PURCHASE AGREEMENT
between
QWEST DEX, INC.,
QWEST SERVICES CORPORATION,
QWEST COMMUNICATIONS INTERNATIONAL INC.
and
DEX HOLDINGS LLC
August 19, 2002
ARTICLE I
DEFINITIONS
1.1 General Rules of Construction.........................................2
1.2 Definitions...........................................................2
ARTICLE II
SALE AND PURCHASE OF LLC INTERESTS; CLOSING; CONTRIBUTION
2.1 Sale of LLC Interests by Seller......................................16
2.2 Purchase of the LLC Interests by Buyer...............................16
2.3 The Closing..........................................................16
2.4 Deliveries by Seller.................................................17
2.5 Deliveries by Buyer..................................................17
2.6 The Contribution.....................................................17
2.7 Post-Signing Purchase Price Adjustment...............................17
2.8 Pre-Closing Working Capital Purchase Price Adjustment................18
2.9 Post-Closing Working Capital Purchase Price Adjustment...............18
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE QWEST PARTIES
3.1 Organization and Related Matters.....................................19
3.2 Authorization; No Conflicts..........................................20
3.3 Legal Proceedings....................................................20
3.4 Approvals and Third Party Consents...................................21
3.5 Capitalization.......................................................21
3.6 Financial Information................................................21
3.7 Real and Personal Property; Title to Property; Leases................22
3.8 Material Contracts...................................................22
3.9 Tax Returns and Reports..............................................22
3.10 Permits..............................................................23
3.11 Intercompany Transactions............................................23
3.12 Compliance with Law..................................................23
3.13 No Brokers or Finders................................................24
3.14 Intellectual Property................................................24
3.15 [Reserved]...........................................................25
3.16 Labor Matters........................................................25
3.17 Employee Benefits....................................................26
3.18 Insurance............................................................27
3.19 Environmental Matters................................................27
3.20 Directory Publication Schedules......................................27
3.21 Receivables..........................................................28
3.22 Qwest Corporation....................................................28
3.23 Certain Accounting Issues............................................28
3.24 Contribution Agreement...............................................28
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
4.1 Organization and Related Matters.....................................28
4.2 Authorization; No Conflicts..........................................29
4.3 Legal Proceedings....................................................29
4.4 Investment Intent....................................................29
4.5 Approvals, Permits and Third Party Consents..........................29
4.6 Financing............................................................30
4.7 No Brokers or Finders................................................30
4.8 No Other Representations or Warranties...............................30
ARTICLE V
PRE-CLOSING COVENANTS
5.1 Access...............................................................31
5.2 Conduct of Business..................................................31
5.3 Notification of Certain Matters......................................33
5.4 Approvals, Permits and Third Party Consents..........................33
5.5 Supplements to Seller's Disclosure Schedule..........................36
5.6 Financial Statements.................................................36
5.7 Collective Bargaining Agreements.....................................37
5.8 WARN.................................................................37
5.9 Confidentiality Agreements...........................................37
5.10 Financing............................................................37
5.11 No Negotiations......................................................40
5.12 Actions by Management................................................40
5.13 Additional Agreements................................................40
5.14 Tax Certificate......................................................41
5.15 Indebtedness.........................................................41
5.16 Separation and Other Costs...........................................41
5.17 Working Capital......................................................41
5.18 Third Party Intellectual Property....................................41
5.19 B&C Systems Transition Plan..........................................41
ARTICLE VI
ADDITIONAL CONTINUING COVENANTS
6.1 Tax Matters..........................................................42
6.2 Tax Treatment and Purchase Price Allocation..........................46
6.3 Maintain Records.....................................................47
6.4 Cooperation..........................................................47
6.5 Buyer's Employee-Related Obligations.................................48
6.6 Termination Fee......................................................53
6.7 Liquidated Damages...................................................53
ARTICLE VII
CONDITIONS OF PURCHASE
7.1 General Conditions...................................................53
7.2 Conditions to Obligations of Buyer...................................54
7.3 Conditions to Obligations of Seller..................................55
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ARTICLE VIII
TERMINATION OF OBLIGATIONS; SURVIVAL
8.1 Termination of Agreement.............................................57
8.2 Effect of Termination................................................58
8.3 Survival of Representations and Warranties and Agreements............58
ARTICLE IX
INDEMNIFICATION
9.1 Obligations of Qwest Parties.........................................59
9.2 Obligations of Buyer.................................................59
9.3 Procedure............................................................60
9.4 Indemnification Threshold; Maximum Losses............................62
9.5 Cooperation..........................................................62
9.6 Exclusive Remedy.....................................................62
9.7 Damages..............................................................63
9.8 Relationship to Dexter Purchase Agreement............................63
ARTICLE X
GENERAL
10.1 Amendments; Waivers..................................................63
10.2 Schedules; Exhibits; Integration.....................................63
10.3 Further Assurances...................................................64
10.4 Governing Law........................................................64
10.5 No Assignment........................................................64
10.6 Headings.............................................................64
10.7 Counterparts.........................................................64
10.8 Publicity and Reports................................................64
10.9 Confidentiality......................................................65
10.10 Parties in Interest..................................................65
10.11 Notices..............................................................65
10.12 Expenses.............................................................67
10.13 Waiver...............................................................67
10.14 Representation by Counsel; Interpretation............................67
10.15 Severability.........................................................67
10.16 Waiver of Jury Trial; Equitable Relief...............................67
10.17 Arbitration..........................................................67
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EXHIBITS
Exhibit A Advertising and Telecommunications Commitments Side Letter
Exhibit B Contribution Agreement
Exhibit C IP Contribution Agreement
Exhibit D Publishing Agreement
Exhibit E Directory List License Agreement
Exhibit F Expanded Use List License Agreement
Exhibit G Billing and Collection Agreement
Exhibit H Professional Services Agreement
Exhibit I Public Pay Stations Agreement
Exhibit J Trademark License Agreement
Exhibit K Transition Services Agreement
Exhibit L Separation Agreement
Exhibit M Noncompetition Agreement
Exhibit N Debt Financing Commitment Letter
Exhibit O Equity Financing Commitment Letter
Exhibit P [Reserved]
Exhibit Q Joint Management Agreement
Exhibit R Equity Term Sheet
Exhibit S Commercial Agreement Joinder
Exhibit T Buyer Joinder
Exhibit U B&C Systems Transition Plan
Exhibit V Term Sheet - PIK Preferred Stock
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PURCHASE AGREEMENT
This Purchase Agreement is entered into as of August 19, 2002
by and between Qwest Dex, Inc., a Colorado corporation ("Seller"), Qwest
Services Corporation, a Colorado corporation ("QSC"), and Qwest Communications
International Inc., a Delaware corporation ("Qwest" and, collectively with
Seller and QSC, the "Qwest Parties"), on the one hand, and Dex Holdings LLC, a
Delaware limited liability company ("Buyer"), on the other hand.
RECITALS
A. Qwest owns all of the outstanding capital stock of
QSC;
B. QSC owns all the outstanding capital stock of Qwest
Dex Holdings, Inc., a Delaware corporation ("Holding");
C. Holding owns all of the outstanding capital stock of
Seller;
D. Seller owns all of the outstanding limited liability
company interests (the "LLC Interests") of GPP LLC, a Delaware limited liability
company ("Company"), and immediately prior to the Closing (as defined herein),
Seller will contribute certain of the assets relating to the Xxxxxx Transferred
Business (as defined herein) to Company, and Company shall assume certain of the
liabilities relating to the Xxxxxx Transferred Business, pursuant to the terms
of the Contribution (as defined herein);
E. Concurrently herewith, the Qwest Parties and Buyer
are entering into that certain Purchase Agreement (the "Dexter Purchase
Agreement") pursuant to which the Qwest Parties have agreed to contribute assets
and liabilities relating to the Transferred Business (as defined in the Dexter
Purchase Agreement) to a newly formed Delaware limited liability company ("SGN
LLC"), and sell all of the interests in SGN LLC to Buyer on the terms and
conditions set forth therein;
F. After entertaining offers for all or a portion of
Seller's assets from multiple prospective purchasers and without waiving any
rights, conditions, benefits or obligations contained herein or in the Dexter
Purchase Agreement, Seller believes that the Transactions (as defined herein)
contemplated under this Agreement (as defined herein), as well as the
transactions contemplated under the Dexter Purchase Agreement, represent the
best available offer to purchase the assets subject to this Agreement and the
Dexter Purchase Agreement and constitute reasonably equivalent value for the LLC
Interests, and accordingly Seller is willing to enter into this Agreement and
the Dexter Purchase Agreement and to consummate the Transactions contemplated
hereunder and the transactions contemplated by the Dexter Purchase Agreement;
G. Seller desires to sell, and Buyer desires to buy, the
LLC Interests for the consideration and on the terms and conditions described
herein; and
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H. As an inducement to Buyer to enter into this
Agreement and to consummate the Transactions, Qwest and QSC have become parties
to this Agreement solely with respect to the matters expressly identified
herein.
AGREEMENT
In consideration of the mutual promises contained in this
Agreement and intending to be legally bound, the parties agree as follows:
ARTICLE I
DEFINITIONS
1.1 General Rules of Construction. For all purposes of
this Agreement and the Exhibits, Schedules and Disclosure Schedules delivered
pursuant to this Agreement, except as otherwise expressly provided or unless the
context otherwise requires:
(a) terms include the plural as well as the singular;
(b) all accounting terms not otherwise defined have the
meanings assigned under GAAP, as in effect from time to time;
(c) all references in this Agreement to designated
"Articles," "Sections" and other subdivisions are to the designated Articles,
Sections and other subdivisions of the body of this Agreement;
(d) the words "herein," "hereof" and "hereunder" and
other words of similar import refer to this Agreement as a whole and not to any
particular Section or other subdivision;
(e) "or" is not exclusive; and
(f) "including" and "includes" will be deemed to be
followed by "but not limited to" and "but is not limited to," respectively.
1.2 Definitions. As used in this Agreement and the
Exhibits and Schedules delivered pursuant to this Agreement, the following
definitions will apply:
"Accrued Liability" is defined in Section 6.5(c)(iv).
"Action" means any action, complaint, petition, investigation,
suit or other proceeding, whether administrative, civil or criminal, in law or
in equity, or before any arbitrator or Governmental Entity.
"Additional Equity" is defined in Section 5.10(e).
"Adjusted Base Purchase Price" means the Base Purchase Price,
as adjusted (if applicable) pursuant to Section 2.7.
"Adjustment Fraction" means, with respect to any month, the
number of days elapsed in that month divided by the total number of days in that
month.
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"Advertising and Telecommunications Commitments Side Letter"
means the Advertising and Telecommunications Commitments Side Letter by and
between Qwest and Qwest Corporation, on the one hand, and Buyer, Company and SGN
LLC, on the other hand, to be effective with respect to Company at the Closing,
substantially in the form of Exhibit A to this Agreement.
"Affiliate" means a Person that directly, or indirectly
through one or more intermediaries, controls, or is controlled by, or is under
common control with, a specified Person. The term "control" (including, with
correlative meanings, the terms "controlled by" and "under common control with")
means the possession of the power to direct the management and policies of the
referenced Person, whether through ownership interests, by contract or
otherwise.
"Agreement" means this Purchase Agreement by and between the
Qwest Parties, on the one hand, and Buyer, on the other hand, as amended,
supplemented, restated or otherwise modified from time to time, together with
all Exhibits and Schedules delivered pursuant to this Agreement.
"Agreement Accounting Principles" means GAAP, together with
the principles and adjustments set forth in Section 1.2AAP of Seller's
Disclosure Schedule.
"Approval" means any approval, authorization, consent,
qualification, Order, registration, or any waiver of any of the foregoing,
required by Law or by assertion of any Governmental Entity to be obtained from,
or any notice, statement or other communication required to be filed with or
delivered to, any Governmental Entity.
"Approval Filings" is defined in Section 5.4(a).
"Assumed Affiliate Payables" means (i) all accounts payable to
Qwest with respect to third party invoices to the extent such amounts have not
actually been paid by Qwest, payroll liabilities of Qwest to the extent such
amounts have not already been paid by Qwest, and (ii) other payables to Qwest
with respect to "Headquarters Allocations," "Qwest Services Corp.," "Qwest
BRI-Facilities Expense," "Qwest IT" and "Qwest Communications Services," in each
case determined consistent with the December 31, 2001 Holding Audited Balance
Sheet.
"B & S Systems Transition Plan" is defined in Section 5.19.
"Bankruptcy Code" means the United States Bankruptcy Code (11
U.S.C.ss.101 et seq.), as amended from time to time, and any successor statute.
"Base Purchase Price" means $4,300,000,000.
"Billing and Collection Agreement" means the Agreement for the
Provision of Billing and Collection Services for Directory Publishers by and
between Qwest Corporation and Company to be entered into at the Closing,
substantially in the form of Exhibit G to this Agreement.
"Business" means the business of publishing of telephone
directory products and services consisting principally of searchable (e.g., by
alphabet letter or category) multiple telephone listings and classified
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advertisements that are delivered or otherwise made available to end users in
tangible media (e.g., paper directories, CD-ROM) or electronic media (e.g.,
Internet), as presently conducted by Seller.
"Business Day" means any day other than a Saturday, a Sunday
or a day on which banks in New York, New York or Denver, Colorado are authorized
or obligated by Law or executive order to close.
"Buyer" is defined in this Agreement's opening paragraph.
"Buyer Indemnified Persons" is defined in Section 9.1.
"Buyer Joinder" means the Joinder, by and between Buyer, the
Qwest Parties and Qwest Corporation, to be entered into at the Closing,
substantially in the form of Exhibit T to this Agreement.
"Buyer Material Adverse Effect" means any change in or effect
on Buyer or the business of Buyer or any part thereof that would materially
impair the validity or enforceability of the Transaction Documents or materially
adversely affect or delay Buyer's ability to consummate the Closing or perform
its obligations under the Transaction Documents; provided that neither of the
following will constitute a Buyer Material Adverse Effect: (a) any change
resulting from or relating to general economic conditions or (b) any change
generally affecting the industries in which Seller operates.
"Buyer Organizational Documents" is defined in Section 4.1.
"Buyer Pension Plan" is defined in Section 6.5(c)(i).
"Buyer Securities" means the subordinated notes or preferred
stock issued, if at all, by Buyer or its Affiliate and having the terms set
forth in Schedule 1.2BS.
"Buyer's Notice" is defined in Section 5.10(e).
"Buyer's Separation Cost Limit" is defined in Section 5.16.
"CBAs" is defined in Section 3.16.
"Closing" means the consummation of the purchase and sale of
the LLC Interests under this Agreement.
"Closing Date" means the date of the Closing.
"Closing Date Working Capital" is defined in Section 2.9(a).
"Closing Purchase Price" is defined in Section 2.8.
"COBRA" is defined in Section 6.5(e).
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"Code" means the Internal Revenue Code of 1986, as amended,
and the related regulations and published interpretations.
"Commercial Agreement Joinder" means the Joinder, by and
between the Qwest Parties, Qwest Corporation, Company and Buyer, to be effective
with respect to Company at the Closing, substantially in the form of Exhibit S
to this Agreement.
"Commercial Agreements" means the Buyer Joinder, the Directory
List License Agreement, the Expanded Use List License Agreement, the Billing and
Collection Agreement, the Master Sales Agent Agreement (to the extent that the
parties agree on the terms for such an agreement between the date hereof and the
Closing Date pursuant to Section 5.13).
"Company" is defined in this Agreement's Recitals.
"Company Inbound License Agreements" is defined in Section
3.14(e).
"Confidentiality Agreement" is defined in Section 10.9.
"Content" is defined in the Dexter Purchase Agreement.
"Contract" means any legally binding agreement, arrangement,
bond, commitment, franchise, indemnity, indenture, instrument, lease or license,
whether or not written.
"Contributed Assets" is defined in Section 2.1 of the
Contribution Agreement.
"Contribution" is defined in Section 2.6(a).
"Contribution Agreement" is defined in Section 2.6(a).
"Controlled Group" is defined in Section 3.17(c).
"Copyrights" is defined in Section 3.14(a).
"Current Assets" means the sum of (a) Local Billed Accounts
Receivable, (b) National Billed Accounts Receivable and (c) affiliate
receivables as set forth in "Accounts receivable net" line item of the Audited
Holding Financial Statements.
"Current Liabilities" means (i) accounts payable to
third-party vendors, plus (ii) Assumed Affiliate Payables, plus (iii) all other
current liabilities determined, in each case, in a manner consistent with the
line items included in "Total current liabilities" in the Holding Audited
Financial Statements and calculated in accordance with the Agreement Accounting
Principles, except (x) Excluded Current Liabilities, and (y) liabilities
relating to accrued pension and OPEB liabilities and deferred revenue and
customer deposits.
"Debt Financing" is defined in Section 4.6.
"Debt Financing Commitment Letter" is defined in Section 4.6.
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"Dex Pension Participant" is defined in Section 6.5(c)(i).
"Dexter Closing" means the Closing as such term is defined in
the Dexter Purchase Agreement.
"Dexter Closing Date" means the Closing Date as such term is
defined in the Dexter Purchase Agreement.
"Dexter Purchase Agreement" is defined in this Agreement's
Recitals.
"Directory List License Agreement" means the License Agreement
for the Use of Directory Publisher Lists and Directory Delivery Lists by and
between Qwest Corporation and Company to be entered into at the Closing,
substantially in the form of Exhibit E to this Agreement.
"Disclosure Schedule" means Seller's Disclosure Schedule and
Buyer's Disclosure Schedule attached to this Agreement. The sections of each of
Seller's and Buyer's Disclosure Schedule are numbered to correspond to the
applicable Sections of this Agreement and, together with all matters under such
heading, are deemed to qualify only that section; provided, however, that
information included in any section of either Disclosure Schedule will be deemed
to be included in another section of such Disclosure Schedule, but only to the
extent the applicability of such information to that section of such Disclosure
Schedule is reasonably apparent.
"Domain Names" is defined in Section 3.14(a).
"EBITDA" means, with respect to any Person for any period,
earnings before interest, income taxes, depreciation and amortization as each
such item is calculated in accordance with GAAP for such Person during such
period.
"Employee" is defined in Section 3.17(a).
"Encumbrance" means any claim, charge, easement, encumbrance,
lease, covenant, security interest, lien, option, pledge, rights of others, or
restriction (whether on voting, sale, transfer, disposition or otherwise),
whether imposed by agreement, understanding, Law, equity or otherwise, except
for any restrictions on transfer generally arising under any applicable federal
or state securities law.
"Environmental Laws" means any and all Laws applicable to the
Xxxxxx Transferred Business relating to pollution or protection of human health,
the environment or natural resources.
"Equity Securities" means any capital stock or other equity
interest or any securities convertible into or exchangeable for capital stock or
any other rights, warrants or options to acquire any of the foregoing
securities.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and the related regulations and published interpretations.
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"Estimated Excess Working Capital" is defined in Section
2.9(e).
"Estimated Working Capital" is defined in Section 2.8.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Excluded Affiliate Payables" means all payables to Qwest and
its Affiliates except the Assumed Affiliate Payables.
"Excluded Current Liabilities" means (i) Excluded Affiliate
Payables, (ii) short term borrowings from Affiliates, (iii) current income taxes
payable by Qwest, (iv) dividends payable to Qwest, (v) merger related reserves,
(vi) general reserves, (vii) errors and omissions reserves (included within the
"Other accrued liabilities" line item in the Holding Audited Financial
Statements), (viii) accrued taxes, (ix) "Capital Funding - Dex Holdings," and
(x) bank overdrafts, in each case, such item determined consistent with the
Holding Audited Financial Statements.
"Excluded Liabilities" has the meaning set forth in Section
2.4 of the Contribution Agreement.
"Existing Qwest Group" is defined in Section 3.14.
"Expanded Use List License Agreement" means the License
Agreement for the Expanded Use of Subscribed List Database Load and Updates by
and between Qwest Corporation and Company to be entered into at the Closing,
substantially in the form of Exhibit F to this Agreement.
"Filing Party" is defined in Section 6.1(f).
"Final Additional Equity Commitment" is defined in Section
5.10(e).
"Final Statement" is defined in Section 2.9(a).
"Financing" is defined in Section 4.6.
"Financing Fees" means (i) investment banking fees, (ii) fees
of financing institutions with respect to the Debt Financing required for the
Closing that are incurred and paid by Buyer, such as commitment fees and ticking
fees, in each case, not to exceed the amount of such fees as set forth in
engagement letters and fee letters, complete copies of which have been delivered
to Seller prior to the date hereof and (iii) legal fees, consulting fees,
accounting fees and other professional fees of such financial institutions.
"Fiscal Measurement Period" is defined in Section
5.4(b)(iii)(C).
"Future Periods" is defined in Section 5.4(b)(iii)(A).
"GAAP" means generally accepted accounting principles in the
United States of America as consistently applied.
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"Governmental Entity" means any government or any agency,
bureau, board, commission, court, department, official, political subdivision,
tribunal or other instrumentality of any government, whether Federal, state or
local, domestic or foreign.
"Hazardous Materials" means all substances, wastes and
materials, including petroleum, petroleum products, asbestos and polychlorinated
biphenyls, that are regulated pursuant to Environmental Laws.
"Holding" is defined in this Agreement's Recitals.
"Holding Audited Financial Statements" means the audited
balance sheets of Holding as at December 31, 2000 and December 31, 2001, and
audited statements of income and cash flows of Holding for the twelve months
ended December 31, 1999, December 31, 2000 and December 31, 2001 together with
an opinion of Seller's independent accounting firm containing no exceptions or
qualifications.
"Holding Financial Statements" means the Holding Audited
Financial Statements and the Holding Unaudited Financial Statements.
"Holding Unaudited Financial Statements" means the unaudited
balance sheet of Holding as of June 30, 2002 and the unaudited statement of
income of Holding for the six months ended June 30, 2002.
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 1976, as amended, and the related regulations and published
interpretations.
"Included Claims" is defined in Section 9.4(a).
"Indebtedness" of any Person shall mean, without duplication,
(a) all indebtedness for borrowed money or issued in exchange or substitution
for borrowed money (including amounts drawn against overdraft lines of credit),
(b) all liabilities of such Person evidenced by any note, bond, debenture or
other debt security, (c) all liabilities of such Person for the deferred
purchase price of property with respect to which such Person is liable,
contingently or otherwise, (d) all liabilities under capitalized or synthetic
leases with respect to which such Person is liable, contingently or otherwise,
as obligor, guarantor or otherwise, or with respect to which obligations another
Person ensures a creditor against loss, and (e) liabilities described in clauses
(a) through (d) that are guaranteed in any manner by such Person (including
guarantees in the form of an agreement to repurchase or reimburse) and any fees,
penalties or accrued and unpaid interest on the foregoing.
"Indemnifiable Claim" is defined in Section 9.3(d).
"Indemnified Party" is defined in Section 9.3(a).
"Indemnifying Party" is defined in Section 9.3(a).
"Independent Accountants" is defined in Section 2.9(c).
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"Inquiry" is defined in Section 5.4(d).
"Insolvent" means, as to any Person, that: (i) (A) the present
fair salable value of its assets is less than the amount that will be required
to pay its probable liability on its existing debts as they become absolute and
matured or (B) the sum of such Person's debts (as such term is defined in
Section 101 of the Bankruptcy Code) is greater than all of its property, at a
fair valuation, exclusive of property transferred, concealed, or removed with
intent to hinder, delay or defraud its creditors; (ii) such Person is a
defendant in an action for money damages and is reasonably likely to be unable
to satisfy any judgment which has been rendered against it in such action; (iii)
such Person is engaged or about to engage in a business or transaction for which
the property remaining in its hands after the conveyance is an unreasonably
small capital; (iv) such Person intends or believes that it will incur debts
beyond its ability to pay as they mature; (v) such Person is entering into the
Transactions or incurring any obligation in connection with the Transaction
Documents with the intent to hinder, delay or defraud any of its creditors to
which such Person is indebted on the Closing Date or any creditor to which it
might become indebted after the Closing Date; (vi) such Person admits in writing
that it will be unable to pay its debts as they come due or is generally not
paying its debts as they come due; (vii) such Person has an involuntary case or
other proceeding commenced against it which seeks liquidation, reorganization or
other relief with respect to its debts or other liabilities under the Bankruptcy
Code or any other bankruptcy, insolvency or similar law then in effect; (viii)
such Person has had a receiver, liquidator, custodian or other similar official
appointed for it or any material part of its property or seeks the appointment
of such an official for it or any material part of its property; (ix) such
Person commences a voluntary case or other proceeding seeking liquidation,
reorganization or other relief with respect to itself or its debts or other
liabilities under the Bankruptcy Code or any other bankruptcy, insolvency or
similar law; (x) such Person has made a general assignment for the benefit of
creditors; or (xi) such Person has been adjudged or admitted that it is an
insolvent or bankrupt.
"Intellectual Property" means, collectively, the Trademarks,
Patents, Copyrights, Domain Names and Trade Secrets.
"Intercompany Agreement" is defined in Section 3.11.
"Inter-Party Claim" is defined in Section 9.3(d).
"IRS" means the Internal Revenue Service.
"Joint Defense and Common Interest Agreement" means the Joint
Defense and Common Interest Agreement dated as of the date hereof between Buyer
and Qwest relating to the control and disposition of any Action or Inquiry that
may arise in connection with the Transactions.
"Joint Management Agreement" means the Joint Management
Agreement by and between Seller and Company to be effective with respect to
Company at the Closing, substantially in the form of Exhibit Q to this
Agreement.
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"Knowledge" means (i) (A) with respect to Seller on the date
of this Agreement, the actual knowledge of [redacted] and (B) with respect to
Seller on the Closing Date, the actual knowledge of [redacted], and (ii) with
respect to Buyer, [redacted].
"Law" means any constitutional provision, statute, ordinance
or other law, rule or regulation of any Governmental Entity and any Order.
"LLC Interests" is defined in this Agreement's Recitals.
"Local Billed Accounts Receivable" means accounts receivable
for local third-party advertisers, determined in a manner consistent with the
"Accounts receivable net" line item in the Holding Audited Financial Statements.
Local Billed Accounts Receivable will be calculated net of related reserves and
otherwise in accordance with the Agreement Accounting Principles.
"Loss" means any cost, damage, disbursement, expense,
liability, loss, obligation, penalty or settlement, including interest or other
carrying costs, legal, accounting and other professional fees and expenses
incurred in the investigation, collection, prosecution and defense of claims and
amounts paid in settlement, that may be imposed on or otherwise incurred or
suffered by the referenced Person.
"Master Sales Agent Agreement" means the Master Sales Agent
Agreement by and between Qwest Corporation and Company to be entered into at the
Closing pursuant to Section 5.13 of this Agreement.
"Material Adverse Effect" means (a) any change in or effect on
Company or the Xxxxxx Transferred Business as conducted on the date hereof that
would be materially adverse to the business, assets, properties, results of
operations or financial condition of Company or the Xxxxxx Transferred Business,
taken as a whole, or (b) any change in or effect on Qwest or any of its
Subsidiaries that is a party to a Commercial Agreement that materially and
adversely affects such party's material ability to perform its obligations under
any Commercial Agreement; provided that Material Adverse Effect shall not
include any change (i) generally affecting the industries in which Seller or
Company operates, or (ii) to the extent resulting from or relating to general
economic conditions.
"Material Contract" means each Contract to which Seller or,
following the Contribution, Company is a party or to which Seller or, following
the Contribution, Company or any of its properties is subject or by which any
thereof is bound and, in each case, that relates to the Xxxxxx Transferred
Business that (a) is for the purchase of materials, supplies, goods, services,
equipment or other assets that (i)(A) has a remaining term, as of the date of
this Agreement, of over 180 days in length of obligation on the part of Seller
or Company or which is not terminable by Seller or Company within 180 days
without penalty, and (B) provides for a payment by Seller or Company in any year
of $2 million or more, or (ii) provides for aggregate payments by Seller or
Company of $4 million or more; (b) is a sales, distribution, services or other
similar agreement providing for the sale by Seller or Company of materials,
supplies, goods, services, equipment or other assets that (i) has a remaining
term, as of the date of this Agreement, of over 180 days in length of obligation
on the part of Seller or Company or which is not terminable by Seller or Company
10
within 180 days without penalty, and (ii) provides for a payment to Seller or
Company in any year of $2 million or more; (c) is a lease that (i) has a
remaining term, as of the date of this Agreement, of over 180 days in length of
obligation on the part of Seller or Company or which is not terminable by Seller
or Company within 180 days without penalty, and (ii) provides for annual rentals
of $4 million or more; (d) limits or restricts the ability of Seller or Company
to compete or otherwise to conduct the Xxxxxx Transferred Business in any
material manner or place; (e) is a contract relating to Indebtedness; (f)
provides for a guaranty for borrowed money by Seller or Company or in respect of
any Person other than Seller or Company; or (g) creates a partnership or joint
venture.
"Material Regulatory Impact" is defined in Section 5.4(b)(ii).
"National Billed Accounts Receivable" means accounts
receivable from national advertisers, determined in a manner consistent with the
"Accounts receivables, net" line item in the Holding Financial Statements.
National Billed Accounts Receivable will be calculated net of related reserves
and in accordance with the Agreement Accounting Principles.
"Net Billed Receivables" means Local Billed Accounts
Receivable and National Billed Accounts Receivable.
"Noncompetition Agreement" means the Non-Competition and
Non-Solicitation Agreement by and between the Qwest Parties and Qwest
Corporation, on the one hand, and Buyer and Company, on the other hand, to be
effective with respect to Company at the Closing, substantially in the form of
Exhibit M to this Agreement.
"Order" means any decree, injunction, judgment, order, ruling,
assessment or writ.
"Patents" is defined in Section 3.14(a).
"PBGC" means the Pension Benefit Guaranty Corporation.
"Pension Plan" is defined in Section 3.17(a).
"Periodic Taxes" is defined in Section 6.1(d).
"Permit" means any license, permit, franchise, certificate of
authority, or any waiver of the foregoing, required to be issued by any
Governmental Entity.
"Permitted Encumbrances" means: (a) statutory Encumbrances not
yet delinquent or the validity of which are being contested in good faith by
appropriate actions; (b) Encumbrances, with respect to the properties or assets
of Seller relating to the Xxxxxx Transferred Business or Company, that do not
individually or in the aggregate, materially impair or materially interfere with
the present use of the properties or assets or otherwise materially impair
present business operations at such properties; (c) Encumbrances for Taxes,
assessments and other governmental charges not yet delinquent or the validity of
which are being contested in good faith by appropriate actions; (d) as to real
property, (i) leases and subleases to third party tenants, (ii) the terms and
conditions of the leases pursuant to which Seller or Company is a tenant, (iii)
11
matters shown on a survey, (iv) zoning laws and other governmental land use
restrictions, and (v) existing utility, access and other easements and rights of
way of record and imperfections of title; and (e) Encumbrances identified in
Section 1.2PE of Seller's Disclosure Schedule (provided that Seller shall cause,
prior to the Closing, any material Encumbrance identified in Section 1.2PE
(other than security interests relating to operating leases of office equipment)
to have been released).
"Person" means an association, a corporation, an individual, a
partnership, a limited liability company, a trust or any other entity or
organization, including a Governmental Entity.
"Post-Closing Covenants" is defined in Section 8.3.
"PPD Accounts Payable" means accounts payable to third party
paper, printing and distribution vendors.
"Pre-Closing Tax Period" is defined in Section 6.1(a)(ii).
"Preliminary Closing Date Statement" is defined in Section
2.8.
"Prevailing Party" is defined in Section 2.9(c).
"Proceeds" shall have the meaning ascribed to it in the
revised Article 9 of the Uniform Commercial Code as enacted in the State of New
York and in effect on the date hereof.
"Professional Services Agreement" means the Professional
Services Agreement by and between Seller and Company to be effective with
respect to Company at the Closing, substantially in the form of Exhibit H to
this Agreement.
"Proration Periods" is defined in Section 6.1(d).
"Prospective Transferred Employees" is defined in Section
6.5(a).
"Prospective Transferred Employees List" is defined in Section
6.5(a).
"Public Pay Stations Agreement" means the Public Pay Stations
Agreement by and between Qwest Corporation and Company to be effective with
respect to Company at the Closing, substantially in the form of Exhibit I to
this Agreement.
"Publishing Agreement" means the Publishing Agreement for
Official Listings/Directories by and between Qwest Corporation and Company to be
entered into at the Closing, substantially in the form of Exhibit D to this
Agreement.
"Purchase Price" is defined in Section 2.2.
"Purchase Price Allocation" is defined in Section 6.2(b).
"QSC" is defined in this Agreement's opening paragraph.
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"Qwest" is defined in this Agreement's opening paragraph.
"Qwest Authorizations" is defined in Section 3.22.
"Qwest Corporation" means Qwest Corporation, a Colorado
corporation.
"Qwest Parties" is defined in this Agreement's opening
paragraph.
"Qwest States" is defined in Section 3.22.
"Qwest Transaction Parties" means the Qwest Parties and Qwest
Corporation.
"Region" means the seven state territory comprised of Arizona,
Idaho, Montana, Wyoming, Oregon, Utah and Washington.
"Regulatory Restriction" is defined in Section 5.4(b)(ii).
"Reimbursable Expenses" means the reasonable out-of-pocket
fees and expenses (including financial advisory, legal, accounting and
consulting fees and expenses of Buyer, but excluding Financing Fees) incurred
and paid by Buyer after the Dexter Closing Date in connection with this
Agreement and the Transactions through the date on which this Agreement
terminates; provided that in no event shall Reimbursable Expenses exceed
$2,500,000.
"Representatives" is defined in Section 5.1.
"Resigning Officers" is defined in Section 7.2(e).
"Xxxxxx Equity Financing" is defined in Section 4.6.
"Xxxxxx Equity Financing Commitment Letter" is defined in
Section 4.6.
"Xxxxxx IP Products Condition" is defined in Section 5.18(d)
of Exhibit P to the Dexter Purchase Agreement.
"Xxxxxx Transferred Business" means the Business as presently
conducted of Seller as it relates to the Region.
"Xxxxxx Transferred Business Audited Financial Statements" is
defined in Section 5.6(a).
"Xxxxxx Transferred Business Financial Statements" is defined
in Section 5.6(a).
"Xxxxxx Transferred Business Unaudited Financial Statements"
is defined in Section 5.6(a).
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
13
"Seller" is defined in this Agreement's opening paragraph.
"Seller Additional Equity" is defined in Section 5.10(e).
"Seller Benefit Plan" is defined in Section 3.17(a).
"Seller Common Equity Limitation" is defined in Section
5.10(e).
"Seller Indemnified Persons" is defined in Section 9.2.
"Separation Agreement" means the Separation Agreement by and
between Qwest and Seller, on the one hand, and Buyer and Dexter LLC, on the
other hand, to be effective with respect to Company at the Dexter Closing.
"Separation Costs" means costs incurred pursuant to Sections
3.1 through 3.4 of the Separation Agreement.
"Separation IP Covenant" is defined in Section 5.18(d) of
Exhibit P to the Dexter Purchase Agreement.
"SGN LLC" is defined in this Agreement's Recitals.
"State PUCs" means the public utility commissions or similar
state regulatory agencies or bodies that regulate the business of Qwest
Corporation in each of the states.
"Subsidiary" means, with respect to any Person, any Person in
which such Person has a direct or indirect equity ownership interest in excess
of 50%.
"Tax" means any United States federal, state or local or any
non-United States net or gross income, gross receipts, net proceeds,
corporation, capital gains, license, payroll, employment, excise, severance,
stamp, occupation, premium, windfall profits, environmental (including taxes
under Section 59A of the Code), customs, capital stock, franchise, profits,
withholding, social security (or similar), unemployment, disability, real
property, personal property, sales, inheritance, use, transfer, registration,
value added, alternative or add-on minimum, or other taxes, assessments, duties,
fees, levies or other governmental charges of any kind whatever, whether
disputed or not, including any interest, penalty or addition thereto.
"Tax Return" means a report, return, or other information
required to be supplied to a Governmental Entity with respect to Taxes
including, where permitted or required, combined, consolidated or other similar
returns for any group of entities that includes Company.
"Termination Date" is defined in Section 8.1(g).
"Third Party Acquisition" means the occurrence of any of the
following events: (a) the acquisition of Company by merger or similar business
combination by any Person other than Buyer or any Affiliate thereof or any Qwest
Party or any Affiliate (a "Third Party"); (ii) the acquisition by a Third Party
of 50% or more of the assets of Company; or (iii) the acquisition by a Third
Party of 50% or more of the LLC Interests; provided, however, that any
14
transaction involving the acquisition of Qwest, QSC or Company and other
businesses of Qwest shall not constitute a Third Party Acquisition.
"Third-Party Claim" is defined in Section 9.3(b).
"Third Party Consent" means any approval, consent or waiver
required to be obtained from or any notice required to be delivered to any
Person other than any Governmental Entity.
"Third Party IP Agreements" is defined in the IP Contribution
Agreement.
"Trade Secrets" is defined in Section 3.14(d).
"Trademark License Agreement" means the Trademark License
Agreement by and between Qwest and Company to be effective with respect to
Company at the Closing, substantially in the form of Exhibit J to this
Agreement.
"Trademarks" is defined in Section 3.14(a).
"Transaction Documents" means this Agreement, the Contribution
Agreement, and the IP Contribution Agreement.
"Transactions" means the contribution of assets and
liabilities of the Xxxxxx Transferred Business to Company pursuant to the
Contribution Agreement and the IP Contribution Agreement, the sale of the LLC
Interests and the other transactions contemplated by the Transaction Documents.
"Transferable Copyrights" is defined in Section 3.14(c).
"Transferable Patents" is defined in Section 3.14(b).
"Transferred Employee" is defined in Section 6.5(a).
"Transferred Net Billed Receivables" is defined in Section
2.9(e).
"Transition Services Agreement" means the Transition Services
Agreement by and between Qwest and Seller, on the one hand, and Buyer and
Company, on the other hand, to be effective with respect to Company at the
Closing, substantially in the form of Exhibit K to this Agreement.
"Volume Metric" is defined in Section 5.4(b)(iii)(D).
"WARN Act" is defined in Section 5.8(a).
"Welfare Plan" is defined in Section 3.17(a).
"Working Capital" means, as of any date, the difference
between (i) Current Assets and (ii) Current Liabilities of the Transferred
Business Closing Date. Working Capital and Working Capital Target shall be
15
determined in a consistent manner except with respect to the sentence in Working
Capital Target addressing Taxes.
"Working Capital Adjustment" is defined in Section 2.9(a).
"Working Capital Adjustment Factor" means 1.03.
"Working Capital Target" means, for the month in which the
Closing Date occurs, (i) the sum of (A) the monthly average of Local Billed
Accounts Receivable for the prior 12 months plus (B) the National Billed
Accounts Receivable balance as the end of such month in the prior year, as
adjusted by the Timing Adjustment, plus (C) the monthly average of Affiliate
receivables as set forth in "Accounts receivable, net" line item of the Audited
Holding Financial Statements for the prior 12 months, minus (ii) the sum of (A)
the monthly average of Current Liabilities (other than PPD Accounts Payable) for
the prior 12 months plus (B) the PPD Accounts Payable balance as the end of such
month in the prior year, as adjusted by the Timing Adjustment, multiplied by
(iii) the Working Capital Adjustment Factor. In determining the Working Capital
Target, the value of any accounts receivable will be determined by subtracting
out of such accounts receivable the amount of any sales Tax, gross receipts Tax
or like Taxes that are borne by the customer and that are attributable to
Pre-Closing Tax Periods. The "Timing Adjustment" means (i) to the extent that a
specific directory has not been shipped prior to the Closing Date but there
exists an entry in the prior year's corresponding month end National Billed
Accounts Receivable and PPD Accounts Payables balances with respect to such
directory the Working Capital Target will be reduced to reflect that such
directory has not yet been shipped, and (ii) to the extent that the shipment of
a specific directory prior to the Closing Date results in an entry in National
Billed Accounts Receivable and PPD Accounts Payables but entries for such
directory were not included in the prior year corresponding month end National
Billed Accounts Receivable and PPD Accounts Payables balances, the Working
Capital Target will be increased by such amount.
ARTICLE II
SALE AND PURCHASE OF LLC INTERESTS; CLOSING; CONTRIBUTION
2.1 Sale of LLC Interests by Seller. Subject to the terms
and conditions of this Agreement, Seller agrees to sell the LLC Interests free
and clear of all Encumbrances to Buyer at the Closing. The transfer of the LLC
Interest from Seller to Buyer shall be in a form acceptable for transfer on the
books of Company.
2.2 Purchase of the LLC Interests by Buyer.
Subject to the terms and conditions of this Agreement, Buyer
agrees to purchase the LLC Interests from Seller for the Base Purchase Price.
The Base Purchase Price is subject to adjustment prior to and after the Closing
pursuant to Sections 2.7, 2.8 and 2.9 below (as finally adjusted, the "Purchase
Price").
2.3 The Closing. The Closing will take place at the
offices of O'Melveny & Xxxxx LLP, 000 Xxxx 00xx Xxxxxx, Xxx Xxxx, XX 00000 on
the third Business Day following the satisfaction or waiver of the conditions in
Article VII (other than conditions that, by their nature, are to be satisfied on
the Closing Date), or at such other time and place as Seller and Buyer may
16
agree. Subject to the provisions of Article VIII, failure to consummate the
purchase and sale provided for in this Agreement on the date and time and at the
place determined pursuant to this Section 2.3 will not result in the termination
of this Agreement and will not relieve any party of any obligation under this
Agreement.
2.4 Deliveries by Seller. In addition to the documents
necessary to transfer the LLC Interests on the books of Company, at the Closing,
the Qwest Parties will deliver or cause to be delivered to Buyer (unless
delivered previously) the following: (a) all Third Party Consents listed in
Section 3.4 of the Seller's Disclosure Schedule that have been obtained prior to
Closing; (b) the resignations of the Resigning Officers; (c) the certificates
required by Sections 7.2(f) and 7.2(h); (d) duly executed copies of the
Transaction Documents and the Commercial Agreements; (e) the fairness opinion(s)
required pursuant to Section 7.2(k); (f) the opinions of counsel required
pursuant to Section 7.2(l); and (g) all other documents, instruments and
writings required to be delivered by Seller on or prior to the Closing Date
pursuant to this Agreement.
2.5 Deliveries by Buyer. At the Closing, Buyer will pay
the Closing Purchase Price (as defined in Section 2.8 below) to Seller in cash
by wire transfer in immediately available funds; provided, however, that if
required to consummate the Closing as contemplated by the Debt Financing
Commitment Letter, a portion of the Closing Purchase Price may be paid by Buyer
tendering Buyer Securities to Seller with an original principal amount of not
greater than $300 million in satisfaction of Buyer's obligation to pay an
equivalent portion of the Closing Purchase Price on the Closing Date by wire
transfer of immediately available funds. In addition, at the Closing, Buyer will
deliver or cause to be delivered to Seller (unless delivered previously) the
following: (a) the certificates of Buyer required by Sections 7.3(d) and 7.3(g);
(b) duly executed copies of the Transaction Documents and the Commercial
Agreements; (c) all Third Party Consents listed in Section 4.5 of the Buyer's
Disclosure Schedule that have been obtained prior to Closing; (d) the opinion of
counsel required pursuant to Section 7.3(h); (e) duly executed originals of the
Buyer Securities, if any; and (f) all other documents, instruments and writings
required to be delivered by Buyer on or prior to the Closing Date pursuant to
this Agreement.
2.6 The Contribution.
(a) Prior to the Closing and pursuant to the Contribution
Agreement attached hereto as Exhibit B (the "Contribution Agreement"), Seller
will contribute to Company (the "Contribution") all of its right, title and
interest in and to certain assets relating to the Xxxxxx Transferred Business,
and shall cause Company to assume certain liabilities of the Xxxxxx Transferred
Business, all on the terms and conditions set forth in the Contribution
Agreement.
(b) The parties hereto acknowledge and agree that nothing
in this Agreement shall be deemed to prohibit the consummation of the
Contribution and that the consummation of the Contribution shall not constitute
a breach of any provision of this Agreement, including Section 5.2.
2.7 Post-Signing Purchase Price Adjustment. The Adjusted
Base Purchase Price shall equal the Base Purchase Price (i) plus, if the "Base
Purchase Price" was greater than the "Adjusted Base Purchase Price" in the
Dexter Purchase Agreement, an amount equal to the "Base Purchase Price" less the
17
"Adjusted Base Purchase Price" in the Dexter Purchase Agreement, or (ii) minus,
if the "Adjusted Base Purchase Price" was greater than the "Base Purchase Price"
in the Dexter Purchase Agreement, an amount equal to the "Adjusted Base Purchase
Price" less the "Base Purchase Price" in the Dexter Purchase Agreement (it being
the intent of the parties that the sum of the Adjusted Base Purchase Price under
this Agreement and the "Adjusted Base Purchase Price" under the Dexter Purchase
Agreement shall equal $7,050,000,000).
2.8 Pre-Closing Working Capital Purchase Price
Adjustment. At least three Business Days prior to the Closing Date, Seller will
prepare and present to Buyer a statement (the "Preliminary Closing Date
Statement") setting forth Seller's good faith estimate of Company's Working
Capital as of the close of business on the Closing Date ("Estimated Working
Capital"). The Base Purchase Price or Adjusted Base Purchase Price, as the case
may be, will be either (x) increased by an amount equal to the excess, if any,
of (i) Estimated Working Capital over (ii) the Working Capital Target as of the
Closing Date, or (y) decreased by an amount equal to the excess, if any, of (i)
the Working Capital Target, as of the Closing Date, over (ii) Estimated Working
Capital. The Base Purchase Price or Adjusted Base Purchase Price, as the case
may be, as increased or decreased pursuant to this Section 2.8, is referred to
as the "Closing Purchase Price."
2.9 Post-Closing Working Capital Purchase Price
Adjustment. The Closing Purchase Price is subject to further adjustment after
the Closing Date in accordance with the following procedure:
(a) Within 90 days after the Closing Date, Seller will
prepare and present to Buyer a statement (the "Final Statement") setting forth
(x) Seller's calculation of Working Capital as of the close of business on the
Closing Date (the "Closing Date Working Capital") and (y) Seller' determination
of the aggregate increase or decrease to the Base Purchase Price or the Adjusted
Purchase Price, as the case may be, without taking into account any payment made
pursuant to Section 2.8 (the "Working Capital Adjustment"). Seller will prepare
the Final Statement on a consistent basis with the Preliminary Closing Date
Statement and in accordance with the Agreement Accounting Principles. Buyer
shall, and shall cause Company to, assist Seller and its Representatives in the
preparation of the Final Statement and shall provide Seller and its
Representatives access at reasonable times and upon reasonable notice to the
personnel, properties, books and records of Company and Buyer for such purpose.
(b) Buyer and its accountants will have the right to
review all work papers and calculations of Seller and its accountants utilized
in preparing the Final Statement. The Final Statement will be binding on Buyer
unless Buyer presents to Seller, within 30 days after its receipt of the Final
Statement from Seller, written notice of disagreement specifying in reasonable
detail the nature and extent of the disagreement. Buyer agrees that it shall not
propose adjustments to or dispute portions of the Final Statement if such
adjustments or disputes involve changes in or question the accounting
principles, methodology or practices of Seller that are in conformity with the
Agreement Accounting Principles used in determining Closing Date Working
Capital.
18
(c) If Seller and Buyer are unable to resolve any
disagreement with respect to the Final Statement within 30 days after Seller
receives a timely notice of disagreement, the items of disagreement alone will
be promptly referred for final determination to Ernst & Young LLP or, if such
firm is unable or unwilling to make such final determination, to such other
independent accounting firm as the parties mutually designate. The accounting
firm making such determination is referred to as the "Independent Accountants".
The Final Statement will be deemed to be binding on Buyer and Seller upon: (i)
Buyer's failure to deliver to Seller a notice of disagreement within 30 days
after it receives the Final Statement; (ii) resolution of any disagreement by
mutual agreement of Seller and Buyer after a timely notice of disagreement has
been delivered to Seller; or (iii) notification by the Independent Accountants
of their final determination of the items of disagreement submitted to them. The
fees and disbursements of the Independent Accountants will be borne by the party
that is not the "prevailing party." The prevailing party will mean the party
whose final submission to the Independent Accountants is closest to the final
determination made by the Independent Accountants, regardless of whether such
final determination requires the submitting party to make a payment to the other
party pursuant to Section 2.9(d) below.
(d) If the Base Purchase Price or Adjusted Purchase Price
plus or minus the Working Capital Adjustment is greater than the Closing
Purchase Price, Buyer shall pay to Seller the difference. If the Base Purchase
Price or Adjusted Purchase Price plus or minus the Working Capital Adjustment is
less than the Closing Purchase Price, Seller shall pay to Buyer the difference.
Payments made pursuant to this Section 2.9(d) shall be made by wire transfer in
immediately available funds within five (5) Business Days after the Final
Statement becomes binding on Buyer and Seller pursuant to Section 2.9(c) above.
(e) Notwithstanding the foregoing, if Estimated Working
Capital exceeds the Working Capital Target as of the Closing Date by more than
$20,000,000 (the amount of such excess, "Estimated Excess Working Capital"), at
Buyer's election, in lieu of paying Seller an amount of cash equal to such
Estimated Excess Working Capital, Buyer may pay such amount in kind by
transferring to Seller Net Billed Receivables in an amount (the "Transferred Net
Billed Receivables") sufficient to yield cash to Seller equal to such Estimated
Excess Working Capital. Such Transferred Net Billed Receivables constitute the
property of Seller, provided that Buyer will collect such Transferred Net Billed
Receivables in the same manner and with the same care as its own receivables.
Specific receivables constituting Transferred Net Billed Receivables shall be a
representative cross selection of the Net Billed Receivables and shall be
selected by Seller.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
THE QWEST PARTIES
Except as otherwise indicated on Seller's Disclosure Schedule,
the Qwest Parties represent and warrant as of the date hereof as follows:
3.1 Organization and Related Matters. Each of the Qwest
Transaction Parties is a corporation duly incorporated, validly existing and in
good standing under the laws of the state of its incorporation. Company is a
limited liability company duly organized, validly existing and in good standing
19
under the laws of the state of its organization. Each of the Qwest Transaction
Parties has all necessary corporate power and authority to execute, deliver and
perform the Transaction Documents and Commercial Agreements to which it is a
party. Each of the Qwest Transaction Parties and Company has all necessary
corporate power and authority to own license or lease its properties and to
carry on its business as now being conducted and, except as otherwise indicated
on Section 3.1 of Seller's Disclosure Schedule, is duly qualified or licensed to
do business as a foreign corporation in good standing in all jurisdictions in
which the nature of its business requires licensing or qualification, except
where the failure to be so qualified or licensed would not, individually or in
the aggregate, reasonably be expected to result in a Material Adverse Effect.
3.2 Authorization; No Conflicts.
(a) The execution, delivery and performance of each of
the Transaction Documents and Commercial Agreements to which any of the Qwest
Transaction Parties is a party have been duly and validly authorized by all
necessary corporate action on the part of such Qwest Transaction Party. The
Transaction Documents and Commercial Agreements to which any Qwest Transaction
Party is a party constitute (or will upon execution constitute) the legally
valid and binding obligations of such Qwest Transaction Party, enforceable
against such Qwest Transaction Party in accordance with their respective terms
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws and equitable principles
relating to or limiting creditors' rights generally. The Transaction Documents
and Commercial Agreements to which Company is a party constitute (or will upon
execution constitute) the legally valid and binding obligations of Company,
enforceable against Company in accordance with their respective terms except as
such enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and other similar laws and equitable principles relating to or
limiting creditors' rights generally.
(b) The Qwest Transaction Parties' respective execution,
delivery and performance of the Transaction Documents and Commercial Agreements
to which any of them is a party will not (i) violate, or constitute a breach or
default under, (A) such parties' respective certificates of incorporation or
bylaws or (B) except as set forth on Section 3.2(b) of Seller's Disclosure
Schedule, any Material Contract to which any of them is a party or under which
any of their material assets are bound, except for any violations of or breaches
or defaults under any Material Contract that would not, individually or in the
aggregate, reasonably be expected to result in a Material Adverse Effect, or
(ii) result in the imposition of any material Encumbrance, other than Permitted
Encumbrances, against all or any portion of the Xxxxxx Transferred Business.
Subject to obtaining the Approvals and Permits listed in Section 3.4 of Seller's
Disclosure Schedule, the Qwest Transaction Parties' respective execution,
delivery and performance of the Transaction Documents and Commercial Agreements
to which any of them is a party will not violate any Law in any material
respect.
3.3 Legal Proceedings. Section 3.3 of Seller's Disclosure
Schedule lists each Order or Action pending or, to Seller's Knowledge,
threatened against Seller that individually or when aggregated with one or more
other Orders or Actions has or if determined adversely would reasonably be
expected to have a Material Adverse Effect or materially impair or delay either
20
Seller's ability to consummate the Closing or Seller's ability to perform its
obligations under this Agreement.
3.4 Approvals and Third Party Consents. Section 3.4 of
Seller's Disclosure Schedule lists any Approvals or Permits and any material
Third Party Consents by any Person not a party to this Agreement required in
connection with the execution or performance of this Agreement and the other
Transaction Documents by the Qwest Parties and the consummation of the
Transactions, except for any applicable requirements of the Securities Act, the
Exchange Act, the HSR Act and any applicable filings under state securities
laws.
3.5 Capitalization. Section 3.5 of Seller's Disclosure
Schedule sets forth the capitalization of Company. Seller owns all of the LLC
Interests, beneficially and of record and free and clear of any Encumbrance.
Other than the LLC Interests, there are no issued and outstanding Equity
Securities of Company. There are no outstanding Contracts or other rights to
subscribe for or purchase, or Contracts or other obligations to issue or grant
any rights to acquire, any Equity Securities of Company. There are no
outstanding Contracts of Company to repurchase, redeem or otherwise acquire any
Equity Securities of Company. The LLC Interests are duly authorized, validly
issued, fully paid and nonassessable and are not subject to and have not been
issued in violation of any preemptive rights or in violation of any federal or
state securities laws.
3.6 Financial Information.
(a) Financial Statements. The Holding Financial
Statements have been, and the Xxxxxx Transferred Business Financial Statements
when delivered pursuant to Section 5.6 below will have been, prepared from the
books and records of Holding and Seller in accordance with GAAP (except, in the
case of the Holding Unaudited Financial Statements and the Xxxxxx Transferred
Business Unaudited Financial Statements, subject to normal year-end adjustments
and the absence of notes) applied on a consistent basis throughout the periods
involved and present and will present fairly, in all material respects, the
information set forth therein.
(b) Certain Changes. Except as set forth in Section
3.6(b) of Seller's Disclosure Schedule, since December 31, 2001 to the date
hereof, (i) Seller has conducted the Xxxxxx Transferred Business in the ordinary
course consistent with past practice, (ii) Seller has not sold any material
assets necessary to the conduct of the Xxxxxx Transferred Business, other than
in the ordinary course of business, and (iii) Seller has not entered into any
agreement, arrangement or undertaking to do any of the foregoing. Except as set
forth in Section 3.6(b) of Seller's Disclosure Schedule, since December 31,
2001, (x) there has not been, occurred or arisen any change or event that would
reasonably be expected to constitute a Material Adverse Effect and (y) there
have not been any material changes in the accounting methods, principles,
practices or policies of Seller (other than changes required by changes in
GAAP).
(c) No Other Liabilities or Contingencies. Seller has not
incurred any liabilities with respect to the Xxxxxx Transferred Business that
would be required in accordance with GAAP to be disclosed in a balance sheet of
the Xxxxxx Transferred Business except liabilities (i) that are disclosed in the
balance sheet attached as Section 3.6(c)(1) of Seller's Disclosure Schedule,
(ii) that are disclosed in Section 3.6(c)(2) of Seller's Disclosure Schedule,
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(iii) that were incurred after December 31, 2001 in the ordinary course of
business, (iv) that are Excluded Liabilities or (v) that would not reasonably be
expected to have a Material Adverse Effect.
3.7 Real and Personal Property; Title to Property;
Leases. Seller has (and, at Closing, Company will have) good, and in the case of
real property, marketable, title to or other right to use pursuant to leases,
free of Encumbrances other than Permitted Encumbrances, (a) all items of real
property necessary to the conduct of the Xxxxxx Transferred Business as
conducted on the date hereof, including fees, leaseholds and other interests in
such real property, and (b) such other tangible assets and properties that are
necessary to the conduct of the Xxxxxx Transferred Business as conducted on the
date hereof, except (i) assets and properties that may be necessary to the
conduct of the Transferred Business and that will be provided or otherwise made
available to Company or Buyer pursuant to the Commercial Agreements and (ii) in
the case of tangible assets and properties only, where the failure to have such
title or right to use would not, individually or in the aggregate, reasonably be
expected to result in a Material Adverse Effect. Section 3.7 of Seller's
Disclosure Schedule lists all parcels of real property leased to Seller and used
in the conduct of the Xxxxxx Transferred Business as conducted on the date
hereof and each such lease is valid and enforceable except where the failure to
be valid and enforceable would not, individually or in the aggregate, reasonably
be expected to result in a Material Adverse Effect.
3.8 Material Contracts. Section 3.8 of the Seller's
Disclosure Schedule lists, as of the date hereof, each Material Contract. True
copies of the agreements identified in Section 3.8 of the Seller's Disclosure
Schedule, including all amendments and supplements, have been made available to
Buyer. As of the date hereof, each Material Contract is valid and in full force
and effect according to its terms, and Seller has performed its obligations
thereunder in all material respects (to the extent such obligations have
accrued) and is not in default or breach under any such Material Contract,
except where such failure to be in full force and effect or default or breach
would not, individually or in the aggregate, reasonably be expected to result in
a Material Adverse Effect. Except as set forth in Section 3.8 of the Seller's
Disclosure Schedule, consummation of the Transactions will not (and will not
give any Person a right to) terminate or modify any material rights of, or
accelerate or augment any material obligation of, Seller under any Material
Contract, or cause or give the right to claim any payment for the assignment or
any qualification of any Material Contract, except for any of the foregoing that
would not reasonably be expected to result in a Material Adverse Effect.
3.9 Tax Returns and Reports.
(a) Each of Seller and Company and their respective
Subsidiaries has timely filed (or, where applicable, have had timely filed on
their behalf) all material Tax Returns required to be filed thereby on or before
the date hereof and has paid all Taxes for which they are liable (whether or not
shown to be due thereon). All such Tax Returns, including amendments to date,
have been prepared in good faith without negligence or willful misrepresentation
and are complete and accurate in all material respects. Company has not made any
election to be taxed as a corporation for any United States federal, state or
local income tax purposes, and where necessary, each of Seller and its
Affiliates has consented to include the income of Company in their respective
taxable income for state or local income tax purposes.
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(b) There are no material Encumbrances for Taxes upon the
Contributed Assets (other than Permitted Encumbrances). No Governmental Entity
has, in writing, proposed (tentatively or definitely), asserted or assessed or,
to Seller's Knowledge, threatened to propose or assert any deficiency,
assessment or claim for Taxes against any of Seller, Company, or their
respective Subsidiaries that has not been fully paid or settled. Each of Seller,
Company, and their respective Subsidiaries has withheld and paid all material
Taxes required to have been withheld and paid in connection with amounts paid or
owing to any Employee, former Employee, creditor, independent contractor,
shareholder, customer, supplier or other third party. Except as set forth on
Section 3.9 of Seller's Disclosure Schedule, none of Company or its Subsidiaries
is a party to any agreement extending the time within which to file any Tax
Return due on or before the Closing Date that has not been filed, or extending
the time for assessment of any Tax. None of Seller or Company or their
respective Subsidiaries has received written notice from any Governmental Entity
in a jurisdiction in which such entity does not file a Tax Return stating that
such entity is or may be subject to taxation by that jurisdiction.
(c) None of the Contributed Assets is property that is
required to be treated as being owned by any other Person pursuant to the
so-called safe harbor lease provisions of former Section 168(f)(8) of the Code.
None of the Contributed Assets is "tax-exempt use property" within the meaning
of Section 168(h) of the Code. None of the Contributed Assets directly or
indirectly secures any debt the interest on which is tax-exempt under Section
103(a) of the Code.
3.10 Permits. Except as set forth on Section 3.10 of
Seller's Disclosure Schedule, Seller holds and, as of the Closing, Company will
hold, all Permits that are required by any Governmental Entity to permit it to
conduct the Xxxxxx Transferred Business and possess the Contributed Assets
immediately after the Closing, except where the failure to have such Permits
would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect. As of the Closing, Company will be in compliance in all
material respects with its material Permits. To Seller's Knowledge, no
suspension, cancellation or termination of any material Permit is threatened or
imminent.
3.11 Intercompany Transactions. Section 3.11(a) of
Seller's Disclosure Schedule lists, as of the date hereof, all Contracts between
QSC or any of its Affiliates (other than Holding or Seller), on the one hand,
and Holding or Seller, on the other hand (each, an "Intercompany Agreement").
Except for the Intercompany Agreements constituting part of the Transaction
Documents or Commercial Agreements, Seller has not engaged in any material
transaction with Qwest or any other Affiliate of Qwest for which any liabilities
or obligations relating to Company or the Xxxxxx Transferred Business will
remain to be satisfied after the Closing. Section 3.11(b) of Seller's Disclosure
Schedule lists, as of July 31, 2002: (a) any material liabilities or obligations
of Seller to Qwest or any other Affiliate of Qwest and (b) any material
liabilities or obligations of Qwest or such Affiliates of Qwest to Seller, in
each case except for those liabilities or obligations arising as a result of the
Transaction Documents. Except as provided in the Transaction Documents or the
Commercial Agreements, the consummation of the Transactions will not result in
any payment arising or becoming due from Company to Seller or any Affiliate of
Seller.
3.12 Compliance with Law. Except as set forth on Section
3.12 of Seller's Disclosure Schedule, neither Seller nor Company is in violation
of any Law (other than any Law the subject matter of which is addressed by the
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representations and warranties set forth in Sections 3.16, 3.17 or 3.19 below)
except to the extent any such violation, individually or in the aggregate, has
not had and would not reasonably be expected to have a Material Adverse Effect.
3.13 No Brokers or Finders. Except for the fees and
commissions payable to Xxxxxx Brothers Inc. and Xxxxxxx Xxxxx & Co., Inc., which
will be the sole responsibility of Seller, no agent, broker, finder, or
investment or commercial banker, or other Person or firm engaged by or acting on
behalf of Seller or any of its Affiliates in connection with the negotiation,
execution or performance of this Agreement or the Transactions, is or will be
entitled to any broker's, finder's or similar fee or other commission as a
result of this Agreement or the Transactions.
3.14 Intellectual Property. For purposes of this Section
3.14, "Existing Qwest Group" shall mean the Qwest Parties and Holding. Except as
set forth in Section 3.14 of Seller's Disclosure Schedule (and, as of the
Closing Date, except to the extent that the Intellectual Property described in
this Section 3.14 is conveyed to Buyer at the Dexter Closing):
(a) Generally. Section 3.14(a) of Seller's Disclosure
Schedule sets forth a complete list of, or references to, all United States: (i)
trademarks and service marks (whether registered or unregistered) and trade
names of the Existing Qwest Group that are material to the Xxxxxx Transferred
Business (collectively, the "Trademarks"); (ii) patents and patent applications
of Existing Qwest Group that are material to the Xxxxxx Transferred Business
(collectively, the "Patents"); (iii) registered copyrights of Existing Qwest
Group that are material to the Xxxxxx Transferred Business (collectively,
together with unregistered copyrights of Existing Qwest Group that are material
to the Xxxxxx Transferred Business, "Copyrights"); and (iv) domain names of
Existing Qwest Group that are material to the Xxxxxx Transferred Business,
including top-level Internet domain names (the "Domain Names").
(b) Patents. Existing Qwest Group has not, to Seller's
Knowledge, received any written notice or claim challenging Existing Qwest
Group's ownership of the material Transferable Patents or suggesting that any
other Person has any claim of legal or beneficial ownership with respect
thereto. The "Transferable Patents" shall mean the applicable ownership
interests in the Patents to be transferred to the Company pursuant to the IP
Contribution Agreement and shall not, in any event, include the ownership
interests transferred to Company.
(c) Copyrights. Existing Qwest Group is the owner of all
right, title and interest in and to each of the Transferable Copyrights, free
and clear of any and all Encumbrances (other than Permitted Encumbrances),
covenants, conditions and restrictions or other adverse claims or interests of
any kind or nature that would reasonably be expected to have a Material Adverse
Effect, and Existing Qwest Group has not received any written notice or claim
challenging Existing Qwest Group's ownership of the material Transferable
Copyrights or suggesting that any other Person has any claim of legal or
beneficial ownership with respect thereto. Existing Qwest Group has not received
any written notice or claim challenging or questioning the validity or
enforceability of any of the material Transferable Copyrights or indicating an
intention on the part of any Person to bring a claim that any material
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Transferable Copyright is invalid or unenforceable. The "Transferable
Copyrights" shall mean the Copyrights to be transferred to Company pursuant to
the IP Contribution Agreement.
(d) Trade Secrets. Seller and Company have taken
reasonable steps in accordance with normal industry practice to protect their
respective rights in material confidential information and material proprietary
information of the Xxxxxx Transferred Business, including any formula, pattern,
compilation, program, device, method, technique, or process, that derives
independent economic value from not being generally known to the public or to
other Persons who can obtain economic value from its disclosure or use
(collectively, "Trade Secrets"). Seller and Company each has a policy of
requiring each relevant employee, consultant and contractor engaged to perform
information technology development services for Seller or Company to execute
proprietary information, confidentiality and assignment agreements substantially
in Seller's standard forms that assign to Existing Qwest Group all rights to any
Intellectual Property of the Xxxxxx Transferred Business that are developed for
Seller or Company by the employees, consultants or contractors, as applicable.
(e) License Agreements. To Seller's Knowledge, Section
3.14(f) of Seller's Disclosure Schedule sets forth a complete and accurate list
of all material license agreements granting (directly or through an Affiliate of
Seller) to Seller any right to use any material software, databases, Content (as
defined below) or similar materials of a third party that are used in and
material to the Xxxxxx Transferred Business (other than "off-the-shelf" shrink
wrap software commercially available on reasonable terms to the public
generally) (collectively, the "Company Inbound License Agreements"), indicating
for each the title and the parties thereto. There is no outstanding or, to
Seller's Knowledge, threatened dispute or disagreement with respect to any
Company Inbound License Agreement. Correct and complete executed copies of all
Company Inbound License Agreements have been made available to Purchaser.
(f) Intellectual Property Sufficiency. To Seller's
Knowledge, except as otherwise provided in Section 3.14 of Seller's Disclosure
Schedule, the assignments, licenses and other rights granted by Qwest and its
current Affiliates to Company under this Agreement, the other Transaction
Documents and the Commercial Agreements and other actions taken in accordance
with Section 5.18 of Exhibit P to the Dexter Purchase Agreement accord to
Company the rights with respect to the intellectual property assets owned or
licensed by Qwest and such Affiliates that are necessary for continued operation
of the Xxxxxx Transferred Business after the Closing in substantially the same
manner as such business has been operated by Seller during the six months prior
to the Closing.
3.15 [Reserved].
3.16 Labor Matters. Except as set forth in Section 3.16(a)
of the Seller's Disclosure Schedule, (i) there is no, and in the past three
years there has been no, material organized strike, labor dispute, slowdown or
stoppage, or material unfair labor practice claim or charge pending or, to
Seller's Knowledge, threatened against or affecting Company or the Xxxxxx
Transferred Business, (ii) no material claim is pending or, to Seller's
Knowledge, threatened by employees or former employees against Seller respecting
Seller's employment practices, and (iii) no material claim is pending or, to
Seller's knowledge, threatened asserting noncompliance by Seller with any
applicable Law respecting employment practices, employee documentation, and
25
terms and conditions of employment and wages and hours and Seller is not
currently engaged in any material unfair labor practice. Section 3.16(b) of the
Seller's Disclosure Schedule lists, as of the date hereof, each collective
bargaining agreement between Seller or Company, on the one hand, and any labor
union or labor organization, on the other hand that is applicable to any portion
of the Xxxxxx Transferred Business (the "CBAs"). True copies of the CBAs,
including all amendments and supplements, have been made available to Buyer.
3.17 Employee Benefits.
(a) Section 3.17(a) of the Seller's Disclosure Schedule
lists and identifies the sponsor of, as of the date hereof, each material
"employee pension benefit plan" (as defined in Section 3(2) of ERISA) (a
"Pension Plan"), each material "employee welfare benefit plan" (as defined in
Section 3(1) of ERISA) (a "Welfare Plan"), and each other material plan,
arrangement, policy or procedure relating to deferred compensation, incentive
compensation, stock options, stock purchases, severance pay, fringe benefits or
other employee benefits, in each case maintained, administered or contributed to
or required to be maintained, administered or contributed to by Seller, Holding
or Company or any of their Affiliates for the benefit of any employee of
Holding, Seller or Company who is engaged in the Xxxxxx Transferred Business (an
"Employee") or any former Employee (all of the foregoing, the "Seller Benefit
Plans"). True copies of (i) each Seller Benefit Plan, (ii) the most recent
summary plan description, and any summary of material modifications, for each
Seller Benefit Plan for which a summary plan description is required, and (iii)
each trust agreement and insurance or group annuity contract with respect to a
Seller Benefit Plan, including all amendments and supplements, have been made
available to Buyer.
(b) Each Seller Benefit Plan has been administered in
accordance with its terms and in compliance with applicable Law, including the
applicable provisions of ERISA and the Code, except for such failures or
noncompliance as would not, individually or in the aggregate, reasonably be
expected to result in a Material Adverse Effect.
(c) Since the effective date of ERISA, no liability under
Title IV of ERISA has been incurred by Seller or any member of its Controlled
Group (defined as any entity that is a member of a controlled group of
organizations within the meaning of Sections 414(b), 414(c), 414(m) or 414(o) of
the Code of which Seller is a member) (other than liability for premiums due to
the PBGC) unless such liability has been, or prior to the Closing Date will be,
satisfied in full. The PBGC has not instituted, or to Seller's knowledge
threatened to institute, proceedings to terminate any Pension Plan that is
subject to Title IV of ERISA, and, except as set forth in Section 3.17(c) of
Seller's Disclosure Schedule, no such Pension Plan has been the subject of a
"reportable event," as that term is defined in Section 4043 of ERISA, as to
which notices would be required to be filed with the PBGC. No Pension Plan has
an "accumulated funding deficiency," as that term is defined in Section 302 of
ERISA and Section 412 of the Code, whether or not waived, as of the last day of
the most recent fiscal year of each Pension Plan ended prior to the date hereof.
(d) No Seller Benefit Plan is a "multiemployer plan," as
that term is defined in Section 3(37) of ERISA. Neither Seller nor any member of
its Controlled Group has at any time in the past six years sponsored,
contributed to or had an obligation to contribute to any multiemployer plan.
26
Neither Seller nor any member of its Controlled Group has any outstanding
"withdrawal liability" (whether or not contingent), as that term is defined in
Section 4201 of ERISA.
(e) Seller, Company and their respective Affiliates have
not made or granted or committed to make or grant any benefit improvements under
any Seller Benefit Plan with respect to any Employee or former Employee, except
as provided in the CBAs or in the plan documents provided to Buyer or as set
forth in Section 3.17(e) of Seller's Disclosure Schedule.
3.18 Insurance. All material insurance policies covering
Seller are identified in Section 3.18 of the Seller's Disclosure Schedule, all
premiums due thereon have been paid (other than retroactive or retrospective
premium adjustments that are not yet, but may be, required to be paid with
respect to any period ending on or prior to the Closing Date), and Seller has
complied in all material respects with the provisions of such policies and have
not received written notice from any of their insurance brokers or carriers that
such brokers or carriers will not be willing or able to renew their existing
coverage. All material properties of Seller relating to the Xxxxxx Transferred
Business are covered by insurance in customary scope and amount of coverage.
3.19 Environmental Matters. Except either as set forth on
or as identified in any written materials listed in Seller's Disclosure
Schedule, to Seller's Knowledge:
(a) Seller has not received any written notice (i) from
any Governmental Entity that the Company or the Xxxxxx Transferred Business is
not in compliance in any material respect with Environmental Laws, or (ii) of
any pending or threatened Action or Order or claim by any third party with
respect to Hazardous Materials or Environmental Laws in connection with any of
the properties currently or formerly owned or occupied by Seller in connection
with the Xxxxxx Transferred Business or in connection with any other properties
to which waste may have been sent by Seller, Company or their respective
Affiliates in connection with the Xxxxxx Transferred Business from properties
owned or occupied by Seller in connection with the Xxxxxx Transferred Business.
(b) Seller has not disposed, released, generated or
transported in violation of Environmental Laws any Hazardous Materials at, from,
on or under any properties currently or formerly owned or occupied by Seller in
connection with the Xxxxxx Transferred Business.
(c) Seller has not assumed, contractually or by operation
of Law, any liabilities or obligations of third parties under any Environmental
Laws with respect to any of the properties currently or formerly owned or
occupied by Seller in connection with the Xxxxxx Transferred Business.
(d) Seller has operated and is operating the Xxxxxx
Transferred Business in compliance in all material respects with Environmental
Laws.
3.20 Directory Publication Schedules.
(a) Section 3.20(a) of Seller's Disclosure Schedule lists
all directories published by Seller in the Region for which, during the past
three years, either (i) the month of publication changed or (ii) the length of
27
service of such directory changed. Section 3.20(a) of Seller's Disclosure
Schedule sets forth the revenue and EBITDA impact of such changes under Seller's
prior revenue recognition methodology (point of publication) in the year that
each such directory was published.
(b) Section 3.20(b) of Seller's Disclosure Schedule lists
the proposed date of publication of all directories by Seller from the date
hereof until August 31, 2003.
3.21 Receivables. All receivables that are included in the
Contributed Assets (i) represent actual indebtedness or other obligations
incurred by the applicable account debtors, and (ii) have arisen from bona fide
transactions in the ordinary course of the Business.
3.22 Qwest Corporation. Qwest Corporation holds the state
and federal authorizations (collectively, the "Qwest Authorizations") necessary
to provide telephone exchange and exchange access services in Washington,
Oregon, Idaho, Montana, Wyoming, North Dakota, South Dakota, Nebraska,
Minnesota, Iowa, Utah, Colorado, New Mexico, and Arizona (collectively, the
"Qwest States"). Qwest Corporation provides these services within the Qwest
States as an incumbent local exchange carrier, as that term is defined in
Section 251(h)(1) of the Communications Act of 1934, as amended, 47 U.S.C. ss.
251(h)(1).
3.23 Certain Accounting Issues. To Seller's Knowledge, as
of the date hereof, the SEC has not objected to any of Seller's accounting
policies, procedures or practices, or any of the accounting policies, procedures
or practices of Qwest which relate to or impact the Holding Financial Statements
or otherwise indicated that any of such policies, procedures or practices are
not in accordance with GAAP and the applicable requirements of the SEC, other
than with respect to matters that have been conformed to the SEC's requests
addressed or reflected in Holding Audited Financial Statements (it being
understood that, to Seller's Knowledge, the Xxxxxx Transferred Business
Financial Statements will address or reflect such matters to the same extent).
3.24 Contribution Agreement. As of the Closing Date, the
transactions contemplated by the Contribution Agreement and the IP Contribution
Agreement shall have been consummated in all material respects in accordance
with their terms (including any required transfer of Contributed Assets (as such
term is defined in the Contribution Agreement) owned or deemed to be owned by an
Affiliate of Seller).
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Except as otherwise indicated on Buyer's Disclosure Schedule,
Buyer represents and warrants and agrees, as of the date hereof, as follows:
4.1 Organization and Related Matters. Buyer is a limited
liability company duly organized, validly existing and in good standing under
the laws of the state of its organization. Buyer has all necessary power and
authority under the Delaware LLC Act and its certificate of formation and
limited liability company operating agreement (together, the "Buyer
Organizational Documents") to execute, deliver and perform the Transaction
Documents and Commercial Agreements to which it is a party. Buyer has all
necessary power and authority under the Delaware LLC Act and the Buyer
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Organizational Documents to own, license or lease its properties and to carry on
its business as now being conducted and is duly qualified or licensed to do
business as a foreign limited liability company in good standing in all
jurisdictions in which the nature of its business requires licensing or
qualification, except where the failure to be so qualified or licensed would
not, individually or in the aggregate, reasonably be expected to result in a
Buyer Material Adverse Effect.
4.2 Authorization; No Conflicts.
(a) The execution, delivery and performance of the
Transaction Documents to which Buyer is a party have been duly and validly
authorized by all necessary limited liability company and member action on
Buyer's part. The Transaction Documents and Commercial Agreements to which Buyer
is a party constitute (or will upon execution constitute) Buyer's legally valid
and binding obligations, enforceable against Buyer in accordance with their
respective terms except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium and other similar laws and equitable
principles relating to or limiting creditors' rights generally.
(b) Buyer's execution, delivery and performance of this
Agreement will not violate, or constitute a breach or default under, any of the
Buyer Organizational Documents. Subject to obtaining the Approvals and Permits
contemplated in Section 4.5, Buyer's execution, delivery and performance of this
Agreement will not violate any Law in any material respect.
4.3 Legal Proceedings. There is no Order or Action
pending or, to Buyer's Knowledge, threatened in writing against Buyer that,
individually or when aggregated with one or more other Orders or Actions, has
had or if determined adversely would reasonably be expected to have a Buyer
Material Adverse Effect.
4.4 Investment Intent. Buyer is an "accredited investor"
as defined under the Securities Act and possesses such knowledge and experience
in financial and business matters that it is capable of evaluating the merits
and risks of its investment hereunder. Buyer is acquiring the LLC Interests for
investment for its own account, not as a nominee or agent, and not with a view
to, or for resale in connection with, any distribution thereof. Buyer will not
sell or otherwise dispose of the LLC Interests except in compliance with the
registration requirements or exemption provisions under the Securities Act or
any other applicable securities law. Buyer understands that the LLC Interests
have not been registered under the Securities Act or any state securities laws
by reason of specific exemptions from the registration requirements thereof that
depend upon, among other things, the bona fide nature of the investment intent
and the accuracy of Buyer's representations and warranties contained herein.
4.5 Approvals, Permits and Third Party Consents. Section
4.5 of Buyer's Disclosure Schedule lists any Approvals and Permits and any
material Third Party Consents by any Person not a party to this Agreement
required in connection with the execution or performance by Buyer of the
Transaction Documents to which Buyer is a party, except for any such Approvals,
Permits and Third Party Consents the failure of which to receive would not,
individually or in the aggregate, reasonably be expected to result in a Buyer
Material Adverse Effect.
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4.6 Financing. Buyer has received, accepted and agreed
to, all applicable commitment fees for (a) a valid and binding commitment letter
from certain lenders (the "Debt Financing Commitment Letter"), committing them
to provide to the Buyer debt financing for the Transactions in an aggregate
amount of $3,535,000,000, subject to the terms and conditions set forth therein
(such debt financing, the "Debt Financing") and (b) a valid, binding and
irrevocable commitment letter from certain equity investors (the "Equity
Financing Commitment Letter"), committing them to provide equity financing to
Buyer in the amount of $1,500,000,000, minus the actual amount of the equity
contributions made by affiliates or assignees of The Carlyle Group and Welsh,
Carson, Xxxxxxxx & Xxxxx to Buyer pursuant to the "Equity Financing Commitment
Letter" under the Dexter Purchase Agreement, subject to the terms and conditions
set forth therein (such equity financing, the "Xxxxxx Equity Financing" and
together with the Debt Financing, the "Financing"). True and complete copies of
the Debt Financing Commitment Letter and the Xxxxxx Equity Financing Commitment
Letter and the Dexter "Equity Funding Commitment Letter" are attached as Exhibit
N, Exhibit O and Exhibit P to this Agreement, respectively. As of the date
hereof, the Debt Financing Commitment Letter and the Equity Financing Commitment
Letter are in full force and effect. True and complete copies of any agreements
or understandings relating to Financing Fees have been delivered to the Qwest
Parties prior to the date hereof.
4.7 No Brokers or Finders. Except for the fees and
commissions payable to X.X. Xxxxxx in its capacity as financial adviser, which
will be the sole responsibility of Buyer, no agent, broker, finder, investment
or commercial banker or other Person or firm engaged by or acting on behalf of
Buyer or any of its Affiliates in connection with the negotiation, execution or
performance of this Agreement or the Transactions, is or will be entitled to any
broker's, finder's or similar fees or other commissions as a result of this
Agreement or the Transactions, except (i) to the extent that such fees or
expenses constitute Reimburseable Expenses and (ii) Buyer is entitled under the
terms of this Agreement to have Seller pay such amounts.
4.8 No Other Representations or Warranties. Buyer
acknowledges and agrees that it has made its own inquiry and investigation into,
and based thereon has formed an independent judgment concerning, the LLC
Interests, Company and the Xxxxxx Transferred Business, and that it has been
afforded adequate access to Seller's management, properties, books and records
for purposes of such inquiry and investigation. Except for the representations
and warranties contained in this Agreement, Buyer acknowledges that none of the
Qwest Transaction Parties, Company or any of their respective Affiliates or any
other Person makes any other express or implied representation or warranty with
respect to the Business or the Xxxxxx Transferred Business, the LLC Interests,
the Qwest Transaction Parties or Company or otherwise or with respect to any
other information provided to Buyer or any of its Affiliates or Representatives,
whether on behalf of Seller or such other Persons, including as to: (a)
merchantability or fitness for any particular use or purpose; (b) the use of the
assets of Company and the operation of the Xxxxxx Transferred Business by Buyer
after the Closing; or (c) the probable success or profitability of the
ownership, use or operation of the Xxxxxx Transferred Business, the LLC
Interests, or Company by Buyer after the Closing. Neither any Qwest Transaction
Party nor any other Person will have or be subject to any liability or
indemnification obligation to Buyer or any other Person with respect to the sale
of the Xxxxxx Transferred Business in accordance with this Agreement resulting
from the distribution to Buyer or its Affiliates' or Representatives' use of,
any information related to the Business, the Xxxxxx Transferred Business, the
30
Qwest Transaction Parties or Company, including the Confidential Descriptive
Memorandum dated April 2002 and any information, document, or material made
available to Buyer in any form in connection with the Transactions.
ARTICLE V
PRE-CLOSING COVENANTS
5.1 Access. Subject to Section 10.9, applicable Laws,
doctrines of attorney-client privilege and fiduciary and privacy obligations,
Seller will, and will cause Company to, authorize and permit Buyer and its
counsel, financial advisors, auditors and other authorized representatives
(collectively, "Representatives") to have reasonable access during normal
business hours, upon reasonable notice and in such manner as will not
unreasonably interfere with the conduct of the Business, to Qwest's, Seller's,
and, after the Contribution, Company's properties, books, records and other
information with respect to the Xxxxxx Transferred Business and its management
personnel as Buyer may from time to time reasonably request for the purpose of
(a) familiarizing itself with the Xxxxxx Transferred Business and (b) obtaining
any necessary Approvals of, or Permits for, the Transactions.
5.2 Conduct of Business. During the period from the date
of this Agreement through the Closing Date unless Qwest shall have received
Buyer's consent not to take such action, which consent may not be unreasonably
conditioned, delayed or withheld, Qwest shall, and shall cause Seller and
Company to, conduct the Xxxxxx Transferred Business in the ordinary course of
business and consistent with past practice (except in connection with the
Transactions and as otherwise set forth in Section 5.2 of Seller's Disclosure
Schedule), and to use their commercially reasonable efforts to maintain all
material assets in good repair and condition (except for ordinary wear and
tear), maintain all insurance necessary to the conduct of their business as
currently conducted, and maintain satisfactory relationships with suppliers and
customers. Additionally, except as set forth in Section 5.2 of Seller's
Disclosure Schedule, without Buyer's prior written consent, which may not be
unreasonably conditioned, delayed or withheld, Qwest agrees that, before
Closing, it will cause Seller and Company not to:
(a) except in the ordinary course of business consistent
with past practice, amend, terminate or renegotiate any Material Contract or
enter into any agreement that would constitute a Material Contract; or
(b) terminate or fail to use commercially reasonable
efforts to renew or preserve any material Permit; or
(c) incur or agree to incur any Indebtedness or other
obligations or liabilities (absolute or contingent) except for Indebtedness,
obligations or liabilities incurred in the ordinary course of business
consistent with past practice; or
(d) make any loan, guaranty or other extension of credit,
or enter into any commitment to make any loan, guaranty or other extension of
credit, to or for the benefit of any director, officer, employee, stockholder or
any of their respective Affiliates, except for loans, guarantees, extensions of
credit or commitments therefor made to officers or employees for moving,
relocation and travel expenses consistent with past practice; or
31
(e) except (i) as set forth in Section 5.2 of Seller's
Disclosure Schedule, (ii) in the ordinary course of business consistent with
past practice or (iii) as required by Law or the terms of this Agreement or any
Contract set forth in Section 3.8 of Seller's Disclosure Schedule, (A) grant any
general or uniform change in the rates of pay or benefits to officers, directors
or Employees (or a class thereof), (B) grant any increase in salary or benefits
of any officer or director or pay any special bonus to any person or (C) enter
into any new or change any existing material employment or severance agreement
or any collective bargaining agreement (other than renegotiation of existing
CBAs in connection with the expiration thereof) relating to the Xxxxxx
Transferred Business; or
(f) issue, pledge, sell, redeem or acquire for value, or
agree to issue, sell, pledge, redeem or acquire for value, any Equity Securities
of the Company; provided that the foregoing shall not limit the ability of
Company or Seller to make cash dividends and distributions; or
(g) effect any recapitalization, reclassification,
combination, stock split or like change in the capitalization of Company; or
(h) amend its certificate of incorporation or bylaws or
other organizational documents; or
(i) sell, transfer, license or otherwise dispose of, in
whole or in part, or subject to any Encumbrance, any material asset or right
used in the Xxxxxx Transferred Business as conducted on the date hereof outside
of the ordinary course of business, or declare or pay any dividend (other than
cash) or make any other distribution of property (other than cash); or
(j) settle or compromise any material federal, state,
local or foreign income tax liability for which Buyer could reasonably be
expected to be adversely affected; or
(k) in any instance where Company or Buyer would be bound
by such action, make any material Tax election, adopt or change any accounting
method for Tax purposes, file any amended material Tax Return, consent to or
enter into any closing agreement or similar agreement with any Tax authority or
take any position with respect to any material item that is inconsistent with
past practice on any Tax Return, except in each case, as contemplated by the
Transaction Documents; or
(l) cause Company to be treated as other than a
disregarded entity for federal or state income tax purposes (other than in
Texas) for any Pre-Closing Tax Period; or
(m) enter into any agreement that substantially limits
the ability of Seller or Company to engage in any business activity; or
(n) change the scheduled publication date of any of its
recurring directories by more than two weeks from such directory's publication
date in 2002; or
(o) acquire, lease or dispose of any interest in real
property used in the Xxxxxx Transferred Business; or
(p) fail to maintain their books and records in
accordance with past practice; or
32
(q) agree to make or make (or permit any Subsidiary of
Seller or Company to agree to make or make) any commitment to take any actions
prohibited by this Section 5.2;
provided, however, except as expressly provided in Section 5.2 above, nothing in
this Section 5.2 will prohibit Seller and its Affiliates from conducting their
businesses in their reasonable discretion. Nothing in this Section 5.2 will
prohibit Company from distributing cash to Seller or prohibit Seller from
distributing cash to Holding. Nothing contained in this Agreement shall give
Buyer, directly or indirectly, the right to control or direct Company's
operations prior to Closing.
5.3 Notification of Certain Matters. Seller will give
prompt notice to Buyer, and Buyer will give prompt notice to Seller, of any
failure of Buyer or Seller and Company, as the case may be, to comply with or
satisfy, in any material respect, any covenant, condition or agreement to be
complied with or satisfied by it under this Agreement.
5.4 Approvals, Permits and Third Party Consents.
(a) Seller and Buyer shall cooperate and use commercially
reasonable efforts to obtain all Approvals and Permits (including taking actions
to promptly prepare, file and deliver all registrations, filings and
applications, requests and notices (collectively, the "Approval Filings") that
may be necessary to consummate the Transactions) and to participate in any
related proceedings. Seller and Buyer shall furnish each other such necessary
information and reasonable assistance as the other may reasonably request in
connection with the Approval Filings and related proceedings; provided, however,
that Buyer shall not be required to make any material concession in order to
obtain any Approval or Permit.
(b) Without limiting the generality of the foregoing
paragraph (a):
(i) Buyer and Seller will file with the Federal
Trade Commission and the Department of Justice pursuant to the HSR Act (A) the
notification and report form required for the Transactions as promptly as
practicable, but not later than ten Business Days after the execution of this
Agreement, and (B) with respect to any supplemental information request in
connection with the Transactions, as soon as reasonably practicable. Any such
notification and report form and supplemental information will be in substantial
compliance with the requirements of the HSR Act. The parties will thereafter
prosecute the application with all reasonable diligence and will otherwise use
commercially reasonable efforts to obtain the termination of the HSR Act review
as expeditiously as possible. Buyer and Seller shall each be responsible for
one-half of all HSR Act filing fees.
(ii) As promptly as practicable, but not later
than 15 days after the execution of this Agreement, Buyer and Seller will file
with the respective State PUCs all applications for Approvals and Permits
identified on Section 3.4(a) of Seller's Disclosure Schedule. The parties will
thereafter prosecute the applications with all reasonable diligence and will
otherwise use commercially reasonable efforts to obtain the grant of such
Approvals and Permits as expeditiously as practicable. Notwithstanding the
foregoing, it is understood that nothing contained in this Agreement shall
33
require the Qwest Parties or any of their respective Affiliates to consent to,
accept or otherwise proceed to close the Transactions in the event that such
Approvals and Permits, or any other Approvals or Permits that any State PUC
requires or purports to require in connection with or as a condition to the
Transactions, collectively or individually, are reasonably likely to result in
(directly or indirectly) a Material Regulatory Impact on Qwest or its
Affiliates. For purposes of this Agreement, a "Material Regulatory Impact" is
defined as an impact in excess of the amount set forth in the confidential
letter of understanding dated August 19, 2002, where such amount reflects the
total net economic loss on Qwest or its Affiliates of any or all of the
following events insofar as they are required by or otherwise result from the
Transactions: (a) any reduction in aggregate net revenues (calculated pursuant
to subsection (iii)(A) below) of Qwest Corporation or any of its Affiliates
during the Fiscal Measurement Period (as defined below), whether such reductions
arise from rate reductions, rate refunds, rebates, credits, one-time payments,
restrictions on the ability of Qwest to charge rates it could have charged but
for the Transactions, or any other reason (each, a "Regulatory Restriction");
(b) any additional capital investment (as calculated pursuant to subsection
(iii)(B) below); and (c) any additional regulatory charges or costs to or
financial impacts on Qwest or any of its Affiliates relating to matters under
the jurisdiction of the State PUCs.
(iii) For purposes of subsection (ii) above:
(A) Any reductions in aggregate net
revenues that are reasonably expected to result from a
Regulatory Restriction shall be calculated (1) on a pro forma
basis as if such Regulatory Restriction had been imposed as of
the beginning of the Fiscal Measurement Period and (2) in the
case of recurring or repeated reductions in aggregate net
revenues that can reasonably be expected to continue after the
Fiscal Measurement Period ("Future Periods"), by present
valuing such revenues to the last day of the Fiscal
Measurement Period (x) using an annual discount rate of 5.0%,
(y) assuming a mid-year discounting convention and (z)
applying the relevant Volume Metric (as defined below) used in
the Fiscal Measurement Period to all Future Periods;
(B) Additional capital investments
occurring in Future Periods shall be calculated by present
valuing such additional capital investments to the last day of
the Fiscal Measurement Period (1) using an annual discount
rate of 5.0%, (2) assuming a mid-year discounting convention
and (3) utilizing Qwest's reasonable determination as to the
time that such additional capital investments will be
incurred;
(C) "Fiscal Measurement Period" means
the four fiscal quarter period ending on the last fiscal
quarter end date occurring at least 45 days prior to the
Closing Date; and
(D) "Volume Metric" means a volume
metric, such as number of access lines or similar concepts
corresponding to numbers of customers or otherwise
approximating volumes of services provided to customers, that
is multiplied by a dollar amount in order to calculate revenue
reduction during any relevant fiscal period.
34
(c) The parties acknowledge that they may be required or
desire to communicate with Governmental Entities regarding the Transactions both
before and after the Closing. Each party agrees to use commercially reasonable
efforts to consult with the other party in advance of any material
communications, whether written or oral, with any Governmental Entity regarding
the Transactions and to cooperate with the other party in connection with any
Inquiry arising therefrom. Except for documents filed pursuant to Item 4(c) of
the Xxxx-Xxxxx-Xxxxxx Notification and Report Form or communications regarding
the same or documents or information submitted in response to any request for
additional information or documents pursuant to the HSR Act that reveal Seller's
or Buyer's negotiating objectives or strategies or purchase price expectations,
(a) each party agrees to submit all Approval Filings made by such party to the
other party for review and approval (which approval shall not be unreasonably
withheld) prior to their submission to any Governmental Entity, and (b) each
party further agrees to forward to the other copies of any material (written or
electronic, including electronic mail) communications sent by it or its
Representatives or received by it from, any Governmental Entity regarding the
Transactions and to use commercially reasonable efforts to advise the other
party of any material oral communications with any Governmental Entity regarding
the Transactions. All such communications will be disclosed to the other party
promptly after they are sent or received in the case of written communications
or promptly following any oral communication with a Governmental Entity. Seller
and Buyer will use commercially reasonable efforts to coordinate and promptly
respond to any Inquiry.
(d) If there is initiated by any State PUC, state
attorney general or other Person any investigation, proceeding, litigation,
inquiry, hearing, information or data request, or information gathering process
relating to the Transactions whether before or after the Closing (each, an
"Inquiry"), then the parties will jointly evaluate such Inquiry. If such Inquiry
is a joint defense endeavor pursuant to the terms of the Joint Defense and
Common Interest Agreement, then Seller's or Qwest's counsel will be the lead
counsel, at Seller's or Qwest's expense and reasonable direction, to undertake
such joint defense unless the Inquiry relates solely to Buyer, in which case
Buyer's counsel will be the lead counsel at Buyer's expense and reasonable
direction. In any such joint defense endeavor, Seller, Qwest or Buyer, as the
case may be, will each use commercially reasonable efforts to cause to be
resisted, resolved or lifted any Order, decree, ruling or other action
restraining, enjoining or otherwise prohibiting the performance of any
obligations under the Transaction Documents with the result or likelihood that
the fundamental business purpose of the Transactions is or will be frustrated.
In so doing, Seller or Qwest will not take any position or agree to any
settlement that will or would reasonably be expected to result in a Buyer
Material Adverse Effect or otherwise prejudice Buyer's interests with respect to
the Transactions. Buyer may elect to retain at its own expense its own counsel
with respect to any Inquiry that is a joint defense endeavor. With respect to
any Inquiry, the party whose counsel is lead counsel shall submit to the other
party for review and approval all information, documents or pleadings to be
provided to or filed with any State PUC, state attorney general or other Person
prior to their submission to such State PUC, state attorney general or other
Person, as the case may be. The respective rights and obligations of the parties
with respect to the joint defense of any Inquiry shall be governed by the Joint
Defense and Common Interest Agreement.
35
(e) Seller and Buyer shall cooperate and use commercially
reasonable efforts to obtain all material Third Party Consents that may be
necessary to consummate the Transactions; provided that (i) except with respect
to the Third Party Consents necessary to satisfy the condition set forth in
Section 7.2(n), Seller shall not be obligated to pay any consent fees to any
third party and (ii) Buyer shall not be required to agree to material
concessions in connection with Third Party Consents. Seller and Buyer shall
furnish each other such necessary information and reasonable assistance as the
other may reasonably request in connection with obtaining such Third Party
Consents.
5.5 Supplements to Seller's Disclosure Schedule. From
time to time prior to the Closing, Seller may supplement or amend any Section of
the Seller's Disclosure Schedule with respect to any matter, condition or
occurrence that is required or permitted to be set forth or described in the
Seller's Disclosure Schedule by delivering to Buyer in accordance with Section
10.11 below a copy of such supplement or amendment. A supplement or amendment
not objected to in writing by Buyer within 10 Business Days after receipt will
be deemed to cure any applicable breach of any representation, warranty or
covenant made in this Agreement. A supplement or amendment objected to in
writing by Buyer within 10 Business Days after receipt will not be taken into
account for purposes of such representations, warranties and covenants.
5.6 Financial Statements.
(a) Seller will deliver to Buyer, as soon as practicable
following the completion of an audit of the Xxxxxx Transferred Business but in
no event later than 30 Business Days prior to the Closing Date, (i) the audited
balance sheets of the Xxxxxx Transferred Business as at December 31, 2000 and
December 31, 2001 and December 31, 2002 if the Closing occurs subsequent to
March 31, 2003, and audited statements of income and cash flows of the Xxxxxx
Transferred Business for the twelve months ended December 31, 1999, December 31,
2000 and December 31, 2001 and December 31, 2002 if the Closing occurs
subsequent to March 31, 2003, together with an opinion of Seller's independent
accounting firm, KPMG, containing no exceptions or qualifications (collectively,
such financial statements of the Xxxxxx Transferred Business, together with the
notes thereto, the "Xxxxxx Transferred Business Audited Financial Statements")
and (ii) an unaudited balance sheet of the Xxxxxx Transferred Business and of
Holding as at June 30, 2002 and an unaudited statement of income for the six
months ended June 30, 2002 (the "Xxxxxx Transferred Business Unaudited Financial
Statements" and, together with the Xxxxxx Transferred Business Audited Financial
Statements, the "Xxxxxx Transferred Business Financial Statements"). The Xxxxxx
Transferred Business Financial Statements will be prepared in accordance with
GAAP and Regulation S-X under the Securities Act.
(b) Seller will deliver to Buyer, promptly upon their
being prepared (and in any event no later than 45 days after the end of each
calendar quarter), true and complete copies of the unaudited balance sheets and
statements of income and cash flow of the Xxxxxx Transferred Business and of
Holding as of each calendar quarter beginning with the calendar quarter ending
June 30, 2002 and unaudited balance sheets and statements of income for the
year-to-date period then ended along with comparative historical information for
the preceding year (which shall have been reviewed by KPMG as provided in
statement of accounting standards No. 71 without exception or qualification,
which review shall be at Buyer's expense).
36
(c) Following the Closing, Seller will, and will cause
all Qwest Parties to, cooperate with Buyer if Buyer, at its expense, desires to
obtain, (i) the audited balance sheet of the Xxxxxx Transferred Business at the
Closing and (ii) audited statements of income and cash flows for the period from
January 1, 2002 through the Closing Date if the Closing occurs during calendar
year 2002, or the period from January 1, 2003 through the Closing Date if the
Closing occurs during calendar year 2003.
5.7 Collective Bargaining Agreements. Upon consummation
of the Closing, Buyer shall assume and be bound by the CBAs with respect to the
Transferred Employees represented by the Communications Workers of America and
the International Brotherhood of Electrical Workers. Prior to the Closing Date,
Seller shall use commercially reasonable efforts to extend by one year, on
commercially reasonable terms, the term of the CBAs.
5.8 WARN.
(a) The Qwest Parties agree that, from the later of (i)
the date of this Agreement, and (ii) the date that is 90 days prior to Closing,
none of them will effectuate a "plant closing" or "mass layoff" as those terms
are defined in the Worker Adjustment and Retraining Notification Act of 1988
(the "WARN Act") or any similar state or local statute, rule or regulation, with
respect to the Xxxxxx Transferred Business, without notifying Buyer in advance
and without complying with the notice requirements and all other provisions of
the WARN Act and any similar state or local statute, rule or regulation.
(b) Buyer agrees that upon Closing and within a period of
90 days thereafter, it will not effectuate a "plant closing" or "mass layoff" as
those terms are defined in the WARN Act or any similar state or local statute,
rule or regulation, with respect to the Xxxxxx Transferred Business, without
notifying the Qwest Parties in advance and without complying with the notice
requirements and all other provisions of the WARN Act and any similar state or
local statute, rule or regulation.
5.9 Confidentiality Agreements. On the Closing Date, the
Qwest Parties shall assign and delegate to Buyer or Company all of their
respective rights and obligations under all confidentiality and nondisclosure
agreements between any of the Qwest Parties and any other Person to the extent
entered into in connection with the Transactions or the evaluation of the
Transactions, but only to the extent such agreements (a) relate to the Xxxxxx
Transferred Business or the Transferred Employees and (b) do not by their terms
prohibit such assignment and delegation.
5.10 Financing.
(a) Buyer will promptly notify Seller of any proposal by
any of the financial institutions party to the Debt Financing Commitment Letter
to withdraw, terminate or make a material change in the amount or terms of the
Debt Financing Commitment Letter. In addition, upon Seller's reasonable request,
Buyer shall advise and update Seller, in a level of detail reasonably
satisfactory to Seller, with respect to the status, proposed closing date and
material terms of the proposed Debt Financing. Buyer shall not consent to any
amendment, modification or early termination of any Equity Financing Commitment
Letter or the Debt Financing Commitment Letter that is reasonably likely to
impair materially the Equity Financing or the Debt Financing.
37
(b) Buyer shall, and shall cause its Affiliates to, use
all commercially reasonable efforts to (1) maintain the effectiveness of the
Debt Financing Commitment Letter, (2) enter into definitive documentation with
respect to the Debt Financing on the terms contained in the Debt Financing
Commitment Letter, (3) satisfy all funding conditions to the Debt Financing set
forth in the definitive documentation with respect to the Debt Financing, (4)
cause to be made available to Buyer, on or prior to the first anniversary of the
Dexter Closing, the Debt Financing in an aggregate principal amount equal to the
principal amount of the Debt Financing, and (5) perform its obligations under
the Financing Commitments, including its obligations to agree to changes in the
structure, terms and pricing contained in the Financing Commitments (it being
understood that such obligations shall not include any obligation to cause any
of its Affiliates to increase the amount of their Equity Financing).
(c) At Seller's request, 60 Business Days following the
satisfaction or waiver of Buyer's conditions in Article VII (other than
conditions that, by their nature, are to be satisfied on the Closing Date),
Buyer shall be required to fund the Closing Purchase Price by drawing on the
"Senior Subordinated Facility" and the "Senior Unsecured Credit Facility"(as
such terms are defined in the Debt Financing Commitment Letter).
(d) The Qwest Parties shall provide and shall cause their
Affiliates to provide, reasonable assistance to Buyer's efforts to obtain the
Debt Financing (including, subject to Section 5.10(c), efforts to obtain high
yield bond financing as part of the Debt Financing), including facilitating
customary due diligence and arranging for senior officers of Seller to meet with
prospective lenders in customary presentations or to participate in customary
road shows, in each case upon Buyer's request with reasonable prior notice and
at Buyer's cost and expense. At Buyer's cost and expense, the Qwest Parties
shall, and shall cause their Affiliates to, use commercially reasonable efforts
to cause their respective accountants and attorneys to provide customary
assistance in such financing. In the event of a registered public offering or an
offering in accordance with Rule 144A under the Securities Act of the debt or
equity securities of Company or its Affiliates, the Qwest Parties will, upon
Buyer's request with reasonable prior notice and at Buyer's cost and expense,
use their commercially reasonable efforts to cause KPMG LLP to deliver to
Company and its Affiliates and the underwriters in any such offering a letter
covering such matters as are reasonably requested by Company or its Affiliates
or such underwriters, as the case may be, and as are customarily addressed in
accountants' "comfort letters," and to provide their consent to the references
to them as experts and the inclusion in any applicable filings of their
auditor's reports. Buyer acknowledges that (i) the assistance provided by the
Qwest Parties and their Affiliates, officers, employees and representatives are
being provided at the request of Buyer, and (ii) none of the Qwest Parties shall
have any liability to lenders or prospective lenders in connection with the
activities contemplated by this Section 5.10(d). Buyer shall indemnify and hold
harmless the Qwest Parties from and against any Losses resulting from any
assistance or activities provided pursuant to this Section 5.10. The provisions
of this Section 5.10(d) (including the indemnity provisions) shall not affect
any rights of Buyer under Section 9.1.
38
(e) The Parties agree and acknowledge that up to
$217,000,000 of additional equity of Buyer in excess of the amounts committed in
the Xxxxxx Equity Financing Commitment Letter may be required under the terms
and conditions of the Debt Financing Commitment Letter to consummate the
Transactions (such amount as is required, the "Additional Equity"). Buyer agrees
to use commercially reasonable efforts to obtain equity commitments for the
Additional Equity (provided that nothing herein shall (i) obligate Buyer or its
Affiliates to sell securities on terms less favorable than those terms received
by the Persons that have provided the Xxxxxx Equity Financing Commitment Letter,
(ii) obligate Buyer or its Affiliates to conduct a public offering for equity
securities, or (iii) obligate Affiliates of Buyer to contribute additional
equity other than as provided in the Xxxxxx Equity Financing Commitment Letter).
From the date hereof until 30 days after the Dexter Closing Date, Seller shall
have the right to commit to provide all or a portion of the Additional Equity on
the same terms and conditions as the equity provided for in the Xxxxxx Equity
Financing Commitment Letter (and on such other terms as specified in Exhibit R)
provided, however, that Seller shall in no event be entitled to own equity
securities in an amount greater than the Seller Common Equity Limitation. Such
commitment by Seller shall be evidenced by an equity commitment letter
containing substantially the same terms and conditions as the Equity Financing
Commitment Letter. From and after 30 days after the Dexter Closing Date, Buyer
shall be free to enter into a binding commitment with third parties or
Affiliates of Buyer for the Additional Equity (or such lesser amount of
Additional Equity that remains after giving effect to amounts subscribed for by
Seller); provided that Seller shall be offered the right to provide up to
twenty-five percent (25%) of such offered Additional Equity on the most
favorable terms and conditions on which any equity has been sold to such third
parties and provided that Seller shall in no event be entitled to own equity
securities in an amount greater than the Seller Common Equity Limitation. From
and after a date 30 days preceding the Termination Date, Seller shall have the
right to provide the entire amount of any remaining Additional Equity not
subscribed for as of such date on the most favorable terms and conditions on
which any equity has been sold (such amount committed by Seller during this
period being referred to as the "Final Additional Equity Commitment"), whether
as Additional Equity or pursuant to the terms of the Xxxxxx Equity Financing
Commitment Letter (and on such other terms as specified in Exhibit R); provided
that Seller shall in no event be entitled to own equity securities in an amount
greater than the Seller Common Equity Limitation. Any Additional Equity
subscribed for by Seller in excess of the Seller Common Equity Limitation shall
be provided in Permissible Preferred Stock (as defined below). Notwithstanding
anything herein to the contrary, Buyer (through Affiliates or third parties)
shall up until the Closing Date have the right to provide Additional Equity in
such amounts as necessary to prevent or limit the issuance of Permissible
Preferred Stock to satisfy the required Additional Equity. If Seller subscribes
for Additional Equity pursuant to this Section 5.10(e) ("Seller Additional
Equity") and Buyer exercises its right pursuant to Section 10.5 to assign its
rights and obligations under this Agreement to a wholly-owned subsidiary of
Buyer, then (i) such wholly-owned subsidiary will also assume Buyer's
obligations to deliver the Seller Additional Equity to Seller, (ii) Buyer shall
contribute the Seller Additional Equity to such wholly-owned subsidiary, and
(iii) such wholly-owned subsidiary shall deliver the Seller Additional Equity
(and the Closing Purchase Price) to Seller in exchange for the LLC Interests and
the cash price for the Seller Additional Equity. Seller shall have the right to
assign all or a portion of its rights under this Section 5.10(e) to one or more
assignees, including to avoid the Seller Common Equity Limitation issue, but
only to the extent that such assignment would not, as reasonably determined by
39
Buyer, cause any asset held directly or indirectly by Buyer to be subject to the
anti-churning rules of Code Section 197(f)(9). In addition, at Seller's option,
Seller may satisfy its obligation to pay for Additional Equity by accepting such
Additional Equity in exchange for a dollar for dollar reduction in the Purchase
Price. "Seller Common Equity Limitation" means an amount of equity securities of
Buyer owned, actually or constructively under applicable provisions of the Code,
by any Qwest Party (or any Affiliate of a Qwest Party) constituting (i) 19.9% of
the voting power or (ii) 19.9% of the value of outstanding equity securities of
Buyer (provided however, Permissible Preferred Stock shall not be considered
equity securities for this purpose). The purpose of this limitation is to ensure
that none of the assets held directly or indirectly by Buyer will be subject to
the anti-churning rules of Code Section 197(f)(9). "Permissible Preferred Stock"
means preferred stock (i) described in Code Section 1563(c)(1)(A) and issued by
Buyer or such other entity as is the issuer and (ii) otherwise having the
economic terms and conditions set forth on Exhibit V with respect to PIK
Preferred Stock issuable in connection with the Seller Notes.
5.11 No Negotiations. Qwest shall not, and shall use
commercially reasonable efforts to cause its officers, directors, employees and
agents not to, initiate, solicit, facilitate or encourage, directly or
indirectly, any inquiries or the making of any proposal with respect to, or
engage in any negotiations or discussions with, any Person relating to, or
provide to any Person confidential or non-public information in connection with,
any acquisition, recapitalization, business combination or purchase of all or a
material portion of the Xxxxxx Transferred Business, or cooperate or participate
with any Person in connection with any of the foregoing activities.
5.12 Actions by Management. Buyer acknowledges that, after
the Dexter Closing, both Buyer and Seller will be utilizing the services of
management personnel formerly employed solely by Seller in accordance with the
terms of the Joint Management Agreement. Accordingly, Buyer (i) shall use its
commercially reasonable efforts to cause the management personnel not to take
any actions on behalf of the Qwest Parties that would reasonably be expected to
result in any representation or warranty set forth in this Agreement, the other
Transaction Documents or the Commercial Agreements being inaccurate or would
reasonably be expected to result in a breach of any covenant of the Qwest
Parties set forth in this Agreement, the other Transaction Documents or the
Commercial Agreements or would reasonably be expected to result in the failure
to comply with any condition required by this Agreement or the Transaction
Documents to be complied with by the Qwest Parties on or before the Closing Date
and (ii) acknowledges that it will be deemed to have consented to any actions
taken by or omissions of such management personnel following the Dexter Closing
(other than actions taken or failures to act at the specific direction of the
Qwest Parties) so that any consequences of such actions may not be the basis of
any assertion that (x) the Qwest Parties have breached any representation and
warranty hereunder or (y) the Qwest Parties have failed to comply with any of
their obligations under this Agreement, including under Section 5.2.
5.13 Additional Agreements. Between the date hereof and
the Closing Date, the parties shall use commercially reasonable efforts to
negotiate the terms of a Master Sales Agent Agreement between Qwest Corporation
and Company pursuant to which Company will perform such services for Qwest
Corporation as Seller currently performs under the existing Master Sales Agent
Agreement. It is the intent of the parties that such negotiations will be
40
completed so that a Master Sales Agent Agreement will be executed at Closing in
conjunction with the execution of the remaining Commercial Agreements, but the
execution of the Master Sales Agent Agreement is not a condition to the
consummation of the transactions contemplated by this Agreement.
5.14 Tax Certificate. Prior to the Closing Date, Seller
shall provide to Buyer a duly executed and completed certificate of nonforeign
status pursuant to Section 1445 of the Code.
5.15 Indebtedness. Between the date hereof and the Closing
Date, the Qwest Parties (or their respective Affiliates) shall assume, or shall
cause Seller to have fully satisfied, any Indebtedness of Company and provide
Buyer with documentation, reasonably satisfactory to Buyer, evidencing that
neither Buyer nor Company is subject to any liability or obligation with respect
to such Indebtedness.
5.16 Separation and Other Costs. As provided in Section
5.18 of the Dexter Purchase Agreement, Buyer shall pay (i) 100% of the
Separation Costs and (ii) 100% of the costs related to IP Products required to
satisfy the Xxxxxx IP Products Condition and to satisfy the Separation IP
Covenant, subject to an aggregate limit on Buyer's liability for clauses (i) and
(ii) of $40 million ("Buyer's Separation Cost Limit"), and Seller shall be
responsible for all amounts incurred in excess of Buyer's Separation Cost Limit
(plus all amounts incurred to satisfy the Dexter IP Products Condition as
provided in the Dexter Purchase Agreement).
5.17 Working Capital. Following the date hereof, the
parties will in good faith determine the historic Working Capital for the Xxxxxx
Transferred Business as of the end of each month beginning with September 30,
2001 and ending with December 31, 2002. If the parties are unable to reach
agreement with respect to the determination of Working Capital for any such
month within 30 days from the date hereof, the items of disagreement alone will
be promptly referred for final determination to the Independent Accountants,
which determination shall be binding on both parties. The fees and disbursements
of the Independent Accountants will be borne by the party that is not the party
whose final submission to the Independent Accountants is closest to the final
determination made by the Independent Accountants.
5.18 Third Party Intellectual Property. Prior to the
Closing Date, Seller shall comply in all material respects with the arrangements
contemplated by Section 5.18 of the Dexter Purchase Agreement.
5.19 B&C Systems Transition Plan. Each of the Qwest
Parties agrees to use their respective commercially reasonable efforts to: (i)
following the Dexter Closing Date and commencing upon the mutual agreement of
the Parties (but in no event less than four months prior to the expected Closing
Date), establish, in consultation with Buyer and its representatives, a detailed
systems implementation plan based on the outline plan attached as Exhibit U (as
such outline plan may be changed, updated and supplemented, the "B&C Systems
Transition Plan") that provides for the accelerated transition of Company's
billing and collection services which are performed by Qwest Corporation under
the Billing and Collection Agreement to be migrated to Company, which plan shall
(x) set forth, in reasonable detail, the reasonable system milestones to be
completed by Qwest Corporation and Company in respect of such transitioning, (y)
41
establish the budget for the implementation of such plan and (z) provide for
full completion of such transitioning by no later than the expected Closing
Date; (ii) in accordance with the B&C Systems Transition Plan, cause Qwest
Corporation and (prior to Closing) Company to carry out and perform the various
systems implementation actions contemplated by such plan; and (iii) following
implementation of the systems modifications contemplated by the B&C Systems
Transition Plan, cause Qwest Corporation and (prior to Closing) Company to
properly maintain such modified systems so as to permit the accelerated
transitioning of Company's billing and collection services at any time upon
Company's directions in accordance with the Billing and Collections Agreement.
Each of the Qwest Parties shall, and Seller shall cause Qwest Corporation and/or
(prior to Closing) Company to, permit Buyer and its representatives (including
financing sources and consultants) to have reasonable access to the appropriate
systems personnel of, and such systems documentation and other material of,
Qwest Corporation and/or (prior to Closing) Company to enable Buyer and its
representatives (including financing sources and consultants) to review and
establish, to their reasonable satisfaction, the adequacy and proper maintenance
of the B&C Systems Transition Plan. For clarification purposes, following
Closing, the Qwest Parties will no longer be responsible for Company's actions,
and Buyer will cause Company to cooperate and perform in accordance with the B&C
Systems Transition Plan. Buyer agrees that it shall be obligated to pay all of
Qwest Corporation's and Company's reasonable costs and expenses incurred in
connection with the implementation and maintenance of the B&C Systems Transition
Plan (provided that it is agreed and understood by the parties that such amount
is estimated to equal no more than $6.5 million).
ARTICLE VI
ADDITIONAL CONTINUING COVENANTS
6.1 Tax Matters.
(a) Liability for Taxes.
(i) Buyer shall indemnify, defend and hold each
Qwest Party harmless from and against any and all Taxes due in respect of
Company and the Xxxxxx Transferred Business for any taxable period (or portion
thereof) beginning after the Closing Date, it being understood that any such
indemnity payment made hereunder shall be adjusted as set forth in Section
9.3(f). Seller shall prepare, and permit Buyer to audit, such analyses as are
reasonably requested by Buyer to support any claim for indemnification under
this Section 6.1(a)(i).
(ii) The Qwest Parties shall indemnify, defend
and hold harmless Buyer, Company and their respective Affiliates from and
against (x) any and all Taxes imposed on Company or due in connection with the
Xxxxxx Transferred Business for any taxable period (or portion thereof) ending
on or before the Closing Date, other than for those transactions occurring on
the Closing Date, but after the Closing, that are not in the ordinary course of
business (a "Pre-Closing Tax Period"), (y) any and all Taxes of any Person
arising from or attributable to a Pre-Closing Tax Period that are imposed on
Buyer or any of its Affiliates, Company or the Xxxxxx Transferred Business under
Treasury Regulation Section 1.1502-6 (or any similar provision under state,
local or foreign law) as a transferee or successor, pursuant to a Tax sharing
agreement, Tax indemnification agreement or similar contract, and (z) any loss
arising from any breach of a representation contained in Section 3.9, it being
42
understood that any such indemnity payment made hereunder shall be adjusted as
set forth in Section 9.3(f). Buyer shall prepare, and permit Seller to audit,
such analyses as are reasonably requested by Seller to support any claim for
indemnification under this Section 6.1(a)(ii).
(iii) No Limitation. The indemnities set out in
this Section 6.1(a) shall not be subject to any limitation contained in Section
9.4.
(b) Refunds. Any refunds or credits of Taxes with respect
to Company or the Xxxxxx Transferred Business for any Pre-Closing Tax Period
shall be for the account of Seller except to the extent such refund arises as a
carryback of a loss or other Tax benefit from a period beginning after the
Closing Date. Any refunds or credits of Taxes with respect to Company or the
Xxxxxx Transferred Business not described in the preceding sentence shall be for
the account of Buyer and/or its Affiliates. The relevant party shall forward to
the other party any such refund or credit amount within ten Business Days of
receipt of such refund. Notwithstanding the foregoing, the control of the
prosecution of a claim for refund or credit for Taxes paid pursuant to a
deficiency assessed subsequent to the Closing Date as the result of an audit
shall be governed by the provisions of Section 6.1(e)(i) below.
(c) Tax Returns.
(i) Seller shall file or cause to be filed with
the appropriate Governmental Entities having jurisdiction (A) all Tax Returns to
be filed by Company prior to the Closing Date and (B) all income Tax Returns in
which Seller (or an Affiliate of Seller other than Company) includes the taxable
income of Company, including the applicable consolidated federal income Tax
Return in which the income of Company is included and in any consolidated or
combined income Tax Return filed by Seller or any of its Affiliates (other than
Company) thereof in which such income can be included under applicable law,
consistent with past custom and practice. The parties agree that, to the extent
permitted by Law, income and operation of Company and the Xxxxxx Transferred
Business, in each case, for the Closing Date (other than those transaction
occurring on the Closing Date, but after the Closing, that are not in the
ordinary course of business) shall be included on Seller's Tax Returns.
(ii) Buyer shall file or cause to be filed with
the appropriate Governmental Entities having jurisdiction all Tax Returns of
Company that are required to be filed after the Closing Date (other than income
Tax Returns described in Section 6.1(c)(i)(B) above). With respect to Tax
Returns to be filed by Buyer for any periods for which Seller has any liability
for the Taxes due (including pursuant to its indemnity obligations hereunder),
such Tax Returns will be properly and timely filed by Buyer and will be correct,
accurate and complete in all material respects, and Buyer shall furnish a
completed copy of such Tax Returns to Seller for Seller's prior written consent
(not to be unreasonably withheld) not later than 10 Business Days before the due
date for filing such returns (including extensions thereof).
(d) Proration of Taxes. Real and personal property taxes,
ad valorem taxes, and franchise fees or taxes (that are imposed on a periodic
basis (as opposed to a net income basis)) (collectively, "Periodic Taxes") shall
be prorated between Seller and Buyer for any taxable period that includes but
does not end on the Closing Date (all such periods of time being hereinafter
called "Proration Periods"). Periodic Taxes attributable to Proration Periods
43
shall be prorated between Buyer and Seller based on the relative periods the
Contributed Assets were owned by each respective party during the fiscal period
of the taxing jurisdiction for which such taxes were imposed by such
jurisdiction (as such fiscal period is or may be reflected on the xxxx rendered
by such taxing jurisdiction). On the Closing Date, Buyer and Seller shall pay or
be reimbursed, on this prorated basis, for Periodic Taxes that have been paid
before the Closing Date. On the Closing Date, Buyer and Seller shall also be
reimbursed, on this prorated basis, for Periodic Taxes that are to be paid after
the Closing Date. The reimbursement of Periodic Taxes that are to be paid on or
after the Closing Date shall be based on a reasonable estimate of the amount of
such Periodic Taxes to be paid (based on past experience). To the extent that
Buyer or Seller are not reimbursed on the Closing Date for Periodic Taxes that
are paid after the Closing Date, or, in the event the estimated amount of the
preceding sentence proves to have been inaccurate, Buyer or Seller shall
promptly forward an invoice to the other party for its reimbursable pro rata
share, if any. If the other party does not pay the invoice within 30 calendar
days of receipt, the amount of such payment shall bear interest at the rate of
8% per annum. With respect to Taxes other than Periodic Taxes, in the case that
the Closing Date is not the end of the taxable period under applicable law, such
Taxes for the Pre-Closing Tax Periods shall be determined as if the Closing Date
were the end of a short taxable period and income or loss for such period shall
be determined on the basis of closing of the books as of the close of business
on the Closing Date (other than for those transactions occurring on the Closing
Date, but after the Closing, that are not in the ordinary course of business).
(e) Contests and Cooperation.
(i) Upon receipt by Buyer of notice of any
pending or threatened federal, state, local or foreign tax audits,
claims for Taxes or assessments, or any other claim or examination with
respect to a Tax liability of Company for which it could be reasonably
be expected that Seller would be required to indemnify Buyer under
Section 6.1(a)(ii) above, Buyer shall promptly notify Seller of such
audit, claim or examination (unless Seller previously was notified
directly by the relevant tax authority). If Seller so requests and at
Seller's expense, Buyer shall contest or cause the relevant entity
(Company or any successor) to contest such claim on audit or by
appropriate claim for refund or credit of Taxes or in a related
administrative or judicial proceeding which Seller in its sole and
absolute discretion, chooses to direct such entity to pursue, and shall
permit Seller, at its expense, to control the prosecution and
settlement of any such audit or refund claim or related administrative
or judicial proceeding with respect to those matters which could affect
the Tax liability of Seller, including any liability hereunder, or
their right to payment; and, where deemed necessary by Seller, Buyer
shall cause the relevant entity to authorize by appropriate powers of
attorney such Persons as Seller shall designate to represent such
entity with respect to such audit or refund claim or related
administrative or judicial proceeding and to settle or otherwise
resolve any such proceeding; provided that no such proceeding shall be
settled or resolved without the prior written consent of Buyer, which
consent shall not be unreasonably withheld. Buyer shall further execute
and deliver, or cause to be executed and delivered, to Seller or its
designee all instruments and documents reasonably requested by Seller
to implement the provisions of this Section 6.1(e)(i). Buyer will at
all times have the right to participate fully in any defense (or
prosecution) of any such claim. In no event shall Buyer agree to the
compromise or settlement of any Tax claims for which Seller is liable
44
(including pursuant to its indemnity obligations hereunder) without the
prior written consent of Seller (such consent not to be unreasonably
withheld). Any refund of Taxes obtained by Buyer or the affected entity
to which Seller is entitled under Section 6.1(b), or which is a refund
of Taxes paid by Seller, shall be paid to Seller within ten Business
Days of receipt of such refund.
(ii) Subject to the provisions of Section 10.9
and the Confidentiality Agreement, from and after the Closing Date,
Buyer shall deliver to Qwest or its designee (including for purposes of
this sentence any tax advisors to Qwest), as soon as practicable after
Qwest's request, such information and data that are reasonably
available concerning the pre-Closing Date operations of Company and
make available such knowledgeable employees of Buyer and Company as
Qwest may reasonably request (including employees having special or
relevant knowledge or information pertaining to particular Tax items),
including providing the full and complete information and data required
by Qwest's customary Tax and accounting questionnaires to the extent
reasonably available, in order to enable Qwest fully to complete and
file all Tax Returns that it may be required to file with respect to
Company through the Closing Date, to respond to and contest audits by
any taxing authorities with respect to any and all Taxes for which it
has an indemnity obligation hereunder, to prosecute any claim for
refund or credit to which Qwest or Seller is or may be entitled
hereunder and to otherwise enable Qwest fully to satisfy its accounting
and Tax requirements. Subject to the provisions of Section 10.9 and the
Confidentiality Agreement, from and after the Closing Date, Qwest shall
deliver to Buyer or its designee (including for purposes of this
sentence, Buyer's tax advisors), as soon as practicable after Buyer's
request, such information and data that are reasonably available
concerning Taxes of Company and make available such knowledgeable
employees of Qwest as Buyer may reasonably request (including employees
having special or relevant knowledge or information pertaining to
particular Tax items), including providing the full and complete
information and data required by Buyer's customary Tax and accounting
questionnaires to the extent reasonably available in order to enable
Buyer to complete and file all Tax Returns that it may be required to
file with respect to Buyer or Company, after the Closing Date, to
respond to and contest audits by any taxing authorities with respect to
any and all Taxes for which Buyer may be liable, to prosecute any claim
for refund or credit to which Buyer or Company is or may be entitled
and to otherwise enable Buyer and Company to fully satisfy their
accounting and Tax requirements.
(f) Transfer Taxes. Notwithstanding anything herein to
the contrary, Buyer and Seller shall each be responsible for one-half of all
sales, use, gross receipts, registration, business and occupation, transfer,
stamp duty, securities transactions, real estate, and similar Taxes and notarial
fees assessed or payable in connection with the transfer of the LLC Interests or
other transactions contemplated hereby (including the Contribution), regardless
of whether such Taxes become due or payable on or after the Closing Date, and
regardless of whether a taxing authority seeks to collect such Taxes from Seller
or Buyer, as well as any interest, penalties and additions to Taxes related to
such Taxes. The party primarily responsible for remitting any such Taxes shall
be responsible for filing all Tax Returns related to such Taxes. The party
responsible for filing such Tax Returns (the "Filing Party") shall provide such
Tax Returns to the other party not less than 10 days prior to the due date of
such Tax Returns. The other party shall pay the Filing Party one-half of all
45
Taxes shown to be due on each Tax Return not less than 5 days prior to the due
date of such Tax Return.
(g) Tax Sharing Agreements, Etc. All Tax sharing
agreements, policies, arrangements and practices between Seller or an Affiliate
of Seller, on the one hand, and Company or their respective Subsidiaries, on the
other hand, shall be terminated as of the Closing Date and, from and after the
Closing Date, none of Company or its Subsidiaries shall be obligated to make any
payment to Seller or any Affiliate of Seller, any taxing authority or any other
Person pursuant to any such agreement or arrangement for any past or future
period.
(h) Coordination With Article IX. To the extent that the
provisions of Article IX are inconsistent with or conflict with the provisions
of this Section 6.1, the provisions of this Section 6.1 shall control.
6.2 Tax Treatment and Purchase Price Allocation.
(a) Tax Treatment. Seller shall report the sale of the
LLC Interests, and Buyer shall report the purchase of the LLC Interests, as a
sale and purchase of assets for federal income tax purposes. Seller shall treat
Company as a disregarded entity for federal income tax purposes, and, to the
maximum extent permitted by Law, for all other Tax purposes (other than those
Taxes addressed in Section 6.1(f)), for all Pre-Closing Tax Periods.
(b) Purchase Price Allocation. Within 60 days after the
date hereof, Buyer shall provide to Seller a draft Purchase Price allocation
intended to comply with the requirements of Section 1060 of the Code (and which
shall include allocations for the Noncompetition Agreement and any other
agreements described in line 6 of Internal Revenue Service Form 8594) (the
"Purchase Price Allocation") for Seller's consent, not to be unreasonably
withheld. If Seller does not consent to the draft Purchase Price Allocation,
Seller shall propose to Buyer any changes in the draft Purchase Price Allocation
within 60 days of the receipt thereof. In the event that no such changes are
proposed in writing to Buyer within such time, Seller shall be deemed to have
agreed to the Purchase Price Allocation. If any such changes are proposed, Buyer
and Seller shall negotiate in good faith and shall use their best efforts to
agree upon the Purchase Price Allocation. In the event that Buyer and Seller are
unable to reach an agreement within 180 days of the Closing Date, then the
disputed items shall be resolved within the next 30 days by an independent
accounting firm, or a nationally recognized valuation firm, in each case, that
is mutually acceptable to both parties and whose fees shall be borne equally by
Buyer and Seller. Such determination by the accounting or valuation firm shall
be binding on the parties and shall be based solely upon written submissions by
Buyer and Seller, and not upon any independent investigation by the accounting
or valuation firm. If the parties have not reached an agreement with respect to
the Purchase Price Allocation and the accounting or valuation firm has not
reached a determination with respect to the disputed items by the latest date
(taking into account all permissible extensions) on which one of the parties to
this Agreement is required to file a Tax Return for which the Purchase Price
Allocation is needed or relevant, such party shall be entitled to file such Tax
Return and take any reasonable position with respect to the allocation of the
purchase price; provided however, that upon final agreement regarding the
Purchase Price Allocation, such party shall, if necessary to be consistent with
the final agreed-upon Purchase Price Allocation, file an amended Tax Return (or
46
make a hold-for-audit adjustment to the Tax Return) to reflect the final
Purchase Price Allocation.
(c) Except as otherwise required by a Governmental Entity
or a taxing authority pursuant to a "determination" as defined in Section
1313(a) of the Code (or any comparable provision of state, local or foreign law)
or the execution of an IRS Form 870-AD, Seller and Buyer agree to report the
transactions contemplated by this Agreement in the manner specified in
subsections (a) and (b) hereof and agree not to take any position on any Tax
Return inconsistent therewith, to prepare and file all Tax Returns and reports
relating to the purchase and sale contemplated by this Agreement, including all
federal, state and local Tax Returns, in a manner which is consistent with such
characterization and the Purchase Price Allocation and to conduct any audit, Tax
proceeding or Tax litigation relating thereto in a manner entirely consistent
with such characterization and the Purchase Price Allocation.
6.3 Maintain Records. Until the later of (i) 5 years
after the Closing Date or (ii) the expiration of the applicable statute of
limitations for the Tax Return in question, Qwest and Buyer will maintain (or
cause to be maintained) all Tax records, working papers, and other supporting
financial records and documents relating to the Tax Returns filed by, on behalf
of, or relating to Company or the Xxxxxx Transferred Business or to any Taxes
for the last closed year and for all open years of Company (including the
taxable year in which the Closing Date occurs). All such documents that relate
primarily to Company or the Xxxxxx Transferred Business will be delivered to and
maintained by Buyer during the period set forth above, and Buyer will make the
same available to Seller or its Representatives at reasonable times for
inspection and copying. All such remaining documents will be retained by Seller
during the period set forth above, and Seller will make the same available to
Buyer or its Representatives at reasonable times, for inspection and copying. At
the end of the period set forth above, Qwest or Buyer, as the case may be, may
dispose of such documents, provided that notice of such disposition must be
given to the other parties at least 60 days in advance of such disposition. Upon
receipt of such notice, Qwest or Buyer, as the case may be, may request, at the
requesting party's expense, that such documents be delivered to them instead of
disposing of such documents.
6.4 Cooperation. After the Closing Date, upon Seller's
request (at Seller's expense) and without necessity of subpoena, Buyer will
cause Company and its representatives and counsel to cooperate fully with Seller
and its representatives and counsel for purposes of permitting Seller to address
and respond to any matters involving Seller that arise as a result of Seller's
prior ownership of Company and the Xxxxxx Transferred Business, whether or not
related to this Agreement, including claims made by or against Seller or any of
its Affiliates, whether involving any Governmental Entity or third party. After
the Closing Date, upon Buyer's request (at Buyer's expense) and without
necessity of subpoena, the Qwest Parties will cause their Affiliates and their
representatives and counsel to cooperate fully with Buyer and its
representatives and counsel for purposes of permitting Buyer to address and
respond to any matters involving Buyer that arise as a result of Seller's prior
ownership of Company and the Xxxxxx Transferred Business, whether or not related
to this Agreement, whether involving any Governmental Entity or third party.
Such cooperation shall include (a) reasonable access during normal business
hours and upon reasonable notice to the other party's officers, directors,
employees, auditors, counsel, representatives, properties, books, records and
operating instructions and procedures and (b) the right to make and retain
copies of all pertinent documents and records relating to any such matters. The
47
parties obligations under this Section 6.4 are in addition to the parties' other
obligations to cooperate with each other contained in this Agreement, including
the parties' obligations under Section 6.1(e).
6.5 Buyer's Employee-Related Obligations.
(a) Effective as of the Closing. Buyer shall offer
employment (which shall include Buyer's compliance with Buyer's covenants in
this Section 6.5) to Employees identified as allocated to Xxxxxx on Section 5.22
of Seller's Disclosure Schedule to the Dexter Purchase Agreement ("Prospective
Transferred Employees") who on the Closing Date are actively at work in the
Xxxxxx Transferred Business. Within at least ten (10) Business Days before the
anticipated Closing Date, Seller will deliver to Company a list of Prospective
Transferred Employees (including information relating to such Prospective
Transferred Employees' salary and benefits) (the "Prospective Transferred
Employees List"). For purposes of this Agreement, any Employee who is not
scheduled to work on the Closing Date due to a short-term absence (e.g.
vacation, holiday, scheduled time off, illness or injury of shorter duration
than would provide for coverage under an applicable Seller Benefit Plan
providing disability benefits, jury duty, bereavement leave) in compliance with
the applicable policies of Seller, Company or any of their Affiliates, or who is
on a paid leave of absence, shall be deemed to be "actively at work." With
respect to each Employee identified on the Prospective Transferred Employees
List who is not "actively at work" on the Closing Date and is on an unpaid leave
of absence with a right to reinstatement under a CBA, a Seller Benefit Plan, a
written policy of Seller, Company or any of their Affiliates in effect on the
Closing Date, or applicable Law (e.g. the Family and Medical Leave Act or
comparable state law, military leave), Buyer shall offer employment (which shall
include Buyer's compliance with Buyer's covenants in this Section 6.5) to each
Employee as of the date on which such Employee presents himself or herself to
Buyer for active employment following the Closing Date. Each Employee who is
actively at work as of the Closing Date and who accepts employment by Buyer, or
who following a leave of absence described in the preceding sentence returns to
active employment with Buyer after the Closing Date, is referred to herein as a
"Transferred Employee."
(b) Compensation and Benefits. Subject to any applicable
CBA requirements, Buyer shall cause each Transferred Employee to receive
compensation (including base salary, wages and commission or bonus
opportunities) for not less than twelve (12) months after the Closing Date that
is no less favorable than the compensation provided to such Transferred Employee
immediately prior to the Closing Date. Subject to any applicable CBA
requirements, Buyer shall take such actions as are required to cause each
Transferred Employee to be provided, as of and for not less than twelve (12)
months after the Closing Date, benefits under Buyer's or its Affiliates'
employee benefit plans, programs, policies and arrangements that are
substantially comparable in the aggregate to the benefits provided to such
Transferred Employee under the Seller Benefit Plans immediately prior to the
Closing Date. Nothing in this Agreement will be deemed a guarantee of employment
for any specified period and, except as expressly provided in this Section 6.5,
nothing herein will confer upon any employee or other Person any right to
employment or any right under any specific benefit plan, program, policy or
arrangement. Without limiting the foregoing, Buyer and its Affiliates will
cooperate with Seller and its Affiliates and take all such actions as are
required to enable the Transferred Employees to make a direct rollover into
Buyer's tax-qualified defined contribution plan(s) of the amounts distributed to
48
such Transferred Employees from the tax-qualified savings, 401(k) or defined
contribution Pension Plans in which such Transferred Employees participated
prior to the Closing. The Transferred Employees will be credited for
eligibility, vesting and all other purposes under the benefit plans, programs,
policies and arrangements of Buyer and its Affiliates, and for all other
employment-related purposes with Buyer and its Affiliates, for their service to
Seller or its Affiliates prior to the Closing Date to the same extent such
service was credited under the comparable Seller Benefit Plans and employment
policies of Seller and its Affiliates; provided, however, that Transferred
Employees need not be credited with pre-Closing service for purposes of benefit
accruals under any defined benefit plan except to the extent described in
Section 6.5(c) of this Agreement. Buyer and its Affiliates shall give each
Transferred Employee full credit for accrued vacation. Buyer and its Affiliates
shall waive all limitations as to pre-existing conditions, exclusions and
waiting periods with respect to participation and coverage requirements
applicable to the Transferred Employees under any welfare plan that the
Transferred Employees participate in after the Closing Date. Buyer and its
Affiliates shall, and shall cause the employee benefit plans of Buyer and its
Affiliates to, provide each Transferred Employee with credit for any co-payments
and deductibles paid under any Welfare Plan during the calendar year in which
the Closing Date occurs in satisfying any applicable deductible requirements or
out-of-pocket limitations for such calendar year under any comparable welfare
plan of Buyer and its Affiliates that such Transferred Employee participates in
after the Closing Date to the same extent as if those deductibles or co-payments
had been paid under the welfare plans in which such Transferred Employee
participates after the Closing Date.
(c) Buyer Pension Plan.
(i) No later than the Closing Date, Buyer shall
establish or maintain, or shall cause one of its Affiliates to
establish or maintain, a defined benefit pension plan (the "Buyer
Pension Plan") that, subject to this Section 6.5(c), (A) for a period
of not less than twelve (12) months following the Closing Date,
provides benefits to each non-union Transferred Employee that are no
less favorable in the aggregate than those provided by the Qwest
Pension Plan based on terms of the Qwest Pension Plan applicable to
such Transferred Employee as of the Closing Date, and (B) for a period
provided by the applicable CBA, provides benefits for each
union-represented Transferred Employee that are substantially identical
to those provided by the Qwest Pension Plan based on terms of the Qwest
Pension Plan applicable to such Transferred Employee as of the Closing
Date. The Buyer Pension Plan shall be established and/or maintained for
the benefit of each Transferred Employee (collectively, the "Dex
Pension Participants") who participated or had accrued benefits in the
Qwest Pension Plan immediately prior to the Closing Date, and shall be
(or remain) qualified under Section 401(a) of the Code, and the trust
which is a part of the Buyer Pension Plan shall be exempt from tax
under Section 501(a) of the Code. Each Dex Pension Participant who is a
participant in the Qwest Pension Plan as of the Closing Date shall
become a participant in the Buyer Pension Plan as of the Closing Date.
The Buyer Pension Plan and the trust which is a part of such plan (and
any successor to such plan and/or trust) shall provide (I) that with
respect to assets transferred to the Buyer Pension Plan from the Qwest
Pension Plan, such assets shall be held by the trust which is a part of
the Buyer Pension Plan for the exclusive benefit of the participants in
such plan, (II) that the accrued benefits as of the Closing Date of
each Dex Pension Participant may not be decreased by amendment or
49
otherwise, (III) that each Dex Pension Participant shall have the right
to receive his or her benefit accrued through the Closing Date under
the Qwest Pension Plan in any optional form available to such Dex
Pension Participant with respect to such benefit provided under the
Qwest Pension Plan, (IV) that during the periods set forth in the first
sentence of this paragraph, each Transferred Employee shall accrue
benefits thereunder pursuant to benefit formulas that satisfy such
sentence, and (V) that each Dex Pension Participant shall be credited
for service with Qwest and its Affiliates (or U S WEST, if applicable)
for eligibility, vesting, early retirement, and, contingent upon the
transfer of assets set forth below, benefit accrual and compensation
earned with Qwest and its Affiliates (or U S WEST, if applicable) to
the extent such service was credited under the Qwest Pension Plan. In
addition to the foregoing, subject to the transfer of pension assets
described in this Section 6.5(c), upon termination of employment with
Buyer and its Affiliates, each Transferred Employee's accrued benefit
under the Buyer Pension Plan shall be not less than the sum of (x) the
benefit accrued based on service with Qwest and its Affiliates (or U S
WEST, if applicable) through the Closing Date, determined on the basis
of the benefit formula, rights and features of the Qwest Pension Plan
as in effect on the Closing Date, but using such Transferred Employee's
final years of compensation with Buyer or its Affiliates for this
purpose (except to the extent that the Qwest Pension Plan provides, at
the time of the Closing Date, that compensation has already been frozen
for the Transferred Employee under the applicable formula), plus (y)
the benefit accrued based on service following the Closing Date,
determined on the basis of the benefit formula, rights and features of
the Buyer Pension Plan as in effect from time to time; provided,
however, that clauses (x) and (y) shall not restrict Buyer's right to
amend or terminate the Buyer Pension Plan subsequent to expiration of
the applicable periods set forth in the first sentence of this
paragraph so long as accrued benefits as of the effective date of the
amendment are not reduced.
(ii) As soon as practicable following the Closing
Date, Seller shall cause its actuary to calculate the Accrued Liability
(as defined in Section 6.5(c)(iv)) of the Dex Pension Participants as
of the Closing Date. Seller shall cause to be transferred to a trust
established by Buyer as part of the Buyer Pension Plan a combination of
cash and readily tradable assets (as mutually agreed by Seller and
Buyer) equal to the Accrued Liability for all Dex Pension Participants,
determined as of the Closing Date pursuant to Section 6.5(c)(iv). For
this purpose, the value of the assets shall be determined based on the
audited reports of the trustee of the Qwest Pension Plan. The amount
finally determined in accordance with the foregoing to be transferred
from the Qwest Pension Plan to the Buyer Pension Plan shall be adjusted
to take into account the actual investment return of the Qwest Pension
Plan from the Closing Date until the date of the asset transfer
(provided, that the investment return for the month in which the
transfer occurs shall be deemed to be the average monthly rate on the
Mellon Trust Short Term Interest Fund (STIF) in which the Qwest Pension
Plan holds certain temporary cash funds from time to time), and shall
be decreased by any benefit payment made to or with respect to the Dex
Pension Participants under the Qwest Pension Plan during such period;
it being understood that any benefits payable to a Dex Pension
Participant who retires or terminates employment with Buyer and its
Affiliates after the Closing Date and prior to the date of the asset
transfer described herein and who is eligible to receive a distribution
at such time shall be paid from the Qwest Pension Plan until the date
of the transfer.
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(iii) The transfer of assets from the Qwest
Pension Plan to the Buyer Pension Plan shall be made as soon as
practicable, but not later than 270 days after the Closing Date,
following the determination pursuant to Section 6.5(c)(iv) of the
applicable amount to be transferred in accordance with Section
6.5(c)(iv). Notwithstanding the foregoing, no transfer shall be made
until such time as Seller has been provided evidence reasonably
satisfactory to Seller that (A) Buyer has established a trust as part
of the Buyer Pension Plan, (B) that the Buyer Pension Plan satisfies
the requirements for a qualified plan under Section 401(a) of the Code
and that such trust is exempt from tax under Section 501(a) of the
Code, and (C) Buyer has provided documentation regarding the
tax-qualification of the Buyer Pension Plan; such documentation
consisting of either (I) a favorable determination from the IRS, (II) a
filed request for a determination that the Buyer Pension Plan is
qualified under Section 401(a) of the Code and a written commitment
from Buyer that it will make all amendments requested by the IRS to
obtain a favorable determination letter, or (III) an opinion of
counsel, reasonably acceptable to Seller, that the Buyer Pension Plan
is qualified under Section 401(a) of the Code. Unless Seller and Buyer
agree otherwise, all transfers shall occur on the last business day of
a month. Seller's actuary shall be responsible for the required
actuarial certification under Section 414(l) of the Code. Upon the
transfer of assets described herein, Buyer and the Buyer's Pension Plan
shall assume all liabilities and obligations of Seller and its
Affiliates and the Qwest Pension Plan with respect to the Dex Pension
Participants under or in connection with the Qwest Pension Plan, and
Buyer shall become responsible for all benefits due under the Qwest
Pension Plan with respect to each Dex Pension Participant as of the
Closing Date (except for liabilities for such benefits as have been
paid by the Qwest Pension Plan after the Closing Date and before the
date of the asset transfer in accordance with the last sentence of
Section 6.5(c)(ii)); for this purpose, liabilities shall include all
accrued benefits within the meaning of Section 411(d)(6) of the Code,
all ancillary benefits (such as the death benefits set forth in Article
VII of the Qwest Pension Plan and disability benefits set forth in
Appendix J thereof) and any other benefits, including enhanced
retirement pension benefits under Appendix R or additional defined lump
sum benefits under Appendix S of the Qwest Pension Plan.
(iv) The term "Accrued Liability" shall mean the
amount calculated in accordance with the actuarial assumptions and
methods used by the Qwest Pension Plan as of the date hereof to
calculate the "current liability" under Section 412(l)(9)(C) of the
Code, as set forth in Section 6.5(c) of Seller's Disclosure Schedule,
but using a discount rate equal to the discount rate that would be used
by the Qwest Pension Plan as of the date hereof to compute a lump sum
distribution from the Plan consistent with Section 417(e)(3) of the
Code, and the amount expressly called for to be transferred pursuant to
this Section 6.5(c) shall be adjusted to the extent necessary for the
required approval of any Governmental Entity (including the IRS and the
PBGC) and to satisfy Section 414(1) of the Code as well as Section 4044
of ERISA. The Accrued Liability shall be agreed upon by an enrolled
actuary designated by Seller and an enrolled actuary designated by
Buyer each of whom shall be provided with information reasonably
necessary to calculate the Accrued Liability in all material respects
and to verify that such calculation has been performed in a manner
consistent with accepted actuarial practices and the terms of this
Agreement. If there is a good faith dispute between Seller's actuary
and Buyer's actuary as to the amount to be transferred to the Buyer's
Pension Plan under this Agreement and such dispute remains unresolved
51
for 14 days, the chief financial officers of Seller and Buyer shall
endeavor to resolve the dispute. If such dispute remains unresolved for
30 days, Seller and Buyer shall select and appoint a third actuary who
is mutually satisfactory to both Seller and Buyer. The reasoned written
decision of such third party actuary shall be rendered within 30 days
and shall be conclusive as to any dispute for which such actuary was
appointed. The cost of such third party actuary shall be divided
equally between Seller and Buyer. Each of Seller and Buyer shall be
responsible for the cost of its own actuary.
(v) Buyer shall use its best efforts to qualify
the Buyer Pension Plan under Section 401(a) of the Code. Buyer and
Seller shall reasonably cooperate to make any and all filings and
submissions to the appropriate Governmental Entities required or
appropriate to be made by Buyer or Seller in order to effectuate the
provisions of this Section 6.5(c), including (A) IRS Form 5310-A in
respect of the transfers of assets, and (B) if the transactions
contemplated by this Agreement constitute a "reportable event," as that
term is defined in Section 4043 of ERISA, as to which notices would be
required to be filed with the PBGC, timely notification to the PBGC and
the submission of all reports required in connection therewith.
(d) Retiree Welfare Benefits. Effective as of the Closing
Date, Buyer shall cause each Transferred Employee and his or her spouse and
dependents to be provided retiree medical, health and life benefits upon his or
her retirement from Buyer or its Affiliates after meeting applicable eligibility
conditions. With respect to each such union-represented Transferred Employee,
the retiree medical, health and life benefits and eligibility conditions shall
be substantially identical to the benefits and eligibility conditions required
under the applicable CBA and the Seller Benefit Plans immediately prior to the
Closing Date, and shall be provided for the period required under such CBA. With
respect to each other Transferred Employee, the retiree medical, health and life
benefits and eligibility conditions shall be substantially comparable to those
provided by Seller or its Affiliates under the Seller Benefit Plans immediately
prior to the Closing Date; Buyer shall cause these retiree welfare benefits to
be maintained for the duration prescribed by the applicable Seller Benefit Plan
as in effect immediately prior to the Closing Date; provided, however, that
after December 31, 2003, Buyer and its Affiliates may change or modify these
retiree medical, health and life benefits to the extent permitted by applicable
Law.
(e) COBRA. Seller will be responsible for making
continuation coverage under Section 4980B of the Code and Sections 601-608 of
ERISA ("COBRA") available to any Employee and any eligible spouse or dependent
of an Employee who experiences a "qualifying event," as defined in Code Section
4980B(f)(3), on or before the Closing. Buyer will be responsible for making
continuation coverage under COBRA available to any Transferred Employee and any
eligible spouse or dependent of a Transferred Employee who experiences a
"qualifying event," as defined in Code Section 4980B(f)(3), after the Closing.
(f) Nonqualified Plans. Buyer shall assume all
liabilities and obligations of Seller and its Affiliates with respect to each
Transferred Employee under or in connection with the Seller Benefit Plans that
are excess benefit plans or nonqualified defined benefit pension plans. Seller
shall retain all liabilities and obligations with respect to the Transferred
52
Employees under or in connection with any Seller Benefit Plan that is a
nonqualified defined contribution benefit plan.
(g) Third-Party Limitations. Nothing expressed or implied
in this Section 6.5 shall confer upon any current or former Employee, any
Transferred Employee, any spouse or dependent or legal representative of an
Employee or Transferred Employee, or any labor union or bargaining
representative, any rights or remedies, including any right to employment or
continued employment for any specified period, or any benefits other than under
the express terms of an applicable employee benefit plan.
6.6 Termination Fee. If (i) either (x) Seller terminates
this Agreement, other than pursuant to Sections 8.1(d) (unless Seller caused the
event to occur or condition to exist that resulted in the ability to terminate
under such section), 8.1(f) or 8.1(g) (solely as a result of the condition in
Section 7.2(j) not having satisfied), or (y) Buyer terminates this Agreement
pursuant to Sections 8.1(e) or 8.1(g) (unless the condition set forth in Section
7.2(j) has not been satisfied) at a time when Buyer is not otherwise in breach
of this Agreement, (ii) prior to any such termination, Buyer shall have received
commitments for the Additional Equity (other than as a result of the Seller
making a Final Additional Equity Commitment), and (iii) within 12 months
thereafter, Seller has entered into definitive documentation to consummate a
Third Party Acquisition and such Third Party Acquisition is consummated
substantially in accordance with the terms of such definitive documentation,
then Seller shall pay to Buyer, within five Business Days following the
consummation of such Third Party Acquisition, a cash termination fee of 50% of
the amount, if any, by which the fair value of the purchase price received by
Qwest in connection with the Third Party Acquisition exceeds the Base Purchase
Price hereunder.
6.7 Liquidated Damages. The parties acknowledge and agree
that Buyer would not have entered into this Agreement if the Qwest Parties and
Qwest Corporation had not simultaneously agreed to be bound by the Publishing
Agreement and the Noncompetition Agreement. Therefore, an event giving rise to
the payment of Publisher Liquidated Damages or Service Area Default Liquidated
Damages (as such terms are defined in the Publishing Agreement and the
Noncompetition Agreement) will be deemed to constitute a material breach of this
Agreement (with solely the remedies provided in the Publishing Agreement and
Noncompetition Agreement), and the parties intend that any payment of Publisher
Liquidated Damages or Service Area Default Liquidated Damages for breach of
either of such agreements shall be treated as an adjustment to the Purchase
Price.
ARTICLE VII
CONDITIONS OF PURCHASE
7.1 General Conditions. The obligations of the parties to
effect the Closing will be subject to the following conditions, unless waived in
writing by both parties:
(a) No Law or Order will have been enacted, entered,
issued, promulgated or enforced by any Governmental Entity at what would
otherwise be the Closing Date that prohibits the Transactions;
53
(b) All Approvals and Permits that are listed on Section
7.1(b) of Seller's Disclosure Schedule will have been received or obtained on or
before the Closing Date;
(c) The waiting period under the HSR Act, if applicable
to the consummation of the Transactions, will have expired or been terminated;
and
(d) The closing under the Dexter Purchase Agreement shall
have been consummated.
7.2 Conditions to Obligations of Buyer. The obligations
of Buyer to effect the Closing will be subject to the following conditions,
unless waived in writing by Buyer:
(a) The representations and warranties of the Qwest
Parties in this Agreement which are not modified by materiality or Material
Adverse Effect will be true in all material respects on the Closing Date (except
to the extent such representations and warranties by their terms speak as of an
earlier date, in which case they shall be true in all material respects as of
such date), and the representations and warranties of the Qwest Parties in this
Agreement which are modified by materiality or Material Adverse Effect will be
true on the Closing Date (except to the extent such representations and
warranties by their terms speak as of an earlier date, in which case they shall
be true as of such date);
(b) The Qwest Parties will have performed in all material
respects all obligations and complied with all covenants and conditions required
by this Agreement and the other Transaction Documents to be performed or
complied with by them on or before the Closing Date;
(c) Each of the Qwest Parties and Qwest Corporation
shall, both immediately before and after consummation of the Transactions, not
be Insolvent.
(d) Seller will have obtained and provided to Buyer all
Third Party Consents listed in Section 7.2(d) of Seller's Disclosure Schedule;
(e) The officers of Company listed in a letter to be
delivered by Buyer to Seller not less than 3 days before the Closing Date (the
"Resigning Officers") will have submitted their resignations in writing or will
otherwise have been removed from office, effective as of the Closing Date;
(f) Seller will have delivered to Buyer a certificate of
Seller in form and substance reasonably satisfactory to Buyer, dated the Closing
Date and signed by an executive officer of Seller, to the effect that the
conditions in the foregoing paragraphs (a), (b) and (c) have been satisfied;
(g) Seller and its Affiliates, as applicable, will have
executed and delivered to Buyer the Transaction Documents and Commercial
Agreements (including, if agreed to by the parties pursuant to Section 5.13, the
Master Sales Agent Agreement), or such agreements will have become effective
with respect to Company pursuant to the terms thereof (to the extent executed
and delivered at the Dexter Closing), to which such Persons are a party and such
agreements shall be in full force and effect (excluding any failure of a
Commercial Agreement to which Buyer is a party to be in full force and effect as
a result of any action or inaction by Buyer);
54
(h) Seller will have executed and delivered to Buyer a
signature and incumbency certificate in form and substance reasonably
satisfactory to Buyer with respect to the Persons executing the Transaction
Documents and Commercial Agreements on behalf of Seller;
(i) The contributions of the assets to Xxxxxx LLC
pursuant to the Contribution Agreement shall have been consummated in all
material respects;
(j) (i) The financial institutions party to the Debt
Financing Commitment Letter shall have consummated the Debt Financing required
in connection with the Dexter Closing in accordance with the terms of the Debt
Financing Commitment Letters and (ii) Buyer shall have received the Additional
Equity Commitments;
(k) Seller shall have delivered a copy of the fairness
opinions rendered to the Qwest Parties with respect to the Transactions by each
of Xxxxxx Brothers Inc. and Xxxxxxx Xxxxx & Co., Inc.;
(l) Buyer shall have received from one or more counsels
to the Qwest Parties, as specified in Section 7.2(l) of Seller's Disclosure
Schedule, legal opinions with respect to the matters set forth in Section 7.2(l)
of Seller's Disclosure Schedule, addressed to Buyer and dated as of the Closing
Date;
(m) Either (i) the CBAs shall have been extended pursuant
to Section 5.7 or (ii) new CBAs shall have been entered into on commercially
reasonable terms (including with wage and benefit increases, if any, not
materially less favorable to Seller than prior such increases entered into by
Seller in connection with the entering into of new CBAs); and
(n) (i) Sufficient Third Party Consents shall have been
obtained and/or Company shall be able to replace such Contracts on terms such
that Company can conduct the Transferred Business in the same manner and
substantially on the same terms and conditions as currently conducted by Seller
and (ii) the Xxxxxx IP Products Condition shall have been satisfied, unless the
failure to consummate the transactions that would satisfy such condition was a
result of action or inaction by Buyer or SGN LLC inconsistent with the goals or
undertakings contemplated under Section 5.18 of Exhibit P to the Dexter Purchase
Agreement.
7.3 Conditions to Obligations of Seller. The obligations
of Seller to effect the Closing will be subject to the following conditions,
unless waived in writing by Seller:
(a) The representations and warranties of Buyer in this
Agreement which are not modified by materiality or Buyer Material Adverse Effect
will be true in all material respects on the Closing Date (except to the extent
such representations and warranties by their terms speak as of an earlier date,
in which case they shall be true in all material respects as of such date), and
the representations and warranties of Buyer in this Agreement which are modified
by materiality or Buyer Material Adverse Effect will be true on the Closing Date
(except to the extent such representations and warranties by their terms speak
as of an earlier date, in which case they shall be true as of such date);
55
(b) Buyer will have performed in all material respects
all obligations and complied with all covenants and conditions required by this
Agreement and the other Transaction Documents to be performed or complied with
by it on or before the Closing Date;
(c) Buyer shall, both immediately before and after
consummation of the Transactions, not be Insolvent;
(d) Buyer will have delivered to Seller a certificate of
Buyer in form and substance satisfactory to Seller, dated the Closing Date and
signed by an executive officer of Buyer, to the effect that the conditions in
the foregoing paragraphs (a), (b) and (c) have been satisfied;
(e) Buyer will have obtained and provided to Seller all
Third Party Consents listed in Section 7.3 of Buyer's Disclosure Schedule;
(f) Buyer will have executed and delivered to Seller the
Transaction Documents and Commercial Agreements (including, if agreed to by the
parties pursuant to Section 5.13, the Master Sales Agent Agreement), or such
agreements will have become effective with respect to Company pursuant to the
terms thereof (to the extent executed and delivered at the Dexter Closing), to
which Buyer is a party and such agreements shall be in full force and effect
(excluding any failure of a Commercial Agreement to which a Qwest Party is a
party to be in full force and effect as a result of any action or inaction by
any Qwest Party);
(g) Buyer will have executed and delivered to Seller a
signature and incumbency certificate in form and substance reasonably
satisfactory to Seller with respect to the Persons executing the Transaction
Documents, Commercial Agreements and the Buyer Securities, if any, on behalf of
Buyer;
(h) The Qwest Parties shall have received from Xxxxxx &
Xxxxxxx, counsel to Buyer, a legal opinion with respect to the matters set forth
in Section 7.3(h) of Buyer's Disclosure Schedule, addressed to the Qwest Parties
and dated as of the Closing Date;
(i) If a portion of the Closing Purchase Price is being
satisfied by delivery of the Buyer Securities, Buyer shall have executed and
delivered the Buyer Securities and such Buyer Securities shall be in full force
and effect and there shall not be existing any default thereunder;
(j) All Approvals and Permits required to be obtained
from any Governmental Entity (including the State PUCs) will have been received
or obtained on or before the Closing Date; provided, however, that for purposes
of this Section 7.3(j), the Approvals and Permits of such Governmental Entities
(including the State PUCs) shall not be deemed to have been obtained if in
connection with the grants thereof there shall have been a Material Regulatory
Impact; and
(k) If Seller or its assignees have exercised the rights
set forth in Section 5.10(e), Seller or its assignees will have received the
equity securities as contemplated by Section 5.10(e).
56
ARTICLE VIII
TERMINATION OF OBLIGATIONS; SURVIVAL
8.1 Termination of Agreement. Anything herein to the
contrary notwithstanding, this Agreement and the Transactions may be terminated
at any time before the Closing as follows and in no other manner:
(a) By mutual consent in writing of Buyer and Seller;
(b) By either Seller or Buyer if any Governmental Entity
has issued an Order or taken any other actions (which the parties will use their
commercially reasonable efforts to lift), in either case permanently
restraining, enjoining or otherwise prohibiting the Transactions, and such Order
or other action becomes final and nonappealable;
(c) By Buyer upon written notice to Seller if any event
occurs or condition exists that would render impossible the satisfaction on or
before the Termination Date of one or more conditions to the obligations of
Buyer to consummate the Closing contemplated by this Agreement as set forth in
Article VII;
(d) By Seller upon written notice to Buyer if any event
occurs or condition exists that would render impossible the satisfaction on or
before the Termination Date of one or more conditions to the obligations of
Seller to consummate the Closing contemplated by this Agreement as set forth in
Article VII;
(e) By Buyer upon written notice to Seller if Seller
materially breaches this Agreement and fails to cure such breach within 30 days
after receiving notice from Buyer; provided, that failure to cure such breach
constitutes a Material Adverse Effect;
(f) By Seller upon written notice to Buyer if Buyer
materially breaches this Agreement and fails to cure such breach within 30 days
after receiving notice from Seller; provided, that failure to cure such breach
constitutes a Material Adverse Effect; or
(g) By Seller or Buyer at any time after December 15,
2003, if the Closing shall not have occurred on or prior to such date, unless
extended by mutual consent in writing of Buyer and Seller (such date, as
extended, the "Termination Date"); provided that no party shall have the right
to terminate this Agreement pursuant to this Section 8.1(g) if such party's
breach or failure to fulfill any obligation under this Agreement has been the
proximate cause of, or resulted in, the failure of the Closing to occur by such
date; or
(h) Automatically, without any action on the part of any
Person, if, in any proceeding before any Governmental Entity, any Qwest Party
proposes, consents or acquiesces to or is required to participate in the
initiation, solicitation or facilitation of any inquiries or the making of any
proposal or offer with respect to any Person relating to any acquisition,
recapitalization, business combination or purchase of all of a material portion
of the Transferred Business or is required by Law to do any of the foregoing.
57
8.2 Effect of Termination.
(a) In the event of the termination of this Agreement
pursuant to Section 8.1, this Agreement and the Transaction Documents shall
thereafter become void and have no effect, and no party hereto shall have any
liability to the other parties hereto or their respective stockholders or
directors or officers in respect thereof or with respect to the Transactions
contemplated hereby; provided that the obligations of the parties contained in
this Section 8.2, Section 10.9 and Section 10.12 shall survive any such
termination. A termination under Section 8.1 shall not relieve any party of any
liability for any material misrepresentation under this Agreement or any
material breach of a covenant, or be deemed to constitute a waiver of any
available remedy (including specific performance if available) for any such
material misrepresentation or material breach of covenant.
(b) If the Dexter Closing has occurred and the Closing
fails to occur on or before the Termination Date as a result of the failure to
be satisfied of any of the conditions set forth in Section 7.1(b) hereof,
Section 7.2 hereof (other than Section 7.2(j)) or Section 7.3(j) hereof, then in
the event that, prior to the date this Agreement is terminated pursuant to
Section 8.1 hereof, Buyer shall have received commitments for the Additional
Equity (other than as a result of Seller making a Final Additional Equity
Commitment), Seller shall pay to Buyer, within five Business Days of receipt of
a reasonably itemized list of such items, an amount equal to the sum of (x) the
Reimbursable Expenses and (y) the Financing Fees; provided that, in the event of
a failure of the condition set forth in Section 7.3(j), Financing Fees payable
by Seller shall be only such amount incurred by Buyer in excess of $35 million;
provided, further, that Seller shall not be responsible for any of the costs,
fees and expenses set forth above if, as of the date of termination of this
Agreement, Buyer is unable to satisfy the conditions set forth in Section 7.3(a)
or 7.3(b). Notwithstanding the foregoing, nothing in this Section 8.2(b) shall
limit any other remedies under this Agreement of (i) Seller based on the failure
of the conditions set forth in Section 7.3 to be satisfied or (ii) Buyer except
in the case of a termination by Seller due to a failure of the closing condition
set forth in Section 7.3(j).
8.3 Survival of Representations and Warranties and
Agreements. The representations, warranties and agreements contained in or made
pursuant to this Agreement shall survive the Closing and shall expire upon the
18 month anniversary of the Closing, except that (a) the representations and
warranties contained in Sections 3.9 (Tax Returns and Reports) and 3.17
(Employee Benefits) shall survive until three months after the expiration of the
applicable statute of limitations; provided that if there is no statute of
limitations applicable to any such representation or warranty such
representation or warranty shall expire upon the third anniversary of the
Closing, (b) the representations and warranties contained in Sections 3.1
(Organization and Related Matters), 3.2(a) (Authorization), 3.2(b) (No
Conflicts, but only with respect to the last sentence and only as it relates to
State PUC Laws), 3.5 (Capitalization), 3.13 (No Brokers or Finders), 3.24
(Contribution Agreement), 4.1 (Organization and Related Matters), 4.2(a)
(Authorization) and 4.7 (No Brokers or Finders) shall remain in full force and
effect indefinitely, and (c) the agreements contained herein (including the
Covenants in Article VI) and in the other Transaction Documents that require
performance after the Closing (the "Post-Closing Covenants") will survive and
remain in full force and effect indefinitely. Article IX shall survive the
Closing and shall remain in effect (a) with respect to Sections 9.1(a) and
9.2(a), so long as the relevant representations survive, (b) with respect to
breaches of pre-Closing covenants, for one year after Closing, and (c) with
58
respect to Sections 9.1(b) (Post-Closing Covenants only), 9.1(c), 9.1(d), 9.2(b)
(Post-Closing Covenants only), 9.2(c) and 9.2(d), indefinitely. Any matter as to
which a claim has been asserted by notice to the other party that is pending or
unresolved at the end of any applicable limitation period but is being
diligently pursued shall continue to be covered by Article IX notwithstanding
any applicable statute of limitations (which the parties hereby waive) until
such matter is finally terminated or otherwise resolved by the parties under
this Agreement or by a court of competent jurisdiction and any amounts payable
hereunder are finally determined and paid.
ARTICLE IX
INDEMNIFICATION
9.1 Obligations of Qwest Parties. From and after the
Closing, the Qwest Parties agree to indemnify and hold harmless Buyer, Company
and their respective directors, officers, employees, Affiliates, agents and
assigns (the "Buyer Indemnified Persons"), jointly and severally, from and
against any and all Losses based upon or arising from:
(a) any inaccuracy, as of the date hereof or as of the
Closing Date, in any of the representations and warranties made by any Qwest
Party in this Agreement (except to the extent such representations and
warranties by their terms speak as of another date, in which case, this Section
9.1(a) shall be limited to inaccuracy as of such date); or
(b) any failure to perform in any material respect any
covenant or agreement of any Qwest Party contained in this Agreement or any
Transaction Document; or
(c) the Excluded Liabilities; or
(d) any other matter as to which any of the Qwest Parties
in other provisions of this Agreement has expressly agreed to indemnify Buyer
or, subsequent to Closing, Company.
9.2 Obligations of Buyer . From and after the Closing,
Buyer agrees to indemnify and hold harmless the Qwest Parties and each of their
respective directors, officers, employees, Affiliates, agents and assigns (the
"Seller Indemnified Persons"), jointly and severally, from and against any
Losses based upon or arising from:
(a) any inaccuracy, as of the date hereof or as of the
Closing Date, in any of the representations and warranties made by Buyer in this
Agreement (except to the extent such representations and warranties by their
terms speak as of another date, in which case, this Section 9.2(a) shall be
limited to inaccuracy as of such date); or
(b) any failure to perform in any material respect any
covenant or agreement of Buyer contained in this Agreement or any Transaction
Agreement; or
(c) any claim arising on or after the Closing Date
relating to the conduct of the Xxxxxx Transferred Business or any action of
Company on or after the Closing Date (other than any claim brought against any
Qwest Party or Qwest Corporation with respect to services provided pursuant to
any Commercial Agreement with all such claims to be resolved in accordance with
59
the terms of the applicable Commercial Agreement or any claim arising from a
Qwest Party breach of this Agreement or the Transaction Documents); or
(d) any other matter as to which Buyer in other
provisions of this Agreement has expressly agreed to indemnify any Qwest Party.
9.3 Procedure.
(a) Any party seeking indemnification with respect to any
Loss (the "Indemnified Party") will promptly notify the party required to
provide indemnity hereunder (the "Indemnifying Party") in accordance with
Section 10.11. Notwithstanding the foregoing, the failure of any Indemnified
Party to give timely notice hereunder shall not affect rights to indemnification
hereunder, except and to the extent that the Indemnifying Party has been
prejudiced thereby in defending against such claim.
(b) If any claim, demand or liability is asserted by any
third party against any Indemnified Party (other than a claim for Taxes
addressed in Section 6.1(e)(i)) (a "Third-Party Claim"), the Indemnified Party
will, upon notice of the claim or demand, promptly notify the Indemnifying
Party, and the Indemnifying Party will defend and/or settle any actions or
proceedings brought against the Indemnified Party in respect of matters embraced
by the indemnity with counsel reasonably satisfactory to the Indemnified Party.
If the Indemnifying Party does not promptly defend or settle any such claims,
the Indemnified Party will have the right to control any defense or settlement,
at the expense of the Indemnifying Party. No claim will be settled or
compromised without the prior written consent of each party to be affected by
such settlement or compromise, with such consent not being unreasonably
withheld. The Indemnified Party will at all times also have the right to
participate fully in the defense. Such participation shall be at the defense of
the Indemnified Party unless the Indemnified Party shall have been advised by
counsel retained by the Indemnifying Party that representation of the
Indemnified Party by counsel provided by the Indemnifying Party would be
inappropriate due to actual conflicting interests between the Indemnifying Party
and the Indemnified Party, including situations in which there are one or more
substantial legal defenses available to the Indemnified Party that are different
from or additional to those available to the Indemnifying Party. The parties
will cooperate in the defense of all Third-Party Claims that may give rise to
Indemnifiable Claims hereunder. In connection with the defense of any claim,
each party will make available to the party controlling such defense, any books,
records or other documents within its control that are reasonably requested in
the course of such defense.
(c) [Reserved]
(d) If the Indemnified Party has a claim against the
Indemnifying Party that does not involve a Third-Party Claim (an "Inter-Party
Claim"; and together with a Third-Party Claim, an "Indemnifiable Claim"), the
Indemnified Party will notify the Indemnifying Party with reasonable promptness
of the claim, specifying the nature, estimated amount and the specific basis for
the claim. The Indemnifying Party will respond within 45 days of receipt of the
notice of an Inter-Party Claim. If the Indemnifying Party fails to respond, the
estimated amount of the claim specified by the Indemnified Party will be
conclusively deemed a liability of the Indemnifying Party. If the Indemnifying
Party timely disputes the claim, the Indemnified and the Indemnifying Party will
60
negotiate in good faith to resolve the dispute, and if not resolved, either
party may pursue whatever remedies it may have.
(e) If any Loss is covered by insurance, the Indemnified
Party will use good faith efforts to exhaust claims against the applicable
policies. The provisions of this Article IX are subject to the rights of any
Indemnified Party's insurer that may be defending any such claim. If the
Indemnifying Party makes any payment hereunder of a Loss, the Indemnifying Party
will be subrogated, to the extent of the payment, to the rights of the
Indemnified Party against any insurer or third party with respect to the Loss.
The Indemnifying Party shall pay all costs and expenses for pursuing any claims
hereunder. Notwithstanding the foregoing, Buyer and Seller acknowledge and agree
that, with respect to Indemnifiable Claims, the Indemnified Party may seek
payment directly against the Indemnifying Party, without having first to pursue
its claims against an insurer, if such Loss is (and following receipt of a
payment from such insurer, the Indemnified Party will remain) covered by the
Indemnified Party's insurance. If an Indemnifying Party pays the Loss directly
to the Indemnified Party, the Indemnified Party will use commercially reasonable
efforts to assist the Indemnifying Party in pursuing any claims against the
applicable policies.
(f) Tax Adjustments.
(i) Any amount otherwise payable by an
Indemnifying Party to or on behalf of an Indemnified Party pursuant to this
Agreement shall be reduced (at the time and in the manner discussed in Section
9.3(f)(ii) below) by any actual Tax benefit arising from the payment of the
claim that gave rise to the Indemnifying Party making an indemnity payment. If
an Indemnified Party realizes any such Tax benefit, then such Indemnified Party
shall pay an amount to the Indemnifying Party equal to the Tax benefit realized,
provided that in the event an amount payable by the Indemnifying Party is
reduced by the amount of such Tax benefit and there is a disallowance of such
Tax benefit by a taxing authority (based upon a reasonable and good faith
determination by the Indemnified Party) such that the Indemnified Party is not
entitled to all or any portion of such Tax benefit, then the Indemnifying Party
shall pay to the Indemnified Party the amount of the Tax benefit that was
disallowed.
(ii) A Tax benefit will be considered to be
realized for purposes of this Section 9.3(f) on (A) the date on which the Tax
benefit is received as a refund of Taxes, or (B) to the extent that the Tax
benefit is not received as a refund of Taxes but rather is claimed as an item
that reduces liability for Taxes (on a with and without basis), the due date
(including extensions) of the Tax Return that reflects such change in liability
for Taxes. Notwithstanding anything herein to the contrary, the Indemnified
Party shall determine whether, for purposes of this Section 9.3, a Tax benefit
is available to the Indemnified Party in respect of the relevant Indemnifiable
Claim, provided that such determination shall be reasonable and shall be made in
good faith. The Indemnifying Party shall have opportunity to reasonably review
the Indemnified Party's calculation of the Tax benefit realized (including a
calculation pursuant to which it is determined that there is no Tax benefit
available to the Indemnified Party), provided that such review shall in no event
relate to the Indemnified Party's determination of how to report any items on
its Tax Return. The Indemnifying Party's review of the Indemnified Party's
calculation may include review of relevant parts of the Indemnified Party's Tax
Return, provided such review of the Tax Return does not materially adversely
affect the Indemnified Party.
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(g) All payments made pursuant to Section 6.1 or this
Article IX (other than a payment based on an obligation arising under Section
6.1(c)) shall be treated as adjustments to the purchase price for the LLC
Interests.
9.4 Indemnification Threshold; Maximum Losses.
(a) Except with respect to Losses arising from or related
to Seller's breach of Sections 3.1 (Organization and Related Matters), 3.2(a)
(Authorization), 3.2(b) (No Conflicts, but only with respect to the last
sentence and only as it relates to State PUC Laws), 3.5 (Capitalization), 3.9
(Taxes), 3.13 (No Brokers or Finders) and 3.24 (Contribution Agreement), the
Qwest Parties will have no liability for any Losses incurred by any Buyer
Indemnified Person with respect to any individual claim or series of related
claims under Section 9.1(a) unless the amount of Losses (not otherwise
indemnified) resulting therefrom exceeds $500,000 (the "Included Claims") and
the aggregate amount of all Included Claims exceeds $32,250,000 and in such
event, the Qwest Parties shall be responsible for only the amount in excess of
such amount.
(b) Except with respect to Losses arising from or related
to Seller's breach of Sections 3.1 (Organization and Related Matters), 3.2(a)
(Authorization), 3.2(b) (No Conflicts, but only with respect to the last
sentence and only as it relates to State PUC Laws), 3.5 (Capitalization), 3.9
(Taxes), 3.13 (No Brokers or Finders) and 3.24 (Contribution Agreement), the
Qwest Parties will have no liability for Losses incurred by Buyer Indemnified
Persons under Section 9.1(a), whether resulting from an action for
indemnification or otherwise, to the extent the aggregate Losses incurred
thereunder, including any Losses previously recovered, exceed $860 million.
(c) Except with respect to Section 3.6, for purposes of
Section 9.1(a) and 9.2(a), representations and warranties in this Agreement will
be deemed to have been made without giving effect to any limitation of "in all
material respects" or based on Material Adverse Effect or Buyer Material Adverse
Effect set forth therein.
9.5 Cooperation. In connection with any Indemnifiable
Claim, the Indemnified Party will cooperate in all reasonable requests of the
Indemnifying Party.
9.6 Exclusive Remedy. Except for (a) claims arising out
of any breach of the Confidentiality Agreement, (b) claims for fraud and (c) as
provided in Section 10.16, the remedies provided for in this Article IX
(including this Section 9.6) shall constitute the exclusive remedy for any
post-Closing claims made for breach of this Agreement, the other Transaction
Documents or in connection with the Transactions (other than the Transactions
governed by the Commercial Agreements), and each of the parties hereto agrees
not to bring any Action, at law, in equity or otherwise, against any other party
or its Affiliates in respect of any breach of this Agreement, the other
Transaction Documents or in connection with the Transactions. Without limiting
the foregoing, Buyer waives any right to assert a breach by Seller of the
Contribution Agreement or the IP Contribution Agreement following the Closing,
but without prejudice to the right of Buyer, Company and their Affiliates to be
indemnified for Excluded Liabilities under Section 9.1(c) or Section 3.24. In no
event shall the mere inaccuracy of a representation or warranty itself be used
as evidence of or deemed to constitute bad faith, misconduct or fraud. Each
62
party hereby waives any provision of Law to the extent that it would limit or
restrict the agreement contained in this Section 9.6.
9.7 Damages. Notwithstanding any provision of this
Agreement to the contrary, neither party shall be entitled in connection with
any breach or violation of this Agreement or otherwise in connection with the
Transactions contemplated by this Agreement to recover any punitive, exemplary
or other special damages; provided that the parties shall be permitted to
recover indirect, incidental or consequential damages to the extent, but only to
the extent, such indirect, incidental or consequential damages are caused by and
are a reasonably foreseeable result of such breach or violation and provided
further that the parties shall be entitled to the remedies provided in the
Commercial Agreements. The foregoing shall not limit the right of either party
to indemnification in accordance with the provisions of this Article IX with
respect to all components of any claim, settlement, aware or judgment against
such party by any unaffiliated third party. Nothing in this Agreement shall be
deemed to create any presumption that the EBITDA Multiplier is to be used in the
computation of any amount which a party is entitled to recover under this
Agreement.
9.8 Relationship to Dexter Purchase Agreement.
Notwithstanding anything to the contrary contained herein, Buyer acknowledges
that any fact, matter or circumstance that is or may constitute an
"Indemnifiable Claim" under the Dexter Purchase Agreement may only be asserted
as a claim under Article IX of the Dexter Purchase Agreement (subject to the
terms and conditions of such Article) and may not be asserted as an
Indemnifiable Claim under this Agreement.
ARTICLE X
GENERAL
10.1 Amendments; Waivers. Except as expressly provided
herein, this Agreement, any attached Disclosure Schedule, Schedule or Exhibit
and each of the other Transaction Documents may be amended only by agreement in
writing of all parties. No waiver of any provision nor consent to any exception
to the terms of this Agreement or any other Transaction Document will be
effective unless in writing and signed by the party to be bound and then only to
the specific purpose, extent and instance so provided.
10.2 Schedules; Exhibits; Integration. Each Disclosure
Schedule, Schedule and Exhibit delivered pursuant to the terms of this Agreement
must be in writing and will constitute a part of this Agreement, although
schedules need not be attached to each copy of this Agreement. The mere
inclusion of an item in a Disclosure Schedule as an exception to a
representation or warranty shall not be deemed an admission by Seller (in the
case of the Seller's Disclosure Schedule) or Buyer (in the case of the Buyer's
Disclosure Schedule) that such item represents an exception or material fact,
event or circumstance or that such item is reasonably likely to result in a
Material Adverse Effect. This Agreement, together with such Disclosure
Schedules, Schedules, Exhibits Transaction Documents and the Commercial
Agreements, constitutes the entire agreement among the parties pertaining to the
subject matter hereof and supersedes all prior agreements and understandings of
the parties in connection therewith.
63
10.3 Further Assurances. Each party shall use all
commercially reasonable efforts to cause all conditions to its and the other
party's obligations hereunder to be timely satisfied and to perform and fulfill
all obligations on its part to be performed and fulfilled under this Agreement,
to the end that the Transactions shall be effected substantially in accordance
with its terms as soon as reasonably practicable. Without limiting the
generality of the foregoing, (a) the parties shall cooperate with each other in
such actions and in securing any requisite Approvals and Permits and (b) each
party shall execute and deliver, both before and after the Closing, such further
certificates, agreements and other documents and take such other actions as the
other party may reasonably request to consummate or implement the Transactions
or to evidence such events or matters.
10.4 Governing Law. This Agreement and the legal relations
between the parties will be governed by and construed in accordance with the
laws of the State of New York applicable to contracts made and performed in such
State and without regard to conflicts of law doctrines unless certain matters
are preempted by federal law.
10.5 No Assignment. Neither this Agreement nor any rights
or obligations under it are assignable by one party without the prior written
consent of the other party; provided, however, that following the Closing, Buyer
may assign its rights under this Agreement in whole or in part to any purchaser
of all or a portion of the Xxxxxx Transferred Business. Any such assignment
without the prior written consent of the other party shall be void ab initio.
Notwithstanding anything to the contrary in this Section 10.5, upon written
notice to Seller, Buyer shall, without the consent of the Qwest Parties, be
permitted to (x) assign this Agreement and the rights and obligations under it
(a) to its lenders for collateral security purposes, or (b) to a wholly-owned
subsidiary of Buyer; provided, however, that, in the event of any such
assignment, Buyer shall remain liable in full for the performance of its
obligations hereunder and the assignee shall execute a document in form and
substance reasonably acceptable to Seller to signify the consent of Buyer's
assignee to the obligations of Buyer hereunder on a joint and several basis or
(y) change its status from a limited liability company to a corporation.
10.6 Headings. The descriptive headings of the Articles,
Sections and subsections of this Agreement are for convenience only and do not
constitute a part of this Agreement.
10.7 Counterparts. This Agreement and any amendment hereto
or any other Transaction Document may be executed in one or more counterparts
and by different parties in separate counterparts. All counterparts will
constitute one and the same agreement and will become effective when one or more
counterparts have been signed by each party and delivered to the other party.
10.8 Publicity and Reports. Seller and Buyer will
coordinate all publicity relating to the Transactions, and no party will issue
any press release, publicity statement or other public notice relating to this
Agreement or the Transactions without first obtaining the written consent of the
other party to the issuance of such release, statement or notice (which consent
may not be unreasonably withheld, conditioned or delayed); provided that to the
extent that independent legal counsel to Seller or Buyer, as the case may be,
shall deliver a written opinion to the other party that a particular action is
required by applicable Law, the parties shall be obligated only to use
64
commercially reasonable efforts to consult with the other party prior to issuing
any such press release, publicity statement or other public notice. Each party
shall obtain the prior consent of the other party to the form and content of any
information included in any application, report or response made to any
Governmental Entity or which relates to this Agreement.
10.9 Confidentiality. Each of Seller and Buyer agrees that
all non-public, confidential information so received from the other party is
deemed received pursuant to the confidentiality agreements dated as of April 22,
2002 and April 24, 2002 between an Affiliate of Seller and Affiliate of Buyer
(the "Confidentiality Agreements"), and each party will, and will cause its
representatives (as defined in the Confidentiality Agreements) to, comply with
the provisions of the Confidentiality Agreements with respect to such
information, and the provisions of the Confidentiality Agreements are hereby
incorporated by reference with the same effect as if fully set forth herein.
10.10 Parties in Interest. This Agreement is binding upon
and will inure to the benefit of each party and their respective successors or
assigns, and nothing in this Agreement, express or implied, is intended to
confer upon any other Person any rights or remedies of any nature whatsoever
under or by reason of this Agreement.
10.11 Notices. Any notice or other communication hereunder
must be given in writing and: (a) delivered in Person; (b) transmitted by
facsimile or other telecommunications mechanism; (c) delivered via an overnight
courier service of national reputation; or (d) mailed by certified or registered
mail, postage prepaid, receipt requested as follows:
If to Buyer, addressed to:
Dex Holdings LLC
c/o The Carlyle Group
000 Xxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxxx, Xx.
Fax: (000) 000-0000
65
With a copy to:
The Carlyle Group
000 Xxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxxx, Xx.
Fax: (000) 000-0000
Welsh, Carson, Xxxxxxxx & Xxxxx
000 Xxxx Xxxxxx
Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxxxxx X. xxXxxxxx
Fax: (000) 000-0000
Xxxxxx & Xxxxxxx
000 Xxxxx Xxxxxx
Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Attention: R. Xxxxxx Xxxxxxxxx, Esq.
Fax: (000) 000-0000
If to Seller, QSC or Qwest, addressed to:
c/o Qwest Communications International Inc.
0000 Xxxxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxx 00000
Attention: General Counsel
Fax: (000) 000-0000
With a copy to:
O'Melveny & Xxxxx, LLP
1999 Avenue of the Stars
Xxxxx 000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxx, Esq.
Fax: (000) 000-0000
or to such other address or to such other Person as Seller, QSC, Qwest or Buyer
has last designated by such notice to the other parties. Each such notice or
other communication will be effective: (i) if given by facsimile or other
telecommunication, when transmitted to the applicable number so specified in
this Section 10.11 and an appropriate confirmation is received; (ii) if given by
mail, three days after such communication is deposited in the mails with first
class postage prepaid, addressed as above; (iii) if given by overnight courier
66
service of national reputation, one day after such communication is deposited
with such courier service; or (iv) if given by any other means, when actually
received at such address.
10.12 Expenses. Qwest, QSC, Seller and Buyer will each pay
its own expenses incident to and Buyer's evaluation of Qwest, QSC, Seller,
Company and the Xxxxxx Transferred Business and the negotiation, preparation and
performance of this Agreement, the Transaction Documents and the Transactions,
including the fees, expenses and disbursements of their respective investment
bankers, accountants and counsel, except as agreed in Section 8.2(b).
10.13 Waiver. No failure on the part of any party to
exercise or delay in exercising any right hereunder will be deemed a waiver
thereof, nor will any single or partial exercise preclude any further or other
exercise of such or any other right.
10.14 Representation by Counsel; Interpretation. Seller and
Buyer each acknowledge that it has been represented by counsel in connection
with this Agreement and the Transactions. Accordingly, any rule of Law or any
legal decision that would require interpretation of any claimed ambiguities in
this Agreement against the party that drafted it has no application and is
expressly waived. The provisions of this Agreement will be interpreted in a
reasonable manner to effect the intent of Buyer and Seller.
10.15 Severability. If any provision of this Agreement is
determined to be invalid, illegal or unenforceable by any Governmental Entity,
the remaining provisions of this Agreement to the extent permitted by Law shall
remain in full force and effect provided that the essential terms and conditions
of this Agreement for both parties remain valid, binding and enforceable and
provided that the economic and legal substance of the transactions contemplated
is not affected in any manner materially adverse to any party. In event of any
such determination, the parties agree to negotiate in good faith to modify this
Agreement to fulfill as closely as possible the original intents and purposes
hereof. To the extent permitted by Law, the parties hereby to the same extent
waive any provision of Law that renders any provision hereof prohibited or
unenforceable in any respect.
10.16 Waiver of Jury Trial; Equitable Relief.
(a) The parties irrevocably waive trial by jury in any
Action relating to this Agreement or any other Transaction Document and for any
counterclaim with respect thereto.
(b) In the event of any breach of the provisions of this
Agreement or any of the other Transaction Documents, the non-breaching party
shall be entitled to seek equitable relief, including in the form of injunctions
and orders for specific performance, where the applicable legal standards for
such relief in such courts are met, in addition to all other remedies available
to the non-breaching party with respect thereto at law or in equity.
10.17 Arbitration. Any dispute, controversy or claim
arising under or related to this Agreement, any of the Transaction Documents,
regardless of the legal theory upon which it is based, will be settled by final,
binding arbitration pursuant to the Federal Arbitration Act, 9 U.S.C. ss.. 1 et
seq., in accordance with the American Arbitration Association Commercial
Arbitration Rules. Nothing herein shall, however, prohibit a party from seeking
temporary or preliminary injunctive relief in a court of competent jurisdiction.
In any arbitration, the number of arbitrators shall be three, each of Qwest, QSC
67
and Seller, on the one hand, and Buyer, on the other hand, having the right to
appoint one arbitrator, who shall together appoint a third neutral arbitrator
within 30 days after the appointment of the last party-designated arbitrator.
All arbitration proceedings shall take place in Denver, Colorado. Only damages
allowed pursuant to this Agreement may be awarded and the arbitrators shall have
no authority to award special, punitive, exemplary, consequential, incidental or
indirect losses or damages, including any damages relating to loss of profit or
business opportunity, except as expressly provided in Section 9.7. Judgment upon
any award granted in a proceeding brought pursuant hereto may be entered in any
court of competent jurisdiction. Should it become necessary to resort or respond
to court proceedings to enforce a party's compliance with this Section 10.17,
such proceedings shall be brought only in the federal or state courts located in
the State and County of New York, which shall have exclusive jurisdiction to
resolve any disputes with respect to this Agreement and the other Transaction
Documents, with each party irrevocably consenting to the jurisdiction thereof.
If the court directs or otherwise requires compliance herewith, then all costs
and expenses, including reasonable attorneys' fees incurred by the party
requesting such compliance, shall be reimbursed by the non-complying party to
the requesting party.
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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"
DEX HOLDINGS LLC
By: /s/ XXXXX X. XXXXXXX, XX.
------------------------------------
Name: Xxxxx X. Xxxxxxx, Xx.
Title: Managing Director
By: /s/ XXXXXXX X. XX XXXXXX
------------------------------------
Name: Xxxxxxx X. xx Xxxxxx
Title: Managing Member
S-1
"QWEST"
QWEST COMMUNICATIONS INTERNATIONAL INC.
By: /s/ XXXXXXX X. XXXXXXXXX
----------------------------
Name: Xxxxxxx X. Xxxxxxxxx
Title: Chairman & Chief Executive Officer
"QSC"
QWEST SERVICES CORPORATION
By: /s/ DRAKE S. TEMPEST
------------------------------------
Name: Drake S. Tempest
Title: Executive Vice President and
General Counsel
"SELLER"
QWEST DEX, INC.
By: /s/ XXXX XXXX
------------------------------------
Name: Xxxx Xxxx
Title: Vice President
S-2
