PURCHASE AGREEMENT
between
QWEST DEX, INC.,
QWEST SERVICES CORPORATION,
QWEST COMMUNICATIONS INTERNATIONAL INC.
and
DEX HOLDINGS LLC
August 19, 2002
ARTICLE I
DEFINITIONS
1.1 General Rules of Construction.........................................2
1.2 Definitions...........................................................2
ARTICLE II
SALE AND PURCHASE OF LLC INTERESTS; CLOSING; CONTRIBUTION
2.1 Sale of LLC Interests by Seller......................................16
2.2 Purchase of the LLC Interests by Buyer...............................17
2.3 The Closing..........................................................17
2.4 Deliveries by Seller.................................................17
2.5 Deliveries by Buyer..................................................17
2.6 The Contribution.....................................................17
2.7 Post-Signing Purchase Price Adjustment; Exclusivity of Audit
Adjustment Remedy....................................................18
2.8 Pre-Closing Working Capital Purchase Price Adjustment................18
2.9 Post-Closing Working Capital Purchase Price Adjustment...............19
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE QWEST PARTIES
3.1 Organization and Related Matters.....................................20
3.2 Authorization; No Conflicts..........................................21
3.3 Legal Proceedings....................................................21
3.4 Approvals and Third Party Consents...................................21
3.5 Capitalization.......................................................21
3.6 Financial Information................................................22
3.7 Real and Personal Property; Title to Property; Leases................22
3.8 Material Contracts...................................................23
3.9 Tax Returns and Reports..............................................23
3.10 Permits..............................................................24
3.11 Intercompany Transactions............................................24
3.12 Compliance with Law..................................................24
3.13 No Brokers or Finders................................................24
3.14 Intellectual Property................................................25
3.15 LCI..................................................................27
3.16 Labor Matters........................................................27
3.17 Employee Benefits....................................................27
3.18 Insurance............................................................28
3.19 Environmental Matters................................................28
3.20 Directory Publication Schedules......................................29
3.21 Receivables..........................................................29
3.22 Qwest Corporation....................................................29
3.23 Certain Accounting Issues............................................29
3.24 Contribution Agreement...............................................30
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
4.1 Organization and Related Matters.....................................30
4.2 Authorization; No Conflicts..........................................30
i
4.3 Legal Proceedings....................................................30
4.4 Investment Intent....................................................31
4.5 Approvals, Permits and Third Party Consents..........................31
4.6 Financing............................................................31
4.7 No Brokers or Finders................................................31
4.8 No Other Representations or Warranties...............................31
ARTICLE V
PRE-CLOSING COVENANTS
5.1 Access...............................................................32
5.2 Conduct of Business..................................................32
5.3 Notification of Certain Matters......................................34
5.4 Approvals, Permits and Third Party Consents..........................34
5.5 Supplements to Seller's Disclosure Schedule..........................36
5.6 Financial Statements.................................................36
5.7 Collective Bargaining Agreements.....................................37
5.8 WARN.................................................................37
5.9 Confidentiality Agreements...........................................37
5.10 Financing............................................................37
5.11 No Negotiations......................................................39
5.12 Additional Agreements................................................39
5.13 Tax Certificate......................................................39
5.14 Indebtedness.........................................................39
5.15 Working Capital......................................................39
5.16 Interim Agreements...................................................39
5.17 Transition Covenants.................................................40
ARTICLE VI
ADDITIONAL CONTINUING COVENANTS
6.1 Tax Matters..........................................................40
6.2 Tax Treatment and Purchase Price Allocation..........................44
6.3 Maintain Records.....................................................45
6.4 Cooperation..........................................................45
6.5 Buyer's Employee-Related Obligations.................................46
6.6 Liquidated Damages...................................................51
ARTICLE VII
CONDITIONS OF PURCHASE
7.1 General Conditions...................................................51
7.2 Conditions to Obligations of Buyer...................................51
7.3 Conditions to Obligations of Seller..................................53
ARTICLE VIII
TERMINATION OF OBLIGATIONS; SURVIVAL
8.1 Termination of Agreement.............................................54
8.2 Effect of Termination................................................55
8.3 Survival of Representations and Warranties and Agreements............56
ii
ARTICLE IX
INDEMNIFICATION
9.1 Obligations of Qwest Parties.........................................57
9.2 Obligations of Buyer.................................................57
9.3 Procedure............................................................58
9.4 Indemnification Threshold; Maximum Losses............................60
9.5 Cooperation..........................................................60
9.6 Exclusive Remedy.....................................................60
9.7 Damages..............................................................61
9.8 Relationship to Rodney Purchase Agreement............................61
ARTICLE X
GENERAL
10.1 Amendments; Waivers..................................................61
10.2 Schedules; Exhibits; Integration.....................................61
10.3 Further Assurances...................................................62
10.4 Governing Law........................................................62
10.5 No Assignment........................................................62
10.6 Headings.............................................................62
10.7 Counterparts.........................................................62
10.8 Publicity and Reports................................................62
10.9 Confidentiality......................................................63
10.10 Parties in Interest..................................................63
10.11 Notices..............................................................63
10.12 Expenses.............................................................64
10.13 Waiver...............................................................65
10.14 Representation by Counsel; Interpretation............................65
10.15 Severability.........................................................65
10.16 Waiver of Jury Trial; Equitable Relief...............................65
10.17 Arbitration..........................................................65
iii
EXHIBITS
Exhibit A Advertising and Telecommunications Commitments Side Letter
Exhibit B Contribution Agreement
Exhibit C IP Contribution Agreement
Exhibit D Publishing Agreement
Exhibit E Directory List License Agreement
Exhibit F Expanded Use List License Agreement
Exhibit G Billing and Collection Agreement
Exhibit H Professional Services Agreement
Exhibit I Public Pay Stations Agreement
Exhibit J Trademark License Agreement
Exhibit K Transition Services Agreement
Exhibit L Separation Agreement
Exhibit M Noncompetition Agreement
Exhibit N Debt Financing Commitment Letter
Exhibit O Equity Financing Commitment Letter
Exhibit P Transition Covenants
Exhibit Q Joint Management Agreement
Exhibit R [Reserved]
Exhibit S Commercial Agreement Joinder
Exhibit T Buyer Joinder
iv
PURCHASE AGREEMENT
This Purchase Agreement is entered into as of August 19, 2002 by and
between Qwest Dex, Inc., a Colorado corporation ("Seller"), Qwest Services
Corporation, a Colorado corporation ("QSC"), and Qwest Communications
International Inc., a Delaware corporation ("Qwest" and, collectively with
Seller and QSC, the "Qwest Parties"), on the one hand, and Dex Holdings LLC, a
Delaware limited liability company ("Buyer"), on the other hand.
RECITALS
A. Qwest owns all of the outstanding capital stock of QSC;
B. QSC owns all the outstanding capital stock of Qwest Dex
Holdings, Inc., a Delaware corporation ("Holding");
C. Holding owns all of the outstanding capital stock of Seller;
D. Seller owns all of the outstanding limited liability company
interests (the "LLC Interests") of SGN LLC, a Delaware limited liability company
("Company"), and immediately prior to the Closing (as defined herein), Seller
will contribute certain of the assets relating to the Transferred Business (as
defined herein) to Company, and Company shall assume certain of the liabilities
relating to the Transferred Business, pursuant to the terms of the Contribution
(as defined herein);
E. Concurrently herewith, the Qwest Parties and Buyer are
entering into that certain Purchase Agreement (the "Rodney Purchase Agreement")
pursuant to which the Qwest Parties have agreed to contribute assets and
liabilities relating to the Rodney Transferred Business (as defined in the
Rodney Purchase Agreement) to a newly formed LLC ("Rodney LLC"), and sell all of
the interests in Rodney LLC to Buyer on the terms and conditions set forth
therein;
F. After entertaining offers for all or a portion of Seller's
assets from multiple prospective purchasers and without waiving any rights,
conditions, benefits or obligations contained herein or in the Rodney Purchase
Agreement, Seller believes that the Transactions contemplated under this
Agreement, as well as the transactions contemplated under the Rodney Purchase
Agreement, represent the best available offer to purchase the assets subject to
this Agreement and the Rodney Purchase Agreement and constitute reasonably
equivalent value for the LLC Interests, and accordingly Seller is willing to
enter into this Agreement and the Rodney Purchase Agreement and to consummate
the Transactions contemplated hereunder and the transactions contemplated by the
Rodney Purchase Agreement;
G. Seller desires to sell, and Buyer desires to buy, the LLC
Interests for the consideration and on the terms and conditions described
herein; and
H. As an inducement to Buyer to enter into this Agreement (as
defined herein) and to consummate the Transactions (as defined herein), Qwest
and QSC have become parties to this Agreement solely with respect to the matters
expressly identified herein.
AGREEMENT
In consideration of the mutual promises contained in this Agreement and
intending to be legally bound, the parties agree as follows:
ARTICLE I
DEFINITIONS
1.1 General Rules of Construction. For all purposes of this Agreement
and the Exhibits, Schedules and Disclosure Schedules delivered pursuant to this
Agreement, except as otherwise expressly provided or unless the context
otherwise requires:
(a) terms include the plural as well as the singular;
(b) all accounting terms not otherwise defined have the meanings
assigned under GAAP, as in effect from time to time;
(c) all references in this Agreement to designated "Articles,"
"Sections" and other subdivisions are to the designated Articles, Sections and
other subdivisions of the body of this Agreement;
(d) the words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any particular
Section or other subdivision;
(e) "or" is not exclusive; and
(f) "including" and "includes" will be deemed to be followed by "but
not limited to" and "but is not limited to," respectively.
1.2 Definitions. As used in this Agreement and the Exhibits and
Schedules delivered pursuant to this Agreement, the following definitions will
apply:
"Accrued Liability" is defined in Section 6.5(c)(iv).
"Action" means any action, complaint, petition, investigation, suit or
other proceeding, whether administrative, civil or criminal, in law or in
equity, or before any arbitrator or Governmental Entity.
"Additional IP Products" means the software, databases, Content and
similar materials licensed (directly or through an Affiliate of Seller) to
Seller under a material Third Party IP Agreement other than the Initial IP
Products.
"Adjusted Base Purchase Price" means the Base Purchase Price, as
adjusted (if applicable) pursuant to Section 2.7(a)(i), Section 2.7(a)(ii) or
Section 2.7(a)(iii).
"Advertising and Telecommunications Commitments Side Letter" means the
Advertising and Telecommunications Commitments Side Letter by and between Qwest
2
and Qwest Corporation, on the one hand, and Buyer, Company and GPP LLC, on the
other hand, to be entered into at the Closing, substantially in the form of
Exhibit A to this Agreement.
"Affiliate" means a Person that directly, or indirectly through one or
more intermediaries, controls, or is controlled by, or is under common control
with, a specified Person. The term "control" (including, with correlative
meanings, the terms "controlled by" and "under common control with") means the
possession of the power to direct the management and policies of the referenced
Person, whether through ownership interests, by contract or otherwise.
"Agreement" means this Purchase Agreement by and between the Qwest
Parties, on the one hand, and Buyer, on the other hand, as amended,
supplemented, restated or otherwise modified from time to time, together with
all Exhibits and Schedules delivered pursuant to this Agreement.
"Agreement Accounting Principles" means GAAP, together with the
principles and adjustments set forth in Section 1.2AAP of Seller's Disclosure
Schedule.
"Amdocs Project" is defined in Section 5.21 on Exhibit P.
"Approval" means any approval, authorization, consent, qualification,
Order, registration, or any waiver of any of the foregoing, required by Law or
by assertion of any Governmental Entity to be obtained from, or any notice,
statement or other communication required to be filed with or delivered to, any
Governmental Entity.
"Approval Filings" is defined in Section 5.4(a).
"Assumed Affiliate Payables" means (i) all accounts payable to Qwest
with respect to third party invoices to the extent such amounts have not
actually been paid by Qwest, payroll liabilities of Qwest to the extent such
amounts have not already been paid by Qwest, and (ii) other payables to Qwest
with respect to "Headquarters Allocations," "Qwest Services Corp.," "Qwest
BRI-Facilities Expense," "Qwest IT" and "Qwest Communications Services," in each
case determined consistent with the December 31, 2001 Holding Audited Balance
Sheet.
"Audited Adjusted EBITDA" means the EBITDA of the Transferred Business
for 2001 derived from the Transferred Business Audited Financial Statements, as
adjusted for applicable adjustment categories set forth on Schedule 1.2EA.
"Bankruptcy Code" means the United States Bankruptcy Code (11
U.S.C.ss.101 et seq.), as amended from time to time, and any successor statute.
"Base Purchase Price" means $2,750,000,000.
"Baseline Adjusted EBITDA" means $406,300,000. Schedule 1.2EA sets
forth the methodology and calculations used to determine Baseline EBITDA.
"Billing and Collection Agreement" means the Agreement for the
Provision of Billing and Collection Services for Directory Publishers by and
between Qwest Corporation and Company to be entered into at the Closing,
substantially in the form of Exhibit G to this Agreement.
3
"Business" means the business of publishing of telephone directory
products and services consisting principally of searchable (e.g., by alphabet
letter or category) multiple telephone listings and classified advertisements
that are delivered or otherwise made available to end users in tangible media
(e.g., paper directories, CD-ROM) or electronic media (e.g., Internet) as
presently conducted by Seller.
"Business Day" means any day other than a Saturday, a Sunday or a day
on which banks in New York, New York or Denver, Colorado are authorized or
obligated by Law or executive order to close.
"Buyer" is defined in this Agreement's opening paragraph.
"Buyer Indemnified Persons" is defined in Section 9.1.
"Buyer Joinder" means the Joinder, by and between Buyer, the Qwest
Parties and Qwest Corporation, to be entered into at the Closing, substantially
in the form of Exhibit T hereto.
"Buyer Material Adverse Effect" means any change in or effect on Buyer
or the business of Buyer or any part thereof that would materially impair the
validity or enforceability of the Transaction Documents or materially adversely
affect or delay Buyer's ability to consummate the Closing or perform its
obligations under the Transaction Documents; provided that neither of the
following will constitute a Buyer Material Adverse Effect: (a) any change
resulting from or relating to general economic conditions or (b) any change
generally affecting the industries in which Seller operates.
"Buyer Organizational Documents" is defined in Section 4.1.
"Buyer Pension Plan" is defined in Section 6.5(c)(i).
"CBAs" is defined in Section 3.16.
"Closing" means the consummation of the purchase and sale of the LLC
Interests under this Agreement.
"Closing Date" means the date of the Closing.
"Closing Date Working Capital" is defined in Section 2.9(a).
"Closing Purchase Price" is defined in Section 2.8.
"COBRA" is defined in Section 6.5(e).
"Code" means the Internal Revenue Code of 1986, as amended, and the
related regulations and published interpretations.
4
"Commercial Agreement Joinder" means the Joinder, by and between the
Qwest Parties, Qwest Corporation, Company and Buyer, to be entered into at the
Closing, substantially in the form of Exhibit S hereto.
"Commercial Agreements" means the Publishing Agreement (including the
Branding Exhibit (as such term is defined in Exhibit C to the Publishing
Agreement)), the Commercial Agreement Joinder, the Buyer Joinder, the Directory
List License Agreement, the Expanded Use List License Agreement, the Billing and
Collection Agreement, the Joint Management Agreement, the Master Sales Agent
Agreement (to the extent that the parties agree on the terms for such an
agreement between the date hereof and the Closing Date pursuant to Section
5.12), the Noncompetition Agreement, the Professional Services Agreement, the
Public Pay Stations Agreement, the Separation Agreement, the Trademark License
Agreement, the Transition Services Agreement and the Advertising and
Telecommunications Commitments Side Letter.
"Company" is defined in this Agreement's Recitals.
"Company Inbound License Agreements" is defined in Section 3.14(f).
"Confidentiality Agreement" is defined in Section 10.9.
"Content" is defined in Section 3.14(g).
"Contract" means any legally binding agreement, arrangement, bond,
commitment, franchise, indemnity, indenture, instrument, lease or license,
whether or not written.
"Contributed Assets" is defined in Section 2.1 of the Contribution
Agreement.
"Contribution" is defined in Section 2.6(a).
"Contribution Agreement" is defined in Section 2.6(a).
"Controlled Group" is defined in Section 3.17(c).
"Copyrights" is defined in Section 3.14(a).
"Current Assets" means the sum of (a) Local Billed Accounts Receivable,
(b) National Billed Accounts Receivable and (c) affiliate receivables as set
forth in "Accounts receivable, net" line item of the Audited Holding Financial
Statements.
"Current Liabilities" means (i) accounts payable to third-party
vendors, plus (ii) Assumed Affiliate Payables, plus (iii) all other current
liabilities determined, in each case, in a manner consistent with the line items
included in "Total current liabilities" in the Holding Audited Financial
Statements and calculated in accordance with the Agreement Accounting
Principles, except (x) Excluded Current Liabilities, and (y) liabilities
relating to accrued pension and OPEB liabilities and deferred revenue and
customer deposits.
5
"Debt Financing" is defined in Section 4.6.
"Debt Financing Commitment Letter" is defined in Section 4.6.
"Dex Pension Participant" is defined in Section 6.5(c)(i).
"Directory List License Agreement" means the License Agreement for the
Use of Directory Publisher Lists and Directory Delivery Lists by and between
Qwest Corporation and Company to be entered into at the Closing, substantially
in the form of Exhibit E to this Agreement.
"Disclosure Schedule" means Seller's Disclosure Schedule and Buyer's
Disclosure Schedule attached to this Agreement. The sections of each of Seller's
and Buyer's Disclosure Schedule are numbered to correspond to the applicable
Sections of this Agreement and, together with all matters under such heading,
are deemed to qualify only that section; provided, however, that information
included in any section of either Disclosure Schedule will be deemed to be
included in another section of such Disclosure Schedule, but only to the extent
the applicability of such information to that section of such Disclosure
Schedule is reasonably apparent.
"Domain Names" is defined in Section 3.14(a).
"EBITDA" means, with respect to any Person for any period, earnings
before interest, income taxes, depreciation and amortization as each such item
is calculated in accordance with GAAP for such Person during such period.
"EBITDA Difference" means (x) in the event Baseline Adjusted EBITDA
exceeds Audited Adjusted EBITDA, the number calculated by subtracting Audited
Adjusted EBITDA from Baseline Adjusted EBITDA, and (y) in the event Audited
Adjusted EBITDA exceeds Baseline Adjusted EBITDA, the number calculated by
subtracting Baseline Adjusted EBITDA from Audited Adjusted EBITDA.
"EBITDA Multiplier" means 7.4.
"EBITDA Terminating Event" is defined in Section 2.7(a)(iii).
"Employee" is defined in Section 3.17(a).
"Encumbrance" means any claim, charge, easement, encumbrance, lease,
covenant, security interest, lien, option, pledge, rights of others, or
restriction (whether on voting, sale, transfer, disposition or otherwise),
whether imposed by agreement, understanding, Law, equity or otherwise, except
for any restrictions on transfer generally arising under any applicable federal
or state securities law.
"Environmental Laws" means any and all Laws applicable to the
Transferred Business relating to pollution or protection of human health, the
environment or natural resources.
6
"Equity Financing" is defined in Section 4.6.
"Equity Financing Commitment Letter" is defined in Section 4.6.
"Equity Securities" means any capital stock or other equity interest or
any securities convertible into or exchangeable for capital stock or any other
rights, warrants or options to acquire any of the foregoing securities.
"Estimated Excess Working Capital" is defined in Section 2.9(e).
"Estimated Working Capital" is defined in Section 2.8.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the related regulations and published interpretations.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Excluded Affiliate Payables" means all payables to Qwest and its
Affiliates except the Assumed Affiliate Payables.
"Excluded Current Liabilities" means (i) Excluded Affiliate Payables,
(ii) short term borrowings from Affiliates, (iii) current income Taxes payable
by Qwest, (iv) dividends payable to Qwest, (v) merger related reserves, (vi)
general reserves, (vii) errors and omissions reserves (included within the
"Other accrued liabilities" line item in the Holding Audited Financial
Statements), (viii) accrued taxes, (ix) "Capital Funding - Dex Holdings," and
(x) bank overdrafts, in each case, such item determined consistent with the
Holding Audited Financial Statements.
"Excluded Liabilities" has the meaning set forth in Section 2.4 of the
Contribution Agreement.
"Existing Qwest Group" is defined in Section 3.14.
"Expanded Use List License Agreement" means the License Agreement for
the Expanded Use of Subscribed List Database Load and Updates by and between
Qwest Corporation and Company to be entered into at the Closing, substantially
in the form of Exhibit F to this Agreement.
"Filing Party" is defined in Section 6.1(f).
"Final Statement" is defined in Section 2.9(a).
"Financing" is defined in Section 4.6.
"Financing Fees" has the meaning set forth in the Rodney Purchase
Agreement.
"GAAP" means generally accepted accounting principles in the United
States of America as consistently applied.
7
"Governmental Entity" means any government or any agency, bureau,
board, commission, court, department, official, political subdivision, tribunal
or other instrumentality of any government, whether Federal, state or local,
domestic or foreign.
"Hazardous Materials" means all substances, wastes and materials,
including petroleum, petroleum products, asbestos and polychlorinated biphenyls,
that are regulated pursuant to Environmental Laws.
"Headquarters Lease" is defined in Section 5.24 on Exhibit P.
"Holding" is defined in this Agreement's Recitals.
"Holding Audited Financial Statements" means the audited balance sheets
of Holding as at December 31, 2000 and December 31, 2001, and audited statements
of income and cash flows of Holding for the twelve months ended December 31,
1999, December 31, 2000 and December 31, 2001 together with an opinion of
Seller's independent accounting firm containing no exceptions or qualifications.
"Holding Financial Statements" means the Holding Audited Financial
Statements and the Holding Unaudited Financial Statements.
"Holding Unaudited Financial Statements" means the unaudited balance
sheet of Holding as of June 30, 2002 and the unaudited statement of income of
Holding for the six months ended June 30, 2002.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the related regulations and published interpretations.
"Included Claims" is defined in Section 9.4(a).
"Indebtedness" of any Person shall mean, without duplication, (a) all
indebtedness for borrowed money or issued in exchange or substitution for
borrowed money (including amounts drawn against overdraft lines of credit), (b)
all liabilities of such Person evidenced by any note, bond, debenture or other
debt security, (c) all liabilities of such Person for the deferred purchase
price of property with respect to which such Person is liable, contingently or
otherwise, (d) all liabilities under capitalized or synthetic leases with
respect to which such Person is liable, contingently or otherwise, as obligor,
guarantor or otherwise, or with respect to which obligations another Person
ensures a creditor against loss, and (e) liabilities described in clauses (a)
through (d) that are guaranteed in any manner by such Person (including
guarantees in the form of an agreement to repurchase or reimburse) and any fees,
penalties or accrued and unpaid interest on the foregoing.
"Indemnifiable Claim" is defined in Section 9.3(d).
"Indemnified Party" is defined in Section 9.3(a).
"Indemnifying Party" is defined in Section 9.3(a).
8
"Independent Accountants" is defined in Section 2.9(c).
"Initial IP Products" means the software, databases, Content and
similar materials licensed (directly or through an Affiliate of Seller) to
Seller under a material Third Party IP Agreement, which software, databases,
Content or similar materials are essential to the continued operation of the
Transferred Business immediately after the Closing Date, without material and
sustained interruption.
"Inquiry" is defined in Section 5.4(d).
"Insolvent" means, as to any Person, that: (i) (A) the present fair
salable value of its assets is less than the amount that will be required to pay
its probable liability on its existing debts as they become absolute and matured
or (B) the sum of such Person's debts (as such term is defined in Section 101 of
the Bankruptcy Code) is greater than all of its property, at a fair valuation,
exclusive of property transferred, concealed, or removed with intent to hinder,
delay or defraud its creditors; (ii) such Person is a defendant in an action for
money damages and is reasonably likely to be unable to satisfy any judgment
which has been rendered against it in such action; (iii) such Person is engaged
or about to engage in a business or transaction for which the property remaining
in its hands after the conveyance is an unreasonably small capital; (iv) such
Person intends or believes that it will incur debts beyond its ability to pay as
they mature; (v) such Person is entering into the Transactions or incurring any
obligation in connection with the Transaction Documents with the intent to
hinder, delay or defraud any of its creditors to which such Person is indebted
on the Closing Date or any creditor to which it might become indebted after the
Closing Date; (vi) such Person admits in writing that it will be unable to pay
its debts as they come due or is generally not paying its debts as they come
due; (vii) such Person has an involuntary case or other proceeding commenced
against it which seeks liquidation, reorganization or other relief with respect
to its debts or other liabilities under the Bankruptcy Code or any other
bankruptcy, insolvency or similar law then in effect; (viii) such Person has had
a receiver, liquidator, custodian or other similar official appointed for it or
any material part of its property or seeks the appointment of such an official
for it or any material part of its property; (ix) such Person commences a
voluntary case or other proceeding seeking liquidation, reorganization or other
relief with respect to itself or its debts or other liabilities under the
Bankruptcy Code or any other bankruptcy, insolvency or similar law; (x) such
Person has made a general assignment for the benefit of creditors; or (xi) such
Person has been adjudged or admitted that it is an insolvent or bankrupt.
"Intellectual Property" means, collectively, the Trademarks, Patents,
Copyrights, Domain Names and Trade Secrets.
"Intercompany Agreement" is defined in Section 3.11.
"Inter-Party Claim" is defined in Section 9.3(d).
"IP Contribution Agreement" is defined in Section 2.6(a).
"IP Products" means the Initial IP Products and the Additional IP
Products.
"IRS" means the Internal Revenue Service.
9
"IT Assets" is defined in Section 5.19 on Exhibit P.
"IT Assets Financer" is defined in Section 5.19 on Exhibit P.
"Joint Defense and Common Interest Agreement" means the Joint Defense
and Common Interest Agreement dated as of the date hereof between Buyer and
Qwest relating to the control and disposition of any Action or Inquiry that may
arise in connection with the Transactions.
"Joint Management Agreement" means the Joint Management Agreement by
and between Seller and Company to be entered into at the Closing, substantially
in the form of Exhibit Q of this Agreement.
"Knowledge" means (i) with respect to Seller, the actual knowledge of
[redacted] and (ii) with respect to Buyer, [redacted].
"Law" means any constitutional provision, statute, ordinance or other
law, rule or regulation of any Governmental Entity and any Order.
"LCI" means LCI International, Inc., a Delaware corporation.
"LLC Interests" is defined in this Agreement's Recitals.
"Local Billed Accounts Receivable" means accounts receivable for local
third-party advertisers, determined in a manner consistent with the "Accounts
receivables net" line item in the Holding Audited Financial Statements. Local
Billed Accounts Receivable will be calculated net of related reserves and
otherwise in accordance with the Agreement Accounting Principles.
"Loss" means any cost, damage, disbursement, expense, liability, loss,
obligation, penalty or settlement, including interest or other carrying costs,
legal, accounting and other professional fees and expenses incurred in the
investigation, collection, prosecution and defense of claims and amounts paid in
settlement, that may be imposed on or otherwise incurred or suffered by the
referenced Person.
"Master Sales Agent Agreement" means the Master Sales Agent Agreement
by and between Qwest Corporation and Company to be entered into at the Closing
pursuant to Section 5.12.
"Material Adverse Effect" means (a) any change in or effect on Company
or the Transferred Business as conducted on the date hereof that would be
materially adverse to the business, assets, properties, results of operations or
financial condition of Company or the Transferred Business, taken as a whole, or
(b) any change in or effect on Qwest or any of its Subsidiaries that is a party
to a Commercial Agreement that materially and adversely affects such party's
material ability to perform its obligations under any Commercial Agreement;
provided that Material Adverse Effect shall not include any change (i) generally
affecting the industries in which Seller or Company operates, or (ii) to the
extent resulting from or relating to general economic conditions.
10
"Material Contract" means each Contract to which Seller or, following
the Contribution, Company is a party or to which Seller or, following the
Contribution, Company or any of its properties is subject or by which any
thereof is bound and, in each case, that relates to the Transferred Business
that (a) is for the purchase of materials, supplies, goods, services, equipment
or other assets that (i)(A) has a remaining term, as of the date of this
Agreement, of over 180 days in length of obligation on the part of Seller or
Company or which is not terminable by Seller or Company within 180 days without
penalty, and (B) provides for a payment by Seller or Company in any year of $2
million or more, or (ii) provides for aggregate payments by Seller or Company of
$4 million or more; (b) is a sales, distribution, services or other similar
agreement providing for the sale by Seller or Company of materials, supplies,
goods, services, equipment or other assets that (i) has a remaining term, as of
the date of this Agreement, of over 180 days in length of obligation on the part
of Seller or Company or which is not terminable by Seller or Company within 180
days without penalty, and (ii) provides for a payment to Seller or Company in
any year of $2 million or more; (c) is a lease that (i) has a remaining term, as
of the date of this Agreement, of over 180 days in length of obligation on the
part of Seller or Company or which is not terminable by Seller or Company within
180 days without penalty, and (ii) provides for annual rentals of $4 million or
more; (d) limits or restricts the ability of Seller or Company to compete or
otherwise to conduct the Transferred Business in any material manner or place;
(e) is a contract relating to Indebtedness; (f) provides for a guaranty for
borrowed money by Seller or Company or in respect of any Person other than
Seller or Company; or (g) creates a partnership or joint venture.
"National Billed Accounts Receivable" means accounts receivable from
national advertisers, determined in a manner consistent with the "Accounts
receivables net" line item in the Holding Audited Financial Statements. National
Billed Accounts Receivable will be calculated net of related reserves and
otherwise in accordance with the Agreement Accounting Principles.
"Net Billed Receivables" means Local Billed Accounts Receivable and
National Billed Accounts Receivable.
"Noncompetition Agreement" means the Non-Competition and
Non-Solicitation Agreement by and between the Qwest Parties and Qwest
Corporation, on the one hand, and Buyer and Company, on the other hand, to be
entered into at the Closing, substantially in the form of Exhibit M to this
Agreement.
"Order" means any decree, injunction, judgment, order, ruling,
assessment or writ.
"Patents" is defined in Section 3.14(a).
"PBGC" means the Pension Benefit Guaranty Corporation.
"Pension Plan" is defined in Section 3.17(a).
"Performance Collateral" is defined in Section 8.2(b).
"Performance Security Interest" is defined in Section 8.2(b).
11
"Periodic Taxes" is defined in Section 6.1(d).
"Permit" means any license, permit, franchise, certificate of
authority, or any waiver of the foregoing, required to be issued by any
Governmental Entity.
"Permitted Encumbrances" means: (a) statutory Encumbrances not yet
delinquent or the validity of which are being contested in good faith by
appropriate actions; (b) Encumbrances, with respect to the properties or assets
of Seller relating to the Transferred Business or Company, that do not
individually or in the aggregate, materially impair or materially interfere with
the present use of the properties or assets or otherwise materially impair
present business operations at such properties; (c) Encumbrances for Taxes,
assessments and other governmental charges not yet delinquent or the validity of
which are being contested in good faith by appropriate actions; (d) as to real
property, (i) leases and subleases to third party tenants, (ii) the terms and
conditions of the leases pursuant to which Seller or Company is a tenant, (iii)
matters shown on a survey, (iv) zoning laws and other governmental land use
restrictions, and (v) existing utility, access and other easements and rights of
way of record and imperfections of title; and (e) Encumbrances identified in
Section 1.2PE of Seller's Disclosure Schedule (provided that Seller shall cause,
prior to the Closing, any material Encumbrance identified in Section 1.2PE
(other than security interests relating to operating leases of office equipment)
to have been released).
"Person" means an association, a corporation, an individual, a
partnership, a limited liability company, a trust or any other entity or
organization, including a Governmental Entity.
"Post-Closing Covenants" is defined in Section 8.3.
"PPD Accounts Payable" means accounts payable to third party paper,
printing and distribution vendors.
"Pre-Closing Tax Period" is defined in Section 6.1(a)(ii).
"Preliminary Closing Date Statement" is defined in Section 2.8.
"Prevailing Party" is defined in Section 2.9(c).
"Pro Rata" means, with respect to any cost or expense to be borne by
Seller and Company, fifty-seven percent (57%) with respect to Seller and
forty-three percent (43%) with respect to Company.
"Proceeds" shall have the meaning ascribed to it in the revised Article
9 of the Uniform Commercial Code as enacted in the State of New York and in
effect on the date hereof.
"Professional Services Agreement" means the Professional Services
Agreement by and between Seller and Company to be entered into at the Closing,
substantially in the form of Exhibit H to this Agreement.
"Proprietary Data" is defined in Section 5.19 on Exhibit P.
12
"Proration Periods" is defined in Section 6.1(d).
"Prospective Transferred Employees" is defined in Section 5.22(b) on
Exhibit P.
"Prospective Transferred Employees List" is defined in Section 5.22(b)
on Exhibit P.
"Public Pay Stations Agreement" means the Public Pay Stations Agreement
by and between Qwest Corporation and Company to be entered into at the Closing,
substantially in the form of Exhibit I to this Agreement.
"Publishing Agreement" means the Publishing Agreement for Official
Listings/Directories by and between Qwest Corporation and Company to be entered
into at the Closing, substantially in the form of Exhibit D to this Agreement.
"Purchase Price" is defined in Section 2.2.
"Purchase Price Allocation" is defined in Section 6.2(b).
"QSC" is defined in this Agreement's opening paragraph.
"Qwest" is defined in this Agreement's opening paragraph.
"Qwest Authorizations" is defined in Section 3.22.
"Qwest Corporation" means Qwest Corporation, a Colorado corporation.
"Qwest Parties" is defined in this Agreement's opening paragraph.
"Qwest States" is defined in Section 3.22.
"Qwest Transaction Parties" means the Qwest Parties and Qwest
Corporation.
"Region" means the seven state territory comprised of Colorado, Iowa,
Minnesota, Nebraska, New Mexico, North Dakota and South Dakota and the standard
metropolitan statistical area of El Paso, Texas.
"Reimbursable Expenses" means the reasonable out-of-pocket fees and
expenses (including financial advisory, legal, accounting and consulting fees
and expenses, but excluding Financing Fees) incurred and paid by Buyer in
connection with this Agreement and the Transactions through the date on which
this Agreement terminates; provided that in no event shall Reimbursable Expenses
exceed $7,500,000.
"Representatives" is defined in Section 5.1.
"Resigning Officers" is defined in Section 7.2(e).
"Retained Employees" is defined in Section 5.22(b) on Exhibit P.
13
"Retained Facilities" is defined in Section 5.25 on Exhibit P.
"Rodney LLC" is defined in this Agreement's Recitals.
"Rodney IP Products Condition" is defined in Section 5.18(d) on Exhibit
P.
"Rodney Purchase Agreement" is defined in this Agreement's Recitals.
"Rodney Region" has the meaning set forth in the Rodney Purchase
Agreement.
"SEC" means the Securities and Exchange Commission.
"Second Closing" means the consummation of the purchase and sale of the
interests in Rodney LLC under the Rodney Purchase Agreement.
"Securities Act" means the Securities Act of 1933, as amended.
"Seller" is defined in this Agreement's opening paragraph.
"Seller Benefit Plan" is defined in Section 3.17(a).
"Seller Indemnified Persons" is defined in Section 9.2.
"Senior Debt" is defined in Section 8.2(b).
"Separation Agreement" means the Separation Agreement by and between
Qwest and Seller, on the one hand, and Buyer and Company, on the other hand, to
be entered into at the Closing, substantially in the form of Exhibit L to this
Agreement.
"Separation IP Covenant" is defined in Section 5.18(d) of Exhibit P.
"State PUCs" means the public utility commissions or similar state
regulatory agencies or bodies that regulate the business of Qwest Corporation in
each of the states.
"Subsidiary" means, with respect to any Person, any Person in which
such Person has a direct or indirect equity ownership interest in excess of 50%.
"Tax" means any United States federal, state or local or any non-United
States net or gross income, gross receipts, net proceeds, corporation, capital
gains, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Section 59A of
the Code), customs, capital stock, franchise, profits, withholding, social
security (or similar), unemployment, disability, real property, personal
property, sales, inheritance, use, transfer, registration, value added,
alternative or add-on minimum, or other taxes, assessments, duties, fees, levies
or other governmental charges of any kind whatever, whether disputed or not,
including any interest, penalty or addition thereto.
"Tax Return" means a report, return, or other information required to
be supplied to a Governmental Entity with respect to Taxes including, where
permitted or required, combined, consolidated or other similar returns for any
group of entities that includes Company.
14
"Termination Date" is defined in Section 8.1(h).
"Third-Party Claim" is defined in Section 9.3(b).
"Third Party Consent" means any approval, consent or waiver required to
be obtained from or any notice required to be delivered to any Person other than
any Governmental Entity.
"Third Party IP Agreements" is defined in the IP Contribution
Agreement.
"Trade Secrets" is defined in Section 3.14(e).
"Trademark License Agreement" means the Trademark License Agreement by
and between Qwest and Company to be entered into at the Closing, substantially
in the form of Exhibit J to this Agreement.
"Trademarks" is defined in Section 3.14(a).
"Transaction Documents" means this Agreement, the Contribution
Agreement, and the IP Contribution Agreement.
"Transactions" means the contribution of assets and liabilities of the
Transferred Business to Company pursuant to the Contribution Agreement and the
IP Contribution Agreement, the granting of the Performance Security Interests,
the sale of the LLC Interests and the other transactions contemplated by the
Transaction Documents.
"Transferable Copyrights" is defined in Section 3.14(d).
"Transferable Domain Names" is defined in Section 3.14(g).
"Transferable Patents" is defined in Section 3.14(c).
"Transferable Trademarks" is defined in Section 3.14(b).
"Transferred Business" means the Business as presently conducted of
Seller as it relates to the Region.
"Transferred Business Audited Financial Statements" is defined in
Section 5.6(a).
"Transferred Business Financial Statements" is defined in Section
5.6(a).
"Transferred Business Unaudited Financial Statements" is defined in
Section 5.6(a).
"Transferred Employee" is defined in Section 6.5(a).
"Transferred Facilities" is defined in Section 5.23 on Exhibit P.
"Transferred Facilities Leases" is defined in Section 5.23 on Exhibit
P.
15
"Transferred Net Billed Receivables" is defined in Section 2.9(e).
"Transition Services Agreement" means the Transition Services Agreement
by and between Qwest and Seller, on the one hand, and Buyer and Company, on the
other hand, to be entered into at the Closing, substantially in the form of
Exhibit K to this Agreement.
"UCC" is defined in Section 8.2(b).
"WARN Act" is defined in Section 5.8(a).
"Welfare Plan" is defined in Section 3.17(a).
"Working Capital" means, as of any date, the difference between (a)
Current Assets of the Transferred Business and (b) Current Liabilities of the
Transferred Business. Closing Date Working Capital and Working Capital Target
shall be determined in a consistent manner, except with respect to the sentence
in the Working Capital Target addressing Taxes.
"Working Capital Adjustment" is defined in Section 2.9(a).
"Working Capital Adjustment Factor" means 1.03.
"Working Capital Target" means, for the month in which the Closing Date
occurs, (i) the sum of (A) the monthly average of Local Billed Accounts
Receivable for the prior 12 months plus (B) the National Billed Accounts
Receivable balance as the end of such month in the prior year, as adjusted by
the Timing Adjustment, plus (C) the monthly average of affiliate receivables as
set forth in "Accounts receivable, net" line item of the Audited Holding
Financial Statements for the prior 12 months, minus (ii) the sum of (A) the
monthly average of Current Liabilities (other than PPD Accounts Payable) for the
prior 12 months plus (B) the PPD Accounts Payable balance as the end of such
month in the prior year, as adjusted by the Timing Adjustment, multiplied by
(iii) the Working Capital Adjustment Factor. In determining the Working Capital
Target, the value of any accounts receivable will be determined by subtracting
out of such accounts receivable the amount of any sales Tax, gross receipts Tax
or like Taxes that are borne by the customer and that are attributable to
Pre-Closing Tax Periods. The "Timing Adjustment" means (i) to the extent that a
specific directory has not been shipped prior to the Closing Date but there
exists an entry in the prior year's corresponding month end National Billed
Accounts Receivable and PPD Accounts Payables balances with respect to such
directory, the Working Capital Target will be reduced to reflect that such
directory has not yet been shipped, and (ii) to the extent that the shipment of
a specific directory prior to the Closing Date results in an entry in National
Billed Accounts Receivable and PPD Accounts Payables but entries for such
directory were not included in the prior year corresponding month end National
Billed Accounts Receivable and PPD Accounts Payables balances, the Working
Capital Target will be increased by such amount.
ARTICLE II
SALE AND PURCHASE OF LLC INTERESTS; CLOSING; CONTRIBUTION
2.1 Sale of LLC Interests by Seller. Subject to the terms and
conditions of this Agreement, Seller agrees to sell the LLC Interests free and
clear of all Encumbrances to Buyer at the Closing. The transfer of the LLC
Interest from Seller to Buyer shall be in a form acceptable for transfer on the
books of Company.
16
2.2 Purchase of the LLC Interests by Buyer. Subject to the terms and
conditions of this Agreement, Buyer agrees to purchase the LLC Interests from
Seller for the Base Purchase Price. The Base Purchase Price is subject to
adjustment prior to and after the Closing pursuant to Sections 2.7, 2.8 and 2.9
below (as finally adjusted, the "Purchase Price").
2.3 The Closing. The Closing will take place at the offices of
O'Melveny & Myers LLP, 153 East 53rd Street, New York, NY 10022 on the third
Business Day following the satisfaction or waiver of the conditions in Article
VII (other than conditions that, by their nature, are to be satisfied on the
Closing Date), or at such other time and place as Seller and Buyer may agree.
Subject to the provisions of Article VIII, failure to consummate the purchase
and sale provided for in this Agreement on the date and time and at the place
determined pursuant to this Section 2.3 will not result in the termination of
this Agreement and will not relieve any party of any obligation under this
Agreement.
2.4 Deliveries by Seller. In addition to the documents necessary to
transfer the LLC Interests on the books of Company, at the Closing, the Qwest
Parties will deliver or cause to be delivered to Buyer (unless delivered
previously) the following: (a) all Third Party Consents listed in Section 3.4 of
the Seller's Disclosure Schedule that have been obtained prior to Closing; (b)
the resignations of the Resigning Officers; (c) the certificates required by
Sections 7.2(f) and 7.2(h); (d) duly executed copies of the Transaction
Documents; (e) duly executed copies of the Commercial Agreements; (f) the
fairness opinion(s) required pursuant to Section 7.2(l); (g) the opinions of
counsel required pursuant to Section 7.2(m); and (h) all other documents,
instruments and writings required to be delivered by Seller on or prior to the
Closing Date pursuant to this Agreement.
2.5 Deliveries by Buyer. At the Closing, Buyer will pay the Closing
Purchase Price (as defined in Section 2.8 below) to Seller in cash by wire
transfer in immediately available funds. In addition, at the Closing, Buyer will
deliver or cause to be delivered to Seller (unless delivered previously) the
following: (a) the certificates of Buyer required by Sections 7.3(d) and 7.3(g);
(b) all Third Party Consents listed in Section 4.5 of Buyer's Disclosure
Schedule that have been obtained prior to Closing; (c) a duly executed copy of
the Transaction Documents and the Commercial Agreements, to the extent Buyer is
a party thereto; (d) the opinion of counsel required pursuant to Section 7.3(h);
and (e) all other documents, instruments and writings required to be delivered
by Buyer on or prior to the Closing Date pursuant to this Agreement.
2.6 The Contribution.
(a) Prior to the Closing and pursuant to the Contribution Agreement
attached hereto as Exhibit B (the "Contribution Agreement") and the Intellectual
Property Contribution Agreement attached hereto as Exhibit C (the "IP
Contribution Agreement"), Seller will contribute to Company (the "Contribution")
all of its right, title and interest in and to certain assets relating to the
Transferred Business, and shall cause Company to assume certain liabilities of
the Transferred Business, all on the terms and conditions set forth in the
Contribution Agreement and the IP Contribution Agreement.
17
(b) Immediately prior to the Closing, QSC shall contribute to Seller
and Seller shall contribute to Company all of the issued and outstanding capital
stock of LCI and shall deliver to Company the certificates evidencing such
stock. The certificates will be properly endorsed for transfer to, or
accompanied by a duly executed stock power in favor of, Company and otherwise in
a form acceptable for transfer on the books of LCI.
(c) The parties hereto acknowledge and agree that nothing in this
Agreement shall be deemed to prohibit the consummation of the Contribution and
that the consummation of the Contribution shall not constitute a breach of any
provision of this Agreement, including Section 5.2.
2.7 Post-Signing Purchase Price Adjustment; Exclusivity of Audit
Adjustment Remedy.
(a) No later than 30 Business Days prior to the Closing Date, Seller
shall deliver the Transferred Business Financial Statements to Buyer pursuant to
Section 5.6 hereof. In the event that Audited Adjusted EBITDA shall be:
(i) less than Baseline Adjusted EBITDA but equal to or
greater than 90% of Baseline Adjusted EBITDA, then the Base Purchase
Price shall be decreased by an amount equal to the product of (x) the
EBITDA Multiplier and (y) the EBITDA Difference; and
(ii) more than Baseline Adjusted EBITDA but equal to or
less than 105% of Baseline Adjusted EBITDA, then the Base Purchase
Price shall be increased by an amount equal to the product of (x) the
EBITDA Multiplier and (y) the EBITDA Difference; and
(iii) less than 90% of Baseline Adjusted EBITDA or more
than 105% of Baseline Adjusted EBITDA (an "EBITDA Terminating Event"),
then the Base Purchase Price will be either (x) decreased to
$2,449,338,000 (if Audited Adjusted EBITDA is less than 90% of Baseline
Adjusted EBITDA), or (y) increased to $2,900,331,000 (if Audited
Adjusted EBITDA is more than 105% of Baseline Adjusted EBITDA), unless
either party elects to terminate this Agreement in accordance with
Section 8.1(g) hereof.
(b) Notwithstanding anything to the contrary herein, the adjustment
to the Base Purchase Price, if any, under Sections 2.7(a)(i), (ii) or (iii) and
the right of termination, if any, under Section 8.1(g) relating thereto shall
constitute Buyer's sole and exclusive remedies for (i) Audited Adjusted EBITDA
being less than Baseline Adjusted EBITDA and (ii) the causes of Audited Adjusted
EBITDA being less than Baseline Adjusted EBITDA or the circumstances that gave
rise thereto but only to the extent that the economic impact of such causes or
circumstances are reflected in Audited Adjusted EBITDA.
2.8 Pre-Closing Working Capital Purchase Price Adjustment. At least
three Business Days prior to the Closing Date, Seller will prepare and present
to Buyer a statement (the "Preliminary Closing Date Statement") setting forth
Seller's good faith estimate of Company's Working Capital as of the close of
business on the Closing Date ("Estimated Working Capital"). The Base Purchase
18
Price or Adjusted Base Purchase Price, as the case may be, will be either (x)
increased by an amount equal to the excess, if any, of (i) Estimated Working
Capital over (ii) the Working Capital Target as of the Closing Date, or (y)
decreased by an amount equal to the excess, if any, of (i) the Working Capital
Target, as of the Closing Date, over (ii) Estimated Working Capital. The Base
Purchase Price or Adjusted Base Purchase Price, as the case may be, as increased
or decreased pursuant to this Section 2.8, is referred to as the "Closing
Purchase Price."
2.9 Post-Closing Working Capital Purchase Price Adjustment. The
Closing Purchase Price is subject to further adjustment after the Closing Date
in accordance with the following procedure:
(a) Within 90 days after the Closing Date, Seller will prepare and
present to Buyer a statement (the "Final Statement") setting forth (x) Seller's
calculation of Working Capital as of the close of business on the Closing Date
(the "Closing Date Working Capital") and (y) Seller' determination of the
aggregate increase or decrease to the Base Purchase Price or the Adjusted
Purchase Price, as the case may be, without taking into account any payment made
pursuant to Section 2.8 (the "Working Capital Adjustment"). Seller will prepare
the Final Statement on a consistent basis with the Preliminary Closing Date
Statement and in accordance with the Agreement Accounting Principles. Buyer
shall, and shall cause Company to, assist Seller and its Representatives in the
preparation of the Final Statement and shall provide Seller and its
Representatives access at reasonable times and upon reasonable notice to the
personnel, properties, books and records of Company and Buyer for such purpose.
(b) Buyer and its accountants will have the right to review all work
papers and calculations of Seller and its accountants utilized in preparing the
Final Statement. The Final Statement will be binding on Buyer unless Buyer
presents to Seller, within 30 days after its receipt of the Final Statement from
Seller, written notice of disagreement specifying in reasonable detail the
nature and extent of the disagreement. Buyer agrees that it shall not propose
adjustments to or dispute portions of the Final Statement if such adjustments or
disputes involve changes in or question the accounting principles, methodology
or practices of Seller that are in conformity with the Agreement Accounting
Principles used in determining Closing Date Working Capital.
(c) If Seller and Buyer are unable to resolve any disagreement with
respect to the Final Statement within 30 days after Seller receives a timely
notice of disagreement, the items of disagreement alone will be promptly
referred for final determination to Ernst & Young LLP or, if such firm is unable
or unwilling to make such final determination, to such other independent
accounting firm as the parties mutually designate. The accounting firm making
such determination is referred to as the "Independent Accountants". The Final
Statement will be deemed to be binding on Buyer and Seller upon: (i) Buyer's
failure to deliver to Seller a notice of disagreement within 30 days after it
receives the Final Statement; (ii) resolution of any disagreement by mutual
agreement of Seller and Buyer after a timely notice of disagreement has been
delivered to Seller; or (iii) notification by the Independent Accountants of
their final determination of the items of disagreement submitted to them. The
fees and disbursements of the Independent Accountants will be borne by the party
that is not the "prevailing party." The prevailing party will mean the party
whose final submission to the Independent Accountants is closest to the final
19
determination made by the Independent Accountants, regardless of whether such
final determination requires the submitting party to make a payment to the other
party pursuant to Section 2.9(d) below.
(d) If the Base Purchase Price or Adjusted Purchase Price plus or
minus the Working Capital Adjustment is greater than the Closing Purchase Price,
Buyer shall pay to Seller the difference. If the Base Purchase Price or Adjusted
Purchase Price plus or minus the Working Capital Adjustment is less than the
Closing Purchase Price, Seller shall pay to Buyer the difference. Payments made
pursuant to this Section 2.9(d) shall be made by wire transfer in immediately
available funds within five (5) Business Days after the Final Statement becomes
binding on Buyer and Seller pursuant to Section 2.9(c) above.
(e) Notwithstanding the foregoing, if Estimated Working Capital
exceeds the Working Capital Target as of the Closing Date by more than
$20,000,000 (the amount of such excess "Estimated Excess Working Capital"), at
Buyer's election, in lieu of paying Seller an amount of cash equal to such
Estimated Excess Working Capital, Buyer may pay such amount in kind by
transferring to Seller Net Billed Receivables in an amount (the "Transferred Net
Billed Receivables") sufficient to yield cash to Seller equal to such Estimated
Excess Working Capital. Such Transferred Net Billed Receivables constitute the
property of Seller, provided that Buyer will collect such Transferred Net Billed
Receivables in the same manner and with the same care as its own receivables.
Specific receivables constituting Transferred Net Billed Receivables shall be a
representative cross selection of the Net Billed Receivables and shall be
selected by Seller.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
THE QWEST PARTIES
Except as otherwise indicated on Seller's Disclosure Schedule, the
Qwest Parties represent and warrant as of the date hereof as follows:
3.1 Organization and Related Matters. Each of the Qwest Transaction
Parties is a corporation duly incorporated, validly existing and in good
standing under the laws of the state of its incorporation. Company is a limited
liability company duly organized, validly existing and in good standing under
the laws of the state of its organization. Each of the Qwest Transaction Parties
has all necessary corporate power and authority to execute, deliver and perform
the Transaction Documents and Commercial Agreements to which it is a party. Each
of the Qwest Transaction Parties and Company has all necessary corporate power
and authority to own license or lease its properties and to carry on its
business as now being conducted and, except as otherwise indicated on Section
3.1 of Seller's Disclosure Schedule, is duly qualified or licensed to do
business as a foreign corporation in good standing in all jurisdictions in which
the nature of its business requires licensing or qualification, except where the
failure to be so qualified or licensed would not, individually or in the
aggregate, reasonably be expected to result in a Material Adverse Effect.
20
3.2 Authorization; No Conflicts.
(a) The execution, delivery and performance of each of the
Transaction Documents and Commercial Agreements to which any of the Qwest
Transaction Parties is a party have been duly and validly authorized by all
necessary corporate action on the part of such Qwest Transaction Party. The
Transaction Documents and Commercial Agreements to which any Qwest Transaction
Party is a party constitute (or will upon execution constitute) the legally
valid and binding obligations of such Qwest Transaction Party, enforceable
against such Qwest Transaction Party in accordance with their respective terms
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws and equitable principles
relating to or limiting creditors' rights generally. The Transaction Documents
and Commercial Agreements to which Company is a party constitute (or will upon
execution constitute) the legally valid and binding obligations of Company,
enforceable against Company in accordance with their respective terms except as
such enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and other similar laws and equitable principles relating to or
limiting creditors' rights generally.
(b) The Qwest Transaction Parties' respective execution, delivery and
performance of the Transaction Documents and Commercial Agreements to which any
of them is a party will not (i) violate, or constitute a breach or default
under, (A) such parties' respective certificates of incorporation or bylaws or
(B) except as set forth on Section 3.2(b) of Seller's Disclosure Schedule, any
Material Contract to which any of them is a party or under which any of their
material assets are bound, except for any violations of or breaches or defaults
under any Material Contract that would not, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect, or (ii) result in
the imposition of any material Encumbrance, other than Permitted Encumbrances,
against all or any portion of the Transferred Business. Subject to obtaining the
Approvals and Permits listed in Section 3.4 of Seller's Disclosure Schedule, the
Qwest Transaction Parties' respective execution, delivery and performance of the
Transaction Documents and Commercial Agreements to which any of them is a party
will not violate any Law in any material respect.
3.3 Legal Proceedings. Section 3.3 of Seller's Disclosure Schedule
lists each Order or Action pending or, to Seller's Knowledge, threatened against
Seller that individually or when aggregated with one or more other Orders or
Actions has or if determined adversely would reasonably be expected to have a
Material Adverse Effect or materially impair or delay either Seller's ability to
consummate the Closing or Seller's ability to perform its obligations under this
Agreement.
3.4 Approvals and Third Party Consents. Section 3.4 of Seller's
Disclosure Schedule lists any Approvals or Permits and any material Third Party
Consents by any Person not a party to this Agreement required in connection with
the execution or performance of this Agreement and the other Transaction
Documents by the Qwest Parties and the consummation of the Transactions, except
for any applicable requirements of the Securities Act, the Exchange Act, the HSR
Act and any applicable filings under state securities laws.
3.5 Capitalization. Section 3.5 of Seller's Disclosure Schedule sets
forth the capitalization of Company. Seller owns all of the LLC Interests,
beneficially and of record and free and clear of any Encumbrance. Other than the
21
LLC Interests, there are no issued and outstanding Equity Securities of Company.
There are no outstanding Contracts or other rights to subscribe for or purchase,
or Contracts or other obligations to issue or grant any rights to acquire, any
Equity Securities of Company. There are no outstanding Contracts of Company to
repurchase, redeem or otherwise acquire any Equity Securities of Company. The
LLC Interests are duly authorized, validly issued, fully paid and nonassessable
and are not subject to and have not been issued in violation of any preemptive
rights or in violation of any federal or state securities laws.
3.6 Financial Information.
(a) Financial Statements. The Holding Financial Statements have been,
and the Transferred Business Financial Statements when delivered pursuant to
Section 5.6 below will have been, prepared from the books and records of Holding
and Seller in accordance with GAAP (except, in the case of the Holding Unaudited
Financial Statements and the Transferred Business Unaudited Financial
Statements, subject to normal year-end adjustments and the absence of notes)
applied on a consistent basis throughout the periods involved and present and
will present fairly, in all material respects, the information set forth
therein.
(b) Certain Changes. Except as set forth in Section 3.6(b) of
Seller's Disclosure Schedule, since December 31, 2001 to the date hereof, (i)
Seller has conducted the Transferred Business in the ordinary course consistent
with past practice, (ii) Seller has not sold any material assets necessary to
the conduct of the Transferred Business, other than in the ordinary course of
business, and (iii) Seller has not entered into any agreement, arrangement or
undertaking to do any of the foregoing. Except as set forth in Section 3.6(b) of
Seller's Disclosure Schedule, since December 31, 2001, (x) there has not been,
occurred or arisen any change or event that would reasonably be expected to
constitute a Material Adverse Effect and (y) there have not been any material
changes in the accounting methods, principles, practices or policies of Seller
(other than changes required by changes in GAAP),
(c) No Other Liabilities or Contingencies. Seller has not incurred
any liabilities with respect to the Transferred Business that would be required
in accordance with GAAP to be disclosed in a balance sheet of the Transferred
Business except liabilities (i) that are disclosed in the balance sheet attached
as Section 3.6(c)(1) of Seller's Disclosure Schedule, (ii) that are disclosed in
Section 3.6(c)(2) of Seller's Disclosure Schedule, (iii) that were incurred
after December 31, 2001 in the ordinary course of business, (iv) that are
Excluded Liabilities or (v) that would not reasonably be expected to have a
Material Adverse Effect.
3.7 Real and Personal Property; Title to Property; Leases. Seller has
(and, at Closing, Company will have) good, and in the case of real property,
marketable, title to or other right to use pursuant to leases, free of
Encumbrances other than Permitted Encumbrances, (a) all items of real property
necessary to the conduct of the Transferred Business as conducted on the date
hereof, including fees, leaseholds and other interests in such real property,
and (b) such other tangible assets and properties that are necessary to the
conduct of the Transferred Business as conducted on the date hereof, except, (i)
assets and properties that may be necessary to the conduct of the Transferred
Business and that will be provided or otherwise made available to Company or
Buyer pursuant to the Commercial Agreements, and (ii) in the case of tangible
22
assets and properties only, where the failure to have such title or right to use
would not, individually or in the aggregate, reasonably be expected to result in
a Material Adverse Effect. Section 3.7 of Seller's Disclosure Schedule lists all
parcels of real property leased to Seller and used in the conduct of the
Transferred Business as conducted on the date hereof and each such lease is
valid and enforceable except where the failure to be valid and enforceable would
not, individually or in the aggregate, reasonably be expected to result in a
Material Adverse Effect.
3.8 Material Contracts. Section 3.8 of the Seller's Disclosure
Schedule lists, as of the date hereof, each Material Contract. True copies of
the agreements identified in Section 3.8 of the Seller's Disclosure Schedule,
including all amendments and supplements, have been made available to Buyer. As
of the date hereof, each Material Contract is valid and in full force and effect
according to its terms, and Seller has performed its obligations thereunder in
all material respects (to the extent such obligations have accrued) and is not
in default or breach under any such Material Contract, except where such failure
to be in full force and effect or default or breach would not, individually or
in the aggregate, reasonably be expected to result in a Material Adverse Effect.
Except as set forth in Section 3.8 of the Seller's Disclosure Schedule,
consummation of the Transactions will not (and will not give any Person a right
to) terminate or modify any material rights of, or accelerate or augment any
material obligation of, Seller under any Material Contract, or cause or give the
right to claim any payment for the assignment or any qualification of any
Material Contract, except for any of the foregoing that would not reasonably be
expected to result in a Material Adverse Effect.
3.9 Tax Returns and Reports.
(a) Each of Seller, Company and LCI and their respective Subsidiaries
has timely filed (or, where applicable, have had timely filed on their behalf)
all material Tax Returns required to be filed thereby on or before the date
hereof and has paid all Taxes for which they are liable (whether or not shown to
be due thereon). All such Tax Returns, including amendments to date, have been
prepared in good faith without negligence or willful misrepresentation and are
complete and accurate in all material respects. Company has not made any
election to be taxed as a corporation for any United States federal, state or
local income tax purposes, and where necessary, each of Seller and its
Affiliates has consented to include the income of Company in their respective
taxable income for state or local income tax purposes.
(b) There are no material Encumbrances for Taxes upon the Contributed
Assets (other than Permitted Encumbrances). No Governmental Entity has, in
writing, proposed (tentatively or definitely), asserted or assessed or, to
Seller's Knowledge, threatened to propose or assert any deficiency, assessment
or claim for Taxes against any of Seller, Company, LCI or their respective
Subsidiaries that has not been fully paid or settled. Each of Seller, Company,
LCI and their respective Subsidiaries has withheld and paid all material Taxes
required to have been withheld and paid in connection with amounts paid or owing
to any Employee, former Employee, creditor, independent contractor, shareholder,
customer, supplier or other third party. Except as set forth on Section 3.9 of
Seller's Disclosure Schedule, none of Company, LCI or their respective
Subsidiaries is a party to any agreement extending the time within which to file
any Tax Return due on or before the Closing Date that has not been filed, or
extending the time for assessment of any Tax. None of Seller, Company, LCI or
their respective Subsidiaries has received written notice from any Governmental
23
Entity in a jurisdiction in which such entity does not file a Tax Return stating
that such entity is or may be subject to taxation by that jurisdiction.
(c) None of the Contributed Assets is property that is required to be
treated as being owned by any other Person pursuant to the so-called safe harbor
lease provisions of former Section 168(f)(8) of the Code. None of the
Contributed Assets is "tax-exempt use property" within the meaning of Section
168(h) of the Code. None of the Contributed Assets directly or indirectly
secures any debt the interest on which is tax-exempt under Section 103(a) of the
Code.
3.10 Permits. Except as set forth on Section 3.10 of Seller's
Disclosure Schedule, Seller holds and, as of the Closing, Company will hold, all
Permits that are required by any Governmental Entity to permit it to conduct the
Transferred Business and possess the Contributed Assets immediately after the
Closing, except where the failure to have such Permits would not, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect.
As of the Closing, Company will be in compliance in all material respects with
its material Permits. To Seller's Knowledge, no suspension, cancellation or
termination of any material Permit is threatened or imminent.
3.11 Intercompany Transactions. Section 3.11(a) of Seller's Disclosure
Schedule lists, as of the date hereof, all Contracts between QSC or any of its
Affiliates (other than Holding or Seller), on the one hand, and Holding or
Seller, on the other hand (each, an "Intercompany Agreement"). Except for the
Intercompany Agreements constituting part of the Transaction Documents or
Commercial Agreements, Seller has not engaged in any material transaction with
Qwest or any other Affiliate of Qwest for which any liabilities or obligations
relating to Company or the Transferred Business will remain to be satisfied
after the Closing. Section 3.11(b) of Seller's Disclosure Schedule lists, as of
July 31, 2002: (a) any material liabilities or obligations of Seller to Qwest or
any other Affiliate of Qwest and (b) any material liabilities or obligations of
Qwest or such Affiliates of Qwest to Seller, in each case except for those
liabilities or obligations arising as a result of the Transaction Documents.
Except as provided in the Transaction Documents or the Commercial Agreements,
the consummation of the Transactions will not result in any payment arising or
becoming due from Company to Seller or any Affiliate of Seller.
3.12 Compliance with Law. Except as set forth on Section 3.12 of
Seller's Disclosure Schedule, neither Seller nor Company is in violation of any
Law (other than any Law the subject matter of which is addressed by the
representations and warranties set forth in Sections 3.16, 3.17 or 3.19 below)
except to the extent any such violation, individually or in the aggregate, has
not had and would not reasonably be expected to have a Material Adverse Effect.
3.13 No Brokers or Finders. Except for the fees and commissions
payable to Lehman Brothers Inc. and Merrill Lynch & Co., Inc., which will be the
sole responsibility of Seller, no agent, broker, finder, or investment or
commercial banker, or other Person or firm engaged by or acting on behalf of
Seller or any of its Affiliates in connection with the negotiation, execution or
performance of this Agreement or the Transactions, is or will be entitled to any
broker's, finder's or similar fee or other commission as a result of this
Agreement or the Transactions.
24
3.14 Intellectual Property. For purposes of this Section 3.14,
"Existing Qwest Group" shall mean the Qwest Parties and Holding. Except as set
forth in Section 3.14 of Seller's Disclosure Schedule:
(a) Generally. Section 3.14(a) of Seller's Disclosure Schedule sets
forth a complete list of, or references to, all United States: (i) trademarks
and service marks (whether registered or unregistered) and trade names of the
Existing Qwest Group that are material to the Transferred Business
(collectively, the "Trademarks"); (ii) patents and patent applications of
Existing Qwest Group that are material to the Transferred Business
(collectively, the "Patents"); (iii) registered copyrights of Existing Qwest
Group that are material to the Transferred Business (collectively, together with
unregistered copyrights of Existing Qwest Group that are material to the
Transferred Business, "Copyrights"); and (iv) domain names of Existing Qwest
Group that are material to the Transferred Business, including top-level
Internet domain names (the "Domain Names").
(b) Trademarks. All Transferable Trademarks for which an application
for trademark registration has been filed are currently in material compliance
with all legal requirements for the maintenance of such application or resulting
registration, other than any requirement that, if not satisfied, would not
reasonably be expected to result in a Material Adverse Effect. Existing Qwest
Group is the owner of all right, title and interest in and to all of such
Transferable Trademarks, in each case free and clear of any and all Encumbrances
(other than Permitted Encumbrances), covenants, conditions and other
restrictions that would reasonably be expected to have a Material Adverse
Effect, and Existing Qwest Group has not, to Seller's Knowledge, received any
written notice or claim challenging Existing Qwest Group's ownership or such use
of the material Transferable Trademarks or suggesting that any other Person has
any claim of legal or beneficial ownership with respect thereto. The
"Transferable Trademarks" shall mean the Trademarks to be transferred to Company
pursuant to the IP Contribution Agreement.
(c) Patents. All material Transferable Patents are currently in
material compliance with legal requirements for the maintenance of such
Transferable Patents (including payment of filing, examination, and maintenance
fees) other than any requirement that, if not satisfied, would not result in a
revocation or lapse of such Transferable Patents or otherwise would reasonably
be expected to result in a Material Adverse Effect. Existing Qwest Group is the
owner of all right, title and interest in and to all of the Transferable
Patents, in each case free and clear of any and all Encumbrances (other than
Permitted Encumbrances), covenants, conditions and restrictions of any kind or
nature that would reasonably be expected to have a Material Adverse Effect, and
Existing Qwest Group has not, to Seller's Knowledge, received any written notice
or claim challenging Existing Qwest Group's ownership of the material
Transferable Patents or suggesting that any other Person has any claim of legal
or beneficial ownership with respect thereto. The "Transferable Patents" shall
mean the applicable ownership interests in the Patents to be transferred to the
Company pursuant to the IP Contribution Agreement.
(d) Copyrights. Existing Qwest Group is the owner of all right, title
and interest in and to each of the Transferable Copyrights, free and clear of
any and all Encumbrances (other than Permitted Encumbrances), covenants,
conditions and restrictions or other adverse claims or interests of any kind or
25
nature that would reasonably be expected to have a Material Adverse Effect, and
Existing Qwest Group has not received any written notice or claim challenging
Existing Qwest Group's ownership of the material Transferable Copyrights or
suggesting that any other Person has any claim of legal or beneficial ownership
with respect thereto. Existing Qwest Group has not received any written notice
or claim challenging or questioning the validity or enforceability of any of the
material Transferable Copyrights or indicating an intention on the part of any
Person to bring a claim that any material Transferable Copyright is invalid or
unenforceable. The "Transferable Copyrights" shall mean the Copyrights to be
transferred to Company pursuant to the IP Contribution Agreement.
(e) Trade Secrets. Seller and Company have taken reasonable steps in
accordance with normal industry practice to protect their respective rights in
material confidential information and material proprietary information of the
Transferred Business, including any formula, pattern, compilation, program,
device, method, technique, or process, that derives independent economic value
from not being generally known to the public or to other Persons who can obtain
economic value from its disclosure or use (collectively, "Trade Secrets").
Seller has and Company shall have a policy of requiring each relevant employee,
consultant and contractor engaged to perform information technology development
services for Seller or Company to execute proprietary information,
confidentiality and assignment agreements substantially in Seller's standard
forms that assign to Existing Qwest Group all rights to any Intellectual
Property of the Transferred Business that are developed for Seller or Company by
the employees, consultants or contractors, as applicable.
(f) License Agreements. To Seller's Knowledge, Section 3.14(f) of
Seller's Disclosure Schedule sets forth a complete and accurate list of all
material license agreements granting (directly or through an Affiliate of
Seller) to Seller any right to use any material software, databases, Content (as
defined below) or similar materials of a third party that are used in and
material to the Transferred Business (other than "off-the-shelf" shrink wrap
software commercially available on reasonable terms to the public generally)
(collectively, the "Company Inbound License Agreements"), indicating for each
the title and the parties thereto. There is no outstanding or, to Seller's
Knowledge, threatened dispute or disagreement with respect to any Company
Inbound License Agreement. Correct and complete executed copies of all Company
Inbound License Agreements have been made available to Buyer.
(g) Domain Names. Existing Qwest Group is the sole owner of the
Transferable Domain Names, and all such Transferable Domain Names are currently
registered by Existing Qwest Group, as sole owner, with an ICANN accredited
registrar. Existing Qwest Group is the owner or authorized licensee of all
content displayed on and material to the Internet site associated with each of
the Transferable Domain Names (collectively, the "Content"). No consent, license
or approval from any third party is required in connection with the sale or
transfer of the ownership of the Transferable Domain Names. To Seller's
Knowledge, there do not exist any facts or circumstances which could reasonably
form the basis of a challenge relating to Seller's use of the Domain Names or
Content that would reasonably be expected to have a Material Adverse Effect. The
term "Transferable Domain Names" shall mean the Domain Names to be transferred
to the Company pursuant to the IP Contribution Agreement.
26
(h) Intellectual Property Sufficiency. To Seller's Knowledge, except
as otherwise provided in Section 3.14 of Seller's Disclosure Schedule, the
assignments, licenses and other rights granted by Qwest and its current
Affiliates to Company under this Agreement, the other Transaction Documents and
the Commercial Agreements and other actions taken in accordance with Section
5.18 of Exhibit P to this Agreement accord to Company the rights with respect to
the intellectual property assets owned or licensed by Qwest and such Affiliates
that are necessary for continued operation of the Transferred Business after the
Closing in substantially the same manner as such business has been operated by
Seller during the six months prior to the Closing.
3.15 LCI. LCI is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Delaware. LCI's sole asset is a
1% limited partnership interest in Qwest N. Limited Partnership, a Delaware
limited partnership. LCI has timely filed all Tax Returns required to be filed
by it, and it has no Tax or other liabilities, actual or contingent.
3.16 Labor Matters. Except as set forth in Section 3.16(a) of the
Seller's Disclosure Schedule, (i) there is no, and in the past three years there
has been no, material organized strike, labor dispute, slowdown or stoppage, or
material unfair labor practice claim or charge pending or, to Seller's
Knowledge, threatened against or affecting Company or the Transferred Business,
(ii) no material claim is pending or, to Seller's Knowledge, threatened by
employees or former employees against Seller respecting Seller's employment
practices, and (iii) no material claim is pending or, to Seller's knowledge,
threatened asserting noncompliance by Seller with any applicable Law respecting
employment practices, employee documentation, and terms and conditions of
employment and wages and hours and Seller is not currently engaged in any
material unfair labor practice. Section 3.16(b) of the Seller's Disclosure
Schedule lists, as of the date hereof, each collective bargaining agreement
between Seller or Company, on the one hand, and any labor union or labor
organization, on the other hand that is applicable to any portion of the
Transferred Business (the "CBAs"). True copies of the CBAs, including all
amendments and supplements, have been made available to Buyer.
3.17 Employee Benefits.
(a) Section 3.17(a) of the Seller's Disclosure Schedule lists and
identifies the sponsor of, as of the date hereof, each material "employee
pension benefit plan" (as defined in Section 3(2) of ERISA) (a "Pension Plan"),
each material "employee welfare benefit plan" (as defined in Section 3(1) of
ERISA) (a "Welfare Plan"), and each other material plan, arrangement, policy or
procedure relating to deferred compensation, incentive compensation, stock
options, stock purchases, severance pay, fringe benefits or other employee
benefits, in each case maintained, administered or contributed to or required to
be maintained, administered or contributed to by Seller, Holding or Company or
any of their Affiliates for the benefit of any employee of Holding, Seller or
Company who is engaged in the Transferred Business (an "Employee") or any former
Employee (all of the foregoing, the "Seller Benefit Plans"). True copies of (i)
each Seller Benefit Plan, (ii) the most recent summary plan description, and any
summary of material modifications, for each Seller Benefit Plan for which a
summary plan description is required, and (iii) each trust agreement and
insurance or group annuity contract with respect to a Seller Benefit Plan,
including all amendments and supplements, have been made available to Buyer.
27
(b) Each Seller Benefit Plan has been administered in accordance with
its terms and in compliance with applicable Law, including the applicable
provisions of ERISA and the Code, except for such failures or noncompliance as
would not, individually or in the aggregate, reasonably be expected to result in
a Material Adverse Effect.
(c) Since the effective date of ERISA, no liability under Title IV of
ERISA has been incurred by Seller or any member of its Controlled Group (defined
as any entity that is a member of a controlled group of organizations within the
meaning of Sections 414(b), 414(c), 414(m) or 414(o) of the Code of which Seller
is a member) (other than liability for premiums due to the PBGC) unless such
liability has been, or prior to the Closing Date will be, satisfied in full. The
PBGC has not instituted, or to Seller's knowledge threatened to institute,
proceedings to terminate any Pension Plan that is subject to Title IV of ERISA,
and, except as set forth in Section 3.17(c) of Seller's Disclosure Schedule, no
such Pension Plan has been the subject of a "reportable event," as that term is
defined in Section 4043 of ERISA, as to which notices would be required to be
filed with the PBGC. No Pension Plan has an "accumulated funding deficiency," as
that term is defined in Section 302 of ERISA and Section 412 of the Code,
whether or not waived, as of the last day of the most recent fiscal year of each
Pension Plan ended prior to the date hereof.
(d) No Seller Benefit Plan is a "multiemployer plan," as that term is
defined in Section 3(37) of ERISA. Neither Seller nor any member of its
Controlled Group has at any time in the past six years sponsored, contributed to
or had an obligation to contribute to any multiemployer plan. Neither Seller nor
any member of its Controlled Group has any outstanding "withdrawal liability"
(whether or not contingent), as that term is defined in Section 4201 of ERISA.
(e) Seller, Company and their respective Affiliates have not made or
granted or committed to make or grant any benefit improvements under any Seller
Benefit Plan with respect to any Employee or former Employee, except as provided
in the CBAs or in the plan documents provided to Buyer or as set forth in
Section 3.17(e) of Seller's Disclosure Schedule.
3.18 Insurance. All material insurance policies covering Seller are
identified in Section 3.18 of the Seller's Disclosure Schedule, all premiums due
thereon have been paid (other than retroactive or retrospective premium
adjustments that are not yet, but may be, required to be paid with respect to
any period ending on or prior to the Closing Date), and Seller has complied in
all material respects with the provisions of such policies and have not received
written notice from any of their insurance brokers or carriers that such brokers
or carriers will not be willing or able to renew their existing coverage. All
material properties of Seller relating to the Transferred Business are covered
by insurance in customary scope and amount of coverage.
3.19 Environmental Matters. Except either as set forth on or as
identified in any written materials listed in Seller's Disclosure Schedule, to
Seller's Knowledge:
(a) Seller has not received any written notice (i) from any
Governmental Entity that the Company or the Transferred Business is not in
compliance in any material respect with Environmental Laws, or (ii) of any
pending or threatened Action or Order or claim by any third party with respect
to Hazardous Materials or Environmental Laws in connection with any of the
28
properties currently or formerly owned or occupied by Seller in connection with
the Transferred Business or in connection with any other properties to which
waste may have been sent by Seller, Company or their respective Affiliates in
connection with the Transferred Business from properties owned or occupied by
Seller in connection with the Transferred Business.
(b) Seller has not disposed, released, generated or transported in
violation of Environmental Laws any Hazardous Materials at, from, on or under
any properties currently or formerly owned or occupied by Seller in connection
with the Transferred Business.
(c) Seller has not assumed, contractually or by operation of Law, any
liabilities or obligations of third parties under any Environmental Laws with
respect to any of the properties currently or formerly owned or occupied by
Seller in connection with the Transferred Business.
(d) Seller has operated and is operating the Transferred Business in
compliance in all material respects with Environmental Laws.
3.20 Directory Publication Schedules.
(a) Section 3.20(a) of Seller's Disclosure Schedule lists all
directories published by Seller in the Region for which, during the past three
years, either (i) the month of publication changed or (ii) the length of service
of such directory changed. Section 3.20(a) of Seller's Disclosure Schedule sets
forth the revenue and EBITDA impact of such changes under Seller's prior revenue
recognition methodology (point of publication) in the year that each such
directory was published.
(b) Section 3.20(b) of Seller's Disclosure Schedule lists the
proposed date of publication of all directories by Seller from the date hereof
until August 31, 2003.
3.21 Receivables. All receivables that are included in the Contributed
Assets (i) represent actual indebtedness or other obligations incurred by the
applicable account debtors, and (ii) have arisen from bona fide transactions in
the ordinary course of the Business.
3.22 Qwest Corporation. Qwest Corporation holds the state and federal
authorizations (collectively, the "Qwest Authorizations") necessary to provide
telephone exchange and exchange access services in Washington, Oregon, Idaho,
Montana, Wyoming, North Dakota, South Dakota, Nebraska, Minnesota, Iowa, Utah,
Colorado, New Mexico, and Arizona (collectively, the "Qwest States"). Qwest
Corporation provides these services within the Qwest States as an incumbent
local exchange carrier, as that term is defined in Section 251(h)(1) of the
Communications Act of 1934, as amended, 47 U.S.C. ss. 251(h)(1).
3.23 Certain Accounting Issues. To Seller's Knowledge, as of the date
hereof, the SEC has not objected to any of Seller's accounting policies,
procedures or practices, or any of the accounting policies, procedures or
practices of Qwest which relate to or impact the Holding Financial Statements,
or otherwise indicated that any of such policies, procedures or practices are
not in accordance with GAAP and the applicable requirements of the SEC, other
than with respect to matters that have been conformed to the SEC's requests
addressed or reflected in Holding Audited Financial Statements (it being
understood that, to Seller's Knowledge, the Transferred Business Financial
Statements will address or reflect such matters to the same extent).
29
3.24 Contribution Agreement. As of the Closing Date, the transactions
contemplated by the Contribution Agreement and the IP Contribution Agreement
shall have been consummated in all material respects in accordance with their
terms (including any required transfer of Contributed Assets (as such term is
defined in the Contribution Agreement) owned or deemed to be owned by an
Affiliate of Seller).
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Except as otherwise indicated on Buyer's Disclosure Schedule, Buyer
represents and warrants and agrees, as of the date hereof , as follows:
4.1 Organization and Related Matters. Buyer is a limited liability
company duly organized, validly existing and in good standing under the laws of
the state of its organization. Buyer has all necessary power and authority under
the Delaware LLC Act and its certificate of formation and limited liability
company operating agreement (together, the "Buyer Organizational Documents") to
execute, deliver and perform the Transaction Documents and Commercial Agreements
to which it is a party. Buyer has all necessary power and authority under the
Delaware LLC Act and the Buyer Organizational Documents to own, license or lease
its properties and to carry on its business as now being conducted and is duly
qualified or licensed to do business as a foreign limited liability company in
good standing in all jurisdictions in which the nature of its business requires
licensing or qualification, except where the failure to be so qualified or
licensed would not, individually or in the aggregate, reasonably be expected to
result in a Buyer Material Adverse Effect.
4.2 Authorization; No Conflicts.
(a) The execution, delivery and performance of the Transaction
Documents to which Buyer is a party have been duly and validly authorized by all
necessary limited liability company and member action on Buyer's part. The
Transaction Documents and Commercial Agreements to which Buyer is a party
constitute (or will upon execution constitute) Buyer's legally valid and binding
obligations, enforceable against Buyer in accordance with their respective terms
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws and equitable principles
relating to or limiting creditors' rights generally.
(b) Buyer's execution, delivery and performance of this Agreement
will not violate, or constitute a breach or default under, any of the Buyer
Organizational Documents. Subject to obtaining the Approvals and Permits
contemplated in Section 4.5, Buyer's execution, delivery and performance of this
Agreement will not violate any Law in any material respect.
4.3 Legal Proceedings. There is no Order or Action pending or, to
Buyer's Knowledge, threatened in writing against Buyer that, individually or
when aggregated with one or more other Orders or Actions, has had or if
determined adversely would reasonably be expected to have a Buyer Material
Adverse Effect.
30
4.4 Investment Intent. Buyer is an "accredited investor" as defined
under the Securities Act and possesses such knowledge and experience in
financial and business matters that it is capable of evaluating the merits and
risks of its investment hereunder. Buyer is acquiring the LLC Interests for
investment for its own account, not as a nominee or agent, and not with a view
to, or for resale in connection with, any distribution thereof. Buyer will not
sell or otherwise dispose of the LLC Interests except in compliance with the
registration requirements or exemption provisions under the Securities Act or
any other applicable securities law. Buyer understands that the LLC Interests
have not been registered under the Securities Act or any state securities laws
by reason of specific exemptions from the registration requirements thereof that
depend upon, among other things, the bona fide nature of the investment intent
and the accuracy of Buyer's representations and warranties contained herein.
4.5 Approvals, Permits and Third Party Consents. Section 4.5 of
Buyer's Disclosure Schedule lists any Approvals and Permits and any material
Third Party Consents by any Person not a party to this Agreement required in
connection with the execution or performance by Buyer of the Transaction
Documents to which Buyer is a party, except for any such Approvals, Permits and
Third Party Consents the failure of which to receive would not, individually or
in the aggregate, reasonably be expected to result in a Buyer Material Adverse
Effect.
4.6 Financing. Buyer has received, accepted and agreed to, all
applicable commitment fees for (a) a valid and binding commitment letter from
certain lenders (the "Debt Financing Commitment Letter"), committing them to
provide to the Buyer debt financing for the Transactions in an aggregate amount
of $2,330,000,000, subject to the terms and conditions set forth therein (such
debt financing, the "Debt Financing") and (b) a valid, binding and irrevocable
commitment letter from certain equity investors (the "Equity Financing
Commitment Letter"), committing them to provide equity financing to Buyer in the
amount of $755,000,000, subject to the terms and conditions set forth therein
(such equity financing, the "Equity Financing" and together with the Debt
Financing, the "Financing"). True and complete copies of the Debt Financing
Commitment Letter and the Equity Financing Commitment Letter are attached hereto
as Exhibit N and Exhibit O, respectively. As of the date hereof, the Debt
Financing Commitment Letter and the Equity Financing Commitment Letter are in
full force and effect. True and complete copies of any agreements or
understandings relating to Financing Fees have been delivered to the Qwest
Parties prior to the date hereof.
4.7 No Brokers or Finders. Except for the fees and commissions
payable to J.P. Morgan in its capacity as financial adviser, which will be the
sole responsibility of Buyer, no agent, broker, finder, investment or commercial
banker or other Person or firm engaged by or acting on behalf of Buyer or any of
its Affiliates in connection with the negotiation, execution or performance of
this Agreement or the Transactions, is or will be entitled to any broker's,
finder's or similar fees or other commissions as a result of this Agreement or
the Transactions, except (i) to the extent that such fees or expenses constitute
Reimbursable Expenses and (ii) Buyer is entitled under the terms of this
Agreement to have Seller pay such amounts.
4.8 No Other Representations or Warranties. Buyer acknowledges and
agrees that it has made its own inquiry and investigation into, and based
thereon has formed an independent judgment concerning, the LLC Interests,
Company and the Transferred Business, and that it has been afforded adequate
31
access to Seller's management, properties, books and records for purposes of
such inquiry and investigation. Except for the representations and warranties
contained in this Agreement, Buyer acknowledges that none of the Qwest
Transaction Parties, Company or any of their respective Affiliates or any other
Person makes any other express or implied representation or warranty with
respect to the Business or the Transferred Business, the LLC Interests, the
Qwest Transaction Parties or Company or otherwise or with respect to any other
information provided to Buyer or any of its Affiliates or Representatives,
whether on behalf of Seller or such other Persons, including as to: (a)
merchantability or fitness for any particular use or purpose; (b) the use of the
assets of Company and the operation of the Transferred Business by Buyer after
the Closing; or (c) the probable success or profitability of the ownership, use
or operation of the Transferred Business, the LLC Interests, or Company by Buyer
after the Closing. Neither any Qwest Transaction Party nor any other Person will
have or be subject to any liability or indemnification obligation to Buyer or
any other Person with respect to the sale of the Transferred Business in
accordance with this Agreement resulting from the distribution to Buyer or its
Affiliates' or Representatives' use of, any information related to the Business,
the Transferred Business, the Qwest Transaction Parties or Company, including
the Confidential Descriptive Memorandum dated April 2002 and any information,
document, or material made available to Buyer in any form in connection with the
Transactions.
ARTICLE V
PRE-CLOSING COVENANTS
5.1 Access. Subject to Section 10.9, applicable Laws, doctrines of
attorney-client privilege and fiduciary and privacy obligations, Seller will,
and will cause Company to, authorize and permit Buyer and its counsel, financial
advisors, auditors and other authorized representatives (collectively,
"Representatives") to have reasonable access during normal business hours, upon
reasonable notice and in such manner as will not unreasonably interfere with the
conduct of the Business, to Qwest's, Seller's, LCI's and, after the
Contribution, Company's properties, books, records and other information with
respect to the Transferred Business and its management personnel as Buyer may
from time to time reasonably request for the purpose of (a) familiarizing itself
with the Transferred Business and (b) obtaining any necessary Approvals of, or
Permits for, the Transactions.
5.2 Conduct of Business. During the period from the date of this
Agreement through the Closing Date unless Qwest shall have received Buyer's
consent not to take such action, which consent may not be unreasonably
conditioned, delayed or withheld, Qwest shall, and shall cause Seller and
Company to, conduct the Transferred Business in the ordinary course of business
and consistent with past practice (except in connection with the Transactions
and as otherwise set forth in Section 5.2 of Seller's Disclosure Schedule), and
to use their commercially reasonable efforts to maintain all material assets in
good repair and condition (except for ordinary wear and tear), maintain all
insurance necessary to the conduct of their business as currently conducted, and
maintain satisfactory relationships with suppliers and customers. Additionally,
except as set forth in Section 5.2 of Seller's Disclosure Schedule, without
Buyer's prior written consent, which may not be unreasonably conditioned,
delayed or withheld, Qwest agrees that, before Closing, it will cause Seller and
Company not to:
32
(a) except in the ordinary course of business consistent with past
practice, amend, terminate or renegotiate any Material Contract or enter into
any agreement that would constitute a Material Contract; or
(b) terminate or fail to use commercially reasonable efforts to renew
or preserve any material Permit; or
(c) incur or agree to incur any Indebtedness or other obligations or
liabilities (absolute or contingent) except for Indebtedness, obligations or
liabilities incurred in the ordinary course of business consistent with past
practice; or
(d) make any loan, guaranty or other extension of credit, or enter
into any commitment to make any loan, guaranty or other extension of credit, to
or for the benefit of any director, officer, employee, stockholder or any of
their respective Affiliates, except for loans, guarantees, extensions of credit
or commitments therefor made to officers or employees for moving, relocation and
travel expenses consistent with past practice; or
(e) except (i) as set forth in Section 5.2 of Seller's Disclosure
Schedule, (ii) in the ordinary course of business consistent with past practice
or (iii) as required by Law or the terms of this Agreement or any Contract set
forth in Section 3.8 of Seller's Disclosure Schedule, (A) grant any general or
uniform change in the rates of pay or benefits to officers, directors or
Employees (or a class thereof), (B) grant any increase in salary or benefits of
any officer or director or pay any special bonus to any person or (C) enter into
any new or change any existing material employment or severance agreement or any
collective bargaining agreement (other than the extension of the CBAs pursuant
to Section 5.7 hereof) relating to the Transferred Business; or
(f) issue, pledge, sell, redeem or acquire for value, or agree to
issue, sell, pledge, redeem or acquire for value, any Equity Securities of the
Company; provided that the foregoing shall not limit the ability of Company or
Seller to make cash dividends and distributions; or
(g) effect any recapitalization, reclassification, combination, stock
split or like change in the capitalization of Company; or
(h) amend its certificate of incorporation or bylaws or other
organizational documents; or
(i) sell, transfer, license or otherwise dispose of, in whole or in
part, or subject to any Encumbrance, any material asset or right used in the
Transferred Business as conducted on the date hereof outside of the ordinary
course of business, or declare or pay any dividend (other than cash) or make any
other distribution of property (other than cash); or
(j) settle or compromise any material federal, state, local or
foreign income tax liability for which Buyer could reasonably be expected to be
adversely affected; or
(k) in any instance where Company, LCI or Buyer would be bound by
such action, make any material Tax election, adopt or change any accounting
method for Tax purposes, file any amended material Tax Return, consent to or
enter into any closing agreement or similar agreement with any Tax authority or
33
take any position with respect to any material item that is inconsistent with
past practice on any Tax Return, except in each case, as contemplated by the
Transaction Documents; or
(l) cause Company to be treated as other than a disregarded entity
for federal or state income tax purposes (other than in Texas) for any
Pre-Closing Tax Period; or
(m) enter into any agreement that substantially limits the ability of
Seller or Company to engage in any business activity; or
(n) change the scheduled publication date of any of its recurring
directories by more than two weeks from such directory's publication date in
2002; or
(o) acquire, lease or dispose of any interest in real property used
in the Transferred Business; or
(p) fail to maintain their books and records in accordance with past
practice; or
(q) agree to make or make (or permit any Subsidiary of Seller or
Company to agree to make or make) any commitment to take any actions prohibited
by this Section 5.2;
provided, however, except as expressly provided in Section 5.2 above, nothing in
this Section 5.2 will prohibit Seller and its Affiliates from conducting their
businesses in their reasonable discretion. Nothing in this Section 5.2 will
prohibit Company from distributing cash to Seller or prohibit Seller from
distributing cash to Holding. Nothing contained in this Agreement shall give
Buyer, directly or indirectly, the right to control or direct Company's
operations prior to Closing.
5.3 Notification of Certain Matters. Seller will give prompt notice
to Buyer, and Buyer will give prompt notice to Seller, of any failure of Buyer
or Seller and Company, as the case may be, to comply with or satisfy, in any
material respect, any covenant, condition or agreement to be complied with or
satisfied by it under this Agreement.
5.4 Approvals, Permits and Third Party Consents.
(a) Seller and Buyer shall cooperate and use commercially reasonable
efforts to obtain all Approvals and Permits (including taking actions to
promptly prepare, file and deliver all registrations, filings and applications,
requests and notices (collectively, the "Approval Filings") that may be
necessary to consummate the Transactions) and to participate in any related
proceedings. Seller and Buyer shall furnish each other such necessary
information and reasonable assistance as the other may reasonably request in
connection with the Approval Filings and related proceedings; provided, however,
that Buyer shall not be required to make any material concession in order to
obtain any Approval or Permit.
(b) Without limiting the generality of the foregoing paragraph (a),
Buyer and Seller will file with the Federal Trade Commission and the Department
of Justice pursuant to the HSR Act (i) the notification and report form required
for the Transactions as promptly as practicable, but not later than ten Business
Days after the execution of this Agreement, and (ii) with respect to any
34
supplemental information request in connection with the Transactions, as soon as
reasonably practicable. Any such notification and report form and supplemental
information will be in substantial compliance with the requirements of the HSR
Act. The parties will thereafter prosecute the application with all reasonable
diligence and will otherwise use commercially reasonable efforts to obtain the
termination of the HSR Act review as expeditiously as possible. Buyer and Seller
shall each be responsible for one-half of all HSR Act filing fees.
(c) The parties acknowledge that they may be required or desire to
communicate with Governmental Entities regarding the Transactions both before
and after the Closing. Each party agrees to use commercially reasonable efforts
to consult with the other party in advance of any material communications,
whether written or oral, with any Governmental Entity regarding the Transactions
and to cooperate with the other party in connection with any Inquiry arising
therefrom. Except for documents filed pursuant to Item 4(c) of the
Hart-Scott-Rodino Notification and Report Form or communications regarding the
same or documents or information submitted in response to any request for
additional information or documents pursuant to the HSR Act that reveal Seller's
or Buyer's negotiating objectives or strategies or purchase price expectations,
(a) each party agrees to submit all Approval Filings made by such party to the
other party for review and approval (which approval shall not be unreasonably
withheld) prior to their submission to any Governmental Entity, and (b) each
party further agrees to forward to the other copies of any material (written or
electronic, including electronic mail) communications sent by it or its
Representatives or received by it from, any Governmental Entity regarding the
Transactions and to use commercially reasonable efforts to advise the other
party of any material oral communications with any Governmental Entity regarding
the Transactions. All such communications will be disclosed to the other party
promptly after they are sent or received in the case of written communications
or promptly following any oral communication with a Governmental Entity. Seller
and Buyer will use commercially reasonable efforts to coordinate and promptly
respond to any Inquiry.
(d) If there is initiated by any State PUC, state attorney general or
other Person any investigation, proceeding, litigation, inquiry, hearing,
information or data request, or information gathering process relating to the
Transactions whether before or after the Closing (each, an "Inquiry"), then the
parties will jointly evaluate such Inquiry. If such Inquiry is a joint defense
endeavor pursuant to the terms of the Joint Defense and Common Interest
Agreement, then Seller's or Qwest's counsel will be the lead counsel, at
Seller's or Qwest's expense and reasonable direction, to undertake such joint
defense unless the Inquiry relates solely to Buyer, in which case Buyer's
counsel will be the lead counsel at Buyer's expense and reasonable direction. In
any such joint defense endeavor, Seller, Qwest or Buyer, as the case may be,
will each use commercially reasonable efforts to cause to be resisted, resolved
or lifted any Order, decree, ruling or other action restraining, enjoining or
otherwise prohibiting the performance of any obligations under the Transaction
Documents with the result or likelihood that the fundamental business purpose of
the Transactions is or will be frustrated. In so doing, Seller or Qwest will not
take any position or agree to any settlement that will or would reasonably be
expected to result in a Buyer Material Adverse Effect or otherwise prejudice
Buyer's interests with respect to the Transactions. Buyer may elect to retain at
its own expense its own counsel with respect to any Inquiry that is a joint
defense endeavor. With respect to any Inquiry, the party whose counsel is lead
counsel shall submit to the other party for review and approval all information,
35
documents or pleadings to be provided to or filed with any State PUC, state
attorney general or other Person prior to their submission to such State PUC,
state attorney general or other Person, as the case may be. The respective
rights and obligations of the parties with respect to the joint defense of any
Inquiry shall be governed by the Joint Defense and Common Interest Agreement.
(e) Seller and Buyer shall cooperate and use commercially reasonable
efforts to obtain all material Third Party Consents that may be necessary to
consummate the Transactions; provided that (i) except with respect to the Third
Party Consents necessary to satisfy the condition set forth in Section 7.2(n),
Seller shall not be obligated to pay any consent fees to any third party and
(ii) Buyer shall not be required to agree to material concessions in connection
with Third Party Consents. Seller and Buyer shall furnish each other such
necessary information and reasonable assistance as the other may reasonably
request in connection with obtaining such Third Party Consents.
5.5 Supplements to Seller's Disclosure Schedule. From time to time
prior to the Closing, Seller may supplement or amend any Section of the Seller's
Disclosure Schedule with respect to any matter, condition or occurrence that is
required or permitted to be set forth or described in the Seller's Disclosure
Schedule by delivering to Buyer in accordance with Section 10.11 below a copy of
such supplement or amendment. A supplement or amendment not objected to in
writing by Buyer within 10 Business Days after receipt will be deemed to cure
any applicable breach of any representation, warranty or covenant made in this
Agreement. A supplement or amendment objected to in writing by Buyer within 10
Business Days after receipt will not be taken into account for purposes of such
representations, warranties and covenants.
5.6 Financial Statements.
(a) Seller will deliver to Buyer, as soon as practicable following
the completion of an audit of the Transferred Business but in no event later
than 30 Business Days prior to the Closing Date, (i) the audited balance sheets
of the Transferred Business as at December 31, 2000 and December 31, 2001, and
audited statements of income and cash flows of the Transferred Business for the
twelve months ended December 31, 1999, December 31, 2000 and December 31, 2001,
together with an opinion of Seller's independent accounting firm, KPMG,
containing no exceptions or qualifications (collectively, such financial
statements of the Transferred Business, together with the notes thereto, the
"Transferred Business Audited Financial Statements") and (ii) an unaudited
balance sheet of the Transferred Business and of Holding as at June 30, 2002 and
an unaudited statement of income for the six months ended June 30, 2002 (the
"Transferred Business Unaudited Financial Statements" and, together with the
Transferred Business Audited Financial Statements, the "Transferred Business
Financial Statements"). The Transferred Business Financial Statements will be
prepared in accordance with GAAP and Regulation S-X under the Securities Act.
(b) Seller will deliver to Buyer, promptly upon their being prepared
(and in any event no later than 45 days after the end of each calendar quarter),
true and complete copies of the unaudited balance sheets and statements of
income and cash flow of the Transferred Business and of Holding as of each
calendar quarter beginning with the calendar quarter ending on June 30, 2002 and
unaudited balance sheets and statements of income and cash flow for the
year-to-date period then ended along with comparative historical information for
the preceding year (which shall have been reviewed by KPMG as provided in
statement of accounting standards No. 71 without exception or qualification,
which review shall be at Buyer's expense).
36
(c) Following the Closing, Seller will, and will cause all Qwest
Parties to, cooperate with Buyer if Buyer, at its expense, desires to obtain,
(i) the audited balance sheet of the Transferred Business at the Closing and
(ii) audited statements of income and cash flows for the period from January 1,
2002 through the Closing Date.
5.7 Collective Bargaining Agreements. Upon consummation of the
Closing, Buyer shall assume and be bound by the CBAs with respect to the
Transferred Employees represented by the Communications Workers of America and
the International Brotherhood of Electrical Workers. Prior to the Closing Date,
Seller shall use commercially reasonable efforts to extend by one year, on
commercially reasonable terms, the term of the CBAs.
5.8 WARN.
(a) The Qwest Parties agree that, from the later of (i) the date of
this Agreement, and (ii) the date that is 90 days prior to Closing, none of them
will effectuate a "plant closing" or "mass layoff" as those terms are defined in
the Worker Adjustment and Retraining Notification Act of 1988 (the "WARN Act")
or any similar state or local statute, rule or regulation, with respect to the
Transferred Business, without notifying Buyer in advance and without complying
with the notice requirements and all other provisions of the WARN Act and any
similar state or local statute, rule or regulation.
(b) Buyer agrees that upon Closing and within a period of 90 days
thereafter, it will not effectuate a "plant closing" or "mass layoff" as those
terms are defined in the WARN Act or any similar state or local statute, rule or
regulation, with respect to the Transferred Business, without notifying the
Qwest Parties in advance and without complying with the notice requirements and
all other provisions of the WARN Act and any similar state or local statute,
rule or regulation.
5.9 Confidentiality Agreements. On the Closing Date, the Qwest
Parties shall assign and delegate to Buyer or Company all of their respective
rights and obligations under all confidentiality and nondisclosure agreements
between any of the Qwest Parties and any other Person to the extent entered into
in connection with the Transactions or the evaluation of the Transactions, but
only to the extent such agreements (a) relate to the Transferred Business or the
Transferred Employees and (b) do not by their terms prohibit such assignment and
delegation.
5.10 Financing.
(a) Buyer will promptly notify Seller of any proposal by any of the
financial institutions party to the Debt Financing Commitment Letter to
withdraw, terminate or make a material change in the amount or terms of the Debt
Financing Commitment Letter. In addition, upon Seller's reasonable request,
Buyer shall advise and update Seller, in a level of detail reasonably
satisfactory to Seller, with respect to the status, proposed closing date and
material terms of the proposed Debt Financing. Buyer shall not consent to any
amendment, modification or early termination of any Equity Financing Commitment
Letter or the Debt Financing Commitment Letter that is reasonably likely to
impair materially the Equity Financing or the Debt Financing.
37
(b) Buyer shall, and shall cause its Affiliates to, use all
commercially reasonable efforts to (1) maintain the effectiveness of the Debt
Financing Commitment Letter, (2) enter into definitive documentation with
respect to the Debt Financing on the terms contained in the Debt Financing
Commitment Letter, (3) satisfy all funding conditions to the Debt Financing set
forth in the definitive documentation with respect to the Debt Financing,
including paying for any back-up systems for billing and collection required to
satisfy the condition to funding that the back-up system be reasonably
satisfactory to the institutions providing the Debt Financing, (4) cause to be
made available to Buyer, on or prior to December 15, 2002, the Debt Financing in
an aggregate principal amount equal to the principal amount of the Debt
Financing, and (5) perform its obligations under the Financing Commitments,
including its obligations to agree to changes in the structure, terms and
pricing contained in the Financing Commitments (it being understood that such
obligations shall not include any obligation to cause any of its Affiliates to
increase the amount of their Equity Financing).
(c) At Seller's request and subject to the conditions to Buyer's
obligations to close set forth in Article VII, after November 30, 2002, Buyer
shall be required to fund the Closing Purchase Price by drawing on the "Senior
Subordinated Facility" and the "Senior Unsecured Credit Facility" (as such terms
are defined in the Debt Financing Commitment Letter).
(d) The Qwest Parties shall provide and shall cause their Affiliates
to provide, reasonable assistance to Buyer's efforts to obtain the Debt
Financing (including, subject to Section 5.10(c), efforts to obtain high yield
bond financing as part of the Debt Financing), including facilitating customary
due diligence and arranging for senior officers of Seller to meet with
prospective lenders in customary presentations or to participate in customary
road shows, in each case upon Buyer's request with reasonable prior notice and
at Buyer's cost and expense. At Buyer's cost and expense, the Qwest Parties
shall, and shall cause their Affiliates to, use commercially reasonable efforts
to cause their respective accountants and attorneys to provide customary
assistance in such financing. In the event of a registered public offering or an
offering in accordance with Rule 144A under the Securities Act of the debt or
equity securities of Company or its Affiliates, the Qwest Parties will, upon
Buyer's request with reasonable prior notice and at Buyer's cost and expense,
use their commercially reasonable efforts to cause KPMG LLP to deliver to
Company and its Affiliates and the underwriters in any such offering a letter
covering such matters as are reasonably requested by Company or its Affiliates
or such underwriters, as the case may be, and as are customarily addressed in
accountants' "comfort letters," and to provide their consent to the references
to them as experts and the inclusion in any applicable filings of their
auditor's reports. Buyer acknowledges that (i) the assistance provided by the
Qwest Parties and their Affiliates, officers, employees and representatives are
being provided at the request of Buyer, and (ii) none of the Qwest Parties shall
have any liability to lenders or prospective lenders in connection with the
activities contemplated by this Section 5.10(d). Buyer shall indemnify and hold
harmless the Qwest Parties from and against any Losses resulting from any
assistance or activities provided pursuant to this Section 5.10. The provisions
of this Section 5.10(d) (including the indemnity provisions) shall not affect
any rights of Buyer under Section 9.1.
38
5.11 No Negotiations. Qwest shall not, and shall use commercially
reasonable efforts to cause its officers, directors, employees and agents not
to, initiate, solicit, facilitate or encourage, directly or indirectly, any
inquiries or the making of any proposal with respect to, or engage in any
negotiations or discussions with, any Person relating to, or provide to any
Person confidential or non-public information in connection with, any
acquisition, recapitalization, business combination or purchase of all or a
material portion of the Transferred Business, or cooperate or participate with
any Person in connection with any of the foregoing activities.
5.12 Additional Agreements. Between the date hereof and the Closing
Date, the parties shall use commercially reasonable efforts to negotiate the
terms of a Master Sales Agent Agreement between Qwest Corporation and Company
pursuant to which Company will perform such services for Qwest Corporation as
Seller currently performs under the existing Master Sales Agent Agreement. It is
the intent of the parties that such negotiations will be completed so that a
Master Sales Agent Agreement will be executed at Closing in conjunction with the
execution of the remaining Commercial Agreements, but the execution of the
Master Sales Agent Agreement is not a condition to the consummation of the
transactions contemplated by this Agreement.
5.13 Tax Certificate. Prior to the Closing Date, Seller shall provide
to Buyer a duly executed and completed certificate of nonforeign status pursuant
to Section 1445 of the Code.
5.14 Indebtedness. Between the date hereof and the Closing Date, the
Qwest Parties (or their respective Affiliates) shall assume, or shall cause
Seller to have fully satisfied, any Indebtedness of Company and provide Buyer
with documentation, reasonably satisfactory to Buyer, evidencing that neither
Buyer nor Company is subject to any liability or obligation with respect to such
Indebtedness of Company.
5.15 Working Capital. Promptly following the date hereof, the parties
will in good faith determine the historic Working Capital for the Transferred
Business as of the end of each month beginning with September 30, 2001 and
ending with December 31, 2002. If the parties are unable to reach agreement with
respect to the determination of Working Capital for any such month within 30
days from the date hereof, the items of disagreement alone will be promptly
referred for final determination to the Independent Accountants, which
determination shall be binding on both parties. The fees and disbursements of
the Independent Accountants will be borne by the party that is not the party
whose final submission to the Independent Accountants is closest to the final
determination made by the Independent Accountants.
5.16 Interim Agreements. The Qwest Parties shall use their
commercially reasonable efforts to have the financial institutions that are
parties to the existing Qwest Credit Agreement, together with the financial
institutions that will be parties to the new credit facility contemplated to be
entered into by Qwest, consent to Qwest Corporation executing and delivering to
Rodney LLC an interim noncompetition agreement and interim publishing agreement
containing terms and conditions substantially similar to the terms and
conditions of the "Noncompetition Agreement" and "Publishing Agreement," as such
terms are defined in the Rodney Purchase Agreement, with such revised terms as
may be appropriate to reflect the standalone nature of such agreements.
39
5.17 Transition Covenants. The provisions set forth on Exhibit P as
Sections 5.18 through 5.26 will be deemed to be a part of this Agreement, and
all references in this Agreement, any other Transaction Documents or any
Commercial Agreement to any such Sections shall be deemed to be references to
Sections in this Agreement.
ARTICLE VI
ADDITIONAL CONTINUING COVENANTS
6.1 Tax Matters.
(a) Liability for Taxes.
(i) Buyer shall indemnify, defend and hold each Qwest
Party harmless from and against any and all Taxes due in respect of
Company and the Transferred Business for any taxable period (or portion
thereof) beginning after the Closing Date, it being understood that any
such indemnity payment made hereunder shall be adjusted as set forth in
Section 9.3(f). Seller shall prepare, and permit Buyer to audit, such
analyses as are reasonably requested by Buyer to support any claim for
indemnification under this Section 6.1(a)(i).
(ii) The Qwest Parties shall indemnify, defend and hold
harmless Buyer, Company and their respective Affiliates (other than
LCI) from and against (x) any and all Taxes imposed on Company or due
in connection with the Transferred Business for any taxable period (or
portion thereof) ending on or before the Closing Date, other than for
those transactions occurring on the Closing Date, but after the
Closing, that are not in the ordinary course of business (a
"Pre-Closing Tax Period"), (y) any and all Taxes of any Person arising
from or attributable to a Pre-Closing Tax Period that are imposed on
Buyer or any of its Affiliates, Company, the Transferred Business or
LCI under Treasury Regulation Section 1.1502-6 (or any similar
provision under state, local or foreign law) as a transferee or
successor, pursuant to a Tax sharing agreement, Tax indemnification
agreement or similar contract, and (z) any loss arising from any breach
of a representation contained in Section 3.9, it being understood that
any such indemnity payment made hereunder shall be adjusted as set
forth in Section 9.3(f). Buyer shall prepare, and permit Seller to
audit, such analyses as are reasonably requested by Seller to support
any claim for indemnification under this Section 6.1(a)(ii).
(iii) LCI. The Qwest Parties shall pay and shall indemnify,
defend and hold harmless Buyer, Company and their respective Affiliates
(other than LCI) from and against any Tax due from LCI for any period,
to the extent that funds distributed to LCI from Qwest N. Limited
Partnership are insufficient to timely pay those Taxes in full. Buyer
agrees that it will not contribute to LCI (or otherwise cause LCI to
acquire) any income-producing asset or right after Closing and that it
will not take any action to cause any other Person to be liable for
LCI's Taxes (except by reason of Treasury Regulation 1.1502-6 (or
comparable provisions of foreign, state or local law)).
(iv) No Limitation. The indemnities set out in this
Section 6.1(a) shall not be subject to any limitation contained in
Section 9.4.
40
(b) Refunds. Any refunds or credits of Taxes with respect to Company,
the Transferred Business or LCI for any Pre-Closing Tax Period shall be for the
account of Seller except to the extent such refund arises as a carryback of a
loss or other Tax benefit from a period beginning after the Closing Date. Any
refunds or credits of Taxes with respect to Company, the Transferred Business or
LCI not described in the preceding sentence shall be for the account of Buyer
and/or its Affiliates. The relevant party shall forward to the other party any
such refund or credit amount within ten Business Days of receipt of such refund.
Notwithstanding the foregoing, the control of the prosecution of a claim for
refund or credit for Taxes paid pursuant to a deficiency assessed subsequent to
the Closing Date as the result of an audit shall be governed by the provisions
of Section 6.1(e)(i) below.
(c) Tax Returns.
(i) Seller shall file or cause to be filed with the
appropriate Governmental Entities having jurisdiction (A) all Tax
Returns to be filed by Company and LCI prior to the Closing Date and
(B) all income Tax Returns in which Seller (or an Affiliate of Seller
other than Company or LCI) includes the taxable income of Company and
LCI, including the applicable consolidated federal income Tax Return in
which the income of Company or LCI is included and in any consolidated
or combined income Tax Return filed by Seller or any of its Affiliates
(other than Company or LCI) thereof in which such income can be
included under applicable law, consistent with past custom and
practice. The parties agree that, to the extent permitted by Law,
income and operation of Company, the Transferred Business and LCI, in
each case, for the Closing Date (other than those transaction occurring
on the Closing Date, but after the Closing, that are not in the
ordinary course of business) shall be included on Seller's Tax Returns.
(ii) Buyer shall file or cause to be filed with the
appropriate Governmental Entities having jurisdiction all Tax Returns
of Company and LCI that are required to be filed after the Closing Date
(other than income Tax Returns described in Section 6.1(c)(i)(B)
above). With respect to Tax Returns to be filed by Buyer for any
periods for which Seller has any liability for the Taxes due (including
pursuant to its indemnity obligations hereunder), such Tax Returns will
be properly and timely filed by Buyer and will be correct, accurate and
complete in all material respects, and Buyer shall furnish a completed
copy of such Tax Returns to Seller for Seller's prior written consent
(not to be unreasonably withheld) not later than 10 Business Days
before the due date for filing such returns (including extensions
thereof).
(d) Proration of Taxes. Real and personal property taxes, ad valorem
taxes, and franchise fees or taxes (that are imposed on a periodic basis (as
opposed to a net income basis)) (collectively, "Periodic Taxes") shall be
prorated between Seller and Buyer for any taxable period that includes but does
not end on the Closing Date (all such periods of time being hereinafter called
"Proration Periods"). Periodic Taxes attributable to Proration Periods shall be
prorated between Buyer and Seller based on the relative periods the Contributed
Assets were owned by each respective party during the fiscal period of the
taxing jurisdiction for which such taxes were imposed by such jurisdiction (as
such fiscal period is or may be reflected on the bill rendered by such taxing
jurisdiction). On the Closing Date, Buyer and Seller shall pay or be reimbursed,
on this prorated basis, for Periodic Taxes that have been paid before the
41
Closing Date. On the Closing Date, Buyer and Seller shall also be reimbursed, on
this prorated basis, for Periodic Taxes that are to be paid after the Closing
Date. The reimbursement of Periodic Taxes that are to be paid on or after the
Closing Date shall be based on a reasonable estimate of the amount of such
Periodic Taxes to be paid (based on past experience). To the extent that Buyer
or Seller are not reimbursed on the Closing Date for Periodic Taxes that are
paid after the Closing Date, or, in the event the estimated amount of the
preceding sentence proves to have been inaccurate, Buyer or Seller shall
promptly forward an invoice to the other party for its reimbursable pro rata
share, if any. If the other party does not pay the invoice within 30 calendar
days of receipt, the amount of such payment shall bear interest at the rate of
8% per annum. With respect to Taxes other than Periodic Taxes, in the case that
the Closing Date is not the end of the taxable period under applicable law, such
Taxes for the Pre-Closing Tax Periods shall be determined as if the Closing Date
were the end of a short taxable period and income or loss for such period shall
be determined on the basis of closing of the books as of the close of business
on the Closing Date (other than for those transactions occurring on the Closing
Date, but after the Closing, that are not in the ordinary course of business).
(e) Contests and Cooperation.
(i) Upon receipt by Buyer of notice of any pending or
threatened federal, state, local or foreign tax audits, claims for
Taxes or assessments, or any other claim or examination with respect to
a Tax liability of Company or LCI for which it could be reasonably be
expected that Seller would be required to indemnify Buyer under Section
6.1(a)(ii) or (iii) above, Buyer shall promptly notify Seller of such
audit, claim or examination (unless Seller previously was notified
directly by the relevant tax authority). If Seller so requests and at
Seller's expense, Buyer shall contest or cause the relevant entity
(Company, LCI or any successor) to contest such claim on audit or by
appropriate claim for refund or credit of Taxes or in a related
administrative or judicial proceeding which Seller in its sole and
absolute discretion, chooses to direct such entity to pursue, and shall
permit Seller, at its expense, to control the prosecution and
settlement of any such audit or refund claim or related administrative
or judicial proceeding with respect to those matters which could affect
the Tax liability of Seller, including any liability hereunder, or
their right to payment; and, where deemed necessary by Seller, Buyer
shall cause the relevant entity to authorize by appropriate powers of
attorney such Persons as Seller shall designate to represent such
entity with respect to such audit or refund claim or related
administrative or judicial proceeding and to settle or otherwise
resolve any such proceeding; provided that no such proceeding shall be
settled or resolved without the prior written consent of Buyer, which
consent shall not be unreasonably withheld. Buyer shall further execute
and deliver, or cause to be executed and delivered, to Seller or its
designee all instruments and documents reasonably requested by Seller
to implement the provisions of this Section 6.1(e)(i). Buyer will at
all times have the right to participate fully in any defense (or
prosecution) of any such claim. In no event shall Buyer agree to the
compromise or settlement of any Tax claims for which Seller is liable
(including pursuant to its indemnity obligations hereunder) without the
prior written consent of Seller (such consent not to be unreasonably
withheld). Any refund of Taxes obtained by Buyer or the affected entity
to which Seller is entitled under Section 6.1(b), or which is a refund
of Taxes paid by Seller, shall be paid to Seller within ten Business
Days of receipt of such refund.
42
(ii) Subject to the provisions of Section 10.9 and the
Confidentiality Agreement, from and after the Closing Date, Buyer shall
deliver to Qwest or its designee (including for purposes of this
sentence any tax advisors to Qwest), as soon as practicable after
Qwest's request, such information and data that are reasonably
available concerning the pre-Closing Date operations of Company and
make available such knowledgeable employees of Buyer and Company as
Qwest may reasonably request (including employees having special or
relevant knowledge or information pertaining to particular Tax items),
including providing the full and complete information and data required
by Qwest's customary Tax and accounting questionnaires to the extent
reasonably available, in order to enable Qwest fully to complete and
file all Tax Returns that it may be required to file with respect to
Company through the Closing Date, to respond to and contest audits by
any taxing authorities with respect to any and all Taxes for which it
has an indemnity obligation hereunder, to prosecute any claim for
refund or credit to which Qwest or Seller is or may be entitled
hereunder and to otherwise enable Qwest fully to satisfy its accounting
and Tax requirements. Subject to the provisions of Section 10.9 and the
Confidentiality Agreement, from and after the Closing Date, Qwest shall
deliver to Buyer or its designee (including for purposes of this
sentence, Buyer's tax advisors), as soon as practicable after Buyer's
request, such information and data that are reasonably available
concerning Taxes of Company and LCI and make available such
knowledgeable employees of Qwest as Buyer may reasonably request
(including employees having special or relevant knowledge or
information pertaining to particular Tax items), including providing
the full and complete information and data required by Buyer's
customary Tax and accounting questionnaires to the extent reasonably
available in order to enable Buyer to complete and file all Tax Returns
that it may be required to file with respect to Buyer, Company or LCI,
after the Closing Date, to respond to and contest audits by any taxing
authorities with respect to any and all Taxes for which Buyer may be
liable, to prosecute any claim for refund or credit to which Buyer or
Company is or may be entitled and to otherwise enable Buyer and Company
to fully satisfy their accounting and Tax requirements.
(f) Transfer Taxes. Notwithstanding anything herein to the contrary,
Buyer and Seller shall each be responsible for one-half of all sales, use, gross
receipts, registration, business and occupation, transfer, stamp duty,
securities transactions, real estate, and similar Taxes and notarial fees
assessed or payable in connection with the transfer of the LLC Interests or
other transactions contemplated hereby (including the Contribution), regardless
of whether such Taxes become due or payable on or after the Closing Date, and
regardless of whether a taxing authority seeks to collect such Taxes from Seller
or Buyer, as well as any interest, penalties and additions to Taxes related to
such Taxes. The party primarily responsible for remitting any such Taxes shall
be responsible for filing all Tax Returns related to such Taxes. The party
responsible for filing such Tax Returns (the "Filing Party") shall provide such
Tax Returns to the other party not less than 10 days prior to the due date of
such Tax Returns. The other party shall pay the Filing Party one-half of all
Taxes shown to be due on each Tax Return not less than 5 days prior to the due
date of such Tax Return.
(g) Tax Sharing Agreements, Etc. All Tax sharing agreements,
policies, arrangements and practices between Seller or an Affiliate of Seller,
on the one hand, and Company or LCI or their respective Subsidiaries, on the
other hand, shall be terminated as of the Closing Date and, from and after the
43
Closing Date, none of the Company, LCI or their respective Subsidiaries shall be
obligated to make any payment to Seller or any Affiliate of Seller, any taxing
authority or any other Person pursuant to any such agreement or arrangement for
any past or future period.
(h) Amendments to Tax Returns. Buyer shall not file, and shall not
permit to be filed an amendment to any Tax Return of LCI covering any period (or
portion thereof) ending on or prior to the Closing Date without the prior
written consent of Qwest, such consent not to be unreasonably withheld.
(i) Coordination With Article IX. To the extent that the provisions
of Article IX are inconsistent with or conflict with the provisions of this
Section 6.1, the provisions of this Section 6.1 shall control.
6.2 Tax Treatment and Purchase Price Allocation.
(a) Tax Treatment. Seller shall report the sale of the LLC Interests,
and Buyer shall report the purchase of the LLC Interests, as a sale and purchase
of assets for federal income tax purposes. Seller shall treat Company as a
disregarded entity for federal income tax purposes, and, to the maximum extent
permitted by Law, for all other Tax purposes (other than those Taxes addressed
in Section 6.1(f)), for all Pre-Closing Tax Periods.
(b) Purchase Price Allocation. Within 60 days after the date hereof,
Buyer shall provide to Seller a draft Purchase Price allocation intended to
comply with the requirements of Section 1060 of the Code (and which shall
include allocations for the Noncompetition Agreement and any other agreements
described in line 6 of Internal Revenue Service Form 8594) (the "Purchase Price
Allocation") for Seller's consent, not to be unreasonably withheld. If Seller
does not consent to the draft Purchase Price Allocation, Seller shall propose to
Buyer any changes in the draft Purchase Price Allocation within 60 days of the
receipt thereof. In the event that no such changes are proposed in writing to
Buyer within such time, Seller shall be deemed to have agreed to the Purchase
Price Allocation. If any such changes are proposed, Buyer and Seller shall
negotiate in good faith and shall use their best efforts to agree upon the
Purchase Price Allocation. In the event that Buyer and Seller are unable to
reach an agreement within 180 days of the Closing Date, then the disputed items
shall be resolved within the next 30 days by an independent accounting firm, or
a nationally recognized valuation firm, in each case, that is mutually
acceptable to both parties and whose fees shall be borne equally by Buyer and
Seller. Such determination by the accounting or valuation firm shall be binding
on the parties and shall be based solely upon written submissions by Buyer and
Seller, and not upon any independent investigation by the accounting or
valuation firm. If the parties have not reached an agreement with respect to the
Purchase Price Allocation and the accounting or valuation firm has not reached a
determination with respect to the disputed items by the latest date (taking into
account all permissible extensions) on which one of the parties to this
Agreement is required to file a Tax Return for which the Purchase Price
Allocation is needed or relevant, such party shall be entitled to file such Tax
Return and take any reasonable position with respect to the allocation of the
purchase price; provided however, that upon final agreement regarding the
Purchase Price Allocation, such party shall, if necessary to be consistent with
the final agreed-upon Purchase Price Allocation, file an amended Tax Return (or
make a hold-for-audit adjustment to the Tax Return) to reflect the final
Purchase Price Allocation.
44
(c) Except as otherwise required by a Governmental Entity or a taxing
authority pursuant to a "determination" as defined in Section 1313(a) of the
Code (or any comparable provision of state, local or foreign law) or the
execution of an IRS Form 870-AD, Seller and Buyer agree to report the
transactions contemplated by this Agreement in the manner specified in
subsections (a) and (b) hereof and agree not to take any position on any Tax
Return inconsistent therewith, to prepare and file all Tax Returns and reports
relating to the purchase and sale contemplated by this Agreement, including all
federal, state and local Tax Returns, in a manner which is consistent with such
characterization and the Purchase Price Allocation and to conduct any audit, Tax
proceeding or Tax litigation relating thereto in a manner entirely consistent
with such characterization and the Purchase Price Allocation.
6.3 Maintain Records. Until the later of (i) 5 years after the
Closing Date or (ii) the expiration of the applicable statute of limitations for
the Tax Return in question, Qwest and Buyer will maintain (or cause to be
maintained) all Tax records, working papers, and other supporting financial
records and documents relating to the Tax Returns filed by, on behalf of, or
relating to Company, the Transferred Business or LCI or to any Taxes for the
last closed year and for all open years of Company and LCI (including the
taxable year in which the Closing Date occurs). All such documents that relate
primarily to Company or the Transferred Business will be delivered to and
maintained by Buyer during the period set forth above, and Buyer will make the
same available to Seller or its Representatives at reasonable times for
inspection and copying. All such remaining documents will be retained by Seller
during the period set forth above, and Seller will make the same available to
Buyer or its Representatives at reasonable times, for inspection and copying. At
the end of the period set forth above, Qwest or Buyer, as the case may be, may
dispose of such documents, provided that notice of such disposition must be
given to the other parties at least 60 days in advance of such disposition. Upon
receipt of such notice, Qwest or Buyer, as the case may be, may request, at the
requesting party's expense, that such documents be delivered to them instead of
disposing of such documents.
6.4 Cooperation. After the Closing Date, upon Seller's request (at
Seller's expense) and without necessity of subpoena, Buyer will cause Company
and LCI and their representatives and counsel to cooperate fully with Seller and
its representatives and counsel for purposes of permitting Seller to address and
respond to any matters involving Seller that arise as a result of Seller's prior
ownership of Company, the Transferred Business and LCI, whether or not related
to this Agreement, including claims made by or against Seller or any of its
Affiliates, whether involving any Governmental Entity or third party. After the
Closing Date, upon Buyer's request (at Buyer's expense) and without necessity of
subpoena, the Qwest Parties will cause their Affiliates and their
representatives and counsel to cooperate fully with Buyer and its
representatives and counsel for purposes of permitting Buyer to address and
respond to any matters involving Buyer that arise as a result of Seller's prior
ownership of Company, the Transferred Business and LCI, whether or not related
to this Agreement, whether involving any Governmental Entity or third party.
Such cooperation shall include (a) reasonable access during normal business
hours and upon reasonable notice to the other party's officers, directors,
employees, auditors, counsel, representatives, properties, books, records and
operating instructions and procedures and (b) the right to make and retain
copies of all pertinent documents and records relating to any such matters. The
45
parties obligations under this Section 6.4 are in addition to the parties' other
obligations to cooperate with each other contained in this Agreement, including
the parties' obligations under Section 6.1(e).
6.5 Buyer's Employee-Related Obligations.
(a) Effective as of the Closing, Buyer shall offer employment (which
shall include Buyer's compliance with Buyer's covenants in this Section 6.5) to
Employees identified on the Prospective Transferred Employees List who on the
Closing Date are actively at work in the Transferred Business. For purposes of
this Agreement, any Employee who is not scheduled to work on the Closing Date
due to a short-term absence (e.g., vacation, holiday, scheduled time off,
illness or injury of shorter duration than would provide for coverage under an
applicable Seller Benefit Plan providing disability benefits, jury duty,
bereavement leave) in compliance with the applicable policies of Seller, Company
or any of their Affiliates, or who is on a paid leave of absence, shall be
deemed to be "actively at work." With respect to each Employee identified on the
Prospective Transferred Employees List who is not an actively at work on the
Closing Date and is on an unpaid leave of absence with a right to reinstatement
under a CBA, a Seller Benefit Plan, a written policy of Seller, Company or any
of their Affiliates in effect on the Closing Date, or applicable Law (e.g., the
Family and Medical Leave Act or comparable state law, military leave), Buyer
shall offer employment (which shall include Buyer's compliance with Buyer's
covenants in this Section 6.5) to each such Employee as of the date on which
such Employee presents himself or herself to Buyer for active employment
following the Closing Date. Each Employee who is actively at work as of the
Closing Date and who accepts employment by Buyer, or who following a leave of
absence described in the preceding sentence returns to active employment with
Buyer after the Closing Date, is referred to herein as a "Transferred Employee."
(b) Compensation and Benefits. Subject to any applicable CBA
requirements, Buyer shall cause each Transferred Employee to receive
compensation (including base salary, wages and commission or bonus
opportunities) for not less than twelve (12) months after the Closing Date that
is no less favorable than the compensation provided to such Transferred Employee
immediately prior to the Closing Date. Subject to any applicable CBA
requirements, Buyer shall take such actions as are required to cause each
Transferred Employee to be provided, as of and for not less than twelve (12)
months after the Closing Date, benefits under Buyer's or its Affiliates'
employee benefit plans, programs, policies and arrangements that are
substantially comparable in the aggregate to the benefits provided to such
Transferred Employee under the Seller Benefit Plans immediately prior to the
Closing Date. Nothing in this Agreement will be deemed a guarantee of employment
for any specified period and, except as expressly provided in this Section 6.5,
nothing herein will confer upon any employee or other Person any right to
employment or any right under any specific benefit plan, program, policy or
arrangement. Without limiting the foregoing, Buyer and its Affiliates will
cooperate with Seller and its Affiliates and take all such actions as are
required to enable the Transferred Employees to make a direct rollover into
Buyer's tax-qualified defined contribution plan(s) of the amounts distributed to
such Transferred Employees from the tax-qualified savings, 401(k) or defined
contribution Pension Plans in which such Transferred Employees participated
prior to the Closing. The Transferred Employees will be credited for
eligibility, vesting and all other purposes under the benefit plans, programs,
policies and arrangements of Buyer and its Affiliates, and for all other
46
employment-related purposes with Buyer and its Affiliates, for their service to
Seller or its Affiliates prior to the Closing Date to the same extent such
service was credited under the comparable Seller Benefit Plans and employment
policies of Seller and its Affiliates; provided, however, that Transferred
Employees need not be credited with pre-Closing service for purposes of benefit
accruals under any defined benefit plan except to the extent described in
Section 6.5(c) of this Agreement. Buyer and its Affiliates shall give each
Transferred Employee full credit for accrued vacation. Buyer and its Affiliates
shall waive all limitations as to pre-existing conditions, exclusions and
waiting periods with respect to participation and coverage requirements
applicable to the Transferred Employees under any welfare plan that the
Transferred Employees participate in after the Closing Date. Buyer and its
Affiliates shall, and shall cause the employee benefit plans of Buyer and its
Affiliates to, provide each Transferred Employee with credit for any co-payments
and deductibles paid under any Welfare Plan during the calendar year in which
the Closing Date occurs in satisfying any applicable deductible requirements or
out-of-pocket limitations for such calendar year under any comparable welfare
plan of Buyer and its Affiliates that such Transferred Employee participates in
after the Closing Date to the same extent as if those deductibles or co-payments
had been paid under the welfare plans in which such Transferred Employee
participates after the Closing Date.
(c) Buyer Pension Plan.
(i) No later than the Closing Date, Buyer shall establish
or maintain, or shall cause one of its Affiliates to establish or
maintain, a defined benefit pension plan (the "Buyer Pension Plan")
that, subject to this Section 6.5(c), (A) for a period of not less than
twelve (12) months following the Closing Date, provides benefits to
each non-union Transferred Employee that are no less favorable in the
aggregate than those provided by the Qwest Pension Plan based on terms
of the Qwest Pension Plan applicable to such Transferred Employee as of
the Closing Date, and (B) for a period provided by the applicable CBA,
provides benefits for each union-represented Transferred Employee that
are substantially identical to those provided by the Qwest Pension Plan
based on terms of the Qwest Pension Plan applicable to such Transferred
Employee as of the Closing Date. The Buyer Pension Plan shall be
established and/or maintained for the benefit of each Transferred
Employee (collectively, the "Dex Pension Participants") who
participated or had accrued benefits in the Qwest Pension Plan
immediately prior to the Closing Date, and shall be (or remain)
qualified under Section 401(a) of the Code, and the trust which is a
part of the Buyer Pension Plan shall be exempt from tax under Section
501(a) of the Code. Each Dex Pension Participant who is a participant
in the Qwest Pension Plan as of the Closing Date shall become a
participant in the Buyer Pension Plan as of the Closing Date. The Buyer
Pension Plan and the trust which is a part of such plan (and any
successor to such plan and/or trust) shall provide (I) that with
respect to assets transferred to the Buyer Pension Plan from the Qwest
Pension Plan, such assets shall be held by the trust which is a part of
the Buyer Pension Plan for the exclusive benefit of the participants in
such plan, (II) that the accrued benefits as of the Closing Date of
each Dex Pension Participant may not be decreased by amendment or
otherwise, (III) that each Dex Pension Participant shall have the right
to receive his or her benefit accrued through the Closing Date under
the Qwest Pension Plan in any optional form available to such Dex
Pension Participant with respect to such benefit provided under the
Qwest Pension Plan, (IV) that during the periods set forth in the first
sentence of this paragraph, each Transferred Employee shall accrue
47
benefits thereunder pursuant to benefit formulas that satisfy such
sentence, and (V) that each Dex Pension Participant shall be credited
for service with Qwest and its Affiliates (or U S WEST, if applicable)
for eligibility, vesting, early retirement, and, contingent upon the
transfer of assets set forth below, benefit accrual and compensation
earned with Qwest and its Affiliates (or U S WEST, if applicable) to
the extent such service was credited under the Qwest Pension Plan. In
addition to the foregoing, subject to the transfer of pension assets
described in this Section 6.5(c), upon termination of employment with
Buyer and its Affiliates, each Transferred Employee's accrued benefit
under the Buyer Pension Plan shall be not less than the sum of (x) the
benefit accrued based on service with Qwest and its Affiliates (or U S
WEST, if applicable) through the Closing Date, determined on the basis
of the benefit formula, rights and features of the Qwest Pension Plan
as in effect on the Closing Date, but using such Transferred Employee's
final years of compensation with Buyer or its Affiliates for this
purpose (except to the extent that the Qwest Pension Plan provides, at
the time of the Closing Date, that compensation has already been frozen
for the Transferred Employee under the applicable formula), plus (y)
the benefit accrued based on service following the Closing Date,
determined on the basis of the benefit formula, rights and features of
the Buyer Pension Plan as in effect from time to time; provided,
however, that clauses (x) and (y) shall not restrict Buyer's right to
amend or terminate the Buyer Pension Plan subsequent to expiration of
the applicable periods set forth in the first sentence of this
paragraph so long as accrued benefits as of the effective date of the
amendment are not reduced.
(ii) As soon as practicable following the Closing Date,
Seller shall cause its actuary to calculate the Accrued Liability (as
defined in Section 6.5(c)(iv)) of the Dex Pension Participants as of
the Closing Date. Seller shall cause to be transferred to a trust
established by Buyer as part of the Buyer Pension Plan a combination of
cash and readily tradable assets (as mutually agreed by Seller and
Buyer) equal to the Accrued Liability for all Dex Pension Participants,
determined as of the Closing Date pursuant to Section 6.5(c)(iv). For
this purpose, the value of the assets shall be determined based on the
audited reports of the trustee of the Qwest Pension Plan. The amount
finally determined in accordance with the foregoing to be transferred
from the Qwest Pension Plan to the Buyer Pension Plan shall be adjusted
to take into account the actual investment return of the Qwest Pension
Plan from the Closing Date until the date of the asset transfer
(provided, that the investment return for the month in which the
transfer occurs shall be deemed to be the average monthly rate on the
Mellon Trust Short Term Interest Fund (STIF) in which the Qwest Pension
Plan holds certain temporary cash funds from time to time), and shall
be decreased by any benefit payment made to or with respect to the Dex
Pension Participants under the Qwest Pension Plan during such period;
it being understood that any benefits payable to a Dex Pension
Participant who retires or terminates employment with Buyer and its
Affiliates after the Closing Date and prior to the date of the asset
transfer described herein and who is eligible to receive a distribution
at such time shall be paid from the Qwest Pension Plan until the date
of the transfer.
(iii) The transfer of assets from the Qwest Pension Plan to
the Buyer Pension Plan shall be made as soon as practicable, but not
later than 270 days after the Closing Date, following the determination
pursuant to Section 6.5(c)(iv) of the applicable amount to be
48
transferred in accordance with Section 6.5(c)(iv). Notwithstanding the
foregoing, no transfer shall be made until such time as Seller has been
provided evidence reasonably satisfactory to Seller that (A) Buyer has
established a trust as part of the Buyer Pension Plan, (B) that the
Buyer Pension Plan satisfies the requirements for a qualified plan
under Section 401(a) of the Code and that such trust is exempt from tax
under Section 501(a) of the Code, and (C) Buyer has provided
documentation regarding the tax-qualification of the Buyer Pension
Plan; such documentation consisting of either (I) a favorable
determination from the IRS, (II) a filed request for a determination
that the Buyer Pension Plan is qualified under Section 401(a) of the
Code and a written commitment from Buyer that it will make all
amendments requested by the IRS to obtain a favorable determination
letter, or (III) an opinion of counsel, reasonably acceptable to
Seller, that the Buyer Pension Plan is qualified under Section 401(a)
of the Code. Unless Seller and Buyer agree otherwise, all transfers
shall occur on the last business day of a month. Seller's actuary shall
be responsible for the required actuarial certification under Section
414(l) of the Code. Upon the transfer of assets described herein, Buyer
and the Buyer's Pension Plan shall assume all liabilities and
obligations of Seller and its Affiliates and the Qwest Pension Plan
with respect to the Dex Pension Participants under or in connection
with the Qwest Pension Plan, and Buyer shall become responsible for all
benefits due under the Qwest Pension Plan with respect to each Dex
Pension Participant as of the Closing Date (except for liabilities for
such benefits as have been paid by the Qwest Pension Plan after the
Closing Date and before the date of the asset transfer in accordance
with the last sentence of Section 6.5(c)(ii)); for this purpose,
liabilities shall include all accrued benefits within the meaning of
Section 411(d)(6) of the Code, all ancillary benefits (such as the
death benefits set forth in Article VII of the Qwest Pension Plan and
disability benefits set forth in Appendix J thereof) and any other
benefits, including enhanced retirement pension benefits under Appendix
R or additional defined lump sum benefits under Appendix S of the Qwest
Pension Plan.
(iv) The term "Accrued Liability" shall mean the amount
calculated in accordance with the actuarial assumptions and methods
used by the Qwest Pension Plan as of the date hereof to calculate the
"current liability" under Section 412(l)(9)(C) of the Code, as set
forth in Section 6.5(c) of Seller's Disclosure Schedule, but using a
discount rate equal to the discount rate that would be used by the
Qwest Pension Plan as of the date hereof to compute a lump sum
distribution from the Plan consistent with Section 417(e)(3) of the
Code, and the amount expressly called for to be transferred pursuant to
this Section 6.5(c) shall be adjusted to the extent necessary for the
required approval of any Governmental Entity (including the IRS and the
PBGC) and to satisfy Section 414(1) of the Code as well as Section 4044
of ERISA. The Accrued Liability shall be agreed upon by an enrolled
actuary designated by Seller and an enrolled actuary designated by
Buyer each of whom shall be provided with information reasonably
necessary to calculate the Accrued Liability in all material respects
and to verify that such calculation has been performed in a manner
consistent with accepted actuarial practices and the terms of this
Agreement. If there is a good faith dispute between Seller's actuary
and Buyer's actuary as to the amount to be transferred to the Buyer's
Pension Plan under this Agreement and such dispute remains unresolved
for 14 days, the chief financial officers of Seller and Buyer shall
endeavor to resolve the dispute. If such dispute remains unresolved for
30 days, Seller and Buyer shall select and appoint a third actuary who
49
is mutually satisfactory to both Seller and Buyer. The reasoned written
decision of such third party actuary shall be rendered within 30 days
and shall be conclusive as to any dispute for which such actuary was
appointed. The cost of such third party actuary shall be divided
equally between Seller and Buyer. Each of Seller and Buyer shall be
responsible for the cost of its own actuary.
(v) Buyer shall use its best efforts to qualify the Buyer
Pension Plan under Section 401(a) of the Code. Buyer and Seller shall
reasonably cooperate to make any and all filings and submissions to the
appropriate Governmental Entities required or appropriate to be made by
Buyer or Seller in order to effectuate the provisions of this Section
6.5(c), including (A) IRS Form 5310-A in respect of the transfers of
assets, and (B) if the transactions contemplated by this Agreement
constitute a "reportable event," as that term is defined in Section
4043 of ERISA, as to which notices would be required to be filed with
the PBGC, timely notification to the PBGC and the submission of all
reports required in connection therewith.
(d) Retiree Welfare Benefits. Effective as of the Closing Date, Buyer
shall cause each Transferred Employee and his or her spouse and dependents to be
provided retiree medical, health and life benefits upon his or her retirement
from Buyer or its Affiliates after meeting applicable eligibility conditions.
With respect to each such union-represented Transferred Employee, the retiree
medical, health and life benefits and eligibility conditions shall be
substantially identical to the benefits and eligibility conditions required
under the applicable CBA and the Seller Benefit Plans immediately prior to the
Closing Date, and shall be provided for the period required under such CBA. With
respect to each other Transferred Employee, the retiree medical, health and life
benefits and eligibility conditions shall be substantially comparable to those
provided by Seller or its Affiliates under the Seller Benefit Plans immediately
prior to the Closing Date; Buyer shall cause these retiree welfare benefits to
be maintained for the duration prescribed by the applicable Seller Benefit Plan
as in effect immediately prior to the Closing Date; provided, however, that
after December 31, 2003, Buyer and its Affiliates may change or modify these
retiree medical, health and life benefits to the extent permitted by applicable
Law.
(e) COBRA. Seller will be responsible for making continuation
coverage under Section 4980B of the Code and Sections 601-608 of ERISA ("COBRA")
available to any Employee and any eligible spouse or dependent of an Employee
who experiences a "qualifying event," as defined in Code Section 4980B(f)(3), on
or before the Closing. Buyer will be responsible for making continuation
coverage under COBRA available to any Transferred Employee and any eligible
spouse or dependent of a Transferred Employee who experiences a "qualifying
event," as defined in Code Section 4980B(f)(3), after the Closing.
(f) Nonqualified Plans. Buyer shall assume all liabilities and
obligations of Seller and its Affiliates with respect to each Transferred
Employee under or in connection with the Seller Benefit Plans that are excess
benefit plans or nonqualified defined benefit pension plans. Seller shall retain
all liabilities and obligations with respect to the Transferred Employees under
or in connection with any Seller Benefit Plan that is a nonqualified defined
contribution benefit plan.
50
(g) Third-Party Limitations. Nothing expressed or implied in this
Section 6.5 shall confer upon any current or former Employee, any Transferred
Employee, any spouse or dependent or legal representative of an Employee or
Transferred Employee, or any labor union or bargaining representative, any
rights or remedies, including any right to employment or continued employment
for any specified period, or any benefits other than under the express terms of
an applicable employee benefit plan.
6.6 Liquidated Damages. The parties acknowledge and agree that Buyer
would not have entered into this Agreement if the Qwest Parties and Qwest
Corporation had not simultaneously agreed to be bound by the Publishing
Agreement and the Noncompetition Agreement. Therefore, an event giving rise to
the payment of Publisher Liquidated Damages or Service Area Default Liquidated
Damages (as such terms are defined in the Publishing Agreement and the
Noncompetition Agreement) will be deemed to constitute a material breach of this
Agreement (with solely the remedies provided in the Publishing Agreement and
Noncompetition Agreement), and the parties intend that any payment of Publisher
Liquidated Damages or Service Area Default Liquidated Damages for breach of
either of such agreements shall be treated as an adjustment to the Purchase
Price.
ARTICLE VII
CONDITIONS OF PURCHASE
7.1 General Conditions. The obligations of the parties to effect the
Closing will be subject to the following conditions, unless waived in writing by
both parties:
(a) No Law or Order will have been enacted, entered, issued,
promulgated or enforced by any Governmental Entity at what would otherwise be
the Closing Date that prohibits the Transactions;
(b) All Approvals and Permits that are listed on Section 7.1(b) of
Seller's Disclosure Schedule will have been received or obtained on or before
the Closing Date; and
(c) The waiting period under the HSR Act, if applicable to the
consummation of the Transactions, will have expired or been terminated.
7.2 Conditions to Obligations of Buyer. The obligations of Buyer to
effect the Closing will be subject to the following conditions, unless waived in
writing by Buyer:
(a) The representations and warranties of the Qwest Parties in this
Agreement which are not modified by materiality or Material Adverse Effect will
be true in all material respects on the Closing Date (except to the extent such
representations and warranties by their terms speak as of an earlier date, in
which case they shall be true in all material respects as of such date), and the
representations and warranties of the Qwest Parties in this Agreement which are
modified by materiality or Material Adverse Effect will be true on the Closing
Date (except to the extent such representations and warranties by their terms
speak as of an earlier date, in which case they shall be true as of such date);
(b) The Qwest Parties will have performed in all material respects
all obligations and complied with all covenants and conditions required by this
Agreement and the other Transaction Documents to be performed or complied with
by them on or before the Closing Date;
51
(c) Each of the Qwest Parties and Qwest Corporation shall, both
immediately before and after consummation of the Transactions, not be Insolvent.
(d) Seller will have obtained and provided to Buyer all Third Party
Consents listed in Section 7.2(d) of Seller's Disclosure Schedule;
(e) The officers of Company listed in a letter to be delivered by
Buyer to Seller not less than 3 days before the Closing Date (the "Resigning
Officers") will have submitted their resignations in writing or will otherwise
have been removed from office, effective as of the Closing Date;
(f) Seller will have delivered to Buyer a certificate of Seller in
form and substance reasonably satisfactory to Buyer, dated the Closing Date and
signed by an executive officer of Seller, to the effect that the conditions in
the foregoing paragraphs (a), (b) and (c) have been satisfied;
(g) Seller and its Affiliates, as applicable, will have executed and
delivered to Buyer the Transaction Documents and Commercial Agreements
(including, if agreed to by the parties pursuant to Section 5.12, the Master
Sales Agent Agreement) to which such Persons are a party and such agreements
shall be in full force and effect (excluding any failure of a Commercial
Agreement to which Buyer is a party to be in full force and effect as a result
of any action or inaction by Buyer);
(h) Seller will have executed and delivered to Buyer a signature and
incumbency certificate in form and substance reasonably satisfactory to Buyer
with respect to the Persons executing the Transaction Documents and Commercial
Agreements on behalf of Seller;
(i) The contributions of the assets pursuant to the Contribution
Agreement and the IP Contribution Agreement shall have been consummated in all
material respects;
(j) The financial institutions party to the Debt Financing Commitment
Letter shall have consummated the Debt Financing required in connection with the
Closing in accordance with the terms thereof;
(k) The Qwest Parties will have granted to Buyer the Performance
Security Interests in the Performance Collateral and the Proceeds of the
Performance Collateral in accordance with Section 8.2(b) of this Agreement;
(l) Seller shall have delivered a copy of the fairness opinions
rendered to the Qwest Parties with respect to the Transactions by each of Lehman
Brothers Inc. and Merrill Lynch & Co., Inc.;
(m) The Buyer shall have received from one or more counsels to the
Qwest Parties, as specified in Section 7.2(m) of Seller's Disclosure Schedule,
legal opinions with respect to the matters set forth in Section 7.2(m) of
Seller's Disclosure Schedule, addressed to Buyer and dated as of the Closing
Date; and
52
(n) Both (i) sufficient Third Party Consents shall have been obtained
and/or Company shall be able to replace such Contracts on commercially
reasonable terms such that Company can conduct the Transferred Business in the
same manner and substantially on the same terms and conditions as currently
conducted by Seller and (ii) the Dexter IP Products Condition shall have been
satisfied unless the failure to consummate the transactions that would satisfy
such condition was a result of action or inaction by Buyer inconsistent goals or
with the undertakings contemplated in Section 5.18 of Exhibit P.
7.3 Conditions to Obligations of Seller. The obligations of Seller to
effect the Closing will be subject to the following conditions, unless waived in
writing by Seller:
(a) The representations and warranties of Buyer in this Agreement
which are not modified by materiality or Buyer Material Adverse Effect will be
true in all material respects on the Closing Date (except to the extent such
representations and warranties by their terms speak as of an earlier date, in
which case they shall be true in all material respects as of such date), and the
representations and warranties of Buyer in this Agreement which are modified by
materiality or Buyer Material Adverse Effect will be true on the Closing Date
(except to the extent such representations and warranties by their terms speak
as of an earlier date, in which case they shall be true as of such date);
(b) Buyer will have performed in all material respects all
obligations and complied with all covenants and conditions required by this
Agreement and the other Transaction Documents to be performed or complied with
by it on or before the Closing Date;
(c) Buyer shall, upon consummation of the Transactions, not be
Insolvent.
(d) Buyer will have delivered to Seller a certificate of Buyer in
form and substance satisfactory to Seller, dated the Closing Date and signed by
an executive officer of Buyer, to the effect that the conditions in the
foregoing paragraphs (a), (b) and (c) have been satisfied;
(e) Buyer will have obtained and provided to Seller all Third Party
Consents listed in Section 7.3 of Buyer's Disclosure Schedule;
(f) Buyer will have executed and delivered to Seller the Transaction
Documents and Commercial Agreements (including, if agreed to by the parties
pursuant to Section 5.12, the Master Sales Agent Agreement) to which Buyer is a
party and such agreements shall be in full force and effect (excluding any
failure of a Commercial Agreement to which a Qwest Party is a party to be in
full force and effect as a result of any action or inaction by any Qwest Party);
(g) Buyer will have executed and delivered to Seller a signature and
incumbency certificate in form and substance reasonably satisfactory to Seller
with respect to the Persons executing the Transaction Documents and Commercial
Agreements on behalf of Buyer; and
53
(h) The Qwest Parties shall have received from Latham & Watkins,
counsel to Buyer, a legal opinion with respect to the matters set forth in
Section 7.3(h) of Buyer's Disclosure Schedule, addressed to the Qwest Parties
and dated as of the Closing Date.
ARTICLE VIII
TERMINATION OF OBLIGATIONS; SURVIVAL
8.1 Termination of Agreement. Anything herein to the contrary
notwithstanding, this Agreement and the Transactions may be terminated at any
time before the Closing as follows and in no other manner:
(a) By mutual consent in writing of Buyer and Seller;
(b) By either Seller or Buyer if any Governmental Entity has issued
an Order or taken any other actions (which the parties will use their
commercially reasonable efforts to lift), in either case permanently
restraining, enjoining or otherwise prohibiting the Transactions, and such Order
or other action becomes final and nonappealable;
(c) By Buyer upon written notice to Seller if any event occurs or
condition exists that would render impossible the satisfaction on or before the
Termination Date of one or more conditions to the obligations of Buyer to
consummate the Closing contemplated by this Agreement as set forth in Article
VII;
(d) By Seller upon written notice to Buyer if any event occurs or
condition exists that would render impossible the satisfaction on or before the
Termination Date of one or more conditions to the obligations of Seller to
consummate the Closing contemplated by this Agreement as set forth in Article
VII;
(e) By Buyer upon written notice to Seller if Seller materially
breaches this Agreement and fails to cure such breach within 30 days after
receiving notice from Buyer; provided, that failure to cure such breach
constitutes a Material Adverse Effect;
(f) By Seller upon written notice to Buyer if Buyer materially
breaches this Agreement and fails to cure such breach within 30 days after
receiving notice from Seller; provided, that failure to cure such breach
constitutes a Material Adverse Effect;
(g) By either Seller or Buyer upon written notice to the other within
five Business Days after the delivery of the Transferred Business Audited
Financial Statements, if an EBITDA Terminating Event occurs;
(h) By Seller or Buyer at any time after December 15, 2002 if the
Closing shall not have occurred on or prior to such date, unless extended by
mutual consent in writing of Buyer and Seller (such date, as extended, the
"Termination Date"); provided that no party shall have the right to terminate
this Agreement pursuant to this Section 8.1(h) if such party's breach or failure
to fulfill any obligation under this Agreement has been the proximate cause of,
or resulted in, the failure of the Closing to occur by such date; or
54
(i) Automatically, without any action on the part of any Person, if,
in any proceeding before any Governmental Entity, any Qwest Party proposes,
consents or acquiesces to, or is required to participate in, the initiation,
solicitation or facilitation of the making of any proposal or offer with respect
to any Person relating to any acquisition, recapitalization, business
combination or purchase of all or a material portion of the Transferred Business
or is required by Law to do any of the foregoing.
8.2 Effect of Termination.
(a) In the event of the termination of this Agreement pursuant to
Section 8.1, this Agreement and the Transaction Documents shall thereafter
become void and have no effect, and no party hereto shall have any liability to
the other parties hereto or their respective stockholders or directors or
officers in respect thereof or with respect to the Transactions contemplated
hereby; provided that the obligations of the parties contained in this Section
8.2, Section 10.9 and Section 10.12 shall survive any such termination. A
termination under Section 8.1 shall not relieve any party of any liability for
any material misrepresentation under this Agreement or any material breach of a
covenant, or be deemed to constitute a waiver of any available remedy (including
specific performance if available) for any such material misrepresentation or
material breach of covenant.
(b) To ensure that Buyer has an adequate remedy for any breaches by
the Qwest Parties of their obligations pursuant to this Agreement and the Rodney
Purchase Agreement, as and when due, upon the Closing Date, the Qwest Parties
will grant, convey, pledge, assign and transfer to Buyer a security interest
(the "Performance Security Interest") in, all right, title and interest of the
Qwest Parties in and to assets to be conveyed to Rodney LLC in connection with
the Rodney Contribution Agreement and the Rodney Purchase Agreement and which
are subject to the granting and perfection of security interests under Article 9
of the Uniform Commercial Code as in effect in the applicable jurisdiction (the
"UCC") (other than (x) any receivables that are part of such assets and (y) any
assets located in the states of Arizona, Utah and Washington) (such assets
being, collectively, the "Performance Collateral") and the Proceeds of the
Performance Collateral to secure not more than $100 million of Losses incurred
by Buyer as a result of any such breach, which security interest will be
"silent", junior and subordinated as and to the extent required by third party
lenders to whom a first, second or other senior priority security interest in
such assets is granted in favor of holders of senior secured obligations in an
aggregate principal funded amount of up to $3,880,000,000 outstanding from time
to time (the "Senior Debt"). Seller shall be entitled from time to time to
substitute other collateral for the Performance Collateral; provided that such
other collateral is reasonably equivalent in value to the Performance Collateral
and otherwise reasonably acceptable to Buyer. Buyer shall be entitled to file,
or have filed on its behalf, duly executed financing statements containing a
correct description of the Performance Collateral for filing in every
governmental office in every state, county and other jurisdiction in which the
principal or any other place of business or the chief executive office of any of
the Qwest Parties, or any portion of the Performance Collateral, is located and
in each jurisdiction in which such action is necessary to establish a valid and
perfected lien in favor of Buyer, which lien may be perfected by filing under
the UCC. Buyer shall perform such acts as are necessary, or that the Qwest
Parties may reasonably request, including without limitation the execution and
delivery of subordination and intercreditor agreements with the holders of the
Senior Debt in order to properly reflect the priority and rights related to the
55
Performance Security Interest as contemplated by this Section 8.2(b). The Qwest
Parties shall, at their own expense, perform such acts as may be necessary, or
that Buyer may reasonably request at any time, to ensure the attachment,
perfection and relative priority of the Performance Security Interest or to
carry out the intent of this Section 8.2(b). Upon the closing of the
transactions contemplated by the Rodney Purchase Agreement or within 30 days of
the earlier termination of the Rodney Purchase Agreement, Buyer shall, at
Buyer's expense, perform such acts as may be necessary, or that the Qwest
Parties may reasonably request at any time, to ensure the proper recording of
the termination of the Performance Security Interest or to carry out the intent
of this Section 8.2(b); provided, however, that, in the event that within 30
days after the termination of the Rodney Purchase Agreement, Buyer asserts, in
writing and with reasonable specificity, a claim against one or more of the
Qwest Parties alleging the failure of any of the Qwest Parties to make any
payment or perform any of their obligations pursuant to this Agreement or the
Rodney Purchase Agreement, Buyer's obligation to cause the Performance Security
Interest to be released shall be deferred until such claim has been resolved
except that (i) the Performance Security Interest shall be released prior to the
resolution of such claim if Buyer fails to diligently prosecute such claim or
(ii) the Performance Security Interest shall be released to the extent that the
value of the Performance Collateral and the Proceeds at any time exceeds the
amount of Buyer's claim.
(c) Without limiting any other rights of Buyer under this Agreement,
if the Closing does not occur for any reason other than as a result, in whole or
in part, of a breach of this Agreement or any other Transaction Document by
Buyer, within five Business Days of receipt of a reasonably itemized list of
Buyer's Reimbursable Expenses, the Qwest Parties shall pay to Buyer an aggregate
amount equal to the Reimbursable Expenses by wire transfer of immediately
available funds to an account designated in writing by Buyer at the time it
provides such itemized list.
8.3 Survival of Representations and Warranties and Agreements. The
representations, warranties and agreements contained in or made pursuant to this
Agreement shall survive the Closing and shall expire upon the 18 month
anniversary of the Closing, except that (a) the representations and warranties
contained in Sections 3.9 (Tax Returns and Reports) and 3.17 (Employee Benefits)
shall survive until three months after the expiration of the applicable statute
of limitations; provided that if there is no statute of limitations applicable
to any such representation or warranty such representation or warranty shall
expire upon the third anniversary of the Closing, (b) the representations and
warranties contained in Sections 3.1 (Organization and Related Matters), 3.2(a)
(Authorization), 3.2(b) (No Conflicts, but only with respect to the last
sentence and only as it relates to State PUC Laws), 3.5 (Capitalization), 3.13
(No Brokers or Finders), 3.15 (LCI), 3.24 (Contribution Agreement), 4.1
(Organization and Related Matters), 4.2(a) (Authorization) and 4.7 (No Brokers
or Finders) shall remain in full force and effect indefinitely, and (c) the
agreements contained herein (including the covenants in Article VI) and in the
other Transaction Documents that require performance after Closing (the
"Post-Closing Covenants") will survive and remain in full force and effect
indefinitely. Article IX shall survive the Closing and shall remain in effect
(a) with respect to Sections 9.1(a) and 9.2(a), so long as the relevant
representations survive, (b) with respect to breaches of pre-Closing covenants,
for one year after the Closing, and (c) with respect to Sections 9.1(b)
(Post-Closing Covenants only), 9.1(c), 9.1(d), 9.1(e), 9.2(b) (Post-Closing
Covenants only), 9.2(c) and 9.2(d), indefinitely. Any matter as to which a claim
has been asserted by notice to the other party that is pending or unresolved at
56
the end of any applicable limitation period but is being diligently pursued
shall continue to be covered by Article IX notwithstanding any applicable
statute of limitations (which the parties hereby waive) until such matter is
finally terminated or otherwise resolved by the parties under this Agreement or
by a court of competent jurisdiction and any amounts payable hereunder are
finally determined and paid.
ARTICLE IX
INDEMNIFICATION
9.1 Obligations of Qwest Parties. From and after the Closing, the
Qwest Parties agree to indemnify and hold harmless Buyer, Company and their
respective directors, officers, employees, Affiliates, agents and assigns (the
"Buyer Indemnified Persons"), jointly and severally, from and against any and
all Losses based upon or arising from:
(a) any inaccuracy, as of the date hereof or as of the Closing Date,
in any of the representations and warranties made by any Qwest Party in this
Agreement (except to the extent such representations and warranties by their
terms speak as of another date, in which case, this Section 9.1(a) shall be
limited to inaccuracy as of such date); or
(b) any failure to perform in any material respect any covenant or
agreement of any Qwest Party contained in this Agreement or any Transaction
Document; or
(c) the operation of LCI prior to the Closing; or
(d) the Excluded Liabilities; or
(e) any other matter as to which any of the Qwest Parties in other
provisions of this Agreement has expressly agreed to indemnify Buyer or,
subsequent to Closing, Company.
9.2 Obligations of Buyer . From and after the Closing, Buyer agrees
to indemnify and hold harmless the Qwest Parties and each of their respective
directors, officers, employees, Affiliates, agents and assigns (the "Seller
Indemnified Persons"), jointly and severally, from and against any Losses based
upon or arising from:
(a) any inaccuracy, as of the date hereof or as of the Closing Date,
in any of the representations and warranties made by Buyer in this Agreement
(except to the extent such representations and warranties by their terms speak
as of another date, in which case, this Section 9.2(a) shall be limited to
inaccuracy as of such date); or
(b) any failure to perform in any material respect any covenant or
agreement of Buyer contained in this Agreement or any Transaction Document; or
(c) any claim arising on or after the Closing Date relating to the
conduct of the Transferred Business or any action of Company on or after the
Closing Date (other than any claim brought against any Qwest Party or Qwest
Corporation with respect to services provided pursuant to any Commercial
Agreement with all such claims to be resolved in accordance with the terms of
the applicable Commercial Agreement or any claim arising from a Qwest Party
breach of this Agreement or the Transaction Documents); or
57
(d) any other matter as to which Buyer in other provisions of this
Agreement has expressly agreed to indemnify any Qwest Party.
9.3 Procedure.
(a) Any party seeking indemnification with respect to any Loss (the
"Indemnified Party") will promptly notify the party required to provide
indemnity hereunder (the "Indemnifying Party") in accordance with Section 10.11.
Notwithstanding the foregoing, the failure of any Indemnified Party to give
timely notice hereunder shall not affect rights to indemnification hereunder,
except and to the extent that the Indemnifying Party has been prejudiced thereby
in defending against such claim.
(b) If any claim, demand or liability is asserted by any third party
against any Indemnified Party (other than a claim for Taxes addressed in Section
6.1(e)(i)) (a "Third-Party Claim"), the Indemnified Party will, upon notice of
the claim or demand, promptly notify the Indemnifying Party, and the
Indemnifying Party will defend and/or settle any actions or proceedings brought
against the Indemnified Party in respect of matters embraced by the indemnity
with counsel reasonably satisfactory to the Indemnified Party. If the
Indemnifying Party does not promptly defend or settle any such claims, the
Indemnified Party will have the right to control any defense or settlement, at
the expense of the Indemnifying Party. No claim will be settled or compromised
without the prior written consent of each party to be affected by such
settlement or compromise, with such consent not being unreasonably withheld. The
Indemnified Party will at all times also have the right to participate fully in
the defense. Such participation shall be at the defense of the Indemnified Party
unless the Indemnified Party shall have been advised by counsel retained by the
Indemnifying Party that representation of the Indemnified Party by counsel
provided by the Indemnifying Party would be inappropriate due to actual
conflicting interests between the Indemnifying Party and the Indemnified Party,
including situations in which there are one or more substantial legal defenses
available to the Indemnified Party that are different from or additional to
those available to the Indemnifying Party. The parties will cooperate in the
defense of all Third-Party Claims that may give rise to Indemnifiable Claims
hereunder. In connection with the defense of any claim, each party will make
available to the party controlling such defense, any books, records or other
documents within its control that are reasonably requested in the course of such
defense.
(c) [Reserved]
(d) If the Indemnified Party has a claim against the Indemnifying
Party that does not involve a Third-Party Claim (an "Inter-Party Claim"; and
together with a Third-Party Claim, an "Indemnifiable Claim"), the Indemnified
Party will notify the Indemnifying Party with reasonable promptness of the
claim, specifying the nature, estimated amount and the specific basis for the
claim. The Indemnifying Party will respond within 45 days of receipt of the
notice of an Inter-Party Claim. If the Indemnifying Party fails to respond, the
estimated amount of the claim specified by the Indemnified Party will be
conclusively deemed a liability of the Indemnifying Party. If the Indemnifying
Party timely disputes the claim, the Indemnified and the Indemnifying Party will
negotiate in good faith to resolve the dispute, and if not resolved, either
party may pursue whatever remedies it may have.
58
(e) If any Loss is covered by insurance, the Indemnified Party will
use good faith efforts to exhaust claims against the applicable policies. The
provisions of this Article IX are subject to the rights of any Indemnified
Party's insurer that may be defending any such claim. If the Indemnifying Party
makes any payment hereunder of a Loss, the Indemnifying Party will be
subrogated, to the extent of the payment, to the rights of the Indemnified Party
against any insurer or third party with respect to the Loss. The Indemnifying
Party shall pay all costs and expenses for pursuing any claims hereunder.
Notwithstanding the foregoing, Buyer and Seller acknowledge and agree that, with
respect to Indemnifiable Claims, the Indemnified Party may seek payment directly
against the Indemnifying Party, without having first to pursue its claims
against an insurer, if such Loss is (and following receipt of a payment from
such insurer, the Indemnified Party will remain) covered by the Indemnified
Party's insurance. If an Indemnifying Party pays the Loss directly to the
Indemnified Party, the Indemnified Party will use commercially reasonable
efforts to assist the Indemnifying Party in pursuing any claims against the
applicable policies.
(f) Tax Adjustments.
(i) Any amount otherwise payable by an Indemnifying Party
to or on behalf of an Indemnified Party pursuant to this Agreement
shall be reduced (at the time and in the manner discussed in Section
9.3(f)(ii) below) by any actual Tax benefit arising from the payment of
the claim that gave rise to the Indemnifying Party making an indemnity
payment. If an Indemnified Party realizes any such Tax benefit, then
such Indemnified Party shall pay an amount to the Indemnifying Party
equal to the Tax benefit realized, provided that in the event an amount
payable by the Indemnifying Party is reduced by the amount of such Tax
benefit and there is a disallowance of such Tax benefit by a taxing
authority (based upon a reasonable and good faith determination by the
Indemnified Party) such that the Indemnified Party is not entitled to
all or any portion of such Tax benefit, then the Indemnifying Party
shall pay to the Indemnified Party the amount of the Tax benefit that
was disallowed.
(ii) A Tax benefit will be considered to be realized for
purposes of this Section 9.3(f) on (A) the date on which the Tax
benefit is received as a refund of Taxes, or (B) to the extent that the
Tax benefit is not received as a refund of Taxes but rather is claimed
as an item that reduces liability for Taxes (on a with and without
basis), the due date (including extensions) of the Tax Return that
reflects such change in liability for Taxes. Notwithstanding anything
herein to the contrary, the Indemnified Party shall determine whether,
for purposes of this Section 9.3, a Tax benefit is available to the
Indemnified Party in respect of the relevant indemnifiable claim,
provided that such determination shall be reasonable and shall be made
in good faith. The Indemnifying Party shall have opportunity to
reasonably review the Indemnified Party's calculation of the Tax
benefit realized (including a calculation pursuant to which it is
determined that there is no Tax benefit available to the Indemnified
Party), provided that such review shall in no event relate to the
Indemnified Party's determination of how to report any items on its Tax
Return. The Indemnifying Party's review of the Indemnified Party's
calculation may include review of relevant parts of the Indemnified
Party's Tax Return, provided such review of the Tax Return does not
materially adversely affect the Indemnified Party.
59
(g) All payments made pursuant to Section 6.1 or this Article IX
(other than a payment based on an obligation arising under Section 6.1(c)) shall
be treated as adjustments to the purchase price for the LLC Interests.
9.4 Indemnification Threshold; Maximum Losses.
(a) Except with respect to Losses arising from or related to Seller's
breach of Sections 3.1 (Organization and Related Matters), 3.2(a)
(Authorization), 3.2(b) (No Conflicts, but only with respect to the last
sentence and only as it relates to State PUC Laws), 3.5 (Capitalization), 3.9
(Taxes), 3.13 (No Brokers or Finders), 3.15 (LCI) and 3.24 (Contribution
Agreement), the Qwest Parties will have no liability for any Losses incurred by
any Buyer Indemnified Person with respect to any individual claim or series of
related claims under Section 9.1(a) unless the amount of Losses (not otherwise
indemnified) resulting therefrom exceeds $500,000 (the "Included Claims") and
the aggregate amount of all Included Claims exceeds $20,625,000 and in such
event, the Qwest Parties shall be responsible for only the amount in excess of
such amount.
(b) Except with respect to Losses arising from or related to Seller's
breach of Sections 3.1 (Organization and Related Matters), 3.2(a)
(Authorization), 3.2(b) (No Conflicts, but only with respect to the last
sentence and only as it relates to State PUC Laws), 3.5 (Capitalization), 3.9
(Taxes), 3.13 (No Brokers or Finders) and 3.15 (LCI), the Qwest Parties will
have no liability for Losses incurred by Buyer Indemnified Persons under Section
9.1(a), whether resulting from an action for indemnification or otherwise, to
the extent the aggregate Losses incurred thereunder, including any Losses
previously recovered, exceed $550,000,000.
(c) Except with respect to Section 3.6, for purposes of Section
9.1(a) and 9.2(a), representations and warranties in this Agreement will be
deemed to have been made without giving effect to any limitation of "in all
material respects" or based on Material Adverse Effect or Buyer Material Adverse
Effect set forth therein.
9.5 Cooperation. In connection with any Indemnifiable Claim, the
Indemnified Party will cooperate in all reasonable requests of the Indemnifying
Party.
9.6 Exclusive Remedy. Except for (a) claims arising out of any breach
of the Confidentiality Agreement, (b) claims for fraud and (c) as provided in
Section 10.16, the remedies provided for in this Article IX (including this
Section 9.6) shall constitute the exclusive remedy for any post-Closing claims
made for breach of this Agreement, the other Transaction Documents or in
connection with the Transactions (other than Transactions governed by the
Commercial Agreements), and each of the parties hereto agrees not to bring any
Action, at law, in equity or otherwise, against any other party or its
Affiliates in respect of any breach of this Agreement, the other Transaction
Documents or in connection with the Transactions (other than Transactions
governed by the Commercial Agreements). Without limiting the foregoing, Buyer
waives any right to assert a breach by Seller of the Contribution Agreement or
the IP Contribution Agreement following the Closing, but without prejudice to
the right of Buyer, Company and their Affiliates to be indemnified for Excluded
Liabilities under Section 9.1(d) or breaches of Section 3.24. In no event shall
the mere inaccuracy of a representation or warranty itself be used as evidence
of or deemed to constitute bad faith, misconduct or fraud. Each party hereby
waives any provision of Law to the extent that it would limit or restrict the
agreement contained in this Section 9.6.
60
9.7 Damages. Notwithstanding any provision of this Agreement to the
contrary, neither party shall be entitled in connection with any breach or
violation of this Agreement or otherwise in connection with the Transactions
contemplated by this Agreement to recover any punitive, exemplary or other
special damages; provided that the parties shall be permitted to recover
indirect, incidental or consequential damages to the extent, but only to the
extent, such indirect, incidental or consequential damages are caused by and are
a reasonably foreseeable result of such breach or violation and provided further
that the parties shall be entitled to the remedies provided in the Commercial
Agreements. The foregoing shall not limit the right of either party to
indemnification in accordance with the provisions of this Article IX with
respect to all components of any claim, settlement, aware or judgment against
such party by any unaffiliated third party. Nothing in this Agreement shall be
deemed to create any presumption that the EBITDA Multiplier is to be used in the
computation of any amount which a party is entitled to recover under this
Agreement.
9.8 Relationship to Rodney Purchase Agreement. Notwithstanding
anything to the contrary contained herein, Buyer acknowledges that any fact,
matter or circumstance that is or may constitute an "Indemnifiable Claim" under
the Rodney Purchase Agreement may only be asserted as a claim under Article IX
of the Rodney Purchase Agreement (subject to the terms and conditions of such
Article) and may not be asserted as an Indemnifiable Claim under this Agreement.
ARTICLE X
GENERAL
10.1 Amendments; Waivers. Except as expressly provided herein, this
Agreement, any attached Disclosure Schedule, Schedule or Exhibit and each of the
other Transaction Documents may be amended only by agreement in writing of all
parties. No waiver of any provision nor consent to any exception to the terms of
this Agreement or any other Transaction Document will be effective unless in
writing and signed by the party to be bound and then only to the specific
purpose, extent and instance so provided.
10.2 Schedules; Exhibits; Integration. Each Disclosure Schedule,
Schedule and Exhibit delivered pursuant to the terms of this Agreement must be
in writing and will constitute a part of this Agreement, although schedules need
not be attached to each copy of this Agreement. The mere inclusion of an item in
a Disclosure Schedule as an exception to a representation or warranty shall not
be deemed an admission by Seller (in the case of the Seller's Disclosure
Schedule) or Buyer (in the case of the Buyer's Disclosure Schedule) that such
item represents an exception or material fact, event or circumstance or that
such item is reasonably likely to result in a Material Adverse Effect. This
Agreement, together with such Disclosure Schedules, Schedules, Exhibits,
Transaction Documents and the Commercial Agreements constitutes the entire
agreement among the parties pertaining to the subject matter hereof and
supersedes all prior agreements and understandings of the parties in connection
therewith.
61
10.3 Further Assurances. Each party shall use all commercially
reasonable efforts to cause all conditions to its and the other party's
obligations hereunder to be timely satisfied and to perform and fulfill all
obligations on its part to be performed and fulfilled under this Agreement, to
the end that the Transactions shall be effected substantially in accordance with
its terms as soon as reasonably practicable. Without limiting the generality of
the foregoing, (a) the parties shall cooperate with each other in such actions
and in securing any requisite Approvals and Permits and (b) each party shall
execute and deliver, both before and after the Closing, such further
certificates, agreements and other documents and take such other actions as the
other party may reasonably request to consummate or implement the Transactions
or to evidence such events or matters.
10.4 Governing Law. This Agreement and the legal relations between the
parties will be governed by and construed in accordance with the laws of the
State of New York applicable to contracts made and performed in such State and
without regard to conflicts of law doctrines unless certain matters are
preempted by federal law.
10.5 No Assignment. Neither this Agreement nor any rights or
obligations under it are assignable by one party without the prior written
consent of the other party; provided, however, that following the Closing, Buyer
may assign its rights under this Agreement in whole or in part to any purchaser
of all or a portion of the Transferred Business. Any such assignment without the
prior written consent of the other party shall be void ab initio.
Notwithstanding anything to the contrary in this Section 10.5, upon written
notice to Seller, Buyer shall, without the consent of the Qwest Parties, be
permitted to (x) assign this Agreement and the rights and obligations under it
(a) to its lenders for collateral security purposes, or (b) to a wholly-owned
subsidiary of Buyer; provided, however, that, in the event of any such
assignment, Buyer shall remain liable in full for the performance of its
obligations hereunder and the assignee shall execute a document in form and
substance reasonably acceptable to Seller to signify the consent of Buyer's
assignee to the obligations of Buyer hereunder on a joint and several basis or
(y) change its status from a limited liability company to a corporation.
10.6 Headings. The descriptive headings of the Articles, Sections and
subsections of this Agreement are for convenience only and do not constitute a
part of this Agreement.
10.7 Counterparts. This Agreement and any amendment hereto or any
other Transaction Document may be executed in one or more counterparts and by
different parties in separate counterparts. All counterparts will constitute one
and the same agreement and will become effective when one or more counterparts
have been signed by each party and delivered to the other party.
10.8 Publicity and Reports. Seller and Buyer will coordinate all
publicity relating to the Transactions, and no party will issue any press
release, publicity statement or other public notice relating to this Agreement
or the Transactions without first obtaining the written consent of the other
party to the issuance of such release, statement or notice (which consent may
not be unreasonably withheld, conditioned or delayed); provided that to the
extent that independent legal counsel to Seller or Buyer, as the case may be,
shall deliver a written opinion to the other party that a particular action is
required by applicable Law, the parties shall be obligated only to use
62
commercially reasonable efforts to consult with the other party prior to issuing
any such press release, publicity statement or other public notice. Each party
shall obtain the prior consent of the other party to the form and content of any
information included in any application, report or response made to any
Governmental Entity or which relates to this Agreement.
10.9 Confidentiality. Each of Seller and Buyer agrees that all
non-public, confidential information so received from the other party is deemed
received pursuant to the confidentiality agreements dated as of April 22, 2002
and April 24, 2002 between an Affiliate of Seller and Affiliate of Buyer (the
"Confidentiality Agreements"), and each party will, and will cause its
representatives (as defined in the Confidentiality Agreements) to, comply with
the provisions of the Confidentiality Agreements with respect to such
information, and the provisions of the Confidentiality Agreements are hereby
incorporated by reference with the same effect as if fully set forth herein.
10.10 Parties in Interest. This Agreement is binding upon and will
inure to the benefit of each party and their respective successors or assigns,
and nothing in this Agreement, express or implied, is intended to confer upon
any other Person any rights or remedies of any nature whatsoever under or by
reason of this Agreement.
10.11 Notices. Any notice or other communication hereunder must be
given in writing and: (a) delivered in Person; (b) transmitted by facsimile or
other telecommunications mechanism; (c) delivered via an overnight courier
service of national reputation; or (d) mailed by certified or registered mail,
postage prepaid, receipt requested as follows:
If to Buyer, addressed to:
Dex Holdings LLC
c/o The Carlyle Group
520 Madison Avenue
41st Floor
New York, New York 10022
Attention: James A. Attwood, Jr.
Fax: (212) 381-4901
With a copy to:
The Carlyle Group
520 Madison Avenue
41st Floor
New York, New York 10022
Attention: James A. Attwood, Jr.
Fax: (212) 381-4901
63
Welsh, Carson, Anderson & Stowe
320 Park Avenue
Suite 2500
New York, New York 10022-6815
Attention: Anthony J. deNicola
Fax: (212) 893-9548
Latham & Watkins
885 Third Avenue
Suite 1000
New York, New York 10022
Attention: R. Ronald Hopkinson, Esq.
Fax: (212) 751-4864
If to Seller, QSC or Qwest, addressed to:
c/o Qwest Communications International Inc.
1801 California Street
Denver, Colorado 80202
Attention: General Counsel
Fax: (303) 296-5974
With a copy to:
O'Melveny & Myers LLP
1999 Avenue of the Stars
Suite 700
Los Angeles, California 90067
Attention: Steven L. Grossman, Esq.
Fax: (310) 246-6779
or to such other address or to such other Person as Seller, QSC, Qwest or Buyer
has last designated by such notice to the other parties. Each such notice or
other communication will be effective: (i) if given by facsimile or other
telecommunication, when transmitted to the applicable number so specified in
this Section 10.11 and an appropriate confirmation is received; (ii) if given by
mail, three days after such communication is deposited in the mails with first
class postage prepaid, addressed as above; (iii) if given by overnight courier
service of national reputation, one day after such communication is deposited
with such courier service; or (iv) if given by any other means, when actually
received at such address.
10.12 Expenses. Qwest, QSC, Seller and Buyer will each pay its own
expenses incident to and Buyer's evaluation of Qwest, QSC, Seller, Company and
the Transferred Business and the negotiation, preparation and performance of
this Agreement, the Transaction Documents and the Transactions, including the
fees, expenses and disbursements of their respective investment bankers,
accountants and counsel, except as agreed in Section 8.2(c).
64
10.13 Waiver. No failure on the part of any party to exercise or delay
in exercising any right hereunder will be deemed a waiver thereof, nor will any
single or partial exercise preclude any further or other exercise of such or any
other right.
10.14 Representation by Counsel; Interpretation. Seller and Buyer each
acknowledge that it has been represented by counsel in connection with this
Agreement and the Transactions. Accordingly, any rule of Law or any legal
decision that would require interpretation of any claimed ambiguities in this
Agreement against the party that drafted it has no application and is expressly
waived. The provisions of this Agreement will be interpreted in a reasonable
manner to effect the intent of Buyer and Seller.
10.15 Severability. If any provision of this Agreement is determined to
be invalid, illegal or unenforceable by any Governmental Entity, the remaining
provisions of this Agreement to the extent permitted by Law shall remain in full
force and effect provided that the essential terms and conditions of this
Agreement for both parties remain valid, binding and enforceable and provided
that the economic and legal substance of the transactions contemplated is not
affected in any manner materially adverse to any party. In event of any such
determination, the parties agree to negotiate in good faith to modify this
Agreement to fulfill as closely as possible the original intents and purposes
hereof. To the extent permitted by Law, the parties hereby to the same extent
waive any provision of Law that renders any provision hereof prohibited or
unenforceable in any respect.
10.16 Waiver of Jury Trial; Equitable Relief.
(a) The parties irrevocably waive trial by jury in any Action
relating to this Agreement or any other Transaction Document and for any
counterclaim with respect thereto.
(b) In the event of any breach of the provisions of this Agreement or
any of the other Transaction Documents, the non-breaching party shall be
entitled to seek equitable relief, including in the form of injunctions and
orders for specific performance, where the applicable legal standards for such
relief in such courts are met, in addition to all other remedies available to
the non-breaching party with respect thereto at law or in equity.
10.17 Arbitration. Any dispute, controversy or claim arising under or
related to this Agreement or any of the Transaction Documents, regardless of the
legal theory upon which it is based, will be settled by final, binding
arbitration pursuant to the Federal Arbitration Act, 9 U.S.C. ss.. 1 et seq., in
accordance with the American Arbitration Association Commercial Arbitration
Rules. Nothing herein shall, however, prohibit a party from seeking temporary or
preliminary injunctive relief in a court of competent jurisdiction. In any
arbitration, the number of arbitrators shall be three, each of Qwest, QSC and
Seller, on the one hand, and Buyer, on the other hand, having the right to
appoint one arbitrator, who shall together appoint a third neutral arbitrator
within 30 days after the appointment of the last party-designated arbitrator.
All arbitration proceedings shall take place in Denver, Colorado. Only damages
allowed pursuant to this Agreement may be awarded and the arbitrators shall have
no authority to award special, punitive, exemplary, consequential, incidental or
indirect losses or damages, including any damages relating to loss of profit or
business opportunity, except as expressly provided in Section 9.7. Judgment upon
any award granted in a proceeding brought pursuant hereto may be entered in any
65
court of competent jurisdiction. Should it become necessary to resort or respond
to court proceedings to enforce a party's compliance with this Section 10.17,
such proceedings shall be brought only in the federal or state courts located in
the State and County of New York, which shall have exclusive jurisdiction to
resolve any disputes with respect to this Agreement and the other Transaction
Documents, with each party irrevocably consenting to the jurisdiction thereof.
If the court directs or otherwise requires compliance herewith, then all costs
and expenses, including reasonable attorneys' fees incurred by the party
requesting such compliance, shall be reimbursed by the non-complying party to
the requesting party.
66
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed by its duly authorized officers as of the day and year
first above written.
DEX HOLDINGS LLC
By: /s/ JAMES A. ATTWOOD, JR.
----------------------------
Name: James A. Attwood, Jr.
Title: Managing Director
By: /s/ ANTHONY J. DE NICOLA
----------------------------
Name: Anthony J. de Nicola
Title: Managing Member
S-1
"QWEST"
QWEST COMMUNICATIONS INTERNATIONAL INC.
By: /s/ RICHARD C. NOTEBAERT
----------------------------
Name: Richard C. Notebaert
Title: Chairman & Chief Executive Officer
"QSC"
QWEST SERVICES CORPORATION
By: /s/ DRAKE S. TEMPEST
----------------------------
Name: Drake S. Tempest
Title: Executive Vice President and
General Counsel
"SELLER"
QWEST DEX, INC.
By: /s/ YASH RANA
----------------------------
Name: Yash Rana
Title: Vice President
S-2