Exhibit 2.1
ASSET PURCHASE AGREEMENT
by and between
CORIO, INC.
and
QWEST XXXXX.XXXXXXXXX LLC,
Dated as of August 1, 2002
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Confidential treatment has been requested for portions of this exhibit. The copy
filed herewith omits the information subject to the confidentiality request.
Omissions are designated as [***]. A complete version of this exhibit has been
filed separately with the Securities and Exchange Commission.
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TABLE OF CONTENTS
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ARTICLE I PURCHASE AND SALE OF ASSETS; ASSIGNMENT AND ASSUMPTION
OF LIABILITIES .............................................................. 1
1.1 Purchase and Sale of Assets ........................................... 1
1.2 Assumption of Liabilities ............................................. 3
1.3 Excluded Liabilities .................................................. 4
1.4 License Grant to Buyer ................................................ 5
1.5 License Grant to Seller ............................................... 5
1.6 Deemed Ownership of Intellectual Property ............................. 6
ARTICLE II PURCHASE PRICE ........................................................ 6
2.1 Purchase Price ........................................................ 6
ARTICLE III CLOSING .............................................................. 6
3.1 Closing Date .......................................................... 6
3.2 Location of Closing ................................................... 6
3.3 Deliveries by Seller .................................................. 6
3.4 Deliveries by Buyer ................................................... 7
ARTICLE IV CONDITIONS OF CLOSING ................................................. 8
4.1 Mutual Condition Precedent to Closing ................................. 8
4.2 Conditions to Obligations of Buyer .................................... 8
4.3 Conditions to Obligations of Seller ................................... 9
ARTICLE V REPRESENTATIONS AND WARRANTIES OF SELLER ............................... 9
5.1 Organization and Related Matters ...................................... 9
5.2 Authorization; No Conflicts ........................................... 10
5.3 Approvals ............................................................. 10
5.4 No Brokers or Finders ................................................. 10
5.5 Legal Proceedings ..................................................... 10
5.6 Title; Purchased Assets ............................................... 10
5.7 Compliance with Law ................................................... 11
5.8 Assigned Contracts .................................................... 11
5.9 Employment Matters; Employee Benefits ................................. 12
5.10 Accounts Receivable ................................................... 13
5.11 Books and Records ..................................................... 13
5.12 Assets Utilized in the Business ....................................... 13
5.13 Intellectual Property ................................................. 14
5.14 No Liquidation, Insolvency, Winding-Up ................................ 14
5.15 Unaudited Statement of Purchased Assets and Assumed Liabilities;
Undisclosed Liabilities ............................................... 14
5.16 Sole Conduct and Ownership of the Business ............................ 15
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TABLE OF CONTENTS
(Continued)
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ARTICLE VI REPRESENTATIONS AND WARRANTIES OF BUYER ............................... 15
6.1 Organization and Related Matters ...................................... 15
6.2 Authorization; No Conflicts ........................................... 15
6.3 Approvals ............................................................. 15
6.4 Funding ............................................................... 15
6.5 No Brokers or Finders ................................................. 15
6.6 Legal Proceedings ..................................................... 16
6.7 Solely Seller Obligation .............................................. 16
ARTICLE VII COVENANTS WITH RESPECT TO CONDUCT PRIOR TO CLOSING ................... 16
7.1 Access ................................................................ 16
7.2 Compliance With Regulations ........................................... 16
7.3 Filings and Consents; Cooperation ..................................... 17
7.4 Conduct of Business ................................................... 17
7.5 Employment Matters .................................................... 19
7.6 Transaction Documents ................................................. 21
7.7 Update of Disclosure Schedule; Notification of Certain Matters ........ 21
7.8 Tax Allocation ........................................................ 22
ARTICLE VIII ADDITIONAL CONTINUING COVENANTS ..................................... 23
8.1 Confidentiality ....................................................... 23
8.2 Change of Name ........................................................ 23
8.3 Sales and Use Taxes ................................................... 23
8.4 Tax Matters ........................................................... 23
8.5 Post-Closing Cooperation .............................................. 24
8.6 Non-Competition; Non-Solicitation ..................................... 25
8.7 No Shop ............................................................... 27
8.8 Publicity and Reports ................................................. 27
8.9 Financial Statements .................................................. 28
ARTICLE IX INDEMNIFICATION ....................................................... 28
9.1 Obligations of Seller ................................................. 28
9.2 Obligations of Buyer .................................................. 28
9.3 Definition of Loss with Respect to ASP Contracts ...................... 28
9.4 Limit of Indemnification. The indemnification obligation pursuant
to Section 9.3 shall be Buyer's sole remedy after the Closing
Date for any Losses except with respect to such claims and
damages arising directly out of a Seller's fraud or willful or
intentional misconduct ................................................ 30
9.5 Procedure ............................................................. 30
9.6 Indemnification Threshold; Maximum Losses ............................. 31
9.7 Cooperation ........................................................... 31
9.8 Damages ............................................................... 31
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TABLE OF CONTENTS
(Continued)
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9.9 Escrow Arrangements ................................................... 31
ARTICLE X TERMINATION OF OBLIGATIONS ............................................. 32
10.1 Termination of Agreement .............................................. 32
10.2 Effect of Termination ................................................. 33
10.3 Survival of Representations and Warranties and Covenants .............. 33
ARTICLE XI GENERAL ............................................................... 34
11.1 General Rules of Construction ......................................... 34
11.2 Amendments; Waivers ................................................... 34
11.3 Schedules; Exhibits; Integration ...................................... 34
11.4 Governing Law ......................................................... 34
11.5 No Assignment ......................................................... 34
11.6 Headings .............................................................. 34
11.7 Counterparts .......................................................... 34
11.8 Successors and Assigns; No Third Party Beneficiaries .................. 35
11.9 Notices ............................................................... 35
11.10 Expenses .............................................................. 36
11.11 Attorney Fees ......................................................... 36
11.12 Waiver ................................................................ 36
11.13 Other Remedies ........................................................ 36
11.14 Representation By Counsel; Interpretation ............................. 36
11.15 Severability .......................................................... 36
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ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (this "Agreement") is entered into as of August 1,
2002 by and between Corio, Inc., a Delaware corporation ("Buyer"), and Qwest
Xxxxx.Xxxxxxxxx LLC, a Delaware limited liability company ("Seller").
Capitalized terms used in this Agreement and not otherwise defined have the
meanings stated in Annex 1. The parties agree as follows:
BACKGROUND
A. Seller is engaged in the Business.
B. Seller desires to sell, transfer and assign to Buyer, and Buyer desires to
purchase and assume from Seller, substantially all of the assets and
certain related liabilities of the Business (the specific assets and
liabilities to be set forth herein in more detail) on the terms and
conditions set forth in this Agreement.
ARTICLE I
PURCHASE AND SALE OF ASSETS; ASSIGNMENT AND
ASSUMPTION OF LIABILITIES
1.1 Purchase and Sale of Assets.
1.1.1 Purchase and Sale of Assets. Subject to the terms and conditions of
this Agreement, at the Closing Seller will sell, convey, assign, transfer
and deliver to Buyer, and Buyer will purchase, acquire and accept from
Seller, all of Seller's right, title and interest in and to all assets,
properties, rights, privileges, claims and contracts, real, personal and
mixed, tangible and intangible, absolute or contingent, that are material
to or primarily related to the operation of the Business, wherever located,
other than Retained Assets, free and clear of all Encumbrances
(collectively, the "Purchased Assets"), including but, except with respect
to clauses (a) and (e), not limited to, the following:
(a) all rights under the ASP Contracts listed on Schedule
1.1.1(a)-1, the ISV Contracts listed on Schedule 1.1.1(a)-2, the
Software Contracts listed Schedule 1.1.1(a)-3, the Additional
Contracts listed on Schedule 1.1.1(a)-4, and any Contracts added to
the foregoing schedules pursuant to Section 7.7.1 (the foregoing
Contracts (excluding any Contracts removed from the foregoing
schedules pursuant to Section 7.7.1) are referred to herein as the
"Assigned Contracts"), but not any other Contracts;
(b) all rights to termination or similar fees with respect to any
ASP Contracts included on Schedule 1.1.1(a)-1 on the date of this
Agreement (other than the Termination Pending Contract) which are
terminated prior to the Closing Date;
(c) the right to 50% of the termination payment, if any, made in
connection with the termination of Termination Pending Contract;
(d) all computers, servers, routers, firewalls and related assets
listed on Schedule 1.1.1(d) (the "Computer Equipment);
(e) the Trademarks listed on Schedule 1.1.1(e) (collectively, the
"Transferred Trademarks"), and all goodwill of Seller associated
therewith, but not any other Trademark;
(f) all accounts receivable arising out of the Business, including
those listed on the accounts receivable aging schedule as of July
21, 2002 attached as Schedule 1.1.1(f) that remain unpaid as of the
Closing, and any other accounts receivable that arise out of the
operation of the Business through the date of the Closing (the
"Accounts Receivable");
(g) all books and records relating to customers of the Business, the
Purchased Assets, the Accounts Receivable and the Assumed
Liabilities, and all other books and records directly relating to
the Business (the "Transferred Records");
(h) all Know How and Copyrights (but not Patents) owned and used by
Seller in the Business as of the Closing Date in: (i) any methods
and procedures specifically directed to managing Oracle ERP
software, SAP applications, PeopleSoft financial and HR
applications, Ariba e-commerce applications, or Siebel customer
relationship management software (the foregoing software is
collectively referred to as "Subject Software"); (ii) any scripts,
software tools and utilities specifically directed to managing the
Subject Software; (iii) any written documentation prepared to enable
Seller to manage the Subject Software; provided, however, that the
foregoing sections (i) through (iii) shall not be deemed to include
any method or procedure, script, software tool, utility, or written
documentation specifically directed to monitoring the Subject
Software; and (iv) the items set forth on Schedule 1.1.1(h);
(i) All rights to damages for the breach, infringement or
misappropriation, as the case may be, after the date of this
Agreement of any of the foregoing and all rights to collect for
non-payment under any Account Receivable and any ASP Contract that
is an Assigned Contract.
In addition, all assets of any sort transferred to Buyer pursuant to Section 3
of the Joinder Agreement shall be deemed to be Purchased Assets for all purposes
under this Agreement.
1.1.2 Retained Assets. The Retained Assets are:
(a) the PSO Contracts, the SAP license for Seller's internal
financial reporting and the Clarify license and the Contracts listed
on Schedule 1.1.2(a) (the "Retained Contracts");
(b) cash, cash equivalents, bank accounts and similar investments;
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(c) securities;
(d) other than those assets described in Sections (a) through (i) of
Section 1.1.1 and the schedules referenced therein: (i) all
Intellectual Property Rights developed by or for and owned by Seller
or its Affiliates, (ii) the name "Qwest," either alone or in
conjunction with other words or phrases, including "Qwest
Xxxxx.Xxxxxxxxx," and any derivation or variant thereof, and (iii)
all Software and other written documentation developed by or for and
owned by Seller or its Affiliates;
(e) accounts receivable not arising out of the operation of the
Business;
(f) other than those assets described in Sections (a) through (i) of
Section 1.1.1 and the schedules referenced therein, any other asset
owned, leased or licensed by Seller (other than an asset that is
material to or primarily related to the operation or conduct of the
Business) that is primarily used in the PSO Business as of the date
hereof or that Seller or its Affiliates will use primarily to
provide services to Buyer under the Wholesale Services Agreement;
(g) any leasehold interest in real property and any interest in and
to all improvements, equipment, furniture, fixtures, machinery ,
other tangible personal property, and if the Real Estate Agreement
is not executed, materials and supplies contained therein or
thereon; and
(h) the right to 50% of the termination payment, if any, made in
connection with the Termination Pending Contract.
The assets described in this Section 1.1.2 are collectively referred
herein as the "Retained Assets" and Seller will not sell, transfer,
assign or convey to Buyer any right or interest in or to the
Retained Assets.
1.2 Assumption of Liabilities. Subject to the terms and conditions of this
Agreement, at the Closing, Buyer will assume and agree to pay, perform and
discharge as and when due the following, and only the following, liabilities
(collectively, the "Assumed Liabilities"):
(a) any liabilities or obligations to be paid or performed after the
Closing Date that arise from or out of the performance or
non-performance of the Assigned Contracts after the Closing Date
other than any liabilities or obligations arising from a breach by
Seller, or in the case of a Non-Seller Assigned Contract, the breach
by the Affiliate of Seller that is party to the Contract, of an
Assigned Contract; provided that, Buyer shall not assume any
liability or obligation relating to royalty payments or license fees
under any ISV Contract, Software Contracts or Additional Contract
except as set forth on Schedule 1.1.1(a)-4-5;
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(b) any liabilities or obligations relating to Transferred Employees
that arise from or out of Buyer's employment or termination of the
Transferred Employees after the Closing Date;
(c) any liabilities or obligations incurred, arising from or out of,
in connection with or as a result of claims made by or against Buyer
or Seller with respect to the operation of the Business by or on
behalf of Buyer that arise out of events occurring on or after the
Closing Date; and
(d) all Payables.
Buyer's assumption of the Assumed Liabilities will be effected by Buyer's
delivery to Seller of a duly executed Assumption Agreement. Buyer agrees
that to the extent that Seller requires and obtains Approvals with respect
to any of the Assigned Contracts, Seller and Buyer will use Commercially
Reasonable Efforts to effect a novation of such Assigned Contracts to
Buyer.
1.3 Excluded Liabilities. Except for the Assumed Liabilities specifically set
forth in Section 1.2 above, Buyer is not assuming, the Assumed Liabilities
expressly exclude, and Seller and its Affiliates will retain, any debt,
liability, duty or obligation, whether known or unknown, fixed or contingent, of
Seller or its Affiliates (the "Excluded Liabilities"). Without limiting the
foregoing, Excluded Liabilities include liabilities arising from or related to:
(a) Seller's or its Affiliates' operations, whenever arising or
incurred, or Seller's ownership or operation of the Business and
Purchased Assets through the Closing Date including liabilities
arising from guarantees or warranties under any Assigned Contract
related thereto;
(b) Any contracts relating to the Business that are not Assigned
Contracts;
(c) any Transferred Employee that accrues or arises as of or prior
to the Closing Date, or any of Seller's other agents, consultants,
independent contractors, employees or former employees, whenever
arising, in each case including workers' compensation, paid time
off/accrued vacation, severance, salary, bonuses or under any Plan,
whether or not the person in question accepts employment with Buyer
in connection with the Transactions;
(d) any implied or explicit guarantee or warranty obligations of
Seller or its Affiliates with respect to the Business entered into
prior to the Closing Date, except as to post-Closing obligations in
the Assigned Contracts;
(e) the Retained Assets,
(f) any intercompany loans or payables;
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(g) any Orders or Actions arising from or out of, or in connection
the operation of the Business prior to the Closing Date;
(h) any Benefits Liabilities; and
(i) liabilities for Taxes of Seller or Taxes attributable to the
ownership of the Purchased Assets or operation of the Business for
any taxable period (or portion of any period) ending on or prior to
the Closing Date.
1.4 License Grant to Buyer. Effective as of the Closing and only upon Closing,
Seller hereby grants to Buyer a non-exclusive, royalty-free, worldwide,
perpetual, irrevocable, non-terminable, license, under all Licensed Intellectual
Property Rights, to conduct a Covered Business. Buyer may grant sublicenses of
the foregoing license only to Buyer's Affiliates and other third parties and
only to the extent reasonably necessary to enable Buyer or its Affiliates to
conduct a Covered Business. Buyer may assign the foregoing license only in
connection with a Change of Control of Buyer or to an Affiliate of Buyer that is
conducting (or for the purpose of conducting) a Covered Business. The foregoing
license granted to Buyer is, and shall otherwise be deemed to be, for purposes
of Section 365(n) of the United States Bankruptcy Code, a license to
"Intellectual Property Rights" as defined thereunder. Notwithstanding any
provision contained herein to the contrary, if Seller is under any proceeding
under the Bankruptcy Code and the trustee in bankruptcy of Seller, or Seller, as
a debtor in possession, rightfully elects to reject the license granted to
Buyer, Buyer may, pursuant to 11 U.S.C. Section 365(n)(1) and (2), retain any
and all of Buyer's rights under such license, to the maximum extent permitted by
law.
1.5 License Grant to Seller. Effective as of the Closing and only upon Closing,
Buyer hereby grants to Seller a non-exclusive, royalty-free, worldwide,
perpetual, irrevocable, non-terminable, license, under the Know-How and
Copyrights described in Section 1.1.1(h), to conduct a Covered Business, subject
to the prohibitions in Section 8.6. Seller may grant sublicenses of the
foregoing license only to Seller's Affiliates and other third parties and only
to the extent reasonably necessary to enable Buyer or its Affiliates to conduct
a Covered Business, provided that the sublicense shall not permit the licensee
to conduct any activity that would if conducted by Seller, together with the
activities being conducted by Seller and its other sublicensees hereunder, be
prohibited under Section 8.6 (for the term thereof). Seller may assign the
foregoing license only in connection with a Change of Control of Seller or to an
Affiliate of Seller who is conducting (or for the purpose of conducting) a
Covered Business, provided that the assignee agrees in writing that it shall not
use the license to conduct any activity that would if conducted by Seller be
prohibited in Section 8.6 (for the term thereof). The foregoing license granted
to Seller is, and shall otherwise be deemed to be, for purposes of Section
365(n) of the United States Bankruptcy Code, a license to "Intellectual Property
Rights" as defined thereunder. Notwithstanding any provision contained herein to
the contrary, if Buyer is under any proceeding under the Bankruptcy Code and the
trustee in bankruptcy of Buyer, or Buyer, as a debtor in possession, rightfully
elects to reject the license granted to Seller, Seller may, pursuant to 11
U.S.C. Section 365(n)(1) and (2), retain any and all of Seller's rights under
such license, to the maximum extent permitted by law.
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1.6 Deemed Ownership of Intellectual Property. Notwithstanding anything else in
this Agreement, any Intellectual Property Rights owned by an Affiliate of Seller
that were developed, invented, created or authored by Shifted Seller Employees,
both during their employment with Seller and after such employees were
transferred from Seller to an Affiliate of Seller, shall be deemed to be
Intellectual Property Rights owned by Seller for all purposes under this
Agreement. For the purposes of this Agreement, "Shifted Seller Employee" shall
mean an individual who was, within one year prior to the effective date of this
Agreement, an employee of Seller, and who was, during such one year period,
transferred from Seller to become an employee of an Affiliate of Seller.
ARTICLE II
PURCHASE PRICE
2.1 Purchase Price. Subject to the terms and conditions hereof, Buyer will
purchase the Purchased Assets and assume the Assumed Liabilities for an
aggregate cash purchase price of Fifteen Million Dollars ($15,000,000) (the
"Purchase Price"). On the Closing Date, Buyer will (i) pay or cause to be paid
to Seller by wire transfer in immediately available funds to an account or
accounts identified by Seller an amount equal to (a) the Purchase Price (b) less
One Million Five Hundred Thousand Dollars ($1,500,000) and (ii) will transfer or
cause to be transferred to the Escrow Agent One Million Five Hundred Thousand
Dollars (the "Escrow Amount").
ARTICLE III
CLOSING
3.1 Closing Date. The closing of the Transactions (the "Closing") will take
place at 10 A.M. California time on the second (2nd) Business Day after the
satisfaction, or waiver by the party for whom such action is a condition to the
Closing, of the conditions in Article IV (other than such conditions that, by
their terms, are to be satisfied or waived on the Closing Date), or at such
other time as Seller and Buyer may mutually agree. The date upon which the
Closing occurs is herein called the "Closing Date."
3.2 Location of Closing. The Closing will take place at the offices of Seller's
counsel, O'Melveny & Xxxxx LLP, 000 Xxxxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxxxxxxx,
Xxxxxxxxxx, or at such other location as the parties mutually agree.
3.3 Deliveries by Seller. At or prior to the Closing, Seller shall, at Seller's
sole cost, in the manner and form, and to the locations, reasonably specified by
Buyer, deliver to Buyer or other entity designated by Buyer, title to all of the
Purchased Assets in their present location, or in the case of intangible
property, such instruments (other than third-party consents) as are necessary or
desirable to document and to transfer such assets from Seller to buyer in
accordance with this Section 3.3. Without limiting the foregoing, (a) all
Software included in the Purchased Assets that is not already loaded on servers
included in the Purchased Assets, shall be delivered to Buyer by electronic
means and (b) any tangible embodiments of the Licensed Intellectual Property
Rights and any tangible embodiments of the Know-How and Copyrights described in
Section 1.1.1(h) shall be delivered to Buyer in a medium reasonably requested by
Buyer. To the extent that Buyer cannot be granted title to or possession of
certain Purchased Assets as of the Closing, those assets shall be held
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by Seller for and on behalf of Buyer until such time as Buyer or its designee is
granted title or possession thereof and during such period Seller shall bear all
risk of loss with respect to such assets. Without limiting the foregoing, at or
prior to the Closing, Seller will deliver to Buyer:
(a) Duly executed copies of the Assumption Agreement, the Xxxx of
Sale, the Sales Agency Agreement (subject to Section 7.6), if any,
the Wholesale Services Agreement, the Joinder Agreement, the
Administrative Services Agreement, the Real Estate Agreement (if
pursuant to Section 7.6 Buyer requests a Real Estate Agreement) and
all other instruments and documents executed and delivered by any
Person in connection with the consummation of any of the
Transactions contemplated hereby and thereby (collectively, the
"Transaction Documents").
(b) the executed Approvals listed on Schedule 4.2.6. in such form as
is reasonably acceptable to Buyer.
(c) Originals, if available, or copies of all Assigned Contracts
including all amendments and supplements, exhibits, ancillary
agreements, and material correspondence related thereto.
(d) A certificate of Seller certifying that: (i) the conditions set
forth in Sections 4.1 and 4.2 have been satisfied by Seller; and
(ii) to Seller's Knowledge, there has not been, nor has any event
occurred that would reasonably be expected to result in, a Material
Adverse Effect.
(e) An instrument of assignment of the Transferred Trademarks and an
instrument of assignment of the Copyrights described in Section
1.1.1(h), each in customary form and substance as prepared by
Buyer's counsel and reasonably acceptable to Seller.
(f) Such other good and sufficient instruments of conveyance,
assignment and transfer, excluding any consents to assign or
acknowledgments of assignment, in form and substance reasonably
acceptable to Buyer's counsel, as shall be effective to vest in
Buyer good and valid title in and to the Purchased Assets.
(g) Such certificates, filings or other documents necessary or
appropriate to evidence that Seller has removed the Encumbrances
listed on Schedule 5.6 and is delivering good and valid title to
each of the Purchased Assets free and clear of any Encumbrances.
3.4 Deliveries by Buyer. At or prior to the Closing, Buyer will deliver to
Seller or Escrow Agent, as applicable:
(a) The Purchase Price as described in Section 2.1.
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(b) Subject to Section 7.6 duly executed copies of the Transaction
Documents to which Buyer is a Party.
(c) A certificate of Buyer certifying that the conditions set forth
in Sections 4.1 and 4.3 have been satisfied by Buyer.
ARTICLE IV
CONDITIONS OF CLOSING
4.1 Mutual Condition Precedent to Closing. The respective obligations of each
party to effect the Closing are subject to the satisfaction of the condition,
unless waived in writing by both parties at or before the Closing of the
following conditions:
4.1.1 Governmental Action., No court or any other Governmental Entity
shall have issued or released an Order restraining or prohibiting the
Transactions, no Governmental Entity shall have commenced or threatened in
writing to commence any Action before any court of competent jurisdiction
or other Governmental Entity that seeks to restrain or prohibit the
consummation of the Transactions or otherwise seeks a remedy that would
prohibit or materially and adversely affect the consummation of the
Transactions, and no Regulation shall have been enacted by any Governmental
Entity that makes the consummation of the Transactions illegal; provided,
however, that the parties will use Commercially Reasonable Efforts to cause
any such Order, Action or Regulation to be vacated, dismissed or lifted.
4.1.2 Statement From Accountants. Neither party shall have been informed
by its accountants that it will be impossible to audit the financial
statements of the Business to be prepared pursuant to Section 8.9 within
the time period required by Section 8.9.
4.2 Conditions to Obligations of Buyer. The obligation of Buyer to effect the
Closing is subject to the satisfaction (or waiver by Buyer) at or before the
Closing of the following conditions:
4.2.1 Representation and Warranties. The representations and warranties of
Seller contained herein on the date hereof (excluding any updates to the
Disclosure Schedule pursuant to Section 7.7.1), except as to changes
contemplated or explicitly permitted by this Agreement, must be true and
correct in all material respects as of the Closing, other than those
qualified by materiality, which must be true in all respects, as if made as
of the Closing.
4.2.2 Covenants. Seller must have in all material respects performed all
obligations and complied with all covenants and conditions required by this
Agreement to be performed or complied with by it at or prior to the Closing
Date.
4.2.3 Deliveries. Seller must have delivered to Buyer all items required
by Section 3.3.
4.2.4 No Material Adverse Effect. There must not have been, or no event
can have occurred that would reasonably be expected to result in, a
Material Adverse Effect.
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4.2.5 Joinder Agreement. Qwest Services Corporation, as Seller's parent,
must have executed and delivered a joinder agreement in the form attached
as Exhibit E (the "Joinder Agreement") and the representation and
warranties contained in Section 1 of the Joinder Agreement must be true and
correct in all material respects as of the Closing.
4.2.6 Software Contracts. Seller shall have obtained assignments or
consents to assignment in such form as is reasonably acceptable to Buyer to
the Software Contracts and ISV Contracts listed on Schedule 4.2.6.
4.3 Conditions to Obligations of Seller. The obligation of Seller to effect the
Closing is subject to the satisfaction (or waiver by Seller) on or before the
Closing of the following conditions:
4.3.1 Representations and Warranties. The representations and warranties
of Buyer contained herein on the date hereof, except as to changes
contemplated or explicitly permitted by this Agreement, must be true and
correct in all material respects as of the Closing, other than those
qualified by materiality, which must be true in all respects, as if made as
of the Closing.
4.3.2 Covenants. Buyer must have in all material respects performed all
obligations and complied with all covenants and conditions required by this
Agreement to be performed or complied with by it at or prior to the Closing
Date.
4.3.3 Deliveries. Buyer must have delivered to Seller all items required
by Section 3.4.
4.3.4 Waiver by Buyer. If Seller has not delivered one or more Approvals
required by Section 4.2.6, and Buyer has waived the requirement of their
delivery in order to proceed with the Closing, then Seller must have
received from Buyer a waiver of any liability of Seller and its Affiliates
to Buyer with respect to any breach of any covenant, agreement,
representation or warranty contained in this Agreement arising from or
relating to Seller's failure to deliver such Approval(s).
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer that except as otherwise indicated
on the Disclosure Schedule:
5.1 Organization and Related Matters. Seller is a limited liability company
duly organized, validly existing and in good standing under the laws of the
State of Delaware. Seller has all necessary power and authority to own its
properties and to carry on the Business and to own and use the Purchased Assets
in the Business as presently conducted. Seller is a wholly owned subsidiary of
Qwest Services Corporation which is a wholly-owned subsidiary of and the primary
operating subsidiary of Qwest Communications International Inc.
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5.2 Authorization; No Conflicts. Seller has all necessary power and authority
to execute, deliver and perform this Agreement and the Transaction Documents to
which it is a party and to sell, convey and assign the Purchased Assets in
accordance with the terms hereof. The execution, delivery and performance of
this Agreement and the Transaction Documents by Seller have been duly and
validly authorized by all necessary action on Seller's part. This Agreement and
the Transaction Documents have been duly executed and delivered by Seller and
constitute Seller's legally valid and binding obligations, enforceable against
Seller 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. Seller's execution, delivery and performance of this Agreement and
the Transaction Documents will not conflict with, violate, or constitute a
breach or default under Seller's Organizational Documents, or any Regulation or
Order to which Seller or any of its Affiliates is subject, and will not conflict
with, or result in any violation of, or default under, or give rise to a right
of termination, cancellation, modification, or acceleration of any obligation or
loss of any benefit under any Contract to which Seller or any of its Affiliates
is a party, including the Assigned Contracts, or by which the Purchased Assets
are bound.
5.3 Approvals. No Approvals by any Governmental Entity and no material
Approvals by any Person not a party (including a party to any agreement with
Seller) to this Agreement are required in connection with the execution or
performance of this Agreement by Seller or the consummation of the Transactions.
With respect to each of the Assigned Contracts, except as listed on Schedule
5.3, no Approval is required in connection with the execution or performance of
this Agreement or the consummation of the Transactions, which if not obtained
would result in a material conflict with or material violation of or material
default under (with or without notice or lapse of time, or both) or give rise to
a right of termination, cancellation, modification or acceleration of any
obligation payment of any benefit or loss of any benefit under such Assigned
Contract.
5.4 No Brokers or Finders. No agent, broker, finder, investment or commercial
banker or other Person, Governmental Entity or firm engaged by or acting on
behalf of Seller or its Affiliates in connection with the negotiation, execution
or performance of this Agreement or the consummation of the Transactions, is or
will be entitled to any broker's or finder's or similar fees or other
commissions payable by Buyer as a result of this Agreement or the Transactions.
5.5 Legal Proceedings. There is no Order or Action pending or, to Seller's
Knowledge, threatened against or affecting Seller or any of its Affiliates 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 (a) Material
Adverse Effect, (b)constitute an Assumed Liability or (c) be binding upon any
Purchased Assets.
5.6 Title; Purchased Assets.
(a) Seller has good and marketable title to, or valid leasehold
interests in, each of the Purchased Assets, free and clear of any
Encumbrances. Seller has all rights, power and authority to sell,
convey, assign, transfer and deliver to Buyer, in accordance with
the terms of this Agreement, all of Seller's right, title and
interest (including
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leasehold interests) in the Purchased Assets. Other than the leased
Computer Equipment and Software Contracts listed on Schedule 5.6, no
Purchased Assets are leased by Seller. At the Closing, Seller will
deliver title to, and all of Seller's rights and interests
(including leasehold interests) in, the Purchased Assets to Buyer,
and Buyer will have acquired good and marketable title in and to,
and all of Seller's rights and interests (including leasehold
interests) in, each of the Purchased Assets, free and clear of any
Encumbrance, subject, in the case of Contracts (but without limiting
the representations set forth in Sections 5.3 and 5.8 hereof), to
the rights of the other party to the Contract.
(b) The Purchased Assets that are physical assets are in good
working order and repair and are regularly and properly maintained
as required for their current use in the Business, ordinary wear and
tear excepted.
5.7 Compliance with Law. Seller has materially complied with, and is in
material compliance with, all Regulations applicable to Seller in connection
with the Business or by which any of the Purchased Assets is bound or affected.
5.8 Assigned Contracts. With the exception of the relevant Retained Contracts,
the Assigned Contracts are all of the Contracts primarily related to the
operation of the Business by Seller, and include all ISV Contracts, ASP
Contracts and Software Contracts to which Seller is a party. None of the
Assigned Contracts is a PSO Contract or relates to the PSO Business. Seller has
delivered to Buyer true, correct and complete copies of the Assigned Contracts,
including all amendments and supplements, exhibits, ancillary agreements, and
all material correspondence related thereto. Each Assigned Contract is in full
force and effect and is a binding obligation of the other party thereto, and
Seller, or in the case of a Non-Seller Assigned Contract, the Affiliate of
Seller that is party to the Assigned Contract, is not subject to any default
thereunder, nor, to Seller's Knowledge, is any party obligated to Seller or in
the case of a Non-Seller Assigned Contract, the Affiliate of Seller that is
party to the Assigned Contract, pursuant to any such Assigned Contract subject
to any default thereunder. No party to any Assigned Contract has informed Seller
of its intention to terminate or not renew such Assigned Contracts. No issue has
been raised by any party out of the Ordinary Course that, if unresolved, would
result in the termination or nonrenewal of such Assigned Contract. Seller or in
the case of a Non-Seller Assigned Contract, the Affiliate of Seller that is the
party to the Assigned Contract, is in full compliance with all Assigned
Contracts, and has neither breached, violated or defaulted under, nor received
notice that Seller has breached, violated or defaulted under, any of the terms
or conditions of any Assigned Contract. Neither the consummation of the
Transactions nor the assignment of any Assigned Contract will cause Buyer to be
required to pay amounts or consideration under any Assigned Contract greater
than such amounts or consideration that Seller would have been required to pay
had the Transactions or assignment not occurred. Schedule 5.8 sets forth, for
each ASP Contract which constitutes an Assigned Contract, the gross revenue
recognized by Seller attributable to each such contract for the 6 months ended
June 30, 2002 and the committed revenues under each such contract for the 12
months following the date hereof (assuming no termination of any such contract),
subject to the disclosures set forth on Schedule 5.8.
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5.9 Employment Matters; Employee Benefits.
(a) Schedule 5.9(a) lists all employees of Seller or its Affiliates
who are currently principally utilized in the Business as of the
date of this Agreement (the "Specified Employees"), showing for each
such Specified Employee: (i) a list of all remuneration payable and
other benefits that Seller is bound to provide (whether at present
or in the future) to each such employee, or any person connected
with any such employee, and including, if any, particulars of all
profit sharing, incentive and bonus arrangements to which Seller is
a party, whether legally binding or not, (ii) the date of hire,
(iii) leave status (including type of leave), (iv) visa status, and
(v) whether such employee is an independent contractor or is an
employee of any entity other than Seller. All Specified Employees
are employees of Qwest Services Corporation or an Affiliate thereof
(other than Seller).
(b) As of the date of this Agreement, none of the Specified
Employees has given to Seller written or oral notice of termination
of employment and Seller has not given notice of any workforce
reduction to any Specified Employee or Governmental Entity or
started consultations with any trade union pursuant to any
Regulation.
(c) Except as set forth on Schedule 5.9(c), Seller is not a party to
any employment agreement, written or oral, relating to any Specified
Employee who cannot be terminated at will by Seller.
(d) Schedule 5.9(d) lists the Plans covering the Specified
Employees.
(e) Except as contemplated by Section 7.5.4, there are no Contracts
with any Specified Employee providing for severance payments or
acceleration of benefits for which Buyer will be liable.
(f) No collective bargaining agreement exists that is binding on
Seller with respect to the Specified Employees, and to Seller's
Knowledge, no petition has been filed or proceeding instituted, or
any action taken in contemplation of any such filing or institution,
by an employee or group of employees of Seller, with the National
Labor Relations Board seeking recognition of a bargaining
representative.
(g) There is no labor strike, dispute, slow down or stoppage pending
or, to Seller's Knowledge, threatened against Seller by any of the
Specified Employees, and Seller has received no demand letters,
civil rights charges, suits or drafts of suits with respect to
claims made by any of the Specified Employees.
(h) There are no pending, or to Seller's Knowledge, threatened
claims or actions by any Specified Employee against Seller under any
worker's compensation policy or long-term disability policy.
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(i) To Seller's Knowledge, Seller is in material compliance will all
applicable foreign, federal, state and local laws respecting
employment, employment practices, terms and conditions of employment
and wages and hours, in each case, with respect to the Specified
Employees.
(i) To Seller's Knowledge, no Specified Employee is obligated under
any agreement or subject to any judgment, decree or order of any
court or administrative agency that would interfere with such
Specified Employee's efforts to promote the interests of the
Business or that would interfere with the Business.
5.10 Accounts Receivable. A list of all Accounts Receivable of the Business as
of July 21, 2002, together with a range of days elapsed since invoice, is
attached to Schedule 1.1.1(f). All of the Accounts Receivable arose in the
Ordinary Course and, are carried (net of reserves) at values determined in
accordance with GAAP and to the Knowledge of Seller, as of the date hereof, are
reasonably believed to be collectible except to the extent of the reserves
therefore. The goods or services involved with respect to such Accounts
Receivable have been sold and delivered to the account obligor, are in transit,
or are being sold and delivered in accordance with the Ordinary Course practices
of the Business, and, except as to the deferred service revenues, no further
goods or services are required to be provided in order to complete the portion
of the sales covered by the Accounts Receivable, other than those to be provided
in accordance with the Ordinary Course practices of the Business. Seller's
deferred service revenue as of June 30, 2002 consists entirely of (i) revenue
related to services to be performed within thirty days after June 30, 2002 for
which invoices have been sent but payment has not yet been received, (ii)
PowerPack service for which services will be performed in the future and (iii)
customer deposits obtained due to customer's credit worthiness all as set forth
on Schedule 1.1.1(f). Seller has not incurred any additional deferred service
revenue of the type described in clause (ii) (other than where there is an
offsetting Account Receivable) and clause (iii) of the preceding sentence since
June 30, 2002. No Accounts Receivable is subject to any Encumbrance. As of the
date hereof, no written or, to Seller's Knowledge, oral request or agreement for
deduction or discount has been made with respect to any of the Accounts
Receivable that has not been included in the reserves.
5.11 Books and Records . All of the books, records, documents, Contracts and
accounts of the Business in all material respects (a) have been maintained in
accordance with reasonable business practices, and (b) accurately present and
reflect all of the material transactions of the Business.
5.12 Assets Utilized in the Business. The Purchased Assets, the license granted
under Section 1.4, and the rights acquired by Buyer under the Assigned Contracts
collectively include all assets and rights that (i) are material to the
operation or conduct of the Business and (ii) are required or used by Seller, or
in the case of a Non-Seller Assigned Contract, are required or used by the
Affiliate of Seller party to the Contract, to perform the current obligations
under the Assigned Contracts, in each case, other than: (a) the services and
personnel to be utilized by Seller or its Affiliates in providing the services
reflected in the Wholesale Services Agreement; (b) the various administrative
services provided by Seller and its Affiliates including bookkeeping, legal
support, payroll services, insurance, human resources support, purchasing, and
other related activities; (c) the Retained Assets
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and (d) software licenses which customers of the Business are required to
provide under the ASP Contracts which are Assigned Contracts, (e) third party
Intellectual Property rights except those licensed to Seller or its Affiliates,
(f) any Transferred Employees or other Specified Employees, (g) Trademarks, and
(h) real estate facilities.
5.13 Intellectual Property. All Know How and Copyrights identified in Section
1.1.1(h), the tangible embodiments thereof delivered to Buyer hereunder, the
tangible embodiments of the Licensed Intellectual Property Rights delivered to
Buyer hereunder, and the use thereof by Buyer in the same manner used by Seller
prior to Closing, and, to Seller's Knowledge (without inquiry or investigation),
the Transferred Trademarks, do not, individually or collectively, infringe,
misappropriate or otherwise violate the Intellectual Property Rights of any
other party. All third party Software delivered or transferred to Buyer under
this Agreement will be fully usable to the same degree, and for the same number
of users, that such Software was used by Seller prior to Closing. Seller is in
full compliance with all of Seller's licenses and other legal obligations
applicable to all such third party Software. EXCEPT AS OTHERWISE EXPRESSLY SET
FORTH IN THIS AGREEMENT, SELLER ON BEHALF OF ITSELF AND ITS AFFILIATES EXPRESSLY
DISCLAIMS ANY OTHER REPRESENTATIONS OR WARRANTIES, WITH RESPECT TO ANY KNOW HOW
AND COPYRIGHTS IDENTIFIED IN SECTION 1.1.1(H), THE TANGIBLE EMBODIMENTS THEREOF
DELIVERED TO BUYER HEREUNDER, AND THE TANGIBLE EMBODIMENTS OF THE LICENSED
INTELLECTUAL PROPERTY RIGHTS DELIVERED TO BUYER HEREUNDER,WHETHER EXPRESS OR
IMPLIED, INCLUDING, WITHOUT LIMITATION, ANY IMPLIED WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, AND ANY WARRANTIES THAT MAY
ARISE FROM COURSE OF PERFORMANCE, COURSE OF DEALING OR USAGE OF TRADE.
5.14 No Liquidation, Insolvency, Winding-Up. No Order has been made or petition
presented, or resolution passed for the winding-up or liquidation of Seller and
there is not outstanding: (a) any petition or Order for the winding-up of
Seller; (b) any appointment of a receiver over the whole or part of the
undertaking of assets of Seller; (c) any petition or Order for administration of
Seller; (d) any voluntary arrangement between Seller and any of its creditors;
(e) any voluntary or involuntary petition for bankruptcy with respect to Seller
or (f) any distress or execution or other process levied in respect of Seller
that remains undischarged. Seller has not been deemed unable to pay its debts
within the meaning of applicable Regulation. The operations of Seller have not
been terminated.
5.15 Unaudited Statement of Purchased Assets and Assumed Liabilities;
Undisclosed Liabilities. Attached as Schedule 5.15 is the unaudited
statement of Purchased Assets and Assumed Liabilities at June 30, 2002 (the
"Unaudited Statement"). Seller derived the Unaudited Statement in good faith
from its internal books and records using what Seller believes are reasonable
accounting methods and procedures under the circumstances. The Unaudited
Statement sets forth Seller's book value of the Purchased Assets and Assumed
Liabilities as of June 30, 2002 and entries on the Unaudited Statement reflect
amounts that would be included in the preparation of a balance sheet prepared in
accordance with GAAP. Except as set forth herein, Seller makes no other
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representations or warranties regarding the historical financial results of the
Business on the Unaudited Statement.
5.16 Sole Conduct and Ownership of the Business. Seller and not any Affiliate of
Seller takes all actions that are primarily related to or material to the
operation and conduct of the Business except the employment of the Specified
Employees which is done by an Affiliate of Seller.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller that, except as otherwise indicated on
the Disclosure Schedules attached hereto:
6.1 Organization and Related Matters. Buyer is a corporation duly incorporated,
validly existing and in good standing under the laws of State of Delaware.
6.2 Authorization; No Conflicts. Buyer has all necessary corporate authority
and power to execute, deliver and perform this Agreement and the Transaction
Documents. The execution, delivery and performance of this Agreement and the
Transaction Documents by Buyer have been duly and validly authorized by all
necessary action on Buyer's part. This Agreement and the Transaction Documents
have been duly executed and delivered by Buyer and 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.
Buyer's execution, delivery and performance of this Agreement and the
Transaction Documents will not violate, or constitute a breach or default under,
(i) Buyer's Organizational Documents or (ii) any Regulation or Order to which
Buyer is subject.
6.3 Approvals. Except for any Approvals that Seller is required to obtain
pursuant to this Agreement, no Approvals by any Governmental Entity and no
material Approvals by any Person not a party to this Agreement are required in
connection with the execution or performance of this Agreement by Buyer or the
consummation of the Transactions by Buyer.
6.4 Funding. Buyer has, and will have at the Closing, cash available or
existing borrowing facilities that, together with its available cash, are
sufficient to enable it to consummate the Transactions and pay the Purchase
Price and all related fees and expenses for which Buyer will be responsible and
will, from time to time, provide assurances and information to Seller as Seller
may reasonably request that Buyer will have such financial capability on the
Closing Date. Buyer is and will be, immediately after giving effect to the
Transactions, able to pay its debts as they become absolute and mature. The
capital of Buyer is not and will not be, immediately after and giving effect to
the Transactions, unreasonably small for the business in which Buyer is engaged
as presently conducted and as proposed to be conducted following the Closing.
6.5 No Brokers or Finders. No agent, broker, finder, investment or commercial
banker or other Person, Governmental Entity or firm engaged by or acting on
behalf of Buyer or its Affiliates in
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connection with the negotiation, execution or performance of this Agreement or
the consummation of the Transactions, is or will be entitled to any broker's or
finder's or similar fees or other commissions payable by Seller as a result of
this Agreement or the Transactions.
6.6 Legal Proceedings. There is no Order or Action pending or, to Buyer's
Knowledge (without any search of court or other public records), threatened
against or affecting Buyer 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 on Buyer's ability to consummate the
Transactions.
6.7 Solely Seller Obligation. Buyer acknowledges and agrees that Buyer will
have no claim against any manager, member of the management committee or officer
of Seller or any of its Affiliates in connection with this Agreement other than
for fraud or willful misconduct.
ARTICLE VII
COVENANTS WITH RESPECT TO CONDUCT
PRIOR TO CLOSING
7.1 Access. Prior to the Closing Date, Buyer will be entitled, through its
employees and other representatives, to gain reasonable access during normal
business hours to the assets, properties, business, operations, personnel,
professional advisors, contracts and other documents and data of Seller relating
to the Business, the Purchased Assets, the Specified Employees and the Assumed
Liabilities, including access to discussions with customers and employees (to an
extent to be determined by Buyer in its sole discretion, provided that Seller
will be afforded an opportunity to participate in any conversations, meetings
and the like) and the books, records and financial condition of the Business.
Any such access will be at reasonable times and under reasonable circumstances,
and Seller will cooperate therein. Buyer will also have reasonable access during
normal business hours to the operations of Seller in order to evaluate the
functionality of Seller's systems including disaster recover systems; provided
that any such access shall occur under the supervision of an employee of Seller
or its Affiliates, shall be at reasonable times and with reasonable notice, and
shall not disrupt Seller's operation of the Business; provided further that an
employee of Seller or its Affiliates, and not Buyer, will operate or otherwise
handle any such systems or the related equipment or machinery for the purposes
of completing such evaluation. Any and all information or documents obtained
from Seller under this Section 7.1 will at all times be subject to the
confidentiality provisions set forth in Section 8.1. No information or knowledge
obtained in any investigation pursuant to this Section 7.1 shall affect or be
deemed to modify any representation or warranty contained herein or the
conditions to the obligations of the parties hereto to consummate the
Transactions.
7.2 Compliance With Regulations. Each of the parties agrees for the benefit of
the other party to comply in all respects with all Regulations of each
Governmental Entity and all decisions, rulings, orders and awards of each
arbitrator applicable to it or its business, properties or operations in
connection with the Transactions if a failure to comply with any of the
foregoing, individually or in the aggregate, would reasonably be expected to
have a Material Adverse Effect.
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7.3 Filings and Consents; Cooperation. Each of the parties will use its best
efforts to obtain and to cooperate in obtaining any Approval required in
connection with the execution, delivery or performance of this Agreement and the
other documents and instruments to be executed pursuant hereto. Each of the
parties will also use its best efforts to take, or cause to be taken, all
actions and to do, or cause to be done, all things necessary, proper or
advisable to consummate and make effective the Transactions. In particular, the
parties will cooperate in obtaining the Approvals necessary to assign the
Consent Required Contracts to Buyer pursuant to this Agreement.
7.4 Conduct of Business. Between the date hereof and the Closing Date as
contemplated by this Agreement, or as otherwise consented to in writing by
Buyer:
(a) Seller will:
(i) conduct the Business in the Ordinary Course;
(ii) pay the debts and Taxes of the Business,
including all Payables, when due consistent with past practice;
(iii) pay or perform other obligations of the Business
when due consistent with past practice;
(iv) use Commercially Reasonable Efforts to preserve
intact the current business organization of Seller relating to the
Business, keep available the services of the current officers,
employees and agents of Seller relating to the Business, and
maintain the relations and goodwill with the suppliers, customers,
distributors, licensors, licensees, landlords, trade creditors,
employees, agents, and others having business relationships with
Seller relating to the Business, with the goal of preserving
unimpaired the goodwill and ongoing business of the Business as of
the Closing;
(v) confer with Buyer concerning business or
operational matters relating to the Business of a significant
nature, including developments as to Seller's financial condition
and status with creditors that would reasonably be expected to
impact the Transactions;
(vi) use Commercially Reasonable Efforts to maintain
all of the Purchased Assets in their current condition, ordinary
wear and tear excepted, and, in the event of any damage to or
destruction of any of the Purchased Assets prior to the Closing
Date, replace, repair or restore such Purchased Assets as soon as
practicable after such event;
(vii) use Commercially Reasonable Efforts to make sales
of the products sold by the Business consistent with past practice;
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(viii) use Commercially Reasonable Efforts to introduce
Buyer to customers of the Business and to cooperate with Buyer's
efforts to retain the customers of the Business;
(ix) maintain the books and records relating to the
Business in the Ordinary Course; and
(x) report to Buyer concerning any material event or
occurrence becoming known to Seller relating to the Business.
(b) Seller will not:
(i) enter into any Contract that would be an
Assigned Contract without the consent of Buyer (such consent not to
be unreasonably withheld or delayed);
(ii) enter into any Contract (or series of related
contracts) that would result in a Purchased Asset or constitute an
Assigned Liability if such Contract, includes a payment obligation
in excess of $75,000, has a duration exceeding one year, or,
together with all other new contracts, includes a payment obligation
in excess of $250,000;
(iii) lower pricing or royalties charged to customers
or licensees of the Business;
(iv) enter into any strategic arrangement or
relationship, development or joint marketing arrangement or
agreement relating to the Business;
(v) fire, or give notice of termination to, any
Transferred Employee other than for cause;
(vi) hire any employees relating to the Business;
(vii) change, increase or amend the rate of
remuneration or amount of bonuses or other benefits or any other
terms of employment of any Transferred Employee;
(viii) grant any severance or termination pay to any
Transferred Employee, amend or modify or alter in any manner any
severance plan, agreement or arrangement with any Transferred
Employee;
(ix) enter into any contract with any Transferred
Employee;
(x) discount or settle for less than the full stated
amount thereof any Account Receivable in excess of the reserves
applicable thereto;
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(xi) incur any Payable other than in the Ordinary
Course;
(xii) amend, modify, or materially violate the terms
of, any of the Assigned Contracts;
(xiii) incur any deferred service revenue other than
for services to be performed within 30 days and for which payment
has not been received or with respect to sales of PowerPack services
in the Ordinary Course pursuant to the terms of an ASP Contract;
(xiv) Remove any Software the license for which is a
Purchased Asset from any server which is a Purchased Asset except as
required to perform Seller's obligations to customers;
(xv) commence or settle any Actions or obtain any
releases of threatened Actions involving or relating to the Business
to the extent any such settlement would be binding on Buyer or any
of the Purchased Assets;
(xvi) take any action, or fail to take any action,
that would reasonably be expected to result in any of the
representations and warranties set forth in Article V not being true
and correct on and as of the Closing Date with the same force and
effect as if such representations and warranties had been made on
and as of the Closing Date; or
(xvii) take, or agree in writing or otherwise to take,
any of the actions described in Section 7.4(b)(i) through (xvi)
above, or any other action that would reasonably be expected to
prevent Seller from performing or cause Seller not to perform its
covenants hereunder.
7.5 Employment Matters.
7.5.1 Transferred Employee. Buyer will offer employment to be effective as
of the Closing Date to Specified Employees of its choosing. Each Specified
Employee who becomes an employee of Buyer after the Closing pursuant to
this Section 7.5 will be referred to as a "Transferred Employee." The terms
of each offer of employment will provide that employment will supersede any
prior employment agreements and other arrangements with such Specified
Employee in effect prior to the Closing Date and contain terms that reflect
the following:
(a) Salary; Location. Each Transferred Employee will be offered a
base salary of not less than such Transferred Employee's base salary
immediately prior to Closing. Each Transferred Employee will be
offered employment in their current city of employment.
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(b) Benefits. Transferred Employees will be eligible to participate
in Buyer's benefits programs to the same extent as similarly
situated employees of Buyer. To the extent permitted by applicable
Regulation and applicable Tax qualification requirements, and Buyer
will (i) give Transferred Employees full credit under such programs
for prior service at Seller for purposes of eligibility and vesting
(but not benefit accruals); provided, however, that such service
shall not be recognized to the extent it would result in the
duplication of benefits and (ii) cause each "employee welfare plan"
(as defined in Section 3(1) of ERISA) covering Transferred Employees
(A) to reduce each such eligible employee's (and his or her eligible
dependents) annual deductible limits under such plans for the plan
year in which the Closing Date occurs to the extent deductible
expenses were incurred and recognized for comparable purposes under
the comparable benefit plans covering such employees immediately
prior to the Closing Date, and (B) to waive any pre-existing
condition limitations or exclusions that do not apply to such
employees immediately prior to the Closing Date. Nothing in this
Section 7.5.1(b) will be construed to entitle any Transferred
Employee to continue his or her employment with Buyer for any period
of time and the employment of all Transferred Employees will be
terminable "at-will."
7.5.2 Termination of Employment; Health Care Coverage. Immediately prior
to the Closing, Seller will terminate (a) the employment of all Transferred
Employees, and (b) all employment agreements and other arrangements with
the Transferred Employees. As of the Closing, Seller shall pay to the
Transferred Employees any and all liabilities relating to or arising out of
their employment or termination of employment by Seller or its Affiliates,
including any payments and benefits due to such Transferred Employees
pursuant to accrued wages, salary, bonus, severance not caused by Buyer's
breach of Section 7.5.1, commission or other forms of compensation. Buyer
will provide continuation health care coverage to all Transferred Employees
and their qualified beneficiaries who incur a qualifying event after the
Closing Date in accordance with and to the extent required under the
continuation health care coverage requirements of Code Section 4980B, as
amended, and Sections 601 through 608 of ERISA ("COBRA"). Seller will be
responsible for providing continuation coverage and all related notices to
the extent required by law to any Specified Employee or qualified
beneficiary who incurs or incurred a qualifying event under COBRA on or
before the Closing Date.
7.5.3 Benefits Liabilities. From and after the Closing, Seller will assume
or retain, as the case may be, and be solely responsible for all debts,
liabilities and obligations, arising under, resulting from or relating to
the Plans or Seller's employment of or termination of the Specified
Employees, whether incurred before, on or after the Closing (the "Benefits
Liabilities"). From and after the Closing, Buyer will be solely responsible
for all liabilities and obligations, arising under, resulting from or
relating to Buyer's employment or termination of the Transferred Employees.
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7.5.4 Severance. For a period of at least three months after the Closing
Date, Buyer will cause the Transferred Employees to be eligible for
benefits under a severance or separation pay policy or plans that are at
least the same as or comparable to the severance or separation pay policy
benefits as described on Schedule 7.5. Buyer will recognize the service of
each such Transferred Employee with Seller for eligibility, vesting, and
benefit determinations with respect to severance or separation pay policy
after the Closing.
7.5.5 WARN Act. On and after the Closing Date, with respect to any
terminations by Buyer after the Closing Date, Buyer will be responsible
with respect to the Transferred Employees and their beneficiaries for
compliance with the Worker Adjustment and Retraining Notification Act of
1988, including any requirement to provide for and discharge any and all
notifications, benefits, and liabilities to Transferred Employees and any
Governmental Entity. Buyer will not take any action after the Closing Date
that would cause any termination of employment of any employees by Seller
or any of its Affiliates prior to the Closing Date to constitute a "plant
closing" or "mass layoff" under the Worker Adjustment and Retraining
Notification Act of 1988 or any similar state or local law or create any
liability to Seller or any of its Affiliates for employment terminations
under applicable Regulation.
7.5.6 H-1B Nonimmigrant Visas. In the event any Transferred Employee
requires an H-1B visa to work in the United States, Buyer will be
responsible for all actions and costs associated with transferring any H-1B
nonimmigrant visas for the Transferred Employees from Seller to Buyer,
including (a) filing, to the extent necessary, a Labor Condition
Application with the U.S. Department of Labor or a Form I-129, Petition for
Nonimmigrant Worker, with H Supplement, and supporting documentation with
the Immigration and Naturalization Service and (b) paying any transfer fees
or associated costs or expenses therewith.
7.6 Transaction Documents. The parties will use Commercially Reasonable Efforts
to complete negotiations within ten Business Days of the date of this Agreement
with respect to a sales agency agreement (the "Sales Agency Agreement) an
administrative services agreement (the "Administrative Services Agreement"), the
Escrow Agreement, and, if requested by Buyer in its sole discretion, a Real
Estate Agreement. Under the Administrative Services Agreement, Seller will
provide to Buyer administrative services upon usual and customary terms and
conditions for such an agreement, an outline of which are set forth on Schedule
7.6. If the parties are unable to complete negotiations with respect to the
Sales Agency Agreement by the time all other conditions to closing are
satisfied, the Closing will not be delayed
7.7 Update of Disclosure Schedule; Notification of Certain Matters.
7.7.1 Update of Disclosure Schedule. Schedules 1.1.1(a)-1 through 1.1.1(f)
will be updated by Buyer and Seller two Business Days prior to the Closing
such that, as to the Business:
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(a) the following will be included among the Purchased Assets: (i)
those ASP Contracts, ISV Contracts, Software Contracts and
Additional Contracts primarily related to the operation of the
Business entered into by Seller in the Ordinary Course in accordance
with the terms hereof after the date of this Agreement and prior to
the Closing Date (to the extent they permit assignment to Buyer),
(ii) any rights in and to additional assets that are obtained,
installed, licensed or acquired by Seller in accordance with the
terms hereof after the date of this Agreement and prior to the
Closing Date (in each case to the extent such assets would
constitute Purchased Assets if they were owned or leased by or
licensed to Seller on the date hereof), (iii) any Contract which is
not listed as an Assigned Contract or a Retained Contract as of the
date of this Agreement but which the parties in good faith agree
should be transferred to Buyer;
(b) the following will be removed from the Purchased Assets: (i)
those Contracts that expire in accordance with the terms thereof
after the date hereof but prior to the Closing Date (other than a
termination of an ASP Contract prior to expiration); (ii) those
Account Receivables which are paid in accordance with the terms
hereof and (iii), with Buyer's consent which will not be
unreasonably withheld or delayed any rights in and to any assets
that are lost, removed, or otherwise terminated by Seller in the
Ordinary Course in accordance with the terms hereof after the date
hereof but prior to the Closing Date;
7.7.2 Notification. Seller will give prompt notice to Buyer, and Buyer
will give prompt notice to Seller, of: (a) the occurrence, or failure to
occur, of any event that would be likely to cause any of its
representations or warranties contained in this Agreement to be untrue or
inaccurate at the Closing Date, and (b) any failure on its part to
materially comply with or satisfy any covenant, condition or agreement to
be complied with or satisfied by it under this Agreement; provided,
however, that the delivery of any notice pursuant to this Section 7.7.2
will not (x) limit or otherwise affect any remedies available to the party
receiving such notice or (y) constitute an acknowledgment or admission of a
breach of this Agreement. No disclosure by Buyer or Seller pursuant to this
Section 7.7.2, will be deemed to amend or supplement such party's
Disclosure Schedule or prevent or cure any misrepresentations, breach of
warranty or breach of covenant without the written consent of the other
party.
7.8 Tax Allocation. Before the Closing, by mutual agreement of the parties, the
Purchase Price will be allocated to broad categories constituting components of
the Purchased Assets (the "Allocation"). Each party will report the Transactions
in accordance with the agreed upon Allocation (except to the extent
modifications are necessary to reflect changes in the Purchased Assets and
Assumed Liabilities between the date of the Allocation and the Closing Date) for
all federal, state, local and other tax purposes, but such allocation will not
constrain reporting for other purposes.
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ARTICLE VIII
ADDITIONAL CONTINUING COVENANTS
8.1 Confidentiality. All non-public, confidential information received from the
other party is deemed received pursuant to the Confidentiality Agreement. Each
party will comply, and will cause its employees, officers, directors, advisors
and other representatives to comply, with the provisions of the Confidentiality
Agreement with respect to such information. The provisions of the
Confidentiality Agreement are hereby incorporated by reference with the same
effect as if fully set forth herein. If this Agreement terminates for any
reason, any documents or other materials obtained from Seller or otherwise in
Buyer's possession or under Buyer's control, including any extracts or other
documents containing confidential information, will be promptly returned to
Seller or destroyed by Buyer, which destruction will be certified in writing by
Buyer within five (5) Business Days following such termination. Notwithstanding
anything to the contrary herein or in the Confidentiality Agreement, Buyer is
entitled to discuss publicly the material terms of this Agreement, including the
Purchase Price, and to file this Agreement in order to meet regulatory
requirements.
8.2 Change of Name. Buyer acknowledges that Seller is retaining all Trademarks
that include, and all other rights in, the name "Qwest," either alone or in
conjunction with other words or phrases, including "Qwest Xxxxx.Xxxxxxxxx," and
any derivation or variant thereof. As of the Closing Date, Buyer will not use
"Qwest Cyber Solutions" in the external operations of the Business including
marketing, sales and dealing with third parties, will promptly cease using the
Qwest name in its internal operations, and shall operate the Business under a
new name of its choosing.
8.3 Sales and Use Taxes. Seller and Buyer will each be responsible for the
payment of, and will pay when due, half of any sales, use, excise, or similar
transfer taxes (the "Transfer Taxes") that may be payable in connection with the
sale or purchase of the Purchased Assets; provided that if any law or regulation
requires that one party (and not the other party) pay any such Transfer Taxes,
such party shall pay those Transfer Taxes and shall be promptly reimbursed by
the other party for half of the amount of those Transfer Taxes. The parties
hereto will cooperate with each other and use Commercially Reasonable Efforts to
minimize the Transfer Taxes.
8.4 Tax Matters.
(a) In the case of any real or personal property taxes (or other
similar Taxes) attributable to the Purchased Assets which returns
cover a taxable period commencing before the Closing Date and ending
thereafter, Buyer shall prepare such returns and make all payments
required with respect to any such return, provided, however, Seller
will promptly reimburse Buyer upon receipt of a copy of the filed
Tax Return to the extent any payment made by Buyer relates to that
portion of the taxable period ending on or before the Closing Date
which amount shall be determined and prorated on a per diem basis.
(b) After the Closing, Seller and Buyer will, (a) cooperate fully
with each other in the preparation and filing of all Tax Returns and
with respect to any Tax investigation,
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audit or other proceeding with respect to the Business or the
Purchased Assets (a "Tax Proceeding"); and (b) provide, or cause to
be provided, any records and other information in their possession
or control or in the control of their representatives reasonably
requested by such other party in connection therewith, as well as
access to, and the cooperation of, their respective auditors. Each
party will notify the other promptly upon receipt of any notice of
any pending or threatened Tax Proceeding with respect to the
Purchased Assets. Seller will have the right to control the handling
and disposition of such Tax Proceeding (and to employ counsel of its
choice at its expense) if the Tax Proceeding might result in
increased Tax liabilities of Seller. Buyer will take such action as
Seller may reasonably request by notice in connection with such Tax
Proceeding. If the outcome of the Tax Proceeding could have an
adverse effect on Buyer, then Buyer may participate in the Tax
Proceeding and Seller will use Commercially Reasonable Efforts to
keep Buyer fully informed in a timely manner as to the status and
resolution of the Tax Proceeding. Buyer and Seller will bear their
respective costs and expenses in connection with any Tax Proceeding.
8.5 Post-Closing Cooperation.
(a) At any time or from time to time after the Closing, at Buyer's
request and without further consideration, Seller shall: (i) execute
and deliver to Buyer such other instruments of sale, transfer,
conveyance, assignment and confirmation; (ii) provide such materials
and information; (iii) to assist Buyer in preparing copyright
registrations for any of the copyrightable works described in
Section 1.1.1 (h); and (iv) take such other actions, as Buyer may
reasonably deem necessary or desirable and reasonably request in
order more effectively to transfer, convey and assign to Buyer, to
confirm Buyer's title to, all of the Purchased Assets, to enforce
Buyer's Rights thereunder and, to the full extent permitted by law,
to put Buyer in actual possession and operating control of the
Purchased Assets and to use Commercially Reasonable Efforts to
assist Buyer in exercising all rights with respect thereto and
otherwise to cause Seller to fulfill its obligations under this
Agreement and the Transaction Documents. In addition, if after Buyer
has made reasonable efforts to enforce an Assigned Contract or
collect an Account Receivable, Seller, upon Buyer's reasonable
request, shall file and prosecute litigation, at Buyer's expense, to
enforce such Assigned Contracts or to collect such the Account
Receivable. In lieu of filing and prosecuting such litigation,
Seller may, in its sole discretion, grant Buyer a power of attorney
to file and prosecute such litigation. Notwithstanding anything to
the contrary in this paragraph, Buyer shall have no right to require
or compel Seller to provide it with a power of attorney.
(b) Following the Closing, Seller will afford Buyer, its counsel and
its accountants, during normal business hours, reasonable access to
the books, records and other data relating to the Business in
Seller's possession with respect to periods prior to the Closing and
the right to make copies and extracts therefrom, to the extent that
such access may be reasonably required by Buyer in connection with:
(i) the determination
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or enforcement of rights and obligations against any party to an
Assigned Contract; (ii) establishing title or other rights with
respect to any Purchased Asset; (iii) the determination of or
defense of claims made with any third party in connection with the
Assumed Liabilities; or (iv) compliance with the requirements of any
Governmental Entity.
(c) For a period not to exceed 90 calendar days after the Closing,
Seller will use Commercially Reasonable Efforts to introduce Buyer
to customers of the Business and to cooperate with Buyer's efforts
to retain the customers of the Business. All related travel expenses
associated with such introductions will be borne by Buyer.
8.6 Non-Competition; Non-Solicitation. The provisions of this Section 8.6 are
not assignable in whole or in part, directly or by operation of law, to any
third party.
8.6.1 Noncompetition. Beginning on the Closing Date and ending on the
second (2/nd/) anniversary of the Closing, Seller will not directly or
indirectly engage in the Initial Noncompete Business anywhere in the
Restricted Territory without the prior written consent of Buyer, and
beginning on the second anniversary of the Closing and ending on the third
(3/rd/) anniversary of the Closing, Seller will not directly or indirectly
engage in the Subsequent Noncompete Business anywhere in the Restricted
Territory without the prior written consent of Buyer; provided that nothing
herein will prevent Seller or its Affiliates from owning for passive
investment purposes less than five percent (5%) of the outstanding equity
of a Person engaged in a Noncompete Business; provided further that Seller
will not be in breach of this Section 8.6 if Seller or its Affiliates
acquires another Person that engages, as less than twenty percent (20%) of
the net revenues of such Person's business, in activities that are in
direct competition with the Noncompete Business, as long as Seller, acting
in good faith, did not acquire such Person in order to compete in the
Noncompete Business. Buyer agrees that the foregoing covenant will not
prohibit or restrain the ability of Seller or its Affiliates from engaging
in any business activity not constituting a Noncompete Business. If Seller
requests a written consent from Buyer under this Section 8.6.1, Buyer shall
promptly grant or reject such request, in its sole discretion. For the
purpose of this paragraph 8.6.1, "Noncompete Business" shall mean an
Initial Noncompete Business for the period from the Closing Date through
the 2/nd/ anniversary of the Closing Date and Subsequent Noncompete
Business for the period from the 2/nd/ anniversary of the Closing Date
through the 3/rd/ anniversary of the Closing Date.
8.6.2 Nonsolicitation.
(a) Employees. Beginning on the date hereof and ending on the third
(3rd) anniversary of the Closing, Seller will not directly or
indirectly, (i) make, offer, solicit or induce to enter into, any
written or oral arrangement, agreement or understanding regarding
employment or retention as a consultant or independent contractor,
or (ii) encourage or take any other action that is intended to
induce or encourage, or has the effect of inducing of encouraging,
any Transferred Employee to terminate his or her employment with
Buyer or its Affiliates; provided, however, that Seller will be
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permitted to engage in, and make subsequent employment offers
resulting from, generalized searches for employees through media
advertisements, employment firms or otherwise that are not focused
on Persons employed by Buyer.
(b) Customers. Beginning on the date hereof and ending on the third
(3rd) anniversary of the Closing: (i) Seller will not directly or
indirectly, encourage or take any other action that is intended to
induce or encourage, or has the effect of inducing of encouraging,
any current customer or supplier of the Business to terminate or
alter the relationship of such party with the Business and (ii)
Seller will not during the term of an ASP Contract (and for a period
of 180 days after the expiration of such ASP Contract), provide any
services to the customer that Buyer (whether directly or by
subcontract) is providing pursuant to the ASP Contract as of the
Closing Date. For purposes of this Section 8.6.2(b), "expiration"
shall mean expiration after any current or renewal term of a
contract, termination by Buyer for reasons other than customer's
breach, or termination by customer for breach of the ASP Contract,
other than breach related to Seller's assignment of the contract to
Buyer or services that Seller is providing indirectly through Buyer
to the customer under the Wholesale Services Agreement.
Notwithstanding anything else contained herein, the provision of
telecommunications services and the indirect provision of services
through Buyer pursuant to the Wholesale Services Agreement or
similar agreement will be exempt from the restrictions contained in
this Section 8.6.2(b).
8.6.3 Enforcement. The covenants contained in Section 8.6.1 will be
construed as a series of separate covenants, one for each country,
province, state, city or other political subdivision of the Restricted
Territory. Except for geographic coverage, each such separate covenant will
be deemed identical in terms to the covenant contained in Section 8.6.1.
Seller and Buyer agree and acknowledge that it is not their intention in
Section 8.6.1 to violate any public policy or statutory or common law. If,
in any judicial proceeding, a court refuses to enforce any of such separate
covenants (or any part thereof), then such unenforceable covenant (or such
part) will be eliminated from this Agreement to the extent necessary to
permit the remaining separate covenants (or portions thereof) to be
enforced. If the provisions of Section 8.6.1 are deemed to exceed the time,
geographic or scope limitations permitted by applicable law, then such
provisions shall be reformed to the maximum time, geographic or scope
limitations, as the case may be, permitted by applicable laws.
8.6.4 Preservation of Value. Seller acknowledges that (a) the goodwill
associated with the existing business, customers and assets of the Business
prior to the Closing are an integral component of the value of the Business
to Buyer and is reflected in the value of the Purchase Price to be received
by Seller, and (b) Seller's agreement as set forth in this Section 8.6 is
necessary to preserve the value of the Business for Buyer following the
date hereof. Seller also acknowledges that the limitations of time,
geography and scope of activity agreed to in Section 8.6.1 are reasonable
because, among other things, (i) Buyer and Seller are engaged in a highly
competitive industry, (ii) Seller has had unique access to the trade
secrets and know-how of the Business including the plans and strategy (and,
in particular, the competitive
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strategy) of the Business, and (iii) Seller is receiving significant
consideration in connection with the consummation of the transactions
contemplated by this Agreement.
8.6.5 Injunctive Relief. The parties agree that in the event of a breach
or threatened breach by Seller of any of the covenants set forth in this
Section 8.6, monetary damages alone would be inadequate to fully protect
Buyer from, and compensate Buyer for, the harm caused by such breach or
threatened breach. Accordingly, Seller agrees that if it breaches or
threatens breach of any provision of this Section 8.6, Buyer will be
entitled to seek, in addition to any other right or remedy otherwise
available, the right to injunctive relief restraining such breach or
threatened breach and to specific performance of any such provision of this
Section 8.6.
8.7 No Shop. Until the earlier of (a) the Closing Date and (b) the date of
termination of this Agreement pursuant to the provisions of Section 10.1, Seller
will not (nor will Seller permit any of its officers, directors, employees,
agents or representatives), directly or indirectly, to take any of the following
actions with any party other than Buyer and its designees: (i) solicit,
encourage, initiate or participate in any negotiations or discussions with
respect to, any offer or proposal to acquire any of the Purchased Assets,
whether by merger, purchase of assets, or otherwise, or effect any such
transaction to the extent such transaction would be consummated prior to the
earlier of the consummation of the Transactions or the termination of this
Agreement, (ii) disclose any information not customarily disclosed to any Person
concerning the Business or afford to any person or entity access to the
Purchased Assets or to the books or records pertaining thereto in connection
with any proposal to purchase any of the Purchased Assets, (iii) assist or
cooperate with any Person to make any proposal to purchase any of the Purchased
Assets, or (iv) enter into any agreement with any Person providing for the
acquisition of the Purchased Assets (whether by way of merger, purchase of
assets or otherwise). In the event Seller shall receive any proposal referenced
above it shall promptly notify Buyer. The parties hereto agree that irreparable
damage would occur if the provisions of this Section 8.7 were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed by the parties hereto that Buyer shall be entitled to seek an
injunction or injunctions to prevent breaches of the provisions of this Section
8.7 and to enforce specifically the terms and provisions hereof in any court of
the United States or any state having jurisdiction, this being in addition to
any other remedy to which Buyer may be entitled at law or in equity.
8.8 Publicity and Reports. All media releases, public announcements and public
disclosures by either party with respect to the Transactions will be coordinated
between and approved by the parties before release, it being understood that
while the parties will consult in good faith, they will not have approval rights
over any announcement of the other party intended solely for internal
distribution or any disclosure of the other party required by legal, accounting,
or regulatory requirements, or any listing agreement with a nationally
recognized stock exchange. Such approval will not be unreasonably withheld,
conditioned or delayed by either party. Buyer and Seller will release jointly
the press release attached hereto as Exhibit 8.8-1 no later than the first
Business Day after the execution of this Agreement. Within 12 hours after such
release, Seller will send to each customer of the Business the letter in the
form attached hereto as Exhibit 8.8-2 and will send to each Specified
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Employee an e-mail in the form attached hereto as Exhibit 8.8-3. Either party
may refer to or quote from the agreed press release or any mutually approved
public statement without further approval of the other party.
8.9 Financial Statements. Seller will cooperate, including providing customary
management letters and affording reasonable access during normal business hours
at reasonable times and with reasonable notice to managers, books and records
and auditor's work papers, with Buyer and Buyer's accountants in the preparation
of audited financial statements for the Business Buyer is required to file under
Item 7 of Form 8-K under the Securities Exchange Act of 1934, as amended. The
parties shall each be responsible for and pay half of the fees of the fees of
the accountants relating to the audit of such financial statements. Seller
agrees that it will not terminate the employment of Xxxxx Xxxxxxxxx prior to 75
calendar days after the Closing and that within two weeks of the Closing Date
Seller will prepare financial statements for the Business in SEC compliant
format sufficient (other than the need for an audit) to satisfy Buyer's filing
requirement under Item 7 of Form 8-K under the Securities Exchange Act of 1934,
as amended. In addition, within 5 Business Days after the Closing Date, Seller
will provide to Buyer updated Schedules 1.1.1(f) and 5.15 accurate as of the
Closing Date.
ARTICLE IX
INDEMNIFICATION
9.1 Obligations of Seller. Seller will indemnify and hold harmless Buyer and
its directors, officers, employees, stockholders, Affiliates, agents,
representatives, successors and assigns (collectively, "Buyer Indemnified
Persons") from and against any and all Losses directly or indirectly as a result
of, based upon, arising from or resulting from (a) any inaccuracy in or breach
or nonperformance of any of the representations, warranties, covenants or
agreements made by Seller in this Agreement or in any certificate or other
instrument delivered pursuant to this Agreement (it being understood that for
purposes of the Indemnifications set forth in this Article IX, all
qualifications as to "materiality" and "Material Adverse Effect" contained in
any representation and warranty shall be disregarded for purposes of determining
the amount of Losses), (b) the Retained Assets,(c) the Excluded Liabilities and
(d) a Revenue Shortfall Loss.
9.2 Obligations of Buyer. Buyer will indemnify and hold harmless Seller and its
management committee members, members, officers, employees, Affiliates, agents,
representatives, successors and assigns (collectively, "Seller Indemnified
Persons") from and against any and all Losses directly or indirectly as a result
of, based upon, arising from or resulting from: (a) any inaccuracy in or breach
or nonperformance of any of the representations, warranties, covenants or
agreements made by Buyer in or pursuant to this Agreement (it being understood
that for purposes of the Indemnifications set forth in this Article IX, all
qualifications as to "materiality" and "Material Adverse Effect" contained in
any representation and warranty shall be disregarded for purposes of determining
the amount of Losses); (b) Buyer's conduct and operation of the Business from
and after the Closing; and (c) the Assumed Liabilities.
9.3 Definition of Loss with Respect to ASP Contracts. In the event that, ninety
(90) calendar days after the Closing Date, Annualized Revenue is less than the
Threshold Amount, Buyer shall be
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deemed to have incurred a Loss (a "Revenue Shortfall Loss") equal to the sum of
(i) 50% of the difference between Annualized Revenue less the Threshold Amount
plus (ii) 50% of the Termination Payments; provided that if the foregoing
calculation results in a positive number Buyer shall be deemed not to have
incurred a Revenue Shortfall Loss. For the purpose of this Section 9.3,
capitalized terms shall have the following meanings:
9.3.1 "Annualized Revenue" shall mean the sum of the AR Amounts for all
Effective Contracts;
9.3.2 "AR Amount" shall mean for each ASP Contract the amount listed to
the right of such Contract on Schedule 5.8 under the heading "Est NTM
Revenue";
9.3.3 "Effective Contract" shall mean an ASP Contract listed on Schedule
5.8 with respect to which, as of ninety (90) calendar days after the
Closing Date, Buyer has not (i) received a notice of termination of such
ASP Contract, which has not been revoked (ii) sent a notice of breach by
the customer of such ASP Contract or (iii) [***].
9.3.4 "Termination Payments" shall mean the sum of (i) all payments
actually received by Buyer within ninety (90) calendar days after the
Closing Date from customers in connection with the termination, after the
date of this Agreement, of an ASP Contract listed on Schedule 5.8 and (ii)
all amounts due from customers in connection with the termination, after
the date of this Agreement, of an ASP Contract listed on Schedule 5.8 with
respect to which, as of ninety (90) calendar days after the Closing Date,
Buyer has received written confirmation from the customer that the customer
intends to pay (which confirmation Buyer shall use Commercially Reasonable
Efforts to obtain), excluding any payment arising from the Termination
Pending Contract.
9.3.5 "Threshold Amount" shall mean $27,500,000 less the AR Amounts for
any ASP Contracts for which Buyer has received a notice terminating the
contract, which has not been revoked within 90 calendar days after the
Closing, based upon a breach of such ASP Contracts by Buyer and [***].
-----------------
[***] Confidential treatment requested pursuant to a request for
confidential treatment filed with the Securities and Exchange Commission.
Omitted portions have been filed separately with the Commission.
-29-
9.4 Limit of Indemnification. The indemnification obligation pursuant to
Section 9.3 shall be Buyer's sole remedy after the Closing Date for any
Losses [***] except with respect to such claims and damages arising
directly out of a Seller's fraud or willful or intentional misconduct.
9.5 Procedure Notice. 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 11.10; provided, however, that the failure to give such notice will
not affect the right of the Indemnified Party to indemnification, except to
the extent the failure to give notice materially prejudices the
Indemnifying Party.
9.5.2 Defense. If any claim, demand or liability is asserted by any third
Person against any Indemnified Party (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, with such consent not
being unreasonably withheld. The Indemnified Party will at all times also
have the right to participate fully in the defense at its own expense
unless: (a) under applicable standards of conduct, a conflict on any
significant issue exists between any two or more Indemnified Parties; or
(b) the Third Party Claim is made both against an Indemnifying Party and an
Indemnified Party and the Indemnified Party has been advised by counsel
that there are legal defenses available to such Indemnified Party that are
materially different from those available to the Indemnifying Party, in
which case the fees and expenses of one counsel in respect of such claim
incurred by the Indemnified Party will be paid by 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.
9.5.3 Claims Between the Parties. If the Indemnified Party has a claim
against the Indemnifying Party that does not involve a Third Party Claim
(an "Inter-Party Claim"), the Indemnified Party will notify the
Indemnifying Party with reasonable promptness of the claim, and, to the
extent known, specifying the nature, estimated amount and the specific
basis for the claim. The Indemnifying Party will respond within thirty days
of receipt of the
-----------------
[***] Confidential treatment requested pursuant to a request for
confidential treatment filed with the Securities and Exchange Commission.
Omitted portions have been filed separately with the Commission.
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notice of an Inter-Party Claim. If the Indemnifying Party fails to respond,
the claim specified by the Indemnified Party will be conclusively deemed a
liability of the Indemnifying Party, subject only to proof of the amount of
Loss. 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.
9.5.4 Order of Payment. To the extent that Buyer has the right to receive
payment from Seller pursuant to this Section IX, as long as the Escrow Fund
is available, the first One Million Five Hundred Thousand Dollars
($1,500,000) of such payment shall be satisfied by disbursements from the
Escrow Fund; provided that, the Escrow Fund shall be available only for a
Revenue Shortfall Loss or for other Losses subject to indemnification under
Section 9.1 with respect to which Buyer has given Seller notice of within
ninety (90) days after the Closing Date; provided further that, to the
extent that claims under this Section IX exceed One Million Five Hundred
Thousand Dollars ($1,500,000), the Escrow Fund shall be first used to pay
claims arising from a breach of a representation or warranty or a Revenue
Shortfall Loss. Buyer and Seller shall cooperate on the preparation of
written instructions to the Escrow Agent with respect to any amounts both
parties agree are to be paid to Buyer from the Escrow Fund.
9.6 Indemnification Threshold; Maximum Losses. Neither party will have any
indemnity obligation arising out of breaches of representations and warranties
unless and until the aggregate amount of Losses incurred, sustained or accrued
by the other party as a result of such breaches exceeds Two Hundred Fifty
Thousand Dollars ($250,000) and only to the extent of any Losses in excess of
that amount; provided, however that in no event will the amount of such
indemnification exceed, in the aggregate, an amount equal to Five Million
Dollars ($5,000,000), in the case of Buyer, or Five Million Dollars ($5,000,000)
plus the amount of any disbursements to Buyer from the Escrow Fund, in the case
of Seller, except in each case with respect to such claims and damages arising
directly out of a party's fraud willful or intentional misconduct
9.7 Cooperation. In connection with any Indemnifiable Claim, the Indemnified
Party will cooperate in all reasonable requests of the Indemnifying Party.
9.8 Damages. Notwithstanding anything to the contrary elsewhere in this
Agreement, no party, or its Affiliates, will be liable to the other party, or
its Affiliates, for any damages other than compensatory damages, except in the
case of bad faith, fraud or willful or intentional misconduct. Neither party
will be entitled to recover and hereby waives any claim with respect to, and
will not seek, consequential, punitive, exemplary or any other special damages
as to any matter under, relating to or arising out of the Transactions, except
with respect to such claims and damages arising directly out of a party's bad
faith, fraud or willful or intentional misconduct.
9.9 Escrow Arrangements.
9.9.1 Escrow Fund. As described in Section 2.1, at the Closing, Buyer
shall transfer to the Escrow Agent the Escrow Amount, such Escrow Amount to
constitute an escrow fund (the "Escrow Fund") to be governed by the terms
set forth herein and in an escrow agreement
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(the "Escrow Agreement") to be entered into between Buyer, Seller and an
escrow agent (the "Escrow Agent") mutually agreeable to Buyer and Seller.
The Escrow Fund shall be available to compensate for Losses incurred by
Buyer Indemnified Persons and subject to Indemnification by Seller pursuant
to Section 9.1.
9.9.2 Distribution of Escrow Fund to Satisfy Claims. The Escrow Agent
shall disburse the amounts held in the Escrow Fund upon (i) receipt of a
written instructions executed by Buyer and Seller pursuant to Section 9.5.4
authorizing such disbursement or (ii) a court order mandating such
disbursement.
9.9.3 Escrow Period; Distribution upon Termination of Escrow Periods.
Subject to the following requirements, the Escrow Fund shall be in
existence immediately following the Closing Date and shall terminate at
5:00 p.m., local time, 120 calendar days after the Closing Date (the
"Escrow Period"); provided, however, that the Escrow Period shall not
terminate with respect to (i) any amounts that Buyer states in good faith
are subject to unresolved claims against Seller relating to Revenue
Shortfall Losses or (ii) other unresolved claims under Section 9.1 which
were made by Buyer within ninety (90) days after the Closing Date
(together, the "Unresolved Amounts") in a notice sent to Escrow Agent and
Seller prior to the end of the Escrow Period. With respect to the
Unresolved Amounts, the Escrow Period shall end upon receipt by Escrow
Agent of a memorandum executed by Buyer and Seller stating that the Escrow
Period with respect to such Unresolved Amount has terminated or a court
order mandating the disbursement of the Unresolved Amount. Unless such
amounts are required to be distributed to Buyer to satisfy claims pursuant
to Section 9.9.2 hereof, Escrow Agent shall disburse to Seller all
remaining amounts in the Escrow Fund upon the termination of the Escrow
Period with respect to such amounts
9.9.4 Escrow Agent's Duties. . The Escrow Agent will be subject to
customary duties and responsibilities to be set forth in the Escrow
Agreement and agreed to by Buyer, Seller and the Escrow Agent. Buyer and
Seller shall each be responsible for half of the fees of Escrow Agent.
ARTICLE X
TERMINATION OF OBLIGATIONS
10.1 Termination of Agreement. Notwithstanding anything herein to the contrary,
this Agreement and the Transactions may be terminated at any time before the
Closing Date as follows and in no other manner, so long as the terminating party
is not then in material breach hereunder:
10.1.1 Mutual Consent. By mutual consent in writing of Buyer and Seller.
10.1.2 Conditions Not Met.
(a) By Buyer if any event occurs or condition exists that would
render impossible the satisfaction, as of the Closing Date, of one
or more conditions to the obligations of Buyer to consummate the
Transactions as set forth in Section 4.1 or 4.2.
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(b) By Seller if any event occurs or condition exists that would
render impossible the satisfaction, as of the Closing Date, of one
or more conditions to the obligations of Seller to consummate the
Transactions as set forth in Section 4.1 or 4.3.
10.1.3 Drop-Dead Date. By either Seller or Buyer if the Closing does not
occur on or before the close of business on September 30, 2002; provided
that the right to terminate this Agreement under this Section 10.1.3 will
not be available to any party whose action or failure to act has been a
principal cause of or resulted in the failure of the Closing to occur on or
before such date and such action or failure to act constitutes breach of
this Agreement.
10.1.4 Order. By either Seller or Buyer if any Governmental Entity has
issued an Order or taken any other actions (that the parties will use their
Commercially Reasonable Efforts to lift), in either case permanently
restraining, enjoining or otherwise prohibiting or making illegal the
Transactions, and such Order or other action becomes final and
non-appealable.
10.1.5 Material Breach. By Buyer or Seller if there has been a material
misrepresentation or other material breach by the other party in its
representations, warranties or covenants set forth herein; provided,
however, that if such breach or misrepresentation is susceptible to cure,
the breaching party will have thirty (30) calendar days, after receipt of
notice from the other party of its intention to terminate this Agreement if
such breach or misrepresentation continues, in which to cure such breach or
misrepresentation.
10.1.6 Regulatory Action. By Buyer or Seller if there has been any action
taken, or any Regulation or Order enacted, promulgated or issued or deemed
applicable to the Transactions by any Governmental Entity, that would: (a)
prohibit Buyer's ownership or operation of any portion of the Business or
(b) compel Buyer or Seller to dispose of or hold separate all or any
portion of the business or assets of Buyer or Seller as a result of the
Closing.
10.2 Effect of Termination. If this Agreement is terminated pursuant to Section
10.1, all further obligations of the parties under this Agreement will terminate
without further liability of any party to another; provided, however, that the
obligations of the parties contained in Section 8.1 (Confidentiality) and
Article IX will survive any such termination. A termination under Section 10.1
will not relieve any party of any liability for a breach of, or for any
misrepresentation under this Agreement, or be deemed to constitute a waiver of
any available remedy for any such breach or misrepresentation.
10.3 Survival of Representations and Warranties and Covenants. Each of the
representations and warranties made in this Agreement will terminate on the date
that is the 18 months after the Closing Date, except that those representations
and warranties made in Sections 5.1 (Organization and Related Matters), 5.2
(Authorization; No Conflicts), 5.6 (a) (Title; Purchased Assets), 6.1
(Organization and Related Matters) and 6.2 (Authorization; No Conflicts) will
survive the Closing and remain in full force and effect indefinitely, and if a
claim or notice is given under Article IX (Indemnification) with respect to any
representation or warranty before the applicable expiration date, such
representation or warranty will continue indefinitely until such claim is
finally resolved. The covenants and agreements of the parties set forth in this
Agreement and the
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indemnification obligations of the parties hereunder will survive for the
applicable statute of limitations, except as expressly provided herein.
ARTICLE XI
GENERAL
11.1 General Rules of Construction. For all purposes of this Agreement and the
Exhibits and 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; (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.
11.2 Amendments; Waivers. Except as expressly provided herein, this Agreement
and any attached Schedule or Exhibit 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 agreement contemplated hereby 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. 11.3 Schedules; Exhibits;
Integration. Each 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. This
Agreement, together with such Schedules and Exhibits, and the other agreements
and instruments delivered at the Closing, constitutes the entire agreement among
the parties pertaining to the subject matter hereof and supersedes all prior
agreements and understandings, both written and oral, of the parties in
connection therewith.
11.4 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.
11.5 No Assignment. Unless otherwise expressly provided, neither this Agreement
nor any rights or obligations under it are assignable by one party without the
prior written consent of the other party other than in connection with a Change
of Control of party.
11.6 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.
11.7 Counterparts. This Agreement and any amendment hereto or any other
agreement delivered pursuant hereto 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
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effective when one or more counterparts have been signed by each party and
delivered to the other party. A facsimile signature page will be deemed an
original.
11.8 Successors and Assigns; No Third Party Beneficiaries. 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 or Governmental Entity any rights or
remedies of any nature whatsoever under or by reason of this Agreement.
11.9 Notices. All notices, demands and other communications to be given or
delivered under or by reason of the provisions of this Agreement must be in
writing and will be deemed to have been given: (a) immediately when personally
delivered or delivery is refused; (b) when received by first class mail, return
receipt requested; (c) one day after being sent by Federal Express or other
overnight delivery service; or (d) when receipt is acknowledged, either
electronically or otherwise, if sent by facsimile, telecopy or other electronic
transmission device. Notices, demands and communications to Buyer and Seller
will, unless another address is specified by Buyer or Seller hereafter in
writing, be sent to the address indicated below:
If to Buyer, addressed to:
Corio, Inc.
000 Xxxxxx Xxxx, Xxxxx 000
Xxx Xxxxxx, Xxxxxxxxxx 00000
Attention: (a) President and CEO and (b) General Counsel
Facsimile: (000) 000-0000
with a copy to (which will not constitute notice):
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx
Professional Corporation
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, XX 0000-0000
Attention: Xxxxxxx X. Xxxxxx
Facsimile: 000-000-0000
If to Seller, addressed to:
Qwest Xxxxx.Xxxxxxxxx LLC
0000 Xxxxxxx
Xxxxxx, Xxxxxxxx 00000
Attention: Xxxx Xxxxxxx
Facsimile: 000-000-0000
with a copy to (which will not constitute notice):
O'Melveny & Xxxxx XXX
-00-
0000 Xxxxxx of the Stars , Xxxxx 000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxx, Esq.
Facsimile: (000) 000-0000
11.10 Expenses. Except as otherwise set forth herein, Seller and Buyer will each
pay its own expenses incident to the negotiation, preparation and performance of
this Agreement and the Transactions, including, the fees, expenses and
disbursements of their respective accountants and counsel.
11.11 Attorney Fees. In the event of any Action for the breach of this Agreement
or for misrepresentation by any party, the prevailing party will be entitled to
reasonable attorney's fees, costs and expenses incurred in such Action.
Attorneys fees incurred in enforcing any judgment in respect of this Agreement
are recoverable as a separate item. The preceding sentence is intended to be
severable from the other provisions of this Agreement and to survive any
judgment and, to the maximum extent permitted by law, will not be deemed merged
into any such judgment.
11.12 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.
11.13 Other Remedies. Any and all remedies herein expressly conferred upon a
party will be deemed cumulative with and not exclusive of any other remedy
conferred hereby, or by law or equity upon such party, and the exercise by a
party of any one remedy will not preclude the exercise of any other remedy.
11.14 Representation By Counsel; Interpretation. Seller and Buyer each
acknowledge that each 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.
11.15 Severability. If any provision of this Agreement is held to be
unenforceable for any reason, it will be adjusted rather than voided, if
possible, to achieve the intent of the parties. All other provisions of this
Agreement will be deemed valid and enforceable to the extent possible.
[signature page to follow]
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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.
"BUYER"
CORIO, INC.
By: /s/ George Kadifa
---------------------------------------------------
Name: George Kadifa
-------------------------------------------------
Title: Chairman, President and Chief Executive Officer
------------------------------------------------
"SELLER"
QWEST XXXXX.XXXXXXXXX LLC
By: /s/ Xxxxxx Xxxxxxx
---------------------------------------------------
Name: Xxxxxx Xxxxxxx
-------------------------------------------------
Title:
------------------------------------------------
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ANNEX 1
DEFINITIONS
"Accounts Receivable" is defined in Section 1.1.1(f).
"Action" means an action, suit, investigation, complaint, claim, notice of
infringement, instruction to cease and desist, demand or other proceeding,
threatened or pending, whether civil or criminal, in law or in equity or before
any arbitrator or Governmental Entity.
"Administrative Services Agreement" is defined in Section 7.6.
"Additional Contracts" means any Contract other than an ASP Contract, ISP
Contract, PSO Contract or Software Contract.
"Affiliate" of a Person 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" is defined in the introductory paragraph.
"Allocation" is defined in Section 2.3.
"Approval" means an authorization, consent, consent to assignment, approval or
waiver of, clearance by, notice to or registration or filing with, or any other
similar action by or with respect to a Governmental Entity or any other Person
and the expiration or termination of all prescribed waiting, review or appeal
periods with respect to any of the foregoing, that is required in order to
consummate the Transactions, including transferring or assigning all of the
Purchased Assets (including Assigned Contracts) to Buyer.
"Application Management Services" means performing technical and functional
management, support and services for third parties with respect to software
applications, including, with respect to such applications: (i) configuration,
repair and maintenance of applications, including managing application software
patches, major and minor application upgrades, and rollout of and transition to
new versions; (ii) application architecture design and tuning, including
performance tuning; (iii) automation and integration related to such
applications; and (iv) managing the access to, and use of, such applications by
customers.
"ASP Contracts" means a Contract relating to the provision to third parties of
the services of the Business.
"Assigned Contracts" is defined in Section 1.1.1(a).
Definitions-1
"Assumed Liabilities" is defined in Section 1.2.
"Assumption Agreement" means that certain Assumption Agreement between Buyer and
Seller to be entered into on the Closing Date, the form of which is attached as
Exhibit A.
"Benefits Liabilities" is defined in Section 7.5.3.
"Xxxx of Sale" means that certain Xxxx of Sale by Seller to be entered into on
the Closing Date, the form of which is attached as Exhibit B.
"Business" means (a) the business, software, products, services, and operations
of (i) providing managed software applications for third party enterprise
applications including managing, using for the benefit of customers, monitoring,
maintaining and making available such applications, and (ii) owning the servers
necessary to host such applications, and (iii) managing and monitoring servers
for the benefit of customers by Seller while owning the servers, but none of the
data centers, networks, and other infrastructure, necessary to provide such
services and (b) the use of Software, Know-How and processes owned by Seller or
leased or licensed by Seller from a third party, but not an Affiliate, to
perform infrastructure management and to manage servers, all as presently
conducted or as required to be conducted under the Assigned Contracts.
"Business Day" means any day excluding Saturday, Sunday and any day that is a
legal holiday in the State of New York or is a day on which banking institutions
located in such jurisdiction are authorized or required by law or other
governmental action to close.
"Buyer" is defined in the introductory paragraph.
"Buyer Indemnified Persons" is defined in Section 9.1.
"Change of Control" means: (a) the consummation of a merger or consolidation of
party with or into another entity or any other corporate reorganization, if more
than 50% of the combined voting power of the continuing or surviving entity's
securities outstanding immediately after such merger, consolidation or other
reorganization is owned by Persons who were not stockholders of the party
immediately prior to such merger, consolidation or other reorganization; or (b)
the sale, transfer or other disposition of 50% or more of a party's assets.
"Closing" is defined in Section 3.1.
"Closing Date" is defined in Section 3.1.
"COBRA" is defined in Section 7.5.2.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commercially Reasonable Efforts" means efforts that are designed to enable a
party, directly or indirectly, to satisfy a condition to, comply with a covenant
required by, or otherwise assist in the
Definitions-2
consummation of, the Transactions and that do not require the performing party
to expend funds or assume liabilities other than expenditures and liabilities
that are customary and reasonable in nature and amount in the context of the
Transactions.
"Confidentiality Agreement" means the Confidentiality Agreement, dated as of
February 6, 2002, between an Affiliate of Seller and Buyer, a copy of which is
attached hereto as Exhibit D.
"Consent Required Contracts" means those contracts identified as "Consent
Required Contracts" on Schedule 5.8.
"Contract" means any mortgage, indenture, lease, contract, covenant or other
agreement, instrument or commitment, permit, concession, franchise or license.
"Covered Business" means the business, software, products, services, and
operations of with or related to (i) Application Management Services, and (ii)
providing infrastructure management services.
"Disclosure Schedule" means either Seller's Disclosure Schedule delivered by
Seller to Buyer on the date hereof and as amended from time to time pursuant to
the terms of this Agreement, or Buyer's Disclosure Schedule delivered by Buyer
to Seller on the date hereof and as amended from time to time pursuant to the
terms of this Agreement, as the context requires. Any fact or item that is
disclosed in any section of the Disclosure Schedule will be deemed to be
disclosed in all applicable sections of the Disclosure Schedule, notwithstanding
the omission of a reference or a cross-reference thereto. The disclosure of any
fact or item in the Disclosure Schedule will not constitute any acknowledgment
regarding the materiality of such disclosure or whether the subject matter of
such disclosure will have a Material Adverse Effect.
"Dollars" and "$" refer to United States dollars and other lawful currency of
the United States of America.
"Encumbrance" means any claim, charge, lease, covenant, easement, encumbrance,
security interest, lien, option, pledge, right of others, or restriction of any
nature (whether on voting, sale, transfer, disposition, use, ownership,
competition 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 or any Permitted
Encumbrances.
"Enterprise Software Application" means a software program that is made
generally commercially available from an independent software vendor (ISV), and
that is considered `enterprise software' (as the terminology for such
classification may evolve over time, including subsets of such classification
and terminology referring to software substantially similar to that currently
considered enterprise software) in the marketplace, taking into account the
marketing of such program and the classification of such program by industry
analysts.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended.
Definitions-3
"Escrow Agent" is defined in Section 9.9.1.
"Escrow Agreement" is defined in Section 9.9.1.
"Escrow Amount" is defined in Section 2.1.
"Escrow Fund" is defined in Section 9.9.1.
"Excluded Liabilities" is defined in Section 1.3.
"GAAP" means United States generally accepted accounting principles consistently
applied by Seller.
"Governmental Entity" means any agency, bureau, commission, court, department,
official, political subdivision, tribunal or other instrumentality of any
government, whether federal, state, county or local, domestic or foreign.
"Indemnifiable Claim" means any Loss for or against which any party is entitled
to indemnification under this Agreement.
"Indemnified Party" is defined in Section 9.3.1.
"Indemnifying Party" is defined in Section 9.3.1.
"Initial Non-Compete Business" means the business of performing Application
Management Services with respect to Enterprise Software Applications, but shall
not include providing the following services to any third party: (a) the
services proposed to be provided to Buyer under the Wholesale Services
Agreement, including the Managed Service Exhibit thereto; (b) the services
included in the PSO Business; (c) monitoring of Enterprise Software
Applications; or (d) services relating to electronic messaging applications.
"Intellectual Property Rights" means any or all of the following and all
statutory and/or common law rights throughout the world in, arising out of, or
associated with: (i) and all inventions (whether patentable or not) and
invention disclosures and improvements thereon, and all patents and applications
therefor and all reissues, divisions, renewals, extensions, provisionals,
continuations and continuations-in-part thereof ("Patents"); (ii) all trade
secrets and know-how ("Know-How") ; (iii) all works of authorship, copyrights,
mask works, and copyright and mask work registrations and applications
("Copyrights"); (iv) all industrial designs and any registrations and
applications therefor; (v) all trade names, logos, trademarks and service marks;
trademark and service xxxx registrations and applications ("Trademarks"); (vi)
all databases and data collections (including knowledge databases, customer
lists and customer databases); (vii) all rights in or to Software or other
Technology; (viii) rights to Domain Names; (ix) any similar, corresponding or
equivalent rights to any of the foregoing; and (x) all goodwill associated with
any of the foregoing.
"Inter-Party Claim" is defined in Section 9.3.3.
Definitions-4
"ISV Contracts means the Contracts listed on Schedule 1.1.1(a)-2.
"Joinder Agreement" is defined in Section 4.2.5.
"Know-How" is defined in the definition of Intellectual Property Rights.
"Knowledge" means, with respect to Seller, the knowledge, with a reasonable duty
of inquiry and investigation (internal to Seller and its Affiliates), of Xxxx
Xxxxx, Senior Vice President of Seller, Xxxxx Xxxxxxxxx, Chief Financial Officer
of Seller, Xxxxxx Xxxxxxx, Senior Vice President, Products and Services, Xxxxx
Xxxxxx, Corporate Counsel, and Xxx Xxxxxx, Vice President, Networks Operations
and Engineering, of Seller, and, with respect to Buyer, the knowledge, with a
reasonable duty of inquiry and investigation (internal to Buyer and its
Affiliates), of Buyer's executive officers and directors.
"Licensed Intellectual Property Rights" means all statutory and/or common law
rights throughout the world in, arising out of, or associated therewith in any
Patents, Know-How, and Copyrights existing and used in, or which would otherwise
be infringed by, Seller's Covered Business as of the Closing Date, and as to
which Seller as of the Closing Date has the right to grant a license of the
scope set forth in Section 1.4, without an obligation to pay a fee of any kind
to a third party other than any fee that Seller would have been obligated to pay
if the transaction contemplated herein had not occurred.
"Loss" means any action, cost, damage, disbursement, expense, liability, loss,
deficiency, diminution in value, obligation, penalty or settlement of any kind
or nature, whether foreseeable or unforeseeable, interest or other carrying
costs, penalties, 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 specified Person.
"Material Adverse Effect" means any change in or effect on the Purchased Assets,
Assumed Liabilities or the Business as expected to be conducted immediately
after the Closing (i.e., giving effect to the transfers of the Purchased Assets
and Assumed Liabilities contemplated by this Agreement) that would (a) be
materially adverse to the conduct or value of the Business by Buyer immediately
following the Closing Date, (b) materially impair the validity or enforceability
of this Agreement and the Transaction Documents taken as a whole, (c) materially
impair the value of the Purchased Assets or (d) materially impair Buyer's
ability to realize the benefit of the indemnification provisions of this
Agreement or the Joinder Agreement; provided, however, that the following will
not constitute a Material Adverse Effect: (i) termination of employment of any
person or persons; (ii) general economic conditions; (iii) any changes generally
affecting the industries in which Seller currently operates the Business,
provided that such changes do not materially disproportionately affect Seller;
or (iv) anything specifically disclosed in the Disclosure Schedule.
"Non-Seller Assigned Contract" means an Assigned Contract where an Affiliate of
Seller and not Seller is the party to the Contract.
Definitions-5
"Order" means any decree, injunction, judgment, order, ruling, assessment or
writ.
"Ordinary Course" means for the Business, with respect to any Person and as of
any date of determination, the conduct or operation of a line of business of
such Person in the ordinary course of such business, as then conducted and
proposed to be conducted, in a manner consistent with the past business
practices of such Person and in accordance with the reasonable requirements of
such business, in each case as determined with respect to such business as of
such date of determination.
"Organizational Documents" means (a) the articles or certificate of
incorporation and the bylaws of a corporation; (b) the operating agreement and
certificate of organization or formation for a limited liability company; (c)
the partnership agreement and any statement of partnership of a general
partnership; (d) the limited partnership agreement and the certificate of
limited partnership of a limited partnership; (e) any charter or similar
document adopted or filed in connection with the creation, formation, or
organization of a Person; and (f) any amendment to any of the foregoing.
"Payables" means all accounts payable to trade creditors relating to or arising
from the Business that are reflected on the Unaudited Statements and unpaid as
of the Closing and those incurred on or after June 30, 2002 in the Ordinary
Course and in accordance with the terms hereof that are in the same categories
as those listed on the Unaudited Statements. Payables will be computed in
accordance with GAAP, but will not include Seller's transaction expenses in
connection with the Transactions.
"Permitted Encumbrances" means: (a) Encumbrances for Taxes not yet delinquent or
the validity of which are being contested in good faith by appropriate actions
and that are described in Schedule 5.6; (b) Encumbrances existing on the Closing
Date to remain on the Purchased Assets after the Closing as listed in Schedule
5.6; (c) Encumbrances that are statutory liens of landlords, carriers,
warehousemen, mechanics, materialmen and other Encumbrances imposed by law
created in the Ordinary Course of Seller for amounts not yet due and for which,
at Closing, Seller will have incurred no liability to pay; (d) Encumbrances that
are minor or technical defects in title that in the aggregate do not materially
affect the value, marketability or utility of the Purchased Assets as presently
used; and (e) Encumbrances that are Assumed Liabilities.
"Person" means an individual, a corporation, a partnership, a limited liability
company, a joint venture, an association, a trust, an unincorporated association
or any other entity or organization, including a Governmental Entity.
"Plans" means employee benefit plans and collective bargaining, employment or
severance agreements or other similar arrangements applicable to Specified
Employees to which Seller any one of its Affiliates is a party, including (a)
any profit-sharing, deferred compensation, bonus, stock option, stock purchase,
pension, retainer, consulting, retirement, severance, welfare or incentive plan,
agreement or arrangement, (b) any plan, agreement or arrangement providing for
"fringe benefits" or perquisites to employees, officers, directors or agents,
including but not limited to benefits relating to company automobiles, clubs,
vacation, child care, parenting, sabbatical, sick leave, medical, dental,
hospitalization, life insurance and other types of insurance, (c) any employment
agreement, or (d) any other "employee benefit plan" (within the meaning of
Section 3(3) or ERISA).
Definitions-6
"PSO Business" means traditional professional information technology consulting
and messaging services.
"PSO Contracts" means those agreements, other than ASP Agreements, between
Seller and third parties primarily related to the provision by Seller to such
third parties of the professional services of information technology consulting
personnel.
"Purchase Price" is defined in Section 2.2.
"Purchased Assets" is defined in Section 1.1.1.
"Real Estate Agreement" means a triple net sub-lease of such amount of Seller's
space under either or both of Seller's leases in Dallas and/or Denver as Buyer
reasonably requests. The sublease(s) will last until the expiration of the
applicable lease terms and fully reimburse Seller for all pro rata costs and
expenses of the occupied space, common areas and leasehold amenities.
"Regulation" means (a) any applicable law, statutes, rule, regulation,
ordinance, judgment, decree, ruling, order, award, injunction, recommendation or
other official action of any Governmental Entity, and (b) any official change in
the interpretation or administration of any of the foregoing by the Governmental
Entity or by any other Governmental Entity or other Person responsible for the
interpretation or administration of any of the foregoing.
"Restricted Territory" means each and every country, province, state, city or
other political subdivision of the world including those in which Seller is
currently engaged in the Business or otherwise distributes, licenses or sells
its ASP products or services.
"Retained Assets" is defined in Section 1.1.2.
"Retained Contracts" is defined in Section 1.1.2(a).
"Revenue Shortfall Loss" is defined in Section 9.3.
"Sales Agency Agreement" is defined in Section 7.6.
"Seller" is defined in the introductory paragraph.
"Seller Indemnified Persons" is defined in Section 9.2.
"Software" means any and all computer software and code, including assemblers,
applets, compilers, source code, object code, data (including image and sound
data), design tools and user interfaces, in any form or format, however fixed.
Software will include source code listings and documentation.
"Software Contract" is a Contract granting a license to use Software.
"Specified Employees" is defined in Section 5.9(a).
Definitions-7
"Subsequent Non-Compete Business" means the business of performing Application
Management Services with respect to Ariba applications, PeopleSoft applications,
Oracle applications, SAP applications and Siebel applications, but shall not
include providing the following services to any third party: (a) the services
proposed to be provided to Buyer under the Wholesale Services Agreement,
including the Managed Service Exhibit thereto; (b) the services included in the
PSO Business; (c) monitoring of Enterprise Software Applications; or (d)
services relating to electronic messaging applications.
"Tax Proceeding" is defined in Section 8.4.
"Tax Return" means a report, return or other information required to be filed by
a Person with or submitted to a Governmental Entity with respect to Taxes,
including, where permitted or required, combined or consolidated returns for any
group of entities that includes the Person.
"Taxes" means any foreign, federal, state, county or local income, sales and
use, excise, franchise, real and personal property, transfer, gross receipt,
capital stock, production, business and occupation, disability, employment,
payroll, severance or withholding tax or charge imposed by any Governmental
Entity, any interest and penalties (civil or criminal) related thereto or to the
nonpayment thereof and any obligations under any agreements or arrangements with
any other person with respect to such amounts and including any liability for
taxes of a predecessor entity.
"Technology" means all information related to, constituting or disclosing, and
all tangible copies and embodiments in any media of, technology, including all
know-how, show-how, techniques, trade secrets, inventions (whether or not
patented or patentable), algorithms, routines, Software, hardware, files,
databases, works of authorship, methods and processes.
"Termination Pending Contract" shall mean the ASP Contract identified as the
Termination Pending Contract on Schedule 5.8.
"Third Party Claim" is defined in Section 9.3.2.
"Trademarks" is defined in the definition of Intellectual Property Rights.
"Transaction Documents" is defined in Section 3.3.1.
"Transactions" means, collectively, the transactions undertaken pursuant to, or
otherwise contemplated by, the Agreement and the Transaction Documents.
"Transferred Employee" is defined in Section 7.5.1.
"Transferred Records" is defined in Section 1.1.1(g).
"Transfer Taxes" is defined in Section 8.3.
"Transferred Trademarks" is defined in Section 1.1.1(e).
Definitions-8
"Unaudited Statement" is defined in Section 5.15.
"Unresolved Amounts" is defined in Section 9.9.3.
"Wholesale Services Agreement" means the Wholesale Services Agreement between
Seller and Buyer to be entered into at or before the Closing Date in the form
attached as Exhibit C.
[END]
Definitions-9
Exhibit A
FORM OF ASSUMPTION AGREEMENT
This Assumption Agreement (this "Agreement") is made effective as of _________,
__, 2002, by and between CORIO, INC., a Delaware corporation ("Buyer"), and
QWEST XXXXX.XXXXXXXXX LLC, a Delaware limited liability company ("Seller").
Capitalized terms used in this Agreement and not otherwise defined have the
meanings stated in the Asset Purchase Agreement (as defined below). The parties
hereto hereby agree as follows:
BACKGROUND
WHEREAS, Seller and Buyer have entered into that certain Asset Purchase
Agreement, dated as of August 1, 2002 (the "Asset Purchase Agreement"), under
which Seller has agreed to sell, convey, assign, transfer and deliver the
Purchased Assets to Buyer or its assigns.
WHEREAS, all of the instruments, documents and agreements required to be
executed and delivered in order to consummate the Transactions are being
executed and delivered by and to the respective parties to the Asset Purchase
Agreement concurrently herewith.
1. Assumption. Seller hereby transfers unto Buyer all of its obligations and
duties in connection with the Assumed Liabilities. Buyer hereby assumes and
agrees to pay, perform, discharge and be responsible for the Assumed
Liabilities from and after the date hereof.
2. Representations and Warranties. All representations and warranties of the
parties set forth in the Asset Purchase Agreement will continue in effect
as provided therein and will not be deemed to be amended, modified,
terminated or superseded by or merged with this Agreement.
3. Miscellaneous Provisions.
3.1 Amendments; Waiver. The terms, provisions and conditions of this
Agreement 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 agreement contemplated hereby 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.
3.2 Further Assurances. Each party will 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 or as may be necessary or appropriate to consummate or implement
the Transactions, including to assume or evidence the assumption of the
Assumed Liabilities, or to evidence such events or matters.
3.3 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 other than in connection with a Change of Control of a party.
A-1
3.4 Descriptive Headings. The descriptive headings of the sections and
subsections of this Agreement are for convenience only and do not
constitute a part of this Agreement.
3.5 Counterparts. This Agreement and any amendment hereto or any other
agreement delivered pursuant hereto 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. A facsimile signature page will be deemed an
original.
3.6 Governing Laws. 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.
3.7 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.
3.8 Representation By Counsel; Interpretation. The parties each acknowledge
that each 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 the parties hereto.
3.9 Severability. If any provision of this Agreement is held to be
unenforceable for any reason, it will be adjusted rather than voided, if
possible, to achieve the intent of the parties. All other provisions of
this Agreement will be deemed valid and enforceable to the extent possible.
[signature page to follow]
A-2
IN WITNESS WHEREOF, Seller and Buyer have caused this Agreement to be duly
executed as of the day and year first above written.
BUYER: SELLER:
CORIO, INC. QWEST XXXXX.XXXXXXXXX LLC
By: _______________________________ By: __________________________________
Name: _____________________________ Name: ________________________________
Title: ____________________________ Title: _______________________________
A-3
Exhibit B
FORM OF XXXX OF SALE AND LICENSE
This Xxxx of Sale and License (this "Xxxx of Sale") is made effective as of
________ __, 2002, by and between CORIO, INC., a Delaware corporation ("Buyer"),
and QWEST XXXXX.XXXXXXXXX LLC, a Delaware limited liability company ("Seller").
Capitalized terms used in this Agreement and not otherwise defined have the
meanings stated in the Asset Purchase Agreement (as defined below). The parties
hereto hereby agree as follows:
BACKGROUND
WHEREAS, Seller and Buyer have entered into that certain Asset Purchase
Agreement, dated as of August 1, 2002 (the "Asset Purchase Agreement"), under
which Seller has agreed to sell, convey, assign, transfer and deliver the
Purchased Assets to Buyer or its assigns, and to grant a license pursuant to
Section 1.4 of the Asset Purchase Agreement.
1. Sale. Seller does hereby sell, convey, assign, transfer and deliver to
Buyer, and Buyer does hereby purchase, acquire and accept from Seller, all
of Seller's right, title and interest in and to the Purchased Assets.
2. Representations. All representations, warranties, agreements and
indemnities of Seller with respect to the Purchased Assets set forth in the
Asset Purchase Agreement will continue in effect as provided therein and
will not be deemed to be amended, modified, terminated or superseded by or
merged with this Xxxx of Sale.
3. Miscellaneous Provisions.
3.1 Amendments; Waiver. The terms, provisions and conditions of this Xxxx
of Sale 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
Xxxx of Sale or any agreement contemplated hereby 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.
3.2 Further Assurances. Each party will 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 or as may be necessary or appropriate to consummate or implement
the Transactions, including to more effectively transfer the Purchased
Assets, or to evidence such events or matters.
3.3 Assignment. Neither this Xxxx of Sale nor any rights or obligations
under it are assignable by one party without the prior written consent of
the other party other than in connection with a Change of Control of a
party.
3.4 Descriptive Headings. The descriptive headings of the sections and
subsections of this Xxxx of Sale are for convenience only and do not
constitute a part of this Xxxx of Sale.
B-1
3.5 Counterparts. This Xxxx of Sale and any amendment hereto or any other
agreement delivered pursuant hereto 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. A facsimile signature page will be deemed an
original.
3.6 Governing Laws. This Xxxx of Sale 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.
3.7 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.
3.8 Representation By Counsel; Interpretation. The parties each acknowledge
that each has been represented by counsel in connection with this Xxxx of
Sale and the Transactions. Accordingly, any rule of law or any legal
decision that would require interpretation of any claimed ambiguities in
this Xxxx of Sale 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 the parties hereto.
3.9 Severability. If any provision of this Xxxx of Sale is held to be
unenforceable for any reason, it will be adjusted rather than voided, if
possible, to achieve the intent of the parties. All other provisions of
this Xxxx of Sale will be deemed valid and enforceable to the extent
possible.
[signature page to follow]
B-2
IN WITNESS WHEREOF, Seller and Buyer have caused this Xxxx of Sale and
License to be duly executed as of the day and year first above written.
BUYER: SELLER:
CORIO, INC. QWEST XXXXX.XXXXXXXXX LLC
By: _______________________________ By: __________________________________
Name: _____________________________ Name: ________________________________
Title: ____________________________ Title: _______________________________
B-3
Exhibit C
Wholesale Services Agreement
EXHIBIT D
QWEST SERVICES CORPORATION
0000 Xxxxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxx 00000
February 6, 2002
CONFIDENTIAL
Corio, Inc.
000 Xxxxxx Xxxx, Xxxxx 000
Xxx Xxxxxx, XX 00000
Attention: Xxxxxx Xxxxxx, Senior VP of Corporate Development
Ladies and Gentlemen:
We are discussing a possible transaction (the "Transaction")
between Corio, Inc. or one of its subsidiaries or affiliates (collectively, the
"Company") and Qwest Services Corporation or one of its subsidiaries or
affiliates (including, among others, Qwest Cyber Solutions, L.L.C.)
(collectively, "Qwest"). This letter agreement sets forth the understanding
between the Company and Qwest with respect to the terms on which each party is
prepared to continue their discussions and to make available to the other party
information that is non-public, confidential or proprietary in nature
(collectively, the "Evaluation Material").
1. Confidentiality. Each party and its representatives shall treat
confidentially all Evaluation Material received from the other
party and its representatives, except that the receiving party
and its representatives need not maintain the confidentiality
of those portions of the Evaluation Material that (a) become
generally available to the public other than as a result of a
disclosure by the receiving party or its representatives or (b)
were available or become available to the receiving party or any
of its representatives on a non-confidential basis, provided that
the source of such information was not then known by the
receiving party or its representatives, after reasonable
investigation, to be bound by a confidentiality agreement with or
other obligation of confidentiality to the other party or any of
its affiliates with respect to such material.
2. Use. Notwithstanding anything to the contrary herein, each party
and its representatives shall use the Evaluation Material
received from the other party and its representatives solely for
the purpose of determining whether it wishes to enter into a
Transaction. If a party decides not to proceed with a
Transaction, it shall notify the other party promptly of its
decision. Each party and its representatives shall then promptly
return to the other party or destroy all Evaluation Material
received from the other party and its representatives. Nothing
herein shall create any non-compete or similar obligation on
either party.
3. Protection. If a party or any of its representatives receiving
any Evaluation Material is requested or required to disclose any
Evaluation Material in any legal proceeding or similar process,
the party shall give the other party prompt written notice of
such request or requirement so that the other party may seek an
appropriate protective order or other remedy and/or waive
compliance with the provisions of this letter agreement, and the
party or its representatives subject to such request or
requirement shall cooperate with the other party to obtain such
protective order.
4. Disclosure. The parties and their representatives shall not make
any disclosure that the parties or their representatives are
having or have had discussions concerning a Transaction, that the
parties or their representatives have received Evaluation
Material or that the parties are considering a possible
Transaction. However, a party may make such disclosure if the
party based on advice of its counsel that such disclosure is
required by law. Before making any such disclosure, the party
shall promptly advise and consult with the other party and its
legal counsel concerning the information the party proposes to
disclose. Each party shall be responsible for any breach of this
agreement by any of its employees, officers, directors,
principals, partners, financing sources, accountants, attorneys,
advisors, affiliates and other representatives.
5. Entire Agreement: Counterparts. This letter agreement embodies
the entire agreement and understanding of the Company and Qwest
with respect to the Transaction and supercedes all prior
agreements or understandings with respect to the matter. This
letter agreement may be executed in two or more counterparts,
each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
6. Disputes: Governing Law. Each party (a) agrees that any legal
action with respect to this letter agreement or the Transaction
may be brought in a federal or state court sitting in the Borough
of Manhattan, New York, (b) accepts for itself and in respect of
its property, generally and unconditionally, the jurisdiction of
those courts and (c) irrevocably waives any objection, including,
without limitation, any objection to the laying of venue or based
on the grounds of forum non conveniens, which it may now or
hereafter have to the bringing of any action in those
jurisdictions. All matters related to this letter agreement shall
be governed by the laws of the State of New York (without regard
to principles of conflicts of laws).
7. Non-Solicitation. For six (6) months following the date of this
agreement, neither party nor any of their representatives will
(or will encourage, assist or permit others to), directly or
indirectly, solicit, for the purpose of hiring, any of the other
party's senior executives.
8. Not Binding Commitment. Except as stated above, this letter
agreement is not intended to be, and does not constitute, a
binding or enforceable agreement with respect to the Transaction.
This letter agreement does not create a duty on the part of any
party to negotiate in good faith toward a binding contract
relating to a Transaction, and may not be relied upon by any
party as the basis for a contract with respect to the Transaction
or any other transaction by estoppel or otherwise. A binding
agreement with respect to the Transaction will result only from
execution of the definitive agreements relating to the
Transaction, and in each case subject to the conditions expressed
therein. This letter agreement and all obligations of the parties
hereunder shall terminate on the first anniversary of the date
hereof, unless terminated earlier in accordance with its terms,
provided that the obligation not to use the other party's
Evaluation Material except to evaluate the possible Transaction
shall survive for two years from the date of this letter
agreement.
_______________________[Intentionally Left Blank]
D-2
If this letter agreement expresses your understanding with
respect to the matters subject to this letter agreement, please sign the
enclosed copy of this letter agreement where indicated below and return the
signed copy to us at the above address by address by 5:00 p.m., Mountain time,
on February 6, 2002.
QWEST SERVICES CORPORATION
By: /s/ Xxxx Xxxx
-----------------------------------
Name: Xxxx Xxxx
Title: VP
ACKNOWLEDGED AND AGREED AS OF
THE DATE FIRST WRITTEN ABOVE:
CORIO, INC.
By: /s/ Xxxxxx Xxxxxx
-----------------------------------
Name: Xxxxxx Xxxxxx
Title: Senior VP of Corporate Development.
D-3
Exhibit E
FORM OF JOINDER AGREEMENT
This Joinder Agreement (this "Joinder Agreement") is made effective as of
________ __, 2002, by and between CORIO, INC., a Delaware corporation ("Buyer"),
and Qwest Services Corporation, a Colorado corporation ("QSC"). Capitalized
terms used in this Agreement and not otherwise defined have the meanings stated
in the Asset Purchase Agreement (as defined below).
BACKGROUND
WHEREAS, Buyer and Qwest Xxxxx.Xxxxxxxxx LLC, a wholly-owned subsidiary of QSC
("Seller"), have entered into that certain Asset Purchase Agreement, dated as of
August 1 2002 (the "Asset Purchase Agreement"), under which Buyer has agreed to
acquire certain assets and assume certain liabilities of Seller; and
WHEREAS, QSC has agreed to make certain representations, warranties, covenants
and agreements in connection with the execution of the Asset Purchase Agreement;
NOW, THERFORE, for good and valid consideration, the receipt of which is hereby
acknowledged the parties agrees as follows:
1. Representations and Warranties of QSC. QSC represents to Buyer as follows:
(a) QSC is a corporation duly organized, validly existing and in good standing
under the laws of the State of Colorado. QSC has all necessary power and
authority to own its properties and to carry on its business.
(b) QSC has all necessary power and authority to execute, deliver and perform
this Joinder Agreement, to sell, convey and assign assets as described in
Section 3 hereof in accordance with the terms hereof, and to grant the license
described in Section 4 hereof. The execution, delivery and performance of this
Joinder Agreement by QSC and of the Asset Purchase Agreement and the Transaction
Documents by Seller have and of the Asset Purchase Agreement and the Transaction
Documents by Seller have has been duly and validly authorized by all necessary
action on the part of QSC and its Affiliates. This Joinder Agreement has been
duly executed and delivered by QSC and constitutes QSC's legally valid and
binding obligations, enforceable against QSC in accordance with its 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. QSC's execution, delivery and performance
of this Joinder Agreement will not conflict with, violate, or constitute a
breach or default under QSC's Organizational Documents, or any Regulation or
Order to which QSC or any of its Affiliates is subject.
(c) No Approvals by any Governmental Entity and no material Approvals by any
Person not a party (including a party to any agreement with QSC) to this Joinder
Agreement are required in connection with the execution or performance of this
Joinder Agreement by QSC or the consummation of the transactions contemplated
herein.
(d) No Order has been made or petition presented, or resolution passed for the
winding-up or liquidation of QSC and there is not outstanding: (a) any petition
or Order for the winding-up of QSC; (b) any appointment of a receiver over the
whole or part of the undertaking of assets of QSC; (c) any petition or Order for
administration of QSC; (d) any voluntary arrangement between QSC and any of its
creditors; (e) any voluntary or involuntary petition for bankruptcy with respect
to Seller or (f) any distress or execution or other process levied in respect of
QSC that remains undischarged. QSC has not been deemed unable to pay its debts
within the meaning of applicable Regulation. The operations of QSC have not been
terminated.
2. Joinder. QSC hereby joins the Asset Purchase Agreement solely for the purpose
of (i) being jointly and severally liable with respect to the indemnification
obligations of Seller under Article IX thereof (including the indemnification
threshold and maximum losses set forth in Section 9.4), (ii) being bound, and
causing its Affiliates to be bound, by the covenants in Sections 7.4(b)(v)
through (ix), 7.5.2, 7.5.3, 8.5, 8.6, 8.7, 8.8 and 8.9, and (iii) being bound by
the agreement in Section 1.5, as fully as though QSC (or in the case of clause
(ii) and (iii), QSC and its Affiliates) were a signatory with respect to such
Article and Sections.
3. Transfer of Assets. QSC agrees that if any right, title and interest in and
to any assets, properties, rights, privileges, claims and contracts, real,
personal and mixed, tangible and intangible, absolute or contingent, that are
material to or primarily related to the operations of the Business wherever
located other than Retained Assets, are held by QSC or its Affiliates then, QSC
will take such steps as are necessary to promptly transfer such right, title or
interest to Buyer.
4. License. Effective as of the Closing and only upon Closing, QSC hereby grants
to Buyer a non-exclusive, royalty-free, worldwide, perpetual, irrevocable,
non-terminable, license under all Licensed Intellectual Property Rights to
conduct a Covered Business. Buyer may grant sublicenses of the foregoing license
only to Buyer's Affiliates and other third parties and only to the extent
reasonably necessary to enable Buyer or its Affiliates to conduct a Covered
Business. Buyer may assign the foregoing license only in connection with Change
of Control of Buyer or to an Affiliate of Buyer that is conducting (or for the
purpose of conducting) a Covered Business. The foregoing license granted to
Buyer is, and shall otherwise be deemed to be, for purposes of Section 365(n) of
the United States Bankruptcy Code, a license to "Intellectual Property Rights"
as defined thereunder. Notwithstanding any provision contained herein to the
contrary, if QSC is under any proceeding under the Bankruptcy Code and the
trustee in bankruptcy of QSC, or QSC, as a debtor in possession, rightfully
elects to reject the license granted to Buyer, Buyer may, pursuant to 11 U.S.C.
Section 365(n)(1) and (2), retain any and all of Buyer's rights under such
license, to the maximum extent permitted by law. "Licensed Intellectual Property
Rights" means all statutory and/or common law rights throughout the world in,
arising out of, or associated therewith in any Patents, Know-How, and Copyrights
existing and used in, or which would otherwise be infringed by, Seller's Covered
Business as of the Closing Date, and as to which QSC or its Affiliates as of the
Closing Date has the right to grant a license of the scope set forth in this
Section 4, without an obligation to pay a fee of any kind to a third party other
than any fee that QSC or its Affiliates would have been obligated to pay if the
transaction contemplated herein had not occurred.
E-2
5. Miscellaneous Provisions.
(a) The terms, provisions and conditions of this Joinder Agreement 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
Joinder Agreement or any agreement contemplated hereby 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.
(b) Neither this Joinder Agreement nor any rights or obligations under
it are assignable by one party without the prior written consent of
the other party other than in connection with a Change of Control of a
party.
(c) The descriptive headings of the sections and subsections of this
Joinder Agreement are for convenience only and do not constitute a
part of this Joinder Agreement.
(d) This Joinder Agreement and any amendment hereto or any other
agreement delivered pursuant hereto 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. A facsimile signature
page will be deemed an original.
(e) This Joinder 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.
(f) 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.
(g) The parties each acknowledge that each has been represented by
counsel in connection with this Joinder Agreement and the
Transactions. Accordingly, any rule of law or any legal decision that
would require interpretation of any claimed ambiguities in this
Joinder 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 the parties
hereto.
(h) If any provision of this Joinder Agreement is held to be
unenforceable for any reason, it will be adjusted rather than voided,
if possible, to achieve the intent of the parties. All other
provisions of this Joinder Agreement will be deemed valid and
enforceable to the extent possible.
E-3
IN WITNESS WHEREOF, QSC and Buyer have caused this Joinder Agreement to be
duly executed as of the day and year first above written.
BUYER: QSC:
CORIO, INC. QWEST SERVICES CORPORATION
By: ________________________________ By: _________________________________
Name: ______________________________ Name: _______________________________
Title: _____________________________ Title: ______________________________
E-4
