STOCK PURCHASE AGREEMENT
by and among
GLOBAL CROSSING LTD.,
GLOBAL CROSSING NORTH AMERICA, INC.
and
CITIZENS COMMUNICATIONS COMPANY
Dated as of July 11, 2000
TABLE OF CONTENTS
Page
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Article 1. Purchase and Sale................................................................ 1
1.1 General........................................................................ 1
1.2 Delivery of the Shares......................................................... 1
1.3 Purchase Price; Payment........................................................ 2
1.4 Post-Closing Adjustment........................................................ 3
1.5 Resignations................................................................... 5
1.6 Closing and Closing Date....................................................... 5
1.7 Taking of Necessary Action; Further Action..................................... 5
Article 2. Representations and Warranties Relating to the Sellers........................... 6
2.1 Organization and Standing...................................................... 6
2.2 Binding Agreement.............................................................. 6
2.3 Absence of Violations or Required Consents..................................... 6
2.4 Ownership of Stock............................................................. 7
2.5 Entire Business................................................................ 8
2.6 Financial Information.......................................................... 8
2.7 Title to Assets; Related Matters............................................... 9
2.8 Absence of Certain Changes, Events and Conditions.............................. 9
2.9 Litigation..................................................................... 10
2.10 Insurance...................................................................... 10
2.11 Material Contracts............................................................. 11
2.12 Permits and Licenses; Compliance with Law...................................... 11
2.13 Environmental Matters.......................................................... 12
2.14 Employee Benefit Matters....................................................... 12
2.15 Labor Relations................................................................ 14
2.16 Intellectual Property.......................................................... 14
2.17 Taxes.......................................................................... 14
2.18 Commissions.................................................................... 15
2.19 Affiliate Transactions......................................................... 15
2.20 Telephone Operations........................................................... 15
2.21 Long Distance Agreements....................................................... 18
Article 3. Representations and Warranties of the Buyer...................................... 18
3.1 Organization and Standing...................................................... 18
3.2 Binding Agreement.............................................................. 18
3.3 Absence of Violations or Required Consents..................................... 18
3.4 Litigation..................................................................... 19
3.5 Commissions.................................................................... 19
3.6 Financing...................................................................... 19
3.7 Acquisition of Shares for Investment........................................... 19
Article 4. Covenants and Agreements......................................................... 20
4.1 Conduct of the Business Prior to Closing; Access........................... 20
4.2 Financing Commitments...................................................... 24
4.3 Post-Closing Covenants and Agreements...................................... 25
4.4 Cooperation................................................................ 27
4.5 Confidentiality............................................................ 30
4.6 Public Announcements....................................................... 30
4.7 No Solicitation............................................................ 30
4.8 No Additional Representations.............................................. 30
4.9 Use of Global Crossing and Frontier Names.................................. 31
4.10 Long Distance Agreements................................................... 31
4.11 Transition Services........................................................ 32
4.12 Sublease of Premises in GCNA Building...................................... 34
4.13 Intercompany Accounts and Guaranties....................................... 35
4.14 Capital Expenditures....................................................... 35
4.15 Non-Compete................................................................ 36
4.16 Transition Plan............................................................ 37
Article 5. Conditions to Obligations of the Buyer....................................... 38
5.1 Representations and Warranties............................................. 38
5.2 Performance by the Sellers................................................. 38
5.3 Certificate................................................................ 38
5.4 Consents; No Objections.................................................... 38
5.5 No Proceedings or Litigation............................................... 39
5.6 No Material Events......................................................... 39
Article 6. Conditions to Obligations of the Seller...................................... 39
6.1 Representations and Warranties............................................. 39
6.2 Performance by the Buyer................................................... 39
6.3 Certificate................................................................ 39
6.4 Consents; No Objections.................................................... 40
6.5 No Proceedings or Litigation............................................... 40
6.6 Purchase Price Adjustment Limitation....................................... 40
Article 7. Tax Matters.................................................................. 40
7.1 Liability for Taxes........................................................ 40
7.2 Tax Refunds................................................................ 41
7.3 Adjustment to Purchase Price............................................... 42
7.4 Amended Returns............................................................ 42
7.5 Tax Returns................................................................ 42
7.6 Tax Contest Provisions..................................................... 43
7.7 Termination of Tax Allocation Agreements................................... 44
7.8 Assistance and Cooperation................................................. 44
7.9 Transfer and Conveyance Taxes.............................................. 44
7.10 Global Crossing Options.................................................... 44
7.11 Carryback of Net Operating Losses.......................................... 45
7.12 Survival................................................................... 45
Article 8. Employee Benefit and Labor Matters........................................... 45
8.1 Continuation of Employee Benefits.......................................... 45
8.2 Termination of Participation in Employee Benefit Plans; Defined
Benefit Pension Plans.................................................... 46
8.3 Defined Contribution Plan................................................... 47
8.4 Post-Retirement Benefits.................................................... 48
8.5 Collective Bargaining Agreements............................................ 49
8.6 WARN........................................................................ 49
8.7 Annual Incentive Compensation............................................... 49
Article 9. Indemnification............................................................... 50
9.1 Indemnification by the Sellers.............................................. 50
9.2 Indemnification by the Buyer................................................ 50
9.3 Limitations on Indemnification Claims and Liability......................... 50
9.4 Computation of Claims and Damages........................................... 52
9.5 Notice of Claims............................................................ 52
9.6 Defense of Third Party Claims............................................... 53
9.7 Special Indemnification Procedures with Respect to Environmental Matters.... 54
9.8 Probable Liabilities and Assets Lists....................................... 55
Article 10. Definitions................................................................... 55
Article 11. Miscellaneous Provisions...................................................... 68
11.1 Termination Rights.......................................................... 68
11.2 Expenses.................................................................... 68
11.3 Notices..................................................................... 68
11.4 Benefit and Assignment...................................................... 70
11.5 Waiver...................................................................... 70
11.6 Severability................................................................ 71
11.7 Amendment................................................................... 71
11.8 Effect and Construction of this Agreement................................... 71
11.9 Specific Performance........................................................ 71
INDEX OF ANNEXES AND SCHEDULES
ANNEXES
Annex I The Companies
Annex II The Company Subsidiaries
SCHEDULES
Schedule 1.3 Performance Adjustment Calculation Methodology
Schedule 4.11 Transition Services
Disclosure Schedule
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (this "Agreement") made as of July 11,
2000 by and among Global Crossing Ltd., a company formed under the laws of
Bermuda ("Global"), Global Crossing North America, Inc., a New York corporation
and a wholly owned subsidiary of Global ("GCNA" and together with Global, the
"Sellers"), and Citizens Communications Company, a Delaware corporation (the
"Buyer").
W I T N E S S E T H :
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WHEREAS, GCNA is the record and beneficial owner of all of the capital
stock of certain corporations (the "Companies") that, together with their wholly
owned subsidiaries, constitute the Frontier LEC Business (as hereinafter
defined); and
WHEREAS, the Sellers desire to sell to the Buyer all of the
outstanding capital stock of the Companies (the "Sale") and the Buyer desires to
purchase from GCNA at the Closing all of the then outstanding capital stock of
the Companies, in each case upon the terms and subject to the conditions set
forth in this Agreement; and
WHEREAS, the respective Boards of Directors of the Sellers and the
Buyer have each approved the Sale, the terms of this Agreement and the
transactions contemplated hereby.
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, the parties, intending legally to be bound, agree as follows:
[A list of defined terms is provided in Article 10 hereof]
Article 1. Purchase and Sale.
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1.1 General. At the Closing (as defined in Section 1.6 hereof), and
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subject to the terms and conditions of this Agreement, GCNA agrees to, and
Global agrees to cause GCNA to, sell, assign, convey and deliver to the Buyer,
and the Buyer agrees to purchase, acquire and accept from GCNA, all of the
outstanding shares of capital stock of the Companies as set forth in Annex I
hereto (the "Shares").
1.2 Delivery of the Shares. At the Closing, and subject to the terms
----------------------
and conditions of this Agreement, GCNA shall deliver to the Buyer certificates
representing all of the Shares, duly endorsed in blank for transfer or
accompanied by stock powers duly executed, with all necessary stock transfer
stamps attached thereto and canceled, and such other instruments as shall
reasonably be required to transfer to the Buyer all right, title and interest in
and to the Shares, free and clear of any security interests, pledges, liens,
charges, encumbrances, adverse claims, restrictions or defects in title. All
such certificates, stock powers and instruments shall be in form and substance
reasonably satisfactory to the Buyer.
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1.3 Purchase Price; Payment. (a) The consideration for the sale of
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the Shares shall be the aggregate of (i) $ 3,650,000,000 (Three Billion, Six
Hundred Fifty Million Dollars), minus (ii) the amount of the Combined
Liabilities as of 11:59 p.m., New York City time, on the day immediately
preceding the Closing Date (the "Liabilities Adjustment"), plus (if greater than
or equal to zero) or minus (if less than zero) (iii) the amount of the Combined
Working Capital as of 11:59 p.m., New York City time, on the day immediately
preceding the Closing Date (the "Working Capital Adjustment"), minus (iv) the
Performance Adjustment set forth in Section 1.3(d), if any, subject to
adjustment pursuant to Section 1.4 (the "Purchase Price").
(b) On or before ten days prior to the Closing, the Sellers shall
deliver to the Buyer a statement setting forth the amounts estimated in good
faith by the Company to be the amounts of the Liabilities Adjustment, the
Working Capital Adjustment and the Performance Adjustment, if any, as of the
Closing Date (collectively, the "Estimated Adjustment") and the estimated amount
of the aggregate Purchase Price based upon the Estimated Adjustment (the
"Closing Cash Payment").
(c) At the Closing, and subject to the terms and conditions of this
Agreement, the Buyer shall pay to GCNA the Closing Cash Payment by wire transfer
in immediately available funds to an account or accounts designated by GCNA not
later than three Business Days prior to the Closing.
(d) The "Performance Adjustment," if any, shall be the largest of
(x) the Access Line Deficiency, if any, (y) the Revenue Deficiency, if any, and
(z) the EBITDA Deficiency, if any. For purposes of this Section 1.3(d),
(i) The "Access Line Deficiency" means (A) the difference between
the number of Access Lines billed by the Companies and Company Subsidiaries
as of the end of the month most recently completed prior to the Closing
Date and 1,071,644 multiplied by (B) $3,294; provided that there shall be
no Access Line Deficiency unless the number of Access Lines billed by the
Companies and Company Subsidiaries as of such date is less than 1,071,644;
(ii) The "Revenue Deficiency" means (A) the difference between the
pro forma revenue for the Frontier LEC Business (calculated as provided in
Schedule 1.3 hereto) for the 12 calendar months ending as of the end of the
month most recently completed prior to the Closing Date (the "Pre-Closing
Pro Forma Revenue) and $805,204,000 multiplied by (B) 4.38; provided that
there shall be no Revenue Deficiency unless the Pre-Closing Pro Forma
Revenue is less than $805,204,000; and
(iii) The "EBITDA Deficiency" means (A) the difference between the
pro forma earnings before interest, taxes, depreciation and amortization
("EBITDA") for the Frontier LEC Business (excluding non-recurring revenues
and expenses resulting from assets and liabilities being put on the balance
sheet in the process of determining the amount of Combined Liabilities or
Combined Working Capital and calculated as provided in Schedule 1.3 hereto)
for the 12 calendar months ending as of the end of the month most
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recently completed prior to the Closing Date (the "Pre-Closing Pro Forma
EBITDA") and $386,769,000 multiplied by (B) 9.13; provided that there shall
be no EBITDA Deficiency unless the Pre-Closing Pro Forma EBITDA is less
than $386,769,000.
(e) Notwithstanding anything in this Agreement to the contrary,
other than with respect to the calculation of the Performance Adjustment (which
shall be calculated without consideration of whether any matter reflected in
such adjustment also may be reflected in any other adjustment or payment), in no
event shall the Buyer be entitled to receive any duplicate decrease to the
Purchase Price under any adjustment provision hereof or payment under any other
Section of this Agreement relating to any single matter.
1.4 Post-Closing Adjustment. (a) Not later than 75 days after the
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Closing (or such later date on which such statement reasonably can be prepared
and delivered in light of the compliance of the Buyer with its obligations set
forth in next two succeeding sentences), the Sellers shall cause to be prepared
and shall deliver to the Buyer (i) a statement of the actual amount of the
Combined Liabilities as of 11:59 p.m., New York City time, on the day
immediately preceding the Closing Date, the actual amount of the Combined
Working Capital as of 11:59 p.m., New York City time, on the day immediately
preceding the Closing Date, the actual amount of the Performance Adjustment, if
any, and the actual amount of the Purchase Price derived thereby (the "Closing
Statement") to be prepared in conformity with GAAP consistently applied and on a
basis consistent with the basis used in preparing the financial data and
information described in clauses (ii) and (iii) of Section 2.6(a) and except as
specifically required by the definitions of "Combined Liabilities", "Combined
Working Capital" and "Performance Adjustment", (ii) a determination of the
amount (the "Proposed Adjustment") by which the Purchase Price as then
determined by the Sellers is less than or greater than the Closing Cash Payment
(the amount of such excess or shortfall, as finally determined, is referred to
herein as the "Adjustment"), (iii) a statement of the Probable Liabilities
prepared in accordance with Section 9.8 (the "Probable Liabilities Statement")
and (iv) a statement of the Probable Assets prepared in accordance with Section
9.8 (the "Probable Assets Statement"), in each case certified by
PricewaterhouseCoopers LLP, or other independent accountants for the Sellers.
The Buyer shall provide the Sellers and their independent accountants access at
all reasonable times to the relevant personnel, properties, books and records of
the Frontier LEC Business in the possession of the Buyer and its Affiliates
(including, without limitation, the Companies and Company Subsidiaries) for such
purposes and to assist the Sellers and their independent accountants in
preparing the Closing Statement, the Probable Liabilities Statement and the
Probable Assets Statement. The Buyer's assistance shall include, without
limitation, the closing of the books of the Frontier LEC Business as of the
Closing, the preparation of schedules supporting the amounts set forth in the
general ledger and other books and records of the Frontier LEC Business, and
such other assistance as the Sellers or their independent accountants may
reasonably request.
(b) During the 75-day period following the delivery by the Sellers
of the Closing Statement, the Proposed Adjustment, the Probable Liabilities
Statement and the Probable Assets Statement referred to in Section 1.4(a) (or
such longer period during which such statement and adjustment reasonably can be
reviewed in light of the compliance of the Sellers with their obligations set
forth in next two succeeding sentences), the Buyer and KPMG LLP, independent
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accountants for the Buyer (or another nationally recognized accounting firm
selected by the Buyer that is not also retained by the Sellers), will be
permitted to review the working papers of the Sellers and their independent
accountants relating to the preparation of the Closing Statement, the Proposed
Adjustment, the Probable Liabilities Statement and the Probable Assets
Statement. The Sellers shall provide the Buyer and its independent accountants
access at all reasonable times to the relevant personnel, properties, books and
records of the Frontier LEC Business in the possession of the Sellers and their
Affiliates for such purposes and to assist the Buyer and its independent
accountants in reviewing the Closing Statement, the Probable Liabilities
Statement and the Probable Assets Statement. The Sellers' assistance shall
include, without limitation, the preparation of schedules supporting the amounts
set forth in the general ledger and other books and records of the Frontier LEC
Business, and such other assistance as the Buyer or its independent accountants
may reasonably request.
(c) Unless the Buyer delivers written notice to the Sellers of its
disagreement with the Closing Statement and the Proposed Adjustment, the
Probable Liabilities Statement and/or the Probable Assets Statement within 75
days following delivery by the Sellers of the Closing Statement, the Proposed
Adjustment, the Probable Liabilities Statement and the Probable Assets
Statement, the Buyer will be deemed to have accepted and agreed to the Closing
Statement and Proposed Adjustment, the Probable Liabilities Statement and/or the
Probable Assets Statement, and such Adjustment, the Probable Liabilities List
and/or the Probable Assets List shall be final and binding. If, within such 75-
day period, the Buyer notifies the Sellers that it disagrees with the Closing
Statement and the Proposed Adjustment, the Probable Liabilities Statement and/or
the Probable Assets Statement, and the Sellers and the Buyer cannot agree with
respect to the Closing Statement and the Proposed Adjustment, the Probable
Liabilities Statement and/or the Probable Assets Statement within 14 days of the
notice of disagreement provided by the Buyer to the Sellers, then the
determination shall be submitted for resolution promptly to an independent
nationally recognized accounting firm jointly selected by the Sellers and the
Buyer (the "Neutral Auditor"), whose determination (the "Neutral Auditor
Determination") shall be instructed by the parties to be made within 30 days and
be final and binding upon all parties hereto. All fees and expenses relating to
the work, if any, to be performed by the Neutral Auditor will be borne (i) by
the Buyer in the same proportion that the aggregate amount of all of the
objections on the Closing Statement, the Probable Liabilities Statement and/or
the Probable Assets Statement that are submitted by the Buyer to the Neutral
Auditor and are unsuccessfully disputed by the Buyer, bear to the total amount
of all of such objections and (ii) by the Sellers in the same proportion that
the aggregate amount of all of the objections on the Closing Statement, the
Probable Liabilities Statement and/or the Probable Assets Statement that are
submitted by the Buyer to the Neutral Auditor and are successfully disputed by
the Buyer, bear to the total amount of all of such objections. The Buyer and the
Sellers shall reimburse the other to the extent the other pays more than the
amount so required pursuant to the preceding sentence. In the event of a Neutral
Auditor Determination, the Neutral Auditor shall deliver a certificate to each
of the Sellers and the Buyer setting forth the amount of the Adjustment, the
Probable Liabilities List and/or the Probable Assets List.
(d) If the Adjustment provides that the Closing Cash Payment is
greater than the Purchase Price as finally determined, then the Purchase Price
shall be reduced to the amount as so
5
determined and GCNA shall pay to the Buyer an amount equal to the amount of the
Adjustment. If the Adjustment provides that the Closing Cash Payment is less
than the Purchase Price as finally determined, then the Purchase Price shall be
increased to the amount as so determined and the Buyer shall pay to GCNA an
amount equal to the amount of the Adjustment. If the Adjustment provides that
the Closing Cash Payment was equal to the Purchase Price as finally determined,
then no further payments with respect to the Purchase Price shall be made. Any
payment required to be made by GCNA or the Buyer pursuant to this Section 1.4(d)
shall bear interest from the Closing Date through the date of payment at a rate
of interest equal to the prime rate per annum publicly announced from time to
time by The Chase Manhattan Bank, N.A. at its principal office in New York City
and shall be made by wire transfer in immediately available funds to an account
or accounts designated by the party to receive such payment.
1.5 Resignations. Prior to or at the Closing, the Sellers will,
------------
upon the request of the Buyer, obtain the removal or resignation, effective as
of the Closing, of each of the directors and officers of the Companies and
Company Subsidiaries so requested.
1.6 Closing and Closing Date. Unless this Agreement shall have been
------------------------
terminated and the transactions herein contemplated shall have been terminated
pursuant to Section 11.1 hereof, the closing (the "Closing") of the transactions
herein contemplated shall take place ten days following the satisfaction of the
conditions set forth in Sections 5.4(a) and 6.4(a) hereof, and the satisfaction
or waiver of the other conditions set forth in Articles 5 and 6 hereof, other
than those that are satisfied on the Closing Date, or at such other time and
date as the Sellers and the Buyer shall agree (such time and date being referred
to herein as the "Closing Date"), at the offices of Simpson Thacher & Bartlett,
425 Lexington Avenue, New York, New York, or at such other place as the Sellers
and the Buyer shall agree. At the Closing, each of the parties hereto shall
take, or cause to be taken, all such actions and deliver, or cause to be
delivered, all such documents, instruments, certificates and other items as may
be required under this Agreement or otherwise, in order to perform or fulfill
all covenants and agreements on its part to be performed at or prior to the
Closing Date.
1.7 Taking of Necessary Action; Further Action. Each of the parties
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shall use its respective reasonable best efforts to take all such action as may
be necessary or appropriate in order to effectuate the Closing as promptly as
possible. If, on or at any time after the Closing Date, any further reasonable
action is necessary or desirable to carry out the purposes of this Agreement and
to vest the Buyer with full right, title and possession to all assets, property,
rights, privileges, powers, and franchises of the Frontier LEC Business, the
Sellers shall take, and shall ensure that the officers of the Companies are
fully authorized, in the name of the Companies or otherwise, to take, and shall
take, all such lawful and necessary action.
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Article 2. Representations and Warranties Relating to the Sellers.
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Each of the Sellers represents and warrants to the Buyer as follows:
2.1 Organization and Standing. (a) Each of the Sellers is a company
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or a corporation duly incorporated, validly existing, and in good standing under
the laws of the jurisdiction of its organization, and has all requisite
corporate power and authority to own, lease and operate its properties and
assets and to conduct its business as it is now being conducted.
(b) Each of the Companies and their respective Subsidiaries (the
"Company Subsidiaries") is a corporation duly incorporated, validly existing,
and in good standing under the laws of the state of its incorporation and has
all requisite corporate power and authority to own, lease and operate its
properties and assets and to conduct its business as it is now being conducted.
Each of the Companies and the Company Subsidiaries is duly qualified to do
business as a foreign corporation and is in good standing under the laws of each
state in which the operation of its business or ownership of its assets makes
such qualification necessary, except where the failure to so qualify or be in
good standing would not reasonably be expected to have a Material Adverse
Effect.
2.2 Binding Agreement. Each of the Sellers has all requisite
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corporate power and authority to enter into this Agreement, to execute and
deliver this Agreement, to carry out its obligations hereunder and to consummate
the transactions contemplated hereby. The execution and delivery of this
Agreement by the Sellers and the consummation by the Sellers of their
obligations hereunder have been duly and validly authorized by all necessary
corporate and stockholder action on the part of the Sellers. This Agreement has
been duly executed and delivered on behalf of the Sellers and, assuming the due
authorization, execution and delivery by the Buyer, constitutes a legal, valid
and binding obligation of each of the Sellers enforceable in accordance with its
terms.
2.3 Absence of Violations or Required Consents. Except as set forth
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in Section 2.3 of the Disclosure Schedule and, in the case of clauses (b), (c)
and (d), except for such violations, breaches, defaults, consents, approvals,
authorizations, orders, actions, registrations, filings, declarations,
notifications and Encumbrances that would not reasonably be expected to have a
Material Adverse Effect or materially impair or delay the consummation of the
transactions contemplated hereby, the execution, delivery and performance by the
Sellers of this Agreement do not and will not (a) violate or result in the
breach or default of any provision of Global's memorandum of association or bye-
laws or the certificates of incorporation or by-laws of GCNA, the Companies or
the Company Subsidiaries, (b) violate any Law or Governmental Order applicable
to either Seller or any of the Companies or the Company Subsidiaries or any of
their respective properties or assets, (c) except for the Required Consents,
require any consent, approval, authorization or other order of, action by,
registration or filing with or declaration or notification to any Governmental
Authority or any other Person or (d) result in any violation or breach of,
constitute a default (or event which with the giving of notice, or lapse of time
or both, would become a default) under, require any consent under, or give to
others any rights of termination, amendment, acceleration, suspension,
revocation or cancellation of, or result in the
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creation of any Encumbrance on any of the Sellers', the Companies' or the
Company Subsidiaries' respective assets, or result in the imposition or
acceleration of any payment, time of payment, vesting or increase in the amount
of compensation or benefit payable, pursuant to, any note, bond, mortgage or
indenture, contract, agreement, lease, sublease, license or permit, or franchise
to which either Seller or any Company or Company Subsidiary is a party or by
which their respective assets are bound.
2.4 Ownership of Stock. (a) GCNA is the record and beneficial owner
------------------
of all of the issued and outstanding shares of capital stock of each of the
Companies.
(b) One of the Companies, Frontier Subsidiary Telco Inc. ("FSTI"),
or one or more of the other Company Subsidiaries wholly owned by FSTI, is the
record and beneficial owner of all of the issued and outstanding shares of
capital stock of each of the Company Subsidiaries. The issued and outstanding
shares of capital stock of each of the Company Subsidiaries, and the record
owners thereof, are set forth in Annex II hereto.
(c) Other than this Agreement, the shares of capital stock
identified in Annex I and Annex II hereto, and rights or interests created by or
suffered to exist by the Buyer, there are no outstanding options, warrants or
other rights of any kind relating to the sale, issuance or voting of any shares
of capital stock or other ownership interests in any of the Companies or Company
Subsidiaries or any securities convertible into or evidencing the right to
purchase any shares of capital stock or other ownership interests in any of the
Companies or Company Subsidiaries.
(d) Upon the consummation of the Sale at the Closing as contemplated
by this Agreement, the Sellers will deliver to the Buyer good title to the
Shares free and clear of any security interests, pledges, liens, charges,
encumbrances, adverse claims, restrictions or defects in title, other than (i)
security interests, pledges, liens, charges, encumbrances, claims or
restrictions created by or suffered to exist by the Buyer and (ii) requirements
of federal and state securities Laws and utilities, telecommunications and other
Laws respecting limitations on the subsequent transfer thereof.
(e) Except as set forth in Section 2.4 of the Disclosure Schedule,
other than the Company Subsidiaries, none of the Companies or Company
Subsidiaries owns any shares of capital stock or other ownership interests in
any other Person or any options, warrants or other securities, or other rights
of any kind, convertible into or evidencing the right to purchase any shares of
capital stock or other ownership interests in any other Person.
2.5 Entire Business. Except as disclosed in Section 2.5 of the
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Disclosure Schedule and except for such matters that are not material to the
Frontier LEC Business (and, in each case, such exceptions being subject to (i)
an obligation of the Sellers to use their reasonable best efforts to effect the
actions required by Section 2.5 of the Disclosure Schedule prior to the Closing
and (ii) the obligations of the Sellers pursuant to Section 1.7 to the extent
that any such required actions have not been effected prior to the Closing), the
Sellers' ownership of the Frontier LEC Business is evidenced solely by the
Shares and the sale, assignment, conveyance and delivery of the Shares to the
Buyer or its permitted assignee pursuant to this Agreement will
8
transfer all of the Sellers' and their Affiliates' ownership interests
comprising the Frontier LEC Business.
2.6 Financial Information. (a) The (i) business segment information
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for the Frontier LEC Business (identified as "Local Communications Services")
(x) for the three fiscal years ended December 31, 1996, 1997 and 1998 included
in the audited consolidated financial statements of GCNA (formerly named
Frontier Corporation) incorporated by reference in GCNA's Annual Report on Form
10-K for the fiscal year ended December 31, 1998 and (y) for the three-month
periods and nine-month periods ended September 30, 1998 and 1999 included in the
unaudited consolidated financial statements of GCNA included in GCNA's Quarterly
Report on Form 10-Q for the quarterly period ended September 30, 1999; (ii)
segment financial data for the Frontier LEC Business (identified as "Incumbent
Local Exchange Carrier Services") set forth in Note 19 to the audited
consolidated financial statements of Global included in Global's Annual Report
on Form 10-K for the fiscal year ended December 31, 1999; and (iii) business
segment information for the Frontier LEC Business (identified as "Incumbent
Local Exchange Carrier Services") for the three-month period ended March 31,
2000 included in the unaudited consolidated financial statements of Global
included in Global's Quarterly Report on Form 10-Q for the quarterly period
ended March 31, 2000 (in each case subject to the information set forth in the
notes to such financial statements) fairly state in all material respects in
relation to the basic financial statements taken as a whole the financial
information or data set forth therein (subject, in the case of unaudited interim
financial statements, to normal year-end adjustments) and have been prepared in
conformity with GAAP applied on a consistent basis (except as may be indicated
in the notes to such financial statements).
(b) The Sellers have furnished to the Buyer the financial statements
of certain of the Companies and Company Subsidiaries contained in filings with
PUCs under applicable regulatory Laws as listed in Section 2.6 of the Disclosure
Schedule (the "Regulatory Financial Statements"). The Regulatory Financial
Statements have been prepared based on the books and records of the relevant
Company or Company Subsidiary in all material respects. Such books and records
have been maintained in all material respects in accordance with the Uniform
System of Accounts, GAAP and, where required by Law, the applicable regulations
of the FCC and relevant PUCs; however, because each such Company or Company
Subsidiary represents only a portion of a larger entity, the Regulatory
Financial Statements are based on the extensive use of estimates and
allocations. The Sellers believe that these estimates and allocations have been
performed on a reasonable basis consistent in all material respects with the
Uniform System of Accounts, GAAP and, where required by Law, the applicable
regulations of the FCC and relevant PUCs.
2.7 Title to Assets; Related Matters. Except for Permitted
--------------------------------
Exceptions or as disclosed in Section 2.7 of the Disclosure Schedule and except
for such matters that would not reasonably be expected to have a Material
Adverse Effect, (i) the Companies and the Company Subsidiaries have good, valid
and marketable title (as measured in the context of their current uses) to, or,
in the case of leased or subleased assets or other possessory interests, valid
and subsisting leasehold or other possessory interests (as measured in the
context of their current uses) in, or otherwise have the right to use, all of
the assets of the Frontier LEC Business, free and clear of all Encumbrances
(except for any assets sold or otherwise disposed of, or with
9
respect to which the lease, sublease or other right to use such asset has
expired or has been terminated, in each case after the date hereof solely to the
extent permitted under Section 4.1(a) hereof), (ii) such assets constitute all
the assets and rights necessary for the operation of the Frontier LEC Business
as currently conducted, including, without limitation, all interoffice network
facilities and related electronic equipment used in the Frontier LEC Business,
(iii) the Real Property and Equipment are in good operating condition and repair
and maintained in accordance with customary procedures of the Frontier LEC
Business taking into account the age thereof and (iv) to the knowledge of the
Sellers, there are no contractual or legal restrictions to which either Seller
or any of the Companies or Company Subsidiaries is a party or by which the Real
Property is otherwise bound that preclude or restrict the Companies' or Company
Subsidiaries' ability to use the Real Property for the purposes for which it is
currently being used.
2.8 Absence of Certain Changes, Events and Conditions. Since
-------------------------------------------------
December 31, 1999, except as otherwise provided in or contemplated by this
Agreement or as disclosed in Section 2.8 of the Disclosure Schedule and, with
respect to clauses (a), (b), (d), (f), (g) and (h) (to the extent clause (h)
refers to clause (a), (b), (d), (f) or (g)), except for such matters that,
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect:
(a) other than in the ordinary course of business consistent with
past practice, neither Seller nor any Company or Company Subsidiary has
sold, transferred, leased, subleased, licensed, encumbered or otherwise
disposed of any assets of the Frontier LEC Business, other than the sale of
obsolete Equipment and transfers of cash;
(b) (i) neither Seller nor any Company or Company Subsidiary has
granted any increase, or announced any increase, in the wages, salaries,
compensation, bonuses, incentives, pension or other benefits payable to any
of the officers or employees of the Frontier LEC Business, including,
without limitation, any increase or change pursuant to any Employee Benefit
Plan, or (ii) established, increased or accelerated the payment or vesting
of any benefits under any Employee Benefit Plan with respect to officers or
employees, in either case except (A) as required by Law, (B) that involve
only increases consistent with the past practices of the Frontier LEC
Business, (C) that involve only increases in the ordinary course of
business, (D) as required under any existing agreement or arrangement or
(E) that involve increases related to promotions;
(c) neither Seller nor any Company or Company Subsidiary has made
any material change in any method of accounting or accounting practice or
policy used by the Sellers, the Companies or the Company Subsidiaries with
respect to the Frontier LEC Business, including, without limitation,
material changes in assumptions underlying or methods of calculating bad
debt, contingency or other reserves, or notes or accounts receivable write-
offs, or in corporate allocation methodology, in each case other than
changes required by Law or under GAAP;
10
(d) neither Seller nor any Company or Company Subsidiary has
suffered any casualty loss or damage with respect to any assets of the
Frontier LEC Business, whether or not covered by insurance;
(e) there has not been any Material Adverse Effect;
(f) the Frontier LEC Business has been conducted only in the
ordinary and usual course consistent with past practice;
(g) neither Seller nor any Company or Company Subsidiary has
compromised, settled, granted any waiver or release relating to, or
otherwise adjusted any Action, Indebtedness or any other claims or rights
of the Frontier LEC Business; and
(h) neither Seller nor any Company or Company Subsidiary has entered
into any agreement, contract, commitment or arrangement to do any of the
foregoing.
2.9 Litigation. Except as disclosed in Section 2.9 of the
----------
Disclosure Schedule and except for such matters that would not reasonably be
expected to have a Material Adverse Effect, as of the date hereof, (i) there are
no Actions against either Sellers or any Company or Company Subsidiary pending,
or, to the knowledge of the Sellers, threatened to be brought by or before any
Governmental Authority, in each case with respect to the Frontier LEC Business,
(ii) neither Seller nor any Company or Company Subsidiary is subject to any
Governmental Order (nor, to the knowledge of the Sellers, are there any such
Governmental Orders threatened to be imposed by any Governmental Authority), in
each case with respect to the Frontier LEC Business and (iii) there is no Action
pending, or, to the knowledge of the Sellers, threatened to be brought before
any Governmental Authority, that seeks to question, delay or prevent the
consummation of the transactions contemplated hereby.
2.10 Insurance. Except as set forth in either Section 2.10 or
---------
Section 2.14 of the Disclosure Schedule and except for such matters that would
not reasonably be expected to have a Material Adverse Effect, (i) all insurance
policies to which any Company or Company Subsidiary is a party or under which
such Company or Company Subsidiary is covered as an additional named insured or
otherwise (or replacement policies therefor) are in full force and effect, and
the related Seller or such Company or Company Subsidiary has paid all premiums
due and is not in default, (ii) no notice of cancellation or non-renewal with
respect to, or disallowance of any claim under, any such policy has been
received by the related Seller or such Company or Company Subsidiary and (iii)
neither Seller nor any Company or Company Subsidiary has been refused insurance
with respect to the Frontier LEC Business, nor has coverage with respect to the
Frontier LEC Business been previously canceled or materially limited, by an
insurer to which a Seller or such Company or Company Subsidiary has applied for
such insurance, or with which a Seller or such Company or Company Subsidiary has
held insurance, within the last three years.
2.11 Material Contracts. Except as set forth in Section 2.11 of the
------------------
Disclosure Schedule and except for such matters which would not reasonably be
expected to have a Material Adverse Effect, (i) Section 2.11 of the Disclosure
Schedule sets forth all Material Contracts as of
11
the date hereof, (ii) each agreement, contract, policy, plan, mortgage,
understanding, arrangement or commitment of any Company or Company Subsidiary
that is intended to be binding upon the parties thereto is legal, valid and
binding on the Company or Company Subsidiary party thereto and, to the knowledge
of the Sellers, the other parties thereto, enforceable in accordance with the
terms thereof, (iii) no Company or Company Subsidiary is in default under any
such agreement, contract, policy, plan, mortgage, understanding, arrangement or
commitment and (iv) to the knowledge of the Sellers, no other party to any such
agreement, contract, policy, plan, mortgage, understanding, arrangement or
commitment has breached or is in default thereunder.
2.12 Permits and Licenses; Compliance with Law. (a) Except as
-----------------------------------------
disclosed in Section 2.12 of the Disclosure Schedule and except for such matters
that would not reasonably be expected to have a Material Adverse Effect, (i) the
Companies and Company Subsidiaries currently hold all the permits, licenses,
authorizations, certificates, exemptions and approvals of Governmental
Authorities or other Persons including, without limitation, Environmental
Permits, necessary for the current operation and the conduct (as it is being
conducted prior to the Closing Date) of the Frontier LEC Business (collectively,
"Permits"), and all Permits are in full force and effect, (ii) neither Seller
nor any Company or Company Subsidiary has received any written notice from any
Governmental Authority revoking, canceling, rescinding, materially modifying or
refusing to renew any Permit and (iii) the Sellers and the Companies and Company
Subsidiaries are in compliance with the requirements of all Permits.
(b) Except as disclosed in Section 2.12 of the Disclosure Schedule
and except for such matters that would not reasonably be expected to have a
Material Adverse Effect, (i) the Sellers, the Companies and the Company
Subsidiaries are in compliance with all Laws (including, without limitation,
with respect to affiliate transactions) and Governmental Orders applicable, to
the knowledge of the Sellers, to the conduct of the Frontier LEC Business as it
is being conducted prior to the Closing Date and (ii) neither Seller nor any
Company or Company Subsidiary has been charged since July 1, 1997 by any
Governmental Authority with a violation of any Law or any Governmental Order
relating to the conduct of the Frontier LEC Business which charge remains
unresolved.
(c) Except as disclosed in Section 2.12 of the Disclosure Schedule
and except for such matters that would not reasonably be expected to have a
Material Adverse Effect, (i) each of the Companies and Company Subsidiaries
maintains effective tariffs for services that they offer that are subject to
tariff requirements, (ii) each of the Companies and Company Subsidiaries offers
its tariffed services in a manner consistent with the filed tariff, (iii) other
than orders and other requirements of Law applicable generally to local exchange
carriers or another subset of carriers, no order or other requirement of Law has
been received by a Company or Company Subsidiary concluding that its tariff is
unlawful, (iv) other than orders and other requirements of Law applicable
generally to local exchange carriers or another subset of carriers, no order or
other requirement of Law has been received by a Company or Company Subsidiary
since December 31, 1999 suspending a tariff, which suspension remains in effect
as of the date hereof and (v) each Company and Company Subsidiary with a tariff
in effect has taken steps in the ordinary course of business to maintain the
effectiveness of its tariffs and to enforce applicable terms and conditions in a
manner that is not unreasonably discriminatory.
12
2.13 Environmental Matters. Except as disclosed in Section 2.13 of
---------------------
the Disclosure Schedule and except for such matters that would not reasonably be
expected to have a Material Adverse Effect, to the knowledge of the Sellers, (i)
Hazardous Materials have not been Released on any Real Property except in
compliance with applicable Law; (ii) there have been no events related to the
Companies, the Company Subsidiaries or the Real Property that would reasonably
be expected to give rise to liability under any Environmental Law; (iii) the
Sellers, the Companies and the Company Subsidiaries are now, and have for the
past three years been, in compliance with all applicable Environmental Laws
relating to the Frontier LEC Business and there are no extant conditions that
would reasonably be expected to constitute an impediment to such compliance in
the future; (iv) the Sellers, the Companies and the Company Subsidiaries have
disposed of all wastes containing Hazardous Materials arising from or otherwise
relating to the Frontier LEC Business, in compliance with all applicable
Environmental Laws (including the filing of any required reports with respect
thereto) and Environmental Permits; (v) there are no pending or threatened
Environmental Claims against the Sellers, the Companies or the Company
Subsidiaries relating to the Real Property or the operations of the Frontier LEC
Business; (vi) there is no environmental remediation or other environmental
response occurring on any Real Property (including any easements, rights-of-way
or other possessory interests in the real property of others) nor has any
Company or Company Subsidiary issued a request for proposal or otherwise
requested an environmental contractor to begin plans for any such environmental
remediation or other environmental response; and (vii) no Company or Company
Subsidiary has received any notice, or has knowledge of any circumstances
related to liability, under CERCLA or any analogous state law.
2.14 Employee Benefit Matters. The Sellers have delivered or made
------------------------
available to the Buyer copies of all Employee Benefit Plans, which plans are set
forth in Section 2.14 of the Disclosure Schedule. Except as set forth in Section
2.14 of the Disclosure Schedule, all such Employee Benefit Plans are in
compliance with the terms of the applicable plan and the requirements prescribed
by applicable law currently in effect with respect thereto, and each Seller and
each of the Companies and Company Subsidiaries has performed in all respects all
obligations required to be performed by it under, where any such noncompliance
or nonperformance would be reasonably expected to result in liability that would
have a Material Adverse Effect. The pool of Union Employees who are potentially
eligible to qualify for Post-Retirement Welfare Benefits is frozen. Neither
Seller nor any Company or Company Subsidiary has incurred, and, to the knowledge
of the Sellers, no event, transaction or condition has occurred or exists which
is reasonably expected to result in the occurrence of, any liability to the
Pension Benefit Guaranty Corporation (other than contributions to the plan and
premiums to the Pension Benefit Guaranty Corporation, which in either event are
not in default) or any "withdrawal liability" within the meaning of Section 4201
of ERISA, or any other liability pursuant to Title I or IV of ERISA or the
penalty, excise tax or joint and several liability provisions of the Code
relating to employee benefit plans, in any such case relating to any Employee
Benefit Plan or any pension plan maintained by any company that would be treated
as a single employer with the Sellers, the Companies or the Company Subsidiaries
under Section 4001 of ERISA or Section 414 of the Code (an "ERISA affiliate"),
where individually or in the aggregate, in any of such events, any such
liability would be reasonably expected to have a Material Adverse Effect. Except
as set forth in Section 2.14 of the Disclosure Schedule, each Employee Benefit
Plan intended to be
13
"qualified" within the meaning of Section 401(a) of the Code has received a
favorable determination letter that such plan is so qualified and the trusts
maintained thereunder are exempt from taxation under Section 501(a) of the Code,
the Sellers have not received any notices from the Internal Revenue Service that
any such plan is not so qualified, and, to the knowledge of the Sellers, each
such plan is so qualified in form and in operation. Except as set forth in
Section 2.14 of the Disclosure Schedule, the consummation of the transactions
contemplated by this Agreement will not (i) entitle any current or former
employee or officer of any Company or Company Subsidiary or any ERISA affiliate
to severance pay, unemployment compensation or other payment, except as
expressly provided in this Agreement, or (ii) accelerate the time of payment or
vesting, or increase the amount of compensation due any such employee or
officer. There are no pending, or, to the knowledge of the Sellers, threatened
or anticipated claims by or on behalf of any Employee Benefit Plan, by any
employee or beneficiary covered under any such plan, or otherwise involving any
such plan (other than routine claims for benefits) where any such pending,
threatened or anticipated claims would reasonably be expected to have a Material
Adverse Effect. Except as specifically identified in Section 2.14, neither
Company nor any Company Subsidiary, nor Sellers contribute in any multiemployer
plan (within the meaning of Section 3(37) of ERISA) for the benefit of Business
Employees; and to the extent that they do so contribute, all contributions that
are required under the terms of any applicable collective bargaining agreement
or plan to be contributed prior to the Closing Date will have been contributed
as of the Closing Date. All contributions that are due on or before the Closing
Date to any other Employee Benefit Plans, including without limitation salary
reduction contributions and matching contributions, will have been contributed
or accrued as of the Closing Date (to the extent such accrual is required under
GAAP), except where the failure to do so would not be reasonably expected to
have a Material Adverse Effect. Neither Seller nor any Companies or Company
Subsidiaries shall grant any additional equity-based awards to any current or
former directors of the Companies or Company Subsidiaries.
2.15 Labor Relations. Section 2.15 of the Disclosure Schedule sets
---------------
forth a list of all labor organizations recognized as representing the employees
of the Frontier LEC Business. Complete and accurate copies of all collective
bargaining agreements and other labor union contracts between either Sellers or
any Company or Company Subsidiary and any such labor organizations have been
delivered or made available to the Buyer. Other than as set forth in Section
2.15 of the Disclosure Schedule and except for such matters that would not
reasonably be expected to have a Material Adverse Effect, (i) neither Seller nor
any Company or Company Subsidiary is party to any collective bargaining
agreement or other labor union contract applicable to employees of the Frontier
LEC Business, (ii) there are no strikes, slowdowns or work stoppages pending or,
to the knowledge of the Sellers, threatened between the Sellers or any Company
or Company Subsidiary and any employees of the Frontier LEC Business, and the
Frontier LEC Business has not experienced any such strike, slowdown, or work
stoppage within the past two years, (iii) there are no unfair labor practice
complaints pending against either Sellers or any Company or Company Subsidiary
relating to employees of the Frontier LEC Business before the National Labor
Relations Board or any other Governmental Authority or, to the knowledge of the
Sellers, any current union representation questions involving employees of the
Frontier LEC Business and (iv) to the knowledge of the Sellers, the Frontier LEC
Business is in compliance in all respects with its obligations under all Laws
and Governmental Orders governing
14
its employment practices, including, without limitation, provisions relating to
wages, hours and equal opportunity.
2.16 Intellectual Property. Except as disclosed in Section 2.16 of
---------------------
the Disclosure Schedule and except for such matters that would not reasonably be
expected to have a Material Adverse Effect, (i) the rights of either Sellers or
any Company or Company Subsidiary in or to the Intellectual Property do not
conflict with or infringe on the rights of any other Person, and neither Seller
nor any Company or Company Subsidiary has received any claim from any Person to
such effect, (ii) the Companies and the Company Subsidiaries own, are licensed
or otherwise have the right to use, and as of the Closing Date the Companies and
the Company Subsidiaries will own, be licensed or otherwise have the right to
use, all Intellectual Property and (iii) to the knowledge of the Sellers, no
other Person is infringing or diluting the rights of the Sellers, the Companies
or the Company Subsidiaries with respect to the Intellectual Property.
2.17 Taxes. Except as disclosed in Section 2.17 of the Disclosure
-----
Schedule and except for such matters that would not reasonably be expected to
have a Material Adverse Effect, (a) all Tax Returns required to be filed by the
Sellers, the Companies or the Company Subsidiaries with respect to the Frontier
LEC Business have been timely filed; (b) all Taxes shown on such Tax Returns
have been timely paid other than such Taxes, if any, as are described in Section
2.17 of the Disclosure Schedule and are being contested in good faith and as to
which adequate reserves (determined in accordance with GAAP) have been provided
in the financial statements of the Frontier LEC Business; (c) no audits with
respect to the Companies or Company Subsidiaries are in process, pending or
threatened in writing, no deficiencies or adjustments to Tax Returns exist or
have been asserted in writing with respect to Taxes of the Companies or Company
Subsidiaries, no notice has been received in writing that any Tax Return or
Taxes of the Companies or Company Subsidiaries required to be filed or paid has
not been filed or has not been paid; (d) there are no Tax liens on any of the
assets of the Frontier LEC Business or shares of the Companies or Company
Subsidiaries (other than liens for Taxes that are not yet due and payable); (e)
all Taxes that the Frontier LEC Business is required to withhold or collect have
been duly withheld or collected and, to the extent required, have been paid to
the proper Tax authority; (f) none of the Companies or Company Subsidiaries (i)
is currently or has ever been a member of an affiliated group (other than a
group the common parent of which is any of the Sellers) filing a consolidated
federal income tax return and (ii) has any liability for the Taxes of any person
under Treasury Regulations Section 1.1502-6 (or any similar provision of state,
local or foreign law), or as transferee or successor, by contract or otherwise;
(g) all Tax sharing or similar agreements shall be terminated as of the Closing
Date and, after the Closing Date, the Companies and Company Subsidiaries shall
not be bound thereof or have any liability thereunder; and (h) no consent under
Section 341(f) of the Code has been filed with respect to any of the Companies
or Company Subsidiaries.
2.18 Commissions. With the exception of any responsibility that the
-----------
Sellers have to Chase Securities Inc. and to Merrill Lynch & Co., whose fees
will be paid by the Sellers, there is no broker or finder or other Person who
has any valid claim against any Company or Company Subsidiary, the Buyer, any of
their respective Affiliates or any of their respective assets for a commission,
finders' fee, brokerage fee or other similar fee in connection with this
Agreement, or
15
the transactions contemplated hereby, by virtue of any actions taken by on or
behalf of the Sellers, the Companies, the Company Subsidiaries or any of their
respective officers, employees or agents.
2.19 Affiliate Transactions. Except as set forth in Section 2.19 of
----------------------
the Disclosure Schedule, except as otherwise provided or permitted in this
Agreement or entered into in the ordinary course of business consistent with
past practice, and except for such matters which would not reasonably be
expected to have a Material Adverse Effect, since September 29, 1999 neither the
Sellers nor any Affiliate thereof that is not one of the Companies or Company
Subsidiaries has engaged in any transaction with any Company or Company
Subsidiary, and neither Seller nor any Affiliate thereof that is not one of the
Companies or Company Subsidiaries is a party to any agreements or arrangements,
including, without limitation, co-location or interconnection agreements, with
any Company or Company Subsidiary that will continue in effect after the Closing
Date for the Companies or Company Subsidiaries that are not terminable by the
Companies or Company Subsidiaries at will without cost, penalty or premium to
the Companies and Company Subsidiaries.
2.20 Telephone Operations. Except as disclosed in Section 2.20 of
--------------------
the Disclosure Schedule and except for such matters that, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect:
(a) The financial information for the Frontier LEC Business set forth
in Annex A to Section 2.20 of the Disclosure Schedule (i) with respect to
the historical (actual) information as of December 31, 1995, 1996, 1997,
1998 and 1999 and each of the fiscal years then ended, fairly states the
financial information set forth therein and has been prepared in conformity
with GAAP applied on a consistent basis and (ii) with respect to the pro
forma information for the fiscal year ended December 31, 1999, has been
prepared in good faith by subjecting the historical (actual) information
for the fiscal year ended December 31, 1999 set forth in such Annex A to
the adjustments described in Section 2.20 of the Disclosure Schedule.
(b) The schedule of corporate and information technology charges of
the Frontier LEC Business for the fiscal years ended December 31, 1998 and
1999 set forth in Annex B to Section 2.20 of the Disclosure Schedule fairly
states such information in relation to the basic financial information
based upon the cost allocation methodology described therein.
(c) The information for the Frontier LEC Business set forth in Annex
C to Section 2.20 of the Disclosure Schedule (i) with respect to the pro
forma information for the fiscal year ended December 31, 1999, has been
prepared in good faith by subjecting the historical (actual) information
for the fiscal year ended December 31, 1999 to the adjustments described in
Section 2.20 of the Disclosure Schedule and (ii) with respect to the number
of Access Lines, is a true statement of the approximate number of such
Access Lines as of December 31, 1999.
16
(d) The financial information for the Frontier LEC Business set forth
in Annex D to Section 2.20 of the Disclosure Schedule (i) with respect to
historical (actual) information as of December 31, 1995, 1996, 1997 and
1998 and each of the fiscal years then ended, has been prepared in good
faith based upon the books and records of the Frontier LEC Business and,
taken as a whole, fairly states such information in all material respects
in relation to the basic financial information and (ii) with respect to the
pro forma information as of December 31, 1999 and for the fiscal year then
ended, has been prepared in good faith based upon the books and records of
the Frontier LEC Business after subjecting the historical (actual)
information for such fiscal year to the adjustments described in Section
2.20 of the Disclosure Schedule and, taken as a whole, the historical
(actual) financial information set forth in such Annex fairly states such
information in all material respects in relation to the basic financial
information.
(e) Except as required by Law or by pool requirements applied
generally to carriers or a subgroup of carriers, no Company or Company
Subsidiary has been given written notice by any regulatory authority or
pool administrator advising it that amounts paid to such Company or Company
Subsidiary are required to be repaid into a pool or that amounts payable to
such Company or Company Subsidiary are going to be reduced.
(f) No Company or Company Subsidiary has received an order from any
regulatory authority requiring it to make refunds to its retail customer
base or any significant portion thereof.
(g) No Company or Company Subsidiary has been made subject to any
order from any regulatory authority requiring it to make a reduction to
rates generally applicable to its retail customer base or any significant
portion thereof.
(h) No Company or Company Subsidiary has been made subject to a
moratorium preventing it from seeking an increase in rates for basic
services.
(i) No Company or Company Subsidiary is subject to any requirement of
Law solely applicable to it and not to any carrier or any subgroup of
carriers which requires it to make specific material network investments in
connection with the Frontier LEC Business.
(j) No host or hub switch of a Company or a Subsidiary has exhausted
its capacity to serve the customers who are currently in the area for which
the switch is intended to be used, except switches scheduled for upgrade or
expansion during calendar year 2000 or 2001 (which upgrades and expansions
are included in the amounts of the relevant capital expenditure budgets set
forth in Section 4.4).
(k) The switches of each Company and Company Subsidiary used in the
telephone service areas covered by the Frontier LEC Business are Class 5
compliant, can support the utilization of SS7 signaling and are equipped
for the provision of CLASS services.
17
(l) The Companies and Company Subsidiaries operating in the
Rochester, New York area telephone service area utilize 20 main hub central
offices, each of which is interconnected directly or indirectly to the
other switches through SONET rings using Nortel OC-48 equipment. The
Companies and Company Subsidiaries operating in the Rochester, New York
area telephone service area have features in place that are available to
support local number portability, enhanced 911 services and cellular 911
services.
(m) The Companies and Company Subsidiaries operating in telephone
service areas outside the Rochester, New York market utilize switches that
are Class 5 compliant, and are compatible with CLASS features and SS7
signaling. Where required by an order or other requirements of Law, such
Companies and Company Subsidiaries have installed features that support
local number portability, enhanced 911 services and cellular 911 services.
(n) The regulatory books of account of the Companies and Company
Subsidiaries have been maintained in accordance with normal business
practices, and accurately and fairly reflect in all material respects all
of the properties, assets, liabilities, transactions and regulatorily
required appropriate accruals of each Company and Company Subsidiary. The
continuing property records (CPRs) and other regulatory records related to
the assets and properties of the Companies and Company Subsidiaries
maintained by the Companies and Company Subsidiaries conform in all
material respects with the applicable rules and regulations of the FCC and
applicable PUCs. The records of the Companies and Company Subsidiaries
relating to Telephone Plant (the assets used primarily in the local
exchange carrier operations that would be properly included in the fixed
assets referenced in Part 32 of the FCC Rules and Regulations (47 C.F.R.,
Part 32)) have been prepared in good faith and fairly reflect all such
Telephone Plant.
(o) A true and complete list of the approximate number of Access
Lines of the Companies and Company Subsidiaries in service as of May 31,
2000, broken down by the categories specified therein, is set forth in
Section 2.20 of the Disclosure Schedule.
2.21 Long Distance Agreements. On or prior to the date hereof,
------------------------
Subsidiaries of Global have entered into the Carrier Services Agreement, dated
as of June 19, 2000 (the "Carrier Services Agreement"), and the Asset Purchase
Agreement, dated as of July 11, 2000 (the "Asset Purchase Agreement"), with one
of the Company Subsidiaries. True and complete copies of the Carrier Services
Agreement and the Asset Purchase Agreement have been provided to the Buyer,
together with all amendments, modifications and side letter agreements relating
thereto.
Article 3. Representations and Warranties of the Buyer.
-------------------------------------------
The Buyer represents and warrants to the Seller as follows:
3.1 Organization and Standing. The Buyer is a corporation duly
-------------------------
incorporated, validly existing, and in good standing under the laws of its
jurisdiction of incorporation and has all
18
requisite corporate power and authority to own, lease and operate its properties
and assets and to conduct its business as it is now being conducted.
3.2 Binding Agreement. The Buyer has all requisite corporate power
-----------------
and authority to enter into this Agreement, to execute and deliver this
Agreement, to carry out its obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by the Buyer and the consummation by the Buyer of its obligations hereunder have
been duly and validly authorized by all necessary corporate and stockholder
action on the part of the Buyer. This Agreement has been duly executed and
delivered on behalf of the Buyer and, assuming the due authorization, execution
and delivery by the Seller, constitutes a legal, valid and binding obligation of
the Buyer enforceable in accordance with its terms.
3.3 Absence of Violations or Required Consents. Except as set forth
------------------------------------------
in Section 3.3 of the Disclosure Schedule and, in the case of clauses (b), (c)
and (d), except for such violations, breaches, defaults, consents, approvals,
authorizations, orders, actions, registrations, filings, declarations,
notifications and Encumbrances that would not reasonably be expected to have a
material adverse effect on the business, results of operations or financial
condition of the Buyer and its Subsidiaries, taken as a whole, or materially
impair or delay the consummation of the transactions contemplated hereby, the
execution, delivery and performance by the Buyer of this Agreement does not and
will not (a) violate or result in the breach or default of any provision of the
certificate or articles of incorporation or by-laws of the Buyer, (b) violate
any Law or Governmental Order applicable to the Buyer or any of its properties
or assets, (c) except for the Required Consents, require any consent, approval,
authorization or other order of, action by, registration or filing with or
declaration or notification to any Governmental Authority or any other Person or
(d) result in any violation or breach of, constitute a default (or event which
with the giving of notice, or lapse of time or both, would become a default)
under, require any consent under, or give to others any rights of termination,
amendment, acceleration, suspension, revocation or cancellation of, or result in
the creation of any Encumbrance on any of the Buyer's assets pursuant to, any
note, bond, mortgage or indenture, contract, agreement, lease, sublease, license
or permit, or franchise to which the Buyer is a party or by which its assets are
bound.
3.4 Litigation. Except as described in Section 3.4 of the Disclosure
----------
Schedule, there are no Actions pending or, to the Buyer's knowledge, any Action
threatened to be brought by or before any Governmental Authority, against the
Buyer or any of its Affiliates that (i) seeks to question, delay or prevent the
consummation of the transactions contemplated hereby or (ii) would reasonably be
expected to affect adversely the ability of the Buyer to fulfill its obligations
hereunder, including without limitation, the Buyer's obligations under Article 1
hereof.
3.5 Commissions. There is no broker or finder or other Person who
-----------
has any valid claim against the Sellers, any of their respective Affiliates or
any of their respective assets for a commission, finders' fee, brokerage fee or
other similar fee in connection with this Agreement, or the transactions
contemplated hereby, by virtue of any actions taken by on or behalf of the Buyer
or its officers, employees or agents.
19
3.6 Financing. The Buyer has delivered to the Sellers true and
---------
complete copies of all commitment letters from commercial banks or other
financing sources setting forth their respective commitments to provide all
necessary financing in connection with the transactions contemplated by this
Agreement (the "Financing Commitments"). The Buyer has on hand funds that,
together with the proceeds of the Financing Commitments, are sufficient to pay
the Purchase Price pursuant to this Agreement and otherwise to satisfy its
obligations hereunder. The Buyer has been advised by the parties providing the
Financing Commitments that none of such parties knows of any fact or
circumstance (including, without limitation, the obligations of the Buyer under
this Agreement) that is reasonably likely to result in any of the conditions to
the Financing Commitments not being satisfied or the funds contemplated by the
Financing Commitments not being available for the transactions contemplated by
this Agreement and the Buyer knows of no such fact or circumstance.
3.7 Acquisition of Shares for Investment. The Buyer has such
------------------------------------
knowledge and experience in financial and business matters that it is capable of
evaluating the merits and risks of its purchase of the Shares. The Buyer is
acquiring the Shares for investment and not with a view toward the distribution
thereof. The Buyer agrees that the Shares may not be sold or otherwise disposed
of without registration under the Securities Act of 1933, as amended, except
pursuant to an exemption from registration available under such Act.
Article 4. Covenants and Agreements.
------------------------
4.1 Conduct of the Business Prior to Closing; Access. The Sellers
------------------------------------------------
covenant as follows:
(a) Between the date hereof and the Closing Date, except as
contemplated by this Agreement, except as described in either Section 2.8
or Section 4.1 of the Disclosure Schedule, or except with the consent of
the Buyer (which consent shall not be unreasonably withheld or delayed in
the case of clauses (i), (iii), (vi), (vii), (viii), (ix), (xi), (xii) and
(xiii) to the extent clause (xiii) refers to clauses (i), (iii), (vi),
(vii), (viii), (ix), (xi) or (xii)), the Sellers will cause the Frontier
LEC Business to be operated in the ordinary course of business consistent
with past practice (including, without limitation, with respect to
compliance with Laws and performance under contracts) and will not permit:
(i) any of the assets of the Frontier LEC Business to be
subjected to any Encumbrance, other than Permitted Exceptions, that
will not be released at or prior to the Closing Date;
(ii) any changes, including changes to connection,
disconnection and collection practices, to be made in the operations
of the Frontier LEC Business that are material to the Frontier LEC
Business as a whole;
(iii) other than, in each case, in the ordinary course of
business consistent with past practice, any assets of the Frontier LEC
Business to be sold,
20
transferred, leased, subleased, licensed, encumbered or otherwise
disposed of (including, without limitation, sales, transfers, leases,
subleases, licenses or dispositions of material assets to Sellers or
any of their Subsidiaries other than the Companies and Company
Subsidiaries), other than the sale of obsolete Equipment and transfers
of cash;
(iv) (A) any increase, or the announcement of any
increase, in the wages, salaries, compensation, bonuses, incentives,
pension or other benefits payable by any Company or Company Subsidiary
to any of the officers or key employees of the Frontier LEC Business
to be granted, including, without limitation, any increase or change
pursuant to any Employee Benefit Plan, or (B) any benefits under any
Employee Benefit Plan with respect to officers or key employees (or
material benefits with respect to any employees who are not officers
or key employees) of the Frontier LEC Business to be established or
increased or to be promised to be increased, or any payment or vesting
thereof to be accelerated, in either case except (I) as required by
Law, (II) that involve only increases in the ordinary course of
business consistent with the past practices of the Frontier LEC
Business or (III) as required under any existing agreement or
arrangement;
(v) any material change in any method of accounting or
accounting practice or policy used by the Frontier LEC Business to be
made, including, without limitation, material changes in assumptions
underlying or methods of calculating bad debt, contingency or other
reserves, or notes or accounts receivable write-offs, or in corporate
allocation methodology, in each case other than as required by Law or
under GAAP;
(vi) any commitments for any Company or Company
Subsidiary to make capital expenditures in excess of $20,000,000 in
the aggregate that are not contemplated in the capital improvements
budgets for 2000 or 2001 set forth in Section 4.1 of the Disclosure
Schedule;
(vii) any amendment of the certificate of incorporation
or bylaws of any Company or Company Subsidiary;
(viii) any material Action, Indebtedness or any other
claims or rights related to the Companies or Company Subsidiaries to
be compromised, settled or otherwise adjusted, or any waiver or
release relating thereto to be granted other than (unless such action
would impose material restrictions or obligations on the Frontier LEC
Business after the Closing) in the ordinary course of business;
(ix) any new agreement, contract, commitment or
arrangement, or any amendments or modifications to any existing such
agreement, contract, commitment or arrangement, to be entered into
with any Affiliate of any Company
21
or Company Subsidiary (other than with another Company or Company
Subsidiary) that is material to the Frontier LEC Business or that will
continue in effect after the Closing Date and not be terminable by
such Company or Company Subsidiary on not more than 60 days' written
notice without payment of premium or penalty;
(x) any change in the stock ownership of any Company or
Company Subsidiary to be made or any interest in any Company or
Company Subsidiary to be granted or assigned;
(xi) any Indebtedness in excess of a net amount of
$10,000,000 to be created, incurred, assumed or guaranteed by any
Company or Company Subsidiary that cannot be prepaid or terminated
without payment of premium or penalty, except for borrowings under
existing credit agreements (or replacements therefor on substantially
the same terms) or the creation of trade payables;
(xii) any new Material Contract (other than those covered
by clause (ii), (iii) or (ix) above), or any amendments or
modifications to any existing such Material Contract, to be entered
into that will continue in effect after the Closing Date and not be
terminable by the Company or Company Subsidiary on not more than 60
days' written notice without payment of premium or penalty;
(xiii) any agreement, contract, commitment or arrangement
to do any of the foregoing to be entered into.
(b) Pending the Closing Date, the Sellers shall:
(1) Ensure that the Buyer and its representatives are given
reasonable access during normal business hours to all of the employees
(including appropriate experts and other knowledgeable personnel),
properties, books and records of the Companies and Company
Subsidiaries and that the Buyer and its representatives are furnished
with such information concerning the Companies and Company
Subsidiaries as the Buyer may reasonably require, including such
access and cooperation as may be necessary to allow the Buyer and its
representatives to:
(A) identify those contracts and Permits that require third
party consent to the transactions contemplated hereby, those that
expire prior to or soon after the Closing and those that may require
special documentation at the Closing;
(B) review any arrangements with respect to those assets that
will not be transferred as part of the Frontier LEC Business that
Buyer may need to replicate or replace at the Closing;
22
(C) determine what changes Buyer may need to make to various
assets, including information technology assets, to be owned by the
Companies and the Company Subsidiaries after the Closing;
(D) arrange appropriate insurance coverage by the Closing with
respect to the Companies and the Company Subsidiaries;
(E) become familiar with the location and organization of the
books and records, including any original cost documents and outside
plant maps;
(F) make appropriate arrangements for the continuation of
ongoing maintenance, construction and plant upgrade activities of the
Companies and the Company Subsidiaries after the Closing;
(G) identify various regulatory mandates applicable to the
Companies and the Company Subsidiaries and review compliance
therewith, including matters relating to the National Exchange Carrier
Association (including the Universal Service Fund and the Local
Switching Support and Telecommunications Relay Services funds);
(H) perform Transaction Screens and/or Phase I environmental
reviews with respect to each parcel of Real Property at Buyer's
expense; and
(I) obtain title insurance policies and surveys covering Real
Property at Buyer's expense and provide the title company with such
instructions, authorizations and affidavits at no cost to the Sellers
or the Companies or Company Subsidiaries as may be reasonably
necessary for the title company to issue title policies (based upon
the most recent assessed value or market value of such parcels) to the
Buyer, dated as of the Closing Date, for all of the Real Property
owned by the Companies or Company Subsidiaries with so-called non-
imputation endorsements;
provided that this right of access shall not be exercised in any way
which would unreasonably interfere with the normal operations,
business or activities of the Sellers or any Company or Company
Subsidiary;
(2) Furnish to the Buyer within 30 Business Days after the end
of each month ending between the date of this Agreement and the
Closing Date a statement of income for the Frontier LEC Business for
the month just ended, on a state by state basis to the extent
prepared, and within 30 Business Days after the end of each quarter
ending between the date of this Agreement and the Closing Date a
balance sheet for the Frontier LEC Business as of the end of such
quarter;
(3) Make available for the Buyer all other routine management
and statistical reports of the Frontier LEC Business;
23
(4) From time to time, furnish to the Buyer such additional
information (financial or otherwise) concerning the Frontier LEC
Business as the Buyer may reasonably request (which right to request
information shall not be exercised in any way which would unreasonably
interfere with the normal operations, business or activities of the
Sellers, the Companies or the Company Subsidiaries);
(5) Use, to the extent the Buyer requires audited or reviewed
financial statements of the Frontier LEC Business in order to comply
with the reporting requirements of the Securities and Exchange
Commission (the "SEC") set forth in Regulations S-K and S-X,
reasonable best efforts to obtain (or, if Buyer proposes to have its
auditors audit any such financial statements, to permit the Buyer to
obtain by providing audited consolidating balance sheets as of the end
of the fiscal years hereinafter described and consolidating income
statements and statements of cash flows and changes in equity for such
periods, in each case, for the Companies and the Company Subsidiaries
in the form required by Regulations S-K and S-X), in either case at
the Buyer's expense, the required audited or reviewed combined
financial statements of the Frontier LEC Business covering the fiscal
years ended December 31, 1998 and 1999 (and each fiscal quarter
thereof), and to the extent the Closing shall not have occurred prior
to the end thereof, the fiscal year ending December 31, 2000 (and each
fiscal quarter thereof) and each subsequent fiscal quarter, reasonably
sufficient and timely enough to permit the Buyer reasonably to satisfy
such obligations, including, without limitation, providing reasonable
access as stated under clause (1) above to any auditors engaged by the
Buyer for such purpose and delivering one or more representation
letters from the Sellers to any such auditors as may be reasonably
requested by the Buyer to allow such auditors to complete any such
audit or review and to issue an opinion on such financial statements
acceptable to the SEC;
(6) Consult with the Buyer with respect to taking, or permitting
the Companies and Subsidiaries to take, any material action with
respect with the Frontier LEC Business other than in the ordinary
course of business consistent with past business or other than as
contemplated by this Agreement (including, without limitation, the
Disclosure Schedule), including, without limitation, consultation
regarding the negotiation or renegotiation of any collective
bargaining agreements; provided, however, that, except as required by
Section 4.1(a), neither Seller nor any of the Companies or Company
Subsidiaries shall be obligated to accept or follow any advice
proffered by the Buyer with respect to any such prospective action and
that such right of consultation shall not entitle the Buyer to
participate in any such negotiations or renegotiations of collective
bargaining agreements; and
(7) Endeavor with reasonable efforts to notify the Buyer within
a reasonable period of time after the Sellers have obtained knowledge
of the occurrence of any circumstance, change in, or effect on the
Companies or
24
Company Subsidiaries that Sellers believe had or would in the
reasonably foreseeable future have a Material Adverse Effect.
4.2 Financing Commitments. The Buyer covenants as follows:
---------------------
(a) The Buyer shall use its reasonable best efforts to obtain the
financing provided for by the Financing Commitments. Without limiting the
generality of the foregoing, the Buyer shall not take or fail to take, and
shall cause its Subsidiaries not to take or fail to take, any action the
taking of which, or which the failure to take, would reasonably likely
result in any of the conditions to the Financing Commitments not being
satisfied or the funds contemplated by the Financing Commitments not being
available for the transactions contemplated by this Agreement, or that
would otherwise materially impair or delay the consummation of the
transactions contemplated hereby. In the event that such financing or any
portion thereof becomes unavailable, the Buyer shall use its reasonable
best efforts promptly to obtain commitment letters for alternative
financing from other sources sufficient to enable the Buyer to pay the
Purchase Price pursuant to this Agreement and otherwise to satisfy its
obligations hereunder. Any such alternative financing shall be deemed to
constitute (or to constitute a portion of, as the case may be) "Financing
Commitments" for purposes of this Agreement. The Buyer shall furnish to
the Sellers promptly true and complete copies of any alternative commitment
letters from commercial banks or other financing sources, all definitive
loan agreements entered into pursuant to the Financing Commitments and all
other correspondence or notices from any party providing the Financing
Commitments relating to the financing.
(b) The Buyer shall give prompt notice to the Sellers of the
occurrence, or non-occurrence, of any fact or circumstance, or of any
notice from any party providing the Financing Commitments, that is
reasonably likely to result in any of the conditions to the Financing
Commitments not being satisfied or the funds contemplated by the Financing
Commitments not being available for the transactions contemplated by this
Agreement.
4.3 Post-Closing Covenants and Agreements. (a) From and after the
-------------------------------------
Closing Date, the Sellers shall, at all reasonable times, make available without
cost, for inspection and/or copying for reasonable business purposes by the
Buyer or any of the Companies or Company Subsidiaries, or their representatives,
any books and records of the Frontier LEC Business, whether in electronic or
physical form, that are not in the possession of the Companies and Company
Subsidiaries after the Closing. Any such books and records shall be preserved
by the Sellers for so long as the Buyer or any Company or Company Subsidiary
shall be obligated by Law to maintain the same. After the period set forth
above, upon not less than 30 days written notice to the Buyer specifying in
reasonable detail the books and records that neither Seller proposes to destroy,
such Seller may destroy the books and records in its possession unless, before
expiration of such notice period, the Buyer or any of the Companies or Company
Subsidiaries objects in writing to the destruction of any or all of such books
and records, in which case such books and records shall be delivered to the
objecting Person at the expense of the objecting Person.
25
(b) From and after the Closing Date, the Buyer shall, and shall
cause the Companies and Company Subsidiaries to:
(i) At all reasonable times, make available without cost, for
inspection and/or copying for reasonable business purposes by the Sellers
or their representatives, the books and records of the Companies and
Company Subsidiaries, whether in electronic or physical form. Such books
and records shall be preserved by the Buyer or the Companies and Company
Subsidiaries until the later of the closing by tax audit of, or the
expiration of the relevant statute of limitations (including any waiver
thereof) with respect to, all open tax periods of the Sellers prior to and
including the Closing Date. After the period set forth above, upon not
less than 30 days written notice to the Sellers specifying in reasonable
detail the books and records that the Buyer or any Company or Company
Subsidiary proposes to destroy, the Buyer or such Company or Company
Subsidiary may destroy the books and records in their possession unless,
before expiration of such notice period, a Seller objects in writing to the
destruction of any or all of such books and records, in which case such
books and records shall be delivered to the objecting Person at the expense
of the objecting Person. Notwithstanding the foregoing, the Buyer and the
Companies and Company Subsidiaries shall continue to preserve and, at all
reasonable times after the Closing Date, to make available without cost,
for inspection and/or copying by any Person that was a trustee or other
fiduciary under the Employee Benefit Plans identified in Section 4.3 of the
Disclosure Schedule, the books and records of such Employee Benefit Plan
and the books and records of the Companies and Company Subsidiaries
relating thereto.
(ii) (x) Exculpate, indemnify and hold harmless all past and present
employees, officers, agents and directors of the Companies and Company
Subsidiaries to the full extent permitted by law for any acts or omissions
relating to, or arising out of, the Frontier LEC Business occurring on or
prior to the Closing Date; (y) cause to be maintained in effect through
September 28, 2005 the current provisions regarding elimination of
liability of directors and indemnification of officers and directors
contained in the certificate of incorporation and by-laws or other
organizational documents of the Companies and the Company Subsidiaries; and
(z) not take any action that would cause any directors', officers',
fiduciaries' or similar insurance and indemnification policies that may be
maintained by the Sellers for past and present directors and officers of
the Companies and Company Subsidiaries and trustees of the Employee Benefit
Plans providing coverage for acts and omissions and other events relating
to, or arising out of, the Frontier LEC Business occurring at or prior to
the Closing Date, including, without limitation, in respect of the
transactions contemplated by this Agreement, not to remain in full force
and effect.
(iii) Except for disputes in good faith, honor and comply in all
material respects with the terms and conditions contained in all contracts
to which any of the Companies or any of the Company Subsidiaries is a party
or by which it is bound.
(c) Effective as of the Closing Date, the Sellers will have no
obligation to provide insurance coverage for the Companies, the Company
Subsidiaries and the Frontier LEC
26
Business for occurrences after the Closing Date and the Buyer will become solely
responsible for all insurance coverage and related risk of loss based on events
occurring on and after the Closing Date with respect to the Companies, the
Company Subsidiaries and the Frontier LEC Business. To the extent that (i) any
insurance policies controlled by the Sellers (the "Sellers' Insurance
Policies"), cover any loss, liability, claim, damage or expense relating to the
Companies, the Company Subsidiaries or the Frontier LEC Business (the "Subject
Liabilities") and relating to or arising out of occurrences prior to the Closing
Date, and (ii) the Sellers' Insurance Policies continue after the Closing to
permit claims to be made thereunder with respect to the Subject Liabilities
relating to or arising out of occurrences prior to the Closing Date ("Subject
Claims"), the Sellers shall cooperate with the Buyer in submitting Subject
Claims on behalf of the Buyer or any Company or Company Subsidiary under the
Sellers' Insurance Policies and the Buyer shall reimburse, indemnify and hold
the Sellers harmless from all out-of-pocket, costs and expenses (including,
without limitation, all retroactive or retrospective premiums related to the
Subject Claims (but not any other present or future premiums), deductibles, out-
of-pocket legal and administrative costs, net Tax costs to the Sellers resulting
from the receipt and payment to the Buyer of any insurance proceeds relating to
any Subject Claim and attorneys' fees under the Sellers' Insurance Policies) of
any nature actually incurred by the Sellers as a result of Subject Claims made
under the Sellers' Insurance Policies. The Sellers shall exercise reasonable
best efforts (which efforts shall not require the Sellers to incur any out-of-
pocket costs or expenses not reimbursed by the Buyer or any other adverse
consequences) to cause the Sellers' Insurance Policies to be modified to allow
for the assignment to the Buyer of all benefits, rights and obligations
thereunder in respect of any Subject Liabilities. To the extent any such
policies are not so assigned, upon receipt by the Sellers of any insurance
proceeds relating to any Subject Claims made under the Sellers' Insurance
Policies, the Sellers will promptly pay such insurance proceeds to the Buyer,
net of any unreimbursed costs and expenses described above.
(d) From and after the Closing Date,
(i) The Buyer will not, for a period of two years following the
Closing Date, without the prior written consent of Global, directly or
indirectly, solicit to hire or hire (or cause or seek to cause to leave the
employ of Global or any Subsidiary of Global) any employee of Global or any
Subsidiary of Global with whom the Buyer has had contact or who (or whose
performance) became known to the Buyer in connection with this Agreement;
provided, however, that the foregoing provision will not prevent the Buyer
from hiring any such Person who contacts the Buyer on his or her own
initiative without any direct or indirect solicitation by or encouragement
from the Buyer or who contacted the Buyer in response to a general
advertisement; and.
(ii) The Sellers will not, for the period from the date hereof
through the date that is two years following the Closing Date, without the
prior written consent of the Buyer, directly or indirectly, solicit to hire
or hire (or cause or seek to cause to leave the employ of the Companies or
Company Subsidiaries on the Buyer or any Subsidiary of the Buyer) any
employee of the Companies or Company Subsidiaries or the Buyer or any
Subsidiary of the Buyer with whom (other than with respect to the Companies
and the Company Subsidiaries) the Sellers have had contact or who (or whose
performance) became known
27
to the Sellers in connection with this Agreement; provided, however, that
the foregoing provision will not prevent the Sellers from hiring any such
Person who contacts the Sellers on his or her own initiative without any
direct or indirect solicitation by or encouragement from the Sellers or who
contacted the Sellers in response to a general advertisement.
4.4 Cooperation. Following the execution of this Agreement, the
-----------
Buyer and the Sellers agree as follows:
(a) Subject to the terms and conditions of this Agreement, each party
will use its reasonable best efforts to take, or cause to be taken, all
actions and to do, or cause to be done, all things necessary, proper or
advisable, including under applicable Laws and regulations, to consummate
the Sale and the other transactions contemplated by this Agreement as soon
as practicable after the date hereof. In furtherance and not in limitation
of the foregoing, each party hereto agrees (i) to make an appropriate
filing of a Notification and Report Form pursuant to the HSR Act with
respect to the transactions contemplated hereby as promptly as practicable
after the date hereof and to supply as promptly as practicable any
additional information and documentary material that may be requested
pursuant to the HSR Act and to take all other actions necessary to cause
the expiration or termination of the applicable waiting periods under the
HSR Act as soon as practicable, (ii) to file all necessary applications for
Required Consents at the FCC, PUCs and local franchising authorities with
respect to the transactions contemplated hereby as promptly as practical
after the date hereof and to supply as promptly as practicable any
additional information and documentary material that may be requested by
the FCC, PUCs and local franchising authorities and to take all other
actions necessary to cause the Required Consents to be obtained as soon as
practicable and (iii) to obtain all other required consents from third
parties. The parties agree to file all necessary applications for Required
Consents with state PUCs jointly to the extent permitted under Applicable
Law, and to share counsel whenever feasible and where it does not pose a
conflict of interest.
(b) The Sellers and the Buyer shall, in connection with the efforts
referenced in Section 4.5(a) to obtain all requisite approvals and
authorizations for the transactions contemplated by this Agreement under
the HSR Act or any other Regulatory Law, use its reasonable best efforts to
(i) cooperate in all respects with each other in connection with any filing
or submission and in connection with any investigation or other inquiry,
including any proceeding initiated by a private party, (ii) promptly inform
the other party of any communication received by such party from, or given
by such party to, the FCC, PUCs, the Antitrust Division of the Department
of Justice (the "DOJ") or any other Governmental Entity and of any material
communication received or given in connection with any proceeding by a
private party, in each case regarding any of the transactions contemplated
hereby, and (iii) permit the other party to review any communication (other
than filings pursuant to the HSR Act) given by it to, and consult with each
other in advance of any meeting or conference with, the FCC, PUCs, the DOJ
or any such other Governmental Authority or, in connection with any
proceeding by a private party, with any other Person, and to the extent
permitted by the FCC, PUCs, the DOJ or such other applicable Governmental
Authority or other Person, give the other party the opportunity
28
to attend and participate in such meetings and conferences. Neither party
shall take any action in connection with obtaining any Required Consent
that is intended to create, allocate, or shift to the other party any
liability arising from the obtaining of such Required Consent; provided
that this provision is not intended to limit the rights or obligations of
either party under this Section 4.4 or any other Section of this Agreement
or the right of any party to otherwise seek to reduce or eliminate any such
liability on itself. For purposes of this Agreement, "Regulatory Law" means
(i) the Sherman Act, as amended, the Clayton Act, as amended, the HSR Act,
the Federal Trade Commission Act, as amended, the Communications Act, and
all other federal, state and foreign, if any, Laws that are designed or
intended to prohibit, restrict or regulate actions having the purpose or
effect of monopolization or restraint of trade or lessening of competition,
whether in the communications industry or otherwise, through merger or
acquisition and (ii) all federal, state and foreign, if any, Laws with
respect to the transfer, assignment, modification or granting of Permits,
whether in the public utility or communications industries or otherwise,
including, without limitation, certificates of public convenience and
necessity, public interests certificates and radio licenses.
(c) In furtherance and not in limitation of the covenants of the
parties contained in Sections 4.4(a) and 4.4(b), if any administrative or
judicial action or proceeding, including any proceeding by a private party,
is instituted (or threatened to be instituted) challenging any transaction
contemplated by this Agreement as violative of any Regulatory Law, the
Sellers and Buyer shall cooperate in all respects with each other and use
their respective reasonable best efforts to contest and resist any such
action or proceeding and to have vacated, lifted, reversed or overturned
any decree, judgment, injunction or other order, whether temporary,
preliminary or permanent, that is in effect and that prohibits, prevents or
restricts consummation of the transactions contemplated by this Agreement.
Notwithstanding the foregoing or any other provision of this Agreement,
nothing in this Section 4.4 shall limit a party's right to terminate this
Agreement pursuant to Section 11.1 so long as such party has up to then
complied in all material respects with its obligations under this Section
4.4.
(d) If any objections are asserted with respect to the transactions
contemplated hereby under any Regulatory Law or if any suit is instituted
by any Governmental Authority or any private party challenging any of the
transactions contemplated hereby as violative of any Regulatory Law, each
of the Sellers and the Buyer shall use its reasonable best efforts to
resolve any such objections or challenge as such Governmental Authority or
private party may have to such transactions under such Regulatory Law so as
to permit consummation of the transactions contemplated by this Agreement.
(e) As used in this Section 4.4, "reasonable best efforts" shall not
require (i) the Buyer or any of its Affiliates to divest or hold separate
or otherwise take or commit to take any action that limits their freedom of
action with respect to, or their ability to retain, any of their assets or
businesses or any other action, in each case that would be reasonably
expected to have a Material Adverse Effect or Buyer Material Adverse
Effect, or (ii) either Seller or any of their Affiliates to divest or hold
separate or otherwise take or
29
commit to take any action that limits their freedom of action with respect
to, or their ability to retain, any of their assets or businesses or any
other action, in each case that would be reasonably expected to have a
Material Adverse Effect or an adverse effect (other than an immaterial
effect) on the business, results of operations or financial condition of
the Sellers or their Subsidiaries (other than the Companies and the Company
Subsidiaries).
4.5 Confidentiality.
---------------
(a) Prior to the Closing Date. The terms of the Confidentiality
-------------------------
Agreement are herewith incorporated by reference and shall continue in full
force and effect until the Closing Date and shall remain in effect in accordance
with its terms even if this Agreement is terminated.
(b) Financial and Tax Information. (i) Before and after the Closing
-----------------------------
Date, each of the parties shall maintain the confidentiality of the tax
information of the Frontier LEC Business under terms similar to those set forth
in the Confidentiality Agreement with respect to "Evaluation Material" as though
such terms applied to the parties and continued after the Closing Date.
(ii) After the Closing Date, the Sellers shall maintain the
confidentiality of the financial information of the Frontier LEC Business prior
to the Closing under terms similar to those set forth in the Confidentiality
Agreement with respect to "Evaluation Material" as though such terms applied to
the Sellers and continued after the Closing Date.
4.6 Public Announcements. Except as otherwise required by law or the
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rules of any stock exchange or automated quotation system, the parties shall not
issue any report, statement or press release or otherwise make any public
announcement with respect to this Agreement and the other transactions
contemplated hereby without prior consultation with and approval of the other
parties hereto (which approval shall not be unreasonably withheld).
4.7 No Solicitation. Other than as specified in this Agreement, the
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Sellers shall not, and shall use their best efforts to cause its officers,
directors, representatives, affiliates or associates not to, (a) initiate
contact with, solicit, encourage or respond to any inquiries or proposals by, or
(b) enter into any discussions or negotiations with, or disclose, directly or
indirectly, any information concerning the Companies and Company Subsidiaries
to, or afford any access to the properties, books and records of the Companies
and Company Subsidiaries to, any Person in connection with any possible proposal
for the acquisition (directly or indirectly, whether by purchase, merger,
consolidation or otherwise) of all or substantially all of the assets, business
or capital stock of the Companies and Company Subsidiaries. The Seller agrees
to terminate immediately any such discussions or negotiations.
4.8 No Additional Representations. THE BUYER ACKNOWLEDGES THAT,
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EXCEPT THOSE REPRESENTATIONS AND WARRANTIES EXPRESSLY SET FORTH IN THIS
AGREEMENT, NEITHER THE SELLER NOR ANY OTHER PERSON HAS MADE ANY REPRESENTATION
OR WARRANTY, EXPRESSED OR IMPLIED, REGARDING THE FRONTIER LEC BUSINESS OR THE
ACCURACY OR COMPLETENESS OF ANY
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INFORMATION FURNISHED OR MADE AVAILABLE TO THE BUYER AND ITS REPRESENTATIVES,
INCLUDING, WITHOUT LIMITATION, ANY IMPLIED WARRANTY OR REPRESENTATION AS TO
CONDITION, MERCHANTABILITY OR SUITABILITY AS TO ANY PROPERTIES OR ASSETS OF THE
FRONTIER LEC BUSINESS. THE BUYER FURTHER ACKNOWLEDGES THAT ANY COST ESTIMATES,
PROJECTIONS OR OTHER PREDICTIONS CONTAINED OR REFERRED TO IN THE OFFERING
MATERIALS THAT HAVE BEEN PROVIDED TO THE BUYER ARE NOT AND SHALL NOT BE DEEMED
TO BE REPRESENTATIONS OR WARRANTIES OF THE SELLERS.
4.9 Use of Global Crossing and Frontier Names. (a) After the
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Closing Date, neither the Buyer nor any of its Affiliates (including, without
limitation, the Companies and Company Subsidiaries) shall use "Global Crossing"
or "Global" or any name or term confusingly similar to or "Global Crossing" or
"Global" in any corporate name or in connection with the operation of any
business. Notwithstanding the foregoing, the Companies and Company Subsidiaries
shall have a period of time (which in no event is, except as set forth in
Schedule 4.9(a), to exceed 120 days following the Closing Date) in which to, and
the Buyer shall cause the Companies and Company Subsidiaries to, remove or cover
the names "Global Crossing" or "Global" and any trademarks, tradenames,
servicemarks, trade dress or logos relating to such names from all signs,
billboards, advertising materials, telephone listings, labels, stationery,
office forms and mastheads; provided, however, that during such period of time
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such names, trademarks, tradenames, servicemarks, trade dress and logos shall be
used (i) only to the extent necessary to avoid financial hardship and (ii) only
to the extent and in the manner that such names, trademarks, tradenames,
servicemarks, trade dress and logos were used by the Companies and Company
Subsidiaries as of immediately prior to the Closing.
(b) After the Closing Date, except as set forth in Section 4.9 of the
Disclosure Schedule, neither of the Sellers nor any of their Affiliates shall
use "Frontier" or any name or term confusingly similar to "Frontier" in any
corporate name or in connection with the operation of any business.
Notwithstanding the foregoing, the Sellers and their Affiliates shall have a
period of time (which in no event is, except as set forth in Schedule 4.9(b), to
exceed 120 days following the Closing Date) in which to, and the Sellers shall
cause their Affiliates to, remove or cover the name "Frontier" and any
trademarks, trade names, service marks, trade dress or logos relating to such
names from all signs, billboards, advertising materials, telephone listings,
labels, stationery, office forms and mastheads; provided, however, that during
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such period of time such names, trademarks, trade names, service marks, trade
dress and logos shall be used (i) only to the extent necessary to avoid
financial hardship and (ii) only to the extent and in the