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SCHEDULE 14A INFORMATIONProxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934Check the appropriate box: GENUITY INC.
Payment of filing fee (Check the appropriate box): [x] No fee required.
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(1) | Title of Each Class of Securities To Which Transaction Applies: |
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(2) | Aggregate Number Of Securities To Which Transaction Applies: |
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(3) | Per Unit Price Or Other Underlying Value Of Transaction Computed Pursuant To Exchange Act Rule 0-11 (Set Forth The Amount On Which The Filing Fee Is Calculated And State How It Was Determined): |
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(4) | Proposed Maximum Aggregate Value Of Transaction: |
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(5) | Total Fee Paid: |
[ ] Fee Paid Previously With Premliminary Materials. |
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[ ] | Check Box If Any Part Of The Fee Is Offset As Provided By Exchange Act Rule 0-11(A)(2) And Identify The Filing For Which The Offsetting Fee Was Paid Previously. Identify The Previous Filing By Registration Statement Number, Or The Form Or Schedule And The Date Of Its Filing. |
(1) | Amount Previously Paid: |
(2) | Form, Schedule Or Registration Statement No.: |
(3) | Filing Party: |
(4) | Date Filed: |
3 Van de Graaff Drive Burlington, Massachusetts 01803 October 19, 2000 |
Dear Stockholder: You are cordially invited to attend a special meeting of the holders of our Class A common stock to be held on Thursday, November 16, 2000 at the AMC Empire 25 Theater, 234 West 42nd Street, New York, New York 10036. At this meeting, the holders of our Class A common stock are being asked to elect twelve directors. Your board of directors recommends that you vote your shares of Class A common stock for the nominees for director. You should read with care the enclosed proxy statement that describes the nominees and presents other important information about the election. Whether or not you plan to attend the special meeting, we ask that you please complete, sign, date and promptly return the accompanying proxy in the enclosed, self-addressed postage paid envelope or, if you prefer, vote by proxy over the Internet or by telephone using the instructions on the enclosed proxy. I thank you for your support. |
Sincerely, /s/ PAUL R. GUDONIS Paul R. Gudonis Chairman of the Board and Chief Executive Officer |
By Order of the Board of Directors, /s/ IRA H. PARKER IRA H. PARKER, General Counsel and Secretary |
Burlington, Massachusetts It is important that your shares of Class A common stock be represented at the special meeting. Whether or not you plan to attend the special meeting in person, we recommend that you complete, sign, date and promptly return the accompanying proxy in the enclosed self-addressed postage paid envelope or, if you prefer, vote by proxy over the Internet or by telephone using the instructions on the enclosed proxy. We are limiting admittance to the special meeting to stockholders who are eligible to vote and their authorized representatives. Those beneficial owners that hold shares of our Class A common stock through an intermediary, such as a bank or broker, will be admitted upon proof of ownership. |
Q: What happens if I sign, date and return the proxy but forget to indicate how I want my shares of Class A common stock voted? If you sign, date and return your proxy and do not mark how you want to vote, your proxy will be counted as a vote FOR all of the nominees for directors. Q: What happens if I do not instruct my broker how to vote or if I mark abstain on the proxy?If you mark your proxy abstain, you will have no effect on the outcome of voting on the election of directors. If you do not instruct your broker how to vote, your broker will vote your shares for you at his or her discretion. Q: Can I change my mind after I have mailed in my signed proxy?Yes. If you do not hold your shares of Class A common stock in street name, there are three ways that you may withdraw your proxy at any time before the vote at the special meeting takes place: (1) you may return to the Secretary of Genuity another duly executed and signed proxy bearing a later date; (2) you may deliver a written revocation of your proxy to the Secretary of Genuity; or (3) you may attend the special meeting, or any adjournment or postponement thereof, in person and vote your shares of Class A common stock covered by the proxy. You should note that if you rely on the third option, simply attending the special meeting will not revoke your proxy. If you hold your shares of Class A common stock in street name, then you should follow the instructions provided by your brokerage firm in this respect. The mailing address for the Secretary is: Genuity Inc., 3 Van de Graaff Drive, Burlington, Massachusetts 01803, Attention: Ira H. Parker, General Counsel and Secretary. Q: Who should I call if I have any additional questions?You may call our Shareholder Relations Department at 781-262-3544. |
By Telephone. You can vote your shares of Class A common stock by calling the number on the enclosed proxy and following the recorded instructions. Our telephone voting option is available twenty four hours a day. If you vote by telephone, you do not need to return the enclosed proxy. |
By Internet. You can also choose to vote your shares of Class A common stock over the Internet by going to the web site noted on the enclosed proxy and following the instructions. Our Internet voting option is available twenty four hours a day. If you vote over the Internet, you do not need to return the enclosed proxy. |
In Writing. You may also complete, sign, date and return the enclosed proxy in the self-addressed postage paid envelope provided. |
Under Delaware law, a stockholder of a Delaware corporation may authorize another person to act as proxy for such stockholder by means of an electronic transmission, either over the Internet or by telephone, so long as the electronic transmission contains, or is submitted with, information from which it can be determined that the transmission was authorized by the stockholder. The Internet and telephone voting procedures that we are using are designed to authenticate stockholders by use of a personal identification number. The procedures allow stockholders to appoint a proxy to vote their shares of Class A common stock and to confirm that their instructions have been properly recorded. If you hold shares in street name, you should check the voting form used by your bank or brokerage firm to see if it offers voting by proxy over the Internet or by telephone. If you do not hold your shares of Class A common stock in street name, you may revoke your proxy at any time before is it voted at the special meeting by: (i) returning to the Secretary of Genuity another duly executed proxy bearing a later date; (ii) delivering a written revocation to the Secretary of Genuity; or (iii) attending the special meeting or any adjournment or postponement thereof and voting in person the shares of Class A common stock represented by the proxy. You should note, however, that if you rely on the third option, simply attending the special meeting will not revoke your proxy. If you hold your shares of Class A common stock in street name, then you should follow the instructions provided by your bank or brokerage firm in this respect. The shares of Class A common stock represented by the enclosed form of proxy, when duly executed and delivered to Genuity, and not properly revoked, will be voted at the special meeting as directed therein. If a proxy is duly executed and received by the Secretary of Genuity, but no instructions are indicated, then the proxy will be voted FOR the election of all of the nominees for director named herein |
(i) four Class I directors, whose terms of office will expire at the annual meeting of stockholders in 2001; |
(ii) four Class II directors, whose terms of office will expire at the annual meeting of stockholders in 2002; and |
(iii) four Class III directors, whose terms of office will expire at the annual meeting of stockholders in 2003. |
The term of each director shall be subject to the election and qualification of his successor and to his earlier death, resignation or removal. All nominees for director have indicated their willingness to serve if elected and all nominees are currently directors of Genuity. If any nominee for director named herein for election becomes unavailable for any reason, it is intended that the persons named in the proxy will vote for the election of such other person in his or her stead as may be designated by our board of directors. Our board of directors is not aware of any reason that might cause any nominee for director to be unavailable. The nominees for directors are as follows: NOMINEES FOR DIRECTOR TERMS EXPIRING 2001 Philippe P. Dauman Mr. Dauman has served as Chairman and Chief Executive Officer of DND Capital Partners, L.L.C., a private equity firm, since May 2000. From January 1996 to May 2000, Mr. Dauman was Deputy Chairman and Executive Vice President of Viacom, Inc., a diversified entertainment company. Prior to January 1996, Mr. Dauman served as Executive Vice President, General Counsel and Chief Administrative Officer of Viacom, Inc. Mr. Dauman is a director of Viacom, Inc., Blockbuster, Inc. and Lafarge Corporation. Mr. Dauman received his B.A. from Yale University and received his J.D. from Columbia University School of Law. |
Shares of Class A Common Stock Beneficially Owned | |||||
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Name and Address of Beneficial Owner |
Number |
Percent of Class | |||
Executive Officers and Directors | |||||
Paul R. Gudonis |
100,000 | * | |||
Joseph C. Farina | 23,500 | * | |||
Daniel P. OBrien | 8,400 | * | |||
Ira H. Parker | 8,850 | * | |||
Steven H. Blumenthal | 2,000 | * | |||
Susan H. Bowman | 9,400 | * | |||
James L. Freeze | 4,000 | * | |||
Charles J. Gibney | 13,400 | * | |||
Michael J. Kalagher | 9,400 | * | |||
Paul A. OBrien | 1,000 | * | |||
Richard Stuntz | 7,500 | * | |||
Paul J. Collins | 0 | * | |||
Jeffrey M. Cunningham | 0 | * | |||
John H. Dasburg | 0 | * | |||
Philippe P. Dauman | 100,000 | * | |||
Duncan M. Davidson | 10,000 | * | |||
Gordon Eubanks | 0 | * | |||
John W. Gerdelman | 10,000 | * | |||
John R. Harris | 0 | * | |||
Edward D. Horowitz | 0 | * | |||
Debra A. Lee | 1,000 | * | |||
Michael T. Masin | 9,000 | * | |||
Benson P. Shapiro | 0 | * | |||
Executive Officers and Directors | |||||
as a Group(23 Persons) | 317,450 | * | |||
Five Percent Stockholders: | |||||
Verizon Communications (1) | |||||
1095 Avenue of the Americas New York, New York 10036 | 18,256,000 | 9.5% |
__________
* | Less Than One Percent |
(1) | This represents 18,256,000 shares of Class A common stock issuable upon conversion of our Class B common stock. |
INFORMATION REGARDING OTHER EXECUTIVE OFFICERS
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Name |
Age |
Position | |||
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Joseph C. Farina | 51 | President and Chief Operating Officer | |||
Daniel P. OBrien | 46 | Executive Vice President and Chief Financial Officer | |||
Ira H. Parker | 43 | Senior Vice President, General Counsel and Secretary | |||
Susan H. Bowman | 47 | Senior Vice President, Human Resources | |||
James L. Freeze | 40 | Senior Vice President, Chief Strategy Officer |
Joseph C. Farina has served as our President and Chief Operating Officer since June 2000. From 1998 to June 2000, he served as President and Chief Executive Officer of the Bell Atlantic Data Solutions Group. Mr. Farina was also Executive Vice President-Operations Assurance for Bell Atlantic from 1995 to 1998. From 1993 to 1995, Mr. Farina served as both Vice President-Corporate Business Development of NYNEX Corporation, a Regional Bell Operating Company that is now part of Verizon, and President of the NYNEX Network Systems Company. Prior to that, Mr. Farina served as President of NYNEX Properties and Vice President-Operations of NYNEX Mobile Communications. Mr. Farina holds a B.S. from Fordham University and a M.B.A. from St. Johns University. Daniel P. OBrien has been our Executive Vice President and Chief Financial Officer since June 2000. From June 1998 to June 2000, Mr. OBrien served as Executive Vice President-Finance and Chief Financial Officer of GTE Corporation. From July 1997 to June 1998, he served as Vice President and Treasurer of GTE Corporation, and from October 1995 to July 1997 he served as Assistant Treasurer-Capital Markets for GTE Service Corporation. Prior to 1993, when he joined the Treasury Department of GTE Corporation, Mr. OBrien held several positions with the Electrical Products Group of GTE Corporation, including Vice President-Controller of European Lighting in Geneva, Switzerland from August 1991 to January 1993. Mr. OBrien holds a B.S. in Chemistry from Boston College and a M.B.A. from the University of Chicago. Ira H. Parker has been our Senior Vice President, General Counsel and Secretary since June 2000. From November 1997 to June 2000, he served as Vice President and General Counsel with Genuity. In 1999, in addition to his General Counsel position at Genuity, Mr. Parker was appointed Vice President and Deputy General Counsel of GTE Service Corporation. From July 1993 to November 1997, Mr. Parker was a partner in the Washington, D.C. office of the law firm of Alston & Bird. Prior to 1993, Mr. Parker served in a number of positions with the United States Federal Deposit Insurance Corporation, including Assistant General Counsel for Litigation and Policy from August 1989 to May 1992 and Deputy General Counsel for Litigation for the Resolution Trust Corporation from May 1992 to June 1993. Mr. Parker holds a B.A. from Brooklyn College and a J.D. from Emory University. Susan H. Bowman has been our Senior Vice President, Human Resources since June 2000. From September 1999 to June 2000, Ms. Bowman served as Vice President, Human Resources for Genuity and GTE Technology Service Corporation. Prior to that time, she held several positions with GTE Corporation, including serving as the Director of Staffing and Development for GTE Service Corporation from August 1995 to September 1997. From September 1994 to August 1995, Ms. Bowman served as the Strategic Human Resources Business Partner for the Network Operations Group. From December 1993 to September 1994, she served as the Director of Incentive Compensation for GTE Telephone Operations. Ms. Bowman holds a Ph.D. in industrial/organizational psychology from the University of South Florida. James L. Freeze served as a Director from April 2000 until June 2000 and has been our Senior Vice President and Chief Strategy Officer since June 2000. From August 1999 to June 2000, he served as Vice President of Business Development for Genuity. From July 1998 to August 1999, he served as a senior telecommunications analyst at Forrester Research, Inc., an Internet research firm. From June 1997 to June 1998, Mr. Freeze served as Vice President of Sales and Marketing of Genuity, Inc., an Internet service provider and web hosting company that we acquired in June 1998. In April 2000, we changed our name from GTE Internetworking Incorporated to Genuity Inc. Prior to 1997, he held several positions with CompuServe Inc., a worldwide provider of network access hosting and Internet services to the business and consumer markets, including Director of Marketing and Business Development from January 1995 to May 1997 and Group Manager from June 1994 to December 1994. Mr. Freeze holds a B.S. and M.A. from Ohio State University and a J.D. from Capital University. |
Annual Compensation |
Long-Term Compensation |
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Name and Principal Position |
Salary ($) |
Bonus ($)(1) |
Restricted Stock Awards ($)(2)(3) |
Common Stock Underlying Options (#) |
LTIP Payments ($)(4) |
All Other Compensation ($)(5) | |||||||
Paul R. Gudonis | 349,308 | 305,300 | 80,642 | 43,400 | 1,027,500 | 5,000 | |||||||
Chairman and Chief Executive Officer | |||||||||||||
Charles J. Gibney | 289,808 | 126,200 | 27,018 | 15,700 | 319,300 | 14,911 | |||||||
Senior Vice President, | |||||||||||||
Enterprise Solutions | |||||||||||||
Ira H. Parker | 214,404 | 137,100 | 21,535 | 20,900 | 216,400 | 7,200 | |||||||
Senior Vice President, General | |||||||||||||
Counsel and Secretary | |||||||||||||
David B. Monaghan | 221,708 | 109,700 | 26,855 | 12,200 | 333,800 | 12,372 | |||||||
Vice President, Finance | |||||||||||||
Paul A. OBrien | 208,962 | 88,100 | 5,506 | 35,700 | 0 | 13,533 | |||||||
Senior Vice President, Sales and Marketing |
__________
(1) | These amounts represent the annual bonus received by each executive under the GTE Corporation 1997 Executive Incentive Plan for the year ended December 31, 1999, of which a portion has been deferred into restricted stock units payable at maturity, generally a minimum of three years from the time of deferral, in common stock of GTE Corporation. GTE Corporation restricted stock units will not be granted to these officers in the future. |
(2) | The number of restricted stock units received was calculated by dividing the sum of deferrals under (a) the annual bonus and (b) the long term incentive plan payments by the average closing price of the common stock of GTE Corporation on the New York Stock Exchange Composite Transactions Tape for the twenty consecutive trading days following the release to the public of the financial results of GTE Corporation for the fiscal year in which the bonus and long term incentive plan payments were earned. Each executive received matching restricted stock units on the basis of one additional restricted stock unit for every four restricted stock units earned. The dollar value of the matching restricted stock units is based on the average closing price of the common stock of GTE Corporation on the date of grant for each related restricted stock unit as described above. Additional restricted stock units were received on each dividend payment date based upon the amount of the dividend paid and the closing price of the common stock of GTE Corporation on the New York Stock Exchange Composite Transactions Tape on the dividend declaration date. |
(3) | The aggregate amount of the restricted stock units as of the end of the year ended December 31, 1999 was 12,416, 1,981, 1,000 and 4,406 for Messrs. Gudonis, Gibney, Parker and Monaghan. The aggregate value of these restricted stock units was $876,104, $139,784, $70,562 and $310,898 for Messrs. Gudonis, Gibney, Parker and Monaghan based solely upon the closing price of the common stock of GTE Corporation on December 31, 1999. |
(4) | These amounts represent payments under the GTE Corporation 1997 Long-Term Executive Incentive Plan, of which a portion has been deferred into restricted stock units payable at maturity, generally a minimum of three years from the time of deferral, in common stock of GTE Corporation. These awards became immediately non-forfeitable and payable when the stockholders of GTE Corporation and Bell Atlantic approved the merger. Each payment equaled the average of the performance percentage for each individual for the three award cycles completed prior to the date the merger was approved. We also included in these amounts projected dividends through the end of the award cycle. These executives are no longer eligible to receive restricted stock units of GTE Corporation. |
(5) | These amounts consist of contributions under the BBN Corporation Retirement Trust Agreement of $5,000 for Mr. Gudonis and under the GTE Savings Plan of $7,200 for Messrs. Gibney, Parker, Monaghan and OBrien. This column also includes contributions by GTE Corporation to the GTE Executive Salary Deferral Plan of $7,711, $5,172 and $6,333 for Messrs. Gibney, Monaghan and OBrien, respectively. These executives are no longer eligible to contribute to the GTE Savings Plan or the GTE Executive Salary Deferral Plan. |
Individual Grants |
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---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name |
Common Stock Underlying Options Granted |
% of Total Options Granted to Employees in Fiscal Year |
Exercise or Base Price Per Share |
Expiration Date |
Potential Realizable Value at Assumed Annual Rates of Stock Price Appreciation for Option Term 5% 10% |
||||||||
Paul R. Gudonis | 43,400 | * | $65.0313 | 2/15/2009 | $1,774,355 | $4,498,105 | |||||||
Charles J. Gibney | 15,700 | * | 65.0313 | 2/15/2009 | 642,092 | 1,627,194 | |||||||
Ira H. Parker | 400 | * | 63.0313 | 1/10/2009 | 16,013 | 40,580 | |||||||
10,100 | * | 65.0313 | 2/15/2009 | 413,065 | 1,046,794 | ||||||||
5,600 | * | 68.7500 | 9/1/2009 | 242,123 | 613,589 | ||||||||
4,800 | * | 73.8400 | 11/03/2009 | 222,312 | 564,904 | ||||||||
David B. Monaghan | 12,200 | * | 65.0313 | 2/15/2009 | 498,950 | 1,264,444 | |||||||
Paul A. OBrien | 8,900 | * | 65.0313 | 2/15/2009 | 363,988 | 922,422 | |||||||
20,000 | * | 66.7500 | 4/29/2009 | 839,569 | 2,127,642 |
__________ |
* | Less Than One Percent. |
Number of Shares of Common Stock Underlying Unexercised Options at Fiscal Year End (#) |
Value of Unexercised In-the-Money Options Fiscal Year End ($) |
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---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name |
Common Stock Acquired on Exercise (#) |
Value Realized ($) |
Exercisable |
Unexercisable |
Exercisable |
Unexercisable | |||||||
Paul R. Gudonis | 0 | 0 | 229,075 | 79,400 | $5,426,247 | $923,380 | |||||||
Charles J. Gibney | 0 | 0 | 29,700 | 15,700 | 271,947 | 85,371 | |||||||
Ira H. Parker | 6,000 | 189,750 | 9,700 | 20,900 | 156,111 | 67,271 | |||||||
David B. Monaghan | 6,500 | 282,750 | 38,500 | 12,200 | 839,048 | 66,339 | |||||||
Paul A. OBrien | 0 | 0 | 15,000 | 35,700 | 167,815 | 122,775 |
Estimated Future Payouts Under Non-Stock Price-Based Plans |
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Name |
Number of Shares, Units or Other Rights (#) |
Performance or Other Period Until Maturation or Payout |
Threshold (Units) |
Target (Units) |
Maximum (Units) | ||||||
Paul R. Gudonis | 6,400 | Three years | 1,798 | 6,915 | |||||||
Charles J. Gibney | 1,800 | Three years | 506 | 1,945 | |||||||
Ira H. Parker | 2,070 | Three years | 575 | 2,211 | |||||||
David B. Monaghan | 1,200 | Three years | 337 | 1,297 | |||||||
Paul A. OBrien | 1,350 | Three years | 374 | 1,438 |
Years of Service |
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Final Average Earnings |
15 |
20 |
25 |
30 |
35 | ||||||
$300,000 | $63,765 | $85,020 | $106,275 | $127,530 | $148,785 | ||||||
400,000 | 85,515 | 114,020 | 142,525 | 171,030 | 199,535 | ||||||
500,000 | 107,265 | 143,020 | 178,775 | 214,530 | 250,285 | ||||||
600,000 | 129,015 | 172,020 | 215,025 | 258,030 | 301,035 | ||||||
700,000 | 150,765 | 201,020 | 251,275 | 301,530 | 351,785 | ||||||
800,000 | 172,515 | 230,020 | 287,525 | 345,030 | 402,535 | ||||||
900,000 | 194,265 | 259,020 | 323,775 | 388,530 | 453,285 | ||||||
1,000,000 | 216,015 | 288,020 | 360,025 | 432,030 | 504,035 |
Messrs. Gibney, Parker, Monaghan and OBrien participate in the GTE Service Corporation Plan for EmployeesPensions. The GTE Service Corporation Plan is a noncontributory pension plan for the benefit of all employees of GTE Service Corporation, a wholly owned subsidiary of GTE Corporation, and participating affiliates who are not covered by collective bargaining agreements. It provides a benefit based on a participants years of service and earnings. Pension benefits provided by GTE Service and contributions to the GTE Service Corporation Plan are related to basic salary and incentive payments, exclusive of overtime, differentials, some types of incentive compensation and other similar types of payments. Under the GTE Service Corporation Plan, pensions are computed on a two-rate formula basis of 1.15% and 1.45% for each year of service, with the 1.15% service credit being applied to that portion of the average annual salary for the five highest consecutive years that does not exceed $33,000, which is the portion of salary subject to the Federal Social Security Act, and the 1.45% service credit being applied to that portion of the average annual salary for the five highest consecutive years that exceeds this level up to the statutory limit on compensation. |
| his then-current annual base pay plus his then-current target annual bonus for the remainder of the term of the employment agreement, payable over the remainder of the term of the agreement; or |
| two times the sum of his then-current annual base pay and his then-current target annual bonus, payable over the two-year period following termination of employment. |
If the termination occurs during or at the conclusion of a fourth year under the agreement, the employee will receive a severance payment equal to two times the sum of his then-current annual base pay and his then-current target annual bonus, payable over the two-year period following termination of employment. Under the agreements, Messrs. Gudonis, OBrien, Farina and Parker agree that during employment and during any period of time in which the employee is eligible to receive severance payments under his employment agreement or, if longer, for a period of one year following termination of employment, they will not compete with Genuity or any related companies and that during employment and during any period of time in which the employee is eligible to receive severance payments under his employment agreement or, if longer, for a period of two years following termination of employment, they will not interfere with the business relations of Genuity or any related companies, including for example by soliciting employees or clients. |
| accounting and cash processing services, including payroll, asset accounting and accounts payable; |
| billing and collection processing services; |
| human resources services and benefits administration, including relationships with employee benefits providers; and |
| real estate support services, including project management and environmental and safety services. |
Agreement for Information Technology Transition Services. We and GTE Service Corporation entered into this agreement in order to provide or receive, to the extent either party continues to require them on a transitional basis, the following services:
| software support services to ensure that software continues to run effectively after our initial public offering; and |
| hardware support services, including help desk support for personal computers, systems support centers for critical servers and local area network support. |
In addition, we will provide wide area network support to GTE Service Corporation and GTE Service Corporation will provide us with wide area network support in areas outside of the local service region of Verizon. GTE Service Corporation also will provide us with computer programming and technical services, including the development of software interfaces and modifications and enhancements to existing systems. Unless otherwise agreed, the ownership of any work product, including intellectual property, created during the provision of services under either of the transition service agreements will be determined under the terms and conditions of the Software Development and Technical Services Agreement described below. Similarly, any licenses relating to software will be granted on the same terms and conditions as used in the Software License Agreement described below. The fees for these transition services are fixed under the agreements and were negotiated based on historical costs and comparable market prices. Both agreements have a non-renewable term of one year, but the term of many services will be less than a year. We will be able to terminate each or any portion of the agreements at any time upon 120 days notice to GTE Service Corporation. As an exception, the billing and collection processing services require 180 days notice in order to provide adequate transition time. GTE Service Corporation has the right to terminate the agreements on 120 days notice only with respect to the information technology services that it receives from us. Until termination or expiration, GTE Service Corporation will be obligated to cooperate with us to transition the work to another provider and to use commercially reasonable efforts to secure our continued use of any necessary third party technology. |
| the value of a 10% equity interest in us at the time of such sale, based on the average of the closing prices of the Class A common stock on the thirty trading days prior to the date Verizon offers the shares to us; and |
| the amount Verizon would have had on the date of the completion of the sale if it had taken the amount of its initial investment in us above a 10% equity interest, based on the initial public offering price for our Class A common stock of $11.00 per share, and invested such amount at the time of the closing of such offering in the S&P500 Index. |
Verizon has agreed to grant any consent necessary for us to be able to complete the purchase of their Class B common stock. If Verizon sells all of its Class B common stock, except an amount that can be converted into a 10% interest, the purchase price under clause (b) above shall be only the amount described in the second bullet. We are required to notify Verizon of our intent to purchase the shares within ninety days after their offer to us. If we decide to purchase the shares, we will have 180 days from the date of the offer to complete the purchase. If we decline to purchase the shares or fail to complete the purchase, Verizon will transfer the shares to a disposition trustee selected in accordance with the rules of the Federal Communications Commission, who will attempt to sell the shares to a third party. As required by the Federal Communications Commission order, Verizon is not entitled to proceeds from the third party sale that exceed an amount determined in the same manner as the amount for which we could have purchased the shares as described in clause (b) above, and Verizon shall remit to the United States Treasury any proceeds in excess of that amount, as adjusted to reflect taxes on that amount, or such lesser amount as the Federal Communications Commission may determine. Receipt of Portion of Class B Common Stock Appreciation Upon Conversion or Sale by Verizon. After Verizon has eliminated applicable Section 271 restrictions as to 100% of Bell Atlantic in-region lines, Verizon may increase its ownership of our capital stock to an amount in excess of 10% by converting its shares of our Class B common stock into either Class A common stock or Class C common stock. Under the Federal Communications Commission order, Verizon must at the time of this conversion, or at the time of a sale of its shares of our Class B common stock after it has eliminated applicable Section 271 restrictions as to at least 95% of Bell Atlantic in-region lines, elect either: |
| to make a payment to us for distribution to the holders of our Class A common stock; or |
| to adjust the applicable conversion ratios by receiving fewer shares of our Class A common stock or Class C common stock than it would otherwise be entitled to upon conversion, in which case we would distribute the shares relinquished by Verizon to the holders of our Class A common stock. |
In either event, the holders of our Class A common stock will receive a portion of the appreciation of the shares of our Class B common stock converted by Verizon. Verizon will use the following calculation to determine the amount of the cash paid to us or the number of shares of Class A common stock or Class C common stock relinquished by it upon conversion: First, Verizon will engage a nationally recognized investment banker that has no prior association with Verizon to determine the total appreciation of its shares of our Class B common stock. The appreciation will be determined in proportion to the appreciation in the publicly traded Class A common stock as adjusted, if necessary, to eliminate any increase reflecting the anticipation of the payment or conversion change and distribution contemplated by this paragraph, minus the initial value of our Class B common stock held by Verizon on an as-converted basis, based on the initial public offering price of our Class A common stock of $11.00 per share. Second, the appreciation that would be attributable to a 10% interest in us will be subtracted from the total appreciation. Third, as of each anniversary of the closing of our initial public offering, a percentage will be determined equal to 25%, which the Federal Communications Commission has determined to be a reasonable approximation of the portion of our business in the region of Bell Atlantic, multiplied by a fraction, the numerator of which is the number of Bell Atlantic in-region lines as to which applicable Section 271 restrictions have not been eliminated and the denominator of which is the total number of Bell Atlantic in-region lines. Those annual percentages will be averaged. Finally, the amount of the cash that Verizon will pay to us or the number of shares of Class A common stock or Class C common stock that it will relinquish is equal to the average percentage multiplied by the appreciation as determined using the calculation explained in the prior paragraphs. If Verizon chooses to make a cash payment to us for distribution to the holders of Class A common stock, this amount will be tax adjusted to reflect the fact that Verizon would have to pay taxes if it sold our common stock or other assets to raise the capital required for this payment. If Verizon chooses instead to receive fewer shares of Class A common stock or Class C common stock, the amount of appreciation that Verizon will forego will be converted into a number of shares of our Class A common stock that will be distributed to the other holders of Class A common stock. |
Right to Purchase Additional Shares Upon Conversion. If at any time during the one year following the conversion by Verizon or its affiliates of any shares of Class B common stock Verizon and its affiliates control shares of Class A common stock and Class C common stock that together equal or exceed 70% of the total number of shares of common stock then outstanding, Verizon will have the right during the one year following the conversion to acquire from us a number of shares of Class A common stock so that, immediately after the acquisition, Verizon and its affiliates combined ownership of our Class A common stock and Class C common stock will be equal to 80% of the total number of shares of common stock then outstanding. For purposes of calculating in the preceding sentence the total number of shares of common stock outstanding (1) shares of Class B common stock that can never be converted into more than their proportionate share of 10% of our total common stock outstanding shall be considered to have been converted on that basis and (2) other shares of Class B common stock shall be considered to have been converted to the maximum extent permitted under our certificate of incorporation. This right to purchase additional shares may be exercised only one time. The price payable per share in this purchase would consist of cash, stock or other property with a fair market value equal to the average of the closing prices for the Class A common stock for the thirty trading days immediately preceding the date of the purchase. In the event Verizon elects to pay the purchase price in property, the fair market value of such property will be established by an appraisal conducted by a nationally recognized appraiser chosen by our independent directors. Verizon shall not be permitted to pay the purchase price in property if our independent directors determine that: |
| our ownership of such property will violate applicable law, including without limitation any federal or state regulations applicable to us; or |
| the property is not reasonably useful to us in light of our then existing business plan. |
Consent Requirements. The recapitalization agreement contains provisions requiring us to obtain the consent of Verizon prior to taking the following actions: |
| making any acquisition or series of related acquisitions for consideration that exceeds 20% of our market capitalization at the time of such acquisition or, if earlier, upon our entering into an agreement to effect the acquisition, where market capitalization is determined by multiplying the closing price of our Class A common stock on the date of determination by the number of shares of common stock outstanding on that date, assuming for purposes of this calculation that (1) shares of Class B common stock that can never be converted into more than their proportionate share of 10% of our total common stock outstanding shall be considered to have been converted on that basis and (2) other shares of Class B common stock shall be considered to have been converted to the maximum extent permitted under our certificate of incorporation; |
| making any acquisition for consideration in excess of $100 million or entering into any joint venture in which our investment is more than $100 million, in each case that is not closely related to our business; |
| making any disposition or series of related dispositions for consideration in excess of 20% of our market capitalization at the time of such disposition or, if earlier, of our entering into an agreement to effect such disposition; |
| incurring indebtedness (including capital leases, guarantees of indebtedness of others, letters of credit and indebtedness acquired in connection with any acquisition, but excluding trade accounts payable) (1) in any calendar year that exceeds $3.85 billion, net of any indebtedness repaid during that same calendar year, or (2) at any time, if immediately after the incurrence thereof, our indebtedness would exceed $11.0 billion; |
| entering into any agreement or arrangement that (1) binds or purports to bind, or following conversion, would bind or purport to bind, Verizon or any of its affiliates, or (2) contains provisions that trigger a default or require a material payment when Verizon exercises its rights to convert the Class B common stock; |
| declaring extraordinary dividends or making other extraordinary distributions to the holders of our capital stock; |
| issuing any equity securities or securities convertible or exercisable into equity securities except for: |
(1) | equity securities issued in connection with acquisitions, in an aggregate amount not to exceed 30% of the shares of common stock outstanding upon the completion of our initial public offering; |
(2) | equity securities issued to fund operating needs, including capital expenditures, in an aggregate amount not to exceed 5% of the shares of common stock outstanding upon the completion of our initial public offering; |
(3) | equity securities issued or granted to our employees, provided that: |
(a) | the number of equity securities issued or granted to individuals who were employees on April 6, 2000 does not exceed in the aggregate 5% of the shares of common stock outstanding upon the completion of our initial public offering; |
(b) | the number of equity securities issued or granted to individuals who first become our employees within nine months of April 6, 2000, other than individuals who become our employees as a result of their former employer being acquired by us, does not exceed in the aggregate 1% of the shares of common stock outstanding upon the completion of our initial public offering; |
(c) | the number of equity securities issued or granted to individuals who become our employees beginning on or after January 6, 2001, other than individuals who become our employees as a result of their former employer being acquired by us, does not exceed in the aggregate 2.95% of the shares of common stock outstanding upon the completion of our initial public offering; |
(d) | the number of equity securities issued or granted to non-employee directors does not exceed in the aggregate 0.05% of the shares of common stock outstanding upon the completion of our initial public offering; |
(e) | the number of equity securities issued to a trustee or other fiduciary, or granted or reserved for issuance to our employees described in the previous clauses (a), (b) and (c) in connection with our 401(k) or any similar plan does not exceed 0.5% of the shares outstanding upon completion of our initial public offering; and |
(f) | the number of equity securities issued or granted to individuals who become our employees as a result of their former employer being acquired by us, including equity securities issued, granted or reserved for issuance to a trustee or other fiduciary or to our employees described in clause (e) in connection with our 401(k) or any similar plan, does not exceed 6% multiplied by the total of: (i) the number of shares of common stock outstanding upon the completion of our initial public offering, plus (ii) the number of shares issued in connection with acquisitions completed by us, minus (iii) the aggregate number of shares of common stock that may be issued under clauses (a), (b), (c), (d) and (e) above. |
For the purpose of calculating the percentage of the shares of common stock outstanding upon the completion of our initial public offering in subsections (1), (2) and (3) above, all shares of Class B common stock shall be deemed to have been converted into shares of Class A common stock to the maximum extent permitted under our certificate of incorporation. If options expire or terminate after being granted under subsection (3) above, those shares become available for any of the purposes stated in subsections (1) through (3). We will not be required to obtain the consent of Verizon to take the above actions if at any time: |
| Verizon and its affiliates collectively do not have the right to vote more than 50% of the then outstanding shares of Class B common stock; or |
| the shares of common stock that Verizon and its affiliates collectively own would constitute 10% or less of our then outstanding common stock on an as converted basis; or |
| any person and its affiliates, other than Verizon and its affiliates, collectively own more than 50% of the then outstanding shares of Class B common stock. |
Verizon may assign these consent rights to a third party who may exercise them so long as the third party directly or indirectly: |
| owns and has the right to vote more than 50% of the then outstanding shares of our Class B common stock; and |
| owns or has the right to acquire more than 50% of our then outstanding common stock on an as converted basis. |
PROXY GENUITY INC.3 Van de Graaff Drive
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1. | Election of Directors. |
Nominees for term ending at the Annual Meeting of Stockholders for 2001:
(01) | Philippe P. Dauman |
(02) | Duncan M. Davidson |
(03) | John W. Gerdelman |
(04) | Debra L. Lee |
Nominees for term ending at the Annual Meeting of Stockholders for 2002:
(05) | Paul J. Collins |
(06) | John H. Dasburg |
(07) | Gordon Eubanks |
(08) | Benson P. Shapiro |
Nominees for term ending at the Annual Meeting of Stockholders for 2003: |
(09) | Jeffrey M. Cunningham |
(10) | Paul R. Gudonis |
(11) | John R. Harris |
(12) | Edward D. Horowitz |
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FOR all nominees except as noted above: |
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