EXHIBIT 10.01
THE TRANSFER OF THIS AGREEMENT IS SUBJECT
TO CERTAIN PROVISIONS CONTAINED HEREIN
AND TO RESALE RESTRICTIONS UNDER THE
SECURITIES ACT OF 1933, AS AMENDED
STOCK OPTION AGREEMENT, dated July 27, 1998, between GTE
Corporation, a New York corporation ("Issuer"), and Xxxx Atlantic
Corporation, a Delaware corporation ("Grantee").
WHEREAS, Grantee and Issuer have entered into an Agreement and
Plan of Merger of even date herewith (the "Merger Agreement"), which
agreement has been executed by the parties hereto immediately prior to this
Stock Option Agreement (the "Agreement"); and
WHEREAS, as a condition to Grantee's entering into the Merger
Agreement and in consideration therefor and for the transactions
contemplated thereby Issuer has agreed to grant Grantee the Option (as
hereinafter defined);
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth herein and in the Merger Agreement, the
parties hereto agree as follows:
1. (a) Issuer hereby grants to Grantee an unconditional,
irrevocable option (the "Option") to purchase, subject to the terms hereof,
up to 96,324,124 fully paid and nonassessable shares of Issuer's Common
Stock, par value $0.05 per share ("Common Stock"), at a price of $553/4 per
share (the "Option Price"); provided, however, that in no event shall the
number of shares of Common Stock for which this Option is exercisable
exceed 10% of the Issuer's issued and outstanding shares of Common Stock
after giving effect to any shares subject to or issued pursuant to the
Option. The number of shares of Common Stock that may be received upon the
exercise of the Option and the Option Price are subject to adjustment as
herein set forth.
(b) In the event that any additional shares of Common Stock
are either (i) issued or otherwise become outstanding after the date of
this Agreement (other than pursuant to this Agreement) or (ii) redeemed,
repurchased, retired or otherwise cease to be outstanding after the date of
the Agreement, the number of shares of Common Stock subject to the Option
shall be increased or decreased, as appropriate, so that, after such
issuance, such number equals 10% of the number of shares of Common Stock
then issued and outstanding after giving effect to any shares subject or
issued pursuant to the Option or, if not a whole number of shares, rounded
down to the next whole number. Nothing contained in this Section 1(b) or
elsewhere in this Agreement shall be deemed to authorize Issuer or Grantee
to breach any provision of the Merger Agreement.
2. (a) The Holder (as hereinafter defined) may exercise the
Option, in whole or part, and from time to time, if, but only if, a
Subsequent Triggering Event (as hereinafter defined) shall have occurred
prior to the occurrence of an Exercise Termination Event (as hereinafter
defined), provided that the Holder shall have sent the written notice of
such exercise (as provided in subsection (e) of this Section 2) within 90
days following such Subsequent Triggering Event. Each of the following
shall be an "Exercise Termination Event":
(i) the Effective Time (as defined in the Merger Agreement)
of the Merger;
(ii) termination of the Merger Agreement in accordance with
the provisions thereof if such termination occurs prior to the
occurrence of an Initial Triggering Event (as hereinafter defined),
except a termination by Grantee pursuant to Section 9.1(d)(ii)(A) of
the Merger Agreement (unless the breach by Issuer giving rise to such
right of termination is non-volitional); or
(iii) the passage of two years after termination of the
Merger Agreement if such termination follows the occurrence of an
Initial Triggering Event or is a termination by Grantee pursuant to
Section 9.1(d)(ii)(A) of the Merger Agreement (unless the breach by
Issuer giving rise to such right of termination is non-volitional)
(provided that if an Initial Triggering Event continues or occurs
beyond such termination and prior to the passage of such two-year
period, the Exercise Termination Event shall be two years from the
expiration of the Last Triggering Event but in no event more than two
years and six months after such termination). The "Last Triggering
Event" shall mean the last Initial Triggering Event to occur. The
term "Holder" shall mean the holder or holders of the Option.
(b) The term "Initial Triggering Event" shall mean any of
the following events or transactions occurring after the date hereof:
(i) Issuer or any of its Subsidiaries (each an "Issuer
Subsidiary"), without having received Grantee's prior written consent,
shall have entered into an agreement to engage in an Alternative
Transaction (as hereinafter defined) with any person (the term
"person" for purposes of this Agreement having the meaning assigned
thereto in Sections 3(a)(9) and 13(d)(3) of the Securities Exchange
Act of 1934, as amended (the "1934 Act"), and the rules and
regulations thereunder) other than Grantee or any of its Subsidiaries
(each a "Grantee Subsidiary") or the Board of Directors of Issuer
shall have recommended that the stockholders of Issuer approve or
accept any Alternative Transaction;
(ii) Issuer or any Issuer Subsidiary, without having
received Grantee's prior written consent, shall have authorized,
recommended, proposed or publicly announced its intention to
authorize, recommend or propose, to engage in an Alternative
Transaction with any person other than Grantee or a Grantee
Subsidiary, or the Board of Directors of Issuer shall have publicly
withdrawn or modified, or publicly announced its intent to withdraw or
modify, in any manner adverse to Grantee, its recommendation that the
stockholders of Issuer approve the transactions contemplated by the
Merger Agreement after disclosure of the existence of an Alternative
Transaction;
(iii) Any person other than Grantee, any Grantee
Subsidiary or any Issuer Subsidiary acting in a fiduciary capacity in
the ordinary course of its business shall have acquired beneficial
ownership or the right to acquire beneficial ownership of 10% or more
of the outstanding shares of Common Stock (the term "beneficial
ownership" for purposes of this Agreement having the meaning assigned
thereto in Section 13(d) of the 1934 Act, and the rules and
regulations thereunder);
(iv) Any person other than Grantee or any Grantee Subsidiary
shall have made a bona fide proposal to Issuer or its stockholders by
public announcement or written communication that is or becomes the
subject of public disclosure to engage in an Alternative Transaction;
(v) After an overture is made by a third party to Issuer or
its stockholders to engage in an Alternative Transaction, Issuer shall
have breached any covenant or obligation contained in the Merger
Agreement and such breach (x) would entitle Grantee to terminate the
Merger Agreement and (y) shall not have been cured prior to the Notice
Date (as defined below); or
(vi) Any person other than Grantee or any Grantee
Subsidiary, other than in connection with a transaction to which
Grantee has given its prior written consent, shall have filed an
application or notice with the Federal Communications Commission, or
other federal or state regulatory authority, which application or
notice has been accepted for processing, for approval to engage in an
Alternative Transaction.
(c) The term "Subsequent Triggering Event" shall mean the
consummation of an Alternative Transaction. The term "Alternative
Transaction" means an Alternative Transaction (as defined in the Merger
Agreement) with respect to the Issuer.
(d) Issuer shall notify Grantee promptly in writing of the
occurrence of any Initial Triggering Event and/or Subsequent Triggering
Event of which it has notice (together, a "Triggering Event"), it being
understood that the giving of such notice by Issuer shall not be a
condition to the right of the Holder to exercise the Option.
(e) In the event the Holder is entitled to and wishes to
exercise the Option, it shall send to Issuer a written notice (the date of
which being herein referred to as the "Notice Date") specifying (i) the
total number of shares it will purchase pursuant to such exercise and (ii)
a place and date not earlier than three business days nor later than 30
business days from the Notice Date for the closing of such purchase (the
"Closing Date"); provided that if prior notification to or approval of the
Federal Communications Commission or any other state or federal regulatory
agency is required in connection with such purchase, the Holder shall
promptly file the required notice or application for approval and shall
expeditiously process the same and the period of time that otherwise would
run pursuant to this sentence shall run instead from the date on which any
required notification periods have expired or been terminated or such
approvals have been obtained and any requisite waiting period or periods
shall have passed. Any exercise of the Option shall be deemed to occur on
the Notice Date relating thereto.
(f) At the closing referred to in subsection (e) of this
Section 2, the Holder shall pay to Issuer the aggregate purchase price for
the shares of Common Stock purchased pursuant to the exercise of the Option
in immediately available funds by wire transfer to a bank account
designated by Issuer, provided that failure or refusal of Issuer to
designate such a bank account shall not preclude the Holder from exercising
the Option.
(g) At such closing, simultaneously with the delivery of
immediately available funds as provided in subsection (f) of this Section
2, Issuer shall deliver to the Holder a certificate or certificates
representing the number of shares of Common Stock purchased by the Holder
and, if the Option should be exercised in part only, a new Option
evidencing the rights of the Holder thereof to purchase the balance of the
shares purchasable hereunder, and the Holder shall deliver to Issuer a copy
of this Agreement and a letter agreeing that the Holder will not offer to
sell or otherwise dispose of such shares in violation of applicable law or
the provisions of this Agreement.
(h) Certificates for Common Stock delivered at a closing
hereunder may be endorsed with a restrictive legend that shall read
substantially as follows:
"The transfer of the shares represented by this certificate is
subject to certain provisions of an agreement between the
registered holder hereof and Issuer and to resale restrictions
arising under the Securities Act of 1933, as amended. A copy of
such agreement is on file at the principal office of Issuer and
will be provided to the holder hereof without charge upon receipt
by Issuer of a written request therefor."
It is understood and agreed that:
(i) the reference to the resale restrictions of the
Securities Act of 1933, as amended (the "1933 Act"), in the above
legend shall be removed by delivery of substitute certificate(s)
without such reference if the Holder shall have delivered to Issuer a
copy of a letter from the staff of the SEC, or an opinion of counsel,
in form and substance reasonably satisfactory to Issuer, to the effect
that such legend is not required for purposes of the 1933 Act;
(ii) the reference to the provisions of this Agreement in
the above legend shall be removed by delivery of substitute
certificate(s) without such reference if the shares have been sold or
transferred in compliance with the provisions of this Agreement and
under circumstances that do not require the retention of such
reference; and
(iii) the legend shall be removed in its entirety if the
conditions in the preceding clauses (i) and (ii) are both satisfied.
In addition, such certificates shall bear any other legend as may be
required by law.
(i) Upon the giving by the Holder to Issuer of the written
notice of exercise of the Option provided for under subsection (e) of this
Section 2 and the tender of the applicable purchase price in immediately
available funds, the Holder shall be deemed, subject to the receipt of
applicable regulatory approvals, to be the holder of record of the shares
of Common Stock issuable upon such exercise, notwithstanding that the stock
transfer books of Issuer shall then be closed or that certificates
representing such shares of Common Stock shall not then be actually
delivered to the Holder. Issuer shall pay all expenses, and any and all
United States federal, state and local taxes and other charges that may be
payable in connection with the preparation, issue and delivery of stock
certificates under this Section 2 in the name of the Holder or its
assignee, transferee or designee.
3. Issuer agrees:
(i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury
shares of Common Stock so that the Option may be exercised without
additional authorization of Common Stock after giving effect to all
other options, warrants, convertible securities and other rights to
purchase Common Stock;
(ii) that it will not, by charter amendment or through
reorganization, consolidation, merger, dissolution or sale of assets,
or by any other voluntary act, avoid or seek to avoid the observance
or performance of any of the covenants, stipulations or conditions to
be observed or performed hereunder by Issuer;
(iii) promptly to take all action as may from time to
time be required (including (x) complying with all premerger
notification, reporting and waiting period requirements specified in
the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended,
and the regulations promulgated thereunder and (y) in the event that
prior approval of or notice to the Federal Communications Commission
or to any state regulatory authority is necessary before the Option
may be exercised, cooperating fully with the Holder in preparing such
applications or notices and providing such information to the Federal
Communications Commission or such state regulatory authority as they
may require) in order to permit the Holder to exercise the Option and
Issuer duly and effectively to issue shares of Common Stock pursuant
hereto; and
(iv) promptly to take all action provided herein to protect
the rights of the Holder against dilution.
4. This Agreement and the Option granted hereby are
exchangeable, without expense, at the option of the Holder, upon
presentation and surrender of this Agreement at the principal office of
Issuer, for other Agreements providing for Options of different
denominations entitling the holder thereof to purchase, on the same terms
and subject to the same conditions as are set forth herein, in the
aggregate the same number of shares of Common Stock purchasable hereunder.
The terms "Agreement" and "Option" as used herein include any Stock Option
Agreements and related Options for which this Agreement (and the Option
granted hereby) may be exchanged. Upon receipt by Issuer of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation
of this Agreement, and (in the case of loss, theft or destruction) of
reasonably satisfactory indemnification, and upon surrender and
cancellation of this Agreement, if mutilated, Issuer will execute and
deliver a new Agreement of like tenor and date. Any such new Agreement
executed and delivered shall constitute an additional contractual
obligation on the part of Issuer, whether or not the Agreement so lost,
stolen, destroyed or mutilated shall at any time be enforceable by anyone.
5. In addition to the adjustment in the number of shares of
Common Stock that are purchasable upon exercise of the Option pursuant to
Section 1 of this Agreement, the number of shares of Common Stock
purchasable upon the exercise of the Option and the Option Price shall be
subject to adjustment from time to time as provided in this Section 5. In
the event of any change in, or distributions in respect of, the Common
Stock by reason of stock dividends, split-ups, mergers, recapitalizations,
combinations, subdivisions, conversions, exchanges of shares, distributions
on or in respect of the Common Stock, or the like, the type and number of
shares of Common Stock purchasable upon exercise hereof and the Option
Price shall be appropriately adjusted in such manner as shall fully
preserve the economic benefits provided hereunder and proper provision
shall be made in any agreement governing any such transaction to provide
for such proper adjustment and the full satisfaction of the Issuer's
obligations hereunder.
6. Upon the occurrence of a Subsequent Triggering Event that
occurs prior to an Exercise Termination Event, Issuer shall, at the request
of Grantee delivered within 90 days of such Subsequent Triggering Event
(whether on its own behalf or on behalf of any subsequent holder of this
Option (or part thereof) or any of the shares of Common Stock issued
pursuant hereto), promptly prepare, file and keep current a shelf
registration statement under the 1933 Act covering this Option and any
shares issued and issuable pursuant to this Option and shall use its
reasonable best efforts to cause such registration statement to become
effective and remain current in order to permit the sale or other
disposition of this Option and any shares of Common Stock issued upon total
or partial exercise of this Option ("Option Shares") in accordance with any
plan of disposition requested by Grantee. Issuer will use its reasonable
best efforts to cause such registration statement first to become effective
and then to remain effective for such period not in excess of 180 days from
the day such registration statement first becomes effective or such shorter
time as may be reasonably necessary to effect such sales or other
dispositions. Grantee shall have the right to demand two such
registrations. The foregoing notwithstanding, if, at the time of any
request by Grantee for registration of the Option or Option Shares as
provided above, Issuer is in registration with respect to an underwritten
public offering of shares of Common Stock, and if in the good faith
judgment of the managing underwriter or managing underwriters, or, if none,
the sole underwriter or underwriters, of such offering the inclusion of the
Holder's Option or Option Shares would interfere with the successful
marketing of the shares of Common Stock offered by Issuer, the number of
Option Shares otherwise to be covered in the registration statement
contemplated hereby may be reduced; and provided, however, that after any
such required reduction the number of Option Shares to be included in such
offering for the account of the Holder shall constitute at least 25% of the
total number of shares to be sold by the Holder and Issuer in the
aggregate; and provided further, however, that if such reduction occurs,
then the Issuer shall file a registration statement for the balance as
promptly as practical and no reduction shall thereafter occur. Each such
Holder shall provide all information reasonably requested by Issuer for
inclusion in any registration statement to be filed hereunder. If requested
by any such Holder in connection with such registration, Issuer shall
become a party to any underwriting agreement relating to the sale of such
shares, but only to the extent of obligating itself in respect of
representations, warranties, indemnities and other agreements customarily
included in secondary offering underwriting agreements for the Issuer. Upon
receiving any request under this Section 6 from any Holder, Issuer agrees
to send a copy thereof to any other person known to Issuer to be entitled
to registration rights under this Section 6, in each case by promptly
mailing the same, postage prepaid, to the address of record of the persons
entitled to receive such copies. Notwithstanding anything to the contrary
contained herein, in no event shall Issuer be obligated to effect more than
two registrations pursuant to this Section 6 by reason of the fact that
there shall be more than one Grantee as a result of any assignment or
division of this Agreement. The obligation of Issuer under this Section 6
to file and maintain the effectiveness of a registration statement may be
suspended for one or more periods not to exceed 60 days in the aggregate if
it determines in good faith that such filing or continued effectiveness
would require disclosure of non-public information, the disclosure of which
would materially and adversely affect Issuer.
7. (a) Immediately prior to the occurrence of a Repurchase
Event (as defined below) or thereafter, as directed by the Holder, (i)
following a request of the Holder, delivered prior to an Exercise
Termination Event, Issuer (or any successor thereto) shall repurchase the
Option from the Holder at a price (the "Option Repurchase Price") equal to
the amount by which (A) the Market/Offer Price (as defined below) exceeds
(B) the Option Price, multiplied by the number of shares for which this
Option may then be exercised and (ii) at the request of the owner of Option
Shares from time to time (the "Owner"), delivered within 90 days of such
occurrence (or such later period as provided in Section 10), Issuer shall
repurchase such number of the Option Shares from the Owner as the Owner
shall designate at a price (the "Option Share Repurchase Price") equal to
the Market/Offer Price multiplied by the number of Option Shares so
designated. The term "Market/Offer Price" shall mean the highest of (i) the
price per share of Common Stock at which a tender offer or exchange offer
therefor has been made, (ii) the price per share of Common Stock to be paid
by any third party pursuant to an agreement with Issuer, (iii) the highest
closing price for shares of Common Stock within the six-month period
immediately preceding the date the Holder gives notice of the required
repurchase of this Option or the Owner gives notice of the required
repurchase of Option Shares, as the case may be, or (iv) in the event of a
sale of all or a substantial portion of Issuer's assets, the sum of the
price paid in such sale for such assets and the current market value of the
remaining assets of Issuer as determined by a nationally recognized
investment banking firm selected by the Holder or the Owner, as the case
may be, and reasonably acceptable to the Issuer, divided by the number of
shares of Common Stock of Issuer outstanding at the time of such sale. In
determining the Market/Offer Price, the value of consideration other than
cash shall be determined by a nationally recognized investment banking firm
selected by the Holder or Owner, as the case may be, and reasonably
acceptable to the Issuer.
(b) The Holder and the Owner, as the case may be, may
exercise its right to require Issuer to repurchase the Option and any
Option Shares pursuant to this Section 7 by surrendering for such purpose
to Issuer, at its principal office, a copy of this Agreement or
certificates for Option Shares, as applicable, accompanied by a written
notice or notices stating that the Holder or the Owner, as the case may be,
elects to require Issuer to repurchase this Option and/or the Option Shares
in accordance with the provisions of this Section 7. Within the latter to
occur of (x) five business days after the surrender of the Option and/or
certificates representing Option Shares and the receipt of such notice or
notices relating thereto and (y) the time that is immediately prior to the
occurrence of a Repurchase Event, and subject to the provisions of Section
15 hereof, Issuer shall deliver or cause to be delivered to the Holder the
Option Repurchase Price and/or to the Owner the Option Share Repurchase
Price therefor or the portion thereof, if any, that Issuer is not then
prohibited under applicable law and regulation from so delivering.
(c) To the extent that Issuer is prohibited under
applicable law or regulation from repurchasing the Option and/or the Option
Shares in full, Issuer shall immediately so notify the Holder and/or the
Owner and thereafter deliver or cause to be delivered, from time to time,
to the Holder and/or the Owner, as appropriate, the portion of the Option
Repurchase Price and the Option Share Repurchase Price, respectively, that
it is no longer prohibited from delivering, within five business days after
the date on which Issuer is no longer so prohibited; provided, however,
that if Issuer at any time after delivery of a notice of repurchase
pursuant to paragraph (b) of this Section 7 is prohibited under applicable
law or regulation from delivering to the Holder and/or the Owner, as
appropriate, the Option Repurchase Price and the Option Share Repurchase
Price, respectively, in full (and Issuer hereby undertakes to use its best
efforts to obtain all required regulatory and legal approvals and to file
any required notices, in each case as promptly as practicable in order to
accomplish such repurchase), the Holder or Owner may revoke its notice of
repurchase of the Option or the Option Shares either in whole or to the
extent of the prohibition, whereupon, in the latter case, Issuer shall
promptly (i) deliver to the Holder and/or the Owner, as appropriate, that
portion of the Option Repurchase Price or the Option Share Repurchase Price
that Issuer is not prohibited from delivering; and (ii) deliver, as
appropriate, either (A) to the Holder, a new Stock Option Agreement
evidencing the right of the Holder to purchase that number of shares of
Common Stock obtained by multiplying the number of shares of Common Stock
for which the surrendered Stock Option Agreement was exercisable at the
time of delivery of the notice of repurchase by a fraction, the numerator
of which is the Option Repurchase Price less the portion thereof
theretofore delivered to the Holder and the denominator of which is the
Option Repurchase Price, or (B) to the Owner, a certificate for the Option
Shares it is then so prohibited from repurchasing.
(d) For purposes of this Section 7, a Repurchase Event
shall be deemed to have occurred upon the consummation of any Alternative
Transaction, provided that no such event shall constitute a Repurchase
Event unless a Subsequent Triggering Event shall have occurred prior to an
Exercise Termination Event. The parties hereto agree that Issuer's
obligations to repurchase the Option or Option Shares under this Section 7
shall not terminate upon the occurrence of an Exercise Termination Event
unless no Subsequent Triggering Event shall have occurred prior to the
occurrence of an Exercise Termination Event.
8. (a) In the event that prior to an Exercise Termination
Event, Issuer shall enter into an agreement (i) to consolidate with or
merge into any person, other than Grantee or one of its Subsidiaries, and
shall not be the continuing or surviving corporation of such consolidation
or merger, (ii) to permit any person, other than Grantee or one of its
Subsidiaries, to merge into Issuer and Issuer shall be the continuing or
surviving corporation, but, in connection with such merger, the then
outstanding shares of Common Stock shall be changed into or exchanged for
stock or other securities of any other person or cash or any other property
or the then outstanding shares of Common Stock shall after such merger
represent less than 50% of the outstanding voting shares and voting share
equivalents of the merged company, or (iii) to sell or otherwise transfer
all or substantially all of its assets to any person, other than Grantee or
one of its Subsidiaries, then, and in each such case, the agreement
governing such transaction shall make proper provision so that the Option
shall, upon the consummation of any such transaction and upon the terms and
conditions set forth herein, be converted into, or exchanged for, an option
(the "Substitute Option"), at the election of the Holder, of either (x) the
Acquiring Corporation (as hereinafter defined) or (y) any person that
controls the Acquiring Corporation.
(b) The following terms have the meanings indicated:
(A) "Acquiring Corporation" shall mean (i) the
continuing or surviving corporation of a consolidation or merger
with Issuer (if other than Issuer), (ii) Issuer in a merger in
which Issuer is the continuing or surviving person, and (iii) the
transferee of all or substantially all of Issuer's assets.
(B) "Substitute Common Stock" shall mean the common
stock issued by the issuer of the Substitute Option upon exercise
of the Substitute Option.
(C) "Assigned Value" shall mean the Market/Offer
Price, as defined in Section 7.
(D) "Average Price" shall mean the average closing
price of a share of the Substitute Common Stock for the one year
immediately preceding the consolidation, merger or sale in
question, but in no event higher than the closing price of the
shares of Substitute Common Stock on the day preceding such
consolidation, merger or sale; provided that if Issuer is the
issuer of the Substitute Option, the Average Price shall be
computed with respect to a share of common stock issued by the
person merging into Issuer or by any company which controls or is
controlled by such person, as the Holder may elect.
(c) Subject to paragraph (d) below, the Substitute Option
shall have the same terms as the Option, provided, that if the terms of the
Substitute Option cannot, for legal reasons, be the same as the Option,
such terms shall be as similar as possible and in no event less
advantageous to the Holder. The issuer of the Substitute Option shall also
enter into an agreement with the then Holder or Holders of the Substitute
Option in substantially the same form as this Agreement, which shall be
applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such
number of shares of Substitute Common Stock as is equal to the Assigned
Value multiplied by the number of shares of Common Stock for which the
Option is then exercisable, divided by the Average Price. The exercise
price of the Substitute Option per share of Substitute Common Stock shall
then be equal to the Option Price multiplied by a fraction, the numerator
of which shall be the number of shares of Common Stock for which the Option
is then exercisable and the denominator of which shall be the number of
shares of Substitute Common Stock for which the Substitute Option is
exercisable.
(e) In no event, pursuant to any of the foregoing
paragraphs, shall the Substitute Option be exercisable for more than 10% of
the shares of Substitute Common Stock outstanding prior to exercise of the
Substitute Option. In the event that the Substitute Option would be
exercisable for more than 10% of the shares of Substitute Common Stock
outstanding prior to exercise but for this clause (e), the issuer of the
Substitute Option (the "Substitute Option Issuer") shall make a cash
payment to Holder equal to the excess of (i) the value of the Substitute
Option without giving effect to the limitation in this clause (e) over (ii)
the value of the Substitute Option after giving effect to the limitation in
this clause (e). This difference in value shall be determined by a
nationally recognized investment banking firm selected by the Holder or the
Owner, as the case may be, and reasonably acceptable to the Acquiring
Corporation.
(f) Issuer shall not enter into any transaction described
in subsection (a) of this Section 8 unless the Acquiring Corporation and
any person that controls the Acquiring Corporation assume in writing all
the obligations of Issuer hereunder.
9. (a) At the request of the holder of the Substitute Option
(the "Substitute Option Holder"), the Substitute Option Issuer shall
repurchase the Substitute Option from the Substitute Option Holder at a
price (the "Substitute Option Repurchase Price") equal to the amount by
which (i) the Highest Closing Price (as hereinafter defined) exceeds (ii)
the exercise price of the Substitute Option, multiplied by the number of
shares of Substitute Common Stock for which the Substitute Option may then
be exercised, and at the request of the owner (the "Substitute Share
Owner") of shares of Substitute Common Stock (the "Substitute Shares"), the
Substitute Option Issuer shall repurchase the Substitute Shares at a price
(the "Substitute Share Repurchase Price") equal to the Highest Closing
Price multiplied by the number of Substitute Shares so designated. The term
"Highest Closing Price" shall mean the highest closing price for shares of
Substitute Common Stock within the six-month period immediately preceding
the date the Substitute Option Holder gives notice of the required
repurchase of the Substitute Option or the Substitute Share Owner gives
notice of the required repurchase of the Substitute Shares, as applicable.
(b) The Substitute Option Holder and the Substitute Share
Owner, as the case may be, may exercise its respective right to require the
Substitute Option Issuer to repurchase the Substitute Option and the
Substitute Shares pursuant to this Section 9 by surrendering for such
purpose to the Substitute Option Issuer, at its principal office, the
agreement for such Substitute Option (or, in the absence of such an
agreement, a copy of this Agreement) and certificates for Substitute Shares
accompanied by a written notice or notices stating that the Substitute
Option Holder or the Substitute Share Owner, as the case may be, elects to
require the Substitute Option Issuer to repurchase the Substitute Option
and/or the Substitute Shares in accordance with the provisions of this
Section 9. As promptly as practicable, and in any event within five
business days after the surrender of the Substitute Option and/or
certificates representing Substitute Shares and the receipt of such notice
or notices relating thereto and subject to the provisions of Section 15
hereof, the Substitute Option Issuer shall deliver or cause to be delivered
to the Substitute Option Holder the Substitute Option Repurchase Price
and/or to the Substitute Share Owner the Substitute Share Repurchase Price
therefor or, in either case, the portion thereof which the Substitute
Option Issuer is not then prohibited under applicable law and regulation
from so delivering.
(c) To the extent that the Substitute Option Issuer is
prohibited under applicable law or regulation from repurchasing the
Substitute Option and/or the Substitute Shares in part or in full, the
Substitute Option Issuer following a request for repurchase pursuant to
this Section 9 shall immediately so notify the Substitute Option Holder
and/or the Substitute Share Owner and thereafter deliver or cause to be
delivered, from time to time, to the Substitute Option Holder and/or the
Substitute Share Owner, as appropriate, the portion of the Substitute Share
Repurchase Price, respectively, which it is no longer prohibited from
delivering, within five business days after the date on which the
Substitute Option Issuer is no longer so prohibited; provided, however,
that if the Substitute Option Issuer is at any time after delivery of a
notice of repurchase pursuant to subsection (b) of this Section 9
prohibited under applicable law or regulation from delivering to the
Substitute Option Holder and/or the Substitute Share Owner, as appropriate,
the Substitute Option Repurchase Price and the Substitute Share Repurchase
Price, respectively, in full (and the Substitute Option Issuer shall use
its best efforts to obtain all required regulatory and legal approvals, in
each case as promptly as practicable, in order to accomplish such
repurchase), the Substitute Option Holder or Substitute Share Owner may
revoke its notice of repurchase of the Substitute Option or the Substitute
Shares either in whole or to the extent of the prohibition, whereupon, in
the latter case, the Substitute Option Issuer shall promptly (i) deliver to
the Substitute Option Holder or Substitute Share Owner, as appropriate,
that portion of the Substitute Option Repurchase Price or the Substitute
Share Repurchase Price that the Substitute Option Issuer is not prohibited
from delivering; and (ii) deliver, as appropriate, either (A) to the
Substitute Option Holder, a new Substitute Option evidencing the right of
the Substitute Option Holder to purchase that number of shares of the
Substitute Common Stock obtained by multiplying the number of shares of the
Substitute Common Stock for which the surrendered Substitute Option was
exercisable at the time of delivery of the notice of repurchase by a
fraction, the numerator of which is the Substitute Option Repurchase Price
less the portion thereof theretofore delivered to the Substitute Option
Holder and the denominator of which is the Substitute Option Repurchase
Price, or (B) to the Substitute Share Owner, a certificate for the
Substitute Common Shares it is then so prohibited from repurchasing.
10. The 90-day or 6-month periods for exercise of certain rights
under Sections 2, 6, 7 and 13 shall be extended:
(i) to the extent necessary to obtain all regulatory
approvals for the exercise of such rights, and for the expiration of
all statutory waiting periods;
(ii) to the extent necessary to avoid liability under
Section 16(b) of the 1934 Act by reason of such exercise; and
(iii) during any period in which Grantee is precluded
from exercising such rights due to an injunction or other legal
restriction;
plus, in the case of clauses (i), (ii) and (iii), for such additional
period as is reasonably necessary for the exercise of such rights promptly
following the obtaining of such approvals or the expiration of such
periods.
11. Issuer hereby represents and warrants to Grantee as follows:
(a) Issuer has full corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and
validly authorized by the Board of Directors of Issuer and no other
corporate proceedings on the part of Issuer are necessary to authorize this
Agreement or to consummate the transactions so contemplated. This Agreement
has been duly and validly executed and delivered by Issuer.
(b) Issuer has taken all necessary corporate action to
authorize and reserve and to permit it to issue, and at all times from the
date hereof through the termination of this Agreement in accordance with
its terms will have reserved for issuance upon the exercise of the Option,
that number of shares of Common Stock equal to the maximum number of shares
of Common Stock at any time and from time to time issuable hereunder, and
all such shares, upon issuance pursuant hereto, will be duly authorized,
validly issued, fully paid, nonassessable, and will be delivered free and
clear of all claims, liens, encumbrance and security interests and not
subject to any preemptive rights.
(c) Issuer has taken all action so that the entering into
of this Option Agreement, the acquisition of shares of Common Stock
hereunder and the other transactions contemplated hereby do not and will
not result in the grant of any rights to any person under the Rights
Agreement or enable or require the Rights to be exercised, distributed or
triggered.
12. Grantee hereby represents and warrants to Issuer that:
(a) Grantee has all requisite corporate power and authority
to enter into this Agreement and, subject to any approvals or consents
referred to herein, to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Grantee. This Agreement has been duly
executed and delivered by Grantee.
(b) The Option is not being, and any shares of Common Stock
or other securities acquired by Grantee upon exercise of the Option will
not be, acquired with a view to the public distribution thereof and will
not be transferred or otherwise disposed of except in a transaction
registered or exempt from registration under the Securities Act.
13. Neither of the parties hereto may assign any of its rights
or obligations under this Option Agreement or the Option created hereunder
to any other person, without the express written consent of the other
party, except that in the event a Subsequent Triggering Event shall have
occurred prior to an Exercise Termination Event, Grantee, subject to the
express provisions hereof, may assign in whole or in part its rights and
obligations hereunder within 90 days following such Subsequent Triggering
Event (or such later period as provided in Section 10).
14. Each of Grantee and Issuer will use its best efforts to make
all filings with, and to obtain consents of, all third parties and
governmental authorities necessary to the consummation of the transactions
contemplated by this Agreement, including without limitation making
application to list the shares of Common Stock issuable hereunder on the
New York Stock Exchange upon official notice of issuance.
15. (a) Notwithstanding any other provision of this Agreement,
in no event shall the Grantee's Total Profit (as hereinafter defined)
exceed $2,200,000,000.00 and, if it otherwise would exceed such amount, the
Grantee, at its sole election, shall either (i) reduce the number of shares
of Common Stock subject to this Option, (ii) deliver to the Issuer for
cancellation Option Shares previously purchased by Grantee (valued, for the
purposes of this Section 15(a) at the average closing sales price per share
of Common Stock (or if there is no sale on such date then the average
between the closing bid and ask prices on any such day) as reported by the
New York Stock Exchange for the twenty consecutive trading days preceding
the day on which the Grantee's Total Profit exceeds $2,200,000,000.00)
(iii) pay cash to the Issuer, or (iv) any combination thereof, so that
Grantee's actually realized Total Profit shall not exceed $2,200,000,000.00
after taking into account the foregoing actions.
(b) As used herein, the term "Total Profit" shall mean the
amount (before taxes) of the following: (a) the aggregate amount of (i)(x)
the net cash amounts received by Grantee and its affiliates pursuant to the
sale of Option Shares (or any securities into which such Option Shares are
converted or exchanged) to any unaffiliated party or to Issuer pursuant to
this Agreement, less (y) the Grantee's purchase price of such Option
Shares, (ii) any amounts received by Grantee and its affiliates on the
transfer of the Option (or any portion thereof) to any unaffiliated party,
if permitted hereunder or to Issuer pursuant to this Agreement, and (iii)
the amount received by Grantee pursuant to Section 9.2 of the Merger
Agreement; minus (b) the amount of cash theretofore paid to the Issuer
pursuant to this Section 15 plus the value of the Option Shares theretofore
delivered to the Issuer for cancellation pursuant to this Section 15.
(c) Notwithstanding any other provision of this Agreement,
nothing in this Agreement shall affect the ability of Grantee to receive
nor relieve Issuer's obligation to pay a fee pursuant to Section 9.2 of the
Merger Agreement; provided that if Total Profit received by Grantee would
exceed $2,200,000,000.00 following the receipt of such fee, Grantee shall
be obligated to comply with terms of Section 15(a) within 5 days of the
later of (i) the date of receipt of such fee and (ii) the date of receipt
of the net cash by Grantee pursuant to the sale of Option Shares (or, any
other securities into which such Option Shares are converted or exchanged)
to any unaffiliated party or to Issuer pursuant to this Agreement.
(d) Notwithstanding any other provision of this Agreement,
the Option may not be exercised for a number of Option Shares that would,
as of the Notice Date, result in a Notional Total Profit (as defined below)
of more than $2,200,000,000.00. "Notional Total Profit" shall mean, with
respect to any number of Option Shares as to which the Grantee may propose
to exercise the Option, the Total Profit determined as of the Notice Date
assuming that the Option was exercised on such date for such number of
Option Shares and assuming such Option Shares, together with all other
Option Shares held by the Grantee and its affiliates as of such date, were
sold for cash at the closing sales price for Common Stock as of the close
of business on the preceding trading day.
16. The parties hereto acknowledge that damages would be an
inadequate remedy for a breach of this Agreement by either party hereto and
that the obligations of the parties hereto shall be enforceable by either
party hereto through injunctive or other equitable relief.
17. If any term, provision, covenant or restriction contained in
this Agreement is held by a court or a federal or state regulatory agency
of competent jurisdiction to be invalid, void or unenforceable, the
remainder of the terms, provisions and covenants and restrictions contained
in this Agreement shall remain in full force and effect, and shall in no
way be affected, impaired or invalidated. If for any reason such court or
regulatory agency determines that the Holder is not permitted to acquire,
or Issuer or Substitute Option Issuer, as the case may be, is not permitted
to repurchase pursuant to Section 7 or Section 9, as the case may be, the
full number of shares of Common Stock provided in Section 1(a) hereof (as
adjusted pursuant to Section 1(b) or 5 hereof), it is the express intention
of Issuer (which shall be binding on the Substitute Option Issuer) to allow
the Holder to acquire or to require Issuer or Substitute Option Issuer to
repurchase such lesser number of shares as may be permissible, without any
amendment or modification hereof.
18. All notices, requests, claims, demands and other
communications hereunder shall be deemed to have been duly given when
delivered in person, by cable, telegram, telescope or telex, or by
registered or certified mail (postage prepaid, return receipt requested) at
the respective addresses of the parties set forth in the Merger Agreement.
19. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, regardless of the laws
that might otherwise govern under applicable principles of conflicts of
laws thereof (except to the extent that mandatory provisions of federal law
apply).
20. This Agreement may be executed in two or more counterparts,
each of which shall be deemed to be an original, but all of which shall
constitute one and the same agreement.
21. Except as otherwise expressly provided herein, each of the
parties hereto shall bear and pay all costs and expenses incurred by it or
on its behalf in connection with the transactions contemplated hereunder,
including fees and expenses of its own financial consultants, investment
bankers, accountants and counsel.
22. Except as otherwise expressly provided herein or in the
Merger Agreement, this Agreement contains the entire agreement between the
parties with respect to the transactions contemplated hereunder and
supersedes all prior arrangements or understandings with respect thereof,
written or oral. The terms and conditions of this Agreement shall inure to
the benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns. Nothing in this Agreement, expressed or
implied, is intended to confer upon any party, other than the parties
hereto, and their respective successors except as assigns, any rights,
remedies, obligations or liabilities under or by reason of this Agreement,
except as expressly provided herein.
23. Capitalized terms used in this Agreement and not defined
herein shall have the meanings assigned thereto in the Merger Agreement.
IN WITNESS WHEREOF, each of the parties has caused this Agreement
to be executed on its behalf by its officers thereunto duly authorized, all
as of the date first above written.
GTE CORPORATION
By: s/ Xxxxxxx X. Xxx
_________________________
Name: Xxxxxxx X. Xxx
Title: Chairman and Chief Executive Officer
By: s/ Xxxxxxxx Xxxxx
_________________________
Name: Xxxxxxxx Xxxxx
Title: Secretary
XXXX ATLANTIC CORPORATION
By: s/ Xxxx Xxxxxxxxxx
__________________________
Name: Xxxx Xxxxxxxxxx
Title: President and Chief Executive Officer
