SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 27, 1998
GTE CORPORATION
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(Exact name of registrant as specified in its charter)
New York
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(State or other jurisdiction of incorporation)
1-2755 13-1678633
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(Commission File Number) (IRS Employer Identification No.)
One Stamford Forum, Stamford, Connecticut 06904
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 203-965-2000
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Not applicable
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(Former name or former address, if changed since last report)
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ITEM 5. OTHER EVENTS
On July 28, 1998, the Registrant and Bell Atlantic Corporation, a
Delaware corporation ("Bell Atlantic"), announced that they would merge in a
"merger of equals" transaction pursuant to an Agreement and Plan of Merger dated
as of July 27, 1998 (the "Merger Agreement"), among the Registrant, Bell
Atlantic and a wholly owned subsidiary of Bell Atlantic.
In connection with the execution of the Merger Agreement, the
Registrant and Bell Atlantic entered into (a) an option agreement pursuant to
which Bell Atlantic granted the Registrant an option to purchase up to 10% of
Bell Atlantic's shares, exercisable under certain circumstances (the "GTE Option
Agreement"), and (b) an option agreement pursuant to which the Registrant
granted Bell Atlantic an option to purchase up to 10% of the Registrant's
shares, exercisable under certain circumstances (the "Bell Atlantic Option
Agreement").
The Merger Agreement, the GTE Option Agreement, the Bell Atlantic
Option Agreement and the joint press release of the Registrant and Bell Atlantic
announcing the merger are filed as Exhibits 2.1, 99.1, 99.2 and 99.3,
respectively, to this Current Report on Form 8-K and are incorporated herein by
reference.
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(c) Exhibits.
Exhibit 2.1 Agreement and Plan of Merger dated as of July
27, 1998, among the Registrant, Bell Atlantic
Corporation and Beta Gamma Corporation.
Exhibit 99.1 Option Agreement dated as of July 27, 1998,
between Bell Atlantic Corporation, as issuer,
and the Registrant, as grantee.
Exhibit 99.2 Option Agreement dated as of July 27, 1998,
between the Registrant, as issuer, and Bell
Atlantic Corporation, as grantee.
Exhibit 99.3 Joint Press Release of the Registrant and
Bell Atlantic Corporation issued July 28,
1998.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: July 29, 1998
GTE CORPORATION
By: /s/ MARIANNE DROST
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Name: Marianne Drost
Title: Secretary
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EXHIBIT INDEX
Exhibit
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2.1 Agreement and Plan of Merger dated as of July 27, 1998 among
the Registrant, Bell Atlantic Corporation and Beta Gamma
Corporation.
99.1 Option Agreement dated as of July 27, 1998, between Bell
Atlantic Corporation, as issuer, and the Registrant, as
grantee.
99.2 Option Agreement dated as of July 27, 1998, between the
Registrant, as issuer, and Bell Atlantic Corporation, as
grantee.
99.3 Joint Press Release of the Registrant and Bell Atlantic
Corporation issued July 28, 1998.
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EXHIBIT 2.1
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AGREEMENT AND PLAN
OF MERGER
DATED AS OF
JULY 27, 1998
AMONG
BELL ATLANTIC CORPORATION,
BETA GAMMA CORPORATION
AND
GTE CORPORATION
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TABLE OF CONTENTS
ARTICLE I
THE MERGER
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SECTION 1.1 The Merger.......................................................................2
SECTION 1.2 Effective Time...................................................................2
SECTION 1.3 Effect of the Merger.............................................................2
SECTION 1.4 Subsequent Actions...............................................................2
SECTION 1.5 Certificate of Incorporation; Bylaws; Directors and Officers of
Surviving Corporation............................................................3
ARTICLE II
EFFECT ON STOCK OF THE SURVIVING
CORPORATION AND THE MERGED CORPORATION
SECTION 2.1 Conversion of Securities.........................................................3
SECTION 2.2 Conversion of Shares.............................................................3
SECTION 2.3 Cancellation of Treasury Shares and Bell Atlantic-owned Shares...................4
SECTION 2.4 Conversion of Common Stock of the Merged Corporation into
Common Stock of the Surviving Corporation........................................4
SECTION 2.5 Exchange Procedures..............................................................4
SECTION 2.6 Transfer Books...................................................................5
SECTION 2.7 No Fractional Share Certificates.................................................6
SECTION 2.8 Options to Purchase GTE Common Stock.............................................7
SECTION 2.9 Restricted Stock.................................................................8
SECTION 2.10 Certain Adjustments..............................................................8
ARTICLE III
CERTAIN ADDITIONAL MATTERS
SECTION 3.1 Certificate of Incorporation and Bylaws of Bell Atlantic.........................9
SECTION 3.2 Dividends........................................................................9
SECTION 3.3 Headquarters.....................................................................9
SECTION 3.4 Corporate Identity...............................................................9
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF GTE
SECTION 4.1 Organization and Qualification; Subsidiaries.....................................9
SECTION 4.2 Certificate of Incorporation and Bylaws.........................................10
SECTION 4.3 Capitalization..................................................................10
SECTION 4.4 Authority Relative to this Agreement............................................11
SECTION 4.5 No Conflict; Required Filings and Consents......................................12
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SECTION 4.6 SEC Filings; Financial Statements...............................................12
SECTION 4.7 Absence of Certain Changes or Events............................................13
SECTION 4.8 Litigation......................................................................13
SECTION 4.9 Permits; No Violation of Law....................................................13
SECTION 4.10 Joint Proxy Statement...........................................................14
SECTION 4.11 Employee Matters; ERISA.........................................................15
SECTION 4.12 Labor Matters...................................................................15
SECTION 4.13 Environmental Matters...........................................................16
SECTION 4.14 Board Action; Vote Required; Applicability of Section 912 ......................17
SECTION 4.15 Opinions of Financial Advisors..................................................17
SECTION 4.16 Brokers.........................................................................17
SECTION 4.17 Tax Matters.....................................................................17
SECTION 4.18 Intellectual Property; Year 2000................................................18
SECTION 4.19 Insurance.......................................................................19
SECTION 4.20 Ownership of Securities.........................................................20
SECTION 4.21 Certain Contracts...............................................................20
SECTION 4.22 Rights Agreement................................................................20
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BELL ATLANTIC
SECTION 5.1 Organization and Qualification; Subsidiaries....................................21
SECTION 5.2 Certificate of Incorporation and Bylaws.........................................21
SECTION 5.3 Capitalization..................................................................21
SECTION 5.4 Authority Relative to this Agreement............................................23
SECTION 5.5 No Conflict; Required Filings and Consents......................................23
SECTION 5.6 SEC Filings; Financial Statements...............................................24
SECTION 5.7 Absence of Certain Changes or Events............................................24
SECTION 5.8 Litigation......................................................................25
SECTION 5.9 Permits; No Violation of Law....................................................25
SECTION 5.10 Joint Proxy Statement...........................................................25
SECTION 5.11 Employee Matters; ERISA.........................................................26
SECTION 5.12 Labor Matters...................................................................27
SECTION 5.13 Environmental Matters...........................................................27
SECTION 5.14 Board Action; Vote Required.....................................................28
SECTION 5.15 Opinions of Financial Advisors..................................................28
SECTION 5.16 Brokers.........................................................................28
SECTION 5.17 Tax Matters.....................................................................28
SECTION 5.18 Intellectual Property...........................................................29
SECTION 5.19 Insurance.......................................................................30
SECTION 5.20 Ownership of Securities.........................................................30
SECTION 5.21 Certain Contracts...............................................................31
SECTION 5.22 Merger Subsidiary...............................................................31
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ARTICLE VI
CONDUCT OF BUSINESSES
PENDING THE MERGER
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SECTION 6.1 Transition Planning.............................................................32
SECTION 6.2 Conduct of Business in the Ordinary Course......................................32
SECTION 6.3 No Solicitation.................................................................37
SECTION 6.4 Subsequent Financial Statements.................................................39
SECTION 6.5 Control of Operations...........................................................40
ARTICLE VII
ADDITIONAL AGREEMENTS
SECTION 7.1 Joint Proxy Statement and the Registration Statement............................40
SECTION 7.2 Bell Atlantic and GTE Stockholders' Meetings....................................41
SECTION 7.3 Consummation of Merger; Additional Agreements...................................43
SECTION 7.4 Notification of Certain Matters.................................................45
SECTION 7.5 Access to Information...........................................................45
SECTION 7.6 Public Announcements............................................................45
SECTION 7.7 Transfer Statutes...............................................................46
SECTION 7.8 Indemnification, Directors' and Officers' Insurance.............................46
SECTION 7.9 Employee Benefit Plans..........................................................47
SECTION 7.10 Succession......................................................................48
SECTION 7.11 Stock Exchange Listing..........................................................49
SECTION 7.12 Post-Merger Bell Atlantic Board of Directors....................................49
SECTION 7.13 No Shelf Registration...........................................................50
SECTION 7.14 Affiliates......................................................................50
SECTION 7.15 Blue Sky........................................................................51
SECTION 7.16 Pooling of Interests............................................................51
SECTION 7.17 Tax-Free Reorganization.........................................................51
ARTICLE VIII
CONDITIONS TO MERGER
SECTION 8.1 Conditions to Obligations of Each Party to Effect the Merger....................52
SECTION 8.2 Additional Conditions to Obligations of GTE.....................................53
SECTION 8.3 Additional Conditions to Obligations of Bell Atlantic...........................55
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
SECTION 9.1 Termination.....................................................................56
SECTION 9.2 Effect of Termination...........................................................57
SECTION 9.3 Amendment.......................................................................59
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SECTION 9.4 Waiver..........................................................................59
ARTICLE X
GENERAL PROVISIONS
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SECTION 10.1 Non-Survival of Representations, Warranties
and Agreements................................................................60
SECTION 10.2 Notices.........................................................................60
SECTION 10.3 Expenses........................................................................61
SECTION 10.4 Certain Definitions.............................................................61
SECTION 10.5 Headings........................................................................63
SECTION 10.6 Severability....................................................................63
SECTION 10.7 Entire Agreement; No Third-Party Beneficiaries..................................63
SECTION 10.8 Assignment......................................................................64
SECTION 10.9 Governing Law...................................................................64
SECTION 10.10 Counterparts....................................................................64
SECTION 10.11 Interpretation..................................................................64
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<TABLE>
<CAPTION>
INDEX OF DEFINED TERMS
Defined Term Page
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$.....................................................................................................64
1933 Act..............................................................................................61
affiliate.............................................................................................62
Agreement............................................................................................. 1
Alternative Transaction...............................................................................39
Amended Bylaws........................................................................................48
Bear Stearns..........................................................................................28
Bell Atlantic ........................................................................................ 1
Bell Atlantic Disclosure Schedule...................................................................21
Bell Atlantic Acquisition Agreement...................................................................41
Bell Atlantic Common Stock............................................................................ 3
Bell Atlantic Contracts...............................................................................31
Bell Atlantic Director................................................................................50
Bell Atlantic Equity Rights...........................................................................22
Bell Atlantic ERISA Affiliate.........................................................................26
Bell Atlantic Filed SEC Reports.......................................................................24
Bell Atlantic Intellectual Property...................................................................29
Bell Atlantic Option Agreement........................................................................ 1
Bell Atlantic Plan....................................................................................26
Bell Atlantic SEC Reports.............................................................................24
Bell Atlantic Stockholder Approval....................................................................23
Bell Atlantic Stockholders' Meeting...................................................................41
Bell Atlantic Subsequent Determination................................................................41
Bell Atlantic Subsidiary..............................................................................63
Bell Atlantic Superior Proposal.......................................................................41
Bell Atlantic Termination Fee.........................................................................59
Benefit Plans.........................................................................................34
Bylaws Amendment...................................................................................... 9
Certificate Amendment................................................................................. 9
Closing...............................................................................................43
Closing Date..........................................................................................43
Code.................................................................................................. 1
commercially reasonable efforts.......................................................................62
Common Shares Trust................................................................................... 6
Computer Software ............................................................................... 19, 29
Consents..............................................................................................52
control...............................................................................................62
CPUC..................................................................................................52
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<TABLE>
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DGCL.................................................................................................. 9
Disclosure Schedules..................................................................................21
Effective Time........................................................................................ 2
Environmental Law.....................................................................................16
ERISA.................................................................................................15
Excess Shares......................................................................................... 6
Exchange Act..........................................................................................61
Exchange Agent........................................................................................ 4
Exchange Fund......................................................................................... 5
Exchange Ratio........................................................................................ 3
Extended Termination Date.............................................................................56
Final Termination Date................................................................................56
GAAP.................................................................................................. 1
Goldman Sachs.........................................................................................17
Governmental Entity...................................................................................12
GTE................................................................................................... 1
GTE Disclosure Schedule............................................................................. 9
GTE Acquisition Agreement.............................................................................42
GTE Common Stock...................................................................................... 3
GTE Contracts.........................................................................................20
GTE Director..........................................................................................50
GTE Equity Rights.....................................................................................10
GTE ERISA Affiliate...................................................................................15
GTE Filed SEC Reports.................................................................................13
GTE Intellectual Property.............................................................................18
GTE Option Agreement.................................................................................. 1
GTE Plan..............................................................................................15
GTE Rights Agreement..................................................................................10
GTE SEC Reports.......................................................................................13
GTE Stockholder Approval..............................................................................11
GTE Stockholders' Meeting.............................................................................42
GTE Subsequent Determination..........................................................................42
GTE Subsidiary........................................................................................63
GTE Superior Proposal.................................................................................43
GTE Termination Fee...................................................................................58
Hazardous Substance...................................................................................16
HSR Act...............................................................................................62
incentive stock options............................................................................... 8
Initial Termination Date..............................................................................56
interested stockholder................................................................................31
Joint Proxy Statement.................................................................................14
knowledge.............................................................................................62
</TABLE>
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<CAPTION>
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Legal Requirements....................................................................................13
Material Adverse Effect...............................................................................62
Material Investment...................................................................................62
Merged Corporation.................................................................................... 2
Merger................................................................................................ 2
Merger Subsidiary..................................................................................... 1
Merrill Lynch.........................................................................................28
Nondisclosure Agreement...............................................................................37
NYBCL................................................................................................. 2
NYSE.................................................................................................. 6
Old Certificate....................................................................................... 4
Option Agreements..................................................................................... 1
Parties............................................................................................... 2
Party................................................................................................. 2
Party Representatives.................................................................................45
Permits...............................................................................................14
person................................................................................................63
POR...................................................................................................63
Pre-Surrender Dividends............................................................................... 5
Registration Statement................................................................................14
Requisite Regulatory Approvals........................................................................52
Salomon Smith Barney..................................................................................17
SAR................................................................................................... 8
SEC...................................................................................................12
Significant Subsidiary................................................................................63
Stock Issuance........................................................................................23
Subsidiary............................................................................................63
Surviving Corporation................................................................................. 2
Surviving Corporation Common Stock.................................................................... 4
Tax Return............................................................................................18
Taxes.................................................................................................18
Termination Date......................................................................................56
the date hereof....................................................................................... 1
Third Party...........................................................................................39
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<PAGE>
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of July
27, 1998 ("the date hereof"), is entered into by and among Bell Atlantic
Corporation, a Delaware corporation ("Bell Atlantic"), Beta Gamma Corporation, a
New York corporation and a wholly owned subsidiary of Bell Atlantic ("Merger
Subsidiary"), and GTE Corporation, a New York corporation ("GTE").
WHEREAS, the Board of Directors of each of Bell Atlantic, Merger
Subsidiary and GTE has determined that it is in the best interests of its
stockholders that Bell Atlantic and GTE enter into a business combination under
which a subsidiary of Bell Atlantic will merge with and into GTE pursuant to the
Merger (as defined in Section 1.1 hereof) and Bell Atlantic and GTE desire to
enter into the "merger of equals" transaction contemplated hereby, and, in
connection therewith, to make certain representations, warranties and
agreements;
WHEREAS, as a condition to, and immediately after, the execution of
this Agreement, and as a condition to the execution of the Bell Atlantic Option
Agreement (as defined below), GTE and Bell Atlantic are entering into a stock
option agreement (the "GTE Option Agreement") in the form attached hereto as
Exhibit A;
WHEREAS, as a condition to, and immediately after, the execution of
this Agreement, and as a condition to the execution of the GTE Option Agreement,
GTE and Bell Atlantic are entering into a stock option agreement (the "Bell
Atlantic Option Agreement", and together with the GTE Option Agreement, the
"Option Agreements") in the form attached hereto as Exhibit B;
WHEREAS, the Board of Directors of each of Bell Atlantic, Merger
Subsidiary and GTE has determined that the Merger and the other transactions
contemplated hereby are consistent with, and in furtherance of, its business
strategies and goals and has approved the Merger upon the terms and conditions
set forth herein;
WHEREAS, for federal income tax purposes, it is intended that the
Merger shall constitute a tax-free reorganization under Section 368 of the
Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, for accounting purposes, it is intended that the Merger shall
be accounted for as a pooling of interests under United States generally
accepted accounting principles ("GAAP");
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NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, the parties hereto hereby agree as follows:
ARTICLE I -- THE MERGER
SECTION 1.1 -- THE MERGER. At the Effective Time (as defined in Section
1.2 hereof) and subject to and upon the terms and conditions of this Agreement
and the New York Business Corporation Law ("NYBCL"), Merger Subsidiary will be
merged with and into GTE (the "Merger"), whereby the separate corporate
existence of Merger Subsidiary shall cease and GTE shall continue as the
surviving corporation which shall be a wholly-owned subsidiary of Bell Atlantic.
GTE as the surviving corporation after the Merger is herein sometimes referred
to as the "Surviving Corporation" and Merger Subsidiary as the non-surviving
corporation after the Merger is herein sometimes referred to as the "Merged
Corporation." GTE, Bell Atlantic and Merger Subsidiary are herein referred to
collectively as the "Parties" and each individually as a "Party."
SECTION 1.2 -- EFFECTIVE TIME. As promptly as practicable after the
satisfaction or waiver of the conditions set forth in Article VIII hereof and
the consummation of the Closing referred to in Section 7.2(b) hereof, the
Parties shall cause the Merger to be consummated by filing a Certificate of
Merger with the Secretary of State of the State of New York with respect to the
Merger, in such form as required by, and executed in accordance with, the
relevant provisions of the NYBCL (the time of such filing being the "Effective
Time").
SECTION 1.3 -- EFFECT OF THE MERGER. At the Effective Time, the effect
of the Merger shall be as provided in the applicable provisions of the NYBCL.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time all the property, rights, privileges, powers and franchises of
GTE and Merger Subsidiary shall continue with, or vest in, as the case may be,
GTE as the Surviving Corporation, and all debts, liabilities and duties of GTE
and Merger Subsidiary shall continue to be, or become, as the case may be, the
debts, liabilities and duties of GTE as the Surviving Corporation. As of the
Effective Time, the Surviving Corporation shall be a direct wholly-owned
subsidiary of Bell Atlantic.
SECTION 1.4 -- SUBSEQUENT ACTIONS. If at any time after the Effective
Time the Surviving Corporation shall consider or be advised that any deeds,
bills of sale, assignments, assurances or any other actions or things are
necessary or desirable to continue in, vest, perfect or confirm of record or
otherwise in the Surviving Corporation its right, title or interest in, to or
under any of the rights, properties, privileges, franchises or assets of either
of its constituent corporations acquired or to be acquired by the Surviving
Corporation as a result of, or in connection with, the Merger or otherwise to
carry out this Agreement, the officers and directors of the Surviving
Corporation shall be directed and authorized to execute and deliver, in the name
and on behalf of either of such constituent corporations, all such deeds, bills
of
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sale, assignments and assurances and to take and do, in the name and on behalf
of each of such corporations or otherwise, all such other actions and things as
may be necessary or desirable to vest, perfect or confirm any and all right,
title and interest in, to and under such rights, properties, privileges,
franchises or assets in the Surviving Corporation or otherwise to carry out this
Agreement.
SECTION 1.5 -- CERTIFICATE OF INCORPORATION; BYLAWS; DIRECTORS AND
OFFICERS OF SURVIVING CORPORATION. Unless otherwise agreed by GTE and Bell
Atlantic before the Effective Time, at the Effective Time:
(a) the Certificate of Incorporation of GTE as the Surviving
Corporation shall be the Certificate of Incorporation of GTE as in effect
immediately prior to the Effective Time, until thereafter amended as provided by
law and such Certificate of Incorporation;
(b) the Bylaws of GTE as the Surviving Corporation shall be the Bylaws
of GTE immediately prior to the Effective Time, until thereafter amended as
provided by law and the Certificate of Incorporation and the Bylaws of such
Surviving Corporation; and
(c) the directors and officers of GTE immediately prior to the
Effective Time shall continue to serve in their respective offices of the
Surviving Corporation from and after the Effective Time, in each case until
their successors are elected or appointed and qualified or until their
resignation or removal. If at the Effective Time a vacancy shall exist on the
Board of Directors or in any office of the Surviving Corporation, such vacancy
may thereafter be filled in the manner provided by law and the Bylaws of the
Surviving Corporation.
ARTICLE II -- EFFECT ON STOCK OF THE SURVIVING
CORPORATION AND THE MERGED CORPORATION
SECTION 2.1 -- CONVERSION OF SECURITIES. The manner and basis of
converting the shares of common stock of the Surviving Corporation and of the
Merged Corporation at the Effective Time, by virtue of the Merger and without
any action on the part of any of the Parties or the holder of any of such
securities, shall be as hereinafter set forth in this Article II.
SECTION 2.2 -- CONVERSION OF SHARES. (a) Subject to Section 2.7, each
share of common stock, par value $0.05 per share, of GTE ("GTE Common Stock")
issued and outstanding immediately before the Effective Time (excluding those
cancelled pursuant to Section 2.3) and all rights in respect thereof, shall at
the Effective Time, without any action on the part of any holder thereof, be
converted into and become 1.22 shares of common stock, par value $0.10 per
share, of Bell Atlantic ("Bell Atlantic Common Stock"). Such ratio of GTE Common
Stock to Bell Atlantic Common Stock is herein referred to as the "Exchange
Ratio."
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(b) As of the Effective Time, all shares of GTE Common Stock converted
pursuant to Section 2.2(a) shall no longer be outstanding and shall
automatically be cancelled and retired and shall cease to exist, and each holder
of a certificate (each, an "Old Certificate") representing any such shares of
GTE Common Stock shall cease to have any rights with respect thereto, except the
right to receive shares of Bell Atlantic Common Stock, in accordance with
Section 2.2(a), certain dividends or other distributions in accordance with
Section 2.5(b) and any cash in lieu of fractional shares of Bell Atlantic Common
Stock to be issued or paid in consideration therefor upon surrender of such
certificate in accordance with Section 2.5, without interest.
(c) For all purposes of this Agreement, unless otherwise specified,
each share of GTE Common Stock held by employee stock ownership plans of GTE (i)
shall be deemed to be issued and outstanding, (ii) shall not be deemed to be
held in the treasury of GTE and (iii) shall be converted into shares of Bell
Atlantic Common Stock in accordance with the Exchange Ratio.
SECTION 2.3 -- CANCELLATION OF TREASURY SHARES AND BELL ATLANTIC-OWNED
SHARES. At the Effective Time, each share of GTE Common Stock held in the
treasury of GTE or owned by Bell Atlantic immediately prior to the Effective
Time shall be cancelled and retired and no shares of stock or other securities
of Bell Atlantic or the Surviving Corporation shall be issuable, and no payment
or other consideration shall be made, with respect thereto.
SECTION 2.4 -- CONVERSION OF COMMON STOCK OF THE MERGED CORPORATION
INTO COMMON STOCK OF THE SURVIVING CORPORATION. At the Effective Time, each
share of common stock of Merger Subsidiary issued and outstanding immediately
prior to the Effective Time, and all rights in respect thereof, shall, without
any action on the part of Bell Atlantic, forthwith cease to exist and be
converted into 1,000 validly issued, fully paid and nonassessable shares of
common stock, par value $0.05 per share, of the Surviving Corporation (the
"Surviving Corporation Common Stock"). Immediately after the Effective Time and
upon surrender by Bell Atlantic of the certificate representing the shares of
the common stock of Merger Subsidiary, GTE as the Surviving Corporation shall
deliver to Bell Atlantic an appropriate certificate or certificates representing
the Surviving Corporation Common Stock created by conversion of the common stock
of Merger Subsidiary owned by Bell Atlantic.
SECTION 2.5 -- EXCHANGE PROCEDURES. (a) Subject to the terms and
conditions hereof, at or prior to the Effective Time Bell Atlantic and GTE shall
jointly appoint an exchange agent (the "Exchange Agent") to effect the exchange
of Old Certificates for Bell Atlantic Common Stock in accordance with the
provisions of this Article II. At the Effective Time, Bell Atlantic shall
deposit, or cause to be deposited, with the Exchange Agent certificates
representing Bell Atlantic Common Stock for exchange for Old Certificates in
accordance with the provisions of Section 2.2 hereof (such certificates,
together with any dividends or distributions with
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respect thereto, being herein referred to as the "Exchange Fund"). Commencing
immediately after the Effective Time and until the appointment of the Exchange
Agent shall be terminated, each holder of an Old Certificate may surrender the
same to the Exchange Agent, and, after the appointment of the Exchange Agent
shall be terminated, any such holder may surrender any such certificate to Bell
Atlantic. Such holder shall be entitled upon such surrender to receive in
exchange therefor a certificate or certificates representing the number of whole
shares of Bell Atlantic Common Stock such holder has a right to receive in
accordance with Section 2.2 hereof, certain dividends or other distributions in
accordance with Section 2.5(b) hereof, and a cash payment in lieu of fractional
shares, if any, in accordance with Section 2.7 hereof, and such Old Certificate
shall forthwith be cancelled. The whole shares of Bell Atlantic Common Stock to
be delivered to such holder shall be delivered in book entry form, unless such
holder shall timely elect in writing to receive the certificates representing
such shares.
Unless and until any such Old Certificate is so surrendered, and except as may
be determined by Bell Atlantic for a period not to exceed six months after the
Effective Time, no dividend or other distribution, if any, payable to the
holders of record of Bell Atlantic Common Stock as of any date subsequent to the
Effective Time shall be paid to the holder of such certificate in respect
thereof. Except as otherwise provided in Section 2.6 hereof, upon the surrender
of any such Old Certificate, however, the record holder of the certificate or
certificates representing shares of Bell Atlantic Common Stock issued in
exchange therefor shall receive from the Exchange Agent or from Bell Atlantic,
as the case may be, payment of the amount of dividends and other distributions,
if any, which as of any date subsequent to the Effective Time and until such
surrender shall have become payable and were not paid with respect to such
number of shares of Bell Atlantic Common Stock ("Pre-Surrender Dividends"). No
interest shall be payable with respect to the payment of Pre-Surrender Dividends
upon the surrender of Old Certificates. After the appointment of the Exchange
Agent shall have been terminated, any holders of Old Certificates which have not
received payment of Pre-Surrender Dividends shall look only to Bell Atlantic for
payment thereof. Notwithstanding the foregoing provisions of this Section 2.5
(b), neither the Exchange Agent nor any Party shall be liable to a holder of an
Old Certificate for any Bell Atlantic Common Stock, any dividends or
distributions thereon or any cash payment for fractional shares as contemplated
by Section 2.7, delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law or to a transferee pursuant to
Section 2.6 hereof.
(b) Notwithstanding anything herein to the contrary, certificates
surrendered for exchange by any "affiliate" of GTE shall not be exchanged until
Bell Atlantic shall have received a signed agreement from such "affiliate" as
provided in Section 7.14 hereof.
SECTION 2.6 -- TRANSFER BOOKS. The stock transfer books of GTE shall be
closed at the Effective Time and no transfer of any shares of GTE Common Stock
will thereafter be recorded on any of such stock transfer books. In the event of
a transfer of ownership of GTE
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Common Stock that is not registered in the stock transfer records of GTE at the
Effective Time, a certificate or certificates representing the number of whole
shares of Bell Atlantic Common Stock into which such shares of GTE Common Stock
shall have been converted shall be issued to the transferee together with a cash
payment in lieu of fractional shares, if any, in accordance with Section 2.7
hereof, and a cash payment in the amount of Pre-Surrender Dividends, if any, in
accordance with Section 2.5 (b) hereof, if the Old Certificate therefor is
surrendered as provided in Section 2.5 hereof, accompanied by all documents
required to evidence and effect such transfer and by evidence of payment of any
applicable stock transfer tax. The whole shares of Bell Atlantic Common Stock to
be delivered to such holder shall be delivered in book entry form, unless such
holder shall timely elect in writing to receive the certificates representing
such shares.
SECTION 2.7 -- NO FRACTIONAL SHARE CERTIFICATES. (a) No scrip or
fractional share certificate for Bell Atlantic Common Stock will be issued in
certificated or book entry form upon the surrender for exchange of Old
Certificates, and an outstanding fractional share interest will not entitle the
owner thereof to vote, to receive dividends or to any rights of a stockholder of
Bell Atlantic or of the Surviving Corporation with respect to such fractional
share interest.
(b) As promptly as practicable following the Effective Time, the
Exchange Agent shall determine the excess of (i) the number of whole shares of
Bell Atlantic Common Stock to be issued and delivered to the Exchange Agent
pursuant to Section 2.5 hereof over (ii) the aggregate number of whole shares of
Bell Atlantic Common Stock to be distributed to holders of GTE Common Stock
pursuant to Section 2.5 hereof (such excess being herein called "Excess
Shares"). Following the Effective Time, the Exchange Agent, as agent for the
holders of GTE Common Stock, shall sell the Excess Shares at then prevailing
prices on the New York Stock Exchange (the "NYSE"), all in the manner provided
in subsection (c) of this Section 2.7.
(c) The sale of the Excess Shares by the Exchange Agent shall be
executed on the NYSE through one or more member firms of the NYSE and shall be
executed in round lots to the extent practicable. The Exchange Agent shall use
all reasonable efforts to complete the sale of the Excess Shares as promptly
following the Effective Time as, in the Exchange Agent's reasonable judgment, is
practicable consistent with obtaining the best execution of such sales in light
of prevailing market conditions. The Exchange Agent shall, out of the proceeds
from the sale of the Excess Shares, pay all commissions, transfer taxes and
other out-of-pocket transaction costs, including the expenses and compensation
of the Exchange Agent, incurred in connection with such sale of the Excess
Shares. Until the net proceeds of such sale or sales have been distributed to
the holders of GTE Common Stock, the Exchange Agent will hold such proceeds in
trust for the holders of GTE Common Stock (the "Common Shares Trust"). The
Exchange Agent shall determine the portion of the Common Shares Trust to which
each holder of GTE Common Stock shall be entitled, if any, by multiplying the
amount of the aggregate net proceeds comprising the Common Shares Trust by a
fraction the
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numerator of which is the amount of fractional share interests to which such
holder of GTE Common Stock is entitled (after taking into account all shares of
GTE Common Stock held at the Effective Time by such holder) and the denominator
of which is the aggregate amount of fractional share interests to which all
holders of GTE Common Stock are entitled.
(d) Notwithstanding the provisions of subsections (b) and (c) of this
Section 2.7, GTE and Bell Atlantic may agree at their option, exercised prior to
the Effective Time, in lieu of the issuance and sale of Excess Shares and the
making of the payments contemplated in such subsections, that Bell Atlantic
shall pay to the Exchange Agent an amount sufficient for the Exchange Agent to
pay each holder of GTE Common Stock an amount in cash equal to the product
obtained by multiplying (i) the fractional share interest to which such holder
would otherwise be entitled (after taking into account all shares of GTE Common
Stock held at the Effective Time by such holder) by (ii) the closing price for a
share of Bell Atlantic Common Stock on the NYSE Composite Transaction Tape on
the first business day immediately following the Effective Time, and, in such
case, all references herein to the cash proceeds of the sale of the Excess
Shares and similar references shall be deemed to mean and refer to the payments
calculated as set forth in this subsection (d). In such event, Excess Shares
shall not be issued or otherwise transferred to the Exchange Agent pursuant to
Section 2.5 (a) hereof or, if previously issued, shall be returned to Bell
Atlantic for cancellation.
(e) As soon as practicable after the determination of the amounts of
cash, if any, to be paid to holders of GTE Common Stock with respect to any
fractional share interests, the Exchange Agent shall make available such
amounts, net of any required withholding, to such holders of GTE Common Stock,
subject to and in accordance with the terms of Section 2.5 hereof.
(f) Any portion of the Exchange Fund and the Common Shares Trust which
remains undistributed for six months after the Effective Time shall be delivered
to Bell Atlantic, upon demand, and any holders of GTE Common Stock who have not
theretofore complied with the provisions of this Article II shall thereafter
look only to Bell Atlantic for satisfaction of their claims for Bell Atlantic
Common Stock, any cash in lieu of fractional shares of Bell Atlantic Common
Stock and any Pre-Surrender Dividends.
SECTION 2.8 -- OPTIONS TO PURCHASE GTE COMMON STOCK. (a) At the
Effective Time, each option or warrant granted by GTE to purchase shares of GTE
Common Stock which is outstanding and unexercised immediately prior to the
Effective Time shall be assumed by Bell Atlantic and converted into an option or
warrant to purchase shares of Bell Atlantic Common Stock in such amount and at
such exercise price as provided below and otherwise having the same terms and
conditions as are in effect immediately prior to the Effective Time (except to
the extent that such terms, conditions and restrictions may be altered in
accordance with their terms as a result of the transactions contemplated
hereby):
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(i) the number of shares of Bell Atlantic Common Stock
to be subject to the new option or warrant shall be equal to
the product of (x) the number of shares of GTE Common Stock
subject to the original option or warrant and (y) the
Exchange Ratio;
(ii) the exercise price per share of Bell Atlantic
Common Stock under the new option or warrant shall be equal
to (x) the exercise price per share of the GTE Common Stock
under the original option or warrant divided by (y) the
Exchange Ratio; and
(iii) upon each exercise of options or warrants by a
holder thereof, the aggregate number of shares of Bell
Atlantic Common Stock deliverable upon such exercise shall be
rounded down, if necessary, to the nearest whole share and
the aggregate exercise price shall be rounded up, if
necessary, to the nearest cent.
The adjustments provided herein with respect to any options which are "incentive
stock options" (as defined in Section 422 of the Code) shall be effected in a
manner consistent with Section 424(a) of the Code.
(b) At the Effective Time, each stock appreciation right ("SAR") with
respect to GTE Common Stock which is outstanding and unexercised immediately
before the Effective Time shall be converted into an SAR with respect to shares
of Bell Atlantic Common Stock on the same terms and conditions as are in effect
immediately prior to the Effective Time, with the adjustments set forth in
subsection (a) of this Section 2.8.
SECTION 2.9 -- RESTRICTED STOCK. At the Effective Time, any shares of
GTE Common Stock awarded pursuant to any plan, arrangement or transaction, and
outstanding immediately prior to the Effective Time shall be converted into
shares of Bell Atlantic Common Stock in accordance with Section 2.2 hereof,
subject to the same terms, conditions and restrictions as in effect immediately
prior to the Effective Time, except to the extent that such terms, conditions
and restrictions may be altered in accordance with their terms as a result of
the transactions contemplated hereby.
SECTION 2.10 -- CERTAIN ADJUSTMENTS. If between the date hereof and the
Effective Time, the outstanding shares of GTE Common Stock or of Bell Atlantic
Common Stock shall be changed into a different number of shares by reason of any
reclassification, recapitalization, split-up, combination or exchange of shares,
or any dividend payable in stock or other securities shall be declared thereon
with a record date within such period, the Exchange Ratio shall be adjusted
accordingly to provide to the holders of GTE Common Stock and Bell Atlantic
Common Stock the same economic effect as contemplated by this Agreement prior to
such reclassification, recapitalization, split-up, combination, exchange or
dividend.
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ARTICLE III -- CERTAIN ADDITIONAL MATTERS
SECTION 3.1 -- CERTIFICATE OF INCORPORATION AND BYLAWS OF BELL
ATLANTIC. At the Effective Time and subject to and upon the terms and conditions
of this Agreement and the General Corporation Law of the State of Delaware
("DGCL"), Bell Atlantic shall cause the Certificate of Incorporation of Bell
Atlantic and the Bylaws of Bell Atlantic to be amended and restated to
incorporate the provisions set forth in Appendices I-A and I-B hereto,
respectively. Such amendment and restatement of the Bell Atlantic Certificate of
Incorporation and amendment and restatement of the Bell Atlantic Bylaws are
referred to herein as the "Certificate Amendment" and the "Bylaws Amendment,"
respectively.
SECTION 3.2 -- DIVIDENDS. Each of GTE and Bell Atlantic shall
coordinate with the other the declaration of, and the setting of record dates
and payment dates for, dividends on GTE Common Stock and Bell Atlantic Common
Stock so that holders of GTE Common Stock do not (i) receive dividends on both
GTE Common Stock and Bell Atlantic Common Stock received in connection with the
Merger in respect of any calendar quarter or (ii) fail to receive a dividend on
either GTE Common Stock or Bell Atlantic Common Stock received in connection
with the Merger in respect of any calendar quarter.
SECTION 3.3 -- HEADQUARTERS. GTE and Bell Atlantic agree that
immediately following the Effective Time the headquarters of Bell Atlantic shall
be located in New York, New York.
SECTION 3.4 -- CORPORATE IDENTITY. GTE and Bell Atlantic agree that at
the Effective Time, the corporate name of Bell Atlantic shall be as shall have
been agreed by the Parties.
ARTICLE IV -- REPRESENTATIONS AND WARRANTIES OF GTE
Except as expressly disclosed in the GTE Filed SEC Reports (as defined
below) (including all exhibits referred to therein) or as set forth in the
disclosure schedule delivered by GTE to Bell Atlantic on the date hereof (the
"GTE Disclosure Schedule") (each section of which qualifies the correspondingly
numbered representation and warranty or covenant as specified therein), GTE
hereby represents and warrants to Bell Atlantic as follows:
SECTION 4.1 -- ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. Each of
GTE and each of its Significant Subsidiaries is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation or organization. Each of the GTE Subsidiaries which is not a
Significant Subsidiary is duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation or organization, except for
such failure which, when taken together with all other such failures, would not
reasonably be expected to have a Material Adverse Effect on GTE. Each of GTE and
its Subsidiaries has the
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requisite corporate power and authority and any necessary governmental
authority, franchise, license, certificate or permit to own, operate or lease
the properties that it purports to own, operate or lease and to carry on its
business as it is now being conducted, and is duly qualified as a foreign
corporation to do business, and is in good standing, in each jurisdiction where
the character of its properties owned, operated or leased or the nature of its
activities makes such qualification necessary, except for such failure which,
when taken together with all other such failures, would not reasonably be
expected to have a Material Adverse Effect on GTE.
SECTION 4.2 -- CERTIFICATE OF INCORPORATION AND BYLAWS. GTE has
heretofore furnished, or otherwise made available, to Bell Atlantic a complete
and correct copy of the Certificate of Incorporation and the Bylaws, each as
amended to the date hereof, of GTE. Such Certificate of Incorporation and Bylaws
are in full force and effect. Neither GTE nor any of its Significant
Subsidiaries is in violation of any of the provisions of its respective
Certificate of Incorporation or, in any material respect, its Bylaws.
SECTION 4.3 -- CAPITALIZATION. (a) The authorized capital stock of GTE
consists of (i) 9,217,764 shares of preferred stock, par value $50.00 per share,
none of which are outstanding or reserved for issuance, (ii) 11,727,502 shares
of preferred stock, no par value per share, none of which are outstanding and
700,000 of which have been reserved for issuance in accordance with the Rights
Agreement (as defined below), and (iii) 2,000,000,000 shares of GTE Common
Stock, of which, as of June 30, 1998, (A) 963,241,244 shares were issued and
outstanding, (B) 25,658,980 shares were held in the treasury of GTE, (C) not
more than 50,000,000 shares were issuable upon the exercise of options
outstanding under the GTE option plans, and (D) 31,603,945 shares were reserved
for issuance in connection with other GTE Plans (as defined in Section 4.11(b)
below). Except for GTE Equity Rights issued to GTE employees in the ordinary
course of business or, after the date hereof, as permitted by Section 6.2 hereof
or pursuant to the Bell Atlantic Option Agreement, (i) since June 30, 1998, no
shares of GTE Common Stock have been issued, except upon the exercise of options
described in the immediately preceding sentence, and (ii) there are no
outstanding GTE Equity Rights. For purposes of this Agreement, "GTE Equity
Rights" shall mean subscriptions, options, warrants, calls, commitments,
agreements, conversion rights or other rights of any character (contingent or
otherwise) to purchase or otherwise acquire any shares of the capital stock of
GTE from GTE or any of GTE's Subsidiaries at any time, or upon the happening of
any stated event, except for rights granted under the Rights Agreement, dated as
of December 7, 1989 (the "GTE Rights Agreement"), between GTE and the Rights
Agent (as defined therein), and the Bell Atlantic Option Agreement. Section 4.3
of the GTE Disclosure Schedule sets forth a complete and accurate list of
certain information with respect to all outstanding GTE Equity Rights as of June
30, 1998.
(b) Except as set forth in Section 4.3 of the GTE Disclosure Schedule,
pursuant to the Bell Atlantic Option Agreement, or, after the date hereof, as
permitted by Section 6.2
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hereof, there are no outstanding obligations of GTE or any of GTE's Subsidiaries
to repurchase, redeem or otherwise acquire any shares of capital stock of GTE.
(c) All of the issued and outstanding shares of GTE Common Stock are
validly issued, fully paid and nonassessable.
(d) All of the outstanding capital stock of each of GTE's Significant
Subsidiaries, and all of the outstanding capital stock of GTE's Subsidiaries
owned directly or indirectly by GTE, is duly authorized, validly issued, fully
paid and nonassessable. All of the outstanding capital stock of each of GTE's
Significant Subsidiaries is owned by GTE free and clear of any liens, security
interests, pledges, agreements, claims, charges or encumbrances. All of the
outstanding capital stock of GTE's Subsidiaries owned directly or indirectly by
GTE is owned free and clear of any liens, security interests, pledges,
agreements, claims, charges or encumbrances, except where such liens, security
interests, pledges, agreements, claims, charges or encumbrances would not,
individually or in the aggregate, have a Material Adverse Effect on GTE. Except
as hereafter issued or entered into in accordance with Section 6.2 hereof, there
are no existing subscriptions, options, warrants, calls, commitments,
agreements, conversion rights or other rights of any character (contingent or
otherwise) to purchase or otherwise acquire from GTE or any of GTE's
Subsidiaries at any time, or upon the happening of any stated event, any shares
of the capital stock of any GTE Subsidiary, whether or not presently issued or
outstanding (except for rights of first refusal to purchase interests in
Subsidiaries which are not wholly owned by GTE), or any of GTE's direct or
indirect interests in any Material Investment, and there are no outstanding
obligations of GTE or any of GTE's Subsidiaries to repurchase, redeem or
otherwise acquire any shares of capital stock of any of GTE's Subsidiaries or
securities related to any investments, other than such as would not,
individually or in the aggregate, have a Material Adverse Effect on GTE.
SECTION 4.4 -- AUTHORITY RELATIVE TO THIS AGREEMENT. GTE has the
necessary corporate power and authority to enter into this Agreement and,
subject to obtaining the requisite approval of the Merger Agreement by GTE's
stockholders required by the NYBCL (the "GTE Stockholder Approval"), to perform
its obligations hereunder. The execution and delivery of this Agreement by GTE,
and the consummation by GTE of the transactions contemplated hereby, have been
duly authorized by all necessary corporate action on the part of GTE, subject to
obtaining the GTE Stockholder Approval. This Agreement has been duly executed
and delivered by GTE and, assuming the due authorization, execution and delivery
thereof by each of Bell Atlantic and Merger Subsidiary, constitutes a legal,
valid and binding obligation of GTE, enforceable against it in accordance with
its terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium or other laws relating to or affecting the rights and remedies of
creditors generally and to general principles of equity (regardless of whether
considered in a proceeding in equity or at law).
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SECTION 4.5 -- NO CONFLICT; REQUIRED FILINGS AND CONSENTS. (a) Except
as described in subsection (b) below, the execution and delivery of this
Agreement by GTE do not, and the performance of this Agreement by GTE will not,
(i) violate or conflict with the Certificate of Incorporation or Bylaws of GTE,
(ii) conflict with or violate any law, regulation, court order, judgment or
decree applicable to GTE or any of its Subsidiaries or by which any of their
respective property or assets (including investments) is bound or affected,
(iii) violate or conflict with the Certificate of Incorporation or Bylaws of any
of GTE's Subsidiaries, (iv) result in any breach of or constitute a default (or
an event which with notice or lapse of time or both would become a default)
under, or give to others any rights of termination or cancellation of, or result
in the creation of a lien or encumbrance on any of the properties or assets
(including investments) of GTE or any of its Subsidiaries pursuant to, result in
the loss of any material benefit under, or result in any modification or
alteration of, or require the consent of any other party to, any contract,
instrument, permit, license or franchise to which GTE or any of its Subsidiaries
is a party or by which GTE, any of such Subsidiaries or any of their respective
property or assets (including investments) is bound or affected, except, in the
case of clauses (ii), (iii), and (iv) above, for conflicts, violations,
breaches, defaults, results or consents which, individually or in the aggregate,
would not have a Material Adverse Effect on GTE.
(b) Except for applicable requirements, if any, of state or foreign
public utility commissions or laws or similar local or state or foreign
regulatory bodies or laws, state or foreign antitrust or foreign investment laws
and commissions, the Federal Communications Commission, stock exchanges upon
which securities of GTE are listed, the Exchange Act, the premerger notification
requirements of the HSR Act, filing and recordation of appropriate merger or
other documents as required by the NYBCL and any filings required pursuant to
any state securities or "blue sky" laws or the rules of any applicable stock
exchanges, (i) neither GTE nor any of its Significant Subsidiaries is required
to submit any notice, report or other filing with any federal, state, local or
foreign government, any court, administrative, regulatory or other governmental
agency, commission or authority or any non-governmental U.S. or foreign
self-regulatory agency, commission or authority or any arbitral tribunal (each,
a "Governmental Entity") in connection with the execution, delivery or
performance of this Agreement and (ii) no waiver, consent, approval or
authorization of any Governmental Entity is required to be obtained by GTE or
any of its Significant Subsidiaries in connection with its execution, delivery
or performance of this Agreement.
SECTION 4.6 -- SEC FILINGS; FINANCIAL STATEMENTS. (a) GTE has filed all
forms, reports and documents required to be filed with the Securities and
Exchange Commission ("SEC") since January 1, 1995, and has heretofore delivered
or made available to Bell Atlantic, in the form filed with the SEC, together
with any amendments thereto, its (i) Annual Reports on Form 10-K for the fiscal
years ended December 31, 1995, 1996 and 1997, (ii) all proxy statements relating
to GTE's meetings of stockholders (whether annual or special) held since January
1, 1995, (iii) Quarterly Report on Form 10-Q for the fiscal quarter ended March
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31, 1998, and (iv) all other reports or registration statements filed by GTE
with the SEC since January 1, 1995, including without limitation all Annual
Reports on Form 11-K filed with respect to the GTE Plans (collectively, the "GTE
SEC Reports", with such GTE SEC Reports filed with the SEC prior to the date
hereof being referred to as "GTE Filed SEC Reports"). The GTE SEC Reports (i)
were prepared substantially in accordance with the requirements of the 1933 Act
or the Exchange Act (as defined in Section 10.4 hereof), as the case may be, and
the rules and regulations promulgated under each of such respective acts, and
(ii) did not at the time they were filed contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(b) The financial statements, including all related notes and
schedules, contained in the GTE SEC Reports (or incorporated by reference
therein) fairly present the consolidated financial position of GTE and its
Subsidiaries as at the respective dates thereof and the consolidated results of
operations and cash flows of GTE and its Subsidiaries for the periods indicated
in accordance with GAAP applied on a consistent basis throughout the periods
involved (except for changes in accounting principles disclosed in the notes
thereto) and subject in the case of interim financial statements to normal
year-end adjustments.
SECTION 4.7 -- ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as
disclosed in the GTE Filed SEC Reports and in Section 4.7 of the GTE Disclosure
Schedule, since December 31, 1997, and except as permitted by this Agreement or
consented to hereunder, GTE and its Subsidiaries have not incurred any material
liability required to be disclosed on a balance sheet of GTE and its
Subsidiaries or the footnotes thereto prepared in conformity with GAAP, except
in the ordinary course of their businesses consistent with their past practices,
and there has not been any change, or any event involving a prospective change,
in the business, financial condition or results of operations of GTE or any of
its Subsidiaries which has had, or is reasonably likely to have, a Material
Adverse Effect on GTE, and GTE and its Subsidiaries have conducted their
respective businesses in the ordinary course consistent with their past
practices.
SECTION 4.8 -- LITIGATION. There are no claims, actions, suits,
proceedings or investigations pending or, to GTE's knowledge, threatened against
GTE or any of its Subsidiaries, or any properties or rights of GTE or any of its
Subsidiaries, by or before any Governmental Entity, except for those that are
not, individually or in the aggregate, reasonably likely to have a Material
Adverse Effect on GTE or prevent, materially delay or intentionally delay the
ability of GTE to consummate transactions contemplated hereby.
SECTION 4.9 -- PERMITS; NO VIOLATION OF LAW. The businesses of GTE and
its Subsidiaries are not being conducted in violation of any statute, law,
ordinance, regulation, judgment, order or decree of any Governmental Entity
(including any stock exchange or other self-regulatory body) ("Legal
Requirements"), or in violation of any permits, franchises,
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licenses, authorizations, certificates, variances, exemptions, orders,
registrations or consents that are granted by any Governmental Entity (including
any stock exchange or other self-regulatory body) ("Permits"), except for
possible violations none of which, individually or in the aggregate, may
reasonably be expected to have a Material Adverse Effect on GTE. No
investigation or review by any Governmental Entity (including any stock exchange
or other self-regulatory body) with respect to GTE or its Subsidiaries in
relation to any alleged violation of law or regulation is pending or, to GTE's
knowledge, threatened, nor has any Governmental Entity (including any stock
exchange or other self-regulatory body) indicated an intention to conduct the
same, except for such investigations which, if they resulted in adverse
findings, would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on GTE. Except as set forth in Section 4.9
of the GTE Disclosure Schedule, neither GTE nor any of its Subsidiaries is
subject to any cease and desist or other order, judgment, injunction or decree
issued by, or is a party to any written Agreement, consent Agreement or
memorandum of understanding with, or is a party to any commitment letter or
similar undertaking to, or is subject to any order or directive by, or has
adopted any board resolutions at the request of, any Governmental Entity that
materially restricts the conduct of its business or which may reasonably be
expected to have a Material Adverse Effect on GTE, nor has GTE or any of its
Subsidiaries been advised that any Governmental Entity is considering issuing or
requesting any of the foregoing. None of the representations and warranties made
in this Section 4.9 are being made with respect to Environmental Laws.
SECTION 4.10 -- JOINT PROXY STATEMENT. None of the information supplied
or to be supplied by or on behalf of GTE for inclusion or incorporation by
reference in the registration statement to be filed with the SEC by Bell
Atlantic in connection with the issuance of shares of Bell Atlantic Common Stock
in the Merger (the "Registration Statement") will, at the time the Registration
Statement becomes effective under the 1933 Act, contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading. None of the information supplied or
to be supplied by or on behalf of GTE for inclusion or incorporation by
reference in the joint proxy statement, in definitive form, relating to the
meetings of GTE and Bell Atlantic stockholders to be held in connection with the
Merger, or in the related proxy and notice of meeting, or soliciting material
used in connection therewith (referred to herein collectively as the "Joint
Proxy Statement") will, at the dates mailed to stockholders and at the times of
the GTE stockholders' meeting and the Bell Atlantic stockholders' meeting,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. The Registration Statement and the Joint Proxy Statement (except for
information relating solely to Bell Atlantic) will comply as to form in all
material respects with the provisions of the 1933 Act and the Exchange Act and
the rules and regulations promulgated thereunder.
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SECTION 4.11 -- EMPLOYEE MATTERS; ERISA. (a) Except where the failure
to be true would not, individually or in the aggregate, have a Material Adverse
Effect on GTE, (i) each GTE Plan has been operated and administered in
accordance with applicable law, including but not limited to the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), and the Code, (ii)
each GTE Plan intended to be "qualified" within the meaning of Section 401(a) of
the Code is so qualified, (iii) except as required by COBRA, no GTE Plan
provides death or medical benefits (whether or not insured), with respect to
current or former employees of GTE or of any trade or business, whether or not
incorporated, which together with GTE would be deemed a "single employer" within
the meaning of Section 4001 of ERISA (a "GTE ERISA Affiliate"), beyond their
retirement or other termination of service, (iv) no liability under Title IV of
ERISA has been incurred by GTE or any GTE ERISA Affiliate that has not been
satisfied in full, and no condition exists that presents a material risk to GTE
or any GTE ERISA Affiliate of incurring any such liability (other than PBGC
premiums), (v) all contributions or other amounts due from GTE or any GTE ERISA
Affiliate with respect to each GTE Plan have been paid in full, (vi) neither GTE
nor any GTE ERISA Affiliate has engaged in a transaction in connection with
which GTE or any of its Subsidiaries could reasonably be expected to be subject
to either a civil penalty assessed pursuant to Section 409 or 502(i) of ERISA or
a tax imposed pursuant to Section 4975 or 4976 of the Code, (vii) to the best
knowledge of GTE there are no pending, threatened or anticipated claims (other
than routine claims for benefits) by, on behalf of or against any GTE Plan or
any trusts related thereto, and (viii) neither the execution and delivery of
this Agreement nor the consummation of the transactions contemplated hereby will
(A) result in any payment (including, without limitation, severance,
unemployment compensation, golden parachute or otherwise) becoming due to any
director or any employee of GTE or any of its Subsidiaries under any GTE Plan or
otherwise, (B) materially increase any benefits otherwise payable under any GTE
Plan or (C) result in any acceleration of the time of payment or vesting of any
such benefits.
(b) For purposes of this Agreement, "GTE Plan" shall mean each deferred
compensation, bonus or other incentive compensation, stock purchase, stock
option or other equity compensation plan, program, agreement or arrangement;
each severance or termination pay, medical, surgical, hospitalization, life
insurance or other "welfare" plan, fund or program (within the meaning of
section 3(1) of ERISA); each profit-sharing, stock bonus or other "pension"
plan, fund or program (within the meaning of section 3(2) of ERISA); each
employment, termination or severance agreement; and each other employee benefit
plan, fund, program, agreement or arrangement, in each case, that is sponsored,
maintained or contributed to or required to be contributed to by GTE or by any
GTE ERISA Affiliate or to which GTE or any GTE ERISA Affiliate is party, whether
written or oral, for the benefit of any employee or former employee of GTE or
any GTE ERISA Affiliate.
SECTION 4.12 -- LABOR MATTERS. Neither GTE nor any of its Subsidiaries
is the subject of any material proceeding asserting that it or any of its
Subsidiaries has committed
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an unfair labor practice or is seeking to compel it to bargain with any labor
union or labor organization nor is there pending or, to the actual knowledge of
its executive officers, threatened in writing, nor has there been for the past
five years, any labor strike, dispute, walkout, work stoppage, slow-down or
lockout involving it or any of its Subsidiaries, except in each case as is not,
individually or in the aggregate, reasonably likely to have a Material Adverse
Effect on GTE.
SECTION 4.13 -- ENVIRONMENTAL MATTERS. Except for such matters that,
individually or in the aggregate, are not reasonably likely to have a Material
Adverse Effect on GTE: (i) each of GTE and its Subsidiaries has complied with
all applicable Environmental Laws (as defined below); (ii) the properties
currently owned or operated by it or any of its Subsidiaries (including soils,
groundwater, surface water, buildings or other structures) are not contaminated
with any Hazardous Substances (as defined below); (iii) the properties formerly
owned or operated by it or any of its Subsidiaries were not contaminated with
Hazardous Substances during the period of ownership or operation by it or any of
its Subsidiaries; (iv) neither it nor any of its Subsidiaries is subject to
liability for any Hazardous Substance disposal or contamination on any third
party property; (v) neither it nor any Subsidiary has been associated with any
release or threat of release of any Hazardous Substance; (vi) neither it nor any
Subsidiary has received any notice, demand, letter, claim or request for
information alleging that it or any of its Subsidiaries may be in violation of
or liable under any Environmental Law (including any claims relating to
electromagnetic fields or microwave transmissions); (vii) neither it nor any of
its Subsidiaries is subject to any orders, decrees, injunctions or other
arrangements with any Governmental Entity or is subject to any indemnity or
other agreement with any third party relating to liability under any
Environmental Law or relating to Hazardous Substances; and (viii) there are not
circumstances or conditions involving it or any of its Subsidiaries that could
reasonably be expected to result in any claims, liability, investigations, costs
or restrictions on the ownership, use, or transfer of any of its properties
pursuant to any Environmental Law.
As used herein and in Section 5.13, the term "Environmental Law" means
any law relating to: (A) the protection, investigation or restoration of the
environment, health, safety, or natural resources, (B) the handling, use,
presence, disposal, release or threatened release of any Hazardous Substance or
(C) noise, odor, wetlands, pollution, contamination or any injury or threat of
injury to persons or property in connection with any Hazardous Substance.
As used herein and in Section 5.13, the term "Hazardous Substance"
means any substance that is: listed, classified or regulated pursuant to any
Environmental Law, including any petroleum product or by-product,
asbestos-containing material, lead-containing paint or plumbing, polychlorinated
biphenyls, radioactive materials or radon.
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SECTION 4.14 -- BOARD ACTION; VOTE REQUIRED; APPLICABILITY OF SECTION
912. The Board of Directors of GTE has unanimously determined that the
transactions contemplated by this Agreement and the Option Agreements are in the
best interests of GTE and its stockholders and has resolved to recommend to such
stockholders that they vote in favor thereof.
(b) The approval of the Merger Agreement by two-thirds of the votes of
all outstanding shares entitled to vote thereon by all holders of GTE Common
Stock is the only vote of the holders of any class or series of the capital
stock of GTE required to approve this Agreement, the Merger and the other
transactions contemplated hereby. The provisions of Section 11.A of the
Certificate of Incorporation of GTE will not apply to the transactions
contemplated by this Agreement and the Option Agreements.
(c) The provisions of Section 912 of the NYBCL will not, assuming the
accuracy of the representations contained in Section 5.20 hereof (without giving
effect to the knowledge qualification therein), apply to this Agreement or any
of the transactions contemplated hereby.
SECTION 4.15 -- OPINIONS OF FINANCIAL ADVISORS. GTE has received the
opinions of Goldman, Sachs & Co. ("Goldman Sachs"), and Salomon Smith Barney
Inc. ("Salomon Smith Barney"), each dated July 27, 1998, to the effect that, as
of such date, the Exchange Ratio is fair from a financial point of view to the
holders of GTE Common Stock.
SECTION 4.16 -- BROKERS. Except for Goldman Sachs, Salomon Smith Barney
and Chase Securities Inc., the arrangements with which have been disclosed to
Bell Atlantic prior to the date hereof, which have been engaged by GTE, no
broker, finder or investment banker is entitled to any brokerage, finder's,
investment banking or other fee or commission in connection with the
transactions contemplated by this Agreement and the Option Agreements based upon
arrangements made by or on behalf of GTE or any of its Subsidiaries.
SECTION 4.17 -- TAX MATTERS. Except as set forth in Section 4.17 of the
GTE Disclosure Schedule:
(a) All material federal, state, local and foreign Tax Returns (as
defined herein) required to have been filed by GTE or its Subsidiaries have been
filed with the appropriate governmental authorities by the due date thereof
including extensions;
(b) The Tax Returns referred to in subpart (a) of this Section 4.17
correctly and completely reflect all material Tax liabilities of GTE and its
Subsidiaries required to be shown thereon;
(c) All material Taxes (as defined herein) shown as due on those Tax
Returns referred to in subpart (a) of this Section 4.17 as well as any material
foreign withholding
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Taxes imposed on or in respect of any amounts paid to or by GTE or any of its
Subsidiaries, whether or not such amounts or withholding Taxes are referred to
or shown on any Tax Returns referred to in Section 4.17 (a) hereof, have been
fully paid or adequately reflected as a liability on GTE's or its Subsidiaries'
financial statements included in the GTE SEC Reports;
(d) With respect to any period for which Tax Returns have not yet been
filed, or for which Taxes are not yet due or owing, GTE and its Subsidiaries
have made due and sufficient accruals for such Taxes in their respective books
and records and financial statements;
(e) Neither GTE nor any of its affiliates has taken, agreed to take or
omitted to take any action that would prevent or impede the Merger from
qualifying as a tax-free reorganization under Section 368 of the Code;
(f) No deficiencies for any Taxes have been proposed, asserted or
assessed against GTE or any of its Subsidiaries that are not adequately reserved
for under GAAP, except for deficiencies that individually or in the aggregate
would not have a Material Adverse Effect on GTE;
(g) GTE is not aware of any material liens for Taxes upon any assets of
GTE or any of its Subsidiaries apart from liens for Taxes not yet due and
payable; and
(h) As used in this Agreement, "Taxes" shall include all (x) federal,
state, local or foreign income, property, sales, excise, use, occupation,
service, transfer, payroll, franchise, withholding and other taxes or similar
governmental charges, fees, levies or other assessments including any interest,
penalties or additions with respect thereto, (y) liability for the payment of
any amounts of the type described in clause (x) as a result of being a member of
an affiliated, consolidated, combined or unitary group, and (z) liability for
the payment of any amounts as a result of being party to any tax sharing
agreement or as a result of any express or implied obligation to indemnify any
other person with respect to the payment of any amounts of the type described in
clause (x) or (y). As used in this Agreement, "Tax Return" shall include any
declaration, return, report, schedule, certificate, statement or other similar
document (including relating or supporting information) required to be filed or,
where none is required to be filed with a taxing authority, the statement or
other document issued by a taxing authority in connection with any Tax,
including any information return, claim for refund, amended return or
declaration of estimated Tax.
SECTION 4.18 -- SEC INTELLECTUAL PROPERTY; YEAR 2000.
(a) As used in this Agreement, "GTE Intellectual Property" means all of
the following which are necessary to conduct the business of GTE and its
Subsidiaries as presently conducted or as currently proposed to be conducted:
(i) trademarks, trade dress, service
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marks, copyrights, logos, trade names, corporate names and all registrations and
applications to register the same; (ii) patents and pending patent applications;
(iii) all computer software programs, databases and compilations (collectively,
"Computer Software"); (iv) all technology, know-how and trade secrets; and (v)
all material licenses and agreements to which GTE or any of its Subsidiaries is
a party which relate to any of the foregoing.
(b) GTE or its Subsidiaries owns or has the right to use, sell or
license all GTE Intellectual Property, free and clear of all liens or
encumbrances, and all registrations of GTE Intellectual Property are valid and
enforceable and have been duly recorded and maintained, except, in each case, as
would not, individually or in the aggregate, have a Material Adverse Effect on
GTE.
(c) To the knowledge of GTE, the conduct of GTE's and its Subsidiaries'
business and the use of the GTE Intellectual Property does not materially
infringe, violate or misuse any intellectual property rights or any other
proprietary right of any person or give rise to any obligations to any person as
a result of co-authorship, and neither GTE nor any of its Subsidiaries has
received any notice, not satisfactorily resolved, of any claims or threats that
GTE's or its Subsidiaries' use of any of the GTE Intellectual Property
materially infringes, violates or misuses, or is otherwise in conflict with any
intellectual property or proprietary rights of any third party or that any of
the GTE Intellectual Property is invalid or unenforceable that would,
individually or in the aggregate, have a Material Adverse Effect on GTE.
(d) GTE and its Subsidiaries have used reasonable efforts to maintain
the confidentiality of their trade secrets and other confidential GTE
Intellectual Property.
(e) GTE has undertaken a concerted effort to ensure that all of the
Computer Software, computer firmware, computer hardware (whether general or
special purpose), and other similar or related items of automated, computerized,
and/or software system(s) that are to be used or relied on by GTE or by any of
its Subsidiaries in the conduct of their respective businesses will not
malfunction, will not cease to function, will not generate incorrect data, and
will not provide incorrect results when processing, providing and/or receiving
(i) date-related data into and between the twentieth and twenty-first centuries
and (ii) date-related data in connection with any valid date in the twentieth
and twenty-first centuries. GTE reasonably believes that such effort will be
successful.
SECTION 4.19 -- INSURANCE. Except as set forth in Section 4.19 of the
GTE Disclosure Schedule, each of GTE and each of its Significant Subsidiaries
is, and has been continuously since January 1, 1987 (or such later date as such
Significant Subsidiary was organized or acquired by GTE), insured with
financially responsible insurers in such amounts and against such risks and
losses as are customary for companies conducting the business as conducted by
GTE and its Subsidiaries during such time period. Except as set forth in Section
4.19 of the GTE Disclosure Schedule, since January 1, 1995, neither GTE nor any
of its
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Subsidiaries has received notice of cancellation or termination with respect to
any material insurance policy of GTE or its Subsidiaries. The insurance policies
of GTE and its Subsidiaries are valid and enforceable policies.
SECTION 4.20 -- OWNERSHIP OF SECURITIES. As of the date hereof, neither
GTE nor, to GTE's knowledge, any of its affiliates or associates (as such terms
are defined under the Exchange Act), (i) beneficially owns, directly or
indirectly, or (ii) is party to any agreement, arrangement or understanding for
the purpose of acquiring, holding, voting or disposing of, in each case, shares
of capital stock of Bell Atlantic, which in the aggregate represent 10% or more
of the outstanding shares of Bell Atlantic Common Stock (other than shares held
by GTE Plans and the Bell Atlantic Option Agreement).
SECTION 4.21 -- CERTAIN CONTRACTS. (a) All contracts described in Item
601(b)(10) of Regulation S-K to which GTE or its Subsidiaries is a party or may
be bound ("GTE Contracts") have been filed as exhibits to, or incorporated by
reference in, GTE's Annual Report on Form 10-K for the year ended December 31,
1997. All GTE Contracts are valid and in full force and effect on the date
hereof except to the extent they have previously expired in accordance with
their terms or if the failure to be in full force and effect, individually and
in the aggregate, would not reasonably be expected to have a Material Adverse
Effect on GTE. Neither GTE nor any of its Subsidiaries has violated any
provision of, or committed or failed to perform any act which with or without
notice, lapse of time or both would constitute a default under the provisions
of, any GTE Contract, except in each case for those GTE Contracts which,
individually and in the aggregate, would not reasonably be expected to result in
a Material Adverse Effect on GTE.
(b) Set forth in Section 4.21 of the GTE Disclosure Schedule is a list
of each contract, agreement or arrangement to which GTE or any of its
Subsidiaries is a party or may be bound which is an arrangement limiting or
restraining Bell Atlantic, GTE, any Bell Atlantic or GTE Subsidiary or any
successor thereto from engaging or competing in any business which has, or could
reasonably be expected to have in the foreseeable future, a Material Adverse
Effect on GTE, or to GTE's knowledge, on Bell Atlantic.
SECTION 4.22 -- RIGHTS AGREEMENT. (a) Neither Bell Atlantic nor Merger
Subsidiary shall be deemed to be an Acquiring Person (as such term is defined in
the Rights Agreement) and the Distribution Date (as defined in the Rights
Agreement) shall not be deemed to occur and the Rights will not separate from
GTE Common Stock, as a result of entering into this Agreement or the Option
Agreements or consummating the Merger and/or the other transactions contemplated
hereby or thereby.
(b) GTE has taken all necessary action with respect to all of the
outstanding Rights (as defined in the Rights Agreement) so that, as of
immediately prior to the Effective Time, as a result of entering into this
Agreement or consummating the Merger and/or the other
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transactions contemplated by this Agreement and the Option Agreements, (i)
neither GTE nor Bell Atlantic will have any obligations under the Rights or the
Rights Agreement and (ii) the holders of the Rights will have no rights under
the Rights or the Rights Agreement.
ARTICLE V -- REPRESENTATIONS AND
WARRANTIES OF BELL ATLANTIC
Except as expressly disclosed in the Bell Atlantic Filed SEC Reports
(as defined below) (including all exhibits referred to therein) or as set forth
in the disclosure schedule delivered by Bell Atlantic to GTE on the date hereof
(the "Bell Atlantic Disclosure Schedule" and together with the GTE Disclosure
Schedule, the "Disclosure Schedules") (each section of which qualifies the
correspondingly numbered representation and warranty or covenant as specified
therein), Bell Atlantic hereby represents and warrants to GTE as follows:
SECTION 5.1 -- ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. Each of
Bell Atlantic and each of its Significant Subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation or organization. Each of the Bell Atlantic
Subsidiaries which is not a Significant Subsidiary is duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation or organization, except for such failure which, when taken
together with all other such failures, would not reasonably be expected to have
a Material Adverse Effect on Bell Atlantic. Each of Bell Atlantic and its
Subsidiaries has the requisite corporate power and authority and any necessary
governmental authority, franchise, license or permit to own, operate or lease
the properties that it purports to own, operate or lease and to carry on its
business as it is now being conducted, and is duly qualified as a foreign
corporation to do business, and is in good standing, in each jurisdiction where
the character of its properties owned, operated or leased or the nature of its
activities makes such qualification necessary, except for such failure which,
when taken together with all other such failures, would not reasonably be
expected to have a Material Adverse Effect on Bell Atlantic.
SECTION 5.2 -- CERTIFICATE OF INCORPORATION AND BYLAWS. Bell Atlantic
has heretofore furnished, or otherwise made available, to GTE a complete and
correct copy of the Certificate of Incorporation and the Bylaws, each as amended
to the date hereof, of Bell Atlantic. Such Certificate of Incorporation and
Bylaws are in full force and effect. Neither Bell Atlantic nor any of its
Significant Subsidiaries is in violation of any of the provisions of its
respective Certificate of Incorporation or, in any material respect, its Bylaws.
SECTION 5.3 -- CAPITALIZATION. (a) The authorized capital stock of Bell
Atlantic consists of (i) 250,000,000 shares of Series A Preferred Stock, par
value $.10 per share, none of which are outstanding or reserved for issuance,
and (ii) 2,250,000,000 shares of Bell Atlantic Common Stock, of which, as of
June 30, 1998, (A) 1,553,473,710 shares were issued
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and outstanding, (B) 22,722,614 shares were held in the treasury of Bell
Atlantic and (C) 80,392,512 shares were issuable upon the exercise of options
outstanding under the Bell Atlantic option plans listed in Section 5.3 of the
Bell Atlantic Disclosure Schedule. Except for Bell Atlantic Equity Rights issued
to Bell Atlantic employees in the ordinary course of business or, after the date
hereof, as permitted by Section 6.2 hereof or pursuant to the Bell Atlantic
Option Agreement, (i) since June 30, 1998, no shares of Bell Atlantic Common
Stock have been issued, except upon the exercise of options and rights described
in the immediately preceding sentence, and (ii) there are no outstanding Bell
Atlantic Equity Rights. For purposes of this Agreement, "Bell Atlantic Equity
Rights" shall mean subscriptions, options, warrants, calls, commitments,
agreements, conversion rights or other rights of any character (contingent or
otherwise) to purchase or otherwise acquire, any shares of the capital stock of
Bell Atlantic from Bell Atlantic or any of Bell Atlantic's Subsidiaries at any
time, or upon the happening of any stated event, excluding the GTE Stock Option.
Section 5.3 of the Bell Atlantic Disclosure Schedule sets forth a complete and
accurate list of certain information with respect to all outstanding Bell
Atlantic Equity Rights as of June 30, 1998.
(b) Except as set forth in Section 5.3 of the Bell Atlantic Disclosure
Schedule, pursuant to the GTE Stock Option or, after the date hereof, as
permitted by Section 6.2 hereof, there are no outstanding obligations of Bell
Atlantic or any of Bell Atlantic's Subsidiaries to repurchase, redeem or
otherwise acquire any shares of capital stock of Bell Atlantic.
(c) All of the issued and outstanding shares of Bell Atlantic Common
Stock are validly issued, fully paid and nonassessable.
(d) All of the outstanding capital stock of each of Bell Atlantic's
Significant Subsidiaries, and all of the outstanding capital stock of Bell
Atlantic's Subsidiaries owned directly or indirectly by Bell Atlantic, is duly
authorized, validly issued, fully paid and nonassessable. All of the outstanding
capital stock of each of Bell Atlantic's Significant Subsidiaries is owned by
Bell Atlantic free and clear of any liens, security interests, pledges,
agreements, claims, charges or encumbrances. All of the outstanding capital
stock of Bell Atlantic's Subsidiaries owned directly or indirectly by Bell
Atlantic is owned free and clear of any liens, security interests, pledges,
agreements, claims, charges or encumbrances, except where such liens, security
interests, pledges, agreements, claims, charges or encumbrances would not,
individually or in the aggregate, have a Material Adverse Effect on Bell
Atlantic. Except as hereafter issued or entered into in accordance with Section
6.2 hereof, there are no existing subscriptions, options, warrants, calls,
commitments, agreements, conversion rights or other rights of any character
(contingent or otherwise) to purchase or otherwise acquire from Bell Atlantic or
any of Bell Atlantic's Subsidiaries at any time, or upon the happening of any
stated event, any shares of the capital stock of any Bell Atlantic Subsidiary,
whether or not presently issued or outstanding (except for rights of first
refusal to purchase interests in Subsidiaries which are not wholly owned by Bell
Atlantic), or any of GTE's direct or indirect interests in any Material
Investment, and there are no outstanding obligations of Bell
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Atlantic or any of Bell Atlantic's Subsidiaries to repurchase, redeem or
otherwise acquire any shares of capital stock of any of Bell Atlantic's
Subsidiaries or securities related to any investments, other than such as would
not, individually or in the aggregate, have a Material Adverse Effect on GTE.
SECTION 5.4 -- AUTHORITY RELATIVE TO THIS AGREEMENT. Bell Atlantic has
the necessary corporate power and authority to enter into this Agreement and,
subject to obtaining the requisite stockholder approval of the issuance (the
"Stock Issuance") of Bell Atlantic Common Stock pursuant to the Merger Agreement
and the Certificate Amendment (collectively, the "Bell Atlantic Stockholder
Approval"), to perform its obligations hereunder. The execution and delivery of
this Agreement by Bell Atlantic and the consummation by Bell Atlantic of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Bell Atlantic, subject to obtaining the Bell
Atlantic Stockholder Approval. This Agreement has been duly executed and
delivered by Bell Atlantic and, assuming the due authorization, execution and
delivery thereof by the other Parties, constitutes a legal, valid and binding
obligation of Bell Atlantic, enforceable against it in accordance with its
terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium
or other laws relating to or affecting the rights and remedies of creditors
generally and to general principles of equity (regardless of whether considered
in a proceeding in equity or at law).
SECTION 5.5 -- NO CONFLICT; REQUIRED FILINGS AND CONSENTS. (a) Except
as described in subsection (b) below, the execution and delivery of this
Agreement by Bell Atlantic do not, and the performance of this Agreement by Bell
Atlantic will not, (i) violate or conflict with the Certificate of Incorporation
or Bylaws of Bell Atlantic, (ii) conflict with or violate any law, regulation,
court order, judgment or decree applicable to Bell Atlantic or any of its
Subsidiaries or by which any of their respective property or assets (including
investments) is bound or affected, (iii) violate or conflict with the
Certificate of Incorporation or Bylaws of any of Bell Atlantic's Subsidiaries,
or (iv) result in any breach of or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination or cancellation of, or result in the creation of a
lien or encumbrance on any of the properties or assets (including investments)
of Bell Atlantic or any of its Subsidiaries pursuant to, result in the loss of
any material benefit under, or result in any modification or alteration of, or
require the consent of any other party to, any contract, instrument, permit,
license or franchise to which Bell Atlantic or any of its Subsidiaries is a
party or by which Bell Atlantic, any of such Subsidiaries or any of their
respective property or assets (including investments) is bound or affected,
except, in the case of clauses (ii), (iii) and (iv) above, for conflicts,
violations, breaches, defaults, results or consents which, individually or in
the aggregate, would not have a Material Adverse Effect on Bell Atlantic.
(b) Except for applicable requirements, if any, of state or foreign
public utility commissions or laws or similar local or state foreign regulatory
bodies or laws, state or foreign antitrust or foreign investment laws and
commissions, the Federal Communications
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Commission, stock exchanges upon which the securities of Bell Atlantic are
listed, the Exchange Act, the premerger notification requirements of the HSR
Act, filing and recordation of appropriate merger or other documents as required
by the NYBCL and any filings required pursuant to any state securities or "blue
sky" laws or the rules of any applicable stock exchanges, (i) neither Bell
Atlantic nor any of its Significant Subsidiaries is required to submit any
notice, report or other filing with any Governmental Entity in connection with
the execution, delivery or performance of this Agreement and (ii) no waiver,
consent, approval or authorization of any Governmental Entity is required to be
obtained by Bell Atlantic or any of its Significant Subsidiaries in connection
with its execution, delivery or performance of this Agreement
SECTION 5.6 -- SEC FILINGS; FINANCIAL STATEMENTS. (a) Bell Atlantic has
filed all forms, reports and documents required to be filed with the SEC since
January 1, 1995, and has heretofore delivered or made available to GTE, in the
form filed with the SEC, together with any amendments thereto, its (i) Annual
Reports on Form 10-K for the fiscal years ended December 31, 1995, 1996 and
1997, (ii) all proxy statements relating to Bell Atlantic's meetings of
stockholders (whether annual or special) held since January 1, 1995, (iii)
Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 1998, and
(iv) all other reports or registration statements filed by Bell Atlantic with
the SEC since January 1, 1995, including without limitation all Annual Reports
on Form 11-K filed with respect to the Bell Atlantic Plans (collectively, the
"Bell Atlantic SEC Reports", with such Bell Atlantic SEC Reports filed with the
SEC prior to the date hereof being referred to as "Bell Atlantic Filed SEC
Reports"). The Bell Atlantic SEC Reports (i) were prepared substantially in
accordance with the requirements of the 1933 Act or the Exchange Act, as the
case may be, and the rules and regulations promulgated under each of such
respective acts, and (ii) did not at the time they were filed contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
(b) The financial statements, including all related notes and
schedules, contained in the Bell Atlantic SEC Reports (or incorporated by
reference therein) fairly present the consolidated financial position of Bell
Atlantic and its Subsidiaries as at the respective dates thereof and the
consolidated results of operations and cash flows of Bell Atlantic and its
Subsidiaries for the periods indicated in accordance with GAAP applied on a
consistent basis throughout the periods involved (except for changes in
accounting principles disclosed in the notes thereto) and subject in the case of
interim financial statements to normal year-end adjustments.
SECTION 5.7 -- ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as
disclosed in the Bell Atlantic Filed SEC Reports and in Section 5.7 of the Bell
Atlantic Disclosure Schedule, since December 31, 1997, and except as permitted
by this Agreement or consented to hereunder, Bell Atlantic and its Subsidiaries
have not incurred any material liability required
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to be disclosed on a balance sheet of Bell Atlantic and its Subsidiaries or the
footnotes thereto prepared in conformity with GAAP, except in the ordinary
course of their businesses consistent with their past practices, and there has
not been any change, or any event involving a prospective change, in the
business, financial condition or results of operations of Bell Atlantic or any
of its Subsidiaries which has had, or is reasonably likely to have, a Material
Adverse Effect on Bell Atlantic, and Bell Atlantic and its Subsidiaries have
conducted their respective businesses in the ordinary course consistent with
their past practices.
SECTION 5.8 -- LITIGATION. There are no claims, actions, suits,
proceedings or investigations pending or, to Bell Atlantic's knowledge,
threatened against Bell Atlantic or any of its Subsidiaries, or any properties
or rights of Bell Atlantic or any of its Subsidiaries, by or before any
Governmental Entity, except for those that are not, individually or in the
aggregate, reasonably likely to have a Material Adverse Effect on Bell Atlantic
or prevent, materially delay or intentionally delay the ability of GTE to
consummate the transactions contemplated hereby.
SECTION 5.9 -- PERMITS; NO VIOLATION OF LAW. The businesses of Bell
Atlantic and its Subsidiaries are not being conducted in violation of any Legal
Requirements or in violation of any Permits, except for possible violations none
of which, individually or in the aggregate, may reasonably be expected to have a
Material Adverse Effect on Bell Atlantic. No investigation or review by any
Governmental Entity (including any stock exchange or other self-regulatory body)
with respect to Bell Atlantic or its Subsidiaries in relation to any alleged
violation of law or regulation is pending or, to Bell Atlantic's knowledge,
threatened, nor has any Governmental Entity (including any stock exchange or
other self-regulatory body) indicated an intention to conduct the same, except
for such investigations which, if they resulted in adverse findings, would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on Bell Atlantic. Except as set forth in Section 5.9 of the Bell
Atlantic Disclosure Schedule, neither Bell Atlantic nor any of its Subsidiaries
is subject to any cease and desist or other order, judgment, injunction or
decree issued by, or is a party to any written Agreement, consent Agreement or
memorandum of understanding with, or is a party to any commitment letter or
similar undertaking to, or is subject to any order or directive by, or has
adopted any board resolutions at the request of, any Governmental Entity that
materially restricts the conduct of its business or which may reasonably be
expected to have a Material Adverse Effect on Bell Atlantic, nor has Bell
Atlantic or any of its Subsidiaries been advised that any Governmental Entity is
considering issuing or requesting any of the foregoing. None of the
representations and warranties made in this Section 5.9 are being made with
respect to Environmental Laws.
SECTION 5.10 -- JOINT PROXY STATEMENT. None of the information supplied
or to be supplied by or on behalf of Bell Atlantic for inclusion or
incorporation by reference in the Registration Statement will, at the time the
Registration Statement becomes effective under the 1933 Act, contain any untrue
statement of a material fact or omit to state any material fact
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required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading. None
of the information supplied or to be supplied by or on behalf of Bell Atlantic
for inclusion or incorporation by reference in the Joint Proxy Statement will,
at the dates mailed to stockholders and at the times of the GTE stockholders'
meeting and the Bell Atlantic stockholders' meeting, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading. The
Registration Statement and the Joint Proxy Statement (except for information
relating solely to GTE) will comply as to form in all material respects with the
provisions of the 1933 Act and the Exchange Act and the rules and regulations
promulgated thereunder.
SECTION 5.11 -- EMPLOYEE MATTERS; ERISA. (a) Except where the failure
to be true would not, individually or in the aggregate, have a Material Adverse
Effect on Bell Atlantic, (i) each Bell Atlantic Plan has been operated and
administered in accordance with applicable law, including but not limited to
ERISA and the Code, (ii) each Bell Atlantic Plan intended to be "qualified"
within the meaning of Section 401(a) of the Code is so qualified, (iii) except
as required by COBRA, no Bell Atlantic Plan provides death or medical benefits
(whether or not insured), with respect to current or former employees of Bell
Atlantic or of any trade or business, whether or not incorporated, which
together with Bell Atlantic would be deemed a "single employer" within the
meaning of Section 4001 of ERISA (a "Bell Atlantic ERISA Affiliate"), beyond
their retirement or other termination of service, (iv) no liability under Title
IV of ERISA has been incurred by Bell Atlantic or any Bell Atlantic ERISA
Affiliate that has not been satisfied in full, and no condition exists that
presents a material risk to Bell Atlantic or any Bell Atlantic ERISA Affiliate
of incurring any such liability (other than PBGC premiums), (v) all
contributions or other amounts due from Bell Atlantic or any Bell Atlantic ERISA
Affiliate with respect to each Bell Atlantic Plan have been paid in full, (vi)
neither Bell Atlantic nor any Bell Atlantic ERISA Affiliate has engaged in a
transaction in connection with which Bell Atlantic or any of its Subsidiaries
could reasonably be expected to be subject to either a civil penalty assessed
pursuant to Section 409 or 502(i) of ERISA or a tax imposed pursuant to Section
4975 or 4976 of the Code, (vii) to the best knowledge of Bell Atlantic there are
no pending, threatened or anticipated claims (other than routine claims for
benefits) by, on behalf of or against any Bell Atlantic Plan or any trusts
related thereto, and (viii) neither the execution and delivery of this Agreement
nor the consummation of the transactions contemplated hereby will (A) result in
any payment (including, without limitation, severance, unemployment
compensation, golden parachute or otherwise) becoming due to any director or any
employee of Bell Atlantic or any of its Subsidiaries under any Bell Atlantic
Plan or otherwise, (B) materially increase any benefits otherwise payable under
any Bell Atlantic Plan G or (C) result in any acceleration of the time of
payment or vesting of any such benefits.
(b) For purposes of this Agreement, "Bell Atlantic Plan" shall mean
each deferred compensation, bonus or other incentive compensation, stock
purchase, stock option
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or other equity compensation plan, program, agreement or arrangement; each
severance or termination pay, medical, surgical, hospitalization, life insurance
or other "welfare" plan, fund or program (within the meaning of section 3(1) of
ERISA); each profit-sharing, stock bonus or other "pension" plan, fund or
program (within the meaning of section 3(2) of ERISA); each employment,
termination or severance agreement; and each other employee benefit plan, fund,
program, agreement or arrangement, in each case, that is sponsored, maintained
or contributed to or required to be contributed to by Bell Atlantic or by any
Bell Atlantic ERISA Affiliate or to which Bell Atlantic or any Bell Atlantic
ERISA Affiliate is party, whether written or oral, for the benefit of any
employee or former employee of Bell Atlantic or any Bell Atlantic ERISA
Affiliate.
SECTION 5.12 -- LABOR MATTERS. Neither Bell Atlantic nor any of its
Subsidiaries is the subject of any material proceeding asserting that it or any
of its Subsidiaries has committed an unfair labor practice or is seeking to
compel it to bargain with any labor union or labor organization nor is there
pending or, to the actual knowledge of its executive officers, threatened in
writing, nor has there been for the past five years, any labor strike, dispute,
walkout, work stoppage, slow-down or lockout involving it or any of its
Subsidiaries, except in each case as is not, individually or in the aggregate,
reasonably likely to have a Material Adverse Effect on Bell Atlantic.
SECTION 5.13 -- ENVIRONMENTAL MATTERS. Except for such matters that,
individually or in the aggregate, are not reasonably likely to have a Material
Adverse Effect on Bell Atlantic: (i) each of Bell Atlantic and its Subsidiaries
has complied with all applicable Environmental Laws (as defined below); (ii) the
properties currently owned or operated by it or any of its Subsidiaries
(including soils, groundwater, surface water, buildings or other structures) are
not contaminated with any Hazardous Substances (as defined below); (iii) the
properties formerly owned or operated by it or any of its Subsidiaries were not
contaminated with Hazardous Substances during the period of ownership or
operation by it or any of its Subsidiaries; (iv) neither it nor any of its
Subsidiaries is subject to liability for any Hazardous Substance disposal or
contamination on any third party property; (v) neither it nor any Subsidiary has
been associated with any release or threat of release of any Hazardous
Substance; (vi) neither it nor any Subsidiary has received any notice, demand,
letter, claim or request for information alleging that it or any of its
Subsidiaries may be in violation of or liable under any Environmental Law
(including any claims relating to electromagnetic fields or microwave
transmissions); (vii) neither it nor any of its Subsidiaries is subject to any
orders, decrees, injunctions or other arrangements with any Governmental Entity
or is subject to any indemnity or other agreement with any third party relating
to liability under any Environmental Law or relating to Hazardous Substances;
and (viii) there are not circumstances or conditions involving it or any of its
Subsidiaries that could reasonably be expected to result in any claims,
liability, investigations, costs or restrictions on the ownership, use, or
transfer of any of its properties pursuant to any Environmental Law.
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No representation is made by Bell Atlantic in this Section 5.13 for
which neither Bell Atlantic nor any of its Subsidiaries is (or would be, if a
claim were brought in a formal proceeding) a named defendant, but as to which
Bell Atlantic or any of its Subsidiaries may be liable for an allocable share of
any judgment rendered pursuant to the POR. No representation is made by Bell
Atlantic in subsection (i) of this Section 5.13 as to properties owned, leased
or operated by AT&T or any of its Subsidiaries except for such properties which
are, or at any time since November 1, 1983 were, owned, leased or operated by
Bell Atlantic or any of its Subsidiaries.
SECTION 5.14 -- BOARD ACTION; VOTE REQUIRED. (a) The Board of Directors
of Bell Atlantic has unanimously determined that the transactions contemplated
by this Agreement and the Option Agreements are in the best interests of Bell
Atlantic and its stockholders and has resolved to recommend to such stockholders
that they vote in favor thereof.
(b) The approval of the Certificate Amendment by a majority of the
votes entitled to be cast by all holders of Bell Atlantic Common Stock and the
approval of the Stock Issuance pursuant thereto by a majority of the votes cast
thereon, provided that the total votes cast thereon represents over 50% in
interest of all securities of Bell Atlantic entitled to vote thereon, are the
only votes of the holders of any class or series of the capital stock of Bell
Atlantic required to approve this Agreement, the Merger, the Certificate
Amendment, the Stock Issuance and the other transactions contemplated hereby.
SECTION 5.15 -- OPINIONS OF FINANCIAL ADVISORS. Bell Atlantic has
received the opinions of Bear, Stearns & Co. Inc. ("Bear Stearns") and Merrill
Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), each dated July
27, 1998, to the effect that, as of such date, the Exchange Ratio is fair from a
financial point of view to the holders of Bell Atlantic Common Stock.
SECTION 5.16 -- BROKERS. Except for Bear Stearns, Merrill Lynch and
Morgan Stanley Dean Witter, the arrangements with which have been disclosed to
GTE prior to the date hereof, which have been engaged by Bell Atlantic, no
broker, finder or investment banker is entitled to any brokerage, finder's,
investment banking or other fee or commission in connection with the
transactions contemplated by this Agreement and the Option Agreements based upon
arrangements made by or on behalf of Bell Atlantic or any of its Subsidiaries.
SECTION 5.17 -- TAX MATTERS. Except as set forth in Section 5.17 of the
Bell Atlantic Disclosure Schedule:
(a) All material federal, state, local and foreign Tax Returns required
to have been filed by Bell Atlantic or its Subsidiaries have been filed with the
appropriate governmental authorities by the due date thereof including
extensions;
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(b) The Tax Returns referred to in subpart (a) of this Section 5.17
correctly and completely reflect all material Tax liabilities of Bell Atlantic
and its Subsidiaries required to be shown thereon;
(c) All material Taxes shown as due on those Tax Returns referred to in
subpart (a) of this Section 5.17, as well as any material foreign withholding
Taxes imposed on or in respect of any amounts paid to or by Bell Atlantic or any
of its Subsidiaries, whether or not such amounts or withholding Taxes are
referred to or shown on any Tax Returns referred to in Section 5.17 (a) hereof,
have been fully paid or adequately reflected as a liability on Bell Atlantic's
or its Subsidiaries' financial statements included in the Bell Atlantic SEC
Reports;
(d) With respect to any prior period for which Tax Returns have not yet
been filed, or for which Taxes are not yet due or owing, Bell Atlantic and its
Subsidiaries have made due and sufficient accruals for such Taxes in their
respective books and records and financial statements;
(e) Neither Bell Atlantic nor any of its affiliates has taken, agreed
to take or omitted to take any action that would prevent or impede the Merger
from qualifying as a tax-free reorganization under Section 368 of the Code;
(f) No deficiencies for any Taxes have been proposed, asserted or
assessed against Bell Atlantic or any of its Subsidiaries that are not
adequately reserved for under GAAP, except for deficiencies that individually or
in the aggregate would not have a Material Adverse Effect on Bell Atlantic; and
(g) Bell Atlantic is not aware of any material liens for Taxes upon any
assets of Bell Atlantic or any of its Subsidiaries apart from liens for Taxes
not yet due and payable.
SECTION 5.18 -- INTELLECTUAL PROPERTY.
(a) As used in this Agreement, "Bell Atlantic Intellectual Property"
means all of the following which are necessary to conduct the business of Bell
Atlantic and its Subsidiaries as presently conducted or as currently proposed to
be conducted: (i) trademarks, trade dress, service marks, copyrights, logos,
trade names, corporate names and all registrations and applications to register
the same; (ii) patents and pending patent applications; (iii) Computer Software;
(iv) all technology, know-how and trade secrets; and (v) all material licenses
and agreements to which Bell Atlantic or any of its Subsidiaries is a party
which relate to any of the foregoing.
(b) Bell Atlantic or its Subsidiaries owns or has the right to use,
sell or license all Bell Atlantic Intellectual Property, free and clear of all
liens or encumbrances, and all registrations of Bell Atlantic Intellectual
Property are valid and enforceable and have been
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duly recorded and maintained, except, in each case, as would not, individually
or in the aggregate, have a Material Adverse Effect on Bell Atlantic.
(c) To the knowledge of Bell Atlantic, the conduct of Bell Atlantic's
and its Subsidiaries' business and the use of the Bell Atlantic Intellectual
Property does not materially infringe, violate or misuse any intellectual
property rights or any other proprietary right of any person or give rise to any
obligations to any person as a result of co-authorship, and neither Bell
Atlantic nor any of its Subsidiaries has received any notice, not satisfactorily
resolved, of any claims or threats that Bell Atlantic's or its Subsidiaries' use
of any of the Bell Atlantic Intellectual Property materially infringes, violates
or misuses, or is otherwise in conflict with any intellectual property or
proprietary rights of any third party or that any of the Bell Atlantic
Intellectual Property is invalid or unenforceable that would, individually or in
the aggregate, have a Material Adverse Effect on Bell Atlantic.
(d) Bell Atlantic and its Subsidiaries have used reasonable efforts to
maintain the confidentiality of their trade secrets and other confidential Bell
Atlantic Intellectual Property.
(e) Bell Atlantic has undertaken a concerted effort to ensure that all
of the Computer Software, computer firmware, computer hardware (whether general
or special purpose), and other similar or related items of automated,
computerized, and/or software system(s) that are to be used or relied on by Bell
Atlantic or by any of its Subsidiaries in the conduct of their respective
businesses will not malfunction, will not cease to function, will not generate
incorrect data, and will not provide incorrect results when processing,
providing and/or receiving (i) date-related data into and between the twentieth
and twenty-first centuries and (ii) date-related data in connection with any
valid date in the twentieth and twenty-first centuries. Bell Atlantic reasonably
believes that such effort will be successful.
SECTION 5.19 -- INSURANCE. Except as set forth in Section 5.19 of the
Bell Atlantic Disclosure Schedule, each of Bell Atlantic and each of its
Significant Subsidiaries is, and has been continuously since January 1, 1987 (or
such later date as such Significant Subsidiary was organized or acquired by Bell
Atlantic), insured with financially responsible insurers in such amounts and
against such risks and losses as are customary for companies conducting the
business as conducted by Bell Atlantic and its Subsidiaries during such time
period. Except as set forth in Section 5.19 of the Bell Atlantic Disclosure
Schedule, since January 1, 1995, neither Bell Atlantic nor any of its
Subsidiaries has received notice of cancellation or termination with respect to
any material insurance policy of Bell Atlantic or its Subsidiaries. The
insurance policies of Bell Atlantic and its Subsidiaries are valid and
enforceable policies.
SECTION 5.20 -- OWNERSHIP OF SECURITIES. As of the date hereof, neither
Bell Atlantic nor, to Bell Atlantic's knowledge, any of its affiliates or
associates (as such terms are defined under the Exchange Act), (a) (i)
beneficially owns, directly or indirectly, or (ii) is party to any agreement,
arrangement or understanding for the purpose of acquiring, holding, voting or
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disposing of, in each case, shares of capital stock of GTE, which in the
aggregate represent 10% or more of the outstanding shares of GTE Common Stock
(other than shares held by Bell Atlantic Plans and the GTE Option Agreement),
nor (b) is an "interested stockholder" of GTE within the meaning of Section 912
of the NYBCL. Except as set forth in Section 5.20 of the Bell Atlantic
Disclosure Schedule, Bell Atlantic owns no shares of GTE Common Stock described
in the parenthetical clause of Section 2.2 (a) hereof which would be canceled
and retired without consideration pursuant to Section 2.3 (a) hereof.
SECTION 5.21 -- CERTAIN CONTRACTS. (a) All contracts described in Item
601(b)(10) of Regulation S-K to which Bell Atlantic or its Subsidiaries is a
party or may be bound ("Bell Atlantic Contracts") have been filed as exhibits
to, or incorporated by reference in, Bell Atlantic's Annual Report on Form 10-K
for the year ended December 31, 1997. All Bell Atlantic Contracts are valid and
in full force and effect on the date hereof except to the extent they have
previously expired in accordance with their terms or if the failure to be in
full force and effect, individually and in the aggregate would not reasonably be
expected to have a Material Adverse Effect on Bell Atlantic. Neither Bell
Atlantic nor any of its Subsidiaries has violated any provision of, or committed
or failed to perform any act which with or without notice, lapse of time or both
would constitute a default under the provisions of, any Bell Atlantic Contract,
except in each case for those Bell Atlantic Contracts which, individually and in
the aggregate, would not reasonably be expected to result in a Material Adverse
Effect on Bell Atlantic.
(b) Set forth in Section 5.21 of the Bell Atlantic Disclosure Schedule
is a list of each contract, agreement or arrangement to which Bell Atlantic or
any of its Subsidiaries is a party or may be bound which is an arrangement
limiting or restraining Bell Atlantic, GTE, any Bell Atlantic or GTE Subsidiary
or any successor thereto from engaging or competing in any business which has,
or could reasonably be expected to have in the foreseeable future, a Material
Adverse Effect on Bell Atlantic or, to Bell Atlantic's knowledge, on GTE.
SECTION 5.22 -- MERGER SUBSIDIARY. Bell Atlantic and Merger Subsidiary
represent and warrant to GTE as follows:
(a) ORGANIZATION AND CORPORATE POWER. Merger Subsidiary is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of New York. Merger Subsidiary is a direct, wholly owned
subsidiary of Bell Atlantic.
(b) CORPORATE AUTHORIZATION. Merger Subsidiary has all requisite
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance by
Merger Subsidiary of this Agreement and the consummation by Merger Subsidiary of
the transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Merger Subsidiary. This Agreement has been duly
executed and delivered by Merger Subsidiary and constitutes a valid
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and binding agreement of Merger Subsidiary, enforceable against it in accordance
with its terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium and other similar laws relating to or
affecting creditors generally, by general equity principles (regardless of
whether such enforceability is considered in a proceeding in equity or at law)
or by an implied covenant of good faith and fair dealing.
(c) NON CONTRAVENTION. The execution, delivery and performance by
Merger Subsidiary of this Agreement and the consummation by Merger Subsidiary of
the transactions contemplated hereby do not and will not contravene or conflict
with the certificate of incorporation or by-laws of Merger Subsidiary.
(d) NO BUSINESS ACTIVITIES. Merger Subsidiary has not conducted any
activities other than in connection with the organization of Merger Subsidiary,
the negotiation and execution of this Agreement and the consummation of the
transactions contemplated hereby. Merger Subsidiary has no Subsidiaries.
ARTICLE VI -- CONDUCT OF BUSINESSES
PENDING THE MERGER
SECTION 6.1 -- TRANSITION PLANNING. Ivan G. Seidenberg and Charles R.
Lee, as Chief Executive Officers of Bell Atlantic and GTE, respectively, jointly
shall be responsible for coordinating all aspects of transition planning and
implementation relating to the Merger and the other transactions contemplated
hereby. If either such person ceases to be Chief Executive Officer of his
respective company for any reason, such person's successor as Chief Executive
Officer shall assume his predecessor's responsibilities under this Section 6.1.
During the period between the date hereof and the Effective Time, Messrs.
Seidenberg and Lee jointly shall (i) examine various alternatives regarding the
manner in which to best organize and manage the businesses of Bell Atlantic and
GTE after the Effective Time, and (ii) coordinate policies and strategies with
respect to regulatory authorities and bodies, in all cases subject to applicable
law.
SECTION 6.2 -- CONDUCT OF BUSINESS IN THE ORDINARY COURSE. Each of GTE
and Bell Atlantic covenants and agrees that, subject to the provisions of
Sections 7.16 and 7.17 hereof, between the date hereof and the Effective Time,
unless the other shall otherwise consent in writing, and except as described in
Section 6.2 of the Disclosure Schedules or as otherwise expressly contemplated
hereby, the business of such Party and its Subsidiaries shall be conducted only
in, and such entities shall not take any action except in, the ordinary course
of business and in a manner consistent with past practice; and each of GTE and
Bell Atlantic and their respective Subsidiaries will use their commercially
reasonable efforts to preserve substantially intact their business
organizations, to keep available the services of those of their present
officers, employees and consultants who are integral to the operation of their
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businesses as presently conducted and to preserve their present relationships
with significant customers and suppliers and with other persons with whom they
have significant business relations. By way of amplification and not limitation,
except as set forth in Section 6.2 of the Disclosure Schedules or as otherwise
expressly contemplated by this Agreement and the Option Agreements, and subject
to the provisions of Sections 7.16 and 7.17, each of GTE and Bell Atlantic
agrees on behalf of itself and its Subsidiaries that they will not, between the
date hereof and the Effective Time, directly or indirectly, do any of the
following without the prior written consent of the other:
(a) (i) except for (A) the issuance of shares of GTE Common Stock and
Bell Atlantic Common Stock in order to satisfy obligations under the GTE Plans
and Bell Atlantic Plans in effect on the date hereof and Bell Atlantic Equity
Rights or GTE Equity Rights issued thereunder and under existing dividend
reinvestment plans, which issuances shall be consistent with its existing policy
and past practice; (B) grants of stock options with respect to GTE Common Stock
or Bell Atlantic Common Stock to employees in the ordinary course of business
and in amounts and in a manner consistent with past practice; and (C) the
issuance of securities by a Subsidiary to any person which is directly or
indirectly wholly owned by GTE or Bell Atlantic (as the case may be): issue,
sell, pledge, dispose of, encumber, authorize, or propose the issuance, sale,
pledge, disposition, encumbrance or authorization of any shares of capital stock
of any class, or any options, warrants, convertible securities or other rights
of any kind to acquire any shares of capital stock of, or any other ownership
interest in, such Party or any of its Subsidiaries (excluding such as may arise
upon the exercise of existing rights); (ii) amend or propose to amend the
Certificate of Incorporation or Bylaws of such Party (other than by Bell
Atlantic as contemplated hereby) or any of its Subsidiaries (other than wholly
owned Subsidiaries) or adopt, amend or propose to amend any shareholder rights
plan or related rights agreement; (iii) split, combine or reclassify any
outstanding shares of GTE Common Stock and Bell Atlantic Common Stock, or
declare, set aside or pay any dividend or distribution payable in cash, stock,
property or otherwise with respect to shares of GTE Common Stock and Bell
Atlantic Common Stock, except for cash dividends to stockholders of GTE and Bell
Atlantic declared in accordance with existing dividend policy payable to
stockholders of record on the record dates consistently used in prior periods;
(iv) redeem, purchase or otherwise acquire or offer to redeem, purchase or
otherwise acquire any shares of its capital stock, except that each of GTE and
Bell Atlantic shall be permitted to acquire shares of GTE Common Stock or Bell
Atlantic Common Stock, as the case may be, from time to time in open market
transactions, consistent with past practice and in compliance with applicable
law and the provisions of any applicable employee benefit plan, program or
arrangement, for issuance upon the exercise of options and other rights granted,
and the lapsing of restrictions, under such Party's respective employee benefit
plans, programs and arrangements and dividend reinvestment plans; or (v)
authorize or propose or enter into any contract, agreement, commitment or
arrangement with respect to any of the matters prohibited by this Section 6.2
(a);
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(b) (i) acquire (by merger, consolidation, or acquisition of stock or
assets) any corporation, partnership or other business organization or division
thereof or make any investment in another entity (other than an entity which is
a wholly owned Subsidiary of such Party as of the date hereof and other than
incorporation of a wholly owned Subsidiary), except for acquisitions or
investments which do not exceed $500,000,000 in the aggregate for all such
acquisitions or investments in any 12-month period; (ii) except in the ordinary
course of business and in a manner consistent with past practice, sell, pledge,
dispose of, or encumber or authorize or propose the sale, pledge, disposition or
encumbrance of any assets of such Party or any of its Subsidiaries, except for
transactions which do not exceed $500,000,000 in the aggregate in any 12-month
period and provided further that, unless and until it is mutually determined
that pooling of interests accounting is not available for the Merger, no Party
shall make any dispositions in excess of an aggregate of $100,000,000 except for
those dispositions that the management of either party has determined, with the
concurrence of its independent accountants, to be either in the ordinary course
of business or not in contemplation of the Merger, and therefore not a
disposition to be measured, individually and in the aggregate with other
dispositions, for material disposition of asset purposes, as required by
Accounting Principals Bulletin No. 16 and the authoritative interpretations
thereto; or (iii) authorize, enter into or amend any contract, agreement,
commitment or arrangement with respect to any of the matters prohibited by this
Section 6.2(b);
(c) incur indebtedness if, following the taking of such action, it is
reasonably anticipated that such Party's outstanding senior indebtedness would
be rated by Standard & Poor's at lower than A-, in the case of GTE, or at lower
than A, in the case of Bell Atlantic.
(d) enter into (i) leveraged derivative contracts (defined as contracts
that use a factor to multiply the underlying index exposure) or (ii) other
derivative contracts except for the purpose of hedging known interest rate and
foreign exchange exposures or otherwise reducing such Party's cost of financing;
(e) take any action with respect to the grant of any severance or
termination pay, stay bonus, or other incentive arrangements (otherwise than
pursuant to any GTE Plan, Bell Atlantic Plan (collectively with all GTE Plans,
"Benefit Plans") or any policies, arrangements and agreements of such Party
which were in effect on, or offered or approved to be offered by the board of
directors or senior management of the respective Party prior to, the date
hereof, or pursuant to any renewal or extension subsequent to the date hereof of
the duration of the term of any such Benefit Plans, policies, arrangements or
agreements), or with respect to any increase in benefits payable under its
severance or termination pay policies, or stay bonus or other incentive
arrangements in effect on the date hereof;
provided, however, that this subsection shall not prohibit GTE or Bell
Atlantic or their respective subsidiaries from taking any actions whatsoever
that are described in this Section 6.2(e) if (i) such actions are not
Merger-related and are in amounts not materially
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greater than past practice or as otherwise required by Legal Requirements or
applicable provisions of the plan, policy or arrangement, and the Party taking
such action consults with the other Party (where such consultation is reasonable
and practicable) reasonably in advance of any such action, or (ii) such actions
are Merger-related, are taken to meet business needs, are consistent with
competitive market practices of large data transmission or telecommunications
companies, and the other Party gives its consent to such actions (such consent
not to be unreasonably withheld after being consulted by the Party proposing
such action (where such consultation is reasonable and practicable) reasonably
in advance of any such action);
provided, further, that on and after the date hereof, each of GTE
and Bell Atlantic will use its best efforts in good faith to develop and adopt
within 60 days of the date hereof, in concert with the other, a common set of
principles and guidelines for the design and implementation of merger-related
retention incentives and severance benefits for the purpose of enabling the
respective companies to implement complementary plans, programs and
arrangements, utilizing best competitive practices which each believes will
facilitate the convergence of the benefits and employment practices and policies
of the Parties and their respective subsidiaries during the period culminating
in the Effective Time, and as soon as practicable after such adoption, each such
Party shall comply, and cause their respective subsidiaries to comply, with such
principles and guidelines (and any amendments thereto which are mutually agreed
by the Parties thereafter);
(f) take any action with respect to increases in employee compensation,
or make any payments under any GTE Plan or any Bell Atlantic Plan, as the case
may be, to any director or employee of, or independent contractor or consultant
to, such Party or any of its Subsidiaries, adopt or otherwise materially amend
(except for amendments required or made advisable by Legal Requirements) any GTE
Plan or Bell Atlantic Plan, as the case may be, or enter into or amend any
employment or consulting agreement, or grant or establish any new awards under
any such existing GTE Plan or Bell Atlantic Plan or agreement;
provided, however, that this subsection shall not prohibit GTE or
Bell Atlantic or their respective subsidiaries from taking any actions
whatsoever that are described in this Section 6.2(f) if (i) such actions are not
Merger-related and are in amounts not materially greater than past practice or
as otherwise required by Legal Requirements or applicable provisions of the
plan, policy or arrangement, and, except in the case of increases in employee
compensation in the ordinary course of business consistent with past practice,
the Party taking such action consults with the other Party (where such
consultation is reasonable and practicable) reasonably in advance of any such
action, or (ii) such actions are taken to meet business needs, are consistent
with competitive market practices of large data transmission or
telecommunications companies, and the other Party gives its consent to such
actions (such consent not to be unreasonably withheld after being consulted by
the Party proposing such action (where such consultation is reasonable and
practicable) reasonably in advance of any such action);
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(g) change in any material respect its accounting policies, methods or
procedures except as required by GAAP;
(h) take any action which it believes when taken could reasonably be
expected to adversely affect or delay in any material respect the ability of any
of the Parties to obtain any approval of any Governmental Entity required to
consummate the transactions contemplated hereby;
(i) other than pursuant to this Agreement, take any action to cause the
shares of their respective Common Stock to cease to be quoted on any of the
stock exchanges on which such shares are now quoted;
(j) (i) other than as consistent with past practice, issue SARS, new
performance shares, restricted stock, or similar equity based rights; (ii)
materially modify (with materiality to be determined with respect to the Benefit
Plan in question) any actuarial cost method, assumption or practice used in
determining benefit obligations, annual expense and funding for any Benefit
Plan, except to the extent required by GAAP; (iii) materially modify (with
materiality to be determined with respect to the Benefit Plan trust in question)
the investment philosophy of the Benefit Plan trusts or maintain an asset
allocation which is not consistent with such philosophy, subject to any ERISA
fiduciary obligation; (iv) subject to any ERISA fiduciary obligation, enter into
any outsourcing agreement, or any other material contract relating to the
Benefit Plans or management of the Benefit Plan trusts, provided that Bell
Atlantic and GTE may enter into any such contracts that may be terminated within
two years; (v) offer any new or extend any existing retirement incentive,
"window" or similar benefit program; (vi) grant any ad hoc pension increase;
(vii) establish any new or fund any existing "rabbi" or similar trust (except in
accordance with the current terms of such trust), or enter into any other
arrangement for the purpose of securing non-qualified benefits or deferred
compensation; (viii) adopt any corporate owned life insurance program; or (ix)
adopt or implement any "split dollar" life insurance program;
provided, however, that this subsection shall not prohibit GTE or
Bell Atlantic or their respective subsidiaries from taking any actions
whatsoever that are described in this Section 6.2(j) (with the exception of
clause (j)(i)) if such actions are in amounts not materially greater than past
practice or as otherwise required by Legal Requirements or applicable provisions
of the plan, policy or arrangement, and the Party taking such action consults
with the other Party (where such consultation is reasonable and practicable)
reasonably in advance of any such action; or
(k) take any action which it believes when taken would cause its
representations and warranties contained herein to become inaccurate in any
material respect.
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GTE and Bell Atlantic agree that any written approval obtained under
this Section 6.2 may be relied upon by the other Party if signed by the Chief
Executive Officer or any other executive officer of the Party providing such
written approval.
SECTION 6.3 -- NO SOLICITATION. (a) From and after the date hereof,
Bell Atlantic shall not, nor shall it permit any of its Subsidiaries to, nor
shall it authorize or permit any of its officers, directors or employees or any
investment banker, financial advisor, attorney, accountants or other
representatives retained by it or any of its Subsidiaries to, directly or
indirectly through another person, (i) solicit, initiate or encourage (including
by way of furnishing information), or knowingly take any other action designed
to facilitate, any Alternative Transaction (as hereinafter defined) or (ii)
participate in any discussions regarding any Alternative Transaction; provided,
however, that if, at any time prior to approval of the Stock Issuance and the
Certificate Amendment by the holders of Bell Atlantic Common Stock, the Board of
Directors of Bell Atlantic determines in good faith, after receipt of advice
from outside counsel, that the failure to provide such information or
participate in such negotiations or discussions would result in a reasonable
possibility that the Board of Directors of Bell Atlantic would breach their
fiduciary duties to stockholders under applicable law, Bell Atlantic may, in
response to any such proposal that has been determined by it to be a Bell
Atlantic Superior Proposal (as defined in Section 7.2(b)), that was not
solicited by it and that did not otherwise result from a breach of this Section
6.3(a), and subject to Bell Atlantic giving GTE at least two business days
written notice of its intention to do so, (x) furnish information with respect
to Bell Atlantic and its Subsidiaries to any person pursuant to a customary
confidentiality agreement containing terms no less restrictive than the terms of
the Nondisclosure Agreement dated July 19, 1998 entered into between Bell
Atlantic and GTE (the "Nondisclosure Agreement"), provided that a copy of all
such information is delivered simultaneously to GTE, and (y) participate in
negotiations regarding such proposal. Bell Atlantic shall promptly notify GTE
orally and in writing of any request for information or of any proposal in
connection with an Alternative Transaction, the material terms and conditions of
such request or proposal (including a copy thereof, if in writing, and all other
documentation and any related correspondence) and the identity of the person
making such request or proposal. Bell Atlantic will keep GTE reasonably informed
of the status and details (including amendments or proposed amendments) of such
request or proposal on a current basis. Bell Atlantic shall immediately cease
and terminate any existing solicitation, initiation, encouragement, activity,
discussion or negotiation with any persons conducted heretofore by Bell Atlantic
or its representatives with respect to the foregoing. Bell Atlantic (i) agrees
not to release any Third Party (as defined below) from, or waive any provision
of, or fail to enforce, any standstill agreement or similar agreements to which
it is a party related to, or which could affect, an Alternative Transaction and
agrees that GTE shall be entitled to enforce Bell Atlantic's rights and remedies
under and in connection with such agreements and (ii) acknowledges that the
provisions of clause (i) are an important and integral part of this Agreement.
Nothing contained in this Section 6.3(a) or Section 7.2 shall prohibit Bell
Atlantic (i) from taking and disclosing to its stockholders a position
contemplated by Rule
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14e-9 or Rule 14e-2(a) promulgated under the Exchange Act or (ii) from making
any disclosure to its stockholders if, in the good faith judgment of the Board
of Directors of Bell Atlantic, after receipt of advice from outside counsel,
failure to disclose would result in a reasonable possibility that the Board of
Directors of Bell Atlantic would breach its fiduciary duties to Bell Atlantic's
stockholders under applicable law.
(b) From and after the date hereof, GTE shall not, nor shall it permit
any of its Subsidiaries to, nor shall it authorize or permit any of its
officers, directors or employees or any investment banker, financial advisor,
attorney, accountants or other representatives retained by it or any of its
Subsidiaries to, directly or indirectly through another person, (i) solicit,
initiate or encourage (including by way of furnishing information), or knowingly
take any other action designed to facilitate, any Alternative Transaction (as
hereinafter defined) or (ii) participate in any discussions regarding any
Alternative Transaction; provided, however, that if, at any time prior to
approval of this Agreement by the holders of GTE Common Stock, the Board of
Directors of GTE determines in good faith, after receipt of advice from outside
counsel, that the failure to provide such information or participate in such
negotiations or discussions would result in a reasonable possibility that the
Board of Directors of GTE would breach their fiduciary duties to stockholders
under applicable law, GTE may, in response to a proposal that has been
determined by it to be a GTE Superior Proposal (as defined in Section 7.2(d)),
that was not solicited by it and that did not otherwise result from a breach of
this Section 6.3(b), and subject to GTE giving Bell Atlantic at least two
business days written notice of its intention to do so, (x) furnish information
with respect to GTE and its Subsidiaries to any person pursuant to a customary
confidentiality agreement containing terms no less restrictive than the terms of
the Nondisclosure Agreement, provided that a copy of all such information is
delivered simultaneously to Bell Atlantic, and (y) participate in negotiations
regarding such proposal. GTE shall promptly notify Bell Atlantic orally and in
writing of any request for information or of any proposal in connection with an
Alternative Transaction, the material terms and conditions of such request or
proposal (including a copy thereof, if in writing, and all other documentation
and any related correspondence) and the identity of the person making such
request or proposal. GTE will keep Bell Atlantic reasonably informed of the
status and details (including amendments or proposed amendments) of such request
or proposal on a current basis. GTE shall immediately cease and terminate any
existing solicitation, initiation, encouragement, activity, discussion or
negotiation with any persons conducted heretofore by GTE or its representatives
with respect to the foregoing. GTE (i) agrees not to release any Third Party
from, or waive any provision of, or fail to enforce, any standstill agreement or
similar agreements to which it is a party related to, or which could affect, an
Alternative Transaction and agrees that Bell Atlantic shall be entitled to
enforce GTE's rights and remedies under and in connection with such agreements
and (ii) acknowledges that the provisions of clause (i) are an important and
integral part of this Agreement. Nothing contained in this Section 6.3(b) or in
Section 7.2 shall prohibit GTE (i) from taking and disclosing to its
stockholders a position contemplated by Rule 14e-9 or Rule 14e-2(a) promulgated
under the Exchange Act or (ii) from making any disclosure to its stockholders
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if, in the good faith judgment of the Board of Directors of GTE, after receipt
of advice from outside counsel, failure to disclose would result in a reasonable
possibility that the Board of Directors of GTE would breach its fiduciary duties
to GTE's stockholders under applicable law.
(c) For purposes of this Agreement, "Alternative Transaction" means,
whether in the form of a proposal or intended proposal, a signed agreement or
completed action, as the case may be, any of (i) a transaction or series of
transactions pursuant to which any person (or group of persons) other than Bell
Atlantic and its Subsidiaries and other than GTE and its Subsidiaries (a "Third
Party") acquires or would acquire, directly or indirectly, beneficial ownership
(as defined in Rule 13d-3 under the Exchange Act) of more than 20% of the
outstanding shares of Bell Atlantic or GTE, as the case may be, whether from
Bell Atlantic or GTE or pursuant to a tender offer or exchange offer or
otherwise, (ii) any acquisition or proposed acquisition of, or business
combination with, Bell Atlantic or any of its Significant Subsidiaries or GTE or
any of its Significant Subsidiaries, as the case may be, by a merger or other
business combination (including any so-called "merger-of-equals" and whether or
not Bell Atlantic or any of its Significant Subsidiaries or GTE or any of its
Significant Subsidiaries, as the case may be, is the entity surviving any such
merger or business combination) or (iii) any other transaction pursuant to which
any Third Party acquires or would acquire, directly or indirectly, control of
assets (including for this purpose the outstanding equity securities of
Subsidiaries of Bell Atlantic or GTE, as the case may be, and any entity
surviving any merger or business combination including any of them) of Bell
Atlantic or any of its Subsidiaries or GTE or any of its Subsidiaries, as the
case may be, for consideration equal to 20% or more of the fair market value of
all of the outstanding shares of Bell Atlantic Common Stock or all of the
outstanding shares of GTE Common Stock, as the case may be, on the date of this
Agreement.
SECTION 6.4 -- SUBSEQUENT FINANCIAL STATEMENTS. Prior to the Effective
Time, each of GTE and Bell Atlantic (a) will consult with the other prior to
making publicly available its financial results for any period and (b) will
consult with the other prior to the filing of, and will timely file with the
SEC, each Annual Report on Form 10-K, Quarterly Report on Form 10-Q and Current
Report on Form 8-K required to be filed by such Party under the Exchange Act and
the rules and regulations promulgated thereunder and will promptly deliver to
the other copies of each such report filed with the SEC. As of their respective
dates, none of such reports shall contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading. The respective audited financial statements and
unaudited interim financial statements of each of GTE and Bell Atlantic, as the
case may be, included in such reports will fairly present the consolidated
financial position of such Party and its Subsidiaries as at the dates thereof
and the results of their operations and cash flows for the periods then ended in
accordance with GAAP applied on a consistent basis
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and, subject, in the case of unaudited interim financial statements, to normal
year-end adjustments.
SECTION 6.5 -- CONTROL OF OPERATIONS. Nothing contained in this
Agreement shall give Bell Atlantic, directly or indirectly, the right to control
or direct GTE's operations prior to the Effective Time. Nothing contained in
this Agreement shall give GTE, directly or indirectly, the right to control or
direct Bell Atlantic's operations prior to the Effective Time. Prior to the
Effective Time, each of Bell Atlantic and GTE shall exercise, consistent with
the terms and conditions of this Agreement, complete control and supervision
over its respective operations.
ARTICLE VII -- ADDITIONAL AGREEMENTS
SECTION 7.1 -- JOINT PROXY STATEMENT AND THE REGISTRATION STATEMENT.
(a) As promptly as practicable after the execution and delivery of this
Agreement, the Parties shall prepare and file with the SEC, and shall use all
reasonable efforts to have cleared by the SEC, and promptly thereafter shall
mail to the holders of record of shares of Bell Atlantic Common Stock and GTE
Common Stock, the Joint Proxy Statement, provided, however, that GTE and Bell
Atlantic shall not mail or otherwise furnish the Joint Proxy Statement to their
respective stockholders unless and until:
(i) they have received notice from the SEC that the
Registration Statement is effective under the 1933 Act;
(ii) GTE shall have received a letter of
PricewaterhouseCoopers L.L.P., dated a date within two
business days prior to the date of the first mailing of the
Joint Proxy Statement, and addressed to GTE, in form and
substance reasonably satisfactory to GTE and customary in
scope and substance for "cold comfort" letters delivered by
independent public accountants in connection with
registration statements on Form S-4 with respect to the
financial statements of Bell Atlantic included in the Joint
Proxy Statement and the Registration Statement; and
(iii) Bell Atlantic shall have received a letter of
Arthur Andersen LLP, dated a date within two business days
prior to the date of the first mailing of the Joint Proxy
Statement, and addressed to Bell Atlantic, in form and
substance reasonably satisfactory to Bell Atlantic and
customary in scope and substance for "cold comfort" letters
delivered by independent public accountants in connection
with registration statements on Form S-4 with respect to the
financial statements of GTE included in the Joint Proxy
Statement and the Registration Statement.
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(b) The Parties will cooperate in the preparation of the Joint Proxy
Statement and the Registration Statement and in having the Registration
Statement declared effective as soon as practicable.
SECTION 7.2 -- BELL ATLANTIC AND GTE STOCKHOLDERS' MEETINGS.
(a) As promptly as practicable after the Registration Statement is
declared effective under the Securities Act, Bell Atlantic shall duly give
notice of, convene and hold a meeting of its stockholders (the "Bell Atlantic
Stockholders' Meeting") in accordance with the DGCL for the purpose of obtaining
the Bell Atlantic Stockholder Approval and shall, subject to the provisions of
Section 7.2(b) hereof, through its Board of Directors, recommend to its
stockholders the approval of the Stock Issuance and adoption of the Certificate
Amendment.
(b) Neither the Board of Directors of Bell Atlantic nor any committee
thereof shall (i) except as expressly permitted by this Section 7.2(b),
withdraw, qualify or modify, or propose publicly to withdraw, qualify or modify,
in a manner adverse to GTE, the approval or recommendation of such Board of
Directors or such committee of the Certificate Amendment or the Stock Issuance,
(ii) approve or recommend, or propose publicly to approve or recommend, any
Alternative Transaction or (iii) cause Bell Atlantic to enter into any letter of
intent, agreement in principle, acquisition agreement or other similar agreement
(each, a "Bell Atlantic Acquisition Agreement") related to any Alternative
Transaction. Notwithstanding the foregoing, in the event that prior to the
adoption of the Stock Issuance and the Certificate Amendment by the holders of
Bell Atlantic Common Stock the Board of Directors of Bell Atlantic determines in
good faith, after it has received a Bell Atlantic Superior Proposal (as defined
below) and after receipt of advice from outside counsel, that the failure to do
so would result in a reasonable possibility that the Board of Directors of Bell
Atlantic would breach its fiduciary duties to Bell Atlantic stockholders under
applicable law, the Board of Directors of Bell Atlantic may (subject to this and
the following sentences) inform Bell Atlantic stockholders that it no longer
believes that such adoption is advisable and no longer recommends approval (a
"Bell Atlantic Subsequent Determination"), but only at a time that is after the
fifth business day following GTE's receipt of written notice advising GTE that
the Board of Directors of Bell Atlantic has received a Bell Atlantic Superior
Proposal specifying the material terms and conditions of such Bell Atlantic
Superior Proposal (and including a copy thereof with all accompanying
documentation, if in writing), identifying the person making such Bell Atlantic
Superior Proposal and stating that it intends to make a Bell Atlantic Subsequent
Determination. After providing such notice, Bell Atlantic shall provide a
reasonable opportunity to GTE to make such adjustments in the terms and
conditions of this Agreement as would enable Bell Atlantic to proceed with its
recommendation to its stockholders without a Bell Atlantic Subsequent
Determination; provided, however, that any such adjustment shall be at the
discretion of the Parties at the time. For purposes of this Agreement, a "Bell
Atlantic Superior Proposal" means any proposal (on its most recently
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amended or modified terms, if amended or modified) made by a Third Party to
enter into an Alternative Transaction which the Board of Directors of Bell
Atlantic determines in its good faith judgment (based on, among other things,
the advice of a financial advisor of nationally recognized reputation) to be
more favorable to Bell Atlantic's stockholders than the Merger taking into
account all relevant factors (including whether, in the good faith judgment of
the Board of Directors of Bell Atlantic, after obtaining the advice of a
financial advisor of nationally recognized reputation, the Third Party is
reasonably able to finance the transaction, and any proposed changes to this
Agreement that may be proposed by GTE in response to such Alternative
Transaction). Notwithstanding any other provision of this Agreement, Bell
Atlantic shall submit the Stock Issuance and the Certificate Amendment to its
stockholders whether or not the Board of Directors of Bell Atlantic makes a Bell
Atlantic Subsequent Determination.
(c) As promptly as practicable after the Registration Statement is
declared effective under the Securities Act, GTE shall duly give notice of,
convene and hold a meeting of its stockholders (the "GTE Stockholders' Meeting")
in accordance with the NYBCL for the purpose of obtaining the GTE Stockholder
Approval and shall, subject to the provisions of Section 7.2(d) hereof, through
its Board of Directors, recommend to its stockholders the approval and adoption
of this Agreement and the Merger.
(d) Neither the Board of Directors of GTE nor any committee thereof
shall (i) except as expressly permitted by this Section 7.2(d), withdraw,
qualify or modify, or propose publicly to withdraw, qualify or modify, in a
manner adverse to Bell Atlantic, the approval or recommendation of such Board of
Directors or such committee of the Merger or this Agreement, (ii) approve or
recommend, or propose publicly to approve or recommend, any Alternative
Transaction, or (iii) cause GTE to enter into any letter of intent, agreement in
principle, acquisition agreement or other similar agreement (each, a "GTE
Acquisition Agreement") related to any Alternative Transaction. Notwithstanding
the foregoing, in the event that prior to the adoption of this Agreement by the
holders of GTE Common Stock the Board of Directors of GTE determines in good
faith, after it has received a GTE Superior Proposal (as defined below) and
after receipt of advice from outside counsel, that the failure to do so would
result in a reasonable possibility that the Board of Directors of GTE would
breach its fiduciary duties to GTE stockholders under applicable law, the Board
of Directors of GTE may (subject to this and the following sentences) inform GTE
stockholders that it no longer believes that the Merger is advisable and no
longer recommends approval (a "GTE Subsequent Determination"), but only at a
time that is after the fifth business day following Bell Atlantic's receipt of
written notice advising Bell Atlantic that the Board of Directors of GTE has
received a GTE Superior Proposal specifying the material terms and conditions of
such GTE Superior Proposal (and including a copy thereof with all accompanying
documentation, if in writing), identifying the person making such GTE Superior
Proposal and stating that it intends to make a GTE Subsequent Determination.
After providing such notice, GTE shall provide a reasonable opportunity to Bell
Atlantic to make such adjustments in the
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terms and conditions of this Agreement as would enable GTE to proceed with its
recommendation to its stockholders without a GTE Subsequent Determination;
provided, however, that any such adjustment shall be at the discretion of the
Parties at the time. For purposes of this Agreement, a "GTE Superior Proposal"
means any proposal (on its most recently amended or modified terms, if amended
or modified) made by a Third Party to enter into an Alternative Transaction
which the Board of Directors of GTE determines in its good faith judgment (based
on, among other things, the advice of a financial advisor of nationally
recognized reputation) to be more favorable to GTE's stockholders than the
Merger taking into account all relevant factors (including whether, in the good
faith judgment of the Board of Directors of GTE, after obtaining the advice of a
financial advisor of nationally recognized reputation, the Third Party is
reasonably able to finance the transaction, and any proposed changes to this
Agreement that may be proposed by Bell Atlantic in response to such Alternative
Transaction). Notwithstanding any other provision of this Agreement, GTE shall
submit this Agreement to its stockholders whether or not the Board of Directors
of GTE makes a GTE Subsequent Determination.
SECTION 7.3 -- CONSUMMATION OF MERGER; ADDITIONAL AGREEMENTS.
(a) Upon the terms and subject to the conditions hereof and as soon as
practicable after the conditions set forth in Article VIII hereof have been
fulfilled or waived, each of the Parties required required by the NYBCL and
deliver to and file with the Secretary of State of the State of New York such
instruments and agreements as may be required by the NYBCL and the Parties shall
take all such other and further actions as may be required by law to make the
Merger effective, and Bell Atlantic shall take all such other and further
actions as may be required by law to make the Certificate Amendment and the
Bylaws Amendment effective. Prior to the filings referred to in this Section
7.3(a), a closing (the "Closing") will be held at the offices of Bell Atlantic
(or such other place as the Parties may agree) for the purpose of confirming all
the foregoing. The Closing will take place upon the fulfillment or waiver of all
of the conditions to closing set forth in Article VIII of this Agreement, or as
soon thereafter as practicable (the date of the Closing being herein referred to
as the "Closing Date").
(b) Each of the Parties will comply in all material respects with all
applicable laws and with all applicable rules and regulations of any
Governmental Entity in connection with its execution, delivery and performance
of this Agreement and the transactions contemplated hereby. Each of the Parties
agrees to use all commercially reasonable efforts to obtain in a timely manner
all necessary waivers, consents and approvals and to effect all necessary
registrations and filings, and to use all commercially reasonable efforts to
take, or cause to be taken, all other actions and to do, or cause to be done,
all other things necessary, proper or advisable to consummate and make effective
as promptly as practicable the transactions contemplated by this Agreement and
the Option Agreements and to effect all necessary filings under the 1933 Act,
the Exchange Act and the HSR Act. Without limiting the generality of
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the foregoing, each of GTE and Bell Atlantic shall promptly prepare and file a
Premerger Notification in accordance with the HSR Act, shall promptly comply
with any requests for additional information, and shall use its commercially
reasonable efforts to obtain termination of the waiting period thereunder as
promptly as practicable.
(c) Each of Bell Atlantic and GTE shall, in connection with the efforts
referenced in Section 7.3(a) and (b), (i) cooperate in all respects with each
other in connection with any filing or submission and in connection with any
investigation or other inquiry, including any proceeding initiated by a private
party; (ii) promptly inform the other party of any material communication
received by such party from, or given by such party to any Governmental Entity
and of any material communication received or given in connection with any
proceeding by a private party, in each case regarding any of the transactions
contemplated hereby and (iii) consult with each other in advance of any meeting
or conference with any such Governmental Entity or, in connection with any
proceeding by a private party, with any other person, and to the extent
permitted by the applicable Governmental Entity or other person, give the other
Party the opportunity to attend and participate in such meetings and
conferences.
(d) In furtherance and not in limitation of the covenants of the
parties contained in Sections 7.3(a), (b) and (c), if any administrative or
judicial action or proceeding, including any proceeding by a private party, is
instituted (or threatened to be instituted) challenging any transaction
contemplated by this Agreement or the Option Agreements as violative of any
applicable law, or if any statute, rule, regulation, executive order, decree,
injunction or administrative order is enacted, entered or promulgated or
enforced by a Governmental Entity which would make the Merger or the other
transactions contemplated hereby or by the Option Agreements illegal or
otherwise prohibit or materially impair or delay consummation of the
transactions contemplated hereby or thereby, each of Bell Atlantic and GTE shall
cooperate in all respects with each other and use all commercially reasonable
efforts to contest and resist any such action or proceeding, to have vacated,
lifted, reversed or overturned any decree, judgment, injunction or other order,
whether temporary, preliminary or permanent, that is in effect and that
prohibits, prevents or restricts consummation of the transactions contemplated
by this Agreement and to have such statute, rule, regulation, executive order,
decree, injunction or administrative order repealed, rescinded or made
inapplicable. Notwithstanding the foregoing or any other provision of this
Agreement, nothing in this Section 7.3 shall limit a party's right to terminate
this Agreement pursuant to Section 9.1 so long as such Party has up to then
complied in all respects with its obligations under this Section 7.3.
(e) If any objections are asserted with respect to the transactions
contemplated hereby under any applicable law or if any suit is instituted by any
Governmental Entity or any private party challenging any of the transactions
contemplated hereby as violative of any applicable law, each of Bell Atlantic
and GTE shall use its commercially reasonable efforts to resolve any such
objections or challenge as such Governmental Entity or private party may
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have to such transactions under such law so as to permit consummation of the
transactions contemplated by this Agreement.
SECTION 7.4 -- NOTIFICATION OF CERTAIN MATTERS. Each of GTE and Bell
Atlantic shall give prompt notice to the other of the following:
(a) the occurrence or nonoccurrence of any event whose occurrence or
nonoccurrence would be likely to cause either (i) any representation or warranty
contained in this Agreement to be untrue or inaccurate in any material respect
at any time from the date hereof to the Effective Time, or (ii) directly or
indirectly, any Material Adverse Effect on such Party;
(b) any material failure of such Party, or any officer, director,
employee or Agent of any thereof, to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder, and
(c) any facts relating to such Party which would make it necessary or
advisable to amend the Joint Proxy Statement or the Registration Statement in
order to make the statements therein not misleading or to comply with applicable
law; provided, however, that the delivery of any notice pursuant to this Section
7.4 shall not limit or otherwise affect the remedies available hereunder to the
Party receiving such notice.
SECTION 7.5 -- ACCESS TO INFORMATION. (a) From the date hereof to the
Effective Time, each of GTE and Bell Atlantic shall, and shall cause its
respective Subsidiaries, and its and their officers, directors, employees,
auditors, counsel and agents to afford the officers, employees, auditors,
counsel and agents of the other Party complete access at all reasonable times to
such Party's and its Subsidiaries' officers, employees, auditors, counsel
agents, properties, offices and other facilities and to all of their respective
books and records, and shall furnish the other with all financial, operating and
other data and information as such other Party may reasonably request, including
in connection with confirmatory due diligence.
(b) Each of GTE and Bell Atlantic agrees that all information so
received from the other Party shall be deemed received pursuant to the
Nondisclosure Agreement and such Party shall, and shall cause its Subsidiaries
and each of its and their respective officers, directors, employees, financial
advisors and agents ("Party Representatives"), to comply with the provisions of
the Nondisclosure Agreement with respect to such information and the provisions
of the Nondisclosure Agreement are hereby incorporated herein by reference with
the same effect as if fully set forth herein, provided that such information may
be used for any purpose contemplated hereby.
SECTION 7.6 -- PUBLIC ANNOUNCEMENTS. GTE and Bell Atlantic shall use
all reasonable efforts to develop a joint communications plan and each Party
shall use all reasonable efforts to ensure that all press releases and other
public statements with respect to
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the transactions contemplated hereby shall be consistent with such joint
communications plan or, to the extent inconsistent therewith, shall have
received the prior written approval of the other.
SECTION 7.7 -- TRANSFER STATUTES. Each of GTE and Bell Atlantic agrees
to use its commercially reasonable efforts to comply promptly with all
requirements of the New Jersey and Connecticut Property Transfer Statutes, to
the extent applicable to the transactions contemplated hereby, and to take all
actions necessary to cause the transactions contemplated hereby to be effected
in compliance with the New Jersey and Connecticut Property Transfer Statutes.
GTE and Bell Atlantic agree that they will consult with each other to determine
what, if any, actions must be taken prior to or after the Effective Time to
ensure compliance with such statutes. Each of GTE and Bell Atlantic agrees to
provide the other with any documents to be submitted to the relevant state
agencies prior to submission and agrees not to take any action to comply with
the New Jersey and Connecticut Property Transfer Statutes without the other's
prior consent, which consent shall not be unreasonably withheld. Each Party
shall bear its respective costs and expenses incurred in connection with
compliance with the New Jersey and Connecticut Property Transfer Statutes. For
purposes of this section, the New Jersey and Connecticut Property Transfer
Statutes means the New Jersey Industrial Site Recovery Act, 1993 N.J. Laws 139,
and the Connecticut Transfer Act, Conn. Gen. Stat. Ann. ss. 22a-134(b).
SECTION 7.8 INDEMNIFICATION, DIRECTORS' AND OFFICERS' INSURANCE. For a
period of six years after the Effective Time, Bell Atlantic shall cause GTE to,
and Bell Atlantic shall, maintain in effect the current policies of directors'
and officers' liability insurance and fiduciary liability insurance maintained
by GTE and Bell Atlantic, respectively (provided that Bell Atlantic may
substitute therefor policies of at least the same coverage and amounts
containing terms and conditions which are, in the aggregate, no less
advantageous to the insured in any material respect) with respect to all
possible claims arising from facts or events which occurred on or before the
Effective Time. Bell Atlantic shall cause GTE to maintain in effect (a) the
current provisions regarding indemnification of officers and directors contained
in the charter and bylaws of GTE and each of its Subsidiaries until the statutes
of limitations for all possible claims have run; provided that Bell Atlantic
need not cause GTE to maintain in effect indemnification provisions contained in
the charter and bylaws of its Subsidiaries if and to the extent that Bell
Atlantic assumes such indemnity obligations; and (b) any directors, officers or
employees indemnification agreements of GTE and its respective Subsidiaries.
Bell Atlantic shall cause GTE to, and Bell Atlantic shall, indemnify the
directors and officers of GTE and Bell Atlantic, respectively, to the fullest
extent to which GTE and Bell Atlantic are permitted to indemnify such officers
and directors under their respective charters and bylaws and applicable law. As
of the Effective Time, Bell Atlantic shall unconditionally and irrevocably
guarantee for the benefit of such directors, officers and employees the
obligations of GTE under the foregoing indemnification arrangements.
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SECTION 7.9 -- EMPLOYEE BENEFIT PLANS. (a) Except as otherwise provided
herein or set forth in Section 6.2 of the Disclosure Schedules, GTE and Bell
Atlantic agree that, unless otherwise mutually determined, the GTE Plans and the
Bell Atlantic Plans in effect at the date hereof shall remain in effect after
the Effective Time with respect to classes of employees covered by such plans
immediately prior to the Effective Time.
From time to time from the date hereof to the Effective Time, the
management of Bell Atlantic and GTE shall consult with one another for the
purpose of reviewing such Benefit Plans for management (non-represented)
employees of Bell Atlantic and GTE and their respective subsidiaries
("Management Employees"), and determining which of such Benefit Plans represent
best competitive practices, which should be terminated at the Effective Time (or
following a transition period thereafter), and which of such Benefit Plans
should be redesigned and/or extended to other employees at (or after) the
Effective Time. Notwithstanding the foregoing or any other provision of this
Agreement, (1) after the Effective Time, Bell Atlantic shall cause the
compensation and benefits provided to similarly-situated Management Employees of
each business unit to be at least as valuable as the aggregate compensation and
benefit package provided to such employees of that business unit immediately
prior to the Effective Time, except to the extent (i) such benefits and/or
compensation plans are replaced by one or more benefits and/or compensation
plans at least as valuable as those which are provided to similarly situated
employees of comparable business units of the other Party or its subsidiaries,
or (ii) corresponding benefits for similarly situated employees of the other
Party or its subsidiaries are eliminated, (2) from the Effective Time until the
first anniversary thereof, Bell Atlantic shall not, and shall ensure that each
of its Subsidiaries shall not, discontinue, or change eligibility provisions or
levels of benefits under, severance plans, policies and arrangements in which
such Management Employees participated immediately prior to the Effective Time,
and further agrees that any of such plans, policies or arrangements that expire
during such one-year period shall be extended for the duration of such one-year
period, and (3) for the 18-month period immediately following the Effective
Time, with respect to those GTE Management Employees who were relocated as part
of the consolidation of GTE's world headquarters to Texas, Bell Atlantic shall
not, and shall ensure that each of its Subsidiaries shall not, discontinue, or
change the relocation benefits program which was applicable to such Management
Employees as of the Effective Time. In addition, with respect to all Management
Employees, at and after the Effective Time (i) each such employee shall receive
full credit for their credited service with their respective employer prior to
the Effective Time for all purposes, including eligibility (including
eligibility for early retirement, disability and other benefits), vesting, level
of benefits and benefit accrual (except to the extent such benefit accrual would
be duplicative); (ii) any provisions which restrict benefits by reason of
pre-existing conditions, waiting periods or evidence of insurability shall be
waived and (iii) such employees shall receive credit under such plan for
co-payments and deductible during the applicable plan year.
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(b) Except as otherwise set forth in Sections 2.8 and 2.9 hereof, in
the case of the GTE Plans under which the employees' interests are based upon
GTE Common Stock, or the respective market prices thereof (but which interests
do not constitute stock options), GTE and Bell Atlantic agree that such
interests shall, from and after the Effective Time, be based on Bell Atlantic
Common Stock in accordance with the Exchange Ratio.
(c) With respect to all GTE Plans which have entitlement or vesting
terms that are based upon the market price or value per share of GTE Common
Stock, GTE and Bell Atlantic agree that from and after the Effective Time, such
market price or value per share shall be adjusted by multiplying it by the
inverse of the Exchange Ratio.
(d) With respect to any GTE Plans maintained or contributed to outside
the United States for the benefit of non-United States citizens or residents,
the principles set forth in this Section 7.9 and in Section 6.2 of the
Disclosure Schedules shall apply to the extent the application of such
principles does not violate applicable foreign law.
(e) Without limiting the applicability of Sections 2.8 and 2.9 hereof,
each of the Parties shall take all actions as are necessary to ensure that GTE
will not at the Effective Time be bound by any stock options, SARS, warrants or
other rights or agreements which would entitle any person, other than Bell
Atlantic, to own any capital stock of the Surviving Corporation or to receive
any payment in respect thereof, and all GTE Plans conferring any rights with
respect to GTE Common Stock or other capital stock of GTE shall be deemed hereby
to be amended to be in conformity with this Section 7.9.
SECTION 7.10 -- SUCCESSION. (a) At the Effective Time, pursuant to the
terms of the Employment Agreements (as defined below) and subject to Section
5.11 of the Bylaws of Bell Atlantic reflecting the Bylaws Amendment (the
"Amended Bylaws") (i) Charles R. Lee shall hold the positions of Chairman and
Co-Chief Executive Officer of Bell Atlantic and (ii) Ivan G. Seidenberg shall
hold the positions of President and Co-Chief Executive Officer of Bell Atlantic.
Pursuant to the terms of the Employment Agreements and subject to Section 5.11
of the Amended Bylaws (A) on June 30, 2002, Mr. Seidenberg shall become the sole
Chief Executive Officer of Bell Atlantic and (B) on June 30, 2004, Mr. Lee shall
cease to be Chairman of Bell Atlantic and such position will be assumed by Mr.
Seidenberg. If either of such persons is unable or unwilling to hold such
offices as set forth above, his successor shall be selected by the Board of
Directors of Bell Atlantic in accordance with the Amended Bylaws. The authority,
duties and responsibilities of the positions set forth above shall be set forth
in the Employment Agreements, which Employment Agreements shall also set forth
in their entirety the rights and remedies of Mr. Seidenberg and Mr. Lee with
respect to employment by Bell Atlantic. Neither Mr. Seidenberg nor Mr. Lee shall
have any right, remedy or cause of action under this Section 7.10, nor shall
they be third party beneficiaries of this Section 7.10.
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(b) As soon as practicable after the date hereof, Bell Atlantic shall
enter into employment agreements effective as of the Effective Time (the
"Employment Agreements") with Messrs. Lee and Seidenberg containing arrangements
concerning management succession satisfactory to each Party.
SECTION 7.11 -- STOCK EXCHANGE LISTING. Each of the Parties shall use
its best efforts to obtain, prior to the Effective Time, the approval for
listing on the NYSE, effective upon official notice of issuance, of the shares
of Bell Atlantic Common Stock into which the GTE Common Stock will be converted
pursuant to Article II hereof and which will be issuable upon exercise of
options pursuant to Section 2.8 hereof.
SECTION 7.12 -- POST-MERGER BELL ATLANTIC BOARD OF DIRECTORS. (a) At
the Effective Time, 50% of the directors of Bell Atlantic shall be directors
selected by Bell Atlantic, to the extent possible from current directors of Bell
Atlantic, and 50% shall be selected by GTE, to the extent possible from current
directors of GTE.
The persons to serve initially on the Board of Directors of Bell
Atlantic at the Effective Time who are GTE Directors (as defined below) shall be
selected solely by and at the absolute discretion of the Board of Directors of
GTE prior to the Effective Time; and the persons to serve on the Board of
Directors of Bell Atlantic at the Effective Time who are Bell Atlantic Directors
(as defined below) shall be selected solely by and at the absolute discretion of
the Board of Directors of Bell Atlantic prior to the Effective Time. In the
event that, prior to the Effective Time, any person so selected to serve on the
Board of Directors of Bell Atlantic after the Effective Time is unable or
unwilling to serve in such position, the Board of Directors which selected such
person shall designate another of its members to serve in such person's stead in
accordance with the provisions of the immediately preceding sentence.
(b) From and after the Effective Time and until July 1, 2002, the Board
of Directors of Bell Atlantic and each Committee of the Board of Directors of
Bell Atlantic as constituted following each election of Directors shall consist
of an equal number of GTE Directors and Bell Atlantic Directors and subject to
the fiduciary duties of the Directors, the Board of Directors shall nominate for
election at each stockholders meeting at which Directors are elected, an equal
number of GTE Directors and Bell Atlantic Directors. If, at any time prior to
July 1, 2002, the number of GTE Directors and Bell Atlantic Directors serving,
either as directors or as members of any Committee of the Board of Directors of
Bell Atlantic, would not be equal, then, subject to the fiduciary duties of the
directors, the Board of Directors shall appoint to fill any existing vacancy or
vacancies, as appropriate, such person or persons as may be requested by the
remaining GTE Directors (if the number of GTE Directors is, or would otherwise
become, less than the number of Bell Atlantic Directors) or by the remaining
Bell Atlantic Directors (if the number of Bell Atlantic Directors is, or would
otherwise become, less than the number of GTE Directors) to ensure that there
shall be an equal number of GTE Directors and Bell Atlantic Directors. The
provisions of the preceding two sentences
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shall not apply in respect of any vacancy which occurs after July 1, 2002. The
term "GTE Director" means (i) any person serving as a director of GTE on the
date hereof who becomes a director of Bell Atlantic at the Effective Time and
(ii) any person who subsequently becomes a director of Bell Atlantic and who is
designated by the GTE Directors pursuant to this paragraph; and the term "Bell
Atlantic Director" means (i) any person serving as a director of Bell Atlantic
on the date hereof who continues as a director of Bell Atlantic after the
Effective Time and (ii) any person who becomes a director of Bell Atlantic and
who is designated by the Bell Atlantic Directors pursuant to this paragraph.
From the Effective Time through July 1, 2002, the Board of Directors shall
consist of an even number of Directors and such number of Directors shall not be
amended unless, immediately following such amendment, the number of GTE
Directors then in office is equal to the number of Bell Atlantic Directors then
in office.
(c) Each of GTE and Bell Atlantic shall take such action as shall
reasonably be deemed by either thereof to be advisable to give effect to the
provisions set forth in this section, including but not limited to incorporating
such provisions in the Bylaws of Bell Atlantic in effect at the Effective Time.
SECTION 7.13 -- NO SHELF REGISTRATION. Bell Atlantic shall not be
required to amend or maintain the effectiveness of the Registration Statement
for the purpose of permitting resale of the shares of Bell Atlantic Common Stock
received pursuant hereto by the persons who may be deemed to be "affiliates" of
GTE or Bell Atlantic within the meaning of Rule 145 promulgated under the 1933
Act. The shares of Bell Atlantic Common Stock issuable upon exercise of options
pursuant to Section 2.8 hereof shall be registered under the 1933 Act and such
registration shall be effective at the time of issuance.
SECTION 7.14 -- AFFILIATES. (a) Each of GTE and Bell Atlantic (i) has
disclosed to the other in Section 7.14 of the Disclosure Schedules all persons
who are, or may be, as of the date hereof its "affiliates" for purposes of Rule
145 under the Securities Act or SEC Accounting Series Release 135, and (ii)
shall use all reasonable efforts to cause each person who is identified as an
"affiliate" of it in Section 7.14 of the Disclosure Schedules to deliver to the
other as promptly as practicable but in no event later than 31 days prior to the
Closing Date, a signed Agreement substantially in the form attached hereto as
Exhibit 7.14(a), in the case of GTE, and 7.14(b), in the case of Bell Atlantic.
GTE and Bell Atlantic shall notify each other from time to time of any other
persons who then are, or may be, such an "affiliate" and use all reasonable
efforts to cause each additional person who is identified as an "affiliate" to
execute a signed Agreement as set forth in this Section 7.14(a).
(b) If the transactions contemplated by this Agreement and the Option
Agreements would otherwise qualify for pooling of interests accounting
treatment, shares of GTE Common Stock and shares of Bell Atlantic Common Stock
held by such "affiliates" of GTE or Bell Atlantic, as the case may be, shall not
be transferable during the 30 day period prior to the Effective Time, and shares
of Bell Atlantic Common Stock issued to, or as of the Effective
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Time held by, such "affiliates" of GTE and Bell Atlantic shall not be
transferable until such time as financial results covering at least 30 days of
combined operations of GTE and Bell Atlantic have been published within the
meaning of Section 201.01 of the SEC's Codification of Financial Reporting
Policies, regardless of whether each such "affiliate" has provided the signed
Agreement referred to in Section 7.14 (a), except to the extent permitted by,
and in accordance with, SEC Accounting Series Release 135 and SEC Staff
Accounting Bulletins 65 and 76. Any Bell Atlantic Common Stock held by any such
"affiliate" shall not be transferable, regardless of whether such "affiliate"
has provided the applicable signed Agreement referred to in Section 7.14(a), if
such transfer, either alone or in the aggregate with other transfers by
"affiliates", would preclude the ability of the Parties to account for the
transactions contemplated by this Agreement and the Option Agreements as a
pooling of interests. Bell Atlantic shall not register the transfer of any
shares of Bell Atlantic Common Stock unless such transfer is made in compliance
with the foregoing.
SECTION 7.15 -- BLUE SKY. GTE and Bell Atlantic will use their best
efforts to obtain prior to the Effective Time all necessary blue sky permits and
approvals required to permit the distribution of the shares of Bell Atlantic
Common Stock to be issued in accordance with the provisions of this Agreement.
SECTION 7.16 -- POOLING OF INTERESTS. Each of the Parties will use its
best efforts to (a) cause the transactions contemplated by this Agreement to be
accounted for as a pooling of interests in accordance with GAAP, and such
accounting treatment to be accepted by Bell Atlantic's independent certified
public accountants, by the NYSE and by the SEC, respectively, and (b) not take
any action which could reasonably be expected to cause such accounting treatment
not to be obtained; provided that the foregoing shall not apply to any conduct
or the effect of any conduct to obtain all necessary waivers, approvals and
consents, and to avoid any contractual, legal, regulatory or other issues,
impediments or delays, to consummate the transactions contemplated by this
Agreement and the Option Agreements. Nothing in this Agreement shall restrict
the rights of any Party pursuant to the Option Agreements.
SECTION 7.17 -- TAX-FREE REORGANIZATION. (a) Each of the Parties will
use its best efforts to cause the Merger to qualify as a tax-free reorganization
under Section 368 of the Code. (b) Bell Atlantic will deliver an Officer's
Certificate substantially in the form of Exhibit 7.17(b)(i) executed as of the
Closing Date and GTE will deliver an Officer's Certificate substantially in the
form of Exhibit 7.17(b)(ii) executed as of the Closing Date.
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ARTICLE VIII -- CONDITIONS TO MERGER
SECTION 8.1 -- CONDITIONS TO OBLIGATIONS OF EACH PARTY TO EFFECT THE
MERGER. The respective obligations of each Party to effect the Merger shall be
subject to the following conditions:
(a) STOCKHOLDER APPROVAL. Each of the GTE Stockholder Approval and the
Bell Atlantic Stockholder Approval shall have been obtained;
(b) LEGALITY. No federal, state or foreign statute, rule, regulation,
executive order, decree, injunction or administrative order shall have been
enacted, entered, promulgated or enforced by any Governmental Entity which is in
effect and has the effect of (i) making the Merger illegal or otherwise
prohibiting the consummation of the Merger or (ii) creating a Material Adverse
Effect on GTE or Bell Atlantic, with or without including its ownership of GTE
and its Subsidiaries after the Effective Time;
(c) HSR ACT; CALIFORNIA PUC. Any waiting period applicable to the
consummation of the Merger under the HSR Act shall have expired or been
terminated and the decision and order of the California Public Utilities
Commission ("CPUC") authorizing the Merger and making any required
determinations under Section 854(a)-(c) of the California Public Utilities Code,
including its determination as to any required allocation of economic benefits,
if any, of the Merger, between shareholders and ratepayers, shall have become
final;
(d) REGULATORY MATTERS. All authorizations, consents, orders, permits
or approvals of, or declarations or filings with, and all expirations of waiting
periods imposed by, any Governmental Entity (all of the foregoing, "Consents")
which are necessary for the consummation of the transactions contemplated
hereby, other than Consents which, if not obtained, would not have a Material
Adverse Effect on Bell Atlantic, with or without including its ownership of GTE
and its Subsidiaries after the Merger, or GTE, shall have been filed, have
occurred or have been obtained (all such Consents being referred to as the
"Requisite Regulatory Approvals") and all such Requisite Regulatory Approvals
shall be in full force and effect, provided, however, that a Requisite
Regulatory Approval shall not be deemed to have been obtained if in connection
with the grant thereof there shall have been an imposition by any Governmental
Entity of any condition, requirement, restriction or change of regulation, or
any other action directly or indirectly related to such grant taken by such
Governmental Entity, which would reasonably be expected to have a Material
Adverse Effect on either of (A) GTE or (B) Bell Atlantic (either with or without
including its ownership of GTE and its Subsidiaries after the Merger);
(e) REGISTRATION STATEMENT EFFECTIVE. The Registration Statement shall
have become effective prior to the mailing by each of GTE and Bell Atlantic of
the Joint Proxy
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Statement to its respective stockholders, no stop order suspending the
effectiveness of the Registration Statement shall then be in effect, and no
proceedings for that purpose shall then be threatened by the SEC or shall have
been initiated by the SEC and not concluded or withdrawn;
(f) BLUE SKY. All state securities or blue sky permits or approvals
required to carry out the transactions contemplated hereby shall have been
received;
(g) STOCK EXCHANGE LISTING. The shares of Bell Atlantic Common Stock
into which the GTE Common Stock will be converted pursuant to Article II hereof
and the shares of Bell Atlantic Common Stock issuable upon the exercise of
options pursuant to Section 2.8 hereof shall have been duly approved for listing
on the NYSE, subject to official notice of issuance;
(h) POOLING. Unless unable to be delivered due to actions taken by the
Parties which constitute mutually agreed commercially reasonable efforts or
commercially reasonable efforts with respect to wireless operations, (i) Bell
Atlantic shall have received a letter from PricewaterhouseCoopers L.L.P., dated
as of the Closing Date, to the effect that the transactions contemplated hereby
will qualify for pooling of interests accounting treatment; and (ii) GTE shall
have received a letter from Arthur Andersen LLP, dated as of the Closing Date,
to the effect that the transactions contemplated hereby will qualify for pooling
of interests accounting treatment;
(i) CONSENTS UNDER GTE AGREEMENTS. GTE shall have obtained the consent
or approval of any person whose consent or approval shall be required under any
agreement or instrument in order to permit the consummation of the transactions
contemplated hereby except those which the failure to obtain would not,
individually or in the aggregate, have a Material Adverse Effect on Bell
Atlantic, including its ownership of GTE and its Subsidiaries after the Merger;
and
(j) CONSENTS UNDER BELL ATLANTIC AGREEMENTS. Bell Atlantic shall have
obtained the consent or approval of any person whose consent or approval shall
be required under any agreement or instrument in order to permit the
consummation of the transactions contemplated hereby except those which the
failure to obtain would not, individually or in the aggregate, have a Material
Adverse Effect on Bell Atlantic, including its ownership of GTE and its
Subsidiaries after the Merger.
SECTION 8.2 -- ADDITIONAL CONDITIONS TO OBLIGATIONS OF GTE. The
obligations of GTE to effect the Merger are also subject to the fulfillment of
the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Bell Atlantic contained in this Agreement shall be true and correct on the
date hereof and (except to the extent such representations and warranties speak
as of a date earlier than the date hereof)
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shall also be true and correct on and as of the Closing Date, except for changes
permitted under Section 6.2 hereof or otherwise contemplated by this Agreement
and the Option Agreements, with the same force and effect as if made on and as
of the Closing Date, provided, however, that for purposes of this Section 8.2(a)
only, such representations and warranties shall be deemed to be true and correct
unless the failure or failures of such representations and warranties to be so
true and correct (without regard to materiality qualifiers contained therein),
individually or in the aggregate, results or would reasonably be expected to
result in a Material Adverse Effect on Bell Atlantic, either with or without
including its ownership of GTE and its Subsidiaries after the Merger;
(b) AGREEMENTS AND COVENANTS. Bell Atlantic and Merger Subsidiary shall
have performed or complied with all agreements and covenants required by this
Agreement to be performed or complied with by them on or before the Effective
Time, provided, however, that for purposes of this Section 8.2 (b) only, such
agreements and covenants shall be deemed to have been complied with unless the
failure or failures of such agreements and covenants to have been complied with
(without regard to materiality qualifiers contained therein), individually or in
the aggregate, results or would reasonably be expected to result in a Material
Adverse Effect on Bell Atlantic, either with or without including its ownership
of GTE and its Subsidiaries after the Merger;
(c) CERTIFICATES. GTE shall have received a certificate of an executive
officer of Bell Atlantic to the effect set forth in paragraphs (a) and (b)
above;
(d) TAX OPINION. GTE shall have received an opinion of O'Melveny &
Myers LLP, special counsel to GTE, dated as of the Closing Date, in form and
substance reasonably satisfactory to GTE, substantially to the effect that, on
the basis of the facts, representations and assumptions set forth in such
opinion, the Merger constitutes a tax-free reorganization under Section 368 of
the Code and therefore: (A) no gain or loss will be recognized for federal
income tax purposes by Bell Atlantic, GTE or Merger Subsidiary as a result of
the formation of Merger Subsidiary and the Merger; and (B) no gain or loss will
be recognized for federal income tax purposes by the stockholders of GTE upon
their exchange of GTE Common Stock solely for Bell Atlantic Common Stock
pursuant to the Merger (except with respect to cash received in lieu of a
fractional share interest in Bell Atlantic Common Stock). In rendering such
opinion, O'Melveny & Myers LLP may require and rely upon representations and
covenants including representations and covenants substantially in the form of
those contained in the GTE officer's certificate and the Bell Atlantic officer's
certificate attached hereto as Exhibit 7.17(b)(ii) and Exhibit 7.17(b)(i),
respectively;
(e) AFFILIATE AGREEMENTS. GTE shall have received the agreements
required by Section 7.14 hereof to be delivered by the Bell Atlantic
"affiliates," duly executed by each "affiliate" of Bell Atlantic; and
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(f) BYLAWS AMENDMENT, BOARD OF DIRECTORS. Bell Atlantic shall have
taken all such actions as shall be necessary so that (i) the Bylaws Amendment
shall become effective not later than the Effective Time; and (ii) at the
Effective Time, the composition of Bell Atlantic's Board shall comply with
Section 7.12 hereof (assuming GTE has designated the GTE Directors as
contemplated by Section 7.12 hereof).
SECTION 8.3 -- ADDITIONAL CONDITIONS TO OBLIGATIONS OF BELL ATLANTIC.
The obligations of Bell Atlantic to effect the Merger are also subject to the
fulfillment of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of GTE contained in this Agreement shall be true and correct on the date hereof
and (except to the extent such representations and warranties speak as of a date
earlier than the date hereof) shall also be true and correct on and as of the
Closing Date, except for changes permitted under Section 6.2 hereof or otherwise
contemplated by this Agreement and the Option Agreements, with the same force
and effect as if made on and as of the Closing Date, provided, however, that for
purposes of this Section 8.3 (a) only, such representations and warranties shall
be deemed to be true and correct unless the failure or failures of such
representations and warranties to be so true and correct (without regard to
materiality qualifiers contained therein), individually or in the aggregate,
results or would reasonably be expected to result in a Material Adverse Effect
on GTE or Bell Atlantic (only after including its ownership of GTE and its
Subsidiaries after the Merger);
(b) AGREEMENTS AND COVENANTS. GTE shall have performed or complied with
all agreements and covenants required by this Agreement to be performed or
complied with by them on or before the Effective Time, provided, however, that
for purposes of this Section 8.3 (b) only, such agreements and covenants shall
be deemed to have been complied with unless the failure or failures of such
agreements and covenants to have been complied with (without regard to
materiality qualifiers contained therein), individually or in the aggregate,
results or would reasonably be expected to result in a Material Adverse Effect
on GTE;
(c) CERTIFICATES. Bell Atlantic shall have received a certificate of an
executive officer of GTE to the effect set forth in paragraphs (a) and (b)
above;
(d) GTE RIGHTS AGREEMENT. The rights issued pursuant to the GTE Rights
Agreement shall not have become non-redeemable, exercisable, distributed or
triggered pursuant to the terms of such Agreement and would not become so upon
consummation of the transactions contemplated hereby;
(e) TAX OPINION. Bell Atlantic shall have received an opinion of
Skadden, Arps, Slate, Meagher & Flom LLP, special counsel to Bell Atlantic,
dated as of the Effective Time, in form and substance reasonably satisfactory to
Bell Atlantic, substantially to the effect that,
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on the basis of the facts, representations and assumptions set forth in such
opinion, the Merger constitutes a tax-free reorganization under Section 368 of
the Code and therefore: (A) no gain or loss will be recognized for federal
income tax purposes by Bell Atlantic, GTE or Merger Subsidiary as a result of
the formation of Merger Subsidiary and the Merger; and (B) no gain or loss will
be recognized for federal income tax purposes by the stockholders of Bell
Atlantic as a result of the Merger, including the Certificate Amendment. In
rendering such opinion, Skadden, Arps, Slate, Meagher & Flom LLP may require and
rely upon representations and covenants including representations and covenants
substantially in the form of those contained in the GTE officer's certificate
and the Bell Atlantic officer's certificate attached hereto as Exhibits
7.17(b)(ii) and 7.17(b)(i) respectively.
(f) AFFILIATE AGREEMENTS. Bell Atlantic shall have received the
agreements required by Section 7.14 hereof to be delivered by the GTE
"affiliates," duly executed by each "affiliate" of GTE.
ARTICLE IX -- TERMINATION, AMENDMENT AND WAIVER
SECTION 9.1 -- TERMINATION. This Agreement may be terminated at any
time before the Effective Time, in each case as authorized by the respective
Board of Directors of GTE or Bell Atlantic:
(a) By mutual written consent of each of GTE and Bell Atlantic;
(b) By either GTE or Bell Atlantic if the Merger shall not have been
consummated on or before July 26, 1999 (the "Initial Termination Date" and as
such may be extended pursuant to this paragraph, the "Termination Date"),
provided, however, that if on the Termination Date the conditions to the Closing
set forth in Sections 8.1(b)(i), (c) or (d) shall not have been fulfilled, but
all other conditions to the Closing shall be fulfilled or shall be capable of
being fulfilled, then the Termination Date shall be extended to March 31, 2000,
(the "Extended Termination Date"); and provided further that if on the Extended
Termination Date the conditions to the Closing set forth in Sections 8.1(b)(i),
(c) or (d) shall not have been fulfilled, but all other conditions to the
Closing shall be fulfilled or shall be capable of being fulfilled, then the
Termination Date shall be extended to June 30, 2000 (the "Final Termination
Date"), unless within five days prior to the Extended Termination Date any Party
reasonably determines that it is substantially unlikely that the conditions to
the Closing set forth in Sections 8.1(b)(i), (c) and (d) will be fulfilled by
the Final Termination Date and delivers to the other Parties a notice to such
effect. The right to terminate this Agreement under this Section 9.1(b) shall
not be available to any Party whose failure to fulfill any obligation under this
Agreement has been the cause of, or resulted in, the failure of any condition to
be satisfied;
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(c) By either GTE or Bell Atlantic if after the date hereof a court of
competent jurisdiction or Governmental Entity shall have issued an order, decree
or ruling or taken any other action (which order, decree or ruling the Parties
shall use their commercially reasonable efforts to lift), in each case
permanently restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement and the Option Agreements, and such order,
decree, ruling or other action shall have become final and nonappealable;
(d) (i) by GTE, (A) if Bell Atlantic shall have breached or failed to
perform in any material respect any of its representations, warranties,
covenants or other agreements contained in this Agreement, which breach or
failure to perform (1) is incapable of being cured by Bell Atlantic prior to the
Termination Date and (2) renders any condition under Section 8.1 or 8.2
incapable of being satisfied prior to the Termination Date, or (B) if a
condition under Sections 8.1 or 8.2 to GTE's obligations hereunder cannot be
satisfied prior to the Termination Date;
(ii) by Bell Atlantic, (A) if GTE shall have breached or failed to
perform in any material respect any of its representations, warranties,
covenants or other agreements contained in this Agreement, which breach or
failure to perform (1) is incapable of being cured by GTE prior to the
Termination Date and (2) renders any condition under Sections 8.1 and 8.3
incapable of being satisfied prior to the Termination Date, or (B) if a
condition under Sections 8.1 or 8.3 to Bell Atlantic's obligations hereunder
cannot be satisfied prior to the Termination Date;
(e) By either GTE or Bell Atlantic if the Board of Directors of the
other or any committee of the Board of Directors of the other (i) shall fail to
include in the Joint Proxy Statement its recommendation without modification or
qualification that stockholders approve this Agreement and the Merger, in the
case of GTE, or the Stock Issuance and the Certificate Amendment, in the case of
Bell Atlantic Stock, (ii) shall withdraw or modify in any adverse manner its
approval or recommendation of this Agreement or the Merger, in the case of GTE,
or the Certificate Amendment or the Stock Issuance in the case of Bell Atlantic,
(iii) shall fail to reaffirm such approval or recommendation upon such Party's
request, (iv) shall approve or recommend any Alternative Transaction or (v)
shall resolve to take any of the actions specified in this Section 9.1(e); or
(f) By either GTE or Bell Atlantic if any of the required approvals of
the stockholders of GTE or of Bell Atlantic shall fail to have been obtained at
a duly held stockholders meeting of either of such companies, including any
adjournments thereof.
SECTION 9.2 -- EFFECT OF TERMINATION. (a) In the event of termination
of this Agreement as provided in Section 9.1 hereof, and subject to the
provisions of Section 10.1 hereof, this Agreement shall forthwith become void
and there shall be no liability on the part of any of the Parties, except (i) as
set forth in this Section 9.2 and in Sections 4.10, 4.16, 5.10,
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5.16 and 10.3 hereof, and (ii) nothing herein shall relieve any Party from
liability for any willful breach hereof.
(b) If this Agreement (i) is terminated by GTE pursuant to Section
9.1(e) hereof, (ii) could have been (but was not) terminated by GTE pursuant to
Section 9.1(e) hereof and is subsequently terminated by Bell Atlantic or GTE
pursuant to Section 9.1(f) because of the failure to obtain the Bell Atlantic
Stockholder Approval, (iii)(A) could not have been terminated by GTE pursuant to
Section 9.1(e) hereof but is subsequently terminated by Bell Atlantic or GTE
pursuant to Section 9.1(f) because of the failure to obtain the Bell Atlantic
Stockholder Approval, (B) prior to the Bell Atlantic Stockholders' Meeting there
shall have been an offer or proposal for, an announcement of any intention with
respect to (including the filing of a statement of beneficial ownership on
Schedule 13D discussing the possibility of or reserving the right to engage in),
or any agreement with respect to, a transaction that would constitute an
Alternative Transaction (as defined in Section 6.3(c) hereof, except that for
the purposes of this Section 9.2(b), the applicable percentage in clause (i) of
such definition shall be fifty percent (50%)) involving Bell Atlantic or any of
Bell Atlantic's Subsidiaries, and (C) within 12 months after the termination of
this Agreement, Bell Atlantic enters into a definitive agreement with any Third
Party with respect to an Alternative Transaction, or (iv) is terminated by GTE
as a result of Bell Atlantic's material breach of Section 7.1, Section 7.2(a) or
Section 7.2(b) hereof which, in the case of Section 7.1 and Section 7.2(a) only,
is not cured within 30 days after notice thereof to Bell Atlantic, Bell Atlantic
shall pay to GTE a termination fee of one billion eight hundred million dollars
($1,800,000,000) (the "GTE Termination Fee").
(c) If this Agreement (i) is terminated by Bell Atlantic pursuant to
Section 9.1(e) hereof, (ii) could have been (but was not) terminated by Bell
Atlantic pursuant to Section 9.1(e) hereof and is subsequently terminated by GTE
or Bell Atlantic pursuant to Section 9.1(f) because of the failure to obtain the
GTE Stockholder Approval, (iii)(A) could not have been terminated by Bell
Atlantic pursuant to Section 9.1(e) hereof but is subsequently terminated by GTE
or Bell Atlantic pursuant to Section 9.1(f) because of the failure to obtain the
GTE Stockholder Approval, (B) prior to the GTE Stockholders' Meeting there shall
have been an offer or proposal for, an announcement of any intention with
respect to (including the filing of a statement of beneficial ownership on
Schedule 13D discussing the possibility of or reserving the right to engage in),
or any agreement with respect to, a transaction that would constitute an
Alternative Transaction (as defined in Section 6.3(c) hereof, except that for
the purposes of this Section 9.2(c), the applicable percentage in clause (i) of
such definition shall be fifty percent (50%)) involving GTE or any of GTE's
Subsidiaries, and (C) within 12 months after the termination of this Agreement,
GTE enters into a definitive agreement with any Third Party with respect to an
Alternative Transaction, or (iv) is terminated by Bell Atlantic as a result of
GTE's material breach of Section 7.1, Section 7.2(c) or Section 7.2(d) hereof
which, in the case of Section 7.1 and Section 7.2(c) only, is not cured within
30 days after notice
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thereof to GTE, GTE shall pay to Bell Atlantic a termination fee of one billion
eight hundred million dollars ($1,800,000,000) (the "Bell Atlantic Termination
Fee").
(d) Each termination fee payable under Sections 9.2(b) and (c) above
shall be payable in cash, payable no later than one business day following the
delivery of notice of termination to the other Party, or, if such fee shall be
payable pursuant to clause (iii) of either of Section 9.2(b) or (c), such fee
shall be payable no later than one business day following the day such Party
enters into the definitive agreement referenced in such clause (iii).
(e) GTE and Bell Atlantic agree that the agreements contained in
Sections 9.2(b) and (c) above are an integral part of the transactions
contemplated by this Agreement and the Option Agreements and constitute
liquidated damages and not a penalty. In the event of any dispute as to whether
any fee due under such Sections 9.2(b) and (c) is due and payable, the
prevailing party shall be entitled to receive from the other Party the costs and
expenses (including legal fees and expenses) in connection with any action,
including the filing of any lawsuit or other legal action, relating to such
dispute. Interest shall be paid on the amount of any unpaid fee at the publicly
announced prime rate of Citibank, N.A. from the date such fee was required to be
paid.
SECTION 9.3 -- AMENDMENT. This Agreement may be amended by the Parties
pursuant to a writing adopted by action taken by all of the Parties at any time
before the Effective Time; provided, however, that, after approval of the Merger
Agreement by the stockholders of GTE or Bell Atlantic, whichever shall occur
first, no amendment may be made which would (a) alter or change the amount or
kinds of consideration to be received by the holders of GTE Common Stock upon
consummation of the Merger, (b) alter or change any term of the Certificate of
Incorporation of GTE or the Certificate of Incorporation of Bell Atlantic
(except for the implementation at the Effective Time of the Certificate
Amendment) or (c) alter or change any of the terms and conditions of this
Agreement if such alteration or change would adversely affect the holders of any
class or series of securities of GTE or Bell Atlantic. This Agreement may not be
amended except by an instrument in writing signed by the Parties.
SECTION 9.4 -- WAIVER. At any time before the Effective Time, any Party
may (a) extend the time for the performance of any of the obligations or other
acts of the other Parties, (b) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant hereto and (c)
waive compliance with any of the agreements or conditions contained herein. Any
agreement on the part of a Party to any such extension or waiver shall be valid
only as against such Party and only if set forth in an instrument in writing
signed by such Party.
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ARTICLE X -- GENERAL PROVISIONS
SECTION 10.1 -- NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
AGREEMENTS. The representations, warranties and agreements in this Agreement
shall terminate at the Effective Time or upon the termination of this Agreement
pursuant to Section 9.1 hereof, as the case may be, except that (a) the
agreements set forth in Article I and Sections 2.2, 2.4, 2.5, 2.6, 2.7, 2.8,
2.9, 7.8, 7.9 and 7.12 hereof shall survive the Effective Time indefinitely, (b)
the agreements and representations set forth in Sections 4.10, 4.16, 5.10, 5.16,
7.5 (b), 9.2 and 10.3 hereof shall survive termination indefinitely and (c)
nothing contained herein shall limit any covenant or Agreement of the Parties
which by its terms contemplates performance after the Effective Time.
SECTION 10.2 -- NOTICES. All notices and other communications given or
made pursuant hereto shall be in writing and shall be deemed to have been duly
given or made as of the date of receipt and shall be delivered personally or
mailed by registered or certified mail (postage prepaid, return receipt
requested), sent by overnight courier or sent by telecopy, to the Parties at the
following addresses or telecopy numbers (or at such other address or telecopy
number for a Party as shall be specified by like notice):
(a) if to GTE:
GTE Corporation
One Stamford Forum
Stamford, Connecticut 06904
Attention: William P. Barr
Executive Vice President-Government
and Regulatory and General Counsel
Telecopy No.: (203) 965-3464
with a copy to:
O'Melveny & Myers LLP
153 East 53rd Street, 54th Floor
New York, New York 10066
Attention: Jeffrey J. Rosen, Esq.
Telecopy No.: (212) 326-2061
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(b) if to Bell Atlantic:
Bell Atlantic Corporation
1095 Avenue of the Americas, 39th Floor
New York, New York 10036
Attention: Vice President and General Counsel
Telecopy: (212) 597-2587
with a copy to:
Bell Atlantic Network Services, Inc.
1717 Arch Street, 32N
Philadelphia, Pennsylvania 19103
Attention: Assistant General Counsel - Mergers and Acquisitions
Telecopy: (215) 963-9195
and
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022-3897
Attention: Peter Allan Atkins, Esq.
Telecopy No.: (212) 735-2000
SECTION 10.3 -- EXPENSES. Except as otherwise provided in this
Agreement, all costs and expenses incurred in connection with this Agreement and
the transactions contemplated hereby shall be paid by the Party incurring such
costs and expenses, except that those expenses incurred in connection with the
printing of the Joint Proxy Statement and the Registration Statement, as well as
the filing fees related thereto and any filing fee required in connection with
the filing of Premerger Notifications under the HSR Act, shall be shared equally
by GTE and Bell Atlantic. GTE will pay any real property transfer or similar
Taxes imposed on the stockholders of GTE in connection with this Agreement and
the transactions contemplated hereby.
SECTION 10.4 -- CERTAIN DEFINITIONS. For purposes of this Agreement,
the following terms shall have the following meanings:
(a) "1933 Act" means the Securities Act of 1933, as the same may be
amended from time to time, and "Exchange Act" means the Securities Exchange Act
of 1934, as the same may be amended from time to time.
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(b) "affiliate" of a person means a person that directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is under
common control with, the first mentioned person.
(c) "commercially reasonable efforts" shall mean those efforts necessary
or advisable to advance the interests of the Parties in achieving the purposes
and specific requirements and satisfying the conditions of this Agreement,
provided that such efforts will not require or include either expense or conduct
not ordinarily incurred or engaged in by Parties seeking to implement agreements
of this type unless part of a separate mutual understanding of the Parties not
contained in this Agreement whether reached before or after the Agreement is
executed.
(d) "control" (including the terms "controlled by" and "under common
control with") means the possession, direct or indirect, of the power to direct
or cause the direction of the management and policies of a person, whether
through the ownership of stock, as trustee or executor, by contract or credit
arrangement or otherwise.
(e) "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as the same may be amended from time to time.
(f) "knowledge" of any Party shall mean the actual knowledge of the
executive officers of such Party.
(g) "Material Adverse Effect" means any change in or effect on the
business of the referenced corporation or any of its Subsidiaries that is or
will be materially adverse to the business, operations (including the income
statement), properties (including intangible properties), condition (financial
or otherwise), assets, liabilities or regulatory status of such referenced
corporation and its Subsidiaries taken as a whole, but shall not include (I) the
effects of changes that are generally applicable in (A) the telecommunications
industry, (B) the United States economy or (C) the United States securities
markets if, in any of (A), (B) or (C), the effect on GTE or Bell Atlantic,
determined without including its ownership of GTE after the Merger, (as the case
may be) and its respective Subsidiaries, taken as a whole, is not materially
disproportionate relative to the effect on the other and its Subsidiaries, taken
as a whole. All references to Material Adverse Effect on Bell Atlantic or its
Subsidiaries contained in Article IV, V or VI of this Agreement shall be deemed
to refer solely to Bell Atlantic and its Subsidiaries without including its
ownership of GTE and its Subsidiaries after the Merger.
(h) "Material Investment" means (a) as to GTE, any person which GTE
directly or indirectly holds the stock of, or other equity interest in, provided
the lesser of the fair market value or book value of such interest exceeds $100
million, excluding, however, any person which is a Subsidiary of GTE; and (b) as
to Bell Atlantic, any person which Bell Atlantic directly or indirectly holds
the stock of, or other equity interest in, provided the lesser
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of the fair market value or book value of such interest exceeds $100 million,
excluding, however, any Person which is a Subsidiary of Bell Atlantic.
(i) "person" means an individual, corporation, partnership, association,
trust, estate, limited liability company, labor union, unincorporated
organization, entity or group (as defined in the Exchange Act).
(j) "POR" means the Plan of Reorganization approved by the United States
Court for the District of Columbia on August 5, 1983 and the Agreement
Concerning Contingent Liabilities, Tax Matters and Termination of Certain
Agreements dated as of November 1, 1983, as amended and supplemented.
(k) "Significant Subsidiary" with respect to GTE means any Subsidiary
which on the date of determination is a "significant subsidiary" within the
meaning of Rule 1-02(w) of Regulation S-X promulgated under the Exchange Act
and, with respect to Bell Atlantic means any Subsidiary which on the date of
determination is a "significant subsidiary" within the meaning of Rule 1-02(w)
of Regulation S-X promulgated under the Exchange Act.
(l) "Subsidiary", "GTE Subsidiary", or "Bell Atlantic Subsidiary" means
any corporation or other legal entity of which GTE or Bell Atlantic, as the case
may be (either alone or through or together with any other Subsidiary or
Subsidiaries), owns, directly or indirectly, more than 50% of the stock or other
equity interests the holders of which are generally entitled to vote for the
election of the board of directors or other governing body of such corporation
or other legal entity. For purposes of this Agreement, Grupo Iusacell S.A. de
C.V. shall be deemed to be a Material Investment, and not a Subsidiary, of Bell
Atlantic.
SECTION 10.5 -- HEADINGS. The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 10.6 -- SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any Party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the Parties shall negotiate
in good faith to modify this Agreement so as to effect the original intent of
the Parties as closely as possible in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the maximum extent possible.
SECTION 10.7 -- ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES. This
Agreement, the Nondisclosure Agreement and the Stock Option Agreements
constitute the entire
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agreement and, except as expressly set forth herein, supersedes any and all
other prior agreements and undertakings, both written and oral, among the
Parties, or any of them, with respect to the subject matter hereof and, except
for Section 7.8 (Indemnification, Directors' and Officers' Insurance) and
Section 7.12 (Post-Merger Bell Atlantic Board of Directors), is not intended to
confer upon any person other than GTE, Bell Atlantic, and Merger Subsidiary and,
after the Effective Time, their respective stockholders, any rights or remedies
hereunder.
SECTION 10.8 -- ASSIGNMENT. This Agreement shall not be assigned by
operation of law or otherwise.
SECTION 10.9 -- GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware applicable to
contracts executed in and to be performed entirely within that State, without
regard to the conflicts of laws provisions thereof; provided that the Merger
shall be governed by the laws of the State of New York applicable to contracts
executed in and to be performed entirely within that State, without regard to
the conflicts of laws provisions thereof.
SECTION 10.10 -- COUNTERPARTS. This Agreement may be executed in two or
more counterparts, and by the different Parties in separate counterparts, each
of which when executed shall be deemed to be an original, but all of which shall
constitute one and the same Agreement.
SECTION 10.11 -- INTERPRETATION.
(a) Whenever the words "include", "includes" or "including" are used in
this Agreement they shall be deemed to be followed by the words "without
limitation."
(b) Words denoting any gender shall include all genders. Where a word
or phrase is defined herein, each of its other grammatical forms shall have a
corresponding meaning.
(c) A reference to any party to this Agreement or any other agreement
or document shall include such party's successors and permitted assigns.
(d) A reference to any legislation or to any provision of any
legislation shall include any modification or re-enactment thereof, any
legislative provision substituted therefor and all regulations and statutory
instruments issued thereunder or pursuant thereto.
(e) All references to "$" and dollars shall be deemed to refer to
United States currency unless otherwise specifically provided.
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IN WITNESS WHEREOF, GTE, Bell Atlantic and Beta Gamma Corporation have
caused this Agreement to be executed as of the date first written above by their
respective officers thereunto duly authorized.
GTE CORPORATION
By: /s/ CHARLES R. LEE
------------------------------------------
Name: Charles R. Lee
Title: Chairman and Chief Executive Officer
By: /s/ MARIANNE DROST
------------------------------------------
Name: Marianne Drost
Title: Secretary
BELL ATLANTIC CORPORATION
By: /s/ IVAN SEIDENBERG
------------------------------------------
Name: Ivan Seidenberg
Title: Vice Chairman, President and Chief
Executive Officer
BETA GAMMA CORPORATION
By: /s/ IVAN SEIDENBERG
------------------------------------------
Name: Ivan Seidenberg
Title: President and Chief Executive Officer
EXHIBIT 99.1
THE TRANSFER OF THIS AGREEMENT IS SUBJECT
TO CERTAIN PROVISIONS CONTAINED HEREIN
AND TO RESALE RESTRICTIONS UNDER THE
SECURITIES ACT OF 1933, AS AMENDED
STOCK OPTION AGREEMENT, dated July 27, 1998, between Bell
Atlantic Corporation, a Delaware corporation ("Issuer"), and GTE Corporation, a
New York corporation ("Grantee").
WHEREAS, Grantee and Issuer have entered into an Agreement and
Plan of Merger of even date herewith (the "Merger Agreement"), which agreement
has been executed by the parties hereto immediately prior to this Stock Option
Agreement (the "Agreement"); and
WHEREAS, as a condition to Grantee's entering into the Merger
Agreement and in consideration therefor and for the transactions contemplated
thereby Issuer has agreed to grant Grantee the Option (as hereinafter defined);
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements set forth herein and in the Merger Agreement,
the parties hereto agree as follows:
1. (a) Issuer hereby grants to Grantee an unconditional,
irrevocable option (the "Option") to purchase, subject to the terms hereof, up
to 155,347,371 fully paid and nonassessable shares of Issuer's Common Stock, par
value $0.10 per share ("Common Stock"), at a price of $45 per share (the "Option
Price"); provided, however, that in no event shall the number of shares of
Common Stock for which this Option is exercisable exceed 10% of the Issuer's
issued and outstanding shares of Common Stock after giving effect to any shares
subject to or issued pursuant to the Option. The number of shares of Common
Stock that may be received upon the exercise of the Option and the Option Price
are subject to adjustment as herein set forth.
(b) In the event that any additional shares of Common
Stock are either (i) issued or otherwise become outstanding after the date of
this Agreement (other than pursuant to this Agreement) or (ii) redeemed,
repurchased, retired or otherwise cease to be outstanding after the date of the
Agreement,
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the number of shares of Common Stock subject to the Option shall be increased
or decreased, as appropriate, so that, after such issuance, such number equals
10% of the number of shares of Common Stock then issued and outstanding after
giving effect to any shares subject or issued pursuant to the Option or, if not
a whole number of shares, rounded down to the next whole number. Nothing
contained in this Section 1(b) or elsewhere in this Agreement shall be deemed to
authorize Issuer or Grantee to breach any provision of the Merger Agreement.
2. (a) The Holder (as hereinafter defined) may exercise the
Option, in whole or part, and from time to time, if, but only if, a Subsequent
Triggering Event (as hereinafter defined) shall have occurred prior to the
occurrence of an Exercise Termination Event (as hereinafter defined), provided
that the Holder shall have sent the written notice of such exercise (as provided
in subsection (e) of this Section 2) within 90 days following such Subsequent
Triggering Event. Each of the following shall be an "Exercise Termination
Event":
(i) the Effective Time (as defined in the Merger
Agreement) of the Merger;
(ii) termination of the Merger Agreement in accordance
with the provisions thereof if such termination occurs prior to the
occurrence of an Initial Triggering Event (as hereinafter defined),
except a termination by Grantee pursuant to Section 9.1(d)(i)(A) of the
Merger Agreement (unless the breach by Issuer giving rise to such right
of termination is non-volitional); or
(iii) the passage of two years after termination of the
Merger Agreement if such termination follows the occurrence of an
Initial Triggering Event or is a termination by Grantee pursuant to
Section 9.1(d)(i)(A) of the Merger Agreement (unless the breach by
Issuer giving rise to such right of termination is non-volitional)
(provided that if an Initial Triggering Event continues or occurs
beyond such termination and prior to the passage of such two-year
period, the Exercise Termination Event shall be two years from the
expiration of the Last Triggering Event but in no event more than two
years and six months after such termination). The "Last Triggering
Event" shall mean the last Initial Triggering Event to occur. The term
"Holder" shall mean the holder or holders of the Option.
(b) The term "Initial Triggering Event" shall mean any of
the following events or transactions occurring after the date hereof:
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(i) Issuer or any of its Subsidiaries (each an "Issuer
Subsidiary"), without having received Grantee's prior written consent,
shall have entered into an agreement to engage in an Alternative
Transaction (as hereinafter defined) with any person (the term "person"
for purposes of this Agreement having the meaning assigned thereto in
Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934,
as amended (the "1934 Act"), and the rules and regulations thereunder)
other than Grantee or any of its Subsidiaries (each a "Grantee
Subsidiary") or the Board of Directors of Issuer shall have recommended
that the stockholders of Issuer approve or accept any Alternative
Transaction;
(ii) Issuer or any Issuer Subsidiary, without having
received Grantee's prior written consent, shall have authorized,
recommended, proposed or publicly announced its intention to authorize,
recommend or propose, to engage in an Alternative Transaction with any
person other than Grantee or a Grantee Subsidiary, or the Board of
Directors of Issuer shall have publicly withdrawn or modified, or
publicly announced its intent to withdraw or modify, in any manner
adverse to Grantee, its recommendation that the stockholders of Issuer
approve the transactions contemplated by the Merger Agreement after
disclosure of the existence of an Alternative Transaction;
(iii) Any person other than Grantee, any Grantee Subsidiary
or any Issuer Subsidiary acting in a fiduciary capacity in the ordinary
course of its business shall have acquired beneficial ownership or the
right to acquire beneficial ownership of 10% or more of the outstanding
shares of Common Stock (the term "beneficial ownership" for purposes of
this Agreement having the meaning assigned thereto in Section 13(d) of
the 1934 Act, and the rules and regulations thereunder);
(iv) Any person other than Grantee or any Grantee
Subsidiary shall have made a bona fide proposal to Issuer or its
stockholders by public announcement or written communication that is or
becomes the subject of public disclosure to engage in an Alternative
Transaction;
(v) After an overture is made by a third party to Issuer
or its stockholders to engage in an Alternative Transaction, Issuer
shall have breached any covenant or obligation contained in the Merger
Agreement and
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such breach (x) would entitle Grantee to terminate the Merger Agreement
and (y) shall not have been cured prior to the Notice Date (as defined
below); or
(vi) Any person other than Grantee or any Grantee
Subsidiary, other than in connection with a transaction to which
Grantee has given its prior written consent, shall have filed an
application or notice with the Federal Communications Commission, or
other federal or state regulatory authority, which application or
notice has been accepted for processing, for approval to engage in an
Alternative Transaction.
(c) The term "Subsequent Triggering Event" shall mean the
consummation of an Alternative Transaction. The term "Alternative Transaction"
means an Alternative Transaction (as defined in the Merger Agreement) with
respect to the Issuer.
(d) Issuer shall notify Grantee promptly in writing of
the occurrence of any Initial Triggering Event and/or Subsequent Triggering
Event of which it has notice (together, a "Triggering Event"), it being
understood that the giving of such notice by Issuer shall not be a condition to
the right of the Holder to exercise the Option.
(e) In the event the Holder is entitled to and wishes to
exercise the Option, it shall send to Issuer a written notice (the date of which
being herein referred to as the "Notice Date") specifying (i) the total number
of shares it will purchase pursuant to such exercise and (ii) a place and date
not earlier than three business days nor later than 30 business days from the
Notice Date for the closing of such purchase (the "Closing Date"); provided that
if prior notification to or approval of the Federal Communications Commission or
any other state or federal regulatory agency is required in connection with such
purchase, the Holder shall promptly file the required notice or application for
approval and shall expeditiously process the same and the period of time that
otherwise would run pursuant to this sentence shall run instead from the date on
which any required notification periods have expired or been terminated or such
approvals have been obtained and any requisite waiting period or periods shall
have passed. Any exercise of the Option shall be deemed to occur on the Notice
Date relating thereto.
(f) At the closing referred to in subsection (e) of this
Section 2, the Holder shall pay to Issuer the aggregate purchase price for the
shares of Common Stock purchased pursuant to the exercise of the Option in
immediately
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available funds by wire transfer to a bank account designated by Issuer,
provided that failure or refusal of Issuer to designate such a bank account
shall not preclude the Holder from exercising the Option.
(g) At such closing, simultaneously with the delivery of
immediately available funds as provided in subsection (f) of this Section 2,
Issuer shall deliver to the Holder a certificate or certificates representing
the number of shares of Common Stock purchased by the Holder and, if the Option
should be exercised in part only, a new Option evidencing the rights of the
Holder thereof to purchase the balance of the shares purchasable hereunder, and
the Holder shall deliver to Issuer a copy of this Agreement and a letter
agreeing that the Holder will not offer to sell or otherwise dispose of such
shares in violation of applicable law or the provisions of this Agreement.
(h) Certificates for Common Stock delivered at a closing
hereunder may be endorsed with a restrictive legend that shall read
substantially as follows:
"The transfer of the shares represented by this certificate is
subject to certain provisions of an agreement between the
registered holder hereof and Issuer and to resale restrictions
arising under the Securities Act of 1933, as amended. A copy
of such agreement is on file at the principal office of Issuer
and will be provided to the holder hereof without charge upon
receipt by Issuer of a written request therefor."
It is understood and agreed that:
(i) the reference to the resale restrictions of the
Securities Act of 1933, as amended (the "1933 Act"), in the above
legend shall be removed by delivery of substitute certificate(s)
without such reference if the Holder shall have delivered to Issuer a
copy of a letter from the staff of the SEC, or an opinion of counsel,
in form and substance reasonably satisfactory to Issuer, to the effect
that such legend is not required for purposes of the 1933 Act;
(ii) the reference to the provisions of this Agreement in
the above legend shall be removed by delivery of substitute
certificate(s) without such reference if the shares have been sold or
transferred in compliance with
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the provisions of this Agreement and under circumstances that do not
require the retention of such reference; and
(iii) the legend shall be removed in its entirety if the
conditions in the preceding clauses (i) and (ii) are both satisfied. In
addition, such certificates shall bear any other legend as may be
required by law.
(i) Upon the giving by the Holder to Issuer of the
written notice of exercise of the Option provided for under subsection (e) of
this Section 2 and the tender of the applicable purchase price in immediately
available funds, the Holder shall be deemed, subject to the receipt of
applicable regulatory approvals, to be the holder of record of the shares of
Common Stock issuable upon such exercise, notwithstanding that the stock
transfer books of Issuer shall then be closed or that certificates representing
such shares of Common Stock shall not then be actually delivered to the Holder.
Issuer shall pay all expenses, and any and all United States federal, state and
local taxes and other charges that may be payable in connection with the
preparation, issue and delivery of stock certificates under this Section 2 in
the name of the Holder or its assignee, transferee or designee.
3. Issuer agrees:
(i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury
shares of Common Stock so that the Option may be exercised without
additional authorization of Common Stock after giving effect to all
other options, warrants, convertible securities and other rights to
purchase Common Stock;
(ii) that it will not, by charter amendment or through
reorganization, consolidation, merger, dissolution or sale of assets,
or by any other voluntary act, avoid or seek to avoid the observance or
performance of any of the covenants, stipulations or conditions to be
observed or performed hereunder by Issuer;
(iii) promptly to take all action as may from time to time
be required (including (x) complying with all premerger notification,
reporting and waiting period requirements specified in the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and
the regulations promulgated thereunder and (y) in the event that prior
approval of or notice to the Federal Communications Commission or to
any state regulatory authority is neces-
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sary before the Option may be exercised, cooperating fully with the
Holder in preparing such applications or notices and providing such
information to the Federal Communications Commission or such state
regulatory authority as they may require) in order to permit the Holder
to exercise the Option and Issuer duly and effectively to issue shares
of Common Stock pursuant hereto; and
(iv) promptly to take all action provided herein to
protect the rights of the Holder against dilution.
4. This Agreement and the Option granted hereby are
exchangeable, without expense, at the option of the Holder, upon presentation
and surrender of this Agreement at the principal office of Issuer, for other
Agreements providing for Options of different denominations entitling the holder
thereof to purchase, on the same terms and subject to the same conditions as are
set forth herein, in the aggregate the same number of shares of Common Stock
purchasable hereunder. The terms "Agreement" and "Option" as used herein include
any Stock Option Agreements and related Options for which this Agreement (and
the Option granted hereby) may be exchanged. Upon receipt by Issuer of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation of
this Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver a new Agreement of like
tenor and date. Any such new Agreement executed and delivered shall constitute
an additional contractual obligation on the part of Issuer, whether or not the
Agreement so lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
5. In addition to the adjustment in the number of shares of
Common Stock that are purchasable upon exercise of the Option pursuant to
Section 1 of this Agreement, the number of shares of Common Stock purchasable
upon the exercise of the Option and the Option Price shall be subject to
adjustment from time to time as provided in this Section 5. In the event of any
change in, or distributions in respect of, the Common Stock by reason of stock
dividends, split-ups, mergers, recapitalizations, combinations, subdivisions,
conversions, exchanges of shares, distributions on or in respect of the Common
Stock, or the like, the type and number of shares of Common Stock purchasable
upon exercise hereof and the Option Price shall be appropriately adjusted in
such manner as shall fully preserve the economic benefits provided hereunder and
proper provision shall be made in any agreement
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<PAGE>
governing any such transaction to provide for such proper adjustment and the
full satisfaction of the Issuer's obligations hereunder.
6. Upon the occurrence of a Subsequent Triggering Event that
occurs prior to an Exercise Termination Event, Issuer shall, at the request of
Grantee delivered within 90 days of such Subsequent Triggering Event (whether on
its own behalf or on behalf of any subsequent holder of this Option (or part
thereof) or any of the shares of Common Stock issued pursuant hereto), promptly
prepare, file and keep current a shelf registration statement under the 1933 Act
covering this Option and any shares issued and issuable pursuant to this Option
and shall use its reasonable best efforts to cause such registration statement
to become effective and remain current in order to permit the sale or other
disposition of this Option and any shares of Common Stock issued upon total or
partial exercise of this Option ("Option Shares") in accordance with any plan of
disposition requested by Grantee. Issuer will use its reasonable best efforts to
cause such registration statement first to become effective and then to remain
effective for such period not in excess of 180 days from the day such
registration statement first becomes effective or such shorter time as may be
reasonably necessary to effect such sales or other dispositions. Grantee shall
have the right to demand two such registrations. The foregoing notwithstanding,
if, at the time of any request by Grantee for registration of the Option or
Option Shares as provided above, Issuer is in registration with respect to an
underwritten public offering of shares of Common Stock, and if in the good faith
judgment of the managing underwriter or managing underwriters, or, if none, the
sole underwriter or underwriters, of such offering the inclusion of the Holder's
Option or Option Shares would interfere with the successful marketing of the
shares of Common Stock offered by Issuer, the number of Option Shares otherwise
to be covered in the registration statement contemplated hereby may be reduced;
and provided, however, that after any such required reduction the number of
Option Shares to be included in such offering for the account of the Holder
shall constitute at least 25% of the total number of shares to be sold by the
Holder and Issuer in the aggregate; and provided further, however, that if such
reduction occurs, then the Issuer shall file a registration statement for the
balance as promptly as practical and no reduction shall thereafter occur. Each
such Holder shall provide all information reasonably requested by Issuer for
inclusion in any registration statement to be filed hereunder. If requested by
any such Holder in connection with such registration, Issuer shall become a
party to any underwriting agreement relating to the sale of such shares, but
only to the extent of obligating itself in respect of representations,
warranties, indemnities and other agreements customarily included in secondary
offering underwriting agreements for the Issuer. Upon receiving any request
under this Section 6 from any Holder, Issuer
8
<PAGE>
agrees to send a copy thereof to any other person known to Issuer to be entitled
to registration rights under this Section 6, in each case by promptly mailing
the same, postage prepaid, to the address of record of the persons entitled to
receive such copies. Notwithstanding anything to the contrary contained herein,
in no event shall Issuer be obligated to effect more than two registrations
pursuant to this Section 6 by reason of the fact that there shall be more than
one Grantee as a result of any assignment or division of this Agreement. The
obligation of Issuer under this Section 6 to file and maintain the effectiveness
of a registration statement may be suspended for one or more periods not to
exceed 60 days in the aggregate if it determines in good faith that such filing
or continued effectiveness would require disclosure of non-public information,
the disclosure of which would materially and adversely affect Issuer.
7. (a) Immediately prior to the occurrence of a Repurchase Event
(as defined below) or thereafter, as directed by the Holder, (i) following a
request of the Holder, delivered prior to an Exercise Termination Event, Issuer
(or any successor thereto) shall repurchase the Option from the Holder at a
price (the "Option Repurchase Price") equal to the amount by which (A) the
Market/Offer Price (as defined below) exceeds (B) the Option Price, multiplied
by the number of shares for which this Option may then be exercised and (ii) at
the request of the owner of Option Shares from time to time (the "Owner"),
delivered within 90 days of such occurrence (or such later period as provided in
Section 10), Issuer shall repurchase such number of the Option Shares from the
Owner as the Owner shall designate at a price (the "Option Share Repurchase
Price") equal to the Market/Offer Price multiplied by the number of Option
Shares so designated. The term "Market/Offer Price" shall mean the highest of
(i) the price per share of Common Stock at which a tender offer or exchange
offer therefor has been made, (ii) the price per share of Common Stock to be
paid by any third party pursuant to an agreement with Issuer, (iii) the highest
closing price for shares of Common Stock within the six-month period immediately
preceding the date the Holder gives notice of the required repurchase of this
Option or the Owner gives notice of the required repurchase of Option Shares, as
the case may be, or (iv) in the event of a sale of all or a substantial portion
of Issuer's assets, the sum of the price paid in such sale for such assets and
the current market value of the remaining assets of Issuer as determined by a
nationally recognized investment banking firm selected by the Holder or the
Owner, as the case may be, and reasonably acceptable to the Issuer, divided by
the number of shares of Common Stock of Issuer outstanding at the time of such
sale. In determining the Market/Offer Price, the value of consideration other
than cash shall be determined by a nationally
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<PAGE>
recognized investment banking firm selected by the Holder or Owner, as the case
may be, and reasonably acceptable to the Issuer.
(b) The Holder and the Owner, as the case may be, may
exercise its right to require Issuer to repurchase the Option and any Option
Shares pursuant to this Section 7 by surrendering for such purpose to Issuer, at
its principal office, a copy of this Agreement or certificates for Option
Shares, as applicable, accompanied by a written notice or notices stating that
the Holder or the Owner, as the case may be, elects to require Issuer to
repurchase this Option and/or the Option Shares in accordance with the
provisions of this Section 7. Within the latter to occur of (x) five business
days after the surrender of the Option and/or certificates representing Option
Shares and the receipt of such notice or notices relating thereto and (y) the
time that is immediately prior to the occurrence of a Repurchase Event, and
subject to the provisions of Section 15 hereof, Issuer shall deliver or cause to
be delivered to the Holder the Option Repurchase Price and/or to the Owner the
Option Share Repurchase Price therefor or the portion thereof, if any, that
Issuer is not then prohibited under applicable law and regulation from so
delivering.
(c) To the extent that Issuer is prohibited under
applicable law or regulation from repurchasing the Option and/or the Option
Shares in full, Issuer shall immediately so notify the Holder and/or the Owner
and thereafter deliver or cause to be delivered, from time to time, to the
Holder and/or the Owner, as appropriate, the portion of the Option Repurchase
Price and the Option Share Repurchase Price, respectively, that it is no longer
prohibited from delivering, within five business days after the date on which
Issuer is no longer so prohibited; provided, however, that if Issuer at any time
after delivery of a notice of repurchase pursuant to paragraph (b) of this
Section 7 is prohibited under applicable law or regulation from delivering to
the Holder and/or the Owner, as appropriate, the Option Repurchase Price and the
Option Share Repurchase Price, respectively, in full (and Issuer hereby
undertakes to use its best efforts to obtain all required regulatory and legal
approvals and to file any required notices, in each case as promptly as
practicable in order to accomplish such repurchase), the Holder or Owner may
revoke its notice of repurchase of the Option or the Option Shares either (A) in
whole or to the extent of the prohibition, whereupon, in the latter case, Issuer
shall promptly (i) deliver to the Holder and/or the Owner, as appropriate, that
portion of the Option Repurchase Price or the Option Share Repurchase Price that
Issuer is not prohibited from delivering; and (ii) deliver, as appropriate,
either (A) to the Holder, a new Stock Option Agreement evidencing the right of
the Holder to purchase that number of shares of Common Stock obtained by
multiplying the number of shares of Common Stock for
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<PAGE>
which the surrendered Stock Option Agreement was exercisable at the time of
delivery of the notice of repurchase by a fraction, the numerator of which is
the Option Repurchase Price less the portion thereof theretofore delivered to
the Holder and the denominator of which is the Option Repurchase Price, or (B)
to the Owner, a certificate for the Option Shares it is then so prohibited from
repurchasing.
(d) For purposes of this Section 7, a Repurchase Event
shall be deemed to have occurred upon the consummation of any Alternative
Transaction, provided that no such event shall constitute a Repurchase Event
unless a Subsequent Triggering Event shall have occurred prior to an Exercise
Termination Event. The parties hereto agree that Issuer's obligations to
repurchase the Option or Option Shares under this Section 7 shall not terminate
upon the occurrence of an Exercise Termination Event unless no Subsequent
Triggering Event shall have occurred prior to the occurrence of an Exercise
Termination Event.
8. (a) In the event that prior to an Exercise Termination
Event, Issuer shall enter into an agreement (i) to consolidate with or merge
into any person, other than Grantee or one of its Subsidiaries, and shall not be
the continuing or surviving corporation of such consolidation or merger, (ii) to
permit any person, other than Grantee or one of its Subsidiaries, to merge into
Issuer and Issuer shall be the continuing or surviving corporation, but, in
connection with such merger, the then outstanding shares of Common Stock shall
be changed into or exchanged for stock or other securities of any other person
or cash or any other property or the then outstanding shares of Common Stock
shall after such merger represent less than 50% of the outstanding voting shares
and voting share equivalents of the merged company, or (iii) to sell or
otherwise transfer all or substantially all of its assets to any person, other
than Grantee or one of its Subsidiaries, then, and in each such case, the
agreement governing such transaction shall make proper provision so that the
Option shall, upon the consummation of any such transaction and upon the terms
and conditions set forth herein, be converted into, or exchanged for, an option
(the "Substitute Option"), at the election of the Holder, of either (x) the
Acquiring Corporation (as hereinafter defined) or (y) any person that controls
the Acquiring Corporation.
(b) The following terms have the meanings indicated:
(A) "Acquiring Corporation" shall mean (i) the
continuing or surviving corporation of a consolidation or
merger with Issuer (if other than Issuer), (ii) Issuer in a
merger in which Issuer is
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<PAGE>
the continuing or surviving person, and (iii) the transferee
of all or substantially all of Issuer's assets.
(B) "Substitute Common Stock" shall mean the common
stock issued by the issuer of the Substitute Option upon
exercise of the Substitute Option.
(C) "Assigned Value" shall mean the Market/Offer
Price, as defined in Section 7.
(D) "Average Price" shall mean the average closing
price of a share of the Substitute Common Stock for the one
year immediately preceding the consolidation, merger or sale
in question, but in no event higher than the closing price of
the shares of Substitute Common Stock on the day preceding
such consolidation, merger or sale; provided that if Issuer is
the issuer of the Substitute Option, the Average Price shall
be computed with respect to a share of common stock issued by
the person merging into Issuer or by any company which
controls or is controlled by such person, as the Holder may
elect.
(c) Subject to paragraph (d) below, the Substitute Option
shall have the same terms as the Option, provided, that if the terms of the
Substitute Option cannot, for legal reasons, be the same as the Option, such
terms shall be as similar as possible and in no event less advantageous to the
Holder. The issuer of the Substitute Option shall also enter into an agreement
with the then Holder or Holders of the Substitute Option in substantially the
same form as this Agreement, which shall be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such
number of shares of Substitute Common Stock as is equal to the Assigned Value
multiplied by the number of shares of Common Stock for which the Option is then
exercisable, divided by the Average Price. The exercise price of the Substitute
Option per share of Substitute Common Stock shall then be equal to the Option
Price multiplied by a fraction, the numerator of which shall be the number of
shares of Common Stock for which the Option is then exercisable and the
denominator of which shall be the number of shares of Substitute Common Stock
for which the Substitute Option is exercisable.
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<PAGE>
(e) In no event, pursuant to any of the foregoing
paragraphs, shall the Substitute Option be exercisable for more than 10% of the
shares of Substitute Common Stock outstanding prior to exercise of the
Substitute Option. In the event that the Substitute Option would be exercisable
for more than 10% of the shares of Substitute Common Stock outstanding prior to
exercise but for this clause (e), the issuer of the Substitute Option (the
"Substitute Option Issuer") shall make a cash payment to Holder equal to the
excess of (i) the value of the Substitute Option without giving effect to the
limitation in this clause (e) over (ii) the value of the Substitute Option after
giving effect to the limitation in this clause (e). This difference in value
shall be determined by a nationally recognized investment banking firm selected
by the Holder or the Owner, as the case may be, and reasonably acceptable to the
Acquiring Corporation.
(f) Issuer shall not enter into any transaction described
in subsection (a) of this Section 8 unless the Acquiring Corporation and any
person that controls the Acquiring Corporation assume in writing all the
obligations of Issuer hereunder.
9. (a) At the request of the holder of the Substitute
Option (the "Substitute Option Holder"), the Substitute Option Issuer shall
repurchase the Substitute Option from the Substitute Option Holder at a price
(the "Substitute Option Repurchase Price") equal to the amount by which (i) the
Highest Closing Price (as hereinafter defined) exceeds (ii) the exercise price
of the Substitute Option, multiplied by the number of shares of Substitute
Common Stock for which the Substitute Option may then be exercised, and at the
request of the owner (the "Substitute Share Owner") of shares of Substitute
Common Stock (the "Substitute Shares"), the Substitute Option Issuer shall
repurchase the Substitute Shares at a price (the "Substitute Share Repurchase
Price") equal to the Highest Closing Price multiplied by the number of
Substitute Shares so designated. The term "Highest Closing Price" shall mean the
highest closing price for shares of Substitute Common Stock within the six-month
period immediately preceding the date the Substitute Option Holder gives notice
of the required repurchase of the Substitute Option or the Substitute Share
Owner gives notice of the required repurchase of the Substitute Shares, as
applicable.
(b) The Substitute Option Holder and the Substitute Share
Owner, as the case may be, may exercise its respective right to require the
Substitute Option Issuer to repurchase the Substitute Option and the Substitute
Shares pursuant to this Section 9 by surrendering for such purpose to the
Substitute Option Issuer, at
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<PAGE>
its principal office, the agreement for such Substitute Option (or, in the
absence of such an agreement, a copy of this Agreement) and certificates for
Substitute Shares accompanied by a written notice or notices stating that the
Substitute Option Holder or the Substitute Share Owner, as the case may be,
elects to require the Substitute Option Issuer to repurchase the Substitute
Option and/or the Substitute Shares in accordance with the provisions of this
Section 9. As promptly as practicable, and in any event within five business
days after the surrender of the Substitute Option and/or certificates
representing Substitute Shares and the receipt of such notice or notices
relating thereto and subject to the provisions of Section 15 hereof, the
Substitute Option Issuer shall deliver or cause to be delivered to the
Substitute Option Holder the Substitute Option Repurchase Price and/or to the
Substitute Share Owner the Substitute Share Repurchase Price therefor or, in
either case, the portion thereof which the Substitute Option Issuer is not then
prohibited under applicable law and regulation from so delivering.
(c) To the extent that the Substitute Option Issuer is
prohibited under applicable law or regulation from repurchasing the Substitute
Option and/or the Substitute Shares in part or in full, the Substitute Option
Issuer following a request for repurchase pursuant to this Section 9 shall
immediately so notify the Substitute Option Holder and/or the Substitute Share
Owner and thereafter deliver or cause to be delivered, from time to time, to the
Substitute Option Holder and/or the Substitute Share Owner, as appropriate, the
portion of the Substitute Share Repurchase Price, respectively, which it is no
longer prohibited from delivering, within five business days after the date on
which the Substitute Option Issuer is no longer so prohibited; provided,
however, that if the Substitute Option Issuer is at any time after delivery of a
notice of repurchase pursuant to subsection (b) of this Section 9 prohibited
under applicable law or regulation from delivering to the Substitute Option
Holder and/or the Substitute Share Owner, as appropriate, the Substitute Option
Repurchase Price and the Substitute Share Repurchase Price, respectively, in
full (and the Substitute Option Issuer shall use its best efforts to obtain all
required regulatory and legal approvals, in each case as promptly as
practicable, in order to accomplish such repurchase), the Substitute Option
Holder or Substitute Share Owner may revoke its notice of repurchase of the
Substitute Option or the Substitute Shares either in whole or to the extent of
the prohibition, whereupon, in the latter case, the Substitute Option Issuer
shall promptly (i) deliver to the Substitute Option Holder or Substitute Share
Owner, as appropriate, that portion of the Substitute Option Repurchase Price or
the Substitute Share Repurchase Price that the Substitute Option Issuer is not
prohibited from delivering; and (ii) deliver, as appropriate, either (A) to the
Substitute Option Holder, a new Substitute Option evidencing the right of
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<PAGE>
the Substitute Option Holder to purchase that number of shares of the Substitute
Common Stock obtained by multiplying the number of shares of the Substitute
Common Stock for which the surrendered Substitute Option was exercisable at the
time of delivery of the notice of repurchase by a fraction, the numerator of
which is the Substitute Option Repurchase Price less the portion thereof
theretofore delivered to the Substitute Option Holder and the denominator of
which is the Substitute Option Repurchase Price, or (B) to the Substitute Share
Owner, a certificate for the Substitute Common Shares it is then so prohibited
from repurchasing.
10. The 90-day or 6-month periods for exercise of certain
rights under Sections 2, 6, 7 and 13 shall be extended:
(i) to the extent necessary to obtain all
regulatory approvals for the exercise of such rights, and for the
expiration of all statutory waiting periods;
(ii) to the extent necessary to avoid liability
under Section 16(b) of the 1934 Act by reason of such exercise; and
(iii) during any period in which Grantee is precluded
from exercising such rights due to an injunction or other legal
restriction;
plus, in the case of clauses (i), (ii) and (iii), for such additional period as
is reasonably necessary for the exercise of such rights promptly following the
obtaining of such approvals or the expiration of such periods.
11. Issuer hereby represents and warrants to Grantee as
follows:
(a) Issuer has full corporate power and authority
to execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by the Board of Directors of Issuer and no other corporate
proceedings on the part of Issuer are necessary to authorize this Agreement or
to consummate the transactions so contemplated. This Agreement has been duly and
validly executed and delivered by Issuer.
(b) Issuer has taken all necessary corporate action
to authorize and reserve and to permit it to issue, and at all times from the
date hereof
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through the termination of this Agreement in accordance with its terms will have
reserved for issuance upon the exercise of the Option, that number of shares of
Common Stock equal to the maximum number of shares of Common Stock at any time
and from time to time issuable hereunder, and all such shares, upon issuance
pursuant hereto, will be duly authorized, validly issued, fully paid,
nonassessable, and will be delivered free and clear of all claims, liens,
encumbrance and security interests and not subject to any preemptive rights.
(c) Issuer has taken all action so that the
entering into of this Option Agreement, the acquisition of shares of Common
Stock hereunder and the other transactions contemplated hereby do not and will
not result in the grant of any rights to any person under the Rights Agreement
or enable or require the Rights to be exercised, distributed or triggered.
12. Grantee hereby represents and warrants to Issuer
that:
(a) Grantee has all requisite corporate power and
authority to enter into this Agreement and, subject to any approvals or consents
referred to herein, to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Grantee. This Agreement has been duly executed
and delivered by Grantee.
(b) The Option is not being, and any shares of
Common Stock or other securities acquired by Grantee upon exercise of the Option
will not be, acquired with a view to the public distribution thereof and will
not be transferred or otherwise disposed of except in a transaction registered
or exempt from registration under the Securities Act.
13. Neither of the parties hereto may assign any of its
rights or obligations under this Option Agreement or the Option created
hereunder to any other person, without the express written consent of the other
party, except that in the event a Subsequent Triggering Event shall have
occurred prior to an Exercise Termination Event, Grantee, subject to the express
provisions hereof, may assign in whole or in part its rights and obligations
hereunder within 90 days following such Subsequent Triggering Event (or such
later period as provided in Section 10).
14. Each of Grantee and Issuer will use its best efforts
to make all filings with, and to obtain consents of, all third parties and
governmental authorities
16
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necessary to the consummation of the transactions contemplated by this
Agreement, including without limitation making application to list the shares of
Common Stock issuable hereunder on the New York Stock Exchange upon official
notice of issuance.
15. (a) Notwithstanding any other provision of this
Agreement, in no event shall the Grantee's Total Profit (as hereinafter defined)
exceed $2,200,000,000.00 and, if it otherwise would exceed such amount, the
Grantee, at its sole election, shall either (i) reduce the number of shares of
Common Stock subject to this Option, (ii) deliver to the Issuer for cancellation
Option Shares previously purchased by Grantee (valued, for the purposes of this
Section 15(a) at the average closing sales price per share of Common Stock (or
if there is no sale on such date then the average between the closing bid and
ask prices on any such day) as reported by the New York Stock Exchange for the
twenty consecutive trading days preceding the day on which the Grantee's Total
Profit exceeds $2,200,000,000.00) (iii) pay cash to the Issuer, or (iv) any
combination thereof, so that Grantee's actually realized Total Profit shall not
exceed $2,200,000,000.00 after taking into account the foregoing actions.
(b) As used herein, the term "Total Profit" shall
mean the amount (before taxes) of the following: (a) the aggregate amount of
(i)(x) the net cash amounts received by Grantee and its affiliates pursuant to
the sale of Option Shares (or any securities into which such Option Shares are
converted or exchanged) to any unaffiliated party or to Issuer pursuant to this
Agreement, less (y) the Grantee's purchase price of such Option Shares, (ii) any
amounts received by Grantee and its affiliates on the transfer of the Option (or
any portion thereof) to any unaffiliated party, if permitted hereunder or to
Issuer pursuant to this Agreement, and (iii) the amount received by Grantee
pursuant to Section 9.2 of the Merger Agreement; minus (b) the amount of cash
theretofore paid to the Issuer pursuant to this Section 15 plus the value of the
Option Shares theretofore delivered to the Issuer for cancellation pursuant to
this Section 15.
(c) Notwithstanding any other provision of this
Agreement, nothing in this Agreement shall affect the ability of Grantee to
receive nor relieve Issuer's obligation to pay a fee pursuant to Section 9.2 of
the Merger Agreement; provided that if Total Profit received by Grantee would
exceed $2,200,000,000.00 following the receipt of such fee, Grantee shall be
obligated to comply with terms of Section 15(a) within 5 days of the later of
(i) the date of receipt of such fee and (ii) the date of receipt of the net cash
by Grantee pursuant to the sale
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<PAGE>
of Option Shares (or, any other securities into
which such Option Shares are converted or exchanged) to any unaffiliated party
or to Issuer pursuant to this Agreement.
(d) Notwithstanding any other provision of this
Agreement, the Option may not be exercised for a number of Option Shares that
would, as of the Notice Date, result in a Notional Total Profit (as defined
below) of more than $2,200,000,000.00. "Notional Total Profit" shall mean, with
respect to any number of Option Shares as to which the Grantee may propose to
exercise the Option, the Total Profit determined as of the Notice Date assuming
that the Option was exercised on such date for such number of Option Shares and
assuming such Option Shares, together with all other Option Shares held by the
Grantee and its affiliates as of such date, were sold for cash at the closing
sales price for Common Stock as of the close of business on the preceding
trading day.
16. The parties hereto acknowledge that damages would be
an inadequate remedy for a breach of this Agreement by either party hereto and
that the obligations of the parties hereto shall be enforceable by either party
hereto through injunctive or other equitable relief.
17. If any term, provision, covenant or restriction
contained in this Agreement is held by a court or a federal or state regulatory
agency of competent jurisdiction to be invalid, void or unenforceable, the
remainder of the terms, provisions and covenants and restrictions contained in
this Agreement shall remain in full force and effect, and shall in no way be
affected, impaired or invalidated. If for any reason such court or regulatory
agency determines that the Holder is not permitted to acquire, or Issuer or
Substitute Option Issuer, as the case may be, is not permitted to repurchase
pursuant to Section 7 or Section 9, as the case may be, the full number of
shares of Common Stock provided in Section 1(a) hereof (as adjusted pursuant to
Section 1(b) or 5 hereof), it is the express intention of Issuer (which shall be
binding on the Substitute Option Issuer) to allow the Holder to acquire or to
require Issuer or Substitute Option Issuer to repurchase such lesser number of
shares as may be permissible, without any amendment or modification hereof.
18. All notices, requests, claims, demands and other
communications hereunder shall be deemed to have been duly given when delivered
in person, by cable, telegram, telescope or telex, or by registered or certified
mail (postage prepaid, return receipt requested) at the respective addresses of
the parties set forth in the Merger Agreement.
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19. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws thereof
(except to the extent that mandatory provisions of federal law apply).
20. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
21. Except as otherwise expressly provided herein, each
of the parties hereto shall bear and pay all costs and expenses incurred by it
or on its behalf in connection with the transactions contemplated hereunder,
including fees and expenses of its own financial consultants, investment
bankers, accountants and counsel.
22. Except as otherwise expressly provided herein or in
the Merger Agreement, this Agreement contains the entire agreement between the
parties with respect to the transactions contemplated hereunder and supersedes
all prior arrangements or understandings with respect thereof, written or oral.
The terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective successors and permitted
assigns. Nothing in this Agreement, expressed or implied, is intended to confer
upon any party, other than the parties hereto, and their respective successors
except as assigns, any rights, remedies, obligations or liabilities under or by
reason of this Agreement, except as expressly provided herein.
23. Capitalized terms used in this Agreement and not
defined herein shall have the meanings assigned thereto in the Merger Agreement.
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IN WITNESS WHEREOF, each of the parties has caused this
Agreement to be executed on its behalf by its officers thereunto duly
authorized, all as of the date first above written.
GTE CORPORATION
By: /s/ CHARLES R. LEE
-----------------------------------------
Name: Charles R. Lee
Title: Chairman and Chief Executive Officer
By: /s/ MARIANNE DROST
-----------------------------------------
Name: Marianne Drost
Title: Secretary
BELL ATLANTIC CORPORATION
By: /s/ IVAN SEIDENBERG
-----------------------------------------
Name: Ivan Seidenberg
Title: President and Chief Executive Officer
20
EXHIBIT 99.2
THE TRANSFER OF THIS AGREEMENT IS SUBJECT
TO CERTAIN PROVISIONS CONTAINED HEREIN
AND TO RESALE RESTRICTIONS UNDER THE
SECURITIES ACT OF 1933, AS AMENDED
STOCK OPTION AGREEMENT, dated July 27, 1998, between GTE
Corporation, a New York corporation ("Issuer"), and Bell Atlantic Corporation, a
Delaware corporation ("Grantee").
WHEREAS, Grantee and Issuer have entered into an Agreement and
Plan of Merger of even date herewith (the "Merger Agreement"), which agreement
has been executed by the parties hereto immediately prior to this Stock Option
Agreement (the "Agreement"); and
WHEREAS, as a condition to Grantee's entering into the Merger
Agreement and in consideration therefor and for the transactions contemplated
thereby Issuer has agreed to grant Grantee the Option (as hereinafter defined);
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements set forth herein and in the Merger Agreement,
the parties hereto agree as follows:
1. (a) Issuer hereby grants to Grantee an unconditional,
irrevocable option (the "Option") to purchase, subject to the terms hereof, up
to 96,324,124 fully paid and nonassessable shares of Issuer's Common Stock, par
value $0.05 per share ("Common Stock"), at a price of $55 3/4 per share (the
"Option Price"); provided, however, that in no event shall the number of shares
of Common Stock for which this Option is exercisable exceed 10% of the Issuer's
issued and outstanding shares of Common Stock after giving effect to any shares
subject to or issued pursuant to the Option. The number of shares of Common
Stock that may be received upon the exercise of the Option and the Option Price
are subject to adjustment as herein set forth.
(b) In the event that any additional shares of Common
Stock are either (i) issued or otherwise become outstanding after the date of
this Agreement (other than pursuant to this Agreement) or (ii) redeemed,
repurchased, retired or otherwise cease to be outstanding after the date of the
Agreement, the number of shares of Common Stock subject to the Option shall be
increased or decreased, as appropriate,
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so that, after such issuance, such number equals 10% of the number of shares of
Common Stock then issued and outstanding after giving effect to any shares
subject or issued pursuant to the Option or, if not a whole number of shares,
rounded down to the next whole number. Nothing contained in this Section 1(b) or
elsewhere in this Agreement shall be deemed to authorize Issuer or Grantee to
breach any provision of the Merger Agreement.
2. (a) The Holder (as hereinafter defined) may exercise the
Option, in whole or part, and from time to time, if, but only if, a Subsequent
Triggering Event (as hereinafter defined) shall have occurred prior to the
occurrence of an Exercise Termination Event (as hereinafter defined), provided
that the Holder shall have sent the written notice of such exercise (as provided
in subsection (e) of this Section 2) within 90 days following such Subsequent
Triggering Event. Each of the following shall be an "Exercise Termination
Event":
(i) the Effective Time (as defined in the Merger
Agreement) of the Merger;
(ii) termination of the Merger Agreement in accordance
with the provisions thereof if such termination occurs prior to the
occurrence of an Initial Triggering Event (as hereinafter defined),
except a termination by Grantee pursuant to Section 9.1(d)(ii)(A) of
the Merger Agreement (unless the breach by Issuer giving rise to such
right of termination is non-volitional); or
(iii) the passage of two years after termination of the
Merger Agreement if such termination follows the occurrence of an
Initial Triggering Event or is a termination by Grantee pursuant to
Section 9.1(d)(ii)(A) of the Merger Agreement (unless the breach by
Issuer giving rise to such right of termination is non-volitional)
(provided that if an Initial Triggering Event continues or occurs
beyond such termination and prior to the passage of such two-year
period, the Exercise Termination Event shall be two years from the
expiration of the Last Triggering Event but in no event more than two
years and six months after such termination). The "Last Triggering
Event" shall mean the last Initial Triggering Event to occur. The term
"Holder" shall mean the holder or holders of the Option.
(b) The term "Initial Triggering Event" shall mean any of
the following events or transactions occurring after the date hereof:
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(i) Issuer or any of its Subsidiaries (each an "Issuer
Subsidiary"), without having received Grantee's prior written consent,
shall have entered into an agreement to engage in an Alternative
Transaction (as hereinafter defined) with any person (the term "person"
for purposes of this Agreement having the meaning assigned thereto in
Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934,
as amended (the "1934 Act"), and the rules and regulations thereunder)
other than Grantee or any of its Subsidiaries (each a "Grantee
Subsidiary") or the Board of Directors of Issuer shall have recommended
that the stockholders of Issuer approve or accept any Alternative
Transaction;
(ii) Issuer or any Issuer Subsidiary, without having
received Grantee's prior written consent, shall have authorized,
recommended, proposed or publicly announced its intention to authorize,
recommend or propose, to engage in an Alternative Transaction with any
person other than Grantee or a Grantee Subsidiary, or the Board of
Directors of Issuer shall have publicly withdrawn or modified, or
publicly announced its intent to withdraw or modify, in any manner
adverse to Grantee, its recommendation that the stockholders of Issuer
approve the transactions contemplated by the Merger Agreement after
disclosure of the existence of an Alternative Transaction;
(iii) Any person other than Grantee, any Grantee Subsidiary
or any Issuer Subsidiary acting in a fiduciary capacity in the ordinary
course of its business shall have acquired beneficial ownership or the
right to acquire beneficial ownership of 10% or more of the outstanding
shares of Common Stock (the term "beneficial ownership" for purposes of
this Agreement having the meaning assigned thereto in Section 13(d) of
the 1934 Act, and the rules and regulations thereunder);
(iv) Any person other than Grantee or any Grantee
Subsidiary shall have made a bona fide proposal to Issuer or its
stockholders by public announcement or written communication that is or
becomes the subject of public disclosure to engage in an Alternative
Transaction;
(v) After an overture is made by a third party to Issuer
or its stockholders to engage in an Alternative Transaction, Issuer
shall have breached any covenant or obligation contained in the Merger
Agreement and such breach (x) would entitle Grantee to terminate the
Merger Agreement and (y) shall not have been cured prior to the Notice
Date (as defined below); or
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(vi) Any person other than Grantee or any Grantee
Subsidiary, other than in connection with a transaction to which
Grantee has given its prior written consent, shall have filed an
application or notice with the Federal Communications Commission, or
other federal or state regulatory authority, which application or
notice has been accepted for processing, for approval to engage in an
Alternative Transaction.
(c) The term "Subsequent Triggering Event" shall mean the
consummation of an Alternative Transaction. The term "Alternative Transaction"
means an Alternative Transaction (as defined in the Merger Agreement) with
respect to the Issuer.
(d) Issuer shall notify Grantee promptly in writing of
the occurrence of any Initial Triggering Event and/or Subsequent Triggering
Event of which it has notice (together, a "Triggering Event"), it being
understood that the giving of such notice by Issuer shall not be a condition to
the right of the Holder to exercise the Option.
(e) In the event the Holder is entitled to and wishes to
exercise the Option, it shall send to Issuer a written notice (the date of which
being herein referred to as the "Notice Date") specifying (i) the total number
of shares it will purchase pursuant to such exercise and (ii) a place and date
not earlier than three business days nor later than 30 business days from the
Notice Date for the closing of such purchase (the "Closing Date"); provided that
if prior notification to or approval of the Federal Communications Commission or
any other state or federal regulatory agency is required in connection with such
purchase, the Holder shall promptly file the required notice or application for
approval and shall expeditiously process the same and the period of time that
otherwise would run pursuant to this sentence shall run instead from the date on
which any required notification periods have expired or been terminated or such
approvals have been obtained and any requisite waiting period or periods shall
have passed. Any exercise of the Option shall be deemed to occur on the Notice
Date relating thereto.
(f) At the closing referred to in subsection (e) of this
Section 2, the Holder shall pay to Issuer the aggregate purchase price for the
shares of Common Stock purchased pursuant to the exercise of the Option in
immediately available funds by wire transfer to a bank account designated by
Issuer, provided that failure or refusal of Issuer to designate such a bank
account shall not preclude the Holder from exercising the Option.
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(g) At such closing, simultaneously with the delivery of
immediately available funds as provided in subsection (f) of this Section 2,
Issuer shall deliver to the Holder a certificate or certificates representing
the number of shares of Common Stock purchased by the Holder and, if the Option
should be exercised in part only, a new Option evidencing the rights of the
Holder thereof to purchase the balance of the shares purchasable hereunder, and
the Holder shall deliver to Issuer a copy of this Agreement and a letter
agreeing that the Holder will not offer to sell or otherwise dispose of such
shares in violation of applicable law or the provisions of this Agreement.
(h) Certificates for Common Stock delivered at a closing
hereunder may be endorsed with a restrictive legend that shall read
substantially as follows:
"The transfer of the shares represented by this certificate is
subject to certain provisions of an agreement between the
registered holder hereof and Issuer and to resale restrictions
arising under the Securities Act of 1933, as amended. A copy
of such agreement is on file at the principal office of Issuer
and will be provided to the holder hereof without charge upon
receipt by Issuer of a written request therefor."
It is understood and agreed that:
(i) the reference to the resale restrictions of the
Securities Act of 1933, as amended (the "1933 Act"), in the above
legend shall be removed by delivery of substitute certificate(s)
without such reference if the Holder shall have delivered to Issuer a
copy of a letter from the staff of the SEC, or an opinion of counsel,
in form and substance reasonably satisfactory to Issuer, to the effect
that such legend is not required for purposes of the 1933 Act;
(ii) the reference to the provisions of this Agreement in
the above legend shall be removed by delivery of substitute
certificate(s) without such reference if the shares have been sold or
transferred in compliance with the provisions of this Agreement and
under circumstances that do not require the retention of such
reference; and
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(iii) the legend shall be removed in its entirety if the
conditions in the preceding clauses (i) and (ii) are both satisfied. In
addition, such certificates shall bear any other legend as may be
required by law.
(i) Upon the giving by the Holder to Issuer of the
written notice of exercise of the Option provided for under subsection (e) of
this Section 2 and the tender of the applicable purchase price in immediately
available funds, the Holder shall be deemed, subject to the receipt of
applicable regulatory approvals, to be the holder of record of the shares of
Common Stock issuable upon such exercise, notwithstanding that the stock
transfer books of Issuer shall then be closed or that certificates representing
such shares of Common Stock shall not then be actually delivered to the Holder.
Issuer shall pay all expenses, and any and all United States federal, state and
local taxes and other charges that may be payable in connection with the
preparation, issue and delivery of stock certificates under this Section 2 in
the name of the Holder or its assignee, transferee or designee.
3. Issuer agrees:
(i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury
shares of Common Stock so that the Option may be exercised without
additional authorization of Common Stock after giving effect to all
other options, warrants, convertible securities and other rights to
purchase Common Stock;
(ii) that it will not, by charter amendment or through
reorganization, consolidation, merger, dissolution or sale of assets,
or by any other voluntary act, avoid or seek to avoid the observance or
performance of any of the covenants, stipulations or conditions to be
observed or performed hereunder by Issuer;
(iii) promptly to take all action as may from time to time
be required (including (x) complying with all premerger notification,
reporting and waiting period requirements specified in the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and
the regulations promulgated thereunder and (y) in the event that prior
approval of or notice to the Federal Communications Commission or to
any state regulatory authority is necessary before the Option may be
exercised, cooperating fully with the Holder in preparing such
applications or notices and providing such information to the Federal
Communications Commission or such state regulatory authority as they
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may require) in order to permit the Holder to exercise the Option and
Issuer duly and effectively to issue shares of Common Stock pursuant
hereto; and
(iv) promptly to take all action provided herein to
protect the rights of the Holder against dilution.
4. This Agreement and the Option granted hereby are
exchangeable, without expense, at the option of the Holder, upon presentation
and surrender of this Agreement at the principal office of Issuer, for other
Agreements providing for Options of different denominations entitling the holder
thereof to purchase, on the same terms and subject to the same conditions as are
set forth herein, in the aggregate the same number of shares of Common Stock
purchasable hereunder. The terms "Agreement" and "Option" as used herein include
any Stock Option Agreements and related Options for which this Agreement (and
the Option granted hereby) may be exchanged. Upon receipt by Issuer of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation of
this Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver a new Agreement of like
tenor and date. Any such new Agreement executed and delivered shall constitute
an additional contractual obligation on the part of Issuer, whether or not the
Agreement so lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
5. In addition to the adjustment in the number of shares of
Common Stock that are purchasable upon exercise of the Option pursuant to
Section 1 of this Agreement, the number of shares of Common Stock purchasable
upon the exercise of the Option and the Option Price shall be subject to
adjustment from time to time as provided in this Section 5. In the event of any
change in, or distributions in respect of, the Common Stock by reason of stock
dividends, split-ups, mergers, recapitalizations, combinations, subdivisions,
conversions, exchanges of shares, distributions on or in respect of the Common
Stock, or the like, the type and number of shares of Common Stock purchasable
upon exercise hereof and the Option Price shall be appropriately adjusted in
such manner as shall fully preserve the economic benefits provided hereunder and
proper provision shall be made in any agreement governing any such transaction
to provide for such proper adjustment and the full satisfaction of the Issuer's
obligations hereunder.
6. Upon the occurrence of a Subsequent Triggering Event that
occurs prior to an Exercise Termination Event, Issuer shall, at the request of
Grantee delivered within 90 days of such Subsequent Triggering Event (whether on
its own
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behalf or on behalf of any subsequent holder of this Option (or part thereof) or
any of the shares of Common Stock issued pursuant hereto), promptly prepare,
file and keep current a shelf registration statement under the 1933 Act covering
this Option and any shares issued and issuable pursuant to this Option and shall
use its reasonable best efforts to cause such registration statement to become
effective and remain current in order to permit the sale or other disposition of
this Option and any shares of Common Stock issued upon total or partial exercise
of this Option ("Option Shares") in accordance with any plan of disposition
requested by Grantee. Issuer will use its reasonable best efforts to cause such
registration statement first to become effective and then to remain effective
for such period not in excess of 180 days from the day such registration
statement first becomes effective or such shorter time as may be reasonably
necessary to effect such sales or other dispositions. Grantee shall have the
right to demand two such registrations. The foregoing notwithstanding, if, at
the time of any request by Grantee for registration of the Option or Option
Shares as provided above, Issuer is in registration with respect to an
underwritten public offering of shares of Common Stock, and if in the good faith
judgment of the managing underwriter or managing underwriters, or, if none, the
sole underwriter or underwriters, of such offering the inclusion of the Holder's
Option or Option Shares would interfere with the successful marketing of the
shares of Common Stock offered by Issuer, the number of Option Shares otherwise
to be covered in the registration statement contemplated hereby may be reduced;
and provided, however, that after any such required reduction the number of
Option Shares to be included in such offering for the account of the Holder
shall constitute at least 25% of the total number of shares to be sold by the
Holder and Issuer in the aggregate; and provided further, however, that if such
reduction occurs, then the Issuer shall file a registration statement for the
balance as promptly as practical and no reduction shall thereafter occur. Each
such Holder shall provide all information reasonably requested by Issuer for
inclusion in any registration statement to be filed hereunder. If requested by
any such Holder in connection with such registration, Issuer shall become a
party to any underwriting agreement relating to the sale of such shares, but
only to the extent of obligating itself in respect of representations,
warranties, indemnities and other agreements customarily included in secondary
offering underwriting agreements for the Issuer. Upon receiving any request
under this Section 6 from any Holder, Issuer agrees to send a copy thereof to
any other person known to Issuer to be entitled to registration rights under
this Section 6, in each case by promptly mailing the same, postage prepaid, to
the address of record of the persons entitled to receive such copies.
Notwithstanding anything to the contrary contained herein, in no event shall
Issuer be obligated to effect more than two registrations pursuant to this
Section 6 by reason of the fact that there shall be more than one Grantee as a
result of any assignment or division of this Agreement. The obligation of Issuer
under this
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Section 6 to file and maintain the effectiveness of a registration statement may
be suspended for one or more periods not to exceed 60 days in the aggregate if
it determines in good faith that such filing or continued effectiveness would
require disclosure of non-public information, the disclosure of which would
materially and adversely affect Issuer.
7. (a) Immediately prior to the occurrence of a Repurchase
Event (as defined below) or thereafter, as directed by the Holder, (i) following
a request of the Holder, delivered prior to an Exercise Termination Event,
Issuer (or any successor thereto) shall repurchase the Option from the Holder at
a price (the "Option Repurchase Price") equal to the amount by which (A) the
Market/Offer Price (as defined below) exceeds (B) the Option Price, multiplied
by the number of shares for which this Option may then be exercised and (ii) at
the request of the owner of Option Shares from time to time (the "Owner"),
delivered within 90 days of such occurrence (or such later period as provided in
Section 10), Issuer shall repurchase such number of the Option Shares from the
Owner as the Owner shall designate at a price (the "Option Share Repurchase
Price") equal to the Market/Offer Price multiplied by the number of Option
Shares so designated. The term "Market/Offer Price" shall mean the highest of
(i) the price per share of Common Stock at which a tender offer or exchange
offer therefor has been made, (ii) the price per share of Common Stock to be
paid by any third party pursuant to an agreement with Issuer, (iii) the highest
closing price for shares of Common Stock within the six-month period immediately
preceding the date the Holder gives notice of the required repurchase of this
Option or the Owner gives notice of the required repurchase of Option Shares, as
the case may be, or (iv) in the event of a sale of all or a substantial portion
of Issuer's assets, the sum of the price paid in such sale for such assets and
the current market value of the remaining assets of Issuer as determined by a
nationally recognized investment banking firm selected by the Holder or the
Owner, as the case may be, and reasonably acceptable to the Issuer, divided by
the number of shares of Common Stock of Issuer outstanding at the time of such
sale. In determining the Market/Offer Price, the value of consideration other
than cash shall be determined by a nationally recognized investment banking firm
selected by the Holder or Owner, as the case may be, and reasonably acceptable
to the Issuer.
(b) The Holder and the Owner, as the case may be, may
exercise its right to require Issuer to repurchase the Option and any Option
Shares pursuant to this Section 7 by surrendering for such purpose to Issuer, at
its principal office, a copy of this Agreement or certificates for Option
Shares, as applicable, accompanied by a written notice or notices stating that
the Holder or the Owner, as the case may be, elects to require Issuer to
repurchase this Option and/or the Option Shares
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in accordance with the provisions of this Section 7. Within the latter to occur
of (x) five business days after the surrender of the Option and/or certificates
representing Option Shares and the receipt of such notice or notices relating
thereto and (y) the time that is immediately prior to the occurrence of a
Repurchase Event, and subject to the provisions of Section 15 hereof, Issuer
shall deliver or cause to be delivered to the Holder the Option Repurchase Price
and/or to the Owner the Option Share Repurchase Price therefor or the portion
thereof, if any, that Issuer is not then prohibited under applicable law and
regulation from so delivering.
(c) To the extent that Issuer is prohibited under
applicable law or regulation from repurchasing the Option and/or the Option
Shares in full, Issuer shall immediately so notify the Holder and/or the Owner
and thereafter deliver or cause to be delivered, from time to time, to the
Holder and/or the Owner, as appropriate, the portion of the Option Repurchase
Price and the Option Share Repurchase Price, respectively, that it is no longer
prohibited from delivering, within five business days after the date on which
Issuer is no longer so prohibited; provided, however, that if Issuer at any time
after delivery of a notice of repurchase pursuant to paragraph (b) of this
Section 7 is prohibited under applicable law or regulation from delivering to
the Holder and/or the Owner, as appropriate, the Option Repurchase Price and the
Option Share Repurchase Price, respectively, in full (and Issuer hereby
undertakes to use its best efforts to obtain all required regulatory and legal
approvals and to file any required notices, in each case as promptly as
practicable in order to accomplish such repurchase), the Holder or Owner may
revoke its notice of repurchase of the Option or the Option Shares either in
whole or to the extent of the prohibition, whereupon, in the latter case, Issuer
shall promptly (i) deliver to the Holder and/or the Owner, as appropriate, that
portion of the Option Repurchase Price or the Option Share Repurchase Price that
Issuer is not prohibited from delivering; and (ii) deliver, as appropriate,
either (A) to the Holder, a new Stock Option Agreement evidencing the right of
the Holder to purchase that number of shares of Common Stock obtained by
multiplying the number of shares of Common Stock for which the surrendered Stock
Option Agreement was exercisable at the time of delivery of the notice of
repurchase by a fraction, the numerator of which is the Option Repurchase Price
less the portion thereof theretofore delivered to the Holder and the denominator
of which is the Option Repurchase Price, or (B) to the Owner, a certificate for
the Option Shares it is then so prohibited from repurchasing.
(d) For purposes of this Section 7, a Repurchase Event
shall be deemed to have occurred upon the consummation of any Alternative
Transaction, provided that no such event shall constitute a Repurchase Event
unless a Subsequent Triggering Event shall have occurred prior to an Exercise
Termination Event. The
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parties hereto agree that Issuer's obligations to repurchase the Option or
Option Shares under this Section 7 shall not terminate upon the occurrence of an
Exercise Termination Event unless no Subsequent Triggering Event shall have
occurred prior to the occurrence of an Exercise Termination Event.
8. (a) In the event that prior to an Exercise Termination
Event, Issuer shall enter into an agreement (i) to consolidate with or merge
into any person, other than Grantee or one of its Subsidiaries, and shall not be
the continuing or surviving corporation of such consolidation or merger, (ii) to
permit any person, other than Grantee or one of its Subsidiaries, to merge into
Issuer and Issuer shall be the continuing or surviving corporation, but, in
connection with such merger, the then outstanding shares of Common Stock shall
be changed into or exchanged for stock or other securities of any other person
or cash or any other property or the then outstanding shares of Common Stock
shall after such merger represent less than 50% of the outstanding voting shares
and voting share equivalents of the merged company, or (iii) to sell or
otherwise transfer all or substantially all of its assets to any person, other
than Grantee or one of its Subsidiaries, then, and in each such case, the
agreement governing such transaction shall make proper provision so that the
Option shall, upon the consummation of any such transaction and upon the terms
and conditions set forth herein, be converted into, or exchanged for, an option
(the "Substitute Option"), at the election of the Holder, of either (x) the
Acquiring Corporation (as hereinafter defined) or (y) any person that controls
the Acquiring Corporation.
(b) The following terms have the meanings indicated:
(A) "Acquiring Corporation" shall mean (i) the
continuing or surviving corporation of a consolidation or
merger with Issuer (if other than Issuer), (ii) Issuer in a
merger in which Issuer is the continuing or surviving person,
and (iii) the transferee of all or substantially all of
Issuer's assets.
(B) "Substitute Common Stock" shall mean the common
stock issued by the issuer of the Substitute Option upon
exercise of the Substitute Option.
(C) "Assigned Value" shall mean the Market/Offer
Price, as defined in Section 7.
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(D) "Average Price" shall mean the average closing
price of a share of the Substitute Common Stock for the one
year immediately preceding the consolidation, merger or sale
in question, but in no event higher than the closing price of
the shares of Substitute Common Stock on the day preceding
such consolidation, merger or sale; provided that if Issuer is
the issuer of the Substitute Option, the Average Price shall
be computed with respect to a share of common stock issued by
the person merging into Issuer or by any company which
controls or is controlled by such person, as the Holder may
elect.
(c) Subject to paragraph (d) below, the Substitute Option
shall have the same terms as the Option, provided, that if the terms of the
Substitute Option cannot, for legal reasons, be the same as the Option, such
terms shall be as similar as possible and in no event less advantageous to the
Holder. The issuer of the Substitute Option shall also enter into an agreement
with the then Holder or Holders of the Substitute Option in substantially the
same form as this Agreement, which shall be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such
number of shares of Substitute Common Stock as is equal to the Assigned Value
multiplied by the number of shares of Common Stock for which the Option is then
exercisable, divided by the Average Price. The exercise price of the Substitute
Option per share of Substitute Common Stock shall then be equal to the Option
Price multiplied by a fraction, the numerator of which shall be the number of
shares of Common Stock for which the Option is then exercisable and the
denominator of which shall be the number of shares of Substitute Common Stock
for which the Substitute Option is exercisable.
(e) In no event, pursuant to any of the foregoing
paragraphs, shall the Substitute Option be exercisable for more than 10% of the
shares of Substitute Common Stock outstanding prior to exercise of the
Substitute Option. In the event that the Substitute Option would be exercisable
for more than 10% of the shares of Substitute Common Stock outstanding prior to
exercise but for this clause (e), the issuer of the Substitute Option (the
"Substitute Option Issuer") shall make a cash payment to Holder equal to the
excess of (i) the value of the Substitute Option without giving effect to the
limitation in this clause (e) over (ii) the value of the Substitute Option after
giving effect to the limitation in this clause (e). This difference in value
shall be determined by a nationally recognized investment banking firm selected
by the Holder or the Owner, as the case may be, and reasonably acceptable to the
Acquiring Corporation.
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(f) Issuer shall not enter into any transaction described
in subsection (a) of this Section 8 unless the Acquiring Corporation and any
person that controls the Acquiring Corporation assume in writing all the
obligations of Issuer hereunder.
9. (a) At the request of the holder of the Substitute
Option (the "Substitute Option Holder"), the Substitute Option Issuer shall
repurchase the Substitute Option from the Substitute Option Holder at a price
(the "Substitute Option Repurchase Price") equal to the amount by which (i) the
Highest Closing Price (as hereinafter defined) exceeds (ii) the exercise price
of the Substitute Option, multiplied by the number of shares of Substitute
Common Stock for which the Substitute Option may then be exercised, and at the
request of the owner (the "Substitute Share Owner") of shares of Substitute
Common Stock (the "Substitute Shares"), the Substitute Option Issuer shall
repurchase the Substitute Shares at a price (the "Substitute Share Repurchase
Price") equal to the Highest Closing Price multiplied by the number of
Substitute Shares so designated. The term "Highest Closing Price" shall mean the
highest closing price for shares of Substitute Common Stock within the six-month
period immediately preceding the date the Substitute Option Holder gives notice
of the required repurchase of the Substitute Option or the Substitute Share
Owner gives notice of the required repurchase of the Substitute Shares, as
applicable.
(b) The Substitute Option Holder and the Substitute Share
Owner, as the case may be, may exercise its respective right to require the
Substitute Option Issuer to repurchase the Substitute Option and the Substitute
Shares pursuant to this Section 9 by surrendering for such purpose to the
Substitute Option Issuer, at its principal office, the agreement for such
Substitute Option (or, in the absence of such an agreement, a copy of this
Agreement) and certificates for Substitute Shares accompanied by a written
notice or notices stating that the Substitute Option Holder or the Substitute
Share Owner, as the case may be, elects to require the Substitute Option Issuer
to repurchase the Substitute Option and/or the Substitute Shares in accordance
with the provisions of this Section 9. As promptly as practicable, and in any
event within five business days after the surrender of the Substitute Option
and/or certificates representing Substitute Shares and the receipt of such
notice or notices relating thereto and subject to the provisions of Section 15
hereof, the Substitute Option Issuer shall deliver or cause to be delivered to
the Substitute Option Holder the Substitute Option Repurchase Price and/or to
the Substitute Share Owner the Substitute Share Repurchase Price therefor or, in
either case, the portion thereof which the Substitute Option Issuer is not then
prohibited under applicable law and regulation from so delivering.
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(c) To the extent that the Substitute Option Issuer is
prohibited under applicable law or regulation from repurchasing the Substitute
Option and/or the Substitute Shares in part or in full, the Substitute Option
Issuer following a request for repurchase pursuant to this Section 9 shall
immediately so notify the Substitute Option Holder and/or the Substitute Share
Owner and thereafter deliver or cause to be delivered, from time to time, to the
Substitute Option Holder and/or the Substitute Share Owner, as appropriate, the
portion of the Substitute Share Repurchase Price, respectively, which it is no
longer prohibited from delivering, within five business days after the date on
which the Substitute Option Issuer is no longer so prohibited; provided,
however, that if the Substitute Option Issuer is at any time after delivery of a
notice of repurchase pursuant to subsection (b) of this Section 9 prohibited
under applicable law or regulation from delivering to the Substitute Option
Holder and/or the Substitute Share Owner, as appropriate, the Substitute Option
Repurchase Price and the Substitute Share Repurchase Price, respectively, in
full (and the Substitute Option Issuer shall use its best efforts to obtain all
required regulatory and legal approvals, in each case as promptly as
practicable, in order to accomplish such repurchase), the Substitute Option
Holder or Substitute Share Owner may revoke its notice of repurchase of the
Substitute Option or the Substitute Shares either in whole or to the extent of
the prohibition, whereupon, in the latter case, the Substitute Option Issuer
shall promptly (i) deliver to the Substitute Option Holder or Substitute Share
Owner, as appropriate, that portion of the Substitute Option Repurchase Price or
the Substitute Share Repurchase Price that the Substitute Option Issuer is not
prohibited from delivering; and (ii) deliver, as appropriate, either (A) to the
Substitute Option Holder, a new Substitute Option evidencing the right of the
Substitute Option Holder to purchase that number of shares of the Substitute
Common Stock obtained by multiplying the number of shares of the Substitute
Common Stock for which the surrendered Substitute Option was exercisable at the
time of delivery of the notice of repurchase by a fraction, the numerator of
which is the Substitute Option Repurchase Price less the portion thereof
theretofore delivered to the Substitute Option Holder and the denominator of
which is the Substitute Option Repurchase Price, or (B) to the Substitute Share
Owner, a certificate for the Substitute Common Shares it is then so prohibited
from repurchasing.
10. The 90-day or 6-month periods for exercise of certain
rights under Sections 2, 6, 7 and 13 shall be extended:
(i) to the extent necessary to obtain all regulatory
approvals for the exercise of such rights, and for the expiration of
all statutory waiting periods;
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(ii) to the extent necessary to avoid liability under
Section 16(b) of the 1934 Act by reason of such exercise; and
(iii) during any period in which Grantee is precluded from
exercising such rights due to an injunction or other legal restriction;
plus, in the case of clauses (i), (ii) and (iii), for such additional period as
is reasonably necessary for the exercise of such rights promptly following the
obtaining of such approvals or the expiration of such periods.
11. Issuer hereby represents and warrants to Grantee as
follows:
(a) Issuer has full corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by the Board of Directors of Issuer and no other corporate
proceedings on the part of Issuer are necessary to authorize this Agreement or
to consummate the transactions so contemplated. This Agreement has been duly and
validly executed and delivered by Issuer.
(b) Issuer has taken all necessary corporate action to
authorize and reserve and to permit it to issue, and at all times from the date
hereof through the termination of this Agreement in accordance with its terms
will have reserved for issuance upon the exercise of the Option, that number of
shares of Common Stock equal to the maximum number of shares of Common Stock at
any time and from time to time issuable hereunder, and all such shares, upon
issuance pursuant hereto, will be duly authorized, validly issued, fully paid,
nonassessable, and will be delivered free and clear of all claims, liens,
encumbrance and security interests and not subject to any preemptive rights.
(c) Issuer has taken all action so that the entering
into of this Option Agreement, the acquisition of shares of Common Stock
hereunder and the other transactions contemplated hereby do not and will not
result in the grant of any rights to any person under the Rights Agreement or
enable or require the Rights to be exercised, distributed or triggered.
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12. Grantee hereby represents and warrants to Issuer that:
(a) Grantee has all requisite corporate power and
authority to enter into this Agreement and, subject to any approvals or consents
referred to herein, to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Grantee. This Agreement has been duly executed
and delivered by Grantee.
(b) The Option is not being, and any shares of Common
Stock or other securities acquired by Grantee upon exercise of the Option will
not be, acquired with a view to the public distribution thereof and will not be
transferred or otherwise disposed of except in a transaction registered or
exempt from registration under the Securities Act.
13. Neither of the parties hereto may assign any of its rights
or obligations under this Option Agreement or the Option created hereunder to
any other person, without the express written consent of the other party, except
that in the event a Subsequent Triggering Event shall have occurred prior to an
Exercise Termination Event, Grantee, subject to the express provisions hereof,
may assign in whole or in part its rights and obligations hereunder within 90
days following such Subsequent Triggering Event (or such later period as
provided in Section 10).
14. Each of Grantee and Issuer will use its best efforts to
make all filings with, and to obtain consents of, all third parties and
governmental authorities necessary to the consummation of the transactions
contemplated by this Agreement, including without limitation making application
to list the shares of Common Stock issuable hereunder on the New York Stock
Exchange upon official notice of issuance.
15. (a) Notwithstanding any other provision of this Agreement,
in no event shall the Grantee's Total Profit (as hereinafter defined) exceed
$2,200,000,000.00 and, if it otherwise would exceed such amount, the Grantee, at
its sole election, shall either (i) reduce the number of shares of Common Stock
subject to this Option, (ii) deliver to the Issuer for cancellation Option
Shares previously purchased by Grantee (valued, for the purposes of this Section
15(a) at the average closing sales price per share of Common Stock (or if there
is no sale on such date then the average between the closing bid and ask prices
on any such day) as reported by the New York Stock Exchange for the twenty
consecutive trading days preceding the day on which the Grantee's Total Profit
exceeds $2,200,000,000.00) (iii) pay cash to the Issuer, or (iv) any
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combination thereof, so that Grantee's actually realized Total Profit shall not
exceed $2,200,000,000.00 after taking into account the foregoing actions.
(b) As used herein, the term "Total Profit" shall mean
the amount (before taxes) of the following: (a) the aggregate amount of (i)(x)
the net cash amounts received by Grantee and its affiliates pursuant to the sale
of Option Shares (or any securities into which such Option Shares are converted
or exchanged) to any unaffiliated party or to Issuer pursuant to this Agreement,
less (y) the Grantee's purchase price of such Option Shares, (ii) any amounts
received by Grantee and its affiliates on the transfer of the Option (or any
portion thereof) to any unaffiliated party, if permitted hereunder or to Issuer
pursuant to this Agreement, and (iii) the amount received by Grantee pursuant to
Section 9.2 of the Merger Agreement; minus (b) the amount of cash theretofore
paid to the Issuer pursuant to this Section 15 plus the value of the Option
Shares theretofore delivered to the Issuer for cancellation pursuant to this
Section 15.
(c) Notwithstanding any other provision of this
Agreement, nothing in this Agreement shall affect the ability of Grantee to
receive nor relieve Issuer's obligation to pay a fee pursuant to Section 9.2 of
the Merger Agreement; provided that if Total Profit received by Grantee would
exceed $2,200,000,000.00 following the receipt of such fee, Grantee shall be
obligated to comply with terms of Section 15(a) within 5 days of the later of
(i) the date of receipt of such fee and (ii) the date of receipt of the net cash
by Grantee pursuant to the sale of Option Shares (or, any other securities into
which such Option Shares are converted or exchanged) to any unaffiliated party
or to Issuer pursuant to this Agreement.
(d) Notwithstanding any other provision of this
Agreement, the Option may not be exercised for a number of Option Shares that
would, as of the Notice Date, result in a Notional Total Profit (as defined
below) of more than $2,200,000,000.00. "Notional Total Profit" shall mean, with
respect to any number of Option Shares as to which the Grantee may propose to
exercise the Option, the Total Profit determined as of the Notice Date assuming
that the Option was exercised on such date for such number of Option Shares and
assuming such Option Shares, together with all other Option Shares held by the
Grantee and its affiliates as of such date, were sold for cash at the closing
sales price for Common Stock as of the close of business on the preceding
trading day.
16. The parties hereto acknowledge that damages would be an
inadequate remedy for a breach of this Agreement by either party hereto and that
the
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obligations of the parties hereto shall be enforceable by either party hereto
through injunctive or other equitable relief.
17. If any term, provision, covenant or restriction contained
in this Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions and covenants and restrictions contained in this Agreement
shall remain in full force and effect, and shall in no way be affected, impaired
or invalidated. If for any reason such court or regulatory agency determines
that the Holder is not permitted to acquire, or Issuer or Substitute Option
Issuer, as the case may be, is not permitted to repurchase pursuant to Section 7
or Section 9, as the case may be, the full number of shares of Common Stock
provided in Section 1(a) hereof (as adjusted pursuant to Section 1(b) or 5
hereof), it is the express intention of Issuer (which shall be binding on the
Substitute Option Issuer) to allow the Holder to acquire or to require Issuer or
Substitute Option Issuer to repurchase such lesser number of shares as may be
permissible, without any amendment or modification hereof.
18. All notices, requests, claims, demands and other
communications hereunder shall be deemed to have been duly given when delivered
in person, by cable, telegram, telescope or telex, or by registered or certified
mail (postage prepaid, return receipt requested) at the respective addresses of
the parties set forth in the Merger Agreement.
19. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws thereof
(except to the extent that mandatory provisions of federal law apply).
20. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
21. Except as otherwise expressly provided herein, each of the
parties hereto shall bear and pay all costs and expenses incurred by it or on
its behalf in connection with the transactions contemplated hereunder, including
fees and expenses of its own financial consultants, investment bankers,
accountants and counsel.
22. Except as otherwise expressly provided herein or in the
Merger Agreement, this Agreement contains the entire agreement between the
parties with
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respect to the transactions contemplated hereunder and supersedes all prior
arrangements or understandings with respect thereof, written or oral. The terms
and conditions of this Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and permitted assigns.
Nothing in this Agreement, expressed or implied, is intended to confer upon any
party, other than the parties hereto, and their respective successors except as
assigns, any rights, remedies, obligations or liabilities under or by reason of
this Agreement, except as expressly provided herein.
23. Capitalized terms used in this Agreement and not defined
herein shall have the meanings assigned thereto in the Merger Agreement.
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IN WITNESS WHEREOF, each of the parties has caused this
Agreement to be executed on its behalf by its officers thereunto duly
authorized, all as of the date first above written.
GTE CORPORATION
By: /s/ CHARLES R. LEE
-----------------------------------------
Name: Charles R. Lee
Title: Chairman and Chief Executive Officer
By: /s/ MARIANNE DROST
-----------------------------------------
Name: Marianne Drost
Title: Secretary
BELL ATLANTIC CORPORATION
By: /s/ IVAN SEIDENBERG
-----------------------------------------
Name: Ivan Seidenberg
Title: President and Chief Executive Officer
EXHIBIT 99.3
BELL ATLANTIC AND GTE AGREE TO MERGE
NEW YORK and STAMFORD, Conn., July 28, 1998--Bell Atlantic (NYSE: BEL) and GTE
Corp. (NYSE: GTE) will merge in a transaction joining Bell Atlantic's
sophisticated network serving its dense, data-intensive customer base with GTE's
national footprint, advanced data communications capabilities and long distance
experience. The transaction also creates one of the world's premier wireless
communications companies and combines two companies with extensive and
complementary international assets. The merger of equals was announced today by
Bell Atlantic Chairman Raymond W. Smith, Bell Atlantic Chief Executive Officer
Ivan Seidenberg, and GTE Chairman and Chief Executive Officer Charles R. Lee.
The executives said a hallmark of the transaction is the ability of the merged
company to accelerate its growth by building upon its complementary strengths to
bring new, competitively priced services to millions of consumers and business
customers. It is anticipated that the merged company, with 1997 combined
revenues of $53 billion and a current combined market capitalization of
approximately $ 125 billion, will target annual EPS growth of 15 percent,
exceeding each company's current expectations.
Under the terms of the definitive agreement, which was approved by the boards of
directors of both companies, GTE shareholders will receive 1.22 shares of Bell
Atlantic stock for each GTE share they own. (GTE had 963,241,244 shares
outstanding as of June 30, 1998.) The transaction is expected to be tax-free to
shareholders and to be accounted for as a pooling of interests.
Based on investments they have already made, and the strategic fit between them,
the merged company will immediately have leadership positions and enhanced
growth potential in four key businesses:
o DATA: GTE is already a major provider of data and advanced Internet
services to consumers and businesses, with one of the industry's most
sophisticated data networks. Bell Atlantic serves millions of the
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world's most information-intensive residential and business customers,
including the headquarters of 175 of the Fortune 500 companies, and a
huge base of multinational businesses. The merged company thus combines
a major provider of advanced data services with millions of customers
whose demand for these services is exploding. In addition, both Bell
Atlantic and GTE have committed to aggressive ADSL deployments,
positioning the merged company to be the leading provider of advanced
data services to the home.
o WIRELESS: The merged company will be the nation's largest and most
advanced cellular service provider. Together, Bell Atlantic and GTE
currently have 10.6 million domestic wireless customers and more than
100 million cellular POPs. The wireless technologies of the two
companies are both migrating to state-of-the-art CDMA technology and
are, therefore, fully compatible. Moreover, Bell Atlantic and GTE have
both demonstrated the ability to successfully integrate wireless
operations and to significantly enhance their efficiency and
profitability.
o DOMESTIC: With 63 million access lines, the merged company will provide
the crucial first-mile link to the global telecommunications network
for millions of homes and businesses in 38 states. As the nation's
largest local exchange carrier, and an emerging long distance provider,
it will be able to better serve its customers by using that size and
scope to drive down costs and speed new services to market.
o INTERNATIONAL: With a significant presence in more than 30 countries
and virtually no overlap, the international portfolios of GTE and Bell
Atlantic are focused on some of the world's highest-growth markets. The
merged company will have significant international reach, extending
from Canada to Argentina and from Europe to Asia. In addition,
customers in its service territory currently account for more than 30
percent of the world's international traffic. Those customers represent
an enormous business opportunity for the merged company when it
receives regulatory approval to handle long distance traffic.
In addition, the merged company will be the world's largest publisher of
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telephone directories. Capital investments already made by the two companies in
their markets will enable the merged company to achieve its growth objectives
without major new capital commitments. Moreover, based on anticipated revenue
and cost synergies, the transaction is expected to be accretive to earnings per
share, excluding one-time, merger-related charges, in the first year following
completion.
Seidenberg of Bell Atlantic said: "This transaction means more choice. Customers
will have access to a complete range of competitively priced services, and have
it far faster than would otherwise be possible.
"The transaction also means more competition. The combined enterprise will have
the financial, operational and technological resources to compete effectively
against the strategies of AT&T/TCI, SBC/Ameritech, WorldCom/MCI and others, both
current and future," Seidenberg said.
Lee of GTE said: We will be the only telecommunications company that has it all:
a unique mix of local and long distance, national and international assets, and
voice, wireless, data, Internet and other services. With those competitive
advantages - unmatched by any existing or proposed communications company - we
will be well-positioned to better serve our customers, accelerate our growth and
continue to build shareholder value."
Smith of Bell Atlantic said: "In the new telecommunications environment,
companies with scope, scale, and a clear vision of how best to meet customer
demand will be the industry leaders. Today, we are creating such a company."
Lee and Seidenberg will share responsibility for the management of the company,
and will both serve on the merged company's board. Lee will serve as Chairman
and Co-CEO of the merged company, and Seidenberg will serve as its President and
Co-CEO. Beginning on June 30, 2002, Seidenberg will become the sole CEO, with
Lee continuing as non-executive Chairman until June 30, 2004, when he will be
succeeded by Seidenberg. As previously announced, Smith will retire as Chairman
of Bell Atlantic by year-end 1998.
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The merged company's board of directors will have equal numbers of directors
designated by Bell Atlantic and GTE. The top management team for the merged
company, which will be named shortly, will be a blend of the senior managers of
both Bell Atlantic and GTE. The merged company will be headquartered in New York
City, with a significant operational presence in Dallas and other locations.
Lee and Seidenberg said that they expect the transaction to produce cost
synergies totaling $2 billion within three years of completion, principally
related to economies of scale and other operating efficiencies. It is expected
that the merged company will generate an additional $2 billion in revenue
synergies.
The two companies have a total of more than 250,000 employees. Because the
transaction is driven primarily by growth opportunities, not by opportunities to
cut costs by eliminating jobs, it is not expected to have a material impact on
employment levels of the hourly workers of either GTE or Bell Atlantic. In fact,
as the combined enterprise grows, overall employment levels may increase. In
addition, while a small percentage of overlapping management positions may be
eliminated, it is anticipated that this growth will create many new professional
opportunities.
Both GTE and Bell Atlantic have proven track records in successfully and quickly
integrating business operations. For example, GTE today thrives as a highly
focused, integrated company, after a series of major acquisitions and
divestitures over the past decade, including the acquisition of BBN Corp. in
1997. Bell Atlantic and NYNEX formed a wireless joint venture in 1994, and the
two companies merged in 1997. By 1996, the wireless joint venture achieved a
market leadership position with innovative products, faster customer growth and
sharply improved profitability. The integration of Bell Atlantic and NYNEX is
now largely complete, and is already producing efficiencies greater than those
initially projected.
Bell Atlantic has been a leader in opening its market to local competition.
Seidenberg said: "The key for us, and for our customers, is our ability to move
into new markets faster. We will continue to work closely with our regulators to
expedite the long distance approval process so the customers of the combined
enterprise can realize the benefits of the merger as quickly as possible."
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The transaction, which requires approval by the shareholders of both companies,
expiration of the applicable Hart-Scott-Rodino waiting period and approval by
various regulatory authorities, is expected to be completed in approximately 12
months.
Bear, Stearns & Co. Inc., Merrill Lynch and Morgan Stanley acted as financial
advisors to Bell Atlantic, and Bear, Stearns and Merrill Lynch each provided a
fairness opinion to Bell Atlantic.
Goldman, Sachs & Co. and Salomon Smith Barney acted as financial advisors to
GTE, and each firm provided a fairness opinion to GTE.
INTERNET USERS: This news release and other information on the two companies can
be found on the Bell Atlantic World Wide Web site (www.ba.com) and on GTE's Web
site (www.gte.com).
Information contained in this release with respect to the expected financial
impact of the proposed merger is forward-looking. These statements represent the
companies' reasonable judgment with respect to future events and are subject to
risks and uncertainties that could cause actual events to differ materially.
Such factors include: materially adverse changes in regulatory and economic
conditions in the markets in which the companies operate; substantial delay in
the expected closing of the merger; the ability to achieve the synergies
identified; and a significant change in the timing of, and conditions under
which, Bell Atlantic is allowed to offer long distance services within its
region.
Contacts: Bell Atlantic GTE
------------- ---
Susan Kraus/Eric Rabe Peter Thonis
212-395-0500 203-965-3326
[email protected] [email protected]
[email protected]
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