EXECUTION COPY
ASSET PURCHASE AGREEMENT
Between
GTE MIDWEST INCORPORATED
as Seller,
and
SPECTRA COMMUNICATIONS GROUP LLC
as Buyer
July 8, 1999
-------------------------------------------------------
TABLE OF CONTENTS
Page
ARTICLE 1 DEFINITIONS....................................................1
1.1 Terms.....................................................1
1.2 Interpretation...........................................11
ARTICLE 2 PURCHASE AND SALE OF ASSETS...................................11
2.1 Purchase and Sale of Assets..............................11
2.2 Purchased Property.......................................11
2.3 Excluded Property........................................12
2.4 Assumption of Liabilities................................13
2.4.1 Assumed Liabilities.............................13
2.4.2 Retained Liabilities............................14
2.5 No Assignment Without Consent............................15
ARTICLE 3 ARTICLE 3. PURCHASE PRICE.....................................16
3.1 Purchase Price...........................................16
3.2 Closing Date Estimate....................................16
3.3 Closing Date Statement...................................16
3.4 Performance Deposit......................................18
ARTICLE 4 REQUIRED APPROVALS, CONSENTS AND NOTIFICATIONS................19
4.1 State Regulatory Approval................................19
4.2 Bondholder Consents......................................19
4.3 Material Consents........................................19
4.4 FCC Consents.............................................19
4.5 HSR Act Review...........................................19
4.6 Notification.............................................20
4.7 GTE/Bell Atlantic Merger.................................20
ARTICLE 5 PRE-CLOSING COVENANTS.........................................20
5.1 Investigation by Buyer...................................20
5.2 Operation of the Business in the Ordinary Course.........21
5.2.1 Preservation of Business........................21
5.2.2 No Material Changes.............................21
5.3 Satisfaction of Conditions...............................22
5.4 Approvals................................................22
5.5 Financial Statements.....................................22
5.6 Capital Expenditures.....................................23
5.7 Delivery of Interim Information..........................23
5.8 Cooperation with Respect to Like-Kind Exchange...........23
ARTICLE 6 CONDITIONS PRECEDENT TO THE CLOSING...........................24
6.1 Conditions Precedent to Obligations of Buyer.............24
6.1.1 No Misrepresentation or Breach of
Covenants and Warranties.......................24
6.1.2 Documents.......................................24
6.1.3 HSR.............................................24
6.1.4 No Legal Obstruction............................24
6.1.5 No Material Adverse Effect......................25
6.2 Conditions Precedent to Obligations of Seller............25
6.2.1 No Misrepresentation or Breach of
Covenants and Warranties.......................25
6.2.2 Documents.......................................25
6.2.3 Delivery of Closing Date Amount.................25
6.2.4 HSR.............................................25
6.2.5 No Legal Obstruction............................25
ARTICLE 7 THE CLOSING...................................................25
7.1 The Closing..............................................25
7.2 Seller's Obligations at Closing..........................26
7.3 Buyer's Obligations at Closing...........................27
ARTICLE 8 REPRESENTATIONS AND WARRANTIES................................27
8.1 Representations and Warranties of Seller.................27
8.1.1 Authorization and Effect of Agreement...........27
8.1.2 No Restrictions Against Sale or
Assignment of the Purchased Property...........27
8.1.3 Consents, Approvals and Permits of
Governmental Authorities.......................28
8.1.4 No Violation of Law.............................28
8.1.5 Corporate Organization..........................28
8.1.6 Brokers.........................................28
8.1.7 Title to Owned Real Property....................28
8.1.8 Real Property Leases............................29
8.1.9 Tangible Assets.................................29
8.1.10 No Material Adverse Change......................29
8.1.11 Material Contracts..............................29
8.1.12 Insurance.......................................30
8.1.13 Taxes...........................................31
8.1.14 No Material Claims or Suits.....................31
8.1.15 Tariffs; FCC Licenses...........................31
8.1.16 Employee Matters................................32
8.1.17 Schedules of Telephone Plant....................34
8.1.18 Schedule of Real Property Interests.............34
8.1.19 Environmental Matters...........................34
8.1.20 Schedule of Joint Construction Projects.........35
8.1.21 Financial Statements............................35
8.1.22 Year 2000 Compliance............................35
8.1.23 Access Line Count...............................36
8.2 Representations and Warranties of Buyer..................36
8.2.1 Corporate Organization..........................36
8.2.2 Authorization and Effect of Agreement...........36
8.2.3 No Restrictions Against Purchase of the
Purchased Properties...........................37
8.2.4 No Violation of Law.............................37
8.2.5 Financial Capacity..............................37
8.2.6 Brokers.........................................37
8.2.7 Consents and Approvals of Governmental
Authority......................................37
ARTICLE 9 CONTINUING BUSINESS RELATIONSHIPS.............................38
9.1 Transition Services Agreement............................38
9.2 Optional Services Agreement..............................38
9.3 Directory Publishing.....................................38
9.3.1 Assumption of Certain Directory Publishing
Agreement Rights and Obligations...............38
9.3.2 Co-Bound Directories Acknowledgement............38
9.3.3 Meeting to Discuss Directory Publication........38
9.4 GTE Telecom Agreements...................................39
ARTICLE 10 ADDITIONAL COVENANTS OF THE PARTIES...........................39
10.1 Intellectual Property....................................39
10.1.1 No License......................................39
10.1.2 Infringement....................................39
10.1.3 Trademark Phaseout..............................40
10.1.4 Third Party Software............................41
10.2 Effect of Due Diligence and Related Matters..............41
10.3 Confidentiality..........................................42
10.4 Further Assurances.......................................42
10.5 Prorations...............................................42
10.6 Cost Studies/NECA Matters................................43
10.6.1 Prior to Closing................................43
10.6.2 From and After Closing..........................43
10.7 Customer Deposits and Construction Advances..............44
10.8 Access to Books and Records..............................44
10.9 Purchase Price Allocation................................45
10.10 Owned Real Property Transfers............................45
10.11 Transaction Taxes........................................46
10.12 Bulk Sales Laws..........................................46
10.13 Prepaid Non-regulated Maintenance Agreements.............47
10.14 Vehicle Registration.....................................47
10.15 Carrier Access Billing and Accounts
Receivable Transition...................................47
10.16 End-User Billing and Accounts Receivable
Transition..............................................47
10.17 Cooperation..............................................48
ARTICLE 11 EMPLOYEES AND EMPLOYEE MATTERS................................48
11.1 Employment of Transferred Employees......................48
11.1.1 Assumption of Collective Bargaining
Agreement Obligations..........................48
11.1.2 Assumption of Employment and
Other Agreements...............................49
11.1.3 Recognition of Transferred
Employee Service...............................49
11.1.4 Assumption of Obligation to
Pay Bonuses....................................49
11.1.5 No Duplicate Benefits; Dependents
and Beneficiaries..............................50
11.1.6 Affiliate Employees.............................50
11.1.7 Term of Assumed Obligations.....................50
11.2 Transferred Employee Benefit Matters.....................50
11.2.1 Defined Benefit Plans...........................50
11.2.2 Savings Plans...................................56
11.2.3 Welfare Plans...................................58
11.3 Miscellaneous Benefits...................................61
11.3.1 Loans...........................................61
11.3.2 Vacation........................................61
11.4 Employee Rights..........................................62
11.5 WARN Act Requirements....................................62
11.6 Indemnification..........................................63
11.6.1 Indemnification of Seller.......................63
11.6.2 Indemnification of Buyer........................63
11.7 Special Provisions For Certain Employees.................63
ARTICLE 12 INDEMNIFICATION...............................................64
12.1 Survival of Representations, Warranties
and Covenants...........................................64
12.2 Indemnification..........................................65
12.3 Limitations on Liability.................................65
12.4 Defense of Claims........................................68
ARTICLE 13 TERMINATION...................................................69
13.1 Termination Rights.......................................69
13.2 Good Faith Performance...................................70
13.3 Effect of Termination....................................70
ARTICLE 14 MISCELLANEOUS.................................................71
14.1 Notices..................................................71
14.2 Information Releases.....................................72
14.3 Expenses.................................................72
14.4 Successors and Assigns...................................72
14.5 Amendments...............................................73
14.6 Captions.................................................73
14.7 Entire Agreement.........................................73
14.8 Waiver...................................................73
14.9 Third Parties............................................73
14.10 Counterparts.............................................73
14.11 Governing Law............................................73
14.12 Further Assurances.......................................74
14.13 Severability.............................................74
14.14 Representation by Counsel; Interpretation................74
INDEX OF SCHEDULES
Schedule*....Title
1.1-A Assigned Contracts
1.1-B Excluded Contracts
1.1-C Purchased Exchanges
1.1-D License Agreement
1.1-E National Account Agreement Customers
2.3(g) Other Excluded Property
4.3 Material Consents
4.4 FCC Consents/Waivers
5.2.1 Operation of the Business
5.2.2(c) Increase in Transferred Employee Benefits
5.2.2(d) Dispositions
6.1.1 Seller's Closing Certificate
6.2.1 Buyer's Closing Certificate
7.2(a) Bill of Sale and Assignment and Assumption Agreement
7.2(b) Legal Opinion of Seller's Counsel
7.2(g) Affidavit as to Status of Foreign Person
7.3(c) Legal Opinion of Buyer's Counsel
8.1.3 Consents, Approvals and Permits of Governmental Authorities
8.1.4 Violation of Law
8.1.7(a) Owned Real Property
8.1.7(b) Bondholders Liens
8.1.8 Real Property Leases
8.1.9 Title Exceptions for Tangible Purchased Property
8.1.10 Material Adverse Changes
8.1.11(a) Material Contracts - Limitations on Competition
8.1.11(b) Material Contracts - Liens
8.1.11(c) Material Contracts - Sale of Purchased Property
8.1.11(d) Material Contracts - Ordinary Course
8.1.13 Exceptions to Tax Return Filings
8.1.14 State and Federal Claims/Suits
8.1.15(a) Tariff Proceedings
8.1.15(b) FCC Licenses
8.1.16(a) Employee Matters - Seller's Employee Benefit Plans
8.1.16(b) Employee Matters - Seller's Material Liabilities under ERISA
8.1.16(c) Employee Matters - Seller's ERISA Plans - Compliance
8.1.16(d) Employee Matters - Seller's Multiemployer Plans
8.1.16(e) Employee Matters - Seller's Union Representation
8.1.17 Telephone Plant
8.1.18 Real Property Interests List
8.1.19 Environmental Matters
8.1.20 Joint Construction Projects
8.1.21(a) Financial Statement - Estimated Income Statement
8.1.21(b) Financial Statement - Estimated Balance Sheet
8.1.21(c) Financial Statement - Estimated Statement of Cash Flows
9.1 Transition Services Agreement
9.2 Optional Services Agreement
9.3.1 Directory Publishing Agreements
9.3.2 Co-Bound Directory Agreements
9.4 GTE Telecom Agreements
11.1 Employees and Employee Matters - Transferred Employees and
LTD Recipients
11.1.1 Employees and Employee Matters - Collective Bargaining Agreements
11.1.2 Employees and Employee Matters - Employment Agreement Obligations
and Exceptions
11.1.4 Employees and Employee Matters - Seller's Bonus Plans
11.3.1 Employees and Employee Matters - Employment Loans
* The Schedule numbers refer to the appropriate Section within the Agreement.
<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of the 8th day of July, 1999, by and between Spectra Communications
Group LLC, a Delaware Limited Liability Company ("Buyer"), and GTE Midwest
Incorporated, a Delaware corporation ("Seller").
RECITALS
WHEREAS, Seller is in the business of providing regulated local
exchange telephone service in certain areas of the state of Missouri; and
WHEREAS, Seller desires to sell, convey, assign, transfer and deliver
to Buyer, and Buyer desires to purchase and accept from Seller, certain of its
telephone properties and related assets used in the provision of such service,
upon the terms and conditions set forth in this Agreement.
NOW, THEREFORE, the parties hereto, intending to be legally bound,
agree as follows:
ARTICLE 1
---------
DEFINITIONS
1.1 Terms. For purposes of this Agreement and any amendment hereto, the
following terms are defined as set out below or in the Section referenced below:
"Accounts Receivable Settlement Statements" is defined in
Section 10.16(b).
"Acquired Local Loop" means a "Local Loop" as defined in 47
C.F.R. Section 51.319(a) of the FCC's rules, which Local Loop is part of the
Purchased Exchanges.
"Active Employees" is defined in Section 11.1.
"Advanced Billings" means amounts arising primarily from the
operation of the Business that have been billed by Seller as of the Closing Date
but that are unearned because they relate to provision of service after the
Closing Date.
"Affiliate" means, with respect to any Person, any other
Person that, directly or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control with, such Person.
"Allocation" is defined in Section 10.9.
"Ancillary Documents" means the Transition Services Agreement,
the Optional Services Agreement, the License Agreement, the GTE Telecom
Agreements and the Bill of Sale and Assignment and Assumption Agreement.
"Assigned Contracts" means Contracts to which Seller is a
party (i) which relate primarily to the operation of the Business, other than
the Excluded Contracts, Real Property Interests, Real Property Leases and Third
Party Intellectual Property Contracts, and (ii) any other Contract to which
Seller or its Affiliates are a party and is listed on Schedule 1.1-A.
"Assigned Permits" means, to the extent assignable, all
permits, licenses, franchises, approvals and authorizations of Seller issued or
granted by any Governmental Authority that relate primarily to the operation of
the Business, other than the FCC Licenses and the Excluded Permits.
"Assumed Liabilities" is defined in Section 2.4.1
"Automated Assets" is defined in Section 8.1.22.
"Bargained Welfare Plans" is defined in Section 11.2.3(a).
"Base Purchase Price" is defined in Section 3.1.
"Bill of Sale and Assignment and Assumption Agreement" is
defined in Section 7.2(a).
"Bondholder Consents" is defined in Section 4.2.
"Bondholders" means the Persons listed on Schedule 8.1.7(b).
"Business" means the business of providing in the geographic
area serviced by the Purchased Exchanges (i) local exchange (including extended
community calling and extended area service), exchange access, switched,
dedicated, special access, tandem, end office switching service and intra-LATA
toll telecommunications services to end users, (ii) exchange access
telecommunications services to interexchange carriers and other local exchange
carriers, (iii) retail sales, leasing and maintenance of telephone equipment and
products (including customer premises equipment), (iv) non-tariffed public
communications (pay telephones) and commercial telecommunications services
facilities leasing, and (v) provision of subscriber listing information
(including directory services).
"Buyer Pension" is defined in Section 11.2.1(c)(iii)(B).
"Buyer Pension Plan" and "Buyer Pension Plans" are defined
in Section 11.2.1(b).
"Buyer Savings Plan" and "Buyer Savings Plans" are defined
in Section 11.2.2(b).
"Buyer Welfare Plans" is defined in Section 11.2.3(a).
"Buyer's Actuary" is defined in Section 11.2.1(d)(ii).
"Buyer's Closing Certificate" is defined in Section 6.2.1.
"Calendar-Related" is defined in Section 8.1.22.
"Capital Expenditure Amount" is defined in Section 5.6.
"Capital Expenditure Deficiency" is defined in Section 5.6.
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended.
"Closing" is defined in Section 7.1.
"Closing Date" is defined in Section 7.1.
"Closing Date Amount" is defined in Section 3.2(b).
"Closing Date Statement" is defined in Section 3.3.
"CLTA" is defined in Section 10.10.
"Co-Bound Directories" is defined in Section 9.3.2.
"Confidentiality Agreement" means the Confidentiality
Agreement dated as of November 9, 1998, between Buyer, Seller and certain
Affiliates of Seller.
"Construction Advances" means advances collected by Seller for
the future performance of non-regulated construction in the Purchased Exchanges.
"Contracts" means all contracts, leases, indentures,
agreements, and other legally binding arrangements.
"Customer Advances" means amounts arising from the operation
of the Business that have been billed and collected by Seller as of the Closing
Date but that are unearned because they relate to the provision of service after
the Closing Date.
"Customer Deposits" is defined in Section 10.7.
"Date Data" is defined in Section 8.1.22.
"Deposit" is defined in Section 3.4.
"Deposit L/C" is defined in Section 3.4.
"Direct Claim" is defined in Section 12.4(b).
"DOJ" is defined in Section 4.5.
"Due Diligence Materials" means all materials contained in the
six volumes delivered to Buyer on July 8, 1999.
"Earned End-User Accounts Receivable" means accounts
receivable arising primarily from the operation of the Business that have been
earned by Seller's provision of service on or before the Closing Date excluding
amounts billed through the carrier access billing system to interexchange
carriers.
"Earned End-User Accounts Receivable Amount" means the
aggregate amount of all Earned End-User Accounts Receivable as of the Closing
Date, less a discount for anticipated uncollectible Earned End-User Accounts
Receivable in an amount equal to the Uncollectible Factor multiplied by the
Earned End-User Accounts Receivable as of the Closing Date.
"Employment Agreements" is defined in Section 8.1.16(a).
"Environmental Requirements" means all federal, state,
interstate and local government or agency Laws relating to pollution or
protection of human health and safety or the environment (including, without
limitation, air, surface water, ground water, land surface and subsurface
strata), including, without limitation, Laws relating to emissions, discharges,
releases or threatened releases of Regulated Materials; or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transportation or handling of Regulated Materials.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"ERISA Plans" is defined in Section 8.1.16(a).
"Estimated Non-Regulated Construction Work in Process Amount"
is defined in Section 3.2(a).
"Estimated Regulatory Obligation Amount" is defined in
Section 3.2(a).
"Evaluation Material" is defined in the first paragraph of the
Confidentiality Agreement.
"Excluded Contracts" means all billing and collection
agreements, interconnection agreements, National Account Agreements, billing
media agreements, vehicle leasing agreements, except to the extent expressly
listed on Schedule 1.1-A, and (ii) such other agreements as are listed on
Schedule 1.1-B.
"Excluded Marks" means all trademarks, applications for
trademark registration, service marks, applications for service mark
registration, trade names, domain names and related registrations owned by
Seller or an Affiliate of Seller, or licensed to Seller or an Affiliate of
Seller by any Person, and any derivations of the foregoing.
"Excluded Permits" means the permits, licenses, franchises,
approvals and authorizations of Seller by Governmental Authorities that relate
to the Excluded Property.
"Excluded Property" is defined in Section 2.3.
"Executive Officers" of Seller means the regional president of
the region that includes the Purchased Exchanges, the general manager and the
director of infrastructure provisioning for the Purchased Exchanges and the
general manager of customer operations for the Purchased Exchanges.
"Expiration Date" is defined in Section 12.1(a).
"FCC" means the Federal Communications Commission.
"FCC Consents" is defined in Section 4.4.
"FCC Licenses" means all licenses, certificates, permits or
other authorizations granted to Seller by the FCC that are used primarily in the
operation of the Business.
"Final Order" is defined in Section 6.1.4.
"Financial Statements" is defined in Section 8.1.21.
"FRP" is defined in Section 11.2.3(e).
"FTC" is defined in Section 4.5.
"Future Capital Expenditure Obligations" is defined in
Section 2.4.1(h).
"Future Regulatory Obligations" is defined in Section 2.4.1(g)
"GAAP" means United States generally accepted accounting
principles.
"GATT Grandfathered Participant" is defined in Section
11.2.1(c)(ii)(C).
"Governmental Authority" means any court or any federal, state
or foreign governmental, legislative, administrative or regulatory body, agency,
department, authority or other instrumentality.
"GTE Telecom Agreements" is defined in Section 9.4.
"GTE Telecom Assets" is defined in Section 9.4.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
"Indemnifiable Losses" is defined in Section 12.3(a).
"Indemnification Payment" is defined in Section 12.3(a).
"Indemnifying Party" is defined in Section 12.3(a).
"Indemnitee" is defined in Section 12.3(a).
"Intellectual Property" means all inventions (whether
patentable or not and whether or not such inventions are described or claimed in
any patent or patent application), designs (useful or ornamental), and works
subject to copyright protection, invention disclosures, specifications, manuals,
drawings, functional or system block diagrams, flow charts, circuit diagrams,
design or user documentation, engineering notebooks, schematics, test programs,
documented procedures, documented processes, documented flows, devices, software
(in any form), or firmware, and all intellectual property rights therein or
based thereon, including patents, patent applications (including continuations,
continuations-in-part, divisions, reissues), reexamined patents and extensions
thereof, copyrights (whether registered or unregistered), and trade secrets.
"IRC" means the Internal Revenue Code of 1986, as amended.
"IRS" means the Internal Revenue Service.
"Joint Construction Projects" is defined in Section 2.4.1(d).
"LTD Recipient" is defined in Section 11.7.
"Law" or "Laws" means any statute, rule, regulation, mandate,
decree, decision, order or ordinance of any Governmental Authority.
"Leased Real Property" means the real property leased to
Seller under the Real Property Leases.
"License Agreement" means the license agreement attached
hereto as Schedule 1.1-D pursuant to which Seller grants to Buyer certain rights
and licenses under Licensed Intellectual Property.
"Licensed Intellectual Property" means Intellectual Property
owned by Seller, and Third Party Intellectual Property licensed to Seller which
Seller has the right to sublicense to Buyer and its Affiliates without the
payment of compensation or other consideration to any Person, and which
Intellectual Property and Third Party Intellectual Property (i) are required for
the use or maintenance (to the extent not provided by the owner or licensor of
the Third Party Intellectual Property) of the Purchased Exchanges, (ii) are
located in the geographic area of the Purchased Exchanges, and (iii) are used in
the operation of the Business as of the Closing; provided that Licensed
Intellectual Property shall at all times be Excluded Property.
"Lien" means any lien, charge, pledge, option, mortgage,
security interest, right of first refusal or other encumbrance.
"Material Adverse Effect" means a materially adverse effect on
the Business or the Purchased Property, taken as a whole, other than effects
relating to or arising from (i) the execution of this Agreement, (ii) the United
States economy generally or Missouri in particular, or (iii) events or
circumstances that affect the Business in the same manner and to the same extent
as other businesses in the industry generally.
"Material and Supply Inventory" is defined in the FCC's Part
32 Uniform System of Accounts.
"Material Consents" is defined in Section 4.3.
"Material Contracts" is defined in Section 8.1.11.
"Merger" means the proposed merger involving GTE Corporation
and Bell Atlantic Corporation and their respective Subsidiaries.
"National Account Agreements" means agreements between Seller
or its Affiliates with those customers listed on Schedule 1.1-E.
"NECA" is defined in Section 10.6.1.
"Non-Regulated Construction" means all construction related to
non-tariffed activities, including PBX, CPE and related construction activities.
"Non-Regulated Construction Work in Process Amount" means
amounts expended by Seller for non-regulated construction work not completed as
of Closing Date, net of Construction Advances related to such construction work.
Non-Regulated Construction Work in Process Amount is billable by Buyer to third
parties after Closing Date.
"Non-Union Welfare Plans" is defined in Section 11.2.3(a).
"Optional Services Agreement" is defined in Section 9.2.
"Owned Real Property" means the real property (i) owned in fee
by Seller, (ii) located in the geographic area of the Purchased Exchanges and
(iii)used primarily in the operation of the Business, including all land,
buildings, structures, appurtenances and improvements located thereon.
"Participant Loans" is defined in Section 11.2.2(c)(i).
"PBGC" means the Pension Benefit Guaranty Corporation.
"Pension Assets" is defined in Section 11.2.1(d)(i).
"Periodic Taxes" is defined in Section 10.5.
"Permitted Encumbrances" means (i) Liens for current Taxes and
assessments not yet delinquent, or the amount or validity of which is being
contested in good faith by appropriate proceedings during which collection or
enforcement against the relevant property is stayed, (ii) standard utility
easements, covenants and restrictions of record that do not individually or in
the aggregate materially interfere with the operation of the Business as
currently conducted on the Owned Real Property affected thereby, (iii)
mechanics', carriers', workers', repairers' and other statutory Liens,
satisfaction of which has not come due in the ordinary course of business, (iv)
existing zoning or similar Laws or ordinances that do not interfere with the
operation of the Business, (v) leases otherwise disclosed herein, and (vi) any
other Liens that do not materially interfere with the operations of the
Purchased Property in a manner consistent with the current use by Seller.
"Person" means an individual, corporation, partnership, trust,
association, limited liability company or similar entity or organization.
"Plans" is defined in Section 8.1.16(a).
"Price-Cap Regulation Entity" means an entity subject to
price-cap regulation within the meaning of 47 C.F.R. Section 61.41(c)(2) (the
"all-or-nothing" rule).
"Proration Periods" is defined in Section 10.5.
"PSC" means the Missouri Public Service Commission.
"Publisher" is defined in Section 9.3.1.
"Publishing Agreement" is defined in Section 9.3.1.
"Purchase Price" is defined in Section 3.3(c).
"Purchased Exchanges" means the telephone exchanges listed in
Schedule 1.1-C.
"Purchased Property" is defined in Section 2.2.
"Rate-of-Return Regulation Entity" means an entity not subject
to price-cap regulation within the meaning of 47 C.F.R. Section 61.41(c)(2) (the
"all-or-nothing"rule).
"Real Property Interests" means all easements, rights of way,
licenses or other interests in real property of Seller that are used primarily
in the operation of the Business, and are located in the geographic area of the
Purchased Exchanges, other than Owned Real Property or Leased Real Property.
"Real Property Leases" means the Leases set forth on
Schedule 8.1.8.
"Regulated Material" means (i) any "hazardous substance" as
defined in CERCLA, (ii) any petroleum or petroleum substance, and (iii) any
other pollutant, waste, contaminant, or other substance regulated under
Environmental Requirements.
"Regulatory Approvals" is defined in Section 4.1.
"Regulatory Obligation Amount" is defined in Section 3.1.
"Retained Books and Records" means, collectively, all
corporate records and stock books of Seller and its Affiliates, the general
ledger, all records required by Law to be retained by Seller and all books and
records relating to (i) Tax Returns and Tax records, (ii) Excluded Property,
(iii) attorney work product, and (iv) the Retained Liabilities; provided that
where reasonably necessary or prudent, "Retained Books and Records" shall also
include copies of the Transferred Books and Records.
"Retained Future Capital Expenditure Obligations" is defined
in Section 2.4.1(h).
"Retained Future Regulatory Obligations" is defined in
Section 2.4.1(g).
"Retained Liabilities" is defined in Section 2.4.2.
"Retired Non-Union Transferred Employee" is defined in
Section 11.2.3(b)(ii).
"Seller's Actuary" is defined in Section 11.2.1(d)(ii).
"Seller's Bonus Plans" is defined in Section 11.1.4.
"Seller's Closing Certificate" is defined in Section 6.1.1.
"Seller's Hourly Pension Plan" is defined in Section
11.2.1(a)(ii).
"Seller's LTD Plan" is defined in Section 11.7.
"Seller's Pension" is defined in Section 11.2.1(c)(iii)(B).
"Seller's Pension Plan" and "Seller's Pension Plans" are
defined in Section 11.2.1(a)(ii).
"Seller's Salaried Pension Plan" is defined in Section
11.2.1(a)(i).
"Seller's Savings Plans" is defined in Section 11.2.2(a).
"Seller's Welfare Plans" is defined in Section 11.2.3(a).
"Switch Software" means any telephone switch software licensed
to Seller which software is necessary to Seller's current operation and use of
any telephone switching equipment in the Purchased Exchanges and which equipment
is included in Telephone Plant.
System Date" is defined in Section 8.1.22.
"Tax Returns" means a report, return or other information
statement required to be supplied to or filed with a Governmental Authority with
respect to Taxes.
"Tax(es)" means any foreign, federal, state, county or local
income, sales, use, transfer, excise, franchise, stamp duty, custom duty, real
and personal property, gross receipt, capital stock, business and occupation,
disability, employment, payroll, recording, ad valorem, unemployment
compensation, profits, registration, social security, estimated, add-on,
minimum, or withholding tax relating to the Business or the Purchased Exchanges
and any interest and penalties and additions to such taxes (civil or criminal)
related thereto or to the nonpayment thereof and related notarial fees.
"Telephone Plant" means (i) Owned Real Property, (ii) Real
Property Interests, and (iii) the machinery, equipment, inventory, vehicles
(whether currently owned or leased by Seller) and all other assets and
properties used primarily in the operation of the Business, including all plant,
systems, structures, construction work in progress, telephone cable (whether in
service or under construction), microwave facilities (including frequency
spectrum assignment), telephone line facilities, machinery, furniture, fixtures,
tools, implements, conduits, stations, substations, equipment (including central
office equipment, subscriber station equipment, network connection equipment and
other equipment in general), instruments, house wiring connections and other
personal property used primarily in the operation of the Business and located in
the Purchased Exchanges, other than Excluded Property. Without limiting the
generality of the foregoing, Telephone Plant includes the assets that would be
properly included in the fixed assets referenced in Part 32 of the FCC Rules and
Regulations (47 CFR, Part 32), as such accounts are reflected in Schedule
8.1.17.
"Third Party Claim" is defined in Section 12.4(a).
"Third Party Intellectual Property" means Intellectual
Property owned by any Person, other than Seller, without regard as to whether
Seller has any rights therein or the right to assign such rights to Buyer.
"Third Party Intellectual Property Contracts" is defined in
Section 10.1.4.
"Total Service Pension" is defined in Section
11.2.1(c)(iii)(B).
"Transaction Taxes" is defined in Section 10.11.
"Transferred Books and Records" means all of Seller's customer
or subscriber lists and records, accounts and billing records, plant and
continuing property records, plans, blueprints, specifications, drawings,
surveys, engineering reports, personnel records of Transferred Employees (where
applicable), tariffs, orders or other material correspondence or records
relating to regulation of the Business by any Governmental Authority, and all
other documents, computer data and records, in each case relating primarily to
the operation of the Business, except for the Retained Books and Records.
"Transferred Employees" is defined in Section 11.1.
"Transition Services Agreement" is defined in Section 9.1.
"Transitional Year" means any calendar year (beginning with
the calendar year in which the Closing occurs) in which USF distributions are
based upon the costs, whether historic costs or forward-looking economic costs,
reported for a calendar year in which Seller owned the Acquired Local Loop for
any part of such calendar year.
"Uncollectible Factor" is defined in Section 10.16.
"USAC" is defined in Section 10.6.1.
"USF" is defined in Section 10.6.1.
"Vacation Proration Amount" is defined in Section 11.3.2(c).
"Year 2000 Compliant" is defined in Section 8.1.22.
1.2 Interpretation.
(a) Unless the context otherwise requires, (i) all references to Sections,
Articles or Schedules are to Sections, Articles or Schedules of or to this
Agreement, (ii) each accounting term not otherwise defined in this Agreement has
the meaning assigned to it in accordance with GAAP, (iii) all references to the
"knowledge of Seller" are deemed to refer to the actual knowledge of the
Executive Officers of Seller, (iv) the term "primarily" means primarily or
exclusively, and (v) the term "including" means including without limitation.
(b) No provision of this Agreement will be interpreted in favor of or against
either of the parties by reason of the extent to which any such party or its
counsel participated in the drafting thereof or by reason of the extent to which
any such provision is inconsistent with any prior draft of such provision or of
this Agreement.
(c) Except as otherwise provided in this Agreement, in the event of any dispute
concerning the "knowledge" of a party to this Agreement, the burden of proof
shall be on the party asserting that another party had such knowledge.
ARTICLE 2
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PURCHASE AND SALE OF ASSETS
2.1 Purchase and Sale of Assets. Upon the terms and subject to
the conditions of this Agreement, Seller hereby agrees to sell, convey,
transfer, assign and deliver to Buyer and Buyer hereby agrees to purchase,
acquire and accept from Seller, in each case effective as of the Closing, all of
Seller's right, title and interest in and to the Purchased Property.
2.2 Purchased Property. The term "Purchased Property" means all
the following business, properties, assets and rights of Seller on the Closing
Date, other than the Excluded Property:
(i) Telephone Plant;
(ii) Earned End-User Accounts Receivable;
(iii) Material and Supply Inventory
(iv) Non-Regulated Construction Work In Process
(v) FCC Licenses and Assigned Permits;
(vi) Assigned Contracts;
(vii) Transferred Books and Records;
(viii) Real Property Leases;
(ix) Advance Billings;
(x) Insurance proceeds of Seller arising
from any loss, damage or destruction
of Purchased Property between the
date hereof and the Closing Date, to
the extent that (1) such Purchased
Property has not been replaced by
Seller, and (2) such insurance
proceeds do not exceed the
replacement cost of such Purchased
Property; and
(xi) All other business, property, assets
and rights of Seller on the Closing
Date not described above that relate
primarily to the Purchased
Exchanges.
2.3 Excluded Property. For purposes of this Agreement, "Excluded
Property" means the following:
(a) Cash, cash equivalents and investments;
(b) All rights of Seller and its Affiliates under this Agreement, the Ancillary
Documents and the certificates and other documents delivered to Seller by Buyer
in connection with this Agreement;
(c) All records prepared in connection with the sale of the Business, including
bids received from third parties and analysis relating to the Business;
(d) All rights and obligations related to the Retained Liabilities;
(e) The Retained Books and Records;
(f) Seller's interests in any business other than the Business, including the
provision of wireless service (cellular and PCS), inter-LATA long distance and
internet service or internet related services, air-to-ground communications (air
phone service), and any Excluded Permits related thereto, and all assets of
Seller and its Affiliates used in connection with any such business or related
thereto, and all assets used by Seller and its Affiliates in rendering corporate
services to Seller or the Business that are located outside the geographic area
serviced by the Purchased Exchanges;
(g) Such other assets (i.e., encryption decoder devices, AWAS terminals, SODA,
etc.), if any, as set forth on Schedule 2.3(g);
(h) The Excluded Contracts;
(i) The Excluded Marks;
(j) All Intellectual Property, including the Licensed Intellectual Property
and Third Party Intellectual Property (except for such rights to possess
and use Third Party Intellectual Property as may be assigned in accordance with
Section 10.1.4); and
(k) All of Seller's insurance proceeds arising in connection with the operation
of the Business or the Purchased Property prior to the Closing, except as
described in Section 2.2(x).
2.4 Assumption of Liabilities.
2.4.1 Assumed Liabilities. Upon the terms and subject to the
conditions of this Agreement, Buyer hereby agrees to assume, as of the Closing
Date, and agrees, beginning on the day following the Closing Date, to pay,
perform and discharge when due the following (the "Assumed Liabilities"):
(a) Ordinary Course. All liabilities, responsibilities and obligations
(including Taxes), arising out of or accruing or resulting from the use or
ownership of the Purchased Property in the ordinary course after the Closing
Date;
(b) Employment Matters. All liabilities, responsibilities and obligations of
Buyer as provided in Article 11 with respect to Transferred Employees;
(c) Assigned Contracts, Real Property Interests and Real Property Leases.
All liabilities, responsibilities and obligations that arise after the Closing
Date in connection with the performance of the Assigned Contracts, Real Property
Interests and the Real Property Leases;
(d) Joint Construction Projects. All liabilities, responsibilities and
obligations to third parties that relate to arrangements and commitments between
Seller and a third party related to post-Closing engineering and construction
required to complete scheduled construction of mutual transmission facilities
between various switching points included in the Purchased Exchanges ("Joint
Construction Projects");
(e) Construction in Progress. All liabilities, responsibilities and obligations
relating to post-Closing engineering and construction required to complete
scheduled construction and other capital expenditure projects for the Purchased
Exchanges;
(f) Customer Advances, Advance Billings, Customer Deposits and Construction
Advances. All liabilities, responsibilities and obligations relating to Customer
Advances, Advance Billings, Customer Deposits and Construction Advances;
(g) Future Regulatory Obligations. All liabilities, responsibilities and
obligations, other than Future Capital Expenditure Obligations, related to the
Purchased Exchanges arising out of any Law promulgated or issued by a
Governmental Authority after the Closing Date or other action taken by a
Governmental Authority after the Closing Date, regardless of whether such Law or
action is or purports to be based on conduct or actions that occurred at any
time prior to the Closing Date ("Future Regulatory Obligations"), except that
Buyer shall not be liable for any such Future Regulatory Obligation arising
directly out of any intentional misconduct by Seller or conduct by Seller that
was not reasonably prudent based on the circumstances prevailing at the time
that occurred prior to the Closing Date ("Retained Future Regulatory
Obligations"); provided that (i) Seller's reliance on reasonable interpretation
of existing Law or practice shall be deemed reasonably prudent, and (ii) Seller
shall not retain any liability for Future Regulatory Obligations to the extent
that the costs associated with such obligations are included in Buyer's rate
base for the Purchased Exchanges;
(h) Future Capital Expenditure Obligations. All liabilities, responsibilities
and obligations related to the Purchased Exchanges arising out of any Law
promulgated or issued by a Governmental Authority or other action taken by a
Governmental Authority requiring any capital expenditure (other than a Future
Regulatory Obligation) after the date of this Agreement, regardless of whether
such Law or action is or purports to be based on conduct, facts or actions that
occurred at any time prior to the date of this Agreement ("Future Capital
Expenditure Obligations"), except that Buyer shall not be liable for any such
Future Capital Expenditure Obligation arising directly out of any intentional
misconduct by Seller or conduct by Seller that was not reasonably prudent based
on the circumstances prevailing at the time ("Retained Future Capital
Expenditure Obligations"); provided that (i) Seller's reliance on reasonable
interpretation of existing Law or practice shall be deemed reasonably prudent,
and (ii) Seller shall not retain any liability for Future Capital Expenditure
Obligations to the extent that the costs associated with such obligations are
included in Buyer's rate base for the Purchased Exchanges. Prior to the Closing
Date, Seller shall notify Buyer of all material Future Capital Expenditure
Obligations within a reasonable time after publication of said obligations by a
Governmental Authority; and
(i) Litigation and Claims. All liabilities and obligations arising out of (i)
litigation and claims that arise out of an occurrence after the Closing Date,
(ii) litigation and claims in respect of Future Regulatory Obligations (other
than Retained Future Regulatory Obligations) regardless of when filed, and (iii)
claims of a Governmental Authority arising from or related to a Future
Regulatory Obligation (other than Retained Future Regulatory Obligations).
Notwithstanding anything in this Section 2.4.1 to the contrary, "Assumed
Liabilities" shall not include any liabilities, responsibilities or obligations
expressly included in Retained Liabilities pursuant to Section 2.4.2.
2.4.2 Retained Liabilities. Seller shall retain and shall
pay, perform anddischarge when due, the following liabilities, responsibilities
and obligations of Seller (the "Retained Liabilities"); provided that Retained
Liabilities shall not include any liability, responsibility or obligation with
respect to any matter that is the subject of a representation, warranty or
covenant by Seller (breaches of which shall be handled in accordance with
Article 12):
(a) Subject to Section 10.5, all trade payables and other accrued payment
obligations of Seller as of the Closing Date;
(b) All debt of Seller (including indebtedness to the Bondholders) and debt of
Seller owed to any one or more of its Affiliates;
(c) Subject to Section 10.5, all federal, state and local income, franchise,
gross receipts and similar Taxes of Seller or its consolidated or combined group
and all federal, state and local income, franchise, gross receipts and sales,
use, property or other Taxes relating to the operation of the Business on or
before the Closing Date or the use, ownership or operation of the Purchased
Property on or before the Closing Date;
(d) Except to the extent otherwise provided in Article 11, all liabilities and
obligations arising on or before the Closing Date with respect to the
Transferred Employees, including (i) all liabilities responsibilities and
obligations arising on or before the Closing Date relating to collective
bargaining agreements or other union Contracts, and (ii) any such liabilities or
obligations that arise after the Closing Date to the extent that such
liabilities and obligations relate to facts, circumstances or conditions arising
or occurring on or before the Closing Date, but excluding any Future Regulatory
Obligations with respect to the Transferred Employees;
(e) All liabilities, responsibilities and obligations resulting from (i)
litigation and claims that arise out of an occurrence prior to the Closing Date,
(ii) litigation and claims in respect of Retained Future Regulatory Obligations
and (iii) litigation and claims in respect of Retained Future Capital
Expenditure Obligations;
(f) Any Retained Future Regulatory Obligations and any Retained Future Capital
Expenditure Obligations; and
(g) All liabilities, responsibilities and obligations with respect to the
Excluded Property and Excluded Contracts.
2.5 No Assignment Without Consent. Notwithstanding anything to
the contrary contained in this Agreement, to the extent that the sale,
conveyance, transfer, assignment or delivery or attempted sale, conveyance,
transfer, assignment or delivery to Buyer of any Purchased Property (including
any Contract) is prohibited by any applicable Law or would require any
governmental or third-party authorizations, approvals, consents or waivers and
such authorizations, approvals, consents or waivers shall not have been obtained
prior to the Closing, this Agreement shall not constitute a sale, conveyance,
transfer, assignment or delivery, or an attempted sale, conveyance, transfer,
assignment or delivery thereof, if any of the foregoing would constitute a
breach of applicable Law or the rights of any third party; provided, however,
that, except to the extent that a condition to Closing set forth in Article 6
relating to the foregoing shall not be satisfied, the Closing shall occur
notwithstanding the foregoing without any adjustment to the Purchase Price on
account of such required authorization. Following the Closing, the parties shall
use their commercially reasonable efforts, and shall cooperate with each other,
to obtain promptly such authorizations, approvals, consents or waivers;
provided, however, that neither Seller nor Buyer nor any of their respective
Affiliates shall be required to pay any consideration therefor, other than
filing, recordation or similar fees payable to any Governmental Authority, which
fees shall be shared equally by Seller and Buyer. Pending or in the absence of
such authorization, approval, consent or waiver, the parties shall cooperate
with each other in any reasonable and lawful arrangements to provide to Buyer
the benefits and liabilities of use of such Purchased Property including, if
permitted by the terms of any applicable Real Property Lease or applicable
Material Contract, through a sublease or subcontract in accordance with Article
4. If such authorization, approval, consent or waiver for the sale, conveyance,
transfer, assignment or delivery of any such Purchased Property is obtained,
Seller shall promptly convey, transfer, assign and deliver, or cause to be
conveyed, transferred, assigned and delivered, such Purchased Property to Buyer.
ARTICLE 3
---------
PURCHASE PRICE
3.1 Purchase Price. The purchase price for the Purchased Property
shall be the sum of (i) Two Hundred Ninety Million Dollars ($290,000,000) (the
"Base Purchase Price"), (ii) amounts expended by Seller to comply with Future
Capital Expenditure Obligations between the date of this Agreement and the
Closing Date (the "Regulatory Obligation Amount"), and (iii) the Non-Regulated
Construction Work in Process Amount, minus (iv) any Capital Expenditure
Deficiency and (v) any Vacation Proration Amount (assuming that Buyer receives a
credit under Section 11.3.2, but if Seller receives a credit, the Vacation
Proration Amount shall be added to the Purchase Price).
3.2 Closing Date Estimate.
(a) Not less than three (3) business days prior to the Closing Date, Seller
will give to Buyer a notice, setting forth Seller's good faith estimate as of
the Closing Date of (i) the Regulatory Obligation Amount (the "Estimated
Regulatory Obligation Amount"), (ii) the Non-Regulated Construction Work in
Process Amount (the "Estimated Non-Regulated Construction Work in Process
Amount"), (iii) any Capital Expenditure Deficiency, and (iv) any Vacation
Proration Amount.
(b) On the Closing Date, Buyer shall pay to Seller an amount equal to the sum
of (i) the Base Purchase Price, (ii) the Estimated Regulatory Obligation Amount,
and (iii) the Estimated Non-Regulated Construction Work in Process Amount, minus
(iv) any Capital Expenditure Deficiency and (v) any Vacation Proration Amount
(assuming that Buyer receives a credit under Section 11.3.2, but if Seller
receives a credit, the Vacation Proration Amount shall be added to the Purchase
Price) (the "Closing Date Amount"). The Closing Date Amount shall be paid by
delivery on the Closing Date of immediately available funds in U.S. dollars by
wire transfer to an account that Seller shall designate to Buyer at least two
(2) business days prior to the Closing Date. Payments from Buyer to Seller for
Earned End-User Accounts Receivable and from Seller to Buyer for Customer
Advances and Customer Deposits will occur subsequent to Closing in accordance
with Article 10.
3.3 Closing Date Statement
(a) Within sixty (60) days after Closing Date, Seller shall prepare and
deliver to Buyer a written statement (with appropriate supporting documentation)
of the Base Purchase Price, Regulatory Obligation Amount, Non-Regulated
Construction Work in Process Amount, any Capital Expenditure Deficiency and any
Vacation Proration Amount ("Closing Date Statement"). Within thirty (30) days
after receipt of the Closing Date Statement, Buyer shall, in a written notice to
Seller, either accept the Closing Date Statement or describe in reasonable
detail any proposed adjustments to the Closing Date Statement and the reasons
therefore. If Seller shall not have received a notice of proposed adjustments
within such thirty (30) day period, Buyer will be deemed irrevocably to have
accepted such Closing Date Statement.
(b) Upon the acceptance of any Closing Date Statement by Buyer, the parties
shall, based thereupon, calculate the Base Purchase Price, Regulatory Obligation
Amount and Non-Regulated Construction Work in Process Amount (collectively, the
"Purchase Price"). If the Purchase Price as finally determined above is greater
than the Closing Date Amount, Buyer shall promptly, but no later than three (3)
business days after such acceptance, pay to Seller the amount of such
difference. If the Purchase Price as determined above is less than the Closing
Date Amount, Seller shall promptly, but no later than three (3) business days
after such acceptance, pay to Buyer the amount of such difference.
(c) Seller and Buyer shall negotiate in good faith to resolve any disputes
over any proposed adjustments to the Closing Date Statement, provided that if
any such dispute is not resolved within thirty (30) days following Seller's
receipt of any proposed adjustments delivered by Buyer pursuant to Section
3.3(b), Buyer and Seller jointly shall select an independent public accounting
firm that is nationally recognized in the United States to resolve such disputes
in accordance with the standards set forth in this Section 3.3, which resolution
shall be final and binding. The fees and expenses of such accounting firm shall
be shared by Buyer and Seller in inverse proportion to the relative amounts of
the disputed amount determined to be for the account of Buyer and Seller,
respectively.
(d) If Buyer disputes any portion of the Closing Date Statement, the parties
shall calculate the portion of the Closing Date Statement that is not the
subject of any dispute or proposed adjustment. If the undisputed portion of the
Closing Date Statement (i) is greater than the respective estimated amounts paid
on the Closing Date, Buyer shall promptly pay Seller the amount of such
difference, or (ii) is less than the respective estimated amounts paid on the
Closing Date, Seller shall promptly pay Buyer the amount of such difference.
Payments with respect to any undisputed portions of these adjustments shall be
made no later than three (3) business days after delivery of the notice of the
proposed adjustments. Upon resolution of any dispute over any proposed
adjustments as described above in Section 3.3(d), a party which is determined to
owe the other party an amount shall pay that amount promptly, but no later than
three (3) business days after resolution.
(e) Any amount payable pursuant to this Section 3.3 after the date which is
ninety (90) days following the Closing Date shall bear interest from such
ninetieth day through but excluding the date of payment, at a rate of eight
percent (8%) per annum. Such interest shall accrue daily on the basis of a year
of three hundred sixty-five (365) days and the actual number of days for which
interest is due and shall be payable together with the amount payable pursuant
to this Section 3.3. All amounts payable pursuant to this Section 3.3 shall be
paid by delivery of immediately available funds in U.S. dollars by wire transfer
to, in the case of amounts payable by Buyer, the account identified by Seller as
described in 3.2 above or to an alternate account that Seller may designate on
the Closing Date Statement and, in the case of amounts payable by Seller, to
such account of Buyer as Buyer shall designate in writing to Seller.
3.4 Performance Deposit.
(a) Concurrently with the execution and delivery hereof, Buyer shall pay to
Seller by wire transfer of immediately available funds the sum of Fourteen
Million Five Hundered Thousand Dollars ($14,500,000), an amount equal to five
percent (5%) of the Base Purchase Price (the "Deposit"), to be held by Seller
against payment of the Purchase Price and as security for the performance by
Buyer of its obligations under this Agreement.
(b) Buyer may elect to deliver the Deposit to Seller in cash or in the form of
an irrevocable, clean, standby letter of credit for the same amount (the
"Deposit L/C"). The Deposit L/C shall (i) be in a form reasonably acceptable to
Seller, (ii) be issued in favor of Seller under this Agreement and (iii) be
issued by a bank that has a long-term unsecured debt rating of at least A+ by
Standard & Poor's Rating Services and that is otherwise reasonably satisfactory
to Seller. The Deposit L/C (and any replacement thereof furnished in accordance
with this Section 3.4(b) shall have an expiration date no earlier than the first
anniversary of the date of issuance thereof and shall be automatically renewed
from year to year unless stated not to be so renewed by the issuer thereof in a
written notice given to the Seller not less than 30 days prior to the expiration
thereof. In the event of the termination of the Deposit L/C (and any replacement
thereof furnished in accordance with the provisions of this Section 3.4(b)),
Buyer shall deliver to Seller a replacement letter or letters of credit in lieu
thereof no later than 30 days prior to the expiration of the preceding letter of
credit. If Buyer shall fail to obtain any replacement of the Deposit L/C (and/or
any replacement thereof furnished in accordance with the provisions of this
Section 3.4(b)), then Seller shall draw down the full amount of the existing
letter of credit and retain the same as security for the covenants, agreements
and obligations of Buyer under this Agreement. Any replacement of any Deposit
L/C shall be in a form reasonably acceptable to Seller. Buyer acknowledges that
Seller has agreed to accept the Deposit L/C in lieu of a cash down payment
against the Purchase Price solely as an accommodation to Buyer.
(c) If the transfer of the Purchased Property as contemplated hereunder is
consummated, then the Deposit shall be paid to Seller at the Closing and
credited against the Base Purchase Price. If Buyer elects to deliver the Deposit
L/C in lieu of cash, Seller shall draw down the full amount of the Deposit L/C
at the Closing and pay such proceeds to Seller as a credit against the Base
Purchase Price.
(d) Seller acknowledges that, upon two (2) business days prior written notice
to Seller, Buyer shall have the right to deliver to Seller a cash payment of
$14,500,000, and upon receipt of such payment, Seller shall return to Buyer the
Deposit L/C.
(e) The parties hereto acknowledge and agree that their respective rights and
obligations related to the Deposit are described in Section 13.3.
ARTICLE 4
REQUIRED APPROVALS, CONSENTS AND NOTIFICATIONS
4.1 State Regulatory Approval. Promptly after the date of this
Agreement, Buyer and Seller shall file the appropriate applications and notices
with the PSC, seeking orders permitting the transfer of service in the Purchased
Exchanges to Buyer (collectively, the "Regulatory Approvals"). Buyer will be
responsible for establishing the tariff for its post-Closing operations in the
Purchased Exchanges. Buyer agrees to use its commercially reasonable efforts to
obtain the Regulatory Approvals and Seller agrees to cooperate fully with Buyer
and with the applicable regulatory agency to obtain the Regulatory Approvals at
the earliest practicable date.
4.2 Bondholder Consents. Seller shall use its commercially
reasonable efforts to obtain from its Bondholders the termination or release, at
Closing, of all security agreements, mortgages, financing statements or other
Liens running in favor of the Bondholders and relating to the Purchased Property
(such termination or release being hereinafter referred to as the "Bondholder
Consents"). Buyer agrees to cooperate in good faith with Seller in obtaining the
required Bondholder Consents.
4.3 Material Consents. Promptly after the date hereof, the parties
shall use their commercially reasonable efforts to mutually seek the consent of
the lessor under any Real Property Lease with respect to a central office or any
license with respect to Switch Software which lease or license requires consent
as a condition to an assignment, and which is identified on Schedule 4.3 or
Schedule 8.1.8 (the "Material Consents"). If a lessor or licensor refuses to
consent to an assignment, and if the applicable lease or license permits a
sublease or sublicense without the consent of the lessor or licensor, the
parties hereto shall, effective as of the Closing, enter into a sublease or
sublicense upon terms and conditions as similar and comparable to an assignment
of the lease or license as is reasonably feasible.
4.4 FCC Consents. Promptly after the date of this Agreement, the
parties shall use their commercially reasonable efforts to obtain (i) the FCC's
consent to the transfer of the FCC Licenses from Seller to Buyer, (ii) the FCC
consents and waivers set forth on Schedule 4.4 and (iii) the FCC Final Orders
(all such consents, waivers or orders are collectively referred to as the "FCC
Consents").
4.5 HSR Act Review. Within thirty (30) business days after
the date of this Agreement, the parties will make such filings as may be
required by the HSR Act with respect to the transactions contemplated by this
Agreement. Thereafter, the parties will file as promptly as practicable all
reports or other documents required or requested by the U.S. Federal Trade
Commission ("FTC") or the U.S. Department of Justice ("DOJ") pursuant to the HSR
Act or otherwise and will comply promptly with any requests by the FTC or the
DOJ for additional information concerning such transactions, so that the waiting
period specified in the HSR Act will expire as soon as reasonably possible after
the execution and delivery of this Agreement. Without limiting the foregoing,
Seller and Buyer agree to use their commercially reasonable efforts to cooperate
and oppose any preliminary injunction sought by any Governmental Authority
preventing the consummation of the transactions contemplated by this Agreement.
Buyer agrees to pay all application fees required in connection with any filings
under the HSR Act.
Seller and Buyer shall cause their respective counsel to furnish each
other such necessary information and reasonable assistance as the other may
reasonably request in connection with the preparation of necessary filings or
submissions under the provisions of the HSR Act. Seller and Buyer will cause
their respective counsel to supply to each other copies of all correspondence,
filings or written communications by such party or its Affiliates with any
Governmental Authority or staff members thereof, with respect to the
transactions contemplated by this Agreement and any related or contemplated
transactions, except for documents filed pursuant to Item 4(c) of the
Hart-Scott-Rodino Notification and Report Form or communications regarding the
same documents or information submitted in response to any request for
additional information or documents pursuant to the HSR Act which reveal
Seller's or Buyer's negotiating objectives or strategies or purchase price
expectations.
4.6 Notification. Each of the parties agrees to notify the others
promptly upon learning of any fact or set of circumstances that would be
reasonably likely to delay or prevent receipt of a Regulatory Approval,
Bondholder Consent, FCC Consent, HSR clearance or other consent or approval
referred to in Article 4.
4.7 GTE/Bell Atlantic Merger. Notwithstanding anything else
contained in this Agreement, Seller and its Affiliates shall not be obligated to
take any action that would violate the terms of their agreements regarding the
Merger, or that would interfere with, delay or prevent the consummation of the
Merger; provided that Buyer shall not be obligated to proceed with the Closing
if the Merger has resulted in a Material Adverse Effect.
ARTICLE 5
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PRE-CLOSING COVENANTS
5.1 Investigation by Buyer. Prior to the Closing, upon reasonable
notice from Buyer to Seller given in accordance with this Agreement and subject
to approval by Seller's appointed representative (which shall not be
unreasonably withheld), Seller will afford to the authorized representatives of
Buyer reasonable access during normal business hours to the Transferred Books
and Records, the Owned Real Property and the Leased Real Property, so as to
afford Buyer the opportunity to make such review, examination and investigation
of the Business and the Purchased Property as Buyer may reasonably request;
provided, however, that no environmental sampling or other testing shall be
performed without Seller's prior written consent, which consent may be given or
withheld in Seller's sole discretion. Buyer will not contact any employee,
customer or supplier of Seller with respect to this Agreement, the matters
involved herein or the Purchased Property without the prior written consent of
Seller. Nothing herein will obligate Seller to take actions that would
unreasonably disrupt the normal course of the business of Seller or violate the
terms of any applicable Law or any Contract to which Seller or any of its
Affiliates is a party or to which any of its assets is subject. Any information
or documentation provided to Buyer or acquired by Buyer during this
investigation shall be deemed "Evaluation Material" as that term is defined in
the Confidentiality Agreement and shall be subject in all cases to the terms of
the Confidentiality Agreement.
5.2 Operation of the Business in the Ordinary Course.
5.2.1 Preservation of Business. Except as contemplated on
Schedule 5.2.1 or in connection with or relating to the Merger (and disclosed to
Buyer) or as otherwise consented to by Buyer prior to the Closing, from the date
of this Agreement until the Closing Seller shall:
(a) Conduct the Business in the ordinary course consistent with past practice
and shall keep available to the Business its services and the services of its
Affiliates to the same extent generally available on the date hereof;
(b) Operate the Business in substantially the same manner as it is presently
being conducted, and, with respect to the Business, refrain from entering into
any Contract that would be a Material Contract without the prior consent of
Buyer (which shall not be unreasonably withheld);
(c) Not institute or participate in any proceeding with respect to, or other-
wise change, amend or supplement any of its tariffs or make any other filings
(other than periodic reports) with the PSC without the prior consent of Buyer
(which shall not be unreasonably withheld) except as disclosed on Schedule
8.1.15(a);
(d) Maintain the Purchased Property in good repair, order and condition,
reasonable wear and use excepted;
(e) Maintain insurance with respect to the Purchased Property consistent with
past practice;
(f) Make capital expenditures in accordance with Section 5.6; and
(g) Maintain the books and records of the Business substantially in accordance
with prior practice, except as changes are mandated by Governmental Authorities
or required by GAAP, in which event Seller shall promptly notify Buyer.
5.2.2 No Material Changes. Except as contemplated by this
Agreement or in connection with or relating to Merger (and disclosed to Buyer)
or as otherwise consented to by Buyer prior to the Closing, from the date of
this Agreement until the Closing, Seller will not:
(a) Make any material change in the general nature of the Business;
(b) Sell, lease or dispose of, or make any Contract for the sale, lease or
disposition of any Purchased Property, other than in the ordinary course of
business consistent with past practice;
(c) Increase the number of Active Employees other than in a manner consistent
with past practice, or increase the benefit provided under any plans concerning
employee benefits or increase the general rates of compensation of its
Transferred Employees, except (i) as required by Law, (ii) pursuant to any
Contract to which Seller is a party existing on the date hereof, (iii) in the
ordinary course of business of Seller consistent with past practice, or (iv) as
listed or described on Schedule 5.2.2(c);
(d) (i) Enter, amend, modify or terminate any Material Contract or permit any
of the foregoing to occur other than in the ordinary course of business; or (ii)
sell, transfer or otherwise dispose of any Purchased Property other than in the
ordinary course of business or as listed or described on Schedule 5.2.2(d), or
encumber any Purchased Property, except for Permitted Encumbrances;
(e) Enter into any new written employment agreement, or union agreement with,
or commitment to, the Transferred Employees (including any new commitment to pay
retirement or other benefits or other amendments to Seller's retirement plans),
provided that Seller may enter into new union agreements to the extent the new
union agreements succeed any union agreement that expires prior to the Closing;
or
(f) Except as contemplated by this Agreement or the Ancillary Agreements,
enter into any transaction with any of its Affiliates that contemplates (i) the
transfer of any Purchased Property; or (ii) any other contractual arrangement
that will survive the Closing and not be terminable at will by, and with no cost
to, Buyer subsequent to the Closing.
5.3 Satisfaction of Conditions. Without limiting the generality or
effect of any provision of Article 6, the parties will use their commercially
reasonable efforts to satisfy promptly all the conditions required to be
satisfied prior to the Closing.
5.4 Approvals.
(a) Between the date of this Agreement and the Closing Date, Buyer and Seller
will (i) cooperate with one another and take all reasonable steps to obtain, as
promptly as practicable, all consents, approvals, authorizations, waivers and
permits of any Governmental Authorities required of either party to consummate
the transactions contemplated by this Agreement and (ii) provide such other
information and communications to any Governmental Authority as may be
reasonably requested.
(b) To the extent that any consents, approvals, authorization or waiver of a
third party with respect to any Assigned Contract is required in connection with
the transactions contemplated by this Agreement, Seller shall use its
commercially reasonable efforts to obtain such authorization, consent, approval
or waiver prior to the Closing Date.
5.5 Financial Statements. Seller will cooperate with the indepen-
dent auditors chosen by Buyer to audit the Financial Statements delivered to
Buyer in accordance with Section 8.1.21. Seller's cooperation will include
access to workpapers and other supporting documents used in the preparation of
the Financial Statements as may be reasonably required by such auditors to
render an opinion, and cooperation with respect to such other financial
statements as Buyer may require with respect to the Business in order to comply
with the reporting requirements of the Securities and Exchange Commission under
Regulations S-K and S-X. Seller will bear the cost of preparation of the
Financial Statements. Buyer will bear the cost of the audit and the cost of
preparation of any financial statements other than the Financial Statements.
Buyer acknowledges that the Financial Statements and any supporting documents
have been made available as an indication of the historical financial
performance and condition of the Business. Except to the extent that the
Financial Statements reflect intentional misrepresentation or fraud, or to the
extent that Seller has breached its representations and warranties under Section
8.1.21, Buyer agrees not to make any claims related to the performance of the
Business after the date of the Financial Statements on the basis of a comparison
to the Financial Statements.
5.6 Capital Expenditures. Seller shall be obligated to make
capital expenditures with respect to the Telephone Plant required to support
normal maintenance and customer growth in a manner consistent with established
regulatory performance objectives, which expenditures (exclusive of any Future
Capital Expenditure Obligations or Future Regulatory Obligations) shall not be
less than $8,000,000 during calendar year 1999, and which amount shall be
discounted on a pro rata daily basis to the extent that the Closing Date occurs
prior to December 31, 1999 (the "Capital Expenditure Amount"). The Purchase
Price shall be adjusted down, on a dollar-for-dollar basis, to the extent that
Seller's actual capital expenditures are less than the Capital Expenditure
Amount (a "Capital Expenditure Deficiency"). In the event the Closing does not
occur prior to January 1, 2000, the Capital Expenditure Amount shall be
increased on a pro rata daily basis and Seller shall be obligated to make
capital expenditures during fiscal year 2000 in the same relative amount, and
the Purchase Price shall be adjusted in the same manner described above for any
Capital Expenditure Deficiency occurring during the period after January 1,
2000. Between the date of this Agreement and the Closing Date, Seller will
notify Buyer of any project involving Non-Regulated Construction Work in Process
in excess of $100,000.
5.7 Delivery of Interim Information. From the date of this
Agreement until the Closing, Seller shall furnish Buyer monthly reports
concerning the operating performance of the Business. Such reports shall contain
such data as typically reported to GTE management with respect to the Purchased
Exchanges, including revenue, access line counts, trouble [capital expenditures
(on a quarterly basis only)] indices and other service measures. All information
provided in accordance with this Section 5.7 shall be subject to compliance with
the Confidentiality Agreement and to compliance with applicable antitrust Laws.
5.8 Cooperation with Respect to Like-Kind Exchange.Buyer agrees
that Seller's transfer of the Purchased Property may, at Seller's election, be
accomplished in a manner enabling such transfer to qualify as part of a
like-kind exchange of property covered by Section 1031 of the IRC. If Seller so
elects, Buyer shall cooperate with Seller (but without being required to incur
any out-of-pocket costs in the course thereof) in connection with Seller's
efforts to effect such like-kind exchange, which cooperation shall include,
without limitation, taking such actions as Seller requests in order to enable
Seller to qualify such transfer as part of a like-kind exchange of property
covered by Section 1031 of the IRC (including any actions required to facilitate
the use of a "qualified intermediary" within the meaning of the United States
Treasury Regulations), and Buyer agrees that Seller may assign all or part of
its rights (but no obligations) under this Agreement to a person or entity
acting as a qualified intermediary to qualify the transfer of the Purchased
Property as part of a like-kind exchange of property covered by Section 1031 of
the IRC. Buyer and Seller agree in good faith to use reasonable efforts to
coordinate the transactions contemplated by this Agreement with any other
transactions engaged in by either Buyer or Seller; provided that such efforts
are not required to include an unreasonable delay in the consummation of the
transactions contemplated by this Agreement.
ARTICLE 6
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CONDITIONS PRECEDENT TO THE CLOSING
6.1 Conditions Precedent to Obligations of Buyer. The obligations
of Buyer to consummate the Closing shall be subject to the satisfaction or
waiver by Buyer, at or prior to the Closing, of each of the following
conditions, any one or more of which may be waived at the option of Buyer:
6.1.1 No Misrepresentation or Breach of Covenants and
Warranties. Seller shall have complied in all material respects with its
covenants to be performed in whole or in part prior to the Closing, and the
representations and warranties of Seller in Section 8.1 shall be true and
correct as of the Closing, except for (i) such representations or warranties
that are made expressly as of and only as of an earlier date, which shall have
been true and correct as of such earlier date except as would not have a
Material Adverse Effect, and (ii) to the extent that any breach of such
representations and warranties has not had and is not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect; and Seller shall
have delivered to Buyer a certificate ("Seller's Closing Certificate") in the
form attached as Schedule 6.1.1, dated the Closing Date and signed by an
Executive Officer of Seller, certifying each of the foregoing, or specifying
those respects in which such covenants have not been performed or such
representations and warranties are not true and correct.
6.1.2 Documents. Seller shall have delivered to Buyer all
documents required by Section 7.2.
6.1.3 HSR. All required waiting periods under the HSR Act
shall have expired or been terminated.
6.1.4 No Legal Obstruction. Each of the required Bondholder
Consents shall have been obtained, each consent required under Section 4.3 shall
have been obtained and each of the required Regulatory Approvals and FCC
Consents shall have been obtained, free of any special terms, conditions or
restrictions that are materially adverse to Buyer (other than any such approvals
or consents which, if not obtained, would not have a Material Adverse Effect);
provided that any Regulatory Approval that would have the effect of converting
any of Buyer's equity investors or their Affiliates from a Rate-of-Return
Regulation Entity to a Price-Cap Regulation Entity shall be deemed to have a
Material Adverse Effect. For purposes of this Agreement, all such approvals and
consents shall be deemed to have been obtained upon the granting thereof, and
the expiration of any appeals period (a "Final Order"). In addition, there shall
not have been entered a preliminary or permanent injunction, temporary
restraining order or other judicial or administrative order or decree in any
jurisdiction, the effect of which prohibits the Closing.
6.1.5 No Material Adverse Effect. There shall not have
occurred any event or condition, which individually or in the aggregate has
resulted, or could reasonably be expected to result, in a Material Adverse
Effect.
6.2 Conditions Precedent to Obligations of Seller. The obligations
of Seller to consummate the Closing shall be subject to the satisfaction or
waiver by Seller, at or prior to the Closing, of each of the following
conditions:
6.2.1 No Misrepresentation or Breach of Covenants and
Warranties. Buyer shall have complied in all material respects with its
covenants to be performed in whole or in part prior to the Closing, and the
representations and warranties of Buyer in Section 8.2 shall be true and correct
in all material respects as of the Closing, except for (i) representations or
warranties made expressly as of and only as of an earlier date, which shall have
been true and correct as of such earlier date except as would not have a
Material Adverse Effect, and (ii) to the extent that any breach of such
representations and warranties has not, individually or in the aggregate, had a
Material Adverse Effect, and Buyer shall have delivered to Seller a certificate
("Buyer's Closing Certificate") in the form attached as Schedule 6.2.1, dated
the Closing Date and signed by an Executive Officer of Buyer, certifying each of
the foregoing or specifying those respects in which such covenants have not been
performed or such representations and warranties are not true and correct.
6.2.2 Documents. Buyer shall have delivered to Seller all
documents required by Section 7.3.
6.2.3 Delivery of Closing Date Amount. Buyer shall have
delivered to Seller, in the manner specified in Section 3.2, the Closing Date
Amount.
6.2.4 HSR. All required waiting periods under the HSR Act
shall have expired or been terminated.
6.2.5 No Legal Obstruction. Each of the required Bondholder
Consents shall have been obtained, and each of the required Regulatory Approvals
and FCC Consents shall have been obtained free of any special terms, conditions
or restrictions that are materially adverse to Seller based upon good faith
business concerns that are not commercially unreasonable (other than any such
approvals or consents which, if not obtained, would not have a Material Adverse
Effect). For purposes of this Agreement, all such approvals and consents shall
be deemed to have been obtained upon the granting of a Final Order. In addition,
there shall not have been entered a preliminary or permanent injunction,
temporary restraining order or other judicial or administrative order or decree
in any jurisdiction, the effect of which prohibits the Closing.
ARTICLE 7
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THE CLOSING
7.1 The Closing. Subject to the terms and conditions of this
Agreement, the closing of the purchase and sale of the Purchased Property and
the assumption of the Assumed Liabilities (the "Closing") shall be held at 9
A.M. local time at the offices of GTE Network Services at 600 Hidden Ridge,
Irving, Texas 75038, on the date agreed upon by the parties, provided such date
shall be (i) the last business day of the month, and (ii) at least five (5)
business days, but not more than ninety (90) days, after the date either party
notifies the other in writing of its determination that all required Regulatory
Approvals, Bondholder Consents, the Material Consents and FCC Consents have been
obtained, or at such other time and place as the parties may agree (the "Closing
Date"). Such Closing shall be deemed to have occurred as of 11:59 P.M., local
time, on the Closing Date. Seller's ownership and operation of the Purchased
Property shall be deemed to cease immediately prior to the Closing.
7.2 Seller's Obligations at Closing. At the Closing, Seller shall
deliver to Buyer the following documents:
(a) (i) The Bill of Sale and Assignment and Assumption Agreement, (ii) subject
to Permitted Encumbrances, special warranty deeds in respect of the Owned Real
Property, and (iii) subject to Section 2.5, assignments of the Assigned
Contracts or to the extent set forth in Section 4.3, sublicenses of certain
Assigned Contracts. For purposes of this Agreement, the term "Bill of Sale and
Assignment and Assumption Agreement" means the form attached hereto as Schedule
7.2(a) executed by Seller;
(b) A legal opinion from William Mundy, general counsel for GTE Network
Services, as counsel for Seller, dated as of the Closing Date and in the form of
Schedule 7.2(b);
(c) Seller's Closing Certificate;
(d) Instruments of assignment of the Real Property Leases and Real Property
Interests or, to the extent set forth in Section 4.3, subleases for the Leased
Real Property;
(e) Mortgage satisfactions, UCC Form 3 Termination Statements and other
instruments necessary to remove, release and terminate all Liens held by any
party on the Purchased Property (except for Permitted Encumbrances);
(f) All of the documents and papers required of Seller as conditions to
Closing pursuant to Section 6.1, including the Regulatory Approvals, Bondholder
Consents and FCC Consents;
(g) A certificate substantially in the form of Schedule 7.2(g) certifying that
Seller is not a "foreign person" within the meaning of Section 1445(b)(2) of the
IRC;
(h) The License Agreement;
(i) All documentation and information required to be delivered by Seller prior
to Closing pursuant to Article 11; and
(j) Such other documents as Buyer may reasonably request.
7.3 Buyer's Obligations at Closing. At the Closing, Buyer shall
deliver to Seller the following:
(a) The Closing Date Amount in the manner specified in Section 3.2;
(b) The Bill of Sale and Assignment and Assumption Agreement and the Ancillary
Agreements executed by Buyer;
(c) A legal opinion from Boles, Boles & Ryan, counsel to Buyer dated as of the
Closing Date and in the form of Schedule 7.3(c);
(d) Buyer's Closing Certificate;
(e) All other documents and papers required of Buyer as conditions of Closing
pursuant to Section 6.2, including the Regulatory Approvals; and
(f) Such other documents as Seller may reasonably request.
ARTICLE 8
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REPRESENTATIONS AND WARRANTIES
8.1 Representations and Warranties of Seller. Seller represents
and warrants to Buyer as follows:
8.1.1 Authorization and Effect of Agreement. Seller has the
requisite corporate power and authority to execute and deliver this Agreement
and the Ancillary Agreements and to perform its obligations hereunder and
thereunder. The execution and delivery by Seller of this Agreement and the
Ancillary Agreements and the fulfillment of its obligations under this Agreement
and the Ancillary Agreements have been duly authorized by all necessary
corporate action on the part of Seller and, to the extent required by Law, any
entity that controls the Seller. This Agreement and the Ancillary Agreements
have been or will be duly executed and delivered by Seller and, assuming the due
execution and delivery of this Agreement and the Ancillary Agreements by Buyer,
constitute valid and binding obligations of Seller enforceable in accordance
with its terms subject to bankruptcy, insolvency, reorganization, moratorium and
other similar laws affecting the rights of creditors generally and subject to
the exercise of judicial discretion in accordance with principles of equity
8.1.2 No Restrictions Against Sale or Assignment of the
Purchased Property. The execution and delivery of this Agreement and the
Ancillary Agreements by Seller does not, and prior to Closing will not, and the
fulfillment by Seller of its obligations under this Agreement and the Ancillary
Agreements will not (i) conflict with or violate any provision of its
certificate of incorporation or bylaws, (ii) subject to obtaining the approvals
and or consents referred to in Section 2.5, Article 4 and Schedule 8.1.11(a-e),
conflict with, violate or result in the breach of any provision of any Material
Contract, or (iii) result in the creation of any Lien (other than Permitted
Encumbrances) upon any of the Purchased Property under (a) any Material Contract
or (b) any Law applicable to any of the Purchased Property, except in the case
of clauses (ii) or (iii) for any such conflict, violation, breach or Lien that
would not have a Material Adverse Effect.
8.1.3 Consents, Approvals and Permits of Governmental
Authorities. Except as set forth in Schedule 8.1.3:
(a) No consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Authority is required to be
obtained or made by or with respect to Seller or in connection with the
execution and delivery of this Agreement and the Ancillary Agreements by Seller
or the fulfillment by Seller of its obligations under this Agreement and the
Ancillary Agreements, except (i) FCC Consents and HSR Act clearance, (ii) the
Regulatory Approvals, and (iii) any consent approval, order or authorization or
registration declaration or filing, which if not obtained or made would not have
a Material Adverse Effect.
(b) Seller holds valid permits, licenses, franchises, approvals and
authorizations issued or granted by any Governmental Authority and adequate for
the operation of the Business as currently conducted, except to the extent
absence of any such permit, license, franchise, approval or authorization would
not have an Material Adverse Effect.
8.1.4 No Violation of Law. Except as indicated in Schedule
8.1.4, the execution and delivery of this Agreement and the Ancillary Agreements
and the fulfillment by Seller of its obligations under this Agreement and the
Ancillary Agreements will not violate any applicable Law, except where such
violation would not reasonably be expected to have a Material Adverse Effect.
8.1.5 Corporate Organization. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the state of
Delaware, and is duly qualified to conduct business in Missouri. Seller has full
power and authority to own its properties and to carry on the Business as it is
now being conducted and to own, or hold under lease or Contract the Purchased
Property.
8.1.6 Brokers. Seller has not paid or become obligated
to pay any fee or commission to any broker, finder, investment banker or other
intermediary in connection with the transactions contemplated by this Agreement
in such a manner as to give rise to a valid claim against Buyer or any of the
Purchased Property for any broker's or finder's fees or similar fees or
expenses.
8.1.7 Title to Owned Real Property. As of the date hereof,
the address and a general description of each item of Owned Real Property are
set forth on Schedule 8.1.7(a). Seller has good fee simple title to all of the
Owned Real Property, free and clear of any Lien other than Permitted
Encumbrances and Liens of the Bondholders identified on Schedule 8.1.7(b).
Seller represents that the only creditors that have a Lien (other than any
Permitted Encumbrances) on any of the Owned Real Property are the Bondholders
identified on Schedule 8.1.7(b). The Owned Real Property set forth on Schedule
8.1.7(a) constitutes substantially all of the Owned Real Property used in the
Business during calendar year 1998 and located in the Purchased Exchanges,
except as such (i) has been disposed of since January 1, 1998 in the ordinary
course of business, or (ii) would not have a Material Adverse Effect.
8.1.8 Real Property Leases. Schedule 8.1.8 sets forth (i) a
list of all Real Property Leases as of the date hereof and, except for such Real
Property Leases as may have been executed or terminated in accordance with
Section 5.2, as of the Closing Date, and (ii) all Real Property Leases used in
the Business and with respect to property located in the Purchased Exchanges
during calendar year 1998 except such as (1) have been executed or terminated
since January 1, 1998 in the ordinary course of business, or (2) would not have
a Material Adverse Effect. Each of the leases for the Leased Real Property is
enforceable in accordance with its terms, subject to bankruptcy, insolvency and
other similar laws affecting the rights of creditors generally and subject to
the exercise of judicial discretion in accordance with the principles of equity,
and except as otherwise disclosed in Schedule 8.1.8, there is not under any
lease any material default or a material breach of covenant by Seller.
8.1.9 Tangible Assets. All of the tangible Purchased
Property is in substantially good operating condition and repair, normal wear
and tear excepted. Except as set forth on Schedule 8.1.9 or elsewhere in this
Agreement, Seller has, or as of Closing will have, good title to each item of
tangible Purchased Property (other than Real Property Interests, representations
with respect to which are included in Section 8.1.7 and 8.1.8 hereof, and office
equipment or vehicles subject to leases) with a fair market value in excess of
$10,000, free and clear of any Lien (other than Permitted Encumbrances). Seller
has not received any written notice within the past twelve(12) months of a
violation of any ordinances, regulations or building, zoning or other Laws with
respect to such assets that would have a Material Adverse Effect. EXCEPT AS
EXPRESSLY PROVIDED IN THIS SECTION 8.1.9, SELLER MAKES NO REPRESENTATIONS OR
WARRANTIES, EXPRESS OR IMPLIED, AS TO THE CONDITION OR FITNESS OF THE TANGIBLE
PURCHASED PROPERTY AND HEREBY DISCLAIMS ANY WARRANTY OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE OR WARRANTY AGAINST INFRINGEMENT.
8.1.10 No Material Adverse Change. Except as disclosed in
Schedule 8.1.10 or as may be related to the Merger (and disclosed to Buyer),
between December 31, 1997 and the date of this Agreement there has not occurred
(i) any event or condition that would have a Material Adverse Effect; (ii) any
increase in compensation payable or to become payable by Seller to any of its
Transferred Employees or agents, other than normal merit or promotional
increases made in the ordinary course of business consistent with past practice,
other than Seller's obligation to make payments for service prior to Closing
under the retention pay program announced in connection with the network
business repositioning of Seller and its Affiliates; or (iii) any amendment or
termination by Seller of any Material Contract, except any amendment or
termination in the ordinary course of business.
8.1.11 Material Contracts. Except for the agreements set
forth on Schedule 8.1.11 subparts (a) through (d) (all such contracts being
referred to herein as the "Material Contracts"), there is no Assigned Contract
(other than the Assigned Contracts entered into after the date of this Agreement
in the ordinary course of business) that is:
(a) an agreement containing a non-compete agreement or other covenant that
in either case would by its terms limit the freedom of Buyer following the
Closing to compete in any material respect with respect to the Business with any
third party, other than any such agreement or covenant which does not materially
impair the continued operation of the Business as it is currently conducted;
(b) an agreement granting a Lien with respect to any of the Purchased Property
(other than a Permitted Encumbrance or Lien of a Bondholder);
(c) an agreement for the sale, lease or encumbrance (other than a Permitted
Encumbrance or Lien of a Bondholder) of any material Purchased Property
(including any interconnection agreements) or grant of any preferential rights
to purchase any material Purchased Property in each case outside the ordinary
course of business; or
(d) an agreement other than as set forth above with respect to which the
aggregate amount to be received or paid thereunder with respect to calendar year
1999 is expected to exceed $100,000 based on the payments which have been made
under such agreement with respect to calendar year 1998, to the extent
applicable.
Except as set forth on Schedule 8.1.11, to the knowledge of Seller,
each of the Material Contracts is valid, binding and in full force and effect
and is enforceable by Seller or Seller's Affiliates, as applicable, in
accordance with its terms, except for any such failure to be valid, binding, in
full force and effect or enforceable that is not reasonably likely to have a
Material Adverse Effect. Except as set forth on Schedule 8.1.11, to the
knowledge of Seller, Seller and Seller's Affiliates have performed all material
obligations required to be performed by them to date under the Material
Contracts, and they are not (with or without the lapse of time or the giving of
notice, or both) in breach or default thereunder and, to the knowledge of
Seller, no other party to any Material Contract is (with or without the lapse of
time or the giving of notice, or both) in breach or default in any respect
thereunder, in each case except for such noncompliance, breaches and defaults
that, individually or in the aggregate, are not reasonably likely to have a
Material Adverse Effect. As of the date hereof, neither Seller nor any Seller
Affiliate has, except as disclosed on Schedule 8.1.11, received any written
notice of the intention of any party to terminate any Material Contract. Except
as set forth in Schedule 8.1.11, no consents or approvals are required from
third parties with respect to the assignment of any Material Contract. Complete
and correct copies of all the Material Contracts, together with all
modifications and amendments thereto to the date of this Agreement, have been
made available to Buyer or its representatives.
8.1.12 Insurance. The Purchased Property of an insurable
nature and of a character usually insured by companies carrying on similar
businesses is insured under insurance policies or self insured in such amounts
and against such losses or casualties as is usual in Seller's industry.
Effective at 11:59 P.M. on the Closing Date, the coverage under the insurance
policies and programs applicable to the Purchased Property will be terminated.
Thereafter, Buyer will be responsible for providing all insurance coverage for
the Purchased Property.
8.1.13 Taxes. Except as disclosed on Schedule 8.1.13,
(i) all Tax Returns required to be filed by Seller on or before the Closing Date
have or will have been filed, and all Taxes shown as due and payable on such Tax
Returns have been or will be paid by Seller when required by law; (ii) no
deficiencies or assessments for any Taxes have been asserted in writing or
assessed against Seller that remain unpaid and that individually or in the
aggregate are material to the Business; (iii) Seller has withheld all required
federal, state and local payroll Taxes relating to the Business and have
remitted or will remit all amounts required to be remitted to the appropriate
Taxing authorities; (iv) there are no Tax Liens upon any of the Purchased
Property except for statutory liens covering Taxes not yet due and payable; (v)
Seller is not a "foreign person" within the meaning of Section 1445(b)(2) of the
IRC and shall provide an appropriate certificate for purposes of Section
1445(b)(2) of the IRC; and (vi) there are no material, current audits or
material audits for which written notice has been received or, to the knowledge
of Seller, for which verbal notice has been received (in either case,
specifically with respect to the Business).
8.1.14 No Material Claims or Suits. Except as disclosed in
Schedule 8.1.13 or Schedule 8.1.14, there are no claims, actions, lawsuits or
legal proceedings pending before any Governmental Authority, or, to the
knowledge of Seller threatened, against or affecting the Business or Purchased
Property that in Seller's opinion, if determined adversely to Seller, would
reasonably be expected to have a Material Adverse Effect on the Business or
materially adversely affect ability of Seller to consummate the transactions
contemplated hereby.
8.1.15 Tariffs; FCC Licenses.
(a) Schedule 8.1.15(a) sets forth a list of all regulatory tariffs applicable
to the Business. Such tariffs stand in full force and effect on the date of
this Agreement in accordance with all terms, and there is no outstanding notice
of cancellation or terminatio or, to Seller's knowledge, any threatened
cancellation or termination in connection therewith, nor is Seller subject to
any restrictions or conditions applicable to its regulatory tariffs that limit
or would limit the operation of the Business (other than restrictions or
conditions generally applicable to tariffs of that type). Each such tariff has
been duly and validly approved by Seller's regulatory agency. Seller is not in
material default under the terms and conditions of any such tariff and there is
no basis for any claim of default by Seller in any material respect under any
such tariff. Except as disclosed on Schedule 8.1.15(a), there are no
applications by Seller or complaints (other than end-user complaints), or
petitions by others or proceedings pending or threatened before the PSC relating
to the Business or its operations or the regulatory tariffs. To the knowledge of
Seller, there are no material violations by subscribers or others under any such
tariff. A true and correct copy of each tariff set forth on Schedule 8.1.15(a)
has been delivered or made available to Buyer.
(b) Schedule 8.1.15(b) sets forth a list of all FCC Licenses held by Seller
and used in the operation of the Business. Except as set forth on Schedule
8.1.15(b), (i) each such FCC License is in full force and effect on the date of
this Agreement in accordance with its terms, (ii) there is no outstanding notice
of cancellation or termination or, to Seller's knowledge, any threatened
cancellation or termination in connection therewith, nor (iii) are any of such
FCC Licenses subject to any restrictions or conditions that limit the operation
of the Business (other than restrictions or conditions generally applicable to
licenses of that type). Subject to the Communications Act of 1934, as amended,
and the regulations thereunder, the FCC Licenses are free from all security
interests, liens, claims, or encumbrances of any nature whatsoever. There are no
applications by Seller or complaints (other than individual end-user complaints
that would not cause a Material Adverse Effect) or petitions by others or
proceedings pending or threatened before the FCC relating to the Business or the
FCC Licenses that, in Seller's opinion, would reasonably be expected to have a
Material Adverse Effect on the Business.
8.1.16 Employee Matters.
(a) Seller will provide by letter as soon as practicable following the date
hereof the name, annual compensation, incentive compensation target, job title,
job location and collective bargaining unit status as of June 26, 1999, of each
person employed by Seller at a location in the Purchased Exchanges who is
expected to be a Transferred Employee. Schedule 8.1.16(a) lists (and identifies
the sponsor of) each material "Employee Pension Benefit Plan," as that term is
defined in Section 3(2) of ERISA, each material "Employee Welfare Benefit Plan,"
as that term is defined in Section 3(1) of ERISA (such plans being hereinafter
referred to collectively as the "ERISA Plans"), and each other material
retirement, pension, profit-sharing, money purchase, deferred compensation,
incentive compensation, bonus, stock option, stock purchase, severance pay,
unemployment benefit, vacation pay, savings, medical, dental, post-retirement
medical, accident, disability, weekly income, salary continuation, health, life
or other insurance, fringe benefit, or other employee benefit plan, program,
agreement, or arrangement maintained or contributed to by Seller or its
Affiliates in respect of or for the benefit of any Transferred Employee or
former employee of Seller, excluding any such plan, program, agreement, or
arrangement maintained or contributed to solely in respect of or for the benefit
of Transferred Employees or former employees employed or formerly employed by
Seller outside of the United States, as of the date hereof (collectively,
together with the ERISA Plans, referred to hereinafter as the "Plans"). Schedule
8.1.16(a) also includes a list of each material written employment, severance,
termination or similar-type agreement between Seller and its Affiliates and any
Transferred Employee (the "Employment Agreements"). Except for retention bonuses
paid in connection with the closing of the transactions contemplated by this
Agreement and except as otherwise disclosed on Schedule 8.1.16(a), the execution
and delivery of this Agreement by Seller and the performance of this Agreement
by Seller will not directly result now or at any time in the future in the
payment to any Transferred Employee of any severance, termination, or
similar-type payments or benefits being paid to any Transferred Employee.
(b) Except as set forth on Schedule 8.1.16(b):
(i) Neither Seller nor any of its Affiliates, any of the ERISA
Plans, any trust created thereunder, or any trustee or administrator thereof,
has engaged in any transaction as a result of which Seller, any of its
Affiliates or the Business could be subject to any material liability pursuant
to Section 409 of ERISA or to either a civil penalty assessed pursuant to
Section 502(i) of ERISA or a tax imposed pursuant to Section 4975 of the IRC;
and
(ii) Since the effective date of ERISA, no material liability
under Title IV of ERISA has been incurred or is reasonably expected to be
incurred by Seller, any of its Affiliates or the Business (other than liability
for premiums due to the PBGC), unless such liability has been, or prior to the
Closing Date will be, satisfied in full.
(c) Except as set forth on Schedule 8.1.16(c), with respect to the Plans
other than those Plans identified on Schedule 8.1.16(a) as "multiemployer plans"
(i) the PBGC has not instituted proceedings to terminate any Plan
that is subject to Title IV of ERISA (the "Retirement Plans");
(ii) none of the ERISA Plans has incurred an "accumulated funding
deficiency" (as defined in Section 302 of ERISA and Section 412 of the IRC),
whether or not waived, as of the last day of the most recent fiscal year of each
of the ERISA Plans ended prior to the date of this Agreement;
(iii) each of the Plans has been operated and administered in all
material respects in accordance with its provisions and with all applicable
laws;
(iv) each of the ERISA Plans that is intended to be "qualified"
within the meaning of Section 401(a) of the IRC and, to the extent applicable,
Section 401(k) of the IRC, has been determined by the IRS to be so qualified,
and nothing has occurred since the date of the most recent such determination
(other than the effective date of certain amendments to the IRC, the remedial
amendment period for which has not yet expired) that would adversely affect the
qualified status of any of such ERISA Plans; and
(v) there are no pending material claims by or on behalf of any of
the Plans, by any employee or beneficiary covered under any such Plan, or other-
wise involving any such Plan (other than routine claims for benefits and routine
expenses).
(d) Except as set forth on Schedule 8.1.16(d), none of the ERISA Plans is a
"multiemployer Plan," as that term is defined in Section 3(37) of ERISA, and
with respect to any such multiemployer plans (as so defined) listed in Schedule
8.1.16(d), neither Seller nor any of its Affiliates have made or incurred a
"complete withdrawal" or a "partial withdrawal," as such terms are respectively
defined in Sections 4203 and 4205 of ERISA that would result in the incurrence
of a material liability by Seller, any of its Affiliates or the Business, and
the transactions contemplated herein shall not constitute a "complete
withdrawal" or a "partial withdrawal" as such terms are defined in Sections 4203
and 4205 of ERISA, respectively.
(e) Except as set forth on Schedule 8.1.16(e), (i) none of the Transferred
Employees are represented by a labor union or labor organization, and (ii)
Seller is not subject to any collective bargaining agreement covering any
Transferred Employee. There are currently no strikes, slowdowns, work stoppages
or lockouts by or with respect to any Transferred Employee covered by collective
bargaining agreements. Except as set forth on Schedule 8.1.16(e), to the best
knowledge of Seller, during the twelve (12) months preceding the date of this
Agreement, there have not been any union organizational campaigns by or directed
at Transferred Employees.
(f) Seller will make available to Buyer, prior to the Closing Date, a list of
those Transferred Employees that Seller believes to have participated in the
health or dependent care reimbursement accounts of Seller, together with the
elections made prior to the Closing Date with respect to such accounts through
the Closing Date.
8.1.17 Schedules of Telephone Plant. Schedule 8.1.17 sets
forth, as of December 31, 1998 and, except for such changes as may occur
pursuant to Section 5.2, as of the Closing Date, a materially accurate summary
of the book value of the Telephone Plant (except for Real Property Interests and
Real Property Leases) and Material and Supply Inventory as reflected in Seller's
continuing property records. Schedule 8.1.17 summarizes substantially all
Telephone Plant used in the Business (other than Excluded Property and the GTE
Telecom Assets) during calendar year 1998 and located in the Purchased
Exchanges, except such as (i) has been disposed of in the ordinary course of
business since January 1, 1998, or (ii) would not have a Material Adverse
Effect.
8.1.18 Schedule of Real Property Interests. To the knowledge
of Seller and as of the date of this Agreement, Schedule 8.1.18 sets forth a
true and accurate list of all its Real Property Interests.
8.1.19 Environmental Matters. Except as set forth in
Schedule 8.1.19 (which Seller may supplement within 30 days of the date hereof
with respect to Leased Real Property):
(a) Seller's current use of the Owned Real Property or Leased Real Property
materially complies with Environmental Requirements;
(b) No Liens under any Environmental Requirement have been or are imposed on
any of the Owned Real Property, except for such Liens as would not have a
Material Adverse Effect;
(c) No action, proceeding, revocation proceeding, procedure, writ, injunction
or claim is pending, or to Seller's knowledge threatened, concerning any
Environmental Requirement and relating to any of the Owned Real Property, except
as would not have a Material Adverse Effect;
(d) Seller has obtained or filed for all permits, licenses, registrations, and
other approvals and has made all reports and notifications required under any
Environmental Requirements in connection with the Owned Real Property, except as
would not have a Material Adverse Effect; and (e) There are no present actions,
activities, circumstances, conditions, events, or incidents relating to Seller's
use of any of the Owned Real Property or Leased Real Property that would
reasonably be expected to involve Seller in any material litigation under the
Environmental Requirements, or impose upon Seller any material liability related
to any Environmental Requirements.
8.1.20 Schedule of Joint Construction Projects. Schedule
8.1.20 sets forth a list of all Joint Construction Projects for which Buyer is
to assume liability as of the Closing.
8.1.21 Financial Statements. Schedules 8.1.21(a), 8.1.21(b)
and 8.1.21(c) present the estimated income statement, estimated balance sheet
and estimated statement of cash flows, respectively for the Business for the
years ended December 31, 1997 and December 31, 1998 (collectively, the
"Financial Statements"). The Financial Statements have been prepared based on
the books and records of Seller. Such books and records have been maintained in
accordance with GAAP. However, because the Business represents only a portion of
Seller, the Financial Statements are based on the extensive use of estimates and
allocations. Seller believes these estimates and allocations have been performed
on a reasonable basis and such Financial Statements materially reflect the
results of operations for the periods set forth therein. However, Buyer
acknowledges that (i) the Financial Statements themselves may not be consistent
with the applicable regulations of the FCC or state regulatory authorities, and
(ii) because the Business represents only a portion of Seller, the Buyer is not
acquiring significant support elements located outside the Purchased Exchanges,
and Buyer will operate under new tariffs, carrier contracts and other conditions
that may significantly impact the future revenue of the Business, the Financial
Statements may not be representative of the financial performance of the
Business during future periods.
8.1.22 Year 2000 Compliance.
(a) As of the Closing Date, Seller shall have caused the modification or
remediation of the Automated Assets in accordance with applicable manufacturer
or vendor recommendations such that the Automated Assets are Year 2000
Compliant; provided that any and all Buyer or third-party supplied computer
software, computer firmware and computer hardware that directly interfaces with
the Automated Assets, co-exists with the Automated Assets, or indirectly
influences the operation of the Automated Assets are also demonstrated to be
Year 2000 Compliant.
(b) Seller shall be deemed to be in satisfaction of the requirements of
subsection (a) of this Section 8.1.22 to the extent that Seller has (i)
performed on or before the Closing Date any modification or remediation in
accordance with applicable manufacturer or vendor recommendations for achieving
Year 2000 compliance or Year 2000 readiness, or (ii) received on or before the
Closing Date reasonable assurances from the applicable manufacturer or vendor
that an Automated Asset, without modification or remediation, is Year 2000
Compliant or Year 2000 ready.
(c) When used in this Section 8.1.22, the following terms shall have the
respective meanings given below:
"Automated Assets" means the computer software, computer firmware,
computer hardware (whether general or special purpose), documentation, data, and
other similar or related items of the automated, computerized, and/or software
system(s) that are provided by Seller to Buyer as part of the Purchased
Exchanges pursuant to this Agreement.
"Calendar-Related" refers to the date values based on the Gregorian
calendar, as defined in Encyclopedia Britannica, 15th edition, 1982, page 602,
and to all uses in any manner of those date values, including without limitation
manipulations, calculations, conversions, comparisons and presentations.
"Date Data" means any Calendar-Related data in the inclusive range
January 1, 1900 through December 31, 2050, which the Automated Assets use in any
manner.
"System Date" means any Calendar-Related data value in the inclusive
range January 1, 1985 through December 31, 2035 (including the natural
transition between such values) which the Automated Assets shall be able to use
as their current date while operating.
"Year 2000 Compliant" means:
(i) As of the Closing Date, in connection with Calendar-Related
data and Calendar-Related processing of Date Data or of any System Date, the
Automated Assets will not malfunction, will not cease to function and will not
produce incorrect results; and
(ii) As of the Closing Date, the Automated Assets will represent
dates without ambiguity as to century when providing Calendar-Related data to
and accepting Calendar-Related data from other automated, computerized and/or
software systems and users by way of user interfaces, electronic interfaces and
data storage.
8.1.23 Access Line Count. As of December 31, 1998, the
Purchased Exchanges served a total of 116,149 access lines.
8.2 Representations and Warranties of Buyer. Buyer represents and
warrants to Seller as follows:
8.2.1 Corporate Organization. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the state of
Delaware, and is duly qualified to conduct business in Missouri and has the
requisite corporate power and authority to own, lease or otherwise hold the
assets owned, leased or held by it.
8.2.2 Authorization and Effect of Agreement. Buyer has the
requisite corporate power and authority to execute and deliver this Agreement
and the Ancillary Agreements, to carry on the Business as presently conducted
and to fulfill all other obligations of Buyer under this Agreement and the
Ancillary Agreements. The execution and delivery by Buyer of this Agreement and
the Ancillary Agreements, and the fulfillment by it of its obligations under
this Agreement and the Ancillary Agreements have been duly authorized by all
necessary corporate action on the part of Buyer. Buyer has the requisite legal
capacity to purchase, own and hold the Purchased Property upon the consummation
of the sale of the Purchased Property. This Agreement and the Ancillary
Agreements have been duly executed and delivered by Buyer and, assuming the due
execution and delivery of this Agreement and the Ancillary Agreements by Seller,
constitute valid and binding obligations of Buyer enforceable in accordance with
their terms subject to bankruptcy, insolvency, reorganization, moratorium and
other similar laws affecting the rights of creditors generally and subject to
the exercise of judicial discretion in accordance with principles of equity.
8.2.3 No Restrictions Against Purchase of the Purchased
Properties. The execution and delivery of this Agreement and the Ancillary
Agreements by Buyer do not, and the fulfillment by Buyer of its obligations
under this Agreement and the Ancillary Agreements will not, conflict with,
violate or result in the breach of any provision of the certificate of
incorporation or bylaws of Buyer or, conflict with, violate or result in the
breach of any contract to which Buyer is a party. No material consent, approval,
order or authorization of, or registration, declaration or filing with, any
Governmental Authority is required to be obtained or made by or with respect to
Buyer in connection with the execution and delivery of this Agreement by Buyer
or the fulfillment by Buyer of its obligations under this Agreement, except the
filings and approvals described in Article 4.
8.2.4 No Violation of Law. The execution and delivery of
this Agreement and the Ancillary Agreements and the fulfillment by Buyer of its
obligations under this Agreement and the Ancillary Agreements will not violate
any Law except to the extent any such violation would not have a material
adverse effect on the ability of Buyer to fulfill its obligations hereunder and
thereunder.
8.2.5 Financial Capacity.
(a) Buyer has sufficient cash or other sources of funds to pay the Purchase
Price in the manner specified in Section 3.1 and all related fees and expenses.
(b) Buyer has sufficient financial resources to operate the Business after the
Closing Date. Without limiting the generality of the foregoing, Buyer has
sufficient financial resources to satisfy any applicable requirement relating to
financial capacity or capital imposed by any Governmental Authority in any state
in which the Business is conducted. Buyer is solvent, is able to pay its debts
as they become due, and owns property that has both a fair value and a fair
saleable value in excess of the amount required to pay its debts as they become
due.
8.2.6 Brokers. Buyer has not paid or become obligated
to pay any fee or commission to any broker, finder, investment banker or other
intermediary in connection with the transactions contemplated by this Agreement
in such a manner as to give rise to a valid claim against Seller for any
broker's or finder's fees or similar fees or expenses.
8.2.7 Consents and Approvals of Governmental Authority.
Subject to Article 4 with respect to Regulatory Approvals and FCC Consents, no
consent, approval or authorization of, or declaration, filing or registration
with, any Governmental Authority or regulatory authority is required in
connection with the execution, delivery and performance of this Agreement by
Buyer or the consummation by Buyer of the transactions contemplated herein,
except for filings with the FTC and DOJ pursuant to the HSR Act, if required.
ARTICLE 9
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CONTINUING BUSINESS RELATIONSHIPS
9.1 Transition Services Agreement. The parties agree to cooperate
with each other to ensure that the transition of the ownership of the Purchased
Property proceeds with minimal disruption to the services being provided to
subscribers. The parties agree that it may be necessary for Seller to assist
Buyer in converting Seller's systems and processes with respect to the Purchased
Property to Buyer's systems and processes. Seller and Buyer agree to execute a
separate "Transition Services Agreement" substantially in the form attached
hereto as Schedule 9.1 for the provision of such services.
9.2 Optional Services Agreement. It is understood and agreed that
Buyer may not have for a period of time after Closing Date, certain systems or
processes necessary to provide some basic customer services. Seller will at
Buyer's request and for the fees described in the attachments to the Optional
Services Agreement provide any or all of the services described in said
attachments on terms and conditions substantially in the form attached hereto as
Schedule 9.2.
9.3 Directory Publishing.
9.3.1 Assumption of Certain Directory Publishing Agreement
Rights and Obligations. Seller is party to a directories publishing agreement
with GTE Directories Service Corporation n/k/a GTE Directories Corporation or
GTE Directories Corporation as purchaser of the rights and interests of
Associated Directory Services, Inc. f/k/a Mast Advertising and Publishing, Inc.
herein "Publisher." These agreements are identified in Schedule 9.3.1 attached
hereto ("Publishing Agreements"). Pursuant to these agreements Publisher has the
exclusive right and obligation to sell advertising, and to publish, print and
distribute directories containing telephone numbers relating to the Purchased
Exchanges.
At Seller's option, Buyer agrees to execute an agreement
effective as of the Closing to assume and appropriately amend the Publishing
Agreements as they relate to the Purchased Exchanges, which agreement will
extend the length of the term of the Publishing Agreements to expire not earlier
than December 31, 2001. Buyer agrees to allow Publisher to participate in any
process for negotiating future directory publishing agreements on terms no less
favorable than any other participant.
9.3.2 Co-Bound Directories Acknowledgement. Buyer acknow-
ledges that Publisher may have a pre-existing obligation (which Publisher may
choose to continue) to sell advertising, publish, print and distribute the
telephone numbers of third party local exchange telephone companies in the same
directory as the Purchased Exchanges ("Co-Bound" directory). Co-Bound directory
agreements of which Seller is aware, if any, are identified on Schedule 9.3.2.
9.3.3 Meeting to Discuss Directory Publication. Within
ninety (90) days following the date of this Agreement, Buyer agrees to meet with
Seller and Publisher for the purpose of having an initial discussion about the
first directory publication after the Closing Date. This meeting will be held at
Publisher's address unless otherwise agreed between the parties and Publisher.
All parties shall employ their respective commercially reasonable efforts to
ensure that directory publication is not interrupted following the Closing Date.
9.4 GTE Telecom Agreements. Buyer acknowledges that GTE Telecom
will retain ownership of certain assets as well as related rights in connection
with fiber loop located in the Purchased Exchanges, all of which assets and
rights are listed on Schedule 2.3(g) (the "GTE Telecom Assets"). Buyer further
acknowledges that the GTE Telecom Assets may be co-located with the Purchased
Property, and may share certain easements, rights of way or other real property
interests. In order to clarify the relationship between Buyer and GTE Telecom
with respect to the GTE Telecom Assets, Buyer agrees to execute and deliver at
Closing certain agreements substantially in the form attached hereto as Schedule
9.4 (the "GTE Telecom Agreements").
ARTICLE 10
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ADDITIONAL COVENANTS OF THE PARTIES
10.1 Intellectual Property.
10.1.1 No License. Buyer and Seller agree and understand
that except as expressly set forth in writing in the License Agreement and
Section 10.1.3, Seller has not granted any rights or licenses, express or
implied, of, and nothing shall constitute or be construed as a license of Seller
under any Intellectual Property now or hereafter owned, obtained or licensable
by Seller or under any Third Party Intellectual Property.
10.1.2 Infringement.
(a) Notwithstanding anything in this Agreement to the contrary, Seller shall
have no obligation to defend, indemnify or hold harmless Buyer or any of its
Affiliates, from any damages, costs or expenses resulting from any obligation,
proceeding or suit based upon any claim that any activity subsequent to the
Closing Date engaged in by Buyer, a customer of Buyer's or anyone claiming under
Buyer, constitutes direct or contributory infringement, misuse of, or
misappropriation of, or inducement to infringe, any Third Party Intellectual
Property.
(b) Buyer shall defend, indemnify and hold harmless Seller and its Affiliates
from and against any and all Indemnifiable Losses resulting from any obligation,
proceeding or suit based upon any claim alleging or asserting direct or
contributory infringement, or misuse or misappropriation of or inducement to
infringe by Seller or any of its Affiliates of any Third Party Intellectual
Property, to the extent that such claim is based on, or would not have arisen
but for, activity conducted or engaged in subsequent to the Closing Date by
Buyer, a customer of Buyer's, or anyone claiming under Buyer.
10.1.3 Trademark Phaseout.
(a) Buyer acknowledges that Seller or its Affiliates are the owners of Excluded
Marks that qualify as Excluded Property under Section 2.3. Buyer understands and
agrees that the Excluded Marks, or any right to or license of the Excluded
Marks, are not being transferred pursuant to this Agreement. Buyer acknowledges
the exclusive and proprietary rights of Seller and its Affiliates in the use of
the Excluded Marks, and Buyer agrees that it shall not use the Excluded Marks
(or any names, domain names, marks or indicia confusingly similar to the
Excluded Marks) except and to the extent expressly set forth in this Section
10.1.3 or assert any rights or claims in such Excluded Marks (or in any names,
domain names, marks or when confusingly similar to the Excluded Marks). After
the Closing, all Excluded Marks of Seller and its Affiliates shall be replaced
by Buyer, at Buyer's expense, as soon as possible, but in no event later than
ninety (90) days after the Closing Date for items with Excluded Marks affixed to
them which Buyer has continued to use in Buyer's operation of the Business,
including buildings, vehicles, heavy equipment, hard hats, tools, tool boxes,
kits (safety and others), signs, public (pay) telephones, manual covers and
notebooks. After the Closing, Buyer will not use, and will destroy or deliver to
Seller, all such items with Excluded Marks affixed to them that have no valid
continuing use in Buyer's operation of the Business, including items affecting
customer or employee relations or items that do not reflect Buyer's true
identity. Specific items to be destroyed or returned include items with Excluded
Marks affixed to them including giveaways; order, purchase or materials forms;
requisitions; invoices; statements; time sheets/labor reports; bill inserts;
stationery; personalized note pads; maps; organization charts;
bulletins/releases; sales/price literature; manuals or catalogs; report
covers/folders; program materials; and materials such as media contact
lists/cards. The ninety (90) day time period for replacement of Excluded Marks
affixed to telephone directories that were already published or closed for
publication at the Closing Date shall be extended to the expiration date of such
directories.
(b) Buyer recognizes the great value of the goodwill associated with the
Excluded Marks, and acknowledges that the Excluded Marks and all rights therein
and the goodwill pertaining thereto belong exclusively to Seller and that the
Excluded Marks have a secondary meaning in the minds of the public. Buyer
further agrees that any and all permitted use of the Excluded Marks pursuant to
this Agreement shall inure to the sole and exclusive benefit of Seller.
(c) Buyer agrees that any permitted use of the Excluded Marks in the operation
of the Business after the Closing shall be provided in accordance with all
applicable federal, state and local laws, and that the same shall not reflect
adversely upon the good name of Seller or its Affiliates, and that the operation
of the Business will be of a high standard and skill.
(d) Buyer acknowledges that its failure to cease use of the Excluded Marks as
provided in this Agreement, or its improper use of the Excluded Marks, will
result in immediate and irreparable harm to Seller and its Affiliates. Buyer
acknowledges and admits that there is no adequate remedy at law for such failure
to terminate use of the Excluded Marks, or for such improper use of the Excluded
Marks. Buyer agrees that in the event of such failure or improper use, Seller
and its Affiliates shall be entitled to equitable relief by way of temporary
restraining order, or preliminary or permanent injunction, or any other relief
available under this Agreement.
(e) Buyer will not contest the ownership or validity of any rights of Seller
or its Affiliates in the Excluded Marks.
10.1.4 Third Party Software. To the extent that the transfer
of Purchased Property by Seller to Buyer under this Agreement results in the
transfer of possession to Buyer of software that at the Closing Date is Third
Party Intellectual Property, which software was located in and rightfully used
by Seller in the geographical areas of the Purchased Exchanges prior to the
Closing Date in the normal and ordinary operation of the Business pursuant to
Contracts with the owners or licensors of such software ("Third Party
Intellectual Property Contracts"), then subject to Section 2.5 and the receipt
of any required consents from Switch Software vendors, effective as of the
Closing and provided that no payments to any Person other than a Switch Software
vendor are thereby required, Seller hereby assigns to Buyer, and Buyer hereby
accepts all rights and licenses, if any, to possess and use such software
pursuant to such Third Party Intellectual Property Contracts. Buyer agrees that
the acceptance by Buyer of such assignment of the Third Party Intellectual
Property Contracts includes the assumption by Buyer of obligations under such
Third Party Intellectual Property Contracts, including all obligations necessary
or incidental to the transfer of such rights and licenses. Buyer understands and
agrees that except as provided above in this Section 10.1.4, or as expressly
provided elsewhere in this Agreement or in another written agreement between
Buyer and Seller, no rights or licenses to use or possess such software or any
Third Party Intellectual Property are transferred to Buyer. Buyer shall properly
dispose of, and shall not use, any software of which Buyer acquires possession
in connection with Purchased Property and which, after the Closing Date, Buyer
knows, or reasonably should know, is not the subject of a Third Party
Intellectual Property Contract that has been rightfully transferred to Buyer.
Seller makes no warranty or representation that any Third Party Intellectual
Property Contract or any right therein is assignable in whole or in part to
Buyer.
10.2 Effect of Due Diligence and Related Matters.
(a) Buyer represents that it is a sophisticated entity that was advised by
knowledgeable counsel and financial advisors and, to the extent it deemed
necessary, other advisors in connection with this Agreement and has conducted
its own independent review and evaluation of the Purchased Property.
Accordingly, Buyer covenants and agrees that (i) except for the representations
and warranties set forth in this Agreement, Buyer has not relied and will not
rely upon any duty to disclose or any document or written or oral information
furnished to or discovered by it or its representatives, including any financial
data, (ii) there are no representations or warranties, express or implied,
statutory or otherwise, by or on behalf of Seller or its Affiliates or
representatives except for those expressly set forth in this Agreement, and
(iii) to the fullest extent permitted by law, Buyer's rights and obligations
with respect to all of the foregoing matters will be solely as set forth in this
Agreement. Buyer further acknowledges and agrees that Seller is not under any
duty to make any inquiry regarding any matter that may or may not be known to
Seller or any of its officers, directors, employees or representatives.
(b) Upon the Closing, Buyer shall be deemed to have waived any claim with
respect to a breach of any representation, warranty, covenant or obligation of
Seller, or any failure of a condition, hereunder of which Buyer had actual
knowledge on or prior to the date hereof; provided that Buyer shall be deemed to
have actual knowledge on or prior to the date hereof of the information made
available to Buyer and/or its representatives during Buyer's due diligence
review, and which information is contained in the Due Diligence Materials.
(c) After the date of this Agreement and prior to the Closing Date, Buyer
shall promptly notify Seller if Buyer obtains actual knowledge of any actual or
prospective breach of any representation, warranty, covenant or obligation of
Seller, or any actual or prospective failure of a condition, hereunder of which
Buyer obtains actual knowledge. Failure to provide timely notice of any such
breach of which Buyer obtains actual knowledge after the date hereof shall be
deemed to constitute a waiver with respect to such breach.
10.3 Confidentiality. Whether or not the Closing occurs, the
parties hereto and their respective officers, directors, employees and repre-
sentatives will comply with the Confidentiality Agreement (to the extent not
inconsistent with this Agreement), the provisions of which are expressly
incorporated herein in their entirety by this reference.
10.4 Further Assurances. After the Closing, Seller will use its
commercially reasonable efforts to furnish to Buyer such other instruments and
information as Buyer may reasonably request in order to convey to Buyer title
to the Purchased Property, to be delivered from time to time upon Buyer's
reasonable request.
10.5 Prorations. The following liabilities that call for periodic
payments shall be prorated between Seller and Buyer: (i) utility charges (which
shall include water, sewer, electricity, gas and other utility charges) with
respect to the Owned Real Property, the property subject to the Real Property
Leases and customer owned equipment, (ii) rental charges (which shall include
rental charges and other lease payments under the Real Property Leases and Real
Property Interests), (iii) personal services (these services are charged for a
period which includes the Closing Date; this shall include contract labor), and
(iv) any Taxes that are imposed on a periodic basis and are payable for a
taxable period that includes (but does not end on) the Closing Date, including
but not limited to real and personal property Taxes, ad valorem Taxes, and
franchise fees or Taxes ("Periodic Taxes"). With respect to measurement periods
during which the Closing Date occurs (all such periods of time being hereinafter
called "Proration Periods"), the liabilities described in clauses (i), (ii) and
(iii) of the preceding sentence shall be apportioned between Seller and Buyer as
of the Closing Date, with Buyer bearing only the expense thereof in the
proportion that the number of days remaining in the applicable Proration Period
after the Closing Date bears to the total number of days covered by such
Proration Period. Real and personal property Taxes and ad valorem Taxes shall be
prorated between Buyer and Seller based on the relative periods the Purchased
Property was owned by each respective party during the fiscal period for which
Periodic Taxes were assessed by the Taxing jurisdiction (as such fiscal period
is reflected on the bill rendered by such taxing jurisdiction). Buyer and Seller
shall pay or be reimbursed for Periodic Taxes (including instances in which such
property Taxes have been paid before the Closing Date) on this prorated basis.
If a payment on a Periodic Tax bill is due after the Closing, the party that is
legally required to make such payment shall make such payment and promptly
forward an invoice to the other party for its pro rata share, if any. If the
other party does not pay the invoice within thirty (30) calendar days of
receipt, the amount of such payment shall bear interest at the rate of eight
percent (8%) per annum. Similarly, all prepayments made by Seller under Assigned
Contracts with respect to service or maintenance agreements requiring periodic
payments with third parties or license or other fees payable to third parties
shall be prorated on an appropriate basis between Seller and Buyer.
10.6 Cost Studies/NECA Matters.
10.6.1 Prior to Closing. Seller agrees that, with respect
to all toll revenues, settlements, pools, separations studies or similar
activities, Seller shall be responsible for (and shall receive the benefit or
suffer the burden of) any adjustments to contributions, or receipt of funds, by
Seller resulting from any such activities that are related to the operation of
the Business or the ownership or operation of the Purchased Property prior to
the Closing Date. Specifically, this paragraph shall apply, but shall not be
limited to, any matters related to the National Exchange Carrier Association
("NECA") or the Universal Service Administration Company ("USAC") including the
Universal Service Fund ("USF"), Long Term Support ("LTS"), and
Telecommunications Relay Services funds established by the FCC.
10.6.2 From and After Closing.
(a) In the case of Purchased Exchanges that comprise less than an entire Study
Area, the following shall apply:
(i) Rural and non-rural carriers currently receive USF funds based
on historic costs computed pursuant to Subpart F of Part 36 of the FCC's rules.
Beginning July 1, 1999 or a date thereafter determined by the FCC, non-rural
carriers shall not receive USF funds pursuant to Part 36, but will receive
support based on forward-looking economic costs pursuant to Part 54. Seller will
take all steps necessary to ensure that, for each Transitional Year, Buyer
receives a pro rata share of any USF funds distributed during each year. Buyer's
pro rata share of such USF funds for a given Transitional Year shall be
determined for each Acquired Local Loop by multiplying the USF funds
attributable to such loop for that year times the number of months of that year
that such loop is owned by the Buyer.
(ii) Buyer shall make all USF filings that are required under FCC
rules after the Closing Date, and Seller shall provide such reasonable
assistance as is required in order to make such filings.
(iii) Notwithstanding the foregoing, Buyer's right to receive a pro
rata share of USF is conditioned upon Buyer's payment, from and after the
Closing Date, of a pro rata share of the annual universal service contribution
liability assessed by the USAC based on end-user retail revenues for the
previous year generated by assets being sold. The resulting Buyer's annual USF
obligation for assets purchased shall be prorated in proportion to the number of
months in the year from and after the Closing Date.
(b) In the case of Purchased Exchanges that comprise an entire Study Area, the
following shall apply:
(i) Buyer shall receive all USF funds, from and after the Closing
Date, as determined by USAC from data submitted by Seller prior to Closing Date
pursuant to FCC Rules and Regulations as stated in Part 36.611 and Part 36.612
for rural carriers and Part 54 for non-rural carriers. After Closing Date Buyer
shall make all submissions and filings for USF funds for all years for which
Seller had not made a submission prior to Closing Date in accordance with FCC
Rules and Regulations. Within a reasonable time after Buyer's written request,
Seller shall furnish to Buyer such necessary information regarding Seller's
ownership of the Purchased Property during any year for which Buyer shall make a
submission, and such reasonable assistance as required in connection with
Buyer's preparation of necessary filings or submissions.
(ii) Notwithstanding the foregoing, Buyer's right to receive all
USF revenue is conditioned upon Buyer's payment, from and after the Closing
Date, of all universal service contribution liability assessed by USAC based on
end-user retail revenues for the previous year generated by assets being sold.
10.7 Customer Deposits and Construction Advances. Within thirty
(30) days after Closing, Seller agrees to transfer to Buyer the customer
deposits together with any interest accrued thereon (collectively "Customer
Deposits") and Construction Advances, together with all of Seller's obligations
(exclusive of pre-Closing disputes with respect thereto) and rights to hold the
Customer Deposits and Construction Advances of the Business, up to the Closing
Date, and Buyer agrees to hold, disburse and retain such deposits so delivered
to it, and to perform related construction, as the case may be, as if it were
Seller.
10.8 Access to Books and Records.
(a) After the Closing, Seller will retain all Retained books and Records for a
period of three (3) years from the date hereof, except for Tax Returns and
supporting documentation, which Seller shall retain until the later to occur of
(i) sixty (60) days subsequent to the expiration of the applicable statute of
limitations or any extensions thereof, or (ii) the expiration of three (3) years
from the date hereof.
(b) After the Closing, upon reasonable notice and subject to the Confiden-
tiality Agreement, the parties will give to the representatives, employees,
counsel and accountants of the other, access, during normal business hours, to
books and records relating to the Business and the Purchased Property, and will
permit such persons to examine and copy such records, in each case to the extent
reasonably requested by the other party in connection with Tax and financial
reporting matters (including any Tax Returns and related information, but not
attorney work product), audits, legal proceedings, governmental investigations
and other business purposes (including such financial information and any
receipts evidencing payment of Taxes as may be requested by Seller to
substantiate any claim for Tax credits or refunds); provided, however, that
nothing herein will obligate any party to take actions that would unreasonably
disrupt the normal course of its business or violate the terms of any Contract
to which it is a party or to which it or any of its assets is subject. Seller
and Buyer will cooperate with each other in the conduct of any Tax audit or
similar proceedings involving or otherwise relating to the Business (or the
income therefrom or assets thereof) with respect to any Tax and each will
execute and deliver such powers of attorney and other documents as are necessary
to carry out the intent of this Section 10.8(b).
10.9 Purchase Price Allocation. No later than ninety (90) days
subsequent to the Closing Date, Buyer and Seller shall use their good faith
efforts to agree to the allocation (the "Allocation") of the Purchase Price, the
Assumed Liabilities and other relevant items (including, for example,
adjustments to the Purchase Price) to the individual assets or classes of assets
within the meaning of Section 1060 of the IRC. If Buyer and Seller agree to such
Allocation prior to Closing, Buyer and Seller covenant and agree that (i) the
values assigned to the assets by the parties' mutual agreement shall be
conclusive and final for all purposes, and (ii) neither Buyer nor Seller will
take any position before any Governmental Authority or in any judicial
proceeding that is in any way inconsistent with such Allocation. Notwithstanding
the foregoing, if Buyer and Seller cannot agree to an Allocation, Buyer and
Seller covenant and agree to file and to cause their respective Affiliates to
file, all Tax Returns and schedules thereto (including, for example, amended
returns, claims for refund, and those returns and forms required under Section
1060 of the IRC and any Treasury regulations promulgated thereunder) consistent
with each of Buyer and Seller's good faith Allocations, unless otherwise
required because of a change in applicable Law.
10.10 Owned Real Property Transfers. Within sixty (60) days of the
date of this Agreement, Seller shall deliver to Buyer copies of all existing
title insurance policies in Seller's possession covering the Owned Real
Property. Thereafter, no later than thirty (30) days before the Closing Date,
Seller shall deliver (at Seller's expense) to Buyer title commitments for
owners' policies of title insurance prepared by a title insurance company
reasonably acceptable to Buyer and a certified current survey, with respect to
all Owned Real Property included in the Purchased Property and in which Seller
purports to own fee title. Buyer acknowledges that such title commitments shall
be for California Land Title Association ("CLTA") owners' policies of title
insurance (or its equivalent) unless Buyer has requested in writing, prior to
the date hereof, that such commitments be issued for other forms of title
insurance (in which event, Buyer shall bear all costs and premiums for such
title insurance to the extent attributable to such coverage being in excess of
CLTA coverage or its equivalent). Such title commitments shall reflect that upon
the consummation of the sale to Buyer contemplated by this Agreement and the
payment of all premiums and charges due for such title insurance, Buyer will be
vested with good, fee simple title to such Owned Real Property, subject only to
the exceptions show thereon, the title company's standard exceptions and
exclusions, and such matters that arise after the date and time of such title
commitment. Except as provided in the following sentence, in the event that
Buyer requires endorsements to such title commitments or the applicable title
insurance policies, such endorsements shall be obtained at Buyer's sole cost and
expense and shall not be a condition to Closing. On the Closing Date, Seller
shall convey the Owned Real Property to be transferred to Buyer subject only to
Permitted Encumbrances, provided that Seller may transfer such property subject
to one or more exceptions that are not Permitted Encumbrances if Seller commits
in writing, in form and substance reasonably acceptable to Buyer, on or before
the Closing Date, to cause any such exception that is not a Permitted
Encumbrance to be removed, insured or bonded over to Buyer's reasonable
satisfaction, or if Seller indemnifies Buyer with respect to such exceptions to
Buyer's reasonable satisfaction on or before the Closing Date. With respect to
each parcel of Owned Real Property covered by a title commitment referenced
above, the amount of title insurance provided under the applicable title
insurance policy shall be the fair market value of the applicable property,
which shall be determined by Buyer at its sole cost and expense using
commercially reasonable methods of valuation, provided that all such valuations
shall be consistent with all allocations of the Purchase Price made hereunder or
pursuant to this Agreement, and shall be acceptable to the title insurance
company. The determination of fair market value shall be made in a timely manner
such that the title commitments can be issued in a timely manner prior to the
Closing Date. Seller agrees that prior to Closing it will provide the title
company with such instructions, authorizations, affidavits, and indemnities as
may be reasonably necessary for the title company to issue title policies to
Buyer, dated as of the Closing Date, for all of the Owned Real Property with
so-called non-imputation endorsements. By no later than forty-five (45) days
after the Closing Date, Seller shall deliver to Buyer a final title insurance
policy covering each parcel of the Owned Real Property covered by the title
commitments. Buyer will use its commercially reasonable efforts to work with the
title company between the date hereof and forty-five (45) days after Closing
Date to resolve any issues with respect to such title commitments. Seller shall
be responsible for the payment of all title insurance premiums attributable to
the CLTA portion of the coverage afforded by each such policy obtained, and
Buyer shall be responsible for the payment of all title insurance premiums in
excess of such amount and for the payment of all endorsement charges and other
fees and costs imposed by the title company.
10.11 Transaction Taxes. Buyer shall bear and be responsible for
paying any sales, use, transfer, documentary, registration, business and
occupation and other similar Taxes (including related penalties (civil or
criminal), additions to Tax and interest) imposed by any Governmental
Authorities with respect to the transfer of Purchased Property to Buyer
(including the Owned Real Property) ("Transaction Taxes"), regardless of whether
the Tax authority seeks to collect the such Taxes from Seller or Buyer. Buyer
shall also be responsible for (i) administering the payment of such Transaction
Taxes, (ii) defending or pursuing any proceedings related thereto, and (iii)
paying any expenses related thereto. Seller shall give prompt written notice to
Buyer of any proposed adjustment or assessment of any Transaction Taxes with
respect to the transaction, or of any examination of said transaction in a
sales, use, transfer or similar Tax audit. In any proceedings, whether formal or
informal, Seller shall permit Buyer to participate and control the defense of
such proceeding, and shall take all actions and execute all documents required
to allow such participation. Seller shall not negotiate a settlement or
compromise of any Transaction Taxes without the written consent of Buyer, which
consent shall not be unreasonably withheld.
10.12 Bulk Sales Laws. Seller and Buyer waive compliance with
applicable Laws under any version of Article 6 of the Uniform Commercial Code
adopted by any state or any similar Law relating to the sale of inventory,
equipment or other assets in bulk in connection with the sale of the Purchased
Property.
10.13 Prepaid Non-regulated Maintenance Agreements. Within thirty
(30) days following Closing, Seller shall pay to Buyer an amount equal to the
pro rata portion of all prepaid but unearned revenues from Seller's customers
for all non-regulated maintenance agreements as of the Closing Date.
10.14 Vehicle Registration. Buyer agrees to use its commercially
reasonable efforts to file promptly the appropriate vehicle title applications
and registrations to change the name of the titled owner on each vehicle title
certificate and change the motor vehicle registration (with respect to license
plate information) on each vehicle being transferred to Buyer from Seller
pursuant to this Agreement. Buyer agrees that it shall remove and destroy
Seller's existing license plates from all vehicles received promptly upon the
receipt of new license plates.
10.15 Carrier Access Billing and Accounts Receivable Transition.
Seller shall render its own final carrier access bills to its interexchange
carriers for minutes, messages and other applicable charges up to the Closing
Date. Seller shall be responsible for collecting and settling any disputes
associated with its final bills to the interexchange carriers.
10.16 End-User Billing and Accounts Receivable Transition. Buyer
agrees to purchase Seller's Earned End-user Accounts Receivable and make payment
to Seller for those accounts in the manner described below.
(a) Seller shall transfer to Buyer, as soon as reasonably available after
Closing, all open end-user customer account records as of the end of business on
the Closing Date. Following the Closing, Buyer will be responsible for
administering those records including the application of cash receipts to
customer accounts, whether related to services rendered before or after the
Closing. Seller will promptly forward to Buyer all customer payments and related
remittance documents received by Seller after the Closing for processing by
Buyer.
(b) Within twenty (20) days following the Closing, Seller will provide an
accounting to Buyer of the Earned End-User Accounts Receivable and the Customer
Advances, as well as the most recent twelve (12) month history of Seller's
uncollectible net writeoffs expressed as a percentage of billings for the
Business (the "Uncollectible Factor"). This data and the resulting calculation
of the Earned End-User Accounts Receivable Amount will be summarized in an
accounts receivable settlement statement (the "Accounts Receivable Settlement
Statement"). Within thirty (30) days following the Closing, Buyer will remit to
Seller an amount equal to 80% of the Earned End-User Accounts Receivable Amount
less 100% of the Customer Advances. Within sixty (60) days following the
Closing, Buyer will remit an additional 15% of the Earned End-User Accounts
Receivable Amount and within ninety (90) days will remit the final 5%.
(c) Not later than ten (10) days prior to the due dates for the sixty (60)
and ninety (90) day payments referred to in Section 10.16(b) above, Seller
will provide Buyer with an updated Accounts Receivable Settlement Statement
reflecting any adjustments based upon non-sufficient funds checks, billing
adjustments or other facts that have become known after the original statement
that relate to pre-closing activity.
(d) If at any time during the ninety (90) day period following the Closing,
Buyer or Seller discovers any material discrepancy in the Accounts Receivable
Settlement Statement, Seller and Buyer agree to use commercially reasonable
efforts to resolve any discrepancy in a timely manner, and also agree to make
payments related to any undisputed amounts as set forth above.
10.17 Cooperation. Subsequent to the Closing Date, Buyer and Seller
agree that they shall cooperate, each with the other, in order to facilitate the
orderly transfer of the operation of the Business from Seller to Buyer; provided
that except as may be otherwise required under that Agreement, no party shall be
required to pay any out-of-pocket costs associated with their respective
obligations hereunder.
ARTICLE 11
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EMPLOYEES AND EMPLOYEE MATTERS
11.1 Employment of Transferred Employees. All Active Employees of
Seller employed in the Business, and all Active Employees of Seller and its
Affiliates who are associated with the Business, on the Closing Date
(hereinafter collectively referred to as "Transferred Employees") shall be
employed by (or become the responsibility of, as applicable) Buyer as of the
Closing Date in the same or comparable positions, and at the same or comparable
total compensation (including base pay and bonus (exclusive of any retention
bonus)), as were in effect on the Closing Date, except as otherwise provided in
this Agreement. The term "Transferred Employees" shall include only those
individuals described in the preceding sentence who are identified as such on
Schedule 11.1. For purposes of the first sentence, the term "Active Employees"
shall include all full-time and part-time employees, employees on workers'
compensation, military leave, maternity leave, leave under the Family and
Medical Leave Act of 1993, short-term disability, non-occupational disability,
on layoff with recall rights, and employees on other approved leaves of absence
with a legal or contractual right to reinstatement. Buyer also shall employ any
employee of Seller or its Affiliates who on the Closing Date is an LTD Recipient
(as defined in Section 11.7) and who immediately before his active employment
with Seller or its Affiliates ceased was employed in or in association with the
Business, provided such employee returns to active employment within one (1)
year of the Closing Date. For a period of six (6) months following the Closing
Date, Buyer shall not employ, and Buyer shall not permit any of its Affiliates
to employ, any person who retires or otherwise terminates from any employment at
or in association with the Business during the six-month period beginning three
(3) months before the Closing Date. All Transferred Employees and LTD Recipients
(as defined in Section 11.7) shall be identified on Schedule 11.1 to be prepared
by Seller and submitted to Buyer at least fifteen (15) days prior to the Closing
Date; such Schedule 11.1 shall identify, as of the date of such Schedule, the
employees who have terminated employment as described in the preceding sentence;
and such Schedule 11.1 shall be updated as of the date that is three months
after the Closing to identify any employees who terminated employment as
described in the preceding sentence after the date of the original Schedule
11.1.
11.1.1 Assumption of Collective Bargaining Agreement
Obligations. On and after the Closing Date, Buyer, as successor employer to
Seller (subject to Seller's Retained Liabilities in Section 2.4.2(d)), shall
assume all of the employer's obligations under, and be bound by the provisions
of, each collective bargaining agreement covering Transferred Employees. Each
such collective bargaining agreement relating to Transferred Employees shall be
identified on a Schedule 11.1.1 to be prepared by Seller and submitted to Buyer
at least fifteen (15) days prior to the Closing Date. Seller shall cooperate
with Buyer in Buyer's efforts to contact the unions representing Transferred
Employees. If a union representing Transferred Employees objects to Buyer's
assumption of, or refuses to allow Buyer to assume, the provisions of any
existing collective bargaining agreement that covers such Transferred Employees
immediately before the Closing Date, or objects to any change in or termination
of employee benefits on or after the Closing Date, Seller and its Affiliates
shall have no liability or obligation to Buyer by reason of such objection or
refusal. If, on or before the Closing Date, an employee objects, or refuses to
assent, to the consummation of the transactions contemplated by this Agreement
insofar as the Agreement affects the employee, Seller and its Affiliates shall
have no liability or obligation to the employee or any other party by reason of
the employee's objection or refusal to assent, and Buyer shall be responsible
for any liability or obligation that arises by reason of the employee's
objection or refusal to assent (other than any liability or obligation that
results from Seller's failure to comply with this Agreement and that does not
result from Buyer's failure to comply with this Agreement).
11.1.2 Assumption of Employment and Other Agreements. On
and after the Closing Date, except as otherwise provided in this Agreement or in
Schedule 11.1.2, Buyer, as successor employer to Seller (subject to Seller's
Retained Liabilities in Section 2.4.2(d)), shall assume all obligations under
and be bound by the provisions of each offer of employment by Seller relating to
the Business, each employment agreement or any other agreement by Seller
relating to conditions of employment, employment separation, severance, or
employee benefits in connection with the Business. All obligations described in
this Section 11.1.2 assumed by and binding Buyer shall be identified on a
Schedule 11.1.2 to be prepared by Seller and submitted to Buyer at least fifteen
(15) days prior to the Closing Date.
11.1.3 Recognition of Transferred Employee Service. On and
after the Closing Date, and subject to the provisions of any applicable
collective bargaining agreement, Buyer shall recognize the service of each
Transferred Employee for all employment-related purposes (other than an employee
achievement award, within the meaning of Section 274(j) of the IRC) determined
in accordance with the practices and procedures of Seller in effect on the
Closing Date, as if such service had been rendered to Buyer. Schedule 11.1 to be
prepared by Seller and submitted to Buyer no later than fifteen (15) days prior
to the Closing Date shall list the service of each Transferred Employee for the
employment-related purposes referred to in the preceding sentence.
11.1.4 Assumption of Obligation to Pay Bonuses. Except as
otherwise expressly provided in this Agreement, Transferred Employees shall not
accrue benefits under any employee benefit policies, plans, arrangements,
programs, practices, or agreements of Seller or any of its Affiliates after the
Closing Date. For the year in which the Closing Date occurs, the Transferred
Employees shall be paid any bonuses that would have been payable to the
Transferred Employees for that year had the Transferred Employees remained
employees of Seller or one of its Affiliates, in accordance with the provisions
of the policy, plan, arrangement, program, practice or agreement under which the
bonus would have been paid (the "Seller's Bonus Plans"). Seller shall pay to
Transferred Employees that portion of any such bonus (exclusive of any retention
bonus) that is attributable to service during such year on or before the Closing
Date, and Buyer shall pay to Transferred Employees that portion of any such
bonus that is attributable to service during such year after the Closing Date.
In determining the amount of the bonus to be paid by Buyer in accordance with
the preceding sentence, Buyer shall apply criteria that are substantially
comparable to the criteria established as of the Closing Date under the Seller
Bonus Plans under which the bonus would have been paid had the Transferred
Employees remained employees of Seller or one of its Affiliates. Seller shall
identify the Seller Bonus Plans on a Schedule 11.1.4 to be delivered to Buyer no
later than fifteen (15) days prior to the Closing Date.
11.1.5 No Duplicate Benefits; Dependents and Beneficiaries.
Nothing in this Agreement shall cause duplicate benefits to be paid or provided
to or with respect to a Transferred Employee under any employee benefit
policies, plans, arrangements, programs, practices, or agreements. References
herein to a benefit with respect to a Transferred Employee shall include, where
applicable, benefits with respect to any eligible dependents and beneficiaries
of such Transferred Employee under the same employee benefit policy, plan,
arrangement, program, practice or agreement.
11.1.6 Affiliate Employees. If any employee identified in
Schedule 11.1 is an employee of an Affiliate of Seller, he or she shall be
considered a Transferred Employee and shall be treated under this Agreement in a
manner that is comparable to the treatment given to the Transferred Employees
who are employed by Seller, except that his or her service as of the Closing
Date shall be determined in accordance with the practices and procedures of his
or her employer, as in effect on the Closing Date.
11.1.7 Term of Assumed Obligations. Except as otherwise
expressly provided in this Agreement, Buyer's obligations with respect to
Transferred Employees under this Article 11 shall continue for a period of not
less than one year after the Closing Date.
11.2 Transferred Employee Benefit Matters.
11.2.1 Defined Benefit Plans.
(a) Seller's Pension Plans. As of the date of this Agreement, Seller partici-
pates in the following single-employer defined benefit pension plans maintained
in the United States:
(i) the GTE Service Corporation Plan for Employees' Pensions (the
"Seller's Salaried Pension Plan"); and
(ii) the GTE Midwest Incorporated Plan for Hourly-Paid Employees'
Pensions (the "Seller's Hourly Pension Plan").
The plans identified in this Section 11.2.1(a) shall be
referred to collectively in this Agreement as the "Seller's Pension Plans," and
each such plan shall be referred to individually as a "Seller's Pension Plan."
(b) Buyer Obligations. Buyer shall take all actions necessary and appropriate
to ensure that, as soon as practicable after the Closing Date, Buyer maintains
or adopts one or more pension plans (hereinafter referred to in the aggregate as
the "Buyer Pension Plans" and individually as the "Buyer Pension Plan")
effective as of the Closing Date and to ensure that each Buyer Pension Plan
satisfies the following requirements as of the Closing Date: (i) the Buyer
Pension Plan is a qualified, single-employer defined benefit plan under Section
401(a) of the IRC; (ii) any Buyer Pension Plan that was in effect before the
Closing Date shall not have any "accumulated funding deficiency," as defined in
Section 302 of ERISA and Section 412 of the IRC, whether or not waived,
immediately before the Closing Date; (iii) the Buyer Pension Plan is not the
subject of termination proceedings or a notice of termination under Title IV of
ERISA; (iv) the Buyer Pension Plan does not exclude Transferred Employees from
eligibility to participate therein; (v) the Buyer Pension Plan does not violate
the requirements of any applicable collective bargaining agreement; and (vi)
with respect to Transferred Employees who were participants in the Seller's
Hourly Pension Plan on the Closing Date, the terms of the Buyer Pension Plan are
substantially identical in all material respects to the terms of the Seller's
Hourly Pension Plan. Within the 30-day period immediately preceding any transfer
of assets and liabilities from a Seller's Pension Plan to a Buyer Pension Plan
pursuant to this Section 11.2.1(b), Buyer shall provide Seller with a written
certification, in a form acceptable to Seller, that the Buyer Pension Plan
satisfies each of the requirements set forth in this Section 11.2.1(b).
(c) Transfer of Liabilities.
(i) In accordance with the provisions of this Section 11.2.1,
Buyer shall cause the Buyer Pension Plans to accept all liabilities for benefits
under the Seller's Pension Plans, whether or not vested, that would have been
paid or payable (but for the transfer of assets and liabilities pursuant to this
Section 11.2.1) to or with respect to the Transferred Employees under the terms
of the Seller's Pension Plans, including, but not limited to, all liabilities
for "Section 411(d)(6) protected benefits" (as defined by Section 411(d)(6) of
the IRC and the regulations thereunder) that have accrued under the Seller's
Pension Plans to or with respect to the Transferred Employees based on
accredited service and compensation under the Seller's Pension Plans as of the
Closing Date. Buyer shall not amend the Buyer Pension Plans, or permit the Buyer
Pension Plans to be amended, to eliminate any benefit, whether or not vested,
that is a "Section 411(d)(6) protected benefit" (as defined by Section 411(d)(6)
of the IRC and the regulations thereunder). Seller or an Affiliate thereof may,
in its sole discretion on or prior to the transfer of liabilities, take action
to fully vest Transferred Employees in their benefits (if any) under the
Seller's Pension Plans.
(ii) (A) For purposes of eligibility and vesting under the Buyer
Pension Plans, each Transferred Employee whose accrued benefit is transferred
from a Seller's Pension Plan to a Buyer Pension Plan shall be credited with
service and compensation as of the Closing Date as determined under the terms of
the Seller's Pension Plan. The benefit under the Buyer Pension Plan for each
Transferred Employee who, on the Closing Date, participates in the Seller's
Hourly Pension Plan, shall be calculated under terms of the Buyer Pension Plan
that are substantially identical in all material respects to the terms of the
Seller's Hourly Pension Plan. The benefit for each Transferred Employee who, on
the Closing Date, participates in the Seller's Salaried Pension Plan, shall not
be less than the greater of (x) the sum of the Transferred Employee's "Seller's
Pension" and "Buyer Pension," or (y) the Transferred Employee's "Total Service
Pension," each as determined under the rules set forth in subsection (c)(iii)(B)
of this Section 11.2.1.
(B) Each Transferred Employee who, as of the Closing Date,
participates or formerly participated in the Seller's Salaried Pension Plan and
who, under the terms of the Seller's Salaried Pension Plan, has at least 15
years of accredited service and combined years of age and accredited service of
at least 74 as of June 1, 1999, shall be eligible, after the Transferred
Employee's employment with the Buyer and its Affiliates is terminated and after
the Transferred Employee's combined years of age and years of accredited service
equal or exceed 76, to receive his or her "Seller's Pension" (as determined
under the rules set forth in subsection (c)(iii) of this Section 11.2.1) as an
immediate early retirement pension under the applicable Buyer Pension Plan in
accordance with early retirement provisions that are no less favorable to the
Transferred Employee than the early retirement provisions of the Seller's
Salaried Pension Plan as of the Closing Date. For a period of at least five (5)
years following June 1, 1999, Buyer shall cause the Buyer Pension Plan to retain
early retirement provisions that are no less favorable to the Transferred
Employees than the early retirement provisions of the Seller's Salaried Pension
Plan to which they were subject as of the Closing Date; provided, however, that
a Transferred Employee shall be entitled to consent to the provision to such
Transferred Employee of a different and less favorable early retirement benefit.
(C) Notwithstanding the foregoing provisions of this sub-
section (c) (ii), if a lump-sum distribution is available under the Buyer
Pension Plan, the benefit under the Buyer Pension Plan of a GATT Grandfathered
Participant, when expressed in the form of a lump sum, shall not be less than
the benefit under the Buyer Pension Plan determined without regard to the
changes to Section 417 of the IRC made by the Uruguay Round Agreements Act. The
method used to convert a GATT Grandfathered Participant's accrued benefit into a
lump-sum amount under the Buyer Pension Plan after 1999 shall be not less
favorable to a GATT Grandfathered Participant than the method used for similar
purposes by the Seller's Pension Plan. For purposes of this paragraph
(c)(ii)(C), "GATT Grandfathered Participant" shall mean a Transferred Employee
(x) with respect to whom liabilities are transferred pursuant to this subsection
(c) and (y) who, taking service from Buyer into account as service with Seller,
would have been eligible under the Seller's Pension Plan, but for the transfer
of liabilities pursuant to this subsection (c), to have his benefit under the
Seller's Pension Plan (when expressed in the form of a lump sum) determined
without regard to the changes to Section 417 of the IRC made by the Uruguay
Round Agreements Act.
(D) For a period of five (5) years following June 1, 1999,
Buyer shall cause the Buyer Pension Plan to retain early retirement provisions
that are no less favorable to the Transferred Employees than the early
retirement provisions of the Seller's Hourly Pension Plan to which they were
subject as of the Closing Date; provided, however, that a Transferred Employee
shall be entitled to consent to the provision to such Transferred Employee of a
different and less favorable early retirement benefit.
(iii) (A) The Buyer Pension Plan benefit of a Transferred Employee
who, on the Closing Date, participates in the Seller's Hourly Pension Plan,
shall be calculated as set forth in paragraph (c)(ii)(a) of this Section 11.2.1.
(B) The Buyer Pension Plan benefit of a Transferred Employee
who, on the Closing Date, participates in the Seller's Salaried Pension Plan,
shall be calculated by applying the benefit formula set forth in paragraph
(c)(ii)(A) of this Section 11.2.1, in accordance with the rules described in the
remainder of this paragraph (B). A Transferred Employee's "Seller's Pension"
shall be calculated by applying the benefit formula under the Seller's Salaried
Pension Plan (as in effect on the Closing Date) to the Transferred Employee's
service and compensation credited under the Seller's Salaried Pension Plan as of
the Closing Date. A Transferred Employee's "Buyer Pension" shall be not less
than an amount calculated by applying the benefit formula under the Buyer
Pension Plan to the Transferred Employee's total accredited service and
compensation under the Buyer Pension Plan (including service and compensation
credited under the Seller's Salaried Pension Plan as of the Closing Date as if
such service and compensation had been earned under the Buyer Pension Plan and
service and compensation credited under the Buyer Pension Plan after the Closing
Date), multiplied by the ratio of accredited service earned after the Closing
Date to such total accredited service; provided that for a period of at least
five (5) years following June 1, 1999, Buyer shall cause the benefit formula
used in determining such "Buyer Pension" to provide benefits at least as
valuable as were provided under the benefit formula applicable to the
Transferred Employee under the Seller's Salaried Pension Plan on the Closing
Date. A Transferred Employee's "Total Service Pension" shall be calculated by
applying the benefit formula under the Buyer Pension Plan to the Transferred
Employee's accredited service (including service and compensation credited with
the Seller under the Seller's Salaried Pension Plan as of the Closing Date as if
such service and compensation was earned under the Buyer Pension Plan and
service and compensation credited under the Buyer Pension Plan on and after the
Closing Date). Solely for purposes of computing a Transferred Employee's "Total
Service Pension," compensation received by such a Transferred Employee from the
Seller shall be treated as compensation received from the Buyer. The Seller's
Pension, the Buyer Pension, and the Total Service Pension shall take into
account the Transferred Employee's actual age and entire period of service
(including service credited under the Seller's Salaried Pension Plan as of the
Closing Date and service credited under the Buyer Pension Plan on and after the
Closing Date) for vesting and benefit eligibility purposes.
(C) Each Transferred Employee who is eligible to receive a
benefit under the Buyer Pension Plan may elect to receive the portion of said
benefit that is equal to the Seller's Pension in any form, and with any early
retirement or other actuarial subsidy, that was available under the Seller's
Pension Plan on the Closing Date, without regard to whether the Transferred
Employee is eligible to elect or receive, or does elect or receive, the same
form of payment or early retirement or actuarial subsidy for the remainder of
the pension under the Buyer Pension Plan.
(iv) As soon as practicable after the Closing Date, Seller shall
deliver to Buyer a list reflecting each Transferred Employee's service and com-
pensation under each of the Seller's Pension Plans and each Transferred
Employee's accrued benefit thereunder as of the Closing Date.
(d) Transfer of Assets.
(i) In accordance with the provisions of subsection (d)(i)
of this Section 11.2.1 and subject to the provisions of subsection (d)(vi) of
this Section 11.2.1, Seller shall direct the trustee of the Seller's Pension
Plans to transfer to the trustee or funding agent of the applicable Buyer
Pension Plan an amount determined as provided in the following sentence (the
"Pension Assets") with respect to the Transferred Employees whose accrued
benefits are transferred to a Buyer Pension Plan pursuant to Section (c) of this
Section 11.2.1. The value of the Pension Assets to be transferred by the
Seller's Pension Plans shall be equal in value to the projected benefit
obligation, as defined in paragraph 17 of Statement of Financial Accounting
Standards No. 87 ("FAS 87"), under the Seller's Pension Plans for the
Transferred Employees whose accrued benefits are transferred to a Buyer Pension
Plan pursuant to Section (c) of this Section 11.2.1, determined in each case on
an on-going plan basis as of the Closing Date, and on the basis of the
assumptions used for the fiscal year which includes the Closing Date in Seller's
determination of pension expense for the Seller's Pension Plans in accordance
with FAS 87; provided, however, that in no event shall the value of the Pension
Assets be less than the amount required to be transferred by Section 414(l) of
the Code and the regulations thereunder, determined using the assumptions used
by the PBGC with respect to a plan termination occurring on the Closing Date.
The Pension Assets shall be in the form of cash or marketable obligations. Under
no circumstances shall Seller or the Seller's Pension Plans be liable to
transfer any additional amount to Buyer or a Buyer Pension Plan or any other
person in respect of the accrued benefits transferred to a Buyer Pension Plan
pursuant to Section (c) of this Section 11.2.1, including but not limited to any
circumstance under which any person (including a governmental agency) states a
claim to some portion or all of the Pension Assets.
(ii) Seller shall appoint an actuary ("Seller's Actuary") to deter-
mine the amount to be transferred pursuant to subsection (d)(i) of this Section
11.2.1 and shall provide such determination to Buyer. Buyer shall appoint an
actuary ("Buyer's Actuary") who shall have the right to audit and review the
determination made by Seller's Actuary. Within thirty (30) days of the date
Seller inform Buyer of the amount of the Pension Assets, Seller's Actuary shall
provide Buyer's Actuary with a computer file containing all the employee data
used by Seller's Actuary to calculate the Pension Assets. If Buyer's Actuary is
unable to agree with Seller's Actuary on the amount of the transfer within sixty
(60) days after Seller inform Buyer of the amount to be transferred, Seller and
Buyer shall jointly select a third actuary, whose determination shall be binding
on Seller and Buyer. Each of Seller and Buyer shall bear the fees, costs and
expenses of their respective actuaries, and the fees, costs, and expenses of the
third actuary shall be borne one-half by Seller and one-half by Buyer.
(iii) The Pension Assets shall be credited with interest from the
Closing Date to the actual date of transfer at the assumed discount rate used in
accordance with paragraph (i) of this Section (d); provided that any Pension
Assets that are distributed from the Seller's Pension Plans before the date of
transfer pursuant to subsection (d)(vi) of this Section 11.2.1 shall be credited
with interest (such interest to be credited to the Buyer Pension Plans) only
from the Closing Date to the date of distribution.
(iv) Under the terms of each Buyer Pension Plan, the accrued
benefit of each Transferred Employee immediately after the transfer of assets
and liabilities pursuant to this Section 11.2.1 shall not be less than the sum
of each Transferred Employee's accrued benefits under the Seller's Pension Plan
and the Buyer Pension Plan immediately before the transfer of assets and
liabilities. Neither Seller nor its Affiliates nor the Seller's Pension Plans
nor any trustee thereof shall retain any liability for benefits under the
Seller's Pension Plans for any Transferred Employee with respect to whom cash or
marketable obligations have been transferred to a Buyer Pension Plan pursuant to
this Section 11.2.1 or distributed pursuant to subsection (d)(vi) of this
Section 11.2.1 (other than any additional liability that results from Seller's
(or its Affiliates') failure to comply with this Agreement, the Seller's Pension
Plan or applicable Law and that does not result from any failure of Buyer or its
Affiliates to comply with this Agreement, the Buyer Pension Plan or applicable
Law).
(v) In connection with the transfer of assets and liabilities
pursuant to this Section 11.2.1, Seller and Buyer shall cooperate with each
other in making all appropriate filings required by the IRC or ERISA and the
regulations thereunder, and the transfer of assets and liabilities pursuant to
this Section 11.2.1 shall not take place until as soon as practicable after the
latest of (i) the expiration of the 30-day period following the filing of any
required notices with the IRS pursuant to Section 6058(b) of the IRC, or (ii)
the date Buyer has delivered to Seller (xx) a copy of the Buyer Pension Plan and
a copy of the most recent determination letter from the IRS to the effect that
the Buyer Pension Plan is qualified under Section 401(a) of the IRC, together
with documentation reasonably satisfactory to Seller of the due adoption of any
amendments to the Buyer Pension Plan required by the IRS as a condition to such
qualification and a certification from Buyer that no events have occurred that
adversely affect the continued validity of such determination letter (apart from
the enactment of any Federal law for which the remedial amendment period under
Section 401(b) of the IRC has not yet expired), and (yy) information enabling
the enrolled actuary for the Buyer Pension Plan to issue the certification
required by Section 6058(b) of the IRC.
(vi) (A) If, after the Closing Date and before the date of transfer
of assets and liabilities from the Seller's Pension Plans pursuant to this
Section 11.2.1, the accrued benefit as of the Closing Date becomes payable under
a Seller's Pension Plan to or with respect to a Transferred Employee, Buyer
shall (xx) furnish GTE Service Corporation with a copy of a properly completed
application for such benefits, and (yy) direct GTE Service Corporation to
instruct the trustee of the Seller's Pension Plan to make benefit payments in
the form and amount determined by GTE Service Corporation in accordance with the
properly completed application for benefits. Seller shall cause GTE Service
Corporation to comply with any such direction.
(B) To the extent that any reasonable custodial, trustee, asset
management, or other plan administration expenses attributable to the Pension
Assets and to the period ending on the date of the transfer of assets and
liabilities from the Seller's Pension Plans pursuant to this Section 11.2.1 are
allocable to the assets and liabilities to be so transferred, Buyer shall
reimburse the trustee of the Seller's Pension Plans in the amount of such
allocable expense if the expense is to be paid from assets then held by the
trustee of the Seller's Pension Plans or, if the expense is not to be paid from
assets then held by the trustee of the Seller's Pension Plans, Buyer shall
reimburse GTE Service Corporation in the amount of the expense, in each case
within fifteen (15) days of the date on which Buyer receives a statement
therefor from GTE Service Corporation.
(C) Notwithstanding anything herein to the contrary, the assets
and liabilities to be transferred from the trustee of the Seller's Pension Plans
to the trustee or funding agent of the Buyer Pension Plan pursuant to this
Section 11.2.1 shall be reduced, as provided in this subsection (vi), to reflect
any benefit payments made pursuant to this subsection (vi) regardless of the
form in which paid and any expenses described in paragraph (B) of this
subsection (vi) that have not otherwise been paid pursuant to this subsection
(vi).
11.2.2 Savings Plans.
(a) As of the date of this Agreement, Seller participates in the GTE Savings
Plan and the GTE Hourly Savings Plan (collectively referred to as the "Seller's
Savings Plans"). Except as provided in Section (g) of this Section 11.2.2,
Transferred Employees shall not be entitled to make contributions to or to
benefit from matching or other contributions under the Seller's Savings Plans on
and after the Closing Date.
(b) Buyer shall take all action necessary and appropriate to ensure that, as
soon as practicable after the Closing Date, Buyer maintains or adopts one or
more savings plans (hereinafter referred to in the aggregate as the "Buyer
Savings Plans" and individually as the "Buyer Savings Plan") effective as of the
Closing Date and to ensure that the Buyer Savings Plans satisfy the following
requirements as of the Closing Date: (i) each Buyer Savings Plan is a qualified,
single-employer individual account plan under Section 401(a) of the IRC; (ii) at
least one (1) Buyer Savings Plan does not exclude Transferred Employees from
eligibility to participate therein; (iii) at least one (1) Buyer Savings Plan
permits Transferred Employees to make before-tax contributions (under Section
401(k) of the IRC) and provides for matching contributions by the Buyer at a
rate of match determined solely in the discretion of Buyer; and (iv) the Buyer
Savings Plan does not violate the requirements of any applicable collective
bargaining agreement to which it is subject. Within the thirty (30) day period
immediately preceding any transfer of assets and liabilities from a Seller's
Savings Plan to a Buyer Savings Plan pursuant to this Section 11.2.2, Buyer
shall provide Seller with a written certification, in a form acceptable to
Seller, that the Buyer Savings Plan satisfies each of the requirements set forth
in this Section (b).
(c) (i) Seller shall direct the trustee of the Seller's Savings Plans
to transfer to the trustee or funding agent of the Buyer Savings Plan designated
by Buyer an amount in cash equal in value to the account balances of the
Transferred Employees covered by the Seller's Savings Plans as of the date of
the transfer; provided that to the extent the account balances to be transferred
consist in whole or in part of outstanding participant loans which comply with
the provisions of the IRC and ERISA (the "Participant Loans"), Seller shall
direct the trustee of the Seller's Savings Plans to transfer to the trustee or
funding agent of the Buyer Savings Plans, in lieu of cash, the promissory notes
and related documents evidencing such Participant Loans. Buyer and Seller shall
take such actions as may be required to effect the assignment of such loans by
the trustee of the Seller's Savings Plan to the trustee or funding agent of the
Buyer Savings Plan, and Buyer shall cause the trustee or funding agent of the
Buyer Savings Plan to accept the assignment of such Participant Loans.
(ii) After the date of the transfer of assets and liabilities
pursuant to this Section 11.2.2, Buyer shall assume all liabilities for the
benefits payable to or with respect to such Transferred Employees under the
Seller's Savings Plans, and Seller and the Seller's Savings Plans and their
implementing trust shall retain no liability for such benefits (other than any
additional liability that results from Seller's (or its Affiliates') failure to
comply with this Agreement, the Seller's Savings Plan or applicable Law and that
does not result from any failure of Buyer or its Affiliates to comply with this
Agreement, the Buyer Savings Plan or applicable Law).
(d) For purposes of eligibility and vesting under the Buyer Savings Plans,each
Transferred Employee shall be credited with service as of the Closing Date as
determined under the terms of the Seller's Savings Plans. As soon as practicable
after the Closing Date, Seller shall cause GTE Service Corporation to deliver to
Buyer a list of the Transferred Employees covered by the Seller's Savings Plans,
together with each Transferred Employee's service under each of the Seller's
Savings Plans as of the Closing Date.
(e) In connection with the transfer of assets and liabilities pursuant to this
Section 11.2.2, Seller and Buyer shall cooperate with each other in making all
appropriate filings required by the IRC or ERISA and the regulations thereunder,
and the transfer of assets and liabilities pursuant to this Section 11.2.2 shall
not take place until as soon as practicable after the latest of (i) the
expiration of the thirty (30) day period following the filing of any required
notices with the IRS pursuant to Section 6058(b) of the IRC, and (ii) the date
Buyer has delivered to Seller (xx) a copy of the Buyer Savings Plan and a copy
of the most recent determination letter from the IRS to the effect that the
Buyer Savings Plan is qualified under Sections 401(a) and 401(k) of the IRC,
together with documentation reasonably satisfactory to Seller of the due
adoption of any amendments to the Buyer Savings Plan required by the IRS as a
condition to such qualification and a certification from Buyer that no events
have occurred that adversely affect the continued validity of such determination
letter (apart from the enactment of any Federal law for which the remedial
amendment period under Section 401(b) of the IRC has not yet expired).
(f) As soon as practicable after the Closing Date, Seller shall cause GTE
Service Corporation to deliver to Buyer a list of the Transferred Employees who
have outstanding Participant Loans under the Seller's Savings Plans, together
with copies of said Transferred Employees' notes, disclosure statements, and
security agreements under the Seller's Savings Plans. Subject to obtaining the
consent of the applicable Transferred Employee if required by law, from the
Closing Date until the earliest of (i) the actual date of transfer of assets and
liabilities pursuant to this Section 11.2.2; (ii) the full amortization of the
Transferred Employee's indebtedness; (iii) the distribution of the entire
balance of the Transferred Employee's accounts; or (iv) the last date on which
Buyer or one of its Affiliates pays remuneration to the Transferred Employee,
Buyer or its Affiliate shall (x) continue the payroll deductions pursuant to
which each such Transferred Employee is discharging indebtedness to a Seller's
Savings Plan and (y) remit the deducted funds to Fidelity Management Trust
Company, the trustee of the Seller's Savings Plans, as soon as practicable, but
in no event more than thirty (30) days, after the date of deduction, together
with an accounting that identifies the Transferred Employees with respect to
whom the funds were deducted and the amount deducted for each Transferred
Employee. All such remitted funds shall be transferred to the appropriate
Seller's Savings Plan and applied to reduce the appropriate Transferred
Employee's outstanding indebtedness. Buyer's obligations under this Section (f)
are limited to payroll deductions of Participant Loans repayments by the
Transferred Employees and remittance of those funds, and nothing herein shall be
construed to obligate Buyer to repay to Seller any portion of the outstanding
indebtedness of the Transferred Employees that are not otherwise discharged by
the Transferred Employees themselves.
(g) Seller shall make all required matching contributions with respect to the
Transferred Employees' contributions to the Seller's Savings Plans that are (i)
eligible for matching and (ii) made before, or relate to a period ending on or
prior to, the Closing Date. Such matching contributions shall be made not later
than the date on which all other matching contributions are made to the Seller's
Savings Plans with respect to contributions made at the same time as the
Transferred Employees' contributions.
11.2.3 Welfare Plans.
(a) Buyer shall take all action necessary and appropriate to ensure that, as
soon as practicable after the Closing Date, Buyer maintains or adopts, as of the
Closing Date, one or more employee welfare benefit plans, including medical,
health, dental, flexible spending account, accident, life, short-term
disability, and long-term disability and other employee welfare benefit plans
(including retiree medical and life) for the benefit of (i) the non-bargained
Transferred Employees (the "Non-Union Welfare Plans") and (ii) the
union-represented Transferred Employees in accordance with the provisions of
applicable collective bargaining agreements (the "Bargained Welfare Plans"). The
Non-Union Welfare Plans and the Bargained Welfare Plans are hereinafter referred
to collectively as the "Buyer Welfare Plans." The Buyer Welfare Plans shall
provide as of the Closing Date pre-retirement benefits to Transferred Employees
(and their dependents and beneficiaries) that, in the aggregate, are comparable
to the pre-retirement benefits to which they were entitled under the
corresponding employee welfare benefit plans maintained by Seller on the Closing
Date. For purposes of determining eligibility to participate in each Buyer
Welfare Plan, each Transferred Employee shall be credited with service,
determined under the terms of the corresponding welfare plans maintained by
Seller on the Closing Date (hereinafter referred to collectively as the
"Seller's Welfare Plans"). Any restrictions on coverage for pre-existing
conditions or requirements for evidence of insurability under the Buyer Welfare
Plans shall be waived for Transferred Employees, and Transferred Employees shall
receive credit under the Buyer Welfare Plans for co-payments and payments under
a deductible limit made by them and for out-of-pocket maximums applicable to
them during the plan year of the Seller's Welfare Plan in accordance with the
corresponding Seller's Welfare Plans. As soon as practicable after the Closing
Date, Seller shall deliver to Buyer a list of the Transferred Employees who had
credited service under a Seller's Welfare Plan, together with each such
Transferred Employee's service, co-payment amounts, and deductible and
out-of-pocket limits under such plan.
(b) (i) Except as otherwise provided in subsection (b)(ii) of this
Section (b) or in an applicable collective bargaining agreement, Buyer shall
provide or cause to be provided retiree medical, health, and life benefits to
each Transferred Employee (or the dependents or beneficiaries of such
Transferred Employee, as the case may be) under substantially comparable terms
and conditions as apply to other comparable employees of Buyer, and Seller shall
have no obligation to provide retiree medical, health and life benefits in
respect of any Transferred Employee on or after the Closing Date.
(ii) Subject to Section 11.4 below, following the retirement from
Buyer and its Affiliates or any successor thereof of a Transferred Employee who
is not subject to a collective bargaining agreement as of the Closing Date, who
has combined age and years of accredited service (within the meaning of the
Seller's Pension Plan) as of June 1, 1999, equal to at least 66, and who as of
his or her retirement has combined age and years of accredited service (within
the meaning of the Seller's Pension Plan) equal to at least 76 and at least 15
years of accredited service (within the meaning of the Seller's Pension Plan) (a
"Retired Non-Union Transferred Employee"), Seller shall provide or cause to be
provided to each such Retired Nonunion Transferred Employee (and/or his or her
dependents and beneficiaries) retiree medical, health, and life benefits under
terms and conditions that are substantially identical to the terms and
conditions under the corresponding programs offered by Seller to its similarly
situated noncollectively bargained employees retiring as of the Closing Date;
provided that nothing in this subsection (b)(ii) shall be construed to prevent
any Retired Non-Union Transferred Employee (or his or her dependents or
beneficiaries) from voluntarily relinquishing such benefits. Buyer shall
reimburse Seller, in accordance with this subsection (b)(ii), for the cost of
the retiree medical, health, and life coverage for which Seller are responsible
and that Seller actually provide pursuant to this subsection (b)(ii). For each
year for which Buyer is required to reimburse Seller under this subsection
(b)(ii), Buyer shall pay Seller annually in arrears, within 30 days after Seller
provides a statement therefor to Buyer, (A) $4,500 with respect to each Retired
Non-Union Transferred Employee who has not yet attained age 65 during the year
for which the payment is made and $4,500 with respect to each spouse who is
covered with respect to a Retired Non-Union Transferred Employee and who has not
yet attained age 65 during the year for which the payment is made, and (B)
$2,000 with respect to each Retired Non-Union Transferred Employee who has
attained at least age 65 during the year for which the payment is made and
$2,000 with respect to each spouse who is covered with respect to a Retired
Non-Union Transferred Employee and who has attained at least age 65 during the
year for which the payment is made. No reimbursement shall be due with respect
to any dependent, other than a spouse, covered with respect to a Retired
Non-Union Transferred Employee. The reimbursement obligation for partial years
shall be prorated based on the portion of the year covered by the obligation.
Each Retired Non-Union Transferred Employee (or his or her dependent or
beneficiary, as the case may be) who is provided benefits by Seller under this
subsection (b)(ii) shall be required to pay to Seller any premium, contribution
or other payment required under, and shall be subject to any co-payment or
deductible required under, the terms of Seller's applicable retiree medical,
health, or life benefit plan; to the extent that any amount constituting such a
payment is deducted from any plan, program, or arrangement maintained by Buyer
or one of its Affiliates or is otherwise paid to Buyer or one of its Affiliates
by such person, Buyer shall cause such amount to be paid to Seller as soon as
administratively practicable.
(iii) Benefits provided pursuant to subsection (b)(ii) of this
Section (b) shall take into account service with and compensation increases from
Buyer on and after the Closing Date in the same manner as if such post-Closing
Date service was performed with, or such compensation was provided by, Seller.
Buyer shall provide Seller with such information as shall be required to
implement the immediately preceding sentence.
(c) Buyer shall refer to GTE Service Corporation and GTE Service Corporation
shall assume responsibility for any valid claim under a Seller's Welfare Plan
for disability, medical, dental or other benefits made by a Transferred Employee
on or after the Closing Date arising from a loss incurred on or before the
Closing Date. Nothing in this Section 11.2.3 shall require Seller, any Affiliate
of Seller, or the Seller's Welfare Plans to make any payment or to provide any
benefit not otherwise provided by the terms of the Seller's Welfare Plans.
(d) Seller, Buyer, their respective Affiliates, and the Seller's Welfare Plans
and the Buyer Welfare Plans shall assist and cooperate with each other in the
disposition of claims made under the Seller's Welfare Plans pursuant to
subsection (c) of this Section 11.2.3, and in providing each other with any
records, documents, or other information within its control or to which it has
access that is reasonably requested by any other as necessary or appropriate to
the disposition, settlement, or defense of such claims.
(e) Except for GTE Flexible Reimbursement Plan (the "FRP") account balances
described in Section 11.2.3(f), nothing in this Agreement shall require Seller
or its Affiliates to transfer assets or reserves with respect to the Seller's
Welfare Plans to Buyer or the Buyer Welfare Plans.
(f) As of the Closing Date, Seller shall cause the portion of the FRP app-
licable to Transferred Employees to be segregated into a separate component and
all account balances of the Transferred Employees in the FRP shall be
transferred to a flexible reimbursement plan that Buyer shall cause to be
maintained for the duration of the calendar year in which the Closing Date
occurs.
(g) On and for a period of at least three (3) years after the Closing Date,
Transferred Employees not subject to a collective bargaining agreement shall be
eligible for benefits under a Buyer severance or separation pay policy or plans
that are the same as or comparable to the severance or separation pay policy
benefits that are provided by Seller (or the applicable Affiliate, if the
Transferred Employee is employed by an employer other than the Seller) or a
Seller's Pension Plan as of the Closing Date. Buyer shall recognize the service
of each such Transferred Employee with Seller and its Affiliates for
eligibility, vesting, and benefit determinations under the Buyer severance or
separation pay policy or plan. Transferred Employees subject to a collective
bargaining agreement shall be eligible for severance or separation pay benefits
in accordance with the terms of the applicable collective bargaining agreement.
11.3 Miscellaneous Benefits.
11.3.1 Loans.
Buyer shall (i) obtain at its own expense newly executed
payroll deduction authorization forms from all Transferred Employees to whom
Seller has made outstanding education loans, mortgage loans, and relocation
loans (excluding any Participant Loans under the Seller's Savings Plans), (ii)
subject to obtaining the consent of the applicable Transferred Employee if
required by law, continue the payroll deductions pursuant to which such
Transferred Employees are discharging such indebtedness, and (iii) as soon as
practicable, but in no event more than thirty (30) days, after the date of
deduction, remit such funds (together with an accounting that identifies the
Transferred Employees with respect to whom the funds were deducted and the
amount deducted for each Transferred Employee) to Seller for application by
Seller to the Transferred Employees' outstanding indebtedness. Buyer's
obligation with respect to each respective Transferred Employee pursuant to the
preceding sentence shall commence as of the Closing Date and continue until the
earlier of the full amortization of the Transferred Employee's indebtedness or
the last date on which Buyer or one of its Affiliates pays remuneration to the
Transferred Employee. Seller shall not seek to accelerate, cancel or otherwise
change the terms of any education loans, mortgage loans, or relocation loans
made by Seller to such Transferred Employees, except in the case of a default by
a Transferred Employee. Buyer's obligations under this Section 11.3.1 are
limited to payroll deductions of loan repayments by the Transferred Employees
and remittance of those funds and the related accounting, and nothing herein
shall be construed to obligate Buyer to repay to Seller any portion of the
outstanding indebtedness of the Transferred Employees that are not otherwise
discharged by the Transferred Employees themselves; provided that,
notwithstanding anything to the contrary in Article 12 of this Agreement or
Section 11.6 of this Agreement, Seller shall indemnify and hold harmless Buyer
for all claims, demands, actions, proceedings, causes of action, liability,
loss, cost, damage, and expense (including reasonable attorney's fees) in any
way arising from or incurred as a result of Buyer's administration of the
outstanding indebtedness or the payroll deduction authorization process as
described above. All Transferred Employees with outstanding indebtedness as
described in this Section 11.3.1 and the amount and nature of this indebtedness
shall be identified on a Schedule 11.3.1 to be prepared by Seller and submitted
to Buyer before the Closing Date.
11.3.2 Vacation.
(a) On or after the Closing Date, Buyer shall allow Transferred Employees to
receive paid time off in the calendar year of the Closing for any unused
vacation time accrued, with respect to the calendar year of the Closing, prior
to the Closing Date. Except as provided in the following sentence, Seller and
its Affiliates shall have no liability to Transferred Employees for the vacation
payments described in this Section 11.3.2. Seller shall pay Transferred
Employees any banked vacation on or before the Closing Date. Schedule 11.1 to be
prepared by Seller and submitted to Buyer on or before the Closing Date shall
list the accrued but unused vacation pay, as of the Closing Date, of each
Transferred Employee for the calendar year in which the Closing Date occurs.
(b) For purposes of determining a Transferred Employee's eligibility for
vacation under Buyer's vacation plan, a Transferred Employee shall be credited,
as of the first day of the first calendar year that begins after the calendar
year in which the Closing Date occurs, with service for the calendar year in
which the Closing Date occurs in an amount equal to the aggregate of the
Transferred Employee's service with both Seller and Buyer during the calendar
year in which the Closing Date occurs.
(c) At the time of Closing, all vacation for Transferred Employees for the
calendar year of Closing shall be prorated and the net liability shall be an
adjustment to the Purchase Price (the "Vacation Proration Amount"). The
adjustment shall be determined by crediting the Buyer with an amount equal to
the accrued and unused vacation for Transferred Employees. In determining said
net liability, Seller shall receive a credit against the total liability for any
vacation used in excess of the accrued vacation for Transferred Employees as of
the Closing Date.
11.4 Employee Rights.
Nothing herein expressed or implied shall confer upon any
employee of Seller or its Affiliates, or Buyer or its Affiliates, or upon any
legal representative of such employee, or upon any collective bargaining agent,
any rights or remedies, including any right to employment or continued
employment for any specified period, of any nature or kind whatsoever under or
by reason of this Agreement.
Nothing in this Agreement shall be deemed to confer upon any
person (nor any beneficiary thereof) any rights under or with respect to any
plan, program, or arrangement described in or contemplated by this Agreement,
and each person (and any beneficiary thereof) shall be entitled to look only to
the express terms of any such plan, program, or arrangement for his or her
rights thereunder.
Nothing in this Agreement shall cause Buyer or its Affiliates,
nor Seller or its Affiliates to have any obligation to provide employment or any
employee benefits to any individual who is not a Transferred Employee or, except
as otherwise provided in Section 11.1.2 with respect to employment agreements,
to continue to employ any Transferred Employee for any period of time following
the Closing Date.
11.5 WARN Act Requirements.
On and after the Closing Date, Buyer shall be responsible with
respect to Transferred Employees and their beneficiaries for compliance with the
Worker Adjustment and Retraining Notification Act of 1988 and any other
applicable Law, including any requirement to provide for and discharge any and
all notifications, benefits, and liabilities to Transferred Employees and
government agencies that might be imposed as a result of the consummation of the
transactions contemplated by this Agreement or otherwise.
11.6 Indemnification.
11.6.1 Indemnification of Seller. Notwithstanding anything
to the contrary in Article 12 of this Agreement, Buyer shall indemnify and hold
harmless Seller, its Affiliates, and their respective directors, officers,
employees, agents, and assigns, and each employee benefit plan or arrangement
maintained or contributed to by Seller or an Affiliate thereof (whether or not
such plan or arrangement is an "employee benefit plan" within the meaning of
Section 3(3) of ERISA) and its administrators, fiduciaries, and agents, from and
against any and all claims, demands, actions, administrative or other
proceedings, causes of action, liability, loss, cost, damage, and expense
(including reasonable attorneys' fees) (i) in any way arising out of or incurred
as a result of any action by Buyer, its Affiliates, their respective directors,
officers, employees, or agents, the administrators or fiduciaries of any
employee benefit plan maintained or contributed to by Buyer or an Affiliate
thereof (whether or not such plan or arrangement is an "employee benefit plan"
within the meaning of Section 3(3) of ERISA), or any of their successors, to
change, reduce contributions to, terminate, fail to continue, fail to pay
benefits under, or fail to manage or administer properly any employee benefit
plan or arrangement (whether or not such plan or arrangement is an "employee
benefit plan" within the meaning of Section 3(3) of ERISA) on or after the
Closing Date, or (ii) in any way arising out of or incurred as a result of any
action that is a breach of any the covenants, representations, warranties, or
obligations of any such person under this Agreement.
11.6.2 Indemnification of Buyer. Notwithstanding anything
to the contrary in Article 12 of the Agreement, Seller shall indemnify and hold
harmless Buyer, its Affiliates, and their respective directors, officers,
employees, agents, and assigns, and each employee benefit plan or arrangement
maintained or contributed to by Buyer or an Affiliate thereof (whether or not
such plan or arrangement is an "employee benefit plan" within the meaning of
Section 3(3) of ERISA) and its administrators, fiduciaries, and agents, from and
against any and all claims, demands, actions, administrative or other
proceedings, causes of action, liability, loss, cost, damage, and expense
(including reasonable attorneys' fees) (i) in any way arising out of or incurred
as a result of any action by Seller, its Affiliates, their respective directors,
officers, employees, or agents, the administrators or fiduciaries of any
employee benefit plan maintained or contributed to by Seller or an Affiliate
thereof (whether or not such plan or arrangement is an "employee benefit plan"
within the meaning of Section 3(3) of ERISA), or any of their successors, to
change, reduce contributions to, terminate, fail to continue, fail to pay
benefits under, or fail to manage or administer properly any employee benefit
plan or arrangement (whether or not such plan or arrangement is an "employee
benefit plan" within the meaning of Section 3(3) of ERISA) before, or relating
to a period before, the Closing Date, or (ii) in any way arising out of or
incurred as a result of any action that is a breach of any the covenants,
representations, warranties, or obligations of any such person under this
Agreement.
11.7 Special Provisions For Certain Employees.
Any individual employed in or in association with the Business
and whose primary work location is within the areas services by the Purchased
Exchanges who as of the Closing Date either (i) is currently receiving long-term
disability benefits under a long-term disability plan of the Seller or one of
its Affiliates (the "Seller's LTD Plan"), (ii) has been approved for receipt of
long-term disability benefits under the Seller's LTD Plan, or (iii) is receiving
a disability pension under a Seller's Pension Plan (collectively, an "LTD
Recipient") shall be treated as a Transferred Employee if and when the LTD
Recipient recovers from his or her disabling condition and returns to active
service with the Buyer. The term "LTD Recipients" shall include only those
individuals described in the preceding sentence who are identified on Schedule
11.1.
Any Transferred Employee described in the preceding paragraph
(whether or not identified on Schedule 11.1 as an "LTD Recipient") shall
continue to receive benefits under Seller's LTD Plan (or, if applicable, a
disability pension under a Seller's Pension Plan) after the Closing Date to the
extent provided under Seller's LTD Plan (or the applicable Seller's Pension
Plan). As long as such individual remains eligible to receive benefits under
Seller's LTD Plan (or the applicable Seller's Pension Plan), the Buyer shall not
be required to provide coverage or benefits to the individual under the employee
benefit plans or programs maintained by the Buyer.
If any LTD Recipient recovers from his or her disabling
condition, Seller shall have no obligation to offer or provide any employment to
such LTD Recipient, and absent a legal or contractual right to reemployment and
except as otherwise provided in Section 11.1, Buyer shall have no obligation to
offer or provide any employment to such LTD Recipient. If an LTD Recipient who
received disability benefits under the Seller's LTD Plan (or the applicable
Seller's Pension Plan, as the case may be) returns to active service with the
Buyer or one of its Affiliates, the LTD Recipient's period of disability covered
under the Seller's LTD Plan (or the applicable Seller's Pension Plan, as the
case may be) shall be treated as a period of service under the employee benefit
plans and programs of the Buyer and its Affiliates to the same extent that the
period of disability is treated as a period of service under the employee
benefit plans and programs of Seller and its Affiliates.
ARTICLE 12
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INDEMNIFICATION
12.1 Survival of Representations, Warranties and Covenants.
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(a) The representations and warranties contained in Sections 8.1.6 and 8.2.6
will survive the Closing and remain in full force and effect indefinitely. The
representations and warranties contained in Section 8.1.13 will terminate upon
the expiration of the applicable statute of limitations. Each of the other
representations and warranties contained in Article 8 will terminate, without
further action, on the date which is (i) the later of one (1) year following the
Closing Date, or (ii) the completion of Buyer's first audit cycle following the
Closing Date, however, that such cycle is completed within fifteen (15) months
following the Closing Date (in each case, the applicable date of expiration of
such representations and warranties is referred to herein as an "Expiration
Date").
(b) This Article 12 shall survive any termination of this Agreement and the
Ancillary Agreements and the indemnification contained in this Article 12 shall
survive the Closing and shall remain in effect (i) indefinitely, with respect to
any Indemnifiable Claim related to the breach of any representation or warranty
which pursuant to Section 12.1(a) survives indefinitely, (ii) indefinitely, with
respect to any Indemnifiable Claim arising under Section 12.2(a)(iii) (Retained
Liabilities) or 12.2(b)(iii) (Assumed Liabilities) and (iii) until the date
Expiration Date for any Indemnifiable Claims that are not specified in any of
the preceding clauses. Unless a claim for indemnification with respect to any
alleged breach of any representation or warranty is asserted by notice given as
herein provided that specifically identifies a particular breach and the
underlying facts relating thereto, which notice is given within the applicable
period of survival for such representation or warranty, such claim may not be
pursued and is irrevocably waived after such time. Without limiting the
generality or effect of the foregoing, no claim for indemnification with respect
to any representation or warranty will be deemed to have been properly made
except (i) to the extent it is based upon a Third Party Claim made or brought
prior to the expiration of the survival period for such representation or
warranty, or (ii) to the extent based on Indemnifiable Losses actually incurred,
or after due inquiry, reasonably expected to be incurred, by an Indemnitee prior
to the expiration of the survival period for such representation or warranty.
12.2 Indemnification.
(a) Following the Closing and subject to the other sections of this Article 12
Seller will indemnify, defend and hold harmless Buyer and its Affiliates and
their respective directors, officers, and agents from and against all
Indemnifiable Losses relating to, resulting from or arising out of (i) any
inaccuracy in any of the representations and warranties made by Seller in
Section 8.1 of this Agreement, (ii) a breach by Seller of any covenant or
agreement of Seller contained in this Agreement, and (iii) any of the Retained
Liabilities.
(b) Following the Closing and subject to the other sections of this Article 12
Buyer will indemnify, defend and hold harmless Seller and its Affiliates and
directors, officers, and agents from and against all Indemnifiable Losses
relating to, resulting from or arising out of (i) any inaccuracy in any of the
representations or warranties made by Buyer in Section 8.2 of this Agreement,
(ii) a breach by Buyer of any covenant or agreement of Buyer contained in this
Agreement, and (iii) any of the Assumed Liabilities.
(c) Payments made under this Section 12.2 shall be treated by Buyer and Seller
as purchase price adjustments and Buyer and Seller shall file all Tax Returns
consistent with such treatment. Notwithstanding anything to the contrary
contained herein, Buyer shall not be indemnified or reimbursed for any Tax
consequences arising from the receipt or accrual of an indemnity payment
hereunder including any Tax consequences arising from adjustments to the basis
of any asset resulting from an adjustment to the Purchase Price or any
additional or reduced taxes resulting from any such basis adjustment.
12.3 Limitations on Liability.
(a) For purposes of this Agreement, (i) "Indemnification Payment" means any
amount of Indemnifiable Losses required to be paid pursuant to this Agreement,
(ii) "Indemnitee" means any person or entity entitled to indemnification under
this Agreement, (iii) "Indemnifying Party" means any person or entity required
to provide indemnification under this Agreement, and (iv) "Indemnifiable Losses"
means any losses, liabilities, damages, costs and expenses (including reasonable
attorneys' fees and expenses and reasonable costs of investigation) actually
incurred in connection with any actions, suits, demands, assessments, judgments
and settlements, in any such case (x) reduced by (i) the amount of insurance
proceeds recovered from any person or entity with respect thereto, and (ii) any
Tax benefits to the Indemnitee as a result of the Indemnifiable Losses involved
and (y) excluding any such losses, liabilities, damages, costs and expenses to
the extent that the underlying liability or obligation is the result of any
action taken or omitted to be taken by any Indemnitee. For purposes of this
12.3(a), the amount of any Tax benefits to the Indemnitee shall be deemed to be
equal to the net present value amount of the reduction in federal, state and
local income or franchise Taxes or the increase of a Tax loss or credit
determined on the basis of the maximum marginal Tax rates in effect for the
Taxable period when payment is made by the Indemnifying Party (regardless of
whether the Indemnitee realizes or will realize an actual reduction in federal,
state or local income or franchise Taxes).
(b) Notwithstanding anything to the contrary contained in this Agreement, if
the Closing occurs, (i) no claim for indemnification may be asserted under
Section 12.2(a)(i) or Section 12.2(a)(ii) with respect to any matter (x) known
to Buyer on or before the date of this Agreement, or (y) after the date of this
Agreement and on or before the Closing Date to the extent that such matter
became known to Buyer prior to Closing and Buyer did not provide timely notice
to Seller of the existence of such claim or condition in accordance with Section
10.2(c), and (ii) no claim for indemnification may be asserted under Section
12.2(b)(i) or Section 12.2(b)(ii) with respect to any matter discovered by or
known to Seller on or before the date of this Agreement.
(c) As between Seller and any Affiliate of Seller, on the one hand, and Buyer
and any Affiliate of Buyer, on the other hand, the remedies, rights and
obligations set forth in this Article 12, Sections 10.1.2, 11.2.2, 11.7, 13.3
and the Ancillary Agreements will be the exclusive remedies, rights and
obligations with respect to the liabilities and obligations referred to in
Section 12.2 and any breach of the representations, warranties or covenants set
forth in this Agreement. Without limiting the foregoing, as a material
inducement to entering into this Agreement, to the fullest extent permitted by
law, each of the parties waives any claim or cause of action that it otherwise
might assert, and any breach of the representations, warranties or covenants set
forth in this Agreement, except for claims or causes of action brought under and
subject to the terms and conditions of this Article 12 and Sections 10.1.2, 11.7
and 13.3, and claims based on common law fraud.
(d) Notwithstanding any other provision of this Agreement or of any applicable
Law, no Indemnitee will be entitled to make a claim against an Indemnifying
Party under Sections 11.2.2, 11.7, 12.2(a)(i), 12.2(a)(ii), 12.2(b)(i) or
12.2(b)(ii) until:
(i) the aggregate amount of Indemnifiable Losses incurred by the
Indemnitee for any individual occurrence giving rise to such Indemnifiable
Losses exceeds $25,000, and
(ii) the aggregate amount of claims that may be asserted for such
Indemnifiable Losses pursuant to Section 12.3(d)(i) exceeds an amount equal to
two percent (2%) of the Purchase Price, but only to the extent such amount, if
any, (a) exceeds an amount equal to two percent (2%) of the Purchase Price, or
in the case of claims for breaches of Section 8.1.19 only, exceeds an amount
equal to $2,400,000 (provided that Indemnifiable Losses with respect to breaches
of Section 8.1.19 shall be payable as Indemnifiable Losses in excess of the
$2,400,000 basket or the two percent (2%) basket, but not both), and (b) is less
than the amount set forth in Section 12.3(e).
(e) Notwithstanding any other provision of this Agreement, the indemnification
obligations of Seller under Section 12.2(a) (except with respect to
indemnification for inaccuracies of the representations contained in Sections
8.1.1 through 8.1.6) or the indemnification obligation of Buyer under Section
12.2(b) will not exceed the amount of an amount equal to ten percent (10%) of
the Purchase Price respectively, after subtracting the floor amount specified in
Section 12.3(d)(ii).
(f) No Indemnifying Party shall be liable to or obligated to indemnify any
Indemnitee hereunder for any consequential, special, multiple, punitive or
exemplary damages including, but not limited to, damages arising from loss or
interruption of business, profits, business opportunities or goodwill, loss of
use of facilities, loss of capital, claims of customers, or any cost or expense
related thereto, except to the extent such damages have been recovered by the
Indemnifying Party under its insurance or have been received by a third person
and are the subject of a Third Party Claim for which indemnification is
available under the express terms of this Section 12.
(g) Notwithstanding anything in this Agreement to the contrary, Seller shall
not be liable to or obligated to indemnify Buyer or any other Indemnitee
hereunder for any claim that any of Seller's representations or warranties in
Section 8.1 is inaccurate, or that any covenant has been breached, if such claim
is predicated on any action by a Governmental Authority (other than a Tax
authority) undertaken after Closing or any action a Governmental Authority
(other than a Tax authority) requires Seller to undertake after Closing.
(h) From the date hereof through the Expiration Date, Buyer shall not be
eligible to seek indemnification from Seller with respect to any resulting
Indemnifiable Losses, and shall indemnify Seller from any losses, liabilities,
damages, costs and expenses (including reasonable attorneys' fees and expenses
and reasonable costs of investigation) actually incurred in connection with any
resulting actions, suits, demands, assessments, judgments and settlements in the
event that Buyer, without the prior written consent of Seller: (i) undertakes
any environmental remediation activity with respect to any Owned Real Property;
or (ii) contacts, or causes or permits any of its subsidiaries, affiliates,
agents, employees, officers or directors to contact on its behalf, any
Governmental Authority for the purpose of initiating any investigation or
inquiry as to the compliance by Seller with Environmental Requirements with
respect to the Owned Real Property, except in each case as is required to comply
with applicable Environmental Requirements.
(i) Seller and Buyer shall cooperate with each other with respect
to resolving any claim or liability with respect to which one party is obligated
to indemnify the other party hereunder, including by making commercially
reasonable efforts to mitigate or resolve any such claim or liability.
12.4 Defense of Claims.
(a) If any Indemnitee receives notice of the assertion of any claim or of the
commencement of any action or proceeding by any entity that is not a party to
this Agreement or an Affiliate of such a party (a "Third Party Claim") against
such Indemnitee, with respect to which an Indemnifying Party is obligated to
provide indemnification under this Agreement, the Indemnitee will give such
Indemnifying Party reasonably prompt written notice thereof, but in any event
not later than ten (10) calendar days after receipt of notice of such Third
Party Claim; provided, however, that the failure of the Indemnitee to notify the
Indemnifying Party shall only relieve the Indemnifying Party from its obligation
to indemnify the Indemnitee pursuant to this Article 12 to the extent that the
Indemnifying Party is materially prejudiced by such failure (whether as a result
of the forfeiture of substantive rights or defenses or otherwise). Upon receipt
of notification of a Third Party Claim, the Indemnifying Party shall be
entitled, upon written notice to the Indemnitee, to assume the investigation and
defense thereof with counsel reasonably satisfactory to the Indemnitee. Whether
or not the Indemnifying Party elects to assume the investigation and defense of
any Third Party Claim, the Indemnitee shall have the right to employ separate
counsel and to participate in the investigation and defense thereof; provided,
however, that the Indemnitee shall pay the fees and disbursements of such
separate counsel unless (i) the employment of such separate counsel has been
specifically authorized in writing by the Indemnifying Party, (ii) the
Indemnifying Party has failed to assume the defense of such Third Party Claim
within reasonable time after receipt of notice thereof with counsel reasonably
satisfactory to such Indemnitee, or (iii) the named parties to the proceeding in
which such claim, demand, action or cause of action has been asserted include
both the Indemnifying Party and such Indemnitee and, in the reasonable judgment
of counsel to such Indemnitee, there exists one or more defenses that may be
available to the Indemnitee that are in conflict with those available to the
Indemnifying Party. Notwithstanding the foregoing, the Indemnifying Party shall
not be liable for the fees and disbursements of more than one counsel for all
Indemnified Parties in connection with any one proceeding or any similar or
related proceedings arising from the same general allegations or circumstances.
Without the prior written consent of the Indemnitee, the Indemnifying Party will
not enter into any settlement of any Third Party Claim that would lead to
liability or create any financial or other obligation on the part of the
Indemnitee unless such settlement includes as an unconditional term thereof the
release of the Indemnitee from all liability in respect of such Third Party
Claim. If a settlement offer solely for money damages is made by the applicable
third party claimant, and the Indemnifying Party notifies the Indemnitee in
writing of the Indemnifying Party's willing-ness to accept the settlement offer
and pay the amount called for by such offer without reservation of any rights or
defenses against the Indemnitee, the Indemnitee may continue to contest such
claim, free of any participation by the Indemnifying Party, and the amount of
any ultimate liability with respect to such Third Party Claim that the
Indemnifying Party has an obligation to pay hereunder shall be limited to the
lesser of (A) the amount of the settlement offer that the Indemnitee declined to
accept plus the Losses of the Indemnitee relating to such Third Party Claim
through the date of its rejection of the settlement offer or (B) the aggregate
Losses of the Indemnitee with respect to such claim.
(b) Any claim by an Indemnitee on account of an Indemnifiable Loss that does
not result from a Third Party Claim (a "Direct Claim") will be asserted by
giving the Indemnifying Party reasonably prompt written notice thereof, but in
any event not later than thirty (30) calendar days after the receipt of notice
thereof, and the Indemnifying Party will have a period of thirty (30) calendar
days within which to respond in writing to such Direct Claim. If the
Indemnifying Party does not so respond within such thirty (30) calendar day
period, the Indemnifying Party will be deemed to have rejected such claim, in
which event the Indemnitee will be free to pursue such remedies as may be
available to the Indemnitee on the terms and subject to the provisions of this
Article 12.
(c) If after the making of any Indemnification Payment the amount of the
Indemnifiable Loss to which such payment relates is reduced by recovery,
settlement or otherwise under any insurance coverage, or pursuant to any claim,
recovery, settlement or payment by or against any other entity, the amount of
such reduction (less any costs, expenses, premiums or taxes incurred in
connection therewith) will promptly be repaid by the Indemnitee to the
Indemnifying Party. Upon making any Indemnification Payment, the Indemnifying
Party will, to the extent of such Indemnification Payment, be subrogated to all
rights of the Indemnitee against any third party that is not an Affiliate of the
Indemnitee in respect of the Indemnifiable Loss to which the Indemnification
Payment relates; provided that (i) the Indemnifying Party shall then be in
compliance with its obligations under this Agreement in respect of such
Indemnifiable Loss, and (ii) until the Indemnitee recovers full payment of its
Indemnifiable Loss, all claims of the Indemnifying Party against any such third
party on account of said Indemnification Payment will be subrogated and
subordinated in right of payment to the Indemnitee's rights against such third
party. Without limiting the generality or effect of any other provision of this
Article 12, each such Indemnitee and Indemnifying Party will duly execute upon
request all instruments reasonably necessary to evidence and perfect the
above-described subrogation and subordination rights.
ARTICLE 13
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TERMINATION
13.1 Termination Rights. This Agreement may be terminated at any
time prior to the Closing Date:
(a) at any time by mutual written consent of the parties;
(b) by Buyer if any of the conditions provided in Section 6.1 of this
Agreement have not been met within eighteen (18) months after execution of this
Agreement and have not been waived by Buyer;
(c) by Seller if any of the conditions provided in Section 6.2 of this Agree-
ment have not been met within eighteen (18) months after execution of this
Agreement and have not been waived by Seller; or by Seller if any obligations of
Buyer provided in Article 3 become incapable of being fulfilled.
13.2 Good Faith Performance. Neither party shall be entitled to
exercise any right of termination pursuant to subsection 13.1(b), (c) or (d)
above if such party shall not have performed diligently and in good faith
the obligations required to be performed by such party hereunder prior
to the date of termination.
13.3 Effect of Termination.
(a) If this Agreement is terminated as a result of a Material Adverse Effect
or Section 13.1(a), this Agreement shall be of no further force and effect and
there shall be no further liability hereunder (except the obligations under the
Confidentiality Agreement and the liability for breach of such obligations) on
the part of either party or their respective Affiliates, directors, officers,
shareholders, agents or other representatives.
(b) If this Agreement is terminated by Buyer pursuant to Section 13.1(b), this
Agreement shall be of no further force and effect and there shall be no further
obligations or liability hereunder (except the obligations under the
Confidentiality Agreement and the liability for breach of such obligations) on
the part of either party or their respective Affiliates, directors, officers,
shareholders, agents or other representatives; provided, however, that (i) in
the event that such termination is the result of one or more Seller's willful or
negligent failure to fulfill its conditions to Closing under Section 6.1 and
Buyer has fulfilled its conditions to Closing under Section 6.2, and Seller has
failed to cure such non-performance within a reasonable period after notice from
Buyer, then Seller shall pay Buyer liquidated damages in an amount equal to the
Deposit, and (ii) Seller shall promptly refund the Deposit following such
termination. Payment of the amount of the Deposit by Seller as liquidated
damages and return of the Deposit to Buyer shall be Buyer's sole and exclusive
remedy. Seller shall promptly pay such amount to Buyer in immediately available
funds following such termination. Notwithstanding anything herein to the
contrary, in no event shall any act or omission of Seller in connection with the
Merger be deemed to be a breach of the terms and conditions of this Agreement
for purposes of this Section 13.3(b).
(c) If this Agreement is terminated by Seller pursuant to Section 13.1(c) or
(d), this Agreement shall be of no further force and effect and there shall be
no further obligations or liability hereunder (except the obligations under the
Confidentiality Agreement and the liability for breach of such obligations) on
the part of either party or their respective Affiliates, directors, officers,
shareholders, agents or other representatives; provided, however, that Seller
shall be entitled to retain the Deposit as liquidated damages as Seller's sole
and exclusive remedy if such termination is (i) the result of Buyer's willful or
negligent failure to fulfill its conditions to Closing under Section 6.2 and
Seller has fulfilled its condition to Closing under Section 6.1, and Buyer has
failed to cure such non-performance within a reasonable period after notice from
Seller, or (ii) the result of Buyer's incapacity to fulfill its obligations
under Article 3.
(d) Upon any termination of the Agreement, each of the parties shall promptly
comply with the obligations of the Confidentiality Agreement regarding return or
destruction of Evaluation Material of the other party. Notwithstanding anything
to the contrary contained herein, the provisions of this Section 13.3 and of
Sections 14.1, 14.2, 14.3, 14.8, 14.11, 14.13 and 14.14, shall survive any
termination of this Agreement.
ARTICLE 14
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MISCELLANEOUS
14.1 Notices. All notices and other communications required or
permitted hereunder shall be in writing and, unless otherwise provided in this
Agreement, will be deemed to have been given when delivered in person or
dispatched by electronic facsimile transfer (confirmed in writing by certified
mail, concurrently dispatched) or one business day after having been dispatched
for next-day delivery by a nationally recognized overnight courier service to
the appropriate party at the address specified below:
(a) If to Buyer, to:
Spectra Communications Group LLC
3190 NE Expressway, Suite 220
Atlanta, GA 30341
Facsimile No.: (770) 455-1866
Attention: Dorothy D. Rollins
President
With a copy to:
CenturyTel, Inc.
100 Century Park Drive
Monroe, LA 71203
Facsimile No.: 318-388-9488
Attention: R. Stewart Ewing, Jr.
Executive Vice President and
Chief Financial Officer
Stacey W. Goff
General Counsel's Office
William R. Boles, Jr.
Boles, Boles & Ryan
1805 Tower Drive
Monroe, LA 71201
Facsimile No.: 318-329-9150
(b) If to Seller, to:
William M. Edwards, III
Vice President - Property Repositioning
600 Hidden Ridge, HQE02J27
Irving, TX 75038
Facsimile No. (972) 719-7062
With a copy to:
Dale R. Chamberlain
Legal Counsel - Property Repositioning
600 Hidden Ridge, HQE02J34
Irving, TX 75038
Facsimile No. (972) 719-7162
or to such other address or addresses as any such party may from time to time
designate for itself by like notice.
14.2 Information Releases. The parties shall consult with each
other (and allow the other party notice, and a reasonable time to comment) in
preparing any employee announcement, press release, public announcement, news
media response or other form of release of information concerning this Agreement
or the transactions contemplated hereby that is intended to provide such
information to the employees generally, news media or the public. Neither party
shall issue or cause the publication of any press release, public announcement
or media response without the prior written consent of the other party;
provided, however, that, after allowing the other party notice and a reasonable
time to comment prior to issuance, nothing herein will prohibit either party
from making an employee announcement, or issuing or causing publication of any
press release, public announcement or media response to the extent that such
action is required by applicable Law or the rules of any national stock exchange
applicable to such party or its Affiliates.
14.3 Expenses. Whether or not the transactions contemplated
hereby are consummated and except as otherwise expressly provided herein, each
party will pay any expenses (including attorneys' fees) incurred by it inci-
dental to this Agreement and in consummating the transactions provided for
herein.
14.4 Successors and Assigns. This Agreement will be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns, but is not assignable or delegable by any party without
the prior written consent of the other party; provided, that (i) Seller may
assign this Agreement to an Affiliate of Seller without the consent of Buyer
including, on and after the closing of the Merger, the ultimate parent entity of
the successor corporation to such merger or any entity controlled thereby and
(ii) Buyer may assign its rights under this Agreement to one or more
wholly-owned subsidiaries, provided that Buyer shall remain responsible for all
of its obligations under this Agreement.
14.5 Amendments. This Agreement may be amended or modified only by
a subsequent writing signed by authorized representatives of both parties.
14.6 Captions. The captions set forth in this Agreement are for
convenience only and shall not be considered as part of this Agreement, nor as
in any way limiting or amplifying the terms and provisions hereof.
14.7 Entire Agreement. The term "Agreement" shall mean collectively
this document, the Schedules hereto and any agreements expressly incorporated
herein. This Agreement supersedes and revokes any prior discussions and
representations, other agreements, commitments, arrangements or understandings
of any sort whatsoever, whether oral or written, that may have been made or
entered into by the parties relating to the matters contemplated hereby, except
the Confidentiality Agreement. This Agreement, the Confidentiality Agreement and
the Ancillary Documents constitute the entire agreement by and among the parties
with respect to the subject matter hereof, and there are no representations,
warranties, agreements, commitments, arrangements or understandings except as
expressly set forth herein.
14.8 Waiver. Except as otherwise expressly provided in this
Agreement, neither the failure nor any delay on the part of any party to
exercise any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise or waiver of any such right,
power or privilege preclude any other or further exercise thereof, or the
exercise of any other right, power or privilege available to each party at law
or in equity.
14.9 Third Parties. Except as expressly provided herein, nothing
contained in this Agreement is intended to confer upon any Person, other than
the parties hereto and their successors and permitted assigns, any rights or
remedies under or by reason of this Agreement.
14.10 Counterparts. This Agreement may be executed in two or more
counterparts, any or all of which shall constitute one and the same instrument.
14.11 Governing Law. This Agreement and the Ancillary Agreements
shall in all respects be governed by and construed in accordance with the laws
of the State of New York (except that no effect shall be given to any conflicts
of law principles of the State of New York that would require the application of
the laws of any other jurisdiction). The parties irrevocably submit to the
exclusive jurisdiction of any Missouri District Court or any Federal Court
located in Missouri for purposes of any suit, action or other proceeding arising
out of this Agreement, the Ancillary Agreements or any transaction contemplated
hereby or thereby. The parties agree that service of process, summons or notice
or document by U.S. registered mail to such party's respective address set forth
in Section 14.1 shall be effective service of process for any action, suit or
proceeding in Missouri with respect to any matters to which it has submitted to
jurisdiction as set forth above in the immediately preceding sentence. The
parties hereto irrevocably and unconditionally waive trial by jury in any legal
action or proceeding relating to this Agreement or any other agreement entered
into in connection therewith and for any counterclaim with respect thereto. In
the event of any breach of the provisions of this Agreement or any other
agreement entered into in connection therewith, the non-breaching party shall be
entitled to equitable relief, including in the form of injunctions and orders
for specific performance, where the applicable legal standards for such relief
in such courts are met, in addition to all other remedies available to the
non-breaching party with respect thereto at law or in equity.
14.12 Further Assurances. From time to time, as and when requested
by one of the parties, the other party will use its commercially reasonable
efforts to execute and deliver, or cause to be executed and delivered, all such
documents and instruments as may be reasonably necessary or appropriate, in the
reasonable opinion of counsel for Seller and Buyer, to consummate and make
effective the transactions contemplated by this Agreement.
14.13 Severability. If any provision of this Agreement is
determined to be invalid, illegal or unenforceable by any Governmental
Authority, the remaining provisions of this Agreement to the extent permitted by
Law shall remain in full force and effect provided that the essential terms and
conditions of this Agreement for both parties remain valid, binding and
enforceable and provided that the economic and legal substance of the
transactions contemplated is not affected in any manner materially adverse to
any party. In the event of any such determination, the parties agree to
negotiate in good faith to modify this Agreement to fulfill as closely as
possible the original intents and purposes hereof. To the extent permitted by
Law, the parties hereby to the same extent waive any provision of Law that
renders any provision hereof prohibited or unenforceable in any respect.
14.14 Representation by Counsel; Interpretation. Seller and Buyer
each acknowledge that each party to this Agreement has been represented by
counsel in connection with this Agreement and the transactions contemplated by
this Agreement. Accordingly, any rule of Law or any legal decision that would
require interpretation of any claimed ambiguities in this Agreement against the
party that drafted it has no application and is expressly waived. The provisions
of this Agreement shall be interpreted in a reasonable manner to effect the
intent of Buyer and Seller.
Intentionally left blank.
<PAGE>
IN WITNESS WHEREOF, the parties, acting through their duly
authorized agents, have caused this Agreement to be duly executed and delivered
as of the date first above written.
GTE MIDWEST INCORPORATED SPECTRA COMMUNICATIONS GROUP LLC
By: /s/ William M. Edwards,III By: /s/ Dorothy D. Rollins
--------------------------- -------------------------
Name: William M. Edwards, III Name: Dorothy D. Rollins
--------------------------- -------------------------
Title: Vice President- Title: Chairman
Property Repositioning
