in, the Parent or any Significant Subsidiary, (ii)
obligating the Parent or any Significant Subsidiary to issue, grant, extend or
enter into any such option, warrant, call, right, security, commitment,
contract, arrangement or undertaking or (iii) that give any Person the right to
receive any economic benefit or right similar to or derived from the economic
benefits and rights accruing to holders of capital stock of, or other equity
interests in, the Parent or any Significant Subsidiary. As of the date of this
Agreement, there are no outstanding contractual obligations of the Parent or any
of the Significant Subsidiaries to repurchase, redeem or otherwise acquire any
shares of capital stock of, or other equity interests in, the Parent or any of
the Significant Subsidiaries.
Section 4.3 Authorization. Parent and Merger Sub have all requisite
corporate and limited liability company power and authority to execute and
deliver this Agreement and to perform its obligations hereunder and, to
consummate the transactions contemplated hereby. The execution, delivery and
performance of this Agreement and the consummation of the Merger and the other
transactions contemplated hereby have been duly and validly authorized by all
necessary actions of Parent and Merger Sub, and no other corporate or limited
liability company proceedings on the part of Parent or Merger Sub, as the case
may be, are necessary for Parent or Merger Sub to authorize this Agreement and
to consummate the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by each of Parent and Merger Sub and,
assuming due authorization, execution and delivery by the Company, is a legal,
valid and binding obligation of each of Parent and Merger Sub, enforceable
against each of Parent and Merger Sub in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors' rights
and to general equity principles.
Section 4.4 Consents and Approvals; No Violations.
(a) The execution and delivery of this Agreement by Parent and
Merger Sub do not and the consummation by Parent and Merger Sub of the
transactions contemplated hereby will not (i) conflict with any provision of the
certificate of
33
incorporation or by-laws or any other organizational documents of Parent or
Merger Sub, (ii) violate any Law or Order (assuming compliance with the matters
set forth in Section 4.4(b)); (iii) result in any violation of or default or
loss of a benefit under, or permit the acceleration or termination of any
obligation under, any mortgage, indenture, lease, agreement or other instrument,
permit, concession, grant, franchise, license or result in the creation or
imposition of any Lien upon any properties or assets of the Parent or any Parent
Subsidiary; or (iv) cause the suspension or revocation of any permit, license,
governmental authorization, consent or approval necessary for each of Parent and
Merger Sub to conduct its business as currently conducted, except, in the case
of clauses (ii) or (iii), for such violations that, in the aggregate, have not
had and would not reasonably be expected to result in a Parent Material Adverse
Effect and as would not reasonably be expected to materially delay or impair the
consummation of the Merger.
(b) No consent, approval, order or authorization of, or declaration,
registration or filing with, or notice to any Governmental Entity is required to
be made or obtained by Parent or Merger Sub in connection with the execution and
delivery of this Agreement by Parent and Merger Sub or the consummation by
Parent of Merger Sub of the transactions contemplated hereby, except for (i)
compliance by Parent and Merger Sub with the HSR Act and such foreign antitrust
and competition law requirements set forth in Section 4.4(b)(i) of the Parent
Disclosure Letter, (ii) the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware in accordance with the DGCL, (iii)
the filing with the SEC of (A) the Proxy Statement and Prospectus in accordance
with Regulation 14A promulgated under the Exchange Act, (B) the registration
statement on Form S-4 promulgated under the Securities Act and (C) such reports
under and such other compliance with the Exchange Act and the Securities Act and
the rules and regulations thereunder as may be required in connection with this
Agreement and the transactions contemplated hereby, (iv) the reports, filings,
registrations, consents, approvals, permits, authorizations and/or notices with
or to the FCC, (v) the reports, filings, registrations, consents, approvals,
permits, authorizations and/or notices with or to the State Commissions set
forth in Section 4.4(b)(v) of the Parent Disclosure Letter; and (vi) the
reports, filings, registrations, consents, approvals, permits, authorizations
and/or notices with or to those foreign Governmental Entities regulating
competition and telecommunications businesses or the use of radio spectrum or
regulating or limiting investment set forth in Section 4.4(b)(vi) of the Parent
Disclosure Letter.
Section 4.5 SEC Reports; Financial Statements.
(a) Parent has filed or furnished, as applicable, all reports,
schedules, forms, statements and other documents required to be filed or
furnished with or by it to the SEC since December 31, 2003 (the "Parent SEC
Documents"). As of its respective date, each of the Parent SEC Documents,
complied when filed or furnished and as amended in all material respects with
the requirements of the Exchange Act or the
34
Securities Act and the rules and regulations of the SEC promulgated thereunder
applicable to such Parent SEC Documents, and did not, and any Parent SEC
Documents filed with the SEC subsequent to the date hereof will not, 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 light
of the circumstances under which they were made, not misleading.
(b) The consolidated financial statements of Parent and its
consolidated Subsidiaries included in the Parent SEC Documents have been derived
from the accounting books and records of Parent and its consolidated
Subsidiaries and have been prepared in accordance with GAAP applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto). The consolidated balance sheets included in such consolidated
financial statements present fairly in all material respects the consolidated
financial position of Parent and its consolidated Subsidiaries as at the
respective dates thereof and the consolidated statements of income and
consolidated statements of cash flows included in such consolidated financial
statements present fairly in all material respects the results of operations and
cash flows of Parent and its consolidated Subsidiaries for the respective
periods indicated.
Section 4.6 Absence of Undisclosed Liabilities. Parent and its
Subsidiaries do not have any liabilities or obligations, known or unknown,
contingent or otherwise, except (a) liabilities and obligations in the
respective amounts reflected on or reserved against in the consolidated balance
sheet of the Parent and its Subsidiaries included in the Parent Financial
Statements (or readily apparent in the notes thereto), (b) liabilities and
obligations incurred in the ordinary course of business, consistent with past
practice, since the date of such balance sheet, and (c) liabilities and
obligations that would not, individually or in the aggregate, reasonably be
expected to have a Parent Material Adverse Effect.
Section 4.7 Form S-4; Proxy Statement/Prospectus. None of the information
supplied or to be supplied by Parent or Merger Sub for inclusion or
incorporation by reference in the Proxy Statement/Prospectus, at the date such
Proxy Statement is first mailed to stockholders of the Company, and at the time
of the Company Stockholders Meeting, will 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 light of the
circumstances under which they are made, not misleading. None of the information
contained or incorporated by reference in the Form S-4, at the time the Form S-4
is filed with the SEC, at any time it is amended or supplemented and at the time
the Form S-4 becomes effective under the Securities Act, will 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 light of
the circumstances under which they are made, not misleading, except that no
representation is made by Parent or Merger Sub with respect to statements made
in the Form S-4 based on information
35
supplied by the Company in writing for inclusion in the Form S-4. The Form S-4
will comply as to form in all material respects with all Laws.
Section 4.8 Absence of Certain Changes. Except for liabilities incurred in
connection with this Agreement or the transactions contemplated hereby and
except as set forth in Schedule 4.8 of the Parent Disclosure Letter, for the
period beginning September 30, 2004 until the date hereof, the Parent and its
Subsidiaries have conducted their respective businesses only in the ordinary
course consistent with past practice. Except as disclosed in the Parent SEC
Documents filed prior to the date of this Agreement, since December 31, 2003,
there have not been any changes, circumstances or events that, individually and
in the aggregate, have had or would reasonably be expected to result in a Parent
Material Adverse Effect.
Section 4.9 Litigation. Except as set forth in Section 4.9 of the Parent
Disclosure Letter, there is no suit, action, proceeding, claim, review or
investigation (whether at law or in equity, before or by any Governmental Entity
or before any arbitrator) pending, affecting or, to the knowledge of the Parent,
threatened against the Parent or any of its Subsidiaries, or their respective
properties or rights that, individually and in the aggregate for any such
matters premised on common legal theories and similar facts, would reasonably be
expected to result in a Parent Material Adverse Effect. Except as set forth in
Section 4.9 of the Parent Disclosure Letter, there is no Order of any
Governmental Entity or arbitrator outstanding against Parent or any of its
Subsidiaries which would, individually or in the aggregate, reasonably be
expected to result in a Parent Material Adverse Effect.
Section 4.10 Compliance with Laws. Each of the Parent and its Subsidiaries
is, and since December 31, 2003, has been in compliance with all applicable Laws
and, to the knowledge of the Parent, is not under investigation with respect to,
and has not been threatened to be charged with or given notice of, any violation
of any Law, in each case except for such failures to be in compliance, such
investigations or such violations as would not, individually or in the
aggregate, reasonably be expected to result in a Parent Material Adverse Effect.
Section 4.11 Brokers. No Person other than Bear, Xxxxxxx & Co. Inc. (the
"Parent Financial Advisor") is entitled to any brokerage, financial advisory,
finder's or similar fee or commission payable by Parent or Merger Sub in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Parent or Merger Sub.
36
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 5.1 Covenants of the Company. From the date of this Agreement
until the Effective Time, unless Parent shall otherwise consent in writing or
except as set forth in Section 5.1 of the Company Disclosure Letter or as
otherwise expressly provided for in this Agreement, the Company shall, and shall
cause each of the Company Subsidiaries to, conduct its business in a
commercially reasonable manner consistent with industry practice, and shall use
its commercially reasonable efforts to preserve intact its business organization
and goodwill and relationships with customers, suppliers and others having
business dealings with it, to keep available the services of its current
officers and key employees and to maintain its current rights and franchises, in
each case, consistent with industry practice. In addition to and without
limiting the generality of the foregoing, except as expressly set forth in
Section 5.1 of the Company Disclosure Letter or as otherwise expressly provided
for in this Agreement or as required by applicable Law, from the date hereof
until the Effective Time, without the prior written consent of Parent, the
Company shall not, and shall not permit any Company Subsidiary to:
(a) adopt or propose any change in the Company's certificate of
incorporation or by-laws;
(b) (i) declare, set aside, make or pay any dividend or other
distribution (whether in cash, stock or property) in respect of any of its
capital stock, other than (x) pursuant to Section 6.16 of this Agreement, (y)
regular quarterly cash dividends consistent with past practice (which in no
event shall exceed $1,947,000,000 in the aggregate since February 1, 2005) which
are paid prior to the Special Cash Dividend or (z) dividends or distributions by
wholly owned Company Subsidiaries, (ii) split, combine or reclassify any of its
capital stock or issue or propose or authorize the issuance of any other
securities (including options, warrants or any similar security exercisable for,
or convertible into, such other security) in respect of, in lieu of, or in
substitution for, shares of its capital stock, (iii) repurchase, redeem or
otherwise acquire any shares of the capital stock of the Company or any Company
Subsidiary, or any other equity interests or any rights, warrants or options to
acquire any such shares or interests, other than pursuant to the Company Stock
Plans and the redemption of Company Rights;
(c) issue, sell, grant, pledge or otherwise encumber any shares of
its capital stock or other securities (including any options, warrants or any
similar security exercisable for or convertible into such capital stock or
similar security) (other than (i) issuances of Company Common Stock (and the
associated Company Rights) in connection with the ESPP, Company Restricted
Shares or Other Equity-Based Awards, in each case, in accordance with their
terms (it being understood that grants of Company Restricted Shares and Other
Equity-Based Awards after the date hereof shall be in
37
accordance with Schedule 5.1(g) of the Disclosure Letter), (ii) issuances by a
wholly owned Company Subsidiary of capital stock to such Company Subsidiary's
parent or another wholly owned Company Subsidiary, (iii) issuances in accordance
with the Rights Agreement, and (iv) issuances pursuant to the Chapter 11 Plan);
(d) merge or consolidate with any Person (other than the Company or
a wholly owned Company Subsidiary) or acquire a material amount of the assets or
equity of any other Person (other than the Company or a Company Subsidiary),
other than (i) acquisitions disclosed on the Section 5.1(d) of the Company
Disclosure Letter and (ii) acquisitions the fair market value of the total
consideration (including the value of indebtedness acquired or assumed) for
which does not exceed $50,000,000 for any individual acquisition, or
$100,000,000 in the aggregate;
(e) sell, lease, license, subject to a Lien, other than a Permitted
Lien, encumber or otherwise surrender, relinquish or dispose of any assets,
property or rights (including capital stock of a Company Subsidiary) except (i)
pursuant to existing written contracts or commitments (the terms of which have
been disclosed in writing to Parent prior to the date hereof), (ii) sales of
network capacity in the ordinary course consistent with past practice, (iii)
sales of assets listed on Schedule 9.12 or (iv) in an amount not in excess of
$50,000,000 in the aggregate;
(f) (i) make any loans, advances or capital contributions to, or
investments in, any other Person other than (x) by the Company or any Company
Subsidiary to or in the Company or any Company Subsidiary or (y) pursuant to any
contract or other legal obligation existing at the date of this Agreement set
forth on Section 5.1(f) of the Company Disclosure Letter, (ii) create, incur,
guarantee or assume any Indebtedness, issuances of debt securities, guarantees,
loans or advances not in existence as of the date of this Agreement, except
Indebtedness incurred in the ordinary course of business not to exceed
$25,000,000 in the aggregate, Indebtedness in replacement of existing
Indebtedness on customary commercial terms, and guarantees by the Company of
Indebtedness of wholly owned Subsidiaries of the Company or guarantees by
Subsidiaries of Indebtedness of the Company, or (iii) other than in the ordinary
course of business consistent with past practice or as set forth in the
Company's capital budget, a copy of which was delivered to Parent prior to the
date hereof, make or commit to make any capital expenditure;
(g) amend or otherwise modify benefits under any Company Benefit
Plan, accelerate the payment or vesting of benefits or amounts payable or to
become payable under any Company Benefit Plan as currently in effect on the date
hereof, fail to make any required contribution to any Company Benefit Plan,
merge or transfer any Company Benefit Plan or the assets or liabilities of any
Company Benefit Plan, change the sponsor of any Company Benefit Plan, or
terminate or establish any Company Benefit Plan, except (i) as reasonably
appropriate to reflect changes in applicable Law or
38
generally accepted accounting principles, (ii) in the ordinary course of
business, consistent with existing policies and practices, or (iii) as
identified on Schedule 5.1(g) of the Disclosure Letter;
(h) grant any increase in the compensation or benefits of directors,
officers, employees or consultants of the Company or any Company Subsidiary,
provided, however, that the Company or any of its Subsidiaries may grant
increases in base salaries in the ordinary course of business consistent with
existing policies and practices (including pursuant to the Company's "focal
point review" and the Company's salary administration program outlined on
Schedule 5.1(g) of the Disclosure Letter), so long as such increases, in the
aggregate, do not exceed 4% in any calendar year;
(i) enter into or amend or modify any severance, consulting,
retention or employment agreement, plan, program or arrangement, (i) other than
in the ordinary course of business, consistent with existing policies and
practices or (ii) except as identified on Schedule 5.1(i) of the Disclosure
Letter;
(j) hire or terminate the employment or contractual relationship of
any officer, employee or consultant of the Company or any Company Subsidiary, as
the case may be, other than hirings or terminations (i) in the ordinary course,
consistent with existing policies and practices, (ii) identified on Schedule
5.1(i) of the Disclosure Letter or (iii) that, individually and in the
aggregate, would not result in (x) in the case of hirings, a material increase
in the number of persons providing services to the Company and its Subsidiaries
in all such capacities, (y) in the case of hirings, a material increase in the
aggregate payroll and other benefits costs to the Company or such Company
Subsidiary (such increase to be determined, in the case of a hiring to replace
an employee or other service provider in a pre-existing position based solely on
the costs in excess of the costs associated with the replaced service provider),
and (z) in the case of terminations, material liability to the Company or any of
its Subsidiaries in excess of the costs savings, if any, directly derived from
such terminations;
(k) settle or compromise any action, suit, claim, litigation,
proceeding, arbitration, investigation, audit or controversy (each, a
"Proceeding") or enter into any consent, decree, injunction or similar restraint
or form of equitable relief in settlement of any material Proceeding other than
(i) such settlements and compromises that (A) relate to Taxes (which are the
subject of Section 5.1(l)), (B) relate to Bankruptcy Claims (which are the
subject of Section 6.18), (C) are in the ordinary course consistent with past
practice or (D) do not require payments by the Company in excess of $10,000,000
and (ii) such consents, decrees, injunctions or similar restraints or forms of
equitable relief that, individually or in the aggregate, are not material to the
Company and the Company Subsidiaries, taken as a whole;
39
(l) (i) make or rescind any material election relating to Taxes,
(ii) settle or compromise any Proceeding relating to Taxes (other than Taxes
that relate to Bankruptcy Claims (which are the subject of Section 6.18)), (iii)
make a request for a written ruling of a Taxing Authority relating to Taxes,
other than any request for a determination concerning qualified status of any
Company Benefit Plan intended to be qualified under Code Section 401(a), (iv)
enter into a written and legally binding agreement with a Taxing Authority
relating to material Taxes, or (v) except as required by Law, change any of its
methods of reporting income or deductions for federal income tax purposes from
those employed in the preparation of its federal income tax returns for the
taxable year ending December 31, 2003;
(m) other than in the ordinary course of business consistent with
past practice or the indenture amendments disclosed in Section 3.7 of the
Company Disclosure Letter, (i) modify or amend in any material respect or
terminate any Company Contract, (ii) enter into any successor agreement to an
expiring Company Contract that changes the terms of the expiring Company
Contract in a way that is materially adverse to the Company or any Company
Subsidiary, or (iii) enter into any new agreement that would have been
considered a Company Contract if it were entered into at or prior to the date
hereof;
(n) enter into or renew or extend any agreements or arrangements
that limit or otherwise restrict the Company or any of the Company Subsidiaries
or any of their respective Affiliates or any successor thereto, or that could,
after the Effective Time, limit or restrict Parent or any of its Affiliates
(including the Surviving Entity) or any successor thereto, from engaging or
competing in any line of business or in any geographic area, which agreements or
arrangements, individually or in the aggregate, would reasonably be expected to
have a Parent Material Adverse Effect, after giving effect to the Merger;
(o) change any method of accounting or accounting principles or
practices by the Company or any Company Subsidiary, except for any such change
required by a change in GAAP or by a Governmental Entity;
(p) terminate or cancel, or amend or modify in any material respect,
any material insurance policies maintained by it covering the Company or the
Company Subsidiaries or their respective properties which is not replaced by a
comparable amount of insurance coverage;
(q) adopt or implement a plan of complete or partial liquidation,
dissolution, restructuring, recapitalization or other reorganization of the
Company or any of the Company Subsidiaries organized in jurisdictions other than
the United States or any political subdivision thereof;
40
(r) take any actions or omit to take any actions that would or would
be reasonably likely to (i) result in any of the conditions to the consummation
of the Merger set forth in Article VII not being satisfied or (ii) materially
impair the ability of the Company, Parent or Merger Sub to consummate the Merger
in accordance with the terms hereof or materially delay such consummation; or
(s) agree or commit to do any of the foregoing.
Section 5.2 Covenants of Parent. From the date of this Agreement until the
Effective Time, unless the Company shall otherwise consent in writing, or except
as set forth in Section 5.2 of the Parent Disclosure Letter or as otherwise
expressly provided for in this Agreement, Parent shall, and shall cause each of
its Subsidiaries to, conduct its business in the ordinary course, consistent
with past practice, and shall use all commercially reasonable efforts to
preserve intact its business organization and goodwill and relationships with
customers, suppliers and others having business dealings with it and maintain
its current rights and franchises, subject to the terms of this Agreement. In
addition to and without limiting the generality of the foregoing, except as
expressly set forth in Section 5.2 of the Parent Disclosure Letter or as
otherwise expressly provided for in this Agreement, from the date hereof until
the Effective Time, without the prior written consent of the Company, Parent
shall not, and shall not permit any Subsidiary of Parent to:
(a) adopt or propose any change in its certificate of incorporation
or by-laws or other comparable organizational documents in a manner that would
adversely affect the economic benefits of the Merger to the Company's
stockholders;
(b) declare, set aside, make or pay any dividend or other
distribution (whether in cash, stock or property) in respect of any of its
capital stock, except for dividends or distributions by wholly owned
Subsidiaries of Parent for the declaration and payment of regular quarterly cash
dividends or for any distribution of stock or property for which adjustment is
made pursuant to Section 1.12;
(c) take or omit to take any action, including engaging in an
acquisition of a business, that would be reasonably likely to prevent the
consummation of the Merger by the Outside Date; or
(d) agree or commit to do any of the foregoing.
Section 5.3 Certain Actions. If, in conformity with Section 5.2(c), Parent
or any Subsidiary of Parent takes any action that is reasonably likely to
materially delay the consummation of the Merger, including engaging in an
acquisition of a business which is reasonably likely to result in its being
materially more difficult to obtain any approval or authorization required in
connection with the Merger under Laws, Parent or such
41
Subsidiary shall, or shall authorize the Company or its Subsidiaries to, take
all necessary Specified Efforts to consummate the Merger, notwithstanding
anything to the contrary in Section 6.4(e). If such action results in a delay of
the consummation of the Merger, then, during the period after which the Merger
would otherwise have been consummated, Parent shall not be entitled to invoke
the condition set forth in Section 7.2(f) or the condition set forth in Section
7.2(a), except to the extent the failure of such conditions to be satisfied is
caused by a breach of a representation or warranty caused by the Company during
such period.
ARTICLE VI
ADDITIONAL AGREEMENTS
Section 6.1 Preparation of Proxy Statement.
(a) As promptly as reasonably practicable following the date hereof,
Parent and the Company shall prepare and file with the SEC mutually acceptable
proxy materials that shall constitute the Proxy Statement/Prospectus (such proxy
statement/prospectus, and any amendments or supplements thereto, the "Proxy
Statement/Prospectus") and Parent shall prepare and file the Form S-4. The Proxy
Statement/Prospectus will be included in and will constitute a part of the Form
S-4 as Parent's prospectus. The Form S-4 and the Proxy Statement/Prospectus
shall comply as to form in all material respects with the applicable provisions
of the Securities Act and the Exchange Act and the rules and regulations
thereunder.
(b) Each of Parent and the Company shall use commercially reasonable
efforts to have the Form S-4 declared effective by the SEC as promptly as
practicable after the date hereof and to keep the Form S-4 effective as long as
is necessary to consummate the Merger and the transactions contemplated thereby.
(c) Parent and the Company shall, as promptly as practicable after
receipt thereof, provide the other party copies of any written comments and
advise the other party of any oral comments, with respect to the Proxy
Statement/Prospectus received from the SEC. Parent shall provide the Company
with a reasonable opportunity to review and comment on any amendment or
supplement to the Form S-4 and any communications prior to filing such with the
SEC, and will promptly provide the Company with a copy of all such filings and
communications made with the SEC.
(d) The Company will use commercially reasonable efforts to cause
the Proxy Statement/Prospectus to be mailed to the Company's stockholders as
soon as reasonably practicable after the Form S-4 is declared effective under
the Securities Act. Parent shall take any action (other than qualifying to do
business in any jurisdiction in which it is not now so qualified or to file a
general consent to service of process) required
42
to be taken under any applicable state securities laws in connection with the
Share Issuance and the Company shall furnish all information concerning the
Company and the holders of Company Common Stock as may be reasonably requested
in connection with any such action. Each party will advise the other party,
promptly after it receives notice thereof, of the time when the Form S-4 has
become effective, the issuance of any stop order, the suspension of the
qualification of the Parent Common Stock issuable in connection with the Merger
for offering or sale in any jurisdiction, or any request by the SEC for
amendment of the Proxy Statement/Prospectus or the Form S-4.
(e) If at any time prior to the Effective Time any information
relating to Parent or the Company, or any of their respective Affiliates,
officers or directors, should be discovered by Parent or the Company which
should be set forth in an amendment or supplement to any of the Form S-4 or the
Proxy Statement/Prospectus so that any of such documents would not include any
misstatement of a material fact or omit to state any material fact necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, the party that discovers such information shall promptly
notify the other party hereto and, to the extent required by law, rules or
regulations, an appropriate amendment or supplement describing such information
shall be promptly filed with the SEC and disseminated to the stockholders of the
Company.
Section 6.2 Stockholders Meeting; Company Recommendation. The Company
shall duly take all lawful and commercially reasonable action to call, give
notice of, convene and hold a meeting of its stockholders on a date as soon as
reasonably practicable after the S-4 Registration Statement is declared
effective (the "Company Stockholders Meeting") for the purpose of obtaining the
Company Stockholder Approval with respect to the adoption of this Agreement and
shall take all lawful and commercially reasonable action to solicit the adoption
of this Agreement by the Company Stockholder Approval; and the Board of
Directors of the Company shall recommend adoption of this Agreement by the
stockholders of the Company to the effect as set forth in Section 3.4(b) (the
"Company Recommendation"), and shall not withdraw, modify or qualify (a
"Change") in any manner adverse to Parent such recommendation or make any
statement in connection with the Company Stockholders Meeting inconsistent with
such recommendation including, without limitation, approving or recommending a
third party Takeover Proposal with respect to the Company or failing to
recommend the adoption of this Agreement (collectively, a "Change in the Company
Recommendation"); provided that the Board of Directors of the Company may make a
Change in the Company Recommendation pursuant to Section 6.5(c).
Section 6.3 Access to Information; Confidentiality. Upon reasonable
notice, the Company shall, and shall cause the Company Subsidiaries to, afford
to the officers, directors, employees, accountants, counsel, financial advisors,
consultants, financing sources and other advisors or representatives
(collectively, "Representatives") of Parent
43
access during normal business hours to all of the Company's and its
Subsidiaries' properties, books, records, contracts, commitments and personnel
and shall furnish, and shall cause to be furnished, as promptly as practicable
to Parent (a) a copy of each report, schedule and other document filed,
furnished, published, announced or received by it during such period pursuant to
the requirements of federal or state securities laws or a Governmental Entity,
and (b) all other information as Parent may reasonably request; provided that
the Company may restrict the foregoing access to the extent required by
applicable Law and provided, further, that the foregoing shall not require the
Company to permit any inspection, or to disclose any information, that in the
reasonable judgment of the Company would result in the disclosure of any trade
secrets of third parties or violate any of its obligations with respect to
confidentiality if the Company shall have used reasonable best efforts to obtain
the consent of such third party to such inspection or disclosure. In addition,
the Company shall use best efforts to furnish, within twelve weeks of the date
hereof, to Parent the items listed on Section 6.3 of the Company Disclosure
Letter. The Company shall (i) keep Parent reasonably informed from time to time
as to status and developments regarding any audit, investigation, claim, suit or
other proceeding with respect to Taxes and (ii) provide to Parent, when
available and prior to filing, drafts of any U.S. federal, U.K., French and
German income Tax Returns relating to the Company or any Company Subsidiary. All
information furnished pursuant to this Section 6.3 shall be subject to the
confidentiality agreement, dated as of September 10, 2004, between the Company
and Parent (the "Confidentiality Agreement"). No investigation pursuant to this
Section 6.3 shall affect the representations, warranties or conditions to the
obligations of the parties contained herein.
Section 6.4 Commercially Reasonable Efforts.
(a) Subject to the terms and conditions of this Agreement, each of
the Company and Parent will use its commercially reasonable efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all things
necessary, proper or advisable under this Agreement and applicable Laws and
regulations to consummate the Merger and the other transactions contemplated by
this Agreement in the most expeditious manner practicable after the date of this
Agreement, including (i) preparing and filing as promptly as practicable all
documentation to effect all necessary applications, notices, petitions, filings
and other documents and to obtain as promptly as practicable all consents,
clearances, waivers, licenses, orders, registrations, approvals, permits and
authorizations necessary or advisable to be obtained from any third party and/or
any Governmental Entity in order to consummate the Merger or any of the other
transactions contemplated by this Agreement and (ii) taking all reasonable steps
as may be necessary to obtain all such material consents, clearances, waivers,
licenses, registrations, permits, authorizations, orders and approvals. In
furtherance and not in limitation of the foregoing, each of the Company and
Parent agrees to make an appropriate filing of a Notification and Report Form
pursuant to the HSR Act and any other Regulatory Law (as defined below) with
respect to the transactions contemplated hereby as promptly as
44
practicable after the date of this Agreement and to supply as promptly as
practicable any additional information and documentary material that may be
requested pursuant to the HSR Act and any other Regulatory Law and use
commercially reasonable efforts to cause the expiration or termination of the
applicable waiting periods under the HSR Act in the most expeditious manner
practicable.
(b) To the extent permissible under applicable Law or any rule,
regulation or restriction of a Governmental Entity, each of the Company and
Parent shall, in connection with the efforts referenced above to obtain all
requisite material approvals, clearances and authorizations for the transactions
contemplated by this Agreement under the HSR Act or any other Regulatory Law,
use its commercially reasonable efforts to (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 communication
received by such party from, or given by such party to, the Antitrust Division
of the Department of Justice (the "DOJ"), the Federal Trade Commission (the
"FTC") or any other 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, (iii) permit the
other party, or the other party's legal counsel, to review any communication
given by it to, and consult with each other in advance of any meeting or
conference with, the DOJ, the FTC or any such other Governmental Entity or, in
connection with any proceeding by a private party, with any other Person and
(iv) to the extent permitted by such Governmental Entity or other Person, give
the other party the opportunity to attend and participate in such meetings and
conferences. For purposes of this Agreement, "Regulatory Law" means the
Communications Act of 1934, as amended, and the rules and regulations
thereunder, the laws, rules, regulations and orders of the state public service
or public utility commissions, or similar state regulatory bodies regulating
telecommunications businesses or the use of radio spectrum, Xxxxxxx Act, as
amended, the Xxxxxxx Act, as amended, the HSR Act, as amended, the Federal Trade
Commission Act, as amended, and all other Federal, state and foreign, if any,
statutes, rules, regulations, orders, decrees, administrative and judicial
doctrines and other Laws that are designed or intended to prohibit, restrict or
regulate actions having the purpose or effect of monopolization or restraint of
trade or lessening of competition.
(c) To the extent permissible under applicable Law or any rule,
regulation or restriction of a Governmental Entity, each of the Company and
Parent shall, in connection with the efforts referenced above, obtain all
requisite material approvals, clearances and authorizations for the transactions
contemplated by this Agreement and will use its commercially reasonable efforts
to (i) cooperate in all respects with each other in connection with any filing
or submission and in connection with any investigation or other inquiry and (ii)
promptly inform the other party of any communication received by such party
from, or given by such party to, the Governmental Entities regulating
45
competition and telecommunications businesses or the use of radio spectrum or
regulating or limiting investment and State agencies or departments or local
governments that have issued competitive access provider or other
telecommunications franchises or any other similar authorizations.
(d) If any objections are asserted with respect to the transactions
contemplated hereby under any Regulatory 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 Regulatory Law, each of the Company and
the Parent shall use its commercially reasonable efforts (which for these
purposes shall include taking Specified Efforts (as defined below)) to resolve
any such objections or challenge as such Governmental Entity or private party
may have to such transactions under such Regulatory Law so as to permit
consummation of the transactions contemplated by this Agreement.
(e) If necessary to obtain any consents, approvals, permits or
authorizations or to remove any impediments to the Merger or the transactions
contemplated hereby relating to any Regulatory Law or to avoid the entry of, or
to effect the dissolution of, any injunction, temporary restraining order or
other order in any suit or proceeding relating to Regulatory Law, each of Parent
and the Company shall cooperate with each other and take such lawful steps as
shall be necessary or appropriate to secure such end ("Specified Efforts");
provided that neither Parent nor the Company shall be required to take any
Specified Efforts to the extent that such Specified Efforts, individually or in
the aggregate, would reasonably be expected to have a Specified Material Adverse
Effect. "Specified Material Adverse Effect" means a Company Material Adverse
Effect or a Parent Material Adverse Effect following the Effective Time
(provided, however, that for purposes of determining whether any adverse effect
upon Parent constitutes a Parent Material Adverse Effect for purposes of this
definition of Specified Material Adverse Effect, Parent and its Subsidiaries,
taken as a whole, shall be deemed to be a consolidated group of entities of the
size and scale of the Company and its Subsidiaries, taken as a whole).
Section 6.5 No Solicitation.
(a) The Company shall not, nor shall it authorize or permit any of
the Company Subsidiaries to, and the Company shall use its commercially
reasonable efforts to cause its and its Subsidiaries' respective Representatives
not to, directly or indirectly (i) initiate or solicit or knowingly facilitate
or encourage any inquiry or the making of any proposal that constitutes a
Takeover Proposal (as defined in Section 6.5(e)), (ii) enter into any letter of
intent, memorandum of understanding, merger agreement or other agreement,
arrangement or understanding relating to any Takeover Proposal, or (iii)
continue or otherwise participate in any discussions or negotiations regarding,
furnish to any Person any information or data with respect to, or otherwise
cooperate with
46
or take any other action to facilitate any proposal that (A) constitutes any
Takeover Proposal or (B) requires the Company to abandon, terminate or fail to
consummate the Merger or any other transactions contemplated by this Agreement.
Notwithstanding the foregoing, prior to the receipt of the Company Stockholder
Approval, the Company may, in response to a bona fide written Takeover Proposal
that was unsolicited and did not otherwise result from a breach of this Section
6.5(a), and subject to compliance with Section 6.5(c):
(x) furnish information with respect to the Company and the Company
Subsidiaries to the Person making such Takeover Proposal and its
Representatives pursuant to and in accordance with a confidentiality
agreement containing terms and conditions no less restrictive than those
contained in the Confidentiality Agreement, provided that such
confidentiality agreement shall not be required to contain standstill
provisions and shall not contain any provisions that would prevent the
Company from complying with its obligation to provide the required
disclosure to Parent pursuant to Section 6.5(b), and provided further that
all such information provided to such Person has previously been provided
to Parent or is provided to Parent prior to or concurrently with the time
it is provided to such Person; and
(y) participate in discussions or negotiations with such Person or
its Representatives regarding such Takeover Proposal;
provided, in each case, that the Board of Directors of the Company determines in
good faith after consultation with its outside legal counsel and a financial
advisor of nationally recognized reputation, that (i) the failure to furnish
such information or participate in such discussions or negotiations could be
reasonably expected to result in a breach of its fiduciary duties to the
stockholders of the Company under applicable Law and (ii) such Takeover Proposal
could reasonably be expected to lead to a Superior Proposal (as defined in
Section 6.5(e)). The Company shall (A) immediately cease and cause to be
terminated any existing activities, discussions or negotiations with any Persons
or their Representatives conducted prior to the date of this Agreement with
respect to any Takeover Proposal and will request the prompt return of any
confidential information previously furnished to such Persons in connection
therewith, and (B) use its commercially reasonable efforts promptly to inform
its Representatives of the obligations undertaken in this Section 6.5. Without
limiting the foregoing, any violation of the restrictions set forth in this
Section 6.5 by any Representative of the Company or any of its Subsidiaries
shall be deemed to be a breach of this Section 6.5 by the Company.
(b) As promptly as practicable after the receipt by the Company of
any Takeover Proposal or any inquiry with respect to, or that could reasonably
be expected to lead to, any Takeover Proposal, and in any case within 24 hours
after the receipt thereof, the Company shall provide oral and written notice to
Parent of (i) such Takeover
47
Proposal or inquiry, (ii) the identity of the Person making any such Takeover
Proposal or inquiry, and (iii) the material terms and conditions of any such
Takeover Proposal or inquiry (including any amendments or modifications
thereto). The Company shall keep Parent fully informed on a current basis of the
status of any such Takeover Proposal, including, without limitation, any changes
to the terms and conditions thereof, and promptly provide Parent with copies of
all Takeover Proposals (and modifications thereof) and related agreements, draft
agreements and modifications thereof.
(c) Neither the Board of Directors of the Company nor any committee
thereof shall, directly or indirectly, (i) effect a Change in the Company
Recommendation or (ii) approve any letter of intent, memorandum of
understanding, merger agreement or other agreement, arrangement or understanding
relating to any Takeover Proposal. Notwithstanding the foregoing, at any time
prior to the Company Stockholder Approval, the Board of Directors of the Company
may, in response to a Superior Proposal or an Intervening Event, effect a Change
in the Company Recommendation, provided that the Board of Directors of the
Company determines in good faith, after consultation with its outside legal
counsel and a financial advisor of nationally recognized reputation, that the
failure to do so would be reasonably expected to result in a breach of its
fiduciary duties to the stockholders of the Company under applicable Law, and
provided, further, that the Board of Directors of the Company may not effect
such a Change in the Company Recommendation unless (i) the Board of Directors
shall have first provided prior written notice to Parent that it is prepared to
effect a Change in the Company Recommendation in response to a Superior Proposal
or an Intervening Event, which notice shall, in the case of a Superior Proposal,
attach the most current version of any written agreement relating to the
transaction that constitutes such Superior Proposal, and, in the case of an
Intervening Event, attach information describing such Intervening Event in
reasonable detail, and (ii) Parent does not make, within five Business Days
after the receipt of such notice (or, in the event of a Takeover Proposal that
has been materially revised or modified, within two Business Days of such
modification, if later), a proposal that the Board of Directors determines in
good faith, after consultation with a financial advisor of nationally recognized
reputation, is at least as favorable to the stockholders of the Company as such
Superior Proposal or obviates the need for a Change in the Company
Recommendation as a result of the Intervening Event, as the case may be. The
Company agrees that, during the five Business Day period prior to its effecting
a Change in the Company Recommendation, the Company and its Representatives
shall negotiate in good faith with Parent and its Representatives regarding any
revisions to the terms of the transaction contemplated by this Agreement
proposed by Parent. Notwithstanding any Change in the Company Recommendation as
a result of an Intervening Event, Parent shall have the option, exercisable
within five Business Days after such Change in the Company Recommendation, to
cause the Board of Directors to submit this Agreement to the stockholders of the
Company for the purpose of adopting this Agreement and approving the Merger. If
Parent exercises such option, Parent shall not be entitled to terminate this
Agreement pursuant to Section 8.1(c)(iii). If Parent fails to exercise such
48
option, the Company may terminate this Agreement pursuant to and in accordance
with Section 8.1(d)(ii).
(d) Nothing contained in this Section 6.5 shall prohibit the Company
from complying with Rule 14d-9 and Rule 14e-2 promulgated under the Exchange Act
in respect of any Takeover Proposal or making any disclosure to the stockholders
of the Company if the Board of Directors determines in good faith, after
consultation with its outside counsel, that the failure to make such disclosure
could be reasonably expected to result in a of breach its fiduciary duties to
the stockholders of the Company under applicable Law, provided, however that
neither the Board of Directors of the Company nor any committee thereof shall,
except as expressly permitted by Section 6.5(c), effect a Change in Company
Recommendation or approve or recommend, or publicly propose to approve or
recommend, a Takeover Proposal.
(e) For purposes of this Agreement:
"Intervening Event" shall mean an event, unknown to the Board of Directors
of the Company as of the date hereof, which becomes known prior to the Company
Stockholder Approval and which causes the Board of Directors to conclude in good
faith, after consultation with its outside legal counsel and a financial advisor
of nationally recognized reputation, that its failure to effect a Change in the
Company Recommendation would be reasonably likely to result in a breach of its
fiduciary duties to the stockholders of the Company under applicable Law.
"Takeover Proposal" means any proposal or offer in respect of (i) a
merger, consolidation, business combination, share exchange, reorganization,
recapitalization, liquidation, dissolution, or similar transaction involving (x)
the Company or (y) any of the Company Subsidiaries which represent, individually
or in the aggregate, 15% or more of the Company's consolidated assets (any of
the foregoing, a "Business Combination Transaction") with any Person other than
Parent, Merger Sub or any Affiliate thereof (a "Third Party") in which such
Third Party or the shareholders of the Third Party immediately prior to
consummation of such Business Combination Transaction will own more than 15% of
the Company's outstanding capital stock immediately following such Business
Combination Transaction, including the issuance by the Company of more than 15%
of any class of its voting equity securities as consideration for assets or
securities of a Third Party, or (ii) any direct or indirect acquisition, whether
by tender or exchange offer or otherwise, by any Third Party of 15% or more of
any class of capital stock of the Company or of 15% or more of the consolidated
assets of the Company and the Company Subsidiaries, in a single transaction or a
series of related transactions.
"Superior Proposal" means any bona fide written proposal or offer made by
a Third Party in respect of a Business Combination Transaction involving, or any
transaction involving the purchase or acquisition of, (i) all or substantially
all of the
49
voting power of the Company's capital stock or (ii) all or substantially all of
the consolidated assets of the Company and the Company Subsidiaries, which
transaction the Board of Directors determines in good faith, after consultation
with its outside counsel and a financial advisor of nationally recognized
reputation, (x) would be, if consummated, more favorable to the stockholders of
the Company than the Merger and the Special Cash Dividend, taking into account
all of the terms and conditions of such proposal and of this Agreement
(including any proposal by Parent to amend the terms of this Agreement) as well
as any other factors deemed relevant by the Board of Directors, and (y) is
reasonably capable of being consummated on the terms so proposed, taking into
account all financial, regulatory, legal and other aspects of such proposal.
Section 6.6 Employee Matters.
(a) Until the first anniversary of the Effective Time (the "Benefits
Continuation Period"), the Surviving Entity shall pay or cause to be paid to
each employee of the Company and the Company Subsidiaries who continues as an
employee of the Company, the Company Subsidiaries or the Surviving Entity during
the Benefits Continuation Period (the "Continuing Employees") a base salary at a
rate not less than the rate of such base salary in effect at the Effective Time.
During the Benefits Continuation Period, the Surviving Entity shall provide or
cause to be provided an incentive compensation opportunity not less than the
incentive compensation opportunity in effect at the Effective Time. The
Surviving Entity shall also provide or cause to be provided to any Continuing
Employee during the Benefits Continuation Period medical benefits and other
welfare benefit plans, programs and arrangements (i) that are substantially
comparable to those provided under the Company Benefit Plans as in effect at the
Effective Time; (ii) which are substantially comparable to those provided to
management employees of the Parent or its Subsidiaries; or (iii) any combination
of the foregoing; provided that (x) with respect to Continuing Employees who are
subject to collective bargaining or employment agreements (including change in
control agreements), compensation, benefits and payments shall be provided in
accordance with such agreements, and the Surviving Entity expressly assumes such
collective bargaining or employment agreements (including change in control
agreements) and (y) during the Benefits Continuation Period, the Surviving
Entity shall pay, subject to such terms and conditions as it shall establish,
any such Continuing Employee whose employment is involuntarily terminated by the
Parent, the Surviving Entity or any of their Subsidiaries without cause an
amount of severance pay in cash equal to the amount of cash severance pay that
would have been payable to such Continuing Employee under the terms of the
severance plan maintained by the Company and its Subsidiaries and applicable to
such Continuing Employee immediately prior to the date of this Agreement. The
foregoing provisions of this Section 6.6 shall not be construed or interpreted
to restrict in any way the Surviving Entity's or Parent's ability to amend,
modify or terminate any Company Benefit Plan (including, without limitation, to
change the entities who administer such Company Benefit Plans, or the manner in
which such Company Benefits Plans are
50
administered) to the extent not inconsistent with such foregoing restrictions or
any other plan made available to the Continuing Employees or to terminate any
person's employment at any time or for any reason.
(b) The Surviving Entity shall (i) waive any applicable pre-existing
condition exclusions and waiting periods with respect to participation and
coverage requirements in any replacement or successor welfare benefit plan of
the Surviving Entity that an employee of the Company or any of the Company
Subsidiaries is eligible to participate in following the Effective Time to the
extent such exclusions or waiting periods were inapplicable to, or had been
satisfied by, such employee immediately prior to the Effective Time under the
relevant Company Benefit Plan in which such employee participated, (ii) provide
each such employee with credit for any co-payments and deductible paid prior to
the Effective Time (to the same extent such credit was given under the analogous
Company Benefit Plan prior to the Effective Time) in satisfying any applicable
deductible or out-of-pocket requirements and (iii) to the extent that any
Continuing Employee is allowed to participate in any employee benefit plan of
the Parent, the Surviving Entity or any of their Subsidiaries following the
Effective Time, cause such plan to recognize the service of such Continuing
Employee with the Company and the Company Subsidiaries prior to the Effective
Time for purposes of eligibility to participate, vesting and benefit accrual
(but not for benefit accrual under any defined benefit, retiree welfare or
similar plan) to the same extent such service was recognized by the Company and
the Company Subsidiaries under any similar Company Benefit Plan in which such
Continuing Employee participated immediately prior to the Effective Time;
provided that the foregoing shall not apply to the extent it would result in any
duplication of benefits for the same period of service.
(c) With respect to matters described in this Section 6.6, the
Company will consult with Parent (and consider in good faith the advice of
Parent) prior to sending any written notices or other communication materials
(including, without limitation, any postings to any website) to its employees or
former employees of the Company or any Company Subsidiary. Prior to the
Effective Time, the Company shall provide Parent with reasonable access to such
employees or former employees for purposes of Parent providing notices or other
communication materials regarding Parent compensation and benefit plans and the
matters described in this Section 6.6; provided that such notices or other
communication materials are approved in advance by the Company, which approval
shall not be unreasonably withheld.
(d) The Company and each of its Subsidiaries shall (i) provide any
and all notices to, (ii) make any and all filings or registrations with, and
(iii) obtain any and all consents or approvals of, any labor organization, works
council or any similar entity, council or organization, required to be made or
obtained in connection with this Agreement or the consummation of the
transactions contemplated hereby.
51
(e) The Parent shall prepare and file with the SEC a registration
statement on an appropriate form, or a post-effective amendment to a
registration statement previously filed under the Securities Act, with respect
to the shares of Parent Common Stock subject to any Other Company Equity-Based
Award and, where applicable, shall use its reasonable best efforts to have such
registration statement declared effective as soon as practicable following the
Effective Time and to maintain the effectiveness of such registration statement
covering such Other Company Equity-Based Award (and to maintain the current
status of the prospectus contained therein) for so long as such Other Company
Equity-Based Award remains outstanding. With respect to those individuals, if
any, who, subsequent to the Effective Time, will be subject to the reporting
requirements under Section 16 of the Exchange Act, where applicable, the Parent
shall use all reasonable efforts to administer any applicable Company Stock Plan
in a manner that complies with Rule 16b-3 under the Exchange Act to the extent
such Company Stock Plan complied with such rule prior to the Effective Time.
Section 6.7 Fees and Expenses. Subject to Section 8.3, whether or not the
Merger is consummated, all Expenses incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by the party incurring
such Expenses. As used in this Agreement, "Expenses" includes all out-of-pocket
expenses (including, without limitation, all fees and expenses of counsel,
accountants, investment bankers, experts and consultants to a party hereto and
its Affiliates) incurred by a party or on its behalf in connection with or
related to the authorization, preparation, negotiation, execution and
performance of this Agreement and the transactions contemplated hereby,
including the preparation, printing, filing and mailing, as the case may be, of
the Proxy Statement/Prospectus and the Form S-4 and any amendments or
supplements thereto, and the solicitation of the Company Stockholder Approval
and all other matters related to the transactions contemplated hereby.
Section 6.8 Directors' and Officers' Indemnification and Insurance.
(a) From and after the Effective Time the Surviving Entity shall,
and Parent shall cause the Surviving Entity to, (i) indemnify and hold harmless,
against any costs or expenses (including attorney's fees), judgments, fines,
losses, claims, damages or liabilities incurred in connection with any claim,
action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, and provide advancement of expenses to, all
past and present directors, officers and employees of the Company and the
Company Subsidiaries (in all of their capacities) (A) to the same extent such
persons are indemnified or have the right to advancement of expenses as of the
date of this Agreement by the Company pursuant to the Company's Constituent
Documents and indemnification agreements, if any, in existence on the date
hereof with any directors, officers and employees of the Company and the Company
Subsidiaries and (B) without limitation to clause (A), to the fullest extent
permitted by Law, (ii) include and cause to be maintained in effect in the
Surviving Entity's (or any successor's) certificate of
52
incorporation and bylaws, the current provisions regarding elimination of
liability of directors, indemnification of officers, directors and employees and
advancement of expenses contained in the Company's Constituent Documents and
(iii) cause to be maintained for a period of six years after the Effective Time
the current policies of directors' and officers' liability insurance and
fiduciary liability insurance ("D & O Insurance") maintained by the Company
(provided that the Surviving Entity (or any successor) 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)
with respect to claims arising from facts or events that occurred on or before
the Effective Time (including for acts or omissions occurring in connection with
the approval of this Agreement and the consummation of the transactions
contemplated hereby); and provided, further, that in no event shall the
Surviving Entity be required to expend in any one year more than 200% of the
current annual premium expended by the Company and the Company Subsidiaries to
maintain or procure such D & O Insurance immediately prior to the Effective Time
(such 200% amount, the "Maximum Annual Premium"); provided, further, that if the
annual premiums of such insurance coverage exceed such amount, the Surviving
Entity shall be obligated to obtain a policy with the greatest coverage
available for a cost not exceeding the Maximum Annual Premium. In addition, the
Company may purchase a six-year "tail" prepaid policy prior to the Effective
Time on terms and conditions no less advantageous to the insured than the
existing D & O Insurance maintained by the Company; provided, that the amount
paid by the Company shall not exceed six times the Maximum Annual Premium. If
such "tail" prepaid policy has been obtained by the Company prior to the
Closing, (i) the Surviving Entity shall not be obligated to maintain D & O
Insurance as described above, and (ii) the Surviving Entity shall, and Parent
shall cause the Surviving Entity to, maintain such "tail" policy in full force
and effect, for its full term, and continue to honor their respective
obligations thereunder. The obligations of the Surviving Entity under this
Section 6.8 shall not be terminated or modified in such a manner as to adversely
affect any indemnitee to whom this Section 6.8 applies without the consent of
such affected indemnitee (it being expressly agreed that the indemnitees to whom
this Section 6.8 applies shall be third party beneficiaries of this Section
6.8).
(b) If the Surviving Entity or any of its successors or assigns (i)
shall consolidate with or merge into any other corporation or entity and shall
not be the continuing or Surviving Entity or entity of such consolidation or
merger or (ii) shall transfer all or substantially all of its properties and
assets to any individual, corporation or other entity, then, and in each such
case, proper provisions shall be made so that the successors and assigns of the
Surviving Entity shall assume all of the obligations set forth in this Section
6.8.
Section 6.9 Public Announcements. Parent and the Company shall develop a
joint communications plan and each party shall (i) ensure that all press
releases and other public statements or communications with respect to the
transactions contemplated
53
hereby shall be consistent with such joint communications plan and (ii) unless
otherwise required by applicable law or by obligations pursuant to any listing
agreement with or rules of any securities exchange, consult with each other
before issuing any press release or, to the extent practical, otherwise making
any public statement or communication with respect to this Agreement or the
transactions contemplated hereby. In addition to the foregoing, except to the
extent disclosed in or consistent with the Proxy Statement/Prospectus in
accordance with the provisions of Section 6.1, neither Parent nor the Company
shall issue any press release or otherwise make any public statement or
disclosure concerning the other party or the other party's business, financial
condition or results of operations without the consent of the other party, which
consent shall not be unreasonably withheld or delayed.
Section 6.10 Notification of Certain Matters. The Company shall use its
commercially reasonable efforts to give prompt notice to Parent, and Parent
shall use its commercially reasonable efforts to give prompt notice to Company,
to the extent that either acquires actual knowledge of (i) the occurrence or
non-occurrence of any event the occurrence or non-occurrence of which would be
reasonably likely to cause any representation or warranty contained in this
Agreement to be untrue or inaccurate as of the date hereof or as of the Closing
Date and (ii) any failure of Parent, Merger Sub or the Company, as the case may
be, to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder, provided, however, that the delivery
of any notice pursuant to this Section 6.10 shall not limit or otherwise affect
the remedies available hereunder to the party receiving such notice.
Section 6.11 Accountant's Letters.
(a) Parent shall use its commercially reasonable efforts to cause to
be delivered to the Company two letters from Parent's independent public
accountants, one dated approximately the date on which the Form S-4 shall become
effective and one dated the Closing Date, each addressed to Parent and the
Company, in form reasonably satisfactory to the Company and customary in scope
for comfort letters delivered by independent public accountants in connection
with registration statements similar to the Form S-4.
(b) The Company shall use its commercially reasonable efforts to
cause to be delivered to Parent two letters from the Company's independent
public accountants, one dated approximately the date on which the Form S-4 shall
become effective and one dated the Closing Date, each addressed to the Company
and Parent, in form reasonably satisfactory to Parent and customary in scope for
comfort letters delivered by independent public accountants in connection with
registration statements similar to the Form S-4.
54
Section 6.12 Listing of Shares of Parent Common Stock. Parent shall use
its commercially reasonable efforts to cause the shares of Parent Common Stock
to be issued in the Merger to be approved for listing on the NYSE, subject to
official notice of issuance, prior to the Closing Date.
Section 6.13 Affiliates. Not later than 45 days prior to the Effective
Time, the Company shall deliver to Parent a letter identifying all persons who,
in the judgment of the Company, may be deemed at the time this Agreement is
submitted to the stockholders of the Company for the Company Stockholder
Approval, "affiliates" of the Company for purposes of Rule 145 under the
Securities Act and applicable SEC rules and regulations, and such list shall be
updated as necessary to reflect changes from the date thereof. The Company shall
use commercially reasonable efforts to cause each person identified on such list
to deliver to Parent not less than 30 days prior to the Effective Time, a
written agreement substantially in the form attached as Exhibit A hereto (an
"Affiliate Agreement"). Parent will give stop transfer instructions to its
transfer agent with respect to any Parent Common Stock received pursuant to the
Merger by any stockholder of the Company who may reasonably be deemed to be an
affiliate of the Company for purposes of Rule 145 under the Securities Act and
there will be placed on the certificates representing such Parent Common Stock,
or any substitutions therefor, a legend stating in substance that the shares
were issued in a transaction to which Rule 145 under the Securities Act applies
and may only be transferred (i) in conformity with Rule 145 or (ii) in
accordance with a written opinion of counsel, reasonably acceptable to Parent in
form and substance, that such transfer is exempt from registration under the
Securities Act.
Section 6.14 State Takeover Laws. If any "fair price," "business
combination" or "control share acquisition" statute or other similar statute or
regulation is or shall become applicable to the transactions contemplated
hereby, Parent, the Company and their respective Boards of Directors shall use
all reasonable efforts to grant such approvals and take such actions as are
necessary so that the transactions contemplated hereby may be consummated as
promptly as practicable on the terms contemplated hereby and shall otherwise act
to minimize the effects of any such statute or regulation on the transactions
contemplated hereby.
Section 6.15 Stockholder Litigation. The Company shall give Parent the
opportunity to participate in the defense or settlement of any stockholder
litigation against the Company and/or its directors relating to the transactions
contemplated by this Agreement. The Company agrees that it shall not settle or
offer to settle any litigation commenced on or after the date hereof against the
Company or any of its directors or executive officers by any stockholder of the
Company relating to this Agreement, the Merger, any other transaction
contemplated hereby or otherwise, without the prior written consent of Parent.
55
Section 6.16 Special Cash Dividend. Following the date of adoption of this
Agreement by the holders of Company Common Stock constituting the Company
Stockholder Approval and prior to the Effective Time, the Company will, unless
prohibited by applicable law or covenants in instruments of Indebtedness
existing as of the date hereof, declare and pay a special cash dividend per
share of Company Common Stock equal to (i) $4.10 minus (ii) the per share amount
of any dividend declared by the Company during the period beginning on the date
of this Agreement and ending on the Closing Date, excluding, for the avoidance
of doubt, the $0.40 per share cash dividend approved by the Board on February
11, 2005 (the "Special Cash Dividend"). It is the expectation of the parties
that such Special Cash Dividend will be paid as soon as practicable following
the date the Company Stockholder Approval is obtained.
Section 6.17 Bankruptcy Court Order. The Company will use its reasonable
efforts to obtain an order in form and in substance satisfactory to Parent,
issued by the United States Bankruptcy Court for the Southern District of New
York providing that following the Effective Time of the Merger, the Surviving
Entity may issue shares of Parent Common Stock in lieu of shares of Company
Common Stock to which certain general unsecured creditors would have been
entitled prior to the Effective Time in satisfaction of their claims pursuant to
the Debtors' Modified Second Amended Joint Plan of Reorganization dated October
21, 2003 (the "Bankruptcy Court Order"). In addition, the parties will cooperate
with regard to the possibility of seeking an order to the effect that such
shares of Parent Common Stock will be exempt from registration under the
Securities Act pursuant to Section 1145(a) of the Bankruptcy Code.
Section 6.18 Settlement of Bankruptcy Claims. The Company will not settle
any Bankruptcy Claims or any matter directly arising out of the Bankruptcy
Claims for a plan-affected amount of cash in excess of $15,000,000 without first
providing Parent with written notification setting forth the terms of such
settlement. Such notification shall be delivered to Parent no less than three
Business Days prior to the settlement date. Parent shall have an opportunity to
comment on the terms of such settlement and the Company will consider Parent's
comments in good faith. The Company shall provide Parent regular updates about
the status of the Bankruptcy Claims in the format produced by Huron (or any
replacement system used by the Company after the date hereof), which updates
shall be provided no less often than monthly.
Section 6.19 No Amendment of Plan of Reorganization. Unless required by
Law, the Company shall not take any action to amend or modify the Plan of
Reorganization of WorldCom, Inc. and certain of its Subsidiaries under Chapter
11 of the Bankruptcy Code, confirmed by the United States Bankruptcy Court for
the Southern District of New York on October 31, 2003 and consummated on April
20, 2004.
Section 6.20 Restoring Trust. The Company has, since November, 2002, had
the oversight of a Corporate Monitor, pursuant to a permanent injunction entered
by the
00
Xxxxxx Xxxxxx Xxxxxxxx Xxxxx for the Southern District of New York against the
Company's predecessor company on November 26, 2002. As part of his oversight,
the Corporate Monitor developed corporate governance principles and processes
entitled Restoring Trust, which guided the Company's predecessor company and the
Company through the present, and the Company has fully complied with Restoring
Trust. The Company will use its reasonable best efforts to obtain an Order,
satisfactory to Parent, from the United States District Court for the Southern
District of New York (the "Corporate Monitor Order"), (i) confirming the
successful conclusion of the efforts of the Corporate Monitor, (ii) concluding
that the function of the Corporate Monitor is no longer necessary, (iii)
relieving the Company from the oversight of the Corporate Monitor, prior to or
upon the Effective Time, (iv) acknowledging that Parent and its Subsidiaries,
including the Surviving Entity, will not be subject to Restoring Trust or any
related or similar corporate governance restrictions and (v) making such changes
to the permanent injunctions entered by such Court as shall be necessary to
effectuate the foregoing. In addition, the Company will use its reasonable best
efforts to have such permanent injunctions dissolved.
Section 6.21 Network Facility Maintenance and Compliance. The Company and
the Company Subsidiaries will maintain or cause Owned Network Facilities and
Leased Network Facilities, taken as a whole, to be maintained in Good Condition
and in compliance with standard industry practice through the Closing Date.
Section 6.22 Section 16 of the Exchange Act. Prior to the Effective Time,
each of Parent and the Company shall take all such steps as may be required to
cause any dispositions of Company Common Stock (including derivative securities
with respect to Company Common Stock) or acquisitions of Parent Common Stock
(including derivative securities with respect to Parent Common Stock) resulting
from the transactions contemplated by Article I or Article II of this Agreement
by each individual who is subject to the reporting requirements of Section 16(a)
of the Exchange Act, to be exempt under Rule 16b-3 promulgated under the
Exchange Act, such steps to be taken in accordance with the guidance provided by
the SEC.
Section 6.23 Tax Treatment. Subject to Section 1.9, Parent and the Company
and each of their respective Affiliates shall use their commercially reasonable
efforts to cause the Merger to qualify as a reorganization within the meaning of
Section 368(a) of the Code and to obtain the opinions of Debevoise & Xxxxxxxx
LLP and Xxxxx Xxxx & Xxxxxxxx referred to in Sections 7.4(a) and 7.4(b) of this
Agreement, including by providing such customary representations as counsel may
reasonably request in connection with such opinions. Notwithstanding the
foregoing, nothing in this Section 6.23 shall limit Parent in providing cash
consideration where permitted or required by this Agreement, even if doing so
would jeopardize qualification of the Merger as a reorganization.
57
ARTICLE VII
CONDITIONS PRECEDENT
Section 7.1 Conditions to Each Party's Obligation to Effect the Merger.
The respective obligations of the Company, Parent and Merger Sub to effect the
Merger are subject to the satisfaction or waiver on or prior to the Closing Date
of the following conditions:
(a) Stockholder Approval. The Company shall have obtained the
Company Stockholder Approval.
(b) NYSE Listing. The shares of Parent Common Stock to be issued in
the Merger and such other shares to be reserved for issuance in connection with
the Merger shall have been approved for listing on the NYSE, subject to official
notice of issuance.
(c) Regulatory Approval. (i) The waiting period (and any extension
thereof) applicable to the Merger under the HSR Act shall have been terminated
or shall have expired, any investigation opened by means of a second request for
additional information or otherwise shall have been terminated or closed and no
action shall have been instituted by the Department of Justice or the Federal
Trade Commission challenging or seeking to enjoin the consummation of this
transaction, which action shall not have been withdrawn or terminated, (ii) the
authorization required to be obtained from the FCC for the consummation of the
Merger shall have been obtained, (iii) all approvals, if any, required to be
obtained (A) with or from any state public service or public utility commissions
or similar state regulatory bodies listed in Section 7.1(c) of the Company
Disclosure Letter or (B) under any foreign antitrust, competition or similar
Laws, in each case in connection with the consummation of the Merger and the
transactions contemplated by this Agreement, shall have been obtained (except,
in the case of clause (B), for any failures to obtain such approvals that would
not, individually or in the aggregate, reasonably be expected to result in a
Specified Material Adverse Effect) and (iv) all other notices, reports, filings,
consents, registrations, approvals, permits or authorizations required to be
made prior to the Effective Time by the Company or Parent or any of their
respective Subsidiaries with, or obtained prior to the Effective Time by the
Company or Parent or any of their respective Subsidiaries from, any Governmental
Entity in connection with the execution and delivery of this Agreement and the
consummation of the Merger and the other transactions contemplated hereby, the
failure of which to make or obtain would, individually or in the aggregate,
provide a reasonable basis to conclude that the Company or the Parent or their
respective directors or officers would be subject to the risk of criminal
liability, shall have been made or obtained.
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(d) No Injunctions or Restraints, Illegality. No Laws shall have
been adopted or promulgated, and no temporary restraining order, preliminary or
permanent injunction or other order, judgment, decision, opinion or decree
issued by a court or other Governmental Entity of competent jurisdiction having
the effect of making the Merger illegal or otherwise prohibiting consummation of
the Merger, except by Governmental Entities outside the United States as would
not, individually or in the aggregate, reasonably be expected to be material to
Parent and which do not provide a reasonable basis to conclude that the Company,
Parent or their respective directors or officers would be subject to the risk of
criminal liability.
(e) Effectiveness of the Form S-4. The Form S-4 shall have been
declared effective by the SEC under the Securities Act. No stop order suspending
the effectiveness of the Form S-4 shall have been issued by the SEC and no
proceedings for that purpose shall have been initiated or threatened by the SEC.
(f) Determination of Specified Included Liabilities Amount. The
Specified Included Liabilities Amount shall have been determined pursuant to
Section 1.10.
Section 7.2 Conditions to Obligations of Parent and Merger Sub. The
obligations of Parent and Merger Sub to effect the Merger are subject to the
satisfaction of, or waiver by Parent, on or prior to the Closing Date of the
following additional conditions:
(a) Representations and Warranties. Each of the representations and
warranties of the Company set forth in this Agreement, in each case, made as if
none of such representations and warranties contained any qualifications or
limitations as to "materiality" or Company Material Adverse Effect, shall be
true and correct, in each case, as of the date of this Agreement and as of the
Closing Date as though made on and as of the Closing Date (except to the extent
in either case that such representations and warranties speak as of another
date), except where the failure of such representations and warranties to be
true and correct as so made does not have and is not, individually or in the
aggregate, reasonably likely to have, a Company Material Adverse Effect,
provided that the representations and warranties of the Company in Sections
3.3(a), (b), (d) and (e) (with respect to the Company only, and not the Company
Subsidiaries) and 3.4 shall be true in all material respects. Parent shall have
received a certificate of the chief executive officer or the chief financial
officer of the Company to such effect.
(b) Performance of Obligations of the Company. The Company shall
have performed or complied in all material respects with all agreements and
covenants required to be performed by it under this Agreement at or prior to the
Closing Date and Parent shall have received a certificate of the chief executive
officer or the chief financial officer of the Company to such effect.
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(c) No Litigation. There shall be no pending suit, action or
proceeding by any U.S. Governmental Entity, in each case that has a reasonable
likelihood of success, (i) challenging the acquisition by Parent or Merger Sub
of any Company Common Stock, seeking to restrain or prohibit the consummation of
the Merger or any other transaction or seeking to obtain from the Company,
Parent or Merger Sub any damages that are material in relation to the Company
and the Company Subsidiaries taken as a whole, (ii) seeking to prohibit or limit
the ownership or operation by the Company, Parent or any of their respective
Subsidiaries of any material portion of the business or assets of the Company,
Parent or any of their respective Subsidiaries, or to compel the Company, Parent
or any of their respective Subsidiaries to dispose of or hold separate any
material portion of the business or assets of the Company, Parent or any of
their respective Subsidiaries, as a result of the Merger or any other
transaction, (iii) seeking to impose limitations on the ability of Parent to
acquire or hold, or exercise full rights of ownership of, any shares of Company
Common Stock, including the right to vote the Company Common Stock purchased by
it on all matters properly presented to the stockholders of the Company, or (iv)
seeking to prohibit Parent or any of its Subsidiaries from effectively
controlling in any material respect the business or operations of the Company
and the Company Subsidiaries.
(d) Receipt of Bankruptcy Court Order. The United States Bankruptcy
Court for the Southern District of New York shall have issued the Bankruptcy
Court Order in form and substance reasonably satisfactory to Parent.
(e) Corporate Monitor. The United States District Court for the
Southern District of New York shall have issued the Corporate Monitor Order in
form and substance reasonably satisfactory to Parent; and there shall have been
no amendment after the date hereof to the permanent injunctions issued by such
court adverse to Parent or its Subsidiaries.
(f) No Material Change. From the period beginning on the date of
this Agreement, there shall not have been any state of facts, event, change,
effect, development, condition or occurrence that, individually or in the
aggregate, has had or would reasonably be expected to have a Company Material
Adverse Effect.
(g) Regulatory Approval. The condition set forth in Section 7.1(c)
shall have been satisfied on terms that, individually or in the aggregate, would
not reasonably be expected to have a Specified Material Adverse Effect.
Section 7.3 Conditions to Obligations of the Company. The obligations of
the Company to effect the Merger are subject to the satisfaction of, or waiver
by the Company, on or prior to the Closing Date of the following additional
conditions:
(a) Representations and Warranties. Each of the representations and
warranties of Parent and Merger Sub set forth in this Agreement, in each case,
made as if none of such representations and warranties contained any
qualification or limitation as to
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"materiality" or Parent Material Adverse Effect, shall be true and correct, in
each case, as of the date of this Agreement and as of the Closing Date as though
made on and as of the Closing Date (except to the extent in either case that
such representations and warranties speak as of another date), except where the
failure of such representations and warranties to be true and correct as so made
does not have and is not, individually or in the aggregate, reasonably likely to
have, a Parent Material Adverse Effect, provided that the representations and
warranties of Parent and Merger Sub in Sections 4.2 (with respect to Parent
only, and not the Subsidiaries of Parent) and 4.3 shall be true in all material
respects. The Company shall have received a certificate of the chief executive
officer or the chief financial officer of Parent to such effect.
(b) Performance of Obligations of Parent and Merger Sub. Parent and
Merger Sub shall have performed or complied in all material respects with all
agreements and covenants required to be performed by each of them under this
Agreement at or prior to the Closing Date and the Company shall have received a
certificate of the chief executive officer or the chief financial officer of
Parent to such effect.
(c) No Material Change. From the period beginning on the date of
this Agreement, there shall not have been any state of facts, event, change,
effect, development, condition or occurrence that, individually or in the
aggregate, has had or would reasonably be expected to have a Parent Material
Adverse Effect.
Section 7.4 Additional Conditions. The obligations of Parent and the
Company to effect the Merger as a merger of the Company with and into Merger Sub
are subject to the satisfaction of, or waiver by the appropriate party, on or
prior to the Closing Date of the following additional conditions:
(a) with respect to the obligations of Parent, that Parent shall
have received the opinion of Debevoise & Xxxxxxxx LLP, counsel to Parent, dated
the Closing Date, to the effect that the Merger will be treated for U.S. federal
income tax purposes as a "reorganization" within the meaning of Section 368(a)
of the Code, and that each of the Parent and the Company will be a party to that
reorganization within the meaning of Section 368(b) of the Code;
(b) with respect to the obligations of the Company, that the Company
shall have received the opinion of Xxxxx Xxxx & Xxxxxxxx, counsel to the
Company, dated the Closing Date, to the effect that the Merger will be treated
for U.S. federal income tax purposes as a "reorganization" within the meaning of
Section 368(a) of the Code, and that each of the Parent and the Company will be
a party to that reorganization within the meaning of Section 368(b) of the Code.
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In the event either of the above conditions fails to be satisfied or waived by
the appropriate party, the transactions contemplated hereby shall be effected in
the form of the Alternative Merger as provided in Section 1.9.
ARTICLE VIII
TERMINATION AND AMENDMENT
Section 8.1 Termination. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned at any time prior to the
Effective Time, whether before or after receipt of the Company Stockholder
Approval:
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company, if:
(i) the Merger shall not have been consummated by February 14, 2006,
whether such date is before or after the date of the Company Stockholder
Approval referred to in Section 7.1(a), (A) provided, that in the event
that, as of February 14, 2006, the conditions set forth in Section 7.1(c)
or 7.2(g) have not been satisfied, the termination date may be extended
from time to time by Parent or the Company by up to an aggregate of 180
days and (B) provided, further, that in the event that as of February 14,
2006 (as such date may be extended pursuant to clause (A)), an agreement
or resolution of any dispute regarding the adjustment for Specified
Included Liabilities at the Closing pursuant to Section 1.10 has not been
reached, the termination date may be extended from time to time by Parent
or the Company by up to an aggregate of 120 days (such date, including any
such permitted extensions thereof, the "Outside Date") and provided,
further, that the right to terminate the Agreement pursuant to this
Section 8.1(b)(i) shall not be available to any party whose failure to
perform any of its obligations under this Agreement primarily contributes
to the failure of the Merger to be consummated by such time;
(ii) any Governmental Entity of competent jurisdiction issues a
final, non-appealable order, judgment, decision, opinion, decree or
ruling, which prevents the fulfillment of the condition set forth in
Section 7.1(d); or
(iii) the Company Stockholder Approval shall not have been obtained
at the Company Stockholders Meeting or any adjournment or postponement
thereof; provided that the right to terminate the Agreement pursuant to
this Section 8.1(b)(iii) shall not be available to the Company if it has
not complied with its obligations under Section 6.5.
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(c) by Parent, if:
(i) the Company shall have breached or failed to perform in any
material respect any of its representations, warranties or covenants
contained in this Agreement, which breach or failure to perform (A) is
incapable of being cured by the Company prior to the Outside Date or is
not cured by the earlier of (x) 30 Business Days following written notice
to the Company by Parent of such breach or (y) the Outside Date, and (B)
would result in a failure of any condition set forth in Sections 7.2(a) or
(b);
(ii) the Company or any of the Company Subsidiaries or their
respective Representatives shall have breached in any respect their
respective obligations under Section 6.5; or
(iii) subject to the penultimate sentence of Section 6.5(c), the
Board of Directors shall (A) fail to authorize, approve or recommend the
Merger, or (B) effect a Change in the Company Recommendation or, in the
case of a Takeover Proposal made by way of a tender offer or exchange
offer, fail to recommend that the Company's stockholders reject such
tender offer or exchange offer within the ten Business Day period
specified in Section 14e-2(a) under the Exchange Act;
(d) by the Company:
(i) if Parent shall have breached or failed to perform in any
material respect any of its representations, warranties or covenants
contained in this Agreement, which breach or failure to perform (A) is
incapable of being cured by Parent prior to the Outside Date or is not -
cured by the Outside Date and (B) would result in a failure of any
condition set forth in Sections 7.3(a) or (b); or -
(ii) pursuant to the last sentence of Section 6.5(c) or if the Board
of Directors of the Company authorizes the Company, subject to complying
with the Section 6.5(c), to enter into a definitive agreement providing
for the implementation of a Superior Proposal, and, in either case, the
Company, prior to the termination of this Agreement, pays the Termination
Fee (as defined in Section 8.3(a)) to Parent.
Section 8.2 Effect of Termination. In the event of any termination of this
Agreement as provided in Section 8.1, the obligations of the parties hereunder
shall terminate and there shall be no liability on the part of any party hereto
with respect thereto, except for the confidentiality provisions of Section 6.3
and the provisions of this Section 8.2, Section 8.3 and Article IX, each of
which shall remain in full force and
63
effect; provided, however, that no party hereto shall be relieved or released
from any liability or damages arising from a willful breach of any provision of
this Agreement.
Section 8.3 Termination Fee.
(a) If this Agreement is terminated pursuant to any of the following
provisions, the Company shall pay to Parent a fee equal to $200,000,000
(the "Termination Fee"), which Termination Fee shall be Parent's sole
remedy in respect of termination of this Agreement except in the case of
any willful breach of this Agreement by the Company:
(i) Sections 8.1(c)(ii) or (iii);
(ii) Section 8.1(d)(ii);
(iii) Section 8.1(b)(iii), provided that (A) after the date of this
Agreement, any Person makes a Takeover Proposal or amends or reasserts a
Takeover Proposal made prior to the date of this Agreement and such
Takeover Proposal becomes publicly known prior to the Company Stockholders
Meeting (and such Takeover Proposal shall not have been withdrawn at the
time of the Company Stockholders Meeting), and (B) within twelve months
after the date of such termination, the Company enters into a definitive
agreement to consummate, or consummates, the transactions contemplated by
a Takeover Proposal; and provided, further, that, solely for purposes of
this Section 8.3(a)(iii), the term "Takeover Proposal" shall have the
meaning ascribed thereto in Section 6.5(e), except that all references to
15% shall be changed to 40%; or
(iv) Section 8.1(c)(i), provided, that such termination is based on
a material breach of Section 6.2.
(b) If the Company is required to pay Parent a Termination Fee, such
Termination Fee shall be payable immediately prior to termination of this
Agreement in the event of termination by the Company, and not later than one
Business Day after the receipt by the Company of a notice of termination from
Parent in the event of termination by Parent, in each case by wire transfer of
immediately available funds to an account designated by Parent (except that, in
the case of termination pursuant to Section 8.1(b)(iii), such payment shall be
made on the date of the first to occur of the events referred to in clause (B)
of Section 8.3(a)(iii)).
(c) The parties each agree that the agreements contained in this
Section 8.3 are an integral part of the transaction contemplated by this
Agreement, and that, without these agreements, Parent would not enter into this
Agreement; accordingly, if the Company fails promptly to pay any amounts due
under this Section 8.3 and, in order to obtain such payment, Parent commences a
suit that results in a judgment against
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the Company for such amounts, the Company shall pay interest on such amounts
from the date payment of such amounts were due to the date of actual payment at
the prime rate of Citibank, N.A. in effect on the date such payment was due,
together with the costs and expenses of Parent (including reasonable legal fees
and expenses) in connection with such suit.
ARTICLE IX
GENERAL PROVISIONS
Section 9.1 Non-Survival of Representations, Warranties and Agreements.
None of the representations, warranties, covenants and other agreements in this
Agreement or in any instrument delivered pursuant to this Agreement, including
any rights arising out of any breach of such representations, warranties,
covenants and other agreements, shall survive the Effective Time, except for
those covenants and agreements contained herein and therein (including Section
6.8) that by their terms apply or are to be performed in whole or in part after
the Effective Time and this Article IX.
Section 9.2 Notices. All notices and other communications hereunder shall
be in writing and shall be deemed duly given (i) on the date of delivery if
delivered personally, or by telecopy or telefacsimile, upon confirmation of
receipt, (ii) on the first Business Day following the date of dispatch if
delivered by a recognized next-day courier service, or (iii) on the third
Business Day following the date of mailing if delivered by registered or
certified mail, return receipt requested, postage prepaid. All notices hereunder
shall be delivered as set forth below, or pursuant to such other instructions as
may be designated in writing by the party to receive such notice:
If to Parent or Merger Sub, to:
Verizon Communications Inc.
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopier: (000) 000-0000
Attention: Corporate Secretary
with a copy (which shall not constitute notice) to:
Debevoise & Xxxxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopier: (000) 000-0000
Attention: Xxxxxxx X. Xxxxx, Esq.
Xxxxxxx X. Xxxxxx, Esq.
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If to the Company, to:
MCI, Inc.
00000 Xxxxxxx Xxxxxx Xxxxxxx
Xxxxxxx, Xxxxxxxx 00000
Telecopier: (000) 000-0000
Attention: Xxxxxxxxx X. Xxxxx, Esq.
with a copy (which shall not constitute notice) to:
Xxxxx, Polk & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopier: (000) 000-0000
Attention: Xxxxxxx X. Xxxxx, Esq.
Section 9.3 Interpretation.
(a) When a reference is made in this Agreement to Sections, Exhibits
or Schedules, such reference shall be to a Section of or Exhibit or Schedule to
this Agreement unless otherwise indicated. The table of contents and headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. Whenever the words
"include," "includes" or "including" are used in this Agreement, they shall be
deemed to be followed by the words "without limitation."
(b) Items disclosed on one particular party's disclosure letter
relating to one section of this Agreement shall be deemed to be constructively
disclosed or listed on such party's disclosure letter relating to other sections
of this Agreement only to the extent it is reasonably apparent on the face of
such disclosure letter that such disclosure is applicable to such other
sections.
Section 9.4 Counterparts; Effectiveness. This Agreement may be executed in
two or more counterparts, each of which shall be deemed to be an original but
all of which shall constitute one and the same instrument. This Agreement shall
become effective when each party hereto shall have received counterparts thereof
signed and delivered (by telecopy or otherwise) by all of the other parties
hereto.
Section 9.5 Entire Agreement; Third Party Beneficiaries.
(a) This Agreement (including the Exhibits and the parties'
disclosure letters hereto) and the Confidentiality Agreement constitute the
entire agreement, and
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supersede all prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter hereof and thereof.
(b) This Agreement shall be binding upon and inure solely to the
benefit of each party hereto, and nothing in this Agreement, express or implied,
is intended to or shall confer upon any Person not a party to this Agreement any
rights, benefits or remedies of any nature whatsoever, other than Section 6.8
(which is intended to be for the benefit of the Persons covered thereby and may
be enforced by such Persons).
Section 9.6 Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any law or public policy,
all other terms 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 materially
adverse to any party. Notwithstanding the foregoing, 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 in order that the transactions contemplated hereby are
consummated as originally contemplated to the greatest extent possible.
Section 9.7 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties, in
whole or in part (whether by operation of law or otherwise), without the prior
written consent of the other party, and any attempt to make any such assignment
without such consent shall be null and void, except that Merger Sub may assign,
in its sole discretion, any or all of its rights, interests and obligations
under this Agreement to any direct wholly owned Subsidiary of Parent without the
consent of the Company, but no such assignment shall relieve Merger Sub of any
of its obligations under this Agreement. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and assigns. Parent agrees to cause
Merger Sub to fulfill all of its obligations hereunder.
Section 9.8 Amendment. This Agreement may be amended by the parties, by
action taken or authorized by their respective Boards of Directors, at any time
before or after approval of the matters presented in connection with the Merger
by the stockholders of the Company, but, after such approval, no amendment shall
be made which by law or in accordance with the rules of any relevant stock
exchange requires further approval by such stockholders without such further
approval. This Agreement may not be amended except by an instrument in writing
signed on behalf of each of the parties.
Section 9.9 Extension; Waiver. At any time prior to the Effective Time,
the parties, by action taken or authorized by their respective Boards of
Directors, may, to the
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extent legally allowed, (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 hereto to any
such extension or waiver shall be valid only if set forth in a written
instrument signed on behalf of such party. The failure of any party to this
Agreement to assert any of its rights under this Agreement or otherwise shall
not constitute a waiver of those rights.
Section 9.10 GOVERNING LAW AND VENUE; WAIVER OF JURY TRIAL.
(a) THIS AGREEMENT SHALL BE DEEMED TO BE MADE IN AND IN ALL RESPECTS
SHALL BE INTERPRETED, CONSTRUED AND GOVERNED BY AND IN ACCORDANCE WITH THE LAW
OF THE STATE OF NEW YORK WITHOUT REGARD TO ITS RULES OF CONFLICTS OF LAW EXCEPT
TO THE EXTENT THAT THE LAW OF THE STATE OF DELAWARE IS MANDATORILY APPLICABLE TO
THE MERGER. The parties hereby irrevocably submit to the jurisdiction of the
courts of the County and State of New York and the State of Delaware and the
Federal courts of the United States of America located in the County and State
of New York or the State of Delaware solely in respect of the interpretation and
enforcement of the provisions of this Agreement and of the documents referred to
in this Agreement, and in respect of the transactions contemplated hereby, and
hereby waive, and agree not to assert, as a defense in any action, suit or
proceeding for the interpretation or enforcement hereof or of any such document,
that it is not subject thereto or that such action, suit or proceeding may not
be brought or is not maintainable in said courts or that the venue thereof may
not be appropriate or that this Agreement or any such document may not be
enforced in or by such courts, and the parties hereto irrevocably agree that all
claims with respect to such action or proceeding shall be heard and determined
in such a New York State, Delaware State or Federal court. The parties hereby
consent to and grant any such court jurisdiction over the person of such parties
solely for such purpose and over the subject matter of such dispute and agree
that mailing of process or other papers in connection with any such action or
proceeding in the manner provided in Section 9.2 or in such other manner as may
be permitted by law shall be valid and sufficient service thereof.
(b) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH
MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT
ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY
WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT,
OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND
ACKNOWLEDGES
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THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH PARTY
UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH PARTY
MAKES THIS WAIVER VOLUNTARILY, AND (iv) EACH PARTY HAS BEEN INDUCED TO ENTER
INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION 9.10(b).
Section 9.11 Enforcement. The parties hereto agree that irreparable damage
would occur in the event that any provision of this Agreement was not performed
in accordance with its specific terms or was otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in any court of competent jurisdiction, this
being in addition to any other remedy to which they are entitled at law or in
equity.
Section 9.12 Definitions. As used in this agreement:
An "Affiliate" of any Person means another Person that directly or
indirectly through one or more intermediaries, controls, is controlled by, or is
under common control with, such first Person, where "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management policies of a Person, whether through the ownership
of voting securities, by contract, as trustee or executor or otherwise.
"Aggregate Incremental Amount" equals the product of (i) the Incremental
Amount multiplied by (ii) the sum of (x) the number of shares of Company Common
Stock issued and outstanding immediately prior to the Effective Time (excluding
any Excluded Shares) and (y) the number of shares of shares reserved for
issuance pursuant to the Chapter 11 Plan that are unissued immediately prior to
the Effective Time (which number shall not exceed 5,375,000 minus the number of
shares so issued after the date here).
"Bankruptcy Cases" means the Debtors' cases under chapter 11 of the
Bankruptcy Code in the United States Bankruptcy Court for the Southern District
of New York, jointly administered under Chapter 11 Case No. 02-13533 (AJG).
"Bankruptcy Claims" means (i) all pre-petition claims filed in the
Bankruptcy Cases as of the Closing Date, (ii) all administrative expense claims
filed in the Bankruptcy Cases as of the Closing Date and (iii) all Tax claims
filed, asserted in writing or of which Debtors have actual knowledge as of the
Closing Date that constitute or would constitute administrative expense claims
in the Bankruptcy Cases.
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"Bankruptcy Code" means title 11 of the United States Code.
"beneficial ownership" or "beneficially own" has the meaning under Section
13(d) of the Exchange Act and the rules and regulations thereunder.
"Board of Directors" means the Board of Directors of any specified Person
and any committees thereof.
"Business" means the business and operations of the Company and the
Company Subsidiaries as currently conducted.
"Business Day" means any day on which banks are not required or authorized
to close in the City of New York.
"Chapter 11 Plan" means the Debtors' Modified Second Amended Joint Plan of
Reorganization Under Chapter 11 of the Bankruptcy Code, dated October 21, 2003
(as thereafter modified through October 31, 2003) filed in the Bankruptcy Cases
by WorldCom, Inc. and certain of its direct and indirect Subsidiaries, as
debtors and debtors in possession.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Company Benefit Plans" means each written or oral employee benefit plan,
scheme, program, policy, arrangement and contract (including, but not limited
to, any "employee benefit plan," as defined in Section 3(3) of ERISA, whether or
not subject to ERISA, and any bonus, deferred compensation, stock bonus, stock
purchase, restricted stock, stock option or other equity-based arrangement, and
any employment, termination, retention, bonus, change in control or severance
plan, program, policy, arrangement or contract) for the benefit of any current
or former officer, employee or director of the Company or any Company Subsidiary
that is maintained or contributed to by the Company or any Company Subsidiary,
or with respect to which any of them could incur material liability under the
Code or ERISA or any similar non-U.S. law.
"Company Common Stock" means the common stock, $.01 par value, of the
Company.
"Company Financial Statements" means the consolidated financial statements
of the Company and the Company Subsidiaries included in the Company SEC
Documents together, in the case of year-end statements, with reports thereon by
KPMG LLP, the independent auditors of the Company, including in each case a
consolidated balance sheet, a consolidated statement of income, a consolidated
statement of shareholders' equity and a consolidated statement of cash flows,
and accompanying notes.
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"Company Intellectual Property" means all Intellectual Property owned by
or used by the Company or any of the Company Subsidiaries in the Business.
"Company Material Adverse Effect" means a material adverse effect on (i)
the business, financial condition or results of operations of the Company and
its Subsidiaries, taken as a whole, other than any such effect relating to or
resulting from (x) changes or conditions affecting the economy or financial
markets in general or changes in political or regulatory conditions generally,
(y) general changes in the segments of the telecommunications industry in which
the Company or any of its Subsidiaries operates or (z) the announcement or
consummation of this Agreement or (ii) the ability of the Company to perform its
obligations under this Agreement or to consummate the transactions contemplated
by this Agreement.
"Company Restricted Share" shall mean each share of restricted Company
Common Stock granted and awarded pursuant to a Company Benefit Plan.
"Company Rights" means the rights distributed to the holders of Company
Common Stock pursuant to the Rights Agreement.
"Constituent Documents" means with respect to any entity, the Certificate
or Articles of Incorporation, the Bylaws of such entity, the minute books, or
any similar charter or other organizational documents of such entity.
"Debtors" has the meaning given in the Chapter 11 Plan.
"Dissenting Shares" means shares of Company Common Stock as to which the
holder thereof has exercised appraisal rights pursuant to Section 262 of the
DGCL.
"Environmental Law" means any foreign, federal, state or local law,
treaty, statute, rule, regulation, order, ordinance, decree, injunction,
judgment, governmental restriction or any other requirement of law (including
common law) regulating or relating to the protection of human health, safety (as
it relates to Releases to Hazardous Substances), natural resources or the
environment, including, without limitation, laws relating to wetlands,
pollution, contamination or the use, generation, management, handling,
transport, treatment, disposal, storage, Release or threatened Release of
Hazardous Substances.
"Environmental Permit" means any permit, license, authorization or consent
required pursuant to applicable Environmental Laws.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
71
"Exchange Act" means the Securities and Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Excluded Shares" means any shares of Company Common Stock (a) held by
the Company, Parent, Merger Sub, any other wholly owned Subsidiary of Parent or
any wholly owned Subsidiary of the Company, in each case except for any such
shares held on behalf of third parties, or (b) as to which the holder thereof
has exercised appraisal rights pursuant to Section 262 of the DGCL.
"Final Remaining Specified Included Liabilities Amount" means the
amount determined pursuant to Section 1.10(b) or Section 1.10(d), as the case
may be, to be the final Remaining Specified Included Liabilities Amount, with
Specified International Tax Liabilities translated into U.S. dollars using the
most recent closing spot exchange rate as of the date of determination.
"Governmental Entity" means any nation or government or multinational
body, any state, agency, commission (including, without limitation, the FCC), or
other political subdivision thereof or any entity (including a court) exercising
executive, legislative, judicial or administration functions of or pertaining to
government, any stock exchange or self regulatory entity supervising, organizing
and supporting any stock exchange.
"Hazardous Substances" means any substance that: (i) is or contains
asbestos, urea formaldehyde insulation, polychlorinated biphenyls, petroleum,
petroleum products or petroleum-derived substances or wastes, radon gas,
microbial or microbiological contamination or related materials, (ii) requires
investigation or remedial action pursuant to any Environmental Law or (iii) is
defined, listed or identified as a "hazardous waste," "hazardous substance,"
"toxic substance" or words of similar import thereunder, or (iv) is regulated
under any Environmental Law.
"Indebtedness" means, with respect to any Person, without duplication,
(i) all obligations of such Person for borrowed money, or with respect to
deposits or advances of any kind, (ii) all obligations of such Person evidenced
by bonds, debentures, notes or similar instruments, (iii) all obligations of
such Person upon which interest charges are customarily paid (other than trade
payables incurred in the ordinary course of business consistent with past
practices or, in the case of the Company or any Company Subsidiary, incurred in
a commercially reasonable manner consistent with industry practice), (iv) all
obligations of such Person under conditional sale or other title retention
agreements relating to any property purchased by such Person, (v) all
obligations of such Person issued or assumed as the deferred purchase price of
property or services (excluding obligations of such Person to creditors for raw
materials, inventory, services and supplies incurred in the ordinary course of
business consistent with past practices, or, in the case of the Company or any
Company Subsidiary, incurred in a commercially reasonable manner consistent with
industry practice), (vi) all lease obligations of such Person
72
capitalized on the books and records of such Person, (vii) all obligations of
others secured by a Lien on property or assets owned or acquired by such Person,
whether or not the obligations secured thereby have been assumed, (viii) all
obligations of such Person under interest rate, currency or commodity
derivatives or hedging transactions, (ix) all letters of credit or performance
bonds issued for the account of such Person (excluding (a) letters of credit
issued for the benefit of suppliers to support accounts payable to suppliers
incurred in the ordinary course of business consistent with past practices, or,
in the case of the Company or any Company Subsidiary, incurred in a commercially
reasonable manner consistent with industry practice, (b) standby letters of
credit relating to workers' compensation insurance and surety bonds and (c)
surety bonds and customs bonds) and (x) all guarantees and arrangements having
the economic effect of a guarantee of such Person of any Indebtedness of any
other Person.
"Intellectual Property" means all trademarks, service marks, trade
names, trade dress, including all goodwill associated with the foregoing, domain
names, copyrights, Software, Internet Web sites, mask works and other
semiconductor chip rights, moral rights, and similar rights, and registrations
and applications to register or renew the registration of any of the foregoing,
patents and patent applications, Trade Secrets, and all other intellectual
property rights.
"Intellectual Property Licenses" means all agreements to which the
Company or any of the Company Subsidiaries is a party or by which any of them is
otherwise bound that relate to Intellectual Property, including: (i) licenses of
Intellectual Property to the Company or any of the Company Subsidiaries by any
other Person; (ii) licenses of Intellectual Property to any other Person by the
Company or any of the Company Subsidiaries; (iii) agreements otherwise granting
or restricting the right to use any Intellectual Property; and (iv) agreements
transferring, assigning, indemnifying with respect to or otherwise relating to
Intellectual Property used or held for use in the Business.
"IRS" means the Internal Revenue Service.
"IRUs" means Indefeasible Rights to Use.
"known" or "knowledge" means, with respect to any party, the knowledge
of such party's executive officers and senior management.
"Law" (and with the correlative meaning "Laws") means rule, regulation,
statute, order, ordinance, guideline, code or other legally enforceable
requirement, including, but not limited to common law, state and federal laws or
securities laws and laws of foreign jurisdictions.
73
"Leased Network Facilities" means all of the Company's and the Company
Subsidiaries' Network Facilities that are not owned by the Company or the
Company Subsidiaries but are provided under lease, license, IRUs or other
agreements, including Right-of-Way Agreements between the Company or the Company
Subsidiaries and third persons or entities.
"Leased Real Property" means all interests leased pursuant to the
Leases.
"Leases" means leases, subleases, licenses and occupancy agreements.
"Liens" means any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), other charge or security
interest; or any preference, priority or other agreement or preferential
arrangement of any kind or nature whatsoever (including, without limitation, any
conditional sale or other title retention agreement, or any capital lease having
substantially the same economic effect as any of the foregoing).
"Nasdaq" means The NASDAQ National Market.
"Network Facilities" means all of the Company's and the Company
Subsidiaries' material network facilities (including, cable, wires, conduits,
switches, and other equipment and facilities) and related material operating
support systems, network operations centers, and land and buildings. For
purposes of this definition "material" shall mean any network facility the
absence of which would materially and adversely affect the ability of the
Company or any of its Subsidiaries to use the Company's domestic or
international networks, respectively, taken as a whole, in the manner and scope
in which such respective network is currently being used.
"Network Facility Agreement" means agreements under which third Persons
provide Network Facilities to the Company and the Company Subsidiaries,
including leases, licenses, IRUs and Right-of-Way-Agreements.
"Order" means any charge, order, writ, injunction, judgment, decree,
ruling, determination, directive, award or settlement, whether civil, criminal
or administrative and whether formal or informal, applicable to the Company or
any Company Subsidiary.
"other party" means, with respect to the Company, Parent and means,
with respect to Parent, the Company, unless the context otherwise requires.
"Owned Network Facilities" means Network Facilities that are owned by
the Company or the Company Subsidiaries.
"Owned Real Property" means real property, together with all
improvements and fixtures presently or hereafter located thereon or attached or
appurtenant thereto or owned
74
by the Company or any of the Company Subsidiaries, and all easements, licenses,
rights and appurtenances relating to the foregoing.
"Paid Specified Included Liabilities Amount" means the amount of cash
in U.S. dollars that has actually been spent from and after January 1, 2005
through the Closing Date to satisfy Specified Included Liabilities. If any such
cash has been spent in a currency other than the U.S. dollar, such amount shall
be translated into U.S. dollars using the closing spot exchange rate on the date
of payment.
"Parent Common Stock" means the common stock, par value $0.10 per
share, of Parent.
"Parent Material Adverse Effect" means a material adverse effect on (i)
the business, financial condition or results of operations of the Parent and its
Subsidiaries, taken as a whole, other than any such effect relating to or
resulting from (x) changes or conditions affecting the economy or financial
markets in general or changes in political or regulatory conditions generally,
(y) changes in the segments of the telecommunications industry in which the
Parent or any of its Subsidiaries operates or (z) the announcement or
consummation of this Agreement or (ii) the ability of the Parent or Merger Sub
to perform its obligations under this Agreement or to consummate the
transactions contemplated by this Agreement.
"Permitted Liens" means (i) any liens for taxes not yet due or which
are being contested in good faith by appropriate proceedings, (ii) carriers',
warehousemen's, mechanics', materialmen's, repairmen's or other similar liens,
(iii) pledges or deposits in connection with workers' compensation, unemployment
insurance, and other social security legislation and (iv) easements,
rights-of-way, restrictions and other similar encumbrances incurred in the
ordinary course of business or, in the case of the Company or any Company
Subsidiary, incurred in a commercially reasonable manner consistent with
industry practice, which, in the aggregate, are not substantial in amount and
which do not in any case materially detract from the value of the property
subject thereto.
"Person" means an individual, corporation, limited liability company,
partnership, association, trust, unincorporated organization, other entity or
group (as defined in the Exchange Act).
"Release" means any releasing, disposing, discharging, injecting,
spilling, leaking, leaching, pumping, dumping, emitting, escaping, emptying,
seeping, dispersal, migration, transporting, placing and the like, including
without limitation, the moving of any materials through, into or upon, any land,
soil, surface water, groundwater or air, or otherwise entering into the indoor
or outdoor environment.
75
"Restoring Trust" means the August 26, 2003 report entitled "Restoring
Trust" issued by the Corporate Monitor of the Company appointed by the U.S.
District Court for the Southern District of New York.
"Rights Agreement" means the rights agreement, dated as of April 20,
2004 between the Company and The Bank of New York, as rights agent.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Software" means any and all computer software, including application
software, system software and firmware, including all source code and object
code versions thereof, in any and all forms and media, and all related
documentation.
"Specified Included Liabilities" means, without duplication, all
Bankruptcy Claims and Specified International Tax Liabilities.
"Specified Included Liabilities Amount" means, without duplication, the
sum of (x) the Paid Specified Included Liabilities Amount and (y) the Final
Remaining Specified Included Liabilities Amount.
"Specified International Tax Liabilities" means all liabilities
(whether accrued, contingent, asserted or unasserted) in respect of any Tax
imposed on or measured by income (including interest and penalties thereon)
imposed by any Taxing Authority of any jurisdiction other than the United States
or any political subdivision thereof with respect to any period or portion
thereof ending on or prior to April 20, 2004.
"Subsidiary" when used with respect to any party means any corporation
or other organization, whether incorporated or unincorporated, (i) of which such
party or any other Subsidiary of such party is a general partner (excluding
partnerships, the general partnership interests of which held by such party or
any Subsidiary of such party do not have a majority of the voting interests in
such partnership) or (ii) at least a majority of the securities or other
interests of which having by their terms ordinary voting power to elect a
majority of the Board of Directors or others performing similar functions with
respect to such corporation or other organization is directly or indirectly
owned or controlled by such party or by any one or more of its Subsidiaries, or
by such party and one or more of its Subsidiaries.
"Tax" (and with the correlative meaning "Taxes") shall mean (A) all
federal, state, local or foreign net income, franchise, gross income, sales,
use, ad valorem, property, gross receipts, license, capital stock, payroll,
withholding, excise, severance, transfer, employment, alternative or add-on
minimum, stamp, occupation, premium, environmental or windfall profits taxes,
and other taxes or similar charges, fees, levies, imposts, customs, duties,
licenses and other assessments, together with any interest and
76
any penalties, additions to tax or additional amounts imposed by any taxing
authority, (B) any liability for payment of amounts described in clause (A)
whether as a result of transferee liability, of being a member of an affiliated,
consolidated, combined or unitary group for any period, transferor liability,
successor liability or otherwise through operation of law, and (C) any liability
for the payment of amounts described in clauses (A) or (B) as a result of any
tax sharing, tax indemnity or tax allocation agreement or any other express or
implied agreement to indemnify any other person.
"Taxing Authority" means, with respect to any Tax, the Governmental
Entity that imposes such Tax, and the agency (if any) charged with the
collection of such Tax for such Governmental Entity.
"Tax Return" means all federal, state, local and foreign tax returns,
estimates, information statements and reports relating to Taxes.
"Trade Secrets" means all inventions (whether or not patentable),
discoveries, processes, procedures, designs, formulae, trade secrets, know-how,
Software, ideas, methods, research and development, data, databases,
confidential information and other proprietary or non-public information and
data.
77
IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.
VERIZON COMMUNICATIONS INC.
By:
-----------------------------------
Name:
Title:
XXX ACQUISITION, LLC
By:
-----------------------------------
Name:
Title:
MCI, INC.
By:
-----------------------------------
Name:
78
INDEX
PAGE
----
Affiliate...............................................................................................70
Affiliate Agreement.....................................................................................56
Aggregate Base Merger Consideration......................................................................7
Aggregate Incremental Amount............................................................................70
Agreement................................................................................................1
Alternative Merger.......................................................................................4
Bankruptcy Cases........................................................................................70
Bankruptcy Claims.......................................................................................70
Bankruptcy Claims Proposals..............................................................................5
Bankruptcy Claims Valuation Firm.........................................................................4
Bankruptcy Code.........................................................................................70
Bankruptcy Court Order..................................................................................57
Base Merger Consideration................................................................................3
beneficial ownership....................................................................................70
beneficially own........................................................................................70
Benefits Continuation Period............................................................................51
Board of Directors......................................................................................70
Business................................................................................................70
Business Combination Transaction........................................................................50
Business Day............................................................................................71
By-Laws..................................................................................................2
Certificate of Formation.................................................................................2
Certificate of Merger....................................................................................2
Certificates.............................................................................................3
Change..................................................................................................44
Change in the Company Recommendation....................................................................44
Chapter 11 Plan.........................................................................................71
Closing..................................................................................................2
Closing Date.............................................................................................2
Code ...................................................................................................71
Company..................................................................................................1
Company Benefit Plans...................................................................................71
Company Common Stock....................................................................................71
Company Contracts.......................................................................................29
Company Disclosure Letter...............................................................................13
Company Financial Advisors..............................................................................25
Company Financial Statements............................................................................71
Company Intellectual Property...........................................................................71
Company Material Adverse Effect.........................................................................71
1
INDEX
(cont.)
PAGE
----
Company Recommendation..................................................................................44
Company Restricted Share................................................................................72
Company Rights..........................................................................................72
Company SEC Documents...................................................................................18
Company Stock Plans.....................................................................................15
Company Stockholder Approval............................................................................16
Company Stockholders Meeting............................................................................44
Company Subsidiaries....................................................................................14
Company Subsidiary......................................................................................14
Confidentiality Agreement...............................................................................45
Constituent Documents...................................................................................72
Continuing Employees....................................................................................51
Corporate Monitor Order.................................................................................57
Customer Requirements...................................................................................24
D & O Insurance.........................................................................................53
Debtors.................................................................................................72
DGCL ....................................................................................................1
Dissenting Shares.......................................................................................72
Dissenting Stockholder...................................................................................8
DOJ ....................................................................................................45
Effective Time...........................................................................................2
Environmental Law.......................................................................................72
Environmental Permit....................................................................................72
ERISA...................................................................................................72
ESPP ....................................................................................................8
Exchange Act............................................................................................72
Exchange Agent...........................................................................................9
Exchange Fund............................................................................................9
Exchange Ratio...........................................................................................3
Excluded Shares.........................................................................................72
Expenses................................................................................................53
FCC ....................................................................................................17
Final Remaining Specified Included Liabilities Amount...................................................73
Form S-4................................................................................................19
FTC ....................................................................................................45
GAAP ...................................................................................................18
Good Condition..........................................................................................24
Governmental Entity.....................................................................................73
Xxxxxxxxx...............................................................................................25
Hazardous Substances....................................................................................73
HSR Act.................................................................................................17
Improvements............................................................................................23
Incremental Amount.......................................................................................6
2
INDEX
(cont.)
PAGE
----
Indebtedness............................................................................................73
Industry Standards......................................................................................24
Intellectual Property...................................................................................74
Intellectual Property Licenses..........................................................................74
Intervening Event.......................................................................................50
IRS ....................................................................................................74
IRUs ...................................................................................................74
JPMorgan................................................................................................25
knowledge...............................................................................................74
known...................................................................................................74
Law ....................................................................................................74
Lazard..................................................................................................25
Leased Network Facilities...............................................................................74
Leased Real Property....................................................................................75
Leases..................................................................................................75
Liens...................................................................................................75
LLC Act..................................................................................................1
material weakness.......................................................................................21
Maximum Annual Premium..................................................................................54
Merger...................................................................................................1
Merger Consideration.....................................................................................3
Merger Sub...............................................................................................1
Nasdaq..................................................................................................75
Network Facilities......................................................................................75
Network Facility Agreement..............................................................................75
Neutral Valuation Firms..................................................................................4
NYSE ...................................................................................................11
Order...................................................................................................75
Other Company Equity-Based Award.........................................................................7
other party.............................................................................................75
Outside Date............................................................................................63
Owned Intellectual Property.............................................................................27
Owned Network Facilities............................................................................24, 75
Owned Real Property.....................................................................................75
Paid Specified Included Liabilities Amount..............................................................76
Parent...................................................................................................1
Parent Common Stock.....................................................................................76
Parent Disclosure Letter................................................................................32
Parent Financial Advisor................................................................................37
Parent Material Adverse Effect..........................................................................76
Parent Preferred Stock..................................................................................32
Parent Restricted Shares.................................................................................7
Parent SEC Documents....................................................................................35
3
INDEX
(cont.)
PAGE
----
parties..................................................................................................1
Per Share Cash Amount....................................................................................3
Permitted Liens.........................................................................................76
Person..................................................................................................76
Proceeding..............................................................................................39
Proxy Statement/Prospectus..............................................................................42
Real Property...........................................................................................23
Regulatory Law..........................................................................................46
Release.................................................................................................76
Remaining Specified Included Liabilities Amount..........................................................4
Representatives.........................................................................................44
Restoring Trust.........................................................................................77
Right-of-Way Agreement..................................................................................23
Rights Agreement........................................................................................77
Xxxxxxxx-Xxxxx Act......................................................................................20
SEC ....................................................................................................17
Securities Act..........................................................................................77
significant deficiency..................................................................................21
Software................................................................................................77
Special Cash Dividend...................................................................................56
Specified Efforts.......................................................................................47
Specified Included Liabilities..........................................................................77
Specified International Tax Liabilities.................................................................77
Specified Material Adverse Effect.......................................................................47
Specified Tax Liabilities Proposals......................................................................5
Specified Tax Liabilities Valuation Firm.................................................................4
State Commissions.......................................................................................18
Stock Consideration......................................................................................3
Subsidiary..............................................................................................77
Superior Proposal.......................................................................................50
Surviving Entity.........................................................................................1
Takeover Proposal.......................................................................................50
Tax ....................................................................................................77
Tax Return..............................................................................................78
Taxes...................................................................................................77
Taxing Authority........................................................................................78
Termination Fee.........................................................................................64
Third Party.............................................................................................50
Trade Secrets...........................................................................................78
Trigger Notice...........................................................................................4
4
Table of Contents
ARTICLE I
THE MERGER; CERTAIN RELATED MATTERS
Page
----
Section 1.1 The Merger.............................................................................1
Section 1.2 Closing................................................................................2
Section 1.3 Effective Time.........................................................................2
Section 1.4 Certificate of Formation...............................................................2
Section 1.5 By-Laws................................................................................2
Section 1.6 Directors..............................................................................2
Section 1.7 Officers...............................................................................3
Section 1.8 Effect on Capital Stock................................................................3
Section 1.9 Alternative Merger Structure...........................................................4
Section 1.10 Adjustment for Specified Included Liabilities at Closing...............................4
Section 1.11 Treatment of Company Restricted Shares and Other Equity-Based Awards...................7
Section 1.12 Certain Adjustments....................................................................8
Section 1.13 Appraisal Rights.......................................................................8
Section 1.14 Associated Rights......................................................................9
ARTICLE II
EXCHANGE OF CERTIFICATES
Section 2.1 Exchange Fund..........................................................................9
Section 2.2 Exchange Procedures....................................................................9
Section 2.3 Distributions with Respect to Unexchanged Shares......................................10
Section 2.4 No Further Ownership Rights in Company Common Stock...................................10
Section 2.5 No Fractional Shares of Parent Common Stock...........................................11
Section 2.6 Termination of Exchange Fund..........................................................11
Section 2.7 No Liability..........................................................................11
Section 2.8 Investment of the Exchange Fund.......................................................12
Section 2.9 Lost Certificates.....................................................................12
Section 2.10 Withholding Rights....................................................................12
Section 2.11 Further Assurances....................................................................12
Section 2.12 Stock Transfer Books..................................................................13
Section 2.13 Affiliates............................................................................13
i
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 3.1 Organization..........................................................................13
Section 3.2 Subsidiaries..........................................................................13
Section 3.3 Capitalization........................................................................14
Section 3.4 Authorization.........................................................................16
Section 3.5 Takeover Statute, No Restrictions on the Merger.......................................16
Section 3.6 Rights Agreement......................................................................16
Section 3.7 Consents and Approvals; No Violations.................................................17
Section 3.8 SEC Reports; Company Financial Statements.............................................18
Section 3.9 Absence of Undisclosed Liabilities....................................................19
Section 3.10 Form S-4; Proxy Statement/Prospectus..................................................19
Section 3.11 Absence of Certain Changes............................................................19
Section 3.12 Litigation............................................................................20
Section 3.13 Compliance with Laws..................................................................20
Section 3.14 Taxes.................................................................................21
Section 3.15 ESPP..................................................................................23
Section 3.16 Sufficiency of Real Property, etc.....................................................23
Section 3.17 Right-of-Way Agreements and Network Facilities........................................23
Section 3.18 Brokers...............................................................................25
Section 3.19 Employee Benefit Plans and Related Matters; ERISA.....................................25
Section 3.20 Employees, Labor Matters..............................................................27
Section 3.21 Intellectual Property Rights..........................................................27
Section 3.22 Contracts.............................................................................28
Section 3.23 Environmental Laws and Regulations....................................................30
Section 3.24 Insurance Coverage....................................................................31
Section 3.25 Consent Decrees.......................................................................31
Section 3.26 Foreign Corrupt Practices and International Trade Sanctions...........................31
Section 3.27 Compliance with Governance Requirements...............................................32
Section 3.28 Opinions of Financial Advisors........................................................32
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Section 4.1 Organization..........................................................................32
Section 4.2 Capitalization........................................................................32
Section 4.3 Authorization.........................................................................33
Section 4.4 Consents and Approvals; No Violations.................................................34
Section 4.5 SEC Reports; Financial Statements.....................................................35
Section 4.6 Absence of Undisclosed Liabilities....................................................35
ii
Section 4.7 Form S-4; Proxy Statement/Prospectus..................................................36
Section 4.8 Absence of Certain Changes............................................................36
Section 4.9 Litigation............................................................................36
Section 4.10 Compliance with Laws..................................................................36
Section 4.11 Brokers...............................................................................37
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 5.1 Covenants of the Company..............................................................37
Section 5.2 Covenants of Parent...................................................................41
Section 5.3 Certain Actions.......................................................................42
ARTICLE VI
ADDITIONAL AGREEMENTS
Section 6.1 Preparation of Proxy Statement........................................................42
Section 6.2 Stockholders Meeting; Company Recommendation..........................................44
Section 6.3 Access to Information; Confidentiality................................................44
Section 6.4 Commercially Reasonable Efforts.......................................................45
Section 6.5 No Solicitation.......................................................................47
Section 6.6 Employee Matters......................................................................51
Section 6.7 Fees and Expenses.....................................................................53
Section 6.8 Directors' and Officers' Indemnification and Insurance................................53
Section 6.9 Public Announcements..................................................................54
Section 6.10 Notification of Certain Matters.......................................................55
Section 6.11 Accountant's Letters..................................................................55
Section 6.12 Listing of Shares of Parent Common Stock..............................................55
Section 6.13 Affiliates............................................................................55
Section 6.14 State Takeover Laws...................................................................56
Section 6.15 Stockholder Litigation................................................................56
Section 6.16 Special Cash Dividend.................................................................56
Section 6.17 Bankruptcy Court Order................................................................57
Section 6.18 Settlement of Bankruptcy Claims.......................................................57
Section 6.19 No Amendment of Plan of Reorganization................................................57
Section 6.20 Restoring Trust.......................................................................57
Section 6.21 Network Facility Maintenance and Compliance...........................................58
Section 6.22 Section 16 of the Exchange Act........................................................58
Section 6.23 Tax Treatment.........................................................................58
iii
ARTICLE VII
CONDITIONS PRECEDENT
Section 7.1 Conditions to Each Party's Obligation to Effect the Merger............................58
Section 7.2 Conditions to Obligations of Parent and Merger Sub....................................60
Section 7.3 Conditions to Obligations of the Company..............................................61
Section 7.4 Additional Conditions.................................................................62
ARTICLE VIII
TERMINATION AND AMENDMENT
Section 8.1 Termination...........................................................................62
Section 8.2 Effect of Termination.................................................................64
Section 8.3 Termination Fee.......................................................................64
ARTICLE IX
GENERAL PROVISIONS
Section 9.1 Non-Survival of Representations, Warranties and Agreements............................65
Section 9.2 Notices...............................................................................66
Section 9.3 Interpretation........................................................................67
Section 9.4 Counterparts; Effectiveness...........................................................67
Section 9.5 Entire Agreement; Third Party Beneficiaries...........................................67
Section 9.6 Severability..........................................................................67
Section 9.7 Assignment............................................................................68
Section 9.8 Amendment.............................................................................68
Section 9.9 Extension; Waiver.....................................................................68
Section 9.10 GOVERNING LAW AND VENUE; WAIVER OF JURY TRIAL.........................................68
Section 9.11 Enforcement...........................................................................69
Section 9.12 Definitions...........................................................................70
iv
