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United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report: April 10, 2000
SBC Communications Inc.
(Exact name of registrant as specified in its charter)
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Delaware 1-8610 43-1301883
(State of (Commission File No.) (IRS Employer No.)
incorporation)
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175 E. Houston, San Antonio, Texas 78205
(Address of principal executive offices) (Zip Code)
(210) 821-4105
(Registrant's telephone number,
including area code)
N/A
(Former name or former address, if changed since last report)
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Items 1-4. Not Applicable.
Item 5. Other Events
SBC Communications Inc., a Delaware corporation ("SBC"), and BellSouth
Corporation, a Georgia corporation ("BellSouth"), entered into a Contribution
and Formation Agreement, dated as of April 4, 2000 (the "Contribution
Agreement"). Pursuant to the terms of the Contribution Agreement, each of SBC
and BellSouth agreed to contribute to a limited liability company to be formed
under the laws of Delaware (the "LLC") substantially all of their respective
United States wireless voice and wireless data businesses (as more fully
described in the Contribution Agreement). Pursuant to the terms of the
Contribution Agreement, at the Closing (as defined in the Contribution
Agreement), SBC will own approximately 60% of the outstanding interests in the
LLC and BellSouth will own approximately 40% of the outstanding interests in the
LLC, with the remainder of the interests to be held by a corporation to be
formed under the laws of Delaware ("Manager") and owned equally by SBC and
BellSouth. The Closing is conditioned upon the satisfaction or due waiver of
various conditions, including the expiration of the waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 and receipt of approvals
from the Federal Communications Commission. The foregoing description is
qualified in its entirety by reference to the Contribution Agreement.
In connection with the execution of the Combination Agreement, SBC and BellSouth
agreed to the forms of various agreements to be entered into either at or prior
to the Closing, including the terms of the Limited Liability Company Agreement
of the LLC (the "LLC Agreement"), the certificate of incorporation of Manager
and agreements for the provision of services between the LLC and each of
BellSouth and SBC, although these forms may be modified by the agreement of
BellSouth and SBC prior to Closing. The LLC Agreement is expected to govern the
LLC, but also sets forth certain relationships between and among SBC, BellSouth
and the LLC. The LLC Agreement provides that each of BellSouth and SBC will, for
as long as it holds at least 10% of the total equity securities of the LLC and
holds shares of the Class B Common Stock of Manager, only engage in the wireless
business through the LLC, with limited exceptions. In addition, the LLC would
agree that with respect to certain telecommunications services, including local
exchange calling, it would only utilize and sell the services of SBC or
BellSouth or their applicable controlled subsidiaries when acting in the markets
in which SBC or BellSouth, as the case may be, is the incumbent local exchange
carrier (except in circumstances when the LLC would be materially
disadvantaged).
The LLC would be managed by Manager. Many of the important business decisions of
the LLC are to be made by the Strategic Review Committee of the Board of
Directors of
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Manager (the "Strategic Review Committee"). The Strategic Review Committee would
be composed of four members, with two being appointed by each of SBC and
BellSouth. Half of the members of the Board of Directors of Manager are to be
nominated by BellSouth and the other half are to be nominated by SBC. The LLC
Agreement would also provide that neither BellSouth nor SBC would be permitted
to directly or indirectly transfer their interests in the LLC, subject to
certain exceptions, prior to an initial public offering of securities of
Manager.
The Contribution Agreement is attached hereto as Exhibit 10(a) and is
incorporated herein by reference.
Item 6. Not Applicable.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
10(a) Contribution and Formation Agreement, dated as of April 4, 2000,
between SBC Communications Inc. and BellSouth Corporation.
Item 8. Not Applicable.
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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 thereunto duly authorized.
SBC COMMUNICATIONS INC.
By: /s/ Donald E. Kiernan
-------------------------
Name: Donald E. Kiernan
Title: Senior Executive
Vice President
and Chief Financial
Officer
April 10, 2000
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EXHIBIT 10A
================================================================================
CONTRIBUTION AND FORMATION AGREEMENT
between
SBC COMMUNICATIONS INC.
and
BELLSOUTH CORPORATION
Dated as of April 4, 2000
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TABLE OF CONTENTS
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ARTICLE I
DEFINITIONS AND TERMS
1.1 Specific Definitions.................................................. 2
1.2 Other Terms........................................................... 18
1.3 Other Definitional Provisions......................................... 18
ARTICLE II
FORMATION AND CONTRIBUTIONS
2.1 Formation of Newco and Manager........................................ 18
2.2 Contribution of SBC Wireless LLC Shares............................... 19
2.3 Contribution of BellSouth Shares...................................... 19
2.4 Issuance of Newco LLC Units........................................... 20
2.5 Closing............................................................... 20
2.6 Additional Closing Deliveries by SBC.................................. 20
2.7 Additional Closing Deliveries by BellSouth............................ 21
2.8 Deliveries by Newco................................................... 21
2.9 SBC Additional Closings............................................... 21
2.10 BellSouth Additional Closing.......................................... 22
2.11 Net Debt.............................................................. 25
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of SBC................................. 27
3.2 Representations and Warranties of BellSouth........................... 38
ARTICLE IV
CERTAIN COVENANTS AND AGREEMENTS OF SBC AND BELLSOUTH
4.1 Access and Information................................................ 49
4.2 Conduct of Business................................................... 50
4.3 Registrations, Filings and Consents................................... 54
4.4 Employee Benefit Plan/Employees....................................... 56
4.5 Transferred Businesses................................................ 63
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4.6 Divestitures.......................................................... 63
4.7 Acquisitions by SBC or BellSouth...................................... 64
4.8 Accountants' Letter................................................... 64
4.9 Transition Group...................................................... 64
4.10 Initial Marketing Plan................................................ 65
4.11 Newco LLC Agreement................................................... 65
4.12 Ancillary Agreements.................................................. 65
4.13 Resale and Agency Agreements.......................................... 65
4.14 Headquarters.......................................................... 65
4.15 Branding; Corporate Name.............................................. 65
4.16 Intercompany Obligations.............................................. 66
4.17 Taxes................................................................. 66
4.18 Business Assets....................................................... 68
4.19 Notification of Certain Matters....................................... 68
4.20 Regulatory Compliance................................................. 69
4.21 Control of Operations................................................. 69
4.22 Conversions........................................................... 70
4.23 Certain Exclusions.................................................... 70
4.24 Consent of Third Parties.............................................. 71
4.25 Further Assurances.................................................... 71
ARTICLE V
CONDITIONS TO CLOSING
5.1 Conditions to Each Party's Obligation to Effect the Transaction....... 71
5.2 Conditions to Obligation of BellSouth................................. 72
5.3 Conditions to Obligation of SBC....................................... 73
ARTICLE VI
TERMINATION
6.1 Termination........................................................... 74
6.2 Effect of Termination................................................. 75
ARTICLE VII
SURVIVAL AND INDEMNIFICATION
7.1 Survival of Representations, Warranties, Covenants and Agreements;
Knowledge of Breach................................................. 76
7.2 Indemnification by BellSouth.......................................... 76
7.3 Indemnification by SBC................................................ 77
7.4 Indemnification as Sole Remedy; Specific Performance.................. 78
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7.5 Method of Asserting Claims, Etc....................................... 79
7.6 No Additional Recoveries.............................................. 80
7.7 Calculation of Losses................................................. 80
7.8 Assignment of Claims.................................................. 80
7.9 Tower Indemnity....................................................... 80
ARTICLE VIII
MISCELLANEOUS
8.1 Amendment and Waiver.................................................. 81
8.2 Expenses.............................................................. 81
8.3 Public Disclosure..................................................... 81
8.4 Assignment............................................................ 82
8.5 Entire Agreement...................................................... 82
8.6 Fulfillment of Obligations............................................ 82
8.7 Parties in Interest; No Third Party Beneficiaries..................... 82
8.8 Counterparts.......................................................... 82
8.9 Section Headings...................................................... 82
8.10 Notices............................................................... 82
8.11 Governing Law; Submission to Jurisdiction; Selection of Forum......... 84
8.12 Submission to Jurisdiction............................................ 84
8.13 Waiver of Jury Trial.................................................. 85
8.14 Severability.......................................................... 85
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EXHIBITS AND SCHEDULES
Exhibit A Form of Certificate of Formation of Newco
Exhibit B Form of Certificate of Incorporation of Manager
Exhibit C Form of By-laws of Manager
Exhibit D [Reserved]
Exhibit E [Reserved]
Exhibit F Form of Newco LLC Agreement
Exhibit G Form of Registration Rights Agreement
Exhibit H Form of Resale Agreements
Exhibit I Form of Agency Agreements (consisting of the Wireless Agency
Agreements and the Wireline Agency Agreements)
Exhibit J Form of Transition Services Agreement
Exhibit K Form of Management Agreement
Exhibit L Form of Intellectual Property License Agreement
Exhibit M Form of Stockholders' Agreement
Exhibit N Form of Transition Marks Agreement
Schedule 1 Excluded BellSouth Business
Schedule 2 SBC Additional Subsidiary Dates
Schedule 3 Arkansas Market and Los Angeles Market
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CONTRIBUTION AND FORMATION AGREEMENT, dated as of April 4,
2000, between SBC Communications Inc., a Delaware corporation ("SBC"), and
BellSouth Corporation, a Georgia corporation ("BellSouth").
W I T N E S S E T H:
WHEREAS, SBC and BellSouth (each a "Party" and, collectively,
the "Parties") wish to combine their respective Domestic mobile wireless voice
and data services businesses, to be conducted through a stand-alone limited
liability company to be formed under the laws of Delaware ("Newco") and governed
by the terms of the Newco LLC Agreement;
WHEREAS, the Boards of Directors of each Party have approved
the Transaction;
WHEREAS, the Parties are entering into this Agreement to set
forth their agreement as to the creation of and contribution of certain assets
to Newco and the conditions to such contributions;
WHEREAS, subject to the terms and conditions set forth herein,
SBC will be contributing the SBC Business to Newco, including its equity
interests in the SBC Companies;
WHEREAS, subject to the terms and conditions set forth herein,
BellSouth will be contributing the BellSouth Business to Newco, including its
equity interests in the BellSouth Companies;
WHEREAS, in connection with the execution and delivery of this
Agreement, BellSouth, SBC and Newco will also be entering into the Newco LLC
Agreement and the Stockholders' Agreement in accordance with the terms hereof;
and
WHEREAS, the Parties intend that for federal income tax
purposes the contributions of the SBC Business and the BellSouth Business shall
(a) qualify as a transfer of assets under the provisions of Section 721 of the
Internal Revenue Code of 1986, as amended (the "Code"), and (b) not interfere
with the accounting by SBC of prior business combinations using the
"pooling-of-interests" method of accounting;
NOW, THEREFORE, in consideration of the premises and the
mutual representations, warranties, covenants and undertakings contained herein,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
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ARTICLE I
DEFINITIONS AND TERMS
1.1 Specific Definitions. As used in this Agreement, the following
terms shall have the meanings set forth below:
"ABC Agreement" shall mean the AB Cellular Holding, LLC Limited Liability
Company Agreement, dated November 13, 1998.
"ABC Holding" shall mean AB Cellular Holding, LLC, a Delaware limited liability
company.
"Additional Subsidiaries" shall mean collectively, the SBC Additional
Subsidiaries and the BellSouth Additional Subsidiary.
"Affiliates" shall mean with respect to any Person, any Person directly or
indirectly Controlling, Controlled by, or under Common Control with
such other Person at any time during the period for which the
determination of affiliation is being made.
"Agency Agreements" shall mean, collectively, the Wireline Agency Agreements
and the Wireless Agency Agreements.
"Agreement" shall mean this Contribution and Formation Agreement, the Schedules
hereto, the BellSouth Disclosure Letter, the SBC Disclosure Letter, and
the Exhibits hereto, as the same may be amended or supplemented from
time to time in accordance with the terms hereof.
"Air-Ground Service" shall mean air-ground wireless voice and data service
provided pursuant to licenses issued by the FCC pursuant to Subpart G
of Part 22 of the FCC Rules and all air-ground wireless voice and data
services reasonably ancillary thereto.
"Ancillary Agreements" shall mean, collectively, the Agency Agreements,
Intellectual Property License Agreement, Newco LLC Agreement,
Registration Rights Agreement, Resale Agreements, Stockholders'
Agreement, Management Agreement, Transition Marks Agreement and
Transition Services Agreement, in each case substantially in the form
attached as an Exhibit hereto.
"Arkansas Assets" shall mean all right, title and interest of the applicable SBC
Additional Subsidiary in and to (i) all FCC Licenses held by the SBC
Companies or any Subsidiary of a SBC Company covering the Arkansas
Market, (ii) all other
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Licenses held by the SBC Companies or any Subsidiary of a SBC Company
relating exclusively to the wireless telecommunications systems serving
the Arkansas Market; and (iii) all other assets, rights and properties
owned or leased by SBC or any Subsidiary of SBC and used exclusively by
SBC or its Affiliates in connection with the SBC Business in the
Arkansas Market.
"Arkansas Liabilities" shall mean any direct or indirect liability,
indebtedness, obligation, cost, expense, claim, loss, damage,
deficiency, guaranty or endorsements of or by any SBC Company or any
Subsidiary of a SBC Company relating exclusively (i) to the Arkansas
Assets or (ii) the SBC Business in the Arkansas Market.
"Arkansas Market" shall have the meaning set forth on Schedule 3 of the SBC
Disclosure Letter hereto.
"Bankruptcy and Equity Exception" shall have the meaning set forth in Section
3.1(e).
"BellSouth" shall have the meaning set forth in the Preamble.
"BellSouth Additional Closing" shall have the meaning set forth in Section
2.10(d).
"BellSouth Additional Closing Date" shall have the meaning set forth in Section
2.10(e).
"BellSouth Additional Subsidiary" shall have the meaning set forth in Section
2.10(d).
"BellSouth Additional Subsidiary Value" shall mean the Fair Market Value of the
BellSouth Additional Subsidiary as of December 31, 2002.
"BellSouth Benefits Liabilities" shall have the meaning set forth in Section
4.4(m).
"BellSouth Books and Records" shall mean all books, ledgers, files, reports,
plans and operating records of, or maintained for the BellSouth
Business; provided that with respect to any of the foregoing items that
are not held by the BellSouth Companies or any of their Subsidiaries,
BellSouth Books and Records shall be deemed to refer only to items
materially related to the BellSouth Business.
"BellSouth Business" shall mean the Business as conducted by BellSouth and its
Affiliates, but shall not include the Excluded BellSouth Business.
"BellSouth Cellular" shall mean BellSouth Cellular Corp., a Georgia corporation.
"BellSouth Closing Net Debt" shall mean the BellSouth Net Debt as of the
Closing.
"BellSouth Companies" shall mean collectively BellSouth Data and BellSouth
Mobility and shall be deemed to include the BellSouth Additional
Subsidiary. For
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purposes of Sections 3.2 and 4.2 hereof, the term BellSouth Companies
shall include the Subsidiaries listed on Schedule 3.2(d) of the
BellSouth Disclosure Letter.
"BellSouth Companies' Licenses" shall have the meaning set forth in Section
3.2(n).
"BellSouth Compensation and Benefit Plans" shall have the meaning set forth in
Section 3.2(i)(i).
"BellSouth Contribution" shall have the meaning set forth in Section 2.3.
"BellSouth Data" shall mean BellSouth Wireless Data, L.P., a Delaware limited
partnership, and its successor companies.
"BellSouth Data Shares" shall mean all of the issued and outstanding equity
interests of BellSouth Data in whatever form such equity interests may
be held.
"BellSouth Deductible" shall have the meaning set forth in Section 7.2(b).
"BellSouth Disclosure Letter" shall mean the disclosure letter, dated the date
hereof, delivered by BellSouth to SBC.
"BellSouth Employees" shall have the meaning set forth in Section 3.2(i)(i).
"BellSouth Financial Statements" shall have the meaning set forth in Section
3.2(f).
"BellSouth Holdings" shall mean BellSouth Mobile Data, Inc., a Georgia
corporation, and its successor companies.
"BellSouth Interim Financial Statements" shall have the meaning set forth in
Section 3.2(f).
"BellSouth Leasing Company" shall have the meaning set forth in Section 4.4(a).
"BellSouth Mobility" shall mean BellSouth Mobility, Inc, a Georgia corporation,
and its successor companies.
"BellSouth Net Debt" shall mean, as calculated as of the Closing Date, (x) the
sum of the liabilities of (a) each of the BellSouth Companies
(including for such purposes, each direct and indirect wholly owned
Subsidiary of a BellSouth Company, but excluding the BellSouth
Additional Subsidiary) and (b) each other Subsidiary of the BellSouth
Companies, but excluding the BellSouth Additional Subsidiary,
multiplied by the direct or indirect percentage ownership of the
BellSouth Companies, minus (y) the sum of the current assets (including
cash and cash
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equivalents owned by such companies and by Wireless Investco) of (a)
each of the BellSouth Companies (including for such purposes each
direct and indirect wholly owned Subsidiary of a BellSouth Company, but
excluding the BellSouth Additional Subsidiary that are operating
Companies) and (b) each other Subsidiary of the BellSouth Companies,
but excluding the BellSouth Additional Subsidiary by the percentage
ownership of BellSouth, clauses (x) and (y) being calculated from time
to time in a manner consistent with GAAP. The Fair Market Value of the
securities of Cellemetry LLC, a Delaware limited liability company
owned by the BellSouth Companies on the Closing Date, shall be deemed a
current asset for the purposes of the calculation of the BellSouth Net
Debt.
"BellSouth Pension Plans" shall have the meaning set forth in Section 3.2(i)(i).
"BellSouth PCS" shall mean BellSouth Personal Communications, Inc., a Delaware
corporation and its successor companies.
"BellSouth Proportionate Share" shall have the meaning set forth in Section
4.4(m).
"BellSouth Required Consents" shall have the meaning set forth in Section
3.2(b)(i).
"BellSouth Shares" shall mean, collectively, the BellSouth Mobility Shares and
BellSouth Data Shares.
"BellSouth Transferred Employees" shall have the meaning set forth in Section
4.4(b).
"BellSouth Wireless Employees" shall have the meaning set forth in Section
4.4(b).
"Benefits Calculation" shall have the meaning set forth in Section 4.4(j).
"Books and Records" shall mean the BellSouth Books and Records or the SBC Books
and Records, as the context requires.
"Business" shall mean (a) the acquisition, development, ownership and operation
of businesses engaged in the Domestic provision of mobile wireless
voice and data services utilizing radio frequencies licensed by the FCC
for the provision of Cellular Service, PCS Service, Wireless Data
Service, Air-Ground Service, Satellite Services and Part 27 Service and
(b) business activities customarily ancillary to the provision of any
of the foregoing.
"Business Day" shall mean any day other than a Saturday, a Sunday or a day on
which banks in New York City are authorized or obligated by law or
executive order to close.
"Calculation" shall have the meaning set forth in Section 2.11(a).
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"Cellular Service" shall mean mobile wireless voice and data service provided
pursuant to licenses issued by the FCC pursuant to Subpart H of Part 22
of the FCC Rules and all mobile voice and data services reasonably
ancillary thereto.
"Chosen Courts" shall have the meaning set forth in Section 8.11.
"Claim Notice" shall have the meaning set forth in Section 7.5.
"Closing" shall have the meaning set forth in Section 2.5(a).
"Closing Date" shall have the meaning set forth in Section 2.5(a).
"Closing Net Debt" shall mean the sum of the SBC Closing Net Debt and the
BellSouth Closing Net Debt.
"CMRS" shall mean Commercial mobile radio service, as defined in 47 C.F.R.
Section 20.3.
"Code" shall have the meaning set forth in the Recitals.
"Compensation and Benefit Plans" shall mean, collectively, the SBC Compensation
and Benefit Plans and the BellSouth Compensation and Benefit Plans.
"Communications Act" shall mean the Communications Act of 1934, as amended or
any successor statute.
"Confidentiality Agreement" shall have the meaning set forth in Section 4.1(c).
"Conflicted Systems" shall have the meaning set forth in Section 4.6.
"Contracts" shall mean all agreements, contracts, leases and subleases, purchase
orders, arrangements, commitments, non-governmental licenses, notes,
mortgages, indentures or other obligations.
"Control" (including the correlative meanings of the terms "Controlled by" and
"under Common Control with"), as used with respect to any Person, shall
mean the possession, directly or indirectly, of the power to direct or
cause the direction of management policies of such Person, whether
through the ownership of voting securities, by contract or otherwise.
"CPA Firm" shall have the meaning set forth in Section 2.11(c).
"Disposition Committee" shall have the meaning set forth in Section 4.6.
"Disposition Systems" shall have the meaning set forth in Section 4.6.
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"Domestic" shall mean the fifty states comprising the United States of America,
the District of Columbia, the U.S. Virgin Islands and the Commonwealth
of Puerto Rico, but excluding all other territories and possessions of
the United States of America.
"Encumbrances" shall mean liens, charges, encumbrances, security interests,
options, or any other restrictions or third party rights.
"Entity" shall mean any corporation, firm, unincorporated organization,
association, partnership, limited liability company, business trust,
joint stock company, joint venture organization, entity or business.
"Environmental Law" shall mean any Law related 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.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" shall have the meaning set forth in Section 3.1(i)(iii).
"ERISA Affiliate Plan" shall have the meaning set forth in Section 3.1(i)(iii).
"EU Merger Regulation" shall mean the Merger Regulation of the European Union,
adopted in Council Regulation (EEC) 4064/89, as amended.
"Excluded BellSouth Business" shall mean (i) all microwave licenses and related
assets, rights and interests used by BellSouth or any of its Affiliates
in any of its businesses outside of the BellSouth Business, (ii) the
rights to any Contracts with a customer of any of the BellSouth
Companies or their Subsidiaries if such Person is billed or directly
charged by BellSouth for Cellular Service or PCS Service in a manner
packaged with any Telecom Services provided by BellSouth or an
Affiliate of BellSouth and (iii) the assets listed in Schedule 1
hereto.
"Excluded SBC Business" shall mean (i) all microwave licenses and related
assets, rights and interests used by SBC or any of its Affiliates in
any of its businesses outside of the SBC Business, (ii) the rights to
any Contracts with a customer of any of the SBC Companies or their
Subsidiaries, if such Person is billed by SBC or an Affiliate of SBC
for Cellular Service or PCS Service in a manner packaged with any
Telecom Services provided by SBC or an Affiliate of SBC, (iii) all
assets,
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rights and interests related to SBC PR's and SBC Wireless's status as a
competitive local exchange carrier, (iv) all assets related to Paging
Services provided by the SBC Companies or any of their Subsidiaries and
(v) the business of Radiofone and its Subsidiaries and all assets held
by Radiofone and its Subsidiaries together with all assets acquired
from Radiofone PCS LLC, a limited liability company.
"Extended Termination Date" shall have the meaning set forth in Section 6.1(d).
"FAA" shall mean the Federal Aviation Administration or the successor agency
thereof.
"FAA Rules" shall have the meaning set forth in Section 4.20(a).
"Fair Market Value" shall mean, with respect to any asset, as of the date of
determination, the cash price at which a willing seller would sell, and
a willing buyer would buy, each being apprised of all relevant facts
and neither acting under compulsion, such asset in an arm's length,
negotiated transaction with an unaffiliated third party without time
constraints, determined in accordance with Section 11.3 of the Newco
LLC Agreement, treating the asset to be valued as if it were
"Securities" as set forth in Section 11.3 of the Newco LLC Agreement
and the parties disputing the Fair Market Value as the Initial Members
(as defined in the Newco LLC Agreement).
"FCC" shall mean the Federal Communications Commission or the successor agency
thereof.
"FCC Licenses" shall have the meaning set forth in Section 3.1(n).
"FCC Rules" shall have the meaning set forth in Section 4.20(a).
"Final Order" shall have the meaning set forth in Section 5.1(a)(i).
"401(k) Plans" shall have the meaning set forth in Section 4.4(i).
"GAAP" shall mean United States generally accepted accounting principles.
"Governmental Entity" shall mean any governmental or regulatory authority,
court, agency, commission, body or other governmental entity.
"Hazardous Substance" shall mean 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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"Houston Partnership Agreement" shall mean the Houston Cellular Telephone
Company, L.P. Limited Partnership Agreement, dated October 2, 1998.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended.
"Indemnified Parties" shall have the meaning set forth in Section 7.2(a).
"Indemnifying Party" shall have the meaning set forth in Section 7.5.
"Intellectual Property License Agreement" shall mean the Intellectual Property
License Agreements between Newco and each of SBC and BellSouth,
substantially in the form of Exhibit L hereto.
"Intellectual Property Rights" shall have the meaning set forth in Section
3.1(u).
"Knowledge" or any similar phrase shall mean, with respect to SBC, the actual
knowledge of Stan Sigman, Stephen Carter, Rick Lindner, Gregg Hall,
Carol Tacker or John Stephens, and, with respect to BellSouth, the
actual knowledge of Mark Feidler, Joaquin R. Carbonell, James Glass,
Edgar L. Reynolds, Sandra J. Evans or Charles W. Shewbridge, III.
"Laws" shall have the meaning set forth in Section 3.1(j).
"Leased Employees" shall have the meaning set forth in Section 4.4(e).
"Leasing Companies" shall have the meaning set forth in Section 4.4(a).
"Leasing Company Contribution Date" shall have the meaning set forth in Section
4.4(g).
"Licenses" shall have the meaning set forth in Section 3.1(n).
"LLC Unit" shall have the meaning ascribed to such term in the Newco LLC
Agreement.
"Los Angeles Assets" shall mean all right, title and interest of the applicable
SBC Additional Subsidiary in and to (i) all FCC Licenses held by the
SBC Companies or any of Subsidiary of a SBC Company which relate
exclusively to that portion of the Los Angeles Market; (ii) all other
Licenses held by the SBC Companies or any Subsidiary of SBC or any
Subsidiary of SBC relating exclusively to the wireless
telecommunications system serving the Los Angeles Market; and (iii) all
other assets, rights and properties owned or leased by SBC or any
Subsidiary of SBC and used exclusively by SBC or its Affiliates in
connection with the SBC Business in the Los Angeles Market.
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"Los Angeles Liabilities" shall mean any direct or indirect liability,
indebtedness, obligation, cost, expense, claim, loss, damage,
deficiency, guaranty or endorsements of or by any SBC Company or any
Subsidiary of a SBC Company relating exclusively (i) to the Los Angeles
Assets or (ii) the SBC Business in the Los Angeles Market.
"Los Angeles Market" shall have the meaning set forth on Schedule 3 hereto.
"Losses" shall have the meaning set forth in Section 7.2(a).
"Manager" shall mean Alloy Management Corp., a corporation to be formed as a
Delaware corporation.
"Management Agreement" shall mean each management agreement between Newco and
each of the SBC Additional Subsidiaries, substantially in the form
attached hereto as Exhibit K.
"Material Adverse Effect" shall have the meaning set forth in Section 3.1(a).
"MSA" shall mean Metropolitan Statistical Area ( as defined in Section 22.909 of
the FCC Rules).
"Newco" shall have the meaning set forth in the Recitals.
"Newco LLC Agreement" shall mean the Limited Liability Company Agreement of
Newco, by and among, SBC, BellSouth and Manager in the form attached
hereto as Exhibit F.
"Newco LLC Unit" shall mean a unit of ownership in Newco.
"Newco Plans" shall have the meaning set forth in Section 4.4(k).
"Notice Period" shall have the meaning set forth in Section 7.5.
"Order" shall have the meaning set forth in Section 5.1(b).
"Other BellSouth Assets" shall mean all assets or rights of BellSouth or any of
its Subsidiaries that principally relate to or are principally used in
the conduct of the BellSouth Business, to the extent not held or owned
by the BellSouth Companies or their Subsidiaries on the Closing Date,
but not including any Excluded BellSouth Assets.
"Other SBC Assets" shall mean all assets or rights of SBC or any of its
Subsidiaries that principally relate to or are principally used in the
conduct of the SBC Business, to
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the extent not held or owned by the SBC Companies or their Subsidiaries
on the Closing Date, but not including any Excluded SBC Assets.
"Overlap Laws" shall have the meaning set forth in Section 4.6.
"Paging Service" shall mean the provision of Domestic one- and two-way paging
and radiotelephone service pursuant to licenses issued by the FCC
pursuant to Subpart E of Part 22 and Subpart P of Part 90 of the FCC
Rules and all one- and two-way paging and radiotelephone services
reasonably ancillary thereto.
"Part 27 Service" shall mean mobile wireless voice and data service provided
pursuant to licenses issued by the FCC pursuant to Part 27 of the FCC
rules and all mobile voice and data services reasonably ancillary
thereto, other than with respect to the provision of multi-channel
video programming service and data services reasonably ancillary
thereto.
"Party" shall have the meaning set forth in the Recitals.
"PCS Service" shall mean mobile wireless voice and data service provided
pursuant to licenses issued by the FCC pursuant to Part 24 of the FCC
rules regardless of the frequency block designated by the FCC under 47
C.F.R. Section 24.229 and all mobile voice and data services reasonably
ancillary thereto.
"Permits" shall have the meaning set forth in Section 3.1(j).
"Permitted Encumbrances" shall mean, as to any Person, (i) mechanics',
carriers', workers', materialmen's, warehousemen's and other similar
liens arising or incurred in the ordinary course of business for sums
not yet due and payable or such liens as are being contested by such
Person in good faith, (ii) liens for Taxes not yet due and payable or
which are being contested in good faith by such Person, and (iii)
covenants, restrictions, reservations, rights, liens, easements and
other matters affecting title which do not individually or in the
aggregate materially impair the value or marketability of the property
subject thereto or materially interfere with the use of such property
in the conduct of the business of such Person as it is currently
conducted thereon.
"Person" shall mean any natural person or Entity.
"Pittsburgh Assets" shall mean all right, title and interest of the applicable
SBC Additional Subsidiary in and to (i) all FCC Licenses held by an
entity, in which the SBC Companies or any Subsidiary of a SBC Company
holds an equity interest (the "Pittsburgh Licensee"), covering Cellular
Market Area 013 (Pittsburgh, PA MSA) (the "Pittsburgh Market"); (ii)
all other Licenses held the
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Pittsburgh Licensee that relate exclusively to its wireless
telecommunications systems serving the Pittsburgh Market; and (iii) all
other assets, rights and properties that are (a) owned or leased by
SBC, a Subsidiary of SBC or the Pittsburgh Licensee and (b) used
exclusively by SBC, an Affiliate or the Pittsburgh Licensee in
connection with the Pittsburgh Licensee's Business in the Pittsburgh
Market.
"Pittsburgh Liabilities" shall mean any direct or indirect liability,
indebtedness, obligation, cost, expense, claim, loss, damage,
deficiency, guaranty or endorsements of or by any SBC Company or any
Subsidiary of a SBC Company relating exclusively (i) to the Pittsburgh
Assets or (ii) the SBC Business in the Pittsburgh Market.
"Pittsburgh Market" shall have the meaning set forth in the definition of
Pittsburgh Assets.
"Potential Contributor" shall have the meaning set forth in Section 7.8.
"PUC" shall have the meaning set forth in Section 3.1(b)(i).
"Radiofone" shall mean Radiofone, Inc, a Louisiana corporation.
"Registration Rights Agreement" shall mean the Registration Rights Agreement to
be entered into among Manager, SBC and BellSouth, substantially in the
form of Exhibit G hereto.
"Resale Agreements" shall mean those Resale Agreements regarding resale of
Wireless Services to be entered into between Newco and each of SBC and
BellSouth, substantially in the form of Exhibit H hereto.
"Resolution Period" shall have the meaning set forth in Section 2.11(b).
"Resolved Items" shall have the meaning set forth in Section 2.11(b).
"Satellite Services" shall mean mobile wireless voice and data services (other
than multi-channel video services and data services reasonably
ancillary thereto) provided directly or indirectly via fixed or
non-geostationary satellite, pursuant to licenses issued by the FCC
pursuant to Part 25 of the FCC Rules and all mobile wireless voice and
data services reasonably ancillary thereto that are also provided via
fixed or non-geostationary satellite.
"SBC" shall have the meaning set forth in the Preamble.
"SBC Additional Closing" shall have the meaning set forth in Section 2.9.
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"SBC Additional Closing Date" shall have the meaning set forth in Section 2.9.
"SBC Additional Subsidiary" shall have the meaning set forth in Section 4.23(a).
"SBC Additional Subsidiary Value" shall mean, with respect to each SBC
Additional Subsidiary, the Fair Market Value of such Subsidiary as of
the dates set forth on Schedule 2 hereto for each such Subsidiary.
"SBC Benefits Liabilities" shall have the meaning set forth in Section 4.4(m).
"SBC Books and Records" shall mean all books, ledgers, files, reports, plans and
operating records of, or maintained for, the SBC Business, provided
that with respect to any of the foregoing items that are not held by
the SBC Companies or any of their Subsidiaries, SBC Books and Records
shall only be deemed to refer to items materially related to the SBC
Business.
"SBC Business" shall mean the Business as conducted by SBC and its Affiliates,
but shall not include the Excluded SBC Business.
"SBC Closing Net Debt" shall mean the SBC Net Debt as of the Closing.
"SBC Companies" shall mean collectively SBC CT 1, SBC CT 2, SBC Holdings, SBC
Midwest, SBC Midwest Wireless, SBC Mobile, SBC Pacific, SBC Wireless
and SBC Wireless LLC, and shall be deemed to include during all periods
following organization thereof, the SBC Additional Subsidiaries after
formation thereof.
"SBC Companies' Licenses" shall have the meaning set forth in Section 3.1(n).
"SBC Compensation and Benefit Plans" shall have the meaning set forth in Section
3.1(i)(i).
"SBC Contribution" shall have the meaning set forth in Section 2.2.
"SBC CT 1" shall mean SNET Cellular, Inc., a Connecticut corporation and its
successor companies.
"SBC CT 1 Shares" shall mean all of the issued and outstanding equity interests
of SBC CT 1 in whatever form such equity interests may be held.
"SBC CT 2" shall mean SNET Mobility, Inc., a Connecticut corporation, and its
successor companies.
"SBC CT 2 Shares" shall mean all of the issued and outstanding equity interests
of SBC CT 2 in whatever form such equity interests may be held.
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"SBC Deductible" shall have the meaning set forth in Section 7.3(b).
"SBC Disclosure Letter" shall mean the disclosure letter, dated the date hereof,
delivered by SBC to BellSouth.
"SBC Domestic Wireless Group" shall have the meaning set forth in Section
3.1(f).
"SBC Employees" shall have the meaning set forth in Section 3.1(i)(i).
"SBC Financial Statements" shall have the meaning set forth in Section 3.1(f).
"SBC Holdings" shall mean the Person formed by SBC formed to own all of the
limited liability company interests of SBC Wireless LLC in connection
with the transactions contemplated by Section 4.22.
"SBC Leasing Company" shall have the meaning set forth in Section 4.4(a).
"SBC Midwest" shall mean Ameritech Mobile Communications, Inc., a Delaware
corporation, and its successor companies.
"SBC Midwest Shares" shall mean all of the issued and outstanding equity
interests of SBC Midwest in whatever form such equity interests may be
held.
"SBC Midwest Wireless" shall mean Ameritech Wireless Communications Inc., a
Delaware corporation, and its successor companies.
"SBC Midwest Wireless Shares" shall mean all of the issued and outstanding
equity interests of SBC Midwest Wireless in whatever form such equity
interests may be held.
"SBC Mobile" shall mean Southwestern Bell Mobile Systems, Inc., a Delaware and
Virginia corporation, and its successor companies.
"SBC Mobile Shares" shall mean the issued and outstanding equity interests of
SBC Mobile held by SBC PAC in whatever form such equity interests may
be held.
"SBC Net Debt" shall mean, as calculated at the Closing Date, (x) the sum of the
liabilities of (a) each of the SBC Companies (including for such
purposes, each direct and indirect wholly owned Subsidiary of a SBC
Company) and (b) each other Subsidiary of the SBC
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Companies multiplied by the percentage ownership as noted in Schedule
3.1(d)(i) of the SBC Disclosure Letter, minus (y) the sum of the
current assets (including cash and cash equivalents) of (a) each of the
SBC Companies (including for such purposes each direct and indirect
wholly owned Subsidiary of a SBC Company) and (b) each other Subsidiary
of the SBC Companies multiplied by the percentage ownership as noted in
Schedule 3.1(d)(i) of the SBC Disclosure Letter, clauses (x) and (y)
being calculated from time to time in a manner consistent with GAAP.
The Fair Market Value of the securities of Highway Master
Communications, Inc. owned by the SBC Companies on the Closing Date
shall be deemed a current asset of the SBC Companies for purposes of
the calculation of the SBC Net Debt.
"SBC PAC" shall mean Pacific Telesis Group, a Nevada corporation, and its
successor companies.
"SBC Pacific" shall mean Pacific Telesis Mobile Services, a California
corporation, and its successor companies.
"SBC Pacific Shares" shall mean all of the issued and outstanding equity
interests of SBC Pacific in whatever form such equity interests may be.
"SBC Pension Plans" shall have the meaning set forth in Section 3.1(i)(ii).
"SBC PR" shall mean SBC Wireless-Puerto Rico, Inc., a Delaware corporation and
its successor companies.
"SBC Proportionate Share" shall have the meaning set forth in Section 4.4(m).
"SBC Required Consents" shall have the meaning set forth in Section 3.1(b)(i).
"SBC Shares" shall mean collectively the SBC CT 1 Shares, SBC CT 2 Shares, SBC
Midwest Shares, SBC Midwest Wireless Shares, SBC Mobile Shares, SBC
Pacific Shares and SBC Wireless Shares.
"SBC Transferred Employees" shall have the meaning set forth in Section 4.4(b).
"SBC Wireless" shall mean SBC Wireless, Inc., a Delaware corporation, and its
successor companies.
"SBC Wireless Employees" shall have the meaning set forth in Section 4.4(b).
"SBC Wireless LLC" shall mean the limited liability company formed under the
laws of Delaware and in accordance with the terms hereof and for the
purpose of directly holding all of the SBC Shares.
"SBC Wireless LLC Shares" shall mean all of the issued and outstanding equity
interests of SBC Wireless LLC in whatever form such equity interests
may be.
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"SBC Wireless Shares" shall mean all of the issued and outstanding equity
interests of SBC Wireless in whatever form such equity interests may
be.
"Stockholders' Agreement" shall mean the Stockholders' Agreement to be entered
into by and among SBC, BellSouth and Manager, substantially in the form
set forth in Exhibit M.
"Strategic Review Committee" shall have the meaning ascribed to such term in the
Newco LLC Agreement.
"Subsidiary" shall mean, as to any Person, any Person (i) of which such Person
directly or indirectly owns securities or other equity interests
representing fifty percent or more of the aggregate voting power, (ii)
of which such Person possesses fifty percent or more of the right to
elect directors or Persons holding similar positions or (iii) which
such person Controls directly or indirectly through one or more
intermediaries.
"Subsidiary Restructuring" shall have the meaning set forth in Section 4.22(b).
"Target BellSouth Net Debt" $3,150,000,000.
"Target SBC Net Debt" shall mean $6,000,000,000.
"Tax Returns" shall mean all reports and returns (including elections,
declarations, disclosures, schedules, estimates, information returns
and claims for refund) required to be supplied to a taxing authority
with respect to Taxes.
"Taxes" shall mean all federal, state, local and foreign income, profits,
franchise, gross receipts, environmental, customs duty, capital stock,
severance, stamp, payroll, sales, employment, unemployment, disability,
use, property, withholding, excise, production, value added, occupancy
and other taxes, duties or assessments of any nature whatsoever,
together with all interest, penalties and additions imposed with
respect to such amounts and any interest in respect of such penalties
and additions.
"Telecom Services" shall have the meaning set forth in the Newco LLC Agreement.
"Termination Date" shall have the meaning set forth in Section 6.1(d).
"Total Benefits Liabilities" shall have the meaning set forth in Section 4.4(m).
"Tower Bankruptcy" shall mean the appointment of a receiver or liquidator or
trustee or assignee in bankruptcy or insolvency of the Tower Lessor or
of its property, the
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Tower Lessor's inability to pay its debts generally as they become due
or the adjudication of a Tower Lessor as a bankrupt.
"Tower Lessor" shall have the meaning set forth in Section 7.9.
"Transaction" shall mean collectively the transactions contemplated by this
Agreement, including (i) the SBC Contribution and (ii) the BellSouth
Contribution.
"Transfer Date" shall have the meaning set forth in Section 4.4(b).
"Transfer Taxes" means all federal, state, local or foreign sales, use, value
added, documentary, stamp or similar Taxes that may be imposed in
connection with the transfers contemplated by this Agreement, together
with all interest, penalties and additions imposed with respect to such
amounts and any interest in respect of such penalties and additions.
"Transferred Employees" shall have the meaning set forth in Section 4.4(b).
"Transition Group" shall have the meaning set forth in Section 4.9.
"Transition Marks Agreements" shall mean the Transition Marks Agreements between
Newco and each of BellSouth Intellectual Property Marketing
Corporation, a Georgia corporation, and SBC, substantially in the form
of Exhibit N hereto.
"Transition Services Agreement" shall mean the Transition Services Agreement
between each of BellSouth and SBC, as service providers, and Newco, set
forth as Exhibit J hereto, as amended from time to time.
"Unresolved Items" shall have the meaning set forth in Section 2.11(c).
"Utilities Laws" shall have the meaning set forth in Section 3.1(b)(i).
"Wireless Agency Agreements" shall mean the agency agreements between Newco and
each of BellSouth and SBC, each as an agent, relating to Wireless
Services (as defined in the LLC Agreement), substantially in the form
of Exhibit I hereto.
"Wireless Data Service" shall mean the provision of Domestic wireless data
service pursuant to licenses issued by the FCC pursuant to Subparts E
and H of Part 22 of the FCC Rules and Subpart S of Part 90 of the FCC
Rules and all wireless data services customarily ancillary thereto.
"Wireless Investco" shall mean Wireless Telecommunications Investment Company
LLC, a Delaware limited liability company which shall be deemed to be a
non-operating company.
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"Wireline Agency Agreements" shall mean the agency agreements between Newco, as
an agent, and each of BellSouth and SBC relating to Telecom Services,
as set forth in Exhibit I hereto.
1.2 Other Terms. Other terms may be defined elsewhere in the text of
this Agreement and, unless otherwise indicated, shall have such meaning
throughout this Agreement.
1.3 Other Definitional Provisions. The words "hereof", "herein", and
"hereunder" and words of similar import, when used in this Agreement, shall
refer to this Agreement as a whole and not to any particular provision of this
Agreement.
(a) The terms defined in the singular shall have a comparable
meaning when used in the plural, and vice versa.
(b) The terms "dollars" and "$" shall mean United States
dollars.
(c) References herein to a specific Section, Subsection or
Schedule shall refer, respectively, to Sections, Subsections or Schedules of
this Agreement, unless the express context otherwise requires.
(d) The words "include," "includes," and "including" when used
in this Agreement, shall be deemed to be followed by the words "without
limitation."
(e) Any reference herein to any law, rule, regulation, order
or other act of a Governmental Entity, or to any Ancillary Agreement between the
Parties hereto or their Subsidiaries, shall be deemed to include a reference to
any such act or any such agreement, in each case as it may be amended or
supplemented from time to time, and any reference to a form under the Securities
Act of 1933, as amended, or the Securities and Exchange Act of 1934, as amended,
shall include any successor forms thereto.
ARTICLE II
FORMATION AND CONTRIBUTIONS
2.1 Formation of Newco and Manager. (a) SBC agrees to incorporate
Manager no later than the fifth Business Day following the date hereof. The
Parties agree that promptly following the receipt of approval or suspension
under the EU Merger Regulation, a certificate of incorporation of Manager
substantially in the form attached hereto as Exhibit B shall be filed with the
Secretary of State of Delaware for Manager and the bylaws of Manager shall be
substantially in the form attached hereto as Exhibit C. Promptly following the
contribution to Newco by BellSouth described in Section 2.1(a), one share of
Class B common stock, par value $0.01 per share, of Manager will be issued
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to SBC and one share of Class B common stock, par value $0.01 per share, of
Manager will be issued to BellSouth each in exchange for $30. Immediately
following such issuance, the Parties agree to, and agree to cause Manager to
enter into the Stockholders' Agreement.
(b) Reasonably promptly after the incorporation of Manager,
SBC shall, or shall cause an Affiliate to, form Newco and shall, or shall cause
an Affiliate to, file a certificate of formation with the Secretary of State of
Delaware, substantially in the form attached hereto as Exhibit A. On the day on
which the Certificate of Formation is filed, SBC agrees to contribute $150 to
Newco in exchange for 5 LLC Units, BellSouth agrees to contribute $90 to Newco
in exchange for 3 LLC Units and SBC and BellSouth agree to cause Manager to
contribute $60 to Newco in exchange for 2 LLC Units.
(c) Promptly following Newco's formation, SBC, BellSouth and
Newco shall enter into an amendment to this Agreement pursuant to which Newco
will become a party hereto. It is understood that all agreements and obligations
entered into in this Agreement by SBC in favor of BellSouth, and by BellSouth in
favor of SBC shall be deemed in each case to have also been made in favor of
Newco whether such agreements or obligations relate to periods prior to or after
the Closing.
(d) SBC agrees that upon its formation Manager shall not have
any assets, liabilities or obligations of any nature other than those incident
to its formation and any acquired pursuant to this Agreement or any of the
Ancillary Agreements.
2.2 Contribution of SBC Wireless LLC Shares. On the terms and subject
to the conditions set forth herein, at the Closing, SBC shall or shall cause its
Subsidiaries to convey, transfer and assign to Newco all of the right, title and
interest in and to the SBC Wireless LLC Shares and to the extent permitted by
Law or any relevant Contract, the Other SBC Assets (except the SBC Additional
Subsidiaries may not be so contributed) to the extent held by SBC or any
Subsidiary thereof, in each case, free and clear of all Encumbrances except for
the Encumbrances set forth on Schedule 2.2 of the SBC Disclosure Letter and,
except with respect to the Other SBC Assets, Permitted Encumbrances (the "SBC
Contribution").
2.3 Contribution of BellSouth Shares. On the terms and subject to the
conditions set forth herein, at the Closing, BellSouth shall or shall cause its
Subsidiaries to convey, transfer and assign to Newco all of the right, title and
interest in and to the BellSouth Shares and, to the extent permitted by Law or
any relevant Contract, the Other BellSouth Assets (except the BellSouth
Additional Subsidiary may not be so contributed) to the extent held by BellSouth
or any Subsidiary of BellSouth, in each case, free and clear of all Encumbrances
except for the Encumbrances set forth on Schedule 2.3 of the
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BellSouth Disclosure Letter and, except with respect to the Other BellSouth
Assets being contributed, Permitted Encumbrances (the "BellSouth Contribution").
2.4 Issuance of Newco LLC Units. On the terms and subject to the
conditions set forth herein, at the Closing, in exchange for the SBC
Contribution and the BellSouth Contribution, respectively, SBC and BellSouth
shall cause Newco to issue LLC Units to SBC Holdings and BellSouth Holdings such
that SBC Holdings and BellSouth Holdings shall be issued the number of LLC Units
specified on Schedule 2.4 hereto; provided that at the Closing SBC shall own 60%
of the outstanding LLC Units, disregarding for such purpose any LLC Units owned
by Manager outstanding at such time, and BellSouth shall own 40% of the LLC
Units, disregarding for such purpose any LLC Units owned by Manager outstanding
at such time.
2.5 Closing. (a) The consummation of the transactions contemplated
hereby, including the delivery of the SBC Wireless LLC Shares, and the BellSouth
Shares, and the issuance of Newco LLC Units in the number specified in Section
2.4 (the "Closing") shall take place at the offices of Sullivan & Cromwell, 125
Broad Street, New York, New York as promptly as is practicable on the third
Business Day following the day on which the conditions set forth in Article V
hereof have been satisfied or duly waived (other than those conditions that by
their nature are to be satisfied at the Closing, but subject to the satisfaction
or waiver of those conditions), or at such other time and place as the Parties
may mutually agree. The date on which the Closing occurs is called the "Closing
Date."
(b) At the Closing:
(i) BellSouth shall deliver or cause to be delivered
to Newco assignments effective to convey the BellSouth Shares, in form
reasonably acceptable to Newco and SBC, free and clear of all
Encumbrances, except as provided in Section 2.3;
(ii) SBC shall deliver or cause to be delivered to
Newco assignments effective to convey the SBC Shares, in form
reasonably acceptable to Newco and BellSouth, free and clear of all
Encumbrances, except as provided in Section 2.2; and
(iii) SBC and BellSouth shall cause the issuance of
LLC Units by Newco in the amounts specified in Section 2.4, free and
clear of all Encumbrances, other than those Encumbrances contained in
the Newco LLC Agreement.
2.6 Additional Closing Deliveries by SBC. At the Closing, SBC shall
also deliver, or cause to be delivered, to Newco the following:
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(a) such other instruments or documents, in form and substance
reasonably acceptable to Newco and BellSouth, as may be necessary to transfer
the SBC Shares and to vest in Newco all of SBC Holding's right, title and
interest therein;
(b) such other instruments or documents, in form and substance
reasonably acceptable to Newco and BellSouth, as may be necessary to transfer
all rights of ownership in any Other SBC Assets, subject to Section 4.18 hereof;
(c) a copy of each of the Ancillary Agreements not previously
executed, to which it or its Subsidiary is to be a party, duly executed by it or
the applicable Subsidiary; and
(d) the certificates and opinions to be delivered pursuant to
Section 5.2 hereof.
2.7 Additional Closing Deliveries by BellSouth. At the Closing,
BellSouth shall also deliver or cause to be delivered to Newco the following:
(a) such other documents or instruments in form and substance
reasonably acceptable to Newco and SBC as may be necessary to transfer the
BellSouth Shares and to vest in Newco all of BellSouth Holdings' right, title
and interest therein;
(b) such other instruments or documents, in form and substance
reasonably acceptable to Newco and SBC, as may be necessary to transfer all
rights of ownership in any Other BellSouth Assets, subject to Section 4.20
hereof;
(c) a copy of each of the Ancillary Agreements not previously
executed, to which it or its Subsidiary is to be a party, duly executed by it or
the applicable Subsidiary; and
(d) the certificates and opinions to be delivered by or on
behalf of BellSouth pursuant to Section 5.3 hereof.
2.8 Deliveries by Newco. At the Closing, BellSouth and SBC shall cause
Newco to deliver to BellSouth and SBC a duly executed copy of each of the
Ancillary Agreements not previously executed to which Newco is to be a party.
2.9 SBC Additional Closings. (a) From time to time after the Closing
and prior to December 31, 2009, SBC may contribute or cause to be contributed to
Newco the SBC Additional Subsidiaries (provided that the SBC Additional
Subsidiary holding the Arkansas Assets, the Arkansas Liabilities, the Pittsburgh
Assets and the Pittsburgh Liabilities shall not contribute the Pittsburgh Assets
and the Pittsburgh Liabilities) together with all cash distributions, which have
been made to such SBC Additional
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Subsidiary with respect to the assets and liabilities being contributed, between
the Closing Date and the SBC Additional Closing Date with respect to such SBC
Additional Subsidiary, in each case net of Taxes required to be paid with
respect to such distributions, plus interest from the date of each such
distribution at the prime rate publicly announced from time to time by Bank of
America or any successor thereto compounded annually from the date of each such
distribution (each such contribution shall be a "SBC Additional Closing"). A SBC
Additional Closing shall occur on the fifth Business Day following the date on
which SBC provides notice to Newco that a SBC Additional Closing is to occur;
provided that, if any notice to or approval shall be required to be made or
obtained from any Governmental Entity, such SBC Additional Closing shall take
place on the second Business Day following the time that the last to be made or
obtained of such filings or approvals is made or obtained; provided that a SBC
Additional Closing shall always occur on the last Business Day of a month or at
such other time as SBC and Newco shall agree in writing (the date of each such
SBC Additional Closing shall be a "SBC Additional Closing Date"). SBC shall not
be required to effect the SBC Additional Closing if any Governmental Entity of
competent jurisdiction shall have enacted, issued, promulgated, enforced or
entered any Law (whether temporary, preliminary or permanent) that is in effect
and enjoins or otherwise prohibits such SBC Additional Closing or any
Governmental Entity shall have notified SBC of any proceeding seeking the
foregoing.
(b) Each SBC Additional Closing shall take place at the main
offices of Newco, as promptly as practicable after 10 a.m., local time, on the
relevant SBC Additional Closing Date or at such other time or place as SBC and
Newco shall agree in writing. At each SBC Additional Closing, SBC shall deliver
or cause to delivered to Newco all of the equity interests in the relevant SBC
Additional Subsidiary, free and clear of all Encumbrances, together with all
instruments or documents, in form and substance reasonably acceptable to Newco,
as may be necessary to transfer such equity interests to Newco and to vest in
Newco all of SBC Holding's right, title and interest therein.
(c) In the event that any SBC Additional Subsidiary shall not
have been contributed to Newco prior to December 31, 2009, SBC shall promptly
pay to Newco in cash an amount equal to the product of (x) 2 and (y) the
aggregate of all SBC Additional Subsidiary Values not contributed to Newco. The
provisions of this subsection (c) shall not apply to the value attributed to (i)
the Pittsburgh Assets and the Pittsburgh Liabilities if the Arkansas Assets and
the Arkansas Liabilities are contributed or (ii) the Arkansas Assets and the
Arkansas Liabilities if the Pittsburgh Assets and the Pittsburgh Liabilities are
contributed.
2.10 BellSouth Additional Closing. (a) Newco shall have the right to
direct BellSouth and its Subsidiaries to make the election provided in Section
9.1 of the ABC
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Agreement. BellSouth and SBC shall cause the Strategic Review Committee of
Manager to meet at least once during the 10-day period beginning on December 13,
2000 to determine which election, if any, it shall make. The Persons nominated
by BellSouth to be directors of Manager who serve as members of the Strategic
Review Committee shall vote as directed by the persons nominated by SBC as
members of such Committee as to the making of such election. Promptly following
such meeting, BellSouth shall cause the applicable BellSouth Subsidiaries to
provide notice of the election, if any, in accordance with the applicable
procedure in the ABC Agreement.
(b) BellSouth shall effect Manager's election in accordance
with the ABC Agreement and, at the applicable BellSouth Additional Closing,
shall contribute to Newco its interest in the Subsidiaries of ABC Holding or its
remaining interest in ABC Holding in accordance with paragraph (f) below and any
cash received relating to such election, net of income Taxes payable with
respect to any such cash. In addition, BellSouth shall contribute to Newco cash
in an amount equal to the distributions received by BellSouth or its Affiliates
since the Closing attributable to the interest being contributed to Newco, net
of any Taxes paid or to be payable on income reported by BellSouth or its
Affiliates attributable to the interest being contributed, plus interest at the
prime rate on a per annum basis publicly announced from time to time by Bank of
America or any successor thereto from the date of each such distribution.
(c) If Newco does not make an election under Section 9.1 of
the ABC Agreement, but an election later is made under Section 9.2 of the ABC
Agreement, following the closing of the transaction contemplated by such
election, BellSouth shall make the applicable contribution to Newco in
accordance with Section 2.10(a) above.
(d) The contribution made by a BellSouth Subsidiary or
Subsidiaries as provided in 2.10(b) or (c) above shall be a "BellSouth
Additional Closing." Each Entity in which BellSouth contributes equity interests
shall be a "BellSouth Additional Subsidiary."
(e) A BellSouth Additional Closing shall occur on the fifth
Business Day following the date on which BellSouth provides notice to Newco that
a BellSouth Additional Closing is to occur; provided that, if any notice or
approval shall be required to be made to or obtained from any Governmental
Entity, such BellSouth Additional Closing shall take place on the second
Business Day following the time that the last to be made or obtained of such
filings or approvals is made or obtained; provided that a BellSouth Additional
Closing shall always occur on the last Business Day of a month or at such other
time as BellSouth and Newco shall agree in writing (the date of each such
BellSouth Additional Closing shall be a "BellSouth Additional Closing Date").
BellSouth shall not be required to effect a BellSouth Additional Closing if any
Governmental Entity of competent jurisdiction shall have enacted, issued,
promulgated, enforced or entered
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any Law (whether temporary, preliminary or permanent) that is in effect and
enjoins or otherwise prohibits the BellSouth Additional Closing or any
Governmental Entity shall have notified BellSouth of any proceeding seeking the
foregoing.
(f) Each BellSouth Additional Closing shall take place at the
main offices of Newco, as promptly as practicable after 10 a.m., local time on
the relevant BellSouth Additional Closing Date or at such other time or place as
BellSouth and Newco shall agree in writing.
(g) If Newco shall have made the election set forth in Section
2.10(b) and the BellSouth Additional Subsidiary shall not have been contributed
to Newco by December 31, 2002, then BellSouth shall promptly pay cash to Newco
in the amount of the BellSouth Additional Subsidiary Value.
(h) At each BellSouth Additional Closing, BellSouth shall
deliver, or cause to be delivered, to Newco all of its equity interests in the
relevant BellSouth Additional Subsidiary, free and clear of all Encumbrances
together with all instruments or documents, in form and substance reasonably
acceptable to Newco as may be necessary to transfer such equity interests to
Newco and to vest in Newco all right, title and interest therein.
(i) As soon as practicable, but in no event later than
forty-five (45) days following the BellSouth Additional Closing Date, Newco
shall, on a basis consistent with GAAP consistently applied, prepare and deliver
to BellSouth a statement showing (x) the liabilities of each BellSouth
Additional Subsidiary calculated in a manner consistent with GAAP and (y) the
current assets (including cash and cash equivalents) of such BellSouth
Additional Subsidiary (including for purposes of this calculation the current
assets of only those Subsidiaries that are operating companies) calculated in
accordance with GAAP consistently applied, each as of the BellSouth Additional
Closing Date. In the event of any disputes over the calculation prepared by
Newco, the procedures set forth in Section 2.11(b) and (c) shall apply. Within
five Business Days following either (i) an agreement by BellSouth and Newco as
to the calculation, or (ii) the determination of the CPA Firm pursuant to
Section 2.11(c), the following payments shall be made:
(A) To the extent the number in (x) above
exceeds the number in (y) above, such BellSouth Additional Subsidiary
shall pay to Newco, in cash, the amount by which the number in (x)
above exceeds the number in (y) above.
(B) To the extent the number in (y) above
exceeds the number in (x) above, Newco shall pay to such BellSouth
Additional Subsidiary, in
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cash, the amount by which the number in (y) above exceeds the number in
(x) above.
(j) BellSouth shall cause a BellSouth Additional Subsidiary to
own, free and clear of all Encumbrances, at least $1.150 billion in cash and
cash equivalents in a non-operating company as of the Closing Date and shall
maintain at least such level of cash and cash equivalents in such entity through
the BellSouth Additional Closing or, if there is no such closing, until the time
of determination of the BellSouth Additional Subsidiary Value pursuant to
Section 2.10(g).
(k) Any payments made pursuant to this Section 2.10 shall be
made according to the procedures set forth in Section 2.11(e).
2.11 Net Debt. (a) As soon as practicable, but in no event later than
ninety (90) days following the Closing Date, Newco shall, on a basis consistent
with GAAP prepare and deliver to each of SBC and BellSouth a statement showing
the calculation of the Closing Net Debt (the "Calculation"). The Calculation
shall separately set forth the SBC Closing Net Debt and BellSouth Closing Net
Debt.
(b) After receipt of the Calculation, SBC and BellSouth shall
each have 60 days to review the Calculation. Newco, SBC and BellSouth shall each
provide the others and their authorized representatives reasonable access during
normal business hours and without significant disruption to their respective
business, to (i) all of their and their Subsidiaries' respective books, records
and employees having relevant information concerning the Calculation and (ii)
the accountants who assisted Newco in preparing the Calculation and such
accountants' relevant supporting workpapers. Unless SBC or BellSouth delivers
written notice to Newco and to SBC or BellSouth, as the case may be, on or prior
to the 60th day after Newco's delivery of the Calculation stating that SBC or
BellSouth, as the case may be, has objections to the Calculation and describing
any such objections with reasonable particularity, SBC and BellSouth shall be
deemed to have accepted and agreed to the Calculation. In addition, any item
included in the Calculation which is not objected to by either SBC or BellSouth
shall be deemed to be accepted by SBC and BellSouth (the "Resolved Items") and
any amounts included within a Resolved Item shall be deemed to be final, binding
and conclusive. If SBC or BellSouth notifies Newco of its objections to the
Calculation, SBC, BellSouth and Newco shall, within 10 days (or such longer
period as the parties may agree) following such notice (the "Resolution
Period"), attempt to resolve their differences, and any written resolution by
them as to any disputed amounts shall be final, binding and conclusive.
(c) Any amounts remaining in dispute at the conclusion of the
Resolution Period ("Unresolved Items") shall be submitted to Arthur Andersen LLP
(such firm being referred to as the "CPA Firm") or, if such firm shall be unable
or
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unwilling to serve in such capacity or if the parties shall otherwise mutually
agree, such other nationally recognized firm of independent accountants mutually
agreed by SBC, BellSouth and Newco (and, in such case, such firm shall be deemed
to be the CPA Firm), within 10 days after the expiration of the Resolution
Period. Each Party agrees to execute, if requested by the CPA Firm, an
engagement letter with the CPA Firm containing reasonable terms. All fees and
expenses relating to the work, if any, to be performed by the CPA Firm shall be
borne by all of the parties equally. The CPA Firm shall act as an arbitrator and
not as an expert in determining the Unresolved Items. The CPA Firm's
determination of the Unresolved Items shall be made within 30 days after the
submission of the Unresolved Items to the CPA Firm, and, together with a
calculation of the Closing Working Capital and the Closing Long Term Liabilities
based upon the amount of Resolved Items and the CPA Firm's determinations of the
Unresolved Items, shall be set forth in a written statement delivered to SBC,
BellSouth and Newco by the CPA Firm and shall be final, binding and conclusive
on the parties for all purposes.
(d) Within five (5) Business Days following either (i) an
agreement by SBC, BellSouth and Newco as to the Calculation or (ii) the CPA
Firm's determination of the Calculation, the following payments shall be made:
(x) If the SBC Closing Net Debt exceeds the Target
SBC Net Debt, then SBC shall pay to Newco, in cash, an amount
equal to the amount by which the SBC Closing Net Debt exceeds
the Target SBC Net Debt. If the BellSouth Closing Net Debt
exceeds the Target BellSouth Net Debt, then BellSouth shall
pay to Newco, in cash, an amount equal to the amount by which
the BellSouth Closing Net Debt exceeds the Target BellSouth
Net Debt.
(y) If the Target SBC Net Debt exceeds the SBC
Closing Net Debt, then Newco shall pay to SBC, in cash, an
amount equal to the amount by which the Target SBC Net Debt
exceeds the SBC Closing Net Debt. If the Target BellSouth Net
Debt exceeds the BellSouth Closing Net Debt, then Newco shall
pay to BellSouth, in cash, an amount equal to the amount by
which the Target BellSouth Net Debt exceeds the BellSouth
Closing Net Debt.
(e) Any payments made pursuant to this Section 2.11 shall be
made by wire transfer of immediately available funds to an account indicated in
writing by the party to receive such funds and shall be accompanied by interest
at the prime rate publicly announced from time to time by Bank of America or its
successor calculated on the basis of a year of 360 days for the actual number of
days elapsed, accrued from the Closing Date up to and including the date of
payment.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of SBC. Except as set forth in the
corresponding sections or subsections of the SBC Disclosure Letter, SBC hereby
represents and warrants to BellSouth as of the date hereof and as of the Closing
that:
(a) Organization, Good Standing and Qualification. Each of it
and its Subsidiaries that is a SBC Company or holds (beneficially or of record)
SBC Shares or any Other SBC Assets is a corporation, partnership, limited
liability company or other entity duly organized, validly existing and in good
standing under the laws of its respective jurisdiction of organization and has
all requisite corporate or similar power and authority to own and operate its
properties and assets and to carry on its business as presently conducted and is
qualified to do business and is in good standing as a foreign corporation in
each jurisdiction where the ownership or operation of its properties or conduct
of its business requires such qualification, except where the failure to be so
qualified or in good standing is not, individually or in the aggregate,
reasonably likely to have a Material Adverse Effect on the SBC Companies. It has
made available to BellSouth a complete and correct copy of its, its Subsidiaries
that own of record SBC Shares, the SBC Companies' and the SBC Companies'
Subsidiaries' certificates of incorporation, articles of incorporation or other
comparable governing instruments, as the case may be, and by-laws or other
comparable governing instruments, each as in effect and as amended through the
date hereof. Such certificates of incorporation, articles of incorporation,
by-laws and other comparable governing documents as so made available are in
full force and effect.
As used in this Agreement, the term "Material Adverse Effect"
means, with respect to the SBC Companies, a material adverse effect on the
financial condition, properties, business or results of operations of the SBC
Companies and their Subsidiaries, taken as a whole, with respect to the
BellSouth Companies, a material adverse effect on the financial condition,
properties, business or results of operations of the BellSouth Companies and
their Subsidiaries taken as a whole, and, with respect to Newco, a material
adverse effect on the financial condition, properties, business or results of
operations of Newco and its Subsidiaries, assuming for such purposes the
completion of the Transaction in each case, other than effects arising out of
(i) general changes in economic conditions in the United States, (ii) changes
affecting the mobile wireless voice and data services industry generally or
(iii) changes resulting from the entry into this Agreement.
(b) Governmental Filings; No Violations.
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(i) Other than the filings and/or notices (A) under
the HSR Act, (B) the necessary notices and, if any, approvals of the
FCC pursuant to the Communications Act or the FCC Rules, (C) the
necessary notices and necessary approvals, if any, of the state and
foreign public utility commissions or similar state or foreign
regulatory bodies (each a "PUC") identified in the SBC Disclosure
Letter pursuant to applicable state or foreign laws regulating CMRS
(together with the FCC Rules and the FAA Rules, "Utilities Laws") and
(D) the necessary notices and approvals of foreign Governmental
Entities identified in the SBC Disclosure Letter (such filings and/or
notices being the "SBC Required Consents"), no notices, reports or
other filings are required to be made by it or its Subsidiaries with,
nor are any consents, registrations, approvals, permits or
authorizations required to be obtained by it or its Subsidiaries from,
any Governmental Entity, in connection with the execution and delivery
of this Agreement by it and the consummation by it of the SBC
Contribution or the SBC Additional Closings hereby, except those that
the failure to make or obtain would not, individually or in the
aggregate, be reasonably likely to have a Material Adverse Effect on
the SBC Companies or prevent, materially delay or materially impair its
ability to consummate the transactions contemplated by this Agreement.
(ii) The execution, delivery and performance of this
Agreement by it do not, and the consummation by it of the transactions
contemplated hereby will not, constitute or result in (A) a breach or
violation of, or a default under, its certificate of incorporation or
by-laws or the certificate of incorporation, by-laws or other
organizational documents, including partnership agreements and limited
liability company agreements, of any of the SBC Companies (B) a breach
or violation of, or a default under, the certificate of incorporation
or other organizational documents, including partnership agreements and
limited liability company agreements, of any Subsidiaries of the SBC
Companies (C) a breach or violation of, or a default under, the
acceleration of any obligations or the creation of a lien, pledge,
security interest or other Encumbrance on its assets or the assets of
any of its Subsidiaries (with or without notice, lapse of time or both)
pursuant to any Contract binding upon it or any of its Subsidiaries or
any Law or governmental or non-governmental permit or license to which
it or any of its Subsidiaries is subject or (D) any change in the
rights or obligations of any party under any of its or its
Subsidiaries' Contracts, except, in the case of clause (B), (C) or (D)
above, for any breach, violation, default, acceleration, creation or
change that, individually or in the aggregate, would not be reasonably
likely to have a Material Adverse Effect on the SBC Companies or
prevent, materially delay or materially impair its ability to
consummate the transactions contemplated by this Agreement.
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(c) Capitalization of the SBC Companies. The issued and
outstanding SBC Shares have been duly authorized and validly issued, are fully
paid and nonassessable and are owned by SBC or direct or indirect wholly owned
Subsidiaries of SBC free and clear of any Encumbrances. There are no preemptive
or other outstanding rights, options, warrants, conversion rights, stock
appreciation rights, redemption rights, agreements, arrangements or commitments
to issue or sell any shares of capital stock or other securities of any of the
SBC Companies or any securities or obligations convertible or exchangeable into
or exercisable for, or giving any Person a right to subscribe for or acquire,
any securities of any of the SBC Companies, and no securities or obligations
evidencing such rights are authorized, issued or outstanding.
(d) Subsidiaries of the SBC Companies.
(i) Schedule 3.1(d)(i) of the SBC Disclosure Letter
lists, as of the date hereof the name of each Subsidiary of each of the
SBC Companies and the equity interest of the SBC Company or one or more
of its Subsidiaries therein and lists the organizational name of each
other equity interest held by a SBC Company in one or more of its
Subsidiaries. All equity interests of each Subsidiary of a SBC Company
that are owned by such SBC Company or a Subsidiary of a SBC Company are
owned by a SBC Company or the applicable Subsidiary free and clear of
all Encumbrances, and all equity interests are duly authorized, validly
issued and fully paid. All other equity interests that are owned by a
SBC Company or a subsidiary of a SBC Company are owned by the
applicable SBC Company or subsidiary free and clear of all
Encumbrances.
(ii) As of the date hereof, none of the SBC Companies
or any of their Subsidiaries has any obligation to sell, transfer or
assign or has entered into a Contract regarding the sale, transfer or
assignment of any of its rights, securities or interests in any
Subsidiary of the SBC Companies or any of the other equity interests
owned by a SBC Company or any Subsidiary of a SBC Company.
(e) Corporate Authority; Approval. SBC has all requisite
corporate power and authority and has taken all corporate action necessary in
order to execute, deliver and perform its obligations under this Agreement and
the Ancillary Agreements and, prior to Closing, SBC Holdings shall have taken
all limited liability company action necessary to contribute, transfer and
assign the SBC Wireless LLC Shares to Newco. This Agreement and each of the
Ancillary Agreements are, or will be when executed, legal, valid and binding
agreements of SBC or the Subsidiary or Subsidiaries of SBC executing such
agreements enforceable against SBC or the applicable Subsidiary of SBC, as the
case may be, in accordance with their respective terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general
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applicability relating to or affecting creditors' rights and to general equity
principles (the "Bankruptcy and Equity Exception").
(f) Financial Statements. Schedule 3.1(f) of the SBC
Disclosure Letter contains true, complete and correct copies of (i) the
unaudited SBC Domestic Wireless Group Historical Combined Statements of Income
for the year ended December 31, 1999; and (ii) the unaudited SBC Domestic
Wireless Group Historical Combined Balance Sheets as of December 31, 1999 (the
"SBC Financial Statements"). The SBC Financial Statements fairly present in all
material respects and consistent with GAAP, the financial position of SBC
Wireless; SBC Pacific; SBC Midwest; SBC Midwest Wireless; SBC CT1 and SBC CT2;
and SBC Mobile (the "SBC Domestic Wireless Group") as of the date indicated and
the results of operations of the SBC Domestic Wireless Group for the period then
ended (subject to the absence of notes).
(g) Absence of Certain Changes. Except as expressly
contemplated by this Agreement and except with respect to the Excluded SBC
Business, since December 31, 1999 (i) the SBC Companies have conducted their
respective businesses only in the ordinary and usual course of such businesses;
(ii) there has not been any change in the financial condition, properties,
business or results of operations of the SBC Companies and their Subsidiaries,
except those changes that have not had and would not, individually or in the
aggregate, be reasonably likely to have a Material Adverse Effect on the SBC
Companies; (iii) there has not been any damage, destruction or other casualty
loss with respect to any asset or property owned, leased or otherwise used by
the SBC Companies and their Subsidiaries, whether or not covered by insurance,
which damage, destruction or loss is reasonably likely, individually or in the
aggregate, to have a Material Adverse Effect on the SBC Companies; (iv) there
has not been any sale, transfer, conveyance, lease, creation of an Encumbrance
or other disposition of assets of the SBC Companies and their Subsidiaries
outside of the ordinary course of business; and (v) there has not been any
change by it or any SBC Company in accounting principles, practices or methods
of the SBC Companies.
(h) Litigation and Liabilities. There are no (i) civil,
criminal or administrative actions, suits, claims, hearings, investigations or
proceedings pending or, to the Knowledge of SBC, threatened against the SBC
Companies or any of their Affiliates or otherwise in connection with the SBC
Business or (ii) obligations or liabilities, whether or not accrued, contingent
or otherwise that are required to be disclosed under GAAP, or any other facts or
circumstances, in either such case, of which SBC has Knowledge that are
reasonably likely to result in any claims against or obligations or liabilities
of it or any of its Affiliates, except for those that have not had and are not,
individually or in the aggregate, reasonably likely to have a Material Adverse
Effect on the SBC Companies or prevent or materially impair or delay SBC's
ability to consummate the transactions contemplated by this Agreement.
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(i) SBC Employee Benefits.
(i) A listing of each bonus, deferred compensation,
pension, retirement, profit-sharing, thrift, savings, employee stock
ownership, stock bonus, stock purchase, restricted stock, stock option,
employment, termination, severance, compensation, medical, health or
other plan, agreement, policy or arrangement (the "SBC Compensation and
Benefit Plans") that covers employees, directors, former employees or
former directors of the SBC Companies or their Subsidiaries and any
other employee of SBC or a Subsidiary of SBC whose services are
primarily related (or, for persons who no longer perform such services,
were related) to the SBC Business (the "SBC Employees") and any trust
agreements or insurance contracts forming a part of the SBC
Compensation and Benefit Plans is set forth in Schedule 3.1(i)(i) of
the SBC Disclosure Letter.
(ii) All of the SBC Compensation and Benefit Plans
are in compliance with their terms and with all applicable Law,
including the Code and ERISA, except for failures to comply which are
not, individually or in the aggregate, reasonably likely to have a
Material Adverse Effect on the SBC Companies. Each of the SBC
Compensation and Benefit Plans that is an "employee pension benefit
plan" within the meaning of Section 3(2) of ERISA (a "SBC Pension Plan"
and collectively, the "SBC Pension Plans") and that is intended to be
qualified under Section 401(a) of the Code has received a favorable
determination letter from the IRS, and SBC does not have Knowledge of
any circumstances likely to result in revocation of any such favorable
determination letter. There is no pending or, to the Knowledge of SBC,
threatened claim, audit, investigation, litigation or other proceeding
relating to the SBC Compensation and Benefit Plans, except for
proceedings which are not, individually or in the aggregate, reasonably
likely to have a Material Adverse Effect on the SBC Companies. Neither
SBC nor any Subsidiary of SBC has engaged in a transaction with respect
to any of the SBC Compensation and Benefit Plans that, assuming the
taxable period of such transaction expired as of the date hereof, would
subject the SBC Companies or any of their Subsidiaries to a material
tax or penalty imposed by either Section 4975 of the Code or Section
502 of ERISA.
(iii) As of the date hereof, no liability under
Subtitle C or D of Title IV of ERISA (other than the payment of
prospective premium amounts to the Pension Benefit Guaranty Corporation
in the normal course) has been or is expected to be incurred by the SBC
Companies or any of their Subsidiaries with respect to any ongoing,
frozen or terminated "single-employer plan," within the meaning of
Section 4001(a)(15) of ERISA, currently or formerly maintained by any
of them, or the single-employer plan of any entity which is considered
one employer with it under Section 4001 of ERISA or Section 414 of the
Code (its
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"ERISA Affiliate") (each such single-employer plan, an "ERISA Affiliate
Plan"). The SBC Companies, their Subsidiaries and their ERISA
Affiliates have not contributed, or been obligated to contribute, to a
multiemployer plan under Subtitle E of Title IV of ERISA at any time
since September 26, 1980. No notice of a "reportable event," within the
meaning of Section 4043 of ERISA for which the 30-day reporting
requirement has not been waived, has been required to be filed for any
of the SBC's Pension Plans or any of its ERISA Affiliate Plans within
the 12-month period ending on the date hereof or will be required to be
filed in connection with the transactions contemplated by this
Agreement.
(iv) None of the SBC Pension Plans nor any of SBC's
ERISA Affiliate Plans has an "accumulated funding deficiency" (whether
or not waived) within the meaning of Section 412 of the Code or Section
302 of ERISA. Neither SBC nor any of its Subsidiaries has provided, or
is required to provide, security to any SBC Pension Plans or to any of
its ERISA Affiliate Plans pursuant to Section 401(a)(29) of the Code.
(v) Under each of the SBC Pension Plans which is a
single-employer plan and each of SBC's ERISA Affiliate Plans, as of the
last day of the most recent plan year ended prior to the date hereof,
the actuarially determined present value of all "benefit liabilities,"
within the meaning of Section 4001(a)(16) of ERISA (as determined on
the basis of the actuarial assumptions contained in such SBC Pension
Plan's or SBC ERISA Affiliate Plan's most recent actuarial valuation),
did not exceed the then current value of the assets of such SBC Pension
Plan or SBC ERISA Affiliate Plan, and there has been no material change
in the financial condition of such SBC Pension Plan or SBC ERISA
Affiliate Plan since the last day of the most recent plan year as such
would affect any of the SBC Companies.
(vi) Except as set forth on Schedule 3.1(i)(vi) to
the SBC Disclosure Letter, there are no material obligations to the SBC
Employees for retiree health and life benefits under any of the SBC
Compensation and Benefit Plans or as required by applicable law.
(vii) The consummation of the transactions
contemplated by this Agreement (whether alone or in connection with any
other event) will not (x) entitle any SBC Employee to severance pay,
directly or indirectly, upon termination of employment, (y) accelerate
the time of payment or vesting or trigger any payment of compensation
or benefits under, increase the amount payable or trigger any other
material obligation pursuant to, any of the SBC Compensation and
Benefit Plans or (z) result in any breach or violation of, or a default
under, any of the SBC Compensation and Benefit Plans, but excluding any
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exceptions to (x), (y) and (z) which are not, individually or in the
aggregate, material.
(viii) Since December 31, 1999, except as
contemplated hereby, there has not been any increase in the
compensation payable or that could become payable by the SBC Companies
or any of their Subsidiaries to any SBC Employee or any amendment of
any of the SBC Compensation and Benefit Plans other than increases or
amendments in the ordinary course of business consistent with past
practice.
(j) Compliance with Laws. The SBC Business and businesses of
each of the SBC Companies and their Subsidiaries have not been, and are not
being, conducted in violation of any federal, state, local or foreign law,
statute, ordinance, regulation, judgment, order, decree, injunction, arbitration
award, franchise, license, authorization, opinion, agency requirement or permit
of any Governmental Entity or common law (collectively, "Laws"), except for
violations or possible violations that have not had and would not, individually
or in the aggregate, be reasonably likely to have a Material Adverse Effect on
the SBC Companies or prevent or materially impair SBC's ability to consummate
the transactions contemplated by this Agreement. No investigation or review by
any Governmental Entity with respect to the SBC Companies or any of their
Subsidiaries is pending or, to the Knowledge of SBC, threatened, nor has any
Governmental Entity indicated an intention to conduct the same, except for those
the outcome of which have not had and would not, individually or in the
aggregate, be reasonably likely to have a Material Adverse Effect on the SBC
Companies or prevent or materially impair SBC's ability to consummate the
transactions contemplated by this Agreement. Each of the SBC Companies and their
Subsidiaries has all permits, licenses, franchises, variances, exemptions,
orders and other governmental authorizations, consents and approvals
(collectively, "Permits"), necessary to conduct their businesses as presently
conducted, except for those Permits the absence of which has not had and would
not, individually or in the aggregate, be reasonably likely to have a Material
Adverse Effect on the SBC Companies or prevent or materially impair SBC's
ability to consummate the transactions contemplated by this Agreement.
(k) Environmental Matters. Except for such matters that,
individually or in the aggregate, have not had and would not be reasonably
likely to have a Material Adverse Effect on the SBC Companies: (i) each of the
SBC Companies and their Subsidiaries has complied with all applicable
Environmental Laws; (ii) the properties currently owned or operated by the SBC
Companies or any of their Subsidiaries (including soils, groundwater, surface
water, buildings or other structures) are not contaminated with any Hazardous
Substances; (iii) the properties formerly owned or operated by the SBC
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Companies or any of their Subsidiaries were not contaminated with Hazardous
Substances during the period of ownership or operation by the SBC Companies or
any of their Subsidiaries; (iv) neither the SBC Companies nor any of their
Subsidiaries is subject to liability for any Hazardous Substance disposal or
contamination on any third party property; (v) neither the SBC Companies nor any
of their Subsidiaries has received any notice, demand, letter, claim or request
for information alleging that the SBC Companies or any of their Subsidiaries may
be in violation of or liable under any Environmental Law.
(l) Labor Matters. None of the SBC Companies nor any of their
Subsidiaries is the subject of any proceeding relating to any SBC Employee
before the National Labor Relations Board asserting the commission of an unfair
labor practice or is seeking to compel any of them to bargain with any labor
union or labor organization nor is there pending or, to the Knowledge of SBC,
threatened, nor has there been since January 1, 1995, any labor strike, dispute,
walkout, work stoppage, slow-down or lockout relating to any SBC Employee,
except in each case as has not had and would not, individually or in the
aggregate, be reasonably likely to have a Material Adverse Effect on the SBC
Companies. The collective bargaining agreements set forth on Schedule 3.1(l) of
the SBC Disclosure Letter are the only collective bargaining agreements relating
to any SBC Employee.
(m) Taxes. (i) SBC, the SBC Companies and each of their
Subsidiaries have prepared in good faith and duly and timely filed (taking into
account any extension of time within which to file) all material Tax Returns
required to be filed by any of them with respect to the SBC Companies or any of
their Subsidiaries and all such filed tax returns are complete and accurate in
all material respects; (ii) the SBC Companies and each of their Subsidiaries
have paid all Taxes that are shown as due on such filed Tax Returns or that the
SBC Companies or any of their Subsidiaries are obligated to withhold from
amounts owing to any employee, creditor or third party, except with respect to
matters contested in good faith or for such amounts that, individually or in the
aggregate, have not had and would not be reasonably likely to have a Material
Adverse Effect on the SBC Companies; (iii) as of the date hereof, there are not
pending or, to the Knowledge of SBC, threatened, in writing, any audits,
examinations, investigations or other proceedings in respect of Taxes or Tax
matters with respect to the SBC Companies; and (iv) there are not, to the
Knowledge of SBC, any unresolved questions or claims concerning the SBC
Companies' or any of their Subsidiaries' Tax liability that have had or would be
reasonably likely to have a Material Adverse Effect on the SBC Companies. No
material payments to be made to any of the officers or employees of the SBC
Companies or any of their Subsidiaries will as a result of consummation of the
transactions contemplated hereby be subject to the deduction limitations under
Section 280G of the Code.
(n) Regulatory Matters. The SBC Companies and their
Subsidiaries hold all licenses, franchises, certificates, consents, Permits,
qualifications and
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authorizations (including, without limitation, licenses granted by the FCC ("FCC
Licenses"), and licenses, authorizations and certificates of public convenience
and necessity from applicable state and local authorities) from all Governmental
Entities required under Utilities Laws ("Licenses") necessary for the lawful
conduct of the SBC Business, other than Licenses the lack of which, individually
or in the aggregate, have not had and would not be reasonably likely to have a
Material Adverse Effect on the SBC Companies. Schedule 3.1(n) of the SBC
Disclosure Letter sets forth each License obtained by SBC or any of its
Subsidiaries and which is, or in the absence of a violation thereof, would be in
full force and effect with respect to the SBC Business (the "SBC Companies'
Licenses"). To the Knowledge of SBC, no event has occurred or fact exists with
respect to the SBC Companies' Licenses (other than the requirement to file in
the future applications for renewal and obtain renewals in the ordinary course)
which permits, or after notice or lapse of time or both would permit,
revocation, non-renewal or termination of any of such licenses or would result
in any other impairment of the rights of the holder of any of such licenses or
which would be reasonably likely to limit the operation of the SBC Companies'
and their Subsidiaries' businesses as they are currently conducted, except for
revocations, limitations, non-renewals or other terminations which, individually
or in the aggregate, have not had and would not be reasonably likely to have a
Material Adverse Effect on the SBC Companies. The SBC Companies and their
Subsidiaries have performed their respective obligations under the SBC
Companies' Licenses with such exceptions which, individually or in the
aggregate, have not had and would not be reasonably likely to have a Material
Adverse Effect on the SBC Companies. The FCC actions granting the SBC Companies'
Licenses, together with all underlying construction permits, have not been
reversed, stayed, enjoined, annulled or suspended, and there is not pending or,
to the Knowledge of SBC, threatened, any application, petition, objection or
other pleading with the FCC or other Governmental Entity which challenges or
questions the validity of or any rights of the holder under any of the SBC
Companies' Licenses, except for such reversals, stays, injunctions, annulments,
suspensions, applications, petitions, objections or other pleadings, which have
not had and would not, individually or in the aggregate, be reasonably likely to
have a Material Adverse Effect on the SBC Companies.
(o) Contracts. Schedule 3.1(o) of the SBC Disclosure Letter
lists the following Contracts to which any of the SBC Companies or any of their
Subsidiaries is a party:
(A) any agreement which materially restricts or
materially limits their ability or the ability of any of their
respective Affiliates to freely conduct the SBC Business or any other
business or otherwise operate in any geographic market;
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<PAGE> 41
(B) any collective bargaining agreement and any
written employment agreement;
(C) all agreements with respect to outstanding
indebtedness for money borrowed in excess of $50,000,000 or any
guaranty thereof;
(D) all material leases of real property, which shall
be deemed to include all leases of real property, with an annual rental
payment in excess of $50,000, and all sale/leaseback arrangements
relating to cellular towers;
(E) all partnership, shareholder or joint venture
agreements or other agreements relating to the management or Control of
any such partnership, joint venture or non-wholly owned Subsidiary;
(F) all interconnection agreements; and
(G) any roaming agreements not terminable at the
option of either party thereto on 90 days or less notice.
(ii) Each Contract listed on Schedule 3.1(o) to the
SBC Disclosure Letter is valid, binding, enforceable, and in full force
and effect, the SBC Companies or the applicable Subsidiary are not in
breach or default under any such Contract and no event has occurred
which, with notice or lapse of time or both, would constitute such a
breach or default, or permit termination, modification, or
acceleration, under such Contract, except where the failure to be so
valid, binding, enforceable or in full force and effect or such breach
or default, termination, modification or acceleration has not had and
would not be, either individually or in the aggregate, reasonably
likely to have a Material Adverse Effect on the SBC Companies.
(p) Property and Leases. Schedule 3.1(p) to the SBC Disclosure
Letter contains a list of all real property owned by the SBC Companies or any of
their respective Subsidiaries or otherwise used primarily in the SBC Business
and real property leased pursuant to a lease agreement set forth on Schedule
3.1(o) to the SBC Disclosure Letter. The SBC Companies and their Subsidiaries
have marketable title to all material owned real property set forth on Schedule
3.1(p) and valid leasehold title to all material leased real property set forth
on Schedule 3.1(o) of the SBC Disclosure Letter, in each case free and clear of
all Encumbrances, other than Permitted Encumbrances.
(q) Brokers and Finders. Neither the SBC Companies nor any of
their respective officers, directors or employees has employed any broker or
finder or incurred any liability for any brokerage fees, commissions or finders'
fees in connection with the transactions contemplated in this Agreement.
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(r) Ownership of Assets. Substantially all of the assets,
properties, businesses, licenses and other assets, owned or leased by SBC and
its Subsidiaries and forming a part of the SBC Business are owned or leased by
the SBC Companies and their respective Subsidiaries.
(s) Sufficiency of Assets. The assets and properties owned or
leased by the SBC Companies or their respective Subsidiaries, together with all
Contracts to which the SBC Companies or their respective Subsidiaries are a
party, constitute the assets, properties and Contract rights reasonably
necessary to conduct the SBC Business in accordance with past practice.
(t) Other Business. Other than with respect to the Excluded
SBC Business, none of the SBC Companies, their respective Subsidiaries or the
SBC Additional Subsidiaries conducts or engages in any business material to the
SBC Companies and their Subsidiaries taken as a whole other than the SBC
Business or owns or leases any assets material to the SBC Companies and their
Subsidiaries taken as a whole that are not used or intended for the use in the
SBC Business, other than obsolete assets.
(u) Intellectual Property. Subject to Section 4.16
(Intercompany Obligations), the SBC Companies and their Subsidiaries each own,
or possess adequate licenses or other valid rights to use, all trademarks,
trademark rights, trade names, trade name rights, patents, patent rights,
industrial models, inventions, copyrights, service marks, trade secrets,
applications for trademarks and for service marks, know-how and other
proprietary rights and information, including rights to software (collectively,
"Intellectual Property Rights") used or held for use in connection with the SBC
Business except where the failure to have such ownership, possession or rights
would not, individually or in the aggregate, be reasonably likely to have a
Material Adverse Effect on the SBC Companies. To the Knowledge of SBC, the SBC
Companies and their Subsidiaries are not the subject of any threatened or
pending lawsuits alleging the violation or infringement of any Intellectual
Property Rights of any third party that, individually or in the aggregate, would
be reasonably likely to have a Material Adverse Effect on the SBC Companies. To
the Knowledge of SBC, there are no material infringements of any Intellectual
Property Right owned by any of the SBC Companies or their Subsidiaries. None of
the SBC Companies or their Subsidiaries is in material breach of any agreements
pursuant to which any of them has a license to use Intellectual Property Rights,
and consummation of the transactions contemplated hereby will not constitute
such a material breach or otherwise reduce or impair, in any material respect,
the rights of any of them under such license agreements other than any breach
which would not, individually or in the aggregate, be reasonably likely to have
a Material Adverse Effect on the SBC Companies. No claims are pending or, to the
Knowledge of SBC, threatened by any Person with respect to the ownership,
validity or enforceability of
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any Intellectual Property Rights owned by any of the SBC Companies or their
Subsidiaries, or challenging or questioning the right of the SBC Companies or
their Subsidiaries to use any Intellectual Property Rights owned by them, except
claims that would not, individually or in the aggregate, be reasonably likely to
have a Material Adverse Effect.
(v) No Other Representations and Warranties. Except for
representations and warranties contained in this Agreement, none of SBC, the SBC
Companies or their Affiliates, or any other Person makes any express or implied
representation or warranty on behalf of SBC with respect to the subject matter
of this Agreement.
3.2 Representations and Warranties of BellSouth. Except as set forth in
the corresponding sections or subsections of the BellSouth Disclosure Letter,
BellSouth hereby represents and warrants to SBC as of the date hereof and as of
the Closing that:
(a) Organization, Good Standing and Qualification. Each of it
and its Subsidiaries that is a BellSouth Company or holds (beneficially or of
record) BellSouth Shares or any Other BellSouth Assets is a corporation,
partnership, limited liability company or other entity duly organized, validly
existing and in good standing under the laws of its respective jurisdiction of
organization and has all requisite corporate or similar power and authority to
own and operate its properties and assets and to carry on its business as
presently conducted and is qualified to do business and is in good standing as a
foreign corporation in each jurisdiction where the ownership or operation of its
properties or conduct of its business requires such qualification, except where
the failure to be so qualified or in good standing is not, individually or in
the aggregate, reasonably likely to have a Material Adverse Effect on the
BellSouth Companies. It has made available to SBC a complete and correct copy of
its, its Subsidiaries that own of record BellSouth Shares, the BellSouth
Companies' and the BellSouth Companies' Subsidiaries' certificates of
incorporation, articles of incorporation or other comparable governing
instruments, as the case may be, and by-laws or other comparable governing
instruments, each as in effect and as amended through the date hereof. Such
certificates of incorporation, articles of incorporation, other comparable
governing instruments and by-laws as so made available are in full force and
effect.
(b) Governmental Filings; No Violations.
(i) Other than the filings and/or notices (A) under
the HSR Act, (B) the necessary notices and, if any, approvals of the
FCC pursuant to the Communications Act or the FCC Rules, (C) the
necessary notices and necessary approvals, if any, of the PUCs
identified in the BellSouth Disclosure Letter pursuant to Utilities
Laws and (D) the necessary notices and approvals of Foreign
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Governmental Entities identified in the BellSouth Disclosure Letter
(such filings and/or notices of BellSouth being the "BellSouth Required
Consents"), no notices, reports or other filings are required to be
made by it with, nor are any consents, registrations, approvals,
permits or authorizations required to be obtained by it or its
Subsidiaries from, any Governmental Entity, in connection with the
execution and delivery of this Agreement by it and the consummation by
it of the BellSouth Contribution or the BellSouth Additional Closings
hereby, except those that the failure to make or obtain would not,
individually or in the aggregate, be reasonably likely to have a
Material Adverse Effect on the BellSouth Companies or prevent,
materially delay or materially impair its ability to consummate the
transactions contemplated by this Agreement.
(ii) The execution, delivery and performance of this
Agreement by it do not, and the consummation by it of the transactions
contemplated hereby will not, constitute or result in (A) a breach or
violation of, or a default under, its certificate of incorporation,
by-laws or the certificate of incorporation, by-laws or other
organizational documents, including partnership agreements and limited
liability company agreements, of any of the BellSouth Companies, (B) a
breach or violation of, or any default under the certificate of
incorporation or other organizational documents, including partnership
agreements and limited liability company agreements, of any
Subsidiaries of the BellSouth Companies, (C) a breach or violation of,
or a default under, the acceleration of any obligations or the creation
of a lien, pledge, security interest or other Encumbrance on its assets
or the assets of any of its Subsidiaries (with or without notice, lapse
of time or both) pursuant to any Contract binding upon it or any of its
Subsidiaries of the BellSouth Companies or any Law or governmental or
non-governmental permit or license to which it or any of its
Subsidiaries is subject or (D) any change in the rights or obligations
of any party under any of its or its Subsidiaries' Contracts, except,
in the case of clause (B), (C) or (D) above, for any breach, violation,
default, acceleration, creation or change that, individually or in the
aggregate, would not be reasonably likely to have a Material Adverse
Effect on the BellSouth Companies or prevent, materially delay or
materially impair its ability to consummate the transactions
contemplated by this Agreement.
(c) Capitalization of the BellSouth Companies. The issued and
outstanding BellSouth Shares have been duly authorized and validly issued, are
fully paid and nonassessable and are owned by BellSouth or direct or indirect
wholly owned Subsidiaries of BellSouth free and clear of any Encumbrances. There
are no preemptive or other outstanding rights, options, warrants, conversion
rights, stock appreciation rights, redemption rights, agreements, arrangements
or commitments to issue or sell any shares of capital stock or other securities
of any of the BellSouth Companies or any of their Subsidiaries or any securities
or obligations convertible or exchangeable into or
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exercisable for, or giving any Person a right to subscribe for or acquire, any
securities of any of the BellSouth Companies, and no securities or obligations
evidencing such rights are authorized, issued or outstanding. All other equity
interests that are owned by a BellSouth Company or a Subsidiary of a BellSouth
Company are owned by the applicable BellSouth Company or Subsidiary of a
BellSouth Company free and clear of all encumbrances.
(d) Subsidiaries of the BellSouth Companies.
(i) Schedule 3.2(d)(i) of the BellSouth Disclosure
Letter lists, as of the date hereof, the name of each Subsidiary of
each of the BellSouth Companies and the equity interest of the
BellSouth Company or one or more of its Subsidiaries therein and lists
the organizational name of each other equity interest held by a
BellSouth Company in one or more of its Subsidiaries. All shares of or
similar equity interests of each Subsidiary of a BellSouth Company that
are owned by such BellSouth Company or a Subsidiary of a BellSouth
Company are owned by a BellSouth Company or the applicable Subsidiary
free and clear of all Encumbrances, and all such equity interests are
duly authorized, validly issued and fully paid.
(ii) As of the date hereof, none of the BellSouth
Companies or any of their Subsidiaries has any obligation to sell,
transfer or assign or has entered into a Contract regarding the sale,
transfer or assignment of any of its rights, securities or interests in
any Subsidiary of the BellSouth Companies or any of the other equity
interests owned by a BellSouth Company or any Subsidiary of a BellSouth
Company.
(e) Corporate Authority; Approval. BellSouth has all requisite
corporate power and authority and has taken all corporate action necessary in
order to execute, deliver and perform its obligations under this Agreement and
the Ancillary Agreements and, prior to Closing, BellSouth Holdings shall have
taken all limited liability company action necessary to contribute, transfer and
assign the BellSouth Shares to Newco. This Agreement and each of the Ancillary
Agreements is, or will be when executed, legal, valid and binding agreements of
BellSouth or the Subsidiary or Subsidiaries executing such agreements
enforceable against BellSouth or the applicable Subsidiary of BellSouth, as the
case may be, in accordance with their respective terms, subject to the
Bankruptcy and Equity Exception.
(f) Financial Statements. Schedule 3.2(f) of the BellSouth
Disclosure Letter contains true, complete and correct copies of (i) the
BellSouth Cellular unaudited financial statements as at November 30, 1999, (ii)
the unaudited financial statements for the year ended December 31, 1999 of
BellSouth Wireless Data, and (iii) audited financial
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<PAGE> 46
statements for the year ended December 31, 1999 for BellSouth PCS, which include
the balance sheet and related statements of income for the year then ended (the
"BellSouth Financial Statements"). The BellSouth Financial Statements fairly
represent in all material respects, in accordance with GAAP, the financial
position of BellSouth Cellular, BellSouth Wireless Data and BellSouth PCS as of
the date indicated and the results of operations of such companies for the
period then ended (subject to the absence of notes with respect to the unaudited
financial statements).
(g) Absence of Certain Changes. (i) Except as expressly
contemplated by this Agreement and except with respect to the Excluded BellSouth
Business, since November 30, 1999 (i) the BellSouth Companies have conducted
their respective businesses only in the ordinary and usual course of such
businesses; (ii) there has not been any change in the financial condition,
properties, business or results of operations of the BellSouth Companies and
their Subsidiaries, except those changes that have not had and would not,
individually or in the aggregate, be reasonably likely to have a Material
Adverse Effect on the BellSouth Companies; (iii) there has not been any damage,
destruction or other casualty loss with respect to any asset or property owned,
leased or otherwise used by the BellSouth Companies and their Subsidiaries,
whether or not covered by insurance, which damage, destruction or loss is
reasonably likely, individually or in the aggregate, to have a Material Adverse
Effect on the BellSouth Companies; (iv) there has not been any sale, transfer,
conveyance, lease, creation of an Encumbrance or other disposition of assets of
the BellSouth Companies and their Subsidiaries outside of the ordinary course of
business; and (v) there has not been any change by it or any BellSouth Company
in accounting principles, practices or methods of the BellSouth Companies.
(h) Litigation and Liabilities. There are no (i) civil,
criminal or administrative actions, suits, claims, hearings, investigations or
proceedings pending or, to the Knowledge of BellSouth, threatened against the
BellSouth Companies or any of their Affiliates or otherwise in connection with
the BellSouth Business or (ii) obligations or liabilities, whether or not
accrued, contingent or otherwise that are required to be disclosed under GAAP,
or any other facts or circumstances, in either such case, of which BellSouth has
Knowledge that are reasonably likely to result in any claims against or
obligations or liabilities of it or any of its Affiliates, except for those that
have not had and are not, individually or in the aggregate, reasonably likely to
have a Material Adverse Effect on the BellSouth Companies or prevent or
materially impair or delay BellSouth's ability to consummate the transactions
contemplated by this Agreement.
(i) BellSouth Employee Benefits.
(i) A listing of each bonus, deferred compensation,
pension, retirement, profit-sharing, thrift, savings, employee stock
ownership, stock bonus,
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stock purchase, restricted stock, stock option, employment,
termination, severance, compensation, medical, health or other plan,
agreement, policy or arrangement (the "BellSouth Compensation and
Benefit Plans") that covers employees, directors, former employees or
former directors of the BellSouth Companies or their Subsidiaries and
any other employee of BellSouth or an employee of BellSouth Companies
whose duties are primarily related (or, for persons who no longer
perform such services, were related) to the BellSouth Business (the
"BellSouth Employees") and any trust agreements or insurance contracts
forming a part of the BellSouth Compensation and Benefit Plans is set
forth in Schedule 3.2(i)(i) of the BellSouth Disclosure Letter.
(ii) All of the BellSouth Compensation and Benefit
Plans are in compliance with the terms and with all applicable Law,
including the Code and ERISA, except for failures to comply which are
not, individually or in the aggregate, reasonably likely to have a
Material Adverse Effect on the BellSouth Companies. Each of the
BellSouth Compensation and Benefit Plans that is an "employee pension
benefit plan" within the meaning of Section 3(2) of ERISA (a "BellSouth
Pension Plan" and collectively, the "BellSouth Pension Plans") and that
is intended to be qualified under Section 401(a) of the Code has
received a favorable determination letter from the IRS, and BellSouth
does not have Knowledge of any circumstances likely to result in
revocation of any such favorable determination letter. There is no
pending or, to the Knowledge of BellSouth, threatened claim, audit,
investigation, litigation or other proceeding relating to the BellSouth
Compensation and Benefit Plans, except for proceedings which are not,
individually or in the aggregate, reasonably likely to have a Material
Adverse Effect on the BellSouth Companies. Neither BellSouth nor any
Subsidiary of BellSouth has engaged in a transaction with respect to
any of the BellSouth Compensation and Benefit Plans that, assuming the
taxable period of such transaction expired as of the date hereof, would
subject the BellSouth Companies or any of their Subsidiaries to a
material tax or penalty imposed by either Section 4975 of the Code or
Section 502 of ERISA.
(iii) As of the date hereof, no liability under
Subtitle C or D of Title IV of ERISA (other than the payment of
prospective premium amounts to the Pension Benefit Guaranty Corporation
in the normal course) has been or is expected to be incurred by the
BellSouth Companies or any of their Subsidiaries with respect to any
ongoing, frozen or terminated "single-employer plan", within the
meaning of Section 4001(a)(15) of ERISA, currently or formerly
maintained by any of them, or any of its ERISA Affiliate Plans. The
BellSouth Companies, their Subsidiaries and their ERISA Affiliates have
not contributed, or been obligated to contribute, to a multiemployer
plan under Subtitle E of Title IV of ERISA at any time since September
26, 1980. No notice of a "reportable event",
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<PAGE> 48
within the meaning of Section 4043 of ERISA for which the 30-day
reporting requirement has not been waived, has been required to be
filed for any of the BellSouth's Pension Plans or any of its ERISA
Affiliate Plans within the 12-month period ending on the date hereof or
will be required to be filed in connection with the transactions
contemplated by this Agreement.
(iv) None of the BellSouth Pension Plans nor any of
BellSouth's ERISA Affiliate Plans has an "accumulated funding
deficiency" (whether or not waived) within the meaning of Section 412
of the Code or Section 302 of ERISA. Neither BellSouth nor any of its
Subsidiaries has provided, or is required to provide, security to any
BellSouth Pension Plans or to any of its ERISA Affiliate Plans pursuant
to Section 401(a)(29) of the Code.
(v) Under each of the BellSouth Pension Plans which
is a single-employer plan and each of BellSouth's ERISA Affiliate
Plans, as of the last day of the most recent plan year ended prior to
the date hereof, the actuarially determined present value of all
"benefit liabilities," within the meaning of Section 4001(a)(16) of
ERISA (as determined on the basis of the actuarial assumptions
contained in such BellSouth Pension Plan's or BellSouth ERISA Affiliate
Plan's most recent actuarial valuation), did not exceed the then
current value of the assets of such BellSouth Pension Plan or BellSouth
ERISA Affiliate Plan, and there has been no material change in the
financial condition of such BellSouth Pension Plan or BellSouth ERISA
Affiliate Plan since the last day of the most recent plan year as such
would affect any of the BellSouth Companies.
(vi) Except as set forth on Schedule 3.2(i)(vi) to
the BellSouth Disclosure Letter, there are no material obligations to
the BellSouth Employees for retiree health and life benefits under any
of the BellSouth Compensation and Benefit Plans or as required by
applicable law.
(vii) The consummation of the transactions
contemplated by this Agreement (whether alone or in connection with any
other event) will not (x) entitle any BellSouth Employee to severance
pay, directly or indirectly, upon termination of employment, (y)
accelerate the time of payment or vesting or trigger any payment of
compensation or benefits under, increase the amount payable or trigger
any other material obligation pursuant to, any of the BellSouth
Compensation and Benefit Plans or (z) result in any breach or violation
of, or a default under, any of the BellSouth Compensation and Benefit
Plans, but excluding any exceptions to (x), (y) and (z) which are not,
individually or in the aggregate, material.
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<PAGE> 49
(viii) Since November 30, 1999, except as
contemplated hereby, there has not been any increase in the
compensation payable or that could become payable by the BellSouth
Companies or any of their Subsidiaries to any BellSouth Employee or any
amendment of any of the BellSouth Compensation and Benefit Plans other
than increases or amendments in the ordinary course of business
consistent with past practice.
(j) Compliance with Laws. The BellSouth Business and
businesses of each of the BellSouth Companies and their Subsidiaries have not
been, and are not being, conducted in violation of any Law, except for
violations or possible violations that have not had and would not, individually
or in the aggregate, be reasonably likely to have a Material Adverse Effect on
the BellSouth Companies or prevent or materially impair BellSouth's ability to
consummate the transactions contemplated by this Agreement. No investigation or
review by any Governmental Entity with respect to the BellSouth Companies or any
of their Subsidiaries is pending or, to the Knowledge of BellSouth, threatened,
nor has any Governmental Entity indicated an intention to conduct the same,
except for those the outcome of which have not had and would not, individually
or in the aggregate, be reasonably likely to have a Material Adverse Effect on
the BellSouth Companies or prevent or materially impair BellSouth's ability to
consummate the transactions contemplated by this Agreement. Each of the
BellSouth Companies and their Subsidiaries has all Permits, necessary to conduct
their businesses as presently conducted, except for those Permits the absence of
which has not had and would not, individually or in the aggregate, be reasonably
likely to have a Material Adverse Effect on the BellSouth Companies or prevent
or materially delay BellSouth's ability to consummate the transactions
contemplated by this Agreement.
(k) Environmental Matters. Except for such matters that,
individually or in the aggregate, have not had and would not be reasonably
likely to have a Material Adverse Effect on the BellSouth Companies, taken as a
whole: (i) each of the BellSouth Companies and their Subsidiaries has complied
with all applicable Environmental Laws; (ii) the properties currently owned or
operated by the BellSouth Companies or any of their Subsidiaries (including
soils, groundwater, surface water, buildings or other structures) are not
contaminated with any Hazardous Substances; (iii) the properties formerly owned
or operated by the BellSouth Companies or any of their respective Subsidiaries
were not contaminated with Hazardous Substances during the period of ownership
or operation by the BellSouth Companies or any of their Subsidiaries; (iv)
neither the BellSouth Companies nor any of their Subsidiaries is subject to
liability for any Hazardous Substance disposal or contamination on any third
party property; (v) neither the BellSouth Companies nor any of their
Subsidiaries has received any notice, demand, letter, claim or request for
information alleging that the BellSouth Companies nor any of their respective
Subsidiaries may be in violation of or liable under any Environmental Law.
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(l) Labor Matters. None of the BellSouth Companies nor any of
their Subsidiaries is the subject of any proceeding relating to any BellSouth
Employee before the National Labor Relations Board asserting the commission of
an unfair labor practice or is seeking to compel any of them to bargain with any
labor union or labor organization nor is there pending or, to the Knowledge of
BellSouth, threatened, nor has there been since January 1, 1995, any labor
strike, dispute, walkout, work stoppage, slow-down or lockout relating to any
BellSouth Employee, except in each case as has not and would not, individually
or in the aggregate, be reasonably likely to have a Material Adverse Effect on
the BellSouth Companies. The collective bargaining agreements set forth on
Schedule 3.2(l) to the BellSouth Disclosure Letter are the only collective
bargaining agreements relating to any BellSouth Employee.
(m) Taxes. (i) BellSouth, the BellSouth Companies and each of
their Subsidiaries have prepared in good faith and duly and timely filed (taking
into account any extension of time within which to file) all material Tax
Returns required to be filed by any of them with respect to the BellSouth
Companies or any of their Subsidiaries and all such filed tax returns are
complete and accurate in all material respects; (ii) the BellSouth Companies and
each of their Subsidiaries have paid all Taxes that are shown as due on such
filed Tax Returns or that the BellSouth Companies or any of their Subsidiaries
are obligated to withhold from amounts owing to any employee, creditor or third
party, except with respect to matters contested in good faith or for such
amounts that, individually or in the aggregate have not had and would not be
reasonably likely to have a Material Adverse Effect on the BellSouth Companies;
(iii) as of the date hereof, there are not pending or, to the Knowledge of
BellSouth, threatened, in writing, any audits, examinations, investigations or
other proceedings in respect of Taxes or Tax matters with respect to the
BellSouth Companies; and (iv) there are not, to the Knowledge of BellSouth, any
unresolved questions or claims concerning the BellSouth Companies' or any of
their Subsidiaries' Tax liability that have had or would be reasonably likely to
have a Material Adverse Effect on the BellSouth Companies. No material payments
to be made to any of the officers or employees of the BellSouth Companies or any
of their Subsidiaries will as a result of consummation of the transactions
contemplated hereby be subject to the deduction limitations under Section 280G
of the Code.
(n) Regulatory Matters. The BellSouth Companies and their
Subsidiaries hold all Licenses necessary for the lawful conduct of the BellSouth
Business other than Licenses the lack of which, individually or in the
aggregate, have not had and would not be reasonably likely to have a Material
Adverse Effect on the BellSouth Companies. Schedule 3.2(n) of the BellSouth
Disclosure Letter sets forth each License obtained by BellSouth or any of its
Subsidiaries and which is, or in the absence of a violation thereof, would be in
full force and effect with respect to the BellSouth Business (the "BellSouth
Companies' Licenses"). To the Knowledge of BellSouth, no event has
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occurred or fact exists with respect to the BellSouth Companies Licenses (other
than the requirement to file in the future applications for renewal and obtain
renewals in the ordinary course) which permits, or after notice or lapse of time
or both would permit, revocation, non-renewal or termination of any of such
licenses or would result in any other impairment of the rights of the holder of
any of such licenses or which would be reasonably likely to limit the operation
of the BellSouth Companies' and their Subsidiaries' businesses as they are
currently conducted, except for revocations, limitations, non-renewals or other
terminations which, individually or in the aggregate, have not had and would not
be reasonably likely to have a Material Adverse Effect on the BellSouth
Companies. The BellSouth Companies and their Subsidiaries have performed their
respective obligations under such BellSouth Companies' Licenses with such
exceptions which, individually or in the aggregate, have not had and would not
be reasonably likely to have a Material Adverse Effect on the BellSouth
Companies. The FCC actions granting the BellSouth Companies' Licenses, together
with all underlying construction permits, have not been reversed, stayed,
enjoined, annulled or suspended, and there is not pending or, to the Knowledge
of BellSouth, threatened, any application, petition, objection or other pleading
with the FCC or other Governmental Entity which challenges or questions the
validity of or any rights of the holder under any of the BellSouth Companies'
Licenses, except for such reversals, stays, injunctions, annulments,
suspensions, applications, petitions, objections or other pleadings, which have
not had and would not, individually or in the aggregate, be reasonably likely to
have a Material Adverse Effect on the BellSouth Companies.
(o) Contracts. (i) Schedule 3.2(o) of the BellSouth Disclosure
Letter lists the following Contracts to which any of the BellSouth Companies or
one of their Subsidiaries is a party:
(A) any agreement which materially restricts or
materially limits their ability or the ability of any of their
respective Affiliates to freely conduct the BellSouth Business or any
other business or otherwise operate in any geographic market;
(B) any collective bargaining agreement and any
written employment agreement;
(C) all agreements with respect to outstanding
indebtedness for money borrowed in excess of $50,000,000 or any
guaranty thereof;
(D) all material leases of real property, which shall
be deemed to include all leases of real property, with an annual rental
payment in excess of $50,000, and all arrangements relating to a
sublease of space on the cellular towers;
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(E) all partnership, shareholder or joint venture
agreements or other agreements relating to the management or Control of
any such partnership, joint venture or non-wholly owned Subsidiary;
(F) all interconnection agreements; and
(G) any roaming agreements not terminable at the
option of either party thereto on 90 days or less notice.
(ii) Each Contract listed on Schedule 3.2(o) to the
BellSouth Disclosure Letter is valid, binding, enforceable, and in full
force and effect, the BellSouth Companies or the applicable Subsidiary
are not in breach or default under any such Contract and no event has
occurred which, with notice or lapse of time or both, would constitute
such a breach or default, or permit termination, modification, or
acceleration, under such Contract, except where the failure to be so
valid, binding, enforceable or in full force and effect or such breach
or default, termination, modification or acceleration would not be,
either individually or in the aggregate, reasonably likely to have a
Material Adverse Effect on the BellSouth Companies.
(p) Property and Leases. Schedule 3.2(p) to the BellSouth
Disclosure Letter contains a list of all real property owned by the BellSouth
Companies or any of their respective Subsidiaries or otherwise used primarily in
the BellSouth Business and real property leased pursuant to lease agreements set
forth on Schedule 3.2(o). The BellSouth Companies and their Subsidiaries have
marketable title to all material owned real property set forth on Schedule
3.2(p) and valid leasehold title to all material leased real property set forth
on Schedule 3.2(o), in each case free and clear of all Encumbrances, other than
Permitted Encumbrances.
(q) Brokers and Finders. Neither the BellSouth Companies nor
any of their respective officers, directors or employees has employed any broker
or finder or incurred any liability for any brokerage fees, commissions or
finders' fees in connection with the BellSouth transactions contemplated in this
Agreement.
(r) Ownership of Assets. Substantially all of the assets,
properties, businesses, licenses and other assets, owned or leased by BellSouth
and its Subsidiaries and forming a part of the BellSouth Business are owned or
leased by the BellSouth Companies and their respective Subsidiaries.
(s) Sufficiency of Assets. The assets and properties owned or
leased by the BellSouth Companies or their respective Subsidiaries, together
with all Contracts to which the BellSouth Companies or their respective
Subsidiaries are a party, constitute
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the assets, properties and Contract rights reasonably necessary to conduct the
BellSouth Business in accordance with past practice.
(t) Other Business. Other than with respect to the Excluded
BellSouth Business, none of the BellSouth Companies, their respective
Subsidiaries or the BellSouth Additional Subsidiary conducts or engages in any
business material to the BellSouth Companies and their Subsidiaries taken as a
whole other than the BellSouth Business or owns or leases any assets material to
the BellSouth Companies and their Subsidiaries taken as a whole that are not
used or intended for the use in the BellSouth Business, other than obsolete
assets.
(u) Intellectual Property. Subject to Section 4.16
(Intercompany Obligations), the BellSouth Companies and their Subsidiaries each
own, or possess adequate licenses or other valid rights to use, all Intellectual
Property Rights used or held for use in connection with the BellSouth Business
except where the failure to have such ownership or rights would not,
individually or in the aggregate be reasonably likely to have a Material Adverse
Effect on the BellSouth Companies. To the Knowledge of BellSouth, the BellSouth
Companies and their Subsidiaries are not the subject of any threatened or
pending lawsuits alleging the violation or infringement of any Intellectual
Property Rights of any third party that, individually or in the aggregate, would
be reasonably likely to have a Material Adverse Effect on the BellSouth
Companies. To the Knowledge of BellSouth, there are no material infringements of
any Intellectual Property Right owned by any of the BellSouth Companies or their
Subsidiaries. None of the BellSouth Companies or their Subsidiaries is in
material breach of any agreements pursuant to which any of them has a license to
use Intellectual Property Rights, and consummation of the transactions
contemplated hereby will not constitute such a material breach or otherwise
reduce or impair, in any material respect, the rights of any of them under such
license agreements, other than any breach which would not, individually or in
the aggregate, be reasonably likely to have a Material Adverse Effect on the
BellSouth Companies. No claims are pending or, to the Knowledge of BellSouth,
threatened by any Person with respect to the ownership, validity or
enforceability of any Intellectual Property Rights owned by any of the BellSouth
Companies or their Subsidiaries, or challenging or questioning the right of the
BellSouth Companies or their Subsidiaries to use any Intellectual Property
Rights owned by them, except claims that would not, individually or in the
aggregate, be reasonably likely to have a Material Adverse Effect.
(v) No Other Representations and Warranties. Except for
representations and warranties contained in this Agreement, none of BellSouth,
the BellSouth Companies or their Affiliates, or any other Person makes any
express or implied representation or warranty on behalf of BellSouth with
respect to the subject matter of this Agreement.
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ARTICLE IV
CERTAIN COVENANTS AND AGREEMENTS OF SBC AND BELLSOUTH
4.1 Access and Information.
(a) Prior to the Closing (and with respect to each of the
Additional Subsidiaries, prior to the earlier to occur of the time such
Additional Subsidiary is conveyed to Newco and December 31, 2009), SBC and
BellSouth shall each permit the other and the other's representatives to have
reasonable access to its Books and Records, officers and Subsidiaries, in each
case (i) during regular business hours and upon reasonable advance notice to the
other, (ii) to the extent that such access does not unreasonably interfere with
the business of the SBC Companies or their Subsidiaries or the BellSouth
Companies or their Subsidiaries, as the case may be and (iii) to the extent
relating to the SBC Companies, the BellSouth Companies and their respective
Subsidiaries; provided, that any such representatives shall comply with the
confidentiality obligations contained herein and in the Confidentiality
Agreement and; provided, further that the foregoing shall not (i) require SBC or
BellSouth to permit any inspection, or to disclose any information, that in its
reasonable judgment would result in the disclosure of any trade secrets of third
parties or trade secrets of SBC or BellSouth unrelated to the SBC Companies and
their Subsidiaries or the BellSouth Companies and their Subsidiaries, as the
case may be, or violate any of SBC's, BellSouth's, the SBC Companies', the
BellSouth Companies' or any of their respective Subsidiaries' legal obligations
or obligations with respect to confidentiality if SBC or BellSouth, as the case
may be, shall have used reasonable best efforts to obtain the consent of such
third party to such inspection or disclosure, or (ii) require any disclosure by
SBC, BellSouth, the SBC Companies, the BellSouth Companies or any of their
Subsidiaries that would be reasonably likely to, as a result of such disclosure,
have the effect of causing the waiver of any attorney-client privilege;
provided, that SBC or BellSouth, as the case may be, shall have used its
commercially reasonable efforts to effect disclosure without the waiver of
attorney-client privilege.
(b) In the event of the termination of this Agreement, SBC and
BellSouth, each at its own expense, shall promptly deliver (without retaining
any copies thereof) to BellSouth or SBC, as the case may be, or confirm to the
other in writing that it has destroyed, all information furnished to it or its
representatives by the other or any of the other's Subsidiaries or any of their
respective agents, employees or representatives as a result hereof or in
connection herewith, whether so obtained before or after the execution hereof,
and all analyses, compilations, forecasts, studies or other documents prepared
by it or its representatives which contain or reflect any such information. SBC
and BellSouth shall, and shall cause their respective employees, officers,
directors and Subsidiaries and the employees, officers and directors of their
Subsidiaries to, subject to any exceptions set forth in the Confidentiality
Agreement, cause any information so
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obtained to be kept confidential and will not use, or permit the use of, such
information in its business or in any other manner or for any other purpose
except as contemplated hereby.
(c) In addition to the confidentiality arrangements contained
herein, all information provided or obtained in connection with the transactions
contemplated by this Agreement (including pursuant to clause (a) above) shall be
held in accordance with and subject to the terms of the Confidentiality
Agreement, dated February 18, 2000, between SBC and BellSouth (the
"Confidentiality Agreement"). In the event of a conflict or inconsistency
between the terms of this Agreement and the Confidentiality Agreement, the terms
of this Agreement shall govern.
4.2 Conduct of Business. (a) During the period from the date hereof
until the Closing, except (x) as otherwise expressly contemplated by this
Agreement or any Ancillary Agreement in effect prior to the Closing, (y) as set
forth on Schedule 4.2(a) to the SBC Disclosure Letter, or (z) as BellSouth shall
otherwise agree in writing (such agreement not to be unreasonably withheld or
delayed), and subject to fiduciary duties to third parties, SBC covenants and
agrees that it shall cause the SBC Companies and their Subsidiaries to operate
their businesses in the ordinary course consistent with past practice and to use
their commercially reasonable efforts to preserve intact the business and
relationships of the SBC Business, the SBC Companies and their Subsidiaries with
third parties, and, in addition, cause the SBC Companies and their Subsidiaries,
taken together, to not:
(i) approve any new individual capital expenditure
(or series of related expenditures) requiring expenditures in excess of
$50,000,000 during any twelve-month period, except for (A) any
expenditures currently approved by the SBC Companies or any of their
respective Subsidiaries, (B) pursuant to projects for which material
work has already been performed, (C) projects included in the SBC
Companies' or their Subsidiaries' 2000 or 2001 capital investment
projections or (D) expenditures required by the organizational
documents of any Subsidiary of any of the SBC Companies;
(ii) dispose of any individual capital asset, other
than dispositions in the ordinary course of business for consideration
equal to or greater than fair market value;
(iii) dispose of capital assets for consideration in
the aggregate during any twelve month period in excess of $10,000,000;
(iv) by any means make any acquisition of, or
investment in, (A) the assets of any Person other than in the ordinary
course of business or (B) the stock of any Person in excess of
$50,000,000 in the aggregate for
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acquisitions or investments pursuant to (A) and (B) during any twelve
month period, except as required by the certificate of incorporation or
bylaws or other organizational documents of a Subsidiary of the SBC
Companies;
(v) except in the ordinary course of business
consistent with past practice, incur or assume any indebtedness for
borrowed money or guarantee any such obligations or place an
Encumbrance material to the SBC Companies taken as a whole on any
assets of the SBC Companies or any of their Subsidiaries;
(vi) except in the ordinary course of business
consistent with past practice and except as required by Law or any
collective bargaining agreement, grant material salary or wage
increases, or modify or amend any SBC Compensation and Benefit Plan (by
SBC) or adopt any similar plan (whether by SBC or any SBC Company) in
any manner that materially increases the amount of the liability
attributable to the SBC Companies in respect of such plan;
(vii) except as required by Contract, issue, sell,
pledge, dispose of or encumber any shares of, or securities convertible
into or exchangeable or exercisable for, or options, warrants, calls,
commitments or rights of any kind to acquire any shares of the capital
stock of the SBC Companies or the capital stock of any of the
Subsidiaries of the SBC Companies;
(viii) in any material respect amend their respective
certificates of incorporation, by-laws or other similar organizational
documents, except as required pursuant to the terms thereof;
(ix) materially amend or modify or knowingly waive or
fail to enforce any material rights under any of the Contracts set
forth on Schedule 3.1(o) of the SBC Disclosure Letter;
(x) engage in any business other than the SBC
Business and the Excluded SBC Business;
(xi) declare, set aside or pay any dividend payable
in stock or property in respect of any capital stock other than
dividends (A) from a Subsidiary of a SBC Company to a SBC Company or
another wholly owned Subsidiary of a SBC Company (other than SBC
Holdings), (B) as required so as not to breach or violate a Contract or
applicable Law or (C) in accordance with past practice; or
(xii) authorize or enter into an agreement to do any
of the foregoing.
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(b) During the period from the date hereof until the Closing
except (x) as otherwise expressly contemplated by this Agreement or any
Ancillary Agreement in effect prior to the Closing, (y) as set forth on Schedule
4.2(b) to the BellSouth Disclosure Letter, or (z) as SBC shall otherwise agree
in writing (such agreement not to be unreasonably withheld or delayed), and
subject to fiduciary duties to third parties, BellSouth covenants and agrees
that it shall cause the BellSouth Companies and their Subsidiaries to operate
their businesses in the ordinary course consistent with past practice and to use
their commercially reasonable efforts to preserve intact the business and
relationships of the BellSouth Business, the BellSouth Companies and their
Subsidiaries with third parties, and cause the BellSouth Companies and their
Subsidiaries, taken together, to not:
(i) approve any new individual capital expenditure
(or series of related expenditures) requiring expenditures in excess of
$50,000,000 during any twelve-month period, except for (A) any
expenditures currently approved by the SBC Companies or any of their
respective Subsidiaries, (B) pursuant to projects for which work has
already been performed, (C) projects included in the BellSouth
Companies' or their Subsidiaries' 2000 or 2001 capital investment
projections or (D) expenditures required by their organizational
documents of any Subsidiary of any of the BellSouth Companies;
(ii) dispose of any individual capital asset, other
than dispositions in the ordinary course of business for consideration
equal to or greater than fair market value,
(iii) dispose of capital assets for consideration in
the aggregate during any twelve-month period in excess of $10,000,000;
(iv) by any means make any acquisition of, or
investment in (A) the assets of any Person other than in the ordinary
course of business or (B) the stock of any Person in excess of
$50,000,000 in the aggregate for acquisitions or investments pursuant
to (A) and (B) during any twelve month period, except as required by
the certificate of incorporation or bylaws or other organizational
documents of a Subsidiary of the BellSouth Companies;
(v) except in the ordinary course of business
consistent with past practice, incur or assume any indebtedness for
borrowed money or guarantee any such obligations or place an
Encumbrance material to the BellSouth Companies taken as a whole on any
assets of the BellSouth Companies or any of their Subsidiaries;
(vi) except in the ordinary course of business
consistent with past practice and except as required by Law or any
collective bargaining
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agreement, grant material salary or wage increases, or modify or amend
any BellSouth Compensation and Benefit Plan (by BellSouth) or adopt any
similar plan (whether by BellSouth or any BellSouth Company) in any
manner that materially increases the amount of the liability
attributable to the BellSouth Companies in respect of such plan;
(vii) except as required by Contract, issue, sell,
pledge, dispose of or encumber any shares of, or securities convertible
into or exchangeable or exercisable for, or options, warrants, calls,
commitments or rights of any kind to acquire any shares of the capital
stock the BellSouth Companies or the capital stock of any of the
Subsidiaries of the BellSouth Companies;
(viii) in any material respect amend their respective
certificates of incorporation, by-laws or other similar organizational
documents, except as required pursuant to the terms thereof;
(ix) materially amend or modify or knowingly waive or
fail to enforce any material rights under any of the Contracts set
forth on Schedule 3.2(o) of the BellSouth Disclosure Letter;
(x) engage in any business other than the BellSouth
Business and the Excluded BellSouth Business;
(xi) declare, set aside or pay any dividend payable
in cash, stock or property in respect of any capital stock other than
dividends (A) from a Subsidiary of a BellSouth Company to a BellSouth
Company or another wholly owned Subsidiary of a BellSouth Company
(other than BellSouth Holdings), (B) as required so as not to breach or
violate a Contract or applicable Law or (C) in accordance with past
practice; or
(xii) authorize or enter into an agreement to do any
of the foregoing.
(c) With respect to the SBC Additional Subsidiaries, during
the period from the Closing until the earlier to occur of the time such SBC
Additional Subsidiary is contributed to Newco and December 31, 2009, except (x)
as expressly contemplated by the Management Agreement or (y) as Newco shall
otherwise agree in writing (such agreement not to be unreasonably withheld or
delayed), and subject to fiduciary duties to third parties, SBC covenants and
agrees that it shall cause the SBC Additional Subsidiaries to operate their
businesses in the ordinary course consistent with past practice (taking into
account industry-wide changes), and in addition cause the SBC Additional
Subsidiaries to not:
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(i) except in the ordinary course of business
consistent with past practice, incur or assume any indebtedness for
borrowed money or guarantee any such obligation, if such indebtedness
or guarantee would be in effect following the relevant SBC Additional
Closing; and
(ii) engage in any business other than the SBC
Business; or
(iii) engage in any businesses engaged in by Newco.
(d) With respect to the BellSouth Additional Subsidiary,
during the period from the Closing until the earlier to occur of the time such
BellSouth Additional Subsidiary is contributed to Newco and December 31, 2002,
except (x) as expressly contemplated by the Management Agreement, dated November
13, 1998, between Houston Cellular Telephone Company, L.P., a Texas limited
partnership and American Cellular Communications Corporation, the Houston
Partnership Agreement and the ABC Agreement, or (y) as Newco shall otherwise
agree in writing (such agreement not to be unreasonably withheld or delayed),
and subject to fiduciary duties to third parties, BellSouth covenants and agrees
that it shall cause the BellSouth Additional Subsidiary to operate its business
in the ordinary course consistent with past practice (taking into account
industry-wide changes), and in addition cause the BellSouth Additional
Subsidiary to not:
(i) except in the ordinary course of business
consistent with past practice, incur or assume any indebtedness for
borrowed money or guarantee any such obligation, if such indebtedness
or guarantee would be in effect following the relevant BellSouth
Additional Closing;
(ii) amend the Houston Partnership Agreement or the
ABC Agreement; or
(iii) engage in any business other than the BellSouth
Business; or
(iv) engage in any business engaged in by Newco.
4.3 Registrations, Filings and Consents. (a) SBC and BellSouth shall
cooperate with each other and use (and shall cause their respective Subsidiaries
to use) all their respective reasonable best efforts to take or cause to be
taken all actions, and do or cause to be done all things, necessary, proper or
advisable on its part under this Agreement and applicable Laws to consummate and
make effective the transactions contemplated by this Agreement as soon as
reasonably practicable, including preparing and filing as promptly as reasonably
practicable all documentation to effect all necessary applications, notices,
petitions, filings and other documents and to obtain as promptly as
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reasonably practicable all consents, registrations, approvals, permits and
authorizations necessary or advisable to be obtained from any third party and/or
any Governmental Entity in order to consummate the transactions contemplated by
this Agreement; provided, however, that nothing set forth in this Section 4.3
shall require or be construed to require, SBC or BellSouth to agree to, or
comply with any conditions to the granting of any such consent, registration,
approval, permit or authorization, by any Governmental Entity which (i) relate
to any material business of SBC or BellSouth, as the case may be, that is not
included in the SBC Business or the BellSouth Business and which would be
reasonably likely to be material and adverse to such businesses or would be
reasonably likely to have a Material Adverse Effect on Newco following the
Closing; provided, further, that any divestiture by either SBC or BellSouth or
any of their respective Subsidiaries reasonably required by a Governmental
Entity to cause Newco to be in compliance with the CMRS spectrum aggregation
limits established by the FCC in 47 C.F.R. Section 20.6 and the Cellular Cross
Ownership limits contained in 47 C.F.R. Section 22.942 shall be deemed not to
have a Material Adverse Effect on Newco and not to be materially adverse to SBC
or BellSouth. In addition to the foregoing, each of SBC and BellSouth agree to
file or cause to be filed within thirty (30) days following the date of this
Agreement all documentation, filings and other documents necessary in connection
with (i) the notification and report form required under the HSR Act and (ii)
any required application, report or other filing or request for approval or
notifications with the FCC, any PUC and any Foreign Governmental Entity from
which consent, approval or clearance is required to be obtained in connection
with the transactions contemplated by this Agreement; provided, that neither SBC
nor BellSouth shall be deemed to be in breach of this Agreement if any such
filing is not made within thirty (30) days following the date of this Agreement.
Subject to applicable Laws relating to the exchange of information, SBC and
BellSouth shall have the right to review in advance, and to the extent
practicable each will consult the other on, all the information relating to SBC,
the SBC Companies, BellSouth or the BellSouth Companies as the case may be, with
respect to the contents of any filing made with, or written materials submitted
to, any third party and/or any Governmental Entity in connection with the
transactions contemplated by this Agreement. In exercising the foregoing right,
each of SBC and BellSouth shall act reasonably and as promptly as reasonably
practicable.
(b) SBC and BellSouth each shall, upon request by the other,
furnish the other with all information concerning itself, its Subsidiaries,
directors, officers and stockholders and such other matters as may be reasonably
necessary or advisable in connection with any statement, filing, notice or
application made by or on behalf of SBC, the SBC Companies, BellSouth and the
BellSouth Companies, or any of their respective Subsidiaries or Affiliates to
any third party and/or any Governmental Entity in connection with the
transactions contemplated by this Agreement.
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(c) SBC and BellSouth each shall keep the other apprised of
the status of matters relating to completion of the transactions contemplated
hereby, including promptly furnishing the other with copies of notices or other
communications received by SBC, the SBC Companies, BellSouth, the BellSouth
Companies or any of their respective Subsidiaries, as the case may be from any
third party and/or any Governmental Entity with respect to the transactions
contemplated by this Agreement.
4.4 Employee Benefit Plan/Employees. (a) At least one week prior to the
Closing Date, SBC and BellSouth shall each form a new Subsidiary (such
Subsidiary of SBC being the "SBC Leasing Company" and such Subsidiary of
BellSouth being the "BellSouth Leasing Company," and, together, the "Leasing
Companies"); provided that, instead of such formation, either of the Parties may
designate an existing Subsidiary with no assets or liabilities as its Leasing
Company. SBC and BellSouth shall as soon as reasonably practicable, but in no
event later than 90 days from the date hereof, agree on the terms and conditions
of the Leasing Agreements (which shall be substantially similar) to be entered
into by SBC Leasing Company and BellSouth Leasing Company, respectively, with
Newco, which shall be consistent with the terms and conditions of this Section
4.4. SBC and BellSouth shall take and shall cause to be taken all action
necessary to effectuate the provisions of this Section 4.4 (including, without
limitation, the adoption and amendment of applicable benefit plans and
arrangements). SBC and BellSouth shall cause their respective Leasing Companies
to be participating employers, as of the Closing Date, in the SBC Compensation
and Benefit Plans and the BellSouth Compensation and Benefit Plans, as the case
may be, which provide compensation and employee benefits to the Transferred
Employees (as defined below) immediately prior to the Closing Date.
(b) Following the formation of the Leasing Companies, and on a
date (such date, the "Transfer Date") prior to the Closing Date, SBC and
BellSouth each respectively agree, to the extent it has the unilateral right to,
and to the extent it does not have the unilateral right to, to use its
reasonable best efforts to cause all Persons employed by either of them or any
affiliate of either of them whose employment is primarily related to the SBC
Business or the BellSouth Business, as the case may be, as of the Transfer Date
(or such earlier date as the transfer of employment occurs) to become employed
not later than the Transfer Date by the applicable Leasing Company (such
employees, collectively, the "Transferred Employees"). The Transferred Employees
shall be employed at rates of compensation and with employee benefits which are
substantially equivalent to the respective rates of compensation and benefits
paid or provided to such Transferred Employees immediately prior to the Closing.
Only the Transferred Employees and individuals hired following the Transfer Date
whose employment is primarily related to the SBC Business or the BellSouth
Business, as the case may be, shall be employed by the Leasing Companies.
Employees so employed by the SBC Leasing Company will be referred to herein as
"SBC Wireless Employees" and
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employees so employed by the BellSouth Leasing Company are referred to as
"BellSouth Wireless Employees."
(c) The SBC Leasing Company shall, as of the Transfer Date,
assume (i) all employment-related obligations and liabilities (without regard to
when such obligations and liabilities arise or are incurred whether before or
after the Transfer Date), including all obligations and liabilities under the
SBC Compensation and Benefit Plans for which representations and warranties have
been made in Section 3.1(i) herein, in respect of the SBC Wireless Employees as
of the date each such employee becomes employed by the SBC Leasing Company, and
(ii) all employment-related obligations and liabilities (without regard to when
such obligations and liabilities arose or were incurred whether before or after
the Transfer Date) in respect of former employees whose employment was primarily
related to the SBC Business prior to the Closing Date (but excluding obligations
and liabilities relating to former employees under tax-qualified defined
contribution and defined benefit plans).
(d) The BellSouth Leasing Company shall, as of the Transfer
Date, assume (i) all employment-related obligations and liabilities (without
regard to when such obligations and liabilities arise or are incurred whether
before or after the Transfer Date), including all obligations and liabilities
under the BellSouth Compensation and Benefit Plans for which representations and
warranties have been made in Section 3.2(i) herein, in respect of the BellSouth
Wireless Employees as of the date each such employee becomes employed by the
BellSouth Leasing Company, and (ii) all employment-related obligations and
liabilities (without regard to when such obligations and liabilities arose or
were incurred whether before or after the Transfer Date) in respect of former
employees whose employment was primarily related to the BellSouth Business prior
to the Closing Date (but excluding obligations and liabilities relating to
former employees under tax-qualified defined contribution and defined benefit
plans).
(e) From time to time prior to the Leasing Company
Contribution Date, Newco shall have the sole discretion to select which of the
Transferred Employees of the SBC Leasing Company and the BellSouth Leasing
Company (the "Leased Employees") will cease to provide services to Newco prior
to the Leasing Company Contribution Date. Leased Employees so selected shall at
the discretion of the Leasing Company employing such Person be terminated by the
Leasing Companies or transferred by the Leasing Companies to SBC or BellSouth or
one of their Affiliates, as the case may be, in each case prior to the Leasing
Company Contribution Date. Notwithstanding any other provisions of this
Agreement to the contrary, including Sections 4.4(c) and 4.4(d), (i) all
employment related obligations and liabilities in respect of any Leased Employee
transferred to SBC, BellSouth or any of their Affiliates pursuant to the
preceding sentence shall cease to be an obligation or liability of the Leasing
Company and become the sole responsibility and obligation of SBC, BellSouth or
such Affiliates, as applicable, and
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(ii) neither the Leasing Companies nor Newco shall have any liabilities or
obligations under any SBC Compensation and Benefit Plan or BellSouth
Compensation and Benefit Plan, as the case may be, that is a severance plan in
respect of a Leased Employee whose employment with a Leasing Company and all of
its affiliates is terminated prior to the Leasing Company Contribution Date.
(f) Following the Closing Date, Newco shall reimburse each of
the BellSouth Leasing Company and the SBC Leasing Company for all employment
expenses, out-of-pocket expenses and related costs associated with the provision
of services by the Transferred Employees. All reimbursements will be determined
and made in a manner consistent with the determination of reimbursements under
the Leasing Agreements. Such expenses and costs shall include, but are not
limited to (i) all costs incurred by the Leasing Companies associated with
payroll services to be provided hereunder (including (A) gross wages before
deductions for state and federal income taxes, employment taxes and other tax
deductions and before reductions for pre-tax salary deferrals related to Code
Sections 401(k) and 125 plans and plans of executive compensation, and (B)
employer's share of Federal Social Security taxes (FICA) and Federal
Unemployment Insurance taxes (FUTA)); (ii) all costs associated with and arising
out of the provision of benefits to the Leased Employees and their dependents as
contemplated in Sections 4.4(c) and 4.4(d) other than cash severance payments as
described in Section 4.4(e) (all expenses incurred by the Leasing Companies in
the payment and processing of benefit claims, costs associated with
administering denied claims, premiums and premium taxes); and (iii) all costs
and expenses relating to the relocation of Transferred Employees that are
relocated at the request of Newco. Promptly after the date hereof, BellSouth and
SBC shall agree on a reciprocal retention program for the Transferred Employees,
which program shall be subject to reimbursement in accordance with this Section
4.4(f).
(g) On or prior to December 31, 2001 or such other date as the
parties agree (the "Leasing Company Contribution Date"), each of SBC and
BellSouth shall cause to be contributed to Newco all of the outstanding stock of
or other equity interests in the respective Leasing Companies in consideration
of the acceptance by Newco of the obligations and liabilities of the Leasing
Companies; it being understood that both contributions shall be made on the same
Business Day. The Leasing Companies shall cease participating in (or otherwise
provide benefits under) the SBC Compensation and Benefit Plans and BellSouth
Compensation and Benefit Plans, as applicable, as of the Leasing Company
Contribution Date and shall commence to participate in (or otherwise provide
benefits under) the Newco Plans established pursuant to Section 4.4(k) hereof.
(h) SBC and BellSouth shall cause Newco to establish a
severance policy, effective as of and following the Leasing Company Contribution
Date. Newco shall bear and be responsible for all obligations and liabilities
under such policy as to the
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employees of the Leasing Companies and Newco on and after the Leasing Company
Contribution Date.
(i) Unless the parties agree otherwise, the assets and
liabilities of the SBC Wireless Employees and the BellSouth Wireless Employees
held under their respective Pension Plans with Code Section 401(k) features
("401(k) Plans") to be transferred to the Newco 401(k) Plan in a trust-to-trust
transfer as soon as practicable following the later of (i) the Leasing Company
Contribution Date and (ii) the date that Newco has demonstrated, to the
reasonable satisfaction of BellSouth or SBC, as applicable, that the Newco
401(k) Plan satisfies the qualification requirements of Section 401 of the Code.
(j) If the Parties agree, the Parties, the SBC Leasing
Company, the BellSouth Leasing Company, and Newco shall take all actions
necessary to cause the assets and liabilities corresponding to the SBC Wireless
Employees and the BellSouth Wireless Employees held under any defined benefit
Pension Plans to be transferred to a Newco Pension Plan on a projected benefit
obligation basis at the Leasing Company Contribution Date or as of a later date
determined to be permissible under the appropriate Pension Plan documents (such
transfers to be effected on the basis of actuarial assumptions agreed to by
BellSouth and SBC).
(k) Newco shall establish and sponsor, or cause to be
established and sponsored, Compensation and Benefit Plans (the "Newco Plans")
which are separate from the BellSouth Compensation and Benefit Plans and the SBC
Compensation and Benefit Plans. The Newco Plans shall provide that the SBC
Wireless Employees and the BellSouth Wireless Employees and each other person
who becomes an employee of Newco or any of its Subsidiaries subsequent to the
Closing Date upon a direct transfer of employment from SBC, a Subsidiary of SBC,
BellSouth or a Subsidiary of BellSouth shall be credited with such years of
service with SBC, a Subsidiary of SBC, BellSouth, or a Subsidiary of BellSouth
for purposes of eligibility, participation, and determining the level of
benefits (but not benefit accrual) under the Newco Plans.
(l) From and after the Leasing Company Contribution Date,
Newco shall indemnify, defend and hold harmless each of BellSouth and SBC and
the affiliates of each of them and hold BellSouth and SBC and the affiliates of
each of them harmless from and against any Losses which may be incurred or
suffered by any of them in connection with the obligations and liabilities of
the Leasing Companies and the obligations and liabilities assumed by Newco
relating to compensation and employee benefits (whether arising in connection
with the transactions contemplated by this Section 4.4, or otherwise). In
addition, from and after the Leasing Company Contribution Date, (i) BellSouth
agrees to indemnify, defend and hold harmless Newco from and against all Losses
arising out of or relating to the BellSouth Leasing Company, other than the
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BellSouth Benefits Liabilities, and (ii) SBC agrees to indemnify, defend and
hold harmless Newco from and against all Losses arising out of or relating to
the SBC Leasing Company, other than the SBC Benefits Liabilities. The procedures
with respect to the indemnities set forth in this Section 4.4(l) shall be the
same as those indemnification procedures set forth in Article VII.
(m) Benefits True-Up Payment.
(i) Definitions. For purposes of this Section
4.4(m):
(v) "Total Benefits Liabilities" shall mean
the sum of the SBC Benefits Liabilities and
the BellSouth Benefits Liabilities.
(w) "SBC Benefits Liabilities" shall mean
the aggregate employment-related liabilities
assumed by the SBC Leasing Company,
determined as of the Leasing Company
Contribution Date (including, without
limitation, (A) all such liabilities assumed
pursuant to Section 4.4(c), (B)
post-retirement and post-employment benefit
liabilities determined pursuant to FAS 106
and FAS 112, (C) non-qualified retirement
and deferred compensation plan liabilities
and (D) accrued vacation pay liabilities,
but excluding liabilities under
tax-qualified defined contribution and
defined benefit plans), reduced to the
extent that such liabilities have been
funded or are subject to payment for the
benefit of the SBC Leasing Company under
contracts of insurance.
(x) "BellSouth Benefits Liabilities" shall
mean the aggregate employment-related
liabilities assumed by the BellSouth Leasing
Company, determined as of the Leasing
Company Contribution Date (including,
without limitation, (A) all such liabilities
assumed pursuant to Section 4.4(d), (B)
post-retirement and post-employment benefit
liabilities determined pursuant to FAS 106
and FAS 112, (C) non-qualified retirement
and deferred compensation plan liabilities
and (D) accrued vacation pay liabilities,
but excluding liabilities under
tax-qualified defined contribution and
defined benefit plans), reduced to the
extent that such liabilities have been
funded or are subject to payment for the
benefit of the BellSouth Leasing
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Company under contracts of insurance.
(y) "SBC Proportionate Share" shall mean the
quotient, expressed as a percentage, of the
SBC Benefits Liabilities, divided by the
Total Benefits Liabilities.
(z) "BellSouth Proportionate Share" shall
mean the quotient, expressed as a
percentage, of the BellSouth Benefits
Liabilities, divided by the Total Benefits
Liabilities.
(ii) Procedures.
(x) As soon as practicable, but in no event
later than ninety (90) days following the
Leasing Company Contribution Date, Newco
shall, on a basis consistent with GAAP and
generally accepted actuarial principles,
prepare and deliver to each of SBC and
BellSouth a statement showing the
calculation of the SBC Benefits Liabilities
and the BellSouth Benefits Liabilities (the
"Statement").
(y) After receipt of the Statement, SBC and
BellSouth shall each have sixty (60) days to
review the Statement. Newco, SBC and
BellSouth shall each provide each other and
their authorized representatives reasonable
access during normal business hours and
without significant disruption to their
respective business to (i) all of their and
their Subsidiaries' respective books,
records and employees having relevant
information concerning the calculation of
the Statement to the extent that such
information was used in the calculation of
the Statement, and (ii) the accountants and
actuaries who assisted Newco in preparing
the calculation of the Statement and such
accountants' and actuaries' relevant
supporting workpapers. Unless SBC or
BellSouth delivers written notice to Newco
and to SBC or BellSouth, as the case may be,
on or prior to the 60th day after Newco's
delivery of the Statement stating that SBC
or BellSouth, as the case may be, has
objections to the Statement and describing
any such objections with reasonable
particularity, SBC and BellSouth shall be
deemed to have accepted and agreed to the
calculation of the Statement. In addition,
any item included in the
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Statement which is not objected to by either
SBC or BellSouth shall be deemed to be
accepted by SBC and BellSouth and any
amounts included within any such item shall
be deemed to be final, binding and
conclusive. If SBC or BellSouth notifies
Newco of its objections to the calculation,
SBC, BellSouth and Newco shall, within ten
(10) days, attempt to resolve their
differences, and any written resolution by
them as to any disputed amounts shall be
final, binding and conclusive on all parties
for all purposes.
(z) Any amounts remaining in dispute at the
conclusion of the seventieth (70th) day
following the delivery of the Statement
shall be submitted, within ten (10) days
after the expiration of such period, to
Arthur Andersen LLP or another accounting or
actuarial consulting firm mutually agreed to
by the Parties. Each Party agrees to
execute, if requested by such firm, an
engagement letter with such firm containing
reasonable terms. All fees and expenses
relating to the work, if any, to be
performed by such firm shall be borne by the
Parties equally. Such firm shall act as an
arbitrator and not as an expert in resolving
any disputed items hereunder. Such firm's
determination of such items shall be made
within thirty (30) days after the submission
of such items to such firm. Such firm's
resolution of such disputed items shall be
set forth in a written statement delivered
to the parties and shall be final, binding
and conclusive on all parties for all
purposes.
(iii) Payment.
(x) In the event that the BellSouth
Proportionate Share is greater than .40,
BellSouth shall make a cash payment to Newco
equal to the quotient of (A) divided by (B),
where (A) is the excess of (I) the BellSouth
Benefits Liabilities over (II) the product
of the Total Benefits Liabilities and .40
and (B) is .60.
(y) In the event that the SBC Proportionate
Share is greater than .60, SBC shall make a
cash payment to Newco equal to the quotient
of (A) divided by (B), where (A) is the
excess of (I) the SBC Benefits Liabilities
over (II) the
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product of the Total Benefits Liabilities
and .60 and (B) is .40.
(iv) The payment to be made pursuant to Section
4.4(m)(iii)(x) or 4.4(m)(iii)(y), as applicable, shall be made within
five (5) Business Days following the resolution of all disputes in
accordance with Section 4.4(m)(ii) hereof.
4.5 Transferred Businesses. (a) Notwithstanding anything to the
contrary contained herein, prior to Closing, SBC shall be permitted to cause to
be transferred, conveyed or assigned to SBC or any other Person designated by
SBC, any assets, rights or interests primarily related to the Excluded SBC
Business and prior to such transfer, conveyance or assignment shall be free to
continue to operate such businesses. The Parties acknowledge that following the
Closing, Newco shall be required to cause any such assets, rights or interests
to be transferred, conveyed or assigned to SBC or a Person designated by SBC as
soon as practicable after receiving written notice from SBC that it or any of
its Subsidiaries is in possession of any such assets, rights or interests. In
each case, SBC or the Person designated by SBC shall not be required to pay
consideration in respect of the transfer, conveyance or assignment referred to
in the preceding sentence.
(b) Notwithstanding anything to the contrary contained herein,
prior to Closing, BellSouth shall be permitted to cause to be transferred,
conveyed or assigned to BellSouth or any other Person designated by BellSouth,
any assets, rights or interests primarily related to the Excluded BellSouth
Business and prior to such transfer, conveyance or assignment shall be free to
continue to operate such businesses. The Parties acknowledge that following the
Closing, Newco shall be required to cause any such assets, rights or interests
to be transferred, conveyed or assigned to BellSouth or a Person designated by
BellSouth as soon as practicable after receiving written notice from BellSouth
that it or any of its Subsidiaries is in possession of any such assets, rights
or interests. In each case, BellSouth or the Person designated by BellSouth
shall not be required to pay consideration in respect of the transfer,
conveyance or assignment referred to in the preceding sentence.
4.6 Divestitures. In the event that any properties or assets of either
of the Parties or their Subsidiaries are required to be divested (such
properties or assets, "Conflicted Systems") under the CMRS station spectrum
aggregation limits established by the FCC in 47 C.F.R. Section 20.6 and the
Cellular Cross Ownership Limits contained in 47 C.F.R. Section 22.942 (together,
the "Overlap Laws"), the Parties shall establish a committee (the "Disposition
Committee") comprised of one member representing BellSouth and one member
representing SBC, which shall determine within 45 days after the date hereof
which Conflicted Systems will be required to be disposed (the "Disposition
Systems"). The Parties may cause some or all of the Disposition Systems to
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be marketed as a single transaction or in such other manner as the Disposition
Committee shall determine will be in the best interests of Newco and the Party
making the divestiture. With respect to each of the Disposition Systems, the
Party which is, or whose Affiliate is, the holder of a Person which is the
current licensee of such Disposition System, shall, with the approval of the
other Party, (i) take all reasonably necessary steps to conclude a binding
agreement to transfer such Disposition System as promptly as practicable at a
reasonable price, (ii) file all necessary applications for all Governmental
Approvals required to consummate such transfer, (iii) seek such applications and
the satisfaction of any other conditions to closing such transaction promptly,
diligently and in good faith; provided that nothing set forth in this Section
4.6 shall be deemed to affect the obligations of SBC and BellSouth under Section
4.3 hereof. Closing of the transfer of each of the Disposition Systems shall
take place concurrently with (or earlier, if the selling Party consents in
writing) the Closing.
4.7 Acquisitions by SBC or BellSouth. Notwithstanding any action
permitted to be taken by Sections 4.2(a) and 4.2(b) hereof, SBC and BellSouth
shall not, and shall cause their Subsidiaries (other than the SBC Companies and
their Subsidiaries and the BellSouth Companies and their Subsidiaries) not to
purchase or otherwise become the owner of, or enter into an agreement to
purchase or otherwise become the owner of any property or assets that would
result in the SBC Contribution and the BellSouth Contribution causing Newco to
be in violation of the Overlap Laws, if not divested prior to the Closing.
4.8 Accountants' Letter. SBC shall use its reasonable best efforts, to
obtain a letter from Ernst & Young LLP or another nationally recognized
independent accounting firm, dated the Closing Date, addressing whether or not
the consummation of the transactions contemplated hereby will require SBC to
restate the accounting for any of the transactions set forth on Schedule 4.8 of
the SBC Disclosure Letter from a "pooling-of-interests" transaction to a
"purchase" transaction; provided that the failure of SBC to use its reasonable
best efforts to obtain such a letter shall not constitute a breach of this
covenant if the condition in Section 5.3(e) shall have been waived or deemed
waived.
4.9 Transition Group. Promptly after the date hereof, the Parties will
create a transition group (the "Transition Group") to consist of at least one
marketing executive, one technical executive, one financial executive, one human
resources executive, one regulatory executive and one designated team leader
(who may be one of such executives) from each of the Parties. The Transition
Group will have responsibility for developing and implementing transitional
arrangements until the Closing, including, without limitation, issues with
respect to Newco relating to technology, human resources, wireless coverage
area, service offerings to be made available after the Closing and marketing.
The financial members of the Transition Group will also work together to assist
in the preparation of pro forma financial statements required by the Parties in
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connection with the operation of their respective companies' businesses
(including in connection with offerings of securities).
4.10 Initial Marketing Plan. Prior to the Closing Date, BellSouth and
SBC shall prepare an initial marketing plan covering the balance of the year
2000 (if the Closing is to occur in the year 2000) and all of the year 2001 that
will include, among other things, a branding strategy and a packaging strategy,
including a determination as to the uses, if any, of BellSouth and SBC brand
names by Newco.
4.11 Newco LLC Agreement. On the date Newco is formed, SBC and
BellSouth shall collectively cause Manager to enter into the Newco LLC
Agreement.
4.12 Ancillary Agreements. On the Closing Date, the Parties shall, and
shall cause their applicable Affiliates (including Newco) to, enter into each of
the Ancillary Agreements that has not been entered into prior to the Closing.
4.13 Resale and Agency Agreements. On or prior to the Closing Date, SBC
agrees to enter into and to cause the SBC Companies, their Subsidiaries and
Newco, and BellSouth agrees to enter into and to cause the BellSouth Companies
and their Subsidiaries to enter into the Resale Agreements and, subject to the
next succeeding sentence, the Agency Agreements. The Parties agree, between the
date hereof and the Closing Date, to negotiate in good faith with respect to any
revisions the Parties may suggest with respect to the Agency Agreements. If the
Parties agree to any such revisions, the term Agency Agreements shall be deemed
to be the Agency Agreements as so revised.
4.14 Headquarters. The location of Newco's initial principal place of
business shall be determined by the Transition Group.
4.15 Branding; Corporate Name. (a) Prior to Closing the Parties shall
agree upon a brand name and logo or logos for Newco. In no event shall any of
such brand name and logo or logos include any reference to the SBC or BellSouth
names or any derivative thereof, subject to Section 4.10.
(b) The Parties agree that they shall promptly meet after the
date hereof to agree upon Newco's company name following the Closing. The
Parties agree that Newco's company name following the Closing will not be
directly or indirectly tied to either SBC or BellSouth or to any of their
respective Subsidiaries or Affiliates. Newco shall do business under a company
name that will reflect Newco's broad geographic strategy of local, regional and
national wireless coverage and future wireless opportunities in voice, data,
Internet and other telecommunications services. The Parties will ensure that
such name shall be the exclusive property of Newco, and no Party shall have any
right to use, and each Party agrees not to use, such name other than on behalf
of
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Newco, except as may be permitted from time to time by the Board of Directors of
Manager or as set forth in this Agreement, or the Ancillary Agreements.
4.16 Intercompany Obligations. (a) On or prior to the Closing Date,
SBC shall cause all intercompany obligations and agreements between the SBC
Companies and their Subsidiaries, on the one hand, and SBC and its other
Affiliates, on the other hand, to be settled and/or terminated so that by the
Closing no such intercompany obligations shall remain outstanding, other than
those intercompany arrangements (i) set forth in the Ancillary Agreements, (ii)
as otherwise agreed by the Parties in writing, (iii) intercompany obligations
for money borrowed, and (iv) set forth on Schedule 4.16 (a) of the SBC
Disclosure Letter.
(b) On or prior to the Closing Date, BellSouth shall cause all
intercompany obligations and agreements between the BellSouth Companies and
their Subsidiaries, on the one hand, and BellSouth and its other Subsidiaries,
on the other hand, to be settled and/or terminated so that by the Closing no
such intercompany obligations shall remain outstanding other than those
intercompany arrangements (i) set forth in the Ancillary Agreements, (ii) as
otherwise agreed by the Parties in writing, (iii) intercompany obligations for
money borrowed, and (iv) those set forth on Schedule 4.16(b) of the BellSouth
Disclosure Letter.
4.17 Taxes. (a) SBC Liability for Pre-Closing Taxes. SBC shall be
liable for and indemnify Newco for all Taxes imposed on the SBC Companies or
their Subsidiaries or for which the SBC Companies or their Subsidiaries may
otherwise by liable for any taxable year or period that ends on or before the
Closing Date and, with respect to any taxable year or period beginning before
and ending after the Closing Date, the portion of such taxable year ending on
and including the Closing Date. Except as set forth in paragraph (d), SBC shall
be entitled to any refund of Taxes of the SBC Companies or any of their
Subsidiaries received for such pre-closing periods.
(b) BellSouth Liability for Pre-Closing Taxes. BellSouth shall
be liable for and indemnify Newco for all Taxes imposed on the BellSouth
Companies or their Subsidiaries or for which the BellSouth Companies or their
Subsidiaries may otherwise by liable for any taxable year or period that ends on
or before the Closing Date and, with respect to any taxable year or period
beginning before and ending after the Closing Date, the portion of such taxable
year ending on and including the Closing Date. Except as set forth in paragraph
(e), BellSouth shall be entitled to any refund of Taxes of the BellSouth
Companies or any of their Subsidiaries received for such pre-closing periods.
(c) Taxes for Short Taxable Year. For purposes of paragraphs
(a) and (b), whenever it is necessary to determine the liability for Taxes of
the SBC Companies,
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the BellSouth Companies or any of their respective Subsidiaries for a portion of
a taxable year or period that begins before and ends after the Closing Date, the
determination of the Taxes of the relevant entity for the portion of the year or
period ending on, and the portion of the year or period beginning after, the
Closing Date shall be determined by assuming that the relevant entity had a
taxable year or period which ended at the close of the Closing Date, except that
exemptions, allowances or deductions that are calculated on an annual basis,
such as the deduction for depreciation and Taxes on real or personal property,
shall be apportioned on a daily basis.
(d) Refunds from SBC Carrybacks. If SBC becomes entitled to a
refund or credit of Taxes for any period for which it is liable under Section
4.17(a) to indemnify Newco and such Taxes are attributable solely to the
carryback of losses, credits or similar items attributable to the SBC Companies
or their Subsidiaries and from a taxable year or period that begins after the
Closing Date, SBC shall promptly pay to Newco the amount of such refund or
credit together with any interest thereon. In the event that any refund or
credit of Taxes for which a payment has been made is subsequently reduced or
disallowed, SBC and BellSouth shall cause Newco to indemnify and hold harmless
SBC for any tax liability, including interest and penalties, assessed against
SBC by reason of the reduction or disallowance. SBC and BellSouth will cause
Newco to waive this carryback option, if possible.
(e) Refunds from BellSouth Carrybacks. If BellSouth becomes
entitled to a refund or credit of Taxes for any period for which it is liable
under Section 4.17(b) to indemnify Newco and such Taxes are attributable solely
to the carryback of losses, credits or similar items attributable to the
BellSouth Companies or their Subsidiaries and from a taxable year or period that
begins after the Closing Date, BellSouth shall promptly pay to Newco the amount
of such refund or credit together with any interest thereon. In the event that
any refund or credit of Taxes for which a payment has been made is subsequently
reduced or disallowed, SBC and BellSouth shall cause Newco to indemnify and hold
harmless BellSouth for any tax liability, including interest and penalties,
assessed against BellSouth by reason of the reduction or disallowance. SBC and
BellSouth will cause Newco to waive this carryback option, if possible.
(f) SBC Tax Returns. SBC shall file or cause to be filed when
due all Tax Returns that are required to be filed by or with respect to the SBC
Companies or any of their Subsidiaries for taxable years or periods ending on or
before the Closing Date and shall pay any Taxes due in respect of such Tax
Returns, and SBC and BellSouth shall cause Newco to file or cause to be filed
when due all Tax Returns that are required to be filed by or with respect to the
SBC Companies or any of their Subsidiaries for taxable years or periods ending
after the Closing Date and to remit any Taxes due in respect of such Tax
Returns. SBC shall pay Newco the Taxes for which SBC is liable pursuant to
Section 4.17(a) but which are payable with Tax Returns to be filed by Newco
pursuant to
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the previous sentence within 10 days prior to the due date for the filing of
such Tax Returns.
(g) BellSouth Tax Returns. BellSouth shall file or cause to be
filed when due all Tax Returns that are required to be filed by or with respect
to the BellSouth Companies or any of their Subsidiaries for taxable years or
periods ending on or before the Closing Date and shall pay any Taxes due in
respect of such Tax Returns, and SBC and BellSouth shall cause Newco to file or
cause to be filed when due all Tax Returns that are required to be filed by or
with respect to the BellSouth Companies or any of their Subsidiaries for taxable
years or periods ending after the Closing Date and to remit any Taxes due in
respect of such Tax Returns. BellSouth shall pay Newco the Taxes for which
BellSouth is liable pursuant to Section 4.17(b) but which are payable with Tax
Returns to be filed by Newco pursuant to the previous sentence within 10 days
prior to the due date for the filing of such Tax Returns.
4.18 Business Assets. (a) SBC agrees to use its reasonable best efforts
to cause as soon as reasonably practicable after the Closing the sale,
assignment, transfer or other conveyance of the Other SBC Assets (other than the
SBC Additional Subsidiaries) to Newco without cost to Newco. In the event and to
the extent that any such Other SBC Assets cannot be sold, assigned, transferred
or otherwise conveyed to Newco within 30 days after Closing, SBC shall make
arrangements to provide to Newco, without cost to Newco, the material benefits
of any such Other SBC Assets, to the extent permitted by Law. The provisions of
this Section 0 shall not be deemed to affect the provisions of Section 4.23.
(b) BellSouth agrees to use its reasonable best efforts to
cause as soon as reasonably practicable after the Closing the sale, assignment,
transfer or other conveyance of the Other BellSouth Assets (other than the
BellSouth Additional Subsidiary) to Newco. In the event and to the extent that
any such Other BellSouth Assets cannot be sold, assigned, transfer or otherwise
conveyed to Newco within 30 days after Closing, BellSouth shall make
arrangements to provide Newco, without cost to Newco, the material benefits of
any such Other BellSouth Assets, to the extent permitted by Law. The provisions
of this Section 0 shall not be deemed to affect the provisions of Section 4.23.
4.19 Notification of Certain Matters. Each Party shall prior to the
Closing give prompt written notice to the other of (a) the occurrence of
circumstances which provide it with knowledge of the occurrence of any employee
strikes, work stoppings, slowdowns or lockouts related to the SBC Companies or
their Subsidiaries or the BellSouth Companies and their Subsidiaries, as the
case may be, and (b) the entry into any collective bargaining agreement related
to the SBC Companies and their Subsidiaries or
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the BellSouth Companies and their Subsidiaries, as the case may be, and each
Party agrees to consult with the other prior to taking actions related to such
events.
4.20 Regulatory Compliance. (a) SBC shall take all actions reasonably
requested in writing by BellSouth to (i) cure no later than the Closing, or,
with respect to any Additional SBC Subsidiary, the applicable SBC Additional
Closing, any material violations and defaults under any applicable rules and
regulations of the FCC (the "FCC Rules") and the FAA (the "FAA Rules"), (ii)
comply, in all material respects, with the FCC Rules and the FAA Rules and cause
each of the SBC Companies to file or cause to be filed with the FCC and the FAA
all reports and other filings required to be filed under applicable FCC Rules
and FAA Rules, and (iii) cause SBC and each of the SBC Companies on or before
the Closing to be in compliance upon the consummation of the Closing with the
provisions of Sections 271 and 272 of the Communications Act (including any
Final Orders issued by the FCC interpreting or implementing such provisions);
provided that the foregoing shall not be deemed to require SBC to take any
actions prior to the Closing that would adversely affect the SBC Companies if
the transactions contemplated by this Agreement were not consummated or to take
any actions beyond its control.
(b) BellSouth shall take all actions reasonably requested in
writing by SBC to (i) cure no later than the Closing, or, with respect to any
BellSouth Additional Subsidiary, the applicable BellSouth Additional Closing,
any material violations and defaults under the FCC Rules and the FAA Rules, (ii)
comply, in all material respects, with the FCC Rules and the FAA Rules and cause
each of the BellSouth Companies to file or cause to be filed with the FCC Rules
and the FAA all reports and other filings required to be filed under applicable
FCC Rules and FAA Rules, and (iii) cause BellSouth and each of the BellSouth
Companies on or before the Closing to be in compliance upon the consummation of
the Closing with the provisions of Sections 271 and 272 of the Communications
Act (including any Final Orders issued by the FCC interpreting or implementing
such provisions); provided that the foregoing shall not be deemed to require
BellSouth to take any actions prior to the Closing that would adversely affect
the BellSouth Companies if the transactions contemplated by this Agreement were
not consummated or to take any actions beyond its control.
4.21 Control of Operations. Nothing contained in this Agreement shall
give SBC, directly or indirectly, the right to control or direct the operations
of BellSouth or its Affiliates with respect to the BellSouth Business prior to
the Closing. Nothing contained in this Agreement shall give BellSouth, directly
or indirectly, the right to control or direct the operations of SBC or its
Affiliates with respect to the SBC Business prior to the Closing.
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4.22 Conversions. (a) SBC agrees that prior to Closing it shall use
commercially reasonable best efforts to cause each SBC Company and each
Subsidiary of a SBC Company that is a corporation or treated as a corporation
for United States federal income Tax purposes, to the extent permitted by Law to
be either converted into or merged into an entity that is a United States person
and that is taxable as a partnership for United States federal income tax
purposes or that is a disregarded entity under Treasury Regulation Section
301.7701-3(b)(l)(ii); provided that the terms of any agreement providing for the
foregoing shall (i) ensure that SBC's direct or indirect ownership percentage of
each such entity shall not be affected and (ii) only provide for those matters
required to effect such merger or conversion. In addition, prior to Closing, SBC
agrees to form SBC Holdings as a direct, wholly owned Subsidiary of SBC, and SBC
Wireless LLC as a Delaware limited liability company and a direct, wholly owned
Subsidiary of SBC Holdings. Prior to the Closing, SBC, or the applicable
Subsidiary or Subsidiaries of SBC shall cause each of SBC CT 1, SBC CT 2, SBC
Midwest, SBC Mobile, SBC Pacific and SBC Wireless to be contributed to SBC
Wireless LLC.
(b) BellSouth agrees that prior to Closing it shall use
commercially reasonable best efforts to cause each BellSouth Company and each
Subsidiary of a BellSouth Company that is a corporation or treated as a
corporation for United States federal income Tax purposes, to the extent
permitted by Law to be either converted into or merged into an entity that is a
United States person and that is taxable as a partnership for United States
federal income tax purposes or that is a disregarded entity under Treasury
Regulation Section 301.7701-3(b)(1)(ii); provided that the terms of any
agreement providing for the foregoing shall (i) ensure that BellSouth's direct
or indirect ownership percentage of each such entity shall not be affected and
(ii) only provide for those matters required to effect such merger or
conversion. In addition, BellSouth agrees that prior to the Closing it shall
cause the transactions specified on Schedule 4.22(b) of the BellSouth Disclosure
Letter or similar transactions such that the BellSouth Companies own all of the
BellSouth Business which shall be contributed to Newco in accordance with the
terms of this Agreement to occur (the "Subsidiary Restructuring"). The BellSouth
Companies shall not have any liabilities as a result of the Subsidiary
Restructuring that are not taken into account in the Calculation.
4.23 Certain Exclusions. Prior to the Closing, SBC shall cause the SBC
Companies and certain Subsidiaries of the SBC Companies, respectively, to
distribute the Arkansas Assets and the Arkansas Liabilities, the Los Angeles
Assets and the Los Angeles Liabilities, and the Pittsburgh Assets and the
Pittsburgh Liabilities to two (one of which shall hold the Arkansas Assets,
Arkansas Liabilities, Pittsburgh Assets and Pittsburgh Liabilities) separate
Entities wholly owned by SBC or a Subsidiary of SBC (each, a "SBC Additional
Subsidiary"). The Parties agree that prior to the Closing, Newco shall enter
into a Management Agreement with each of the SBC Additional Subsidiaries (other
than with respect to the Pittsburgh Market) on terms reasonably
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acceptable to Newco, which Management Agreement shall permit each SBC Additional
Subsidiary to, along with the assets owned or leased by such SBC Additional
Subsidiary, conduct its business in all material respects as it is conducted on
the Closing Date. SBC agrees to file all relevant notices, forms and
applications required to be made with any Governmental Entity with respect to
such distributions. At any time following the Closing Date, SBC and BellSouth
shall cause Newco to or cause to be promptly executed and delivered any other
documents or assurances, as shall be reasonably requested by SBC in order to
vest in SBC its rights in such assets, and SBC shall promptly execute and
deliver any other documents as shall be reasonably requested by Newco in order
that the liabilities specified above shall be assumed by the applicable SBC
Additional Subsidiary.
4.24 Consent of Third Parties. Except as otherwise provided herein,
nothing in this Agreement shall be construed as an attempt by any Party to
assign to Newco pursuant to this Agreement any Contract, License, franchise,
claim or asset that is by its terms or by Law non-assignable without the consent
of any other Person, unless such consent or approval shall have been given.
4.25 Further Assurances. At any time following the Closing Date, SBC
and BellSouth shall, and shall cause Newco and their respective Subsidiaries to,
promptly execute, acknowledge and deliver any other assurances or documents
reasonably requested by Newco, SBC or BellSouth, as the case may be, and
necessary for SBC, BellSouth or Newco, as the case may be, to satisfy its
obligations under this Agreement or obtain the benefits contemplated by this
Agreement, including with respect to the SBC Additional Subsidiaries and the
BellSouth Additional Subsidiary.
ARTICLE V
CONDITIONS TO CLOSING
5.1 Conditions to Each Party's Obligation to Effect the Transaction.
The respective obligations of the Parties to consummate the transactions
contemplated hereby are subject to the satisfaction or waiver on or prior to the
Closing Date of each of the following conditions:
(a) (i) The waiting periods applicable to the consummation of
the transactions contemplated hereby under the HSR Act and the EU Merger
Regulation shall have expired or been earlier terminated, and (ii) all SBC
Required Consents and BellSouth Required Consents, the failure of which to be
made or obtained would be reasonably likely, individually or in the aggregate,
to have a Material Adverse Effect on Newco following consummation of the
Transaction or prevent or materially delay or impair the consummation of the
transactions contemplated hereby in each case shall have been made or obtained
(as the case may be) pursuant to a Final Order, free of any conditions (other
than conditions that (x) would not be reasonably likely, individually or
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in the aggregate, to have a Material Adverse Effect on Newco following the
Closing, and (y) would not be reasonably likely to be material and adverse to
any material business of SBC or BellSouth, as the case may be, that is not
included in the SBC Business or the BellSouth Business). For the purposes of
this Agreement, "Final Order" means an action or decision that has been granted
as to which (i) no request for a stay or any similar request is pending, no stay
is in effect, the action or decision has not been vacated, reversed, set aside,
annulled or suspended and any deadline for filing such a request that may be
designated by statute or regulation has passed, (ii) no petition for rehearing
or reconsideration or application for review is pending and the time for the
filing of any such petition or application has passed, (iii) no Governmental
Entity has undertaken to reconsider the action on its own motion and the time
within which it may initiate such reconsideration has passed, and (iv) no appeal
is pending or in effect and any deadline for filing any such appeal that may be
specified by statute or rule has passed, which in each case (i), (ii), (iii) or
(iv) is reasonably likely to result in vacating, reversing, setting aside,
annulling, suspending or modifying such action or decision.
(b) No Governmental Entity of competent jurisdiction shall
have enacted, issued, promulgated, enforced or entered any Law (whether
temporary, preliminary or permanent) that is in effect and enjoins or otherwise
prohibits consummation of the transactions contemplated by this Agreement (an
"Order"), and no Governmental Entity shall have instituted any proceeding
seeking any such Order.
5.2 Conditions to Obligation of BellSouth. The obligation of BellSouth
to consummate the transactions contemplated by this Agreement is further subject
to the satisfaction or due waiver by BellSouth at or prior to the Closing of
each of the following conditions:
(a) The representations and warranties of SBC (other than
those related to the Pittsburgh Assets and Pittsburgh Liabilities) contained
herein that are qualified by reference to Material Adverse Effect, another
materiality qualifier or Knowledge shall be true and correct as of the date
hereof and as of the Closing Date as if made as of the Closing Date and all
other representations and warranties of SBC shall be true and correct as of the
date hereof and as of Closing as if made as of the Closing Date, except for such
inaccuracies as would not be reasonably likely, individually or in the
aggregate, to have a Material Adverse Effect on the SBC Companies (except in
each case that representations and warranties that are made as of a specific
date or as of the date hereof need be so true and correct only as of such date),
and BellSouth shall have received a certificate to such effect dated the Closing
Date and executed by a duly authorized officer of SBC.
(b) The covenants and agreements of SBC to be performed or
complied with on or prior to the Closing shall have been duly performed or
complied
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with, as the case may be, in all material respects, and BellSouth shall have
received a certificate to such effect dated the Closing Date and executed by a
duly authorized officer of SBC.
(c) SBC and/or the applicable Affiliate of SBC shall have
executed and delivered each of the Ancillary Agreements, to which they are
respective parties, and any Ancillary Agreements in effect prior to the Closing
shall not have been terminated.
(d) SBC shall have obtained and made available to BellSouth
the consent or approval of each Person whose consent or approval shall be
required in order to consummate the transactions contemplated by this Agreement
under any Contract to which the SBC Companies or any of their Subsidiaries is a
party, except those for which the failure to obtain such consent or approval is
not reasonably likely, individually or in the aggregate, to have a Material
Adverse Effect on the SBC Companies.
(e) SBC shall have furnished to BellSouth the opinion of
in-house counsel for SBC, dated the Closing Date, to the effect that:
(i) SBC has been duly incorporated and is an existing
corporation in good standing under the law of the state of Delaware;
and
(ii) this Agreement and the Ancillary Agreements to
be executed by SBC have been validly authorized, duly executed and
delivered by SBC.
5.3 Conditions to Obligation of SBC. The obligation of SBC to
consummate the transactions contemplated by this Agreement is further subject to
the satisfaction or due waiver by SBC on or prior to the Closing Date of each of
the following conditions:
(a) The representations and warranties of BellSouth contained
herein that are qualified by reference to Material Adverse Effect, another
materiality qualifier or Knowledge, shall be true and correct as of the date
hereof and as of the Closing Date as if made as of the Closing Date and all
other representations and warranties of BellSouth shall be true and correct as
of the date hereof and as of the Closing as if made as of the Closing Date,
except for such inaccuracies as would not be reasonably likely, individually or
in the aggregate, to have a Material Adverse Effect on the BellSouth Companies
(except that in each case representations and warranties that are made as of a
specific date or as of the date hereof need be so true and correct only as of
such date), and SBC shall have received a certificate to such effect dated the
Closing Date and executed by a duly authorized officer of BellSouth.
(b) The covenants and agreements of BellSouth to be performed
or complied with on or prior to the Closing shall have been duly performed or
complied
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with, as the case may be, in all material respects, and SBC shall have received
a certificate to such effect dated the Closing Date and executed by a duly
authorized officer of BellSouth.
(c) BellSouth and/or the applicable Affiliate of BellSouth
shall have executed and delivered each of the Ancillary Agreements, to which
they are respective parties, and any Ancillary Agreements in effect prior to the
Closing shall not have been terminated.
(d) BellSouth shall have obtained and made available to SBC
the consent or approval of each Person whose consent or approval shall be
required in order to consummate the transactions contemplated by this Agreement
under any Contract to which the BellSouth Companies or any of their Subsidiaries
is a party, except those for which the failure to obtain such consent or
approval is not reasonably likely, individually or in the aggregate, to have a
Material Adverse Effect on the BellSouth Companies.
(e) SBC shall have received a letter substantially similar to
the Ernst & Young letter dated April 4, 2000 to SBC, dated the Closing Date,
from Ernst & Young LLP or another nationally recognized independent accounting
firm to the effect that the consummation of the transactions contemplated hereby
will not require SBC to restate the accounting for any of the transactions set
forth on Schedule 4.10(a) of the SBC Disclosure Letter from a
"pooling-of-interests" transaction to a "purchase" transaction; provided that
this condition shall be deemed to have been satisfied if SBC shall have been
required to restate the accounting for any of such transactions whether or not
the transactions contemplated hereby are consummated.
(f) BellSouth shall have furnished to SBC the opinion of
in-house counsel for BellSouth, dated the Closing Date, to the effect that:
(i) BellSouth has been duly incorporated and is an
existing corporation in good standing under the law of the state of
Georgia; and
(ii) this Agreement and the Ancillary Agreements to
be executed by BellSouth have been validly authorized, duly executed
and delivered by BellSouth.
ARTICLE VI
TERMINATION
6.1 Termination. This Agreement may be terminated at any time prior to
the Closing:
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(a) by mutual written agreement of SBC and BellSouth; or
(b) by either SBC or BellSouth, by giving written notice of
such termination to the other party, if such other party shall have breached any
of its material obligations or agreements under this Agreement and such breach
shall be incapable of cure or has not been cured within 60 days following the
giving of written notice by the non-breaching party to the breaching party of
such breach; or
(c) by either SBC or BellSouth, by giving written notice of
such termination to the other party, if any Order permanently enjoining or
otherwise prohibiting consummation of the transactions contemplated hereby shall
become final and non-appealable; or
(d) by either SBC or BellSouth, by giving written notice of
such termination to the other, if the Closing shall not have occurred on or
prior to December 1, 2000 (the "Termination Date"); provided, that the
terminating party shall not be in material breach of its obligations under this
Agreement; and provided, further, that the Termination Date shall be extended to
March 31, 2001 (the "Extended Termination Date") if either party provides
written notice thereof to the other on or prior to November 30, 2000 that such
party has reasonably determined that additional time is necessary in connection
with obtaining required consent or approval from any Governmental Entity; or
(e) by BellSouth, by giving written notice of such termination
to SBC, if there has been a breach of the representations and warranties of SBC
contained in this Agreement which (x) would result in the failure of the
condition set forth in Section 5.2(a) and (y) cannot be or is not cured prior
to the Termination Date, or, if extended, the Extended Termination Date; or
(f) by SBC, by giving written notice of such termination to
BellSouth, if there has been a breach of the representations and warranties of
BellSouth contained in this Agreement which (x) would result in the failure of
the condition set forth in Section 5.3(a) and (y) cannot be or is not cured
prior to the Termination Date, or, if extended, the Extended Termination Date.
6.2 Effect of Termination. In the event of the termination of this
Agreement in accordance with Section 6.1 (Termination) hereof, this Agreement
shall thereafter become void and have no effect, and no party hereto or its
respective Affiliates or their directors, officers, employees, agents or
advisors shall have any liability to the other party hereto or their respective
Affiliates, directors, officers or employees, except for the obligations of the
parties hereto contained in this Section 6.2 and in Sections 8.2 (Expenses),
8.3 (Public Disclosure), 8.11 (Notices), 8.12 (Governing Law) and 8.13
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(Waiver of Jury Trial) hereof, and except that nothing herein will relieve any
party from liability for any breach of this Agreement prior to such termination.
ARTICLE VII
SURVIVAL AND INDEMNIFICATION
7.1 Survival of Representations, Warranties, Covenants and Agreements;
Knowledge of Breach. Except as set forth in this Section 7.1, the
representations and warranties contained in this Agreement shall expire on the
eighteenth month anniversary of the Closing Date (provided that with respect to
the SBC Additional Subsidiaries and the BellSouth Additional Subsidiary, the
relevant eighteenth month anniversary shall be the eighteenth month following
the applicable SBC Additional Closing or BellSouth Additional Closing, as the
case may be). The representations and warranties included or provided for (x) in
Sections 3.1(m) and 3.2(m) (Tax Matters) herein shall survive the Closing until
the expiration of the applicable statute of limitations (including any waivers
or extensions thereof) with respect to such matters and shall expire at such
time, (y) in Sections 3.1(k) and 3.2(k) (Environmental Matters) shall survive
until the third anniversary of the Closing Date (provided that with respect to
the SBC Additional Subsidiaries and the BellSouth Additional Subsidiary, the
relevant third anniversary shall be the third anniversary following the
applicable SBC Additional Closing or BellSouth Additional Closing, as the case
may be) and shall expire at such time, and (z) in Sections 3.1(a) and 3.2(a)
(Organization, Good Standing and Qualification), 3.1(c) and 3.2(c)
(Capitalization), 3.1(d) and 3.2(d) (Subsidiaries), 3.1(e) and 3.2(e) (Corporate
Authority and Approval) and 3.1(q) and 3.2(q) (Brokers and Finders) shall have
no expiration date. In the event that any Claim Notice or any other written
notice of a claim shall be given hereunder within the applicable survival
period, the representations and warranties that are the subject of such
indemnity claim shall survive until such claim is finally resolved but only with
respect to such claim and any directly related matters. The covenants and other
agreements contained in this Agreement shall survive the Closing until the date
or dates specified therein or the expiration of the applicable statute of
limitations (including any waivers or extensions thereof) with respect to such
matters, whichever is later.
7.2 Indemnification by BellSouth. (a) For the period commencing on the
Closing Date and ending, as the case may be, upon the expiration of the periods
specified in Section 7.1, BellSouth shall, subject to the limitations set forth
in Section 7.1 and this Section 7.2, indemnify, defend and hold harmless Newco
and its Affiliates (other than SBC and BellSouth), and their respective
directors, officers, employees, shareholders and agents (the "Indemnified
Parties") against and in respect of all losses, damages (excluding punitive and
consequential damages other than for lost profits), liabilities, costs and
expenses (including reasonable attorneys' fees and expenses incurred in
investigating, preparing or defending any claims covered hereby) (collectively,
"Losses")
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sustained or incurred arising out of, in connection with or relating to any
breaches of any of BellSouth's representations and warranties set forth in this
Agreement (disregarding for purposes of this Article VII all qualifications and
exceptions contained therein relating to materiality (including Material Adverse
Effect)); provided, that no individual Loss or series of related Losses arising
out of, in connection with or relating to any breaches of any of BellSouth's
representations and warranties set forth in this Agreement shall be deemed to be
a Loss until the amount of such Loss or series of related Losses exceeds
$2,000,000 and then only the amount in excess of $2,000,000 shall be deemed a
Loss. In determining whether a representation or warranty set forth in this
Agreement has been breached, the matters set forth in the BellSouth Disclosure
Schedule that qualify the accuracy of a representation or warranty shall be
disregarded; provided that with respect to a Loss or a series of related Losses
arising out of a representation or warranty as to which disclosure to qualify
such a representation or warranty has been made on BellSouth Disclosure Schedule
there shall be no Loss until the amount of such Loss or series of related Losses
exceeds $4,000,000 and then only the amount in excess of $4,000,000 shall be
deemed a Loss.
(b) BellSouth shall not be liable for any Losses arising in
connection with a breach of BellSouth's representations and warranties set forth
in this Agreement unless and until the amount of such Losses sustained or
incurred by the Indemnified Parties arising out of, in connection with or
relating to any breaches of BellSouth's representations and warranties set forth
in this Agreement exceeds $250 million in the aggregate (the "BellSouth
Deductible"), it being understood that for purposes of calculating whether the
BellSouth Deductible has been met, the losses of equity holders shall not be
counted if a similar Loss of Newco arising out of or related to the same breach
of a representation or warranty has been included in such calculation. If the
aggregate amount of such Losses exceeds the BellSouth Deductible, BellSouth
shall be liable only for the amount by which such Losses exceed the BellSouth
Deductible. In addition, except for breaches of Sections 3.1(c) and 3.2(c)
(Capitalization), 3.1(d) and 3.2(d) (Subsidiaries), 3.1(f) and 3.2(f) (Financial
Statements), 3.1(m) and 3.2(m) (Taxes) and 3.1(q) and 3.2(q) (Brokers and
Finders) for which there shall be no limit, any payments under this Section 7.2
by BellSouth to the Indemnified Parties for Losses shall not exceed in the
aggregate $3 billion.
7.3 Indemnification by SBC. (a) For the period commencing on the
Closing Date and ending, as the case may be, upon the expiration of the periods
specified in Section 7.1, SBC shall, subject to the limitations set forth in
Section 7.1 and this Section 7.3, indemnify, defend and hold harmless the
Indemnified Parties against and in respect of all Losses sustained or incurred
arising out of, in connection with or relating to any breaches of any of SBC's
representations and warranties set forth in this Agreement (disregarding for
purposes of this Article VII all qualifications and exceptions contained therein
relating to materiality (including Material Adverse Effect); provided, that no
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individual Loss or series of related Losses arising out of, in connection with
or relating to any breaches of any of SBC's representations and warranties set
forth in this Agreement shall be deemed to be a Loss until the amount of such
Loss or series of related Losses exceeds $2,000,000 and then only the amount in
excess of $2,000,000 shall be deemed a Loss. In determining whether a
representation or warranty set forth in this Agreement has been breached, the
matters set forth in the BellSouth Disclosure Schedule that qualify the accuracy
of a representation or warranty shall be disregarded; provided that with respect
to Loss or a series of related Losses arising out of a representation or
warranty as to which disclosure to qualify such representation or warranty has
been made on SBC Disclosure Schedule there shall be no Loss until the amount of
such Loss or series of related Losses exceeds $4,000,000 and then only the
amount in excess of $4,000,000 shall be deemed a Loss.
(b) SBC shall not be liable for any Losses arising in
connection with a breach of SBC's representations and warranties set forth in
this Agreement unless and until the amount of such Losses sustained or incurred
by the Indemnified Parties arising out of, in connection with or relating to any
breaches of SBC's representations and warranties set forth in this Agreement
exceeds $250 million in the aggregate (the "SBC Deductible"), it being
understood that for purposes of calculating whether the SBC Deductible has been
met, the losses of equity holders shall not be counted if a similar Loss of
Newco arising out of or related to the same breach of a representation or
warranty has been included in such calculation. If the aggregate amount of such
Losses exceeds the SBC Deductible, SBC shall be liable only for the amount by
which such Losses exceed the SBC Deductible. In addition, except for breaches of
Sections 3.1(c) and 3.2(c) (Capitalization), 3.1(d) and 3.2(d) (Subsidiaries),
3.1(f) and 3.2(f) (Financial Statements), 3.1(m) and 3.2(m) (Taxes) and 3.1(q)
and 3.2(q) (Brokers and Finders) for which there shall be no limit, any payments
under this Section 7.3 by SBC to the Indemnified Parties for Losses shall not
exceed in the aggregate $3 billion.
7.4 Indemnification as Sole Remedy; Specific Performance. Following the
Closing, the indemnities provided in this Article VII and in Section 4.17 shall
be the sole and exclusive remedy of the Parties hereto, their Affiliates,
successors and assigns with respect to any and all claims for Losses sustained
or incurred arising out of, in connection with or relating to this Agreement and
the transactions contemplated by this Agreement, except for damages for breach
of any covenants, agreements (other than any covenant or agreement providing for
the maintenance of the accuracy of representations or warranties) or wilful or
fraudulent breach of the representations and warranties set forth in this
Agreement or any of the other agreements contemplated hereby. Notwithstanding
the foregoing, a Party hereto may seek specific performance of the obligations
set forth in Article II and Section 4.18 (Business Assets) of this Agreement.
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7.5 Method of Asserting Claims, Etc. All claims for indemnification by
the Indemnified Party hereunder shall be asserted and resolved as set forth in
this Section 7.5. In the event that any written claim or demand for which SBC or
BellSouth, as the case may be (an "Indemnifying Party"), may be liable to any
Indemnified Party hereunder is asserted against or sought to be collected from
any Indemnified Party by a third party, such Indemnified Party shall promptly,
but in no event later than 15 days following such Indemnified Party's receipt of
such claim or demand, notify in writing the Indemnifying Party of such claim or
demand (the "Claim Notice"). The Indemnifying Party shall be relieved of its
obligations to indemnify the Indemnified Party with respect to such claim or
demand if the Indemnified Party fails to timely deliver the Claim Notice and the
Indemnifying Party is materially prejudiced thereby. The Indemnifying Party
shall have 30 days after the personal delivery or mailing of the Claim Notice,
whichever is later, (the "Notice Period") to notify the Indemnified Party
whether or not it desires to defend the Indemnified Party against such claim or
demand and shall during the Notice Period and thereafter be provided by the
Indemnified Party with such information relating to the claim or demand as the
Indemnifying Party shall request. All costs and expenses incurred by the
Indemnifying Party in defending such claim or demand shall be borne by the
Indemnifying Party. Except as hereinafter provided, in the event that the
Indemnifying Party notifies the Indemnified Party within the Notice Period that
it desires to defend the Indemnified Party against such claim or demand, the
Indemnifying Party shall have the sole power to direct and control such defense.
If the Indemnifying Party so elects to assume the defense of such claim, the
Indemnifying Party shall not be liable to the Indemnified Party for any legal
expenses subsequently incurred by the Indemnified Party, except as hereinafter
provided. The Indemnifying Party shall be liable for the reasonable fees and
expenses of the Indemnified Party in connection with the defense of a Claim if
the Indemnified Party shall have been advised in writing by outside counsel that
there are actual conflicts of interests between the Indemnified Party and the
Indemnifying Party in connection with the defense of such Claim; provided,
however, that the Indemnifying Party shall not be responsible for the fees and
expenses of more than one separate firm of attorneys at any time for all
Indemnified Parties. If any Indemnified Party desires to participate in, but not
control, any such defense it may do so at its sole cost and expense (except as
provided in the preceding sentence), provided, that in any action seeking an
injunction or decree which would restrict the future activity or conduct of the
Indemnified Party or any Subsidiary or Affiliate thereof, the Indemnified Party
shall be entitled to participate in the defense of such action at the expense of
the Indemnifying Party. The Indemnified Party shall not settle, compromise or
discharge a claim or demand for which it is indemnified by the Indemnifying
Party or admit to any liability with respect to such claim or demand without the
prior written consent of the Indemnifying Party. The Indemnifying Party shall
not, without the written consent of the Indemnified Party settle, compromise or
offer to settle or compromise any such claim or demand on a basis which would
result in the imposition of a consent order, injunction or decree which would
restrict the future activity or conduct of the Indemnified Party or any
Subsidiary or
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Affiliate thereof. To the extent the Indemnifying Party shall direct, control or
participate in the defense or settlement of any third party claim or demand, the
Indemnified Party will provide the Indemnifying Party and its counsel access to
all relevant business records and other documents, and shall use its reasonable
best efforts to assist, and to cause the employees and counsel of the
Indemnified Party to assist, in defense of such claim. If the Indemnifying Party
elects not to defend the Indemnified Party, the Indemnified Party shall have the
right and the obligation to defend the claim or demand by appropriate
proceedings and shall have the sole power to direct and control such defense.
7.6 No Additional Recoveries. No indemnity shall be recoverable by the
Indemnified Parties with respect to any matter to the extent such matter was
reflected in (i) the final calculation of the Closing Net Debt, if any, pursuant
to Section 2.11 or (ii) the Benefits Calculation, if any, pursuant to Section
4.4(i) and any Losses related thereto to the extent reflected in the final
calculation of the adjustment to the Closing Net Debt or the Benefits True-Up,
as the case may be, shall not be counted as Losses.
7.7 Calculation of Losses. The amount of any Losses payable by the
Indemnifying Party to the Indemnified Party shall be net of any (i) amounts
recovered or recoverable by the Indemnified Party under applicable insurance
policies, (ii) Tax cost incurred by the Indemnified Party arising from the
receipt of indemnity payments and (iii) Tax benefit realized by the Indemnified
Party arising from the incurrence or payment of any such Loss, but only to the
extent of such Loss. In computing the amount of any such Tax cost or Tax
benefit, the Indemnified Party shall be deemed to fully utilize all Tax items
arising from the receipt of any indemnity payment hereunder or the incurrence or
payment of any indemnified Loss. Nothing in this Section 7.6 shall require SBC
or BellSouth to disclose any information regarding the calculation of Taxes
(including, without limitation, any Tax Return), other than to the extent such
information relates directly to the computation of Tax cost or Tax benefit for
these purposes.
7.8 Assignment of Claims. If the Indemnified Party receives any payment
from an Indemnifying Party in respect of any Losses and the Indemnified Party
could have recovered all or a part of such Losses from a third party (a
"Potential Contributor") based on the underlying claim or demand asserted
against the Indemnifying Party, the Indemnified Party shall, to the extent
permitted by Law or any applicable contractual arrangement, assign such of its
rights to proceed against the Potential Contributor as are necessary to permit
the Indemnifying Party to recover from the Potential Contributor the amount of
such payment.
7.9 Tower Indemnity. For the period commencing on the Closing Date and
ending on the fourth anniversary thereof, SBC shall indemnify, defend and hold
harmless the Indemnified Parties against and in respect of all Losses sustained,
incurred, arising out of, in connection with or relating to the Tower Bankruptcy
of the lessor of any
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Towers that are subject to and part of the Tower Transaction (as defined in
Schedule 4.2 of the SBC Disclosure Letter) (each, a "Tower Lessor"); provided
that if the counterparty to the Tower Transaction is described as on Schedule
7.9 of the SBC Disclosure Letter the maximum amount of Losses related to the
foregoing for which SBC may be liable shall not exceed 50% of the proceeds
received by SBC or its Subsidiaries by the Tower Lessor in connection with the
Tower Transaction; and provided further that such indemnification shall not
apply if the Tower Transaction is substantially similar to the arrangement
described on Schedule 3.2(o)(D) of the BellSouth Disclosure Letter. The
indemnification procedures set forth in the preceding Sections of this Article
VII shall apply to any indemnifications under this Section 7.9.
ARTICLE VIII
MISCELLANEOUS
8.1 Amendment and Waiver. Any provision of this Agreement may be
amended or waived if, and only if, such amendment or waiver is in writing and
signed, in the case of an amendment, by SBC and BellSouth, or in the case of a
waiver, by the party against whom the waiver is to be effective. No failure or
delay by any party in exercising any right, power or privilege hereunder shall
operate as a waiver thereof nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege.
8.2 Expenses. Except as otherwise expressly provided in this Agreement,
whether or not the transactions contemplated by this Agreement are consummated,
the Parties shall bear their own respective expenses (including, but not limited
to, Transfer Taxes and all compensation and expenses of counsel, financial
advisors, consultants, actuaries and independent accountants) incurred in
connection with this Agreement and the transactions contemplated hereby.
8.3 Public Disclosure. The Parties to this Agreement hereby agree with
the other party hereto that prior to the Closing, except as may be required to
comply with the requirements of applicable Law or the rules and regulations of
any national securities exchange upon which the securities of one of the Parties
or its Affiliates is listed, no press release or similar public announcement or
communication will be made or caused to be made concerning the execution or
performance of this Agreement unless specifically approved in advance by all
parties hereto; provided, however, that to the extent that either party to this
Agreement is required by Law or the rules and regulations of any stock exchange
upon which the securities of one or more of the parties or its Affiliates is
listed to make such a public disclosure, such public disclosure shall only be
made after prior consultation with and delivery of a copy of the proposed
disclosure substantially in the
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form it will be disclosed to the public to the other party to this Agreement, if
consultation and delivery is reasonably practicable.
8.4 Assignment. No Party may assign any of its rights or obligations
under this Agreement without the prior written consent of the other Party
hereto; provided that any Party may assign this Agreement to a wholly owned
Subsidiary so long as the Party assigning this Agreement agrees to guarantee,
without restriction, the performance of all such Subsidiary's obligations
hereunder.
8.5 Entire Agreement. This Agreement and the Ancillary Agreements
(including all Annexes, Exhibits and Schedules hereto and thereto) contain the
entire agreement between the parties hereto with respect to the subject matter
hereof and supersede all prior agreements and understandings, oral or written,
with respect to such matters, except for the Confidentiality Agreement which
will remain in full force and effect for the term provided for therein.
8.6 Fulfillment of Obligations. Any obligation of any Party to any
other Party under this Agreement, which obligation is performed, satisfied or
fulfilled by an Affiliate of such Party, shall be deemed to have been performed,
satisfied or fulfilled by such Party.
8.7 Parties in Interest; No Third Party Beneficiaries. 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, express
or implied, is intended to confer upon any Person other than SBC, BellSouth,
Newco or their respective successors any rights or remedies under or by reason
of this Agreement.
8.8 Counterparts. This Agreement and any amendments hereto may be
executed in one or more counterparts, each of which shall be deemed to be an
original by the parties executing such counterpart, but all of which shall be
considered one and the same instrument.
8.9 Section Headings. The section and paragraph headings and table of
contents contained in this Agreement are for reference purposes only and shall
not in any way affect the meaning or interpretation of this Agreement.
8.10 Notices. All notices or other communications hereunder shall be
deemed to have been duly given and made if in writing and if served by personal
delivery upon the party for whom it is intended, if delivered by registered or
certified mail, return receipt requested, or by a national courier service, or
if sent by facsimile; provided that the facsimile is promptly confirmed by
written confirmation by registered mail thereof, to the person at the address
set forth below, or such other address as may be designated in writing
hereafter, in the same manner, by such person:
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(a) if to SBC, to:
SBC Communications Inc.
175 E. Houston
San Antonio, TX 78205
Facsimile: (210) 351-3553
Attention: Chairman and Chief Executive
Officer
With a copy to:
SBC Communications Inc.
175 E. Houston
San Antonio, TX 78205
Facsimile: (210) 351-2298
Attention: Senior Executive Vice
President and General Counsel
With an additional copy to:
Sullivan & Cromwell
125 Broad Street
New York, NY 10004
Facsimile: (212) 558-3588
Attention: Joseph B. Frumkin
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and
(b) if to BellSouth, to:
BellSouth Corporation
1155 Peachtree Street
Suite 2000
Atlanta, GA 30309
Attention: Chief Executive Officer
Facsimile: (404) 249-5110
With a copy to:
BellSouth Corporation
1155 Peachtree Street
Suite 2000
Atlanta, GA 30309
Attention: General Counsel
Facsimile: (404) 249-5948
Any notice given by mail shall be effective when received.
8.11 Governing Law; Submission to Jurisdiction; Selection of Forum.
THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF DELAWARE WITHOUT REFERENCE TO THE CHOICE OF LAW PRINCIPLES
THEREOF. EACH PARTY HERETO AGREES THAT IT SHALL BRING ANY ACTION OR PROCEEDING
IN RESPECT OF ANY CLAIM ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE
TRANSACTIONS CONTAINED IN OR CONTEMPLATED BY THIS AGREEMENT, WHETHER IN TORT OR
CONTRACT OR AT LAW OR IN EQUITY, EXCLUSIVELY IN THE COURTS OF THE STATE OF
DELAWARE AND THE FEDERAL COURTS OF THE UNITED STATES OF AMERICA LOCATED IN THE
STATE OF DELAWARE (THE "CHOSEN COURTS").
8.12 Submission to Jurisdiction. Each of SBC, BellSouth and Newco
hereby irrevocably submits in any action, suit or proceeding arising out of this
Agreement or any of the transactions contemplated hereby to the exclusive
jurisdiction of the courts of the State of Delaware and the Federal courts of
the United States of America located in the State of Delaware. The Parties
hereto irrevocably waive, to the fullest extent permitted by law, any objections
which they may now or hereafter have to the laying of the venue of any such
action, suit or proceeding in any such court or that any such action, suit or
proceeding which is brought in any such court has been brought in an
inconvenient
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forum. Process in any such action, suit or proceeding may be served on any Party
anywhere in the world, whether within or without the jurisdiction of any such
court.
8.13 Waiver of Jury Trial. Each Party acknowledges and agrees that any
controversy which may arise under this Agreement is likely to involve
complicated and difficult issues, and therefore each such Party hereby
irrevocably and unconditionally waives any right such Party may have to a trial
by jury in respect of any litigation directly or indirectly arising out of or
relating to this Agreement, or the transactions contemplated by this Agreement.
Each Party certifies and acknowledges that (i) no representative, agent or
attorney of any other Party has represented, expressly or otherwise, that such
other Party would not, in the event of litigation, seek to enforce the foregoing
waiver, (ii) each such Party understands and has considered the implications of
this waiver, (iii) each such Party makes this waiver voluntarily and (iv) each
such Party has been induced to enter into this Agreement by, among other things,
the mutual waivers and certifications in this Section 8.13.
8.14 Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof unless such
invalidity or unenforceability, after taking into account the mitigation
contemplated by the next sentence, deprives a party of a material benefit
contemplated by this Agreement. If any provision of this Agreement, or the
application thereof to any Person or any circumstance, is invalid or
unenforceable, (a) a suitable and equitable provision shall be substituted
therefor in order to carry out, so far as may be valid and enforceable, the
intent and purpose of such invalid or unenforceable provision and (b) the
remainder of this Agreement and the application of such provision to other
persons, entities or circumstances shall not be affected by such invalidity or
unenforceability, nor shall such invalidity or unenforceability affect the
validity or enforceability of such provision, or the application thereof, in any
other jurisdiction.
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IN WITNESS WHEREOF, this Agreement has been signed on behalf
of each of the parties hereto as of the date first written above.
SBC COMMUNICATIONS INC.
By: /s/ James S. Kahan
-------------------------------
Name: James S. Kahan
Title: Senior Executive Vice President -
Corporate Development
BELLSOUTH CORPORATION
By: /s/ Keith O. Cowan
-------------------------------
Name: Keith O. Cowan
Title: Vice President - Corporate Development
